G.R. No.

193136 July 10, 2019

ABS-CBN BROADCASTING CORPORATION, Petitioner vs. HONORATO C. HILARIO,

substituted by GLORIA Z. HILARIO, and DINDO B. BANTING, Respondents

CARANDANG, J.:

FACTS: Petitioner is a domestic corporation primarily engaged in the business of

international and local broadcasting of television and radio content. ABS-CBN's Scenic
Department initially handled the design, construction and provision of the props and sets for
its different shows and programs. Subsequently, petitioner engaged independent
contractors to create, provide and construct its different sets and props requirements. One
of the independent contractors engaged by petitioner was Mr. Edmund Ty.

CCI was formed and incorporated by Ty together with some officers of petitioner. Ty
became the Vice-President and Managing Director of CCI. Respondent Honorato was hired
by CCI as Designer. He rose from the ranks until he became Set Controller. Respondent
Banting, on the other hand, was engaged by CCI as Metal Craftsman. He likewise rose from
the ranks and became Assistant Set Controller.

Ty decided to retire as Managing Director of CCI. His decision was prompted by his intention
to organize and create his own company. Without Ty to manage and lead CCI, and
considering that CCI was not generating revenue but was merely "breaking even", the
Board of Directors of CCI decided to close the company down by shortening its corporate
term.

Ty organized and created Dream Weaver Visual Exponents, Inc. (DWVEI). Like CCI, DWVEI
is primarily engaged in the business of conceptualizing, designing and constructing sets and
props for use in television programs and similar projects. With the incorporation of DWVEI,
petitioner engaged the services of DWVEI.

Respondents Banting and Hilario were served their respective notices of the closure of CCI.

Respondents filed a complaint for illegal dismissal, illegal deduction, non-payment of meal
allowances, with prayer for damages against CCI and petitioner before the National Labor
Relations Commission (NLRC).

Labor Arbiter found respondents to have been illegally dismissed, and ordering CCI and
petitioner to reinstate them to their former or equivalent positions and to jointly and
severally pay their full backwages and other allowances.

In finding petitioner jointly and severally liable with CCI for illegal dismissal, the LA noted
that CCI appears to have been created, organized and operated under the direction, control
and management of petitioner. CCI was principally formed to perform the functions and
activities formerly undertaken by petitioner's ABS-CBN Scenic Department whose functions
and activities of handling design, construction and provision of props and sets are necessary
in petitioner's business. CCI was also affiliated with and/or a subsidiary of petitioner and
majority of its stockholders are also the major stockholders of petitioner. As found by the
LA, petitioner had a clear hand in the purported closure of the latter and the subsequent
creation of DWVEI.
NLRC and CA affirmed the decision of the LA.

ISSUE: Whether petitioner was correctly held jointly and severally liable with CCI for
payment of monetary award to respondents.

RULING: Yes. The doctrine of piercing the veil of corporate fiction is a legal precept that
allows a corporation's separate personality to be disregarded under certain circumstances so
that a corporation and its stockholders or members, or a corporation and another related
corporation should be treated as a single entity. In PNB v. Hydro Resources Contractors
Corp., 28 the Court said that:

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: (1)
defeat public convenience as when the corporate fiction is used as a vehicle for the evasion
of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or (3) alter ego cases, where a corporation is
merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation. 29

The present case falls under the third instance where a corporation is merely a farce since it
is a mere alter ego or business conduit of person or in this case a corporation. "The
corporate mask may be removed or the corporate veil pierced when the corporation is just
an alter ego of a person or of another corporation." 30 By looking at the circumstances
surrounding the creation, incorporation, management and closure and cessation of business
operations of CCI, it cannot be denied that CCJ's existence was dependent upon Ty and
petitioner. First, the internal Scenic Department which initially handled the props and set
designs of petitioner was abolished and shut down and CCI was incorporated to cater to the
props and set design requirements of petitioner, thereby transferring most of its personnel
to CCI. Notably, CCI was a subsidiary of petitioner and was incorporated through the
collaboration of Ty and the other major stockholders and officers of petitioner. CCI provided
services mainly to petitioner and its other subsidiaries. Petitioner clearly exercised control
and influence in the management and closure of CCI's operations, which justifies the ruling
of the appellate court and labor tribunals of disregarding their separate corporate
personalities and treating them as a single entity.

