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G.R. No.

101699 March 13, 1996


BENJAMIN A. SANTOS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER FRUCTUOSO T.
AURELLANO and MELVIN D. MILLENA, respondents.
VITUG, J.:p
In a petition for certiorari under Rule 65 of the Rules of Court, petitioner Benjamin A. Santos,
former President of the Mana Mining and Development Corporation ("MMDC"), questions the
resolution of the National Labor Relations Commission ("NLRC") affirming the decision of Labor
Arbiter Fructuoso T. Aurellano who, having held illegal the termination of employment of private
respondent Melvin D. Millena, has ordered petitioner MMDC, as well as its president (herein
petitioner) and the executive vice-president in their personal capacities, to pay Millena his
monetary claims.
Private respondent, on 01 October 1985, was hired to be the project accountant for MMDC's
mining operations in Gatbo, Bacon, Sorsogon. On 12 August 1986, private respondent sent to Mr.
Gil Abao, the MMDC corporate treasurer, a memorandum calling the latter's attention to the
failure of the company to comply with the withholding tax requirements of, and to make the
corresponding monthly remittances to, the Bureau of Internal Revenue ("BIR") on account of
delayed payments of accrued salaries to the company's laborers and employees. 1
In a letter, dated 08 September 1986, Abao advised private respondent thusly:
Regarding Gatbo operations, as you also are aware, the rainy season is now upon
us and the peace and order condition in Sorsogon has deteriorated. It is therefore,
the board's decision that it would be useless for us to continue operations,
especially if we will always be in the "hole," so to speak. Our first funds receipts will
be used to pay all our debts. We will stop production until the advent of the dry
season, and until the insurgency problem clears. We will undertake only necessary
maintenance and repair work and will keep our overhead down to the minimum
manageable level. Until we resume full-scale operations, we will not need a project
accountant as there will be very little paper work at the site, which can be easily
handled at Makati.
We appreciate the work you have done for Mana and we will not hesitate to take
you back when we resume work at Gatbo. However it would be unfair to you if we
kept you in the payroll and deprive you of the opportunity to earn more, during this
period of Mana's crisis. 2
Private respondent expressed "shock" over the termination of his employment. He complained
that he would not have resigned from the Sycip, Gorres & Velayo accounting firm, where he was
already a senior staff auditor, had it not been for the assurance of a "continuous job" by MMDC's
Engr. Rodillano E. Velasquez. Private respondent requested that he be reimbursed the "advances"
he had made for the company and be paid his "accrued salaries/claims. 3
The claim was not heeded; on 20 October 1986, private respondent filed with the NLRC Regional
Arbitration, Branch No. V, in Legazpi City, a complaint for illegal dismissal, unpaid salaries, 13th
month pay, overtime pay, separation pay and incentive leave pay against MMDC and its two top
officials, namely, herein petitioner Benjamin A. Santos (the President) and Rodillano A. Velasquez
(the executive vice-president). in his complaint-affidavit (position paper), submitted on 27
October 1986, Millena alleged, among other things, that his dismissal was merely an offshoot of
his letter of 12 August 1986 to Abao about the company's inability to pay its workers and to
remit withholding taxes to the BIR. 4
A copy of the notice and summons was served on therein respondents (MMDC, Santos and
Velasquez) on 29 October 1986. 5 At the initial hearing on 14 November 1986 before the Labor
Arbiter, only the complainant, Millena, appeared; however, Atty. Romeo Perez, in representation of
the respondents, requested by telegram that the hearing be reset to 01 December 1986.

Although the request was granted by the Labor Arbiter, private respondent was allowed,
nevertheless, to present his evidence ex parte at that initial hearing.
The scheduled 01st December 1986 hearing was itself later reset to 19 December 1986. On 05
December 1986, the NLRC in Legazpi City again received a telegram from Atty. Perez asking for
fifteen (15) days within which to submit the respondents' position paper. On 19 December 1986,
Atty. Perez sent yet another telegram seeking a further postponement of the hearing and asking
for a period until 15 January 1987 within which to submit the position paper.
On 15 January 1987, Atty. Perez advised the NLRC in Legazpi City that the position paper had
finally been transmitted through the mail and that he was submitting the case for resolution
without further hearing. The position paper was received by the Legazpi City NLRC office on 19
January 1987. Complainant Millena filed, on 26 February 1987, his rejoinder to the position paper.
On 27 July 1988, Labor Arbiter Fructuoso T. Aurellano, finding no valid cause for terminating
complainant's employment, ruled, citing this Court's pronouncement in Construction &
Development Corporation of the Philippines vs. Leogardo, Jr. 6 that a partial closure of an
establishment due to losses was a retrenchment measure that rendered the employer liable for
unpaid salaries and other monetary claims. The Labor Arbiter adjudged
WHEREFORE, the respondents are hereby ordered to pay the petitioner the amount
of P37,132.25 corresponding to the latter's unpaid salaries and advances;
P5,400.00 for petitioner's 13th month pay; P3,340.95 as service incentive leave
pay; and P5,400.00 as separation pay. The respondents are further ordered to pay
the petitioner 10% of the monetary awards as attorney's fees.
All other claims are dismissed for lack of sufficient evidence.
SO ORDERED. 7
Alleging abuse of discretion by the Labor Arbiter, the company and its co-respondents filed a
"motion for reconsideration and/or appeal. 8 The motion/appeal was forthwith indorsed to the
Executive Director of the NLRC in Manila.
In a resolution, dated 04 September 1989, the NLRC 9 affirmed the decision of the Labor Arbiter. It
held that the reasons relied upon by MMDC and its co-respondents in the dismissal of Millena, i.e.,
the rainy season, deteriorating peace and order situation and little paperwork, were "not causes
mentioned under Article 282 of the Labor Code of the Philippines" and that Millena, being a
regular employee, was "shielded by the tenurial clause mandated under the law. 10
A writ of execution correspondingly issued; however, it was returned unsatisfied for the failure of
the sheriff to locate the offices of the corporation in the address indicated. Another writ of
execution and an order of garnishment was thereupon served on petitioner at his residence.
Contending that he had been denied due process, petitioner filed a motion for reconsideration of
the NLRC's resolution along with a prayer for the quashal of the writ of execution and order of
garnishment. He averred that he had never received any notice, summons or even a copy of the
complaint; hence, he said, the Labor Arbiter at no time had acquired jurisdiction over him.
On 16 August 1991, the NLRC 11 dismissed the motion for reconsideration. Citing Section 2, Rule
13, 12 and Section 13, Rule 14, 13 of the Rules of Court, it ruled that the Regional Arbitration office
had not, in fact, been remiss in the observance of the legal processes for acquiring jurisdiction
over the case and over the persons of the respondents therein. The NLRC was also convinced that
Atty. Perez had been the authorized counsel of MMDC and its two most ranking officers.
In holding petitioner personally liable for private respondent's claim, the NLRC cited Article 289 14
of the Labor Code and the ruling in A.C. Ransom Labor Union-CCLU vs. NLRC 15 to the effect that
"(t)he responsible officer of an employer corporation (could) be held personally, not to say even
criminally, liable for non-payment of backwages," and that of Gudez vs. NLRC 16 which amplified
that "where the employer corporation (was) no longer existing and unable to satisfy the judgment
in favor of the employee, the officer should be liable for acting on behalf of the corporation.

In the instant petition for certiorari, petitioner Santos reiterates that he should not have been
adjudged personally liable by public respondents, the latter not having validly acquired
jurisdiction over his person whether by personal service of summons or by substituted service
under Rule 19 of the Rules of Court.
Petitioner's contention is unacceptable. The fact that Atty. Romeo B. Perez has been able to timely
ask for a deferment of the initial hearing on 14 November 1986, coupled with his subsequent
active participation in the proceedings, should disprove the supposed want of service of legal
process. Although as a rule, modes of service of summons are strictly followed in order that the
court may acquire jurisdiction over the person of a defendant, 17 such procedural modes,
however, are liberally construed in quasi-judicial proceedings, substantial compliance with the
same being considered adequate. 18 Moreover, jurisdiction over the person of the defendant in
civil cases is acquired not only by service of summons but also by voluntary appearance in court
and submission to its authority. 19 "Appearance" by a legal advocate is such "voluntary submission
to a court's jurisdiction." 20 It may be made not only by actual physical appearance but likewise by
the submission of pleadings in compliance with the order of the court or tribunal.
To say that petitioner did not authorize Atty. Perez to represent him in the case 21 is to unduly tax
credulity. Like the Solicitor General, the Court likewise considers it unlikely that Atty. Perez would
have been so irresponsible as to represent petitioner if he were not, in fact, authorized. 22 Atty.
Perez is an officer of the court, and he must be presumed to have acted with due propriety. The
employment of a counsel or the authority to employ an attorney, it might be pointed out, need
not be proved in writing; such fact could be inferred from circumstantial evidence. 23 Petitioner
was not just an ordinary official of the MMDC; he was the President of the company.
Petitioner, in any event, argues that public respondents have gravely abused their discretion "in
finding petitioner solidarily liable with MMDC even (in) the absence of bad faith and malice on his
part." 24 There is merit in this plea.
A corporation is a juridical entity with legal personality separate and distinct from those acting for
and in its behalf and, in general, from the people comprising it. The rule is that obligations
incurred by the corporation, acting through its directors, officers and employees, are its sole
liabilities. Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist
to warrant, albeit done sparingly, the disregard of its independent being and the lifting of the
corporate veil. 25 As a rule, this situation might arise when a corporation is used to evade a just
and due obligation or to justify a wrong, 26 to shield or perpetrate fraud, 27 to carry out similar
other unjustifable aims or intentions, or as a subterfuge to commit injustice and so circumvent the
law. 28 In Tramat Mercantile, Inc., vs. Court of Appeals, 29 the Court has collated the settled
instances when, without necessarily piercing the veil of corporate fiction, personal civil liability
can also be said to lawfully attach to a corporate director, trustee or officer; to wit: When
(1) He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith
or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in
damages to the corporation, its stockholders or other persons;
(2) He consents to the issuance of watered stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his written objection
thereto;
(3) He agrees to hold himself personally and solidarily liable with the corporation; or
(4) He is made, by a specific provision of law, to personally answer for his corporate
action.
The case of petitioner is way off these exceptional instances. It is not even shown that
petitioner has had a direct hand in the dismissal of private respondent enough to attribute
to him (petitioner) a patently unlawful act while acting for the corporation. Neither can
Article 289 30 of the Labor Code be applied since this law specifically refers only to the
imposition of penalties under the Code. It is undisputed that the termination of petitioner's
employment has, instead, been due, collectively, to the need for a further mitigation of

losses, the onset of the rainy season, the insurgency problem in Sorsogon and the lack of
funds to further support the mining operation in Gatbo.
It is true, there were various cases when corporate officers were themselves held by the Court to
be personally accountable for the payment of wages and money claims to its employees. In A.C.
Ransom Labor Union-CCLU vs. NLRC, 31 for instance, the Court ruled that under the Minimum
Wage Law, the responsible officer of an employer corporation could be held personally liable for
nonpayment of backwages for "(i)f the policy of the law were otherwise, the corporation employer
(would) have devious ways for evading payment of back wages." In the absence of a clear
identification of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC 32
in holding personally liable the vice-president of the company, being the highest and most
ranking official of the corporation next to the President who was dismissed, for the latter's claim
for unpaid wages.
A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability an the part of the company officer. In
A.C. Ransom, the corporate entity was a family corporation and execution against it could not be
implemented because of the disposition posthaste of its leviable assets evidently in order to
evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was thus
clearly appropriate. Chua likewise involved another family corporation, and this time the conflict
was between two brothers occupying the highest ranking positions in the company. There were
incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in bad
faith, in the easing out from the company of one of the brothers by the other.
The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs.
National Labor Relations Commission; 33 thus:
We come now to the personal liability of petitioner, Sunio, who was made jointly
and severally responsible with petitioner company and CIPI for the payment of the
backwages of private respondents. This is reversible error. The Assistant Regional
Director's Decision failed to disclose the reason why he was made personally liable.
Respondents, however, alleged as grounds thereof, his the being owner of one-half
(1/2) interest of said corporation, and his alleged arbitrary dismissal of private
respondents.
Petitioner Sunio was impleaded in the Complaint in his capacity as General
Manager of petitioner corporation. There appears to be no evidence on record that
he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and was a
corporate act.
It is basic that a corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of any other
legal entity to which it may be related. Mere ownership by a single stockholder or
by another corporation of all or nearly all of the capital stock of a corporation is not
of itself sufficient ground for disregarding the separate corporate personality.
Petitioner Sunio, therefore, should not have been made personally answerable for
the payment of private respondents' back salaries.
The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC; 34 however, it
should be clear from our recent pronouncement in Mam Realty Development Corporation and
Manuel Centeno vs. NLRC 35 that the Sunio doctrine still prevails.
WHEREFORE, the instant petition for certiorari is given DUE COURSE and the decision of the Labor
Arbiter, affirmed by the NLRC, is hereby MODIFIED insofar as it holds herein petitioner Benjamin
Santos personally liable with Mana Mining and Development Corporation, which portion of the
questioned judgment is now SET ASIDE. In all other respects, the questioned decision remains
unaffected. No costs.
SO ORDERED.

