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CORPORATION LAW CASES 1

From such an order, an appeal was taken to this Court

1. TESTATE ESTATE OF IDONAH SLADE PERKINS,

not by the domiciliary administrator, the County Trust

deceased.

Company

RENATO

D.

TAYAG, ancillary

administrator-appellee,
vs.BENGUET

of

New

York,

but

by

the

Philippine

corporation, the Benguet Consolidated, Inc. The

CONSOLIDATED,

INC., oppositor-

appellant.

appeal cannot possibly prosper. The challenged order


represents a response and expresses a policy, to
paraphrase Frankfurter, arising out of a specific

Confronted by an obstinate and adamant refusal of


the

domiciliary

administrator,

the

County

Trust

Company of New York, United States of America, of


the estate of the deceased Idonah Slade Perkins, who

problem, addressed to the attainment of specific ends


by the use of specific remedies, with full and ample
support

from

legal

doctrines

of

weight

and

significance.

died in New York City on March 27, 1960, to surrender


to the ancillary administrator in the Philippines the

The facts will explain why. As set forth in the brief of

stock certificates owned by her in a Philippine

appellant Benguet Consolidated, Inc., Idonah Slade

corporation, Benguet Consolidated, Inc., to satisfy the

Perkins, who died on March 27, 1960 in New York City,

legitimate claims of local creditors, the lower court,

left among others, two stock certificates covering

then presided by the Honorable Arsenio Santos, now

33,002 shares of appellant, the certificates being in

retired, issued on May 18, 1964, an order of this

the possession of the County Trust Company of New

tenor: "After considering the motion of the ancillary

York, which as noted, is the domiciliary administrator

administrator, dated February 11, 1964, as well as

of the estate of the deceased. 2 Then came this

the opposition filed by the Benguet Consolidated, Inc.,

portion of the appellant's brief: "On August 12, 1960,

the Court hereby (1) considers as lost for all purposes

Prospero Sanidad instituted ancillary administration

in connection with the administration and liquidation

proceedings in the Court of First Instance of Manila;

of the Philippine estate of Idonah Slade Perkins the

Lazaro

stock certificates covering the 33,002 shares of stock

administrator, and on January 22, 1963, he was

standing in her name in the books of the Benguet

substituted by the appellee Renato D. Tayag. A

Consolidated,

certificates

dispute arose between the domiciary administrator in

cancelled, and (3) directs said corporation to issue

New York and the ancillary administrator in the

new certificates in lieu thereof, the same to be

Philippines as to which of them was entitled to the

delivered by said corporation to either the incumbent

possession of the stock certificates in question. On

ancillary administrator or to the Probate Division of

January 27, 1964, the Court of First Instance of Manila

this Court."1

ordered the domiciliary administrator, County Trust

Inc.,

(2)

orders

said

A.

Marquez

was

appointed

ancillary

Company, to "produce and deposit" them with the


ancillary administrator or with the Clerk of Court. The

domiciliary administrator did not comply with the

situation. What cannot be ignored is that conduct

order, and on February 11, 1964, the ancillary

bordering on wilful defiance, if it had not actually

administrator petitioned the court to "issue an order

reached it, cannot without undue loss of judicial

declaring the certificate or certificates of stocks

prestige, be condoned or tolerated. For the law is not

covering the 33,002 shares issued in the name of

so lacking in flexibility and resourcefulness as to

Idonah Slade Perkins by Benguet Consolidated, Inc.,

preclude such a solution, the more so as deeper

be declared [or] considered as lost."3

reflection would make clear its being buttressed by


indisputable

It is to be noted further that appellant Benguet

principles

and

supported

by

the

strongest policy considerations.

Consolidated, Inc. admits that "it is immaterial" as far


as it is concerned as to "who is entitled to the

It can truly be said then that the result arrived at

possession of the stock certificates in question;

upheld and vindicated the honor of the judiciary no

appellant opposed the petition of

the ancillary

less than that of the country. Through this challenged

administrator because the said stock certificates are

order, there is thus dispelled the atmosphere of

in existence, they are today in the possession of the

contingent

domiciliary administrator, the County Trust Company,

persistence of the domiciliary administrator to hold

in New York, U.S.A...."4

on to the stock certificates after it had, as admitted,

frustration

brought

about

by

the

voluntarily submitted itself to the jurisdiction of the


It is its view, therefore, that under the circumstances,
the

stock

certificates

cannot

be

declared

or

considered as lost. Moreover, it would allege that

lower court by entering its appearance through


counsel on June 27, 1963, and filing a petition for
relief from a previous order of March 15, 1963.

there was a failure to observe certain requirements of


its by-laws before new stock certificates could be

Thus did the lower court, in the order now on appeal,

issued. Hence, its appeal.

impart vitality and effectiveness to what was decreed.


For without it, what it had been decided would be set

As was made clear at the outset of this opinion, the


appeal lacks merit. The challenged order constitutes
an emphatic affirmation of judicial authority sought to
be

emasculated

domiciliary

by

the

administrator

wilful
in

conduct

refusing

to

of

the

accord

obedience to a court decree. How, then, can this


order be stigmatized as illegal?

As is true of many problems confronting the judiciary,


such a response was called for by the realities of the

at naught and nullified. Unless such a blatant


disregard by the domiciliary administrator,

with

residence abroad, of what was previously ordained by


a court order could be thus remedied, it would have
entailed, insofar as this matter was concerned, not a
partial but a well-nigh complete paralysis of judicial
authority.

1. Appellant Benguet Consolidated, Inc. did not


dispute

the

power

of

the

appellee

ancillary

administrator to gain control and possession of all

It would follow then that the authority of the probate

assets of the decedent within the jurisdiction of the

court to require that ancillary administrator's right to

Philippines. Nor could it. Such a power is inherent in

"the stock certificates covering the 33,002 shares ...

his duty to settle her estate and satisfy the claims of

standing in her name in the books of [appellant]

local creditors.5 As Justice Tuason speaking for this

Benguet Consolidated, Inc...." be respected is equally

Court made clear, it is a "general rule universally

beyond

recognized" that administration, whether principal or

corporation owing full allegiance and subject to the

ancillary, certainly "extends to the assets of a

unrestricted jurisdiction of local courts. Its shares of

decedent found within the state or country where it

stock cannot therefore be considered in any wise as

was

immune from lawful court orders.

granted,"

the

corollary

being

"that

an

question.

For

appellant

is

Philippine

administrator appointed in one state or country has


no power over property in another state or country."6

Our holding in Wells Fargo Bank and Union v. Collector


of Internal Revenue8 finds application. "In the instant

It is to be noted that the scope of the power of the

case, the actual situs of the shares of stock is in the

ancillary administrator was, in an earlier case, set

Philippines, the corporation being domiciled [here]."

forth by Justice Malcolm. Thus: "It is often necessary

To the force of the above undeniable proposition, not

to have more than one administration of an estate.

even appellant is insensible. It does not dispute it.

When a person dies intestate owning property in the

Nor could it successfully do so even if it were so

country of his domicile as well as in a foreign country,

minded.

administration is had in both countries. That which is


granted in the jurisdiction of decedent's last domicile
is termed the principal administration, while any
other

administration

is

termed

the

ancillary

administration. The reason for the latter is because a


grant

of

administration

does

not ex

proprio

vigore have any effect beyond the limits of the


country

in

which

it

is

granted.

Hence,

an

administrator appointed in a foreign state has no


authority

in

the

[Philippines].

The

ancillary

administration is proper, whenever a person dies,


leaving in a country other than that of his last
domicile, property to be administered in the nature of
assets of the deceased liable for his individual debts
or to be distributed among his heirs."7

2. In the face of such incontrovertible doctrines that


argue in a rather conclusive fashion for the legality of
the challenged order, how does appellant, Benguet
Consolidated, Inc. propose to carry the extremely
heavy

burden

of

persuasion

of

precisely

demonstrating the contrary? It would assign as the


basic error allegedly committed by the lower court its
"considering as lost the stock certificates covering
33,002 shares of Benguet belonging to the deceased
Idonah Slade Perkins, ..."9 More specifically, appellant
would stress that the "lower court could not "consider
as lost" the stock certificates in question when, as a
matter of fact, his Honor the trial Judge knew, and
does know, and it is admitted by the appellee, that

the said stock certificates are in existence and are

upon in the pursuit of legitimate ends have played an

today

important part in its development."11

in

the

possession

of

the

domiciliary

administrator in New York."10


Speaking of the common law in its earlier period,
There may be an element of fiction in the above view

Cardozo could state fictions "were devices to advance

of the lower court. That certainly does not suffice to

the ends of justice, [even if] clumsy and at times

call for the reversal of the appealed order. Since there

offensive."12 Some of them have persisted even to the

is a refusal, persistently adhered to by the domiciliary

present,

administrator in New York, to deliver the shares of

contract, the adopted child, the constructive trust, all

stocks

of

noting

"the

quasi

of flourishing vitality, to attest the empire of "as if"

in

the

today."13 He likewise noted "a class of fictions of

or

another order, the fiction which is a working tool of

arbitrary in considering them as lost and requiring the

thought, but which at times hides itself from view till

appellant to issue new certificates in lieu thereof.

reflection and analysis have brought it to the light." 14

Philippines,

the
there

ancillary
was

owned

jurist,

the

to

corporation

eminent

by

decedent

appellant

that

administrator

nothing

unreasonable

Thereby, the task incumbent under the law on the


ancillary administrator could be discharged and his
responsibility fulfilled.

What cannot be disputed, therefore, is the at times


indispensable role that fictions as such played in the
law. There should be then on the part of the appellant

Any other view would result in the compliance to a

further

refinement

valid judicial order being made to depend on the

condemnation of such judicial technique. If ever an

uncontrolled discretion of the party or entity, in this

occasion did call for the employment of a legal fiction

case domiciled abroad, which thus far has shown the

to put an end to the anomalous situation of a valid

utmost persistence in refusing to yield obedience.

judicial

Certainly, appellant would not be heard to contend in

impunity, this is it. What is thus most obvious is that

all seriousness that a judicial decree could be treated

this

as a mere scrap of paper, the court issuing it being

persuasion.

order

particular

being

in

the

catholicity

disregarded

alleged

error

with

does

of

its

apparent

not

carry

powerless to remedy its flagrant disregard.


3. Appellant Benguet Consolidated, Inc. would seek to
It may be admitted of course that such alleged loss as

bolster the above contention by its invoking one of

found by the lower court did not correspond exactly

the provisions of its by-laws which would set forth the

with the facts. To be more blunt, the quality of truth

procedure to be followed in case of a lost, stolen or

may be lacking in such a conclusion arrived at. It is to

destroyed stock certificate; it would stress that in the

be remembered however, again to borrow from

event of a contest or the pendency of an action

Frankfurter, "that fictions which the law may rely

regarding ownership of such certificate or certificates


of stock allegedly lost, stolen or destroyed, the

issuance of a new certificate or certificates would

gives substance to such a fear. Gossamer possibilities

await the "final decision by [a] court regarding the

of a future prejudice to appellant do not suffice to

ownership [thereof]."15

nullify the lawful exercise of judicial authority.

Such reliance is misplaced. In the first place, there is

4. What is more the view adopted by appellant

no such occasion to apply such by-law. It is admitted

Benguet

that the foreign domiciliary administrator did not

implications at war with the basic postulates of

appeal from the order now in question. Moreover,

corporate theory.

Consolidated,

Inc.

is

fraught

with

there is likewise the express admission of appellant


that as far as it is concerned, "it is immaterial ... who
is

entitled

to

the

possession

of

the

stock

certificates ..." Even if such were not the case, it


would be a legal absurdity to impart to such a
provision conclusiveness and finality. Assuming that a
contrariety exists between the above by-law and the
command of a court decree, the latter is to be

We start with the undeniable premise that, "a


corporation is an artificial being created by operation
of law...."16 It owes its life to the state, its birth being
purely dependent on its will. As Berle so aptly stated:
"Classically, a corporation was conceived as an
artificial person, owing its existence through creation
by a sovereign power."17As a matter of fact, the
statutory language employed owes much to Chief

followed.

