Republic of the Philippines (Presidential Commission on Good Government) vs.

Sandiganbayan
[GR 107789, 30 April 2003]; also Africa vs. Sandiganbayan [GR 147214]
Resolution En Banc, Carpio-Morales (J): 9 concur, 1 concurs in result, 2 took no part, 1 abroad on officialbusiness
Facts:
On 7 August 1991, the Presidential Commission on Good Government (PCGG) conducted an Eastern Telecommunications,
Philippines, Inc. (ETPI) stockholders meeting during which a PCGG controlled board of directors was elected. A special
stockholders meeting was later convened by the registered ETPI stockholders wherein another set of board of directors was
elected, as a result of which two sets of such boardand officers were elected. Victor Africa, a stockholder of ETPI, alleging that
the PCGG had since 29 January1988 been "illegally 'exercising' the rights of stockholders of ETPI," especially in the election of
the membersof the board of directors, filed a motion before the Sandiganbayan, prayed that said court order the "calling and
holding of the Eastern Telecommunications, Philippines, Inc. (ETPI) annual stockholders meeting for 1992 under the [c]ourt's
control and supervision and prescribed guidelines." The PCGG did not object to Africa's motion provided that "(1) An Order be
issued upholding the right of PCGG to vote all the Class "A" shares of ETPI; (2) In the alternative, in the remote event that
PCGG's right to vote the sequestered shares benot upheld, an Order be issued (a) disregarding the Stock and Transfer Book and
Booklet of Stock Certificates of ETPI in determining who can vote the shares in an Annual Stockholders Meeting of ETPI, (b)
allowing PCGG to vote 23.9% of the total subscription in ETPI, and (c) directing the amendment of the Articles of Incorporation
and By-laws of ETPI providing for the minimum safeguards for the conservation of assets prior to the calling of a stockholders
meeting. By the assailed Resolution of 13 November 1992, the Sandiganbayan resolved Africa's motion, ordering the conduct of
an annual stockholders meeting of ETPI, for 1992. Assailing the foregoing resolution, the PCGG filed before the Supreme Court a
petition (GR 107789) for Certiorari, Mandamus and Prohibition. By Resolution of 26 November 1992, the Supreme Court enjoined
the Sandiganbayan from (a) implementing its Resolution of 13 November 1992, and (b) holding the stockholders' meeting of
ETPI scheduled on 27November 1992. On 7 December 1992, Aerocom Investors and Managers, Inc. (AEROCOM), Benito
Nieto,Carlos Nieto, Manuel Nieto III, Ramon Nieto, Rosario Arellano, Victoria Legarda, Angela Lobregat, Ma. Ritade los Reyes,
Carmen Tuazon and Rafael Valdez, all stockholders of record of ETPI, filed a motion to intervene in GR 107789. Their motion was
granted by the Supreme Court by Resolution of 14 January 1993.After the parties submitted their respective memoranda, the
PCGG, in early 1995, filed a "VERY URGENTPETITION FOR AUTHORITY TO HOLD SPECIAL STOCKHOLDERS' MEETING FOR [THE]
SOLEPURPOSE OF INCREASING [ETPI's] AUTHORIZED CAPITAL STOCK," it claiming that the increase in authorized capital stock
was necessary in light of the requirements laid down by Executive Order 109 andRepublic Act 7975. By Resolution of 7 May
1996, the Supreme Court resolved to refer the PCGG's very urgent petition to hold the special stockholders' meeting to the
Sandiganbayan for reception of evidence and resolution. In compliance therewith, the Sandiganbayan issued a Resolution of 13
December 1996, granting the PCGG "authority to cause the holding of a special stockholders' meeting of ETPI for the sole
purpose of increasing ETPI's authorized capital stock and to vote therein the sequestered Class 'A' shares of stock." The PCGGcontrolled ETPI board of directors thus authorized the ETPI Chair and Corporate Secretary to call the special stockholders
meeting. Notices were sent to those entitled to vote for a meeting on 17 March 1997. The meeting was held as scheduled and
the increase in ETPI's authorized capital stock from P250 Million to P2.6Billion was "unanimously approved." On 1 April 1997,
Africa filed before the Supreme Court a motion to cite the PCGG "and its accomplices" in contempt and "to nullify the
'stockholders meeting' called/conducted by PCGG and its accomplices," he contending that only this Court, and not the
Sandiganbayan, has the power to authorize the PCGG to call a stockholders meeting and vote the sequestered shares. Africa
went on to contend that, assuming that the Sandiganbayan had such power, its Resolution of 13 December 1996 authorizing the
PCGG to hold the stockholders meeting had not yet become final because the motions for reconsideration of said resolution
were still pending. Further, Africa alleged that he was not given notice of the meeting, and the PCGG had no right to vote the
sequestered Class "A" shares. A motion for leave to intervene relative to Africa's "Motion to Cite the PCGG and its Accomplices in
Contempt" was filed by ETPI. The Supreme Court granted the motion for leave but ETPI never filed any pleading relative to
Africa's motion to cite the PCGG in contempt. By Resolution of 16 February 2001, the Sandiganbayan finally resolved to deny the
motions for reconsideration of its Resolution of 13 December 1996, prompting Africa to file on 6 April 2001 before the Supreme
Court a petition for Review on Certiorari (GR 147214), challenging the Sandiganbayan Resolutionsof 13 December 1996
(authorizing the holding of a stockholders meeting to increase ETPI's authorized capital stock and to vote therein the
sequestered Class "A" shares of stock) and 16 February 2001 (denying econsideration of the December 13, 1996 Resolution).
The petitions were consolidated.
Issue [1]:
Whether the PCGG can vote the sequestered ETPI Class "A" shares in the stockholders meeting for the election of the board of
directors.
Held [1]:
When sequestered shares registered in the names of private individuals or entities are alleged to have been acquired with illgotten wealth, then the two-tiered test is applied. However, when the sequestered shares in the name of private individuals or
entities are shown, prima facie, to have been (1) originally government shares, or (2) purchased with public funds or those
affected with public interest, then the two-tiered test does not apply. Rather, the public character exception in Baseco v. PCGG
and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the shares.
Issue [2]:
Whether the Sandiganbayan can order the Division Clerk of Court to call the stockholders meeting and in appointing then
Sandiganbayan Associate Justice Sabino de Leon, Jr. to control and supervise the same.
Held [2]:
The Clerk of Court, who is already saddled with judicial responsibilities, need not be burdened with he additional duties of a
corporate secretary. Moreover, the Clerk of Court may not have the requisite knowledge and expertise to discharge the functions
of a corporate secretary. The case of Board of Directors nd Election Committee of SMB Workers Savings and Loan Asso., Inc. v.
Tan, etc., et al. (105 Phil. 426(1959). Vide also 5 Fletcher Cyc Corp (Perm Ed) 2074; 18A Am Jur 2d ) provides a solution to the
Sandiganbayan's dilemma of calling a meeting when ETPI had two sets of officers. There, the Supreme Court upheld the creation
of a committee empowered to call, conduct and supervise the election of the board of directors. Such a committee composed of
impartial persons knowledgeable in corporate proceedings would provide the needed expertise and objectivity in the calling and
the holding of the meeting without compromising the Sandiganbayan or its officers. The appointment of the committee