WHEREFORE, premises considered, the petition is DENIED.

G.R. No. 167291               January 12, 2011

PRINCE TRANSPORT, Inc. and Mr. RENATO CLAROS, Petitioners, vs. DIOSDADO

GARCIA et. al Respondents.

PERALTA, J.:

FACTS: Respondents were employees of Prince Transport, Inc. (PTI), a company engaged in
the business of transporting passengers by land; respondents were hired either as drivers,
conductors, mechanics or inspectors and Operations Manager; in addition to their regular
monthly income, respondents also received commissions however, said commissions were
reduced; this led respondents and other employees of PTI to hold a series of meetings to
discuss the protection of their interests as employees; in December 1997, PTI employees
requested for a cash advance, but the same was denied by management which resulted in
demoralization on the employees' ranks; later, PTI acceded to the request of some, but not
all, of the employees; the foregoing circumstances led respondents to form a union for their
mutual aid and protection; in order to block the continued formation of the union, PTI
caused the transfer of all union members and sympathizers to one of its sub-companies,
Lubas Transport (Lubas); despite such transfer, the schedule of drivers and conductors, as
well as their company identification cards, were issued by PTI; the daily time records,
tickets and reports of the respondents were also filed at the PTI office; and, all claims for
salaries were transacted at the same office; later, the business of Lubas deteriorated
because of the refusal of PTI to maintain and repair the units being used therein, which
resulted in the virtual stoppage of its operations and respondents' loss of employment.

Various complaints filed by herein respondents charging petitioners with illegal dismissal,
unfair labor practice and illegal deductions.

Petitioners, on the other hand, contend that herein respondents were no longer their
employees, since they all transferred to Lubas at their own request; and petitioners have
nothing to do with the management and operations of Lubas as well as the control and
supervision of the latter's employees.

Labor Arbiter rendered a Decision, dismissing the complaints against petitioners and
declaring that the complainants are illegally dismissed by Lubas Transport. CA reversed the
decision of LA.

ISSUE: Whether or not Prince Transport and Lubas Transprot was should be held jointly and
severally liable to the employees.

RULING: The Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of
PTI. A settled formulation of the doctrine of piercing the corporate veil is that when two
business enterprises are owned, conducted and controlled by the same parties, both law
and equity will, when necessary to protect the rights of third parties, disregard the legal
fiction that these two entities are distinct and treat them as identical or as one and the
same.26 In the present case, it may be true that Lubas is a single proprietorship and not a
corporation. However, petitioners’ attempt to isolate themselves from and hide behind the
supposed separate and distinct personality of Lubas so as to evade their liabilities is
precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent
and remedy.

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that
it was Prince Transport who made the decision to transfer its employees to the former?
Besides, Prince Transport never regarded Lubas Transport as a separate entity. What is
telling is the fact that in a memorandum issued by PTI, petitioner company admitted that
Lubas is one of its sub-companies.28 

WHEREFORE, the instant petition is denied.

G.R. No. 177493 March 19, 2014

ERIC GODFREY STANLEY LIVESEY, Petitioner, vs. BINSWANGER PHILIPPINES, INC.

and KEITH ELLIOT, Respondent.

BRION, J.

FACTS: Philippines Strategic Property Services, Inc. (CBB) hired Livesey as Director and
Head of Business Space Developmen. He was later on appointed as Managing Director and
his salary was increased. Allegedly, despite the several deals for CBB he drew up, CBB failed
to pay him a significant portion of his salary. For this reason, he was compelled to resign.

