Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 175352 DANTE V. LIBAN, REYNALDO M.

BERNARDO, and SALVADOR M. VIARI, Petitioners, vs. RICHARD J. GORDON, Respondent. DECISION CARPIO, J.: The Case This is a petition to declare Senator Richard J. Gordon (respondent) as having forfeited his seat in the Senate. The Facts Petitioners Dante V. Liban, Reynaldo M. Bernardo, and Salvador M. Viari (petitioners) filed with this Court a Petition to Declare Richard J. Gordon as Having Forfeited His Seat in the Senate. Petitioners are officers of the Board of Directors of the Quezon City Red Cross Chapter while respondent is Chairman of the Philippine National Red Cross (PNRC) Board of Governors. During respondents incumbency as a member of the Senate of the Philippines,1 he was elected Chairman of the PNRC during the 23 February 2006 meeting of the PNRC Board of Governors. Petitioners allege that by accepting the chairmanship of the PNRC Board of Governors, respondent has ceased to be a member of the Senate as provided in Section 13, Article VI of the Constitution, which reads: SEC. 13. No Senator or Member of the House of Representatives may hold any other office or employment in the Government, or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries, during his term without forfeiting his seat. Neither shall he be appointed to any office which may have been created or the emoluments thereof increased during the term for which he was elected. Petitioners cite Camporedondo v. NLRC,2 which held that the PNRC is a government-owned or controlled corporation. Petitioners claim that in accepting and holding the position of Chairman of the PNRC Board of Governors, respondent has automatically forfeited his seat in the Senate, pursuant to Flores v. Drilon,3 which held that incumbent national legislators lose their elective posts upon their appointment to another government office. In his Comment, respondent asserts that petitioners have no standing to file this petition which appears to be an action for quo warranto, since the petition alleges that respondent committed an act which, by provision of law, constitutes a ground for forfeiture of his public office. Petitioners do not claim to be entitled to the Senate office of respondent. Under Section 5, Rule 66 of the Rules of Civil Procedure, only a person claiming to be entitled to a public office usurped or unlawfully held by

another may bring an action for quo warranto in his own name. If the petition is one for quo warranto, it is already barred by prescription since under Section 11, Rule 66 of the Rules of Civil Procedure, the action should be commenced within one year after the cause of the public officers forfeiture of office. In this case, respondent has been working as a Red Cross volunteer for the past 40 years. Respondent was already Chairman of the PNRC Board of Governors when he was elected Senator in May 2004, having been elected Chairman in 2003 and re-elected in 2005. Respondent contends that even if the present petition is treated as a taxpayers suit, petitioners cannot be allowed to raise a constitutional question in the absence of any claim that they suffered some actual damage or threatened injury as a result of the allegedly illegal act of respondent. Furthermore, taxpayers are allowed to sue only when there is a claim of illegal disbursement of public funds, or that public money is being diverted to any improper purpose, or where petitioners seek to restrain respondent from enforcing an invalid law that results in wastage of public funds. Respondent also maintains that if the petition is treated as one for declaratory relief, this Court would have no jurisdiction since original jurisdiction for declaratory relief lies with the Regional Trial Court. Respondent further insists that the PNRC is not a government-owned or controlled corporation and that the prohibition under Section 13, Article VI of the Constitution does not apply in the present case since volunteer service to the PNRC is neither an office nor an employment. In their Reply, petitioners claim that their petition is neither an action for quo warranto nor an action for declaratory relief. Petitioners maintain that the present petition is a taxpayers suit questioning the unlawful disbursement of funds, considering that respondent has been drawing his salaries and other compensation as a Senator even if he is no longer entitled to his office. Petitioners point out that this Court has jurisdiction over this petition since it involves a legal or constitutional issue which is of transcendental importance. The Issues Petitioners raise the following issues: 1. Whether the Philippine National Red Cross (PNRC) is a government- owned or controlled corporation; 2. Whether Section 13, Article VI of the Philippine Constitution applies to the case of respondent who is Chairman of the PNRC and at the same time a Member of the Senate; 3. Whether respondent should be automatically removed as a Senator pursuant to Section 13, Article VI of the Philippine Constitution; and 4. Whether petitioners may legally institute this petition against respondent.4 The substantial issue boils down to whether the office of the PNRC Chairman is a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the Constitution. The Courts Ruling We find the petition without merit.

Petitioners Have No Standing to File this Petition A careful reading of the petition reveals that it is an action for quo warranto. Section 1, Rule 66 of the Rules of Court provides: Section 1. Action by Government against individuals. An action for the usurpation of a public office, position or franchise may be commenced by a verified petition brought in the name of the Republic of the Philippines against: (a) A person who usurps, intrudes into, or unlawfully holds or exercises a public office, position or franchise; (b) A public officer who does or suffers an act which by provision of law, constitutes a ground for the forfeiture of his office; or (c) An association which acts as a corporation within the Philippines without being legally incorporated or without lawful authority so to act. (Emphasis supplied) Petitioners allege in their petition that: 4. Respondent became the Chairman of the PNRC when he was elected as such during the First Regular Luncheon-Meeting of the Board of Governors of the PNRC held on February 23, 2006, the minutes of which is hereto attached and made integral part hereof as Annex "A." 5. Respondent was elected as Chairman of the PNRC Board of Governors, during his incumbency as a Member of the House of Senate of the Congress of the Philippines, having been elected as such during the national elections last May 2004. 6. Since his election as Chairman of the PNRC Board of Governors, which position he duly accepted, respondent has been exercising the powers and discharging the functions and duties of said office, despite the fact that he is still a senator. 7. It is the respectful submission of the petitioner[s] that by accepting the chairmanship of the Board of Governors of the PNRC, respondent has ceased to be a Member of the House of Senate as provided in Section 13, Article VI of the Philippine Constitution, x x x xxxx 10. It is respectfully submitted that in accepting the position of Chairman of the Board of Governors of the PNRC on February 23, 2006, respondent has automatically forfeited his seat in the House of Senate and, therefore, has long ceased to be a Senator, pursuant to the ruling of this Honorable Court in the case of FLORES, ET AL. VS. DRILON AND GORDON, G.R. No. 104732, x x x 11. Despite the fact that he is no longer a senator, respondent continues to act as such and still performs the powers, functions and duties of a senator, contrary to the constitution, law and jurisprudence. 12. Unless restrained, therefore, respondent will continue to falsely act and represent himself as a senator or member of the House of Senate, collecting the salaries, emoluments and

other compensations, benefits and privileges appertaining and due only to the legitimate senators, to the damage, great and irreparable injury of the Government and the Filipino people.5 (Emphasis supplied) Thus, petitioners are alleging that by accepting the position of Chairman of the PNRC Board of Governors, respondent has automatically forfeited his seat in the Senate. In short, petitioners filed an action for usurpation of public office against respondent, a public officer who allegedly committed an act which constitutes a ground for the forfeiture of his public office. Clearly, such an action is for quo warranto, specifically under Section 1(b), Rule 66 of the Rules of Court. Quo warranto is generally commenced by the Government as the proper party plaintiff. However, under Section 5, Rule 66 of the Rules of Court, an individual may commence such an action if he claims to be entitled to the public office allegedly usurped by another, in which case he can bring the action in his own name. The person instituting quo warranto proceedings in his own behalf must claim and be able to show that he is entitled to the office in dispute, otherwise the action may be dismissed at any stage.6 In the present case, petitioners do not claim to be entitled to the Senate office of respondent. Clearly, petitioners have no standing to file the present petition. Even if the Court disregards the infirmities of the petition and treats it as a taxpayers suit, the petition would still fail on the merits. PNRC is a Private Organization Performing Public Functions On 22 March 1947, President Manuel A. Roxas signed Republic Act No. 95,7 otherwise known as the PNRC Charter. The PNRC is a non-profit, donor-funded, voluntary, humanitarian organization, whose mission is to bring timely, effective, and compassionate humanitarian assistance for the most vulnerable without consideration of nationality, race, religion, gender, social status, or political affiliation.8 The PNRC provides six major services: Blood Services, Disaster Management, Safety Services, Community Health and Nursing, Social Services and Voluntary Service.9 The Republic of the Philippines, adhering to the Geneva Conventions, established the PNRC as a voluntary organization for the purpose contemplated in the Geneva Convention of 27 July 1929.10 The Whereas clauses of the PNRC Charter read: WHEREAS, there was developed at Geneva, Switzerland, on August 22, 1864, a convention by which the nations of the world were invited to join together in diminishing, so far lies within their power, the evils inherent in war; WHEREAS, more than sixty nations of the world have ratified or adhered to the subsequent revision of said convention, namely the "Convention of Geneva of July 29 [sic], 1929 for the Amelioration of the Condition of the Wounded and Sick of Armies in the Field" (referred to in this Charter as the Geneva Red Cross Convention); WHEREAS, the Geneva Red Cross Convention envisages the establishment in each country of a voluntary organization to assist in caring for the wounded and sick of the armed forces and to furnish supplies for that purpose; WHEREAS, the Republic of the Philippines became an independent nation on July 4, 1946 and proclaimed its adherence to the Geneva Red Cross Convention on February 14, 1947, and by that action indicated its desire to participate with the nations of the world in mitigating the suffering caused by war and to establish in the Philippines a voluntary organization for that purpose as contemplated by the Geneva Red Cross Convention;

WHEREAS, there existed in the Philippines since 1917 a Charter of the American National Red Cross which must be terminated in view of the independence of the Philippines; and WHEREAS, the volunteer organizations established in the other countries which have ratified or adhered to the Geneva Red Cross Convention assist in promoting the health and welfare of their people in peace and in war, and through their mutual assistance and cooperation directly and through their international organizations promote better understanding and sympathy among the peoples of the world. (Emphasis supplied) The PNRC is a member National Society of the International Red Cross and Red Crescent Movement (Movement), which is composed of the International Committee of the Red Cross (ICRC), the International Federation of Red Cross and Red Crescent Societies (International Federation), and the National Red Cross and Red Crescent Societies (National Societies). The Movement is united and guided by its seven Fundamental Principles: 1. HUMANITY The International Red Cross and Red Crescent Movement, born of a desire to bring assistance without discrimination to the wounded on the battlefield, endeavors, in its international and national capacity, to prevent and alleviate human suffering wherever it may be found. Its purpose is to protect life and health and to ensure respect for the human being. It promotes mutual understanding, friendship, cooperation and lasting peace amongst all peoples. 2. IMPARTIALITY It makes no discrimination as to nationality, race, religious beliefs, class or political opinions. It endeavors to relieve the suffering of individuals, being guided solely by their needs, and to give priority to the most urgent cases of distress. 3. NEUTRALITY In order to continue to enjoy the confidence of all, the Movement may not take sides in hostilities or engage at any time in controversies of a political, racial, religious or ideological nature. 4. INDEPENDENCE The Movement is independent. The National Societies, while auxiliaries in the humanitarian services of their governments and subject to the laws of their respective countries, must always maintain their autonomy so that they may be able at all times to act in accordance with the principles of the Movement. 5. VOLUNTARY SERVICE It is a voluntary relief movement not prompted in any manner by desire for gain. 6. UNITY There can be only one Red Cross or one Red Crescent Society in any one country. It must be open to all. It must carry on its humanitarian work throughout its territory. 7. UNIVERSALITY The International Red Cross and Red Crescent Movement, in which all Societies have equal status and share equal responsibilities and duties in helping each other, is worldwide. (Emphasis supplied) The Fundamental Principles provide a universal standard of reference for all members of the Movement. The PNRC, as a member National Society of the Movement, has the duty to uphold the Fundamental Principles and ideals of the Movement. In order to be recognized as a National Society, the PNRC has to be autonomous and must operate in conformity with the Fundamental Principles of the Movement.11

The reason for this autonomy is fundamental. To be accepted by warring belligerents as neutral workers during international or internal armed conflicts, the PNRC volunteers must not be seen as belonging to any side of the armed conflict. In the Philippines where there is a communist insurgency and a Muslim separatist rebellion, the PNRC cannot be seen as government-owned or controlled, and neither can the PNRC volunteers be identified as government personnel or as instruments of government policy. Otherwise, the insurgents or separatists will treat PNRC volunteers as enemies when the volunteers tend to the wounded in the battlefield or the displaced civilians in conflict areas. Thus, the PNRC must not only be, but must also be seen to be, autonomous, neutral and independent in order to conduct its activities in accordance with the Fundamental Principles. The PNRC must not appear to be an instrument or agency that implements government policy; otherwise, it cannot merit the trust of all and cannot effectively carry out its mission as a National Red Cross Society.12 It is imperative that the PNRC must be autonomous, neutral, and independent in relation to the State. To ensure and maintain its autonomy, neutrality, and independence, the PNRC cannot be owned or controlled by the government. Indeed, the Philippine government does not own the PNRC. The PNRC does not have government assets and does not receive any appropriation from the Philippine Congress.13 The PNRC is financed primarily by contributions from private individuals and private entities obtained through solicitation campaigns organized by its Board of Governors, as provided under Section 11 of the PNRC Charter: SECTION 11. As a national voluntary organization, the Philippine National Red Cross shall be financed primarily by contributions obtained through solicitation campaigns throughout the year which shall be organized by the Board of Governors and conducted by the Chapters in their respective jurisdictions. These fund raising campaigns shall be conducted independently of other fund drives by other organizations. (Emphasis supplied) The government does not control the PNRC. Under the PNRC Charter, as amended, only six of the thirty members of the PNRC Board of Governors are appointed by the President of the Philippines. Thus, twenty-four members, or four-fifths (4/5), of the PNRC Board of Governors are not appointed by the President. Section 6 of the PNRC Charter, as amended, provides: SECTION 6. The governing powers and authority shall be vested in a Board of Governors composed of thirty members, six of whom shall be appointed by the President of the Philippines, eighteen shall be elected by chapter delegates in biennial conventions and the remaining six shall be selected by the twenty-four members of the Board already chosen. x x x. Thus, of the twenty-four members of the PNRC Board, eighteen are elected by the chapter delegates of the PNRC, and six are elected by the twenty-four members already chosen a select group where the private sector members have three-fourths majority. Clearly, an overwhelming majority of four-fifths of the PNRC Board are elected or chosen by the private sector members of the PNRC. The PNRC Board of Governors, which exercises all corporate powers of the PNRC, elects the PNRC Chairman and all other officers of the PNRC. The incumbent Chairman of PNRC, respondent Senator Gordon, was elected, as all PNRC Chairmen are elected, by a private sector-controlled PNRC Board four-fifths of whom are private sector members of the PNRC. The PNRC Chairman is not appointed by the President or by any subordinate government official. Under Section 16, Article VII of the Constitution,14 the President appoints all officials and employees in the Executive branch whose appointments are vested in the President by the Constitution or by

law. The President also appoints those whose appointments are not otherwise provided by law. Under this Section 16, the law may also authorize the "heads of departments, agencies, commissions, or boards" to appoint officers lower in rank than such heads of departments, agencies, commissions or boards.15 In Rufino v. Endriga,16 the Court explained appointments under Section 16 in this wise: Under Section 16, Article VII of the 1987 Constitution, the President appoints three groups of officers. The first group refers to the heads of the Executive departments, ambassadors, other public ministers and consuls, officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in the President by the Constitution. The second group refers to those whom the President may be authorized by law to appoint. The third group refers to all other officers of the Government whose appointments are not otherwise provided by law. Under the same Section 16, there is a fourth group of lower-ranked officers whose appointments Congress may by law vest in the heads of departments, agencies, commissions, or boards. x x x xxx In a department in the Executive branch, the head is the Secretary. The law may not authorize the Undersecretary, acting as such Undersecretary, to appoint lower-ranked officers in the Executive department. In an agency, the power is vested in the head of the agency for it would be preposterous to vest it in the agency itself. In a commission, the head is the chairperson of the commission. In a board, the head is also the chairperson of the board. In the last three situations, the law may not also authorize officers other than the heads of the agency, commission, or board to appoint lower-ranked officers. xxx The Constitution authorizes Congress to vest the power to appoint lower-ranked officers specifically in the "heads" of the specified offices, and in no other person. The word "heads" refers to the chairpersons of the commissions or boards and not to their members, for several reasons. The President does not appoint the Chairman of the PNRC. Neither does the head of any department, agency, commission or board appoint the PNRC Chairman. Thus, the PNRC Chairman is not an official or employee of the Executive branch since his appointment does not fall under Section 16, Article VII of the Constitution. Certainly, the PNRC Chairman is not an official or employee of the Judiciary or Legislature. This leads us to the obvious conclusion that the PNRC Chairman is not an official or employee of the Philippine Government. Not being a government official or employee, the PNRC Chairman, as such, does not hold a government office or employment. Under Section 17, Article VII of the Constitution,17 the President exercises control over all government offices in the Executive branch. If an office is legally not under the control of the President, then such office is not part of the Executive branch. In Rufino v. Endriga,18 the Court explained the Presidents power of control over all government offices as follows: Every government office, entity, or agency must fall under the Executive, Legislative, or Judicial branches, or must belong to one of the independent constitutional bodies, or must be a quasi-judicial body or local government unit. Otherwise, such government office, entity, or agency has no legal and constitutional basis for its existence.

