G.R. No.

L-18216

October 30, 1962

STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants,

vs.
REGISTER OF DEEDS OF MANILA, respondent-appellee.
Ramon C. Fernando for petitioners-appellants.
Office of the Solicitor General for respondent-appellee.
BAUTISTA ANGELO, J.:
On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc. executed a certificate of
liquidation of the assets of the corporation reciting, among other things, that by virtue of a resolution of the
stockholders adopted on September 17, 1960, dissolving the corporation, they have distributed among
themselves in proportion to their shareholdings, as liquidating dividends, the assets of said corporation,
including real properties located in Manila.
The certificate of liquidation, when presented to the Register of Deeds of Manila, was denied registration on
seven grounds, of which the following were disputed by the stockholders:
3. The number of parcels not certified to in the acknowledgment;
5. P430.50 Reg. fees need be paid;
6. P940.45 documentary stamps need be attached to the document;
7. The judgment of the Court approving the dissolution and directing the disposition of the assets of the
corporation need be presented (Rules of Court, Rule 104, Sec. 3).
Deciding the consulta elevated by the stockholders, the Commissioner of Land Registration overruled ground
No. 7 and sustained requirements Nos. 3, 5 and 6.
The stockholders interposed the present appeal.
As correctly stated by the Commissioner of Land Registration, the propriety or impropriety of the three grounds
on which the denial of the registration of the certificate of liquidation was predicated hinges on whether or not
that certificate merely involves a distribution of the corporation's assets or should be considered a transfer or
conveyance.
Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a distribution of
the assets of the corporation which has ceased to exist for having been dissolved. This is apparent in the
minutes for dissolution attached to the document. Not being a conveyance the certificate need not contain a
statement of the number of parcel of land involved in the distribution in the acknowledgment appearing therein.
Hence the amount of documentary stamps to be affixed thereon should only be P0.30 and not P940.45, as
required by the register of deeds. Neither is it correct to require appellants to pay the amount of P430.50 as
registration fee.
The Commissioner of Land Registration, however, entertained a different opinion. He concurred in the view
expressed by the register of deed to the effect that the certificate of liquidation in question, though it involves a

distribution of the corporation's assets, in the last analysis represents a transfer of said assets from the
corporation to the stockholders. Hence, in substance it is a transfer or conveyance.
We agree with the opinion of these two officials. A corporation is a juridical person distinct from the members
composing it. Properties registered in the name of the corporation are owned by it as an entity separate and
distinct from its members. While shares of stock constitute personal property they do not represent property of
the corporation. The corporation has property of its own which consists chiefly of real estate (Nelson v. Owen,
113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot
part of the corporation's property, or the right to share in its proceeds to that extent when distributed according
to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala 398, 56 So., 235), but its holder is not the owner
of any part of the capital of the corporation (Bradley v. Bauder 36 Ohio St., 28). Nor is he entitled to the
possession of any definite portion of its property or assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis, 35
Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate property (Halton v.
Hohnston, 166 Ala 317, 51 So 992).
On the basis of the foregoing authorities, it is clear that the act of liquidation made by the stockholders of the F.
Guanzon and Sons, Inc. of the latter's assets is not and cannot be considered a partition of community
property, but rather a transfer or conveyance of the title of its assets to the individual stockholders. Indeed,
since the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer
their title from the corporation to the stockholders in proportion to their shareholdings, and this is in effect
the purpose which they seek to obtain from the Register of Deeds of Manila, that transfer cannot be effected
without the corresponding deed of conveyance from the corporation to the stockholders. It is, therefore, fair
and logical to consider the certificate of liquidation as one in the nature of a transfer or conveyance.
WHEREFORE, we affirm the resolution appealed from, with costs against appellants.

G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,
vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A.
and FAR EAST BANK & TRUST COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 51022, which affirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case
No. 54887, as well as the Resolution2 of the CA denying the motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950,
it had been engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations
were conducted on eight parcels of land with a total area of 47,233 square meters. The properties, located in
Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos. 451117, 451118, 451119,
451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation organized and registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the
General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of
ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted
to stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of
ECs Board of Directors, to dispose of the eight parcels of land. Adams engaged the services of realtor/broker
Lauro G. Marquez so that the properties could be offered for sale to prospective buyers. Glanville later showed
the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to
sell the properties for P27,000,000.00 and that the terms of the sale were subject to negotiation.4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his
brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez
apprised Glanville of the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the latter did
not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/
counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex
to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00
and P2,500,000.00 to cover all existing obligations prior to final liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the
counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter dated February 26, 1987,
confirmed that the Litonjua siblings had accepted the counter-proposal of Delsaux. He also stated that the
Litonjua siblings would confirm full payment within 90 days after execution and preparation of all documents of
sale, together with the necessary governmental clearances.6

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company,
Ermita Branch, and drafted an Escrow Agreement to expedite the sale.7
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer, which
had given him the impression that "he is prepared to press for a satisfactory conclusion to the sale."8 He also
emphasized to Delsaux that the buyers were concerned because they would incur expenses in bank
commitment fees as a consequence of prolonged period of inaction.9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the
political situation in the Philippines had improved. Marquez received a telephone call from Glanville, advising
that the sale would no longer proceed. Glanville followed it up with a Letter dated May 7, 1987, confirming that
he had been instructed by his principal to inform Marquez that "the decision has been taken at a Board
Meeting not to sell the properties on which Eternit Corporation is situated."10
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided
not to proceed with the sale of the subject land, to wit:
May 22, 1987
Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering [the] new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations
in Manila. In fact, production has started again last week, and (sic) to recognize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later
state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for
damages they had suffered on account of the aborted sale. EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton MultiResources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An
amended complaint was filed, in which defendant EC was substituted by Eterton Multi-Resources Corporation;
Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded as additional
defendants on account of their purchase of ESAC shares of stocks and were the controlling stockholders of
EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the
Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never
approved any resolution to sell subject properties nor authorized Marquez to sell the same; and the telex dated
October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended
complaint.12 The fallo of the decision reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and
Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale between the plaintiffs and
said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is
also dismissed for lack of merit.13
The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not
merely unenforceable, and as such, could not have been ratified by the principal. In any event, such ratification
cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the
property without a clear authorization from the corporation concerned, that is, through resolutions of the Board
of Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all
the assets of defendant EC which would result in the eventual total cessation of its operation.14
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that the
real estate broker in the instant case needed a written authority from appellee corporation and/or that said
broker had no such written authority; and (2) the lower court committed grave error of law in holding that
appellee corporation is not legally bound for specific performance and/or damages in the absence of an
enabling resolution of the board of directors."15 They averred that Marquez acted merely as a broker or gobetween and not as agent of the corporation; hence, it was not necessary for him to be empowered as such by
any written authority. They further claimed that an agency by estoppel was created when the corporation
clothed Marquez with apparent authority to negotiate for the sale of the properties. However, since it was a
bilateral contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was
obliged to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were
Glanville and Delsaux authorized by its board of directors to offer the property for sale. Since the sale involved
substantially all of the corporations assets, it would necessarily need the authority from the stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The Litonjuas filed a motion
for reconsideration, which was also denied by the appellate court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article
1874 of the New Civil Code. Under Section 23 of the Corporation Code, he needed a special authority from
ECs board of directors to bind such corporation to the sale of its properties. Delsaux, who was merely the
representative of ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointed out
that Delsaux was not even a member of the board of directors of EC. Moreover, the Litonjuas failed to prove
that an agency by estoppel had been created between the parties.
In the instant petition for review, petitioners aver that
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF
SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED
A WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE
NECESSARY AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE
KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN
APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER TO
SELL THE SAID PROPERTIES.17
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels
of land and the improvements thereon for "US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to
final liquidation." Petitioners insist that they had accepted the counter-offer of respondent EC and that before
the counter-offer was withdrawn by respondents, the acceptance was made known to them through real estate
broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez
to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his
authority was of a special and limited character in most respects. His only job as a broker was to look for a
buyer and to bring together the parties to the transaction. He was not authorized to sell the properties or to
make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does
not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both
the offer and counter-offer and their acceptance of respondent ECs counter-offer, resulting in a perfected
contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who
was the President and General Manager of respondent EC, and Delsaux, who was the Managing Director for
ESAC Asia, had the necessary authority to sell the subject property or, at least, had been allowed by

respondent EC to hold themselves out in the public as having the power to sell the subject properties.
Petitioners identified such evidence, thus:
1. The testimony of Marquez that he was chosen by Glanville as the then President and General
Manager of Eternit, to sell the properties of said corporation to any interested party, which authority, as
hereinabove discussed, need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL
MONTHS, from 1986 to 1987;
3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties as evidenced by the
Petitioners ACCEPTANCE of the counter-offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that
an ESCROW agreement was drafted over the subject properties;
6. Glanvilles telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO
BUY AND SELL";
7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that Petitioners
offer was allegedly REJECTED by both Glanville and Delsaux.18
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners offer
and thereafter reject such offer unless they were authorized to do so by respondent EC. Petitioners insist that
Delsaux confirmed his authority to sell the properties in his letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was
proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far
as the Philippines are (sic) concerned. Considering the new political situation since the departure of MR.
MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations
in Manila[.] [I]n fact production started again last week, and (sic) to reorganize the participation in the
Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later
stage we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties within the scope of an apparent authority. Petitioners insist
that respondents held themselves to the public as possessing power to sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are
proscribed by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (now EMC) and
ESAC reiterate their submissions in the CA. They maintain that Glanville, Delsaux and Marquez had no
authority from the stockholders of respondent EC and its Board of Directors to offer the properties for sale to
the petitioners, or to any other person or entity for that matter. They assert that the decision and resolution of
the CA are in accord with law and the evidence on record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed
to the written authority of Marquez to sell the properties. The authority of Glanville and Delsaux to bind
respondent EC is evidenced by the fact that Glanville and Delsaux negotiated for the sale of 90% of stocks of
respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their positions and their duties in
respondent EC at the time of the transaction, and the fact that respondent ESAC owns 90% of the shares of
stock of respondent EC, a formal resolution of the Board of Directors would be a mere ceremonial formality.
What is important, petitioners maintain, is that Marquez was able to communicate the offer of respondent EC
and the petitioners acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in this
case are factual. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as
its agents relative to the sale of the properties of respondent EC, and if so, the boundaries of their authority as
agents, is a question of fact. In the absence of express written terms creating the relationship of an agency, the
existence of an agency is a fact question.20 Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent
authority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence on
record.21 The findings of the trial court on such issues, as affirmed by the CA, are conclusive on the Court,
absent evidence that the trial and appellate courts ignored, misconstrued, or misapplied facts and
circumstances of substance which, if considered, would warrant a modification or reversal of the outcome of
the case.22
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court
because the Court is not a trier of facts. It is not to re-examine and assess the evidence on record, whether
testimonial and documentary. There are, however, recognized exceptions where the Court may delve into and
resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary
to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on
which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify a different conclusion; and (10) when the findings of

fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on
record.23
We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant case
falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of Appeals is supported
by the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had
empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers
and to accept any counter-offer. Petitioners likewise failed to prove that their counter-offer had been accepted
by respondent EC, through Glanville and Delsaux. It must be stressed that when specific performance is
sought of a contract made with an agent, the agency must be established by clear, certain and specific proof.24
Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines,
provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one
(1) year and until their successors are elected and qualified.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not
affected by the personal rights,
obligations and transactions of the latter.25 It may act only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the normal course of business.
The general principles of agency govern the relation between the corporation and its officers or agents, subject
to the articles of incorporation, by-laws, or relevant provisions of law.26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the
limitations prescribed by law and the Constitution, as follows:
SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and
capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such
real and personal property, including securities and bonds of other corporations, as the transaction of a lawful
business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by
the law and the Constitution.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may
not be sold without express authority from the board of directors.27 Physical acts, like the offering of the
properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such
properties and the execution of the deed of sale covering such property, can be performed by the corporation
only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board
of directors.28 Absent such valid delegation/authorization, the rule is that the declarations of an individual

director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of
authorized duties of such director, are not binding on the corporation.29
While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to
be with the board of directors through its officers and agents as authorized by a board resolution or by its bylaws.30An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same
expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting
to be an agent thereof but without written authority from the corporation is null and void. The declarations of the
agent alone are generally insufficient to establish the fact or extent of his/her authority.31
By the contract of agency, a person binds himself to render some service or to do something in representation
on behalf of another, with the consent or authority of the latter.32 Consent of both principal and agent is
necessary to create an agency. The principal must intend that the agent shall act for him; the agent must
intend to accept the authority and act on it, and the intention of the parties must find expression either in words
or conduct between them.33
An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his
failure to repudiate the agency knowing that another person is acting on his behalf without authority.
Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his
silence or inaction according to the circumstances.34 Agency may be oral unless the law requires a specific
form.35However, to create or convey real rights over immovable property, a special power of attorney is
necessary.36Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void.37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for
sale, for and in its behalf, the eight parcels of land owned by respondent EC including the improvements
thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of
respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that he had likewise been
authorized by respondent EC to sell the parcels of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who,
in turn, acted on the authority of respondent ESAC, through its Committee for Asia,38 the Board of Directors of
respondent ESAC,39 and the Belgian/Swiss component of the management of respondent ESAC.40 As such,
Adams and Glanville engaged the services of Marquez to offer to sell the properties to prospective buyers.
Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized to offer for sale the
property forP27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners offered to
purchase the property for P20,000,000.00, through Marquez, the latter relayed petitioners offer to Glanville;
Glanville had to send a telex to Delsaux to inquire the position of respondent ESAC to petitioners offer.
However, as admitted by petitioners in their Memorandum, Delsaux was unable to reply immediately to the
telex of Glanville because Delsaux had to wait for confirmation from respondent ESAC.41 When Delsaux finally
responded to Glanville on February 12, 1987, he made it clear that, based on the "Belgian/Swiss decision" the
final offer of respondent ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior
to final liquidation.42 The offer of Delsaux emanated only from the "Belgian/Swiss decision," and not the entire
management or Board of Directors of respondent ESAC. While it is true that petitioners accepted the counteroffer of respondent ESAC, respondent EC was not a party to the transaction between them; hence, EC was
not bound by such acceptance.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind
EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality
but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares
of stocks of respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks
of another, or even all of such shares of stocks, taken alone, will not justify their being treated as one
corporation.43
It bears stressing that in an agent-principal relationship, the personality of the principal is extended through the
facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all
acts which the latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court.44
The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said properties to the
petitioners. A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the
agents; statements as to the extent of his powers; such person must not act negligently but must use
reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority.45 The
settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to prove it.46 In this case, the petitioners failed to
discharge their burden; hence, petitioners are not entitled to damages from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As
gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed, for and in behalf of the
petitioners, that the latter had accepted such offer to sell the land and the improvements thereon. However, we
agree with the ruling of the appellate court that Marquez had no authority to bind respondent EC to sell the
subject properties. A real estate broker is one who negotiates the sale of real properties. His business,
generally speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He
has no authority to bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of
real property does not include an authority to sell.47
Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence of a
principal-agency relationship between it and Glanville or Delsaux. For an agency by estoppel to exist, the
following must be established: (1) the principal manifested a representation of the agents authority or
knowlingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such
representation; (3) relying upon such representation, such third person has changed his position to his
detriment.48 An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the representations predated the action
taken in reliance.49Such proof is lacking in this case. In their communications to the petitioners, Glanville and
Delsaux positively and unequivocally declared that they were acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified the transactions between the petitioners and
respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the various communications
inter se were never submitted to the Board of Directors of respondent EC for ratification.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

G.R. No. L-31061 August 17, 1976

SULO NG BAYAN INC., plaintiff-appellant,
vs.
GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL WATERWORKS & SEWERAGE
AUTHORITY, HACIENDA CARETAS, INC, and REGISTER OF DEEDS OF BULACAN, defendantsappellees.
Hill & Associates Law Offices for appellant.
Araneta, Mendoza & Papa for appellee Gregorio Araneta, Inc.
Carlos, Madarang, Carballo & Valdez for Paradise Farms, Inc.
Leopoldo M. Abellera, Arsenio J. Magpale & Raul G. Bernardo, Office of the Government Corporate Counsel
for appellee National Waterworks & Sewerage Authority.
Candido G. del Rosario for appellee Hacienda Caretas, Inc.

