BATCH 3 CASES

G.R. No. 195580               April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND

DEVELOPMENT, INC., and MCARTHUR MINING, INC., Petitioners, vs. REDMONT
CONSOLIDATED MINES CORP., Respondent.

VELASCO, JR., J.

FACTS: Respondent Redmont Consolidated Mines Corp. (Redmont), a domestic corporation,

took interest in mining and exploring certain areas of the province of Palawan. After
inquiring with the DENR, it learned that the areas where it wanted to undertake exploration
and mining activities where already covered by Mineral Production Sharing Agreement
(MPSA) applications of petitioners Narra, Tesoro and McArthur.

Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI),
filed an application for an MPSA and Exploration Permit (EP) with the Mines and Geo-
Sciences Bureau (MGB), Office of the Department of Environment and Natural Resources
(DENR). Subsequently, SMMI was issued MPSA-AMA-IVB-153 and EPA-IVB-44. The MPSA
and EP were then transferred to Madridejos Mining Corporation (MMC) and, on November 6,
2006, assigned to petitioner McArthur.2

Petitioner Narra acquired its MPSA from Alpha Resources and Development Corporation and
Patricia Louise Mining & Development Corporation (PLMDC) which previously filed an
application for an MPSA on January 6, 1992. Through the said application, the DENR issued
MPSA-IV-1-12. Subsequently, PLMDC conveyed, transferred and/or assigned its rights and
interests over the MPSA application in favor of Narra. Another MPSA application of SMMI
was filed. SMMI subsequently conveyed, transferred and assigned its rights and interest
over the said MPSA application to Tesoro.

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three
(3) separate petitions for the denial of petitioners’ applications for MPSA. Redmont alleged
that at least 60% of the capital stock of McArthur, Tesoro and Narra are owned and
controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation.

In their Answers, petitioners claimed that the issue on nationality should not be raised since
McArthur, Tesoro and Narra are in fact Philippine Nationals as 60% of their capital is owned
by citizens of the Philippines.

ISSUE: Whether or not the nationality of the petitioners is Filipino.

RULING: No. Their nationality is not Filipino. Basically, there are two acknowledged tests in
determining the nationality of a corporation: the control test and the grandfather rule.
Paragraph 7 of DOJ Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which
implemented the requirement of the Constitution and other laws pertaining to the
controlling interests in enterprises engaged in the exploitation of natural resources owned
by Filipino citizens, provides:

Shares belonging to corporations or partnerships at least 60% of the capital of which is

owned by Filipino citizens shall be considered as of Philippine nationality, but if the
percentage of Filipino ownership in the corporation or partnership is less than 60%, only the
number of shares corresponding to such percentage shall be counted as of Philippine
nationality. Thus, if 100,000 shares are registered in the name of a corporation or
partnership at least 60% of the capital stock or capital, respectively, of which belong to
Filipino citizens, all of the shares shall be recorded as owned by Filipinos. But if less than
60%, or say, 50% of the capital stock or capital of the corporation or partnership,
respectively, belongs to Filipino citizens, only 50,000 shares shall be counted as owned by
Filipinos and the other 50,000 shall be recorded as belonging to aliens.

The first part of paragraph 7, DOJ Opinion No. 020, stating "shares belonging to
corporations or partnerships at least 60% of the capital of which is owned by Filipino
citizens shall be considered as of Philippine nationality," pertains to the control test or the
liberal rule. On the other hand, the second part of the DOJ Opinion which provides, "if the
percentage of the Filipino ownership in the corporation or partnership is less than 60%, only
the number of shares corresponding to such percentage shall be counted as Philippine
nationality," pertains to the stricter, more stringent grandfather rule.

Based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of
the SEC Rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt.
After a scrutiny of the evidence extant on record, it is found that this case calls for the
application of the grandfather rule since, as ruled by the POA and affirmed by the OP, doubt
prevails and persists in the corporate ownership of petitioners. Also, as found by the CA,
doubt is present in the 60-40 Filipino equity ownership of petitioners Narra, McArthur and
Tesoro, since their common investor, the 100% Canadian corporation––MBMI, funded them.

The assertion of petitioners that "doubt" only exists when the stockholdings are less than
60% fails to convince the Court.

