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THIRD DIVISION [ G.R. No.

170689, March 17, 2009 ]


PANTRANCO R TR NCH D MP!O" MP!O" S ASSOCIATION S ASSOCIATION

#P A$PTG%O& AND PANTRANCO #PANR A&, P TITION RS, VS. NATIONA! !A'OR R !ATIONS COMMISSION #N!RC&, PANTRANCO NORTH #PN I&, PHI!IPPIN #PN'&, PHI!IPPIN (PR SS, INC. NATIONA! 'AN) NATIONA! 'AN)$

MANAG M NT AND D V !OPM NT CORPORATION #PN'$MAD COR&, AND M GA PRIM R A!T" AND HO!DINGS CORPORATION #M GA PRIM &, R SPOND NTS. G.R. NO. 17070* PHI!IPPIN NATIONA! 'AN), MP!O" MP!O" S S P TITION R, VS. PANTRANCO PANTRANCO R TR NCH D

ASSOCIATION, INC. #P A$PTG%O&,

ASSOCIATION #PANR A& AND PANTRANCO ASSOCIATION O+ CONC RN D #PAC &, T A!., PHI!IPPIN MP!O" S NATIONA!

'AN)$MANAG M NT D V !OPM NT CORPORATION #PN'$MAD COR&, AND M GA PRIM R A!T" HO!DINGS, INC., CISION R SPOND NTS.D
NACH,RA, -..

Before us are two consolidated petitions assailing the Court of Appeals (CA) Decision [1] dated June 3, 2 its "esolution[2] dated Dece#$er %, 2 +o( , !--( .n G.R. No. 170689, the *antranco /#plo0ees ! and ! in CA&'("( )*

Association (*/A) and *antranco "etrenched /#plo0ees Association (*A+"/A) pra0 that the CA decision $e set aside and a new one $e entered, declaring the *hilippine +ational Ban1 (*+B) and *+B 2anage#ent 4ointl0 and and De3elop#ent Corporation (*+B&2adecor)

solidaril0 lia$le for the *%22,%2%,1! (22 +ational 5a$or "elations Co##ission (+5"C) 4udg#ent in fa3or of the *antranco +orth /6press, .nc( (*+/.) e#plo0ees7 [3] while in G.R. No. 17070*, *+B pra0s that the auction sale of

the *antranco properties $e declared null and 3oid([8] 9he facts of the case, as found $0 the CA, [!] and esta$lished in Republic of the Phils. v. NLRC,[:] Pantranco North Express, Inc. v. NLRC,[%] and PNB MADEC R v. !",[,] follow; 9he 'on<ales fa#il0 owned two corporations, na#el0, the *+/. and 2acris "ealt0 Corporation (2acris)( *+/. pro3ided transportation ser3ices to the pu$lic, and had its $us ter#inal at the corner of =ue<on and "oose3elt A3enues in =ue<on Cit0( 9he ter#inal stood on four 3alua$le pieces of real estate (1nown as *antranco properties) registered under the na#e of 2acris( [-] 9he 'on<ales fa#il0 later incurred huge financial losses despite atte#pts of reha$ilitation and loan infusion( .n 2arch 1-%!, their creditors too1 o3er the #anage#ent of *+/. and 2acris( B0 1-%,, full ownership was transferred to one of their creditors, the +ational .n3est#ent De3elop#ent Corporation (+.DC), a su$sidiar0 of the *+B( 2acris #erged 2adecor( was with later the rena#ed +ational as the +ational and "ealt0

De3elop#ent

Corporation

(+aredeco)

e3entuall0 Corporation

>arehousing

(+awaco) to for# the new *+B su$sidiar0, the *+B&

.n 1-,!, +.DC sold *+/. to +orth /6press 9ransport, .nc( (+/9.), a co#pan0 owned $0 'regorio Araneta ...( .n 1-,:, *+/. was a#ong the se3eral co#panies placed under se?uestration $0 the *residential Co##ission on 'ood 'o3ern#ent (*C'') shortl0 after the historic e3ents in /D)A( .n Januar0 1-,,, *C'' lifted the se?uestration order to pa3e the wa0 for the sale of *+/. $ac1 to the pri3ate sector through the Asset *ri3ati<ation 9rust (A*9)( A*9 thus too1 o3er the #anage#ent of *+/.( .n 1--2, *+/. applied with the )ecurities and /6change Co##ission ()/C) for suspension of pa0#ents( A #anage#ent co##ittee was thereafter created which reco##ended to the )/C the sale of the co#pan0 through pri3ati<ation( As a cost&sa3ing #easure, the co##ittee li1ewise suggested the retrench#ent of se3eral *+/. e#plo0ees( /3entuall0, *+/. ceased its operation( Along with the cessation of $usiness ca#e the 3arious la$or clai#s co##enced $0 the for#er e#plo0ees of *+/. where the latter o$tained fa3ora$le decisions( @n Jul0 !, 2 on the 2, the 5a$or Ar$iter issued the )i6th Alias of *+/. in order to satisf0 the

>rit of /6ecution[1 ] co##anding the +5"C )heriffs to le30 assets *%22,%2%,1! (22 due its for#er e#plo0ees, as full and final satisfaction of the 4udg#ent awards in the la$or cases( 9he sheriffs were li1ewise instructed to proceed

against

*+B,

*+B&2adecor

and

2ega

*ri#e( [11]

.n

i#ple#enting the writ, the sheriffs le3ied upon the four 3alua$le pieces of real estate located at the corner of =ue<on and "oose3elt A3enues, on which the for#er *antranco Bus 9er#inal stood( 9hese properties were co3ered $0 9ransfer Certificate of 9itle (9C9) +os( ,%,,1& ,%,,8, registered under the na#e of *+B&2adecor( [12] )u$se?uentl0, +otice of )ale of the foregoing real properties was pu$lished in the newspaper and the sale was set on Jul0 31, 2 2( Aa3ing $een notified of the auction sale, #otions to ?uash the writ were separatel0 filed $0 *+B&2adecor and 2ega *ri#e, and *+B( 9he0 li1ewise filed their 9hird&*art0 Clai#s( [13] *+B&2adecor anchored its #otion on its right as the registered owner of the *antranco properties, Bor and its 2ega *ri#e as the the successor&in&interest( part, *+B sought

nullification of the writ on the ground that it was not a part0 to the la$or case([18] .n its 9hird&*art0 Clai#, *+B alleged that *+B&2adecor was inde$ted to the for#er and that the *antranco properties would answer for such de$t( As such, the scheduled auction sale of the aforesaid properties was not legall0 in order([1!] @n )epte#$er 1 , 2 2, the 5a$or Ar$iter declared that

the su$4ect *antranco properties were owned $0 *+B& 2adecor( .t $eing a corporation with a distinct and separate personalit0, its assets could not answer for the

lia$ilities *%,,,8,

of (

*+/.(

Considering,

howe3er,

that

*+B&

2adecor e6ecuted a pro#issor0 note in fa3or of *+/. for , the writ of e6ecution to the e6tent of the said a#ount was concerned was considered 3alid( [1:] *+BCs third&part0 clai# & to nullif0 the writ on the ground that it has an interest in the *antranco properties $eing a creditor of *+B&2adecor, & on the other hand, was denied $ecause it onl0 had an inchoate interest in the properties(
[1%]

9he dispositi3e portion of the 5a$or Ar$iterCs )epte#$er 1 ,2 2 "esolution is ?uoted hereunder; >A/"/B@"/, the 9hird *art0 Clai# of *+B 2adecor andDor 2ega *ri#e Aoldings, .nc( is here$0 '"A+9/D and conco#itantl0 the le3ies #ade $0 the sheriffs of the +5"C on the properties of *+B 2adecor should $e as it (sic) is here$0 5.B9/D su$4ect to the pa0#ent $0 *+B 2adecor to the co#plainants the a#ount of *%,,,8, ( (

9he 2otion to =uash and 9hird *art0 Clai# of *+B is here$0 D/+./D( 9he 2otion to =uash of *+B 2adecor and 2ega *ri#e Aoldings, .nc( is here$0 *A"9.A55E '"A+9/D insofar as the a#ount of the writ e6ceeds *%,,,8, ( (

9he

2otion

for

"eco#putation

and

/6a#ination

of

Judg#ent Awards is here$0 D/+./D for want of #erit( 9he 2otion to /6punge fro# the "ecords 2

clai#antsDco#plainants @pposition dated August 3, 2 is here$0 D/+./D for lac1 of #erit( )@ @"D/"/D([1,]

@n appeal to the +5"C, the sa#e was denied and the 5a$or Ar$iterCs disposition was affir#ed( [1-] )pecificall0, the +5"C concluded as follows; (1) *+B&2adecor and 2ega *ri#e contended that it would $e i#possi$le for the# to co#pl0 with the re?uire#ent of the la$or ar$iter to pa0 to the *+/. e#plo0ees the a#ount of *%(, #illion as a condition to the lifting of the le30 on the properties, since the credit was alread0 garnished $0 'erardo F0 and other creditors of *+/.( 9he +5"C found no e3idence that F0 had satisfied his 4udg#ent fro# the pro#issor0 note, and opined that e3en if the credit was in custo#ia le$is, the clai# of the *+/. e#plo0ees should en4o0 preference under the 5a$or Code( (2) 9he *+/. e#plo0ees contested the finding that *+B& 2adecor was inde$ted to the *+/. for onl0 *%(, #illion without considering the accrual of interest( But the +5"C said that there was no e3idence that de#and was #ade as a $asis for rec1oning interest(

(3) 9he *+/. e#plo0ees further argued that the la$or ar$iter #a0 not properl0 conclude fro# a decision of Judge De#etrio 2acapagal Jr( of the "9C of =ue<on Cit0 that *+B&2adecor was the owner of the properties as his decision was reconsidered $0 the ne6t presiding 4udge, nor fro# a decision of the )upre#e Court that *+/. was a #ere lessee of the properties, the fact $eing that the transfer of the properties to *+B&2adecor was done to a3oid satisfaction of the clai#s of the e#plo0ees with the +5"C and that as a result of a ci3il case filed $0 2ega *ri#e, the su$se?uent sale of the properties $0 *+B to 2ega *ri#e was rescinded( 9he +5"C pointed out that while the 2acapagal decision was set aside $0 Judge Bruselas and hence, his findings could not $e in3o1ed $0 the la$or ar$iter, the titles of *+B&2adecor are conclusi3e and there is no e3idence that *+/. had e3er $een an owner( 9he )upre#e Court had o$ser3ed in its decision that *+/. owed $ac1 rentals of *,(% #illion to *+B& 2adecor( (8) 9he *+/. e#plo0ees faulted the la$or ar$iter for not finding that *+/., *+B, *+B&2adecor and 2ega *ri#e were all 4ointl0 and se3erall0 lia$le for their clai#s( 9he +5"C underscored the fact that *+/. and 2acris were su$sidiaries of +.DC and had passed through and were under the Asset *ri3ati<ation 9rust (A*9) when the la$or

clai#s accrued( 9he la$or ar$iter was correct in not granting *+BCs third&part0 clai# $ecause at the ti#e the causes of action accrued, the *+/. was #anaged $0 a #anage#ent co##ittee appointed $0 the *+B as the new owner of *+". (sic) and 2acris through a deed of assign#ent or transfer of ownership( 9he +5"C sa0s at length that the sa#e is not true with *+B&2adecor which is now the registered owner of the properties([2
]

9he partiesC separate #otions for reconsideration were li1ewise denied([21] 9hereafter, the #atter was ele3ated to the CA $0 *A+"/A, */A&*9'>@ and the *antranco Association of Concerned /#plo0ees( 9he latter group, howe3er, , !--( *+B&2adecor and 2ega *ri#e li1ewise filed their separate petition $efore the CA which was doc1eted as CA&'("( )* +o( , %3%, $ut the sa#e was dis#issed( [22] .n 3iew of the *%,,,8, *+/., on June 23, 2 ( de$t of *+B&2adecor to later withdrew its petition( 9he for#er e#plo0eesC petition was doc1eted as CA&'("( )* +o(

8, an auction sale was conducted

o3er the *antranco properties to satisf0 the clai# of the *+/. e#plo0ees, wherein C*A" "ealt0 was ad4udged as the highest $idder([23] @n June 3, 2 !, the CA rendered the assailed decision

affir#ing the +5"C resolutions( 9he appellate court pointed out that *+B, *+B&2adecor and 2ega *ri#e are corporations with personalities separate and distinct fro# *+/.( As such, there $eing no cogent reason to pierce the 3eil of corporate fiction, the separate personalities of the a$o3e corporations should $e #aintained( 9he CA added that the *antranco properties were ne3er owned $0 *+/.7 rather, their titles were registered under the na#e of *+B&2adecor( .f *+B and *+B&2adecor could not answer for the lia$ilities of *+/., with #ore reason should 2ega *ri#e not $e held lia$le $eing a #ere successor&in&interest of *+B&2adecor( Fnsatisfied, */A&*9'>@ and *A+"/A filed their #otion for reconsideration7[28] while *+B filed its *artial 2otion for "econsideration([2!] *+B pointed out that *+B&2adecor was #ade to answer for *%,,,8, ( to the *+/. e#plo0ees $0 3irtue of the pro#issor0 note it (*+B&2adecor) earlier e6ecuted in fa3or of *+/.( *+B, howe3er, ?uestioned the June 23, 2 8 auction sale as the *%(, #illion de$t had alread0 $een satisfied pursuant to this CourtCs decision in PNB MADEC R v. !".[2:] Both #otions were denied $0 the appellate court([2%] .n two separate petitions, *+B and the for#er *+/.

e#plo0ees co#e up to this Court assailing the CA decision and resolution( 9he for#er *+/. e#plo0ees raise the lone error, thus; 9he Aonora$le Court of Appeals palpa$l0 departed fro# the esta$lished rules and 4urisprudence in ruling that pri3ate respondents *antranco +orth /6press, .nc( (*+/.), *hilippine +ational Ban1 (*+B), *hilippine +ational Ban1 2anage#ent and De3elop#ent Corporation (*+B& 2AD/C@"), 2ega *ri#e "ealt0 and Aoldings, .nc( (2ega *ri#e) are not 4ointl0 and se3erall0 answera$le to the *%22,%2%,1! (22 2illion +5"C #one0 4udg#ent awards in fa3or of the 8,
[2,]

indi3idual #e#$ers of the *etitioners(

9he0 clai# that *+B, through *+B&2adecor, directl0 $enefited fro# the operation of *+/. and had co#plete control o3er the funds of *+/.( Aence, the0 are solidaril0 answera$le with *+/. for the unpaid #one0 clai#s of the e#plo0ees([2-] Citing A.C. Ranso% Labor !nion&CCL! v. NLRC,[3
]

the e#plo0ees insist that where the e#plo0er

corporation ceases to e6ist and is no longer a$le to satisf0 the 4udg#ent awards in fa3or of its e#plo0ees, the owner of the e#plo0er corporation should $e #ade 4ointl0 and se3erall0 lia$le([31] 9he0 added that #alice or $ad faith need not $e pro3en to #a1e the owners lia$le( @n the other hand, *+B anchors its petition on this sole assign#ent of error, vi'.;

9A/ AFC9.@+ )A5/ @B 9A/ *"@*/"9E C@G/"/D BE 9C9 +@( ,%,,8 .+9/+D/D ( 9@ *A"9.A55E )A9.)BE 9A/ C5A.2) @B B@"2/" >@"H/") @B *+/. .+ 9A/ A2@F+9 @B *%,,,8, (9A/ A2@F+9 @B *+B&2AD/C@"C) *"@2.))@"E +@9/ .+ BAG@" @B *+/.) .) +@9 .+ @"D/" A) 9A/ )A.D *"@*/"9E .) +@9 @>+/D BE *+/.( BF"9A/", 9A/ )A.D *"@2.))@"E +@9/ AAD A5"/ADE B//+ 'A"+.)A/D .+ BAG@" @B '/"A"D@ C( FE >A.CA 5/D 9@ 9A"// (3) *"@*/"9./) F+D/" 9A/ +A2/ @B *+B&2AD/C@", +A2/5E 9C9 +@)( ,%,,1, ,%,,2 A+D ,%,,3, B/.+' 5/G./D A+D )@5D @+ /I/CF9.@+ .+ 9A/ J*+B&2AD/C@" G)( FEJ CA)/ (3:3 )C"A 12, [2 %2:,!, "9C 2A+.5A, B"A+CA 3,)([32] *+B insists that the *antranco properties could no longer $e le3ied upon $ecause the pro#issor0 note for which the 5a$or Ar$iter held *+B&2adecor lia$le to *+/., and in turn to the latterCs for#er e#plo0ees, had alread0 $een satisfied in fa3or of 'erardo C( F0( .t added that the properties were in fact awarded to the highest $idder( Besides, sa0s *+B, the su$4ect properties were not owned $0 *+/., hence, the e6ecution sale thereof was not 3alidl0 effected([33] Both petitions #ust fail( G.R. No. 170689 1]) A+D J'/"A"D@ C( FE G)( *+/.J (C.G.5 CA)/ +@( -!&

)tripped

of

the

non&essentials,

the

sole

issue

for

resolution raised $0 the for#er *+/. e#plo0ees is whether the0 can attach the properties (specificall0 the *antranco properties) of *+B, *+B&2adecor and 2ega *ri#e to satisf0 their unpaid la$or clai#s against *+/.( >e answer in the negati3e( First, the su$4ect propert0 is not owned $0 the 4udg#ent de$tor, that is, *+/.( +owhere in the records was it shown that *+/. owned the *antranco properties( *etitioners, in fact, ne3er alleged in an0 of their pleadings the fact of such ownership( >hat was esta$lished, instead, in PNB MADEC R v. !"[38] and PNB v. Me$a Pri%e Realt" an# (ol#in$s Corporation)Me$a Pri%e Realt" an# (ol#in$s Corporation v. PNB[3!] was that the properties were owned $0 2acris, the predecessor of *+B&2adecor( Aence, the0 cannot $e pursued against $0 the creditors of *+/.( >e would li1e to stress the settled rule that the power of the court in e6ecuting 4udg#ents e6tends onl0 to properties un?uestiona$l0 $elonging to the 4udg#ent de$tor alone([3:] 9o $e sure, one #anCs goods shall not $e sold for another #anCs de$ts([3%] A sheriff is not authori<ed to attach or le30 on propert0 not $elonging to the 4udg#ent de$tor, and e3en incurs lia$ilit0 if he wrongfull0

le3ies upon the propert0 of a third person([3,] Second, *+B, *+B&2adecor and 2ega *ri#e are

corporations with personalities separate and distinct fro# that of *+/.( *+B is sought to $e held lia$le $ecause it ac?uired *+/. through +.DC at the ti#e when *+/. was suffering financial re3erses( *+B&2adecor is $eing #ade to answer for petitionersC la$or clai#s as the owner of the su$4ect *antranco properties and as a su$sidiar0 of *+B( 2ega *ri#e is also included for ha3ing ac?uired *+BCs shares o3er *+B&2adecor( 9he general rule is that a corporation has a personalit0 separate and distinct fro# those of its stoc1holders and other corporations to which it #a0 $e connected( [3-] 9his is a fiction created $0 law for con3enience and to pre3ent in4ustice([8
]

@$3iousl0, *+B, *+B&2adecor, 2ega *ri#e,

and *+/. are corporations with their own personalities( 9he Jseparate personalitiesJ of the first three corporations had $een recogni<ed $0 this Court in PNB v. Me$a Pri%e Realt" an# (ol#in$s Corporation)Me$a Pri%e Realt" an# (ol#in$s Corporation v. PNB[81] where we stated that *+B was onl0 a stoc1holder of *+B&2adecor which later sold its shares to 2ega *ri#e7 and that *+B&2adecor was the owner of the *antranco properties( 2oreo3er, these corporations are registered as separate entities and, a$sent an0 3alid reason, we #aintain their separate

identities and we cannot treat the# as one( +either can we #erge the personalit0 of *+/. with *+B si#pl0 $ecause the latter ac?uired the for#er( )ettled is the rule that where one corporation sells or otherwise transfers all its assets to another corporation for 3alue, the latter is not, $0 that fact alone, lia$le for the de$ts and lia$ilities of the transferor([82] Lastly, while we recogni<e that there are peculiar circu#stances or 3alid grounds that #a0 e6ist to warrant the piercing of the corporate 3eil, *+B&2adecor( Fnder the doctrine of Jpiercing the 3eil of corporate fiction,J the court loo1s at the corporation as a #ere collection of indi3iduals or an aggregation of persons underta1ing $usiness as a group, disregarding the separate 4uridical personalit0 of the corporation unif0ing the group([88] Another for#ulation of this doctrine is that when two $usiness enterprises are owned, conducted and controlled $0 the sa#e parties, $oth law and e?uit0 will, when necessar0 to protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities and treat the# as identical or as one and the sa#e([8!]
[83]

none applies in the

present case whether $etween *+B and *+/.7 or *+B and

>hether the separate personalit0 of the corporation should $e pierced hinges on o$taining facts appropriatel0 pleaded or pro3ed( Aowe3er, an0 piercing of the corporate 3eil has to $e done with caution, al$eit the Court will not hesitate to disregard the corporate 3eil when it is #isused or when necessar0 in the interest of 4ustice( After all, the concept of corporate entit0 was not #eant to pro#ote unfair o$4ecti3es([8:] As $etween *+B and *+/., petitioners want us to disregard their separate personalities, and insist that $ecause the co#pan0, *+/., has alread0 ceased operations and there is no other wa0 $0 which the 4udg#ent in fa3or of the e#plo0ees can $e satisfied, corporate officers can $e held 4ointl0 and se3erall0 lia$le with the co#pan0( *etitioners rel0 on the pronounce#ent of this Court in A.C. Ranso% Labor !nion&CCL! v. NLRC [8%] and su$se?uent cases([8,] 9his reliance fails to persuade( >e find the aforesaid decisions inapplica$le to the instant case( Bor one, in the said cases, the persons #ade lia$le after the co#pan0Cs cessation of operations were the officers and agents of the corporation( 9he rationale is that, since the corporation is an artificial person, it #ust ha3e an

officer who can $e presu#ed to $e the e#plo0er, $eing the person acting in the interest of the e#plo0er( 9he corporation, onl0 in the technical sense, is the e#plo0er(
[8-]

.n the instant case, what is $eing #ade lia$le is

another corporation (*+B) which ac?uired the de$tor corporation (*+/.)( 2oreo3er, in the recent cases Cara$ v. National Labor Relations Co%%ission[!
]

and McLeo# v. National Labor

Relations Co%%ission,[!1] the Court e6plained the doctrine laid down in AC Ranso% relati3e to the personal lia$ilit0 of the officers and agents of the e#plo0er for the de$ts of the latter( .n AC Ranso%, the Court i#puted lia$ilit0 to the officers of the corporation on the strength of the definition of an e#plo0er in Article 212(c) (now Article 212[e]) of the 5a$or Code( Fnder the said pro3ision, e%plo"er includes an0 person acting in the interest of an e#plo0er, directl0 or indirectl0, $ut does not include an0 la$or organi<ation or an0 of its officers or agents e6cept when acting as e#plo0er( .t was clarified in Cara$ and McLeo# that Article 212(e) of the 5a$or Code, $0 itself, does not #a1e a corporate officer personall0 lia$le for the de$ts of the corporation( .t added that the go3erning law on personal lia$ilit0 of directors or officers for de$ts of the corporation is still )ection 31[!2] of the Corporation Code( 2ore i#portantl0, as aptl0 o$ser3ed $0 this Court in AC

Ranso%,

it

appears

that

"anso#,

foreseeing

the

possi$ilit0 or pro$a$ilit0 of pa0#ent of $ac1wages to its e#plo0ees, organi<ed "osario to replace "anso#, with the latter to $e e3entuall0 phased out if the stri1ers win their case( 9he e6ecution could not $e i#ple#ented against "anso# $ecause of the disposition posthaste of its le3ia$le assets e3identl0 in order to e3ade its 4ust and due o$ligations([!3] Aence, the Court sustained the piercing of the corporate 3eil and #ade the officers of "anso# personall0 lia$le for the de$ts of the latter( Clearl0, what can $e inferred fro# the earlier cases is that the doctrine of piercing the corporate 3eil applies onl0 in three (3) $asic areas, na#el0; 1) defeat of pu$lic con3enience as when the corporate fiction is used as a 3ehicle for the e3asion of an e6isting o$ligation7 2) fraud cases or when the corporate entit0 is used to 4ustif0 a wrong, protect fraud, or defend a cri#e7 or 3) alter e$o cases, where a corporation is #erel0 a farce since it is a #ere alter ego or $usiness conduit of a person, or where the corporation is so organi<ed and controlled and its affairs are so conducted as to #a1e it #erel0 an instru#entalit0, agenc0, conduit or ad4unct of another corporation([!8] .n the a$sence of #alice, $ad faith, or a specific pro3ision of law #a1ing a corporate officer lia$le, such corporate officer cannot $e #ade personall0 lia$le for corporate lia$ilities([!!]