members and the delineation of the scope of the duties of the committee may be made pursuant to an agreement by the
parties or in accordance with the provisions of Rule 9 (Management Committee) of the Interim Rules of Procedure or IntraCorporate Controversies insofar as they are applicable.
Presidential Commission on Good Government v. The Hon. Sandiganbayan
February 23, 2000
Piercing Veil of Corporate Fiction to recover Ill-Gotten Wealth
Facts: World Universal Trading & Investment Co., S.A. *WUTIC ( was a sociedad anonima registered in Panama but not licensed
to do business in the Philippines. Construction Development Corporation of the Philippines, now known as Philippine National
Construction Corporation (CDCP/PNCC) is duly organized and existing under the laws of the Philippines. PCGG ordered the
sequestration and provisional takeovers against assets and records of Rodolfo Cuenca, Universal Holdings, Cuenca Investment,
PNCC and San Mariano Milling Corporation. In 1987 PCGG filed with the Sandiganbayan a complaint against Cuenca for illegally
acquiring assets in the Cuenca owned corporations of CDCP/PNCC, Asia International Hardwood Limited (AHL), a Hongkong
based company and Construction Development Corporation International Limited, Hongkong, a wholly owned subsidiary or alter
ego of CDCP/PNCC. In 1991, claiming to be an assignee of AHL, WUTIC filed with the RTC against CDCP/PNCC to enforce a
foreign judgment which WUTIC had obtained in Hongkong against CDCPI, which is wholly owned by CDCP/PNCC. After trial, the
RTC found in favor of WUTIC, it considered CDCP/PNCC and CDCPI as one corporate entity and liable to pay WUTIC.
CDCP/PNCC appealed, the CA affirmed the decision of the RTC and the Supreme Court denied it on petition for review. Upon
motion of WUTIC, the RTC issued a writ of execution and Sheriff Harina issued notices of garnishment against the accounts,
shares of stocks and income of CDCP/PNCC with various banks and corporations.
In October 197, PCGG Commissioner Mendoza attended the PNCC board meeting and discovered the writ and notices of
garnishment. After realizing that WUTIC/AHLs claim could be Cuencas in disguise, PCGG enjoined ONCC and/or any person
acting in its behalf from taking any action which would dissipate or affect the assets of CDCP/PNCC. PCGG filed for certiorari
with the Sandiganbayan to annul the RTC decision, writ and garnishment. The Sandiganbayan dismissed the petition ruling that
it had not jurisdiction to annul the judgement of the RTC. It claimed to have only appellate jurisdiction over decisions of the RTC
in criminal cases involving offenses relating to public office.
Issue: Whether or not the Sandiganbayan committed grave abuse of discretion in summarily dismissing the petition for
certiorari despite the possibility that WUTIC is a dummy corporation or an alter ego of Rodolfo Cuenca.
Held:
The 3 corporations involved in this petition, PNCC/CDCP, AHL and CDCPI, Hongkong are under sequestration are
defendants in the sequestration case pending before the Sandiganbayan. AHL had claims against CDCPI and assigned the same
to WUTIC. Eventually WUTIC obtained a favorable judgement in a Hongkong court. Due to the closure of CDCPI in Hongkong,
WUTIC filed a case with RTC against PNCC/CDCP to enforce a foreign judgement obtained against CDCPI. Both corporations are
Cuenca-owned and under sequestration. Hence there is valid ground for PCGG to evaluate the validity of WUTICs claim as a
legitimate assignee or merely a dummy corporation set up to circumvent the sequestration case. As per the Court, it should be
noted that despite the initial sequestration orders and the case filed with the Sandiganbayan against stockholdings of Rodolfo
Cuenca and th so-called Cuenca-owned corporations, AHL, ONCC/CDCP and CDCPI, the PCGG was not made a party in the civil
case in Hongkong and the case to enforce the foreign judgement filled with the trial court. Considering the interconnections
between the participating corporations in the said transactions and the existence of the sequestration case, the PCGG should
have been informed of the above cases to question and verify the veracity of the claim.
The Court stated that it is aware of various schemes employed to circumvent sequestration orders, dissipate sequestered assets
and thwart PCGGs efforts to recover ill-gotten wealth. That there is a possibility that WUTIC is a dummy corporation formed by
Rodolfo Cuenca, or his alter ego, the reach the sequestered assets, there is a need to vigorously guard these assets and
preserve them pending resolution of the sequestration case before the Sandiganbayan.

