You are on page 1of 30

Republic of the Philippines

Supreme Court


- versus -

G.R. No. 136409



March 14, 2008

This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking the reversal of the Decision[1] of the Court of Appeals (CA)
dated May 26, 1998 and its Resolution[2] dated December 10, 1998 in CA-G.R. SP
No. 37739 dismissing the petition filed by petitioners Josephine and Subhash
The facts of the case, as culled from the records, are as follows:

Respondent Don Luis Dison Realty, Inc. and petitioners executed two
Contracts of Lease[3] whereby the former, as lessor, agreed to lease to the latter
Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the San Luis Building, located at
1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn,
agreed to pay monthly rentals, as follows:
For Rooms 32/35:
From March 1, 1991 to August 31, 1991 P5,000.00/P10,000.00
From September 1, 1991 to February 29, 1992 P5,500.00/P11,000.00
From March 1, 1992 to February 28, 1993 P6,050.00/P12,100.00
From March 1, 1993 to February 28, 1994 P6,655.00/P13,310.00
From March 1, 1994 to February 28, 1995 P7,320.50/P14,641.00
From March 1, 1995 to February 28, 1996 P8,052.55/P16,105.10
From March 1, 1996 to February 29, 1997 P8,857.81/P17,715.61
From March 1, 1997 to February 28, 1998 P9,743.59/P19,487.17
From March 1, 1998 to February 28, 1999 P10,717.95/P21,435.89
From March 1, 1999 to February 28, 2000 P11,789.75/P23,579.48[4]
For Rooms 22 and 24:
Effective July 1, 1992 P10,000.00 with an increment of 10% every two years.[5]
For Rooms 33 and 34:
Effective April 1, 1992 P5,000.00 with an increment of 10% every two years.[6]
For Rooms 36, 37 and 38:
Effective when tenants vacate said premises P10,000.00 with an increment of
10% every two years.[7]

Petitioners were, likewise, required to pay for the cost of electric consumption,
water bills and the use of telephone cables.[8]
The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24,
32, 33, 34 and 35 as subjects of the lease contracts. [9] While the contracts were in
effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of
private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms.

Bautista).[10]Petitioners religiously paid the monthly rentals until May 1992.

After that, however, despite repeated demands, petitioners continuously refused
to pay the stipulated rent.Consequently, respondent was constrained to refer the
matter to its lawyer who, in turn, made a final demand on petitioners for the
payment of the accrued rentals amounting toP916,585.58.[12] Because petitioners
still refused to comply, a complaint for ejectment was filed by private respondent
through its representative, Ms. Bautista, before the Metropolitan Trial Court
(MeTC) of Manila.[13] The case was raffled to Branch XIX and was docketed as
Civil Case No. 143058-CV.
Petitioners admitted their failure to pay the stipulated rent for the leased premises
starting July until November 1992, but claimed that such refusal was justified
because of the internal squabble in respondent company as to the person authorized
to receive payment.[14] To further justify their non-payment of rent, petitioners
alleged that they were prevented from using the units (rooms) subject matter of the
lease contract, except Room 35. Petitioners eventually paid their monthly rent for
December 1992 in the amount ofP30,000.00, and claimed that respondent waived
its right to collect the rents for the months of July to November 1992 since
petitioners were prevented from using Rooms 22, 24, 32, 33, and 34. [15] However,
they again withheld payment of rents starting January 1993 because of respondents
refusal to turn over Rooms 36, 37 and 38. [16] To show good faith and willingness to
pay the rents, petitioners alleged that they prepared the check vouchers for their
monthly rentals from January 1993 to January 1994.[17] Petitioners further averred
in their Amended Answer[18] that the complaint for ejectment was prematurely
filed, as the controversy was not referred to the barangay for conciliation.
For failure of the parties to reach an amicable settlement, the pre-trial conference
was terminated. Thereafter, they submitted their respective position papers.
On November 24, 1994, the MeTC rendered a Decision dismissing the complaint
for ejectment.[19] It considered petitioners non-payment of rentals as

unjustified. The court held that mere willingness to pay the rent did not amount to
payment of the obligation; petitioners should have deposited their payment in the
name of respondent company. On the matter of possession of the subject premises,
the court did not give credence to petitioners claim that private respondent failed to
turn over possession of the premises. The court, however, dismissed the complaint
because of Ms. Bautistas alleged lack of authority to sue on behalf of the
Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1,
in Civil Case No. 94-72515, reversed and set aside the MeTC Decision in this
WHEREFORE, the appealed decision is hereby reversed and set aside and
another one is rendered ordering defendants-appellees and all persons claiming
rights under them, as follows:
(1) to vacate the leased premised (sic) and restore possession thereof to
(2) to pay plaintiff-appellant the sum of P967,915.80 representing the
accrued rents in arrears as of November 1993, and the rents on the
leased premises for the succeeding months in the amounts stated in
paragraph 5 of the complaint until fully paid; and
(3) to pay an additional sum equivalent to 25% of the rent accounts as
and for attorneys fees plus the costs of this suit.