Conclusively, it is quite safe to say that petitioners McArthur, Tesoro and Narra are not
Filipino since MBMI, a 100% Canadian corporation, owns 60% or more of their equity
interests. Such conclusion is derived from grandfathering petitioners’ corporate owners,
namely: MMI, SMMI and PLMDC. Going further and adding to the picture, MBMI’s Summary
of Significant Accounting Policies statement– –regarding the "joint venture" agreements that
it entered into with the "Olympic" and "Alpha" groups––involves SMMI, Tesoro, PLMDC and
Narra. Noticeably, the ownership of the "layered" corporations boils down to MBMI, Olympic
or corporations under the "Alpha" group wherein MBMI has joint venture agreements with,
practically exercising majority control over the corporations mentioned. In effect, whether
looking at the capital structure or the underlying relationships between and among the
corporations, petitioners are NOT Filipino nationals and must be considered foreign since
60% or more of their capital stocks or equity interests are owned by MBMI.

22
G.R. No. 89252 May 24, 1993

RAUL SESBREÑO, petitioner, vs. HON. COURT OF APPEALS, DELTA MOTORS

CORPORATION AND PILIPINAS BANK, respondents.

FELICIANO, J.

FACTS: Petitioner Raul Sesbreño made a money market placement in the amount of
P300,000.00 with the Philippine Underwriters Finance Corporation ("Philfinance);
Philfinance, issued the following documents to petitioner: (a) the Certificate of Confirmation
of Sale, "without recourse," of one (1) Delta Motors Corporation Promissory Note; (b) the
Certificate of securities Delivery Receipt indicating the sale of DMC PN No. 2731 to
petitioner; and (c) post-dated checks. On 13 March 1981, petitioner sought to encash the
postdated checks issued by Philfinance. However, the checks were dishonored for having
been drawn against insufficient funds.

Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, and handed her
a demand letter informing the bank that his placement with Philfinance in the amount
reflected in the DCR No. 10805 had remained unpaid and outstanding, and that he in effect
was asking for the physical delivery of the underlying promissory note.

Petitioner later made similar demand letters again asking private respondent Pilipinas for
physical delivery of the original of DMC PN No. 2731. Pilipinas allegedly referred all of
petitioner's demand letters to Philfinance for written instructions, as has been supposedly
agreed upon in "Securities Custodianship Agreement" between Pilipinas and Philfinance.

Petitioner also made a written demand upon private respondent Delta for the partial
satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee thereof, had assigned
to him said Note to the extent of P307,933.33. Delta, however, denied any liability to
petitioner on the promissory note.

As petitioner had failed to collect his investment and interest thereon, he filed an action for
damages with the Regional Trial Court of Cebu City, against private respondents Delta and
Pilipinas.5 The trial court, in a decision, dismissed the complaint. Petitioner appealed to
respondent Court of Appeals. The Court of Appeals denied the appeal.

ISSUE: Whether or not Philfinance and private respondents Delta and Pilipinas should be
treated as one corporate entity so as to make them liable for the action for damages.

RULING: No. Philfinance, Delta and Pilipinas cannot be treated as one corporate entity.
Philfinance and private respondents Delta and Pilipinas have been organized as separate
corporate entities. Petitioner prayed to pierce their separate corporate entities, but has been
able only to cite the presence of a common Director — Mr. Ricardo Silverio, Sr., sitting on
the Board of Directors of all three (3) companies. Petitioner has neither alleged nor proved
that one or another of the three (3) concededly related companies used the other two (2) as
mere alter egos or that the corporate affairs of the other two (2) were administered and
managed for the benefit of one. There is simply not enough evidence of record to justify
disregarding the separate corporate personalities of delta and Pilipinas and to hold them
liable for any assumed or undetermined liability of Philfinance to petitioner.
G.R. No. 151438 July 15, 2005

JARDINE DAVIES, INC., Petitioners, vs. JRB REALTY, INC., Respondent.

