You are on page 1of 16

Concept Builders Inc. vs.

NLRC Case Digest


Concept Builders Inc. vs. National Labor Relations Commission
[GR 108!"# $% &a' 1%%()
*acts+ Concept Buders, Inc., (CBI) a domestc corporaton, wth prncpa offce at 355
Maysan Road, Vaenzuea, Metro Mana, s engaged n the constructon busness whe
Norberto Marabe; Rodofo Raque, Crstoba Rego, Manue Gego, Pacrono Gducos, Pedro
Abogar, Norberto Comendador, Rogeo Saut, Emo Garca, |r., Marano Ro, Pauna Basea,
Afredo Abera, Paquto Saut, Domngo Guarno, Romeo Gave, Domnador Sabna, Fepe
Radana, Gavno Suabo, Moreno Escares, Ferdnand Torres, Fepe Basan, and Ruben
Robaos were empoyed by sad company as aborers, carpenters and rggers. On November
1981, Marabe, et. a. were served ndvdua wrtten notces of termnaton of empoyment by
CBI, effectve on 30 November 1981. It was stated n the ndvdua notces that ther
contracts of empoyment had expred and the pro|ect n whch they were hred had been
competed. The Natona Labor Reatons Commsson (NLRC) found t to be, the fact,
however, that at the tme of the termnaton of Marabe, et.a.'s empoyment, the pro|ect n
whch they were hred had not yet been fnshed and competed. CBI had to engage the
servces of sub-contractors whose workers performed the functons of Marabe, et. a.
Aggreved, Marabe, et. a. fed a compant for ega dsmssa, unfar abor practce and
non-payment of ther ega hoday pay, overtme pay and thrteenth-month pay aganst CBI.
On 19 December 1984, the Labor Arbter rendered |udgment orderng CBI to renstate
Marabe et. a. and to pay them back wages equvaent to 1 year or 300 workng days. On 27
November 1985, the NLRC dsmssed the moton for reconsderaton fed by CBI on the
ground that the sad decson had aready become fna and executory.
On 16 October 1986, the NLRC Research and Informaton Department made the fndng that
Marabe, et. a.'s back wages amounted to P199,800.00. On 29 October 1986, the Labor
Arbter ssued a wrt of executon drectng the sherff to execute the Decson, dated 19
December 1984. The wrt was partay satsfed through garnshment of sums from CBI's
debtor, the Metropotan Waterworks and Sewerage Authorty, n the amount of P81,385.34.
Sad amount was turned over to the casher of the NLRC. On 1 February 1989, an Aas Wrt
of Executon was ssued by the Labor Arbter drectng the sherff to coect from CBI the sum
of P117,414.76, representng the baance of the |udgment award, and to renstate Marabe,
et. a. to ther former postons. On 13 |uy 1989, the sherff ssued a report statng that he
tred to serve the aas wrt of executon on pettoner through the securty guard on duty but
the servce was refused on the ground that CBI no onger occuped the premses. On 26
September 1986, upon moton of Marabe, et. a., the Labor Arbter ssued a second aas wrt
of executon. The sad wrt had not been enforced by the speca sherff because, as stated n
hs progress report dated 2 November 1989, that a the empoyees nsde CBI's premses
camed that they were empoyees of Hydro Ppes Phppnes, Inc. (HPPI) and not by CBI;
that evy was made upon persona propertes he found n the premses; and that securty
guards wth hgh-powered guns prevented hm from removng the propertes he had eved
upon. The sad speca sherff recommended that a "break-open order" be ssued to enabe
hm to enter CBI's premses so that he coud proceed wth the pubc aucton sae of the
aforesad persona propertes on 7 November 1989. On 6 November 1989, a certan Denns
Cuyegkeng fed a thrd-party cam wth the Labor Arbter aegng that the propertes sought
to be eved upon by the sherff were owned by HPPI, of whch he s the Vce-Presdent. On
23 November 1989, Marabe, et. a. fed a "Moton for Issuance of a Break-Open Order,"
aegng that HPPI and CBI were owned by the same ncorporator/stockhoders. They aso
aeged that pettoner temporary suspended ts busness operatons n order to evade ts
ega obgatons to them and that Marabe, et. a. were wng to post an ndemnty bond to
answer for any damages whch CBI and HPPI may suffer because of the ssuance of the
break-open order. On 2 March 1990, the Labor Arbter ssued an Order whch dened Marabe,
et. a.'s moton for break-open order.
Marabe, et. a. then appeaed to the NLRC. On 23 Apr 1992, the NLRC set asde the order of
the Labor Arbter, ssued a break-open order and drected Marabe, et. a. to fe a bond.
Thereafter, t drected the sherff to proceed wth the aucton sae of the propertes aready
eved upon. It dsmssed the thrd-party cam for ack of mert. CBI moved for
reconsderaton but the moton was dened by the NLRC n a Resouton, dated 3 December
1992. Hence, the petton.
Issue+ Whether the NLRC was correct n ssung the break-open order to evy the "HPPI
propertes" ocated at CBI amd/or HPPIs premses at 355 Maysan Road, Vaenzuea, Metro
Mana.
,eld+ It s a fundamenta prncpe of corporaton aw that a corporaton s an entty separate
and dstnct from ts stockhoders and from other corporatons to whch t may be connected.
But, ths separate and dstnct personaty of a corporaton s merey a fcton created by aw
for convenence and to promote |ustce. So, when the noton of separate |urdca personaty
s used to defeat pubc convenence, |ustfy wrong, protect fraud or defend crme, or s used
as a devce to defeat the abor aws, ths separate personaty of the corporaton may be
dsregarded or the ve of corporate fcton perced. Ths s true kewse when the
corporaton s merey an ad|unct, a busness condut or an ater ego of another corporaton.
