GR No.
46997 January 11, 1940 Camarines Sur, for believing that they were the property of the defendant Man Sun Lung,
WISE & COMPANY, INC., Plaintiff-appellant,
vs.
MAN SUN LUNG, defendant.
THE SHERIFF PROVINCIAL DE CAMARINES SUR, defendant-appealed.
Messrs. Franco and Reinoso representing the appellant.
D. Moises Pardo representing the appellate.
VILLA-REAL, J .:
This is an appeal filed by the plaintiff, Wise & Company, Inc., against the order of the
Manila Court of First Instance denying the motion, filed by said plaintiff on February 15,
1937, in which requested that the Provincial Sheriff of Camarines Sur be ordered to sell
the different properties seized by him and the product of the sale be delivered to said
claimant.
In support of its appeal, the repeated complainant entity, Wise & Company, Inc., notes
the following errors of law as committed by the Court to quo , namely:
1. The lower court erred in failing to distinguish between the natural person, Man
Sun Lung from the corporation, Man Sun Lung & Co., Inc.
2. The lower court erred in gratuitously relinguishing its custody of the goods put
under preliminary attachment to the prejudice of Wise & Company, Inc.
The necessary and pertinent facts for the resolution of the questions of law raised in this
appeal and the only ones that we can take into account are those that are reported in the
appealed car, namely:
It appears in the Sheriff's report on the back of the order of execution Exhibit B
that he delivered said goods to the Insolvency Syndicate of Man Sun Lung & Co.,
Inc., because he had seized such effects in the Man Sun store Lung & Co., Inc. It
also appears in the Sheriff's reply that he made said delivery under the order of
the Court of Camarines Sur and that said goods have been sold by the trustee by
order of the Court in said Insolvency Matter and its amount of P656.64 is held by
the notary, by order of the Court of Camarines Sur dated January 20, 1937.
Undoubtedly, Man Sun Lung, the defendant in this case, is legally different and distinct
from Man Sun Lung & Co., Inc., declared insolvent in the corresponding insolvency file:
the first is a natural person and the last is a Legal person with a distinct and independent
personality from that of the person, Not realizing that the assets seized by the Sheriff of
were really of this, the presumption is that they belonged to Man Sun Lung & Co., Inc.,
as part of the assets of that business entity. Having appointed a trustee to possess and
insure the assets of the insolvent, subject to the orders of the Court that he knew of the
insolvency, only this had jurisdiction to order the disposition that should be made of such
goods. Having seized the Provincial Sheriff of Camarines Sur of the assets under
discussion as the property of the defendant Man Un Lung and not even includingprima
facie , that they were of this, but of the mercantile entity, Man Sun Lung & Co., Inc., in
doing so its seizure was illegal, and the Court quo work within its jurisdiction when
ordering the delivery of said goods to the trustee of the aforementioned insolvency, who
then sold them by order of the Court of repeated insolvency, depositing the proceeds of
the sale, which amounted to P656.64, by order of the same Court of Camarines Sur
dated January 20, 1937, held of the scribe of the same court.
(Arts. 18, 60, 69, Law No. 1956; Dharmdas v. Buenaflor, 57 Jur. Fil., 505; Cu Unjeng e
Hijos v Mitchell, 58 Jur. Fil., 515; Bastida contra Penalosa, 30 Jur. Fil. , 156; De
Amuzategui v Macleod, 33 Jur. Fil., 85).
As for the second alleged error, which is alleged to have been committed by the
Trubunal a quo, having been illegal the seizure of the assets here treated as the property
of the defendant Man Sun Lung, not always, the lower court did not incur in error when
ordering the lifting of the embargo on them and their delivery to the insolvency trustee of
Man Sun Lung & Co., Inc.
Due to the above considerations, we are of opinion and thus we declare (1) that the
articles or movable goods that are found in the store of a corporation, are presumed to
be the property of the corporation and not of any member of the corporation to unless
proven otherwise; (2) that the seizure locked by the Sheriff on such movable property, by
virtue of an injunction issued against a member thereof, not having proven that they
belong exclusively to said member, as illegal; and (3) that it has issued the embargo
order, it is not beyond its jurisdiction when ordering the lifting of the same and the
delivery of the seized assets to the insolvency trustee of said corporation.
By virtue of it, finding no error in the appealed car, we confirm it in all its parts with the
costs to the appellant.
Avanceña, Pres., Imperial, Diaz, Laurel and Concepcion, MM., Are satisfied.
G.R. No. 203770, November 23, 2016
MANUELA AZUCENA MAYOR, Petitioner, v. EDWIN TIU AND DAMIANA CHARITO
MARTY, Respondents.
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing
the October 5, 20111 and September 24, 20122
Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 06256, which dismissed the
petition filed by Remedios Tiu (Remedios) and Manuela Azucena Mayor (Manuela) for
procedural infirmities. The said CA petition challenged the January 20, 20113 and June
10, 20114 Orders of the Regional Trial Court, Branch 6, Tacloban City (RTC-Br. 6), in Sp.
Proc. No. 2008-05-30, a case for Probate of Last Will and Testament and Issuance of
Letters of Testamentary.
The Antecedents:
On May 25, 2008, Rosario Guy-Juco Villasin Casilan (Rosario), the widow of the late
Primo Villasin (Primo), passed away and left a holographic Last Will and
Testament,5 wherein she named her sister, Remedios Tiu (Remedios), and her niece,
Manuela Azucena Mayor (Manuela), as executors. Immediately thereafter, Remedios
and Manuela filed a petition for the probate of Rosario's holographic will6 with prayer for
the issuance of letters testamentary (probate proceedings). The petition was raffled to
the Regional Trial Court, Branch 9, Tacloban City (RTC-Br. 9) and docketed as Sp.
Proc. No. 2008-05-30. They averred that Rosario left properties valued at approximately
P2.5 million.
On May 29, 2008, respondent Damiana Charito Marty (Marty) claiming to be the adopted
daughter of Rosario, filed a petition for letters of administration before the RTC, Branch
34, Tacloban City (RTC-Br. 34), docketed as Sp. Proc. No. 2008-05-32, but it was not
given due course because of the probate proceedings. Per records, this dismissal is
subject of a separate proceeding filed by Marty with the CA Cebu City, docketed as CA
G.R. SP No. 04003.7
On June 12, 2008, in its Order,8 the RTC-Br. 9 found the petition for probate of will filed
by Remedios and Manuela as sufficient in form and substance and set the case for
hearing.
Consequently, Marty filed her Verified Urgent Manifestation and Motion,9 dated June 23,
2008, stating that Remedios kept the decedent Rosario a virtual hostage for the past ten
(10) years and her family was financially dependent on her which led to the wastage and
disposal of the properties owned by her and her husband, Primo. Marty averred that until
the alleged will of the decedent could be probated and admitted, Remedios
and her ten (10) children had no standing to either possess or control the properties
comprising the estate of the Villasins. She prayed for the probate court to: 1) order an
immediate inventory of all the properties subject of the proceedings; 2) direct the tenants
of the estate, namely, Mercury Drug and Chowking, located at Primrose Hotel, to deposit
their rentals with the court; 3) direct Metrobank, P. Burgos Branch, to freeze the accounts
in the name of Rosario, Primrose Development Corporation (Primrose) or Remedios; and
4) lock up the Primrose Hotel in order to preserve the property until final disposition by
the court.
On July 8, 2008, Remedios and Manuela filed their Comment/Opposition10 to the urgent
manifestation averring that Marty was not an adopted child of the Villasins based on a
certification issued by the Office of the Clerk of Court of Tacloban City, attesting that no
record of any adoption proceedings involving Marty existed in their records. They also
argued that the probate court had no jurisdiction over the properties mistakenly claimed
by Marty as part of Rosario's estate because these properties were actually owned by,
and titled in the name of, Primrose. Anent the prayer to direct the tenants to deposit the
rentals to the probate court, Remedios and Manuela countered that the probate court
had no jurisdiction over properties owned by third persons, particularly by Primrose, the
latter having a separate and distinct personality from the decedent's estate.
In her Reply,11 dated July 15, 2008, Marty cited an order of the Court of First Instance of
Leyte (CFI Leyte) in SP No. 1239,12 claiming that as early as March 3, 1981, the veil of
corporate entity of Primrose was pierced on the ground that it was a closed family
corporation controlled by Rosario after Primo's death. Thus, Marty alleged that "piercing"
was proper in the case of Rosario's estate because the incorporation of Primrose was
founded on a fraudulent consideration, having been done in contemplation of Primo's
death.
Further, on July 22, 2008, in her Opposition to the Petition for the Approval of the Will of
the Late Rosario Guy-Juco Villasin Casilan,13 Marty impugned the authenticity of her
holographic will.
Meanwhile, Edwin Tiu (Edwin), a son of Remedios, also filed his Opposition,14 dated
June 13, 2008.
After a protracted exchange of pleadings, the parties submitted their respective
memoranda.
The January 14, 2009 Order
In its January 14, 2009 Order,15 the RTC-Br. 9 granted the motion of Marty and
appointed the OIC Clerk of Court as special administrator of the Estate. The Probate
Court also ordered Mercury Drug and Chowking to deposit the rental income to the court
and Metrobank to freeze the bank accounts mentioned in the motion of Marty. The
doctrine of piercing the corporate veil was applied in the case considering that Rosario
had no other properties that comprised her estate other than Primrose. According to the
probate court, for the best interest of whoever would be adjudged as the legal heirs of
the Estate, it was best to preserve the properties from dissipation.
On January 22, 2009, Remedios and Manuela filed their Motion for Inhibition16 on the
ground of their loss of trust and confidence in RTC-Br. 9 Presiding Judge Rogelio C.
Sescon (Judge Sescon) to dispense justice. Later, they also filed their Motion for
Reconsideration Ad Cautelam,17 dated February 3, 2009, arguing that Rosario's estate
consisted only of shares of stock in Primrose and not the corporation itself. Thus, the
probate court could not order the lessees of the corporation to remit the rentals to the
Estate's administrator. With regard to the appointment of a special administrator,
Remedios and Manuela insisted that it be recalled. They claimed that if ever there was a
need to appoint one, it should be the two of them because it was the desire of the
decedent in the will subject of the probation proceedings.
Order,18
In its dated March 27, 2009, the RTC-Br. 9 denied the motion for
reconsideration for lack of merit and affirmed its January 14, 2009 Order. The presiding
judge, Judge Sescon, also granted the motion for inhibition and ordered that the records
of the case be referred to the RTC Executive Judge for reraffling. The case was later re-
raffled to RTC-Br.6, Judge Alphinor C. Serrano, presiding judge.
Aggrieved by the denial of their motion for reconsideration, Remedios and Manuela filed
a petition for certiorari with the CA in Cebu City, docketed as CA-G.R. S.P. No. 04254,
assailing the January 14, 2009 and March 27, 2009 Orders of the RTC-Br. 9.19
Ruling of the CA
In its October 16, 2009 Decision,20 the CA reversed the assailed orders of the RTC Br. 9,
except as to the appointment of a special administrator insofar as this relates to
properties specifically belonging to the "Estate." It held that Primrose had a personality
separate and distinct from the estate of the decedent and that the probate court
had no jurisdiction to apply the doctrine of piercing the corporate veil.
According to the CA, nowhere in the assailed orders of the probate court was it stated
that its determination of the title of the questioned properties was only for the purpose of
determining whether such properties ought to be included in the inventory. When the
probate court applied the doctrine of "piercing," in effect, it adjudicated with finality the
ownership of the properties in favor of the Estate. The CA stated that RTC-Br. 9 had no
jurisdiction to adjudicate ownership of a property claimed by another based on adverse
title; and that questions like this must be submitted to a court of general jurisdiction and
not to a probate court.
The CA added that assuming that the probate court's determination on the issue of
ownership was merely intended to be provisional, Marty's contentions still had no merit.
The properties, which she claimed to be part of the estate of Rosario and over which she
claimed co-ownership, comprised of real properties registered under the Torrens system.
As such, Primrose was considered the owner until the titles to those properties were
nullified in an appropriate ordinary action. The CA further stated that the RTC
erroneously relied on the order issued by the CFI Leyte in 1981, in the probate
proceedings involving the estate of Primo. Whatever determination the CFI made at the
time regarding the title of the properties was merely provisional, hence, not conclusive as
to the ownership.
By reason of the favorable decision by the CA, Remedios and Manuela filed their Motion
to Partially Revoke the Writ of Execution Enforcing the January 14, 2009 Order of the
Honorable Court and Manifestation in Compliance with the October 21, 2009 Order (Ad
Cautelam),21 dated October 27, 2009.
In its Order,22 dated November 17, 2009, the RTC-Br. 6 partially granted the motion as it
revoked the power of the special administrator to oversee the day-to-day operations of
Primrose. It also revoked the order with respect to Mercury Drug and Chowking,
reasoning out that the said establishments dealt with Primrose, which had a personality
distinct and separate from the estate of the decedent. In the said order, Atty. Blanche A.