The court adopted the MeTCs finding on petitioners unjustified refusal to pay the
rent, which is a valid ground for ejectment. It, however, faulted the MeTC in
dismissing the case on the ground of lack of capacity to sue. Instead, it upheld Ms.
Bautistas authority to represent respondent notwithstanding the absence of a board
resolution to that effect, since her authority was implied from her power as a
general manager/treasurer of the company.[21]
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for
review on certiorari.[22] On March 18, 1998, petitioners filed an Omnibus

Motion[23] to cite Ms. Bautista for contempt; to strike down the MeTC and RTC
Decisions as legal nullities; and to conduct hearings and ocular inspections or
delegate the reception of evidence.Without resolving the aforesaid motion, on May
26, 1998, the CA affirmed[24] the RTC Decision but deleted the award of attorneys
Petitioners moved for the reconsideration of the aforesaid decision.
Thereafter, they filed several motions asking the Honorable Justice Ruben T.
Reyes to inhibit from further proceeding with the case allegedly because of his
close association with Ms. Bautistas uncle-in-law.[27]
In a Resolution[28] dated December 10, 1998, the CA denied the motions for lack of
merit. The appellate court considered said motions as repetitive of their previous
arguments, irrelevant and obviously dilatory.[29] As to the motion for inhibition of
the Honorable Justice Reyes, the same was denied, as the appellate court justice
stressed that the decision and the resolution were not affected by extraneous
matters.[30] Lastly, the appellate court granted respondents motion for execution and
directed the RTC to issue a new writ of execution of its decision, with the
exception of the award of attorneys fees which the CA deleted.[31]
Petitioners now come before this Court in this petition for review
on certiorari raising the following issues:
Whether this ejectment suit should be dismissed and whether petitioners
are entitled to damages for the unauthorized and malicious filing by Rosario (sic)
Bautista of this ejectment case, it being clear that [Roswinda] whether as general
manager or by virtue of her subsequent designation by the Board of Directors as
the corporations attorney-in-fact had no legal capacity to institute the ejectment
suit, independently of whether Director Pacanas Order setting aside the SEC
revocation Order is a mere scrap of paper.

Whether the RTCs and the Honorable Court of Appeals failure and refusal to
resolve the most fundamental factual issues in the instant ejectment case render
said decisions void on their face by reason of the complete abdication by the
RTC and the Honorable Justice Ruben Reyes of their constitutional duty not
only to clearly and distinctly state the facts and the law on which a decision is
based but also to resolve the decisive factual issues in any given case.
Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit
himself, despite his admission by reason of his silence of petitioners accusation
that the said Justice enjoyed a $7,000.00 scholarship grant courtesy of the unclein-law of respondent corporations purported general manager and (2), worse, his
act of ruling against the petitioners and in favor of the respondent corporation
constitute an unconstitutional deprivation of petitioners property without due
process of law.[32]

In addition to Ms. Bautistas lack of capacity to sue, petitioners insist that

respondent company has no standing to sue as a juridical person in view of the
suspension and eventual revocation of its certificate of registration. [33] They
likewise question the factual findings of the court on the bases of their ejectment
from the subject premises. Specifically, they fault the appellate court for not
finding that: 1) their non-payment of rentals was justified; 2) they were deprived of
possession of all the units subject of the lease contract except Room 35; and 3)
respondent violated the terms of the contract by its continued refusal to turn over
possession of Rooms 36, 37 and 38. Petitioners further prayed that a Temporary
Restraining Order (TRO) be issued enjoining the CA from enforcing its Resolution
directing the issuance of a Writ of Execution. Thus, in a Resolution[34] datedJanuary
18, 1999, this Court directed the parties to maintain the status quo effective
immediately until further orders.
The petition lacks merit.
We uphold the capacity of respondent company to institute the ejectment
case. Although the Securities and Exchange Commission (SEC) suspended and
eventually revoked respondents certificate of registration on February 16, 1995,

records show that it instituted the action for ejectment on December 15,
1993. Accordingly, when the case was commenced, its registration was not yet
revoked.[35] Besides, as correctly held by the appellate court, the SEC later set aside
its earlier orders of suspension and revocation of respondents certificate, rendering
the issue moot and academic.[36]
We likewise affirm Ms. Bautistas capacity to sue on behalf of the company despite
lack of proof of authority to so represent it. A corporation has no powers except
those expressly conferred on it by the Corporation Code and those that are implied
from or are incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and/or its duly authorized officers and
agents. Physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate by-laws or by a
specific act of the board of directors.[37] Thus, any person suing on behalf of the
corporation should present proof of such authority. Although Ms. Bautista initially
failed to show that she had the capacity to sign the verification and institute the
ejectment case on behalf of the company, when confronted with such question, she
immediately presented the Secretarys Certificate[38] confirming her authority to
represent the company.
There is ample jurisprudence holding that subsequent and substantial
compliance may call for the relaxation of the rules of procedure in the interest of
justice.[39] InNovelty Phils., Inc. v. Court of Appeals,[40] the Court faulted the
appellate court for dismissing a petition solely on petitioners failure to timely
submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v.
Galan,[41] we upheld the sufficiency of a petition verified by an employment
specialist despite the total absence of a board resolution authorizing her to act for
and on behalf of the corporation. Lastly, in China Banking Corporation v.
Mondragon International Philippines, Inc,[42] we relaxed the rules of procedure
because the corporation ratified the managers status as an authorized signatory. In
all of the above cases, we brushed aside technicalities in the interest of justice. This

