Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

). P.27,-01.8- a$ount of the third billin#, additional acco$plished &or= and retention $one% 1. P.,8)0,819.22 in actual da$a#es 7. P)2,222,222.22 in $oral da$a#es

G.R. No. 171182

August 23, 2012 -. P).2,222.22 and P),.22.22 per appearance as attorne%As feesB and .. !osts of suit. SO ORD R D. Follo&in# the RT!As denial of its $otion for reconsideration on Ma% 8, 1221,0 the /P filed a notice of appeal on :une 7, 1221.8 Stern 3uilders and dela !ru6 opposed the notice of appeal on the #round of its filin# bein# belated, and $oved for the e'ecution of the decision. The /P countered that the notice of appeal &as filed &ithin the re#le$entar% period because the /PAs Office of ;e#al *ffairs +O;S, in Dili$an, 5ue6on !it% received the order of denial onl% on Ma% 7), 1221. On Septe$ber 10, 1221, the RT! denied due course to the notice of appeal for havin# been filed out of ti$e and #ranted the private respondentsA $otion for e'ecution.4 The RT! issued the &rit of e'ecution on October -, 1221,9 and the sheriff of the RT! served the &rit of e'ecution and notice of de$and upon the /P, throu#h its counsel, on October 9, 1221.)2 The /P filed an ur#ent $otion to reconsider the order dated Septe$ber 10, 1221, to Cuash the &rit of e'ecution dated October -, 1221, and to restrain the proceedin#s.)) Do&ever, the RT! denied the ur#ent $otion on *pril ), 1227.)1 On :une 1-, 1227, the /P assailed the denial of due course to its appeal throu#h a petition for (ertiorari in the !ourt of *ppeals +!*,, doc=eted as !*>(.R. No. 8879..)7 On Februar% 1-, 122-, the !* dis$issed the petition for certiorari upon findin# that the /PAs notice of appeal had been filed late,)- statin#@ Records clearl% sho& that petitioners received a cop% of the Decision dated Nove$ber 14, 122) and :anuar% 8, 1221, thus, the% had until :anuar% 11, 1221 &ithin &hich to file their appeal. On :anuar% )0, 1221 or after the lapse of nine +9, da%s, petitioners throu#h their counsel *tt%. Nolasco filed a Motion for Reconsideration of the aforesaid decision, hence, pursuant to the rules, petitioners still had si' +0, re$ainin# da%s to file their appeal. *s ad$itted b% the petitioners in their petition +Rollo, p. 1.,, *tt%. Nolasco received a cop% of the Order den%in# their $otion for reconsideration on Ma% )8, 1221, thus, petitioners still has until Ma% 17, 1221 +the re$ainin# si' +0, da%s, &ithin &hich to file their appeal. Obviousl%, petitioners &ere not able to file their Notice of *ppeal on Ma% 17, 1221 as it &as onl% filed on :une 7, 1221. In vie& of the said circu$stances, ?e are of the belief and so holds that the Notice of *ppeal filed b% the petitioners &as reall% filed out of ti$e, the sa$e havin# been filed seventeen +)8, da%s late of the re#le$entar% period. 3% reason of &hich, the decision dated Nove$ber 14, 122) had alread% beco$e final and e'ecutor%. ESettled is the rule that the perfection of an appeal in the $anner and &ithin the period per$itted b% la& is not onl% $andator% but "urisdictional, and failure to perfect that appeal renders the challen#ed "ud#$ent final and e'ecutor%. This is not an e$pt% procedural rule but is #rounded on funda$ental considerations of public polic% and sound practice.E +Ra$As Studio and Photo#raphic Cuip$ent, Inc. vs. !ourt of *ppeals, 7-0 S!R* 09), 090,. Indeed, *tt%. Nolasco received the order of denial of the Motion for Reconsideration on Ma% )8, 1221 but filed a Notice of *ppeal onl% on :une 7, 7227. *s such, the decision of the lo&er court ipso fa(to beca$e final &hen no appeal &as perfected after the lapse of the re#le$entar% period. This procedural caveat cannot be trifled &ith, not even b% the Di#h !ourt.).

UNIVERSITY OF THE PHI IPPINES, !OSE V. A"UEVA, RAU P. #E GU$MAN, RU"EN P. ASPIRAS, EMMANUE P. "E O, %I FRE#O P. #AVI#, CASIANO S. A"RIGO, &'( !OSEFINA R. ICUANAN, Petitioners, vs. HON. AGUSTIN S. #I$ON, )*s +&,&+*t- &s P./s*(*'g !u(g/ o0 t)/ R/g*o'&1 T.*&1 Cou.t o0 2u/3o' C*t-, ".&'+) 80, STERN "UI #ERS, INC., &'( SERVI ANO #E A CRU$, Respondents. D "ERSAMIN, J.: Trial "ud#es should not i$$ediatel% issue &rits of e'ecution or #arnish$ent a#ainst the (overn$ent or an% of its subdivisions, a#encies and instru$entalities to enforce $one% "ud#$ents.) The% should bear in $ind that the pri$ar% "urisdiction to e'a$ine, audit and settle all clai$s of an% sort due fro$ the (overn$ent or an% of its subdivisions, a#encies and instru$entalities pertains to the !o$$ission on *udit +!O*, pursuant to Presidential Decree No. )--. (Government Auditing Code of the Philippines). T)/ C&s/ On appeal b% the /niversit% of the Philippines and its then incu$bent officials +collectivel%, the /P, is the decision pro$ul#ated on Septe$ber )0, 122.,1 &hereb% the !ourt of *ppeals +!*, upheld the order of the Re#ional Trial !ourt +RT!,, 3ranch 42, in 5ue6on !it% that directed the #arnish$ent of public funds a$ountin# to P)0,782,)9).8belon#in# to the /P to satisf% the &rit of e'ecution issued to enforce the alread% final and e'ecutor% "ud#$ent a#ainst the /P. A't/+/(/'ts On *u#ust 72, )992, the /P, throu#h its then President :ose V. *bueva, entered into a (eneral !onstruction *#ree$ent &ith respondent Stern 3uilders !orporation +Stern 3uilders,, represented b% its President and (eneral Mana#er Servillano dela !ru6, for the construction of the e'tension buildin# and the renovation of the !olle#e of *rts and Sciences 3uildin# in the ca$pus of the /niversit% of the Philippines in ;os 3a<os +/P;3,.7 In the course of the i$ple$entation of the contract, Stern 3uilders sub$itted three pro#ress billin#s correspondin# to the &or= acco$plished, but the /P paid onl% t&o of the billin#s. The third billin# &orth P187,819.-8 &as not paid due to its disallo&ance b% the !o$$ission on *udit +!O*,. Despite the liftin# of the disallo&ance, the /P failed to pa% the billin#, pro$ptin# Stern 3uilders and dela !ru6 to sue the /P and its co>respondent officials to collect the unpaid billin# and to recover various da$a#es. The suit, entitled Stern Builders Corporation and Servillano R. Dela Cruz v. Universit of the Philippines S stems! "ose #. A$ueva! Raul P. de Guzman! Ru$en P. Aspiras! %mmanuel P. Bello! &ilfredo P. David! Casiano S. A$rigo! and "osefina R. 'i(uanan! &as doc=eted as !ivil !ase No. 5>97> )-98) of the Re#ional Trial !ourt in 5ue6on !it% +RT!,.*fter trial, on Nove$ber 14, 122), the RT! rendered its decision in favor of the plaintiffs,. viz) ?herefore, in the li#ht of the fore#oin#, "ud#$ent is hereb% rendered in favor of the plaintiff and a#ainst the defendants orderin# the latter to pa% plaintiff, "ointl% and severall%, the follo&in#, to &it@ !ISION

The /P sou#ht a reconsideration, but the !* denied the /PAs $otion for reconsideration on *pril )9, 122-.)0 On Ma% )), 122-, the /P appealed to the !ourt b% petition for revie& on (ertiorari +(.R. No. )07.2),. On :une 17, 122-, the !ourt denied the petition for revie&.)8 The /P $oved for the reconsideration of the denial of its petition for revie& on *u#ust 19, 122-,)4 but the !ourt denied the $otion on October 0, 122-.)9 The denial beca$e final and e'ecutor% on Nove$ber )1, 122-.12 In the $ean&hile that the /P &as e'haustin# the available re$edies to overturn the denial of due course to the appeal and the issuance of the &rit of e'ecution, Stern 3uilders and dela !ru6 filed in the RT! their $otions for e'ecution despite their previous $otion havin# alread% been #ranted and despite the &rit of e'ecution havin# alread% issued. On :une )), 1227, the RT! #ranted another $otion for e'ecution filed on Ma% 9, 1227 +althou#h the RT! had alread% issued the &rit of e'ecution on October -, 1221,.1) On :une 17, 1227 and :ul% 1., 1227, respectivel%, the sheriff served notices of #arnish$ent on the /PAs depositor% ban=s, na$el%@ ;and 3an= of the Philippines +3uendia 3ranch, and the Develop$ent 3an= of the Philippines +D3P,, !o$$on&ealth 3ranch.11 The /P assailed the #arnish$ent throu#h an ur#ent $otion to Cuash the notices of #arnish$entB17 and a $otion to Cuash the &rit of e'ecution dated Ma% 9, 1227.1On their part, Stern 3uilders and dela !ru6 filed their e' parte $otion for issuance of a release order.1. On October )-, 1227, the RT! denied the /PAs ur#ent $otion to Cuash, and #ranted Stern 3uilders and dela !ru6As e* parte $otion for issuance of a release order.10 The /P $oved for the reconsideration of the order of October )-, 1227, but the RT! denied the $otion on Nove$ber 8, 1227.18 On :anuar% )1, 122-, Stern 3uilders and dela !ru6 a#ain sou#ht the release of the #arnished funds.14 Despite the /PAs opposition,19 the RT! #ranted the $otion to release the #arnished funds on March )0, 122-.72 On *pril 12, 122-, ho&ever, the RT! held in abe%ance the enforce$ent of the &rits of e'ecution issued on October -, 1221 and :une 7, 1227 and all the ensuin# notices of #arnish$ent, citin# Section -, Rule .1, Rules of !ourt, &hich provided that the pendenc% of a ti$el% $otion for reconsideration sta%ed the e'ecution of the "ud#$ent.7) On Dece$ber 1), 122-, the RT!, throu#h respondent :ud#e *#ustin S. Di6on, authori6ed the release of the #arnished funds of the /P,71 to &it@ ?D R FOR , pre$ises considered, there bein# no $ore le#al i$pedi$ent for the release of the #arnished a$ount in satisfaction of the "ud#$ent a&ard in the instant case, let the a$ount #arnished be i$$ediatel% released b% the Develop$ent 3an= of the Philippines, !o$$on&ealth 3ranch, 5ue6on !it% in favor of the plaintiff. SO ORD R D. The /P &as served on :anuar% 7, 122. &ith the order of Dece$ber 1), 122- directin# D3P to release the #arnished funds.77 On :anuar% 0, 122., Stern 3uilders and dela !ru6 $oved to cite D3P in direct conte$pt of court for its non>co$pliance &ith the order of release.7Thereupon, on :anuar% )2, 122., the /P brou#ht a petition for (ertiorari in the !* to challen#e the "urisdiction of the RT! in

issuin# the order of Dece$ber 1), 122- +!*>(.R. !V No. 44)1.,.7. *side fro$ raisin# the denial of due process, the /P averred that the RT! co$$itted #rave abuse of discretion a$ountin# to lac= or e'cess of "urisdiction in rulin# that there &as no lon#er an% le#al i$pedi$ent to the release of the #arnished funds. The /P ar#ued that #overn$ent funds and properties could not be sei6ed b% virtue of &rits of e'ecution or #arnish$ent, as held in Department of Agri(ulture v. +ational 'a$or Relations Commission,70 and citin# Section 4- of Presidential Decree No. )--. to the effect that Erevenue funds shall not be paid out of an% public treasur% or depositor% e'cept in pursuance of an appropriation la& or other specific statutor% authorit%BE and that the order of #arnish$ent clashed &ith the rulin# in Universit of the Philippines Board of Regents v. 'igot,-elan78 to the effect that the funds belon#in# to the /P &ere public funds. On :anuar% )9, 122., the !* issued a te$porar% restrainin# order +TRO, upon application b% the /P.74 On March 11, 122., Stern 3uilders and dela !ru6 filed in the RT! their a$ended $otion for sheriffAs assistance to i$ple$ent the release order dated Dece$ber 1), 122-, statin# that the 02>da% period of the TRO of the !* had alread% lapsed.79 The /P opposed the a$ended $otion and countered that the i$ple$entation of the release order be suspended.-2 On Ma% 7, 122., the RT! #ranted the a$ended $otion for sheriffAs assistance and directed the sheriff to proceed to the D3P to receive the chec= in satisfaction of the "ud#$ent.-) The /P sou#ht the reconsideration of the order of Ma% 7, 122..-1 On Ma% )0, 122., D3P filed a $otion to consi#n the chec= representin# the "ud#$ent a&ard and to dis$iss the $otion to cite its officials in conte$pt of court.-7 On Ma% 17, 122., the /P presented a $otion to &ithhold the release of the pa%$ent of the "ud#$ent a&ard.-On :ul% 4, 122., the RT! resolved all the pendin# $atters,-. notin# that the D3P had alread% delivered to the sheriff Mana#erAs !hec= No. 4))9-) for P)0,782,)9).8- representin# the #arnished funds pa%able to the order of Stern 3uilders and dela !ru6 as its co$pliance &ith the RT!As order dated Dece$ber 1), 122-.-0 Do&ever, the RT! directed in the sa$e order that Stern 3uilders and dela !ru6 should not encash the chec= or &ithdra& its a$ount pendin# the final resolution of the /PAs petition for (ertiorari, to &it@-8 To enable the $one% represented in the chec= in Cuestion +No. 22224))9-)), to earn interest durin# the pendenc% of the defendant /niversit% of the Philippines application for a &rit of in"unction &ith the !ourt of *ppeals the sa$e $a% no& be deposited b% the plaintiff at the #arnishee 3an= +Develop$ent 3an= of the Philippines,, the disposition of the a$ount represented therein bein# sub"ect to the final outco$e of the case of the /niversit% of the Philippines et al., vs. Don. *#ustin S. Di6on et al., +!* (.R. 44)1., before the !ourt of *ppeals. ;et it be stated herein that the plaintiff is not authori6ed to encash and &ithdra& the a$ount represented in the chec= in Cuestion and en"o% the sa$e in the fashion of an o&ner durin# the pendenc% of the case bet&een the parties before the !ourt of *ppeals &hich $a% or $a% not be resolved in plaintiffAs favor. ?ith the end in vie& of seein# to it that the chec= in Cuestion is deposited b% the plaintiff at the Develop$ent 3an= of the Philippines +#arnishee ban=,, 3ranch Sheriff Derlan Velasco is directed to acco$pan% andFor escort the plaintiff in $a=in# the deposit of the chec= in Cuestion. SO ORD R D.

On Septe$ber )0, 122., the !* pro$ul#ated its assailed decision dis$issin# the /PAs petition for (ertiorari, rulin# that the /P had been #iven a$ple opportunit% to contest the $otion to direct the D3P to deposit the chec= in the na$e of Stern 3uilders and dela !ru6B and that the #arnished funds could be the proper sub"ect of #arnish$ent because the% had been alread% ear$ar=ed for the pro"ect, &ith the /P holdin# the funds onl% in a fiduciar% capacit%,-4 viz) Petitioners ne't ar#ue that the /P funds $a% not be sei6ed for e'ecution or #arnish$ent to satisf% the "ud#$ent a&ard. !itin# Depart$ent of *#riculture vs. N;R!, /niversit% of the Philippines 3oard of Re#ents vs. Don. ;i#ot>Telan, petitioners contend that /P deposits at ;and 3an= and the Develop$ent 3an= of the Philippines, bein# #overn$ent funds, $a% not be released absent an appropriations bill fro$ !on#ress. The ar#u$ent is specious. /P entered into a contract &ith private respondents for the e'pansion and renovation of the *rts and Sciences 3uildin# of its ca$pus in ;os 3a<os, ;a#una. Decidedl%, there &as alread% an appropriations ear$ar=ed for the said pro"ect. The said funds are retained b% /P, in a fiduciar% capacit%, pendin# co$pletion of the construction pro"ect. ?e a#ree &ith the trial !ourt GsicH observation on this score@ E-. 'ecutive Order No. )29 +Directin# all National (overn$ent *#encies to Revert !ertain *ccounts Pa%able to the !u$ulative Result of Operations of the National (overn$ent and for Other Purposes, Section 9. Reversion of *ccounts Pa%able, provides that, all )99. and prior %ears docu$ented accounts pa%able and all undocu$ented accounts re#ardless of the %ear the% &ere incurred shall be reverted to the !u$ulative Result of Operations of the National (overn$ent +!RO/,. This shall appl% to accounts pa%able of all funds, e'cept fiduciar% funds, as lon# as the purpose for &hich the funds &ere created have not been acco$plished and accounts pa%able under forei#n assisted pro"ects for the duration of the said pro"ect. In this re#ard, the Depart$ent of 3ud#et and Mana#e$ent issued :oint> !ircular No. 99>0 -.2 +-.7, Procedural (uidelines &hich provides that all accounts pa%able that reverted to the !RO/ $a% be considered for pa%$ent upon deter$ination thru ad$inistrative process, of the e'istence, validit% and le#alit% of the clai$. Thus, the alle#ation of the defendants that considerin# no appropriation for the pa%$ent of an% a$ount a&arded to plaintiffs appellee the funds of defendant> appellants $a% not be sei6ed pursuant to a &rit of e'ecution issued b% the re#ular court is $isplaced. Surel% &hen the defendants and the plaintiff entered into the (eneral !onstruction of *#ree$ent there is an a$ount alread% allocated b% the latter for the said pro"ect &hich is no lon#er sub"ect of future appropriation.E-9 *fter the !* denied their $otion for reconsideration on Dece$ber 17, 122., the petitioners appealed b% petition for revie&. M&tt/.s A.*s*'g #u.*'g t)/ P/'(/'+- o0 t)/ P/t*t*o' On :anuar% 72, 1220, :ud#e Di6on of the RT! +3ranch 42, denied Stern 3uilders and dela !ru6As $otion to &ithdra& the deposit, in consideration of the /PAs intention to appeal to the !*,.2 statin#@ Since it appears that the defendants are intendin# to file a petition for revie& of the !ourt of *ppeals resolution in !*>(.R. No. 44)1. &ithin the re#le$entar% period of fifteen +)., da%s fro$ receipt of resolution, the !ourt a#rees &ith the defendants stand that the #rantin# of plaintiffsA sub"ect $otion is pre$ature. ;et it be stated that &hat the !ourt $eant b% its Order dated :ul% 4, 122. &hich states in part that the Edisposition of the a$ount represented therein bein# sub"ect to the final outco$e of the case of the /niversit% of the Philippines, et. al., vs. Don. *#ustin S. Di6on et al., +!* (.R. No. 44)1. before the !ourt of *ppeals, is that the "ud#$ent or resolution of said court has to be final and e'ecutor%, for if the sa$e &ill still be elevated to the Supre$e !ourt, it &ill not attain finalit% %et until the hi#hest court has rendered its o&n final "ud#$ent or resolution..)

Do&ever, on :anuar% 11, 1228, the /P filed an Urgent Appli(ation for A -emporar Restraining .rder and/or A &rit of Preliminar 0n1un(tion,.1 averrin# that on :anuar% 7, 1228, :ud#e Maria Theresa dela Torre>Iadao +&ho had $ean&hile replaced :ud#e Di6on upon the latterAs appoint$ent to the !*, had issued another order allo&in# Stern 3uilders and dela !ru6 to &ithdra& the deposit,.7 to &it@ It bears stressin# that defendantsA liabilit% for the pa%$ent of the "ud#$ent obli#ation has beco$e indubitable due to the final and e'ecutor% nature of the Decision dated Nove$ber 14, 122). Insofar as the pa%$ent of the GsicH "ud#$ent obli#ation is concerned, the !ourt believes that there is nothin# $ore the defendant can do to escape liabilit%. It is observed that there is nothin# $ore the defendant can do to escape liabilit%. It is observed that defendant /.P. S%ste$ had alread% e'hausted all its le#al re$edies to overturn, set aside or $odif% the decision +dated Nove$ber 14, 122)+ rendered a#ainst it. The &a% the !ourt sees it, defendant /.P. S%ste$As petition before the Supre$e !ourt concerns onl% &ith the $anner b% &hich said "ud#$ent a&ard should be satisfied. It has nothin# to do &ith the le#alit% or propriet% thereof, althou#h it pra%s for the deletion of GsicH reduction of the a&ard of $oral da$a#es. It $ust be e$phasi6ed that this !ourtAs findin#, i.e., that there &as sufficient appropriation ear$ar=ed for the pro"ect, &as upheld b% the !ourt of *ppeals in its decision dated Septe$ber )0, 122.. 3ein# a findin# of fact, the Supre$e !ourt &ill, ordinaril%, not disturb the sa$e &as said !ourt is not a trier of fact. Such bein# the case, defendantsA ar#u$ents that there &as no sufficient appropriation for the pa%$ent of the "ud#$ent obli#ation $ust fail. ?hile it is true that the for$er Presidin# :ud#e of this !ourt in its Order dated :anuar% 72, 1220 had stated that@ ;et it be stated that &hat the !ourt $eant b% its Order dated :ul% 4, 122. &hich states in part that the Edisposition of the a$ount represented therein bein# sub"ect to the final outco$e of the case of the /niversit% of the Philippines, et. al., vs. Don. *#ustin S. Di6on et al., +!* (.R. No. 44)1. before the !ourt of *ppeals, is that the "ud#$ent or resolution of said court has to be final and e'ecutor%, for if the sa$e &ill still be elevated to the Supre$e !ourt, it &ill not attain finalit% %et until the hi#hest court has rendered its o&n final "ud#$ent or resolution. it should be noted that neither the !ourt of *ppeals nor the Supre$e !ourt issued a preli$inar% in"unction en"oinin# the release or &ithdra&al of the #arnished a$ount. In fact, in its present petition for revie& before the Supre$e !ourt, /.P. S%ste$ has not pra%ed for the issuance of a &rit of preli$inar% in"unction. Thus, the !ourt doubts &hether such &rit is forthco$in#. The !ourt honestl% believes that if defendantsA petition assailin# the Order of this !ourt dated Dece$ber 7), 122- #rantin# the $otion for the release of the #arnished a$ount &as $eritorious, the !ourt of *ppeals &ould have issued a &rit of in"unction en"oinin# the sa$e. Instead, said appellate court not onl% refused to issue a &it of preli$inar% in"unction pra%ed for b% /.P. S%ste$ but denied the petition, as &ell..The /P contended that :ud#e Iadao thereb% effectivel% reversed the :anuar% 72, 1220 order of :ud#e Di6on disallo&in# the &ithdra&al of the #arnished a$ount until after the decision in the case &ould have beco$e final and e'ecutor%. *lthou#h the !ourt issued a TRO on :anuar% 1-, 1228 to en"oin :ud#e Iadao and all persons actin# pursuant to her authorit% fro$ enforcin# her order of :anuar% 7, 1228,.. it appears that on :anuar% )0, 1228, or prior to the issuance of the TRO, she had alread% directed the D3P to forth&ith release the #arnished a$ount to Stern 3uilders and dela !ru6B .0 and that D3P had forth&ith co$plied &ith the order on :anuar% )8, 1228 upon the sheriffAs service of the order of :ud#e Iadao..8 These intervenin# develop$ents i$pelled the /P to file in this !ourt a supple$ental petition on :anuar% 10, 1228,.4 alle#in# that the RT!

+:ud#e Iadao, #ravel% erred in orderin# the i$$ediate release of the #arnished a$ount despite the pendenc% of the petition for revie& in this !ourt. The /P filed a second supple$ental petition.9 after the RT! +:ud#e Iadao, denied the /PAs $otion for the redeposit of the &ithdra&n a$ount on *pril )2, 1228,02 to &it@ This resolves defendant /.P. S%ste$As /r#ent Motion to Redeposit :ud#$ent *&ard pra%in# that plaintiffs be directed to redeposit the "ud#$ent a&ard to D3P pursuant to the Te$porar% Restrainin# Order issued b% the Supre$e !ourt. Plaintiffs opposed the $otion and countered that the Te$porar% Restrainin# Order issued b% the Supre$e !ourt has beco$e $oot and acade$ic considerin# that the act sou#ht to be restrained b% it has alread% been perfor$ed. The% also alle#ed that the redeposit of the "ud#$ent a&ard &as no lon#er feasible as the% have alread% spent the sa$e. It bears stressin#, if onl% to set the record strai#ht, that this !ourt did not J in its Order dated :anuar% 7, 1228 +the i$ple$entation of &hich &as restrained b% the Supre$e !ourt in its Resolution dated :anuar% 1-, 1221, J direct that that #arnished a$ount Ebe deposited &ith the #arnishee ban= +Develop$ent 3an= of the Philippines,E. In the first place, there &as no need to order D3P to $a=e such deposit, as the #arnished a$ount &as alread% deposited in the account of plaintiffs &ith the D3P as earl% as Ma% )7, 122.. ?hat the !ourt #ranted in its Order dated :anuar% 7, 1228 &as plaintiffAs $otion to allo& the release of said deposit. It $ust be recalled that the !ourt found plaintiffAs $otion $eritorious and, at that ti$e, there &as no restrainin# order or preli$inar% in"unction fro$ either the !ourt of *ppeals or the Supre$e !ourt &hich could have en"oined the release of plaintiffsA deposit. The !ourt also too= into account the follo&in# factors@ a, the Decision in this case had lon# been final and e'ecutor% after it &as rendered on Nove$ber 14, 122)B b, the propriet% of the dis$issal of /.P. S%ste$As appeal &as upheld b% the Supre$e !ourtB c, a &rit of e'ecution had been issuedB d, defendant /.P. S%ste$As deposit &ith D3P &as #arnished pursuant to a la&ful &rit of e'ecution issued b% the !ourtB and e, the #arnished a$ount had alread% been turned over to the plaintiffs and deposited in their account &ith D3P. The #arnished a$ount, as discussed in the Order dated :anuar% )0, 1228, &as alread% o&ned b% the plaintiffs, havin# been delivered to the$ b% the Deput% Sheriff of this !ourt pursuant to par. +c,, Section 9, Rule 79 of the )998 Rules of !ivil Procedure. Moreover, the "ud#$ent obli#ation has alread% been full% satisfied as per Report of the Deput% Sheriff. *nent the Te$porar% Restrainin# Order issued b% the Supre$e !ourt, the sa$e has beco$e fun(tus ofi(io, havin# been issued after the #arnished a$ount had been released to the plaintiffs. The "ud#$ent debt &as released to the plaintiffs on :anuar% )8, 1228, &hile the Te$porar% Restrainin# Order issued b% the Supre$e !ourt &as received b% this !ourt on Februar% 1, 1228. *t the ti$e of the issuance of the Restrainin# Order, the act sou#ht to be restrained had alread% been done, thereb% renderin# the said Order ineffectual. *fter a careful and thorou#h stud% of the ar#u$ents advanced b% the parties, the !ourt is of the considered opinion that there is no le#al basis to #rant defendant /.P. S%ste$As $otion to redeposit the "ud#$ent a$ount. (rantin# said $otion is not onl% contrar% to la&, but it &ill also render this !ourtAs final e'ecutor% "ud#$ent nu#ator%. ;iti#ation $ust end and ter$inate so$eti$e and so$e&here, and it is