Appl0ing the foregoing doctrine to the instant case, we ?uote with appro3al the CA disposition in this wise; .t would not $e enough, then, for the petitioners in this case, the *+/. e#plo0ees, to rest on their laurels with e3idence that *+B was the owner of *+/.( Apart fro# pro3ing ownership, it is necessar0 to show facts that will 4ustif0 us to pierce the 3eil of corporate fiction and hold *+B lia$le for the de$ts of *+/.( 9he $urden undou$tedl0 falls on the petitioners to pro3e their affir#ati3e allegations( .n line with the $asic 4urisprudential principles we ha3e e6plored, the0 #ust show that *+B was using *+/. as a #ere ad4unct or instru#entalit0 or has e6ploited or #isused the corporate pri3ilege of *+/.( >e do not see how the $urden has $een #et( 5ac1ing proof of a ne6us apart fro# #ere ownership, the petitioners ha3e not pro3ided us with the legal $asis to reach the assets of corporations separate and distinct fro# *+/.([!:] Assu#ing, for the sa1e of argu#ent, that *+B #a0 $e held lia$le for the de$ts of *+/., petitioners still cannot proceed against the *antranco properties, the sa#e $eing owned $0 *+B&2adecor, notwithstanding the fact that *+B&2adecor was a su$sidiar0 of *+B( 9he general rule re#ains that *+B&2adecor has a personalit0 separate and distinct fro# *+B( 9he #ere fact that a corporation owns

all of the stoc1s of another corporation, ta1en alone, is not sufficient to 4ustif0 their $eing treated as one entit0( .f used to perfor# legiti#ate functions, a su$sidiar0Cs separate e6istence shall $e respected, and the lia$ilit0 of the parent corporation as well as the su$sidiar0 will $e confined to those arising in their respecti3e $usinesses( [!%] .n PNB v. Ritratto *roup, Inc.,[!,] we outlined the circu#stances which are useful in the deter#ination of whether a su$sidiar0 is $ut a #ere instru#entalit0 of the parent&corporation, to wit; 1( 9he parent corporation owns all or #ost of the capital stoc1 of the su$sidiar07 2( 9he parent and su$sidiar0 corporations ha3e co##on directors or officers7 3( 9he parent corporation finances the su$sidiar07 8( 9he parent corporation su$scri$es to all the capital stoc1 of the su$sidiar0 or otherwise causes its incorporation7 !( 9he su$sidiar0 has grossl0 inade?uate capital7 :( 9he parent corporation pa0s the salaries and other e6penses or losses of the su$sidiar07 %( 9he su$sidiar0 has su$stantiall0 no $usiness e6cept with the parent corporation or no assets e6cept those con3e0ed to or $0 the parent corporation7 ,( .n the papers of the parent corporation or in the state#ents of its officers, the su$sidiar0 is descri$ed

as

depart#ent

or

di3ision

of

the

parent

corporation, or its $usiness or financial responsi$ilit0 is referred to as the parent corporationCs own7 -( 9he parent corporation uses the propert0 of the su$sidiar0 as its own7 1 ( 9he directors or e6ecuti3es of the su$sidiar0 do not act independentl0 in the interest of the su$sidiar0, $ut ta1e their orders fro# the parent corporation7 11( 9he for#al legal re?uire#ents of the su$sidiar0 are not o$ser3ed( +one of the foregoing circu#stances is present in the instant case( 9hus, piercing of *+B&2adecorCs corporate 3eil is not warranted( Being a #ere successor&in&interest of *+B&2adecor, with #ore reason should no lia$ilit0 attach to 2ega *ri#e( G.R. No. 170705 .n its petition $efore this Court, *+B see1s the annul#ent of the June 23, 2 8 e6ecution sale of the *antranco properties on the ground that the 4udg#ent de$tor (*+/.) ne3er owned said lots( .t li1ewise contends that the le30 and the e3entual sale on e6ecution of the su$4ect properties was null and 3oid as the pro#issor0 note on which *+B&2adecor was #ade lia$le had alread0 $een satisfied(

.t

has

$een

repeatedl0

stated

that

the

*antranco

properties which were the su$4ect of e6ecution sale were owned $0 2acris and later, the *+B&2adecor( 9he0 were ne3er owned $0 *+/. or *+B( Bollowing our earlier discussion on the separate personalities of the different corporations in3ol3ed in the instant case, the onl0 entit0 which has the right and interest to ?uestion the e6ecution sale and the e3entual right to annul the sa#e, if an0, is *+B&2adecor or its successor&in&interest( )ettled is the rule that proceedings in court #ust $e instituted $0 the real part0 in interest( A real part0 in interest is the part0 who stands to $e $enefited or in4ured $0 the 4udg#ent in the suit, or the part0 entitled to the a3ails of the suit( [!-] J.nterestJ within the #eaning of the rule #eans #aterial interest, an interest in issue and to $e affected $0 the decree, as distinguished fro# #ere interest in the ?uestion in3ol3ed, or a #ere incidental interest( [:
]

9he interest of the part0

#ust also $e personal and not one $ased on a desire to 3indicate the constitutional right of so#e third and unrelated part0([:1] "eal interest, on the other hand, #eans a present su$stantial interest, as distinguished fro# a #ere e6pectanc0 or a future, contingent, su$ordinate, or conse?uential interest([:2] )pecificall0, in proceedings to set aside an e6ecution sale,

the real part0 in interest is the person who has an interest either in the propert0 sold or the proceeds thereof( Con3ersel0, one who is not interested or is not in4ured $0 the e6ecution sale cannot ?uestion its 3alidit0( [:3] .n 4ustif0ing its clai# against the *antranco properties, *+B alleges that 2ega *ri#e, the $u0er of its entire stoc1holdings in *+B&2adecor was inde$ted to it (*+B)( Considering that said inde$tedness re#ains unpaid, *+B insists that it has an interest o3er *+B&2adecor and 2ega *ri#eCs assets( Again, the contention is $ereft of #erit( >hile *+B has an apparent interest in 2ega *ri#eCs assets $eing the creditor of the latter for a su$stantial a#ount, its interest re#ains inchoate and has not 0et ripened into a present su$stantial interest, which would gi3e it the standing to #aintain an action in3ol3ing the su$4ect properties( As aptl0 o$ser3ed $0 the 5a$or Ar$iter, *+B onl0 has an inchoate right to the properties of 2ega *ri#e in case the latter would not $e a$le to pa0 its inde$tedness( 9his is especiall0 true in the instant case, as the de$t $eing clai#ed $0 *+B is secured $0 the accessor0 contract of pledge of the entire stoc1holdings of 2ega *ri#e to *+B& 2adecor([:8] 9he Court further notes that the *antranco properties (or

a portion thereof ) were sold on e6ecution to satisf0 the unpaid o$ligation of *+B&2adecor to *+/.( *+B&2adecor was thus #ade lia$le to the for#er *+/. e#plo0ees as the 4udg#ent de$tor of *+/.( .t has long $een esta$lished in PNB&Ma#ecor v. !" and other si#ilar cases that *+B& 2adecor had an unpaid o$ligation to *+/. a#ounting to #ore or less *% #illion which could $e 3alidl0 pursued $0 the creditors of the latter( Again, this strengthens the proper partiesC right to ?uestion the 3alidit0 of the e6ecution sale, definitel0 not *+B( Besides, the issue of whether *+B has a su$stantial interest o3er the *antranco properties has alread0 $een laid to rest $0 the 5a$or Ar$iter( [:!] .t is noteworth0 that in its "esolution dated )epte#$er 1 , 2 2, the 5a$or Ar$iter denied *+BCs 9hird&*art0 Clai# pri#aril0 $ecause *+B onl0 has an inchoate right o3er the *antranco properties([::] )uch conclusion was later affir#ed $0 the +5"C in its "esolution dated June 3 , 2 3([:%] +otwithstanding said conclusion, *+B did not ele3ate the #atter to the CA 3ia a petition for re3iew( Aence it is presu#ed to $e satisfied with the ad4udication therein( [:,] 9hat decision of the +5"C has $eco#e final as against *+B and can no longer $e re3iewed, #uch less re3ersed, $0 this Court([:-] 9his is in accord with the doctrine that a part0 who has not appealed cannot o$tain fro# the appellate court an0 affir#ati3e relief other than the ones

granted in the appealed decision([%

%H R +OR , pre#ises considered, the petitions are here$0 D NI D for lac1 of #erit( SO ORD R D( +nares&,antia$o, -Chairperson., Carpio/, Chico&Na'ario and Peralta, 00., concur(

Additional #e#$er in lieu of Associate Justice 2a( Alicia per -( )pecial @rder +o( !:, dated

Austria&2artine< Be$ruar0 12, 2

[1]

*enned $0 Associate Justice 2ario 5( 'uariLa ..., with Justices 2arina 5( Bu<on and Aa1i# )(

Associate 3-(

A$dulwahid, concurring7 rollo ('("( +o( 1% :,-), pp( 2!&

[2]

.d( at 81( Rollo ('("( +o( 1% :,-), pp( 1%&1,( Rollo ('("( +o( 1% % !), p( :3(

[3]

[8]

[!]

Rollo ('("( +o( 1% :,-), pp( 2!&33( 331 *hil( : , (1--:)( 3%3 *hil( !2 (1---)( 81! *hil( 38, (2 1)(

[:]

[%]

[,]

[-]

Rollo ('("( +o( 1% :,-), p( 2:( .d( at 82&8!( .d( at 2!&2:( .d( at 2:( .d( at 8-( CA rollo, pp( 113&12 ( .d( at 13,&183( Rollo ('("( +o( 1% :,-), pp( !2&!!( .d( at !!( .d( at !:&!%(

[1 ]

[11]

[12]

[13]

[18]

[1!]

[1:]

[1%]

[1,]

[1-]

.d( at !-&%3( .d( at 2%&2,( (Citations o#itted() .d( at %8&%%( Rollo ('("( +o( 1% % !), p( 13-( CA rollo, p( !3%( .d( at ! 8&!1!( .d( at !38&!8-( )upra note ,( )upra note 2( Rollo ('("( +o( 1% :,-), p( ,( .d( at 1 &11( 22: *hil( 1-- (1-,:)( Rollo ('("( +o( 1% :,-), p( 11(

[2 ]

[21]

[22]

[23]

[28]

[2!]

[2:]

[2%]

[2,]

[2-]

[3 ]

[31]

[32]

Rollo ('("( +o( 1% % !), p( !:( .d( at :1&:2( )upra note ,( '("( +os( 1%38!8 and 1%38!:, @cto$er :, 2 ,(

[33]

[38]

[3!]

[3:]

Cleo#ia !. 1rancisco, et al. v. ,ps. 0or$e C. *on'ales Purificacion 3)( 2. *on'ales, '("( +o( 1%%::%, *hil( ,7 +ao v. (on. Perello, 8:

an#

)epte#$er 1%, 2 :!,,::2 (2 .d(

[3%]

[3,]

Cleo#ia !. 1rancisco, et al. v. ,ps. 0or$e C. *on'ales 2)(

an# Purificacion 2. *on'ales, supra7 see 3anon$on v. ,a%son, 831 *hil( %2- (2

[3-]

China Ban4in$ Corporation v. D"ne&,e% Electronics :, 8-8 )C"A '("( +o(

Corporation, '("( +o( 18-23%, Jul0 11, 2 Develop%ent an# Invest%ent

8-3, 8--7 see *eneral Cre#it Corporation v. Alsons Corporation , 1!8-%!, Januar0 2-, 2 %, !13 )C"A 22!, 23%&23,(

[8 ]

China Ban4in$ Corporation v. D"ne&,e% Electronics

Corporation, supra, at 8--(

[81]

)upra note 3!( China Ban4in$ Corporation v. D"ne&,e% Electronics

[82]

Corporation, supra note 3-, at ! 1( .d( at 8--( *eneral Cre#it Corporation v. Alsons Develop%ent an#

[83]

[88]

Invest%ent Corporation, supra note 3-, at 23,( .d( .d( )upra note 3 ( Restaurante Las Conchas v. Lle$o , 3%2 *hil( :-% Na$uiat v. NLRC, 33: *hil( !8! (1--%)7

[8!]

[8:]

[8%]

[8,]

(1---)7

5al#erra%a v. NLRC, 32: *hil( 8%% (1--:)( A.C. Ranso% Labor !nion&CCL! v. +5"C, supra note

[8-]

3 , at 2 !( '("( +o( 18%!- , April 2, 2 %, !2 )C"A 2,( %, !12 )C"A 222(

[! ]

[!1]

'("( +o( 18:::%, Januar0 23, 2

[!2]

)ec( 31( Liabilit" of #irectors, trustees or officers. &

Directors or trustees who willfull0 and 1nowingl0 3ote for or assent to patentl0 unlawful acts of the corporation or who are guilt0 of gross negligence or $ad faith in directing the affairs of the corporation or ac?uire an0 personal or pecuniar0 interest in conflict with their dut0 as such directors or trustees shall $e lia$le 4ointl0 and se3erall0 for all da#ages resulting therefro# suffered $0 the corporation, its stoc1holders or #e#$ers and other persons( >hen a director, trustee or officer atte#pts to ac?uire or ac?uires, in 3iolation of his dut0, an0 interest ad3erse to the corporation in respect of an0 #atter which has $een reposed in hi# in confidence, as to which e?uit0 i#poses a disa$ilit0 upon hi# to deal in his own $ehalf, he shall $e lia$le as a trustee for the corporation and #ust account for the profits which otherwise would ha3e accrued to the corporation( Cara$ v. National Labor Relations Co%%ission , supra

[!3]

note ! , at !8&!!( *eneral Cre#it Corporation v. Alsons Develop%ent an# 1)(

[!8]

Invest%ent Corporation, supra note 3-, at 23!, 23,, 23-7 PNB v. Ritratto *roup, Inc., 818 *hil( 8-8, ! ! (2

[!!]

McLeo# v. National Labor Relations Co%%ission , supra

note !1, at 2!3( Rollo ('("( +o( 1% :,-), pp( 3:&3%( Nisce v. E6uitable PCI Ban4, Inc., '("( +o( 1:%838, %, !1: )C"A 231, 2!,7 MR (ol#in$s, *hil( 883, 8:-&8% (2 2)7 PNB

[!:]

[!%]

Be$ruar0 1-, 2

Lt#. v. ,heriff Ba7ar, 83

v. Ritratto *roup, Inc., supra note !8, at ! 3( )upra note !8( Republic v. A$uno", ,r., '("( +o( 1!!3-8, Be$ruar0 1%, !, 8!1 )C"A %3!, %8:( Ca8ete v. *enuino Ice Co%pan", Inc. , '("( +o( ,, !82 )C"A 2 :, 2227 5,C

[!,]

[!-]

[: ]

1!8 , , Januar0 22, 2 *hil( 2:-, 2%: (2 2)(

Co%%ercial Enterprises, Inc. v. Court of Appeals , 882

[:1]

Ca8ete v. *enuino Ice Co%pan", Inc. , supra, at 2227

5,C Co%%ercial Enterprises, Inc. v. Court of Appeals , supra, at 2%:&2%%( Celestial Nic4el Minin$ Exploration Corporation v. Corporation, '("( +os( 1:- , , 1%2-3:,

[:2]

Macroasia

1%:22: and 1%:31-, Dece#$er 1-, 2

%, !81 )C"A 1::,

2 37 Ca8ete v. *enuino Ice Co%pan", Inc. , supra note : , at 2227 5,C Co%%ercial Enterprises, Inc. v. Court of Appeals, supra note : , at 2%%( De Leon v. CA, 383 *hil( 2!8, 2:! (1--%)( Rollo ('("( +o( 1% :,-), p( !!( .d( at 8:&!,( .d( at !!( .d( at : &%3( ,ps. Custo#io v. CA, 323 *hil( !%!, !,3 (1--:)( .d( at !,3&!,8( !niversal ,taffin$ ,ervices, Inc. v. NLRC an# *race M. ,(

[:3]

[:8]

[:!]

[::]

[:%]

[:,]

[:-]

[% ]

Morales, '("( +o( 1%%!%:, Jul0 21, 2

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

[ G.R. No. !$2297/, -a01ar2 /0, 1968 ]


MAM',!AO !,M' R COMPAN", P!AINTI++$APP !!ANT, VS. PHI!IPPIN NATIONA! 'AN) AND ANAC! TO H RA!DO, D P,T" PROVINCIA! SH RI++ O+ CAMARIN S NORT , D + NDANTS$ APP !!
ANG ! S, -..

S. D

CISION

An appeal fro# a decision, dated April 2, 1-:8, of the Court of Birst .nstance of 2anila in Ci3il Case +o( !2 ,-, entitled J2a#$ulao 5u#$er Co#pan0, plaintiff, 3ersus *hilippine defendants +ational and Ban1 the and the Anacleto plaintiff to Aeraldo, $oth to pa0 defendantsJ, dis#issing co#plaint against

sentencing

defendant *hilippine +ational Ban1 (*+B for short) the su# of *3,!,2(!2 with interest thereon at the rate of :M per annu# fro# Dece#$er 22, 1-:1 until full0 paid, and the costs of suit( .n see1ing the re3ersal of the decision, the plaintiff ad3ances se3eral propositions in its $rief which #a0 $e

restated as follows; 1( 9hat its total inde$tedness to the *+B as of +o3e#$er 21, 1-:1, was onl0 *!:,8,!(,% and not *!,,213(!1 as concluded $0 the court a ?uo7 hence, the proceeds of the foreclosure sale of its real propert0 alone in the a#ount of *!:,- ,( on that date, added to the su# of *%3,(!- it re#itted to the *+B thereafter was #ore than sufficient to li?uidate its o$ligation, there$0 rendering the su$se?uent foreclosure sale of its chattels unlawful7 2( 9hat it is not lia$le to pa0 *+B the a#ount of

*!,,21(3! for attorne0Cs fees and the additional su# of *2-,(!8 as e6penses of the foreclosure sale7 3( 9hat the su$se?uent foreclosure sale of its chattels is null and 3oid, not onl0 $ecause it had alread0 settled its inde$tedness to the *+B at the ti#e the sale was effected, $ut also for the reason that the said sale was not conducted in accordance with the pro3isions of the Chattel 2ortgage 5aw and the 3enue agreed upon $0 the parties in the #ortgage contract7 8( 9hat the *+B, ha3ing illegall0 sold the chattels, is lia$le to the plaintiff for its 3alue7 and !( 9hat for the acts of the *+B in proceeding with the sale of the chattels, in utter disregard of plaintiffCs 3igorous opposition thereto, and in ta1ing possession thereof after

the

sale

thru

force,

inti#idation,

coercion,

and

$0

detaining its J#an&in&chargeJ of said properties, the *+B is lia$le to plaintiff for da#ages and attorne0Cs fees( 9he antecedent facts of the case, as found $0 the trial court, are as follows; J@n 2a0 !, 1-!:, the plaintiff applied for an industrial loan of *1!!, and *1 , with the +aga Branch of defendant *+B e?uip#ents was as collaterals( for a loan 9he of and the for#er offered real estate, #achiner0, logging transportation application, howe3er, appro3ed

onl0( 9o secure the pa0#ent of the loan, the

plaintiff #ortgaged to defendant *+B a parcel of land, together with the $uildings and i#pro3e#ents e6isting thereon, situated in the po$lacion of Jose *angani$an (for#erl0 2a#$ulao), pro3ince of Ca#arines +orte, and co3ered $0 9ransfer Certificate of 9itle +o( 3,1 of the land records of said pro3ince, as well as 3arious saw#ill e?uip#ent, rolling unit and other fi6ed assets of the plaintiff, all situated in its co#pound in the afore#entioned #unicipalit0( J@n August 2, 1-!:, the *+B released fro# the appro3ed loan the su# of *2%,! , for which the plaintiff signed a pro#issor0 note wherein it pro#ised to pa0 to the *+B the said su# in fi3e e?ual 0earl0 install#ents at the rate of *:,!2,(8 $eginning Jul0 31, 1-!%, and e3er0 0ear thereafter, the last of which would $e on Jul0 31, 1-:1(

J@n @cto$er 1-, 1-!:, the *+B #ade another release of *1!,! as part of the appro3ed loan granted to the plaintiff and so on the said date, the latter e6ecuted a& nother pro#issor0 note wherein it agreed to pa0 to the for#er the said su# in fi3e e?ual 0earl0 install#ents at the rate of *3,:%-(:8 $eginning Jul0 31, 1-!%, and ending on Jul0 31, 1-:1( J9he plaintiff failed to pa0 the a#orti<ations on the a#ounts released to and recei3ed $0 it( de#ands were #ade upon the plaintiff "epeated to pa0 its

o$ligation $ut it failed or otherwise refused to do so( Fpon inspection and 3erification #ade $0 e#plo0ees of the *+B, it was found that the plaintiff had alread0 stopped operation a$out the end of 1-!% or earl0 part of 1-!,( J@n )epte#$er 2%, 1-:1, the *+B sent a letter to the *ro3incial )heriff of Ca#arines +orte re?uesting hi# to ta1e possession of the parcel of land, together with the i#pro3e#ents e6isting thereon, co3ered $0 9ransfer Cer& tificate of 9itle +o( 3,1 of the land records of Ca#arines +orte, and to sell it at pu$lic auction in accordance with the pro3isions of Act +o( 313!, as a#ended, for the satisfaction of the unpaid o$ligation of the plaintiff, which as of )epte#$er 22, 1-:1, a#ounted to *!%,:8:(!-, e6cluding attorne0Cs fees( .n co#pliance with the re?uest, on @cto$er 1:, 1-:1, the *ro3incial )heriff of Ca#arines +orte issued the corresponding notice of e6tra&4udicial

foreclosure sale and sent a cop0 thereof to the plaintiff( According to the notice, the #ortgaged propert0 would $e sold at pu$lic auction at 1 ; Ca#arines +orte( J@n +o3e#$er :, 1-:1, the *+B sent a letter to the *ro3incial )heriff of Ca#arines +orte re?uesting hi# to ta1e possession of the chattels #ortgaged to it $0 the plaintiff and sell the# as pu$lic auction also on +o3e#$er 21, 1-:1, for the satisfaction of the su# of *!%,:8:(!-, plus :M annual interest thereon fro# )epte#$er 23, 1-:1, attorne0Cs fees e?ui3alent to 1 M of the a#ount due and the costs and e6penses of the sale( @n the sa#e da0, the *+B sent notice to the plaintiff that the for#er was foreclosing e6tra4udiciall0 the chattels #ortgaged $0 the latter and that the auction sale thereof would $e held on +o3e#$er 21, 1-:1, $etween -; 2a#$ulao, Ca#arines +orte, chattels were situated( J@n +o3e#$er ,, 1-:1, Deput0 *ro3incial )heriff Anacleto Aeraldo too1 possession of the chattels #ortgaged $0 the plaintiff and #ade an in3entor0 thereof in the presence of a *C )ergeant and a police#an of the #unicipalit0 of Jose *angani$an( @n +o3e#$er -, 1-:1, the said Deput0 )heriff issued the corresponding notice of pu$lic auction sale of the #ortgaged chattels to $e held on +o3e#$er 21, 1-:1, at 1 ; a(#(, at the plaintiffCs co#pound and 12; the a(#(, in #ortgaged where a(#( on +o3e#$er 21, 1-:1, at the ground floor of the Court Aouse in Daet,

situated in the #unicipalit0 of Jose *angani$an, *ro3ince of Ca#arines +orte( J@n +o3e#$er 1-, 1-:1, the plaintiff sent separate letters, posted as registered air #ail #atter, one to the +aga Branch of the *+B and another to the *ro3incial )heriff of Ca#arines +orte, protesting against the foreclosure of the real estate and chattel #ortgages on the grounds that the0 could not $e effected unless a CourtCs order was issued against it (plaintiff) for said purpose and that the foreclosure proceedings, according to the ter#s of the #ortgage contracts, should $e #ade in 2anila( .n said letter to the +aga Branch of the *+B, it was inti#ated that if the pu$lic auction sale would $e suspended and the plaintiff would $e gi3en an e6tension of ninet0 (- ) da0s, its o$ligation would $e settled satis& factoril0 $ecause an i#portant negotiation was then going on for the sale of its Jwhole interestJ for an a#ount #ore than sufficient to li?uidate said o$ligation( J9he letter of the plaintiff to the +aga Branch of the *+B was construed $0 the latter as a re?uest for e6tension of the foreclosure sale of the #ortgaged chattels and so it ad3ised the )heriff of Ca#arines +orte to defer it to Dece#$er 21, 1-:1, at the sa#e ti#e and place( A cop0 of said ad3ice was sent to the plaintiff for its infor#ation and guidance( J9he foreclosure sale of the parcel of land, together with the $uildings and i#pro3e#ents thereon, co3ered $0

9ransfer Certificate of 9itle +o( 3,1, was, howe3er, held on +o3e#$er 21, 1-:1, and the said propert0 was sold to the *+B for the su# of *!:,- ,( 0ear( , su$4ect to the right of the plaintiff to redee# the sa#e within a period of one @n the sa#e date, Deput0 *ro3incial )heriff Aeraldo e6ecuted a certificate of sale in fa3or of the *+B and a cop0 thereof was sent to the plaintiff( J.n a letter dated Dece#$er 18, 1-:1 ($ut apparentl0 posted se3eral da0s later), the plaintiff sent a $an1 draft for *%3,(!- to the +aga Branch of the *+B, allegedl0 in full settle#ent of the $alance of the o$ligation of the plaintiff after the application thereto of the su# of *!:,- ,( representing the proceeds of the foreclosure sale of parcel of land descri$ed in 9ransfer Certificate of 9itle +o( 3,1( .n the said letter, the plaintiff reiterated its re?uest that the foreclosure sale of the #ortgaged chattels $e discontinued on the grounds that the #ortgaged inde$tedness had $een full0 paid and that it could not $e legall0 effected at a place other than the Cit0 of 2anila( J.n a letter dated Dece#$er 1:, 1-:1, the plaintiff ad3ised the *ro3incial )heriff of Ca#arines +orte that it had full0 paid its o$ligation to the *+B, and enclosed therewith a cop0 of its letter to the latter dated Dece#$er 18, 1-:1( J@n Dece#$er 1,, 1-:1, the Attorne0 of the +aga Branch of the *+B, wrote to the plaintiff ac1nowledging the

re#ittance of *%3,(!- with the ad3ice, howe3er, that as of that date the $alance of the account of the plaintiff was *-,1:1(%:, to which should $e added the e6penses of guarding the #ortgaged chattels at the rate of *8( da0 $eginning Dece#$er 1-, 1-:1( a .t was further

e6plained in said letter that the su# of *!%,:8:(!-, which was stated in the re?uest for the foreclosure of the real estate #ortgage, did not include the 1 M attorne0Cs fees and e6penses of the sale( Accordingl0, the plaintiff was ad3ised that the foreclosure sale scheduled on the 21st of said #onth would $e stopped if a re#ittance of *-,1:1(%:, plus interest thereon and guarding fees, would $e #ade( J@n Dece#$er 21, 1-:1, the foreclosure sale of the #ortgaged chattels was held at 1 ; a(#( and the0 were and the awarded to the *+B for the su# of *8,2 *ro3incial )heriff Aeraldo( J.n a letter dated Dece#$er 2:, 1-:1, the 2anager of the +aga Branch of the *+B ad3ised the plaintiff gi3ing it priorit0 to repurchase the chattels ac?uired $0 the for#er at pu$lic auction( 9his offer was reiterated in a letter dated Januar0 3, 1-:2, of the Attorne0 of the +aga Branch of the *+B to the plaintiff, with the suggestion that it e6ercise its right of rede#ption and that it appl0 for the condonation of the attorne0Cs fees( 9he plaintiff did not follow the ad3ice $ut on the contrar0 it #ade 1nown of its

corresponding $ill of sale was issued in its fa3or $0 Deput0

intention to file appropriate action or actions for the protection of its interests( J@n 2a0 28, 1-:2, se3eral e#plo0ees of the *+B arri3ed in the co#pound of the plaintiff in Jose *angani$an, Ca#arines +orte, and the0 infor#ed 5uis )algado, Chief )ecurit0 'uard of the pre#ises, that the properties therein had $een auctioned and $ought $0 the *+B, which in turn sold the# to 2ariano Bundo1( Fpon $eing ad3ised that the purchaser would ta1e deli3er0 of the things he $ought, )algado was at first reluctant to allow an0 piece of propert0 to $e ta1en out of the co#pound of the plaintiff( 9he e#plo0ees of the *+B e6plained that should )algado refuse, he would $e e6posing hi#self to a litigation wherein he could $e held lia$le to pa0 $ig su# of #one0 $0 wa0 of da#ages( Apprehensi3e of the ris1 that he would ta1e, )algado i##ediatel0 sent a wire to the *resident of the plaintiff in 2anila, as1ing ad3ice as to what he should do( .n the #eanti#e, 2ariano Bundo1 was a$le to ta1e out fro# the plaintiffCs co#pound two truc1 loads of e?uip#ent( J.n the afternoon of the sa#e da0, )algado recei3ed a telegra# fro# plaintiffCs *resident directing hi# not to deli3er the CchattelsC without court order, with the infor#ation that the co#pan0 was then filing an action for da#ages against the *+B( @n the following da0, 2a0 2!, 1-:2, two truc1s and #en of 2ariano Bundo1 arri3ed $ut )algado did not per#it the# to ta1e out an0 e?uip#ent

fro# inside the co#pound of the plaintiff(

9hru the

inter3ention, howe3er, of the local police and *C soldiers, the truc1s of 2ariano Bundo1 were a$le finall0 to haul the properties originall0 #ortgaged $0 the plaintiff to the *+B, which were $ought $0 it at the foreclosure sale and su$se?uentl0 sold to 2ariano Bundo1(J Fpon the foregoing facts, the trial court rendered the decision appealed fro# which, as stated in the first paragraph of this opinion, sentenced the 2a#$ulao 5u#$er Co#pan0 to pa0 to the defendant *+B the su# of *3,!,2(!2 with interest thereon at the rate of :M per annu# fro# Dece#$er 22, 1-:1 (da0 following the date of the ?uestioned foreclosure of plaintiffCs chattels) until full0 paid, and the costs( 2a#$ulao 5u#$er Co#pan0 interposed the instant appeal( >e shall discuss the 3arious points raised in appellantCs $rief in seriati#( 9he first ?uestion 2a#$ulao 5u#$er Co#pan0 poses is that which relates to the a#ount of its inde$tedness to the *+B arising out of the principal loans and the accrued interest thereon( .t is contended that its o$ligation under the ter#s of the two pro#issor0 notes it had e6ecuted in fa3or of the *+B a#ounts onl0 to *!:,8,!(,% as of +o3e#$er 21, 1-:1, when the sale of real propert0 was effected, and not *!,,213(!1 as found $0 the trial court( 9here is #erit to this clai#( /6a#ining the ter#s of the

pro#issor0 note e6ecuted $0 the appellant in fa3or of the *+B, we find that the agreed interest on the loan of *83, *1!,! ( ( & *2%,! released ( on released on August 2, 1-!:, as @cto$er 1-, 1-!:, as per per pro#issor0 note of e3en date (/6hi$it C&3), and pro#issor0 note of the sa#e date (/6hi$it C&8) & was si6 per cent (:M) per annu# fro# the respecti3e date of said notes Juntil paidJ( .n the state#ent of account of the appellant as of )epte#$er 22, 1-:1, su$#itted $0 the *+B, it appears that in arri3ing at the total inde$tedness *!%,:8:(!- as of that date, the *+B had co#pounded the principal of the loan and the accrued :M interest thereon each ti#e the 0earl0 a#orti<ations $eca#e due, and on the $asis of these co#pounded a#ounts charged additional delin?uenc0 interest on the# up to )epte#$er 22, 1-:17 and to this erroneousl0 co#puted total of *!%,:8:(!-, the trial court added :M interest per annu# fro# )epte#$er 23, 1-:1 to +o3e#$er 21 of the sa#e 0ear( .n effect, the *+B has clai#ed, and the trial court has ad4udicated to it, interest on accrued interests fro# the ti#e the 3arious a#orti<ations of the loan $eca#e due until the real estate #ortgage e6ecuted to secure the loan was e6tra&4udiciall0 foreclosed on +o3e#$er 21, 1-:1( 9his is an error( pro#issor0 note )ection ! of Act +o( 2:!! e6pressl0 or other instru#ent or contract, pro3ides that in co#puting the interest on an0 o$ligation, co#pound interest shall not $e rec1oned, e6cept $0

agree#ent, or in default thereof, whene3er the de$t is 4udiciall0 clai#ed( 9his is also the clear #andate of Article 2212 of the new Ci3il Code which pro3ides that interest due shall earn legal interest onl0 fro# the ti#e it is 4udiciall0 de#anded, and of Article 1-!- of the sa#e code which ordains that interest due and unpaid shall not earn interest( @f course, the parties #a0, $0 stipulation, capitali<e the interest due and unpaid, which as added principal shall earn new interest7 $ut such stipulation is nowhere to $e found in the ter#s of the pro#issor0 notes in3ol3ed in this case( Clearl0 therefore, the trial court fell into error when it awarded interest on accrued interests, without an0 agree#ent to that effect and $efore the0 had $een 4udiciall0 de#anded( Appellant ne6t assails the award of attorne0Cs fees and the e6penses of the foreclosure sale in fa3or of the *+B( >ith respect to the a#ount of *2-,(!8 allowed a e6penses of the e6tra&4udicial sale of the real propert0, appellant #aintains that the sa#e has no $asis, factual or legal, and should not ha3e $een awarded( .t li1ewise decries the award of attorne0Cs fees which, according to the appellant, should not $e deducted fro# the proceeds of the sale of the real propert0, not onl0 $ecause there is no e6press agree#ent in the real estate #ortgage contract to pa0 attorne0Cs fees in case the sa#e is e6tra&4udiciall0 foreclosed, $ut also for the reason that the *+B neither spent nor incurred an0 o$ligation to pa0 attorne0Cs fees in

connection with the said e6tra&4udicial foreclosure under consideration( 9here is reason for the appellant to assail the award of *2-,(!8 as e6penses of the sale( .n this respect, the trial court said; J9he parcel of land, together with the $uildings and i#pro3e#ents e6isting thereon co3ered $0 9ransfer Certificate of 9itle +o( 3,1, was sold for *!:,- ,( 9here was, howe3er, no e3idence how #uch was the e6penses of the foreclosure sale although fro# the pertinent pro3isions of the "ules of Court, the )heriffCs fees would $e *1 for ad3ertising the sale (par( 1, )ec( %, "ule 13 (par( n, )ec( %, "ule 13 *2-,(!8(J 9here is reall0 no e3idence of record to support the conclusion that the *+B is entitled to the a#ount awarded as e6penses of the e6tra&4udicial foreclosure sale( 9he court $elow co##itted error in appl0ing the pro3isions of the "ules of Court for purposes of arri3ing at the a#ount awarded( 13 .t is to $e $orne in #ind that the fees enu#erated under paragraphs 1 and n, )ection %, of "ule (now "ule 181) are de#anda$le onl0 $0 a sheriff ser3ing processes of he court in connection with 4udicial foreclosure of #ortgages under "ule :, of the new "ules, and not in cases of e6tra&4udicial foreclosure of #ortgages of the @ld "ules) and *2-%(!8 as his co##ission for the sale of the @ld "ules) or a total of

under Act 313!( 9he law applica$le is )ection 8 of Act 313! which pro3ides that the officer conducting the sale is entitled to collect a fee of *!( for each da0 of actual wor1 perfor#ed in addition to his e6penses in connection with the foreclosure sale( Ad#ittedl0, the *+B failed to pro3e during the trial of the case, that it actuall0 spent an0 a#ount in connection with the said foreclosure sale( +either #a0 e6penses for pu$lication of the notice $e legall0 allowed in the a$sence of e3idence on record to support it(
[1]

