1 | P a g e

CORPO CASES: Batch 1 Full text

WILSON P. GAMBOA,
Petitioner,
G.R. No. 17!7"
Present:
- versus -

FINANCE SECRE#AR$ MARGARI#O B. #E%ES,
FINANCE &N'ERSECRE#AR$ (O)N P. SE%ILLA,
AN' COMMISSIONER RICAR'O ABCE'E OF #)E
PRESI'EN#IAL COMMISSION ON GOO'
GO%ERNMEN# *PCGG+ IN #)EIR CAPACI#IES AS
C)AIR AN' MEMBERS, RESPEC#I%EL$, OF #)E
PRI%A#I,A#ION CO&NCIL,
C)AIRMAN AN#)ONI SALIM OF FIRS# PACIFIC
CO., L#'. IN )IS CAPACI#$ AS 'IREC#OR OF
ME#RO PACIFIC ASSE# )OL'INGS INC.,
C)AIRMAN MAN&EL %. PANGILINAN OF
P)ILIPPINE LONG 'IS#ANCE #ELEP)ONE
COMPAN$ *PL'#+ IN )IS CAPACI#$ AS
MANAGING 'IREC#OR OF FIRS# PACIFIC CO.,
L#'., PRESI'EN# NAPOLEON L. NA,ARENO OF
P)ILIPPINE LONG 'IS#ANCE #ELEP)ONE
COMPAN$, C)AIR FE BARIN OF #)E SEC&RI#IES
E-C)ANGE COMMISSION, a./ PRESI'EN#
FRANCIS LIM OF #)E P)ILIPPINE S#OC0
E-C)ANGE,
Respondents.

CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARO-E CAS!RO,
"RION,
PERAL!A,
"ERSA#IN,
EL CAS!ILLO,
A"A,
VILLARA#A, JR.,
PERE$,
#ENO$A, and
SERENO, JJ.

















PABLI#O %. SANI'A' a./
ARNO %. SANI'A',
Petitioners-in-Intervention.
Pro%u&gated:

June '(, ')11
x1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1x


' E C I S I O N


CARPIO, J.:


#he Ca2e

!*is is an origina& petition +or pro*i,ition, in-un.tion, de.&arator/ re&ie+ and
de.&aration o+ nu&&it/ o+ t*e sa&e o+ s*ares o+ sto.0 o+ P*i&ippine
!e&e.o%%uni.ations Invest%ent Corporation 1P!IC2 ,/ t*e govern%ent o+
t*e Repu,&i. o+ t*e P*i&ippines to #etro Pa.i3. Assets 4o&dings, In.. 1#PA42,
an a5&iate o+ 6irst Pa.i3. Co%pan/ Li%ited 16irst Pa.i3.2.

#he A.tece/e.t2

!*e +a.ts, a..ording to petitioner 7i&son P. 8a%,oa, a sto.0*o&der o+
P*i&ippine Long istan.e !e&ep*one Co%pan/ 1PL!2, are as +o&&o9s:
1

On '( Nove%,er 1:'(, t*e P*i&ippine Legis&ature ena.ted A.t No. ;<;=
9*i.* granted PL! a +ran.*ise and t*e rig*t to engage in
te&e.o%%uni.ations ,usiness. In 1:=:, 8enera& !e&ep*one and E&e.troni.s
Corporation 18!E2, an A%eri.an .o%pan/ and a %a-or PL! sto.0*o&der,
so&d '= per.ent o+ t*e outstanding .o%%on s*ares o+ PL! to P!IC. In
1:>>, Pri%e 4o&dings, In.. 1P4I2 9as in.orporated ,/ severa& persons,
in.&uding Ro&and 8apud and Jose Ca%pos, Jr. Su,se?uent&/, P4I ,e.a%e t*e
o9ner o+ 111,<1@ s*ares o+ sto.0 o+ P!IC ,/ virtue o+ t*ree eeds o+
Assign%ent eAe.uted ,/ P!IC sto.0*o&ders Ra%on Co-uang.o and
Luis !irso Rivi&&a. In 1:(=, t*e 111,<1@ s*ares o+ sto.0 o+ P!IC *e&d ,/ P4I
9ere se?uestered ,/ t*e Presidentia& Co%%ission on 8ood 8overn%ent
1PC882. !*e 111,<1@ P!IC s*ares, 9*i.* represent a,out <=.1'@ per.ent o+
t*e outstanding .apita& sto.0 o+ P!IC, 9ere &ater de.&ared ,/ t*is Court to
,e o9ned ,/ t*e Repu,&i. o+ t*e P*i&ippines.
'

In 1:::, 6irst Pa.i3., a "er%uda-registered, 4ong Bong-,ased invest%ent
3r%, a.?uired t*e re%aining @< per.ent o+ t*e outstanding .apita& sto.0 o+
P!IC. On ') Nove%,er '))=, t*e Inter-Agen./ PrivatiCation Coun.i& 1IPC2 o+
t*e P*i&ippine 8overn%ent announ.ed t*at it 9ou&d se&& t*e 111,<1@ P!IC
s*ares, or <=.1'@ per.ent o+ t*e outstanding .apita& sto.0 o+ P!IC, t*roug*
a pu,&i. ,idding to ,e .ondu.ted on < e.e%,er '))=. Su,se?uent&/, t*e
pu,&i. ,idding 9as reset to ( e.e%,er '))=, and on&/ t9o ,idders,
Para&&aA Venture 6und DDVII 1Para&&aA2 and Pan-Asia Presidio Capita&,
su,%itted t*eir ,ids. Para&&aA 9on 9it* a ,id o+ P'@.= ,i&&ion or ESF@1)
%i&&ion.

!*erea+ter, 6irst Pa.i3. announ.ed t*at it 9ou&d eAer.ise its rig*t o+ 3rst
re+usa& as a P!IC sto.0*o&der and ,u/ t*e 111,<1@ P!IC s*ares ,/ %at.*ing
t*e ,id pri.e o+ Para&&aA. 4o9ever, 6irst Pa.i3. +ai&ed to do so ,/ t*e 1
6e,ruar/ '))> dead&ine set ,/ IPC and instead, /ie&ded its rig*t to P!IC
itse&+ 9*i.* 9as t*en given ,/ IPC unti& ' #ar.* '))> to ,u/ t*e P!IC
s*ares. On 1< 6e,ruar/ '))>, 6irst Pa.i3., t*roug* its su,sidiar/, #PA4,
entered into a Conditiona& Sa&e and Pur.*ase Agree%ent o+ t*e 111,<1@
P!IC s*ares, or <=.1'@ per.ent o+ t*e outstanding .apita& sto.0 o+ P!IC, 9it*
' | P a g e
t*e P*i&ippine 8overn%ent +or t*e pri.e o+ P'@,'1>,@@=,))) or
ESF@1),@(),1(:. !*e sa&e 9as .o%p&eted on '( 6e,ruar/ '))>.

Sin.e P!IC is a sto.0*o&der o+ PL!, t*e sa&e ,/ t*e P*i&ippine 8overn%ent
o+ <=.1'@ per.ent o+ P!IC s*ares is a.tua&&/ an indire.t sa&e o+ 1' %i&&ion
s*ares or a,out =.; per.ent o+ t*e outstanding .o%%on s*ares o+
PL!. W3th the 2ale, F342t Pac35c62 co77o. 2ha4ehol/3.82 3. PL'#
3.c4ea2e/ 94o7 :;.7 <e4ce.t to :7 <e4ce.t, the4e=> 3.c4ea23.8 the
co77o. 2ha4ehol/3.82 o9 9o4e38.e42 3. PL'# to a=out ?1.@7
<e4ce.t. !*is vio&ates Se.tion 11, Arti.&e DII o+ t*e 1:(> P*i&ippine
Constitution 9*i.* &i%its +oreign o9ners*ip o+ t*e .apita& o+ a pu,&i. uti&it/
to not %ore t*an <) per.ent.
;

On t*e ot*er *and, pu,&i. respondents 6inan.e
Se.retar/ #argarito ". !eves, Enderse.retar/ Jo*n P. Sevi&&a, and PC88
Co%%issioner Ri.ardo A,.ede a&&ege t*e +o&&o9ing re&evant +a.ts:

On : Nove%,er 1:=>, P!IC 9as in.orporated and *ad sin.e engaged in t*e
,usiness o+ invest%ent *o&dings. P!IC *e&d '=,);<,'=; PL! .o%%on
s*ares, or 1;.(<> per.ent o+ t*e tota& PL! outstanding .o%%on s*ares.
P4I, on t*e ot*er *and, 9as in.orporated in 1:>>, and ,e.a%e t*e o9ner o+
111,<1@ P!IC s*ares or <=.1'@ per.ent o+ t*e outstanding .apita& sto.0 o+
P!IC ,/ virtue o+ t*ree eeds o+ Assign%ent eAe.uted ,/
Ra%on Co-uang.o and Luis !irso Rivi&&a. In 1:(=, t*e 111,<1@ P!IC s*ares
*e&d ,/ P4I 9ere se?uestered ,/ t*e PC88, and su,se?uent&/ de.&ared ,/
t*is Court as part o+ t*e i&&-gotten 9ea&t* o+ +or%er President 6erdinand
#ar.os. !*e se?uestered P!IC s*ares 9ere re.onve/ed to t*e Repu,&i. o+
t*e P*i&ippines in a..ordan.e 9it* t*is CourtGs de.ision
<
9*i.* ,e.a%e 3na&
and eAe.utor/ on ( August '))=.
!*e P*i&ippine 8overn%ent de.ided to se&& t*e 111,<1@ P!IC s*ares, 9*i.*
represent =.< per.ent o+ t*e outstanding .o%%on s*ares o+ sto.0 o+ PL!,
and designated t*e Inter-Agen./ PrivatiCation Coun.i& 1IPC2, .o%posed o+
t*e epart%ent o+ 6inan.e and t*e PC88, as t*e disposing entit/. An
invitation to ,id 9as pu,&is*ed in seven diHerent ne9spapers +ro% 1; to '<
Nove%,er '))=. On ') Nove%,er '))=, a pre-,id .on+eren.e 9as *e&d,
and t*e origina& dead&ine +or ,idding s.*edu&ed on < e.e%,er '))= 9as
reset to ( e.e%,er '))=. !*e eAtension 9as pu,&is*ed in nine diHerent
ne9spapers.

uring t*e ( e.e%,er '))= ,idding, Para&&aA Capita& #anage%ent LP
e%erged as t*e *ig*est ,idder 9it* a ,id o+ P'@,'1>,@@=,))). !*e
govern%ent noti3ed 6irst Pa.i3., t*e %a-orit/ o9ner o+ P!IC s*ares, o+ t*e
,idding resu&ts and gave 6irst Pa.i3. unti& 1 6e,ruar/ '))> to eAer.ise its
rig*t o+ 3rst re+usa& in a..ordan.e 9it* P!ICGs Arti.&es o+ In.orporation. 6irst
Pa.i3. announ.ed its intention to %at.* Para&&aAGs ,id.

On ;1 Januar/ '))>, t*e 4ouse o+ Representatives 14R2 Co%%ittee on
8ood 8overn%ent .ondu.ted a pu,&i. *earing on t*e parti.u&ars o+ t*e t*en
i%pending sa&e o+ t*e 111,<1@ P!IC s*ares.
Respondents !eves and Sevi&&a 9ere a%ong t*ose 9*o attended t*e pu,&i.
*earing. !*e 4R Co%%ittee Report No. ''>) .on.&uded t*at: 1a2 t*e
au.tion o+ t*e govern%entGs 111,<1@ P!IC s*ares ,ore due di&igen.e,
transparen./ and .on+or%it/ 9it* eAisting &ega& pro.eduresI and 1,2 F342t
Pac35c62 3.te./e/ acAu323t3o. o9 the 8oBe4.7e.t62 111,@1! P#IC
2ha4e2 4e2ult3.8 3. F342t Pac35c62 1;;C oD.e42h3< o9 P#IC D3ll .ot
B3olate the @; <e4ce.t co.2t3tut3o.al l373t o. 9o4e38. oD.e42h3< o9
a <u=l3c ut3l3t> 23.ce P#IC hol/2 o.l> 1:.?@7 <e4ce.t o9 the total
out2ta./3.8 co77o. 2ha4e2 o9 PL'#.
@
On '( 6e,ruar/ '))>, 6irst Pa.i3.
.o%p&eted t*e a.?uisition o+ t*e 111,<1@ s*ares o+ sto.0 o+ P!IC.

Respondent #anue& V. Pangi&inan ad%its t*e +o&&o9ing +a.ts: 1a2 t*e IPC
.ondu.ted a pu,&i. ,idding +or t*e sa&e o+ 111,<1@ P!IC s*ares or <=
per.ent o+ t*e outstanding .apita& sto.0 o+ P!IC 1t*e re%aining @< per.ent
o+ P!IC s*ares 9as a&read/ o9ned ,/ 6irst Pa.i3. and its a5&iates2I 1,2
Para&&aA oHered t*e *ig*est ,id a%ounting to P'@,'1>,@@=,)))I 1.2
pursuant to t*e rig*t o+ 3rst re+usa& in +avor o+ P!IC and its s*are*o&ders
granted in P!ICGs Arti.&es o+ In.orporation, #PA4, a 6irst Pa.i3. a5&iate,
eAer.ised its rig*t o+ 3rst re+usa& ,/ %at.*ing t*e *ig*est ,id oHered +or
P!IC s*ares on 1; 6e,ruar/ '))>I and 1d2 on '( 6e,ruar/ '))>, t*e sa&e
9as .onsu%%ated 9*en #PA4 paid IPC P'@,'1>,@@=,))) and t*e
govern%ent de&ivered t*e .erti3.ates +or t*e 111,<1@ P!IC s*ares.
Respondent Pangi&inandenies t*e ot*er a&&egations o+ +a.ts o+ petitioner.

On '( 6e,ruar/ '))>, petitioner 3&ed t*e instant petition +or pro*i,ition,
in-un.tion, de.&arator/ re&ie+, and de.&aration o+ nu&&it/ o+ sa&e o+ t*e
111,<1@ P!IC s*ares. Petitioner .&ai%s, a%ong ot*ers, t*at t*e sa&e o+ t*e
111,<1@ P!IC s*ares 9ou&d resu&t in an in.rease in 6irst Pa.i3.Gs .o%%on
s*are*o&dings in PL! +ro% ;).> per.ent to ;> per.ent, and t*is, .o%,ined
9it* Japanese N!! oCo#oGs .o%%on s*are*o&dings in PL!, 9ou&d resu&t
to a tota& +oreign .o%%on s*are*o&dings in PL! o+ @1.@= per.ent 9*i.* is
over t*e <) per.ent .onstitutiona& &i%it.
=
Petitioner asserts:

I+ and 9*en t*e sa&e is .o%p&eted, 6irst Pa.i3.Gs e?uit/ in PL! 9i&&
go up +ro% ;).> per.ent to ;>.) per.ent o+ its .o%%on J or voting-
sto.0*o&dings, A AA. 4en.e, t*e .onsu%%ation o+ t*e sa&e 9i&& put
t*e t9o &argest +oreign investors in PL! J 6irst Pa.i3. and JapanGs
N!! oCo#o, 9*i.* is t*e 9or&dGs &argest 9ire&ess
te&e.o%%uni.ations 3r%, o9ning @1.@= per.ent o+ PL! .o%%on
e?uit/. A A A 7it* t*e .o%p&etion o+ t*e sa&e, data .u&&ed +ro% t*e
o5.ia& 9e,site o+ t*e Ne9 Kor0 Sto.0 EA.*ange 1999.n/se..o%2
s*o9ed t*at t*ose +oreign entities, 9*i.* o9n at &east 3ve per.ent
o+ .o%%on e?uit/, 9i&& .o&&e.tive&/ o9n (1.<> per.ent o+ PL!Gs
.o%%on e?uit/. A A A
A A A as t*e annua& dis.&osure reports, a&so
re+erred to as 6or% ')-B reports A A A 9*i.*
PL! su,%itted to t*e Ne9 Kor0 Sto.0 EA.*ange
+or t*e period '));-'))@, revea&ed t*at 6irst
Pa.i3. and severa& ot*er +oreign entities
,rea.*ed t*e .onstitutiona& &i%it o+ <) per.ent
o9ners*ip as ear&/ as '));. A A AL
>
; | P a g e

Petitioner raises t*e +o&&o9ing issues: 112 9*et*er t*e .onsu%%ation o+ t*e
t*en i%pending sa&e o+ 111,<1@ P!IC s*ares to 6irst Pa.i3. vio&ates t*e
.onstitutiona& &i%it on +oreign o9ners*ip o+ a pu,&i. uti&it/I 1'2 9*et*er
pu,&i. respondents .o%%itted grave a,use o+ dis.retion in a&&o9ing t*e
sa&e o+ t*e 111,<1@ P!IC s*ares to 6irst Pa.i3.I and 1;2 9*et*er t*e sa&e o+
.o%%on s*ares to +oreigners in eA.ess o+ <) per.ent o+ t*e entire
su,s.ri,ed .o%%on .apita& sto.0 vio&ates t*e .onstitutiona& &i%it on +oreign
o9ners*ip o+ a pu,&i. uti&it/.
(

On 1; August '))>, Pa,&ito V. Sanidad and Arno V. Sanidad 3&ed a #otion
+or Leave to Intervene and Ad%it Atta.*ed Petition-in-Intervention. In t*e
Reso&ution o+ '( August '))>, t*e Court granted t*e %otion and noted t*e
Petition-in-Intervention.

Petitioners-in-intervention M-oin petitioner 7i&son 8a%,oa A A A in see0ing,
a%ong ot*ers, to en-oin andNor nu&&i+/ t*e sa&e ,/ respondents o+ t*e
111,<1@ P!IC s*ares to 6irst Pa.i3. or assignee.L Petitioners-in-intervention
.&ai% t*at, as PL! su,s.ri,ers, t*e/ *ave a Msta0e in t*e out.o%e o+ t*e
.ontrovers/ A A A 9*ere t*e P*i&ippine 8overn%ent is .o%p&eting t*e sa&e
o+ govern%ent o9ned assets in OPL!P, un?uestiona,&/ a pu,&i. uti&it/, in
vio&ation o+ t*e nationa&it/ restri.tions o+ t*e P*i&ippine Constitution.L


#he I22ue


!*is Court is not a trier o+ +a.ts. 6a.tua& ?uestions su.* as t*ose raised ,/
petitioner,
:
9*i.* indisputa,&/ de%and a t*oroug* eAa%ination o+ t*e
eviden.e o+ t*e parties, are genera&&/ ,e/ond t*is CourtGs -urisdi.tion.
Ad*ering to t*is 9e&&-sett&ed prin.ip&e, t*e Court s*a&& .on3ne t*e reso&ution
o+ t*e instant .ontrovers/ so&e&/ on t*e th4e2hol/ a./ <u4el> le8al
322ue o+ 9*et*er t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e
Constitution re+ers to t*e tota& .o%%on s*ares on&/ or to t*e tota&
outstanding .apita& sto.0 1.o%,ined tota& o+ .o%%on and non-voting
pre+erred s*ares2 o+ PL!, a pu,&i. uti&it/.

#he Rul3.8 o9 the Cou4t

!*e petition is part&/ %eritorious.

Petition for declaratory relief treated as petition for mandamus

At t*e outset, petitioner is +a.ed 9it* a pro.edura& ,arrier. A%ong t*e
re%edies petitioner see0s, on&/ t*e petition +or pro*i,ition is 9it*in t*e
origina& -urisdi.tion o+ t*is .ourt, 9*i.* *o9ever is not eA.&usive ,ut is
.on.urrent 9it* t*e Regiona& !ria& Court and t*e Court o+ Appea&s. !*e
a.tions +or de.&arator/ re&ie+,
1)
in-un.tion, and annu&%ent o+ sa&e are not
e%,ra.ed 9it*in t*e origina& -urisdi.tion o+ t*e Supre%e Court. On t*is
ground a&one, t*e petition .ou&d *ave ,een dis%issed outrig*t.

7*i&e dire.t resort to t*is Court %a/ ,e -usti3ed in a petition +or
pro*i,ition,
11
t*e Court s*a&& nevert*e&ess re+rain +ro% dis.ussing t*e
grounds in support o+ t*e petition +or pro*i,ition sin.e on '( 6e,ruar/ '))>,
t*e ?uestioned sa&e 9as .onsu%%ated 9*en #PA4 paid
IPC P'@,'1>,@@=,))) and t*e govern%ent de&ivered t*e .erti3.ates +or t*e
111,<1@ P!IC s*ares.

4o9ever, sin.e t*e t*res*o&d and pure&/ &ega& issue on t*e de3nition o+ t*e
ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution *as +ar-rea.*ing
i%p&i.ations to t*e nationa& e.ono%/, t*e Court treats t*e petition +or
de.&arator/ re&ie+ as one +or %anda%us.
1'

In Salvacion v. Central Bank of the Philippines,
1;
t*e Court treated t*e
petition +or de.&arator/ re&ie+ as one +or %anda%us .onsidering t*e grave
in-usti.e t*at 9ou&d resu&t in t*e interpretation o+ a ,an0ing &a9. In t*at
.ase, 9*i.* invo&ved t*e .ri%e o+ rape .o%%itted ,/ a +oreign tourist
against a 6i&ipino %inor and t*e eAe.ution o+ t*e 3na& -udg%ent in t*e .ivi&
.ase +or da%ages on t*e touristGs do&&ar deposit 9it* a &o.a& ,an0, t*e Court
de.&ared Se.tion 11; o+ Centra& "an0 Cir.u&ar No. :=), eAe%pting +oreign
.urren./ deposits +ro% atta.*%ent, garnis*%ent or an/ ot*er order or
pro.ess o+ an/ .ourt, inapp&i.a,&e due to t*e pe.u&iar .ir.u%stan.es o+ t*e
.ase. !*e Court *e&d t*at Min-usti.e 9ou&d resu&t espe.ia&&/ to a .itiCen
aggrieved ,/ a +oreign guest &i0e a..used A A AL t*at 9ou&d Mnegate Arti.&e
1) o+ t*e Civi& Code 9*i.* provides t*at Qin .ase o+ dou,t in t*e
interpretation or app&i.ation o+ &a9s, it is presu%ed t*at t*e &a9%a0ing
,od/ intended rig*t and -usti.e to prevai&.GL !*e Court t*ere+ore re?uired
respondents Centra& "an0 o+ t*e P*i&ippines, t*e &o.a& ,an0, and t*e
a..used to .o%p&/ 9it* t*e 9rit o+ eAe.ution issued in t*e .ivi& .ase +or
da%ages and to re&ease t*e do&&ar deposit o+ t*e a..used to satis+/ t*e
-udg%ent.

In Alliance of Government Workers v. Minister of Labor,
1<
t*e Court si%i&ar&/
,rus*ed aside t*e pro.edura& in3r%it/ o+ t*e petition +or de.&arator/ re&ie+
and treated t*e sa%e as one +or %anda%us. In Alliance, t*e issue 9as
9*et*er t*e govern%ent un&a9+u&&/ eA.&uded petitioners, 9*o 9ere
govern%ent e%p&o/ees, +ro% t*e en-o/%ent o+ rig*ts to 9*i.* t*e/ 9ere
entit&ed under t*e &a9. Spe.i3.a&&/, t*e ?uestion 9as: MAre t*e ,ran.*es,
agen.ies, su,divisions, and instru%enta&ities o+ t*e 8overn%ent, in.&uding
govern%ent o9ned or .ontro&&ed .orporations in.&uded a%ong t*e +our
Qe%p&o/ersG under Presidentia& e.ree No. (@1 9*i.* are re?uired to pa/
t*eir e%p&o/ees A A A a t*irteent* 11;t*2 %ont* pa/ A A A RL !*e
Constitutiona& prin.ip&e invo&ved t*erein aHe.ted a&& govern%ent
e%p&o/ees, .&ear&/ -usti+/ing a re&aAation o+ t*e te.*ni.a& ru&es o+
pro.edure, and .ertain&/ re?uiring t*e interpretation o+ t*e assai&ed
presidentia& de.ree.

In s*ort, it is 9e&&-sett&ed t*at t*is Court %a/ treat a petition +or de.&arator/
re&ie+ as one +or %anda%us i+ t*e issue invo&ved *as +ar-rea.*ing
i%p&i.ations. As t*is Court *e&d in Salvacion:
< | P a g e

!*e Court *as no origina& and eA.&usive -urisdi.tion over a petition
+or de.&arator/ re&ie+. )oDeBe4, exce<t3o.2 to th32 4ule haBe
=ee. 4eco8.3Ee/. #hu2, Dhe4e the <et3t3o. ha2 9a414each3.8
37<l3cat3o.2 a./ 4a32e2 Aue2t3o.2 that 2houl/ =e 4e2olBe/,
3t 7a> =e t4eate/ a2 o.e 9o4 7a./a7u2.
1@
1E%p*asis supp&ied2


In t*e present .ase, petitioner see0s pri%ari&/ t*e interpretation o+ t*e ter%
M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution. 4e pra/s t*at t*is
Court de.&are t*at t*e ter% M.apita&L re+ers to .o%%on s*ares on&/, and
t*at su.* s*ares .onstitute Mt*e so&e ,asis in deter%ining +oreign e?uit/ in
a pu,&i. uti&it/.L Petitioner +urt*er as0s t*is Court to de.&are an/ ru&ing
in.onsistent 9it* su.* interpretation un.onstitutiona&.

!*e interpretation o+ t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e
Constitution *as +ar-rea.*ing i%p&i.ations to t*e nationa& e.ono%/. In +a.t,
a reso&ution o+ t*is issue 9i&& deter%ine 9*et*er 6i&ipinos are %asters, or
se.ond .&ass .itiCens, in t*eir o9n .ountr/. 7*at is at sta0e *ere is 9*et*er
6i&ipinos or +oreigners 9i&& *ave efective control o+ t*e nationa& e.ono%/.
Indeed, i+ ever t*ere is a &ega& issue t*at *as +ar-rea.*ing i%p&i.ations to
t*e entire nation, and to +uture generations o+ 6i&ipinos, it is
t*e t*res**o&d &ega& issue presented in t*is .ase.

!*e Court 3rst en.ountered t*e issue on t*e de3nition o+ t*e ter% M.apita&L
in Se.tion 11, Arti.&e DII o+ t*e Constitution in t*e .ase o+Fernane!
v. Co"#an$co% do.0eted as 8.R. No. 1@>;=).
1=
!*at .ase invo&ved t*e sa%e
pu,&i. uti&it/ 1PL!2 and su,stantia&&/ t*e sa%e private respondents.
espite t*e i%portan.e and nove&t/ o+ t*e .onstitutiona& issue raised
t*erein and despite t*e +a.t t*at t*e petition invo&ved a pure&/ &ega&
?uestion, t*e Court de.&ined to reso&ve t*e .ase on t*e %erits, and instead
denied t*e sa%e +or disregarding t*e *ierar.*/ o+ .ourts.
1>
!*ere, petitioner
6ernandeC assai&ed on a pure ?uestion o+ &a9 t*e Regiona& !ria& CourtGs
e.ision o+ '1 6e,ruar/ ')); via a petition +or revie9 under Ru&e <@. !*e
CourtGs Reso&ution, den/ing t*e petition, ,e.a%e 3na& on '1 e.e%,er
'))<.
!*e instant petition t*ere+ore presents t*e Court 9it* anot*er opportunit/
to 3na&&/ sett&e t*is <u4el> le8al 322ue 9*i.* is o+ trans.endenta&
i%portan.e to t*e nationa& e.ono%/ and a +unda%enta& re?uire%ent to a
+ait*+u& ad*eren.e to our Constitution. !*e Court %ust +ort*9it* seiCe su.*
opportunit/, not on&/ +or t*e ,ene3t o+ t*e &itigants, ,ut %ore signi3.ant&/
+or t*e ,ene3t o+ t*e entire 6i&ipino peop&e, to ensure, in t*e 9ords o+ t*e
Constitution, Ma se&+-re&iant and independent nationa& e.ono%/ eFect3Bel>
co.t4olle/ ,/ 6i&ipinos.L
1(
"esides, in t*e &ig*t o+ vague and .on+using
positions ta0en ,/ govern%ent agen.ies on t*is pure&/ &ega& issue, present
and +uture +oreign investors in t*is .ountr/ deserve, as a %atter o+ ,asi.
+airness, a .ategori.a& ru&ing +ro% t*is Court on t*e eAtent o+ t*eir
parti.ipation in t*e .apita& o+ pu,&i. uti&ities and ot*er nationa&iCed
,usinesses.

espite its +ar-rea.*ing i%p&i.ations to t*e nationa& e.ono%/, t*is pure&/
&ega& issue *as re%ained unreso&ved +or over >@ /ears sin.e t*e 1:;@
Constitution. !*ere is no reason +or t*is Court to evade t*is ever re.urring
+unda%enta& issue and de&a/ again de3ning t*e ter% M.apita&,L 9*i.*
appears not on&/ in Se.tion 11, Arti.&e DII o+ t*e Constitution, ,ut a&so in
Se.tion ', Arti.&e DII on .o-produ.tion and -oint venture agree%ents +or t*e
deve&op%ent o+ our natura& resour.es,
1:
in Se.tion >, Arti.&e DII on
o9ners*ip o+ private &ands,
')
in Se.tion 1), Arti.&e DII on t*e reservation o+
.ertain invest%ents to 6i&ipino .itiCens,
'1
in Se.tion <1'2, Arti.&e DIV on t*e
o9ners*ip o+ edu.ationa& institutions,
''
and in Se.tion 111'2, Arti.&e DVI on
t*e o9ners*ip o+ advertising .o%panies.
';


Petitioner has locus standi

!*ere is no dispute t*at petitioner is a sto.0*o&der o+ PL!. As su.*, *e *as
t*e rig*t to ?uestion t*e su,-e.t sa&e, 9*i.* *e .&ai%s to vio&ate t*e
nationa&it/ re?uire%ent pres.ri,ed in Se.tion 11, Arti.&e DII o+ t*e
Constitution. I+ t*e sa&e indeed vio&ates t*e Constitution, t*en t*ere is a
possi,i&it/ t*at PL!Gs +ran.*ise .ou&d ,e revo0ed, a dire .onse?uen.e
dire.t&/ aHe.ting petitionerGs interest as a sto.0*o&der.

#ore i%portant&/, t*ere is no ?uestion t*at t*e instant petition raises
%atters o+ trans.endenta& i%portan.e to t*e pu,&i.. !*e +unda%enta& and
t*res*o&d &ega& issue in t*is .ase, invo&ving t*e nationa& e.ono%/ and t*e
e.ono%i. 9e&+are o+ t*e 6i&ipino peop&e, +ar out9eig*s an/ per.eived
i%pedi%ent in t*e &ega& persona&it/ o+ t*e petitioner to ,ring t*is a.tion.

In Chave! v. PCGG,
'<
t*e Court up*e&d t*e rig*t o+ a .itiCen to ,ring a suit
on %atters o+ trans.endenta& i%portan.e to t*e pu,&i., t*us:

In &a'aa v. &#vera, t*e Court asserted t*at Dhe. the 322ue co.ce4.2 a
<u=l3c 438ht a./ the o=Gect o9 7a./a7u2 32 to o=ta3. the
e.9o4ce7e.t o9 a <u=l3c /ut>, the <eo<le a4e 4e8a4/e/ a2 the 4eal
<a4t3e2 3. 3.te4e2tH a./ =ecau2e 3t 32 2uIc3e.t that <et3t3o.e4 32 a
c3t3Ee. a./ a2 2uch 32 3.te4e2te/ 3. the execut3o. o9 the laD2, he
.ee/ .ot 2hoD that he ha2 a.> le8al o4 2<ec3al 3.te4e2t 3. the
4e2ult o9 the act3o.. In t*e a+oresaid .ase, t*e petitioners soug*t to
en+or.e t*eir rig*t to ,e in+or%ed on %atters o+ pu,&i. .on.ern, a rig*t t*en
re.ogniCed in Se.tion =, Arti.&e IV o+ t*e 1:>; Constitution, in .onne.tion
9it* t*e ru&e t*at &a9s in order to ,e va&id and en+or.ea,&e %ust ,e
pu,&is*ed in t*e O5.ia& 8aCette or ot*er9ise eHe.tive&/ pro%u&gated. In
ru&ing +or t*e petitionersG &ega& standing, t*e Court de.&ared t*at t*e rig*t
t*e/ soug*t to ,e en+or.ed Qis a pu,&i. rig*t re.ogniCed ,/ no &ess t*an t*e
+unda%enta& &a9 o+ t*e &and.G
Le$aspi v. Civil Service Commission, 9*i&e reiterating !aSada, +urt*er
de.&ared t*at QDhe. a 7a./a7u2 <4ocee/3.8 3.BolBe2 the a22e4t3o.
o9 a <u=l3c 438ht, the 4eAu34e7e.t o9 <e42o.al 3.te4e2t 32 2at325e/
=> the 7e4e 9act that <et3t3o.e4 32 a c3t3Ee. a./, the4e9o4e, <a4t o9
the 8e.e4al J<u=l3c6 Dh3ch <o22e22e2 the 438ht.G
@ | P a g e
6urt*er, in Albano v. (e)es, 9e said t*at 9*i&e eApenditure o+ pu,&i. +unds
%a/ not *ave ,een invo&ved under t*e ?uestioned .ontra.t +or t*e
deve&op%ent, %anage%ent and operation o+ t*e #ani&a Internationa&
Container !er%ina&, Q<u=l3c 3.te4e2t KDa2L /e5.3tel> 3.BolBe/
co.23/e43.8 the 37<o4ta.t 4ole Ko9 the 2u=Gect co.t4actL . . . 3. the
eco.o73c /eBelo<7e.t o9 the cou.t4> a./ the 7a8.3tu/e o9 the
5.a.c3al co.23/e4at3o. 3.BolBe/.G 7e .on.&uded t*at, as a .onse?uen.e,
t*e dis.&osure provision in t*e Constitution 9ou&d .onstitute su5.ient
aut*orit/ +or up*o&ding t*e petitionerGs standing. 1E%p*asis supp&ied2

C&ear&/, sin.e t*e instant petition, ,roug*t ,/ a .itiCen, invo&ves %atters o+
trans.endenta& pu,&i. i%portan.e, t*e petitioner *as t*e
re?uisite loc#s stani.

Defnition of the Term Capital in
Section 11 !rticle "## of the 1$%& Constitution

Se.tion 11, Arti.&e DII 1Nationa& E.ono%/ and Patri%on/2 o+ t*e 1:(>
Constitution %andates t*e 6i&ipiniCation o+ pu,&i. uti&ities, to 9it:


Se.tion 11. No 94a.ch32e, ce4t35cate, o4 a.> othe4 9o47 o9
autho43Eat3o. 9o4 the o<e4at3o. o9 a <u=l3c ut3l3t> 2hall =e
84a.te/ exce<t to c3t3Ee.2 o9 the Ph3l3<<3.e2 o4 to
co4<o4at3o.2 o4 a22oc3at3o.2 o48a.3Ee/ u./e4 the laD2 o9
the Ph3l3<<3.e2, at lea2t 23xt> <e4 ce.tu7 o9 Dho2e ca<3tal
32 oD.e/ => 2uch c3t3Ee.2I nor s*a&& su.* +ran.*ise, .erti3.ate,
or aut*oriCation ,e eA.&usive in .*ara.ter or +or a &onger period
t*an 3+t/ /ears. Neit*er s*a&& an/ su.* +ran.*ise or rig*t ,e
granted eA.ept under t*e .ondition t*at it s*a&& ,e su,-e.t to
a%end%ent, a&teration, or repea& ,/ t*e Congress 9*en t*e
.o%%on good so re?uires. !*e State s*a&& en.ourage e?uit/
parti.ipation in pu,&i. uti&ities ,/ t*e genera& pu,&i.. !*e
parti.ipation o+ +oreign investors in t*e governing ,od/ o+ an/
pu,&i. uti&it/ enterprise s*a&& ,e &i%ited to t*eir proportionate
s*are in its .apita&, and a&& t*e eAe.utive and %anaging o5.ers o+
su.* .orporation or asso.iation %ust ,e .itiCens o+ t*e P*i&ippines.
1E%p*asis supp&ied2


!*e a,ove provision su,stantia&&/ reiterates Se.tion @, Arti.&e DIV o+ t*e
1:>; Constitution, t*us:

Sect3o. !. No 94a.ch32e, ce4t35cate, o4 a.> othe4 9o47 o9
autho43Eat3o. 9o4 the o<e4at3o. o9 a <u=l3c ut3l3t> 2hall =e
84a.te/ exce<t to c3t3Ee.2 o9 the Ph3l3<<3.e2 o4 to
co4<o4at3o.2 o4 a22oc3at3o.2 o48a.3Ee/ u./e4 the laD2 o9
the Ph3l3<<3.e2 at lea2t 23xt> <e4 ce.tu7 o9 the ca<3tal o9
Dh3ch 32 oD.e/ => 2uch c3t3Ee.2, nor s*a&& su.* +ran.*ise,
.erti3.ate, or aut*oriCation ,e eA.&usive in .*ara.ter or +or a
&onger period t*an 3+t/ /ears. Neit*er s*a&& an/ su.* +ran.*ise or
rig*t ,e granted eA.ept under t*e .ondition t*at it s*a&& ,e su,-e.t
to a%end%ent, a&teration, or repea& ,/ t*e Nationa& Asse%,&/
9*en t*e pu,&i. interest so re?uires. !*e State s*a&& en.ourage
e?uit/ parti.ipation in pu,&i. uti&ities ,/ t*e genera& pu,&i.. !*e
parti.ipation o+ +oreign investors in t*e governing ,od/ o+ an/
pu,&i. uti&it/ enterprise s*a&& ,e &i%ited to t*eir proportionate
s*are in t*e .apita& t*ereo+. 1E%p*asis supp&ied2



!*e +oregoing provision in t*e 1:>; Constitution reprodu.ed Se.tion (,
Arti.&e DIV o+ t*e 1:;@ Constitution, vi!:

Sect3o. ?. No 94a.ch32e, ce4t35cate, o4 a.> othe4 9o47 o9
autho43Eat3o. 9o4 the o<e4at3o. o9 a <u=l3c ut3l3t> 2hall =e
84a.te/ exce<t to c3t3Ee.2 o9 the Ph3l3<<3.e2 o4 to
co4<o4at3o.2 o4 othe4 e.t3t3e2 o48a.3Ee/ u./e4 the laD2 o9
the Ph3l3<<3.e2 23xt> <e4 ce.tu7 o9 the ca<3tal o9 Dh3ch 32
oD.e/ => c3t3Ee.2 o9 the Ph3l3<<3.e2, nor s*a&& su.* +ran.*ise,
.erti3.ate, or aut*oriCation ,e eA.&usive in .*ara.ter or +or a
&onger period t*an 3+t/ /ears. No +ran.*ise or rig*t s*a&& ,e
granted to an/ individua&, 3r%, or .orporation, eA.ept under t*e
.ondition t*at it s*a&& ,e su,-e.t to a%end%ent, a&teration, or
repea& ,/ t*e Congress 9*en t*e pu,&i. interest so re?uires.
1E%p*asis supp&ied2


6at*er Joa?uin 8. "ernas, S.J., a &eading %e%,er o+ t*e 1:(= Constitutiona&
Co%%ission, re%inds us t*at t*e 6i&ipiniCation provision in t*e 1:(>
Constitution is one o+ t*e produ.ts o+ t*e spirit o+ nationa&is% 9*i.* gripped
t*e 1:;@ Constitutiona& Convention.
'@
!*e 1:(> Constitution Mprovides +or
t*e 6i&ipiniCation o+ pu,&i. uti&ities ,/ re?uiring t*at an/ +or% o+
aut*oriCation +or t*e operation o+ pu,&i. uti&ities s*ou&d ,e granted on&/ to
Q.itiCens o+ t*e P*i&ippines or to .orporations or asso.iations organiCed
under t*e &a9s o+ t*e P*i&ippines at &east siAt/ per .entu% o+ 9*ose .apita&
is o9ned ,/ su.* .itiCens.G #he <4oB323o. 32 Ka. ex<4e22L 4eco8.3t3o.
o9 the 2e.23t3Be a./ B3tal <o23t3o. o9 <u=l3c ut3l3t3e2 =oth 3. the
.at3o.al eco.o7> a./ 9o4 .at3o.al 2ecu43t>.M
'=
!*e evident purpose o+
t*e .itiCens*ip re?uire%ent is to prevent a&iens +ro% assu%ing .ontro& o+
pu,&i. uti&ities, 9*i.* %a/ ,e ini%i.a& to t*e nationa& interest.
'>
!*is spe.i3.
provision eAp&i.it&/ reserves to 6i&ipino .itiCens .ontro& o+ pu,&i. uti&ities,
pursuant to an overriding e.ono%i. goa& o+ t*e 1:(> Constitution: to
M.onserve and deve&op our patri%on/L
'(
and ensure Ma se&+-re&iant and
independent nationa& e.ono%/ efectivelycontrolled ,/ 6i&ipinos.L
':

An/ .itiCen or -uridi.a& entit/ desiring to operate a pu,&i. uti&it/ %ust
t*ere+ore %eet t*e %ini%u% nationa&it/ re?uire%ent pres.ri,ed in Se.tion
11, Arti.&e DII o+ t*e Constitution. 4en.e, +or a .orporation to ,e granted
= | P a g e
aut*orit/ to operate a pu,&i. uti&it/, at &east =) per.ent o+ its M.apita&L %ust
,e o9ned ,/ 6i&ipino .itiCens.

!*e .ruA o+ t*e .ontrovers/ is t*e de3nition o+ t*e ter% Mca<3tal.L oes t*e
ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution re+er to .o%%on
s*ares or to t*e tota& outstanding .apita& sto.0 1.o%,ined tota& o+ .o%%on
and non-voting pre+erred s*ares2R

Petitioner su,%its t*at t*e <) per.ent +oreign e?uit/ &i%itation in do%esti.
pu,&i. uti&ities re+ers on&/ to .o%%on s*ares ,e.ause su.* s*ares are
entit&ed to vote and it is t*roug* voting t*at .ontro& over a .orporation is
eAer.ised. Petitioner posits t*at t*e ter% M.apita&L in Se.tion 11, Arti.&e DII
o+ t*e Constitution re+ers to Mt*e o9ners*ip o+ .o%%on .apita& sto.0
su,s.ri,ed and outstanding, 9*i.* .&ass o+ s*ares a&one, under t*e
.orporate set-up o+ PL!, .an vote and e&e.t %e%,ers o+ t*e ,oard o+
dire.tors.L It is undisputed t*at PL!Gs non-voting pre+erred s*ares are *e&d
%ost&/ ,/ 6i&ipino .itiCens.
;)
!*is arose +ro% Presidentia& e.ree No.
'1>,
;1
issued on 1= June 1:>; ,/ t*en President 6erdinand #ar.os,
re?uiring ever/ app&i.ant o+ a PL! te&ep*one &ine to su,s.ri,e to non-
voting pre+erred s*ares to pa/ +or t*e invest%ent .ost o+ insta&&ing t*e
te&ep*one &ine.
;'

Petitioners-in-intervention ,asi.a&&/ reiterate petitionerGs argu%ents and
adopt petitionerGs de3nition o+ t*e ter% M.apita&.L
;;
Petitioners-in-
intervention a&&ege t*at Mt*e approAi%ate +oreign o9ners*ip o+ .o%%on
.apita& sto.0 o+ PL! A A A a&read/ a%ounts to at &east =;.@<T o+ t*e tota&
outstanding .o%%on sto.0,L 9*i.* %eans t*at +oreigners eAer.ise
signi3.ant .ontro& over PL!, patent&/ vio&ating t*e <) per.ent +oreign
e?uit/ &i%itation in pu,&i. uti&ities pres.ri,ed ,/ t*e Constitution.

Respondents, on t*e ot*er *and, do not oHer an/ de3nition o+ t*e ter%
M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution. #ore i%portant&/,
private respondents NaCareno and Pangi&inan o+ PL! do not dispute t*at
%ore t*an <) per.ent o+ t*e .o%%on s*ares o+ PL! are *e&d ,/ +oreigners.

In parti.u&ar, respondent NaCarenoGs #e%orandu%, .onsisting o+ >; pages,
*arps %ain&/ on t*e pro.edura& in3r%ities o+ t*e petition and t*e supposed
vio&ation o+ t*e due pro.ess rig*ts o+ t*e MaHe.ted +oreign .o%%on
s*are*o&ders.L Respondent NaCareno does not den/ petitionerGs a&&egation
o+ +oreignersG do%inating t*e .o%%on s*are*o&dings o+
PL!. NaCareno stressed %ain&/ t*at t*e petition M2eeN2 to /3Be2t
9o4e38. co77o. 2ha4ehol/e42 <u4<o4te/l> excee/3.8 @;C o9 the
total co77o. 2ha4ehol/3.82 3. PL'# o9 the34 oD.e42h3< oBe4 the34
2ha4e2.L !*us, Mt*e +oreign natura& and -uridi.a& PL! s*are*o&ders %ust
,e i%p&eaded in t*is suit so t*at t*e/ .an ,e
*eard.L
;<
Essentia&&/, NaCareno invo0es denia& o+ due pro.ess on ,e*a&+ o+
t*e +oreign .o%%on s*are*o&ders.