CEBU FILVENEER CORPORATION V NLRC (VILLAFLOR) 286 SCRA 556 PUNO; February 24, 1998
FACTS
- Villaflor was the chief accountant of CFC. The top execs were Italians: Cordaro (president), Kun (GM), Marinoni (Production
manager). Guillermo was the accounting clerk of Villaflor.
- Kun resigned from the company and asked for the liquidation of his investment: P125k. Two weeks later, he asked Guillermo for
a blank check and a blank check voucher. Guillermo gave him. Three days later, Villlaflor noticed that a check voucher was
missing. She asked Guillermo, who said that Mr. Kun has it.
- Villaflor immediately informed Mr. Cordaro of what happened. She also wrote to the bank demanding the return of the
encashed check.
- Marinoni charged Villaflor of complicity in Kuns irregular disbursement of company funds. Two days later, she was prevented
entry to the office by the security guards. Her office drawer and safe were also forcibly opened upon order of Marinoni. Villaflor
reported the incident to the PNP.
- Marinoni suspended her for 30 days without pay for failure to come to work for half a day (the day she was prevented entry).
The next day she was preventively suspended for 30 days pending investigation of her involvement in Kuns booboo. The
company also printed a newspaper ad for an accountant.
- Villaflor filed for illegal dismissal with the LA. LA decided in her favor. NLRC affirmed.
ISSUE : WON Villaflor was illegally dismissed
HELD: YES
- Due to its far reaching implications, our Labor Code decrees that an employee cannot be dismissed, except for the most
serious causes. Article 282 enumerates the causes for which the employer may terminate an employee.

- Company says its loss of trust. The SC said that Villaflors omission cannot be described as willful to justify dismissal. A
breach is willful if it is done intentionally, knowingly and purposely. Petitioners merely proved the omission of the private
respondent but there is no evidence whatsoever that it was done intentionally.
- Company says shes grossly or habitually negligent in the performance of her duties. The SC said that since she has not been
remiss in the performance of her duties in the past, she cant be charged with habitual negligence. Neither is her negligence
gross in character. Gross negligence implies a want or absence of or failure to exercise slight care or diligence or the entire
absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. She had not the
slightest reason to distrust Kun because he was the GM and appears to have conducted himself well in the performance of his
duties in the past. At most, its error of judgment, not gross negligence.
Disposition NLRC decision affirmed.
G.R. No. 140923. September 16, 2005
MANUEL M. MENDOZA and EDGARDO A. YOTOKO, Petitioners,
Development Bank), Respondent.

vs. BANCO REAL DEVELOPMENT BANK (now LBC

DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari1, assailing the Decision2 of the Court of Appeals dated September 21, 1998 in CAG.R. No. 41544, entitled "Banco Real Development Bank, plaintiff, versus, Technica Video Inc., et. al., Manuel M. Mendoza, et. al.,
defendants" and Resolution dated December 3, 1999.
The petition alleges inter alia that on August 7, 1985, the Board of Directors of Technical Video, Inc. (TVI) passed a Resolution
authorizing its President, Eduardo A. Yotoko, petitioner, or its General Manager-Secretary-Treasurer, Manuel M. Mendoza, also a
petitioner, to apply for and secure a loan from the Pasay City Banco Real Development Bank (now LBC Development Bank),
herein respondent.
On September 11, 1985, respondent bank extended a loan of P500,000.00 to TVI. In his capacity as General Manager, petitioner
Mendoza executed a promissory note and chattel mortgage over 195 units of Beta video machines and their equipment and
accessories belonging to TVI in favor of respondent bank.
On October 3, 1986, TVI and two other video firms, Fox Video and Galactica Video, organized a new corporation named FGT
Video Network Inc. (FGT). It was registered with the Securities and Exchange Commission.3 Petitioner Mendoza was the
concurrent President of FGT and Operating General Manager of TVI. Thus, the office of TVI had to be transferred to the building
of FGT for easier monitoring of the distribution and marketing aspects of the business.
For TVIs failure to pay its loan upon maturity, respondent bank, on January 26, 1987, filed with the Office of the Clerk of Court of
the Regional Trial Court (RTC), Pasay City, a petition for Extra Judicial Foreclosure and Sale of Chattel Mortgage.
However, the Sheriffs Report/Return4 dated January 27, 1987 shows that TVI is no longer doing business at its given address;
that its General Manager, Mr. Manuel M. Mendoza, is presently employed at FGT Video Network with offices at the Philcemcor
Bldg., No. 4 Edsa cor. Connecticut St., Greenhills, San Juan, Metro Manila; that when asked about the whereabouts of the video
machines, in the presence of the representative of respondent bank and its counsel, Mr. Mendoza denied any knowledge of their
whereabouts; and that action on respondents petition is indefinitely postponed until further notice from the bank.
Respondent then wrote TVI demanding the surrender of the video machines. In his letter dated February 19, 1987, petitioner
Mendoza requested the bank to give him "additional time to enable us to pay our total obligations" and proposed a repayment
scheme to start not later than March 10, 1987.5 Still, no payment was received by the bank. TVI simply refused and ignored the
demand and kept silent as to the whereabouts of the video machines.
Meanwhile, in a case entitled "Republic of the Philippines, plaintiff vs. FGT Video Network Inc., Manuel Mendoza, Alfredo C.
Ongyangco, Eric Apolonio, Susan Yang ang Eduardo A. Yotoko, defendants," the RTC, Branch 167, Pasig City issued a search
warrant. The agents of the National Bureau of Investigation (NBI) confiscated at the offices of FGT 638 machines and equipment
including the 195 Beta machines mortgaged with respondent bank.
On May 29, 1987, upon motion of FGT and herein petitioners, the same court issued another Order directing the NBI to release
and return the said machines to them.
However, Columbia Pictures Inc., Orion Pictures Corp., Paramount Pictures Corp., Universal City Studios Inc., The Walt Disney
Company and Warner Bros. filed with this Court a petition for certiorari6 assailing the Order of the lower court.
On June 18, 1987, this Court issued a temporary restraining order enjoining the RTC from enforcing its assailed order. The
machines and equipment were left in the custody of the NBI until the petition for certiorari shall have been resolved with finality.
On July 13, 1990, respondent bank filed with the RTC, Branch 110, Pasig City,7 a complaint for collection of a sum of money8
against TVI, FGT and petitioners. Only petitioners filed their joint answer to the complaint.
In their joint answer, petitioners specifically denied the allegations in the complaint, raising the defense that the loan is purely a
corporate indebtedness of TVI.
On April 29, 1991, the trial court rendered a Decision, holding that:
"As by these considerations, the Court finds that TVI was the mere alter ego or business conduit of Yotoko and Mendoza, and
additionally considering 1) that Mendoza disclaimed knowledge of the whereabouts of the TVI mortgaged property at the time
plaintiffs petition for extrajudicial foreclosure was being effected, and 2) that Mendoza and Yotoko transferred the mortgaged
property to FGT without first securing plaintiffs consent despite their awareness that under the chattel mortgage, such consent
was necessary, the doctrine of corporate entity must be pierced and the two must be held personally liable for TVIs obligation
to plaintiff for said doctrine cannot be used to defeat public convenience, justify wrong, protect fraud or avoid a legal
obligation."