Sa1ino nominated by oppositors Marty and Edwin, was appointed special administrator
to oversee the day-to-day operations of the estate. The same order also upheld the
January 14, 2009 Order, as to the conduct and inventory of all the properties comprising
the estate.
This order was not questioned or appealed by the parties.
Omnibus Motion
On September 24, 2010, or almost ten (10) months after the November 17, 2009 Order
of the probate court was issued, Marty, together with her new counsel, filed her Omnibus
Motion,23 praying for the probate court to: 1) order Remedios and Manuela to render an
accounting of all the properties and assets comprising the estate of the decedent; 2)
deposit or consign all rental payments or other passive income derived from the
properties comprising the estate; and 3) prohibit the disbursement of funds comprising
the estate of the decedent without formal motion and approval by the probate court.
Ruling of the RTC-Br. 6
In its January 20, 2011 Order, the RTC-Br. 6 granted Marty's Omnibus Motion. Although
it agreed with the October 16, 2009 CA Decision reversing the January 14, 2009 Order of
the RTC-Br. 9, nonetheless, it acknowledged the urgency and necessity of appointing a
special administrator. According to the probate court, considering that there was clear
evidence of a significant decrease of Rosario's shares in the outstanding capital stock of
Primrose,24 prudence dictated that an inquiry into the validity of the transfers should be
made. A final determination of this matter would be outside the limited jurisdiction of the
probate court, but it was likewise settled that the power to institute an action for the
recovery of a property claimed to be part of the estate was normally lodged with the
executor or administrator. Thus, the probate court disposed:
WHEREFORE, for the reasons aforestated, and so as not to render moot any action that
the special administrator, or the regular administrator upon the latter's qualification and
appointment, may deem appropriate to take on the matter (i.e. Whether or not to institute
in the name of the estate the appropriate action for the recovery of the shares of stock),
this Court hereby GRANTS Oppositor Marty's Omnibus Motion, dated September 24,
2010, and thus hereby:
1. DIRECTS petitioners, either individually or jointly, to: (a) RENDER AN
ACCOUNTINGof all the properties and assets comprising the estate of the decedent that
may have come into their possession; and, (b) DEPOSIT OR CONSIGN all the rentals
payments or such other passive incomes from the properties and assets registered in the
name of Primrose Development Corporation, including all income derived from the
Primrose Hotel and the lease contracts with Mercury Drug and Chowking Restaurant,
both within fifteen (15) days from receipt of this Order;
2. DIRECTS the Special Administrator to take possession and charge of the properties
comprising the decedent's estate, specially those pertaining to the sharesholding of the
decedent in Primrose Development Corporation, to determine whether or not action for
the recovery of the shares of stock supposedly transferred from the decedent to
petitioners Remedios Tiu, Manuela Azucena Mayor should be instituted in the name of
the estate against the said transferees and to submit a Report on the foregoing matters
to this Court, within fifteen (15) days from receipt of this Order; and,
3. ORDERS that no funds comprising the estate of the decedent shall be disbursed
without formal Motion therefor, with the conformity of the Special Administrator, duly
approved by this Court.
SO ORDERED. cralawlawlibrary25cralawred [Underscoring supplied]
The partial motion for reconsideration of the above order filed by Remedios and Manuela
was denied in the other assailed order of the RTC-Br. 6, dated June 10, 2011.26
Dissatisfied, Remedios and Manuela availed of the special civil action of certiorari under
Rule 65, and filed a petition before the CA.
Action by the CA
The CA, however, in its October 5, 2011 Resolution,27 dismissed the same based on the
following infirmities: 1) there was no proper proof of service of a copy of the petition on
the respondents which was sent by registered mail; 2) petitioners failed to indicate on the
petition the material date when the motion for reconsideration was filed; 3) the copy of
the assailed order was not certified true and correct by the officer having custody of the
original copy; and 4) the serial number of the commission of the notary public, the
province-city where he was commissioned, the office address of the notary public and
the roll of attorney's number were not properly indicated on the verification and
certification of non-forum shopping.
Remedios and Manuela moved for reconsideration of the assailed CA resolution, but to
no avail, as the appellate court denied the motion in its September 24, 2012 Resolution.
Hence, this petition before the Court, filed only by Manuela as Remedios had also
passed away, and anchored on the following
GROUNDS
I.
THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE
ERROR IN THE APPLICATION OF LAW AND THE RULES WARRANTING REVIEW
WHEN IT MISAPPLIED SECTION 13, RULE 13 OF THE RULES OF COURT AND
DECLARED THAT THERE WAS NO PROPER PROOF OF SERVICE BY
REGISTERED MAIL.
II.
THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE
ERROR IN THE APPLICATION OF LAW AND THE RULES WARRANTING REVIEW
WHEN IT MISAPPLIED JURISPRUDENCE AND RULE 65 AND IT HELD THAT
PETITIONER MAYOR DID NOT COMPLY WITH THE MATERIAL DATE RULE.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE
ERROR IN THE APPLICATION OF LAW AND THE RULES WARRANTING REVIEW
WHEN IT DECLARED THAT PETITIONER MAYOR FAILED TO COMPLY WITH THE
REQUIREMENT OF SECTION 1, RULE 65 FOR FAILING TO ATTACH CERTIFIED
TRUE COPY OF THE ORDER OF THE TRIAL COURT.
IV.
THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE
ERROR IN THE APPLICATION OF LAW AND THE RULES WARRANTING REVIEW
WHEN IT DECLARED THAT PETITIONER MAYOR DID NOT COMPLY WITH THE
REQUIREMENT OF VERIFICATION AND CERTIFICATION AGAINST FORUM
SHOPPING.
V.
THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE
ERROR IN THE APPLICATION OF LAW AND THE RULES WARRANTING REVIEW
WHEN IT ALLOWED TECHNICALITIES TO BE USED TO DEFEAT SUBSTANTIAL
RIGHT OF THE PARTIES.
VI.
PETITIONERS HAVE GOOD CAUSE AND A MERITORIOUS CASE AGAINST
HEREIN RESPONDENTS AS PARAGRAPH 1(B) OF THE DISPOSITIVE PORTION OF
THE FIRST ASSAILED ORDER SHOULD HAVE BEEN REVERSED BECAUSE IT
OVERTURNS THE DECISION OF THE COURT OF APPEALS DATED 16 OCTOBER
2009 WHICH HAS LONG BECOME FINAL AND EXECUTORY.28
Petitioner Manuela argued that:
1) There was actual compliance with Section 13, Rule 13 of the Rules of Court. The
CA petition was accompanied by a notarized affidavit of service and filing of
registered mail. At the time the petition was filed, this was the best evidence of
the service. The other registry receipts for the other parties were also attached to
the petition. Further, the available registry return card was furnished the CA in the
motion for reconsideration.29
2) The failure of the petition to comply with the rule on a statement of material dates
could be excused because the dates were evident from the records.30
3) The petitioner went to the RTC of Tacloban to secure certified true copies of the
assailed orders. Only the stamped name of the Clerk of Court, however,
appeared thereon, because the particular branch had no stamp pad which had
the phrase for certification. The branch did not even have a typewriter in order to
affix the phrase on the copies. These inadequacies could not be attributed to the
petitioners.31
4) The lack of information pertaining to the notary public in the verification and
certification against forum-shopping should not invalidate the same because,
again, it was not attributable to the parties.32
5) Technicalities should never be used to defeat the substantive rights of a party.33
In its January 23, 2013 Resolution34 the Court ordered the respondents to file their
respective comments. Marty, in her Comment, insisted that the petitioner failed to comply
with the procedural requirements as stated by the CA.35
In her Reply to Comment,36 petitioner Manuela clarified that the affidavit of service was
executed on August 31, 2011, which was after the petition was signed by the lawyers
and after it was verified by the petitioner herself. After contesting Marty's arguments on
the alleged procedural infirmities of the petitions with the CA and this Court, Manuela
asserted that the final and executory October 16, 2009 Decision of the CA already held
that Primrose had a personality separate and distinct from the estate of decedent
Rosario.
Meanwhile, in his Manifestation,37 dated May 29, 2013, Edwin affirmed that he and
Manuela decided to patch up their differences and agreed to settle amicably.
Accordingly, he manifested that he was withdrawing from the case pursuant to their
agreement.
On June 18, 2014, Manuela filed her Motion for Issuance of Temporary Restraining
Order and Writ of Preliminary Injunction38 on the ground that a flurry of orders had been
issued by the RTC-Br. 6 in the implementation of the assailed January 20, 2011 Order,
such as the Order,39 dated May 27, 2013, wherein the probate court vaguely ordered "the
inventory of the exact extent of the 'decedent's estate.'" Then another order was issued
appointing an auditing firm to conduct an inventory/audit of the Estate including the
rentals and earnings derived from the lease of Mercury Drug and Chowking Restaurant,
as tenants of Primrose.40 According to petitioner Manuela, although an inventory of the
assets of the decedent was proper, the probate court ordered an inventory of the assets
of Primrose, a separate and distinct entity. Manuela asserts that it was clearly in error.
In her Supplement to the Motion for Issuance of Temporary Restraining Order and Writ
of Preliminary Injunction,41 dated June 17, 2013, Manuela informed the Court that the
inventory and accounting of Primrose would already commence on June 19, 2013.
Marty filed her Opposition,42 dated July 3, 2013, stating that the petition of Manuela had
been rendered moot and academic as the probate court had declared her as the sole
heir of Rosario and appointed her administrator of the estate. She argued that an
injunctive relief would work injustice to the estate because of the total assimilation by
petitioner of the shareholdings of the decedent in Primrose and her share in the
corporation's income corresponding to her shareholdings.
Finding that the requisites for preliminary injunctive relief were present,43 the Court
issued the TRO44 in favor of Manuela on October 14, 2013. At the outset, the Court was
convinced that the rights of Primrose sought to be protected by the grant of injunctive
relief were material and substantial and the TRO was issued in order to prevent any
irreparable damage to a corporate entity that could arise from the conduct of an
accounting by the court-appointed inventory.
The Court's Ruling
The Court now resolves the subject case by the issuance of a permanent injunction, as
prayed for by petitioner Manuela. This position is supported by law and jurisprudence, as
follows:
First. Artificial persons include (1) a collection or succession of natural persons forming a
corporation; and (2) a collection of property to which the law attributes the capacity of
having rights and duties. This class of artificial persons is recognized only to a limited
extent in our law. Example is the estate of a bankrupt or deceased person.45 From this
pronouncement, it can be gleaned that the estate of the deceased person is a juridical
person separate and distinct from the person of the decedent and any other corporation.
This status of an estate comes about by operation of law. This is in consonance with the
basic tenet under corporation law that a corporation has a separate personality distinct
from its stockholders and from other corporations to which it may be connected.46
Second. The doctrine of piercing the corporate veil has no relevant application in this
case. Under this doctrine, the court looks at the corporation as a mere collection of
individuals or an aggregation of persons undertaking business as a group, disregarding
the separate juridical personality of the corporation unifying the group. Another
formulation of this doctrine is that when two business enterprises are owned, conducted
and controlled by the same parties, both law and equity will, when necessary to protect
the rights of third parties, disregard the legal fiction that two corporations are distinct
entities and treat them as identical or as one and the same.47 The purpose behind
piercing a corporation's identity is to remove the barrier between the corporation and the
persons comprising it to thwart the fraudulent and illegal schemes of those who use the
corporate personality as a shield for undertaking certain proscribed activities.48
Here, instead of holding the decedent's interest in the corporation separately as a
stockholder, the situation was reversed. Instead, the probate court ordered the lessees of
the corporation to remit rentals to the estate's administrator without taking note of the fact
that the decedent was not the absolute owner of Primrose but only an owner of shares
thereof. Mere ownership by a single stockholder or by another corporation of all or nearly
all of the capital stocks of a corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities.49 Moreover, to disregard the separate
juridical personality of a corporation, the wrongdoing cannot be presumed, but must be
clearly and convincingly established.50
Third. A probate court is not without limits in the determination of the scope of property
covered in probate proceedings. In a litany of cases, the Court had defined the
parameters by which a probate court may extend its probing arms in the determination of
the question of title in probate proceedings. In Pastor, Jr. vs. Court of Appeals,51 the
Court explained that, as a rule, the question of ownership was an extraneous matter
which the probate court could not resolve with finality. Thus, for the purpose of
determining whether a certain property should, or should not, be included in the inventory
of estate properties, the probate court may pass upon the title thereto, but such
determination is provisional, not conclusive, and is subject to the final decision in a
separate action to resolve title. It is a well-settled rule that a probate court or one in
charge of proceedings, whether testate or intestate, cannot adjudicate or determine title
to properties claimed to be part of the estate but which are equally claimed to belong to
outside parties. It can only determine whether they should, or should not, be included in
the inventory or list of properties to be overseen by the administrator. If there is no
dispute, well and good; but if there is, then the parties, the administrator and the
opposing parties have to resort to an ordinary action for a final determination of the
conflicting claims of title because the probate court cannot do so.52
In this case, respondent Marty argues that the subject properties and the parcel of land
on which these were erected should be included in the inventory of Rosario's estate.