Livesey filed a complaint for illegal dismissal with money claims against CBB and Paul
Dwyer. CBB denied liability. LA found that Livesey had been illegally dismissed. Thereafter,
the parties entered into a compromise agreement7 which LA approved in an order Under the
agreement, Livesey was to receive US$31,000.00 to be paid by CBB to Livesey or his
authorized representative upon the signing of the agreement. Further, the agreement
provided that unless and until the agreement is fully satisfied, CBB shall not: (1) sell,
alienate, or otherwise dispose of all or substantially all of its assets or business; (2)
suspend, discontinue, or cease its entire, or a substantial portion of its business operations;
(3) substantially change the nature of its business; and (4) declare bankruptcy or
insolvency.

CBB paid Livesey the initial amount of US$13,000.00, but not the next two installments as
the company ceased operations. In reaction, Livesey moved for the issuance of a writ of
execution. LA but it was not enforced. Livesey then filed a motion for the issuance of an
alias writ of execution,10 alleging that in the process of serving respondents the writ,
respondents, in a clear and willful attempt to avoid their liabilities to complainant x x x have
organized another corporation.11 He claimed that there was evidence showing that CBB and
Binswanger Philippines, Inc. (Binswanger) are one and the same corporation, pointing out
that CBB stands for Chesterton Blumenauer Binswanger.12 Invoking the doctrine of piercing
the veil of corporate fiction, Livesey prayed that an alias writ of execution be issued.

ISSUE: Whether or not the incorporation of Binswanger is to avoid liability that CBB has
with Livesey.

RULING: Yes. Under the doctrine of piercing the corporate veil, the corporate existence may
be disregarded where the entity is formed or used for non-legitimate purposes, such as to
evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to
carry out similar or inequitable considerations, other unjustifiable aims or intentions, 45 in
which case, the fiction will be disregarded and the individuals composing it and the two
corporations will be treated as identical.46

In the present case, the Court saw an indubitable link between CBB’s closure and
Binswanger’s incorporation. CBB ceased to exist only in name; it re-emerged in the person
of Binswanger for an urgent purpose— to avoid payment by CBB of the last two installments
of its monetary obligation to Livesey, as well as its other financial liabilities. Freed of CBB’s
liabilities, especially that owing to Livesey, Binswanger can continue, as it did continue,
CBB’s real estate brokerage business.

Livesey’s evidence, whose existence the respondents never denied, converged to show this
continuity of business operations from CBB to Binswanger. It was not just coincidence that
Binswanger is engaged in the same line of business CBB embarked on: (1) it even holds
office in the very same building and on the very same floor where CBB once stood; (2)
CBB’s key officers, Elliot, no less, and Catral moved over to Binswanger, performing the
tasks they were doing at CBB; (3) notwithstanding CBB’s closure, Binswanger’s Web Editor
(Young), in an e-mail correspondence, supplied the information that Binswanger is "now
known" as either CBB (Chesterton Blumenauer Binswanger or as Chesterton Petty, Ltd., in
the Philippines; (4) the use of Binswanger of CBB’s paraphernalia (receiving stamp) in
connection with a labor case where Binswanger was summoned by the authorities, although
Elliot claimed that he bought the item with his own money; and (5) Binswanger’s takeover
of CBB’s project with the PNB.

While the ostensible reason for Binswanger’s establishment is to continue CBB’s business
operations in the Philippines, which by itself is not illegal, the close proximity between CBB’s
disestablishment and Binswanger’s coming into existence points to an unstated but urgent
consideration which was to evade CBB’s unfulfilled financial obligation to Livesey under the
compromise agreement.47
G.R. No. 205925, June 20, 2018

BASES CONVERSION AND DEVELOPMENT AUTHORITY, Petitioner, v. COMMISSIONER

OF INTERNAL REVENUE, Respondent.