G.R. No. L-67626 April 18, 1989


JOSE REMO, JR., petitioner,
vs.
THE HON. INTERMEDIATE APPELLATE COURT and E.B. MARCHA TRANSPORT COMPANY,
INC., represented by APIFANIO B. MARCHA, respondents.
GANCAYCO, J.:
A corporation is an entity separate and distinct from its stockholders. While not in fact and in
reality a person, the law treats a corporation as though it were a person by process of fiction or by
regarding it as an artificial person distinct and separate from its individual stockholders. 1
However, the corporate fiction or the notion of legal entity may be disregarded when it "is used to
defeat public convenience, justify wrong, protect fraud, or defend crime" in which instances "the
law will regard the corporation as an association of persons, or in case of two corporations, will
merge them into one." The corporate fiction may also be disregarded when it is the "mere alter
ego or business conduit of a person." 2 There are many occasions when this Court pierced the
corporate veil because of its use to protect fraud and to justify wrong. 3 The herein petition for
review of a. resolution of the Intermediate Appellate Court dated February 8, 1984 seeking the
reversal thereof and the reinstatement of its earlier decision dated June 30, 1983 in AC-G.R. No.
68496-R 4 calls for the application of the foregoing principles.
In the latter part of December, 1977 the board of directors of Akron Customs Brokerage
Corporation (hereinafter referred to as Akron), composed of petitioner Jose Remo, Jr., Ernesto
Baares, Feliciano Coprada, Jemina Coprada, and Dario Punzalan with Lucia Lacaste as Secretary,
adopted a resolution authorizing the purchase of thirteen (13) trucks for use in its business to be
paid out of a loan the corporation may secure from any lending institution. 5
Feliciano Coprada, as President and Chairman of Akron, purchased thirteen trucks from private
respondent on January 25, 1978 for and in consideration of P525,000.00 as evidenced by a deed
of absolute sale. 6 In a side agreement of the same date, the parties agreed on a downpayment
in the amount of P50,000.00 and that the balance of P475,000.00 shall be paid within sixty (60)
days from the date of the execution of the agreement. The parties also agreed that until said
balance is fully paid, the down payment of P50,000.00 shall accrue as rentals of the 13 trucks;
and that if Akron fails to pay the balance within the period of 60 days, then the balance shall
constitute as a chattel mortgage lien covering said cargo trucks and the parties may allow an
extension of 30 days and thereafter private respondent may ask for a revocation of the contract
and the reconveyance of all said trucks. 7
The obligation is further secured by a promissory note executed by Coprada in favor of Akron. It is
stated in the promissory note that the balance shall be paid from the proceeds of a loan obtained
from the Development Bank of the Philippines (DBP) within sixty (60) days. 8 After the lapse of 90
days, private respondent tried to collect from Coprada but the latter promised to pay only upon
the release of the DBP loan. Private respondent sent Coprada a letter of demand dated May 10,

1978. 9 In his reply to the said letter, Coprada reiterated that he was applying for a loan from the
DBP from the proceeds of which payment of the obligation shall be made. 10
Meanwhile, two of the trucks were sold under a pacto de retro sale to a certain Mr. Bais of the
Perpetual Loans and Savings Bank at Baclaran. The sale was authorized by a board resolution
made in a meeting held on March 15, 1978. 11
Upon inquiry, private respondent found that no loan application was ever filed by Akron with DBP.
12
In the meantime, Akron paid rentals of P500.00 a day pursuant to a subsequent agreement, from
April 27, 1978 (the end of the 90-day period to pay the balance) to May 31, 1978. Thereafter, no
more rental payments were made.
On June 17, 1978, Coprada wrote private respondent begging for a grace period of until the end of
the month to pay the balance of the purchase price; that he will update the rentals within the
week; and in case he fails, then he will return the 13 units should private respondent elect to get
back the same. 13 Private respondent, through counsel, wrote Akron on August 1, 1978
demanding the return of the 13 trucks and the payment of P25,000.00 back rentals covering the
period from June 1 to August 1, 1978. 14
Again, Coprada wrote private respondent on August 8, 1978 asking for another grace period of up
to August 31, 1978 to pay the balance, stating as well that he is expecting the approval of his
loan application from a certain financing company, and that ten (10) trucks have been returned to
Bagbag, Novaliches. 15 On December 9, 1978, Coprada informed private respondent anew that
he had returned ten (10) trucks to Bagbag and that a resolution was passed by the board of
directors confirming the deed of assignment to private respondent of P475,000 from the proceeds
of a loan obtained by Akron from the State Investment House, Inc. 16
In due time, private respondent filed a compliant for the recovery of P525,000.00 or the return of
the 13 trucks with damages against Akron and its officers and directors, Feliciano Coprada, Dario
D. Punzalan, Jemina Coprada, Lucia Lacaste, Wilfredo Layug, Arcadio de la Cruz, Francisco Clave,
Vicente Martinez, Pacifico Dollario and petitioner with the then Court of First Instance of Rizal.
Only petitioner answered the complaint denying any participation in the transaction and alleging
that Akron has a distinct corporate personality. He was, however, declared in default for his failure
to attend the pre-trial.
In the meanwhile, petitioner sold all his shares in Akron to Coprada. It also appears that Akron
amended its articles of incorporation thereby changing its name to Akron Transport International,
Inc. which assumed the liability of Akron to private respondent.
After an ex parte reception of the evidence of the private respondent, a decision was rendered on
October 28, 1980, the dispositive part of which reads as follows:
Finding the evidence sufficient to prove the case of the plaintiff, judgment is hereby rendered in
favor of the plaintiff and against the defendants, ordering them jointly and severally to pay;
a the purchase price of the trucks in the amount of P525,000.00 with ... legal
rate (of interest) from the filing of the complaint until the full amount is paid;
b rentals of Bagbag property at P1,000.00 a month from August 1978 until the
premises is cleared of the said trucks;
c attorneys fees of P10,000.00, and
d costs of suit.
The P50,000.00 given as down payment shall pertain as rentals of the trucks from June 1 to
August 1, 1978 which is P25,000.00 (see demand letter of Atty. Aniano Exhibit "T") and the

remaining P25,000.00 shall be from August 1, 1978 until the trucks are removed totally from the
place." 17
A motion for new trial filed by petitioner was denied so he appealed to the then Intermediate
Appellate Court (IAC) wherein in due course a decision was rendered on June 30, 1 983 setting
aside the said decision as far as petitioner is concemed. However, upon a motion for
reconsideration filed by private respondent dent, the IAC, in a resolution dated February 8,1984,
set aside the decision dated June 30, 1983. The appellate court entered another decision
affirming the appealed decision of the trial court, with costs against petitioner.
Hence, this petition for review wherein petitioner raises the following issues:
I. The Intermediate Appellate Court (IAC) erred in disregarding the corporate fiction
and in holding the petitioner personally liable for the obligation of the Corporation
which decision is patently contrary to law and the applicable decision thereon.
II. The Intermediate Appellate Court (IAC) committed grave error of law in its
decision by sanctioning the merger of the personality of the corporation with that of
the petitioner when the latter was held liable for the corporate debts. 18
We reverse.
The environmental facts of this case show that there is no cogent basis to pierce the corporate
veil of Akron and hold petitioner personally liable for its obligation to private respondent. While it
is true that in December, 1977 petitioner was still a member of the board of directors of Akron
and that he participated in the adoption of a resolution authorizing the purchase of 13 trucks for
the use in the brokerage business of Akron to be paid out of a loan to be secured from a lending
institution, it does not appear that said resolution was intended to defraud anyone and more
particularly private respondent. It was Coprada, President and Chairman of Akron, who negotiated
with said respondent for the purchase of 13 cargo trucks on January 25, 1978. It was Coprada who
signed a promissory note to guarantee the payment of the unpaid balance of the purchase price
out of the proceeds of a loan he supposedly sought from the DBP. The word "WE' in the said
promissory note must refer to the corporation which Coprada represented in the execution of the
note and not its stockholders or directors. Petitioner did not sign the said promissory note so he
cannot be personally bound thereby.
Thus, if there was any fraud or misrepresentation that was foisted on private respondent in that
there was a forthcoming loan from the DBP when it fact there was none, it is Coprada who should
account for the same and not petitioner.
As to the sale through pacto de retro of the two units to a third person by the corporation by
virtue of a board resolution, petitioner asserts that he never signed said resolution. Be that as it
may, the sale is not inherently fraudulent as the 13 units were sold through a deed of absolute
sale to Akron so that the corporation is free to dispose of the same. Of course, it was stipulated
that in case of default in payment to private respondent of the balance of the consideration, a
chattel mortgage lien shag be constituted on the 13 units. Nevertheless, said mortgage is a prior
lien as against the pacto de retro sale of the 2 units.
As to the amendment of the articles of incorporation of Akron thereby changing its name to Akron
Transport International, Inc., petitioner alleges that the change of corporate name was in order to
include trucking and container yard operations in its customs brokerage of which private
respondent was duly informed in a letter. 19 Indeed, the new corporation confirmed and assumed
the obligation of the old corporation. There is no indication of an attempt on the part of Akron to
evade payment of its obligation to private respondent.
There is the fact that petitioner sold his shares in Akron to Coprada during the pendency of the
case. Since petitioner has no personal obligation to private respondent, it is his inherent right as a
stockholder to dispose of his shares of stock anytime he so desires.
Mention is also made of the alleged "dumping" of 10 units in the premises of private respondent
at Bagbag, Novaliches which to the mind of the Court does not prove fraud and instead appears

to be an attempt on the part of Akron to attend to its obligations as regards the said trucks. Again
petitioner has no part in this.
If the private respondent is the victim of fraud in this transaction, it has not been clearly shown
that petitioner had any part or participation in the perpetration of the same. Fraud must be
established by clear and convincing evidence. If at all, the principal character on whom fault
should be attributed is Feliciano Coprada, the President of Akron, whom private respondent dealt
with personally all through out. Fortunately, private respondent obtained a judgment against him
from the trial court and the said judgment has long been final and executory.
WHEREFORE, the petition is GRANTED. The questioned resolution of the Intermediate Appellate
Court dated February 8,1984 is hereby set aside and its decision dated June 30,1983 setting aside
the decision of the trial court dated October 28, 1980 insofar as petitioner is concemed is hereby
reinstated and affirmed, without costs.
SO ORDERED.

G.R. No. L-18216

October 30, 1962

STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants,


vs.
REGISTER OF DEEDS OF MANILA, respondent-appellee.
BAUTISTA ANGELO, J.:
On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation reciting, among other things, that by
virtue of a resolution of the stockholders adopted on September 17, 1960, dissolving the
corporation, they have distributed among themselves in proportion to their shareholdings, as
liquidating dividends, the assets of said corporation, including real properties located in Manila.
The certificate of liquidation, when presented to the Register of Deeds of Manila, was denied
registration on seven grounds, of which the following were disputed by the stockholders:
3. The number of parcels not certified to in the acknowledgment;
5. P430.50 Reg. fees need be paid;
6. P940.45 documentary stamps need be attached to the document;
7. The judgment of the Court approving the dissolution and directing the disposition of the
assets of the corporation need be presented (Rules of Court, Rule 104, Sec. 3).
Deciding the consulta elevated by the stockholders, the Commissioner of Land Registration
overruled ground No. 7 and sustained requirements Nos. 3, 5 and 6.
The stockholders interposed the present appeal.