The CCP does not fall under the Legislative or Judicial branches of government. The CCP is also not one of the independent constitutional bodies. Neither is the CCP a quasi-judicial body nor a local government unit. Thus, the CCP must fall under the Executive branch. Under the Revised Administrative Code of 1987, any agency "not placed by law or order creating them under any specific department" falls "under the Office of the President." Since the President exercises control over "all the executive departments, bureaus, and offices," the President necessarily exercises control over the CCP which is an office in the Executive branch. In mandating that the President "shall have control of all executive . . . offices," Section 17, Article VII of the 1987 Constitution does not exempt any executive office one performing executive functions outside of the independent constitutional bodies from the Presidents power of control. There is no dispute that the CCP performs executive, and not legislative, judicial, or quasi-judicial functions. The Presidents power of control applies to the acts or decisions of all officers in the Executive branch. This is true whether such officers are appointed by the President or by heads of departments, agencies, commissions, or boards. The power of control means the power to revise or reverse the acts or decisions of a subordinate officer involving the exercise of discretion. In short, the President sits at the apex of the Executive branch, and exercises "control of all the executive departments, bureaus, and offices." There can be no instance under the Constitution where an officer of the Executive branch is outside the control of the President. The Executive branch is unitary since there is only one President vested with executive power exercising control over the entire Executive branch. Any office in the Executive branch that is not under the control of the President is a lost command whose existence is without any legal or constitutional basis. (Emphasis supplied) An overwhelming four-fifths majority of the PNRC Board are private sector individuals elected to the PNRC Board by the private sector members of the PNRC. The PNRC Board exercises all corporate powers of the PNRC. The PNRC is controlled by private sector individuals. Decisions or actions of the PNRC Board are not reviewable by the President. The President cannot reverse or modify the decisions or actions of the PNRC Board. Neither can the President reverse or modify the decisions or actions of the PNRC Chairman. It is the PNRC Board that can review, reverse or modify the decisions or actions of the PNRC Chairman. This proves again that the office of the PNRC Chairman is a private office, not a government office.
1avv phi 1

Although the State is often represented in the governing bodies of a National Society, this can be justified by the need for proper coordination with the public authorities, and the government representatives may take part in decision-making within a National Society. However, the freelyelected representatives of a National Societys active members must remain in a large majority in a National Societys governing bodies.19 The PNRC is not government-owned but privately owned. The vast majority of the thousands of PNRC members are private individuals, including students. Under the PNRC Charter, those who contribute to the annual fund campaign of the PNRC are entitled to membership in the PNRC for one year. Thus, any one between 6 and 65 years of age can be a PNRC member for one year upon contributing P35, P100, P300, P500 or P1,000 for the year.20 Even foreigners, whether residents or not, can be members of the PNRC. Section 5 of the PNRC Charter, as amended by Presidential Decree No. 1264,21 reads: SEC. 5. Membership in the Philippine National Red Cross shall be open to the entire population in the Philippines regardless of citizenship. Any contribution to the Philippine National Red Cross

Annual Fund Campaign shall entitle the contributor to membership for one year and said contribution shall be deductible in full for taxation purposes. Thus, the PNRC is a privately owned, privately funded, and privately run charitable organization. The PNRC is not a government-owned or controlled corporation. Petitioners anchor their petition on the 1999 case of Camporedondo v. NLRC,22 which ruled that the PNRC is a government-owned or controlled corporation. In ruling that the PNRC is a governmentowned or controlled corporation, the simple test used was whether the corporation was created by its own special charter for the exercise of a public function or by incorporation under the general corporation law. Since the PNRC was created under a special charter, the Court then ruled that it is a government corporation. However, the Camporedondoruling failed to consider the definition of a government-owned or controlled corporation as provided under Section 2(13) of the Introductory Provisions of the Administrative Code of 1987: SEC. 2. General Terms Defined. x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.(Boldfacing and underscoring supplied) A government-owned or controlled corporation must be owned by the government, and in the case of a stock corporation, at least a majority of its capital stock must be owned by the government. In the case of a non-stock corporation, by analogy at least a majority of the members must be government officials holding such membership by appointment or designation by the government. Under this criterion, and as discussed earlier, the government does not own or control PNRC. The PNRC Charter is Violative of the Constitutional Proscription against the Creation of Private Corporations by Special Law The 1935 Constitution, as amended, was in force when the PNRC was created by special charter on 22 March 1947. Section 7, Article XIV of the 1935 Constitution, as amended, reads: SEC. 7. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof. The subsequent 1973 and 1987 Constitutions contain similar provisions prohibiting Congress from creating private corporations except by general law. Section 1 of the PNRC Charter, as amended, creates the PNRC as a "body corporate and politic," thus: SECTION 1. There is hereby created in the Republic of the Philippines a body corporate and politic to be the voluntary organization officially designated to assist the Republic of the Philippines in discharging the obligations set forth in the Geneva Conventions and to perform such other duties as are inherent upon a National Red Cross Society. The national headquarters of this Corporation shall be located in Metropolitan Manila. (Emphasis supplied)

In Feliciano v. Commission on Audit,23 the Court explained the constitutional provision prohibiting Congress from creating private corporations in this wise: We begin by explaining the general framework under the fundamental law. The Constitution recognizes two classes of corporations. The first refers to private corporations created under a general law. The second refers to government-owned or controlled corporations created by special charters. Section 16, Article XII of the Constitution provides: Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. The Constitution emphatically prohibits the creation of private corporations except by general law applicable to all citizens. The purpose of this constitutional provision is to ban private corporations created by special charters, which historically gave certain individuals, families or groups special privileges denied to other citizens. In short, Congress cannot enact a law creating a private corporation with a special charter. Such legislation would be unconstitutional. Private corporations may exist only under a general law. If the corporation is private, it must necessarily exist under a general law. Stated differently, only corporations created under a general law can qualify as private corporations. Under existing laws, the general law is the Corporation Code, except that the Cooperative Code governs the incorporation of cooperatives. The Constitution authorizes Congress to create government-owned or controlled corporations through special charters. Since private corporations cannot have special charters, it follows that Congress can create corporations with special charters only if such corporations are governmentowned or controlled.24 (Emphasis supplied) In Feliciano, the Court held that the Local Water Districts are government-owned or controlled corporations since they exist by virtue of Presidential Decree No. 198, which constitutes their special charter. The seed capital assets of the Local Water Districts, such as waterworks and sewerage facilities, were public property which were managed, operated by or under the control of the city, municipality or province before the assets were transferred to the Local Water Districts. The Local Water Districts also receive subsidies and loans from the Local Water Utilities Administration (LWUA). In fact, under the 2009 General Appropriations Act,25 the LWUA has a budget amounting to P400,000,000 for its subsidy requirements.26 There is no private capital invested in the Local Water Districts. The capital assets and operating funds of the Local Water Districts all come from the government, either through transfer of assets, loans, subsidies or the income from such assets or funds. The government also controls the Local Water Districts because the municipal or city mayor, or the provincial governor, appoints all the board directors of the Local Water Districts. Furthermore, the board directors and other personnel of the Local Water Districts are government employees subject to civil service laws and anti-graft laws. Clearly, the Local Water Districts are considered government-owned or controlled corporations not only because of their creation by special charter but also because the government in fact owns and controls the Local Water Districts. Just like the Local Water Districts, the PNRC was created through a special charter. However, unlike the Local Water Districts, the elements of government ownership and control are clearly lacking in the PNRC. Thus, although the PNRC is created by a special charter, it cannot be considered a

government-owned or controlled corporation in the absence of the essential elements of ownership and control by the government. In creating the PNRC as a corporate entity, Congress was in fact creating a private corporation. However, the constitutional prohibition against the creation of private corporations by special charters provides no exception even for non-profit or charitable corporations. Consequently, the PNRC Charter, insofar as it creates the PNRC as a private corporation and grants it corporate powers,27 is void for being unconstitutional. Thus, Sections 1,28 2,29 3,304(a),31 5,32 6,33 7,34 8,35 9,36 10,37 11,38 12,39 and 1340 of the PNRC Charter, as amended, are void. The other provisions41 of the PNRC Charter remain valid as they can be considered as a recognition by the State that the unincorporated PNRC is the local National Society of the International Red Cross and Red Crescent Movement, and thus entitled to the benefits, exemptions and privileges set forth in the PNRC Charter. The other provisions of the PNRC Charter implement the Philippine Governments treaty obligations under Article 4(5) of the Statutes of the International Red Cross and Red Crescent Movement, which provides that to be recognized as a National Society, the Society must be "duly recognized by the legal government of its country on the basis of the Geneva Conventions and of the national legislation as a voluntary aid society, auxiliary to the public authorities in the humanitarian field." In sum, we hold that the office of the PNRC Chairman is not a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. However, since the PNRC Charter is void insofar as it creates the PNRC as a private corporation, the PNRC should incorporate under the Corporation Code and register with the Securities and Exchange Commission if it wants to be a private corporation. WHEREFORE, we declare that the office of the Chairman of the Philippine National Red Cross is not a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. We also declare that Sections 1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the Philippine National Red Cross, or Republic Act No. 95, as amended by Presidential Decree Nos. 1264 and 1643, are VOID because they create the PNRC as a private corporation or grant it corporate powers. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 141735 June 8, 2005

SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE CIVIL SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF THE PHILIPPINES, respondents. DECISION CHICO-NAZARIO, J.: This is a petition for certiorari under Rule 65 of the Rules of Court of the Decision1 of the Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil Service Commission (CSC) dated 11 August 1994 and 11 April 1995, respectively, which in turn affirmed Resolution No. 2309 of the Board of Directors of the Al-Amanah Islamic Investment Bank of the Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty of Dishonesty in the Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and dismissing him from the service, and its Resolution2 of 15 December 1999 dismissing petitioners Motion for Reconsideration. The records show that petitioner Sappari K. Sawadjaan was among the first employees of the Philippine Amanah Bank (PAB) when it was created by virtue of Presidential Decree No. 264 on 02 August 1973. He rose through the ranks, working his way up from his initial designation as security guard, to settling clerk, bookkeeper, credit investigator, project analyst, appraiser/ inspector, and eventually, loans analyst.3 In February 1988, while still designated as appraiser/investigator, Sawadjaan was assigned to inspect the properties offered as collaterals by Compressed Air Machineries and Equipment Corporation (CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The properties consisted of two parcels of land covered by Transfer Certificates of Title (TCTs) No. N-130671 and No. C-52576. On the basis of his Inspection and Appraisal Report,4the PAB granted the loan application. When the loan matured on 17 May 1989, CAMEC requested an extension of 180 days, but was granted only 120 days to repay the loan.5 In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July 1989.6 In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing P.D. No. 264 (which created the PAB). All assets, liabilities and capital accounts of the PAB were transferred to the AIIBP,7 and the existing personnel of the PAB were to continue to discharge their functions unless discharged.8 In the ensuing reorganization, Sawadjaan was among the personnel retained by the AIIBP. When CAMEC failed to pay despite the given extension, the bank, now referred to as the AIIBP, discovered that TCT No. N-130671 was spurious, the property described therein non-existent, and

that the property covered by TCT No. C-52576 had a prior existing mortgage in favor of one Divina Pablico. On 08 June 1993, the Board of Directors of the AIIBP created an Investigating Committee to look into the CAMEC transaction, which had cost the bank Six Million Pesos (P6,000,000.00) in losses.9 The subsequent events, as found and decided upon by the Court of Appeals,10 are as follows: On 18 June 1993, petitioner received a memorandum from Islamic Bank [AIIBP] Chairman Roberto F. De Ocampo charging him with Dishonesty in the Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and preventively suspending him. In his memorandum dated 8 September 1993, petitioner informed the Investigating Committee that he could not submit himself to the jurisdiction of the Committee because of its alleged partiality. For his failure to appear before the hearing set on 17 September 1993, after the hearing of 13 September 1993 was postponed due to the Manifestation of even date filed by petitioner, the Investigating Committee declared petitioner in default and the prosecution was allowed to present its evidence ex parte. On 08 December 1993, the Investigating Committee rendered a decision, the pertinent portions of which reads as follows: In view of respondent SAWADJAANS abject failure to perform his duties and assigned tasks as appraiser/inspector, which resulted to the prejudice and substantial damage to the Bank, respondent should be held liable therefore. At this juncture, however, the Investigating Committee is of the considered opinion that he could not be held liable for the administrative offense of dishonesty considering the fact that no evidence was adduced to show that he profited or benefited from being remiss in the performance of his duties. The record is bereft of any evidence which would show that he received any amount in consideration for his non-performance of his official duties. This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform his official duties resulted to the prejudice and substantial damage to the Islamic Bank for which he should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE. Premises considered, the Investigating Committee recommends that respondent SAPPARI SAWADJAAN be meted the penalty of SIX (6) MONTHS and ONE (1) DAY SUSPENSION from office in accordance with the Civil Service Commissions Memorandum Circular No. 30, Series of 1989. On 13 December 1993, the Board of Directors of the Islamic Bank [AIIBP] adopted Resolution No. 2309 finding petitioner guilty of Dishonesty in the Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and imposing the penalty of Dismissal from the Service. On reconsideration, the Board of Directors of the Islamic Bank [AIIBP] adopted the Resolution No. 2332 on 20 February 1994 reducing the penalty imposed on petitioner from dismissal to suspension for a period of six (6) months and one (1) day. On 29 March 1994, petitioner filed a notice of appeal to the Merit System Protection Board (MSPB).

On 11 August 1994, the CSC adopted Resolution No. 94-4483 dismissing the appeal for lack of merit and affirming Resolution No. 2309 dated 13 December 1993 of the Board of Directors of Islamic Bank. On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying petitioners Motion for Reconsideration. On 16 June 1995, the instant petition was filed with the Honorable Supreme Court on the following assignment of errors: I. Public respondent Al-Amanah Islamic Investment Bank of the Philippines has committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it initiated and conducted administrative investigation without a validly promulgated rules of procedure in the adjudication of administrative cases at the Islamic Bank. II. Public respondent Civil Service Commission has committed a grave abuse of discretion amounting to lack of jurisdiction when it prematurely and falsely assumed jurisdiction of the case not appealed to it, but to the Merit System Protection Board. III. Both the Islamic Bank and the Civil Service Commission erred in finding petitioner Sawadjaan of having deliberately reporting false information and therefore guilty of Dishonesty and Conduct Prejudicial to the Best Interest of the Service and penalized with dismissal from the service. On 04 July 1995, the Honorable Supreme Court En Banc referred this petition to this Honorable Court pursuant to Revised Administrative Circular No. 1-95, which took effect on 01 June 1995. We do not find merit [in] the petition. Anent the first assignment of error, a reading of the records would reveal that petitioner raises for the first time the alleged failure of the Islamic Bank [AIIBP] to promulgate rules of procedure governing the adjudication and disposition of administrative cases involving its personnel. It is a rule that issues not properly brought and ventilated below may not be raised for the first time on appeal, save in exceptional circumstances (Casolita, Sr. v. Court of Appeals, 275 SCRA 257) none of which, however, obtain in this case. Granting arguendo that the issue is of such exceptional character that the Court may take cognizance of the same, still, it must fail. Section 26 of Republic Act No. 6848 (1990) provides: Section 26. Powers of the Board. The Board of Directors shall have the broadest powers to manage the Islamic Bank, x x x The Board shall adopt policy guidelines necessary to carry out effectively the provisions of this Charter as well as internal rules and regulations necessary for the conduct of its Islamic banking business and all matters related to personnel organization, office functions and salary administration. (Italics ours) On the other hand, Item No. 2 of Executive Order No. 26 (1992) entitled "Prescribing Procedure and Sanctions to Ensure Speedy Disposition of Administrative Cases" directs, "all administrative agencies" to "adopt and include in their respective Rules of Procedure" provisions designed to abbreviate administrative proceedings. The above two (2) provisions relied upon by petitioner does not require the Islamic Bank [AIIBP] to promulgate rules of procedure before administrative discipline may be imposed upon its employees.

The internal rules of procedures ordained to be adopted by the Board refers to that necessary for the conduct of its Islamic banking business and all matters related to "personnel organization, office functions and salary administration." On the contrary, Section 26 of RA 6848 gives the Board of Directors of the Islamic Bank the "broadest powers to manage the Islamic Bank." This grant of broad powers would be an idle ceremony if it would be powerless to discipline its employees. The second assignment of error must likewise fail. The issue is raised for the first time via this petition forcertiorari. Petitioner submitted himself to the jurisdiction of the CSC. Although he could have raised the alleged lack of jurisdiction in his Motion for Reconsideration of Resolution No. 944483 of the CSC, he did not do so. By filing the Motion for Reconsideration, he is estopped from denying the CSCs jurisdiction over him, as it is settled rule that a party who asks for an affirmative relief cannot later on impugn the action of the tribunal as without jurisdiction after an adverse result was meted to him. Although jurisdiction over the subject matter of a case may be objected to at any stage of the proceedings even on appeal, this particular rule, however, means that jurisdictional issues in a case can be raised only during the proceedings in said case and during the appeal of said case (Aragon v. Court of Appeals, 270 SCRA 603). The case at bar is a petition [for] certiorari and not an appeal. But even on the merits the argument must falter. Item No. 1 of CSC Resolution No. 93-2387 dated 29 June 1993, provides: Decisions in administrative cases involving officials and employees of the civil service appealable to the Commission pursuant to Section 47 of Book V of the Code (i.e., Administrative Code of 1987) including personnel actions such as contested appointments shall now be appealed directly to the Commission and not to the MSPB. In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it was categorically held: . . . The functions of the MSPB relating to the determination of administrative disciplinary cases were, in other words, re-allocated to the Commission itself. Be that as it may, "(i)t is hornbook doctrine that in order `(t)o ascertain whether a court (in this case, administrative agency) has jurisdiction or not, the provisions of the law should be inquired into. Furthermore, `the jurisdiction of the court must appear clearly from the statute law or it will not be held to exist."(Azarcon v. Sandiganbayan, 268 SCRA 747, 757) From the provision of law abovecited, the Civil Service Commission clearly has jurisdiction over the Administrative Case against petitioner. Anent the third assignment of error, we likewise do not find merit in petitioners proposition that he should not be liable, as in the first place, he was not qualified to perform the functions of appraiser/investigator because he lacked the necessary training and expertise, and therefore, should not have been found dishonest by the Board of Directors of Islamic Bank [AIIBP] and the CSC. Petitioner himself admits that the position of appraiser/inspector is "one of the most serious [and] sensitive job in the banking operations." He should have been aware that accepting such a designation, he is obliged to perform the task at hand by the exercise of more than ordinary prudence. As appraiser/investigator, he is expected, among others, to check the authenticity of the documents presented by the borrower by comparing them with the originals on file with the proper government office. He should have made it sure that the technical descriptions in the location plan on file with the Bureau of Lands of Marikina, jibe with that indicated in the TCT of the collateral offered by CAMEC, and that the mortgage in favor of the Islamic Bank was duly annotated at the back of the copy of the TCT kept by the Register of Deeds of Marikina. This, petitioner failed to do, for which he must be held liable. That he did not profit from his false report is of no moment. Neither