7*i&e NaCareno does not introdu.e an/ de3nition o+ t*e ter% M.apita&,L *e
states t*at Ma7o.8 the 9actual a22e4t3o.2 that .ee/ to =e
e2ta=l32he/ to cou.te4 <et3t3o.e462 alle8at3o.2 32 the u.39o47
3.te4<4etat3o. => 8oBe4.7e.t a8e.c3e2 *2uch a2 the SEC+,
3.2t3tut3o.2 a./ co4<o4at3o.2 *2uch a2 the Ph3l3<<3.e Nat3o.al O3l
Co7<a.>1E.e48> 'eBelo<7e.t Co4<o4at3o. o4 PNOC1E'C+ o9
3.clu/3.8 =oth <4e9e44e/ 2ha4e2 a./ co77o. 2ha4e2 3. Oco.t4oll3.8
3.te4e2tM 3. B3eD o9 te2t3.8 co7<l3a.ce D3th the @;C co.2t3tut3o.al
l373tat3o. o. 9o4e38. oD.e42h3< 3. <u=l3c ut3l3t3e2.L
;@

Si%i&ar&/, respondent #anue& V. Pangi&inan does not de3ne t*e ter%
M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution. Neit*er does *e re+ute
petitionerGs .&ai% o+ +oreigners *o&ding %ore t*an <) per.ent o+ PL!Gs
.o%%on s*ares. Instead, respondent Pangi&inan+o.uses on t*e pro.edura&
Ua9s o+ t*e petition and t*e a&&eged vio&ation o+ t*e due pro.ess rig*ts o+
+oreigners. Respondent Pangi&inane%p*asiCes in *is #e%orandu% 112 t*e
a,sen.e o+ t*is CourtGs -urisdi.tion over t*e petitionI 1'2 petitionerGs &a.0 o+
standingI 1;2%ootness o+ t*e petitionI 1<2 non-avai&a,i&it/ o+ de.&arator/
re&ie+I and 1@2 t*e denia& o+ due pro.ess rig*ts. #oreover,
respondentPangi&inan a&&eges t*at t*e issue s*ou&d ,e 9*et*er Mo9ners o+
s*ares in PL! as 9e&& as o9ners o+ s*ares in .o%panies *o&ding s*ares in
PL! %a/ ,e re?uired to re&in?uis* t*eir s*ares in PL! and in t*ose
.o%panies 9it*out an/ &a9 re?uiring t*e% to surrender t*eir s*ares and
a&so 9it*out noti.e and tria&.L

Respondent Pangi&inan +urt*er asserts t*at MSect3o. 11, KA4t3cle -II o9
the Co.2t3tut3o.L 37<o2e2 .o .at3o.al3t> 4eAu34e7e.t o. the
2ha4ehol/e42 o9 the ut3l3t> co7<a.> a2 a co./3t3o. 9o4 Nee<3.8
the34 2ha4e2 3. the ut3l3t> co7<a.>.L A..ording to *i%, MSe.tion 11
does not aut*oriCe ta0ing one personGs propert/ 1t*e s*are*o&derGs sto.0 in
t*e uti&it/ .o%pan/2 on t*e ,asis o+ anot*er part/Gs a&&eged +ai&ure to satis+/
a re?uire%ent t*at is a .ondition on&/ +or t*at ot*er part/Gs retention o+
anot*er pie.e o+ propert/ 1t*e uti&it/ .o%pan/ ,eing at &east =)T 6i&ipino-
o9ned to 0eep its +ran.*ise2.L
;=

!*e OS8, representing pu,&i. respondents Se.retar/ #argarito !eves,
Enderse.retar/ Jo*n P. Sevi&&a, Co%%issioner Ri.ardo A,.ede, and
C*air%an 6e "arin, is &i0e9ise si&ent on t*e de3nition o+ t*e ter% M.apita&.L
In its #e%orandu%
;>
dated '< Septe%,er '))>, t*e OS8 a&so &i%its its
dis.ussion on t*e supposed pro.edura& de+e.ts o+ t*e petition, i.e. &a.0 o+
standing, &a.0 o+ -urisdi.tion, non-in.&usion o+ interested parties, and &a.0 o+
,asis +or in-un.tion. !*e OS8 does not present an/ de3nition or
interpretation o+ t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e
Constitution. !*e OS8 .ontends t*at Mt*e petition a.tua&&/ parta0es o+ a
.o&&atera& atta.0 on PL!Gs +ran.*ise as a pu,&i. uti&it/,L 9*i.* in eHe.t
re?uires a M+u&&-,&o9n tria& 9*ere a&& t*e parties in interest are given t*eir
da/ in .ourt.L
;(

Respondent 6ran.is.o Ed Li%, i%p&eaded as President and C*ie+ EAe.utive
O5.er o+ t*e P*i&ippine Sto.0 EA.*ange 1PSE2, does not a&so de3ne t*e
ter% M.apita&L and see0s t*e dis%issa& o+ t*e petition on t*e +o&&o9ing
grounds: 112 +ai&ure to state a .ause o+ a.tion against Li%I 1'2 t*e PSE
> | P a g e
a&&eged&/ i%p&e%ented its ru&es and re?uired a&& &isted .o%panies, in.&uding
PL!, to %a0e proper and ti%e&/ dis.&osuresI and 1;2 t*e re&ie+s pra/ed +or
in t*e petition 9ou&d adverse&/ i%pa.t t*e sto.0 %ar0et.

In t*e ear&ier .ase o+ Fernane! v. Co"#an$co, petitioner 6ernandeC 9*o
.&ai%ed to ,e a sto.0*o&der o+ re.ord o+ PL!, .ontended t*at t*e ter%
M.apita&L in t*e 1:(> Constitution re+ers to s*ares entit&ed to vote or t*e
.o%%on s*ares. 6ernandeC eAp&ained t*us:

!*e +ort/ per.ent 1<)T2 +oreign e?uit/ &i%itation in pu,&i. uti&ities
pres.ri,ed ,/ t*e Constitution re+ers to o9ners*ip o+ s*ares o+
sto.0 entit&ed to vote, i.e., .o%%on s*ares, .onsidering t*at it is
t*roug* voting t*at .ontro& is ,eing eAer.ised. A A A

O,vious&/, t*e intent o+ t*e +ra%ers o+ t*e Constitution in i%posing
&i%itations and restri.tions on +u&&/ nationa&iCed and partia&&/
nationa&iCed a.tivities is +or 6i&ipino nationa&s to ,e a&9a/s in
.ontro& o+ t*e .orporation underta0ing said a.tivities. Ot*er9ise, i+
t*e !ria& CourtGs ru&ing up*o&ding respondentsG argu%ents 9ere to
,e given .reden.e, it 9ou&d ,e possi,&e +or t*e o9ners*ip
stru.ture o+ a pu,&i. uti&it/ .orporation to ,e divided into one
per.ent 11T2 .o%%on sto.0s and ninet/-nine per.ent 1::T2
pre+erred sto.0s. 6o&&o9ing t*e !ria& CourtGs ru&ing adopting
respondentsG argu%ents, t*e .o%%on s*ares .an ,e o9ned
entire&/ ,/ +oreigners t*us .reating an a,surd situation 9*erein
+oreigners, 9*o are supposed to ,e %inorit/ s*are*o&ders, .ontro&
t*e pu,&i. uti&it/ .orporation.

A A A A

!*us, t*e <)T +oreign o9ners*ip &i%itation s*ou&d ,e interpreted
to app&/ to ,ot* t*e ,ene3.ia& o9ners*ip and t*e .ontro&&ing
interest.

A A A A

C&ear&/, t*ere+ore, t*e +ort/ per.ent 1<)T2 +oreign e?uit/ &i%itation
in pu,&i. uti&ities pres.ri,ed ,/ t*e Constitution re+ers to o9ners*ip
o+ s*ares o+ sto.0 entit&ed to vote, i.e., .o%%on s*ares.
6urt*er%ore, o9ners*ip o+ re.ord o+ s*ares 9i&& not su5.e ,ut it
%ust ,e s*o9n t*at t*e &ega& and ,ene3.ia& o9ners*ip rests in t*e
*ands o+ 6i&ipino .itiCens. Conse?uent&/, in t*e .ase o+ petitioner
PL!, sin.e it is a&read/ ad%itted t*at t*e voting interests o+
+oreigners 9*i.* 9ou&d gain entr/ to petitioner PL! ,/ t*e
a.?uisition o+ S#AR! s*ares t*roug* t*e Vuestioned !ransa.tions
is e?uiva&ent to ('.::T, and t*e no%inee arrange%ents ,et9een
t*e +oreign prin.ipa&s and t*e 6i&ipino o9ners is &i0e9ise ad%itted,
t*ere is, t*ere+ore, a vio&ation o+ Se.tion 11, Arti.&e DII o+ t*e
Constitution.
Parent*eti.a&&/, t*e Opinions dated 6e,ruar/ 1@, 1:(( and Apri&
1<, 1:(> .ited ,/ t*e !ria& Court to support t*e proposition t*at
t*e %eaning o+ t*e 9ord M.apita&L as used in Se.tion 11, Arti.&e DII
o+ t*e Constitution a&&eged&/ re+ers to t*e su% tota& o+ t*e s*ares
su,s.ri,ed and paid-in ,/ t*e s*are*o&der and it a&&eged&/ is
i%%ateria& *o9 t*e sto.0 is .&assi3ed, 9*et*er as .o%%on or
pre+erred, .annot stand in t*e +a.e o+ a .&ear &egis&ative po&i./ as
stated in t*e 6IA 9*i.* too0 eHe.t in 1::1 or 9a/ a+ter said
opinions 9ere rendered, and as .&ari3ed ,/ t*e a,ove-?uoted
A%end%ents. In t*is regard, su5.e it to state t*at as ,et9een t*e
&a9 and an opinion rendered ,/ an ad%inistrative agen./, t*e &a9
indu,ita,&/ prevai&s. #oreover, said Opinions are %ere&/ advisor/
and .annot prevai& over t*e .&ear intent o+ t*e +ra%ers o+ t*e
Constitution.

In t*e sa%e vein, t*e SECGs .onstru.tion o+ Se.tion 11, Arti.&e DII
o+ t*e Constitution is at ,est %ere&/ advisor/ +or it is t*e .ourts
t*at 3na&&/ deter%ine 9*at a &a9 %eans.
;:


On t*e ot*er *and, respondents t*erein, Antonio O. Co-uang.o, #anue&
V. Pangi&inan, Car&os A. Are&&ano, 4e&en K. ee, #agdanga& ".
E&%a, #ari&es Ca.*o-Ro%u&o, 6r. "ienvenido 6. Ne,res, Ra/ C. Espinosa,
Napo&eon L. NaCareno, A&,ert 6. e& Rosario, and Or&ando ". Vea, argued
t*at t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution in.&udes
pre+erred s*ares sin.e t*e Constitution does not distinguis* a%ong .&asses
o+ sto.0, t*us:

1=. !*e Constitution app&ies its +oreign o9ners*ip &i%itation on t*e
.orporationGs M.apita&,L 9it*out distin.tion as to .&asses o+ s*ares.
A A A

In t*is .onne.tion, t*e Corporation Code J 9*i.* 9as a&read/ in
+or.e at t*e ti%e t*e present 11:(>2 Constitution 9as dra+ted J
de3ned outstanding .apita& sto.0 as +o&&o9s:

Se.tion 1;>. Outstanding .apita& sto.0 de3ned. J !*e ter%
Moutstanding .apita& sto.0L, as used in t*is Code, %eans t*e tota&
s*ares o+ sto.0 issued under ,inding su,s.ription agree%ents to
su,s.ri,ers or sto.0*o&ders, 9*et*er or not +u&&/ or partia&&/ paid,
eA.ept treasur/ s*ares.

Se.tion 1;> o+ t*e Corporation Code a&so does not distinguis*
,et9een .o%%on and pre+erred s*ares, nor eA.&ude eit*er .&ass o+
s*ares, in deter%ining t*e outstanding .apita& sto.0 1t*e M.apita&L2
o+ a .orporation. Conse?uent&/, petitionerGs suggestion to re.0on
PL!Gs +oreign e?uit/ on&/ on t*e ,asis o+ PL!Gs outstanding
.o%%on s*ares is 9it*out &ega& ,asis. !*e &anguage o+ t*e
Constitution s*ou&d ,e understood in t*e sense it *as in .o%%on
use.
( | P a g e
A A A A

1>. "ut even assu%ing t*at resort to t*e pro.eedings o+ t*e
Constitutiona& Co%%ission is ne.essar/, t*ere is not*ing in t*e
Re.ord o+ t*e Constitutiona& Co%%ission 1Vo&. III2 J 9*i.* petitioner
%is&eading&/ .ited in t*e Petition A A A J 9*i.* supports
petitionerGs vie9 t*at on&/ .o%%on s*ares s*ou&d +or% t*e ,asis
+or .o%puting a pu,&i. uti&it/Gs +oreign e?uit/.
A A A A

1(. In addition, t*e SEC J t*e govern%ent agen./ pri%ari&/
responsi,&e +or i%p&e%enting t*e Corporation Code, and 9*i.*
a&so *as t*e responsi,i&it/ o+ ensuring .o%p&ian.e 9it* t*e
ConstitutionGs +oreign e?uit/ restri.tions as regards nationa&iCed
a.tivities A A A J *as .ategori.a&&/ ru&ed t*at ,ot* .o%%on and
pre+erred s*ares are proper&/ .onsidered in deter%ining
outstanding .apita& sto.0 and t*e nationa&it/ .o%position t*ereo+.
<)


7e agree 9it* petitioner and petitioners-in-intervention. !*e ter% M.apita&L
in Se.tion 11, Arti.&e DII o+ t*e Constitution re+ers on&/ to s*ares o+ sto.0
entit&ed to vote in t*e e&e.tion o+ dire.tors, and t*us in t*e present .ase
on&/ to .o%%on s*ares,
<1
and not to t*e tota& outstanding .apita& sto.0
.o%prising ,ot* .o%%on and non-voting pre+erred s*ares.
!*e Corporation Code o+ t*e P*i&ippines
<'
.&assi3es s*ares as .o%%on or
pre+erred, t*us:

Se.. =. Classi*cation of shares. - !*e s*ares o+ sto.0 o+ sto.0
.orporations %a/ ,e divided into .&asses or series o+ s*ares, or
,ot*, an/ o+ 9*i.* .&asses or series o+ s*ares %a/ *ave su.*
rig*ts, privi&eges or restri.tions as %a/ ,e stated in t*e arti.&es o+
in.orporation: Provided, #hat .o 2ha4e 7a> =e /e<43Be/ o9
Bot3.8 438ht2 exce<t tho2e cla2235e/ a./ 322ue/ a2
O<4e9e44e/M o4 O4e/ee7a=leM 2ha4e2, u.le22 othe4D32e
<4oB3/e/ 3. th32 Co/e: Provided, +urt*er, !*at t*ere s*a&& a&9a/s
,e a .&ass or series o+ s*ares 9*i.* *ave .o%p&ete voting rig*ts.
An/ or a&& o+ t*e s*ares or series o+ s*ares %a/ *ave a par va&ue or
*ave no par va&ue as %a/ ,e provided +or in t*e arti.&es o+
in.orporation: Provided, *o9ever, !*at ,an0s, trust .o%panies,
insuran.e .o%panies, pu,&i. uti&ities, and ,ui&ding and &oan
asso.iations s*a&& not ,e per%itted to issue no-par va&ue s*ares o+
sto.0.
Pre+erred s*ares o+ sto.0 issued ,/ an/ .orporation %a/ ,e given
pre+eren.e in t*e distri,ution o+ t*e assets o+ t*e .orporation in
.ase o+ &i?uidation and in t*e distri,ution o+ dividends, or su.*
ot*er pre+eren.es as %a/ ,e stated in t*e arti.&es o+ in.orporation
9*i.* are not vio&ative o+ t*e provisions o+ t*is Code: Provided,
!*at pre+erred s*ares o+ sto.0 %a/ ,e issued on&/ 9it* a stated
par va&ue. !*e "oard o+ ire.tors, 9*ere aut*oriCed in t*e arti.&es
o+ in.orporation, %a/ 3A t*e ter%s and .onditions o+ pre+erred
s*ares o+ sto.0 or an/ series t*ereo+: Provided, !*at su.* ter%s
and .onditions s*a&& ,e eHe.tive upon t*e 3&ing o+ a .erti3.ate
t*ereo+ 9it* t*e Se.urities and EA.*ange Co%%ission.
S*ares o+ .apita& sto.0 issued 9it*out par va&ue s*a&& ,e dee%ed
+u&&/ paid and non-assessa,&e and t*e *o&der o+ su.* s*ares s*a&&
not ,e &ia,&e to t*e .orporation or to its .reditors in respe.t
t*ereto: ProvidedI !*at s*ares 9it*out par va&ue %a/ not ,e
issued +or a .onsideration &ess t*an t*e va&ue o+ 3ve 1P@.))2 pesos
per s*are: Provided, +urt*er, !*at t*e entire .onsideration re.eived
,/ t*e .orporation +or its no-par va&ue s*ares s*a&& ,e treated as
.apita& and s*a&& not ,e avai&a,&e +or distri,ution as dividends.
A .orporation %a/, +urt*er%ore, .&assi+/ its s*ares +or t*e purpose
o+ insuring .o%p&ian.e 9it* .onstitutiona& or &ega& re?uire%ents.
EA.ept as ot*er9ise provided in t*e arti.&es o+ in.orporation and
stated in t*e .erti3.ate o+ sto.0, ea.* s*are s*a&& ,e e?ua& in a&&
respe.ts to ever/ ot*er s*are.
7*ere t*e arti.&es o+ in.orporation provide +or non-voting s*ares in
t*e .ases a&&o9ed ,/ t*is Code, t*e *o&ders o+ su.* s*ares s*a&&
nevert*e&ess ,e entit&ed to vote on t*e +o&&o9ing %atters:
1. A%end%ent o+ t*e arti.&es o+ in.orporationI
'. Adoption and a%end%ent o+ ,/-&a9sI
;. Sa&e, &ease, eA.*ange, %ortgage, p&edge or ot*er
disposition o+ a&& or su,stantia&&/ a&& o+ t*e .orporate
propert/I
<. In.urring, .reating or in.reasing ,onded inde,tednessI
@. In.rease or de.rease o+ .apita& sto.0I
=. #erger or .onso&idation o+ t*e .orporation 9it* anot*er
.orporation or ot*er .orporationsI
>. Invest%ent o+ .orporate +unds in anot*er .orporation
or ,usiness in a..ordan.e 9it* t*is CodeI and
(. isso&ution o+ t*e .orporation.
EA.ept as provided in t*e i%%ediate&/ pre.eding paragrap*, t*e
vote ne.essar/ to approve a parti.u&ar .orporate a.t as provided
in t*is Code s*a&& ,e dee%ed to re+er on&/ to sto.0s 9it* voting
rig*ts.


Indisputa,&/, one o+ t*e rig*ts o+ a sto.0*o&der is t*e rig*t to parti.ipate in
t*e .ontro& or %anage%ent o+ t*e .orporation.
<;
!*is is eAer.ised t*roug*
*is vote in t*e e&e.tion o+ dire.tors ,e.ause it is t*e ,oard o+ dire.tors t*at
.ontro&s or %anages t*e .orporation.
<<
In t*e a,sen.e o+ provisions in t*e
arti.&es o+ in.orporation den/ing voting rig*ts to pre+erred s*ares, pre+erred
s*ares *ave t*e sa%e voting rig*ts as .o%%on s*ares. 4o9ever, pre+erred
s*are*o&ders are o+ten eA.&uded +ro% an/ .ontro&, t*at is, deprived o+ t*e
rig*t to vote in t*e e&e.tion o+ dire.tors and on ot*er %atters, on t*e t*eor/
t*at t*e pre+erred s*are*o&ders are %ere&/ investors in t*e .orporation +or
in.o%e in t*e sa%e %anner as ,ond*o&ders.
<@
In +a.t, under t*e
Corporation Code on&/ pre+erred or redee%a,&e s*ares .an ,e deprived o+
t*e rig*t to vote.
<=
Co%%on s*ares .annot ,e deprived o+ t*e rig*t to vote
: | P a g e
in an/ .orporate %eeting, and an/ provision in t*e arti.&es o+ in.orporation
restri.ting t*e rig*t o+ .o%%on s*are*o&ders to vote is inva&id.
<>

Considering t*at .o%%on s*ares *ave voting rig*ts 9*i.* trans&ate to
.ontro&, as opposed to pre+erred s*ares 9*i.* usua&&/ *ave no voting rig*ts,
t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e Constitution re+ers on&/ to
.o%%on s*ares. 4o9ever, i+ t*e pre+erred s*ares a&so *ave t*e rig*t to
vote in t*e e&e.tion o+ dire.tors, t*en t*e ter% M.apita&L s*a&& in.&ude su.*
pre+erred s*ares ,e.ause t*e rig*t to parti.ipate in t*e .ontro& or
%anage%ent o+ t*e .orporation is eAer.ised t*roug* t*e rig*t to vote in t*e
e&e.tion o+ dire.tors. I. 2ho4t, the te47 Oca<3talM 3. Sect3o. 11,
A4t3cle -II o9 the Co.2t3tut3o. 4e9e42 o.l> to 2ha4e2 o9 2tocN that
ca. Bote 3. the elect3o. o9 /34ecto42.

!*is interpretation is .onsistent 9it* t*e intent o+ t*e +ra%ers o+ t*e
Constitution to p&a.e in t*e *ands o+ 6i&ipino .itiCens t*e .ontro& and
%anage%ent o+ pu,&i. uti&ities. As revea&ed in t*e de&i,erations o+ t*e
Constitutiona& Co%%ission, M.apita&L re+ers to t*e voting sto.0
orco.t4oll3.8 3.te4e2t o+ a .orporation, to 9it:

#R. NOLLEO. In Se.tions ;, : and 1@, t*e Co%%ittee stated &o.a&
or 6i&ipino e?uit/ and +oreign e?uit/I na%e&/, =)-<) in Se.tion ;,
=)-<) in Se.tion : and 'N;-1N; in Se.tion 1@.

#R. VILLE8AS. !*at is rig*t.

#R. NOLLEO. In tea.*ing &a9, 9e are a&9a/s +a.ed 9it* t*is
?uestion: M7*ere do 9e ,ase t*e e?uit/ re?uire%ent, is it on t*e
aut*oriCed .apita& sto.0, on t*e su,s.ri,ed .apita& sto.0, or on t*e
paid-up .apita& sto.0 o+ a .orporationLR 7i&& t*e Co%%ittee p&ease
en&ig*ten %e on t*isR

#R. VILLE8AS. 7e *ave -ust *ad a &ong dis.ussion 9it* t*e
%e%,ers o+ t*e tea% +ro% t*e EP La9 Center 9*o provided us a
dra+t. #he <h4a2e that 32 co.ta3.e/ he4e Dh3ch De a/o<te/
94o7 the &P /4a9t 32 O; <e4ce.t o9 Bot3.8 2tocN.M

#R. NOLLEO. !*at %ust ,e ,ased on t*e su,s.ri,ed .apita&
sto.0, ,e.ause un&ess de.&ared de&in?uent, unpaid .apita& sto.0
s*a&& ,e entit&ed to vote.

#R. VILLE8AS. !*at is rig*t.

#R. NOLLEO. !*an0 /ou.

7it* respe.t to an invest%ent ,/ one .orporation in anot*er
.orporation, sa/, a .orporation 9it* =)-<) per.ent e?uit/ invests
in anot*er .orporation 9*i.* is per%itted ,/ t*e
Corporation Code, does t*e Co%%ittee adopt t*e grand+at*er
ru&eR

#R. VILLE8AS. Kes, t*at is t*e understanding o+ t*e Co%%ittee.

#R. NOLLEO. !*ere+ore, 9e need additiona& 6i&ipino .apita&R

#R. VILLE8AS. Kes.
<(

A A A A
#R. A$CENA. #a/ I ,e .&ari3ed as to t*at portion t*at 9as
a..epted ,/ t*e Co%%ittee.

#R. VILLE8AS. !*e portion a..epted ,/ t*e Co%%ittee is t*e
de&etion o+ t*e p*rase Mvoting sto.0 or .ontro&&ing interest.L

#R. A$CENA. 4en.e, 9it*out t*e avide a%end%ent, t*e
.o%%ittee report 9ou&d read: M.orporations or asso.iations at
&east siAt/ per.ent o+ 9*ose CAPI!AL is o9ned ,/ su.* .itiCens.L

#R. VILLE8AS. Kes.

#R. A$CENA. So i+ t*e avide a%end%ent is &ost, 9e are stu.0
9it* =) per.ent o+ t*e .apita& to ,e o9ned ,/ .itiCens.

#R. VILLE8AS. !*at is rig*t.

MR. A,C&NA. But the co.t4ol ca. =e D3th the 9o4e38.e42
eBe. 39 the> a4e the 73.o43t>. Let u2 2a> @; <e4ce.t o9 the
ca<3tal 32 oD.e/ => the7, =ut 3t 32 the Bot3.8 ca<3tal,
Dhe4ea2, the F3l3<3.o2 oD. the .o.Bot3.8 2ha4e2. So De
ca. haBe a 23tuat3o. Dhe4e the co4<o4at3o. 32 co.t4olle/ =>
9o4e38.e42 /e2<3te =e3.8 the 73.o43t> =ecau2e the> haBe
the Bot3.8 ca<3tal. #hat 32 the a.o7al> that Doul/ 4e2ult
he4e.

MR. BENG,ON. No, the 4ea2o. De el373.ate/ the Do4/
O2tocNM a2 2tate/ 3. the 1"7: a./ 1":! Co.2t3tut3o.2 32
that acco4/3.8 to Co773223o.e4 Ro/438o, the4e a4e
a22oc3at3o.2 that /o .ot haBe 2tocN2. #hat 32 Dh> De 2a>
OCAPI#AL.M

MR. A,C&NA. We 2houl/ .ot el373.ate the <h4a2e
Oco.t4oll3.8 3.te4e2t.M

MR. BENG,ON. I. the ca2e o9 2tocN co4<o4at3o.2, 3t 32
a22u7e/.
<:
1E%p*asis supp&ied2


!*us, =) per.ent o+ t*e M.apita&L assu%es, or s*ou&d resu&t in, Mco.t4oll3.8
3.te4e2tL in t*e .orporation. Rein+or.ing t*is interpretation o+ t*e ter%
M.apita&,L as re+erring to .ontro&&ing interest or s*ares entit&ed to vote, is t*e
1) | P a g e
de3nition o+ a MP*i&ippine nationa&L in t*e 6oreign Invest%ents A.t o+
1::1,
@)
to 9it:

SEC. ;. +e*nitions. - As used in t*is A.t:

a. !*e ter% MPhilippine national, s*a&& %ean a .itiCen o+ t*e
P*i&ippinesI or a do%esti. partners*ip or asso.iation 9*o&&/ o9ned
,/ .itiCens o+ t*e P*i&ippinesI or a co4<o4at3o. o48a.3Ee/ u./e4
the laD2 o9 the Ph3l3<<3.e2 o9 Dh3ch at lea2t 23xt> <e4ce.t
*;C+ o9 the ca<3tal 2tocN out2ta./3.8a./ e.t3tle/ to Bote
32 oD.e/ a./ hel/ => c3t3Ee.2 o9 the Ph3l3<<3.e2I or a
.orporation organiCed a,road and registered as doing ,usiness in
t*e P*i&ippines under t*e Corporation Code o+ 9*i.* one *undred
per.ent 11))T2 o+ t*e .apita& sto.0 outstanding and entit&ed to
vote is 9*o&&/ o9ned ,/ 6i&ipinos or a trustee o+ +unds +or pension
or ot*er e%p&o/ee retire%ent or separation ,ene3ts, 9*ere t*e
trustee is a P*i&ippine nationa& and at &east siAt/ per.ent 1=)T2 o+
t*e +und 9i&& a..rue to t*e ,ene3t o+ P*i&ippine nationa&s: Provie,
!*at 9*ere a .orporation and its non-6i&ipino sto.0*o&ders o9n
sto.0s in a Se.urities and EA.*ange Co%%ission 1SEC2 registered
enterprise, at &east siAt/ per.ent 1=)T2 o+ t*e .apita& sto.0
outstanding and entit&ed to vote o+ ea.* o+ ,ot* .orporations %ust
,e o9ned and *e&d ,/ .itiCens o+ t*e P*i&ippines and at &east siAt/
per.ent 1=)T2 o+ t*e %e%,ers o+ t*e "oard o+ ire.tors o+ ea.* o+
,ot* .orporations %ust ,e .itiCens o+ t*e P*i&ippines, in order t*at
t*e .orporation, s*a&& ,e .onsidered a MP*i&ippine nationa&.L
1E%p*asis supp&ied2

In eAp&aining t*e de3nition o+ a MP*i&ippine nationa&,L t*e I%p&e%enting
Ru&es and Regu&ations o+ t*e 6oreign Invest%ents A.t o+ 1::1 provide:

,. MPhilippine national, s*a&& %ean a .itiCen o+ t*e P*i&ippines or a
do%esti. partners*ip or asso.iation 9*o&&/ o9ned ,/ t*e .itiCens
o+ t*e P*i&ippinesI or a co4<o4at3o. o48a.3Ee/ u./e4 the laD2
o9 the Ph3l3<<3.e2 o9 Dh3ch at lea2t 23xt> <e4ce.t K;CL o9
the ca<3tal 2tocN out2ta./3.8 a./ e.t3tle/ to Bote 32 oD.e/
a./ hel/ => c3t3Ee.2 o9 the Ph3l3<<3.e2I or a trustee o+ +unds
+or pension or ot*er e%p&o/ee retire%ent or separation ,ene3ts,
9*ere t*e trustee is a P*i&ippine nationa& and at &east siAt/ per.ent
O=)TP o+ t*e +und 9i&& a..rue to t*e ,ene3t o+ t*e P*i&ippine
nationa&sI Provie% t*at 9*ere a .orporation its non-6i&ipino
sto.0*o&ders o9n sto.0s in a Se.urities and EA.*ange Co%%ission
OSECP registered enterprise, at &east siAt/ per.ent O=)TP o+ t*e
.apita& sto.0 outstanding and entit&ed to vote o+ ,ot* .orporations
%ust ,e o9ned and *e&d ,/ .itiCens o+ t*e P*i&ippines and at &east
siAt/ per.ent O=)TP o+ t*e %e%,ers o+ t*e "oard o+ ire.tors o+
ea.* o+ ,ot* .orporation %ust ,e .itiCens o+ t*e P*i&ippines, in
order t*at t*e .orporation s*a&& ,e .onsidered a P*i&ippine
nationa&. !*e .ontro& test s*a&& ,e app&ied +or t*is purpose.

Co7<l3a.ce D3th the 4eAu34e/ F3l3<3.o oD.e42h3< o9 a
co4<o4at3o. 2hall =e /ete473.e/ o. the =a232 o9
out2ta./3.8 ca<3tal 2tocN Dhethe4 9ull> <a3/ o4 .ot, =ut
o.l> 2uch 2tocN2 Dh3ch a4e 8e.e4all> e.t3tle/ to Bote a4e
co.23/e4e/.

Fo4 2tocN2 to =e /ee7e/ oD.e/ a./ hel/ => Ph3l3<<3.e
c3t3Ee.2 o4 Ph3l3<<3.e .at3o.al2, 7e4e le8al t3tle 32 .ot
e.ou8h to 7eet the 4eAu34e/ F3l3<3.o eAu3t>. Full =e.e5c3al
oD.e42h3< o9 the 2tocN2, cou<le/ D3th a<<4o<43ate Bot3.8
438ht2 32 e22e.t3al. #hu2, 2tocN2, the Bot3.8 438ht2 o9 Dh3ch
haBe =ee. a2238.e/ o4 t4a.29e44e/ to al3e.2 ca..ot =e
co.23/e4e/ hel/ => Ph3l3<<3.e c3t3Ee.2 o4 Ph3l3<<3.e
.at3o.al2.

I./3B3/ual2 o4 Gu43/3cal e.t3t3e2 .ot 7eet3.8 the
a9o4e7e.t3o.e/ Aual35cat3o.2 a4e co.23/e4e/ a2 .o.1
Ph3l3<<3.e .at3o.al2. 1E%p*asis supp&ied2






#ere &ega& tit&e is insu5.ient to %eet t*e =) per.ent 6i&ipino-o9ned
M.apita&L re?uired in t*e Constitution. 6u&& ,ene3.ia& o9ners*ip o+ =)
per.ent o+ t*e outstanding .apita& sto.0, .oup&ed 9it* =) per.ent o+ t*e
voting rig*ts, is re?uired. !*e &ega& and ,ene3.ia& o9ners*ip o+ =) per.ent
o+ t*e outstanding .apita& sto.0 %ust rest in t*e *ands o+ 6i&ipino nationa&s
in a..ordan.e 9it* t*e .onstitutiona& %andate. Ot*er9ise, t*e .orporation
is M.onsidered as non-P*i&ippine nationa&OsP.L

Ender Se.tion 1), Arti.&e DII o+ t*e Constitution, Congress %a/ Mreserve to
.itiCens o+ t*e P*i&ippines or to .orporations or asso.iations at &east
siAt/ per cent#m o+ 9*ose .apita& is o9ned ,/ su.* .itiCens, or su.* *ig*er
per.entage as Congress %a/ pres.ri,e, .ertain areas o+ invest%ents.L
!*us, in nu%erous &a9s Congress *as reserved .ertain areas o+ invest%ents
to 6i&ipino .itiCens or to .orporations at &east siAt/ per.ent o+ t*e Mca<3talL
o+ 9*i.* is o9ned ,/ 6i&ipino .itiCens. So%e o+ t*ese &a9s are: 112
Regu&ation o+ A9ard o+ 8overn%ent Contra.ts or R.A. No. @1(;I 1'2
P*i&ippine Inventors In.entives A.t or R.A. No. ;(@)I 1;2 #agna Carta +or
#i.ro, S%a&& and #ediu% Enterprises or R.A. No. =:>>I 1<2 P*i&ippine
Overseas S*ipping eve&op%ent A.t or R.A. No. ><>1I 1@2 o%esti.
S*ipping eve&op%ent A.t o+ '))< or R.A. No. :':@I 1=2 P*i&ippine
!e.*no&og/ !rans+er A.t o+ ')): or R.A. No. 1))@@I and 1>2 S*ip #ortgage
e.ree or P.. No. 1@'1. 4en.e, t*e ter% Mca<3talL in Se.tion 11, Arti.&e DII
o+ t*e Constitution is a&so used 3. the 2a7e co.text 3. .u7e4ou2
laD2 reserving .ertain areas o+ invest%ents to 6i&ipino .itiCens.

11 | P a g e
!o .onstrue ,road&/ t*e ter% M.apita&L as t*e tota& outstanding .apita&
sto.0, in.&uding ,ot* .o%%on and non-votin$ pre+erred s*ares, gross&/
.ontravenes t*e intent and &etter o+ t*e Constitution t*at t*e MState s*a&&
deve&op a se&+-re&iant and independent nationa& e.ono%/efectively
controlled ,/ 6i&ipinos.L A ,road de3nition un-usti3a,&/ disregards 9*o
o9ns t*e a&&-i%portant voting sto.0, 9*i.* ne.essari&/ e?uates to .ontro& o+
t*e pu,&i. uti&it/.

7e s*a&& i&&ustrate t*e g&aring ano%a&/ in giving a ,road de3nition to t*e
ter% M.apita&.L Let us assu%e t*at a .orporation *as 1)) .o%%on s*ares
o9ned ,/ +oreigners and 1,))),))) non-voting pre+erred s*ares o9ned ,/
6i&ipinos, 9it* ,ot* .&asses o+ s*are *aving a par va&ue o+ one peso 1P1.))2
per s*are. Ender t*e ,road de3nition o+ t*e ter% M.apita&,L su.*
.orporation 9ou&d ,e .onsidered .o%p&iant 9it* t*e <) per.ent
.onstitutiona& &i%it on +oreign e?uit/ o+ pu,&i. uti&ities sin.e t*e
over9*e&%ing %a-orit/, or %ore t*an ::.::: per.ent, o+ t*e tota&
outstanding .apita& sto.0 is 6i&ipino o9ned. !*is is o,vious&/ a,surd.

In t*e eAa%p&e given, on&/ t*e +oreigners *o&ding t*e .o%%on s*ares *ave
voting rig*ts in t*e e&e.tion o+ dire.tors, even i+ t*e/ *o&d on&/ 1)) s*ares.
!*e +oreigners, 9it* a %inus.u&e e?uit/ o+ &ess t*an ).))1 per.ent, eAer.ise
.ontro& over t*e pu,&i. uti&it/. On t*e ot*er *and, t*e 6i&ipinos, *o&ding %ore
t*an ::.::: per.ent o+ t*e e?uit/, .annot vote in t*e e&e.tion o+ dire.tors
and *en.e, *ave no .ontro& over t*e pu,&i. uti&it/. !*is star0&/ .ir.u%vents
t*e intent o+ t*e +ra%ers o+ t*e Constitution, as 9e&& as t*e .&ear &anguage
o+ t*e Constitution, to p&a.e t*e .ontro& o+ pu,&i. uti&ities in t*e *ands o+
6i&ipinos. It a&so renders i&&usor/ t*e State po&i./ o+ an independent nationa&
e.ono%/efectively controlled ,/ 6i&ipinos.

!*e eAa%p&e given is not t*eoreti.a& ,ut .an ,e +ound in t*e rea&
9or&d, and in fact e'ists in the present case.

4o&ders o+ PL! pre+erred s*ares are eAp&i.it&/ denied o+ t*e rig*t to vote in
t*e e&e.tion o+ dire.tors. PL!Gs Arti.&es o+ In.orporation eApress&/ state
t*at Mthe hol/e42 o9 Se43al P4e9e44e/ StocN 2hall .ot =e e.t3tle/ to
Bote at a.> 7eet3.8 o9 the 2tocNhol/e42 9o4 the elect3o. o9
/34ecto42 o4 9o4 a.> othe4 <u4<o2e or ot*er9ise parti.ipate in an/
a.tion ta0en ,/ t*e .orporation or its sto.0*o&ders, or to re.eive noti.e o+
an/ %eeting o+ sto.0*o&ders.L
@1

On t*e ot*er *and, *o&ders o+ .o%%on s*ares are granted t*e eA.&usive
rig*t to vote in t*e e&e.tion o+ dire.tors. PL!Gs Arti.&es o+
In.orporation
@'
state t*at Mea.* *o&der o+ Co%%on Capita& Sto.0 s*a&& *ave
one vote in respe.t o+ ea.* s*are o+ su.* sto.0 *e&d ,/ *i% on a&& %atters
voted upon ,/ t*e sto.0*o&ders, and the hol/e42 o9 Co77o. Ca<3tal
StocN 2hall haBe the exclu23Be 438ht to Bote 9o4 the elect3o. o9
/34ecto42 a./ 9o4 all othe4 <u4<o2e2.L
@;

In s*ort, on&/ *o&ders o+ .o%%on s*ares .an vote in t*e e&e.tion o+
dire.tors, %eaning on&/ .o%%on s*are*o&ders eAer.ise .ontro& over PL!.
Converse&/, *o&ders o+ pre+erred s*ares, 9*o *ave no voting rig*ts in t*e
e&e.tion o+ dire.tors, do not *ave an/ .ontro& over PL!. In +a.t, under
PL!Gs Arti.&es o+ In.orporation, *o&ders o+ .o%%on s*ares *ave voting
rig*ts +or a&& purposes, 9*i&e *o&ders o+ pre+erred s*ares *ave no voting
rig*t +or an/ purpose 9*atsoever.

It %ust ,e stressed, and 4e2<o./e.t2 /o .ot /32<ute, t*at +oreigners
*o&d a %a-orit/ o+ t*e .o%%on s*ares o+ PL!. In +a.t, ,ased on PL!Gs
')1) 8enera& In+or%ation S*eet 18IS2,
@<
9*i.* is a do.u%ent re?uired to ,e
su,%itted annua&&/ to t*e Se.urities and EA.*ange
Co%%ission,
@@
+oreigners *o&d 1'),)<=,=:) .o%%on s*ares o+ PL!
9*ereas 6i&ipinos *o&d on&/ ==,>@),='' .o%%on s*ares.
@=
In ot*er 9ords,
+oreigners *o&d =<.'>T o+ t*e tota& nu%,er o+ PL!Gs .o%%on s*ares, 9*i&e
6i&ipinos *o&d on&/ ;@.>;T. Sin.e *o&ding a %a-orit/ o+ t*e .o%%on s*ares
e?uates to .ontro&, it is .&ear t*at +oreigners eAer.ise .ontro& over PL!.
Su.* a%ount o+ .ontro& un%ista0a,&/ eA.eeds t*e a&&o9a,&e <) per.ent
&i%it on +oreign o9ners*ip o+ pu,&i. uti&ities eApress&/ %andated in Se.tion
11, Arti.&e DII o+ t*e Constitution.

#oreover, t*e ividend e.&arations o+ PL! +or ')):,
@>
as su,%itted to t*e
SEC, s*o9s t*at per s*are t*e SIP
@(
pre+erred s*ares earn a pittan.e in
dividends .o%pared to t*e .o%%on s*ares. PL! de.&ared dividends +or
t*e .o%%on s*ares at P>).)) per s*are, 9*i&e t*e de.&ared dividends +or
t*e pre+erred s*ares a%ounted to a %eas&/ P1.)) per s*are.
@:
So t*e
pre+erred s*ares not on&/ .annot vote in t*e e&e.tion o+ dire.tors, t*e/ a&so
*ave ver/ &itt&e and o,vious&/ neg&igi,&e dividend earning .apa.it/
.o%pared to .o%%on s*ares.

As s*o9n in PL!Gs ')1) 8IS,
=)
as su,%itted to t*e SEC, t*e par va&ue o+
PL! .o%%on s*ares is P@.)) per s*are, 9*ereas t*e par va&ue o+ pre+erred
s*ares is P1).)) per s*are. In ot*er 9ords, pre+erred s*ares *ave t9i.e t*e
par va&ue o+ .o%%on s*ares ,ut .annot e&e.t dire.tors and *ave on&/ 1N>)
o+ t*e dividends o+ .o%%on s*ares. #oreover, ::.<<T o+ t*e pre+erred
s*ares are o9ned ,/ 6i&ipinos 9*i&e +oreigners o9n on&/ a %inus.u&e ).@=T
o+ t*e pre+erred s*ares.
=1
7orse, pre+erred s*ares .onstitute >>.(@T o+ t*e
aut*oriCed .apita& sto.0 o+ PL! 9*i&e .o%%on s*ares .onstitute on&/
''.1@T.
='
!*is undenia,&/ s*o9s t*at ,ene3.ia& interest in PL! is not 9it*
t*e non-voting pre+erred s*ares ,ut 9it* t*e .o%%on s*ares, ,&atant&/
vio&ating t*e .onstitutiona& re?uire%ent o+ =) per.ent 6i&ipino .ontro& and
6i&ipino ,ene3.ia& o9ners*ip in a pu,&i. uti&it/.

!*e &ega& and ,ene3.ia& o9ners*ip o+ =) per.ent o+ t*e outstanding .apita&
sto.0 %ust rest in t*e *ands o+ 6i&ipinos in a..ordan.e 9it* t*e
.onstitutiona& %andate. 6u&& ,ene3.ia& o9ners*ip o+ =) per.ent o+ t*e
outstanding .apita& sto.0, .oup&ed 9it* =) per.ent o+ t*e voting rig*ts, is
.onstitutiona&&/ re?uired +or t*e StateGs grant o+ aut*orit/ to operate a
pu,&i. uti&it/. !*e undisputed +a.t t*at t*e PL! pre+erred s*ares, ::.<<T
o9ned ,/ 6i&ipinos, are non-voting and earn on&/ 1N>) o+ t*e dividends t*at
PL! .o%%on s*ares earn, gross&/ vio&ates t*e .onstitutiona& re?uire%ent
1' | P a g e
o+ =) per.ent 6i&ipino .ontro& and 6i&ipino ,ene3.ia& o9ners*ip o+ a pu,&i.
uti&it/.
I. 2ho4t, F3l3<3.o2 hol/ le22 tha. ; <e4ce.t o9 the Bot3.8 2tocN,
a./ ea4. le22 tha. ; <e4ce.t o9 the /3B3/e./2, o9 PL'#. !*is dire.t&/
.ontravenes t*e eApress .o%%and in Se.tion 11, Arti.&e DII o+ t*e
Constitution t*at MOnPo +ran.*ise, .erti3.ate, or an/ ot*er +or% o+
aut*oriCation +or t*e operation o+ a pu,&i. uti&it/ s*a&& ,e granted eA.ept to
A A A .orporations A A A organiCed under t*e &a9s o+ t*e P*i&ippines, at
lea2t 23xt> <e4 ce.tu7 o9 Dho2e ca<3tal 32 oD.e/ => 2uch c3t3Ee.2
x x x.L

!o repeat, 112 +oreigners o9n =<.'>T o+ t*e .o%%on s*ares o+ PL!, 9*i.*
.&ass o+ s*ares eAer.ises t*e 2ole rig*t to vote in t*e e&e.tion o+ dire.tors,
and t*us eAer.ise .ontro& over PL!I 1'2 6i&ipinos o9n on&/ ;@.>;T o+
PL!Gs .o%%on s*ares, .onstituting a %inorit/ o+ t*e voting sto.0, and
t*us do not eAer.ise .ontro& over PL!I 1;2 pre+erred s*ares, ::.<<T o9ned
,/ 6i&ipinos, *ave no voting rig*tsI 1<2 pre+erred s*ares earn on&/ 1N>) o+
t*e dividends t*at .o%%on s*ares earnI
=;
1@2 pre+erred s*ares *ave t9i.e
t*e par va&ue o+ .o%%on s*aresI and 1=2 pre+erred s*ares .onstitute
>>.(@T o+ t*e aut*oriCed .apita& sto.0 o+ PL! and .o%%on s*ares on&/
''.1@T. !*is 0ind o+ o9ners*ip and .ontro& o+ a pu,&i. uti&it/ is a %o.0er/
o+ t*e Constitution.

In.identa&&/, t*e +a.t t*at PL! .o%%on s*ares 9it* a par va&ue o+ P@.))
*ave a .urrent sto.0 %ar0et va&ue o+ P',;'(.)) per s*are,
=<
9*i&e PL!
pre+erred s*ares 9it* a par va&ue o+ P1).)) per s*are *ave a .urrent sto.0
%ar0et va&ue ranging +ro% on&/ P1).:' toP11.)= per s*are,
=@
is a g&aring
.on3r%ation ,/ t*e %ar0et t*at .ontro& and ,ene3.ia& o9ners*ip o+ PL!
rest 9it* t*e .o%%on s*ares, not 9it* t*e pre+erred s*ares.