ANTONIO, J.:
The issue posed in this appeal is whether or not plaintiff corporation (non- stock may institute an action in
behalf of its individual members for the recovery of certain parcels of land allegedly owned by said members;
for the nullification of the transfer certificates of title issued in favor of defendants appellees covering the
aforesaid parcels of land; for a declaration of "plaintiff's members as absolute owners of the property" and the
issuance of the corresponding certificate of title; and for damages.
On April 26, 1966, plaintiff-appellant Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First
Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against defendants-appellees to recover the
ownership and possession of a large tract of land in San Jose del Monte, Bulacan, containing an area of
27,982,250 square meters, more or less, registered under the Torrens System in the name of defendantsappellees' predecessors-in-interest. 1 The complaint, as amended on June 13, 1966, specifically alleged that
plaintiff is a corporation organized and existing under the laws of the Philippines, with its principal office and
place of business at San Jose del Monte, Bulacan; that its membership is composed of natural persons
residing at San Jose del Monte, Bulacan; that the members of the plaintiff corporation, through themselves and
their predecessors-in-interest, had pioneered in the clearing of the fore-mentioned tract of land, cultivated the
same since the Spanish regime and continuously possessed the said property openly and public under
concept of ownership adverse against the whole world; that defendant-appellee Gregorio Araneta, Inc.,
sometime in the year 1958, through force and intimidation, ejected the members of the plaintiff corporation fro
their possession of the aforementioned vast tract of land; that upon investigation conducted by the members
and officers of plaintiff corporation, they found out for the first time in the year 1961 that the land in question
"had been either fraudelently or erroneously included, by direct or constructive fraud, in Original Certificate of
Title No. 466 of the Land of Records of the province of Bulacan", issued on May 11, 1916, which title is
fictitious, non-existent and devoid of legal efficacy due to the fact that "no original survey nor plan whatsoever"
appears to have been submitted as a basis thereof and that the Court of First Instance of Bulacan which
issued the decree of registration did not acquire jurisdiction over the land registration case because no notice
of such proceeding was given to the members of the plaintiff corporation who were then in actual possession of
said properties; that as a consequence of the nullity of the original title, all subsequent titles derived therefrom,

such as Transfer Certificate of Title No. 4903 issued in favor of Gregorio Araneta and Carmen Zaragoza, which
was subsequently cancelled by Transfer Certificate of Title No. 7573 in the name of Gregorio Araneta, Inc.,
Transfer Certificate of Title No. 4988 issued in the name of, the National Waterworks & Sewerage Authority
(NWSA), Transfer Certificate of Title No. 4986 issued in the name of Hacienda Caretas, Inc., and another
transfer certificate of title in the name of Paradise Farms, Inc., are therefore void. Plaintiff-appellant
consequently prayed (1) that Original Certificate of Title No. 466, as well as all transfer certificates of title
issued and derived therefrom, be nullified; (2) that "plaintiff's members" be declared as absolute owners in
common of said property and that the corresponding certificate of title be issued to plaintiff; and (3) that
defendant-appellee Gregorio Araneta, Inc. be ordered to pay to plaintiff the damages therein specified.
On September 2, 1966, defendant-appellee Gregorio Araneta, Inc. filed a motion to dismiss the amended
complaint on the grounds that (1) the complaint states no cause of action; and (2) the cause of action, if any, is
barred by prescription and laches. Paradise Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss
based on the same grounds. Appellee National Waterworks & Sewerage Authority did not file any motion to
dismiss. However, it pleaded in its answer as special and affirmative defenses lack of cause of action by the
plaintiff-appellant and the barring of such action by prescription and laches.
During the pendency of the motion to dismiss, plaintiff-appellant filed a motion, dated October 7, 1966, praying
that the case be transferred to another branch of the Court of First Instance sitting at Malolos, Bulacan,
According to defendants-appellees, they were not furnished a copy of said motion, hence, on October 14,
1966, the lower court issued an Order requiring plaintiff-appellant to furnish the appellees copy of said motion,
hence, on October 14, 1966, defendant-appellant's motion dated October 7, 1966 and, consequently, prayed
that the said motion be denied for lack of notice and for failure of the plaintiff-appellant to comply with the Order
of October 14, 1966. Similarly, defendant-appellee paradise Farms, Inc. filed, on December 2, 1966, a
manifestation information the court that it also did not receive a copy of the afore-mentioned of appellant. On
January 24, 1967, the trial court issued an Order dismissing the amended complaint.
On February 14, 1967, appellant filed a motion to reconsider the Order of dismissal on the grounds that the
court had no jurisdiction to issue the Order of dismissal, because its request for the transfer of the case from
the Valenzuela Branch of the Court of First Instance to the Malolos Branch of the said court has been approved
by the Department of Justice; that the complaint states a sufficient cause of action because the subject matter
of the controversy in one of common interest to the members of the corporation who are so numerous that the
present complaint should be treated as a class suit; and that the action is not barred by the statute of
limitations because (a) an action for the reconveyance of property registered through fraud does not prescribe,
and (b) an action to impugn a void judgment may be brought any time. This motion was denied by the trial
court in its Order dated February 22, 1967. From the afore-mentioned Order of dismissal and the Order
denying its motion for reconsideration, plaintiff-appellant appealed to the Court of Appeals.
On September 3, 1969, the Court of Appeals, upon finding that no question of fact was involved in the appeal
but only questions of law and jurisdiction, certified this case to this Court for resolution of the legal issues
involved in the controversy.
I
Appellant contends, as a first assignment of error, that the trial court acted without authority and jurisdiction in
dismissing the amended complaint when the Secretary of Justice had already approved the transfer of the
case to any one of the two branches of the Court of First Instance of Malolos, Bulacan.
Appellant confuses the jurisdiction of a court and the venue of cases with the assignment of cases in the
different branches of the same Court of First Instance. Jurisdiction implies the power of the court to decide a

case, while venue the place of action. There is no question that respondent court has jurisdiction over the
case. The venue of actions in the Court of First Instance is prescribed in Section 2, Rule 4 of the Revised
Rules of Court. The laying of venue is not left to the caprice of plaintiff, but must be in accordance with the
aforesaid provision of the rules. 2The mere fact that a request for the transfer of a case to another branch of the
same court has been approved by the Secretary of Justice does not divest the court originally taking
cognizance thereof of its jurisdiction, much less does it change the venue of the action. As correctly observed
by the trial court, the indorsement of the Undersecretary of Justice did not order the transfer of the case to the
Malolos Branch of the Bulacan Court of First Instance, but only "authorized" it for the reason given by plaintiff's
counsel that the transfer would be convenient for the parties. The trial court is not without power to either grant
or deny the motion, especially in the light of a strong opposition thereto filed by the defendant. We hold that the
court a quo acted within its authority in denying the motion for the transfer the case to Malolos notwithstanding
the authorization" of the same by the Secretary of Justice.
II
Let us now consider the substantive aspect of the Order of dismissal.
In dismissing the amended complaint, the court a quo said:
The issue of lack of cause of action raised in the motions to dismiss refer to the lack of
personality of plaintiff to file the instant action. Essentially, the term 'cause of action' is
composed of two elements: (1) the right of the plaintiff and (2) the violation of such right by the
defendant. (Moran, Vol. 1, p. 111). For these reasons, the rules require that every action must
be prosecuted and defended in the name of the real party in interest and that all persons having
an interest in the subject of the action and in obtaining the relief demanded shall be joined as
plaintiffs (Sec. 2, Rule 3). In the amended complaint, the people whose rights were alleged to
have been violated by being deprived and dispossessed of their land are the members of the
corporation and not the corporation itself. The corporation has a separate. and distinct
personality from its members, and this is not a mere technicality but a matter of substantive law.
There is no allegation that the members have assigned their rights to the corporation or any
showing that the corporation has in any way or manner succeeded to such rights. The
corporation evidently did not have any rights violated by the defendants for which it could seek
redress. Even if the Court should find against the defendants, therefore, the plaintiff corporation
would not be entitled to the reliefs prayed for, which are recoveries of ownership and possession
of the land, issuance of the corresponding title in its name, and payment of damages. Neither
can such reliefs be awarded to the members allegedly deprived of their land, since they are not
parties to the suit. It appearing clearly that the action has not been filed in the names of the real
parties in interest, the complaint must be dismissed on the ground of lack of cause of action. 3
Viewed in the light of existing law and jurisprudence, We find that the trial court correctly dismissed the
amended complaint.
It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity
to be considered as separate and apart from the individual stockholders or members who compose it, and is
not affected by the personal rights, obligations and transactions of its stockholders or members. 4 The property
of the corporation is its property and not that of the stockholders, as owners, although they have equities in it.
Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its
members. 5 Conversely, a corporation ordinarily has no interest in the individual property of its stockholders
unless transferred to the corporation, "even in the case of a one-man corporation. 6 The mere fact that one is

president of a corporation does not render the property which he owns or possesses the property of the
corporation, since the president, as individual, and the corporation are separate similarities. 7 Similarly,
stockholders in a corporation engaged in buying and dealing in real estate whose certificates of stock entitled
the holder thereof to an allotment in the distribution of the land of the corporation upon surrender of their stock
certificates were considered not to have such legal or equitable title or interest in the land, as would support a
suit for title, especially against parties other than the corporation. 8
It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the
persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the ends
of justice. 9 This separate personality of the corporation may be disregarded, or the veil of corporate fiction
pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where
necessary to achieve equity. 10
Thus, when "the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, ... the law will regard the corporation as an association of persons, or in the case of two
corporations, merge them into one, the one being merely regarded as part or instrumentality of the other. 11 The
same is true where a corporation is a dummy and serves no business purpose and is intended only as a blind,
or an alter ego or business conduit for the sole benefit of the stockholders. 12 This doctrine of disregarding the
distinct personality of the corporation has been applied by the courts in those cases when the corporate entity
is used for the evasion of taxes 13 or when the veil of corporate fiction is used to confuse legitimate issue of
employer-employee relationship, 14 or when necessary for the protection of creditors, in which case the veil of
corporate fiction may be pierced and the funds of the corporation may be garnished to satisfy the debts of a
principal stockholder. 15 The aforecited principle is resorted to by the courts as a measure protection for third
parties to prevent fraud, illegality or injustice. 16
It has not been claimed that the members have assigned or transferred whatever rights they may have on the
land in question to the plaintiff corporation. Absent any showing of interest, therefore, a corporation, like
plaintiff-appellant herein, has no personality to bring an action for and in behalf of its stockholders or members
for the purpose of recovering property which belongs to said stockholders or members in their personal
capacities.
It is fundamental that there cannot be a cause of action 'without an antecedent primary legal right conferred' by
law upon a person. 17 Evidently, there can be no wrong without a corresponding right, and no breach of duty by
one person without a corresponding right belonging to some other person. 18 Thus, the essential elements of a
cause of action are legal right of the plaintiff, correlative obligation of the defendant, an act or omission of the
defendant in violation of the aforesaid legal right. 19 Clearly, no right of action exists in favor of plaintiff
corporation, for as shown heretofore it does not have any interest in the subject matter of the case which is
material and, direct so as to entitle it to file the suit as a real party in interest.
III
Appellant maintains, however, that the amended complaint may be treated as a class suit, pursuant to Section
12 of Rule 3 of the Revised Rules of Court.
In order that a class suit may prosper, the following requisites must be present: (1) that the subject matter of
the controversy is one of common or general interest to many persons; and (2) that the parties are so
numerous that it is impracticable to bring them all before the court. 20

Under the first requisite, the person who sues must have an interest in the controversy, common with those for
whom he sues, and there must be that unity of interest between him and all such other persons which would
entitle them to maintain the action if suit was brought by them jointly. 21
As to what constitutes common interest in the subject matter of the controversy, it has been explained in Scott
v. Donald 22 thus:
The interest that will allow parties to join in a bill of complaint, or that will enable the court to
dispense with the presence of all the parties, when numerous, except a determinate number, is
not only an interest in the question, but one in common in the subject Matter of the suit; ... a
community of interest growing out of the nature and condition of the right in dispute; for,
although there may not be any privity between the numerous parties, there is a common title out
of which the question arises, and which lies at the foundation of the proceedings ... [here] the
only matter in common among the plaintiffs, or between them and the defendants, is an interest
in the Question involved which alone cannot lay a foundation for the joinder of parties. There is
scarcely a suit at law, or in equity which settles a Principle or applies a principle to a given state
of facts, or in which a general statute is interpreted, that does not involved a Question in which
other parties are interested. ... (Emphasis supplied )
Here, there is only one party plaintiff, and the plaintiff corporation does not even have an interest in the subject
matter of the controversy, and cannot, therefore, represent its members or stockholders who claim to own in
their individual capacities ownership of the said property. Moreover, as correctly stated by the appellees, a
class suit does not lie in actions for the recovery of property where several persons claim Partnership of their
respective portions of the property, as each one could alleged and prove his respective right in a different way
for each portion of the land, so that they cannot all be held to have Identical title through acquisition
prescription. 23
Having shown that no cause of action in favor of the plaintiff exists and that the action in the lower court cannot
be considered as a class suit, it would be unnecessary and an Idle exercise for this Court to resolve the
remaining issue of whether or not the plaintiffs action for reconveyance of real property based upon
constructive or implied trust had already prescribed.
ACCORDINGLY, the instant appeal is hereby DISMISSED with costs against the plaintiff-appellant.
Fernando, C.J., Barredo, Aquino and Concepcion, Jr., JJ., concur.

[G.R. No. 124715. January 24, 2000]

RUFINA LUY LIM petitioner, vs. COURT OF APPEALS, AUTO TRUCK TBA CORPORATION, SPEED
DISTRIBUTING, INC., ACTIVE DISTRIBUTORS, ALLIANCE MARKETING CORPORATION, ACTION
COMPANY, INC. respondents.
DECISION
BUENA, J.:
May a corporation, in its universality, be the proper subject of and be included in the inventory of the estate of a
deceased person?
Petitioner disputes before us through the instant petition for review on certiorari, the decision[1] of the Court of
Appeals promulgated on 18 April 1996, in CA-GR SP No. 38617, which nullified and set aside the orders dated
04 July 1995[2], 12 September 1995[3] and 15 September 1995[4] of the Regional Trial Court of Quezon City,
Branch 93, sitting as a probate court.
Petitioner Rufina Luy Lim is the surviving spouse of the late Pastor Y. Lim whose estate is the subject of
probate proceedings in Special Proceedings Q-95-23334, entitled, "In Re: Intestate Estate of Pastor Y. Lim
Rufina Luy Lim, represented by George Luy, Petitioner".
Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active
Distributing, Inc. and Action Company are corporations formed, organized and existing under Philippine laws
and which owned real properties covered under the Torrens system.
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving spouse and duly represented by
her nephew George Luy, filed on 17 March 1995, a joint petition[5] for the administration of the estate of Pastor
Y. Lim before the Regional Trial Court of Quezon City.
Private respondent corporations, whose properties were included in the inventory of the estate of Pastor Y.
Lim, then filed a motion[6] for the lifting of lis pendens and motion[7] for exclusion of certain properties from the
estate of the decedent.
In an order[8] dated 08 June 1995, the Regional Trial Court of Quezon City, Branch 93, sitting as a probate
court, granted the private respondents twin motions, in this wise:
"Wherefore, the Register of Deeds of Quezon City is hereby ordered to lift, expunge or delete
the annotation of lis pendens on Transfer Certificates of Title Nos. 116716, 116717, 116718,
116719 and 5182 and it is hereby further ordered that the properties covered by the same titles
as well as those properties by (sic) Transfer Certificate of Title Nos. 613494, 363123, 236236
and 263236 are excluded from these proceedings.
SO ORDERED."
Subsequently, Rufina Luy Lim filed a verified amended petition[9] which contained the following averments:
"3. The late Pastor Y. Lim personally owned during his lifetime the following business entities, to
wit:
Business Entity
X

Address:
X

Alliance Marketing ,Inc.

Block 3, Lot 6, Dacca

BF Homes,
Paraaque,
Metro Manila.
X

Speed Distributing Inc.

910 Barrio Niog,

Aguinaldo Highway,
Bacoor, Cavite.
X

Auto Truck TBA Corp.

2251 Roosevelt Avenue,

Quezon City.
X

Active Distributors, Inc.

Block 3, Lot 6, Dacca BF

Homes, Paraaque,
Metro Manila.
X

Action Company

X
100 20th Avenue

Murphy, Quezon City

or
92-D Mc-Arthur Highway
Valenzuela Bulacan.
"3.1 Although the above business entities dealt and engaged in business with the public as
corporations, all their capital, assets and equity were however, personally owned by the late
Pastor Y Lim. Hence the alleged stockholders and officers appearing in the respective articles of
incorporation of the above business entities were mere dummies of Pastor Y. Lim, and they
were listed therein only for purposes of registration with the Securities and Exchange
Commission.
"4. Pastor Lim, likewise, had Time, Savings and Current Deposits with the following banks: (a)
Metrobank, Grace Park, Caloocan City and Quezon Avenue, Quezon City Branches and (b)
First Intestate Bank (formerly Producers Bank), Rizal Commercial Banking Corporation and in
other banks whose identities are yet to be determined.

"5. That the following real properties, although registered in the name of the above entities, were
actually acquired by Pastor Y. Lim during his marriage with petitioner, to wit:
Corporation
X

Title
X

Location

k. Auto Truck

TCT No. 617726

TBA Corporation

Sto. Domingo
Cainta, Rizal

q. Alliance Marketing

TCT No. 27896

Prance,

Metro Manila
Copies of the above-mentioned Transfer Certificate of Title and/or Tax Declarations are hereto
attached as Annexes "C" to "W".
X

"7. The aforementioned properties and/or real interests left by the late Pastor Y. Lim, are all
conjugal in nature, having been acquired by him during the existence of his marriage with
petitioner.
"8. There are other real and personal properties owned by Pastor Y. Lim which petitioner could
not as yet identify. Petitioner, however will submit to this Honorable Court the identities thereof
and the necessary documents covering the same as soon as possible."
On 04 July 1995, the Regional Trial Court acting on petitioners motion issued an order[10], thus:
"Wherefore, the order dated 08 June 1995 is hereby set aside and the Registry of Deeds of
Quezon City is hereby directed to reinstate the annotation of lis pendens in case said annotation
had already been deleted and/or cancelled said TCT Nos. 116716, 116717, 116718, 116719 and
51282.
Further more (sic), said properties covered by TCT Nos. 613494, 365123, 236256 and 236237
by virtue of the petitioner are included in the instant petition.
SO ORDERED."
On 04 September 1995, the probate court appointed Rufina Lim as special administrator[11] and Miguel Lim and
Lawyer Donald Lee, as co-special administrators of the estate of Pastor Y. Lim, after which letters of
administration were accordingly issued.
In an order[12] dated 12 September 1995, the probate court denied anew private respondents motion for
exclusion, in this wise:
"The issue precisely raised by the petitioner in her petition is whether the corporations are the
mere alter egos or instrumentalities of Pastor Lim, Otherwise (sic) stated, the issue involves the
piercing of the corporate veil, a matter that is clearly within the jurisdiction of this Honorable
Court and not the Securities and Exchange Commission. Thus, in the case of Cease vs. Court
of Appeals, 93 SCRA 483, the crucial issue decided by the regular court was whether the
corporation involved therein was the mere extension of the decedent. After finding in the
affirmative, the Court ruled that the assets of the corporation are also assets of the estate.