More so, the arrears from the rental of these properties were later on ordered to be
remitted to the administrator of the estate grounded on the allegation that Rosario had no
other properties other than her interests in Primrose. To the Court's mind, this holding of
the probate court was in utter disregard of the undisputed fact the subject land is
registered under the Torrens system in the name of Primrose, a third person who may be
prejudiced by the orders of the probate court. In Valera vs. Inserto:53 the Court stated:
x x x, settled is the rule that a Court of First Instance (now Regional Trial Court), acting
as a probate court, exercises but limited jurisdiction, and thus has no power to take
cognizance of and determine the issue of title to property claimed by a third person
adversely to the decedent, unless the claimant and all the other parties having legal
interest in the property consent, expressly or impliedly, to the submission of the question
to the probate court for adjudgment, or the interests of third persons are not thereby
prejudiced, the reason for the exception being that the question of whether or not a
particular matter should be resolved by the Court in the exercise of its general jurisdiction
or of its limited jurisdiction as a special court (e.g. probate, land registration, etc.), is in
reality not a jurisdictional but in essence of procedural one, involving a mode of practice
which may be waived.
xxxx
x x x These considerations assume greater cogency where, as here, the Torrens
title to the property is not in the decedent's names but in others, a situation on
which this Court has already had occasion to rule.54 [Emphasis and underscoring
supplied]
Thus, the probate court should have recognized the incontestability accorded to the
Torrens title of Primrose over Marty's arguments of possible dissipation of properties. In
fact, in the given setting, even evidence purporting to support a claim of ownership has to
yield to the incontestability of a Torrens title, until after the same has been set aside in
the manner indicated in the law itself. In other words, the existence of a Torrens title may
not be discounted as a mere incident in special proceedings for the settlement of the
estate of deceased persons. Put clearly, if a property covered by Torrens title is involved,
"the presumptive conclusiveness of such title should be given due weight, and in the
absence of strong compelling evidence to the contrary, the holder thereof should be
considered as the owner of the property in controversy until his title is nullified or
modified in an appropriate ordinary action, particularly, when as in the case at bar,
possession of the property itself is in the persons named in the title."55
Additionally, Presidential Decree (P.D.) No. 152956 proscribes a collateral attack on a
Torrens title:
Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall not be
subject to collateral attack. It cannot be altered, modified or cancelled except in a direct
proceeding in accordance with law.
In Cuizon vs. Ramolete,57 the property subject of the controversy was duly registered
under the Torrens system. To this, Court categorically stated:
Having been apprised of the fact that the property in question was in the possession of
third parties and more important, covered by a transfer certificate of title issued in the
name of such third parties, the respondent court should have denied the motion of
the respondent administrator and excluded the property in question from the
inventory of the property of the estate. It had no authority to deprive such third
persons of their possession and ownership of the property.58 x x x [Emphasis and
underscoring supplied]
A perusal of the records of this case would show that that no compelling evidence was
ever presented to substantiate the position of Marty that Rosario and Primrose were one
and the same, justifying the inclusion of the latter's properties in the inventory of the
decedent's properties. This has remained a vacant assertion. At most, what Rosario
owned were shares of stock in Primrose. In turn, this boldly underscores the fact that
Primrose is a separate and distinct personality from the estate of the decedent.
Inasmuch as the real properties included in the inventory of the estate of Rosario are in
the possession of, and are registered in the name of, Primrose, Marty's claims are bereft
of any logical reason and conclusion to pierce the veil of corporate fiction.
Fourth. The probate court in this case has not acquired jurisdiction over Primrose and its
properties. Piercing the veil of corporate entity applies to determination of liability not of
jurisdiction; it is basically applied only to determine established liability. It is not available
to confer on the court a jurisdiction it has not acquired, in the first place, over a party not
impleaded in a case.59 This is so because the doctrine of piercing the veil of corporate
fiction comes to play only during the trial of the case after the court has already acquired
jurisdiction over the corporation. Hence, before this doctrine can be even applied, based
on the evidence presented, it is imperative that the court must first have jurisdiction over
the corporation.60
Hence, a corporation not impleaded in a suit cannot be subject to the court's process of
piercing the veil of its corporate fiction. Resultantly, any proceedings taken against the
corporation and its properties would infringe on its right to due process.
In the case at bench, the probate court applied the doctrine of piercing the corporate veil
ratiocinating that Rosario had no other properties that comprise her estate other than her
shares in Primrose. Although the probate court's intention to protect the decedent's
shares of stock in Primrose from dissipation is laudable, it is still.an error to order the
corporation's tenants to remit their rental payments to the estate of Rosario.
Considering the above disquisition, the Court holds that a permanent and final injunction
is in order in accordance with Section 9, Rule 58 of the Rules of Court which provides
that "[i]f after the trial of the action it appears that the applicant is entitled to have the act
or acts complained of permanently enjoined, the court shall grant a final injunction
perpetually restraining the party or person enjoined from the commission or continuance
of the act or acts or confirming the preliminary mandatory injunction." Undoubtedly,
Primrose stands to suffer an irreparable injury from the subject order of the probate
court.
WHEREFORE, the petition is GRANTED. The Temporary Restraining Order, dated June
14, 2013, is hereby made PERMANENT, effective immediately. The Regional Trial
Court, Branch 6, Tacloban City, is ENJOINED from enforcing and implementing its
January 20, 2011 and June 10, 2011 Orders, insofar as the corporate properties of
Primrose Development Corporation are concerned, to avert irreparable damage to a
corporate entity, separate and distinct from the Estate of Rosario Guy-Juco Villasin
Casilan.
SO ORDERED.
G.R. No. 192530, March 07, 2018
TEE LING KIAT, Petitioner, v. AYALA CORPORATION (SUBSTITUTED HEREIN BY
ITS ASSIGNEE AND SUCCESSOR-IN-INTEREST, BIENVENIDO B.M. AMORA,
JR.), Respondent.
DECISION
CAGUIOA, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court. (Petition) filed by Petitioner Tee Ling Kiat against Respondent Ayala Corporation,
substituted by its assignee and successor-in-interest, Bienvenido B.M. Amora, Jr.,
(Amora), assailing the Court of Appeals' (CA): (1) Decision2 dated September 24, 2009;
and (2) Resolution3 dated May 26, 2010 in CA-G.R. SP No. 105081.
In the assailed Decision and Resolution, the CA affirmed the Order4 of the Regional Trial
Court - Makati City, Branch 59 (RTC Branch 59) dated February 20, 2008
and Order5 dated June 26, 2008, which dismissed Tee Ling Kiat's Third-Party Claim6 in
Civil Case No. 40074.7
The Antecedent Facts
The present petition arose from a judgment for a sum of money obtained by Ayala
Corporation against Continental Manufacturing Corporation (CMC) and Spouses Dewey
and Lily Dee (Spouses Dee)8 in 1990.
On January 28, 1981, Ayala Corporation instituted a Complaint9for Sum of Money with
an application for a writ of attachment against the Spouses Dee. The complaint was
initially raffled to Branch 15 of the Court of First Instance of Rizal.10 It appears that on
May 21, 1980, Ayala Investment and Development Corporation (AIDC) granted in favor
of CMC a money market line in the maximum amount of P2,000,000.00.11' With Dewey
Dee as the President of CMC then, the Spouses Dee executed a Surety Agreement on
the same date, as guarantee for the money market line. One of CMC's availments under
the money market line was evinced by a Promissory Note12 dated November 20, 1980
for P800,000.00 due on January 16, 1981. AIDC subsequently endorsed the Promissory
Note to Ayala Corporation.13 CMC defaulted on its obligation under the promissory note,
leading Ayala Corporation to institute a claim for sum of money against CMC and the
Spouses Dee.14
Ruling on the Complaint for Sum of Money, the RTC - Makati City, Branch 149 (RTC
Branch 149) ruled in favor of Ayala Corporation in a Decision15 dated November 29,
1990, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering [CMC and
Spouses Dee] to pay [Ayala Corporation]:
1. The sum of Eight Hundred Thousand (P800,000.00) Pesos representing the amount of
the subject promissory note plus Twelve (12%) Percent per annum interest from date of
maturity until fully paid;
2. The sum of Twenty Thousand (P20,000.00) Pesos as attorney's fees; and
3. The costs of suit.
SO ORDERED.16
With the above Decision having attained finality, the RTC Branch 149 forthwith issued a
Writ of Execution17 against the Spouses Dee, commanding the sheriff18 to "cause the
execution of the aforesaid judgment against Sps. Dewey and Lily Dee, including payment
in full of your lawful fees for the service of this writ."19 (Italics supplied)
Thereafter, on November 21, 2006, a Notice of Levy on Execution20 was issued and
addressed to the Register of Deeds of Antipolo City, to levy upon "the rights, claims,
shares, interest, title and participation"21 that the Spouses Dee may have in parcels of
land covered by Transfer Certificates of Title (TCT) Nos. R-24038,22 R-24039,23 and R-
2404024 and any improvements thereon.25 The parcels of land were registered in the
name of Vonnel Industrial Park, Inc. (VIP).26 According to the Sheriffs Return27filed on
January 04, 2007, the titles over the subject properties are registered in the name of VIP,
in which Dewey Dee was an incorporator.28
Tee LingKiat's Third-Party Claim
On March 26, 2007, before the scheduled sale on execution,29 Tee Ling Kiat filed
a Third-Party Claim, alleging that:
x x x the aforesaid levy was made based on the information that Mr. Dewey Dee was one
of the incorporators of VIP. Apparently, the Sheriff who caused the levy made the
assumption that since Mr. Dewey is one of the incorporators of VIP, then it follows that
he is a stockholder thereof. Consequently, as such stockholder, he would have rights,
claims, shares, interest, title and participation in the real properties belonging to VIP.
However, while Mr. Dewey Dee was indeed one of the incorporators of VIP, he is no
longer a stockholder thereof. He no longer has any rights, claims, shares, interest, title
and participation in VIP or any of its properties. As early as December 1980, Mr. Dewey
Dee has already sold to Mr. Tee Ling Kiat all his stocks in VIP, as evidenced by a
cancelled check which he issued in Mr. Tee Ling Kiat's favor. x x x
xxxx
Moreover, we would like to point out that even assuming that Mr. Dewey Dee is still a
stockholder of VIP, at most he merely has rights, claims, shares, interest, title and
participation to its shares of stocks, but not as to the real properties registered under its
name, x x x It is well to note that this property is the sole and exclusive property of VIP
and that there is no showing that Mr. Dewey Dee has any right, claim, share, interest,
title and participation therein. It must be likewise be emphasized that VIP is a corporate
entity which has a legal personality separate and distinct from Mr. Dewey Dee and/or Ms.
Lily L. Dee.30
Attached to the Third-Party Claim was a copy of an Affidavit31 executed by Tee Ling Kiat,
attesting to the fact that he is a stockholder of VIP and that he acquired knowledge of the
levy on the subject properties only through newspaper,32 as well as a photocopy of
cancelled checks33 issued by Tee Ling Kiat in Dewey Dee's favor, allegedly as payment
for the purchase of the latter's shares in VIP.
Acting on the Third-Party Claim, the Office of the Clerk of Court of the RTC issued
a Notice of Third-Party Claim34 on March 28, 2007. Amora, who by then had substituted
Ayala Corporation, posted a bond in the amount of P2,658,700.00.35 VIP and Tee Ling
Kiat opposed the posting of the bond in an Ex-Parte Motion36, claiming that the bond was
less than the value of the property levied upon.
Nevertheless, the court approved the bond, leading VIP and Tee Ling Kiat to file
an Omnibus Motion37 to declare null and void the Notice of Levy on Execution and all
proceedings and issuances arising out of the same.38 In the Omnibus Motion, VIP and
Tee Ling Kiat reiterated that Dewey Dee no longer had any interest in the levied property
and that the bond was far less than the value of the property levied.39
In his Opposition to Third Party Claimants' Omnibus Motion,40 Amora claimed that from
the date of VIP's incorporation until present, no general information sheets and audited
financial statements have been submitted by VIP to the Securities and Exchange
Commission (SEC).41 Further, nowhere in the SEC records does Tee Ling Kiat's name
appear as a stockholder.42 Meanwhile, the case was re-raffled to the RTC Branch 59 due
to the inhibition of the judge formerly hearing the case.43
Ruling of the RTC Branch 59
The RTC, in an Order dated February 20, 2008, denied VIP and Tee Ling Kiat's Omnibus
Motion and disallowed the third-party claim because the alleged sale of shares of stock
from Dewey Dee to Tee Ling Kiat was not proven. Specifically, the RTC ruled that:
First, Tee Ling Kiat failed to adduce evidence to prove that the sale of shares of stock
from Dewey Dee to Tee Ling Kiat had taken place in accordance with the law. The
purported Deed of Sale of Shares of Stock44 was not recorded in the stock and transfer
books of VIP, as required by Section 63 of the Corporation Code.45 Thus, there was no
valid transfer of shares as against third persons. The RTC observed that in support of the
purported sale of shares of stock, Tee Ling Kiat merely submitted a cancelled
check46 issued by Tee Ling Kiat in favor of Dewey Dee and a photocopy47 of the Deed of
Sale of Shares of Stock dated December 29, 1980.