.t is true, as pointed out $0 the appellee

$an1, that courts should ta1e 4udicial notice of the fees pro3ided for $0 law which need not $e pro3ed7 $ut in the a$sence of e3idence to show at least the nu#$er of wor1ing da0s the sheriff concerned actuall0 spent in connection with the e6tra&4udicial foreclosure sale, the #ost that he #a0 $e entitled to, would $e the a#ount of *1 ( as a reasona$le allowance for two da0Cs wor1 & one for the preparation of the necessar0 notices of sale, and the other for conducting the auction sale and issuance of the corresponding certificate of sale in fa3or of the $u0er( @$3iousl0, therefore, the award of *2-,(!8 as e6penses of the sale should $e set aside( But the clai# of the appellant that the real estate #ortgage does not pro3ide for attorne0Cs fees in case the sa#e is e6tra&4udiciall0 foreclosed, cannot $e fa3ora$l0 considered, as would readil0 $e re3ealed $0 an e6a#ination of the pertinent pro3ision of the #ortgage

contract(

9he parties to the #ortgage appear to ha3e

stipulated under paragraph (c) thereof, inter alia; J6 6 6 Bor the purpose of e6tra&4udicial foreclosure, the 2ortgagor here$0 appoints the 2ortgagee his attorne0&in& fact to sell the propert0 #ortgaged under Act 313!, as a#ended, to sign all docu#ents and to perfor# all acts re?uisite and necessar0 to acco#plish said purpose and to appoint its su$stitute as such attorne0&in&fact with the sa#e powers as a$o3e specified( foreclosure, the 2ortgagor here$0 .n case of 4udicial consents to the

appoint#ent of the 2ortgagee or an0 of its e#plo0ees as recei3er, without an0 $ond, to ta1e charge of the #ortgaged propert0 at once, and to hold possession of the sa#e and the rents, $enefits and profits deri3ed fro# the #ortgaged propert0 $efore the sale, less the costs and e6penses of the recei3ership7 the 2ortgagor here$0 agrees further that in all cases, attorne0Cs fees here$0 fi6ed at 9en *er Cent (1 M) of the total inde$tedness then unpaid, which is no case shall $e less than *1 ( e6clusi3e of all fees allowed $0 law, and the e6penses of collection shall $e the o$ligation of the 2ortgagor and shall with priorit0, $e paid to the 2ortgagee out of an0 su#s reali<ed as rents and pro deri3ed fro# the #ortgaged propert0 or fro# the proceeds reali<ed fro# the sale of the said propert0 and this #ortgage shall li1ewise stand as securit0 therefor( 6 6 6(J >e find the a$o3e stipulation to pa0 attorne0Cs fees clear

enough to co3er $oth cases of foreclosure sale #entioned thereunder, i( e(, 4udiciall0 or e6tra&4udiciall0( >hile the phrase Jin all casesJ appears to $e part of the second sentence, a reading of the whole conte6t of the stipulation would readil0 show that it logicall0 refers to e6tra&4udicial foreclosure found in the first sentence and to 4udicial foreclosure #entioned in the ne6t sentence( And the a#$iguit0 in the stipulation suggested and pointed out $0 the appeal $0 reason of the fault0 sentence construction should not $e #ade to defeat the otherwise clear intention of the parties in the agree#ent( .t is suggested $0 the appellant, howe3er, that e3en if the a$o3e stipulation to pa0 attorne0Cs fees were applica$le to the e6tra&4udicial foreclosure sale of its real properties, still, the award of *!,,21(3! for attorne0Cs fees has no legal 4ustification, considering the circu#stance that the *+B did not actuall0 spend an0thing $0 wa0 of attorne0Cs fees in connection with the sale( .n support of this proposition, appellant cites authorities to the effect; (1) that when the #ortgagee has neither paid nor incurred an0 o$ligation to pa0 an attorne0 in connection with the foreclosure sale, the clai# for such fees should $e denied7
[2]

and (2) that attorne0Cs fees will not $e allowed when the

attorne0 conducting the foreclosure proceedings is an officer of the corporation (#ortgagee) who recei3es a salar0 for all the legal ser3ices perfor#ed $0 hi# for the corporation(
[3]

9hese authorities are indeed enlightening7

$ut the0 should not $e applied in this case(

9he 3er0

sa#e authorit0 first cited suggests that said principle is not a$solute, for there is authorit0 to the contrar0( As to the fact that the foreclosure proceedings were handled $0 an attorne0 of the legal staff of the *+B, we are reluctant to e6onerate herein appellant fro# the pa0#ent of the stipulated attorne0Cs fees on this ground alone, considering the e6press agree#ent $etween the parties in the #ortgage contract under which appellant $eca#e lia$le to pa0 the sa#e( At an0 rate, we find #erit in the contention of the appellant that the award of *!,,21(3! in fa3or of the *+B as attorne0Cs fees is unconsciona$le and unreasona$le, considering that all that the $ranch attorne0 of the said $an1 did in connection with the foreclosure sale of the real propert0 was to file a petition with the pro3incial sheriff of Ca#arines +orte re?uesting the latter to sell the so#e in accordance with the pro3isions of Act 313!( 9he principle fees that courts should it is reduce found stipulated under the

attorne0Cs

whene3er

circu#stances of the case that the sa#e is unreasona$le, is now deepl0 rooted in this 4urisdiction to entertain an0 serious o$4ection to it( 9hus, this Court has e6plained; JBut the principle that it #a0 $e lawfull0 stipulated that the legal e6penses in3ol3ed in the collection of a de$t shall $e defra0ed $0 the de$tor does not i#pl0 that such

stipulations #ust $e enforced in accordance with the ter#s, no #atter how in4urious or oppressi3e the0 #a0 $e( 9he lawful purpose to $e acco#plished $0 such a stipulation is to per#it the creditor to recei3e the a#ount due hi# under his contract without a deduction of the e6penses caused $0 the delin?uenc0 of the de$tor( .t should not $e per#itted for hi# to con3ert such a stipulation into a source of speculati3e profit at the e6pense of the de$tor( JContracts for attorne0Cs ser3ices in this 4urisdiction stands upon an entirel0 different footing fro# contracts for the pa0#ent of co#pensation for an0 other ser3ices( B0 e6press pro3ision of section 2- of the Code of Ci3il *rocedure, an attorne0 is not entitled in a$sence of e6press contract to reco3er #ore than a reasona$le co#pensation for his ser3ices7 and e3en when an e6press contract is #ade the court can ignore it and li#it the reco3er0 to reasona$le co#pensation if the a#ount of the stipulated fee is found $0 the court to $e unreasona$le( 9his is a 3er0 different rule fro# that announced in section 1 -1 of the Ci3il Code with reference to the o$ligation of contracts in general, where it is said that such o$ligation has the force of law $etween the contracting parties( Aad the plaintiff herein #ade an e6press contract to pa0 his attorne0 an uncontingent fee of *2,11!(2! for the ser3ices to $e rendered in reducing the note here in suit to 4udg#ent, it would not ha3e $ees enforced against hi#

had he seen fit to oppose it, as such a fee is o$3iousl0 far greater than is necessar0 to re#unerate the attorne0 for the wor1 in3ol3ed and is therefore unreasona$le( .n order to ena$le the court to ignore an e6press contract for an attorne0Cs fees, it is not necessar0 to show, as in other contracts, that it is contrar0 to #oralit0 or pu$lic polic0 (Art( 12!!, Ci3il Code)( .t is
[8]

enough

that

it

is

unreasona$le or unconsciona$le(J

)ince then this Court has in3aria$l0 fi6ed counsel fees on a ?uantu# #eruit $asis whene3er the fees stipulated appear e6cessi3e, unconsciona$le, or unreasona$le, $ecause a law0er is pri#aril0 a court officer charged with the dut0 of assisting the court in ad#inistering i#partial 4ustice $etween the parties, and hence, the fees should $e su$4ect to 4udicial control( +or should it $e ignored that sound pu$lic polic0 de#ands that courts disregard stipu& lations for counsel fees, whene3er the0 appear to $e a source of speculati3e profit at the e6pense of the de$tor or #ortgagor(
[!]

And it is not #aterial that the present

action is $etween the de$tor and the creditor, and not $etween attorne0 and client( As court ha3e power to fi6 the fee as $etween attorne0 and client, it #ust necessaril0 ha3e the right to sa0 whether a stipulation li1e this, inserted in a #ortgage contract, is 3alid(
[:]

.n deter#ining the co#pensation of an attorne0, the following circu#stances should $e considered; the a#ount and character of the ser3ices rendered7 the

responsi$ilit0 i#posed7 the a#ount of #one0 or the 3alue of the propert0 affected $0 the contro3ers0, or in3ol3ed in the e#plo0#ent7 the s1ill and e6perience called for in the perfor#ance of the ser3ice7 the professional standing of the attorne07 the results secured7 and whether or not the fee is contingent or a$solute, it $eing a recogni<ed rule that an attorne0 #a0 properl0 charge a #uch larger fee when it is to $e contingent than when it is not( appears that the agreed fee is 1 M of
[%]

Bro# the the total

stipulation in the #ortgage contract earlier ?uoted, it inde$tedness, irrespecti3e of the #anner the foreclosure of the #ortgage is to $e effected( 9he agree#ent is perhaps fair enough in case the foreclosure proceedings is prosecuted 4udiciall0 $ut, surel0, it is unreasona$le when, as in this case, the #ortgage was foreclosed e6tra& 4udiciall0, and all that the attorne0 did was to file a petition for foreclosure with the sheriff concerned( .t is to $e assu#ed though, that the said $ranch attorne0 of the *+B #ade a stud0 of the case $efore deciding to file the petition for foreclosure7 $ut e3en with this in #ind, we $elie3e the a#ount of *!,,21(3! is far too e6cessi3e a fee for such ser3ices( Considering the a$o3e circu#stances #entioned, it is our considered opinion that the a#ount of *1, ( would $e #ore than sufficient to co#pensate the wor1 afore#entioned( 9he ne6t issue raised deals with the clai# that the proceeds of the sale of the real properties alone together

with the a#ount it re#itted to the *+B later was #ore than sufficient to li?uidate its total o$ligation to herein appellee $an1( Again, we find #erit in this clai#( Bro# the foregoing discussion of the first two errors assigned, and for purposes of deter#ining the total o$ligation of herein appellant to the *+B as of +o3e#$er 21, 1-:1 when the real estate #ortgage was foreclosed, we ha3e the following illustration in support of this conclusion; A( &

.( *rincipal 5oan (a) *ro#issor0 note dated August 2, 1-!: ( ( ( ( ( ( ( ( ( ( *2%,! ( (1) .nterest at :M per annu# fro# Aug( 2, 1-!: to +o3( 21, 1-:1( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ($) *ro#issor0 note dated @cto$er 1-, 1-!: ( ( ( ( ( ( ( ( ( (1) .nterest at :M per annu# fro# @ct( 1-, 1-!: to +o3( 21, 1-:1 ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ..( )heriffNs fees (for two [2] 8,%38( , *1!,! ( ,,%!1(%, (

da0Cs wor1 ( ( ( ( ( ( ( ( ( ( ( ( ( (((( ...( Attorne0Cs fees ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( 9otal o$ligation as of +o3( 21, 1-:1 ( ( ( ( ( ( (
B( &

1 ( 1, (

*!%,8-!(,:

.( *roceeds of the foreclosure sale of the real estate #ort& gage on +o3( 21, 1-:1 ( ( ( ( ( ( ( ( ( ..( Additional a#ount re#itted to the *+B on Dec( 1,, 1-:1 ( ( ( ( 9otal a#ount of *a0#ent #ade to *+B as of Dec( 1,, 1-:1( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( (( Deduct; 9otal o$ligation to the *+B ( ( ( ( ( ( ( ( ( ( ( /6cess *a0#ent to the *+B ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( * (
Bro# the foregoing illustration or co#putation, it is clear

*!:,- ,(

%3,(!-

*!%,:8:(!-

*!%,8-!(,: 1! (%3

that there was no further necessit0 to foreclose the #ortgage of herein appellantCs chattels on Dece#$er 21, 1-:17 and on this ground alone, we #a0 declare the sale of appellantCs chattels on the said date, illegal and 3oid( But we ta1e into consideration the fact that the *+B #ust ha3e $een led to $elie3e that the stipulated 1 M of the unpaid loan four attorne0Cs fees in the real estate #ortgage was legall0 #aintaina$le, and in accordance with such $elief, herein appellee $an1 insisted that the proceeds of the sale of appellantCs real propert0 was deficient to li?uidate the latterCs total inde$tedness( Be that as it #a0, howe3er, we still find the su$se?uent sale of herein appellantCs chattels illegal and o$4ectiona$le on other grounds( 9hat appellant 3igorousl0 o$4ected to the foreclosure of its chattel #ortgage after the foreclosure of its real estate #ortgage on +o3e#$er 21, 1-:1, cannot $e dou$ted, as shown not onl0 $0 its letter to the *+B on +o3e#$er 1-, 1-:1, $ut also in its letter to the pro3incial sheriff of Ca#arines +orte on the sa#e date( 9hese letters were followed $0 another letter to the appellee $an1 on Dece#$er 18, 1-:1, wherein herein appellant, in no uncertain ter#s, reiterated its o$4ection to the scheduled sale of its chattels on Dece#$er 21, 1-:1 at Jose *angani$an, Ca#arines +orte for the reasons therein stated that; (1) it had settled in full its total o$ligation to the *+B $0 the sale of the real estate and its su$se?uent

re#ittance of the a#ount of *%3,(!-7 and (2) that the conte#plated sale at Jose *angani$an would 3iolate their agree#ent e#$odied under paragraph (i) in the Chattel 2ortgage which pro3ides as follows; J(i) .n case of $oth 4udicial and e6tra&4udicial foreclosure under Act 1! ,, as a#ended, the parties hereto agree that the corresponding co#plaint for foreclosure of the petition for sale should $e filed with the courts or the sheriff of the Cit0 of 2anila, as the case #a0 $e7 and that the 2ortgagor shall pa0 attorne0Cs fees here$0 fi6ed at ten per cent (1 M) of the total inde$tedness then unpaid $ut in no case shall it $e less than *1 incurred in connection with the ( said , e6clusi3e of foreclosure(J all costs and fees allowed $0 law and of other e6penses [Fnderscoring supplied] +otwithstanding the a$o3e&?uoted agree#ent in the chattel #ortgage contract, and in utter disregard of the o$4ection of herein appellant to the sale of its chattels at Jose *angani$an, Ca#arines +orte and not in the Cit0 of 2anila as agreed upon, the *+B proceeded with the foreclosure sale of said chattels( 9he trial court, howe3er, 4ustified said action of the *+B in the decision appealed fro# in the following rationale; J>hile it is true that it was stipulated in the chattel #ortgage contract that a petition for the e6tra&4udicial foreclosure thereof should $e filed with the )heriff of the

Cit0 of 2anila, ne3ertheless, the effect thereof was #erel0 to pro3ide another place where the #ortgage chattel could $e sold, in addition to those specified in the Chattel 2ortgage 5aw( .ndeed, a stipulation in a contract cannot a$rogate #uch less i#pliedl0 repeal a specific pro3ision of the statute( Considering that )ection 18 of Act +o( 1! , 3ests in the #orgagee the choice where the foreclosure sale should $e held, hence, in the case under consideration, the *+B has three places fro# which to select, na#el0; (1) the place of residence of the #ortgagor7 (2) the place of the #ortgaged chattels were situated7 and (3) the place stipulated in the contract( 9he *+B selected the second and, accordingl0, the foreclosure sale held in Jose *angani$an, Ca#arines +orte, was legal and 3alid(J 9o the foregoing conclusion, >e disagree( >hile the law grants power and authorit0 to the #ortgagee to sell the #ortgaged propert0 at a pu$lic place in the #unicipalit0 where the #ortgagor resides, or where the propert0 is situated, this Court has said that the sale of a #ortgaged
[,]

chattel #a0 $e #ade in a place other than that where it is found, pro3ided that the owner thereof consents thereto7 or that there is an agree#ent to this effect $etween the #ortgagor and the #ortgagee( But when, as in this case,
[-]

the parties agreed to ha3e the sale of the #ortgaged chattels in the Cit0 of 2anila, which, an0 wa0, is the residence of the #ortgagor, it cannot $e rightl0 said that

the #ortgagee still retained the power and authorit0 to select fro# a#ong the places pro3ided for in the law and the place designated of the in their agree#ent, .n pro3iding o3er that the the o$4ection #ortgagor(

#ortgaged chattel #a0 $e sold at the place of residences of the #ortgagor or the place where it is situated, at the option of the #ortgagee, the law clearl0 conte#plated $enefits not onl0 to the #ortgagor $ut to the #ortgagee as well( 9heir rights arising thereunder, howe3er, are personal to the#7 the0 do not affect either pu$lic polic0 or the rights of third persons( 9he0 #a0 3alidl0 $e wai3ed( )o, when herein #ortgagor and #ortgagee agreed in the #ortgage contract that in cases of $oth 4udicial and e6tra& 4udicial foreclosure under Act 1! ,, as a#ended, the corresponding co#plaint for foreclosure or the petition for sale should $e filed with the courts or the )heriff of 2anila, as the case #a0 $e, the0 wai3ed their corresponding rights under the law( 9he correlati3e o$li& gation arising fro# that agree#ent ha3e the force of law $etween the# and should $e co#plied with in good faith(
[1 ]

JB0 said agree#ent the parties wai3ed the legal 3enue, and such wai3er is 3alid and legall0 effecti3e, $ecause it was #erel0 a personal pri3ilege the0 wai3ed, which is not contrar0 to pu$lic polic0 or to the pre4udice of third persons( .t is a general principle that a person #a0 renounce an0 right which the law gi3es unless such

renunciation is e6pressl0 prohi$ited or the right conferred is of such nature that its renunciation would $e against pu$lic polic0(J
[11]

J@n the other hand, if a place of sale is specified in the #ortgage and statutor0 re?uire#ents in regard thereto are co#plied with, a sale is properl0 conducted in that place( .ndeed, in the a$sence of a statute to the contrar0, a sale conducted at a place other than that stipulated for in the #ortgage is in3alid, unless the #ortgagor consents to such sale(J
[12]

2oreo3er, )ection 18 of Act 1! ,, as a#ended, pro3ides that the officer #a1ing the sale should #a1e a return of his doings which shall particularl0 descri$e the articles sold and the a#ount recei3ed fro# each article( Bro# this, it is clear that the law re?uires that sale $e #ade article $0 article, otherwise, it would $e i#possi$le for hi# to state the #ount recei3ed for each ite#( 9his re?uire& #ent was totall0 disregarded $0 the Deput0 )heriff of Ca#arines +orte when he sold the chattels in ?uestion in $ul1, notwithstanding the fact that the said chattels consisted of no less than twent0 different ite#s as shown in the $ill of sale(
[13]

9his #a1es the sale of the chattels And in the a$sence of an0

#anifestl0 o$4ectiona$le(

e3idence to show that the #ortgagor had agreed or consented to such sale in gross, the sa#e should $e set aside( .t is said that the #ortgagee is guilt0 of con3ersion when

he sells under the #ortgage $ut not in accordance with its ter#s, or where the proceedings as to the sale of foreclosure do not co#pl0 with the statute(
[18]

9his rule

applies s?uarel0 to the facts of this case where, as earlier shown, herein appellee $an1 insisted, and the appellee deput0 sheriff of Ca#arines +orte proceeded with the sale of the #ortgaged chattels at Jose *angani$an, Ca#arines +orte, in utter disregard of the 3alid o$4ection of the #ortgagor thereto for the reason that it is not the place of sale agreed upon in the #ortgage contract7 and the said deput0 sheriff sold all the chattels (a#ong which were a s1agit with caterpillar engine, three '2C : 6 : truc1s, a Aerring Aall )afe, and )aw#ill e?uip#ents consisting of a 1! A* 2urph0 /ngine, plainer, large circular saws, etc() as a single lot in 3iolation of the re?uire#ent of the law to sell the sa#e article $0 article( 9he *+B has resold the chattels to another $u0er with who# it appears to ha3e acti3el0 cooperated in su$se?uentl0 ta1ing possession and re#o3ing the chattels fro# appellantCs co#pound $0 force, as shown $0 the circu#stance that the0 had to ta1e along *C soldiers and #unicipal police#en of Jose *angani$an who placed the chief securit0 officer of the pre#ises in 4ail to depri3e herein appellant of its possession thereof( 9o e6onerate itself of an0 lia$ilit0 for the $reach of peace thus co##itted, the *+B would want us to $elie3e that it was the su$se?uent $u0er alone, who is not a part0 to this case, that was responsi$le for the

forci$le ta1ing of the propert07 $ut assu#ing this to $e so, still the *+B cannot escape lia$ilit0 for the con3ersion of the #ortgaged chattels $0 parting with its interest in the propert0( +either would its clai# that it afterwards ga3e a chance to herein appellant to repurchase or redee# the chattels, i#pro3e its position, for the #ortgagor is not under o$ligation to ta1e affir#ati3e steps to repossess the chattels that were con3erted $0 the #ortgagee(
[1!]

As a

conse?uence of the said wrongful acts of the *+B and the Deput0 )heriff of Ca#arines +orte, therefore, >e ha3e to declare that herein appellant is entitled to collect fro# the#, 4ointl0 and se3erall0, the full 3alue of the chattels in ?uestion at the ti#e the0 were illegall0 sold $0 the#( 9o this effect was the holding of this Court in a si#ilar situation(
[1:]

J9he effect of this irregularit0 was, in our opinion to #a1e the plaintiff lia$le to the defendant for the full 3alue of the truc1 at the ti#e the plaintiff thus carried it off to $e sold7 and of course, the $urden is on the defendant to pro3e the da#age to which he was thus su$4ected( 6 6 6(J 9his $rings us to the pro$le# of deter#ining the 3alue of the #ortgaged chattels at the ti#e of their sale in 1-:1( 9he trial court did not #a1e an0 finding on the 3alue of the chattels in the decision appealed fro# and denied altogether the right of the appellant to reco3er the sa#e( >e find enough e3idence of record, howe3er, which #a0 $e used as a guide to ascertain their 3alue( 9he record

shows that at the ti#e herein appellant applied for its loan with the *+B in 1-!:, for which the chattels in ?uestion were #ortgaged as part of the securit0 therefor, herein appellant su$#itted a list of the chattels together with its application for the loan with a stated 3alue of *1 %,11!(,!( An official of the *+B #ade an inspection of the chattels in the sa#e 0ear gi3ing it an appraised 3alue of *82,,! ( and a #ar1et 3alue of *,!,% ( (
[1%]

9he

sa#e chattels with so#e additional e?uip#ent ac?uired $0 herein appellant with part of the proceeds of the loan were reappraised in a reinspection conducted $0 the sa#e official in 1-!,, in the report of which he ga3e all the chattels an appraised 3alue of *2:,,! ( 3alue of *8,,2 ( (
[1,]

and a #ar1et ( and the and

Another reinspection report in ( ( 9he said official of the *+B

1-!- ga3e the appraised 3alue of *1-,8 #ar1et 3alue of *2!,:


[1-]

who #ade the foregoing reports of inspection

reinspections testified in court that in gi3ing the 3alues appearing in the reports, he used a conser3ati3e #ethod of appraisal which, of course, is to $e e6pected of an official of the appellee $an1( And it appears that the 3alues were considera$l0 reduced in all the reinspection reports for the reason that when he went to herein appellantCs pre#ises at the ti#e, he found the chattels no longer in use with so#e of the hea3ier e?uip#ents dis#antled with parts thereof 1ept in the $odega7 and finding it difficult to ascertain the 3alue of the dis#antled

chattels in such condition, he did not gi3e the# an0#ore an0 3alue in his reports( +oteworth0 is the fact, howe3er, that in the last reinspection report he #ade of the chattels in 1-:1, 4ust a few #onths $efore the foreclosure sale, the sa#e inspector of the *+B reported that the hea30 e?uip#ents of herein appellant were Jl0ing idle and rust0J, $ut were Jwith a shed, free fro# rainsJ,
[2 ]

showing

that although the0 were no longer in use at the ti#e, the0 were 1ept in a proper place and not e6posed to the ele#ents( 9he *resident of the appellant co#pan0, on the other hand, testified that its caterpillar (tractor) alone is worth *3!, ( in the #ar1et, and that the 3alue of its two truc1s ac?uired $0 it with part of the proceeds of the loan and included as additional ite#s in the #ortgaged chattels were worth no less than *18, ( ( Ae li1ewise ( appraised the worth of its 2urph0 engine at *1:,

which, according to hi#, when ta1en together with the hea30 e?uip#ents he #entioned, the saw#ill itself and all other e?uip#ents for#ing part of the chattels under consideration, and $earing in #ind the current cost of e?uip#ents these da0s which he alleged to ha3e increased $0 a$out fi3e (!) ti#es, could safel0 $e esti#ated at *12 , ( ( 9his testi#on0, e6cept for the appraised and #ar1et 3alues appearing in the inspection and reinspection reports of the *+B official earlier #entioned, stand uncontro3erted in the record7 $ut >e are not inclined to accept such testi#on0 at its par 3alue, 1nowing

that the e?uip#ents of herein appellant had $een idle and unused since it stopped operating its saw#ill in 1-!, up to the ti#e of the sale of the chattels in 1-:1( >e ha3e no dou$t that the 3alue of the chattels was depreciated after all those 0ears of inoperation, although fro# the e3idence afore#entioned, >e #a0 also safel0 conclude that the a#ount of *8,2 ( for which the chattels were sold in the foreclosure sale in ?uestion was grossl0 unfair to the #ortgagor( Considering, howe3er, the facts that the appraised 3alue of *82,,! ( of *,!,% ad#ittedl0 ( conser3ati3e7 that and the #ar1et 3alue two : 6 : truc1s originall0 gi3en $0 the *+B official were

su$se?uentl0 $ought $0 the appellant co#pan0 had thereafter $een added to the chattels7 and that the real 3alue thereof, although depreciated after se3eral 0ears of inoperation, was in a wa0 #aintained $ecause the depreciation is off&set $0 the #ar1ed increase in the cost of hea30 e?uip#ent in the #ar1et, it is our opinion that the #ar1et 3alue of the chattels at the ti#e of the sale should $e fi6ed at the original appraised 3alue of *82,,! ( (

Aerein appellantCs clai# for #oral da#ages, howe3er, see#s to ha3e no legal or factual $asis( @$3iousl0, an artificial person li1e herein appellant corporation cannot e6perience ph0sical sufferings, #ental anguish, fright, serious an6iet0, wounded feelings, #oral shoc1 or social hu#iliation which are the $asis of #oral da#ages(
[21]

corporation

#a0

ha3e

good

reputation

which,

if

$es#irched, #a0 also $e a ground for the award of #oral da#ages( 9he sa#e cannot $e considered under the facts of this case, howe3er, not onl0 $ecause it is ad#itted that herein appellant had alread0 ceased in its $usiness opera& tion at the ti#e of the foreclosure sale of the chattels, $ut also for the reason that whate3er ad3erse effect the foreclosure sale of the chattels could ha3e upon its reputation or $usiness standing would undou$tedl0 $e the sa#e whether the sale was conducted at Jose *angani$an, Ca#arines +orte, or in 2anila which is the place agreed upon $0 the parties in the #ortgage contract( But for the wrongful acts of herein appellee $an1 and the deput0 sheriff of Ca#arines +orte in proceeding with the sale in utter disregard of the agree#ent to ha3e the chattels sold in 2anila as pro3ided for in the #ortgage contract, to which their attentions were ti#el0 called $0 herein appellant, and in disposing of the chattels in gross for the #isera$le a#ount of *8,2 *1 , ( ( , herein appellant should $e awarded e6e#plar0 da#ages in the su# of ( 9he circu#stances of the case also warrant ( as attorne0Cs fees for herein the award of *3, appellant( %H R +OR AND CONSID RING A!! TH

+OR GOING, the decision appealed fro# should $e, as

here$0, it is set aside( 9he *hilippine +ational Ban1 and the Deput0 )heriff of the pro3ince of Ca#arines +orte are ordered to pa0, 4ointl0 and se3erall0, to 2a#$ulao 5u#$er Co#pan0 the total a#ount of *!:, *82,,! ( (%3, $ro1en as follows; *1! (%3 o3erpaid $0 the latter to the *+B, the 3alue of the chattels at the ti#e of the ( in sale with interest at the rate of :M per annu# fro# Dece#$er 21, 1-:1, until full0 paid, *1 , e6e#plar0 da#ages, and *3, Costs against $oth appellees( Concepcion, C.0., Re"es, 0.B.L., Di'on, Ma4alintal, ( as attorne0Cs fees(

9al#ivar, ,anche', Rui' Castro, and 1ernan#o, 00., concur( Ben$'on, 0.P., 0., *ursuant to "ule 13% )ec( 1, too1 no part(

[1]

)ee, 'orospe et al( v( 'ochangco, 5&12%3!, @cto$er 3 ,

1-!-(
[2]

!- C(J()( 1!8%( !- C(J()( 1!8-( Bachrach v( 'olingco, 3- *hil( 13,( )ee, 'orospe, et al( v. 'ochangco, supra( Bachrach v( 'olingco, supra(

[3]

[8]

[!]