essential to an effective ad$inistration of "ustice that once a "ud#$ent has beco$e final the issue or cause involved therein should be laid to rest. This doctrine of finalit% of "ud#$ent is #rounded on funda$ental considerations of public polic% and sound practice. In fact, nothin# is $ore settled in la& than that once a "ud#$ent attains finalit% it thereb% beco$es i$$utable and unalterable. It $a% no lon#er be $odified in an% respect, even if the $odification is $eant to correct &hat is perceived to be an erroneous conclusion of fact or la&, and re#ardless of &hether the $odification is atte$pted to be $ade b% the court renderin# it or b% the hi#hest court of the land. ?D R FOR , pre$ises considered, findin# defendant /.P. S%ste$As /r#ent Motion to Redeposit :ud#$ent *&ard devoid of $erit, the sa$e is hereb% D NI D. SO ORD R D. Issu/s The /P no& sub$its that@ I TD !O/RT OF *PP *;S !OMMITT D (R*V RROR IN DISMISSIN( TD P TITION, *;;O?IN( IN FF !T TD (*RNISDM NT OF /P F/NDS, ?D N IT R/; D TD*T F/NDS D*V *;R *DI 3 N *RM*RK D FOR TD !ONSTR/!TION PRO: !TB *ND TD/S, TD R IS NO N D FOR F/RTD R *PPROPRI*TIONS. II TD !O/RT OF *PP *;S !OMMITT D (R*V RROR IN *;;O?IN( (*RNISDM NT OF * ST*T /NIV RSITIAS F/NDS IN VIO;*TION OF *RTI!; LIV, S !TION .+., OF TD !ONSTIT/TION. III IN TD *;T RN*TIV , TD /NIV RSITI INVOK S 5/ITI *ND TD R VI ? PO? RS OF TDIS DONOR*3; !O/RT TO MODIFI, IF NOT TOT*;;I D ; T TD *?*RD OF P)2 MI;;ION *S MOR*; D*M*( S TO R SPOND NTS. IV TD RT!>3R*N!D 42 !OMMITT D (R*V RROR IN ORD RIN( TD IMM DI*T R ; *S OF TD :/D(M NT *?*RD IN ITS ORD R D*T D 7 :*N/*RI 1228 ON TD (RO/ND OF 5/ITI *ND :/DI!I*; !O/RT SI. V TD RT!>3R*N!D 42 !OMMITT D (R*V RROR IN ORD RIN( TD IMM DI*T R ; *S OF TD :/D(M NT *?*RD IN ITS ORD R D*T D )0 :*N/*RI 1228 ON TD (RO/ND TD*T P TITION R /NIV RSITI STI;; D*S * P NDIN( MOTION FOR R !ONSID R*TION OF TD ORD R D*T D 7 :*N/*RI 1228. VI TD RT!>3R*N!D 42 !OMMITT D (R*V RROR IN NOT ORD RIN( TD R D POSIT OF TD (*RNISD D *MO/NT TO TD D3P IN VIO;*TION OF TD !; *R ;*N(/*( OF TD S/PR M !O/RT R SO;/TION D*T D 1- :*N/*RI 1228. The /P ar#ues that the a$ount ear$ar=ed for the construction pro"ect had been purposel% set aside onl% for the aborted pro"ect and did not include incidental $atters li=e the a&ards of actual da$a#es, $oral

da$a#es and attorne%As fees. In support of its ar#u$ent, the /P cited *rticle )1.1 of the (eneral !onstruction *#ree$ent, &hich stipulated that no deductions &ould be allo&ed for the pa%$ent of clai$s, da$a#es, losses and e'penses, includin# attorne%As fees, in case of an% liti#ation arisin# out of the perfor$ance of the &or=. The /P insists that the !* decision &as inconsistent &ith the rulin#s in Commissioner of Pu$li( 2igh3a s v. San Diego0) andDepartment of Agri(ulture v. +'RC01 to the effect that #overn$ent funds and properties could not be sei6ed under &rits of e'ecution or #arnish$ent to satisf% "ud#$ent a&ards. Further$ore, the /P contends that the !* contravened Section ., *rticle LIV of the !onstitution b% allo&in# the #arnish$ent of /P funds, because the #arnish$ent resulted in a substantial reduction of the /PAs li$ited bud#et allocated for the re$uneration, "ob satisfaction and fulfill$ent of the best available teachersB that :ud#e Iadao should have e'hibited "udicial courtes% to&ards the !ourt due to the pendenc% of the /PAs petition for revie&B and that she should have also desisted fro$ declarin# that the TRO issued b% this !ourt had beco$e fun(tus offi(io. ;astl%, the /P states that the a&ards of actual da$a#es of P.,8)0,819.22 and $oral da$a#es of P)2 $illion should be reduced, if not entirel% deleted, due to its bein# unconscionable, ineCuitable and detri$ental to public service. In contrast, Stern 3uilders and dela !ru6 aver that the petition for revie& &as fatall% defective for its failure to $ention the other cases upon the sa$e issues pendin# bet&een the parties +i.e., !*>(.R. No. 8879. and (.R No. )07.2),B that the /P &as evidentl% resortin# to foru$ shoppin#, and to dela%in# the satisfaction of the final "ud#$ent b% the filin# of its petition for revie&B that the rulin# in Commissioner of Pu$li( &or4s v. San Diego had no application because there &as an appropriation for the pro"ectB that the /P retained the funds allotted for the pro"ect onl% in a fiduciar% capacit%B that the contract price had been $ean&hile ad"usted to P11,774,..7.1., an a$ount alread% $ore than sufficient to cover the "ud#$ent a&ardB that the /PAs pra%er to reduce or delete the a&ard of da$a#es had no factual basis, because the% had been #ravel% &ron#ed, had been deprived of their source of inco$e, and had suffered untold $iseries, disco$fort, hu$iliation and sleepless %earsB that dela !ru6 had even been constrained to sell his house, his eCuip$ent and the i$ple$ents of his trade, and to#ether &ith his fa$il% had been forced to live $iserabl% because of the &ron#ful actuations of the /PB and that the RT! correctl% declared the !ourtAs TRO to be alread% fun(tus offi(io b% reason of the &ithdra&al of the #arnished a$ount fro$ the D3P. The decisive issues to be considered and passed upon are, therefore@ +a, &hether the funds of the /P &ere the proper sub"ect of #arnish$ent in order to satisf% the "ud#$ent a&ardB and +b, &hether the /PAs pra%er for the deletion of the a&ards of actual da$a#es of P.,8)0,819.22, $oral da$a#es of P)2,222,222.22 and attorne%As fees of P).2,222.22 plus P),.22.22 per appearance could be #ranted despite the finalit% of the "ud#$ent of the RT!. Ru1*'g The petition for revie& is $eritorious. I. UP4s 0u'(s, 5/*'g go6/.'7/'t 0u'(s, &./ 'ot su58/+t to g&.'*s)7/'t The /P &as founded on :une )4, )924 throu#h *ct )482 to provide advanced instruction in literature, philosoph%, the sciences, and arts, and to #ive professional and technical trainin# to deservin# students.07 Despite its establish$ent as a bod% corporate,0- the /P re$ains to be a Echartered institutionE0. perfor$in# a le#iti$ate #overn$ent function. It is an institution of hi#her learnin#, not a corporation established for profit and declarin# an% dividends.00 In enactin# Republic *ct No. 9.22 (-he Universit of the Philippines Charter of 5667), !on#ress has declared the /P as the national

universit%08 Ededicated to the search for truth and =no&led#e as &ell as the develop$ent of future leaders.E04 Irrefra#abl%, the /P is a #overn$ent instru$entalit%,09 perfor$in# the StateAs constitutional $andate of pro$otin# Cualit% and accessible education.82 *s a #overn$ent instru$entalit%, the /P ad$inisters special funds sourced fro$ the fees and inco$e enu$erated under *ct No. )482 and Section ) of 'ecutive Order No. 8)-,8) and fro$ the %earl% appropriations, to achieve the purposes laid do&n b% Section 1 of *ct )482, as e'panded in Republic *ct No. 9.22.81 *ll the funds #oin# into the possession of the /P, includin# an% interest accruin# fro$ the deposit of such funds in an% ban=in# institution, constitute a Especial trust fund,E the disburse$ent of &hich should al&a%s be ali#ned &ith the /PAs $ission and purpose,87 and should al&a%s be sub"ect to auditin# b% the !O*.8Presidential Decree No. )--. defines a Etrust fundE as a fund that officiall% co$es in the possession of an a#enc% of the #overn$ent or of a public officer as trustee, a#ent or ad$inistrator, or that is received for the fulfill$ent of so$e obli#ation.8. * trust fund $a% be utili6ed onl% for the Especific purpose for &hich the trust &as created or the funds received.E80 The funds of the /P are #overn$ent funds that are public in character. The% include the inco$e accruin# fro$ the use of real propert% ceded to the /P that $a% be spent onl% for the attain$ent of its institutional ob"ectives.88Dence, the funds sub"ect of this action could not be validl% $ade the sub"ect of the RT!As &rit of e'ecution or #arnish$ent. The adverse "ud#$ent rendered a#ainst the /P in a suit to &hich it had i$pliedl% consented &as not i$$ediatel% enforceable b% e'ecution a#ainst the /P,84 because suabilit% of the State did not necessaril% $ean its liabilit%.89 * $ar=ed distinction e'ists bet&een suabilit% of the State and its liabilit%. *s the !ourt succinctl% stated in8uni(ipalit of San 9ernando! 'a Union v. 9irme)42 * distinction should first be $ade bet&een suabilit% and liabilit%. ESuabilit% depends on the consent of the state to be sued, liabilit% on the applicable la& and the established facts. The circu$stance that a state is suable does not necessaril% $ean that it is liableB on the other hand, it can never be held liable if it does not first consent to be sued. ;iabilit% is not conceded b% the $ere fact that the state has allo&ed itself to be sued. ?hen the state does &aive its soverei#n i$$unit%, it is onl% #ivin# the plaintiff the chance to prove, if it can, that the defendant is liable. *lso, in Repu$li( v. #illasor,4) &here the issuance of an alias &rit of e'ecution directed a#ainst the funds of the *r$ed Forces of the Philippines to satisf% a final and e'ecutor% "ud#$ent &as nullified, the !ourt said@ ''' The universal rule that &here the State #ives its consent to be sued b% private parties either b% #eneral or special la&, it $a% li$it clai$antAs action Eonl% up to the co$pletion of proceedin#s anterior to the sta#e of e'ecutionE and that the po&er of the !ourts ends &hen the "ud#$ent is rendered, since #overn$ent funds and properties $a% not be sei6ed under &rits of e'ecution or #arnish$ent to satisf% such "ud#$ents, is based on obvious considerations of public polic%. Disburse$ents of public funds $ust be covered b% the correspondin# appropriation as reCuired b% la&. The functions and public services rendered b% the State cannot be allo&ed to be paral%6ed or disrupted b% the diversion of public funds fro$ their le#iti$ate and specific ob"ects, as appropriated b% la&. The /P correctl% sub$its here that the #arnish$ent of its funds to satisf% the "ud#$ent a&ards of actual and $oral da$a#es +includin# attorne%As fees, &as not validl% $ade if there &as no special appropriation b% !on#ress to cover the liabilit%. It &as, therefore, le#all% un&arranted for the !* to a#ree &ith the RT!As holdin# in the order issued on *pril ), 1227 that no appropriation b% !on#ress to allocate and set aside the pa%$ent of the "ud#$ent a&ards &as necessar% because Ethere +&ere, alread% an appropriations +sic, ear$ar=ed for the said pro"ect.E41The !* and the RT! thereb%

un"ustifiabl% i#nored the le#al restriction i$posed on the trust funds of the (overn$ent and its a#encies and instru$entalities to be used e'clusivel% to fulfill the purposes for &hich the trusts &ere created or for &hich the funds &ere received e'cept upon e'press authori6ation b% !on#ress or b% the head of a #overn$ent a#enc% in control of the funds, and sub"ect to pertinent bud#etar% la&s, rules and re#ulations.47 Indeed, an appropriation b% !on#ress &as reCuired before the "ud#$ent that rendered the /P liable for $oral and actual da$a#es +includin# attorne%As fees, &ould be satisfied considerin# that such $onetar% liabilities &ere not covered b% the Eappropriations ear$ar=ed for the said pro"ect.E The !onstitution strictl% $andated that E+n,o $one% shall be paid out of the Treasur% e'cept in pursuance of an appropriation $ade b% la&.E4II COA 7ust &(8u(*+&t/ ,.*6&t/ ./s,o'(/'ts4 +1&*7 5/0o./ /9/+ut*o' s)ou1( ,.o+//( The e'ecution of the $onetar% "ud#$ent a#ainst the /P &as &ithin the pri$ar% "urisdiction of the !O*. This &as e'pressl% provided in Section 10 of Presidential Decree No. )--., to &it@ Section 10. General 1urisdi(tion. > The authorit% and po&ers of the !o$$ission shall e'tend to and co$prehend all $atters relatin# to auditin# procedures, s%ste$s and controls, the =eepin# of the #eneral accounts of the (overn$ent, the preservation of vouchers pertainin# thereto for a period of ten %ears, the e'a$ination and inspection of the boo=s, records, and papers relatin# to those accountsB and the audit and settle$ent of the accounts of all persons respectin# funds or propert% received or held b% the$ in an accountable capacit%, as &ell as the e'a$ination, audit, and settle$ent of all debts and clai$s of an% sort due fro$ or o&in# to the (overn$ent or an% of its subdivisions, a#encies and instru$entalities. The said "urisdiction e'tends to all #overn$ent>o&ned or controlled corporations, includin# their subsidiaries, and other self>#overnin# boards, co$$issions, or a#encies of the (overn$ent, and as herein prescribed, includin# non #overn$ental entities subsidi6ed b% the #overn$ent, those funded b% donations throu#h the #overn$ent, those reCuired to pa% levies or #overn$ent share, and those for &hich the #overn$ent has put up a counterpart fund or those partl% funded b% the #overn$ent. It &as of no $o$ent that a final and e'ecutor% decision alread% validated the clai$ a#ainst the /P. The settle$ent of the $onetar% clai$ &as still sub"ect to the pri$ar% "urisdiction of the !O* despite the final decision of the RT! havin# alread% validated the clai$. 4. *s such, Stern 3uilders and dela !ru6 as the clai$ants had no alternative e'cept to first see= the approval of the !O* of their $onetar% clai$. On its part, the RT! should have e'ercised ut$ost caution, prudence and "udiciousness in dealin# &ith the $otions for e'ecution a#ainst the /P and the #arnish$ent of the /PAs funds. The RT! had no authorit% to direct the i$$ediate &ithdra&al of an% portion of the #arnished funds fro$ the depositor% ban=s of the /P. 3% esche&in# ut$ost caution, prudence and "udiciousness in dealin# &ith the e'ecution and #arnish$ent, and b% authori6in# the &ithdra&al of the #arnished funds of the /P, the RT! acted be%ond its "urisdiction, and all its orders and issuances thereon &ere void and of no le#al effect, specificall%@ +a, the order :ud#e Iadao issued on :anuar% 7, 1228 allo&in# Stern 3uilders and dela !ru6 to &ithdra& the deposited #arnished a$ountB +b, the order :ud#e Iadao issued on :anuar% )0, 1228 directin# D3P to forth&ith release the #arnish a$ount to Stern 3uilders and dela !ru6B +c, the sheriffAs report of :anuar% )8, 1228 $anifestin# the full satisfaction of the &rit of e'ecutionB and +d, the order of *pril )2, 1228 de%in# the /PAs $otion for the redeposit of the &ithdra&n a$ount. Dence, such orders and issuances should be struc= do&n &ithout e'ception. Nothin# e'tenuated :ud#e IadaoAs successive violations of Presidential Decree No. )--.. She &as a&are of Presidential Decree No. )--., considerin# that the !ourt circulated to all "ud#es its *d$inistrative !ircular No. )2>1222,40 issued on October 1., 1222, en"oinin# the$ Eto observe ut$ost caution, prudence and "udiciousness in the issuance of &rits of e'ecution to satisf% $one%

"ud#$ents a#ainst #overn$ent a#encies and local #overn$ent unitsE precisel% in order to prevent the circu$vention of Presidential Decree No. )--., as &ell as of the rules and procedures of the !O*, to &it@ In order to prevent possible circu$vention of the rules and procedures of the !o$$ission on *udit, "ud#es are hereb% en"oined to observe ut$ost caution, prudence and "udiciousness in the issuance of &rits of e'ecution to satisf% $one% "ud#$ents a#ainst #overn$ent a#encies and local #overn$ent units. :ud#es should bear in $ind that in !o$$issioner of Public Di#h&a%s v. San Die#o +7) S!R* 0)8, 01. )982,, this !ourt e'plicitl% stated@ EThe universal rule that &here the State #ives its consent to be sued b% private parties either b% #eneral or special la&, it $a% li$it clai$antAs action Monl% up to the co$pletion of proceedin#s anterior to the sta#e of e'ecutionA and that the po&er of the !ourt ends &hen the "ud#$ent is rendered, since #overn$ent funds and properties $a% not be sei6ed under &rits of e'ecution or #arnish$ent to satisf% such "ud#$ents, is based on obvious considerations of public polic%. Disburse$ents of public funds $ust be covered b% the correspondin# appropriation as reCuired b% la&. The functions and public services rendered b% the State cannot be allo&ed to be paral%6ed or disrupted b% the diversion of public funds fro$ their le#iti$ate and specific ob"ects, as appropriated b% la&. Moreover, it is settled "urisprudence that upon deter$ination of State liabilit%, the prosecution, enforce$ent or satisfaction thereof $ust still be pursued in accordance &ith the rules and procedures laid do&n in P.D. No. )--., other&ise =no&n as the (overn$ent *uditin# !ode of the Philippines +Depart$ent of *#riculture v. N;R!, 118 S!R* 097, 82)>21 )997 citin# Republic vs. Villasor, .- S!R* 4- )987,. *ll $one% clai$s a#ainst the (overn$ent $ust first be filed &ith the !o$$ission on *udit &hich $ust act upon it &ithin si't% da%s. Re"ection of the clai$ &ill authori6e the clai$ant to elevate the $atter to the Supre$e !ourt on certiorari and in effect, sue the State thereb% +P.D. )--., Sections -9>.2,. Do&ever, not&ithstandin# the rule that #overn$ent properties are not sub"ect to lev% and e'ecution unless other&ise provided for b% statute +Republic v. Palacio, 17 S!R* 499 )904B !o$$issioner of Public Di#h&a%s v. San Die#o, supra, or $unicipal ordinance +Municipalit% of Ma=ati v. !ourt of *ppeals, )92 S!R* 120 )992,, the !ourt has, in various instances, distin#uished bet&een #overn$ent funds and properties for public use and those not held for public use. Thus, in Viuda de Tan Toco v. Municipal !ouncil of Iloilo +-9 Phil .1 )910, the !ourt ruled that E&here propert% of a $unicipal or other public corporation is sou#ht to be sub"ected to e'ecution to satisf% "ud#$ents recovered a#ainst such corporation, the Cuestion as to &hether such propert% is leviable or not is to be deter$ined b% the usa#e and purposes for &hich it is held.E The follo&in# can be culled fro$ Viuda de Tan Toco v. Municipal !ouncil of Iloilo@ ). Properties held for public uses J and #enerall% ever%thin# held for #overn$ental purposes J are not sub"ect to lev% and sale under e'ecution a#ainst such corporation. The sa$e rule applies to funds in the hands of a public officer and ta'es due to a $unicipal corporation. 1. ?here a $unicipal corporation o&ns in its proprietar% capacit%, as distin#uished fro$ its public or #overn$ent capacit%, propert% not used or used for a public purpose but for Cuasi>private purposes, it is the #eneral rule that such propert% $a% be sei6ed and sold under e'ecution a#ainst the corporation. 7. Propert% held for public purposes is not sub"ect to e'ecution $erel% because it is te$poraril% used for private purposes. If the public use is &holl% abandoned, such propert% beco$es sub"ect to e'ecution. This *d$inistrative !ircular shall ta=e effect i$$ediatel% and the !ourt *d$inistrator shall see to it that it is faithfull% i$ple$ented. *lthou#h :ud#e Iadao pointed out that neither the !* nor the !ourt had issued as of then an% &rit of preli$inar% in"unction to en"oin the

release or &ithdra&al of the #arnished a$ount, she did not need an% &rit of in"unction fro$ a superior court to co$pel her obedience to the la&. The !ourt is disturbed that an e'perienced "ud#e li=e her should loo= at public la&s li=e Presidential Decree No. )--. dis$issivel% instead of lo%all% follo&in# and unCuestionin#l% i$ple$entin# the$. That she did so turned her court into an oppressive bastion of $indless t%rann% instead of havin# it as a true haven for the see=ers of "ustice li=e the /P. III P/.*o( o0 &,,/&1 (*( 'ot st&.t :*t)out /00/+t*6/ s/.6*+/ o0 (/+*s*o' u,o' +ou's/1 o0 ./+o.(; F./s)<,/.*o( .u1/ &''ou'+/( *' N/-,/s 6. Cou.t o0 A,,/&1s +&' 5/ g*6/' ./t.o&+t*6/ &,,1*+&t*o' The /P ne't pleads that the !ourt #ives due course to its petition for revie& in the na$e of eCuit% in order to reverse or $odif% the adverse "ud#$ent a#ainst it despite its finalit%. *t sta=e in the /PAs plea for eCuit% &as the return of the a$ount of P)0,782,)9).8- ille#all% #arnished fro$ its trust funds. Obstructin# the plea is the finalit% of the "ud#$ent based on the supposed tardiness of /PAs appeal, &hich the RT! declared on Septe$ber 10, 1221. The !* upheld the declaration of finalit% on Februar% 1-, 122-, and the !ourt itself denied the /PAs petition for revie& on that issue on Ma% )), 122- +(.R. No. )07.2),. The denial beca$e final on Nove$ber )1, 122-. It is true that a decision that has attained finalit% beco$es i$$utable and unalterable, and cannot be $odified in an% respect,48 even if the $odification is $eant to correct erroneous conclusions of fact and la&, and &hether the $odification is $ade b% the court that rendered it or b% this !ourt as the hi#hest court of the land.44 Public polic% dictates that once a "ud#$ent beco$es final, e'ecutor% and unappealable, the prevailin# part% should not be deprived of the fruits of victor% b% so$e subterfu#e devised b% the losin# part%. /n"ustified dela% in the enforce$ent of such "ud#$ent sets at nau#ht the role and purpose of the courts to resolve "usticiable controversies &ith finalit%.49 Indeed, all liti#ations $ust at so$e ti$e end, even at the ris= of occasional errors. 3ut the doctrine of i$$utabilit% of a final "ud#$ent has not been absolute, and has ad$itted several e'ceptions, a$on# the$@ +a, the correction of clerical errorsB +b, the so>called nun( pro tun( entries that cause no pre"udice to an% part%B +c, void "ud#$entsB and +d, &henever circu$stances transpire after the finalit% of the decision that render its e'ecution un"ust and ineCuitable.92 Moreover, in 2eirs of 8aura So v. .$lios(a,9) &e stated that despite the absence of the precedin# circu$stances, the !ourt is not precluded fro$ brushin# aside procedural nor$s if onl% to serve the hi#her interests of "ustice and eCuit%. *lso, in Gumaru v. :uirino State College,91 the !ourt nullified the proceedin#s and the &rit of e'ecution issued b% the RT! for the reason that respondent state colle#e had not been represented in the liti#ation b% the Office of the Solicitor (eneral. ?e rule that the /PAs plea for eCuit% &arrants the !ourtAs e'ercise of the e'ceptional po&er to disre#ard the declaration of finalit% of the "ud#$ent of the RT! for bein# in clear violation of the /PAs ri#ht to due process. 3oth the !* and the RT! found the filin# on :une 7, 1221 b% the /P of the notice of appeal to be tard%. The% based their findin# on the fact that onl% si' da%s re$ained of the /PAs re#le$entar% ).>da% period &ithin &hich to file the notice of appeal because the /P had filed a $otion for reconsideration on :anuar% )0, 1221 vis>N>vis the RT!As decision the /P received on :anuar% 8, 1221B and that because the denial of the $otion for reconsideration had been served upon *tt%. Feli$on D. Nolasco of the /P;3 ;e#al Office on Ma% )8, 1221, the /P had onl% until Ma% 17, 1221 &ithin &hich to file the notice of appeal. The /P counters that the service of the denial of the $otion for reconsideration upon *tt%. Nolasco &as defective considerin# that its counsel of record &as not *tt%. Nolasco of the /P;3 ;e#al Office but the O;S in Dili$an, 5ue6on !it%B and that the period of appeal should be rec=oned fro$ Ma% 7), 1221, the date &hen the O;S received the

order. The /P sub$its that the filin# of the notice of appeal on :une 7, 1221 &as &ell &ithin the re#le$entar% period to appeal. ?e a#ree &ith the sub$ission of the /P. Firstl%, the service of the denial of the $otion for reconsideration upon *tt%. Nolasco of the /P;3 ;e#al Office &as invalid and ineffectual because he &as ad$ittedl% not the counsel of record of the /P. The rule is that it is on the counsel and not the client that the service should be $ade.97 That counsel &as the O;S in Dili$an, 5ue6on !it%, &hich &as served &ith the denial onl% on Ma% 7), 1221. *s such, the runnin# of the re$ainin# period of si' da%s resu$ed onl% on :une ), 1221,9- renderin# the filin# of the /PAs notice of appeal on :une 7, 1221 ti$el% and &ell &ithin the re$ainin# da%s of the /PAs period to appeal. Veril%, the service of the denial of the $otion for reconsideration could onl% be validl% $ade upon the O;S in Dili$an, and no other. The fact that *tt%. Nolasco &as in the e$plo% of the /P at the /P;3 ;e#al Office did not render the service upon hi$ effective. It is settled that &here a part% has appeared b% counsel, service $ust be $ade upon such counsel.9. Service on the part% or the part%As e$plo%ee is not effective because such notice is not notice in la&.90 This is clear enou#h fro$ Section 1, second para#raph, of Rule )7, Rules of Court, &hich e'plicitl% states that@ EIf an% part% has appeared b% counsel, service upon hi$ shall be $ade upon his counsel or one of the$, unless service upon the part% hi$self is ordered b% the court. ?here one counsel appears for several parties, he shall onl% be entitled to one cop% of an% paper served upon hi$ b% the opposite side.E *s such, the period to appeal resu$ed onl% on :une ), 1221, the date follo&in# the service on Ma% 7), 1221 upon the O;S in Dili$an of the cop% of the decision of the RT!, not fro$ the date &hen the /P &as notified.98 *ccordin#l%, the declaration of finalit% of the "ud#$ent of the RT!, bein# devoid of factual and le#al bases, is set aside. Secondl%, even assu$in# that the service upon *tt%. Nolasco &as valid and effective, such that the re$ainin# period for the /P to ta=e a ti$el% appeal &ould end b% Ma% 17, 1221, it &ould still not be correct to find that the "ud#$ent of the RT! beca$e final and i$$utable thereafter due to the notice of appeal bein# filed too late on :une 7, 1221. In so declarin# the "ud#$ent of the RT! as final a#ainst the /P, the !* and the RT! applied the rule contained in the second para#raph of Section 7, Rule -) of the Rules of Court to the effect that the filin# of a $otion for reconsideration interrupted the runnin# of the period for filin# the appealB and that the period resu$ed upon notice of the denial of the $otion for reconsideration. For that reason, the !* and the RT! $i#ht not be ta=en to tas= for strictl% adherin# to the rule then prevailin#. Do&ever, eCuit% calls for the retroactive application in the /PAs favor of the fresh,period rule that the !ourt first announced in $id>Septe$ber of 122. throu#h its rulin# in +e pes v. Court of Appeals!;7 viz) To standardi6e the appeal periods provided in the Rules and to afford liti#ants fair opportunit% to appeal their cases, the !ourt dee$s it practical to allo& a fresh period of ). da%s &ithin &hich to file the notice of appeal in the Re#ional Trial !ourt, counted fro$ receipt of the order dis$issin# a $otion for a ne& trial or $otion for reconsideration. The retroactive application of the fresh,period rule, a procedural la& that ai$s Eto re#i$ent or $a=e the appeal period unifor$, to be counted fro$ receipt of the order den%in# the $otion for ne& trial, $otion for reconsideration +&hether full or partial, or an% final order or resolution,E99 is i$pervious to an% serious challen#e. This is because there are no vested ri#hts in rules of procedure.)22 * la& or re#ulation is procedural &hen it prescribes rules and for$s of procedure in order that courts $a% be able to ad$inister "ustice.)2) It does not co$e &ithin the le#al conception of a retroactive la&, or is not sub"ect of the

#eneral rule prohibitin# the retroactive operation of statues, but is #iven retroactive effect in actions pendin# and undeter$ined at the ti$e of its passa#e &ithout violatin# an% ri#ht of a person &ho $a% feel that he is adversel% affected. ?e have further said that a procedural rule that is a$ended for the benefit of liti#ants in furtherance of the ad$inistration of "ustice shall be retroactivel% applied to li=e&ise favor actions then pendin#, as eCuit% deli#hts in eCualit%.)21 ?e $a% even rela' strin#ent procedural rules in order to serve substantial "ustice and in the e'ercise of this !ourtAs eCuit% "urisdiction.)27 Cuit% "urisdiction ai$s to do co$plete "ustice in cases &here a court of la& is unable to adapt its "ud#$ents to the special circu$stances of a case because of the infle'ibilit% of its statutor% or le#al "urisdiction.)2It is co#ent to add in this re#ard that to den% the benefit of the fresh, period rule to the /P &ould a$ount to in"ustice and absurdit% J in"ustice, because the "ud#$ent in Cuestion &as issued on Nove$ber 14, 122) as co$pared to the "ud#$ent in Ne%pes that &as rendered in )994B absurdit%, because parties receivin# notices of "ud#$ent and final orders issued in the %ear )994 &ould en"o% the benefit of the fresh,period rule but the later rulin#s of the lo&er courts li=e that herein &ould not.)2. !onseCuentl%, even if the rec=onin# started fro$ Ma% )8, 1221, &hen *tt%. Nolasco received the denial, the /PAs filin# on :une 7, 1221 of the notice of appeal &as not tard% &ithin the conte't of the fresh,period rule. For the /P, the fresh period of ).>da%s counted fro$ service of the denial of the $otion for reconsideration &ould end on :une ), 1221, &hich &as a Saturda%. Dence, the /P had until the ne't &or=in# da%, or :une 7, 1221, a Monda%, &ithin &hich to appeal, confor$abl% &ith Section ) of Rule 11, Rules of !ourt, &hich holds that@ EIf the last da% of the period, as thus co$puted, falls on a Saturda%, a Sunda%, or a le#al holida% in the place &here the court sits, the ti$e shall not run until the ne't &or=in# da%.E IV A:&.(s o0 7o'/t&.- (&7&g/s, 5/*'g (/6o*( o0 0&+tu&1 &'( 1/g&1 5&s/s, (*( 'ot &tt&*' 0*'&1*t- &'( s)ou1( 5/ (/1/t/( Section )- of *rticle VIII of the !onstitution prescribes that e'press findin#s of fact and of la& should be $ade in the decision rendered b% an% court, to &it@ Section )-. No decision shall be rendered b% an% court &ithout e'pressin# therein clearl% and distinctl% the facts and the la& on &hich it is based. No petition for revie& or $otion for reconsideration of a decision of the court shall be refused due course or denied &ithout statin# the le#al basis therefor. I$ple$entin# the constitutional provision in civil actions is Section ) of Rule 70, Rules of Court! viz) Section ). Rendition of "ud#$ents and final orders. O * "ud#$ent or final order deter$inin# the $erits of the case shall be in &ritin# personall% and directl% prepared b% the "ud#e, statin# clearl% and distinctl% the facts and the la& on &hich it is based, si#ned b% hi$, and filed &ith the cler= of the court. +)a, The !onstitution and the Rules of Court apparentl% delineate t&o $ain essential parts of a "ud#$ent, na$el%@ the$od and the de(retal portion. *lthou#h the latter is the controllin# part,)20 the i$portance of the for$er is not to be li#htl% re#arded because it is there &here the court clearl% and distinctl% states its findin#s of fact and of la& on &hich the decision is based. To state it differentl%, one &ithout the other is ineffectual and useless. The o$ission of either inevitabl% results in a "ud#$ent that violates the letter and the spirit of the !onstitution and the Rules of Court.

