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parents against Ago Medical and Educational Center-Bicol Christian

College of Medicine (AMEC) and its administrators. Claiming that the


broadcasts were defamatory, AMEC and Angelita Ago (Ago), as Dean
[G.R. No. 141994. January 17, 2005] of AMECs College of Medicine, filed a complaint for
damages[7] against FBNI, Rima and Alegre on 27 February 1990.
Quoted are portions of the allegedly libelous broadcasts:
FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs. AGO MEDICAL AND EDUCATIONAL CENTER- JUN ALEGRE:
BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents. Let us begin with the less burdensome: if you have children taking
medical course at AMEC-BCCM, advise them to pass all subjects
DECISION because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already.
CARPIO, J.: Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If
The Case [there] is no such regulation why is AMEC doing the same?

This petition for review[1] assails the 4 January 1999 xxx


Decision[2] and 26 January 2000 Resolution of the Court of Appeals in
CA-G.R. CV No. 40151. The Court of Appeals affirmed with Second: Earlier AMEC students in Physical Therapy had
modification the 14 December 1992 Decision[3] of the Regional Trial complained that the course is not recognized by DECS. xxx
Court of Legazpi City, Branch 10, in Civil Case No. 8236. The Court
of Appeals held Filipinas Broadcasting Network, Inc. and its Third: Students are required to take and pay for the subject even if
broadcasters Hermogenes Alegre and Carmelo Rima liable for libel the subject does not have an instructor - such greed for money on
and ordered them to solidarily pay Ago Medical and Educational the part of AMECs administration. Take the subject Anatomy:
Center-Bicol Christian College of Medicine moral damages, attorneys students would pay for the subject upon enrolment because it is offered
fees and costs of suit. by the school. However there would be no instructor for such subject.
Students would be informed that course would be moved to a later date
because the school is still searching for the appropriate instructor.
The Antecedents
xxx
Expos is a radio documentary[4] program hosted by Carmelo Mel
Rima (Rima) and Hermogenes Jun Alegre (Alegre).[5] Expos is aired It is a public knowledge that the Ago Medical and Educational Center
every morning over DZRC-AM which is owned by Filipinas has survived and has been surviving for the past few years since its
Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi City, inception because of funds support from foreign foundations. If you
the Albay municipalities and other Bicol areas.[6] will take a look at the AMEC premises youll find out that the names of
the buildings there are foreign soundings. There is a McDonald Hall.
In the morning of 14 and 15 December 1989, Rima and Alegre
Why not Jose Rizal or Bonifacio Hall? That is a very concrete and
exposed various alleged complaints from students, teachers and
undeniable evidence that the support of foreign foundations for AMEC
is substantial, isnt it? With the report which is the basis of the expose May I say Im sorry to Dean Justita Lola. But this is the truth. The truth
in DZRC today, it would be very easy for detractors and enemies of is this, that your are no longer fit to teach. You are too old. As an
the Ago family to stop the flow of support of foreign foundations who aviation, your case is zero visibility. Dont insist.
assist the medical school on the basis of the latters purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross xxx Why did AMEC still absorb her as a teacher, a dean, and chairman
purpose with its reason for being it is possible for these foreign of the scholarship committee at that. The reason is practical cost
foundations to lift or suspend their donations temporarily.[8] saving in salaries, because an old person is not fastidious, so long as
she has money to buy the ingredient of beetle juice. The elderly can
xxx get by thats why she (Lola) was taken in as Dean.

On the other hand, the administrators of AMEC-BCCM, AMEC xxx


Science High School and the AMEC-Institute of Mass
Communication in their effort to minimize expenses in terms of xxx On our end our task is to attend to the interests of students. It is
salary are absorbing or continues to accept rejects. For example likely that the students would be influenced by evil. When they
how many teachers in AMEC are former teachers of Aquinas become members of society outside of campus will be liabilities
University but were removed because of immorality? Does it mean rather than assets. What do you expect from a doctor who while
that the present administration of AMEC have the total definite moral studying at AMEC is so much burdened with unreasonable
foundation from catholic administrator of Aquinas University. I will imposition? What do you expect from a student who aside from
prove to you my friends, that AMEC is a dumping ground, garbage, peculiar problems because not all students are rich in their struggle to
not merely of moral and physical misfits. Probably they only qualify improve their social status are even more burdened with false
in terms of intellect. The Dean of Student Affairs of AMEC is Justita regulations. xxx[9] (Emphasis supplied)
Lola, as the family name implies. She is too old to work, being an old
woman. Is the AMEC administration exploiting the very [e]nterprising The complaint further alleged that AMEC is a reputable learning
or compromising and undemanding Lola? Could it be that AMEC is institution. With the supposed exposs, FBNI, Rima and Alegre
just patiently making use of Dean Justita Lola were if she is very old. transmitted malicious imputations, and as such, destroyed plaintiffs
As in atmospheric situation zero visibility the plane cannot land, (AMEC and Ago) reputation. AMEC and Ago included FBNI as
meaning she is very old, low pay follows. By the way, Dean Justita defendant for allegedly failing to exercise due diligence in the
Lola is also the chairman of the committee on scholarship in AMEC. selection and supervision of its employees, particularly Rima and
She had retired from Bicol University a long time ago but AMEC has Alegre.
patiently made use of her.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil
Lozares, filed an Answer[10] alleging that the broadcasts against
xxx
AMEC were fair and true. FBNI, Rima and Alegre claimed that they
were plainly impelled by a sense of public duty to report the goings-on
MEL RIMA:
in AMEC, [which is] an institution imbued with public interest.
xxx My friends based on the expose, AMEC is a dumping ground for Thereafter, trial ensued. During the presentation of the evidence
moral and physically misfit people. What does this mean? Immoral for the defense, Atty. Edmundo Cea, collaborating counsel of Atty.
and physically misfits as teachers. Lozares, filed a Motion to Dismiss[11] on FBNIs behalf. The trial court
denied the motion to dismiss. Consequently, FBNI filed a separate
Answer claiming that it exercised due diligence in the selection and Both parties, namely, FBNI, Rima and Alegre, on one hand, and
supervision of Rima and Alegre. FBNI claimed that before hiring a AMEC and Ago, on the other, appealed the decision to the Court of
broadcaster, the broadcaster should (1) file an application; (2) be Appeals. The Court of Appeals affirmed the trial courts judgment with
interviewed; and (3) undergo an apprenticeship and training program modification. The appellate court made Rima solidarily liable with
after passing the interview. FBNI likewise claimed that it always FBNI and Alegre. The appellate court denied Agos claim for damages
reminds its broadcasters to observe truth, fairness and objectivity in and attorneys fees because the broadcasts were directed against
their broadcasts and to refrain from using libelous and indecent AMEC, and not against her. The dispositive portion of the Court of
language. Moreover, FBNI requires all broadcasters to pass Appeals decision reads:
the Kapisanan ng mga Brodkaster sa Pilipinas (KBP) accreditation
test and to secure a KBP permit. WHEREFORE, the decision appealed from is hereby AFFIRMED,
subject to the modification that broadcaster Mel Rima
On 14 December 1992, the trial court rendered a
is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes
Decision[12] finding FBNI and Alegre liable for libel except Rima. The
Alegre.
trial court held that the broadcasts are libelous per se. The trial court
rejected the broadcasters claim that their utterances were the result of
SO ORDERED.[14]
straight reporting because it had no factual basis. The broadcasters did
not even verify their reports before airing them to show good faith. In
FBNI, Rima and Alegre filed a motion for reconsideration which
holding FBNI liable for libel, the trial court found that FBNI failed to
the Court of Appeals denied in its 26 January 2000 Resolution.
exercise diligence in the selection and supervision of its employees.
Hence, FBNI filed this petition.[15]
In absolving Rima from the charge, the trial court ruled that Rimas
only participation was when he agreed with Alegres expos. The trial
court found Rimas statement within the bounds of freedom of speech, The Ruling of the Court of Appeals
expression, and of the press. The dispositive portion of the decision
reads:
The Court of Appeals upheld the trial courts ruling that the
WHEREFORE, premises considered, this court finds for the questioned broadcasts are libelous per se and that FBNI, Rima and
plaintiff. Considering the degree of damages caused by the Alegre failed to overcome the legal presumption of malice. The Court
controversial utterances, which are not found by this court to be of Appeals found Rima and Alegres claim that they were actuated by
really very serious and damaging, and there being no showing that their moral and social duty to inform the public of the students gripes
indeed the enrollment of plaintiff school dropped, defendants as insufficient to justify the utterance of the defamatory remarks.
Hermogenes Jun Alegre, Jr. and Filipinas Broadcasting Network Finding no factual basis for the imputations against AMECs
(owner of the radio station DZRC), are hereby jointly and severally administrators, the Court of Appeals ruled that the broadcasts were
ordered to pay plaintiff Ago Medical and Educational Center-Bicol made with reckless disregard as to whether they were true or false. The
Christian College of Medicine (AMEC-BCCM) the amount appellate court pointed out that FBNI, Rima and Alegre failed to
of P300,000.00 moral damages, plus P30,000.00 reimbursement of present in court any of the students who allegedly complained against
attorneys fees, and to pay the costs of suit. AMEC. Rima and Alegre merely gave a single name when asked to
identify the students. According to the Court of Appeals, these
SO ORDERED. [13] (Emphasis supplied) circumstances cast doubt on the veracity of the broadcasters claim that
they were impelled by their moral and social duty to inform the public This is a civil action for damages as a result of the allegedly
about the students gripes. defamatory remarks of Rima and Alegre against AMEC.[17] While
AMEC did not point out clearly the legal basis for its complaint, a
The Court of Appeals found Rima also liable for libel since he
reading of the complaint reveals that AMECs cause of action is based
remarked that (1) AMEC-BCCM is a dumping ground for morally and
on Articles 30 and 33 of the Civil Code. Article 30[18] authorizes a
physically misfit teachers; (2) AMEC obtained the services of Dean
separate civil action to recover civil liability arising from a criminal
Justita Lola to minimize expenses on its employees salaries; and (3)
offense. On the other hand, Article 33[19]particularly provides that the
AMEC burdened the students with unreasonable imposition and false
injured party may bring a separate civil action for damages in cases of
regulations.[16]
defamation, fraud, and physical injuries. AMEC also invokes Article
The Court of Appeals held that FBNI failed to exercise due 19[20] of the Civil Code to justify its claim for damages. AMEC cites
diligence in the selection and supervision of its employees for allowing Articles 2176[21] and 2180[22] of the Civil Code to hold FBNI solidarily
Rima and Alegre to make the radio broadcasts without the proper KBP liable with Rima and Alegre.
accreditation. The Court of Appeals denied Agos claim for damages
and attorneys fees because the libelous remarks were directed against
I.
AMEC, and not against her. The Court of Appeals adjudged FBNI,
Whether the broadcasts are libelous
Rima and Alegre solidarily liable to pay AMEC moral damages,
attorneys fees and costs of suit.
A libel[23] is a public and malicious imputation of a crime, or of a
vice or defect, real or imaginary, or any act or omission, condition,
Issues
status, or circumstance tending to cause the dishonor, discredit, or
contempt of a natural or juridical person, or to blacken the memory of
FBNI raises the following issues for resolution: one who is dead.[24]
There is no question that the broadcasts were made public and
I. WHETHER THE BROADCASTS ARE LIBELOUS;
imputed to AMEC defects or circumstances tending to cause it
dishonor, discredit and contempt. Rima and Alegres remarks such as
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
greed for money on the part of AMECs administrators; AMEC is a
dumping ground, garbage of xxx moral and physical misfits; and
III. WHETHER THE AWARD OF ATTORNEYS FEES IS AMEC students who graduate will be liabilities rather than assets of
PROPER; and the society are libelous per se. Taken as a whole, the broadcasts
suggest that AMEC is a money-making institution where physically
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA and morally unfit teachers abound.
AND ALEGRE FOR PAYMENT OF MORAL
DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT. However, FBNI contends that the broadcasts are not malicious.
FBNI claims that Rima and Alegre were plainly impelled by their civic
duty to air the students gripes. FBNI alleges that there is no evidence
The Courts Ruling that ill will or spite motivated Rima and Alegre in making the
broadcasts. FBNI further points out that Rima and Alegre exerted
We deny the petition. efforts to obtain AMECs side and gave Ago the opportunity to defend
AMEC and its administrators. FBNI concludes that since there is no privileged communications for being commentaries on matters of
malice, there is no libel. public interest. Such being the case, AMEC should prove malice in
fact or actual malice. Since AMEC allegedly failed to prove actual
FBNIs contentions are untenable.
malice, there is no libel.
Every defamatory imputation is presumed malicious.[25] Rima and
FBNIs reliance on Borjal is misplaced. In Borjal, the Court
Alegre failed to show adequately their good intention and justifiable
elucidated on the doctrine of fair comment, thus:
motive in airing the supposed gripes of the students. As hosts of a
documentary or public affairs program, Rima and Alegre should have
[F]air commentaries on matters of public interest are privileged and
presented the public issues free from inaccurate and misleading
constitute a valid defense in an action for libel or slander. The doctrine
information.[26] Hearing the students alleged complaints a month
of fair comment means that while in general every discreditable
before the expos,[27] they had sufficient time to verify their sources and
imputation publicly made is deemed false, because every man is
information. However, Rima and Alegre hardly made a thorough
presumed innocent until his guilt is judicially proved, and every false
investigation of the students alleged gripes. Neither did they inquire
imputation is deemed malicious, nevertheless, when the discreditable
about nor confirm the purported irregularities in AMEC from the
imputation is directed against a public person in his public capacity, it
Department of Education, Culture and Sports. Alegre testified that he
is not necessarily actionable. In order that such discreditable
merely went to AMEC to verify his report from an alleged AMEC
imputation to a public official may be actionable, it must either be
official who refused to disclose any information. Alegre simply relied
a false allegation of fact or a comment based on a false
on the words of the students because they were many and not because
supposition. If the comment is an expression of opinion, based on
there is proof that what they are saying is true.[28] This plainly shows
established facts, then it is immaterial that the opinion happens to be
Rima and Alegres reckless disregard of whether their report was true
mistaken, as long as it might reasonably be inferred from the
or not.
facts.[32] (Emphasis supplied)
Contrary to FBNIs claim, the broadcasts were not the result of
straight reporting. Significantly, some courts in the United States apply True, AMEC is a private learning institution whose business of
the privilege of neutral reportage in libel cases involving matters of educating students is genuinely imbued with public interest. The
public interest or public figures. Under this privilege, a republisher welfare of the youth in general and AMECs students in particular is a
who accurately and disinterestedly reports certain defamatory matter which the public has the right to know. Thus, similar to the
statements made against public figures is shielded from liability, newspaper articles in Borjal, the subject broadcasts dealt with matters
regardless of the republishers subjective awareness of the truth or of public interest. However, unlike in Borjal, the questioned
falsity of the accusation.[29] Rima and Alegre cannot invoke the broadcasts are not based on established facts. The record supports the
privilege of neutral reportage because unfounded comments abound in following findings of the trial court:
the broadcasts. Moreover, there is no existing controversy involving
AMEC when the broadcasts were made. The privilege of neutral xxx Although defendants claim that they were motivated by consistent
reportage applies where the defamed person is a public figure who is reports of students and parents against plaintiff, yet, defendants have
involved in an existing controversy, and a party to that controversy not presented in court, nor even gave name of a single student who
makes the defamatory statement.[30] made the complaint to them, much less present written complaint or
petition to that effect. To accept this defense of defendants is too
However, FBNI argues vigorously that malice in law does not
dangerous because it could easily give license to the media to malign
apply to this case. Citing Borjal v. Court of Appeals,[31] FBNI
people and establishments based on flimsy excuses that there were
contends that the broadcasts fall within the coverage of qualifiedly
reports to them although they could not satisfactorily establish it. Such As for the allegation that plaintiff is the dumping ground for misfits,
laxity would encourage careless and irresponsible broadcasting which and immoral teachers, defendant[s] singled out Dean Justita Lola who
is inimical to public interests. is said to be so old, with zero visibility already. Dean Lola testified in
court last Jan. 21, 1991, and was found to be 75 years old. xxx Even
Secondly, there is reason to believe that defendant radio broadcasters, older people prove to be effective teachers like Supreme Court Justices
contrary to the mandates of their duties, did not verify and analyze the who are still very much in demand as law professors in their late years.
truth of the reports before they aired it, in order to prove that they are Counsel for defendants is past 75 but is found by this court to be still
in good faith. very sharp and effective. So is plaintiffs counsel.

