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G.R. No. 172428 November 28, 2008

Facts: On 28 March 1978, spouses Crystal obtained a P300, 000.00 loan in behalf of the Cebu Contractors
Consortium Co. (CCCC) from the BPI-Butuan. The loan was secured by a chattel mortgage on heavy equipment and
machinery of CCCC. On the same date, the spouses executed in favor of BPI-Butuan a Continuing Suretyship where
they bound themselves as surety of CCCC in the aggregate principal sum of not exceeding P300, 000.00.
Thereafter, or on 29 March 1979, Raymundo Crystal executed a promissory note for the amount of P300, 000.00,
also in favor of BPI-Butuan. Sometime in August 1979, CCCC renewed a previous loan, this time from BPI, Cebu City
branch (BPI-Cebu City). However, CCCC had no real property to offer as security for the loan; hence, the spouses
executed a real estate mortgage over their own real property. They executed another real estate mortgage over the
same lot in favor of BPI-Cebu City, to secure an additional loan of P20,000.00 of CCCC. CCCC failed to pay its loans
to both BPI-Butuan and BPI-Cebu City when they became due. CCCC, as well as the spouses, failed to pay their
obligations despite demands. Thus, BPI resorted to the foreclosure of the chattel mortgage and the real estate
mortgage. The foreclosure sale on the chattel mortgage was initially stalled and done. BPI filed a complaint for sum
of money against CCCC and the spouses before the Regional Trial Court, seeking to recover the deficiency of the
loan of CCCC and the spouses with BPI-Butuan Before the Court, petitioners who are the heirs of the spouses argue
that the failure of the spouses to pay the BPI-Cebu City loan of P120,000.00 was due to BPIs illegal refusal to
accept payment for the loan unless the P300,000.00 loan from BPI-Butuan would also be paid. Consequently, in
view of BPIs unjust refusal to accept payment of the BPI-Cebu City loan, the loan obligation of the spouses was
extinguished, petitioners contend.

Issues: Whether or not the obligation of the spouses is extinguished

Whether or not BPI is entitled to moral damages
Held: No, the obligation is not yet extinguished. Under Art. 1236 of the Civil Code, the creditor is not bound to
accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary. The Court sees no stipulation in the promissory note which states that a third
person may fulfill the spouses obligation. Thus, it is clear that the spouses alone bear responsibility for the same. A
solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is
entitled to demand the satisfaction of the whole obligation from any or all of the debtors. A liability is solidary "only
when the obligation expressly so states, when the law so provides or when the nature of the obligation so
requires."24 Thus, when the obligor undertakes to be "jointly and severally" liable, it means that the obligation is
solidary. More importantly, the promissory note, wherein the spouses undertook to be solidarily liable for the
principal loan, partakes the nature of a suretyship and therefore is an additional security for the loan.
No, they are not entitled to moral damages. BPI is not entitled to moral damages. A juridical person is generally not
entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals found BPI as
"being famous and having gained its familiarity and respect not only in the Philippines but also in the whole world
because of its good will and good reputation must protect and defend the same against any unwarranted suit such
as the case at bench. Obviously, an artificial person like herein appellant corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social humiliation which are
basis of moral damages. A corporation may have good reputation which, if besmirched may also be a ground for the
award of moral damages. Indeed, while the Court may allow the grant of moral damages to corporations, it is not
automatically granted; there must still be proof of the existence of the factual basis of the damage and its causal
relation to the defendants acts. This is so because moral damages, though incapable of pecuniary estimation, are
in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a
penalty on the wrongdoer.

ABS-CBN Broadcasting Corporation vs Court of Appeals

February 4, 2013

301 SCRA 572 Business Organization Corporation Law Delegation of Corporate Powers Moral Damages
In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-Concio, requested Viva
Production, Inc. to allow ABS-CBN to air at least 14 films produced by Viva. Pursuant to this request, a meeting was
held between Vivas representative (Vicente Del Rosario) and ABS-CBNs Eugenio Lopez (General Manager) and
Santos-Concio was held on April 2, 1992. During the meeting Del Rosario proposed a film package which will allow
ABS-CBN to air 104 Viva films for P60 million. Later, Santos-Concio, in a letter to Del Rosario, proposed a
counterproposal of 53 films (including the 14 films initially requested) for P35 million. Del Rosario presented the
counter offer to Vivas Board of Directors but the Board rejected the counter offer. Several negotiations were
subsequently made but on April 29, 1992, Viva made an agreement with Republic Broadcasting Corporation
(referred to as RBS or GMA 7) which gave exclusive rights to RBS to air 104 Viva films including the 14 films
initially requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that there is already a perfected
contract between Viva and ABS-CBN in the April 2, 1992 meeting. Lopez testified that Del Rosario agreed to the
counterproposal and he (Lopez) even put the agreement in a napkin which was signed and given to Del Rosario.
ABS-CBN also filed an injunction against RBS to enjoin the latter from airing the films. The injunction was granted.
RBS now filed a countersuit with a prayer for moral damages as it claimed that its reputation was debased when
they failed to air the shows that they promised to their viewers. RBS relied on the ruling in People vs Manero and
Mambulao Lumber vs PNB which states that a corporation may recover moral damages if it has a good reputation
that is debased, resulting in social humiliation. The trial court ruled in favor of Viva and RBS. The Court of Appeals
affirmed the trial court.
Whether or not a contract was perfected in the April 2, 1992 meeting between the representatives of the
Whether or not a corporation, like RBS, is entitled to an award of moral damages upon grounds of debased
1. No. There is no proof that a contract was perfected in the said meeting. Lopez testimony about the contract
being written in a napkin is not corroborated because the napkin was never produced in court. Further, there is no
meeting of the minds because Del Rosarios offer was of 104 films for P60 million was not accepted. And that the
alleged counter-offer made by Lopez on the same day was not also accepted because theres no proof of such. The
counter offer can only be deemed to have been made days after the April 2 meeting when Santos-Concio sent a
letter to Del Rosario containing the counter-offer. Regardless, there was no showing that Del Rosario accepted. But
even if he did accept, such acceptance will not bloom into a perfected contract because Del Rosario has no
authority to do so.
As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the Board of Directors. But
this power may be delegated to a corporate committee, a corporate officer or corporate manager. Such a
delegation must be clear and specific. In the case at bar, there was no such delegation to Del Rosario. The fact that

