You are on page 1of 18



290 SCRA 198 (1998)


Private respondents EYCO Group of Companies (“EYCO”), Eulogio O.

Yutingco, Caroline Yutingco-Yao, and Theresa T. Lao (the “Yutingcos”), all of
whom are controlling stockholders of the aforementioned corporations,
jointly filed with the SEC a Petition for the Declaration of Suspension of
Payments, Formation and Appointment of Rehabilitation
Receiver/Committee, Approval of Rehabilitation Plan with Alternative Prayer
for Liquidation and Dissolution of Corporations alleging that “the present
combined financial condition of the petitioners clearly indicates that their
assets are more than enough to pay off the credits” but that due to “factors
beyond the control and anticipation of the management, the inability of the
EYCO Group of Companies to meet the obligations as they fall due on the
schedule agreed with the creditors has now become a stark reality.” The
Yutingcos justified their inclusion as copetitioners before the SEC on the
ground that they had personally bound themselves to EYCO’s creditors
under a J.S.S. Clause (Joint Several Solidary Guaranty) Cos., thereby in
effect discarding the Veil of Corporate Fiction on their personal selves. In
connection with this petition, a the SEC Hearing Panel issued an order dated
September 19, 1997 setting its hearing on October 22, 1997 and directed the
suspension of all actions, claims and proceedings against private
respondents pending before any court, tribunal, office, board and/or
commission. Meanwhile, some of private respondents’ creditors, composed
mainly of 22 domestic banks (the “consortium”) including herein petitioner
Union Bank of the Philippines Philippines, also convened on September 19,
1997 for the purpose of deciding their options in the event that private
Respondents invoke the provisions of Presidential Decree No. 902-A, as
amended. Without notifying the members of the consortium, petitioner,
however, decided to break away from the group by suing private respondents
in the regular courts. Aside from commencing suits in the regular courts,
petitioner also vehemently opposed private respondents’ petition for
suspension of payments in the SEC by filing a Motion to Dismiss wherein it
contended that the SEC was bereft of jurisdiction over such petition on the
ground that the inclusion of the Yutingcos in the petition “cannot be allowed
since the authority and power of the Commission under the virtue of the law
applies only to corporations, partnerships and other forms of associations,
and not to individual petitioners who are not clearly covered by P.D. 902-A
as amended.” Subsequently, a creditors’ meeting was again convened
pursuant to SEC’s order wherein the matter of creating a Mancom was
submitted for resolution. Apparently, only petitioner opposed the creation of
said Mancom as it filed earlier with the SEC its Motion to Dismiss.

The SEC Hearing Panel then issued an Omnibus Order directing this time
the creation of the Mancom and likewise granted an earlier Urgent Motion for
Reconsideration filed by creditor banks which sought to annotate the
suspension order on the titles of the properties of the private respondent
corporations. This directive expressly stated that the same was without
prejudice to the resolution of petitioner’s Motion to Dismiss. Aggrieved,
petitioner immediately took recourse to the Court of Appeals by filing
therewith a Petition for Certiorari with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction. It
imputed grave abuse of 26 discretion on the part of the SEC Hearing Panel
in precipitately issuing the suspension order and in prematurely directing
the creation of the Mancom prior to the scheduled hearing of its Motion to
Dismiss. Petitioner lamented that these actions of the panel deprived it of
due process by effectively rendering moot and academic its Motion to dismiss
which allegedly presented a prejudicial question to the propriety of creating a
Mancom. Meanwhile, members of the so-called steering committee of the
consortium filed with the appellate court an Urgent Motion for Intervention
and a Consolidated Intervention and Counter-Motion for Contempt and for
the Imposition of Disciplinary Measures Against Petitioner’s Counsel
claiming that they were not impleaded at all by petitioner in its petition
before the appellate court when in fact they had actual, material, direct and
legal interest in the outcome of said case as owners of at least eighty-five
percent (85%) of private respondents’ obligations.

Moreover, they opposed said petition because of petitioner’s ostensible

failure to exhaust administrative remedies in the consortium and for being
guilty of forum-shopping. Series of Motions were filed and after several
exchanges of pleadings finally rendered its assailed decision granting the
Motion for Intervention. Without moving for reconsideration of the appellate
court’s decision, petitioner elevated the said matter to this Court through
Petition for Certiorari.


