Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 180197 June 23, 2009

FRANCISCO N. VILLANUEVA, Petitioner,

vs.
VIRGILIO P. BALAGUER and INTERCONTINENTAL BROADCASTING CORPORATION
CHANNEL-13,Respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed is the August 10, 2007 Decision1 of the Court of Appeals in CA-G.R. CV No. 81657 which
reversed the October 29, 2003 Decision and February 2, 2004 Resolution of the Regional Trial Court
of Quezon City, Branch 89 finding petitioner Francisco N. Villanueva entitled to damages. Also
assailed is the October 16, 2007 Resolution2denying the motion for reconsideration.

On March 31, 1992, petitioner Francisco N. Villanueva, then Assistant Manager for Operations of
Intercontinental Broadcasting Corporation-Channel 13 (IBC-13) was dismissed from employment on
the ground of loss of confidence for purportedly selling forged certificates of performance. Contesting
his termination, petitioner filed a complaint for illegal dismissal before the National Labor Relations
Commission.

During the pendency of the labor case, news articles about irregularities in IBC-13 were published in
the July 18, 1992 issue of the Manila Times and the Philippine Star, and in the July 19, 1992 issue of
the Manila Bulletin.

In these news articles, respondent Virgilio P. Balaguer, then President of IBC-13, was quoted to
have said that he uncovered various anomalies in IBC-13 during his tenure which led to the
dismissal of an operations executive for selling forged certificates of performance.

In the Manila Times, on July 18, 1992:3

Anomalies at IBC-13 uncovered

INSIDER pilferage, malversation, overpricing and other irregularities have cost government-owned
Intercontinental Broadcasting Corporation (IBC) 13 more than P108 million in losses for the period
1986-1989.

Gil P. Balaguer, IBC president, uncovered the anomalies after a long and painstaking investigation
when he took over the company in 1990.

The investigation uncovered irregularities ranging from selling forged certificates of performance
(CP’s) to non-remittance of sales collections, illegal and unauthorized airing of movie trailer
advertisements (MTA’s), illegal leasing of electricity and machines to "friendly clients," millions worth
of undocumented transactions to movie suppliers, exorbitant fees against in-house productions,
abused overtime charges by certain employees.

The anomalies did not escape Balaguer when he came to IBC-13 backed by hands-on experience in
television management work.

IBC has had four presidents since 1986 after the EDSA revolution. Balaguer is the fifth president.

A special investigative committee helped Balaguer uncover the anomalies in IBC. It led to the
dismissal of an operations executive who sold forged certificates of performance, a former
supervisor who pocketed IBC’s sales collections, and station managers who did not remit payments
on radio advertisements.
Other anomalies committed against the government station include the loose issuance of technical
facilities orders (TFO’s) which practically leased the network’s broadcast facilities to a "friendly client"
for free.

Balaguer, sources said, succeeded in staying as president because of his technical expertise in
media and communications and his "managerial will" to cleanse the ranks of the firm. (Emphasis
supplied)

In the Philippine Star, on July 18, 1992:4

IBC president uncovers anomalies at tv network

The government-owned International Broadcasting Corp.-Channel 13 lost more than P108 million
due to insider pilferage, malversation, overpricing and other irregularities from 1986 to 1989.

IBC president Gil P. Balaguer uncovered the anomalies after "a long and painstaking investigation"
when he took over the television station in 1990.

Balaguer, in a statement, said the irregularities uncovered included the sale of forged certificates of
performance, non-remittance of sales collections, illegal and unauthorized airing of movie
advertisements, illegal lease of equipment to "friendly" clients, exorbitant fees on in-house
productions and abused overtime charges by some employees.

Balaguer, the fifth IBC president since 1986, easily detected the anomalies as he has a vast
experience in television management work.

A special investigative committee helped Balaguer uncover the anomalies at IBC, which has resulted
in the dismissal of an operations executive who sold forged certificates of performance, a former
supervisor who pocketed sales collections and a station manager who did not remit payments on
radio advertisements. (Emphasis supplied)

In the Manila Bulletin, on July 19, 1992:5

Sequestered firm’s losses bared

The Intercontinental Broadcasting Corp. (IBC) 13, a sequestered firm, lost more than P108 million
for the period 1986-1989 due to pilferage, malversation, over-pricing, and other irregularities
perpetrated by a syndicate, according to Gil P. Balaguer, IBC president, who took over the company
in 1990.