CALLEJO, SR., J.:

FACTS: In 1979-1980, respondent JRB Realty, Inc. built a nine-storey building on its parcel
of land. An air conditioning system was needed for the Blanco Law Firm housed at the
second floor of the building. Respondent’s Executive Vice-President, Jose R. Blanco,
accepted the contract quotation of Mr. A.G. Morrison, President of Aircon and Refrigeration
Industries, Inc. (Aircon), for two (2) sets of Fedders Adaptomatic air conditioning
equipment.2 Thereafter, two (2) brand new packaged air conditioners were installed by
Aircon. When the units with rotary compressors were installed, they could not deliver the
desired cooling temperature. Despite several adjustments and corrective measures, the
respondent conceded that Fedders Air Conditioning USA’s technology for rotary compressors
for big capacity conditioners like those installed at the Blanco Center had not yet been
perfected. The parties thereby agreed to replace the units with reciprocating/semi-hermetic
compressors instead.

TempControl Systems, Inc. a subsidiary of Aircon, undertook the maintenance of the units,
inclusive of parts and services. In October 1987, the respondent learned, through
newspaper ads,5 that Maxim Industrial and Merchandising Corporation (Maxim, for short)
was the new and exclusive licensee of Fedders Air Conditioning USA in the Philippines for
the manufacture, distribution, sale, installation and maintenance of Fedders air conditioners.
The respondent requested that Maxim honor the obligation of Aircon, but the latter refused.
Respondent instituted an action for specific performance with damages against Aircon &
Refrigeration Industries, Inc., Fedders Air Conditioning USA, Inc., Maxim Industrial &
Merchandising Corporation and petitioner Jardine Davies, Inc.6 The latter was impleaded as
defendant, considering that Aircon was a subsidiary of the petitioner.

RTC rendered its Decision finding the defendants Jardine Davies, Inc., Fedders Air
Conditioning USA, Inc. and Maxim Industrial and Merchandising Corporation, jointly and
severally liable.

ISSUE: Whether or not Aircon is the subsidiary of Jardine Davies Inc.

RULING: NO. Aircon is not a subsidiary of Jardine Davies hence, the latter cannot be
impleaded as a defendant in the case where Aircon was impleaded. It is an elementary and
fundamental principle of corporation law that a corporation is an artificial being invested by
law with a personality separate and distinct from its stockholders and from other
corporations to which it may be connected. While a corporation is allowed to exist solely for
a lawful purpose, the law will regard it as an association of persons or in case of two
corporations, merge them into one, when this corporate legal entity is used as a cloak for
fraud or illegality.14 

While it is true that Aircon is a subsidiary of the petitioner, it does not necessarily follow
that Aircon’s corporate legal existence can just be disregarded. In Velarde v. Lopez,
Inc.,17 the Court categorically held that a subsidiary has an independent and separate
juridical personality, distinct from that of its parent company; hence, any claim or suit
against the latter does not bind the former, and vice versa. In applying the doctrine, the
following requisites must be established: (1) control, not merely majority or complete stock
control; (2) such control must have been used by the defendant to commit fraud or wrong,
to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in
contravention of plaintiff’s legal rights; and (3) the aforesaid control and breach of duty
must proximately cause the injury or unjust loss complained of.18

The records bear out that Aircon is a subsidiary of the petitioner only because the latter
acquired Aircon’s majority of capital stock. It, however, does not exercise complete control
over Aircon; nowhere can it be gathered that the petitioner manages the business affairs of
Aircon. Indeed, no management agreement exists between the petitioner and Aircon, and
the latter is an entirely different entity from the petitioner.19

IN VIEW OF THE FOREGOING, the petition is GRANTED. The assailed decision of the
Court of Appeals, affirming the decision of the Regional Trial Court is REVERSED and SET
ASIDE.

.
G.R. No. 167603

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. HYDRO RESOURCES

CONTRACTORS CORPORATION, Respondent.

LEONARDO-DE CASTRO, J.:

FACTS: Petitioner DBP together with PNB (in a separate case) foreclosed on certain
mortgages made on the properties of Marinduque Mining and Industrial Corporation (MMIC).
As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC
and resumed the business operations of the defunct MMIC by organizing NMIC. 7 DBP and
PNB owned 57% and 43% of the shares of NMIC, respectively, except for five qualifying
shares.

Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and
Road Construction Program. After computing the payments already made by NMIC under
the program and crediting the NMIC’s receivables from Hercon, Inc., the latter found that
NMIC still has an unpaid balance.10 Hercon, Inc. made several demands on NMIC, and when
these were not heeded, a complaint for sum of money was filed in the RTC of Makati
seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the amount owing
Hercon, Inc.

Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger.
This prompted the amendment of the complaint to substitute HRCC for Hercon, Inc.12

Thereafter, then President Corazon C. Aquino issued Proclamation No. 50 creating the APT
for the expeditious disposition and privatization of certain government corporations and/or
the assets thereof. Pursuant to the said Proclamation, DBP and PNB executed their
respective deeds of transfer in favor of the National Government assigning, transferring and
conveying certain assets and liabilities, including their respective stakes in NMIC.13 In turn
and on even date, the National Government transferred the said assets and liabilities to the
APT as trustee under a Trust Agreement.14 Thus, the complaint was amended for the second
time to implead and include the APT as a defendant.

ISSUE: Whether or not DBP together with PNB is correctly impleaded as defendant in the
case against NMIC.

RULING: In applying the alter ego doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant’s relationship to that
operation.62 With respect to the control element, it refers not to paper or formal control by
majority or even complete stock control but actual control which amounts to "such
domination of finances, policies and practices that the controlled corporation has, so to
speak, no separate mind, will or existence of its own, and is but a conduit for its
principal."63 In addition, the control must be shown to have been exercised at the time the
acts complained of took place.64

While ownership by one corporation of all or a great majority of stocks of another

corporation and their interlocking directorates may serve as indicia of control, by
themselves and without more, however, these circumstances are insufficient to establish an
alter ego relationship or connection between DBP and PNB on the one hand and NMIC on
the other hand, that will justify the puncturing of the latter’s corporate cover. This Court has
declared that "mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality."66 This Court has likewise ruled that the
"existence of interlocking directors, corporate officers and shareholders is not enough
justification to pierce the veil of corporate fiction in the absence of fraud or other public
policy considerations."67

In this case, nothing in the records shows that the corporate finances, policies and practices
of NMIC were dominated by DBP and PNB in such a way that NMIC could be considered to
have no separate mind, will or existence of its own but a mere conduit for DBP and PNB. On
the contrary, the evidence establishes that HRCC knew and acted on the knowledge that it
was dealing with NMIC, not with NMIC’s stockholders. The letter proposal of Hercon, Inc.,
HRCC’s predecessor-in-interest, regarding the contract for NMIC’s mine stripping and road
construction program was addressed to and accepted by NMIC.71 The various billing reports,
progress reports, statements of accounts and communications of Hercon, Inc./HRCC
regarding NMIC’s mine stripping and road construction program in 1985 concerned NMIC
and NMIC’s officers, without any indication of or reference to the control exercised by DBP
and/or PNB over NMIC’s affairs, policies and practices.72
G.R. No. 149237             June 11, 2006
CHINA BANKING CORPORATION, petitioner, vs. DYNE-SEM ELECTRONICS
CORPORATION, respondent.
CORONA, J.:

FACTS: Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a total of P8,939,000 from
petitioner China Banking Corporation. The borrowers failed to pay when the obligations
became due. Petitioner consequently instituted a complaint for sum of money against them.

An amended complaint4 was filed by petitioner impleading respondent Dyne-Sem Electronics

Corporation (Dyne-Sem) and its stockholders Vicente Chuidian, Antonio Garcia and Jacob
Ratinoff. According to petitioner, respondent was formed and organized to be Dynetics’ alter
ego.

After hearing, the Court rules that Dyne-Sem Electronics Corporation is not an alter ego of
Dynetics, Inc. Thus, Dyne-Sem Electronics Corporation is not liable under the promissory
notes. Petitioner appealed to the Court of Appeals8 but the appellate court dismissed the
appeal and affirmed the trial court’s decision.9 

ISSUE: Whether or not Dyne-Sem Electronics Corporation is an alter ego Dynetics Inc. to
warrant the complaint against it.