Whether suspension of payments with the SEC is the proper remedy on

account of the alleged insolvency of private respondents when they allegedly
disposed of a substantial portion of their properties in fraud of creditors.

Yes. The Supreme Court held that what determines the nature of an action,
as well as which court or body has jurisdiction over it, are the allegations of
the complaint, or a petition as in this case, and the character of the relief
sought. that the petitioner’s reasoning that the Yutingcos and the corporate
entities making up the EYCO Group, on the basis of the footnote that the
former were filing the petition because they bound themselves as surety to
the corporate obligations, should be considered as mere individuals who
should file their petition for suspension of payments with the regular courts
pursuant to Section 2 of the Insolvency Law. The doctrine of piercing the veil
of corporate fiction heavily relied upon by petitioner is entirely misplaced, as
said doctrine only applies when such corporate fiction is used to defeat
public convenience, justify wrong, protect fraud or defend crime.
G.R.NO. 163786


Times Transportation Company, Inc. (Times) is a corporation engaged in the

business of land transportation. Times Employees Union (TEU) was formed
and issued a certificate of union registration. Times challenged the
legitimacy of TEU by filing a petition for the cancellation of its union
registration. TEU held a strike in response to Times’ alleged attempt to form
a rival union and its dismissal of the employees identified to be active union
members. The Labor Secretary assumed jurisdiction over the case and
referred the matter to the NLRC for compulsory arbitration. A return-to-work
order was likewise issued. In a certification election, TEU was certified as the
sole and exclusive collective bargaining agent in Times. Consequently, TEU’s
president wrote the management of Times and requested for collective
bargaining. Times refused.

TEU filed a Notice of Strike. Another conciliation/mediation proceeding was

conducted for the purpose of settling the brewing dispute. Times’
management implemented a retrenchment program and notices of
retrenchment were sent to some of its employees. TEU held a strike vote on
grounds of unfair labor practice on the part of Times. For alleged
participation in an illegal strike, Times terminated all the 123 striking
employees. The DOLE Secretary issued the second return-to-work order
certifying the dispute to the NLRC. While the strike was ended, the
employees were no longer admitted back to work. Mencorp Transport
Systems, Inc. (Mencorp) had acquired ownership over Times’ Certificates of
Public Convenience and a number of its bus units by virtue of several deeds
of sale. Mencorp is controlled and operated by Mrs. Virginia Mendoza,
daughter of Santiago Rondaris, the majority stockholder of Times.
Meanwhile, the NLRC rendered a decision declaring the first strike LEGAL
and the second ILLEGAL. Times and TEU both appealed the decision of the
NLRC, which CA affirmed. Upon denial of its motion for reconsideration,
Times filed a petition for review on certiorari. After the closure of Times, the
retrenched employees filed cases for illegal dismissal, money claims and
unfair labor practices against Times before the Regional Arbitration Branch
in San Fernando City, La Union. The employees withdrew their complaints
with leave of court and filed a new set of cases before the National Capital
Region Arbitration Branch, impleading Mencorp and the Spouses Mendoza.
Times sought the dismissal of these cases on the ground of lit is pendencia
and forum shopping.
The Labor Arbiter ruled that the dismissals of complainants Times, effected,
participated in, authorized or ratified by Santiago Rondaris constituted the
prohibited act of unfair labor practice and hence, illegal and that the sale of
said respondent company to respondents Mencorp Transport Systems
Company (sic),Inc. and/or Virginia Mendoza and Reynaldo Mendoza was
simulated and/or effected in badfaith. Times, Mencorp and the Spouses
Mendoza submitted their respective memorandum of appeal to the NLRC.
NLRC rendered its decision remanding the records of the consolidated cases
to the Arbitration Branch of origin for disposition and for the conduct of
appropriate proceedings. NLRC denied the Motion for Reconsideration. Thus,
the employees appealed to the CA by way of a petition for certiorari, which
granted the petition and set aside the decision of the N LRC. Times, Mencorp
and the Spouses Mendoza filed Motions for Reconsideration, which were
denied. Hence, this petition for review on certiorari.