REYES, JR., J.:

FACTS: BCDA filed a petition for review with the CTA in order to preserve its right to pursue
its claim for refund of the Creditable Withholding Tax (CWT) which was paid under protest
from March 19, 2008 to October 8, 2008. The CWT which BCDA paid under protest was in
connection with its sale of the BCDA-allocated units as its share in the Serendra Project
pursuant to the Joint Development Agreement with Ayala Land, Inc.4

The petition for review was filed with a Request for Exemption from the Payment of Filing
Fees. CTA denied BCDA's Request for Exemption and ordered it to pay the filing fees within
five days from notice.6

BCDA moved for reconsideration which was denied by the CTA BCDA was once again
ordered to pay the filing fees within five days from notice.

ISSUE: Whether or not BCDA, a government instrumentality, be exempted from payment of

filing fees.

RULING: Yes. BCDA is a government instrumentality vested with corporate powers.

As such, it is exempt from the payment of docket fees.

Section 21, Rule 141 of the Rules of Court provides that, “the Republic of the
Philippines, its agencies and instrumentalities, are exempt from paying the legal
fees provided in this rule. Local governments and government-owned or controlled
corporations with or without independent charters are not exempt from paying such fees.”

WHEREFORE, premises considered, the present petition is GRANTED.

G.R. No. 193462               February 4, 2014

DENNIS A.B. FUNA, Petitioner, vs. MANILA ECONOMIC AND CULTURAL OFFICE and
the COMMISSION ON AUDIT, Respondents.

PEREZ, J.

FACTS: The Philippines formally ended its official diplomatic relations with the government
in Taiwan, when the country and the People’s Republic of China (PROC) expressed mutual
recognition thru the Joint Communiqué of the Government of the Republic of the Philippines
and the Government of the People’s Republic of China (Joint Communiqué).8

Hence, despite ending their diplomatic ties, the people of Taiwan and of the Philippines
maintained an unofficial relationship facilitated by the offices of the Taipei Economic and
Cultural Office, for the former, and the MECO, for the latter.11

From the moment it was incorporated, it is the MECO that oversees the rights and interests
of Overseas Filipino Workers (OFWs) in Taiwan; promotes the Philippines as a tourist and
investment destination for the Taiwanese; and facilitates the travel of Filipinos and
Taiwanese from Taiwan to the Philippines, and vice versa.17

On August 2010, petitioner sent a letter18 to the COA requesting for a "copy of the latest
financial and audit report" of the MECO. The petitioner made the request on the belief that
the MECO, being under the "operational supervision" of the Department of Trade and
Industry (DTI), is a government owned and controlled corporation (GOCC) and thus subject
to the audit jurisdiction of the COA.19

In A memorandum, however, Assistant Commissioner revealed that the MECO was "not
among the agencies audited by any of the three Clusters of the Corporate Government
Sector."21

ISSUE:

Whether or not MECO is a government instrumentality, and must be subjected for audit by
COA.

RULING:

MECO is not a government instrumentality. MECO is a non-governmental entity. However,

under existing laws, the accounts of the MECO pertaining to the "verification fees" it collects
on of the DOLE as well as the fees it was authorized to collect under Section 2(6) of EO No.
15, s. 2001, are subject to the audit jurisdiction of the COA. Such fees pertain to the
government and should be audited by the COA.
Under Section 2(1) [5] of Article IX-D of the Constitution, 77 the COA was vested with the
"power, authority and duty" to "examine, audit and settle" the "accounts" of the following
entities:

x x x x…

5. Non-governmental entities receiving subsidy or equity, directly or indirectly, from

or through the government, which are required by law or the granting institution to
submit to the COA for audit as a condition of subsidy or equity.78

Section 29(1) of the Audit Code, however, limits the audit of the foregoing non-
governmental entities only to "funds xxx coming from or through the government."81  In
addition to the foregoing, the Administrative Code also empowers the COA to examine and
audit "the books, records and accounts" of public utilities "in connection with the fixing of
rates of every nature, or in relation to the proceedings of the proper regulatory agencies,
for purposes of determining franchise tax."83
 G.R. No. 218787, December 08, 2015

LEO Y. QUERUBIN, MARIA CORAZON M. AKOL, AND AUGUSTO C.

