I
CORPORATION LAW CASES (2ND SEMESTER)Assoc Dean ChavezSharla
Louisse A. Castillo
I. Government Owned and Controlled Corporation
G.R. No. 129049. August 6, 1999
BALTAZAR G. CAMPOREDONDO, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION (NLRC), Fifth Division, Cagayan de Oro City,
THE PHILIPPINE NATIONAL RED CROSS (PNRC)
PARDO, J.:
Issue: whether the Philippine National Red Cross (PNRC for
short) is a government owned and controlled corporation or it has
been impliedly converted to a private organization subject to the
jurisdiction of labor tribunals
The case discusses a complaint filed by petitioner, a former
PNRC chapter administrator in Surigao del Norte, for illegal
dismissal and damages, as he was forced to "retire" after he was
required to restitute shortages and unremitted collections in the
total sum of P135,927.78.Facts:
1. Since 1980, petitioner was employed with the PNRC, and until
his early "retirement" on December 15, 1995, he was administrator
of the Surigao del Norte Chapter, Philippine National Red
Cross.
2. In July, 1995, a field auditor of the PNRC conducted an audit
of the books of account of the Surigao del Norte Chapter headed by
petitioner and found him short in the total sum of
P109,000.00.[3]
3. On November 21, 1995, Dr. Celso Samson, Secretary General of
the PNRC wrote petitioner requiring him to restitute within seventy
two (72) hours from notice, the total sum of P135,927.78
representing cash shortage, technical shortage and unremitted
collections.[4]
4. On December 15, 1995, petitioner applied for early retirement
from the service, and later wrote Dr. Samson requesting for a
re-audit by an independent auditor of his accounts. However, Dr.
Samson denied the request.[5
5. On May 28, 1996, petitioner filed with the National Labor
Relations Commission, Sub-Regional Arbitration Branch X, Butuan
City, a complaint for illegal dismissal, damages and underpayment
of wages against the Philippine National Red Cross and its key
officials.[6]
6. On June 14, 1996, respondent Philippine National Red Cross
filed with the Surigao del Norte provincial office, Department of
Labor and Employment, a motion to dismiss the complaint for lack of
jurisdiction over the subject matter of the case because the PNRC
is a government corporation whose employees are members of the
Government Service Insurance System (GSIS), and embraced within the
Civil Service Law and regulations.[7]
7. On July 25, 1996, petitioner filed an opposition to motion to
dismiss arguing that there was between the PNRC and its duly
appointed paid staff, an employer-employee relationship, governed
by the Labor Code of the Philippines.[8]
8. On October 11, 1996, the Labor Arbiter issued an order
dismissing the complaint for lack of jurisdiction, finding that the
Philippine National Red Cross is a government corporation with an
original charter, having been created by Republic Act No.
95.[9]
9. On November 12, 1996, the Labor Arbiter denied petitioner's
motion for reconsideration
10. On November 20, 1996, petitioner filed a notice of appeal
and appeal memorandum with the National Labor Relations
Commission.
11. On March 21, 1997, the National Labor Relations Commission,
Fifth Division, issued a resolution dismissing the appeal and
confirming the decision of the Labor Arbiter that dismissed
petitioner's complaint for lack of jurisdiction.[12]Ruling:
I. Clean Hands
All suitors must come to court with clean hands. This is
especially true of paid staff of the Philippine National Red Cross.
Like its unpaid volunteers, they must be men of unquestioned
honesty and integrity serving in selfless manner .Paid staff of the
PNRC are government employees who are members of the Government
Service Insurance System and covered by the Civil Service Law.
Unlike government service in other agencies, Red Cross service
demands of its paid staff uberrima fides, the utmost good faith and
dedication to work.II. Main issue on the PNRC being a private
corporation
Philippine National Red Cross (PNRC) is a government owned and
controlled corporation, with an original charter under Republic Act
No. 95, as amended. The test to determine whether a corporation is
government owned or controlled, or private in nature is simple. Is
it created by its own charter for the exercise of a public
function, or by incorporation under the general corporation law?
Those with special charters are government corporations subject to
its provisions, and its employees are under the jurisdiction of the
Civil Service Commission, and are compulsory members of the
Government Service Insurance System. The PNRC was not "impliedly
converted to a private corporation" simply because its charter was
amended to vest in it the authority to secure loans, be exempted
from payment of all duties, taxes, fees and other charges of all
kinds on all importations and purchases for its exclusive use, on
donations for its disaster relief work and other services and in
its benefits and fund raising drives, and be alloted one lottery
draw a year by the Philippine Charity Sweepstakes Office for the
support of its disaster relief operation in addition to its
existing lottery draws for blood program.
Having served in the Philippine National Red Cross for a number
of years since his initial employment, he must know that it is a
government corporation with its own charter and that he was covered
by compulsory membership in the Government Service Insurance
System, which is why he could apply, as he did, for "early"
retirement from the service under Presidential Decree No. 1146 or
Republic Act No. 1616.WHEREFORE, the Court hereby DISMISSES the
petition, and AFFIRMS the ruling of the National Labor Relations
Commission.
SO ORDERED.Petitioner therein was the administrator of the
Surigao del Norte chapter of the PNRC. An audit conducted by a
field auditor revealed a shortage in the chapter funds in the sum
of P109,000.00. When required to restitute the amount of
P135,927.78, petitioner therein instead applied for early
retirement, which was denied by the Secretary General of the PNRC.
Subsequently, the petitioner filed a complaint for illegal
dismissal and damages against PNRC before the National Labor
Relations Commission. In turn, PNRC moved to dismiss the complaint
on the ground of lack of jurisdiction, averring that PNRC was a
government corporation whose employees are embraced by civil
service regulation. The labor arbiter dismissed the complaint, and
the Commission sustained his order. The petitioner assailed the
dismissal of his complaint via a petition for certiorari,
contending that the PNRC is a private organization and not a
government-owned or controlled corporation.G.R. No. 136374 February
9, 2000
FRANCISCA S. BALUYOT, petitioner, vs. PAUL E. HOLGANZA and the
OFFICE OF THE OMBUDSMAN
DE LEON, JR., J.:
A special civil action for certiorari, seeking the reversal of
the Orders dated August 21, 1998 and October 28, 1998 issued by the
Office of the Ombudsman, which denied petitioner's motion to
dismiss and motion for reconsideration, respectively.
Facts: 1. During a spot audit conducted on March 21, 1977 by a
team of auditors from the Philippine National Red Cross (PNRC)
headquarters, a cash shortage of P154,350.13 was discovered in the
funds of its Bohol chapter. The chapter administrator, petitioner
Francisca S. Baluyot, was held accountable for the shortage.
2. on January 8, 1998, private respondent Paul E. Holganza, in
his capacity as a member of the board of directors of the Bohol
chapter, filed an affidavit-complaint before the Office of the
Ombudsman charging petitioner of malversation under Article 217 of
the Revised Penal Code.
3. However, upon recommendation by respondent Anna Marie P.
Militante, Graft Investigation Officer I, an administrative docket
for dishonesty was also opened against petitioner
4. On February 6, 1998, public respondent issued an Order
requiring petitioner to file her counter-affidavit to the charges
of malversation and dishonesty within ten days from notice, with a
warning that her failure to comply would be construed as a waiver
on her part to refute the charges, and that the case would be
resolved based on the evidence on record.
5. March 14, 1998, petitioner filed her counter-affidavit,
raising principally the defense that public respondent had no
jurisdiction over the controversy. She argued that the Ombudsman
had authority only over government-owned or controlled
corporations, which the PNRC was not, or so she claimed.
6. On August 21, 1998, public respondent issued the first
assailed Order denying petitioner's motion to dismiss.