ISSUE: Whether or not piercing the corporate veil in this case was proper.


Yes. We have held that piercing the corporate veil is warranted only in cases
when the separate legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, such that in the case of two
corporations, the law will regard the corporations as merged into one. It may
be allowed only if the following elements concur: (1) control—not mere stock
control, but complete domination—not only of finances, but of policy and
business practice in respect to the transaction attacked; (2) such control
must have been used to commit a fraud or a wrong to perpetuate the
violation of a statutory or other positive legal duty, or a dishonest andan
unjust act in contravention of a legal right; and (3) the said control and
breach of duty musthave proximately caused the injury or unjust loss
complained of.

In this case, the sale was transferred to a corporation controlled by V.

Mendoza, the daughter of S. Rondaris of Times where she is/was also a
director. All of the stockholders/incorporators of Mencorp are all relatives of
S. Rondaris. The timing of the sale evidently was to negate the
employees/complainants/members’ right to organization as it was effected
when their union (TEU) was just organized/requesting Times to bargain.
Mencorp never obtained a franchise since its supposed incorporation but at
present, all the buses of Times are already being run/operated by Mencorp,
the franchise of Times having been transferred to it. The sale of Times’
franchise as well as most of its bus units to a company owned by Rondaris’
daughter and family members, right in the middle of a labor dispute, is
highly suspicious. It is evident that the transaction was made in order to
remove Times’ remaining assets from the reach of any judgment that may be
rendered in the unfair labor practice cases filed against it. The petition was
Citibank, N.A. Vs. Chua


Petitioner Citibank, N.A. is a foreign commercial banking corporation duly

licensed to do business in the Philippines. Private respondents spouses
Cresencio and Zenaida Velez, were good clients of petitioner bank’s branch
in Cebu until March 14, 1986 when they filed a complaint for specific
performance and damages against it before the RTC of Cebu.

During the date of the pre-trial conference, counsel for petitioner bank
appeared, presenting a special power of attorney executed by Citibank officer
Florencia Tarriela in favor of petitioner bank’s counsel, J.P. Garcia and
Associates, to represent and bind petitioner bank at the pre-trial conference
of the case at bar. Inspite of this special power of attorney, counsel for
private respondents orally moved to declare petitioner bank as in default on
the ground that the special power of attorney was not executed by the Board
of Directors of Citibank.

ISSUE: Whether or not a resolution of the Board of Directors of a corporation

is always necessary for granting authority to an agent to represent the
corporation in court cases.


No. Just as a natural person may authorize another to do certain acts in his
behalf, so may the board of directors of a corporation validly delegate some
of its functions to individual officers or agents appointed by it.

Corporate powers may be directly conferred upon corporate officers or agents

by statute, the articles of incorporation, the by-laws or by resolution or other
act of the board of directors. In addition, an officer who is not a director may
also appoint other agents when so authorized by the by-laws or by the board
of directors.

576 SCRA 463 (2009)


This case emanated from a complaint for regularization, subsequently

converted into one for illegal dismissal, filed before Labor Arbiter Madjayran
H. Ajan by private respondent Sheryl Oabel. It appears that Oabel was
initially hired by petitioner as an extra beverage attendant on April 24, 1995
which lasted until February 7, 1997. Respondent worked in Century Park
Hotel, an establishment owned by the petitioner. However, on September 16,
1996, petitioner contracted with Manila Resource Development Corporation.
Subsequently, Oabel was transferred to MANRED, with the latter deporting
itself as her employer. MANRED has intervened at all stages of these
proceedings and has consistently claimed to be the employer of private
respondent Oabel.

On July 20, 1998, private respondent filed before the Labor Arbiter a petition
for regularization of employment against the petitioner. On August 1, 1998,
however, she was dismissed from employment. Respondent converted her
petition for regularization into a complaint for illegal dismissal. Labor Arbiter
Madjayran H. Ajan rendered a decision on July 13, 1999, dismissing the
complaint against the petitioner. Private respondent appealed before the
National Labor Relations Commission (NLRC). The NLRC reversed the ruling
of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor,
and (2) private respondent was illegally dismissed. Petitioner subsequently
appealed before the Court of Appeals but dismissed the petition on the
ground of non-compliance with the rule on certification against forum
shopping taking into account that the aforesaid certification was subscribed
and verified by the Personnel Director of petitioner corporation without
attaching thereto his authority to do so for and in behalf of petitioner
corporation per board resolution or special power of attorney executed by the
latter. The petitioner filed its motion for reconsideration which was denied.
Hence, this petition.