The condtons under whch the |urdca entty may be dsregarded vary accordng to the
pecuar facts and crcumstances of each case. No hard and fast rue can be accuratey ad
down, but certany, there are some probatve factors of dentty that w |ustfy the
appcaton of the doctrne of percng the corporate ve, to wt: (1) Stock ownershp by one
or common ownershp of both corporatons; (2) Identty of drectors and offcers; (3) The
manner of keepng corporate books and records; and (4) Methods of conductng the
busness. The SEC en banc expaned the "nstrumentaty rue" whch the courts have
apped n dsregardng the separate |urdca personaty of corporatons as "Where one
corporaton s so organzed and controed and ts affars are conducted so that t s, n fact, a
mere nstrumentaty or ad|unct of the other, the fcton of the corporate entty of the
"nstrumentaty" may be dsregarded. The contro necessary to nvoke the rue s not
ma|orty or even compete stock contro but such domnaton of nstances, poces and
practces that the controed corporaton has, so to speak, no separate mnd, w or
exstence of ts own, and s but a condut for ts prncpa. It must be kept n mnd that the
contro must be shown to have been exercsed at the tme the acts companed of took
pace. Moreover, the contro and breach of duty must proxmatey cause the n|ury or un|ust
oss for whch the compant s made." The test n determnng the appcabty of the
doctrne of percng the ve of corporate fcton s as (1) Contro, not mere ma|orty or
compete stock contro, but compete domnaton, not ony of fnances but of pocy and
busness practce n respect to the transacton attacked so that the corporate entty as to
ths transacton had at the tme no separate mnd, w or exstence of ts own; (2) Such
contro must have been used by the defendant to commt fraud or wrong, to perpetuate the
voaton of a statutory or other postve ega duty or dshonest and un|ust act n
contraventon of pantff's ega rghts; and (3) The aforesad contro and breach of duty
must proxmatey cause the n|ury or un|ust oss companed of. The absence of any one of
these eements prevents "percng the corporate ve." In appyng the "nstrumentaty" or
"ater ego" doctrne, the courts are concerned wth reaty and not form, wth how the
corporaton operated and the ndvdua defendant's reatonshp to that operaton. Thus the
queston of whether a corporaton s a mere ater ego, a mere sheet or paper corporaton, a
sham or a subterfuge s purey one of fact. Here, whe CBI camed that t ceased ts
busness operatons on 29 Apr 1986, t fed an Informaton Sheet wth the Securtes and
Exchange Commsson on 15 May 1987, statng that ts offce address s at 355 Maysan
Road, Vaenzuea, Metro Mana. On the other hand, HPPI, the thrd-party camant,
submtted on the same day, a smar nformaton sheet statng that ts offce address s at
355 Maysan Road, Vaenzuea, Metro Mana. Further, both nformaton sheets were fed by
the same Vrgo O. Caso as the corporate secretary of both corporatons. Both
corporatons had the same presdent, the same board of drectors, the same corporate
offcers, and substantay the same subscrbers. From the foregong, t appears that, among
other thngs, the CBI and the HPPI shared the same address and/or premses. Under these
crcumstances, t cannot be sad that the property eved upon by the sherff were not of
CBI's. Ceary, CBI ceased ts busness operatons n order to evade the payment to Marabe,
et. a. of back wages and to bar ther renstatement to ther former postons. HPPI s
obvousy a busness condut of CBI and ts emergence was skfuy orchestrated to avod
the fnanca abty that aready attached to CBI.
Re'noso I- v. C. / General Credit Corporation [!"0 1CR. !!0 2Nov.$$# $0003)
1eparate 4uridical 5ntit'
1u66icienc' o6 7roo6 to 7ierce t8e -eil o6 Corporate *iction
Facts: Commerca Credt Corporaton (CCC), a fnancng & nvestment frm, decded to
organze franchse companes n dfferent parts of the country, wheren t sha hod 30%
equty. Empoyees of CCC were desgnated as resdent managers of the franchse
companes - Bbano Reynoso IV was resdent manager n CCC-OC.
Due to the DOSRI Rue prohbtng endng of funds by a corporaton to ts drectors, offcers,
Share Hoders & other persons wth reated nterests theren, CCC decded to form CCC
Equty Corporaton, a whoy-owned subsdary to whch CCC transferred ts 30% equty n
CCC-OC together wth 2 seats on the BoD. In the new set-up, severa empoyees of CCC
became empoyees of CCC-Equty.
A compant for a sum of money was ater fed by CCC-OC aganst Reynoso, who n the
meantme was dsmssed from CCC-Equty, & wfe for embezzement of funds whch were
used to buy a house n Vae Verde. Reynoso cams the money he used represented hs
money pacements n CCC-OC shown by 23 checks he ssued to CCC-OC.
RTC dsmssed the case aganst Reynoso and found hs countercam for damages to be
mertorous hence granted t. For fang to pay the docket fees, CCC-OCs appea to the IAC
was dsmssed hence the RTC decson became fna & executory. However, the |udgment
became remaned unsatsfed promptng Reynoso to fe a Moton for Aas Wrt of Executon.
CCC-OC opposed sayng that ts premses & records had been taken over by CCC.
CCC meanwhe became known as Genera Credt Corporaton. So, when the RTC ordered
GCC to fe ts comment on the petton of Reynoso, t camed that t was not a party to the
case & Reynoso shoud drect hs cam aganst CCC-OC. Reynoso reped sayng that CCC-
OC s n ad|unct nstrumentaty, condut & agency of CCC & nvoked the rung n Ramoso v.
GCC where the SC decared that GCC, CCC-Equty & other franchsed companes ncudng
CCC-OC were decared as 1 corp. Reynoso camed that GCC s |ust the new name of CCC
hence both shoud be treated as 1 entty. Cases were fed n the RTC of Pasg & OC to evy
on the propertes of GCC. CA on the other hand en|ons the aucton sae of the propertes.
Issue: (1) WON the percng the ve of corporate fcton was proper.
Hed: CA decson reversed and set asde. In|uncton aganst evyng on propertes of GCC &
ther aucton sae fted. The use by CCC-OC of the same name of Commerca Credt
Corporaton was ntended to pubcy dentfy t as a component of the CCC group of
companes engaged n one & the same busness: nvestment & fnancng. When the mother
corporaton & ts subsdary corporatons cease to act n good fath and honest busness
|udgment, when the corporate fcton s used to perpetuate fraud or promote n|ustce, the
aw steps n to remedy the n|ustce. The corporate character s not necessary abrogated.
It contnues for egtmate ob|ectves; however perced, to remedy n|ustces.
A court |udgment becomes useess & neffectve f the empoyer, n ths case CCC as a
mother corporaton, s paced beyond the ega reach of the |udgment credtor who after
protracted tgaton, has been found entted to postve reef. Courts have been organzed
to put an end to controversy. Ths shoud not be negated by an nappcabe and wrong use
of the fcton of the corporate ve.
The defense of separateness w be dsregarded where the busness affars of a subsdary
corporaton are so controed by the mother corporaton to the extent that t becomes an
nstrument or agent of ts parent. But even when there us domnance over the affars of the
subsdary, the doctrne of percng the ve of corporate fcton appes ony when used to
defeat pubc convenence, |ustfy wrong, protect fraud, or defend crme.
Factuay & egay, CCC had domnant contro of the busness operatons of CCC-OC:
a. the excusve management contract nsured that CCC-OC woud be managed &
controed by CCC & not devate from the commands of the mother corp
b. CCC apponted ts own empoyee as the resdent manager of CCC-OC
c. Saares, pensons, benefts, etc were from CCC, whch ater became GCC
d. Unty of nterest, management, contro, ntensve audtng functon of CCC over CCC-OC,
sharng of offce space
e. Lawyers of the CCC-OC case were a n-house counses of CCC
General Credit Corp v. .lsons Dev. and Investment Corp
*.C91+ Pettoner Genera Credt Corporaton (GCC), then known as Commerca Credt
Corporaton (CCC), estabshed CCC franchse companes n dfferent urban centers of the
country. In furtherance of ts busness, GCC was abe to secure cense from Centra Bank
(CB) and SEC to engage aso n quas-bankng actvtes. On the other hand, respondent CCC
Equty Corporaton (EOUITY) was organzed n by GCC for the purpose of, among other
thngs, takng over the operatons and management of the varous franchse companes. At a
tme matera hereto, respondent Asons Deveopment and Investment Corporaton
(ALSONS) and the Acantara famy, each owned, |ust ke GCC, shares n the aforesad GCC
franchse companes, e.g., CCC Davao and CCC Cebu.