7. Petitioner received the order on August 26, 1998 and she
filed a motion for reconsideration which was also denied by the
public respondent.
Issue: W/N the contention of the petitioner is valid; W/N PNRC
is a private corporation
Petitioner contends:
a. the Ombudsman has no jurisdiction over the subject matter of
the controversy since the PNRC is allegedly a private voluntary
organization because:
(1) the PNRC does not receive any budgetary support from the
government, and that all money given to it by the latter and its
instrumentalities become private funds of the organization;
(2) funds for the payment of personnel's salaries and other
emoluments come from yearly fund campaigns, private contributions
and rentals from its properties;
(3) it is not audited by the Commission on Audit.
b. PNRC falls under the International Federation of Red Cross, a
Switzerland-based organization, and that the power to discipline
employees accused of misconduct, malfeasance, or immorality belongs
to the PNRC Secretary General by virtue of Section "G", Article IX
of its by-laws.
She threatens that "to classify the PNRC as a government-owned
or controlled corporation would create a dangerous precedent as it
would lose its neutrality, independence and impartiality . . .
.9
Ruling:
I. Ombudsmans jurisdiction
Clearly then, public respondent has jurisdiction over the
matter, pursuant to Section 13, of Republic Act No. 6770, otherwise
known as "The Ombudsman Act of 1989", to wit:
Sec. 13. Mandate. The Ombudsman and his Deputies, as protectors
of the people, shall act promptly on complaints filed in any form
or manner against officers or employees of the Government, or of
any subdivision, agency or instrumentality thereof, including
government-owned or controlled corporations, and enforce their
administrative, civil and criminal liability in ever case where the
evidence warrants in order to promote efficient service by the
Government to the people.**the case of Camporedondo was reiterated
in the ruling of this caseWHEREFORE, the petition for certiorari is
hereby DISMISSED. Costs against petitioner.
SO ORDERED.II. Forms of Business Organization
G.R. No. 125027. August 12, 2002
ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA
GUINA, respondents.This is a petition fore review on certiorari
under Rule 45 of the Rules of Court, seeking to set aside the
Decision[1] of the Court of Appeals
Facts: 1. Petitioner Anita Mangila, petitioner, is an exporter
of sea foods and doing business under the name and style of
Seafoods Products. Private respondent Loreta Guina, private
respondent, is the President and General Manager of Air Swift
International, a single registered proprietorship engaged in the
freight forwarding business.
2. Sometime in January 1988, petitioner contracted the freight
forwarding services of private respondent for shipment of
petitioners products, such as crabs, prawns and assorted fishes, to
Guam (USA) where petitioner maintains an outlet..
3. Petitioner agreed to pay private respondent cash on delivery.
Private respondents invoice stipulates a charge of 18 percent
interest per annum on all overdue accounts. In case of suit, the
same invoice stipulates attorneys fees equivalent to 25 percent of
the amount due plus costs of suit.
4. On the first shipment, petitioner requested for seven days
within which to pay private respondent. However, for the next three
shipments, March 17, 24 and 31, 1988, petitioner failed to pay
private respondent shipping charges amounting to P109, 376.95.
5. Despite several demands, petitioner never paid private
respondent.
6. Thus, on June 10, 1988, private respondent filed Civil Case
No. 5875 before the Regional Trial Court of Pasay City for
collection of sum of money.
7. On August 1, 1988, the sheriff filed his Sheriffs Return
showing that summons was not served on petitioner. A woman found at
petitioners house informed the sheriff that petitioner transferred
her residence to Sto. Nio, Guagua, Pampanga. The sheriff found out
further that petitioner had left the Philippines for Guam.
8. Thus,, construing petitioners departure from the Philippines
as done with intent to defraud her creditors, private respondent
filed a Motion for Preliminary Attachment.
9. On September 26, 1988, the trial court issued an Order of
Preliminary Attachment against petitioner. The following day, the
trial court issued a Writ of Preliminary Attachment.
10. The trial court granted the request of its sheriff for
assistance from their counterparts in RTC, Pampanga.
11. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC
Pampanga served on petitioners household help in San Fernando,
Pampanga, the Notice of Levy with the Order, Affidavit and
Bond.[7]
12. On November 7, 1988, petitioner filed an Urgent Motion to
Discharge Attachment[8] without submitting herself to the
jurisdiction of the trial court. She pointed out that up to then,
she had not been served a copy of the Complaint and the summons.
Hence, petitioner claimed the court had not acquired jurisdiction
over her person.[9]
13. In the hearing of the Urgent Motion to Discharge Attachment
on November 11, 1988, private respondent sought and was granted a
re-setting to December 9, 1988. On that date, private respondents
counsel did not appear, so the Urgent Motion to Discharge
Attachment was deemed submitted for resolution.
14. The trial court granted the Motion to Discharge Attachment
on January 13, 1989 upon filing of petitioners counter-bond. The
trial court, however, did not rule on the question of jurisdiction
and on the validity of the writ of preliminary attachment.15. On
December 26, 1988, private respondent applied for an alias summons,
which the trial court issued on January 19, 1989.[11] It was only
on January 26, 1989 that summons was finally served on
petitioner.
16. On February 9, 1989, petitioner filed a Motion to Dismiss
the Complaint on the ground of improper venue. Private respondents
invoice for the freight forwarding service stipulates that if court
litigation becomes necessary to enforce collection xxx the agreed
venue for such action is Makati, Metro Manila.
17. Private respondent filed an Opposition asserting that
although Makati appears as the stipulated venue, the same was
merely an inadvertence by the printing press whose general manager
executed an affidavit[14] admitting such inadvertence. Moreover,
private respondent claimed that petitioner knew that private
respondent was holding office in Pasay City and not in Makati.18.
The lower court, finding credence in private respondents assertion,
denied the Motion to Dismiss and gave petitioner five days to file
her Answer. Petitioner filed a Motion for Reconsideration but this
too was denied.Petitioner filed her Answer[16] on June 16, 1989,
maintaining her contention that the venue was improperly laid.
On June 26, 1989, the trial court issued an Order setting the
pre-trial for July 18, 1989 at 8:30 a.m. and requiring the parties
to submit their pre-trial briefs. 19. Meanwhile, private respondent
filed a Motion to Sell Attached Properties but the trial court
denied the motion.
20. On motion of petitioner, the trial court issued an Order
resetting the pre-trial from July 18, 1989 to August 24, 1989 at
8:30 a.m..
21. On the day of the pre-trial, the trial court issued an Order
terminating the pre-trial and allowing the private respondent to
present evidence ex-parte The Order stated that when the case was
called for pre-trial at 8:31 a.m., only the counsel for private
respondent appeared. Upon the trial courts second call 20 minutes
later, petitioners counsel was still nowhere to be found. Thus,
upon motion of private respondent, the pre-trial was considered
terminated.
22. On September 12, 1989, petitioner filed her Motion for
Reconsideration of the Order terminating the pre-trial. Petitioner
explained that her counsel arrived 5 minutes after the second call,
as shown by the transcript of stenographic notes, and was late
because of heavy traffic. Petitioner claims that the lower court
erred in allowing private respondent to present evidence ex-parte
since there was no Order considering the petitioner as in
default.
23. On October 6, 1989, the trial court denied the Motion for
Reconsideration and scheduled the presentation of private
respondents evidence ex-parte.
24. On October 10, 1989, petitioner filed an Omnibus Motion
stating that the presentation of evidence ex-parte should be
suspended because there was no declaration of petitioner as in
default and petitioners counsel was not absent, but merely
late.
24. the trial court denied the Omnibus Motion.25. On November
20, 1989, the petitioner received a copy of the Decision of
November 10, 1989, ordering petitioner to pay respondent
P109,376.95 plus 18 percent interest per annum, 25 percent
attorneys fees and costs of suit. Private respondent filed a Motion
for Execution Pending Appeal but the trial court denied the
same.