The ter$ findings of fa(t that $ust be found in the bod% of the decision refers to state$ents of fact, not to conclusions of la&.)28 /nli=e in pleadin#s &here ulti$ate facts alone need to be stated, the !onstitution and the Rules of !ourt reCuire not onl% that a decision should state the ulti$ate facts but also that it should specif% the supportin# evidentiar% facts, for the% are &hat are called the findin#s of fact. The i$portance of the findin#s of fact and of la& cannot be overstated. The reason and purpose of the !onstitution and the Rules of Court in that re#ard are obviousl% to infor$ the parties &h% the% &in or lose, and &hat their ri#hts and obli#ations are. Onl% thereb% is the de$and of due process $et as to the parties. *s :ustice Isa#ani *. !ru6 e'plained in Nicos Industrial !orporation v. !ourt of *ppeals@)24 It is a reCuire$ent of due process that the parties to a liti#ation be infor$ed of ho& it &as decided, &ith an e'planation of the factual and le#al reasons that led to the conclusions of the court. The court cannot si$pl% sa% that "ud#$ent is rendered in favor of L and a#ainst I and "ust leave it at that &ithout an% "ustification &hatsoever for its action. The losin# part% is entitled to =no& &h% he lost, so he $a% appeal to a hi#her court, if per$itted, should he believe that the decision should be reversed. * decision that does not clearl% and distinctl% state the facts and the la& on &hich it is based leaves the parties in the dar= as to ho& it &as reached and is especiall% pre"udicial to the losin# part%, &ho is unable to pinpoint the possible errors of the court for revie& b% a hi#her tribunal. Dere, the decision of the RT! "ustified the #rant of actual and $oral da$a#es, and attorne%As fees in the follo&in# terse $anner, vi6@ ''' The !ourt is not un$indful that due to defendantsA un"ustified refusal to pa% their outstandin# obli#ation to plaintiff, the sa$e suffered losses and incurred e'penses as he &as forced to re>$ort#a#e his house and lot located in 5ue6on !it% to Metroban= + 'h. E!!E, and 3PI 3an= "ust to pa% its $onetar% obli#ations in the for$ of interest and penalties incurred in the course of the construction of the sub"ect pro"ect.)29 The state$ent that Edue to defendantsA un"ustified refusal to pa% their outstandin# obli#ation to plaintiff, the sa$e suffered losses and incurred e'penses as he &as forced to re>$ort#a#e his house and lot located in 5ue6on !it% to Metroban= + 'h. E!!E, and 3PI 3an= "ust to pa% its $onetar% obli#ations in the for$ of interest and penalties incurred in the course of the construction of the sub"ect pro"ectE &as onl% a conclusion of fact and la& that did not co$pl% &ith the constitutional and statutor% prescription. The state$ent specified no detailed e'penses or losses constitutin# the P.,8)0,819.22 actual da$a#es sustained b% Stern 3uilders in relation to the construction pro"ect or to other pecuniar% hardships. The o$ission of such e'penses or losses directl% indicated that Stern 3uilders did not prove the$ at all, &hich then contravened *rticle 1)99, Civil Code, the statutor% basis for the a&ard of actual da$a#es, &hich entitled a person to an adeCuate co$pensation onl% for such pecuniar% loss suffered b% hi$ as he has dul proved. *s such, the actual da$a#es allo&ed b% the RT!, bein# bereft of factual support, &ere speculative and &hi$sical. ?ithout the clear and distinct findin#s of fact and la&, the a&ard a$ounted onl% to anipse di*it on the part of the RT!,))2 and did not attain finalit%. There &as also no clear and distinct state$ent of the factual and le#al support for the a&ard of $oral da$a#es in the substantial a$ount of P)2,222,222.22. The a&ard &as thus also speculative and &hi$sical. ;i=e the actual da$a#es, the $oral da$a#es constituted another "udicial ipse di'it, the inevitable conseCuence of &hich &as to render the a&ard of $oral da$a#es incapable of attainin# finalit%. In addition, the #rant of $oral da$a#es in that $anner contravened the la& that per$itted the recover% of $oral da$a#es as the $eans to assua#e Eph%sical sufferin#, $ental an#uish, fri#ht, serious an'iet%, bes$irched reputation, &ounded feelin#s, $oral shoc=, social hu$iliation, and si$ilar in"ur%.E))) The contravention of the la& &as $anifest considerin# that Stern 3uilders, as an artificial person, &as incapable of e'periencin# pain and $oral sufferin#s.))1 *ssu$in# that in #rantin# the substantial a$ount of P)2,222,222.22 as $oral da$a#es, the RT! $i#ht have had in $ind that dela !ru6 had hi$self

suffered $ental an#uish and an'iet%. If that &as the case, then the RT! obviousl% disre#arded his separate and distinct personalit% fro$ that of Stern 3uilders.))7 Moreover, his $oral and e$otional sufferin#s as the President of Stern 3uilders &ere not the sufferin#s of Stern 3uilders. ;astl%, the RT! violated the basic principle that $oral da$a#es &ere not intended to enrich the plaintiff at the e'pense of the defendant, but to restore the plaintiff to his status Cuo ante as $uch as possible. Ta=en to#ether, therefore, all these considerations e'posed the substantial a$ount of P)2,222,222.22 allo&ed as $oral da$a#es not onl% to be factuall% baseless and le#all% indefensible, but also to be unconscionable, ineCuitable and unreasonable. ;i=e the actual and $oral da$a#es, the P).2,222.22, plus P),.22.22 per appearance, #ranted as attorne%As fees &ere factuall% un&arranted and devoid of le#al basis. The #eneral rule is that a successful liti#ant cannot recover attorne%As fees as part of the da$a#es to be assessed a#ainst the losin# part% because of the polic% that no pre$iu$ should be placed on the ri#ht to liti#ate.))- Prior to the effectivit% of the present !ivil !ode, indeed, such fees could be recovered onl% &hen there &as a stipulation to that effect. It &as onl% under the present Civil Codethat the ri#ht to collect attorne%As fees in the cases $entioned in *rticle 1124)). of the Civil Code ca$e to be reco#ni6ed.))0 Nonetheless, &ith attorne%As fees bein# allo&ed in the concept of actual da$a#es,))8 their a$ounts $ust be factuall% and le#all% "ustified in the bod% of the decision and not stated for the first ti$e in the decretal portion.))4 Statin# the a$ounts onl% in the dispositive portion of the "ud#$ent is not enou#hB))9 a rendition of the factual and le#al "ustifications for the$ $ust also be laid out in the bod% of the decision.)12 That the attorne%As fees #ranted to the private respondents did not satisf% the fore#oin# reCuire$ent suffices for the !ourt to undo the$.)1) The #rant &as ineffectual for bein# contrar% to la& and public polic%, it bein# clear that the e'press findin#s of fact and la& &ere intended to brin# the case &ithin the e'ception and thereb% "ustif% the a&ard of the attorne%As fees. Devoid of such e'press findin#s, the a&ard &as a conclusion &ithout a pre$ise, its basis bein# i$properl% left to speculation and con"ecture.)11 Nonetheless, the absence of findin#s of fact and of an% state$ent of the la& and "urisprudence on &hich the a&ards of actual and $oral da$a#es, as &ell as of attorne%As fees, &ere based &as a fatal fla& that invalidated the decision of the RT! onl% as to such a&ards. *s the !ourt declared in #elarde v. So(ial "usti(e So(iet ,)17 the failure to co$pl% &ith the constitutional reCuire$ent for a clear and distinct state$ent of the supportin# facts and la& Eis a #rave abuse of discretion a$ountin# to lac= or e'cess of "urisdictionE and that E+d,ecisions or orders issued in careless disre#ard of the constitutional $andate are a patent nullit% and $ust be struc= do&n as void.E)1- The other ite$ #ranted b% the RT! +i.e., P.27,-01.8-, shall stand, sub"ect to the action of the !O* as stated herein. %HEREFORE, the !ourt GRANTS the petition for revie& on certiorariB REVERSES and SETS ASI#E the decision of the !ourt of *ppeals under revie&B ANNU S the orders for the #arnish$ent of the funds of the /niversit% of the Philippines and for the release of the #arnished a$ount to Stern 3uilders !orporation and Servillano dela !ru6B and #E ETES fro$ the decision of the Re#ional Trial !ourt dated Nove$ber 14, 122) for bein# void onl% the a&ards of actual da$a#es of P.,8)0,819.22, $oral da$a#es of P)2,222,222.22, and attorne%Ps fees ofP).2,222.22, plus P),.22.22 per appearance, in favor of Stern 3uilders !orporation and Servillano dela !ru6. The !ourt OR#ERS Ste$ 3uilders !orporation and Servillano dela !ru6 to redeposit the a$ount ofP)0,782,)9).8- &ithin )2 da%s fro$ receipt of this decision. !osts of suit to be paid b% the private respondents. SO ORD R D.

Lipat vs. Pacific Banking Corporation Case Digest *,&t 6s. P&+*0*+ "&'=*'g Co.,o.&t*o' >GR 1?2?3@, 30 A,.*1 2003A F&+tsB The spouses *lfredo ;ipat and stelita 3ur#os ;ipat, o&ned E3elaPs 'port Tradin#E +3 T,, a sin#le proprietorship &ith principal office at No. 4)- *urora 3oulevard, !ubao, 5ue6on !it%. 3 T &as en#a#ed in the $anufacture of #ar$ents for do$estic and forei#n consu$ption. The ;ipats also o&ned the EM%stical FashionsE in the /nited States, &hich sells #oods i$ported fro$ the Philippines throu#h 3 T. Mrs. ;ipat desi#nated her dau#hter, Teresita 3. ;ipat, to $ana#e 3 T in the Philippines &hile she &as $ana#in# EM%stical FashionsE in the /nited States. In order to facilitate the convenient operation of 3 T, stelita ;ipat e'ecuted on )- Dece$ber )984, a special po&er of attorne% appointin# Teresita ;ipat as her attorne%>in>fact to obtain loans and other credit acco$$odations fro$ Pacific 3an=in# !orporation +Pacific 3an=,. She li=e&ise authori6ed Teresita to e'ecute $ort#a#e contracts on properties o&ned or co>o&ned b% her as securit% for the obli#ations to be e'tended b% Pacific 3an= includin# an% e'tension or rene&al thereof. So$eti$e in *pril )989, Teresita, b% virtue of the special po&er of attorne%, &as able to secure for and in behalf of her $other, Mrs. ;ipat and 3 T, a loan fro$ Pacific 3an= a$ountin# to P.47,4.-.22 to bu% fabrics to be $anufactured b% 3 T and e'ported to EM%stical FashionsE in the /nited States. *s securit% therefor, the ;ipat spouses, as represented b% Teresita, e'ecuted a Real state Mort#a#e over their propert% located at No. 4)- *urora 3lvd., !ubao, 5ue6on !it%. Said propert% &as li=e&ise $ade to secure other additional or ne& loans, etc. On . Septe$ber )989, 3 T &as incorporated into a fa$il% corporation na$ed 3elaPs 'port !orporation +3 !, in order to facilitate the $ana#e$ent of the business. 3 ! &as en#a#ed in the business of $anufacturin# and e'portation of all =inds of #ar$ents of &hatever =ind and description and utili6ed the sa$e $achineries and eCuip$ent previousl% used b% 3 T. Its incorporators and directors included the ;ipat spouses &ho o&ned a co$bined 722 shares out of the -12 shares subscribed, Teresita ;ipat &ho o&ned 12 shares, and other close relatives and friends of the ;ipats. stelita ;ipat &as na$ed president of 3 !, &hile Teresita beca$e the vice>president and #eneral $ana#er. ventuall%, the loan &as later restructured in the na$e of 3 ! and subseCuent loans &ere obtained b% 3 ! &ith the correspondin# pro$issor% notes dul% e'ecuted b% Teresita on behalf of the corporation. * letter of credit &as also opened b% Pacific 3an= in favor of *. O. Knittin# Manufacturin# !o., Inc., upon the reCuest of 3 ! after 3 ! e'ecuted the correspondin# trust receipt therefor. 'port bills &ere also e'ecuted in favor of Pacific 3an= for additional finances. These transactions &ere all secured b% the real estate $ort#a#e over the ;ipatsP propert%. The pro$issor% notes, e'port bills, and trust receipt eventuall% beca$e due and de$andable. /nfortunatel%, 3 ! defaulted in its pa%$ents. *fter receipt of Pacific 3an=Ps de$and letters, stelita ;ipat &ent to the office of the ban=Ps liCuidator and as=ed for additional ti$e to enable her to personall% settle 3 !Ps obli#ations. The ban= acceded to her reCuest but stelita failed to fulfill her pro$ise. !onseCuentl%, the real estate $ort#a#e &as foreclosed and after co$pliance &ith the reCuire$ents of the la& the $ort#a#ed propert% &as sold at public auction. On 7) :anuar% )949, a certificate of sale &as issued to respondent u#enio D. Trinidad as the hi#hest bidder. On 14 Nove$ber )949, the spouses ;ipat filed before the 5ue6on !it% RT! a co$plaint for annul$ent of the real estate $ort#a#e, e'tra"udicial foreclosure and the certificate of sale issued over the propert% a#ainst Pacific 3an= and u#enio D. Trinidad. The co$plaint alle#ed, a$on# others, that the pro$issor% notes, trust receipt, and e'port bills &ere all ultra vires acts of Teresita as the% &ere e'ecuted &ithout the reCuisite board resolution of the 3oard of Directors of 3 !. The ;ipats also averred that assu$in# said acts &ere valid and bindin# on 3 !, the sa$e &ere the corporationPs sole obli#ation, it havin# a personalit% distinct and separate fro$ spouses ;ipat. It &as li=e&ise pointed out that TeresitaPs authorit% to secure a loan fro$ Pacific 3an= &as specificall% li$ited to Mrs. ;ipatPs sole use and benefit and that the real estate $ort#a#e &as e'ecuted to secure the ;ipatsP and 3 TPs P.47,4.-.22 loan onl%. In their respective ans&ers, Pacific 3an= and Trinidad alle#ed in co$$on that petitioners ;ipat cannot evade pa%$ents of the value of the pro$issor% notes, trust receipt, and e'port bills &ith their propert% because the% and the 3 ! are one and the sa$e, the latter

bein# a fa$il% corporation. Trinidad further clai$ed that he &as a bu%er in #ood faith and for value and that the ;ipat spouses are estopped fro$ den%in# 3 !Ps e'istence after holdin# the$selves out as a corporation. *fter trial on the $erits, the RT! dis$issed the co$plaint. The ;ipats ti$el% appealed the RT! decision to the !ourt of *ppeals in !*>(.R. !V -).70. Said appeal, ho&ever, &as dis$issed b% the appellate court for lac= of $erit. The ;ipats then $oved for reconsideration, but this &as denied b% the appellate court in its Resolution of 17 Februar% 1222. The ;ipat spouses filed the petition for revie& on certiorari. Issu/B ?hether 3 ! and 3 T are separate business entities, and thus the ;ipt spouses can isolate the$selves behind the corporate personalit% of 3 !. H/1(B ?hen the corporation is the $ere alter e#o or business conduit of a person, the separate personalit% of the corporation $a% be disre#arded. This is co$$onl% referred to as the Einstru$entalit% ruleE or the alter e#o doctrine, &hich the courts have applied in disre#ardin# the separate "uridical personalit% of corporations. *s held in one case, &here one corporation is so or#ani6ed and controlled and its affairs are conducted so that it is, in fact, a $ere instru$entalit% or ad"unct of the other, the fiction of the corporate entit% of the Pinstru$entalit%P $a% be disre#arded. The control necessar% to invo=e the rule is not $a"orit% or even co$plete stoc= control but such do$ination of finances, policies and practices that the controlled corporation has, so to spea=, no separate $ind, &ill or e'istence of its o&n, and is but a conduit for its principal. The evidence on record sho&s 3 T and 3 ! are not separate business entities. +), stelita and *lfredo ;ipat are the o&ners and $a"orit% shareholders of 3 T and 3 !, respectivel%B +1, both fir$s &ere $ana#ed b% their dau#hter, TeresitaB )9 +7, both fir$s &ere en#a#ed in the #ar$ent business, suppl%in# products to EM%stical Fashion,E a /.S. fir$ established b% stelita ;ipatB +-, both fir$s held office in the sa$e buildin# o&ned b% the ;ipatsB +., 3 ! is a fa$il% corporation &ith the ;ipats as its $a"orit% stoc=holdersB +0, the business operations of the 3 ! &ere so $er#ed &ith those of Mrs. ;ipat such that the% &ere practicall% indistin#uishableB +8, the corporate funds &ere held b% stelita ;ipat and the corporation itself had no visible assetsB +4, the board of directors of 3 ! &as co$posed of the 3ur#os and ;ipat fa$il% $e$bersB +9, stelita had full control over the activities of and decided business $atters of the corporationB and that +)2, stelita ;ipat had benefited fro$ the loans secured fro$ Pacific 3an= to finance her business abroad and fro$ the e'port bills secured b% 3 ! for the account of EM%stical Fashion.E It could not have been coincidental that 3 T and 3 ! are so intert&ined &ith each other in ter$s of o&nership, business purpose, and $ana#e$ent. *pparentl%, 3 T and 3 ! are one and the sa$e and the latter is a conduit of and $erel% succeeded the for$er. The spousesP atte$pt to isolate the$selves fro$ and hide behind the corporate personalit% of 3 ! so as to evade their liabilities to Pacific 3an= is precisel% &hat the classical doctrine of piercin# the veil of corporate entit% see=s to prevent and re$ed%. 3 ! is a $ere continuation and successor of 3 T, and the ;ipat spouses cannot evade their obli#ations in the $ort#a#e contract secured under the na$e of 3 ! on the prete't that it &as si#ned for the benefit and under the na$e of 3 T.

10

T/e 2%5ts:

FIRST DIVISION

S/'rt*- %2ter 0ts 0n5'r1'r%t0'n 0n 1957 %s % 20n%n5e %n& 0n3est(ent 5'(1%n-, 1et0t0'ner Gener%* $re&0t $'r1'r%t0'n

GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE CORPORATION), Petitione r,

G&R& No& '()*+( Present:

:G$$,

2'r

s/'rt;,

t/en

6n'4n

%s

$'((er50%*

$re&0t

$'r1'r%t0'n :$$$;, est%<*0s/e& $$$ 2r%n5/0se 5'(1%n0es 0n &022erent )r<%n 5enters '2 t/e 5')ntr-.839 n 2)rt/er%n5e '2 0ts <)s0ness, G$$ /%&, %s e%r*- %s 1974, %11*0e& 2'r %n& 4%s %<*e t' se5)re *05ense 2r'( t/e t/en $entr%* ?%n6 :$?; '2 t/e

PUNO, C.J., Chai rperson, SANDOVALGUT !""!#, - versus $O"ONA, A#$UNA, %n& GA"$ A, JJ. ALSONS DEVELOPMENT INVESTMENT CORPORATION E"#IT$ CORPORATION, !ents& ,%n)%r- 29, 2007 .--------------------------------------------------------------------------------------. n! n! CCC Pr'()*+%te&: Res%on

P/0*0110nes %n& t/e Se5)r0t0es %n& !.5/%n+e $'((0ss0'n :S!$; t' en+%+e %*s' 0n >)%s0-<%n60n+ %5t030t0es. 849On t/e 't/er /%n&, res1'n&ent $$$ !>)0t$'r1'r%t0'n :!@U TA, 2'r

<re30t-; 4%s 'r+%n0Be& 0n N'3e(<er 1994 <- G$$ 2'r t/e 1)r1'se '2, %('n+ 't/er t/0n+s, t%60n+ '3er t/e '1er%t0'ns %n& (%n%+e(ent '2 t/e 3%r0')s 2r%n5/0se 5'(1%n0es. At % t0(e (%ter0%* /eret', res1'n&ent A*s'ns De3e*'1(ent %n& n3est(ent $'r1'r%t0'n :ALSONS, /ere0n%2ter; %n& $'nr%&', N05%s0', !&0t/% %n& L%&0s*%4%, %** s)rn%(e& A*5%nt%r%, %n& A*2re&' &e ?'rC% :/ere0n%2ter t/e A*5%nt%r% 2%(0*-, 2'r

5'n3en0en5e;, e%5/ '4ne&, C)st *06e G$$, s/%res 0n t/e %2'res%0& G$$ 2r%n5/0se 5'(1%n0es, e.g., $$$ D%3%' %n& $$$ $e<).

n De5e(<er 1980, ALSONS %n& t/e A*5%nt%r% 2%(0*-, DECISION 2'r % 5'ns0&er%t0'n '2 T4' =0**0'n :P2,000,000.00; Pes's, s'*& t/e0r s/%re/'*&0n+s D % t't%* '2 101,953 s/%res, ('re 'r *ess GARCIA, J&,
[5]

0n

t/e

$$$

2r%n5/0se

5'(1%n0es

t'

!@U TA.

On ,%n)%r- 2, 1981, !@U TA 0ss)e& ALSONS et al., %

E<e%rerF 1r'(0ss'r- n'te 2'r P2,000,000.00 40t/ % 'ne--e%r (%t)r0t- &%te, %t 18G 0nterest 1er %nn)(, 40t/ 1r'30s0'ns 2'r n t/0s 1et0t0'n 2'r re30e4 'n 5ert0'r%r0 )n&er ")*e 45 '2 t/e ")*es '2 $')rt, 1et0t0'ner Gener%* $re&0t $'r1'r%t0'n, n'4 6n'4n %s Pent% $%10t%* 70n%n5e $'r1'r%t0'n, see6s t' %nn)* %n& set %s0&e t/e De50s0'n819 %n& "es'*)t0'n829 &%te& A1r0* 11, 2002 %n& A)+)st 20, 2002, res1e5t03e*-, '2 t/e $')rt '2 A11e%*s :$A; 0n CA-G.R. CV No. 31801, %220r(0n+ t/e S'(e 2')r -e%rs *%ter, t/e A*5%nt%r% 2%(0*- %ss0+ne& 0ts r0+/ts %n& 0nterests '3er t/e <e%rer n'te t' ALSONS 4/05/ t/en5e2'rt/ <e5%(e t/e /'*&er t/ere'2. 879 ?)t e3en <e2're t/e e.e5)t0'n '2 t/e %ss0+n(ent &e%* %2'rest%te&, *etters '2 &e(%n& 2'r 0nterest 1%-(ent 4ere %*re%&- sent t' !@U TA, t/r')+/ 0ts Pres0&ent, H0*2re&' L%<%-en, 4/' 1*e%&e& 0n%<0*0tt' 1%- t/e st01)*%te& 0nterest, !@U TA n' *'n+er t/en /%30n+ %ssets 'r 1r'1ert- t' sett*e 0ts '<*0+%t0'n n'r <e0n+ e.ten&e& 20n%n50%* s)11'rt <- G$$. &%(%+es %n& *0t0+%t0'n 5'sts 0n 5%se '2 &e2%)*t. 869

N'3e(<er 8, 1990 &e50s0'n '2 t/e "e+0'n%* Tr0%* $')rt :"T$; '2 =%6%t0 $0t- 0n 0ts $030* $%se N'. 12707, %n %5t0'n 2'r % s)( '2 ('ne- t/ere%t 0nst0t)te& <- t/e /ere0n res1'n&ent A*s'ns De3e*'1(ent %n& n3est(ent $'r1'r%t0'n %+%0nst t/e

1et0t0'ner %n& res1'n&ent $$$ !>)0t- $'r1'r%t0'n.

11

H/%t /%11ene& ne.t, %s n%rr%te& 0n t/e %ss%0*e& De50s0'n '2 t/e $A, (%- <e s)((%r0Be&, %s 2'**'4s:

20*e& 0ts Ans!er t/eret' %n& set )1 %220r(%t03e &e2enses 40t/ 5')nter5*%0( 2'r e.e(1*%r- &%(%+es %n& %tt'rne-Ks 2ees.