He said the irregularities ranged from selling forged certificates of performance to non-remittance of
sales collections, illegal and unauthorized airing of movie trailer advertisements, illegal leasing of
electricity and machines to "friendly clients," millions worth of undocumented transactions to movie
suppliers, exorbitant fees against in-house productions, and abused overtime charges by certain
employees.

IBC has had four presidents since 1986, Balaguer being the fifth.

A special probe committee that helped Balaguer said one dismissed executive sold forged
certificates of performance, a former supervisor pocketed IBC sales collections, and some station
managers did not remit payments on radio advertisements.

The loose issuance of technical facilities orders practically leased the network’s broadcast facilities
to a "friendly client" for free.

Balaguer is credited with accelerating the network’s rank from number five in 1988 to number two or
three under current ratings, despite the efforts of some holdouts who tried to derail his
administration. (Emphasis supplied)

In a letter dated July 20, 1992, petitioner urged respondents to confirm or deny if he was the person
alluded to in the news article as the operations executive of IBC-13 who was dismissed for selling
forged certificates of performance.6 None of the respondents replied to the letter.
On September 25, 1992, petitioner filed before the Regional Trial Court of Quezon City a complaint
for damages against Balaguer,7 which was later amended by impleading IBC-13 as additional
defendant.8

Petitioner claimed that respondents caused the publication of the subject news articles which
defamed him by falsely and maliciously referring to him as the IBC-13 operations executive
who sold forged certificates of performance.9 He alleged that in causing these false and
malicious publications, respondents violated Articles 19, 20, 21, and 26 of the Civil Code.10

Balaguer denied that he had anything to do with the publications.11 However, he argued that
the publications are not actionable because they are true and without malice;12 are of legitimate
public concern and interest because IBC-13 is under sequestration; that petitioner is a newsworthy
and public figure;13 and that they are privileged communication.14 Balaguer filed a counterclaim
against petitioner for alleged malicious filing of the civil case.15

IBC-13 also denied participation in the publications. It claimed that assuming press statements
were issued during a press conference, the same was done solely by Balaguer without its authority
or sanction.16 IBC-13 also filed a counterclaim against petitioner17 and a cross-claim against
Balaguer.18

On August 31, 1993, the Labor Arbiter rendered a Decision19 finding petitioner’s dismissal as illegal,
which was affirmed by the National Labor Relations Commission. The Commission, however,
declared respondents to be acting in good faith, hence, it deleted the award of moral and exemplary
damages. On December 6, 1994, the parties entered into a Compromise Agreement,20 with IBC-13
proposing a scheme of payment for petitioner’s monetary claims, and with IBC-13 and petitioner
waiving any and all claims against each other arising out of the labor case.

On October 29, 2003, the Regional Trial Court21 of Quezon City held that petitioner is entitled to an
award of damages,22 thus:

WHEREFORE, premises considered, judgment is rendered in favor of plaintiff Francisco N.

Villanueva and against defendants Balaguer and Intercontinental Broadcasting Corporation (IBC-
13).

Accordingly, defendants are hereby ordered to pay the plaintiff jointly and severally, as follows:

1) the sum of Five Hundred Thousand (P500,000.00) Pesos by way of moral damages;

2) the sum of One Hundred Thousand (P100,000.00) Pesos as and by way of exemplary
damages;

3) the sum of Thirty Thousand (P30,000.00) Pesos by way of nominal damages;

4) the sum of Ten Thousand (P10,000.00) Pesos by way of temperate or moderate

damages; and

5) the sum of One Hundred Thousand (P100,000.00) Pesos as and by way of attorney’s
fees.

With costs against defendants.

SO ORDERED.23

Respondents moved for reconsideration but it was denied.24 Hence, they appealed to the Court of
Appeals which rendered the herein assailed Decision on August 10, 2007, disposing thus:

WHEREFORE, premises considered, the appeal is hereby GRANTED. The October 29, 2003
Decision and the February 2, 2004 Resolution with Clarification issued by the Regional Trial Court,
Br. 89, National Capital Judicial Region, Quezon City, are hereby REVERSED. The Complaint, the
Counterclaim, and the Cross-claim in Civil Case No. Q-92-13680 are hereby DISMISSED.

