1

G.R. No. L-23145

November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary

administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust
Company of New York, United States of America, of the estate of the deceased Idonah Slade Perkins,
who died in New York City on March 27, 1960, to surrender to the ancillary administrator in the Philippines
the stock certificates owned by her in a Philippine corporation, Benguet Consolidated, Inc., to satisfy the
legitimate claims of local creditors, the lower court, then presided by the Honorable Arsenio Santos, now
retired, issued on May 18, 1964, an order of this tenor: "After considering the motion of the ancillary
administrator, dated February 11, 1964, as well as the opposition filed by the Benguet Consolidated, Inc.,
the Court hereby (1) considers as lost for all purposes in connection with the administration and
liquidation of the Philippine estate of Idonah Slade Perkins the stock certificates covering the 33,002
shares of stock standing in her name in the books of the Benguet Consolidated, Inc., (2) orders said
certificates cancelled, and (3) directs said corporation to issue new certificates in lieu thereof, the same to
be delivered by said corporation to either the incumbent ancillary administrator or to the Probate Division
of this Court."1
From such an order, an appeal was taken to this Court not by the domiciliary administrator, the County
Trust Company of New York, but by the Philippine corporation, the Benguet Consolidated, Inc. The appeal
cannot possibly prosper. The challenged order represents a response and expresses a policy, to
paraphrase Frankfurter, arising out of a specific problem, addressed to the attainment of specific ends by
the use of specific remedies, with full and ample support from legal doctrines of weight and significance.
The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc., Idonah Slade
Perkins, who died on March 27, 1960 in New York City, left among others, two stock certificates covering
33,002 shares of appellant, the certificates being in the possession of the County Trust Company of New
York, which as noted, is the domiciliary administrator of the estate of the deceased. 2 Then came this
portion of the appellant's brief: "On August 12, 1960, Prospero Sanidad instituted ancillary administration
proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary
administrator, and on January 22, 1963, he was substituted by the appellee Renato D. Tayag. A dispute
arose between the domiciary administrator in New York and the ancillary administrator in the Philippines
as to which of them was entitled to the possession of the stock certificates in question. On January 27,
1964, the Court of First Instance of Manila ordered the domiciliary administrator, County Trust Company,
to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The domiciliary
administrator did not comply with the order, and on February 11, 1964, the ancillary administrator
petitioned the court to "issue an order declaring the certificate or certificates of stocks covering the 33,002
shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or]
considered as lost."3
It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far as it
is concerned as to "who is entitled to the possession of the stock certificates in question; appellant
opposed the petition of the ancillary administrator because the said stock certificates are in existence,

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they are today in the possession of the domiciliary administrator, the County Trust Company, in New York,
U.S.A...."4
It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or
considered as lost. Moreover, it would allege that there was a failure to observe certain requirements of its
by-laws before new stock certificates could be issued. Hence, its appeal.
As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order constitutes
an emphatic affirmation of judicial authority sought to be emasculated by the wilful conduct of the
domiciliary administrator in refusing to accord obedience to a court decree. How, then, can this order be
stigmatized as illegal?
As is true of many problems confronting the judiciary, such a response was called for by the realities of
the situation. What cannot be ignored is that conduct bordering on wilful defiance, if it had not actually
reached it, cannot without undue loss of judicial prestige, be condoned or tolerated. For the law is not so
lacking in flexibility and resourcefulness as to preclude such a solution, the more so as deeper reflection
would make clear its being buttressed by indisputable principles and supported by the strongest policy
considerations.
It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary no less
than that of the country. Through this challenged order, there is thus dispelled the atmosphere of
contingent frustration brought about by the persistence of the domiciliary administrator to hold on to the
stock certificates after it had, as admitted, voluntarily submitted itself to the jurisdiction of the lower court
by entering its appearance through counsel on June 27, 1963, and filing a petition for relief from a
previous order of March 15, 1963.
Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what was
decreed. For without it, what it had been decided would be set at naught and nullified. Unless such a
blatant disregard by the domiciliary administrator, with residence abroad, of what was previously ordained
by a court order could be thus remedied, it would have entailed, insofar as this matter was concerned, not
a partial but a well-nigh complete paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary administrator
to gain control and possession of all assets of the decedent within the jurisdiction of the Philippines. Nor
could it. Such a power is inherent in his duty to settle her estate and satisfy the claims of local
creditors.5 As Justice Tuason speaking for this Court made clear, it is a "general rule universally
recognized" that administration, whether principal or ancillary, certainly "extends to the assets of a
decedent found within the state or country where it was granted," the corollary being "that an
administrator appointed in one state or country has no power over property in another state or country." 6
It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case, set forth
by Justice Malcolm. Thus: "It is often necessary to have more than one administration of an estate. When
a person dies intestate owning property in the country of his domicile as well as in a foreign country,
administration is had in both countries. That which is granted in the jurisdiction of decedent's last domicile
is termed the principal administration, while any other administration is termed the ancillary
administration. The reason for the latter is because a grant of administration does not ex proprio
vigore have any effect beyond the limits of the country in which it is granted. Hence, an administrator
appointed in a foreign state has no authority in the [Philippines]. The ancillary administration is proper,
whenever a person dies, leaving in a country other than that of his last domicile, property to be
administered in the nature of assets of the deceased liable for his individual debts or to be distributed
among his heirs."7