A reading of P.D. 902, the law relied upon by oppositors, shows that the SECs exclusive (sic)
applies only to intra-corporate controversy. It is simply a suit to settle the intestate estate of a
deceased person who, during his lifetime, acquired several properties and put up corporations
as his instrumentalities.
SO ORDERED."
On 15 September 1995, the probate court acting on an ex parte motion filed by petitioner, issued an
order[13] the dispositive portion of which reads:
"Wherefore, the parties and the following banks concerned herein under enumerated are hereby
ordered to comply strictly with this order and to produce and submit to the special administrators
, through this Honorable Court within (5) five days from receipt of this order their respective
records of the savings/current accounts/time deposits and other deposits in the names of Pastor
Lim and/or corporations above-mentioned, showing all the transactions made or done
concerning savings /current accounts from January 1994 up to their receipt of this court order.
XXX

XXX

XXX

SO ORDERED."
Private respondent filed a special civil action for certiorari[14], with an urgent prayer for a restraining order or writ
of preliminary injunction, before the Court of Appeals questioning the orders of the Regional Trial Court, sitting
as a probate court.
On 18 April 1996, the Court of Appeals, finding in favor of herein private respondents, rendered the assailed
decision[15], the decretal portion of which declares:
"Wherefore, premises considered, the instant special civil action for certiorari is hereby granted,
The impugned orders issued by respondent court on July 4,1995 and September 12, 1995 are
hereby nullified and set aside. The impugned order issued by respondent on September 15,
1995 is nullified insofar as petitioner corporations" bank accounts and records are concerned.
SO ORDERED."
Through the expediency of Rule 45 of the Rules of Court, herein petitioner Rufina Luy Lim now comes before
us with a lone assignment of error[16]:
"The respondent Court of Appeals erred in reversing the orders of the lower court which merely
allowed the preliminary or provisional inclusion of the private respondents as part of the estate
of the late deceased (sic) Pastor Y. Lim with the respondent Court of Appeals arrogating unto
itself the power to repeal, to disobey or to ignore the clear and explicit provisions of Rules
81,83,84 and 87 of the Rules of Court and thereby preventing the petitioner, from performing her
duty as special administrator of the estate as expressly provided in the said Rules."
Petitioners contentions tread on perilous grounds.
In the instant petition for review, petitioner prays that we affirm the orders issued by the probate court which
were subsequently set aside by the Court of Appeals.
Yet, before we delve into the merits of the case, a review of the rules on jurisdiction over probate proceedings
is indeed in order.
The provisions of Republic Act 7691[17], which introduced amendments to Batas Pambansa Blg. 129, are
pertinent:

"Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby amended to read as follows:
Section 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive jurisdiction:
xxx

xxx

xxx

(4) In all matters of probate, both testate and intestate, where the gross value of the estate
exceeds One Hundred Thousand Pesos (P100,000) or, in probate matters in Metro Manila,
where such gross value exceeds Two Hundred Thousand Pesos (P200,000);
xxx

xxx

xxx

Section 3. Section 33 of the same law is hereby amended to read as follows:

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases.-Metropolitan Trial Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts shall exercise:
1.
Exclusive original jurisdiction over civil actions and probate
proceedings, testate and intestate, including the grant of provisional remedies in
proper cases, where the value of the personal property, estate or amount of the
demand does not exceed One Hundred Thousand Pesos(P100,000) or, in Metro
Manila where such personal property, estate or amount of the demand does not
exceed Two Hundred Thousand Pesos (P200,000), exclusive of interest,
damages of whatever kind, attorneys fees, litigation expenses and costs, the
amount of which must be specifically alleged, Provided, that interest, damages of
whatever kind, attorneys, litigation expenses and costs shall be included in the
determination of the filing fees, Provided further, that where there are several
claims or causes of actions between the same or different parties, embodied in
the same complaint, the amount of the demand shall be the totality of the claims
in all the causes of action, irrespective of whether the causes of action arose out
of the same or different transactions;
xxx

xxx

xxx"

Simply put, the determination of which court exercises jurisdiction over matters of probate depends upon the
gross value of the estate of the decedent.
As to the power and authority of the probate court, petitioner relies heavily on the principle that a probate court
may pass upon title to certain properties, albeit provisionally, for the purpose of determining whether a certain
property should or should not be included in the inventory.
In a litany of cases, We defined the parameters by which the court may extend its probing arms in the
determination of the question of title in probate proceedings.
This Court, in PASTOR, JR. vs. COURT OF APPEALS,[18] held:
"X X X As a rule, the question of ownership is an extraneous matter which the probate court
cannot resolve with finality. Thus, for the purpose of determining whether a certain property
should or should not be included in the inventory of estate properties, the Probate Court may
pass upon the title thereto, but such determination is provisional, not conclusive, and is subject
to the final decision in a separate action to resolve title."
We reiterated the rule in PEREIRA vs. COURT OF APPEALS[19]:

"X X X The function of resolving whether or not a certain property should be included in the
inventory or list of properties to be administered by the administrator is one clearly within the
competence of the probate court. However, the courts determination is only provisional in
character, not conclusive, and is subject to the final decision in a separate action which may be
instituted by the parties."
Further, in MORALES vs. CFI OF CAVITE[20] citing CUIZON vs. RAMOLETE[21], We made an exposition on
the probate courts limited jurisdiction:
"It is a well-settled rule that a probate court or one in charge of proceedings whether testate or
intestate cannot adjudicate or determine title to properties claimed to be a part of the estate and
which are equally claimed to belong to outside parties. All that the said court could do as
regards said properties is to determine whether they should or should not be included in the
inventory or list of properties to be administered by the administrator. If there is no dispute, well
and good; but if there is, then the parties, the administrator and the opposing parties have to
resort to an ordinary action for a final determination of the conflicting claims of title because the
probate court cannot do so."
Again, in VALERA vs. INSERTO[22], We had occasion to elucidate, through Mr. Justice Andres Narvasa[23]:
"Settled is the rule that a Court of First Instance (now Regional Trial Court), acting as a probate
court, exercises but limited jurisdiction, and thus has no power to take cognizance of and
determine the issue of title to property claimed by a third person adversely to the decedent,
unless the claimant and all other parties having legal interest in the property consent, expressly
or impliedly, to the submission of the question to the probate court for adjudgment, or the
interests of third persons are not thereby prejudiced, the reason for the exception being that the
question of whether or not a particular matter should be resolved by the court in the exercise of
its general jurisdiction or of its limited jurisdiction as a special court (e.g. probate, land
registration, etc.), is in reality not a jurisdictional but in essence of procedural one, involving a
mode of practice which may be waived. x x x
x x x. These considerations assume greater cogency where, as here, the Torrens title is
not in the decedents name but in others, a situation on which this Court has already had
occasion to rule x x x."(emphasis Ours)
Petitioner, in the present case, argues that the parcels of land covered under the Torrens system and
registered in the name of private respondent corporations should be included in the inventory of the estate of
the decedent Pastor Y. Lim, alleging that after all the determination by the probate court of whether these
properties should be included or not is merely provisional in nature, thus, not conclusive and subject to a final
determination in a separate action brought for the purpose of adjudging once and for all the issue of title.
Yet, under the peculiar circumstances, where the parcels of land are registered in the name of private
respondent corporations, the jurisprudence pronounced in BOLISAY vs., ALCID[24] is of great essence and
finds applicability, thus:
"It does not matter that respondent-administratrix has evidence purporting to support her claim
of ownership, for, on the other hand, petitioners have a Torrens title in their favor, which under
the law is endowed with incontestability until after it has been set aside in the manner indicated
in the law itself, which, of course, does not include, bringing up the matter as a mere incident in
special proceedings for the settlement of the estate of deceased persons. x x x"
"x x x. In regard to such incident of inclusion or exclusion, We hold that if a property covered by
Torrens title is involved, the presumptive conclusiveness of such title should be given due
weight, and in the absence of strong compelling evidence to the contrary, the holder thereof
should be considered as the owner of the property in controversy until his title is nullified or

modified in an appropriate ordinary action, particularly, when as in the case at bar, possession
of the property itself is in the persons named in the title. x x x"
A perusal of the records would reveal that no strong compelling evidence was ever presented by petitioner to
bolster her bare assertions as to the title of the deceased Pastor Y. Lim over the properties. Even so, P.D.
1529, otherwise known as, " The Property Registration Decree", proscribes collateral attack on Torrens Title,
hence:
"xxx

xxx

xxx

Section 48. Certificate not subject to collateral attack.

- A certificate of title shall not be subject to collateral attack. It cannot be altered, modified or
cancelled except in a direct proceeding in accordance with law."
In CUIZON vs. RAMOLETE, where similarly as in the case at bar, the property subject of the controversy was
duly registered under the Torrens system, We categorically stated:
"x x x Having been apprised of the fact that the property in question was in the possession of
third parties and more important, covered by a transfer certificate of title issued in the name of
such third parties, the respondent court should have denied the motion of the respondent
administrator and excluded the property in question from the inventory of the property of the
estate. It had no authority to deprive such third persons of their possession and ownership of
the property. x x x"
Inasmuch as the real properties included in the inventory of the estate of the late Pastor Y. Lim are in the
possession of and are registered in the name of private respondent corporations, which under the law possess
a personality separate and distinct from their stockholders, and in the absence of any cogency to shred the veil
of corporate fiction, the presumption of conclusiveness of said titles in favor of private respondents should
stand undisturbed.
Accordingly, the probate court was remiss in denying private respondents motion for exclusion. While it may
be true that the Regional Trial Court, acting in a restricted capacity and exercising limited jurisdiction as a
probate court, is competent to issue orders involving inclusion or exclusion of certain properties in the inventory
of the estate of the decedent, and to adjudge, albeit, provisionally the question of title over properties, it is no
less true that such authority conferred upon by law and reinforced by jurisprudence, should be exercised
judiciously, with due regard and caution to the peculiar circumstances of each individual case.
Notwithstanding that the real properties were duly registered under the Torrens system in the name of private
respondents, and as such were to be afforded the presumptive conclusiveness of title, the probate court
obviously opted to shut its eyes to this gleamy fact and still proceeded to issue the impugned orders.
By its denial of the motion for exclusion, the probate court in effect acted in utter disregard of the presumption
of conclusiveness of title in favor of private respondents. Certainly, the probate court through such brazen act
transgressed the clear provisions of law and infringed settled jurisprudence on this matter.
Moreover, petitioner urges that not only the properties of private respondent corporations are properly part of
the decedents estate but also the private respondent corporations themselves. To rivet such flimsy contention,
petitioner cited that the late Pastor Y. Lim during his lifetime, organized and wholly-owned the five corporations,
which are the private respondents in the instant case.[25] Petitioner thus attached as Annexes "F"[26] and
"G"[27] of the petition for review affidavits executed by Teresa Lim and Lani Wenceslao which among others,
contained averments that the incorporators of Uniwide Distributing, Inc. included on the list had no actual
participation in the organization and incorporation of the said corporation. The affiants added that the persons
whose names appeared on the articles of incorporation of Uniwide Distributing, Inc., as incorporators thereof,

are mere dummies since they have not actually contributed any amount to the capital stock of the corporation
and have been merely asked by the late Pastor Y. Lim to affix their respective signatures thereon.
It is settled that a corporation is clothed with personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of the persons composing it. It may not be held liable
for the personal indebtedness of its stockholders or those of the entities connected with it.[28]
Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate from its
stockholders or members. In the same vein, a corporation by legal fiction and convenience is an entity shielded
by a protective mantle and imbued by law with a character alien to the persons comprising it.
Nonetheless, the shield is not at all times invincible. Thus, in FIRST PHILIPPINE INTERNATIONAL BANK vs.
COURT OF APPEALS[29], We enunciated:
"x x x When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement
or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which
the law covers and isolates the corporation from the members or stockholders who compose it
will be lifted to allow for its consideration merely as an aggregation of individuals. x x x"
Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction.[30]
The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter
ego of a person or of another corporation. Where badges of fraud exist, where public convenience is defeated;
where a wrong is sought to be justified thereby, the corporate fiction or the notion of legal entity should come to
naught.[31]
Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as
follows: 1) Control, not mere majority or complete stock control, but complete domination, not only of finances
but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own; (2) Such control must have been
used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and (3) The aforesaid control and
breach of duty must proximately cause the injury or unjust loss complained of. The absence of any of these
elements prevent "piercing the corporate veil".[32]
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities.[33]
Moreover, to disregard the separate juridical personality of a corporation, the wrong-doing must be clearly and
convincingly established. It cannot be presumed.[34]
Granting arguendo that the Regional Trial Court in this case was not merely acting in a limited capacity as a
probate court, petitioner nonetheless failed to adduce competent evidence that would have justified the court to
impale the veil of corporate fiction. Truly, the reliance reposed by petitioner on the affidavits executed by Teresa
Lim and Lani Wenceslao is unavailing considering that the aforementioned documents possess no weighty
probative value pursuant to the hearsay rule. Besides it is imperative for us to stress that such affidavits are
inadmissible in evidence inasmuch as the affiants were not at all presented during the course of the
proceedings in the lower court. To put it differently, for this Court to uphold the admissibility of said documents
would be to relegate from Our duty to apply such basic rule of evidence in a manner consistent with the law
and jurisprudence.
Our pronouncement in PEOPLE BANK AND TRUST COMPANY vs. LEONIDAS[35] finds pertinence:

"Affidavits are classified as hearsay evidence since they are not generally prepared by the
affiant but by another who uses his own language in writing the affiants statements, which may
thus be either omitted or misunderstood by the one writing them. Moreover, the adverse party is
deprived of the opportunity to cross-examine the affiants. For this reason, affidavits are
generally rejected for being hearsay, unless the affiant themselves are placed on the witness
stand to testify thereon."
As to the order[36] of the lower court, dated 15 September 1995, the Court of Appeals correctly observed that
the Regional Trial Court, Branch 93 acted without jurisdiction in issuing said order; The probate court had no
authority to demand the production of bank accounts in the name of the private respondent corporations.
WHEREFORE, in view of the foregoing disquisitions, the instant petition is hereby DISMISSED for lack of merit
and the decision of the Court of Appeals which nullified and set aside the orders issued by the Regional Trial
Court, Branch 93, acting as a probate court, dated 04 July 1995 and 12 September 1995 is AFFIRMED.
SO ORDERED.

G.R. No. 152347

June 21, 2006

UNION BANK OF THE PHILIPPINES, Petitioner,

vs.
SPS. ALFREDO ONG AND SUSANA ONG and JACKSON LEE, Respondents.
DECISION
GARCIA, J.:
By this petition for review under Rule 45 of the Rules of Court, petitioner Union Bank of the Philippines (Union
Bank) seeks to set aside the decision1 dated December 5, 2001 of the Court of Appeals (CA) in CA-G.R. No.
66030 reversing an earlier decision of the Regional Trial Court (RTC) of Pasig City in Civil Case No. 61601, a
suit thereat commenced by the petitioner against the herein respondents for annulment or rescission of sale in
fraud of creditors.
The facts:
Herein respondents, the spouses Alfredo Ong and Susana Ong, own the majority capital stock of Baliwag
Mahogany Corporation (BMC). On October 10, 1990, the spouses executed a Continuing Surety Agreement in
favor of Union Bank to secure a P40,000,000.00-credit line facility made available to BMC. The agreement
expressly stipulated a solidary liability undertaking.
On October 22, 1991, or about a year after the execution of the surety agreement, the spouses Ong,
forP12,500,000.00, sold their 974-square meter lot located in Greenhills, San Juan, Metro Manila, together with
the house and other improvements standing thereon, to their co-respondent, Jackson Lee (Lee, for short). The
following day, Lee registered the sale and was then issued Transfer Certificate of Title (TCT) No. 4746-R. At
about this time, BMC had already availed itself of the credit facilities, and had in fact executed a total of twentytwo (22) promissory notes in favor of Union Bank.
On November 22, 1991, BMC filed a Petition for Rehabilitation and for Declaration of Suspension of Payments
with the Securities and Exchange Commission (SEC). To protect its interest, Union Bank lost no time in filing
with the RTC of Pasig City an action for rescission of the sale between the spouses Ong and Jackson Lee for
purportedly being in fraud of creditors.
In its complaint, docketed as Civil Case No. 61601 and eventually raffled to Branch 157 of the court, Union
Bank assailed the validity of the sale, alleging that the spouses Ong and Lee entered into the transaction in
question for the lone purpose of fraudulently removing the property from the reach of Union Bank and other
creditors. The fraudulent design, according to Union Bank, is evidenced by the following circumstances: (1)
insufficiency of consideration, the purchase price of P12,500,000.00 being below the fair market value of the
subject property at that time; (2) lack of financial capacity on the part of Lee to buy the property at that time
since his gross income for the year 1990, per the credit investigation conducted by the bank, amounted to
only P346,571.73; and (3) Lee did not assert absolute ownership over the property as he allowed the spouses
Ong to retain possession thereof under a purported Contract of Lease dated October 29, 1991.
Answering, herein respondents, as defendants a quo, maintained, in the main, that both contracts of sale and
lease over the Greenhills property were founded on good and valid consideration and executed in good faith.
They also scored Union Bank for forum shopping, alleging that the latter is one of the participating creditors in
BMCs petition for rehabilitation.

Issues having been joined, trial followed. On September 27, 1999, the trial court, applying Article 1381 of the
Civil Code and noting that the evidence on record "present[s] a holistic combination of circumstances distinctly
characterized by badges of fraud," rendered judgment for Union Bank, the Deed of Sale executed on October
22, 1991 by the spouses Ong in favor of Lee being declared null and void.
Foremost of the circumstances adverted to relates to the execution of the sale against the backdrop of the
spouses Ong, as owners of 70% of BMC's stocks, knowing of the companys insolvency. This knowledge was
the reason why, according to the court, the spouses Ong disposed of the subject property leaving the bank
without recourse to recover BMC's indebtedness. The trial court also made reference to the circumstances
which Union Bank mentioned in its complaint as indicia of conveyance in fraud of creditors.
Therefrom, herein respondents interposed an appeal to the CA which docketed their recourse as CA-G.R. No.
66030.
In its Decision dated December 5, 2001, the CA reversed and set aside the trial court's ruling, observing that
the contract of sale executed by the spouses Ong and Lee, being complete and regular on its face, is clothed
with the prima facie presumption of regularity and legality. Plodding on, the appellate court said:
In order that rescission of a contract made in fraud of creditors may be decreed, it is necessary that the
complaining creditors must prove that they cannot recover in any other manner what is due them. xxx.
There is no gainsaying that the basis of liability of the appellant spouses in their personal capacity to Union
Bank is the Continuing Surety Agreement they have signed on October 10, 1990. However, the real debtor
of Union Bank is BMC, which has a separate juridical personality from appellants Ong. Granting that BMC was
already insolvent at the time of the sale, still, there was no showing that at the time BMC filed a petition for
suspension of payment that appellants Ong were themselves bankrupt. In the case at bench, no attempt was
made by Union Bank, not even a feeble or half-hearted one, to establish that appellants spouses have no other
property from which Union Bank, as creditor of BMC, could obtain payment. While appellants Ong may be
independently liable directly to Union Bank under the Continuing Surety Agreement, all that Union Bank tried to
prove was that BMC was insolvent at the time of the questioned sale. No competent evidence was adduced
showing that appellants Ong had no leviable assets other than the subject property that would justify challenge
to the transaction.2
Petitioner moved for a reconsideration of the above decision but its motion was denied by the appellate court in
its resolution of February 21, 2002.3
Hence, petitioners present recourse on its submission that the appellate court erred:
I. xxx WHEN IT CONSIDERED THAT THE SALE TRANSACTION BETWEEN [ RESPONDENTS SPOUSES
ONG AND LEE] ENJOYS THE PRESUMPTION OF REGULARITY AND LEGALITY AS THERE EXISTS ALSO
A PRESUMPTION THAT THE SAID SALE WAS ENTERED IN FRAUD OF CREDITORS. PETITIONER
THEREFORE NEED NOT PROVE THAT RESPONDENTS SPOUSES ONG DID NOT LEAVE SUFFICIENT
ASSETS TO PAY THEIR CREDITORS. BUT EVEN THEN, PETITIONER HAS PROVEN THAT THE
SPOUSES HAVE NO OTHER ASSETS.
II. IN CONCLUDING, ASSUMING EX-GRATIA ARGUMENTI THAT THE SALE BETWEEN DEFENDANTAPPELLANTS ENJOY THE PRESUMPTION OF REGULARITY AND LEGALITY, THAT THE EVIDENCE
ADDUCED BY THE PETITIONER WAS NOT SUFFICIENT TO OVERCOME THE PRESUMPTION.