ALSONS and the Acantara famy, for a consderaton of P2M, sod ther sharehodngs
(101,953 shares), n the CCC franchse companes to EOUITY. EOUITY ssued ALSONS et al.,
a "bearer" promssory note for P2M wth a one-year maturty date.
4 years ater, the Acantara famy assgned ts rghts and nterests over the bearer note to
ALSONS whch became the hoder thereof. But even before the executon of the assgnment
dea aforestated, etters of demand for nterest payment were aready sent to EOUITY.
EOUITY no onger then havng assets or property to sette ts obgaton nor beng extended
fnanca support by GCC, peaded nabty to pay.
ALSONS, havng faed to coect on the bearer note aforementoned, fed a compant for a
sum of money
8
aganst EOUITY and GCC. GCC s beng mpeaded as party-defendant for any
|udgment ALSONS mght secure aganst EOUITY and, under the doctrne of percng the ve
of corporate fcton, aganst GCC, EOUITY havng been organzed as a too and mere condut
of GCC.
Accordng to EOUITY (cross-cam aganst GCC): t acted merey as ntermedary or brdge for
oan transactons and other deangs of GCC to ts franchses and the nvestng pubc; and s
soey dependent upon GCC for ts fundng requrements. Hence, GCC s soey and drecty
abe to ALSONS, the former havng faed to provde .EOUITY the necessary funds to meet
ts obgatons to ALSONS.
GCC fed ts ANSWER to Cross-cam, stressng that t s a dstnct and separate entty from
EOUITY.
RTC, fndng that EOUITY was but an nstrumentaty or ad|unct of GCC and consderng the
ega consequences and mpcatons of such reatonshp, rendered |udgment for Ason. CA
affrmed.
I11:5+ WON the doctrne of "Percng the Ve of Corporate Fcton" shoud be apped n the
case at bar.
,5LD+ YES.
The noton of separate personaty, however, may be dsregarded under the doctrne -
"percng the ve of corporate fcton" - as n fact the court w often ook at the corporaton
as a mere coecton of ndvduas or an aggregaton of persons undertakng busness as a
group, dsregardng the separate |urdca personaty of the corporaton unfyng the group.
Another formuaton of ths doctrne s that when two (2) busness enterprses are owned,
conducted and controed by the same partes, both aw and equty w, when necessary to
protect the rghts of thrd partes, dsregard the ega fcton that two corporatons are
dstnct enttes and treat them as dentca or one and the same.
Authortes are agreed on at east three (3) basc areas where percng the ve, wth whch
the aw covers and soates the corporaton from any other ega entty to whch t may be
reated, s aowed. These are: 1) defeat of pubc convenence, as when the corporate fcton
s used as vehce for the evason of an exstng obgaton; 2) fraud cases or when the
corporate entty s used to |ustfy a wrong, protect fraud, or defend a crme; or 3) ater ego
cases, where a corporaton s merey a farce snce t s a mere ater ego or busness condut
of a person, or where the corporaton s so organzed and controed and ts affars are so
conducted as to make t merey an nstrumentaty, agency, condut or ad|unct of another
corporaton.
The Court agrees wth the dsposton of the CA on the appcaton of the percng doctrne to
the transacton sub|ect of ths case. Per the Courts count, the tra court enumerated no ess
than 20 documented crcumstances and transactons, whch, taken as a package, ndeed
strongy supported the concuson that respondent EOUITY was but an ad|unct, an
nstrumentaty or busness condut of pettoner GCC. Ths reaton, n turn, provdes a
|ustfyng ground to perce pettoners corporate exstence as to ALSONS cam n queston.
Foremost of what the tra court referred to as "certan crcumstances" are the commonaty
of drectors, offcers and stockhoders and even sharng of offce between pettoner GCC and
respondent EOUITY; certan fnancng and management arrangements between the two,
aowng the pettoner to hande the funds of the atter; the vrtua domnaton f not contro
weded by the pettoner over the fnances, busness poces and practces of respondent
EOUITY; and the estabshment of respondent EOUITY by the pettoner to crcumvent CB
rues.
Very, ndeed, as the reatonshps bndng heren |respondent EOUITY and pettoner GCC|
have been that of "parent-subsdary corporatons" the foregong prncpes and doctrnes
fnd sutabe appcabty n the case at bar; and, t havng been satsfactory and
ndubtaby shown that the sad reatonshps had been used to perform certan functons not
characterzed wth egtmacy, ths Court . fees ampy |ustfed to "perce the ve of
corporate entty" and dsregard the separate exstence of the parent and subsdary the
atter havng been so controed by the parent that ts separate dentty s hardy dscernbe
thus becomng a mere nstrumentaty or ater ego of the former.
G;LD LIN5 9;:R1# INC.# 7etitioner#vs. ,5IR1 ;* &.RI. C;NC57CI;N L.C1.#
Respondents
FACTS:
Ma. Concepcon Lacsa (Concepcon) boarded a Godne passenger bus owned and operated
by Trave&Tours Advsers, Inc. Before reachng ther destnaton, the Godne bus coded
wth a passenger |eepneys and as a resut, a meta part of the |eepney was detached and
struck Concepcon n the chest, causng her nstant death. Then, Concepcons hers,
represented by Teodoro Lacsa, nsttuted n theRTC a sut aganst Trave & Tours Advsers
Inc. to recover damages arsng from breach of contract of carrage. The RTC rued n favor
of the hers of Concepcon and thereafter, God Lne appeaed thedecson to the CA but the
CA dsmssed the appea for faure of the defendants to pay the docket andother awfu fees
wthn the requred perod as provded n Rue 41, Secton 4 of the Rues of Court.
Thedsmssa became fna.Thereafter, the hers of concepcon moved for the ssuance of a
wrt of executon to mpement thedecson and RTC granted ther moton. Pettoner
submtted a verfed thrd party cam, camng thatthe tourst bus be returned to pettoner
because t was the and that pettoner was a corporaton entreydfferent from Trave &
Tours Advsers, Inc. then RTC dsmssed pettoners verfed thrd -party cam,observng that
the dentty of Trave & Tours Advsers, Inc. coud not be dvorced from that of pettoner
consderng that Cheng had camed to be the operator as we as the
Presdent/Manager/ncorporator of both enttes; and that Trave & Tours Advsers, Inc. had
been known n Sorsogon as Godne. They(Godne) appeaed the decson to CA but CA
dsmssed ther petton and affrmed the decson of RTC. Hence ths appea to the Supreme
Court where pettoner seeks to reverse the decson of CA.
ISSUE:
Whether or not the proposton of the thrd party camant by the pettoner where Trave &
Tours Advses, Inc. has an exstence separate and/or dstnct from God Lne Tours, Inc.
RULING:
The Supreme Court the DENIED the petton for revew on certorar, and AFFIRMED the
decsonpromugated by the Court of Appeas.The two corporatons are abe to the death of
Ma. Concepcon Lacsa.The Court was not persuaded by the proposton of the thrd party
camant that a corporaton has anexstence separate and/or dstnct from ts members
nsofar as ths case at bar s concerned, for thereason that whenever necessary for the
nterest of the pubc or for the protecton of enforcement of ther rghts, the noton of ega
entty shoud not and s not to be used to defeat pubcconvenence, |ustfy wrong, protect
fraud or defend crme.