Indisputa,&/, .onstruing t*e ter% M.apita&L in Se.tion 11, Arti.&e DII o+ t*e
Constitution to in.&ude ,ot* voting and non-voting s*ares 9i&& resu&t in t*e
a,-e.t surrender o+ our te&e.o%%uni.ations industr/ to +oreigners,
a%ounting to a .&ear a,di.ation o+ t*e StateGs .onstitutiona& dut/ to &i%it
.ontro& o+ pu,&i. uti&ities to 6i&ipino .itiCens. Su.* an interpretation .ertain&/
runs .ounter to t*e .onstitutiona& provision reserving .ertain areas o+
invest%ent to 6i&ipino .itiCens, su.* as t*e eAp&oitation o+ natura& resour.es
as 9e&& as t*e o9ners*ip o+ &and, edu.ationa& institutions and advertising
,usinesses. !*e Court s*ou&d never open to +oreign .ontro& 9*at t*e
Constitution *as eApress&/ reserved to 6i&ipinos +or t*at 9ou&d ,e a ,etra/a&
o+ t*e Constitution and o+ t*e nationa& interest. !*e Court %ust per+or% its
so&e%n dut/ to de+end and up*o&d t*e intent and &etter o+ t*e Constitution
to ensure, in t*e 9ords o+ t*e Constitution, Ma se&+-re&iant and independent
nationa& e.ono%/ e.ectivel) controlle ,/ 6i&ipinos.L

Se.tion 11, Arti.&e DII o+ t*e Constitution, &i0e ot*er provisions o+ t*e
Constitution eApress&/ reserving to 6i&ipinos speci*c areas o+ invest%ent,
su.* as t*e deve&op%ent o+ natura& resour.es and o9ners*ip o+ &and,
edu.ationa& institutions and advertising ,usiness, is self(e'ecutin). !*ere
is no need +or &egis&ation to i%p&e%ent t*ese se&+-eAe.uting provisions o+
t*e Constitution. !*e rationa&e 9*/ t*ese .onstitutiona& provisions are se&+-
eAe.uting 9as eAp&ained in Manila Prince /otel v. GS0S,
==
t*us:
A A A 4en.e, un&ess it is eApress&/ provided t*at a &egis&ative a.t is
ne.essar/ to en+or.e a .onstitutiona& %andate, t*e presu%ption
no9 is t*at a&& provisions o+ t*e .onstitution are se&+-eAe.uting. I+
t*e .onstitutiona& provisions are treated as re?uiring &egis&ation
instead o+ se&+-eAe.uting, t*e &egis&ature 9ou&d *ave t*e po9er to
ignore and pra.ti.a&&/ nu&&i+/ t*e %andate o+ t*e +unda%enta& &a9.
!*is .an ,e .ata.&/s%i.. !*at is 9*/ t*e prevai&ing vie9 is, as it
*as a&9a/s ,een, t*at W

. . . in .ase o+ dou,t, t*e Constitution s*ou&d ,e .onsidered se&+-
eAe.uting rat*er t*an non-se&+-eAe.uting. . . . &.le22 the
co.t4a4> 32 clea4l> 3.te./e/, the <4oB323o.2 o9 the
Co.2t3tut3o. 2houl/ =e co.23/e4e/ 2el91execut3.8, a2 a
co.t4a4> 4ule Doul/ 83Be the le832latu4e /32c4et3o. to
/ete473.e Dhe., o4 Dhethe4, the> 2hall =e eFect3Be. !*ese
provisions 9ou&d ,e su,ordinated to t*e 9i&& o+ t*e &a9%a0ing
,od/, 9*i.* .ou&d %a0e t*e% entire&/ %eaning&ess ,/ si%p&/
re+using to pass t*e needed i%p&e%enting statute. 1E%p*asis
supp&ied2





In Manila Prince /otel, even t*e issenting Opinion o+ t*en Asso.iate
Justi.e Re/nato S. Puno, &ater C*ie+ Justi.e, agreed t*at .onstitutiona&
provisions are presu%ed to ,e se&+-eAe.uting. Justi.e Puno stated:

Courts as a ru&e .onsider t*e provisions o+ t*e Constitution as se&+-
eAe.uting, rat*er t*an as re?uiring +uture &egis&ation +or t*eir
en+or.e%ent. !*e reason is not di5.u&t to dis.ern. Fo4 39 the> a4e
.ot t4eate/ a2 2el91execut3.8, the 7a./ate o9 the
9u./a7e.tal laD 4at35e/ => the 2oBe4e38. <eo<le ca. =e
ea23l> 38.o4e/ a./ .ull35e/ => Co.84e22. SuFu2e/ D3th
D32/o7 o9 the a8e2 32 the u.>3el/3.8 4ule that le832lat3Be
act3o.2 7a> 83Be =4eath to co.2t3tut3o.al 438ht2 =ut
co.84e223o.al 3.act3o. 2houl/ .ot 2uFocate the7.


!*us, 9e *ave treated as se&+-eAe.uting t*e provisions in t*e "i&& o+
Rig*ts on arrests, sear.*es and seiCures, t*e rig*ts o+ a person
under .ustodia& investigation, t*e rig*ts o+ an a..used, and t*e
privi&ege against se&+-in.ri%ination. It is re.ogniCed t*at &egis&ation
is unne.essar/ to ena,&e .ourts to eHe.tuate .onstitutiona&
provisions guaranteeing t*e +unda%enta& rig*ts o+ &i+e, &i,ert/ and
t*e prote.tion o+ propert/. !*e sa%e treat%ent is a..orded to
.onstitutiona& provisions +or,idding t*e ta0ing or da%aging o+
1; | P a g e
propert/ +or pu,&i. use 9it*out -ust .o%pensation. 1E%p*asis
supp&ied2


!*us, in nu%erous .ases,
=>
t*is Court, even in t*e a,sen.e o+ i%p&e%enting
&egis&ation, app&ied dire.t&/ t*e provisions o+ t*e 1:;@, 1:>; and 1:(>
Constitutions &i%iting &and o9ners*ip to 6i&ipinos. In Soriano
v. 1n$ /oo,
=(
t*is Court ru&ed:

A A A As t*e Constitution is si&ent as to t*e eHe.ts or .onse?uen.es
o+ a sa&e ,/ a .itiCen o+ *is &and to an a&ien, and as ,ot* t*e .itiCen
and t*e a&ien *ave vio&ated t*e &a9, none o+ t*e% s*ou&d *ave a
re.ourse against t*e ot*er, and it s*ou&d on&/ ,e t*e State t*at
s*ou&d ,e a&&o9ed to intervene and deter%ine 9*at is to ,e done
9it* t*e propert/ su,-e.t o+ t*e vio&ation. 7e *ave said t*at 9*at
t*e State s*ou&d do or .ou&d do in su.* %atters is a %atter o+
pu,&i. po&i./, entire&/ ,e/ond t*e s.ope o+ -udi.ia&
aut*orit/. 1ing&asan, et a&. vs. Lee "un !ing, et a&., = 8. R. No. L-
@::=, June '>, 1:@=.2 Wh3le the le832latu4e ha2 .ot /e5.3tel>
/ec3/e/ Dhat <ol3c> 2houl/ =e 9olloDe/ 3. ca2e2 o9
B3olat3o.2 a8a3.2t the co.2t3tut3o.al <4oh3=3t3o., cou4t2 o9
Gu2t3ce ca..ot 8o =e>o./ => /ecla43.8 the /32<o23t3o. to =e
.ull a./ Bo3/ a2 B3olat3Be o9 the Co.2t3tut3o.. A A A 1E%p*asis
supp&ied2


!o treat Se.tion 11, Arti.&e DII o+ t*e Constitution as not se&+-eAe.uting
9ou&d %ean t*at sin.e t*e 1:;@ Constitution, or over t*e &ast >@ /ears, not
one o+ t*e .onstitutiona& provisions eApress&/ reserving spe.i3. areas o+
invest%ents to .orporations, at &east =) per.ent o+ t*e M.apita&L o+ 9*i.* is
o9ned ,/ 6i&ipinos, 9as en+or.ea,&e. In s*ort, t*e +ra%ers o+ t*e 1:;@, 1:>;
and 1:(> Constitutions %isera,&/ +ai&ed to eHe.tive&/ reserve to 6i&ipinos
spe.i3. areas o+ invest%ent, &i0e t*e operation ,/ .orporations o+ pu,&i.
uti&ities, t*e eAp&oitation ,/ .orporations o+ %inera& resour.es, t*e
o9ners*ip ,/ .orporations o+ rea& estate, and t*e o9ners*ip o+ edu.ationa&
institutions. A&& t*e &egis&atures t*at .onvened sin.e 1:;@ a&so %isera,&/
+ai&ed to ena.t &egis&ations to i%p&e%ent t*ese vita& .onstitutiona&
provisions t*at deter%ine 9*o 9i&& eHe.tive&/ .ontro& t*e nationa& e.ono%/,
6i&ipinos or +oreigners. !*is Court .annot a&&o9 su.* an a,surd
interpretation o+ t*e Constitution.

!*is Court *as *e&d t*at t*e SEC M*as ,ot* regu&ator/ and ad-udi.ative
+un.tions.L
=:
Ender its regu&ator/ +un.tions, t*e SEC .an ,e .o%pe&&ed ,/
%anda%us to per+or% its statutor/ dut/ 9*en it un&a9+u&&/ neg&e.ts to
per+or% t*e sa%e. Ender its ad-udi.ative or ?uasi--udi.ia& +un.tions, t*e
SEC .an ,e a&so ,e .o%pe&&ed ,/ %anda%us to *ear and de.ide a possi,&e
vio&ation o+ an/ &a9 it ad%inisters or en+or.es 9*en it is %andated ,/ &a9
to investigate su.* vio&ation.

Ender Se.tion 1>1<2
>)
o+ t*e Corporation Code, t*e SEC *as t*e regu&ator/
+un.tion to re-e.t or disapprove t*e Arti.&es o+ In.orporation o+ an/
.orporation 9*ere Othe 4eAu34e/ <e4ce.ta8e o9 oD.e42h3< o9 the
ca<3tal 2tocN to =e oD.e/ => c3t3Ee.2 o9 the Ph3l3<<3.e2 ha2 .ot
=ee. co7<l3e/ D3th a2 4eAu34e/ => ex32t3.8 laD2 o4 the
Co.2t3tut3o..M !*us, t*e SEC is t*e govern%ent agen./ tas0ed 9it* t*e
statutor/ dut/ to en+or.e t*e nationa&it/ re?uire%ent pres.ri,ed in Se.tion
11, Arti.&e DII o+ t*e Constitution on t*e o9ners*ip o+ pu,&i. uti&ities. !*is
Court, in a petition +or de.&arator/ re&ie+ t*at is treated as a petition +or
%anda%us as in t*e present .ase, .an dire.t t*e SEC to per+or% its
statutor/ dut/ under t*e &a9, a dut/ t*at t*e SEC *as apparent&/ un&a9+u&&/
neg&e.ted to do ,ased on t*e ')1) 8IS t*at respondent PL! su,%itted to
t*e SEC.
Ender Se.tion @1%2 o+ t*e Se.urities Regu&ation Code,
>1
t*e SEC is vested
9it* t*e Mpo9er and +un.tionL to M2u2<e./ o4 4eBoNe, a9te4 <4o<e4
.ot3ce a./ hea43.8, the 94a.ch32e o4 ce4t35cate o9 4e832t4at3o. o9
co4<o4at3o.2, <a4t.e42h3<2 o4 a22oc3at3o.2, u<o. a.> o9 the
84ou./2 <4oB3/e/ => laD.L !*e SEC is %andated under Se.tion @1d2 o+
t*e sa%e Code 9it* t*e Mpo9er and +un.tionL to M3.Be2t38ate x x x the
act3B3t3e2 o9 <e42o.2 to e.2u4e co7<l3a.ceL 9it* t*e &a9s and
regu&ations t*at SEC ad%inisters or en+or.es. !*e 8IS t*at a&& .orporations
are re?uired to su,%it to SEC annua&&/ s*ou&d put t*e SEC on guard against
vio&ations o+ t*e nationa&it/ re?uire%ent pres.ri,ed in t*e Constitution and
eAisting &a9s. !*is Court .an .o%pe& t*e SEC, in a petition +or de.&arator/
re&ie+ t*at is treated as a petition +or %anda%us as in t*e present .ase, to
*ear and de.ide a possi,&e vio&ation o+ Se.tion 11, Arti.&e DII o+ t*e
Constitution in vie9 o+ t*e o9ners*ip stru.ture o+ PL!Gs voting s*ares, as
ad%itted ,/ respondents and as stated in PL!Gs ')1) 8IS t*at PL!
su,%itted to SEC.

W)EREFORE, 9e PAR#L$ GRAN# t*e petition and ru&e t*at t*e ter%
M.apita&L in Se.tion 11, Arti.&e DII o+ t*e 1:(> Constitution re+ers on&/ to
s*ares o+ sto.0 entit&ed to vote in t*e e&e.tion o+ dire.tors, and t*us in t*e
present .ase on&/ to .o%%on s*ares, and not to t*e tota& outstanding
.apita& sto.0 1.o%%on and non-voting pre+erred s*ares2. Respondent
C*airperson o+ t*e Se.urities and EA.*ange Co%%ission is 'IREC#E' to
app&/ t*is de3nition o+ t*e ter% M.apita&L in deter%ining t*e eAtent o+
a&&o9a,&e +oreign o9ners*ip in respondent P*i&ippine Long istan.e
!e&ep*one Co%pan/, and i+ t*ere is a vio&ation o+ Se.tion 11, Arti.&e DII o+
t*e Constitution, to i%pose t*e appropriate san.tions under t*e &a9.

SO OR'ERE'.
PPPPPPPPPPPP
1< | P a g e
'AN#E %. LIBAN, RE$NAL'O M. BERNAR'O
a./ SAL%A'OR M. %IARI,
Pet3t3o.e42,






1 versus 1






RIC)AR' (. GOR'ON,
Re2<o./e.t.

P)ILIPPINE NA#IONAL RE' CROSS,
I.te4Be.o4.
G. R. No. 17!:!Q

P4e2e.t:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
%ELASCO, (R.,
NAC)&RA,
LEONAR'O1'E CAS#RO,
BRION,
PERAL#A,
BERSAMIN,
'EL CAS#ILLO,
ABA',
%ILLARAMA, (R.,
PERE,,
MEN'O,A, a./
SERENO, JJ.

P4o7ul8ate/:

(a.ua4> 1?, Q;11
x 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1 x


R E S O L & # I O N


LEONAR'O1'E CAS#RO, J.:


!*is reso&ves t*e #otion +or C&ari3.ation andNor +or
Re.onsideration
O1P
3&ed on August 1), ')): ,/ respondentRi.*ard J.
8ordon 1respondent2 o+ t*e e.ision pro%u&gated ,/ t*is Court on Ju&/ 1@,
')): 1t*e e.ision2, t*e #otion +or Partia& Re.onsideration
O'P
3&ed on August
'>, ')): ,/ %ovant-intervenor P*i&ippine Nationa& Red Cross 1PNRC2, and
t*e &atterGs #ani+estation and #otion to Ad%it Atta.*ed Position
Paper
O;P
3&ed on e.e%,er ';, ')):.

In t*e e.ision,
O<P
t*e Court *e&d t*at respondent did not +or+eit *is seat in
t*e Senate 9*en *e a..epted t*e .*air%ans*ip o+ t*e PNRC "oard o+
8overnors, as Mt*e o5.e o+ t*e PNRC C*air%an is not a govern%ent o5.e
or an o5.e in a govern%ent-o9ned or .ontro&&ed .orporation +or purposes
o+ t*e pro*i,ition in Se.tion 1;, Arti.&e VI o+ t*e 1:(> Constitution.L
O@P
!*e
e.ision, *o9ever, +urt*er de.&ared void t*e PNRC C*arter Minso+ar as it
.reates t*e PNRC as a private .orporationL and .onse?uent&/ ru&ed t*at
Mt*e PNRC s*ou&d in.orporate under t*e Corporation Code and register 9it*
t*e Se.urities and EA.*ange Co%%ission i+ it 9ants to ,e a private
.orporation.L
O=P
!*e dispositive portion o+ t*e e.ision reads as +o&&o9s:

74ERE6ORE, 9e de.&are t*at t*e o5.e o+ t*e C*air%an o+ t*e P*i&ippine
Nationa& Red Cross is not a govern%ent o5.e or an o5.e in a govern%ent-
o9ned or .ontro&&ed .orporation +or purposes o+ t*e pro*i,ition in Se.tion
1;, Arti.&e VI o+ t*e 1:(> Constitution. 7e a&so de.&are t*at Se.tions 1, ', ;,
<1a2, @, =, >, (, :, 1), 11, 1', and 1; o+ t*e C*arter o+ t*e P*i&ippine
Nationa& Red Cross, or Repu,&i. A.t No. :@, as a%ended ,/ Presidentia&
e.ree Nos. 1'=< and 1=<;, are VOI ,e.ause t*e/ .reate t*e PNRC as a
private .orporation or grant it .orporate po9ers.
O>P
In *is #otion +or C&ari3.ation andNor +or Re.onsideration, respondent
raises t*e +o&&o9ing grounds: 112 as t*e issue o+ .onstitutiona&it/ o+ Repu,&i.
A.t 1R.A.2 No. :@ 9as not raised ,/ t*e parties, t*e Court 9ent ,e/ond t*e
.ase in de.iding su.* issueI and 1'2 as t*e Court de.ided t*at Petitioners
did not *ave standing to 3&e t*e instant Petition, t*e pronoun.e%ent o+ t*e
Court on t*e va&idit/ o+ R.A. No. :@ s*ou&d ,e .onsidered obiter.
O(P

Respondent argues t*at t*e va&idit/ o+ R.A. No. :@ 9as a non-issueI
t*ere+ore, it 9as unne.essar/ +or t*e Court to de.ide on t*at ?uestion.
Respondent .ites La#rel v. Garcia,
O:P
9*erein t*e Court said t*at it M9i&& not
pass upon a .onstitutiona& ?uestion a&t*oug* proper&/ presented ,/ t*e
re.ord i+ t*e .ase .an ,e disposed o+ on so%e ot*er groundL and goes on to
.&ai% t*at sin.e t*is Court, in t*e e.ision, disposed o+ t*e petition on
so%e ot*er ground, i.e.% &a.0 o+ standing o+ petitioners, t*ere 9as no need
+or it to de&ve into t*e va&idit/ o+ R.A. No. :@, and t*e rest o+ t*e -udg%ent
s*ou&d ,e dee%ed obiter.

In its #otion +or Partia& Re.onsideration, PNRC pra/s t*at t*e Court sustain
t*e .onstitutiona&it/ o+ its C*arter on t*e +o&&o9ing grounds:

1@ | P a g e
A. !4E ASSAILE ECISION ECLARIN8 ENCONS!I!E!IONAL
REPE"LIC AC! NO. :@ AS A#ENE EPRIVE IN!ERVENOR PNRC O6 I!S
CONS!I!E!IONAL RI84! !O EE PROCESS.

1. IN!ERVENOR PNRC 7AS NEVER A PAR!K !O !4E INS!AN!
CON!ROVERSK.

'. !4E CONS!I!E!IONALI!K O6 REPE"LIC AC! NO. :@, AS A#ENE
7AS NEVER AN ISSEE IN !4IS CASE.

". !4E CERREN! C4AR!ER O6 PNRC IS PRESIEN!IAL ECREE NO. 1'=<
AN NO! REPE"LIC AC! NO. :@. PRESIEN!IAL ECREE NO. 1'=< 7AS NO!
A CREA!ION O6 CON8RESS.

C. PNRCGS S!REC!ERE IS S20 G343(0SI I! IS A CLASS O6 I!S O7N. 74ILE
I! IS PER6OR#IN8 4E#ANI!ARIAN 6ENC!IONS AS AN AEDILIARK !O
8OVERN#EN!, I! IS A NEE!RAL EN!I!K SEPARA!E AN INEPENEN! O6
8OVERN#EN! CON!ROL, KE! I! OES NO! VEALI6K AS S!RIC!LK PRIVA!E
IN C4ARAC!ER.


In *is Co%%ent and #ani+estation
O1)P
3&ed on Nove%,er :, ')):,
respondent %ani+ests: 112 t*at *e agrees 9it* t*e position ta0en ,/ t*e
PNRC in its #otion +or Partia& Re.onsideration dated August '>, ')):I and
1'2 as o+ t*e 9riting o+ said Co%%ent and #ani+estation, t*ere 9as pending
,e+ore t*e Congress o+ t*e P*i&ippines a proposed ,i&& entit&ed MAn A.t
Re.ogniCing t*e PNRC as an Independent, Autono%ous, Non-8overn%enta&
OrganiCation AuAi&iar/ to t*e Aut*orities o+ t*e Repu,&i. o+ t*e P*i&ippines in
t*e 4u%anitarian 6ie&d, to ,e Bno9n as !*e P*i&ippine Red Cross.L
O11P

A+ter a t*oroug* stud/ o+ t*e argu%ents and points raised ,/ t*e
respondent as 9e&& as t*ose o+ %ovant-intervenor in t*eir respe.tive
%otions, 9e *ave re.onsidered our pronoun.e%ents in our e.ision dated
Ju&/ 1@, ')): 9it* regard to t*e nature o+ t*e PNRC and t*e
.onstitutiona&it/ o+ so%e provisions o+ t*e PNRC C*arter, R.A. No. :@, as
a%ended.

As .orre.t&/ pointed out in respondentGs #otion, t*e issue o+
.onstitutiona&it/ o+ R.A. No. :@ 9as not raised ,/ t*e parties, and 9as not
a%ong t*e issues de3ned in t*e ,od/ o+ t*e e.isionI t*us, it 9as not t*e
ver/ lis mota o+ t*e .ase. 7e *ave reiterated t*e ru&e as to 9*en t*e Court
9i&& .onsider t*e issue o+ .onstitutiona&it/ in Alvare! v. P0C1P (eso#rces%
0nc.,
O1'P
t*us:

!*is Court 9i&& not tou.* t*e issue o+ un.onstitutiona&it/ un&ess it is t*e
ver/ lis mota. It is a 9e&&-esta,&is*ed ru&e t*at a .ourt s*ou&d not pass upon
a .onstitutiona& ?uestion and de.ide a &a9 to ,e un.onstitutiona& or inva&id,
un&ess su.* ?uestion is raised ,/ t*e partiesand t*at 9*en it is raised, i+
t*e re.ord a&so presents so%e ot*er ground upon 9*i.* t*e .ourt %a/
OrestP its -udg%ent, t*at .ourse 9i&& ,e adopted and t*e .onstitutiona&
?uestion 9i&& ,e &e+t +or .onsideration unti& su.* ?uestion 9i&& ,e
unavoida,&e.
O1;P


Ender t*e ru&e ?uoted a,ove, t*ere+ore, t*is Court s*ou&d not *ave
de.&ared void .ertain se.tions o+ R.A. No. :@, as a%ended ,/ Presidentia&
e.ree 1P..2 Nos. 1'=< and 1=<;, t*e PNRC C*arter. Instead, t*e Court
s*ou&d *ave eAer.ised -udi.ia& restraint on t*is %atter, espe.ia&&/ sin.e
t*ere 9as so%e ot*er ground upon 9*i.* t*e Court .ou&d *ave ,ased its
-udg%ent. 6urt*er%ore, t*e PNRC, t*e entit/ %ost adverse&/ aHe.ted ,/
t*is de.&aration o+ un.onstitutiona&it/, 9*i.* 9as not even origina&&/ a part/
to t*is .ase, 9as ,eing .o%pe&&ed, as a .onse?uen.e o+ t*e e.ision, to
sudden&/ reorganiCe and in.orporate under t*e Corporation Code, a+ter
%ore t*an siAt/ 1=)2 /ears o+ eAisten.e in t*is .ountr/.

Its eAisten.e as a .*artered .orporation re%ained un.*a&&enged on
ground o+ un.onstitutiona&it/ not9it*standing t*at R.A. No. :@ 9as ena.ted
on #ar.* '', 1:<> during t*e eHe.tivit/ o+ t*e 1:;@ Constitution, 9*i.*
provided +or a pros.ription against t*e .reation o+ private .orporations ,/
spe.ia& &a9, to 9it:

SEC. >. !*e Congress s*a&& not, eA.ept ,/ genera& &a9, provide +or t*e
+or%ation, organiCation, or regu&ation o+ private .orporations, un&ess su.*
.orporations are o9ned and .ontro&&ed ,/ t*e 8overn%ent or an/
su,division or instru%enta&it/ t*ereo+. 1Art. DIV, 1:;@ Constitution.2

Si%i&ar provisions are +ound in Arti.&e DIV, Se.tion < o+ t*e 1:>;
Constitution and Arti.&e DII, Se.tion 1= o+ t*e 1:(> Constitution. !*e &atter
reads:

SEC!ION 1=. !*e Congress s*a&& not, eA.ept ,/ genera& &a9, provide +or t*e
+or%ation, organiCation, or regu&ation o+ private .orporations. 8overn%ent-
o9ned or .ontro&&ed .orporations %a/ ,e .reated or esta,&is*ed ,/ spe.ia&
.*arters in t*e interest o+ t*e .o%%on good and su,-e.t to t*e test o+
e.ono%i. via,i&it/.


Sin.e its ena.t%ent, t*e PNRC C*arter 9as a%ended severa& ti%es,
parti.u&ar&/ on June 11, 1:@;, August 1=, 1:>1, e.e%,er 1@, 1:>>, and
O.to,er 1, 1:>:, ,/ virtue o+ R.A. No. (@@, R.A. No. =;>;, P.. No. 1'=<,
and P.. No. 1=<;, respe.tive&/. !*e passage o+ severa& &a9s re&ating to t*e
PNRCGs .orporate eAisten.e not9it*standing t*e eHe.tivit/ o+ t*e
.onstitutiona& pros.ription on t*e .reation o+ private .orporations ,/ &a9, is
a re.ognition t*at t*e PNRC is not stri.t&/ in t*e nature o+ a private
.orporation .onte%p&ated ,/ t*e a+oresaid .onstitutiona& ,an.

A .&oser &oo0 at t*e nature o+ t*e PNRC 9ou&d s*o9 t*at t*ere is none &i0e it
not -ust in ter%s o+ stru.ture, ,ut a&so in ter%s o+ *istor/, pu,&i. servi.e and
o5.ia& status a..orded to it ,/ t*e State and t*e internationa&
1= | P a g e
.o%%unit/. !*ere is %erit in PNRCGs .ontention t*at its stru.ture is s#i
$eneris.

!*e PNRC su..eeded t*e .*apter o+ t*e A%eri.an Red Cross 9*i.* 9as in
eAisten.e in t*e P*i&ippines sin.e 1:1>. It 9as .reated ,/ an A.t o+
Congress a+ter t*e Repu,&i. o+ t*e P*i&ippines ,e.a%e an independent
nation on Ju&/ =, 1:<= and pro.&ai%ed on 6e,ruar/ 1<, 1:<> its ad*eren.e
to t*e Convention o+ 8eneva o+ Ju&/ ':, 1:': +or t*e A%e&ioration o+ t*e
Condition o+ t*e 7ounded and Si.0 o+ Ar%ies in t*e 6ie&d 1t*e M8eneva Red
Cross ConventionL2. "/ t*at a.tion t*e P*i&ippines indi.ated its desire to
parti.ipate 9it* t*e nations o+ t*e 9or&d in %itigating t*e suHering .aused
,/ 9ar and to esta,&is* in t*e P*i&ippines a vo&untar/ organiCation +or t*at
purpose and &i0e ot*er vo&unteer organiCations esta,&is*ed in ot*er
.ountries 9*i.* *ave rati3ed t*e 8eneva Conventions, to pro%ote t*e
*ea&t* and 9e&+are o+ t*e peop&e in pea.e and in 9ar.
O1<P

!*e provisions o+ R.A. No. :@, as a%ended ,/ R.A. Nos. (@@ and =;>;, and
+urt*er a%ended ,/ P.. Nos. 1'=< and 1=<;, s*o9 t*e *istori.a&
,a.0ground and &ega& ,asis o+ t*e .reation o+ t*e PNRC ,/ &egis&ative 3at,
as a vo&untar/ organiCation i%pressed 9it* pu,&i. interest. Pertinent&/ R.A.
No. :@, as a%ended ,/ P.. 1'=<, provides:

74EREAS, during t*e %eeting in 8eneva, S9itCer&and, on '' August 1(:<,
t*e nations o+ t*e 9or&d unani%ous&/ agreed to di%inis* 9it*in t*eir po9er
t*e evi&s in*erent in 9arI

74EREAS, %ore t*an one *undred +ort/ nations o+ t*e 9or&d *ave rati3ed
or ad*ered to t*e 8eneva Conventions o+ August 1', 1:<: +or t*e
A%e&ioration o+ t*e Condition o+ t*e 7ounded and Si.0 o+ Ar%ed 6or.es in
t*e 6ie&d and at Sea, !*e Prisoners o+ 7ar, and !*e Civi&ian Popu&ation in
!i%e o+ 7ar re+erred to in t*is C*arter as t*e 8eneva ConventionsI

74EREAS, t*e Repu,&i. o+ t*e P*i&ippines ,e.a%e an independent nation
on Ju&/ <, 1:<=, and pro.&ai%ed on 6e,ruar/ 1<, 1:<> its ad*eren.e to t*e
8eneva Conventions o+ 1:':, and ,/ t*e a.tion, indi.ated its desire to
parti.ipate 9it* t*e nations o+ t*e 9or&d in %itigating t*e suHering .aused
,/ 9ar and to esta,&is* in t*e P*i&ippines a vo&untar/ organiCation +or t*at
purpose as .onte%p&ated ,/ t*e 8eneva ConventionsI

74EREAS, t*ere eAisted in t*e P*i&ippines sin.e 1:1> a .*apter o+ t*e
A%eri.an Nationa& Red Cross 9*i.* 9as ter%inated in vie9 o+ t*e
independen.e o+ t*e P*i&ippinesI and

74EREAS, t*e vo&unteer organiCations esta,&is*ed in ot*er .ountries 9*i.*
*ave rati3ed or ad*ered to t*e 8eneva Conventions assist in pro%oting t*e
*ea&t* and 9e&+are o+ t*eir peop&e in pea.e and in 9ar, and t*roug* t*eir
%utua& assistan.e and .ooperation dire.t&/ and t*roug* t*eir internationa&
organiCations pro%ote ,etter understanding and s/%pat*/ a%ong t*e
peop&e o+ t*e 9or&dI

NO7, !4ERE6ORE, I, 6ERINAN E. #ARCOS, President o+ t*e P*i&ippines,
,/ virtue o+ t*e po9ers vested in %e ,/ t*e Constitution as Co%%ander-in-
C*ie+ o+ a&& t*e Ar%ed 6or.es o+ t*e P*i&ippines and pursuant to
Pro.&a%ation No. 1)(1 dated Septe%,er '1, 1:>', and 8enera& Order No. 1
dated Septe%,er '', 1:>', do *ere,/ de.ree and order t*at Repu,&i. A.t
No. :@, C*arter o+ t*e P*i&ippine Nationa& Red Cross 1PNRC2 as a%ended ,/
Repu,&i. A.ts No. (@@ and =;>;, ,e +urt*er a%ended as +o&&o9s:

Se.tion 1. !*ere is *ere,/ .reated in t*e Repu,&i. o+ t*e P*i&ippines a ,od/
.orporate and po&iti. to ,e t*e vo&untar/ organiCation o5.ia&&/ designated
to assist t*e Repu,&i. o+ t*e P*i&ippines in dis.*arging t*e o,&igations set
+ort* in t*e 8eneva Conventions and to per+or% su.* ot*er duties as are
in*erent upon a nationa& Red Cross So.iet/. !*e nationa& *ead?uarters o+
t*is Corporation s*a&& ,e &o.ated in #etropo&itan #ani&a. 1E%p*asis
supp&ied.2


!*e signi3.ant pu,&i. servi.e rendered ,/ t*e PNRC .an ,e g&eaned +ro%
Se.tion ; o+ its C*arter, 9*i.* provides:

Se.tion ;. !*at t*e purposes o+ t*is Corporation s*a&& ,e as +o&&o9s:

1a2 !o provide vo&unteer aid to t*e si.0 and 9ounded o+ ar%ed +or.es in
ti%e o+ 9ar, in a..ordan.e 9it* t*e spirit o+ and under t*e .onditions
pres.ri,ed ,/ t*e 8eneva Conventions to 9*i.* t*e Repu,&i. o+ t*e
P*i&ippines pro.&ai%ed its ad*eren.eI

1,2 6or t*e purposes %entioned in t*e pre.eding su,-se.tion, to per+or% a&&
duties devo&ving upon t*e Corporation as a resu&t o+ t*e ad*eren.e o+ t*e
Repu,&i. o+ t*e P*i&ippines to t*e said ConventionI

1.2 !o a.t in %atters o+ vo&untar/ re&ie+ and in a..ordan.e 9it* t*e
aut*orities o+ t*e ar%ed +or.es as a %ediu% o+ .o%%uni.ation ,et9een
peop&e o+ t*e Repu,&i. o+ t*e P*i&ippines and t*eir Ar%ed 6or.es, in ti%e o+
pea.e and in ti%e o+ 9ar, and to a.t in su.* %atters ,et9een si%i&ar
nationa& so.ieties o+ ot*er govern%ents and t*e 8overn%ents and peop&e
and t*e Ar%ed 6or.es o+ t*e Repu,&i. o+ t*e P*i&ippinesI

1d2 !o esta,&is* and %aintain a s/ste% o+ nationa& and internationa& re&ie+ in
ti%e o+ pea.e and in ti%e o+ 9ar and app&/ t*e sa%e in %eeting and
e%ergen./ needs .aused ,/ t/p*oons, Uood, 3res, eart*?ua0es, and ot*er
natura& disasters and to devise and .arr/ on %easures +or %ini%iCing t*e
suHering .aused ,/ su.* disastersI

1e2 !o devise and pro%ote su.* ot*er servi.es in ti%e o+ pea.e and in ti%e
o+ 9ar as %a/ ,e +ound desira,&e in i%proving t*e *ea&t*, sa+et/ and
9e&+are o+ t*e 6i&ipino peop&eI

1+2 !o devise su.* %eans as to %a0e ever/ .itiCen andNor resident o+ t*e
P*i&ippines a %e%,er o+ t*e Red Cross.
1> | P a g e

!*e PNRC is one o+ t*e Nationa& Red Cross and Red Cres.ent So.ieties,
9*i.*, toget*er 9it* t*e Internationa& Co%%ittee o+ t*e Red Cross 1ICRC2
and t*e I6RC and RCS, %a0e up t*e Internationa& Red Cross and Red
Cres.ent #ove%ent 1t*e #ove%ent2. !*e/ .onstitute a 9or&d9ide
*u%anitarian %ove%ent, 9*ose %ission is:

O!Po prevent and a&&eviate *u%an suHering 9*erever it %a/ ,e +ound, to
prote.t &i+e and *ea&t* and ensure respe.t +or t*e *u%an ,eing, in
parti.u&ar in ti%es o+ ar%ed .onUi.t and ot*er e%ergen.ies, to 9or0 +or t*e
prevention o+ disease and +or t*e pro%otion o+ *ea&t* and so.ia& 9e&+are, to
en.ourage vo&untar/ servi.e and a .onstant readiness to give *e&p ,/ t*e
%e%,ers o+ t*e #ove%ent, and a universa& sense o+ so&idarit/ to9ards a&&
t*ose in need o+ its prote.tion and assistan.e.
O1@P


!*e PNRC 9or0s .&ose&/ 9it* t*e ICRC and *as ,een invo&ved in
*u%anitarian a.tivities in t*e P*i&ippines sin.e 1:('. A%ong ot*ers, t*ese
a.tivities in t*e .ountr/ in.&ude:

1. 8iving prote.tion and assistan.e to .ivi&ians disp&a.ed or ot*er9ise
aHe.ted ,/ ar%ed .&as*es ,et9een t*e govern%ent and ar%ed opposition
groups, pri%ari&/ in #indanaoI
'. 7or0ing to %ini%iCe t*e eHe.ts o+ ar%ed *osti&ities and vio&en.e on
t*e popu&ationI
;. Visiting detaineesI and
<. Pro%oting a9areness o+ internationa& *u%anitarian &a9 in t*e pu,&i.
and private se.tors.
O1=P

Nationa& So.ieties su.* as t*e PNRC a.t as auAi&iaries to t*e pu,&i.
aut*orities o+ t*eir o9n .ountries in t*e *u%anitarian 3e&d and provide a
range o+ servi.es in.&uding disaster re&ie+ and *ea&t* and so.ia&
progra%%es.

!*e Internationa& 6ederation o+ Red Cross 1I6RC2 and Red Cres.ent So.ieties
1RCS2 Position Paper,
O1>P
su,%itted ,/ t*e PNRC, is instru.tive 9it* regard to
t*e e&e%ents o+ t*e spe.i3. nature o+ t*e Nationa& So.ieties su.* as t*e
PNRC, to 9it:

Nationa& So.ieties, su.* as t*e P*i&ippine Nationa& Red Cross and its sister
Red Cross and Red Cres.ent So.ieties, *ave .ertain spe.i3.ities deriving
+ro% t*e 1:<: 8eneva Convention and t*e Statutes o+ t*e Internationa& Red
Cross and Red Cres.ent #ove%ent 1t*e #ove%ent2. !*e/ are a&so guided
,/ t*e seven 6unda%enta& Prin.ip&es o+ t*e Red Cross and Red Cres.ent
#ove%ent: 4u%anit/, I%partia&it/, Neutra&it/, Independen.e, Vo&untar/
Servi.e, Enit/ and Eniversa&it/.

A Nationa& So.iet/ parta0es o+ a s#i $eneris .*ara.ter. It is a prote.ted
.o%ponent o+ t*e Red Cross %ove%ent under Arti.&es '< and '= o+ t*e 6irst
8eneva Convention, espe.ia&&/ in ti%es o+ ar%ed .onUi.t. !*ese provisions
re?uire t*at t*e staH o+ a Nationa& So.iet/ s*a&& ,e respe.ted and prote.ted
in a&& .ir.u%stan.es. Su.* prote.tion is not ordinari&/ aHorded ,/ an
internationa& treat/ to ordinar/ private entities or even non-govern%enta&
organisations 1N8Os2. !*is s#i $eneris .*ara.ter is a&so e%p*asiCed ,/ t*e
6ourt* 8eneva Convention 9*i.* *o&ds t*at an O..up/ing Po9er .annot
re?uire an/ .*ange in t*e personne& or stru.ture o+ a Nationa&
So.iet/. Nationa& so.ieties are t*ere+ore organiCations t*at are dire.t&/
regu&ated ,/ internationa& *u%anitarian &a9, in .ontrast to ot*er ordinar/
private entities, in.&uding N8Os.

A A A A

In addition, Nationa& So.ieties are not on&/ o5.ia&&/ re.ogniCed ,/ t*eir
pu,&i. aut*orities as vo&untar/ aid so.ieties, auAi&iar/ to t*e pu,&i.
aut*orities in t*e *u%anitarian 3e&d, ,ut a&so ,ene3t +ro% re.ognition at
t*e Internationa& &eve&. !*is is .onsidered to ,e an e&e%ent distinguis*ing
Nationa& So.ieties +ro% ot*er organisations 1%ain&/ N8Os2 and ot*er +or%s
o+ *u%anitarian response.

A A A. No ot*er organisation ,e&ongs to a 9or&d-9ide #ove%ent in 9*i.* a&&
So.ieties *ave e?ua& status and s*are e?ua& responsi,i&ities and duties in
*e&ping ea.* ot*er. !*is is .onsidered to ,e t*e essen.e o+ t*e
6unda%enta& Prin.ip&e o+ Eniversa&it/.

6urt*er%ore, t*e Nationa& So.ieties are .onsidered to ,e auAi&iaries to t*e
pu,&i. aut*orities in t*e *u%anitarian 3e&d. A A A.

!*e auAi&iar/ status o+ OaP Red Cross So.iet/ %eans t*at it is at one and t*e
sa%e ti%e a private institution and a pu,&i. servi.e organiCation ,e.ause
t*e ver/ nature o+ its 9or0 i%p&ies .ooperation 9it* t*e aut*orities, a &in0
9it* t*e State. In .arr/ing out t*eir %a-or +un.tions, Red Cross So.ieties
give t*eir *u%anitarian support to o5.ia& ,odies, in genera& *aving &arger
resour.es t*an t*e So.ieties, 9or0ing to9ards .o%para,&e ends in a given
se.tor.

A A A No ot*er organiCation *as a dut/ to ,e its govern%entGs *u%anitarian
partner 9*i&e re%aining independent.
O1(P
1E%p*ases ours.2


It is in re.ognition o+ t*is s#i $eneris .*ara.ter o+ t*e PNRC
t*at R.A. No. :@ *as re%ained va&id and eHe.tive +ro% t*e ti%e o+ its
ena.t%ent in #ar.* '', 1:<> under t*e 1:;@ Constitution and during t*e
eHe.tivit/ o+ t*e 1:>; Constitution and t*e 1:(> Constitution.


!*e PNRC C*arter and its a%endator/ &a9s *ave not ,een ?uestioned or
.*a&&enged on .onstitutiona& grounds, not even in t*is .ase ,e+ore t*e Court
no9.

1( | P a g e
In t*e e.ision, t*e Court, .iting Feliciano v. Commission on A#it,
O1:P
eAp&ained t*at t*e purpose o+ t*e .onstitutiona& provision pro*i,iting
Congress +ro% .reating private .orporations 9as to prevent t*e granting o+
spe.ia& privi&eges to .ertain individua&s, +a%i&ies, or groups, 9*i.* 9ere
denied to ot*er groups. "ased on t*e a,ove dis.ussion, it .an ,e seen t*at
t*e PNRC C*arter does not .o%e 9it*in t*e spirit o+ t*is .onstitutiona&
provision, as it does not grant spe.ia& privi&eges to a parti.u&ar individua&,
+a%i&/, or group, ,ut .reates an entit/ t*at strives to serve t*e .o%%on
good.

6urt*er%ore, a stri.t and %e.*ani.a& interpretation o+ Arti.&e DII,
Se.tion 1= o+ t*e 1:(> Constitution 9i&& *inder t*e State in adopting
%easures t*at 9i&& serve t*e pu,&i. good or nationa& interest. It s*ou&d ,e
noted t*at a spe.ia& &a9, R.A. No. :@'), t*e P*i&ippine Cooperative Code o+
'))(, and not t*e genera& .orporation .ode, vests .orporate po9er and
.apa.ities upon .ooperatives 9*i.* are private .orporations, in order to
i%p&e%ent t*e StateGs avo9ed po&i./.

In t*e e.ision o+ Ju&/ 1@, ')):, t*e Court re.ogniCed t*e pu,&i. servi.e
rendered ,/ t*e PNRC as t*e govern%entGs partner in t*e o,servan.e o+ its
internationa& .o%%it%ents, to 9it:

!*e PNRC is a non-pro3t, donor-+unded, vo&untar/, *u%anitarian
organiCation, 9*ose %ission is to ,ring ti%e&/, eHe.tive, and
.o%passionate *u%anitarian assistan.e +or t*e %ost vu&nera,&e 9it*out
.onsideration o+ nationa&it/, ra.e, re&igion, gender, so.ia& status, or po&iti.a&
a5&iation. !*e PNRC provides siA %a-or servi.es: "&ood Servi.es, isaster
#anage%ent, Sa+et/ Servi.es, Co%%unit/ 4ea&t* and Nursing, So.ia&
Servi.es and Vo&untar/ Servi.e.

!*e Repu,&i. o+ t*e P*i&ippines, ad*ering to t*e 8eneva Conventions,
esta,&is*ed t*e PNRC as a vo&untar/ organiCation +or t*e purpose
.onte%p&ated in t*e 8eneva Convention o+ '> Ju&/ 1:':. A A A.
O')P
1Citations
o%itted.2


So %ust t*is Court re.ogniCe too t*e .ountr/Gs ad*eren.e to t*e 8eneva
Convention and respe.t t*e uni?ue status o+ t*e PNRC in .onsonan.e 9it*
its treat/ o,&igations. !*e 8eneva Convention *as t*e +or.e and eHe.t o+
&a9.
O'1P
Ender t*e Constitution, t*e P*i&ippines adopts t*e genera&&/
a..epted prin.ip&es o+ internationa& &a9 as part o+ t*e &a9 o+ t*e &and.
O''P
!*is .onstitutiona& provision %ust ,e re.on.i&ed and *ar%oniCed
9it* Arti.&e DII, Se.tion 1= o+ t*e Constitution, instead o+ using t*e &atter to
negate t*e +or%er.

"/ re?uiring t*e PNRC to organiCe under t*e Corporation Code -ust &i0e an/
ot*er private .orporation, t*e e.ision o+ Ju&/ 1@, ')): &ost sig*t o+ t*e
PNRCGs spe.ia& status under internationa& *u%anitarian &a9 and as an
auAi&iar/ o+ t*e State, designated to assist it in dis.*arging its o,&igations
under t*e 8eneva Conventions. A&t*oug* t*e PNRC is .a&&ed to ,e
independent under its 6unda%enta& Prin.ip&es, it interprets su.*
independen.e as in.&usive o+ its dut/ to ,e t*e govern%entGs *u%anitarian
partner. !o ,e re.ogniCed in t*e Internationa& Co%%ittee, t*e PNRC %ust
*ave an autono%ous status, and .arr/ out its *u%anitarian %ission in a
neutra& and i%partia& %anner.

4o9ever, in a..ordan.e 9it* t*e 6unda%enta& Prin.ip&e o+ Vo&untar/
Servi.e o+ Nationa& So.ieties o+ t*e #ove%ent, t*e PNRC %ust ,e
distinguis*ed +ro% private and pro3t-%a0ing entities. It is t*e %ain
.*ara.teristi. o+ Nationa& So.ieties t*at t*e/ Mare not inspired ,/ t*e desire
+or 3nan.ia& gain ,ut ,/ individua& .o%%it%ent and devotion to a
*u%anitarian purpose +ree&/ .*osen or a..epted as part o+ t*e servi.e t*at
Nationa& So.ieties t*roug* its vo&unteers andNor %e%,ers render to t*e
Co%%unit/.L
O';P

!*e PNRC, as a Nationa& So.iet/ o+ t*e Internationa& Red Cross and Red
Cres.ent #ove%ent, .an neit*er M,e .&assi3ed as an instru%enta&it/ o+ t*e
State, so as not to &ose its .*ara.ter o+ neutra&it/L as 9e&& as its
independen.e, nor stri.t&/ as a private .orporation sin.e it is regu&ated ,/
internationa& *u%anitarian &a9 and is treated as an auAi&iar/ o+ t*e State.
O'<P


"ased on t*e a,ove, t*e s#i $eneris status o+ t*e PNRC is no9 su5.ient&/
esta,&is*ed. A&t*oug* it is neit*er a su,division, agen./, or instru%enta&it/
o+ t*e govern%ent, nor a govern%ent-o9ned or -.ontro&&ed .orporation or a
su,sidiar/ t*ereo+, as su..in.t&/ eAp&ained in t*e e.ision o+ Ju&/ 1@, ')):,
so %u.* so t*at respondent, under t*e e.ision, 9as .orre.t&/ a&&o9ed to
*o&d *is position as C*air%an t*ereo+ .on.urrent&/ 9*i&e *e served as a
Senator, su.* a .on.&usion does not ipso facto i%p&/ t*at t*e PNRC is a
Mprivate .orporationL 9it*in t*e .onte%p&ation o+ t*e provision o+ t*e
Constitution, t*at %ust ,e organiCed under t*e Corporation Code. As
.orre.t&/ %entioned ,/ Justi.e Ro,erto A. A,ad, t*e s#i $eneris .*ara.ter o+
PNRC re?uires us to approa.* .ontroversies invo&ving t*e PNRC on a .ase-
to-.ase ,asis.