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It would follow then that the authority of the probate court to require that ancillary administrator's right to
"the stock certificates covering the 33,002 shares ... standing in her name in the books of [appellant]
Benguet Consolidated, Inc...." be respected is equally beyond question. For appellant is a Philippine
corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts. Its shares of
stock cannot therefore be considered in any wise as immune from lawful court orders.
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue 8 finds application. "In the
instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled
[here]." To the force of the above undeniable proposition, not even appellant is insensible. It does not
dispute it. Nor could it successfully do so even if it were so minded.
2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the legality of
the challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry the extremely
heavy burden of persuasion of precisely demonstrating the contrary? It would assign as the basic error
allegedly committed by the lower court its "considering as lost the stock certificates covering 33,002
shares of Benguet belonging to the deceased Idonah Slade Perkins, ..." 9 More specifically, appellant
would stress that the "lower court could not "consider as lost" the stock certificates in question when, as a
matter of fact, his Honor the trial Judge knew, and does know, and it is admitted by the appellee, that the
said stock certificates are in existence and are today in the possession of the domiciliary administrator in
New York."10
There may be an element of fiction in the above view of the lower court. That certainly does not suffice to
call for the reversal of the appealed order. Since there is a refusal, persistently adhered to by the
domiciliary administrator in New York, to deliver the shares of stocks of appellant corporation owned by
the decedent to the ancillary administrator in the Philippines, there was nothing unreasonable or arbitrary
in considering them as lost and requiring the appellant to issue new certificates in lieu thereof. Thereby,
the task incumbent under the law on the ancillary administrator could be discharged and his responsibility
fulfilled.
Any other view would result in the compliance to a valid judicial order being made to depend on the
uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far has shown the
utmost persistence in refusing to yield obedience. Certainly, appellant would not be heard to contend in all
seriousness that a judicial decree could be treated as a mere scrap of paper, the court issuing it being
powerless to remedy its flagrant disregard.
It may be admitted of course that such alleged loss as found by the lower court did not correspond exactly
with the facts. To be more blunt, the quality of truth may be lacking in such a conclusion arrived at. It is to
be remembered however, again to borrow from Frankfurter, "that fictions which the law may rely upon in
the pursuit of legitimate ends have played an important part in its development." 11
Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to advance
the ends of justice, [even if] clumsy and at times offensive." 12 Some of them have persisted even to the
present, that eminent jurist, noting "the quasi contract, the adopted child, the constructive trust, all of
flourishing vitality, to attest the empire of "as if" today." 13 He likewise noted "a class of fictions of another
order, the fiction which is a working tool of thought, but which at times hides itself from view till reflection
and analysis have brought it to the light."14
What cannot be disputed, therefore, is the at times indispensable role that fictions as such played in the
law. There should be then on the part of the appellant a further refinement in the catholicity of its
condemnation of such judicial technique. If ever an occasion did call for the employment of a legal fiction

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to put an end to the anomalous situation of a valid judicial order being disregarded with apparent impunity,
this is it. What is thus most obvious is that this particular alleged error does not carry persuasion.
3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking one of
the provisions of its by-laws which would set forth the procedure to be followed in case of a lost, stolen or
destroyed stock certificate; it would stress that in the event of a contest or the pendency of an action
regarding ownership of such certificate or certificates of stock allegedly lost, stolen or destroyed, the
issuance of a new certificate or certificates would await the "final decision by [a] court regarding the
ownership [thereof]."15
Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is admitted
that the foreign domiciliary administrator did not appeal from the order now in question. Moreover, there is
likewise the express admission of appellant that as far as it is concerned, "it is immaterial ... who is
entitled to the possession of the stock certificates ..." Even if such were not the case, it would be a legal
absurdity to impart to such a provision conclusiveness and finality. Assuming that a contrariety exists
between the above by-law and the command of a court decree, the latter is to be followed.
It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which, however,
the judiciary must yield deference, when appropriately invoked and deemed applicable. It would be most
highly unorthodox, however, if a corporate by-law would be accorded such a high estate in the jural order
that a court must not only take note of it but yield to its alleged controlling force.
The fear of appellant of a contingent liability with which it could be saddled unless the appealed order be
set aside for its inconsistency with one of its by-laws does not impress us. Its obedience to a lawful court
order certainly constitutes a valid defense, assuming that such apprehension of a possible court action
against it could possibly materialize. Thus far, nothing in the circumstances as they have developed gives
substance to such a fear. Gossamer possibilities of a future prejudice to appellant do not suffice to nullify
the lawful exercise of judicial authority.
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with implications at
war with the basic postulates of corporate theory.
We start with the undeniable premise that, "a corporation is an artificial being created by operation of
law...."16 It owes its life to the state, its birth being purely dependent on its will. As Berle so aptly stated:
"Classically, a corporation was conceived as an artificial person, owing its existence through creation by a
sovereign power."17As a matter of fact, the statutory language employed owes much to Chief Justice
Marshall, who in the Dartmouth College decision defined a corporation precisely as "an artificial being,
invisible, intangible, and existing only in contemplation of law." 18
The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact and in
reality a person, but the law treats it as though it were a person by process of fiction, or by regarding it as
an artificial person distinct and separate from its individual stockholders.... It owes its existence to law. It is
an artificial person created by law for certain specific purposes, the extent of whose existence, powers
and liberties is fixed by its charter."19 Dean Pound's terse summary, a juristic person, resulting from an
association of human beings granted legal personality by the state, puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote from
Friedmann, "is the reality of the group as a social and legal entity, independent of state recognition and
concession."21 A corporation as known to Philippine jurisprudence is a creature without any existence until
it has received the imprimatur of the state according to law. It is logically inconceivable therefore that it will
have rights and privileges of a higher priority than that of its creator. More than that, it cannot legitimately

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refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever called
upon to do so.
As a matter of fact, a corporation once it comes into being, following American law still of persuasive
authority in our jurisdiction, comes more often within the ken of the judiciary than the other two coordinate
branches. It institutes the appropriate court action to enforce its right. Correlatively, it is not immune from
judicial control in those instances, where a duty under the law as ascertained in an appropriate legal
proceeding is cast upon it.
To assert that it can choose which court order to follow and which to disregard is to confer upon it not
autonomy which may be conceded but license which cannot be tolerated. It is to argue that it may, when
so minded, overrule the state, the source of its very existence; it is to contend that what any of its
governmental organs may lawfully require could be ignored at will. So extravagant a claim cannot
possibly merit approval.
5. One last point. In Viloria v. Administrator of Veterans Affairs, 22 it was shown that in a guardianship
proceedings then pending in a lower court, the United States Veterans Administration filed a motion for
the refund of a certain sum of money paid to the minor under guardianship, alleging that the lower court
had previously granted its petition to consider the deceased father as not entitled to guerilla benefits
according to a determination arrived at by its main office in the United States. The motion was denied. In
seeking a reconsideration of such order, the Administrator relied on an American federal statute making
his decisions "final and conclusive on all questions of law or fact" precluding any other American official to
examine the matter anew, "except a judge or judges of the United States court." 23 Reconsideration was
denied, and the Administrator appealed.
In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the opinion that the
appeal should be rejected. The provisions of the U.S. Code, invoked by the appellant, make the decisions
of the U.S. Veterans' Administrator final and conclusive when made on claims property submitted to him
for resolution; but they are not applicable to the present case, where the Administrator is not acting as a
judge but as a litigant. There is a great difference between actions against the Administrator (which must
be filed strictly in accordance with the conditions that are imposed by the Veterans' Act, including the
exclusive review by United States courts), and those actions where the Veterans' Administrator seeks a
remedy from our courts and submits to their jurisdiction by filing actions therein. Our attention has not
been called to any law or treaty that would make the findings of the Veterans' Administrator, in actions
where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals of judicial
discretion and render them mere subordinate instrumentalities of the Veterans' Administrator."
It is bad enough as the Viloria decision made patent for our judiciary to accept as final and conclusive,
determinations made by foreign governmental agencies. It is infinitely worse if through the absence of any
coercive power by our courts over juridical persons within our jurisdiction, the force and effectivity of their
orders could be made to depend on the whim or caprice of alien entities. It is difficult to imagine of a
situation more offensive to the dignity of the bench or the honor of the country.
Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as shown by its failure to accept the validity of the order
complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not succeed. The
deplorable consequences attendant on appellant prevailing attest to the necessity of negative response
from us. That is what appellant will get.
That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always easy to
conjure extreme and even oppressive possibilities. That is not decisive. It does not settle the issue. What

