TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D.
existence and are today in the possession of the domiciliary administrator in New
TAYAG,
vs.
BENGUET CONSOLIDATED, INC.
Facts:
Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among
others, two stock certificates covering 33,002 shares in Benguet Consolidated, and
the said certificates were in the possession of the County Trust Company of New
York, which is the domiciliary administrator of the estate of the deceased. A dispute
arose between the domiciliary administrator in New York and Renato D. Tayag who is
the ancillary administrator in the Philippines, as to which of them was entitled to the
possession of the stock certificates in question. On January 27, 1964, the Court of
First Instance of Manila ordered the domiciliary administrator, County Trust Company,
to "produce and deposit" them with the ancillary administrator or with the Clerk of
Court. The domiciliary administrator did not comply with the order, and on February
11, 1964, the ancillary administrator petitioned the court to "issue an order declaring
the certificate or certificates of stocks covering the 33,002 shares issued in the name
of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered
as lost.
Benguet Consolidated, Inc. opposed Tayags petition because the said stock
certificates are not loxt but are in existence, and are in the possession of the
domiciliary administrator, the County Trust Company, in New York, U.S.A.Thus, it is
of Benguets view therefore, that under the circumstances, the stock certificates
cannot be declared or considered as lost. Moreover, it allege that there was a failure
to observe certain requirements of its by-laws before new stock certificates could be
issued. Hence, Benguet appealed.
Issue:
Whether or not the order is valid?
Held: Yes.
Ruling:
-The authority of the probate court to require that ancillary administrator's right to
"the stock certificates covering the 33,002 shares ... standing in her name in the
books of Benguet Consolidated, Inc...." be respected is equally beyond question since
appellant is a Philippine corporation owing full allegiance and subject to the
unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be
considered in any wise as immune from lawful court orders. Our holding in Wells
Fargo Bank and Union v. Collector of Internal Revenue8 finds application. "In the
instant case, the actual situs of the shares of stock is in the Philippines, the
corporation being domiciled [here]."
-As appellant Benguet stated, the "lower court could not "consider as lost" the stock
certificates in question when, as a matter of fact, his Honor the trial Judge knew, and
does know, and it is admitted by the appellee, that the said stock certificates are in
York. However, the court is f the belief that the occasion did call for the employment
of a legal fiction (devices to advance the ends of justice ), to put an end to the
anomalous situation of a valid judicial order being disregarded with apparent impunity
by a party domiciled abroad.
-Benguet Consolidated, Inc., expresses that issuance of new stock certificates as
provided for in the order cannot be done since one of the provisions of its by-laws
which set forth the procedure to be followed in case of a lost, stolen or destroyed
stock certificate, states that their issuance would await a final court order as to who
is the rightful owner, and yet, even they admitted that "it is immaterial ... who is
entitled to the possession of the stock certificates ...". Assuming that a contrariety
exists between the above by-law and the command of a court decree, the latter is to
be followed. It would be most highly unorthodox, if a corporate by-law would be
accorded such a high estate in the jural order that a court must not only take note of
it but yield to its alleged controlling force.
-A corporation as known to Philippine jurisprudence is a creature without any
existence until it has received the imprimatur of the state according to law, the
source of its very existence, thus, it cannot legitimately refuse to yield obedience to
acts of its state organs, certainly not excluding the judiciary, whenever called upon to
do so. It does not have the autonomy to choose which court order to follow and
which to disregard. It is not immune from judicial control in those instances, where a
duty under the law as ascertained in an appropriate legal proceeding is cast upon it.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the
Court of First Instance, dated May 18, 1964, is affirmed. With costs against oppositor-
appelant Benguet Consolidated, Inc.
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs.
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL
FEDERATION, respondents.
KAPUNAN, J.:
Facts:
Intl Express Travel wrote Phil Football Federation (PFF), through its president Henri
Kahn, and offered its services to the latter. PFF accepted.
IET was able to secure plane tickets for the athletes to the SEA Games etc. total
ticket cost was Php 449,654.83. Several payments had been made by PFF and
personally by Kahn. Still, however, the balance has not been totally paid. Thereafter,
no payments were made despite repeated demands.
IET filed a civil case before the RTC suing Kahn in his personal capacity and as
president of PFF and impleaded PFF as alternative defendant.
Kahn averred that IET has no cause of action against him because he merely acted
as an agent of PFF which has a separate juridical personality.
Issue: (MAIN) WON PFF has a juridical personality and is liable for the unpaid
obligation.
RTC: no juridical personality. Kahn solely liable.
CA: has juridical personality. Kahn not liable.
Held: PFF has no juridical personality. Kahn is solely liable.
Ratio:
RA 3135 and PD 604 granted the power to national sports association to acquire
juridical personality. However, this does not automatically take place by the mere
passage of the said laws. It is a basic postulate that before a corporation may acquire
juridical personality, the State must give its consent either in the form of a special law
or a general enabling act. These laws merely recognized the existence of national
sports associations and provided the manner by which these entities may acquire
juridical personality. Clearly the above cited provisions require that before an entity
may be considered as a national sports association, such entity must be recognized
by the accrediting organization, the Philippine Amateur Athletic Federation under R.A.
3135, and the Department of Youth and Sports Development under P.D. 604. This
fact of recognition, however, Henri Kahn failed to substantiate
Issue 2: Whether or not Doctrine of Corporation by estoppel applies.
Held 2: No. The application of the doctrine applies to a third party only when he tries
to escape liability on a contract from which he has benefited on the irrelevant ground
of defective incorporation. In the case at bar, the petitioner is not trying to escape
liability from the contract but rather is the one claiming from the contract.
Doctrine:
It is a settled principal in corporation law that any person acting or purporting to act
on behalf of a corporation which has no valid existence assumes such privileges and
becomes personally liable for contract entered into or for other acts performed as
such agent.
BENNY HUNG V. BPI FINANCE CORPORATION
Facts:
Guess Footwear and BPI Express Credit Card Corporation entered into two merchant
agreements whereby Guess Footwear agreed to honor validly issued BPI Express
Credit Cards in the purchase of its goods and services. In the first agreement,
petitioner Benny Hung signed as owner and manager of Guess Footwear. In the
second agreement, he signed as presidentGuess? Footwear(which he also referred as
B & R Sportswear Enterprises). Later, respondent BPI mistakenly credited through
352 checks (P3,480,427.23) to the account of Guess? Footwear. Petitioner Hung
transferred P963,604.00 from the Bank Account of B&R Sportwear Enterprises to
BPIs account as partial payment (partial settlement of overpayments).BPI demanded
the balance payment but Guess Footwear failed to pay. BPI filed a collection suit
before RTC Makati City against B& R Sportswear Distributor, Inc (B&R SDI). Although
the case was against B & R Sportswear Distributor, Inc., it was B & R Footwear
Distributors, Inc., that filed an answer, appeared and participated in the trial.
RTC: against B&R SDI, ordering the latter to pay BPI. During execution of judgment,
it was discovered the B&R SDI is a non-existing entity. Respondent filed Motion to
pierce the corporate veil of B&R Footwear Distributors Inc. to hold stockholders and
officers, including Benny Hung personally liable.