Alegre contended that plaintiff school had no permit and is not Dr. Lola was observed by this court not to be physically decrepit yet,
accredited to offer Physical Therapy courses. Yet, plaintiff produced a nor mentally infirmed, but is still alert and docile.
certificate coming from DECS that as of Sept. 22, 1987 or more than 2
years before the controversial broadcast, accreditation to offer Physical The contention that plaintiffs graduates become liabilities rather than
Therapy course had already been given the plaintiff, which certificate assets of our society is a mere conclusion. Being from the place
is signed by no less than the Secretary of Education and Culture himself, this court is aware that majority of the medical graduates of
herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could plaintiffs pass the board examination easily and become prosperous
have easily known this were they careful enough to verify. And yet, and responsible professionals.[33]
defendants were very categorical and sounded too positive when they
made the erroneous report that plaintiff had no permit to offer Physical Had the comments been an expression of opinion based on
Therapy courses which they were offering. established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
The allegation that plaintiff was getting tremendous aids from foreign facts.[34] However, the comments of Rima and Alegre were not backed
foundations like Mcdonald Foundation prove not to be true also. The up by facts. Therefore, the broadcasts are not privileged and remain
truth is there is no Mcdonald Foundation existing. Although a big libelous per se.
building of plaintiff school was given the name Mcdonald building,
The broadcasts also violate the Radio Code[35] of the Kapisanan
that was only in order to honor the first missionary in Bicol of
ng mga Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the
plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim
Radio Code provides:
of defendants over the air, not a single centavo appears to be received
by plaintiff school from the aforementioned McDonald Foundation
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND
which does not exist.
COMMENTARIES
Defendants did not even also bother to prove their claim, though
1. x x x
denied by Dra. Ago, that when medical students fail in one subject,
they are made to repeat all the other subject[s], even those they have
4. Public affairs program shall present public issues free
already passed, nor their claim that the school charges laboratory fees
from personal bias, prejudice and inaccurate and
even if there are no laboratories in the school. No evidence was
misleading information. x x x Furthermore, the station
presented to prove the bases for these claims, at least in order to give
shall strive to present balanced discussion of issues. x x x.
semblance of good faith.
xxx A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
7. The station shall be responsible at all times in the suffering or such sentiments as wounded feelings, serious anxiety,
supervision of public affairs, public issues and mental anguish or moral shock.[40] The Court of Appeals
commentary programs so that they conform to the cites Mambulao Lumber Co. v. PNB, et al.[41] to justify the award of
provisions and standards of this code. moral damages. However, the Courts statement in Mambulao that a
corporation may have a good reputation which, if besmirched, may
8. It shall be the responsibility of the newscaster, commentator, also be a ground for the award of moral damages is an obiter
host and announcer to protect public interest, general dictum.[42]
welfare and good order in the presentation of public
Nevertheless, AMECs claim for moral damages falls under item 7
affairs and public issues.[36] (Emphasis supplied)
of Article 2219[43] of the Civil Code. This provision expressly
authorizes the recovery of moral damages in cases of libel, slander or
The broadcasts fail to meet the standards prescribed in the Radio
any other form of defamation. Article 2219(7) does not qualify
Code, which lays down the code of ethical conduct governing
whether the plaintiff is a natural or juridical person. Therefore, a
practitioners in the radio broadcast industry. The Radio Code is a
juridical person such as a corporation can validly complain for libel or
voluntary code of conduct imposed by the radio broadcast industry on
any other form of defamation and claim for moral damages.[44]
its own members. The Radio Code is a public warranty by the radio
broadcast industry that radio broadcast practitioners are subject to a Moreover, where the broadcast is libelous per se, the law implies
code by which their conduct are measured for lapses, liability and damages.[45] In such a case, evidence of an honest mistake or the want
sanctions. of character or reputation of the party libeled goes only in mitigation
of damages.[46] Neither in such a case is the plaintiff required to
The public has a right to expect and demand that radio broadcast
introduce evidence of actual damages as a condition precedent to the
practitioners live up to the code of conduct of their profession, just like
recovery of some damages.[47] In this case, the broadcasts are
other professionals. A professional code of conduct provides the
libelous per se. Thus, AMEC is entitled to moral damages.
standards for determining whether a person has acted justly, honestly
and with good faith in the exercise of his rights and performance of his However, we find the award of P300,000 moral damages
duties as required by Article 19[37] of the Civil Code. A professional unreasonable. The record shows that even though the broadcasts were
code of conduct also provides the standards for determining whether a libelous per se, AMEC has not suffered any substantial or material
person who willfully causes loss or injury to another has acted in a damage to its reputation. Therefore, we reduce the award of moral
manner contrary to morals or good customs under Article 21[38] of the damages from P300,000 to P150,000.
Civil Code.
II.
III.
Whether AMEC is entitled to moral damages
Whether the award of attorneys fees is proper