LAGMAN, Petitioners, v. COMMISSION ON ELECTIONS EN BANC, Respondent.

VELASCO JR., J.:

FACTS: COMELEC en banc through its Resolution released the bidding documents for the
"Two-Stage Competitive Bidding for the Lease of Election Management System (EMS) and
Precinct-Based Optical Mark Reader (OMR) or Optical Scan (OP-SCAN) System." 2
The joint venture of Smartmatic-TIM Corporation (SMTC), Smartmatic International Holding
B.V., and Jarltech International Corporation (collectively referred to as "Smartmatic JV"
responded to the call and submitted bid for the project on the scheduled date. Indra
Sistemas, S.A. (Indra) and MIRU Systems Co. Ltd. likewise signified their interest in the
project, but only Indra, aside from Smartmatic JV, submitted its bid.7

During the opening of the bids, Smartmatic JV, in a sworn certification, informed the BAC
that one of its partner corporations, SMTC, has a pending application with the Securities and
Exchange Commission (SEC) to amend its Articles of Incorporation (AOI) . The amendments
adopted as early as November 12, 2014 were approved by the SEC on December 10,
2014.9 On even date, Smartmatic JV and Indra participated in the end-to-end testing of
their initial technical proposals for the procurement project before the BAC.

Upon evaluation of the submittals, the BAC, through its Resolution declared Smartmatic JV
and Indra eligible to participate in the second stage of the bidding process. 10  Finding that
the joint venture satisfied the requirements in the published Invitation to Bid, Smartmatic
JV was declared to have tendered a complete and responsive Overall Summary of the
Financial Proposal.11 

Subsequently, for purposes of post-qualification evaluation, the BAC required Smartmatic JV

to submit additional documents and a prototype sample of its OMR. 13

After the conduct of post-qualification, the BAC disqualified Smartmatic JV. Aggrieved,
Smartmatic JV filed a Protest. COMELEC En Banc granted the protest. The petitioners
questioned the order to grant protest on the ground AOI is an eligibility requirement that
Smartmatic JV cannot be deemed to have complied with.

ISSUE: Whether or not the COMELEC acted with grave abuse of discretion in declaring
Smartmatic JV eligible in spite of the alleged nullity of, or defect in, SMTC's AOI.

RULING: No. The submission of an AOI is not an eligibility criterion

It bears stressing on the outset that no issue has been brought forth questioning the
technical capability of Smartmatic JV's 0MR+. Instead, the pivotal point to be resolved
herein is Petitioner would first insist that the submission of an AOI is an eligibility
requirement that Smartmatic JV cannot be deemed to have complied with. In addressing
this assertion, a discussion of the qualification process is apropos.

It is a basic tenet that except only in cases in which alternative methods of procurement are
allowed, all government procurement shall be done by competitive bidding. This is initiated
by the BAC, which publishes an Invitation to Bid for contracts under competitive bidding in
order to ensure the widest possible dissemination thereof.81

Answering the invitation, interested participants submit their bids using the forms specified
in the bidding documents.

The BAC then sets out to determine the eligibility of the prospective bidders based on their
compliance with the eligibility requirements set forth in the Invitation to Bid and their
submission of the legal, technical and financial documents required under RA 9184 and the
GPRA IRR.83 

Based on the rule, the BAC's function in determining the eligibility of a bidder during pre-
qualification is ministerial in the sense that it only needs to countercheck the completeness
and sufficiency of the documents submitted by a bidder against a checklist of requirements.
It cannot, therefore, declare a bidder ineligible for failure to submit a document which, in
the first place, is not even required in the bid documents.