RTC: Benny Hung is liable since he signed the merchant agreements in his personal
capacity.
CA: affirmed TC; since B & R Sportswear Distributor, Inc. is not a corporation, it
therefore has no personality separate from petitioner Benny Hung who induced the
respondent BPI and the RTC to believe that it is a corporation.
Motion for Reconsideration denied, hence this instant petition.
ISSUE: Whether petitioner can be held liable for the satisfaction of the RTCs Decision
against B & R Sportswear Distributor, Inc.?
RULING:
Yes. Clearly, petitioner has represented in his dealings with respondent that Guess?
Footwear or B & R Footwear Distributors, Inc. is also B & R Sportswear Enterprises.
For this reason, the more complete correction on the name of defendant should be
from B & R Sportswear Distributor, Inc. to B & R Footwear Distributors, Inc. and
Benny Hung. Petitioner is the proper defendant because his sole proprietorship B & R
Sportswear Enterprises has no juridical personality apart from him.[19] Again, the
correction only confirms the voluntary correction already made by B & R Footwear
Distributors, Inc. or Guess? Footwear which is also B & R Sportswear Enterprises.
Correction of this formal defect is also allowed by Section 4, Rule 10 of the Rules of
Court.
(Side note: As to the correction of name; in case this will be asked)
Our impression that respondent BPI should have named petitioner as a defendant
finds validation from (1) petitioners own admission that B & R Sportswear Enterprises
is his sole proprietorship and (2) respondents belated prayer that defendants name
be changed to Benny Hung and/or B & R Footwear Distributors, Inc. on the ground
that such relief is allowed under Sections 4[16] and 5,[17] Rule 10 of the Rules of
Court.
Indeed, we can validly make the formal correction on the name of the defendant
from B & R Sportswear Distributor, Inc. to B & R Footwear Distributors, Inc. Such
correction only confirms the voluntary correction already made by B & R Footwear
Distributors, Inc. which answered the complaint and claimed that it is the defendant.
Respondents belated prayer for correction is also sufficient since a court can even
make the correction motupropio. More importantly, no prejudice is caused to B & R
Footwear Distributors, Inc. considering its participation in the trial.
Boyer-Roxas vs. Court of Appeals
Facts:
- Eugenia Roxas originally owned the questioned properties in this case which
include among others cottages, houses, buildings, swimming pools, tennis
 court, restaurants, open pavilions inside the Hidden Valley Springs Resort in
Laguna.
- When Eugenia died, her heirs among whom were Rebecca Boyer-Roxas and
Guillermo Roxas decided to form the corporation, Heirs of Eugenia V. Roxas,
Inc. with the inherited properties as capital of the corporation.
- This was incorporated with the primary purpose of engaging in agriculture to
develop the inherited properties.
- The Articles of Incorporation however was amended to allow it to engage in
the resort business.
- Accordingly, the corporation put up a resort known as Hidden Valley Spring
Resort where the questioned properties were located.
- Eufrocino Roxas, (husband of Eugenia) during his lifetime together with
Eribito Roxas ( husband of Rebecca and father of Guillermo) managed the
corporation.
- Eriberto and Rebecca occupied the staff house as their residence and
converted the recreation hall into a residential house with the blessings of
Eufrocino, who was then the majority stockholder of the corporation.
- The Board of directors did not object to the actions of Eufrocino.
- Rebecca and Guillermo were allowed to stay within the questioned
properties until the Board of Directors approved a resolution ejecting them.
- Despite demand however, they refused to vacate.
- Hence, two separate complaints for recovery of possession was filed.
- TC affirmed by CA, ordered Rebecca and all persons claiming under her to
vacate the premises.
- Hence, this petition.
Issue: Whether or not the petitioner could be ejected? Yes.
Held:
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. A share of stock only typifies an aliquot part of the corporations
property or the right to share in its proceeds to that extent when distributed
according to law and equity but its holder is not the owner of any part of the capital
of the corporation. Nor is he entitled to the possession of any definite portion of its
property or assets. The stockholder is not a co-owner or tenant in common of the
corporate property. A corporation can therefore sue to recover real property being
occupied by its former president (who was also a significant stockholder) for it has a
juridical personality separate and distinct from its stockholders even though in the
past the corporation allowed the president to enjoy the possession of the property.
There is nothing irregular in the adoption of the Resolution by the BOD ejecting
petitioners for Corporations expansion and improvement program.
- Petitioners stay within the questioned properties was merely by tolerance of
the respondent corporation in deference to the wishes of Eufrocino Roxas.
- Eufrocinos action cannot bound the corporation forever.
The Corrporation may elect to eject petitioners at any time it wishes for the benefit
and interest of the respondent corporation.
PHILIPPINE STOCK EXCHANGE vs SECURITIES & EXCHANGE COMMISSION
FACTS:
The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, had
sought to offer its shares to the public in order to raise funds allegedly to develop its
properties and pay its loans with several banking institutions. In January, 1995, PALI
was issued a Permit to Sell its shares to the public by the Securities and Exchange
Commission (SEC). To facilitate the trading of its shares among investors, PALI
sought to course the trading of its shares through the Philippine Stock Exchange, Inc.
(PSE), for which purpose it filed the said stock exchange an application to list its
shares, with supporting documents attached. The Listing Committee of the PSE, upon
a perusal of PALIs application, recommended to the PSEs Board of Governors the
approval of PALIs listing application. Before it could act upon PALIs application, the
Board of Governors of PSE received a letter from the heirs of Ferdinand E. Marcos,
claiming that the late President Marcos was the legal and beneficial owner of certain
properties forming part of the Puerto Azul Beach Hotel and Resort Complex which
PALI claims to be among its assets and that the Ternate Development Corporation,
which is among the stockholders of PALI, likewise appears to have been held and
continue to be held in trust by one Rebecco Panlilio for then President Marcos and
now, effectively for his estate, and requested PALIs application to be deferred. The
Board of Governors of the PSE reached its decision to reject PALIs application, citing
the existence of serious claims, issues and circumstances surrounding PALIs
ownership over its assets that adversely affect the suitability of listing PALIs shares in
the stock exchange. PALI wrote a letter to the SEC addressed to the then Acting
Chairman, Perfecto R. Yasay, Jr., bringing to the SECs attention the action taken by
the PSE in the application of PALI for the listing of its shares with the PSE, and
requesting that the SEC, in the exercise of its supervisory and regulatory powers over
stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSEs action on
PALIs listing application and institute such measures as are just and proper and
under the circumstances. SEC ordered PSE to immediately cause the listing of the
PALI shares in the Exchange.
