Cont Piercing The Veil.docx

PNB vs. Ritratto Group, Inc., 362 SCRA 216 (2001) FACTS: Petitioner Philippine National Bank is a domestic corporation organized and existing under Philippine law. Meanwhile, respondents Ritratto Group, Inc., Riatto International, Inc. and Dadasan General Merchandise are domestic corporations, likewise, organized and existing under Philippine law. On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a subsidiary company of PNB, organized and doing business in Hong Kong, extended a letter of credit in favor of the respondents in the amount of US$300,000.00 secured by real estate mortgages constituted over four (4) parcels of land in Makati City. Respondents made repayments of the loan incurred by remitting those amounts to their loan account with PNB-IFL in Hong Kong. However, as of April 30, 1998, their outstanding obligations stood at US$1,497,274.70. Pursuant to the terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact PNB, notified the respondents of the foreclosure of all the real estate mortgages and that the properties subject thereof were to be sold at a public auction on May 27, 1999 at the Makati City Hall. On May 25, 1999, respondents filed a complaint for injunction with prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order before the Regional Trial Court of Makati. The Executive Judge of the Regional Trial Court of Makati issued a 72-hour temporary restraining order. At the hearing of the application for preliminary injunction, petitioner was given a period of seven days to file its written opposition to the application. On June 25, 1999, petitioner filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of any privity between the petitioner and respondents. On June 30, 1999, the trial court judge issued an Order for the issuance of a writ of preliminary injunction, which writ was correspondingly issued on July 14, 1999. On October 4, 1999, the motion to dismiss was denied by the trial court judge for lack of merit. Petitioner, thereafter, in a petition for certiorari and prohibition assailed the issuance of the writ of preliminary injunction before the Court of Appeals. In the impugned decision, the appellate court dismissed the petition. ISSUE: Whether petitioner may be sued by the respondents on the ground of parent-subsidiary relationship between PNB and PNB-IFL. RULING: NO. In their Comment, respondents argue that even assuming arguendo that petitioner and PNB-IFL are two separate entities, petitioner is still the party-in-interest in the application for preliminary injunction because it is tasked to commit acts of foreclosing respondents' properties. Respondents maintain that the entire credit facility is void as it contains stipulations in violation of the principle of mutuality of contracts. In addition, respondents justified the act of the court a quo in applying the doctrine of "Piercing the Veil of Corporate Identity" by stating that petitioner is merely an alter ego or a business conduit of PNB-IFL. Respondents sought to enjoin and restrain PNB from the foreclosure and eventual sale of the property in order to protect their rights to said property by reason of void credit facilities as bases for the real estate mortgage over the said property. The contract questioned is one entered into between respondent and PNB-IFL, not PNB. In other words, herein petitioner is an agent with limited authority and specific duties under a special power of attorney incorporated in the real estate mortgage. It is not privy to the loan contracts entered into by respondents and PNB-IFL. Yet, despite the recognition that petitioner is a mere agent, the respondents in their complaint prayed that the petitioner PNB be ordered to re-compute the rescheduling of the interest to be paid by them in accordance with the terms and conditions in the documents evidencing the credit facilities, and crediting the amount previously paid to PNB by herein respondents. Clearly, petitioner not being a part to the contract has no power to re-compute the interest rates set forth in the contract. Respondents, therefore, do not have any cause of action against petitioner.

The trial court, however, in its Order dated October 4, 1994, ruled that since PNB-IFL, is a wholly owned subsidiary of defendant Philippine National Bank, the suit against the defendant PNB is a suit against PNB-IFL.10 In justifying its ruling, the trial court, citing the case of Koppel Phil. Inc. vs. Yatco,11 reasoned that the corporate entity may be disregarded where a corporation is the 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.12 We disagree. The general rule is that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter. The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiary's separate existence may be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The courts may in the exercise of judicial discretion step in to prevent the abuses of separate entity privilege and pierce the veil of corporate entity. Similarly, in this jurisdiction, we have held that the doctrine of piercing the corporate veil is an equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the 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. Aside from the fact that PNB-IFL is a wholly owned subsidiary of petitioner PNB, there is no showing of the indicative factors that the former corporation is a mere instrumentality of the latter are present. Neither is there a demonstration that any of the evils sought to be prevented by the doctrine of piercing the corporate veil exists. Inescapably, therefore, the doctrine of piercing the corporate veil based on the alter ego or instrumentality doctrine finds no application in the case at bar. All told, respondents do not have a cause of action against the petitioner as the latter is not privy to the contract the provisions of which respondents seek to declare void. Accordingly, the case before the Regional Trial Court must be dismissed and the preliminary injunction issued in connection therewith, must be lifted. IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED. The Orders dated June 30, 1999 and October 4, 1999 of the Regional Trial Court of Makati, Branch 147 in Civil Case No. 99-1037 are hereby ANNULLED and SET ASIDE and the complaint in said case DISMISSED. SO ORDERED. Land Bank of the Philippines vs Court of Appeals In 1980, ECO Management Corporation (ECO) obtained loans amounting to about P26 million from Land Bank. ECO defaulted in its payment but in 1981, ECO submitted a Payment Plan with the hope of restructuring its loan. The plan was rejected and Land Bank sued ECO. It impleaded Emmanuel C. Oñate, the majority stockholder of ECO who is serving as the Chairman and treasurer of ECO. The trial court ruled in favor of Land Bank but Oñate was absolved from liabilities. The Court of Appeals affirmed the decision of the trial court. Land Bank appealed as it wanted Oñate to be personally liable on the following grounds (among others): a) ECO stands for Emmanuel C. Oñate, b) Oñate is the majority stockholder, c) ECO was formed ostensibly to allow Oñate to acquire loans from Land Bank which he used for his personal advantage, d) Oñate holds two positions in the corporation, and e) ECO never held any board meeting which just shows only Oñate was in control of the corporation. ISSUE: Whether or not Oñate should be held personally. HELD: No. Land Bank was not able to produce sufficient evidence to prove its claim. A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those persons composing it as well as from any other legal entity to which it may be related. The corporate fiction is only disregarded when the fiction is used to defeat public convenience, justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. This is likewise true where the corporate entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity. None of the foregoing was proved by Land Bank. The mere fact that Oñate owned the majority of the shares of ECO is not a ground to conclude that Oñate and ECO is one and the same. Mere ownership by a single stockholder of all or nearly all of the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of separate corporate personalities.

Anent the issue of the corporate name, the fact that Oñate’s initials coincide with the corporate name ECO is not sufficient to disregard the corporate fiction. Even if ECO does stand for “Emmanuel C. Oñate”, it does not mean that the said corporation is merely a dummy of Oñate. A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation acquiring the name or as in this case, the initials of one of its shareholders. PADILLA VS CA -- PDF ADALIA B. FRANCISCO and MERRYLAND DEVELOPMENT CORPORATION, petitioners, vs. RITA C. MEJIA, as Executrix of Testate Estate of ANDREA CORDOVA VDA. DE GUTERREZ, respondent. G.R. No. 141617, August 14, 2001 GONZAGA-REYES,J.: FACTS: Andrea Cordova Vda. de Gutierrez (Gutierrez) was the registered owner of a parcel of land in Camarin, Caloocan City. Gutierrez and Cardale Financing and Realty Corporation (Cardale) executed a Deed of Sale with Mortgage relating to the lots for the consideration of P800,000.00. Owing to Cardale's failure to settle its mortgage obligation, Gutierrez filed a complaint for rescission of the contract. However, Cardale, which was represented by petitioner Adalia B. Francisco (Francisco) in her capacity as Vice-President and Treasurer of Cardale, lost interest in proceeding with the presentation of its evidence and the case lapsed into inactive status for a period of about fourteen years. In the meantime, the mortgaged parcels of land became delinquent in the payment of real estate taxes which culminated in their levy and auction sale in satisfaction of the tax arrears. The highest bidder for the three parcels of land was petitioner Merryland Development Corporation (Merryland), whose President and majority stockholder is Francisco. Thereafter, Francisco filed an undated Manifestation to the effect that the properties subject of the mortgage had been levied upon and sold at a tax delinquency sale. Francisco further claimed that the delinquency sale had rendered the issues in Civil Case moot and academic. Mejia, in her capacity as executrix of the Estate of Gutierrez, filed with the RTC of Quezon City a complaint for damages with prayer for preliminary attachment against Francisco, Merryland and the Register of Deeds of Caloocan City. The RTC held that plaintiff Mejia, as executrix of Gutierrez's estate, failed to establish by clear and convincing evidence her allegations that Francisco controlled Cardale and Merryland and that she had employed fraud by intentionally causing Cardale to default in its payment of real property taxes on the mortgaged properties so that Merryland could purchase the same by means of a tax delinquency sale. There are times when the corporate fiction will be disregarded: (1) where all the members or stockholders commit illegal act; (2) where the corporation is used as dummy to commit fraud or wrong; (3) where the corporation is an agency for a parent corporation; and (4) where the stock of a corporation is owned by one person. The RTC held that none of the foregoing reasons can be applied to the incidents in this case and the stock of either of the two corporation is not owned by one person (defendant Francisco). Except for defendant Adalia B. Francisco, the incorporators and stockholders of one corporation are different from the other. The Court of Appeals, reversed the trial court, holding that the corporate veil of Cardale and Merryland must be pierced in order to hold Francisco and Merryland solidarily liable since these two corporations were used as dummies by Francisco. ISSUE #1: Whether or not petitioner Francisco acted in bad faith in her dealings. HELD: YES. The Court, after an assiduous study of this case, is convinced that the totality of the circumstances appertaining conduce to the inevitable conclusion that petitioner Francisco acted in bad faith. Not only did Francisco allow the auction sale to take place, but she used her other corporation (Merryland) in participating in the auction sale and in acquiring the very properties which her first corporation (Cardale) had mortgaged to Gutierrez. It is dicta in corporation law that a corporation is a juridical person with a separate and distinct personality from that of the stockholders or members who compose it. However, when the legal fiction of the separate corporate personality is abused, such as when the same is used for fraudulent or wrongful ends, the courts have not hesitated to pierce the corporate veil. If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but, when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded. In such cases, the corporation will be considered as a mere association of persons. The members or stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers and stockholders. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect

fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the merealter 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. It is exceedingly apparent to the Court that the totality of Francisco's actions clearly betray an intention to conceal the tax delinquencies, levy and public auction of the subject properties from the estate of Gutierrez and the trial court in Civil Case No. Q-12366 until after the expiration of the redemption period when the remotest possibility for the recovery of the properties would be extinguished. Consequently, Francisco had effectively deprived the estate of Gutierrez of its rights as mortgagee over the three parcels of land which were sold to Cardale. ISSUE #2: Whether or not Merryland may be held solidarily liable with Francisco. HELD: NO. We cannot agree, however, with the Court of Appeals' decision to hold Merryland solidarily liable with Francisco. The only act imputable to Merryland in relation to the mortgaged properties is that it purchased the same and this by itself is not a fraudulent or wrongful act. No evidence has been adduced to establish that Merryland was a mere alter ego or business conduit of Francisco. Time and again it has been reiterated 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. Neither has it been alleged or proven that Merryland is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of Cardale. Even assuming that the businesses of Cardale and Merryland are interrelated, this alone is not justification for disregarding their separate personalities, absent any showing that Merryland was purposely used as a shield to defraud creditors and third persons of their rights.32 Thus, Merryland's separate juridical personality must be upheld. San Miguel Corp. Employees Union-PTGWO, etc. vs Confesor, San Miguel Corporation, Magnolia Corp. and San Miguel Foofd, Inc. Sept. 19, 1996 FACTS: On June 28, 1990, petitioner-union SMC Union-PTGWO concluded a CBA with SMC to take effect upon the expiration of the Previous CBA on June 30, 1989. This CBA provided that the agreement shall remain in force until June 30, 1992, but that in accordance with Article 253-A of the labor Code as amended. The terms of the agreement, insofar as the representation aspect is concerned, shall b e for 5 yrs from July 1, 1999 to June 30, 1994. In keeping with its vision and strategy for business expansion, SMC management informed its employees in a letter dated August 13, 1991 that the company will undergo restructuring. Effective October 1, 1991, the Magnolia and the Feeds and Livestock Division were spun-off and became two distinct corporations. Notwithstanding the spin-offs, the CBA in force and the effect. As a result of spin-offs: 1. Each of the companies are run by, supervised and controlled by different management teams including separate human resource/ personnel managers. 2. Each company enforces its own administrative and operational rules and policies and are not dependent on each other in their operations. 3. Each entity maintains separate financial statements and are audited separately from each other. The CBA negotiation started in July 1992. During the negotiations, the petitioner-union insisted that the bargaining unit of SMC should still include the employees of the spun-off corporations, Magnolia and SMFI, and the renegotiated terms of the CBA shall be effective only for the remaining two years is until June 30, 1994. SMC, on the other hand, contended that the members/employees who had moved to Magnolia and SMFI automatically ceased to be part of the bargaining iunit at the SMC, and that, the CBA should be effective three years in accordance with Articke 253-A of the LAbor Code. ISSUES: 1. WON the duration of the renegotiated terms of the CBA is three yrs or two; and 2. WON the bargaining unit of the SMCincludes also employees of Magnolia and SMFI. Pertinent to the first issue is Art. 253-A of the LC, as amended. The supreme court quoting a book, defines the two classes of CBA provisions.