Second, the SEC had revoked48 VIP's Certificate of Registration as early as August 11,
200349 for failure to comply with reportorial requirements. Consequently, in accordance
with Section 122 of the Corporation Code50 which provides for the three-year period for
the winding down of corporate affairs, VIP no longer had any capacity to sue when the
third-party claim was instituted on March 26, 2007.51
Finally, the indemnity bond posted by Amora was sufficient because Tee Ling Kiat was
merely claiming "rights, claims, shares, interest, title and participation"52 of Dewey Dee in
the subject property, and not the entire property.
Tee Ling Kiat's Motion for Reconsideration53 of the above Order having been denied in
an RTC Order dated June 26, 2008, Tee Ling Kiat filed a petition for certiorari under Rule
65 of the Rules of Court before the CA. This time, however, the petition for certiorari was
instituted solely in Tee Ling Kiat's name.54
Ruling of the CA
The CA, in the assailed Decision dated September 24, 2009, denied Tee Ling Kiat's
petition for certiorari, on the ground that Tee Ling Kiat is not a real party-in-interest,
especially considering that the alleged sale of Dewey Dee's shares of stock to Tee Ling
Kiat has not been proven.
In particular, the CA observed that Tee Ling Kiat failed to prove to the Court the
existence or veracity of the claimed Deed of Sale of Shares of Stock. The CA held that
"[i]t is not sufficient to attach photocopies of the deed or payment of checks to the
motion, [Tee Ling Kiat] needed to submit evidence to prove that the transaction took
place."55 Before the CA, Tee Ling Kiat also raised, for the first time, that he can be
properly considered a trustee of VIP, entitled to hold properties on the latter's behalf. The
CA observed, however, that there was no evidence produced to show that Tee Ling Kiat
is a trustee of the corporation.56
Thus, the CA held that Tee Ling Kiat utterly failed: (i) to prove that he is a stockholder of
VIP; and assuming he is, (ii) to show that he was authorized by the corporation for the
purpose of prosecuting the claim on behalf of the corporation.57
In a Resolution dated May 26, 2010, the CA denied Tee Ling Kiat's motion for
reconsideration for lack of merit.58 In denying Tee Ling Kiat's motion for reconsideration,
the CA maintained its finding that Tee Ling Kiat lacked any legal personality to file the
third-party claim, and consequently, the petition for certioraribefore the CA.
Hence, this petition.
In asking the Court to set aside the assailed CA Decision and Resolution, Tee Ling Kiat
submits that: first, as regards the recording of the alleged sale of stocks, the burden was
on Ayala Corporation to overcome the disputable presumption that VIP followed its
ordinary course of business as provided for in Section 3(q), Rule 131 of the Rules of
Court. Considering that the duty to record the sale of shares of stock in the books lies
with VIP, Tee Ling Kiat claims that such recording "need not be proved" by
him.59Second, that assuming Dewey Dee was still a stockholder of VIP, that what would
have been the proper subjects of levy were the precise and actual shares of Dewey Dee
and not the subject properties.60
Tee Ling Kiat further prays for the Court's issuance of a Temporary Restraining Order
(TRO) directing Amora and the sheriffs of RTC Branch 149 to immediately desist from
executing the RTC Orders61 and to issue a Writ of Preliminary Injunction (WPI) after due
notice and hearing.62
In a Resolution63 dated July 7, 2010, the Court required Amora to comment on
the petition which he did on October 15, 2010.64 In a Resolution65 dated June 13, 2011,
the Court noted Tee Ling Kiat's reply.66
Issue
The sole issue for the Court's resolution is whether the CA committed any reversible
error in issuing its Decision dated September 24, 2009 and Resolution dated May 26,
2010.
Our Ruling
The petition lacks merit.
At the crux of determining whether the CA committed any reversible error in issuing the
assailed Decisionand Resolution is the question of whether it has been sufficiently
proven by Tee Ling Kiat that Dewey Dee had in fact sold his shares of stock to Tee Ling
Kiat in 1980, such that, as a result, Tee Ling Kiat can be considered a real party-in-
interest in the Third-Party Claim, and consequently, in the petition for certiorari before the
CA.
Such determination, however, inevitably necessitates a review of the probative value of
the evidence adduced by Tee Ling Kiat. In this regard, the Rules of Court67 categorically
state that a Rule 45 petition shall only raise questions of law. On the one hand, a
question of law arises when there is doubt as to what the law is on a certain state of
facts.68 On the other hand, a question of fact arises when doubt arises as to the truth or
falsity of alleged facts.69 Once it is clear that the resolution of an issue invites a review of
the evidence presented by the parties, the question raised is one of fact70 which this
Court is precluded from reviewing in a Rule 45 petition.
Here, Tee Ling Kiat imputes error on the CA by the simple expedient of arguing that he
did not personally need to prove that the sale of shares of stock between Dewey Dee
and himself had in fact transpired, as the duty to record the sale in the corporate books
lies with VIP. Such an argument, however, fails to recognize that the very right of Tee
Ling Kiat, as a third-party claimant, to institute a terceria is founded on his claimed title
over the levied property.71
Consequently, although courts can exercise their limited supervisory powers in
determining whether the sheriff acted correctly in executing the judgment, they may only
do so if the third-party claimant hasunmistakably established his ownership or right of
possession over the subject property.72 Accordingly, if the third-party claimant's evidence
does not persuade the court of the validity of his title or right possession thereto, the
third-party claim will, and should be, denied.73
Suffice it to state that the only evidence adduced by Tee Ling Kiat to support his claim
that Dewey Dee's shares in VIP have been sold to him are a cancelled check74 issued by
Tee Ling Kiat in favor of Dewey Dee and a photocopy75 of the Deed of Sale of Shares of
Stock dated December 29, 1980. A photocopy of a document has no probative value and
is inadmissible in evidence.76 The records likewise do not show that Tee Ling Kiat offered
any explanation as to why the original Deed of Sale of Shares of Stock could not be
produced, instead alleging that because of the disputable presumption "[t]hat the
ordinary course of business has been followed"77 provided in Section 3(q) of Rule 131 of
the Rules of Court, then the burden is not on him to prove that he is a stockholder, but on
Amora, to prove that he is not a stockholder.78
This argument is off tangent. Meaning, even if it could be assumed that the sale of
shares of stock contained in the photocopies had indeed transpired, such transfer is only
valid as to the parties thereto, but is not binding on the corporation if the same is not
recorded in the books of the corporation. Section 63 of the Corporation Code of the
Philippines provides that: "No transfer, x x x shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation showing the
names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred."79 Here, the records
show that the purported transaction between Tee Ling Kiat and Dewey Dee has never
been recorded in VIP's corporate books. Thus, the transfer, not having been recorded in
the corporate books in accordance with law, is not valid or binding as to the corporation
or as to third persons.
On a final note, the Court observes that the judgment for a sum of money dated
November 29, 1990 obtained by Ayala Corporation was against the Spouses Dewey and
Lily Dee in their personal capacities as sureties in the money market line transaction.
Yet, in the execution of said judgment, the properties levied upon were registered in the
name of VIP, a juridical entity with personality separate and distinct from Dewey Dee. It
is a basic principle of law that money judgments are enforceable only against property
incontrovertibly belonging to the judgment debtor,80 and certainly, a person other than
the judgment debtor who claims ownership over the levied properties is not precluded
from challenging the levy through any of the remedies provided for under the Rules of
Court.81 In the pursuit of such remedies, however, the third-party must, to reiterate,
unmistakably establish ownership over the levied property,82 which Tee Ling Kiat failed to
do.
In as much as the validity of the third-party claim would only be relevant if the person
instituting the same has established that he has a real interest in the levied property, the
Court will not belabor the merits of the third-party claim in view of the conclusive
determination that Tee Ling Kiat has not adduced evidence to prove that the shares of
stock of Dewey Dee were indeed sold to him.
Given the foregoing, the Court finds no reversible error on the part of the CA in affirming
the RTC Ordersdated February 20, 2008 and June 26, 2008, which dismissed Tee Ling
Kiat's third-party claim in Civil Case No. 40074.83
For the reasons foregoing, the Court DENIES the petition.
WHEREFORE, premises considered, the instant petition for review is DENIED. The
Decision dated September 24, 2009 and Resolution dated May 26, 2010 of the Court of
Appeals in CA-G.R. SP No. 105081 are hereby AFFIRMED.
SO ORDERED.
[G.R. No. 39681. March 21, 1934.]
BONIFACIO LUMANLAN, Plaintiff-Appellee, v. JACINTO R. CURA, ET
AL., Defendants. DIZON & CO., INC., ETC., Appellant.
Leoncio M. Aranda and Gregorio M. Bañaga for Appellant.
Lagman & Santos for Appellee.
SYLLABUS
1. CORPORATIONS; ACTION BY CREDITORS UPON UNPAID SUBSCRIPTIONS TO
THE CAPITAL STOCK. — It is established doctrine that subscriptions to the capital of a
corporation constitute a fund to which the creditors have a right to look for satisfaction of
their claims and that the assignee in insolvency can maintain an action upon any unpaid
subscription in order to realize assets for the payment of its debts.
2. ID.; ID. — The Corporation Law clearly recognizes that a stock subscription is a
subsisting liability from the time the subscription is made, since it requires the subscriber
to pay interest quarterly from that date unless he is relieved from such liability by the by-
laws of the corporation. The subscribed by him as he would be to pay any other debt,
and the right of the company to demand payment is no less incontestable.
DECISION
GODDARD, J.:
This is an appeal from a decision of the Court of First Instance of Tarlac, the dispositive
part of which reads as follows:jgc:
"Por las consideraciones expuestas, el Juzgado falla este asunto condenando a dizon y
Cia., Inc., a acreditar en sus libros como pago de las obligaciones de Bonifacio
Lumanlan la suma de P11,840, ordenando a la misma entidad que inmediatamente
expida los certificados de accion equivalent a la mencionada suma; declarando perpetuo
y absoluto el interdicto prohibitorio expedido contra los demandados; condenando a la
Dizon y Cia., Inc., al pago de la suma de P2,000 a fovor del demandante, y se condena
a los demandados al pago de las constas del juicio. En cuanto a los danos y perjuicios
reclamados por el demandante, no habiendo este probado los mismos, el Jurgado no
puede accederlos."
The appellant, Dizon & Co., Inc., assigns twenty-three errors as having been committed
by the trial court.
The appellant is a corporation duly organized under the laws of the Philippine Islands
with its central office in the City of Manila. The plaintiff-appellee Bonifacio Lumanlan, on
July 31, 1922, subscribed for 300 shares of stock of said corporation at a par value of
P50 or a total of P15,000. Julio Valenzuela, Pedro Santos and Francisco Escoto,
creditors of this corporation, filed suit against it in the Court of First Instance of Manila,
case No. 37007, praying that a receiver be appointed, as it appeared that the corporation
at the time had no assets except credits against those who had subscribed for shares of
stock. The court named Tayag as receiver for the purpose of collecting said
subscriptions. As Bonifacio Lumanlan had only paid P1,500 of the P15,000, par value of
the stock for which he subscribed, the receiver on August 30, 1930, filed a suit against
him in the Court of First Instance of Manila, civil case No. 37492, for the collection of
P15,109, P13,500 of which was the amount he owned for unpaid stock and P1,609 for
loans and advances by the corporation to Lumanlan. In that case Lumanlan was
sentenced to pay the corporation the above- mentioned sum of P15,109 with legal
interest thereon from August 30, 1930, and costs. Lumanlan appealed from this
decision.
Pending this appeal, with the permission of the court, the creditors, some of the directors
and the majority of the stockholders held several meetings in which it was agreed in
substance that subscribers for the capital stock who were in default should pay the
creditors; Lumanlan was designated to pay the debt of the corporation to Julio
Valenzuela, one of the petitioners in case No. 37007; at that time the corporation owed
Valenzuela the sum of P8,000 plus interest thereon at the rate of 12 per cent per annum
from March 17, 1928. Lumanlan agreed to assume this obligation and in turn the
corporation agreed that if Lumanlan would dismiss his appeal in case No. 37492 the
corporation would collect only 50 per cent of the amount subscribed by him for stock,
provided that in case the 50 per cent was insufficient to pay Valenzuela he should pay an
additional amount which should not exceed the amount of the judgment against him in
that case. In view of this agreement Lumanlan withdrew his appeal and paid Valenzuela
the sum of P11,840 including interest and thereby was subrogated in place of
Valenzuela. The petitioning creditors having been paid the amounts owed to them by the
corporation asked that the receiver be dismissed and the court granted this. Disregarding
this agreement and notwithstanding the payment made by Lumanlan to Valenzuela, the
corporation on May 5, 1932, asked for the execution of the sentence in case No. 37492
and by virtue of an order of execution the provincial sheriff levied upon two parcels of
land belonging to Lumanlan described in certificate of title No. 901 of the Province of
Tarlac. Lumanlan brought this case to collect from Dizon & Co., Inc., and to prevent the
sheriff from selling the two parcels of land. Pending the result of this case the sheriff was
enjoined from proceeding with the sale.