1. On ,%n)%r- 14, 1986, <e2're t/e "T$ '2 =%6%t0, ALSONS, /%30n+ 2%0*e& t' 5'**e5t 'n t/e <e%rer n'te %2're(ent0'ne&, 20*e& % 5'(1*%0nt 2'r % s)( '2 ('ne-889 %+%0nst !@U TA %n& G$$. T/e 5%se, &'56ete& %s $030* $%se N'. 12707, 4%s e3ent)%**- r%22*e& t' ?r%n5/ 58 '2 t/e 5')rt. As st%te& 0n 1%r. 4 '2 t/e 5'(1*%0nt, G$$ 0s <e0n+ 0(1*e%&e& %s 1%rt--&e2en&%nt 2'r %nC)&+(ent ALSONS (0+/t se5)re %+%0nst !@U TA %n&, )n&er t/e &'5tr0ne '2 10er50n+ t/e 3e0* '2 5'r1'r%te 205t0'n, %+%0nst G$$, !@U TA /%30n+ <een 'r+%n0Be& %s % t''* %n& (ere 5'n&)0t '2 G$$.

ss)es /%30n+ <een C'0ne&, tr0%* ens)e&. Presente& <ALSONS, <)t test02-0n+ %s %&3erse 40tnesses, 4ere $? %n& G$$ '2205ers. A('n+ 't/er t/0n+s, ALSONSK e30&en5e, 4/05/ 0n5*)&e& t/e !@U TA-0ss)e& E<e%rerF 1r'(0ss'r- n'te (%r6e& %s !./0<0t ELF %n& '3er s0.t- :60; 't/er (%r6e& %n& s)<se>)ent*- %&(0tte& &'5)(ents,899 4ere t' t/e e22e5t t/%t 203e :5; 0n5'r1'r%t'rs, e%5/ 5'ntr0<)t0n+ P100,000.00 %s t/e 0n0t0%* 1%0& )1 5%10t%* '2 t/e 5'(1%n-, 'r+%n0Be& !@U TA t' (%n%+e, %s 0t &0& (%n%+e, 3%r0')s G$$ 2r%n5/0ses t/r')+/ (%n%+e(ent 5'ntr%5ts. ?e2're !@U TAKs 0n5'r1'r%t0'n,

2. Ans4er0n+ 40t/ % 5r'ss-5*%0( %+%0nst G$$, !@U TA st%te& <- 4%- '2 s1e50%* %n& %220r(%t03e &e2enses t/%t 0t :!@U TA;:

/'4e3er, G$$ 4%s %*re%&- 0nt' t/e 20n%n50n+ <)s0ness %s 0t 4%s 0n 2%5t (%n%+0n+ %n& '1er%t0n+ 3%r0')s $$$ 2r%n5/0ses. Presente& 0n e30&en5e, t'', 4%s t/e Se1te(<er 29, 1982 *etter-re1*- '2 'ne G. V0**%n)e3%, t/en G$$ Pres0&ent, t'

%; 4%s 1)r1'se*'r+%n0Be& <- G$$ 2'r t/e *%tter t' %3'0& $? ")*es %n& "e+)*%t0'ns 'n DOS" :D0re5t'rs, O2205ers, St'56/'*&ers %n& "e*%te& nterest; *0(0t%t0'ns, %n& t/%t 0t %5te& (ere*- %s 0nter(e&0%r- 'r <r0&+e 2'r *'%n tr%ns%5t0'ns %n& 't/er &e%*0n+s '2 G$$ t' 0ts 2r%n5/0ses %n& t/e 0n3est0n+ 1)<*05I %n&

!@U TA Pres0&ent H0*2re&' L%<%-en, <e%r0n+ 'n t/e s%*e '2 !@U TA s/%res t' t/0r& 1%rt0es, 1%rt '2 t/e 1r'5ee&s '2 4/05/ t/e A*5%nt%r%s 4%nte& %11*0e& t' *0>)0&%te t/e 1r'(0ss'rn'te 0n >)est0'n. n s%0& *etter, =r. V0**%n)e3% e.1*%0ne& t/%t t/e G$$ ?'%r& &en0e& t/e A*5%nt%r%sK re>)est t' <e 1%0& ')t '2 s)5/ 1r'5ee&s, <)t n'net/e*ess %)t/'r0Be& !@U TA t' 1%t/e( 0nterest ')t '2 !@U TAKs '1er%t0'n 0n5'(e, 0n 1re2eren5e '3er 4/%t 4%s &)e G$$.8109

<; 0s s'*e*&e1en&ent )1'n G$$ 2'r 0ts 2)n&0n+ re>)0re(ents, t' sett*e, %('n+ 't/ers, e>)0t- 1)r5/%ses (%&e <0n3est'rs 'n t/e 2r%n5/0sesI /en5e, G$$ 0s s'*e*- %n& &0re5t*- *0%<*e t' ALSONS, t/e 2'r(er /%30n+ 2%0*e& t' 1r'30&e J !@U TA t/e ne5ess%r2)n&s t' (eet 0ts '<*0+%t0'ns t' ALSONS.

Albeit EQUITY presented its president, it opted to adopt the testimony of some of ALSONS witnesses, in l!si"e of the do !mentary e#hibits testified to by ea h of them, as its e"iden e$

%or its part, &'' alled only (ilfredo Labayen to testify$ It st! ) to its !nderlyin* defense of separateness and presented do !mentary e"iden e detailin* the or*ani+ational str! t!res of both &'' and EQUITY$ And in a bid to ne*ate the notion that it was ond! tin* its b!siness ille*ally, &'' presented ', and SE'-iss!ed li enses a!thorin* it to en*a*e in finan in* and .!asi-ban)in* a ti"ities$ It also add! ed e"iden e to pro"e that it was ne"er a

3. G$$ 20*e& 0ts ANSWER to Crossclai , stress0n+ t/%t 0t 0s % &0st0n5t %n& se1%r%te ent0t- 2r'( !@U TA %n& %**e+0n+, 0n essen5e t/%t t/e <)s0ness re*%t0'ns/01s 40t/ e%5/ 't/er 4ere %*4%-s %t %r(Ks *en+t/. An& 2'**'40n+ t/e &en0%* '2 0ts ('t0'n t' &0s(0ss ALSONSK 5'(1*%0nt, 'n t/e +r')n& '2 *%56 '2 C)r0s&05t0'n %n& 4%nt '2 5%)se '2 %5t0'n, G$$

party to any of the a tionable do !ments ALSONS and its prede essors-ininterest had in their possession and that the No"ember /0, 1234 deed of assi*nment of ri*hts o"er the promissory note was !nenfor eable$ E"ent!ally, the trial o!rt, on its findin* that EQUITY was b!t an instr!mentality or ad5!n t of &'' and onsiderin* the le*al onse.!en es

12

and impli ations of s! h

relationship,

ame

o!t

with

its

de ision

4.

on No"ember 3, 1226, renderin* 5!d*ment for ALSONS, to wit7

n n't /'*&0n+ ALSONS 0n est'11e* t' >)est0'n t/e 5'r1'r%te 1ers'n%*0t- '2 !@U TA.

On A1r0* 11, 2002, t/e %11e**%te 5')rt ren&ere& t/e HM!"!7O"!, t/e 2're+'0n+ 1re(0ses 5'ns0&ere&, C)&+(ent 0s /ere<- ren&ere& 0n 2%3'r '2 1*%0nt022 8ALSONS9 %n& %+%0nst t/e &e2en&%nts 8!@U TA %n& G$$9 4/' %re /ere<- 'r&ere&, C'0nt*- %n& se3er%**-, t' 1%1*%0nt022: /ere0n %ss%0*e& De50s0'n,8119 %220r(0n+ t/%t '2 t/e tr0%* 5')rt, t/)s:

1. t/e 1r0n501%* s)( '2 T4' =0**0'n Pes's :P2,000,000.00; t'+et/er 40t/ t/e 0nterest &)e t/ere'n %t t/e r%te '2 e0+/teen 1er5ent :18G; %nn)%**- 5'(1)te& 2r'( ,%n. 2, 1981 )nt0* t/e '<*0+%t0'n 0s 2)**- 1%0&I

(8E9E%O9E, premises onsidered, the :e ision of the 9e*ional Trial 'o!rt, ,ran h 43, ;a)ati in 'i"il 'ase No$ 1/060 is hereby A%%I9;E:$ SO O9:E9E:$

2. *0>)0&%te& &%(%+es &)e t/ere'n e>)03%*ent t' t/ree 1er5ent :3G; ('nt/*5'(1)te& 2r'( ,%n)%r- 2, 1982 )nt0* t/e '<*0+%t0'n 0s 2)**- 1%0&I

n t0(e, G$$ ('3e& 2'r re5'ns0&er%t0'n 2'**'4e& <- % ('t0'n 2'r 'r%* %r+)(ent, <)t <'t/ ('t0'ns 4ere &en0e& <t/e $A 0n 0ts e>)%**- %ss%0*e& "es'*)t0'n '2 A)+)st 20, 2002.8129

3. %tt'rne-Ks 2ees 0n %n %(')nt e>)03%*ent t' t4ent- 2')r 1er5ent :24G; '2 t/e t't%* '<*0+%t0'n &)eI %n&

8en e, &''s present re o!rse an hored on the followin* ar*!ments, iss!es and<or s!bmissions7

4. t/e 5'sts '2 s)0t.

T S SO O"D!"!D. :H'r&s 0n <r%56ets %&&e&.;

1. T/e ('t0'n 2'r 'r%* %r+)(ent 40t/ ('t0'n 2'r re5'ns0&er%t0'n %n& 0ts s)11*e(ent 4ere 1er2)n5t'r0*&en0e& <- t/e $A 40t/')t C)st020%<*e <%s0sI

/$ There is absol!tely no basis for pier in* the "eil of orporate fi tion= T/ere2r'(, G$$ 4ent 'n %11e%* t' t/e $A 4/ere 0ts %11e**%te re5')rse 4%s &'56ete& %s CA-G.R. CV No. >$ 9espondent Alsons is not a real party-ininterest as the promissory note payable to bearer s!b5e t of the olle tion s!it is b!t a sim!lated do !ment and<or refers to another party$ ;oreo"er, the s!b5e t promissory note is not admissible in e"iden e be a!se it has not been d!ly a!thenti ated and it is an altered do !ment= 4. T/e 2%5t '2 2)** 1%-(ent st%te& 0n t/e ten :10; &ee&s '2 s%*e '2 t/e s/%res '2 st'56 0s 5'n5*)s03e 'n t/e se**ers, %n& <- t/e 1%tr'* e30&en5e r)*e, t/e %**e+e& 2%5t '2 0ts n'n-1%-(ent 5%nn't <e 0ntr'&)5e& 0n e30&en5e&I %n&

31801, %s5r0<0n+ t' t/e tr0%* 5')rt t/e 5'((0ss0'n '2 t/e 2'**'40n+ err'rs:

1.

n /'*&0n+ t/%t t/ere 0s % EP%rent-S)<s0&0%r-F 5'r1'r%te re*%t0'ns/01 <et4een !@U TA %n& G$$I

2.

n n't /'*&0n+ t/%t !@U TA %n& G$$ %re &0st0n5t %n& se1%r%te 5'r1'r%te ent0t0esI

5. T/e 5')nter-5*%0( 20*e& <- G$$ %+%0nst A*s'ns s/')*& <e +r%nte& 0n t/e 0nterest '2 C)st05e.

3.

n %11*-0n+ t/e &'5tr0ne '2 EP0er50n+ t/e Ve0* '2 $'r1'r%te 705t0'nF 0n t/e 5%se %t <%rI %n&

13

T/e 1et0t0'n %n& t/e %r+)(ents %n&N'r 0ss)es /'*&0n+ 0t t'+et/er %re 40t/')t (er0t. T/e &es0re& re3ers%* '2 t/e %ss%0*e& &e50s0'n %n& res'*)t0'n '2 t/e %11e**%te 5')rt 0s %55'r&0n+*- DENIED. nste%& '2 r%0s0n+ &0st0n5t*- 2'r()*%te& >)est0'ns '2 *%4, %s 0s e.1e5te& '2 'ne see60n+ % re30e4 )n&er ")*e 45 '2 t/e ")*es '2 $')rt '2 % 20n%* $A C)&+(ent, 8139 1et0t0'ner G$$ st%rts '22 <- 3'050n+ &0s%11'0nt(ent '3er t/e E1er2)n5t'r-F &en0%* <- t/e $A '2 0ts t40n ('t0'ns 2'r re5'ns0&er%t0'n %n& 'r%* %r+)(ent. Pet0t0'ner, t' <e s)re, 5%nn't 1*%)s0<*- e.1e5t % re3ers%* %5t0'n 1re(0se& 'n t/e 5)rs'r- 4%- 0ts ('t0'ns 4ere &en0e&, 02 s)5/ 0n&ee& 4ere t/e 5%se. S)5/ (%nner '2 &en0%*, 4/0*e 1er/%1s 2%r 2r'( 0&e%*, 0s n't e3en % re5'+n0Be& +r')n& 2'r %11e%* <- 5ert0'r%r0, )n*ess % &en0%* '2 &)e 1r'5ess ens)es, 4/05/ 0s n't t/e 5%se /ere. An& *est 0t <e '3er*''6e&, t/e $A 1re2%5e& 0ts %ss%0*e& &en0%* res'*)t0'n 40t/ t/e 5*%)se: "#$%in&ing no re'ersi(le error co the o&i)ication an&*or re'ersal o) itte& to !arrant the April 11, ,)st *06e t/e 20rst, t/e *%st t/ree :3; %r+)(ents set 2'rt/ 0n t/e 1et0t0'n 40** n't 5%rr- t/e &%- 2'r t/e 1et0t0'ner. n re*%t0'n t/ere40t/, t/e $')rt n'tes t/%t t/ese %r+)(ents %n& t/e 0ss)es <e/0n& t/e( 4ere n't r%0se& <e2're t/e tr0%* 5')rt. T/0s %11e**%te (%ne)3er 5%nn't <e %**'4e&. 7'r, 4e**-sett*e& 0s t/e r)*e t/%t 0ss)es 'r +r')n&s n't r%0se& <e*'4 5%nn't <e res'*3e& 'n re30e4 0n /0+/er 5')rts.8149 S1r0n+0n+ s)r1r0ses 'n t/e '11's0n+ 1%rt- 0s %nt0t/et05%* t' t/e s1'rt0n+ 0&e% '2 2%0r 1*%-, C)st05e %n& &)e 1r'5essI /en5e, t/e 1r's5r01t0'n %+%0nst Pet0t0'nerKs *%(ent %<')t <e0n+ &e1r03e& '2 % 1%rt- s/02t0n+ 2r'( 'ne t/e'r- %t t/e tr0%* 5')rt t' % ne4 %n& &022erent t/e'r- 0n t/e %11e**%te *e3e*. On t/e s%(e r%t0'n%*e, 1'0nts '2 *%4, t/e'r0es, 0ss)es n't <r')+/t t' t/e %ttent0'n '2 t/e *'4er 5')rt 'r, 0n 20ne, n't 0nter1'se& &)r0n+ t/e tr0%* 5%nn't <e r%0se& 2'r t/e 20rst t0(e 'n %11e%*. 8159 1r'5e&)r%* &)e 1r'5ess '40n+ t' t/e &en0%* '2 0ts ('t0'n 2'r 'r%* %r+)(ent 0s s0(1*- s1e50')s. Un&er t/e $A ntern%* ")*es, t/e %11e**%te 5')rt (%- t%1 %n- '2 t/e t/ree :3; %*tern%t03es t/ere0n 1r'30&e& t' %0& t/e 5')rt 0n res'*30n+ %11e%*e& 5%ses <e2're 0t. t (%- re*- 'n %3%0*%<*e re5'r&s %*'ne, re>)0re t/e s)<(0ss0'n '2 (e('r%n&% 'r set t/e 5%se 2'r 'r%* %r+)(ent. T/e '1t0'n t/e ntern%* ")*es t/)s +03es t/e $A ne5ess%r0*s)++ests t/%t t/e %11e**%te 5')rt (%-, %t 0ts s')n& &0s5ret0'n, &0s1ense 40t/ % te&0')s 'r%* %r+)(ent e.er50se. ")*e V , Se5t0'n 6 '2 t/e 2002 ntern%* ")*es '2 t/e $A, 1r'30&es: T/ere %re, t' <e s)re, e.5e1t0'ns t' t/e r)*e res1e5t0n+ 4/%t (%- <e r%0se& 2'r t/e 20rst t0(e 'n %11e%*. L%56 '2 C)r0s&05t0'n '3er 4/en t/e 0ss)es r%0se& 1resent % (%tter '2 1)<*05 1'*05- 8169 5'(es 0((e&0%te*- t' (0n&. N'ne '2 SEC& - Judicial Action on Certain Petitions.- :%; n 1et0t0'ns 2'r re30e4, %2ter t/e re5e01t '2 t/e res1'n&entKs 5'((ent 'n t/e 1et0t0'n, J t/e $')rt 8'2 A11e%*s9 (%- &0s(0ss t/e 1et0t0'n 02 0t 20n&s t/e s%(e t' <e 1%tent*- 40t/')t (er0t J, 't/er40se, 0t s/%** +03e &)e 5')rse t' 0t. t/e 4e**-re5'+n0Be& e.5e1t0'ns '<t%0n 0n t/0s 5%se, n t/e 5%se %t <en5/, re5'r&s re3e%* t/%t t/e %11e**%te 5')rt, 0n *0ne 40t/ t/e 1res5r01t0'n '2 0ts '4n r)*es, re>)0re& t/e 1%rt0es t' C)st s)<(0t, %s t/e- &0&, t/e0r res1e5t03e (e('r%n&% t' 1r'1er*- 3ent0*%te t/e0r se1%r%te 5%)ses. Un&er t/0s s5en%r0', t/e 1et0t0'ner 5%nn't <e 3%*0&*/e%r&, /%30n+ <een &e1r03e& '2 &)e 1r'5ess. ... ... ...

2 t/e 1et0t0'n 0s +03en &)e 5')rse, t/e $')rt (%- 5'ns0&er t/e 5%se s)<(0tte& 2'r &e50s0'n 'r re>)0re t/e 1%rt0es t' s)<(0t t/e0r (e('r%n&)( 'r set t/e 5%se 2'r 'r%* %r+)(ent. .... A2ter t/e 'r%* %r+)(ent 'r )1'n s)<(0ss0'n '2 t/e (e('r%n&% J t/e 5%se s/%** <e &ee(e& s)<(0tte& 2'r &e50s0'n.

+00+ ,ecision,F s)++est0n+ t/%t t/e %11e**%te 5')rt +%3e t/e 1et0t0'nerKs ('t0'n 2'r re5'ns0&er%t0'n t/e %ttent0'n 0t

&eser3e&. At t/e 3er- *e%st, t/e 1et0t0'ner 4%s &)*- %11r0se& '2 t/e re%s'ns 4/- re5'ns0&er%t0'n 5')*& n't <e 2%3'r%<*5'ns0&ere&. An e.ten&e& res'*)t0'n 4%s n't re%**- ne5ess%rt' &0s1'se '2 t/e ('t0'n 2'r re5'ns0&er%t0'n 0n >)est0'n.

/'4e3er.

Lest 0t <e '3er*''6e& 'is---'is t/e s%(e *%st t/ree %r+)(ents t/)s 1resse&, <'t/ t/e tr0%* 5')rt %n& t/e $A,

14

<%se& 'n t/e e30&en5e %&&)5e&, %&C)&+e& t/e 1et0t0'ner %n& res1'n&ent !@U TA C'0nt*- %n& se3er%**- *0%<*e t' 1%- 4/%t res1'n&ent ALSONS 0s ent0t*e& t' )n&er t/e E<e%rerF T/0s <r0n+s )s t' t/e re(%0n0n+ <)t 5're 0ss)e ten&ere& 0n t/0s 5%se %n& %1t*- r%0se& <- t/e 1et0t0'ner, t' 40t: 4/et/er t/ere 0s %<s'*)te*- n' <%s0s 2'r 10er50n+ G$$Ks 3e0* '2 5'r1'r%te 0&ent0t-.

1r'(0ss'r- n'te. T/e C)&+(ent %r+)es %+%0nst t/e n't0'n '2 t/e n'te <e0n+ s0()*%te& 'r %*tere& 'r t/%t res1'n&ent ALSONS /%s n' st%n&0n+ t' s)e 'n t/e n'te, n't <e0n+ t/e 1%-ee '2 t/e E<e%rerF n'te. 7'r, t/e &e5*%r%t0'n '2 *0%<0*0t- n't 'n*- 1res)11'ses t/e &)*- est%<*0s/e& %)t/ent050t- %n& &)e e.e5)t0'n '2 t/e 1r'(0ss'r- n'te '3er 4/05/ ALSONS, %s t/e /'*&er 0n &)e 5')rse t/ere'2, /%s 0nterest, <)t %*s' t/e )nten%<0*0t- '2 t/e 1et0t0'nerKs 5')nter5*%0( 2'r %tt'rne-Ks 2ees %n& e.e(1*%r- &%(%+es %+%0nst ALSONS. At <'tt'(, t/e 1et0t0'ner 1re&05%te& s)5/ 5')nter-5*%0( 'n t/e 1'st)*%te t/%t res1'n&ent ALSONS /%& n' 5%)se '2 %5t0'n, t/e s)11'se& 1r'(0ss'r- n'te <e0n+, %55'r&0n+ t' t/e 1et0t0'ner, e0t/er % s0()*%te& 'r %n %*tere& &'5)(ent.

A 5'r1'r%t0'n 0s %n %rt02050%* <e0n+ 3este& <- *%4 40t/ % 1ers'n%*0t- &0st0n5t %n& se1%r%te 2r'( t/'se '2 t/e 1ers'ns 5'(1's0n+ 0t8209 %s 4e** %s 2r'( t/%t '2 %n- 't/er ent0t- t' 4/05/ 0t (%- <e re*%te&.8219 T/e 20rst 5'nse>)en5e '2 t/e &'5tr0ne '2 *e+%* ent0t- '2 t/e se1%r%te 1ers'n%*0t- '2 t/e 5'r1'r%t0'n 0s t/%t % 5'r1'r%t0'n (%- n't <e (%&e t' %ns4er 2'r %5ts %n& *0%<0*0t0es '2 0ts st'56/'*&ers 'r t/'se '2 *e+%* ent0t0es t' 4/05/ 0t (%- <e 5'nne5te& 'r 305e 3ers%.8229

T/e n't0'n '2 se1%r%te 1ers'n%*0t-, /'4e3er, (%- <e n net e22e5t, t/e &e20n0t03e 5'n5*)s0'n '2 t/e &0sre+%r&e& )n&er t/e &'5tr0ne D E10er50n+ t/e 3e0* '2 5'r1'r%te 205t0'nF D %s 0n 2%5t t/e 5')rt 40** '2ten *''6 %t t/e 5'r1'r%t0'n %s % (ere 5'**e5t0'n '2 0n&030&)%*s 'r %n

%11e**%te 5')rt D %220r(%t'r- '2 t/%t '2 t/e tr0%* 5')rt D 4%s t/%t t/e <e%rer 1r'(0ss'r- n'te :!./. ELF; 4%s % +en)0ne %n& %)t/ent05 0nstr)(ent 1%-%<*e t' t/e /'*&er t/ere'2. T/0s 2%5t)%* &eter(0n%t0'n, %s % (%tter '2 *'n+ %n& s')n& %11e**%te 1r%5t05e, &eser3es +re%t 4e0+/t %n& s/%** n't <e &0st)r<e& 'n %11e%*, s%3e 2'r t/e ('st 5'(1e**0n+ re%s'ns,
8179

%++re+%t0'n '2 1ers'ns )n&ert%60n+ <)s0ness %s % +r')1, &0sre+%r&0n+ t/e se1%r%te C)r0&05%* 1ers'n%*0t'2 t/e

5'r1'r%t0'n )n02-0n+ t/e +r')1. An't/er 2'r()*%t0'n '2 t/0s &'5tr0ne 0s t/%t 4/en t4' :2; <)s0ness enter1r0ses %re '4ne&, 5'n&)5te& %n& 5'ntr'**e& <- t/e s%(e 1%rt0es, <'t/ *%4 %n&

s)5/ %s 4/en t/%t &eter(0n%t0'n 0s 5*e%r*- 40t/')t

e30&ent0%r- s)11'rt 'r 4/en +r%3e %<)se '2 &0s5ret0'n /%s <een 5'((0tte&.
8189

e>)0t- 40**, 4/en ne5ess%r- t' 1r'te5t t/e r0+/ts '2 t/0r& 1%rt0es, &0sre+%r& t/e *e+%* 205t0'n t/%t t4' 5'r1'r%t0'ns %re &0st0n5t ent0t0es %n& tre%t t/e( %s 0&ent05%* 'r 'ne %n& t/e s%(e.8239

T/0s 0s %s 0t s/')*& <e s0n5e t/e $')rt, 0n

1et0t0'ns 2'r re30e4 '2 $A &e50s0'ns )n&er ")*e 45 '2 t/e ")*es '2 $')rt, )s)%**- *0(0ts 0ts 0n>)0r- 'n*- t' >)est0'ns '2 *%4. St%te& 't/er40se, 0t 0s n't t/e 2)n5t0'n '2 t/e $')rt t' %n%*-Be %n& 4e0+/ %** '3er %+%0n t/e e30&en5e 'r 1re(0ses s)11'rt03e '2 t/e 2%5t)%* /'*&0n+s '2 *'4er 5')rts.8199

H/et/er t/e se1%r%te 1ers'n%*0t- '2 t/e 5'r1'r%t0'n s/')*& <e 10er5e& /0n+es 'n '<t%0n0n+ 2%5ts, %11r'1r0%te*1*e%&e& 'r 1r'3e&. M'4e3er, %n- 10er50n+ '2 t/e 5'r1'r%te

As n't/0n+ 0n t/e re5'r& 0n&05%tes %n- '2 t/e e.5e1t0'ns %&3erte& t' %<'3e, t/e 2%5t)%* 5'n5*)s0'n '2 t/e $A t/%t t/e P2 =0**0'n 1r'(0ss'r- n'te 0n >)est0'n 4%s %)t/ent05 %n& 4%s 0ss)e& %t t/e 20rst 0nst%n5e t' res1'n&ent ALSONS %n& t/e A*5%nt%r% 2%(0*- 2'r t/e %(')nt st%te& 'n 0ts 2%5e, ()st <e %220r(e&. t s/')*& <e stresse& 0n t/0s re+%r& t/%t e3en t/e 0ss)0n+ ent0t-, i.e., res1'n&ent !@U TA, ne3er 5/%**en+e& t/e +en)0neness %n& &)e e.e5)t0'n '2 t/e n'te.

3e0* /%s t' <e &'ne 40t/ 5%)t0'n, %*<e0t t/e $')rt 40** n't /es0t%te t' &0sre+%r& t/e 5'r1'r%te 3e0* 4/en 0t 0s (0s)se& 'r 4/en ne5ess%r- 0n t/e 0nterest '2 C)st05e. 8249 A2ter %**, t/e 5'n5e1t '2 5'r1'r%te ent0t- 4%s n't (e%nt t' 1r'('te )n2%0r '<Ce5t03es.