is not to say that we disregard the requirement of prior authority to act in the name
of a corporation. The relaxation of the rules applies only to highly meritorious
cases, and when there is substantial compliance. While it is true that rules of
procedure are intended to promote rather than frustrate the ends of justice, and
while the swift unclogging of court dockets is a laudable objective, we should not
insist on strict adherence to the rules at the expense of substantial justice.
Technical and procedural rules are intended to help secure, not suppress, the
cause of justice; and a deviation from the rigid enforcement of the rules may be
allowed to attain that prime objective, for, after all, the dispensation of justice is
the core reason for the existence of courts.[44]
As to the denial of the motion to inhibit Justice Reyes, we find the same to be in
order. First, the motion to inhibit came after the appellate court rendered the
assailed decision, that is, after Justice Reyes had already rendered his opinion on
the merits of the case. It is settled that a motion to inhibit shall be denied if filed
after a member of the court had already given an opinion on the merits of the case,
the rationale being that a litigant cannot be permitted to speculate on the action of
the court x x x (only to) raise an objection of this sort after the decision has been
rendered.[45] Second, it is settled that mere suspicion that a judge is partial to one of
the parties is not enough; there should be evidence to substantiate the
suspicion. Bias and prejudice cannot be presumed, especially when weighed
against a judges sacred pledge under his oath of office to administer justice without
regard for any person and to do right equally to the poor and the rich. There must
be a showing of bias and prejudice stemming from an extrajudicial source,
resulting in an opinion on the merits based on something other than what the judge
learned from his participation in the case.[46] We would like to reiterate, at this
point, the policy of the Court not to tolerate acts of litigants who, for just about any
conceivable reason, seek to disqualify a judge (or justice) for their own purpose,
under a plea of bias, hostility, prejudice or prejudgment.[47]

We now come to the more substantive issue of whether or not the petitioners may
be validly ejected from the leased premises.
Unlawful detainer cases are summary in nature. In such cases, the elements to be
proved and resolved are the fact of lease and the expiration or violation of its
terms.[48]Specifically, the essential requisites of unlawful detainer are: 1) the fact of
lease by virtue of a contract, express or implied; 2) the expiration or termination of
the possessors right to hold possession; 3) withholding by the lessee of possession
of the land or building after the expiration or termination of the right to possess; 4)
letter of demand upon lessee to pay the rental or comply with the terms of the lease
and vacate the premises; and 5) the filing of the action within one year from the
date of the last demand received by the defendant.[49]
It is undisputed that petitioners and respondent entered into two separate contracts
of lease involving nine (9) rooms of the San Luis Building. Records, likewise,
show that respondent repeatedly demanded that petitioners vacate the premises, but
the latter refused to heed the demand; thus, they remained in possession of the
premises. The only contentious issue is whether there was indeed a violation of the
terms of the contract: on the part of petitioners, whether they failed to pay the
stipulated rent without justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except Room 35.
This issue involves questions of fact, the resolution of which requires the
evaluation of the evidence presented. The MeTC, the RTC and the CA all found
that petitioners failed to perform their obligation to pay the stipulated rent. It is
settled doctrine that in a civil case, the conclusions of fact of the trial court,
especially when affirmed by the Court of Appeals, are final and conclusive, and
cannot be reviewed on appeal by the Supreme Court.[50] Albeit the rule admits of
exceptions, not one of them obtains in this case.[51]

To settle this issue once and for all, we deem it proper to assess the array of factual
findings supporting the courts conclusion.
The evidence of petitioners non-payment of the stipulated rent is
overwhelming. Petitioners, however, claim that such non-payment is justified by
the following: 1) the refusal of respondent to allow petitioners to use the leased
properties, except room 35; 2) respondents refusal to turn over Rooms 36, 37 and
38; and 3) respondents refusal to accept payment tendered by petitioners.
Petitioners justifications are belied by the evidence on record. As correctly held by
the CA, petitioners communications to respondent prior to the filing of the
complaint never mentioned their alleged inability to use the rooms. [52] What they
pointed out in their letters is that they did not know to whom payment should be
made, whether to Ms. Bautista or to Pacheco.[53] In their July 26 and October 30,
1993 letters, petitioners only questioned the method of computing their electric
billings without, however, raising a complaint about their failure to use the rooms.
Although petitioners stated in their December 30, 1993 letter that respondent
failed to fulfill its part of the contract,[55] nowhere did they specifically refer to their
inability to use the leased rooms. Besides, at that time, they were already in default
on their rentals for more than a year.
If it were true that they were allowed to use only one of the nine (9) rooms
subject of the contract of lease, and considering that the rooms were intended for a
business purpose, we cannot understand why they did not specifically assert their
right. If we believe petitioners contention that they had been prevented from using
the rooms for more than a year before the complaint for ejectment was filed, they
should have demanded specific performance from the lessor and commenced an
action in court. With the execution of the contract, petitioners were already in a
position to exercise their right to the use and enjoyment of the property according
to the terms of the lease contract.[56] As borne out by the records, the fact is that
respondent turned over to petitioners the keys to the leased premises and