FBNI contends that AMEC is not entitled to moral damages


FBNI contends that since AMEC is not entitled to moral damages,
because it is a corporation.[39]
there is no basis for the award of attorneys fees. FBNI adds that the
instant case does not fall under the enumeration in Article 2208[48] of FBNI further argues that Alegres age and lack of training are
the Civil Code. irrelevant to his competence as a broadcaster. FBNI points out that the
minor deficiencies in the KBP accreditation of Rima and Alegre do not
The award of attorneys fees is not proper because AMEC failed to
in any way prove that FBNI did not exercise the diligence of a good
justify satisfactorily its claim for attorneys fees. AMEC did not adduce
father of a family in selecting and supervising them. Rimas
evidence to warrant the award of attorneys fees. Moreover, both the
accreditation lapsed due to his non-payment of the KBP annual fees
trial and appellate courts failed to explicitly state in their respective
while Alegres accreditation card was delayed allegedly for reasons
decisions the rationale for the award of attorneys fees.[49] In Inter-Asia
attributable to the KBP Manila Office. FBNI claims that membership
Investment Industries, Inc. v. Court of Appeals,[50] we held that:
in the KBP is merely voluntary and not required by any law or
government regulation.
[I]t is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsels fees are not FBNIs arguments do not persuade us.
to be awarded every time a party wins a suit. The power of the court
The basis of the present action is a tort. Joint tort feasors are
to award attorneys fees under Article 2208 of the Civil Code
jointly and severally liable for the tort which they commit.[52] Joint tort
demands factual, legal and equitable justification, without which
feasors are all the persons who command, instigate, promote,
the award is a conclusion without a premise, its basis being
encourage, advise, countenance, cooperate in, aid or abet the
improperly left to speculation and conjecture. In all events, the
commission of a tort, or who approve of it after it is done, if done for
court must explicitly state in the text of the decision, and not only in
their benefit.[53] Thus, AMEC correctly anchored its cause of action
the decretal portion thereof, the legal reason for the award of attorneys
against FBNI on Articles 2176 and 2180 of the Civil Code.
fees.[51] (Emphasis supplied)
As operator of DZRC-AM and employer of Rima and Alegre,
While it mentioned about the award of attorneys fees by stating FBNI is solidarily liable to pay for damages arising from the libelous
that it lies within the discretion of the court and depends upon the broadcasts. As stated by the Court of Appeals, recovery for defamatory
circumstances of each case, the Court of Appeals failed to point out statements published by radio or television may be had from
any circumstance to justify the award. the owner of the station, a licensee, the operator of the station, or a
person who procures, or participates in, the making of the defamatory
IV.
statements.[54] An employer and employee are solidarily liable for a
Whether FBNI is solidarily liable with Rima and Alegre
defamatory statement by the employee within the course and scope of
for moral damages, attorneys fees
his or her employment, at least when the employer authorizes or
and costs of suit
ratifies the defamation.[55] In this case, Rima and Alegre were clearly
performing their official duties as hosts of FBNIs radio program Expos
FBNI contends that it is not solidarily liable with Rima and Alegre when they aired the broadcasts. FBNI neither alleged nor proved that
for the payment of damages and attorneys fees because it exercised Rima and Alegre went beyond the scope of their work at that time.
due diligence in the selection and supervision of its employees, There was likewise no showing that FBNI did not authorize and ratify
particularly Rima and Alegre. FBNI maintains that its broadcasters, the defamatory broadcasts.
including Rima and Alegre, undergo a very regimented process before
Moreover, there is insufficient evidence on record that FBNI
they are allowed to go on air. Those who apply for broadcaster are
exercised due diligence in the selection and supervision of its
subjected to interviews, examinations and an apprenticeship program.
employees, particularly Rima and Alegre. FBNI merely showed that it
exercised diligence in the selection of its broadcasters without
introducing any evidence to prove that it observed the same diligence
in the supervision of Rima and Alegre. FBNI did not show how it
exercised diligence in supervising its broadcasters. FBNIs alleged
constant reminder to its broadcasters to observe truth, fairness and
objectivity and to refrain from using libelous and indecent language is
not enough to prove due diligence in the supervision of its
broadcasters. Adequate training of the broadcasters on the industrys
code of conduct, sufficient information on libel laws, and continuous
evaluation of the broadcasters performance are but a few of the many
ways of showing diligence in the supervision of broadcasters.
FBNI claims that it has taken all the precaution in the selection of
Rima and Alegre as broadcasters, bearing in mind their qualifications.
However, no clear and convincing evidence shows that Rima and
Alegre underwent FBNIs regimented process of application.
Furthermore, FBNI admits that Rima and Alegre had deficiencies in
their KBP accreditation,[56] which is one of FBNIs requirements before
it hires a broadcaster. Significantly, membership in the KBP, while
voluntary, indicates the broadcasters strong commitment to observe the
broadcast industrys rules and regulations. Clearly, these circumstances
show FBNIs lack of diligence in selecting and supervising Rima and
Alegre. Hence, FBNI is solidarily liable to pay damages together with
Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the
Decision of 4 January 1999 and Resolution of 26 January 2000 of the
Court of Appeals in CA-G.R. CV No. 40151 with the
MODIFICATION that the award of moral damages is reduced
from P300,000 to P150,000 and the award of attorneys fees is deleted.
Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-
Santiago, and Azcuna, JJ., concur.
MANILA ELECTRIC COMPANY,

Petitioners,
- versus -
Electric Company (Meralco) is a utility company supplying electricity
T.E.A.M. ELECTRONICS
in the Metro Manila area.
CORPORATION, TECHNOLOGY
ELECTRONICS ASSEMBLY and
MANAGEMENT PACIFIC Petitioner and NS Electronics (Philippines), Inc., the
CORPORATION; and ULTRA predecessor-in-interest of respondent TEC, were parties to two
ELECTRONICS INSTRUMENTS,
INC., separate contracts denominated as Agreements for the Sale of Electric

Energy under the following account numbers: 09341-1322-


Respondents.
16[3] and 09341-1812-13.[4]Under the aforesaid agreements, petitioner
DECISION
undertook to supply TECs building known as Dyna Craft International
NACHURA, J.:
Manila (DCIM) located at Electronics Avenue, Food Terminal
This is a petition for review on certiorari under Rule 45 of the Complex, Taguig, Metro Manila, with electric power. Another contract
Rules of Court seeking the reversal of the Decision[1] of the Court of was entered into for the supply of electric power to TECs NS Building
Appeals (CA) dated June 18, 1997 and its under Account No. 19389-0900-10.
Resolution[2] dated December 3, 1997 in CA-G.R. CV No. 40282
In September 1986, TEC, under its former name National
denying the appeal filed by petitioner Manila Electric Company.
Semi-Conductors (Phils.) entered into a Contract of Lease[5] with
The facts of the case, as culled from the records, are as follows: respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the

formers DCIM building for a period of five years or until September


Respondent T.E.A.M. Electronics Corporation (TEC) was
1991. Ultra was, however, ejected from the premises on February 12,
formerly known as NS Electronics (Philippines), Inc. before 1982 and
1988 by virtue of a court order, for repeated violation of the terms and
National Semi-Conductors (Phils.) before 1988. TEC is wholly owned
conditions of the lease contract.
by respondent Technology Electronics Assembly and Management

Pacific Corporation (TPC). On the other hand, petitioner Manila On September 28, 1987, a team of petitioners inspectors

conducted a surprise inspection of the electric meters installed at the


DCIM building, witnessed by Ultras[6] representative, Mr. Willie but the latter refused to heed the demand. Hence, TEC filed a

Abangan. The two meters covered by account numbers 09341-1322-16 complaint on May 27, 1988 before the Energy Regulatory Board
and 09341-1812-13, were found to be allegedly tampered with and did (ERB) praying that electric power be restored to the DCIM

not register the actual power consumption in the building. The results building.[11] The ERB immediately ordered the reconnection of the

of the inspection were reflected in the Service Inspection service but petitioner complied with it only on October 12, 1988 after

Reports[7] prepared by the team. TEC paid P1,000,000.00, under protest. The complaint before the ERB

was later withdrawn as the parties deemed it best to have the issues
In a letter dated November 25, 1987, petitioner informed TEC
threshed out in the regular courts. Prior to the reconnection, or on June
of the results of the inspection and demanded from the latter the
7, 1988, petitioner conducted a scheduled inspection of the questioned
payment of P7,040,401.01 representing its unregistered consumption
meters and found them to have been tampered anew.[12]
from February 10, 1986 until September 28, 1987, as a result of the

alleged tampering of the meters.[8] TEC received the letters on January Meanwhile, on April 25, 1988, petitioner conducted another

7, 1988. Since Ultra was in possession of the subject building during inspection, this time, in TECs NS Building. The inspection allegedly

the covered period, TECs Managing Director, Mr. Bobby Tan, referred revealed that the electric meters were not registering the correct power

the demand letter to Ultra[9] which, in turn, informed TEC that its consumption. Petitioner, thus, sent a letter dated June 18,