A)t/'r0t0es %re %+ree& 'n %t *e%st t/ree :3; <%s05 %re%s 4/ere 10er50n+ t/e 3e0*, 40t/ 4/05/ t/e *%4 5'3ers %n&

15

0s'*%tes t/e 5'r1'r%t0'n 2r'( %n- 't/er *e+%* ent0t- t' 4/05/ 0t (%- <e re*%te&, 0s %**'4e&.
8259

t/e tr0%* 5')rtKs &e50s0'n sett0n+ 2'rt/ 0n s'(e &et%0* t/e t0110n+ 50r5)(st%n5es %&3erte& t' t/ere0n:

T/ese %re: 1; &e2e%t '2 1)<*05

5'n3en0en5e,8269 %s 4/en t/e 5'r1'r%te 205t0'n 0s )se& %s 3e/05*e 2'r t/e e3%s0'n '2 %n e.0st0n+ '<*0+%t0'nI 8279 2; 2r%)& 5%ses 'r 4/en t/e 5'r1'r%te ent0t- 0s )se& t' C)st02- % 4r'n+, 1r'te5t 2r%)&, 'r &e2en& % 5r0(eI8289 'r 3; alter ego 5%ses, 4/ere % 5'r1'r%t0'n 0s (ere*- % 2%r5e s0n5e 0t 0s % (ere %*ter e+' 'r <)s0ness 5'n&)0t '2 % 1ers'n, 'r 4/ere t/e 5'r1'r%t0'n 0s s' 'r+%n0Be& %n& 5'ntr'**e& %n& 0ts %22%0rs %re s' 5'n&)5te& %s t' (%6e 0t (ere*- %n 0nstr)(ent%*0t-, %+en5-, 5'n&)0t 'r %&C)n5t '2 %n't/er 5'r1'r%t0'n.8299 t ()st <e n'te& t/%t %s 5/%r%5ter0Be& <- t/e0r <)s0ness re*%t0'ns/01, 8res1'n&ent9 E"#IT$ n! .%etitioner/ GCC 0 ! 1o22on !ire1tors n!3or o44i1ers s we55 s sto160o5!ers . T/0s 0s re3e%*e& <- t/e 1r'5ee&0n+s re5'r&e& 0n S!$ $%se N'. 25-81 ent0t*e& EA3e*0n% "%('s', et %*., 3s. G$$, et %*., 4/ere 0t 4%s est%<*0s/e&, t/r) t/e test0('n- '2 !@U TAKs '4n Pres0&ent J t/%t ('re t/%n 90G '2 t/e st'56/'*&ers '2 J !@U TA 4ere %*s' st'56/'*&ers '2 J G$$ J.. D0s5*'se& *06e40se 0s t/e 2%5t t/%t 4/en 8!@U TAKs Pres0&ent9 L%<%-en s'*& t/e s/%re/'*&0n+s '2 !@U TA 0n s%0& 2r%n5/0se 5'(1%n0es, 1r%5t05%**- t/e ent0re 1r'5ee&s t/ere'2 4ere s)rren&ere& t' G$$, %n& n't re5e03e& <!@U TA :!OM ? T E""F; ....

T/e $A 2')n& 3%*0& +r')n&s t' 10er5e t/e 5'r1'r%te 3e0* '2 1et0t0'ner G$$, t/ere <e0n+ C)st020%<*e <%s0s 2'r s)5/ %5t0'n. H/en t/e %11e**%te 5')rt s1'6e '2 % C)st02-0n+ 2%5t'r, t/e re2eren5e 4%s t' 4/%t t/e tr0%* 5')rt s%0& 0n 0ts &e50s0'n, n%(e*-: t/e e.0sten5e '2 Ecertain circumstances #!hich%, ta.en together, ga'e rise to the inel/cta(le concl/sion that 0 #respon&ent% E12345 is (/t an instr/ entalit6 or a&7/nct o) #petitioner% GCC.8

T/e $')rt %+rees 40t/ t/e &0s1's0t0'n '2 t/e %11e**%te 5')rt 'n t/e %11*05%t0'n '2 t/e 10er50n+ &'5tr0ne t' t/e tr%ns%5t0'n s)<Ce5t '2 t/0s 5%se. Per t/e $')rtKs 5')nt, t/e tr0%* 5')rt en)(er%te& n' *ess t/%n 20 &'5)(ente& 50r5)(st%n5es %n& tr%ns%5t0'ns, 4/05/, t%6en %s % 1%56%+e, 0n&ee& str'n+*s)11'rte& t/e 5'n5*)s0'n t/%t res1'n&ent !@U TA 4%s <)t %n %&C)n5t, %n 0nstr)(ent%*0t- 'r <)s0ness 5'n&)0t '2 1et0t0'ner G$$. T/0s re*%t0'n, 0n t)rn, 1r'30&es % C)st02-0n+ +r')n& t' 10er5e 1et0t0'nerKs 5'r1'r%te e.0sten5e %s t' ALSONSK 5*%0( 0n >)est0'n. 7're('st '2 4/%t t/e tr0%* 5')rt re2erre& t' %s E5ert%0n 50r5)(st%n5esF %re t/e 5'(('n%*0t- '2 &0re5t'rs, '2205ers %n& st'56/'*&ers %n& e3en s/%r0n+ '2 '2205e <et4een 1et0t0'ner G$$ %n& res1'n&ent !@U TAI 5ert%0n 20n%n50n+ %n& (%n%+e(ent %rr%n+e(ents <et4een t/e t4', %**'40n+ t/e 1et0t0'ner t' /%n&*e t/e 2)n&s '2 t/e *%tterI t/e 30rt)%* &'(0n%t0'n 02 n't 5'ntr'* 40e*&e& <- t/e 1et0t0'ner '3er t/e 20n%n5es, <)s0ness 1'*050es %n& 1r%5t05es '2 res1'n&ent !@U TAI %n& t/e est%<*0s/(ent '2 res1'n&ent !@U TA <- t/e 1et0t0'ner t' 50r5)(3ent $? r)*es. 7'r %

t 4%s *06e40se s/'4n <- % 1re1'n&er%n5e '2 e30&en5e t/%t n't 'n*/%& JGCC 4in n1e! 7 E"#IT$ %n& t/%t t/e *%tter 4%s /e%30*- 0n&e<te& t' t/e 2'r(er <)t E"#IT$ w s, in 4 1t, w0o558 owne! su9si!i r8 o4 7GCC& T/)s, %s %220r(e& <!@U TAKs Pres0&ent, J t/e 4un!s investe! 98 E"#IT$ in t0e CCC 4r n10ise 1o2% nies 1tu 558 1 2e 4ro2 CCC P0i5s& or GCC :!./0<0t EA-5F;J. t/%t, %s &0s5*'se& <- t/e A)&0t'rKs re1'rt 2'r 1982, 1%st &)e re5e03%<*es %*'ne '2 G$$ e.5ee&e& P101,000,000.00 ('st*- t' G$$ %220*0%tes es1e50%**- $$$ !@U TA. JI t/%t 8$?Ks9 "e1'rt '2 !.%(0n%t0'n &%te& ,)*- 14, 1977 s/'4s t/%t J !@U TA 4/05/ /%s % 1%0&-)1 5%10t%* '2 'n*- P500,000.00 4%s t/e <0++est <'rr'4er '2 G$$ 40t/ % t't%* *'%n '2 P6.70 =0**0'n J.

...

...

...

t /%s *06e40se <een %(1*s)<st%nt0%te& <- 8res1'n&ent ALSONSK9 e30&en5e t/%t n't 'n*- &0& J G$$ 5%)se t/e 0n5'r1'r%t0'n '2 J !@U TA, <)t, t/e *%tter /%& +r'ss*- 0n%&e>)%te 5%10t%* 2'r t/e 1)rs)0t '2 0ts *0ne '2 <)s0ness t' t/e e.tent t/%t its 9usiness 44 irs were 1onsi!ere! s GCC:s own 9usiness en!e vors& ....

...

...

...

1ers1e5t03e, t/e 2'**'40n+ %re s'(e re*e3%nt e.5er1ts 2r'(

ALSONS /%s *06e40se s/'4n Jt/%t t/e <'n)ses '2 t/e '2205ers %n& &0re5t'rs '2 J !@U TA 4%s <%se& 'n 0ts t't%* 20n%n50%* 1er2'r(%n5e t'+et/er 40t/ %** 0ts %220*0%tesJ

16

<'t/ 20r(s 4ere s/%r0n+ 'ne %n& t/e s%(e '2205e 4/en <'t/ 4ere st0** '1er%t0'n%* J %n& t/%t t/e &0re5t'rs %n& e.e5)t03es '2 J E"#IT$ never 1te! in!e%en!ent58 7 9ut too6 t0eir or!ers 4ro2 7 GCC7&

T0e evi!en1e 0 s 5so in!u9it 958 est 95is0e! t0 t 7 E"#IT$ w s or; ni<e! 98 7 GCC 4or t0e %ur%ose o4 1ir1u2ventin; .C=/ ru5es n! re;u5 tions n! t0e Anti-#sur8 L w. T/)s, %s &0s5*'se& <- t/e A&3%n5e "e1'rt J 'n t/e res)*t '2 $entr%* ?%n6Ks O1er%t0'ns !.%(0n%t0'n 5'n&)5te& 'n J G$$ %s '2 =%r5/ 31, 1977 :!OM ? TS E777F et5.;, t/e *%tter 30'*%te& 8$?9 r)*es %n& re+)*%t0'ns <- : :%; )s0n+ %s % 5'n&)0t 0ts n'n->)%s0 <%n6 %220*0%tes J. :<; 0ss)0n+ 40t/')t re5')rse 2%50*0t0es t' en%<*e G$$ t' e.ten& 5re&0t t' %220*0%tes *06e J !@U TA 4/05/ +' <e-'n& t/e s0n+*e <'rr'4erKs *0(0t 40t/')t t/e nee& '2 s/'40n+ ')tst%n&0n+ <%*%n5e 0n t/e <''6 '2 %55')nts. :!(1/%s0s '3er 4'r&s 0n <r%56ets %&&e&.;

%n& 5'ntr%5ts '2 0ts s)<s0&0%rD 8res1'n&ent9 !@U TA - ('st es1e50%**- 02 t/e *%tter :4/' /%& %n-/'4 %56n'4*e&+e& 0ts *0%<0*0t- t' ALSONS; (%-<e :s05; 40t/')t s)22050ent 1r'1ert- 40t/ 4/05/ t' sett*e 0ts '<*0+%t0'ns. 7'r, %2ter %**, G$$ 4%s t/e ent0t4/05/ 0n0t0%te& %n& <ene20te& 0((ense*2r'( t/e 2r%)&)*ent s5/e(e 1er1etr%te& 0n 30'*%t0'n '2 t/e *%4. :H'r&s 0n 1%rent/es0s 0n t/e 'r0+0n%*I e(1/%s0s %n& <r%56ete& 4'r&s %&&e&;.

G03en t/e 2're+'0n+ 5'ns0&er%t0'ns, 0t <e/''3es t/e 1et0t0'ner, %s % (%tter '2 *%4 %n& e>)0t-, t' %ss)(e t/e *e+0t0(%te 20n%n50%* '<*0+%t0'n '2 % 5%s/-str%11e& s)<s0&0%r5'r1'r%t0'n 4/05/ 0t 30rt)%**- 5'ntr'**e& t' s)5/ % &e+ree t/%t t/e *%tter <e5%(e 0ts 0nstr)(ent 'r %+ent. T/e 2%5ts, %s 2')n& <- t/e 5')rts a 9/o, %n& t/e %11*05%<*e *%4 5%** 2'r t/0s 60n& '2 &0s1's0t0'n. Or e*se, t/e $')rt 4')*& <e %**'40n+ t/e 4r'n+ )se '2 t/e 205t0'n '2 5'r1'r%te 3e0*.

?@EREFORE, t/e 0nst%nt 1et0t0'n 0s DENIED %n& t/e t <e%rs t' stress %t t/0s 1'0nt t/%t t/e 2%5ts %n& t/e 0n2eren5es &r%4n t/ere2r'(, )1'n 4/05/ t/e t4' :2; 5')rts <e*'4 %11*0e& t/e 10er50n+ &'5tr0ne, st%n&, 2'r t/e ('st 1%rt, )n&0s1)te&. A('n+ t/ese 0s, t' re0ter%te, t/e (%tter '2 !@U TA /%30n+ <een 0n5'r1'r%te& t' ser3e, %s 0t &0& ser3e, %s %n 0nstr)(ent%*0t- 'r %&C)n5t '2 G$$. H0t/ t/e 30e4 4e t%6e '2 t/0s 5%se, G$$ &0& n't %&&)5e %n- e30&en5e, *et %*'ne re<)t t/e test0('n0es %n& &'5)(ents 1resente& <- ALSONS, t' est%<*0s/ t/e 1re3%0*0n+ 50r5)(st%n5es %&3erte& t' t/%t 1r'30&e& t/e C)st02-0n+ '55%s0'n t' 10er5e t/e 3e0* '2 5'r1'r%te 205t0'n <et4een G$$ %n& !@U TA. He >)'te t/e tr0%* 5')rt: $'sts %+%0nst t/e 1et0t0'ner. %11e%*e& De50s0'n %n& "es'*)t0'n '2 t/e $')rt '2 A11e%*s %re %55'r&0n+*- AFFIRMED.

Ver0*-, 0n&ee&, %s t/e re*%t0'ns/01s <0n&0n+ /ere0n 8res1'n&ent !@U TA %n& 1et0t0'ner G$$9 /%3e <een t/%t '2 E1%rents)<s0&0%r- 5'r1'r%t0'nsF t/e 2're+'0n+ 1r0n501*es %n& &'5tr0nes 20n& s)0t%<*e %11*05%<0*0t- 0n t/e 5%se %t <%rI %n&, 0t /%30n+ <een s%t0s2%5t'r0*- %n& 0n&)<0t%<*s/'4n t/%t t/e s%0& re*%t0'ns/01s /%& <een )se& t' 1er2'r( 5ert%0n 2)n5t0'ns n't 5/%r%5ter0Be& 40t/ *e+0t0(%5-, t/0s $')rt J 2ee*s %(1*- C)st020e& t' E10er5e t/e 3e0* '2 5'r1'r%te ent0t-F n! !isre; r! t0e se% r te e>isten1e o4 t0e %er1ent (s05) n! su9si!i r8 t0e 5 tter 0 vin; 9een so 1ontro55e! 98 t0e % rent t0 t its se% r te i!entit8 is 0 r!58 !is1erni95e t0us 9e1o2in; 2ere instru2ent 5it8 or 5ter e;o o4 t0e 4or2e r. $'nse>)ent*-, %s t/e 1%rent 5'r1'r%t0'n, 81et0t0'ner9 G$$ (%-<e :s05; /e*& res1'ns0<*e 2'r t/e %5ts

17

S ron F 1ts,

vs NLRC AB'A

<)s0ness 5'n&)0t '2 % 1ers'n, 'r 4/eret/e 5'r1'r%t0'n 0s s' 'r+%n0Be& %n& 5'ntr'**e& %n& 0ts %22%0rs %re s' 5'n&)5te& %s t' (%6e 0t (ere*%n0nstr)(ent%*0t-, %+en5-, 5'n&)0t 'r %&C)n5t '2 %n't/er 5'r1'r%t0'n.

Pet0t0'ner, % se5)r0t- +)%r& 0n S5e1tre s0n5e A1r0* 1976, 4%s %s6e& <-S5e1treKs '1er%t0'ns(%n%+er 'n ,)ne 2003, t' s)<(0t % res0+n%t0'n *etter %s % re>)0re(ent 2'r %n %11*05%t0'n 0n "'-%*e%n& t' 20** )1 %n e(1*'-(ent %11*05%t0'n 2'r( 2'r t/e s%0& 5'(1%n-. Me 4%s t/en %ss0+ne& %tM0+/*0+/t =et%* $r%2t n5. 2r'( ,)*- 29 t' A)+)st 8, 2003 %n& 4%s *%ter tr%ns2erre& t' H0&e H0&eH'r*& !.1ress n5. On Se1te(<er 2003, /e 4%s 0n2'r(e& t/%t /0s %ss0+n(ent %t HHH! n5. 4%s40t/&r%4n <e5%)se "'-%*e /%s <een %**e+e&*- re1*%5e& <- %n't/er se5)r0t- %+en5- 4/05/ /e *%ter&0s5'3ere& t' <e )ntr)e. Ne3ert/e*ess, /e 4%s 'n5e %+%0n %ss0+ne& %t M0+/*0+/t =et%* s'(et0(e 0nSe1te(<er 2003 %n& 4/en /e re1'rte& %t "'-%*eKs '2205e 'n O5t'<er 1, 2003, /e 4%s 0n2'r(e& t/%t /e4')*& n' *'n+er <e +03en %n- %ss0+n(ent %s 0nstr)5te& <-S5e1treKs +ener%* (%n%+er. Me t/)s 20*e&%5'(1*%0nt 2'r 0**e+%* &0s(0ss%*.T/e LA r)*e& 0n 1et0t0'nerKs 2%3'r %s /e 2')n& /0( 0**e+%**&0s(0sse& %n& 4%s n't 5'n30n5e& <t/e res1'n&entKs 5*%0( 'n 1et0t0'nerKs %<%n&'n(ent. "es1'n&ents 4ere 'r&ere& t' 1%<%564%+es5'(1)te& 2r'( t/e &%/e 4%s &0s(0sse& )1 t' t/e 1r'()*+%t0'n '2 /0s &e50s0'n 'n =%- 11, 2005.T/e LA %*s' 'r&ere& 2'r t/e 1%-(ent '2 se1%r%t0'n 1%- <)t re2)se& t' 10er5e "'-%*eKs 5'r1'r%te 3e0*. "es1'n&ents %11e%*e& t' t/e NL"$ 5*%0(0n+ t/%t t/e LA %5te& 40t/ +r%3e %<)se '2 &0s5ret0'n)1'n r)*0n+ 'n t/e 0**e+%* &0s(0ss%* '2 1et0t0'ner. NL"$ 1%rt0%**%220r(e& t/e LAKs &e50s0'n40t/re+%r& t' 1et0t0'nerKs 0**e+%* &0s(0ss%* %n&se1%r%t0'n 1%- <)t ('&020e& t/e %(')nt '2 <%564%+es %n&*0(0te& 0t t' 'n*- 3 ('nt/s '2 /0s *%st ('nt/ s%*%r- re&)50n+ P95, 600 t' P15, 600 s0n5e /e 4'r6e& 2'r"'-%*e 2'r 'n*- 1 ('nt/ %n& 3 &%-s. Pet0t0'ner &0& n't %11e%* t' LA <)t r%0se& t/e 3%*0&0t'2 LAKs 20n&0n+s 'n 10er50n+ "'-%*eKs5'r1'r%te 1ers'n%*0t- %n& 5'(1)t%t0'n '2 /0s se1%r%t0'n 1%%n& s)5/ 1et0t0'n 4%s &0s(0sse& <t/eNL"$.Pet0t0'ner e*e3%te& NL"$Ks &e50s0'n t' t/e $A 'n % 1et0t0'n 2'r 5ert0'r%r0, %n& t/e $A&0s%+ree& 40t/ t/e NL"$Ks &e50s0'n '2 n't 1r'5ee&0n+ t' re30e4 t/e e30&en5e 2'r &eter(0n0n+ 02 "'-%*e 0sS5e1treKs %*ter e+' t/%t 4')*& 4%rr%nt t/e 10er50n+ '2 0ts 5'r1'r%te 3e0*. H/et/er 'r n't "'-%*eKs 5'r1'r%te 205t0'n s/')*& <e 10er5e& 2'r t/e 1)r1'se '2 5'(1e**0n+ 0t t' re5'+n0Be t/e 1et0t0'nerKs *en+t/ '2 ser305e 40t/ S5e1tre %n&2'r /'*&0n+ 0t *0%<*e 2'r t/e <ene20ts t/%t /%3e %55r)e& t' /0( %r0s0n+ 2r'( /0se(1*'-(ent 40t/ S5e1tre. H/et/er 'r n't 1et0t0'nerKs <%564%+es s/')*& <e *0(0te& t' /0s s%*%r- 2'r 3('nt/s

T/e res1'n&entsK s5/e(e ree6s '2 <%& 2%0t/ %n& 2r%)& %n& 5'(1%ss0'n%te C)st05e &05t%tes t/%t "'-%*e %n& S5e1tre <e (er+e& %s % s0n+*e ent0t-, 5'(1e**0n+ "'-%*e t' 5re&0t %n& re5'+n0Be t/e 1et0t0'nerKs *en+t/ '2 ser305e 40t/ S5e1tre. T/e res1'n&ents 5%nn't )se t/e *e+%* 205t0'n '2 % se1%r%te 5'r1'r%te 1ers'n%*0t- 2'r en&s s)<3ers03e '2 t/e 1'*05- %n& 1)r1'se <e/0n& 0ts 5re%t0'n 'r 4/05/ 5')*& n't /%3e <een 0nten&e& <- *%4 t' 4/05/ 0t '4e& 0ts <e0n+. A*s', S5e1tre %n& "'-%*e /%3e t/e s%(e 1r0n501%* 1*%5e '2 <)s0ness. As e%r*- %s O5t'<er 14, 1994, A0&% %n& H0*2re&' <e5%(e t/e '4ners '2 t/e 1r'1ert)se& <- S5e1tre %s 0ts 1r0n501%* 1*%5e '2 <)s0ness <30rt)e '2 % Dee& '2 A<s'*)te S%*e t/e- e.e5)te& 40t/ "'s'. "'-%*e, s/'rt*- %2ter 0ts 0n5'r1'r%t0'n, st%rte& t' /'*& '2205e 0n t/e s%(e 1r'1ert-. T/ese, t/e res1'n&ents 2%0*e& t' &0s1)te. "'-%*e %*s' 5*%0(e& % r0+/t t' t/e 5%s/ <'n& 4/05/ t/e 1et0t0'ner 1'ste& 4/en /e 4%s st0** 40t/ S5e1tre. 2 S5e1tre %n& "'-%*e %re 0n&ee& se1%r%te ent0t0es, S5e1tre s/')*& /%3e re*e%se& t/e 1et0t0'nerKs 5%s/ <'n& 4/en /e res0+ne& %n& "'-%*e 4')*& /%3e re>)0re& t/e 1et0t0'ner t' 1'st % ne4 5%s/ <'n& 0n 0ts 2%3'r. T/e 4%- 'n /'4 1et0t0'ner 4%s (%&e t' res0+n 2r'( S5e1tre t/en *%ter 'n (%&e %n e(1*'-ee'2 "'-%*e, re2*e5ts t/e )se '2 t/e *e+%* 205t0'n '2 t/e se1%r%te 5'r1'r%te 1ers'n%*0t- %n& 0s %n0(1*05%t0'n '2 5'nt0n)e& e(1*'-(ent. "'-%*e 0s % 5'nt0n)%t0'n 'r s)55ess'r 'r S5e1tre s0n5e t/ee(1*'-ees '2 S5e1tre %n& '2 "'-%*e %re t/e s%(e %n& s%0& 5'(1%n0es /%3e t/e s%(e 1r0n501%* 1*%5e'2 <)s0ness. ?e5%)se 1et0t0'nerKs r0+/ts 4ere 30'*%te& %n& /0s e(1*'-er /%s n't 5/%n+e&,/e 0s ent0t*e& t' se1%r%t0'n 1%- 4/05/ ()st <e 5'(1)te& 2r'( t/e t0(e /e 4%s /0re& )nt0* t/e 20n%*0t- '2 t/0s &e50s0'n. "'-%*e 0s %*s' 'r&ere& t' 1%- /0( <%564%+es 2r'( /0s &0s(0ss%* 'n O5t'<er 1, 2003 )nt0* t/e 20n%*0t- '2 t/0s &e50s0'n. M'4e3er, t/e %(')nt %*re%&- re5e03e& <- 1et0t0'ner 2r'( t/e res1'n&ents s/%** <e &e&)5te&. Me 0s %*s' %4%r&e& ('r%* %n& e.e(1*%r- &%(%+es %(')nt0n+ t' P 25, 000.00 e%5/ 2'r /0s &0s(0ss%* 4/05/ 4%s t%0nte& 40t/ <%& 2%0t/ %n& 2r%)&. Pet0t0'n 0s +r%nte&. $AKs &e50s0'n 0s re3erse& %n& set %s0&e.

Issue,

Ru5in;, T/e &'5tr0ne '2 10er50n+ t/e 5'r1'r%te 3e0* 0s %11*05%<*e 'n %*ter e+' 5%ses, 4/ere %5'r1'r%t0'n 0s (ere*- % 2%r5e s0n5e 0t 0s % (ere %*ter e+' 'r

18

N 3*N! G.R. No. <1@121 August 31, 1CD2

GREGORIO PA ACIO, *' )*s o:' 5/)&10 &'( *' 5/)&10 o0 )*s 7*'o. +)*1(, MARIO PA ACIO, plaintiffs>appellants, vs. FE Y TRANSPORTATION COMPANY, defendant>appellee. Antonio A. Sa$a for plaintiffs,appellants. 8er(ado! #er and Re es for defendant,appellee. REGA A, J.B This is an appeal b% the plaintiffs fro$ the decision of the !ourt of First Instance of Manila &hich dis$issed their co$plaint. Ori#inall% ta=en to the !ourt of *ppeals, this appeal &as certified to this !ourt on the #round that it raises purel% Cuestions of la&. The parties in this case adopt the follo&in# findin#s of fact of the lo&er court@ In their co$plaint filed &ith this !ourt on Ma% )., )9.-, plaintiffs alle#e, a$on# other thin#s, Ethat about Dece$ber, )9.1, the defendant co$pan% hired *lfredo !arillo as driver of *!>848 +048, +a re#istration for )9.1, o&ned and operated b% the said defendant co$pan%B that on Dece$ber 1-, )9.1, at about ))@72 a.$., &hile the driver *lfonso +*lfredo, !arillo &as drivin# *!>048 at Dalcon Street, 5ue6on !it%, &ilfull%, unla&full% and feloniousl% and in a ne#li#ent, rec=less and i$prudent $anner, run over a child Mario Palacio of the herein plaintiff (re#orio PalacioB that on account of the aforesaid in"uries, Mario Palacio suffered a si$ple fracture of the ri#ht tenor +sic,, co$plete third, thereb% hospitali6in# hi$ at the Philippine Orthopedic Dospital fro$ Dece$ber 1-, )9.1, up to :anuar% 4, )9.7, and continued to be treated for a period of five $onths thereafterB that the plaintiff (re#orio Palacio herein is a &elder b% occupation and o&ner of a s$all &eldin# shop and because of the in"uries of his child he has abandoned his shop &here he derives inco$e of P)2.22 a da% for the support of his bi# fa$il%B that durin# the period that the plaintiffPs +(re#orio PalacioPs, child &as in the hospital and &ho said child &as under treat$ent for five $onths in order to $eet the needs of his bi# fa$il%, he &as forced to sell one air co$pressor +heav% dut%, and one heav% dut% electric drill, for a sacrifice sale of P).2.22 &hich could easil% sell at P7.2.22B that as a conseCuence of the ne#li#ent and rec=less act of the driver *lfredo !arillo of the herein defendant co$pan%, the herein plaintiffs &ere forced to liti#ate this case in !ourt for an a#reed a$ount of P722.22 for attorne%Ps feeB that the herein plaintiffs have no& incurred the a$ount of P.22.22 actual e'penses for transportation, representation and si$ilar e'penses for #atherin# evidence and &itnessesB and that because of the nature of the in"uries of plaintiff Mario Palacio and the fear that the child $i#ht beco$e a useless invalid, the herein plaintiff (re#orio Palacio has suffered $oral da$a#es &hich could be conservativel% esti$ated at P),122.22. On Ma% 17, )9.0, defendant Fel% Transportation !o., filed a Motion to Dis$iss on the #rounds +), that there is no cause of action a#ainst the defendant co$pan%, and +1, that the cause of action is barred b% prior "ud#$ent.. In its Order, dated :une 4, )9.0, this !ourt deferred the deter$ination of the #rounds alle#ed in the Motion to Dis$iss until the trial of this case.