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carries weight and conviction is the result arrived at, the just solution obtained, grounded in the soundest
of legal doctrines and distinguished by its correspondence with what a sense of realism requires. For
through the appealed order, the imperative requirement of justice according to law is satisfied and
national dignity and honor maintained.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First
Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant Benguet Consolidated,
Inc.

G.R. No. L-7922

February 22, 1957

RECREATION AND AMUSEMENT ASSOCIATION OF THE PHILIPPINES, plaintiff-appellant,

vs.
THE CITY OF MANILA, THE MAYOR OF MANILA, THE CITY TREASURER OF MANILA, and THE
CHIEF OF POLICE OF MANILA, defendants-appellees.
Leandro H. Fernandez, Jr. for appellant.
City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.
FELIX, J.:
On March 30, 1954, the Recreation and Amusement Association of the Philippines, Inc., allegedly a nonstock corporation organized and existing under the laws of the Philippines, whose 35 members are
licensed owner and operators in the City of Manila, of Five-Ball-Flipper-Action-Pinball machines (also
known as slot machines), filed a complaint in the Court of First Instance of said City praying that a
preliminary injunction be issued to restrain the City Mayor and the City Treasurer from enforcing
Ordinance No. 3628 passed by the Municipal Board of Manila on March 19, 1954, and approved by the
City Mayor on the following day, which reads as follows:
ORDINANCE NO. 3628.
AN ORDINANCE AMENDING SECTIONS SEVEN HUNDRED SEVENTY THREE AND SEVEN
HUNDRED SEVENTY FOUR ORDINANCE NUMBERED ONE THOUSAND SIX HUNDRED
KNOWN AS "THE REVISED ORDINANCES OF THE CITY OF MANILA", AS LASTLY AMENDED
BY HUNDRED FORTY SEVEN.
Be it ordained by the Municipal Board of the City of Manila, that:
SECTION 1. Sections seven hundred seventy-three and seven hundred seventy-four of
Ordinance Numbered One thousand six hundred, known as "The Revised Ordinances of the City
of Manila, as lastly amended by Ordinance Numbered Three thousand three hundred forty-seven,
are hereby amended to read as follows:
SEC. 773. Licenses. No person, entity or corporation shall install or cause to be installed for
the use of the public for compensation any mechanical contrivance or automatic apparatus which

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functions through the introduction of money not otherwise prohibited by law of weights and
measure and not a gambling device, for purposes of amusement or of confronting the weight of
persons or things, or printing letters or numbers, or displaying features inside the apparatus or
reproducing recorded music including other kinds of machines or apparatus without having first
obtained a license therefor from the City Treasurer. Such license must be posted on the
apparatus concerned, Provided, that the operation or maintenance of pinball machines, not
otherwise failing under the category of gambling device, shall not be allowed within a radius of
two hundred (200) meters from any church, hospital, institution of learning public market, plaza,
and government buildings.
SEC. 774. Fees. There shall be paid for every license granted for the installation and use of an
apparatus provided in this chapter, an annual fee of P300 which is payable in advance: Provided,
that person-coin operated weighing or scale machines shall pay only an annual fee of P12,
payable in advance.
SEC. 2. This Ordinance shall take effect on its approval.
Enacted, March 19, 1954.
Approved, March 20, 1954.
It is further prayed in the complaint that the City Mayor and the Treasurer be compelled to issue permits
and licenses to the members of the said corporation upon compliance with the provisions of the ordinance
(No. 3347)enforced before the enactment of Ordinance No. 3628; that after hearing, said ordinance he
declared null and void, the writ of preliminary injunction be made permanent, and that plaintiff be granted
such other relief to which it may be entitled under the law.
Acting upon this complaint, the lower court required plaintiff to file, as it did file, a bond in the amount of
P2,000 for the issuance of a writ of preliminary injunction to restrain the defendant City Officials from
enforcing the ordinance in question, and said writ was actually issued on April 1, 1954. Thereupon,
Assistant City Fiscal filed on April 14, 1954, a motion to lift the writ of preliminary injunction issued as well
as a motion to dismiss on the ground that plaintiff has no legal capacity to sue and that the complaint
states no cause of action. Defendants argue that the complaint does not state that plaintiff is the owner of
any pinball machine to be affected by the ordinance in question; on the contrary, it appears from the
complaint that the real parties in interest are the individual members of said organization whose names
are not given. Such being the case, plaintiff association cannot be in any way adversely affected by the
enforcement of the questioned ordinance, from which it follows that the complaint does not state a cause
of action.
A supplement to the Motion to Dismiss and the Motion to lift the Preliminary Injunction was subsequently
filed on April 21, 1954, wherein defendants' counsel endeavors to substantiate its previous contention by
alleging, among others, that the ordinance subject of litigation is a valid legislation and within the power of
the Municipal Board to enact; that the power of the Board to regulate slot machines is embodied in the
Revised Charter of the City of Manila (section 18-(1) of Republic Act No. 409); that the regulation of the
operation and maintenance of this kind of machine which they alleged to be inimical to the general
welfare of the population especially the school children, is a lawful exercise of the police power of the
State (section 18-kk), Republic Act No. 409); and that as it a discretionary function of the Mayor to deny or
issue permits and licenses, he cannot be compelled by mandamus to issue the same.
Upon defendants' motion, the hearing of the motion to dismiss was re-set for April 24, 1954, and on that
date the Court granted defendants' counsel a period of 5 days from April 26, 1954, to file an answer to
plaintiff's opposition to the motions to dismiss and to lift the preliminary injunction, and another 5 days to
plaintiff's counsel to reply, if necessary.