RULING: No. Dyne-Sem Electronics Corporation is not an alter ego Dynetics Inc. hence, it
cannot warrant the complaint gaisnt it. The general rule is that a corporation has a
personality separate and distinct from that of its stockholders and other corporations to
which it may be connected.14 This is a fiction created by law for convenience and to prevent
injustice.15To disregard the separate juridical personality of a corporation, the wrongdoing
must be proven clearly and convincingly.18

In this case, petitioner failed to prove that Dyne-Sem was organized and controlled, and its
affairs conducted, in a manner that made it merely an instrumentality, agency, conduit or
adjunct of Dynetics, or that it was established to defraud Dynetics’ creditors, including
petitioner. The similarity of business of the two corporations did not warrant a conclusion
that respondent was but a conduit of Dynetics.

Likewise, respondent’s acquisition of some of the machineries and equipment of Dynetics

was not proof that respondent was formed to defraud petitioner. As the Court of Appeals
found, no merger20 took place between Dynetics and respondent Dyne-Sem. What took
place was a sale of the assets 21 of the former to the latter. Merger is legally distinct from a
sale of assets.22 Thus, where one corporation sells or otherwise transfers all its assets to
another corporation for value, the latter is not, by that fact alone, liable for the debts and
liabilities of the transferor.

Finally, it may be true that respondent later hired Dynetics’ former Vice-President Luvinia
Maglaya and Assistant Corporate Counsel Virgilio Gesmundo. From this, however, we cannot
conclude that respondent was an alter ego of Dynetics. In fact, even the overlapping of
incorporators and stockholders of two or more corporations will not necessarily lead to such
inference and justify the piercing of the veil of corporate fiction.

Premises considered, no factual and legal basis exists to hold respondent Dyne-Sem liable
for the obligations of Dynetics to petitione

G.R. No. 199687 March 24, 2014

PACIFIC REHOUSE CORPORATION, Petitioners, vs. COURT OF APPEALS and EXPORT

AND INDUSTRY BANK, INC., Respondents.

REYES, J.:

FACTS: A complaint was instituted with the Makati City Regional Trial Court (RTC) against
EIB Securities Inc. (E-Securities) for unauthorized sale of DMCI shares of private
respondents Pacific Rehouse Corporation, Pacific Concorde Corporation, Mizpah Holdings,
Inc., Forum Holdings Corporation, and East Asia Oil Company, Inc. RTC, in its decision,
directed the defendant [E-Securities] to return the private respondents DMCI shares, as
of judicial demand. On the other hand, plaintiffs are directed to reimburse the defendant an
amount representing the buy back price of the KPP shares of stocks at P 0.18 per share. The
Resolution was ultimately affirmed by the Supreme Court and attained finality.

When the Writ of Execution was returned unsatisfied, private respondents moved for the
issuance of an alias writ of execution to hold Export and Industry Bank, Inc. liable for the
judgment obligation as E- Securities is "a wholly-owned controlled and dominated
subsidiary of Export and Industry Bank, Inc., thus a mere alter ego and business conduit of
the latter. E-Securities opposed the motion arguing that it has a corporate personality that
is separate and distinct from petitioner.

The RTC concluded that E-Securities is a mere business conduit or alter ego of petitioner,
the dominant parent corporation, which justifies piercing of the veil of corporate fiction.

ISSUE: Whether or not Alter Ego Doctrine is applicable in this case.

RULING: NO. The Alter Ego Doctrine is not applicable. The Court has laid down a three-
pronged control test to establish when the alter ego doctrine should be operative:

(1) Control, not mere majority or complete stock control, but complete domination, not only
of finances but of policy and business practice in respect to the transaction attacked so that
the corporate entity as to this transaction had at the time no separate mind, will or
existence of its own;

(2) Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust
act in contravention of plaintiff’s legal right; and

(3) The aforesaid control and breach of duty must [have] proximately caused the injury or
unjust loss complained of.63
The absence of any one of these elements prevents ‘piercing the corporate veil’ in applying
the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant’s relationship to that
operation.64 

All the foregoing circumstances, with the exception of the admitted stock ownership, were
however not properly pleaded and proved in accordance with the Rules of Court.