petitioners, in fact, renovated the rooms. Thus, they were placed in possession of
the premises and they had the right to the use and enjoyment of the same. They,
likewise, had the right to resist any act of intrusion into their peaceful possession of
the property, even as against the lessor itself. Yet, they did not lift a finger to
protect their right if, indeed, there was a violation of the contract by the lessor.
What was, instead, clearly established by the evidence was petitioners nonpayment of rentals because ostensibly they did not know to whom payment should
be made.However, this did not justify their failure to pay, because if such were the
case, they were not without any remedy. They should have availed of the
provisions of the Civil Code of the Philippines on the consignation of payment and
of the Rules of Court on interpleader.
Article 1256 of the Civil Code provides:
Article 1256. If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases:
(4) When two or more persons claim the same right to collect;
x x x x.

Consignation shall be made by depositing the things due at the disposal of a

judicial authority, before whom the tender of payment shall be proved in a proper
case, and the announcement of the consignation in other cases.[57]
In the instant case, consignation alone would have produced the effect of
payment of the rentals. The rationale for consignation is to avoid the performance
of an obligation becoming more onerous to the debtor by reason of causes not
imputable to him.[58] Petitioners claim that they made a written tender of payment
and actually prepared vouchers for their monthly rentals. But that was insufficient

to constitute a valid tender of payment. Even assuming that it was valid tender,
still, it would not constitute payment for want of consignation of the amount. Wellsettled is the rule that tender of payment must be accompanied by consignation in
order that the effects of payment may be produced.[59]
Moreover, Section 1, Rule 62 of the Rules of Court provides:
Section 1. When interpleader proper. Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest
whatever in the subject matter, or an interest which in whole or in part is not
disputed by the claimants, he may bring an action against the conflicting
claimants to compel them to interplead and litigate their several claims among

Otherwise stated, an action for interpleader is proper when the lessee does not
know to whom payment of rentals should be made due to conflicting claims on the
property (or on the right to collect). [60] The remedy is afforded not to protect a
person against double liability but to protect him against double vexation in respect
of one liability.[61]
Notably, instead of availing of the above remedies, petitioners opted to
refrain from making payments.
Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as
a justification for non-payment of rentals. Although the two contracts embraced the
lease of nine (9) rooms, the terms of the contracts - with their particular reference
to specific rooms and the monthly rental for each - easily raise the inference that
the parties intended the lease of each room separate from that of the others. There
is nothing in the contract which would lead to the conclusion that the lease of one
or more rooms was to be made dependent upon the lease of all the nine (9)
rooms. Accordingly, the use of each room by the lessee gave rise to the
corresponding obligation to pay the monthly rental for the same. Notably,

respondent demanded payment of rentals only for the rooms actually delivered to,
and used by, petitioners.
It may also be mentioned that the contract specifically provides that the lease of
Rooms 36, 37 and 38 was to take effect only when the tenants thereof would vacate
the premises.Absent a clear showing that the previous tenants had vacated the
premises, respondent had no obligation to deliver possession of the subject rooms
to petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and
38 as an excuse for their failure to pay the rentals due on the other rooms they
In light of the foregoing disquisition, respondent has every right to exercise his
right to eject the erring lessees. The parties contracts of lease contain identical
provisions, to wit:
In case of default by the LESSEE in the payment of rental on the fifth (5 th) day of
each month, the amount owing shall as penalty bear interest at the rate of FOUR
percent (4%) per month, to be paid, without prejudice to the right of the LESSOR
to terminate his contract, enter the premises, and/or eject the LESSEE as
hereinafter set forth;[62]

Moreover, Article 1673[63] of the Civil Code gives the lessor the right to judicially
eject the lessees in case of non-payment of the monthly rentals. A contract of lease
is a consensual, bilateral, onerous and commutative contract by which the owner
temporarily grants the use of his property to another, who undertakes to pay the
rent therefor.[64]For failure to pay the rent, petitioners have no right to remain in the
leased premises.
WHEREFORE, premises considered, the petition is DENIED and the Status
Quo Order dated January 18, 1999 is hereby LIFTED. The Decision of the Court
of Appeals datedMay 26, 1998 and its Resolution dated December 10, 1998 in CAG.R. SP No. 37739 are AFFIRMED.