The dispositive portion of the trial courts Decision reads:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants TECHNICA VIDEO, INC., Mendoza and
Yotoko, ordering them,
1) to pay plaintiff the sum of P500,000.00 plus interests, charges and penalties as agreed upon in the promissory note of
September 11, 1985, until the same is fully paid;
2) to pay plaintiff the sum equivalent to ten (10%) of the total unpaid obligation as and for attorneys fees, and
3) to pay the costs.
SO ORDERED."
Upon appeal by herein petitioners, the Court of Appeals rendered its Decision dated September 21, 1998, affirming in toto the
Decision of the trial court. Petitioners motion for reconsideration was denied in its Resolution dated December 3, 1999.
Hence, the instant petition.
The basic issue for our resolution is whether herein petitioners are personally liable for TVIs indebtedness of P500,000.00 with
respondent bank.
Both the trial court and the Appellate Court found that the petitioners transferred the Beta video machines from TVI to FGT
without the consent of respondent bank. Also, upon inquiry of the sheriff, petitioner Mendoza declined knowledge of the
whereabouts of the mortgaged video machines. Moreover, the fact that the NBI seized the video machines from FGT glaringly
shows that petitioners transferred the same from TVI. More importantly, a comparison of the list of video machines in the
Chattel Mortgage Contract and the list of video machines seized by the NBI from FGT shows that they have the same serial
numbers.
The courts below also found that TVI is petitioners mere alter ego or business conduit. They control the affairs of TVI. Among its
stockholders or directors, they were the only ones who became incorporators of FGT. They transferred the assets of TVI to FGT.
The general rule is that obligations incurred by a corporation, acting through its directors, officers or employees, are its sole
liabilities. However, the veil with which the law covers and isolates the corporation from its directors, officers or employees will
be lifted when the corporation is used by any of them as a cloak or cover for fraud or illegality or injustice.9 here, the fraud was
committed by petitioners to the prejudice of respondent bank. It bears emphasis that as reported by the sheriff, TVI is no longer
doing business at its given address and its whereabouts cannot be established as yet.
Both the trial court and the Court of Appeals thus concluded that petitioners succeeded to hide the chattels, preventing the
sheriff to foreclose the mortgage. Obviously, they acted in bad faith to defraud respondent bank.
In fine, we hold that the Appellate Court, in affirming the Decision of the trial court, correctly ruled that petitioners, not TVI, are
the ones personally liable to respondent bank for the payment of the loan.
WHEREFORE, the petition is DENIED. Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

SOLIDBANK CORPORATION V. MINDANAO FERROALLOY CORPORATION

GR 153535, JULY 28, 2005
FACTS:
Mindanao Ferroalloy corporation is the fruit of a joint venture agreement between a Filipino corporation and Korean
Corporation. In its operations, its liabilities ballooned over its assets that it had to secure loans from petitioner
Solidbank. The loans were later consolidated and restructured, evidenced by a promissory note. The promissory note was
signed by Cu and Hong, both officers of the corporation. The corporation, through the same officers also executed a deed of
assignment. Thereafter, the corporation stopped its operations and the loan was left unpaid. The bank was prompted
to file a complaint against the corporation, and with it, impleading the officers who signed the agreement and
promissory notes. The trial court held in favor of the bank but didn't adjudge liability of the officers. Both the trial court and CA
held that there was no solidary liability on the part of the officers impleaded by the bank.

HELD:
Though Hong and Cu signed above the maker/borrower and the printed name of the corporation, without the word by
preceding their signatures, the fact that they signed in their personal capacities is negated by the facts that name and address
of the corporation also appeared on the space provided for in the maker/borrower and their signatures only
appeared once when it should be twice if indeed it was in their personal capacities. Further, they didn't sign on the portion
allocated for the co-maker, and there was also indicia of it being signed as authorized representatives.

Solid Bank Corp. vs Mindanao Ferroalloy Corp. G.R. No. 153535July 28, 2005
Doctrine: It is axiomatic that solidary liability cannot be lightly inferred. Under Article 1207 of the Civil Code, "there is a solidary
liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity."

Facts: Private respondents herein secured a loan to the petitioner bank under the name of the respondent corporation. In the
course of the corporations operation, it was not able to pay its obligation to the petitioner and has to stop its operation.
Petitioner bank filed an action against the corporation together with its principal officers for the collection of the loan they
acquired. The RTC ruled in favor of the bank petitioner and ordering the respondent corporation to pay the amount of loan plus
interest. On appeal, the CA held the decision of the RTC and ruled also that the private respondents were not solidary liable to
the petitioner.
Issue: Whether or not principal officers can be held personally liable upon signing the contract of loan under the name of the
corporation?
Ruling: Basic is the principle that a corporation is vested by law with a personality separate and distinct from that of each person
composing or representing it. Equally fundamental is the general rule that corporate officers cannot be held personally liable for
the consequences of their acts, for as long as these are for and on behalf of the corporation, within the scope of their authority
and in good faith. The separate corporate personality is a shield against the personal liability of corporate officers, whose acts
are properly attributed to the corporation. Moreover, it is axiomatic that solidary liability cannot be lightly inferred. Since
solidary liability is not clearly expressed in the Promissory Note and is not required by law or the nature of the obligation in this
case, no conclusion of solidary liability can be made. Furthermore, nothing supports the alleged joint liability of the individual
petitioners because, as correctly pointed out by the two lower courts, the evidence shows that there is only one debtor: the
corporation