Whether the filing of a motion for reconsideration with an appended

certificate of non forum-shopping suffices to cure the defect in the pleading.

No. Petitioner’s contention that the filing of a motion for reconsideration with
an appended certificate of non forum-shopping suffices to cure the defect in
the pleading is absolutely specious. It negates the very purpose for which the
certification against forum shopping is required: to inform the Court of the
pendency of any other case which may present similar issues and involve
similar parties as the one before it. The requirement applies to both natural
and juridical persons. Well-settled is the rule that the certificate of non-
forum shopping is a mandatory requirement. Substantial compliance applies
only with respect to the contents of the certificate but not as to its presence
in the pleading wherein it is required

G.R.No. L- 67626


The Board of Directors of Akron Customs Brokerage Corporation (Akron),

composed of Jose Remo, Jr., Ernesto Bañares, Feliciano Coprada, Jemina
Coprada, and Dario Punzalan with Lucia Lacaste as Secretary, adopted a
resolution authorizing the purchase of 13 trucks for use in its business to be
paid out of a loan the corporation may secure from anyl ending institution.
Feliciano Coprada, as President and Chairman of Akron, purchased the
trucks from E.B. Marcha Transport Company, Inc.for P 525K as evidenced
by a deed of absolute sale. The parties agreed on a downpayment in the
amount of P50K and that the balance of P 475K shall be paid within 60 days
from the date of the execution of the agreement. They also agreed that until
balance is fully paid, the down payment of P 50K shall accrue as rentals and
failure to pay the balance within 60 days, then the balance shall constitute
as a chattel mortgage lien covering the cargo trucks and the parties may
allow an extension of 30 days and Marcha may ask for a revocation of the
contract and the re-conveyance of all trucks.

The obligation is further secured by a promissory note executed by Coprada

in favor of Akron. It is stated that the balance shall be paid from the
proceeds of a loan obtained from the Development Bank of the Philippines
(DBP) within 60 days After the lapse of 90 days, Marsha tried to collect from
Coprada but the Coprada promised to pay only upon the release of the DBP
loan. Marsha found that no loan application was ever filed by Akron with
DBP. In due time, Marsha filed a complaint for the recovery of P 525K or the
return of the 13 trucks with damages against Akron and its officers and
directors. Remo Jr. sold all his shares in Akron to Coprada. It also appears
that Akron amended its articles of incorporation thereby changing its name
to Akron Transport International, Inc. which assumed the liability of Akron
to Marsha.


Whether Remo Jr. should be held personally liable together with Akron
Transport International, Inc.

No, the environmental facts of this case show that there is no cogent basis to
pierce the corporate veil of Akron and hold petitioner personally liable. While
it is true that in December, 1977 petitioner was still a member of the board
of directors of Akron and that he participated in the adoption of a resolution
authorizing the purchase of 13 trucks for the use in the brokerage business
of Akron to be paid out of a loan to be secured from a lending institution, it
does not appear that said resolution was intended to defraud anyone. The
word "WE' in the said promissory note must refer to the corporation which
Coprada represented in the execution of the note and not its stockholders or
directors. Petitioner did not sign the said promissory note so he cannot be
personally bound thereby. It is his inherent right as a stockholder 5 to
dispose of his shares of stock anytime he desires.
Rural Bank of Lipa City, Inc. vs. Court of appeals

366 SCRA 188 (2001). See also

Batangas Laguna Tayabas Bus company, Inc., et al., vs. Benjamin

Bitanga, et al., 362 SCRA 635 (2001)