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On May 7, 1954, plaintiff was served with a "Resolucion" dated April 30, 1954, issued by the trial Judge,
wherein the Court dismissed the complaint and dissolved the injunction issued thereby on the ground that
the City Mayor has discretionary power to issue or refuse the issuance of a license or permit, declaring at
the same time that Ordinance No. 3628 is valid and within the power of the Municipal Board to enact. The
motion for reconsideration filed by plaintiff having been denied, the case was brought to us on appeal and
in this instance plaintiff ascribes to the lower Court the commission of the following errors:
1. In motu proprio resolving upon the constitutionality or Ordinance No. 3628 at said stage of the
proceeding (before defendants' answer and hearing on the merits), and consequently, in dissolving the
writ of preliminary injunction;
2. In finding the Mayor of Manila vested with discretionary powers to grant or refuse to issue municipal
licenses and permits, and that the same cannot be controlled by mandamus; and
3. In finding Ordinance No. 3628 valid and constitutional assuming that it had the power to do so at such
stage of the proceeding.
There is no dispute that the Municipal Board of the City of Manila passed Ordinance No. 3628 limiting the
operation and maintenance of a certain kind of slot machine to areas not within the radius of 200 hundred
meters from any church, hospital, institution of learning, public market, plaza and government buildings
and that it increased the annual fee from P55 to P300 payable in advance. It is likewise clear that at the
expiration of the period allowed the parties within which to file certain pleadings in connection with
defendants' motion to dismiss, the Court issued a "Resolucion" dated April 30, 1954, the dispositive part
of which, translated into English, reads as follows:
In view of the foregoing consideration the Court is of the opinion and consequently declares
Ordinance No. 3628 of the City of Manila valid and that the writ of preliminary injunction issued by
this Court shall be dissolved with costs against plaintiff.
It is to be stated in this connection that defendants did not file in time their answer to plaintiff's opposition
to their two motions, but on May 4, 1954, and that is undoubtedly the reason why the Court prepared its
Resolution before the lapse of plaintiff's period to reply if necessary" (which was conditioned on
defendants' pleading which the latter failed to submit in time), though it was released thereafter, or
on May 7, 1956. It is true that the trial Judge, instead of ruling on the motion to dismiss on either of the
two grounds stated therein, namely, lack of legal capacity to sue and failure to state a cause of action,
elected to ignore the same and dismissed the complaint upon its own findings. However, it is to be
remembered that it was only the motion to dismiss that was set for hearing and that section 3, Rule 8 of
the Rules of Court provides for the manner in which such kind of motion may be resolved:
SEC. 3. Order. After hearing the Court may deny or grant the motion or allow amendment of
pleading, or may defer the hearing and determination of the motion until the trial if the ground
alleged therein does not appear to be indubitable.
By arriving at a conclusion upholding the constitutionality of the ordinance and stating the reasons in
support of such declaration, the lower court though in effect it passed upon the merits of the case, also
assumed the lack of sufficient cause of action on the part of the plaintiff. Moreover, the question relative to
the constitutionality of a statute or ordinance is one of law which does not need to be supported by
evidence.
In the complaint filed with the lower court, plaintiff alleged that it was a non-stock corporation duly
organized and existing in accordance with the laws of the Philippines. Subsequent inquires from the

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Securities and Exchange Commission and the Bureau of Commerce disclosed that the Recreation and
Amusement Association of the Philippines, Inc., is not registered and does not appear in the files of said
Offices. Most probably, owners and operators of such pin-ball machines met, put up their set of officers
and thus an association was formed, after which they merely folded their arms and exerted no further
effort to effectuate the necessary registration that would bestow juridicial personality upon it. The right to
be and to act as a corporation is not a natural or civil right any person; such right as well as the right to
enjoy the immunities and privileges resulting from incorporation constitute a franchise and a corporation,
therefore cannot be created except by or under a special authority from the state (Vol. II, Tolentino's
Commentaries and Jurisprudence on the Commercial Law of the Philippines, p. 734). When there is no
legal organization of a corporation, the association of a group of men for business or other endeavors
does not absorb the personality of the group and merge it into the personality of another separate and
independent entity which is not given corporate life by the mere formation of the group. Such
conglomeration of persons is incompetent to act as a corporation, cannot create agents, or exercise by
itself authority in its behalf. (See Fay vs. Noble, 7 Cushing (Mass.) 188.)
Section 1-(c), Rule 8 of the Rules of Court provides for the grounds upon which an action may be
dismissed upon motion of defendant and one of them is "that the plaintiff has no legal capacity to sue."
The City Fiscal rightly capitalized on this basis because as far as the Court was concerned, appellant
herein, being an association not organized as a juridicial entity, did not possess the personality to conduct
or maintain an action. The term "lack of legal capacity to sue" means either that the plaintiff does not have
the necessary qualifications to appear in the case . . . or when he does not have the character or
representation which he claims, as, when he is not a duly appointed executor or administrator of the
estate he purports to represent, or that the plaintiff is not a corporation duly registered in accordance with
law. (I Moran's Comments on the Rules of Court, p. 168, 1952 ed.)
It may be argued that under the law plaintiff could be considered as a civil association, but in this case
plaintiff-appellant does not claim to be a civil association but a corporation and as such it has no capacity
to sue.
If from the records of the case We shall find, as We do: (1) that plaintiff has no legal capacity to sue; (2)
that the complaint states no cause of action; and (3) that a proper and adequate interpretation of section
18, paragraph (1) and (kk) of Republic Act No. 409, would lead Us to conclude that Ordinance No. 3628
of the City of Manila is valid, would We be justified in annuling or setting aside the order of the Court
dismissing this case, just because it was issued before the filing of defendants' answer and before
hearing on the merits but after defendants had submitted their motion to dismiss and argued maintaining
the constitutionality of said ordinance? On the strenght of the foregoing considerations, the answer is
obviously in the negative.
Wherefore, the order appealed from is hereby affirmed, with costs against appellant. It is so ordered.