[:]

[%]

Delgado v. De la "a#a, 83 *hil( 81-( )ection 18, Act( +o( 1! ,( "iosa v. )tilianopulos, .nc(, :% *hil( 822( Art( 11!-, new Ci3il Code( 'eneral A<ucarera de 9arlac v( De 5eon, !: *hil( 1:-7 , @cto$er

[,]

[-]

[1 ]

[11]

)ee also, Bautista v. De Bor4a, et al(, 5&2 : 2,, 1-::(


[12]

18 C(J()( 1 3 ( /6hi$it =( C(J()( ,1%&,1,( 18 C(J()( ,1-( Bachrach v( 'olingco, supra( /6hi$it !( /6hi$it :( /6hi$it :&$( /6hi$it :&c( )ee Art( 221%, Ci3il Code(

[13]

[18]

[1!]

[1:]

[1%]

[1,]

[1-]

[2 ]

[21]

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

THIRD DIVISION [ G.R. No. 132*91, A4r56 /0, 200/ ]


ST !ITA ',RGOS !IPAT AND A!+R DO !IPAT, P TITION RS, VS. PACI+IC 'AN)ING CORPORATION, R GIST R O+ D DS, RTC ($O++ICIO SH RI++ O+ H IRS O+ ,G NIO 7, 8ON CIT" AND TH

D. TRINIDAD, R SPOND NTS.D CISION


SANDOVA!$G,TI RR 8, -..

A 4udg#ent of default does not auto#aticall0 i#pl0 ad#ission $0 the defendant of the facts and causes of action of the plaintiff( 9he "ules of Court re?uire the latter to adduce e3idence in support of his allegations as an indispensa$le condition $efore final 4udg#ent could $e

gi3en in his fa3or([1] 9he trial 4udge has to e3aluate the allegations with the highest degree of o$4ecti3it0 and certaint0( Ae #a0 sustain an allegation for which the plaintiff has adduced sufficient e3idence, otherwise, he has to re4ect it( .n the case at $ar, 4udicial re3iew is i#perati3e to a3ert the award of da#ages that is unreasona$le and without e3identiar0 support( Assailed in this petition for re3iew under "ule 8! of the 1--% "ules of Ci3il *rocedure, as a#ended, is the Decision[2] dated June 1%, 1--- of the Court of Appeals in CA&'("( CG +o( !%323, entitled :Bonifacio ,. Mace#a, 0r. versus 0oseph Chan, et. al.,; affir#ing in toto the Decision[3] dated Dece#$er 2:, 1--: of the "egional 9rial Court, Branch 1: , *asig Cit0, in Ci3il Case +o( !3 88( 9he essential antecedents are as follows; @n Jul0 2,, 1-%:, Bonifacio )( 2aceda, Jr(, herein respondent, o$tained a *%(3 #illion loan fro# the De3elop#ent Ban1 of the *hilippines for the construction of his +ew 'ran Aotel *ro4ect in 9aclo$an Cit0( 9hereafter, on )epte#$er 2-, 1-%:, respondent entered into a $uilding construction contract with 2ore#an Builders Co(, .nc(, (2ore#an)( 9he0 agreed that the construction would $e finished not later than Dece#$er

22, 1-%%( "espondent purchased 3arious construction #aterials and e?uip#ent in 2anila( 2ore#an, in turn, deposited the# in the warehouse of >ilson and 5il0 Chan, herein petitioners( Th9 :94o;5< =a; >r99 o> char?9. Fnfortunatel0, 2ore#an failed to finish the construction of the hotel at the stipulated ti#e( Aence, on Be$ruar0 1, 1-%,, respondent filed with the then Court of Birst .nstance (CB., now "egional 9rial Court), Branch 3-, 2anila, an action for rescission and da#ages against 2ore#an, doc1eted as Ci3il Case +o( 1138-,( @n +o3e#$er 2,, 1-%,, the CB. rendered its Decision [8] rescinding the contract $etween 2ore#an and respondent and awarding to the latter * 88!, 50cr9a;9 *3!, ( 50 <h9 co0;<r1c<5o0 ( as actual, #oral @a<9r5a6;A and and li?uidated da#ages7 P20,000.00 r94r9;90<50? <h9 as attorne0Ns fees( 2ore#an interposed an

appeal to the Court of Appeals $ut the sa#e was dis#issed on 2arch %, 1-,- for $eing dilator0( Ae ele3ated the case to this Court via a petition for re3iew on certiorari( .n a Decision[!] dated Be$ruar0 21, 1-- , we denied the petition( @n April 23, 1-- , [:] an /ntr0 of Judg#ent was issued(

2eanwhile, during the pendenc0 of the case, respondent ordered petitioners to return to hi# the construction #aterials and e?uip#ent which 2ore#an deposited in their warehouse( *etitioners, howe3er, told the# that 2ore#an withdrew those construction #aterials in 1-%%( Aence, on Dece#$er 11, 1-,!, respondent filed with the "egional 9rial Court, Branch 1: , *asig Cit0, an action for da#ages with an application for a writ of preli#inar0 attach#ent against petitioners, [%] doc1eted as Ci3il Case +o( !3 88( .n the #eanti#e, on @cto$er 3 , 1-,:, respondent was appointed Judge of the "egional 9rial Court, Branch 12, )an Jose Anti?ue([,] @n August 2!, 1-,-, or after al#ost four (8) 0ears, the trial court dis#issed respondentNs co#plaint for his failure to prosecute and for lac1 of interest(O [-] @n )epte#$er :, 1--8, or fi3e 0ears thereafter, respondent filed a #otion for reconsideration, $ut the sa#e was denied in the @rder dated )epte#$er -, 1--8 $ecause of the failure of respondent and his counsel to appear on the scheduled hearing([1
]

O0 Oc<oB9r 13, 1993, r9;4o0:90< >569: a ;9co0: @o<5o0 >or r9co0;5:9ra<5o0. Th5; <5@9, <h9 @o<5o0

=a; ?ra0<9: a0: <h9 ca;9 =a; or:9r9: r950;<a<9: o0 -a01ar2 10, 199*, or <90 #10& 29ar; >ro@ <h9 <5@9 <h9 ac<5o0 =a; or5?50a662 >569:. [11] 9hereafter, su##ons, together with the copies of the co#plaint and its anne6es, were ser3ed on petitioners( @n 2arch 2, 1--!, counsel for petitioners filed a #otion to dis#iss on se3eral grounds([12] "espondent, on the other hand, #o3ed to declare petitioners in default on the ground that their #otion to dis#iss was filed out of ti#e and that it did not contain an0 notice of hearing([13] @n April 2%, 1--!, the trial court issued an order declaring petitioners in default([18] *etitioners filed with the Court of Appeals a petition for certiorari[1!] to annul the trial courtNs order of default, $ut the sa#e was dis#issed in its @rder [1:] dated August 31, 1--!( 9he case reached this Court, and in a "esolution dated @cto$er 2!, 1--!,[1%] we affir#ed the assailed order of the Court of Appeals( @n +o3e#$er 2-, 1--!, [1,] the corresponding /ntr0 of Judg#ent was issued( 9hus, upon the return of the records to the "9C, Branch 1: , *asig Cit0, respondent was allowed to present his e3idence ex&parte(

Fpon #otion of respondent, which was granted $0 the trial court in its @rder dated April 2-, 1--:, [1-] the depositions of his witnesses, na#el0, 5eonardo Conge, Alfredo 2aceda and /ngr( Da#iano +adera were ta1en in the 2etropolitan 9rial Court in Cities, Branch 2, 9aclo$an Cit0([2
]

Deponent 5eonardo Conge, a la$or contractor,

testified that on Dece#$er 18 up to Dece#$er 28, 1-%%, he was contracted $0 petitioner 5il0 Chan to get $ags of ce#ent fro# the +ew 'ran Aotel construction site and to store the sa#e into the latterNs warehouse in 9aclo$an Cit0( Aside fro# those $ags of ce#ent, deponent also hauled a$out 8 $undles of steel $ars fro# the sa#e construction site, upon order of petitioners( Corresponding deli3er0 receipts were presented and #ar1ed as /6hi$its PAO, PA&1O,PA&2O,OA&3O and PA&8O([21] Deponent Alfredo 2aceda testified and that he was who

respondentNs

Dis$urse#ent

*a0roll

@fficer

super3ised the construction and 1ept in3entor0 of the properties of the +ew 'ran Aotel( >hile conducting the in3entor0 on +o3e#$er 23, 1-%%, he found that the appro6i#ate total 3alue of the #aterials stored in petitionersN warehouse was *218,31 ( ( 9his a#ount

was accordingl0 reflected in the certification signed $0 2ario "a#os, store cler1 and representati3e of 2ore#an who was present during the in3entor0([22]

Deponent Da#iano +adera testified on the current cost of the architectural and structural re?uire#ents needed to co#plete the construction of the +ew 'ran Aotel( [23] @n Dece#$er 2:, 1--:, the trial court rendered a decision in fa3or of respondent, thus; P>A/"/B@"/, foregoing considered, 4udg#ent is here$0 rendered ordering defendants to 4ointl0 and se3erall0 pa0 plaintiff;

1) 2) 3)

*1,-3 , *2,!8-,

( (

as actual da#ages7 as actual da#ages7 ( 7 e6e#plar0 da#ages of

2oral da#ages of *1! , of *! , (

and to pa0 the costs(

P)@ @"D/"/D(O 9he trial court ratiocinated as follows; P9he in3entor0 of other #aterials, aside fro# the steel $ars and ce#ent is found highl0 relia$le $ased on first, the affida3it of Arthur /dralin dated )epte#$er 1!, 1-%-, personnel officer of 2ore#an Builders that he was assigned with others to guard the warehouse7 (/6hs( P2O Q P@O)7 secondl0, the in3entor0 (/6h( PCO) dated +o3e#$er 23, 1-%% shows (sic) deposit of assorted #aterials7 thirdl0, that there were ite#s in the warehouse as of Be$ruar0 3, 1-%, as shown in the $alance sheet of

2ore#anNs stoc1 cler1 Jose Cedilla( P*laintiff is entitled to pa0#ent of da#ages for the o3erhauling of #aterials fro# the construction site $0 5il0 Chan without the 1nowledge and consent of its owner( Article 2 of the Ci3il Code pro3ides; RArt( 2 ( /3er0 person who contrar0 to law, willfull0 or negligentl0 caused da#age to another, shall inde#nif0 the latter for the sa#e(N PAs to the #aterials stored inside the $odega of defendant >ilson Chan, the in3entor0 (/6h( PCO) show (sic), that the sa#e were owned $0 the +ew 'ran Aotel( )aid #aterials were stored $0 2ore#an Builders Co(, .nc( since it was attested to $0 the warehouse#an as without an0 lien or encu#$rances, the defendants are dut0 $ound to release it( Article 21 of the Ci3il Code pro3ides; RArt( 21( An0 person who willfull0 caused loss or in4ur0 to another in a #anner that is contrar0 to #orals, good custo#s or pu$lic polic0 shall co#pensate the latter for the da#age(N P*laintiff is entitled to pa0#ent of actual da#ages $ased on the in3entor0 as of +o3e#$er 23, 1-%% a#ounting to *1,-3 , , ( defendants( P*laintiff is li1ewise entitled to pa0#ent of 12,! $ags of (/6hs( P=O Q P=&1O)( 9he in3entor0 was signed $0 the agent 2ore#an Builders Corporation and

ce#ent *2,!8-,

and (

$undles

of

steel

$ars

totaling

(/6hs( P)O Q P)&1O7 /6hs( PBO Q PB&3O)( should pa0 ( plaintiff #oral da#ages ( of and

PDefendants *1! , (

7 e6e#plar0 da#ages of *! ,

attorne0Ns fees of *! ,

and to pa0 the costs(

P9he clai# of defendant for pa0#ent of da#ages with respect to the #aterials appearing in the $alance sheets as of Be$ruar0 3, 1-%, in the a#ount of *3,2,:,:- ( of e3idence cannot $e gi3en weight(O[28] *etitioners then ele3ated the case to the Court of Appeals, doc1eted as CA&'("( CG +o( !%323( @n June 1%, 1---, the Appellate Court rendered the assailed Decision [2!] affir#ing in toto the trial courtNs 4udg#ent, ratiocinating as follows; P2oreo3er, although the pra0er in the co#plaint did not specif0 the a#ount of da#ages sought, the sa#e was satisfactoril0 pro3ed during the trial( Bor da#ages to $e awarded, it is essential that the clai#ant satisfactoril0 pro3e during the trial the e6istence of the factual $asis thereof and its causal connection with the ad3erse part0Ns act (*A5, .nc( 3s( +5"C, 2!- )C"A 8!-( .n sustaining appelleeNs clai# for da#ages, the court a 6uo held as follows; R9he Court finds the contention of plaintiff that #aterials , not ha3ing $een esta$lished with enough preponderance

and e?uip#ent of plaintiff were stored in the warehouse of defendants and ad#itted $0 defendants in the certification issued to )heriff Bor4a( 6 6 6 R/3idence further re3ealed that assorted #aterials owned $0 the +ew 'ran Aotel (/6h( PCO) were deposited in the $odega of defendant >ilson Chan with a total #ar1et 3alue of *1,-3 , ( , current price(

R9he in3entor0 of other #aterials, aside fro# the steel $ars and ce#ent, is highl0 relia$le $ased on first, the affida3it of Arthur /dralin dated )epte#$er 1!, 1-%-, personnel officer of 2ore#an Builders7 that he was assigned, with others to guard the warehouse (/6hs( 2 Q @)7 secondl0, the in3entor0 (/6h( C) +o3e#$er 23, 1-%% shows deposit of assorted #aterials7 thirdl0, that there were ite#s in the warehouse as of Be$ruar0 3, 1-%,, as shown in the $alance sheet of 2ore#anNs stoc1 cler1, Jose Cedilla (pp( : &:1, "ollo)(N P9he Court affir#s the a$o3e findings( P>ell settled is the rule that Ra$sent an0 proper reason to depart fro# the rule, factual conclusions reached $0 the trial court are not to $e distur$ed ( People vs. Dupali, 23 )C"A :2)(N Aence, in the a$sence of an0 showing that serious and su$stantial errors were co##itted $0 the lower court in the appraisal of the e3idence, the trial

4udgeNs assess#ent of the credi$ilit0 of the witnesses is accorded great weight and respect ( People vs. 0ain, 2!8 )C"A :,:)( And, there $eing a$solutel0 nothing on record to show that the court a 6uo o3erloo1ed, disregarded, or #isinterpreted facts of weight and significance, its factual findings and conclusions #ust $e gi3en great weight and should not $e distur$ed on appeal( P>A/"/B@"/, $eing in accord with law and e3idence, the appealed decision is here$0 ABB."2/D in toto(O Aence, this petition for re3iew on certiorari anchored on the following grounds; CI Th9 Co1r< o> A449a6; ac<9: =5<h ?raD9 aB1;9 o> :5;cr9<5o0 a0: 10:9r a @5;a44r9h90;5o0 o> <h9 6a= a0: <h9 >ac<; =h90 5< a>>5r@9: in toto <h9 a=ar: o> ac<1a6 :a@a?9; @a:9 B2 <h9 <r5a6 co1r< 50 >aDor o> r9;4o0:90< 50 <h5; ca;9. II Th9 a=ar:; o> @ora6 a0: 9E9@46ar2 :a@a?9; o> <h9 <r5a6 co1r< <o r9;4o0:90< 50 <h5; ca;9 a0: a>>5r@9: in toto B2 <h9 Co1r< o> A449a6; ar9 10=arra0<9: B2 <h9 9D5:90c9 4r9;90<9: B2 r9;4o0:90< a< <h9 a quo h9ar50? o> <h5; ca;9 a0: ;ho16:, <h9r9>or9, B9

965@50a<9: or a< 69a;< r9:1c9:. III Th9 a=ar: o> a<<or092F; >99; B2 <h9 <r5a6 co1r< <o r9;4o0:90< 50 <h5; ca;9 a0: a>>5r@9: B2 <h9 Co1r< o> A449a6; ;ho16: B9 :969<9: B9ca1;9 o> <h9 >a561r9 o> <h9 <r5a6 co1r< <o ;<a<9 <h9 69?a6 a0: >ac<1a6 Ba;5; o> ;1ch a=ar:.G *etitioners contend inter alia that the actual da#ages clai#ed $0 respondent in the present case were alread0 awarded to hi# in Ci3il Case +o( 1138-, [2:] and hence, cannot $e reco3ered $0 hi# again( /3en assu#ing that respondent is entitled to da#ages, he can not reco3er *8,8%-, ( which is ele3en (11) ti#es #ore than the ( awarded to hi# in total actual da#ages of *3:!, Ci3il Case +o( 1138-,([2%] .n his co##ent on the petition, respondent #aintains that petitioners, as depositaries under the law, ha3e $oth the fiduciar0 and e6traordinar0 o$ligations not onl0 to safel0 1eep the construction #aterial deposited, $ut also to return the# with all their products, accessories and accessions, pursuant to Articles 1-%2, [2,] 1-%-,[2-] 1-,3,[3
]

and 1-,,[31] of the Ci3il Code( Considering that petitionersN dut0 to return the construction #aterials in ?uestion has alread0 $eco#e i#possi$le, it is onl0 proper that the

prices of those construction #aterials in 1--: should $e the $asis of the award of actual da#ages( 9his is the onl0 wa0 to fulfill the P#ut" to returnO conte#plated in the applica$le laws([32] "espondent further clai#s that petitioners #ust $ear the increase in #ar1et prices fro# 1-%% to 1--: $ecause lia$ilit0 for fraud includes P all #a%a$es <hich %a" be reasonabl" attribute# to the non& perfor%ance of the obli$ation(O 5astl0, respondent insists that there can $e no dou$le reco3er0 $ecause in Ci3il Case +o( 1138-,,[33] the parties were respondent hi#self and 2ore#an and the cause of action was the rescission of their $uilding contract( .n the present case, howe3er, the parties are respondent and petitioners and the cause of action $etween the# is for reco3er0 of da#ages arising fro# petitionersN failure to return the construction #aterials and e?uip#ent( @$3iousl0, petitionersN assigned errors call for a re3iew of the lower courtNs findings of fact( )uccinct is the rule that this Court is not a trier of facts and does not nor#all0 underta1e the re&e6a#ination of the e3idence su$#itted $0 the contending parties during the trial of the case considering that findings of fact of the Court of Appeals are generall0 $inding and conclusi3e on this Court([38] 9he 4urisdiction of this Court in a petition for re3iew on certiorari is li#ited to re3iewing onl0 errors of

law,[3!] not of fact, unless it is shown, inter alia, that; #1& the conclusion is a finding grounded on speculations, sur#ises or con4ectures7 #2& the inference is #anifestl0 #ista1en, a$surd and i#possi$le7 #/& there is gra3e a$use of discretion7 #3& the 4udg#ent is $ased on #isapprehension of facts7 #*& the findings of fact are conflicting7 and #6& the Court of Appeals, in #a1ing its findings went $e0ond the issues of the case and the sa#e is contrar0 to the ad#ission of $oth parties( [3:] *etitioners su$#it that this case is an e6ception to the general rule since $oth the trial court and the Court of Appeals $ased their 4udg#ents on #isapprehension of facts( >e agree( At the outset, the case should ha3e $een dis#issed outright $0 the trial court $ecause of patent procedural infir#ities( .t $ears stressing that the case was originall0 filed on Dece#$er 11, 1-,!( Bour (8) 0ears thereafter, or on August 2!, 1-,-, the case was dis#issed for respondentNs failure to prosecute( Bi3e (!) 0ears after, or on )epte#$er :, 1--8, respondent filed his #otion for reconsideration( Bro# here, the trial court alread0 erred in its ruling $ecause it should ha3e dis#issed the #otion for reconsideration outright as it was filed far $e0ond the

fifteen&da0

regle#entar0

period([3%]

>orse,

when

respondent filed his second #otion for reconsideration on @cto$er 18, 1--8, a prohi$ited pleading, [3,] the trial court still granted the sa#e and reinstated the case on Januar0 1 , 1--!( 9his is a glaring gross procedural error co##itted $0 $oth the trial court and the Court of Appeals( /3en without such serious procedural flaw, the case should also $e dis#issed for utter lac1 of #erit( .t #ust $e stressed that respondentNs clai# for da#ages is $ased on petitionersN failure to return or to release to hi# the construction #aterials and e?uip#ent deposited $0 2ore#an to their warehouse( Aence, the essential issues to $e resol3ed are; (1) Aas respondent presented proof that the construction #aterials and e?uip#ent were actuall0 in petitionersN warehouse when he as1ed that the sa#e $e turned o3er to hi#S #2& .f so, does respondent ha3e the right to de#and the release of the said #aterials and e?uip#ent or clai# for da#agesS Fnder Article 1311 of the Ci3il Code, contracts are $inding upon the parties (and their assigns and heirs) who e6ecute the#( >hen there is no pri3it0 of contract, there is li1ewise no o$ligation or lia$ilit0 to spea1 a$out and thus no cause of action arises( )pecificall0, in an action

against the depositar0, the $urden is on the plaintiff to pro3e the $ail#ent or deposit and the perfor#ance of conditions precedent to the right of action([3-] A depositar0 is o$liged to return the thing to the depositor, or to his heirs or successors, or to the person who #a0 ha3e $een designated in the contract(
[8 ]

.n the present case, the record is $ereft of an0 contract of deposit, oral or written, $etween petitioners and respondent( .f at all, it was onl0 $etween petitioners and 2ore#an( And granting ar$uen#o that there was indeed a contract of deposit $etween petitioners and 2ore#an, it is still incu#$ent upon respondent to pro3e its e6istence and that it was e6ecuted in his fa3or( Aowe3er, respondent #isera$l0 failed to do so( 9he onl0 pieces of e3idence respondent presented to pro3e the contract of deposit were the :965D9r2 r9c954<;.[81] )ignificantl0, the0 are 10;5?09: a0: 0o< :162 r9c95D9: or a1<h90<5ca<9: B2 95<h9r Mor9@a0, 49<5<5o09r; or r9;4o0:90< or a02 o> <h95r a1<hor5H9: r94r9;90<a<5D9;. Aence, those deli3er0 receipts ha3e no pro$ati3e 3alue at all( >hile our laws grant a person the re#edial right to prosecute or institute a ci3il action against another for the enforce#ent or protection of a right, or the pre3ention or redress of a wrong,[82] e3er0 cause of action ex&contractu #ust $e founded upon a contract, oral or written, e6press or i#plied(

2oreo3er, respondent also failed to pro3e that there were construction #aterials and e?uip#ent in petitionersN warehouse at the ti#e he #ade a de#and for their return( Considering that respondent failed to pro3e (1) the e6istence of an0 contract of deposit $etween hi# and petitioners, nor $etween the latter and 2ore#an in his fa3or, and (2) that there were construction #aterials in petitionersN warehouse at the ti#e of respondentNs de#and to return the sa#e, we hold that petitioners ha3e no corresponding o$ligation or lia$ilit0 to respondent with respect to those construction #aterials( Anent the issue of da#ages, petitioners are still not lia$le $ecause, as e6pressl0 pro3ided for in Article 21-- of the Ci3il Code,[83] actual or co#pensator0 da#ages cannot $e presu#ed, $ut #ust $e pro3ed with reasona$le degree of certaint0( A court cannot rel0 on speculations, con4ectures, or guesswor1 as to the fact and a#ount of da#ages, $ut #ust depend upon co#petent proof that the0 ha3e $een suffered $0 the in4ured part0 and on the $est o$taina$le e3idence of the actual a#ount thereof( .t #ust point out specific facts which could afford a $asis for #easuring whate3er co#pensator0 or actual da#ages are $orne([88]

Considering our findings that there was no contract of deposit $etween petitioners and respondent or 2ore#an and that actuall0 there were no #ore construction #aterials or e?uip#ent in petitionersN warehouse when respondent #ade a de#and for their return, we hold that he has no right whatsoe3er to clai# for da#ages( As we stressed in the $eginning, a 4udg#ent of default does not auto#aticall0 i#pl0 ad#ission $0 the defendant of plaintiffNs causes of action( Aere, the trial court #erel0 adopted respondentNs allegations in his co#plaint and e3idence without e3aluating the# with the highest degree of o$4ecti3it0 and certaint0( %H R +OR , the petition is GRANT D( 9he challenged Decision of the Court of Appeals dated June 1%, 1--- is R V RS D a0: S T ASID . Costs against respondent( SO ORD R D. Puno, -Chair%an., Pan$aniban, Corona, and Carpio

Morales, 00., concur(

[T]

*resentl0 /6ecuti3e Judge, "egional 9rial Court, 5as

*iLas Cit0 and *residing Judge, "9C, Branch 2%!, 5as

*iLas Cit0( Monarch Insurance Co., Inc. vs. Court of Appeals , 333 )(

[1]

)C"A %1 (2

[2]

*enned $0 Associate Justice Arte#io '( 9u?uero and

concurred in $0 Associate Justices /u$olo '( Ger<ola and Candido G( "i3era (retired), "ollo at 32&3:( *enned $0 Judge 2ariano 2( F#ali, "ecords at 2 :&

[3]

213( "ollo at 8 &%:( '("( +o( ,,31 ( "ollo at 112( "ecords at 1&1!( I#. at 38( I#. at 32( I#. at 3-( I#. at 8!(

[8]

[!]