Justice Marshall, who in the Dartmouth College


It is understandable, as Cardozo pointed out, that the

decision defined a corporation precisely as "an

Constitution overrides a statute, to which, however,

artificial being, invisible, intangible, and existing only

the

in contemplation of law."18

judiciary

must

yield

deference,

when

appropriately invoked and deemed applicable. It


would be most highly unorthodox, however, if a
corporate by-law would be accorded such a high
estate in the jural order that a court must not only
take note of it but yield to its alleged controlling force.

The well-known authority Fletcher could summarize


the matter thus: "A corporation is not in fact and in
reality a person, but the law treats it as though it
were a person by process of fiction, or by regarding it
as an artificial person distinct and separate from its

The fear of appellant of a contingent liability with

individual stockholders.... It owes its existence to law.

which it could be saddled unless the appealed order

It is an artificial person created by law for certain

be set aside for its inconsistency with one of its by-

specific purposes, the extent of whose existence,

laws does not impress us. Its obedience to a lawful

powers and liberties is fixed by its charter."19 Dean

court order certainly constitutes a valid defense,

Pound's terse summary, a juristic person, resulting

assuming that such apprehension of a possible court

from an association of human beings granted legal

action against it could possibly materialize. Thus far,

personality by the state, puts the matter neatly.20

nothing in the circumstances as they have developed

There

is

thus

rejection

of

5. One last point. In Viloria v. Administrator of

Gierke's genossenchaft theory, the basic theme of

Veterans Affairs,22 it was shown that in a guardianship

which to quote from Friedmann, "is the reality of the

proceedings then pending in a lower court, the United

group as a social and legal entity, independent of

States Veterans Administration filed a motion for the

state recognition and concession."21 A corporation as

refund of a certain sum of money paid to the minor

known to Philippine jurisprudence is a creature

under guardianship, alleging that the lower court had

without any existence until it has received the

previously

imprimatur of the state according to law. It is logically

deceased father as not entitled to guerilla benefits

inconceivable therefore that it will have rights and

according to a determination arrived at by its main

privileges of a higher priority than that of its creator.

office in the United States. The motion was denied. In

More than that, it cannot legitimately refuse to yield

seeking

obedience to acts of its state organs, certainly not

Administrator relied on an American federal statute

excluding the judiciary, whenever called upon to do

making his decisions "final and conclusive on all

so.

questions of law or fact" precluding any other

granted

its

petition

reconsideration

of

to

consider

such

order,

the

the

American official to examine the matter anew,


As a matter of fact, a corporation once it comes into
being, following American law still of persuasive
authority in our jurisdiction, comes more often within

"except a judge or judges of the United States


court."23 Reconsideration

was

denied,

and

the

Administrator appealed.

the ken of the judiciary than the other two coordinate


branches. It institutes the appropriate court action to

In an opinion by Justice J.B.L. Reyes, we sustained the

enforce its right. Correlatively, it is not immune from

lower court. Thus: "We are of the opinion that the

judicial control in those instances, where a duty under

appeal should be rejected. The provisions of the U.S.

the law as ascertained in an appropriate legal

Code, invoked by the appellant, make the decisions of

proceeding is cast upon it.

the U.S. Veterans' Administrator final and conclusive


when made on claims property submitted to him for

To assert that it can choose which court order to


follow and which to disregard is to confer upon it not
autonomy which may be conceded but license which
cannot be tolerated. It is to argue that it may, when
so minded, overrule the state, the source of its very
existence; it is to contend that what any of its
governmental organs may lawfully require could be
ignored at will. So extravagant a claim cannot
possibly merit approval.

resolution; but they are not applicable to the present


case, where the Administrator is not acting as a judge
but as a litigant. There is a great difference between
actions against the Administrator (which must be filed
strictly in accordance with the conditions that are
imposed by the Veterans' Act, including the exclusive
review by United States courts), and those actions
where the Veterans' Administrator seeks a remedy
from our courts and submits to their jurisdiction by

filing actions therein. Our attention has not been

of

called to any law or treaty that would make the

correspondence

findings of the Veterans' Administrator, in actions

requires.

where he is a party, conclusive on our courts. That, in

imperative requirement of justice according to law is

effect,

satisfied and national dignity and honor maintained.

would

discretion

deprive

and

our

render

tribunals

them

mere

of

judicial

legal

doctrines

For

and

with

what

through

the

distinguished
a

sense

appealed

of

by

its

realism

order,

the

subordinate
WHEREFORE, the appealed order of the Honorable

instrumentalities of the Veterans' Administrator."

Arsenio Santos, the Judge of the Court of First


It is bad enough as the Viloria decision made patent

Instance, dated May 18, 1964, is affirmed. With costs

for our judiciary to accept as final and conclusive,

against oppositor-appelant Benguet Consolidated, Inc.

determinations

made

by

foreign

governmental

agencies. It is infinitely worse if through the absence


of any coercive power by our courts over juridical
persons

within

our

jurisdiction,

the

force

and

effectivity of their orders could be made to depend on


the whim or caprice of alien entities. It is difficult to
imagine of a situation more offensive to the dignity of
the bench or the honor of the country.

proposition

to

which

appellant

Benguet

Consolidated seems to be firmly committed as shown


by its failure to accept the validity of the order
complained of; it seeks its reversal. Certainly we must
at all pains see to it that it does not succeed. The
deplorable consequences attendant on appellant
prevailing

attest

to

the

necessity

OF

THE

vs.THE

CITY

PHILIPPINES, plaintiff-appellant,
OF

MANILA,

THE

MAYOR

OF

MANILA, THE CITY TREASURER OF MANILA, and


THE CHIEF OF POLICE OF MANILA, defendantsappellees.

On March 30, 1954, the Recreation and Amusement

Yet that would be the effect, even if unintended, of


the

2. RECREATION AND AMUSEMENT ASSOCIATION

of

negative

response from us. That is what appellant will get.

Association of the Philippines, Inc., allegedly a nonstock corporation organized and existing under the
laws of the Philippines, whose 35 members are
licensed owner and operators in the City of Manila, of
Five-Ball-Flipper-Action-Pinball machines (also known
as slot machines), filed a complaint in the Court of
First Instance of said City praying that a preliminary
injunction be issued to restrain the City Mayor and
the City Treasurer from enforcing Ordinance No. 3628
passed by the Municipal Board of Manila on March 19,

That is all then that this case presents. It is obvious

1954, and approved by the City Mayor on the

why the appeal cannot succeed. It is always easy to

following day, which reads as follows:

conjure extreme and even oppressive possibilities.


That is not decisive. It does not settle the issue. What
carries weight and conviction is the result arrived at,
the just solution obtained, grounded in the soundest

ORDINANCE NO. 3628.

AN ORDINANCE AMENDING SECTIONS SEVEN

license must be posted on the apparatus

HUNDRED

concerned, Provided, that the operation or

SEVENTY

HUNDRED

THREE

SEVENTY

AND

FOUR

SEVEN

ORDINANCE

maintenance

of

failing

pinball
under

machines,
the

category

not

NUMBERED ONE THOUSAND SIX HUNDRED

otherwise

of

KNOWN AS "THE REVISED ORDINANCES OF

gambling device, shall not be allowed within a

THE CITY OF MANILA", AS LASTLY AMENDED

radius of two hundred (200) meters from any

BY HUNDRED FORTY SEVEN.

church, hospital, institution of learning public


market, plaza, and government buildings.

Be it ordained by the Municipal Board of the


City of Manila, that:

SEC. 774. Fees. There shall be paid for


every license granted for the installation and

SECTION 1. Sections seven hundred seventy-

use of an apparatus provided in this chapter,

three and seven hundred seventy-four of


Ordinance

Numbered

One

thousand

an annual fee of P300 which is payable in

six

advance: Provided, that person-coin operated

hundred, known as "The Revised Ordinances

weighing or scale machines shall pay only an

of the City of Manila, as lastly amended by

annual fee of P12, payable in advance.

Ordinance Numbered Three thousand three


hundred forty-seven, are hereby amended to

SEC. 2. This Ordinance shall take effect on its

read as follows:

approval.
Enacted,

SEC. 773. Licenses. No person, entity or

March

19,

1954.

Approved, March 20, 1954.

corporation shall install or cause to be


installed

for

It is further prayed in the complaint that the City

compensation any mechanical contrivance or

Mayor and the Treasurer be compelled to issue

automatic apparatus which functions through

permits and licenses to the members of the said

the introduction of money not otherwise

corporation upon compliance with the provisions of

prohibited by law of weights and measure and

the

not a gambling device, for purposes of

enactment of Ordinance No. 3628; that after hearing,

amusement or of confronting the weight of

said ordinance he declared null and void, the writ of

persons or things, or printing letters or

preliminary injunction be made permanent, and that

numbers, or displaying features inside the

plaintiff be granted such other relief to which it may

apparatus or reproducing recorded music

be entitled under the law.

including

for

the

other

use

kinds

of

of

the

public

machines

ordinance

(No.

3347)enforced

before

the

or

apparatus without having first obtained a


license therefor from the City Treasurer. Such

Acting upon this complaint, the lower court required


plaintiff to file, as it did file, a bond in the amount of

P2,000 for the issuance of a writ of preliminary

409); and that as it a discretionary function of the

injunction to restrain the defendant City Officials from

Mayor to deny or issue permits and licenses, he

enforcing the ordinance in question, and said writ was

cannot be compelled by mandamus to issue the

actually issued on April 1, 1954. Thereupon, Assistant

same.

City Fiscal filed on April 14, 1954, a motion to lift the


writ of preliminary injunction issued as well as a
motion to dismiss on the ground that plaintiff has no
legal capacity to sue and that the complaint states no
cause of action. Defendants argue that the complaint
does not state that plaintiff is the owner of any pinball
machine to be affected by the ordinance in question;
on the contrary, it appears from the complaint that
the real parties in interest are the individual members
of said organization whose names are not given. Such
being the case, plaintiff association cannot be in any
way adversely affected by the enforcement of the
questioned ordinance, from which it follows that the
complaint does not state a cause of action.

to

subsequently

lift

the

filed

on

Preliminary
April

21,

Injunction
1954,

to dismiss was re-set for April 24, 1954, and on that


date the Court granted defendants' counsel a period
of 5 days from April 26, 1954, to file an answer to
plaintiff's opposition to the motions to dismiss and to
lift the preliminary injunction, and another 5 days to
plaintiff's counsel to reply, if necessary.

On May

7,

1954,

plaintiff

was

served

with

"Resolucion" dated April 30, 1954, issued by the trial


Judge, wherein the Court dismissed the complaint and
dissolved the injunction issued thereby on the ground
that the City Mayor has discretionary power to issue
or refuse the issuance of a license or permit,

A supplement to the Motion to Dismiss and the


Motion

Upon defendants' motion, the hearing of the motion

was

wherein

defendants' counsel endeavors to substantiate its


previous contention by alleging, among others, that
the ordinance subject of litigation is a valid legislation
and within the power of the Municipal Board to enact;
that the power of the Board to regulate slot machines
is embodied in the Revised Charter of the City of
Manila (section 18-(1) of Republic Act No. 409); that
the regulation of the operation and maintenance of
this kind of machine which they alleged to be inimical

declaring at the same time that Ordinance No. 3628


is valid and within the power of the Municipal Board
to enact. The motion for reconsideration filed by
plaintiff having been denied, the case was brought to
us on appeal and in this instance plaintiff ascribes to
the lower Court the commission of the following
errors:

1. In motu proprio resolving upon the constitutionality


or Ordinance No. 3628 at said stage of the proceeding
(before defendants' answer and hearing on the
merits), and consequently, in dissolving the writ of
preliminary injunction;

to the general welfare of the population especially the


school children, is a lawful exercise of the police

2. In finding the Mayor of Manila vested with

power of the State (section 18-kk), Republic Act No.

discretionary powers to grant or refuse to issue

municipal licenses and permits, and that the same

on defendants' pleading which the latter failed to

cannot be controlled by mandamus; and

submit in time), though it was released thereafter, or


on May 7, 1956. It is true that the trial Judge, instead

3.