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G.R. No. 100866 July 14, 1992

REBECCA BOYER-ROXAS and GUILLERMO ROXAS, petitioners,
vs.
HON. COURT OF APPEALS and HEIRS OF EUGENIA V. ROXAS, INC., respondents.

GUTIERREZ, JR., J.:

This is a petition to review the decision and resolution of the Court of Appeals in CA-G.R. No. 14530
affirming the earlier decision of the Regional Trial Court of Laguna, Branch 37, at Calamba, in the
consolidated RTC Civil Case Nos. 802-84-C and 803-84-C entitled "Heirs of Eugenia V. Roxas, Inc. v.
Rebecca Boyer-Roxas" and Heirs of Eugenia V. Roxas, Inc. v. Guillermo Roxas," the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and
against the defendants, by ordering as it is hereby ordered that:
1) In RTC Civil Case No. 802-84-C: Rebecca Boyer-Roxas and all persons claiming
under her to:
a) Immediately vacate the residential house near the Balugbugan pool located inside the
premises of the Hidden Valley Springs Resort at Limao, Calauan, Laguna;
b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for her
occupancy of the residential house until the same is vacated;
c) Remove the unfinished building erected on the land of the plaintiff within ninety (90)
days from receipt of this decision;

11
d) Pay the plaintiff the amount of P100.00 per month from September 10, 1983, until the
said unfinished building is removed from the land of the plaintiff; and
e) Pay the costs.
2) In RTC Civil Case No. 803-84-C: Guillermo Roxas and all persons claiming under him
to:
a) Immediately vacate the residential house near the tennis court located within the
premises of the Hidden Valley Springs Resort at Limao, Calauan, Laguna;
b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for his
occupancy of the said residential house until the same is vacated; and
c) Pay the costs. (Rollo, p. 36)
In two (2) separate complaints for recovery of possession filed with the Regional Trial Court of Laguna
against petitioners Rebecca Boyer-Roxas and Guillermo Roxas respectively, respondent corporation,
Heirs of Eugenia V. Roxas, Inc., prayed for the ejectment of the petitioners from buildings inside the
Hidden Valley Springs Resort located at Limao, Calauan, Laguna allegedly owned by the respondent
corporation.
In the case of petitioner Rebecca Boyer-Roxas (Civil Case No-802-84-C), the respondent corporation
alleged that Rebecca is in possession of two (2) houses, one of which is still under construction, built at
the expense of the respondent corporation; and that her occupancy on the two (2) houses was only upon
the tolerance of the respondent corporation.
In the case of petitioner Guillermo Roxas (Civil Case No. 803-84-C), the respondent corporation alleged
that Guillermo occupies a house which was built at the expense of the former during the time when
Guillermo's father, Eriberto Roxas, was still living and was the general manager of the respondent
corporation; that the house was originally intended as a recreation hall but was converted for the
residential use of Guillermo; and that Guillermo's possession over the house and lot was only upon the
tolerance of the respondent corporation.
In both cases, the respondent corporation alleged that the petitioners never paid rentals for the use of the
buildings and the lots and that they ignored the demand letters for them to vacate the buildings.
In their separate answers, the petitioners traversed the allegations in the complaint by stating that they
are heirs of Eugenia V. Roxas and therefore, co-owners of the Hidden Valley Springs Resort; and as coowners of the property, they have the right to stay within its premises.
The cases were consolidated and tried jointly.
At the pre-trial, the parties limited the issues as follows:
1) whether plaintiff is entitled to recover the questioned premises;
2) whether plaintiff is entitled to reasonable rental for occupancy of the premises in
question;

12
3) whether the defendant is legally authorized to pierce the veil of corporate fiction and
interpose the same as a defense in an accion publiciana;
4) whether the defendants are truly builders in good faith, entitled to occupy the
questioned premises;
5) whether plaintiff is entitled to damages and reasonable compensation for the use of the
questioned premises;
6) whether the defendants are entitled to their counterclaim to recover moral and
exemplary damages as well as attorney's fees in the two cases;
7) whether the presence and occupancy by the defendants on the premises in
questioned (sic) hampers, deters or impairs plaintiff's operation of Hidden Valley Springs
Resort; and
8) whether or not a unilateral and sudden withdrawal of plaintiffs tolerance allowing
defendants' occupancy of the premises in questioned (sic) is unjust enrichment. (Original
Records, 486)
Upon motion of the plaintiff respondent corporation, Presiding Judge Francisco Ma. Guerrero of Branch
34 issued an Order dated April 25, 1986 inhibiting himself from further trying the case. The cases were reraffled to Branch 37 presided by Judge Odilon Bautista. Judge Bautista continued the hearing of the
cases.
For failure of the petitioners (defendants below) and their counsel to attend the October 22, 1986 hearing
despite notice, and upon motion of the respondent corporation, the court issued on the same day,
October 22, 1986, an Order considering the cases submitted for decision. At this stage of the
proceedings, the petitioners had not yet presented their evidence while the respondent corporation had
completed the presentation of its evidence.
The evidence of the respondent corporation upon which the lower court based its decision is as follows:
To support the complaints, the plaintiff offered the testimonies of Maria Milagros Roxas
and that of Victoria Roxas Villarta as well as Exhibits "A" to "M-3".
The evidence of the plaintiff established the following: that the plaintiff, Heirs of Eugenia V
Roxas, Incorporated, was incorporated on December 4, 1962 (Exh. "C") with the primary
purpose of engaging in agriculture to develop the properties inherited from Eugenia V.
Roxas and that of y Eufrocino Roxas; that the Articles of Incorporation of the plaintiff, in
1971, was amended to allow it to engage in the resort business (Exh.
"C-1"); that the incorporators as original members of the board of directors of the plaintiff
were all members of the same family, with Eufrocino Roxas having the biggest share; that
accordingly, the plaintiff put up a resort known as Hidden Valley Springs Resort on a
portion of its land located at Bo. Limao, Calauan, Laguna, and covered by TCT No.
32639 (Exhs. "A" and "A-l"); that improvements were introduced in the resort by the
plaintiff and among them were cottages, houses or buildings, swimming pools, tennis
court, restaurant and open pavilions; that the house near the Balugbugan Pool (Exh. "Bl") being occupied by Rebecca B. Roxas was originally intended as staff house but later
used as the residence of Eriberto Roxas, deceased husband of the defendant Rebecca
Boyer-Roxas and father of Guillermo Roxas; that this house presently being occupied by