SO ORDERED.25
Petitioner’s motion for reconsideration was denied. Hence, the instant petition raising the following
issues:26

a) Does the failure of the addressee to respond to a letter containing statements attributing to
him commission of acts constituting actionable wrong, hence, adverse to his interest, and of
such nature as would call for his reaction, reply, or comment if untrue, constitute his
admission of said statements, consequently, may be used in evidence against him?

b) Is the admission by a principal admissible against its agent? Is the admission by a person
jointly interested with a party admissible against the latter?

c) Does the failure of an individual to disown the attribution to him by newspaper

publications, as the source of defamatory newspaper reports, when he is free and very able
to do so, constitute admission that he, indeed, was the source of the said defamatory news
reports?

The petition lacks merit.

As early as 1905, this Court has declared that it is the duty of the party seeking to enforce a
right to prove that their right actually exists. In varying language, our Rules of Court, in
speaking of burden of proof in civil cases, states that each party must prove his own
affirmative allegations and that the burden of proof lies on the party who would be defeated if
no evidence were given on either side.27 Thus, in civil cases, the burden of proof is generally
on the plaintiff, with respect to his complaint.28

In proving his claim, petitioner relied on the July 20, 1992 letter, the newspaper articles, and the
alleged admission of respondents. Based on the above pieces of evidence, the Court finds that
petitioner was unable to discharge his burden of proof. As such, the Court of Appeals properly
dismissed the complaint for damages.

The July 20, 1992 letter sent by petitioner to respondents reads as follows:29

20 July 1992

Mr. Virgilio Balaguer

Intercontinental Broadcasting Corporation
Broadcast City, Capitol Hills
Diliman, Quezon City

Dear Mr. Balaguer:

We write on behalf of our client, Mr. Francisco N. Villanueva.

You have caused to be published in the 18 July 1992 issue of The Philippine Star and 19 July 1992
issue of Manila Bulletin, a news item wherein you stated that you dismissed an Operations Executive
because he "sold forged Certificate of Performance". Our immediate impression is, you are referring
to our client, Francisco N. Villanueva, because he is the only Operations Executive in IBC, Channel
13 you have illegally and despotically dismissed.

We urge you, therefore, to inform us, within forty-eight (48) hours from your receipt of this letter that
the Operations Executive you referred to in your press statement is not our client, Francisco N.
Villanueva. We shall construe your failure/refusal to reply as your unequivocal admission that you
are, in fact, actually referring to our client, Mr. Francisco N. Villanueva, as the operations executive
who "sold forged Certificate of Performance". Accordingly, we shall immediately proceed to take
appropriate criminal and civil court actions against you without further notice.

Very truly yours,

(signed)
REX G. RICO

cc: Mr. Francisco N. Villanueva

Board of Administrators, IBC-13
Petitioner argues that by not responding to the above letter which expressly urged them to
reply if the statements therein contained are untrue, respondents in effect admitted the
matters stated therein, pursuant to the rule on admission by silence in Sec. 32, Rule
130,30 and the disputable presumption that acquiescence resulted from a belief that the thing
acquiesced in was conformable to the law or fact.31

Petitioner’s argument lacks merit. One cannot prove his claim by placing the burden of proof
on the other party. Indeed, "(a) man cannot make evidence for himself by writing a letter
containing the statements that he wishes to prove. He does not make the letter evidence by
sending it to the party against whom he wishes to prove the facts [stated therein]. He no
more can impose a duty to answer a charge than he can impose a duty to pay by sending
goods. Therefore a failure to answer such adverse assertions in the absence of further
circumstances making an answer requisite or natural has no effect as an admission."32

Moreover, the rule on admission by silence applies to adverse statements in writing if the
party was carrying on a mutual correspondence with the declarant. However, if there was no
such mutual correspondence, the rule is relaxed on the theory that while the party would
have immediately reacted by a denial if the statements were orally made in his presence,
such prompt response can generally not be expected if the party still has to resort to a
written reply.33

In the same manner, we also cannot assume an admission by silence on the part of Balaguer
by virtue of his failure to protest or disclaim the attribution to him by the newspapers that he
is the source of the articles. As explained above, the rule on admission by silence is relaxed
when the statement is not made orally in one’s presence or when one still has to resort to a
written reply, or when there is no mutual correspondence between the parties.