In

finding

Ordinance

No.

3628

valid

and

constitutional assuming that it had the power to do so


at such stage of the proceeding.

There is no dispute that the Municipal Board of the


City of Manila passed Ordinance No. 3628 limiting the
operation and maintenance of a certain kind of slot
machine to areas not within the radius of 200
hundred meters from any church, hospital, institution
of learning, public market, plaza and government

of ruling on the motion to dismiss on either of the two


grounds stated therein, namely, lack of legal capacity
to sue and failure to state a cause of action, elected
to ignore the same and dismissed the complaint upon
its own findings. However, it is to be remembered
that it was only the motion to dismiss that was set for
hearing and that section 3, Rule 8 of the Rules of
Court provides for the manner in which such kind of
motion may be resolved:

buildings and that it increased the annual fee from

SEC. 3. Order. After hearing the Court may

P55 to P300 payable in advance. It is likewise clear

deny or grant the motion or allow amendment

that at the expiration of the period allowed the

of pleading, or may defer the hearing and

parties within which to file certain pleadings in

determination of the motion until the trial if

connection with defendants' motion to dismiss, the

the ground alleged therein does not appear to

Court issued a "Resolucion" dated April 30, 1954, the

be indubitable.

dispositive part of which, translated into English,


reads as follows:

By

arriving

at

conclusion

upholding

the

constitutionality of the ordinance and stating the


In view of the foregoing consideration the
Court is of the opinion and consequently
declares Ordinance No. 3628 of the City of
Manila valid and that the writ of preliminary
injunction issued by this Court shall be
dissolved with costs against plaintiff.

It is to be stated in this connection that defendants


did not file in time their answer to plaintiff's
opposition to their two motions, but on May 4, 1954,
and that is undoubtedly the reason why the Court
prepared its Resolution before the lapse of plaintiff's
period to reply if necessary" (which was conditioned

reasons in support of such declaration, the lower


court though in effect it passed upon the merits of the
case, also assumed the lack of sufficient cause of
action on the part of the plaintiff. Moreover, the
question relative to the constitutionality of a statute
or ordinance is one of law which does not need to be
supported by evidence.

In the complaint filed with the lower court, plaintiff


alleged that it was a non-stock corporation duly
organized and existing in accordance with the laws of
the

Philippines.

Subsequent

inquires

from

the

Securities and Exchange Commission and the Bureau

of Commerce disclosed that the Recreation and

an association not organized as a juridicial entity, did

Amusement Association of the Philippines, Inc., is not

not possess the personality to conduct or maintain an

registered and does not appear in the files of said

action. The term "lack of legal capacity to sue" means

Offices. Most probably, owners and operators of such

either that the plaintiff does not have the necessary

pin-ball machines met, put up their set of officers and

qualifications to appear in the case . . . or when he

thus an association was formed, after which they

does not have the character or representation which

merely folded their arms and exerted no further effort

he claims, as, when he is not a duly appointed

to effectuate the necessary registration that would

executor or administrator of the estate he purports to

bestow juridicial personality upon it. The right to be

represent, or that the plaintiff is not a corporation

and to act as a corporation is not a natural or civil

duly registered in accordance with law. (I Moran's

right any person; such right as well as the right to

Comments on the Rules of Court, p. 168, 1952 ed.)

enjoy the immunities and privileges resulting from


incorporation

constitute

franchise

and

corporation, therefore cannot be created except by or


under a special authority from the state (Vol. II,
Tolentino's Commentaries and Jurisprudence on the
Commercial Law of the Philippines, p. 734). When
there is no legal organization of a corporation, the
association of a group of men for business or other
endeavors does not absorb the personality of the
group and merge it into the personality of another
separate and independent entity which is not given
corporate life by the mere formation of the group.
Such conglomeration of persons is incompetent to act
as a corporation, cannot create agents, or exercise by
itself authority in its behalf. (See Fay vs. Noble, 7
Cushing (Mass.) 188.)

Section 1-(c), Rule 8 of the Rules of Court provides for


the grounds upon which an action may be dismissed
upon motion of defendant and one of them is "that
the plaintiff has no legal capacity to sue." The City
Fiscal rightly capitalized on this basis because as far
as the Court was concerned, appellant herein, being

It may be argued that under the law plaintiff could be


considered as a civil association, but in this case
plaintiff-appellant does not claim to be a civil
association but a corporation and as such it has no
capacity to sue.

If from the records of the case We shall find, as We


do: (1) that plaintiff has no legal capacity to sue; (2)
that the complaint states no cause of action; and (3)
that a proper and adequate interpretation of section
18, paragraph (1) and (kk) of Republic Act No. 409,
would lead Us to conclude that Ordinance No. 3628 of
the City of Manila is valid, would We be justified in
annuling or setting aside the order of the Court
dismissing this case, just because it was issued
before the filing of defendants' answer and before
hearing on the merits but after defendants had
submitted

their

motion

to

dismiss

and

argued

maintaining the constitutionality of said ordinance?


On the strenght of the foregoing considerations, the
answer is obviously in the negative.

Wherefore,

the

order

appealed

from

is

hereby

affirmed, with costs against appellant. It is so


ordered.

3. REBECCA BOYER-ROXAS and GUILLERMO ROXAS,


petitioners, vs.HON. COURT OF APPEALS and HEIRS
OF EUGENIA V. ROXAS, INC., respondents.
This is a petition to review the decision and resolution
of the Court of Appeals in CA-G.R. No. 14530 affirming
the earlier decision of the Regional Trial Court of
Laguna, Branch 37, at Calamba, in the consolidated
RTC Civil Case Nos. 802-84-C and 803-84-C entitled
"Heirs of Eugenia V. Roxas, Inc. v. Rebecca BoyerRoxas" and Heirs of Eugenia V. Roxas, Inc. v.
Guillermo Roxas," the dispositive portion of which
reads:
IN VIEW OF THE FOREGOING, judgment is hereby
rendered in favor of the plaintiff and against the
defendants, by ordering as it is hereby ordered that:
1)
In RTC Civil Case No. 802-84-C: Rebecca
Boyer-Roxas and all persons claiming under her to:
a)
Immediately vacate the residential house
near the Balugbugan pool located inside the premises
of the Hidden Valley Springs Resort at Limao,
Calauan, Laguna;

b)Pay the plaintiff the amount of P300.00 per month


from September 10, 1983, for her occupancy of the
residential house until the same is vacated;
c)Remove the unfinished building erected on the land
of the plaintiff within ninety (90) days from receipt of
this decision;
d)Pay the plaintiff the amount of P100.00 per month
from September 10, 1983, until the said unfinished
building is removed from the land of the plaintiff; and
e)Pay the costs.

Heirs of Eugenia V. Roxas, Inc., prayed for the


ejectment of the petitioners from buildings inside the
Hidden Valley Springs Resort located at Limao,
Calauan, Laguna allegedly owned by the respondent
corporation.
In the case of petitioner Rebecca Boyer-Roxas (Civil
Case No-802-84-C), the respondent corporation
alleged that Rebecca is in possession of two (2)
houses, one of which is still under construction, built
at the expense of the respondent corporation; and
that her occupancy on the two (2) houses was only
upon the tolerance of the respondent corporation.
In the case of petitioner Guillermo Roxas (Civil Case
No. 803-84-C), the respondent corporation alleged
that Guillermo occupies a house which was built at
the expense of the former during the time when
Guillermo's father, Eriberto Roxas, was still living and
was the general manager of the respondent
corporation; that the house was originally intended as
a recreation hall but was converted for the residential
use of Guillermo; and that Guillermo's possession
over the house and lot was only upon the tolerance of
the respondent corporation.
In both cases, the respondent corporation alleged
that the petitioners never paid rentals for the use of
the buildings and the lots and that they ignored the
demand letters for them to vacate the buildings.
In their separate answers, the petitioners traversed
the allegations in the complaint by stating that they
are heirs of Eugenia V. Roxas and therefore, coowners of the Hidden Valley Springs Resort; and as
co-owners of the property, they have the right to stay
within its premises.
The cases were consolidated and tried jointly.
At the pre-trial, the parties limited the issues as
follows:
1)
whether plaintiff is entitled to recover the
questioned premises;
2)
whether plaintiff is entitled to reasonable
rental for occupancy of the premises in question;

2)In RTC Civil Case No. 803-84-C: Guillermo Roxas and


all persons claiming under him to:

3)
whether the defendant is legally authorized to
pierce the veil of corporate fiction and interpose the
same as a defense in an accion publiciana;

a)Immediately vacate the residential house near the


tennis court located within the premises of the
Hidden Valley Springs Resort at Limao, Calauan,
Laguna;

4)
whether the defendants are truly builders in
good faith, entitled to occupy the questioned
premises;

b)Pay the plaintiff the amount of P300.00 per month


from September 10, 1983, for his occupancy of the
said residential house until the same is vacated; and

5)
whether plaintiff is entitled to damages and
reasonable compensation for the use of the
questioned premises;

c)Pay the costs. (Rollo, p. 36)


In two (2) separate complaints for recovery of
possession filed with the Regional Trial Court of
Laguna against petitioners Rebecca Boyer-Roxas and
Guillermo Roxas respectively, respondent corporation,

6)
whether the defendants are entitled to their
counterclaim to recover moral and exemplary
damages as well as attorney's fees in the two cases;

7)
whether the presence and occupancy by the
defendants on the premises in questioned (sic)
hampers, deters or impairs plaintiff's operation of
Hidden Valley Springs Resort; and
8)
whether or not a unilateral and sudden
withdrawal of plaintiffs tolerance allowing defendants'
occupancy of the premises in questioned (sic) is
unjust enrichment. (Original Records, 486)
Upon motion of the plaintiff respondent corporation,
Presiding Judge Francisco Ma. Guerrero of Branch 34
issued an Order dated April 25, 1986 inhibiting
himself from further trying the case. The cases were
re-raffled to Branch 37 presided by Judge Odilon
Bautista. Judge Bautista continued the hearing of the
cases.
For failure of the petitioners (defendants below) and
their counsel to attend the October 22, 1986 hearing
despite notice, and upon motion of the respondent
corporation, the court issued on the same day,
October 22, 1986, an Order considering the cases
submitted for decision. At this stage of the
proceedings, the petitioners had not yet presented
their evidence while the respondent corporation had
completed the presentation of its evidence.
The evidence of the respondent corporation upon
which the lower court based its decision is as follows:
To support the complaints, the plaintiff offered the
testimonies of Maria Milagros Roxas and that of
Victoria Roxas Villarta as well as Exhibits "A" to "M-3".
The evidence of the plaintiff established the following:
that the plaintiff, Heirs of Eugenia V Roxas,
Incorporated, was incorporated on December 4, 1962
(Exh. "C") with the primary purpose of engaging in
agriculture to develop the properties inherited from
Eugenia V. Roxas and that of y Eufrocino Roxas; that
the Articles of Incorporation of the plaintiff, in 1971,
was amended to allow it to engage in the resort
business (Exh.
"C-1"); that the incorporators as original members of
the board of directors of the plaintiff were all
members of the same family, with Eufrocino Roxas
having the biggest share; that accordingly, the
plaintiff put up a resort known as Hidden Valley
Springs Resort on a portion of its land located at Bo.
Limao, Calauan, Laguna, and covered by TCT No.
32639 (Exhs. "A" and "A-l"); that improvements were
introduced in the resort by the plaintiff and among
them were cottages, houses or buildings, swimming
pools, tennis court, restaurant and open pavilions;
that the house near the Balugbugan Pool (Exh. "B-l")
being occupied by Rebecca B. Roxas was originally
intended as staff house but later used as the
residence of Eriberto Roxas, deceased husband of the
defendant Rebecca Boyer-Roxas and father of
Guillermo Roxas; that this house presently being
occupied by Rebecca B. Roxas was built from
corporate funds; that the construction of the
unfinished house (Exh. "B-2") was started by the
defendant Rebecca Boyer-Roxas and her husband
Eriberto Roxas; that the third building (Exh. "B-3")