ACESITE CORPORATION, HOLIDAY INN, JOHANN ANGERBAUER and PHIL KENNEDY, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION (Second Division) and LEO A. GONZALES, respondents.
[G.R. No. 152321. January 26, 2005]
LEO A. GONZALES, petitioner, vs. ACESITE (PHILIPPINES) HOTEL CORPORATION, HOLIDAY INN MANILA, JOHANN ANGERBAUER
and PHIL KENNEDY, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court are two consolidated petitions for review on certiorari challenging the Court of Appeals Decision of October 12,
2001 and Resolution of February 19, 2002 in CA-G.R. SP No. 65406, Acesite (Philippines) Hotel Corporation, Holiday Inn Manila,
Johann Angerbauer and Phil Kennedy v. National Labor Relations Commission and Leo A. Gonzales.
The antecedents of the case are as follows:
Leo A. Gonzales (Gonzales) was hired on October 18, 1993 as Chief of Security of Manila Pavillion Hotel.[1] On January 1, 1995,
Acesite Corporation (Acesite) took over the operations of Manila Pavillion and renamed it Holiday Inn Manila (the hotel). Acesite
retained Gonzales as Chief of Security of the hotel.

On March 25, 1998, Gonzales took a 4-day sick leave and took emergency leave on March 30, 1998. On April 16-29, 1998, he
again took a 12-day vacation leave, thereby using up all leaves that he was entitled for the year.
Before the expiration of his 12-day vacation leave or on April 23, 1998, Gonzales filed an application[2] for emergency leave for
10 days commencing on April 30 up to May 13, 1998. The application was not, however, approved. By Acesites claim, he
received a telegram[3] informing him of the disapproval and asking him to report back for work on April 30, 1998.
Gonzales did not report for work on April 30, 1998. On even date, he received a telegram[4] from Acesite advising him that he
was on unauthorized leave and asking him to provide a written explanation within the next 24 hours why he was not reporting
for work. At the same time, he was required to report for work the following day or on May 1, 1998.

On May 2, 1998, Gonzales father Anacleto sent a telegram[5] to Acesite stating that he was still recovering from severe stomach
disorder and would report back for work on May 4, 1998. A medical certificate[6] dated May 3, 1998 issued by a Dr. Laureano C.
Gonzales, Jr. stating that Gonzales was under his care from April 30 May 3, 1998 was presented to prove that he indeed was
treated from such sickness.
On May 4, 1998, around lunchtime, Gonzales reported for work and presented himself to Johann Angerbauer, then Resident
Manager of the hotel. Angerbauer claims that when Gonzales went to him, he asked him to explain why he had been absent
despite orders for him to report back for work to which he (Gonzales) replied that it was necessary for him to go home to his
province in Abra.
Gonzales, on the other hand, claims that when he conferred with Angerbauer, he requested for leave without pay from May 5-9,
1998 which was provisionally approved on condition that he (Gonzales) would be sending his explanation through e-mail behind
his absences on April 30, 1998 and May 2, 1998 so that Angerbauer could send it to the hotel General Manager Phil Kennedy
who was then out of the country.
Around 5:33 pm of May 4, 1998, Gonzales sent his explanation[7] to Angerbauer through e-mail, to wit, quoted verbatim:
This has reference with your verbal instruction that I will submit my written explanation regarding my absences on April 30,1998
and May 2, 1998.
At the outset, my profound apologies for the above-stated absences. As you are fully aware of, on April 27, 1998, I formally
requested your office that my official leave [which] will expire on April 29, 1998 shall be extended up to May 15, 1998. Inasmuch
that I was in the province (ABRA) at that time, I was not aware that my request was disapproved until such time that I received
your telegram two days later. Likewise, when I received your telegram, I was sick at that time and this was duly communicated
to your office thru telegram. This was the reason I failed to report for work also on May 2, 1998.

As exhaustively discussed to you today, there is a great necessity for me to go home tonight in the province. Once again, I am
asking your kind understanding that I shall be allowed to go on leave effective tomorrow and rest assured that I will report for
work after the election. At any rate, the training of our new guards will start on May 18, 1998.
Thank you for this and for the past favors.
In the evening Gonzales left for Abra.

Also on May 4, 1998 Angerbauer sent the following inter-office memo[8] to Gonzales, allegedly received at around 7:55 pm by
the security staff:
As discussed during our meeting, you are advised to submit an explanation within 24 hours why you did not report to work 1st
May 1998? And why you came in late today 4th of May 1998, as we had a 10:30 AM scheduled communication meeting with the
incoming Security Agency.

We will be having another meeting tomorrow regarding the turnover of the outgoing Security Agency. I will be expecting your
presence during the said meeting.
For your compliance.
Gonzales claims that he got hold of a copy of the above-quoted memo only on May 8, 1998.
Gonzales not having reported for work on May 5, 1998, Angerbauer sent him on even date the following telegram[9] at his
provincial address in Abra:

THIS IS TO REITERATE OUR ADVICE FOR YOU TO REPORT BACK TO WORK IMMEDIATELY UPON RECEIPT OF THIS NOTICE DUE TO
VERY URGENT MATTERS INVOLVING SECURITY DEPARTMENTS CONCERNS WHICH IMPERATIVELY REQUIRE YOUR PERSONAL
ATTENTION. PLEASE CONSIDER THIS AS OUR FINAL ADVICE.
Gonzales, who claims to have received the May 5, 1998 telegram only in the afternoon of May 7, 1998, immediately repaired
back to Manila on May 8, 1998 only to be humiliatingly and ignominiously barred by the guard (a subordinate of [Gonzales])
from entering the premises.
It appears that on May 7, 1998, Angerbauer issued the following Notice of Termination[10] through an inter-office memo:
As you continuously disregard our several advices for you to report back to work to attend to very urgent matters involving
Security Departments concerns which, as categorically made clear to you, imperatively required your personal presence and
attention considering that you are its Department Head, thus adversely affecting the operations of said department, we are left
with no recourse but to terminate your services from the Hotel effective immediately for violations of rule no. 27, Type C, of the
House Code of Discipline Acts of gross disobedience or insubordination and provisions of the Labor Code, specifically Art. 282.
Termination by Employer, par. (a) x x x willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work.