Executive Vice-President had met with petitioners representative. 1988demanding payment of P280,813.72 representing the differential

Ultra further intimated that assuming that there was tampering of the billing.[13] TEC denied petitioners allegations and claim in a letter

meters, petitioners assessment was excessive.[10] For failure of TEC to dated June 29, 1988.[14] Petitioner, thus, sent TEC another letter

pay the differential billing, petitioner disconnected the electricity demanding payment of the aforesaid amount, with a warning that the

supply to the DCIM building on April 29, 1988. electric service would be disconnected in case of continued refusal to
pay the differential billing.[15] To avert the impending disconnection of
TEC demanded from petitioner the reconnection of electrical
electrical service, TEC paid the above amount, under protest.[16]
service, claiming that it had nothing to do with the alleged tampering
WHEREFORE, judgment is hereby rendered in this
On January 13, 1989, TEC and TPC filed a complaint for case in favor of the plaintiffs and against the defendants
damages against petitioner and Ultra[17] before the Regional Trial as follows:

Court (RTC) of Pasig. The case was raffled to Branch 162 and was

docketed as Civil Case No. 56851.[18] Upon the filing of the parties (1) Ordering both defendants
Meralco and ULTRA Electronics
answer to the complaint, pre-trial was scheduled.
Instruments, Inc. to jointly and
severally reimburse plaintiff TEC
At the pre-trial, the parties agreed to limit the issues, as
actual damages in the amount of ONE
follows: MILLION PESOS with legal rate of
interest from the date of the filing of
1. Whether or not the defendant Meralco is
this case on January 19, 1989 until the
liable for the plaintiffs disconnection of electric service
said amount shall have been fully paid;
at DCIM Building.
(2) Ordering defendant Meralco
to pay to plaintiff TEC the amount
2. Whether or not the plaintiff is liable for (sic) of P280,813.72 as actual damages with
the defendant for the differential billings in the amount legal rate of interest also from January
of P7,040,401.01. 19, 1989;

(3) Ordering defendant Meralco


to pay to plaintiff TPC the amount
3. Whether or not the plaintiff is liable to of P150,000.00 as actual damages with
defendant for exemplary damages.[19] interest at legal rate from January 19,
1989;
For failure of the parties to reach an amicable settlement, trial on the
(4) Condemning defendant
merits ensued. On June 17, 1992, the trial court rendered a Decision in Meralco to pay both plaintiffs moral
damages in the amount pf P500,000.00;
favor of respondents TEC and TPC, and against respondent Ultra and
(5) Condemning defendant
petitioner. The pertinent portion of the decision reads:
Meralco to pay both plaintiffs
corrective and/or exemplary damages
in the amount of P200,000.00;
(6) Ordering defendant Meralco
to pay attorneys fees in the amount electric power; and because Ultra manifested to settle the claims of
of P200,000.00 petitioner, the court imposed solidary liability on both Ultra and
petitioner for the payment of the P1,000,000.00.

Costs against defendant Meralco.


Ultra and petitioner appealed to the CA which affirmed the

RTC decision, with a modification of the amount of actual damages


SO ORDERED.[20] and interest thereon. The dispositive portion of the CA decision

dated June 18, 1997, states:


The trial court found the evidence of petitioner insufficient to
WHEREFORE, this Court renders judgment
prove that TEC was guilty of tampering the meter installations. The
affirming in toto the Decision rendered by the trial court
deformed condition of the meter seal and the existence of an opening with the slight modification that the interest at legal rate
shall be computed from January 13, 1989 and that
in the wire duct leading to the transformer vault did not, in themselves,
Meralco shall pay plaintiff T.E.A.M. Electronics
prove the alleged tampering, especially since access to the transformer Corporation and Technology Electronics Assembly and
Management Pacific Corporation the sum
was given only to petitioners employees.[21] The sudden drop in TECs
of P150,000.00 per month for five (5) months for actual
(or Ultras) electric consumption did not, per se, show meter damages incurred when it was compelled to lease a
generator set with interest at the legal rate from the
tampering. The delay in the sending of notice of the results of the
above-stated date.
inspection was likewise viewed by the court as evidence of
SO ORDERED.[24]
inefficiency and arbitrariness on the part of petitioner. More

importantly, petitioners act of disconnecting the DCIM buildings The appellate court agreed with the RTCs conclusion. In addition, it

electric supply constituted bad faith and thus makes it liable for considered petitioner negligent for failing to discover the alleged

damages.[22] The court further denied petitioners claim of differential defects in the electric meters; in belatedly notifying TEC and TPC of

billing primarily on the ground of equitable negligence.[23] Considering the results of the inspection; and in disconnecting the electric power

that TEC and TPC paid P1,000,000.00 to avert the disconnection of without prior notice.
Petitioner now comes before this Court in this petition for review
9. In declaring that petitioner
on certiorari contending that:
MERALCO estopped from claiming any tampering of
The Court of Appeals committed grievous errors and the meters.
decided matters of substance contrary to law and the
10. In finding that the method employed by
rulings of this Honorable Court:
MERALCO to as certain (sic) the correct amount of
1. In finding that the issue in the case is whether there electricity consumed is questionable;
was deliberate tampering of the metering installations at
11. In declaring that MERALCO all throughout
the building owned by TEC.
its dealings with TEC took on an attitude which is
2. In not finding that the issue is: whether or not, based oppressive, wanton and reckless.
on the tampered meters, whether or not petitioner is
12. In declaring that MERALCO acted
entitled to differential billing, and if so, how much.
arbitrarily in inspecting TECs DCIM building and the
3. In declaring that petitioner ME RALCO had the NS building.
burden of proof to show by clear and convincing
13. In declaring that respondents TEC and TPC
evidence that with respect to the tampered meters that
are entitled to the damages which it awarded.
TEC and/or TPC authored their tampering.
14. In not declaring that petitioner is entitled to
4. In finding that petitioner Meralco should not have
the differential bill.
held TEC and/or TPC responsible for the acts of Ultra.
15. In not declaring that respondents are liable
5. In finding that TEC should not be held liable for the
to petitioner for exemplary damages, attorneys fee and
tampering of this electric meter in its DCIM Building.
expenses for litigation.[25]
6. In finding that there was no notice of disconnection.
The petition must fail.
7. In finding that petitioner MERALCO was negligent
in informing TEC of the alleged tampering.
The issues for resolution can be summarized as follows: 1) whether or
8. In making the finding that it is difficult to believe
that when petitioner MERALCO inspected on June 7, not TEC tampered with the electric meters installed at its DCIM and
1988 the meter installations, they were found to be NS buildings; 2) If so, whether or not it is liable for the differential
tampered.
billing as computed by petitioner; and 3) whether or not petitioner was
justified in disconnecting the electric power supply in TECs DCIM The first instance was supposedly discovered on September 28,

building. 1987. The inspector allegedly found the presence of a short circuiting
device and saw that the meter seal was deformed. In addition,
Petitioner insists that the tampering of the electric meters installed at
petitioner, through the Supervising Engineer of its Special Billing
the DCIM and NS buildings owned by respondent TEC has been
Analysis Department,[27] claimed that there was a sudden and
established by overwhelming evidence, as specifically shown by the
unexplainable drop in TECs electrical consumption starting February
shorting devices found during the inspection. Thus, says petitioner,
10, 1986. On the basis of the foregoing, petitioner concluded that the
tampering of the meter is no longer an issue.
electric meters were tampered with.
It is obvious that petitioner wants this Court to revisit the factual
However, contrary to petitioners claim that there was a drastic and
findings of the lower courts. Well-established is the doctrine that under
unexplainable drop in TECs electric consumption during the affected
Rule 45 of the Rules of Court, only questions of law, not of fact, may
period, the Pattern of TECs Electrical Consumption[28] shows that the
be raised before the Court. We would like to stress that this Court is
sudden drop is not peculiar to the said period. Noteworthy is the
not a trier of facts and may not re-examine and weigh anew the
observation of the RTC in this wise:
respective evidence of the parties. Factual findings of the trial court,
In fact, in Account No. 09341-1812-13 (heretofore
especially those affirmed by the Court of Appeals, are binding on this referred as Account/Meter No. 2), as evidenced by
Court.[26] Exhibits 35 and 35-A, there was likewise a sudden drop
of electrical consumption from the year 1984 which
Looking at the record, we note that petitioner claims to have recorded an average 141,300 kwh/month to 1985 which
recorded an averagekwh/month at 87,600 or a
discovered three incidences of meter-tampering; twice in the DCIM difference-drop of 53,700 kwh/month; from 1985s
building on September 28, 1987 and June 7, 1988; and once in the NS 87,600 recorded consumption, the same dropped to
18,600 kwh/month or a difference-drop of 69,000
building on April 24, 1988. kwh/month. Surely, a drop of 53,700 could be equally
categorized as a sudden drop amounting to 69,000
which, incidentally, the Meralco claimed as
unexplainable. x x x.[29]
The witnesses for petitioner who testified on the alleged Even more revealing is the fact that TECs meters registered

tampering of the electric meters, declared that tampering is committed 9,300 kwh and 19,200 kwh consumption on the first and second
by consumers to prevent the meter from registering the correct amount accounts, respectively, a month prior to the inspection. On the first

of electric consumption, and result in a reduced monthly electric bill, month after the meters were corrected, TECs electric

while continuing to enjoy the same power supply. Only the registration consumption registered at 9,300 kwh and 22,200 kwh on the respective

of actual electric energy consumption, not the supply of electricity, is accounts. These figures clearly show that there was no palpably drastic

affected when a meter is tampered with.[30] The witnesses claimed that difference between the consumption before and after the inspection,

after the inspection, the tampered electric meters were corrected, so casting a cloud of doubt over petitioners claim of meter-tampering.

that they would register the correct consumption of TEC. Logically, Indeed, Ultras explanation that the corporation was losing; thus, it had

then, after the correction of the allegedly tampered meters, the lesser consumption of electric power appear to be the more plausible

customers registered consumption would go up. reason for the drop in electric consumption.