In the case of Paaco vs. Fey Transportaton Co., the Supreme Court hed that:
"Where the man purpose n formng the corporaton was to evade ones subsdary abty
for damages n a crmna case, the corporaton may not be heard to say that t has a
personaty separate anddstnct from ts members, because to aow t to do so woud be to
sancton the use of fcton of corporate entty as a shed to further an end subversve of
|ustce (La Campana Coffee Factory, et a.v. Kasahan ng mga Manggagawa, etc., et a., L-
5677, May 25, 1953).Ths s what the thrd party camant wants to do ncudng the
defendant n ths case, to use theseparate and dstnct personaty of the two corporaton as
a shed to further an end subversve of |ustce by avodng the executon of a fna |udgment
of the court.
The RTC thus rghty rued that pettoner mght not be sheded from abty under the fna
|udgment through the use of the doctrne of separate corporate dentty. Truy, ths fcton of
aw coud not be empoyed to defeat the ends of |ustce.
4ardine Davies Inc. vs. C. and *ar 5ast &ills 1uppl' Corporation< 7ure *oods
Corporation vs C. 24une 1%# $0003
Corporation entitled to &oral Damages 2reputation besmirc8ed3
Facts: In 1992 Purefoods decded to nsta 2 generators n ts food processng pant n San
Roque, Markna. A bddng for the suppy and nstaaton was hed among the bdders was
Far East Ms Suppy Corporaton (FEMSCO). Thereafter, n a etter addressed to FEMSCO
presdent, Purefoods confrmed the award of the contract. Immedatey FEMSCO submtted
the requrements such as a performance bond and a rsk nsurance pocy as we as
purchasng the necessary materas. However, n another etter, Purefoods unateray
canceed the award ctng "sgnfcant factors" whch were uncovered and brought to ther
attenton "whch dctate the canceaton and warrant a tota revew and re-bd of the
pro|ect." FEMSCO protested the canceaton but before the matter coud be resove,
Purefoods awarded the pro|ect wth |ardne Ne, a dvson of |ardne Daves.
FEMSCO sued both Purefoods and |ardne. The RTC granted |ardnes demurrer to evdence
but found n favor of FEMSCO aganst Purefoods and order ndemnfcaton. FEMSCO
appeaed the grantng of the demurrer fed by |ardne and Purefoods appeaed the decson
of the court. The CA affrmed the decson of the RTC but ordered |ardne to pay FEMSCO
damages for nducng Purefoods to voate the contract as such, |ardne must pay mora
damages. In addton, Purefoods was aso drected to pay FEMSCO mora damages and
exempary damages Both Purefoods and |ardne fed motons for reconsderaton whch
were dened.
Issue: Whether or not mora damages may be granted to a corporaton?
Hed: The Court has awarded n the past mora damages to a corporaton whose reputaton
has been besmrched. (Asset Prvatzaton Trust v. CA, 300 SCRA 379) In ths case,
respondent FEMSCO has suffcenty shown that ts reputaton was tarnshed after t
mmedatey ordered equpment from ts suppers on account of the urgency of the pro|ect,
ony to be canceed ater. The Court thus, sustaned respondent appeate courts award of
mora damages. However, as there s no showng whatsoever that |ardne nduced
Purefoods, the decson of the CA s modfed. The order to |ardne Daves to pay FEMSCO
mora damages s reversed and set asde.
*ilipinas Broadcasting Net=or> Inc. vs. .go &edical and 5ducational Center?Bicol
C8ristian College o6 &edicine 2.&5C?BCC&3
[GR 1"1%%"# 1 4anuar' $000)
*acts+ "Expos" s a rado documentary program hosted by Carmeo Me Rma ("Rma")
and Hermogenes |un Aegre ("Aegre"). Expos s ared every mornng over DZRC-AM whch
s owned by Fpnas Broadcastng Network, Inc. ("FBNI"). "Expos" s heard over Legazp
Cty, the Abay muncpates and other Bco areas. In the mornng of 14 and 15 December
1989, Rma and Aegre exposed varous aeged compants from students, teachers and
parents aganst Ago Medca and Educatona Center-Bco Chrstan Coege of Medcne
("AMEC") and ts admnstrators. Camng that the broadcasts were defamatory, AMEC and
Angeta Ago ("Ago"), as Dean of AMECs Coege of Medcne, fed a compant for damages
aganst FBNI, Rma and Aegre on 27 February 1990.
The compant further aeged that AMEC s a reputabe earnng nsttuton. Wth the
supposed exposs, FBNI, Rma and Aegre "transmtted macous mputatons, and as such,
destroyed pantffs (AMEC and Ago) reputaton." AMEC and Ago ncuded FBNI as defendant
for aegedy fang to exercse due dgence n the seecton and supervson of ts
empoyees, partcuary Rma and Aegre. On 18 |une 1990, FBNI, Rma and Aegre, through
Atty. Roz Lozares, fed an Answer aegng that the broadcasts aganst AMEC were far and
true. FBNI, Rma and Aegre camed that they were pany mpeed by a sense of pubc
duty to report the "gongs-on n AMEC, |whch s| an nsttuton mbued wth pubc nterest."
Thereafter, tra ensued. Durng the presentaton of the evdence for the defense, Atty.
Edmundo Cea, coaboratng counse of Atty. Lozares, fed a Moton to Dsmss on FBNIs
behaf. The tra court dened the moton to dsmss. Consequenty, FBNI fed a separate
Answer camng that t exercsed due dgence n the seecton and supervson of Rma and
Aegre. FBNI camed that before hrng a broadcaster, the broadcaster shoud (1) fe an
appcaton; (2) be ntervewed; and (3) undergo an apprentceshp and tranng program
after passng the ntervew. FBNI kewse camed that t aways remnds ts broadcasters to
"observe truth, farness and ob|ectvty n ther broadcasts and to refran from usng beous
and ndecent anguage." Moreover, FBNI requres a broadcasters to pass the Kapsanan ng
mga Brodkaster sa Ppnas ("KBP") accredtaton test and to secure a KBP permt. On 14
December 1992, the tra court rendered a Decson fndng FBNI and Aegre abe for be
except Rma. The tra court hed that the broadcasts are beous per se. The tra court
re|ected the broadcasters cam that ther utterances were the resut of straght reportng
because t had no factua bass. The broadcasters dd not even verfy ther reports before
arng them to show good fath. In hodng FBNI abe for be, the tra court found that FBNI
faed to exercse dgence n the seecton and supervson of ts empoyees. In absovng
Rma from the charge, the tra court rued that Rmas ony partcpaton was when he
agreed wth Aegres expos. The tra court found Rmas statement wthn the "bounds of
freedom of speech, expresson, and of the press." Both partes, namey, FBNI, Rma and
Aegre, on one hand, and AMEC and Ago, on the other, appeaed the decson to the Court of
Appeas. The Court of Appeas affrmed the tra courts |udgment wth modfcaton. The
appeate court made Rma sodary abe wth FBNI and Aegre. The appeate court dened
Agos cam for damages and attorneys fees because the broadcasts were drected aganst
AMEC, and not aganst her. FBNI, Rma and Aegre fed a moton for reconsderaton whch
the Court of Appeas dened n ts 26 |anuary 2000 Resouton. Hence, FBNI fed the petton
for revew.