the fact that it was not deliberate or willful, detracts from the nature of the act as dishonest. What is apparent is he stated something to be a fact, when he really was not sure that it was so. Wherefore, above premises considered, the instant Petition is DISMISSED, and the assailed Resolutions of the Civil Service Commission are hereby AFFIRMED. On 24 March 1999, Sawadjaans counsel notified the court a quo of his change of address,11 but apparently neglected to notify his client of this fact. Thus, on 23 July 1999, Sawadjaan, by himself, filed a Motion for New Trial12 in the Court of Appeals based on the following grounds: fraud, accident, mistake or excusable negligence and newly discovered evidence. He claimed that he had recently discovered that at the time his employment was terminated, the AIIBP had not yet adopted its corporate by-laws. He attached a Certification13 by the Securities and Exchange Commission (SEC) that it was only on 27 May 1992 that the AIIBP submitted its draft by-laws to the SEC, and that its registration was being held in abeyance pending certain corrections being made thereon. Sawadjaan argued that since the AIIBP failed to file its by-laws within 60 days from the passage of Rep. Act No. 6848, as required by Sec. 51 of the said law, the bank and its stockholders had "already forfeited its franchise or charter, including its license to exist and operate as a corporation,"14 and thus no longer have "the legal standing and personality to initiate an administrative case." Sawadjaans counsel subsequently adopted his motion, but requested that it be treated as a motion for reconsideration.15 This motion was denied by the court a quo in its Resolution of 15 December 1999.16 Still disheartened, Sawadjaan filed the present petition for certiorari under Rule 65 of the Rules of Court challenging the above Decision and Resolution of the Court of Appeals on the ground that the court a quo erred: i) in ignoring the facts and evidences that the alleged Islamic Bank has no valid by-laws; ii) in ignoring the facts and evidences that the Islamic Bank lost its juridical personality as a corporation on 16 April 1990; iii) in ignoring the facts and evidences that the alleged Islamic Bank and its alleged Board of Directors have no jurisdiction to act in the manner they did in the absence of a valid by-laws; iv) in not correcting the acts of the Civil Service Commission who erroneously rendered the assailed Resolutions No. 94-4483 and No. 95-2754 as a result of fraud, falsification and/or misrepresentations committed by Farouk A. Carpizo and his group, including Roberto F. de Ocampo; v) in affirming an unconscionably harsh and/or excessive penalty; and vi) in failing to consider newly discovered evidence and reverse its decision accordingly. Subsequently, petitioner Sawadjaan filed an "Ex-parte Urgent Motion for Additional Extension of Time to File a Reply (to the Comments of Respondent Al-Amanah Investment Bank of the Philippines),17 Reply (to Respondents Consolidated Comment,)18 and Reply (to the Alleged Comments of Respondent Al-Amanah Islamic Bank of the Philippines)."19 On 13 October 2000, he informed this Court that he had terminated his lawyers services, and, by himself, prepared and filed the following: 1) Motion for New Trial;20 2) Motion to Declare Respondents in Default and/or Having Waived their Rights to Interpose Objection to Petitioners Motion for New Trial;21 3) Ex-Parte Urgent Motions to Punish Attorneys Amado D. Valdez, Elpidio J. Vega, Alda G. Reyes, Dominador R. Isidoro, Jr., and Odilon A. Diaz for Being in Contempt of Court & to Inhibit them from Appearing in this Case Until they Can Present Valid Evidence of Legal Authority;22 4) Opposition/Reply (to Respondent AIIBPs Alleged Comment);23 5) Ex-ParteUrgent Motion to Punish Atty. Reynaldo A. Pineda for Contempt of Court and the Issuance of a Commitment Order/Warrant for His Arrest;24 6) Reply/Opposition (To the Formal Notice of Withdrawal of Undersigned Counsel as Legal Counsel for the Respondent Islamic Bank with Opposition to Petitioners Motion to Punish Undersigned Counsel for Contempt of Court for the Issuance of a Warrant of Arrest);25 7) Memorandum for Petitioner;26 8) Opposition to SolGens Motion for Clarification with Motion for Default and/or Waiver of Respondents to File their Memorandum;27 9) Motion for Contempt of Court and Inhibition/Disqualification with

Opposition to OGCCs Motion for Extension of Time to File Memorandum;28 10) Motion for Enforcement (In Defense of the Rule of Law);29 11) Motion and Opposition (Motion to Punish OGCCs Attorneys Amado D. Valdez, Efren B. Gonzales, Alda G. Reyes, Odilon A. Diaz and Dominador R. Isidoro, Jr., for Contempt of Court and the Issuance of a Warrant for their Arrest; and Opposition to their Alleged "Manifestation and Motion" Dated February 5, 2002);30 12) Motion for Reconsideration of Item (a) of Resolution dated 5 February 2002 with Supplemental Motion for Contempt of Court;31 13) Motion for Reconsideration of Portion of Resolution Dated 12 March 2002;32 14) Ex-Parte Urgent Motion for Extension of Time to File Reply Memorandum (To: CSC and AIIBPs Memorandum);33 15) Reply Memorandum (To: CSCs Memorandum) With Ex-Parte Urgent Motion for Additional Extension of time to File Reply Memorandum (To: AIIBPs Memorandum);34 and 16) Reply Memorandum (To: OGCCs Memorandum for Respondent AIIBP).35 Petitioners efforts are unavailing, and we deny his petition for its procedural and substantive flaws. The general rule is that the remedy to obtain reversal or modification of the judgment on the merits is appeal. This is true even if the error, or one of the errors, ascribed to the court rendering the judgment is its lack of jurisdiction over the subject matter, or the exercise of power in excess thereof, or grave abuse of discretion in the findings of fact or of law set out in the decision.36 The records show that petitioners counsel received the Resolution of the Court of Appeals denying his motion for reconsideration on 27 December 1999. The fifteen day reglamentary period to appeal under Rule 45 of the Rules of Court therefore lapsed on 11 January 2000. On 23 February 2000, over a month after receipt of the resolution denying his motion for reconsideration, the petitioner filed his petition for certiorari under Rule 65. It is settled that a special civil action for certiorari will not lie as a substitute for the lost remedy of appeal,37 and though there are instances38 where the extraordinary remedy of certiorari may be resorted to despite the availability of an appeal,39 we find no special reasons for making out an exception in this case. Even if we were to overlook this fact in the broader interests of justice and treat this as a special civil action forcertiorari under Rule 65,40 the petition would nevertheless be dismissed for failure of the petitioner to show grave abuse of discretion. Petitioners recurrent argument, tenuous at its very best, is premised on the fact that since respondent AIIBP failed to file its by-laws within the designated 60 days from the effectivity of Rep. Act No. 6848, all proceedings initiated by AIIBP and all actions resulting therefrom are a patent nullity. Or, in his words, the AIIBP and its officers and Board of Directors, . . . [H]ave no legal authority nor jurisdiction to manage much less operate the Islamic Bank, file administrative charges and investigate petitioner in the manner they did and allegedly passed Board Resolution No. 2309 on December 13, 1993 which is null and void for lack of an (sic) authorized and valid by-laws. The CIVIL SERVICE COMMISSION was therefore affirming, erroneously, a null and void "Resolution No. 2309 dated December 13, 1993 of the Board of Directors of Al-Amanah Islamic Investment Bank of the Philippines" in CSC Resolution No. 94-4483 dated August 11, 1994. A motion for reconsideration thereof was denied by the CSC in its Resolution No. 95-2754 dated April 11, 1995. Both acts/resolutions of the CSC are erroneous, resulting from fraud, falsifications and misrepresentations of the alleged Chairman and CEO Roberto F. de Ocampo and the alleged Director Farouk A. Carpizo and his group at the alleged Islamic Bank.41 Nowhere in petitioners voluminous pleadings is there a showing that the court a quo committed grave abuse of discretion amounting to lack or excess of jurisdiction reversible by a petition for certiorari. Petitioner already raised the question of AIIBPs corporate existence and lack of

jurisdiction in his Motion for New Trial/Motion for Reconsideration of 27 May 1997 and was denied by the Court of Appeals. Despite the volume of pleadings he has submitted thus far, he has added nothing substantial to his arguments. The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business, has shareholders, corporate officers, a board of directors, assets, and personnel. It is, in fact, here represented by the Office of the Government Corporate Counsel, "the principal law office of government-owned corporations, one of which is respondent bank."42 At the very least, by its failure to submit its by-laws on time, the AIIBP may be considered ade facto corporation43 whose right to exercise corporate powers may not be inquired into collaterally in any private suit to which such corporations may be a party.44 Moreover, a corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the Certificate of Registration of Corporations,45details the procedures and remedies that may be availed of before an order of revocation can be issued. There is no showing that such a procedure has been initiated in this case. In any case, petitioners argument is irrelevant because this case is not a corporate controversy, but a labor dispute; and it is an employers basic right to freely select or discharge its employees, if only as a measure of self-protection against acts inimical to its interest.46 Regardless of whether AIIBP is a corporation, a partnership, a sole proprietorship, or a sari-sari store, it is an undisputed fact that AIIBP is the petitioners employer. AIIBP chose to retain his services during its reorganization, controlled the means and methods by which his work was to be performed, paid his wages, and, eventually, terminated his services.47 And though he has had ample opportunity to do so, the petitioner has not alleged that he is anything other than an employee of AIIBP. He has neither claimed, nor shown, that he is a stockholder or an officer of the corporation. Having accepted employment from AIIBP, and rendered his services to the said bank, received his salary, and accepted the promotion given him, it is now too late in the day for petitioner to question its existence and its power to terminate his services. One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation.48
1avvphi1

Even if we were to consider the facts behind petitioner Sawadjaans dismissal from service, we would be hard pressed to find error in the decision of the AIIBP. As appraiser/investigator, the petitioner was expected to conduct an ocular inspection of the properties offered by CAMEC as collaterals and check the copies of the certificates of title against those on file with the Registry of Deeds. Not only did he fail to conduct these routine checks, but he also deliberately misrepresented in his appraisal report that after reviewing the documents and conducting a site inspection, he found the CAMEC loan application to be in order. Despite the number of pleadings he has filed, he has failed to offer an alternative explanation for his actions. When he was informed of the charges against him and directed to appear and present his side on the matter, the petitioner sent instead a memorandum questioning the fairness and impartiality of the members of the investigating committee and refusing to recognize their jurisdiction over him. Nevertheless, the investigating committee rescheduled the hearing to give the petitioner another chance, but he still refused to appear before it. Thereafter, witnesses were presented, and a decision was rendered finding him guilty of dishonesty and dismissing him from service. He sought a reconsideration of this decision and the same

committee whose impartiality he questioned reduced their recommended penalty to suspension for six months and one day. The board of directors, however, opted to dismiss him from service. On appeal to the CSC, the Commission found that Sawadjaans failure to perform his official duties greatly prejudiced the AIIBP, for which he should be held accountable. It held that: . . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was remiss in the performance of his duties as appraiser/inspector. Had respondent performed his duties as appraiser/inspector, he could have easily noticed that the property located at Balintawak, Caloocan City covered by TCT No. C52576 and which is one of the properties offered as collateral by CAMEC is encumbered to Divina Pablico. Had respondent reflected such fact in his appraisal/inspection report on said property the ISLAMIC BANK would not have approved CAMECs loan of P500,000.00 in 1987 and CAMECs P5 Million loan in 1988, respondent knowing fully well the Banks policy of not accepting encumbered properties as collateral. Respondent SAWADJAANs reprehensible act is further aggravated when he failed to check and verify from the Registry of Deeds of Marikina the authenticity of the property located at Mayamot, Antipolo, Rizal covered by TCT No. N-130671 and which is one of the properties offered as collateral by CAMEC for its P5 Million loan in 1988. If he only visited and verified with the Register of Deeds of Marikina the authenticity of TCT No. N-130671 he could have easily discovered that TCT No. N130671 is fake and the property described therein non-existent. ... This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform his official duties resulted to the prejudice and substantial damage to the ISLAMIC BANK for which he should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.49 From the foregoing, we find that the CSC and the court a quo committed no grave abuse of discretion when they sustained Sawadjaans dismissal from service. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.50 The records show that the respondents did none of these; they acted in accordance with the law. WHEREFORE, the petition is DISMISSED. The Decision of the Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil Service Commission, and its Resolution of 15 December 1999 are hereby affirmed. Costs against the petitioner. SO ORDERED.

SECOND DIVISION

PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. PANTALEON, Petitioners,

G.R. No. 160545 Present:

versus

NACHURA, J., BRION, Acting Chairperson, DEL CASTILLO, ABAD, and PEREZ, JJ.

ARTHUR F. MENCHAVEZ , Respondent.

Promulgated: March 9, 2010

x------------------------------------------------------------------------------------------x DECISION BRION, J.: We resolve in this Decision the petition for review on certiorari[1] filed by petitioners Prisma Construction & Development Corporation (PRISMA) and Rogelio S. Pantaleon (Pantaleon) (collectively, petitioners) who seek to reverse and set aside the Decision[2] dated May 5, 2003 and the Resolution[3] dated October 22, 2003 of the Former Ninth Division of the Court of Appeals ( CA) in CA-G.R. CV No. 69627. The assailed CA Decision affirmed the Decision of the Regional Trial Court (RTC), Branch 73, Antipolo City in Civil Case No. 97-4552 that held the petitioners liable for payment of P3,526,117.00 to respondent Arthur F. Menchavez (respondent), but modified the interest rate from 4% per month to 12% per annum, computed from the filing of the complaint to full payment. The assailed CA Resolution denied the petitioners Motion for Reconsideration.

FACTUAL BACKGROUND The facts of the case, gathered from the records, are briefly summarized below. On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained a P1,000,000.00[4] loan from the respondent, with a monthly interest of P40,000.00 payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months,[5] under the following schedule of payments:
January 8, 1994 . P40,000.00 February 8, 1994 ... P40,000.00 March 8, 1994 ... P40,000.00 April 8, 1994 . P40,000.00 May 8, 1994 .. P40,000.00 June 8, 1994 P1,040,000.00[6] Total P1,240,000.00

To secure the payment of the loan, Pantaleon issued a promissory note[7] that states:
I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY THOUSAND PESOS (P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez, representing a six-month loan payable according to the following schedule: January 8, 1994 . P40,000.00 February 8, 1994 ... P40,000.00 March 8, 1994 ... P40,000.00 April 8, 1994 . P40,000.00 May 8, 1994 .. P40,000.00 June 8, 1994 P1,040,000.00 The checks corresponding to the above amounts are hereby acknowledged.[8]

and six (6) postdated checks corresponding to the schedule of payments. Pantaleon signed the promissory note in his personal capacity,[9] and as duly authorized by

the Board of Directors of PRISMA.[10] The petitioners failed to completely pay the loan within the stipulated six (6)-month period. From September 8, 1994 to January 4, 1997, the petitioners paid the following amounts to the respondent:
September 8, 1994 P320,000.00 October 8, 1995.P600,000.00 November 8, 1995.....P158,772.00 January 4, 1997 P30,000.00[11]

As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the petitioners still had an outstanding balance ofP1,364,151.00 as of January 4, 1997, to which it applied a 4% monthly interest.[12] Thus, on August 28, 1997, the respondent filed a complaint for sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest, P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.[13] In their Answer dated October 6, 1998, the petitioners admitted the loan of P1,240,000.00, but denied the stipulation on the 4% monthly interest, arguing that the interest was not provided in the promissory note. Pantaleon also denied that he made himself personally liable and that he made representations that the loan would be repaid within six (6) months.[14] THE RTC RULING The RTC rendered a Decision on October 27, 2000 finding that the respondent issued a check for P1,000,000.00 in favor of the petitioners for a loan that would earn an interest of 4% or P40,000.00 per month, or a total of P240,000.00 for a 6-month period. It noted that the petitioners made several

payments amounting to P1,228,772.00, but they were still indebted to the respondent for P3,526,117.00 as of February 11,[15] 1999 after considering the 4% monthly interest. The RTC observed that PRISMA was a one-man corporation of Pantaleon and used this circumstance to justify the piercing of the veil of corporate fiction. Thus, the RTC ordered the petitioners to jointly and severally pay the respondent the amount of P3,526,117.00 plus 4% per month interest from February 11, 1999 until fully paid.[16] The petitioners elevated the case to the CA via an ordinary appeal under Rule 41 of the Rules of Court, insisting that there was no express stipulation on the 4% monthly interest. THE CA RULING The CA decided the appeal on May 5, 2003. The CA found that the parties agreed to a 4% monthly interest principally based on the board resolution that authorized Pantaleon to transact a loan with an approved interest of not more than 4% per month. The appellate court, however, noted that the interest of 4% per month, or 48% per annum, was unreasonable and should be reduced to 12% per annum. The CA affirmed the RTCs finding that PRISMA was a mere instrumentality of Pantaleon that justified the piercing of the veil of corporate fiction. Thus, the CA modified the RTC Decision by imposing a 12% per annum interest, computed from the filing of the complaint until finality of judgment, and thereafter, 12% from finality until fully paid.[17] After the CA's denial[18] of their motion for reconsideration,[19] the petitioners filed the present petition for review on certiorari under Rule 45 of the Rules of Court. THE PETITION

The petitioners submit that the CA mistakenly relied on their board resolution to conclude that the parties agreed to a 4% monthly interest because the board resolution was not an evidence of a loan or forbearance of money, but merely an authorization for Pantaleon to perform certain acts, including the power to enter into a contract of loan. The expressed mandate of Article 1956 of the Civil Code is that interest due should be stipulated in writing, and no such stipulation exists. Even assuming that the loan is subject to 4% monthly interest, the interest covers the six (6)-month period only and cannot be interpreted to apply beyond it. The petitioners also point out the glaring inconsistency in the CA Decision, which reduced the interest from 4% per month or 48% per annum to 12% per annum, but failed to consider that the amount of P3,526,117.00 that the RTC ordered them to pay includes the compounded 4% monthly interest. THE CASE FOR THE RESPONDENT The respondent counters that the CA correctly ruled that the loan is subject to a 4% monthly interest because the board resolution is attached to, and an integral part of, the promissory note based on which the petitioners obtained the loan. The respondent further contends that the petitioners are estopped from assailing the 4% monthly interest, since they agreed to pay the 4% monthly interest on the principal amount under the promissory note and the board resolution. THE ISSUE The core issue boils down to whether the parties agreed to the 4% monthly interest on the loan. If so, does the rate of interest apply to the 6-month payment period only or until full payment of the loan? OUR RULING

We find the petition meritorious. Interest due should be stipulated in writing; otherwise, 12% per annum Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. [20] When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations governs.[21] In such cases, courts have no authority to alter the contract by construction or to make a new contract for the parties; a court's duty is confined to the interpretation of the contract the parties made for themselves without regard to its wisdom or folly, as the court cannot supply material stipulations or read into the contract words the contract does not contain.[22] It is only when the contract is vague and ambiguous that courts are permitted to resort to the interpretation of its terms to determine the parties intent. In the present case, the respondent issued a check for P1,000,000.00.[23] In turn, Pantaleon, in his personal capacity and as authorized by the Board, executed the promissory note quoted above. Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather a fixed sum equivalent to this rate was agreed upon. Article 1956 of the Civil Code specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. Under this provision, the payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the

payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. Thus, we held in Tan v. Valdehueza[24] and Ching v. Nicdao[25] that collection of interest without any stipulation in writing is prohibited by law. Applying this provision, we find that the interest of P40,000.00 per month corresponds only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the legal interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals:[26]
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. (Emphasis supplied)

We reiterated this ruling in Security Bank and Trust Co. v. RTC-Makati, Br. 61,[27] Sulit v. Court of Appeals,[28] Crismina Garments, Inc. v. Court of Appeals,[29]Eastern Assurance and Surety Corporation v. Court of Appeals,[30] Sps. Catungal v. Hao,[31] Yong v. Tiu,[32] and Sps. Barrera v. Sps. Lorenzo.[33] Thus, the RTC and the CA misappreciated the facts of the case; they erred in finding that the parties agreed to a 4% interest, compounded by the application of this interest beyond the promissory notes six (6) -month period. The facts show that the parties agreed to the payment of a specific sum of money of P40,000.00 per month for six months, not to a 4% rate of interest payable within a six (6)-month period. Medel v. Court of Appeals not applicable

The CA misapplied Medel v. Court of Appeals[34] in finding that a 4% interest per month was unconscionable. In Medel, the debtors in a P500,000.00 loan were required to pay an interest of 5.5% per month, a service charge of 2% per annum, and a penalty charge of 1% per month, plus attorneys fee equivalent to 25% of the amount due, until the loan is fully paid. Taken in conjunction with the stipulated service charge and penalty, we found the interest rate of 5.5% to be excessive, iniquitous, unconscionable, exorbitant and hence, contrary to morals, thereby rendering the stipulation null and void. Applying Medel, we invalidated and reduced the stipulated interest in Spouses Solangon v. Salazar[35] of 6% per month or 72% per annum interest on a P60,000.00 loan; inRuiz v. Court of Appeals,[36] of 3% per month or 36% per annum interest on a P3,000,000.00 loan; in Imperial v. Jaucian,[37] of 16% per month or 192% per annum interest on a P320,000.00 loan; in Arrofo v. Quio,[38] of 7% interest per month or 84% per annum interest on a P15,000.00 loan; in Bulos, Jr. v. Yasuma,[39] of 4% per month or 48% per annum interest on a P2,500,000.00 loan; and in Chua v. Timan,[40] of 7% and 5% per month for loans totalling P964,000.00. We note that in all these cases, the terms of the loans were open-ended; the stipulated interest rates were applied for an indefinite period. Medel finds no application in the present case where no other stipulation exists for the payment of any extra amount except a specific sum of P40,000.00 per month on the principal of a loan payable within six months. Additionally, no issue on the excessiveness of the stipulated amount of P40,000.00 per month was ever put in issue by the petitioners;[41] they only assailed the application of a 4% interest rate, since it was not agreed upon.