As correctly stated by the Commissioner of Land Registration, the propriety or impropriety of the
three grounds on which the denial of the registration of the certificate of liquidation was
predicated hinges on whether or not that certificate merely involves a distribution of the
corporation's assets or should be considered a transfer or conveyance.
Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a
distribution of the assets of the corporation which has ceased to exist for having been dissolved.
This is apparent in the minutes for dissolution attached to the document. Not being a conveyance
the certificate need not contain a statement of the number of parcel of land involved in the
distribution in the acknowledgment appearing therein. Hence the amount of documentary stamps
to be affixed thereon should only be P0.30 and not P940.45, as required by the register of deeds.
Neither is it correct to require appellants to pay the amount of P430.50 as registration fee.
The Commissioner of Land Registration, however, entertained a different opinion. He concurred in
the view expressed by the register of deed to the effect that the certificate of liquidation in
question, though it involves a distribution of the corporation's assets, in the last analysis
represents a transfer of said assets from the corporation to the stockholders. Hence, in substance
it is a transfer or conveyance.
We agree with the opinion of these two officials. A corporation is a juridical person distinct from
the members composing it. Properties registered in the name of the corporation are owned by it
as an entity separate and distinct from its members. While shares of stock constitute personal
property they do not represent property of the corporation. The corporation has property of its
own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v.
Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part of the
corporation's property, or the right to share in its proceeds to that extent when distributed
according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala 398, 56 So., 235), but its
holder is not the owner of any part of the capital of the corporation (Bradley v. Bauder 36 Ohio St.,
28). Nor is he entitled to the possession of any definite portion of its property or assets (Gottfried
v. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a co-owner or
tenant in common of the corporate property (Halton v. Hohnston, 166 Ala 317, 51 So 992).
On the basis of the foregoing authorities, it is clear that the act of liquidation made by the
stockholders of the F. Guanzon and Sons, Inc. of the latter's assets is not and cannot be
considered a partition of community property, but rather a transfer or conveyance of the title of
its assets to the individual stockholders. Indeed, since the purpose of the liquidation, as well as
the distribution of the assets of the corporation, is to transfer their title from the corporation to
the stockholders in proportion to their shareholdings, and this is in effect the purpose which
they seek to obtain from the Register of Deeds of Manila, that transfer cannot be effected
without the corresponding deed of conveyance from the corporation to the stockholders. It is,
therefore, fair and logical to consider the certificate of liquidation as one in the nature of a
transfer or conveyance.
WHEREFORE, we affirm the resolution appealed from, with costs against appellants.
Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and Makalintal, JJ.,
Barrera, J., took no part.

concur.

G.R. No. 80863 April 27, 1989


ANTONIO M. VILLANUEVA and FULGENCIO B. LAVAREZ, petitioners,
vs.
HONORABLE ABEDNEGO O. ADRE, Presiding Judge, Regional Trial Court, Branch 22,
11th Judicial Region, and LUCIO VELAYO, respondents.
SARMIENTO, J.:
The central question in the petition at bar is whether or not the regular courts may stay an
execution decreed by the labor arbiters and what the consequences are of such a recourse to the
courts.
The case began from a complaint, dated January 6, 1977, for recovery of unpaid thirteenth-month
pay filed by the Sarangani Marine and General Workers Union-ALU with the Department of Labor
(Regional Office No. XI, General Santos City) against the South Cotabato Integrated Port Services,
Inc. (SCIPSI), a Philippine corporation. Later, thirty-seven SCIPSI employees, non-union members
apparently, filed their own complaint. The labor arbiter consolidated the twin complaints and after
hearing, ordered a dismissal on December 29, 1977. On appeal, however, the National Labor
Relations Commission, on June 9, 1981, reversed and accordingly, ordered the private
respondents, SCIPSI and its president and general, Lucio Velayo, to pay the thirteenth-month pays
demanded. The private respondents' motion for reconsideration was denied, and the decision has
since attained finality.
Thereafter, the parties, on orders of the labor arbiter, were made to appear before a corporate
auditing examiner to determine the private respondents' exact liability. On October 24, 1986, the
corporate auditing examiner submitted an accounting and found the private respondents liable in
the total sum of Pl,134,000.00. Thereupon, the private respondents interposed an objection and

prayed for a revision. It appears, however, that the private respondents never pursued their
exceptions. 1
On January 16,1987, the union moved for execution and pursuant thereto, the labor arbiter issued
a writ of execution. As a result, the sheriff levied on two parcels of land, both registered in Lucio
Velayo's name, with an area of 400 and 979 square meters.
On February 14, 1987, both SCIPSI and Velayo petitioned this Court 2 on certiorari with injunction
on the ground, fundamentally that the Department of Labor's examiner erred in her determination
of the private respondents pecuniary liabilities.
On February 16,1987, Velayo alone filed a petition with the respondent court (Special Case No.
227) on a cause of action based on an alleged irregular execution, on the ground that he "was
never a party to the labor case" 3 and that "a corporation (that is, SCIPSI has a separate and
distinct personality from this incorporators, stockholders and officers." 4
On February 17, 1987, the respondent court issued a temporary restraining order enjoining
execution of the judgment in the aforementioned labor cases. On March 5, 1987, the petitioner
moved for dismissal for lack of jurisdiction and litis pendentia.
On the strength of this Court's decision in National Mines Allied Workers Union v. Vera, 5 the trial
judge denied the motion to dismiss. Reconsideration having been likewise denied, the union as
well as the labor arbiter (Antonio Villanueva) and the sheriff (Fulgencio Lavarez) themselves, on
October 22, 1987, instituted these certiorari proceedings. 6
Meanwhile, on April 27,1988, the parties (in G.R. Nos. 7730001) submitted a Compromise
Agreement whereby the private respondents agreed to pay, in installments, the reduced sum of
P637,400.00 to the workers. On May 11, 1988, we issued a Resolution approving the Compromise
Agreement, and considering the cases (G.R. Nos. 77300-01) closed and terminated. 7
At the same time, we issued (in this petition) a Resolution requiring the private respondents
and/or counsel, Atty. Oscar Dinipol, to show cause why they should not be held in contempt for
forum-shopping. On December 9,1988, Atty. Dinopol filed a manifestation praying for dismissal
"not because it has become moot and academic in view of the compromise agreement executed
by the parties in G.R. Nos. 77300-01 (but because) the subject or cause of action (thereof) is
totally different from the cause of action in the above-entitled case." 8
On whether or not this case has become moot and academic in view of the compromise reached
in G.R. Nos. 77300-01, the Court rules in the affirmative. It should be noted that the instant
petition has been brought as a result of the execution of the judgment rendered below, and since
the parties, by virtue of the compromise, have spelled out the manner by which payment shall be
made, execution by means of levy, the question confronting the court herein, may no longer be
carried out. Nevertheless, because of the ethical implications of the acts of the private
respondents, the Court is constrained to render its judgment if only to forestall future similar acts
and for the guidance of the bench and the bar.
We likewise render judgment notwithstanding Atty. Oscar Dinopol's pending prayer for extension
of time to file his comment to our show cause Resolution of November 7, 1988. We consider his
manifestation, dated November 29,1988, urging us not to dismiss this case for having became
moot and academic but because the petition lacks merit as his comment. We do so for one
because it has been the position of the private respondents that Special Case No. 227 and G.R.
Nos. 77300-01 could stand together and for another, because of the compelling need to dispose
of labor cases with utmost dispatch. We take this as his defense to that show-cause Resolution.
Parenthetically, we find him mistaken for supposing that our Resolution is based on the
simultaneous commencement of Special Case No. 227 and G.R. Nos. 77300-01. This is not the act
that forced suspicions on our part of efforts by the private respondents to "shop for a friendly
forum". Rather, it is the institution of Special Case No. 227, despite the pendency of the labor
proceedings below, that led us to those suspicions. G.R. Nos. 77300-01, on the other hand, were
brought primarily on the question of the exact amount SCIPSI is liable to pay. It is on its face, a
legitimate ground for certiorari, and for this reason we accepted the parties compromise reached
there, instead of dismissing it.

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks
a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only
with respect to suits filed in the courts but also in connection with litigations commenced in the
courts while an administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative ruling and a
favorable court ruling. This is specially so, as in this case, where the court in which the second
suit was brought, has no jurisdiction.
Accordingly, the respondent court must be held to be in error assuming jurisdiction over Special
Case No. 227. It is well-established that the courts cannot enjoin execution of judgment rendered
by the National Labor Relations Commission. 9
The respondent Lucio Velayo's reliance upon National Mines and Allied Workers Union v. Vera 10 is
not well-taken. In that case, the properties involved belonged to third persons, a development
that provided a civil dimension to the labor case, and a development that gave the courts the
jurisdiction. In the case at bar, however, Velayo cannot be said to be a stranger to the
proceedings for a number of reasons. First, and as pointed out by the Solicitor General, and as the
records will amply show, he, Velayo, was a party to the proceedings below where he took part
actively in defense of his case. We quote:
... It is not true that Lucio Velayo was not a party in the labor cases. The caption of
the labor cases shows he was a respondent. The records of the labor cases show
that he participated in the proceedings therein, without raising the issue that he
was not a party nor the employer of the complainants. Thus, the Motion for
Reconsideration dated August 7, 1981 attached to the Petition as Annex B was filed
by both SCIPS and Lucio Velayo. SCIPS and Velayo discussed the merits of the cases
in said motion and there was nary a mention of the allegation of Velayo now that he
not not a party in the cases nor an employer of the complainants. Likewise, the
Exception and/or Opposition to Report of Examiner dated November 13, 1986,
attached to the Petition as Annex F, was also filed by both SCIPS and Velayo and,
like the Motion for Reconsideration aforementioned, it does not mention anything
about Velayo not being a party and not being an employer of complainants. 11
Certainly, he cannot now be heard to say that he was no party to the controversy.
The fact that he was never mentioned in the pleadings before the petitioner-labor arbiter is of no
moment.The fact is that he himself had questioned the findings of the corporate auditor (in G.R.
Nos. 77300-01) and this is enough evidence that he admits personal liability, although he does
not agree with the amount supposedly due from him. His remonstrances came too late in the day.
But other than estoppel, the law itself stands as a formidable obstacle to Velayo's claims. In A.C.
Ransom Labor Union-CCLU v. NLRC 12 we held that in case of corporations. It is the president who
responds personally for violation of the labor pay laws. We quote:
Article 273 of the Code provides that:
Any person violating any of the provisions of Article 265 of this Code shall be
punished by a fine of not exceeding five hundred pesos and/or imprisonment for
not less than one (1) day nor more than six (6) months.
(b) How can the foregoing provisions be implemented when the employer is a
corporation? The answer is found in Article 212 (c) of the Labor Code which
provides:
(c) 'Employer' of the Labor Code which provides: which 'Employer' includes any
person acting in the interest of an employer, directly or indirectly. The term shall
not include any labor organization or any of its officers or agents except when
acting as employer.
The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since
RANSOM is an artificial person, it must have an officer who can be presumed to be