Issue+ Whether AMEC s entted to mora damages.
,eld+ A |urdca person s generay not entted to mora damages because, unke a natura
person, t cannot experence physca sufferng or such sentments as wounded feengs,
serous anxety, menta angush or mora shock. The Court of Appeas ctes Mambuao
Lumber Co. v. PNB, et a. to |ustfy the award of mora damages. However, the Courts
statement n Mambuao that "a corporaton may have a good reputaton whch, f
besmrched, may aso be a ground for the award of mora damages" s an obter dctum.
Nevertheess, AMECs cam for mora damages fas under tem 7 of Artce 2219 of the Cv
Code. Ths provson expressy authorzes the recovery of mora damages n cases of be,
sander or any other form of defamaton. Artce 2219(7) does not quafy whether the
pantff s a natura or |urdca person. Therefore, a |urdca person such as a corporaton
can vady compan for be or any other form of defamaton and cam for mora damages.
Moreover, where the broadcast s beous per se, the aw mpes damages. In such a case,
evdence of an honest mstake or the want of character or reputaton of the party beed
goes ony n mtgaton of damages. Nether n such a case s the pantff requred to
ntroduce evdence of actua damages as a condton precedent to the recovery of some
damages. In ths case, the broadcasts are beous per se. Thus, AMEC s entted to mora
damages. However, the Court found the award of P300,000 mora damages unreasonabe.
The record shows that even though the broadcasts were beous per se, AMEC has not
suffered any substanta or matera damage to ts reputaton. Therefore, the Court reduced
the award of mora damages from P300,000 to P150,000.
RULING:
A |urdca person s generay not entted to mora damages because, unke a natura
person, t cannot experence physca sufferng or such sentments as wounded feengs,
serous anxety, menta angush or mora shock. Nevertheess, AMECs cam, or mora
damages fa under tem 7 of Art - 2219 of the NCC.
Ths provson expressy authorzes the recovery of mora damages n cases of be, sander
or any other form of defamaton. Art 2219 (7) does not quafy whether the pantff s a
natura or |urdca person. Therefore, a |urdca person such as a corporaton can vady
compan for be or any other form of defamaton and cam for mora damages. Moreover,
where the broadcast s beous per se, the aw mped damages. In such a case, evdence of
an honest mstake or the want of character or reputaton of the party beed goes ony n
mtgaton of damages. In ths case, the broadcasts are beous per se. thus, AMEC s
entted to mora damages. However, we fnd the award P500,000 mora damages
unreasonabe. The record shows that even though the broadcasts were beous, per se,
AMEC has not suffered any substanta or matera damage to ts reputaton. Therefore, we
reduce the award of mora damages to P150k.
v |OIN TORT FEASORS are a the persons who command, nstgate, promote, encourage,
advce countenance, cooperate n, ad or abet the commsson of a tort, as who
approve of t after t s done, for ts beneft.
&5R.LC; -. 95.& 5L5C9R;NIC C;R7 27D "01@R. 8!$# C;R7A1 CL.I& ;*
&;R.L D.&.G513
The aw n force at the tme matera to ths controversy was PD 401. It penazed
unauthorzed nstaaton of water, eectrca, teephone connectons and such acts as the
use of tampered eectrca meters. PD 401 granted the eectrca companes the rght to
conduct nspectons of eectrc meters and the crmna prosecuton or errng customers who
were found to have tampered wth ther eectrca meters. It dd not provde for more
expedent remedes as the chargng of dfferenta bng and mmedate dsconnecton
aganst errng customers. Thus, eectrc companes found a creatve way of avang
themseves of such remedes by nsertng nto the servce contracts a provson for
dfferenta bng wth the opton of dsconnecton upon non-payment by the errng
customers. The Court has recognzed the vadty of such stpuatons. However, recourse to
dfferenta bng wth dsconnecton was sub|ect to the pror requrement of a 48-hour
wrtten notce of dsconnecton.
MERALCO, n the nstant case, resorted to the remedy of dsconnecton wthout pror notce.
Whe t s true that MERALCO sent a demand etter to TEC for the payment of dfferenta
bng, t dd not ncude any notce that the eectrc suppy woud be dsconnected. In fne, t
abused the remedes granted to t under PD 401 by outrght deprvng TEC of eectrc
servces wthout frst notfyng t of the mpendng dsconnecton.
SC deems t proper to deete the award of mora damages. TEC's cam was premsed
aegedy on the damage to ts goodw and reputaton. As a rue, A CORPORATION IS NOT
ENTITLED TO MORAL DAMAGES BECAUSE, NOT BEING A NATURAL PERSON, IT CANNOT
EXPERIENCE PHYSICAL SUFFERING OR SENTIMENTS ke wounded feengs, serous anxety,
menta angush, and mora shock. The ony EXCEPTION to ths rue s when the corporaton
has a reputaton that s debased, resutng n ts humaton n the busness ream. but n
such a case, t s mperatve for the camant to present proof to |ustfy the award. It s
essenta to prove the exstence of the factua bass of the damage and ts causa reaton to
pettoner's acts. In the present case, the records are bereft of any evdence that the name
or reputaton of TEC/TPC has been debased as a resut of pettoner's act. Besdes, the tra
court smpy awarded mora damages n the dspostve porton of ts decson wthout
statng the bass thereof.
78ilips 5Bport B- vs. C.
Gr %(1(1# $1 *ebruar' 1%%$< 1econd Division # &elencio?,errera 243
Facts: Phps Export BV s a foregn corporaton organzed n Netherands and not engaged n
busness n the Phppnes. It s the regstered owner of the trademark "Phps" and "Phps
Shed Embem". Phps Eectrca Lamp, Inc. and Phps Industra Deveopment Inc. besdes
PEBV, are corporatons beongng to the Phps Group of Companes. In 1984, PEVB fed a
etter-compant wth the SEC for the canceaton of the word "Phps" from Standard
Phps corporate name. The SEC en banc affrmed the dsmssa of PEBUs compant by one
of ts hearng offcers. The Court of Appeas dsmssed PEVBs petton for revew certorar,
as referred by the Supreme Court.
Issue: Whether there s confusng smarty between the corporate names to warrant the
remova of "Phps" n Standard Phps corporate name.
Hed: Yes. The rght to excusve use of a corporate name wth freedom from nfrngement by
smarty s determned by prorty of adopton. PEBV, et a. have prorty n adopton, as
Standard Phps was ssued a Certfcate of Regstraton 26 years after Phps Eectrca and
Phps Industra acqured thers. A readng from sad corporate names, t s obvous that
"Phps" s the domnant word n a companes affated wth the prncpa corporaton,
PEVB. Gven that standard Phps prmary purpose does not prevent t from deang n the
same ne of busness of eectrca devces, products or suppes, as that of Phps Eectrca,
t can ony be sad that the subsequent approprator of the name or one confusngy smar
thereto usuay seeks an unfar advantage, a free rde on anothers goodw. Inasmuch as
Standard Phps has submtted an undertakng to the SEC "manfestng ts wngness to
change ts corporate name n the event another person, frm or entty has acqured a pror
rght to the use of the sad frm name or one deceptvey or confusngy smar to t.