It is a familiar doctrine in obligations and contracts that the parties are bound by the stipulations, clauses, terms and conditions they have agreed to, which is the law between them, the only limitation being that these stipulations, clauses, terms and conditions are not contrary to law, morals, public order or public policy.[42] The payment of the specific sum of money of P40,000.00 per month was voluntarily agreed upon by the petitioners and the respondent. There is nothing from the records and, in fact, there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with the respondent. Therefore, as agreed by the parties, the loan of P1,000,000.00 shall earn P40,000.00 per month for a period of six (6) months, or from December 8, 1993 to June 8, 1994, for a total principal and interest amount of P1,240,000.00. Thereafter, interest at the rate of 12% per annum shall apply. The amounts already paid by the petitioners during the pendency of the suit, amounting to P1,228,772.00 as of February 12, 1999,[43] should be deducted from the total amount due, computed as indicated above. We remand the case to the trial court for the actual computation of the total amount due. Doctrine of Estoppel not applicable The respondent submits that the petitioners are estopped from disputing the 4% monthly interest beyond the six-month stipulated period, since they agreed to pay this interest on the principal amount under the promissory note and the board resolution. We disagree with the respondents contention. We cannot apply the doctrine of estoppel in the present case since the facts and circumstances, as established by the record, negate its application. Under the promissory note,[44] what the petitioners agreed to was the payment of a specific sum of P40,000.00 per month for six months not a 4% rate of interest per month for six (6) months on a loan whose principal is P1,000,000.00, for the

total amount of P1,240,000.00. Thus, no reason exists to place the petitioners in estoppel, barring them from raising their present defenses against a 4% per month interest after the six-month period of the agreement. The board resolution,[45] on the other hand, simply authorizes Pantaleon to contract for a loan with a monthly interest of not more than 4%. This resolution merely embodies the extent of Pantaleons authority to contract and does not create any right or obligation except as between Pantaleon and the board. Again, no cause exists to place the petitioners in estoppel. Piercing the corporate veil unfounded We find it unfounded and unwarranted for the lower courts to pierce the corporate veil of PRISMA. The doctrine of piercing the corporate veil applies only in three (3) basic instances, namely: a) when the separate and distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.[46] In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.[47] In the present case, we see no competent and convincing evidence of any wrongful, fraudulent or unlawful act on the part of PRISMA to justify piercing its corporate veil. While Pantaleon denied personal liability in his Answer, he made himself accountable in the promissory note in his personal capacity and as authorized by the Board Resolution of PRISMA.[48] With this statement of

personal liability and in the absence of any representation on the part of PRISMA that the obligation is all its own because of its separate corporate identity, we see no occasion to consider piercing the corporate veil as material to the case. WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the Decision dated May 5, 2003 of the Court of Appeals in CA-G.R. CV No. 69627. The petitioners loan of P1,000,000.00 shall bear interest of P40,000.00 per month for six (6) months from December 8, 1993 as indicated in the promissory note. Any portion of this loan, unpaid as of the end of the six-month payment period, shall thereafter bear interest at 12% per annum. The total amount due and unpaid, including accrued interests, shall bear interest at 12% per annum from the finality of this Decision. Let this case be REMANDED to the Regional Trial Court, Branch 73, Antipolo City for the proper computation of the amount due as herein directed, with due regard to the payments the petitioners have already remitted. Costs against the respondent. SO ORDERED.

FIRST DIVISION
JOSE C. TUPAZ IV and PETRONILA C. TUPAZ, Petitioners, Present: Davide, Jr., C.J., Chairman, - versus Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ. G.R. No. 145578

THE COURT OF APPEALS and BANK OF THE PHILIPPINE ISLANDS, Respondents. Promulgated:

November 18, 2005

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

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the Decision[2] of the Court of Appeals dated 7 September 2000 and its Resolution dated 18 October 2000. The 7 September 2000 Decision affirmed the ruling of the Regional Trial Court, Makati, Branch 144 in a case for estafa under Section 13, Presidential Decree No. 115. The Court of Appeals Resolution of 18 October 2000 denied petitioners motion for reconsideration.

The Facts

Petitioners Jose C. Tupaz IV and Petronila C. Tupaz (petitioners) were VicePresident for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation (El Oro Corporation). El Oro Corporation had a contract with the Philippine Army to supply the latter with survival bolos.

To finance the purchase of the raw materials for the survival bolos, petitioners, on behalf of El Oro Corporation, applied with respondent Bank of the Philippine Islands (respondent bank) for two commercial letters of credit. The letters of credit were in favor of El Oro Corporations suppliers, Tanchaoco Manufacturing Incorporated[3](Tanchaoco Incorporated) and Maresco Rubber and Retreading Corporation[4] (Maresco Corporation). Respondent bank granted petitioners application and issued Letter of Credit No. 2-00896-3 for P564,871.05 to Tanchaoco Incorporated and Letter of Credit No. 2-00914-5 for P294,000 to Maresco Corporation.

Simultaneous with the issuance of the letters of credit, petitioners signed trust receipts in favor of respondent bank. On 30 September 1981, petitioner Jose C. Tupaz IV (petitioner Jose Tupaz) signed, in his personal capacity, a trust receipt corresponding to Letter of Credit No. 2-00896-3 (for P564,871.05). Petitioner Jose Tupaz bound himself to sell the goods covered by the letter of credit and to remit the proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 29 December 1981.

On 9 October 1981, petitioners signed, in their capacities as officers of El Oro Corporation, a trust receipt corresponding to Letter of Credit No. 2-00914-5 (for P294,000). Petitioners bound themselves to sell the goods covered by that letter of credit and to remit the proceeds to respondent bank, if sold, or to return the goods, if not sold, on or before 8 December 1981.

After Tanchaoco Incorporated and Maresco Corporation delivered the raw materials to El Oro Corporation, respondent bank paid the former P564,871.05 and P294,000, respectively.

Petitioners did not comply with their undertaking under the trust receipts. Respondent bank made several demands for payments but El Oro Corporation made partial payments only. On 27 June 1983 and 28 June 1983, respondent banks counsel[5] and its representative[6] respectively sent final demand letters to El Oro Corporation. El Oro Corporation replied that it could not fully pay its debt because the Armed Forces of the Philippines had delayed paying for the survival bolos.

Respondent bank charged petitioners with estafa under Section 13, Presidential Decree No. 115 (Section 13)[7] or Trust Receipts Law (PD 115). After preliminary investigation, the then Makati Fiscals Office found probable cause to indict petitioners. The Makati Fiscals Office filed the corresponding Informations (docketed as Criminal Case Nos. 8848 and 8849) with the Regional Trial Court, Makati, on 17 January 1984 and the cases were raffled to Branch 144 (trial court) on 20 January 1984. Petitioners pleaded not guilty to the charges and trial ensued. During the trial, respondent bank presented evidence on the civil aspect of the cases.

The Ruling of the Trial Court

On 16 July 1992, the trial court rendered judgment acquitting petitioners of estafa on reasonable doubt. However, the trial court found petitioners solidarily liable with El Oro Corporation for the balance of El Oro Corporations principal debt under the trust receipts. The dispositive portion of the trial courts Decision provides:

WHEREFORE, judgment is hereby rendered ACQUITTING both accused Jose C. Tupaz, IV and Petronila Tupaz based upon reasonable doubt.

However, El Oro Engraver Corporation, Jose C. Tupaz, IV and Petronila Tupaz, are hereby ordered, jointly and solidarily, to pay the Bank of the Philippine Islands the outstanding principal obligation of P624,129.19 (as of January 23, 1992) with the stipulated interest at the rate of 18% per annum; plus 10% of the total amount due as attorneys fees; P5,000.00 as expenses of litigation; and costs of the suit.[8]

In holding petitioners civilly liable with El Oro Corporation, the trial court held:

[S]ince the civil action for the recovery of the civil liability is deemed impliedly instituted with the criminal action, as in fact the prosecution thereof was actively handled by the private prosecutor, the Court believes that the El Oro Engraver Corporation and both accused Jose C. Tupaz and Petronila Tupaz, jointly and solidarily should be held civilly liable to the Bank of the Philippine Islands. The mere fact that they were unable to collect in full from the AFP and/or the Department of National Defense the proceeds of the sale of the delivered survival bolos manufactured from the raw materials covered by the trust receipt agreements is no valid defense to the civil claim of the said complainant and surely could not wipe out their civil obligation. After all, they are free to institute an action to collect the same.[9]

Petitioners appealed to the Court of Appeals. Petitioners contended that: (1) their acquittal operates to extinguish *their+ civil liability and (2) at any rate, they are not personally liable for El Oro Corporations debts.

The Ruling of the Court of Appeals

In its Decision of 7 September 2000, the Court of Appeals affirmed the trial courts ruling. The appellate court held:

It is clear from [Section 13, PD 115] that civil liability arising from the violation of the trust receipt agreement is distinct from the criminal

liability imposed therein. In the case of Vintola vs. Insular Bank of Asia and America, our Supreme Court held that acquittal in the estafa case (P.D. 115) is no bar to the institution of a civil action for collection. This is because in such cases, the civil liability of the accused does not arise ex delicto but rather based ex contractu and as such is distinct and independent from any criminal proceedings and may proceed regardless of the result of the latter. Thus, an independent civil action to enforce the civil liability may be filed against the corporation aside from the criminal action against the responsible officers or employees.

xxx

[W]e hereby hold that the acquittal of the accused-appellants from the criminal charge of estafa did not operate to extinguish their civil liability under the letter of credit-trust receipt arrangement with plaintiff-appellee, with which they dealt both in their personal capacity and as officers of El Oro Engraver Corporation, the letter of credit applicant and principal debtor.

Appellants argued that they cannot be held solidarily liable with their corporation, El Oro Engraver Corporation, alleging that they executed the subject documents including the trust receipt agreements only in their capacity as such corporate officers. They said that these instruments are mere pro-forma and that they executed these instruments on the strength of a board resolution of said corporation authorizing them to apply for the opening of a letter of credit in favor of their suppliers as well as to execute the other documents necessary to accomplish the same.

Such contention, however, is contradicted by the evidence on record. The trust receipt agreement indicated in clear and unmistakable terms that the accused signed the same as surety for the corporation and that they bound themselves directly and immediately liable in the event of default with respect to the obligation under the letters of credit which were made part of the said agreement, without need of demand. Even in the application for the letter of credit, it is likewise clear that the undertaking of the accused is that of a surety as indicated *in+ the following words: In consideration of your establishing the commercial letter of credit herein applied for substantially in accordance with the foregoing, the undersigned Applicant and Surety hereby agree, jointly and severally, to each and all stipulations, provisions and conditions on the reverse side hereof.

xxx

Having contractually agreed to hold themselves solidarily liable with El Oro Engraver Corporation under the subject trust receipt agreements with appellee Bank of the Philippine Islands, herein accused-appellants may not, therefore, invoke the separate legal personality of the said corporation to evade their civil liability under the letter of credit-trust receipt arrangement with said appellee, notwithstanding their acquittal in the criminal cases filed against them. The trial court thus did not err in holding the appellants solidarily liable with El Oro Engraver Corporation for the outstanding principal obligation of P624,129.19 (as of January 23, 1992) with the stipulated interest at the rate of 18% per annum, plus 10% of the total amount due as attorneys fees, P5,000.00 as expenses of litigation and costs of suit.[10]

Hence, this petition. Petitioners contend that:

1.

A JUDGMENT OF ACQUITTAL OPERATE[S] TO EXTINGUISH THE CIVIL LIABILITY OF PETITIONERS[;]

2.

GRANTING WITHOUT ADMITTING THAT THE QUESTIONED OBLIGATION WAS INCURRED BY THE CORPORATION, THE SAME IS NOT YET DUE AND PAYABLE;

3.

GRANTING THAT THE QUESTIONED OBLIGATION WAS ALREADY DUE AND PAYABLE, xxx PETITIONERS ARE NOT PERSONALLY LIABLE TO xxx RESPONDENT BANK, SINCE THEY SIGNED THE LETTER[S] OF CREDIT AS SURETY AS OFFICERS OF EL ORO, AND THEREFORE, AN EXCLUSIVE LIABILITY OF EL ORO; [AND]

4.

IN THE ALTERNATIVE, THE QUESTIONED TRANSACTIONS ARE SIMULATED AND VOID.[11]

The Issues

The petition raises these issues:

(1) Whether petitioners bound themselves personally liable for El Oro Corporations debts under the trust receipts; (2) If so (a) whether petitioners liability is solidary with El Oro Corporation; and (b) whether petitioners acquittal of estafa under Section 13, PD 115 extinguished their civil liability.

The Ruling of the Court

The petition is partly meritorious. We affirm the Court of Appeals ruling with the modification that petitioner Jose Tupaz is liable as guarantor of El Oro Corporations debt under the trust receipt dated 30 September 1981.

On Petitioners Undertaking Under the Trust Receipts

A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent.[12] As an exception, directors or officers are personally liable for the corporations debts only if they so contractually agree or stipulate.[13]

Here, the dorsal side of the trust receipts contains the following stipulation:
To the Bank of the Philippine Islands

In consideration of your releasing to under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said . I/we further agree that my/our liability in this guarantee shall be DIRECT AND IMMEDIATE, without any need whatsoever on your part to take any steps or exhaust any legal remedies that you may have against the said . before making demand upon me/us.[14](Capitalization in the original)

In the trust receipt dated 9 October 1981, petitioners signed below this clause as officers of El Oro Corporation. Thus, under petitioner Petronila Tupazs signature are the words Vice-PresTreasurer and under petitioner Jose Tupazs signature are the words Vice-PresOperations. By so signing that trust receipt, petitioners did not bind themselves personally liable for El Oro Corporations obligation. In Ong v. Court of Appeals,[15] a corporate representative signed a solidary guarantee clause in two trust receipts in his capacity as corporate representative. There, the Court held that the corporate representative did not undertake to guarantee personally the payment of the corporations debts, thus:
[P]etitioner did not sign in his personal capacity the solidary guarantee clause found on the dorsal portion of the trust receipts. Petitioner placed his signature after the typewritten words ARMCO INDUSTRIAL CORPORATION found at the end of the solidary guarantee clause. Evidently, petitioner did not undertake to guaranty personally the payment of the principal and interest of ARMAGRIs debt under the two trust receipts.

Hence, for the trust receipt dated 9 October 1981, we sustain petitioners claim that they are not personally liable for El Oro Corporations obligation.

For the trust receipt dated 30 September 1981, the dorsal portion of which petitioner Jose Tupaz signed alone, we find that he did so in his personal capacity. Petitioner Jose Tupaz did not indicate that he was signing as El Oro Corporations Vice-President for Operations. Hence, petitioner Jose Tupaz bound himself personally liable for El Oro Corporations debts. Not being a party to the trust receipt dated 30 September 1981, petitioner Petronila Tupaz is not liable under such trust receipt.

The Nature of Petitioner Jose Tupazs Liability Under the Trust Receipt Dated 30 September 1981

As stated, the dorsal side of the trust receipt dated 30 September 1981 provides:

To the Bank of the Philippine Islands

In consideration of your releasing to under the terms of this Trust Receipt the goods described herein, I/We, jointly and severally, agree and promise to pay to you, on demand, whatever sum or sums of money which you may call upon me/us to pay to you, arising out of, pertaining to, and/or in any way connected with, this Trust Receipt, in the event of default and/or non-fulfillment in any respect of this undertaking on the part of the said . I/we further agree

that my/our liability in this guarantee shall be DIRECT AND IMMEDIATE,without any need whatsoever on your part to take any steps or exhaust any legal remedies that you may have against the said . Before making demand upon me/us. (Underlining supplied; capitalization in the original)

The lower courts interpreted this to mean that petitioner Jose Tupaz bound himself solidarily liable with El Oro Corporation for the latters debt under that trust receipt.