the employer, being "the person acting in the interest of (the) employer" RANSOM.
The corporation, only in the technical sense, is the employer.
The responsible officer of an employer corporation can be held personally, not to
say even criminally, liable for non-payment of back wages. That is the policy of the
law. In the Minimum Wage Law, Section 15(b) provided:
(b) If any violation of this Act is committed by a corporation, trust, partnership or
association, the manager or in his default, the person acting as such when the
violation took place, shall be responsible. In the case of a government corporation,
the managing head shall be made responsible, except when shown that the
violation was due to an act or commission of some other person, over whom he has
no control, in which case the latter shall be held responsible.
In PD 525, where a corporation fails to pay the emergency allowance therein
provided, the prescribed penalty shall be imposed upon the guilty officer or officers
of the corporation.
(c) If the policy of the law were otherwise, the corporation employer can have
devious ways for evading payment of back wages. In the instant case, it would
appear that RANSOM, in 1969, foreesing the possibility or probability of payment of
back wages to the 22 strikers, organized ROSARIO to replace RANSOM, with the
latter to be eventually phased out if the 22 strikers win their case. RANSOM actually
ceased operations on May 1, 1973 after the December 19, 1972 Decision of the
Court of Industrial Relations was promulgated against RANSOM.
(d) The record does not clearly Identify the "officer or officers" of RANSOM directly
responsible for failure to pay the back wages of the 22 strikers. In the absence of
definite proof in that regard, we behave it should be presumed that the responsible
officer is the President of the corporation who can be deemed the chief operation
officer thereof. Thus, in RA 602, criminal responsibility is with the "Manager or in his
default, the person acting as such." In RANSOM, the President appears to be the
Manager.
(e) Considering that non-payment of the back wages of the 22 strikers has been a
continuing situation, it is our opinion that the personal liability of the RANSOM
President, at the time the back wages were ordered to be paid should also be a
continuing joint and several personal liabilities of all who may have thereafter
succeeded to the office of president; otherwise, the 22 striken may be deprived of
their rights by the election of a president without leviable assets. 13
Accordingly, Velayo cannot be excused from payment of SCIPSI's liability by mere reason of
SCIPSI's separate corporate existence. The theory of corporate entity, in the first place, was not
meant to promote unfair objectives or otherwise, to shield them. This Court has not hesitated in
penetrating the veil of corporate fiction when it would defeat the ends envisaged by law, 14 not to
mention the clear decree of the Labor Code.
And if Velayo truly had a valid objection (to the levy on his properties), he could have raised it at
the earliest hour, and in the course of the labor proceedings themselves. But, as we earlier
indicated, he raised nary a finger there, and he cannot raise it now, much less in a separate
proceeding. He is not only estopped, litis pendencia is a bar to such a separate action. 15
While the instant case has been rendered moot and academic by reason of the out-of-court
settlement between the parties, that development will not absolve Velayo and/or his counsel, Atty.
Oscar Dinopol 16 from charges of forum-shopping. In Buan v. Lopez, Jr., supra, we declared that
forum- shopping is an act of malpractice that constitutes contempt of court.
In this connection, we reject Atty. Dinopol's pretense that no Identity exists between Special Case
No. 227 and the labor case that had precipitated it. The fact remains that in Special Case No. 227,
he assails the execution of the judgment of the National Labor Relations Commission, the same
relief he could have asked for in the very labor proceeding. The fact that he likewise prayed for

damages therein will not alter the essence of the petition- to stay execution-and in which the
claim for damages is but an incidental relief.
Clearly, both Velayo and Atty. Dinopol must account for forum-shopping.
WHEREFORE, judgment is rendered: (1) DISMISSING the petition for having become moot and
academic; (2) ORDERING the respondent judge to dismiss Special Case No. 227; (3) DECLARING
the respondent, Lucio Velayo and Atty. Oscar Dinopol IN CONTEMPT and ORDERING them to pay a
fine of Pl,000.00 each within five (5) days from notice; and (4) SUSPENDING Atty. Oscar Dinopol,
for a period of three (3) months effective from notice, from the practice of law. Let a copy of this
Decision be entered in his record.
THIS DECISION IS IMMEDIATELY EXECUTORY.
IT IS SO ORDERED.

G.R. No. 129459 September 29, 1998


SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,
vs.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL
DEVELOPMENT CORP. and JNM REALTY AND DEVELOPMENT CORP., respondents.
PANGANIBAN, J.:
May corporate treasurer, by herself and without any authorization from he board of directors,
validly sell a parcel of land owned by the corporation?. May the veil of corporate fiction be pierced
on the mere ground that almost all of the shares of stock of the corporation are owned by said
treasurer and her husband?
The Case

These questions are answered in the negative by this Court in resolving the Petition for Review on
Certiorari before us, assailing the March 18, 1997 Decision 1 of the Court of Appeals 2 in CA GR CV
No. 46801 which, in turn, modified the July 18, 1994 Decision of the Regional Trial Court of Makati,
Metro Manila, Branch 63 3 in Civil Case No. 89-3511. The RTC dismissed both the Complaint and
the Counterclaim filed by the parties. On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the appealed decision is AFFIRMED WITH
MODIFICATION ordering defendant-appellee Nenita Lee Gruenberg to REFUND or
return to plaintiff-appellant the downpayment of P100,000.00 which she received
from plaintiff-appellant. There is no pronouncement as to costs. 4
The petition also challenges the June 10, 1997 CA Resolution denying reconsideration.

The Facts
The facts as found by the Court of Appeals are as follows:
Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc.'s amended
complaint alleged that on 14 February 1989, plaintiff-appellant entered into an
agreement with defendant-appellee Motorich Sales Corporation for the transfer to it
of a parcel of land identified as Lot 30, Block 1 of the Acropolis Greens Subdivision
located in the District of Murphy, Quezon City. Metro Manila, containing an area of
Four Hundred Fourteen (414) square meters, covered by TCT No. (362909) 2876:
that as stipulated in the Agreement of 14 February 1989, plaintiff-appellant paid the
downpayment in the sum of One Hundred Thousand (P100,000.00) Pesos, the
balance to be paid on or before March 2, 1989; that on March 1, 1989. Mr. Andres T.
Co, president of plaintiff-appellant corporation, wrote a letter to defendant-appellee
Motorich Sales Corporation requesting for a computation of the balance to be paid:
that said letter was coursed through defendant-appellee's broker. Linda Aduca, who
wrote the computation of the balance: that on March 2, 1989, plaintiff-appellant
was ready with the amount corresponding to the balance, covered by Metrobank
Cashier's Check No. 004223, payable to defendant-appellee Motorich Sales
Corporation; that plaintiff-appellant and defendant-appellee Motorich Sales
Corporation were supposed to meet in the office of plaintiff-appellant but
defendant-appellee's treasurer, Nenita Lee Gruenberg, did not appear; that
defendant-appellee Motorich Sales Corporation despite repeated demands and in
utter disregard of its commitments had refused to execute the Transfer of
Rights/Deed of Assignment which is necessary to transfer the certificate of title;
that defendant ACL Development Corp. is impleaded as a necessary party since
Transfer Certificate of Title No. (362909) 2876 is still in the name of said defendant;
while defendant JNM Realty & Development Corp. is likewise impleaded as a
necessary party in view of the fact that it is the transferor of right in favor of
defendant-appellee Motorich Sales Corporation: that on April 6, 1989, defendant
ACL Development Corporation and Motorich Sales Corporation entered into a Deed
of Absolute Sale whereby the former transferred to the latter the subject property;
that by reason of said transfer, the Registry of Deeds of Quezon City issued a new
title in the name of Motorich Sales Corporation, represented by defendant-appellee
Nenita Lee Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title
No. 3571; that as a result of defendants-appellees Nenita Lee Gruenberg and
Motorich Sales Corporation's bad faith in refusing to execute a formal Transfer of
Rights/Deed of Assignment, plaintiff-appellant suffered moral and nominal damages
which may be assessed against defendants-appellees in the sum of Five Hundred
Thousand (500,000.00) Pesos; that as a result of defendants-appellees Nenita Lee
Gruenberg and Motorich Sales Corporation's unjustified and unwarranted failure to
execute the required Transfer of Rights/Deed of Assignment or formal deed of sale
in favor of plaintiff-appellant, defendants-appellees should be assessed exemplary
damages in the sum of One Hundred Thousand (P100,000.00) Pesos; that by reason
of defendants-appellees' bad faith in refusing to execute a Transfer of Rights/Deed
of Assignment in favor of plaintiff-appellant, the latter lost the opportunity to
construct a residential building in the sum of One Hundred Thousand (P100,000.00)
Pesos; and that as a consequence of defendants-appellees Nenita Lee Gruenberg
and Motorich Sales Corporation's bad faith in refusing to execute a deed of sale in

favor of plaintiff-appellant, it has been constrained to obtain the services of counsel


at an agreed fee of One Hundred Thousand (P100,000.00) Pesos plus appearance
fee for every appearance in court hearings.
In its answer, defendants-appellees Motorich Sales Corporation and Nenita Lee
Gruenberg interposed as affirmative defense that the President and Chairman of
Motorich did not sign the agreement adverted to in par. 3 of the amended
complaint; that Mrs. Gruenberg's signature on the agreement (ref: par. 3 of
Amended Complaint) is inadequate to bind Motorich. The other signature, that of
Mr. Reynaldo Gruenberg, President and Chairman of Motorich, is required: that
plaintiff knew this from the very beginning as it was presented a copy of the
Transfer of Rights (Annex B of amended complaint) at the time the Agreement
(Annex B of amended complaint) was signed; that plaintiff-appellant itself drafted
the Agreement and insisted that Mrs. Gruenberg accept the P100,000.00 as earnest
money; that granting, without admitting, the enforceability of the agreement,
plaintiff-appellant nonetheless failed to pay in legal tender within the stipulated
period (up to March 2, 1989); that it was the understanding between Mrs.
Gruenberg and plaintiff-appellant that the Transfer of Rights/Deed of Assignment
will be signed only upon receipt of cash payment; thus they agreed that if the
payment be in check, they will meet at a bank designated by plaintiff-appellant
where they will encash the check and sign the Transfer of Rights/Deed. However,
plaintiff-appellant informed Mrs. Gruenberg of the alleged availability of the check,
by phone, only after banking hours.
On the basis of the evidence, the court a quo rendered the judgment appealed
from[,] dismissing plaintiff-appellant's complaint, ruling that:
The issue to be resolved is: whether plaintiff had the right to compel
defendants to execute a deed of absolute sale in accordance with the
agreement of February 14, 1989: and if so, whether plaintiff is
entitled to damage.
As to the first question, there is no evidence to show that defendant
Nenita Lee Gruenberg was indeed authorized by defendant
corporation. Motorich Sales, to dispose of that property covered by
T.C.T. No. (362909) 2876. Since the property is clearly owned by the
corporation. Motorich Sales, then its disposition should be governed
by the requirement laid down in Sec. 40. of the Corporation Code of
the Philippines, to wit:
Sec. 40, Sale or other disposition of assets. Subject to
the provisions of existing laws on illegal combination
and monopolies, a corporation may by a majority vote
of its board of directors . . . sell, lease, exchange,
mortgage, pledge or otherwise dispose of all or
substantially all of its property and assets including its
goodwill . . . when authorized by the vote of the
stockholders representing at least two third (2/3) of the
outstanding capital stock . . .
No such vote was obtained by defendant Nenita Lee Gruenberg for
that proposed sale[;] neither was there evidence to show that the
supposed transaction was ratified by the corporation. Plaintiff should
have been on the look out under these circumstances. More so,
plaintiff himself [owns] several corporations (tsn dated August 16,
1993, p. 3) which makes him knowledgeable on corporation matters.
Regarding the question of damages, the Court likewise, does not find
substantial evidence to hold defendant Nenita Lee Gruenberg liable
considering that she did not in anyway misrepresent herself to be
authorized by the corporation to sell the property to plaintiff (tsn
dated September 27, 1991, p. 8).

In the light of the foregoing, the Court hereby renders judgment


DISMISSING the complaint at instance for lack of merit.
"Defendants" counterclaim is also DISMISSED for lack of basis.
(Decision, pp. 7-8; Rollo, pp. 34-35)
For clarity, the Agreement dated February 14, 1989 is reproduced hereunder:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, made and entered into by and between:
MOTORICH SALES CORPORATION, a corporation duly organized and
existing under and by virtue of Philippine Laws, with principal office
address at 5510 South Super Hi-way cor. Balderama St., Pio del Pilar.
Makati, Metro Manila, represented herein by its Treasurer, NENITA LEE
GRUENBERG, hereinafter referred to as the TRANSFEROR;
and
SAN JUAN STRUCTURAL & STEEL FABRICATORS, a corporation duly
organized and existing under and by virtue of the laws of the
Philippines, with principal office address at Sumulong Highway, Barrio
Mambungan, Antipolo, Rizal, represented herein by its President,
ANDRES T. CO, hereinafter referred to as the TRANSFEREE.
WITNESSETH, That:
WHEREAS, the TRANSFEROR is the owner of a parcel of land identified as Lot 30
Block 1 of the ACROPOLIS GREENS SUBDIVISION located at the District of Murphy,
Quezon City, Metro Manila, containing an area of FOUR HUNDRED FOURTEEN (414)
SQUARE METERS, covered by a TRANSFER OF RIGHTS between JNM Realty & Dev.
Corp. as the Transferor and Motorich Sales Corp. as the Transferee;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties
have agreed as follows:
1. That the purchase price shall be at FIVE THOUSAND TWO
HUNDRED PESOS (P5,200.00) per square meter; subject to the
following terms:
a. Earnest money amounting to ONE HUNDRED
THOUSAND PESOS (P100,000.00), will be paid upon
the execution of this agreement and shall form part of
the total purchase price;
b. Balance shall be payable on or before March 2,
1989;
2. That the monthly amortization for the month of February 1989
shall be for the account of the Transferor; and that the monthly
amortization starting March 21, 1989 shall be for the account of the
Transferee;
The transferor warrants that he [sic] is the lawful owner of the above-described
property and that there [are] no existing liens and/or encumbrances of whatsoever
nature;

In case of failure by the Transferee to pay the balance on the date specified on 1,
(b), the earnest money shall be forfeited in favor of the Transferor.
That upon full payment of the balance, the TRANSFEROR agrees to execute a
TRANSFER OF RIGHTS/DEED OF ASSIGNMENT in favor of the TRANSFEREE.
IN WITNESS WHEREOF, the parties have hereunto set their hands this 14th day of
February, 1989 at Greenhills, San Juan, Metro Manila, Philippines.
MOTORICH SALES CORPORATION SAN JUAN STRUCTURAL & STEEL FABRICATORS
TRANSFEROR TRANSFEREE
[SGD.] [SGD.]
By. NENITA LEE GRUENBERG By: ANDRES T. CO
Treasurer President
Signed In the presence of:
[SGD.] [SGD.]
6
In its recourse before the Court of Appeals, petitioner insisted:
1. Appellant is entitled to compel the appellees to execute a Deed of
Absolute Sale in accordance with the Agreement of February 14,
1989,
2. Plaintiff is entitled to damages.