CA: Court of Appeals rendered a decision affirming the decision
of the trial court. The Court of Appeals upheld the validity of the
issuance of the writ of attachment and sustained the filing of the
action in the RTC of Pasay. The Court of Appeals also affirmed the
declaration of default on petitioner and concluded that the trial
court did not commit any reversible error.
Motion for Reconsideration denied.
Issue: W/N there is an improper venue in the filing of the
case
Ruling:
I. Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay
and points to a provision in private respondents invoice which
contains the following:
3. If court litigation becomes necessary to enforce collection,
an additional equivalent (sic) to 25% of the principal amount will
be charged. The agreed venue for such action is Makati, Metro
Manila, Philippines.
Pet: The action should have been instituted in the RTC of Makati
and to do otherwise would be a ground for the dismissal of the
case.
We resolve to dismiss the case on the ground of improper venue
but not for the reason stated by petitioner.
The Rules of Court provide that parties to an action may agree
in writing on the venue on which an action should be brought.
However, a mere stipulation on the venue of an action is not enough
to preclude parties from bringing a case in other venues.The
parties must be able to show that such stipulation is
exclusive.
Venue stipulations in a contract, while considered valid and
enforceable, do not as a rule supersede the general rule set forth
in Rule 4 of the Revised Rules of Court. In the absence of
qualifying or restrictive words, they should be considered merely
as an agreement on additional forum, not as limiting venue to the
specified place.
The stipulation does not limit the venue exclusively to Makati.
There are no qualifying or restrictive words in the invoice that
would evince the intention of the parties that Makati is the only
or exclusive venue where the action could be instituted.
Nevertheless, we hold that Pasay is not the proper venue for this
case.
Under the 1997 Rules of Civil Procedure, the general rule is
venue in personal actions is where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any
of the plaintiffs resides, at the election of the plaintiff.The
exception to this rule is when the parties agree on an exclusive
venue other than the places mentioned in the rules.
But, this exception is not applicable in this case. Hence,
following the general rule, the instant case may be brought in the
place of residence of the plaintiff or defendant, at the election
of the plaintiff (private respondent herein).
The residence of private respondent (plaintiff in the lower
court) was not alleged in the complaint. Rather, what was alleged
was the postal address of her sole proprietorship, Air Swift
International. It was only when private respondent testified in
court, after petitioner was declared in default, that she mentioned
her residence to be in Better Living Subdivision, Paraaque
City.
Sy v. Tyson Enterprises, Inc. The plaintiff in that case was
Tyson Enterprises, Inc., a corporation owned and managed by
Dominador Ti. The complaint, however, did not allege the office or
place of business of the corporation, which was in Binondo, Manila.
What was alleged was the residence of Dominador Ti, who lived in
San Juan, Rizal. The case was filed in the Court of First Instance
of Rizal, Pasig. The Court there held that the evident purpose of
alleging the address of the corporations president and manager was
to justify the filing of the suit in Rizal, Pasig instead of in
Manila. Thus, the Court ruled that there was no question that venue
was improperly laid in that case and held that the place of
business of Tyson Enterpises, Inc. is considered as its residence
for purposes of venue. Furthermore, the Court held that the
residence of its president is not the residence of the corporation
because a corporation has a personality separate and distinct from
that of its officers and stockholders.
In the instant case, it was established in the lower court that
petitioner resides in San Fernando, Pampanga while private
respondent resides in Paraaque City. However, this case was brought
in Pasay City, where the business of private respondent is found.
This would have been permissible had private respondents business
been a corporation, just like the case in Sy v. Tyson Enterprises,
Inc. However, as admitted by private respondent in her Complaint in
the lower court, her business is a sole proprietorship, and as
such, does not have a separate juridical personality that could
enable it to file a suit in court. In fact, there is no law
authorizing sole proprietorships to file a suit in court.II. Sole
ProprietorshipA sole proprietorship does not possess a juridical
personality separate and distinct from the personality of the owner
of the enterprise.[40] The law merely recognizes the existence of a
sole proprietorship as a form of business organization conducted
for profit by a single individual and requires its proprietor or
owner to secure licenses and permits, register its business name,
and pay taxes to the national government.[41] The law does not vest
a separate legal personality on the sole proprietorship or empower
it to file or defend an action in court.[42]
Thus, not being vested with legal personality to file this case,
the sole proprietorship is not the plaintiff in this case but
rather Loreta Guina in her personal capacity.All these considered,
private respondent should have filed this case either in San
Fernando, Pampanga (petitioners residence) or Paraaque (private
respondents residence). Since private respondent (complainant
below) filed this case in Pasay, we hold that the case should be
dismissed on the ground of improper venue.
III. Nature and Purpose of Action Quo WarrantoG.R. No. 161434.
March 3, 2004MARIA JEANETTE C. TECSON and FELIX B. DESIDERIO, JR.,
petitioners, vs. The COMMISSION ON ELECTIONS, RONALD ALLAN KELLY
POE (a.k.a. FERNANDO POE, JR.) and VICTORINO X. FORNIER,
respondents.G.R. No. 161634. March 3, 2004
ZOILO ANTONIO VELEZ, petitioner, vs. RONALD ALLAN KELLEY POE,
a.k.a. FERNANDO POE, JR., respondent.
G. R. No. 161824. March 3, 2004
VICTORINO X. FORNIER, petitioner, vs. HON. COMMISSION ON
ELECTIONS and RONALD ALLAN KELLEY POE, ALSO KNOWN AS FERNANDO POE
JR., respondents.VITUG, J.:
Citizenship is a treasured right conferred on those whom the
state believes are deserving of the privilege. It is a precious
heritage, as well as an inestimable acquisition,[1] that cannot be
taken lightly by anyone - either by those who enjoy it or by those
who dispute it.
The issue of citizenship is brought up to challenge the
qualifications of a presidential candidate to hold the highest
office of the land. Our people are waiting for the judgment of the
Court with bated breath. Is Fernando Poe, Jr., the hero of silver
screen, and now one of the main contenders for the presidency, a
natural-born Filipino or is he not?Facts: 1. On 31 December 2003,
respondent Ronald Allan Kelly Poe, also known as Fernando Poe, Jr.
(hereinafter "FPJ"), filed his certificate of candidacy for the
position of President of the Republic of the Philippines under the
Koalisyon ng Nagkakaisang Pilipino (KNP) Party, in the forthcoming
national elections. In his certificate of candidacy, FPJ,
representing himself to be a natural-born citizen of the
Philippines, stated his name to be "Fernando Jr.," or "Ronald
Allan" Poe, his date of birth to be 20 August 1939 and his place of
birth to be Manila.
2. Victorino X. Fornier, petitioner in G.R. No. 161824,
initiated, on 09 January 2004, a petition before the Commission on
Elections ("COMELEC") to disqualify FPJ and to deny due course or
to cancel his certificate of candidacy upon the thesis that FPJ
made a material misrepresentation in his certificate of candidacy
by claiming to be a natural-born Filipino citizen when in truth,
according to Fornier, his parents were foreigners; his mother,
Bessie Kelley Poe, was an American, and his father, Allan Poe, was
a Spanish national, being the son of Lorenzo Pou, a Spanish
subject. Granting that Allan F. Poe was a Filipino citizen, he
could not have transmitted his Filipino citizenship to FPJ, the
latter being an illegitimate child of an alien mother. Petitioner
based the allegation of the illegitimate birth of respondent on two
assertions - first, Allan F. Poe contracted a prior marriage to a
certain Paulita Gomez before his marriage to Bessie Kelley and,
second, even if no such prior marriage had existed, Allan F. Poe,
married Bessie Kelly only a year after the birth of respondent.