As for the publications themselves, newspaper articles purporting to state what the defendant said
are inadmissible against him, since he cannot be held responsible for the writings of third
persons.34 As correctly observed by the Court of Appeals, "while the subject news items indicated
that Balaguer was the source of the columnists, proving that he truly made such statements is
another matter."35 Petitioner failed to prove that Balaguer did make such statements.

Notably, petitioner did not implead the editorial staff and the publisher of the alleged defamatory
articles.36 Contrary to petitioner’s assertion, he should have at least presented the authors of the
news articles as witnesses to prove his case against respondents in the absence of an express
admission by the latter that the subject news articles have been caused by them.

Petitioner also claims that respondents have admitted that they held a press conference and caused
the publication of the news articles, based on the following testimony of Balaguer:37

ATTY. JIMENEZ:

Okay, Let me ask another question. Now Mr. Balaguer this publication referred to so called
anomalies of 1986 to 1989 now how about the termination.

A: 1991.

ATTY. JIMENEZ:

Yes.

WITNESS:

I think the termination of Mr. Villanueva has nothing to do with that press statement release
because the period that covers that report is from specific date 1986 to 1989. (TSN, 07
November 2000, p. 19)

Admissions, however, should be clear and unambiguous38 which can hardly be said of Balaguer’s
above testimony. If Balaguer intended to admit the allegation that he conducted a press conference
and caused the publication of the news articles, he could have done so. Instead, Balaguer
specifically denied these allegations in paragraphs 4 and 5 of his Answer.39
Petitioner next argues that IBC-13’s Cross-Claim against Balaguer, in that:40

11. The acts complained of by the plaintiff were done solely by co-defendant Balaguer.

Balaguer resorted to these things in his attempt to stave off his impending removal from IBC.

is an admission by IBC-13, which is admissible against Balaguer pursuant to Sec. 29, Rule 13041 as
an admission by a co-partner or an agent.

Petitioner is mistaken. IBC-13’s cross-claim against Balaguer effectively created an adverse interest
between them. Hence, the admission of one defendant is not admissible against his co-defendant.
Besides, as already discussed, the alleged acts imputed to Balaguer were never proven to have
been committed, much less maliciously, by Balaguer. Malice or bad faith implies a conscious and
intentional design to do a wrongful act for a dishonest purpose or moral obliquity. Such must be
substantiated by evidence.42

In sum, we find that petitioner failed to discharge his burden of proof. No satisfactory evidence was
presented to prove by preponderance of evidence that respondents committed the acts imputed
against them. As such, there is no more need to discuss whether the assailed statements are
defamatory. 1av vphi1

WHEREFORE, the petition is DENIED. The August 10, 2007 Decision of the Court of Appeals in CA-
G.R. CV No. 81657 reversing the October 29, 2003 Decision and February 2, 2004 Resolution of the
Regional Trial Court of Quezon City, Branch 89, finding petitioner entitled to damages, as well as the
October 16, 2007 Resolution denying the motion for reconsideration, are AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice
Case Digest: SME Bank, et al. v. De Guzman, et al.

G.R. No. 184517 : October 8, 2013

SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR.,Petitioners, v. PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR,
, RICARDO GASPAR JR., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and
LIBERATO MANGOBA, Respondents.

x-----------------------x

G.R. No. 186641

SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR,
JR.,Petitioners,v. ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA ROSETE, FIDEL
ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA,Respondents.

SERENO,C.J.:

FACTS:

Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr. (Ricardo), Eufemia Rosete
(Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato)
were employees of Small and Medium Enterprise Bank, Incorporated (SME Bank).Originally, the
principal shareholders and corporate directors of the bank were Eduardo M. Agustin, Jr. (Agustin)
and Peregrin de Guzman, Jr. (De Guzman).

SME Bank experienced financial difficulties. To remedy the situation, the bank officials proposed its
sale to Samson.