Associate Justice
Associate Justice
Associate Justice Associate Justice

Associate Justice
Chief Justice

Republic of the Philippines

G.R. No. 150283

April 16, 2008

YAMAMOTO, petitioner,
In 1983, petitioner, Ryuichi Yamamoto (Yamamoto), a Japanese national,
organized under Philippine laws Wako Enterprises Manila, Incorporated
(WAKO), a corporation engaged principally in leather tanning, now known as
Nishino Leather Industries, Inc. (NLII), one of herein respondents.
In 1987, Yamamoto and the other respondent, Ikuo Nishino (Nishino), also a
Japanese national, forged a Memorandum of Agreement under which they
agreed to enter into a joint venture wherein Nishino would acquire such
number of shares of stock equivalent to 70% of the authorized capital stock of
Eventually, Nishino and his brother1 Yoshinobu Nishino (Yoshinobu) acquired
more than 70% of the authorized capital stock of WAKO, reducing Yamamotos
investment therein to, by his claim, 10%,2 less than 10% according to Nishino.3
The corporate name of WAKO was later changed to, as reflected earlier, its
current name NLII.
Negotiations subsequently ensued in light of a planned takeover of NLII by
Nishino who would buy-out the shares of stock of Yamamoto. In the course of
the negotiations, Yoshinobu and Nishinos counsel Atty. Emmanuel G. Doce
(Atty. Doce) advised Yamamoto by letter dated October 30, 1991, the pertinent
portions of which follow:

Hereunder is a simple memorandum of the subject matters discussed

with me by Mr. Yoshinobu Nishino yesterday, October 29 th, based on the
letter of Mr. Ikuo Nishino from Japan, and which I am now transmitting
to you.4
12. Machinery and Equipment:
The following machinery/equipment have been contributed by you to the


1 unit


1 unit


1 unit


4 units


2 units

Regarding the above machines, you may take them out with you (for your
own use and sale) if you want,provided, the value of such machines is
deducted from your and Wakos capital contributions, which will be paid
to you.
Kindly let me know of your comments on all the above, soonest.
x x x x5 (Emphasis and underscoring supplied)

On the basis of such letter, Yamamoto attempted to recover the machineries

and equipment which were, by Yamamotos admission, part of his investment in
the corporation,6 but he was frustrated by respondents, drawing Yamamoto to
file on January 15, 1992 before the Regional Trial Court (RTC) of Makati a
complaint7 against them for replevin.
Branch 45 of the Makati RTC issued a writ of replevin after Yamamoto filed a
bond. 8
In their Answer with Counterclaim,9 respondents claimed that the machineries
and equipment subject of replevin form part of Yamamotos capital
contributions in consideration of his equity in NLII and should thus be treated
as corporate property; and that the above-said letter of Atty. Doce to Yamamoto
was merely a proposal, "conditioned on [Yamamotos] sell-out to . . . Nishino of
his entire equity,"10 which proposal was yet to be authorized by the
stockholders and Board of Directors of NLII.
By way of Counterclaim, respondents, alleging that they suffered damage due
to the seizure via the implementation of the writ of replevin over the
machineries and equipment, prayed for the award to them of moral and
exemplary damages, attorneys fees and litigation expenses, and costs of suit.
The trial court, by Decision of June 9, 1995, decided the case in favor of
Yamamoto,11 disposing thus:
WHEREFORE, judgment is hereby rendered: (1) declaring plaintiff as the
rightful owner and possessor of the machineries in question, and making
the writ of seizure permanent; (2) ordering defendants to pay plaintiff
attorneys fees and expenses of litigation in the amount of Fifty Thousand
Pesos (P50,000.00), Philippine Currency; (3) dismissing defendants
counterclaims for lack of merit; and (4) ordering defendants to pay the
costs of suit.
SO ORDERED.12 (Underscoring supplied)
On appeal,13 the Court of Appeals held in favor of herein respondents and
accordingly reversed the RTC decision and dismissed the complaint.14 In so
holding, the appellate court found that the machineries and equipment claimed
by Yamamoto are corporate property of NLII and may not thus be retrieved
without the authority of the NLII Board of Directors; 15 and that petitioners
argument that Nishino and Yamamoto cannot hide behind the shield of

corporate fiction does not lie,16 nor does petitioners invocation of the doctrine
of promissory estoppel.17 At the same time, the Court of Appeals found no
ground to support respondents Counterclaim.18
denied19 his
Reconsideration, Yamamoto filed the present petition, faulting the Court of
The resolution of the petition hinges, in the main, on whether the advice in the
letter of Atty. Doce that Yamamoto may retrieve the machineries and
equipment, which admittedly were part of his investment, bound the
corporation. The Court holds in the negative.
Indeed, without a Board Resolution authorizing respondent Nishino to act for
and in behalf of the corporation, he cannot bind the latter. Under the
Corporation Law, unless otherwise provided, corporate powers are exercised by
the Board of Directors.23
Urging this Court to pierce the veil of corporate fiction, Yamamoto argues, viz:
During the negotiations, the issue as to the ownership of the
Machiner[ies] never came up. Neither did the issue on the proper
procedure to be taken to execute the complete take-over of the Company
come up since Ikuo, Yoshinobu, and Yamamoto were the owners thereof,
the presence of other stockholders being only for the purpose of
complying with the minimum requirements of the law.