3. Petitioner, in support of his claim, presented several
documentary exhibits
1) a copy of the certificate of birth of FPJ
2) a certified photocopy of an affidavit executed in Spanish by
Paulita Poe y Gomez attesting to her having filed a case for bigamy
and concubinage against the father of respondent, Allan F. Poe,
after discovering his bigamous relationship with Bessie Kelley, 3)
an English translation of the affidavit aforesaid, 4) a certified
photocopy of the certificate of birth of Allan F. Poe, 5) a
certification issued by the Director of the Records Management and
Archives Office, attesting to the fact that there was no record in
the National Archives that a Lorenzo Poe or Lorenzo Pou resided or
entered the Philippines before 1907, and 6) a certification from
the Officer-In-Charge of the Archives Division of the National
Archives to the effect that no available information could be found
in the files of the National Archives regarding the birth of Allan
F. Poe.
4. Respondent, presented twenty-two documentary pieces of
evidence, the more significant ones being
a) a certification issued by Estrella M. Domingo of the Archives
Division of the National Archives that there appeared to be no
available information regarding the birth of Allan F. Poe in the
registry of births for San Carlos, Pangasinan
b) a certification issued by the Officer-In-Charge of the
Archives Division of the National Archives that no available
information about the marriage of Allan F. Poe and Paulita Gomez
could be found,
c) a certificate of birth of Ronald Allan Poe
d) Original Certificate of Title No. P-2247 of the Registry of
Deeds for the Province of Pangasinan, in the name of Lorenzo
Pou
e) copies of Tax Declaration No. 20844, No. 20643, No. 23477 and
No. 23478 in the name of Lorenzo Pou, f) a copy of the certificate
of death of Lorenzo Pou, g) a copy of the purported marriage
contract between Fernando Pou and Bessie Kelley, and h) a
certification issued by the City Civil Registrar of San Carlos
City, Pangasinan, stating that the records of birth in the said
office during the period of from 1900 until May 1946 were totally
destroyed during World War II.
5. On 23 January 2004, the COMELEC dismissed SPA No. 04-003 for
lack of merit. Motion for reconsideration was denied.
6. On 10 February 2004, petitioner assailed the decision of the
COMELEC before this Court conformably with Rule 64, in relation to
Rule 65, of the Revised Rules of Civil Procedure. The petition,
likewise prayed for a temporary restraining order, a writ of
preliminary injunction or any other resolution that would stay the
finality and/or execution of the COMELEC resolutions.
The other petitions, later consolidated with G. R. No. 161824,
would include G. R. No. 161434, both challenging the jurisdiction
of the COMELEC and asserting that, under Article VII, Section 4,
paragraph 7, of the 1987 Constitution, only the Supreme Court had
original and exclusive jurisdiction to resolve the basic issue on
the case.(Case Digest)
Petitioners sought for respondent Poes disqualification in the
presidential elections for having allegedly misrepresented material
facts in his (Poes) certificate of candidacy by claiming that he is
a natural Filipino citizen despite his parents both being
foreigners. Comelec dismissed the petition, holding that Poe was a
Filipino Citizen. Petitioners assail the jurisdiction of the
Comelec, contending that only the Supreme Court may resolve the
basic issue on the case under Article VII, Section 4, paragraph 7,
of the 1987 Constitution.Issue:Whether or not it is the Supreme
Court which had jurisdiction.
Whether or not Comelec committed grave abuse of discretion in
holding that Poe was a Filipino citizen.Ruling:
1.) The Supreme Court had no jurisdiction on questions regarding
qualification of a candidate for the presidency or vice-presidency
before the elections are held.
"Rules of the Presidential Electoral Tribunal" in connection
with Section 4, paragraph 7, of the 1987 Constitution, refers to
contests relating to the election, returns and qualifications of
the "President" or "Vice-President", of the Philippines which the
Supreme Court may take cognizance, and not of "candidates" for
President or Vice-President before the elections.
2.) Comelec committed no grave abuse of discretion in holding
Poe as a Filipino Citizen.
The 1935 Constitution on Citizenship, the prevailing fundamental
law on respondents birth, provided that among the citizens of the
Philippines are "those whose fathers are citizens of the
Philippines." Tracing respondents paternal lineage, his grandfather
Lorenzo, as evidenced by the latters death certificate was
identified as a Filipino Citizen. His citizenship was also drawn
from the presumption that having died in 1954 at the age of 84,
Lorenzo would have been born in 1980. In the absence of any other
evidence, Lorenzos place of residence upon his death in 1954 was
presumed to be the place of residence prior his death, such that
Lorenzo Pou would have benefited from the "en masse Filipinization"
that the Philippine Bill had effected in 1902. Being so, Lorenzos
citizenship would have extended to his son, Allan---respondents
father.
Respondent, having been acknowledged as Allans son to Bessie,
though an American citizen, was a Filipino citizen by virtue of
paternal filiation as evidenced by the respondents birth
certificate. The 1935 Constitution on citizenship did not make a
distinction on the legitimacy or illegitimacy of the child, thus,
the allegation of bigamous marriage and the allegation that
respondent was born only before the assailed marriage had no
bearing on respondents citizenship in view of the established
paternal filiation evidenced by the public documents presented.But
while the totality of the evidence may not establish conclusively
that respondent FPJ is a natural-born citizen of the Philippines,
the evidence on hand still would preponderate in his favor enough
to hold that he cannot be held guilty of having made a material
misrepresentation in his certificate of candidacy in violation of
Section 78, in relation to Section 74 of the Omnibus Election
Code.IV. Control TestG.R. No. L-2294 May 25, 1951FILIPINAS COMPAIA
DE SEGUROS vs.CHRISTERN, HUENEFELD and CO., INC.
PARAS, C.J.:Facts: 1. On October 1, 1941, Christern Huenefeld,
& Co., Inc., after payment of corresponding premium, obtained
from Filipinas Cia. de Seguros, fire policy No. 29333 in the sum of
P1000,000 covering merchandise contained in a building located at
No. 711 Roman Street, Binondo Manila. 2. During the Japanese
military occupation, the building and insured merchandise were
burned. In due time, the respondent submitted to the petitioner its
claim under the policy. 3. The petitioner refused to pay the claim
on the ground that the policy in favor of the respondent had ceased
to be in force on the date the United States declared war against
Germany, the respondent Corporation (though organized under and by
virtue of the laws of the Philippines) being controlled by the
German subjects and the petitioner being a company under American
jurisdiction when said policy was issued on October 1, 1941. 4. The
petitioner, however, in pursuance of the order of the Director of
Bureau of Financing, Philippine Executive Commission, dated April
9, 1943, paid to the respondent the sum of P92,650 on April 19,
1943.5. The present action was filed on August 6, 1946, in the
Court of First Instance of Manila for the purpose of recovering
from the respondent the sum of P92,650 above mentioned. The theory
of the petitioner is that the insured merchandise were burned up
after the policy issued in 1941 in favor of the respondent
corporation has ceased to be effective because of the outbreak of
the war between the United States and Germany on December 10, 1941,
and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under
pressure. 6. After trial, the Court of First Instance of Manila
dismissed the action without pronouncement as to costs. 7. Upon
appeal, the judgment of the Court of First Instance of Manila was
affirmed, with costs. Issues:
1. W/N the petitioner may recover the payment it made for
respondent by virtue of the latters fire policy
2. W/N the respondent is considered a foreign corporation under
our laws
8. The Court of Appeals overruled the contention of the
petitioner that the respondent corporation became an enemy when the
United States declared war against Germany, relying on English and
American cases which held that a corporation is a citizen of the
country or state by and under the laws of which it was created or
organized. It rejected the theory that nationality of private
corporation is determine by the character or citizenship of its
controlling stockholders.