There was nothing on record demonstrative of Export Bank’s wrongful intent in setting up a
subsidiary, E-Securities. If used to perform legitimate functions, a subsidiary’s separate
existence shall be respected, and the liability of the parent corporation as well as the
subsidiary will be confined to those arising in their respective business. 71 To justify treating
the sole stockholder or holding company as responsible, it is not enough that the subsidiary
is so organized and controlled as to make it "merely an instrumentality, conduit or adjunct"
of its stockholders. It must further appear that to recognize their separate entities would aid
in the consummation of a wrong.72

Ownership by Export Bank of a great majority or all of stocks of E-Securities and the
existence of interlocking directorates may serve as badges of control, but ownership of
another corporation, per se, without proof of actuality of the other conditions are insufficient
to establish an alter ego relationship or connection between the two corporations, which will
justify the setting aside of the cover of corporate fiction. The Court has declared that "mere
ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality."
G. R. No. 164317             February 6, 2006

ALFREDO CHING, Petitioner, vs. THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR

ECILYN BURGOS-VILLAVERT, JUDGE EDGARDO SUDIAM of the Regional Trial Court,
Manila, Branch 52; RIZAL COMMERCIAL BANKING CORP. and THE PEOPLE OF THE
PHILIPPINES, Respondents.

CALLEJO, SR., J.:

FACTS: PBMI, through petitioner, applied with the Rizal Commercial Banking Corporation
(respondent bank) for the issuance of commercial letters of credit to finance its importation
of assorted goods.3

Respondent bank approved the application, and irrevocable letters of credit were issued in
favor of petitioner. The goods were purchased and delivered in trust to PBMI. Under the
receipts, petitioner agreed to hold the goods in trust for the said bank, with authority to sell
but not by way of conditional sale, pledge or otherwise.

When the trust receipts matured, petitioner failed to return the goods to respondent bank,
or to return their value despite demands. Thus, the bank filed a criminal complaint for
estafa6 against petitioner in the Office of the City Prosecutor of Manila.

The RTC granted the Motion to Quash the Informations filed by petitioner on the ground
that the material allegations therein did not amount to estafa. Respondent bank re-filed the
criminal complaint for estafa against petitioner before the Office of the City Prosecutor of
Manila. City Prosecutor ruled that there was no probable cause to charge petitioner with
violating P.D. No. 115. Respondent bank appealed the resolution to the Department of
Justice (DOJ) via petition for review.

The Secretary of Justice issued Resolution No. 25015 granting the petition and reversing the
assailed resolution of the City Prosecutor. The Justice Secretary stated that the respondent
bound himself under the terms of the trust receipts not only as a corporate official of PBMI
but also as its surety; hence, he could be proceeded against in two (2) ways: first, as surety
as determined by the Supreme Court in its decision in Rizal Commercial Banking
Corporation v. Court of Appeals;17 and second, as the corporate official responsible for the
offense under P.D. No. 115, via criminal prosecution.

ISSUE: Whether or not petitioner should be held liable when he is only acting on behalf of
the corporation

RULING: In the case at bar, though the entrustee is a corporation, nevertheless, the law
specifically makes the officers, employees or other officers or persons responsible for the
offense, without prejudice to the civil liabilities of such corporation and/or board of
directors, officers, or other officials or employees responsible for the offense. The rationale
is that such officers or employees are vested with the authority and responsibility to devise
means necessary to ensure compliance with the law and, if they fail to do so, are held
criminally accountable; thus, they have a responsible share in the violations of the law.48

If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and
penalized for the crime, precisely because of the nature of the crime and the penalty
therefor. A corporation cannot be arrested and imprisoned; hence, cannot be penalized for a
crime punishable by imprisonment.49 However, a corporation may be charged and
prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribes both
fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty,
may be fined.50

When a criminal statute designates an act of a corporation or a crime and prescribes

punishment therefor, it creates a criminal offense which, otherwise, would not exist and
such can be committed only by the corporation. But when a penal statute does not
expressly apply to corporations, it does not create an offense for which a corporation may
be punished. On the other hand, if the State, by statute, defines a crime that may be
committed by a corporation but prescribes the penalty therefor to be suffered by the
officers, directors, or employees of such corporation or other persons responsible for the
offense, only such individuals will suffer such penalty. 51 Corporate officers or employees,
through whose act, default or omission the corporation commits a crime, are themselves
individually guilty of the crime.52

In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind
the cloak of the separate corporate personality of PBMI. In the words of Chief Justice Earl
Warren, a corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.55
 28

G.R. No. 126204            November 20, 2001

NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS OCEANIC,

INC., respondent.