As stated earlier, the Court of Appeals debunked petitioner's arguments and affirmed the Decision
of the RTC with the modification that Respondent Nenita Lee Gruenberg was ordered to refund
P100,000 to petitioner, the amount remitted as "downpayment" or "earnest money." Hence, this
petition before us. 8
The Issues
Before this Court, petitioner raises the following issues:
I. Whether or not the doctrine of piercing the veil of corporate fiction
is applicable in the instant case
II. Whether or not the appellate court may consider matters which
the parties failed to raise in the lower court
III. Whether or not there is a valid and enforceable contract between
the petitioner and the respondent corporation
IV. Whether or not the Court of Appeals erred in holding that there is
a valid correction/substitution of answer in the transcript of
stenographic note[s].
V. Whether or not respondents are liable for damages and attorney's
fees 9
The Court synthesized the foregoing and will thus discuss them seriatim as follows:

1. Was there a valid contract of sale between petitioner and


Motorich?
2. May the doctrine of piercing the veil of corporate fiction be applied
to Motorich?
3. Is the alleged alteration of Gruenberg's testimony as recorded in
the transcript of stenographic notes material to the disposition of this
case?
4. Are respondents liable for damages and attorney's fees?
The Court's Ruling
The petition is devoid of merit.
First Issue: Validity of Agreement
Petitioner San Juan Structural and Steel Fabricators, Inc. alleges that on February 14, 1989, it
entered through its president, Andres Co, into the disputed Agreement with Respondent Motorich
Sales Corporation, which was in turn allegedly represented by its treasurer, Nenita Lee
Gruenberg. Petitioner insists that "[w]hen Gruenberg and Co affixed their signatures on the
contract they both consented to be bound by the terms thereof." Ergo, petitioner contends that
the contract is binding on the two corporations. We do not agree.
True, Gruenberg and Co signed on February 14, 1989, the Agreement, according to which a lot
owned by Motorich Sales Corporation was purportedly sold. Such contract, however, cannot bind
Motorich, because it never authorized or ratified such sale.
A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members
and may not be sold by the stockholders or members without express authorization from the
corporation's board of directors. 10 Section 23 of BP 68, otherwise known as the Corporation Code
of the Philippines, provides;
Sec. 23. The Board of Directors or Trustees. Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled
and held by the board of directors or trustees to be elected from among the holders
of stocks, or where there is no stock, from among the members of the corporation,
who shall hold office for one (1) year and until their successors are elected and
qualified.
Indubitably, a corporation may act only through its board of directors or, when authorized either
by its bylaws or by its board resolution, through its officers or agents in the normal course of
business. The general principles of agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, bylaws, or relevant provisions of law. 11
Thus, this Court has held that "a corporate officer or agent may represent and bind the
corporation in transactions with third persons to the extent that the authority to do so has been
conferred upon him, and this includes powers which have been intentionally conferred, and also
such powers as, in the usual course of the particular business, are incidental to, or may be
implied from, the powers intentionally conferred, powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such apparent powers as the corporation has
caused persons dealing with the officer or agent to believe that it has conferred." 12
Furthermore, the Court has also recognized the rule that "persons dealing with an assumed agent,
whether the assumed agency be a general or special one bound at their peril, if they would hold
the principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to establish it
(Harry Keeler v. Rodriguez, 4 Phil. 19)." 13 Unless duly authorized, a treasurer, whose powers are
limited, cannot bind the corporation in a sale of its assets. 14

In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita
Gruenberg, its treasurer, to sell the subject parcel of land. 15 Consequently, petitioner had the
burden of proving that Nenita Gruenberg was in fact authorized to represent and bind Motorich in
the transaction. Petitioner failed to discharge this burden. Its offer of evidence before the trial
court contained no proof of such authority. 16 It has not shown any provision of said respondent's
articles of incorporation, bylaws or board resolution to prove that Nenita Gruenberg possessed
such power.
That Nenita Gruenberg is the treasurer of Motorich does not free petitioner from the responsibility
of ascertaining the extent of her authority to represent the corporation. Petitioner cannot assume
that she, by virtue of her position, was authorized to sell the property of the corporation. Selling is
obviously foreign to a corporate treasurer's function, which generally has been described as "to
receive and keep the funds of the corporation, and to disburse them in accordance with the
authority given him by the board or the properly authorized officers." 17
Neither was such real estate sale shown to be a normal business activity of Motorich. The primary
purpose of Motorich is marketing, distribution, export and import in relation to a general
merchandising business. 18 Unmistakably, its treasurer is not cloaked with actual or apparent
authority to buy or sell real property, an activity which falls way beyond the scope of her general
authority.
Art. 1874 and 1878 of the Civil Code of the Philippines provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing: otherwise, the sale shall be
void.
Art. 1878. Special powers of attorney are necessary in the following case:
xxx xxx xxx
(5) To enter any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;
xxx xxx xxx.
Petitioner further contends that Respondent Motorich has ratified said contract of sale because of
its "acceptance of benefits," as evidenced by the receipt issued by Respondent Gruenberg. 19
Petitioner is clutching at straws.
As a general rule, the acts of corporate officers within the scope of their authority are binding on
the corporation. But when these officers exceed their authority, their actions "cannot bind the
corporation, unless it has ratified such acts or is estopped from disclaiming them." 20
In this case, there is a clear absence of proof that Motorich ever authorized Nenita Gruenberg, or
made it appear to any third person that she had the authority, to sell its land or to receive the
earnest money. Neither was there any proof that Motorich ratified, expressly or impliedly, the
contract. Petitioner rests its argument on the receipt which, however, does not prove the fact of
ratification. The document is a hand-written one, not a corporate receipt, and it bears only Nenita
Gruenberg's signature. Certainly, this document alone does not prove that her acts were
authorized or ratified by Motorich.
Art. 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1) consent of
the contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of
the obligation which is established." As found by the trial court 21 and affirmed by the Court of
Appeals, 22 there is no evidence that Gruenberg was authorized to enter into the contract of sale,
or that the said contract was ratified by Motorich. This factual finding of the two courts is binding
on this Court. 23 As the consent of the seller was not obtained, no contract to bind the obligor was
perfected. Therefore, there can be no valid contract of sale between petitioner and Motorich.

Because Motorich had never given a written authorization to Respondent Gruenberg to sell its
parcel of land, we hold that the February 14, 1989 Agreement entered into by the latter with
petitioner is void under Article 1874 of the Civil Code. Being inexistent and void from the
beginning, said contract cannot be ratified. 24
Second
Piercing the Corporate Veil Not Justified

Issue:

Petitioner also argues that the veil of corporate fiction of Motorich should be pierced, because the
latter is a close corporation. Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg
owned all or almost all or 99.866% to be accurate, of the subscribed capital stock" 25 of Motorich,
petitioner argues that Gruenberg needed no authorization from the board to enter into the subject
contract. 26 It adds that, being solely owned by the Spouses Gruenberg, the company can treated
as a close corporation which can be bound by the acts of its principal stockholder who needs no
specific authority. The Court is not persuaded.
First, petitioner itself concedes having raised the issue belatedly, 27 not having done so during the
trial, but only when it filed its sur-rejoinder before the Court of Appeals. 28 Thus, this Court cannot
entertain said issue at this late stage of the proceedings. It is well-settled the points of law,
theories and arguments not brought to the attention of the trial court need not be, and ordinarily
will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal.
29
Allowing petitioner to change horses in midstream, as it were, is to run roughshod over the
basic principles of fair play, justice and due process.
Second, even if the above mentioned argument were to be addressed at this time, the Court still
finds no reason to uphold it. True, one of the advantages of a corporate form of business
organization is the limitation of an investor's liability to the amount of the investment. 30 This
feature flows from the legal theory that a corporate entity is separate and distinct from its
stockholders. However, the statutorily granted privilege of a corporate veil may be used only for
legitimate purposes. 31 On equitable considerations, the veil can be disregarded when it is utilized
as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate
issues; or serve as a mere alter ego or business conduit of a person or an instrumentality, agency
or adjunct of another corporation. 32
Thus, the Court has consistently ruled that "[w]hen the fiction is used as a means of perpetrating
a fraud or an illegal act or as vehicle for the evasion of an existing obligation, the circumvention
of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery
or crime, the veil with which the law covers and isolates the corporation from the members or
stockholders who compose it will be lifted to allow for its consideration merely as an aggregation
of individuals." 33
We stress that the corporate fiction should be set aside when it becomes a shield against liability
for fraud, illegality or inequity committed on third persons. The question of piercing the veil of
corporate fiction is essentially, then, a matter of proof. In the present case, however, the Court
finds no reason to pierce the corporate veil of Respondent Motorich. Petitioner utterly failed to
establish that said corporation was formed, or that it is operated, for the purpose of shielding any
alleged fraudulent or illegal activities of its officers or stockholders; or that the said veil was used
to conceal fraud, illegality or inequity at the expense of third persons like petitioner.
Petitioner claims that Motorich is a close corporation. We rule that it is not. Section 96 of the
Corporation Code defines a close corporation as follows:
Sec. 96. Definition and Applicability of Title. A close corporation, within the
meaning of this Code, is one whose articles of incorporation provide that: (1) All of
the corporation's issued stock of all classes, exclusive of treasury shares, shall be
held of record by not more than a specified number of persons, not exceeding
twenty (20); (2) All of the issued stock of all classes shall be subject to one or more
specified restrictions on transfer permitted by this Title; and (3) The corporation
shall not list in any stock exchange or make any public offering of any of its stock of
any class. Notwithstanding the foregoing, a corporation shall be deemed not a close
corporation when at least two-thirds (2/3) of its voting stock or voting rights is

owned or controlled by another corporation which is not a close corporation within


the meaning of this Code. . . . .
The articles of incorporation 34 of Motorich Sales Corporation does not contain any provision
stating that (1) the number of stockholders shall not exceed 20, or (2) a preemption of shares is
restricted in favor of any stockholder or of the corporation, or (3) listing its stocks in any stock
exchange or making a public offering of such stocks is prohibited. From its articles, it is clear that
Respondent Motorich is not a close corporation. 35 Motorich does not become one either, just
because Spouses Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed capital stock.
The "[m]ere ownership by a single stockholder or by another corporation of all or capital stock of
a corporation is not of itself sufficient ground for disregarding the separate corporate
personalities." 36 So, too, a narrow distribution of ownership does not, by itself, make a close
corporation.
Petitioner cites Manuel R. Dulay Enterprises, Inc. v. Court of Appeals 37 wherein the Court ruled
that ". . . petitioner corporation is classified as a close corporation and, consequently, a board
resolution authorizing the sale or mortgage of the subject property is not necessary to bind the
corporation for the action of its president." 38 But the factual milieu in Dulay is not on all fours
with the present case. In Dulay, the sale of real property was contracted by the president of a
close corporation with the knowledge and acquiescence of its board of directors. 39 In the present
case, Motorich is not a close corporation, as previously discussed, and the agreement was
entered into by the corporate treasurer without the knowledge of the board of directors.
The Court is not unaware that there are exceptional cases where "an action by a director, who
singly is the controlling stockholder, may be considered as a binding corporate act and a board
action as nothing more than a mere formality." 40 The present case, however, is not one of them.
As stated by petitioner, Spouses Reynaldo and Nenita Gruenberg own "almost 99.866%" of
Respondent Motorich. 41 Since Nenita is not the sole controlling stockholder of Motorich, the
aforementioned exception does not apply. Granting arguendo that the corporate veil of Motorich
is to be disregarded, the subject parcel of land would then be treated as conjugal property of
Spouses Gruenberg, because the same was acquired during their marriage. There being no
indication that said spouses, who appear to have been married before the effectivity of the Family
Code, have agreed to a different property regime, their property relations would be governed by
conjugal partnership of gains. 42 As a consequence, Nenita Gruenberg could not have effected a
sale of the subject lot because "[t]here is no co-ownership between the spouses in the properties
of the conjugal partnership of gains. Hence, neither spouse can alienate in favor of another his or
interest in the partnership or in any property belonging to it; neither spouse can ask for a partition
of the properties before the partnership has been legally dissolved." 43
Assuming further, for the sake of argument, that the spouses' property regime is the absolute
community of property, the sale would still be invalid. Under this regime, "alienation of
community property must have the written consent of the other spouse or he authority of the
court without which the disposition or encumbrance is void." 44 Both requirements are manifestly
absent in the instant case.
Third Issue: Challenged Portion of TSN Immaterial
Petitioner calls our attention to the following excerpt of the transcript of stenographic notes (TSN):
Q Did you ever represent to Mr. Co that you were authorized by the
corporation to sell the property?
A Yes, sir.