13
Rebecca B. Roxas was built from corporate funds; that the construction of the unfinished
house (Exh. "B-2") was started by the defendant Rebecca Boyer-Roxas and her husband
Eriberto Roxas; that the third building (Exh. "B-3") presently being occupied by Guillermo
Roxas was originally intended as a recreation hall but later converted as a residential
house; that this house was built also from corporate funds; that the said house occupied
by Guillermo Roxas when it was being built had nipa roofing but was later changed to
galvanized iron sheets; that at the beginning, it had no partition downstairs and the
second floor was an open space; that the conversion from a recreation hall to a
residential house was with the knowledge of Eufrocino Roxas and was not objected to by
any of the Board of Directors of the plaintiff; that most of the materials used in converting
the building into a residential house came from the materials left by Coppola, a film
producer, who filmed the movie "Apocalypse Now"; that Coppola left the materials as part
of his payment for rents of the rooms that he occupied in the resort; that after the said
recreation hall was converted into a residential house, defendant Guillermo Roxas moved
in and occupied the same together with his family sometime in 1977 or 1978; that during
the time Eufrocino Roxas was still alive, Eriberto Roxas was the general manager of the
corporation and there was seldom any board meeting; that Eufrocino Roxas together with
Eriberto Roxas were (sic) the ones who were running the corporation; that during this
time, Eriberto Roxas was the restaurant and wine concessionaire of the resort; that after
the death of Eufrocino Roxas, Eriberto Roxas continued as the general manager until his
death in 1980; that after the death of Eriberto Roxas in 1980, the defendants Rebecca B.
Roxas and Guillermo Roxas, committed acts that impeded the plaintiff's expansion and
normal operation of the resort; that the plaintiff could not even use its own pavilions,
kitchen and other facilities because of the acts of the defendants which led to the filing of
criminal cases in court; that cases were even filed before the Ministry of Tourism, Bureau
of Domestic Trade and the Office of the President by the parties herein; that the
defendants violated the resolution and orders of the Ministry of Tourism dated July 28,
1983, August 3, 1983 and November 26, 1984 (Exhs. "G", "H" and "H-l") which ordered
them or the corporation they represent to desist from and to turn over immediately to the
plaintiff the management and operation of the restaurant and wine outlets of the said
resort (Exh. "G-l"); that the defendants also violated the decision of the Bureau of
Domestic Trade dated October 23, 1983 (Exh. "C"); that on August 27, 1983, because of
the acts of the defendants, the Board of Directors of the plaintiff adopted Resolution No.
83-12 series of 1983 (Exh. "F") authorizing the ejectment of the defendants from the
premises occupied by them; that on September 1, 1983, demand letters were sent to
Rebecca Boyer-Roxas and Guillermo Roxas (Exhs. "D" and "D-1") demanding that they
vacate the respective premises they occupy; and that the dispute between the plaintiff
and the defendants was brought before the barangay level and the same was not settled
(Exhs. "E" and "E-l"). (Original Records, pp. 454-456)
The petitioners appealed the decision to the Court of Appeals. However, as stated earlier, the appellate
court affirmed the lower court's decision. The Petitioners' motion for reconsideration was likewise denied.
Hence, this petition.
In a resolution dated February 5, 1992, we gave due course to the petition.
The petitioners now contend:
I Respondent Court erred when it refused to pierce the veil of corporate fiction over private respondent
and maintain the petitioners in their possession and/or occupancy of the subject premises considering

14
that petitioners are owners of aliquot part of the properties of private respondent. Besides, private
respondent itself discarded the mantle of corporate fiction by acts and/or omissions of its board of
directors and/or stockholders.
II The respondent Court erred in not holding that petitioners were in fact denied due process or their day
in court brought about by the gross negligence of their former counsel.
III The respondent Court misapplied the law when it ordered petitioner Rebecca Boyer-Roxas to remove
the unfinished building in RTC Case No. 802-84-C, when the trial court opined that she spent her own
funds for the construction thereof. (CA Rollo, pp. 17-18)
Were the petitioners denied due process of law in the lower court?
After the cases were re-raffled to the sala of Presiding Judge Odilon Bautista of Branch 37 the following
events transpired:
On July 3, 1986, the lower court issued an Order setting the hearing of the cases on July 21, 1986.
Petitioner Rebecca V. Roxas received a copy of the Order on July 15, 1986, while petitioner Guillermo
Roxas received his copy on July 18, 1986. Atty. Conrado Manicad, the petitioners' counsel received
another copy of the Order on July 11, 1986. (Original Records, p. 260)
On motion of the respondent corporation's counsel, the lower court issued an Order dated July 15, 1986
cancelling the July 21, 1986 hearing and resetting the hearing to August 11, 1986. (Original records, 262263) Three separate copies of the order were sent and received by the petitioners and their counsel.
(Original Records, pp. 268, 269, 271)
A motion to cancel and re-schedule the August 11, 1986 hearing filed by the respondent corporation's
counsel was denied in an Order dated August 8, 1986. Again separate copies of the Order were sent and
received by the petitioners and their counsel. (Original Records, pp. 276-279)
At the hearing held on August 11, 1986, only Atty. Benito P. Fabie, counsel for the respondent corporation
appeared. Neither the petitioners nor their counsel appeared despite notice of hearing. The lower court
then issued an Order on the same date, to wit:
ORDER
When these cases were called for continuation of trial, Atty. Benito P. Fabie appeared
before this Court, however, the defendants and their lawyer despite receipt of the Order
setting the case for hearing today failed to appear. On Motion of Atty. Fabie, further cross
examination of witness Victoria Vallarta is hereby considered as having been waived.
The plaintiff is hereby given twenty (20) days from today within which to submit formal
offer of evidence and defendants are also given ten (10) days from receipt of such formal
offer of evidence to file their objection thereto.
In the meantime, hearing in these cases is set to September 29, 1986 at 10:00 o'clock in
the morning. (Original Records, p. 286)