Accordingly, negotiations ensued, Letter Agreements were sent to Agustin and De Guzman,
conditioning that it shall guarantee the peaceful turn over of all assets as well as the peaceful
transition of management of the bank and shall terminate/retire the employees we mutually agree
upon, upon transfer of shares in favor of groups nominees; and all retirement benefits, if any of the
above officers/stockholders/board of directors are hereby waived upon consummation of the above
sale. The retirement benefits of the rank and file employees including the managers shall be
honored by the new management. Thereafter, the Letter Agreement was accepted.

Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all the
employees and persuaded them to tender their resignations,with the promise that they would be
rehired upon reapplication. His directive was allegedly done at the behest of petitioner Olga Samson.

Relying on this representation, Elicerio,Ricardo,Fidel,Simeon, Jr.,and Liberato tendered their

resignations. As for Eufemia, she first tendered a resignation letter and then a retirement letter.

Agustin and De Guzman signified their conformity to the Letter Agreements and sold 86.365% of the
shares of stock of SME Bank to spouses Abelardo and Olga Samson. Spouses Samson then
became the principal shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed bank
president. As it turned out, respondent employees, except for Simeon, Jr.,were not rehired. After a
month in service, Simeon, Jr. again resigned on October 2001.

Respondent-employees demanded the payment of their respective separation pays, but their
requests were denied. Aggrieved by the loss of their jobs, respondent employees filed a Complaint
before NLRC and sued SME Bank, spouses Abelardo and Olga Samson and Aurelio Villaflor (the
Samson Group). Subsequently, they amended their Complaint to include Agustin and De Guzman
as respondents to the case.

The labor arbiter ruled that the buyer of an enterprise is not bound to absorb its employees, unless
there is an express stipulation to the contrary. However, he also found that respondent employees
were illegally dismissed, because they had involuntarily executed their resignation letters after
relying on representations that they would be given their separation benefits and rehired by the new
management. Accordingly, the labor arbiter decided the case against Agustin and De Guzman, but
dismissed the Complaint against the Samson Group.

Respondent employees questioned the labor arbiters failure to award backwages, while Agustin and
De Guzman contended that they should not be held liable for the payment of the employees claims.

The NLRC found that there was only a mere transfer of shares and therefore, a mere change of
management. As the change of management was not a valid ground to terminate respondent bank
employees, the NLRC ruled that they had indeed been illegally dismissed. It further ruled that
Agustin, De Guzman and the Samson Group should be held jointly and severally liable for the
employees separation pay and backwages.

On appeal, the CA affirmed the decision of the NLRC.

ISSUE: Whether or not the respondents were illegally dismissed.

HELD: The decision of the Court of Appeals is overruled.

LABOR LAW

Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered resignation letters
because they were led to believe that, upon reapplication, they would be reemployed by the new
management.As it turned out, except for Simeon, Jr., they were not rehired by the new
management. Their reliance on the representation that they would be reemployed gives credence to
their argument that they merely submitted courtesy resignation letters because it was demanded of
them, and that they had no real intention of leaving their posts. We therefore conclude that Elicerio,
Ricardo, Fidel, and Liberato did not voluntarily resign from their work; rather, they were terminated
from their employment.

Retirement, like resignation, should be an act completely voluntary on the part of the employee. If
the intent to retire is not clearly established or if the retirement is involuntary, it is to be treated as a
discharge. De Leon v. NLRC, 188 Phil. 666 (1980).

In San Miguel Corporation v. NLRC, 354 Phil. 815 (1998),we have explained that involuntary
retirement is tantamount to dismissal, as employees can only choose the means and methods of
terminating their employment, but are powerless as to the status of their employment and have no
choice but to leave the company.

This rule squarely applies to Eufemias case. Indeed, she could only choose between resignation and
retirement, but was made to understand that she had no choice but to leave SME Bank. Thus, we
conclude that, similar to her other co-employees, she was illegally dismissed from employment.
LABOR LAW

The law permits an employer to dismiss its employees in the event of closure of the business
establishment. However, the employer is required to serve written notices on the worker and the
Department of Labor at least one month before the intended date of closure.Moreover, the
dismissed employees are entitled to separation pay, except if the closure was due to serious
business losses or financial reverses.However, to be exempt from making such payment, the
employer must justify the closure by presenting convincing evidence that it actually suffered serious
financial reverses. Indino v. NLRC, 258 Phil. 792, 799 (1989).