The “representation aspect” refers to the identity and majority status of the union and the negotiated CBA as the excusive bargaining representative of the appropriate bargaining unit concerned. “All other provisions” simply refers to the rest of the CBA, economic as well non-economic provisions, other than representational. Then the court explains the three and five yr term. RULING: 1. Obviously, the framers of the law wanted to maintain industrial peace and stability having both the management and the labor work harmoniously together without any disturbance. Thus no outside union can enter the establishment within 5 years and challenge the status of the incumbent union as the exclusive bargaining agent. Likewise, the terms and conditions of employment (economic and non-economic) cannot be questioned by the employers and employees during the period of the effectivity of the CBA. The CBA is in contract between the parties and the parties must respect the terms and conditions of the agreement. Notably, the framers of the law did not give the fixed terms and conditions of employment. It can be gleaned frm their discussions that it was left to the parties to fix the period. The issue as to the non-representation provisions of the CBA need not be labored especially when we take note of the Memorandum of the Sec. of Labor dated Feb 24, 1994. In the said memorandum, the Sec of LAbor had the occasion to clarify the term of the renegotiated terms of the CBA vis-à-vis the term of the bargaining agent, to wit: As a matter of policy the parties are encouraged to enter into a renegotiated CBA with a term which would coincide with the aforesaid 5 yr term of the bargaining representative. In the event however that the parties, by mutual agreement, enter into a renegotiated contract with the term of 3 yrs or one which does not coincide with the said 5 yr term, and the said agreement is ratified by the said majority members in the bargaining unit, the subject contract is valid and legal and therefore, binds the contracting parties. The same will however not adversely affect the right of another union to challenge the majority status of the incumbent bargaining agent within 60 days before the lapse of the original 5 yr term of the CBA. Thus, we do not find grave abuse of discretion on the part of the Sec of LAbor in the ruling that the effcectivity of the renegotiated terms of the CBA shall be for 3 years. 2. Magnolia and SMFI became distict entities with separate juridical personalities. Thus, they cannot belong to a single bargaining unit as held in the case of Diagton vs Ople. Petitioner-union’s attempt to include the employees of Magnolia and SMFI in the SMC bargaining unit so as to have a bigger mass base of employees has, therefore, no more valid ground. Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or commonality of interests. The employees sought to be represented by the collective bargaining agent must have substantial mutual interests in terms of employment and working conditions evidenced by the type of work they performed. Considering the spin-offs, the companies would consequently have their respective and distinctive concerns in terms of nature of work, wages, hours of work and other conditions of employment. Interests of employees in different companies perforce differ. SMC is engaged in the business of beer manufacturing. Magnolia is involved in the manufacturing and processing products while the SMFI is involved in the production of feeds and processing of chicken. The nature of their products and scale of their businedd may require different compensation packages. The different companies may have different volumes of work and different working conditions. For such reason, the employees of the different companies see the need to group themselves together to organize themselves into distinct and organize groups. It would then be best to have separate bargaining units for different companies where employees can bargain separately according to their needs and according to their own working conditions. PNB, NASUDECO vs. Andrada Electric and Engineering Company (2002) Doctrine: Basic is the rule that a corporation has a legal personality distinct and separate from the persons and entities owning it. The corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and purchased at the resulting public auction by the Development Bank of the Philippines (DBP), will not make PNB liable for the PASUMIL’s contractual debts to respondent. Facts: 1. PASUMIL (Pampanga Sugar Mills) engaged the services of Andrada Electric for electrical rewinding, repair, the construction of a power house building, installation of turbines, transformers, among others. Most of the services were partially paid by PASUMIL, leaving several unpaid accounts.

2. On August 1975, PNB, a semi-government corporation, acquired the assets of PASUMIL—assets that were earlier foreclosed by the DBP. 3. On September 1975, PNB organized NASUDECO (National Sugar Development Corporation), under LOI No. 311 to take ownership and possession of the assets and ultimately, to nationalize and consolidate its interest in other PNB controlled sugar mills. NASUDECO is a semi-government corporation and the sugar arm of the PNB. 4. Andrada Electric alleges that PNB and NASUDECO should be liable for PASUMIL’s unpaid obligation amounting to 500K php, damages, and attorney’s fees, having owned and possessed the assets of PASUMIL. Issue: Whether PNB and NASUDECO may be held liable for PASUMIL’s liability to Andrada Electric and Engineering Company. Held: NO. Basic is the rule that a corporation has a legal personality distinct and separate from the persons and entities owning it. The corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and purchased at the resulting public auction by the Development Bank of the Philippines (DBP), will not make PNB liable for the PASUMIL's contractual debts to Andrada Electric & Engineering Company (AEEC). Piercing the veil of corporate fiction may be allowed only if the following elements concur: (1) control not mere stock control, but complete domination² not only of finances, but of policy and business practice in respect to the transaction attacked, must have been such 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 a fraud or a wrong to perpetuate the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of plaintiff's legal right; and (3) the said control and breach of duty must have proximately caused the injury or unjust loss complained of. The absence of the foregoing elements in the present case precludes the piercing of the corporate veil. First, other than the fact that PNB and NASUDECO acquired the assets of PASUMIL, there is no showing that their control over it warrants the disregard of corporate personalities. Second, there is no evidence that their juridical personality was used to commit a fraud or to do a wrong; or that the separate corporate entity was farcically used as a mere alter ego, business conduit or instrumentality of another entityor person. Third, AEEC was not defrauded or injured when PNB and NASUDECO acquired the assets of PASUMIL. Hence, although the assets of NASUDECO can be easily traced to PASUMIL, the transfer of the latter's assets to PNB and NASUDECO was not fraudulently entered into in order to escape liability for its debt to AEEC. There was NO merger or consolidation with respect to PASUMIL and PNB. Respondent further claims that petitioners should be held liable for the unpaid obligations of PASUMIL by virtue of LOI Nos. 189-A and 311, which expressly authorized PASUMIL and PNB to merge or consolidate (allegedly). On the other hand, petitioners contend that their takeover of the operations of PASUMIL did not involve any corporate merger or consolidation, because the latter had never lost its separate identity as a corporation. A consolidation is the union of two or more existing entities to form a new entity called the consolidated corporation. A merger, on the other hand, is a union whereby one or more existing corporations are absorbed by another corporation that survives and continues the combined business.

The merger, however, does not become effective upon the mere agreement of the constituent corporations. Since a merger or consolidation involves fundamental changes in the corporation, as well as in the rights of stockholders and creditors, there must be an express provision of law authorizing them. For a valid merger or consolidation, the approval by the SEC of the articles of merger or consolidation is required. These articles must likewise be duly approved by a majority of the respective stockholders of the constituent corporations. In the case at bar, there is no merger or consolidation with respect to PASUMIL and PNB. The procedure prescribed under Title IX of the Corporation Code was not followed. In fact, PASUMIL’s corporate existence, as correctly found by the CA, had not been legally extinguished or terminated. Further, prior to PNB’s acquisition of the foreclosed assets, PASUMIL had previously made partial payments to respondent for the former’s obligation in the amount of P777,263.80. As of June 27, 1973, PASUMIL had paid P250,000 to respondent and, from January 5, 1974 to May 23, 1974, another P14,000. Neither did petitioner expressly or impliedly agree to assume the debt of PASUMIL to respondent. LOI No. 11 explicitly provides that PNB shall study and submit recommendations on the claims of PASUMIL’s creditors. Clearly, the corporate separateness between PASUMIL and PNB remains, despite respondent’s insistence to the contrary. Lipat v. Pacific Banking Corporation (G.R. No. 142435) Jun4by Jai Cdn Facts: Petitioners, the spouses Alfredo Lipat and Estelita Burgos Lipat, owned “Bela’s Export Trading” (BET), a single proprietorship engaged in the manufacture of garments for domestic and foreign consumption, which was managed by their daughter Teresita B. Lipat. The spouses also owned the “Mystical Fashions” in the United States, which sells goods imported from the Philippines through BET, managed by Mrs. Lipat. In order to facilitate the convenient operation of BET, a special power of attorney was executed appointing Teresita Lipat to obtain loans and other credit accommodations from respondent Pacific Banking Corporation (Pacific Bank) and to execute mortgage contracts on properties owned or co-owned by her as security for the obligations. By virtue of the special power of attorney, a loan was secured for and in behalf of Mrs. Lipat and BET, a Real Estate Mortgage was executed over their property. BET was then incorporated into a family corporation named Bela’s Export Corporation (BEC) engaged in the business of manufacturing and exportation of all kinds of garments and utilized the same machineries and equipment previously used by BET. Eventually, the loan was later restructured in the name of BEC and subsequent loans were obtained with the corresponding promissory notes duly executed by Teresita on behalf of the corporation. BEC defaulted in payments when it became due and demandable. Consequently, the real estate mortgage was foreclosed and was sold at public auction to respondent Eugenio D. Trinidad as the highest bidder. The spouses Lipat filed a complaint alleging, among others, that the promissory notes, trust receipt, and export bills were all ultra vires acts of Teresita as they were executed without the requisite board resolution of the Board of Directors of BEC. They also averred that assuming said acts were valid and binding on BEC, the same were the corporation’s sole obligation, it having a personality distinct and separate from the spouses. The trial court ruled that there was convincing and conclusive evidence proving that BEC was a family corporation of the Lipats. As such, it was a mere extension of petitioners’ personality and business and a mere alter ego or business conduit of the Lipats established for their own benefit. The Lipats timely appealed which however, was dismissed by the appellate court for lack of merit. Hence, this petition. Issue: Whether or not the doctrine of piercing the veil of corporate fiction is applicable in this case. Ruling: Petitioners’ contentions fail to persuade this Court. A careful reading of the judgment of the RTC and the resolution of the appellate court show that in finding petitioners’ mortgaged property liable for the obligations of BEC, both courts below relied upon the alter ego doctrine or instrumentality rule, rather than fraud in piercing the veil of corporate fiction. When the corporation is the mere alter ego or business conduit of a person, the separate personality of the corporation may be disregarded. This is commonly referred to as the

“instrumentality rule” or the alter ego doctrine, which the courts have applied in disregarding the separate juridical personality of corporations. We find that the evidence on record demolishes, rather than buttresses, petitioners’ contention that BET and BEC are separate business entities. Note that Estelita Lipat admitted that she and her husband, Alfredo, were the owners of BET and were two of the incorporators and majority stockholders of BEC. It is also undisputed that Estelita Lipat executed a special power of attorney in favor of her daughter, Teresita, to obtain loans and credit lines from Pacific Bank on her behalf. Incidentally, Teresita was designated as executive-vice president and general manager of both BET and BEC, respectively. We note further that: (1) Estelita and Alfredo Lipat are the owners and majority shareholders of BET and BEC, respectively; (2) both firms were managed by their daughter, Teresita; (3) both firms were engaged in the garment business, supplying products to “Mystical Fashion,” a U.S. firm established by Estelita Lipat; (4) both firms held office in the same building owned by the Lipats; (5) BEC is a family corporation with the Lipats as its majority stockholders; (6) the business operations of the BEC were so merged with those of Mrs. Lipat such that they were practically indistinguishable; (7) the corporate funds were held by Estelita Lipat and the corporation itself had no visible assets; (8) the board of directors of BEC was composed of the Burgos and Lipat family members; (9) Estelita had full control over the activities of and decided business matters of the corporation; and that (10) Estelita Lipat had benefited from the loans secured from Pacific Bank to finance her business abroad and from the export bills secured by BEC for the account of “Mystical Fashion.” It could not have been coincidental that BET and BEC are so intertwined with each other in terms of ownership, business purpose, and management. Apparently, BET and BEC are one and the same and the latter is a conduit of and merely succeeded the former. Petitioners’ attempt to isolate themselves from and hide behind the corporate personality of BEC so as to evade their liabilities to Pacific Bank is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy. In our view, BEC is a mere continuation and successor of BET and petitioners cannot evade their obligations in the mortgage contract secured under the name of BEC on the pretext that it was signed for the benefit and under the name of BET. We are thus constrained to rule that the Court of Appeals did not err when it applied the instrumentality doctrine in piercing the corporate veil of BEC. Wherefore, the petition is denied.