In the promissory note given by the corporation to Valenzuela the former obligated itself
to pay Valenzuela the sum of P8,000 with interest at 12 per cent per annum and, upon
failure to pay said sum and interest when due, 25 per cent of the principal as expenses
of collection and judicial costs in case of litigation.
By virtue of this facts Lumanlan is entitled to a credit against the judgment in case No.
37492 for P11,840 and an additional sum of P2,000, which is 25 per cent on the principal
debt, as he had to file this suit to collect, or receive credit for the sum which he had to file
this suit to collect, or receive credit for the sum which he had paid Valenzuela for and in
place of the corporation, or a total of P13,840. This leaves a balance due Dizon & Co.,
Inc., of P1269 on that judgment with interest thereon at 6 per cent per annum for August
30, 1930.
It appears from the record that during the trial of the case now under consideration, the
Bank of the Philippine Islands appeared in this case as assignee in the "Involuntary
Insolvency of Dizon & Co., Inc." That bank was appointed assignee in case No. 43065 of
the Court of First Instance of the City of Manila on November 28, 1932. It is therefore
evident that there are still other creditors of Dizon & Co., Inc. This being the case that
corporation has a right to collect all unpaid stock subscriptions and any other amounts
which may be due it.
"It is established doctrine that subscriptions to the capital of a corporation constitute a
fund to which the creditors have a right to look for satisfaction of their claims and that the
assignee is insolvency can maintain an action upon any unpaid stock subscription in
order to realize assets for the payment of its debts." (Philippine Trust Co. v. Rivera, 44
Phil., 469, 470.) .
". . . the Corporation Law clearly recognizes that a stock subscription is a subsisting
liability from the time the subscription is made, since it requires the subscriber to pay
interest quarterly for that date unless he is relieved from such liability by the by-laws of
the corporation. The subscriber is as much bound to pay the amount of the share
subscribed by him as he would be to pay any other debt, and the right of the company to
demand payment is no less incontestable." (Velasco v. Poizat, 37 Phil., 802, 805.)
In view of the above conclusions it is not necessary to discuss the other questions raised
by the parties in this case.
The judgment of the trial court is modified in accordance with the above and Dizon & Co.,
Inc., is ordered to credit Bonifacio Lumanlan with the sum of P13,840 against the
judgment for P15,109, in case NO. 37492 of the Court of First Instance of Manila; to
issue to Bonifacio Lumanlan 300 shares of its capital stock upon payment by him of the
sum of P1,269 with interest thereon at 6 per cent per annum from August 30, 1930. The
preliminary injunction issued in this case is hereby dissolved for the purpose of enabling
1853 12-08-80 03-06-81 P198,150.67 3,000 pcs. (15
Dizon & Co., Inc., to ask for a new order of execution in case No. 37492, Court of First
bundles) Calorized
Instance of Manila, for the sum of P1,269 with interest thereon as stated above. Without
Lance Pipes
pronouncement as to costs.
1824 11-28-80 02-26-81 P707,879.71 One Lot High Fired
Malcolm, Villa-Real, Hull, and Imperial, JJ., concur. Refractory Tundish
Bricks
G. R. No. 164317 February 6, 2006
1798 11-21-80 02-19-81 P835,526.25 5 cases spare parts
ALFREDO CHING, Petitioner, for CCM
vs.
THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS- 1808 11-21-80 02-19-81 P370,332.52 200 pcs. ingot moulds
VILLAVERT, JUDGE EDGARDO SUDIAM of the Regional Trial Court, Manila,
2042 01-30-81 04-30-81 P469,669.29 High Fired Refractory
Branch 52; RIZAL COMMERCIAL BANKING CORP. and THE PEOPLE OF THE
Nozzle Bricks
PHILIPPINES, Respondents.
1801 11-21-80 02-19-81 P2,001,715.17 Synthetic Graphite
DECISION Electrode [with]
tapered pitch filed
CALLEJO, SR., J.: nipples

Before the Court is a petition for review on certiorari of the Decision1 of the Court of 1857 12-09-80 03-09-81 P197,843.61 3,000 pcs. (15
Appeals (CA) in CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition bundles calorized
and mandamus filed by petitioner Alfredo Ching, and its Resolution2 dated June 28, 2004 lance pipes [)]
denying the motion for reconsideration thereof.
1895 12-17-80 03-17-81 P67,652.04 Spare parts for
Spectrophotometer
Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI).
Sometime in September to October 1980, PBMI, through petitioner, applied with the 1911 12-22-80 03-20-81 P91,497.85 50 pcs. Ingot moulds
Rizal Commercial Banking Corporation (respondent bank) for the issuance of
commercial letters of credit to finance its importation of assorted goods.3 2041 01-30-81 04-30-81 P91,456.97 50 pcs. Ingot moulds

Respondent bank approved the application, and irrevocable letters of credit were issued 2099 02-10-81 05-11-81 P66,162.26 8 pcs. Kubota Rolls
in favor of petitioner. The goods were purchased and delivered in trust to PBMI. for rolling mills
Petitioner signed 13 trust receipts4 as surety, acknowledging delivery of the following
goods: 2100 02-10-81 05-12-81 P210,748.00 Spare parts for
Lacolaboratory
Equipment5
T/R Date Maturity Principal Description of Goods
Nos. Granted Date
Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with
1845 12-05-80 03-05-81 P1,596,470.05 79.9425 M/T "SDK" authority to sell but not by way of conditional sale, pledge or otherwise; and in case such
Brand Synthetic goods were sold, to turn over the proceeds thereof as soon as received, to apply against
Graphite Electrode 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
respondent bank without any need of demand. Thus, said "goods, manufactured
products or proceeds thereof, whether in the form of money or bills, receivables, or
accounts separate and capable of identification" were respondent bank’s property.
When the trust receipts matured, petitioner failed to return the goods to respondent bank,
or to return their value amounting to ₱6,940,280.66 despite demands. Thus, the bank
filed a criminal complaint for estafa6 against petitioner in the Office of the City Prosecutor
of Manila.
After the requisite preliminary investigation, the City Prosecutor found probable cause
estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to
Presidential Decree (P.D.) No. 115, otherwise known as the Trust Receipts Law.
Thirteen (13) Informations were filed against the petitioner before the Regional Trial
Court (RTC) of Manila. The cases were docketed as Criminal Cases No. 86-42169 to 86-
42181, raffled to Branch 31 of said court.
Petitioner appealed the resolution of the City Prosecutor to the then Minister of Justice.
The appeal was dismissed in a Resolution7 dated March 17, 1987, and petitioner moved
for its reconsideration. On December 23, 1987, the Minister of Justice granted the
motion, thus reversing the previous resolution finding probable cause against
petitioner.8 The City Prosecutor was ordered to move for the withdrawal of the
Informations.
This time, respondent bank filed a motion for reconsideration, which, however, was
denied on February 24, 1988.9The RTC, for its part, granted the Motion to Quash the
Informations filed by petitioner on the ground that the material allegations therein did not
amount to estafa.10
In the meantime, the Court rendered judgment in Allied Banking Corporation v.
Ordoñez,11 holding that the penal provision of P.D. No. 115 encompasses any act
violative of an obligation covered by the trust receipt; it is not limited to transactions
involving goods which are to be sold (retailed), reshipped, stored or processed as a
component of a product ultimately sold. The Court also ruled that "the non-payment of
the amount covered by a trust receipt is an act violative of the obligation of the entrustee
to pay."12
On February 27, 1995, respondent bank re-filed the criminal complaint for estafa against
petitioner before the Office of the City Prosecutor of Manila. The case was docketed as
I.S. No. 95B-07614.
Preliminary investigation ensued. On December 8, 1995, the City Prosecutor ruled that
there was no probable cause to charge petitioner with violating P.D. No. 115, as
petitioner’s liability was only civil, not criminal, having signed the trust receipts as
surety.13 Respondent bank appealed the resolution to the Department of Justice (DOJ)
via petition for review, alleging that the City Prosecutor erred in ruling:
1. That there is no evidence to show that respondent participated in the misappropriation
of the goods subject of the trust receipts;
2. That the respondent is a mere surety of the trust receipts; and
3. That the liability of the respondent is only civil in nature.14
On July 13, 1999, the Secretary of Justice issued Resolution No. 25015 granting the
petition and reversing the assailed resolution of the City Prosecutor. According to the
Justice Secretary, the petitioner, as Senior Vice-President of PBMI, executed the 13 trust
receipts and as such, was the one responsible for the offense. Thus, the execution of
said receipts is enough to indict the petitioner as the official responsible for violation of
P.D. No. 115. The Justice Secretary also declared that petitioner could not contend that
P.D. No. 115 covers only goods ultimately destined for sale, as this issue had already
been settled in Allied Banking Corporation v. Ordoñez,16 where the Court ruled that P.D.
No. 115 is "not limited to transactions in goods which are to be sold (retailed), reshipped,
stored or processed as a component of a product ultimately sold but covers failure to turn
over the proceeds of the sale of entrusted goods, or to return said goods if unsold or not
otherwise disposed of in accordance with the terms of the trust receipts."
The Justice Secretary further stated that the respondent bound himself under the terms
of the trust receipts not only as a corporate official of PBMI but also as its surety; hence,
he could be proceeded against in two (2) ways: first, as surety as determined by the
Supreme Court in its decision in Rizal Commercial Banking Corporation v. Court of
Appeals;17 and second, as the corporate official responsible for the offense under P.D.
No. 115, via criminal prosecution. Moreover, P.D. No. 115 explicitly allows the
prosecution of corporate officers "without prejudice to the civil liabilities arising from the
criminal offense." Thus, according to the Justice Secretary, following Rizal Commercial
Banking Corporation, the civil liability imposed is clearly separate and distinct from the
criminal liability of the accused under P.D. No. 115.
Conformably with the Resolution of the Secretary of Justice, the City Prosecutor filed 13
Informations against petitioner for violation of P.D. No. 115 before the RTC of Manila.
The cases were docketed as Criminal Cases No. 99-178596 to 99-178608 and
consolidated for trial before Branch 52 of said court. Petitioner filed a motion for
reconsideration, which the Secretary of Justice denied in a Resolution18 dated January
17, 2000.
Petitioner then filed a petition for certiorari, prohibition and mandamus with the CA,
assailing the resolutions of the Secretary of Justice on the following grounds:
1. THE RESPONDENTS ARE ACTING WITH AN UNEVEN HAND AND IN FACT, ARE
ACTING OPPRESSIVELY AGAINST ALFREDO CHING WHEN THEY ALLOWED HIS
PROSECUTION DESPITE THE FACT THAT NO EVIDENCE HAD BEEN PRESENTED
TO PROVE HIS PARTICIPATION IN THE ALLEGED TRANSACTIONS.
2. THE RESPONDENT SECRETARY OF JUSTICE COMMITTED AN ACT IN GRAVE
ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION WHEN THEY
CONTINUED PROSECUTION OF THE PETITIONER DESPITE THE LENGTH OF TIME
INCURRED IN THE TERMINATION OF THE PRELIMINARY INVESTIGATION THAT
SHOULD JUSTIFY THE DISMISSAL OF THE INSTANT CASE.
3. THE RESPONDENT SECRETARY OF JUSTICE AND ASSISTANT CITY
PROSECUTOR ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO AN
EXCESS OF JURISDICTION WHEN THEY CONTINUED THE PROSECUTION OF THE
PETITIONER DESPITE LACK OF SUFFICIENT BASIS.19
In his petition, petitioner incorporated a certification stating that "as far as this Petition is
concerned, no action or proceeding in the Supreme Court, the Court of Appeals or
different divisions thereof, or any tribunal or agency. It is finally certified that if the affiant
should learn that a similar action or proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals, or different divisions thereof, of any other tribunal
or agency, it hereby undertakes to notify this Honorable Court within five (5) days from
such notice."20
In its Comment on the petition, the Office of the Solicitor General alleged that -
A.
THE HONORABLE SECRETARY OF JUSTICE CORRECTLY RULED THAT
PETITIONER ALFREDO CHING IS THE OFFICER RESPONSIBLE FOR THE
OFFENSE CHARGED AND THAT THE ACTS OF PETITIONER FALL WITHIN THE
AMBIT OF VIOLATION OF P.D. [No.] 115 IN RELATION TO ARTICLE 315, PAR. 1(B)
OF THE REVISED PENAL CODE.
B.
THERE IS NO MERIT IN PETITIONER’S CONTENTION THAT EXCESSIVE DELAY
HAS MARRED THE CONDUCT OF THE PRELIMINARY INVESTIGATION OF THE
CASE, JUSTIFYING ITS DISMISSAL.
C.