There is no question that majority of the stockholders of the
respondent corporation were German subjects. Ruling:The said
respondent became an enemy corporation upon the outbreak of the war
between the United States and Germany. The English and American
cases relied upon by the Court of Appeals have lost their force in
view of the latest decision of the Supreme Court of the United
States in Clark vs. Uebersee Finanz Korporation, in which the
controls test has been adopted. In "Enemy Corporation" by Martin
Domke, a paper presented to the Second International Conference of
the Legal Profession held at the Hague (Netherlands) in August.
1948 the following enlightening passages appear:
A corporation was subject to enemy legislation when it was
controlled by enemies, namely managed under the influence of
individuals or corporations, themselves considered as enemies. It
was the English courts which first the Daimler case applied this
new concept of "piercing the corporate veil," which was adopted by
the peace of Treaties of 1919 and the Mixed Arbitral established
after the First World
..
The United States did not, in the amendments of the Trading with
the Enemy Act during the last war, include as did other
legislations the applications of the control test and again, as in
World War I, courts refused to apply this concept whereby the enemy
character of an American or neutral-registered corporation is
determined by the enemy nationality of the controlling
stockholders..Court decisions sanctioned such administrative
practice enacted under the First War Powers Act of 1941, and more
recently, on December 8, 1947, the Supreme Court of the United
States definitely approved of the control theory. In Clark vs.
Uebersee Finanz Korporation, A. G., dealing with a Swiss
corporation allegedly controlled by German interest, the Court:
"The property of all foreign interest was placed within the reach
of the vesting power (of the Alien Property Custodian) not to
appropriate friendly or neutral assets but to reach enemy interest
which masqueraded under those innocent fronts. . . . The power of
seizure and vesting was extended to all property of any foreign
country or national so that no innocent appearing device could
become a Trojan horse."
It becomes unnecessary, therefore, to dwell at length on the
authorities cited in support of the appealed decision. However, we
may add that, in Haw Pia vs. China Banking Corporation,* 45 Off
Gaz., (Supp. 9) 299, we already held that China Banking Corporation
came within the meaning of the word "enemy" as used in the Trading
with the Enemy Acts of civilized countries not only because it was
incorporated under the laws of an enemy country but because it was
controlled by enemies.The Philippine Insurance Law (Act No. 2427,
as amended,) in section 8, provides that "anyone except a public
enemy may be insured." It stands to reason that an insurance policy
ceases to be allowable as soon as an insured becomes a public
enemy.Effect of war, generally. All intercourse between citizens of
belligerent powers which is inconsistent with a state of war is
prohibited by the law of nations. Such prohibition includes all
negotiations, commerce, or trading with the enemy; all acts which
will increase, or tend to increase, its income or resources; all
acts of voluntary submission to it; or receiving its protection;
also all acts concerning the transmission of money or goods; and
all contracts relating thereto are thereby nullified. It further
prohibits insurance upon trade with or by the enemy, upon the life
or lives of aliens engaged in service with the enemy; this for the
reason that the subjects of one country cannot be permitted to lend
their assistance to protect by insurance the commerce or property
of belligerent, alien subjects, or to do anything detrimental too
their country's interest. The purpose of war is to cripple the
power and exhaust the resources of the enemy, and it is
inconsistent that one country should destroy its enemy's property
and repay in insurance the value of what has been so destroyed, or
that it should in such manner increase the resources of the enemy,
or render it aid, and the commencement of war determines, for like
reasons, all trading intercourse with the enemy, which prior
thereto may have been lawful. All individuals therefore, who
compose the belligerent powers, exist, as to each other, in a state
of utter exclusion, and are public enemies. (6 Couch, Cyc. of Ins.
Law, pp. 5352-5353.)
In the case of an ordinary fire policy, which grants insurance
only from year, or for some other specified term it is plain that
when the parties become alien enemies, the contractual tie is
broken and the contractual rights of the parties, so far as not
vested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)
The respondent having become an enemy corporation on December
10, 1941, the insurance policy issued in its favor on October 1,
1941, by the petitioner (a Philippine corporation) had ceased to be
valid and enforcible, and since the insured goods were burned after
December 10, 1941, and during the war, the respondent was not
entitled to any indemnity under said policy from the petitioner.
However, elementary rules of justice (in the absence of specific
provision in the Insurance Law) require that the premium paid by
the respondent for the period covered by its policy from December
11, 1941, should be returned by the petitioner.
The Court of Appeals, in deciding the case, stated that the main
issue hinges on the question of whether the policy in question
became null and void upon the declaration of war between the United
States and Germany on December 10, 1941, and its judgment in favor
of the respondent corporation was predicated on its conclusion that
the policy did not cease to be in force. The Court of Appeals
necessarily assumed that, even if the payment by the petitioner to
the respondent was involuntary, its action is not tenable in view
of the ruling on the validity of the policy. As a matter of fact,
the Court of Appeals held that "any intimidation resorted to by the
appellee was not unjust but the exercise of its lawful right to
claim for and received the payment of the insurance policy," and
that the ruling of the Bureau of Financing to the effect that "the
appellee was entitled to payment from the appellant was, well
founded." Factually, there can be no doubt that the Director of the
Bureau of Financing, in ordering the petitioner to pay the claim of
the respondent, merely obeyed the instruction of the Japanese
Military Administration, as may be seen from the following: "In
view of the findings and conclusion of this office contained in its
decision on Administrative Case dated February 9, 1943 copy of
which was sent to your office and the concurrence therein of the
Financial Department of the Japanese Military Administration, and
following the instruction of said authority, you are hereby ordered
to pay the claim of Messrs. Christern, Huenefeld & Co., Inc.
The payment of said claim, however, should be made by means of
crossed check." (Emphasis supplied.)
It results that the petitioner is entitled to recover what paid
to the respondent under the circumstances on this case. However,
the petitioner will be entitled to recover only the equivalent, in
actual Philippines currency of P92,650 paid on April 19, 1943, in
accordance with the rate fixed in the Ballantyne scale.
Wherefore, the appealed decision is hereby reversed and the
respondent corporation is ordered to pay to the petitioner the sum
of P77,208.33, Philippine currency, less the amount of the premium,
in Philippine currency, that should be returned by the petitioner
for the unexpired term of the policy in question, beginning
December 11, 1941. Without costs. So ordered.GR 176579
GAMBOA v TEVESCARPIO, J.:
THE FACTSThis is a petition to nullify the sale of shares of
stock of Philippine Telecommunications Investment Corporation
(PTIC) by the government of the Republic of the Philippines, acting
through the Inter-Agency Privatization Council (IPC), to Metro
Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific
Company Limited (First Pacific), a Hong Kong-based investment
management and holding company and a shareholder of the Philippine
Long Distance Telephone Company (PLDT).The petitioner questioned
the sale on the ground that it also involved an indirect sale of 12
million shares (or about 6.3 percent of the outstanding common
shares) of PLDT owned by PTIC to First Pacific. With the this sale,
First Pacifics common shareholdings in PLDT increased from 30.7
percent to 37 percent, thereby increasing the total common
shareholdings of foreigners in PLDT to about 81.47%. This,
according to the petitioner, violates Section 11, Article XII of
the 1987 Philippine Constitution which limits foreign ownership of
the capital of a public utility to not more than 40%, thus:
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens; nor
shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall
any such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general
public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be
citizens of the Philippines. (Emphasis supplied)II. THE ISSUEDoes
the term capital in Section 11, Article XII of the Constitution
refer to the total common shares only, or to the total outstanding
capital stock (combined total of common and non-voting preferred
shares) of PLDT, a public utility?
III. THE RULING[The Court partly granted the petition and held
that the term capital in Section 11, Article XII of the
Constitution refers only to shares of stock entitled to vote in the
election of directors of a public utility, i.e., to the total
common shares in PLDT.]