Please be guided accordingly. (Emphasis and underscoring supplied)

Gonzales thus filed on May 27, 1998 a complaint[11] against Acesite, Angerbauer and Kennedy for illegal dismissal with prayer
for reinstatement and payment of full backwages, service incentive leave, 13th month pay, moral and exemplary damages and
attorneys fees. Gonzales, however, failed to appear in 2 consecutive hearings despite notice, meriting the dismissal by the
Labor Arbiter of his complaint by Order[12] of September 17, 1998.

Gonzales refiled on July 13, 1999 his complaint for illegal dismissal[13] against Angerbauer and Kennedy, which he amended[14]
on September 20, 1999, by impleading Acesite as respondent.
After the filing of their respective position papers, pleadings and documentary evidence, the Labor Arbiter, by Decision of
February 7, 2000, dismissed the complaint for lack of merit, it holding that Gonzales was dismissed for just cause and was not
denied of due process.

Gonzales appealed to the National Labor Relations Commission (NLRC), he faulting the Labor Arbiter as follows:

I
The Labor Arbiter committed grave abuse of discretion in dismissing the complaint for lack of merit.
II
The Labor Arbiter seriously erred in the finding of facts, which caused grave or irreparable damage or injury to the
complainant/appellant.
III
The Labor Arbiter seriously erred in the finding that there was absence of due process in the dismissal of the complaint.[15]

By Decision[16] of December 29, 2000, the NLRC reversed that of the Labor Arbiter, the dispositive portion of which is quoted
verbatim:
WHEREFORE, PREMISES CONSIDERED, the decision of Labor Arbiter Geobel A. Bartolabac dated February 7, 2000 is hereby,
REVERSED. Respondents are hereby ordered:
1) to immediately reinstate complainant to his former position without loss of seniority rights;
2) to pay complainant backwages beginning for the period May 16, 1998, until he is actually reinstated, inclusive of all his other
fringe benefits or their monetary equivalent;
3) to pay complainant the sum of P800,000.00 pesos as moral damages and the equal amount of P800,000.00 as and for
exemplary damages;
4) to pay ten (10) per cent attorneys fees. (Underscoring supplied)
Acesite thereupon filed a petition for certiorari before the Court of Appeals anchored on the following grounds:
I. THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT REVERSED THE FINDING OF THE
LABOR ARBITER THAT THE RESPONDENT WAS LEGALLY DISMISSED FOR JUST CAUSE[.]
II. THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT REVERSED THE FINDING OF
THE LABOR ARBITER THAT THE RESPONDENT WAS AFFORDED PROCEDURAL DUE PROCESS[.]
III. THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT REVERSED THE FINDING OF
THE LABOR ARBITER THAT THE RESPONDENT IS NOT ENTITLED TO HIS MONEY CLAIMS[.]
IV. THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT INCLUDED PETITIONERS PHIL
KENNEDY AND JOHANN ANGERBAUER LIABLE TO THE RESPONDENT NOTWITHSTANDING THE FACT THEY ARE MERE EMPLOYEES
OF THE HOTEL[.][17]
By Decision[18] of October 12, 2001, the Court of Appeals, finding that Gonzales was illegally dismissed, affirmed with
modification the NLRC decision:
After a careful study of the evidence on record and of the allegations of both parties, this Court is convinced that private
respondent Gonzales was illegally dismissed.
The parties hereto contest the receipt by private respondent Gonzales of the first telegram sent by petitioner Angerbauer. Since
the evidence of petitioners is merely a piece of paper supposedly containing the contents of the telegram sent to the former, We
cannot accept the same as proof that indeed a telegram was sent and was thereafter received by private respondent Gonzales.
The burden of proof is upon petitioners to show that indeed the latter received the same.
Insofar as private respondent Gonzales failure to report for work on May 1, 1998, we give credence to the medical certificate he
submitted to prove that he was indeed indisposed during the period in controversy especially in the light of the fact that the
same was issued by his rival in the political arena, Dr. Laureano C. Gonzales, Jr., We do not think Dr. Gonzales who likewise ran
for the same elective position as herein private respondent Gonzales would help him cover up his absences if he really did not
treat the latter and had him under his care. Thus, his failure to report for work on May 1, 1998 was justified.
As to the third telegram, the final notice by petitioners to private respondent Gonzales, which directed him to report for work
immediately upon receipt thereof, was complied with by the latter when he reported to the hotel on May 8, 1998 but was
refused entry. Petitioners insist that he did not report to work. Private respondent Gonzales however submitted an official receipt
of his diesoline purchase to evidence the fact that he went to Manila on said date.
And even granting arguendo that private respondent Gonzales did not heed the same, his immediate termination was still
unwarranted despite the provision on petitioners House Code of Discipline.
Article 277 of the Labor Code, as amended, provides:

ART. 277. Miscellaneous provisions. (a) x x x.

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for
just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The
Secretary of the Department of Labor and Employment may certify the dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and Employment before whom such dispute pending that the termination may
cause a serious labor dispute or is in implementation of a mass lay-off.
xxx
In the present case, the records do not show compliance by petitioners with the two (2)-notice rule prescribed in the above
provision of law. Although several telegrams were sent to private respondent Gonzales, there is not one (1) telegram which
contains a statement of the cause for his termination. The telegram and the meeting held on May 4, 1998 requiring him to
submit a written explanation as to his absences did not apprise him that he was being considered for termination. Moreover, he
was not informed that an investigation was being conducted vis--vis his continued absences and his non-disclosure of the fact
that he was running for public office.