presently being occupied by Guillermo Roxas was


originally intended as a recreation hall but later
converted as a residential house; that this house was
built also from corporate funds; that the said house
occupied by Guillermo Roxas when it was being built
had nipa roofing but was later changed to galvanized
iron sheets; that at the beginning, it had no partition
downstairs and the second floor was an open space;
that the conversion from a recreation hall to a
residential house was with the knowledge of
Eufrocino Roxas and was not objected to by any of
the Board of Directors of the plaintiff; that most of the
materials used in converting the building into a
residential house came from the materials left by
Coppola, a film producer, who filmed the movie
"Apocalypse Now"; that Coppola left the materials as
part of his payment for rents of the rooms that he
occupied in the resort; that after the said recreation
hall was converted into a residential house, defendant
Guillermo Roxas moved in and occupied the same
together with his family sometime in 1977 or 1978;
that during the time Eufrocino Roxas was still alive,
Eriberto Roxas was the general manager of the
corporation and there was seldom any board
meeting; that Eufrocino Roxas together with Eriberto
Roxas were (sic) the ones who were running the
corporation; that during this time, Eriberto Roxas was
the restaurant and wine concessionaire of the resort;
that after the death of Eufrocino Roxas, Eriberto
Roxas continued as the general manager until his
death in 1980; that after the death of Eriberto Roxas
in 1980, the defendants Rebecca B. Roxas and
Guillermo Roxas, committed acts that impeded the
plaintiff's expansion and normal operation of the
resort; that the plaintiff could not even use its own
pavilions, kitchen and other facilities because of the
acts of the defendants which led to the filing of
criminal cases in court; that cases were even filed
before the Ministry of Tourism, Bureau of Domestic
Trade and the Office of the President by the parties
herein; that the defendants violated the resolution
and orders of the Ministry of Tourism dated July 28,
1983, August 3, 1983 and November 26, 1984 (Exhs.
"G", "H" and "H-l") which ordered them or the
corporation they represent to desist from and to turn
over immediately to the plaintiff the management
and operation of the restaurant and wine outlets of
the said resort (Exh. "G-l"); that the defendants also
violated the decision of the Bureau of Domestic Trade
dated October 23, 1983 (Exh. "C"); that on August 27,
1983, because of the acts of the defendants, the
Board of Directors of the plaintiff adopted Resolution
No. 83-12 series of 1983 (Exh. "F") authorizing the
ejectment of the defendants from the premises
occupied by them; that on September 1, 1983,
demand letters were sent to Rebecca Boyer-Roxas
and Guillermo Roxas (Exhs. "D" and "D-1")
demanding that they vacate the respective premises
they occupy; and that the dispute between the
plaintiff and the defendants was brought before the
barangay level and the same was not settled (Exhs.
"E" and "E-l"). (Original Records, pp. 454-456)
The petitioners appealed the decision to the Court of
Appeals. However, as stated earlier, the appellate
court affirmed the lower court's decision. The

Petitioners' motion for reconsideration was likewise


denied.

lower court then issued an Order on the same date, to


wit:

Hence, this petition.

ORDER

In a resolution dated February 5, 1992, we gave due


course to the petition.

When these cases were called for continuation of


trial, Atty. Benito P. Fabie appeared before this Court,
however, the defendants and their lawyer despite
receipt of the Order setting the case for hearing today
failed to appear. On Motion of Atty. Fabie, further
cross examination of witness Victoria Vallarta is
hereby considered as having been waived.

The petitioners now contend:


I
Respondent Court erred when it refused to
pierce the veil of corporate fiction over private
respondent and maintain the petitioners in their
possession and/or occupancy of the subject premises
considering that petitioners are owners of aliquot part
of the properties of private respondent. Besides,
private respondent itself discarded the mantle of
corporate fiction by acts and/or omissions of its board
of directors and/or stockholders.
II
The respondent Court erred in not holding
that petitioners were in fact denied due process or
their day in court brought about by the gross
negligence of their former counsel.
III
The respondent Court misapplied the law
when it ordered petitioner Rebecca Boyer-Roxas to
remove the unfinished building in RTC Case No. 80284-C, when the trial court opined that she spent her
own funds for the construction thereof. (CA Rollo, pp.
17-18)
Were the petitioners denied due process of law in the
lower court?
After the cases were re-raffled to the sala of Presiding
Judge Odilon Bautista of Branch 37 the following
events transpired:
On July 3, 1986, the lower court issued an Order
setting the hearing of the cases on July 21, 1986.
Petitioner Rebecca V. Roxas received a copy of the
Order on July 15, 1986, while petitioner Guillermo
Roxas received his copy on July 18, 1986. Atty.
Conrado Manicad, the petitioners' counsel received
another copy of the Order on July 11, 1986. (Original
Records, p. 260)
On motion of the respondent corporation's counsel,
the lower court issued an Order dated July 15, 1986
cancelling the July 21, 1986 hearing and resetting the
hearing to August 11, 1986. (Original records, 262263) Three separate copies of the order were sent
and received by the petitioners and their counsel.
(Original Records, pp. 268, 269, 271)
A motion to cancel and re-schedule the August 11,
1986 hearing filed by the respondent corporation's
counsel was denied in an Order dated August 8,
1986. Again separate copies of the Order were sent
and received by the petitioners and their counsel.
(Original Records, pp. 276-279)
At the hearing held on August 11, 1986, only Atty.
Benito P. Fabie, counsel for the respondent
corporation appeared. Neither the petitioners nor
their counsel appeared despite notice of hearing. The

The plaintiff is hereby given twenty (20) days from


today within which to submit formal offer of evidence
and defendants are also given ten (10) days from
receipt of such formal offer of evidence to file their
objection thereto.
In the meantime, hearing in these cases is set to
September 29, 1986 at 10:00 o'clock in the morning.
(Original Records, p. 286)
Copies of the Order were sent and received by the
petitioners and their counsel on the following dates
Rebecca Boyer-Roxas on August 20, 1986, Guillermo
Roxas on August 26, 1986, and Atty. Conrado Manicad
on September 19, 1986. (Original Records, pp. 288290)
On September 1, 1986, the respondent corporation
filed its "Formal Offer of Evidence." In an Order dated
September 29, 1986, the lower court issued an Order
admitting exhibits "A" to "M-3" submitted by the
respondent corporation in its "Formal Offer of
Evidence . . . there being no objection . . ." (Original
Records, p. 418) Copies of this Order were sent and
received by the petitioners and their counsel on the
following dates: Rebecca Boyer-Roxas on October 9,
1986; Guillermo Roxas on October 9, 1986 and Atty.
Conrado Manicad on October 4, 1986 (Original
Records, pp. 420, 421, 428).
The scheduled hearing on September 29, 1986 did
not push through as the petitioners and their counsel
were not present prompting Atty. Benito Fabie, the
respondent corporation's counsel to move that the
cases be submitted for decision. The lower court
denied the motion and set the cases for hearing on
October 22, 1986. However, in its Order dated
September 29, 1986, the court warned that in the
event the petitioners and their counsel failed to
appear on the next scheduled hearing, the court shall
consider the cases submitted for decision based on
the evidence on record. (Original Records, p. 429, 430
and 431)
Separate copies of this Order were sent and received
by the petitioners and their counsel on the following
dates: Rebecca Boyer-Roxas on October 9, 1986,
Guillermo Roxas on October 9, 1986; and Atty.
Conrado Manicad on October 1, 1986. (Original
Records, pp. 429-430)
Despite notice, the petitioners and their counsel
again failed to attend the scheduled October 22, 1986
hearing. Atty. Fabie representing the respondent

corporation was present. Hence, in its Order dated


October 22, 1986, on motion of Atty. Fabie and
pursuant to the order dated September 29, 1986, the
Court considered the cases submitted for decision.
(Original Records, p. 436)
On November 14, 1986, the respondent corporation,
filed a "Manifestation", stating that ". . . it is
submitting without further argument its "Opposition
to the Motion for Reconsideration" for the
consideration of the Honorable Court in resolving
subject incident." (Original Records, p. 442)
On December 16, 1986, the lower court issued an
Order, to wit:
ORDER
Considering that the Court up to this date has not
received any Motion for Reconsideration filed by the
defendants in the above-entitled cases, the Court
cannot act on the Opposition to Motion for
Reconsideration filed by the plaintiff and received by
the Court on November 14, 1986. (Original Records,
p. 446)
On January 15, 1987, the lower court rendered the
questioned decision in the two (2) cases. (Original
Records, pp. 453-459)
On January 20, 1987, Atty. Conrado Manicad, the
petitioners' counsel filed an Ex-Parte Manifestation
and attached thereto, a motion for reconsideration of
the October 22, 1986 Order submitting the cases for
decision. He prayed that the Order be set aside and
the cases be re-opened for reception of evidence for
the petitioners. He averred that: 1) within the
reglementary period he prepared the motion for
reconsideration and among other documents, the
draft was sent to his law office thru his messenger;
after signing the final copies, he caused the service of
a copy to the respondent corporation's counsel with
the instruction that the copy of the Court be filed;
however, there was a miscommunication between his
secretary and messenger in that the secretary mailed
the copy for the respondent corporation's counsel and
placed the rest in an envelope for the messenger to
file the same in court but the messenger thought that
it was the secretary who would file it; it was only later
on when it was discovered that the copy for the Court
has not yet been filed and that such failure to file the
motion for reconsideration was due to excusable
neglect and/or accident. The motion for
reconsideration contained the following allegations:
that on the date set for hearing (October 22, 1986),
he was on his way to Calamba to attend the hearing
but his car suffered transmission breakdown; and that
despite efforts to repair said transmission, the car
remained inoperative resulting in his absence at the
said hearing. (Original Records, pp. 460-469)
On February 3, 1987, Atty. Manicad filed a motion for
reconsideration of the January 15, 1987 decision. He
explained that he had to file the motion because the
receiving clerk refused to admit the motion for
reconsideration attached to the ex-parte
manifestation because there was no proof of service

to the other party. Included in the motion for


reconsideration was a notice of hearing of the motion
on February 3, 1987. (Original Records, p. 476-A)
On February 4, 1987, the respondent corporation
through its counsel filed a Manifestation and Motion
manifesting that they received the copy of the motion
for reconsideration only today (February 4, 1987),
hence they prayed for the postponement of the
hearing. (Original Records, pp. 478-479)
On the same day, February 4, 1987, the lower court
issued an Order setting the hearing on February 13,
1987 on the ground that it received the motion for
reconsideration late. Copies of this Order were sent
separately to the petitioners and their counsel. The
records show that Atty. Manicad received his copy on
February 11, 1987. As regards the petitioners, the
records reveal that Rebecca Boyer-Roxas did not
receive her copy while as regards Guillermo Roxas,
somebody signed for him but did not indicate when
the copy was received. (Original Records, pp. 481483)
At the scheduled February 13, 1987 hearing, the
counsels for the parties were present. However, the
hearing was reset for March 6, 1987 in order to allow
the respondent corporation to file its opposition to the
motion for reconsideration. (Order dated February 13,
1987, Original Records, p. 486) Copies of the Order
were sent and received by the petitioners and their
counsel on the following dates: Rebecca Boyer-Roxas
on February 23, 1987; Guillermo Roxas on February
23, 1987 and Atty. Manicad on February 19, 1987.
(Original Records, pp. 487, 489-490)
The records are not clear as to whether or not the
scheduled hearing on March 6, 1987 was held.
Nevertheless, the records reveal that on March 13,
1987, the lower court issued an Order denying the
motion for reconsideration.
The well-settled doctrine is that the client is bound by
the mistakes of his lawyer. (Aguila v. Court of First
Instance of Batangas, Branch I, 160 SCRA 352 [1988];
See also Vivero v. Santos, et al., 98 Phil. 500 [1956];
Isaac v. Mendoza, 89 Phil. 279 [1951]; Montes v. Court
of First Instance of Tayabas, 48 Phil. 640 [1926];
People v. Manzanilla, 43 Phil. 167 [1922]; United
States v. Dungca, 27 Phil. 274 [1914]; and United
States v. Umali, 15 Phil. 33 [1910]) This rule,
however, has its exceptions. Thus, in several cases,
we ruled that the party is not bound by the actions of
his counsel in case the gross negligence of the
counsel resulted in the client's deprivation of his
property without due process of law. In the case of
Legarda v. Court of Appeals (195 SCRA 418 [1991]),
we said:
In People's Homesite & Housing Corp. v. Tiongco and
Escasa (12 SCRA 471 [1964]), this Court ruled as
follows:
Procedural technicality should not be made a bar to
the vindication of a legitimate grievance. When such
technicality deserts from being an aid to Justice, the
courts are justified in excepting from its operation a