45

Petitioner claims that the answer "Yes" was crossed out, and, in its place was written a "No" with
an initial scribbled above it. 46 This, however, is insufficient to prove that Nenita Gruenberg was
authorized to represent Respondent Motorich in the sale of its immovable property. Said excerpt
be understood in the context of her whole testimony. During her cross-examination. Respondent
Gruenberg testified:

Q So, you signed in your capacity as the treasurer?


[A] Yes, sir.
Q Even then you kn[e]w all along that you [were] not authorized?
A Yes, sir.
Q You stated on direct examination that you did not represent that
you were authorized to sell the property?
A Yes, sir.
Q But you also did not say that you were not authorized to sell the
property, you did not tell that to Mr. Co, is that correct?
A That was not asked of me.
Q Yes, just answer it.
A I just told them that I was the treasurer of the corporation and it
[was] also the president who [was] also authorized to sign on behalf
of the corporation.
Q You did not say that you were not authorized nor did you say that
you were authorized?
A Mr. Co was very interested to purchase the property and he offered
to put up a P100,000.00 earnest money at that time. That was our
first meeting. 47
Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its property.
On the other hand, her testimony demonstrates that the president of Petitioner Corporation, in his
great desire to buy the property, threw caution to the wind by offering and paying the earnest
money without first verifying Gruenberg's authority to sell the lot.
Fourth
Damages and Attorney's Fees

Issue:

Finally, petitioner prays for damages and attorney's fees, alleging that "[i]n an utter display of
malice and bad faith, respondents attempted and succeeded in impressing on the trial court and
[the] Court of Appeals that Gruenberg did not represent herself as authorized by Respondent
Motorich despite the receipt issued by the former specifically indicating that she was signing on
behalf of Motorich Sales Corporation. Respondent Motorich likewise acted in bad faith when it
claimed it did not authorize Respondent Gruenberg and that the contract [was] not binding,
[insofar] as it [was] concerned, despite receipt and enjoyment of the proceeds of Gruenberg's
act." 48 Assuming that Respondent Motorich was not a party to the alleged fraud, petitioner
maintains that Respondent Gruenberg should be held liable because she "acted fraudulently and
in bad faith [in] representing herself as duly authorized by [R]espondent [C]orporation." 49
As already stated, we sustain the findings of both the trial and the appellate courts that the
foregoing allegations lack factual bases. Hence, an award of damages or attorney's fees cannot
be justified. The amount paid as "earnest money" was not proven to have redounded to the
benefit of Respondent Motorich. Petitioner claims that said amount was deposited to the account
of Respondent Motorich, because "it was deposited with the account of Aren Commercial c/o
Motorich Sales Corporation." 50 Respondent Gruenberg, however, disputes the allegations of
petitioner. She testified as follows:
Q You voluntarily accepted the P100,000.00, as a matter of fact, that
was encashed, the check was encashed.

A Yes. sir, the check was paid in my name and I deposit[ed] it.
Q In your account?
A Yes, sir.

51

In any event, Gruenberg offered to return the amount to petitioner ". . . since the sale did
not push through." 52
Moreover, we note that Andres Co is not a neophyte in the world of corporate business. He has
been the president of Petitioner Corporation for more than ten years and has also served as chief
executive of two other corporate entities. 53 Co cannot feign ignorance of the scope of the
authority of a corporate treasurer such as Gruenberg. Neither can he be oblivious to his duty to
ascertain the scope of Gruenberg's authorization to enter into a contract to sell a parcel of land
belonging to Motorich.
Indeed, petitioner's claim of fraud and bad faith is unsubstantiated and fails to persuade the
Court. Indubitably, petitioner appears to be the victim of its own officer's negligence in entering
into a contract with and paying an unauthorized officer of another corporation.
As correctly ruled by the Court of Appeals, however, Nenita Gruenberg should be ordered to
return to petitioner the amount she received as earnest money, as "no one shall enrich himself at
the expense of another." 54 a principle embodied in Article 2154 of Civil Code. 55 Although there
was no binding relation between them, petitioner paid Gruenberg on the mistaken belief that she
had the authority to sell the property of Motorich. 56 Article 2155 of Civil Code provides that
"[p]ayment by reason of a mistake in the contruction or application of a difficult question of law
may come within the scope of the preceding article."
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.
SO ORDERED.

G.R. No. 78413 November 8, 1989


CAGAYAN VALLEY ENTERPRISES, INC., Represented by its President, Rogelio Q. Lim,
petitioner,
vs.
THE HON. COURT OF APPEALS and LA TONDEA, INC., respondents.
.REGALADO, J.:
This petition for review on certiorari seeks the nullification of the decision of the Court of Appeals
of December 5, 1986 in CA-G.R. CV No. 06685 which reversed the decision of the trial court, and
its resolution dated May 5, 1987 denying petitioner's motion for reconsideration.
The following antecedent facts generative of the present controversy are not in dispute.
Sometime in 1953, La Tondea, Inc. (hereafter, LTI for short) registered with the Philippine Patent
Office pursuant to Republic Act No. 623 1 the 350 c.c. white flint bottles it has been using for its
gin popularly known as "Ginebra San Miguel". This registration was subsequently renewed on
December 4, 1974. 2
On November 10, 1981, LTI filed Civil Case No. 2668 for injunction and damages in the then
Branch 1, Court of First Instance of Isabela against Cagayan Valley Enterprises, Inc. (Cagayan, for
brevity) for using the 350 c.c., white flint bottles with the mark "La Tondea Inc." and "Ginebra
San Miguel" stamped or blown-in therein by filling the same with Cagayan's liquor product
bearing the label "Sonny Boy" for commercial sale and distribution, without LTI's written consent
and in violation of Section 2 of Republic Act No. 623, as amended by Republic Act No. 5700. On
the same date, LTI further filed an ex parte petition for the issuance of a writ of preliminary
injunction against the defendant therein. 3 On November 16, 1981, the court a quo issued a
temporary restraining order against Cagayan and its officers and employees from using the 350
c.c. bottles with the marks "La Tondea" and "Ginebra San Miguel." 4
Cagayan, in its answer,

alleged the following defenses:

1. LTI has no cause of action due to its failure to comply with Section 21 of Republic
Act No. 166 which requires the giving of notice that its aforesaid marks are
registered by displaying and printing the words "Registered in the Phil. Patent
Office" or "Reg Phil. Pat. Off.," hence no suit, civil or criminal, can be filed against
Cagayan;
2. LTI is not entitled to any protection under Republic Act No. 623, as amended by
Republic Act No. 5700, because its products, consisting of hard liquor, are not
among those contemplated therein. What is protected under said law are
beverages like Coca-cola, Royal Tru-Orange, Lem-o-Lime and similar beverages the
bottles whereof bear the words "Reg Phil. Pat. Off.;"

3. No reservation of ownership on its bottles was made by LTI in its sales invoices nor does it
require any deposit for the retention of said bottles; and
4. There was no infringement of the goods or products of LTI since Cagayan uses its own labels
and trademark on its product.
In its subsequent pleadings, Cagayan contended that the bottles they are using are not the
registered bottles of LTI since the former was using the bottles marked with "La Tondea, Inc." and
"Ginebra San Miguel" but without the words "property of" indicated in said bottles as stated in the
sworn statement attached to the certificate of registration of LTI for said bottles.
On December 18, 1981, the lower court issued a writ of preliminary injunction, upon the filing of a
bond by LTI in the sum of P50,000.00, enjoining Cagayan, its officers and agents from using the
aforesaid registered bottles of LTI. 6
After a protracted trial, which entailed five (5) motions for contempt filed by LTI against Cagayan,
the trial court rendered judgment 7 in favor of Cagayan, ruling that the complaint does not state a
cause of action and that Cagayan was not guilty of contempt. Furthermore, it awarded damages
in favor of Cagayan.
LTI appealed to the Court of Appeals which, on December 5, 1986 rendered a decision in favor of
said appellant, the dispositive portion whereof reads:
WHEREFORE, the decision appealed from is hereby SET ASIDE and judgment is
rendered permanently enjoining the defendant, its officers and agents from using
the 350 c.c. white flint bottles with the marks of ownership "La Tondea, Inc." and
"Ginebra San Miguel", blown-in or stamped on said bottles as containers for
defendant's products.
The writ of preliminary injunction issued by the trial court is therefore made
permanent.
Defendant is ordered to pay the amounts of:
(1) P15,000.00 as nominal or temperate damages;
(2) P50,000.00 as exemplary damages;
(3) P10,000.00 as attorney's fees; and
(4) Costs of suit.

On December 23, 1986, Cagayan filed a motion for reconsideration which was denied by the
respondent court in its resolution dated May 5, 1987, hence the present petition, with the
following assignment of errors:
I. The Court of Appeals gravely erred in the decision granting that
"there is, therefore, no need for plaintiff to display the words "Reg.
Phil. Pat. Off." in order for it to succeed in bringing any injunction suit
against defendant for the illegal use of its bottles. Rep. Act No. 623,
as amended by Rep. Act No. 5700 simply provides and requires that
the marks or names shall be stamped or marked on the containers."
II. The Court of Appeals gravely erred in deciding that "neither is
there a reason to distinguish between the two (2) sets of marked
bottles-those which contain the marks "Property of La Tondea, Inc.,
Ginebra San Miguel," and those simply marked La Tondea Inc.,
Ginebra San Miguel'. By omitting the words "property of" plaintiff did
not open itself to violation of Republic Act No. 623, as amended, as
having registered its marks or names it is protected under the law."