In su%, t*e PNRC en-o/s a spe.ia& status as an i%portant a&&/ and auAi&iar/
o+ t*e govern%ent in t*e *u%anitarian 3e&d in a..ordan.e 9it* its
.o%%it%ents under internationa& &a9. !*is Court .annot a&& o+ a sudden
re+use to re.ogniCe its eAisten.e, espe.ia&&/ sin.e t*e issue o+ t*e
.onstitutiona&it/ o+ t*e PNRC C*arter 9as never raised ,/ t*e parties. It
,ears e%p*asiCing t*at t*e PNRC *as responded to a&%ost a&& nationa&
disasters sin.e 1:<>, and is 9ide&/ 0no9n to provide a su,stantia& portion
o+ t*e .ountr/Gs ,&ood re?uire%ents. Its *u%anitarian 9or0 is
unpara&&e&ed. !*e Court s*ou&d not s*a0e its eAisten.e to t*e .ore in an
unti%e&/ and drasti. %anner t*at 9ou&d not on&/ *ave negative
.onse?uen.es to t*ose 9*o depend on it in ti%es o+ disaster and ar%ed
*osti&ities ,ut a&so *ave adverse eHe.ts on t*e i%age o+ t*e P*i&ippines in
t*e internationa& .o%%unit/. !*e se.tions o+ t*e PNRC C*arter t*at 9ere
de.&ared void %ust t*ere+ore sta/.

1: | P a g e
74ERE6ORE, pre%ises .onsidered, respondent Ri.*ard J. 8ordonGs #otion
+or C&ari3.ation andNor +or Re.onsideration and %ovant-intervenor
PNRCGs #otion +or Partia& Re.onsideration o+ t*e e.ision in 8.R. No.
1>@;@'dated Ju&/ 1@, ')): are 8RAN!E. !*e .onstitutiona&it/ o+ R.A. No.
:@, as a%ended, t*e .*arter o+ t*e P*i&ippine Nationa& Red Cross, 9as not
raised ,/ t*e parties as an issue and s*ou&d not *ave ,een passed upon ,/
t*is Court. !*e stru.ture o+ t*e PNRC iss#i $eneris5 ,eing neit*er stri.t&/
private nor pu,&i. in nature. R.A. No. :@ re%ains va&id and .onstitutiona& in
its entiret/. !*e dispositive portion o+ t*e e.ision s*ou&d t*ere+ore
,e #OI6IE ,/ de&eting t*e se.ond senten.e, to no9 read as +o&&o9s:

74ERE6ORE, 9e de.&are t*at t*e o5.e o+ t*e C*air%an o+ t*e P*i&ippine
Nationa& Red Cross is not a govern%ent o5.e or an o5.e in a govern%ent-
o9ned or .ontro&&ed .orporation +or purposes o+ t*e pro*i,ition in Se.tion
1;, Arti.&e VI o+ t*e 1:(> Constitution.


SO ORERE.
XXXXXXXXXXXXXXXX
G.R. No. L1!;7 Se<te7=e4 Q1, 1"?:
PALA$, INC. a./ ALBER# ONS#O##, petitioner,
vs.
(ACOBO C. CLA%E, P4e23/e.t3al Execut3Be A2232ta.t NA#IONAL
)O&SING A&#)ORI#$ a./ NA,ARIO '&MPI# respondents.
Santos% Calcetas-Santos 6 Geronimo La7 18ce for petitioner.
Wilfreo 3. +i!on for private responent.

MELENCIO1)ERRERA, J.*
!*e Reso&ution, dated #a/ ', 1:(), issued ,/ Presidentia& EAe.utive
Assistant Ja.o,o C&ave in O.P. Case No. 1<@:, dire.ting petitioners Pa&a/,
In.. and A&,erto Onstott -oint&/ and severa&&/, to re+und to private
respondent, NaCario u%pit, t*e a%ount o+ P1;,>''.@) 9it* 1'T interest
per annu%, as reso&ved ,/ t*e Nationa& 4ousing Aut*orit/ in its Reso&ution
o+ Ju&/ 1), 1:>: in Case No. '1=>, as 9e&& as t*e Reso&ution o+ O.to,er '(,
1:() den/ing petitionersY #otion +or Re.onsideration o+ said Reso&ution o+
#a/ ', 1:(), are ,eing assai&ed in t*is petition.
On #ar.* '(, 1:=@, petitioner Pa&a/, In.., t*roug* its President, A&,ert
Onstott eAe.uted in +avor o+ private respondent, NaCario u%pit, a Contra.t
to Se&& a par.e& o+ Land 1Lot No. (, "&o.0 IV2 o+ t*e Crestvie9 4eig*ts
Su,division in Antipo&o, RiCa&, 9it* an area o+ 1,1=@ s?uare %eters, -
.overed ,/ !C! No. :)<@<, and o9ned ,/ said .orporation. !*e sa&e pri.e
9as P';,;)).)) 9it* :T interest per annu%, pa/a,&e 9it* a do9npa/%ent
o+ P<,==).)) and %ont*&/ insta&&%ents o+ P'<=.<' unti& +u&&/ paid.
Paragrap* = o+ t*e .ontra.t provided +or auto%ati. eAtra-udi.ia& res.ission
upon de+au&t in pa/%ent o+ an/ %ont*&/ insta&&%ent a+ter t*e &apse o+ :)
da/s +ro% t*e eApiration o+ t*e gra.e period o+ one %ont*, 9it*out need o+
noti.e and 9it* +or+eiture o+ a&& insta&&%ents paid.
Respondent u%pit paid t*e do9npa/%ent and severa& insta&&%ents
a%ounting to P1;,>''.@). !*e &ast pa/%ent 9as %ade on e.e%,er @,
1:=> +or insta&&%ents up to Septe%,er 1:=>.
On #a/ 1), 1:>;, or a&%ost siA 1=2 /ears &ater, private respondent 9rote
petitioner oHering to update a&& *is overdue a..ounts 9it* interest, and
see0ing its 9ritten .onsent to t*e assign%ent o+ *is rig*ts to a .ertain
Lourdes iCon. 4e +o&&o9ed t*is up 9it* anot*er &etter dated June '), 1:>;
reiterating t*e sa%e re?uest. Rep&/ing petitioners in+or%ed respondent t*at
*is Contra.t to Se&& *ad &ong ,een res.inded pursuant to paragrap* = o+ t*e
.ontra.t, and t*at t*e &ot *ad a&read/ ,een reso&d.
Vuestioning t*e va&idit/ o+ t*e res.ission o+ t*e .ontra.t, respondent 3&ed a
&etter .o%p&aint 9it* t*e Nationa& 4ousing Aut*orit/ 1N4A2 +or
re.onve/an.e 9it* an a&tenative pra/er +or re+und 1Case No. '1=>2. In a
Reso&ution, dated Ju&/ 1), 1:>:, t*e N4A, 3nding t*e res.ission void in t*e
a,sen.e o+ eit*er -udi.ia& or notaria& de%and, ordered Pa&a/, In.. and
A&,erto Onstott in *is .apa.it/ as President o+ t*e .orporation, -oint&/ and
severa&&/, to re+und i%%ediate&/ to NaCario u%pit t*e a%ount o+
P1;,>''.@) 9it* 1'T interest +ro% t*e 3&ing o+ t*e .o%p&aint on Nove%,er
(, 1:><. PetitionersY #otion +or Re.onsideration o+ said Reso&ution 9as
denied ,/ t*e N4A in its Order dated O.to,er ';, 1:>:.
1
On appea& to t*e O5.e o+ t*e President, upon t*e a&&egation t*at t*e N4A
Reso&ution 9as .ontrar/ to &a9 1O.P. Case No. 1<@:2, respondent
Presidentia& EAe.utive Assistant, on #a/ ', 1:(), a5r%ed t*e Reso&ution o+
t*e N4A. Re.onsideration soug*t ,/ petitioners 9as denied +or &a.0 o+
%erit. !*us, t*e present petition 9*erein t*e +o&&o9ing issues are raised:
I
7*et*er noti.e or de%and is not %andator/ under t*e .ir.u%stan.es and,
t*ere+ore, %a/ ,e dispensed 9it* ,/ stipu&ation in a .ontra.t to se&&.
II
7*et*er petitioners %a/ ,e *e&d &ia,&e +or t*e re+und o+ t*e insta&&%ent
pa/%ents %ade ,/ respondent NaCario #. u%pit.
III
7*et*er t*e do.trine o+ pier.ing t*e vei& o+ .orporate 3.tion *as app&i.ation
to t*e .ase at ,ar.
IV
7*et*er respondent Presidentia& EAe.utive Assistant .o%%itted grave
a,use o+ dis.retion in up*o&ding t*e de.ision o+ respondent N4A *o&ding
petitioners so&idari&/ &ia,&e +or t*e re+und o+ t*e insta&&%ent pa/%ents %ade
,/ respondent NaCario #. u%pit t*ere,/ den/ing su,stantia& -usti.e to t*e
petitioners, parti.u&ar&/ petitioner Onstott
7e issued a !e%porar/ Restraining Order on 6e, 11, 1:(1 en-oining t*e
en+or.e%ent o+ t*e ?uestioned Reso&utions and o+ t*e 7rit o+ EAe.ution t*at
*ad ,een issued on e.e%,er ', 1:(). On O.to,er '(, 1:(1, 9e dis%issed
t*e petition ,ut upon petitionersY %otion, re.onsidered t*e dis%issa& and
gave due .ourse to t*e petition on #ar.* 1@, 1:('.
On t*e 3rst issue, petitioners %aintain t*at it 9as -usti3ed in .an.e&&ing t*e
.ontra.t to se&& 9it*out prior noti.e or de%and upon respondent in vie9 o+
paragrap* = t*ereo+ 9*i.* provides-
=. !*at in .ase t*e "EKER +a&&s to satis+/ an/ %ont*&/ insta&&%ent or an/
ot*er pa/%ents *erein agreed upon, t*e "EKER s*a&& ,e granted a %ont*
o+ gra.e 9it*in 9*i.* to %a0e t*e pa/%ent o+ t*e t in arrears toget*er 9it*
t*e one .orresponding to t*e said %ont* o+ gra.e. -It s*a&& ,e understood,
*o9ever, t*at s*ou&d t*e %ont* o+ gra.e *erein granted to t*e "EKER
') | P a g e
eApire, 9it*out t*e pa/%ent Z .orresponding to ,ot* %ont*s *aving ,een
satis3ed, an interest o+ ten 11)T2 per .ent per annu% s*a&& ,e .*arged on
t*e a%ounts t*e "EKER s*ou&d *ave paidI it is understood +urt*er, t*at
s*ou&d a period o+ NINE!K 1:)2 AKS e&apse to ,egin +ro% t*e eApiration o+
t*e %ont* o+ gra.e *erein,e+ore %entioned, and t*e "EKER s*a&& not *ave
paid a&& t*e a%ounts t*at t*e "EKER s*ou&d *ave paid 9it* t*e
.orresponding interest up to t*e date, t*e SELLER s*a&& *ave t*e rig*t to
de.&are t*is .ontra.t .an.e&&ed and o+ no eHe.t 9it*out noti.e, and as a
.onse?uen.e t*ereo+, t*e SELLER %a/ dispose o+ t*e &otN&ots .overed ,/
t*is Contra.t in +avor o+ ot*er persons, as i+ t*is .ontra.t *ad never ,een
entered into. In .ase o+ su.* .an.e&&ation o+ t*is Contra.t, a&& t*e a%ounts
9*i.* %a/ *ave ,een paid ,/ t*e "EKER in a..ordan.e 9it* t*e
agree%ent, toget*er 9it* a&& t*e i%prove%ents %ade on t*e pre%ises,
s*a&& ,e .onsidered as rents paid +or t*e use and o..upation o+ t*e a,ove
%entioned pre%ises and +or &i?uidated da%ages suHered ,/ virtue o+ t*e
+ai&ure o+ t*e "EKER to +u&3&& *is part o+ t*is agree%ent : and t*e "EKER
*ere,/ renoun.es *is rig*t to de%and or re.&ai% t*e return o+ t*e sa%e
and +urt*er o,&igates pea.e+u&&/ to va.ate t*e pre%ises and de&iver t*e
sa%e to t*e SELLER.
7e&& sett&ed is t*e ru&e, as *e&d in previous -urispruden.e,
Q
t*at -udi.ia&
a.tion +or t*e res.ission o+ a .ontra.t is not ne.essar/ 9*ere t*e .ontra.t
provides t*at it %a/ ,e revo0ed and .an.e&&ed +or vio&ation o+ an/ o+ its
ter%s and .onditions. 4o9ever, even in t*e .ited .ases, t*ere 9as at &east
a 9ritten noti.e sent to t*e de+au&ter in+or%ing *i% o+ t*e res.ission. As
stressed in 2niversit) of the Philippines vs. Walfrio e los An$eles
:
t*e a.t
o+ a part/ in treating a .ontra.t as .an.e&&ed s*ou&d ,e %ade 0no9n to t*e
ot*er. 7e ?uote t*e pertinent eA.erpt:
O+ .ourse, it %ust ,e understood t*at t*e a.t o+ a part/ in treating a
.ontra.t as .an.e&&ed or reso&ved in a..ount o+ in+ra.tions ,/ t*e ot*er
.ontra.ting part/ m#st be mae kno7n to the other an is al7a)s
provisional bein$ ever s#b"ect to scr#tin) an revie7 b) the proper co#rt. 0f
the other part) enies that rescission is "#sti*e it is free to resort to
"#icial action in its o7n behalf% an brin$ the matter to co#rt. !*en, s*ou&d
t*e .ourt, a+ter due *earing, de.ide t*at t*e reso&ution o+ t*e .ontra.t 9as
not 9arranted, t*e responsi,&e part/ 9i&& ,e senten.ed to da%agesI in t*e
.ontrar/ .ase, t*e reso&ution 9i&& ,e a5r%ed, and t*e .onse?uent
inde%nit/ a9arded to t*e part/ pre-udi.ed.
In ot*er 9ords, t*e part/ 9*o dee%s t*e .ontra.t vio&ated %a/ .onsider it
reso&ved or res.inded, and a.t a..ording&/, 9it*out previous .ourt a.tion,
,ut it procees at its o7n risk. 6or it is on&/ t*e 3na& -udg%ent o+ t*e
.orresponding .ourt t*at 9i&& .on.&usive&/ and 3na&&/ sett&e 9*et*er t*e
a.tion ta0en 9as or 9as not .orre.t in &a9. "ut t*e &a9 de3nite&/ does not
re?uire t*at t*e .ontra.ting part/ 9*o ,e&ieves itse&+ in-ured %ust 3rst 3&e
suit and 9ait +or a -udg%ent ,e+ore ta0ing eAtra-udi.ia& steps to prote.t its
interest. Ot*er9ise, t*e part/ in-ured ,/ t*e ot*erYs ,rea.* 9i&& *ave to
passive&/ sit and 9at.* its da%ages a..u%u&ate during t*e penden./ o+ t*e
suit unti& t*e 3na& -udg%ent o+ res.ission is rendered 9*en t*e &a9 itse&+
re?uires t*at *e s*ou&d eAer.ise due di&igen.e to %ini%iCe its o9n da%ages
1Civi& Code, Arti.&e '');2.
7e see no .onUi.t ,et9een t*is ru&ing and t*e previous -urispruden.e o+
t*is Court invo0ed ,/ respondent de.&aring t*at -udi.ia& a.tion is ne.essar/
+or t*e reso&ution o+ a re.ipro.a& o,&igation 1O.e-o PereC Z Co., vs.
Internationa& "an0ing Corp., ;> P*i&. =;1I Repu,&i. vs. 4ospita& de San Juan
e ios, et a&., (< P*i& (')2 sin.e in ever) case 7here the e9tra"#icial
resol#tion is conteste onl) the *nal a7ar of the co#rt of competent
"#risiction can concl#sivel) settle 7hether the resol#tion 7as proper or
not. It is in t*is sense t*at -udi.ia& a.tion 9in ,e ne.essar/, as 9it*out it,
t*e eAtra-udi.ia& reso&ution 9i&& re%ain .ontesta,&e and su,-e.t to -udi.ia&
inva&idation un&ess atta.0 t*ereon s*ou&d ,e.o%e ,arred ,/ a.?uies.ense,
estoppe& or pres.ription.
6ears *ave ,een eApressed t*at a stipu&ation providing +or a uni&atera&
res.ission in .ase o+ ,rea.* o+ .ontra.t %a/ render nugator/ t*e genera&
ru&e re?uiring -udi.ia& a.tion 1v. 6ootnote, Padi&&a Civi& La9, Civi& Code Anno.,
1:=> ed. Vo&. IV, page 1<)2 ,ut, as a&read/ o,served, in case of ab#se or
error b) the resciner the other part) is not barre from :#estionin$ in
co#rt s#ch ab#se or error% the practical e.ect of the stip#lation bein$
merel) to transfer to the efa#lter the initiative of instit#tin$ s#it% instea
of the resciner 1E%p*asis supp&ied2.
O+ si%i&ar i%port is t*e ru&ing in 4era vs. ;acante
@
, reading:
A stipu&ation entit&ing one part/ to ta0e possession o+ t*e &and and ,ui&ding
i+ t*e ot*er part/ vio&ates t*e .ontra.t does not e9 propio vi$ore .on+er
upon t*e +or%er t*e rig*t to ta0e possession t*ereo+ i+ o,-e.ted to 9it*out
-udi.ia& intervention and deter%ination.
!*is 9as reiterated in <#l#eta vs. Mariano
!
9*ere 9e *e&d t*at eAtra-udi.ia&
res.ission *as &ega& eHe.t 9*ere t*e ot*er part/ does not oppose
it.

7*ere it is o,-e.ted to, a -udi.ia& deter%ination o+ t*e issue is sti&&
ne.essar/.
In ot*er 9ords, reso&ution o+ re.ipro.a& .ontra.ts %a/ ,e %ade
eAtra-udi.ia&&/ un&ess su..ess+u&&/ i%pugned in Court. I+ t*e de,tor i%pugns
t*e de.&aration, it s*a&& ,e su,-e.t to -udi.ia& deter%ination.
7
In t*is .ase, private respondent *as denied t*at res.ission is -usti3ed and
*as resorted to -udi.ia& a.tion. It is no9 +or t*e Court to deter%ine 9*et*er
reso&ution o+ t*e .ontra.t ,/ petitioners 9as 9arranted.
7e *o&d t*at reso&ution ,/ petitioners o+ t*e .ontra.t 9as ineHe.tive and
inoperative against private respondent +or &a.0 o+ noti.e o+ reso&ution, as
*e&d in t*e 2.P. vs. An$eles case% s#pra
Petitioner re&ies on &orralba vs. +e los An$eles
?
9*ere it 9as *e&d t*at
[t*ere 9as no .ontra.t to res.ind in .ourt ,e.ause +ro% t*e %o%ent t*e
petitioner de+au&ted in t*e ti%e&/ pa/%ent o+ t*e insta&&%ents, t*e .ontra.t
,et9een t*e parties 9as dee%ed ipso facto res.inded.[ 4o9ever, it s*ou&d
,e noted t*at even in t*at .ase noti.e in 9riting 9as %ade to t*e vendee o+
t*e .an.e&&ation and annu&%ent o+ t*e .ontra.t a&t*oug* t*e .ontra.t
entit&ed t*e se&&er to i%%ediate repossessing o+ t*e &and upon de+au&t ,/
t*e ,u/er.
!*e indispensa,i&it/ o+ noti.e o+ .an.e&&ation to t*e ,u/er 9as to ,e &ater
unders.ored in Repu,&i. A.t No. =@@1 entit&ed [An A.t to Provide Prote.tion
to "u/ers o+ Rea& Estate on Insta&&%ent Pa/%ents.[ 9*i.* too0 eHe.t on
Septe%,er 1<, 1:>', 9*en it spe.i3.a&&/ provided:
'1 | P a g e
Se.. ;1,2 ... t*e a.tua& .an.e&&ation o+ t*e .ontra.t s*a&& ta0e p&a.e a+ter
t*irt/ da/s +ro% re.eipt ,/ t*e ,u/er o+ t*e notice of cancellation or t*e
de%and +or res.ission o+ t*e .ontra.t ,/ a notaria& a.t and upon +u&&
pa/%ent o+ t*e .as* surrender va&ue to t*e ,u/er. 1E%p*asis supp&ied2.
!*e .ontention t*at private respondent *ad 9aived *is rig*t to ,e noti3ed
under paragrap* = o+ t*e .ontra.t is neit*er %eritorious ,e.ause it 9as a
.ontra.t o+ ad*esion, a standard +or% o+ petitioner .orporation, and private
respondent *ad no +reedo% to stipu&ate. A 9aiver %ust ,e .ertain and
une?uivo.a&, and inte&&igent&/ %adeI su.* 9aiver +o&&o9s on&/ 9*ere &i,ert/
o+ .*oi.e *as ,een +u&&/ a..orded.
"
#oreover, it is a %atter o+ pu,&i. po&i./
to prote.t ,u/ers o+ rea& estate on insta&&%ent pa/%ents against onerous
and oppressive .onditions. 7aiver o+ noti.e is one su.* onerous and
oppressive .ondition to ,u/ers o+ rea& estate on insta&&%ent pa/%ents.
Regarding t*e se.ond issue on re+und o+ t*e insta&&%ent pa/%ents %ade ,/
private respondent. Arti.&e 1;(@ o+ t*e Civi& Code provides:
AR!. 1;(@. Res.ission .reates t*e o,&igation to return t*e t*ings 9*i.* 9ere
t*e o,-e.t o+ t*e .ontra.t, toget*er 9it* t*eir +ruits, and t*e pri.e 9it* its
interestI .onse?uent&/, it .an ,e .arried out on&/ 9*en *e 9*o de%ands
res.ission .an return 9*atever *e %a/ ,e o,&iged to restore.
Neit*er s*a% res.ission ta0e p&a.e 9*en t*e t*ings 9*i.* are t*e o,-e.t o+
t*e .ontra.t are &ega&&/ in t*e possession o+ t*ird persons 9*o did not a.t in
,ad +ait*.
In t*is .ase, inde%nit/ +or da%ages %a/ ,e de%anded +ro% t*e person
.ausing t*e &oss.
As a .onse?uen.e o+ t*e reso&ution ,/ petitioners, rig*ts to t*e &ot s*ou&d
,e restored to private respondent or t*e sa%e s*ou&d ,e rep&a.ed ,/
anot*er a..epta,&e &ot. 4o9ever, .onsidering t*at t*e propert/ *ad a&read/
,een so&d to a t*ird person and t*ere is no eviden.e on re.ord t*at ot*er
&ots are sti&& avai&a,&e, private respondent is entit&ed to t*e re+und o+
insta&&%ents paid p&us interest at t*e &ega& rate o+ 1'T .o%puted +ro% t*e
date o+ t*e institution o+ t*e a.tion.
1;
It 9ou&d ,e %ost ine?uita,&e i+
petitioners 9ere to ,e a&&o9ed to retain private respondentYs pa/%ents and
at t*e sa%e ti%e appropriate t*e pro.eeds o+ t*e se.ond sa&e to anot*er.
7e .o%e no9 to t*e t*ird and +ourt* issues regarding t*e persona& &ia,i&it/
o+ petitioner Onstott 9*o 9as %ade -oint&/ and severa&&/ &ia,&e 9it*
petitioner .orporation +or re+und to private respondent o+ t*e tota& a%ount
t*e &atter *ad paid to petitioner .o%pan/. It is ,asi. t*at a .orporation is
invested ,/ &a9 9it* a persona&it/ separate and distin.t +ro% t*ose o+ t*e
persons .o%posing it as 9en as +ro% t*at o+ an/ ot*er &ega& entit/ to 9*i.*
it %a/ ,e re&ated.
11
As a genera& ru&e, a .orporation %a/ not ,e %ade to
ans9er +or a.ts or &ia,i&ities o+ its sto.0*o&ders or t*ose o+ t*e &ega& entities
to 9*i.* it %a/ ,e .onne.ted and vi.e versa. 4o9ever, t*e vei& o+
.orporate 3.tion %a/ ,e pier.ed 9*en it is used as a s*ie&d to +urt*er an
end su,versive o+ -usti.e
1Q
I or +or purposes t*at .ou&d not *ave ,een
intended ,/ t*e &a9 t*at .reated it
1:
I or to de+eat pu,&i. .onvenien.e,
-usti+/ 9rong, prote.t +raud, or de+end .ri%e.
1@
I or to perpetuate +raud or
.on+use &egiti%ate issues
1!
I or to .ir.u%vent t*e &a9 or perpetuate
de.eption
1
I or as an a&ter ego, ad-un.t or ,usiness .onduit +or t*e so&e
,ene3t o+ t*e sto.0*o&ders.
17
7e 3nd no ,adges o+ +raud on petitionersY part. !*e/ *ad &itera&&/ re&ied,
a&,eit %ista0en&/, on paragrap* = 1supra2 o+ its .ontra.t 9it* private
respondent 9*en it res.inded t*e .ontra.t to se&& eAtra-udi.ia&&/ and *ad
so&d it to a t*ird person.
In t*is .ase, petitioner Onstott 9as %ade &ia,&e ,e.ause *e 9as t*en t*e
President o+ t*e .orporation and *e a to ,e t*e .ontro&&ing sto.0*o&der. No
su5.ient proo+ eAists on re.ord t*at said petitioner used t*e .orporation to
de+raud private respondent. 4e .annot, t*ere+ore, ,e %ade persona&&/
&ia,&e -ust ,e.ause *e [appears to ,e t*e .ontro&&ing sto.0*o&der[. #ere
o9ners*ip ,/ a sing&e sto.0*o&der or ,/ anot*er .orporation is not o+ itse&+
su5.ient ground +or disregarding t*e separate .orporate persona&it/.
1?
In
t*is respe.t t*en, a %odi3.ation o+ t*e Reso&ution under revie9 is .a&&ed +or.
74ERE6ORE, t*e ?uestioned Reso&ution o+ respondent pu,&i. o5.ia&, dated
#a/ ', 1:(), is *ere,/ %odi3ed. Petitioner Pa&a/, In.. is dire.ted to re+und
to respondent NaCario #. u%pit t*e a%ount o+ P1;,>''.@), 9it* interest
at t9e&ve 11'T2 per.ent per annu% +ro% Nove%,er (, 1:><, t*e date o+
t*e 3&ing o+ t*e Co%p&aint. !*e te%porar/ Restraining Order *ereto+ore
issued is *ere,/ &i+ted.
No .osts.
SO ORERE.
XXXXXXXXX
A/7. Matte4 No. R11?11P (ul> :1, 1"?7
A'ELIO C. CR&,, .o%p&ainant,
vs.
R&I#ERIO L. 'ALISA$, 'e<ut> She43F, R#C, Ma.3la, respondents.
R E S O L E ! I O N

FERNAN, J.*
In a s9orn .o%p&aint dated Ju&/ ';, 1:(<, Ade&io C. CruC .*arged Vuiterio L.
a&isa/, Senior eput/ S*eriH o+ #ani&a, 9it* [%a&+easan.e in o5.e,
.orrupt pra.ti.es and serious irregu&arities[ a&&eged&/ .o%%itted as +o&&o9s:
1. Respondent s*eriH atta.*ed andNor &evied t*e %one/ ,e&onging to
.o%p&ainant CruC 9*en *e 9as not *i%se&+ t*e -udg%ent de,tor in t*e 3na&
-udg%ent o+ NLRC NCR Case No. (-1';(:-:1 soug*t to ,e en+or.ed ,ut
rat*er t*e .o%pan/ 0no9n as [Vua&itrans Li%ousine Servi.e, In..,[ a du&/
registered .orporationI and,
'. Respondent &i0e9ise .aused t*e servi.e o+ t*e a&ias 9rit o+ eAe.ution
upon .o%p&ainant 9*o is a resident o+ Pasa/ Cit/, despite 0no9&edge t*at
*is territoria& -urisdi.tion .overs #ani&a on&/ and does not eAtend to Pasa/
Cit/.
In *is Co%%ents, respondent a&isa/ eAp&ained t*at 9*en *e garnis*ed
.o%p&ainantYs .as* deposit at t*e P*i&trust ,an0, *e 9as %ere&/ per+or%ing
a %inisteria& dut/. 7*i&e it is true t*at said 9rit 9as addressed to Vua&itrans
Li%ousine Servi.e, In.., /et it is a&so a +a.t t*at .o%p&ainant *ad eAe.uted
an a5davit ,e+ore t*e Pasa/ Cit/ assistant 3s.a& stating t*at *e is t*e
o9nerNpresident o+ said .orporation and, ,e.ause o+ t*at de.&aration, t*e
.ounse& +or t*e p&aintiH in t*e &a,or .ase advised *i% to serve noti.e o+
garnis*%ent on t*e P*i&trust ,an0.
'' | P a g e
On Nove%,er 1', 1:(<, t*is .ase 9as re+erred to t*e EAe.utive Judge o+ t*e
Regiona& !ria& Court o+ #ani&a +or investigation, report and re.o%%endation.
Prior to t*e ter%ination o+ t*e pro.eedings, *o9ever, .o%p&ainant eAe.uted
an a5davit o+ desistan.e stating t*at *e is no &onger interested in
prose.uting t*e .ase against respondent a&isa/ and t*at it 9as -ust a
[%isunderstanding[ ,et9een t*e%. Epon respondentYs %otion, t*e
EAe.utive Judge issued an order dated #a/ ':, 1:(= re.o%%ending t*e
dis%issa& o+ t*e .ase.
It *as ,een *e&d t*at t*e desistan.e o+ .o%p&ainant does not pre.&ude t*e
ta0ing o+ dis.ip&inar/ a.tion against respondent. Neit*er does it dissuade
t*e Court +ro% i%posing t*e appropriate .orre.tive san.tion. One 9*o *o&ds
a pu,&i. position, espe.ia&&/ an o5.e dire.t&/ .onne.ted 9it* t*e
ad%inistration o+ -usti.e and t*e eAe.ution o+ -udg%ents, %ust at a&& ti%es
,e +ree +ro% t*e appearan.e o+ i%propriet/.
1
7e *o&d t*at respondentYs a.tuation in en+or.ing a -udg%ent against
.o%p&ainant 9*o is not t*e -udg%ent de,tor in t*e .ase .a&&s +or
dis.ip&inar/ a.tion. Considering t*e %inisteria& nature o+ *is dut/ in
en+or.ing 9rits o+ eAe.ution, 9*at is in.u%,ent upon *i% is to ensure t*at
on&/ t*at portion o+ a de.ision ordained or de.reed in t*e dispositive part
s*ou&d ,e t*e su,-e.t o+ eAe.ution.
'
No %ore, no &ess. !*at t*e tit&e o+ t*e
.ase spe.i3.a&&/ na%es .o%p&ainant as one o+ t*e respondents is o+ no
%o%ent as eAe.ution %ust .on+or% to t*at dire.ted in t*e dispositive
portion and not in t*e tit&e o+ t*e .ase.
!*e tenor o+ t*e NLRC -udg%ent and t*e i%p&e%enting 9rit is .&ear enoug*.
It dire.ted Vua&itrans Li%ousine Servi.e, In.. to reinstate t*e dis.*arged
e%p&o/ees and pa/ t*e% +u&& ,a.09ages. Respondent, *o9ever, .*ose to
[pier.e t*e vei& o+ .orporate entit/[ usurping a po9er ,e&onging to t*e .ourt
and assu%ed i%provident&/ t*at sin.e t*e .o%p&ainant is t*e
o9nerNpresident o+ Vua&itrans Li%ousine Servi.e, In.., t*e/ are one and t*e
sa%e. It is a 9e&&-sett&ed do.trine ,ot* in &a9 and in e?uit/ t*at as a &ega&
entit/, a .orporation *as a persona&it/ distin.t and separate +ro% its
individua& sto.0*o&ders or %e%,ers. !*e %ere +a.t t*at one is president o+
a .orporation does not render t*e propert/ *e o9ns or possesses t*e
propert/ o+ t*e .orporation, sin.e t*e president, as individua&, and t*e
.orporation are separate entities.
;
Anent t*e .*arge t*at respondent eA.eeded *is territoria& -urisdi.tion,
su5.e it to sa/ t*at t*e 9rit o+ eAe.ution soug*t to ,e i%p&e%ented 9as
dated Ju&/ :, 1:(<, or prior to t*e issuan.e o+ Ad%inistrative Cir.u&ar No. 1'
9*i.* restrains a s*eriH +ro% en+or.ing a .ourt 9rit outside *is territoria&
-urisdi.tion 9it*out 3rst noti+/ing in 9riting and see0ing t*e assistan.e o+
t*e s*eriH o+ t*e p&a.e 9*ere eAe.ution s*a&& ta0e p&a.e.
ACCORIN8LK, 9e 3nd Respondent eput/ S*eriH Vuiterio L. a&isa/
NE8LI8EN! in t*e en+or.e%ent o+ t*e 9rit o+ eAe.ution in NLRC Case-No. (-
1';(:-:1, and a 3ne e?uiva&ent to t*ree O;P %ont*s sa&ar/ is *ere,/
i%posed 9it* a stern 9arning t*at t*e .o%%ission o+ t*e sa%e or si%i&ar
oHense in t*e +uture 9i&& %erit a *eavier pena&t/. Let a .op/ o+ t*is
Reso&ution ,e 3&ed in t*e persona& re.ord o+ t*e respondent.
SO ORERE.
XXXXXXXX
G.R. No. L17Q A<43l 1?, 1"?"
(OSE REMO, (R., petitioner,
vs.
#)E )ON. IN#ERME'IA#E APPELLA#E CO&R# a./ E.B. MARC)A
#RANSPOR# COMPAN$, INC., 4e<4e2e.te/ => APIFANIO B.
MARC)A, respondents.
1rbos% Cab#sora% +#mlao 6 Sta. Ana for petitioner.

GANCA$CO, J.*
A .orporation is an entit/ separate and distin.t +ro% its sto.0*o&ders. 7*i&e
not in +a.t and in rea&it/ a person, t*e &a9 treats a .orporation as t*oug* it
9ere a person ,/ pro.ess o+ 3.tion or ,/ regarding it as an arti3.ia& person
distin.t and separate +ro% its individua& sto.0*o&ders. 1
4o9ever, t*e .orporate 3.tion or t*e notion o+ &ega& entit/ %a/ ,e
disregarded 9*en it [is used to de+eat pu,&i. .onvenien.e, -usti+/ 9rong,
prote.t +raud, or de+end .ri%e[ in 9*i.* instan.es [t*e &a9 9i&& regard t*e
.orporation as an asso.iation o+ persons, or in .ase o+ t9o .orporations, 9i&&
%erge t*e% into one.[ !*e .orporate 3.tion %a/ a&so ,e disregarded 9*en
it is t*e [%ere a&ter ego or ,usiness .onduit o+ a person.[ Q !*ere are %an/
o..asions 9*en t*is Court pier.ed t*e .orporate vei& ,e.ause o+ its use to
prote.t +raud and to -usti+/ 9rong. : !*e *erein petition +or revie9 o+ a.
reso&ution o+ t*e Inter%ediate Appe&&ate Court dated 6e,ruar/ (, 1:(<
see0ing t*e reversa& t*ereo+ and t*e reinstate%ent o+ its ear&ier de.ision
dated June ;), 1:(; in AC-8.R. No. =(<:=-R @ .a&&s +or t*e app&i.ation o+
t*e +oregoing prin.ip&es.
In t*e &atter part o+ e.e%,er, 1:>> t*e ,oard o+ dire.tors o+ A0ron
Custo%s "ro0erage Corporation 1*ereina+ter re+erred to as A0ron2,
.o%posed o+ petitioner Jose Re%o, Jr., Ernesto "aSares, 6e&i.iano Coprada,
Je%ina Coprada, and ario PunCa&an 9it* Lu.ia La.aste as Se.retar/,
adopted a reso&ution aut*oriCing t*e pur.*ase o+ t*irteen 11;2 tru.0s +or
use in its ,usiness to ,e paid out o+ a &oan t*e .orporation %a/ se.ure +ro%
an/ &ending institution. !
6e&i.iano Coprada, as President and C*air%an o+ A0ron, pur.*ased t*irteen
tru.0s +ro% private respondent on Januar/ '@, 1:>( +or and in .onsideration
o+ P@'@,))).)) as eviden.ed ,/ a deed o+ a,so&ute sa&e. In a side
agree%ent o+ t*e sa%e date, t*e parties agreed on a do9npa/%ent in t*e
a%ount o+ P@),))).)) and t*at t*e ,a&an.e o+ P<>@,))).)) s*a&& ,e paid
9it*in siAt/ 1=)2 da/s +ro% t*e date o+ t*e eAe.ution o+ t*e agree%ent. !*e
parties a&so agreed t*at unti& said ,a&an.e is +u&&/ paid, t*e do9n pa/%ent
o+ P@),))).)) s*a&& a..rue as renta&s o+ t*e 1; tru.0sI and t*at i+ A0ron +ai&s
to pa/ t*e ,a&an.e 9it*in t*e period o+ =) da/s, t*en t*e ,a&an.e s*a&&
.onstitute as a .*atte& %ortgage &ien .overing said .argo tru.0s and t*e
parties %a/ a&&o9 an eAtension o+ ;) da/s and t*erea+ter private
respondent %a/ as0 +or a revo.ation o+ t*e .ontra.t and t*e re.onve/an.e
o+ a&& said tru.0s. 7
!*e o,&igation is +urt*er se.ured ,/ a pro%issor/ note eAe.uted ,/ Coprada
in +avor o+ A0ron. It is stated in t*e pro%issor/ note t*at t*e ,a&an.e s*a&&
,e paid +ro% t*e pro.eeds o+ a &oan o,tained +ro% t*e eve&op%ent "an0
o+ t*e P*i&ippines 1"P2 9it*in siAt/ 1=)2 da/s. ? A+ter t*e &apse o+ :) da/s,
private respondent tried to .o&&e.t +ro% Coprada ,ut t*e &atter pro%ised to
pa/ on&/ upon t*e re&ease o+ t*e "P &oan. Private respondent sent Coprada
'; | P a g e
a &etter o+ de%and dated #a/ 1), 1:>(. " In *is rep&/ to t*e said &etter,
Coprada reiterated t*at *e 9as app&/ing +or a &oan +ro% t*e "P +ro% t*e
pro.eeds o+ 9*i.* pa/%ent o+ t*e o,&igation s*a&& ,e %ade. 1;
#ean9*i&e, t9o o+ t*e tru.0s 9ere so&d under a pacto e retro sa&e to a
.ertain #r. "ais o+ t*e Perpetua& Loans and Savings "an0 at "a.&aran. !*e
sa&e 9as aut*oriCed ,/ a ,oard reso&ution %ade in a %eeting *e&d on #ar.*
1@, 1:>(. 11
Epon in?uir/, private respondent +ound t*at no &oan app&i.ation 9as ever
3&ed ,/ A0ron 9it* "P. 1Q
In t*e %eanti%e, A0ron paid renta&s o+ P@)).)) a da/ pursuant to a
su,se?uent agree%ent, +ro% Apri& '>, 1:>( 1t*e end o+ t*e :)-da/ period
to pa/ t*e ,a&an.e2 to #a/ ;1, 1:>(. !*erea+ter, no %ore renta& pa/%ents
9ere %ade.
On June 1>, 1:>(, Coprada 9rote private respondent ,egging +or a gra.e
period o+ unti& t*e end o+ t*e %ont* to pa/ t*e ,a&an.e o+ t*e pur.*ase
pri.eI t*at *e 9i&& update t*e renta&s 9it*in t*e 9ee0I and in .ase *e +ai&s,
t*en *e 9i&& return t*e 1; units s*ou&d private respondent e&e.t to get ,a.0
t*e sa%e. 1: Private respondent, t*roug* .ounse&, 9rote A0ron on August
1, 1:>( de%anding t*e return o+ t*e 1; tru.0s and t*e pa/%ent o+
P'@,))).)) ,a.0 renta&s .overing t*e period +ro% June 1 to August 1,
1:>(. 1@
Again, Coprada 9rote private respondent on August (, 1:>( as0ing +or
anot*er gra.e period o+ up to August ;1, 1:>( to pa/ t*e ,a&an.e, stating
as 9e&& t*at *e is eApe.ting t*e approva& o+ *is &oan app&i.ation +ro% a
.ertain 3nan.ing .o%pan/, and t*at ten 11)2 tru.0s *ave ,een returned to
"ag,ag, Nova&i.*es. 1! On e.e%,er :, 1:>(, Coprada in+or%ed private
respondent ane9 t*at *e *ad returned ten 11)2 tru.0s to "ag,ag and t*at a
reso&ution 9as passed ,/ t*e ,oard o+ dire.tors .on3r%ing t*e deed o+
assign%ent to private respondent o+ P<>@,))) +ro% t*e pro.eeds o+ a &oan
o,tained ,/ A0ron +ro% t*e State Invest%ent 4ouse, In.. 1
In due ti%e, private respondent 3&ed a .o%p&iant +or t*e re.over/ o+
P@'@,))).)) or t*e return o+ t*e 1; tru.0s 9it* da%ages against A0ron and
its o5.ers and dire.tors, 6e&i.iano Coprada, ario . PunCa&an, Je%ina
Coprada, Lu.ia La.aste, 7i&+redo La/ug, Ar.adio de &a CruC, 6ran.is.o C&ave,
Vi.ente #artineC, Pa.i3.o o&&ario and petitioner 9it* t*e t*en Court o+ 6irst
Instan.e o+ RiCa&. On&/ petitioner ans9ered t*e .o%p&aint den/ing an/
parti.ipation in t*e transa.tion and a&&eging t*at A0ron *as a distin.t
.orporate persona&it/. 4e 9as, *o9ever, de.&ared in de+au&t +or *is +ai&ure to
attend t*e pre-tria&.
In t*e %ean9*i&e, petitioner so&d a&& *is s*ares in A0ron to Coprada. It a&so
appears t*at A0ron a%ended its arti.&es o+ in.orporation t*ere,/ .*anging
its na%e to A0ron !ransport Internationa&, In.. 9*i.* assu%ed t*e &ia,i&it/
o+ A0ron to private respondent.
A+ter an e9 parte re.eption o+ t*e eviden.e o+ t*e private respondent, a
de.ision 9as rendered on O.to,er '(, 1:(), t*e dispositive part o+ 9*i.*
reads as +o&&o9s:
6inding t*e eviden.e su5.ient to prove t*e .ase o+ t*e p&aintiH, -udg%ent
is *ere,/ rendered in +avor o+ t*e p&aintiH and against t*e de+endants,
ordering t*e% -oint&/ and severa&&/ to pa/I
a W t*e pur.*ase pri.e o+ t*e tru.0s in t*e a%ount o+ P@'@,))).)) 9it* ...
&ega& rate 1o+ interest2 +ro% t*e 3&ing o+ t*e .o%p&aint unti& t*e +u&& a%ount
is paidI
, W renta&s o+ "ag,ag propert/ at P1,))).)) a %ont* +ro% August 1:>(
unti& t*e pre%ises is .&eared o+ t*e said tru.0sI
. W attorne/s +ees o+ P1),))).)), and
d W .osts o+ suit.
!*e P@),))).)) given as do9n pa/%ent s*a&& pertain as renta&s o+ t*e
tru.0s +ro% June 1 to August 1, 1:>( 9*i.* is P'@,))).)) 1see de%and
&etter o+ Att/. Aniano EA*i,it [![2 and t*e re%aining P'@,))).)) s*a&& ,e
+ro% August 1, 1:>( unti& t*e tru.0s are re%oved tota&&/ +ro% t*e
p&a.e.[ 17
A %otion +or ne9 tria& 3&ed ,/ petitioner 9as denied so *e appea&ed to t*e
t*en Inter%ediate Appe&&ate Court 1IAC2 9*erein in due .ourse a de.ision
9as rendered on June ;), 1 :(; setting aside t*e said de.ision as +ar as
petitioner is .on.e%ed. 4o9ever, upon a %otion +or re.onsideration 3&ed ,/
private respondent dent, t*e IAC, in a reso&ution dated 6e,ruar/ (,1:(<, set
aside t*e de.ision dated June ;), 1:(;. !*e appe&&ate .ourt entered
anot*er de.ision a5r%ing t*e appea&ed de.ision o+ t*e tria& .ourt, 9it*
.osts against petitioner.
4en.e, t*is petition +or revie9 9*erein petitioner raises t*e +o&&o9ing
issues:
I. !*e Inter%ediate Appe&&ate Court 1IAC2 erred in disregarding t*e
.orporate 3.tion and in *o&ding t*e petitioner persona&&/ &ia,&e +or t*e
o,&igation o+ t*e Corporation 9*i.* de.ision is patent&/ .ontrar/ to &a9 and
t*e app&i.a,&e de.ision t*ereon.
II. !*e Inter%ediate Appe&&ate Court 1IAC2 .o%%itted grave error o+ &a9 in
its de.ision ,/ san.tioning t*e %erger o+ t*e persona&it/ o+ t*e .orporation
9it* t*at o+ t*e petitioner 9*en t*e &atter 9as *e&d &ia,&e +or t*e .orporate
de,ts. 1?
7e reverse.
!*e environ%enta& +a.ts o+ t*is .ase s*o9 t*at t*ere is no .ogent ,asis to
pier.e t*e .orporate vei& o+ A0ron and *o&d petitioner persona&&/ &ia,&e +or
its o,&igation to private respondent. 7*i&e it is true t*at in e.e%,er, 1:>>
petitioner 9as sti&& a %e%,er o+ t*e ,oard o+ dire.tors o+ A0ron and t*at *e
parti.ipated in t*e adoption o+ a reso&ution aut*oriCing t*e pur.*ase o+ 1;
tru.0s +or t*e use in t*e ,ro0erage ,usiness o+ A0ron to ,e paid out o+ a
&oan to ,e se.ured +ro% a &ending institution, it does not appear t*at said
reso&ution 9as intended to de+raud an/one and %ore parti.u&ar&/ private
respondent. It 9as Coprada, President and C*air%an o+ A0ron, 9*o
negotiated 9it* said respondent +or t*e pur.*ase o+ 1; .argo tru.0s on
Januar/ '@, 1:>(. It 9as Coprada 9*o signed a pro%issor/ note to
guarantee t*e pa/%ent o+ t*e unpaid ,a&an.e o+ t*e pur.*ase pri.e out o+
t*e pro.eeds o+ a &oan *e supposed&/ soug*t +ro% t*e "P. !*e 9ord [7EY
in t*e said pro%issor/ note %ust re+er to t*e .orporation 9*i.* Coprada
represented in t*e eAe.ution o+ t*e note and not its sto.0*o&ders or
dire.tors. Petitioner did not sign t*e said pro%issor/ note so *e .annot ,e
persona&&/ ,ound t*ere,/.
!*us, i+ t*ere 9as an/ +raud or %isrepresentation t*at 9as +oisted on
private respondent in t*at t*ere 9as a +ort*.o%ing &oan +ro% t*e "P 9*en
'< | P a g e
it +a.t t*ere 9as none, it is Coprada 9*o s*ou&d a..ount +or t*e sa%e and
not petitioner.
As to t*e sa&e t*roug* pacto e retro o+ t*e t9o units to a t*ird person ,/
t*e .orporation ,/ virtue o+ a ,oard reso&ution, petitioner asserts t*at *e
never signed said reso&ution. "e t*at as it %a/, t*e sa&e is not in*erent&/
+raudu&ent as t*e 1; units 9ere so&d t*roug* a deed o+ a,so&ute sa&e to
A0ron so t*at t*e .orporation is +ree to dispose o+ t*e sa%e. O+ .ourse, it
9as stipu&ated t*at in .ase o+ de+au&t in pa/%ent to private respondent o+
t*e ,a&an.e o+ t*e .onsideration, a .*atte& %ortgage &ien s*ag ,e
.onstituted on t*e 1; units. Nevert*e&ess, said %ortgage is a prior &ien as
against t*e pacto e retro sa&e o+ t*e ' units.
As to t*e a%end%ent o+ t*e arti.&es o+ in.orporation o+ A0ron t*ere,/
.*anging its na%e to A0ron !ransport Internationa&, In.., petitioner a&&eges
t*at t*e .*ange o+ .orporate na%e 9as in order to in.&ude tru.0ing and
.ontainer /ard operations in its .usto%s ,ro0erage o+ 9*i.* private
respondent 9as du&/ in+or%ed in a &etter. 1"Indeed, t*e ne9 .orporation
.on3r%ed and assu%ed t*e o,&igation o+ t*e o&d .orporation. !*ere is no
indi.ation o+ an atte%pt on t*e part o+ A0ron to evade pa/%ent o+ its
o,&igation to private respondent.
!*ere is t*e +a.t t*at petitioner so&d *is s*ares in A0ron to Coprada during
t*e penden./ o+ t*e .ase. Sin.e petitioner *as no persona& o,&igation to
private respondent, it is *is in*erent rig*t as a sto.0*o&der to dispose o+ *is
s*ares o+ sto.0 an/ti%e *e so desires.
#ention is a&so %ade o+ t*e a&&eged [du%ping[ o+ 1) units in t*e pre%ises
o+ private respondent at "ag,ag, Nova&i.*es 9*i.* to t*e %ind o+ t*e Court
does not prove +raud and instead appears to ,e an atte%pt on t*e part o+
A0ron to attend to its o,&igations as regards t*e said tru.0s. Again
petitioner *as no part in t*is.
I+ t*e private respondent is t*e vi.ti% o+ +raud in t*is transa.tion, it *as not
,een .&ear&/ s*o9n t*at petitioner *ad an/ part or parti.ipation in t*e
perpetration o+ t*e sa%e. 6raud %ust ,e esta,&is*ed ,/ .&ear and
.onvin.ing eviden.e. I+ at a&&, t*e prin.ipa& .*ara.ter on 9*o% +au&t s*ou&d
,e attri,uted is 6e&i.iano Coprada, t*e President o+ A0ron, 9*o% private
respondent dea&t 9it* persona&&/ a&& t*roug* out. 6ortunate&/, private
respondent o,tained a -udg%ent against *i% +ro% t*e tria& .ourt and t*e
said -udg%ent *as &ong ,een 3na& and eAe.utor/.
74ERE6ORE, t*e petition is 8RAN!E. !*e ?uestioned reso&ution o+ t*e
Inter%ediate Appe&&ate Court dated 6e,ruar/ (,1:(< is *ere,/ set aside
and its de.ision dated June ;),1:(; setting aside t*e de.ision o+ t*e tria&
.ourt dated O.to,er '(, 1:() inso+ar as petitioner is .on.e%ed is *ere,/
reinstated and a5r%ed, 9it*out .osts.
SO ORERE.
XXXXXXXXXXXXXXXXXXXX
G.R. No. 1;;? (ul> 1@, 1""Q
REBECCA BO$ER1RO-AS a./ G&ILLERMO RO-AS, petitioners,
vs.
)ON. CO&R# OF APPEALS a./ )EIRS OF E&GENIA %. RO-AS,
INC., respondents.