Uy v. Villanueva FACTS 

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Pursuant to the Countrywide Rural Bank of La Carlota (CB) having liquidity and funding problems, several depositors decided to form a Committee of Depositors. o The Committee was to protect their collective interests and increase chances of recovering deposits. o Yusay: elected Chairman; Uy: elected Secretary (petitioners). o They also assumed temporary administrative control of CB (approved by the Board). o They dealt with courtesy resignations tendered by bank employees. The BSP placed them under receivership, appointed a liquidator, and processed claims for deposits. Realizing their bid to rehabilitate CB failed, the Committee disbanded, Eventually, cases for illegal dismissal were filed – Amelia Bueno, Amelia Valdex & Lyn Villa, and Arlene Villanueva (respondent). o Villanueva: she was a regular employee who received an acceptance of her resignation but insists that she never sent a resignation letter. o NLRC: Petitioners are solidarily liable to Villanueva. o NLRC on appeal: dismissed for being filed out of time, but after a hearing, affirmed liability o CA: dismissed for technical grounds (ex: no material attachments) o MR: denied, thus this petition for certiorari Uy: dismissal on technical grounds = denial of substantial justice o Further, LA’s ruling was based only on Villanueva’s pleadings. Villanueva: petition merely reiterated man arguments and questions of fact that had already been passed upon; no new gounds. Meanwhile, in the Bueno case (another illegal dismissal case mentioned in 4th bullet), it was found that there was no evidence that Uy was elected as interim president and secretary and therefore had no legal authority to act for CB. – this was filed in the present case as a manifestation (like an FYI).

ISSUE + RULING: Was the dismissal illegal? YES. Should Petitioners be held liable for the illegal dismissal? NO.

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**Re: CivPro issue – this case is an exception to Rule 45 grounds in committing GADLEJ because the merits of the case were not examined first due to mere technicalities. First, determine whether there was an er-ee relationship using the four-fold test: 1. Whether er has power of selection and engagement of an ee; 2. Whether he has control of the ee with respect to the means and methods by which the work is to be accomplished; **most important, accdg to the Court** 3. Whether he has the power to dismiss; and 4. Whether the ee was paid wages. In this case, all elements are attributable to the bank itself, not the petitioners. o Having been adjudicated by the NLRC decision as final and executory, the bank’s liability is set…but not the Petitioners’.  They only assumed limited administrative control of the bank as part of the Committee.  There is no showing that they took over the management and control of CB, therefore: no er-ee relationship between them and Villanueva.  Even assuming that there is a relationship, corporate officers are not personally responsible for the money claims of discharged employees, unless they acted with evident malice and bad faith in terminating employment.  Also, piercing of the veil of corporate fiction does not apply because there is no wrong being justified, no public convenience defeated, etc. Finally, in Bueno, stare decisis is that Uy is not an officer therefore, she really cannot be held personally liable.

ASJ Corporation and Antonio San Juan vs Spouses Efren and Maura Evangelista FACTS This case is a petition for review on certiorari on the decision of the Court of Appeals affirming the decision of the Regional Trial Court of Malolos, Bulacan Branch 9 in Civil Case No. 745-M-93. Respondents Efren and Maura Evangelista are owners of R.M. Sy Chicks, a business engaged in selling chicks and egg by-products. For hatching and incubation of eggs, they availed the services of ASJ Corp., owned by San Juan and his family. After years of doing business with the ASJ Corp., the respondents delayed payments for the services of ASJ Corp, prompting owner San Juan to refuse the release of the hatched egg. The respondents tendered Php 15,000 to San Juan for partial payment which San Juan accepted but he still insisted on the full settlement of respondents’ accounts before releasing the chicks and by-products. He also threated the respondents that he would impound their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with him. The parties tried to settle amicably before police authorities but failed. The respondents then filed with the RTC an action for damages based on the retention of the chicks and by-products by the petitioners. The RTC held ASJ Corp. and San Juan solidarily liable for the actual and moral damages and attorney’s fees. On appeal, the Court of Appeals affirmed the decision and added exemplary damages. Hence, this petition. ISSUE Whether or not the petitioner’s retention of the chicks and by-products on account of respondents’ failure to pay the corresponding fees justified. HELD Yes. The retention has legal basis, although the threats had none. Under Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express stipulation to that effect. It was the respondents who violated the reciprocity in contracts, hence, the petitioners have the right of retention. This case is a case on non-performance of reciprocal obligation. Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a creditor of the other such that the performance of one is conditioned upon the simultaneous fulfillment of the other. Since respondents are guilty of delay in the performance of their obligations, they are liable to pay petitioners actual damages. The petition was partly granted. The respondents were ordered to pay petitioners for actual damages. The actual, exemplary and moral damages laid down by the Court of Appeals were retained. Borromeo vs CA ----- wala Pantranco North Express, Inc., vs. NLRC & Urbano Suñiga

259 SCRA 161 (1996) Facts: Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined the Pantranco Employees Association-PTGWO. He continued in petitioner's employ until August 12, 1989, when he was retired at the age of fifty-two (52) after having rendered twenty five years' service. The basis of his retirement was the compulsory retirement provision of the collective bargaining agreement between the petitioner and the aforenamed union. On February 1990, private respondent filed a complaint for illegal dismissal against petitioner with NLRC. The complaint was consolidated with two other cases of illegal dismissal having similar facts and issues, filed by other employees, non-union members. Labor Arbiter rendered his decision finding that the three complainants were illegally and unjustly dismissed and order the respondent to reinstate them to their former or substantially equivalent positions without loss of seniority rights with full back wages and other benefits. Petitioner appealed to public respondent, which issued the questioned Resolution affirming the labor arbiter's decision in toto. Issue: Whether or not the CBA stipulation on compulsory retirement after twenty-five years of service is legal and enforceable. Ruling: The Court rules that the CBA stipulation is legal and enforceable. The bone of contention in this case is the provision on compulsory retirement after 25 years of service. Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement 8 between petitioner company and the union states: Section 1. The COMPANY shall formulate a retirement plan with the following main features: (e) The COMPANY agrees to grant the retirement benefits herein provided to regular employees who may be separated from the COMPANY for any of the following reasons: (5) Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to the COMPANY, whichever comes first, and the employee shall be compulsory retired and paid the retirement benefits herein provided." The said Code provides: Art. 287. Retirement. — Any employee may be retired upon reaching the retirement age established in the Collective Bargaining Agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining or other agreement." The Court agrees with petitioner and the Solicitor General. Art. 287 of the Labor Code as worded permits employers and employees to fix the applicable retirement age at below 60 years. Moreover, providing for early retirement does not constitute diminution of benefits. In almost all countries today, early retirement, i.e., before age 60, is considered a reward for services rendered since it enables an employee to reap the fruits of his labor — particularly retirement benefits, whether lump-sum or otherwise — at an earlier age, when said employee, in presumably better physical and mental condition, can enjoy them better and longer. As a matter of fact, one of the advantages of early retirement is that the corresponding retirement benefits, usually consisting of a substantial cash windfall, can early on be put to productive and profitable uses by way of income-generating investments, thereby affording a more significant measure of financial security and independence for the retiree who, up till then, had to contend with life's vicissitudes within the parameters of his fortnightly or weekly wages. Thus we are now seeing many CBAs with such early retirement provisions. And the same cannot be considered a diminution of employment benefits.

Being a product of negotiation, the CBA between the petitioner and the union intended the provision on compulsory retirement to be beneficial to the employees-union members, including herein private respondent. When private respondent ratified the CBA with the union, he not only agreed to the CBA but also agreed to conform to and abide by its provisions. Thus, it cannot be said that he was illegally dismissed when the CBA provision on compulsory retirement was applied to his case. Incidentally, we call attention to Republic Act No. 7641, known as "The Retirement Pay Law", which went into effect on January 7, 1993. Although passed many years after the compulsory retirement of herein private respondent, nevertheless, the said statute sheds light on the present discussion when it amended Art. 287 of the Labor Code, to make it read as follows: Retirement. — Any employee may be retired upon reaching the retirement age establish in the collective bargaining agreement or other applicable employment contract. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment may retire . . ." The aforequoted provision makes clear the intention and spirit of the law to give employers and employees a free hand to determine and agree upon the terms and conditions of retirement. Providing in a CBA for compulsory retirement of employees after twenty-five (25) years of service is legal and enforceable so long as the parties agree to be governed by such CBA. The law presumes that employees know what they want and what is good for them absent any showing that fraud or intimidation was employed to secure their consent thereto Mariano v. Petron, G.R. No. 169438, 21 January 2010, 610 SCRA 487 Summary: The Aure Group, owners of a parcel of land in Tagaytay (“Property”), entered into a lease contract over the Property with ESSO Standard Eastern, Inc., (“ESSO Eastern”), a foreign corporation doing business in the country through its subsidiary ESSO Standard Philippines, Inc. (“ESSO Philippines”). The lease contract contained an assignment veto clause barring the parties from assigning the lease without prior consent of the other. Later, without notice to the Aure group, ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation (“PNOC”). ESSO Philippines, whose corporate name was successively changed to Petrophil Corporation then to Petron Corporation (“Petron”), took possession of the Property. It appears from the stipulation of the parties during trial that the acquisition of ESSO Philippines by PNOC included the acquisition of the leasehold right over the Property. Petitioner Mariano (“Petitioner”), who later bought the Property from the Aure Group and obtained title thereto under his name, sued Petron to rescind the lease contract and recover possession of the Property. Among his arguments was that the assignment veto clause in the lease contract was violated when ESSO Eastern sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the Property, without seeking the Aure Group’s prior consent. Petron countered that the lease contract was not breached because PNOC merely acquired ESSO Eastern’s shares in ESSO Philippines, a separate corporate entity. The underlying assumption of Petron’s assertion was that ESSO Philippines (not ESSO Eastern) initially held the leasehold right over the Property. Supreme Court Ruling: The Supreme Court held that Petron’s reliance on its separate corporate personality, as well as its unstated assumption that ESSO Philippines (not ESSO Eastern) initially held the leasehold right over the Property were both wrong. Citing the conditions for piercing the veil of corporate personality, it found that ESSO Philippines was a mere branch of ESSO Eastern since: (1) by ESSO Eastern’s admission in the lease contract, it is a foreign corporation organized under the laws of the State of Delaware, U.S.A., duly licensed to transact business in the Philippines, and doing business therein under the business name and style of Esso Standard Philippines; and (2) the lease contract was executed by ESSO Eastern, not ESSO Philippines, as lessee, with the Aure Group as lessor. ESSO Eastern leased the Property for the use of ESSO Philippines, acting as ESSO Eastern’s Philippine branch. Consistent with such status, ESSO Philippines took possession of the Property after the execution of the lease contract. Thus, for purposes of the lease contract, ESSO Philippines was a mere alter ego of ESSO Eastern. Thus, PNOC’s complete buyout of ESSO Philippines was not limited to the shares in the latter corporation, but also carried with it the transfer to PNOC of any proprietary interest that ESSO Eastern may hold through ESSO Philippines,