On :une 12, )9.0, defendant filed its ans&er. 3% &a% of affir$ative defenses, it alle#es +), that co$plaint states no cause of action a#ainst defendant, and +1, that the sale and transfer of the "eep *!>048 b% Isabelo !alin#asan to the Fel% Transportation &as $ade on Dece$ber 1-, )9.., lon# after the driver *lfredo !arillo of said "eep had been convicted and had served his sentence in !ri$inal !ase No. 5>)24- of the !ourt of First Instance of 5ue6on !it%, in &hich both the civil and cri$inal cases &ere si$ultaneousl% tried b% a#ree$ent of the parties in said case. In the !ounterclai$ of the *ns&er, defendant alle#es that in vie& of the filin# of this co$plaint &hich is a clearl% unfounded civil action $erel% to harass the defendant, it &as co$pelled to en#a#e the services of a la&%er for an a#reed a$ount of P.22.22. Durin# the trial, plaintiffs presented the transcript of the steno#raphic notes of the trial of the case of EPeople of the Philippines vs. *lfredo !arillo, !ri$inal !ase No. 5>)24-,E in the !ourt of First Instance of Ri6al, 5ue6on !it% +3ranch IV,, as 'hibit E*E.1wph1.t It appears fro$ 'hibit E*E that (re#orio Palacio, one of the herein plaintiffs, testified that Mario Palacio, the other plaintiff, is his sonB that as a result of the rec=less drivin# of accused *lfredo !arillo, his child Mario &as in"ured and hospitali6ed fro$ Dece$ber 1-, )9.1, to :anuar% 4, )9.7B that durin# all the ti$e that his child &as in the hospital, he &atched hi$ durin# the ni#ht and his &ife durin# the da%B that durin# that period of ti$e he could not &or= as he slept durin# the da%B that before his child &as in"ured, he used to earn P)2.22 a da% on ordinar% da%s and on Sunda%s fro$ P12 to P.2 a Sunda%B that to $eet his e'penses he had to sell his co$pressor and electric drill for P).2 onl%B and that the% could have been sold for P722 at the lo&est price. Durin# the trial of the cri$inal case a#ainst the driver of the "eep in the !ourt of First Instance of 5ue6on !it% +!ri$inal !ase No. 5>)24-, an atte$pt &as unsuccessfull% $ade b% the prosecution to prove $oral da$a#es alle#edl% suffered b% herein plaintiff (re#orio Palacio. ;i=e&ise an atte$pt &as $ade in vain b% the private prosecutor in that case to prove the a#reed attorne%Ps fees bet&een hi$ and plaintiff (re#orio Palacio and the e'penses alle#edl% incurred b% the herein plaintiffs in connection &ith that case. Durin# the trial of this case, plaintiff (re#orio Palacio testified substantiall% to the sa$e facts. The !ourt of First Instance of 5ue6on !it% in its decision in !ri$inal !ase No. )24- + 'hibit E1E, deter$ined and thorou#hl% discussed the civil liabilit% of the accused in that case. The dispositive part thereof reads as follo&s@ IN VI ? OF TD FOR (OIN(, the !ourt finds the accused *lfredo !arillo % Da$aso #uilt% be%ond reasonable doubt of the cri$e char#ed in the infor$ation and he is hereb% sentenced to suffer i$prison$ent for a period of T&o Months Q One Da% of *rresto Ma%orB to inde$nif% the offended part%, b% &a% of conseCuential da$a#es, in the su$ of P.22.22 &hich the !ourt dee$s reasonableB &ith subsidiar% i$prison$ent in case of insolvenc% but not to e'ceed RF7 of the principal penalt% i$posedB and to pa% the costs. On the basis of these facts, the lo&er court held action is barred b% the "ud#$ent in the cri$inal case and, that under *rticle )27 of the Revised Penal !ode, the person subsidiaril% liable to pa% da$a#es is Isabel !alin#asan, the e$plo%er, and not the defendant corporation. *#ainst that decision the plaintiffs appealed, contendin# that@ TD ;O? R !O/RT RR D IN NOT S/ST*ININ( TD*T TD D F ND*NT>*PP ;; IS S/3SIDI*RI;I ;I*3; FOR D*M*( S *S * R S/;T OF !RIMIN*; !*S NO. 5>)24- OF TD !O/RT OF FIRST INST*N! OF

19

5/ SON !ITI FOR TD R *SON TD*T TD IN!ORPOR*TORS OF TD F ;I TR*NSPORT*TION !OMP*NI, TD D F ND*NT>*PP ;; D R IN, *R IS*3 ;O !*;IN(*S*N DIMS ;F, DIS SON *ND D*/(DT RSB TD ;O? R !O/RT RR D IN NOT !ONSID RIN( TD*T TD INT NTION OF IS*3 ;O !*;IN(*S*N IN IN!ORPOR*TIN( TD F ;I TR*NSPORT*TION !OMP*NI, TD D F ND*NT>*PP ;; D R IN, ?*S TO V*D DIS !IVI; ;I*3I;ITI *S * R S/;T OF TD !ONVI!TION OF DIS DRIV R OF V DI!; *!>048 TD N O?N D 3I DIM@ TD ;O? R !O/RT RR D IN DO;DIN( TD*T TD !*/S OF *!TION OF TD P;*INTIFFS>*PP ;;*NTS IS 3*RR D 3I PRIOR :/D(M NT. ?ith respect to the first and second assi#n$ents of errors, plaintiffs contend that the defendant corporate should be $ade subsidiaril% liable for da$a#es in the cri$inal case because the sale to it of the "eep in Cuestion, after the conviction of *lfred !arillo in !ri$inal !ase No. 5>)24- of the !ourt of First Instance of 5ue6on !it% &as $erel% an atte$pt on the part of Isabelo !alin#asan its president and #eneral $ana#er, to evade his subsidiar% civil liabilit%. The !ourt a#rees &ith this contention of the plaintiffs. Isabelo !alin#asan and defendant Fel% Transportation $a% be re#arded as one and the sa$e person. It is evident that Isabelo !alin#asanPs $ain purpose in for$in# the corporation &as to evade his subsidiar% civil liabilit%) resultin# fro$ the conviction of his driver, *lfredo !arillo. This conclusion is borne out b% the fact that the incorporators of the Fel% Transportation are Isabelo !alin#asan, his &ife, his son, Dr. !alin#asan, and his t&o dau#hters. ?e believe that this is one case &here the defendant corporation should not be heard to sa% that it has a personalit% separate and distinct fro$ its $e$bers &hen to allo& it to do so &ould be to sanction the use of the fiction of corporate entit% as a shield to further an end subversive of "ustice. +;a !a$pana !offee Factor%, et al. v. Kaisahan n# $#a Man##a#a&a, etc., et al., (.R. No. ;>.088, Ma% 1., )9.7, Further$ore, the failure of the defendant corporation to prove that it has other propert% than the "eep +*!>048, stren#thens the conviction that its for$ation &as for the purpose above indicated. *nd &hile it is true that Isabelo !alin#asan is not a part% in this case, %et, is held in the case of *lonso v. Villa$or, )0 Phil. 7)., this !ourt can substitute hi$ in place of the defendant corporation as to the real part% in interest. This is so in order to avoid $ultiplicit% of suits and thereb% save the parties unnecessar% e'penses and dela%. +Sec. 1, Rule )8, Rules of !ourtB !u%u#an v. Di6on. 89 Phil. 42B 5uison v. Salud, )1 Phil. )29., *ccordin#l%, defendants Fel% Transportation and Isabelo !alin#asan should be held subsidiaril% liable for P.22.22 &hich *lfredo !arillo &as ordered to pa% in the cri$inal case and &hich a$ount he could not pa% on account of insolvenc%. ?e also sustain plaintiffsP third assi#n$ent of error and hold that the present action is not barred b% the "ud#$ent of the !ourt of First Instance of 5ue6on !it% in the cri$inal case. ?hile there see$s to be so$e confusion on part of the plaintiffs as to the theor% on &hich the is based O &hether e*,delito or Cuasi e*,delito +(ulpa a<uiliana, O ?e are convinced, fro$ the discussion pra%er in the brief on appeal, that the% are insistin# the subsidiar% civil liabilit% of the defendant. *s a $atter of fact, the record sho&s that plaintiffs $erel% presented the transcript of the steno#raphic notes + 'hibit E*E, ta=en at the hearin# of the cri$inal case, &hich (re#orio Palacio corroborated, in support of their clai$ for da$a#es. This rules out the defense of res 1udi(ata, because such liabilit% proceeds precisel% fro$ the "ud#$ent in the cri$inal action, &here the accused &as found #uilt% and ordered to pa% an inde$nit% in the su$ P.22.22. ?D R FOR , the decision of the lo&er court is hereb% reversed and defendants Fel% Transportation and Isabelo !alin#asan are ordered to

pa%, "ointl% and severall%, the plaintiffs the a$ount of P.22.22 and the costs. Bengzon! C.".! Padilla! Bautista Angelo! 'a$rador! Con(ep(ion! Barrera! Paredes! Dizon and 8a4alintal! concur. Re es! ".B.'.! ".! too= no part.

20

da$a#es, P)22,222.22 as e'e$plar% da$a#es and P)2,222.22 as attorne%Ps fees. N 3*N! G.R. No. <2088D A,.*1 27, 1CD7 *fter due trial court rendered the appealed "ud#$ent. The appeal &as ta=en to the !ourt of *ppeals, but on :anuar% )., )907 the latter certified the case to us for final ad"udication pursuant to sections )8 and 7) of the :udiciar% *ct of )9-4, as a$ended, the a$ount involved bein# $ore than P122,222.22, e'clusive of interests and cost. The onl% issue to be resolved is &hether, upon the facts found b% the trial court, O &hich, in our opinion, are full% supported b% the evidence O Francisco S%cip $a% be held liable, "ointl% and severall% &ith his co> defendant, for the su$s of $one% ad"ud#ed in favor of N*M*R!O. The evidence of record sho&s that, of the capital stoc= of *SSO!I*T D, S%cip o&ned P02,222.22 &orth of shares, &hile his &ife O the second bi##est stoc=holder O o&ned P12,222.22 &orth of sharesB that the par value of the subscribed capital stoc= of *SSO!I*T D &as onl% P)2.,222.22B that ne#otiations that lead to the e'ecution of the e'chan#e a#ree$ent in Cuestion &ere conducted e'clusivel% b% S%cip on behalf of *SSO!I*T DB that, as a $atter of fact, in the course of his testi$on%, S%cip referred to hi$self as the one &ho contracted or transacted the business in his personal capacit%, and asserted that the e'chan#e a#ree$ent &as his personal contractB that it &as S%cip &ho $ade personal representations and #ave assurances that *SSO!I*T D &as in actual possession of the 11,.)0 ba#s of EVictoriasE andFor ENationalE refined su#ar &hich the latter had a#reed to deliver to N*M*R!O, and that the sa$e &as read% for deliver%B that, as a $atter of fact, *SSO!I*T D &as at that ti$e alread% insolventB that &hen N*M*R!O $ade de$ands upon *SSO!I*T D to deliver the 11,.)0 ba#s of refined su#ar it &as under obli#ation to deliver to the for$er, *SSO!I*T D and S%cip, instead of $a=in# deliver% of the su#ar, offered to pa% its value at the rate of P)..72 per ba# O a clear indication that the% did not have the su#ar contracted for.1wph1.t The fore#oin# facts, full% established b% the evidence, can lead to no other conclusion than that S%cip &as #uilt% of fraud because throu#h false representations he succeeded in inducin# N*M*R!O to enter into the aforesaid e'chan#e a#ree$ent, &ith full =no&led#e, on his part, on the fact that *SSO!I*T D &ho$ he represented and over &hose business and affairs he had absolute control, &as in no position to co$pl% &ith the obli#ation it had assu$ed. !onseCuentl%, he can not no& see= refu#e behind the #eneral principle that a corporation has a personalit% distinct and separate fro$ that of its stoc=holders and that the latter are not personall% liable for the corporate obli#ations. To the contrar%, upon the proven facts, ?e feel perfectl% "ustified in Epiercin# the veil of corporate fictionE and in holdin# S%cip personall% liable, "ointl% and severall% &ith his co>defendant, for the su$s of $one% ad"ud#ed in favor of appellant. It is settled la& in this and other "urisdictions that &hen the corporation is the $ere alter ego of a person, the corporate fiction $a% be disre#ardedB the sa$e bein# true &hen the corporation is controlled, and its affairs are so conducted as to $a=e it $erel% an instru$entalit%, a#enc% or conduit of another +Koppel Phils., etc. vs. Iatco, etc., -7 O.(. No. )). Nov. )9-8B Iutivo Sons, etc. vs. !ourt of Ta' *ppeals, etc., (.R. No. ;> )7127, pro$ul#ated on :anuar% 14, )90),. ?herefore, the decision appealed fro$ is $odified b% sentencin# defendant>appellee Francisco S%cip to pa%, "ointl% and severall% &ith the *ssociated Finance !o$pan%, Inc., the su$ of $one% &hich the trial court sentenced the latter to pa% to the National Mar=etin# !orporation, as follo&s@ the su$ of FO/R D/NDR D TDR TDO/S*ND FIV D/NDR D FO/RT N P SOS, and T? NTI> I(DT ! NT*VOS P-27,.)-.14,, &ith interest at the le#al rate fro$ the date of the filin# of the action until full% paid plus an additional a$ount of I(DTI TDO/S*ND S V N D/NDR D T?O P SOS and I(DTI>SIL ! NT*VOS +P42,821.40, as liCuidated da$a#es and P.,222.22 as attorne%Ps fees and further to pa% the costs. ?ith costs.

NATIONA MAREETING CORPORATION FNAMARCOG, plaintiff> appellant, vs. ASSOCIATE# FINANCE COMPANY, INC., &'( FRANCISCO SYCIP, defendants. FRANCISCO SYCIP, defendant>appellee. -omas P. 8ati(! "r!. for plaintiff and appellant. 9ran(is(o S (ip in his $ehalf as defendant and appellee. #I$ON, J.: *ppeal b% the National Mar=etin# !orporation O hereinafter referred to as N*M*R!O, fro$ the decision of the !ourt of First Instance of Manila in !ivil !ase No. -.882 orderin# the *ssociated Finance !o$pan%, Inc. O hereinafter referred to as the *SSO!I*T D O to pa% the N*M*R!O the su$ of P-27,.)-.14, &ith le#al interest thereon fro$ the date of filin# of the action until full% paid, P42,821.10 as liCuidated da$a#es, P.,222.22 as attorne%Ps fees, plus costs, but dis$issin# the co$plaint insofar as defendant Francisco S%cip &as concerned, as &ell as the latterPs counterclai$. The appeal is onl% fro$ that portion of the decision dis$issin# the case as a#ainst Francisco S%cip. On March 1., )9.4, *SSO!I*T D, a do$estic corporation, throu#h its President, appellee Francisco S%cip, entered into an a#ree$ent to e'chan#e su#ar &ith N*M*R!O, represented b% its then (eneral Mana#er, 3en"a$in strella, &hereb% the for$er &ould deliver to the latter 11,.)0 ba#s +each &ei#hin# )22 pounds, of EVictoriasE andFor ENationalE refined su#ar in e'chan#e for 8,871.8) ba#s of E3usila=E and )8,14..24 piculs of EPasu$ilE ra& su#ar belon#in# to N*M*R!O, both a#reein# to pa% liCuidated da$a#es eCuivalent to 12T of the contractual value of the su#ar should either part% fail to co$pl% &ith the ter$s and conditions stipulated + 'hibit *,. Pursuant thereto, on Ma% )9,)9.4, N*M*R!O delivered to *SSO!I*T D 8,871.8) bars of E3usila=E and )8,14..24 piculs of EPasu$ilE do$estic ra& su#ar. *s *SSO!I*T D failed to deliver to N*M*R!O the 11,.)0 ba#s of EVictoriaE andFor ENationalE refined su#ar a#reed upon, the latter, on :anuar% )1, )9.9, de$anded in &ritin# fro$ the *SSO!I*T D either +a, i$$ediate deliver% thereof before :anuar% 12, or +b, pa%$ent of its eCuivalent cash value a$ountin# to P781,079.42. On :anuar% )9, )9.9, *SSO!I*T D, throu#h S%cip, offered to pa% N*M*R!O the value of 11,.)0 ba#s of refined su#ar at the rate of P)..72 per ba#, but the latter re"ected the offer. Instead, on :anuar% 1) of the sa$e %ear it de$anded pa%$ent of the 8,871.8) ba#s of E3usila=E ra& su#ar at P)..72 per ba#, a$ountin# to P))4,7)2.-2. and of the )8,14..24 piculs of EPasu$ilE ra& su#ar at P)0..2 per picul, a$ountin#, to P14..127.41, or a total price of P-27,.)-.14 for both =inds of su#ar, based on the su#ar Cuotations + 'h. D, as of March 12, )9.4 O the date &hen the e'chan#e a#ree$ent &as entered into. *s *SSO!I*T D refused to deliver the ra& su#ar or pa% for the refined su#ar delivered to it, inspite of repeated de$ands therefore, N*M*R!O instituted the present action in the lo&er court to recover the su$ of P-27,.)-.14 in pa%$ent of the ra& su#ar received b% defendants fro$ itB P42,821.40 as liCuidated da$a#esB P)2,222.22 as attorne%Ps fees, e'penses of liti#ation and e'e$plar% da$a#es, &ith le#al interest thereon fro$ the filin# of the co$plaint until full% paid. In their a$ended ans&er defendants, b% &a% of affir$ative defenses, alle#ed that the correct value of the su#ar delivered b% N*M*R!O to the$ &as P1.9,-.).29 or P)7.72 per ba# of )22 lbs. &ei#ht +Cuedan basis, and not P-27,.)-.74 as clai$ed b% N*M*R!O. *s counterclai$ the% pra%ed for the a&ard of P.22,222.22 as $oral

21

Padilla the su$ of P0,270.00 &ith le#al interest therein fro$ the ti$e of the filin# of the co$plaint until full% paid. G.R. No. <10@10 M&.+) 17, 1CD1 Defendant>appellee RI!*RDO RODRI(/ S is hereb% ordered to pa% to the plaintiffs>appellants Do$in#a de los Re%es and Sabino Padilla the su$ of P),8-1.0- &ith le#al interest thereon fro$ the ti$e of the filin# of the co$plaint and until it is full% paid. In addition thereto the defendants> appellees !irilo Paredes, /rsula Tolentino and Ricardo Rodri#ue6 shall pa% the costs proportionatel% in both instances. IT IS SO ORD R D. !irilo Paredes and /rsula Tolentino then resorted to this court. ?e #ranted (ertiorari. On the $ain issue &hether the individual stoc=holders $a%be held liable for obli#ations contracted b% the corporation, this !ourt has alread% ans&ered the Cuestion in the affir$ative &herever circu$stances have sho&n that the corporate entit% is bein# used as an alter ego or business conduit for the sole benefit of the stoc=holders, or else to defeat public convenience, "ustif% &ron#, protect fraud, or defend cri$e +Koppel GPhil.H Inc. vs. Iatco, 88 Phil. -90B *rnold vs. ?illits and Patterson, -- Phil. 70-,. The !ourt of *ppeals has $ade e'press findin#s to the follo&in# effect@ There is no Cuestion that a &ron# has been co$$itted b% the so>called Par= Rite !o., Inc., upon the plaintiffs &hen it occupied the lot of the latter &ithout its prior =no&led#e and consent and &ithout pa%in# the reasonable rentals for the occupation of said lot. There is also no doubt in our $ind that the corporation3as a mere alter ego or $usiness (onduit of the defendants !irilo Paredes and /rsula Tolentino, and before the$ O the defendants M. Mc!onnel, ?. P. !ochrane, and Ricardo Rodri#ue6. The evidence clearl% sho&s that these persons (ompletel dominated and (ontrolled the (orporation and that the fun(tions of the (orporation 3ere solel for their $enefits. ?hen it &as ori#inall% or#ani6ed on or about *pril )., )9-8, the ori#inal incorporators &ere M. Mc!onnel, ?. P. !ochrane, Ricardo Rodri#ue6, 3enedicto M. Dario and *urea Ordrecio &ith a capital stoc= of P),.22.22 divided into ),.22 shares at P).22 a share. Mc!onnel and !ochrane each o&ned .22 shares, Ricardo Rodri#ue6 -24 shares, and Dario and Ordrecio ) share each. It is obvious that the shares of the last t&o na$ed persons &ere $erel% Cualif%in# shares. Then or about *u#ust 11, )9-8 the defendants !irilo Paredes and /rsula Tolentino purchased ),-90 shares of the said corporation and the re$ainin# four shares &ere acCuired b% 3ienvenido :. !laudio, 5uintin !. Paredes, Se#undo Tarictican, and Paulino MarCue6 at one share each. It is obvious that the last four shares bou#ht b% these four persons &ere $erel% Cualif%in# shares and that to all intents and purposes the spouses !irilo Paredes and /rsula Tolentino co$posed the so>called Par= Rite !o., Inc. -hat the (orporation 3as a mere e*tension of their personalit is sho3n $ the fa(t that the offi(e of Cirilo Paredes and that of Par4 Rite Co.! 0n(. 3ere lo(ated in the same $uilding! in the same floor and in the same room = at >6? &ilson Building. -his is further sho3n $ the fa(t that the funds of the (orporation 3ere 4ept $ Cirilo Paredes in his o3n name +p. )-, Nove$ber 4, )9.2, T.S.N., -he (orporation itself had no visi$le assets! as (orre(tl found $ the trial (ourt! e*(ept perhaps the toll house! the 3ire fen(e around the lot and the signs thereon. 0t 3as for this reason that the 1udgment against it (ould not $e full satisfied. + $phasis supplied,. The facts thus found can not be varied b% us, and conclusivel% sho& that the corporation is a $ere instru$entalit% of the individual stoc=holderPs, hence the latter $ust individuall% ans&er for the

M. MC CONNE , %. P. COCHRANE, RICAR#O RO#RIGUE$, ET A ., petitioners, vs. THE COURT OF APPEA S &'( #OMINGA #E OS REYES, &ss*st/( 5- )/. )us5&'(, SA"INO PA#I A,respondents. "esus B. Santos and Cornelio Anti<uera for petitioners. -eodoro Padilla for respondents. REYES, !.". ., J.B The issue before us in the correctness of the decision of the !ourt of *ppeals that, under the circu$stances of record, there &as "ustification for disre#ardin# the corporate entit% of the Par= Rite !o., Inc., and holdin# its controllin# stoc=holders personall% responsible for a "ud#$ent a#ainst the corporation. The !ourt of *ppeals found that the Par= Rite !o., Inc., a Philippine corporation, &as ori#inall% or#ani6ed on or about *pril )., )9-8, &ith a capital stoc= of ),.22 shares at P).22 a share. The corporation leased fro$ Rafael Pere6 Rosales % Sa$anillo a vacant lot on :uan ;una street +Manila, &hich it used for par=in# $otor vehicles for a consideration. It turned out that in operatin# its par=in# business, the corporation occupied and used not onl% the Sa$anillo lot it had leased but also an ad"acent lot belon#in# to the respondents>appellees Padilla, &ithout the o&nersP =no&led#e and consent. ?hen the latter discovered the truth around October of )9-8, the% de$anded pa%$ent for the use and occupation of the lot. The corporation +then controlled b% petitioners !irilo Parades and /rsula Tolentino, &ho had purchased and held ),-90 of its ),.22 shares, disclai$ed liabilit%, bla$in# the ori#inal incorporators, Mc!onnel, Rodri#ue6 and !ochrane. ?hereupon, the lot o&ners filed a#ainst it a co$plaint for forcible entr% in the Municipal !ourt of Manila on 8 October )9-8 +!ivil !ase No. -27),. :ud#$ent &as rendered in due course on )7 Nove$ber )9-8, orderin# the Par= Rite !o., Inc. to pa% P8,-)2.22 plus le#al interest as da$a#es fro$ *pril )., )9-8 until return of the lot. Restitution not havin# been $ade until 7) :anuar% )9-4, the entire "ud#$ent a$ounted to P)),871..2. /pon e'ecution, the corporation &as found &ithout an% assets other than P..2.22 deposited in !ourt. *fter their application to the "ud#$ent credit, there re$ained a balance of P)),)41..2 outstandin# and unsatisfied. The "ud#$ent creditors then filed suit in the !ourt of First Instance of Manila a#ainst the corporation and its past and present stoc=holders, to recover fro$ the$, "ointl% and severall%, the unsatisfied balance of the "ud#$ent, plus le#al interest and costs. The !ourt of First Instance denied recover%B but on appeal, the !ourt of *ppeals +!*>(.R. No. 4-7->R, reversed, findin# that the corporation &as a $ere alter ego or business conduit of the principal stoc=holders that controlled it for their o&n benefit, and ad"ud#ed the$ responsible for the a$ounts de$anded b% the lot o&ners, as follo&s@ ?D R FOR , pre$ises considered, the decision appealed fro$ is reversed. Defendants>appellees !irilo Paredes and /rsula Tolentino are hereb% declared liable to the plaintiffs> appellants for the rentals due on the lot in Cuestion fro$ *u#ust 11, )9-8 to :anuar% 7), )9-4 at the rate of P),17..22 a $onth, &ith le#al interest thereon fro$ the ti$e of the filin# of the co$plaint. Deductin# the P..2.22 &hich &as paid at the ti$e &hen the corporation &as alread% acCuired b% the said defendants>appellees !irilo Paredes and /rsula Tolentino, the% are hereb% ordered to pa% to plaintiffs>appellants Do$in#a de los Re%es and Sabino

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corporate obli#ations. ?hile the $ere o&nership of all or nearl% all of the capital stoc= of a corporation is a $ere business conduit of the stoc=holder, that conclusion is a$pl% "ustified &here it is sho&n, as in the case before us, that the operations of the corporation &ere so $er#ed &ith those of the stoc=holders as to be practicall% indistin#uishable fro$ the$. To hold the latter liable for the corporationPs obli#ations is not to i#nore the corporationPs separate entit%, but $erel% to appl% the established principle that such entit% can not be invo=ed or used for purposes that could not have been intended b% the la& that created that separate personalit%. The petitioners>appellants insist that the !ourt could have no "urisdiction over an action to enforce a "ud#$ent &ithin five +., %ears fro$ its rendition, since the Rules of !ourt provide for enforce$ent b% $ere $otion durin# those five %ears. The error of this stand is apparent, because the second action, ori#inall% be#un in the !ourt of First Instance, &as not an action to enforce the "ud#$ent of the Municipal !ourt, but an action to have non>parties to the "ud#$ent held responsible for its pa%$ent. Findin# no error in the "ud#$ent appealed fro$, the sa$e is hereb% affir$ed, &ith costs a#ainst petitioners>appellants !irilo Paredes and /rsula Tolentino.