ISSUE:
Whether or not SEC may overrule the decision of PSE in rejecting the application of
PALI
RULING:
The role of the SEC in our national economy cannot be minimized. The
legislature, through the Revised Securities Act, Presidential Decree No. 902-A, and
other pertinent laws, has entrusted to it the serious responsibility of enforcing all laws
affecting corporations and other forms of associations not otherwise vested in some
other government office. This is not to say, however, that the PSEs management
prerogatives are under the absolute control of the SEC. The PSE is, after all, a
corporation authorized by its corporate franchise to engage in its proposed and duly
approved business. One of the PSEs main concerns, as such, is still the generation of
profit for its stockholders. Moreover, the PSE has all the rights pertaining to
corporations, including the right to sue and be sued, to hold property in its own
name, to enter (or not to enter) into contracts with third persons, and to perform all
other legal acts within its allocated express or implied powers. A corporation is but an
association of individuals, allowed to transact under an assumed corporate name, and
with a distinct legal personality. In organizing itself as a collective body, it waives no
constitutional immunities and perquisites appropriate to such body. As to its
corporate and management decisions, therefore, the state will generally not interfere
with the same. Questions of policy and of management are left to the honest decision
of the officers and directors of a corporation, and the courts are without authority to
substitute their judgment for the judgment of the board of directors. The board is the
business manager of the corporation, and so long as it acts in good faith, its orders
are not reviewable by the courts. Thus, notwithstanding the regulatory power of the
SEC over the PSE, and the resultant authority to reverse the PSEs decision in matters
of application for listing in the market, the SEC may exercise such power only if the
PSEs judgment is attended by bad faith. It is also alleged that the properties belong
to naval and forest reserves, and therefore beyond private dominion.
Naguiat v. NLRC
Facts: Petitioner CFTI held a concessionaire's contract with the Army Air Force
Exchange Services ("AAFES") for the operation of taxi services within Clark Air Base.
Sergio F. Naguiat was CFTI's president, while Antolin T. Naguiat was its vice-
president. Like Sergio F. Naguiat Enterprises, Incorporated ("Naguiat Enterprises"), a
trading firm, it was a family-owned corporation. Individual respondents were
previously employed by CFTI as taxicab drivers. Due to the phase-out of the US
military bases in the Philippines, from which Clark Air Base was not spared, the
AAFES was dissolved, and the services of individual respondents were officially
terminated. The AAFES Taxi Drivers Association ("drivers' union) and CFTI held
negotiations as regards separation benefits that should be awarded in favor of the
drivers. They arrived at an agreement that the separated drivers will be given
P500.00 for every year of service as severance pay. Most of the drivers accepted
said amount. However, individual respondents herein refused to accept theirs.
Instead, after disaffiliating themselves from the drivers' union, individual respondents,
through the National Organization of Workingmen ("NOWM"), a labor organization
which they subsequently joined, filed a complaint against "Sergio F. Naguiat doing
business under the name and style Sergio F. Naguiat Enterprises, Inc., Army-Air
Force Exchange Services (AAFES) with Mark Hooper as Area Service Manager, Pacific
Region, and AAFES Taxi Drivers Association with Eduardo Castillo as President," for
payment of separation pay due to termination/phase-out. Said complaint was later
amended to include additional taxi drivers who were similarly situated as
complainants, and CFTI with Antolin T. Naguiat as vice president and general
manager, as party respondent.
Issue: Whether the corporate officers of CFTI can be held solidarily liable for
corporate debts.
Held: Sergio F. Naguiat, in his capacity as president of CFTI, cannot be exonerated
from joint and several liability in the payment of separation pay to individual
respondents. Sergio F. Naguiat, admittedly, was the president of CFTI who actively
managed the business. Thus, applying the ruling in A. C. Ransom, he falls within the
meaning of an "employer" as contemplated by the Labor Code, who may be held
jointly and severally liable for the obligations of the corporation to its dismissed
employees. Moreover, petitioners also conceded that both CFTI and Naguiat
Enterprises were "close family corporations" owned by the Naguiat family. Section
100, paragraph 5, of the Corporation Code, states:" (5)To the extent that the
stockholders are actively engage(d) in the management or operation of the business
and affairs of a close corporation, the stockholders shall be held to strict fiduciary
duties to each other and among themselves. Said stockholders shall be personally
liable for corporate torts unless the corporation has obtained reasonably adequate
liability insurance." Antolin T. Naguiat was the vice president of the CFTI. Although
he carried the title of "general manager" as well, it had not been shown that he had
acted in such capacity. Furthermore, no evidence on the extent of his participation in
the management or operation of the business was proffered. In this light, he cannot
be held solidarily liable for the obligations of CFTI and Sergio Naguiat to the private
respondents.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR
BANK OF ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and
FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents. (consolidated)
Facts:
This case is composed of three consolidated petitions involving several checks,
payable to the Bureau of Internal Revenue, but was embezzled allegedly by an
organized syndicate.
I. G. R. Nos. 121413 and 121479
On October 19, 1977, plaintiff Ford issued a Citibank check amounting to
P4,746,114.41 in favor of the Commissioner of Internal Revenue for the payment of
manufacturers taxes. The check was deposited with defendant IBAA (now PCIB),
subsequently cleared the the Central Bank, and paid by Citibank to IBAA. The
proceeds never reached BIR, so plaintiff was compelled to make a second payment.
Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An
investigation revealed that the check was recalled by Godofredo Rivera, the general
ledger accountant of Ford, and was replaced by a managers check. Alleged members
of a syndicate deposited the two managers checks with Pacific Banking Corporation.
Ford filed a third party complaint against Rivera and PBC. The case against PBC was
dismissed. The case against Rivera was likewise dismissed because summons could
not be served. The trial court held Citibank and PCIB jointly and severally liable to
Ford, but the Court of Appeals only held PCIB liable.
II. G. R. No. 128604
Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting
to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payees
account only. The checks never reached BIR, so plaintiff was compelled to make
second payments. Plaintiff instituted an action for recovery against PCIB and Citibank.
On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made
the checks but instead of delivering them to BIR, passed it to Castro, who was the
manager of PCIB San Andres. Castro opened a checking account in the name of a
fictitious person Reynaldo Reyes. Castro deposited a worthless Bank of America
check with the same amount as that issued by Ford. While being routed to the
Central Bank for clearing, the worthless check was replaced by the genuine one from
Ford.
The trial court absolved PCIB and held Citibank liable, which decision was affirmed in
toto by the Court of Appeals.
Issues:
(1) Whether there is contributory negligence on the part of Ford
(2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and
the drawee bank (Citibank) the value of the checks intended as payment to the
Commissioner of Internal Revenue?
Held:
(2) The general rule is that if the master is injured by the negligence of a third person
and by the concuring contributory negligence of his own servant or agent, the latter's
negligence is imputed to his superior and will defeat the superior's action against the
third person, asuming, of course that the contributory negligence was the proximate
cause of the injury of which complaint is made. As defined, proximate cause is that
which, in the natural and continuous sequence, unbroken by any efficient, intervening
cause produces the injury and without the result would not have occurred. It appears
that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if any,
could not be characterized as the proximate cause of the injury to the parties. The
mere fact that the forgery was committed by a drawer-payor's confidential employee
or agent, who by virtue of his position had unusual facilities for perpertrating the
fraud and imposing the forged paper upon the bank, does notentitle the bank toshift
the loss to the drawer-payor, in the absence of some circumstance raising estoppel
against the drawer. This rule likewise applies to the checks fraudulently negotiated or
diverted by the confidential employees who hold them in their possession.