This is error. In Prudential Bank v. Intermediate Appellate Court,[16] the Court interpreted a substantially identical clause[17] in a trust receipt signed by a corporate officer who bound himself personally liable for the corporations obligation. The petitioner in that case contended that the stipulation we jointly and severally agree and undertake rendered the corporate officer solidarily liable with the corporation. We dismissed this claim and held the corporate officer liable as guarantor only. The Court further ruled that had there been more than one signatories to the trust receipt, the solidary liability would exist between the guarantors. We held:

Petitioner [Prudential Bank] insists that by virtue of the clear wording of the xxx clause x x x we jointly and severally agree and undertake x x x, and the concluding sentence on exhaustion, *respondent+ Chis liability therein is solidary.

xxx

Our xxx reading of the questioned solidary guaranty clause yields no other conclusion than that the obligation of Chi is only that of a guarantor. This is further bolstered by the last sentence which speaks of waiver of exhaustion, which, nevertheless, is ineffective in this case because the space therein for the party whose property may not be exhausted was not filled up. Under Article 2058 of the Civil Code, the defense of exhaustion (excussion) may be raised by a guarantor before he may be held liable for the obligation. Petitioner likewise admits that the questioned provision is a solidary guarantyclause, thereby clearly distinguishing it from a contract of surety. It, however, described the guaranty as solidary between the guarantors; this would have been correct if two (2) guarantors had signed it. The clause we jointly and severally agree and undertake refers to the undertaking of the two (2) parties who are to sign it or to the liability existing between themselves. It does not refer to the undertaking between either one or both of them on the one hand and the petitioner on the other with respect to the liability described under the trust receipt. xxx

Furthermore, any doubt as to the import or true intent of the solidary guaranty clause should be resolved against the petitioner. The trust receipt, together with the questioned solidary guaranty clause, is on a form drafted and prepared solely by the petitioner; Chis participation therein is limited to the affixing of his signature thereon. It is, therefore, a contract of adhesion; as such, it must be strictly construed against the party responsible for its preparation.[18] (Underlining supplied; italicization in the original)

However, respondent banks suit against petitioner Jose Tupaz stands despite the Courts finding that he is liable as guarantor only. First, excussion is not a pre-requisite to secure judgment against a guarantor. The guarantor can still

demand deferment of the execution of the judgment against him until after the assets of the principal debtor shall have been exhausted.[19] Second, the benefit of excussion may be waived.[20] Under the trust receipt dated 30 September 1981, petitioner Jose Tupaz waived excussion when he agreed that his liability in *the+ guaranty shall be DIRECT AND IMMEDIATE, without any need whatsoever on xxx [the] part [of respondent bank] to take any steps or exhaust any legal remedies xxx. The clear import of this stipulation is that petitioner Jose Tupaz waived the benefit of excussion under his guarantee. As guarantor, petitioner Jose Tupaz is liable for El Oro Corporations principal debt and other accessory liabilities (as stipulated in the trust receipt and as provided by law) under the trust receipt dated 30 September 1981. That trust receipt (and the trust receipt dated 9 October 1981) provided for payment of attorneys fees equivalent to 10% of the total amount due and an interest at the rate of 7% per annum, or at such other rate as the bank may fix, from the date due until paid xxx.[21] In the applications for the letters of credit, the parties stipulated that drafts drawn under the letters of credit are subject to interest at the rate of 18% per annum.[22] The lower courts correctly applied the 18% interest rate per

annum considering that the face value of each of the trust receipts is based on the drafts drawn under the letters of credit. Based on the guidelines laid down in

Eastern Shipping Lines, Inc. v. Court of Appeals,[23] the accrued stipulated interest earns 12% interest per annum from the time of the filing of the Informations in the Makati Regional Trial Court on 17 January 1984. Further, the total amount due as of the date of the finality of this Decision will earn interest at 18% per annum until fully paid since this was the stipulated rate in the applications for the letters of credit.[24]

The accounting of El Oro Corporations debts as of 23 January 1992, which the trial court used, is no longer useful as it does not specify the amounts owing under each of the trust receipts. Hence, in the execution of this Decision, the trial court shall compute El Oro Corporations total liability under each of the trust receipts dated 30 September 1981 and 9 October 1981 based on the following formula:[25]

TOTAL AMOUNT DUE = [principal + interest + interest on interest] partial payments made[26] Interest = principal x 18 % per annum x no. of years from due date until finality of judgment
[27]

Interest on interest = interest computed as of the filing of the complaint (17 January 1984) x 12% x no. of years until finality of judgment

Attorneys fees is 10% of the total amount computed as of finality of judgment

Total amount due as of the date of finality of judgment will earn an interest of 18% per annum until fully paid.

In so delegating this task, we reiterate what we said in Rizal Commercial Banking Corporation v. Alfa RTW Manufacturing Corporation[28] where we also ordered the trial court to compute the amount of obligation due based on a formula substantially similar to that indicated above:
The total amount due xxx [under] the xxx contract[] xxx may be easily determined by the trial court through a simple mathematical computation based on the formula specified above. Mathematics is an exact science, the application of which needs no further proof from the parties.

Petitioner Jose Tupazs Acquittal did not Extinguish his Civil Liability

The rule is that where the civil action is impliedly instituted with the criminal action, the civil liability is not extinguished by acquittal

[w]here the acquittal is based on reasonable doubt xxx as only preponderance of evidence is required in civil cases; where the court expressly declares that the liability of the accused is not criminal but only civil in nature xxx as, for instance, in the felonies of estafa, theft, and malicious mischief committed by certain relatives who thereby incur only civil liability (See Art. 332, Revised Penal Code); and, where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquitted xxx.[29] (Emphasis supplied)

Here, respondent bank chose not to file a separate civil action[30] to recover payment under the trust receipts. Instead, respondent bank sought to recover payment in Criminal Case Nos. 8848 and 8849. Although the trial court acquitted petitioner Jose Tupaz, his acquittal did not extinguish his civil liability. As the Court of Appeals correctly held, his liability arose not from the criminal act of which he was acquitted (ex delito) but from the trust receipt contract (ex contractu) of 30 September 1981. Petitioner Jose Tupaz signed the trust receipt of 30 September 1981 in his personal capacity.

On the other Matters Petitioners Raise

Petitioners raise for the first time in this appeal the contention that El Oro Corporations debts under the trust receipts are not yet due and demandable.

Alternatively, petitioners assail the trust receipts as simulated. These assertions have no merit. Under the terms of the trust receipts dated 30 September 1981 and 9 October 1981, El Oro Corporations debts fell due on 29 December 1981 and 8 December 1981, respectively.

Neither is there merit to petitioners claim that the trust receipts were simulated. During the trial, petitioners did not deny applying for the letters of credit and subsequently executing the trust receipts to secure payment of the drafts drawn under the letters of credit.

WHEREFORE, we GRANT the petition in part. We AFFIRM the Decision of the Court of Appeals dated 7 September 2000 and its Resolution dated 18 October 2000 with the following MODIFICATIONS: 1) El Oro Engraver Corporation is principally liable for the total amount due under the trust receipts dated 30 September 1981 and 9 October 1981, as computed by the Regional Trial Court, Makati, Branch 144, upon finality of this Decision, based on the formula provided above; 2) Petitioner Jose C. Tupaz IV is liable for El Oro Engraver Corporations total debt under the trust receipt dated 30 September 1981 as thus computed by the Regional Trial Court, Makati, Branch 144; and

3) Petitioners Jose C. Tupaz IV and Petronila C. Tupaz are not liable under the trust receipt dated 9 October 1981.

SO ORDERED.

SECOND DIVISION LYNVIL FISHING ENTERPRISES, ROSENDO S. DE BORJA, Petitioners, Present: INC. and/or G.R. No. 181974

CARPIO, J., -versusChairperson, BRION, PEREZ, SERENO, and REYES, JJ. ANDRES G. ARIOLA, JESSIE D. ALCOVENDAS, JIMMY B. CALINAO AND LEOPOLDO G. SEBULLEN, Respondents. February 1, 2012 x---------------------- --------------------------x

Promulgated:

DECISION PEREZ, J.:

Before the Court is a Petition for Review on Certiorari[1] of the Decision[2] of the Fourteenth Division of the Court of Appeals in CA-G.R. SP No. 95094 dated 10 September 2007, granting the Writ of Certiorari prayed for under Rule 65 of the 1997 Revised Rules of Civil Procedure by herein respondents Andres G. Ariola, Jessie D. Alcovendas, Jimmy B. Calinao and Leopoldo Sebullen thereby reversing the Resolution of the National Labor Relations Commission (NLRC). The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the Decision dated March 31, 2004 rendered by the National Labor Relations Commission is hereby REVERSED and SET ASIDE. In lieu thereof, the Decision of the Labor Arbiter is hereby REINSTATED, except as to the award of attorneys fees, which is ordered DELETED.[3]

The version of the petitioners follows: 1. Lynvil Fishing Enterprises, Inc. (Lynvil) is a company engaged in deepsea fishing, operating along the shores of Palawan and other outlying islands of the Philippines.[4] It is operated and managed by Rosendo S. de Borja. 2. On 1 August 1998, Lynvil received a report from Romanito Clarido, one of its employees, that on 31 July 1998, he witnessed that while on board the company vessel Analyn VIII, Lynvil employees, namely: Andres G. Ariola (Ariola), the captain; Jessie D. Alcovendas (Alcovendas), Chief Mate; Jimmy B. Calinao (Calinao), Chief Engineer; Ismael G. Nubla (Nubla), cook; Elorde Baez (Baez), oiler; and Leopoldo D. Sebullen (Sebullen), bodegero, conspired with one another and stole eight (8) tubs of pampano and tangigue fish and delivered them to another vessel, to the prejudice of Lynvil.[5] 3. The said employees were engaged on a per trip basis or por viaje which terminates at the end of each trip. Ariola, Alcovendas and Calinao were managerial field personnel while the rest of the crew were field personnel.[6] 4. By reason of the report and after initial investigation, Lynvils General Manager Rosendo S. De Borja (De Borja) summoned respondents to explain within five (5) days why they should not be dismissed from service. However, except for Alcovendas and Baez,[7] the respondents refused to sign the receipt of the notice.

5. Failing to explain as required, respondents employment was terminated. 6. Lynvil, through De Borja, filed a criminal complaint against the dismissed employees for violation of P.D. 532, or the Anti-Piracy and AntiHighway Robbery Law of 1974 before the Office of the City Prosecutor of Malabon City.[8] 7. On 12 November 1998, First Assistant City Prosecutor Rosauro Silverio found probable cause for the indictment of the dismissed employees for the crime of qualified theft[9] under the Revised Penal Code. On the other hand, the story of the defense is: 1. The private respondents were crew members of Lynvils vessel named Analyn VIII.[10] 2. On 31 July 1998, they arrived at the Navotas Fishport on board Analyn VIII loaded with 1,241 baeras of different kinds of fishes. These baeras were delivered to a consignee named SAS and Royale.[11] The following day, the private respondents reported back to Lynvil office to inquire about their new job assignment but were told to wait for further advice. They were not allowed to board any vessel.[12] 3. On 5 August 1998, only Alcovendas and Baez received a memorandum from De Borja ordering them to explain the incident that happened on 31 July 1998. Upon being informed about this, Ariola, Calinao, Nubla and Sebullen went to the Lynvil office. However, they were told that their employments were already terminated.[13] Aggrieved, the employees filed with the Arbitration Branch of the National Labor Relations Commission-National Capital Region on 25 August 1998 a complaint for illegal dismissal with claims for backwages, salary differential reinstatement, service incentive leave, holiday pay and its premium and 13 th month pay from 1996 to1998. They also claimed for moral, exemplary damages and attorneys fees for their dismissal with bad faith.[14] They added that the unwarranted accusation of theft stemmed from their oral demand of increase of salaries three months earlier and their request that they should not be required to sign a blank payroll and vouchers.[15]

On 5 June 2002, Labor Arbiter Ramon Valentin C. Reyes found merit in complainants charge of illegal dismissal.[16] The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered finding that complainants were illegally dismissed, ordering respondents to jointly and severally pay complainants (a) separation pay at one half month pay for every year of service; (b) backwages; (c) salary differential; (d) 13th month pay; and (e) attorneys fees, as follows: 1) Andres Ariola Backwages (P6,500.00 x 36 = P234,000.00) Separation Pay P74,650.00 13th Month Pay P6,500.00 P325,250.00 2) Jessie Alcovendas Backwages (P5,148.00 x 36 = P195,328.00) Separation Pay P44,304.00 13th Month Pay 5,538.00 Salary Differential 1,547.52 P246,717.52 3) Jimmy Calinao Backwages (P6,500.00 x 36 = P234,000.00) Separation Pay 55,250.00 13th Month P6,500.00 P295,700.00 4) Leopoldo Sebullen Backwages (P4, 290.00 x 36 = P154,440.00) P154,440.00 Pay

P234,000.00

P195,328.00

P234,000.00

Separation Pay P44,073.00 13th Month Pay 2,473.12 Salary Differential 4,472.00 P208,455.12 5) Ismael Nubla Backwages Separation Pay P58,149.00 13th Month Pay 2,473.12 Salary Differential P5,538.00 P265, 28.12 ___________ P 1, 341, 650.76 P199,640.12

TOTAL All other claims are dismissed for lack of merit.[17]

The Labor Arbiter found that there was no evidence showing that the private respondents received the 41 baeras of pampano as alleged by De Borja in his reply-affidavit; and that no proof was presented that the [18] 8 baeras of pampano [and tangigue] were missing at the place of destination. The Labor Arbiter disregarded the Resolution of Assistant City Prosecutor Rosauro Silverio on the theft case. He reasoned out that the Labor Office is governed by different rules for the determination of the validity of the dismissal of employees.[19] The Labor Arbiter also ruled that the contractual provision that the employment terminates upon the end of each trip does not make the respondents dismissal legal. He pointed out that respondents and Lynvil did not negotiate on equal terms because of the moral dominance of the employer.[20] The Labor Arbiter found that the procedural due process was not complied with and that the mere notice given to the private respondents fell short of the requirement of ample opportunity to present the employees side.[21]

On appeal before the National Labor Relations Commission, petitioners asserted that private respondents were only contractual employees; that they were not illegally dismissed but were accorded procedural due process and that De Borja did not commit bad faith in dismissing the employees so as to warrant his joint liability with Lynvil.[22] On 31 March 2004, the NLRC reversed and set aside the Decision of the Labor Arbiter. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered REVERSING AND SETTING ASIDE the Decision of the Labor Arbiter a quo and a new one entered DISMISSING the present complaints for utter lack of merit; However as above discussed, an administrative fine of PhP5,000.00 for each complainant, Andres Ariola, Jessie Alcovendas, Jimmy Canilao, Leopoldo Sebullen and Ismael Nobla or a total of PhP25,000.00 is hereby awarded.[23]

The private respondents except Elorde Baez filed a Petition for Certiorari[24] before the Court of Appeals alleging grave abuse of discretion on the part of NLRC. The Court of Appeals found merit in the petition and reinstated the Decision of the Labor Arbiter except as to the award of attorneys fees. The appellate court held that the allegation of theft did not warrant the dismissal of the employees since there was no evidence to prove the actual quantities of the missing kinds of fish loaded to Analyn VIII.[25] It also reversed the finding of the NLRC that the dismissed employees were merely contractual employees and added that they were regular ones performing activities which are usually necessary or desirable in the business and trade of Lynvil. Finally, it ruled that the two-notice rule provided by law and jurisprudence is mandatory and non-compliance therewith rendered the dismissal of the employees illegal. The following are the assignment of errors presented before this Court by Lynvil:
I THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THE ESTABLISHED DOCTRINE LAID DOWN IN NASIPIT LUMBER COMPANY V. NLRC HOLDING THAT THE FILING OF A CRIMINAL CASE BEFORE THE PROSECUTORS OFFICE CONSTITUTES SUFFICIENT BASIS FOR A VALID TERMINATION OF EMPLOYMENT ON

THE GROUNDS OF SERIOUS MISCONDUCT AND/OR LOSS OF TRUST AND CONFIDENCE. II THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE TERMINATION OF RESPONDENTS EMPLOYMENT WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. III THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT THE RESPONDENTS EMPLOYMENT, IN ANY EVENT, WERE CONTRACTUAL IN NATURE BEING ON A PER VOYAGE BASIS. THUS, THEIR RESPECTIVE EMPLOYMENT TERMINATED AFTER THE END OF EACH VOYAGE IV THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS WERE NOT ACCORDED PROCEDURAL DUE PROCESS. V THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS ARE ENTITLED TO THE PAYMENT OF THEIR MONEY CLAIMS. VI THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT PETITIONER ROSENDO S. DE BORJA IS NOT JOINTLY AND SEVERALLY LIABLE FOR THE JUDGMENT WHEN THERE WAS NO FINDING OF BAD FAITH.[26]

The Courts Ruling The Supreme Court is not a trier of facts. Under Rule 45,[27] parties may raise only questions of law. We are not duty-bound to analyze again and weigh the evidence introduced in and considered by the tribunals below. Generally when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) When the inference made is manifestly mistaken, absurd or impossible; (3) Where there is a grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the findings of fact are conflicting; (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) When the findings are contrary to those of the trial court; (8) When the findings of fact are conclusions without citation of specific evidence on which they are based; (9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and (10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. (Emphasis supplied)[28]

The contrariety of the findings of the Labor Arbiter and the NLRC prevents reliance on the principle of special administrative expertise and provides the reason for judicial review, at first instance by the appellate court, and on final study through the present petition. In the first assignment of error, Lynvil contends that the filing of a criminal case before the Office of the Prosecutor is sufficient basis for a valid termination of employment based on serious misconduct and/or loss of trust and confidence relying on Nasipit Lumber Company v. NLRC.[29] Nasipit is about a security guard who was charged with qualified theft which charge was dismissed by the Office of the Prosecutor. However, despite the dismissal of the complaint, he was still terminated from his employment on the ground of loss of confidence. We ruled that proof beyond reasonable doubt of an employee's misconduct is not required when loss of confidence is the ground for dismissal. It is sufficient if the employer has "some basis" to lose confidence or that the employer has reasonable ground to believe or to entertain the moral

conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position.[30] It added that the dropping of the qualified theft charges against the respondent is not binding upon a labor tribunal.[31] In Nicolas v. National Labor Relations Commission,[32] we held that a criminal conviction is not necessary to find just cause for employment termination. Otherwise stated, an employees acquittal in a criminal case, especially one that is grounded on the existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty of acts inimical to the employers interests.[33] In the reverse, the finding of probable cause is not followed by automatic adoption of such finding by the labor tribunals. In other words, whichever way the public prosecutor disposes of a complaint, the finding does not bind the labor tribunal. Thus, Lynvil cannot argue that since the Office of the Prosecutor found probable cause for theft the Labor Arbiter must follow the finding as a valid reason for the termination of respondents employment. The proof required for purposes that differ from one and the other are likewise different. Nonetheless, even without reliance on the prosecutors finding, we find that there was valid cause for respondents dismissal. In illegal dismissal cases, the employer bears the burden of proving that the termination was for a valid or authorized cause.[34]

Just cause is required for a valid dismissal. The Labor Code[35] provides that an employer may terminate an employment based on fraud or willful breach of the trust reposed on the employee. Such breach is considered willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must also be based on substantial evidence and not on the employers whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause for

dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.[36] Breach of trust is present in this case. We agree with the ruling of the Labor Arbiter and Court of Appeals that the quantity of tubs expected to be received was the same as that which was loaded. However, what is material is the kind of fish loaded and then unloaded. Sameness is likewise needed. We cannot close our eyes to the positive and clear narration of facts of the three witnesses to the commission of qualified theft. Jonathan Distajo, a crew member of the Analyn VIII, stated in his letter addressed to De Borja[37] dated 8 August 1998, that while the vessel was traversing San Nicolas, Cavite, he saw a small boat approach them. When the boat was next to their vessel, Alcovendas went inside the stockroom while Sebullen pushed an estimated four tubs of fish away from it. Ariola, on the other hand, served as the lookout and negotiator of the transaction. Finally, Baez and Calinao helped in putting the tubs in the small boat. He further added that he received P800.00 as his share for the transaction. Romanito Clarido, who was also on board the vessel, corroborated the narration of Distajo on all accounts in his 25 August 1998 affidavit.[38] He added that Alcovendas told him to keep silent about what happened on that day. Sealing tight the credibility of the narration of theft is the affidavit[39] executed by Elorde Baez dated 3 May 1999. Baez was one of the dismissed employees who actively participated in the taking of the tubs. He clarified in the affidavit that the four tubs taken out of the stockroom in fact contained fish taken from the eight tubs. He further stated that Ariola told everyone in the vessel not to say anything and instead file a labor case against the management. Clearly, we cannot fault Lynvil and De Borja when it dismissed the employees. The second to the fifth assignment of errors interconnect.