In other words, no notice was sent by petitioners to apprise private respondent Gonzales of the charges against him nor was he
given ample opportunity to contest said charges with the assistance of counsel, if he so desired. What petitioners did was to
send him a notice of termination on the premise that his immediate dismissal is authorized under their House Code of Discipline.
While it is recognized that company policies and regulations, unless they are oppressive or contrary to law, are generally valid
and binding on the parties and must be complied with, the same cannot be exercised for the purpose of defeating the rights of
the employees under the law.
Unfortunately for petitioners, their employees are still entitled to the procedural requirements of notice and hearing despite
provisions in their code of discipline purportedly giving them the right to immediately terminate their services. Employees
cannot bargain away this right notwithstanding their acquiescence to the employers rules.
As to petitioners claim that private respondent willfully disobeyed their orders, the Supreme Court in the case of Lagatic vs.
NLRC held:
In order that an employer may dismiss an employee on the ground of willful disobedience, there must be concurrence of at least
two (2) requisites: the employees assailed conduct must have been willful or intentional, the willingness being characterized by
a wrongful and perverse attitude; and that the order violated must have been reasonable, lawful, made known to the employee
and must pertain to the duties which he had been engaged to discharge.
The present case does not show the presence of the first requisite. As private respondent Gonzales failure to comply with
petitioners orders were not characterized by a perverse attitude. At most he can only be suspended from service for assuming
that his leaves of absence would be approved by management. The penalty of dismissal is too harsh considering that private
respondent Gonzales has been with the company for almost five (5) years and has rendered unblemished service until the
period in controversy. For his unauthorized absences, We hereby rule that a suspension of one (1) week is commensurate to his
violation of Type C, House Code of Discipline rule on unauthorized absences.
Anent the alleged willful non-disclosure by private respondent Gonzales of his candidacy for public office, We find the same to
be unsupported by evidence. The tenor of private respondent Gonzales internal email to petitioner Angerbauer reveals that the
latter was aware that the reason for the formers prolonged absences was his ongoing campaign as Board Member of the
Province of Abra. Considering the same, We are inclined to believe private respondent Gonzales version of the story.
Going now to the propriety of the monetary awards to private respondent Gonzales, We find the amount P800,000.00 each as
moral and exemplary damages unwarranted. The collective amount of P100,000.00 as moral and exemplary damages is just
under the circumstances. Public respondent NLRCs award of ten (10) per cent attorneys fees is affirmed.
WHEREFORE, premises considered, the Decision dated December 29, 2000 of public respondent National Labor Relations
Commission is hereby MODIFIED as follows:

Petitioners are hereby ordered:

1. to reinstate private respondent Leo A. Gonzales to his former position without loss of seniority rights or privileges. If
reinstatement is no longer feasible, then payment of separation pay equivalent to month pay for every year of service is hereby
ordered;
2. to pay private respondent Leo A. Gonzales his full back wages commencing on 14 May 1998 in view of his one (1) week
suspension until he is actually reinstated;
3. to pay P100,000.00 as moral and exemplary damages; and
4. to pay 10% of the total monetary award as and for attorneys fees.
With costs against the petitioners.[19] (Emphasis and underscoring supplied)
Hence, the two separate petitions of Acesite and Gonzales.
In its petition, Acesite contends that:

I
THE COURT OF APPEALS GRAVELY ERRED WHEN IT DID NOT AFFIRM THE FINDING OF THE LABOR ARBITER THAT THE
RESPONDENT WAS LEGALLY DISMISSED FOR JUST CAUSE.

II
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE FINDING OF THE LABOR ARBITER THAT RESPONDENT WAS
AFFORDED PROCEDURAL DUE PROCESS.

III
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE FINDING OF THE LABOR ARBITER THAT THE RESPONDENT IS
NOT ENTITLED TO HIS MONEY CLAIMS.[20]
Gonzales, on the other hand, posits in his petition that:

[THE COURT OF APPEALS] GRAVELY ERRED IN DELETING THE AWARDS OF FRINGE BENEFITS OR THEIR MONETARY EQUIVALENTS
WHICH THE NLRC ORDERED TO BE GIVEN TO THE PETITIONER FROM THE TIME HE WAS ILLEGALLY DISMISSED UP TO HIS ACTUAL
REINSTATEMENT.

II
[THE COURT OF APPEALS] SERIOUSLY ERRED IN BESTOWING TO THE PRIVATE RESPONDENTS THE OPTION WHETHER TO
REINSTATE THE PETITIONER OR NOT.

III
[THE COURT OF APPEALS] ERRED IN SUBSTANTIALLY REDUCING THE AMOUNT OF AWARDS OF MORAL AND EXEMPLARY
DAMAGES WHICH THE NLRC DESERVINGLY ADJUDGED TO BE ACCORDED TO THE PETITIONER.[21]
Acesite argues that there was just cause for Gonzales termination under Article 282 of the Labor Code, the pertinent provision of
which reads:

ART. 282 TERMINATION BY EMPLOYER. An employer may terminate an employment for any of the following causes:
(a) Serious Misconduct of willful Disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual Neglect by the employee of his duties;
xxx
For, so Acesite claims, Gonzales showed no respect for x x x [the] lawful orders for him to report back to work and repeatedly
ignored all telegrams sent to him,[22] and it merely exercised its legal right to dismiss him under the House Code of Discipline
which imposes dismissal as penalty for a violation of Rule 27 thereof.