(2) We have to scrutinize, separately, PCIBank's share of negligence when the
syndicate achieved its ultimate agenda of stealing the proceeds of these checks.
a. G. R. Nos. 121413 and 121479
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the
checks. The neglect of PCIBank employees to verify whether his letter requesting for
the replacement of the Citibank Check No. SN-04867 was duly authorized, showed
lack of care and prudence required in the circumstances. Furthermore, it was
admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of
the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding
the unwarranted instructions given by the payor or its agent. It is a well-settled rule
that the relationship between the payee or holder of commercial paper and the bank
to which it is sent for collection is, in the absence of an argreement to the contrary,
that of principal and agent. A bank which receives such paper for collection is the
agent of the payee or holder.
Indeed, the crossing of the check with the phrase "Payee's Account Only," is a
warning that the check should be deposited only in the account of the CIR. Thus, it is
the duty of the collecting bank PCIBank to ascertain that the check be deposited in
payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to
scrutinize the check and to know its depositors before it could make the clearing
indorsement "all prior indorsements and/or lack of indorsement guaranteed".
Lastly, banking business requires that the one who first cashes and negotiates the
check must take some precautions to learn whether or not it is genuine. And if the
one cashing the check through indifference or other circumstance assists the forger in
committing the fraud, he should not be permitted to retain the proceeds of the check
from the drawee whose sole fault was that it did not discover the forgery or the
defect in the title of the person negotiating the instrument before paying the check.
For this reason, a bank which cashes a check drawn upon another bank, without
requiring proof as to the identity of persons presenting it, or making inquiries with
regard to them, cannot hold the proceeds against the drawee when the proceeds of
the checks were afterwards diverted to the hands of a third party. In such cases the
drawee bank has a right to believe that the cashing bank (or the collecting bank)
had, by the usual proper investigation, satisfied itself of the authenticity of the
negotiation of the checks. Thus, one who encashed a check which had been forged
or diverted and in turn received payment thereon from the drawee, is guilty of
negligence which proximately contributed to the success of the fraud practiced on the
drawee bank. The latter may recover from the holder the money paid on the check.
b. G. R. No. 128604
In this case, there was no evidence presented confirming the conscious participation
of PCIBank in the embezzlement. As a general rule, however, a banking corporation
is liable for the wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment. A bank will be held liable for the
negligence of its officers or agents when acting within the course and scope of their
employment. It may be liable for the tortuous acts of its officers even as regards that
species of tort of which malice is an essential element. In this case, we find a
situation where the PCIBank appears also to be the victim of the scheme hatched by
a syndicate in which its own management employees had participated. But in this
case, responsibility for negligence does not lie on PCIBank's shoulders alone.
Citibank failed to notice and verify the absence of the clearing stamps. For this
reason, Citibank had indeed failed to perform what was incumbent upon it, which is
to ensure that the amount of the checks should be paid only to its designated payee.
The point is that as a business affected with public interest and because of the nature
of its functions, the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their relationship.
Thus, invoking the doctrine of comparative negligence, we are of the view that both
PCIBank and Citibank failed in their respective obligations and both were negligent in
the selection and supervision of their employees resulting in the encashment of
Citibank Check Nos. SN 10597 AND 16508. Thus, we are constrained to hold them
equally liable for the loss of the proceeds of said checks issued by Ford in favor of the
CIR.
Ching V. Sec. Of Justice (2006)
FACTS:
Sept-Oct 1980: PBMI, through Ching, Senior VP of Philippine Blooming Mills, Inc.
(PBMI), applied with the Rizal Commercial Banking Corporation (RCBC) for the
issuance of commercial letters of credit to finance its importation of assorted
goods
RCBC approved the application, and irrevocable letters of credit were issued in
favor of Ching.
The goods were purchased and delivered in trust to PBMI.
Ching signed 13 trust receipts as surety, acknowledging delivery of the goods
Under the receipts, Ching agreed to hold the goods in trust for RCBC, with
authority to sell but not by way of conditional sale, pledge or otherwise
In case such goods were sold, to turn over the proceeds thereof as soon as
received, to apply against the relative acceptances and payment of other
indebtedness to respondent bank.
In case the goods remained unsold within the specified period, the goods were
to be returned to RCBC without any need of demand.
goods, manufactured products or proceeds thereof, whether in the form of
money or bills, receivables, or accounts separate and capable of identification -
RCBCs property
When the trust receipts matured, Ching failed to return the goods to RCBC, or to
return their value amounting toP6,940,280.66 despite demands.
RCBC filed a criminal complaint for estafa against petitioner in the Office of the
City Prosecutor of Manila.
December 8, 1995: no probable cause to charge petitioner with violating P.D.
No. 115, as petitioners liability was only civil, not criminal, having signed the
trust receipts as surety
RCBC appealed the resolution to the Department of Justice (DOJ) via petition for
review
On July 13, 1999: reversed the assailed resolution of the City Prosecutor
execution of said receipts is enough to indict the Ching as the official responsible
for violation of P.D. No. 115
April 22, 2004: CA dismissed the petition for lack of merit and on procedural
grounds
Ching filed a petition for certiorari, prohibition and mandamus with the CA
ISSUE: W/N Ching should be held criminally liable.
HELD: YES. DENIED for lack of merit
There is no dispute that it was the Ching executed the 13 trust receipts.
law points to him as the official responsible for the offense
Since a corporation CANNOT be proceeded against criminally because it CANNOT
commit crime in which personal violence or malicious intent is required, criminal
action is limited to the corporate agents guilty of an act amounting to a crime
and never against the corporation itself
execution by Ching of receipts is enough to indict him as the official responsible
for violation of PD 115
RCBC is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for use
in manufacture.
Moreover, PD 115 explicitly allows the prosecution of corporate officers without
prejudice to the civil liabilities arising from the criminal offense thus, the civil
liability imposed on respondent in RCBC vs. Court of Appeals case is clearly
separate and distinct from his criminal liability under PD 115
Chings being a Senior Vice-President of the Philippine Blooming Mills does not
exculpate him from any liability
The crime defined in P.D. No. 115 is malum prohibitum but is classified
as estafa under paragraph 1(b), Article 315 of the Revised Penal Code,
or estafa with abuse of confidence. It may be committed by a corporation or
other juridical entity or by natural persons. However, the penalty for the crime is
imprisonment for the periods provided in said Article 315.