including ESSO Eastern’s lease over the Property. As the Aure Group gave no prior consent to the transaction between ESSO Eastern and PNOC, ESSO Eastern violated the lease contract’s assignment veto clause. G.R. No. 159108 June 18, 2012GOLD LINE TOURS, INC., Petitioner, vs.HEIRS OF MARIA CONCEPCION LACSA, Respondents. FACTS: Ma. Concepcion Lacsa (Concepcion) boarded a Goldline passenger bus owned and operated by Travel &Tours Advisers, Inc. Before reaching their destination, the Goldline bus collided with a passenger jeepneys and as a result, a metal part of the jeepney was detached and struck Concepcion in the chest, causing her instant death. Then, Concepcion’s heirs, represented by Teodoro Lacsa, instituted in the RTC a suit against Travel & Tours Advisers Inc. to recover damages arising from breach of contract of carriage. The RTC ruled in favor of the heirs of Concepcion and thereafter, Gold Line appealed the decision to the CA but the CA dismissed the appeal for failure of the defendants to pay the docket and other lawful fees within the required period as provided in Rule 41, Section 4 of the Rules of Court. The dismissal became final. Thereafter, the heirs of concepcion moved for the issuance of a writ of execution to implement the decision and RTC granted their motion. Petitioner submitted a verified third party claim, claiming that the tourist bus be returned to petitioner because it was the and that petitioner was a corporation entirely different from Travel & Tours Advisers, Inc. then RTC dismissed petitioner’s verified third-party claim, observing that the identity of Travel & Tours Adivsers, Inc. could not be divorced from that of petitioner considering that Cheng had claimed to be the operator as well as the President/Manager/incorporator of both entities; and that Travel & Tours Advisers, Inc. had been known in Sorsogon as Goldline. They (Goldline) appealed the decision to CA but CA dismissed their petition and affirmed the decision of RTC. Hence this appeal to the Supreme Court where petitioner seeks to reverse the decision of CA. ISSUE: Whether or not the proposition of the third party claimant by the petitioner where Travel & Tours Advises, Inc. has an existence separate and/or distinct from Gold Line Tours, Inc. RULING: The Supreme Court the DENIED the petition for review on certiorari, and AFFIRMED the decision promulgated by the Court of Appeals. The two corporations are liable to the death of Ma. Concepcion Lacsa. The Court was not persuaded by the proposition of the third party claimant that a corporation has an existence separate and/or distinct from its members insofar as this case at bar is concerned, for the reason that whenever necessary for the interest of the public or for the protection of enforcement of their rights, the notion of legal entity should not and is not to be used to defeat public convenience, justify wrong, protect fraud or defend crime. In the case of Palacio vs. Fely Transportation Co., the Supreme Court held that: "Where the main purpose in forming the corporation was to evade one’s subsidiary liability for damages in a criminal case, the corporation may not be heard to say that it has a personality separate and distinct from its members, because to allow it to do so would be to sanction the use of fiction of corporate entity as a shield to further an end subversive of justice (La Campana Coffee Factory, et al. v. Kaisahan ng mga Manggagawa, etc., et al., L-5677, May 25, 1953). This is what the third party claimant wants to do including the defendant in this case, to use the separate and distinct personality of the two corporation as a shield to further an end subversive of justice by avoiding the execution of a final judgment of the court. The RTC thus rightly ruled that petitioner might not be shielded from liability under the final judgment through the use of the doctrine of separate corporate identity. Truly, this fiction of law could not be employed to defeat the ends of justice. BLUE SKY ET AL VS. BLAS AND SILVANO DIGEST DECEMBER 19, 2016 ~ VBDIAZ BLUE SKY TRADING COMPANY, INC. and/or JOSE TANTIANSU and LINDA TANTIANSU, Petitioners vs. ARLENE P. BLAS and JOSEPH D. SILVANO,Respondents, G.R. No. 190559, March 7, 2012 The Case Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assailing th Decision2 and the Resolution3 of the Court of Appeals . Antecedent Facts Petitioner Blue Sky Trading Company, Inc. (Blue Sky) is a duly registered domestic corporation engaged in the importation and sale of medical supplies and equipment. Petitioner Jose G. Tantiansu, Jr. (Jose) is Blue Sky’s vice president for operations while petitioner Linda G. Tantiansu (Linda) is its assistant corporate secretary. The respondents

Arlene P. Blas (Arlene) and Joseph D. Silvano (Joseph) were regular employees of Blue Sky and they respectively held the positions of stock clerk and warehouse helper before they were dismissed from service on February 5, 2005. On January 29, 2005, Lorna N. Manalastas (Lorna), Blue Sky’s warehouse supervisor, wrote Jose a memorandum6 informing the latter that six pairs of intensifying screens were missing. Lorna likewise stated that when a certain “Boy” conducted an inventory on October 2004, the screens were still completely accounted for. On January 31, 2005, Helario Adonis, Jr. (Helario), warehouse personnel, was summoned by Linda, Jose’s wife Alice Tantiansu, and human resources department head Jean B. De La Paz (Jean). Helario was asked to admit his participation in the theft of the missing screens. While he was offered to be paid a separation pay if he would confess complicity with the alleged theft, he pleaded utter innocence. On February 1, 2005, Jean notified Helario of his termination from service on the ground of his failure to properly account for and maintain a balance of the company’s stock inventories, hence, resulting in Blue Sky’s loss of trust and confidence in him.7 The day after, Blue Sky promptly filed with the Department of Labor and Employment (DOLE) an establishment termination report8 indicating therein Helario’s dismissal from service for cause. On February 3, 2005, Jean issued notices to explain/preventive suspension9to Arlene, Joseph, delivery personnel Jayde Tano-an (Jayde) and maintenance personnel/driver Wilfredo Fasonilao (Wilfredo). The notices informed them that they were being accused of gross dishonesty in connection with their alleged participation in and conspiracy with other employees in committing theft against company property, specifically relative to the loss of the six intensifying screens. They were placed under preventive suspension pending investigation and were thus required to file their written explanations within 48 hours from receipt of the notices. On February 4, 2005, Arlene submitted to Jean a handwritten memorandum denying knowledge or complicity with the theft of the intensifying screens. Jayde and Wilfredo also filed their written explanations denying any involvement in the theft which took place and professing their dedication and loyalty to Blue Sky.12 On February 5, 2005, Jean issued to Arlene, Joseph, Jayde and Wilfredo notices of dismissal for cause13 stating therein that evidence that they had conspired with each other to commit theft against company property was too glaring to ignore. Blue Sky had lost its trust and confidence on them and as an act of self-preservation, their termination from service was in order. On February 7, 2005, Blue Sky filed with the DOLE an establishment termination report stating therein the dismissal of Arlene, Joseph, Jayde and Wilfredo.14 On February 8, 2005, Arlene, Joseph, Helario, Jayde and Wilfredo filed with the National Labor Relations Commission (NLRC) a complaint for illegal dismissal and suspension, underpayment of overtime pay, and non-payment of emergency cost of living allowance (ECOLA), with prayers for reinstatement and payment of full backwages. The complaint was docketed as NLRC NCR Case No. 00-02-01351-05. Meanwhile, an entrapment operation was conducted by the police during which Jayde and Helario were caught allegedly attempting to sell to an operative an ultrasound probe worth around P400,000.00 belonging to Blue Sky. On April 22, 2005, Quezon City Inquest Prosecutor Arleen Tagaban issued a resolution15 recommending the filing in court of criminal charges against Jayde and Helario. On May 2005, before the complaint which was filed with the NLRC can be resolved, Helario, Jayde and Wilfredo executed affidavits of desistance16stating therein that their termination by Blue Sky was for cause and after observance of due process. The Ruling of the Labor Arbiter On November 17, 2005, Labor Arbiter Gaudencio P. Demaisip, Jr. (LA Demaisip) dismissed the complaint relative to Helario, Jayde and Wilfredo as a consequence of their filing of the affidavits of desistance. As to Arlene and Joseph, LA Demaisip denied their claims of illegal suspension and dismissal and for payment of ECOLA and overtime pay. Claims for ECOLA and overtime pay were not discussed by the complainants[,] hence, they should be denied.17 Arlene and Joseph assailed before the NLRC the decision rendered by LA Demaisip.18 The Rulings of the NLRC On November 29, 2007, the NLRC ordered the reinstatement of Arlene and Joseph and the payment to them of full backwages and ten percent attorney’s fees. Aggrieved, Arlene and Joseph filed before the CA a Petition for Certiorari22under Rule 65 of the Rules of Court to challenge the above quoted NLRC resolution. The Ruling of the CA In the decision rendered on October 26, 2009, which is now the subject of the instant petition, the CA found merit in the claims advanced by Arlene and Joseph.

The CA denied the petitioners’ motion for reconsideration, hence, the instant petition. The Issues I. WHETHER OR NOT THE EVIDENCE ADDUCED BEFORE THE NLRC BY PETITIONERS ARE SUFFICIENT TO ESTABLISH THE CHARGES WHICH WAS (sic) BASIS FOR THE LOSS OF TRUST AND CONFIDENCE AGAINST RESPONDENTS[-]EMPLOYEES. II. WHETHER OR NOT THE CA WAS CORRECT IN GRANTING THE PETITION FOR CERTIORARI FILED BY RESPONDENTS AND LATER, DENYING PETITIONERS’ MOTION FOR RECONSIDERATION.24 The Petitioners’ Arguments In Salvador v. Philippine Mining Service Corporation,25 it was ruled that proof beyond reasonable doubt of the employee’s misconduct or dishonesty is not required to justify loss of confidence, it being sufficient that there is substantial basis for loss of trust. Thus, an employer should not be held liable for dismissing the services of an employee sincerely believed to have at least known or participated in the commission of theft against company property. The employer is not required to present proofs of the employee’s actual taking or unlawful possession of company property. In fact, in Dole Philippines, Inc. v. NLRC, et al.,26 the court held that where the dismissal for loss of confidence is based on suspected theft of company property on the part of the employee, it remains a valid cause for dismissal even if the employee is subsequently acquitted. Findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect but even finality when they are supported by substantial evidence.27 Thus, the CA erred when it ruled that the NLRC gravely abused its discretion in ordering the dismissal of the respondents’ complaint. The Respondents’ Contentions In their Comment,28 the respondents cited Section 1, Rule 45 of the Rules of Court to argue that only questions of law can be raised in a petition for review on certiorari. In the case at bar, the petitioners raise a factual question, to wit, the alleged sufficiency of the evidence they presented to justify the dismissal of Arlene and Joseph on the basis of loss of trust and confidence. The petitioners thus call for an examination of the probative value of the evidence offered by the parties, which is beyond the province of a petition filed under Rule 45 of the Rules of Court. This Court’s Ruling Substantial evidence of actual breach by an employee is required from an employer to be able to justify the former’s dismissal from service on the basis of an alleged participation in theft of company property. However, in the case at bar, Blue Sky had failed to discharge the burden of proof imposed upon it. We note that the petitioners essentially raise the sole question of whether they had proven by substantial evidence the charges of theft against Arlene and Joseph which led to the latter’s termination from service on the ground of loss of trust and confidence. We rule in the negative. In the case at bar, we agree with the petitioners that mere substantial evidence and not proof beyond reasonable doubt is required to justify the dismissal from service of an employee charged with theft of company property. However, we find no error in the CA’s findings that the petitioners had not adequately proven by substantial evidence that Arlene and Joseph indeed participated or cooperated in the commission of theft relative to the six missing intensifying screens so as to justify the latter’s termination from employment on the ground of loss of trust and confidence. During the entrapment operation conducted by police operatives, Jayde and Helario were caught attempting to sell an ultrasound probe allegedly belonging to Blue Sky. Thereafter, Jayde, Helario and Wilfredo withdrew their complaints for illegal dismissal against the company. Arlene and Joseph, however, pursued their claims. Nonetheless, Blue Sky construed the result of the entrapment operation to mean that there was a conspiracy among the five employees to commit theft of company property. In the reply filed by the petitioners to the respondents’ position paper filed before the LA, the former alleged that in a letter, Jayde, Helario and Wilfredo implicated Arlene and Joseph as participants and conspirators in the commission of theft.34 However, we note that the petitioners’ allegation was bare since the letter supposedly written by Jayde, Helario and Wilfredo was not offered as evidence. Further, Blue Sky alleged that the ultrasound probe was among the items found missing in the inventory conducted in December 2004. We observe though that the employees were dismissed for alleged theft of six intensifying screens. In the termination notices, no references were made at all to a missing ultrasound probe. Further, we notice that both parties mentioned a certain “Boy” who conducted the inventory in October 2004. There is no dispute that at that time, the six intensifying screens were still completely accounted for. Further, Arlene and Joseph claimed that it was Lorna who had control and custody of the stocks as she was the warehouse supervisor. “Boy” and Lorna were not called upon by either of the parties to corroborate their claims. “Boy” and Lorna could have provided