[:]

[%]

[,]

[-]

[1 ]

[11]

[12]

I#. at :1&:%( I#. at :-&% ( I#. at %,( CA&'("( +o( )*&3%32,( "ecords at ,%&-:( I#. at 122( I#. at 121( I#. at 128( "ecords at 12,&1!2( I#. at 1!2&A&1!2&/7 9)+, )epte#$er :, 1--: at 8&1 7

[13]

[18]

[1!]

[1:]

[1%]

[1,]

[1-]

[2 ]

[21]

I#. at 131&13%( /6hs( PCO, PC&1O, PC&2O, PC&3O, PC&8O7 "ecords at 1!8&

[22]

A( "ecords at 183&1! (

[23]

[28]

"ollo at 211&213( ,upra( 9he dispositi3e portion of the trial courtNs decision

[2!]

[2:]

reads; PB@" A55 9A/ B@"/'@.+' C@+).D/"A9.@+), the Court, here$0 renders 4udg#ent, declaring the $uilding contract (/6h( A), rescinded and all su$se?uent contracts and agree#ents entered into $0 the parties relati3e thereto and, conse?uentl0, orders the defendants, 4ointl0 and se3erall0, to pa0 the plaintiffs;

1( 2. 3( 8( *. :(

9he a#ount of *3 , ( for li?uidated da#ages7 Th9 a@o10< o> P/6*,000.00 >or ac<1a6 :a@a?9;A 9he a#ount of *2!, ( for #oral da#ages7 9he a#ount of *2!, ( for e6e#plar0 da#ages7 Th9 a@o10< o> P20,000.00 r94r9;90<50? 50cr9a;9

>505;h <h9 co0;<r1c<5o0A a0: 9he a#ount of *3!, ( for attorne0Ns fees, and to pa

PConse?uentl0, the counterclai# for da#ages is here$0 dis#issed( P.n addition, the Court, in the supre#e interest of 4ustice and e?uit0, considers as suspended the running of the period of a3ail#ent of the proceeds of the loan of the

plaintiffs, fro# Be$ruar0 3, 1-%,, and directs that the a#ount of *1, 3, ( as alread0 granted for release $efore the restraining order of this Court was issued, $e released to the plaintiffs7 lifting the restraining order partiall0, insofar as the release of the said a#ount to the plaintiffs is concerned, who #a0 resu#e construction of the +ew 'ran Aotel, and such other a#ounts still pending release $0 the De3elop#ent Ban1 of the *hilippines fro# the loan of the plaintiffs, pursuant to the pro3isions of the loan agree#ent( 9he restraining order, howe3er, is con3erted into a per#anent in4unction, insofar as it en4oins the defendants, their agents, representati3es, personnel and e#plo0ees fro# continuing with the pro4ect or participating in an0 #anner therein, after the plaintiffs ha3e posted a $ond to $e appro3ed, in the a#ount of *1 , ( , within fi3e da0s fro# receipt of a cop0 of this decision(O ("ollo at %!&%:)( "ollo at 8 ( Art( 1-%2( 9he depositar0 is o$liged to 1eep the thing

[2%]

[2,]

safel0 and to return it, when re?uired, to the depositor, or to his heirs and successors, or to the person who #a0 ha3e $een designated in the contract( Ais responsi$ilit0, with regard to the safe1eeping and the loss of the thing, shall $e go3erned $0 the pro3isions of 9itle . of this Boo1(

.f the deposit is gratuitous, this fact shall $e ta1en into account in deter#ining the degree of care that the depositar0 #ust o$ser3e( Art( 1-%-( 9he depositar0 is lia$le for the loss of the

[2-]

thing through a fortuitous e3ent; 12( .f it is so stipulated7 13( .f he uses the thing without the depositorNs per#ission7 18( .f he dela0s its return7 1!( .f he allows others to use it, e3en though he hi#self #a0 ha3e $een authori<ed to use the sa#e(
[3 ]

Art( 1-,3( 9he thing deposited shall $e returned with

all its products, accessories and accessions( )hould the deposit consist of #one0, the pro3isions relati3e to agents in article 1,-: shall $e applied to the depositar0( Art( 1-,,( 9he thing deposited #ust $e returned to the

[31]

depositor upon de#and, e3en though a specified period or ti#e for such return #a0 ha3e $een fi6ed( 9his pro3ision shall not appl0 when the thing is 4udiciall0 attached while in the depositar0Ns possession, or should he ha3e $een notified of the opposition of a third person to the return or re#o3al of the thing deposited( .n these cases, the depositar0 #ust i##ediatel0 infor# the

depositor of the attach#ent or opposition( "ollo at 122( "ollo at 8 &%:( Con$re$ation of the Reli$ious of the 5ir$in Mar" vs.

[32]

[33]

[38]

Court of Appeals, '("( +o( 12:3:3, June 2:, 1--,, citing Dela Cerna vs. Court of Appeals, 233 )C"A 32!( )ection 1, "ule 8!, "e3ised "ules of Court ( 1ule vs. Court of Appeals , '("( +o( 112212, 2arch 2,

[3!]

[3:]

1--,( )ection 3, "ule 81 in relation to )ec( 1, "ule 3% of the

[3%]

1--% "ules of Ci3il *rocedure, as a#ended( )ection !(2), "ule 3%, i#( 2: C(J()( U :( Article 1-%2 of the Ci3il Code( "ecord at 1!2&A to 1!2&/( )ection 3 (a), "ule 1, 1--% "ules of Ci3il *rocedure, as

[3,]

[3-]

[8 ]

[81]

[82]

a#ended( Article 21--( /6cept as pro3ided $0 law or $0

[83]

stipulation, one is entitled to an ade?uate co#pensation onl0 for such pecuniar0 loss suffered $0 hi# as he has dul0 pro3ed( )uch co#pensation is referred to as actual or co#pensator0 da#ages( Develop%ent Ban4 of the Philippines vs. Court of

[88]

Appeals, '("( +o( 11,382, Januar0 !, 1--,(

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

THIRD DIVISION [ G.R. No. 1329/6, A4r56 17, 2002 ]


PHI!IPPIN NATIONA! 'AN) I NATIONA! ! CTRIC I

S,GAR D V !OPM NT CORPORATION, P TITION RS, VS. ANDRADA NGIN RING COMPAN", R SPOND NT.

D CISION
PANGANI'AN, -..

Basic is the rule that a corporation has a legal personalit0 distinct and separate fro# the persons and entities owning it( 9he corporate 3eil #a0 $e lifted onl0 if it has $een used to shield fraud, defend cri#e, 4ustif0 a wrong, defeat pu$lic con3enience, insulate $ad faith or perpetuate in4ustice( 9hus, the #ere fact that the

*hilippine +ational Ban1 (*+B) ac?uired ownership or #anage#ent of so#e assets of the *a#panga )ugar 2ill (*A)F2.5), purchased *+B lia$le which at for the the had earlier $een foreclosed auction $0 de$ts and the to resulting pu$lic

De3elop#ent Ban1 of the *hilippines (DB*), will not #a1e *A)F2.5Ns contractual respondent( S<a<9@90< o> <h9 Ca;9 Before us is a *etition for "e3iew assailing the April 1%, 2 Decision[1] of the Court of Appeals (CA) in CA&'" CG 9he decretal portion of the challenged +o( !%:1 (

Decision reads as follows; P>A/"/B@"/, the 4udg#ent appealed fro# is here$0 ABB."2/D(O[2]

Th9 +ac<; 9he factual antecedents of the case are su##ari<ed $0 the Court of Appeals as follows; P.n its co#plaint, the plaintiff [herein respondent] alleged that it is a partnership dul0 organi<ed, e6isting, and operating under the laws of the *hilippines, with office and principal place of $usiness at +os( %-8&,12 Del 2onte [A]3enue, =ue<on Cit0, while the defendant [herein petitioner] *hilippine +ational Ban1 (herein referred to as *+B), is a se#i&go3ern#ent corporation dul0 organi<ed, e6isting and operating under the laws of the *hilippines, with office and principal place of $usiness at /scolta )treet, )ta( Cru<, 2anila7 whereas, the other defendant, the +ational )ugar De3elop#ent Corporation (+A)FD/C@ in $rief), is also a se#i&go3ern#ent corporation and the sugar ar# of the *+B, with office and principal place of $usiness at the 2nd Bloor, )a#paguita Building, Cu$ao, =ue<on Cit07 and the defendant *a#panga )ugar 2ills (*A)F2.5 in short), is a corporation organi<ed, e6isting and operating under the 1-%! laws of the *hilippines, and had its $usiness office $efore 1-%! at Del Car#en, Blorida$lanca, *a#panga7 that the plaintiff is engaged in the $usiness of general construction for the repairs andDor construction of different 1inds of #achineries and $uildings7 that on August 2:, 1-%!, the defendant *+B ac?uired the assets of the defendant *A)F2.5 that were

earlier foreclosed $0 the De3elop#ent Ban1 of the *hilippines (DB*) under 5@. +o( 3117 that the defendant *+B organi<ed the defendant +A)FD/C@ in )epte#$er, 1-%!, to ta1e ownership and possession of the assets and ulti#atel0 to nationali<e and consolidate its interest in other *+B controlled sugar #ills7 that prior to @cto$er 2-, 1-%1, the defendant *A)F2.5 engaged the ser3ices of plaintiff for electrical rewinding and repair, #ost of which were partiall0 paid $0 the defendant *A)F2.5, lea3ing se3eral unpaid accounts with the plaintiff7 that finall0, on @cto$er 2-, 1-%1, the plaintiff and the defendant *A)F2.5 entered into a contract for the plaintiff to perfor# the following, to wit V

R(a) R($)

Construction of one (1) power house $uilding7

Construction of three (3) reinforced concrete foundation set[s]7

R(c) R(d) R(e)

Construction of three (3) reinforced concrete foundation f

Co#plete o3erhauling and reconditioning tests su# for th

.nstallation of tur$ine and diesel generating sets includin pro3ided those stated units are co#pletel0 supplied with

R(f)

"elocating of 2,8

G trans#ission line, de#olition of a

e6ca3ation, and earth fillings V all for the total a#ount

cop0 of which is hereto attached as Anne6 RAN and #ade a


that aside fro# the wor1 contract #entioned&a$o3e, the defendant *A)F2.5 re?uired the plaintiff to perfor# e6tra wor1, and pro3ide electrical e?uip#ent and spare parts, such as;

R(a) R($) R(c) R(d) R(e) R(f) R(g) R(h)

)uppl0 of electrical de3ices7 /6tra #echanical wor1s7 /6tra fa$rication wor1s7 )uppl0 of #aterials and consu#a$le ite#s7 /lectrical shop repair7 )uppl0 of parts and related wor1s for tur$ine generator7 )uppl0 of electrical e?uip#ent for #achiner07

)uppl0 of diesel engine parts and other related wor1s inc


( , lea3ing

that out of the total o$ligation of *%%%,2:3(, , the defendant *A)F2.5 had paid onl0 *2! , an unpaid $alance, as of June 2%, 1-%3, a#ounting to *!2%,2:3(, , as shown in the Certification of the chief accountant of the *+B, a #achine cop0 of which is appended as Anne6 RCN of the co#plaint7 that out of said unpaid $alance of *!2%,2:3(, , the defendant *A)F2.5 #ade a partial pa0#ent to the plaintiff of *18, ( , in

$ro1en a#ounts, co3ering the period fro# Januar0 !, 1-%8 up to 2a0 23, 1-%8, lea3ing an unpaid $alance of *!13,2:3(, 7 that the defendant *A)F2.5 and the defendant *+B, and now the defendant +A)FD/C@, failed and refused to pa0 the plaintiff their 4ust, 3alid and de#anda$le o$ligation7 that the *resident of the +A)FD/C@ is also the Gice&*resident of the *+B, and this official holds office at the 1 outstanding owned o$ligation of
th

Bloor of the *+B, /scolta, defendant *A)F2.5,

2anila, and plaintiff $esought this official to pa0 the the inas#uch as the defendant *+B and +A)FD/C@ now and possessed the assets of the defendant *A)F2.5, and these defendants all $enefited fro# the wor1s, and the electrical, as well as the engineering and repairs, perfor#ed $0 the plaintiff7 that $ecause of the failure and refusal of the defendants to pa0 their 4ust, 3alid, and de#anda$le o$ligations, plaintiff suffered actual da#ages in the total a#ount of *!13,2:3(, 7 and that in order to reco3er these su#s, the plaintiff was co#pelled to engage the professional ser3ices of counsel, to who# the plaintiff agreed to pa0 a su# e?ui3alent to 2!M of the a#ount of the o$ligation due $0 wa0 of attorne0Ns fees( Accordingl0, the plaintiff pra0ed that 4udg#ent $e rendered against the defendants *+B, +A)FD/C@, and *A)F2.5, 4ointl0 and se3erall0 to wit; R(1) )entencing the defendants to pa0 the plaintiffs the su# of *!13,2:3(, , with annual interest of 18M fro# the

ti#e the o$ligation falls due and de#anda$le7 R(2) Conde#ning the defendants to pa0 attorne0Ns fees a#ounting to 2!M of the a#ount clai#7 R(3) @rdering the defendants to pa0 the costs of the suit(N P9he defendants *+B and +A)FD/C@ filed a 4oint #otion to dis#iss the co#plaint chiefl0 on the ground that the co#plaint failed to state sufficient allegations to esta$lish a cause of action against $oth defendants, inas#uch as there is lac1 or want of pri3it0 of contract $etween the plaintiff and the two defendants, the *+B and +A)FD/C@, said defendants citing Article 1311 of the +ew Ci3il Code, and the case law ruling in )alonga 3( >arner Barnes Q Co(, ,, *hil( 12!7 and 2anila *ort )er3ice, et al( 3( Court of Appeals, et al(, 2 )C"A 1218( P9he #otion to dis#iss was $0 the court a ?uo denied in its @rder of +o3e#$er 2%, 1-, 7 in the sa#e order, that court directed the defendants to file their answer to the co#plaint within 1! da0s( P.n their answer, the defendant +A)FD/C@ reiterated the grounds of its #otion to dis#iss, to wit; R9hat the co#plaint does not state a sufficient cause of action against the defendant +A)FD/C@ $ecause; (a) +A)FD/C@ is not 6 6 6 pri30 to the 3arious electrical

construction 4o$s $eing sued upon $0 the plaintiff under the present co#plaint7 ($) the ta1ing o3er $0 +A)FD/C@ of the assets of defendant *A)F2.5 was solel0 for the purpose of reconditioning the sugar central of defendant *A)F2.5 pursuant to #artial law powers of the *resident under the Constitution7 (c) nothing in the 5@. +o( 1,-&A (as well as in 5@. +o( 311) authori<ed or co##anded the *+B or its su$sidiar0 corporation, the +A)FD/C@, to assu#e the corporate o$ligations of *A)F2.5 as that $eing in3ol3ed in the present case7 and, (d) all that was #entioned $0 the said letter of instruction insofar as the *A)F2.5 lia$ilities [were] concerned [was] for the *+B, or its su$sidiar0 corporation the +A)FD/C@, to #a1e a stud0 of, and su$#it [a] reco##endation on the pro$le#s concerning the sa#e(N PB0 wa0 of counterclai#, the +A)FD/C@ a3erred that $0 reason of the filing $0 the plaintiff of the present suit, which it [la$eled] as unfounded or $aseless, the defendant +A)FD/C@ was constrained to litigate and incur litigation e6penses in the a#ount of *! , should $e sentenced to pa0( ( , which plaintiff Accordingl0, +A)FD/C@

pra0ed that the co#plaint $e dis#issed and on its counterclai#, that the plaintiff $e conde#ned to pa0 *! , ( in concept of attorne0Ns fees as well as e6e#plar0 da#ages( P.n its answer, the defendant *+B li1ewise reiterated the

grounds of its #otion to dis#iss, na#el0; (1) the co#plaint states no cause of action against the defendant *+B7 (2) that *+B is not a part0 to the contract alleged in par( : of the co#plaint and that the alleged ser3ices rendered $0 the plaintiff to the defendant *A)F2.5 upon which plaintiffNs suit is erected, was rendered long $efore *+B too1 possession of the assets of the defendant *A)F2.5 under 5@. +o( 1,-&A7 (3) that the *+B ta1e& o3er of the assets of the defendant *A)F2.5 under 5@. 1,-&A was solel0 for the purpose of reconditioning the sugar central so that *A)F2.5 #a0 resu#e its operations in ti#e for the 1-%8&%! #illing season, and that nothing in the said 5@. +o( 1,-&A, as well as in 5@. +o( 311, authori<ed or directed *+B to assu#e the corporate o$ligationDs of *A)F2.5, let alone that for which the present action is $rought7 (8) that *+BNs #anage#ent and operation under 5@. +o( 311 did not refer to an0 asset of *A)F2.5 which the *+B had to ac?uire and thereafter [#anage], $ut onl0 to those which were foreclosed $0 the DB* and were in turn redee#ed $0 the *+B fro# the DB*7 (!) that confor#a$l0 to 5@. +o( 311, on August 1!, 1-%!, the *+B and the De3elop#ent Ban1 of the *hilippines (DB*) entered into a R"ede#ption Agree#entN where$0 DB* sold, transferred and con3e0ed in fa3or of the *+B, $0 wa0 of rede#ption, all its (DB*) rights and interest in and o3er the foreclosed real andDor personal properties of *A)F2.5, as shown in Anne6 RCN

which is #ade an integral part of the answer7 (:) that again, confor#a$l0 with 5@. +o( 311, *+B pursuant to a Deed of Assign#ent dated @cto$er 21, 1-%!, con3e0ed, transferred, and assigned for 3alua$le consideration, in fa3or of +A)FD/C@, a distinct and independent corporation, all its (*+B) rights and interest in and under the a$o3e R"ede#ption Agree#ent(N 9his is shown in Anne6 RDN which is also #ade an integral part of the answer7 [%] that as a conse?uence of the said Deed of Assign#ent, *+B on @cto$er 21, 1-%! ceased to #anaged and operate the a$o3e&#entioned assets of *A)F2.5, which function was now actuall0 transferred to +A)FD/C@( .n other words, so asserted *+B, the

co#plaint as to *+B, had $eco#e #oot and acade#ic $ecause of the e6ecution of the said Deed of Assign#ent7 [,] that #oreo3er, 5@. +o( 311 did not authori<e or direct *+B to assu#e the corporate o$ligations of *A)F2.5, including the alleged o$ligation upon which this present suit was $rought7 and [-] that, at #ost, what was granted to *+B in this respect was the authorit0 to R#a1e a stud0 of and su$#it reco##endation on the pro$le#s concerning the clai#s of *A)F2.5 creditors,N under su$& par( ! 5@. +o( 311( P.n its counterclai#, the *+B a3erred that it was

unnecessaril0 constrained to litigate and to incur e6penses in this case, hence it is entitled to clai# attorne0Ns fees in

the a#ount of at least *! ,

Accordingl0, *+B

pra0ed that the co#plaint $e dis#issed7 and that on its counterclai#, that the plaintiff $e sentenced to pa0 defendant *+B the su# of *! , ( as attorne0Ns fees, aside fro# e6e#plar0 da#ages in such a#ount that the court #a0 see# 4ust and e?uita$le in the pre#ises( P)u##ons $0 pu$lication was #ade 3ia the *hilippines Dail0 /6press, a newspaper with editorial office at 3%1 Bonifacio Dri3e, *ort Area, 2anila, against the defendant *A)F2.5, which was thereafter declared in default as shown in the August %, 1-,1 @rder issued $0 the 9rial Court( PAfter due proceedings, the 9rial Court rendered

4udg#ent, the decretal portion of which reads; R>A/"/B@"/, 4udg#ent is here$0 rendered in fa3or of plaintiff and against the defendant Corporation, *hilippine +ational Ban1 (*+B) +A9.@+A5 )F'A" D/G/5@*2/+9 C@"*@"A9.@+ (+A)FD/C@) and *A2*A+'A )F'A" 2.55) (*A)F2.5), ordering the latter to pa0 4ointl0 and se3erall0 the for#er the following;

R1(

9he su# of *!13,:23(,

plus interest thereon at the

)epte#$er 2!, 1-, until full0 paid7 R2( 9he su# of *1 2,%28(%: as attorne0Ns fees7 and,

R3(

Costs(

R)@ @"D/"/D( R2anila, *hilippines, )epte#$er 8, 1-,:( C()'D) /"+/)9@ )( 9/+'C@ RJudgeNO[3] R1650? o> <h9 Co1r< o> A449a6; Affir#ing the trial court, the CA held that it was offensi3e to the $asic tenets of 4ustice and e?uit0 for a corporation to ta1e o3er and operate the $usiness of another corporation, while disa3owing or repudiating an0 responsi$ilit0, o$ligation or lia$ilit0 arising therefro#( [8] Aence, this *etition([!] I;;19; .n their 2e#orandu#, petitioners raise the following errors for the CourtNs consideration; P. 9he Court of Appeals gra3el0 erred in law in holding the

herein petitioners lia$le for the unpaid corporate de$ts of *A)F2.5, a corporation whose corporate e6istence has not $een legall0 e6tinguished or ter#inated, si#pl0 $ecause of petitioners[N] ta1e&o3er of the #anage#ent and operation of *A)F2.5 pursuant to the #andates of 5@. +o( 1,-&A, as a#ended $0 5@. +o( 311( P.. 9he Court of Appeals gra3el0 erred in law in not appl0ing [to] the case at $ench the ruling enunciated in /dward J( +ell Co( 3( *acific Bar#s, 1! )C"A 81!(O[:] )uccinctl0 put, the aforesaid errors $oil down to the principal issue of whether *+B is lia$le for the unpaid de$ts of *A)F2.5 to respondent( Th5; Co1r<F; R1650? 9he *etition is #eritorious( Ma50 I;;19. Liability or !or"orate #ebts As a general rule, ?uestions of fact #a0 not $e raised in a petition for re3iew under "ule 8! of the "ules of Court( [%] 9o this rule, howe3er, there are so#e e6ceptions enu#erated in 1uentes v. Court of Appeals([,] After a

careful

scrutin0

of

the

records

and

the

pleadings

su$#itted $0 the parties, we find that the lower courts #isappreciated the e3idence presented( [-] @3erloo1ed $0 the CA were certain rele3ant facts that would 4ustif0 a conclusion different fro# that reached in the assailed Decision([1
]

*etitioners posit that the0 should not $e held lia$le for the corporate de$ts of *A)F2.5, $ecause their ta1eo3er of the latterNs foreclosed assets did not #a1e the# assignees( @n the other hand, respondent asserts that petitioners and *A)F2.5 should $e treated as one entit0 and, as such, 4ointl0 and se3erall0 held lia$le for *A)F2.5Ns unpaid o$ligation( As a rule, a corporation that purchases the assets of another will not $e lia$le for the de$ts of the selling corporation, pro3ided the for#er acted in good faith and paid ade?uate consideration for such assets, e6cept when an0 of the following circu#stances is present; (1) where the purchaser e6pressl0 or i#pliedl0 agrees to assu#e the de$ts, (2) where the transaction a#ounts to a consolidation or #erger of the corporations, (3) where the purchasing corporation is #erel0 a continuation of the selling corporation, and (8) where the transaction is fraudulentl0 entered into in order to escape lia$ilit0 for those de$ts([11]

$iercin% t&e !or"orate 'eil Not (arranted A corporation is an artificial $eing created $0 operation of law( .t possesses the right of succession and such powers, attri$utes, and properties e6pressl0 authori<ed $0 law or incident to its e6istence( [12] .t has a personalit0 separate and distinct fro# the persons co#posing it, as well as fro# an0 other legal entit0 to which it #a0 $e related([13] 9his is $asic( /?uall0 well&settled is the principle that the corporate #as1 #a0 $e re#o3ed or the corporate 3eil pierced when the corporation is 4ust an alter ego of a person or of another corporation([18] Bor reasons of pu$lic polic0 and in the interest of 4ustice, the corporate 3eil will 4ustifia$l0 $e i#paled[1!] onl0 when it $eco#es a shield for fraud, illegalit0 or ine?uit0 co##itted against third persons([1:] Aence, an0 application of the doctrine of piercing the corporate 3eil should $e done with caution( [1%] A court should $e #indful of the #ilieu where it is to $e applied( [1,] .t #ust $e certain that the corporate fiction was #isused to such an e6tent that in4ustice, fraud, or cri#e was co##itted against another, in disregard of its rights( [1-] 9he wrongdoing #ust $e clearl0 and con3incingl0

esta$lished7 it cannot $e presu#ed( [2 erroneous application([21]

@therwise, an

in4ustice that was ne3er unintended #a0 result fro# an

9his Court has pierced the corporate 3eil to ward off a 4udg#ent credit,[22] to a3oid inclusion of corporate assets as part of the estate of the decedent, [23] to escape lia$ilit0 arising fro# a de$t,[28] or to perpetuate fraud andDor confuse legiti#ate issues[2!] either to pro#ote or to shield unfair o$4ecti3es[2:] or to co3er up an otherwise $latant 3iolation of the prohi$ition against foru#&shopping( [2%] @nl0 in these and si#ilar instances #a0 the 3eil $e pierced and disregarded([2,] 9he ?uestion of whether a corporation is a #ere alter ego is one of fact([2-] *iercing the 3eil of corporate fiction #a0 $e allowed onl0 if the following ele#ents concur; (1) control && not #ere stoc1 control, $ut co#plete do#ination && not onl0 of finances, $ut of polic0 and $usiness practice in respect to the transaction attac1ed, #ust ha3e $een such that the corporate entit0 as to this transaction had at the ti#e no separate #ind, will or e6istence of its own7 (2) such control #ust ha3e $een used $0 the defendant to co##it a fraud or a wrong to perpetuate the 3iolation of a statutor0 or other positi3e legal dut0, or a dishonest and an un4ust act in contra3ention of plaintiffNs legal right7 and (3) the said

control and $reach of dut0 #ust ha3e pro6i#atel0 caused the in4ur0 or un4ust loss co#plained of([3
]

>e $elie3e that the a$sence of the foregoing ele#ents in the present case precludes the piercing of the corporate 3eil( 1irst, other than the fact that petitioners ac?uired the assets of *A)F2.5, there is no showing that their control o3er it warrants the disregard of corporate personalities([31] ,econ#, there is no e3idence that their 4uridical personalit0 was used to co##it a fraud or to do a wrong7 or that the separate corporate entit0 was farcicall0 used as a #ere alter ego, $usiness conduit or instru#entalit0 of another entit0 or person([32] 3hir#, respondent was not defrauded or in4ured when petitioners ac?uired the assets of *A)F2.5([33] Being the part0 that as1ed for the piercing of the corporate 3eil, respondent had the $urden of presenting clear and con3incing e3idence to 4ustif0 the setting aside of the separate corporate personalit0 rule( [38] Aowe3er, it utterl0 failed to discharge this $urden7[3!] it failed to esta$lish $0 co#petent e3idence that petitionerNs separate corporate 3eil had $een used to conceal fraud, illegalit0 or ine?uit0([3:] >hile we agree with respondentNs clai# that the assets of the +ational )ugar De3elop#ent Corporation

(+A)FD/C@) can $e easil0 traced to *A)F2.5, [3%] we are not con3inced that the transfer of the latterNs assets to petitioners was fraudulentl0 entered into in order to escape lia$ilit0 for its de$t to respondent([3,] A careful re3iew of the records re3eals that DB*

foreclosed the #ortgage e6ecuted $0 *A)F2.5 and ac?uired the assets as the highest $idder at the pu$lic auction conducted([3-] 9he $an1 was 4ustified in foreclosing the #ortgage, $ecause the *A)F2.5 account had incurred arrearages of #ore than 2 percent of the total outstanding o$ligation([8 ] 9hus, DB* had not onl0 a right, $ut also a dut0 under the law to foreclose the su$4ect properties([81] *ursuant to 5@. +o( 1,-&A[82] as a#ended $0 5@. +o( 311,
[83]