LABOR LAW

Petitioner bank also argues that, there being a transfer of the business establishment, the innocent
transferees no longer have any obligation to continue employing respondent employees, and that
the most that they can do is to give preference to the qualified separated employees; hence, the
employees were validly dismissed.

The argument is misleading and unmeritorious. Contrary to petitioner banks argument, there was no
transfer of the business establishment to speak of, but merely a change in the new majority
shareholders of the corporation.

There are two types of corporate acquisitions : asset sales and stock sales.In asset sales, the
corporate entitysells all or substantially all of its assetsto another entity. In stock sales, the individual
or corporate shareholderssell a controlling block of stockto new or existing shareholders.

In contrast with asset sales, in which the assets of the selling corporation are transferred to another
entity, the transaction in stock sales takes place at the shareholder level. Because the corporation
possesses a personality separate and distinct from that of its shareholders, a shift in the composition
of its shareholders will not affect its existence and continuity. Thus, notwithstanding the stock sale,
the corporation continues to be the employer of its people and continues to be liable for the payment
of their just claims. Furthermore, the corporation or its new majority share holders are not entitled to
lawfully dismiss corporate employees absent a just or authorized cause.

In the case at bar, the Letter Agreements show that their main object is the acquisition by the
Samson Group of 86.365% of the shares of stock of SME Bank.Hence, this case involves a stock
sale, whereby the transferee acquires the controlling shares of stock of the corporation. Thus,
following the rule in stock sales, respondent employees may not be dismissed except for just or
authorized causes under the Labor Code.

The right to security of tenure guarantees the right of employees to continue in their employment
absent a just or authorized cause for termination.

It is thus erroneous on the part of the corporation to consider the employees as terminated from their
employment when the sole reason for so doing is a change of management by reason of the stock
sale. The conformity of the employees to the corporations act of considering them as terminated and
their subsequent acceptance of separation pay does not remove the taint of illegal dismissal.
Acceptance of separation pay does not bar the employees from subsequently contesting the legality
of their dismissal, nor does it estop them from challenging the legality of their separation from the
service. Sari-sari Group of Companies, Inc. v. Piglas Kamao, G.R. No. 164624, 11 August 2008
ROY D. PASOS vs. PHILIPPINE NATIONAL CONSTRUC
TION CORPORATION G.R. No. 192394, 3 July 2013

FACTS:

Based on the PNCC’s “Personnel Action Form Appointment for Project Employment”, p
etitioner was designated as “Clerk II (Accounting)” and was assigned to the “NAIA – II P
roject.” However, his employment did not end on the expiration but was extended until f
or more than two years. He was rehired, his employment was extended, rehired, and fin
ally, his project employment was terminated. However, his superior required him still to
report. Upon the medical examination, he was required by the doctor to take sick leave
which he did. Upon his return after 74 days, he was informed that he was already dismis
sed.

ISSUE:

Whether or not employer’s failure to file termination reports after every project completi
on constitutes the regularity of the project employee.

RULING: Yes. Duration of project employment should be determined at the time of hiri
ng. While for first three months, petitioner can be considered a project employee of PNC
C, his employment thereafter, when his services were extended without any specification
of as to the duration, made him a regular employee of PNCC. And his status as a regular
employee was not affected by the fact that he was assigned to several other projects and
there were intervals in between said projects since he enjoys security of tenure.

Moreover, failure of an employer to file termination reports after every project completi
on proves that an employee is not a project employee. Records clearly showed that PNC
C did not report the termination of petitioner’s supposed project employment for the NA
IA II Project to the DOLE. Department Order No. 19, or the “Guidelines Governing the E
mployment of Workers in the Construction Industry,” requires employers to submit a re
port of an employee’s termination to the nearest public employment office every time an
employee’s employment is terminated due to a completion of a project. PNCC submitte
d as evidence of its compliance with the requirement supposed photocopies of its termin
ation reports, each listing petitioner as among the employees affected. Unfortunately, no
ne of the reports submitted pertain to the NAIA II Project. Moreover, DOLE NCR verifie
d that petitioner is not included in the list of affected workers based on the termination r
eports filed by PNCC. This certification from DOLE was not refuted by PNCC.