The nature of employment is defined in the Labor Code, thus:

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Lynvil contends that it cannot be guilty of illegal dismissal because the private respondents were employed under a fixed-term contract which expired at the end of the voyage. The pertinent provisions of the contract are:

xxxx

1.

NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sangayon sa patakarang por viaje na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila; NA ako ay nakipagkasundo na babayaran ang aking paglilingkod sa paraang por viaje sa halagang P__________ isang biyahe ng kabuuang araw xxxx.[40]

xxxx

1.

Lynvil insists on the applicability of the case of Brent School,[41] to wit:

Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in

his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences.

Contrarily, the private respondents contend that they became regular employees by reason of their continuous hiring and performance of tasks necessary and desirable in the usual trade and business of Lynvil.

Jurisprudence,[42] laid two conditions for the validity of a fixed-contract agreement between the employer and employee:
First, the fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or Second, it satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.[43]

Textually, the provision that: NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa patakarang por viaje na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila is for a fixed period of employment. In the context, however, of the facts that: (1) the respondents were doing tasks necessarily to Lynvils fishing business with positions ranging from captain of the vessel to bodegero; (2) after the end of a trip, they will again be hired for another trip

with new contracts; and (3) this arrangement continued for more than ten years, the clear intention is to go around the security of tenure of the respondents as regular employees. And respondents are so by the express provisions of the second paragraph of Article 280, thus:
xxx Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

The same set of circumstances indicate clearly enough that it was the need for a continued source of income that forced the employees acceptance of the por viaje provision. Having found that respondents are regular employees who may be, however, dismissed for cause as we have so found in this case, there is a need to look into the procedural requirement of due process in Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code. It is required that the employer furnish the employee with two written notices: (1) a written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; and (2) a written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

From the records, there was only one written notice which required respondents to explain within five (5) days why they should not be dismissed from the service. Alcovendas was the only one who signed the receipt of the notice. The others, as claimed by Lynvil, refused to sign. The other employees argue that no notice was given to them. Despite the inconsistencies, what is clear is that no final written notice or notices of termination were sent to the employees. The twin requirements of notice and hearing constitute the elements of [due] process in cases of employee's dismissal. The requirement of notice is

intended to inform the employee concerned of the employer's intent to dismiss and the reason for the proposed dismissal. Upon the other hand, the requirement of hearing affords the employee an opportunity to answer his employer's charges against him and accordingly, to defend himself therefrom before dismissal is effected.[44] Obviously, the second written notice, as indispensable as the first, is intended to ensure the observance of due process. Applying the rule to the facts at hand, we grant a monetary award of P50,000.00 as nominal damages, this, pursuant to the fresh ruling of this Court in Culili v. Eastern Communication Philippines, Inc.[45] Due to the failure of Lynvil to follow the procedural requirement of two-notice rule, nominal damages are due to respondents despite their dismissal for just cause. Given the fact that their dismissal was for just cause, we cannot grant backwages and separation pay to respondents. However, following the findings of the Labor Arbiter who with the expertise presided over the proceedings below, which findings were affirmed by the Court of Appeals, we grant the 13th month pay and salary differential of the dismissed employees. Whether De Borja is jointly and severally liable with Lynvil As to the last issue, this Court has ruled that in labor cases, the corporate directors and officers are solidarily liable with the corporation for the termination of employment of employees done with malice or in bad faith.[46] Indeed, moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.

It has also been discussed in MAM Realty Development Corporation v. NLRC that:
[47]

x x x A corporation being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary

liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following cases:

1. When directors and trustees or, in appropriate cases, the officers of a corporation: xxx (b) act in bad faith or with gross negligence in directing the corporate affairs; x x x [48]

The term "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose."[49]

We agree with the ruling of both the NLRC and the Court of Appeals when they pronounced that there was no evidence on record that indicates commission of bad faith on the part of De Borja. He is the general manager of Lynvil, the one tasked with the supervision by the employees and the operation of the business. However, there is no proof that he imposed on the respondents the por viaje provision for purpose of effecting their summary dismissal. WHEREFORE, the petition is partially GRANTED. The 10 September 2007 Decision of the Court of Appeals in CA-G.R. SP No. 95094 reversing the Resolution dated 31 March 2004 of the National Labor Relations Commission is hereby MODIFIED. The Court hereby rules that the employees were dismissed for just cause by Lynvil Fishing Enterprises, Inc. and Rosendo S. De Borja, hence, the reversal of the award for backwages and separation pay. However, we affirm the award for 13th month pay, salary differential and grant an additional P50,000.00 in favor of the employees representing nominal damages for petitioners noncompliance with statutory due process. No cost. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. R. No. 164317 February 6, 2006

ALFREDO CHING, Petitioner, vs. THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS-VILLAVERT, JUDGE EDGARDO SUDIAM of the Regional Trial Court, Manila, Branch 52; RIZAL COMMERCIAL BANKING CORP. and THE PEOPLE OF THE PHILIPPINES, Respondents. DECISION CALLEJO, SR., J.: Before the Court is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition and mandamus filed by petitioner Alfredo Ching, and its Resolution2 dated June 28, 2004 denying the motion for reconsideration thereof. Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime in September to October 1980, PBMI, through petitioner, applied with the Rizal Commercial Banking Corporation (respondent bank) for the issuance of commercial letters of credit to finance its importation of assorted goods.3 Respondent bank approved the application, and irrevocable letters of credit were issued in favor of petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust receipts4 as surety, acknowledging delivery of the following goods: T/R Nos. 1845 Date Granted 12-05-80 Maturity Date 03-05-81 Principal P1,596,470.05 Description of Goods 79.9425 M/T "SDK" Brand Synthetic Graphite Electrode 3,000 pcs. (15 bundles) Calorized Lance Pipes One Lot High Fired Refractory Tundish Bricks 5 cases spare parts for CCM 200 pcs. ingot moulds High Fired Refractory

1853 1824 1798 1808 2042

12-08-80 11-28-80 11-21-80 11-21-80 01-30-81

03-06-81 02-26-81 02-19-81 02-19-81 04-30-81

P198,150.67 P707,879.71 P835,526.25 P370,332.52 P469,669.29

Nozzle Bricks 1801 11-21-80 02-19-81 P2,001,715.17 Synthetic Graphite Electrode [with] tapered pitch filed nipples 3,000 pcs. (15 bundles calorized lance pipes [)] Spare parts for Spectrophotometer 50 pcs. Ingot moulds 50 pcs. Ingot moulds 8 pcs. Kubota Rolls for rolling mills Spare parts for Lacolaboratory Equipment5

1857 1895 1911 2041 2099 2100

12-09-80 12-17-80 12-22-80 01-30-81 02-10-81 02-10-81

03-09-81 03-17-81 03-20-81 04-30-81 05-11-81 05-12-81

P197,843.61 P67,652.04 P91,497.85 P91,456.97 P66,162.26 P210,748.00

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with authority to sell but not by way of conditional sale, pledge or otherwise; and in case such goods were sold, to turn over the proceeds thereof as soon as received, to apply against the relative acceptances and payment of other indebtedness to respondent bank. In case the goods remained unsold within the specified period, the goods were to be returned to 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 banks property. When the trust receipts matured, petitioner failed to return the goods to respondent bank, or to return their value amounting to P6,940,280.66 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. Ordoez,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 petitioners 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. Ordoez,16where 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 PETITIONERS 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. Ordoez;22 and (c) petitioner was estopped from raising the City Prosecutors 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 petitioners 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 petitioners 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 petitioners 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.27 However, 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 courts 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. Petitioners being a Senior Vice-President of the Philippine Blooming Mills does not exculpate him from any liability. Petitioners 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 PBMs 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 quasijudicial 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 accuseds 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 latters 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 Banks 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. Ordoez.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 entrustees 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. 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.
1wphi1

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.51 Corporate 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. ROMEO J. CALLEJO, SR. Associate Justice WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice Chairperson CONSUELO YNARES-SANTIAGO Associate Justice MA. ALICIA AUSTRIA-MARTINEZ

THIRD DIVISION

ATTY. ANDREA UY and FELIX YUSAY, Petitioners,

G.R. No. 157851 Present:

YNARES-SANTIAGO, J., Chairperson, - versus AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ. ARLENE VILLANUEVA and NATIONAL LABOR RELATIONS COMMISSION, Respondents. Promulgated:

June 29, 2007

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

DECISION

NACHURA, J.:

This appeal on certiorari under Rule 45 of the Rules of Court seeks the nullification of the February 28, 2002 Resolution and the February 27, 2003 Resolution denying the motion for reconsideration thereof of the Former Tenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 68680.

The antecedents of the case are as follows:

Countrywide Rural Bank of La Carlota, Inc. (Countrywide Bank) is a private banking corporation engaged in rural banking and other allied services through its branches nationwide.

Sometime in 1998, Countrywide Bank experienced liquidity problems and its treasury department was unable to comply with its branches demands for fresh funds. Its various branches eventually experienced bank runs.[1]

Several of the banks depositors were alarmed at the prospect of losing their deposits and investments. A group of depositors, holding about 70% of the banks deposit accounts, met and agreed to organize themselves into a Committee of Depositors. Petitioner Felix Yusay was elected by the Committee as Chairman of the Interim Board of Directors, while petitioner Atty. Andrea Uy was designated Secretary. According to petitioners, the Committee was formed for the purpose of protecting their collective interests and to increase their chances of recovering their deposits.[2]

With the consent and approval of the incumbent Board of Directors, the Committee of Depositors assumed temporary administrative control of the remaining operations of the bank.[3] The incumbent Board of Directors informed the Committee that some employees had tendered courtesy resignations, while some had expressed their willingness to resign upon official request. The Committee then accepted some of the courtesy resignations.[4]

The Bangko Sentral ng Pilipinas (BSP) subsequently placed the bank under receivership and appointed a liquidator. Meanwhile, the Philippine Deposit Insurance System (PDIC) commenced the processing of claims for return of deposits.[5]

Realizing that their bid to rehabilitate the bank had failed, the Committee of Depositors disbanded.[6]

Eventually, three cases for illegal dismissal were filed against Countrywide Bank before the National Labor Relations Commission (NLRC). These were filed by Amalia Bueno (NLRC Case No. RAB-XI-01-50037-99), Amelia Valdez and Lyn Villa (NLRC Case No. RAB-XI-01-20039-99), and herein private respondent Arlene Villanueva (NLRC Case No. RAB-XI-01-50043-99).[7]

Private respondent Villanueva avers that she was a regular employee of Countrywide Banks Marbel, South Cotabato branch. On December 7, 1998, she received a memorandum from the Interim Board of Directors accepting her courtesy resignation. She, however, denies that she submitted a written courtesy resignation.[8]

On November 16, 1999, Labor Arbiter Arturo P. Gamolo of NLRC SubRegional Arbitration Branch No. XI, General Santos City rendered a Decision in RAB-XI-01-50043-99, the dispositive portion of which reads:

WHEREFORE, premises considered, respondent Country Wide Rural Bank of La Carlota, Inc. and Individual Respondents Atty. Andrea Uy and Felix Yusay are solidarily liable to pay complainant Arlene Villanueva the sum PESOS: ONE HUNDRED THIRTEEN THOUSAND

SIX HUNDRED FORTY (P113,640.00) ONLY representing her monetary awards and attorneys fees.[9]

On January 21, 2000, Villanueva filed a Motion for Execution of Judgment[10] to which Countrywide Bank, through the PDIC, filed an Opposition. [11]

Thereafter, Labor Arbiter Gamolo rendered a Resolution and Order for all three cases against Countrywide Bank, the dispositive portion of which reads:

Wherefore, finding the PDICs opposition to complainants motion for execution meritorious, complainants are hereby directed to file their respective money claims as adjudged in the decisions rendered in the above-entitled cases before the liquidation court for the latters approval of inclusion in the Banks Distribution Plan.

SO ORDERED.[12]

Petitioners then filed a Notice of Appeal with Memorandum of Appeal with the NLRC, 5th Division, Cagayan de Oro City.[13] On November 27, 2000, the NLRC dismissed the appeal for being filed out of time.[14] Petitioners filed a motion for reconsideration.[15] The NLRC then recalled its November 27, 2000 Resolution and set the case for clarificatory hearing.[16]

Petitioners, however, received the Resolution five days after the scheduled clarificatory hearing. They instead filed their memorandum in lieu of the clarificatory hearing.

On October 10, 2001, the NLRC rendered another Resolution reinstating its November 27, 2000 Resolution.[17]

Petitioners filed a petition for certiorari before the CA to nullify the NLRCs November 27, 2000 and October 10, 2001 Resolutions.

On February 28, 2002, the Tenth Division of the CA dismissed the petition for certiorari on technical grounds. In particular, the CA cited the following grounds for dismissal:

1. Failure to attach necessary pleadings and comments which are material portion of the records in able [sic] for this to [sic] judiciously evaluate the merit of the case such as:

a.) memorandum of appeal filed by the petitioner on May 18, 2000;

b.) Motion for Reconsideration of the petitioners dated December 21, 2000;

in violation of Section 3, Rule 46 of the 1997 Rules of Civil Procedure as amended;

2. Failure to attach certified photocopy copies [sic] of the assailed resolutions and decisions of the original documents in violation of the same rules; and

3. Failure to send copy of the resolution to the public respondent.[18]

Petitioners filed a Motion for Reconsideration[19] arguing that the failure to attach the abovementioned documents was merely a procedural lapse on their part. They, likewise, attached the documents to the motion.

Their motion for reconsideration having been denied,[20] petitioners filed the present appeal on certiorari.

They argue that the CAs dismissal of their petition for certiorari on technical grounds deprived them of substantial justice. They assail the CAs Resolution dismissing their petition on technical grounds. They cite previous decisions of this Court where it held that technicalities can be relaxed in order to uphold the substantive rights of the parties.[21]

They likewise allege that the Labor Arbiter ruled in favor of respondent Villanueva based only on the pleadings filed by the latter. They allege that they were not properly served summons and notices which led to their failure to file their position paper. They also argue that they cannot be held solidarily liable to private respondent because they were mere depositors of the bank and not stockholders. Even assuming that they were stockholders, they still cannot be held individually liable for the banks obligations.

On the other hand, private respondent argues that the appeal on certiorari merely reiterated arguments and issues on questions of facts that have already been passed upon by competent authority.[22] Having none of the circumstances that will warrant exemption from the requirement that a petition for review on certiorari under Rule 45 shall only raise questions of law, the petition must be dismissed. Likewise, private respondent argues that the petition has no other purpose than to delay the final execution of the decision.

While this case was pending, petitioners filed a Manifestation[23] on February 20, 2007, informing this Court that the case entitled Atty. Andrea Uy and Felix Yusay v. Amalia Bueno,[24] docketed as G.R. No. 159119 and involving the same factual antecedents as the present case, was decided by this Courts Second Division on March 14, 2006 in this wise:

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals Decision dated January 24, 2003 and Resolution dated May 26, 2003 in CA-G.R. SP No. 70672, which found petitioner Atty. Andrea Uy[25] solidarily liable with Countrywide Rural Bank of [La] Carlota, Inc. in Marbel, Koronadal City, South Cotabato, are REVERSED. No costs.

SO ORDERED.[26]

In the Bueno case, the Court found that, per the records of the case, petitioner Uy was a mere depositor,[27] one of several depositors who formed themselves into a group or association indicating their intention to help rehabilitate Countrywide Rural Bank.[28] It also found no evidence that the Committee of Depositors that elected petitioner Uy as Interim President and Corporate Secretary was recognized by the Bangko Sentral ng Pilipinas, hence, had no legal authority to act for the bank.[29] As such, the Court said:

Lacking this evidence, the act of petitioner Uy in dismissing the respondent cannot be deemed an act as an officer of the bank. Consequently, it cannot be held that there existed an employeremployee relationship between petitioner Uy and respondent Bueno when the former allegedly dismissed the latter. This requirement of employer-employee relationship is jurisdictional for the provisions of the Labor Code, specifically Book VI thereof, on Post-Employment, to apply. Since the employer-employee relationship between petitioner Uy and respondent Bueno was not established, the labor arbiter never acquired jurisdiction over petitioner Uy. Consequently, whether petitioner Uy was properly served summons is immaterial. Likewise, that she terminated the services of respondent Bueno in bad faith and with malice is of no moment. Her liability, if any, should be determined in another forum.[30]

The Court noted the manifestation in a Resolution[31] dated April 23, 2007.

We find the present petition meritorious. At the outset, we note that Countrywide Bank did not appeal the NLRCs rulings. As to the bank, therefore, the NLRC Decision has become final and executory.