Private respondent Reynaldo Villanueva, Sr., a stockholder of the Rural Bank

executed a Deed of Assignment, which he assigned his shares, as well as
those of eight (8) other shareholders under his control with a total of 10,467
shares, in favor of the stockholders of the Bank represented by its directors.
When the Spouses failed to settle their obligation amounting to P400000
covered by an Agreement on the due date, the Board sent them a letter
demanding: (1) the surrender of all the stock certificates issued to them; and
(2) the delivery of sufficient collateral to secure the balance of their debt
which the latter ignored. On January 15, 1994, the stockholders of the Bank
met to elect the new directors and set of officers for the year 1994. The
Villanuevas were not notified of said meeting. The legality of the meeting was
questioned by Atty. Amado Ignacio, counsel for the Villanueva spouses. In
reply, the new set of officers informed Atty. Ignacio that the Villanuevas were
no longer entitled to notice of the said meeting since they had relinquished
their rights as stockholders in favor of the Bank. The spouses filed with the
SEC, a petition for annulment of the stockholders' meeting and election of
directors and officers, with damages and prayer for preliminary injunction
against newly-elected officers. The SEC issued a temporary restraining order
enjoining the petitioners herein, from acting as directors and officers of the
Bank, and from performing their duties and functions as such. Petitioners,
moved for the lifting of the temporary restraining order and the dismissal of
the petition for lack of merit, and for the upholding of the validity of the
stockholders' meeting and election of directors and officers. Villanuevas'
application for the issuance of a writ of preliminary injunction was denied.
Upon a motion for reconsideration, the writ was granted upon finding that
since the Villanuevas' have not disposed of their shares, whether voluntarily
or 387 involuntarily, they were still stockholders entitled to notice of the
annual stockholders' meeting was sustained by the SEC. A writ of
preliminary injunction was issued enjoining the petitioners from acting as
directors and officers of the bank. Petitioners filed an urgent motion to
quash the writ of preliminary injunction. SEC Hearing Officer granted
Villanuevas filed an Omnibus Motion praying that the meeting and election
of officers scheduled on January 14, 1995 be suspended or held in
abeyance, and that the 1993 Board of Directors be allowed, in the meantime,
to act as such. A petition for Certiorari and Annulment with Damages was
filed by the Rural Bank, its directors and officers before the SEC en banc,
which the latter denied. The decision states that petitioners could not show
any proof of despotic or arbitrary exercise of discretion committed by the
hearing officer in issuing the assailed and the non-delivery of the stock
certificate does not make the transfer of the shares of stock effective. Motion
for reconsideration was likewise denied by SEC en banc. A Court of Appeals
dismissed the petition for review upon finding that public respondent is
correct in holding that the Hearing Officer did not commit grave abuse of
discretion and the questioned Orders issued by the Hearing Officer were
based on pertinent law and the facts of the case. A motion for
reconsideration was likewise denied. Hence, this present petition.


Did spouses Villanueva validly transfer their shares notwithstanding the

execution of the deed of assignment in favor of the petitioners?


“The Corporation Code specifically provides: SECTION 63. Certificate of stock

and transfer of shares. — The capital stock of stock corporations shall be
divided into shares for which certificates signed by the president or vice
president, countersigned by the secretary or assistant secretary, and sealed
with the seal of the corporation shall be issued in accordance with the by-
laws. Shares of stocks so issued are personal property and may be
transferred by delivery of the certificate or certificates indorsed by the owner
or his attorney-in-fact 388 or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the parties,
until the transfer is recorded in the books of the corporation so as to show
the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates and the number of shares
transferred. No shares of stock against which the corporation holds any
unpaid claim shall be transferable in the books of the corporation.
(Emphasis ours) xxxx. We have uniformly held that for a valid transfer of
stocks, there must be strict compliance with the mode of transfer prescribed
by law. The requirements are: (a) There must be delivery of the stock
certificate: (b) The certificate must be endorsed by the owner or his attorney-
in-fact or other persons legally authorized to make the transfer; and (c) To be
valid against third parties, the transfer must be recorded in the books of the
corporation. As it is, compliance with any of these requisites has not been
clearly and sufficiently shown. It may be argued that despite non-compliance
with the requisite endorsement and delivery, the assignment was valid
between the parties, meaning the private respondents as assignors and the
petitioners as assignees. While the assignment may be valid and binding on
the petitioners and private respondents, it does not necessarily make the
transfer effective. Consequently, the petitioners, as mere assignees, cannot
enjoy the status of a stockholder, cannot vote nor be voted for, and will not
be entitled to dividends, insofar as the assigned shares are concerned
Parenthetically, the private respondents cannot, as yet, be deprived of their
rights as stockholders, until and unless the issue of ownership and transfer
of the shares in question is resolved with finality. There being no showing
that any of the requisites mandated by law was complied with, the SEC
Hearing Officer did not abuse his discretion in granting the issuance of the
preliminary injunction prayed for by petitioners in SEC Case No. 02-94-4683
(herein private respondents). Accordingly, the order of the SEC en banc
affirming the ruling of the SEC Hearing Officer, and the Court of Appeals
decision upholding the SEC en banc order, are valid and in accordance with
law and jurisprudence, thus warranting the denial of the instant petition for
Clemente vs. Court of Appeals, 242 SCRA 717 (1995).See also
Reburiano vs. Court of Appeals, 301 SCRA 342 (1999)