What course of action the Company decides to do or not to do depends

not on the "other members of the Board of Directors". It depends on
what Ikuo and Yoshinobu decide. The Company is but a mere
instrumentality of Ikuo [and] Yoshinobu.24
x x x The Company hardly holds board meetings. It has an inactive
board, the directors are directors in name only and are there to do the
bidding of the Nish[i]nos, nothing more. Its minutes are paper minutes. x
x x 25
The fact that the parties started at a 70-30 ratio and Yamamotos
percentage declined to 10% does not mean the 20% went to others. x x x
The 20% went to no one else but Ikuo himself. x x x Yoshinobu is the
younger brother of Ikuo and has no say at all in the business. Only
Ikuo makes the decisions. There were, therefore, no other members
of the Board who have not given their approval.26(Emphasis and
underscoring supplied)
While the veil of separate corporate personality may be pierced when the
corporation is merely an adjunct, a business conduit, or alter ego of a
person,27 the mere ownership by a single stockholder of even all or nearly all of
the capital stocks of a corporation is not by itself a sufficient ground to
disregard the separate corporate personality.28
The elements determinative of the applicability of the doctrine of piercing the
veil of corporate fiction follow:
"1. Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention of the plaintiffs legal
rights; and

3. The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.
The absence of any one of these elements prevents "piercing the
corporate veil." In applying the instrumentality or alter ego doctrine,
the courts are concerned with reality and not form, with how the
corporation operated and the individual defendants relationship to that
operation."29 (Italics in the original; emphasis and underscoring supplied)
In relation to the second element, to disregard the separate juridical
personality of a corporation, the wrongdoing or unjust act in contravention of a
plaintiffs legal rights must be clearly and convincingly established; it cannot be
presumed.30 Without a demonstration that any of the evils sought to be
prevented by the doctrine is present, it does not apply.31
In the case at bar, there is no showing that Nishino used the separate
personality of NLII to unjustly act or do wrong to Yamamoto in contravention of
his legal rights.
Yamamoto argues, in another vein, that promissory estoppel lies against
respondents, thus:
Under the doctrine of promissory estoppel, x x x estoppel may arise from
the making of a promise, even though without consideration, if it was
intended that the promise should be relied upon and in fact it was relied
upon, and if a refusal to enforce it would be virtually to sanction the
perpetration of fraud or would result in other injustice.
x x x Ikuo and Yoshinobu wanted Yamamoto out of the Company. For this
purpose negotiations were had between the parties. Having expressly
given Yamamoto, through the Letter and through a subsequent meeting
at the Manila Peninsula where Ikuo himself confirmed that Yamamoto
may take out the Machinery from the Company anytime, respondents
should not be allowed to turn around and do the exact opposite of what
they have represented they will do.
In paragraph twelve (12) of the Letter, Yamamoto was expressly advised
that he could take out the Machinery if he wanted to so, provided that
the value of said machines would be deducted from his capital
contribution x x x.

Respondents cannot now argue that they did not intend for Yamamoto to
rely upon the Letter. That was the purpose of the Letter to begin with.
Petitioner[s] in fact, relied upon said Letter and such reliance was further
strengthened during their meeting at the Manila Peninsula.
To sanction respondents attempt to evade their obligation would be to
petitioner. (Underscoring supplied)
It bears noting, however, that the aforementioned paragraph 12 of the letter is
followed by a request for Yamamoto to give his "comments on all the above,
What was thus proffered to Yamamoto was not a promise, but a mere offer,
subject to his acceptance. Without acceptance, a mere offer produces no
Thus, under Article 1181 of the Civil Code, "[i]n conditional obligations, the
acquisition of rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event which constitutes the
condition." In the case at bar, there is no showing of compliance with the
condition for allowing Yamamoto to take the machineries and equipment,
namely, his agreement to the deduction of their value from his capital
contribution due him in the buy-out of his interests in NLII. Yamamotos
allegation that he agreed to the condition 35 remained just that, no proof thereof
having been presented.
The machineries and equipment, which comprised Yamamotos investment in
NLII,36 thus remained part of the capital property of the corporation. 37
It is settled that the property of a corporation is not the property of its
stockholders or members.38 Under the trust fund doctrine, the capital stock,
property, and other assets of a corporation are regarded as equity in trust for
the payment of corporate creditors which are preferred over the stockholders in
the distribution of corporate assets.39The distribution of corporate assets and
property cannot be made to depend on the whims and caprices of the
stockholders, officers, or directors of the corporation unless the indispensable
conditions and procedures for the protection of corporate creditors are

WHEREFORE, the petition is DENIED.