Considering that common shares have voting rights which
translate to control, as opposed to preferred shares which usually
have no voting rights, the term capital in Section 11, Article XII
of the Constitution refers only to common shares. However, if the
preferred shares also have the right to vote in the election of
directors, then the term capital shall include such preferred
shares because the right to participate in the control or
management of the corporation is exercised through the right to
vote in the election of directors. In short, the term capital in
Section 11, Article XII of the Constitution refers only to shares
of stock that can vote in the election of directors.To construe
broadly the term capital as the total outstanding capital stock,
including both common and non-voting preferred shares, grossly
contravenes the intent and letter of the Constitution that the
State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos. A broad definition
unjustifiably disregards who owns the all-important voting stock,
which necessarily equates to control of the public utility.
Holders of PLDT preferred shares are explicitly denied of the
right to vote in the election of directors. PLDTs Articles of
Incorporation expressly state that the holders of Serial Preferred
Stock shall not be entitled to vote at any meeting of the
stockholders for the election of directors or for any other purpose
or otherwise participate in any action taken by the corporation or
its stockholders, or to receive notice of any meeting of
stockholders. On the other hand, holders of common shares are
granted the exclusive right to vote in the election of directors.
PLDTs Articles of Incorporation state that each holder of Common
Capital Stock shall have one vote in respect of each share of such
stock held by him on all matters voted upon by the stockholders,
and the holders of Common Capital Stock shall have the exclusive
right to vote for the election of directors and for all other
purposes.It must be stressed, and respondents do not dispute, that
foreigners hold a majority of the common shares of PLDT. In fact,
based on PLDTs 2010 General Information Sheet (GIS), which is a
document required to be submitted annually to the Securities and
Exchange Commission, foreigners hold 120,046,690 common shares of
PLDT whereas Filipinos hold only 66,750,622 common shares. In other
words, foreigners hold 64.27% of the total number of PLDTs common
shares, while Filipinos hold only 35.73%. Since holding a majority
of the common shares equates to control, it is clear that
foreigners exercise control over PLDT. Such amount of control
unmistakably exceeds the allowable 40 percent limit on foreign
ownership of public utilities expressly mandated in Section 11,
Article XII of the Constitution.
As shown in PLDTs 2010 GIS, as submitted to the SEC, the par
value of PLDT common shares is P5.00 per share, whereas the par
value of preferred shares is P10.00 per share. In other words,
preferred shares have twice the par value of common shares but
cannot elect directors and have only 1/70 of the dividends of
common shares. Moreover, 99.44% of the preferred shares are owned
by Filipinos while foreigners own only a minuscule 0.56% of the
preferred shares. Worse, preferred shares constitute 77.85% of the
authorized capital stock of PLDT while common shares constitute
only 22.15%. This undeniably shows that beneficial interest in PLDT
is not with the non-voting preferred shares but with the common
shares, blatantly violating the constitutional requirement of 60
percent Filipino control and Filipino beneficial ownership in a
public utility.
In short, Filipinos hold less than 60 percent of the voting
stock, and earn less than 60 percent of the dividends, of PLDT.
This directly contravenes the express command in Section 11,
Article XII of the Constitution that [n]o franchise, certificate,
or any other form of authorization for the operation of a public
utility shall be granted except to x x x corporations x x x
organized under the laws of the Philippines, at least sixty per
centum of whose capital is owned by such citizens x x x.To repeat,
(1) foreigners own 64.27% of the common shares of PLDT, which class
of shares exercises the sole right to vote in the election of
directors, and thus exercise control over PLDT; (2) Filipinos own
only 35.73% of PLDTs common shares, constituting a minority of the
voting stock, and thus do not exercise control over PLDT; (3)
preferred shares, 99.44% owned by Filipinos, have no voting rights;
(4) preferred shares earn only 1/70 of the dividends that common
shares earn; (5) preferred shares have twice the par value of
common shares; and (6) preferred shares constitute 77.85% of the
authorized capital stock of PLDT and common shares only 22.15%.
This kind of ownership and control of a public utility is a mockery
of the Constitution.
[Thus, the Respondent Chairperson of the Securities and Exchange
Commission was DIRECTED by the Court to apply the foregoing
definition of the term capital in determining the extent of
allowable foreign ownership in respondent Philippine Long Distance
Telephone Company, and if there is a violation of Section 11,
Article XII of the Constitution, to impose the appropriate
sanctions under the law.]The term capital does not refer to both
preferred and common stocks treated as the same class of shares
regardless of differences in voting rights and privileges.
Consistent with the constitutional mandate that the State shall
develop a self-reliant and independent national economy effectively
controlled by Filipinos, the term "capital" means the outstanding
capital stock entitled to vote (voting stock), coupled with
beneficial ownership, both of which results to "effective
control."
"Mere legal title is insufficient to meet the 60 percent
Filipino owned capital required in the Constitution for certain
industries. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting
rights, is required." In this case, such twin requirements must
apply uniformly and across the board to all classes of shares
comprising the capital. Thus, "the 60-40 ownership requirement in
favor of Filipino citizens must apply separately to each class of
shares, whether common, preferred non-voting, preferred voting or
any other class of shares." This guarantees that the controlling
interest in public utilities always lies in the hands of Filipino
citizens.
V. Corporate Juridical Personality
[G.R. No. 160039. June 29, 2004]
RAYMUNDO ODANI SECOSA, EL BUENASENSO SY and DASSAD WAREHOUSING
and PORT SERVICES, INCORPORATED, petitioners, vs. HEIRS OF ERWIN
SUAREZ FRANCISCO, respondents.YNARES-SANTIAGO, J.:
Facts: 1. On June 27, 1996, at around 4:00 p.m., Erwin Suarez
Francisco, an eighteen year old third year physical therapy student
of the Manila Central University, was riding a motorcycle along
Radial 10 Avenue, near the Veteran Shipyard Gate in the City of
Manila. At the same time, petitioner, Raymundo Odani Secosa, was
driving an Isuzu cargo truck with plate number PCU-253 on the same
road. The truck was owned by petitioner, Dassad Warehousing and
Port Services, Inc.
2. Traveling behind the motorcycle driven by Francisco was a
sand and gravel truck, which in turn was being tailed by the Isuzu
truck driven by Secosa. The three vehicles were traversing the
southbound lane at a fairly high speed. When Secosa overtook the
sand and gravel truck, he bumped the motorcycle causing Francisco
to fall. The rear wheels of the Isuzu truck then ran over
Francisco, which resulted in his instantaneous death. Fearing for
his life, petitioner Secosa left his truck and fled the scene of
the collision.[3]
3. Respondents, the parents of Erwin Francisco, thus filed an
action for damages against Raymond Odani Secosa, Dassad Warehousing
and Port Services, Inc. and Dassads president, El Buenasucenso
Sy.
4. On June 19, 1998, after a full-blown trial, the court a quo
rendered a decision in favor of herein respondents, to pay
plaintiffs jointly and severally:
1. The sum of P55,000.00 as actual and compensatory damages;2.
The sum of P20,000.00 for the repair of the motorcycle;
3. The sum of P100,000.00 for the loss of earning capacity;4.
The sum of P500,000.00 as moral damages;
5. The sum of P50,000.00 as exemplary damages;
6. The sum of P50,000.00 as attorneys fees plus cost of
suit.
5. Petitioners appealed the decision to the Court of Appeals,
which affirmed the appealed decision in toto.