particular case. Where there was something fishy and


suspicious about the actuations of the former counsel
of petitioners in the case at bar, in that he did not
give any significance at all to the processes of the
court, which has proven prejudicial to the rights of
said clients, under a lame and flimsy explanation that
the court's processes just escaped his attention, it is
held that said lawyer deprived his clients of their day
in court, thus entitling said clients to petition for relief
from judgment despite the lapse of the reglementary
period for filing said period for filing said petition.
In Escudero v. Judge Dulay (158 SCRA 69 [1988]), this
Court, in holding that the counsel's blunder in
procedure is an exception to the rule that the client is
bound by the mistakes of counsel, made the following
disquisition:
Petitioners contend, through their new counsel, that
the judgment rendered against them by the
respondent court was null and void, because they
were therein deprived of their day in court and
divested of their property without due process of law,
through the gross ignorance, mistake and negligence
of their previous counsel. They acknowledge that,
while as a rule, clients are bound by the mistake of
their counsel, the rule should not be applied
automatically to their case, as their trial counsel's
blunder in procedure and gross ignorance of existing
jurisprudence changed their cause of action and
violated their substantial rights.
We are impressed with petitioner's contentions.
xxx

xxx

xxx

While this Court is cognizant of the rule that,


generally, a client will suffer consequences of the
negligence, mistake or lack of competence of his
counsel, in the interest of Justice and equity,
exceptions may be made to such rule, in accordance
with the facts and circumstances of each case.
Adherence to the general rule would, in the instant
case, result in the outright deprivation of their
property through a technicality.
In its questioned decision dated November 19, 1989
the Court of Appeals found, in no uncertain terms, the
negligence of the then counsel for petitioners when
he failed to file the proper motion to dismiss or to
draw a compromise agreement if it was true that they
agreed on a settlement of the case; or in simply filing
an answer; and that after having been furnished a
copy of the decision by the court he failed to appeal
therefrom or to file a petition for relief from the order
declaring petitioners in default. In all these instances
the appellate court found said counsel negligent but
his acts were held to bind his client, petitioners
herein, nevertheless.
The Court disagrees and finds that the negligence of
counsel in this case appears to be so gross and
inexcusable. This was compounded by the fact, that
after petitioner gave said counsel another chance to
make up for his omissions by asking him to file a
petition for annulment of the judgment in the
appellate court, again counsel abandoned the case of

petitioner in that after he received a copy of the


adverse judgment of the appellate court, he did not
do anything to save the situation or inform his client
of the judgment. He allowed the judgment to lapse
and become final. Such reckless and gross negligence
should not be allowed to bind the petitioner.
Petitioner was thereby effectively deprived of her day
in court. (at pp. 426-427)
The herein petitioners, however, are not similarly
situated as the parties mentioned in the abovecited
cases. We cannot rule that they, too, were victims of
the gross negligence of their counsel.
The petitioners are to be blamed for the October 22,
1986 order issued by the lower court submitting the
cases for decision. They received notices of the
scheduled hearings and yet they did not do anything.
More specifically, the parties received notice of the
Order dated September 29, 1986 with the warning
that if they fail to attend the October 22, 1986
hearing, the cases would be submitted for decision
based on the evidence on record. Earlier, at the
scheduled hearing on September 29, 1986, the
counsel for the respondent corporation moved that
the cases be submitted for decision for failure of the
petitioners and their counsel to attend despite notice.
The lower court denied the motion and gave the
petitioners and their counsel another chance by
rescheduling the October 22, 1986 hearing.
Indeed, the petitioners knew all along that their
counsel was not attending the scheduled hearings.
They did not take steps to change their counsel or
make him attend to their cases until it was too late.
On the contrary, they continued to retain the services
of Atty. Manicad knowing fully well his lapses vis-a-vis
their cases. They, therefore, cannot raise the alleged
gross negligence of their counsel resulting in their
denial of due process to warrant the reversal of the
lower court's decision. In a similar case, Aguila v.
Court of First Instance of Batangas, Branch 1 (supra),
we ruled:
In the instant case, the petitioner should have noticed
the succession of errors committed by his counsel
and taken appropriate steps for his replacement
before it was altogether too late. He did not. On the
contrary, he continued to retain his counsel through
the series of proceedings that all resulted in the
rejection of his cause, obviously through such
counsel's "ineptitude" and, let it be added, the clients'
forbearance. The petitioner's reverses should have
cautioned him that his lawyer was mishandling his
case and moved him to seek the help of other
counsel, which he did in the end but rather tardily.
Now petitioner wants us to nullify all of the
antecedent proceedings and recognize his earlier
claims to the disputed property on the justification
that his counsel was grossly inept. Such a reason is
hardly plausible as the petitioner's new counsel
should know. Otherwise, all a defeated party would
have to do to salvage his case is claim neglect or
mistake on the part of his counsel as a ground for
reversing the adverse judgment. There would be no
end to litigation if these were allowed as every

shortcoming of counsel could be the subject of


challenge by his client through another counsel who,
if he is also found wanting, would likewise be
disowned by the same client through another
counsel, and so on ad infinitum. This would render
court proceedings indefinite, tentative and subject to
reopening at any time by the mere subterfuge of
replacing counsel. (at pp. 357-358)
We now discuss the merits of the cases.
In the first assignment of error, the petitioners
maintain that their possession of the questioned
properties must be respected in view of their
ownership of an aliquot portion of all the properties of
the respondent corporation being stockholders
thereof. They propose that the veil of corporate fiction
be pierced, considering the circumstances under
which the respondent corporation was formed.
Originally, the questioned properties belonged to
Eugenia V. Roxas. After her death, the heirs of
Eugenia V. Roxas, among them the petitioners herein,
decided to form a corporation Heirs of Eugenia V.
Roxas, Incorporated (private respondent herein) with
the inherited properties as capital of the corporation.
The corporation was incorporated on December 4,
1962 with the primary purpose of engaging in
agriculture to develop the inherited properties. The
Articles of Incorporation of the respondent
corporation were amended in 1971 to allow it to
engage in the resort business. Accordingly, the
corporation put up a resort known as Hidden Valley
Springs Resort where the questioned properties are
located.
These facts, however, do not justify the position taken
by the petitioners.
The respondent is a bona fide corporation. As such, it
has a juridical personality of its own separate from
the members composing it. (Western Agro Industrial
Corporation v. Court of Appeals, 188 SCRA 709
[1990]; Tan Boon Bee & Co., Inc. v. Jarencio, 163 SCRA
205 [1988]; Yutivo Sons Hardware Company v. Court
of Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano
Enterprises, Inc. v. Court of Industrial Relations, 13
SCRA 290 [1965]) There is no dispute that title over
the questioned land where the Hidden Valley Springs
Resort is located is registered in the name of the
corporation. The records also show that the staff
house being occupied by petitioner Rebecca BoyerRoxas and the recreation hall which was later on
converted into a residential house occupied by
petitioner Guillermo Roxas are owned by the
respondent corporation. Regarding properties owned
by a corporation, we stated in the case of
Stockholders of F. Guanzon and Sons, Inc. v. Register
of Deeds of Manila, (6 SCRA 373 [1962]):
xxx

xxx

xxx

. . . 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 coowner or tenant in common of the corporate property
(Harton v. Johnston, 166 Ala., 317, 51 So. 992). (at pp.
375-376)
The petitioners point out that their occupancy of the
staff house which was later used as the residence of
Eriberto Roxas, husband of petitioner Rebecca BoyerRoxas and the recreation hall which was converted
into a residential house were with the blessings of
Eufrocino Roxas, the deceased husband of Eugenia V.
Roxas, who was the majority and controlling
stockholder of the corporation. In his lifetime,
Eufrocino Roxas together with Eriberto Roxas, the
husband of petitioner Rebecca Boyer-Roxas, and the
father of petitioner Guillermo Roxas managed the
corporation. The Board of Directors did not object to
such an arrangement. The petitioners argue that . . .
the authority thus given by Eufrocino Roxas for the
conversion of the recreation hall into a residential
house can no longer be questioned by the
stockholders of the private respondent and/or its
board of directors for they impliedly but no leas
explicitly delegated such authority to said Eufrocino
Roxas. (Rollo, p. 12)
Again, we must emphasize that the respondent
corporation has a distinct personality separate from
its members. The corporation transacts its business
only through its officers or agents. (Western Agro
Industrial Corporation v. Court of Appeals, supra).
Whatever authority these officers or agents may have
is derived from the board of directors or other
governing body unless conferred by the charter of the
corporation. An officer's power as an agent of the
corporation must be sought from the statute, charter,
the by-laws or in a delegation of authority to such
officer, from the acts of the board of directors,
formally expressed or implied from a habit or custom
of doing business. (Vicente v. Geraldez, 52 SCRA 210
[1973])
In the present case, the record shows that Eufrocino
V. Roxas who then controlled the management of the
corporation, being the majority stockholder,
consented to the petitioners' stay within the
questioned properties. Specifically, Eufrocino Roxas
gave his consent to the conversion of the recreation
hall to a residential house, now occupied by petitioner
Guillermo Roxas. The Board of Directors did not object
to the actions of Eufrocino Roxas. The petitioners
were allowed to stay within the questioned properties
until August 27, 1983, when the Board of Directors
approved a Resolution ejecting the petitioners, to wit:

R E S O L U T I O N No. 83-12

Article 453 of the Civil Code provides:

RESOLVED, That Rebecca B. Roxas and Guillermo


Roxas, and all persons claiming under them, be
ejected from their occupancy of the Hidden Valley
Springs compound on which their houses have been
constructed and/or are being constructed only on
tolerance of the Corporation and without any contract
therefor, in order to give way to the Corporation's
expansion and improvement program and obviate
prejudice to the operation of the Hidden Valley
Springs Resort by their continued interference.

If there was bad faith, not only on the part of the


person who built, planted or sown on the land of
another but also on the part of the owner of such
land, the rights of one and the other shall be the
same as though both had acted in good faith.

RESOLVED, Further that the services of Atty. Benito P.


Fabie be engaged and that he be authorized as he is
hereby authorized to effect the ejectment, including
the filing of the corresponding suits, if necessary to
do so. (Original Records, p. 327)

Art. 448 The owner of the land on which anything


has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works,
sowing or planting after payment of the indemnity
provided for in articles 546 and 548, or to oblige the
one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However,
the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the
building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not
choose to appropriate the buildings or trees after
proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the
court shall fix the terms thereof.