Standard Phps must now be hed n ts undertakng.
LCC5:& ;* 9,5 7,IL1. -. C.
219 SCRA 610
FACTS:
1. Pettoner had sometme commenced before n the SEC a compant aganst Lyceum of
Baguo, to requre t to change ts corporate name and to adopt another name not smar or
dentca wth that of pettoner. SEC decded n favor of pettoner. Lyceum of Baguo fed
petton for certorar but was dened for
ack of mert.
2. Armed wth the resouton of the Court, pettoner nsttuted before the SEC to compe
prvate respondents, whch are aso educatona nsttutons, to deete word "Lyceum" from
ther corporate names and permanenty to en|on them from usng such as part of ther
respectve names.
3. Hearng offcer sustaned the cam of pettoner and hed that the word "Lyceum" was
capabe of appropraton and that pettoner had acqured an enforceabe rght to the use of
that word.
4. In an appea, the decson was reversed by the SEC En Banc. They hed that the word
"Lyceum" to have become dentfed wth pettoner as to render use thereof of other
nsttutons as productve of consfuson about the dentty of the schoos concerned n the
mnd of the genera pubc.
5. Pettoner went to appea wth the CA but the atter |ust affrmed the decson of the SEC
En Banc.
HELD:
Under the corporaton code, no corporate name may be aowed by the SEC f the proposed
name s dentca or deceptvey or confusngy smar to that of any exstng corporaton or
to any other name aready protected by aw or s patenty deceptve, confusng or contrary
to exstng aws. The pocy behnd ths provson s to avod fraud upon the pubc, whch
woud have the occason to dea wth the entty concerned, the evason of ega obgatons
and dutes, and the reducton of dffcutes of admnstraton and supervson over
corporatons.
The corporate names of prvate respondents are not dentca or deceptvey or confusngy
smar to that of pettoners. Confuson and decepton has been precuded by the appendng
of geographc names to the word "Lyceum". Furthermore, the word "Lyceum" has become
assocated n tme wth schoos and other nsttutons provdng pubc ectures, concerts,
and pubc dscussons. Thus, t generay refers to a schoo or an nsttuton of earnng.
Pettoner cams that the word has acqured a secondary meanng n reaton to pettoner
wth the resut that the word, athough orgnay generc, has become approprabe by
pettoner to the excuson of other nsttutons.
The doctrne of secondary meanng s a prncpe used n trademark aw but has been
extended to corporate names snce the rght to use a corporate name to the excuson of
others s based upon the same prncpe, whch underes the rght to use a partcuar
trademark or tradename. Under ths doctrne, a word or phrase orgnay ncapabe of
excusve appropraton wth reference to an artce n the market, because geographca or
otherwse descrptve mght nevertheess have been used for so ong and so excusvey by
one producer wth reference to ths artce that, n that trade and to that group of purchasng
pubc, the word or phrase has come to mean that the artce was hs produce. The doctrne
cannot be made to appy where the evdence ddn't prove that the busness has contnued
for so ong a tme that t has become of consequence and acqured good w of consderabe
vaue such that ts artces and produce have acqured a we known reputaton, and
confuson w resut by the use of the dsputed name.
Pettoner ddn't present evdence, whch provded that the word "Lyceum" acqured
secondary meanng. The pettoner faed to adduce evdence that t had excusve use of the
word. Even f pettoner used the word for a ong perod of tme, t hadnt acqured any
secondary meanng n ts favor because the appeant faed to prove that t had been usng
the same word a by tsef to the excuson of others.
LoDano vs. De Los 1antos
Pettoner Lozano fed for damages aganst Adda before the MCTC n Pampanga. Lozano s
the presdent of KAMA|DA whe And a was the presdent of SAMA|ODA. Wth the request of
the Sanggunang Bayan of Mabaacat, Lozano and And a agreed to CONSOLIDATE ther
respectve assocatons and from a unfed |eepney operators assocaton UMA|ODA. They
agreed to eect one set of offcers who sha be gven the SOLE authorty to coect the day
dues from the members of the consodated assoc. Lozano won as presdent and And a
protested aegng fraud and refused to recognze the resuts of the eecton. He aso
contnued to coect the dues from the members of hs assoc despte demands to resst. And
a cams that the |ursdcton was odged wth SEC. MCTC dened the moton. RTC:
Intracorporate - SEC.
ISSUE: |ursdcton
Hed: MCTC There s no ntracorporate nor partnershp reaton between the pettoner and
prv resp. Dspute arose of |ust a pan to consodate nto a snge common assoc and s st a
PROPOSAL .Not approved by SEC and had not submtted ts artces nor ts offcers and
members. CONSOLIDATION becomes effectve not upon mere agreement but ony
UPONISSUANCE OF THE CERTIFICATE OF CONSOLIDATION OF SEC. Consodaton must not
be aganst the provsons of the Corpo Code.
The dspute s not among the members of the KAMA|DA or SAMA|ODA but between members
of separate and dstnct assocatons.
Sec. 5 of the PD 902-A sets forth the |ursdcton of SEC. The |ursdcton s determned by a
concurrence of two eements:1)status or reatonshp of the partes- reatonshp must arse
our of ntracorporate of partnershp reatons between and among stockhoders, members or
assoc etc.2)nature of the queston that s the sub|ect of ther controversy - requres that the
dspute be INTRINSICALLY CONNECTED WITH THE REGULATION OF THECORPO, PARTN,
ASSOC. and dea wth the nterna affars of the corpo. Corporaton by estoppe s founded on
prncpes of equty and s desgned to prevent n|ustce and unfarness. It appes when
persons assume to form a corporaton and exercses corporate functons and enter nto
busness reatons wth thrd persons.
Where there s no thrd person nvoved and the confct arses ony among those assumng
the form of a corporaton, who therefore know that t has not been regstered, there s no
corporaton by estoppe.
Reynado Lozano was the presdent of KAMA|DA (Kapatrang Mabaacat-Angees |eepney
Drvers Assocaton, Inc.). Antono Anda was the presdent of SAMA|ODA (Samahang
Angees-Mabaacat |eepney Operators and Drvers Assocaton, Inc.). In 1995, the two
agreed to consodate the two corporatons, thus, UMA|ODA (Unfed Mabaacat-Angees
|eepney Operators and Drvers Assocaton, Inc.). In the same year, eectons for the offcers
of UMA|ODA were hed. Lozano and Anda both ran for presdent. Lozano won but Anda
aeged fraud and the eectons and thereafter he refused to partcpate wth UMA|ODA. Anda
contnued to coect fees from members of SAMA|ODA and refused to recognze Lozano as
presdent of UMA|ODA. Lozano then fed a compant for damages aganst Anda wth the
MCTC of Mabaacat (and Magaang), Pampanga. Anda moved for the dsmssa of the case
for ack of |ursdcton. The MCTC |udge dened Andas moton. On certorar, |udge Eezer De
Los Santos of RTC Angees Cty reversed and ordered the dsmssa of the case on the
ground that what s nvoved s an ntra-corporate dspute whch shoud be under the
|ursdcton of the Securtes and Exchange Commsson (SEC).
I11:5+ Whether or not the RTC |udge s correct.