*+B

ac?uired

*A)F2.5Ns

assets

that

DB*

had

foreclosed and purchased in the nor#al course( *etitioner $an1 was li1ewise tas1ed to #anage te#poraril0 the operation of such assets either $0 itself or through a su$sidiar0 corporation([88] *+B, as the second #ortgagee, redee#ed fro# DB* the foreclosed *A)F2.5 assets pursuant to )ection : of Act +o( 313!([8!] 9hese assets were later con3e0ed to *+B for a consideration, the ter#s of which were e#$odied in the "ede#ption Agree#ent([8:] *+B, as successor&in&interest,

stepped into the shoes of DB* as *A)F2.5Ns creditor( [8%] B0 wa0 of a Deed of Assign#ent, [8,] *+B then transferred to +A)FD/C@ Agree#ent( .n Develop%ent Ban4 of the Philippines v. Court of Appeals,[8-] we had the occasion to resol3e a si#ilar issue( >e ruled that *+B, DB* and their transferees were not lia$le for 2arindu?ue 2iningNs unpaid o$ligations to "e#ington .ndustrial )ales Corporation ("e#ington) after the two $an1s had foreclosed the assets of 2arindu?ue 2ining( >e li1ewise held that "e#ington failed to discharge its $urden of pro3ing $ad faith on the part of 2arindu?ue 2ining to 4ustif0 the piercing of the corporate 3eil( .n the instant case, the CA erred in affir#ing the trial courtNs lifting of the corporate #as1( [!
]

all

its

rights

under

the

"ede#ption

9he CA did not

point to an0 fact e3idencing $ad faith on the part of *+B and its transferee([!1] 9he corporate fiction was not used to defeat pu$lic con3enience, 4ustif0 a wrong, protect fraud or defend cri#e([!2] +one of the foregoing e6ceptions was shown to e6ist in the present case( [!3] @n the contrar0, the lifting of the corporate 3eil would result in #anifest in4ustice( 9his we cannot allow( No )er%er or

!onsolidation "espondent further clai#s that petitioners should $e held lia$le for the unpaid o$ligations of *A)F2.5 $0 3irtue of 5@. +os( 1,-&A and 311, which e6pressl0 authori<ed *A)F2.5 and *+B to #erge or consolidate( @n the other hand, petitioners contend that their ta1eo3er of the operations of *A)F2.5 did not in3ol3e an0 corporate #erger or consolidation, $ecause the latter had ne3er lost its separate identit0 as a corporation( A consolidation is the union of two or #ore e6isting entities to for# a new entit0 called the consolidated corporation( A #erger, on the other hand, is a union where$0 one or #ore e6isting corporations are a$sor$ed $0 another corporation that sur3i3es and continues the co#$ined $usiness([!8] 9he #erger, howe3er, does not $eco#e effecti3e upon the #ere agree#ent of the constituent corporations([!!] )ince a #erger or consolidation in3ol3es funda#ental changes in the corporation, as well as in the rights of stoc1holders and creditors, there #ust $e an e6press pro3ision of law authori<ing the#([!:] Bor a 3alid #erger or consolidation, the appro3al $0 the )ecurities and /6change Co##ission ()/C) of the articles of #erger or consolidation is re?uired([!%] 9hese articles #ust li1ewise $e dul0 appro3ed

$0 a #a4orit0 of the respecti3e stoc1holders of the constituent corporations([!,] .n the case at $ar, we hold that there is no #erger or consolidation with respect to *A)F2.5 and *+B( Code[!-] was not followed( .n fact, *A)F2.5Ns corporate e6istence, as correctl0 found $0 the CA,
]

9he

procedure prescri$ed under 9itle .I of the Corporation

had

not

$een

legall0

e6tinguished

or

ter#inated([:

Burther, prior to *+BNs ac?uisition of the

foreclosed assets, *A)F2.5 had pre3iousl0 #ade partial pa0#ents to respondent for the for#erNs o$ligation in the a#ount of *%%%,2:3(, ( As of June 2%, 1-%3, *A)F2.5 had paid *2! , to respondent and, fro# Januar0 !, ( 1-%8 to 2a0 23, 1-%8, another *18,

+either did petitioner e6pressl0 or i#pliedl0 agree to assu#e the de$t of *A)F2.5 to respondent( [:1] 5@. +o( 11 e6plicitl0 pro3ides that *+B shall stud0 and su$#it reco##endations on the clai#s of *A)F2.5Ns creditors( [:2] Clearl0, the corporate separateness $etween *A)F2.5 and *+B re#ains, despite respondentNs insistence to the contrar0([:3] >A/"/B@"/, the *etition is here$0 GR*N+,# and the assailed Decision S,+ *S-#,( +o pronounce#ent as to

costs( )@ @"D/"/D( 5itu$, -Actin$ Chair%an., ,an#oval&*utierre', and Carpio, 00., concur( Melo, -Chair%an., 0., A$road, on official lea3e(

[1]

"ollo, pp( 3 &3-(

*enned $0 Justice "enato C(

Dacudao, with the concurrence of Justices =uirino D( A$ad )antos Jr( (Di3ision chair#an) and B( A( Adefuin de la Cru< (#e#$er)( Assailed Decision, p( 117 rollo, p( 3-( .$id(, pp( 1&%7 i$id(, pp( 3 &3!( .d(, p( -7 id(, p( 3%( 9he case was dee#ed su$#itted for decision on 12, 2 1, upon this CourtNs receipt of

[2]

[3]

[8]

[!]

Be$ruar0

petitionersN 2e#orandu#, signed $0 Att0( )al3ador A( 5u0( "espondentNs 2e#orandu#, which was filed on Be$ruar0 -, 2 1, was signed $0 Att0( "enecio "( /spiritu(

[:]

*etitionersN 2e#orandu#, pp( %&,7 rollo, pp( %3&%8(

@riginal in upper case and italici<ed( Cor#ial v. Miran#a, 38, )C"A 1!,, Dece#$er 18, 2 2:, )C"A % 3, Be$ruar0 2:, 1--%( Baricuatro 0r. v. Court of Appeals , 32! )C"A 13%, ( (

[%]

[,]

[-]

Be$ruar0 -, 2 .$id(

[1 ]

[11]

Jose C( Ca#pos Jr( and 2aria Clara 5ope<&Ca#pos, 3he

Corporation Co#e= Co%%ents, Notes an# ,electe# Cases , Gol( 2, 1-- ed(, p( 8:!, citing E#<ar# 0. Nell Co%pan" v. Pacific 1ar%s, Inc., 1! )C"A 81!, +o3e#$er 2-, 1-:!7 2est 3exas Refinin$ > Dev. Co. v. Co%%. of Int. Rev. , :, B( 2d %%( U2, Corporation Code( +u v. National Labor Relations Co%%ission , 28! )C"A

[12]

[13]

138, June 1:, 1--!( Li% v. Court of Appeals, 323 )C"A 1 2, Januar0 28, (

[18]

[1!]

1rancisco Motors Corporation v. Court of Appeals , 3 -

)C"A %2, June 2!, 1---( ,an 0uan ,tructural an# ,teel 1abricators, Inc. v. Court

[1:]

of Appeals, 2-: )C"A :31, )epte#$er 2-, 1--,( Re"noso I5 v. Court of Appeals , 38! )C"A 33!, (

[1%]

+o3e#$er 22, 2

[1,]

1rancisco Motors Corporation v. Court of Appeals,

supra( 3ra#ers Ro"al Ban4 v. Court of Appeals, 2:- )C"A 1!,

[1-]

2arch 3, 1--%( Matu$uina Inte$rate# 2oo# Pro#ucts, Inc. v. Court of

[2 ]

Appeals, 2:3 )C"A 8-1, @cto$er 28, 1--:( 1rancisco Motors Corporation v. Court of Appeals ,

[21]

supra( ,iba$at 3i%ber Corp. v. *arcia, 21: )C"A 8% ,

[22]

Dece#$er 11, 1--2( Cease v. Court of Appeals , -3 )C"A 8,3, @cto$er 1,,

[23]

1-%-(

[28]

Arcilla v. Court of Appeals , 21! )C"A 12 , @cto$er 23,

1--2( 0acinto v. Court of Appeals , 1-, )C"A 211, June :,

[2!]

1--1( 5illanueva v. A#re, 1%2 )C"A ,%:, April 2%, 1-,1irst Philippine International Ban4 v. Court of Appeals ,

[2:]

[2%]

2!2 )C"A 2!-, Januar0 28, 1--:( ARB Construction Co., Inc. v. Court of Appeals , 332 (

[2,]

)C"A 82%, 2a0 31, 2

[2-]

(eirs of Ra%on Durano ,r. v. !" , 388 )C"A 23,, (

@cto$er 28, 2

[3 ]

Li% v. Court of Appeals, supra( 3ra#ers Ro"al Ban4, v. Court of Appeals, supra( !%ali v. Court of Appeals , 1,- )C"A !2-, )epte#$er

[31]

[32]

13, 1-- ( 3ra#ers Ro"al Ban4, v. Court of Appeals, supra( Republic v. ,an#i$anba"an, 38: )C"A %: , Dece#$er

[33]

[38]

8, 2

[3!]

Li% v. Court of Appeals, supra( ,an 0uan ,tructural an# ,teel 1abricators, Inc. v. Court

[3:]

of Appeals, supra( "espondentNs 2e#orandu#, p( :7 rollo, p( : ( E#<ar# 0. Nell Co%pan" v. Pacific 1ar%s Inc. , supra, p(

[3%]

[3,]

81%, per Concepcion, 0. ,ee "ede#ption Agree#ent, Anne6 PCO7 records, p( !:( *residential Decree +o( 3,! (9he 5aw on 2andator0 .t shall $e #andator0 for go3ern#ent

[3-]

[8 ]

Boreclosure) pro3ides; P)ection 1( financial institutions, after the lapse of si6t0 (: ) da0s fro# the issuance of this Decree, to foreclose the collaterals andDor securities for an0 loan, credit, acco##odation, andDor guarantees granted $0 the# whene3er the arrearages on such account, including accrued interest and other charges, a#ount to at least twent0 percent (2 M) of the total outstanding o$ligations, including interest and other charges, as appearing in the $oo1s of account andDor related records of the financial institution concerned( 9his shall $e without pre4udice to

the e6ercise $0 the go3ern#ent financial institutions of such rights andDor re#edies a3aila$le to the# under their respecti3e contracts with their de$tors, including the right to foreclosure on loans, credits, acco##odations andDor guarantees on which the arrearages are less than twent0 percent (2 M)(O
[81]

Develop%ent Ban4 of the Philippines v. Court of

Appeals, supra( Anne6 PAO7 records, p( ! ( Anne6 PBO7 i$id(, p( !2( .$id(7 id(, p( !3( 9his article pro3ides;

[82]

[83]

[88]

[8!]

P)ec( :( .n all cases in which an e6tra4udicial sale is #ade under the special power herein$efore referred to, the de$tor, his successor in interest or an0 4udicial creditor or 4udg#ent creditor of said de$tor, or an0 person ha3ing a lien on the propert0 su$se?uent to the #ortgage or deed of trust under which the propert0 is sold, #a0 redee# the sa#e at an0 ti#e within the ter# of one 0ear fro# and after the date of the sale7 and such rede#ption shall $e go3erned $0 the pro3isions of sections four hundred and si6t0&four to four hundred and si6t0 si6, inclusi3e, of the Code of Ci3il *rocedure (now "ule 3-, )ection 2, of the

1--% "e3ised "ules of Ci3il *rocedure), in so far as these are not inconsistent with the pro3isions of this Act(O
[8:]

,ee "ede#ption Agree#ent Anne6 PCO7 records, p( !:( Liton7ua v. L >R Corporation , 32 )C"A 8 !, Dece#$er

[8%]

-, 1---( Anne6 *+B&27 records, p( :1( '" +o( 12:2 , August 1:, 2 1(

[8,]

[8-]

[! ]

1rancisco Motors Corporation v. Court of Appeals ,

supra( Develop%ent Ban4 of the Philippines v. Court of

[!1]

Appeals, supra( !nion Ban4 of the Philippines v. Court of Appeals , 2-

[!2]

)C"A 1-,, 2a0 1-, 1--,( 5lason Enterprises Corporation v. Court of Appeals , 31

[!3]

)C"A 2:, Jul0 :, 1---( Ca#pos Jr( and 5ope<&Ca#pos, 3he Corporation Co#e=

[!8]

Co%%ents, Notes an# ,electe# Cases, supra, pp( 88 & 881(

[!!]

Associate# Ban4 v. Court of Appeals , 2-1 )C"A !11,

June 2-, 1--,( Ca#pos Jr( and 5ope<&Ca#pos, 3he Corporation Co#e=

[!:]

Co%%ents, Notes an# ,electe# Cases, supra, p( 881( U%- Corporation Code( U%% Corporation Code( P9itle .I V 2/"'/" A+D C@+)@5.DA9.@+ *lan of #erger or consolidation( V 9wo or

[!%]

[!,]

[!-]

P)/C( %:(

#ore corporations #a0 #erge into a single corporation which shall $e one of the constituent corporations or #a0 consolidate into a new single corporation which shall $e the consolidated corporation( P9he $oard of directors or trustees of each corporation, part0 to the #erger or consolidation, shall appro3e a plan of #erger or consolidation setting forth the following; R1( 9he na#es of the corporations proposing to #erge or consolidate, hereinafter referred to as the constituent corporations7 R2( 9he ter#s of the #erger or consolidation and the #ode of carr0ing the sa#e into effect7

R3( A state#ent of the changes, if an0, in the articles of incorporation of the sur3i3ing corporation in case of #erger7 and, with respect to the consolidated corporation in case of consolidation, all the state#ents re?uired to $e set forth in the articles of incorporation for corporations organi<ed under this Code7 and R8( )uch other pro3isions with respect to the proposed #erger or consolidation as are dee#ed necessar0 or desira$le(N P)/C( %%( )toc1holdersN or #e#$ersN appro3al( V Fpon appro3al $0 #a4orit0 3ote of each of the $oard of directors or trustees of the constituent corporations of the plan of #erger or consolidation, the sa#e shall $e su$#itted for appro3al $0 the stoc1holders or #e#$ers of each of such corporations at separate corporate #eetings dul0 called for the purpose( +otice of such #eetings shall $e gi3en to all stoc1holders or #e#$ers of the respecti3e corporations, at least two (2) wee1s prior to the date of the #eeting, either personall0 or $0 registered #ail( )aid notice shall state the purpose of the #eeting and shall include a cop0 or a su##ar0 of the plan of #erger or consolidation( 9he affir#ati3e 3ote of stoc1holders representing at least two&thirds (2D3) of the outstanding capital stoc1 of each corporation in the case of stoc1 corporations or at least two&thirds (2D3) of the #e#$ers in the case of non&stoc1 corporations shall $e necessar0

for the appro3al of such plan( An0 dissenting stoc1holder in stoc1 corporations #a0 e6ercise his appraisal right in accordance with the Code; *ro3ided, 9hat if after the appro3al $0 the stoc1holders of such plan, the $oard of directors decides to a$andon the plan, the appraisal right shall $e e6tinguished( PAn0 a#end#ent to the plan of #erger or consolidation #a0 $e #ade, pro3ided such a#end#ent is appro3ed $0 #a4orit0 3ote of the respecti3e $oards of directors or trustees of all the constituent corporations and ratified $0 the affir#ati3e 3ote of stoc1holders representing at least two&thirds (2D3) of the outstanding capital stoc1 or of two thirds (2D3) of the #e#$ers of each of the constituent corporations( )uch plan, together with an0 a#end#ent, shall $e considered as the agree#ent of #erger or consolidation( P)/C( %,( Articles of #erger or consolidation( & After the appro3al $0 the stoc1holders or #e#$ers as re?uired $0 the preceding section, articles of #erger or articles of consolidation shall $e e6ecuted $0 each of the constituent corporations, to $e signed $0 the president or 3ice& president and certified $0 the secretar0 or assistant secretar0 of each corporation setting forth; R1( 9he plan of the #erger or the plan of consolidation7 R2( As to stoc1 corporations, the nu#$er of shares

outstanding, or in

the case of non&stoc1 corporations,

the nu#$er of #e#$ers, and R3( As to each corporation, the nu#$er of shares or #e#$ers 3oting for and against such plan, respecti3el0(N P)/C( %-( /ffecti3it0 of #erger or consolidation( & 9he articles of #erger or of consolidation, signed and certified as herein a$o3e re?uired, shall $e su$#itted to the )ecurities and /6change Co##ission in ?uadruplicate for its appro3al; *ro3ided, 9hat in the case of #erger or consolidation of $an1s or $an1ing institutions, $uilding and loan associations, trust co#panies, insurance co#panies, pu$lic utilities, educational institutions and other special corporations go3erned $0 special laws, the fa3ora$le reco##endation of the appropriate go3ern#ent agenc0 shall first $e o$tained( satisfied that the #erger is or not corporations concerned .f the Co##ission is consolidation inconsistent of with the the

pro3isions of this Code and e6isting laws, it shall issue a certificate of #erger or of consolidation, at which ti#e the #erger or consolidation shall $e effecti3e( P.f, upon in3estigation, the )ecurities and /6change Co##ission has reason to $elie3e that the proposed #erger or consolidation is contrar0 to or inconsistent with the pro3isions of this Code or e6isting laws, it shall set a hearing to gi3e the corporations concerned the opportunit0 to $e heard( >ritten notice of the date, ti#e

and place of hearing shall $e gi3en to each constituent corporation at least two (2) wee1s $efore said hearing( 9he Co##ission shall thereafter proceed as pro3ided in this Code( P)/C( , ( /ffects of #erger or consolidation( & 9he

#erger or consolidation shall ha3e the following effects; R1( 9he constituent corporations shall $eco#e a single corporation which, in case of #erger, shall $e the sur3i3ing corporation designated in the plan of #erger7 and, in case of consolidation, shall $e the consolidated corporation designated in the plan of consolidation7 R2( 9he separate e6istence of the constituent corporations shall cease, e6cept that of the sur3i3ing or the consolidated corporation7 R3( 9he sur3i3ing or the consolidated corporation shall possess all the rights, pri3ileges, i##unities and powers and shall $e su$4ect to all the duties and lia$ilities of a corporation organi<ed under this Code7 R8( 9he sur3i3ing or the consolidated corporation shall thereupon and thereafter possess all the rights, pri3ileges, i##unities and franchises of each of the constituent corporations7 and all propert0, real or personal, and all recei3a$les due on whate3er account, including

su$scriptions to shares and other choses in action, and all and e3er0 other interest of, or $elonging to, or due to each constituent corporation, shall $e dee#ed transferred to and 3ested in such sur3i3ing or consolidated corporation without further act or deed7 and R!( 9he sur3i3ing or consolidated corporation shall $e responsi$le and lia$le for all the lia$ilities and o$ligations of each of the constituent corporations in the sa#e #anner as if such sur3i3ing or consolidated corporation had itself incurred such lia$ilities or o$ligations7 and an0 pending clai#, action or proceeding $rought $0 or against an0 of such constituent corporations #a0 $e prosecuted $0 or against the sur3i3ing or consolidated corporation( 9he right of creditors or liens upon the propert0 of an0 of such constituent corporations shall not $e i#paired $0 such #erger or consolidation(NO
[: ]

Associate# Ban4 v. Court of Appeals, supra( E#<ar# 0. Nell Co%pan" v. Pacific 1ar%s, Inc., supra( Anne6 PBO7 records, p( !3( 3ra#ers Ro"al Ban4, v. Court of Appeals, supra(

[:1]

[:2]

[:3]

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

THIRD DIVISION [ G.R. No. 131617, A1?1;< 13, 2001 ]


ADA!IA '. +RANCISCO AND M RR"!AND D V !OPM NT CORPORATION, P TITION RS, VS. RITA C. M -IA, AS ( C,TRI( O+ T STAT ANDR A CORDOVA VDA. D R SPOND NT. D
GON8AGA$R " S, -..

STAT

O+

G,TI RR 8,

CISION

.n this petition for re3iew $0 certiorari, petitioners pra0 for the setting aside of the Decision of the Court of Appeals pro#ulgated on 13 April 1--- and its 1! Dece#$er 1--"esolution in CA&'("( CG +o( 1-2,1( As culled fro# the decisions of the lower courts and the pleadings of the parties, the factual $ac1ground of this

case is as set out herein; Andrea Cordo3a Gda( de 'utierre< ('utierre<) was the registered owner of a parcel of land in Ca#arin, Caloocan Cit0 1nown as 5ot ,:1 of the 9ala /state( 9he land had an aggregate area of twent0&fi3e (2!) hectares and was co3ered $0 9ransfer Certificate of 9itle (9C9) +o( !%%- of the "egistr0 of Deeds of Caloocan Cit0( 9he propert0 was later su$di3ided into fi3e lots with an area of fi3e hectares each and pursuant thereto, 9C9 +o( !%%- was cancelled and fi3e new transfer certificates of title were issued in the na#e of 'utierre<, na#el0 9C9 +o( %123 co3ering 5ot ,:1&A, 9C9 +o( %128 co3ering 5ot ,:1&B, 9C9 +o( %12! co3ering 5ot ,:1&C, 9C9 +o( %12: co3ering 5ot ,:1&D and 9C9 +o( %12% co3ering 5ot ,:1&/( @n 21 Dece#$er 1-:8, 'utierre< and Cardale Binancing and "ealt0 Corporation (Cardale) e6ecuted a Deed of )ale with 2ortgage relating to the lots co3ered $0 9C9 +os( %128, %12!, %12: and %12%, for the consideration of *, , ( of ( Fpon the e6ecution of the deed, Cardale ( ( ( .t was agreed that the would $e paid in se3eral *:2-, paid 'utierre< *1%1, $alance

install#ents within fi3e 0ears fro# the date of the deed, at an interest of nine percent per annu# P$ased on the successi3e unpaid principal $alances(O 9hereafter, the titles of 'utierre< were cancelled and in lieu thereof 9C9

+os( %!31 to %!38 were issued in fa3or of Cardale( 9o secure pa0#ent of the $alance of the purchase price, Cardale constituted a #ortgage on three of the four parcels of land co3ered $0 9C9 +os( %!31, %!32 and %!33, and enco#passing ownerNs fifteen hectares of land( [1] 9he 9he encu#$rance was annotated upon the certificates of title the duplicate certificates( ownerNs duplicates were retained $0 'utierre<( @n 2: August 1-:,, owing to CardaleNs failure to settle its #ortgage o$ligation, 'utierre< filed a co#plaint for rescission of the contract with the =ue<on Cit0 "egional 9rial Court ("9C), which was doc1eted as Ci3il Case +o( =&123::([2] @n 2 @cto$er 1-:-, during the pendenc0 of the rescission case, 'utierre< died and was su$stituted $0 her e6ecutri6, respondent "ita C( 2e4ia (2e4ia)( .n 1-%1, plaintiffNs presentation of e3idence was ter#inated( Aowe3er, Cardale, which was represented $0 petitioner Adalia B( Brancisco (Brancisco) in her capacit0 as Gice& *resident and 9reasurer of Cardale, lost interest in proceeding with the presentation of its e3idence and the case lapsed into inacti3e status for a period of a$out fourteen 0ears( .n the #eanti#e, the #ortgaged parcels of land co3ered $0 9C9 +os( %!32 and %!33 $eca#e delin?uent in the

pa0#ent *1 2,3 (

of

real

estate

ta6es

in

the

a#ount

of

, while the other #ortgaged propert0 co3ered

$0 9C9 +o( %!31 $eca#e delin?uent in the a#ount of *,-,231(3%, which cul#inated in their le30 and auction sale on 1 and 12 )epte#$er 1-,3, in satisfaction of the ta6 arrears( 9he highest $idder for the three parcels of land was petitioner 2err0land De3elop#ent Corporation (2err0land), whose *resident and #a4orit0 stoc1holder is Brancisco( A #e#orandu# $ased upon the certificate of sale was then #ade upon the original copies of 9C9 +os( %!31 to %!33( @n 13 August 1-,8, $efore the e6piration of the one 0ear rede#ption period, 2e4ia filed a 2otion for Decision with the trial court( 9he hearing of said #otion was deferred, howe3er, due to a 2otion for *ostpone#ent filed $0 Cardale through Brancisco, who signed the #otion in her capacit0 as Pofficer&in&charge,O clai#ing that Cardale needed ti#e to hire new counsel( Aowe3er, Brancisco did not #ention the ta6 delin?uencies and sale in fa3or of 2err0land( )u$se?uentl0, the rede#ption period e6pired and 2err0land, acting through Brancisco, filed petitions for consolidation of title,[3] which cul#inated in the issuance of certain orders[8] decreeing the cancellation of CardalesN 9C9 +os( %!31 to %!33 and the issuance of new transfer certificates of title Pfree fro# an0 encu#$rance or third& part0 clai# whatsoe3erO in fa3or of 2err0land( *ursuant to

such orders, the "egister of Deeds of Caloocan Cit0 issued new transfer certificates of title in the na#e of 2err0land which did not $ear a #e#orandu# of the #ortgage liens in fa3or of 'utierre<( 9hereafter, so#eti#e in June 1-,!, Brancisco filed in Ci3il Case +o( =&123:: an undated 2anifestation to the effect that the properties su$4ect of the #ortgage and co3ered $0 9C9 +os( %!31 to %!33 had $een le3ied upon $0 the local go3ern#ent of Caloocan Cit0 and sold at a ta6 delin?uenc0 sale( Brancisco further clai#ed that the delin?uenc0 sale had rendered the issues in Ci3il Case +o( =&123:: #oot and acade#ic( Agreeing with Brancisco, the trial court dis#issed the case, e6plaining that since the properties #ortgaged to Cardale had $een transferred to 2err0land which was not a part0 to the case for rescission, it would $e #ore appropriate for the parties to resol3e their contro3ers0 in another action( @n 18 Januar0 1-,%, 2e4ia, in her capacit0 as e6ecutri6 of the /state of 'utierre<, filed with the "9C of =ue<on Cit0 a co#plaint for da#ages with pra0er for preli#inar0 attach#ent against Brancisco, 2err0land and the "egister of Deeds of Caloocan Cit0( 9he case was doc1eted as Ci3il Case +o( =&8-%::( @n 1! April 1-,,, the trial court rendered a decision[!] in fa3or of the defendants, dis#issing the co#plaint for da#ages filed $0 2e4ia( .t

was held that plaintiff 2e4ia, as e6ecutri6 of 'utierre<Ns estate, failed to esta$lish $0 clear and con3incing e3idence her allegations that Brancisco controlled Cardale and 2err0land and that she had e#plo0ed fraud $0 intentionall0 causing Cardale to default in its pa0#ent of real propert0 ta6es on the #ortgaged properties so that 2err0land could purchase the sa#e $0 #eans of a ta6 delin?uenc0 sale( 2oreo3er, according to the trial court, the failure to reco3er the propert0 su$4ect of the Deed of )ale with 2ortgage was due to 2e4iaNs failure to acti3el0 pursue the action for rescission (Ci3il Case +o( 123::), allowing the case to drag on for eighteen 0ears( 9hus, it ruled that & 666 666 666

9he act of not pa0ing or failing to pa0 ta6es due the go3ern#ent $0 the defendant Adalia B( Brancisco, as treasurer of Cardale Binancing and "ealt0 Corporation do not, per se, constitute perpetration of fraud or an illegal act( .t do [sic] not also constitute an act of e3asion of an e6isting o$ligation (to plaintiff) if there is no clear showing that such an act of non&pa0#ent of ta6es was deli$eratel0 #ade despite its (CardaleNs) sol3enc0 and capa$ilit0 to pa0( 9here is no e3idence showing that Cardale Binancing

and "ealt0 Corporation was financiall0 capa$le of pa0ing said ta6es at the ti#e( P9here are ti#es when the corporate fiction will $e disregarded; (1) where all the #e#$ers or stoc1holders co##it illegal act7 (2) where the corporation is used as du##0 to co##it fraud or wrong7 (3) where the corporation is an agenc0 for a parent corporation7 and (8) where the stoc1 of a corporation is owned $0 one person(O (., Bletcher, !,, !-, :1 and :3)( +one of the foregoing reasons can $e applied to the incidents in this case; (1) there appears no illegal act co##itted $0 the stoc1holders of defendant 2err0land De3elop#ent Corporation and Cardale Binancing and "ealt0 Corporation7 (2) the incidents pro3en $0 e3idence of the plaintiff as well as that of the defendants do not show that either or $oth corporations were used as du##ies $0 defendant Adalia B( Brancisco to co##it fraud or wrong( 9o $e used as [a] du##0, there has to $e a showing that the du##0 corporation is controlled $0 the person using it( 9he e3idence of plaintiff failed to pro3e that defendant Adalia B( Brancisco has controlling interest in either or $oth corporations( @n the other hand, the e3idence of defendants clearl0 show that defendant Brancisco has no control o3er either of the two corporations7 (3) none of the two corporations appears to $e an agenc0 for a parent (the other) corporation7 and (8) the stoc1 of either of the

two corporation [sic] is not owned $0 one person (defendant Adalia B( Brancisco)( /6cept for defendant Adalia B( Brancisco, the incorporators and stoc1holders of one corporation are different fro# the other( 666 666 666