G&#IERRE,, J+. J.*
!*is is a petition to revie9 t*e de.ision and reso&ution o+ t*e Court o+
Appea&s in CA-8.R. No. 1<@;) a5r%ing t*e ear&ier de.ision o+ t*e Regiona&
!ria& Court o+ Laguna, "ran.* ;>, at Ca&a%,a, in t*e .onso&idated R!C Civi&
Case Nos. ()'-(<-C and ();-(<-C entit&ed [4eirs o+ Eugenia V. RoAas, In.. v.
Re,e..a "o/er-RoAas[ and 4eirs o+ Eugenia V. RoAas, In.. v. 8ui&&er%o
RoAas,[ t*e dispositive portion o+ 9*i.* reads:
IN VIE7 O6 !4E 6ORE8OIN8, -udg%ent is *ere,/ rendered in +avor o+ t*e
p&aintiH and against t*e de+endants, ,/ ordering as it is *ere,/ ordered
t*at:
12 In R!C Civi& Case No. ()'-(<-C: Re,e..a "o/er-RoAas and a&& persons
.&ai%ing under *er to:
a2 I%%ediate&/ va.ate t*e residentia& *ouse near t*e "a&ug,ugan poo&
&o.ated inside t*e pre%ises o+ t*e 4idden Va&&e/ Springs Resort at Li%ao,
Ca&auan, LagunaI
,2 Pa/ t*e p&aintiH t*e a%ount o+ P;)).)) per %ont* +ro% Septe%,er 1),
1:(;, +or *er o..upan./ o+ t*e residentia& *ouse unti& t*e sa%e is va.atedI
.2 Re%ove t*e un3nis*ed ,ui&ding ere.ted on t*e &and o+ t*e p&aintiH 9it*in
ninet/ 1:)2 da/s +ro% re.eipt o+ t*is de.isionI
d2 Pa/ t*e p&aintiH t*e a%ount o+ P1)).)) per %ont* +ro% Septe%,er 1),
1:(;, unti& t*e said un3nis*ed ,ui&ding is re%oved +ro% t*e &and o+ t*e
p&aintiHI and
e2 Pa/ t*e .osts.
'2 In R!C Civi& Case No. ();-(<-C: 8ui&&er%o RoAas and a&& persons .&ai%ing
under *i% to:
a2 I%%ediate&/ va.ate t*e residentia& *ouse near t*e tennis .ourt &o.ated
9it*in t*e pre%ises o+ t*e 4idden Va&&e/ Springs Resort at Li%ao, Ca&auan,
LagunaI
,2 Pa/ t*e p&aintiH t*e a%ount o+ P;)).)) per %ont* +ro% Septe%,er 1),
1:(;, +or *is o..upan./ o+ t*e said residentia& *ouse unti& t*e sa%e is
va.atedI and
.2 Pa/ t*e .osts. 1(ollo, p. ;=2
In t9o 1'2 separate .o%p&aints +or re.over/ o+ possession 3&ed 9it* t*e
Regiona& !ria& Court o+ Laguna against petitioners Re,e..a "o/er-RoAas and
8ui&&er%o RoAas respe.tive&/, respondent .orporation, 4eirs o+ Eugenia V.
RoAas, In.., pra/ed +or t*e e-e.t%ent o+ t*e petitioners +ro% ,ui&dings
inside t*e 4idden Va&&e/ Springs Resort &o.ated at Li%ao, Ca&auan, Laguna
a&&eged&/ o9ned ,/ t*e respondent .orporation.
In t*e .ase o+ petitioner Re,e..a "o/er-RoAas 1Civi& Case No-()'-(<-C2, t*e
respondent .orporation a&&eged t*at Re,e..a is in possession o+ t9o 1'2
*ouses, one o+ 9*i.* is sti&& under .onstru.tion, ,ui&t at t*e eApense o+ t*e
respondent .orporationI and t*at *er o..upan./ on t*e t9o 1'2 *ouses 9as
on&/ upon t*e to&eran.e o+ t*e respondent .orporation.
In t*e .ase o+ petitioner 8ui&&er%o RoAas 1Civi& Case No. ();-(<-C2, t*e
respondent .orporation a&&eged t*at 8ui&&er%o o..upies a *ouse 9*i.* 9as
,ui&t at t*e eApense o+ t*e +or%er during t*e ti%e 9*en 8ui&&er%oYs +at*er,
Eri,erto RoAas, 9as sti&& &iving and 9as t*e genera& %anager o+ t*e
respondent .orporationI t*at t*e *ouse 9as origina&&/ intended as a
re.reation *a&& ,ut 9as .onverted +or t*e residentia& use o+ 8ui&&er%oI and
t*at 8ui&&er%oYs possession over t*e *ouse and &ot 9as on&/ upon t*e
to&eran.e o+ t*e respondent .orporation.
'@ | P a g e
In ,ot* .ases, t*e respondent .orporation a&&eged t*at t*e petitioners never
paid renta&s +or t*e use o+ t*e ,ui&dings and t*e &ots and t*at t*e/ ignored
t*e de%and &etters +or t*e% to va.ate t*e ,ui&dings.
In t*eir separate ans9ers, t*e petitioners traversed t*e a&&egations in t*e
.o%p&aint ,/ stating t*at t*e/ are *eirs o+ Eugenia V. RoAas and t*ere+ore,
.o-o9ners o+ t*e 4idden Va&&e/ Springs ResortI and as .o-o9ners o+ t*e
propert/, t*e/ *ave t*e rig*t to sta/ 9it*in its pre%ises.
!*e .ases 9ere .onso&idated and tried -oint&/.
At t*e pre-tria&, t*e parties &i%ited t*e issues as +o&&o9s:
12 9*et*er p&aintiH is entit&ed to re.over t*e ?uestioned pre%isesI
'2 9*et*er p&aintiH is entit&ed to reasona,&e renta& +or o..upan./ o+ t*e
pre%ises in ?uestionI
;2 9*et*er t*e de+endant is &ega&&/ aut*oriCed to pier.e t*e vei& o+
.orporate 3.tion and interpose t*e sa%e as a de+ense in an a..ion
pu,&i.ianaI
<2 9*et*er t*e de+endants are tru&/ ,ui&ders in good +ait*, entit&ed to
o..up/ t*e ?uestioned pre%isesI
@2 9*et*er p&aintiH is entit&ed to da%ages and reasona,&e .o%pensation +or
t*e use o+ t*e ?uestioned pre%isesI
=2 9*et*er t*e de+endants are entit&ed to t*eir .ounter.&ai% to re.over
%ora& and eAe%p&ar/ da%ages as 9e&& as attorne/Ys +ees in t*e t9o .asesI
>2 9*et*er t*e presen.e and o..upan./ ,/ t*e de+endants on t*e pre%ises
in ?uestioned 1sic2 *a%pers, deters or i%pairs p&aintiHYs operation o+
4idden Va&&e/ Springs ResortI and
(2 9*et*er or not a uni&atera& and sudden 9it*dra9a& o+ p&aintiHs to&eran.e
a&&o9ing de+endantsY o..upan./ o+ t*e pre%ises in ?uestioned 1sic2 is
un-ust enri.*%ent. 1Origina& Re.ords, <(=2
Epon %otion o+ t*e p&aintiH respondent .orporation, Presiding Judge
6ran.is.o #a. 8uerrero o+ "ran.* ;< issued an Order dated Apri& '@, 1:(=
in*i,iting *i%se&+ +ro% +urt*er tr/ing t*e .ase. !*e .ases 9ere re-ra\ed to
"ran.* ;> presided ,/ Judge Odi&on "autista. Judge "autista .ontinued t*e
*earing o+ t*e .ases.
6or +ai&ure o+ t*e petitioners 1de+endants ,e&o92 and t*eir .ounse& to attend
t*e O.to,er '', 1:(= *earing despite noti.e, and upon %otion o+ t*e
respondent .orporation, t*e .ourt issued on t*e sa%e da/, O.to,er '',
1:(=, an Order .onsidering t*e .ases su,%itted +or de.ision. At t*is stage
o+ t*e pro.eedings, t*e petitioners *ad not /et presented t*eir eviden.e
9*i&e t*e respondent .orporation *ad .o%p&eted t*e presentation o+ its
eviden.e.
!*e eviden.e o+ t*e respondent .orporation upon 9*i.* t*e &o9er .ourt
,ased its de.ision is as +o&&o9s:
!o support t*e .o%p&aints, t*e p&aintiH oHered t*e testi%onies o+ #aria
#i&agros RoAas and t*at o+ Vi.toria RoAas Vi&&arta as 9e&& as EA*i,its [A[ to
[#-;[.
!*e eviden.e o+ t*e p&aintiH esta,&is*ed t*e +o&&o9ing: t*at t*e p&aintiH,
4eirs o+ Eugenia V RoAas, In.orporated, 9as in.orporated on e.e%,er <,
1:=' 1EA*. [C[2 9it* t*e pri%ar/ purpose o+ engaging in agri.u&ture to
deve&op t*e properties in*erited +ro% Eugenia V. RoAas and t*at o+ /
Eu+ro.ino RoAasI t*at t*e Arti.&es o+ In.orporation o+ t*e p&aintiH, in 1:>1,
9as a%ended to a&&o9 it to engage in t*e resort ,usiness 1EA*.
[C-1[2I t*at t*e in.orporators as origina& %e%,ers o+ t*e ,oard o+ dire.tors
o+ t*e p&aintiH 9ere a&& %e%,ers o+ t*e sa%e +a%i&/, 9it* Eu+ro.ino RoAas
*aving t*e ,iggest s*areI t*at a..ording&/, t*e p&aintiH put up a resort
0no9n as 4idden Va&&e/ Springs Resort on a portion o+ its &and &o.ated at
"o. Li%ao, Ca&auan, Laguna, and .overed ,/ !C! No. ;'=;: 1EA*s. [A[ and
[A-&[2I t*at i%prove%ents 9ere introdu.ed in t*e resort ,/ t*e p&aintiH and
a%ong t*e% 9ere .ottages, *ouses or ,ui&dings, s9i%%ing poo&s, tennis
.ourt, restaurant and open pavi&ionsI t*at t*e *ouse near t*e "a&ug,ugan
Poo& 1EA*. ["-&[2 ,eing o..upied ,/ Re,e..a ". RoAas 9as origina&&/
intended as staH *ouse ,ut &ater used as t*e residen.e o+ Eri,erto RoAas,
de.eased *us,and o+ t*e de+endant Re,e..a "o/er-RoAas and +at*er o+
8ui&&er%o RoAasI t*at t*is *ouse present&/ ,eing o..upied ,/ Re,e..a ".
RoAas 9as ,ui&t +ro% .orporate +undsI t*at t*e .onstru.tion o+ t*e
un3nis*ed *ouse 1EA*. ["-'[2 9as started ,/ t*e de+endant Re,e..a "o/er-
RoAas and *er *us,and Eri,erto RoAasI t*at t*e t*ird ,ui&ding 1EA*. ["-;[2
present&/ ,eing o..upied ,/ 8ui&&er%o RoAas 9as origina&&/ intended as a
re.reation *a&& ,ut &ater .onverted as a residentia& *ouseI t*at t*is *ouse
9as ,ui&t a&so +ro% .orporate +undsI t*at t*e said *ouse o..upied ,/
8ui&&er%o RoAas 9*en it 9as ,eing ,ui&t *ad nipa roo3ng ,ut 9as &ater
.*anged to ga&vaniCed iron s*eetsI t*at at t*e ,eginning, it *ad no partition
do9nstairs and t*e se.ond Uoor 9as an open spa.eI t*at t*e .onversion
+ro% a re.reation *a&& to a residentia& *ouse 9as 9it* t*e 0no9&edge o+
Eu+ro.ino RoAas and 9as not o,-e.ted to ,/ an/ o+ t*e "oard o+ ire.tors o+
t*e p&aintiHI t*at %ost o+ t*e %ateria&s used in .onverting t*e ,ui&ding into
a residentia& *ouse .a%e +ro% t*e %ateria&s &e+t ,/ Coppo&a, a 3&%
produ.er, 9*o 3&%ed t*e %ovie [Apo.a&/pse No9[I t*at Coppo&a &e+t t*e
%ateria&s as part o+ *is pa/%ent +or rents o+ t*e roo%s t*at *e o..upied in
t*e resortI t*at a+ter t*e said re.reation *a&& 9as .onverted into a
residentia& *ouse, de+endant 8ui&&er%o RoAas %oved in and o..upied t*e
sa%e toget*er 9it* *is +a%i&/ so%eti%e in 1:>> or 1:>(I t*at during t*e
ti%e Eu+ro.ino RoAas 9as sti&& a&ive, Eri,erto RoAas 9as t*e genera&
%anager o+ t*e .orporation and t*ere 9as se&do% an/ ,oard %eetingI t*at
Eu+ro.ino RoAas toget*er 9it* Eri,erto RoAas 9ere 1sic2 t*e ones 9*o 9ere
running t*e .orporationI t*at during t*is ti%e, Eri,erto RoAas 9as t*e
restaurant and 9ine .on.essionaire o+ t*e resortI t*at a+ter t*e deat* o+
Eu+ro.ino RoAas, Eri,erto RoAas .ontinued as t*e genera& %anager unti& *is
deat* in 1:()I t*at a+ter t*e deat* o+ Eri,erto RoAas in 1:(), t*e
de+endants Re,e..a ". RoAas and 8ui&&er%o RoAas, .o%%itted a.ts t*at
i%peded t*e p&aintiHYs eApansion and nor%a& operation o+ t*e resortI t*at
t*e p&aintiH .ou&d not even use its o9n pavi&ions, 0it.*en and ot*er +a.i&ities
,e.ause o+ t*e a.ts o+ t*e de+endants 9*i.* &ed to t*e 3&ing o+ .ri%ina&
.ases in .ourtI t*at .ases 9ere even 3&ed ,e+ore t*e #inistr/ o+ !ouris%,
"ureau o+ o%esti. !rade and t*e O5.e o+ t*e President ,/ t*e parties
*ereinI t*at t*e de+endants vio&ated t*e reso&ution and orders o+ t*e
#inistr/ o+ !ouris% dated Ju&/ '(, 1:(;, August ;, 1:(; and Nove%,er '=,
1:(< 1EA*s. [8[, [4[ and [4-&[2 9*i.* ordered t*e% or t*e .orporation t*e/
represent to desist +ro% and to turn over i%%ediate&/ to t*e p&aintiH t*e
%anage%ent and operation o+ t*e restaurant and 9ine out&ets o+ t*e said
resort 1EA*. [8-&[2I t*at t*e de+endants a&so vio&ated t*e de.ision o+ t*e
"ureau o+ o%esti. !rade dated O.to,er ';, 1:(; 1EA*. [C[2I t*at on
'= | P a g e
August '>, 1:(;, ,e.ause o+ t*e a.ts o+ t*e de+endants, t*e "oard o+
ire.tors o+ t*e p&aintiH adopted Reso&ution No. (;-1' series o+ 1:(; 1EA*.
[6[2 aut*oriCing t*e e-e.t%ent o+ t*e de+endants +ro% t*e pre%ises
o..upied ,/ t*e%I t*at on Septe%,er 1, 1:(;, de%and &etters 9ere sent to
Re,e..a "o/er-RoAas and 8ui&&er%o RoAas 1EA*s. [[ and [-1[2
de%anding t*at t*e/ va.ate t*e respe.tive pre%ises t*e/ o..up/I and t*at
t*e dispute ,et9een t*e p&aintiH and t*e de+endants 9as ,roug*t ,e+ore
t*e ,aranga/ &eve& and t*e sa%e 9as not sett&ed 1EA*s. [E[ and [E-&[2.
1Origina& Re.ords, pp. <@<-<@=2
!*e petitioners appea&ed t*e de.ision to t*e Court o+ Appea&s. 4o9ever, as
stated ear&ier, t*e appe&&ate .ourt a5r%ed t*e &o9er .ourtYs de.ision. !*e
PetitionersY %otion +or re.onsideration 9as &i0e9ise denied.
4en.e, t*is petition.
In a reso&ution dated 6e,ruar/ @, 1::', 9e gave due .ourse to t*e petition.
!*e petitioners no9 .ontend:
I Respondent Court erred 9*en it re+used to pier.e t*e vei& o+ .orporate
3.tion over private respondent and %aintain t*e petitioners in t*eir
possession andNor o..upan./ o+ t*e su,-e.t pre%ises .onsidering t*at
petitioners are o9ners o+ a&i?uot part o+ t*e properties o+ private
respondent. "esides, private respondent itse&+ dis.arded t*e %ant&e o+
.orporate 3.tion ,/ a.ts andNor o%issions o+ its ,oard o+ dire.tors andNor
sto.0*o&ders.
II !*e respondent Court erred in not *o&ding t*at petitioners 9ere in +a.t
denied due pro.ess or t*eir da/ in .ourt ,roug*t a,out ,/ t*e gross
neg&igen.e o+ t*eir +or%er .ounse&.
III !*e respondent Court %isapp&ied t*e &a9 9*en it ordered petitioner
Re,e..a "o/er-RoAas to re%ove t*e un3nis*ed ,ui&ding in R!C Case No.
()'-(<-C, 9*en t*e tria& .ourt opined t*at s*e spent *er o9n +unds +or t*e
.onstru.tion t*ereo+. 1CA (ollo, pp. 1>-1(2
7ere t*e petitioners denied due pro.ess o+ &a9 in t*e &o9er .ourtR
A+ter t*e .ases 9ere re-ra\ed to t*e sa&a o+ Presiding Judge Odi&on "autista
o+ "ran.* ;> t*e +o&&o9ing events transpired:
On Ju&/ ;, 1:(=, t*e &o9er .ourt issued an Order setting t*e *earing o+ t*e
.ases on Ju&/ '1, 1:(=. Petitioner Re,e..a V. RoAas re.eived a .op/ o+ t*e
Order on Ju&/ 1@, 1:(=, 9*i&e petitioner 8ui&&er%o RoAas re.eived *is .op/
on Ju&/ 1(, 1:(=. Att/. Conrado #ani.ad, t*e petitionersY .ounse& re.eived
anot*er .op/ o+ t*e Order on Ju&/ 11, 1:(=. 1Origina& Re.ords, p. '=)2
On %otion o+ t*e respondent .orporationYs .ounse&, t*e &o9er .ourt issued
an Order dated Ju&/ 1@, 1:(= .an.e&&ing t*e Ju&/ '1, 1:(= *earing and
resetting t*e *earing to August 11, 1:(=. 1Origina& re.ords, '='-'=;2 !*ree
separate .opies o+ t*e order 9ere sent and re.eived ,/ t*e petitioners and
t*eir .ounse&. 1Origina& Re.ords, pp. '=(, '=:, '>12
A %otion to .an.e& and re-s.*edu&e t*e August 11, 1:(= *earing 3&ed ,/
t*e respondent .orporationYs .ounse& 9as denied in an Order dated August
(, 1:(=. Again separate .opies o+ t*e Order 9ere sent and re.eived ,/ t*e
petitioners and t*eir .ounse&. 1Origina& Re.ords, pp. '>=-'>:2
At t*e *earing *e&d on August 11, 1:(=, on&/ Att/. "enito P. 6a,ie, .ounse&
+or t*e respondent .orporation appeared. Neit*er t*e petitioners nor t*eir
.ounse& appeared despite noti.e o+ *earing. !*e &o9er .ourt t*en issued an
Order on t*e sa%e date, to 9it:
O R E R
7*en t*ese .ases 9ere .a&&ed +or .ontinuation o+ tria&, Att/. "enito P. 6a,ie
appeared ,e+ore t*is Court, *o9ever, t*e de+endants and t*eir &a9/er
despite re.eipt o+ t*e Order setting t*e .ase +or *earing toda/ +ai&ed to
appear. On #otion o+ Att/. 6a,ie, +urt*er .ross eAa%ination o+ 9itness
Vi.toria Va&&arta is *ere,/ .onsidered as *aving ,een 9aived.
!*e p&aintiH is *ere,/ given t9ent/ 1')2 da/s +ro% toda/ 9it*in 9*i.* to
su,%it +or%a& oHer o+ eviden.e and de+endants are a&so given ten 11)2
da/s +ro% re.eipt o+ su.* +or%a& oHer o+ eviden.e to 3&e t*eir o,-e.tion
t*ereto.
In t*e %eanti%e, *earing in t*ese .ases is set to Septe%,er ':, 1:(= at
1):)) oY.&o.0 in t*e %orning. 1Origina& Re.ords, p. '(=2
Copies o+ t*e Order 9ere sent and re.eived ,/ t*e petitioners and t*eir
.ounse& on t*e +o&&o9ing dates W Re,e..a "o/er-RoAas on August '), 1:(=,
8ui&&er%o RoAas on August '=, 1:(=, and Att/. Conrado #ani.ad on
Septe%,er 1:, 1:(=. 1Origina& Re.ords, pp. '((-':)2
On Septe%,er 1, 1:(=, t*e respondent .orporation 3&ed its [6or%a& OHer o+
Eviden.e.[ In an Order dated Septe%,er ':, 1:(=, t*e &o9er .ourt issued
an Order ad%itting eA*i,its [A[ to [#-;[ su,%itted ,/ t*e respondent
.orporation in its [6or%a& OHer o+ Eviden.e . . . t*ere ,eing no
o,-e.tion . . .[ 1Origina& Re.ords, p. <1(2 Copies o+ t*is Order 9ere sent and
re.eived ,/ t*e petitioners and t*eir .ounse& on t*e +o&&o9ing dates:
Re,e..a "o/er-RoAas on O.to,er :, 1:(=I 8ui&&er%o RoAas on O.to,er :,
1:(= and Att/. Conrado #ani.ad on O.to,er <, 1:(= 1Origina& Re.ords, pp.
<'), <'1, <'(2.
!*e s.*edu&ed *earing on Septe%,er ':, 1:(= did not pus* t*roug* as t*e
petitioners and t*eir .ounse& 9ere not present pro%pting Att/. "enito 6a,ie,
t*e respondent .orporationYs .ounse& to %ove t*at t*e .ases ,e su,%itted
+or de.ision. !*e &o9er .ourt denied t*e %otion and set t*e .ases +or
*earing on O.to,er '', 1:(=. 4o9ever, in its Order dated Septe%,er ':,
1:(=, t*e .ourt 7arne t*at in t*e event t*e petitioners and t*eir .ounse&
+ai&ed to appear on t*e neAt s.*edu&ed *earing, t*e .ourt s*a&& .onsider t*e
.ases su,%itted +or de.ision ,ased on t*e eviden.e on re.ord. 1Origina&
Re.ords, p. <':, <;) and <;12
Separate .opies o+ t*is Order 9ere sent and re.eived ,/ t*e petitioners and
t*eir .ounse& on t*e +o&&o9ing dates: Re,e..a "o/er-RoAas on O.to,er :,
1:(=, 8ui&&er%o RoAas on O.to,er :, 1:(=I and Att/. Conrado #ani.ad on
O.to,er 1, 1:(=. 1Origina& Re.ords, pp. <':-<;)2
espite noti.e, t*e petitioners and t*eir .ounse& again +ai&ed to attend t*e
s.*edu&ed O.to,er '', 1:(= *earing. Att/. 6a,ie representing t*e
respondent .orporation 9as present. 4en.e, in its Order dated O.to,er '',
1:(=, on %otion o+ Att/. 6a,ie and pursuant to t*e order dated Septe%,er
':, 1:(=, t*e Court .onsidered t*e .ases su,%itted +or de.ision. 1Origina&
Re.ords, p. <;=2
On Nove%,er 1<, 1:(=, t*e respondent .orporation, 3&ed a [#ani+estation[,
stating t*at [. . . it is su,%itting 9it*out +urt*er argu%ent its [Opposition to
t*e #otion +or Re.onsideration[ +or t*e .onsideration o+ t*e 4onora,&e
Court in reso&ving su,-e.t in.ident.[ 1Origina& Re.ords, p. <<'2
On e.e%,er 1=, 1:(=, t*e &o9er .ourt issued an Order, to 9it:
O R E R
'> | P a g e
Considering t*at t*e Court up to t*is date *as not re.eived an/ #otion +or
Re.onsideration 3&ed ,/ t*e de+endants in t*e a,ove-entit&ed .ases, t*e
Court .annot a.t on t*e Opposition to #otion +or Re.onsideration 3&ed ,/
t*e p&aintiH and re.eived ,/ t*e Court on Nove%,er 1<, 1:(=. 1Origina&
Re.ords, p. <<=2
On Januar/ 1@, 1:(>, t*e &o9er .ourt rendered t*e ?uestioned de.ision in
t*e t9o 1'2 .ases. 1Origina& Re.ords, pp. <@;-<@:2
On Januar/ '), 1:(>, Att/. Conrado #ani.ad, t*e petitionersY .ounse& 3&ed
an 39-Parte #ani+estation and atta.*ed t*ereto, a %otion +or
re.onsideration o+ t*e O.to,er '', 1:(= Order su,%itting t*e .ases +or
de.ision. 4e pra/ed t*at t*e Order ,e set aside and t*e .ases ,e re-opened
+or re.eption o+ eviden.e +or t*e petitioners. 4e averred t*at: 12 9it*in t*e
reg&e%entar/ period *e prepared t*e %otion +or re.onsideration and a%ong
ot*er do.u%ents, t*e dra+t 9as sent to *is &a9 o5.e t*ru *is %essengerI
a+ter signing t*e 3na& .opies, *e .aused t*e servi.e o+ a .op/ to t*e
respondent .orporationYs .ounse& 9it* t*e instru.tion t*at t*e .op/ o+ t*e
Court ,e 3&edI *o9ever, t*ere 9as a %is.o%%uni.ation ,et9een *is
se.retar/ and %essenger in t*at t*e se.retar/ %ai&ed t*e .op/ +or t*e
respondent .orporationYs .ounse& and p&a.ed t*e rest in an enve&ope +or t*e
%essenger to 3&e t*e sa%e in .ourt ,ut t*e %essenger t*oug*t t*at it 9as
t*e se.retar/ 9*o 9ou&d 3&e itI it 9as on&/ &ater on 9*en it 9as dis.overed
t*at t*e .op/ +or t*e Court *as not /et ,een 3&ed and t*at su.* +ai&ure to
3&e t*e %otion +or re.onsideration 9as due to eA.usa,&e neg&e.t andNor
a..ident. !*e %otion +or re.onsideration .ontained t*e +o&&o9ing
a&&egations: t*at on t*e date set +or *earing 1O.to,er '', 1:(=2, *e 9as on
*is 9a/ to Ca&a%,a to attend t*e *earing ,ut *is .ar suHered trans%ission
,rea0do9nI and t*at despite eHorts to repair said trans%ission, t*e .ar
re%ained inoperative resu&ting in *is a,sen.e at t*e said *earing. 1Origina&
Re.ords, pp. <=)-<=:2
On 6e,ruar/ ;, 1:(>, Att/. #ani.ad 3&ed a %otion +or re.onsideration o+ t*e
Januar/ 1@, 1:(> de.ision. 4e eAp&ained t*at *e *ad to 3&e t*e %otion
,e.ause t*e re.eiving .&er0 re+used to ad%it t*e %otion +or re.onsideration
atta.*ed to t*e e9-parte %ani+estation ,e.ause t*ere 9as no proo+ o+
servi.e to t*e ot*er part/. In.&uded in t*e %otion +or re.onsideration 9as a
noti.e o+ *earing o+ t*e %otion on 6e,ruar/ ;, 1:(>. 1Origina& Re.ords, p.
<>=-A2
On 6e,ruar/ <, 1:(>, t*e respondent .orporation t*roug* its .ounse& 3&ed a
#ani+estation and #otion %ani+esting t*at t*e/ re.eived t*e .op/ o+ t*e
%otion +or re.onsideration on&/ toda/ 16e,ruar/ <, 1:(>2, *en.e t*e/
pra/ed +or t*e postpone%ent o+ t*e *earing. 1Origina& Re.ords, pp. <>(-
<>:2
On t*e sa%e da/, 6e,ruar/ <, 1:(>, t*e &o9er .ourt issued an Order setting
t*e *earing on 6e,ruar/ 1;, 1:(> on t*e ground t*at it re.eived t*e %otion
+or re.onsideration &ate. Copies o+ t*is Order 9ere sent separate&/ to t*e
petitioners and t*eir .ounse&. !*e re.ords s*o9 t*at Att/. #ani.ad re.eived
*is .op/ on 6e,ruar/ 11, 1:(>. As regards t*e petitioners, t*e re.ords
revea& t*at Re,e..a "o/er-RoAas did not re.eive *er .op/ 9*i&e as regards
8ui&&er%o RoAas, so%e,od/ signed +or *i% ,ut did not indi.ate 9*en t*e
.op/ 9as re.eived. 1Origina& Re.ords, pp. <(1-<(;2
At t*e s.*edu&ed 6e,ruar/ 1;, 1:(> *earing, t*e .ounse&s +or t*e parties
9ere present. 4o9ever, t*e *earing 9as reset +or #ar.* =, 1:(> in order to
a&&o9 t*e respondent .orporation to 3&e its opposition to t*e %otion +or
re.onsideration. 1Order dated 6e,ruar/ 1;, 1:(>, Origina& Re.ords, p. <(=2
Copies o+ t*e Order 9ere sent and re.eived ,/ t*e petitioners and t*eir
.ounse& on t*e +o&&o9ing dates: Re,e..a "o/er-RoAas on 6e,ruar/ ';, 1:(>I
8ui&&er%o RoAas on 6e,ruar/ ';, 1:(> and Att/. #ani.ad on 6e,ruar/ 1:,
1:(>. 1Origina& Re.ords, pp. <(>, <(:-<:)2
!*e re.ords are not .&ear as to 9*et*er or not t*e s.*edu&ed *earing on
#ar.* =, 1:(> 9as *e&d. Nevert*e&ess, t*e re.ords revea& t*at on #ar.* 1;,
1:(>, t*e &o9er .ourt issued an Order den/ing t*e %otion +or
re.onsideration.
!*e 9e&&-sett&ed do.trine is t*at t*e .&ient is ,ound ,/ t*e %ista0es o+ *is
&a9/er. 1Agui&a v. Court o+ 6irst Instan.e o+ "atangas, "ran.* I, 1=) SCRA
;@' O1:((PI See a&so Vivero v. Santos, et a&., :( P*i&. @)) O1:@=PI Isaa. v.
#endoCa, (: P*i&. '>: O1:@1PI #ontes v. Court o+ 6irst Instan.e o+ !a/a,as,
<( P*i&. =<) O1:'=PI Peop&e v. #anCani&&a, <; P*i&. 1=> O1:''PI Enited States
v. ung.a, '> P*i&. '>< O1:1<PI and Enited States v. E%a&i, 1@ P*i&. ;;
O1:1)P2 !*is ru&e, *o9ever, *as its eA.eptions. !*us, in severa& .ases, 9e
ru&ed t*at t*e part/ is not ,ound ,/ t*e a.tions o+ *is .ounse& in .ase t*e
gross neg&igen.e o+ t*e .ounse& resu&ted in t*e .&ientYs deprivation o+ *is
propert/ 9it*out due pro.ess o+ &a9. In t*e .ase o+ Le$ara v. Co#rt of
Appeals 11:@ SCRA <1( O1::1P2, 9e said:
In Peop&eYs 4o%esite Z 4ousing Corp. v. !iong.o and Es.asa 11' SCRA <>1
O1:=<P2, t*is Court ru&ed as +o&&o9s:
Pro.edura& te.*ni.a&it/ s*ou&d not ,e %ade a ,ar to t*e vindi.ation o+ a
&egiti%ate grievan.e. 7*en su.* te.*ni.a&it/ deserts +ro% ,eing an aid to
Justi.e, t*e .ourts are -usti3ed in eA.epting +ro% its operation a parti.u&ar
.ase. 7*ere t*ere 9as so%et*ing 3s*/ and suspi.ious a,out t*e a.tuations
o+ t*e +or%er .ounse& o+ petitioners in t*e .ase at ,ar, in t*at *e did not
give an/ signi3.an.e at a&& to t*e pro.esses o+ t*e .ourt, 9*i.* *as proven
pre-udi.ia& to t*e rig*ts o+ said .&ients, under a &a%e and Ui%s/ eAp&anation
t*at t*e .ourtYs pro.esses -ust es.aped *is attention, it is *e&d t*at said
&a9/er deprived *is .&ients o+ t*eir da/ in .ourt, t*us entit&ing said .&ients to
petition +or re&ie+ +ro% -udg%ent despite t*e &apse o+ t*e reg&e%entar/
period +or 3&ing said period +or 3&ing said petition.
In Es.udero v. Judge u&a/ 11@( SCRA =: O1:((P2, t*is Court, in *o&ding t*at
t*e .ounse&Ys ,&under in pro.edure is an eA.eption to t*e ru&e t*at t*e .&ient
is ,ound ,/ t*e %ista0es o+ .ounse&, %ade t*e +o&&o9ing dis?uisition:
Petitioners .ontend, t*roug* t*eir ne9 .ounse&, t*at t*e -udg%ent rendered
against t*e% ,/ t*e respondent .ourt 9as nu&& and void, ,e.ause t*e/ 9ere
t*erein deprived o+ t*eir da/ in .ourt and divested o+ t*eir propert/ 9it*out
due pro.ess o+ &a9, t*roug* t*e gross ignoran.e, %ista0e and neg&igen.e o+
t*eir previous .ounse&. !*e/ a.0no9&edge t*at, 9*i&e as a ru&e, .&ients are
,ound ,/ t*e %ista0e o+ t*eir .ounse&, t*e ru&e s*ou&d not ,e app&ied
auto%ati.a&&/ to t*eir .ase, as t*eir tria& .ounse&Ys ,&under in pro.edure and
gross ignoran.e o+ eAisting -urispruden.e .*anged t*eir .ause o+ a.tion and
vio&ated t*eir su,stantia& rig*ts.
7e are i%pressed 9it* petitionerYs .ontentions.
AAA AAA AAA
'( | P a g e
7*i&e t*is Court is .ogniCant o+ t*e ru&e t*at, genera&&/, a .&ient 9i&& suHer
.onse?uen.es o+ t*e neg&igen.e, %ista0e or &a.0 o+ .o%peten.e o+ *is
.ounse&, in t*e interest o+ Justi.e and e?uit/, eA.eptions %a/ ,e %ade to
su.* ru&e, in a..ordan.e 9it* t*e +a.ts and .ir.u%stan.es o+ ea.* .ase.
Ad*eren.e to t*e genera& ru&e 9ou&d, in t*e instant .ase, resu&t in t*e
outrig*t deprivation o+ t*eir propert/ t*roug* a te.*ni.a&it/.
In its ?uestioned de.ision dated Nove%,er 1:, 1:(: t*e Court o+ Appea&s
+ound, in no un.ertain ter%s, t*e neg&igen.e o+ t*e t*en .ounse& +or
petitioners 9*en *e +ai&ed to 3&e t*e proper %otion to dis%iss or to dra9 a
.o%pro%ise agree%ent i+ it 9as true t*at t*e/ agreed on a sett&e%ent o+
t*e .aseI or in si%p&/ 3&ing an ans9erI and t*at a+ter *aving ,een +urnis*ed
a .op/ o+ t*e de.ision ,/ t*e .ourt *e +ai&ed to appea& t*ere+ro% or to 3&e a
petition +or re&ie+ +ro% t*e order de.&aring petitioners in de+au&t. In a&& t*ese
instan.es t*e appe&&ate .ourt +ound said .ounse& neg&igent ,ut *is a.ts 9ere
*e&d to ,ind *is .&ient, petitioners *erein, nevert*e&ess.
!*e Court disagrees and 3nds t*at t*e neg&igen.e o+ .ounse& in t*is .ase
appears to ,e so gross and ineA.usa,&e. !*is 9as .o%pounded ,/ t*e +a.t,
t*at a+ter petitioner gave said .ounse& anot*er .*an.e to %a0e up +or *is
o%issions ,/ as0ing *i% to 3&e a petition +or annu&%ent o+ t*e -udg%ent in
t*e appe&&ate .ourt, again .ounse& a,andoned t*e .ase o+ petitioner in t*at
a+ter *e re.eived a .op/ o+ t*e adverse -udg%ent o+ t*e appe&&ate .ourt, *e
did not do an/t*ing to save t*e situation or in+or% *is .&ient o+ t*e
-udg%ent. 4e a&&o9ed t*e -udg%ent to &apse and ,e.o%e 3na&. Su.*
re.0&ess and gross neg&igen.e s*ou&d not ,e a&&o9ed to ,ind t*e petitioner.
Petitioner 9as t*ere,/ eHe.tive&/ deprived o+ *er da/ in .ourt. 1at pp. <'=-
<'>2
!*e *erein petitioners, *o9ever, are not si%i&ar&/ situated as t*e parties
%entioned in t*e a,ove.ited .ases. 7e .annot ru&e t*at t*e/, too, 9ere
vi.ti%s o+ t*e gross neg&igen.e o+ t*eir .ounse&.
!*e petitioners are to ,e ,&a%ed +or t*e O.to,er '', 1:(= order issued ,/
t*e &o9er .ourt su,%itting t*e .ases +or de.ision. !*e/ re.eived noti.es o+
t*e s.*edu&ed *earings and /et t*e/ did not do an/t*ing. #ore spe.i3.a&&/,
t*e parties re.eived noti.e o+ t*e Order dated Septe%,er ':, 1:(= 9it*
t*e 7arnin$ t*at i+ t*e/ +ai& to attend t*e O.to,er '', 1:(= *earing, t*e
.ases 9ou&d ,e su,%itted +or de.ision ,ased on t*e eviden.e on re.ord.
Ear&ier, at t*e s.*edu&ed *earing on Septe%,er ':, 1:(=, t*e .ounse& +or
t*e respondent .orporation %oved t*at t*e .ases ,e su,%itted +or de.ision
+or +ai&ure o+ t*e petitioners and t*eir .ounse& to attend despite noti.e. !*e
&o9er .ourt denied t*e %otion and gave t*e petitioners and t*eir .ounse&
anot*er .*an.e ,/ res.*edu&ing t*e O.to,er '', 1:(= *earing.
Indeed, t*e petitioners 0ne9 a&& a&ong t*at t*eir .ounse& 9as not attending
t*e s.*edu&ed *earings. !*e/ did not ta0e steps to .*ange t*eir .ounse& or
%a0e *i% attend to t*eir .ases unti& it 9as too &ate. On t*e .ontrar/, t*e/
.ontinued to retain t*e servi.es o+ Att/. #ani.ad 0no9ing +u&&/ 9e&& *is
&apses vis-a-vis t*eir .ases. !*e/, t*ere+ore, .annot raise t*e a&&eged gross
neg&igen.e o+ t*eir .ounse& resu&ting in t*eir denia& o+ due pro.ess to
9arrant t*e reversa& o+ t*e &o9er .ourtYs de.ision. In a si%i&ar .ase, A$#ila
v. Co#rt of First 0nstance of Batan$as% Branch = 1s#pra2, 9e ru&ed:
In t*e instant .ase, t*e petitioner s*ou&d *ave noti.ed t*e su..ession o+
errors .o%%itted ,/ *is .ounse& and ta0en appropriate steps +or *is
rep&a.e%ent ,e+ore it 9as a&toget*er too &ate. 4e did not. On t*e .ontrar/,
*e .ontinued to retain *is .ounse& t*roug* t*e series o+ pro.eedings t*at a&&
resu&ted in t*e re-e.tion o+ *is .ause, o,vious&/ t*roug* su.* .ounse&Ys
[ineptitude[ and, &et it ,e added, t*e .&ientsY +or,earan.e. !*e petitionerYs
reverses s*ou&d *ave .autioned *i% t*at *is &a9/er 9as %is*and&ing *is
.ase and %oved *i% to see0 t*e *e&p o+ ot*er .ounse&, 9*i.* *e did in t*e
end ,ut rat*er tardi&/.
No9 petitioner 9ants us to nu&&i+/ a&& o+ t*e ante.edent pro.eedings and
re.ogniCe *is ear&ier .&ai%s to t*e disputed propert/ on t*e -usti3.ation t*at
*is .ounse& 9as gross&/ inept. Su.* a reason is *ard&/ p&ausi,&e as t*e
petitionerYs ne9 .ounse& s*ou&d 0no9. Ot*er9ise, a&& a de+eated part/ 9ou&d
*ave to do to sa&vage *is .ase is .&ai% neg&e.t or %ista0e on t*e part o+ *is
.ounse& as a ground +or reversing t*e adverse -udg%ent. !*ere 9ou&d ,e no
end to &itigation i+ t*ese 9ere a&&o9ed as ever/ s*ort.o%ing o+ .ounse&
.ou&d ,e t*e su,-e.t o+ .*a&&enge ,/ *is .&ient t*roug* anot*er .ounse&
9*o, i+ *e is a&so +ound 9anting, 9ou&d &i0e9ise ,e diso9ned ,/ t*e sa%e
.&ient t*roug* anot*er .ounse&, and so on a in*nit#m. !*is 9ou&d render
.ourt pro.eedings inde3nite, tentative and su,-e.t to reopening at an/ ti%e
,/ t*e %ere su,ter+uge o+ rep&a.ing .ounse&. 1at pp. ;@>-;@(2
7e no9 dis.uss t*e %erits o+ t*e .ases.
In t*e 3rst assign%ent o+ error, t*e petitioners %aintain t*at t*eir
possession o+ t*e ?uestioned properties %ust ,e respe.ted in vie9 o+ t*eir
o9ners*ip o+ an a&i?uot portion o+ a&& t*e properties o+ t*e respondent
.orporation ,eing sto.0*o&ders t*ereo+. !*e/ propose t*at t*e vei& o+
.orporate 3.tion ,e pier.ed, .onsidering t*e .ir.u%stan.es under 9*i.* t*e
respondent .orporation 9as +or%ed.
Origina&&/, t*e ?uestioned properties ,e&onged to Eugenia V. RoAas. A+ter
*er deat*, t*e *eirs o+ Eugenia V. RoAas, a%ong t*e% t*e petitioners
*erein, de.ided to +or% a .orporation W 4eirs o+ Eugenia V. RoAas,
In.orporated 1private respondent *erein2 9it* t*e in*erited properties as
.apita& o+ t*e .orporation. !*e .orporation 9as in.orporated on e.e%,er
<, 1:=' 9it* t*e pri%ar/ purpose o+ engaging in agri.u&ture to deve&op t*e
in*erited properties. !*e Arti.&es o+ In.orporation o+ t*e respondent
.orporation 9ere a%ended in 1:>1 to a&&o9 it to engage in t*e resort
,usiness. A..ording&/, t*e .orporation put up a resort 0no9n as 4idden
Va&&e/ Springs Resort 9*ere t*e ?uestioned properties are &o.ated.
!*ese +a.ts, *o9ever, do not -usti+/ t*e position ta0en ,/ t*e petitioners.
!*e respondent is a bona *e .orporation. As su.*, it *as a -uridi.a&
persona&it/ o+ its o9n separate +ro% t*e %e%,ers .o%posing it. 17estern
Agro Industria& Corporation v. Court o+ Appea&s, 1(( SCRA >): O1::)PI !an
"oon "ee Z Co., In.. v. Jaren.io, 1=; SCRA ')@ O1:((PI Kutivo Sons
4ard9are Co%pan/ v. Court o+ !aA Appea&s, 1 SCRA 1=) O1:=1PI E%i&io
Cano Enterprises, In.. v. Court o+ Industria& Re&ations, 1; SCRA ':) O1:=@P2
!*ere is no dispute t*at tit&e over t*e ?uestioned &and 9*ere t*e 4idden
Va&&e/ Springs Resort is &o.ated is registered in t*e na%e o+ t*e .orporation.
!*e re.ords a&so s*o9 t*at t*e staH *ouse ,eing o..upied ,/ petitioner
Re,e..a "o/er-RoAas and t*e re.reation *a&& 9*i.* 9as &ater on .onverted
into a residentia& *ouse o..upied ,/ petitioner 8ui&&er%o RoAas are o9ned
,/ t*e respondent .orporation. Regarding properties o9ned ,/ a
': | P a g e
.orporation, 9e stated in t*e .ase o+ Stockholers of F. G#an!on an Sons%
0nc. v. (e$ister of +ees of Manila, 1= SCRA ;>; O1:='P2:
AAA AAA AAA
. . . Properties registered in t*e na%e o+ t*e .orporation are o9ned ,/ it as
an entit/ separate and distin.t +ro% its %e%,ers. 7*i&e s*ares o+ sto.0
.onstitute persona& propert/, t*e/ do not represent propert/ o+ t*e
.orporation. !*e .orporation *as propert/ o+ its o9n 9*i.* .onsists .*ieU/
o+ rea& estate 1Ne&son v. O9en, 11; A&a., ;>', '1 So. >@I #orro9 v.
8ou&d% 1<@ Io9a 1, 1'; N.7. ><;2. A s*are o+ sto.0 on&/ t/pi3es an a&i?uot
part o+ t*e .orporationYs propert/, or t*e rig*t to s*are in its pro.eeds to
t*at eAtent 9*en distri,uted a..ording to &a9 and e?uit/ 14a&& Z 6a&e/ v.
A&a,a%a !er%ina&, 1>; A&a., ;:(, @= So. ';@2, ,ut its *o&der is not t*e
o9ner o+ an/ part o+ t*e .apita& o+ t*e .orporation 1"rad&e/ v. "auder, ;=
O*io St., '(2. Nor is *e entit&ed to t*e possession o+ an/ de3nite portion o+
its propert/ or assets 18ott+ried V. #i&&er, 1)< E.S., @'1I Jones v. avis, ;@
O*io St., <><2. !*e sto.0*o&der is not a .o-o9ner or tenant in .o%%on o+
t*e .orporate propert/ 14arton v. Jo*nston, 1== A&a., ;1>, @1 So. ::'2. 1at
pp. ;>@-;>=2
!*e petitioners point out t*at t*eir o..upan./ o+ t*e staH *ouse 9*i.* 9as
&ater used as t*e residen.e o+ Eri,erto RoAas, *us,and o+ petitioner
Re,e..a "o/er-RoAas and t*e re.reation *a&& 9*i.* 9as .onverted into a
residentia& *ouse 9ere 9it* t*e ,&essings o+ Eu+ro.ino RoAas, t*e de.eased
*us,and o+ Eugenia V. RoAas, 9*o 9as t*e %a-orit/ and .ontro&&ing
sto.0*o&der o+ t*e .orporation. In *is &i+eti%e, Eu+ro.ino RoAas toget*er 9it*
Eri,erto RoAas, t*e *us,and o+ petitioner Re,e..a "o/er-RoAas, and t*e
+at*er o+ petitioner 8ui&&er%o RoAas %anaged t*e .orporation. !*e "oard o+
ire.tors did not o,-e.t to su.* an arrange%ent. !*e petitioners argue
t*at . . . t*e aut*orit/ t*us given ,/ Eu+ro.ino RoAas +or t*e .onversion o+
t*e re.reation *a&& into a residentia& *ouse .an no &onger ,e ?uestioned ,/
t*e sto.0*o&ders o+ t*e private respondent andNor its ,oard o+ dire.tors +or
t*e/ i%p&ied&/ ,ut no &eas eAp&i.it&/ de&egated su.* aut*orit/ to said
Eu+ro.ino RoAas. 1(ollo, p. 1'2
Again, 9e %ust e%p*asiCe t*at t*e respondent .orporation *as a distin.t
persona&it/ separate +ro% its %e%,ers. !*e .orporation transa.ts its
,usiness on&/ t*roug* its o5.ers or agents. 17estern Agro Industria&
Corporation v. Court o+ Appea&s, s#pra2. 7*atever aut*orit/ t*ese o5.ers
or agents %a/ *ave is derived +ro% t*e ,oard o+ dire.tors or ot*er
governing ,od/ un&ess .on+erred ,/ t*e .*arter o+ t*e .orporation. An
o5.erYs po9er as an agent o+ t*e .orporation %ust ,e soug*t +ro% t*e
statute, .*arter, t*e ,/-&a9s or in a de&egation o+ aut*orit/ to su.* o5.er,
+ro% t*e a.ts o+ t*e ,oard o+ dire.tors, +or%a&&/ eApressed or i%p&ied +ro% a
*a,it or .usto% o+ doing ,usiness. 1Vi.ente v. 8era&deC, @' SCRA '1)
O1:>;P2
In t*e present .ase, t*e re.ord s*o9s t*at Eu+ro.ino V. RoAas 9*o t*en
.ontro&&ed t*e %anage%ent o+ t*e .orporation, ,eing t*e %a-orit/
sto.0*o&der, .onsented to t*e petitionersY sta/ 9it*in t*e ?uestioned
properties. Spe.i3.a&&/, Eu+ro.ino RoAas gave *is .onsent to t*e .onversion
o+ t*e re.reation *a&& to a residentia& *ouse, no9 o..upied ,/ petitioner
8ui&&er%o RoAas. !*e "oard o+ ire.tors did not o,-e.t to t*e a.tions o+
Eu+ro.ino RoAas. !*e petitioners 9ere a&&o9ed to sta/ 9it*in t*e ?uestioned
properties unti& August '>, 1:(;, 9*en t*e "oard o+ ire.tors approved a
Reso&ution e-e.ting t*e petitioners, to 9it:
R E S O L E ! I O N No. (;-1'
RESOLVE, !*at Re,e..a ". RoAas and 8ui&&er%o RoAas, and a&& persons
.&ai%ing under t*e%, ,e e-e.ted +ro% t*eir o..upan./ o+ t*e 4idden Va&&e/
Springs .o%pound on 9*i.* t*eir *ouses *ave ,een .onstru.ted andNor are
,eing .onstru.ted on&/ on to&eran.e o+ t*e Corporation and 9it*out an/
.ontra.t t*ere+or, in order to give 9a/ to t*e CorporationYs eApansion and
i%prove%ent progra% and o,viate pre-udi.e to t*e operation o+ t*e 4idden
Va&&e/ Springs Resort ,/ t*eir .ontinued inter+eren.e.
RESOLVE, 6urt*er t*at t*e servi.es o+ Att/. "enito P. 6a,ie ,e engaged and
t*at *e ,e aut*oriCed as *e is *ere,/ aut*oriCed to eHe.t t*e e-e.t%ent,
in.&uding t*e 3&ing o+ t*e .orresponding suits, i+ ne.essar/ to do so.
1Origina& Re.ords, p. ;'>2
7e 3nd not*ing irregu&ar in t*e adoption o+ t*e Reso&ution ,/ t*e "oard o+
ire.tors. !*e petitionersY sta/ 9it*in t*e ?uestioned properties 9as %ere&/
,/ to&eran.e o+ t*e respondent .orporation in de+eren.e to t*e 9is*es o+
Eu+ro.ino RoAas, 9*o during *is &i+eti%e, .ontro&&ed and %anaged t*e
.orporation. Eu+ro.ino RoAasY a.tions .ou&d not *ave ,ound t*e .orporation
+orever. !*e petitioners *ave not .ited an/ provision o+ t*e .orporation ,/-
&a9s or an/ reso&ution or a.t o+ t*e "oard o+ ire.tors 9*i.* aut*oriCed
Eu+ro.ino RoAas to a&&o9 t*e% to sta/ 9it*in t*e .o%pan/ pre%ises +orever.
7e ru&e t*at in t*e a,sen.e o+ an/ eAisting .ontra.t ,et9een t*e
petitioners and t*e respondent .orporation, t*e .orporation %a/ e&e.t to
e-e.t t*e petitioners at an/ ti%e it 9is*es +or t*e ,ene3t and interest o+ t*e
respondent .orporation.
!*e petitionersY suggestion t*at t*e vei& o+ t*e .orporate 3.tion s*ou&d ,e
pier.ed is untena,&e. !*e separate persona&it/ o+ t*e .orporation %a/ ,e
disregarded on&/ 9*en t*e .orporation is used [as a .&oa0 or .over +or +raud
or i&&ega&it/, or to 9or0 in-usti.e, or 9*ere ne.essar/ to a.*ieve e?uit/ or
9*en ne.essar/ +or t*e prote.tion o+ t*e .reditors.[ 1Su&ong "a/an, In.. v.
Araneta, In.., >' SCRA ;<> O1:>=P .ited in !an "oon "ee Z Co., In.., v.
Jaren.io, s#pra and 7estern Agro Industria& Corporation v. Court o+
Appea&s, s#pra2 !*e .ir.u%stan.es in t*e present .ases do not +a&& under
an/ o+ t*e enu%erated .ategories.
In t*e t*ird assign%ent o+ error, t*e petitioners insist t*at as regards t*e
un3nis*ed ,ui&ding, Re,e..a "o/er-RoAas is a ,ui&der in good +ait*.
!*e .onstru.tion o+ t*e un3nis*ed ,ui&ding started 9*en Eri,erto RoAas,
*us,and o+ Re,e..a "o/er-RoAas, 9as sti&& a&ive and 9as t*e genera&
%anager o+ t*e respondent .orporation. !*e .oup&e used t*eir o9n +unds to
3nan.e t*e .onstru.tion o+ t*e ,ui&ding. !*e "oard o+ ire.tors o+ t*e
.orporation, *o9ever, did not o,-e.t to t*e .onstru.tion. !*e/ a&&o9ed t*e
.onstru.tion to .ontinue despite t*e +a.t t*at it 9as 9it*in t*e propert/ o+
t*e .orporation. Ender t*ese .ir.u%stan.es, 9e agree 9it* t*e petitioners
t*at t*e provision o+ Arti.&e <@; o+ t*e Civi& Code s*ou&d *ave ,een app&ied
,/ t*e &o9er .ourts.
Arti.&e <@; o+ t*e Civi& Code provides:
I+ t*ere 9as ,ad +ait*, not on&/ on t*e part o+ t*e person 9*o ,ui&t, p&anted
or so9n on t*e &and o+ anot*er ,ut a&so on t*e part o+ t*e o9ner o+ su.*
;) | P a g e
&and, t*e rig*ts o+ one and t*e ot*er s*a&& ,e t*e sa%e as t*oug* ,ot* *ad
a.ted in good +ait*.
In su.* a .ase, t*e provisions o+ Arti.&e <<( o+ t*e Civi& Code $overn t*e
re&ations*ip ,et9een petitioner Re,e..a-"o/er-RoAas and t*e respondent
.orporation, to 9it:
Art. <<( W !*e o9ner o+ t*e &and on 9*i.* an/t*ing *as ,een ,ui&t, so9n or
p&anted in good +ait*, s*a&& *ave t*e rig*t to appropriate as *is o9n t*e
9or0s, so9ing or p&anting a+ter pa/%ent o+ t*e inde%nit/ provided +or in
arti.&es @<= and @<(, or to o,&ige t*e one 9*o ,ui&t or p&anted to pa/ t*e
pri.e o+ t*e &and, and t*e one 9*o so9ed, t*e proper rent. 4o9ever, t*e
,ui&der or p&anter .annot ,e o,&iged to ,u/ t*e &and i+ its va&ue is
.onsidera,&/ %ore t*an t*at o+ t*e ,ui&ding or trees. In su.* .ase, *e s*a&&
pa/ reasona,&e rent, i+ t*e o9ner o+ t*e &and does not .*oose to
appropriate t*e ,ui&dings or trees a+ter proper inde%nit/. !*e parties s*a&&
agree upon t*e ter%s o+ t*e &ease and in .ase o+ disagree%ent, t*e .ourt
s*a&& 3A t*e ter%s t*ereo+.
74ERE6ORE, t*e present petition is part&/ 8RAN!E. !*e ?uestioned
de.ision o+ t*e Court o+ Appea&s a5r%ing t*e de.ision o+ t*e Regiona& !ria&
Court o+ Laguna, "ran.* ;>, in R!C Civi& Case No. ()'-(<-C is #OI6IE in
t*at su,paragrap*s 1.2 and 1d2 o+ Paragrap* 1 o+ t*e dispositive portion o+
t*e de.ision are de&eted. In t*eir stead, t*e petitioner Re,e..a "o/er-RoAas
and t*e respondent .orporation are ordered to +o&&o9 t*e provisions o+
Arti.&e <<( o+ t*e Civi& Code as regards t*e ?uestioned un3nis*ed ,ui&ding
in R!C Civi& Case No. ()'-(<-C. !*e ?uestioned de.ision is a5r%ed in a&&
ot*er respe.ts.
SO ORERE.
XXXXXXXX
G.R. No. 1;Q"!. (a.ua4> Q1, 1"""L
(AMES REB&RIANO a./ &RBANO REB&RIANO, petitioners
vs. )ONORABLE CO&R# OF APPEALS, a./ PEPSI COLA BO##LING
COMPAN$ OF #)E P)ILIPPINES, INC., respondents.
' E C I S I O N
MEN'O,A, J.:
In Civi& Case No. V-;@@:(, entit&ed MPepsi Co&a "ott&ing Co%pan/ o+ t*e
P*i&ippines, In.. v. Er,ano 1"en2 Re,uriano and Ja%es Re,uriano,L t*e
Regiona& !ria& Court, "ran.* 1); rendered on June 1, 1:(> a de.ision, t*e
dispositive portion o+ 9*i.* reads:
ACCORIN8LK, -udg%ent is *ere,/ rendered in +avor o+ p&aintiH Pepsi Co&a
"ott&ing Co. o+ t*e P*i&ippines, In..
1. Ordering t*e de+endants Er,ano 1"en2 Re,uriano and Ja%es Re,uriano
to pa/ -oint&/ and severa&&/ t*e p&aintiH t*e su% o+ P@@,))).)), &ess
9*atever e%pties 1.ases and ,ott&es2 %a/ ,e returned ,/ said de+endants
va&ued at t*e rate o+ P@@.)) per e%pt/ .ase 9it* ,ott&es.
'. Costs against t*e de+endants in .ase o+ eAe.ution.
SO ORERE.
Private respondent Pepsi Co&a "ott&ing Co%pan/ o+ t*e P*i&ippines, In..
appea&ed to t*e Court o+ Appea&s see0ing t*e %odi3.ation o+ t*e portion o+
t*e de.ision, 9*i.* stated t*e va&ue o+ t*e .ases 9it* e%pt/ ,ott&es
as P@@.)) per .ase, and o,tained a +avora,&e de.ision. On June '=, 1::),
-udg%ent 9as rendered as +o&&o9s:
74ERE6ORE, t*e de.ision appea&ed +ro% is SE! ASIE and anot*er one is
rendered, ordering t*e de+endant-appe&&ees to pa/ -oint&/ and severa&&/ t*e
p&aintiH-appe&&ant t*e su% o+ P@@,))).)) 9it* interest at t*e &ega& rate +ro%
Januar/ 1:('. 7it* .osts against de+endants-appe&&ees.
A+ter t*e .ase *ad ,een re%anded to it and t*e -udg%ent *ad ,e.o%e 3na&
and eAe.utor/, t*e tria& .ourt issued on 6e,ruar/ @, 1::1 a 9rit o+
eAe.ution.
It appears t*at prior to t*e pro%u&gation o+ t*e de.ision o+ t*e tria& .ourt,
private respondent a%ended its arti.&es o+ in.orporation to s*orten its ter%
o+ eAisten.e to Ju&/ (, 1:(;. !*e a%ended arti.&es o+ in.orporation 9as
approved ,/ t*e Se.urities and EA.*ange Co%%ission on #ar.* ',
1:(<. !*e tria& .ourt 9as not noti3ed o+ t*is +a.t.
On 6e,ruar/ 1;, 1::1, petitioners %oved to ?uas* t*e 9rit o+ eAe.ution
a&&eging -
;. !*at 9*en t*e tria& o+ t*is .ase 9as .ondu.ted, 9*en t*e de.ision 9as
rendered ,/ t*is 4onora,&e Court, 9*en t*e said de.ision 9as appea&ed to
t*e Court o+ Appea&s, and 9*en t*e Court o+ Appea&s rendered its de.ision,
t*e private respondent 9as no &onger in eAisten.e and *ad no %ore
-uridi.a& persona&it/ and so, as su.*, it no &onger *ad t*e .apa.it/ to sue
and ,e suedI
<. !*at a+ter t*e Oprivate respondentP, as a .orporation, &ost its eAisten.e
and -uridi.a& persona&it/, Att/. Ro%ua&do #. Ju,a/ *ad no %ore .&ient in t*is
.ase and so *is appearan.e in t*is .ase 9as no &onger possi,&e and
tena,&eI
@. !*at in vie9 o+ t*e +oregoing pre%ises, t*ere+ore, t*e de.ision rendered
,/ t*is 4onora,&e Court and ,/ t*e 4onora,&e Court o+ Appea&s are patent
nu&&it/, +or &a.0 o+ -urisdi.tion and &a.0 o+ .apa.it/ to sue and ,e sued on
t*e part o+ t*e Oprivate respondentPI
=. !*at t*e a,ove-stated .*ange in t*e situation o+ parties, 9*ere,/ t*e
Oprivate respondentP .eased to eAist sin.e ( Ju&/ 1:(;, renders t*e
eAe.ution o+ t*e de.ision ine?uita,&e or i%possi,&e.
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Private respondent opposed petitionersG %otion. It argued t*at t*e
-urisdi.tion o+ t*e .ourt as 9e&& as t*e respe.tive partiesG .apa.it/ to sue
*ad a&read/ ,een esta,&is*ed during t*e initia& stages o+ t*e .aseI and t*at
9*en t*e .o%p&aint 9as 3&ed in 1:(', private respondent 9as sti&& an
eAisting .orporation so t*at t*e %ere +a.t t*at it 9as disso&ved at t*e ti%e
t*e .ase 9as /et to ,e reso&ved did not 9arrant t*e dis%issa& o+ t*e .ase or
oust t*e tria& .ourt o+ its -urisdi.tion. Private respondent +urt*er .&ai%ed
t*at its disso&ution 9as eHe.ted in order to trans+er its assets to a ne9 3r%
o+ a&%ost t*e sa%e na%e and 9as t*us on&/ +or .onvenien.e.
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On 6e,ruar/ '(, 1::1, t*e tria& .ourt issued an order
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den/ing petitionersG
%otion to ?uas*. Petitioners t*en 3&ed a noti.e o+ appea&, ,ut private
respondent %oved to dis%iss t*e appea& on t*e ground t*at t*e tria& .ourtGs
order o+ 6e,ruar/ '(, 1::1 den/ing petitionersG %otion to ?uas* 9rit o+
eAe.ution 9as not appea&a,&e.
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!*e tria& .ourt, *o9ever, denied private
respondentGs %otion and a&&o9ed petitioners to pursue t*eir appea&.
In its reso&ution
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o+ Septe%,er ;, 1::1, t*e appe&&ate .ourt dis%issed
petitionersG appea&. Petitioners %oved +or a re.onsideration, ,ut t*eir
%otion 9as denied ,/ t*e appe&&ate .ourt in its reso&ution, dated Nove%,er
'=, 1::1.
;1 | P a g e
4en.e, t*is petition +or revie9 on .ertiorari. Petitioners pra/ t*at t*e
reso&utions, dated Septe%,er ;, 1::1 and Nove%,er '=, 1::1, o+ t*e Court
o+ Appea&s ,e set aside and t*at a ne9 de.ision ,e rendered de.&aring t*e
order o+ t*e tria& .ourt den/ing t*e %otion to ?uas* to ,e appea&a,&e and
ordering t*e Court o+ Appea&s to give due .ourse to t*e appea&.
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On t*e ot*er *and, private respondent argues t*at petitioners 0ne9 t*at it
*ad .eased to eAist during t*e .ourse o+ t*e tria& o+ t*e .ase ,ut did not a.t
upon t*is in+or%ation unti& t*e -udg%ent 9as a,out to ,e en+or.ed against
t*e%I *en.e, t*e 3&ing o+ a #otion to Vuas* and t*e present petition are
%ere di&ator/ ta.ti.s resorted to ,/ petitioners. Private respondent &i0e9ise
.ites t*e ru&ing o+ t*is Court in Gelano v. Co#rt of Appeals
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t*at t*e .ounse&
o+ a disso&ved .orporation is dee%ed a trustee o+ t*e sa%e +or purposes o+
.ontinuing su.* a.tion or a.tions as %a/ ,e pending at t*e ti%e o+ t*e
disso&ution to .ounter petitionersG .ontention t*at private respondent &ost
its .apa.it/ to sue and ,e sued &ong ,e+ore t*e tria& .ourt rendered
-udg%ent and *en.e eAe.ution o+ su.* -udg%ent .ou&d not ,e .o%p&ied
9it* as t*e -udg%ent .reditor *as .eased to eAist.
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F342t. !*e ?uestion is 9*et*er t*e order o+ t*e tria& .ourt den/ing
petitionersG #otion to Vuas* 7rit o+ EAe.ution is appea&a,&e. As a genera&
ru&e, no appea& &ies +ro% su.* an order, ot*er9ise &itigation 9i&& ,e.o%e
inter%ina,&e. !*ere are eA.eptions, ,ut t*is .ase does not +a&& 9it*in an/ o+
su.* eA.eptions.
In Limpin% Jr. v. 0ntermeiate Appellate Co#rt, t*is Court *e&d:
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Certain, it is, . . . t*at eAe.ution o+ 3na& and eAe.utor/ -udg%ents %a/ no
&onger ,e .ontested and prevented, and no appea& s*ou&d &ie t*ere+ro%I
ot*er9ise, .ases 9ou&d ,e inter%ina,&e, and t*ere 9ou&d ,e negation o+ t*e
over%astering need to end &itigations.
!*ere %a/, to ,e sure, ,e instan.es 9*en an error %a/ ,e .o%%itted in
t*e .ourse o+ eAe.ution pro.eedings pre-udi.ia& to t*e rig*ts o+ a
part/. !*ese instan.es, rare t*oug* t*e/ %a/ ,e, do .a&& +or .orre.tion ,/ a
superior .ourt, as 9*ere -
12 t*e 9rit o+ eAe.ution varies t*e -udg%entI
'2 t*ere *as ,een a .*ange in t*e situation o+ t*e parties %a0ing
eAe.ution ine?uita,&e or un-ustI
;2 eAe.ution is soug*t to ,e en+or.ed against propert/ eAe%pt +ro%
eAe.utionI
<2 it appears t*at t*e .ontrovers/ *as never ,een su,%itted to t*e
-udg%ent o+ t*e .ourtI
@2 t*e ter%s o+ t*e -udg%ent are not .&ear enoug* and t*ere re%ains
roo% +or interpretation t*ereo+I or,
=2 it appears t*at t*e 9rit o+ eAe.ution *as ,een i%provident&/ issued,
or t*at it is de+e.tive in su,stan.e, or is issued against t*e 9rong part/, or
t*at t*e -udg%ent de,t *as ,een paid or ot*er9ise satis3ed, or t*e 9rit 9as
issued 9it*out aut*orit/I