RTC rendered judgment in favor of Pepsi Cola Bottling Co. ordering

Reburiano to pay P55,000 with interest for the unpaid bottles of softdrinks it
received from the company. RTC issued a writ of execution. However, it
appears that prior to the promulgation of the decision of the trial court,
private respondent amended its articles of incorporation to shorten its term
of existence to July 8, 1983. The amended articles of incorporation was
approved by the Securities and Exchange Commission on March 2, 1984.
The trial court was not notified of this fact. Reburiano moved to quash the
writ of execution on the grounds that when the Court of Appeals rendered its
decision, the private respondent was no longer in existence and had no more
juridical personality and so, as such, it no longer had the capacity to sue
and be sued; and that after Pepsi lost its existence and juridical personality,
Atty. Romualdo M. Jubay had no more client in this case and so his
appearance in this case was no longer possible and tenable; Private
respondent opposed petitioners' motion. It argued that the jurisdiction of the
court as well as the respective parties capacity to sue had already been
established during the initial stages of the case; and that when the
complaint was filed in1982, private respondent was still an existing
corporation so that the mere fact that it was dissolved at the time the case
was yet to be resolved did not warrant the dismissal of the case or oust the
trial court of its jurisdiction.


Whether or not Pepsi still had juridical personality to pursue its case against
Reburiano after a shortening of its corporate existence.


Yes. Petitioners are in error in contending that "a dissolved and non-existing
corporation could no longer be represented by a lawyer and that a lawyer
could not appear as counsel for a non-existing judicial person.” 453 The only
reason for their refusal to execute the same is that there is no existing
corporation to which they are indebted. Such argument is untenable. The
law specifically allows a trustee to manage the affairs of the corporation in
liquidation. Consequently, any supervening fact, such as the dissolution of
the corporation, repeal of a law, or any other fact of similar nature would not
serve as an effective bar to the enforcement of such right. As clearly stated in
Section 122 of the Corporation Code: Section122: Corporate Liquidation. —
Every Corporation whose charter expires by its own limitation or is annulled
by forfeiture or otherwise, or whose corporate existence for other purposes is
terminated in any other manner, shall nevertheless be continued as a body
corporate for three (3) years after the time when it would have been so
dissolved, for the purpose of prosecuting and defending suits by or against it
and enabling it to settle and close its affairs, to dispose of and convey its
property and to distribute its assets, but not for the purpose of continuing
the business for which it was established. At any time during said three (3)
years, said corporation is authorized the empowered to convey all of its
property to trustees for the benefit of stockholders, members, creditors, and
other persons in interest. From and after any such conveyance by the
corporation of its property in trust for the benefit of its stockholders,
members, creditors and others in interests, all interests which the
corporation had in the property in terminates, the legal interest vests in the
trustees, and the beneficial interest in the stockholders, members, creditors
or other persons in interest. Petitioners argue that while private respondent
Pepsi Cola Bottling Company of the Philippines, Inc. undertook a voluntary
dissolution on July 3, 1983 and the process of liquidation for three (3) years
thereafter, there is no showing that a trustee or receiver was ever appointed.
They contend that Section 122 of the Corporation Code does not authorize a
corporation, after the three-year liquidation period, to continue actions
instituted by it within said period of three years. Here, the change in the
status of private respondent took place in 1983, when it was dissolved,
during the pendency of its case in the trial court. The change occurred prior
to the rendition of judgment by the trial court. Rules of fair play, justice, and
due process dictate that parties cannot raise for the first time on appeal
issues which they could have raised but never did during the trial and even
on appeal from the decision of the trial court