THE PRESENT SPECIAL CIVIL ACTION FOR CERTIORARI, PROHIBITION AND
MANDAMUS IS NOT THE PROPER MODE OF REVIEW FROM THE RESOLUTION OF
THE DEPARTMENT OF JUSTICE. THE PRESENT PETITION MUST THEREFORE BE
DISMISSED.21
On April 22, 2004, the CA rendered judgment dismissing the petition for lack of merit,
and on procedural grounds. On the procedural issue, it ruled that (a) the certification of
non-forum shopping executed by petitioner and incorporated in the petition was defective
for failure to comply with the first two of the three-fold undertakings prescribed in Rule 7,
Section 5 of the Revised Rules of Civil Procedure; and (b) the petition for certiorari,
prohibition and mandamus was not the proper remedy of the petitioner.
On the merits of the petition, the CA ruled that the assailed resolutions of the Secretary
of Justice were correctly issued for the following reasons: (a) petitioner, being the Senior
Vice-President of PBMI and the signatory to the trust receipts, is criminally liable for
violation of P.D. No. 115; (b) the issue raised by the petitioner, on whether he violated
P.D. No. 115 by his actuations, had already been resolved and laid to rest in Allied Bank
Corporation v. Ordoñez;22 and (c) petitioner was estopped from raising the
City Prosecutor’s delay in the final disposition of the preliminary investigation because he
failed to do so in the DOJ.
Thus, petitioner filed the instant petition, alleging that:
I
THE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION ON THE
GROUND THAT THE CERTIFICATION OF NON-FORUM SHOPPING
INCORPORATED THEREIN WAS DEFECTIVE.
II
THE COURT OF APPEALS ERRED WHEN IT RULED THAT NO GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WAS
COMMITTED BY THE SECRETARY OF JUSTICE IN COMING OUT WITH THE
ASSAILED RESOLUTIONS.23
The Court will delve into and resolve the issues seriatim.
The petitioner avers that the CA erred in dismissing his petition on a mere technicality.
He claims that the rules of procedure should be used to promote, not frustrate,
substantial justice. He insists that the Rules of Court should be construed liberally
especially when, as in this case, his substantial rights are adversely affected; hence, the
deficiency in his certification of non-forum shopping should not result in the dismissal of
his petition.
The Office of the Solicitor General (OSG) takes the opposite view, and asserts that
indubitably, the certificate of non-forum shopping incorporated in the petition before the
CA is defective because it failed to disclose essential facts about pending actions
concerning similar issues and parties. It asserts that petitioner’s failure to comply with the
Rules of Court is fatal to his petition. The OSG cited Section 2, Rule 42, as well as the
ruling of this Court in Melo v. Court of Appeals.24
We agree with the ruling of the CA that the certification of non-forum shopping petitioner
incorporated in his petition before the appellate court is defective. The certification reads:
It is further certified that as far as this Petition is concerned, no action or proceeding in
the Supreme Court, the Court of Appeals or different divisions thereof, or any tribunal or
agency.
It is finally certified that if the affiant should learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals, or different
divisions thereof, of any other tribunal or agency, it hereby undertakes to notify this
Honorable Court within five (5) days from such notice.25
Under Section 1, second paragraph of Rule 65 of the Revised Rules of Court, the petition
should be accompanied by a sworn certification of non-forum shopping, as provided in
the third paragraph of Section 3, Rule 46 of said Rules. The latter provision reads in part:
SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. —
The petition shall contain the full names and actual addresses of all the petitioners and
respondents, a concise statement of the matters involved, the factual background of the
case and the grounds relied upon for the relief prayed for.
xxx
The petitioner shall also submit together with the petition a sworn certification that he has
not theretofore commenced any other action involving the same issues in the Supreme
Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency;
if there is such other action or proceeding, he must state the status of the same; and if he
should thereafter learn that a similar action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or different divisions thereof, or any
other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other
tribunal or agency thereof within five (5) days therefrom. xxx
Compliance with the certification against forum shopping is separate from and
independent of the avoidance of forum shopping itself. The requirement is mandatory.
The failure of the petitioner to comply with the foregoing requirement shall be sufficient
ground for the dismissal of the petition without prejudice, unless otherwise provided.26
Indubitably, the first paragraph of petitioner’s certification is incomplete and unintelligible.
Petitioner failed to certify that he "had not heretofore commenced any other action
involving the same issues in the Supreme Court, the Court of Appeals or the different
divisions thereof or any other tribunal or agency" as required by paragraph 4, Section 3,
Rule 46 of the Revised Rules of Court.
We agree with petitioner’s contention that the certification is designed to promote and
facilitate the orderly administration of justice, and therefore, should not be interpreted
with absolute literalness. In his works on the Revised Rules of Civil Procedure, former
Supreme Court Justice Florenz Regalado states that, with respect to the contents of the
certification which the pleader may prepare, the rule of substantial compliance may be
availed of.27However, there must be a special circumstance or compelling reason which
makes the strict application of the requirement clearly unjustified. The instant petition has
not alleged any such extraneous circumstance. Moreover, as worded, the certification
cannot even be regarded as substantial compliance with the procedural requirement.
Thus, the CA was not informed whether, aside from the petition before it, petitioner had
commenced any other action involving the same issues in other tribunals.
On the merits of the petition, the CA ruled that the petitioner failed to establish that the
Secretary of Justice committed grave abuse of discretion in finding probable cause
against the petitioner for violation of estafa under Article 315, paragraph 1(b) of the
Revised Penal Code, in relation to P.D. No. 115. Thus, the appellate court ratiocinated:
Be that as it may, even on the merits, the arguments advanced in support of the petition
are not persuasive enough to justify the desired conclusion that respondent Secretary of
Justice gravely abused its discretion in coming out with his assailed Resolutions.
Petitioner posits that, except for his being the Senior Vice-President of the PBMI, there is
no iota of evidence that he was a participes crimines in violating the trust receipts sued
upon; and that his liability, if at all, is purely civil because he signed the said trust receipts
merely as a xxx surety and not as the entrustee. These assertions are, however, too dull
that they cannot even just dent the findings of the respondent Secretary, viz:
"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:
‘xxx If the violation or offense is committed by a corporation, partnership, association or
other judicial 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 criminal offense.’
"There is no dispute that it was the respondent, who as senior vice-president of PBM,
executed the thirteen (13) trust receipts. As such, the 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 (West Coast Life Ins. Co. vs. Hurd, 27 Phil.
401; Times, [I]nc. v. Reyes, 39 SCRA 303). Thus, the execution by respondent of said
receipts is enough to indict him as the official responsible for violation of PD 115.
"Parenthetically, respondent 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. This issue has already been settled in the Allied Banking Corporation
case, supra, where he was also a party, when the Supreme Court ruled that PD 115 is
‘not limited to transactions in goods which are to be sold (retailed), reshipped, stored or
processed as a component or a product ultimately sold’ but ‘covers failure to turn over
the proceeds of the sale of entrusted goods, or to return said goods if unsold or disposed
of in accordance with the terms of the trust receipts.’
"In regard to the other assigned errors, we note that the respondent bound himself under
the terms of the trust receipts not only as a corporate official of PBM but also as its
surety. It is evident that these are two (2) capacities which do not exclude the other.
Logically, he can be proceeded against in two (2) ways: first, as surety as determined by
the Supreme Court in its decision in RCBC vs. Court of Appeals, 178 SCRA 739; and,
secondly, as the corporate official responsible for the offense under PD 115, the present
case is an appropriate remedy under our penal law.
"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.’"28
Petitioner asserts that the appellate court’s ruling is erroneous because (a) the
transaction between PBMI and respondent bank is not a trust receipt transaction; (b) he
entered into the transaction and was sued in his capacity as PBMI Senior Vice-President;
(c) he never received the goods as an entrustee for PBMI, hence, could not have
committed any dishonesty or abused the confidence of respondent bank; and (d) PBMI
acquired the goods and used the same in operating its machineries and equipment and
not for resale.
The OSG, for its part, submits a contrary view, to wit:
34. Petitioner further claims that he is not a person responsible for the offense allegedly
because "[b]eing charged as the Senior Vice-President of Philippine Blooming Mills
(PBM), petitioner cannot be held criminally liable as the transactions sued upon were
clearly entered into in his capacity as an officer of the corporation" and that [h]e never
received the goods as an entrustee for PBM as he never had or took possession of the
goods nor did he commit dishonesty nor "abuse of confidence in transacting with RCBC."
Such argument is bereft of merit.
35. Petitioner’s being a Senior Vice-President of the Philippine Blooming Mills does not
exculpate him from any liability. Petitioner’s responsibility as the corporate official of PBM
who received the goods in trust is premised on Section 13 of P.D. No. 115, which
provides:
Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the
sale of the goods, documents or instruments covered by a trust receipt to the extent of
the amount owing to the entruster or as appears in the trust receipt or to return said
goods, documents or instruments if they were not sold or disposed of in accordance with
the terms of the trust receipt shall constitute the crime of estafa, punishable under the
provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered
Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised
Penal Code. If the violation or offense 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
criminal offense. (Emphasis supplied)
36. Petitioner having participated in the negotiations for the trust receipts and having
received the goods for PBM, it was inevitable that the petitioner is the proper corporate
officer to be proceeded against by virtue of the PBM’s violation of P.D. No. 115.29
The ruling of the CA is correct.
In Mendoza-Arce v. Office of the Ombudsman (Visayas),30 this Court held that the acts of
a quasi-judicial officer may be assailed by the aggrieved party via a petition for certiorari
and enjoined (a) when necessary to afford adequate protection to the constitutional rights
of the accused; (b) when necessary for the orderly administration of justice; (c) when the
acts of the officer are without or in excess of authority; (d) where the charges are
manifestly false and motivated by the lust for vengeance; and (e) when there is clearly no
prima facie case against the accused.31 The Court also declared that, if the officer
conducting a preliminary investigation (in that case, the Office of the Ombudsman) acts
without or in excess of his authority and resolves to file an Information despite the
absence of probable cause, such act may be nullified by a writ of certiorari.32
Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure,33 the
Information shall be prepared by the Investigating Prosecutor against the respondent
only if he or she finds probable cause to hold such respondent for trial. The Investigating
Prosecutor acts without or in excess of his authority under the Rule if the Information is
filed against the respondent despite absence of evidence showing probable cause
therefor.34 If the Secretary of Justice reverses the Resolution of the Investigating
Prosecutor who found no probable cause to hold the respondent for trial, and orders
such prosecutor to file the Information despite the absence of probable cause, the
Secretary of Justice acts contrary to law, without authority and/or in excess of authority.
Such resolution may likewise be nullified in a petition for certiorari under Rule 65 of the
Revised Rules of Civil Procedure.35
A preliminary investigation, designed to secure the respondent against hasty, malicious
and oppressive prosecution, is an inquiry to determine whether (a) a crime has been
committed; and (b) whether there is probable cause to believe that the accused is guilty
thereof. It is a means of discovering the person or persons who may be reasonably
charged with a crime. Probable cause need not be based on clear and convincing
evidence of guilt, as the investigating officer acts upon probable cause of reasonable
belief. Probable cause implies probability of guilt and requires more than bare suspicion
but less than evidence which would justify a conviction. A finding of probable cause
needs only to rest on evidence showing that more likely than not, a crime has been
committed by the suspect.36
However, while probable cause should be determined in a summary manner, there is a
need to examine the evidence with care to prevent material damage to a potential
accused’s constitutional right to liberty and the guarantees of freedom and fair play37 and
to protect the State from the burden of unnecessary expenses in prosecuting alleged
offenses and holding trials arising from false, fraudulent or groundless charges.38
In this case, petitioner failed to establish that the Secretary of Justice committed grave
abuse of discretion in issuing the assailed resolutions. Indeed, he acted in accord with
law and the evidence.
Section 4 of P.D. No. 115 defines a trust receipt transaction, thus:
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in
this Decree as the entruster, and another person referred to in this Decree as entrustee,
whereby the entruster, who owns or holds absolute title or security interests over certain
specified goods, documents or instruments, releases the same to the possession of the
entrustee upon the latter’s execution and delivery to the entruster of a signed document
called a "trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the
goods, documents or instruments with the obligation to turn over to the entruster the
proceeds thereof to the extent of the amount owing to the entruster or as appears in the
trust receipt or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following:
1. In case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale; Provided, That, in
the case of goods delivered under trust receipt for the purpose of manufacturing or
processing before its ultimate sale, the entruster shall retain its title over the goods
whether in its original or processed form until the entrustee has complied fully with his
obligation under the trust receipt; or (c) to load, unload, ship or otherwise deal with them
in a manner preliminary or necessary to their sale; or
2. In the case of instruments a) to sell or procure their sale or exchange; or b) to deliver
them to a principal; or c) to effect the consummation of some transactions involving
delivery to a depository or register; or d) to effect their presentation, collection or
renewal.
The sale of goods, documents or instruments by a person in the business of selling
goods, documents or instruments for profit who, at the outset of the transaction, has, as
against the buyer, general property rights in such goods, documents or instruments, or
who sells the same to the buyer on credit, retaining title or other interest as security for
the payment of the purchase price, does not constitute a trust receipt transaction and is
outside the purview and coverage of this Decree.