III. xxx IN FINDING THAT IT WAS [RESPONDENT] LEE WHO HAS SUFFICIENTLY PROVEN THAT THERE
WAS A VALID AND SUFFICIENT CONSIDERATION FOR THE SALE.
IV. xxx IN NOT FINDING THAT JACKSON LEE WAS IN BAD FAITH WHEN HE PURCHASED THE
PROPERTY.4
Petitioner maintains, citing China Banking Corporation vs. Court of Appeals,5 that the sale in question, having
been entered in fraud of creditor, is rescissible. In the same breath, however, petitioner would fault the CA for
failing to consider that the sale between the Ongs and Lee is presumed fraudulent under Section 70 of Act No.
1956, as amended, or the Insolvency Law. Elaborating on this point, petitioner states that the subject sale
occurred thirty (30) days prior to the filing by BMC of a petition for suspension of payment before the SEC, thus
rendering the sale not merely rescissible but absolutely void.
We resolve to deny the petition.
In effect, the determinative issue tendered in this case resolves itself into the question of whether or not the
Ong-Lee contract of sale partakes of a conveyance to defraud Union Bank. Obviously, this necessitates an
inquiry into the facts and this Court eschews factual examination in a petition for review under Rule 45 of the
Rules of Court, save when, as in the instant case, a clash between the factual findings of the trial court and
that of the appellate court exists,6 among other exceptions.
As between the contrasting positions of the trial court and the CA, that of the latter commends itself for
adoption, being more in accord with the evidence on hand and the laws applicable thereto.
Essentially, petitioner anchors its case on Article 1381 of the Civil Code which lists as among the rescissible
contracts "[T]hose undertaken in fraud of creditors when the latter cannot in any other manner collect the claim
due them."
Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. They
should not be confused with those entered into without such mal-intent, even if, as a direct consequence
thereof, the creditor may suffer some damage. In determining whether or not a certain conveying contract is
fraudulent, what comes to mind first is the question of whether the conveyance was a bona fide transaction or
a trick and contrivance to defeat creditors.7 To creditors seeking contract rescission on the ground of fraudulent
conveyance rest the onus of proving by competent evidence the existence of such fraudulent intent on the part
of the debtor, albeit they may fall back on the disputable presumptions, if proper, established under Article 1387
of the Code.8
In the present case, respondent spouses Ong, as the CA had determined, had sufficiently established the
validity and legitimacy of the sale in question. The conveying deed, a duly notarized document, carries with it
the presumption of validity and regularity. Too, the sale was duly recorded and annotated on the title of the
property owners, the spouses Ong. As the transferee of said property, respondent Lee caused the transfer of
title to his name.
There can be no quibbling about the transaction being supported by a valid and sufficient consideration.
Respondent Lees account, while on the witness box, about this angle of the sale was categorical and
straightforward. An excerpt of his testimony:
Atty. De Jesus :

Before you prepared the consideration of this formal offer, as standard operating procedure of buy and sell,
what documents were prepared?
xxx xxx xxx
Jackson Lee:
A. There is a downpayment.
Q. And how much was the downpayment?
A. P2,500,000.00.
Q. Was that downpayment covered by a receipt signed by the seller?
A. Yes, Sir, P500,000.00 and P2,000,000.00
xxx xxx xxx
Q. Are you referring to the receipt dated October 19, 1991, how about the other receipt dated October 21,
1991?
A. Yes, Sir, this is the same receipt.
xxx xxx xxx
Q. Considering that the consideration of this document is for P12,000,000.00 and you made mention only
ofP2,500,000.00, covered by the receipts, do you have evidence to show that, finally, Susana Ong received the
balance of P10,000,000.00?
A. Yes, Sir.
Q. Showing to you a receipt denominated as Acknowledgement Receipt, dated October 25, 1991, are you
referring to this receipt to cover the balance of P10,000,000.00?
A. Yes, sir.9
The foregoing testimony readily proves that money indeed changed hands in connection with the sale of the
subject property. Respondent Lee, as purchaser, paid the stipulated contract price to the spouses Ong, as
vendors. Receipts presented in evidence covered and proved such payment. Accordingly, any suggestion
negating payment and receipt of valuable consideration for the subject conveyance, or worse, that the sale
was fictitious must simply be rejected.
In a bid to attach a badge of fraud on the transaction, petitioner raises the issue of inadequate consideration,
alleging in this regard that only P12,500,000.00 was paid for property having, during the period material, a fair
market value of P14,500,000.00.
We do not agree.

The existence of fraud or the intent to defraud creditors cannot plausibly be presumed from the fact that the
price paid for a piece of real estate is perceived to be slightly lower, if that really be the case, than its market
value. To be sure, it is logical, even expected, for contracting minds, each having an interest to protect, to
negotiate on the price and other conditions before closing a sale of a valuable piece of land. The negotiating
areas could cover various items. The purchase price, while undeniably an important consideration, is doubtless
only one of them. Thus, a scenario where the price actually stipulated may, as a matter of fact, be lower than
the original asking price of the vendor or the fair market value of the property, as what perhaps happened in
the instant case, is not out of the ordinary, let alone indicative of fraudulent intention. That the spouses Ong
acquiesced to the price ofP12,500,000.00, which may be lower than the market value of the house and lot at
the time of alienation, is certainly not an unusual business phenomenon.
Lest it be overlooked, the disparity between the price appearing in the conveying deed and what the petitioner
regarded as the real value of the property is not as gross to support a conclusion of fraud. What is more, one
Oliver Morales, a licensed real estate appraiser and broker, virtually made short shrift of petitioners claim of
gross inadequacy of the purchase price. Mr. Morales declared that there exists no gross disparity between the
market value of the subject property and the price mentioned in the deed as consideration. He explained why:
ATTY. EUFEMIO:
Q. I am showing to you the said two (2) exhibits Mr. Morales and I would like you to go over the terms and
conditions stated therein and as an expert in real estate appraiser (sic) and also as a real estate broker, can
you give this Honorable Court your considered opinion whether the consideration stated
therein P12,500,000.00 in the light of all terms and conditions of the said Deed of Absolute Sale and Offer to
Purchase could be deemed fair and reasonable?
xxx xxx xxx
MR. MORALES:
A. My opinion generally a Deed of Absolute Sale indicated prescribed not only the amount of the consideration.
There are also other expenses involved in the sales. I do not see here other payment of who takes care of
capital gains stocks (sic) in this Deed of Sale neither who shouldered the documentary stamps or even transfer
tax. That is my comment regarding this.
Q. Precisely Mr. Witness we have also shown to you the Offer to Purchase which has been marked as Exhibit
"9" as to the terms which we are asking?
xxx xxx xxx
A. Well, it says here in item C of the conditions the Capital Gains Stocks (sic), documentary stamps, transfer
tax registration and brokers fee for the buyers account. I do not know how much is this worth. If at all in
condition (sic) to the 12.5 million which is the selling price, may I, therefore aside (sic) how much is the total
cost pertaining to this. The capital gains tax on (sic), documentary stamps, transfer tax are all computed on the
basis of the consideration which is P12.5 M, the capital gain stocks (sic) is 5%, 5% of 12.5 M.
xxx xxx xxx
Yes sir if the 5% capital gains tax and documentary stamps respectively shall be added to the 12.5 Million
before the inclusion of the transfer tax, the amount will be already in the vicinity of P13,250.000.

Q. With such consideration Mr. Witness and in the light of the terms and conditions in the said Offer to
Purchase and Deed of Absolute Sale could you give your opinion as to whether the consideration is fair and
reasonable.
xxx xxx xxx
A. With our proposal of P14.5 M as compared now to P13,250,000.00 may I give my opinion that generally
there will be two appraisers. In fairness to the situation, they should not vary by as much as 7% down so we
are playing at a variance actually of about 15%. In my experience in this profession for the last 27 years as I
have said in fairness if there is another appraisal done by another person, that kind of difference is very
marginal should at least indicate the fairness of the property and so therefore the only way to find out is to
determine the difference between the P14.5 M and the P13,250,000.00. My computation indicates that it is
close to 10% something like that difference. What is the question again?
Q. Whether it is fair and reasonable under the circumstances.
A. I have answered already the question and I said maximum of 15%.
Q. So based on your computation this is about 10% which is fair and reasonable.
A That is right sir.10
Withal, the consideration of the sale is fair and reasonable as would justify the conclusion that the sale is
undoubtedly a true and genuine conveyance to which the parties thereto are irrevocably and undeniably
bound.
It may be stressed that, when the validity of sales contract is in issue, two veritable presumptions are
relevant:first, that there was sufficient consideration of the contract11 ; and, second, that it was the result of a
fair and regular private transaction.12 If shown to hold, these presumptions infer prima facie the transaction's
validity, except that it must yield to the evidence adduced13 which the party disputing such presumptive validity
has the burden of overcoming. Unfortunately for the petitioner, it failed to discharge this burden. Its bare
allegation respecting the sale having been executed in fraud of creditors and without adequate consideration
cannot, without more, prevail over the respondents' evidence which more than sufficiently supports a
conclusion as to the legitimacy of the transaction and the bona fides of the parties.
Parenthetically, the rescissory action to set aside contracts in fraud of creditors is accion pauliana, essentially a
subsidiary remedy accorded under Article 1383 of the Civil Code which the party suffering damage can avail of
only when he has no other legal means to obtain reparation for the same.14 In net effect, the provision applies
only when the creditor cannot recover in any other manner what is due him.
It is true that respondent spouses, as surety for BMC, bound themselves to answer for the latters debt.
Nonetheless, for purposes of recovering what the eventually insolvent BMC owed the bank, it behooved the
petitioner to show that it had exhausted all the properties of the spouses Ong. It does not appear in this case
that the petitioner sought other properties of the spouses other than the subject Greenhills property. The CA
categorically said so. Absent proof, therefore, that the spouses Ong had no other property except their
Greenhills home, the sale thereof to respondent Lee cannot simplistically be considered as one in fraud of
creditors.

Neither was evidence adduced to show that the sale in question peremptorily deprived the petitioner of means
to collect its claim against the Ongs. Where a creditor fails to show that he has no other legal recourse to
obtain satisfaction for his claim, then he is not entitled to the rescission asked.15
For a contract to be rescinded for being in fraud of creditors, both contracting parties must be shown to have
acted maliciously so as to prejudice the creditors who were prevented from collecting their claims.16 Again, in
this case, there is no evidence tending to prove that the spouses Ong and Lee were conniving cheats. In fact,
the petitioner did not even attempt to prove the existence of personal closeness or business and professional
interdependence between the spouses Ong and Lee as to cast doubt on their true intent in executing the
contract of sale. With the view we take of the evidence on record, their relationship vis--vis the subject
Greenhills property was no more than one between vendor and vendee dealing with each other for the first
time. Any insinuation that the two colluded to gyp petitioner bank is to read in a relationship something which,
from all indications, appears to be purely business.
It cannot be overemphasized that rescission is generally unavailing should a third person, acting in good faith,
is in lawful possession of the property,17 that is to say, he is protected by law against a suit for rescission by the
registration of the transfer to him in the registry.
As recited earlier, Lee was - and may still be - in lawful possession of the subject property as the transfer to
him was by virtue of a presumptively valid onerous contract of sale. His possession is evidenced by no less
than a certificate of title issued him by the Registry of Deeds of San Juan, Metro Manila, after the usual
registration of the corresponding conveying deed of sale. On the other hand, the bona fides of his acquisition
can be deduced from his conduct and outward acts previous to the sale. As testified to by him and duly noted
by the CA, respondent Lee undertook what amounts to due diligence on the possible defects in the title of the
Ongs before proceeding with the sale. As it were, Lee decided to buy the property only after being satisfied of
the absence of such defects.18
Time and again, the Court has held that one dealing with a registered parcel of land need not go beyond the
certificate of title as he is charged with notice only of burdens which are noted on the face of the register or on
the certificate of title.19 The Continuing Surety Agreement, it ought to be particularly pointed out, was never
recorded nor annotated on the title of spouses Ong. There is no evidence extant in the records to show that
Lee had knowledge, prior to the subject sale, of the surety agreement adverted to. In fine, there is nothing to
remotely suggest that the purchase of the subject property was characterized by anything other than good
faith.
Petitioner has made much of respondent Lee not taking immediate possession of the property after the sale,
stating that such failure is an indication of his participation in the fraudulent scheme to prejudice petitioner
bank.
We are not persuaded.
Lee, it is true, allowed the respondent spouses to continue occupying the premises even after the sale. This
development, however, is not without basis or practical reason. The spouses' continuous possession of the
property was by virtue of a one-year lease20 they executed with respondent Lee six days after the sale. As
explained by the respondent spouses, they insisted on the lease arrangement as a condition for the sale in
question. And pursuant to the lease contract aforementioned, the respondent Ongs paid and Lee collected
rentals at the rate of P25,000.00 a month. Contrary thus to the petitioners asseveration, respondent Lee, after
the sale, exercised acts of dominion over the said property and asserted his rights as the new owner. So, when
the respondent spouses continued to occupy the property after its sale, they did so as mere tenants. While the
failure of the vendee to take exclusive possession of the property is generally recognized as a badge of fraud,

the same cannot be said here in the light of the existence of what appears to be a genuine lessor-lessee
relationship between the spouses Ong and Lee. To borrow from Reyes vs. Court of Appeals,21 possession may
be exercised in ones own name or in the name of another; an owner of a piece of land has possession, either
when he himself physically occupies the same or when another person who recognizes his right as owner is in
such occupancy.
Petitioners assertion regarding respondent Lees lack of financial capacity to acquire the property in question
since his income in 1990 was only P346,571.73 is clearly untenable. Assuming for argument that petitioner got
its figure right, it is clearly incorrect to measure ones purchasing capacity with ones income at a given period.
But the more important consideration in this regard is the uncontroverted fact that respondent Lee paid the
purchase price of said property. Where he sourced the needed cash is, for the nonce, really of no moment.
The cited case of China Banking22 cannot plausibly provide petitioner with a winning card. In that case, the
Court, applying Article 1381 (3) of the Civil Code, rescinded an Assignment of Rights to Redeem owing to the
failure of the assignee to overthrow the presumption that the said conveyance/assignment is fraudulent. In
turn, the presumption was culled from Article 1387, par. 2, of the Code pertinently providing that "[A]lienation by
onerous title are also presumed fraudulent when made by persons against whom some judgment has been
rendered in any instance or some writ of attachment has been issued."
Indeed, when the deed of assignment was executed in China Banking, the assignor therein already faced at
that time an adverse judgment. In the same case, moreover, the Court took stock of other signs of fraud which
tainted the transaction therein and which are, significantly, not obtaining in the instant case. We refer, firstly, to
the element of kinship, the assignor, Alfonso Roxas Chua, being the father of the assignee, Paulino. Secondly,
Paulino admitted knowing his father to be insolvent. Hence, the Court, rationalizing the rescission of the
assignment of rights, made the following remarks:
The mere fact that the conveyance was founded on valuable consideration does not necessarily negate the
presumption of fraud under Article 1387 of the Civil Code. There has to be valuable consideration and the
transaction must have been made bona fide.23
There lies the glaring difference with the instant case.
Here, the existence of fraud cannot be presumed, or, at the very least, what were perceived to be badges of
fraud have been proven to be otherwise. And, unlike Alfonso Roxas Chua in China Banking, a judgment has
not been rendered against respondent spouses Ong or that a writ of attachment has been issued against them
at the time of the disputed sale.
In a last-ditch attempt to resuscitate a feeble cause, petitioner cites Section 70 of the Insolvency Law which,
unlike the invoked Article 1381 of the Civil Code that deals with a valid but rescissible contract, treats of a
contractual infirmity resulting in nullity no less of the transaction in question. Insofar as pertinent, Section 70 of
the Insolvency Law provides:
Sec. 70. If any debtor, being insolvent, or in contemplation of insolvency, within thirty days before the filing of a
petition by or against him, with a view to giving a preference to any creditor or person having a claim against
him xxx makes any xxx sale or conveyance of any part of his property, xxx such xxx sale, assignment or
conveyance is void, and the assignee, or the receiver, may recover the property or the value thereof, as assets
of such insolvent debtor. xxx. Any payment, pledge, mortgage, conveyance, sale, assignment, or transfer of
property of whatever character made by the insolvent within one (1) month before the filing of a petition in
insolvency by or against him, except for a valuable pecuniary consideration made in good faith shall be
void. xxx. (Emphasis added)

Petitioner avers that the Ong-Lee sales contract partakes of a fraudulent transfer and is null and void in
contemplation of the aforequoted provision, the sale having occurred on October 22, 1991 or within thirty (30)
days before BMC filed a petition for suspension of payments on November 22, 1991.
Petitioner's reliance on the afore-quoted provision is misplaced for the following reasons:
First, Section 70, supra, of the Insolvency Law specifically makes reference to conveyance of
properties made by a "debtor" or by an "insolvent" who filed a petition, or against whom a petition for
insolvency has been filed. Respondent spouses Ong have doubtlessly not filed a petition for a
declaration of their own insolvency. Neither has one been filed against them. And as the CA aptly
observed, it was never proven that respondent spouses are likewise insolvent, petitioner having failed
to show that they were down to their Greenhills property as their only asset.
It may be that BMC had filed a petition for rehabilitation and suspension of payments with the SEC. The
nagging fact, however is that BMC is a different juridical person from the respondent spouses. Their
seventy percent (70%) ownership of BMCs capital stock does not change the legal situation.
Accordingly, the alleged insolvency of BMC cannot, as petitioner postulates, extend to the respondent
spouses such that transaction of the latter comes within the purview of Section 70 of the Insolvency
Law.
Second, the real debtor of petitioner bank in this case is BMC. The fact that the respondent spouses
bound themselves to answer for BMCs indebtedness under the surety agreement referred to at the
outset is not reason enough to conclude that the spouses are themselves debtors of petitioner bank.
We have already passed upon the simple reason for this proposition. We refer to the basic precept in
this jurisdiction that a corporation, upon coming into existence, is invested by law with a personality
separate and distinct from those of the persons composing it.24 Mere ownership by a single or small
group of stockholders of nearly all of the capital stock of the corporation is not, without more, sufficient
to disregard the fiction of separate corporate personality.25
Third, Section 70 of the Insolvency Law considers transfers made within a month after the date of
cleavage void, except those made in good faith and for valuable pecuniary consideration. The twin
elements of good faith and valuable and sufficient consideration have been duly established. Given the
validity and the basic legitimacy of the sale in question, there is simply no occasion to apply Section 70
of the Insolvency Law to nullify the transaction subject of the instant case.
All told, we are far from convinced by petitioners argumentation that the circumstances surrounding the sale of
the subject property may be considered badges of fraud. Consequently, its failure to show actual fraudulent
intent on the part of the spouses Ong defeats its own cause.
WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals is AFFIRMED.
Costs against petitioner. SO ORDERED.