The COMELEC in this case, did not impose AOI as a requirement. As can be gleaned in the
Instruction to Bidders, AOI is not one of the requirements to present to determine eligibility.
G.R. No. 147402             January 14, 2004

ENGR. RANULFO C. FELICIANO, in his capacity as General Manager of the Leyte

Metropolitan Water District (LMWD), Tacloban City, petitioner, vs. COMMISSION ON
AUDIT, Chairman CELSO D. GANGAN, Commissioners RAUL C. FLORES and
EMMANUEL M. DALMAN, and Regional Director of COA Region VIII, respondents.

CARPIO, J.:

FACTS: A Special Audit Team from COA Regional Office audited the accounts of LMWD.
Subsequently, LMWD received a letter from COA requesting payment of auditing fees. As
General Manager of LMWD, petitioner sent a reply informing COA’s Regional Director that
the water district could not pay the auditing fees. Petitioner cited as basis for his action
Sections 6 and 20 of Presidential Decree 198, as well as Section 18 of Republic Act No.
6758. Petitioner wrote COA through the Regional Director asking for refund of all auditing
fees LMWD previously paid to COA.

On 16 March 2000, petitioner received COA Chairman Resolution denying his requests.

The COA also denied petitioner’s request for COA to stop charging auditing fees as well as
petitioner’s request for COA to refund all auditing fees already paid.

ISSUE: Whether or not a Local Water District ("LWD") created under PD 198, as amended,
is a government-owned or controlled corporation subject to the audit jurisdiction of COA.

RULING: Yes. LWDs are not private corporations because they are not created under the
Corporation Code. LWDs are not registered with the Securities and Exchange Commission.
Section 14 of the Corporation Code states that "[A]ll corporations organized under this code
shall file with the Securities and Exchange Commission articles of incorporation x x x." LWDs
have no articles of incorporation, no incorporators and no stockholders or members. There
are no stockholders or members to elect the board directors of LWDs as in the case of all
corporations registered with the Securities and Exchange Commission.

LWDs exist by virtue of PD 198, which constitutes their special charter. Since under the
Constitution only government-owned or controlled corporations may have special charters,
LWDs can validly exist only if they are government-owned or controlled.

Therefore, COA may charge GOCCs "actual audit cost" but GOCCs must pay the same
directly to COA and not to COA auditors. Petitioner has not alleged that COA charges LWDs
auditing fees in excess of COA’s "actual audit cost." Neither has petitioner alleged that the
auditing fees are paid by LWDs directly to individual COA auditors. Thus, petitioner’s
contention must fail.
G. R. No. 175352               January 18, 2011

DANTE V. LIBAN, REYNALDO M. BERNARDO and SALVADOR M. VIARI, Petitioners,

vs. RICHARD J. GORDON, Respondent.
PHILIPPINE NATIONAL RED CROSS, Intervenor.

LEONARDO-DE CASTRO, J.

FACTS: In the Decision,4 the Court held that respondent did not forfeit his seat in the
Senate when he accepted the chairmanship of the PNRC Board of Governors, as "the office
of the PNRC Chairman is not a government office or an office in a government-owned or
controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987
Constitution."5 The Decision, however, further declared void the PNRC Charter "insofar as it
creates the PNRC as a private corporation" and consequently ruled that "the PNRC should
incorporate under the Corporation Code and register with the Securities and Exchange
Commission if it wants to be a private corporation."

In its Motion for Partial Reconsideration, PNRC prays that the Court sustain the
constitutionality of its Charter.

ISSUE: Whether or not PNRC is a government-owned or controlled corporation.