An entrustee is one having or taking possession of goods, documents or instruments
under a trust receipt transaction, and any successor in interest of such person for the
purpose of payment specified in the trust receipt agreement.39 The entrustee is obliged
to: (1) hold the goods, documents or instruments in trust for the entruster and shall
dispose of them strictly in accordance with the terms and conditions of the trust receipt;
(2) receive the proceeds in trust for the entruster and turn over the same to the entruster
to the extent of the amount owing to the entruster or as appears on the trust receipt; (3)
insure the goods for their total value against loss from fire, theft, pilferage or other
casualties; (4) keep said goods or proceeds thereof whether in money or whatever form,
separate and capable of identification as property of the entruster; (5) return the goods,
documents or instruments in the event of non-sale or upon demand of the entruster; and
(6) observe all other terms and conditions of the trust receipt not contrary to the
provisions of the decree.40
The entruster shall be entitled to the proceeds from the sale of the goods, documents or
instruments released under a trust receipt to the entrustee to the extent of the amount
owing to the entruster or as appears in the trust receipt, or to the return of the goods,
documents or instruments in case of non-sale, and to the enforcement of all other rights
conferred on him in the trust receipt; provided, such are not contrary to the provisions of
the document.41
In the case at bar, the transaction between petitioner and respondent bank falls under
the trust receipt transactions envisaged in P.D. No. 115. Respondent bank imported the
goods and entrusted the same to PBMI under the trust receipts signed by petitioner, as
entrustee, with the bank as entruster. The agreement was as follows:
And in consideration thereof, I/we hereby agree to hold said goods in trust for the said
BANK as its property with liberty to sell the same within ____days from the date of the
execution of this Trust Receipt and for the Bank’s account, but without authority to make
any other disposition whatsoever of the said goods or any part thereof (or the proceeds)
either by way of conditional sale, pledge or otherwise.
I/we agree to keep the said goods insured to their full value against loss from fire, theft,
pilferage or other casualties as directed by the BANK, the sum insured to be payable in
case of loss to the BANK, with the understanding that the BANK is, not to be chargeable
with the storage premium or insurance or any other expenses incurred on said goods.
In case of sale, I/we further agree to turn over the proceeds thereof as soon as received
to the BANK, to apply against the relative acceptances (as described above) and for the
payment of any other indebtedness of mine/ours to the BANK. In case of non-sale within
the period specified herein, I/we agree to return the goods under this Trust Receipt to the
BANK without any need of demand.
I/we agree to keep the said goods, manufactured products or proceeds thereof, whether
in the form of money or bills, receivables, or accounts separate and capable of
identification as property of the BANK.42
It must be stressed that P.D. No. 115 is a declaration by legislative authority that, as a
matter of public policy, the failure of person to turn over the proceeds of the sale of the
goods covered by a trust receipt or to return said goods, if not sold, is a public nuisance
to be abated by the imposition of penal sanctions.43
The Court likewise rules that the issue of whether P.D. No. 115 encompasses
transactions involving goods procured as a component of a product ultimately sold has
been resolved in the affirmative in Allied Banking Corporation v. Ordoñez.44 The law
applies to goods used by the entrustee in the operation of its machineries and
equipment. The non-payment of the amount covered by the trust receipts or the non-
return of the goods covered by the receipts, if not sold or otherwise not disposed of,
violate the entrustee’s obligation to pay the amount or to return the goods to the
entruster.
In Colinares v. Court of Appeals,45 the Court declared that there are two possible
situations in a trust receipt transaction. The first is covered by the provision which refers
to money received under the obligation involving the duty to deliver it (entregarla) to the
owner of the merchandise sold. The second is covered by the provision which refers to
merchandise received under the obligation to return it (devolvera) to the owner.46 Thus,
failure of the entrustee to turn over the proceeds of the sale of the goods covered by the
trust receipts to the entruster or to return said goods if they were not disposed of in
accordance with the terms of the trust receipt is a crime under P.D. No. 115, without
need of proving intent to defraud. The law punishes dishonesty and abuse of confidence
in the handling of money or goods to the prejudice of the entruster, regardless of whether
the latter is the owner or not. A mere failure to deliver the proceeds of the sale of the
goods, if not sold, constitutes a criminal offense that causes prejudice, not only to
another, but more to the public interest.47
The Court rules that although petitioner signed the trust receipts merely as Senior Vice-
President of PBMI and had no physical possession of the goods, he cannot avoid
prosecution for violation of P.D. No. 115.
The penalty clause of the law, Section 13 of P.D. No. 115 reads:
Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the
sale of the goods, documents or instruments covered by a trust receipt to the extent of
the amount owing to the entruster or as appears in the trust receipt or to return said
goods, documents or instruments if they were not sold or disposed of in accordance with
the terms of the trust receipt shall constitute the crime of estafa, punishable under the
provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered
Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised
Penal Code.1âwphi1 If the violation or offense 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
criminal offense.
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, which reads:
ARTICLE 315. Swindling (estafa). – Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its
minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed
22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in this
paragraph shall be imposed in its maximum period, adding one year for each additional
10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years.
In such cases, and in connection with the accessory penalties which may be imposed
and for the purpose of the other provisions of this Code, the penalty shall be termed
prision mayor or reclusion temporal, as the case may be;
2nd. The penalty of prision correccional in its minimum and medium periods, if the
amount of the fraud is over 6,000 pesos but does not exceed 12,000 pesos;
3rd. The penalty of arresto mayor in its maximum period to prision correccional in its
minimum period, if such amount is over 200 pesos but does not exceed 6,000 pesos;
and
4th. By arresto mayor in its medium and maximum periods, if such amount does not
exceed 200 pesos, provided that in the four cases mentioned, the fraud be committed by
any of the following means; xxx
Though the entrustee is a corporation, nevertheless, the 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. The rationale is that such
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.48
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.49 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.50
A crime is the doing of that which the penal code forbids to be done, or omitting to do
what it commands. A necessary part of the definition of every crime is the designation of
the author of the crime upon whom the penalty is to be inflicted. 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.51Corporate officers or employees, through whose act,
default or omission the corporation commits a crime, are themselves individually guilty of
the crime.52
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.53 Moreover, all
parties active in promoting a crime, whether agents or not, are principals.54 Whether such
officers or employees are benefited by their delictual acts is not a touchstone of their
criminal liability. Benefit is not an operative fact.
In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind
the cloak of the separate corporate personality of PBMI. In the words of Chief Justice
Earl Warren, a corporate officer cannot protect himself behind a corporation where he is
the actual, present and efficient actor.55
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioner.
SO ORDERED.
[G.R. NO. 141994 - January 17, 2005]
FILIPINAS BROADCASTING NETWORK, INC., Petitioner, v. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-
BCCM) and ANGELITA F. AGO, Respondents.
DECISION
CARPIO, J.:
The Case
This Petition for Review 1 assails the 4 January 1999 Decision2 and 26 January 2000
Resolution of the Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals
affirmed with modification the 14 December 1992 Decision3 of the Regional Trial Court of
Legazpi City, Branch 10, in Civil Case No. 8236. The Court of Appeals held Filipinas
Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima
liable for libel and ordered them to solidarily pay Ago Medical and Educational Center-
Bicol Christian College of Medicine moral damages, attorney's fees and costs of suit.
The Antecedents
"Exposé" is a radio documentary4 program hosted by Carmelo 'Mel' Rima ("Rima") and
Hermogenes 'Jun' Alegre ("Alegre").5 Exposé is aired every morning over DZRC-AM
which is owned by Filipinas Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over
Legazpi City, the Albay municipalities and other Bicol areas.6
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
AMEC's College of Medicine, filed a complaint for damages7against FBNI, Rima and
Alegre on 27 February 1990. Quoted are portions of the allegedly libelous broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking medical course at
AMEC-BCCM, advise them to pass all subjects because if they fail in any subject
they will repeat their year level, taking up all subjects including those they have
passed already. Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If [there] is no such
regulation why is AMEC doing the same?
xxx
Second: Earlier AMEC students in Physical Therapy had complained that the
course is not recognized by DECS. xxx
Third: Students are required to take and pay for the subject even if the subject
does not have an instructor - such greed for money on the part of AMEC's
administration. Take the subject Anatomy: students would pay for the subject upon
enrolment because it is offered by the school. However there would be no instructor for
such subject. Students would be informed that course would be moved to a later date
because the school is still searching for the appropriate instructor.
xxx
It is a public knowledge that the Ago Medical and Educational Center has survived and
has been surviving for the past few years since its inception because of funds support
from foreign foundations. If you will take a look at the AMEC premises you ll find out that
the names of the buildings there are foreign soundings. There is a McDonald Hall. Why
not Jose Rizal or Bonifacio Hall? That is a very concrete and undeniable evidence that
the support of foreign foundations for AMEC is substantial, isn't it? With the report which
is the basis of the expose in DZRC today, it would be very easy for detractors and
enemies of the Ago family to stop the flow of support of foreign foundations who assist
the medical school on the basis of the latter's purpose. But if the purpose of the
institution (AMEC) is to deceive students at cross purpose with its reason for being it is
possible for these foreign foundations to lift or suspend their donations temporarily.8
xxx
On the other hand, the administrators of AMEC-BCCM, AMEC Science High School
and the AMEC-Institute of Mass Communication in their effort to minimize
expenses in terms of salary are absorbing or continues to accept "rejects". For
example how many teachers in AMEC are former teachers of Aquinas University but
were removed because of immorality? Does it mean that the present administration of
AMEC have the total definite moral foundation from catholic administrator of Aquinas
University. I will prove to you my friends, that AMEC is a dumping ground, garbage,
not merely of moral and physical misfits. Probably they only qualify in terms of
intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family name
implies. She is too old to work, being an old woman. Is the AMEC administration
exploiting the very [e]nterprising or compromising and undemanding Lola? Could it be
that AMEC is just patiently making use of Dean Justita Lola were if she is very old. As in
atmospheric situation - zero visibility - the plane cannot land, meaning she is very old,
low pay follows. By the way, Dean Justita Lola is also the chairman of the committee on
scholarship in AMEC. She had retired from Bicol University a long time ago but AMEC
has patiently made use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for moral and
physically misfit people. What does this mean? Immoral and physically misfits as
teachers.
May I say I m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your
are no longer fit to teach. You are too old. As an aviation, your case is zero visibility.
Don't insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the
scholarship committee at that. The reason is practical cost saving in salaries, because an
old person is not fastidious, so long as she has money to buy the ingredient of beetle
juice. The elderly can get by - that's why she (Lola) was taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is likely that the
students would be influenced by evil. When they become members of society outside
of campus will be liabilities rather than assets. What do you expect from a doctor
who while studying at AMEC is so much burdened with unreasonable imposition? What
do you expect from a student who aside from peculiar problems - because not all
students are rich - in their struggle to improve their social status are even more burdened
with false regulations. xxx9 (Emphasis supplied)ςrαlαωlιbrαrÿ
The complaint further alleged that AMEC is a reputable learning institution. With the
supposed exposés, 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 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an
Answer10 alleging that the broadcasts against AMEC were fair and true. FBNI, Rima and
Alegre claimed that they were plainly impelled by a sense of public duty to report the
"goings-on in AMEC, [which is] an institution imbued with public interest."
Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty.
Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on
FBNI's behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a
separate Answer claiming that it exercised due diligence in the selection and supervision
of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster
should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and
training program after passing the interview. FBNI likewise claimed that it always reminds
its broadcasters to "observe truth, fairness and objectivity in their broadcasts and to
refrain from using libelous and indecent language." Moreover, FBNI requires all
broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP")
accreditation test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre
liable for libel except Rima. The trial court held that the broadcasts are libelous per se.
The trial court rejected the broadcasters' claim that their utterances were the result of
straight reporting because it had no factual basis. The broadcasters did not even verify
their reports before airing them to show good faith. In holding FBNI liable for libel, the
trial court found that FBNI failed to exercise diligence in the selection and supervision of
its employees.
In absolving Rima from the charge, the trial court ruled that Rima's only participation was
when he agreed with Alegre's exposé. The trial court found Rima's statement within the
"bounds of freedom of speech, expression, and of the press." The dispositive portion of
the decision reads:
WHEREFORE, premises considered, this court finds for the plaintiff. Considering the
degree of damages caused by the controversial utterances, which are not found by
this court to be really very serious and damaging, and there being no showing that
indeed the enrollment of plaintiff school dropped, defendants Hermogenes "Jun"
Alegre, Jr. and Filipinas Broadcasting Network (owner of the radio station DZRC), are
hereby jointly and severally ordered to pay plaintiff Ago Medical and Educational Center-
Bicol Christian College of Medicine (AMEC-BCCM) the amount of P300,000.00 moral
damages, plus P30,000.00 reimbursement of attorney's fees, and to pay the costs of suit.
SO ORDERED.13 (Emphasis supplied)ςrαlαωlιbrαrÿ
Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the
other, appealed the decision to the Court of Appeals. The Court of Appeals affirmed the
trial court's judgment with modification. The appellate court made Rima solidarily liable
with FBNI and Alegre. The appellate court denied Ago's claim for damages and
attorney's fees because the broadcasts were directed against AMEC, and not against
her. The dispositive portion of the Court of Appeals' decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the
modification that broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I]
and Hermo[g]enes Alegre.