SANDOVAL-GUTIERREZ, J.:

FACTS: National Power Corporation (NAPOCOR) issued invitations to bid for the supply and
delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired Thermal Power
Plant. The Philipp Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to
participate as one of the bidders. After the public bidding was conducted, PHIBRO's bid was
accepted. The "Bidding Terms and Specifications"4 provide that “the winning TENDERER
shall arrange and provide gearless bulk carrier for the shipment of coal to arrive at
discharging port on or before thirty (30) calendar days after receipt of the Letter of Credit
by the SELLER.”

On July 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon plague
Australia, the shipment's point of origin, which could seriously hamper PHIBRO's ability to
supply the needed coal.6 PHIBRO again apprised NAPOCOR of the situation in Australia.7 In
order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share
the burden of a "strike-free" clause. NAPOCOR refused. Instead of delivering the coal on or
before the thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties in
the July contract, PHIBRO effected its first shipment only on November 17, 1987.

Consequently, in October 1987, NAPOCOR once more advertised for the delivery of coal to
its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. NAPOCOR
disapproved PHIBRO's application for pre-qualification to bid for not meeting the minimum
requirements.8 Upon further inquiry, PHIBRO found that the real reason for the disapproval
was its purported failure to satisfy NAPOCOR's demand for damages due to the delay in the
delivery of the first coal shipment.

This prompted PHIBRO to file an action for damages with application for injunction against
NAPOCOR with the Regional Trial Court Makati City.

In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as reason
for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987
those strikes had already ceased. And, even assuming that the strikes were still ongoing,
PHIBRO should have shouldered the burden of a "strike-free" clause because
the cost and freight from the point of origin until the point of destination would be for the
account of PHIBRO.

The trial court rendered a decision in favor of PHIBRO and grant moral, exemplary and
actual damages. The CA affirmed the decision.
ISSUE: Whether or not NAPOCOR acted wrongfully or with bad faith in disqualifying PHIBRO
from participating in the subsequent public bidding.

Whether or not PHIBRO may be granted of the damages ordered by the court.

RULING: NO. A perusal of the records show that NAPOCOR's act of disapproving PHIBRO's
application for pre-qualification to bid was without any intent to injure or a purposive motive
to perpetrate damage. Apparently, NAPOCOR acted on the strong conviction that PHIBRO
had a "seriously-impaired" track record. NAPOCOR cannot be faulted from believing so. At
this juncture, it is worth mentioning that at the time NAPOCOR issued its subsequent
Invitation to Bid, i.e., October 1987, PHIBRO had not yet delivered the first shipment of coal
under the July 1987 contract, which was due on or before September 5, 1987. Naturally,
NAPOCOR is justified in entertaining doubts on PHIBRO's qualification or capability to
assume an obligation under a new contract.

The very purpose of requiring a bidder to furnish the awarding authority its pre-qualification
documents is to ensure that only those "responsible" and "qualified" bidders could bid and
be awarded with government contracts. It bears stressing that the award of a contract is
measured not solely by the smallest amount of bid for its performance, but also by the
"responsibility" of the bidder. Consequently, the integrity, honesty, and trustworthiness of
the bidder is to be considered. An awarding official is justified in considering a bidder not
qualified or not responsible if he has previously defrauded the public in such contracts or if,
on the evidence before him, the official bona fide believes the bidder has committed such
fraud, despite the fact that there is yet no judicial determination to that effect.

The circumstances under which NAPOCOR disapproved PHIBRO's pre-qualification to bid do

not show an intention to cause damage to the latter. The measure it adopted was one of
self-protection. Consequently, we cannot penalize NAPOCOR for the course of action it took.

The award of moral damages is likewise improper. To reiterate, NAPOCOR did not act in bad
faith. Moreover, moral damages are not, as a general rule, granted to a corporation.47 While
it is true that besmirched reputation is included in moral damages, it cannot cause mental
anguish to a corporation, unlike in the case of a natural person, for a corporation has no
reputation in the sense that an individual has, and besides, it is inherently impossible for a
corporation to suffer mental anguish.48

Neither can we award exemplary damages under Article 2234 of the Civil Code. Before the
court may consider the question of whether or not exemplary damages should be awarded,
the plaintiff must show that he is entitled to moral, temperate, or compensatory damages.