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1. That the &or=ers of the E;a !a$pana !offee Factor%, Inc.E are less than thirt%>oneB G.R. No. <@D77 M&- 2@, 1C@3 7. That the petitionin# union has no le#al capacit% to sue, because its re#istration as an or#ani6ed union has been revo=ed b% the Depart$ent of ;abor on Septe$ber ., )9.)B and -. That there is an e'istin# valid contract bet&een the respondent E;a !a$pana (au#au Pac=in#E and the intervenor P;O?, &here>in the petitionerPs $e$bers are contractin# parties bound b% said contract. Several hearin#s &ere held on the above $otions, in the course of &hich ocular inspections &ere also $ade, and on the basis of the evidence received and the facts observed in the ocular inspections, the !ourt of Industrial Relations denied the said $otions in its order of :anuar% )-, )9.1, because if found as a fact that@ *. ?hile the coffee corporation is a fa$il% corporation &ith Mr. Tan Ton#, his &ife, and children as the incorporations and stoc=helders + 'hibit ),, the ;a !a$pana (au#au Pac=in# is $erel% a business na$e + 'hibit -,. 3. *ccordin# to the contract of lease + 'hibit 17,, Mr. Tan Ton#., propriet% and $ana#er of the Ka !a$pana (au#au Factor%, leased a space of 122 sCuare $eters in the bode#a housin# the #au#au factor% to his son Tan Ken# ;i$, $ana#er of the ;a !a$pana !offee Factor%. 3ut the lease &as e'ecuted onl% on Septe$ber ), )9.), &hile the dispute bet&een the parties &as pendin# before the !ourt. !. There is onl% one entit% ;a !a$pana Starch and !offee Factor%, as sho&n b% the si#nboard + 'hibit ),, the advertise$ent in the deliver% truc=s + 'hibit I>),, the pac=a#es of #au#au+ 'hibit K,, and deliver% for$s + 'hibits :, :>), and :>1,. D. *ll the laborers &or=in# in the #au#au or in the coffee factor% receive their pa% fro$ the sa$e person, the cashier, Miss Natividad (arcia, secretar% of Mr. Tan Ton#B and the% are transferred fro$ the #au#au to the coffee and vice>versa as the $ana#e$ent so reCuires. . There has been onl% one pa%roll for the entire ;a !a$pana personnel and onl% one person preparin# the sa$e O Miss Natividad (arcia, secretar% of Mr. Tan Ton#. 3ut after the case at bar &as certified to this !ourt on :ul% )8, )9.), the co$pan% be#an $a=in# separate pa%rolls for the coffee factor% + 'hibits M>1 and M>7, and for the #au#au factor% + 'hibits O>1, O>7 and O>-,. It is to be noted that before :ul% 1), )9.), the coffee pa%rolls all be#an &ith nu$ber E-)>Maria VillanuevaE &ith 1- or $ore laborers + 'hibits M and M>),, &hereas be#innin# :ul% 1), )9.), the pa%rolls for the coffee factor% be#an &ith No. )>;oreta 3ernabe &ith onl% )- laborers + 'hibits M>1 and M>7,. F. Durin# the ocular inspection $ade in the factor% on *u#ust 10, )9.) the !ourt has found the follo&in#@ In the #round floor and second floor of the #au#au factor% there &ere hundreds of ba#s of ra& coffee behind the pile of #au#au sac=s. There &ere also &o$en e$plo%ees &or=in# paper &rappers for #au#au, and, in the sa$e place there &ere about 7,222 cans to be used as containers for coffee. The !ourt found out also that there &ere )0 truc=s used both for the deliver% of coffee and #au#au. To sho& that those truc=s carried both coffee and #au#au, the union president invited the !ourt to e'a$ine the contents of deliver% truc= No. T>.41 par=ed in a #ara#e bet&een the #au#au buildin# and the coffee factor%, and upon e'a$ination, there &ere

A CAMPANA FACTORY, INC., &'( TAN TONG (o*'g 5us*'/ss u'(/. t)/ t.*&1 '&7/ H A CAMPANA GAUGAU PACEINGH, petitioners, vs. EAISAHAN NG MGA MANGGAGA%A SA A CAMPANA FEEMG &'( THE COURT OF IN#USTRIA RE ATIONS,respondents. Ceferino de los Santos! R.! Ceferino de los Santos! "r. and 8anuel #. Ro*as for petitioners. Carlos %. Santiago for respondent union. REYES, J.B Tan Ton#, one of the herein petitioners, has since )971 been en#a#ed in the business of bu%in# and sellin# #au#au under the trade na$e ;a !a$pana (au#au Pac=in# &ith an establish$ent in 3inondo, Manila, &hich &as later transferred to spa<a 'tension, 5ue6on !it%. 3ut on :ul% 0, )9.2, Tan Ton#, &ith hi$self and $e$bers of his fa$il% corporation =no&n as ;a !a$pana Factor% !o., Inc., &ith its principal office located in the sa$e place as that of ;a !a$pana (au#au Pac=in#. *bout a %ear before the for$ation of the corporation, or on :ul% )), )9-9, Tan Ton# had entered into a collective bar#ainin# a#ree$ent &ith the Philippine ;e#ion of Or#ani6ed ?or=ers, =no&n as P;O? for short, to &hich the union of Tan Ton#Ps e$plo%ees headed b% Manuel . Sadde &as then affiliated. Secedin#, ho&ever, fro$ the P;O?, Tan Ton#Ps e$plo%ees later for$ed their o&n or#ani6ation =no&n as @aisahan +g 8ga 8anggaga3a Sa 'a Campana, one of the herein respondents, and applied for re#istration in the Depart$ent of ;abor as an independent entit%. Pendin# consideration of this application, the Depart$ent #ave the ne& or#ani6ation le#al standin# b% issuin# it a per$it as an affiliate to the @alipunan +g 8ga 8anggaga3a. On :ul% )9, )9.), the @aisahan +g 8ga 8anggaga3a Sa 'a Campana, hereinafter to be referred to as the respondent Kaisahan, &hich, as of that date, counted &ith 00 $e$bers O &or=ers all of the$ of both ;a !a$pana (au#au Pac=in# and ;a !a$pana !offee Factor% !o., Inc. O presented a de$and for hi#her &a#es and $ore privile#es, the de$and bein# addressed to ;a !a$pana Starch and !offee Factor%, b% &hich na$e the% sou#ht to desi#nate, so it appears, the ;a !a$pana (au#au Pac=in# and the ;a !a$pana !offee Factor% !o., Inc. *s the de$and &as not #ranted and an atte$pt at settle$ent throu#h the $ediation of the !onciliation Service of the Depart$ent of ;abor had #iven no result, the said Depart$ent certified the dispute to the !ourt of Industrial Relations on :ul% )8, )9.), the case bein# there doc=eted as !ase No. .4->V. ?ith the case alread% pendin# in the industrial court, the Secretar% of ;abor, on Septe$ber ., )9.), revo=ed the@alipunan +g 8ga @aisahang 8anggaga3aAs per$it as a labor union on the stren#th of infor$ation received that it &as do$inated b% subversive ele$ents, and, in conseCuence, on the 12th of the sa$e $onth, also suspended the per$it of its affiliate, the respondent @aisahan. ?e have it fro$ the courtPs order of :anuar% )., )9.1, &hich for$s one of the anne'es to the present petition, that follo&in# the revocation of the KaisahanPs per$it, E;a !a$pana (au#au and !offee Factor%E +obviousl% the co$bined na$e of ;a !a$pana (au#au Pac=in# and ;a !a$pana !offee Factor% !o., Inc,, and the P;O?, &hich had been allo&ed to intervene as a part% havin# an interest in the dispute, filed separate $otions for the dis$issal of the case on the follo&in# #rounds@ ). That the action is directed a#ainst t&o different entities &ith distinct personalities, &ith E;a !a$pana Starch Factor%E and the E;a !a$pana !offee Factor%, Inc.EB

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found inside the said truc= bo'es of #au#au and cans of coffee, and held that@ . . . there is onl% one $ana#e$ent for the business of #au#au and coffee &ith &ho$ the laborers are dealin# re#ardin# their &or=. Dence, the filin# of action a#ainst the Ka !a$pana Starch and !offee Factor% is proper and "ustified. ?ith re#ards to the alle#ed lac= of personalit%, it is to be noted that before the certification of the case to this !ourt on :ul% )8, )9.), the petitioner @aisahan +g 8ga 8anggaga3a Sa 'a Campana, had a separate per$it fro$ the Depart$ent of ;abor. This per$it &as suspended on Septe$ber 72, )9.). + 'hibit M>Intervenor, pa#e .., of the record,. It is not true that, on :ul% )8, )9.), &hen this case for&arded to this !ourt, the petitionerPs per$it, as an independent union, had not %et been issued, for the ver% 'hibit MM>Intervenor re#ardin# the per$it, conclusivel% sho&s the pree'istence of said per$it. +*nne' (., Their $otion for reconsideration of the above order havin# been denied, Tan Ton# and ;a !a$pana !offee Factor%, Inc. +sa$e as ;a !a$pana !offee Factor% !o., Inc.,, later "oined b% the P;O?, filed the present petition for certiorari on the #rounds that the !ourt of Industrial Relations had no "urisdiction to ta=e co#ni6ance of the case, for the reason, accordin# to the$, E+), that the petitioner ;a !a$pana !offee Factor%, Inc. has onl% )- e$plo%ees, onl% . of &ho$ are $e$bers of the respondent union and therefore the absence of the "urisdictional nu$ber +72, as provided b% sections ) and - of !o$$on&ealth *ct No. )27B and, +1, that the suspension of respondent unionPs per$it b% the Secretar% of ;abor has the effect of ta=in# a&a% the unionPs ri#ht to collective bar#ainin# under section 1 of !o$$on&ealth *ct No. 1)7 and conseCuentl%, its personalit% to sue for ad in behalf of its $e$bers.E *s to the first #round, petitioners obviousl% do not Cuestion the fact that the nu$ber of e$plo%ees of the ;a !a$pana (au#au Pac=in# involved in the case is $ore than the "urisdictional nu$ber +7), reCuired b%la&, but the% do contend that the industrial court has no "urisdiction to tr% the case as a#ainst ;a !a$pana !offee Factor%, Inc. because the latter has alle#edl% onl% )- laborers and onl% of these are $e$bers of the respondent Kaisahan. This contention loses force &hen it is noted that, as found b% the industrial court O and this findin# is conclusive upon us O ;a !a$pana (au#au Pac=in# and ;a !a$pana !offee Factor% !o. Inc., are operatin# under one sin#le $ana#e$ent, that is, as one business thou#h &ith t&o trade na$es. True, the coffee factor% is a corporation and, b% le#al fiction, an entit% e'istin# separate and apart fro the persons co$posin# it, that is, Tan Ton# and his fa$il%. 3ut it is settled that this fiction of la&, &hich has been introduced as a $atter of convenience and to subserve the ends of "ustice cannot be invo=ed to further an end subversive of that purpose. Disregarding Corporate %ntit . O The doctrine that a corporation is a le#al entit% e'istin# separate and apart fro$ the person co$posin# it is a le#al theor% introduced for purposes of convenience and to subserve the ends of "ustice. The concept cannot, therefore, be e'tended to a point be%ond its reason and polic%, and &hen invo=ed in support of an end subversive of this polic%, &ill be disre#arded b% the courts. Thus, in an appropriate case and in furtherance of the ends of "ustice, a corporation and the individual or individuals o&nin# all its stoc=s and assets &ill be treated as identical, the corporate entit% bein# disre#arded &here used as a cloa= or cover for fraud or ille#alit%. +)7 *$. :ur., )02>)0)., . . . * subsidiar% or au'iliar% corporation &hich is created b% a parent corporation $erel% as an a#enc% for the latter $a% so$eti$es be re#arded as identical &ith the parent corporation, especiall% if the stoc=holders or officers of the

t&o corporations are substantiall% the sa$e or their s%ste$ of operation unified. +0$id. )01B see *nnotation ) *. ;. R. 0)1, s. 7- *. ;. R. .99., In the present case Tan Ton# appears to be the o&ner of the gaugau factor%. *nd the coffee factor%, thou#h an incorporated business, is in realit% o&ned e'clusivel% b% Tan Ton# and his fa$il%. *s found b% the !ourt of industrial Relations, the t&o factories have but one office, one $ana#e$ent and one pa%roll, e'cept after :ul% )8, the da% the case &as certified to the !ourt of Industrial Relations, &hen the person &ho &as dischar#in# the office of cashier for both branches of the business be#an preparin# separate pa%rolls for the t&o. *nd above all, it should not be overloo=ed that, as also found b% the industrial court, the laborers of the gaugau factor% and the coffee factor% &ere interchan#eable, that is, the laborers fro$ the #au#au factor% &ere so$eti$es transferred to the coffee factor% and vice> versa. In vie& of all these, the atte$pt to $a=e the t&o factories appears as t&o separate businesses, &hen in realit% the% are but one, is but a device to defeat the ends of the la& +the *ct #overnin# capital and labor relations, and should not be per$itted to prevail. The second point raised b% petitioners is li=e&ise &ith>out $erit. In the first place, there bein# $ore than 72 laborers involved and the Secretar% of ;abor havin# certified the dispute to the !ourt of Industrial Relations, that court dul% acCuired "urisdiction over the case +International Oil Factor% vs. N;/, Inc. 87 Phil., -2)B section -, !. *. )27,. This "urisdiction &as not &hen the Depart$ent of ;abor suspended the per$it of the respondent Kaisahan as a labor or#ani6ation. For once "urisdiction is acCuired b% the !ourt of Industrial Relations it is retained until the case is co$pletel% decided. +Manila Dotel $plo%ees *ssociation vs. Manila Dotel !o. et al., 87 Phil., 78-., In vie& of the fore#oin#, the petition is denied, &ith costs a#ainst the petitioner.

25

and there &as no e$plo%er>e$plo%ee relationship bet&een it and the /NIONPs $e$bers. G.R. Nos. C07C@<CD August 13, 1CC3 SHOEMART, INC., petitioner, vs. NATIONA A"OR RE ATIONS COMMISSION &'( MORIS IN#USTRIES %OREERS UNION, respondents. G.R. Nos. C112@<2D August 13, 1CC3 MORIS IN#USTRIES %OREERS UNION, ./,./s/'t/( 5- t)/ P./s*(/'t, ORNA A"E I#O, petitioner, vs. NATIONA A"OR RE ATIONS COMMISSION, SM SHOEMART, INC., ./,./s/'t/( 5- *ts P./s*(/'t &'( G/'/.&1 M&'&g/., HENRY SY, SR., /t &1., respondents. Gregorio .. Bilog for petitioner. 9ernando -. Collantes for private respondents. *t the hearin# on the $erits on :ul% 8, )940, before ;abor *rbiter Ro$ulo ;ope6, cross>e'a$ination &as allo&ed and &as be#un b% MORISP counsel of the /NIONPs &itness, !resencio dic, based on the latterPs affidavit. dicPs affidavit +as su$$ari6ed b% respondent !o$$ission in its Decision pro$ul#ated on :ul% )2, )949, &as substantiall% to the effect that@ . . . he &as first e$plo%ed as sa$ple $a=er, b% the people &ho o&ned SM. Dis "ob &as to $a=e sa$ples to be displa%ed on the &indo& and onl% those &hich appealed to the custo$ers &ere $ass produced. ?hen he &as pro$oted to over>all supervisor, the factor% &as transferred to its present location and fro$ then on, this production division &as incorporated separatel% and has under#one $an% chan#es in na$e, %et all throu#hout, the =no&n o&ners of the factor% re$ain the sa$e. !ross>e'a$ination of &itness dic &as, ho&ever, not co$pleted b% counsel for MORIS. The cases &ere postponed a nu$ber of ti$es and transferred fro$ one labor arbiter to the other on account of the reor#ani6ation of the Depart$ent of ;abor and $plo%$ent in the after$ath of the )940 Revolution. On *u#ust )7, )940, SDO M*RT and Denr% S%, Sr. $oved to dis$iss the co$plaint a#ainst the$ on the #round of lac= of "urisdiction, there bein# no e$plo%$ent relationship bet&een SDO M*RT and the /NION $e$bers, MORISP e$plo%ees. On Februar% )4, )948, MORIS $oved that trial continue for cross>e'a$ination and further presentation of evidence. Other pleadin#s and $otions &ere filed b% the parties, the last bein# the /NIONPs $anifestation and $otion dated :ul% 4, )948 that the consolidated cases be resolved on the basis of the position papers and pleadin#s alread% on record. The $otions &ere eventuall% acted on b% ;abor *rbiter !ornelio ;insan#an, the fourth arbiter to handle the case. 3% Order dated :ul% )7, )948 he denied SDO M*RTPs +and Denr% S%Ps, $otion to dis$iss for bein# E&ithout $erit,E and because, at an% rate, it could Ebe better discussed and resolved to#ether &ith the $erits of the co$plaint itself.E *s to the /NIONPs $otion, *rbiter ;insan#an ruled in the sa$e order that althou#h he had ascertained, Eafter painsta=in#l% #oin# over the records, that the case can be decided alread% based on the several pleadin#s filed . . .,E the parties should nevertheless be #ranted ti$e +fifteen G).H da%s, E&ithin &hich to file their last pleadin#sE after &hich Ethe case shall be considered sub$itted alread% for resolution.E 1 SDO M*RT +and Denr% S%, Sr., filed in this !ourt on October 19, )948 a special action of (ertiorari to annul the Order of ;abor *rbiter ;insan#an, 2 and in the proceedin#s before the latter, a Manifestation and Motion to Defer Proceedin#s pendin# resolution of their (ertiorari action. 3 *t this ti$e ho&ever, *rbiter ;insan#an had alread% rendered a decision +dated October 10, )948, in favor of the /NION, holdin# both MORIS and SDO M*RT EeCuall% liableE to the co$plainin# /NION. ? The dispositive portion of the "ud#$ent reads as follo&s@ ?D R FOR , "ud#$ent is hereb% rendered declarin# respondent Moris Industries, Inc. #uilt% of unfair labor practice as char#ed. The respondents are hereb% ordered to pa% co$plainants a total of P70.,).2..1 for fift%>si' G.0H e$plo%ees the a$ounts due the$ as discussed above. Further, the respondent are ordered to pa% each co$plainant the su$ of P)2,222.22 b% &a% of da$a#es.

NARVASA, C.J.: T&o $ain Cuestions are raised in these consolidated petitions. The first is &hether the ;abor *rbiterPs refusal to allo& one part% to resu$e and co$plete cross>e'a$ination of a vital &itness O and another part%, even to co$$ence cross>e'a$ination of the sa$e &itness O constitutes a denial of due process. The second is &hether a corporation $a% be held liable for acts of unfair labor practice and ille#al dis$issal of e$plo%ees of a Esister corporation,E en#a#ed in a different line of business, on the theor% that the latter is the for$erPs alter ego or business conduit. One of the corporations involved is Moris Industries, Inc. +MORIS, for short,, a private corporation en#a#ed in the $anufacture of leather products, e.#., ba#s, belts, etc. It had in its e$plo% sevent%>three +87, &or=ers, fift%>si' +.0, of &ho$ are $e$bers of a labor or#ani6ation =no&n as Moris Industries ?or=ers /nion +/NION, for short,. On :une 8, )94. the /NION affiliated itself &ith the Philippine *ssociation of Free ;abor /nions +P*F;/,. On :une )., )94., the /NION, throu#h P*F;/, sent a letter to MORIS infor$in# it of the /NIONPs e'istence, and invitin# the latter to enter into ne#otiations for a collective bar#ainin# a#ree$ent +!3*,. MORISPs reaction &as as s&ift as it &as une'pected. ?ithin t&o da%s, it suddenl% closed shop and ceased operations, clai$in# that such a closure had beco$e inevitable because of business reverses. On :une 12, )94., the /NION +P*F;/, filed a co$plaint for unfair labor practice a#ainst MORIS. * &ee= later, it co$$enced another case a#ainst MORIS, this ti$e for recover% of &a#e differentials and other $onetar% benefits +e$er#enc% cost of livin# allo&ance G !O;*H, sic= leave, vacation leave benefits, etc.,. Shoe$art, Inc., the other corporation involved in these cases, &as i$pleaded b% the /NION in both cases, to#ether &ith the for$erPs president, Mr. Denr% S%, on the stated theor% that Shoe$art, Inc. +hereafter, si$pl% SDO M*RT, and MORIS &ere one and the sa$e "uridical entit%. Durin# the pendenc% of the t&o cases, the /NION disaffiliated itself fro$ P*F;/ and re#istered itself as an independent labor or#ani6ation. The t&o cases &ere consolidated on $otion of the /NION. The parties then sub$itted position papers. SDO M*RTPs position paper set up the clai$ inter alia that its corporate personalit% &as separate and distinct fro$ that of MORIS,

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The ;insan#an decision declared Ethat indeed Moris Industries &as but a conduit of SM Shoe Mart, Inc.,E it appearin# that the Epa%rolls used b% the for$er bear the letterhead of the latter,E and that EMoris Industries is a fa$il% corporation of the S%Ps, . . . the sa$e fa$il% that o&ns and controls SM Shoe Mart, Incorporated . . . .E @ 3oth SDO M*RT +and Denr% S%, Sr., and MORIS appealed to the N;R! on or about Nove$ber )), )948. D SubseCuentl%, SDO M*RTPs +and Denr% S%Ps, (ertiorari action above $entioned +(.R. No. 427)1, &as dis$issed b% this !ourt, b% Resolution dated *pril 0, )944, for bein# pre$ature in vie& of the appeal filed &ith the N;R!. On :ul% )2, )949, the respondent N;R! rendered its decision on the consolidated cases, affir$in# the decision of the ;abor *rbiter &ith $odification. 7 It disposed of the cases as follo&s@ ?D R FOR , pre$ises considered, the appeals of respondents are hereb% dis$issed and the decision of ;abor *rbiter !ornelio ;insan#an is hereb% $odified in that, $e$bers of co$plainant union have the option to choose, in lieu of separation pa%, reinstate$ent to their for$er positions, &ithout loss of seniorit% ri#hts@ and the a&ard of )7th $onth pa% to co$prise three +7, %ears instead of one +), %ear. Further$ore, the a&ard of da$a#es is hereb% reduced to Three Thousand Pesos +P7,222.22, for each &or=er. The rest of the ;abor *rbiterPs decision is affir$ed in all other respects. SO ORD R D. SDO M*RT and the /NION respectivel% $oved for reconsideration and clarification. The $otions &ere resolved b% a Resolution dated October 72, )949, disposin# as follo&s@ ?D R FOR , pre$ises considered, our decision dated :ul% )9, )949 is $odified in that, respondents are ordered to pa% $e$bers of co$plainant union, in addition to the previous a&ards, the eCuivalent of t&o +1, %ears as bac=&a#es, re#ardless of &hether the e$plo%ees elect to be reinstated or opt to receive separation pa%B plus attorne%Ps fees at the rate of )2T of the total a&ardB &ith the further clarification that the a&ard of )7th $onth pa% shall be for the period of three +7, %ears. The !orporate *uditin# 'a$iner is directed to $a=e the necessar% co$putation. The $otion for reconsideration of respondents is hereb% dis$issed for lac= of $erit. 3efore this !ourt no& are t&o petitions see=in#, on different bases, $odification of the N;R! decision of :ul% )2, )949, as $odified b% its Resolution of October 72, )949. One, doc=eted as (.R. Nos. 9289.> 90, &as filed b% SDO M*RTB the other, doc=eted as (.R. Nos. 9))1.> 10, &as filed b% MORIS /NION. The cases &ere raffled to the First and Third Divisions respectivel% of this !ourt. The First Division #ranted SDO M*RTPs pra%er for a restrainin# order, upon a bond of P022,222.22, b% Resolution dated Nove$ber 18, )949. 8 *fter an e'chan#e of pleadin#s b% the parties, the Third Division issued a Resolution dated :anuar% 7), )992, consolidatin# the t&o petitions. C MORIS did not appeal. The $odified "ud#$ent thus beca$e final and e'ecutor%, and its liabilit% for unfair labor practice and for ille#al dis$issal of its e$plo%ees, represented b% the /NION, thus beca$e incontestable. The basic Cuestion involved in these appeals is &hether or not the respondent N;R! #ravel% abused its discretion in +), holdin#, on the

one hand, SDO M*RT EeCuall% liableE &ith MORIS for unfair labor practice, ille#al ter$ination of e$plo%$ent and non>pa%$ent of $andated benefits to the latterPs e$plo%eesB and, on the other, +1, concedin# to the /NION $onetar% a&ards less than those clai$ed b% it. SDO M*RT contends that althou#h in Ethe su$$ar% procedure adopted in labor cases . . . the case is decided based on position paper,E ;abor *rbiters nevertheless have discretion to Ethe$selves conduct trial on the $erits &hen there are intricate Cuestions of facts that need to be resolvedBE and this is &h% the /nion Epresented !resencio dic, &hose direct testi$on% &as concludedE and &hose cross>e'a$ination &as be#un but not finished b% MORISP counsel. *ccordin# to SDO M*RT, MORIS &as unable to resu$e and conclude its cross>e'a$ination of dic O and SDO M*RT itself Etotall% failed to cross>e'a$ine the said &itnessE O because the ;abor *rbiter +;insan#an, to &ho$ the cases &ere finall% assi#ned, in his Order dated :ul% )2, )948, declared that the cases could alread% be decided on the pleadin#s alread% presented, as &ell as on the Elast pleadin#sE that the parties $i#ht additionall% file &ithin the period #ranted to the$@ fifteen +)., da%s fro$ notice. SDO M*RT posits that both it and MORIS &ere thereb% denied due process, speciall% considerin# the crucial character of the testi$on% of the &itness, dic. The ar#u$ent cannot be sustained. ?hatever $erit it $i#ht have in the conte't of ordinar% civil actions, &here the rules of evidence appl% &ith $ore or less strictness, disappears &ere adduced in connection &ith proceedin#s before ;abor *rbiters and the National ;abor Relations !o$$issionB for in said proceedin#s, the la& is e'plicit that Ethe rules of evidence prevailin# in courts of la& or eCuit% shall not be controllin# and it is the +la&Ps, spirit and intention that the !o$$ission and its $e$bers and the ;abor *rbiters shall use ever% and all reasonable $eans to ascertain the fact in each case speedil% and ob"ectivel% and &ithout re#ard to technicalities of la& or procedure, all in the interest of due process.E 10 Indeed, it is not the Rules of !ourt enacted b% the Supre$e !ourt but rather the re#ulations pro$ul#ated b% the National ;abor Relations !o$$ission &hich #overn Ethe hearin# and disposition of cases before it and its re#ional branches . . . .E The ERevised Rule of !ourt of the Philippines and prevailin# "urisprudence,E the la& sa%s, $a% be applied to labor cases onl% under Cuite strin#ent li$its, i.e., Ein the absence of an% applicable provision +in the Rules of the !o$$ission,, and in order to effectuate the ob"ectives of the ;abor !ode . . ., in the interest of e'peditious labor "ustice and &henever practicable and convenient, b% analo#% or in a suppletor% character and effect.E 11 /nder these rules, the proceedin#s before a ;abor *rbiter are Enon>liti#ious in natureE in &hich, Esub"ect to the reCuire$ents of due process, the technicalities of la& and procedure and the rules obtainin# in the courts of la& . . . +do not, strictl% appl%BE 12 Etrial>t%peE hearin#s are not reCuiredB cases $a% be decided on the basis of verified position papers sub$itted b% the parties, acco$panied b% the affidavits of their &itnesses and such other authentic docu$ents as are relevant. 13 Such a procedure has been sanctioned b% this !ourt as not violative of due process. 1? No&, &hether or not a Efor$al trial or hearin#E should be had is a $atter l%in# in the discretion of the ;abor *rbiter.1@ The *rbiter $a% opt to hold a hearin#, e.#., &here the affidavits Ebein# actuall% hearsa% and untested b% cross>e'a$ination, are not enou#h to satisf% the Cuantu$ of proof reCuired b% la&, especiall% &here the state$ents of the affiants are controverted . . . . E 1D In this case, the first ;abor *rbiter &ho too= co#ni6ance of the cases +*rbiter Ro$ulo ;ope6, evidentl% believed a hearin# &ith cross> e'a$ination of &itnesses &ould be of help in the deter$ination of the $erits of the cases. Dis vie& &as not shared b% the ;abor *rbiter to &ho$ the cases &ere ulti$atel% assi#ned +*rtbiter !ornelio ;insan#an, &ho opined that after a thorou#h#oin# revie& of the records, Ethe case be decide alread% based on the several pleadin# filed . . . .E The *rbiter nevertheless #ave the parties fifteen G).H da%s E&ithin &hich to file their last pleadin#s,E i.e., sub$it additional evidence and ar#u$ents, after &hich Ethe case shall be considered sub$itted alread% for resolution.E