With regard his dismissal, a regular employee dismissed for a cause other than the just o
r authorized causes provided by law is illegally dismissed. Petitioner’s regular employme
nt was terminated by PNCC due to contract expiration or project completion, which are
both not among the just or authorized causes provided in the Labor Code, as amended, f
or dismissing a regular employee. Thus, petitioner was illegally dismissed and according
to Article 279 of the Labor Code, he is entitled to reinstatement, full back wages, inclusi
ve of allowances, and to his other benefits or their monetary equivalent from the time hi
s compensation was withheld from him up to the time of his actual reinstatement.
G.R. No. 179488, April 23, 2012

Cosco Philippines, Inc., petitioner

vs Kemper Insurance Company, respondent

Ponente: Peralta

Facts:

This is a petition for review on certiorari seeking to reverse and set aside the decision of
the CA.

Kemper is a foreign insurance company based in Illinois, USA with no license to engage
in business in the Philippines. While petitioner is a domestic shipping company.

1998, Kemper insured the shipment of imported frozen boneless beef. Upon arrival in
Manila port, a portion of the shipment was rejected by reason of spoilage arising from
the alleged temperature fluctuations of Cosco containers.

So, Genosi (the buyer) filed a claim against both Cosco and Kemper. Thereafter, Kemper
paid the claim of Genosi. Hence, in 1999. Kemper filed a complaint for insurance loss
and damage against Cosco alleging that that despite the repeated demands, Cosco failed
and refused to pay the value loss sustained due to the fault of Cosco's container.

In response, Cosco insisted that Kemper had no capacity to sue since it was doing
business in the Philippines without the required license. Petitioner filed a motion to
dismiss contending that the same was filed by Atty. Lat who failed to show his authority
to sue and sign the corresponding certification against forum shopping.

2002, RTC granted the motion to dismiss saying that Atty. Lat has no special power of
attorney. Motion for reconsideration was denied. On appeal by respondent, CA reversed
and set aside the trial court's order, saying that the certificate for non-forum shopping is
mandatory and it must be side not by the counsel but by the plaintiff or principal party
concerned. CA also ordered that the case be in the RTC for further proceedings.
Petitioner's motion for reconsideration was later denied by the CA, hence this present
petition.

Issue:

CA erred in their decision saying that Atty. Lat was properly authorized by the
respondent to sign the certificate.

Held:

Petition is meritorious.

Certification of non-forum shopping must be signed by the parties or if the principal

cannot sign, the behalf must be duly authorized. In case of a corporation, the lawyer
assigned must have a personal knowledge of the facts.

In this case, since this is a corporation, it must show that the board of directors has duly
authorized Atty. Lat. However, there is no proof that respondent authorized Atty. Lat to
sign the certification.
 190 SCRA 717 – Business Organization – Corporation Law – Corporate Fiction – Franchise
– Right of Succession
In 1958, Felix Alberto & Co., Inc (FACI) was granted by Congress a franchise to build radio
stations (later construed as to include telephony). FACI later changed its name to Express
Telecommunications Co., Inc. (ETCI). In 1987, ETCI was granted by the National
Telecommunications Commission a provisional authority to build a telephone system in some
parts of Manila. Philippine Long Distance Telephone Co. (PLDT) opposed the said grant as
it avers, among others, that ETCI is not qualified because its franchise has already been
invalidated when it failed to exercise it within 10 years from 1958; that in 1987, the Albertos,
owners of more than 40% of ETCI’s shares of stocks, transferred said stocks to the new
stockholders (Cellcom, Inc.? – not specified in the case); that such transfer involving more
than 40% shares of stocks amounted to a transfer of franchise which is void because the
authorization of Congress was not obtained. The NTC denied PLDT. PLDT then filed a
petition for certiorari and prohibition against the NTC.
ISSUE: Whether or not PLDT’s petition should prosper.
HELD: No.