We find nothing irregular in the adoption of the


Resolution by the Board of Directors. The petitioners'
stay within the questioned properties was merely by
tolerance of the respondent corporation in deference
to the wishes of Eufrocino Roxas, who during his
lifetime, controlled and managed the corporation.
Eufrocino Roxas' actions could not have bound the
corporation forever. The petitioners have not cited
any provision of the corporation by-laws or any
resolution or act of the Board of Directors which
authorized Eufrocino Roxas to allow them to stay
within the company premises forever. We rule that in
the absence of any existing contract between the
petitioners and the respondent corporation, the
corporation may elect to eject the petitioners at any
time it wishes for the benefit and interest of the
respondent corporation.
The petitioners' suggestion that the veil of the
corporate fiction should be pierced is untenable. The
separate personality of the corporation may be
disregarded only when the corporation is used "as a
cloak or cover for fraud or illegality, or to work
injustice, or where necessary to achieve equity or
when necessary for the protection of the creditors."
(Sulong Bayan, Inc. v. Araneta, Inc., 72 SCRA 347
[1976] cited in Tan Boon Bee & Co., Inc., v. Jarencio,
supra and Western Agro Industrial Corporation v.
Court of Appeals, supra) The circumstances in the
present cases do not fall under any of the
enumerated categories.
In the third assignment of error, the petitioners insist
that as regards the unfinished building, Rebecca
Boyer-Roxas is a builder in good faith.
The construction of the unfinished building started
when Eriberto Roxas, husband of Rebecca BoyerRoxas, was still alive and was the general manager of
the respondent corporation. The couple used their
own funds to finance the construction of the building.
The Board of Directors of the corporation, however,
did not object to the construction. They allowed the
construction to continue despite the fact that it was
within the property of the corporation. Under these
circumstances, we agree with the petitioners that the
provision of Article 453 of the Civil Code should have
been applied by the lower courts.

In such a case, the provisions of Article 448 of the


Civil Code govern the relationship between petitioner
Rebecca-Boyer-Roxas and the respondent
corporation, to wit:

WHEREFORE, the present petition is partly GRANTED.


The questioned decision of the Court of Appeals
affirming the decision of the Regional Trial Court of
Laguna, Branch 37, in RTC Civil Case No. 802-84-C is
MODIFIED in that subparagraphs (c) and (d) of
Paragraph 1 of the dispositive portion of the decision
are deleted. In their stead, the petitioner Rebecca
Boyer-Roxas and the respondent corporation are
ordered to follow the provisions of Article 448 of the
Civil Code as regards the questioned unfinished
building in RTC Civil Case No. 802-84-C. The
questioned decision is affirmed in all other respects.
SO ORDERED.
4. REPUBLIC OF THE PHILIPPINES, represented
by DANTE QUINDOZA, in his capacity as Zone
Administrator

of

the

Bataan

Economic

Zone, Petitioner,
vs.
COALBRINE INTERNATIONAL PHILIPPINES, INC.
and SHEILA F. NERI, Respondents.

Assailed in this petition for review on certiorari filed


by petitioner is the Decision1 dated January 21, 2004
of the Court of Appeals in CA-G.R. SP No 74667, which
affirmed the Order2 dated September 24, 2002 of the

Regional Trial Court (RTC) of Balanga, Bataan, in Civil

injunction with damages against PEZA and/or Bataan

Case No. 548-ML, denying petitioner's Motion to

Economic Zone wherein respondent Coalbrine sought

Dismiss.

to declare that PEZA had no valid cause to rescind the


contract to rehabilitate and lease; and to enjoin PEZA

The

Export

predecessor

Processing
of

the

Zone

Authority

Philippine

Economic

(EPZA),
Zone

Authority (PEZA), is the owner of the Bataan Hilltop


Hotel and Country Club, located at the Bataan Export
Processing

Zone,

Mariveles,

Bataan.

Dante

from taking over the hotel and country club and from
disconnecting the water and electric services to the
hotel. The complaint is pending with Branch 17 of the
RTC of Manila.

M.

Quindoza is the Zone Administrator of the Bataan

On April 24, 2002, respondents Coalbrine and Neri

Economic Zone.

filed with the RTC of Balanga, Bataan, a Complaint for


damages with prayer for the issuance of a TRO and/or

On August 4, 1994, EPZA, now PEZA, and respondent


Coalbrine International Philippines, Inc. entered into a
contract in which the latter would rehabilitate and
lease the Bataan Hilltop Hotel, Golf Course and
Clubhouse

for

twenty-five

(25)

years,

which

commenced on January 1, 1994, and renewable for


another twenty-five (25) years at the option of
respondent Coalbrine. Respondent Sheila F. Neri was
the Managing Director of the hotel.

No. 96-231 rescinding the contract to rehabilitate and


lease, on the ground of respondent Coalbrine's
violations

and

against Zone Administrator Quindoza, docketed as


Civil Case No. 548-ML. Respondent alleged that: in
October 2001, Quindoza started to harass the hotel's
operations by causing the excavation of the entire
width of a cross-section of the only road leading to
the hotel for the supposed project of putting up a one
length steel pipe; that such project had been stopped,
which,

On July 11, 1996, the PEZA Board passed Resolution

repeated

writ of preliminary prohibitory/mandatory injunction

non-performance

of

its

obligations as provided in the contract. Subsequently,


PEZA sent respondent Coalbrine a notice to vacate
the premises and to pay its outstanding obligations to

consequently,

operations;

respondent

paralyzed
Neri

the

hotel's

undertook

the

construction of a temporary narrow access ramp in


order that the hotel guests and their vehicles could
pass through the wide excavations; Quindoza had
also placed a big "ROAD CLOSED" sign near the hotel,
which effectively blocked all access to and from the
hotel and created an impression that the hotel had
been closed; in the last week of March 2002,

it.

Quindoza cut the pipelines that supplied water to the


On April 3, 1998, respondent Coalbrine filed with the

hotel to the great inconvenience of respondents and

RTC of Manila a Complaint for specific performance

the hotel guests, and, subsequently, the pipelines

with

were

prayer

for

the

issuance

of

temporary

restraining order (TRO) and/or writ of preliminary

reconnected.

Respondents

prayed

for

the

payment of damages, for the issuance of a TRO and a

writ of preliminary injunction to enjoin Quindoza from

for certiorari under Rule 65 seeking to annul the RTC

cutting

Orders,

or disconnecting

the

reconnected

water

pipelines to the hotel and from committing further

reiterating

the

grounds

raised

by

Administrator Quindoza in the RTC.

acts of harassment; and to cause the construction of


On January 21, 2004, the CA issued its assailed

a reasonable access road at Quindoza's expense.

Decision denying petitioner's petition for certiorari for


Administrator

Quindoza,

through

the

Solicitor

lack of merit.

General, filed a Motion to Dismiss 3 on the following


Hence, petitioner is now before us in a petition for

grounds:

review

on certiorari raising

the

lone

issue

of

1. The Honorable Court has no jurisdiction

respondent Neri's lack of proof of authority to file the

over the instant case;

complaint in the RTC of Balanga, Bataan, which was


docketed as Civil Case No. 548-ML.1avvphi1

2. The Honorable Court is an improper venue


for the instant case;

In their

Comment,

respondents

argue

that

the

Republic of the Philippines was not a party to the civil


3. Plaintiff (respondent Coalbrine) is guilty of
forum shopping;

case subject of this petition, hence, it has no


personality to file the instant petition for review; that

4. With respect to plaintiff (respondent) Neri,


the complaint states no cause of action

the RTC Order denying the motion to dismiss the


complaint was a mere interlocutory order, thus, the
same is not appealable and not a proper subject of a

against defendant;

petition for certiorari unless it was shown that there


5. The complaint is fatally defective for being

was a grave abuse of discretion in its issuance; that

unauthorized.

petitioner

had

already

filed

an

answer

to

the

complaint incorporating the grounds stated in their


On

September

24,

2002,

the

RTC

issued

an

Order denying petitioner's motion to dismiss.

motion to dismiss; and that respondents had already

Administrator

Quindoza

Reconsideration,

which

filed
the

RTC

presented their evidence by way of an opposition to

Motion
denied

in

for
its

On January 2, 2003, petitioner Republic of the


Philippines, represented by Dante Quindoza, in his

Economic

as

Zone

Zone,

Administrator

filed

with

application for the issuance of a writ of preliminary


mandatory injunction.

Order5 dated December 9, 2002.

capacity

the motion to dismiss and in support of their

the

of
CA

the

Bataan

petition

In its Reply, petitioner argues that it has the


personality to file this petition, since Administrator
Quindoza is being sued for damages for certain acts
he performed in an official capacity; that the denial of

petitioner's motion to dismiss was tainted with grave

That I am the Managing Director of Bataan Hilltop

abuse of discretion, which justified the filing of a

Hotel and one of the plaintiffs in this case.7

petition for certiorari with the CA. The parties filed


their respective memoranda as required under the

Notably,

respondent

verification/certification

Resolution dated January 26, 2005.

Neri
as

one

signed
of

the

the

plaintiffs.

However, we find that respondent Neri is not a real


In its Memorandum, petitioner raises the following

party-in- interest. Section 2, Rule 3 of the Rules of

arguments, to wit:

Civil Procedure provides:

THE COMPLAINT IS FATALLY DEFECTIVE FOR BEING

SEC. 2. Parties-in interest. A real party-in-interest is

UNAUTHORIZED.

the party who stands to be benefited or injured by the


judgment in the suit, or the party entitled to the

PETITIONER REPUBLIC OF THE PHILIPPINES IS THE


REAL PARTY-IN-INTEREST IN THE CASE AT BAR.

or these Rules, every action must be prosecuted or

RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF


DISCRETION IN DENYING PETITIONER'S MOTION TO
DISMISS, NECESSITATING THE FILING OF A PETITION
FOR CERTIORARI UNDER RULE 65 BEFORE THE
HONORABLE COURT OF APPEALS.

to

the

And "interest," within the meaning of the rule, means


material interest, an interest in issue and to be
affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental

the verification and certification against non-forum


attached

defended in the name of the real party-in-interest.

Petitioner claims that respondent Neri's signature in

shopping

avails of the suit. Unless otherwise authorized by law

complaint

filed

by

respondents in the RTC was defective, since there


was no proof of her authority to institute the
complaint on behalf of the corporation; and that
respondent Neri is not a real party-in-interest.

We agree.

interest.8 Cases construing the real party-in-interest


provision can be more easily understood if it is borne
in mind that the true meaning of real party-in-interest
may be summarized as follows: An action shall be
prosecuted in the name of the party who, by the
substantive law, has the right sought to be enforced. 9

The RTC based its conclusion that respondent Neri


had a cause of action against petitioner on the
allegations in the complaint. The CA, however, did not

The verification and certification against non-forum

rule on the matter despite the fact that it was raised

shopping reads:

in petitioner's petition for certiorari filed before it and


merely said that there was no necessity to discuss

xxxx

such issue after deciding the other grounds raised in


the petition.

We find the RTC in error. A reading of the allegations

with which does not necessarily render the pleading

in the complaint shows that the acts complained of

fatally defective.12 Verification is simply intended to

and said to have been committed by petitioner

secure an assurance that the allegations in the

against respondents have solely affected the hotel's

pleading are true and correct, and not the product of

operations where respondent Neri was the hotel's

the imagination or a matter of speculation, and that

Managing Director and whose interest in the suit was

the pleading is filed in good faith. The court may

incidental. Thus, we find that respondent Neri has no

order the correction of the pleading if verification is

cause of action against petitioner. Consequently, the

lacking or act on the pleading although it is not

plaintiff in this case would only be respondent

verified, if the attending circumstances are such that

Coalbrine.

strict compliance with the rules may be dispensed


with in order that the ends of justice may thereby be

A corporation has no power, except those expressly

served.13

conferred on it by the Corporation Code and those


that are implied or incidental to its existence. In turn,

On the other hand, the lack of certification against

a corporation exercises said powers through its board

non-forum shopping is generally not curable by mere

of directors and/or its duly authorized officers and

amendment of the complaint, but shall be a cause for

agents.10 Thus, it has been observed that the power

the dismissal of the case without prejudice. 14 The

of a corporation to sue and be sued in any court is

same rule applies to certifications against non-forum

lodged with the board of directors that exercises its

shopping

corporate powers. In turn, physical acts of the

corporation which are unaccompanied by proof that

corporation, like the signing of documents, can be

said signatory is authorized to file the complaint on

performed only by natural persons duly authorized for

behalf of the corporation.15

signed

by

person

on

behalf

of

the purpose by corporate by-laws or by a specific act


of the board of directors.11

In Philippine Airlines, Inc. v. Flight Attendants and


Stewards Association of the Philippines (FASAP),16 we

In this case, respondent Coalbrine is a corporation.

ruled that only individuals vested with authority by a

However, when respondent Neri filed the complaint in

valid board resolution may sign the certificate of non-

the RTC, there was no proof that she was authorized

forum shopping on behalf of a corporation. We also

to sign the verification and the certification against

required that proof of such authority must be

non-forum shopping.

attached. Failure to provide a certificate of non-forum


shopping is sufficient ground to dismiss the petition.