law specifically makes the officers, employees or other officers or persons
responsible for the offense, without prejudice to the civil liabilities of such
corporation and/or board of directors, officers, or other officials or employees
responsible for the offense
rationale: officers or employees are vested with the authority and responsibility
to devise means necessary to ensure compliance with the law and, if they fail to
do so, are held criminally accountable; thus, they have a responsible share in the
violations of the law
If the crime is committed by a corporation or other juridical entity, the directors,
officers, employees or other officers thereof responsible for the offense shall be
charged and penalized for the crime, precisely because of the nature of the
crime and the penalty therefor. A corporation cannot be arrested and
imprisoned; hence, cannot be penalized for a crime punishable by
imprisonment. However, a corporation may be charged and prosecuted for a
crime if the imposable penalty is fine. Even if the statute prescribes both fine and
imprisonment as penalty, a corporation may be prosecuted and, if found guilty,
may be fined
When a criminal statute designates an act of a corporation or a crime and
prescribes punishment therefor, it creates a criminal offense which, otherwise,
would not exist and such can be committed only by the corporation. But when a
 penal statute does not expressly apply to corporations, it does not create an
offense for which a corporation may be punished. On the other hand, if the
State, by statute, defines a crime that may be committed by a corporation but
prescribes the penalty therefor to be suffered by the officers, directors, or
employees of such corporation or other persons responsible for the offense, only
such individuals will suffer such penalty. Corporate officers or employees,
through whose act, default or omission the corporation commits a crime, are
themselves individually guilty of the crime. The principle applies whether or not
the crime requires the consciousness of wrongdoing. It applies to those
corporate agents who themselves commit the crime and to those, who, by virtue
of their managerial positions or other similar relation to the corporation, could be
deemed responsible for its commission, if by virtue of their relationship to the
corporation, they had the power to prevent the act. Benefit is not an operative
fact.
[G.R. No. 119858. April 29, 2003]
EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE
OF THE PHILIPPINES, respondents.
Facts:
Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and
Benito Ong with two counts of estafa under separate Informations dated 11 October
1991.
In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ong of
the crime of estafa committed as follows:
That on or about July 23, 1990, in the City of Manila, Philippines, the said accused,
representing ARMAGRI International Corporation, conspiring and confederating
together did then and there willfully, unlawfully and feloniously defraud the
SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a
corporation duly organized and existing under the laws of the Philippines located at
Juan Luna Street, Binondo, this City, in the following manner, to wit: the said accused
received in trust from said SOLIDBANK Corporation the following, to wit: 10,000 bags
of urea valued at P2,050,000.00 specified in a Trust Receipt Agreement and
covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil
Corporation.
In Criminal Case No. 92-101990, the Information likewise charges petitioner of the
crime of estafa committed as follows:
That on or about July 6, 1990, in the City of Manila, Philippines, the said accused,
representing ARMAGRI International Corporation, defraud the SOLIDBANK
Corporation represented by its Accountant, DEMETRIO LAZARO. The said accused
received in trust from said SOLIDBANK Corporation the following goods, to wit: 125
pcs. Rear diff. assy RNZO 49 50 pcs. Front & Rear diff assy. Isuzu Elof, 85 units 1-
Beam assy. Isuzu Spz all valued at P2,532,500.00 specified in a Trust Receipt
Agreement and covered by a Domestic Letter of Credit No. DOM GD 90-006 in favor
of the Metropole Industrial Sales with address at P.O. Box AC 219, Quezon City.
Issue: WON PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE
OFFENSE, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND
SIGNED FOR THE ENTRUSTEE CORPORATION.
Held: Section 13 of the Trust Receipts Law which provides: x x x. If the violation is
committed by a corporation, partnership, association or other juridical entities, the
penalty provided for in this Decree shall be imposed upon the directors, officers,
employees or other officials or persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the offense. We hold that petitioner is
a person responsible for violation of the Trust Receipts Law.
The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the
proceeds of the sale of the goods, or (2) return the goods covered by the trust
receipts if the goods are not sold.[18] The mere failure to account or return gives
rise to the crime which is malum prohibitum.[19] There is no requirement to prove
intent to defraud.[20]
The Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law
makes the officers or employees or other persons responsible for the offense liable to
suffer the penalty of imprisonment. The reason is obvious: corporations,
partnerships, associations and other juridical entities cannot be put to jail. Hence, the
criminal liability falls on the human agent responsible for the violation of the Trust
Receipts Law.
Corporation Entitlement to Damages
Case 10: ABS-CBN BROADCASTING CORP. v. CA, REPUBLIC
BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL
ROSARIO (301 SCRA 589)
Date: January 21, 1999
Ponente: C.J. Davide, Jr.
Facts:
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby
VIVA gave ABS-CBN an exclusive right to exhibit some VIVA films. According to the
agreement, ABS-CBN shall have the right of first refusal to the next 24 VIVA films for
TV telecast under such terms as may be agreed upon by the parties, however, such
right shall be exercised by ABS-CBN from the actual offer in writing.
Sometime in December 1991, VIVA, through Vicente Del Rosario (Executive
Producer), offered ABS-CBN through VP Charo Santos-Concio, a list of 3 film
packages from which ABS-CBN may exercise its right of first refusal. ABS-CBN,
however through Mrs. Concio, tick off only 10 titles they can purchase among which
is the film Maging Sino Ka Man which is one of the subjects of the present case,
therefore, it did not accept the said list as per the rejection letter authored by Mrs.
Concio sent to Del Rosario.

Subsequently, Del Rosario approached Mrs. Concio with another list
consisting of 52 original movie titles and 104 re-runs, proposing to sell to ABS-CBN
airing rights for P60M (P30M in cash and P30M worth of television spots). Del Rosario
and ABS-CBNs General Manager, Eugenio Lopez III, met at the Tamarind Grill
Restaurant in QC to discuss the package proposal but to no avail.
Four days later, Del Rosario and Mr. Graciano Gozon, Senior VP of Finance
of Republic Broadcasting Corporation (RBS/Channel 7) discussed the terms and
conditions of VIVAs offer. A day after that, Mrs. Concio sent the draft of the contract
between ABS-CBN and VIVA which contained a counter-proposal covering 53 films for
P35M. VIVAs Board of Directors rejected the counter-proposal as it would not sell
anything less than the package of 104 films for P60M. After said rejection, ABS-CBN
closed a deal with RBS including the 14 films previously ticked off by ABS-CBN.
Consequently, ABS-CBN filed a complaint for specific performance with
prayer for a writ of preliminary injunction and/or TRO against RBS, VIVA and Del
Rosario. RTC then enjoined the latter from airing the subject films. RBS posted a
P30M counterbond to dissolve the injunction. Later on, the trial court as well as the
CA dismissed the complaint holding that there was no meeting of minds between
ABS-CBN and VIVA, hence, there was no basis for ABS-CBNs demand, furthermore,
the right of first refusal had previously been exercised.
Hence, the present petition, ABS-CBN argued that an agreement was made
during the meeting of Mr. Lopez and Del Rosario jotted down on a napkin (this was
never produced in court). Moreover, it had yet to fully exercise its right of first refusal
since only 10 titles were chosen from the first list. As to actual, moral and exemplary
damages, there was no clear basis in awarding the same.
Issue: WON a contract was perfected between ABS-CBN and VIVA and WON moral
damages may be awarded to a corporation
Held: Both NO.