RULING: No. However, their purpose and vision is in line with the welfare of the public
interest, they collaborate with the government to carry out their purpose and vision. In the
Decision of July 15, 2009, the Court recognized the public service rendered by the PNRC as
the government’s partner in the observance of its international commitments, to wit:

The PNRC is a non-profit, donor-funded, voluntary, humanitarian organization, whose

mission is to bring timely, effective, and compassionate humanitarian assistance for the
most vulnerable without consideration of nationality, race, religion, gender, social status, or
political affiliation. The PNRC provides six major services: Blood Services, Disaster
Management, Safety Services, Community Health and Nursing, Social Services and
Voluntary Service.

By requiring the PNRC to organize under the Corporation Code just like any other private
corporation, the Decision of July 15, 2009 lost sight of the PNRC’s special status under
international humanitarian law and as an auxiliary of the State, designated to assist it in
discharging its obligations under the Geneva Conventions. Although the PNRC is called to be
independent under its Fundamental Principles, it interprets such independence as inclusive
of its duty to be the government’s humanitarian partner. To be recognized in the
International Committee, the PNRC must have an autonomous status, and carry out its
humanitarian mission in a neutral and impartial manner.

However, in accordance with the Fundamental Principle of Voluntary Service of National

Societies of the Movement, the PNRC must be distinguished from private and profit-making
entities. It is the main characteristic of National Societies that they "are not inspired by the
desire for financial gain but by individual commitment and devotion to a humanitarian
purpose freely chosen or accepted as part of the service that National Societies through its
volunteers and/or members render to the Community."23

The PNRC, as a National Society of the International Red Cross and Red Crescent
Movement, can neither "be classified as an instrumentality of the State, so as not to lose its
character of neutrality" as well as its independence, nor strictly as a private corporation
since it is regulated by international humanitarian law and is treated as an auxiliary of the
State.24

Based on the above, the sui generis status of the PNRC is now sufficiently established.
G.R. No. 102300. March 17, 1993.

CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA et. al

CAMPOS, JR., J.

FACTS: September 4 of 1985, he (private respondent Crescencio Velez) deposited his unfunded
personal checks with his current account with the petitioner. But prior to depositing said checks, he
would present his personal checks to a bank officer asking the latter to have his personal checks
immediately credited as if it were a cash deposit and at the same time assuring the bank officer that
his personal checks were fully funded. Having already gained the trust and confidence of the officers
of the bank because of his past transactions, the bank's officer would always accommodate his
request. After his requests are granted which is done by way of the bank officer affixing his signature
on the personal checks, private respondent Cresencio Velez would then deposit his priorly approved
personal checks to his current account and at the same time withdraw sums of money from said
current account by way of petitioner bank's manager's check. Private respondent would then deposit
petitioner bank's manager's check to his various current accounts in other commercial banks to
cover his previously deposited unfunded personal checks with petitioner bank. Naturally, petitioner
bank and its officers never discovered that his personal check deposits were unfunded. On the
contrary, it gave the petitioner bank the false impression that private respondent's construction
business was doing very well and that he was one big client who could be trusted. This deceptive
and criminal scheme he did every banking day without fail from September 4, 1985 up to March 11,
1986. Instead of using the proceeds of his withdrawals to cover his unfunded personal checks, he
ran away with petitioner bank's money.

Subsequently, on August 19, 1986, petitioner bank filed a criminal complaint against private
respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa (six counts)
under Article 315 par. 2(d) of the Revised Penal Code.

Inspite of 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. In a opposition petitioner bank attached another special power of
attorney made by, Vice President and highest ranking officer of Citibank. In an Order respondent
judge denied private respondents' oral motion to declare petitioner bank as in default.

ISSUE: Whether 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.

RULING: Yes. In the corporate hierarchy, there are three levels of control: (1) the board of directors,
which is responsible for corporate policies and the general management of the business affairs of
the corporation; (2) the officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business operations; and (3) the
stockholders who have the residual power over fundamental corporate changes, like amendments of
the articles of incorporation. However, 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.

As a general rule, all corporate powers are to be exercised by the board of directors, exceptions are
made where the Code provides otherwise.