important information as to the time line and the manner the intensifying screens were lost. If “Boy” and Lorna remain under Blue Sky’s employ, it is the company which is in a better position to require the two to execute affidavits relative to what they know about the missing screens. Only the following had been established without dispute: (a) the fact of loss of the six intensifying screens; (b) an entrapment operation was successfully conducted by the police operatives who caught Jayde and Helario in the act of attempting to sell an ultrasound probe which allegedly belonged to Blue Sky; and (c) Jayde, Helario and Wilfredo filed their affidavits of desistance to withdraw their complaints for illegal dismissal against Blue Sky while Arlene and Joseph pursued their complaints. In its November 29, 2007 Decision, the NLRC found that Arlene and Joseph, a stock clerk and a warehouse helper, respectively, did not have unlimited access to or custody over Blue Sky’s property. The CA, in the decision and resolution assailed herein, while ordering the reinstatement of the November 29, 2007 NLRC Decision, found that Arlene and Joseph exercised custody over company property. Be that as it may, we observe that the nature of Arlene and Joseph’s regular duties while under Blue Sky’s employ and their specific participation in or knowledge of the theft of the intensifying screens remain uncertain. Thus, whether or not Arlene and Joseph had actual custody over company property, we agree with the CA that the petitioners had failed to establish by substantial evidence the charges which led to Arlene and Joseph’s dismissal from service. While we empathize with Blue Sky’s loss and understand that its actions were merely motivated by its intent to protect the interests of the company, no blanket authority to terminate all employees whom it merely suspects as involved in the commission of theft resides in its favor. We thus reiterate the doctrine enunciated in Functional, Inc.35 that the employer’s case succeeds or fails on the strength of its evidence and not on the weakness of that adduced by the employee, in keeping with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence presented by them. Notwithstanding our affirmation of the CA’s finding that the petitioners had failed to discharge the burden of proof imposed upon them to justify the dismissal of Arlene and Joseph, we deem it proper to modify the assailed decision and resolution in the manner to be discussed hereunder. Blue Sky committed no impropriety in imposing preventive suspension against Arlene and Joseph pending investigation of the theft allegedly committed against the company. We, however, find no merit in the challenge made by Arlene and Joseph against the legality of the preventive suspension imposed by Blue Sky upon them pending the investigation of the alleged theft. In lieu of reinstatement, Arlene and Joseph are entitled to an award of separation pay. If reinstatement proves impracticable, and hardly in the best interest of the parties, perhaps due to the lapse of time since the employee’s dismissal, or if the employee decides not to be reinstated, the latter should be awarded separation pay in lieu of reinstatement.37 In the case at bar, Arlene and Joseph were dismissed from service on February 5, 2005. We find that the lapse of more than seven years already renders their reinstatement impracticable. Further, from the stubborn stances of the parties, to wit, the petitioners’ insistence that dismissal was valid on one hand, and the respondents’ express prayer for the payment of separation pay on the other, we find that reinstatement would no longer be in the best interest of the contending parties. Arlene and Joseph are entitled to the payment of ECOLA, but not to 13th month, service incentive leave and overtime pay. It is well-settled that in labor cases, the burden of proving payment of monetary claims rests on the employer.38 We find nothing in the records to indicate that the petitioners had indeed paid ECOLA to Arlene and Joseph. In the resolution issued on January 30, 2009, the NLRC found proof by way of the petitioners’ annex to their position paper that Arlene and Joseph already received their 13th month and service incentive leave pay for the year 2005.39 The respondents had not specifically refuted the NLRC’s findings, hence, we sustain the same. Anent the respondents’ claim for overtime pay, we find no ample basis to grant it as they had not offered any proof to show that they in fact rendered such service. The decision rendered by the NLRC on November 29, 2007, which the CA affirmed, did not award in favor of Arlene and Joseph moral and exemplary damages. Consequently, we delete the award in the respondents’ favor of ten percent attorney’s fees. If there is no evidence to show that the dismissal of an employee had been carried out arbitrarily, capriciously and maliciously and with personal ill-will, moral damages cannot be awarded.40 If moral damages cannot be awarded, the consequence is that there can also be no award of exemplary damages and attorney’s fees.41 In the case at bar, albeit we find Arlene and Joseph’s dismissal from service as illegal, we cannot attribute bad faith on the part of Blue Sky which merely acted with an intent to protect its interest. Hence, we find as lacking in basis the NLRC’s award of ten percent attorney’s fees in the respondents’ favor.1âwphi1

Jose and Linda cannot be held solidarily liable for the dismissal of Arlene and Joseph in the absence of proof that they acted with malice and bad faith. As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and members.42 In illegal dismissal cases, corporate officers may only be held solidarily liable with the corporation if the termination was done with malice or bad faith.43We find that the aforementioned circumstance did not obtain in the case of Jose and Linda relative to Arlene and Joseph’s dismissal from service. ISSUES WON

The SC En Banc has Jurisdiction over the case

FACTS 1) On August 14, 2000, David Lu, Rosa Go, Silvano Ludo and CL Corporation filed with the Regional Trial Court (RTC) of Cebu City a complaint against Paterno Lu Ym, Sr., Paterno Lu Ym, Jr., Victor Lu Ym, John Lu Ym, Kelly Lu Ym, and Ludo & Luym Development Corporation (LLDC) for Declaration of Nullity of Share Issue, Receivership and Dissolution. 2) The plaintiffs, shareholders of LLDC, claimed that the Lu Ym father and sons, as members of the Board of Directors, caused the issuance to the latter of 600,000 of the corporation’s unsubscribed and unissued shares for less than their actual value. They then prayed for the dissolution of the corporation and the appointment of a receiver during the pendency of the action. 3) The defendants moved to dismiss the complaint but were denied and placed LLDC under receivership. 4) Defendants Lu Ym father and sons elevated the matter to the Court of Appeals through a petition for certiorari but was still denied. They re-filed the petition and was granted. 5) The Lu Ym father and sons then filed with the trial court a motion to lift the order of receivership over LLDC. Before the matter could be heard, David instituted a petition for certiorari and prohibition before the CA on the issue of the motion to lift order of receivership. 6) On February 27, 2003, the CA granted the petition and ruled that the proceedings on the receivership could not proceed without the parties amending their pleadings. The Lu Ym father and sons thus filed a petition for review with this Court. 7) On March 31, 2003, the plaintiffs therein filed a Motion to Admit Complaint to Conform to the Interim Rules Governing IntraCorporate Controversies, which was admitted by the trial court. 8) •On January 23, 2004, the Lu Ym father and sons inquired from the Clerk of Court as to the amount of docket fees paid by David, et al. John Lu Ym further inquired from the Office of the Court Administrator (OCA) on the correctness of the amount paid by David, et al. The OCA informed John Lu Ym that a query on the matter of docket fees should be addressed to the trial court and not to the OCA. 9) On March 1, 2004, the RTC decided the case on the merits. It annulled the issuance of LLDC’s 600,000 shares of stock to the Lu Ym father and sons. It also ordered the dissolution of LLDC and the liquidation of its assets, and created a management committee to take over LLDC. The Lu Ym father and sons appealed to the CA. 10) In our August 26, 2008 Decision, we declared that the subject matter of the complaint filed by David, et al., was one incapable of pecuniary estimation. Movants beg us to reconsider this position, pointing out that the case filed below by David, et al., had for its objective the nullification of the issuance of 600,000 shares of stock of LLDC. The complaint itself contained the allegation that the “real value of these shares, based on underlying real estate values, was One Billion Eighty Seven Million Fifty Five Thousand One Hundred Five Pesos (P1,087,055,105).” 11) Upon deeper reflection, we find that the movants’ claim has merit. The 600,000 shares of stock were, indeed, properties in litigation. They were the subject matter of the complaint, and the relief prayed for entailed the nullification of the transfer thereof and their return to LLDC. 12) Thus, to the extent of the damage or injury they allegedly have suffered from this sale of the shares of stock, the action they filed can be characterized as one capable of pecuniary estimation. The shares of stock have a definite value, which was declared by plaintiffs themselves in their complaint. Accordingly, the docket fees should have been computed based on this amount. This is clear from the following version of Rule 141, Section 7, which was in effect at the time the complaint was filed. DECISION YES 

The Internal Rules of the Supreme Court (IRSC) states that the Court en banc shall act on the following matters and cases: (a) cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive order, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question; (b) criminal cases in which the appealed decision imposes the death penalty or reclusion perpetua; (c) cases raising novel questions of law; (d) cases affecting ambassadors, other public ministers, and consuls;

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(e) cases involving decisions, resolutions, and orders of the Civil Service Commission, the Commission on Elections, and the Commission on Audit; (f) cases where the penalty recommended or imposed is the dismissal of a judge, the disbarment of a lawyer, the suspension of any of them for a period of more than one year, or a fine exceeding forty thousand pesos; (g) cases covered by the preceding paragraph and involving the reinstatement in the judiciary of a dismissed judge, the reinstatement of a lawyer in the roll of attorneys, or the lifting of a judges suspension or a lawyers suspension from the practice of law (h) cases involving the discipline of a Member of the Court, or a Presiding Justice, or any Associate Justice of the collegial appellate court; (i) cases where a doctrine or principle laid down by the Court en banc or by a Division my be modified or reversed; (j) cases involving conflicting decisions of two or more divisions; (k) cases where three votes in a Division cannot be obtained; (l) Division cases where the subject matter has a huge financial impact on businesses or affects the welfare of a community; (m) Subject to Section 11 (b) of this rule, other division cases that, in the opinion of at least three Members of the Division who are voting and present, are appropriate for transfer to the Court en banc; (n) cases that the Court en banc deems of sufficient importance to merit its attention; and (o) all matters involving policy decisions in the administrative supervision of all courts and their personnel.[6] (underscoring supplied) The enumeration is an amalgamation of SC Circular No. 2-89 (February 7, 1989), as amended by En Banc Resolution of November 18, 1993, and the amplifications introduced by Resolution of January 18, 2000 in A.M. No. 99-12-08-SC with respect to administrative cases and matters. The present cases fall under at least three types of cases for consideration by the Court En Banc. At least three members of the Courts Second Division (to which the present cases were transferred,[7] they being assigned to a Member thereof) found, by Resolution of October 20, 2010, that the cases were appropriate for referral-transfer to the Court En Banc which subsequently accepted[8] the referral in view of the sufficiently important reason to resolve all doubts on the validity of the challenged resolutions as they appear to modify or reverse doctrines or principles of law. It is argued that the assailed Resolutions in the present cases have already become final,[12] since a second motion for reconsideration is prohibited except for extraordinarily persuasive reasons and only upon express leave first obtained;[13] and that once a judgment attains finality, it thereby becomes immutable and unalterable, however unjust the result of error may appear. The contention, however, misses an important point. The doctrine of immutability of decisions applies only to final and executory decisions. Since the present cases may involve a modification or reversal of a Court-ordained doctrine or principle, the judgment rendered by the Special Third Division may be considered unconstitutional, hence, it can never become final. It finds mooring in the deliberations of the framers of the Constitution: On proposed Section 3(4), Commissioner Natividad asked what the effect would be of a decision that violates the proviso that no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified or reversed except by the court en banc. The answer given was that such a decision would be invalid. Following up, Father Bernas asked whether the decision, if not challenged, could become final and binding at least on the parties. Romulo answered that, since such a decision would be in excess of jurisdiction, the decision on the case could be reopened anytime. A decision rendered by a Division of this Court in violation of this constitutional provision would be in excess of jurisdiction and, therefore, invalid. Any entry of judgment may thus be said to be inefficacious since the decision is void for being unconstitutional. While it is true that the Court en banc exercises no appellate jurisdiction over its Divisions, Justice Minerva GonzagaReyes opined in Firestone and concededly recognized that [t]he only constraint is that any doctrine or principle of law laid down by the Court, either rendered en banc or in division, may be overturned or reversed only by the Court sitting en banc.[17] That a judgment must become final at some definite point at the risk of occasional error cannot be appreciated in a case that embroils not only a general allegation of occasional error but also a serious accusation of a violation of the Constitution, viz., that doctrines or principles of law were modified or reversed by the Courts Special Third Division August 4, 2009 Resolution. The law allows a determination at first impression that a doctrine or principle laid down by the court en banc or in division may be modified or reversed in a case which would warrant a referral to the Court En Banc. The use of the word “may” instead of “shall” connotes probability, not certainty, of modification or reversal of a doctrine, as may be deemed by the Court. Ultimately, it is the entire Court which shall decide on the acceptance of the referral and, if so, to reconcile any seeming conflict, to reverse or modify an earlier decision, and to declare the Courts doctrine.[18]