G.R. No. 178352

June 17, 2008

VIRGILIO S. DELIMA vs. SUSAN MERCAIDA GOIS

DECISION
YNARES-SANTIAGO, J.:

This petition for review under Rule 45 of the Rules of Court assails the December 21, 2006 Decision [1] of
the Court of Appeals which annulled and set aside the May 31, 2006 and August 22, 2006 Resolutions of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000188-2006 and ordered herein
petitioner to return the cash bond released to him. Also assailed is the February 5, 2007 Resolution[2] denying
the Motion for Reconsideration.
The antecedent facts are as follows:
A case for illegal dismissal was filed by petitioner Virgilio S. Delima against Golden Union Aquamarine
Corporation (Golden), Prospero Gois and herein respondent Susan Mercaida Gois before the Regional
Arbitration Branch No. VIII of the National Labor Relations Commission on October 29, 2004, docketed as
NLRC RAB VIII Case No. 10-0231-04.
On April 29, 2005, Labor Arbiter Philip B. Montaces rendered a decision, the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered
1.

Finding illegality in the dismissal of complainant Virgilio Delima from his employment;

2.

Ordering respondent Golden Union Aquamarine Corporation to pay complainant the

following:

3.

a. Backwages (July 30, 2004 to April 29, 2005 =

9 mos.; P5,350.50 x 9 months) ....
P 48,154.50
b. Separation Pay (P5,350.50 x 4 years)
21,402.00
c. Salary Differentials

32,679.00
d. Service Incentive Leave Pay
2,820.00
Sub-Total
P105,055.50
e. Attorneys fee (10%)

10,505.55
T O TAL
P115,561.05
=========
Dismissing all other claims for lack of merit.
SO ORDERED.[3]

Golden failed to appeal the aforesaid decision; hence, it became final and executory. A writ of
execution was issued and an Isuzu Jeep with plate number PGE-531 was attached.
Thereafter, respondent Gois filed an Affidavit of Third Party Claim claiming that the attachment of the
vehicle was irregular because said vehicle was registered in her name and not Goldens; and that she was not
a party to the illegal dismissal case filed by Delima against Golden.[4]
In an Order[5] dated December 29, 2005, the Labor Arbiter denied respondents third-party claim on
grounds that respondent was named in the complaint as one of the respondents; that summons were served
upon her and Prospero Gois; that both verified Goldens Position Paper and alleged therein that they are the
respondents; and that respondent is one of the incorporators/officers of the corporation.
Gois filed an appeal before the NLRC. At the same time, she filed a motion before the Labor Arbiter to
release the motor vehicle after substituting the same with a cash bond in the amount of P115,561.05.
On January 16, 2006, an Order was issued by the Labor Arbiter which states:

Filed by Third Party Claimant SUSAN M. GOIS is a Motion to Release Motor Vehicle
after substituting same with a cash bond of P115,561.05 under O.R. No. 8307036 which amount
is equivalent to the judgment award in the instant case, in the meantime that she has appealed
the Order denying her Third Party Claim.
Finding said Motion in order and with merit, Sheriff Felicisimo T. Basilio is directed to
release from his custody the Isuzu jeep with Plate No. PGE-532 and return same to SUSAN M.
GOIS.
SO ORDERED.[6]
Meanwhile, on May 31, 2006, the NLRC issued a Resolution [7] which dismissed respondents appeal for
lack of merit. A Motion for Reconsideration[8] was filed but it was denied on August 22, 2006.[9] On September
12, 2006, the NLRC Resolution became final and executory; subsequently, an Entry of Judgment [10] was issued
on September 29, 2006.
On October 13, 2006, Gois filed a petition for certiorari[11] before the Court of Appeals as well as a
Supplement to Petition[12] on October 27, 2006. Gois alleged that the NLRC committed grave abuse of
discretion when it dismissed her appeal. She claimed that by denying her third-party claim, she was in effect
condemned to pay a judgment debt issued against a corporation of which she is neither a president nor a
majority owner but merely a stockholder. She further argued that her personality is separate and distinct from
that of Golden; thus, the judgment ordering the corporation to pay the petitioner could not be satisfied out of
her personal assets.
On December 21, 2006, the appellate court rendered a Decision in favor of respondent, which reads in
part:
In the decision dated April 29, 2005 rendered by Labor Arbiter Montaces, the dispositive
portion confined itself in directing Golden Union Aquamarine Corporation only, no more and no
less, to pay private respondent the award stated therein, but did not mention that the liability is
joint and solidary with petitioner Susan Gois although the complaint filed by the private
respondent included petitioner as among the respondents therein.
It bears stress also that corporate officers cannot be held liable for damages on account
of the employees dismissal because the employer corporation has a personality separate and
distinct from its officers who merely acted as its agents. They are only solidarily liable with the
corporation for the termination of employment of employees if the same was done with malice or
in bad faith. In the case at bench, it was not clearly shown and established that the termination
of private respondent from employment was tainted with evident malice and bad faith. As
elucidated in the case of Reahs Corporation vs. NLRC, the main doctrine of separate
personality of a corporation should remain as the guiding rule in determining corporate liability to
its employees, and that, at the very least, to justify solidary liability, there must be an allegation
or showing that the officers of the corporation deliberately or maliciously designed to evade the
financial obligation of the corporation to its employees.
Further, as wisely put by the petitioner, while it may be true that the subject vehicle was
used by the corporation in transporting the products bought by the corporation from Eastern
Samar to Manila, it does not necessarily follow that it is owned by the corporation as in fact
petitioner was able to duly establish that the said vehicle is hers and is registered under her
name. Nor does it imply that the corporation is free to dispose of the same and neither does it
imply that the said vehicle may and can be levied by respondent NLRC to satisfy a judgment
against the corporation.
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us
GRANTING the petition filed in this case, ANNULLING and SETTING ASIDE the Resolutions
dated May 31, 2006 and August 22, 2006, respectively, issued by the respondent National

Labor Relations Commission (NLRC), 4th Division in NLRC Case No. V-000188-2006 and
ORDERING private respondent to return to petitioner the cash bond earlier released to him.
SO ORDERED.[13]
Petitioner filed a Motion for Reconsideration [14] which was denied. Hence, the present petition raising the
following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS, NINETEENTH (19 th)
DIVISION, ERRED:
1.

WHEN IT OMMITED PRIVATE RESPONDENT AS ONE OF THE PRINCIPAL

RESPONDENTS IN THE ORIGINAL COMPLAINT AS ILLUSTRATED IN ITS BRIEF
STATEMENT OF FACTS;

2.

WHEN IT CONSIDERED THAT THE VEHICLE PRINCIPALLY USED IN THE

BUSINESS OPERATIONS OF THE CORPORATION, WHICH WAS REGISTERED
UNDER THE NAME OF PRIVATE RESPONDENT WHO WAS ALSO THE
CORPORATION PRESIDENT, CANNOT BE SUBJECT OF GARNISHMENT;

3.

WHEN IT ANNULLED AND SET ASIDE A FINAL AND EXECUTED

ORDER/RESOLUTION OF THE NATIONAL LABOR RELATIONS COMMISSION.[15]

A corporation has a personality distinct and separate from its individual stockholders or members and
from that of its officers who manage and run its affairs. The rule is that obligations incurred by the corporation,
acting through its directors, officers and employees, are its sole liabilities. Thus, property belonging to a
corporation cannot be attached to satisfy the debt of a stockholder and vice versa, the latter having only an
indirect interest in the assets and business of the former.[16]
Since the Decision of the Labor Arbiter dated April 29, 2005 directed only Golden to pay the petitioner
the sum of P115,561.05 and the same was not joint and solidary obligation with Gois, then the latter could not
be held personally liable since Golden has a separate and distinct personality of its own. It remains undisputed
that the subject vehicle was owned by Gois, hence it should not be attached to answer for the liabilities of the
corporation. 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. No evidence was presented to show that the termination
of the petitioner was done with malice or in bad faith for it to hold the corporate officers, such as Gois, solidarily
liable with the corporation.
We note that the Resolution of the NLRC dismissing respondents appeal was entered in the Book of
Entries of Judgment on September 29, 2006 after it allegedly became final and executory on September 12,
2006.
It will be recalled, however, that the NLRC issued the Resolution dismissing the appeal of the
respondent on May 31, 2006. A motion for reconsideration was filed on July 24, 2006 but it was denied by the
NLRC on August 22, 2006. Copy of the denial was received by the respondent on September 1, 2006.
[17]
Thus, respondent has sixty (60) days from receipt of the denial of the motion for reconsideration or
until October 31, 2006, within which to file the petition for certiorari under Section 4 of Rule 65 of the Rules of
Court. Thus, the petition for certiorari filed by respondent before the Court of Appeals on October 13,
2006 was timely.[18] Consequently, the NLRC erred in declaring its May 31, 2006 Resolution final and
executory.
A decision issued by a court is final and executory when such decision disposes of the subject matter in
its entirety or terminates a particular proceeding or action, leaving nothing else to be done but to enforce by
execution what has been determined by the court, such as when after the lapse of the reglementary period to
appeal, no appeal has been perfected.[19]

In the instant case, it is undisputed that when the entry of judgment was issued by the NLRC
on September 12, 2006 and entered in the Book of Entries of Judgment onSeptember 29, 2006, the
reglementary period to file a petition for certiorari has not yet lapsed. In fact, when the petition for certiorari
was filed on October 13, 2006, the same was still within the reglementary period. It bears stressing that a
petition for certiorari under Rule 65 must be filed not later than 60 days from notice of the judgment, order or
resolution sought to be annulled.[20]
The period or manner of appeal from the NLRC to the Court of Appeals is governed by Rule 65
pursuant to the ruling of this Court in the case of St. Martin Funeral Home v. National Labor Relations
Commission.[21] Section 4 of Rule 65, as amended, states that the petition may be filed not later than sixty
(60) days from notice of the judgment, or resolution sought to be assailed.[22]
Corollarily, Section 4, Rule III of the New Rules of Procedure of the NLRC expressly mandates that
(f)or the purpose(s) of computing the period of appeal, the same shall be counted from receipt of such
decisions, awards or orders by the counsel of record. Although this rule explicitly contemplates an appeal
before the Labor Arbiter and the NLRC, we do not see any cogent reason why the same rule should not apply
to petitions for certiorari filed with the Court of Appeals from decisions of the NLRC.[23]
We note that in the dispositive portion of its Decision, the appellate court ordered petitioner to return to
respondent the cash bond earlier released to him. However, petitioner admitted that the monies were spent to
defray the medical expenses of his ailing mother. Considering that petitioner is legally entitled to receive said
amount, Golden must reimburse respondent Gois the amount of P115,561.05. To rule otherwise would result
in unjust enrichment of Golden. The corporation has benefited from the payment made by Gois because it was
relieved from its obligation to pay to petitioner the judgment debt.
WHEREFORE, the petition is PARTLY GRANTED. The assailed Decision of the Court of Appeals
dated December 21, 2006 annulling and setting aside the May 31, 2006 and August 22, 2006 Resolutions of
the National Labor Relations Commission; and its Resolution dated February 5, 2007 are AFFIRMED with the
MODIFICATIONthat Golden Union Aquamarine Corporation is ordered to REIMBURSE respondent Susan M.
Gois the amount of P115,561.05.
SO ORDERED.

MOBILIA PRODUCTS, INC., Petitioners, v. HAJIME UMEZAWA, Respondent.

[G.R. NO. 149403. March 04, 2005]
PEOPLE OF THE PHILIPPINES, Petitioners, v. HON. JUDGE RUMOLDO R. FERNANDEZ and HAJIME
UMEZAWA, Respondents.
DECISION
CALLEJO, SR., J.:
Before the Court are two consolidated petitions: a Petition for Review on Certiorari filed by the People of the
Philippines, docketed as G.R. No. 149403 of the Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No.
52440 which reversed its decision and granted the Petition for Certiorari, prohibition and mandamus filed by
respondent Hajime Umezawa; and the Petition for Review on Certiorari docketed as G.R. No. 149357 filed by
petitioner Mobilia Products, Inc. (MPI), the intervenor in the CA, assailing the same Resolution of the appellate
court.
The Antecedents
The antecedents were amply summarized by the Office of the Solicitor General (OSG) in the petition at bar, to
wit:
Mobilia Products, Inc. is a corporation engaged in the manufacture and export of quality furniture which caters
only to the purchase orders booked and placed through Mobilia Products Japan, the mother company which
does all the marketing and booking. After orders from customers are booked at the mother company in Japan,
the same are coursed through Mobilia Philippines for implementation and production, after which, the ordered
items are shipped to Japan through the mother company.
Mobilia Products Japan sent Hajime Umezawa to the Philippines in order to head Mobilia Products, Inc. as
President and General Manager. To qualify him as such and as a Board Director, he was entrusted with one
nominal share of stock.
Sometime in the last week of January 1995, Umezawa, then the President and General Manager of Mobilia
Products, Inc., organized another company with his wife Kimiko, and his sister, Mitsuyo Yaguchi, to be known
as Astem Philippines Corporation, without the knowledge of the Chairman and Chief Executive Officer
Susumo Kodaira and the other members of the Board of Directors of Mobilia.
The said company would be engaged in the same business as Mobilia. Spouses Umezawa recruited Justin
Legaspi, former Production Manager of Mobilia, to act as Manager and one Yoshikazu Hayano of Phoenix
Marble Corporation to serve as investors [sic].
Pending formal organization, Spouses Umezawa, Justin Legaspi and Yoshikazu Hayano wanted to accelerate
the market potentials of Astem by participating in the International Furniture Fair 1995 held at the Word Trade
Centre of Singapore on March 6 to 10, 1995.
One of the requirements of such Fair was that the furniture exhibits must arrive and be received at Singapore
not later than February 23, 1995. Pressed for time, with less than one month to prepare and while Astem had
yet no equipment and machinery, no staff and no ready personnel, Umezawa, with grave abuse of the
confidence reposed on him as President and General Manager of Mobilia Products, Inc., and in conspiracy

with his wife, his sister Mitsuyo Yaguchi, Yoshikazu Hayano and Justin Legaspi, all with intent to gain for
themselves and for their company Astem Philippines Corporation, stole prototype furniture from petitioner
Mobilia so that the said pieces of furniture would be presented and exhibited as belonging to Astem in the
International Furniture Fair '95 in Singapore.
In order to avoid detection, Umezawa contacted Henry Chua, the owner of Dew Foam, one of the suppliers of
Mobilia, for that the latter to load several pieces of prototype furniture into a Dew Foam truck and store them at
the Dew Foam warehouse. The first batch of furniture was stolen on February 8, 1995, when Mr. Henry Chua,
upon the request of respondent Umezawa, caused to be loaded into his Dew Foam truck two prototype sofa
models worth P500,000.00, after which, the same were spirited from the Mobilia compound, then transported
and stored in Henry Chua's warehouse.
Again, on February 18, 1995, Umezawa, with grave abuse of confidence and taking advantage of his position
as President and General Manager, unlawfully stole expensive furniture from Mobilia's factory
worth P2,964,875.00. In order to avoid detection, the said furniture were loaded in the truck belonging to Dew
Foam, with respondent Umezawa personally supervising the loading, the carting and spiriting away of the said
furniture. Thus, taking advantage of his position as General Manager, he managed to have the said furniture
taken out of the company premises and passed the company guard without any problem and difficulty.
Further, on February 19, 1995, around 1 o'clock in the afternoon, respondent Umezawa again loaded into his
motor vehicle, and took away from company premises under the same irregular and unlawful circumstances,
an expensive three-seater sofa worthP255,000.00.
The taking out of the said furniture was effected in violation of the standard procedures established by
petitioner corporation which requires that every shipment or taking out of the furniture be checked and
reviewed by Mobilia's Production, Planning, Inventory Costing and Control (PPICC) Division. All the foregoing
furniture were transported to and stored at Henry Chua's warehouse. After sometime, the foregoing furniture
were photographed for slide photos at Photo Folio at the Reclamation Area, Cebu City and then finally
catalogued for use in the Singapore Fair for the use of Astem and its supposed owners, namely: spouses
Umezawa, Hayano and Legaspi. The foregoing furniture models were finally shipped for exhibition at the
International Furniture Fair '95 in Singapore as furniture belonging to Astem Philippines Corporation.
Sometime in March 1995, based on orders booked for Astem, Umezawa, with unfaithfulness and abuse of
confidence reposed on him as the President and General Manager of petitioner Mobilia, ordered and caused
the manufacture of eighty-nine (89) pieces of furniture with a total value of P17,108,500.00. The said pieces of
furniture were made with Mobilia supplies, materials and machineries, as well as with Mobilia time and
personnel, all of which were under the administration and control of Umezawa as President and General
Manager. The said materials and supplies, the time and labor, were supposed to be used for the manufacture
and production of quality furniture for the EXCLUSIVE USE of Mobilia. However, Umezawa, in violation of his
duty to apply the same for the use of Mobilia and the duty to account for the same, converted their use for the
benefit of Astem or for the use and benefit of Umezawa, his wife and sister, Yoshikazu Hayano and Legaspi,
much to the damage and prejudice of Mobilia Products.
The same furniture could also have been taken out of the company premises by Umezawa and cohorts for
shipment and delivery to Astem customers had it not been for the timely discovery of the previous theft. '2
The Board of Directors of MPI, consisting of its Chairman Susumo Kodaira and members Yasushi Kato and
Rolando Nonato, approved a Resolution on May 2, 1995 authorizing the filing of a complaint against Umezawa
for two counts of qualified theft allegedly committed on February 18 and 19, 1995. Attached to the complaint

was the Joint Affidavit of Danilo Lallaban, George del Rio and Yasushi Kato. The case was docketed as I.S.
No. 95-275.
On May 15, 1995, the public prosecutor filed an Information for qualified theft against Umezawa with the
Regional Trial Court (RTC) of Lapu-Lapu City. The accusatory portion of the Information, docketed as Criminal
Case No. 013231-L, reads:
That during or about the period comprised between the 18th and 19th day of February 1995, in the City of
Lapu-Lapu, Philippines, within the jurisdiction of this Honorable Court, the accused, while being then the
President and General Manager of Mobilia Products, Inc., a corporation engaged in the manufacture and
export of furniture, holding office and doing business in the Mactan Export Processing Zone, Lapu-Lapu City,
with grave abuse of the confidence reposed upon him by his employer, with intent to gain, did then and there
willfully, unlawfully and feloniously take, steal and carry away from the corporation's factory in Mactan Export
Processing Zone, Lapu-Lapu City, expensive pieces of furniture, to wit:
1) 1 set, Model No. 3, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 208,125.00
2) 1 set, Model No. 8, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 315,000.00
3) 1 set, Model No. 5, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 108,000.00
4) 1 set, Model No. 4, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 277,500.00
5) 1 set, Model No. 6, 1-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 146,250.00
6) 1 set, Model No. 2, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 225,000.00
7) 1 set, Model No. 1, 2-seater
German leather sofa, worth - - - - - - - - - - - - - - - - - - P 275,000.00
8) 1 piece, Model Table No. 2,
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 93,750.00
9) 1 piece, Model Table No. 4,
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 105,000.00

10) 2 pieces, Model Pedestal

No. 6, Italian marble pedestal, worth - - - - - - - - - - - - - P 150,000.00
11) 1 piece, Model Column
Standard No. 11, Italian marble worth - - - - - - - - - - - - P 93,750.00
12) 1 piece, Model Table No. 1,
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 105,000.00
13) 1 piece, Model High Table
No. 10, Italian marble, worth - - - - - - - - - - - - - - - - - - - P 187,500.00
14) 1 piece, Model Table No. 8,
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 187,500.00
15) 1 piece, Model Table No. 7
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 187,500.00
16) 1 piece, Model Table No. 5
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 112,500.00
17) 1 piece, Model Table No. 9,
Italian marble table, worth - - - - - - - - - - - - - - - - - - - - P 187,500.00
18) 3-seater sofa, worth - - - - - - - - - - - - - - - - - - P 255,000.00
with an aggregate value of P3,219,875.00, Philippine currency, without the consent of his employer, to the
damage and prejudice of Mobilia Products, Inc., in the said amount ofP3,219,875.00.
Contrary to law.3
On motion of the prosecution, the trial court issued a writ of preliminary attachment covering the properties of
Umezawa.
Umezawa then filed an Omnibus Motion to quash the information filed against him, the discharge of the writ of
attachment issued by the trial court, and to set the case for preliminary investigation. MPI, the private
complainant therein, opposed the motion.
In the meantime on July 21, 1995, MPI filed another criminal complaint for qualified theft against Umezawa, his
wife Kimiko Umezawa, Mitsuyo Yaguchi, Justin Legaspi, Yoshikazu Hayano and Henry Chua allegedly
committed in March 1995, with the Office of the City Prosecutor. The case was docketed as I.S. No. 95-442.