III. The Honorable Court of Appeals gravely erred in deciding that the
words "La Tondea, Inc. and Ginebra San Miguel" are sufficient notice
to the defendant which should have inquired from the plaintiff or the
Philippine Patent Office, if it was lawful for it to re-use the empty
bottles of the plaintiff.
IV. The Honorable Court of Appeals gravely erred in deciding that
defendant-appellee cannot claim good faith from using the bottles of
plaintiff with marks "La Tondea, Inc." alone, short for the description
contained in the sworn statement of Mr. Carlos Palanca, Jr., which was
a requisite of its original and renewal registrations.
V. The Honorable Court of Appeals gravely erred in accommodating
the appeal on the dismissals of the five (5) contempt charges.
VI. The Honorable Court of Appeals gravely erred in deciding that the
award of damages in favor of the defendant-appellee, petitioner
herein, is not in order. Instead it awarded nominal or temperate,
exemplary damages and attorney's fees without proof of bad faith. 9
The pertinent provisions of Republic Act No. 623, as amended by Republic Act No. 5700, provides:
SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling, or
selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful
beverages in bottles, boxes, casks, kegs, or barrels and other similar containers, or
in the manufacturing, compressing or selling of gases such as oxygen, acytelene,
nitrogen, carbon dioxide ammonia, hydrogen, chloride, helium, sulphur, dioxide,
butane, propane, freon, melthyl chloride or similar gases contained in steel
cylinders, tanks, flasks, accumulators or similar containers, with the name or the
names of their principals or products, or other marks of ownership stamped or
marked thereon, may register with the Philippine Patent Office a description of the
names or marks, and the purpose for which the containers so marked and used by
them, under the same conditions, rules, and regulations, made applicable by law or
regulation to the issuance of trademarks.
SEC. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller, who has succesfully registered the marks of
ownership in accordance with the provisions of the next preceding section, to fill
such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators or
other similar containers so marked or stamped, for the purpose of sale, or to sell,
disposed of, buy or traffic in, or wantonly destroy the same, whether filled or not, to
use the same, for drinking vessels or glasses or drain pipes, foundation pipes, for
any other purpose than that registered by the manufacturer, bottler or seller. Any
violation of this section shall be punished by a fine of not more than one thousand
pesos or imprisonment of not more than one year or both.
SEC. 3. The use by any person other than the registered manufacturer, bottler or
seller, without written permission of the latter of any such bottle, cask, barrel, keg,
box, steel cylinders, tanks, flask, accumulators, or other similar containers, or the
possession thereof without written permission of the manufacturer, by any junk
dealer or dealer in casks, barrels, kegs boxes, steel cylinders, tanks, flasks,
accumulators or other similar containers, the same being duly marked or stamped
and registered as herein provided, shall give rise to a prima facie presumption that
such use or possession is unlawful.
The above-quoted provisions grant protection to a qualified manufacturer who successfully
registered with the Philippine Patent Office its duly stamped or marked bottles, boxes, casks and
other similar containers. The mere use of registered bottles or containers without the written
consent of the manufacturer is prohibited, the only exceptions being when they are used as
containers for "sisi," bagoong," "patis" and similar native products. 10

It is an admitted fact that herein petitioner Cagayan buys from junk dealers and retailers bottles
which bear the marks or names La Tondea Inc." and "Ginebra San Miguel" and uses them as
containers for its own liquor products. The contention of Cagayan that the aforementioned bottles
without the words "property of" indicated thereon are not the registered bottles of LTI, since they
do not conform with the statement or description in the supporting affidavits attached to the
original registration certificate and renewal, is untenable.
Republic Act No. 623 which governs the registration of marked bottles and containers merely
requires that the bottles, in order to be eligible for registration, must be stamped or marked with
the names of the manufacturers or the names of their principals or products, or other marks of
ownership. No drawings or labels are required but, instead, two photographs of the container,
duly signed by the applicant, showing clearly and legibly the names and other marks of ownership
sought to be registered and a bottle showing the name or other mark or ownership, irremovably
stamped or marked, shall be submitted. 11
The term "Name or Other Mark of Ownership" 12 means the name of the applicant or the name of
his principal, or of the product, or other mark of ownership. The second set of bottles of LTI
without the words "property of" substantially complied with the requirements of Republic Act No.
623, as amended, since they bear the name of the principal, La Tondea Inc., and of its product,
Ginebra San Miguel. The omitted words "property of" are not of such vital indispensability such
that the omission thereof will remove the bottles from the protection of the law. The owner of a
trade-mark or trade-name, and in this case the marked containers, does not abandon it by
making minor modifications in the mark or name itself. 13 With much more reason will this be true
where what is involved is the mere omission of the words "property of" since even without said
words the ownership of the bottles is easily Identifiable. The words "La Tondea Inc." and "Ginebra
San Miguel" stamped on the bottles, even without the words "property of," are sufficient notice to
the public that those bottles so marked are owned by LTI.
The claim of petitioner that hard liquor is not included under the term "other lawful beverages" as
provided in Section I of Republic Act No. 623, as amended by Republic Act No. 5700, is without
merit. The title of the law itself, which reads " An Act to Regulate the Use of Duly Stamped or
Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers" clearly shows the
legislative intent to give protection to all marked bottles and containers of all lawful beverages
regardless of the nature of their contents. The words "other lawful beverages" is used in its
general sense, referring to all beverages not prohibited by law. Beverage is defined as a liquor or
liquid for drinking. 14 Hard liquor, although regulated, is not prohibited by law, hence it is within
the purview and coverage of Republic Act No. 623, as amended.
Republic Act No. 623, as amended, has for its purpose the protection of the health of the general
public and the prevention of the spread of contagious diseases. It further seeks to safeguard the
property rights of an important sector of Philippine industry. 15 As held by this Court in Destileria
Ayala, Inc. vs. Tan Tay & Co., 16 the purpose of then Act 3070, was to afford a person a means of
Identifying the containers he uses in the manufacture, preservation, packing or sale of his
products so that he may secure their registration with the Bureau of Commerce and Industry and
thus prevent other persons from using them. Said Act 3070 was substantially reenacted as
Republic Act No. 623. 17
The proposition that Republic Act No. 623, as amended, protects only the containers of the soft
drinks enumerated by petitioner and those similar thereto, is unwarranted and specious. The rule
of ejusdem generis cannot be applied in this case. To limit the coverage of the law only to those
enumerated or of the same kind or class as those specifically mentioned will defeat the very
purpose of the law. Such rule of ejusdem generis is to be resorted to only for the purpose of
determining what the intent of the legislature was in enacting the law. If that intent clearly
appears from other parts of the law, and such intent thus clearly manifested is contrary to the
result which would be reached by the appreciation of the rule of ejusdem generis, the latter must
give way. 18
Moreover, the above conclusions are supported by the fact that the Philippine Patent Office, which
is the proper and competent government agency vested with the authority to enforce and
implement Republic Act No. 623, registered the bottles of respondent LTI as containers for gin and
issued in its name a certificate of registration with the following findings:

It appearing, upon due examination that the applicant is entitled to have the said
MARKS OR NAMES registered under R.A. No. 623, the said marks or names have
been duly registered this day in the PATENT OFFICE under the said Act, for gin,
Ginebra San Miguel. 19
While executive construction is not necessarily binding upon the courts, it is entitled to great
weight and consideration. The reason for this is that such construction comes from the particular
branch of government called upon to implement the particular law involved. 20
Just as impuissant is petitioners contention that respondent court erred in holding that there is no
need for LTI to display the words "Reg Phil. Pat. Off." in order to succeed in its injunction suit
against Cagayan for the illegal use of the bottles. To repeat, Republic Act No. 623 governs the
registration of marked bottles and containers and merely requires that the bottles and/or
containers be marked or stamped by the names of the manufacturer or the names of their
principals or products or other marks of ownership. The owner upon registration of its marked
bottles, is vested by law with an exclusive right to use the same to the exclusion of others, except
as a container for native products. A violation of said right gives use to a cause of action against
the violator or infringer.
While Republic Act No. 623, as amended, provides for a criminal action in case of violation, a civil
action for damages is proper under Article 20 of the Civil Code which provides that every person
who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter
for the same. This particular provision of the Civil Case was clearly meant to complement all legal
provisions which may have inadvertently failed to provide for indemnification or reparation of
damages when proper or called for. In the language of the Code Commission "(t)he foregoing rule
pervades the entire legal system, and renders it impossible that a person who suffers damage
because another has violated some legal provisions, should find himself without relief." 21
Moreover, under Section 23 of Republic Act No. 166, as amended, a person entitled to the
exclusive use of a registered mark or tradename may recover damages in a civil action from any
person who infringes his rights. He may also, upon proper showing, be granted injunction.
It is true that the aforesaid law on trademarks provides:
SEC. 21. Requirements of notice of registration of trade-mark.-The registrant of a
trade-mark, heretofore registered or registered under the provisions of this Act,
shall give notice that his mark is registered by displaying with the same as used the
words 'Registered in the Philippines Patent Office' or 'Reg Phil. Pat. Off.'; and in any
suit for infringement under this Act by a registrant failing so to mark the goods
bearing the registered trade-mark, no damages shall be recovered under the
provisions of this Act, unless the defendant has actual notice of the registration.

Even assuming that said provision is applicable in this case, the failure of LTI to make said
marking will not bar civil action against petitioner Cagayan. The aforesaid requirement is not a
condition sine qua non for filing of a civil action against the infringer for other reliefs to which the
plaintiff may be entitled. The failure to give notice of registration will not deprive the aggrieved
party of a cause of action against the infringer but, at the most, such failure may bar recovery of
damages but only under the provisions of Republic Act No. 166.
However, in this case an award of damages to LTI is ineluctably called for. Petitioner cannot claim
good faith. The record shows that it had actual knowledge that the bottles with the blown-in
marks "La Tondea Inc." and "Ginebra San Miguel" are duly registered. In Civil Case No. 102859 of
the Court of First Instance of Manila, entitled "La Tondea Inc. versus Diego Lim, doing business
under the name and style 'Cagayan Valley Distillery,' " a decision was rendered in favor of plaintiff
therein on the basis of the admission and/or acknowledgment made by the defendant that the
bottles marked only with the words "La Tondea Inc." and "Ginebra San Miguel" are registered
bottles of LTI. 22
Petitioner cannot avoid the effect of the admission and/or acknowledgment made by Diego Lim in
the said case. While a corporation is an entity separate and distinct from its stock-holders and

from other corporations with which it may be connected, where the discreteness of its personality
is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation as an association of persons, or in the case of two corporations, merge
them into one. When the corporation is the mere alter ego or business conduit of a person, it may
be disregaded. 23
Petitioner's claim that it is separate and distinct from the former Cagayan Valley Distillery is
belied by the evidence on record. The following facts warrant the conclusion that petitioner, as a
corporate entity, and Cagayan Valley Distillery are one and the same. to wit: (1) petitioner is
being managed by Rogelio Lim, the son of Diego Lim, the owner and manager of Cagayan Valley
Distellery; (2) it is a family corporation; 24 (3) it is an admitted fact that before petitioner was
incorporated it was under a single proprietorship; 25 (4) petitioner is engaged in the same
business as Cagayan Valley Distillery, the manufacture of wines and liquors; and (5) the factory of
petitioner is located in the same place as the factory of the former Cagayan Valley Distillery.
It is thus clear that herein petitioner is a mere continuation and successor of Cagayan Valley
Distillery. It is likewise indubitable that the admission made in the former case, as earlier
explained, is binding on it as cogent proof that even before the filing of this case it had actual
knowledge that the bottles in dispute were registered containers of LTI As held in La Campana
Coffee Factory, Inc., et al. vs. Kaisahan Ng Mga Manggagawa sa La Campana (KKM), et al., 26
where the main purpose in forming the corporation was to evade one's subsidiary liability for
damages in a criminal case, the corporation may not be heard to say that it has a personality
separate and distinct from its members, because to allow it to do so would be to sanction the use
of the fiction of corporate entity as a shield to further an end subversive of justice.
Anent the several motions of private respondent LTI to have petitioner cited for contempt, we
reject the argument of petitioner that an appeal from a verdict of acquittal in a contempt,
proceeding constitutes double jeopardy. A failure to do something ordered by the court for the
benefit of a party constitutes civil contempt. 27 As we held in Converse Rubber Corporation vs.
Jacinto Rubber & Plastics Co., Inc.:
...True it is that generally, contempt proceedings are characterized as criminal in
nature, but the more accurate juridical concept is that contempt proceedings may
actually be either civil or criminal, even if the distinction between one and the other
may be so thin as to be almost imperceptible. But it does exist in law. It is criminal
when the purpose is to vindicate the authority of the court and protect its outraged
dignity. It is civil when there is failure to do something ordered by a court to be
done for the benefit of a party (3 Moran Rules of Court, pp. 343-344, 1970 ed.; see
also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81
Phil. 741.) And with this distinction in mind, the fact that the injunction in the
instant case is manifestly for the benefit of plaintiffs makes of the contempt herein
involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees
have been virtually found by the trial court guilty of civil contempt, not criminal
contempt, hence, the rule on double jeopardy may not be invoked. 28
The contempt involved in this case is civil and constructive in nature, it having arisen from the act
of Cagayan in violating the writ of preliminary injunction of the lower court which clearly defined
the forbidden act, to wit:
NOW THEREFORE, pending the resolution of this case by the court, you are
enjoined from using the 350 c.c. white flint bottles with the marks La Tondea Inc.,'
and 'Ginebra San Miguel' blown-in or stamped into the bottles as containers for the
defendant's products. 19
On this incident, two considerations must be borne in mind. Firstly, an injunction duly issued must
be obeyed, however erroneous the action of the court may be, until its decision is overruled by
itself or by a higher court. 30 Secondly, the American rule that the power to judge a contempt
rests exclusively with the court contemned does not apply in this Jurisdiction. The provision of the
present Section 4, Rule 71 of the Rules of Court as to where the charge may be filed is permissive
in nature and is merely declaratory of the inherent power of courts to punish contumacious
conduct. Said rules do not extend to the determination of the jurisdiction of Philippine courts. 31 In

appropriate case therefore, this Court may, in the interest of expedient justice, impose sanctions
on contemners of the lower courts.
Section 3 of Republic Act No. 623, as amended, creates a prima facie presumption against
Cagayan for its unlawful use of the bottles registered in the name of LTI Corollarily, the writ of
injunction directing petitioner to desist from using the subject bottles was properly issued by the
trial court. Hence, said writ could not be simply disregarded by Cagayan without adducing proof
sufficient to overcome the aforesaid presumption. Also, based on the findings of respondent court,
and the records before us being sufficient for arbitrament without remanding the incident to the
court a quo petitioner can be adjudged guilty of contempt and imposed a sanction in this appeal
since it is a cherished rule of procedure for this Court to always strive to settle the entire
controversy in a single proceeding, 32 We so impose such penalty concordant with the
preservative principle and as demanded by the respect due the orders, writs and processes of the
courts of justice.
WHEREFORE, judgment is hereby rendered DENYING the petition in this case and AFFIRMING the
decision of respondent Court of Appeals. Petitioner is hereby declared in contempt of court and
ORDERED to pay a fine of One Thousand Pesos (P1,000.00), with costs.
SO ORDERED.