In t*ese eA.eptiona& .ir.u%stan.es, .onsiderations o+ -usti.e and e?uit/
di.tate t*at t*ere ,e so%e %ode avai&a,&e to t*e part/ aggrieved o+
e&evating t*e ?uestion to a *ig*er .ourt. !*at %ode o+ e&evation %a/ ,e
eit*er ,/ appea& 19rit o+ error or certiorari2 or ,/ a spe.ia& .ivi& a.tion
o+ certiorari, pro*i,ition, or manam#s.
In t*is .ase, petitioners an.*ored t*eir #otion to Vuas* on t*e .&ai% t*at
t*ere 9as a .*ange in t*e situation o+ t*e parties. 4o9ever, a perusa& o+
t*e .ases 9*i.* *ave re.ogniCed su.* a ground as an eA.eption to t*e
genera& ru&e s*o9s t*at t*e .*ange .onte%p&ated ,/ su.* eA.eption is one
9*i.* o..urred su,se?uent to t*e -udg%ent o+ t*e tria& .ourt. 4ere, t*e
.*ange in t*e status o+ private respondent too0 p&a.e in 1:(;, 9*en it 9as
disso&ved, during t*e penden./ o+ its .ase in t*e tria& .ourt. !*e .*ange
o..urred prior to t*e rendition o+ -udg%ent ,/ t*e tria& .ourt.
It is true t*at private respondent did not in+or% t*e tria& .ourt o+ t*e
approva& o+ t*e a%ended arti.&es o+ in.orporation 9*i.* s*ortened its ter%
o+ eAisten.e. 4o9ever, it is in.redi,&e t*at petitioners did not 0no9 a,out
t*e disso&ution o+ private respondent .onsidering t*e ti%e it too0 t*e tria&
.ourt to de.ide t*e .ase and t*e +a.t t*at petitioner Er,ano Re,uriano 9as
a +or%er e%p&o/ee o+ private respondent. As private respondent sa/s,
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sin.e petitioner Re,uriano 9as a +or%er sa&es %anager o+ t*e .o%pan/,
it .ou&d ,e reasona,&/ presu%ed t*at petitioners 0ne9 o+ t*e .*anges
o..urring in respondent .o%pan/. C&ear&/, t*e present .ase does not +a&&
under t*e eA.eption re&ied upon ,/ petitioners and, t*e Court o+ Appea&s
.orre.t&/ denied due .ourse to t*e appea&. As *as ,een noted, t*ere are in
+a.t .ases 9*i.* *o&d t*at 9*i&e parties are given a re%ed/ +ro% a denia&
o+ a %otion to ?uas* or re.a&& 9rit o+ eAe.ution, it is e?ua&&/ sett&ed t*at t*e
9rit 9i&& not ,e re.a&&ed ,/ reason o+ an/ de+ense 9*i.* .ou&d *ave ,een
%ade at t*e ti%e o+ t*e tria& o+ t*e .ase.
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Seco./. !*e Court o+ Appea&s a&so *e&d t*at in an/ event petitioners
.annot raise t*e ?uestion o+ .apa.it/ o+ a disso&ved .orporation to %aintain
or de+end a.tions previous&/ 3&ed ,/ or against it ,e.ause t*e %atter *ad
not ,een raised ,/ petitioners ,e+ore t*e tria& .ourt nor in t*eir appea& +ro%
t*e de.ision o+ t*e said .ourt. !*e appe&&ate .ourt stated:
It appears t*at said %otion to ?uas* 9rit o+ eAe.ution is an.*ored on t*e
ground t*at p&aintiH-appe&&ee Pepsi "ott&ing Co%pan/ o+ t*e P*i&ippines *ad
,een disso&ved as a .orporation in 1:(;, a+ter t*e 3&ing o+ t*is .ase ,e+ore
t*e &o9er .ourt, *en.e, it *ad &ost its .apa.it/ to sue. 4o9ever, t*is 9as
never raised as an issue ,e+ore t*e &o9er .ourt and t*e Court o+ Appea&s
9*en t*e sa%e 9as e&evated on appea&. !*e de.ision o+ t*is Court, t*roug*
its 6ourt* ivision, dated June '=, 1::), in CA-8.R. CV No. 1=)>) 9*i.*, in
eHe.t, %odi3ed t*e appea&ed de.ision, .onse?uent&/ did not tou.* on t*e
issue o+ &a.0 o+ .apa.it/ to sue, and *as sin.e ,e.o%e 3na& and eAe.utor/
on Ju&/ 1=, 1::), and *as ,een re%anded to t*e .ourt a :#o +or
eAe.ution. It is readi&/ apparent t*at t*e sa%e .an no &onger ,e %ade t*e
,asis +or t*is appea& regarding t*e denia& o+ t*e %otion to ?uas* 9rit o+
eAe.ution. It s*ou&d *ave ,een %ade in t*e ear&ier appea& as t*e sa%e 9as
a&read/ o,taining at t*at ti%e.
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7e agree 9it* t*is ru&ing. Ru&es o+ +air p&a/, -usti.e, and due pro.ess
di.tate t*at parties .annot raise +or t*e 3rst ti%e on appea& +ro% a denia& o+
a #otion to Vuas* a 7rit o+ EAe.ution issues 9*i.* t*e/ .ou&d *ave raised
,ut never did during t*e tria& and even on appea& +ro% t*e de.ision o+ t*e
tria& .ourt.
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#h34/. In an/ event, i+ t*e ?uestion o+ private respondentGs .apa.it/ to sue
.an ,e raised +or t*e 3rst ti%e in t*is .ase, 9e t*in0 petitioners are in error
in .ontending t*at Ma disso&ved and non-eAisting .orporation .ou&d no
;' | P a g e
&onger ,e represented ,/ a &a9/er and .on.o%itant&/ a &a9/er .ou&d not
appear as .ounse& +or a non-eAisting -udi.ia& person.L
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Se.tion 1'' o+ t*e Corporation Code provides in part:
]1''. Corporate Li:#iation. - Ever/ Corporation 9*ose .*arter eApires ,/
its o9n &i%itation or is annu&&ed ,/ +or+eiture or ot*er9ise, or 9*ose
.orporate eAisten.e +or ot*er purposes is ter%inated in an/ ot*er %anner,
s*a&& nevert*e&ess ,e .ontinued as a ,od/ .orporate +or t*ree 1;2 /ears
a+ter t*e ti%e 9*en it 9ou&d *ave ,een so disso&ved, +or t*e purpose o+
prose.uting and de+ending suits ,/ or against it and ena,&ing it to sett&e
and .&ose its aHairs, to dispose o+ and .onve/ its propert/ and to distri,ute
its assets, ,ut not +or t*e purpose o+ .ontinuing t*e ,usiness +or 9*i.* it
9as esta,&is*ed.
At an/ ti%e during said t*ree 1;2 /ears, said .orporation is aut*oriCed and
e%po9ered to .onve/ a&& o+ its propert/ to trustees +or t*e ,ene3t o+
sto.0*o&ders, %e%,ers, .reditors, and ot*er persons in interest. 6ro% and
a+ter an/ su.* .onve/an.e ,/ t*e .orporation o+ its propert/ in trust +or t*e
,ene3t o+ its sto.0*o&ders, %e%,ers, .reditors and ot*ers in interests, a&&
interests 9*i.* t*e .orporation *ad in t*e propert/ ter%inates, t*e &ega&
interest vests in t*e trustees, and t*e ,ene3.ia& interest in t*e
sto.0*o&ders, %e%,ers, .reditors or ot*er persons in interest.
Petitioners argue t*at 9*i&e private respondent Pepsi Co&a "ott&ing
Co%pan/ o+ t*e P*i&ippines, In.. undertoo0 a vo&untar/ disso&ution on Ju&/ ;,
1:(; and t*e pro.ess o+ &i?uidation +or t*ree 1;2 /ears t*erea+ter, t*ere is
no s*o9ing t*at a trustee or re.eiver 9as ever appointed. !*e/ .ontend
t*at ]1'' o+ t*e Corporation Code does not aut*oriCe a .orporation, a+ter
t*e t*ree-/ear &i?uidation period, to .ontinue a.tions instituted ,/ it 9it*in
said period o+ t*ree /ears. Petitioners .ite t*e .ase o+ 4ational Abaca an
1ther Fibers Corporation v. Pore
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9*erein t*is Court stated:
It is genera&&/ *e&d, t*at 9*ere a statute .ontinues t*e eAisten.e o+ a
.orporation +or a .ertain period a+ter its disso&ution +or t*e purpose o+
prose.uting and de+ending suits, et.., t*e .orporation ,e.o%es de+un.t
upon t*e eApiration o+ su.* period, at &east in t*e a,sen.e o+ a provision to
t*e .ontrar/, so t*at no a.tion .an a+ter9ards ,e ,roug*t ,/ or against it,
and %ust ,e dis%issed. A.tions pending ,/ or against t*e .orporation
9*en t*e period a&&o9ed ,/ t*e statute eApires, ordinari&/ a,ate.
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!*is ru&ing, *o9ever, *as ,een %odi3ed ,/ su,se?uent .ases. In Boar of
Li:#iators v. >ala7,
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t*is Court stated:
. . .!*e &ega& interest ,e.a%e vested in t*e trustee ^ t*e "oard o+
Li?uidators. !*e ,ene3.ia& interest re%ained 9it* t*e so&e
sto.0*o&der ^ t*e govern%ent. At no ti%e *ad t*e govern%ent 9it*dra9n
t*e propert/, or t*e aut*orit/ to .ontinue t*e present suit, +ro% t*e "oard
o+ Li?uidators. I+ +or t*is reason a&one, 9e .annot sta/ t*e *and o+ t*e
"oard o+ Li?uidators +ro% prose.uting t*is .ase to its 3na& .on.&usion. !*e
provision o+ Se.tion >( 1no9 Se.tion 1''2 o+ t*e Corporation La9 ^t*e t*ird
%et*od o+ 9inding up .orporate aHairs ^ 3nds app&i.ation.
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Indeed, in Gelano vs. Co#rt of Appeals,
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a .ase *aving su,stantia&&/
si%i&ar +a.ts as t*e instant .ase, t*is Court *e&d:
4o9ever, a .orporation t*at *as a pending a.tion and 9*i.* .annot ,e
ter%inated 9it*in t*e t*ree-/ear period a+ter its disso&ution is aut*oriCed
under Se.. >( Ono9 ]1''P o+ t*e Corporation La9 to .onve/ a&& its propert/
to trustees to ena,&e it to prose.ute and de+end suits ,/ or against t*e
.orporation ,e/ond t*e t*ree-/ear period. A&t*oug* private respondent did
not appoint an/ trustee, /et t*e .ounse& 9*o prose.uted and de+ended t*e
interest o+ t*e .orporation in t*e instant .ase and 9*o in +a.t appeared in
,e*a&+ o+ t*e .orporation %a/ ,e .onsidered a trustee o+ t*e .orporation at
&east 9it* respe.t to t*e %atter in &itigation on&/. Said .ounse& *ad ,een
*and&ing t*e .ase 9*en t*e sa%e 9as pending ,e+ore t*e tria& .ourt unti& it
9as appea&ed ,e+ore t*e Court o+ Appea&s and 3na&&/ to t*is Court. 7e
t*ere+ore *o&d t*at t*ere 9as su,stantia& .o%p&ian.e 9it* Se.. >( Ono9
]1''P o+ t*e Corporation La9 and su.* private respondent Insu&ar Sa9%i&&,
In.. .ou&d sti&& .ontinue prose.uting t*e present .ase even ,e/ond t*e
period o+ t*ree 1;2 /ears +ro% t*e ti%e o+ disso&ution.
...O!P*e trustee %a/ .o%%en.e a suit 9*i.* .an pro.eed to 3na& -udg%ent
even ,e/ond t*e t*ree-/ear period. No reason .an ,e .on.eived 9*/ a suit
a&read/ .o%%en.ed ,/ t*e .orporation itse&+ during its eAisten.e, not ,/ a
%ere trustee 9*o, ,/ 3.tion, %ere&/ .ontinues t*e &ega& persona&it/ o+ t*e
disso&ved .orporation s*ou&d not ,e a..orded si%i&ar treat%ent
a&&o9ed ^ to pro.eed to 3na& -udg%ent and eAe.ution t*ereo+.L
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In t*e Gelano .ase, t*e .ounse& o+ t*e disso&ved .orporation 9as .onsidered
a trustee. In t*e &ater .ase o+ C&e%ente v. Court o+ Appea&s,
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9e *e&d t*at
t*e ,oard o+ dire.tors %a/ ,e per%itted to .o%p&ete t*e .orporate
&i?uidation ,/ .ontinuing as MtrusteesL ,/ &ega& i%p&i.ation. 6or, indeed, as
ear&/ as 1:;:, in t*e .ase o+ S#mera v. ;alencia,
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t*is Court *e&d:
It is to ,e noted t*at t*e ti%e during 9*i.* t*e .orporation, t*roug* its o9n
o5.ers, %a/ .ondu.t t*e &i?uidation o+ its assets and sue and ,e sued as a
.orporation is &i%ited to t*ree /ears +ro% t*e ti%e t*e period o+ disso&ution
.o%%en.esI ,ut t*ere is no ti%e &i%it 9it*in 9*i.* t*e trustees %ust
.o%p&ete a &i?uidation p&a.ed in t*eir *ands. It is provided on&/ 1Corp. La9,
Se.. >( Ono9 Se.. 1''P2 t*at t*e .onve/an.e to t*e trustees %ust ,e %ade
9it*in t*e t*ree-/ear period. It %a/ ,e +ound i%possi,&e to .o%p&ete t*e
9or0 o+ &i?uidation 9it*in t*e t*ree-/ear period or to redu.e disputed .&ai%s
to -udg%ent. !*e aut*orities are to t*e eHe.t t*at suits ,/ or against a
.orporation a,ate 9*en it .eased to ,e an entit/ .apa,&e o+ suing or ,eing
sued 1> R.C.L., Corps., par. >@)2I ,ut trustees to 9*o% t*e .orporate assets
*ave ,een .onve/ed pursuant to t*e aut*orit/ o+ Se.. >( Ono9 Se.. 1''P
%a/ sue and ,e sued as su.* in a&& %atters .onne.ted 9it* t*e &i?uidation.
. . .
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6urt*er%ore, t*e Corporation La9 provides:
]1<@. Amenment or repeal. - No rig*t or re%ed/ in +avor o+ or against an/
.orporation, its sto.0*o&ders, %e%,ers, dire.tors, trustees, or o5.ers, nor
an/ &ia,i&it/ in.urred ,/ an/ su.* .orporation, sto.0*o&ders, %e%,ers,
dire.tors, trustees, or o5.ers, s*a&& ,e re%oved or i%paired eit*er ,/ t*e
su,se?uent disso&ution o+ said .orporation or ,/ an/ su,se?uent
a%end%ent or repea& o+ t*is Code or o+ an/ part t*ereo+.
!*is provision sa+eguards t*e rig*ts o+ a .orporation 9*i.* is disso&ved
pending &itigation.
!*ere is, t*ere+ore, no reason 9*/ t*e suit 3&ed ,/ private respondent
s*ou&d not ,e a&&o9ed to pro.eed to eAe.ution. It is .on.eded ,/
petitioners t*at t*e -udg%ent against t*e% and in +avor o+ private
respondent in C.A. 8.R. No. 1=)>) *ad ,e.o%e 3na& and eAe.utor/. !*e
;; | P a g e
on&/ reason +or t*eir re+usa& to eAe.ute t*e sa%e is t*at t*ere is no eAisting
.orporation to 9*i.* t*e/ are inde,ted. Su.* argu%ent is +a&&a.ious. As
previous&/ %entioned, t*e &a9 spe.i3.a&&/ a&&o9s a trustee to %anage t*e
aHairs o+ t*e .orporation in &i?uidation. Conse?uent&/, an/ supervening
+a.t, su.* as t*e disso&ution o+ t*e .orporation, repea& o+ a &a9, or an/ ot*er
+a.t o+ si%i&ar nature 9ou&d not serve as an eHe.tive ,ar to t*e
en+or.e%ent o+ su.* rig*t.
W)EREFORE, t*e reso&utions, dated Septe%,er ;, 1::1 and Nove%,er
'=, 1::1, o+ t*e Court o+ Appea&s are A66IR#E.
SO OR'ERE'.
XXXXXXXXXXXXXXXXXXXX
G.R. No. 1QQ;@. NoBe7=e4 Q;, Q;;1L
NA#IONAL POWER CORPORA#ION, petitioner, vs. P)ILIPP
BRO#)ERS OCEANIC, INC., respondent.
' E C I S I O N
SAN'O%AL1G&#IERRE,, J.:
7*ere a person %ere&/ uses a rig*t pertaining to *i%, 9it*out ,ad +ait* or
intent to in-ure, t*e +a.t t*at da%ages are t*ere,/ suHered ,/ anot*er 9i&&
not %a0e *i% &ia,&e.
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!*is prin.ip&e 3nds use+u& app&i.ation to t*e present .ase.
"e+ore us is a petition +or revie9 o+ t*e e.ision
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dated August '>, 1::= o+
t*e Court o+ Appea&s a5r%ing in toto t*e e.ision
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dated Januar/ 1=, 1::'
o+ t*e Regiona& !ria& Court, "ran.* @>, #a0ati Cit/.
!*e +a.ts are:
On #a/ 1<, 1:(>, t*e Nationa& Po9er Corporation 1NAPOCOR2 issued
invitations to ,id +or t*e supp&/ and de&iver/ o+ 1'),))) %etri. tons o+
i%ported .oa& +or its "atangas Coa&-6ired !*er%a& Po9er P&ant in Ca&a.a,
"atangas. !*e P*i&ipp "rot*ers O.eani., In.. 1P4I"RO2 pre?ua&i3ed and 9as
a&&o9ed to parti.ipate as one o+ t*e ,idders. A+ter t*e pu,&i. ,idding 9as
.ondu.ted, P4I"ROGs ,id 9as a..epted. NAPOCORGs a..eptan.e 9as
.onve/ed in a &etter dated Ju&/ (, 1:(>, 9*i.* 9as re.eived ,/ P4I"RO on
Ju&/ 1@, 1:(>.
!*e M"idding !er%s and Spe.i3.ationsL
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provide +or t*e %anner o+
s*ip%ent o+ .oa&s, t*us:
OSEC#ION %
S)IPMEN#
!*e 9inning #EN'ERER 9*o t*en ,e.o%es t*e SELLER s*a&& arrange and
provide gear&ess ,u&0 .arrier +or t*e s*ip%ent o+ .oa& to arrive at
dis.*arging port on or ,e+ore th34t> *:;+ cale./a4 /a>2 a9te4 4ece3<t o9
the Lette4 o9 C4e/3t => the SELLER o4 3t2 .o73.ee as per Se.tion DIV
*ereo+ to %eet t*e vesse& arriva& s.*edu&es at Ca&a.a, "atangas, P*i&ippines
as +o&&o9s:
=),))) _N - 1) T Ju&/ '), 1:(>
=),))) _N - 1)T Septe%,er <, 1:(>L
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On Ju&/ 1), 1:(>, P4I"RO sent 9ord to NAPOCOR t*at industria& disputes
%ig*t soon p&ague Austra&ia, t*e s*ip%entGs point o+ origin, 9*i.* .ou&d
serious&/ *a%per P4I"ROGs a,i&it/ to supp&/ t*e needed .oa&.
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6ro% Ju&/ ';
to Ju&/ ;1, 1:(>, P4I"RO again apprised NAPOCOR o+ t*e situation in
Austra&ia, parti.u&ar&/ in+or%ing t*e &atter t*at t*e s*ip o9ners t*erein are
not 9i&&ing to &oad .argo un&ess a Mstri0e-+reeL .&ause is in.orporated in t*e
.*arter part/ or t*e .ontra.t o+ .arriage.
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In order to *asten t*e trans+er o+
.oa&, P4I"RO proposed to NAPOCOR t*at t*e/ e?ua&&/ s*are t*e ,urden o+ a
Mstri0e-+reeL .&ause. NAPOCOR re+used.
On August =, 1:(>, P4I"RO re.eived +ro% NAPOCOR a .on3r%ed and
9or0a,&e &etter o+ .redit. Instead o+ de&ivering t*e .oa& on or ,e+ore t*e
t*irtiet* da/ a+ter re.eipt o+ t*e Letter o+ Credit, as agreed upon ,/ t*e
parties in t*e Ju&/ .ontra.t, P4I"RO eHe.ted its 3rst s*ip%ent on&/ on
Nove%,er 1>, 1:(>.
Conse?uent&/, in O.to,er 1:(>, NAPOCOR on.e %ore advertised +or t*e
de&iver/ o+ .oa& to its Ca&a.a t*er%a& p&ant. P4I"RO parti.ipated ane9 in
t*is su,se?uent ,idding. On Nove%,er '<, 1:(>, NAPOCOR disapproved
P4I"ROGs app&i.ation +or pre-?ua&i3.ation to ,id +or not %eeting t*e
%ini%u% re?uire%ents.
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Epon +urt*er in?uir/, P4I"RO +ound t*at t*e rea&
reason +or t*e disapprova& 9as its purported +ai&ure to satis+/ NAPOCORGs
de%and +or da%ages due to t*e de&a/ in t*e de&iver/ o+ t*e 3rst .oa&
s*ip%ent.
!*is pro%pted P4I"RO to 3&e an a.tion +or da%ages 9it* app&i.ation +or
in-un.tion against NAPOCOR 9it* t*e Regiona& !ria& Court, "ran.* @>,
#a0ati Cit/.
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In its .o%p&aint, P4I"RO a&&eged t*at NAPOCORGs a.t o+
dis?ua&i+/ing it in t*e O.to,er 1:(> ,idding and in a&& su,se?uent ,iddings
9as tainted 9it* %a&i.e and ,ad +ait*. P4I"RO pra/ed +or a.tua&, %ora& and
eAe%p&ar/ da%ages and attorne/Gs +ees.
In its ans9er, NAPOCOR averred t*at t*e stri0es in Austra&ia .ou&d not ,e
invo0ed as reason +or t*e de&a/ in t*e de&iver/ o+ .oa& ,e.ause P4I"RO
itse&+ ad%itted t*at as o+ Ju&/ '(, 1:(> t*ose stri0es *ad a&read/
.eased. And, even assu%ing t*at t*e stri0es 9ere sti&& ongoing, P4I"RO
s*ou&d *ave s*ou&dered t*e ,urden o+ a Mstri0e-+reeL .&ause ,e.ause t*eir
.ontra.t 9as MC and 6 Ca&a.a, "atangas, P*i&ippines,L %eaning,
t*e co2t and 94e38ht +ro% t*e point o+ origin unti& t*e point o+ destination
9ou&d ,e +or t*e a..ount o+ P4I"RO. 6urt*er%ore, NAPOCOR .&ai%ed t*at
due to P4I"ROGs +ai&ure to de&iver t*e .oa& on ti%e, it 9as .o%pe&&ed to
pur.*ase .oa& +ro% ASEA at a *ig*er pri.e. NAPOCOR .&ai%ed +or a.tua&
da%ages in t*e a%ount o+ P1',<;=,1(@.>;, representing t*e in.rease in t*e
pri.e o+ .oa&, and a .&ai% o+ P@)),))).)) as &itigation eApenses.
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!*erea+ter, tria& on t*e %erits ensued.
On Januar/ 1=, 1::', t*e tria& .ourt rendered a de.ision in +avor o+ P4I"RO,
t*e dispositive portion o+ 9*i.* reads:
MW)EREFORE, -udg%ent is *ere,/ rendered in +avor o+ p&aintiH P*i&ipp
"rot*ers O.eani. In.. 1P4I"RO2 and against t*e de+endant Nationa& Po9er
Corporation 1NAPOCOR2 ordering t*e said de+endant NAPOCOR:
1. !o reinstate P*i&ipp "rot*ers O.eani., In.. 1P4I"RO2 in t*e de+endant
Nationa& Po9er CorporationGs &ist o+ a..redited ,idders and a&&o9 P4I"RO to
parti.ipate in an/ and a&& +uture tenders o+ Nationa& Po9er Corporation +or
t*e supp&/ and de&iver/ o+ i%ported stea% .oa&I
' !o pa/ P*i&ipp "rot*ers O.eani., In.. 1P4I"RO2I
a. !*e peso e?uiva&ent at t*e ti%e o+ pa/%ent o+ F(=<,))) as
a.tua& da%agesI
,. !*e peso e?uiva&ent at t*e ti%e o+ pa/%ent o+ F1)),))) as %ora&
da%agesI
;< | P a g e
.. !*e peso e?uiva&ent at t*e ti%e o+ pa/%ent o+ F @),))) as
eAe%p&ar/ da%agesI
d. !*e peso e?uiva&ent at t*e ti%e o+ pa/%ent o+ F>;,';1.:1 as
rei%,urse%ent +or eApenses, .ost o+ &itigation and attorne/Gs +eesI
;. !o pa/ t*e .osts o+ suitI
<. !*e .ounter.&ai%s o+ de+endant NAPOCOR are dis%issed +or &a.0 o+
%erit.
SO OR'ERE'.L
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Ensatis3ed, NAPOCOR, t*roug* t*e So&i.itor 8enera&, e&evated t*e .ase to
t*e Court o+ Appea&s. On August '>, 1::=, t*e Court o+ Appea&s rendered a
e.ision a5r%ing in toto t*e e.ision o+ t*e Regiona& !ria& Court. It
ratio.inated t*at:
M!*ere is a%p&e eviden.e to s*o9 t*at a&t*oug* P4I"ROGs de&iver/ o+ t*e
s*ip%ent o+ .oa& 9as de&a/ed, t*e de&a/ 9as in +a.t .aused ,/ a2 Napo.orGs
o9n de&a/ in opening a 9or0a,&e &etter o+ .reditI and ,2 t*e stri0es 9*i.*
p&a?ued t*e Austra&ian .oa& industr/ +ro% t*e 3rst 9ee0 o+ Ju&/ to t*e t*ird
9ee0 o+ Septe%,er 1:(>. Stri0es are in.&uded in t*e de3nition o+
+or.e ma"e#re in Se.tion DVII o+ t*e "idding !er%s and Spe.i3.ations,
1s#pra2, so P*i,ro is not &ia,&e +or an/ de&a/ .aused t*ere,/.
P*i,ro 9as in+or%ed o+ t*e a..eptan.e o+ its ,id on Ju&/ (, 1:(>. e&iver/
o+ .oa& 9as to ,e eHe.ted t*irt/ 1;)2 da/s +ro% Napo.orGs opening o+ a
.on3r%ed and 9or0a,&e &etter o+ .redit. Napo.or 9as on&/ a,&e to do so on
August =, 1:(>.
"/ t*at ti%e, Austra&iaGs .oa& industr/ 9as in t*e %idd&e o+ a seet*ing
.ontrovers/ and unrest, o..asioned ,/ stri0es, overti%e ,ans, %ine
stoppages. !*e origin, t*e s.ope and t*e eHe.ts o+ t*is industria& unrest
are &u.id&/ des.ri,ed in t*e un.ontroverted testi%on/ o+ Ja%es Ar.*i,a&d,
an e%p&o/ee o+ P*i,ro and %e%,er o+ t*e EAport Co%%ittee o+ t*e
Austra&ian Coa& Asso.iation during t*e ti%e t*ese events transpired.
A A A A A A
!*e re.ords a&so attest t*at P*i,ro periodi.a&&/ in+or%ed Napo.or o+ t*ese
deve&op%ents as ear&/ as Ju&/ 1, 1:(>, even ,e+ore t*e ,id 9as
approved. Ket, Napo.or did not +ort*9it* open t*e &etter o+ .redit in order
to avoid de&a/ 9*i.* %ig*t ,e .aused ,/ t*e stri0es and t*eir a+ter-eHe.ts.
MStri0esL are undou,ted&/ in.&uded in t*e +or.e ma"e#re .&ause o+ t*e
"idding !er%s and Spe.i3.ations 1s#pra2. !*e reno9ned .ivi&ist, Pro+. Arturo
!o&entino, de3nes +or.e ma"e#re as Man event 9*i.* ta0es p&a.e ,/ a..ident
and .ou&d not *ave ,een +oreseen.L 1Civi& Code o+ t*e P*i&ippines, Vo&u%e
IV, O,&igations and Constra.ts, 1'=, O1::1P2 4e +urt*er states:
M6ortuitous events %a/ ,e produ.ed ,/ t9o genera& .auses: 112 ,/ Nature,
su.* as eart*?ua0es, stor%s, Uoods, epide%i.s, 3res, et.., and 1'2 ,/ t*e
a.t o+ %an, su.* as an ar%ed invasion, atta.0 ,/ ,andits, govern%enta&
pro*i,itions, ro,,er/, et..L
!o&entino adds t*at t*e ter% genera&&/ app&ies, ,road&/ spea0ing, to natura&
a..idents. In order t*at a.ts o+ %an su.* as a stri0e, %a/ .onstitute
+ortuitous event, it is ne.essar/ t*at t*e/ *ave t*e +or.e o+ an i%position
9*i.* t*e de,tor .ou&d not *ave resisted. 4e .ites a para&&e& eAa%p&e in
t*e .ase o+ Philippine 4ational Bank v. Co#rt of Appeals, :< SCRA ;@>
11:>:2, 9*erein t*e Supre%e Court said t*at t*e out,rea0 o+ 9ar 9*i.*
prevents per+or%an.e eAe%pts a part/ +ro% &ia,i&it/.
4en.e, ,/ &a9 and ,/ stipu&ation o+ t*e parties, t*e stri0es 9*i.* too0 p&a.e
in Austra&ia +ro% t*e 3rst 9ee0 o+ Ju&/ to t*e t*ird 9ee0 o+ Septe%,er,
1:(>, eAe%pted P*i,ro +ro% t*e eHe.ts o+ de&a/ o+ t*e de&iver/ o+ t*e
s*ip%ent o+ .oa&.L
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!9i.e t*9arted, NAPOCOR .o%es to us via a petition +or revie9 as.ri,ing to
t*e Court o+ Appea&s t*e +o&&o9ing errors:
I
ORe2<o./e.t Cou4t o9 A<<eal2 84aBel> a./ 2e43ou2l> e44e/ 3.
co.clu/3.8 a./ 2o hol/3.8 that P)IBRO62 /ela> 3. the /el3Be4> o9
37<o4te/ coal Da2 /ue to NAPOCOR62 alle8e/ /ela> 3. o<e.3.8 a
lette4 o9 c4e/3t a./ to 9o4ce ma,eure, a./ .ot to P)IBRO62 oD.
/el3=e4ate act2 a./ 9ault2.M
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II
ORe2<o./e.t Cou4t o9 A<<eal2 84aBel> a./ 2e43ou2l> e44e/ 3.
co.clu/3.8 a./ 2o hol/3.8 that NAPOCOR acte/ 7al3c3ou2l> a./
u.Gu2t35a=l> 3. /32Aual39>3.8 P)IBRO 94o7 <a4t3c3<at3.8 3. the
'ece7=e4 ?, 1"?7 a./ 9utu4e =3//3.82 9o4 the 2u<<l> o9 37<o4te/
coal /e2<3te the ex32te.ce o9 Bal3/ 84ou./2 the4e9o4 2uch a2
2e43ou2 37<a347e.t o9 3t2 t4acN 4eco4/.M
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III
ORe2<o./e.t Cou4t o9 A<<eal2 84aBel> a./ 2e43ou2l> e44e/ 3.
co.clu/3.8 a./ 2o hol/3.8 that P)IBRO Da2 e.t3tle/ to 3.Gu.ct3Be
4el3e9, to actual o4 co7<e.2ato4>, 7o4al a./ exe7<la4> /a7a8e2,
atto4.e>62 9ee2 a./ l3t38at3o. ex<e.2e2 /e2<3te the clea4 a=2e.ce
o9 le8al a./ 9actual =a2e2 9o4 2uch aDa4/.M
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I%
ORe2<o./e.t Cou4t o9 A<<eal2 84aBel> a./ 2e43ou2l> e44e/ 3.
a=2olB3.8 P)IBRO 94o7 a.> l3a=3l3t> 9o4 /a7a8e2 to NAPOCOR 9o4
3t2 u.Gu2t35e/ a./ /el3=e4ate 4e9u2al a./So4 9a3lu4e to /el3Be4 the
co.t4acte/ 37<o4te/ coal D3th3. the 2t3<ulate/ <e43o/.M
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%
ORe2<o./e.t Cou4t o9 A<<eal2 84aBel> a./ 2e43ou2l> e44e/ 3.
/3273223.8 NAPOCORM2 cou.te4cla372 9o4 /a7a8e2 a./ l3t38at3o.
ex<e.2e2.M
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It is aAio%ati. t*at on&/ ?uestions o+ &a9, not ?uestions o+ +a.t, %a/ ,e
raised ,e+ore t*is Court in a petition +or revie9 under Ru&e <@ o+ t*e Ru&es
o+ Court.
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!*e 3ndings o+ +a.ts o+ t*e Court o+ Appea&s are .on.&usive and
,inding on t*is Court
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and t*e/ .arr/ even %ore 9eig*t 9*en t*e said
.ourt a5r%s t*e +a.tua& 3ndings o+ t*e tria& .ourt.
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Stated diHerent&/, t*e
3ndings o+ t*e Court o+ Appea&s, ,/ itse&+, 9*i.* are supported ,/
su,stantia& eviden.e, are a&%ost ,e/ond t*e po9er o+ revie9 ,/ t*is Court.
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7it* t*e +oregoing sett&ed -urispruden.e, 9e 3nd it point&ess to de&ve
&engt*i&/ on t*e +a.tua& issues raised ,/ petitioner. !*e eAisten.e o+ stri0es
in Austra&ia *aving ,een du&/ esta,&is*ed in t*e &o9er .ourts, 9e are &e+t
on&/ 9it* t*e ,urden o+ deter%ining 9*et*er or not NAPOCOR a.ted
9rong+u&&/ or 9it* ,ad +ait* in dis?ua&i+/ing P4I"RO +ro% parti.ipating in
t*e su,se?uent pu,&i. ,idding.
Let us .onsider t*e .ase in its proper perspe.tive.
;@ | P a g e
!*e Court o+ Appea&s is -usti3ed in sustaining t*e Regiona& !ria& CourtGs
de.ision eAonerating P4I"RO +ro% an/ &ia,i&it/ +or da%ages to NAPOCOR as
it 9as .&ear&/ esta,&is*ed +ro% t*e eviden.e, testi%onia& and do.u%entar/,
t*at 9*at prevented P4I"RO +ro% .o%p&/ing 9it* its o,&igation under t*e
Ju&/ 1:(> .ontra.t 9as t*e industria& disputes 9*i.* ,esieged Austra&ia
during t*at ti%e. EAtant in our Civi& Code is t*e ru&e t*at no person s*a&& ,e
responsi,&e +or t*ose events 9*i.* .ou&d not ,e +oreseeen, or 9*i.*,
t*oug* +oreseen, 9ere inevita,&e.
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!*is %eans t*at 9*en an o,&igor is
una,&e to +u&3&& *is o,&igation ,e.ause o+ a +ortuitous event or
+or.e ma"e#re% *e .annot ,e *e&d &ia,&e +or da%ages +or non-per+or%an.e.
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In addition to t*e a,ove &ega& pre.ept, it is 9ort*/ to note t*at P4I"RO and
NAPOCOR eAp&i.it&/ agreed in Se.tion DVII o+ t*e M"idding !er%s and
Spe.i3.ationsL
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t*at Mneit*er se&&er 1P4I"RO2 nor ,u/er 1NAPOCOR2 s*a&&
,e &ia,&e +or an/ de&a/ in or +ai&ure o+ t*e per+or%an.e o+ its o,&igations,
ot*er t*an t*e pa/%ent o+ %one/ due, i+ an/ su.* de&a/ or +ai&ure is due to
6or.e Ma"e#re., Spe.i3.a&&/, t*e/ de3ned +or.e %a"e#re as Man/ disa,&ing
.ause ,e/ond t*e .ontro& o+ and 9it*out +au&t or neg&igen.e o+ t*e part/,
9*i.* .auses %a/ in.&ude ,ut are not restri.ted to A.ts o+ 8od or o+ t*e
pu,&i. ene%/I a.ts o+ t*e 8overn%ent in eit*er its sovereign or .ontra.tua&
.apa.it/I govern%enta& restri.tionsI 2t43Ne2, 3res, Uoods, 9ars, t/p*oons,
stor%s, epide%i.s and ?uarantine restri.tions.L
!*e &a9 is .&ear and so is t*e .ontra.t ,et9een NAPOCOR and
P4I"RO. !*ere+ore, 9e *ave no reason to ru&e ot*er9ise.
4o9ever, pro.eeding +ro% t*e pre%ise t*at P4I"RO 9as prevented ,/
+or.e ma"e#re +ro% .o%p&/ing 9it* its o,&igation, does it ne.essari&/ +o&&o9
t*at NAPOCOR a.ted un-ust&/, .apri.ious&/, and un+air&/ in disapproving
P4I"ROGs app&i.ation +or pre-?ua&i3.ation to ,idR
6irst, it %ust ,e stressed t*at NAPOCOR 9as not ,ound under an/ .ontra.t
to approve P4I"ROGs pre-?ua&i3.ation re?uire%ents. In +a.t, NAPOCOR *ad
eApress&/ reserved its rig*t to re-e.t ,ids. !*e Instru.tion to "idders +ound
in t*e MPost-Vua&i3.ation o.u%entsN Spe.i3.ations +or t*e Supp&/ and
e&iver/ o+ Coa& +or t*e "atangas Coa&-6ired !*er%a& Po9er P&ant I at
Ca&a.a, "atangas P*i&ippines%,
O'@P
is eAp&i.it, t*us:
OIB117 RESER%A#ION OF NAPOCOR #O RE(EC# BI'S
NAPOCOR reserves t*e rig*t to re-e.t an/ or a&& ,ids, to 9aive an/ %inor
in+or%a&it/ in t*e ,ids re.eived. #he 438ht 32 al2o 4e2e4Be/ to 4eGect
the =3/2 o9 a.> =3//e4 Dho ha2 <4eB3ou2l> 9a3le/ to <4o<e4l>
<e49o47 o4 co7<lete o. t37e a.> a./ all co.t4act2 9o4 /el3Be4> o9
coal o4 a.> 2u<<l> u./e4taNe. => a =3//e4.M
O'=P
1E%p*asis supp&ied2
!*is Court *as *e&d t*at 9*ere t*e rig*t to re-e.t is so reserved, t*e &o9est
,id or an/ ,id +or t*at %atter %a/ ,e re-e.ted on a %ere te.*ni.a&it/.
O'>P
And 9*ere t*e govern%ent as advertiser, avai&ing itse&+ o+ t*at rig*t,
%a0es its .*oi.e in re-e.ting an/ or a&& ,ids, t*e &osing ,idder *as no .ause
to .o%p&ain nor rig*t to dispute t*at .*oi.e un&ess an un+airness or in-usti.e
is s*o9n. Acco4/3.8l>, a =3//e4 ha2 .o 84ou./ o9 act3o. to co7<el
the GoBe4.7e.t to aDa4/ the co.t4act 3. h32 9aBo4, .o4 to co7<el 3t
to acce<t h32 =3/. Even t*e &o9est ,id or an/ ,id %a/ ,e re-e.ted.
O'(P
In Celeste v. Co#rt of Appeals,
O':P
9e *ad t*e o..asion to ru&e:
M#oreover, paragrap* 1@ o+ t*e Instru.tions to "idders states t*at
Qt*e GoBe4.7e.t he4e=> 4e2e4Be2 the 438ht to 4eGect a.> o4 all =3/2
2u=73tte/.G In t*e .ase o+ A.C. Esguerra and Sons v. A/tona, < SCRA
1'<@, 1'<: 11:='2, 9e *e&d:
QA A A OIPn t*e invitation to ,id, t*ere is a .ondition i%posed upon t*e
,idders to t*e eHe.t t*at t*e ,idders s*a&& ,e su,-e.t to t*e rig*t o+ t*e
govern%ent to re-e.t an/ and a&& ,ids su,-e.t to its dis.retion. 4ere the
8oBe4.7e.t ha2 7a/e 3t2 cho3ce, a./ u.le22 a. u.9a34.e22 o4
3.Gu2t3ce 32 2hoD., the lo23.8 =3//e42 haBe .o cau2e to co7<la3.,
nor rig*t to dispute t*at .*oi.e.G
S3.ce the4e 32 .o eB3/e.ce to <4oBe =a/ 9a3th a./ a4=3t4a43.e22 o.
the <a4t o9 the <et3t3o.e42 3. eBaluat3.8 the =3/2, De 4ule that the
<43Bate 4e2<o./e.t2 a4e .ot e.t3tle/ to /a7a8e2 4e<4e2e.t3.8 lo2t
<4o5t2.L 1E%p*asis supp&ied2
Veri&/, a reservation o+ t*e govern%ent o+ its rig*t to re-e.t an/ ,id,
genera&&/ vests in t*e aut*orities a 9ide dis.retion as to 9*o is t*e ,est and
%ost advantageous ,idder. !*e eAer.ise o+ su.* dis.retion invo&ves
in?uir/, investigation, .o%parison, de&i,eration and de.ision, 9*i.* are
?uasi--udi.ia& +un.tions, and 9*en *onest&/ eAer.ised, %a/ not ,e revie9ed
,/ t*e .ourt.
O;)P
In B#rea# ;eritas v. 18ce of the Presient%
O;1P
9e de.reed:
M#he /32c4et3o. to acce<t o4 4eGect a =3/ a./ aDa4/ co.t4act2 32
Be2te/ 3. the GoBe4.7e.t a8e.c3e2 e.t4u2te/ D3th that
9u.ct3o.. #he /32c4et3o. 83Be. to the autho43t3e2 o. th32 7atte4 32
o9 2uch D3/e lat3tu/e that the Cou4t2 D3ll .ot 3.te49e4e the4eD3th,
u.le22 3t 32 a<<a4e.t that 3t 32 u2e/ a2 a 2h3el/ to a 94au/ule.t
aDa4/. 1Ja&andoni v. NARRA, 1)( P*i&. <(= O1:=)P2. A A A. !*e eAer.ise o+
t*is dis.retion is a po&i./ de.ision t*at ne.essitates prior in?uir/,
investigation, .o%parison, eva&uation, and de&i,eration. !*is tas0 .an ,est
,e dis.*arged ,/ t*e 8overn%ent agen.ies .on.erned, not ,/ t*e
Courts. !*e ro&e o+ t*e Courts is to as.ertain 9*et*er a ,ran.* or
instru%enta&it/ o+ t*e 8overn%ent *as transgresses its .onstitutiona&
,oundaries. "ut t*e Courts 9i&& not inter+ere 9it* eAe.utive or &egis&ative
dis.retion eAer.ised 9it*in t*ose ,oundaries. Ot*er9ise, it stra/s into t*e
rea&% o+ po&i./ de.ision-%a0ing. A A A.L 1E%p*asis supp&ied2
O9ing to t*e dis.retionar/ .*ara.ter o+ t*e rig*t invo&ved in t*is .ase, t*e
propriet/ o+ NAPOCORGs a.t s*ou&d t*ere+ore ,e -udged on t*e ,asis o+ t*e
genera& prin.ip&es regu&ating *u%an re&ations, t*e +ore+ront provision o+
9*i.* is Arti.&e 1: o+ t*e Civi& Code 9*i.* provides t*at Mever/ person
%ust, in t*e eAer.ise o+ *is rig*ts and in t*e per+or%an.e o+ *is duties, a.t
9it* -usti.e, give ever/one *is due, and o,serve *onest/ and good
+ait*.L
O;'P
A..ording&/, a person 9i&& ,e prote.ted on&/ 9*en *e a.ts in t*e
&egiti%ate eAer.ise o+ *is rig*t, t*at is, 9*en *e a.ts 9it* pruden.e and in
good +ait*I ,ut not 9*en *e a.ts 9it* neg&igen.e or a,use.
O;;P
id NAPOCOR a,use its rig*t or a.t un-ust&/ in dis?ua&i+/ing P4I"RO +ro%
t*e pu,&i. ,iddingR
7e ru&e in t*e negative.
In pra.ti.e, .ourts, in t*e sound eAer.ise o+ t*eir dis.retion, 9i&& *ave to
deter%ine under a&& t*e +a.ts and .ir.u%stan.es 9*en t*e eAer.ise o+ a
rig*t is un-ust, or 9*en t*ere *as ,een an a,use o+ rig*t.
O;<P
;= | P a g e
7e 9ent over t*e re.ord o+ t*e .ase 9it* painsta0ing so&i.itude and 9e are
.onvin.ed t*at NAPOCORGs a.t o+ disapproving P4I"ROYs app&i.ation +or
pre-?ua&i3.ation to ,id 9as 9it*out an/ intent to in-ure or a purposive
%otive to perpetrate da%age. Apparent&/, NAPOCOR a.ted on t*e strong
.onvi.tion t*at P4I"RO *ad a Mserious&/-i%pairedL tra.0 re.ord. NAPOCOR
.annot ,e +au&ted +ro% ,e&ieving so. At t*is -un.ture, it is 9ort* %entioning
t*at at t*e ti%e NAPOCOR issued its su,se?uent Invitation to "id, i.e.,
O.to,er 1:(>, P4I"RO *ad not /et de&ivered t*e 3rst s*ip%ent o+ .oa&
under t*e Ju&/ 1:(> .ontra.t, 9*i.* 9as due on or ,e+ore Septe%,er @,
1:(>. Natura&&/, NAPOCOR is -usti3ed in entertaining dou,ts on P4I"ROGs
?ua&i3.ation or .apa,i&it/ to assu%e an o,&igation under a ne9 .ontra.t.
#oreover, P4I"ROGs a.tuation in 1:(> raised dou,ts as to t*e rea& situation
o+ t*e .oa& industr/ in Austra&ia. It appears +ro% t*e re.ords t*at 9*en
NAPOCOR 9as .onstrained to .onsider an oHer +ro% anot*er .oa& supp&ier
1ASEA2 at a pri.e o+ ESF;;.<< per %etri. ton, P4I"RO uneApe.ted&/ oHered
t*e i%%ediate de&iver/ o+ =),))) %etri. tons o+ E&an stea% .oa& at
ESF;1.)) per %etri. ton +or arriva& at Ca&a.a, "atangas on Septe%,er ')-
'1, 1:(>.L
O;@P
O+ .ourse, NAPOCOR *ad reason to ponder-- hoD co7e
P)IBRO coul/ a22u4e the 377e/3ate /el3Be4> o9 ;,;;; 7et43c to.2
o9 coal 94o7 the 2a7e 2ou4ce to a443Be at Calaca .ot late4 tha.
Se<te7=e4 Q;SQ1, 1"?7 =ut 3t coul/ .ot /el3Be4 the coal 3t ha/
u./e4taNe. u./e4 3t2 co.t4actR
Signi3.ant&/, one .*ara.teristi. o+ a +ortuitous event, in a &ega& sense, and
.onse?uent&/ in re&ations to .ontra.ts, is t*at Mt*e .on.urren.e %ust ,e
su.* as to render it i%possi,&e +or t*e de,tor to +u&3&& *is o,&igation in a
nor%a& %anner.L
O;=P
6a.ed 9it* t*e a,ove .ir.u%stan.e, NAPOCOR is
-usti3ed in assu%ing t*at, %a/ ,e, t*ere 9as rea&&/ no +ortuitous event or
+or.e ma"e#re 9*i.* .ou&d render it i%possi,&e +or P4I"RO to eHe.t t*e
de&iver/ o+ .oa&. Corresponding&/, it is a&so -usti3ed in treating P4I"ROGs
+ai&ure to de&iver a serious i%pair%ent o+ its tra.0 re.ord. !*at t*e tria&
.ourt, t*erea+ter, +ound P4I"ROGs uneApe.ted oHer a.tua&&/ a resu&t o+ its
desire to %ini%iCe &osses on t*e part o+ NAPOCOR is in.onse?uentia&. In
deter%ining t*e eAisten.e o+ good +ait*, t*e /ardsti.0 is t*e +ra%e o+ %ind
o+ t*e a.tor at t*e ti%e *e .o%%itted t*e a.t, disregarding a.tua&ities or
+a.ts outside *is 0no9&edge. 7e .annot +au&t NAPOCOR i+ it %istoo0
P4I"ROGs uneApe.ted oHer a %ere atte%pt on t*e &atterGs part to under.ut
ASEA or an indi.ation o+ P4I"ROGs in.onsisten./. !*e .ir.u%stan.es 9arrant
su.* .onte%p&ation.
!*at NAPOCOR ,e&ieved a&& a&ong t*at P4I"ROGs +ai&ure to de&iver on ti%e
9as un+ounded is %ani+est +ro% its &etters
O;>P
re%inding P4I"RO t*at it 9as
,ound to de&iver t*e .oa& 9it*in ;) da/s +ro% its 1P4I"ROGs2 re.eipt o+ t*e
Letter o+ Credit, ot*er9ise it 9ou&d ,e .onstrained to ta0e &ega& a.tion. !*e
sa%e *onest ,e&ie+ .an ,e dedu.ed +ro% NAPOCORGs "oard Reso&ution,
t*us:
OO. the le8al a2<ect, Ma.a8e7e.t 2t4e22e/ that 9a3lu4e o9 PBO to
/el3Be4 u./e4 the co.t4act 7aNe2 the7 l3a=le 9o4 /a7a8e2,
co.23/e43.8 that the 4ea2o.2 3.BoNe/ De4e .ot Bal3/. #he 7ea2u4e
o9 the /a7a8e2 D3ll =e l373te/ to actual a./ co7<e.2ato4>
/a7a8e2. 4o9ever, it 9as reported t*at P*i&ipp "rot*ers advised t*e/
9ou&d &i0e to *ave .ontinuous ,usiness re&ation 9it* NPC so t*e/ are 9i&&ing
to sit do9n or even proposed t*at t*e .ase ,e su,%itted to t*e epart%ent
o+ Justi.e as to avoid a .ourt a.tion or ar,itration.
A A A A A A
On t*e te.*ni.a&-e.ono%i. aspe.t, #anage%ent .&ai%s t*at i+ P"O de&ivers
in Nove%,er 1:(> and Januar/ 1:((, t*ere are so%e advantages. I+ P"O
rea.ts to an/ &ega& a.tion and +ai&s to de&iver, t*e options are: one, to use
1))T Se%irara and se.ond, to go into urgent .oa& order. !*e 3rst option
9i&& resu&t in a >@ #7 derating and oi& 9i&& ,e needed as supp&e%ent. We
D3ll 2ta./ to lo2e a4ou./ P:; M. On t*e ot*er *and, i+ NPC goes into an
urgent .oa& order, t*ere 9i&& ,e an additiona& eApense o+ F>(=,)))
or P1=.11 #, .onsidering t*e pri.e o+ t*e &atest pur.*ase 9it* ASEA. O.
=oth <o3.t2, 4el3a=3l3t> 32 /ec4ea2e/.M
O;(P
!*e ver/ purpose o+ re?uiring a ,idder to +urnis* t*e a9arding aut*orit/ its
pre-?ua&i3.ation do.u%ents is to ensure t*at on&/ t*ose Mresponsi,&eL and
M?ua&i3edL ,idders .ou&d ,id and ,e a9arded 9it* govern%ent .ontra.ts. It
,ears stressing t*at t*e a9ard o+ a .ontra.t is %easured not so&e&/ ,/ t*e
s%a&&est a%ount o+ ,id +or its per+or%an.e, ,ut a&so ,/ t*e Mresponsi,i&it/L
o+ t*e ,idder. Conse?uent&/, t*e integrit/, *onest/, and trust9ort*iness o+
t*e ,idder is to ,e .onsidered. An a9arding o5.ia& is -usti3ed in
.onsidering a ,idder not ?ua&i3ed or not responsi,&e i+ *e *as previous&/
de+rauded t*e pu,&i. in su.* .ontra.ts or i+, on t*e eviden.e ,e+ore *i%,
t*e o5.ia& -ona fde ,e&ieves t*e ,idder *as .o%%itted su.*
+raud, /e2<3te the 9act that the4e 32 >et .o Gu/3c3al /ete473.at3o. to
that eFect.
O;:P
Ot*er9ise stated, i+ t*e a9arding ,od/ -ona fde ,e&ieves
t*at a ,idder *as serious&/ i%paired its tra.0 re.ord ,e.ause o+ a parti.u&ar
.ondu.t, it is -usti3ed in dis?ua&i+/ing t*e ,idder. !*is po&i./ is ne.essar/ to
prote.t t*e interest o+ t*e a9arding ,od/ against irresponsi,&e ,idders.
!*us, one 9*o a.ted pursuant to t*e sin.ere ,e&ie+ t*at anot*er 9i&&+u&&/
.o%%itted an a.t pre-udi.ia& to t*e interest o+ t*e govern%ent .annot ,e
.onsidered to *ave a.ted in ,ad +ait*. "ad +ait* *as a&9a/s ,een a
?uestion o+ intention. It is t*at .orrupt %otive t*at operates in t*e
%ind. As understood in &a9, it .onte%p&ates a state o+ %ind a5r%ative&/
operating 9it* +urtive design or 9it* so%e %otive o+ se&+-interest or i&&-9i&&
or +or u&terior purpose.
O<)P
7*i&e .on3ned in t*e rea&% o+ t*oug*t, its
presen.e %a/ ,e as.ertained t*roug* t*e part/Gs a.tuation or t*roug*
.ir.u%stantia& eviden.e.
O<1P
!*e .ir.u%stan.es under 9*i.* NAPOCOR
disapproved P4I"ROYs pre-?ua&i3.ation to ,id do not s*o9 an intention to
.ause da%age to t*e &atter. !*e %easure it adopted 9as one o+ se&+-
prote.tion. Conse?uent&/, 9e .annot pena&iCe NAPOCOR +or t*e .ourse o+
a.tion it too0. NAPOCOR .annot ,e %ade &ia,&e +or a.tua&, %ora& and
eAe%p&ar/ da%ages.
Coro&&ari&/, in a9arding to P4I"RO a.tua& da%ages in t*e a%ount
o+ F(=<,))), t*e Regiona& !ria& Court .o%puted 9*at .ou&d *ave ,een t*e
pro3ts o+ P4I"RO *ad NAPOCOR a&&o9ed it to parti.ipate in t*e su,se?uent
pu,&i. ,idding. It ru&ed t*at MP4I"RO 9ou&d *ave 9on t*e tenders +or t*e
supp&/ o+ a,out :=),))) %etri. tons out o+ at &east 1,')),))) %etri. tonsL
+ro% t*e pu,&i. ,idding o+ e.e%,er 1:(> to 1::). 7e ?uote t*e tria&
.ourtGs ru&ing, t*us:
MA A A. P4I"RO 9as un-ust&/ eA.&uded +ro% parti.ipating in at &east 3ve 1@2
tenders ,eginning e.e%,er 1:(> to 1::), +or t*e supp&/ and de&iver/ o+
;> | P a g e
i%ported .oa& 9it* a tota& vo&u%e o+ a,out 1,')),))) %etri. tons va&ued at
no &ess t*an ESF;' #i&&ion. 1EA*s. MAA,L MAA-1,L to MAA-'L2. !*e pri.e o+
i%ported .oa& +or de&iver/ in 1:(( 9as ?uoted in June 1:(( ,/ ,idders at
ESF <1.;@ to ES F <;.:@ per %etri. ton 1EA*. MJJL2I in Septe%,er 1:(( at
ESF<1.@) to ESF<:.@) per %etri. ton 1EA*. MJ-1L2I in Nove%,er 1:(( at
ESF ;:.)) to ESF <(.@) per %etri. ton 1EA*. MJ-'L2 and +or t*e 1:(:
de&iveries, at ESF <<.;@ to ESF <>.;@ per %etri. ton 1EA*. MJ-;L2 and
ESF;(.)) to ESF<(.'@ per %etri. ton in Septe%,er 1::) 1EA*. MJJ-=L and
MJJ->L2. P4I"RO 9ou&d *ave 9on t*e tenders +or t*e supp&/ and de&iver/ o+
a,out :=),))) %etri. tons o+ .oa& out o+ at &east 1,')),))) %etri. tons
a9arded during said period ,ased on its proven tra.0 re.ord o+ ()T. #he
Cou4t, the4e9o4e 5./2 that a2 a 4e2ult o9 3t2 /32Aual35cat3o.,
P)IBRO 2uFe4e/ /a7a8e2 eAu3Bale.t to 3t2 2ta./a4/ :C 7a483. 3.
";,;;; 7et43c to.2 o9 coal at the 7o2t co.2e4Bat3Be <43ce o9 &ST
:;.;;; <e4 7et43c to., o4 the total o9 &ST ?@,;;; Dh3ch P)IBRO
Doul/ haBe ea4.e/ ha/ 3t =ee. alloDe/ to <a4t3c3<ate 3. =3//3.82
3. Dh3ch 3t Da2 /32Aual35e/ a./ 3. 2u=2eAue.t te./e42 9o4 2u<<l>
a./ /el3Be4> o9 37<o4te/ coal.M
7e 3nd t*is to ,e erroneous.
"asi. is t*e ru&e t*at to re.over a.tua& da%ages, t*e a%ount o+ &oss %ust
not on&/ ,e .apa,&e o+ proo+ ,ut %ust a.tua&&/ ,e proven 9it* reasona,&e
degree o+ .ertaint/, pre%ised upon .o%petent proo+ or ,est eviden.e
o,taina,&e o+ t*e a.tua& a%ount t*ereo+.
O<'P
A .ourt .annot %ere&/ re&/ on
spe.u&ations, .on-e.tures, or guess9or0 as to t*e +a.t and a%ount o+
da%ages. !*us, 9*i&e inde%ni3.ation +or da%ages s*a&& .o%pre*end not
on&/ t*e va&ue o+ t*e &oss suHered, ,ut a&so t*at o+ t*e pro3ts 9*i.* t*e
o,&igee +ai&ed to o,tain,
O<;P
it is i%perative t*at t*e ,asis o+ t*e a&&eged
unearned pro3ts is not too spe.u&ative and .on-e.tura& as to s*o9 t*e
a.tua& da%ages 9*i.* %a/ ,e suHered on a +uture period.
In Pantranco 4orth 39press% 0nc. v. Co#rt of Appeals,
O<<P
t*is Court denied
t*e p&aintiHGs .&ai% +or a.tua& da%ages 9*i.* 9as pre%ised on a .ontra.t
*e 9as a,out to negotiate on t*e ground t*at t*ere 9as sti&& t*e re?uisite
pu,&i. ,idding to ,e .o%p&ied 9it*, t*us:
MAs to t*e a&&eged .ontra.t *e 9as a,out to negotiate 9it* #inister 4ipo&ito,
t*ere is no s*o9ing t*at t*e sa%e *as ,een a9arded to *i%. I+ !ando. 9as
a,out to negotiate a .ontra.t 9it* #inister 4ipo&ito, t*ere 9as no assuran.e
t*at t*e +or%er 9ou&d get it or t*at t*e &atter 9ou&d a9ard t*e .ontra.t to
*i% sin.e t*ere 9as t*e re?uisite pu,&i. ,idding. #he cla37e/ lo22 o9
<4o5t a4323.8 out o9 that alle8e/ co.t4act Dh3ch Da2 2t3ll to =e
.e8ot3ate/ 32 a 7e4e ex<ecta.c>. #a./oc62 cla37 that he coul/
haBe ea4.e/ PQ 73ll3o. 3. <4o5t2 32 h38hl> 2<eculat3Be a./ .o
co.c4ete eB3/e.ce Da2 <4e2e.te/ to <4oBe the 2a7e. !*e on&/
unearned in.o%e to 9*i.* !ando. is entit&ed to +ro% t*e eviden.e
presented is t*at +or t*e one-%ont* period, during 9*i.* *is ,usiness 9as
interrupted, 9*i.* isP=,1'@.)), .onsidering t*at *is annua& net in.o%e
9as P>;, @)).)).L
In L#fthansa German Airlines v. Co#rt of Appeals%
O<@P
t*is Court &i0e9ise
disa&&o9ed t*e tria& .ourtYs a9ard o+ a.tua& da%ages +or unrea&iCed pro3ts in
t*e a%ount o+ ESF>@,))).)) +or ,eing *ig*&/ spe.u&ative. It 9as *e&d t*at
Mt*e rea&iCation o+ pro3ts ,/ respondent A A A 9as not a .ertaint/, ,ut
depended on a nu%,er o+ +a.tors, +ore%ost o+ 9*i.* 9as *is a,i&it/ to invite
investors and to D3. the =3/.L !*is Court 9ent +urt*er sa/ing t*at a.tua&
or .o%pensator/ da%ages .annot ,e presu%ed, ,ut %ust ,e du&/ proved,
and proved 9it* reasona,&e degree o+ .ertaint/.
And in 4ational Po7er Corporation v. Co#rt of Appeals%
O<=P
t*e Court, in
den/ing t*e ,idderGs .&ai% +or unrea&iCed .o%%issions, ru&ed t*at even i+
NAPOCOR does not den/ its 1,idderYs2 .&ai%s +or unrea&iCed .o%%issions,
and t*at t*ese .&ai%s *ave ,een trans%uted into -udi.ia& ad%issions, t*ese
ad%issions .annot prevai& over t*e ru&es and regu&ations governing t*e
,idding +or NAPOCOR .ontra.ts, 9*i.* ne.essari&/ and in*erent&/ in.&ude
t*e reservation ,/ t*e NAPOCOR o+ its rig*t to re-e.t an/ or a&& ,ids.
!*e a9ard o+ %ora& da%ages is &i0e9ise i%proper. !o reiterate, NAPOCOR
did not a.t in ,ad +ait*. #oreover, %ora& da%ages are not, as a genera&
ru&e, granted to a .orporation.
O<>P
7*i&e it is true t*at ,es%ir.*ed reputation
is in.&uded in %ora& da%ages, it .annot .ause %enta& anguis* to a
.orporation, un&i0e in t*e .ase o+ a natura& person, +or a .orporation *as no
reputation in t*e sense t*at an individua& *as, and ,esides, it is in*erent&/
i%possi,&e +or a .orporation to suHer %enta& anguis*.
O<(P
In LBC 39press%
0nc. v. Co#rt of Appeals,
O<:P
9e ru&ed:
M#ora& da%ages are granted in re.o%pense +or p*/si.a& suHering, %enta&
anguis*, +rig*t, serious anAiet/, ,es%ir.*ed reputation, 9ounded +ee&ings,
%ora& s*o.0, so.ia& *u%i&iation, and si%i&ar in-ur/. A .orporation, ,eing an
arti3.ia& person and *aving eAisten.e on&/ in &ega& .onte%p&ation, *as no
+ee&ings, no e%otions, no sensesI t*ere+ore, it .annot eAperien.e p*/si.a&
suHering and %enta& anguis*. #enta& suHering .an ,e eAperien.ed on&/ ,/
one *aving a nervous s/ste% and it Uo9s +ro% rea& i&&s, sorro9s, and grie+s
o+ &i+e J a&& o+ 9*i.* .annot ,e suHered ,/ respondent ,an0 as an arti3.ia&
person.L
Neit*er .an 9e a9ard eAe%p&ar/ da%ages under Arti.&e '';< o+ t*e Civi&
Code. "e+ore t*e .ourt %a/ .onsider t*e ?uestion o+ 9*et*er or not
eAe%p&ar/ da%ages s*ou&d ,e a9arded, t*e p&aintiH %ust s*o9 t*at *e is
entit&ed to %ora&, te%perate, or .o%pensator/ da%ages.
NAPOCOR, in t*is petition, &i0e9ise .ontests t*e -udg%ent o+ t*e &o9er
.ourts a9arding P4I"RO t*e a%ount o+ F>;,';1.:1 as rei%,urse%ent +or
eApenses, .ost o+ &itigation and attorne/Gs +ees.
7e agree 9it* NAPOCOR.
!*is Court *as &aid do9n t*e ru&e t*at in t*e a,sen.e o+ stipu&ation, a
9inning part/ %a/ ,e a9arded attorne/Ys +ees on&/ in .ase p&aintiHYs a.tion
or de+endantYs stand is so untena,&e as to a%ount to gross and evident ,ad
+ait*.
O@)P
!*is .annot ,e said o+ t*e .ase at ,ar. NAPOCOR is -usti3ed in
resisting P4I"ROGs .&ai% +or da%ages. As a %atter o+ +a.t, 9e partia&&/
grant t*e pra/er o+ NAPOCOR as 9e 3nd t*at it did not a.t in ,ad +ait* in
disapproving P4I"ROYs pre-?ua&i3.ation to ,id.
!ria& .ourts %ust ,e re%inded t*at attorne/Ys +ees %a/ not ,e a9arded to a
part/ si%p&/ ,e.ause t*e -udg%ent is +avora,&e to *i%, +or it %a/ a%ount
to i%posing a pre%iu% on t*e rig*t to redress grievan.es in .ourt. 7e
adopt t*e sa%e po&i./ 9it* respe.t to t*e eApenses o+ &itigation. A 9inning
part/ %a/ ,e entit&ed to eApenses o+ &itigation on&/ 9*ere *e, ,/ reason o+
p&aintiHYs .&ear&/ un-usti3a,&e .&ai%s or de+endantYs unreasona,&e re+usa& to
*is de%ands, 9as .o%pe&&ed to in.ur said eApenditures. Evident&/, t*e
;( | P a g e
+a.ts o+ t*is .ase do not 9arrant t*e granting o+ su.* &itigation eApenses to
P4I"RO.
At t*is point, 9e ,e&ieve t*at, in t*e interest o+ +airness, NAPOCOR s*ou&d
give P4I"RO anot*er opportunit/ to parti.ipate in +uture pu,&i. ,idding. As
ear&ier %entioned, t*e de&a/ on its part 9as due to a +ortuitous event.
"ut ,e+ore 9e dispose o+ t*is .ase, 9e ta0e t*is o..asion to re%ind P4I"RO
o+ t*e indispensa,i&it/ o+ .oa& to a .oa&-3red t*er%a& p&ant. 7it*
*ouse*o&ds and ,usinesses ,eing entire&/ dependent on t*e e&e.tri.it/
supp&ied ,/ NAPOCOR, t*e de&iver/ o+ .oa& .annot ,e
ventureso%e. Indeed, pu,&i. interest de%ands t*at one 9*o oHers to
de&iver .oa& at an appointed ti%e %ust give a reasona,&e assuran.e t*at it
.an .arr/ t*roug*. 7it* t*e de&eterious possi,&e .onse?uen.es t*at %a/
resu&t +ro% +ai&ure to de&iver t*e needed .oa&, 9e ,e&ieve t*ere is greater
strain o+ .o%%it%ent in t*is 0ind o+ o,&igation.
W)EREFORE, t*e de.ision o+ t*e Court o+ Appea&s in CA-8.R. CV No.
1'=')< dated August '>, 1::= is *ere,/ #OI6IE. !*e a9ard, in +avor o+
P4I"RO, o+ a.tua&, %ora& and eAe%p&ar/ da%ages, rei%,urse%ent +or
eApenses, .ost o+ &itigation and attorne/Gs +ees, and .osts o+ suit, is
ELE!E.
SO OR'ERE'.
XXXXXXXXXXXXXXXXXXX
G.R. No. ??;1: Ma4ch 1", 1"";
SIME- IN#ERNA#IONAL *MANILA+, INCORPORA#E', petitioner,
vs.
#)E )ONORABLE CO&R# OF APPEALS a./ #RA'ERS RO$AL
BAN0, respondents.
+on P. Porc#inc#la for petitioner.
San J#an% Gon!ale!% San A$#stin 6 Sinense for private responent.