In this case, the period claimed to have been affected by the Petitioner likewise claimed that when the subject meters were

tampered electric meters is from February 1986 until September again inspected on June 7, 1988, they were found to have been

1987.Based on petitioners Billing Record[31] (for the DCIM building), tampered anew. The Court notes that prior to the inspection, TEC was

TECs monthly electric consumption on Account No. 9341-1322-16 informed about it; and months before the inspection, there was an

was between 4,500 and 27,000 kwh.[32] Account No. 9341-1812-13 unsettled controversy between TEC and petitioner, brought about by

showed a monthly consumption between 9,600 and 34,200 kwh.[33] It the disconnection of electric power and the non-payment of differential

is interesting to note that, after correction of the allegedly tampered billing.We are more disposed to accept the trial courts conclusion that

meters, TECs monthly electric consumption from October 1987 to it is hard to believe that a customer previously apprehended for
February 1988 (the last month that Ultra occupied the DCIM building) tampered meters and assessed P7 million would further jeopardize

was between 8,700 and 24,300 kwh in its first account, and 16,200 to itself in the eyes of petitioner.[34] If it is true that there was evidence of

46,800 kwh on the second account. tampering found on September 28, 1987 and again on June 7, 1988,
the better view would be that the defective meters were not actually In view of the negative finding on the alleged tampering of electric

corrected after the first inspection. If so, then Manila Electric meters on TECs DCIM and NS buildings, petitioners claim of
Company v. Macro Textile Mills Corporation[35] would apply, where differential billing was correctly denied by the trial and appellate

we said that we cannot sanction a situation wherein the defects in the courts. With greater reason, therefore, could petitioner not exercise the

electric meter are allowed to continue indefinitely until suddenly, the right of immediate disconnection.

public utilities demand payment for the unrecorded electricity utilized


The law in force at the time material to this controversy was
when they could have remedied the situation immediately. Petitioners
Presidential Decree (P.D.) No. 401[39] issued on March 1, 1974.[40] The
failure to do so may encourage neglect of public utilities to the
decree penalized unauthorized installation of water, electrical or
detriment of the consuming public. Corollarily, it must be underscored
telephone connections and such acts as the use of tampered electrical
that petitioner has the imperative duty to make a reasonable and proper
meters. It was issued in answer to the urgent need to put an end to
inspection of its apparatus and equipment to ensure that they do not
illegal activities that prejudice the economic well-being of both the
malfunction, and the due diligence to discover and repair defects
companies concerned and the consuming public.[41] P.D. 401 granted
therein. Failure to perform such duties constitutes negligence.[36] By
the electric companies the right to conduct inspections of electric
reason of said negligence, public utilities run the risk of forfeiting
meters and the criminal prosecution[42] of erring consumers who were
amounts originally due from their customers.[37]
found to have tampered with their electric meters. It did not expressly

As to the alleged tampering of the electric meter in TECs NS building, provide for more expedient remedies such as the charging of

suffice it to state that the allegation was not proven, considering that differential billing and immediate disconnection against erring

the meters therein were enclosed in a metal cabinet the metal seal of consumers. Thus, electric companies found a creative way of availing

which was unbroken, with petitioner having sole access to the said themselves of such remedies by inserting into their service contracts
meters.[38] (or agreements for the sale of electric energy) a provision for

differential billing with the option of disconnection upon non-payment

by the erring consumer. The Court has recognized the validity of such
stipulations.[43] However, recourse to differential billing with also be actually proven with a reasonable degree of certainty, premised

disconnection was subject to the prior requirement of a 48-hour written upon competent proof or the best evidence obtainable.[45]
notice of disconnection.[44]
Respondent TEC sufficiently established, and petitioner in fact

Petitioner, in the instant case, resorted to the remedy of disconnection admitted, that the former paid P1,000,000.00 and P280,813.72 under

without prior notice. While it is true that petitioner sent a demand letter protest, the amounts representing a portion of the latters claim of

to TEC for the payment of differential billing, it did not include any differential billing. With the finding that no tampering was committed

notice that the electric supply would be disconnected. In fine, and, thus, no differential billing due, the aforesaid amounts should be

petitioner abused the remedies granted to it under P.D. 401 and returned by petitioner, with interest, as ordered by the Court of

Revised General Order No. 1 by outrightly depriving TEC of electrical Appeals and pursuant to the guidelines set forth by the Court.[46]

services without first notifying it of the impending


However, despite the appellate courts conclusion that no tampering
disconnection. Accordingly, the CA did not err in affirming the RTC
was committed, it held Ultra solidarily liable with petitioner
decision.
for P1,000,000.00, only because the former, as occupant of the

As to the damages awarded by the CA, we deem it proper to modify building, promised to settle the claims of the latter. This ruling is

the same. Actual damages are compensation for an injury that will put erroneous.Ultras promise was conditioned upon the finding of defect

the injured party in the position where it was before the injury. They or tampering of the meters. It did not acknowledge any culpability and

pertain to such injuries or losses that are actually sustained and liability, and absent any tampered meter, it is absurd to make the

susceptible of measurement. Except as provided by law or by lawful occupant liable. It was petitioner who received the P1 million;

stipulation, a party is entitled to adequate compensation only for such thus, it alone should be held liable for the return of the amount.

pecuniary loss as is duly proven. Basic is the rule that to recover actual
TEC also sufficiently established its claim for the
damages, not only must the amount of loss be capable of proof; it must
reimbursement of the amount paid as rentals for the generator set it

was constrained to rent by reason of the illegal disconnection of


electrical service. The official receipts and purchase orders submitted experience physical suffering or sentiments like wounded feelings,

by TEC as evidence sufficiently show that such rentals were indeed serious anxiety, mental anguish and moral shock. The only exception
made. However, the amount of P150,000.00 per month for five to this rule is when the corporation has a reputation that is debased,

months, awarded by the CA, is excessive. Instead, a total sum resulting in its humiliation in the business realm.[51] But in such a case,

of P150,000.00, as found by the RTC, is proper. it is imperative for the claimant to present proof to justify the award. It

is essential to prove the existence of the factual basis of the damage


As to the payment of exemplary damages and attorneys fees,
and its causal relation to petitioners acts.[52] In the present case, the
we find no cogent reason to disturb the same. Exemplary damages are
records are bereft of any evidence that the name or reputation of
imposed by way of example or correction for the public good in
TEC/TPC has been debased as a result of petitioners acts. Besides, the
addition to moral, temperate, liquidated, or compensatory
trial court simply awarded moral damages in the dispositive portion of
damages.[47] In this case, to serve as an example that before a
its decision without stating the basis thereof.
disconnection of electrical supply can be effected by a public utility,

the requisites of law must be complied with we affirm the award WHEREFORE, the petition is DENIED. The Decision of the

of P200,000.00 as exemplary damages. With the award of exemplary Court of Appeals in CA-G.R. CV No. 40282 dated June 18, 1997 and

damages, the award of attorneys fees is likewise proper, pursuant to its Resolution dated December 3, 1997 are AFFIRMED with the

Article 2208[48] of the Civil Code. It is obvious that TEC needed the following MODIFICATIONS: (1) the award of P150,000.00 per

services of a lawyer to argue its cause through three levels of the month for five months as reimbursement for the rentals of the

judicial hierarchy. Thus, the award of P200,000.00 is in order.[49] generator set is REDUCED to P150,000.00; and (2) the award

of P500,000.00 as moral damages is hereby DELETED.


We, however, deem it proper to delete the award of moral

damages. TECs claim was premised allegedly on the damage to its SO ORDERED.
goodwill and reputation.[50] As a rule, a corporation is not entitled to

moral damages because, not being a natural person, it cannot


G.R. No. L-67626 April 18, 1989 (13) trucks for use in its business to be paid out of a loan the
corporation may secure from any lending institution. 5
JOSE REMO, JR., petitioner,
vs. Feliciano Coprada, as President and Chairman of Akron, purchased
THE HON. INTERMEDIATE APPELLATE COURT and E.B. thirteen trucks from private respondent on January 25, 1978 for and in
MARCHA TRANSPORT COMPANY, INC., represented by consideration of P525,000.00 as evidenced by a deed of absolute
APIFANIO B. MARCHA, respondents. sale. 6 In a side agreement of the same date, the parties agreed on a
downpayment in the amount of P50,000.00 and that the balance of
Orbos, Cabusora, Dumlao & Sta. Ana for petitioner. P475,000.00 shall be paid within sixty (60) days from the date of the
execution of the agreement. The parties also agreed that until said
balance is fully paid, the down payment of P50,000.00 shall accrue as
rentals of the 13 trucks; and that if Akron fails to pay the balance
GANCAYCO, J.: within the period of 60 days, then the balance shall constitute as a
chattel mortgage lien covering said cargo trucks and the parties may
A corporation is an entity separate and distinct from its stockholders. allow an extension of 30 days and thereafter private respondent may
While not in fact and in reality a person, the law treats a corporation as ask for a revocation of the contract and the reconveyance of all said
though it were a person by process of fiction or by regarding it as an trucks. 7
artificial person distinct and separate from its individual
stockholders. 1 The obligation is further secured by a promissory note executed by
Coprada in favor of Akron. It is stated in the promissory note that the
However, the corporate fiction or the notion of legal entity may be balance shall be paid from the proceeds of a loan obtained from the
disregarded when it "is used to defeat public convenience, justify Development Bank of the Philippines (DBP) within sixty (60)
wrong, protect fraud, or defend crime" in which instances "the law will days. 8 After the lapse of 90 days, private respondent tried to collect
regard the corporation as an association of persons, or in case of two from Coprada but the latter promised to pay only upon the release of
corporations, will merge them into one." The corporate fiction may the DBP loan. Private respondent sent Coprada a letter of demand
also be disregarded when it is the "mere alter ego or business conduit dated May 10, 1978. 9 In his reply to the said letter, Coprada reiterated
of a person." 2 There are many occasions when this Court pierced the that he was applying for a loan from the DBP from the proceeds of
corporate veil because of its use to protect fraud and to justify which payment of the obligation shall be made. 10
wrong. 3 The herein petition for review of a. resolution of the
Intermediate Appellate Court dated February 8, 1984 seeking the Meanwhile, two of the trucks were sold under a pacto de retro sale to a
reversal thereof and the reinstatement of its earlier decision dated June certain Mr. Bais of the Perpetual Loans and Savings Bank at Baclaran.
30, 1983 in AC-G.R. No. 68496-R 4 calls for the application of the The sale was authorized by a board resolution made in a meeting held
foregoing principles. on March 15, 1978. 11