On July 25, 1995, the trial court issued an Order in Criminal Case No. 013231-L denying the omnibus motion.
On joint motion of Umezawa and the public prosecutor, the trial court ordered a reinvestigation of the case.
Conformably, the public prosecutor conducted a reinvestigation of Criminal Case No. 013231-L jointly with I.S.
No. 95-442.
On September 25, 1995, Umezawa filed a petition with the Securities and Exchange Commission (SEC),
docketed as SEC Case No. 002919, for the nullification of the Resolution issued by the three alleged members
of MPI Board of Directors, authorizing the filing of criminal complaints against him in behalf of the corporation.
On January 3, 1996, the public prosecutor issued a Joint Resolution finding probable cause for qualified theft
and one count of estafa against Umezawa, and dismissing the case against the other accused. The Prosecutor
maintained his finding of probable cause against Umezawa in Criminal Case No. 013231-L.
On February 20, 1996, the public prosecutor filed an Information for qualified theft with the RTC of Lapu-Lapu
City against Umezawa, docketed as Criminal Case No. 013423-L. The accusatory portion reads:
That on the 8th day of February 1995, in the City of Lapu-Lapu, Philippines, within the jurisdiction of this
Honorable Court, the above-named accused, while being the President and General Manager of Mobilia
Products, Inc., a corporation engaged in the manufacture and export of quality furniture, whose principal place
of business is at the Mactan Export Processing Zone, Lapu-Lapu City, with intent to gain, without the consent
of his employer, and with grave abuse of confidence, did then and there willfully, unlawfully and feloniously
take, steal and carry away from the corporation's factory the following expensive pieces of furniture, to wit:
1) 1 set, Model No. 2, 2-seater German
leather sofa, all valued at . . . . . . . . . . . . . . P 225,000.00
2) 1 set, Model No. 1, 2-seater German
leather sofa, all valued at . . . . . . . . . . . . . . . . P 275,000.00
with an aggregate value of P500,000.00 Philippine Currency, to the damage and prejudice of Mobilia Products,
Inc.
CONTRARY TO LAW.4
Another Information for estafa was thereafter filed against the same accused, docketed as Criminal Case No.
013424-L. The accusatory portion reads:
That sometime in March 1995, in the City of Lapu-Lapu, Philippines, within the jurisdiction of this Honorable
Court, the above-named accused, by means of unfaithfulness and abuse of confidence reposed upon him as
the President and General Manager of Mobilia Products, Inc., did then and there willfully, unlawfully and
feloniously misappropriate and convert to his own personal use and benefit the amount of Seventeen Million
One Hundred Eight Thousand Five Hundred (P17,108,500.00) Pesos, Philippine Currency, which was the total
value of the furnitures ordered and manufactured by the accused or at his instance using Mobilia supplies,
materials and machineries, as well as time and personnel which were supposed to be for the exclusive use of
Mobilia Products, Inc. but were converted for the use and benefit of the accused and Astem Philippines
Corporation, a company or firm engaged in the same business as that of Mobilia Products, Inc., which is, [in]
the manufacture and production of quality furniture for export, owned by the accused, to the damage and
prejudice of Mobilia Products, Inc.

CONTRARY TO LAW.5
On April 25, 1996, Umezawa filed a motion for the suspension of the proceedings on the ground of the
pendency of his petition with the SEC in Case No. 002919. The trial court, however, issued an Order on May
21, 1996, denying the said motion. It held that the filing and the pendency of a petition before the SEC did not
warrant a suspension of the criminal cases.
On September 25, 1998, Umezawa was arraigned and pleaded not guilty.
On September 30, 1998, Umezawa filed anew a Joint Motion to Quash the Informations in Criminal Cases
Nos. 013231-L and 013423-L, on the ground that the facts alleged therein did not constitute the felony of
qualified theft. Umezawa claimed that based on the Joint Affidavit of the witnesses for the prosecution
submitted during the preliminary investigation, Yasushi Kato and George del Rio, MPI Vice-President and the
head of the Upholstery Department, respectively, the appropriate charge should be estafa and not qualified
theft. Umezawa further claimed that for their failure to object to and resist his alleged delictual acts, the said
witnesses were as guilty as he was and should have been included in the Information. He also asserted that
there was, likewise, no allegation in the Informations as to who was the owner of the articles stolen; hence,
there was no offended party. He noted that the Informations merely alleged that MPI was his employer. He
further posited that there was no valid charge against him because the resolution authorizing the filing of the
cases against him was approved by a mere minority of the members of the MPI Board of Directors.6
Umezawa, likewise, filed a Motion to Quash7 the Information in Criminal Case No. 013424-L on the ground that
the facts alleged in the Information did not constitute the felony of estafa. He posited that the Information did
not contain any allegation that any demand was made for him to return the goods. Furthermore, the owner of
the said articles was not specified. He noted that as gleaned from the Joint Affidavit of the witnesses for the
prosecution, there was no lawful private complainant. He reiterated that the MPI board resolution authorizing
the filing of the charge against him was not approved by the majority of the members of its board of directors.
Umezawa also alleged that the charge for estafa with abuse of confidence was already included in the charge
for qualified theft, where it was alleged that he committed theft with abuse of confidence; hence, the charge for
estafa should be quashed, otherwise, he would be placed in double jeopardy. The motion was duly opposed by
the prosecution.
On January 29, 1999, the trial court issued a Joint Order8 dismissing the cases for lack of jurisdiction. It held
that the dispute between the private complainant and the accused over the ownership of the properties subject
of the charges is intra-corporate in nature, and was within the exclusive jurisdiction of the SEC. It ruled that
Umezawa, as a member of the board of directors and president of MPI, was also a stockholder thereof. While
Umezawa claimed to be the bona fide owner of the properties subject of the Informations which he
appropriated for himself, the private complainant disputes the same; hence, according to the trial court, the
conflicting claims of the parties should be resolved by the SEC. The private and public prosecutors received
their respective copies of the Joint Order on February 2, 1999.
The MPI, through the private prosecutor, filed a motion for reconsideration of the joint order of the court and for
the reinstatement of the cases on February 15, 1999. The MPI relied on the following grounds:
A. The Honorable Court has jurisdiction and must exercise it over these cases;
b. The above-entitled case is not an intra-corporate controversy;
and

c. The accused could not claim ownership nor co-ownership of the properties of private complainant
corporation.9
The MPI maintained that the trial court had jurisdiction over the cases and cited Section 5 of Presidential
Decree (P.D.) No. 902-A, which provides the rules on cases over which the SEC has original and exclusive
jurisdiction. A copy of the motion was served on the public prosecutor for his approval. However, the public
prosecutor did not affix his conformity to the motion, and instead opted to appear before the trial court during
the hearing of the same. During the hearing, both the public and private prosecutors appeared. In support of
his motion, the private prosecutor argued that the trial of the case must be done in the presence of and under
the control and supervision of the public prosecutor.10
The trial court denied the motion in an Order dated April 19, 1999. It held that the SEC, not the trial court, had
jurisdiction over intra-corporate controversies. It also ruled that the motion of the private complainant was pro
forma, it appearing that the public prosecutor had not approved the same.
The public prosecutor received a copy of the Order on April 20, 1999. On April 26, 1999, the People of the
Philippines, through the OSG, filed a Petition for Certiorari andmandamus with the CA against Presiding Judge
Rumuldo R. Fernandez and Umezawa, docketed as CA-G.R. SP No. 52440. The CA allowed the MPI to
intervene as petitioner, and admitted its petition - in-intervention.
The People of the Philippines, as the petitioner therein, raised the following issues:
I
WHETHER OR NOT IT IS THE LEGAL AND MINISTERIAL DUTY OF THE REGIONAL TRIAL COURT TO
TAKE COGNIZANCE AND JURISDICTION OF THESE SUBJECT CRIMINAL CASES;
II
WHETHER OR NOT THE SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER THE
CRIMINAL CASES AGAINST RESPONDENT HAJIME UMEZAWA;
III
WHETHER OR NOT RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN DISMISSING THE CRIMINAL CASES AND DENYING
PETITIONER'S MOTION FOR RECONSIDERATION.11
The People asserted that the controversy involving the criminal cases was not between Umezawa and the
other stockholders of MPI, but one between him as the accused therein and the People of the Philippines. It
averred that under Section 20(b) of Batas Pambansa (B.P.) Blg. 129, the RTC has exclusive jurisdiction over
the cases against Umezawa. It also alleged that in dismissing the criminal cases against Umezawa on the
ground that it had no jurisdiction over the crimes charged, the RTC committed grave abuse of its discretion
amounting to excess or lack of jurisdiction.
On September 2, 1999, the CA rendered judgment granting the petition and nullifying the assailed Orders of
the RTC. It ruled that the issue of ownership of the properties subject of the Informations was not an intracorporate dispute. It held that Umezawa, although president and general manager of the MPI and a
stockholder thereof, was not a joint owner or co-owner of the personal properties subject of the charges. It also
held that the dispute between a private corporation and any of its stockholders relative to the ownership of

properties does not ipso facto negate the jurisdiction of the RTC over the criminal cases under B.P. Blg. 129,
as amended. It also declared that the material averments of the Informations sufficiently charged qualified theft
and estafa.
Umezawa filed a motion for the reconsideration of the decision of the CA. In a completevolte face, the
appellate court issued a Resolution on August 8, 2001, granting the motion and reversing its decision. It
affirmed the ruling of the RTC that the dispute between Umezawa and the other stockholders and officers over
the implementation of the MPI's standard procedure is intra-corporate in nature; hence, within the exclusive
jurisdiction of the SEC. Citing Section 5(a)(b) of P.D. No. 902-A, and the ruling of this Court in Alleje v. Court of
Appeals,12 the appellate court ruled that based on the material allegations of the Solicitor General in the
petition before the CA, the SEC had exclusive jurisdiction over the conflicting claims of the parties. It likewise
affirmed the ruling of the RTC that the absence of any allegation in the Information that the MPI was the owner
of the properties subject of the Information is fatal.
The petitioner MPI filed the instant Petition for Review on Certiorari , raising the following issues:
I
WHETHER OR NOT THE SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER THE
CRIMINAL CASES AGAINST UMEZAWA.
II
WHETHER OR NOT ALL THE NECESSARY ELEMENTS OF THE CRIMES OF QUALIFIED THEFT
AND ESTAFA ARE SUFFICIENTLY ALLEGED IN THE INFORMATIONS.
III
EVEN ASSUMING ARGUENDO THAT THE FACTS ALLEGED DO NOT CONSTITUTE AN OFFENSE THE
CORRECT RULING IS NOT TO DISMISS THE CASE BUT TO ORDER AMENDMENT.
IV
WHETHER OR NOT THE STATE HS LOST ITS RIGHT TO APPEAL.
V
WHETHER OR NOT THE MOTION FOR RECONSIDERATION OF UMEZAWA IS PRO FORMA.13
The People of the Philippines filed a separate Petition for Review on Certiorari , contending that:
1. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW AND GRAVE ABUSE OF
DISCRETION IN FINDING THAT THE PETITION FOR MANDAMUS, CERTIORARI AND INJUNCTION WAS
FILED OUT OF TIME AND THAT PETITIONER HAS LOST ITS RIGHT TO APPEAL;
2. THE COURT OF APEALS COMMITTED SERIOUS ERRORS OF LAW IN RULING THAT NOT ALL THE
ELEMENTS OF QUALIFIED THEFT AND ESTAFA ARE PRESENT;

3. THE COURT OF APPEALS COMMITTED BLATANT AND SERIOUS ERRORS OF LAW IN FINDING THAT
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS JURISDICTION OVER THE SUBJECT
CRIMINAL CASES;
4. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW AND GRAVE ABUSE OF
DISCRETION IN GIVING DUE COURSE TO THE PRO-FORMA MOTION FOR RECONSIDERATION OF
UMEZAWA.14
The two petitions were consolidated in the Second Division of the Court.
The threshold issues for resolution are the following: (a) whether or not the Petition forCertiorari of the People
of the Philippines in the CA assailing the January 29, 1999 Joint Order of the trial court was time-barred; (b)
whether the RTC has jurisdiction over the crimes charged in the said Informations; (c) whether the Informations
sufficiently charge the felonies of qualified theft and estafa; and (d) if in the affirmative, whether all the
elements of qualified theft and estafa are alleged in the Informations.
On the first issue, the CA held that the Public Prosecutor failed to file a motion for the reconsideration of the
trial court's January 29, 1999 Joint Order dismissing the cases, that is, within fifteen days from receipt of a
copy of the said order on February 2, 1999; neither did the People appeal the said Order within the period
therefor. Thus, according to the CA, the People filed its Petition for Certiorari, prohibition
and mandamus assailing the January 29, 1999 Joint Order of the trial court only on April 26, 1999, well beyond
the 60-day period therefor. The appellate court, likewise, held that the filing of the motion for reconsideration of
the said Joint Order by the private prosecutor without the conformity of the Public Prosecutor did not toll the
period for the People to file its motion for reconsideration thereof, or to appeal therefrom, or to file a Petition
for Certiorari, prohibition or mandamus . It ruled that, having lost its right to appeal in due course, the People
was proscribed from filing a petition for certiorari , prohibition or mandamus . The CA declared that the motion
for reconsideration filed by petitioner MPI of the Joint Order of the RTC is pro forma, the public prosecutor not
having signified his written conformity thereto.
On the other hand, the petitioner People of the Philippines insists that while the public prosecutor did not
expressly conform to the motion for reconsideration of the January 29, 1999 Joint Order of the trial court filed
by the private prosecutor, through the public prosecutor's presence during the hearing of the said motion, his
supervision and control over the private prosecutor during the said hearing, he in effect adopted and
conformed to the said motion for reconsideration.
In his comment on the petitions, respondent Umezawa maintains that the motion for reconsideration of the joint
order of the trial court filed by the private prosecutor did not interrupt the period within which the People could
appeal, citing the ruling of this Court inCabral v. Puno.15 The respondent posits that the finding of the trial court,
which was affirmed by the CA, that the public prosecutor did not conform to the motion for reconsideration of
the private prosecutor, is binding on this Court. The respondent also avers that the petitioner has no
personality to file the petition. Moreover, he insists that whether the public prosecutor conformed to the private
prosecutor's motion for reconsideration is a question of fact which is not proper in a Petition for Review
onCertiorari .
The Court's Ruling
The contention of the petitioner People of the Philippines is not correct. All criminal actions commenced by
complaint or information shall be prosecuted under the direction and control of the public prosecutor.16 When
the civil action for civil liability is instituted in the criminal action pursuant to Rule 111 of the Rules on Criminal
Procedure, the offended party may intervene, by counsel, in the prosecution of the offense.17 In Ramiscal, Jr. v.

Sandiganbayan,18 we held that under Section 16, Rule 110 of the Rules of Criminal Procedure, the offended
party may intervene in the criminal action personally or by counsel, who will then act as private prosecutor for
the protection of his interests and in the interest of the speedy and inexpensive administration of justice. A
separate action for the purpose would only prove to be costly, burdensome and time-consuming for both
parties and further delay the final disposition of the case. The multiplicity of suits must be avoided. With the
implied institution of the civil action in the criminal action, the two actions are merged into one composite
proceeding, with the criminal action predominating the civil. The prime purpose of the criminal action is to
punish the offender in order to deter him and others from committing the same or similar offense, to isolate him
from society, reform and rehabilitate him or, in general, to maintain social order.19
The intervention of the private offended party, through counsel, and his prosecution of the case shall be under
the control and supervision of the public prosecutor until the final termination of the case. A public prosecutor
who has been entrusted by law with the prosecution of criminal cases is duty-bound to take charge thereof until
its final termination, for under the law, he assumes full responsibility for his failure or success since he is the
one more adequately prepared to pursue it to its termination.20 The prosecution of offenses is a public function.
Indeed, the sole purpose of the civil action is the resolution, reparation or indemnification of the private
offended party for the damage or injury he sustained by reason of the delictual or felonious act of the
accused.21 Under Article 104 of the Revised Penal Code, the following are the civil liabilities of the accused:
ART. 104. What is included in civil liability. - The civil liability established in Articles 100, 101, 102 and 103 of
this Code includes:
1. Restitution;
2. Reparation of the damage caused;
3. Indemnification for consequential damages.
Thus, when the offended party, through counsel, has asserted his right to intervene in the proceedings, it is
error to consider his appearance merely as a matter of tolerance.22
The public prosecutor may turn over the actual prosecution of the criminal case, in the exercise of his
discretion, but he may, at any time, take over the actual conduct of the trial. However, it is necessary that the
public prosecutor be present at the trial until the final termination of the case; otherwise, if he is absent, it
cannot be gainsaid that the trial is under his supervision and control.23
In a criminal case in which the offended party is the State, the interest of the private complainant or the
offended party is limited to the civil liability arising therefrom. Hence, if a criminal case is dismissed by the trial
court or if there is an acquittal, a reconsideration of the order of dismissal or acquittal may be undertaken,
whenever legally feasible, insofar as the criminal aspect thereof is concerned and may be made only by the
public prosecutor; or in the case of an appeal, by the State only, through the OSG. The private complainant or
offended party may not undertake such motion for reconsideration or appeal on the criminal aspect of the
case.24 However, the offended party or private complainant may file a motion for reconsideration of such
dismissal or acquittal or appeal therefrom but only insofar as the civil aspect thereof is concerned.25 In so
doing, the private complainant or offended party need not secure the conformity of the public prosecutor. If the
court denies his motion for reconsideration, the private complainant or offended party may appeal or file a
Petition for Certiorari or mandamus, if grave abuse amounting to excess or lack of jurisdiction is shown and the
aggrieved party has no right of appeal or given an adequate remedy in the ordinary course of law.