27

MORIS and SDO M*RT &ere thus #iven a$ple opportunit% to be heard, to adduce evidence of their version of the $aterial factual occurences and controvert the /NIONPs proofs, includin# the affidavit of !rescencio dic. The% both sub$itted position papers &ith supportin# affidavits and docu$entsB the% presented ar#u$ents in support of their sub$issions throu#h various pleadin#s and $otions. 3oth MORIS and SDO M*RT additionall% pleaded their causes on appeal before the National ;abor Relations !o$$ission. /nder the circu$stances, a clai$ of denial of due process on SDO M*RTPs part is co$pletel% unavailin#. The essence of due process is that a part% be afforded a reasonable opportunit% to be heard and to sub$it an% evidence he $a% have in support of his defense. 17 ?hat is vital, in other &ords, is not the opportunit% to cross> e'a$ine a particular &itness, but the opportunit% to be heard of &hich, as alread% stated, SDO M*RT has e'tensivel% availed. SDO M*RT ne't i$pu#ns the public respondentsP act of Epiercin# the veil of corporate fictionE as re#ard MORIS O separatel% re#istered as a "uridical entit% O and pronouncin# it to be a E$ere conduitE of SDO M*RT, and EeCuall% liableE upon the for$erPs liabilities to its e$plo%ees. 18 The respondent !o$$issionPs conclusions on this point &ere dra&n fro$ the follo&in# facts, &hich it dee$ed to have been adeCuatel% established b% the co$plainant /NIONPs evidence, to &it@ 1C ). In his affidavit, Mr. +!resencio, dic testified that he &as first e$plo%ed as sa$ple $a=er, b% the people &ho o&ned SM. Dis "ob &as to $a=e sa$ples to be displa%ed on the &indo& and onl% those &hich appealed to the custo$ers &ere $ass produced. ?hen he &as pro$oted to over>all supervisor, the factor% &as transferred to its present location and fro$ then on, this production division &as incorporated separatel% and has under#one $an% chan#es in na$e, %et all throu#hout, the =no&n o&ners of the factor% re$ain the sa$eB 1. *n e'a$ination of the Incorporation papers of SM Shoe Mart and Moris Manufacturin# sho& +sic, that e'cept for li6abeth S% O all other five +., incorporators and directors of Morris Industries are $a"or stoc=holders of SM Shoe Mart as of :ul% 12, )94.B 7. The SM Shoe Mart is the e'clusive bu%er of all of MorisP productsB -. 3oth are housed in one buildin# and Moris for $an% %ears has been usin# the pa%rolls of SM Shoe Mart. SM #libl% e'cuses this fact b% alle#in# that this &as done &ithout its =no&led#e. ?e, ho&ever, considerin# the close relationship of parties, find this incredible. The !ourt fails to discern an% indication in the record that these factual conclusion &ere reached b% the respondent N;R! &hi$sicall% or capriciousl%. In truth, the respondent !o$$ission is sho&n to have considered and anal%6ed the pertinent proofs of the co$plainant /NION in relation to the defenses set up b% the private respondents. ven if it be theori6ed that there is roo$ for so$e diver#ence of vie&s re#ardin# the ob"ective validit% of said conclusions, the% $a% not be nullified and set aside on the theor% that the% had been rendered &ith #rave abuse of discretion. Much the sa$e thin# $a% be said respectin# the reliefs co$plained of b% the /NION as bein# less than those to &hich the% are ri#htfull% entitled. The !ourt perceives no &hi$sicalit% or capriciousness in the $anner b% &hich the N;R! arrived at its conclusions on the $atter and &ill therefore decline to nullif% or set the$ aside. The onl% other Cuestion left for resolution is &hether or not, upon the facts obtainin# in the cases at bar, the e$plo%ees of MORIS have the

ri#ht to be EreinstatedE or absorbed into the pool of e$plo%ees of SDO M*RT. No clai$ is $ade that SDO M*RT is other than a $ar=etin# co$pan%, or has ever en#a#ed in $anufacturin# leather #oods or products, or an% other co$$odities. It see$s undisputed, too, that MORIS has not been in operation for several %ears, its business is non>e'istentB it is dead co$pan%, to all intents and purposes. It is a defunct co$pan% at this ti$e, &hether $i#ht have been the operations. Its stoc=holders and officers have caused its e'tin#uish$ent@ a realit% that cannot but be ac=no&led#ed. /nder the circu$stances, reinstate$ent of the e$plo%ees to MORIS is no lon#er possible. !o$pulsion of the stoc=holders and officers to reopen for business is not a rational option. So$e other sanction $ust be found. Neither $a% SDO M*RT be co$pelled to open a $anufacturin# co$pan% to en#a#e in the sa$e line of business as MORIS in order to acco$$odate the latterPs for$er e$plo%ees, nu$berin# so$e sevent% or so, or to absorb these sevent% &or=ers latter into its o&n business, considerin# the obvious difference and diversit% in s=ills, e'perience and orientation, etc. bet&een its e$plo%ees and those of MORIS. No reasonable alternative thus present itself e'cept to reCuired the pa%$ent of separation pa% in lieu of the reinstate$ent decreed b% the "ud#$ent of the respondent !o$$ission. That liabilit% $a% in the pre$ises properl% and "ustl% be i$posed on SDO M*RT, as &ell as on MORIS and on the latterPs president or e'ecutive head, 20"ointl% and severall%. ?D R FOR , the petitions for (ertiorari are D NI D. The Decision of the respondent !o$$ission of :ul% )2, )949, as $odified b% its Resolution of October 72, )949, is *FFIRM D but further $odified in that in lieu of the option of reinstate$ent or separation pa% #ranted to the $e$bers of co$plainant union in addition to the other reliefs therein set out, the% shall have the ri#ht onl% to separation pa%, &hich shall be de$andable fro$ and pa%able b% SM Shoe$art, Inc., Moris Industries, Inc., and the latters President, petitioner Denr% T. S%, Sr., "ointl% and severall%. The te$porar% restrainin# order of Nove$ber 18, )949 is ;IFT D *ND S T *SID &ithout pre"udice to the enforce$ent of the liabilit% a#ainst the bond posted in connection there&ith. SO ORD R D.

28

BETTY GABIONZA and ISABELITA TAN v. COURT OF APPEALS, LUKE ROXAS nad EVELYN NOLASCO &$9$ No$ 1?1640 September 1/, /663
FACTS ,etty &o &abion+a @&abion+aA and Isabelita Tan @TanA filed a omplaint har*in* respondents L!)e 9o#as @9o#asA and E"elyn Nolas o @Nolas oA with se"eral riminal a ts$ 9o#as was the president of AS, 8oldin*s, In $ @AS,8IA while Nolas o was the senior "i e president and treas!rer of the same orporation$ &abion+a and Tan had pre"io!sly pla ed monetary in"estment with the ,an) of So!theast Asia @,SAA$ They alle*ed that they were on"in ed by the offi ers of AS,8I to lend or deposit money with the orporation$ they were iss!ed re eipts refle tin* the name BAS, 9ealty :e"elopmentC whi h they were told was the same entity as ,SA or was onne ted therewith b!t be*innin* in ;ar h 1223, the re eipts were iss!ed in the name of AS,8I$ :,S ,an) started to ref!se to pay for the he )s p!rportedly by "irt!e of Bstop paymentC orders from AS,8I$ AS,8I filed a petition for rehabilitation and re ei"ership with the Se !rities and E# han*e 'ommission @SE'A, and it was able to obtain an order en5oinin* it from payin* its o!tstandin* liabilities$ This lead to the filin* of omplaints by the petitioners and others a*ainst AS,8I$ The omplaints were for estafa !nder Arti le >14@/A@aA and @/A@dA of the 9e"ised Denal 'ode, estafa !nder Dresidential :e ree No$ 1?32, "iolation of the 9e"ised Se !rities A t and "iolation of the &eneral ,an)in* A t$ Tas) %or e on %inan ial %ra!d @Tas) %or eA, was reated by the :epartment of E!sti e @:OEA whi h dismissed the said omplaints$ S! h dismissal was on !rred by the in by the assistant hief state prose !tor and appro"ed by the hief state prose !tor$ Detitioners filed a motion for re onsideration b!t it was denied$ (ith respe t to the har*es of estafa !nder Arti le >14@/A of the 9e"ised Denal 'ode and of "iolation of the 9e"ised Se !rities A t the Tas) %or e on l!ded that the s!b5e t transa tions were loans whi h *a"e rise only to i"il liability= that petitioners were satisfied with the arran*ement # # #= that petitioners ne"er dire tly dealt with Nolas o and 9o#as= and that a he ) was not a se !rity as ontemplated by the 9e"ised Se !rities A t$ 8owe"er, the :OE made a 9esol!tion alle*in* that it also made it lear that the false representations ha"e been made to petitioners prior to or sim!ltaneo!sly with the ommission of the fra!d$ The ass!ran e *i"en to them by AS,8I that it is a worthy redit partner o !rred before they parted with their money$ 9ele"antly, AS,8I is not the entity with whom petitioners initially transa ted with, and they a"erred that they had to be on"in ed with s! h representations that 9o#as and the same *ro!p behind ,SA were also in"ol"ed with AS,8I$ ISSUE (ON the har*es a*ainst the orporation an also be pinned a*ainst 9o#as and Nolas o li)ewise$ HELD

YES$ The material misrepresentations ha"e been made by the a*ents or employees of AS,8I to petitioners, to the effe t that the orporation was str! t!rally so!nd and finan ially able to !nderta)e the series of loan transa tions that it ind! ed petitioners to enter into$ The false representations made by the AS, a*ents who dealt with the omplainant-petitioners and who in"ei*led them into in"estin* their f!nds in AS, are properly imp!table to respondents 9o#as and Nolas o, be a!se they, as AS,s president and senior "i e president<treas!rer, respe ti"ely, respe ti"ely, in har*e of its operations, dire ted its a*ents to ma)e the false representations to the p!bli , in l!din* the omplainant-petitioners, in order to on"in e them to in"est their moneys in AS,$ It is diffi !lt to ma)e a different on l!sion, 5!d*in* from the fa t that respondents 9o#as and Nolas o a!thori+ed and a epted for AS, the fra!d-ind! ed loans$

29

ADALIA =& FRANCISCO n! MERR$LAND DEVELOPMENT CORPORATION, 1et0t0'ners, 3s. RITA C& MECIA, s E>e1utri> o4 Test te Est te o4 ANDREA CORDOVA VDA& DE G#TERRED, res1'n&ent. G&R& No& ')'-'+, Au;ust '), ABB' GONDAGA-RE$ES,J&, FACTS, An&re% $'r&'3% V&%. &e G)t0erreB :G)t0erreB; 4%s t/e re+0stere& '4ner '2 % 1%r5e* '2 *%n& 0n $%(%r0n, $%*''5%n $0t-. G)t0erreB %n& $%r&%*e 70n%n50n+ %n& "e%*t$'r1'r%t0'n :$%r&%*e; e.e5)te& % Dee& '2 S%*e 40t/ ='rt+%+e re*%t0n+ t' t/e *'ts 2'r t/e 5'ns0&er%t0'n '2 P800,000.00. O40n+ t' $%r&%*ePs 2%0*)re t' sett*e 0ts ('rt+%+e '<*0+%t0'n, G)t0erreB 20*e& % 5'(1*%0nt 2'r res50ss0'n '2 t/e 5'ntr%5t. M'4e3er, $%r&%*e, 4/05/ 4%s re1resente& <1et0t0'ner A&%*0% ?. 7r%n50s5' :7r%n50s5'; 0n /er 5%1%50t- %s V05e-Pres0&ent %n& Tre%s)rer '2 $%r&%*e, *'st 0nterest 0n 1r'5ee&0n+ 40t/ t/e 1resent%t0'n '2 0ts e30&en5e %n& t/e 5%se *%1se& 0nt' 0n%5t03e st%t)s 2'r % 1er0'& '2 %<')t 2')rteen -e%rs. n t/e (e%nt0(e, t/e ('rt+%+e& 1%r5e*s '2 *%n& <e5%(e &e*0n>)ent 0n t/e 1%-(ent '2 re%* est%te t%.es 4/05/ 5)*(0n%te& 0n t/e0r *e3- %n& %)5t0'n s%*e 0n s%t0s2%5t0'n '2 t/e t%. %rre%rs. T/e /0+/est <0&&er 2'r t/e t/ree 1%r5e*s '2 *%n& 4%s 1et0t0'ner =err-*%n& De3e*'1(ent $'r1'r%t0'n :=err-*%n&;, 4/'se Pres0&ent %n& (%C'r0t- st'56/'*&er 0s 7r%n50s5'. T/ere%2ter, 7r%n50s5' 20*e& %n )n&%te& =%n02est%t0'n t' t/e e22e5t t/%t t/e 1r'1ert0es s)<Ce5t '2 t/e ('rt+%+e /%& <een *e30e& )1'n %n& s'*& %t % t%. &e*0n>)en5s%*e. 7r%n50s5' 2)rt/er 5*%0(e& t/%t t/e &e*0n>)en5- s%*e /%& ren&ere& t/e 0ss)es 0n $030* $%se (''t %n& %5%&e(05. =eC0%, 0n /er 5%1%50t- %s e.e5)tr0. '2 t/e !st%te '2 G)t0erreB, 20*e& 40t/ t/e "T$ '2 @)eB'n $0t- % 5'(1*%0nt 2'r &%(%+es 40t/ 1r%-er 2'r 1re*0(0n%r- %tt%5/(ent %+%0nst

7r%n50s5', =err-*%n& %n& t/e "e+0ster '2 Dee&s '2 $%*''5%n $0t-. T/e "T$ /e*& t/%t 1*%0nt022 =eC0%, %s e.e5)tr0. '2 G)t0erreBPs est%te, 2%0*e& t' est%<*0s/ <5*e%r %n& 5'n30n50n+ e30&en5e /er %**e+%t0'ns t/%t 7r%n50s5' 5'ntr'**e& $%r&%*e %n& =err-*%n& %n& t/%t s/e /%& e(1*'-e& 2r%)& <- 0ntent0'n%**- 5%)s0n+ $%r&%*e t' &e2%)*t 0n 0ts 1%-(ent '2 re%* 1r'1ert- t%.es 'n t/e ('rt+%+e& 1r'1ert0es s' t/%t =err-*%n& 5')*& 1)r5/%se t/e s%(e <(e%ns '2 % t%. &e*0n>)en5- s%*e. T/ere %re t0(es 4/en t/e 5'r1'r%te 205t0'n 40** <e &0sre+%r&e&: :1; 4/ere %** t/e (e(<ers 'r st'56/'*&ers 5'((0t 0**e+%* %5tI :2; 4/ere t/e 5'r1'r%t0'n 0s )se& %s &)((t' 5'((0t 2r%)& 'r 4r'n+I :3; 4/ere t/e 5'r1'r%t0'n 0s %n %+en5- 2'r % 1%rent 5'r1'r%t0'nI %n& :4; 4/ere t/e st'56 '2 % 5'r1'r%t0'n 0s '4ne& <- 'ne 1ers'n. T/e "T$ /e*& t/%t n'ne '2 t/e 2're+'0n+ re%s'ns 5%n <e %11*0e& t' t/e 0n50&ents 0n t/0s 5%se %n& t/e st'56 '2 e0t/er '2 t/e t4' 5'r1'r%t0'n 0s n't '4ne& <- 'ne 1ers'n :&e2en&%nt 7r%n50s5';. !.5e1t 2'r &e2en&%nt A&%*0% ?. 7r%n50s5', t/e 0n5'r1'r%t'rs %n& st'56/'*&ers '2 'ne 5'r1'r%t0'n %re &022erent 2r'( t/e 't/er. T/e $')rt '2 A11e%*s, re3erse& t/e tr0%* 5')rt, /'*&0n+ t/%t t/e 5'r1'r%te 3e0* '2 $%r&%*e %n& =err-*%n& ()st <e 10er5e& 0n 'r&er t' /'*& 7r%n50s5' %n& =err-*%n&s'*0&%r0*- *0%<*e s0n5e t/ese t4' 5'r1'r%t0'ns 4ere )se& %s &)((0es <7r%n50s5'. ISS#E E', H/et/er 'r n't 1et0t0'ner 7r%n50s5' %5te& 0n <%& 2%0t/ 0n /er &e%*0n+s. @ELD, $ES& T/e $')rt, %2ter %n %ss0&)')s st)&- '2 t/0s 5%se, 0s 5'n30n5e& t/%t t/e t't%*0t- '2 t/e 50r5)(st%n5es %11ert%0n0n+ 5'n&)5e t' t/e 0ne30t%<*e 5'n5*)s0'n t/%t 1et0t0'ner 7r%n50s5' %5te& 0n <%& 2%0t/. N't 'n*- &0& 7r%n50s5' %**'4 t/e %)5t0'n s%*e t' t%6e 1*%5e, <)t s/e )se& /er 't/er 5'r1'r%t0'n :=err-*%n&; 0n 1%rt0501%t0n+ 0n 30

t/e %)5t0'n s%*e %n& 0n %5>)0r0n+ t/e 3er1r'1ert0es 4/05/ /er 20rst 5'r1'r%t0'n :$%r&%*e; /%& ('rt+%+e& t' G)t0erreB. t 0s &05t% 0n 5'r1'r%t0'n *%4 t/%t % 5'r1'r%t0'n 0s % C)r0&05%* 1ers'n 40t/ % se1%r%te %n& &0st0n5t 1ers'n%*0t- 2r'( t/%t '2 t/e st'56/'*&ers 'r (e(<ers 4/' 5'(1'se 0t. M'4e3er, 4/en t/e *e+%* 205t0'n '2 t/e se1%r%te 5'r1'r%te 1ers'n%*0t- 0s %<)se&, s)5/ %s 4/en t/e s%(e 0s )se& 2'r 2r%)&)*ent 'r 4r'n+2)* en&s, t/e 5')rts /%3e n't /es0t%te& t' 10er5e t/e 5'r1'r%te 3e0*. 2 %n+ener%* r)*e 5%n <e *%0& &'4n, 0n t/e 1resent st%te '2 %)t/'r0t-, 0t 0s t/%t % 5'r1'r%t0'n 40** <e *''6e& )1'n %s % *e+%* ent0t- %s % +ener%* r)*e, %n& )nt0* s)22050ent re%s'n t' t/e 5'ntr%r- %11e%rsI <)t, 4/en t/e n't0'n '2 *e+%* ent0t- 0s )se& t' &e2e%t 1)<*05 5'n3en0en5e, C)st02- 4r'n+, 1r'te5t 2r%)&, 'r &e2en& 5r0(e, t/e *%4 40** re+%r& t/e 5'r1'r%t0'n %s %n %ss'50%t0'n '2 1ers'ns. Un&er t/e !o1trine o4 %ier1in; t0e vei5 o4 1or%or te entit8, 4/en 3%*0& +r')n&s t/ere2're e.0st, t/e *e+%* 205t0'n t/%t % 5'r1'r%t0'n 0s %n ent0t- 40t/ % C)r0&05%* 1ers'n%*0t- se1%r%te %n& &0st0n5t 2r'( 0ts (e(<ers 'r st'56/'*&ers (%<e &0sre+%r&e&. n s)5/ 5%ses, t/e 5'r1'r%t0'n 40** <e 5'ns0&ere& %s % (ere %ss'50%t0'n '2 1ers'ns. T/e (e(<ers 'r st'56/'*&ers '2 t/e 5'r1'r%t0'n 40** <e 5'ns0&ere& %s t/e 5'r1'r%t0'n, t/%t 0s, *0%<0*0t- 40** %tt%5/ &0re5t*- t' t/e '2205ers %n& st'56/'*&ers. T/e &'5tr0ne %11*0es 4/en t/e 5'r1'r%te 205t0'n 0s )se& t' &e2e%t 1)<*05 5'n3en0en5e, C)st024r'n+, 1r'te5t 2r%)&, 'r &e2en& 5r0(e, 'r 4/en 0t 0s (%&e %s % s/0e*& t' 5'n2)se t/e *e+0t0(%te 0ss)es, 'r 4/ere % 5'r1'r%t0'n 0s t/e (ere%*ter e+' 'r <)s0ness 5'n&)0t '2 % 1ers'n, 'r 4/ere t/e 5'r1'r%t0'n 0s s' 'r+%n0Be& %n& 5'ntr'**e& %n& 0ts %22%0rs %re s' 5'n&)5te& %s t' (%6e 0t (ere*- %n 0nstr)(ent%*0t-, %+en5-, 5'n&)0t 'r %&C)n5t '2 %n't/er 5'r1'r%t0'n. t 0s e.5ee&0n+*- %11%rent t' t/e $')rt t/%t t/e t't%*0t- '2 7r%n50s5'Ps %5t0'ns 5*e%r*<etr%- %n 0ntent0'n t' 5'n5e%* t/e t%.

&e*0n>)en50es, *e3- %n& 1)<*05 %)5t0'n '2 t/e s)<Ce5t 1r'1ert0es 2r'( t/e est%te '2 G)t0erreB %n& t/e tr0%* 5')rt 0n $030* $%se N'. @-12366 )nt0* %2ter t/e e.10r%t0'n '2 t/e re&e(1t0'n 1er0'& 4/en t/e re('test 1'ss0<0*0t- 2'r t/e re5'3er- '2 t/e 1r'1ert0es 4')*& <e e.t0n+)0s/e&. $'nse>)ent*-, 7r%n50s5' /%& e22e5t03e*- &e1r03e& t/e est%te '2 G)t0erreB '2 0ts r0+/ts %s ('rt+%+ee '3er t/e t/ree 1%r5e*s '2 *%n& 4/05/ 4ere s'*& t' $%r&%*e. ISS#E EA, H/et/er 'r n't =err-*%n& (%<e /e*& s'*0&%r0*- *0%<*e 40t/ 7r%n50s5'. @ELD, NO& He 5%nn't %+ree, /'4e3er, 40t/ t/e $')rt '2 A11e%*sP &e50s0'n t' /'*& =err-*%n&s'*0&%r0*- *0%<*e 40t/ 7r%n50s5'. T/e 'n*- %5t 0(1)t%<*e t' =err-*%n& 0n re*%t0'n t' t/e ('rt+%+e& 1r'1ert0es 0s t/%t 0t 1)r5/%se& t/e s%(e %n& t/0s <- 0tse*2 0s n't % 2r%)&)*ent 'r 4r'n+2)* %5t. N' e30&en5e /%s <een %&&)5e& t' est%<*0s/ t/%t =err-*%n& 4%s % (ere %*ter e+' 'r <)s0ness 5'n&)0t '2 7r%n50s5'. T0(e %n& %+%0n 0t /%s <een re0ter%te& t/%t (ere '4ners/01 <- % s0n+*e st'56/'*&er 'r <%n't/er 5'r1'r%t0'n '2 %** 'r ne%r*- %** '2 t/e 5%10t%* st'56 '2 % 5'r1'r%t0'n 0s n't '2 0tse*2 s)22050ent +r')n& 2'r &0sre+%r&0n+ t/e se1%r%te 5'r1'r%te 1ers'n%*0t-. Ne0t/er /%s 0t <een %**e+e& 'r 1r'3en t/%t =err-*%n& 0s s' 'r+%n0Be& %n& 5'ntr'**e& %n& 0ts %22%0rs %re s' 5'n&)5te& %s t' (%6e 0t (ere*- %n 0nstr)(ent%*0t-, %+en5-, 5'n&)0t 'r %&C)n5t '2 $%r&%*e. !3en %ss)(0n+ t/%t t/e <)s0nesses '2 $%r&%*e %n& =err-*%n& %re 0nterre*%te&, t/0s %*'ne 0s n't C)st0205%t0'n 2'r &0sre+%r&0n+ t/e0r se1%r%te 1ers'n%*0t0es, %<sent %n- s/'40n+ t/%t =err-*%n& 4%s 1)r1'se*- )se& %s % s/0e*& t' &e2r%)& 5re&0t'rs %n& t/0r& 1ers'ns '2 t/e0r r0+/ts.32 T/)s, =err-*%n&Ps se1%r%te C)r0&05%* 1ers'n%*0t- ()st <e )1/e*&.

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VI A REY TRANSIT, INC., plaintiff>appellant 6s. FERRER, PANTRANCO &'( PSC, defendants> appellants. PANTRANCO, third>part% plaintiff>appellant, vs. VI ARAMA, third>part% defendant>appellee. (.R. No. ;>17497 October 19, )904 *N( ; S, ".) FACTSB :ose Villara$a &as an operator of a bus transportation pursuant to t&o certificates of public convenience #ranted hi$ b% the Public Service !o$$ission +PS!,. ;ater, he sold the certificates to the Pan#asinan Transportation !o$pan%, Inc. +Pantranco, &ith the condition that the seller +Villara$a, Eshall not for a period of )2 %ears, appl% for an% TP/ service identical or co$petin# &ith the bu%er.E 3arel% three $onths thereafter, a corporation called Villa Re% Transit, Inc. +the !orporation, &as or#ani6ed &ith a capital stoc= of P.22,222.22 divided into .,222 shares of the par value of P)22.22 eachB P122,222.22 &as the subscribed stoc=B Natividad Villara$a +&ife of :ose Villara$a, &as one of the incorporators, and she subscribed for P),222.22B the balance of P)99,222.22 &as subscribed b% the brother and sister>in>la& of :ose Villara$aB of the subscribed capital stoc=, P)2.,222.22 &as paid to the treasurer of the corporation, Natividad. In less than a $onth after its re#istration &ith the S !, the !orporation bou#ht five certificates of public convenience and -9 buses fro$ one Valentin Fernando. ;ater, the Sheriff of Manila levied on 5 of the > (ertifi(ates, in favor of usebio Ferrer, "ud#$ent creditor, a#ainst Fernando, "ud#$ent debtor. * public sale &as conducted. Ferrer &as the hi#hest bidder. Ferrer sold the t3o certificates to Pantranco. The !orporation filed a co$plaint a#ainst Ferrer, Pantranco and the PS! for the annul$ent of the sheriffPs sale. Pantranco, on its part, filed a third>part% co$plaint a#ainst Villara$a, alle#in# that Villara$a andFor the !orporation &as disCualified fro$ operatin# the t&o certificates in Cuestion b% virtue of the previous a#ree$ent. The trial court declared null and void the sheriffPs sale of t3o certificates of public convenience in favor of Ferrer and the subseCuent sale thereof b% the latter to Pantranco and declarin# Villa Re% Transit, Inc., to be the la&ful o&ner of the said certificates of public convenience. Pantranco disputes the correctness of the decision insofar as it holds that Villa Re% Transit, Inc. +!orporation, is a distinct and separate entit% fro$ Villara$a. Ferrer, for his part, challen#es the decision insofar as it holds that the sheriffPs sale is null and void. ISSUEB ?hether the stipulation bet&een Villara$a and Pantranco binds Villa Re% Transit, Inc. HE #B YES. The restrictive clause in the contract entered into b% the Villara$a and Pantranco is also enforceable and bindin# a#ainst the said !orporation. The rule is that a seller or pro$isor $a% not $a=e use of

a corporate entit% as a $eans of evadin# the obli#ation of his covenant. The evidence has disclosed that Villara$a, albeit &as not an incorporator or stoc=holder of the !orporation, his &ife, ho&ever, &as an incorporator and &as elected treasurer of the !orporation. The evidence further sho&s that the initial cash capitali6ation of the corporation &as $ostl% financed b% Villara$aB he supplied the or#ani6ation e'penses and the assets of the !orporation, such as truc=s and eCuip$entB there &as no actual pa%$ent b% the ori#inal subscribers of the a$ounts of P9.,222.22 and P)22,222.22 as appearin# in the boo=sB Villara$a $ade use of the $one% of the !orporation and deposited the$ to his private accountsB and the !orporation paid his personal accounts. The fore#oin# circu$stances are stron# persuasive evidence sho&in# that Villara$a has been too $uch involved in the affairs of the !orporation to alto#ether ne#ate the clai$ that he &as onl% a part>ti$e #eneral $ana#er. The% sho& be%ond doubt that the !orporation is his alter ego. The doctrine that a corporation is a le#al entit% distinct and separate fro$ the $e$bers and stoc=holders &ho co$pose it is reco#ni6ed and respected in all cases &hich are &ithin reason and the la&. ?hen the fiction is ur#ed as a $eans of perpetratin# a fraud or an ille#al act or as a vehicle for the evasion of an e'istin# obli#ation, the circu$vention of statutes, the achieve$ent or perfection of a $onopol% or #enerall% the perpetration of =naver% or cri$e, the veil &ith &hich the la& covers and isolates the corporation fro$ the $e$bers or stoc=holders &ho co$pose it &ill be lifted to allo& for its consideration $erel% as an a##re#ation of individuals.

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