15
Copies of the Order were sent and received by the petitioners and their counsel on the following dates
Rebecca Boyer-Roxas on August 20, 1986, Guillermo Roxas on August 26, 1986, and Atty. Conrado
Manicad on September 19, 1986. (Original Records, pp. 288-290)
On September 1, 1986, the respondent corporation filed its "Formal Offer of Evidence." In an Order dated
September 29, 1986, the lower court issued an Order admitting exhibits "A" to "M-3" submitted by the
respondent corporation in its "Formal Offer of Evidence . . . there being no objection . . ." (Original
Records, p. 418) Copies of this Order were sent and received by the petitioners and their counsel on the
following dates: Rebecca Boyer-Roxas on October 9, 1986; Guillermo Roxas on October 9, 1986 and
Atty. Conrado Manicad on October 4, 1986 (Original Records, pp. 420, 421, 428).
The scheduled hearing on September 29, 1986 did not push through as the petitioners and their counsel
were not present prompting Atty. Benito Fabie, the respondent corporation's counsel to move that the
cases be submitted for decision. The lower court denied the motion and set the cases for hearing on
October 22, 1986. However, in its Order dated September 29, 1986, the court warned that in the event the
petitioners and their counsel failed to appear on the next scheduled hearing, the court shall consider the
cases submitted for decision based on the evidence on record. (Original Records, p. 429, 430 and 431)
Separate copies of this Order were sent and received by the petitioners and their counsel on the following
dates: Rebecca Boyer-Roxas on October 9, 1986, Guillermo Roxas on October 9, 1986; and Atty.
Conrado Manicad on October 1, 1986. (Original Records, pp. 429-430)
Despite notice, the petitioners and their counsel again failed to attend the scheduled October 22, 1986
hearing. Atty. Fabie representing the respondent corporation was present. Hence, in its Order dated
October 22, 1986, on motion of Atty. Fabie and pursuant to the order dated September 29, 1986, the
Court considered the cases submitted for decision. (Original Records, p. 436)
On November 14, 1986, the respondent corporation, filed a "Manifestation", stating that ". . . it is
submitting without further argument its "Opposition to the Motion for Reconsideration" for the
consideration of the Honorable Court in resolving subject incident." (Original Records, p. 442)
On December 16, 1986, the lower court issued an Order, to wit:
ORDER
Considering that the Court up to this date has not received any Motion for
Reconsideration filed by the defendants in the above-entitled cases, the Court cannot act
on the Opposition to Motion for Reconsideration filed by the plaintiff and received by the
Court on November 14, 1986. (Original Records, p. 446)
On January 15, 1987, the lower court rendered the questioned decision in the two (2) cases. (Original
Records, pp. 453-459)
On January 20, 1987, Atty. Conrado Manicad, the petitioners' counsel filed an Ex-Parte Manifestation and
attached thereto, a motion for reconsideration of the October 22, 1986 Order submitting the cases for
decision. He prayed that the Order be set aside and the cases be re-opened for reception of evidence for
the petitioners. He averred that: 1) within the reglementary period he prepared the motion for
reconsideration and among other documents, the draft was sent to his law office thru his messenger; after
signing the final copies, he caused the service of a copy to the respondent corporation's counsel with the
instruction that the copy of the Court be filed; however, there was a miscommunication between his
secretary and messenger in that the secretary mailed the copy for the respondent corporation's counsel

16
and placed the rest in an envelope for the messenger to file the same in court but the messenger thought
that it was the secretary who would file it; it was only later on when it was discovered that the copy for the
Court has not yet been filed and that such failure to file the motion for reconsideration was due to
excusable neglect and/or accident. The motion for reconsideration contained the following allegations:
that on the date set for hearing (October 22, 1986), he was on his way to Calamba to attend the hearing
but his car suffered transmission breakdown; and that despite efforts to repair said transmission, the car
remained inoperative resulting in his absence at the said hearing. (Original Records, pp. 460-469)
On February 3, 1987, Atty. Manicad filed a motion for reconsideration of the January 15, 1987 decision.
He explained that he had to file the motion because the receiving clerk refused to admit the motion for
reconsideration attached to the ex-parte manifestation because there was no proof of service to the other
party. Included in the motion for reconsideration was a notice of hearing of the motion on February 3,
1987. (Original Records, p. 476-A)
On February 4, 1987, the respondent corporation through its counsel filed a Manifestation and Motion
manifesting that they received the copy of the motion for reconsideration only today (February 4, 1987),
hence they prayed for the postponement of the hearing. (Original Records, pp. 478-479)
On the same day, February 4, 1987, the lower court issued an Order setting the hearing on February 13,
1987 on the ground that it received the motion for reconsideration late. Copies of this Order were sent
separately to the petitioners and their counsel. The records show that Atty. Manicad received his copy on
February 11, 1987. As regards the petitioners, the records reveal that Rebecca Boyer-Roxas did not
receive her copy while as regards Guillermo Roxas, somebody signed for him but did not indicate when
the copy was received. (Original Records, pp. 481-483)
At the scheduled February 13, 1987 hearing, the counsels for the parties were present. However, the
hearing was reset for March 6, 1987 in order to allow the respondent corporation to file its opposition to
the motion for reconsideration. (Order dated February 13, 1987, Original Records, p. 486) Copies of the
Order were sent and received by the petitioners and their counsel on the following dates: Rebecca BoyerRoxas on February 23, 1987; Guillermo Roxas on February 23, 1987 and Atty. Manicad on February 19,
1987. (Original Records, pp. 487, 489-490)
The records are not clear as to whether or not the scheduled hearing on March 6, 1987 was held.
Nevertheless, the records reveal that on March 13, 1987, the lower court issued an Order denying the
motion for reconsideration.
The well-settled doctrine is that the client is bound by the mistakes of his lawyer. (Aguila v. Court of First
Instance of Batangas, Branch I, 160 SCRA 352 [1988]; See also Vivero v. Santos, et al., 98 Phil. 500
[1956]; Isaac v. Mendoza, 89 Phil. 279 [1951]; Montes v. Court of First Instance of Tayabas, 48 Phil. 640
[1926]; People v. Manzanilla, 43 Phil. 167 [1922]; United States v. Dungca, 27 Phil. 274 [1914]; and
United States v. Umali, 15 Phil. 33 [1910]) This rule, however, has its exceptions. Thus, in several cases,
we ruled that the party is not bound by the actions of his counsel in case the gross negligence of the
counsel resulted in the client's deprivation of his property without due process of law. In the case
of Legarda v. Court of Appeals (195 SCRA 418 [1991]), we said:
In People's Homesite & Housing Corp. v. Tiongco and Escasa (12 SCRA 471 [1964]), this
Court ruled as follows:
Procedural technicality should not be made a bar to the vindication of a
legitimate grievance. When such technicality deserts from being an aid to
Justice, the courts are justified in excepting from its operation a particular