The Court has consistently held that the requirement


regarding verification of a pleading is formal, not
jurisdictional. Such requirement is simply a condition
affecting the form of the pleading, non-compliance

Likewise, the petition is subject to dismissal if a


certification was submitted unaccompanied by proof
of signatory's authority.

While there were instances where we have allowed

merits. Moreover, Abaya's authority to sign the

the filing of a certificate against non-forum shopping

certification was ratified by the Board.

by someone on behalf of a corporation without the


accompanying proof of authority at the time of its
filing,

we

did

so

on

the

basis

of

special

circumstance or compelling reason. Moreover, there


was a subsequent compliance by the submission of
the proof of authority attesting to the fact that the
person

who

signed

the

certification

was

duly

In the present case, the RTC, in denying petitioner's


motion to dismiss the complaint when the latter
raised respondent Neri's lack of authority to sign the
certification, found that respondent Neri testified that
she was the Managing Director of the Bataan Hilltop
Hotel

which

was

being

leased

by

respondent

Coalbrine, and that she was authorized by the

authorized.

Corporate Secretary to file the case. Notably, while


In China

Banking

Mondragon

the matter of lack of authority was raised by

International Philippines, Inc.,17 the CA dismissed the

petitioner in its petition for certiorari filed with the CA,

petition filed by China Bank, since the latter failed to

it chose not to tackle the issue after disposing of the

show

other issues raised therein.

that

certification

its

Corporation

bank

against

manager

v.

who

non-forum

signed

shopping

the
was

authorized to do so. We reversed the CA and said that


the case be decided on the merits despite the failure
to attach the required proof of authority, since the
board resolution which was subsequently attached
recognized

the

pre-existing

status

of

the

bank

We cannot agree with the RTC's reasoning and find


the certification signed by respondent Neri to be
defective. The authority of respondent Neri to file the
complaint in the RTC had not been proven. First, the
certification against non-forum shopping did not even
contain a statement that she was authorized by the

manager as an authorized signatory.

corporate secretary to file the case on behalf of


In Abaya

Investments

Merit

Coalbrine as she claimed. More importantly, while she

the

testified that she was authorized by the corporate

Metropolitan Trial Court of Manila was instituted by

secretary, there was no showing that there was a

petitioner's Chairman and President, Ofelia Abaya,

valid board resolution authorizing the corporate

who signed the verification and certification against

secretary

non-forum shopping without proof of authority to sign

respondent Neri to file the action. In fact, such proof

for the corporation, we also relaxed the rule. We did

of authority had not been submitted even belatedly to

so taking into consideration the merits of the case

show subsequent compliance. Thus, there was no

and to avoid a re-litigation of the issues and further

reason for the relaxation of the rule.

Philippines,18 where

the

Corporation

v.

complaint

before

to

file

the

action,

and

to

authorize

delay the administration of justice, since the case had


already been decided by the lower courts on the

As to respondents' claim that petitioner Republic of


the Philippines was not a party to the civil case

subject of this petition since Administrator Quindoza

certain special considerations, as public welfare or

was the sole defendant therein and, thus, has no

public policy; (4) where in criminal actions, the court

personality to file this petition, their claim is not

rejects rebuttal evidence for the prosecution as, in

persuasive.

case of acquittal, there could be no remedy; (5)


where the order is a patent nullity; and (6) where the

Notably,

Administrator

Quindoza

was

sued

for

damages for certain acts that he allegedly committed

decision in the certiorari case will avoid future


litigations.

21

while he was the Zone Administrator of the Bataan


Export Processing Zone. Therefore, the complaint is in

In this case, we find that the RTC committed grave

the nature of suit against the State, and the Republic

abuse of discretion amounting to lack of jurisdiction

has the personality to file the petition.

when it failed to consider the lack of proof of


authority of respondent Neri to file the action on

Anent respondents' claim that the RTC Order denying


a motion to dismiss is a mere interlocutory order,

behalf of the corporation as we have discussed


above.

thus, not appealable and may not be a subject of a


petition for certiorari filed by the petitioner before the

WHEREFORE, the petition for review is GRANTED.

CA, the same is also not meritorious.

The Decision dated January 21, 2004 of the Court of


Appeals

While indeed, the general rule is that the denial of a


motion to dismiss cannot be questioned in a special
civil action for certiorari, which is not intended to

in

CA-G.R.

SP

No

74667

is REVERSED and SET ASIDE. The Complaint in Civil


Case No. 548-ML pending in the Regional Trial Court,
Branch 4, Balanga, Bataan, is ordered DISMISSED.

correct every controversial interlocutory ruling, 19 and


that the appropriate recourse is to file an answer and

SO ORDERED.

to interpose as defenses the objections raised in the


motion, to proceed to trial, and, in case of an adverse

5. GOOD EARTH EMPORIUM INC., and LIM KA


PING, petitioners, vs.HONORABLE COURT OF

decision, to elevate the entire case by appeal in due

APPEALS and ROCES-REYES REALTY

course,20 this rule is not absolute.

INC., respondents.

Even when appeal is available and is the proper

This is a petition for review on certiorari of the


December 29, 1987 decision * of the Court of Appeals
in CA-G.R. No. 11960 entitled "ROCES-REYES REALTY,
INC. vs. HONORABLE JUDGE REGIONAL TRIAL COURT
OF MANILA, BRANCH 44, GOOD EARTH EMPORIUM,
INC. and LIM KA PING" reversing the decision of
respondent Judge ** of the Regional Trial Court of
Manila, Branch 44 in Civil Case No. 85-30484, which
reversed the resolution of the Metropolitan Trial Court
Of Manila, Branch 28 in Civil Case No.
09639, *** denying herein petitioners' motion to
quash the alias writ of execution issued against them.

remedy, the Supreme Court has allowed a writ of


certiorari (1) where the appeal does not constitute a
speedy and adequate remedy; (2) where the orders
were also issued either in excess of or without
jurisdiction or with grave abuse of discretion; (3) for

As gathered from the records, the antecedent facts of


this case, are as follows:
A Lease Contract, dated October 16, 1981, was
entered into by and between ROCES-REYES REALTY,
INC., as lessor, and GOOD EARTH EMPORIUM, INC., as
lessee, for a term of three years beginning November
1, 1981 and ending October 31, 1984 at a monthly
rental of P65,000.00 (Rollo, p. 32; Annex "C" of
Petition). The building which was the subject of the
contract of lease is a five-storey building located at
the corner of Rizal Avenue and Bustos Street in Sta.
Cruz, Manila.
From March 1983, up to the time the complaint was
filed, the lessee had defaulted in the payment of
rentals, as a consequence of which, private
respondent ROCES-REYES REALTY, INC., (hereinafter
designated as ROCES for brevity) filed on October 14,
1984, an ejectment case (Unlawful Detainer) against
herein petitioners, GOOD EARTH EMPORIUM, INC. and
LIM KA PING, hereinafter designated as GEE, (Rollo, p.
21; Annex "B" of the Petition). After the latter had
tendered their responsive pleading, the lower court
(MTC, Manila) on motion of Roces rendered judgment
on the pleadings dated April 17, 1984, the dispositive
portion of which states:
Judgment is hereby rendered ordering
defendants (herein petitioners) and all
persons claiming title under him to vacate the
premises and surrender the same to the
plaintiffs (herein respondents); ordering the
defendants to pay the plaintiffs the rental of
P65,000.00 a month beginning March 1983
up to the time defendants actually vacate the
premises and deliver possession to the
plaintiff; to pay attorney's fees in the amount
of P5,000.00 and to pay the costs of this suit.
(Rollo, p. 111; Memorandum of Respondents)
On May 16, 1984, Roces filed a motion for execution
which was opposed by GEE on May 28, 1984
simultaneous with the latter's filing of a Notice of
Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the
trial court resolved such motion ruling:
After considering the motion for the issuance
of a writ of execution filed by counsel for the
plaintiff (herein respondents) and the
opposition filed in relation thereto and finding
that the defendant failed to file the necessary
supersedeas bond, this court resolved to
grant the same for being meritorious. (Rollo,
p. 112)
On June 14, 1984, a writ of execution was issued by
the lower court. Meanwhile, the appeal was assigned
to the Regional Trial Court (Manila) Branch XLVI.
However, on August 15, 1984, GEE thru counsel filed
with the Regional Trial Court of Manila, a motion to
withdraw appeal citing as reason that they are
satisfied with the decision of the Metropolitan Trial
Court of Manila, Branch XXVIII, which said court
granted in its Order of August 27, 1984 and the

records were remanded to the trial court (Rollo, p. 32;


CA Decision). Upon an ex-parte Motion of ROCES, the
trial court issued an Alias Writ of Execution dated
February 25, 1985 (Rollo, p. 104; Annex "D" of
Petitioner's Memorandum), which was implemented
on February 27, 1985. GEE thru counsel filed a motion
to quash the writ of execution and notice of levy and
an urgent Ex-parte Supplemental Motion for the
issuance of a restraining order, on March 7, and 20,
1985, respectively. On March 21, 1985, the lower
court issued a restraining order to the sheriff to hold
the execution of the judgment pending hearing on the
motion to quash the writ of execution (Rollo, p. 22;
RTC Decision). While said motion was pending
resolution, GEE filed a Petition for Relief from
judgment before another court, Regional Trial Court of
Manila, Branch IX, which petition was docketed as
Civil Case No. 80-30019, but the petition was
dismissed and the injunctive writ issued in connection
therewith set aside. Both parties appealed to the
Court of Appeals; GEE on the order of dismissal and
Roces on denial of his motion for indemnity, both
docketed as CA-G.R. No. 15873-CV. Going back to the
original case, the Metropolitan Trial Court after
hearing and disposing some other incidents,
promulgated the questioned Resolution, dated April 8,
1985, the dispositive portion of which reads as
follows:
Premises considered, the motion to quash the
writ is hereby denied for lack of merit.
The restraining orders issued on March 11
and 23, 1985 are hereby recalled, lifted and
set aside. (Rollo, p. 20, MTC Decision)
GEE appealed and by coincidence. was raffled to the
same Court, RTC Branch IX. Roces moved to dismiss
the appeal but the Court denied the motion.
On certiorari, the Court of Appeals dismissed Roces'
petition and remanded the case to the RTC.
Meantime, Branch IX became vacant and the case
was re-raffled to Branch XLIV.
On April 6, 1987, the Regional Trial Court of Manila,
finding that the amount of P1 million evidenced by
Exhibit "I" and another P1 million evidenced by
the pacto de retro sale instrument (Exhibit "2") were
in full satisfaction of the judgment obligation,
reversed the decision of the Municipal Trial Court, the
dispositive portion of which reads:
Premises considered, judgment is hereby
rendered reversing the Resolution appealed
from quashing the writ of execution and
ordering the cancellation of the notice of levy
and declaring the judgment debt as having
been fully paid and/or Liquidated. (Rollo, p.
29).
On further appeal, the Court of Appeals reversed the
decision of the Regional Trial Court and reinstated the
Resolution of the Metropolitan Trial Court of Manila,
the dispositive portion of which is as follows:

WHEREFORE, the judgment appealed from is


hereby REVERSED and the Resolution dated
April 8, 1985, of the Metropolitan Trial Court
of Manila Branch XXXIII is hereby
REINSTATED. No pronouncement as to costs.
(Rollo, p. 40).
GEE's Motion for Reconsideration of April 5, 1988 was
denied (Rollo, p. 43). Hence, this petition.
The main issue in this case is whether or not there
was full satisfaction of the judgment debt in favor of
respondent corporation which would justify the
quashing of the Writ of Execution.
A careful study of the common exhibits (Exhibits 1/A
and 2/B) shows that nowhere in any of said exhibits
was there any writing alluding to or referring to any
settlement between the parties of petitioners'
judgment obligation (Rollo, pp. 45-48).
Moreover, there is no indication in the receipt, Exhibit
"1", that it was in payment, full or partial, of the
judgment obligation. Likewise, there is no indication
in the pacto de retro sale which was drawn in favor of
Jesus Marcos Roces and Marcos V. Roces and not the
respondent corporation, that the obligation embodied
therein had something to do with petitioners'
judgment obligation with respondent corporation.
Finding that the common exhibit, Exhibit 1/A had
been signed by persons other than judgment
creditors (Roces-Reyes Realty, Inc.) coupled with the
fact that said exhibit was not even alleged by GEE
and Lim Ka Ping in their original motion to quash
the alias writ of execution (Rollo, p. 37) but produced
only during the hearing (Ibid.) which production
resulted in petitioners having to claim belatedly that
there was an "overpayment" of about half a million
pesos (Rollo, pp. 25-27) and remarking on the utter
absence of any writing in Exhibits "1/A" and "2/B" to
indicate payment of the judgment debt, respondent
Appellate Court correctly concluded that there was in
fact nopayment of the judgment debt. As aptly
observed by the said court:
What immediately catches one's attention is
the total absence of any writing alluding to or
referring to any settlement between the
parties of private respondents' (petitioners')
judgment obligation. In moving for the
dismissal of the appeal Lim Ka Ping who was
then assisted by counsel simply stated that
defendants (herein petitioners) are satisfied
with the decision of the Metropolitan Trial
Court (Records of CA, p. 54).
Notably, in private respondents' (petitioners')
Motion to Quash the Writ of Execution and
Notice of Levy dated March 7, 1985, there is
absolutely no reference to the alleged
payment of one million pesos as evidenced by
Exhibit 1 dated September 20, 1984. As
pointed out by petitioner (respondent

corporation) this was brought out by Linda


Panutat, Manager of Good Earth only in the
course of the latter's testimony. (Rollo, p. 37)
Article 1240 of the Civil Code of the Philippines
provides that:
Payment shall be made to the person in
whose favor the obligation has been
constituted, or his successor in interest, or
any person authorized to receive it.
In the case at bar, the supposed payments were not
made to Roces-Reyes Realty, Inc. or to its successor
in interest nor is there positive evidence that the
payment was made to a person authorized to receive
it. No such proof was submitted but merely inferred
by the Regional Trial Court (Rollo, p. 25) from Marcos
Roces having signed the Lease Contract as President
which was witnessed by Jesus Marcos Roces. The
latter, however, was no longer President or even an
officer of Roces-Reyes Realty, Inc. at the time he
received the money (Exhibit "1") and signed the sale
with pacto de retro (Exhibit "2"). He, in fact, denied
being in possession of authority to receive payment
for the respondent corporation nor does the receipt
show that he signed in the same capacity as he did in
the Lease Contract at a time when he was President
for respondent corporation (Rollo, p. 20, MTC
decision).
On the other hand, Jesus Marcos Roces testified that
the amount of P1 million evidenced by the receipt
(Exhibit "1") is the payment for a loan extended by
him and Marcos Roces in favor of Lim Ka Ping. The
assertion is home by the receipt itself whereby they
acknowledged payment of the loan in their names
and in no other capacity.
A corporation has a personality distinct and separate
from its individual stockholders or members. Being an
officer or stockholder of a corporation does not make
one's property also of the corporation, and vice-versa,
for they are separate entities (Traders Royal Bank v.
CA-G.R. No. 78412, September 26, 1989; Cruz v.
Dalisay, 152 SCRA 482). Shareowners are in no legal
sense the owners of corporate property (or credits)
which is owned by the corporation as a distinct legal
person (Concepcion Magsaysay-Labrador v. CA-G.R.
No. 58168, December 19, 1989). As a consequence of
the separate juridical personality of a corporation, the
corporate debt or credit is not the debt or credit of
the stockholder, nor is the stockholder's debt or credit
that of the corporation (Prof. Jose Nolledo's "The
Corporation Code of the Philippines, p. 5, 1988
Edition, citing Professor Ballantine).
The absence of a note to evidence the loan is
explained by Jesus Marcos Roces who testified that
the IOU was subsequently delivered to private
respondents (Rollo, pp. 97-98). Contrary to the
Regional Trial Court's premise that it was incumbent
upon respondent corporation to prove that the
amount was delivered to the Roces brothers in the
payment of the loan in the latter's favor, the delivery

of the amount to and the receipt thereof by the Roces


brothers in their names raises the presumption that
the said amount was due to them.1wphi1 There is a
disputable presumption that money paid by one to
the other was due to the latter (Sec. 5(f) Rule 131,
Rules of Court). It is for GEE and Lim Ka Ping to prove
otherwise. In other words, it is for the latter to prove
that the payments made were for the satisfaction of
their judgment debt and not vice versa.
The fact that at the time payment was made to the
two Roces brothers, GEE was also indebted to
respondent corporation for a larger amount, is not
supportive of the Regional Trial Court's conclusions
that the payment was in favor of the latter, especially
in the case at bar where the amount was not
receipted for by respondent corporation and there is
absolutely no indication in the receipt from which it
can be reasonably inferred, that said payment was in
satisfaction of the judgment debt. Likewise, no such
inference can be made from the execution of
the pacto de retro sale which was not made in favor
of respondent corporation but in favor of the two
Roces brothers in their individual capacities without
any reference to the judgment obligation in favor of
respondent corporation.

Osorio, 30 Phil. 365). For indeed, it is well-entrenched


in Our jurisprudence that each party in a case must
prove his own affirmative allegations by the degree of
evidence required by law (Stronghold Insurance Co. v.
CA, G.R. No. 83376, May 29,1989; Tai Tong Chuache &
Co. v. Insurance Commission, 158 SCRA 366).
The appellate court cannot, therefore, be said to have
gravely abused its discretion in finding lack of
convincing and reliable evidence to establish
payment of the judgment obligation as claimed by
petitioner. The burden of evidence resting on the
petitioners to establish the facts upon which their
action is premised has not been satisfactorily
discharged and therefore, they have to bear the
consequences.
PREMISES CONSIDERED, the petition is hereby
DENIED and the Decision of the Respondent court is
hereby AFFIRMED, reinstating the April 8, 1985
Resolution of the Metropolitan Trial Court of Manila.
SO ORDERED.
6. ADELIO C. CRUZ, complainant, vs. QUITERIO L.

In addition, the totality of the amount covered by the


receipt (Exhibit "1/A") and that of the sale with pacto
de retro(Exhibit "2/B") all in the sum of P2 million, far
exceeds petitioners' judgment obligation in favor of
respondent corporation in the sum of P1,560,000.00
by P440,000.00, which militates against the claim of
petitioner that the aforesaid amount (P2M) was in full
payment of the judgment obligation.

DALISAY, Deputy Sheriff, RTC,

Petitioners' explanation that the excess is interest and


advance rentals for an extension of the lease contract
(Rollo, pp. 25-28) is belied by the absence of any
interest awarded in the case and of any agreement as
to the extension of the lease nor was there any such
pretense in the Motion to Quash the Alias Writ of
Execution.

Sheriff of Manila, with "malfeasance in office, corrupt

Manila, respondents.

In a sworn complaint dated July 23, 1984, Adelio C.


Cruz charged Quiterio L. Dalisay, Senior Deputy

practices

and

serious

irregularities"

allegedly

committed as follows:

1. Respondent sheriff attached and/or levied the


Petitioners' averments that the respondent court had
gravely abused its discretion in arriving at the
assailed factual findings as contrary to the evidence
and applicable decisions of this Honorable Court are
therefore, patently unfounded. Respondent court was
correct in stating that it "cannot go beyond what
appears in the documents submitted by petitioners
themselves (Exhibits "1" and "2") in the absence of
clear and convincing evidence" that would support its
claim that the judgment obligation has indeed been
fully satisfied which would warrant the quashal of
the Alias Writ of Execution.
It has been an established rule that when the
existence of a debt is fully established by the
evidence (which has been done in this case), the
burden of proving that it has been extinguished by
payment devolves upon the debtor who offers such a
defense to the claim of the plaintiff creditor (herein
respondent corporation) (Chua Chienco v. Vargas, 11
Phil. 219; Ramos v. Ledesma, 12 Phil. 656; Pinon v. De

money belonging to complainant Cruz when he was


not himself the judgment debtor in the final judgment
of NLRC NCR Case No. 8-12389-91 sought to be
enforced

but

rather

the

company

known

as

"Qualitrans Limousine Service, Inc.," a duly registered


corporation; and,

2. Respondent likewise caused the service of the alias

sanction. One who holds a public position, especially

writ of execution upon complainant who is a resident

an office directly connected with the administration of

of Pasay City, despite knowledge that his territorial

justice and the execution of judgments, must at all

jurisdiction covers Manila only and does not extend to

times be free from the appearance of impropriety.1

Pasay City.
We hold that respondent's actuation in enforcing a
In his Comments, respondent Dalisay explained that

judgment

when he garnished complainant's cash deposit at the

judgment debtor in the case calls for disciplinary

Philtrust bank, he was merely performing a ministerial

action. Considering the ministerial nature of his duty

duty. While it is true that said writ was addressed to

in enforcing writs of execution, what is incumbent

Qualitrans Limousine Service, Inc., yet it is also a fact

upon him is to ensure that only that portion of a

that complainant had executed an affidavit before the

decision ordained or decreed in the dispositive part

Pasay City assistant fiscal stating that he is the

should be the subject of execution. 2 No more, no less.

owner/president of said corporation and, because of

That

that declaration, the counsel for the plaintiff in the

complainant as one of the respondents is of no

labor

moment as execution must conform to that directed

case

advised

him

to

serve

notice

of

garnishment on the Philtrust bank.

the

against

title

complainant

of

the

case

who

is

not

specifically

the

names

in the dispositive portion and not in the title of the


case.

On November 12, 1984, this case was referred to the


Executive Judge of the Regional Trial Court of Manila

The

tenor

for investigation, report and recommendation.

implementing

of

the

writ

is

NLRC
clear

judgment
enough.

and
It

the

directed

Qualitrans Limousine Service, Inc. to reinstate the


Prior to the termination of the proceedings, however,
complainant executed an affidavit of desistance
stating that he is no longer interested in prosecuting
the case against respondent Dalisay and that it was
just a "misunderstanding" between

them.

Upon

respondent's motion, the Executive Judge issued an


order

dated

May

29,

1986

recommending

the

dismissal of the case.

does not preclude the taking of disciplinary action


against respondent. Neither does it dissuade the
from

imposing

Respondent, however, chose to "pierce the veil of


corporate entity" usurping a power belonging to the
court and assumed improvidently that since the
complainant is the owner/president of Qualitrans
Limousine Service, Inc., they are one and the same. It
is a well-settled doctrine both in law and in equity
that as a legal entity, a corporation has a personality

It has been held that the desistance of complainant

Court

discharged employees and pay them full backwages.

the

appropriate

corrective

distinct and separate from its individual stockholders


or members. The mere fact that one is president of a
corporation does not render the property he owns or
possesses the property of the corporation, since the

president, as individual, and the corporation are

ACCORDINGLY, we find Respondent Deputy Sheriff

separate entities.3

Quiterio L. Dalisay NEGLIGENT in the enforcement of


the writ of execution in NLRC Case-No. 8-12389-91,

Anent the charge that respondent exceeded his


territorial jurisdiction, suffice it to say that the writ of
execution sought to be implemented was dated July
9, 1984, or prior to the issuance of Administrative
Circular
enforcing

No.
a

12

which

court

writ

restrains
outside

sheriff
his

from

territorial

and a fine equivalent to three [3] months salary is


hereby imposed with a stern warning that the
commission of the same or similar offense in the
future will merit a heavier penalty. Let a copy of this
Resolution be filed in the personal record of the
respondent.

jurisdiction without first notifying in writing and


seeking the assistance of the sheriff of the place
where execution shall take place.

SO ORDERED.