NAPOCOR is justified in resisting PHIBRO's claim for damages. As a matter of fact, we

partially grant the prayer of NAPOCOR as we find that it did not act in bad faith in
disapproving PHIBRO's pre-qualification to bid.

At this point, we believe that, in the interest of fairness, NAPOCOR should give PHIBRO
another opportunity to participate in future public bidding. As earlier mentioned, the delay
on its part was due to a fortuitous event.
G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner, vs. THE

HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.

CRUZ, J.:

FACTS: The petitioner is a private corporation engaged in the exportation of food products.
Most of its exports are purchased by the petitioner on credit. The petitioner was a depositor
of the respondent bank and maintained a checking. On May 25, 1981, the petitioner
deposited to its account in the said bank the amount of P100,000.00, thus increasing its
balance as of that date to P190,380.74. 1 Subsequently, the petitioner issued several checks
against its deposit but was suprised to learn later that they had been dishonored for
insufficient funds.

As a consequence, the California Manufacturing Corporation sent a letter of demand to the

petitioner. Similar letters were sent to the petitioner by the Malabon Long Life Trading and
by the G. and U. Enterprises. Malabon also cancelled the petitioner's credit line and
demanded that future payments be made by it in cash or certified check. Meantime, action
on the pending orders of the petitioner with the other suppliers whose checks were
dishonored was also deferred.

Investigation disclosed that the sum of P100,000.00 deposited by the petitioner had not
been credited to the bank. The error was rectified and the dishonored checks were paid
after they were re-deposited. 4

In its letter, the petitioner demanded reparation from the respondent bank for its "gross and
wanton negligence." This demand was not met. The petitioner then filed a complaint in the
then Court of First Instance of Rizal claiming from the private respondent moral damages
and exemplary damages.

Trial court rendered judgment holding that moral and exemplary damages were not called
for under the circumstances. However, observing that the plaintiff's right had been violated,
he ordered the defendant to pay nominal damages. This decision was affirmed in toto by the
respondent court.

ISSUE: Whether or not the petitioner should be entitled of moral and exemplary damages
as it prayed.

RULING: Yes. Petitioner is entitled of moral and exemplary damages as it prayed. The initial
carelessness of the respondent bank, aggravated by the lack of promptitude in repairing its
error, justifies the grant of moral damages. This rather lackadaisical attitude toward the
complaining depositor constituted the gross negligence, if not wanton bad faith.

While stressing the rectification made by the respondent bank, the decision of the lower
court practically ignored the prejudice suffered by the petitioner. This was simply glossed
over if not, indeed, disbelieved. The fact is that the petitioner's credit line was canceled and
its orders were not acted upon pending receipt of actual payment by the suppliers. Its
business declined. Its reputation was tarnished. Its standing was reduced in the business
community. All this was due to the fault of the respondent bank which was undeniably
remiss in its duty to the petitioner.

Article 2205 of the Civil Code provides that actual or compensatory damages may be
received "(2) for injury to the plaintiff s business standing or commercial credit." There is no
question that the petitioner did sustain actual injury as a result of the dishonored checks
and that the existence of the loss having been established "absolute certainty as to its
amount is not required." 

For the exemplary damages.

The banking system is an indispensable institution in the modern world and plays a vital role
in the economic life of every civilized nation. Even the humble wage-earner has not
hesitated to entrust his life's savings to the bank of his choice, knowing that they will be
safe in its custody and will even earn some interest for him. As for business entities like the
petitioner, the bank is a trusted and active associate that can help in the running of their
affairs, not only in the form of loans when needed but more often in the conduct of their
day-to-day transactions like the issuance or encashment of checks.

In every case, the depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The point is that
as a business affected with public interest and because of the nature of its functions, the
bank is under obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. In the case at bar, it is obvious that
the respondent bank was remiss in that duty and violated that relationship. What is
especially deplorable is that, having been informed of its error in not crediting the deposit in
question to the petitioner, the respondent bank did not immediately correct it but did so
only one week later or twenty-three days after the deposit was made.

After deliberating on this particular matter, the Court, in the exercise of its discretion,
hereby imposes upon the respondent bank exemplary damages in the amount of
P50,000.00, "by way of example or correction for the public good," in the words of the law.