In the latter part of December, 1977 the board of directors of Akron Upon inquiry, private respondent found that no loan application was
Customs Brokerage Corporation (hereinafter referred to as Akron), ever filed by Akron with DBP. 12
composed of petitioner Jose Remo, Jr., Ernesto Bañares, Feliciano
Coprada, Jemina Coprada, and Dario Punzalan with Lucia Lacaste as In the meantime, Akron paid rentals of P500.00 a day pursuant to a
Secretary, adopted a resolution authorizing the purchase of thirteen subsequent agreement, from April 27, 1978 (the end of the 90-day
period to pay the balance) to May 31, 1978. Thereafter, no more rental After an ex parte reception of the evidence of the private respondent, a
payments were made. decision was rendered on October 28, 1980, the dispositive part of
which reads as follows:
On June 17, 1978, Coprada wrote private respondent begging for a
grace period of until the end of the month to pay the balance of the Finding the evidence sufficient to prove the case of the plaintiff,
purchase price; that he will update the rentals within the week; and in judgment is hereby rendered in favor of the plaintiff and against the
case he fails, then he will return the 13 units should private respondent defendants, ordering them jointly and severally to pay;
elect to get back the same. 13 Private respondent, through counsel,
wrote Akron on August 1, 1978 demanding the return of the 13 trucks a — the purchase price of the trucks in the amount of
and the payment of P25,000.00 back rentals covering the period from P525,000.00 with ... legal rate (of interest) from the
June 1 to August 1, 1978. 14 filing of the complaint until the full amount is paid;

Again, Coprada wrote private respondent on August 8, 1978 asking for b — rentals of Bagbag property at P1,000.00 a month
another grace period of up to August 31, 1978 to pay the balance, from August 1978 until the premises is cleared of the
stating as well that he is expecting the approval of his loan application said trucks;
from a certain financing company, and that ten (10) trucks have been
returned to Bagbag, Novaliches. 15 On December 9, 1978, Coprada c — attorneys fees of P10,000.00, and
informed private respondent anew that he had returned ten (10) trucks
to Bagbag and that a resolution was passed by the board of directors d — costs of suit.
confirming the deed of assignment to private respondent of P475,000
from the proceeds of a loan obtained by Akron from the State The P50,000.00 given as down payment shall pertain as rentals of the
Investment House, Inc. 16 trucks from June 1 to August 1, 1978 which is P25,000.00 (see
demand letter of Atty. Aniano Exhibit "T") and the remaining
In due time, private respondent filed a compliant for the recovery of P25,000.00 shall be from August 1, 1978 until the trucks are removed
P525,000.00 or the return of the 13 trucks with damages against Akron totally from the place." 17
and its officers and directors, Feliciano Coprada, Dario D. Punzalan,
Jemina Coprada, Lucia Lacaste, Wilfredo Layug, Arcadio de la Cruz, A motion for new trial filed by petitioner was denied so he appealed to
Francisco Clave, Vicente Martinez, Pacifico Dollario and petitioner the then Intermediate Appellate Court (IAC) wherein in due course a
with the then Court of First Instance of Rizal. Only petitioner decision was rendered on June 30, 1 983 setting aside the said decision
answered the complaint denying any participation in the transaction as far as petitioner is concemed. However, upon a motion for
and alleging that Akron has a distinct corporate personality. He was, reconsideration filed by private respondent dent, the IAC, in a
however, declared in default for his failure to attend the pre-trial. resolution dated February 8,1984, set aside the decision dated June 30,
1983. The appellate court entered another decision affirming the
In the meanwhile, petitioner sold all his shares in Akron to Coprada. It appealed decision of the trial court, with costs against petitioner.
also appears that Akron amended its articles of incorporation thereby
changing its name to Akron Transport International, Inc. which Hence, this petition for review wherein petitioner raises the following
assumed the liability of Akron to private respondent. issues:
I. The Intermediate Appellate Court (IAC) erred in As to the sale through pacto de retro of the two units to a third person
disregarding the corporate fiction and in holding the by the corporation by virtue of a board resolution, petitioner asserts
petitioner personally liable for the obligation of the that he never signed said resolution. Be that as it may, the sale is not
Corporation which decision is patently contrary to law inherently fraudulent as the 13 units were sold through a deed of
and the applicable decision thereon. absolute sale to Akron so that the corporation is free to dispose of the
same. Of course, it was stipulated that in case of default in payment to
II. The Intermediate Appellate Court (IAC) committed private respondent of the balance of the consideration, a chattel
grave error of law in its decision by sanctioning the mortgage lien shag be constituted on the 13 units. Nevertheless, said
merger of the personality of the corporation with that of mortgage is a prior lien as against the pacto de retro sale of the 2 units.
the petitioner when the latter was held liable for the
corporate debts. 18 As to the amendment of the articles of incorporation of Akron thereby
changing its name to Akron Transport International, Inc., petitioner
We reverse. alleges that the change of corporate name was in order to include
trucking and container yard operations in its customs brokerage of
The environmental facts of this case show that there is no cogent basis which private respondent was duly informed in a letter. 19Indeed, the
to pierce the corporate veil of Akron and hold petitioner personally new corporation confirmed and assumed the obligation of the old
liable for its obligation to private respondent. While it is true that in corporation. There is no indication of an attempt on the part of Akron
December, 1977 petitioner was still a member of the board of directors to evade payment of its obligation to private respondent.
of Akron and that he participated in the adoption of a resolution
authorizing the purchase of 13 trucks for the use in the brokerage There is the fact that petitioner sold his shares in Akron to Coprada
business of Akron to be paid out of a loan to be secured from a lending during the pendency of the case. Since petitioner has no personal
institution, it does not appear that said resolution was intended to obligation to private respondent, it is his inherent right as a stockholder
defraud anyone and more particularly private respondent. It was to dispose of his shares of stock anytime he so desires.
Coprada, President and Chairman of Akron, who negotiated with said
respondent for the purchase of 13 cargo trucks on January 25, 1978. It Mention is also made of the alleged "dumping" of 10 units in the
was Coprada who signed a promissory note to guarantee the payment premises of private respondent at Bagbag, Novaliches which to the
of the unpaid balance of the purchase price out of the proceeds of a mind of the Court does not prove fraud and instead appears to be an
loan he supposedly sought from the DBP. The word "WE' in the said attempt on the part of Akron to attend to its obligations as regards the
promissory note must refer to the corporation which Coprada said trucks. Again petitioner has no part in this.
represented in the execution of the note and not its stockholders or
directors. Petitioner did not sign the said promissory note so he cannot If the private respondent is the victim of fraud in this transaction, it has
be personally bound thereby. not been clearly shown that petitioner had any part or participation in
the perpetration of the same. Fraud must be established by clear and
Thus, if there was any fraud or misrepresentation that was foisted on convincing evidence. If at all, the principal character on whom fault
private respondent in that there was a forthcoming loan from the DBP should be attributed is Feliciano Coprada, the President of Akron,
when it fact there was none, it is Coprada who should account for the whom private respondent dealt with personally all through out.
same and not petitioner. Fortunately, private respondent obtained a judgment against him from
the trial court and the said judgment has long been final and executory.
WHEREFORE, the petition is GRANTED. The questioned resolution G.R. No. 103372 June 22, 1992
of the Intermediate Appellate Court dated February 8,1984 is hereby
set aside and its decision dated June 30,1983 setting aside the decision EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P.
of the trial court dated October 28, 1980 insofar as petitioner is DE GUZMAN, petitioner,
concemed is hereby reinstated and affirmed, without costs. vs.
HONARABLE COURT OF APPEALS (17th Division), ( Republic
SO ORDERED. of the Philippines), UNIVERSITY OF THE
PHILIPPINES, respondents.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

CRUZ, J.:

Petitioner EPG Construction Co., Inc. and the University of the


Philippines, herein private respondent, entered into a contract for the
construction of the UP Law Library Building for the stipulated price of
P7,545,000.00. The agreement included the following provision:

ARTICLE XI

GUARANTEE

CONTRACTOR guarantees that the work completed


under the contract and any change order, thereto, shall
be in accordance with the plans and specification
prepared by ARCHITECT, and shall conform to the
specific requirements, performances, and capacities
required by the contract, and shall be free from
imperfect workmanship or materials. CONTRACTOR
shall repair at his own cost and expenses for a period of
one (1) year from date of substantial completion and
acceptance of the work by the OWNER, all the work
covered under the contract and change orders that may
prove defective except maintenance works. The
CONTRACTOR shall be liable in accordance with Art.
1723 of the Civil Code in case, within 15 years from
completion of the project, the building collapses on
account of defects in the construction or the use of
materials of inferior quality furnished by him or due to After trial, judgment was rendered by Judge Antonio P. Solano
any violation of the terms of contract. requiring both defendants jointly and severally to pay the plaintiff
P190,000.00 as actual damages, P50,000.00 as liquidated damages,
Upon its completion, the building was formally turned over by EPG to P10,000.00 as attorney's fees, and costs.
the private respondent. UP issued a certification of acceptance dated
January 13, 1983, reading as follows: The petitioners appealed to the Court of Appeals, which sustained the
trial court. 1 They then came to this Court to fault the respondent court
This is to certify that the General Construction Work of for not holding that: 1) UP was estopped by its certificate of
the College of Law Library Annex Building, University acceptance from imputing liability to EPG for the defects; 2) the
of the Philippines, Diliman, Quezon City, has been defects were due to force majeure or fortuitous event; and 3)
satisfactorily completed as per plans and specifications Emmanuel de Guzman has a separate personality from that of EPG
as of January 11, 1983 without any defects whatsoever Construction Co., Inc.
and therefore accepted.
The petitioners argue that by issuing the certificate of acceptance, UP
Release of the 10% retention is hereby recommended in waived the guarantee provision and is now estopped from invoking it.
favor of EPG Construction, Inc. The argument is absurd. All UP certified to was that the building was
in good condition at the time it was turned over to it on January 13,
Sometime in July, 1983, the private respondent complained to the 1983. It did not thereby relieve the petitioners of liability for any
petitioner that 6 air-conditioning units on the third floor of the building defect that might arise or be discovered later during the one-year
were not cooling properly. After inspection of the equipment, EPG period of the guarantee. Any other interpretation would make the
agreed to shoulder the expenses for their repair, including labor and guarantee provision useless to begin with as it would have
materials, in the amount of P38.000.00. automatically become functus officio with the turn-over of the
construction.
For whatever reason, the repair was never undertaken. UP repeated its
complaints to EPG, which again sent its representatives to assess the The petitioners bolster their argument by quoting Article 1719 of the
defects. Finally, it made UP a written offer to repair the system for Civil Code thus, "Acceptance of the work by the employer relieves the
P194,000.00. contractor of liability . . . " and stopping there. The Article reads in full
as follows:
UP insisted that EPG was obligated to repair the defects at its own
expense under the guarantee provision in their contract. EPG Art. 1719. Acceptance of the work by the employer
demurred. UP then contracted with another company, which repaired relieves the contractor of liability for any defect in the
the defects for P190,000.00. work, unless:

The private respondent subsequently demanded from EPG (1) The defect is hidden and the employer is not, by his
reimbursement of the said amount plus an equal sum as liquidated special knowledge, expected to recognize the same; or
damages. When the demand was rejected, UP sued EPG and its
president, Emmanuel P. de Guzman, in the Regional Trial Court of (2) The employer expressly reserves his rights against
Quezon City. De Guzman moved to dismiss the complaint as to him the contractor by reason of the defect.
for lack of a cause of action, but the motion was denied.
The exceptions were omitted by the petitioners for obvious reasons. company are its own responsibility and there is no reason why any
The defects complained against were hidden and the employer was not liability arising from such acts should be ascribed to him. Thus:
expected to recognize them at the time the work was accepted.
Moreover, there was an express reservation by UP of its right to hold It is a doctrine well-established and obtains both at law
the contractor liable for the defects during a period of one year. and in equity that a corporation is a distinct legal entity
to be considered as separate and apart from the
The petitioners' contention that the defects were caused by force individual stockholders or members who compose it,
majeure or fortuitous event as a result of the frequent brown-outs in and is not affected by the personal rights, obligations
Metro Manila is not meritorious. The Court is not prepared to accept and transactions of its stockholders or members. 3
that the recurrent power cut-offs can be classified as force majeure or a
fortuitous event, We agree that the real cause of the problem, The trial court did not explain why Emmanuel de Guzman was held
according to the petitioners' own subcontractor, was poor solidarity liable with EPG Construction Co., Inc., and neither did the
workmanship, as discovered upon inspection of the cooling system, respondent court when it affirmed the appealed decision, In its
Among the detects noted were improper interlocking of the entire Comment on the present petition, UP also did not refute the petitioners'
electrical system in all the six units; wrong specification of the time argument and simply passed upon it sub silentio although the matter
delay relay, also in all the six units; incorrect wiring connections on was squarely raised and discussed in the petition.
the oil pressure switches; improper setting of the Hi and Lo pressure
switches; and many missing parts like bolts and screws of panels, and Notably, when Emmanuel de Guzman moved to dismiss the complaint
the compressor terminal insulation, and the terminal screws of a circuit as to him, UP said in its opposition to the motion that it was suing him
breaker. 2 "in his official capacity and not in his personal capacity." His inclusion
as President of the company was therefore superfluous, as De Guzman
Curiously, it has not been shown that the cooling system in buildings correctly contended, because his acts as such were corporate acts
within the same area have been similarly damaged by the power cut- imputable to EPG itself as his principal. It is settled that;
offs. The brown-outs have become an intolerable annoyance, but they
cannot excuse all contractual irregularities, including the petitioners' A corporation is invested by law with a personality
shortcomings. separate and distinct from those of the persons
composing it as well as from that of any other entity to
The petitioners also claim that the breakdown of the cooling system which it may be related. Mere ownership by a single
was caused by the failure of UP to do maintenance work thereon. We stockholder or by another corporation of all or nearly all
do not see how mere maintenance work could have corrected the of the capital stock of a corporation is not of itself
above-mentioned defects. At any rate, whether the repairs in the air- sufficient ground for disregarding the separate
conditioning system can be considered mere maintenance work is a corporate personality. The general manager of a
factual issue. The resolution thereof by the lower courts is binding corporation therefore should not be made personally
upon this Court in the absence of a clear showing that it comes under answerable for the payment of the employee's
the accepted exceptions to the rule. There is no such showing here. backwages unless he had acted maliciously or in bad
faith in terminating the services of the employee. 4
The final point of the petition is that Emmanuel P. de Guzman has a
separate legal personality from EPG Construction Co., Inc. and should The exception noted is where the official "had acted maliciously or in
not be held solidarity liable with it. He stresses that the acts of the bad faith," in which event he may be made personally liable for his
own act. That exception is not applicable in the case at bar, because it
has not been proved that De Guzman acted maliciously or in bad faith
when, as President of EPG, he sought to protect its interests and
resisted UP's claims. Whatever damage was caused to UP as a result of
his acts is the sole responsibility of EPG even though De Guzman was
its principal officer and controlling stockholder.

In sum, we hold that the lower court did not err in holding EPG liable
for the repair of the air-conditioning system at its expense pursuant to
the guarantee provision in the construction contract with UP. However,
Emmanuel de Guzman is not solidarily liable with it, having acted on
its behalf within the scope of his authority and without any
demonstrated malice or bad faith.

WHEREFORE, the appealed decision is AFFIRMED but with the


modification that EPG Construction Co., Inc. shall be solely liable for
the damages awarded in favor of the University of the Philippines. It is
so ordered.

Griño-Aquino, Medialdea and Bellosillo, JJ., concur.