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The Court has the power and prerogative to suspend its own rules and to exempt a case from their operation if and when justice requires it,[19] as in the present circumstance where movant filed a motion for leave after the prompt submission of a second motion for reconsideration but, nonetheless, still within 15 days from receipt of the last assailed resolution. Well-entrenched doctrines or principles of law that went astray need to be steered back to their proper course. Specifically, as David Lu correctly points out, it is necessary to reconcile and declare the legal doctrines regarding actions that are incapable of pecuniary estimation, application of estoppel by laches in raising an objection of lack of jurisdiction, and whether bad faith can be deduced from the erroneous annotation of lis pendens. Upon a considered, thorough reexamination, the Court grants David Lus Motion for Reconsideration. The assailed Resolutions of August 4, 2009 and September 23, 2009, which turn turtle settled doctrines, must be overturned. The Court thus reinstates the August 26, 2008 Decision wherein a three-tiered approach was utilized to analyze the issue on docket fees: In the instant case, however, we cannot grant the dismissal prayed for because of the following reasons: First, the case instituted before the RTC is one incapable of pecuniary estimation. Hence, the correct docket fees were paid. Second, John and LLDC are estopped from questioning the jurisdiction of the trial court because of their active participation in the proceedings below, and because the issue of payment of insufficient docket fees had been belatedly raised before the Court of Appeals, i.e., only in their motion for reconsideration. Lastly, assuming that the docket fees paid were truly inadequate, the mistake was committed by the Clerk of Court who assessed the same and not imputable to David; and as to the deficiency, if any, the same may instead be considered a lien on the judgment that may thereafter be rendered.[20] (italics in the original; emphasis and underscoring supplied)

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12. GSIS Family Bank - Thrift Bank vs. BPI Family Bank G.R. No. 175278, Sept. 23, 2015 TOPIC: Trademark

AUTHOR: GOJAR Notes: [issue as to the corp. names]  BPI Family Bank  GSIS Family Bank

CASE LAW/ DOCTRINE: To fall w/n the prohibition of the law on the right to exclusive use of a corporate name, 2 requisites must be proven: [w/c are present in this case] 1. That the complainant corporation acquired a prior right over the use of such corporate name; and 2. The proposed name is either a. identical; or b. deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law; or c. patently deceptive, confusing or contrary to existing law. Emergency Recit: Respondent filed a petition to disallow petitioner from using the word “Family Bank” in its corporate name. SEC ruled in favor of respondent and stated that it had the prior/preferential right to use the name “Family Bank” in the banking industry. SC affirmed this and cited 2 requisites to be proven to fall w/n the prohibition of the law on the right to exclusive use of a corporate name [see doctrine]. Applying it in the case (1) Petitioner was incorporated only 17 yrs after respondent using its name ; (2) The words “Family Bank” are both identical AND the overriding consideration in determining whether a person, using ordinary care & discrimination might be misled is the circumstance that both of them are engaged in banking business. FACTS: 1. Royal Savings Bank encountered liquidity problems so in 1984 it was placed under receivership & was closed. 2 mos. after it reopened & was renamed Commsavings Bank Inc. 2. 1987- GSIS acquired petitioner, hence, it management & control was transferred to GSIS 3. DTI & BSP - approved the application to change its corporate name now to “GSIS, Family Bank, a Thrift Bank”.  So petitioner operated under such business name pursuant to the DTI certificate of registration & Montary Board Circular approval. 4. Respondent BPI Family Bank now assails this change in petitioner’s corporate name.  BPI Family Bank was a product of merger b/w Family Bank & Trust Company (FBTC) and the Bank of the Philippine Islands (BPI).  1969 - the corporate name “Family First Savings Bank” was registered w/ SEC  Since its incorporation, it has been commonly known as “Family Bank”.  1985 - BPI acquired all the rights, properties, interest of Family Bank WHICH INCLUDED the right to use the names such as “Family First Savings Bank”, “Family Bank” & “Family Bank and Trust Company”  Hence, BPI Family Savings Bank was registered w/ SEC as a wholly-owned subsidiary of BPI.  BPI Family Savings Bank then registered with the Bureau of Domestic Trade the trade or business name “BPI Family Bank” and acquired a reputation and goodwill under the name. 5. SEC proceedings: [Respondent filed a petitioner w/ SEC Company Registration and Monitoring Department (SEC CRMD)]

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To disallow or prevent the registration of the name “GSIS Family Bank” or any other corporate name with the words “Family Bank” in it  Claimed exclusive ownership to the name “Family Bank” since it acquired the name since its purchase & merger way back 1985  Thru the years, it has been known as “BPI Family Bank” or “Family Bank” both locally and internationally. As such, it has acquired a reputation and goodwill under the name, not only with clients here and abroad, but also with correspondent and competitor banks, and the public in general. SEC ruling: BPI Family Bank has a PRIOR/ preferential RIGHT to the use of the name Family Bank in the banking industry  arising from its long & extensive nationwide use  coupled w/ registration w/ the Intellectual Property Office (IPO) of the name “Family Bank" as its trade name  applied the rule of “priority in registration” based on the legal maxim first in time, first in right  there is confusing similarity b/w the corporate names although not identical, are indisputably similar, as to cause confusion in the public mind, even with the exercise of reasonable care and observation, especially so since both corporations are engaged in the banking business.  So it ordered GSIS Family Bank to refrain from using the word “Family” as part of its name & make goods its commitment to change its name by deleting / dropping the word w/n 30 days from actual receipt. SEC En Bank affirmed SEC CRMD CA: Affirmed. Further ruled that proof actual confusion need not be shown. It is enough that confusion is probably or likely to occur.

ISSUES: Should GSIS Family Bank change its corporate name? YES. Sec. 18 of the Corp Code. - No corporate name may be allowed by the SEC if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. RATIO: To fall w/n the prohibition of the law on the right to exclusive use of a corporate name, 2 requisites must be proven: [w/c are present in this case] 1. That the complainant corporation acquired a prior right over the use of such corporate name; and 2. The proposed name is either a. identical; or b. deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law; or c. patently deceptive, confusing or contrary to existing law. 1st requisite of a PRIOR RIGHT/Priority of adoption rule.  

Here, respondent was incorporated in 1969 as Family Savings Bank then in 1985 as BPI Family Bank. While petitioner was incorporated as GSIS Family-Thrift Bank only in 2002 / 17 yrs after respondent started using its name.

2nd requisite, the proposed name is (a) identical; or (b) deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law. As to letter (a): The words “Family Bank” are both in their corporate names, hence, identical.  Respondent can’t claim under Sec. 3 of the Revised Guidelines in the Approval of Corporate and Partnership Names wherein it states that if there be identical, misleading or confusingly similar name to one already registered by another corporation or partnership with the SEC, the proposed name must contain at least one distinctive word different from the name of the company already registered. o To show contrast w/ respondent’s corporate name, petitioner used the words GSIS & thrift. BUT these are not sufficiently distinct from that of respondent’s corporate name o GSIS = is merely an acronym of the proper name by which petitioner is identified o Thrift = classification of the type of bank that petitioner is AND still not distinct since both of them are engaged in the banking business. As to letter (b): There is deceptive & confusing similarity b/w the 2 as found by SEC.  Test is whether the similarity is such as to mislead a person using ordinary care and discrimination. And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.  HERE, the only words that distinguish the 2 are the “BPI” “GSIS” & “Thrift”. o The first 2 are merely acronyms of the proper names by w/c the two corp identify themselves o While thrift only describes the classification of the bank.  The overriding consideration in determining whether a person, using ordinary care & discrimination might be misled is the circumstance that both of them are engaged in banking business.  Respondent even alleged that when its clients saw the signage of petitioner “GSIS Family Bank”, their clients began asking questions such as whether GSIS acquired Family Bank, whether there is a joint agreement b/w GSIS & Family Bank. Hence, it is not a remote possibility that the public may entertain the idea that a relationship or arrangement indeed exists between BPI and GSIS due to the use of the term “Family Bank” in their corporate names.

Petitioner can’t argue that the word “family” is a generic/descriptive name w/c can’t be appropriated by respondent but SC disagreed. Family as used in respondent’s corporate name is NOT generic.  Generic marks - commonly used as the name or description of a kind of goods, such as “Lite” for beer or “Chocolate Fudge” for chocolate soda drink.  Descriptive marks - convey the characteristics, function, qualities or ingredients of a product to one who has never seen it or does not know it exists, such as “Arthriticare” for arthritis medication.  Here, the word family can’t be separated from the word bank. Both parties refer to the phrase “Family Bank”. This phrase is neither generic nor descriptive” but is merely suggestive & may properly regarded as arbitrary.  Arbitrary marks - words or phrases used as a mark that appear to be random in the context of its use. Easy to remember due to their arbitrariness. They are original & unexpected in relation to the products they endorse, thus, becoming themselves distinctive.  Suggestive marks - are marks, which merely suggest some quality or ingredient of goods. The strength of this lies on how the public perceives the word in relation to the product or service.  Family - a group consisting of parents and children living together in a household / group of people related to one another by blood or marriage  Bank - a financial establishment that invests money deposited by customers, pays it out when requested, makes loans at interest, and exchanges currency o Hence, by definition, there can be no expected relation between the word “family” and the banking business of respondent. Rather, the words suggest that respondent bank is where family savings should be deposited. And “family bank” can’t be used to define an object. As to petitioner’s argument that the opinion of BSP + DTI certificate of registration constitute authority for it to use “GSIS Family Bank” as corporate name = untenable ; it is lodged w/ the SEC.  The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate names is lodged exclusively in the SEC. SEC has absolute jurisdiction, supervision and control over all corporations  SEC has the duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved, but also of the public.  It has authority to de-register at all time corporate names which are likely to generate confusion  In implementing Sec. 18 of Corp. Code, the guideline was issued wherein registrant coloration must submit a letter undertaking to change its corporate name in the event that another person, firm or entity has acquired a prior right to use of said name or one similar to it SC also ruled that: Judicial notice may also be taken of the action of the IP in approving respondent’s registration of the trademark “BPI Family Bank” & its logo on 2008. Because the certificate of registration of a mark shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate

FACTS: 1. Ronaldo worked as a checker/customs representative of Zeta Brokerage Corporation since December 1985. 2. On January 1994, he and other employees were informed that Zeta would cease operations, and affected employees such as Ronaldo would be separated. 3. February, he was informed that his termination will be effective in March. 4. He accepted his separation pay (reluctantly) subject to the standing offer to be hired to his former position. 5. April, he was terminated (according to him, without valid cause nor due process). 6. Defense: a. Termination was for cause authorized by Labor Code b. Non-acceptance of him was not irregular nor discriminatory c. It’s predecessors-in-interest complied with requirements for termination due to cessation of business operations d. It had valid management prerogative not to employ him e. Despite being given sufficient time, he did not respond to offer within the deadline f. He was hired on a temporary basis g. It hired another employee due to seniority considerations 7. LA, NLRC, and CA: illegal dismissal ISSUE/S:

1. WON Ronaldo was illegally dismissed – YES RULING: Petition for review is denied for lack of merit.

RATIO: 1. The cessation of business by Zeta was not a bona fide closure as contemplated in the valid grounds for termination of employment in the Labor Code a. LC 283: Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the DOLE at least 1 month before the intended date thereof. 2. The amendments of the article of incorporation of Zeta to broaden its primary functions, increase its capital stock, and change the corporate name to Zuellig Freight and Cargo Systems. Inc. did not produce the dissolution of the former as a corporation. 3. The Corporation Code defined and delineated the different modes of dissolving a corporation, and the amendment of the articles of incorporation was not one of such modes. 4. The effect of change of name was not a change of corporate being. 5. The changing of the name of a corporation is no more the creation of a corporation than the changing of the name of a natural person is begetting of a natural person. 6. A change in corporate name does not make a new corporation, whether effected by a special act or under a general law. It has no effect on the identity of the corporation, or on its property, rights, or liabilities. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed. 7. Zeta and Zuellig remained one and the same corporation. Zuellig was a continuation of Zeta’s corporate being. It had the same obligation to honor Zeta’s obligations, including respecting Ronaldo’s security of tenure.

ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, H.S.K. SA BANSANG PILIPINAS, INC. vs. IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN Facts: Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock religious society or corporation registered in 1936. Sometime in 1976, one Eliseo Soriano and several other members of said corporation disassociated themselves from the latter and succeeded in registering on a new non-stock religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan. Respondent Corporation filed with the SEC a petition to compel the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name. The SEC rendered judgment in favor of respondent, ordering the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name to another name that is not similar or identical to any name already used by a corporation, partnership or association registered with the Commission. No appeal was taken from said decision. It appears that during the above-mentioned case, Soriano, et al., caused the registration of Petitioner Corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi at Saligan ng Katotohanan. Respondent Corporation filed before the SEC another petition, praying that petitioner be compelled to change its corporate name and be barred from using the same or similar name on the ground that the same causes confusion among their members as well as the public. Petitioner filed a motion to dismiss on the ground of lack of cause of action. The motion to dismiss was denied. Thereafter, for failure to file an answer, petitioner was declared in default and respondent was allowed to present its evidence ex parte. The SEC rendered a decision ordering petitioner to change its corporate name. This was affirmed by SEC En Banc finding that petitioner's corporate name was identical or confusingly or deceptively similar to that of respondent's corporate name. On appeal, the CA affirmed the decision of the SEC En Banc. Petitioner's motion for reconsideration was also denied Hence, the instant petition for review. Issues and Ruling: 1. WON petitioner is deprived of procedural due process. Invoking the case of Legarda v. CA, petitioner insists that the decision of the CA and the SEC should be set aside because the negligence of its former counsel of record, Atty. Garaygay, in failing to file an answer after its motion to dismiss was denied by the SEC, deprived them of their day in court. The contention is without merit. As a general rule, the negligence of counsel binds the client. An exception to the foregoing is where the reckless or gross negligence of the counsel deprives the client of due process of law. Said exception, however, does not obtain in the present case.