Ratio:
Contracts that are consensual in nature are perfected upon mere meeting of
the minds. Once there is concurrence between the offer and the acceptance upon
the subject matter, consideration, and terms of payment a contract is produced. The
offer must be certain. To convert the offer into a contract, the acceptance must be
absolute and must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a counter-offer and is a
rejection of the original offer. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the
offer.
After Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN to discuss the
package of films, ABS-CBN, sent through Ms. Concio, counter-proposal in the form a
draft contract. This counter-proposal could be nothing less than the counter-offer of
Mr. Lopez during his conference with Del Rosario. Clearly, there was no acceptance
of VIVAs offer, for it was met by a counter-offer which substantially varied the terms
of the offer.
In the case at bar, VIVA through its Board of Directors, rejected such
counter-offer. Even if it be conceded arguendo that Del Rosario had
accepted the counter-offer, the acceptance did not bind VIVA, as there was
no proof whatsoever that Del Rosario had the specific authority to do so.
Under the Corporation Code, unless otherwise provided by said
Code, corporate powers, such as the power to enter into contracts, are
exercised by the Board of Directors. However, the Board may delegate
such powers to either an executive committee or officials or contracted
managers. The delegation, except for the executive committee, must be
for specific purposes. Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the binding effects of their
acts would apply. For such officers to be deemed fully clothed by the corporation to
exercise a power of the Board, the latter must specially authorize them to do
so. That Del Rosario did not have the authority to accept ABS-CBNs
counter-offer was best evidenced by his submission of the draft contract to
VIVAs Board of Directors for the latters approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds.
The testimony of Mr. Lopez and the allegations in the complaint are clear
admissions that what was supposed to have been agreed upon at the Tamarind Grill
between Mr. Lopez and Del Rosario was not a binding agreement. It is as it should
be because corporate power to enter into a contract is lodged in the Board
of Directors. (Sec. 23, Corporation Code). Without such board approval by
the Viva board, whatever agreement Lopez and Del Rosario arrived at
could not ripen into a valid contact binding upon Viva.
However, the Court find for ABS-CBN on the issue of damages. Moral
damages 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. 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 can be experienced only by
one having a nervous system. The statement that a corporation may recover
moral damages if it has a good reputation that is debased, resulting in social
humiliation is an obiter dictum. On this score alone the award for damages must
be set aside, since RBS is a corporation.
CASE 11: FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO MEDICAL
AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents.
Facts:
Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and
Hermogenes Jun Alegre (Alegre). Expos is aired every morning over DZRC-AM which
is owned by Filipinas Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi
City, the Albay municipalities and other Bicol areas.
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine (AMEC) and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita Ago (Ago), as
Dean of AMECs College of Medicine, filed a complaint for damages against FBNI,
Rima and Alegre on 27 February 1990.
The complaint further alleged that AMEC is a reputable learning institution. With
the supposed expose, FBNI, Rima and Alegre transmitted malicious imputations, and
as such, destroyed plaintiffs (AMEC and Ago) reputation. AMEC and Ago included
FBNI as defendant for allegedly failing to exercise due diligence in the selection and
supervision of its employees, particularly Rima and Alegre.
On 14 December 1992, the trial court rendered a Decision] finding FBNI and
Alegre liable for libel except Rima. In holding FBNI liable for libel, the trial court found
that FBNI failed to exercise diligence in the selection and supervision of its
employees.
The Court of Appeals affirmed the trial courts judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre.
Issues:
1. Whether or not the broadcasts are libelous.
2. Whether or not AMEC is entitled to moral damages.
3. Whether or not the award of attorneys fees is proper.
Ruling:
1. A libel is a public and malicious imputation of a crime, or of a vice or defect,
real or imaginary, or any act or omission, condition, status, or circumstance tending
to cause the dishonor, discredit, or contempt of a natural or juridical person, or to
blacken the memory of one who is dead.
Every defamatory imputation is presumed malicious. Rima and Alegre failed to
show adequately their good intention and justifiable motive in airing the supposed
gripes of the students. As hosts of a documentary or public affairs program, Rima and
Alegre should have presented the public issues free from inaccurate and misleading
information. Hearing the students alleged complaints a month before the expos, they
had sufficient time to verify their sources and information. However, Rima and Alegre
hardly made a thorough investigation of the students alleged gripes. Neither did they
inquire about nor confirm the purported irregularities in AMEC from the Department
of Education, Culture and Sports. Alegre testified that he merely went to AMEC to
verify his report from an alleged AMEC official who refused to disclose any
information. Alegre simply relied on the words of the students because they were
many and not because there is proof that what they are saying is true. This plainly
shows Rima and Alegres reckless disregard of whether their report was true or not.
Had the comments been an expression of opinion based on established facts, it
is immaterial that the opinion happens to be mistaken, as long as it might reasonably
be inferred from the facts. However, the comments of Rima and Alegre were not
backed up by facts. Therefore, the broadcasts are not privileged and remain
libelous per se.
The broadcasts also violate the Radio Code of the Kapisanan ng mga Brodkaster
sa Pilipinas, Ink. (Radio Code). Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free from personal bias,
prejudice and inaccurate and misleading information. x x x
Furthermore, the station shall strive to present balanced discussion of
issues. x x x.
xxx
7. The station shall be responsible at all times in the supervision of public
affairs, public issues and commentary programs so that they conform
to the provisions and standards of this code.
8. It shall be the responsibility of the newscaster, commentator, host and
announcer to protect public interest, general welfare and good order
in the presentation of public affairs and public issues.[36]
The broadcasts fail to meet the standards prescribed in the Radio Code, which
lays down the code of ethical conduct governing practitioners in the radio broadcast
industry. The Radio Code is a voluntary code of conduct imposed by the radio
broadcast industry on its own members. The Radio Code is a public warranty by the
radio broadcast industry that radio broadcast practitioners are subject to a code by
which their conduct are measured for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners
live up to the code of conduct of their profession, just like other professionals. A
professional code of conduct provides the standards for determining whether a
person has acted justly, honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19 of the Civil Code. A professional
code of conduct also provides the standards for determining whether a person who decision, and not only in the decretal portion thereof, the legal reason for the award
willfully causes loss or injury to another has acted in a manner contrary to morals or of attorneys fees.[51] (Emphasis supplied)
good customs under Article 21 of the Civil Code.
Petition denied.
Case 12:
MANILA ELECTRIC COMPANY
2. FBNI contends that AMEC is not entitled to moral damages because it is a vs.
corporation. T.E.A.M. ELECTRONICS CORPORATION,TECHNOLOGY ELECTRONICS
ASSEMBLY and MANAGEMENT PACIFIC CORPORATION; and ULTRA
A juridical person is generally not entitled to moral damages because, unlike a ELECTRONICS INSTRUMENTS, INC. FACTS:
natural person, it cannot experience physical suffering or such sentiments as -
wounded feelings, serious anxiety, mental anguish or moral shock. The Court of
Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the award of moral T.E.A.M. Electronics Corporation (TEC) was formerly known as NS
damages. However, the Courts statement in Mambulao that a corporation may have a Electronics(Philippines), Inc. before 1982 and National Semi-Conductors (Phils.)
good reputation which, if besmirched, may also be a ground for the award of moral before1988.
damages is an obiter dictum. o

Nevertheless, AMECs claim for moral damages falls under item 7 of Article
2219 of the Civil Code. This provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of defamation. Article 2219(7)
does not qualify whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for libel or any other form
of defamation and claim for moral damages.