The public and private prosecutors are not precluded, whenever feasible, from filing a joint motion for the
reconsideration of the dismissal of the case or the acquittal of the accused, on the criminal and civil aspects of
the cases.
In the present case, only petitioner MPI, through counsel, filed a motion for the reconsideration of the trial
court's Joint Order dated January 29, 1999, praying for the reinstatement of the cases insofar as the civil
aspect thereof is concerned. The public prosecutor did not approve nor conform to the said motion. Although
petitioner MPI provided ample space for the said conformity of the public prosecutor, the latter did not do so; he
merely appeared during the hearing of the said motion with the private prosecutor when the latter presented
his oral arguments in support of the said motion.
The fact that the public prosecutor did not conform to the said motion, however, does not mean that the same
is pro forma. It must be stressed that the propriety and efficacy of the motion, insofar as the civil aspect of the
cases is concerned, is not dependent upon the conformity of the public prosecutor. Hence, the filing of the joint
motion for reconsideration effectively suspended the running of the period for petitioner MPI to assail the joint
order in the CA via an appeal or a special civil action for certiorari or mandamusunder Rule 65 of the Rules of
Court.
However, since the public prosecutor did not file any motion for the reconsideration of the joint order nor
conform to the motion of petitioner MPI, insofar as the criminal aspect of the cases is concerned, the period for
the State to assail the said joint order was not suspended. Only the motion for reconsideration filed by the
public prosecutor of the joint order of dismissal of the cases could have tolled the period within which the State
could appeal, insofar as the criminal aspect of the cases was concerned. The bare fact that the public
prosecutor appeared for the State during the hearing of the motion for reconsideration of petitioner MPI does
not amount to or constitute his adoption of the said motion as that of the State. As ruled by this Court in Cabral
v. Puno:26
While it is true that the offended party, Silvino San Diego, through the private prosecutor, filed a motion for
reconsideration within the reglementary fifteen-day period, such move did not stop the running of the period for
appeal. He did not have the legal personality to appeal or file the motion for reconsideration on his behalf. The
prosecution in a criminal case through the private prosecutor is under the direction and control of the Fiscal,
and only the motion for reconsideration or appeal filed by the Fiscal could have interrupted the period for
appeal.27
We agree with the ruling of the CA that the petition for certiorari filed by the petitioner People of the Philippines
with the CA on April 26, 1999 was filed beyond the 60-day period as provided in Section 4, Rule 65 of the
Rules of Court,28 it appearing that the public prosecutor received a copy of the joint order of the trial court on
February 2, 1999, and, thus, had only until April 3, 1999 within which to file the said petition.
Even then, the Court still holds that the CA erred in dismissing the petition of the People of the Philippines
simply because the public prosecutor erred in not himself filing a motion for reconsideration of the joint order of
the trial court, on his perception that by being present during the hearing of the motion for reconsideration of
petitioner MPI, he thereby adopted the said motion as that of the State's. The settled rule is that the State is
not estopped by the mistakes of its officers and employees. Indeed, in Cruz, Jr. v. Court of Appeals,29 the Court
declared:
'Estoppel does not lie against the government because of the supposedly mistaken acts or omissions of its
agents. As we declared in People v. Castaeda, "there is the long familiar rule that erroneous application and
enforcement of the law by public officers do not block subsequent correct application of the statute and that the
government is never estopped by mistake or error on the part of its agents."

The Court also held in Chua v. Court of Appeals:30

'While ordinarily, certiorari is unavailing where the appeal period has lapsed, there are exceptions. Among them
are (a) when public welfare and the advancement of public policy dictates; (b) when the broader interest of
justice so requires; (c) when the writs issued are null and void; or (d) when the questioned order amounts to an
oppressive exercise of judicial authority. - 31
On the second issue, the petitioners assert that the CA erred in holding that the dispute between it and the
respondent is intra-corporate in nature; hence, within the exclusive jurisdiction of the SEC. As gleaned from the
material allegations of the Informations, the RTC had exclusive jurisdiction over the crimes charged. Petitioner
MPI further avers that even if there is no allegation in the Informations identifying it as the owner of the
personal properties described in the Informations, its ownership of the properties can be inferred from the other
allegations. The petitioners maintain that even if the Informations are deficient, the remedy is the amendment
of the Informations and not the dismissal of the cases.
For his part, the respondent avers that the assailed Resolution of the CA is correct, and that it is the appellate
court's decision which is erroneous.
We agree with the petitioners.
According to Section 20 of B.P. Blg. 129'
SEC. 20. Jurisdiction in criminal cases. - Regional Trial Courts shall exercise exclusive original jurisdiction in all
criminal cases not within the exclusive jurisdiction of any court, tribunal or body, except those now falling under
the exclusive and concurrent jurisdiction of the Sandiganbayan which shall hereafter be exclusively taken
cognizance of by the latter.
Section 32 thereof was later amended by Section 2 of Republic Act No. 7691, as follows:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
Criminal Cases. - Except in cases falling within the exclusive original jurisdiction of the Regional Trial Court and
of the Sandiganbayan, the Metropolitan Trial Courts, and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over all violations of city or municipal ordinances committed within their
respective territorial jurisdiction; andcralawlibrary
(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not exceeding six (6) years
irrespective of the amount of fine, and regardless of other imposable accessory or other penalties, including
the civil liability arising from such offenses or predicated thereon, irrespective of kind, nature, value or amount
thereof: Provided, however, That in offenses involving damage to property through criminal negligence, they
shall have exclusive original jurisdiction thereof.
Case law has it that in order to determine the jurisdiction of the court in criminal cases, the complaint or
Information must be examined for the purpose of ascertaining whether or not the facts set out therein and the
prescribed period provided for by law are within the jurisdiction of the court, and where the said Information or
complaint is filed. It is settled that the jurisdiction of the court in criminal cases is determined by the allegations
of the complaint or Information and not by the findings based on the evidence of the court after
trial.32 Jurisdiction is conferred only by the Constitution or by the law in force at the time of the filing of the
Information or complaint. Once jurisdiction is vested in the court, it is retained up to the end of the litigation.
Indeed, in People v. Purisima,33 this Court held that:

In criminal prosecutions, it is settled that the jurisdiction of the court is not determined by what may be meted
out to the offender after trial or even by the result of the evidence that would be presented at the trial, but by
the extent of the penalty which the law imposes for the misdemeanor, crime or violation charged in the
complaint. If the facts recited in the complaint and the punishment provided for by law are sufficient to show
that the court in which the complaint is presented has jurisdiction, that court must assume jurisdiction.
In Criminal Case No. 013231-L, the value of the properties subject of qualified theft isP3,219,875.00, while in
Criminal Case No. 013423-L, the value of the property was pegged at P255,000.00. Under Article 309 of the
Revised Penal Code, the penalty for theft when the value of the stolen property exceeds P22,000.00 is as
follows:
1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing stolen is more than
12,000 pesos but does not exceed 20,000 pesos; but if the value of the thing stolen exceeds the latter amount,
the penalty shall be the maximum period of the one prescribed in this paragraph and one year of each
additional ten thousand pesos, but the total of the penalty which may be imposed shall not exceed twenty
years. In such cases, and in connection with the accessory penalties which may be imposed and for the
purpose of the other provisions of this Code, the penalty shall be termed prision mayor orreclusion temporal,
as the case may be.
Article 310 of the Revised Penal Code further provides for the penalty for qualified theft:
Art. 310. Qualified theft. - The crime of theft shall be punished by the penalties next higher by two degrees than
those respectively specified in the next preceding article, if committed by a domestic servant, or with grave
abuse of confidence, or if the property stolen is motor vehicle, mail matter or large cattle or consists of
coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if property is taken on
the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil
disturbance.
On the other hand, in Criminal Case No. 013424-L for estafa, the amount of the fraud involved is P500,000.00,
and under Article 315 of the Revised Penal Code, the penalty for such crime is'
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the
amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the
latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for
each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. In
such cases, and in connection with the accessory penalties which may be imposed and for the purpose of the
other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may
be.
Patently, then, based on the material allegations of the Informations in the three cases, the court a quo had
exclusive jurisdiction over the crimes charged.
The bare fact that the respondent was the president and general manager of the petitioner corporation when
the crimes charged were allegedly committed and was then a stockholder thereof does not in itself deprive the
court a quo of its exclusive jurisdiction over the crimes charged. The property of the corporation is not the
property of the stockholders or members or of its officers who are stockholders.34 As the Court held in an
avuncular case:35
... Properties registered in the name of the corporation are owned by it as an entity separate and distinct from
its members. While shares of stock constitute personal property, they do not represent property of the

corporation. The corporation has property of its own which consists chiefly of real estate (Nelson v. Owen, 113
Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa, 1, 123 N.W. 743). A share of stock only typifies an aliquot
part of the corporation's property, or the right to share in its proceeds to that extent when distributed according
to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398, 56 So. 235), but its holder is not the owner
of any part of the capital of the corporation (Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the
possession of any definite portion of its property or assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis, 35
Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate property (Harton v.
Johnston, 166 Ala., 317, 51 So., 992) '"36
As early as the case of Fisher v. Trinidad,37 the Court already declared that "[t]he distinction between the title of
a corporation, and the interest of its members or stockholders in the property of the corporation, is familiar and
well-settled. The ownership of that property is in the corporation, and not in the holders of shares of its stock.
The interest of each stockholder consists in the right to a proportionate part of the profits whenever dividends
are declared by the corporation, during its existence, under its charter, and to a like proportion of the property
remaining, upon the termination or dissolution of the corporation, after payment of its debts."38
We also agree with the ruling of the CA in its decision that the SEC (now the Regional Trial Court) had no
jurisdiction over the cases filed in the court a quo. The appellate court's reliance in the assailed Resolution
issued by the Board of Directors of the petitioner corporation, on Section 5(b) of P.D. No. 902, has no factual
and legal basis.
Section 5 of P.D. No. 902-A provides that the SEC39 shall have original and exclusive jurisdiction to hear and
decide cases involving the following:
(a) devices or schemes employed by, or any acts of, the board of directors, business associates, its officers or
partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of association or organizations registered with the Commission,
and
(b) controversies arising out of intra-corporate or partnership relations, between and among stockholders,
members or associates; between any or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively.
In Fabia v. Court of Appeals,40 the Court explained that Section 5 of P.D. No. 902-A should be taken in
conjunction with Section 6 of the law. It then proceeded to explain:
In synthesis, Sec. 5 of PD 902-A mandates that cases involving fraudulent actions and devices which are
detrimental to the interest of stockholders, members or associates and directors of the corporation are within
the original and exclusive jurisdiction of the SEC. Taken in conjunction with Sec. 6 of the same law, it will be
gathered that the fraudulent acts/schemes which the SEC shall exclusively investigate and prosecute are
those "in violation of any law or rules and regulations administered and enforced by the Commission" alone.
This investigative and prosecutorial powers of the SEC are further "without prejudice to any liability for violation
of any provision of The Revised Penal Code."
From the foregoing, it can thus be concluded that the filing of the civil/intra-corporate case before the SEC
does not preclude the simultaneous and concomitant filing of a criminal action before the regular courts; such
that, a fraudulent act may give rise to liability for violation of the rules and regulations of the SEC cognizable by
the SEC itself, as well as criminal liability for violation of the Revised Penal Code cognizable by the regular
courts, both charges to be filed and proceeded independently, and may be simultaneously with the other.41

Thus, the filing of a petition in the SEC for the nullification of the Resolution of May 2, 1995 issued by the
Chairman and two members of the Board of Directors of petitioner MPI, which authorized the filing of criminal
cases against respondent Umezawa, was not a bar to his prosecution for estafa and qualified theft for his
alleged fraudulent and delictual acts. The relationship of the party-litigants with each other or the position held
by petitioner as a corporate officer in respondent MPI during the time he committed the crime becomes merely
incidental and holds no bearing on jurisdiction. What is essential is that the fraudulent acts are likewise of a
criminal nature and hence cognizable by the regular courts.42 Thus, notwithstanding the fact that respondent
Umezawa was the president and general manager of petitioner MPI and a stockholder thereof, the latter may
still be prosecuted for the crimes charged. The alleged fraudulent acts of respondent Umezawa in this case
constitute the element of abuse of confidence, deceit or fraudulent means, and damage under Article 315 of
the Revised Penal Code on estafa.43
We agree with the encompassing disquisitions of the CA in its decision, to wit:
'A dispute involving the corporation and its stockholders is not necessarily an intra-corporate dispute
cognizable only by the Securities and Exchange Commission. Nor does itipso facto negate the jurisdiction of
the Regional Trial Court over the subject cases. The Supreme Court citing the case of Viray v. Court of
Appeals (G.R. No. 92481, 191 SCRA 308 [1990]) in Torio v. Court of Appeals (G.R. No. 107293, March 2,
1994, 230 SCRA 626) held:
"It should be obvious that not every conflict between a corporation and its stockholders involves corporate
matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers."
As the Supreme Court further ruled in the Torio case that "a contrary interpretation would distort the meaning
and intent of P.D. 902-A, the law re-organizing the Securities and Exchange Commission. The better policy in
determining which body has jurisdiction over a case would be to consider not only the relationship of the
parties but also the nature of the questions raised in the subject of the controversy.44
On the last issue, we find and so hold that the Informations state all the essential elements of estafa and
qualified theft. It was adequately alleged that respondent Umezawa, being the President and General Manager
of petitioner MPI, stole and misappropriated the properties of his employer, more specifically, petitioner MPI.
As expostulated by the CA in its decision:
'In any event, the allegations in the informations, if hypothetically admitted, are sufficient to bind Umezawa to
the charges of qualified theft and estafa. As aptly ruled by the court a quo in its Order of July 25, 1995, all the
elements of the offense of qualified theft are present. There is no basis for claiming otherwise. Furthermore,
the private offended party, as well as the subject matter of the felonious taking and the ownership thereof,
have been adequately indicated or identified leaving no room for any doubt on these matters.Considering that
the motions to quash of September 30, 1998 are fundamentally rehash of the motion to quash filed on May 29,
1995 and the culpable acts subject of the new informations are virtually the same as the first information filed
against Umezawa, there is no conceivable reason why the court a quo abandoned its previous stand and
controverted itself in regard the sufficiency of the informations.
In our considered view, and as the court a quo had correctly held in its Order of May 26, 1996, "even a SEC
ruling voiding the resolution authorizing the filing of criminal charges v. the accused Hajime Umezawa can
have no bearing on the validity of the informations filed in these three criminal cases as pointed out by private
complainant, the public offenses of qualified theft and estafa can [be] prosecuted de officio." The resolution of
the office of the prosecutor on the preliminary investigation as well as the re-investigation conducted on the
letter-complaint filed by private complainant company sufficiently established prima facie case against the
accused and the legality or illegality of the constitution of the board which authorized the filing of the complaint

does not materially affect either the informations filed against Umezawa or the pending criminal proceedings.
As petitioners contend, the action is now between the People of the Philippines and herein private
respondent.45
IN LIGHT OF ALL THE FOREGOING, the petitions are GRANTED. The Resolution of the Court of Appeals in
CA-G.R. SP No. 52440 dated August 8, 2001 is REVERSED and SET ASIDE. The Decision of the Court of
Appeals dated September 2, 1999 is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
Endnotes:

[G.R. No. 143312. August 12, 2005]

RICARDO S. SILVERIO, JR., ESSES DEVELOPMENT CORPORATION, and TRI-STAR FARMS,

INC., petitioners, vs. FILIPINO BUSINESS CONSULTANTS, INC., respondent.
DECISION
CARPIO, J.:

The Case
Before us is a petition for review of the Order of the Regional Trial Court, Fourth Judicial Region, Branch
XI, Balayan, Batangas (RTC Balayan) dated 26 May 2000. [1] The order suspended the enforcement of the
writ of possession that the RTC Balayan had previously issued in favor of petitioners Ricardo S. Silverio, Jr.
(Silverio, Jr.), Esses Development Corporation (Esses) and Tri-Star Farms, Inc. (Tri-Star). Filipino
Business Consultants, Inc. (FBCI), now Filipino Vastland Company, Inc. sought to suspend the writ of
possession on the ground of a supervening event. FBCI claimed that it had just acquired all the stocks of
Esses and Tri-Star. As the new owner of Esses and Tri-Star, FBCI asserted its right of possession to the
disputed property. Petitioners Silverio, Jr., Esses and Tri-Star question the RTC Balayans suspension of the
writ of possession and its jurisdiction to hold hearings on the supervening event.

The Antecedent Facts

The parties are wrangling over possession of a 62 hectare-land in Calatagan, Batangas (Calatagan
Property). Silverio, Jr. is the President of Esses and Tri-Star. Esses and Tri-Star were in possession of the
Calatagan Property, covered by TCT No. T-55200 and registered in the names of Esses and Tri-Star.
On 22 September 1995, Esses and Tri-Star executed a Deed of Sale with Assumption of Mortgage in favor
of FBCI. Esses and Tri-Star failed to redeem the Calatagan Property.
On 27 May 1997, FBCI filed a Petition for Consolidation of Title of the Calatagan Property with the RTC
Balayan.[2]
FBCI obtained a judgment by default. Subsequently, TCT No. T-55200 in the names of Esses and Tri-Star
was cancelled and TCT No. T-77656 was issued in FBCIs name. On 20 April 1998, the RTC Balayan issued a
writ of possession in FBCIs favor. FBCI then entered the Calatagan Property.
When Silverio, Jr., Esses and Tri-Star learned of the judgment by default and writ of possession, they filed
a petition for relief from judgment and the recall of the writ of possession. Silverio, Jr., Esses and Tri-Star
alleged that the judgment by default is void because the RTC Balayan did not acquire jurisdiction over them.
FBCI allegedly forged the service of summons on them.
On 28 December 1998, the RTC Balayan nullified and set aside the judgment by default and the writ of
possession. The RTC Balayan found that the summons and the complaint were not served on Silverio, Jr.,
Esses and Tri-Star. The RTC Balayan directed the service of summons anew on Silverio, Jr., Esses and TriStar.
The RTC Balayan denied FBCIs motion for reconsideration of the order. FBCI then filed a petition
for certiorari with the Court of Appeals questioning the RTC Balayans 28 December 1998 Order. [3] On 28 April
2000, the Court of Appeals denied FBCIs petition. The Court of Appeals also denied FBCIs motion for
reconsideration. On 13 August 2001, the Supreme Court denied FBCIs petition.