2. WON the right of action to institute the SEC case has since prescribed prior to its institution. WON Petitioner Corporation’s name is identical or deceptively or confusingly similar to that of Respondent Corporation’s name. Its failure to raise prescription before the SEC can only be construed as a waiver of that defense. At any rate, the SEC has the authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public. Section 18 of the Corporation Code provides: Corporate Name. — No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or is contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. Corollary thereto, the pertinent portion of the SEC Guidelines on Corporate Names states: (d) If the proposed name contains a word similar to a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the name of the company already registered; Parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by another corporation, whether a business or a nonprofit organization, if misleading or likely to injure in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction against the new corp oration to prevent the use of the name. Petitioner claims that it complied with the aforecited SEC guideline by adding not only two but eight words to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner argues, effectively distinguished it from Respondent Corporation. The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or difficulty in distinguishing petitioner from respondent Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and SUHAY. These words are synonymous — both mean ground, foundation or support. Furthermore, the wholesale appropriation by petitioner of respondent's corporate name cannot find justification under the generic word rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public. 3. WON the order to change its corporate name is a violation of religious freedom. Certainly, ordering petitioner to change its corporate name is not a violation of its constitutionally guaranteed right to religious freedom. In so doing, the SEC merely compelled petitioner to abide by one of the SEC guidelines in the approval of partnership and corporate names, namely its undertaking to manifest its willingness to change its corporate name in the event another person, firm, or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it. jmpareja_2010

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China Banking Corporation vs CA Case Digest China Banking Corporation vs. Court of Appeals [GR 117604, 26 March 1997]

Facts: On 21 August 1974, Galicano Calapatia, Jr., a stockholder of Valley Golf & Country Club, Inc. (VGCCI), pledged his Stock Certificate 1219 to China Banking Corporation (CBC). On 16 September 1974, CBC wrote VGCCI requesting that the pledge agreement be recorded in its books. In a letter dated 27 September 1974, VGCCI replied that the deed of pledge executed by Calapatia in CBC's favor was duly noted in its corporate books. On 3 August 1983, Calapatia obtained a loan of P20,000.00 from CBC, payment of which was secured by the pledge agreement still existing between Calapatia and CBC. Due to Calapatia's failure to pay his obligation, CBC, on 12 April 1985, filed a petition for extrajudicial foreclosure before Notary Public Antonio T. de Vera of Manila, requesting the latter to conduct a public auction sale of the pledged stock. On 14 May 1985, CBC informed VGCCI of the foreclosure proceedings and requested that the pledged stock be transferred to its name and the same be recorded in the corporate books. However, on 15 July 1985, VGCCI wrote CBC expressing its inability to accede to CBC's request in

view of Calapatia's unsettled accounts with the club. Despite the foregoing, Notary Public de Vera held a public auction on 17 September 1985 and CBC emerged as the highest bidder at P20,000.00 for the pledged stock. Consequently, CBC was issued the corresponding certificate of sale.

On 21 November 1985, VGCCI sent Calapatia a notice demanding full payment of his overdue account in the amount of P18,783.24. Said notice was followed by a demand letter dated 12 December 1985 for the same amount and another notice dated 22 November 1986 for P23,483.24. On 4 December 1986, VGCCI caused to be published in the newspaper Daily Express a notice of auction sale of a number of its stock certificates, to be held on 10 December 1986 at 10:00 a.m. Included therein was Calapatia's own share of stock (Stock Certificate 1219). Through a letter dated 15 December 1986, VGCCI informed Calapatia of the termination of his membership due to the sale of his share of stock in the 10 December 1986 auction. On 5 May 1989, CBC advised VGCCI that it is the new owner of Calapatia's Stock Certificate 1219 by virtue of being the highest bidder in the 17 September 1985 auction and requested that a new certificate of stock be issued in its name. On 2 March 1990, VGCCI replied that "for reason of delinquency" Calapatia's stock was sold at the public auction held on 10 December 1986 for P25,000.00. On 9 March 1990, CBC protested the sale by VGCCI of the subject share of stock and thereafter filed a case with the Regional Trial Court of Makati for the nullification of the 10 December 1986 auction and for the issuance of a new stock certificate in its name. On 18 June 1990, the Regional Trial Court of Makati dismissed the complaint for lack of jurisdiction over the subject matter on the theory that it involves an intra-corporate dispute and on 27 August 1990 denied CBC's motion for reconsideration. On 20 September 1990, CBC filed a complaint with the Securities and Exchange Commission (SEC) for the nullification of the sale of Calapatia's stock by VGCCI; the cancellation of any new stock certificate issued pursuant thereto; for the issuance of a new certificate in petitioner's name; and for damages, attorney's fees and costs of litigation.

On 3 January 1992, SEC Hearing Officer Manuel P. Perea rendered a decision in favor of VGCCI, stating in the main that considering that the said share is delinquent, VGCCI had valid reason not to transfer the share in the name of CBC in the books of VGCCI until liquidation of delinquency. Consequently, the case was dismissed. On 14 April 1992, Hearing Officer Perea denied CBC's motion for reconsideration. CBC appealed to the SEC en banc and on 4 June 1993, the Commission issued an order reversing the decision of its hearing officer; holding that CBC has a prior right over the pledged share and because of pledgor's failure to pay the principal debt upon maturity, CBC can proceed with the foreclosure of the pledged share; declaring that the auction sale conducted by VGCCI on 10 December 1986 is declared NULL and VOID; and ordering VGCCI to issue another membership certificate in the name of CBC. VGCCI sought reconsideration of the order. However, the SEC denied the same in its resolution dated 7 December 1993. The sudden turn of events sent VGCCI to seek redress from the Court of Appeals. On 15 August 1994, the Court of Appeals rendered its decision nullifying and setting aside the orders of the SEC and its hearing officer on ground of lack of jurisdiction over the subject matter and, consequently, dismissed CBC's original complaint. The Court of Appeals declared that the controversy between CBC and VGCCI is not intra-corporate; nullifying the SEC orders and dismissing CBC’s complaint. CBC moved for reconsideration but the same was denied by the Court of Appeals in its resolution dated 5 October 1994. CBC filed the petition for review on certiorari.

Issue: Whether CBC is bound by VGCCI's by-laws.

Held: In order to be bound, the third party must have acquired knowledge of the pertinent by-laws at the time the transaction or agreement between said third party and the shareholder was entered into. Herein, at the time the pledge agreement was executed. VGCCI could have easily informed CBC of its by-laws when it sent notice formally recognizing CBC as pledgee of one of its shares registered in Calapatia's name. CBC's belated notice of said by-laws at the time of foreclosure will not suffice. By-laws signifies the rules and regulations or private laws enacted by the

corporation to regulate, govern and control its own actions, affairs and concerns and its stockholders or members and directors and officers with relation thereto and among themselves in their relation to it. In other words, by-laws are the relatively permanent and continuing rules of action adopted by the corporation for its own government and that of the individuals composing it and having the direction, management and control of its affairs, in whole or in part, in the management and control of its affairs and activities. The purpose of a by-law is to regulate the conduct and define the duties of the members towards the corporation and among themselves. They are self-imposed and, although adopted pursuant to statutory authority, have no status as public law. Therefore, it is the generally accepted rule that third persons are not bound by by-laws, except when they have knowledge of the provisions either actually or constructively. For the exception to the general accepted rule that third persons are not bound by by-laws to be applicable and binding upon the pledgee, knowledge of the provisions of the VGCCI By-laws must be acquired at the time the pledge agreement was contracted. Knowledge of said provisions, either actual or constructive, at the time of foreclosure will not affect pledgee's right over the pledged share. Article 2087 of the Civil Code provides that it is also of the essence of these contracts that when the principal obligation becomes due, the things in which the pledge or mortgage consists maybe alienated for the payment to the creditor. Further, VGCCI's contention that CBC is dutybound to know its by-laws because of Article 2099 of the Civil Code which stipulates that the creditor must take care of the thing pledged with the diligence of a good father of a family, fails to convince. CBC was never informed of Calapatia's unpaid accounts and the restrictive provisions in VGCCI's by-laws. Furthermore, Section 63 of the Corporation Code which provides that "no shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation" cannot be utilized by VGCCI. The term "unpaid claim" refers to "any unpaid claim arising from unpaid subscription, and not to any indebtedness which a subscriber or stockholder may owe the corporation arising from any other transaction." Herein, the subscription for the share in question has been fully paid as evidenced by the issuance of Membership Certificate 1219. What Calapatia owed the corporation were merely the monthly dues. Hence, Section 63 does not apply. Email ThisBlogThis!Share to TwitterShare to FacebookShare to Pinterest

LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC., petitioner, vs. HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY CORPORATION, EMDEN ENCARNACION and HORATIO AYCARDO, respondents. G.R. No. 117188 August 7, 1997 ROMERO, J.: Loyola Grand Villas Homeowners Association, Inc. (LGVHAI) was organized on 8 February 1983 as the homeoenwers' association for Loyola Grand Villas. It was also registered as the sole homeowners' association in the said village with the Home Financing Corporation (which eventually became Home Insurance Guarantee Corporation ["HIGC"]). However, the association was not able file its corporate by-laws. The LGVHAI officers then tried to registered its By-Laws in 1988, but they failed to do so. They then discovered that there were two other homeowners' organizations within the subdivision - the Loyola Grand Villas Homeowners (North) Association, Inc. [North Association] and herein Petitioner Loyola Grand Villas Homeowners (South) Association, Inc.["South Association]. Upon inquiry by the LGVHAI to HIGC, it was discovered that LGVHAI was dissolved for its failure to submit its by-laws within the period required by the Corporation Code and for its non-user of corporate charter because HIGC had not received any report on the association's activities. These paved the way for the formation of the North and South Associations. LGVHAI then lodged a complaint with HIGC Hearing Officer Danilo Javier, and questioned the revocation of its registration. Hearing Officer Javier ruled in favor of LGVHAI, revoking the registration of the North and South Associations. Petitioner South Association appealed the ruling, contending that LGVHAI's failure to file its by-laws within the period prescribed by Section 46 of the Corporation Code effectively automatically dissolved the corporation. The Appeals Board of the HIGC and the Court of Appeals both rejected the contention of the Petitioner affirmed the decision of Hearing Officer Javier. Issue: W/N LGVHAI's failure to file its by-laws within the period prescribed by Section 46 of the Corporation Code had the effect of automatically dissolving the said corporation. Ruling: No. The pertinent provision of the Corporation Code that is the focal point of controversy in this case states:

Sec. 46. Adoption of by-laws. - Every corporation formed under this Code, must within one (1) month after receipt of official notice of the issuance of its certificate of incorporation by the Securities and Exchange Commission, adopt a code of by-laws for its government not inconsistent with this Code. Ordinarily, the word "must" connotes an imposition of duty which must be enforced. However, the word "must" in a statute, like "shall," is not always imperative. It may be consistent with an ecercise of discretion. If the language of a statute, considered as a whole with due regard to its nature and object, reveals that the legislature intended to use the words "shall" and "must" to be directory, they should be given that meaning. The legislative deliberations of the Corporation Code reveals that it was not the intention of Congress to automatically dissolve a corporation for failure to file the By-Laws on time. Moreover, By-Laws may be necessary to govern the corporation, but By-Laws are still subordinate to the Articles of Incorporation and the Corporation Code. In fact, there are cases where By-Laws are unnecessary to the corporate existence and to the valid exercise of corporate powers. The Corporation Code does not expressly provide for the effects of non-filing of By-Laws. However, these have been rectified by Section 6 of PD 902-A which provides that SEC shall possess the power to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations upon failure to file By-Laws within the required period. This shows that there must be notice and hearing before a corporation is dissolved for failure to file its By-Laws. Even assuming that the existence of a ground, the penalty is not necessarily revocation, but may only be suspension. By-Laws are indispensable to corporations, since they are required by law for an orderly management of corporations. However, failure to file them within the period prescribed does not equate to the automatic dissolution of a corporation. Salafranca vs. Philamlife (Pamplona) Village Homeowners Association (300 SCRA 469 [1998]) Must Not Impair Existing Rights FACTS: In 1981, Enrique Salafranca was hired as an administrative officer by the Philamlife Village Homeowners Associaiton, Inc. (PVHAI). Salafranca was tasked to manage the village’s day to day activities. His employment was originally for 6 months only but his contract was renewed multiple times until 1983. But even after 1983, he was still allowed to continue work even without a renewed contract. In 1987, PVHAI amended its by-laws. Among the amendment was a provision that the administrative officer (Salafranca) shall have a tenure which is co-terminus with the Board of Directors which appointed him. In 1992, the tenure of said Board of Directors expired and so Salafranca was terminated. ISSUE: Whether or not Salafranca was illegally dismissed. HELD: Yes. At that time, Salafranca already enjoys security of tenure because he is already a regular employee. It is true that PVHAI has the right to amend its by-laws but such amendment must not impair existing contracts or rights. In this case, the provision that Salafranca’s position shall be co-terminus with the appointing Board impairs his right to security of tenure which has already vested even prior to the amendment of the by-laws in 1987. PMI Colleges vs. NLRC (277 SCRA 462 [1997]) In 1991, PMI Colleges hired the services of Alejandro Galvan for the latter to teach in said institution. However, for unknown reasons, PMI defaulted from paying the remunerations due to Galvan. Galvan made demands but were ignored by PMI. Eventually, Galvan filed a labor case against PMI. Galvan got a favorable judgment from the Labor Arbiter; this was affirmed by the National Labor Relations Commission. On appeal, PMI reiterated, among others, that the employment of Galvan is void because it did not comply with its by-laws. Apparently, the by-laws require that an employment contract must be signed by the Chairman of the Board of PMI. PMI asserts that Galvan’s employment contract was not signed by the Chairman of the Board. ISSUE: Whether or not Galvan’s employment contract is void. HELD: No. PMI Colleges never even presented a copy of the by-laws to prove the existence of such provision. But even if it did, the employment contract cannot be rendered invalid just because it does not bear the signature of the Chairman of the Board of PMI. ByLaws operate merely as internal rules among the stockholders, they cannot affect or prejudice third persons who deal with the corporation, unless they have knowledge of the same. In this case, PMI was not able to prove that Galvan knew of said provision in the by-laws when he was employed by PMI. IGLESIA EVANGELICA METODISTA EN LAS ISLAS FILIPINAS (IEMELIF) (Corporation Sole), INC., et al. vs. BISHOP NATHANAEL LAZARO, et al., G.R. No. 184088 | July 6, 2010 | Abad, J. FACTS: In 1909, Bishop Nicolas Zamora established the Iglesia Evangelica Metodista En Las Islas Filipinas, Inc. as a corporation sole with Bishop Zamora acting as its "General Superintendent." Thirty-nine years later in 1948, the Iglesia enacted and registered a by-laws that established a Supreme Consistory of Elders (the Consistory), made up of church ministers, who were to serve for 4 years. The bylaws empowered the Consistory to elect a General Superintendent, a General Secretary, a General Evangelist, and a Treasurer General who would manage the affairs of the organization. For all intents and purposes, the Consistory served as the Iglesia’s board of directors. Although the Iglesia remained a corporation sole on paper (with all corporate powers theoretically lodged in the hands of one member, the General Superintendent), it had always acted like a corporation aggregate. The Consistory exercised the Iglesia’s decision-making powers without ever being challenged. Subsequently, during its 1973 General Conference, the general membership voted to put things

right by changing the Iglesia’s organizational structure from a corporation sole to a corporation aggregate, which the SEC approved. However, Iglesia’s corporate papers remained unaltered as a corporation sole. Only in 2001 (28 yrs later) did the issue reemerge. In answer to Iglesia’s query, the SEC replied that although the SEC Commissioner did not in 1948 object to the conversion of the Iglesia into a corporation aggregate, that conversion was not properly carried out and documented and the Iglesia needed to amend its articles of incorporation for that purpose. Acting on this advice, the Consistory resolved to convert the Iglesia to a corporation aggregate. Respondent Bishop Nathanael Lazaro, its General Superintendent, instructed all their congregations to take up the matter with their respective members for resolution. Subsequently, the general membership approved the conversion, prompting the Iglesia to file amended articles of incorporation with the SEC. Bishop Lazaro filed an affidavit-certification in support of the conversion. Petitioners Reverend Nestor Pineda, et al., which belonged to a faction that did not support the conversion, filed a civil case for "Enforcement of Property Rights of Corporation Sole, Declaration of Nullity of Amended Articles of Incorporation from Corporation Sole to Corporation Aggregate with Application for Preliminary Injunction and/or TRO" in Iglesia’s name against respondent members of its Consistory before the RTC of Manila. Petitioners claim that a complete shift from the Iglesia’s status as a corporation sole to a corporation aggregate required, not just an amendment of Iglesia’s articles, but a complete dissolution of the existing corporation sole followed by a re-incorporation. RTC dismissed the petition holding that, while the Corpo Code on Religious Corporations (Chapter II, Title XIII) has no provision governing the amendment of the articles of incorporation of a corporation sole, its Sec 109 provides that religious corporations shall be governed additionally "by the provisions on non-stock corporations insofar as they may be applicable." Thus, Sec. 16 that governed amendments of the articles of non-stock corporations applied to corporations sole as well. The Iglesia needed the vote or written assent of at least 2/3 of the Iglesia membership to authorize the amendment. On appeal by petitioner Pineda, et al, the CA affirmed the TC decision. MR denied. Hence, the present petition for review. Petitioners Pineda, et al. insist that, since the Corpo Code does not have any provision that allows a corporation sole to convert into a corporation aggregate by mere amendment of its articles of incorporation, the conversion can take place only by first dissolving the Iglesia, the corporation sole, and afterwards by creating a new corporation in its place. ISSUE: WON a corporation sole may be converted into a corporation aggregate by mere amendment of its articles of incorporation without first going through the process of dissolution HELD: YES. Religious corporations are governed by Secs 109 through 116 of the Code. In a 2009 case involving the Iglesia, SC distinguished a corporation sole from a corporation aggregate. Citing Sec 110, SC said that a corporation sole is "one formed by the chief archbishop, bishop, priest, minister, rabbi or other presiding elder of a religious denomination, sect, or church, for the purpose of administering or managing, as trustee, the affairs, properties and temporalities of such religious denomination, sect or church." A corporation aggregate formed for the same purpose, on the other hand, consists of two or more persons. True, the Corpo Code provides no specific mechanism for amending the articles of incorporation of a corporation sole. But, as the RTC correctly held, Sec 109 allows the application to religious corporations of the general provisions governing non-stock corporations. In a non-stock corporation, the amendment needs the concurrence of at least 2/3 of its membership. If such approval mechanism is made to operate in a corporation sole, its one member in whom all the powers of the corporation technically belongs, needs to get the concurrence of 2/3 of its membership. The one member, here the General Superintendent, is but a trustee, according to Sec. 110 of the Corpo Code, of its membership. There is no point to dissolving the corporation sole of one member to enable the corporation aggregate to emerge from it. Whether it is a non-stock corporation or a corporation sole, the corporate being remains distinct from its members, whatever be their number. The increase in the number of its corporate membership does not change the complexion of its corporate responsibility to third parties. The one member, with the concurrence of 2/3 of the membership of the organization for whom he acts as trustee, can self-will the amendment. He can, with membership concurrence, increase the technical number of the members of the corporation from "sole" or one to the greater number authorized by its amended articles. The Iglesia’s General Superintendent, respondent Bishop Lazaro, who embodied the corporation sole, had obtained, not only the approval of the Consistory that drew up corporate policies, but also that of the required 2/3 vote of its membership. The amendment of the articles, as correctly put by the CA, requires merely that a) the amendment is not contrary to any provision or requirement under the Corpo Code, and that b) it is for a legitimate purpose. Sec 17 of the Code provides that amendment shall be disapproved if, among others, the prescribed form of the articles of incorporation or amendment to it is not observed, or if the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to government rules and regulations, or if the required percentage of ownership is not complied with. These impediments do not appear in the case of the Iglesia. As the CA noted, the Iglesia worked out the amendment of its articles upon the initiative and advice of the SEC. The latter’s interpretation and application of the Code is entitled to respect and recognition, barring any divergence from applicable laws. CA decision is AFFIRMED. SEPARATE CONCURRING OPINION CARPIO, J.: I concur in the result of the majority opinion that IEMELIF, a corporation sole, may be converted into a corporation aggregate by a mere amendment of its articles of incorporation without the necessity of first dissolving the corporation sole. However, the amendment can be effected by the corporation sole without the concurrence of 2/3 of the members of the religious denomination, sect or church that the corporation sole represents for the ff. reasons: 1. Pursuant to Sec 110 of the Code as a trustee, a corporation sole can exercise such corporate powers as maybe necessary to carry out its duties of administering and managing the affairs, properties and temporalities of the religious organization, provided that such powers are not inconsistent with the law and the Constitution. One of the powers authorized under Sec 36 of the Code is the power to amend the articles of incorporation.

2.

As pointed out in the majority opinion, Sec 109 allows the application to religious corporations of the general provisions go verning non-stock corporations, insofar as they may be applicable. The lack of specific provision on amendments of articles of incorporation of a corporation sole calls for the suppletory application of relevant provisions on non-stock corporations. Thus, Sec 161 of the Code applies. Section 16 requires the majority vote of the board of trustees and the vote or written assent of at least 2/3 of the members of a non-stock corporation. Applying this, a corporation sole, as the lone trustee and member of the corporation, can amend its articles of incorporation. Section 16 refers to the members of the corporation. Again, in the case of a corporation sole, there is only one member—the chief archbishop, bishop, priest, minister, rabbi or presiding elder—who is also the trustee of the corporation. The religious denomination, sect or church represented by the corporation sole has members who are distinct and different from the member of the corporation sole. The members of the religious organization should not be considered for purposes of Sec 16. Thus, the votes of those members are not necessary in amending the articles of incorporation of the corporation sole, the vote of the latter is sufficient to effect the amendment. I vote to DENY the petition. ATRIUM MGT VS CA (SEE PREVIOUS PAGES) AF Realty & Development, Inc. vs Dieselman Freight Services, Co. Commercial Law – Corporation Law – Power of the Board – Ultra Vires Acts of Corporate Officers – Agency FACTS: In 1988, Manuel Cruz, Jr., a board member of Dieselman Freight Services, Co. (DFS) authorized CristetaPolintan to sell a 2,094 sq. m. parcel of land owned by DFS. Polintan in turn authorized Felicisima Noble to sell the same lot. Noble then offered AF Realty & Development, Co., represented by ZenaidaRanullo, the land at the rate of P2,500.00 per sq. m. AF Realty accepted the offer and issued a P300,000 check as downpayment. However, it appeared that DFS did not authorize Cruz, Jr. to sell the said land. Nevertheless, Manuel Cruz, Sr. (father) and president of DFS, accepted the check but modified the offer. He increased the selling price to P4,000.00 per sq. m. AF Realty, in its response, did not exactly agree nor disagree with the counter-offer but only said it is willing to pay the balance (but was not clear at what rate). Eventually, DFS sold the property to someone else. Now AF Realty is suing DFS for specific performance. It claims that DFS ratified the contract when it accepted the check and made a counter-offer. ISSUE: Whether or not the sale made through an agent was ratified. HELD: No. There was no valid agency created. The Board of Directors of DFS never authorized Cruz, Jr. to sell the land. Hence, the agreement between Cruz, Jr. and Polintan, as well as the subsequent agreement between Polintan and Noble, never bound the corporation. Therefore the sale transacted by Noble purportedly on behalf of Polintan and ultimately purportedly on behalf of DFS is void. Being a void sale, it cannot be ratified even if Cruz, Sr. accepted the check and made a counter-offer. (Cruz, Sr. returned the check anyway). Under Article 1409 of the Civil Code, void transactions can never be ratified because they were void from the very beginning.

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Sec. 16. Amendment of Articles of Incorporation. Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least 2/3 of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of at least 2/3 of the members if it be a non-stock corporation.