Rule 45 of the Rules of Civil Procedure provides that only questions of law shall be raised in an appeal by certiorari before this Court. This rule, however, admits of certain exceptions, namely, (1) when the findings are grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of

discretion; (4) when the judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the same are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.[32] In this case, the CA committed grave abuse of discretion in dismissing the petition without first examining its merits. The policy of our judicial system is to encourage full adjudication of the merits of an appeal. In the exercise of its equity jurisdiction, this Court may reverse the dismissal of appeals that are grounded merely on technicalities.[33]

In the past, the Court has held that technicalities should not be permitted to stand in the way of equitably and completely resolving the rights and obligations of the parties. Where the ends of substantial justice would be better served, the application of technical rules of procedure may be relaxed.[34] Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice.[35]

Section 1, Rule 65 of the Rules of Court provides:

SECTION 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46. (emphasis supplied)

Records show that in the petition for certiorari, filed before the CA, the petitioners attached photocopies of the assailed October 10, 2001 NLRC Resolution,[36] the NLRCResolution dated November 27, 2000,[37] the Labor Arbiters Decision dated November 16, 1999,[38] and the Labor [39] Arbiters Resolution and Order dated April 17, 2000. Subsequently, when the CA dismissed the petition on technical grounds, petitioners filed a motion for reconsideration explaining the reason for the omission and attaching, in addition to the abovementioned documents, the other documents referred to in the CA Resolution. The Courts ruling in the case of Garcia v. Philippine Airlines[40] is most instructive, to wit:
It is evident, therefore, that aside from the assailed decision, order or resolution, not every pleading or document mentioned in the petition is required to be submitted only those that are pertinent and relevant to the judgment, order or resolution subject of the petition. The initial determination of what pleadings, documents or orders are relevant and pertinent to the petition rests on the petitioner. If, upon its initial review of the petition, the CA is of the view that additional pleadings, documents or order should have been submitted and appended to the petition, the following are its options: (a) dismiss the petition under the last paragraph of Rule 46 of the Rules of Court; (b) order the petitioner to submit the required additional pleadings, documents, or order within a specific period of time; or (c) order the petitioner to file an amended petition appending thereto the required pleadings, documents or order within a fixed period. If the CA opts to dismiss the petition outright and the petitioner files a motion for the reconsideration of such dismissal, appending thereto the requisite pleadings, documents or order/resolution with an explanation for the failure to append the

required documents to the original petition, this would constitute substantial compliance with the Rules of Court. In such case, then, the petition should be reinstated. As this Court emphasized in CusiHernandez v. Diaz: xxxx We must stress that cases should be determined on the merits after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some procedural imperfections. In that way, the ends of justice would be served better. Moreover, the Court has held: Dismissal of appeals purely on technical grounds is frowned upon and the rules of procedure ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat their very aims. Rules of procedure are mere tools designed to expedite the decision or resolution of cases and other matters pending in court. A strict and rigid application of rules that would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided. (citations omitted)

In putting a premium on technical rules over the just resolution of the case, therefore, the CA overlooked the right of petitioners to the full adjudication of their petition on its merits. Indeed, while labor laws mandate the speedy administration of justice with least attention to technicalities, this must be done without sacrificing the fundamental requisites of due process.[41] We now proceed to rule on the merits of the case.

In order to sustain a finding of illegal dismissal, we must first determine the relationship between the petitioners and private respondent. Illegal dismissal presupposes that there was an employer-employee relationship between the dismissed employee and the persons complained of.

To determine whether there was an employer-employee relationship between petitioners and private respondent, the Court has consistently used the four-fold test. The test calls for the determination of (1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is the most important element.[42] In the instant case, all these elements are attributable to the bank itself and not to petitioners. There is no question that private respondent was an employee of the bank. As mentioned above, the NLRC Decision has become final and executory as to the bank. Its liability for private respondents dismissal is no longer in dispute. The same cannot be said of petitioners. Petitioners assumed only limited administrative control of the bank as part of the Committee of Depositors. However, there is no showing that they took over the management and control of the bank. Given that there is in fact no employer-employee relationship between petitioners and private respondents, the Labor Arbiter, and consequently, the NLRC, is without jurisdiction to adjudicate the dispute between them. The cases a Labor Arbiter can hear and decide are employment-related.[43] Even assuming that an employer-employee relationship does exist between petitioners and private respondent, the former still cannot be held liable with Countrywide Bank for the illegal dismissal of private respondent. Corporate officers are not personally liable for the money claims of discharged corporate employees, unless they acted with evident malice and bad faith in terminating their employment.[44]

First, we agree with petitioners that they are not corporate officers of the bank. It has been held that an office is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee.[45] Given this distinction, petitioners are neither officers nor employees of the bank. They are mere depositors who sought to manage the bank in order to save it. Next, settled is the rule in this jurisdiction that a corporation is vested by law with a legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it.[46] The general rule is that obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities. However, solidary liability may be incurred, but only under the following exceptional circumstances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons; 2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto; 3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; or 4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.[47]

Not one of these circumstances is present in this case.

Furthermore, the doctrine of piercing the veil of corporate fiction finds no application in the case. Piercing the veil of corporate fiction may only be done when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime.[48]

The general rule is that a corporation will be looked upon as a separate legal entity, unless and until sufficient reason to the contrary appears. For the separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and convincingly established. It cannot be presumed.[49] 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.[50] In the case at bar, petitioners are not even stockholders of the bank but mere depositors. That they assumed temporary control of the banks administration did not change the character of their relationship with the bank. In fact, their bid to convert their interest in the bank to that of stockholders failed as the BSP denied their plan to rehabilitate the bank.

Finally, we have noted petitioners Manifestation[51] dated January 31, 2007 and this Courts decision in Atty. Andrea Uy and Felix Yusay v. Amalia Bueno.[52]

In previous cases, the Court has held, When a court has laid down a principle of law as applicable to a certain set of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Stare decisis et non quieta movere. Stand by the decision and disturb not what is settled.

It simply means that a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It comes from the basic principle of justice that like cases ought to be decided alike. Thus, where the same question relating to the same event is brought by parties similarly situated as in a previous case already litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.[53] Petitioners liability, if there be any, must be determined in the proper action and at the proper forum.

WHEREFORE, premises considered, the petition is GRANTED. The February 28, 2002 Resolution in CA-G.R. SP No. 68680 of the Court of Appeals is REVERSEDand SET ASIDE. The Decision of the Labor Arbiter in RAB-XI-01-5003799, finding petitioners solidarily liable with Countrywide Rural Bank of La Carlota is, likewise,REVERSED and SET ASIDE. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 149237 June 11, 2006

CHINA BANKING CORPORATION, petitioner, vs. DYNE-SEM ELECTRONICS CORPORATION, respondent. DECISION CORONA, J.: On June 19 and 26, 1985, Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a total of P8,939,000 from petitioner China Banking Corporation. The loan was evidenced by six promissory notes.1 The borrowers failed to pay when the obligations became due. Petitioner consequently instituted a complaint for sum of money2 on June 25, 1987 against them. The complaint sought payment of the unpaid promissory notes plus interest and penalties. Summons was not served on Dynetics, however, because it had already closed down. Lim, on the other hand, filed his answer on December 15, 1987 denying that "he promised to pay [the obligations] jointly and severally to [petitioner]."3 On January 7, 1988, the case was scheduled for pre-trial with respect to Lim. The case against Dynetics was archived. On September 23, 1988, an amended complaint4 was filed by petitioner impleading respondent Dyne-Sem Electronics Corporation (Dyne-Sem) and its stockholders Vicente Chuidian, Antonio Garcia and Jacob Ratinoff. According to petitioner, respondent was formed and organized to be Dynetics alter ego as established by the following circumstances: Dynetics, Inc. and respondent are both engaged in the same line of business of manufacturing, producing, assembling, processing, importing, exporting, buying, distributing, marketing and testing integrated circuits and semiconductor devices; [t]he principal office and factory site of Dynetics, Inc. located at Avocado Road, FTI Complex, Taguig, Metro Manila, were used by respondent as its principal office and factory site; [r]espondent acquired some of the machineries and equipment of Dynetics, Inc. from banks which acquired the same through foreclosure; [r]espondent retained some of the officers of Dynetics, Inc.5 xxx xxx xxx

On December 28, 1988, respondent filed its answer, alleging that: 5.1 [t]he incorporators as well as present stockholders of [respondent] are totally different from those of Dynetics, Inc., and not one of them has ever been a stockholder or officer of the latter; 5.2 [n]ot one of the directors of [respondent] is, or has ever been, a director, officer, or stockholder of Dynetics, Inc.; 5.3 [t]he various facilities, machineries and equipment being used by [respondent] in its business operations were legitimately and validly acquired, under arms-length transactions, from various corporations which had become absolute owners thereof at the time of said transactions; these were not just "taken over" nor "acquired from Dynetics" by [respondent], contrary to what plaintiff falsely and maliciously alleges; 5.4 [respondent] acquired most of its present machineries and equipment as second-hand items to keep costs down; 5.5 [t]he present plant site is under lease from Food Terminal, Inc., a government-controlled corporation, and is located inside the FTI Complex in Taguig, Metro Manila, where a number of other firms organized in 1986 and also engaged in the same or similar business have likewise established their factories; practical convenience, and nothing else, was behind [respondents] choice of plant site; 5.6 [respondent] operates its own bonded warehouse under authority from the Bureau of Customs which has the sole and absolute prerogative to authorize and assign customs bonded warehouses; again, practical convenience played its role here since the warehouse in question was virtually lying idle and unused when said Bureau decided to assign it to [respondent] in June 1986.6 On February 28, 1989, the trial court issued an order archiving the case as to Chuidian, Garcia and Ratinoff since summons had remained unserved. After hearing, the court a quo rendered a decision on December 27, 1991 which read: xxx [T]he Court rules that Dyne-Sem Electronics Corporation is not an alter ego of Dynetics, Inc. Thus, Dyne-Sem Electronics Corporation is not liable under the promissory notes. xxx xxx xxx

WHEREFORE, judgment is hereby rendered ordering Dynetics, Inc. and Elpidio O. Lim, jointly and severally, to pay plaintiff. xxx xxx xxx

Anent the complaint against Dyne-Sem and the latters counterclaim, both are hereby dismissed, without costs. SO ORDERED.7

From this adverse decision, petitioner appealed to the Court of Appeals8 but the appellate court dismissed the appeal and affirmed the trial courts decision.9 It found that respondent was indeed not an alter ego of Dynetics. The two corporations had different articles of incorporation. Contrary to petitioners claim, no merger or absorption took place between the two. What transpired was a mere sale of the assets of Dynetics to respondent. The appellate court denied petitioners motion for reconsideration.10 Hence, this petition for review11 with the following assigned errors: VI. Issues What is the quantum of evidence needed for the trial court to determine if the veil of corporat[e] fiction should be pierced? [W]hether or not the Regional Trial Court of Manila Branch 15 in its Decision dated December 27, 1991 and the Court of Appeals in its Decision dated February 28, 2001 and Resolution dated July 27, 2001, which affirmed en toto [Branch 15, Manila Regional Trial Courts decision,] have ruled in accordance with law and/or applicable [jurisprudence] to the extent that the Doctrine of Piercing the Veil of Corporat[e] Fiction is not applicable in the case at bar?12 We find no merit in the petition. The question of whether one corporation is merely an alter ego of another is purely one of fact. So is the question of whether a corporation is a paper company, a sham or subterfuge or whether petitioner adduced the requisite quantum of evidence warranting the piercing of the veil of respondents corporate entity. This Court is not a trier of facts. Findings of fact of the Court of Appeals, affirming those of the trial court, are final and conclusive. The jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless it is shown, inter alia, that: (a) the conclusion is grounded entirely on speculations, surmises and conjectures; (b) the inference is manifestly mistaken, absurd and impossible; (c) there is grave abuse of discretion; (d) the judgment is based on a misapplication of facts; (e) the findings of fact of the trial court and the appellate court are contradicted by the evidence on record and (f) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both parties.13 We have reviewed the records and found that the factual findings of the trial and appellate courts and consequently their conclusions were supported by the evidence on record. The general rule is that a corporation has a personality separate and distinct from that of its stockholders and other corporations to which it may be connected.14 This is a fiction created by law for convenience and to prevent injustice.15 Nevertheless, being a mere fiction of law, peculiar situations or valid grounds may exist to warrant the disregard of its independent being and the piercing of the corporate veil.16 In Martinez v. Court of Appeals,17 we held: The veil of separate corporate personality may be lifted when such personality is used to defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to

confuse the legitimate issues; or when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation 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; or when the corporation is used as a cloak or cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or for the protection of the creditors. In such cases, the corporation will be considered as a mere association of persons. The liability will directly attach to the stockholders or to the other corporation. To disregard the separate juridical personality of a corporation, the wrongdoing must be proven clearly and convincingly.18 In this case, petitioner failed to prove that Dyne-Sem was organized and controlled, and its affairs conducted, in a manner that made it merely an instrumentality, agency, conduit or adjunct of Dynetics, or that it was established to defraud Dynetics creditors, including petitioner. The similarity of business of the two corporations did not warrant a conclusion that respondent was but a conduit of Dynetics. As we held in Umali v. Court of Appeals,19 "the mere fact that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights." Likewise, respondents acquisition of some of the machineries and equipment of Dynetics was not proof that respondent was formed to defraud petitioner. As the Court of Appeals found, no merger20 took place between Dynetics and respondent Dyne-Sem. What took place was a sale of the assets21 of the former to the latter. Merger is legally distinct from a sale of assets.22 Thus, where one corporation sells or otherwise transfers all its assets to another corporation for value, the latter is not, by that fact alone, liable for the debts and liabilities of the transferor. Petitioner itself admits that respondent acquired the machineries and equipment not directly from Dynetics but from the various corporations which successfully bidded for them in an auction sale. The contracts of sale executed between the winning bidders and respondent showed that the assets were sold for considerable amounts.23 The Court of Appeals thus correctly ruled that the assets were not "diverted" to respondent as an alter ego of Dynetics.24 The machineries and equipment were transferred and disposed of by the winning bidders in their capacity as owners. The sales were therefore valid and the transfers of the properties to respondent legal and not in any way in contravention of petitioners rights as Dynetics creditor. Finally, it may be true that respondent later hired Dynetics former Vice-President Luvinia Maglaya and Assistant Corporate Counsel Virgilio Gesmundo. From this, however, we cannot conclude that respondent was an alter ego of Dynetics. In fact, even the overlapping of incorporators and stockholders of two or more corporations will not necessarily lead to such inference and justify the piercing of the veil of corporate fiction.25 Much more has to be proven. Premises considered, no factual and legal basis exists to hold respondent Dyne-Sem liable for the obligations of Dynetics to petitioner. WHEREFORE, the petition is hereby DENIED.The assailed Court of Appeals decision and resolution in CA-G.R. CV No. 40672 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

THIRD DIVISION

PANTRANCO EMPLOYEES ASSOCIATION (PEA-PTGWO) and PANTRANCO RETRENCHED EMPLOYEES ASSOCIATION (PANREA), Petitioners,

G.R. No. 170689

- versus -

NATIONAL LABOR RELATIONS COMMISSION (NLRC), PANTRANCO NORTH EXPRESS, INC. (PNEI), PHILIPPINE NATIONAL BANK (PNB), PHILIPPINE NATIONAL BANK-MANAGEMENT AND DEVELOPMENT CORPORATION (PNBMADECOR), and MEGA PRIME REALTY AND HOLDINGS CORPORATION (MEGA PRIME), Respondents. x-----------------------------x PHILIPPINE NATIONAL BANK, Petitioner,

- versus -

PANTRANCO EMPLOYEES ASSOCIATION, INC. (PEA-PTGWO), PANTRANCO RETRENCHED EMPLOYEES ASSOCIATION (PANREA) AND PANTRANCO ASSOCIATION OF CONCERNED EMPLOYEES (PACE), ET AL., PHILIPPINE NATIONAL BANKMANAGEMENT DEVELOPMENT CORPORATION (PNB-MADECOR), and MEGA PRIME REALTY HOLDINGS, INC., Respondents.

G.R. No. 170705

Present:

YNARES-SANTIAGO, J., Chairperson, CARPIO,* CHICO-NAZARIO, NACHURA, and PERALTA, JJ.

Promulgated:

March 17, 2009 x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before us are two consolidated petitions assailing the Court of Appeals (CA) Decision[1] dated June 3, 2005 and its Resolution[2] dated December 7, 2005 in CA-G.R. SP No. 80599. In G.R. No. 170689, the Pantranco Employees Association (PEA) and Pantranco Retrenched Employees Association (PANREA) pray that the CA decision be set aside and a new one be entered, declaring the Philippine National Bank (PNB) and PNB Management and Development Corporation (PNBMadecor) jointly and solidarily liable for theP722,727,150.22 National Labor Relations Commission (NLRC) judgment in favor of the Pantranco North Express, Inc. (PNEI) employees;[3] while in G.R. No. 170705, PNB prays that the auction sale of the Pantranco properties be declared null and void.[4] The facts of the case, as found by the CA,[5] and established in Republic of the Phils. v. NLRC,[6] Pantranco North Express, Inc. v. NLRC,[7] and PNB MADECOR v. Uy,[8] follow: The Gonzales family owned two corporations, namely, the PNEI and Macris Realty Corporation (Macris). PNEI provided transportation services to the public, and had its bus terminal at the corner of Quezon and Roosevelt Avenues in Quezon City. The terminal stood on four valuable pieces of real estate (known as Pantranco properties) registered under the name of Macris.[9] The Gonzales family later incurred huge financial losses despite attempts of rehabilitation and loan infusion. In March 1975, their creditors took over the management of PNEI and Macris. By 1978, full ownership was transferred to one of their creditors, the National Investment Development Corporation (NIDC), a subsidiary of the PNB.