9he said case (Ci3il Case +o( 123::) re#ained pending for al#ost 1, 0ears $efore the then Court of Birst .nstance, now the "egional 9rial Court( /3en if the trial of the said case $eca#e protracted on account of the retire#ent andDor pro#otion of the presiding 4udge, as well as the transfer of the case fro# one sala to another, and as clai#ed $0 the plaintiff Pthat the defendant lost interestO, (which allegation is unusual, so to spea1), the court $elie3e [sic] that it would not ha3e ta1en that long to dispose [of] said case had plaintiff not slept on her rights, and her dut0 and o$ligation to see to it that the case is alwa0s set for hearing so that it #a0 $e ad4udicated [at] the earliest possi$le ti#e( 9his dut0 pertains to $oth parties, $ut plaintiff should ha3e $een #ore asserti3e, as it was her o$ligation, si#ilar to the o$ligation of plaintiff relati3e to the ser3ice of su##ons in other cases( 9he fact that Cardale Binancing and "ealt0 Corporation did not perfor# its o$ligation as pro3ided in the said PDeed of )ale with 2ortgageO (/6hi$it PAO) is 3er0

clear(

5i1ewise,

the

fact

that

Andrea

Cordo3a,

the

contracting part0, represented $0 the plaintiff in this case did not also perfor# her duties andDor o$ligation pro3ided in the said contract is also clear( 9his could ha3e $een the reason wh0 the plaintiff in said case (/6hi$it P/O) slept on her rights and allowed the sa#e to re#ain pending for al#ost 1, 0ears( Aowe3er, and irrespecti3e of an0 other reason $ehind the sa#e, the court $elie3es that plaintiff, indeed, is the one to $la#e for the failure of the testate estate of the late Andrea Cordo3a Gda( de 'utierre< to reco3er the #one0 or propert0 due it on the $asis of /6hi$it PAO( 666 666 666

666 Aad the plaintiff not slept on her rights and had it not $een for her failure to perfor# her co##ensurate dut0 to pursue 3igorousl0 her case against Cardale Binancing and "ealt0 Corporation in said Ci3il Case +o( 123::, she could ha3e easil0 1nown said non&pa0#ent of realt0 ta6es on the said properties $0 said Cardale Binancing and "ealt0 Corporation, or, at least the auction sales that followed, and fro# which she could ha3e redee#ed said properties within the one 0ear period pro3ided $0 law, or, ha3e a3ailed of re#edies at the ti#e to protect the interest of

the testate estate of the late Andrea Cordo3a Gda( de 'utierre<( 666 666 666

9he dispositi3e portion of the trial courtNs decision states & >A/"/B@"/, in 3iew of all the foregoing consideration, the court here$0 renders 4udg#ent in fa3or of the defendants "egister of Deeds of Caloocan Cit0, 2err0land De3elop#ent Corporation and Adalia B( Brancisco, and against plaintiff "ita C( 2e4ia, as /6ecutri6 of the 9estate /state of Andrea Cordo3a Gda( De 'utierre<, and here$0 orders; 1:( 9hat this case for da#ages $e dis#issed, at the sa#e ti#e, plaintiffNs #otion for reconsideration dated )epte#$er 23, 1-,% is denied7 1%( *laintiff pa0 the defendants 2err0land De3elop#ent Corporation and the "egister of Deeds the su# of *2 , ( , and another su# of *2 , ( to the defendant Adalia B( Brancisco, as and for attorne0Ns fees and litigation e6penses, and pa0 the costs of the proceedings( )@ @"D/"/D(

9he Court of Appeals,[:] in its decision[%] pro#ulgated on 13 April 1---, re3ersed the trial court, holding that the corporate 3eil of Cardale and 2err0land #ust $e pierced in order to hold Brancisco and 2err0land solidaril0 lia$le since these two corporations were used as du##ies $0 Brancisco, who e#plo0ed fraud in allowing Cardale to default on the realt0 ta6es for the properties #ortgaged to 'utierre< so that 2err0land could ac?uire the sa#e free fro# all liens and encu#$rances in the ta6 delin?uenc0 sale and, as a conse?uence thereof, frustrating 'utierre<Ns rights as a #ortgagee o3er the su$4ect properties( 9hus, the Court of Appeals pre#ised its findings of fraud on the following circu#stances V 666 666 666 666 Appellee Brancisco 1new that Cardale of which she was 3ice&president and treasurer had an outstanding o$ligation to 'utierre< for the unpaid $alance of the real properties co3ered $0 9C9 +os( %!31 to %!33, which Cardale purchased fro# 'utierre< which account, as of Dece#$er 1-,,, alread0 a#ounted to *8,818,2%1(83 (/6h( H, pp( 3-&88, record)7 she also 1new that 'utierre< had a #ortgage lien on the said properties to secure pa0#ent of the aforesaid o$ligation7 she li1ewise 1new

that the said #ortgaged properties were under litigation in Ci3il Case +o( =&123:: which was an action filed $0 'utierre< against Cardale for rescission of the sale andDor reco3er0 of said properties (/6h( /)( Despite such 1nowledge, appellee Brancisco did not infor# 'utierre<Ns /state or the /6ecutri6 (herein appellant) as well as the trial court that the #ortgaged properties had incurred ta6 delin?uencies, and that Binal +otices dated Jul0 -, 1-,2 had $een sent $0 the Cit0 9reasurer of Caloocan de#anding pa0#ent of such ta6 arrears within ten (1 ) da0s fro# receipt thereof (/6hs( J Q J&1, pp( 3%&3,, record)( Both notices which were addressed to V Cardale Binancing Q "ealt0 Corporation cDo 2err0land De3elop#ent Corporation and sent to appellee BranciscoNs address at ,3 Hatipunan "oad, >hite *lains, =ue<on Cit0, ga3e warning that if the ta6es were not paid within the aforesaid period, the properties would $e sold at pu$lic auction to satisf0 the ta6 delin?uencies( 9o reiterate, notwithstanding receipt of the aforesaid notices, appellee Brancisco did not infor# the /state of 'utierre< or her e6ecutri6 a$out the ta6 delin?uencies and of the i#pending auction sale of the said properties( /3en a #odicu# of good faith and fair pla0 should ha3e encouraged appellee Brancisco to at least ad3ise 'utierre<Ns /state through her e6ecutri6 (herein appellant)

and the trial court which was hearing the co#plaint for rescission and reco3er0 of said properties of such fact, so that the /state of 'utierre<, which had a real interest on the properties as #ortgagee and as plaintiff in the rescission and reco3er0 suit, could at least ta1e steps to forestall the auction sale and there$0 preser3e the properties and protect its interests thereon( And not onl0 did appellee Brancisco allow the auction sale to ta1e place, $ut she used her other corporation (2err0land) in participating in the auction sale and in ac?uiring the 3er0 properties which her first corporation (Cardale) had #ortgaged to 'utierre<( Again, appellee Brancisco did not thereafter infor# the /state of 'utierre< or its e6ecutri6 (herein appellant) a$out the auction sale, thus precluding the /state fro# e6ercising its right of rede#ption( And it was onl0 after the e6piration of the rede#ption period that appellee Brancisco filed a 2anifestation in Ci3il Case +o( =&123:: (/6h( ., p( 3:, record), in which she disclosed for the first ti#e to the trial court and appellant that the properties su$4ect of the case and on which 'utierre< or her /state had a #ortgage lien, had $een sold in a ta6 delin?uenc0 sale( And in order to further conceal her decepti3e #aneu3er, appellee Brancisco did not di3ulge in her aforesaid 2anifestation that it was her other corporation (2err0land) that ac?uired the properties in the auction sale(

>e are not i#pressed $0 appelleeNs su$#ission that no e3idence was adduced to pro3e that Cardale had the capacit0 to pa0 the ta6 arrears and therefore she or Cardale #a0 not $e faulted for the ta6 delin?uenc0 sale of the properties in ?uestion( Appellee BranciscoNs $ad faith or deception did not necessaril0 lie in CardaleNs or her failure to settle the ta6 deli?uencies in ?uestion, $ut in not disclosing to 'utierre<Ns estate or its e6ecutri6 (herein appellant) which had a #ortgage lien on said properties the ta6 delin?uencies and the i#pending auction sale of the encu#$ered properties( Appellee BranciscoNs deception is further shown $0 her conceal#ent of the ta6 delin?uenc0 sale of the properties fro# the estate or its e6ecutri6, thus pre3enting the latter fro# a3ailing of the right of rede#ption of said properties( 9hat appellee Brancisco di3ulged the auction sale of the properties onl0 after such rede#ption period had lapsed clearl0 $etra0s her intention to 1eep 'utierre<Ns /state or its /6ecutri6 fro# a3ailing of such right( And as the e3idence would further show, appellee Brancisco had a hand in securing for 2err0land consolidation of its ownership of the properties and in seeing to it that 2err0landNs torrens certificates for the properties were free fro# liens and encu#$rances( All these appellee Brancisco did e3en as she was full0 aware that 'utierre< or her estate had a 3alid and su$sisting #ortgage lien on

the said properties( .t is li1ewise worth0 of note that earl0 on appellee Brancisco had testified in the action for rescission of sale and reco3er0 of possession and ownership of the properties which 'utierre< filed against Cardale (Ci3il Case +o( =&123::) in her capacit0 as defendant CardaleNs 3ice& president and treasurer( But then, for no plausi$le reason whatsoe3er, she lost interest in continuing with the presentation of e3idence for defendant Cardale( And then, when appellant 2e4ia as e6ecutri6 of 'utierre<Ns /state filed on August 13, 1-,8 a 2otion for Decision in the aforesaid defendant counsel( Brancisco case, appellee needed in Brancisco ti#e her as to #o3ed e#plo0 to defer consideration of appellantNs 2otion on the prete6t that Cardale another for of )ignificantl0, personall0 aforesaid 2otion

*ostpone#ent dated August 1:, 1-,8 which appellee signed @fficer&in&Charge Cardale, she also did not disclose the fact that the properties su$4ect #atter of the case had long $een sold at a ta6 delin?uenc0 sale and ac?uired $0 her other corporation 2err0land( And as if what she had alread0 acco#plished were not enough fraudulence, appellee Brancisco, acting in $ehalf of 2err0land, caused the issuance of new transfer certificates of title in the na#e of 2err0land, which did not

an0#ore $ear the #ortgage lien in fa3or of 'utierre<( .n the #eanti#e, to further a3oid pa0#ent of the #ortgage inde$tedness owing to 'utierre<Ns estate, Cardale corporation was dissol3ed( Binall0, to put the properties $e0ond the reach of the #ortgagee, 'utierre<Ns estate, 2err0land caused the su$di3ision of such properties, which were su$se?uentl0 sold on install#ent $asis( .n its petition for certiorari, petitioners argue that there is no law re?uiring the #ortgagor to infor# the #ortgagee of the ta6 delin?uencies, if an0, of the #ortgaged properties( 2oreo3er, petitioners clai# that CardaleNs failure to pa0 the realt0 ta6es, per se, does not constitute fraud since it was not pro3en that Cardale was capa$le of pa0ing the ta6es( *etitioners also contend that if 2e4ia, as e6ecutri6 of 'utierre<Ns estate, was not re#iss in her dut0 to pursue Ci3il Case +o( 123::, she could ha3e easil0 learned of the non&pa0#ent of realt0 ta6es on the su$4ect properties and of the auction sale that followed and thus, ha3e redee#ed the properties or a3ailed of so#e other re#ed0 to conser3e the estate of 'utierre<( .n addition, 2e4ia could ha3e annotated a notice of lis pendens on the titles of the #ortgaged properties, $ut she failed to do so( .t is the stand of petitioners that respondent has not adduced an0 proof that Brancisco controlled $oth Cardale and 2err0land and that she used these two corporations to perpetuate a fraud upon 'utierre< or her estate(

*etitioners #aintain that the Pe3idence shows that, apart for# the #eager share of petitioner Brancisco, the stoc1holdings of $oth corporations co#prise other shareholders, and the stoc1holders of either of the#, aside fro# petitioner Brancisco, are co#posed of different persons(O As to Ci3il Case +o( 123::, petitioners insist that the decision of the trial court in that case constitutes res 4udicata to the instant case([,] .t is dicta in corporation law that a corporation is a 4uridical person with a separate and distinct personalit0 fro# that of the stoc1holders or #e#$ers who co#pose it([-] Aowe3er, when the legal fiction of the separate corporate personalit0 is a$used, such as when the sa#e is used for fraudulent or wrongful ends, the courts ha3e not hesitated to pierce the corporate 3eil( @ne of the earliest for#ulations of this doctrine of piercing the corporate 3eil was #ade in the A#erican case of !nite# ,tates v. Mil<au4ee Refri$erator 3ransit Co.[1 ] & .f an0 general rule can $e laid down, in the present state of authorit0, it is that a corporation will $e loo1ed upon as a legal entit0 as a general rule, and until sufficient reason to the contrar0 appears7 $ut, when the notion of legal entit0 is used to defeat pu$lic con3enience, 4ustif0 wrong, protect fraud, or defend cri#e, the law will regard the corporation as an association of persons(

)ince then a good nu#$er of cases ha3e fir#l0 i#planted this doctrine in *hilippine 4urisprudence( [11] @ne such case is !%ali v. Court of Appeals[12] wherein the Court declared that V Fnder the doctrine of piercing the 3eil of corporate entit0, when 3alid grounds therefore e6ist, the legal fiction that a corporation is an entit0 with a 4uridical personalit0 separate and distinct fro# its #e#$ers or stoc1holders #a0 $e disregarded( .n such cases, the corporation will $e considered as a #ere association of persons( 9he #e#$ers or stoc1holders of the corporation will $e considered as the corporation, that is, lia$ilit0 will attach directl0 to the officers and stoc1holders( 9he doctrine applies when the corporate fiction is used to defeat pu$lic con3enience, 4ustif0 wrong, protect fraud, or defend cri#e, or when it is #ade as a shield to confuse the legiti#ate issues, or where a corporation is the #ere alter ego or $usiness conduit of a person, or where the corporation is so organi<ed and controlled and its affairs are so conducted as to #a1e it #erel0 an instru#entalit0, agenc0, conduit or ad4unct of another corporation( >ith specific regard to corporate officers, the general rule is that the officer cannot $e held personall0 lia$le with the corporation, whether ci3ill0 or otherwise, for the

conse?uences of his acts, if he acted for and in $ehalf of the corporation, within the scope of his authorit0 and in good faith( .n such cases, the officerNs acts are properl0 attri$uted to the corporation([13] Aowe3er, if it is pro3en that the officer has used the corporate fiction to defraud a third part0,[18] or that he has acted negligentl0, #aliciousl0 or in $ad faith,[1!] then the corporate 3eil shall $e lifted and he shall $e held personall0 lia$le for the particular corporate o$ligation in3ol3ed( 9he Court, after an assiduous stud0 of this case, is con3inced that the totalit0 of the circu#stances appertaining conduce to the ine3ita$le conclusion that petitioner Brancisco acted in $ad faith( 9he e3ents leading up to the loss $0 the 'utierre< estate of its #ortgage securit0 attest to this( .t has $een esta$lished that Cardale failed to co#pl0 with its o$ligation to pa0 the $alance of the purchase price for the four parcels of land it $ought fro# 'utierre< co3ered $0 9C9 +os( %!31 to %!38, which o$ligation was secured $0 a #ortgage upon the lands co3ered $0 9C9 +os( %!31, %!32 and %!33( 9his pro#pted 'utierre< to file an action for rescission of the Deed of )ale with 2ortgage (Ci3il Case +o( =&123::), $ut the case dragged on for a$out fourteen 0ears when Cardale, as represented $0 Brancisco, who was Gice& *resident and 9reasurer of the sa#e,[1:] lost interest in co#pleting its presentation of e3idence(

/3en $efore 1-,8 when 2e4ia, in her capacit0 as e6ecutri6 of 'utierre<Ns estate, filed a 2otion for Decision with the trial court, there is no ?uestion that Brancisco 1new that the properties su$4ect of the #ortgage had $eco#e ta6 delin?uent( .n fact, as treasurer of Cardale, Brancisco herself was the officer charged with the responsi$ilit0 of pa0ing the realt0 ta6es on the corporationNs properties( 9his was ad#itted $0 the trial court in its decision( [1%] .n addition, notices dated - Jul0 1-,2 fro# the Cit0 9reasurer of Caloocan de#anding pa0#ent of the ta6 arrears on the su$4ect properties and gi3ing warning that if the realt0 ta6es were not paid within the gi3en period then such properties would $e sold at pu$lic auction to satisf0 the ta6 delin?uencies were sent directl0 to BranciscoNs address in >hite *lains, =ue<on Cit0( [1,] 9hus, as earl0 as 1-,2, Brancisco could ha3e infor#ed the 'utierre< estate or the trial court in Ci3il Case +o( =& 123:: of the ta6 arrears and of the notice fro# the Cit0 9reasurer so that the estate could ha3e ta1en the necessar0 steps to pre3ent the auction sale and to protect its interests in the #ortgaged properties, $ut she did no such thing( Binall0, in 1-,3, the properties were le3ied upon and sold at pu$lic auction wherein 2err0land & a corporation where Brancisco is a stoc1holder [1-]
]

and

concurrentl0 acts as *resident and director [2 highest $idder(

& was the

>hen 2e4ia filed the 2otion for Decision in Ci3il Case +o( =&123::,[21] the period for redee#ing the properties su$4ect of the ta6 sale had not 0et e6pired( [22] Fnder the "ealt0 *ropert0 9a6 Code,[23] pursuant to which the ta6 le30 and sale were prosecuted, [28] $oth the delin?uent ta6pa0er and in his a$sence, an0 person holding a lien or clai# o3er the propert0 shall ha3e the right to redee# the propert0 within one 0ear fro# the date of registration of the sale([2!] Aowe3er, if these persons fail to redee# the propert0 within the ti#e pro3ided, then the purchaser ac?uires the propert0 Pfree fro# an0 encu#$rance or third part0 clai# whatsoe3er(O[2:] Cardale #ade no atte#pts to redee# the #ortgaged propert0 during this ti#e( 2oreo3er, instead of infor#ing 2e4ia or the trial court in =&123:: a$out the ta6 sale, the records show that Brancisco filed a 2otion for *ostpone#ent [2%] in $ehalf of Cardale & e3en signing the #otion in her capacit0 as Pofficer&in&chargeO & which wor1ed to defer the hearing of 2e4iaNs 2otion for Decision( +o #ention was #ade $0 Brancisco of the ta6 sale in the #otion for postpone#ent( @nl0 after the rede#ption period had e6pired did Brancisco decide to re3eal what had transpired $0 filing a 2anifestation stating that the properties su$4ect of the #ortgage in fa3or of 'utierre< had $een sold at a ta6 delin?uenc0 sale7 howe3er, Brancisco failed to #ention that it was 2err0land that ac?uired the properties since

she was pro$a$l0 afraid that if she did so the court would see $ehind her fraudulent sche#e( .n this regard, it is also significant to note that it was Brancisco herself who filed the petitions for consolidation of title and who helped secure for 2err0land titles o3er the su$4ect properties Pfree fro# an0 encu#$rance or third&part0 clai# whatsoe3er(O .t is e6ceedingl0 apparent to the Court that the totalit0 of BrancisoNs actions clearl0 $etra0 an intention to conceal the ta6 delin?uencies, le30 and pu$lic auction of the su$4ect properties fro# the estate of 'utierre< and the trial court in Ci3il Case +o( =&123:: until after the e6piration of the rede#ption period when the re#otest possi$ilit0 for the reco3er0 of the properties would $e e6tinguished([2,] Conse?uentl0, Brancisco had effecti3el0 depri3ed the estate of 'utierre< of its rights as #ortgagee o3er the three parcels of land which were sold to Cardale( .f Brancisco was acting in good faith, then she should ha3e disclosed the status of the #ortgaged properties to the trial court in Ci3il Case +o( =&123:: & especiall0 after 2e4ia had filed a 2otion for Decision, in response to which she filed a #otion for postpone#ent wherein she could easil0 ha3e #entioned the ta6 sale & since this action directl0 affected such properties which were the su$4ect of $oth the sale and #ortgage(

9hat 2err0land ac?uired the propert0 at the pu$lic auction onl0 ser3es to shed #ore light upon BranciscoNs fraudulent purposes( Based on the findings of the Court of Appeals, Brancisco is the controlling stoc1holder and *resident of 2err0land([2-] 9hus, aside fro# the instru#ental role she pla0ed appears as an officer of Cardale, actions in to e3ading also that it corporationNs that legiti#ate BranciscoNs o$ligations 'utierre<,

were

oriented

towards securing ad3antages for another corporation in which she had a su$stantial interest( >e cannot agree, howe3er, with the Court of AppealsN decision to hold 2err0land solidaril0 lia$le with Brancisco( 9he onl0 act i#puta$le to 2err0land in relation to the #ortgaged properties is that it purchased the sa#e and this $0 itself is not a fraudulent or wrongful act( +o e3idence has $een adduced to esta$lish that 2err0land was a #ere alter ego or $usiness conduit of Brancisco( 9i#e and again it has $een reiterated that #ere ownership $0 a single stoc1holder or $0 another corporation of all or nearl0 all of the capital stoc1 of a corporation is not of itself sufficient ground for
]

disregarding

the

separate

corporate

personalit0([3

+either has it $een alleged or pro3en that

2err0land is so organi<ed and controlled and its affairs are so conducted as to #a1e it #erel0 an instru#entalit0, agenc0, conduit or ad4unct of Cardale( [31] /3en assu#ing that the $usinesses of Cardale and 2err0land are interrelated, this alone is not 4ustification for disregarding

their separate personalities, a$sent an0 showing that 2err0land was purposel0 used as a shield to defraud creditors and third persons of their rights( [32] 9hus, 2err0landNs separate 4uridical personalit0 #ust $e upheld( Based on a state#ent of account su$#itted $0 2e4ia, the Court of Appeals awarded *8,318,2%1(83 in fa3or of the estate of 'utierre< which represents the unpaid $alance of the purchase price in the a#ount of *:2-, ( with an interest rate of nine percent (-M) per annu#, in accordance with the agree#ent of the parties under the Deed of )ale with 2ortgage, [33] as of Dece#$er 1-,,([38] 9herefore, in addition to the a#ount awarded $0 the appellate court, Brancisco should pa0 the estate of 'utierre< interest on the unpaid $alance of the purchase price (in the a#ount of *:2-, until full0 satisfied( Binall0, contrar0 to petitionerNs assertions, we agree with the Court of Appeals that the decision of the trial court in Ci3il Case +o( =&123:: does not constitute res 4udicata insofar as the present case is concerned $ecause the decision in the first case was not a 4udg#ent on the #erits( "ather, it was #erel0 $ased upon the pre#ise that since Cardale had $een dissol3ed and the propert0 ac?uired $0 another corporation, the action for rescission ( ) at the rate of nine percent (-M) per annu# co#puted fro# Januar0, 1-,-

would not prosper( As a #atter of fact, it was e3en e6pressl0 stated $0 the trial court that the parties should 3entilate their issues in another action( >A/"/B@"/, the 13 April 1--- Decision of the Court of Appeals is here$0 accordingl0 2@D.B./D so as to hold ADA5.A B"A+C.)C@ solel0 lia$le to the estate of 'utierre< for the a#ount of *8,318,2%1(83 and for interest on the unpaid $alance of the purchase price (in the a#ount of *:2-, ( ) at the rate of nine percent (-M) per annu# fro# Januar0, 1-,until full0 satisfied( co#puted

2/""E5A+D is here$0 a$sol3ed fro# all lia$ilit0( )@ @"D/"/D( Melo, -Chair%an., 5itu$, Pan$aniban, and ,an#oval& *utierre', 00., concur(

[1]

"eferred to as 9C9 +os( %12!, %12: and %12% in the

Deed of )ale with 2ortgage( /ntitled PAndrea Cordo3a Gda( de 'utierre< 3( Cardale

[2]

Binancing and "ealt0 Corporation(O 5C" "eg( Case +o( ,!:3 and 5"C "eg( Case +o( C&

[3]

2:8 ( 9he @rders were issued on % +o3e#$er 1-,3, 18

[8]

+o3e#$er 1-,3, 2, +o3e#$er 1-,3 and the Decision was pro#ulgated on 12 +o3e#$er 1-,8( "ecords, !-2&: !( )e3enteenth Di3ision, co#posed of Justices 'odardo A(

[!]

[:]

Jacinto, ponente, "o$erto A( Barrios, and "enato C( Dacudao( "ollo, 32&8,( .$id(, 3 :&321( 9raders "o0al Ban1 3( Court of Appeals, 1%% )C"A %,-

[%]

[,]

[-]

(1-,-)7 Cru< 3( Dalisa0, 1!2 )C"A 8,% (1-,%)( 182 Bed( 28% (1- !)( Co##issioner of .nternal "e3enue 3( +orton and

[1 ]

[11]

Aarrison, 11 )C"A %18 (1-!8)7 +a#arco 3( Associated Binance Co(, 1- )C"A -:2 (1-:%)7 Diatagon 5a$or Bederation 5ocal 11 of the F5'>* 3( @ple, 1 1 )C"A !38 (1-, )7 F#ali 3( Court of Appeals, 1,- )C"A !2(1-- )7 .ndophil 9e6tile 2ill >or1ers Fnion 3( Calica, 2 !

)C"A :-% (1--2)7 Fichico 3( +5"C, 2%3 )C"A 3! (1--%)7 )an Juan )tructural and )teel Ba$ricators, .nc( 3( Court of Appeals, 2-: )C"A :31 (1--,)7 5u6uria Ao#es, .nc( 3( Court of Appeals, 3 2 )C"A 31! (1---)7 Brancisco 2otors Corporation 3( Court of Appeals, 3 - )C"A %2 (1---)7 Glason /nterprises Corporation 3( Court of Appeals, 31 )C"A 2: (1---)7 Co#ple6 /lectronics /#plo0ees Association 3( +5"C, 31 )C"A 8 3 (1---)7 Co#pania

2ariti#a, .nc( 3( Court of Appeals, 31, )C"A 1:- (1---)( 1,- )C"A !2- (1-- )( Benguet /lectric Cooperati3e, .nc( 3( +5"C, 2 - )C"A

[12]

[13]

!! (1--2)7 *a$alan 3( +5"C, 1,8 )C"A 8-! (1-- )7 2indanao 2otor 5ine, .nc( 3( Court of .ndustrial "elations, : )C"A %1 (1-:2)( *ala0, .nc( 3( Cla3e, 128 )C"A :3, (1-,3)( A"B Construction Co(, .nc( 3( Court of Appeals, 332 )7 )antos 3( +5"C, 2!8 )C"A :%3

[18]

[1!]

)C"A 82% (2

(1--:)7 2indanao 2otor 5ine, .nc( 3( Court of .ndustrial "elations, : )C"A %1 (1-:2)( CA Decision, 11( 9rial Court Decision in Ci3il Case +o( =&8-%::,

[1:]

[1%]

pro#ulgated on 1! April 1-,,, %( CA Decision, 12&13( *etitionersN 2e#orandu#, 11( CA Decision, 11( 2otion for Decision was filed on 13 August 1-,8( *u$lic auction of the su$4ect properties too1 place on 1

[1,]

[1-]

[2 ]

[21]

[22]

and 12 )epte#$er 1-,3( *residential Decree +o( 8:8 (*D 8:8)( 9rial Court Decision in Ci3il Case +o( =&8-%::,

[23]

[28]

pro#ulgated on 1! April 1-,,, -( *D 8:8, )ec( %,( .d(, )ec( , ( Dated 1: August 1-,8( As earlier e6plained, under )ection , of the "eal

[2!]

[2:]

[2%]

[2,]

*ropert0 9a6 Code, if the delin?uent ta6pa0er or an0 person holding a lien or clai# o3er the propert0 fails to

redee# the sa#e, then the purchaser ac?uires the propert0 Pfree fro# an0 encu#$rance or third part0 clai# whatsoe3er(O CA Decision, 11( *a$alan 3( +5"C, 1,8 )C"A 8-! (1-- )7 *ala0, .nc( 3(

[2-]

[3 ]

Cla3e, 128 )C"A :3, (1-,3), citing 5iddel Q Co( 3( Collector of .nternal "e3enue, 2 )C"A :32 (1-:1)( F#ali 3( Court of Appeals, 1,- )C"A !2- (1-- )( Diatagon 5a$or Bederation 5ocal 11 of the F5'>* 3(

[31]

[32]

@ple, 1 1 )C"A !38 (1-, )( )ee also Co#ple6 /lectronics /#plo0ees Association 3( +5"C, 31 Appeals, 2-: )C"A :31 (1--,)( "ollo, 8%&8,( .$id(, 33,( )C"A 8 3 (1---)7 )an Juan )tructural and )teel Ba$ricators, .nc( 3( Court of

[33]

[38]

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

+IRST DIVISION [ G.R. No. 171/92, Oc<oB9r /0, 2006 ]


R,P RTO S,!DAO, P TITION R, VS. CIM CH S"ST M CONSTR,CTION, INC. AND NGR. RODO!+O S. !A',CA", CISION R SPOND NTS. D
"NAR S$SANTIAGO, -..