Costs against petitioner.
Associate Justice




Republic of the Philippines

Supreme Court
Ynares-Santiago, J. (Chairperson),
- versus - Austria-Martinez,
Reyes, and
Brion,* JJ.
Respondent. Promulgated:
June 17, 2008
x ---------------------------------------------------------------------------------------- x

This petition for review under Rule 45 of the Rules of Court assails the December
21, 2006 Decision[1] of the Court of Appeals which annulled and set aside the May
31, 2006and August 22, 2006 Resolutions of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000188-2006 and ordered herein
petitioner to return the cash bond released to him. Also assailed is the February 5,
2007 Resolution[2] denying the Motion for Reconsideration.
The antecedent facts are as follows:

A case for illegal dismissal was filed by petitioner Virgilio S. Delima against
Golden Union Aquamarine Corporation (Golden), Prospero Gois and herein
respondent Susan Mercaida Gois before the Regional Arbitration Branch No. VIII
of the National Labor Relations Commission on October 29, 2004, docketed as
NLRC RAB VIII Case No. 10-0231-04.
On April 29, 2005, Labor Arbiter Philip B. Montaces rendered a decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
1. Finding illegality in the dismissal of complainant Virgilio Delima
from his employment;
2. Ordering respondent Golden Union Aquamarine Corporation to
pay complainant the following:
a. Backwages (July 30, 2004 to April 29, 2005 =
9 mos.; P5,350.50 x 9 months) .... P 48,154.50
b. Separation Pay (P5,350.50 x 4 years) 21,402.00
c. Salary Differentials 32,679.00
d. Service Incentive Leave Pay 2,820.00
Sub-Total P105,055.50
e. Attorneys fee (10%) 10,505.55
T O T A L P115,561.05
3. Dismissing all other claims for lack of merit.

Golden failed to appeal the aforesaid decision; hence, it became final and
executory. A writ of execution was issued and an Isuzu Jeep with plate number
PGE-531 was attached.
Thereafter, respondent Gois filed an Affidavit of Third Party Claim claiming that
the attachment of the vehicle was irregular because said vehicle was registered in

her name and not Goldens; and that she was not a party to the illegal dismissal case
filed by Delima against Golden.[4]
In an Order[5] dated December 29, 2005, the Labor Arbiter denied respondents
third-party claim on grounds that respondent was named in the complaint as one of
the respondents; that summons were served upon her and Prospero Gois; that both
verified Goldens Position Paper and alleged therein that they are the respondents;
and that respondent is one of the incorporators/officers of the corporation.
Gois filed an appeal before the NLRC. At the same time, she filed a motion
before the Labor Arbiter to release the motor vehicle after substituting the same
with a cash bond in the amount of P115,561.05.
On January 16, 2006, an Order was issued by the Labor Arbiter which states:
Filed by Third Party Claimant SUSAN M. GOIS is a Motion to
Release Motor Vehicle after substituting same with a cash bond of
P115,561.05 under O.R. No. 8307036 which amount is equivalent to the
judgment award in the instant case, in the meantime that she has
appealed the Order denying her Third Party Claim.
Finding said Motion in order and with merit, Sheriff Felicisimo T.
Basilio is directed to release from his custody the Isuzu jeep with Plate
No. PGE-532 and return same to SUSAN M. GOIS.

Meanwhile, on May 31, 2006, the NLRC issued a Resolution [7] which dismissed
respondents appeal for lack of merit. A Motion for Reconsideration[8] was filed but
it was denied on August 22, 2006.[9] On September 12, 2006, the NLRC Resolution
became final and executory; subsequently, an Entry of Judgment[10] was issued
on September 29, 2006.
On October 13, 2006, Gois filed a petition for certiorari [11] before the Court of
Appeals as well as a Supplement to Petition [12] on October 27, 2006. Gois alleged
that the NLRC committed grave abuse of discretion when it dismissed her
appeal. She claimed that by denying her third-party claim, she was in effect
condemned to pay a judgment debt issued against a corporation of which she is
neither a president nor a majority owner but merely a stockholder. She further

argued that her personality is separate and distinct from that of Golden; thus, the
judgment ordering the corporation to pay the petitioner could not be satisfied out of
her personal assets.
On December 21, 2006, the appellate court rendered a Decision in favor of
respondent, which reads in part:
In the decision dated April 29, 2005 rendered by Labor Arbiter
Montaces, the dispositive portion confined itself in directing Golden
Union Aquamarine Corporation only, no more and no less, to pay private
respondent the award stated therein, but did not mention that the liability
is joint and solidary with petitioner Susan Gois although the complaint
filed by the private respondent included petitioner as among the
respondents therein.
It bears stress also that corporate officers cannot be held liable for
damages on account of the employees dismissal because the employer
corporation has a personality separate and distinct from its officers who
merely acted as its agents. They are only solidarily liable with the
corporation for the termination of employment of employees if the same
was done with malice or in bad faith. In the case at bench, it was not
clearly shown and established that the termination of private respondent
from employment was tainted with evident malice and bad faith. As
elucidated in the case of Reahs Corporation vs. NLRC, the main doctrine
of separate personality of a corporation should remain as the guiding rule
in determining corporate liability to its employees, and that, at the very
least, to justify solidary liability, there must be an allegation or showing
that the officers of the corporation deliberately or maliciously designed
to evade the financial obligation of the corporation to its employees.
Further, as wisely put by the petitioner, while it may be true that the
subject vehicle was used by the corporation in transporting the products
bought by the corporation from Eastern Samar to Manila, it does not
necessarily follow that it is owned by the corporation as in fact petitioner
was able to duly establish that the said vehicle is hers and is registered
under her name. Nor does it imply that the corporation is free to dispose
of the same and neither does it imply that the said vehicle may and can
be levied by respondent NLRC to satisfy a judgment against the

WHEREFORE, in view of the foregoing premises, judgment is

hereby rendered by us GRANTING the petition filed in this case,
ANNULLING and SETTING ASIDE the Resolutions dated May 31,
2006 and August 22, 2006, respectively, issued by the respondent
National Labor Relations Commission (NLRC), 4 th Division in NLRC
Case No. V-000188-2006 and ORDERING private respondent to return
to petitioner the cash bond earlier released to him.