Moreover, where the broadcast is libelous per se, the law implies damages. In
such a case, evidence of an honest mistake or the want of character or reputation of
the party libeled goes only in mitigation of damages.[46] Neither in such a case is the
plaintiff required to introduce evidence of actual damages as a condition precedent to
the recovery of some damages. In this case, the broadcasts are libelousper se. Thus,
AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The
record shows that even though the broadcasts were libelous per se, AMEC has not
suffered any substantial or material damage to its reputation. Therefore, we reduce
the award of moral damages from P300,000 to P150,000.
3. The award of attorneys fees is not proper.
TEC is wholly owned by respondent Technology Electronics Assemblyand
Management Pacific Corporation (TPC).
-
On the other hand, petitioner Manila Electric Company (Meralco) is a utilitycompany
supplying electricity in the Metro Manila area.
-
MERALCO and NS Electronics (Philippines), Inc., the predecessor-in-interest
of respondent TEC, entered into two separate contracts denominated as
Agreementsfor the Sale of Electric Energy wherein:
o
petitioner undertook to supply TEC's building known as Dyna CraftInternational
Manila (DCIM) with electric power.
o

AMEC failed to justify satisfactorily its claim for attorneys fees. AMEC did not
adduce evidence to warrant the award of attorneys fees. Moreover, both the trial and
appellate courts failed to explicitly state in their respective decisions the rationale for
the award of attorneys fees.
In Inter-Asia Investment Industries, Inc. v. Court of Appeals, we held that:
[I]t is an accepted doctrine that the award thereof as an item of damages is the
exception rather than the rule, and counsels fees are not to be awarded every time a
party wins a suit. The power of the court to award attorneys fees under Article 2208
of the Civil Code demands factual, legal and equitable justification, without which the
award is a conclusion without a premise, its basis being improperly left to speculation
and conjecture. In all events, the court must explicitly state in the text of the
Another contract was entered into for the supply of electric power toTEC's NS
Building under Account No. 19389-0900-10.
-
TEC, under its former name National Semi-Conductors (Phils.) entered into aContract
of Lease with respondent Ultra Electronics Industries, Inc. for the use of the former's
DCIM building for a period of five years or until September 1991.
o
Ultra was, however, ejected from the premises on February 12, 1988 byvirtue of a
court order, for repeated violation of the terms and conditionsof the lease contract.
-
On September 28, 1987, a team of petitioner's inspectors conducted a
surpriseinspection of the electric meters installed at the DCIM building which were To avert the impending disconnection of electrical service, TEC paid the
foundto be allegedly tampered with and did not register the actual power aboveamount, under protest.
consumptionin the building. -
-
TEC and TPC filed a complaint for damages against petitioner and Ultra beforethe
MERALCO informed TEC of the results of the inspection and demanded from thelatter RTC which rendered a decision in their favor and affirmed by CA.
the payment representing its unregistered consumption from February 10,1986 until -
September 28, 1987, as a result of the alleged tampering of the meters.
- Petitioner now comes before this Court in this petition for review on certiorari.
ISSUES:
Since Ultra was in possession of the subject building during the covered period,TEC's 1) whether or not TEC tampered with the electric meters installed at its DCIM and
Managing Director, Mr. Bobby Tan, referred the demand letter to Ultra. NSbuildings;2) If so, whether or not it is liable for the differential billing as computed
- by petitioner;and3) whether or not petitioner was justified in disconnecting the
electric power supply inTEC's DCIM building.
For failure of TEC to pay the differential billing, petitioner disconnected theelectricity HELD: The petition must fail.
supply to the DCIM building. As to the alleged tampering of the electric meter in TEC's NS building, suffice it to
- statethat the allegation was not proven, considering that the meters therein were
enclosed in ametal cabinet the metal seal of which was unbroken, with petitioner
TEC demanded from petitioner the reconnection of electrical service, claimingthat it having sole access tothe said meters.
had nothing to do with the alleged tampering but the latter refused to heedthe 38
demand. In view of the negative finding on the alleged tampering of electric meters
- on TEC'sDCIM and NS buildings, petitioner's claim of differential billing was correctly
denied bythe trial and appellate courts. With greater reason, therefore, could
Hence, TEC filed a complaint before the Energy Regulatory Board (ERB) petitioner not exercisethe right of immediate disconnection.However, recourse to
whichimmediately ordered the reconnection of the service. differential billing with disconnection was subject to the priorrequirement of a 48-
- hour written notice of disconnection.
44
However, prior to the reconnection, petitioner conducted a scheduled inspectionof the Petitioner, in the instant case, resorted to the remedy of disconnection without
questioned meters and found them to have been tampered anew. priornotice. While it is true that petitioner sent a demand letter to TEC for the
- payment of differential billing, it did not include any notice that the electric supply
would bedisconnected. In fine, petitioner abused the remedies granted to it under
Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time,in P.D. 401 andRevised General Order No. 1 by outrightly depriving TEC of electrical
TEC's NS Building. The inspection allegedly revealed that the electric meterswere not services withoutfirst notifying it of the impending disconnection. Accordingly, the CA
registering the correct power consumption did not err inaffirming the RTC decision.We, however, deem it proper to delete the
award of moral damages. TEC's claim waspremised allegedly on the damage to its
goodwill and reputation.
- 50
As a rule, a corporation is not entitled to moral damages because, not being a
MERALCO sent a letter demanding payment of representing the differentialbilling. natural person, it cannotexperience physical suffering or sentiments like wounded
- feelings, serious anxiety,mental anguish and moral shock. The only exception to this
rule is when the corporationhas a reputation that is debased, resulting in its
TEC denied petitioner's allegations and claim. humiliation in the business realm.
- 51
But insuch a case, it is imperative for the claimant to present proof to justify the
Petitioner, thus, sent TEC another letter demanding payment of the aforesaidamount, award. It isessential to prove the existence of the factual basis of the damage and its
with a warning that the electric service would be disconnected in case of continued causal relationto petitioner's acts.
refusal to pay the differential billing. 52
-
 In the present case, the records are bereft of any evidence that thename or
reputation of TEC/TPC has been debased as a result of petitioner's acts. Besides,the
trial court simply awarded moral damages in the dispositive portion of its
decisionwithout stating the basis thereof.
MARISSA R. UNCHUAN, Petitioner,
vs.
ANTONIO J.P. LOZADA, ANITA LOZADA and THE REGISTER OF DEEDS OF
CEBU CITY, Respondents.