CR&,, J.*
7e are .on.erned in t*is .ase 9it* t*e ?uestion o+ da%ages, spe.i3.a&&/
%ora& and eAe%p&ar/ da%ages. !*e neg&igen.e o+ t*e private respondent
*as a&read/ ,een esta,&is*ed. A&& 9e *ave to as.ertain is 9*et*er t*e
petitioner is entit&ed to t*e said da%ages and, i+ so, in 9*at a%ounts.
!*e parties agree on t*e ,asi. +a.ts. !*e petitioner is a private .orporation
engaged in t*e eAportation o+ +ood produ.ts. It ,u/s t*ese produ.ts +ro%
various &o.a& supp&iers and t*en se&&s t*e% a,road, parti.u&ar&/ in t*e
Enited States, Canada and t*e #idd&e East. #ost o+ its eAports are
pur.*ased ,/ t*e petitioner on .redit.
!*e petitioner 9as a depositor o+ t*e respondent ,an0 and %aintained a
.*e.0ing a..ount in its ,ran.* at Ro%u&o Avenue, Cu,ao, VueCon Cit/. On
#a/ '@, 1:(1, t*e petitioner deposited to its a..ount in t*e said ,an0 t*e
a%ount o+ P1)),))).)), t*us in.reasing its ,a&an.e as o+ t*at date to
P1:),;().><.
1
Su,se?uent&/, t*e petitioner issued severa& .*e.0s against
its deposit ,ut 9as suprised to &earn &ater t*at t*e/ *ad ,een dis*onored
+or insu5.ient +unds.
!*e dis*onored .*e.0s are t*e +o&&o9ing:
1. C*e.0 No. '1@;:1 dated #a/ ':, 1:(1, in +avor o+ Ca&i+ornia
#anu+a.turing Co%pan/, In.. +or P1=,<().)):
'. C*e.0 No. '1@<'= dated #a/ '(, 1:(1, in +avor o+ t*e "ureau o+ Interna&
Revenue in t*e a%ount o+ P;,;(=.>;:
;. C*e.0 No. '1@<@1 dated June <, 1:(1, in +avor o+ #r. 8reg PedreSo in t*e
a%ount o+ P>,)().))I
<. C*e.0 No. '1@<<1 dated June @, 1:(1, in +avor o+ #a&a,on Long&i+e
!rading Corporation in t*e a%ount o+ P<',:)=.)):
@. C*e.0 No. '1@<>< dated June 1), 1:(1, in +avor o+ #a&a,on Long&i+e
!rading Corporation in t*e a%ount o+ P1',:@;.)):
=. C*e.0 No. '1@<>> dated June :, 1:(1, in +avor o+ Sea-Land Servi.es, In..
in t*e a%ount o+ P'>,)'<.<@:
>. C*e.0 No. '1@<1' dated June 1), 1:(1, in +avor o+ "aguio Countr/ C&u,
Corporation in t*e a%ount o+ P<,;(@.)': and
(. C*e.0 No. '1@<() dated June :, 1:(1, in +avor o+ Enri?ueta "a/&a in t*e
a%ount o+ P=,'>@.)).
Q
As a .onse?uen.e, t*e Ca&i+ornia #anu+a.turing Corporation sent on June :,
1:(1, a &etter o+ de%and to t*e petitioner, t*reatening prose.ution i+ t*e
dis*onored .*e.0 issued to it 9as not %ade good. It a&so 9it**e&d de&iver/
o+ t*e order %ade ,/ t*e petitioner. Si%i&ar &etters 9ere sent to t*e
petitioner ,/ t*e #a&a,on Long Li+e !rading, on June 1@, 1:(1, and ,/ t*e
8. and E. Enterprises, on June 1), 1:(1. #a&a,on a&so .an.e&ed t*e
petitionerYs .redit &ine and de%anded t*at +uture pa/%ents ,e %ade ,/ it
in .as* or .erti3ed .*e.0. #eanti%e, a.tion on t*e pending orders o+ t*e
petitioner 9it* t*e ot*er supp&iers 9*ose .*e.0s 9ere dis*onored 9as a&so
de+erred.
!*e petitioner .o%p&ained to t*e respondent ,an0 on June 1),
1:(1.
:
Investigation dis.&osed t*at t*e su% o+ P1)),))).)) deposited ,/
t*e petitioner on #a/ '@, 1:(1, *ad not ,een .redited to it. !*e error 9as
re.ti3ed on June 1>, 1:(1, and t*e dis*onored .*e.0s 9ere paid a+ter t*e/
9ere re-deposited.
@
In its &etter dated June '), 1:(1, t*e petitioner de%anded reparation +ro%
t*e respondent ,an0 +or its [gross and 9anton neg&igen.e.[ !*is de%and
9as not %et. !*e petitioner t*en 3&ed a .o%p&aint in t*e t*en Court o+ 6irst
Instan.e o+ RiCa& .&ai%ing +ro% t*e private respondent %ora& da%ages in
t*e su% o+ P1,))),))).)) and eAe%p&ar/ da%ages in t*e su% o+
P@)),))).)), p&us '@T attorne/Ys +ees, and .osts.
A+ter tria&, Judge Jo*ni.o 8. Ser?uinia rendered -udg%ent *o&ding t*at %ora&
and eAe%p&ar/ da%ages 9ere not .a&&ed +or under t*e .ir.u%stan.es.
4o9ever, o,serving t*at t*e p&aintiHYs rig*t *ad ,een vio&ated, *e ordered
t*e de+endant to pa/ no%ina& da%ages in t*e a%ount o+ P'),))).)) p&us
P@,))).)) attorne/Ys +ees and .osts.
!
!*is de.ision 9as a5r%ed in toto ,/
t*e respondent .ourt.