G.R. No. 80352 September 29, 1989


BENJAMIN G. INDINO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), and DASMARIAS
INDUSTRIAL & STEELWORKS CORPORATION and/or PHILIPPINE NATIONAL
CONSTRUCTION CORPORATION (PNCC), Formerly CONSTRUCTION DEVELOPMENT
CORPORATION OF THE PHILIPPINES (CDCP), respondents.
SARMIENTO, J.:
The main issue in this petition for certiorari assailing the two resolutions dated August 20, 1987 1
and October 5, 1987 2 of the respondent National Labor Relations Commission (NLRC) in NLRC
Case No. 10-3268-85, is the validity of the petitioner's separation from the employ of private
respondent Dasmarinas Industrial and Steelworks Corporation (DISC).

The petitioner, Benjamin G. Indino, joined the Philippine National Construction Corporation (PNCC)
as a project personnel officer on December 12, 1974. On January 6, 1981, he was transferred to
private respondent DISC, a sister corporation of PNCC, which assigned him to its Philphos Project
in Isabel, Leyte.
On July 27, 1983, while the petitioner was on a paid vacation leave, he received a "lettermemorandum" from Roman B. Lopez, DISC personnel manager, informing him that his services
were no longer needed at the Philphos Project in Leyte. The "letter- memorandum" reads:
Date July 27, 1983
The significant business reverses being experienced by the company makes (sic) it
imperative to take drastic measures to reduce both its work force and operating
costs. We regret to inform you, therefore, that your employment with DISC shall be
terminated at the close of business hours on August 27,1983, or after thirty (30)
days from your receipt hereof.
Relatively, you can elect to submit a formal resignation in which case you shall also
be entitled to separation pay and other benefits applicable under existing policies.
You may also take advantage of your earned leave during the period July 27,1983
to August 27, 1983.
The Personnel Administration Department (PAD), will be gIad to answer your
questions pertaining to your formal separation. Please accomplish the necessary
clearance on or before July 30, 1983.
SGD. ROMAN B. LOPEZ
Personnel Manager 3
Immediately after receipt of the "letter-memorandum," the petitioner filed with the
NLRC a complaint for illegal dismissal against private respondent DISC; it was
docketed as NLRC-NCR CASE No. 7- 3590-83. 4 The case, however, was prematurely
terminated upon a joint motion to dismiss, dated September 30, 1983, filed by the
parties, and which reads:
Comes (sic) now both parties in the above-entitled case and unto this Honorable
Commission respectfully state:
1. That both parties mutually agreed to settle their differences and
petitioner/complainant agreed to return to work tomorrow October 1,
1983. On the other hand, respondent accepted his willingness to
return to work at any project or office where he may be assigned;
2. That complainant likewise agreed to be paid only fifty percent
(50%) of his back wages/salaries and other allowances by the
respondent starting July 27, 1983 up to September 30, 1983, and by
this Joint Motion to Dismiss both parties are foregoing and condoning
whatever claims each party may have against each other under
NLRC-NCR CASE No. 7-3590-83;
3. That both parties hereby mutually and jointly move for the
dismissal of the above-entitled case.
Makati, Metro Manila
September 30, 1983.
SGD. BENJAMIN G. INDINO SGD. ORLANDO B. TIONGSON

Complainant President
Dasmarias Industrial & Steelworks Corp.
Assisted by:
SGD. JOSE A. CABATUANDO JR.
Counsel for the respondent 5
On the basis of that agreement, the petitioner was reinstated on October 1, 1983 at
respondent DISC's central office, occupying the position of Project Administrative
Officer III. 6 Barely two months after his reinstatement, however, or on December
14, 1983, the petitioner received another "letter-memorandum" from respondent
DISC, again terminating his services. The "letter-memorandum" states:
December 14,1983
As we have completed most of our major projects and about to complete the
Philippine Phosphate Fertilizer Project plus the fact that there has been a low
project in sales/marketing due to critical economic situation, the company is forced
to take drastic measures to reduce both its work force and operating costs. We
regret to inform you, therefore, that your employment with DISC shall be
terminated at the close of business hours on January 15, 1984, or thirty (30) days
from your receipt hereof.
Relatively, you can elect to submit a formal resignation in which case you shall also
be entitled to separation pay and other benefits applicable under existing policies.
You may also take advantage of your earned leaves during the period December
15, 1983 to January 15,1984.
The Personnel Administration Department (PAD) will be glad to answer your
questions pertaining to your formal separation. Please accomplish the necessary
clearance on or before January 15, 1984.
(SGD.) ROMAN B. LOPEZ
Personnel Manager

Accordingly, pursuant to this "formal separation," the petitioner received from DISC
the amount of P20,458.52 as separation benefits. 8
The petitioner, however, refused to accept his termination; on October 7, 1985, he
filed a complaint for illegal dismissal, unpaid wages, moral and exemplary
damages, and attorney's fees against respondent DISC. 9 Later, he amended his
complaint and impleaded the Philippine National Construction Corporation (PNCC)
as additional respondent. 10 On February 10, 1987, Labor Arbiter Ricardo C. Nora, to
whom the case was assigned, dismissed the petitioner's complaint for lack of merit.
Dissatisfied with the labor arbiter's decision, the petitioner appealed to the
respondent NLRC. The latter, however, finding no error in the appealed judgment,
issued a resolution on August 10, 1987 affirming the same and denying the
petitioner's appeal. A motion for reconsideration seasonably filed by the petitioner
was denied on October 5, 1987. Hence, this petition.
The petitioner insists that his removal was unjustified and illegal and was carried
out to circumvent the compromise agreement he had earlier entered into with
respondent DISC which provided, among others, his reinstatement in any of the
offices or projects of respondent DISC. The aforementioned compromise
agreement, he avers, is already the law between them and precludes his

separation or dismissal. Moreover, the petitioner points out, the reason for his
separation in the "letter-memorandum" of December 14, 1983 is but a rehash of
that in the first "letter-memorandum" of July 27, 1983. The petitioner concludes
that the later move by DISC at ostensible retrenchment had been made in bad faith
and manifested its thinly-veiled desire to dismiss him. The petitioner likewise makes
capital of the failure of the respondent DISC to show that it was incurring, or at
least about to incur, losses, which would warrant its retrenchment policy. As such,
his removal from employment was unjustified and amounted to an illegal dismissal.
Finally, the petitioner substantiates the inclusion of the Philippine National
Construction Corporation (PNCC) as a party respondent in the case with the fact
that PNCC was originally his employer but which later transferred him to
respondent DISC, the PNCC sister company. This, according to the petitioner, shows
the link between the two respondents and for purposes of this case, deprives them
of their separate personality.
We find the petition impressed with merit.
The failure of the respondent DISC to show proof of its actual or imminent losses
that would justify drastic cuts in personnel or costs, is fatal to its cause. Article 283
(then Article 284) of the Labor Code provides that an "employer may also terminate
the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this title." 11 Clearly, under the said provision of
law, the right of an employer to terminate the services of any employee is
predicated on the existence of any of the following causes: (1) installation of laborsaving devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) the
closing or cessation of operation of the establishment or undertaking, unless the
closing is for the purpose of circumventing the provisions of law. 12 Thus, while
business reverses can be a just cause for terminating employees, 13 they must be
sufficiently proven by the employer. 14 This is precisely mandated under par. (b) of
Article 277 (formerly 278) of the Labor Code which states, among others, that "(T)
he burden of proving that the termination was for a valid or authorized cause shall
rest on the employer."
Admittedly, the assassination of' Senator Benigno "Ninoy" Aquino on August 21,
1983 produced extremely adverse political, social, and economic conditions that
resulted in widespread business failures. Not all enterprises, however, experienced
severe economic setbacks; a number, in fact, flourished during that financially
bleak period.
It is almost an inflexible rule that employers who contemplate terminating the
services of their workers cannot be so arbitrary and ruthless as to find flimsy
excuses for their decisions. This must be so considering that the dismissal of an
employee from work involves not only the loss of his position but more important,
his means of livelihood. 15 Applying this caveat to the case at bar, it was therefore
incumbent for respondent DISC, before putting into effect any retrenchment
process on its work force, to show by convincing evidence that it was being
wrecked by serious financial problems. Simply stating its state of insolvency or its
impending doom will not be sufficient. To do so would render the security of tenure
of workers and employees illusory. In a grander scale, to hold as valid and legal the
respondent DISC's act would be disastrous to labor. Any employer desirous of
ridding itself of its employees could then easily do so without need to adduce proof
in support of its action. We can not countenance this. Security of tenure is a right
guaranteed to employees and workers by the Constitution and should not be
denied on the basis of mere speculation. 16
Another point that makes the respondent DISC's cause suspect is that, as correctly
pointed out by the petitioner, the reason it gave in its "letter-memorandum" dated
December 14, 1983 terminating his services was simply a rehash of its (DISC'S)
"letter-memorandum" dated July 27, 1983, which ultimately produced the
compromise agreement between the parties. It will be noted that on July 27, 1983,

the event (Ninoy Aquino's assassination) that led to the near collapse of the
national economy, had not yet taken place. Respondent DISC's use of basically the
same reason thus shows its all-too-apparent effort to remove the petitioner from its
payroll. Taken in the light of the then just recently concluded compromise
agreement between the parties, the act of DISC in subsequently dismissing the
petitioner just two months-and-a-half after his reinstatement appears as having
been made in bad faith. Surely, if the basis for the second "letter-memorandum" is
the same as that of the first, there is no reason why the petitioner could not be
retained as in the first instance. The ground of DISC's retrenchment policy being
basically no different from the first, it is therefore covered by the compromise
agreement reached by the parties earlier.
Finally, considering that the petitioner started his employment originally with the
Philippine National Construction Company (PNCC) but was only transferred later to
its sister company, the respondent DISC, the inclusion of the former as party
respondent in this action is justified and proper. The so-called separate and distinct
personality of PNCC could be validly ignored inasmuch as it would unjustly
prejudice the petitioner vis-a-vis whatever benefits he may receive by reason of his
illegal dismissal. This has been demonstrated by the amount of the separation pay
given to the petitioner by respondent DISC which appears to correspond only to the
period in which the former was in the employ of the latter. The period when the
petitioner was still in the employ of PNCC was apparently ignored. This omission
should not be allowed inasmuch as there is no showing that PNCC gave the
petitioner separation benefits before he was transferred to DISC. It should always
be borne in mind that the fiction of law that a corporation, as a juridical entity, has
a distinct and separate personality, was envisaged for convenience and to serve
justice; therefore, it should not be used as a subterfuge to commit injustice and
circumvent labor laws. 17
WHEREFORE, the petition is granted, the assailed resolutions of the National Labor
Relations Commission dated August 20, 1987 and October 5, 1987 are ANNULLED
and SET ASIDE. The respondent Dasmarinas Industrial & Steelworks Corporation is
hereby ORDERED to REINSTATE the petitioner to his former position without loss of
seniority rights and privileges, and to PAY the petitioner three (3) years back wages
without any qualifications. Costs against the respondent Dasmarinas Industrial &
Steelworks Corporation.
SO ORDERED.