ISSUE: W/N THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED
THE DECISION OF THE TRIAL COURT IN HOLDING PETITIONER EL BUENASENSO
SY SOLIDARILY LIABLE WITH PETITIONERS DASSAD AND SECOSA IN
VIOLATION OF THE CORPORATION LAW AND RELATED JURISPRUDENCE ON THE
MATTER.Ruling:
I. On the issue of whether petitioner Dassad Warehousing and
Port Services, Inc. exercised the diligence of a good father of a
family in the selection and supervision of its employees, we find
the assailed decision to be in full accord.
Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
On the other hand, Article 2180, in pertinent part, states:
The obligation imposed by article 2176 is demandable not only
for ones own acts or omissions, but also for those of persons for
whom one is responsible.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
Based on the foregoing provisions, when an injury is caused by
the negligence of an employee, there instantly arises a presumption
that there was negligence on the part of the employer either in the
selection of his employee or in the supervision over him after such
selection. The presumption, however, may be rebutted by a clear
showing on the part of the employer that it exercised the care and
diligence of a good father of a family in the selection and
supervision of his employee. Hence, to evade solidary liability for
quasi-delict committed by an employee, the employer must adduce
sufficient proof that it exercised such degree of
care.Jurisprudentially, therefore, the employer must not merely
present testimonial evidence to prove that he observed the
diligence of a good father of a family in the selection and
supervision of his employee, but he must also support such
testimonial evidence with concrete or documentary evidence. The
reason for this is to obviate the biased nature of the employers
testimony or that of his witnesses.Applying the foregoing doctrines
to the present case, we hold that petitioner Dassad Warehousing and
Port Services, Inc. failed to conclusively prove that it had
exercised the requisite diligence of a good father of a family in
the selection and supervision of its employees.
Edilberto Duerme, the lone witness presented by Dassad
Warehousing and Port Services, Inc. to support its position that it
had exercised the diligence of a good father of a family in the
selection and supervision of its employees, testified that he was
the one who recommended petitioner Raymundo Secosa as a driver to
Dassad Warehousing and Port Services, Inc.; that it was his duty to
scrutinize the capabilities of drivers; and that he believed
petitioner to be physically and mentally fit for he had undergone
rigid training and attended the PPA safety seminar.Petitioner
Dassad Warehousing and Port Services, Inc. failed to support the
testimony of its lone witness with documentary evidence which would
have strengthened its claim of due diligence in the selection and
supervision of its employees. Such an omission is fatal to its
position, on account of which, Dassad can be rightfully held
solidarily liable with its co-petitioner Raymundo Secosa for the
damages suffered by the heirs of Erwin Francisco.
II. As to the solidary liability of El Buenasenso Sy
However, we find that petitioner El Buenasenso Sy cannot be held
solidarily liable with his co-petitioners. While it may be true
that Sy is the president of petitioner Dassad Warehousing and Port
Services, Inc., such fact is not by itself sufficient to hold him
solidarily liable for the liabilities adjudged against his
co-petitioners.
It is a settled precept in this jurisdiction that a corporation
is invested by law with a personality separate from that of its
stockholders or members.[16] It has a personality separate and
distinct from those of the persons composing it as well as from
that of any other entity to which it may be related. Mere ownership
by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not in itself
sufficient ground for disregarding the separate corporate
personality.[17] A corporations authority to act and its liability
for its actions are separate and apart from the individuals who own
it.[18]
The so-called veil of corporation fiction treats as separate and
distinct the affairs of a corporation and its officers and
stockholders. As a general rule, a corporation will be looked upon
as a legal entity, unless and until sufficient reason to the
contrary appears. When the notion of legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime,
the law will regard the corporation as an association of
persons.[19] Also, the corporate entity may be disregarded in the
interest of justice in such cases as fraud that may work inequities
among members of the corporation internally, involving no rights of
the public or third persons. In both instances, there must have
been fraud and proof of it. For the separate juridical personality
of a corporation to be disregarded, the wrongdoing must be clearly
and convincingly established.[20] It cannot be presumed.[21]
The records of this case are bereft of any evidence tending to
show the presence of any grounds enumerated above that will justify
the piercing of the veil of corporate fiction such as to hold the
president of Dassad Warehousing and Port Services, Inc. solidarily
liable with it.
The Isuzu cargo truck which ran over Erwin Francisco was
registered in the name of Dassad Warehousing and Port Services,
Inc., and not in the name of El Buenasenso Sy. Raymundo Secosa is
an employee of Dassad Warehousing and Port Services, Inc. and not
of El Buenasenso Sy. All these things, when taken collectively,
point toward El Buenasenso Sys exclusion from liability for damages
arising from the death of Erwin Francisco.
G.R. No. 142616 July 31, 2001
PHILIPPINE NATIONAL BANK vs.RITRATTO GROUP INC., RIATTO
INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISEKAPUNAN,
J.:
Facts: 1. Petitioner Philippine National Bank is a domestic
corporation organized and existing under Philippine law. Meanwhile,
respondents Ritratto Group, Inc., Riatto International, Inc. and
Dadasan General Merchandise are domestic corporations, likewise,
organized and existing under Philippine law.
2. On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a
subsidiary company of PNB, organized and doing business in Hong
Kong, extended a letter of credit in favor of the respondents in
the amount of US$300,000.00 secured by real estate mortgages
constituted over four (4) parcels of land in Makati City. This
credit facility was later increased successively and decreased to
US$1,421,316.18 in April 1998. Respondents made repayments of the
loan incurred by remitting those amounts to their loan account with
PNB-IFL in Hong Kong.
3. However, as of April 30, 1998, their outstanding obligations
stood at US$1,497,274.70. Pursuant to the terms of the real estate
mortgages, PNB-IFL, through its attorney-in-fact PNB, notified the
respondents of the foreclosure of all the real estate mortgages and
that the properties subject thereof were to be sold at a public
auction on May 27, 1999 at the Makati City Hall.
4. On May 25, 1999, respondents filed a complaint for injunction
with prayer for the issuance of a writ of preliminary injunction
and/or temporary restraining order before the Regional Trial Court
of Makati. 5. The Executive Judge of the Regional Trial Court of
Makati issued a 72-hour temporary restraining order. On May 28,
1999, the case was raffled to Branch 147 of the Regional Trial
Court of Makati. The trial judge then set a hearing on June 8,
1999. At the hearing of the application for preliminary injunction,
petitioner was given a period of seven days to file its written
opposition to the application. 6. On June 15, 1999, petitioner
filed an opposition to the application for a writ of preliminary
injunction to which the respondents filed a reply. 7. On June 25,
1999, petitioner filed a motion to dismiss on the grounds of
failure to state a cause of action and the absence of any privity
between the petitioner and respondents. 8. On June 30, 1999, the
trial court judge issued an Order for the issuance of a writ of
preliminary injunction, which writ was correspondingly issued on
July 14, 1999.9. On October 4, 1999, the motion to dismiss was
denied by the trial court judge for lack of merit.
10. Petitioner, thereafter, in a petition for certiorari and
prohibition assailed the issuance of the writ of preliminary
injunction before the Court of Appeals.