!*e respondent .ourt +ound 9it* t*e tria& .ourt t*at t*e private respondent
9as gui&t/ o+ neg&igen.e ,ut agreed t*at t*e petitioner 9as nevert*e&ess
not entit&ed to %ora& da%ages. It said:
!*e essentia& ingredient o+ %ora& da%ages is proo+ o+ ,ad +ait* 1e Apari.io
vs. Parogurga, 1@) SCRA '()2. Indeed, t*ere 9as t*e o%ission ,/ t*e
de+endant-appe&&ee ,an0 to .redit appe&&antYs deposit o+ P1)),))).)) on
#a/ '@, 1:(1. "ut t*e ,an0 re.ti3ed its re.ords. It .redited t*e said a%ount
in +avor o+ p&aintiH-appe&&ant in &ess t*an a %ont*. !*e dis*onored .*e.0s
9ere eventua&&/ paid. !*ese .ir.u%stan.es negate an/ i%putation or
;: | P a g e
insinuation o+ %a&i.ious, +raudu&ent, 9anton and gross ,ad +ait* and
neg&igen.e on t*e part o+ t*e de+endant-appe&&ant.
It is t*is ru&ing t*at is +au&ted in t*e petition no9 ,e+ore us.
!*is Court *as .are+u&&/ eAa%ined t*e +a.ts o+ t*is .ase and 3nds t*at it
.annot s*are so%e o+ t*e .on.&usions o+ t*e &o9er .ourts. It see%s to us
t*at t*e neg&igen.e o+ t*e private respondent *ad ,een ,rus*ed oH rat*er
&ig*t&/ as i+ it 9ere a %inor in+ra.tion re?uiring no %ore t*an a s&ap on t*e
9rist. 7e +ee& it is not enoug* to sa/ t*at t*e private respondent re.ti3ed
its re.ords and .redited t*e deposit in &ess t*an a %ont* as i+ t*is 9ere
su5.ient repentan.e. !*e error s*ou&d not *ave ,een .o%%itted in t*e 3rst
p&a.e. !*e respondent ,an0 *as not even eAp&ained 9*/ it 9as .o%%itted
at a&&. It is true t*at t*e dis*onored .*e.0s 9ere, as t*e Court o+ Appea&s
put it, [eventua&&/[ paid. 4o9ever, t*is too0 a&%ost a %ont* 9*en,
proper&/, t*e .*e.0s s*ou&d *ave ,een paid i%%ediate&/ upon
present%ent.
As t*e Court sees it, t*e initia& .are&essness o+ t*e respondent ,an0,
aggravated ,/ t*e &a.0 o+ pro%ptitude in repairing its error, -usti3es t*e
grant o+ %ora& da%ages. !*is rat*er &a.0adaisi.a& attitude to9ard t*e
.o%p&aining depositor .onstituted t*e gross neg&igen.e, i+ not 9anton ,ad
+ait*, t*at t*e respondent .ourt said *ad not ,een esta,&is*ed ,/ t*e
petitioner.
7e a&so note t*at 9*i&e stressing t*e re.ti3.ation %ade ,/ t*e respondent
,an0, t*e de.ision pra.ti.a&&/ ignored t*e pre-udi.e suHered ,/ t*e
petitioner. !*is 9as si%p&/ g&ossed over i+ not, indeed, dis,e&ieved. !*e +a.t
is t*at t*e petitionerYs .redit &ine 9as .an.e&ed and its orders 9ere not
a.ted upon pending re.eipt o+ a.tua& pa/%ent ,/ t*e supp&iers. Its ,usiness
de.&ined. Its reputation 9as tarnis*ed. Its standing 9as redu.ed in t*e
,usiness .o%%unit/. A&& t*is 9as due to t*e +au&t o+ t*e respondent ,an0
9*i.* 9as undenia,&/ re%iss in its dut/ to t*e petitioner.
Arti.&e '')@ o+ t*e Civi& Code provides t*at a.tua& or .o%pensator/
da%ages %a/ ,e re.eived [1'2 +or in-ur/ to t*e p&aintiH s ,usiness standing
or .o%%er.ia& .redit.[ !*ere is no ?uestion t*at t*e petitioner did sustain
a.tua& in-ur/ as a resu&t o+ t*e dis*onored .*e.0s and t*at t*e eAisten.e o+
t*e &oss *aving ,een esta,&is*ed [a,so&ute .ertaint/ as to its a%ount is not
re?uired.[
7
Su.* in-ur/ s*ou&d ,o&ster a&& t*e %ore t*e de%and o+ t*e
petitioner +or %ora& da%ages and -usti3es t*e eAa%ination ,/ t*is Court o+
t*e va&idit/ and reasona,&eness o+ t*e said .&ai%.
7e agree t*at %ora& da%ages are not a9arded to pena&iCe t*e de+endant
,ut to .o%pensate t*e p&aintiH +or t*e in-uries *e %a/ *ave suHered.
?
In
t*e .ase at ,ar, t*e petitioner is see0ing su.* da%ages +or t*e pre-udi.e
sustained ,/ it as a resu&t o+ t*e private respondentYs +au&t. !*e respondent
.ourt said t*at t*e .&ai%ed &osses are pure&/ spe.u&ative and are not
supported ,/ su,stantia& eviden.e, ,ut i+ +ai&ed to .onsider t*at t*e a%ount
o+ su.* &osses need not ,e esta,&is*ed 9it* eAa.titude pre.ise&/ ,e.ause o+
t*eir nature. #ora& da%ages are not sus.epti,&e o+ pe.uniar/ esti%ation.
Arti.&e ''1= o+ t*e Civi& Code spe.i3.a&&/ provides t*at [no proo+ o+
pe.uniar/ &oss is ne.essar/ in order t*at %ora&, no%ina&, te%perate,
&i?uidated or eAe%p&ar/ da%ages %a/ ,e ad-udi.ated.[ !*at is 9*/ t*e
deter%ination o+ t*e a%ount to ,e a9arded 1eA.ept &i?uidated da%ages2 is
&e+t to t*e sound dis.retion o+ t*e .ourt, a..ording to [t*e .ir.u%stan.es o+
ea.* .ase.[
6ro% ever/ vie9point eA.ept t*at o+ t*e petitionerYs, its .&ai% o+ %ora&
da%ages in t*e a%ount o+ P1,))),))).)) is not*ing s*ort o+ preposterous.
Its ,usiness .ertain&/ is not t*at ,ig, or its na%e t*at prestigious, to sustain
su.* an eAtravagant pretense. #oreover, a .orporation is not as a ru&e
entit&ed to %ora& da%ages ,e.ause, not ,eing a natura& person, it .annot
eAperien.e p*/si.a& suHering or su.* senti%ents as 9ounded +ee&ings,
serious anAiet/, %enta& anguis* and %ora& s*o.0. !*e on&/ eA.eption to t*is
ru&e is 9*ere t*e .orporation *as a good reputation t*at is de,ased,
resu&ting in its so.ia& *u%i&iation.
"
7e s*a&& re.ogniCe t*at t*e petitioner did suHer in-ur/ ,e.ause o+ t*e
private respondentYs neg&igen.e t*at .aused t*e dis*onor o+ t*e .*e.0s
issued ,/ it. !*e i%%ediate .onse?uen.e 9as t*at its prestige 9as
i%paired ,e.ause o+ t*e ,oun.ing .*e.0s and .on3den.e in it as a re&ia,&e
de,tor 9as di%inis*ed. !*e private respondent %a0es %u.* o+ t*e one
instan.e 9*en t*e petitioner 9as sued in a .o&&e.tion .ase, ,ut t*at did not
prove t*at it did not *ave a good reputation t*at .ou&d not ,e %arred, %ore
so sin.e t*at .ase 9as u&ti%ate&/ sett&ed.
1;
It does not appear t*at, as t*e
private respondent 9ou&d portra/ it, t*e petitioner is an unsavor/ and
disreputa,&e entit/ t*at *as no good na%e to prote.t.
Considering a&& t*is, 9e +ee& t*at t*e a9ard o+ no%ina& da%ages in t*e su%
o+ P'),))).)) 9as not t*e proper re&ie+ to 9*i.* t*e petitioner 9as entit&ed.
Ender Arti.&e '''1 o+ t*e Civi& Code, [no%ina& da%ages are ad-udi.ated in
order t*at a rig*t o+ t*e p&aintiH, 9*i.* *as ,een vio&ated or invaded ,/ t*e
de+endant, %a/ ,e vindi.ated or re.ogniCed, and not +or t*e purpose o+
inde%ni+/ing t*e p&aintiH +or an/ &oss suHered ,/ *i%.[ As 9e *ave +ound
t*at t*e petitioner *as indeed in.urred &oss t*roug* t*e +au&t o+ t*e private
respondent, t*e proper re%ed/ is t*e a9ard to it o+ %ora& da%ages, 9*i.*
9e i%pose, in our dis.retion, in t*e sa%e a%ount o+ P'),))).)).
No9 +or t*e eAe%p&ar/ da%ages.
!*e pertinent provisions o+ t*e Civi& Code are t*e +o&&o9ing:
Art. ''':. EAe%p&ar/ or .orre.tive da%ages are i%posed, ,/ 9a/ o+
eAa%p&e or .orre.tion +or t*e pu,&i. good, in addition to t*e %ora&,
te%perate, &i?uidated or .o%pensator/ da%ages.
Art. '';'. In .ontra.ts and ?uasi-.ontra.ts, t*e .ourt %a/ a9ard eAe%p&ar/
da%ages i+ t*e de+endant a.ted in a 9anton, +raudu&ent, re.0&ess,
oppressive, or %a&evo&ent %anner.
!*e ,an0ing s/ste% is an indispensa,&e institution in t*e %odern 9or&d and
p&a/s a vita& ro&e in t*e e.ono%i. &i+e o+ ever/ .ivi&iCed nation. 7*et*er as
%ere passive entities +or t*e sa+e0eeping and saving o+ %one/ or as a.tive
instru%ents o+ ,usiness and .o%%er.e, ,an0s *ave ,e.o%e an u,i?uitous
presen.e a%ong t*e peop&e, 9*o *ave .o%e to regard t*e% 9it* respe.t
and even gratitude and, %ost o+ a&&, .on3den.e. !*us, even t*e *u%,&e
9age-earner *as not *esitated to entrust *is &i+eYs savings to t*e ,an0 o+ *is
.*oi.e, 0no9ing t*at t*e/ 9i&& ,e sa+e in its .ustod/ and 9i&& even earn
so%e interest +or *i%. !*e ordinar/ person, 9it* e?ua& +ait*, usua&&/
%aintains a %odest .*e.0ing a..ount +or se.urit/ and .onvenien.e in t*e
sett&ing o+ *is %ont*&/ ,i&&s and t*e pa/%ent o+ ordinar/ eApenses. As +or
,usiness entities &i0e t*e petitioner, t*e ,an0 is a trusted and a.tive
<) | P a g e
asso.iate t*at .an *e&p in t*e running o+ t*eir aHairs, not on&/ in t*e +or% o+
&oans 9*en needed ,ut %ore o+ten in t*e .ondu.t o+ t*eir da/-to-da/
transa.tions &i0e t*e issuan.e or en.as*%ent o+ .*e.0s.
In ever/ .ase, t*e depositor eApe.ts t*e ,an0 to treat *is a..ount 9it* t*e
ut%ost 3de&it/, 9*et*er su.* a..ount .onsists on&/ o+ a +e9 *undred pesos
or o+ %i&&ions. !*e ,an0 %ust re.ord ever/ sing&e transa.tion a..urate&/,
do9n to t*e &ast .entavo, and as pro%pt&/ as possi,&e. !*is *as to ,e done
i+ t*e a..ount is to reUe.t at an/ given ti%e t*e a%ount o+ %one/ t*e
depositor .an dispose o+ as *e sees 3t, .on3dent t*at t*e ,an0 9i&& de&iver
it as and to 9*o%ever *e dire.ts. A ,&under on t*e part o+ t*e ,an0, su.*
as t*e dis*onor o+ a .*e.0 9it*out good reason, .an .ause t*e depositor
not a &itt&e e%,arrass%ent i+ not a&so 3nan.ia& &oss and per*aps even .ivi&
and .ri%ina& &itigation.
!*e point is t*at as a ,usiness aHe.ted 9it* pu,&i. interest and ,e.ause o+
t*e nature o+ its +un.tions, t*e ,an0 is under o,&igation to treat t*e
a..ounts o+ its depositors 9it* %eti.u&ous .are, a&9a/s *aving in %ind t*e
3du.iar/ nature o+ t*eir re&ations*ip. In t*e .ase at ,ar, it is o,vious t*at
t*e respondent ,an0 9as re%iss in t*at dut/ and vio&ated t*at re&ations*ip.
7*at is espe.ia&&/ dep&ora,&e is t*at, *aving ,een in+or%ed o+ its error in
not .rediting t*e deposit in ?uestion to t*e petitioner, t*e respondent ,an0
did not i%%ediate&/ .orre.t it ,ut did so on&/ one 9ee0 &ater or t9ent/-
t*ree da/s a+ter t*e deposit 9as %ade. It ,ears repeating t*at t*e re.ord
does not .ontain an/ satis+a.tor/ eAp&anation o+ 9*/ t*e error 9as %ade in
t*e 3rst p&a.e and 9*/ it 9as not .orre.ted i%%ediate&/ a+ter its dis.over/.
Su.* ineptness .o%es under t*e .on.ept o+ t*e 9anton %anner
.onte%p&ated in t*e Civi& Code t*at .a&&s +or t*e i%position o+ eAe%p&ar/
da%ages.
A+ter de&i,erating on t*is parti.u&ar %atter, t*e Court, in t*e eAer.ise o+ its
dis.retion, *ere,/ i%poses upon t*e respondent ,an0 eAe%p&ar/ da%ages
in t*e a%ount o+ P@),))).)), [,/ 9a/ o+ eAa%p&e or .orre.tion +or t*e
pu,&i. good,[ in t*e 9ords o+ t*e &a9. It is eApe.ted t*at t*is ru&ing 9i&&
serve as a 9arning and deterrent against t*e repetition o+ t*e ineptness
and indiHeren.e t*at *as ,een disp&a/ed *ere, &est t*e .on3den.e o+ t*e
pu,&i. in t*e ,an0ing s/ste% ,e +urt*er i%paired.
ACCORIN8LK, t*e appea&ed -udg%ent is *ere,/ #OI6IE and t*e private
respondent is ordered to pa/ t*e petitioner, in &ieu o+ no%ina& da%ages,
%ora& da%ages in t*e a%ount o+ P'),))).)), and eAe%p&ar/ da%ages in
t*e a%ount o+ P@),))).)) p&us t*e origina& a9ard o+ attorne/Ys +ees in t*e
a%ount o+ P@,))).)), and .osts.
SO ORERE.
XXXXXXXXXXXXXXXXXXXX
G.R. No. 1Q?;. (u.e 1", Q;;;L
(AR'INE 'A%IES INC. petitioner vs. CO&R# OF APPEALS a./ FAR
EAS# MILLS S&PPL$ CORPORA#ION,respondents.
KG.R. No. 1Q?;" (u.e 1", Q;;;L
P&RE FOO'S CORPORA#ION petitioner vs. CO&R# OF APPEALS a./
FAR EAS# MILLS S&PPL$ CORPORA#ION,respondents.
' E C I S I O N
BELLOSILLO, J.:
!*is is rat*er a si%p&e .ase +or spe.i3. per+or%an.e 9it* da%ages 9*i.*
.ou&d *ave ,een reso&ved t*roug* %ediation and .on.i&iation during its
in+an./ stage *ad t*e parties ,een earnest in eApediting t*e disposa& o+ t*is
.ase. !*e/ opted *o9ever to resort to +u&& .ourt pro.eedings and denied
t*e%se&ves t*e ,ene3ts o+ a&ternative dispute reso&ution, t*us %a0ing t*e
pro.ess %ore arduous and &ong-dra9n.
!*e .ontrovers/ started in 1::' at t*e *eig*t o+ t*e po9er .risis 9*i.* t*e
.ountr/ 9as t*en eAperien.ing. !o re%ed/ and .urtai& +urt*er &osses due to
t*e series o+ po9er +ai&ures, petitioner PERE 6OOS CORPORA!ION
1*erea+ter PERE6OOS2 de.ided to insta&& t9o 1'2 1@)) B7 generators in its
+ood pro.essing p&ant in San Ro?ue, #ari0ina Cit/.
So%eti%e in Nove%,er 1::' a ,idding +or t*e supp&/ and insta&&ation o+ t*e
generators 9as *e&d. Severa& supp&iers and dea&ers 9ere invited to attend a
pre-,idding .on+eren.e to dis.uss t*e .onditions, propose s.*e%e and
spe.i3.ations t*at 9ou&d ,est suit t*e needs o+ PERE6OOS. Out o+ t*e
eig*t 1(2 prospe.tive ,idders 9*o attended t*e pre-,idding .on+eren.e,
on&/ t*ree 1;2 ,idders, na%e&/, respondent 6AR EAS! #ILLS SEPPLK
CORPORA!ION 1*erea+ter 6E#SCO2, #ONARB and AVANCE PO7ER
su,%itted ,id proposa&s and gave ,id ,onds e?uiva&ent to @T o+ t*eir
respe.tive ,ids, as re?uired.
!*erea+ter, in a &etter dated 1' e.e%,er 1::' addressed to 6E#SCO
President A&+onso Po, PERE6OOS .on3r%ed t*e a9ard o+ t*e .ontra.t to
6E#SCO -
8ent&e%en:
!*is 9i&& .on3r% t*at Pure 6oods Corporation *as a9arded to /our 3r% t*e
pro-e.t: Supp&/ and Insta&&ation o+ t9o 1'2 units o+ 1@)) B7Nunit 8enerator
Sets at t*e Pro.essed #eats P&ant, "o. San Ro?ue, #ari0ina, ,ased on /our
proposa& nu%,er PC '(-:' dated Nove%,er '), 1::', su,-e.t to t*e
+o&&o9ing ,asi. ter%s and .onditions:
1. Lu%p su% .ontra.t o+ P=,1;>,':;.)) 1VA! in.&uded2, +or t*e supp&/ o+
%ateria&s and &a,or +or t*e &o.a& portion and t*e &a,or +or t*e i%ported
%ateria&s, pa/a,&e ,/ progress ,i&&ing t9i.e a %ont*, 9it* ten per.ent
11)T2 retention. !*e retained a%ount s*a&& ,e re&eased t*irt/ 1;)2 da/s
a+ter a..eptan.e o+ t*e .o%p&eted pro-e.t and upon posting o+ 8uarantee
"ond in an a%ount e?uiva&ent to t9ent/ per.ent 1')T2 o+ t*e .ontra.t
pri.e. !*e 8uarantee "ond s*a&& ,e va&id +or one 112 /ear +ro% .o%p&etion
and a..eptan.e o+ pro-e.t. !*e .ontra.t pri.e in.&udes +uture in.reaseNs in
.osts o+ %ateria&s and &a,orI
'. !*e pro-e.t s*a&& ,e underta0en pursuant to t*e atta.*ed spe.i3.ations.
It is understood t*at an/ ite% re?uired to .o%p&ete t*e pro-e.t, and t*ose
not in.&uded in t*e &ist o+ ite%s s*a&& ,e dee%ed in.&uded and .overed and
s*a&& ,e per+or%edI
;. A&& %ateria&s s*a&& ,e ,rand ne9I
<. !*e pro-e.t s*a&& .o%%en.e i%%ediate&/ and %ust ,e .o%p&eted 9it*in
t9ent/ 1')2 9or0ing da/s a+ter t*e de&iver/ o+ 8enerator Set to #ari0ina
P&ant, pena&t/ e?uiva&ent to 1N1) o+ 1T o+ t*e pur.*ase pri.e +or ever/ da/
o+ de&a/I
@. !*e Contra.tor s*a&& put up Per+or%an.e "ond e?uiva&ent to t*irt/ 1;)T2
o+ t*e .ontra.t pri.e, and s*a&& pro.ure A&& Ris0 Insuran.e e?uiva&ent to t*e
.ontra.t pri.e upon .o%%en.e%ent o+ t*e pro-e.t. !*e A&& Ris0 Insuran.e
<1 | P a g e
Po&i./ s*a&& ,e endorsed in +avor o+ and s*a&& ,e de&ivered to Pure 6oods
CorporationI
=. 7arrant/ o+ one 112 /ear against de+e.tive %ateria& andNor 9or0%ans*ip.
On.e 3na&iCed, 9e s*a&& as0 /ou to sign t*e +or%a& .ontra.t e%,od/ing t*e
+oregoing ter%s and .onditions.
I%%ediate&/, 6E#SCO su,%itted t*e re?uired per+or%an.e ,ond in t*e
a%ount o+ P1,(<1,1(>.:) and .ontra.torGs a&&-ris0 insuran.e po&i./ in t*e
a%ount o+ P=,1;>,':;.)) 9*i.* PERE6OOS t*roug* its Vi.e President
"enedi.to 8. !ope a.0no9&edged in a &etter dated 1( e.e%,er 1::'.
6E#SCO a&so %ade arrange%ents 9it* its prin.ipa& and started t*e
PERE6OOS pro-e.t ,/ pur.*asing t*e ne.essar/ %ateria&s. PERE6OOS on
t*e ot*er *and returned 6E#SCOGs "idderGs "ond in t*e a%ount
o+ P1,))),))).)), as re?uested.
Later, *o9ever, in a &etter dated '' e.e%,er 1::', PERE6OOS t*roug*
its Senior Vi.e President !eodoro L. i%a/uga uni&atera&&/ .an.e&ed t*e
a9ard as [signi3.ant +a.tors 9ere un.overed and ,roug*t to 1t*eir2
attention 9*i.* di.tate 1t*e2 .an.e&&ation and 9arrant a tota& revie9 and re-
,id o+ 1t*e2 pro-e.t.[ Conse?uent&/, 6E#SCO protested t*e .an.e&&ation o+
t*e a9ard and soug*t a %eeting 9it* PERE6OOS. 4o9ever, on '= #ar.*
1::;, ,e+ore t*e %atter .ou&d ,e reso&ved, PERE6OOS a&read/ a9arded
t*e pro-e.t and entered into a .ontra.t 9it* JARINE NELL, a division o+
Jardine avies, In.. 1*erea+ter JARINE2, 9*i.* in.identa&&/ 9as not one o+
t*e ,idders.
6E#SCO t*us 9rote PERE6OOS to *onor its .ontra.t 9it* t*e +or%er, and
to JARINE to .ease and desist +ro% de&ivering and insta&&ing t*e t9o 1'2
generators at PERE6OOS. Its de%and &etters un*eeded, 6E#SCO sued
,ot* PERE6OOS and JARINE: PERE6OOS +or reneging on its .ontra.t,
and JARINE +or its un9arranted inter+eren.e and indu.e%ent. !ria& ensued.
A+ter 6E#SCO presented its eviden.e, JARINE 3&ed a +em#rrer to
3vience.
On '> June 1::< t*e Regiona& !ria& Court o+ Pasig, "r. =(,
O1P
granted
JARINEGs +em#rrer to 3vience. !*e tria& .ourt .on.&uded t*at [O9P*i&e it
%a/ see% to t*e p&aintiH t*at ,/ t*e a.tions o+ t*e t9o de+endants t*ere is
so%et*ing under*anded going on, t*is is a&& a %atter o+ per.eption, and
unsupported ,/ *ard eviden.e, %ere suspi.ions and suppositions 9ou&d not
stand up ver/ 9e&& in a .ourt o+ &a9.[
O'P
#ean9*i&e tria& pro.eeded as regards
t*e .ase against PERE6OOS.
On '( Ju&/ 1::< t*e tria& .ourt rendered a de.ision ordering PERE6OOS:
1a2 to inde%ni+/ 6E#SCO t*e su% o+ P',;)),))).)) representing t*e va&ue
o+ engineering servi.es it renderedI 1,2 to pa/ 6E#SCO t*e su% o+
ESF1<,))).)) or its peso e?uiva&ent, and P:)),))).)) representing
.ontra.torYs %ar0-up on insta&&ation 9or0, .onsidering t*at it 9ou&d ,e
i%possi,&e to .o%pe& PERE6OOS to *onor, per+or% and +u&3&& its
.ontra.tua& o,&igations in vie9 o+ PERE6OOYs .ontra.t 9it* JARINE and
noting t*at .onstru.tion *ad a&read/ started t*ereonI 1.2 to pa/ attorne/Gs
+ees in an a%ount e?uiva&ent to ')T o+ t*e tota& a%ount dueI and, 1d2 to
pa/ t*e .osts. !*e tria& .ourt dis%issed t*e .ounter.&ai% 3&ed ,/
PERE6OOS +or &a.0 o+ +a.tua& and &ega& ,asis.
"ot* 6E#SCO and PERE6OOS appea&ed to t*e Court o+ Appea&s. 6E#SCO
appea&ed t*e '> June 1::< Reso&ution o+ t*e tria& .ourt 9*i.* granted
t*e +em#rrer to 3vience 3&ed ,/ JARINE resu&ting in t*e dis%issa& o+ t*e
.o%p&aint against it, 9*i&e PERE6OOS appea&ed t*e '( Ju&/ 1::< e.ision
o+ t*e sa%e .ourt 9*i.* ordered it to pa/ 6E#SCO.
On 1< August 1::= t*e Court o+ Appea&s a5r%ed in toto t*e '( Ju&/ 1::<
e.ision o+ t*e tria& .ourt.
O;P
It a&so reversed t*e '> June 1::< Reso&ution o+
t*e &o9er .ourt and ordered JARINE to pa/ 6E#SCO da%ages +or indu.ing
PERE6OOS to vio&ate t*e &atterGs .ontra.t 9it* 6E#SCO. As su.*, JARINE
9as ordered to pa/ 6E#SCO P',))),))).)) +or %ora& da%ages. In addition,
PERE6OOS 9as a&so dire.ted to pa/ 6E#SCO P',))),))).)) as %ora&
da%ages and P1,))),))).)) as eAe%p&ar/ da%ages as 9e&& as ')T o+ t*e
tota& a%ount due as attorne/Ys +ees.
On ;1 Januar/ 1::> t*e Court o+ Appea&s denied +or &a.0 o+ %erit t*e
separate %otions +or re.onsideration 3&ed ,/ PERE6OOS and JARINE.
4en.e, t*ese t9o 1'2 petitions +or revie9 3&ed ,/ PERE6OOS and JARINE
9*i.* 9ere su,se?uent&/ .onso&idated.
PERE6OOS %aintains t*at t*e .on.&usions o+ ,ot* t*e tria& .ourt and t*e
appe&&ate .ourt are pre%ised on a %isappre*ension o+ +a.ts. It argues t*at
its 1' e.e%,er 1::' &etter to 6E#SCO 9as not an a..eptan.e o+ t*e
&atterYs ,id proposa& and a9ard o+ t*e pro-e.t ,ut %ore o+ a ?ua&i3ed
a..eptan.e .onstituting a .ounter-oHer 9*i.* re?uired 6E#SCOYs
eApress conforme. Sin.e PERE6OOS never re.eived
6E#SCOGsconforme% PERE6OOS 9as ver/ 9e&& 9it*in reason to revo0e its
?ua&i3ed a..eptan.e or .ounter-oHer. 4en.e, no .ontra.t 9as per+e.ted
,et9een PERE6OOS and 6E#SCO. PERE6OOS a&so .ontends t*at it 9as
never in ,ad +ait* 9*en it dea&t 9it* 6E#SCO. 4en.e %ora& and eAe%p&ar/
da%ages s*ou&d not *ave ,een a9arded.
Coro&&ari&/, JARINE asserts t*at t*e re.ords are ,ere+t o+ an/ s*o9ing t*at
it *ad prior 0no9&edge o+ t*e supposed .ontra.t ,et9een PERE6OOS and
6E#SCO, and t*at it indu.ed PERE6OOS to vio&ate t*e &atterGs a&&eged
.ontra.t 9it* 6E#SCO. #oreover, JARINE reasons t*at 6E#SCO, an
arti3.ia& person, is not entit&ed to %ora& da%ages. "ut
granting ar$#eno t*at t*e a9ard o+ %ora& da%ages is
proper,P',))),))).)) is eAtre%e&/ eA.essive.
In t*e %ain, t*ese .onso&idated .ases present t9o 1'2 issues: 3rst, 9*et*er
t*ere eAisted a per+e.ted .ontra.t ,et9een PERE6OOS and 6E#SCOI and
se.ond, granting t*ere eAisted a per+e.ted .ontra.t, 9*et*er t*ere is an/
s*o9ing t*at JARINE indu.ed or .onnived 9it* PERE6OOS to vio&ate t*e
&atterYs .ontra.t 9it* 6E#SCO.
A .ontra.t is de3ned as [a -uridi.a& .onvention %ani+ested in &ega& +or%, ,/
virtue o+ 9*i.* one or %ore persons ,ind t*e%se&ves in +avor o+ anot*er or
ot*ers, or re.ipro.a&&/, to t*e +u&3&&%ent o+ a prestation to give, to do, or not
to do.[
O<P
!*ere .an ,e no .ontra.t un&ess t*e +o&&o9ing re?uisites .on.ur:
1a2 .onsent o+ t*e .ontra.ting partiesI 1,2 o,-e.t .ertain 9*i.* is t*e su,-e.t
%atter o+ t*e .ontra.tI and, 1.2 .ause o+ t*e o,&igation 9*i.* is esta,&is*ed.
O@P
A .ontra.t ,inds ,ot* .ontra.ting parties and *as t*e +or.e o+ &a9
,et9een t*e%.
Contra.ts are per+e.ted ,/ %ere .onsent, upon t*e a..eptan.e ,/ t*e
oHeree o+ t*e oHer %ade ,/ t*e oHeror. 6ro% t*at %o%ent, t*e parties are
,ound not on&/ to t*e +u&3&&%ent o+ 9*at *as ,een eApress&/ stipu&ated ,ut
a&so to a&& t*e .onse?uen.es 9*i.*, a..ording to t*eir nature, %a/ ,e in
<' | P a g e
0eeping 9it* good +ait*, usage and &a9.
O=P
!o produ.e a .ontra.t, t*e
a..eptan.e %ust not ?ua&i+/ t*e ter%s o+ t*e oHer. 4o9ever, t*e
a..eptan.e %a/ ,e eApress or i%p&ied.
O>P
6or a .ontra.t to arise, t*e
a..eptan.e %ust ,e %ade 0no9n to t*e oHeror. A..ording&/, t*e
a..eptan.e .an ,e 9it*dra9n or revo0ed ,e+ore it is %ade 0no9n to t*e
oHeror.
In t*e instant .ase, t*ere is no issue as regards t*e su,-e.t %atter o+ t*e
.ontra.t and t*e .ause o+ t*e o,&igation. !*e .ontrovers/ &ies in t*e
.onsent - 9*et*er t*ere 9as an a..eptan.e o+ t*e oHer, and i+ so, i+ it 9as
.o%%uni.ated, t*ere,/ per+e.ting t*e .ontra.t.
!o reso&ve t*e dispute, t*ere is a need to deter%ine 9*at .onstituted t*e
oHer and t*e a..eptan.e. Sin.e petitioner PERE6OOS started t*e pro.ess
o+ entering into t*e .ontra.t ,/ .ondu.ting a ,idding, Art. 1;'= o+ t*e Civi&
Code, 9*i.* provides t*at [OaPdvertise%ents +or ,idders are si%p&/
invitations to %a0e proposa&s,[ app&ies. A..ording&/, t*e &erms an
Conitions of the Biin$ disse%inated ,/ petitioner PERE6OOS
.onstitutes t*e [advertise%ent[ to ,id on t*e pro-e.t. !*e ,id proposa&s or
?uotations su,%itted ,/ t*e prospe.tive supp&iers in.&uding respondent
6E#SCO, are t*e oHers. And, t*e rep&/ o+ petitioner PERE6OOS, t*e
a..eptan.e or re-e.tion o+ t*e respe.tive oHers.
Vuite o,vious&/, t*e 1' e.e%,er 1::' &etter o+ petitioner PERE6OOS to
6E#SCO .onstituted a..eptan.e o+ respondent 6E#SCOGs oHer as
.onte%p&ated ,/ &a9. !*e tenor o+ t*e &etter, i.e.% [!*is 9i&& .on3r% t*at
Pure 6oods *as a9arded to /our 3r% 16E#SCO2 t*e pro-e.t,[ .ou&d not ,e
%ore .ategori.a&. 7*i&e t*e sa%e &etter enu%erated .ertain [,asi. ter%s
and .onditions,[ t*ese .onditions 9ere i%posed on t*e per+or%an.e o+ t*e
o,&igation rat*er t*an on t*e per+e.tion o+ t*e .ontra.t. !*us, t*e 3rst
[.ondition[ 9as %ere&/ a reiteration o+ t*e .ontra.t pri.e and ,i&&ing
s.*e%e ,ased on t*e &erms an Conitions of Biin$ and t*e ,id or
previous oHer o+ respondent 6E#SCO. !*e se.ond and t*ird [.onditions[
9ere not*ing %ore t*an genera& state%ents t*at a&& ite%s and %ateria&s
in.&uding t*ose eA.&uded in t*e &ist ,ut ne.essar/ to .o%p&ete t*e pro-e.t
s*a&& ,e dee%ed in.&uded and s*ou&d ,e ,rand ne9. !*e +ourt* [.ondition[
.on.erned t*e .o%p&etion o+ t*e 9or0 to ,e done, i.e., 9it*in t9ent/ 1')2
da/s +ro% t*e de&iver/ o+ t*e generator set, t*e pur.*ase o+ 9*i.* 9as part
o+ t*e .ontra.t. !*e 3+t* [.ondition[ *ad to do 9it* t*e putting up o+ a
per+or%an.e ,ond and an a&&-ris0 insuran.e, ,ot* o+ 9*i.* s*ou&d ,e given
upon .o%%en.e%ent o+ t*e pro-e.t. !*e siAt* [.ondition[ re&ated to t*e
standard 9arrant/ o+ one 112 /ear. In 3ne, t*e enu%erated [,asi. ter%s and
.onditions[ 9ere pres.riptions on *o9 t*e o,&igation 9as to ,e per+or%ed
and i%p&e%ented. !*e/ 9ere +ar +ro% ,eing .onditions i%posed on t*e
per+e.tion o+ t*e .ontra.t.
In "a,asa v. Court o+ Appea&s
O(P
9e distinguis*ed ,et9een a .ondition
i%posed on t*e per+e.tion o+ a .ontra.t and a .ondition i%posed %ere&/ on
t*e per+or%an.e o+ an o,&igation. 7*i&e +ai&ure to .o%p&/ 9it* t*e 3rst
.ondition resu&ts in t*e +ai&ure o+ a .ontra.t, +ai&ure to .o%p&/ 9it* t*e
se.ond %ere&/ gives t*e ot*er part/ options andNor re%edies to prote.t *is
interests.
7e t*us agree 9it* t*e .on.&usion o+ respondent appe&&ate .ourt 9*i.*
a5r%ed t*e tria& .ourt -
As .an ,e in+erred +ro% t*e a.tua& p*rase used in t*e 3rst portion o+ t*e
&etter, t*e de.ision to a9ard t*e .ontra.t *as a&read/ ,een %ade. !*e &etter
on&/ serves as a .on3r%ation o+ su.* de.ision. 4en.e, to t*e CourtGs %ind,
t*ere is a&read/ an a..eptan.e %ade o+ t*e oHer re.eived ,/ Pure+oods.
Not9it*standing t*e ter%s and .onditions enu%erated t*erein, t*e oHer
*as ,een a..epted andNor a%p&i3ed t*e detai&s o+ t*e ter%s and .onditions
.ontained in t*e !er%s and Conditions o+ "idding given out ,/ Pure+oods to
prospe.tive ,idders.
O:P
"ut even granting ar$#eno t*at t*e 1' e.e%,er 1::' &etter o+ petitioner
PERE6OOS .onstituted a [.onditiona& .ounter-oHer,[ respondent 6E#COYs
su,%ission o+ t*e per+or%an.e ,ond and .ontra.torYs a&&-ris0 insuran.e 9as
an i%p&ied a..eptan.e, i+ not a .&ear indi.ation o+ its a.?uies.en.e to, t*e
[.onditiona& .ounter-oHer,[ 9*i.* eApress&/ stated t*at t*e per+or%an.e
,ond and t*e .ontra.torYs a&&-ris0 insuran.e s*ou&d ,e given upon t*e
.o%%en.e%ent o+ t*e .ontra.t. Coro&&ari&/, t*e a.0no9&edg%ent t*ereo+ ,/
petitioner PERE6OOS, not to %ention its return o+ 6E#SCOYs ,idderYs
,ond, 9as a .on.rete %ani+estation o+ its 0no9&edge t*at respondent
6E#SCO indeed .onsented to t*e [.onditiona& .ounter-oHer.[ A+ter a&&, as
ear&ier adverted to, an a..eptan.e %a/ eit*er ,e eApress or i%p&ied,
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and
t*is .an ,e in+erred +ro% t*e .onte%poraneous and su,se?uent a.ts o+ t*e
.ontra.ting parties.
A..ording&/, +or a&& intents and purposes, t*e .ontra.t at t*at point *as
,een per+e.ted, and respondent 6E#SCOYs conforme 9ou&d on&/ ,e a %ere
surp&usage. !*e dis.ussion o+ t*e pri.e o+ t*e pro-e.t t9o 1'2 %ont*s a+ter
t*e 1' e.e%,er 1::' &etter .an ,e dee%ed as not*ing %ore t*an a
pressure ,eing eAerted ,/ petitioner PERE6OOS on respondent 6E#SCO to
&o9er t*e pri.e even a+ter t*e .ontra.t *ad ,een per+e.ted. Indeed +ro% t*e
+a.ts, it .an easi&/ ,e sur%ised t*at petitioner PERE6OOS 9as *agg&ing +or
a &o9er pri.e even a+ter agreeing to t*e ear&ier ?uotation, and 9as
t*reatening to uni&atera&&/ .an.e& t*e .ontra.t, 9*i.* it eventua&&/ did.
Petitioner PERE6OOS a&so %a0es an issue out o+ t*e a,sen.e o+ a
pur.*ase order 1PO2. Su5.e it to sa/ t*at pur.*ase orders or POs do not
%a0e or ,rea0 a .ontra.t. !*us, even t*e tenor o+ t*e su,se?uent &etter o+
petitioner PERE6OOS, i.e.% [Pure 6oods Corporation is *ere,/ .an.e&ing
t*e a9ard to /our .o%pan/ o+ t*e pro-e.t,[ presupposes t*at t*e .ontra.t
*as ,een per+e.ted. 6or, t*ere .an ,e no .an.e&&ation i+ t*e .ontra.t 9as
not per+e.ted in t*e 3rst p&a.e.
Petitioner PERE6OOS a&so argues t*at it 9as never in ,ad +ait*. On t*e
.ontrar/, it ,e&ieved in good +ait* t*at no su.* .ontra.t 9as per+e.ted. 7e
are not .onvin.ed. 7e su,s.ri,e to t*e +a.tua& 3ndings and .on.&usions o+
t*e tria& .ourt 9*i.* 9ere a5r%ed ,/ t*e appe&&ate .ourt -
4en.e, ,/ t*e uni&atera& .an.e&&ation o+ t*e .ontra.t, t*e de+endant
1petitioner PERE 6OOS2 *as a.ted 9it* ,ad +ait* and t*is 9as +urt*er
aggravated ,/ t*e su,se?uent in0ing o+ a .ontra.t ,et9een de+endant
Pure+oods and erst9*i&e .o-de+endant Jardine. It is ver/ evident t*at
Pure+oods t*oug*t t*at ,/ t*e eApedient %eans o+ %ere&/ 9riting a &etter
9ou&d auto%ati.a&&/ .an.e& or nu&&i+/ t*e eAisting .ontra.t entered into ,/
,ot* parties a+ter a pro.ess o+ ,idding. !*is, to t*e CourtGs %ind, is a
Uagrant vio&ation o+ t*e eApress provisions o+ t*e &a9 and is .ontrar/ to +air
and -ust dea&ings to 9*i.* ever/ %an is due.
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<; | P a g e
!*is Court *as a9arded in t*e past %ora& da%ages to a .orporation 9*ose
reputation *as ,een ,es%ir.*ed.
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In t*e instant .ase, respondent 6E#SCO
*as su5.ient&/ s*o9n t*at its reputation 9as tarnis*ed a+ter it i%%ediate&/
ordered e?uip%ent +ro% its supp&iers on a..ount o+ t*e urgen./ o+ t*e
pro-e.t, on&/ to ,e .an.e&ed &ater. 7e t*us sustain respondent appe&&ate
.ourtYs a9ard o+ %ora& da%ages. 7e *o9ever redu.e t*e a9ard
+ro% P',))),))).)) to P1,))),))).)), as %ora& da%ages are never
intended to enri.* t*e re.ipient. Li0e9ise, t*e a9ard o+ eAe%p&ar/ da%ages
,/ 9a/ o+ eAa%p&e +or t*e pu,&i. good is eA.essive and s*ou&d ,e redu.ed
to P1)),))).)).
Petitioner JARINE %aintains on t*e ot*er *and t*at respondent appe&&ate
.ourt erred in ordering it to pa/ %ora& da%ages to respondent 6E#SCO as it
supposed&/ indu.ed PERE6OOS to vio&ate t*e .ontra.t 9it* 6E#SCO. 7e
agree. 7*i&e it %a/ see% t*at petitioners PERE6OOS and JARINE
.onnived to de.eive respondent 6E#SCO, 9e 3nd no spe.i3. eviden.e on
re.ord to support su.* per.eption. Li0e9ise, t*ere is no s*o9ing
9*atsoever t*at petitioner JARINE indu.ed petitioner PERE6OOS. !*e
si%i&arit/ in t*e design su,%itted to petitioner PERE6OOS ,/ ,ot*
petitioner JARINE and respondent 6E#SCO, and t*e tender o+ a &o9er
?uotation ,/ petitioner JARINE are insu5.ient to s*o9 t*at petitioner
JARINE indeed indu.ed petitioner PERE6OOS to vio&ate its .ontra.t 9it*
respondent 6E#SCO.
W)EREFORE, -udg%ent is *ere,/ rendered as +o&&o9s:
1a2 !*e petition in 8.R. No. 1'()== is 8RAN!E. !*e assai&ed e.ision o+
t*e Court o+ Appea&s reversing t*e '> June 1::< reso&ution o+ t*e tria& .ourt
and ordering petitioner JARINE AVIES, INC., to pa/ private respondent
6AR EAS! #ILLS SEPPLK CORPORA!IONP',))),))).)) as %ora& da%ages is
REVERSE and SE! ASIE +or insu5.ien./ o+ eviden.eI and
1,2 !*e petition in 8.R. No. 1'()=: is ENIE. !*e assai&ed e.ision o+ t*e
Court o+ Appea&s ordering petitioner PERE 6OOS CORPORA!ION to pa/
private respondent 6AR EAS! #ILLS SEPPLK CORPORA!ION t*e su%
o+ P',;)),))).)) representing t*e va&ue o+ engineering servi.es it
rendered, ESF1<,))).)) or its peso e?uiva&ent, and P:)),))).))
representing t*e .ontra.torYs %ar0-up on insta&&ation 9or0, as 9e&& as
attorne/Ys +ees e?uiva&ent to t9ent/ per.ent 1')T2 o+ t*e tota& a%ount due,
is A66IR#E. In addtion, petitioner PERE 6OOS CORPORA!ION is ordered
to pa/ private respondent 6AR EAS! #ILLS SEPPLK CORPORA!ION %ora&
da%ages in t*e a%ount o+P1,))),))).)) and eAe%p&ar/ da%ages in t*e
a%ount o+ P1,))),))).)). Costs against petitioner.
SO OR'ERE'.
PPPPP