,5LD+ No. The reguar courts have |ursdcton over the case. The case between Lozano and
Anda s not an ntra-corporate dspute. UMA|ODA s not yet ncorporated. It s yet to submt
ts artces of ncorporaton to the SEC. It s not even a dspute between KAMA|DA or
SAMA|ODA. The controversy between Lozano and Anda does not arse from ntra-corporate
reatons but rather from a mere confct from ther pan to merge the two assocatons.
NOTE: Regular courts can now hear intra-corporate disputes (expanded jurisdiction).
International 5Bpress 9ravel / 9our 1ervices# Inc. vs. Court o6 .ppeals
[GR 11%00$# 1% ;ctober $000)
*acts+ On 30 |une 1989, the Internatona Express Trave and Tour Servces, Inc. (IETTSI),
through ts managng drector, wrote a etter to the Phppne Footba Federaton
(Federaton), through ts presdent, Henr Kahn, wheren the former offered ts servces as a
trave agency to the atter. The offer was accepted. IETTSI secured the arne tckets for the
trps of the athetes and offcas of the Federaton to the South East Asan Games n Kuaa
Lumpur as we as varous other trps to the Peope's Repubc of Chna and Brsbane. The
tota cost of the tckets amounted to P449,654.83. For the tckets receved, the Federaton
made two parta payments, both n September of 1989, n the tota amount of P176,467.50.
On 4 October 1989, IETTSI wrote the Federaton, through Kahn a demand etter requestng
for the amount of P265,894.33. On 30 October 1989, the Federaton, through the Pro|ect
Gntong Aay, pad the amount of P31,603.00. On 27 December 1989, Henr Kahn ssued a
persona check n the amount of P50,000 as parta payment for the outstandng baance of
the Federaton.
Thereafter, no further payments were made despte repeated demands. Ths prompted
IETTSI to fe a cv case before the Regona Tra Court of Mana. IETTSI sued Henr Kahn n
hs persona capacty and as Presdent of the Federaton and mpeaded the Federaton as an
aternatve defendant. IETTSI sought to hod Henr Kahn abe for the unpad baance for the
tckets purchased by the Federaton on the ground that Henr Kahn aegedy guaranteed the
sad obgaton. Kahn fed hs answer wth countercam, whe the Federaton faed to fe ts
answer and was decared n defaut by the tra court. In due course, the tra court rendered
|udgment and rued n favor of IETTSI and decared Henr Kahn personay abe for the
unpad obgaton of the Federaton. The compant of IETTSI aganst the Phppne Footba
Federaton and the countercams of Henr Kahn were dsmssed, wth costs aganst Kahn.
Ony Henr Kahn eevated the decson to the Court of Appeas. On 21 December 1994, the
appeate court rendered a decson reversng the tra court. IETTSI fed a moton for
reconsderaton and as an aternatve prayer peaded that the Federaton be hed abe for
the unpad obgaton. The same was dened by the appeate court n ts resouton of 8
February 1995. IETTSI fed the petton wth the Supreme Court.
Issue
1. Whether the Phppne Footba Federaton has a corporate exstence of ts
own.
2. Whether Kahn shoud be made personay abe for the unpad obgatons of
the Phppne Footba Federaton.
3. Whether the appeate court propery apped the doctrne of corporaton by
estoppe.
,eld
1. Both RA 3135 (the Revsed Charter of the Phppne Amateur Athetc Federaton) and PD
604 recognzed the |urdca exstence of natona sports assocatons. Ths may be geaned
from the powers and functons granted to these assocatons (See Secton 14 of RA 3135 and
Secton 8 of PD 604). The powers and functons granted to natona sports assocatons
ndcate that these enttes may acqure a |urdca personaty. The power to purchase, se,
ease and encumber property are acts whch may ony be done by persons, whether natura
or artfca, wth |urdca capacty. However, whe natona sports assocatons may be
accorded corporate status, such does not automatcay take pace by the mere passage of
these aws. It s a basc postuate that before a corporaton may acqure |urdca personaty,
the State must gve ts consent ether n the form of a speca aw or a genera enabng act.
The Phppne Footba Federaton dd not come nto exstence upon the passage of these
aws. Nowhere can t be found n RA 3135 or PD 604 any provson creatng the Phppne
Footba Federaton. These aws merey recognzed the exstence of natona sports
assocatons and provded the manner by whch these enttes may acqure |urdca
personaty. Secton 11 of RA 3135 and Secton 8 of PD 604 requre that before an entty
may be consdered as a natona sports assocaton, such entty must be recognzed by the
accredtng organzaton, the Phppne, Amateur Athetc Federaton under RA 3135, and the
Department of Youth and Sports Deveopment under PD 604. Ths fact of recognton,
however, Henr Kahn faed to substantate. A copy of the consttuton and by-aws of the
Phppne Footba Federaton does not prove that sad Federaton has ndeed been
recognzed and accredted by ether the Phppne Amateur Athetc Federaton or the
Department of Youth and Sports Deveopment. Accordngy, the Phppne Footba
Federaton s not a natona sports assocaton wthn the purvew of the aforementoned
aws and does not have corporate exstence of ts own.
2. Henry Kahn shoud be hed abe for the unpad obgatons of the unncorporated
Phppne Footba Federaton. It s a setted prncpa n corporaton aw that any person
actng or purportng to act on behaf of a corporaton whch has no vad exstence assumes
such prveges and becomes personay abe for contract entered nto or for other acts
performed as such agent. As presdent of the Federaton, Henr Kahn s presumed to have
known about the corporate exstence or non-exstence of the Federaton.
3. The Court cannot subscrbe to the poston taken by the appeate court that even
assumng that the Federaton was defectvey ncorporated, IETTSI cannot deny the
corporate exstence of the Federaton because t had contracted and deat wth the
Federaton n such a manner as to recognze and n effect admt ts exstence. The doctrne
of corporaton by estoppe s mstakeny apped by the appeate court to IETTSI. The
appcaton of the doctrne appes to a thrd party ony when he tres to escape abtes on
a contract from whch he has benefted on the rreevant ground of defectve ncorporaton.
Heren, IETTSI s not tryng to escape abty from the contract but rather s the one camng
from the contract.
International Express Travel & Tour Services, Inc. v. CA, Kahn & Philippine Football Federation [! SC"A #$!
%&ct.'(, )***+,
Creation o- Separate Corporate Personalit.
/iabilit. o- Person Actin0 -or 1nincorporated Entit.
2octrine o- Estoppel
Facts: IETTSI wrote a etter to the Federaton through ts presdent, Kahn, offerng ts
servces as a trave agency. Ths was accepted by the Federaton. IETTSI secured arne
tckets for the trps of the athetes & offcas of the Federaton to the South East Asan
Games n Kua Lumpur as we as other trps to Chna & Brsbane. A demand etter was sent
to the Federaton re: payment of the tckets. After 3 parta payments, Kahn ssued a
persona check as parta payment for the Federatons baance. No further payments were
made, causng IETTSI to fe a cv case before the RTC aganst Kahn n hs persona capacty
on the ground that he aegedy guaranteed the sad obgaton & as Presdent of the
Federaton, mpeadng the Federaton as an aternatve defendant.