Petitioner filed a Motion for Reconsideration [14] which was denied. Hence, the
present petition raising the following issues:
A corporation has a personality distinct and separate from its individual
stockholders or members and from that of its officers who manage and run its
affairs. The rule is that obligations incurred by the corporation, acting through its
directors, officers and employees, are its sole liabilities. Thus, property belonging
to a corporation cannot be attached to satisfy the debt of a stockholder and vice
versa, the latter having only an indirect interest in the assets and business of the

Since the Decision of the Labor Arbiter dated April 29, 2005 directed only
Golden to pay the petitioner the sum of P115,561.05 and the same was not joint
and solidary obligation with Gois, then the latter could not be held personally
liable since Golden has a separate and distinct personality of its own. It remains
undisputed that the subject vehicle was owned by Gois, hence it should not be
attached to answer for the liabilities of the corporation. Unless they have exceeded
their authority, corporate officers are, as a general rule, not personally liable for
their official acts, because a corporation, by legal fiction, has a personality separate
and distinct from its officers, stockholders and members. No evidence was
presented to show that the termination of the petitioner was done with malice or in
bad faith for it to hold the corporate officers, such as Gois, solidarily liable with the
We note that the Resolution of the NLRC dismissing respondents appeal was
entered in the Book of Entries of Judgment on September 29, 2006 after it
allegedly became final and executory on September 12, 2006.
It will be recalled, however, that the NLRC issued the Resolution dismissing
the appeal of the respondent on May 31, 2006. A motion for reconsideration was
filed on July 24, 2006 but it was denied by the NLRC on August 22, 2006. Copy of
the denial was received by the respondent on September 1, 2006.[17] Thus,
respondent has sixty (60) days from receipt of the denial of the motion for
reconsideration or until October 31, 2006, within which to file the petition for
certiorari under Section 4 of Rule 65 of the Rules of Court. Thus, the petition for
certiorari filed by respondent before the Court of Appeals on October 13, 2006 was
timely.[18] Consequently, the NLRC erred in declaring its May 31, 2006 Resolution
final and executory.
A decision issued by a court is final and executory when such decision
disposes of the subject matter in its entirety or terminates a particular proceeding or
action, leaving nothing else to be done but to enforce by execution what has been
determined by the court, such as when after the lapse of the reglementary period to
appeal, no appeal has been perfected.[19]
In the instant case, it is undisputed that when the entry of judgment was
issued by the NLRC on September 12, 2006 and entered in the Book of Entries of

Judgment onSeptember 29, 2006, the reglementary period to file a petition for
certiorari has not yet lapsed. In fact, when the petition for certiorari was filed
on October 13, 2006, the same was still within the reglementary period. It bears
stressing that a petition for certiorari under Rule 65 must be filed not later than 60
days from notice of the judgment, order or resolution sought to be annulled.[20]
The period or manner of appeal from the NLRC to the Court of Appeals is
governed by Rule 65 pursuant to the ruling of this Court in the case of St. Martin
Funeral Home v. National Labor Relations Commission.[21] Section 4 of Rule 65, as
amended, states that the petition may be filed not later than sixty (60) days from
notice of the judgment, or resolution sought to be assailed.[22]
Corollarily, Section 4, Rule III of the New Rules of Procedure of the NLRC
expressly mandates that (f)or the purpose(s) of computing the period of appeal, the
same shall be counted from receipt of such decisions, awards or orders by the
counsel of record. Although this rule explicitly contemplates an appeal before the
Labor Arbiter and the NLRC, we do not see any cogent reason why the same rule
should not apply to petitions for certiorari filed with the Court of Appeals from
decisions of the NLRC.[23]
We note that in the dispositive portion of its Decision, the appellate court
ordered petitioner to return to respondent the cash bond earlier released to
him. However, petitioner admitted that the monies were spent to defray the medical
expenses of his ailing mother. Considering that petitioner is legally entitled to
receive said amount, Golden must reimburse respondent Gois the amount of
P115,561.05. To rule otherwise would result in unjust enrichment of Golden. The
corporation has benefited from the payment made by Gois because it was relieved
from its obligation to pay to petitioner the judgment debt.
WHEREFORE, the petition is PARTLY GRANTED. The assailed
Decision of the Court of Appeals dated December 21, 2006 annulling and setting
aside the May 31, 2006 and August 22, 2006 Resolutions of the National Labor
Relations Commission; and its Resolution dated February 5, 2007
are AFFIRMED with the MODIFICATIONthat Golden Union Aquamarine
Corporation is ordered to REIMBURSE respondent Susan M. Gois the amount of


Associate Justice


Associate Justice


Associate Justice Associate Justice

Associate Justice