[G.R. No. 124950. May 19, 1998] Upon the resolution of the bargaining deadlock in October of
1992, a CBA was concluded between API and FFW. The contract was
signed on 30 October 1992 by the parties. Respondent Boaquina was
directed to report back since her previous assignment pertained to the
ASIONICS PHILIPPINES, INC. and/or FRANK YIH, petitioners, issuance of raw materials needed for the production of electronic items
vs. NATIONAL LABOR RELATIONS COMMISSION, being ordered by Indala, one of API's client which promptly resumed
YOLANDA BOAQUINA, and JUANA its business with API. On the other hand, Juana Gayola, among other
GAYOLA, respondents. employees, could not be recalled forthwith because the CP Clare/Theta
J account, where she was assigned as the production operator, had yet
RESOLUTION to renew its production orders.
VITUG, J.: Inasmuch as its business activity remained critical, API was
constrained to implement a company-wide retrenchment affecting one
In this special civil action of certiorari, petitioners Asionics hundred five (105) employees from a work force that otherwise
Philippines, Inc. (API), and its President and majority stockholder, totalled three hundred four (304). The selection was based on
Frank Yih, seek to annul and set aside the decision,[1] dated 19 May productivity/performance standards pursuant to the CBA. Yolanda
1996, of the National Labor Relations Commission ("NLRC") which Boaquina was one of those affected by the retrenchment and API,
has ordered, inter alia, that they grant separation pay, computed through its Personnel Manager Beatriz G. Torro, advised her of such
at one-half (1/2) month per year of service, to private respondents fact in its letter of 29 December 1992. In that letter, Boaquina was
Yolanda Boaquina and Juana Gayola.Concomitantly being contested is informed that her services were to be dispensed with effective 31
the subsequent 16th April 1996 resolution[2] of the NLRC denying January 1993[4] although she did not have to render any service for the
petitioners' motion for reconsideration. month of January she being by then already considered to be on leave
API is a domestic corporation engaged in the business of with pay. While Juana Gayola was not supposed to be affected by the
assembling semi-conductor chips and other electronic products mainly retrenchment in view of her high performance rating, her services,
for export.Yolanda Boaquina and Juana Gayola started working for nevertheless, were considered to have been ended on 04 September
API in 1979 and 1988, respectively, as material control clerk and as 1992[5] when she was ordered by API to take an indefinite leave of
production operator.During the third quarter of 1992, API commenced absence.She had not since been recalled.
negotiations with the duly recognized bargaining agent of its Dissatisfied with their union (FFW), Boaquina and
employees, the Federation of Free Workers ("FFW"), for a Collective Gayola, together with some of other co-employees, joined the Lakas
Bargaining Agreement ("CBA"). A deadlock, however, ensued and the ng Manggagawa sa Pilipinas Labor Union ("Lakas Union") where they
union decided to file a notice of strike. Thisevent prompted the two eventually became members of its Board of Directors.
customers of API, Indala and CP Clare Theta J, to thereupon refrain
from sending to API additional kits or materials for assembly. API, On 06 January 1993, Lakas Union filed a notice of strike against
given the circumstance that its assembly line had to thereby grind to a API on the ground of unfair labor practice (ULP) allegedly committed
halt, was forced to suspend operations pursuant to Article 286[3] of the by the latter, specifically, for union busting, termination of union
Labor Code. Private respondents Boaquina and Gayola were among officers/members, harassment and discrimination.[6] A conciliation
the employees asked to take a leave from work. meeting was scheduled for 08 January 1993 by the National
Conciliation and Mediation Board ("NCMB") to address the problem
which meeting, however, was reset to 14 January 1993 for failure of
any representative or member of Lakas Union to appear. On 10 Case No. 00-05-03326 and No. 00-03-01952-93, was assigned to
January 1993, Lakas Union staged a strike. Labor Arbiter Potenciano S. Canizares, Jr.
Claiming that the strike staged by Lakas Union was illegal, API On 22 June 1994, Labor Arbiter Canizares rendered his
on 11 January 1993, brought before the NLRC National Capital decision[9] holding petitioners guilty of illegal dismissal. He ordered
Region Arbitration a petition, docketed NLRC NCR Case No. 00-01- petitioners to pay private respondent Yolanda Boaquina separation pay
00402-93, for declaration of illegality of the strike. Lakas Union of one-half (1/2) month pay for every year of service, plus overtime
countered that their strike was valid and staged as a measure of self- pay, and to reinstate private respondent Juana Gayola with full
preservation and as self-defense against the illegal dismissal of backwages from the time her salaries were withheld from her until her
petitioners aimed at union busting in the guise of a retrenchment actual reinstatement.
program.
The decision of Labor Arbiter Villarente, Jr., and that of Labor
On 23 June 1994, Labor Arbiter Villarente, Jr., to whose sala the Arbiter Canizares were both appealed to the NLRC.
case was raffled, promulgated a decision[7] declaring the strike staged
On 20 April 1995, the Third Division of NLRC promulgated its
by Lakas Union to be illegal. He declared:
resolution[10] which affirmed the finding of Labor Arbiter Villarente,
Jr., that the strike staged by Lakas Union was illegal. On 19 March
WHEREFORE, judgment is hereby rendered declaring that the strike
1996, the same Third Division of NLRC, in the illegal dismissal case,
staged by respondents Federation of Free Workers and the Lakas
rendered a decision[11]modifying the decision of Labor Arbiter
Manggagawa ng Pilipinas on January 10, 1993 and thereafter, was
Canizares by declaring that private respondents were not illegally
ILLEGAL.
dismissed but were validly terminated due to the retrenchment policy
implemented by API. Accordingly, private respondents were awarded
Accordingly, all the registered officers of the two respondent-Unions
separation pay and an additional one (1) month salary in favor of Juana
at the time of the strike are hereby declared to have lost their
Gayola by way of indemnity for petitioner API's failure to properly
employment status (aside from the fact that ten of them earlier
inform her of the retrenchment. The NLRC dismissed the claim of
mentioned had settled their cases amicably with petitioner).
petitioners that private respondents should not be entitled to separation
pay because of their involvement in the strike which was declared
Insofar as the striking members are concerned and who did not settle
illegal .
their cases amicably, their separation from the service of petitioner
API is hereby declared VALID under the company-wide retrenchment On 01 April 1996, petitioners moved for a reconsideration of the
program which was earlier made known to proper authorities. 19th March 1996 NLRC decision; the motion, however, was denied by
the NLRC in its resolution of 16 April 1996.
SO ORDERED.[8]
In this recourse, the following issues have been raised by
petitioners; to wit:
Meanwhile, at the instance of several employees which included
private respondents Boaquina and Gayola, a complaint for illegal
"WHETHER OR NOT PRIVATE RESPONDENTS WHO ARE
dismissal, violation of labor standards and separation pay, as well as
OFFICERS OF THE UNION ARE STILL ENTITLED TO
for recovery of moral and exemplary damages, was filed against API
SEPARATION PAY AND INDEMNITY DESPITE HAVING
and/or Frank Yih before the NLRC National Capital Region
PARTICIPATED IN A STRIKE THAT HAS BEEN DECLARED
Arbitration Branch. The illegal dismissal case, docketed NLRC NCR
ILLEGAL?
"WHETHER OR NOT A STOCKHOLDER/DIRECTOR/OFFICER would have just been terminated outright, without recall. The truth of
OF A CORPORATION CAN BE HELD LIABLE FOR THE the matter is, Boaquina was made to go on leave in September 1992
OBLIGATION OF THE CORPORATION ABSENT ANY PROOF precisely because of the pull-out of CP Clare Theta-J which resulted in
AND FINDING OF BAD FAITH?[12] work shortage. If she was recalled before she was finally retrenched, it
only shows that the company had been trying its best to accommodate
The position advanced by petitioners on the first issue is bereft of the most possible number of employees in its payroll, even given that
merit. It is quite evident that the termination of employment of private it was in dire financial straits. Of course, the company cannot just let
respondents was due to the retrenchment policy adopted by API and the workers go to work and pay them their dues even though there is
not because of the former's union activities. In a letter, dated 29 nothing to do.
December 1992, API itself advised respondent Boaquina that she was
one of those affected by the retrenchment program of the company and Complainant Gayola on the other hand was separated from service
that her services were to be deemed terminated effective 31 January owing to the fact that production totally ceased by virtue of the
1993. In their pleadings submitted to Labor Arbiter Canizares, Jr., in blockade caused by the strike and the pull-out of Asionics last
connection with the illegal dismissal case, petitioners firmly averred customer. In short, the strike aggravated a bad situation by making it
that the services of private respondents were being dispensed with not worse and eventually, the worst possible nightmare for any business
by reason of their union activities but in view of the retrenchment enterprise. There being no work whatsoever to do, complainant
policy of the company. The Solicitor-General correctly pointed out Gayola, like the other employees, had to be terminated from
the admissions made by petitioners; thus: work.[13] (italized portions found in the text)

The fact is, complainant Boaquina was in fact part of the first batch of The decision of Labor Arbiter Villarente, Jr., declaring private
retrenchees. She was duly notified of her retrenchment, as well as the respondents to have lost their employment status due to their
proper labor authorities.Ms. Boaquina alleged in her position participation in an illegal strike is of no really significance to
paper/affidavit that: petitioners. It should suffice to say, as so aptly observed by the NLRC,
that the retrenchment of private respondents has, in fact, preceded the
[O]n September 12, 1992, I was illegally laid-off for no reason that I declaration of strike.
know other than my union activities. I was recalled on October 6, 1992
It is, instead, on the issue of joint and solidary liability of
and again I was laid-off in a memorandum of January 4, 1993 effective
petitioner Frank Yih with API that the Court has decided to give due
the end of said month.
course to the instant petition. The court cannot agree with the
Solicitor-General in suggesting that even if Frank Yih had no direct
Complainant Boaquina of course failed, obvious wittingly, to tell her
hand in the dismissal of the respondents he should be personally liable
story truthfully. In the first place, she was never terminated for her
therefor on account alone of his being the President and majority
union activities. Asionics just concluded its CBA with the employees
stockholder of the company. The disquisition by the Court in Santos
bargaining representative. Asionics were also too preoccupied with
vs. NLRC[14] is quite succinct and clear. Thus -
more earthshaking and exigent problems, principally that of getting the
business back on its feet, to concern themselves with potential
"A corporation is a juridical entity with legal personality separate and
(whether real or imagined) entanglements/complications with the
distinct from those acting for and in its behalf and, in general, from the
union, much less of one individual member. Moreover, for academic
people comprising it.The rule is that obligations incurred by the
discussion, let us say that indeed complainant Boaquina was targeted
corporation, acting through its directors, officers and employees, are
for termination due to union activities.Under the circumstances, she
its sole liabilities. Nevertheless, being a mere fiction of law, peculiar The basic rule is still that which can deduced from the Courts
situations or valid grounds can exist to warrant, albeit done sparingly, pronouncement in Sunio vs. National Labor Relations Commission
the disregard of its independent being and the lifting of the corporate (127 SCRA 390), thus:
veil. As a rule, this situation might arise when a corporation is used to
evade a just and due obligation or to justify a wrong, to shield or We come now to the personal liability of petitioner, Sunio, who was
perpetrate fraud, to carry out similar unjustifiable aims or intentions, or made jointly and severally responsible with petitioner company and
as a subterfuge to commit injustice and so circumvent the law." CIPI for the payment of the backwages of private respondents. This is
reversible error. The Assistant Regional Directors Decision failed to
"xxx xxx xxx" disclose the reason why he was made personally liable. Respondents,
however, alleged as grounds thereof, his being the owner of one-half
It is true, there were various cases when corporate officers were (1/2) interest of said corporation, and his alleged arbitrary dismissal of
themselves held by the Court to be personally accountable for the private respondents.
payment of wages and money claims to its employees. In A.C. Ransom
Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under Petitioner Sunio was impleaded in the Complaint in his capacity as
the Minimum Wage Law, the responsible officer of an employer General Manager of petitioner corporation. There appears to be no
corporation could be held personally liable for nonpayment of evidence on record that he acted maliciously or in bad faith in
backwages for `(i)f the policy of the law were otherwise, the terminating the services of private respondents. His act, therefore, was
corporation employer (would) have devious ways for evading payment within the scope of his authority and was a corporate act.
of back wages. In the absence of a clear identification of the officer
directly responsible for failure to pay the backwages, the Court It is basic that a corporation is invested by law with a personality
considered the President of the corporation as such officer. The case separate and distinct from those of the persons composing it as well as
was cited in Chua vs. NLRC in holding personally liable the vice- from that of any other legal entity to which it may be related. Mere
president of the company, being the highest and most ranking official ownership by a single stockholder or by another corporation of all or
of the corporation next to the President who was dismissed, for the nearly all of the capital stock of a corporation is not of itself sufficient
latters claim for unpaid wages. ground for disregarding the separate corporate personality. Petitioner
Sunio, therefore, should not have been made personally answerable for
A review of the above exceptional cases would readily disclose the the payment of private respondents back salaries.
attendance of facts and circumstances that could rightly sanction
personal liability on the part of the company officer. In A.C. Ransom, The Court, to be sure, did appear to have deviated somewhat in Gudez
the corporate entity was a family corporation and execution against it vs. NLRC (183 SCRA 644), however, it should be clear from our
could not be implemented because of the disposition posthaste of its recent pronouncement in Mam Realty Development Corporation and
leviable assets evidently in order to evade its just and due Manuel Centeno vs. NLRC (244 SCRA 797), that the Sunio doctrine
obligations. The doctrine of `piercing the veil of corporate fiction was still prevails.[15]
this clearly appropriate. Chua likewise involved another family
corporation, and this time the conflict was between two brothers Nothing on record is shown to indicate that Frank Yih has acted in
occupying the highest ranking positions in the company. There were bad faith or with malice in carrying out the retrenchment program of
incontrovertible facts which pointed to extreme personal animosity the company. His having been held by the NLRC to be solidarily and
that resulted, evidently in bad faith, in the easing out from the personally liable with API is thus legally unjustified.
company of one of the brothers by the other.
WHEREFORE, the questioned decision of the NLRC is
MODIFIED insofar as it holds herein petitioner Frank Yih personally
liable with Asionics Philippines, Inc., which portion of the decision is
SET ASIDE; in all other respects, however, the questioned decision is
AFFIRMED and remains unaffected. No costs.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo,
Panganiban, and Quisumbing, JJ., concur.