Macris was later renamed as the National Realty Development Corporation (Naredeco) and eventually merged with the National Warehousing Corporation (Nawaco) to form the new PNB subsidiary, the PNB-Madecor. In 1985, NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned by Gregorio Araneta III. In 1986, PNEI was among the several companies placed under sequestration by the Presidential Commission on Good Government (PCGG) shortly after the historic events in EDSA. In January 1988, PCGG lifted the sequestration order to pave the way for the sale of PNEI back to the private sector through the Asset Privatization Trust (APT). APT thus took over the management of PNEI. In 1992, PNEI applied with the Securities and Exchange Commission (SEC) for suspension of payments. A management committee was thereafter created which recommended to the SEC the sale of the company through privatization. As a cost-saving measure, the committee likewise suggested the retrenchment of several PNEI employees. Eventually, PNEI ceased its operation. Along with the cessation of business came the various labor claims commenced by the former employees of PNEI where the latter obtained favorable decisions. On July 5, 2002, the Labor Arbiter issued the Sixth Alias Writ of Execution[10] commanding the NLRC Sheriffs to levy on the assets of PNEI in order to satisfy theP722,727,150.22 due its former employees, as full and final satisfaction of the judgment awards in the labor cases. The sheriffs were likewise instructed to proceed against PNB, PNB-Madecor and Mega Prime.[11] In implementing the writ, the sheriffs levied upon the four valuable pieces of real estate located at the corner of Quezon and Roosevelt Avenues, on which the former Pantranco Bus Terminal stood. These properties were covered by Transfer Certificate of Title (TCT) Nos. 87881-87884, registered under the name of PNBMadecor.[12] Subsequently, Notice of Sale of the foregoing real properties was published in the newspaper and the sale was set on July 31, 2002. Having been notified of the auction sale, motions to quash the writ were separately filed by PNB-Madecor and Mega Prime, and PNB. They likewise filed their Third-Party Claims.[13] PNB-Madecor anchored its motion on its right as the registered owner of the Pantranco properties, and Mega Prime as the successor-in-interest. For its

part, PNB sought the nullification of the writ on the ground that it was not a party to the labor case.[14] In its Third-Party Claim, PNB alleged that PNBMadecor was indebted to the former and that the Pantranco properties

would answer for such debt. As such, the scheduled auction sale of the aforesaid properties was not legally in order.[15] On September 10, 2002, the Labor Arbiter declared that the subject Pantranco properties were owned by PNB-Madecor. It being a corporation with a distinct and separate personality, its assets could not answer for the liabilities of PNEI. Considering, however, that PNB-Madecor executed a promissory note in favor of PNEI for P7,884,000.00, the writ of execution to the extent of the said amount was concerned was considered valid.[16] PNBs third-party claim to nullify the writ on the ground that it has an interest in the Pantranco properties being a creditor of PNB-Madecor, on the other hand, was denied because it only had an inchoate interest in the properties.[17] The dispositive portion of the Labor Arbiters September 10, 2002 Resolution is quoted hereunder:
WHEREFORE, the Third Party Claim of PNB Madecor and/or Mega Prime Holdings, Inc. is hereby GRANTED and concomitantly the levies made by the sheriffs of the NLRC on the properties of PNB Madecor should be as it (sic) is hereby LIFTED subject to the payment by PNB Madecor to the complainants the amount of P7,884,000.00. The Motion to Quash and Third Party Claim of PNB is hereby DENIED. The Motion to Quash of PNB Madecor and Mega Prime Holdings, Inc. is hereby PARTIALLY GRANTED insofar as the amount of the writ exceeds P7,884,000.00. The Motion for Recomputation and Examination of Judgment Awards is hereby DENIED for want of merit.

The Motion to Expunge from the Records claimants/complainants Opposition dated August 3, 2002 is hereby DENIED for lack of merit. SO ORDERED.[18]

On appeal to the NLRC, the same was denied and the Labor Arbiters disposition was affirmed.[19] Specifically, the NLRC concluded as follows:
(1) PNB-Madecor and Mega Prime contended that it would be impossible for them to comply with the requirement of the labor arbiter to pay to the PNEI employees the amount of P7.8 million as a condition to the lifting of the levy on the properties, since the credit was already garnished by Gerardo Uy and other creditors of PNEI. The NLRC found no evidence that Uy had satisfied his judgment from the promissory note, and opined that even if the credit was in custodia legis, the claim of the PNEI employees should enjoy preference under the Labor Code. (2) The PNEI employees contested the finding that PNBMadecor was indebted to the PNEI for only P7.8 million without considering the accrual of interest. But the NLRC said that there was no evidence that demand was made as a basis for reckoning interest. (3) The PNEI employees further argued that the labor arbiter may not properly conclude from a decision of Judge Demetrio Macapagal Jr. of the RTC of Quezon City that PNB-Madecor was the owner of the properties as his decision was reconsidered by the next presiding judge, nor from a decision of the Supreme Court that PNEI was a mere lessee of the properties, the fact being that the transfer of the properties to PNB-Madecor was done to avoid satisfaction of the claims of the employees with the NLRC and that as a result of a civil case filed by Mega Prime, the subsequent sale of the properties by PNB to Mega Prime was rescinded. The NLRC pointed out that while the Macapagal decision was set aside by Judge Bruselas and hence, his findings could not be invoked by the labor arbiter, the titles of PNB-Madecor are conclusive and there is no evidence that PNEI had ever been an owner. The Supreme Court had observed in its decision that PNEI owed back rentals of P8.7 million to PNB-Madecor.

(4) The PNEI employees faulted the labor arbiter for not finding that PNEI, PNB, PNB-Madecor and Mega Prime were all jointly and severally liable for their claims. The NLRC underscored the fact that PNEI and Macris were subsidiaries of NIDC and had passed through and were under the Asset Privatization Trust (APT) when the labor claims accrued. The labor arbiter was correct in not granting PNBs third-party claim because at the time the causes of action accrued, the PNEI was managed by a management committee appointed by the PNB as the new owner of PNRI (sic) and Macris through a deed of assignment or transfer of ownership. The NLRC says at length that the same is not true with PNB-Madecor which is now the registered owner of the properties.[20]

The parties separate motions for reconsideration were likewise denied.[21] Thereafter, the matter was elevated to the CA by PANREA, PEAPTGWO and the Pantranco Association of Concerned Employees. The latter group, however, later withdrew its petition. The former employees petition was docketed as CA-G.R. SP No. 80599. PNB-Madecor and Mega Prime likewise filed their separate petition before the CA which was docketed as CA-G.R. SP No. 80737, but the same was dismissed.[22] In view of the P7,884,000.00 debt of PNB-Madecor to PNEI, on June 23, 2004, an auction sale was conducted over the Pantranco properties to satisfy the claim of the PNEI employees, wherein CPAR Realty was adjudged as the highest bidder.[23] On June 3, 2005, the CA rendered the assailed decision affirming the NLRC resolutions. The appellate court pointed out that PNB, PNB-Madecor and Mega Prime are corporations with personalities separate and distinct from PNEI. As such, there being no cogent reason to pierce the veil of corporate fiction, the separate personalities of the above corporations should be maintained. The CA added that the Pantranco properties were never owned by PNEI; rather, their titles were

registered under the name of PNB-Madecor. If PNB and PNB-Madecor could not answer for the liabilities of PNEI, with more reason should Mega Prime not be held liable being a mere successor-in-interest of PNB-Madecor. Unsatisfied, PEA-PTGWO and PANREA filed their motion for reconsideration;[24] while PNB filed its Partial Motion for Reconsideration.[25] PNB pointed out that PNB-Madecor was made to answer for P7,884,000.00 to the PNEI employees by virtue of the promissory note it (PNB-Madecor) earlier executed in favor of PNEI. PNB, however, questioned the June 23, 2004 auction sale as the P7.8 million debt had already been satisfied pursuant to this Courts decision in PNB MADECOR v. Uy.[26] Both motions were denied by the appellate court.[27] In two separate petitions, PNB and the former PNEI employees come up to this Court assailing the CA decision and resolution. The former PNEI employees raise the lone error, thus:
The Honorable Court of Appeals palpably departed from the established rules and jurisprudence in ruling that private respondents Pantranco North Express, Inc. (PNEI), Philippine National Bank (PNB), Philippine National Bank Management and Development Corporation (PNB-MADECOR), Mega Prime Realty and Holdings, Inc. (Mega Prime) are not jointly and severally answerable to theP722,727,150.22 Million NLRC money judgment awards in favor of the 4,000 individual members of the Petitioners.[28]

They claim that PNB, through PNB-Madecor, directly benefited from the operation of PNEI and had complete control over the funds of PNEI. Hence, they are solidarily answerable with PNEI for the unpaid money claims of the employees.[29] Citing A.C. Ransom Labor Union-CCLU v. NLRC,[30] the employees insist that where the employer corporation ceases to exist and is no longer able to

satisfy the judgment awards in favor of its employees, the owner of the employer corporation should be made jointly and severally liable.[31] They added that malice or bad faith need not be proven to make the owners liable.

On the other hand, PNB anchors its petition on this sole assignment of error, viz.:

THE AUCTION SALE OF THE PROPERTY COVERED BY TCT NO. 87884 INTENDED TO PARTIALLY SATISFY THE CLAIMS OF FORMER WORKERS OF PNEI IN THE AMOUNT OF P7,884,000.00 (THE AMOUNT OF PNBMADECORS PROMISSORY NOTE IN FAVOR OF PNEI) IS NOT IN ORDER AS THE SAID PROPERTY IS NOT OWNED BY PNEI. FURTHER, THE SAID PROMISSORY NOTE HAD ALREADY BEEN GARNISHED IN FAVOR OF GERARDO C. UY WHICH LED TO THREE (3) PROPERTIES UNDER THE NAME OF PNB-MADECOR, NAMELY TCT NOS. 87881, 87882 AND 87883, BEING LEVIED AND SOLD ON EXECUTION IN THE PNBMADECOR VS. UY CASE (363 SCRA 128 *2001+) AND GERARDO C. UY VS. PNEI (CIVIL CASE NO. 95-72685, RTC MANILA, BRANCH 38).[32]

PNB insists that the Pantranco properties could no longer be levied upon because the promissory note for which the Labor Arbiter held PNB-Madecor liable to PNEI, and in turn to the latters former employees, had already been satisfied in favor of Gerardo C. Uy. It added that the properties were in fact awarded to the highest bidder. Besides, says PNB, the subject properties were not owned by PNEI, hence, the execution sale thereof was not validly effected.[33]

Both petitions must fail.

G.R. No. 170689

Stripped of the non-essentials, the sole issue for resolution raised by the former PNEI employees is whether they can attach the properties (specifically the Pantranco properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid labor claims against PNEI.

We answer in the negative.

First, the subject property is not owned by the judgment debtor, that is, PNEI. Nowhere in the records was it shown that PNEI owned the Pantranco properties. Petitioners, in fact, never alleged in any of their pleadings the fact of such ownership. What was established, instead, in PNB MADECOR v. Uy[34] and PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB[35] was that the properties were owned by Macris, the predecessor of PNB-Madecor. Hence, they cannot be pursued against by the creditors of PNEI.

We would like to stress the settled rule that the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone.[36] To be sure, one mans goods shall not be sold for another mans debts.[37] A sheriff is not authorized to attach or levy on property not belonging to the judgment debtor, and even incurs liability if he wrongfully levies upon the property of a third person.[38]

Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities separate and distinct from that of PNEI. PNB is sought to be held liable because it acquired PNEI through NIDC at the time when PNEI was suffering financial reverses. PNB-Madecor is being made to answer for petitioners labor claims as the owner of the subject Pantranco properties and as a subsidiary of

PNB. Mega Prime is also included for having acquired PNBs shares over PNBMadecor.

The general rule is that a corporation has a personality separate and distinct from those of its stockholders and other corporations to which it may be connected.[39] This is a fiction created by law for convenience and to prevent injustice.[40] Obviously, PNB, PNB-Madecor, Mega Prime, and PNEI are corporations with their own personalities. The separate personalities of the first three corporations had been recognized by this Court in PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB[41] where we stated that PNB was only a stockholder of PNB-Madecor which later sold its shares to Mega Prime; and that PNB-Madecor was the owner of the Pantranco properties. Moreover, these corporations are registered as separate entities and, absent any valid reason, we maintain their separate identities and we cannot treat them as one.

Neither can we merge the personality of PNEI with PNB simply because the latter acquired the former. Settled is the rule that where one corporation sells or otherwise transfers all its assets to another corporation for value, the latter is not, by that fact alone, liable for the debts and liabilities of the transferor.[42]

Lastly, while we recognize that there are peculiar circumstances or valid grounds that may exist to warrant the piercing of the corporate veil, [43] none applies in the present case whether between PNB and PNEI; or PNB and PNBMadecor.

Under the doctrine of piercing the veil of corporate fiction, 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.[44] 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.[45]

Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. After all, the concept of corporate entity was not meant to promote unfair objectives.[46]

As between PNB and PNEI, petitioners want us to disregard their separate personalities, and insist that because the company, PNEI, has already ceased operations and there is no other way by which the judgment in favor of the employees can be satisfied, corporate officers can be held jointly and severally liable with the company. Petitioners rely on the pronouncement of this Court in A.C. Ransom Labor Union-CCLU v. NLRC[47] and subsequent cases.[48]

This reliance fails to persuade. We find the aforesaid decisions inapplicable to the instant case.

For one, in the said cases, the persons made liable after the companys cessation of operations were the officers and agents of the corporation. The rationale is that, since the corporation is an artificial person, it must have an officer who can be presumed to be the employer, being the person acting in the interest of the employer. The corporation, only in the technical sense, is the employer.[49] In the instant case, what is being made liable is another corporation (PNB) which acquired the debtor corporation (PNEI).

Moreover, in the recent cases Carag v. National Labor Relations Commission[50] and McLeod v. National Labor Relations Commission,[51] the Court explained the doctrine laid down in AC Ransom relative to the personal liability of the officers and agents of the employer for the debts of the latter. In AC Ransom, the Court imputed liability to the officers of the corporation on the strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision, employerincludes any person acting in the interest of an employer, directly or indirectly, but does not include any labor organization or any of its officers or agents except when acting as employer. It was clarified in Carag and McLeod that Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. It added that the governing law on personal liability of directors or officers for debts of the corporation is still Section 31[52] of the Corporation Code.

More importantly, as aptly observed by this Court in AC Ransom, it appears that Ransom, foreseeing the possibility or probability of payment of backwages to its employees, organized Rosario to replace Ransom, with the latter to be eventually phased out if the strikers win their case. The execution could not be implemented against Ransom because of the disposition posthaste of its leviable assets evidently in order to evade its just and due obligations.[53] Hence, the Court sustained the piercing of the corporate veil and made the officers of Ransom personally liable for the debts of the latter.

Clearly, what can be inferred from the earlier cases is that the doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a 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.[54] In the absence of malice, bad faith,

or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.[55]

Applying the foregoing doctrine to the instant case, we quote with approval the CA disposition in this wise:

It would not be enough, then, for the petitioners in this case, the PNEI employees, to rest on their laurels with evidence that PNB was the owner of PNEI. Apart from proving ownership, it is necessary to show facts that will justify us to pierce the veil of corporate fiction and hold PNB liable for the debts of PNEI. The burden undoubtedly falls on the petitioners to prove their affirmative allegations. In line with the basic jurisprudential principles we have explored, they must show that PNB was using PNEI as a mere adjunct or instrumentality or has exploited or misused the corporate privilege of PNEI.

We do not see how the burden has been met. Lacking proof of a nexus apart from mere ownership, the petitioners have not provided us with the legal basis to reach the assets of corporations separate and distinct from PNEI.[56]

Assuming, for the sake of argument, that PNB may be held liable for the debts of PNEI, petitioners still cannot proceed against the Pantranco properties, the same being owned by PNB-Madecor, notwithstanding the fact that PNBMadecor was a subsidiary of PNB. The general rule remains that PNB-Madecor has a personality separate and distinct from PNB. 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 subsidiarys separate existence shall be respected, and the liability of

the parent corporation as well as the subsidiary will be confined to those arising in their respective businesses.[57]

In PNB v. Ritratto Group, Inc.,[58] we outlined the circumstances which are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation, to wit:

1.

The parent corporation owns all or most of the capital stock of the subsidiary;

2.

The parent and subsidiary corporations have common directors or officers;

3.

The parent corporation finances the subsidiary;

4.

The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation;

5.

The subsidiary has grossly inadequate capital;

6.

The parent corporation pays the salaries and other expenses or losses of the subsidiary;

7.

The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation;

8.

In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporations own;

9.

The parent corporation uses the property of the subsidiary as its own;

10.

The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their orders from the parent corporation;

11.

The formal legal requirements of the subsidiary are not observed.

None of the foregoing circumstances is present in the instant case. Thus, piercing of PNB-Madecors corporate veil is not warranted. Being a mere successor-ininterest of PNB-Madecor, with more reason should no liability attach to Mega Prime.

G.R. No. 170705

In its petition before this Court, PNB seeks the annulment of the June 23, 2004 execution sale of the Pantranco properties on the ground that the judgment debtor (PNEI) never owned said lots. It likewise contends that the levy and the

eventual sale on execution of the subject properties was null and void as the promissory note on which PNB-Madecor was made liable had already been satisfied.

It has been repeatedly stated that the Pantranco properties which were the subject of execution sale were owned by Macris and later, the PNBMadecor. They were never owned by PNEI or PNB. Following our earlier discussion on the separate personalities of the different corporations involved in the instant case, the only entity which has the right and interest to question the execution sale and the eventual right to annul the same, if any, is PNB-Madecor or its successor-in-interest. Settled is the rule that proceedings in court must be instituted by the real party in interest.

A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.[59] Interest within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest.[60] The interest of the party must also be personal and not one based on a desire to vindicate the constitutional right of some third and unrelated party.[61] Real interest, on the other hand, means a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or consequential interest.[62]

Specifically, in proceedings to set aside an execution sale, the real party in interest is the person who has an interest either in the property sold or the proceeds thereof. Conversely, one who is not interested or is not injured by the execution sale cannot question its validity.[63]

In justifying its claim against the Pantranco properties, PNB alleges that Mega Prime, the buyer of its entire stockholdings in PNB-Madecor was indebted

to it (PNB). Considering that said indebtedness remains unpaid, PNB insists that it has an interest over PNB-Madecor and Mega Primes assets.

Again, the contention is bereft of merit. While PNB has an apparent interest in Mega Primes assets being the creditor of the latter for a substantial amount, its interest remains inchoate and has not yet ripened into a present substantial interest, which would give it the standing to maintain an action involving the subject properties. As aptly observed by the Labor Arbiter, PNB only has an inchoate right to the properties of Mega Prime in case the latter would not be able to pay its indebtedness. This is especially true in the instant case, as the debt being claimed by PNB is secured by the accessory contract of pledge of the entire stockholdings of Mega Prime to PNB-Madecor.[64]

The Court further notes that the Pantranco properties (or a portion thereof ) were sold on execution to satisfy the unpaid obligation of PNB-Madecor to PNEI. PNB-Madecor was thus made liable to the former PNEI employees as the judgment debtor of PNEI. It has long been established in PNB-Madecor v. Uy and other similar cases that PNB-Madecor had an unpaid obligation to PNEI amounting to more or less P7 million which could be validly pursued by the creditors of the latter. Again, this strengthens the proper parties right to question the validity of the execution sale, definitely not PNB.

Besides, the issue of whether PNB has a substantial interest over the Pantranco properties has already been laid to rest by the Labor Arbiter. [65] It is noteworthy that in its Resolution dated September 10, 2002, the Labor Arbiter denied PNBs Third-Party Claim primarily because PNB only has an inchoate right over the Pantranco properties.[66] Such conclusion was later affirmed by the NLRC in its Resolution dated June 30, 2003.[67] Notwithstanding said conclusion, PNB did not elevate the matter to the CA via a petition for review. Hence it is presumed to be satisfied with the adjudication therein.[68] That decision of the NLRC has become final as against PNB and can no longer be reviewed, much less reversed, by this Court.[69] This is in accord with the doctrine that a party who has

not appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the appealed decision.[70] WHEREFORE, premises considered, the petitions are hereby DENIED for lack of merit.

SO ORDERED.