SO ORDERED.14
FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals
denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition.15
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial court's ruling that the questioned broadcasts are
libelous per se and that FBNI, Rima and Alegre failed to overcome the legal presumption
of malice. The Court of Appeals found Rima and Alegre's claim that they were actuated
by their moral and social duty to inform the public of the students' gripes as insufficient to
justify the utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMEC's administrators, the Court of
Appeals ruled that the broadcasts were made "with reckless disregard as to whether they
were true or false." The appellate court pointed out that FBNI, Rima and Alegre failed to
present in court any of the students who allegedly complained against AMEC. Rima and
Alegre merely gave a single name when asked to identify the students. According to the
Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters'
claim that they were "impelled by their moral and social duty to inform the public about
the students' gripes."
The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-
BCCM is a dumping ground for morally and physically misfit teachers; (2) AMEC
obtained the services of Dean Justita Lola to minimize expenses on its employees'
salaries; and (3) AMEC burdened the students with unreasonable imposition and false
regulations."16
The Court of Appeals held that FBNI failed to exercise due diligence in the selection and
supervision of its employees for allowing Rima and Alegre to make the radio broadcasts
without the proper KBP accreditation. The Court of Appeals denied Ago's claim for
damages and attorney's fees because the libelous remarks were directed against AMEC,
and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre solidarily
liable to pay AMEC moral damages, attorney's fees and costs of
suit.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEY'S FEES IS PROPER; andcralawlibrary
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR
PAYMENT OF MORAL DAMAGES, ATTORNEY'S FEES AND COSTS OF SUIT.
The Court's Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly defamatory remarks of Rima
and Alegre against AMEC.17 While AMEC did not point out clearly the legal basis for its
complaint, a reading of the complaint reveals that AMEC's cause of action is based on
Articles 30 and 33 of the Civil Code. Article 3018 authorizes a separate civil action to
recover civil liability arising from a criminal offense. On the other hand, Article
3319 particularly provides that the injured party may bring a separate civil action for
damages in cases of defamation, fraud, and physical injuries. AMEC also invokes Article
1920 of the Civil Code to justify its claim for damages. AMEC cites Articles 217621 and
218022 of the Civil Code to hold FBNI solidarily liable with Rima and Alegre.
I.
Whether the broadcasts are libelous
A libel23 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.24
There is no question that the broadcasts were made public and imputed to AMEC
defects or circumstances tending to cause it dishonor, discredit and contempt. Rima and
Alegre's remarks such as "greed for money on the part of AMEC's administrators";
"AMEC is a dumping ground, garbage of xxx moral and physical misfits"; and AMEC
students who graduate "will be liabilities rather than assets" of the society are
libelous per se. Taken as a whole, the broadcasts suggest that AMEC is a money-
making institution where physically and morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima
and Alegre were plainly impelled by their civic duty to air the students' gripes. FBNI
alleges that there is no evidence that ill will or spite motivated Rima and Alegre in making
the broadcasts. FBNI further points out that Rima and Alegre exerted efforts to obtain
AMEC's side and gave Ago the opportunity to defend AMEC and its administrators. FBNI
concludes that since there is no malice, there is no libel.
FBNI's contentions are untenable.
Every defamatory imputation is presumed malicious.25Rima 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."26 Hearing the students' alleged complaints a month before the
exposé,27 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."28 This plainly shows
Rima and Alegre's reckless disregard of whether their report was true or not.
Contrary to FBNI's claim, the broadcasts were not "the result of straight reporting."
Significantly, some courts in the United States apply the privilege of "neutral reportage" in
libel cases involving matters of public interest or public figures. Under this privilege, a
republisher who accuratelyand disinterestedly reports certain defamatory statements
made against public figures is shielded from liability, regardless of the republisher's
subjective awareness of the truth or falsity of the accusation.29 Rima and Alegre cannot
invoke the privilege of neutral reportage because unfounded comments abound in the
broadcasts. Moreover, there is no existing controversy involving AMEC when the
broadcasts were made. The privilege of neutral reportage applies where the defamed
person is a public figure who is involved in an existing controversy, and a party to that
controversy makes the defamatory statement.30
However, FBNI argues vigorously that malice in law does not apply to this case.
Citing Borjal v. Court of Appeals,31 FBNI contends that the broadcasts "fall within the
coverage of qualifiedly privileged communications" for being commentaries on matters of
public interest. Such being the case, AMEC should prove malice in fact or actual malice.
Since AMEC allegedly failed to prove actual malice, there is no libel.
FBNI's reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of
fair comment," thus:
[F]air commentaries on matters of public interest are privileged and constitute a valid
defense in an action for libel or slander. The doctrine of fair comment means that while in
general every discreditable imputation publicly made is deemed false, because every
man is presumed innocent until his guilt is judicially proved, and every false imputation is
deemed malicious, nevertheless, when the discreditable imputation is directed against a
public person in his public capacity, it is not necessarily actionable. In order that such
discreditable imputation to a public official may be actionable, it must either be a
false allegation of fact or a comment based on a false supposition. If the comment
is an expression of opinion, based on established facts, then it is immaterial that the
opinion happens to be mistaken, as long as it might reasonably be inferred from the
facts.32(Emphasis supplied)ςrαlαωlιbrαrÿ
True, AMEC is a private learning institution whose business of educating students is
"genuinely imbued with public interest." The welfare of the youth in general and AMEC's
students in particular is a matter which the public has the right to know. Thus, similar to
the newspaper articles in Borjal, the subject broadcasts dealt with matters of public
interest. However, unlike in Borjal, the questioned broadcasts are not based
on established facts. The record supports the following findings of the trial court:
xxx Although defendants claim that they were motivated by consistent reports of students
and parents against plaintiff, yet, defendants have not presented in court, nor even gave
name of a single student who made the complaint to them, much less present written
complaint or petition to that effect. To accept this defense of defendants is too dangerous
because it could easily give license to the media to malign people and establishments
based on flimsy excuses that there were reports to them although they could not
satisfactorily establish it. Such laxity would encourage careless and irresponsible
broadcasting which is inimical to public interests.
Secondly, there is reason to believe that defendant radio broadcasters, contrary to the
mandates of their duties, did not verify and analyze the truth of the reports before they
aired it, in order to prove that they are in good faith.
Alegre contended that plaintiff school had no permit and is not accredited to offer
Physical Therapy courses. Yet, plaintiff produced a certificate coming from DECS that as
of Sept. 22, 1987 or more than 2 years before the controversial broadcast, accreditation
to offer Physical Therapy course had already been given the plaintiff, which certificate is
signed by no less than the Secretary of Education and Culture herself, Lourdes R.
Quisumbing (Exh. C-rebuttal). Defendants could have easily known this were they
careful enough to verify. And yet, defendants were very categorical and sounded too
positive when they made the erroneous report that plaintiff had no permit to offer
Physical Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like
Mcdonald Foundation prove not to be true also. The truth is there is no Mcdonald
Foundation existing. Although a big building of plaintiff school was given the name
Mcdonald building, that was only in order to honor the first missionary in Bicol of plaintiffs'
religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants over the air,
not a single centavo appears to be received by plaintiff school from the aforementioned
McDonald Foundation which does not exist.
Defendants did not even also bother to prove their claim, though denied by Dra. Ago,
that when medical students fail in one subject, they are made to repeat all the other
subject[s], even those they have already passed, nor their claim that the school charges
laboratory fees even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give semblance of
good faith.
As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers,
defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility
already. Dean Lola testified in court last Jan. 21, 1991, and was found to be 75 years old.
xxx Even older people prove to be effective teachers like Supreme Court Justices who
are still very much in demand as law professors in their late years. Counsel for
defendants is past 75 but is found by this court to be still very sharp and
effective.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
So is plaintiffs' counsel.
Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally
infirmed, but is still alert and docile.
The contention that plaintiffs' graduates become liabilities rather than assets of our
society is a mere conclusion. Being from the place himself, this court is aware that
majority of the medical graduates of plaintiffs pass the board examination easily and
become prosperous and responsible professionals.33
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.34 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 Code35 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(Emphasis supplied)ςrαlαωlιbrαrÿ
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 1937 of the Civil Code. A professional code of conduct also provides
the standards for determining whether a person who willfully causes loss or injury to
another has acted in a manner contrary to morals or good customs under Article 2138 of
the Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39
A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock.40 The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al.41 to justify the award of moral damages. However, the Court's
statement in Mambulaothat "a corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages" is an obiter
dictum.42
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article 221943 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.44
Moreover, where the broadcast is libelous per se, the law implies damages.45 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.47 In this case, the broadcasts are libelous per 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.
III.
Whether the award of attorney's fees is proper
FBNI contends that since AMEC is not entitled to moral damages, there is no basis for
the award of attorney's fees. FBNI adds that the instant case does not fall under the
enumeration in Article 220848 of the Civil Code.
The award of attorney's fees is not proper because AMEC failed to justify satisfactorily its
claim for attorney's fees. AMEC did not adduce evidence to warrant the award of
attorney's fees. Moreover, both the trial and appellate courts failed to explicitly state in
their respective decisions the rationale for the award of attorney's fees.49 In Inter-Asia
Investment Industries, Inc. v. Court of Appeals,50 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 counsel's fees are not to be awarded every time a party wins a
suit. The power of the court to award attorney's 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 decision, and
not only in the decretal portion thereof, the legal reason for the award of attorney's
fees.51 (Emphasis supplied)ςrαlαωlιbrαrÿ
While it mentioned about the award of attorney's fees by stating that it "lies within the
discretion of the court and depends upon the circumstances of each case," the Court of
Appeals failed to point out any circumstance to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney's
fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of
damages and attorney's fees because it exercised due diligence in the selection and
supervision of its employees, particularly Rima and Alegre. FBNI maintains that its
broadcasters, including Rima and Alegre, undergo a "very regimented process" before
they are allowed to go on air. "Those who apply for broadcaster are subjected to
interviews, examinations and an apprenticeship program."
FBNI further argues that Alegre's age and lack of training are irrelevant to his
competence as a broadcaster. FBNI points out that the "minor deficiencies in the KBP
accreditation of Rima and Alegre do not in any way prove that FBNI did not exercise the
diligence of a good father of a family in selecting and supervising them." Rima's
accreditation lapsed due to his non-payment of the KBP annual fees while Alegre's
accreditation card was delayed allegedly for reasons attributable to the KBP Manila
Office. FBNI claims that membership in the KBP is merely voluntary and not required by
any law or government regulation.
FBNI's arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally liable
for the tort which they commit.52 Joint tort feasors are all the persons who command,
instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit.53 Thus,
AMEC correctly anchored its cause of action against FBNI on Articles 2176 and 2180 of
the Civil Code.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to
pay for damages arising from the libelous broadcasts. As stated by the Court of Appeals,
"recovery for defamatory statements published by radio or television may be had from
the owner of the station, a licensee, the operator of the station, or a person who
procures, or participates in, the making of the defamatory statements."54 An employer
and employee are solidarily liable for a defamatory statement by the employee within the
course and scope of his or her employment, at least when the employer authorizes or
ratifies the defamation.55In this case, Rima and Alegre were clearly performing their
official duties as hosts of FBNI's radio program Exposé when they aired the broadcasts.
FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of their
work at that time. There was likewise no showing that FBNI did not authorize and ratify
the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI exercised due diligence in
the selection and supervisionof its employees, particularly Rima and Alegre. FBNI
merely showed that it exercised diligence in the selectionof its broadcasters without
introducing any evidence to prove that it observed the same diligence in
the supervision of Rima and Alegre. FBNI did not show how it exercised diligence in
supervising its broadcasters. FBNI's alleged constant reminder to its broadcasters to
"observe truth, fairness and objectivity and to refrain from using libelous and indecent
language" is not enough to prove due diligence in the supervision of its broadcasters.
Adequate training of the broadcasters on the industry's code of conduct, sufficient
information on libel laws, and continuous evaluation of the broadcasters' performance
are but a few of the many ways of showing diligence in the supervision of broadcasters.

FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as
broadcasters, bearing in mind their qualifications." However, no clear and convincing
evidence shows that Rima and Alegre underwent FBNI's "regimented process" of
application. Furthermore, FBNI admits that Rima and Alegre had deficiencies in their
KBP accreditation,56 which is one of FBNI's requirements before it hires a broadcaster.
Significantly, membership in the KBP, while voluntary, indicates the broadcaster's strong
commitment to observe the broadcast industry's rules and regulations. Clearly, these
circumstances show FBNI's lack of diligence in selecting and supervising Rima and
Alegre. Hence, FBNI is solidarily liable to pay damages together with Rima and Alegre.

WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January

1999 and Resolution of 26 January 2000 of the Court of Appeals in CA-G.R. CV No.
40151 with the MODIFICATION that the award of moral damages is reduced
from P300,000 to P150,000 and the award of attorney's fees is deleted. Costs against
petitioner.

SO ORDERED.