G.R. No. 172671 | April 16, 2009
FACTS: Petitioner questions the validity of the sale between the sisters Lozada and
their nephew, Antonio. Marissa finds it anomalous that Dr. Lozada, an American
citizen, had paid the lots for Antonio. Thus, she accused the latter of being a mere
dummy of the former.
However, even as Dr. Lozada advanced the money for the payment of Antonios
share, at no point were the lots registered in Dr. Lozadas name. Nor was it
contemplated that the lots be under his control for they are actually to be included as
capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada
are to hold 60% and 40% of the shares in said corporation, respectively.
ISSUE: Is Damasa considered a Filipino corporation and thus may acquire disposable
lands in the Philippines?
HELD: Under Republic Act No. 7042, particularly Section 3, a corporation organized
under the laws of the Philippines of which at least 60% of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines, is
considered a Philippine National. As such, the corporation may acquire disposable
lands in the Philippines. Damasa is Filipino corporation because it is organized under
Philippine laws with 60% capital stock owned and held by a Filipino citizen.
Digest No. 2
FACTS: Anita Lozada Slaughter ands Penegrina Lozada Saribay sold their land to their
nephew, J.P. Lozada.
Dr. Antonio Lozada advanced US$ 367, 000 or P10 million for the payment
of the sale.
Petitioner filed a adverse claim saying that Anita donated her share to her
and prayed the deed be declared void because Dr Antonio is a foreigner.Dr. Antonio
filed for quieting of title.
At the trial, respondents presented a notarized and duly authenticated sworn
statement, and a videotape where Anita denied having donated land in favor of
Marissa. Dr. Lozada testified that he agreed to advance payment for Antonio in
preparation for their plan to form a corporation. The lots are to be eventually infused
in the capitalization of Damasa Corporation, where he and Antonio are to have 40%
and 60% stake, respectively. Meanwhile, Lourdes G. Vicencio, a witness for
respondents confirmed that she had been renting the ground floor of Anitas house
since 1983, and tendering rentals to Antonio.
ISSUE: Whether or not the transaction violates the constitutional prohibition against
foreigners owning lands in the Philippines.
HELD: No. In this case, we find nothing to show that the sale between the sisters
Lozada and their nephew Antonio violated the public policy prohibiting aliens from
owning lands in the Philippines. Even as Dr. Lozada advanced the money for the
payment of Antonios share, at no point were the lots registered in Dr. Lozadas
name. Nor was it contemplated that the lots be under his control for they are actually
to be included as capital of Damasa Corporation. According to their agreement,
Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation,
respectively. Under Republic Act No. 7042,27 particularly Section 3,28 a corporation
organized under the laws of the Philippines of which at least 60% of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines, is
considered a Philippine National. As such, the corporation may acquire disposable
lands in the Philippines.
Right of First Refusal
J.G. Summit Holdings, Inc. v. Court of Appeals, 450 SCRA 169 (2005)
FACTS:
The National Investment and Development Corporation (NIDC), a government
corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy
Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which subsequently became
the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the
NIDC and KAWASAKI will contribute P330 million for the capitalization of PHILSECO in
the proportion of 60%-40% respectively. One of its salient features is the grant to
the parties of the right of first refusal should either of them decide to sell, assign
or transfer its interest in the joint venture.
NIDC transferred all its rights, title and interest in PHILSECO to the Philippine
National Bank (PNB). Such interests were subsequently transferred to the National
Government. A trust agreement was entered into between the National Government
and the APT wherein the latter was named the trustee of the National Government's
share in PHILSECO. as a result of a quasi-reorganization of PHILSECO to settle its
huge obligations to PNB, the National Government's shareholdings in PHILSECO
increased to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy and the government, the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) deemed it best to sell the
National Government's share in PHILSECO to private entities. After a series of
negotiations between the APT and KAWASAKI, they agreed that the latter's right of
first refusal under the JVA be "exchanged" for the right to top by five percent (5%)
the highest bid for the said shares. They further agreed that KAWASAKI would be
entitled to name a company in which it was a stockholder, which could exercise the
right to top. KAWASAKI informed APT that Philyards Holdings, Inc. (PHI) would
exercise its right to top. The bidders were informed of the set up, that, should the
COP approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc.
and/or its nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to
the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of
receipt of such advice from APT within which to exercise their "Option to Top the
Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent
thereof
As J.G. Summit was declared the highest bidder, the COP approved the sale "subject
to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top
JGSMI's bid by 5% as specified in the bidding rules."
J.G. Summit informed APT that it was protesting the offer of PHI to top its bid on the
grounds that: (a) the KAWASAKI/PHI consortium composed of KAWASAKI,
[PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR
because the last four (4) companies were the losing bidders thereby circumventing
the law and prejudicing the weak winning bidder; (b) only KAWASAKI could exercise
the right to top; (c) giving the same option to top to PHI constituted unwarranted
benefit to a third party; (d) no right of first refusal can be exercised in a public
bidding or auction sale; and (e) the JG Summit consortium was not estopped from
questioning the proceedings.
J.G. Summit was notified that PHI had fully paid the balance of the purchase price of
the subject bidding, and that PHI had exercised its option to top the highest bid and
that the COP had approved the same. APT and PHI executed a Stock Purchase
Agreement.
J.G. Summit filed a petition for mandamus, which the Court of Appeals denied.
J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI
could exercise its right of first refusal only up to 40% of the shares of PHILSECO due
to the constitutional prohibition on landholding by corporations with more than 40%
foreign-owned equity. It further argues that since KAWASAKI already held at least
40% equity in PHILSECO, the right of first refusal was inutile and as such, could not
subsequently be converted into the right to top. J.G. Summit also asserts that, at
present, PHILSECO continues to violate the constitutional provision on landholdings
as its shares are more than 40% foreign-owned.
ISSUE:
Whether or not the right of first refusal was validly exercised.
HELD:
Upheld the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC. First of all, the right of first refusal is a property right of
PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This
right allows them to purchase the shares of their co-shareholder before they are
offered to a third party. The agreement of co-shareholders to mutually grant
this right to each other, by itself, does not constitute a violation of the
provisions of the Constitution limiting land ownership to Filipinos and
Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land,
the right of first refusal can be validly assigned to a qualified Filipino entity in order to
maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation
of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could
be made either to a nominee or such other party which the holder of the right of first
refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest
of its landholdings, in which case KAWASAKI, in exercising its right of first refusal,
can exceed 40% of PHILSECOs equity. In fact, it can even be said that if the
foreign shareholdings of a landholding corporation exceeds 40%, it is not
the foreign stockholders ownership of the shares which is adversely
affected but the capacity of the corporation to own land that is, the
corporation becomes disqualified to own land. This finds support under the basic
corporate law principle that the corporation and its stockholders are separate juridical
entities. In this vein, the right of first refusal over shares pertains to the shareholders
whereas the capacity to own land pertains to the corporation. Hence, the fact that
PHILSECO owns land cannot deprive stockholders of their right of first refusal. No
law disqualifies a person from purchasing shares in a landholding
corporation even if the latter will exceed the allowed foreign equity, what
the law disqualifies is the corporation from owning land.