On 14 April 1999, the RTC Balayan modified its 28 December 1998 Order by upholding FBCIs possession
of the Calatagan Property. The RTC Balayan ruled that FBCI could not be deprived of possession of the
Calatagan Property because FBCI made substantial improvements on it. Possession could revert to Silverio,
Jr., Esses and Tri-Star only if they reimburse FBCI. The RTC Balayan gave Silverio, Jr., Esses and Tri-Star 15
days to file their responsive pleadings.
Silverio, Jr., Esses and Tri-Star moved for the partial reconsideration of the 14 April 1999 Order. Silverio,
Jr., Esses and Tri-Star argued that since the judgment by default was nullified, they should be restored to their
possession of the Calatagan Property. FBCI did not file any opposition to the motion.
On 9 November 1999, the RTC Balayan reversed its 14 April 1999 Order by holding that Silverio, Jr.,
Esses and Tri-Star had no duty to reimburse FBCI. The RTC Balayan pointed out that FBCI offered no
evidence to substantiate its claim for expenses. The 9 November 1999 Order also restored possession of the
Calatagan Property to Silverio, Jr., Esses and Tri-Star pursuant to Rule 39, Section 5 of the 1997 Rules of Civil
Procedure. This provision provides for restitution in case of reversal of an executed judgment. On 7 January
2000, the RTC Balayan denied FBCIs motion for reconsideration.
On 8 May 2000, the RTC Balayan issued the writ of possession to Silverio, Jr., Esses and Tri-Star.
On 12 May 2000, FBCI filed with the RTC Balayan a Manifestation and Motion to Recall Writ of
Possession on the ground that the decision of the Court of Appeals in CA-G.R. SP No. 56924 was not yet final
and FBCIs motion for reconsideration was still pending. The RTC Balayan set the hearing on 26 May 2000.
On 23 May 2000, FBCI filed with the RTC Balayan an Urgent Ex-Parte Motion to Suspend Enforcement of
Writ of Possession. FBCI pointed out that it is now the new owner of Esses and Tri-Star having purchased the
substantial and controlling shares of stocks[4] of the two corporations.
On the 26 May 2000 hearing, FBCI reiterated its claim of a supervening event, its ownership of Esses and
Tri-Star. FBCI informed the RTC Balayan that a new board of directors for Esses and Tri-Star had been
convened following the resignation of the members of the board of directors. The previous actions of the
former board of directors have been abandoned and the services of Atty. Vicente B. Chuidian, the counsel of
petitioners Silverio, Jr., Esses and Tri-Star, have been terminated.
On the same day, the RTC Balayan issued the order suspending the writ of possession it had earlier
issued to Silverio, Jr., Esses and Tri-Star. The RTC Balayan reasoned that it would violate the law on forum
shopping if it executed the writ while FBCIs motion for reconsideration of the Court of Appeals decision and
urgent motion to suspend the issuance of the writ of possession remained pending with the Court of
Appeals. The RTC Balayan noted that because of FBCIs strong resistance, Silverio, Jr., Esses and Tri-Star
have still to take possession of the Calatagan Property. More than ten days had already passed from the time
that the RTC Balayan had issued the writ of possession. FBCI had barricaded the Calatagan Property,
threatening bloodshed if possession will be taken away from it. The RTC Balayan believed that if it would not
restrain Silverio, Jr., Esses and Tri-Star from taking possession of the Calatagan Property, a violent
confrontation between the parties might erupt as reported in the Tempo newspaper in its 26 May 2000
issue. Without issuing a restraining order, the RTC Balayan suspended the writ by requesting the counsel of
Silverio, Jr., Esses and Tri-Star to allow the court to study the voluminous records of the case, which are to be
presented at the hearing on 16 June 2000. The hearing would determine the existence of a supervening
event.
On 15 June 2000, the RTC Balayan issued an Order cancelling the 16 June 2000 hearing so that the
Court of Appeals could resolve the issue regarding the existence of a supervening event. However, the RTC
Balayan declared that the suspension of the writ of possession would be lifted on 17 June 2000.
On 8 August 2000, Silverio, Jr., Esses and Tri-Star filed a complaint for annulment of contracts with
damages with the Regional Trial Court of Las Pias City, Branch 275 (RTC Las Pias).[5]

Issues
Silverio, Jr., Esses and Tri-Star argue that:

I
An ex parte motion cannot legally constitute an initiatory basis for the RTC Balayan to conduct additional
hearings in order to validate certain new allegations. Neither can said ex parte motion be the basis for the
suspension of a writ of possession being implemented.
II
When the RTC Balayan suspended the writ of possession, it was barred from hearing intra-corporate disputes.
And though Congress has now amended our law on the matter, the RTC still cannot proceed because of due
process and res judicata reasons.
III
A final and executory judgment cannot be enjoined except by an appropriate petition for relief, a direct attack
in another action or a collateral act in another action.
IV
Respondent FBCI is asking for a suspension of the writ of possession while at the same time threatening
violence if the writ of possession were to be implemented. The RTC Balayan had no lawful basis to suspend
the writ under these admitted circumstances.
V
Respondent has not directly answered petitioners legal theory. The petition is founded on admitted facts upon
which relief is sought under Rule 45. Respondent has altered these facts presenting its so called
counterstatements of facts and issues which involve questions of fact that are still litis pendentia at the RTC
Balayan. And which even involve an attempt to vary res judicata.
VI
Contrary to respondents claims, that the RTC order of 15 June 2000 has rendered this case moot and
academic quite on the contrary said order calls upon the Supreme Court to decide whether or not, the
RTC Balayan may continue to conduct its hearings on suspending the writ of possession.
VII
Respondents theory that an order suspending a writ of possession is interlocutory in nature, and therefore
inappealable, is not supported by jurisprudence.
VIII
Respondents views on when suspending a writ of execution is appropriate would make the exception as
rule. And respondents reliance on Flores vs. CA, et al. is totally misplaced. In the Flores case, the party
being dispossessed was a judgment creditor, who was admitted by the adverse party to be the owner.
IX
The question of jus possessionis on the Calatagan Property is already res judicata while the question of jus
possidendi is still under litis pendentia. For that reason, respondent has lost all his legal options in retaining
the property procured under a faked service of summons.
X

Respondents arguments in his 11-06-01 Memo on (a) forum shopping, (b) petitioners lack of capacity to
sue, (c) service of summons already served (d) no intra-corporate dispute and (e) the relief herein
preempted by events are ratiocinations of miniscule weight, meriting only the slightest comment.[6]
FBCI raises the following issues:
1. Whether the present case has been rendered moot and academic by the Order of the RTC Balayan
dated 15 June 2000 and the filing of an action with the Regional Trial Court of Las Pias City;
2. Whether the present appeal should be dismissed on the ground of forum shopping;
3. Whether the RTC Balayan had the authority to suspend enforcement of the writ of possession and to
conduct hearings on a new set of facts;
4. Whether the present case involves an intra-corporate controversy;
5. Whether appeal by certiorari under Rule 45 is the proper remedy under the given facts of the case.[7]

The Ruling of the Court

The petition has merit.

Procedural Issues
Before resolving the threshold issue, which is the existence of a supervening event, we first address the
following procedural issues: (1) whether appeal is the proper remedy against an order suspending the
execution of a writ of possession; (2) whether the issue of possession was mooted by the 15 June 2000 Order
of the RTC Balayan; and (3) whether the filing of a civil case with the RTC Las Pias constitutes forum
shopping.
First, interlocutory orders are those that determine incidental matters that do not touch on the merits of the
case or put an end to the proceedings. [8] The proper remedy to question an improvident interlocutory order is a
petition for certiorari under Rule 65, not Rule 45.[9] A petition for review under Rule 45 is the proper mode of
redress to question final judgments.[10]
An order staying the execution of the writ of possession is an interlocutory order. [11] Clearly, this order
cannot be appealed. A petition for certiorari was therefore the correct remedy. Moreover, Silverio, Jr., Esses
and Tri-Star pointed out that the RTC Balayan acted on an ex-parte motion to suspend the writ of possession,
which is a litigious matter, without complying with the rules on notice and hearing. Silverio, Jr., Esses and TriStar also assail the RTC Balayans impending move to accept FBCIs evidence on its subsequent ownership of
Esses and Tri-Star. In effect, Silverio, Jr., Esses and Tri-Star accuse the RTC Balayan of acting without or in
excess of jurisdiction or with grave abuse of discretion, which is within the ambit ofcertiorari.
However, in the exercise of our judicial discretion, we will treat the appeal as a petition under Rule 65.
Technical rules must be suspended whenever the purposes of justice warrant it, such as in this case where
substantial and important issues await resolution.
[12]

Second, the RTC Balayans 15 June 2000 Order lifting the suspension of the writ of possession was
issued to correct its action on FBCIs ex-parte motion, which did not have the required notice and
hearing. This issue has thus become a fait accompli. However, while the 15 June 2000 Order is supposed to
have mooted the suspension of the execution of the writ of possession by lifting the suspension on 17 June
2000, Silverio, Jr., Esses and Tri-Star claim that the writ has not been executed in their favor. Thus, the issues
in this petition are far from being moot. Also, the existence of a supervening event is another issue that must
be resolved since the RTC Balayan had instead submitted to the higher courts the resolution of this issue.

Third, Silverio, Jr., Esses and Tri-Star are not guilty of forum shopping for filing another action against
FBCI with the RTC Las Pias during the pendency of this case with the RTC Balayan. Forum shopping
consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or
successively, to obtain a favorable judgment.[13]
The parties and cause of action in the present case before the RTC Balayan and in the case before the
RTC Las Pias are different. The present case was filed by FBCI against Silverio, Jr., Esses and Tri-Star for
the consolidation of title over the Calatagan Property. On the other hand, the case before the RTC Las Pias
was filed by Silverio, Jr., Esses and Tri-Star against FBCI and other defendants for the annulment of contract
with damages, tort and culpa aquiliana (civil fraud).
In its complaint before the RTC Las Pias, Silverio, Jr., Esses and Tri-Star informed the court that there is
a pending case with the RTC Balayan over the Calatagan Property.[14]Silverio, Jr., Esses and Tri-Star made it
clear in the complaint that the case before the RTC Las Pias will focus on the Makati Tuscany property and
any reference to the Calatagan Property is meant to serve only as proof or evidence of the plan, system,
scheme, habit, etc., lurking behind defendants interlocking acts constituting interlocking tort and interlocking
fraud.[15] Clearly, FBCIs claim of forum shopping against Silverio, Jr., Esses and Tri-Star has no basis.

No Supervening Event in this Case

FBCI took possession of the Calatagan Property after the RTC Balayan rendered a judgment by default in
FBCIs favor. The judgment by default was nullified after the RTC Balayan found out that the service of
summons on Silverio, Jr., Esses and Tri-Star was procured fraudulently. The RTC Balayan thus recalled the
writ of possession it had issued to FBCI. Silverio, Jr., Esses and Tri-Star were served anew with
summons. The RTC Balayan restored possession of the Calatagan Property to Silverio, Jr., Esses and Tri-Star
as restitution resulting from the annulment of the judgment by default. The order restoring possession of the
Calatagan Property to Silverio, Jr., Esses and Tri-Star has attained finality. This case then proceeded to pretrial.
FBCI has resisted the enforcement of the writ of possession by barricading the Calatagan Property and
threatening violence if its possession of the property is taken away from it. To avoid bloodshed, as FBCI also
claimed that Silverio, Jr. had armed civilians threatening to shoot FBCIs representatives, [16] the RTC Balayan
momentarily suspended the execution of the writ. The RTC Balayan also had to rule on FBCIs claim of a
supervening event that would allegedly make the execution of the writ absurd, [17] as FBCI alleges it now owns
the controlling interest in Esses and Tri-Star. The RTC Balayan lifted the suspension of the writ but it cancelled
the hearings on the supervening event to give way to the Court of Appeals action on this issue. The RTC
Balayan decided to await the appellate courts resolution because it did not want to violate the rule against
forum shopping.
Silverio, Jr., Esses and Tri-Star argue that the RTC Balayan has no power to conduct hearings on the
supervening event because res judicata has set in on the issue. They also contend that the supervening event
is an intra-corporate controversy that is within the jurisdiction of the Securities and Exchange Commission, not
the trial court. Silverio, Jr., Esses and Tri-Star point out that despite the lifting of the suspension RTC Balayan
has still to execute the writ of possession in their favor. On the other hand, FBCI maintains that its acquisition
of Esses and Tri-Star is a supervening event, which the RTC Balayan could hear and is sufficient ground to
stay the execution of the writ of possession.
We rule in favor of Silverio, Jr., Esses and Tri-Star.
The court may stay immediate execution of a judgment when supervening events, occurring subsequent
to the judgment, bring about a material change in the situation of the parties. [18] To justify the stay of immediate
execution, the supervening events must have a direct effect on the matter already litigated and settled. [19] Or,
the supervening events must create a substantial change in the rights or relations of the parties which would
render execution of a final judgment unjust, impossible or inequitable making it imperative to stay immediate
execution in the interest of justice.[20]

In this case, there is no judgment on the merits, only a judgment on a technicality. Even then, the
judgment of default rendered in FBCIs favor was voided because the RTC Balayan did not acquire jurisdiction
over Silverio, Jr., Esses and Tri-Star due to a fraudulent service of summons. The case for consolidation of
title, from which this petition stemmed, is in fact still being litigated before the RTC Balayan.
The issuance of the writ of possession in favor of Silverio, Jr., Esses and Tri-Star is also not a judgment on
the merits.[21] A writ of possession is an order whereby the sheriff is commanded to place a person in
possession of real or personal property. [22] The issuance of the writ of possession to Silverio, Jr., Esses and TriStar is but an order of restitution a consequence of the nullification of the judgment by default. The order of
restitution placed the parties in the situation prior to the RTC Balayans rendition of the void judgment by
default. Title to the Calatagan Property is still in the names of Esses and Tri-Star. Possession of the
Calatagan Property must revert to Esses and Tri-Star as legal owners of the property.
However, with the reinstitution of the case for consolidation of title with the RTC Balayan, possession of
the Calatagan Property is now subject to the outcome of the case. Nonetheless, while this case is still under
litigation it is only in the pre-trial stage Esses and Tri-Star in whose names the Calatagan Property is titled
and in whose favor the order of restitution was issued, are the ones entitled to possession of the property.
We do not agree with Silverio, Jr., Esses and Tri-Stars assertion that the RTC Balayan has no power to
conduct a hearing on the existence of a supervening event because of res judicata. Res judicata does not set
in where the court is without jurisdiction over the subject or person, and therefore, the judgment is a
nullity[23] such as the judgment by default in this case. The order that voided the judgment by default and the
order of restitution merely recognized the nullity of the judgment by default. The orders did not adjudicate on
the merits of the case. Since res judicata had not set in, the case was tried anew upon the proper service of
summons on Silverio, Jr., Esses and Tri-Star.
Moreover, it is the court issuing the writ of possession that has control and supervision over its processes.
The RTC Balayan can therefore hear the evidence on the existence of a supervening event, provided the
subject matter is within the jurisdiction of the court, as this could affect the execution of the writ of possession.
[24]

We are, therefore, dismayed with the RTC Balayans referral of the existence of the supervening event to
the higher courts. Courts must not shirk from their duty to rule on an issue. The duty of the appellate or higher
courts is to review the findings and rulings of the lower courts, not to issue advisories. Courts must execute its
processes and should not succumb to threats by any of the parties to resort to violence in case of such
enforcement. Had the RTC Balayan immediately passed upon FBCIs allegation of a supervening event, it
would have been apparent that this claim is without merit. The RTC Balayan should have then enforced
posthaste the writ of possession in Silverio, Jr., Esses and Tri-Stars favor.
FBCIs acquisition of the substantial and controlling shares of stocks [25] of Esses and Tri-Star does not
create a substantial change in the rights or relations of the parties that would entitle FBCI to possession of the
Calatagan Property, a corporate property of Esses and Tri-Star. Esses and Tri-Star, just like FBCI, are
corporations. A corporation has a personality distinct from that of its stockholders. As early as the case
of Stockholders of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila,[26] the Court explained the
principle of separate juridical personality in this wise:
A corporation is a juridical person distinct from the members composing it. Properties registered in the name of
the corporation are owned by it as an entity separate and distinct from its members. While shares of stock
constitute personal property, they do not represent property of the corporation. The corporation has property of
its own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145
Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part of the corporation's property, or the right to
share in its proceeds to that extent when distributed according to law and equity (Hall & Faley v. Alabama
Terminal, 173 Ala 398, 56 So., 235), but its holder is not the owner of any part of the capital of the corporation
(Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property
or assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a coowner or tenant in common of the corporate property (Harton v. Hohnston, 166 Ala., 317, 51 So., 992).
Thus, FBCIs alleged controlling shareholdings in Esses and Tri-Star merely represent a proportionate or
aliquot interest in the properties of the two corporations. Such controlling shareholdings do not vest FBCI with
any legal right or title to any of Esses and Tri-Stars corporate properties. As a stockholder, FBCI has an

interest in Esses and Tri-Stars corporate properties that is only equitable or beneficial in nature. Even
assuming that FBCI is the controlling shareholder of Esses and Tri-Star, it does not legally make it the owner of
the Calatagan Property, which is legally owned by Esses and Tri-Star as distinct juridical persons. As such,
FBCI is not entitled to the possession of any definite portion of the Calatagan Property or any of Esses and TriStars properties or assets. FBCI is not a co-owner or tenant in common of the Calatagan Property or any of
Esses and Tri-Stars corporate properties.
We see no reason why the execution of the writ of possession has been long delayed. Possession of the
Calatagan Property must be restored to Esses and Tri-Star through their representative, Silverio, Jr. There is
no proof on record that Silverio, Jr. has ceased to be the representative of Esses and Tri-Star in this case.
WHEREFORE, we GRANT the petition. The Regional Trial Court, Branch XI, Balayan, Batangas is
ordered to immediately execute the writ of possession in Civil Case No. 3356 in favor of Esses Development
Corporation and Tri-Star Farms, Inc. through their representative, Ricardo S. Silverio, Jr. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.