11. In the impugned decision the appellate court dismissed the
petition. Petitioner thus seeks recourse to this Court and raises
the following errors:
1. THE COURT OF APPEALS PALPABLY ERRED IN NOT DISMISSING THE
COMPLAINT A QUO, CONSIDERING THAT BY THE ALLEGATIONS OF THE
COMPLAINT, NO CAUSE OF ACTION EXISTS AGAINST PETITIONER, WHICH IS
NOT A REAL PARTY IN INTEREST BEING A MERE ATTORNEY-IN-FACT
AUTHORIZED TO ENFORCE AN ANCILLARY CONTRACT.2. THE COURT OF APPEALS
PALPABLY ERRED IN ALLOWING THE TRIAL COURT TO ISSUE IN EXCESS OR
LACK OF JURISDICTION A WRIT OF PRELIMINARY INJUNCTION OVER AND
BEYOND WHAT WAS PRAYED FOR IN THE COMPLAINT A QUO CONTRARY TO CHIEF
OF STAFF, AFP VS. GUADIZ JR., 101 SCRA 827.2
Petitioner prays, inter alia, that the Court of Appeals'
Decision dated March 27, 2000 and the trial court's Orders dated
June 30, 1999 and October 4, 1999 be set aside and the dismissal of
the complaint in the instant case.In their Comment, respondents
argue that even assuming arguendo that petitioner and PNB-IFL are
two separate entities, petitioner is still the party-in-interest in
the application for preliminary injunction because it is tasked to
commit acts of foreclosing respondents' properties.4 Respondents
maintain that the entire credit facility is void as it contains
stipulations in violation of the principle of mutuality of
contracts. In addition, respondents justified the act of the court
a quo in applying the doctrine of "Piercing the Veil of Corporate
Identity" by stating that petitioner is merely an alter ego or a
business conduit of PNB-IFL.PETITION IS WITH MERIT.
Respondents, in their complaint, anchor their prayer for
injunction on alleged invalid provisions of the contract:
(grounds)I. THE DETERMINATION OF THE INTEREST RATES BEING LEFT TO
THE SOLE DISCRETION OF THE DEFENDANT PNB CONTRAVENES THE PRINCIPAL
OF MUTUALITY OF CONTRACTS.
II. THERE BEING A STIPULATION IN THE LOAN AGREEMENT THAT THE
RATE OF INTEREST AGREED UPON MAY BE UNILATERALLY MODIFIED BY
DEFENDANT, THERE WAS NO STIPULATION THAT THE RATE OF INTEREST SHALL
BE REDUCED IN THE EVENT THAT THE APPLICABLE MAXIMUM RATE OF
INTEREST IS REDUCED BY LAW OR BY THE MONETARY BOARD.Respondents
sought to enjoin and restrain PNB from the foreclosure and eventual
sale of the property in order to protect their rights to said
property by reason of void credit facilities as bases for the real
estate mortgage over the said property.
Issue: W/N Ruling:The contract questioned is one entered into
between respondent and PNB-IFL, not PNB. In their complaint,
respondents admit that petitioner is a mere attorney-in-fact for
the PNB-IFL with full power and authority to, inter alia, foreclose
on the properties mortgaged to secure their loan obligations with
PNB-IFL. In other words, herein petitioner is an agent with limited
authority and specific duties under a special power of attorney
incorporated in the real estate mortgage. It is not privy to the
loan contracts entered into by respondents and PNB-IFL.
The issue of the validity of the loan contracts is a matter
between PNB-IFL, the petitioner's principal and the party to the
loan contracts, and the respondents. Yet, despite the recognition
that petitioner is a mere agent, the respondents in their complaint
prayed that the petitioner PNB be ordered to re-compute the
rescheduling of the interest to be paid by them in accordance with
the terms and conditions in the documents evidencing the credit
facilities, and crediting the amount previously paid to PNB by
herein respondents.Clearly, petitioner not being a part to the
contract has no power to re-compute the interest rates set forth in
the contract. Respondents, therefore, do not have any cause of
action against petitioner.
The trial court, however, in its Order dated October 4, 1994,
ruled that since PNB-IFL, is a wholly owned subsidiary of defendant
Philippine National Bank, the suit against the defendant PNB is a
suit against PNB-IFL.10 In justifying its ruling, the trial court,
citing the case of Koppel Phil. Inc. vs. Yatco, reasoned that the
corporate entity may be disregarded where a corporation is the mere
alter ego, or business conduit of a person or where the corporation
is so organized and controlled and its affairs are so conducted, as
to make it merely an instrumentality, agency, conduit or adjunct of
another corporation.We disagree.
The general rule is that as a legal entity, a corporation has a
personality distinct and separate from its individual stockholders
or members, and is not affected by the personal rights, obligations
and transactions of the latter. The mere fact that a corporation
owns all of the stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If used to
perform legitimate functions, a subsidiary's separate existence may
be respected, and the liability of the parent corporation as well
as the subsidiary will be confined to those arising in their
respective business. The courts may in the exercise of judicial
discretion step in to prevent the abuses of separate entity
privilege and pierce the veil of corporate entity.
We find, however, that the ruling in Koppel finds no application
in the case at bar. In said case, this Court disregarded the
separate existence of the parent and the subsidiary on the ground
that the latter was formed merely for the purpose of evading the
payment of higher taxes. In the case at bar, respondents fail to
show any cogent reason why the separate entities of the PNB and
PNB-IFL should be disregarded.
While there exists no definite test of general application in
determining when a subsidiary may be treated as a mere
instrumentality of the parent corporation, some factors have been
identified that will justify the application of the treatment of
the doctrine of the piercing of the corporate veil. The case of
Garrett vs. Southern Railway Co.14 is enlightening. The case
involved a suit against the Southern Railway Company. Plaintiff was
employed by Lenoir Car Works and alleged that he sustained injuries
while working for Lenoir. He, however, filed a suit against
Southern Railway Company on the ground that Southern had acquired
the entire capital stock of Lenoir Car Works, hence, the latter
corporation was but a mere instrumentality of the former. The
Tennessee Supreme Court stated that as a general rule the stock
ownership alone by one corporation of the stock of another does not
thereby render the dominant corporation liable for the torts of the
subsidiary unless the separate corporate existence of the
subsidiary is a mere sham, or unless the control of the subsidiary
is such that it is but an instrumentality or adjunct of the
dominant corporation.Similarly, in this jurisdiction, we have held
that the doctrine of piercing the corporate veil is an equitable
doctrine developed to address situations where the separate
corporate personality of a corporation is abused or used for
wrongful purposes. The doctrine applies when the corporate fiction
is used to defeat public convenience, justify wrong, protect fraud
or defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or
business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to
make it merely an instrumentality, agency, conduit or adjunct of
another corporation.
In Concept Builders, Inc. v. NLRC, we have laid the test in
determining the applicability of the doctrine of piercing the veil
of corporate fiction, to wit:
1.Control, not mere majority or complete control, but complete
domination, not only of finances but of policy and business
practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate
mind, will or existence of its own.
2.Such control must have been used by the defendant to commit
fraud or wrong, to perpetuate the violation of a statutory or other
positive legal duty, or dishonest and, unjust act in contravention
of plaintiffs legal rights; and,
3.The aforesaid control and breach of duty must proximately
cause the injury or unjust loss complained of.
The absence of any one of these elements prevents "piercing the
corporate veil." In applying the "instrumentality" or "alter ego"
doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant's
relationship to the operation.
Aside from the fact that PNB-IFL is a wholly owned subsidiary of
petitioner PNB, there is no showing of the indicative factors that
the former corporation is a mere instrumentality of the latter are
present. Neither is there a demonstration that any of the evils
sought to be prevented by the doctrine of piercing the corporate
veil exists. Inescapably, therefore, the doctrine of piercing the
corporate veil based on the alter ego or instrumentality doctrine
finds no application in the case at bar.
In any case, the parent-subsidiary relationship between PNB and
PNB-IFL is not the significant legal relationship involved in this
case since the petitioner was not sued because it is the parent
company of PNB-IFL. Rather, the petitioner was sued because it
acted as an attorney-in-fact of PNB-IFL in initiating the
foreclosure proceedings. A suit against an agent cannot without
compelling reasons be considered a suit against the principal.
Under the Rules of Court, every action must be prosecuted or
defended in the name of the real party-in-interest, unless
otherwise authorized by law or these Rules.18 In mandatory terms,
the Rules require that "parties-in-interest without whom no final
determination can be had, an action shall be joined either as
plaintiffs or defendants."19 In the case at bar, the injunction
suit is directed only against the agent, not the principal.