Kahn fed a countercam aganst IETTSI averrng that t had no cause of acton aganst hm
ether n hs persona nor offca capacty as he dd not guarantee the payment but merey
acted as an agent of the Federaton w/c has a separate & dstnct |urdca personaty. The
Federaton, n fang to fe ts answer, was decared n defaut.
The RTC found Kahn personay abe snce a vountary unncorporated assocaton, ke the
Federaton, doesnt have the power to enter nor ratfy a contract. The contract thus entered
nto by ts offcers or agents on ts behaf s not bndng on the assocaton nor enforceabe
aganst t - but aganst the offcers or agents n ther persona capacty. On appea to the
CA, decson was reversed sayng that IETTSI faed to prove that Kahn guaranteed the
obgaton, hence ths petton.
Issues:
(1) WON the Federaton has a separate |urdca personaty.(2) WON Kahn can be hed
personay abe for the unpad obgatons of the Federzaton
Hed: CA decson reversed & set asde. RTC decson renstated.
RA 3135 & PD 604 recognzed the |urdca exstence of natona sports assocatons. The
power to purchase, se, ease & encumber property are acts w/c may ony be done by
persons, whether natura or artfca, wth |urdca capacty and these have been granted to
natona sports assocatons, ceary ndcatng ther |urdca personaty. However, such
does not automatcay take pace by mere passage of the aws.
Before a corp may acqure |urdca personaty, the State must gve ts consent ether n the
form of a speca aw or a genera enabng act. Nowhere can t be found n RA 3135 & PD
604 any provson creatng the Phppne Footba Federaton. These aws merey recognzed
the exstence of natona sports assocatons & provded the manner by whch they may
acqure |urdca personaty.
The statutory provsons requre that before an entty may be consdered as a natona sports
assocaton, such must be recognzed by the accredtng organzaton, the Phppne
Amateur Athetc Federaton under RA 3135 & the Department of Youth & Sports
Deveopment under PD 604. In attemptng to prove |urdca exstence of the Federaton,
Kahn attached a copy of the consttuton & by-aws of the Federaton ths doesnt prove the
sad Federaton has been recognzed & accredted.
Any person actng or purportng to act on behaf of a corp w/c has no vad exstence
assumes such prveges & obgatons & becomes personay abe for contracts entered nto
or for such other acts performed as such agent. Hence, Kahn shoud be abe for the unpad
obgatons of the unncorporated Federaton. He s presumed to have known of the corp
exstence or non-exstence of the Federaton.
Doctrne of Corporaton by Estoppe - appes to thrd persons ony when he tres to escape
abty on a contract from w/c he has benefted on the rreevant ground of defectve
corporaton. Here, IETTSI s not tryng to escape abty from the contract but rather s the 1
camng from t.
WHAT IS THE EFFECT OF NON-FILING OF THE ARTICLES OF INCORPORATION WITHIN THE
REOUIRED PERIOD?

Faure to submt the by-aws wthn 30 days from ncorporaton does not automatcay
dssove the corporaton. It s merey a ground for suspenson or revocaton of ts charter
after proper notce and hearng. The corporaton s, at the very east, a de facto corporaton
whose exstence may not be coateray attacked. 21a=adEaan v. C.# G.R. No. 1"$$8"#
4une 8# $0003
1.F.D4..N v C.
"0% 1CR. 01(# GR No 1"1!0# 4une 8# $000
*.C91+
Sappar K. Sawad|aan was among the frst empoyees of the Phppne Amanah Bank (PAB)
when t was created by vrtue of Presdenta Decree No. 264 on 02 August 1973. He started
as a securty guard and was eventuay promoted to a oans anayst.
In February 1988, whe desgnated as appraser/nvestgator, Sawad|aan was assgned to
nspect the propertes offered as coateras by Compressed Ar Machneres and Equpment
Corporaton (CAMEC) for a credt ne of Fve Mon Pesos (P5,000,000.00). On the bass of
hs Inspecton and Report, the PAB granted the oan appcaton. When the oan matured on
17 May 1989, CAMEC requested an extenson of 180 days, but was granted ony 120 days to
repay the oan. Sawad|aan was then promoted to Loans Anayst I on 01 |uy 1989.
In |anuary 1990, Congress passed Repubc Act 6848 creatng the AIIBP and repeang P.D.
No. 264 (whch created the PAB). A assets, abtes and capta accounts of the PAB were
transferred to the AIIBP, and the exstng personne of the PAB were to contnue to dscharge
ther functons uness dscharged. In the reorganzaton, Sawad|aan was among the
personne retaned by the AIIBP.
Upon faure of CAMEC to pay, the bank, now AIIBP, dscovered the ff: the TCT offered by
CAMEC was spurous, the property descrbed theren was nexstent, and that the property
covered by another TCT had a pror exstng mortgage n favor of one Dvna Pabco.
On 08 |une 1993, the Board of Drectors of the AIIBP created an Investgatng Commttee to
ook nto the CAMEC transacton, whch had cost the bank P6,000,000.00 n osses. The
Board eventuay hed Sawad|aan abe for the admnstratve offense of conduct pre|udca
to the best nterest of the servce and mposed on hm the penaty from (orgnay) dsmssa
to suspenson for 6 months. Sawad|aan appeaed the decson but the court affrmed the
banks fndng. Sawad|aan fed a moton for new tra camng that he had recenty
dscovered that at the tme hs empoyment was termnated, the AIIBP had not yet adopted
ts corporate by-aws.
I11:5+
W/N the aeged Isamc Bank has no vad by-aws and has ost ts |urdca personaty as a
corporaton on 16 Apr 1990
W/N Isamc Bank and ts aeged Board of Drectors have no |ursdcton to act n the manner
they dd n the absence of a vad by-aws;
R:LING+ AIIBP has a |urdca personaty to act as corporaton!
The AIIBP was created by Rep. Act No. 6848. It has a man offce where t conducts busness,
has sharehoders, corporate offcers, a board of drectors, assets, and personne. It s, n fact,
here represented by the Offce of the Government Corporate Counse, "the prncpa aw
offce of government-owned corporatons, one of whch s respondent bank." At the very
east, by ts faure to submt ts by-aws on tme, the AIIBP may be consdered a de facto
corporaton whose rght to exercse corporate powers may not be nqured nto coateray n
any prvate sut to whch such corporatons may be a party.
Moreover, a corporaton whch has faed to fe ts by-aws wthn the prescrbed perod does
not ipso facto ose ts powers as such. The SEC Rues on Suspenson/Revocaton of the
Certfcate of Regstraton of Corporatons, detas the procedures and remedes that may be
avaed of before an order of revocaton can be ssued. There s no showng that such a
procedure has been ntated n ths case.
In any case, pettoners argument s rreevant because ths case s not a corporate
controversy, but a abor dspute; and t s an empoyers basc rght to freey seect or
dscharge ts empoyees, f ony as a measure of sef-protecton aganst acts nmca to ts
nterest. Regardess of whether AIIBP s a corporaton, a partnershp, a soe propretorshp, or
a sari-sari store, t s an undsputed fact that AIIBP s the pettoners empoyer. AIIBP chose
to retan hs servces durng ts reorganzaton, controed the means and methods by whch
hs work was to be performed, pad hs wages, and, eventuay, termnated hs servces.

You might also like