1. PLDT cannot attack ETCI’s franchise in a petition for certiorari. It cannot be collaterally
attacked. It should be directly attacked through a petition for quo warranto which is the correct
procedure. A franchise is a property right and cannot be revoked or forfeited without due
process of law. The determination of the right to the exercise of a franchise, or whether the
right to enjoy such privilege has been forfeited by non-user, is more properly the subject of
the prerogative writ of quo warranto. Further, for any violation of the franchise, it should be
the government who should be filing a quo warranto proceeding because it was the
government who granted it in the first place.
2. The transfer of more than 40% of the shares of stocks is not tantamount to a transfer of
franchise. There is a distinction here. There is no need to obtain authorization of Congress
for the mere transfer of shares of stocks. Shareholders can transfer their shares to anyone.
The only limitation is that if the transfer involves more than 40% of the corporation’s stocks,
it should be approved by the NTC. The transfer in this case was shown to have been approved
by the NTC. What requires authorization from Congress is the transfer of franchise; and the
person who shall obtain the authorization is the grantee (ETCI). A distinction should be made
between shares of stock, which are owned by stockholders, the sale of which requires only
NTC approval, and the franchise itself which is owned by the corporation as the grantee
thereof, the sale or transfer of which requires Congressional sanction. Since stockholders
own the shares of stock, they may dispose of the same as they see fit. They may not,
however, transfer or assign the property of a corporation, like its franchise. In other words,
even if the original stockholders had transferred their shares to another group of
shareholders, the franchise granted to the corporation subsists as long as the corporation, as
an entity, continues to exist. The franchise is not thereby invalidated by the transfer of the
shares. A corporation has a personality separate and distinct from that of each stockholder.
It has the right of continuity or perpetual succession.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY v. NATIONAL
TELECOMMUNICATIONS COMMISSION G.R. No. 152685, 4 December 2007

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY v. NATIONAL

TELECOMMUNICATIONS COMMISSION

G.R. No. 152685, 4 December 2007

Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Subscription Contract)

FACTS:

This case pertains to Section 40 (e) of the Public Service Act (PSA), as amended on March
15, 1984, pursuant to Batas Pambansa Blg. 325, which authorized the NTC to collect from
public telecommunications companies Supervision and Regulation Fees (SRF) of PhP 0.50
for every PhP 100 or a fraction of the capital and stock subscribed or paid for of a stock
corporation, partnership or single proprietorship of the capital invested, or of the property and
equipment, whichever is higher.

Under Section 40 (e) of the PSA, the NTC sent SRF assessments to petitioner Philippine
Long Distance Telephone Company (PLDT) starting sometime in 1988. The SRF
assessments were based on the market value of the outstanding capital stock, including stock
dividends, of PLDT. PLDT protested the assessments contending that the SRF ought to be
based on the par value of its outstanding capital stock. Its protest was denied by the NTC and
likewise, its motion for reconsideration.

PLDT appealed before the CA. The CA modified the disposition of the NTC by holding that
the SRF should be assessed at par value of the outstanding capital stock of PLDT, excluding
stock dividends.

ISSUE:

Whether or not the value transferred from the unrestricted retained earnings of PLDT to the
capital stock account pursuant to the issuance of stock dividends is the proper basis for the
assessment of the SRF?

RULING:

NO.

In the case of stock dividends, it is the amount that the corporation transfers from its surplus
profit account to its capital account. It is the same amount that can be loosely termed as the
trust fund of the corporation. The Trust Fund doctrine considers this subscribed capital as a
trust fund for the payment of the debts of the corporation, to which the creditors may look for
satisfaction. Until the liquidation of the corporation, no part of the subscribed capital may be
returned or released to the stockholder (except in the redemption of redeemable shares)
without violating this principle. Thus, dividends must never impair the subscribed capital;
subscription commitments cannot be condoned or remitted; nor can the corporation buy its
own shares using the subscribed capital as the considerations therefor.

When stock dividends are distributed, the amount declared ceases to belong to the
corporation but is distributed among the shareholders. Consequently, the unrestricted
retained earnings of the corporation are diminished by the amount of the declared dividend
while the stockholders equity is increased. Furthermore, the actual payment is the cash value
from the unrestricted retained earnings that each shareholder foregoes for additional
stocks/shares which he would otherwise receive as required by the Corporation Code to be
given to the stockholders subject to the availability and conditioned on a certain level of
retained earnings.

In essence, therefore, the stockholders by receiving stock dividends are forced to exchange
the monetary value of their dividend for capital stock, and the monetary value they forego is
considered the actual payment for the original issuance of the stocks given as dividends.
Therefore, stock dividends acquired by shareholders for the monetary value they forego are
under the coverage of the SRF and the basis for the latter is such monetary value as declared
by the board of directors.