G.R.NO. 130998


Petitioner Marubeni Corporation is a foreign corporation organized and

existing under the laws of Japan. It was doing business in the Philippines
through its duly licensed, wholly owned subsidiary companies. On January
27, 1989, respondent Felix Lirag filed with the Regional Trial Court, Makati a
complaint for specific performance and damages claiming that petitioners
owed him the sum of P6, 000,000.00 representing commission pursuant to
an oral consultancy agreement with Marubeni. The consultancy agreement
was not reduced into writing because of the mutual trust between Marubeni
and the Lirag family. Their close business and personal relationship dates
back to 1960, when respondent’s family was engaged in the textile fabric
manufacturing business, in which Marubeni supplied the needed machinery,
equipment, spare parts and raw materials. In compliance with the
agreement, respondent Lirag made representations with various government
officials, arranged for meetings and conferences, relayed pertinent
information as well as submitted feasibility studies and project proposals,
including pertinent documents required by petitioners. As petitioners had
been impressed with respondent’s performance, six (6) additional projects
were given to his group under the same undertaking. One of the projects
handled by respondent Lirag, the Bureau of Post project, amounting to P100,
000,000.00 was awarded to the “Marubeni-Sanritsu tandem.” Despite
respondent’s repeated formal verbal demands for payment of the agreed
consultancy fee, petitioners did not pay. In response to the first demand
letter, petitioners promised to reply within fifteen (15) days, but they did not
do so. On April 29, 1993, the trial court promulgated a decision and ruled
that respondent is entitled to a commission. Respondent was led to believe
that there existed an oral consultancy agreement. Hence, he performed his
part of the agreement and helped petitioners get the project. The Court of
Appeals relied on the doctrine of admission by silence in upholding the
existence of a consultancy agreement, noting that petitioner Tanaka’s
reaction to respondent’s September 26, 1988 demand letter was not
consistent with their claim that there was no consultancy agreement. On the
contrary, it lent credence to respondent’s claim that they had an existing
consultancy agreement. The Court of Appeals observed that if indeed there
were no consultancy agreement, it would have been easy for petitioners to
simply deny respondent’s claim. Yet, they did not do so. The conglomeration
of these circumstances bolstered the existence of the oral consultancy


In this appeal, petitioners raise the following issues: (1) whether or not there
was a consultancy agreement between petitioners and respondent; and
corollary to this, (2) whether or not respondent is entitled to receive a
commission if there was, in fact, a consultancy agreement


Wherefore, the petition is granted. The decision of the court of appeals is

hereby set aside. Civil Case No. 89-3037 filed before the Regional Trial
Court, Branch 143, Makati City is hereby dismissed. No costs an assiduous
scrutiny of the testimonial and documentary evidence extant leads us to the
conclusion that the evidence could not support a solid conclusion that a
consultancy agreement, oral or written, was agreed between petitioners and
respondent. Respondent attempted to fortify his own testimony by
presenting several corroborative witnesses. However, what was apparent in
the testimonies of these witnesses was the fact that they learned about the
existence of the consultancy agreement only because that was what
respondent told them. In civil cases, he who alleges a fact has the burden of
proving it; a mere allegation is not evidence. He must establish his cause by
a preponderance of evidence, which respondent failed to establish in the
instant case. Any agreement entered into because of the actual or supposed
influence which the party has, engaging him to influence executive officials
in the discharge of their duties, which contemplates the use of personal
influence and solicitation rather than an appeal to the judgment of the
official on the merits of the object sought is contrary to public policy.
Consequently, the agreement, assuming that the parties agreed to the
consultancy, is null and void as against public policy. Therefore, it is
unenforceable before a court of justice. In light of the foregoing, we rule that
the preponderance of evidence established no consultancy agreement
between petitioners and respondent from which the latter could anchor his
claim for a six percent (6%) consultancy fee on a project that was not
awarded to petitioners.