Acesite further claims that Gonzales cannot feign ignorance of said rule because it is part of his job to implement it;[23] and the
medical certificate accomplished by a Dr. Gonzales who could very well be a relative, was issued in Quezon City on May 3, 1998
whereas it stated that Gonzales was under the physicians care in Abra from April 30 to May 3, 1998.
Acesite furthermore claims that, as correctly ruled by the Labor Arbiter, the facts by any standard suffice to cause it to lose its
trust and confidence in Gonzales especially his concealment that he was seeking an elective post in Abra during the 1998
elections which would explain why he did not report for work as directed;[24] and that Gonzales was afforded procedural due
process as the twin requirements of notice and hearing were complied with through the numerous telegrams sent to both
Gonzales city and provincial addresses asking him to report for work and explain his unauthorized absences.[25]
This Court finds no reason to depart from the findings of the Court of Appeals. Indeed, there appears to have been no just cause
to dismiss Gonzales from employment. As correctly ruled by the Court of Appeals, Gonzales cannot be considered to have
willfully disobeyed his employer. Willful disobedience entails the concurrence of at least two (2) requisites: the employees
assailed conduct has been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and the
order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had
been engaged to discharge.[26]
In Gonzales case, his assailed conduct has not been shown to have been characterized by a perverse attitude, hence, the first
requisite is wanting. His receipt of the telegram disapproving his application for emergency leave starting April 30, 1998 has not
been shown. And it cannot be said that he disobeyed the May 5, 1998 telegram since he received it only on May 7, 1998. On the
contrary, that he immediately hied back to Manila upon receipt thereof negates a perverse attitude.
As to Gonzales alleged concealment of his candidacy (for provincial board member) as a ground for Acesites loss of trust and
confidence in him, the same is not impressed with merit. It should be noted that Acesites ground for terminating the services of
Gonzales as stated in the Notice of Termination is his alleged acts of insubordination/disobedience. The concealment of
candidacy angle harped upon by Acesite can only thus be considered as mere afterthought to further justify his illegal dismissal.
With regards to Gonzales perceived feigning of illness, the same is purely speculatory.
If there is anything that Gonzales can be faulted for, it is his being too presumptuous that his application for leave would be
approved. For his unauthorized absences, this Court finds that Gonzales violated paragraph 26, Rule 11 of Type B offenses of the
Companys House Code of Discipline unauthorized absence from work for three consecutive days[27] which is punishable by a
suspension of 3 days on the first offense when he did not report for work from May 5-7, 1998.
As for Gonzales petition before this Court, he argues that the Court of Appeals, absent any reason, modified the decision of the
NLRC by deleting or eliminating the other fringe benefits or their monetary equivalent;[28] that the said court should not have
given Acesite the option to reinstate him or not since the case at bar does not fall under circumstances for which reinstatement
is no longer possible; that even assuming that his reinstatement is not in the interest of labor, the severance pay of month pay
ordered by the appellate court is not in accordance with law and jurisprudence; and that the reduction of the moral and
exemplary damages awarded him by the NLRC was erroneous.

In illegal dismissal cases, reinstatement to an illegally dismissed employees former position may be excused on the ground of
strained relations. This may be invoked against employees whose positions demand trust and confidence, or whose differences
with their employer are of such nature or degree as to preclude reinstatement.[29] In the case at bar, Gonzales was Chief of
Security, whose duty was to manage the operation of the security areas of the hotel to provide and ensure the safety and

security of the hotel guests, visitors, management, staff and their properties according to company policies and local laws.[30] It
cannot be gainsaid that Gonzales position is one of trust and confidence, he being in charge of the over-all security of said hotel.
Thus, reinstatement is no longer possible. In lieu thereof, Acesite is liable to pay separation pay of 1 month for every year of
service.
As to the award of moral and exemplary damages, this Court finds it unwarranted. Moral damages are recoverable only where
the dismissal of the employees was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a
manner contrary to morals, good customs or public policy. Exemplary damages on the other hand may be awarded only if the
dismissal was effected in a wanton, oppressive or malevolent manner.[31] Though these grounds have been alleged by
Gonzales, they were not sufficiently proven.
The appellate court affirmed the NLRC ruling that Angerbauer and Kennedy are solidarily liable with Acesite. In the case of BogoMedellin Sugarcane Planters Association, Inc. v. NLRC,[32] this Court ruled:
Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts,
because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and members.
However, this fictional veil may be pierced whenever the corporate personality is used as a means of perpetuating fraud or an
illegal act, evading an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors and
officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad faith.
(Underscoring supplied, citations omitted)
In holding Angerbauer and Kennedy solidarily liable, the NLRC intended to deter other foreign employer[s] from repeating the
inhuman treatment of their Filipino employees who should be treated with equal respect especially in their own land and prevent
further violation of their human rights as employees.
The records of the case do not, however, show any inhuman treatment of Gonzales. His superiors just happen to be foreigners.
Moreover, as previously discussed, bad faith or malice was not proven. Angerbauer, acting on behalf of Acesite, was, like
Gonzales, perhaps also too presumptuous in thinking that the telegrams ordering the latter to report for work were all received
on time, drawing him to hastily conclude that Gonzales intentionally disobeyed the orders contained therein.
As to the deletion of the fringe benefits or their monetary equivalent, this Court agrees with Gonzales that it is not in accord with
law and jurisprudence. Article 279 of the Labor Code provides:
ART. 279 SECURITY OF TENURE. In cases of regular employment, the employer shall not terminate the services of an employee
except for just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of
his actual reinstatement. (Emphasis and underscoring supplied)
As for the award of attorneys fees, the same is in order, Gonzales having been forced to litigate and incur expenses to protect
his rights and interest.[33] This Court, however, reduces the award to P10,000.00.
In fine, this Court affirms the assailed decision with modification in light of the foregoing discussions.
WHEREFORE, as modified, the decision reads as follows:
1) Acesite Corporation is hereby ordered to pay Leo A. Gonzales:
a) his full backwages, inclusive of allowances, and his other benefits or their monetary equivalent, to be computed from the time
he was illegally dismissed until the finality of this Decision less 3 days in view of his suspension;
b) separation pay equivalent to his 1 month salary for every year of service computed from the time Gonzales was first
employed by Acesite until the finality of this Decision;
c) P10,000.00 as attorneys fees; and
2) The complaint against Johann Angerbauer and Phil Kennedy is hereby DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

10