9his petition for re3iew on certiorari assails the Decision [1] dated June 23, 2 2 8 "esolution[2] ! of the Court of Appeals in CA&'("( )* of the +ational 5a$or "elations +o( ,3-:3, which re3ersed and set aside the Be$ruar0 2%, Co##ission (+5"C) in +5"C CA +o( August !, 2 3:-:3& 3 and the

3 Decision of the 5a$or Ar$iter finding : "esolution [3] den0ing

petitioner to ha3e $een constructi3el0 dis#issed( Also assailed is the Januar0 1 , 2 petitionerCs #otion for reconsideration( 9he facts are as follows; "espondent Ci#ech )0ste#s Construction, .nc( e#plo0ed

the ser3ices of petitioner "uperto )uldao on August 31, 2 1 as a #achinist with a dail0 wage of *3 ( on a contractual status for a period of fi3e #onths( After Januar0 31, 2 2, respondent continued to engage the ser3ices of petitioner as a #achinist until he $eca#e a per#anent e#plo0ee( *etitioner alleged that owing to a dearth in pro4ects $eing handled $0 the respondent, he was ordered $0 2s( /lsa 5a$oca0 to ta1e a lea3e of a$sence fro# +o3e#$er 1 to :, 2 % 2( Ae reported for wor1 on +o3e#$er %, 2 to 18, 2 2( @n +o3e#$er 1!, 2 2, 2 $ut was he was again ordered to ta1e a lea3e of a$sence fro# +o3e#$er purportedl0 ordered to #a1e a letter&re?uest for field wor1 transfer which he co#plied( 9he following da0, he failed to report $ac1 for wor1 $ecause he was sic1( @n +o3e#$er 1%, 2 2, he reported for wor1 $ut was 2, he was again $arred fro# hence he filed the instant allegedl0 $arred fro# entering $0 the securit0 guard on dut0( @n +o3e#$er 21, 2 entering the pre#ises,

co#plaint[8] for constructi3e dis#issal( [!] "espondent alleged that due to lac1 of a3aila$le wor1 in the #achine shop, petitioner was te#poraril0 transferred to its fa$rication depart#ent so#eti#e in +o3e#$er 2 2( *etitioner refused to accept the transfer and insisted to wor1 as a #achinist( Because of petitionerCs

arrogant and unrul0 $eha3ior, he was led awa0 $0 a guard( >hen petitioner returned for wor1, he purportedl0 de#anded a salar0 increase and wages for the da0s that he did not wor1( "espondent considered the actuations of petitioner tanta#ount to insu$ordination, hence, it suspended[:] the petitioner for si6 da0s( After his suspension on +o3e#$er 2,, 2 2, petitioner

accepted his transfer to the fa$rication depart#ent $ut wor1ed for onl0 one da0( During the co#pan0Cs Christ#as part0 on Dece#$er 21, 2 2, petitioner ca#e and as1ed 3, petitioner to co#pl0( for his 13th #onth pa0( @n Januar0 13, 2 to secure a clearance which he failed

de#anded to get his one da0 salar0 deposit $ut was told 9hereafter, petitioner filed the instant co#plaint for illegal dis#issal( @n August !, 2 which reads; C@+B@"2AB5E >.9A 9A/ B@"/'@.+', 4udg#ent is here$0 rendered finding co#plainant to ha3e $een illegall0 dis#issed constructi3el0( Conse?uentl0, he should $e reinstated to his for#er position and paid his $ac1wages which has accu#ulated as of Jul0 1%, 2 *:2,8 *%,, ( ( ( plus his one #onth 3 in the su# of pa0 of separation 3, 5a$or Ar$iter 2el?uiades )ol D( Del

"osario rendered a decision, the dispositi3e portion of

)@ @"D/"/D([%] 9he +5"C concurred with the findings of the 5a$or Ar$iter that petitioner was constructi3el0 dis#issed( Aence, respondent filed a petition for certiorari [,] which was granted $0 the Court of Appeals( .n its assailed June 23, 2 ! decision, the Court of Appeals re3ersed the +5"C $0 declaring; >A/"/B@"/, pre#ises considered, the *etition is here$0 gi3en DF/ C@F")/, and the Be$ruar0 2%, 2 Dece#$er 2 , 2 )@ @"D/"/D([-] Aence, this petition raising the sole issue of; >A/9A/" 9A/ C@F"9 @B A**/A5) C@22.9/D '"AG/ ABF)/ @B D.)C"/9.@+ A2@F+9.+' 9@ 5ACH @" /IC/)) @B JF".)D.C9.@+ .+ "/G/").+' 9A/ D/C.).@+ @B 9A/ 5AB@" A"B.9/" A+D 9A/ +5"C 9AA9 9A/ */9.9.@+/" >A) C@+)9"FC9.G/5E D.)2.))/D( As a general rule, a petition for re3iew on certiorari under "ule 8! of the "ules of Court is li#ited to ?uestions of law( Aowe3er, this rule ad#its of e6ceptions, [1 ] such as in this case where the findings of the 5a$or Ar$iter and the +5"C 3ar0 fro# the findings of the Court of Appeals( 8 Decision of the +5"C is here$0 "/G/")/D and )/9 A).D/( 9he 2 Co#plaint is here$0 D.)2.))/D(

9he petition is i#pressed with #erit( After a painsta1ing re3iew of the records, we uphold the findings of the 5a$or Ar$iter and of the +5"C that petitioner ?uitting was constructi3el0 continued dis#issed( e#plo0#ent Constructi3e is rendered dis#issal or a constructi3e discharge has $een defined as $ecause i#possi$le, unreasona$le or unli1el0, as an offer in3ol3ing a de#otion in ran1 and a di#inution in pa0( [11] .n the instant case, there is constructi3e dis#issal $ecause the continued e#plo0#ent of petitioner is rendered i#possi$le so as to foreclose an0 choice on his part e6cept to resign fro# such e#plo0#ent([12] .n cases of constructi3e dis#issal, the $urden of proof is on the e#plo0er to show that the e#plo0ee was dis#issed for a 3alid and a 4ust cause( [13] .n the instant case, respondent failed to discharge this $urden( As aptl0 o$ser3ed $0 the +5"C; .n essence, respondents would ha3e it that the0 ha3e not dis#issed co#plainant, rather it was he who did not return to his 4o$ after 13 Januar0 2 3(

9o $egin with, the issues raised undou$tedl0 was factual, the deter#ination of which lies within the co#petence of the 5a$or Ar$iterCs 4urisdiction, o3er which this Co##ission will interfere onl0 when gra3e a$use or

serious

errors

were

co##itted

$0

hi#

in

the

interpretation of the e3idence on records( .n this case howe3er, respondents failed to show $0 su$stantial proof the 3eracit0 of their assertion( Bor one, while clai#ing that co#plainant was placed on a si6 (:) da0s suspension for an alleged infraction, the0 failed nonetheless to adduce e3idence showing that indeed co#plainant co##itted the offense and was placed as such as disciplinar0 #easure( "ele3ant on this score is the o$ser3ation and findings of the 5a$or Ar$iter, to wit; "espondentsC a3er#ent that co#plainant was arrogant, and did not want to $e transferred to another position or depart#ent is $elied 2( $0 co#plainantCs letter dated +o3e#$er 2,, 2

/6cerpts fro# co#plainantCs letter reads; J+a tinatanggap 1o na utos ng 1u#pan0ang ito na u#a1o ng i$ang gawain para sa 1a$utihan ng lahat( +a ang pagtanggap 1o ng i$ang tra$aho a0 pansa#antala lang ha$ang walang gawain sa dati 1o puwesto or gawain tra$aho sa 1o#pan0a( +ang ang sulat sala0sa0 1ong ito a0 a1ing isinagawa

$ilang pagtali#a sa 1autusan ng atin 1u#pan0a( 6666 Co#plainantCs clai# that he was re?uired to go on a lea3e of a$sence due to a dearth of wor1 is consistent with respondentCs clai# that there was scarcit0 of wor1 $ecause of the econo#ic crisis( B0 all appearances, co#plainant does not ha3e a high educational attain#ent and his s1ill is li#ited to $eing a #achinist( As such, all he can do is to o$e0 the $iddings of his superior( )o when re?uired to go on lea3e, he #ee1l0 o$e0s( /3en his clai# that he failed to report for wor1 due to indisposition is supported $0 a #edical certificate( As $etween the conflicting has clai#s to of the parties, weight this to Ar$itration Branch accord #ore

co#plainantCs clai# that he was no longer allowed to wor1 $ecause he was $arred $0 the securit0 guard of the co#pan0 to enter the pre#ises for reasons onl0 1nown to respondents( Aad there $een truth to respondentsC clai# that

co#plainant a$andoned his wor1 $ecause he did not want the 4o$ in the fa$rication depart#ent, co#plainant would

not ha3e #ade a letter of confor#it0 to do the $idding of the co#pan0( 2oreo3er, co#plainant would not ha3e ta1en steps to protect his rights li1e the institution of the present la$or suit if he had a$andoned his wor1 $ecause rather than spend ti#e, effort and a little #one0 in attending to the hearings of this case, he would ha3e concentrated in his new 4o$ or in finding one in order to feed his fa#il0([18] >hile the decision to transfer e#plo0ees to other areas of its operations of for#s part of it the well $e recogni<ed stressed, prerogati3es #anage#ent, #ust

howe3er, that the #anagerial prerogati3e to transfer personnel #ust not $e e6ercised with gra3e a$use of discretion, $earing in #ind the $asic ele#ents of 4ustice and fair pla0( Aa3ing the right should not $e confused with the #anner in which that right is e6ercised( 9hus it cannot $e used as a su$terfuge $0 the e#plo0er to rid hi#self of an undesira$le wor1er([1!] .n the instant case, while petitionerCs transfer was 3alid, the #anner $0 which respondent un4ustifia$l0 pre3ented hi# fro# returning to wor1 on se3eral occasions runs counter to the clai# of good faith on the part of respondent corporation( B0 reporting for wor1, petitioner #anifested his willingness to co#pl0 with the regulations of the corporation and his desire to continue wor1ing for the latter( Aowe3er, he was $arred fro# entering the

pre#ises

without

an0

e6planation(

9his

is

clear

#anifestation of disdain and insensi$ilit0 on the part of an e#plo0er towards a particular e#plo0ee and a 3erita$le hall#ar1 of constructi3e dis#issal( >e cannot sustain the theor0 of respondent that since petitioner was allowed to 4oin its 2 2 Christ#as *art0, there can $e no constructi3e dis#issal( *etitionerCs 4oining the Christ#as part0 does not negate his illegal dis#issal( +either does it detract us fro# the fact that petitioner was pre3ented fro# entering the pre#ises of the respondent corporation on pre3ious occasions( >hile the lia$ilit0 of the respondent corporation for the constructi3e dis#issal of the petitioner has $een clearl0 esta$lished, the sa#e does not hold true with the other respondent, /ngr( "odolfo )( 5a$uca0, *resident and 'eneral 2anager of the respondent corporation( [1:] .n finding 5a$uca0 also lia$le, the 5a$or Ar$iter declared that; 9he foregoing circu#stances support the 3iew that co#plainant was constructi3el0 dis#issed in an illegal #anner( Conse?uentl0, respondents, in solidu#, are ordered to reinstate the co#plainant to his for#er position and pa0 co#plainant his $ac1wages 6 6 6( A corporation is in3ested $0 law with a personalit0 separate fro# that of its stoc1holders or #e#$ers( .t has

a personalit0 separate and distinct fro# those of the persons co#posing it as well as fro# that of an0 other entit0 to which it #a0 $e related( 2ere ownership $0 a single stoc1holder or $0 another corporation of all or nearl0 all of the capital stoc1 of a corporation is not in itself sufficient ground for disregarding the separate corporate personalit0( A corporationCs authorit0 to act and its lia$ilit0 for its actions are separate and apart fro# the indi3iduals who own it( 9he 3eil of corporate fiction treats as separate and distinct the affairs of a corporation and its officers and stoc1holders( As a general rule, a corporation will $e loo1ed upon as a legal entit0, unless and until sufficient reason to the contrar0 appears( >hen the notion of legal entit0 is used to defeat pu$lic con3enience, 4ustif0 wrong, protect fraud, or defend cri#e, the law will regard the corporation as an association of persons( Also, the corporate entit0 #a0 $e disregarded in the interest of 4ustice in such cases as fraud that #a0 wor1 ine?uities a#ong #e#$ers of the corporation internall0, in3ol3ing no rights of the pu$lic or third persons( .n $oth instances, there #ust ha3e $een fraud and proof of it( Bor the separate 4uridical personalit0 of a corporation to $e disregarded, the wrongdoing #ust $e clearl0 and con3incingl0 esta$lished( .t cannot $e presu#ed( [1%]

.n the instant case, no reason e6ists that will 4ustif0 the piercing of the 3eil of corporate fiction such as to hold 5a$uca0, as the president and general #anager of the respondent corporation, solidaril0 lia$le with it( 9hus, the lia$ilit0 for the constructi3e dis#issal of the petitioner solel0 de3ol3es upon the respondent corporation( Conse?uentl0, the decision of the 5a$or Ar$iter and of the +5"C should $e #odified in that onl0 the respondent corporation should $e held lia$le( %H R +OR , the petition is GRANT D( 9he June 23, 2 ! Decision of the Court of Appeals in CA&'("( )* +o( and its Januar0 1 , 2 : "esolution are 8 ,3-:3

R V RS D and S T ASID ( 9he Be$ruar0 2%, 2 +5"C CA +o(

"esolution of the +ational 5a$or "elations Co##ission in 3:-:3& 3 affir#ing the decision of the 5a$or Ar$iter finding that petitioner was constructi3el0 dis#issed, is R INSTAT D with MODI+ICATION that onl0 the respondent corporation, Ci#ech )0ste# Construction, .nc( is held lia$le( +o pronounce#ent as to costs( SO ORD R D. Pan$aniban, C.0., -Chairperson., Austria&Martine', Calle7o, ,r., and Chico&Na'ario, 00., concur(

[1]

Rollo, pp( 122&12-( *enned $0 Associate Justice Gicente

=( "o6as and concurred in $0 Associate Justices *ortia AliLo&Aor#achuelos and Juan =( /nri?ue<, Jr( .d( at 1 %&113( *enned $0 Co##issioner Gictoriano "(

[2]

Cala0ca0 and concurred in $0 Co##issioners "aul 9( A?uino and Angelita A( 'acutan( .d( at 181&182( .d( at !!&!:( .d( at !,( .d( at !3( .d( at -1( .d( at 31&!1( .d( at 12-( Eastern Co%%unications Philippines, Inc. v. Dia%se , :(

[3]

[8]

[!]

[:]

[%]

[,]

[-]

[1 ]

'("( +o( 1:-2--, June 1:, 2

[11]

!nicorn ,afet" *lass, Inc. v. Basarte , '("( +o( 1!8:,-, 8, 888 )C"A 2,%, 2-8(

+o3e#$er 2!, 2

[12]

Men#iola v. Court of Appeals , '("( +o( 1!-333, Jul0 :(

31, 2

[13]

Philippine In#ustrial ,ecurit" A$enc" Corporation v. !, 8: )C"A

A$uinal#o, '("( +o( 18--%8, June 1!, 2 22-, 23:( Rollo, pp( 11 &112(

[18]

[1!]

Blue Dair" Corporation v. National Labor Relations

Co%%ission, 3%3 *hil( 1%-, 1,: (1---)( )ee Board "esolution dated 2a0 :, 2 8, Rollo, p( !1(

[1:]

[1%]

,ecosa v. (eirs of Er<in ,uare' 1rancisco , '("( +o( 3-, June 2-, 2 8, 833 )C"A 2%3, 2,1(

1:

)ource; )upre#e Court /&5i$rar0 9his page was d0na#icall0 generated $0 the /&5i$rar0 Content 2anage#ent )0ste# (/&5i$C2))

[ G.R. No. !$39/*, Ma2 28,

19*3 ]
-. M. T,ASON I CO., INC., R PR S NT D '" ITS MANAGING PARTN R, GR GORIO ARAN TA, INC., P!AINTI++ AND APP !! VS. 7,IRINO 'O!AJOS, D + NDANT AND APP !!ANT.D
R " S, -..

CISION

9his is an action originall0 $rought in the Court of Birst .nstance of "i<al, =ue<on Cit0 Branch, to reco3er possession of registered land situated in $arrio 9atalon, =ue<on Cit0( *laintiffCs co#plaint was a#ended three ti#es with respect to the e6tent and description of the land sought to $e reco3ered( 9he original co#plaint descri$ed the land as a portion of a lot registered in plaintiffCs na#e under 9ransfer Certificate of 9itle +o( 3%:,:(of the land record of "i<al *ro3ince and as containing an area of 13 hectares #ore or less( But the co#plaint was a#ended $0 reducing the area to : hectares, #ore or less, after defendant had indicated the plaintiffCs sur3e0ors the portion of land clai#ed and occupied $0 hi#( 9he second a#end#ent $eca#e necessar0 and was allowed following the

testi#on0 of plaintiffCs sur3e0ors that a portion of the area was e#$raced in another certificate of title, which was plaintiffCs 9ransfer Certificate of 9itle +o( 3%:%%( And still later, in the course of trial, after defendantCs sur3e0or and witness, =uirino Beria, had testified that the area occupied and clai#ed $0 defendant was a$out 13 hectares, as shown in his /6hi$it 1, plaintiff again, with the lea3e of court, a#ended its co#plaint to #a1e its allegations confor# to the e3idence( Defendant, in his answer, sets up prescription and title in hi#self thru Jopen, continuous, e6clusi3e and pu$lic and notorious possession (of the land in dispute) under clai# of ownership, ad3erse to the entire world $0 defendant and his predecessors in interestJ fro# Jti#e in& #e#orialJ( 9he answer further alleges that registration of the land in dispute was o$tained $0 plaintiff or its predecessors in interest thru Jfraud or error and without 1nowledge 9he answer (of) or notice pra0s either that personal the or thru $e pu$lication to defendant andDor predecessors in interest(J therefore co#plaint dis#issed with costs, and plaintiff re?uired to recon3e0 the land to defendant or pa0 its 3alue( After trial, the lower court rendered 4udg#ent for plaintiff, declaring defendant to $e without an0 right to the land in ?uestion and ordering hi# to restore possession, thereof to plaintiff and to pa0 the latter a #onthl0 rent of S132(:2 fro# Januar0, 1-8 , until he 3acates the land, and also to

pa0 the costs( Appealing directl0 to this court $ecause of the 3alue of the propert0 in3ol3ed, defendant #a1es the following assign#ent of errors7 J.( 9he trial court erred in not dis#issing the case on the ground that the case was hot $rought $0 the real part0 in interest( J..( 9he trial court erred in ad#itting the third a#ended co#plaint( J...( 9he trial court erred in den0ing defendantCs #otion to stri1e( J.G( 9he trial court erred in including in its decision land not in3ol3ed in the litigation( JG( 9he trial court erred in holding that the land in dispute is co3ered $0 transfer certificates of 9itle +os( 3%:,: and 3%:%%( JG.( 9he trial court erred in not finding that the defendant is the true and lawful owner of the land( JG..( 9he trial court erred in finding that the defendant is lia$le to pa0 the plaintiff the a#ount of *132(:2 #onthl0 fro# Januar0, 1-8 , until he 3acates the pre#ises( JG...( 9he trial court erred in not ordering the plaintiff to recon3e0 the land in litigation to the defendant(J As to the first assigned error, there is nothing to the contention that the present action is not $rought $0 the real part0 in interest, that is, $0 J( 2( 9uason Q Co(, .nc( >hat the "ules of Court re?uire is that an action $e

$rought in the na%e of, $ut not necessaril0 $0, the real part0 in interest( ()ection 2, "ule 2() .n fact the practice is for an attorne0&at&law to $ring the action, that is to file the co#plaint, in the na#e of the plaintiff( 9hat practice appears to ha3e $een followed in this case, since the co#plaint is signed $0 the law fir# of Araneta Q Araneta, Jcounsel for plaintiffJ and co##ences with the state#ent JCo#es now plaintiff, through its undersigned counsel(J .t is true that the co#plaint also states that the plaintiff is Jrepresented herein $0 its 2anaging *artner 'regorio Araneta, .nc(J, another corporation, $ut there is nothing against one corporation $eing represented $0 another person, natural or 4uridical, in a suit in court( 9he contention that 'regorio Araneta, .nc( can not act as #anaging partner for plaintiff on the theor0 that it is illegal for two corporations to enter into a partnership is without #erit, for the true rule is that Jthough a corporation has no power to enter into a partnership, it #a0 ne3ertheless enter into a 4oint 3enture with another where, the nature of that 3enture is in line with the $usiness&authori<ed $0 its charter(J (>0o#ing&.ndiana @il 'as Co, 3s( >eston, , A( 5( "(, 1 83, citing 2 Bletcher C0c( of Corp(, 1 ,2() 9here is nothing in the record to indicate that the 3enture in which plaintiff is represented7 $0 'regorio Araneta, .nc( as Jits #anaging partnerJ is not in line with the corporate $usiness of either of the#,( /rrors .., ..., and .G, referring to the ad#ission of the

third a#ended co#plaint, #a0 $e answered; $0 #ere reference to section 8 of "ule 1%, "ules of Court, which sanctions such a#end#ent( .t reads; J)/C( 8( A%en#%ent to confor% to evi#ence.W>hen issues not raised $0 the pleadings are tried $0 e6press or i#plied consent of the parties, the0 shall $e treated in all respects, as if the0 had $een raised in the pleadings( )uch a#end#ent of the pleadings as #a0 $e necessar0 to cause the# to confor# to the e3idence and to raise these issues #a0 $e #ade upon #otion of an0 part0 at #0 ti#e, e3en after 4udg#ent7 $ut failure so to a#end does not affect the result of the trial of these issues( .f e3idence is o$4ected to at the trial on the ground that it is not within the issues #ade $0 the pleadings, the court #a0 allow the pleadingCs to $e a#ended and shall $e so freel0 when the presentation of the #erits of the action will $e su$ser3ed there$0 and the o$4ecting part0 fails to satisf0 the court that the ad#ission of such e3idence would pre4udice hi# in #aintaining his action or defense upon the #erits( 9he court #a0 grant a continuance to ena$le the o$4ecting part0 to #eet such e3idence(J Fnder this pro3ision a#end#ent is not e3en necessar0 for the purpose of rendering 4udg#ent on issues pro3ed though not alleged( 9hus, co##enting on the pro3ision, Chief Justice 2oran sa0s in his "ules of Court; JFnder this section, A#erican courts ha3e, under the +ew Bederal "ules of Ci3il *rocedure, ruled that where the

facts shown entitled plaintiff to relief other than that as1ed for, no a#end#ent to the co#plaint is necessar0, especiall0 where defendant has hi#self raised the point on which reco3er0 is $ased, and that the appellate court treat the pleadings as a#ended to confor# to the e3idence, although the pleadings were not actuall0 a#ended(J (. 2oran, "ules of Court, 1-!2 ed(, 3,-&3- () @ur conclusion therefore is that specification of error .., ..., and .G are without #erit( 5et us now pass on the errors G and G.( Ad#itting, through his attorne0, at the earl0 stage of the trial, that the land in dispute Jis that descri$ed or represented in /6hi$it A and in /6hi$it B enclosed in red pencil with the na#e =uirino Bolanos,J defendant later changed his law0er and also his theor0 and tried to pro3e that the land in dispute was not co3ered $0 plaintiffCs certificate of title( 9he e3idence, howe3er, is against defendant, for it clearl0 esta$lishes that plaintiff is the registered owner of lot +o( 8&B&3&C, situate in $arrio 9atalon, =ue<on Cit0, with an area of !,2-%,82-(3 s?uare #eters, #ore or less, co3ered $0 transfer certificate of title +o( 3%:,: of the land records of "i<al pro3ince, and of lot +o( 8rB&8, situated in the sa#e $arrio, ha3ing an area of %8,%,- s?uare #eters, #ore or less, co3ered $0 transfer certificate of title +o( 3%:%% of the land records of the sa#e pro3ince, $oth lots ha3ing $een originall0 registered on Jul0 ,, 1-18 under original certificate of title +o( %3!( 9he identit0 of the lots

was esta$lished $0 the testi#on0 of Antonio 2anahan and 2agno Baustino, witnesses for plaintiff, and the identit0 of the portion thereof clai#ed $0 defendant was esta$lished $0 the testi#on0 of his own witness, =uirico Beria( 9he co#$ined testi#on0 of these three witnesses clearl0 shows that the portion clai#ed $0 defendant is #ade up of a part of lot 8&B&3&C and #a4or on portion of lot 8&B&8, and is well within the area co3ered $0 the two transfer certificates of title alread0 #entioned( 9his fact also appears ad#itted in defendantCs answer to the third a#ended co#plaint( As the land in dispute is co3ered $0 plaintiffCs 9orrens certificate of title and was registered in 1-18, the decree of registration can no longer $e i#pugned on the ground of fraud, error or lac1 of notice to defendant, as #ore than one 0ear has alread0 elapsed fro# the issuance and entr0 of the decree( +either could the decree $e collaterall0 attac1ed $0 an0 person clai#ing title to, or interest in, the land prior to the registration proceedings( ()orongon 3s( 2a1alintal,[1] 8! @ff( 'a<(, 3,1-() +or could title to that land in derogation of that of plaintiff, the registered owner, $e ac?uired $0 prescription or ad3erse possession( ()ection 8:, Act +o( 8-:() Ad3erse, notorious and continuous possession under clai# of ownership for the period fi6ed $0 law is ineffecti3e against a 9orrens title( (Galiente 3s( Judge of CB. of 9arlac, [2] etc(, 8! @ff( 'a<(, )upp( -, p( 83() And it is li1ewise settled that the

right to secure possession under a decree of registration does not prescri$e( (Brancisco 3s( Cru<, 83 @ff( 'a<(, !1 !, !1 -&!11 () A recent decision of this Court on this point is that rendered in the case of Jose Alcantara et al(, 3s( 2ariano et al(, -2 *hil(, %-:( 9his disposes of the alleged errors G and G.( As to error G.., it is clai#ed that Cthere was no e3idence to sustain the finding that defendant should $e sentenced to pa0 plaintiff *132(:2 #onthl0 fro# Januar0, 1-8 , until he 3acates the pre#ises(J But it appears fro# the record that the reasona$le co#pensation for the use and occupation of the pre#ises, as stipulated at the hearing was *1 a #onth for each hectare and that the area occupied $0 defendant was 13(2:1- hectares( 9he total rent to $e paid for the area occupied should therefore $e *132(:2 a #onth( .t also appears fro# the testi#on0 of J( A( Araneta and witness /#igdio 9an4uatco that as earl0 as 1-3- an action of e4ect#ent had alread0 $een filed against defendant( And it cannot $e supposed that defendant has $een pa0ing rents, for he has $een asserting all along that the pre#ises in ?uestion Jha3e alwa0s $een since ti#e i##e#orial in open, continuous, e6clusi3e and pu$lic and notorious possession and under clai# of ownership ad3erse to the entire world $0 defendant and his predecessors in interest(J 9his assign#ent of error is thus clearl0 without #erit( /rror +o( G... is $ut a conse?uence of the other errors

alleged and needs for further consideration( During the pendenc0 of this case in this Court appellant, thru other counsel, has filed a #otion to dis#iss alleging that there is pending $efore the Court of Birst .nstance of "i<al another action $etween the sa#e parties and for the sa#e cause and see1ing to sustain that allegation with a cop0 of the co#plaint filed in said action( But an e6a#ination of that co#plaint re3eals that appellantCs allegation is not correct, for the pretended identit0 of parties and cause of action in the two suits does not appear( 9hat other case is one for reco3er0 of ownership, while the present one is for reco3er0 of possession( And while appellant clai#s that he is also in3ol3ed in that other action $ecause it is a class suit, the co#plaint does not show that such is reall0 the case( @n the contrar0, it appears that the action see1s relief for each indi3idual plaintiff and not relief for and on $ehalf of others( 9he #otion for dis#issal is clearl0 without #erit( >herefore, the 4udg#ent appealed fro# is affir#ed, with costs against the appellant( Paras, C. 0., Pablo, Ben$'on, Monte%a"or, 0u$o, Bautista An$elo, Labra#or, and Concepcion, 00., concur(

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