he has to present the counteroffer to the Board of Directors of Viva is proof that the contract must be accepted first
by the Vivas Board. Hence, even if Del Rosario accepted the counter-offer, it did not result to a contract because it
will not bind Viva sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because, being an artificial person
and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore,
experience physical suffering and mental anguish, which call be experienced only by one having a nervous
system. No moral damages can be awarded to a juridical person. The statement in the case of People vs Manero
and Mambulao Lumber vs PNB is a mere obiter dictum hence it is not binding as a jurisprudence.






Case Digest GR 185590, Apr 21 2014


Redmont is a domestic corporation interested in the mining and exploration of some areas in Palawan. Upon
learning that those areas were covered by MPSA applications of other three (allegedly Filipino) corporations Narra,
Tesoro, and MacArthur, it filed a petition before the Panel of Arbitrators of DENR seeking to deny their permits on
the ground that these corporations are in reality foreign-owned. MBMI, a 100% Canadian corporation, owns 40% of
the shares of PLMC (which owns 5,997 shares of Narra), 40% of the shares of MMC (which owns 5,997 shares of
McArthur) and 40% of the shares of SLMC (which, in turn, owns 5,997 shares of Tesoro).

Aside from the MPSA, the three corporations also applied for FTAA with the Office of the President. In their answer,
they countered that (1) the liberal Control Test must be used in determining the nationality of a corporation as
based on Sec 3 of the Foreign Investment Act which as they claimed admits of corporate layering schemes, and
that (2) the nationality question is no longer material because of their subsequent application for FTAA.

Commercial / Political Law


Issue 1: W/N the Grandfather Rule must be applied in this case

Yes. It is the intention of the framers of the Constitution to apply the Grandfather Rule in cases where corporate
layering is present.

First, as a rule in statutory construction, when there is conflict between the Constitution and a statute, the
Constitution will prevail. In this instance, specifically pertaining to the provisions under Art. XII of the Constitution
on National Economy and Patrimony, Sec. 3 of the FIA will have no place of application. Corporate layering is
admittedly allowed by the FIA, but if it is used to circumvent the Constitution and other pertinent laws, then it
becomes illegal.

Second, under the SEC Rule1 and DOJ Opinion2 , the Grandfather Rule must be applied when the 60-40 Filipinoforeign equity ownership is in doubt. Doubt is present in the Filipino equity ownership of Narra, Tesoro, and
MacArthur since their common investor, the 100% Canadian-owned corporation MBMI, funded them.

Under the Grandfather Rule, it is not enough that the corporation does have the required 60% Filipino stockholdings
at face value. To determine the percentage of the ultimate Filipino ownership, it must first be traced to the level of
the investing corporation and added to the shares directly owned in the investee corporation. Applying this rule, it
turns out that the Canadian corporation owns more than 60% of the equity interests of Narra, Tesoro and
MacArthur. Hence, the latter are disqualified to participate in the exploration, development and utilization of the
Philippines natural resources.










2 SEC Opinion May 13, 1990

Remedial Law
Issue 2: W/N the case has become moot as a result of the MPSA conversion to FTAA

No. There are certain exceptions to mootness principle and the mere raising of an issue of mootness will not
deter the courts from trying a case when there is a valid reason to do so.

The SC noted that a grave violation of the Constitution is being committed by a foreign corporation through a
myriad of corporate layering under different, allegedly, Filipino corporations. The intricate corporate layering
utilized by the Canadian company, MBMI, is of exceptional character and involves paramount public interest since it
undeniably affects the exploitation of our Countrys natural resources. The corresponding actions of petitioners
during the lifetime and existence of the instant case raise questions as what principle is to be applied to cases with
similar issues. No definite ruling on such principle has been pronounced by the Court; hence, the disposition of the

issues or errors in the instant case will serve as a guide to the bench, the bar and the public. Finally, the instant
case is capable of repetition yet evading review, since the Canadian company, MBMI, can keep on utilizing dummy
Filipino corporations through various schemes of corporate layering and conversion of applications to skirt the
constitutional prohibition against foreign mining in Philippine soil.