17
case. Where there was something fishy and suspicious about the
actuations of the former counsel of petitioners in the case at bar, in that
he did not give any significance at all to the processes of the court, which
has proven prejudicial to the rights of said clients, under a lame and
flimsy explanation that the court's processes just escaped his attention, it
is held that said lawyer deprived his clients of their day in court, thus
entitling said clients to petition for relief from judgment despite the lapse
of the reglementary period for filing said period for filing said petition.
In Escudero v. Judge Dulay (158 SCRA 69 [1988]), this Court, in holding that the
counsel's blunder in procedure is an exception to the rule that the client is bound by the
mistakes of counsel, made the following disquisition:
Petitioners contend, through their new counsel, that the judgment
rendered against them by the respondent court was null and void,
because they were therein deprived of their day in court and divested of
their property without due process of law, through the gross ignorance,
mistake and negligence of their previous counsel. They acknowledge
that, while as a rule, clients are bound by the mistake of their counsel,
the rule should not be applied automatically to their case, as their trial
counsel's blunder in procedure and gross ignorance of existing
jurisprudence changed their cause of action and violated their substantial
rights.
We are impressed with petitioner's contentions.
xxx xxx xxx
While this Court is cognizant of the rule that, generally, a client will suffer
consequences of the negligence, mistake or lack of competence of his
counsel, in the interest of Justice and equity, exceptions may be made to
such rule, in accordance with the facts and circumstances of each case.
Adherence to the general rule would, in the instant case, result in the
outright deprivation of their property through a technicality.
In its questioned decision dated November 19, 1989 the Court of Appeals found, in no
uncertain terms, the negligence of the then counsel for petitioners when he failed to file
the proper motion to dismiss or to draw a compromise agreement if it was true that they
agreed on a settlement of the case; or in simply filing an answer; and that after having
been furnished a copy of the decision by the court he failed to appeal therefrom or to file
a petition for relief from the order declaring petitioners in default. In all these instances
the appellate court found said counsel negligent but his acts were held to bind his client,
petitioners herein, nevertheless.
The Court disagrees and finds that the negligence of counsel in this case appears to be
so gross and inexcusable. This was compounded by the fact, that after petitioner gave
said counsel another chance to make up for his omissions by asking him to file a petition
for annulment of the judgment in the appellate court, again counsel abandoned the case
of petitioner in that after he received a copy of the adverse judgment of the appellate
court, he did not do anything to save the situation or inform his client of the judgment. He
allowed the judgment to lapse and become final. Such reckless and gross negligence

18
should not be allowed to bind the petitioner. Petitioner was thereby effectively deprived of
her day in court. (at pp. 426-427)
The herein petitioners, however, are not similarly situated as the parties mentioned in the abovecited
cases. We cannot rule that they, too, were victims of the gross negligence of their counsel.
The petitioners are to be blamed for the October 22, 1986 order issued by the lower court submitting the
cases for decision. They received notices of the scheduled hearings and yet they did not do anything.
More specifically, the parties received notice of the Order dated September 29, 1986 with the warning that
if they fail to attend the October 22, 1986 hearing, the cases would be submitted for decision based on
the evidence on record. Earlier, at the scheduled hearing on September 29, 1986, the counsel for the
respondent corporation moved that the cases be submitted for decision for failure of the petitioners and
their counsel to attend despite notice. The lower court denied the motion and gave the petitioners and
their counsel another chance by rescheduling the October 22, 1986 hearing.
Indeed, the petitioners knew all along that their counsel was not attending the scheduled hearings. They
did not take steps to change their counsel or make him attend to their cases until it was too late. On the
contrary, they continued to retain the services of Atty. Manicad knowing fully well his lapses vis-a-vis their
cases. They, therefore, cannot raise the alleged gross negligence of their counsel resulting in their denial
of due process to warrant the reversal of the lower court's decision. In a similar case, Aguila v. Court of
First Instance of Batangas, Branch 1 (supra), we ruled:
In the instant case, the petitioner should have noticed the succession of errors committed
by his counsel and taken appropriate steps for his replacement before it was altogether
too late. He did not. On the contrary, he continued to retain his counsel through the series
of proceedings that all resulted in the rejection of his cause, obviously through such
counsel's "ineptitude" and, let it be added, the clients' forbearance. The petitioner's
reverses should have cautioned him that his lawyer was mishandling his case and moved
him to seek the help of other counsel, which he did in the end but rather tardily.
Now petitioner wants us to nullify all of the antecedent proceedings and recognize his
earlier claims to the disputed property on the justification that his counsel was grossly
inept. Such a reason is hardly plausible as the petitioner's new counsel should know.
Otherwise, all a defeated party would have to do to salvage his case is claim neglect or
mistake on the part of his counsel as a ground for reversing the adverse judgment. There
would be no end to litigation if these were allowed as every shortcoming of counsel could
be the subject of challenge by his client through another counsel who, if he is also found
wanting, would likewise be disowned by the same client through another counsel, and so
on ad infinitum. This would render court proceedings indefinite, tentative and subject to
reopening at any time by the mere subterfuge of replacing counsel. (at pp. 357-358)
We now discuss the merits of the cases.
In the first assignment of error, the petitioners maintain that their possession of the questioned properties
must be respected in view of their ownership of an aliquot portion of all the properties of the respondent
corporation being stockholders thereof. They propose that the veil of corporate fiction be pierced,
considering the circumstances under which the respondent corporation was formed.
Originally, the questioned properties belonged to Eugenia V. Roxas. After her death, the heirs of Eugenia
V. Roxas, among them the petitioners herein, decided to form a corporation Heirs of Eugenia V. Roxas,
Incorporated (private respondent herein) with the inherited properties as capital of the corporation. The

19
corporation was incorporated on December 4, 1962 with the primary purpose of engaging in agriculture to
develop the inherited properties. The Articles of Incorporation of the respondent corporation were
amended in 1971 to allow it to engage in the resort business. Accordingly, the corporation put up a resort
known as Hidden Valley Springs Resort where the questioned properties are located.
These facts, however, do not justify the position taken by the petitioners.
The respondent is a bona fide corporation. As such, it has a juridical personality of its own separate from
the members composing it. (Western Agro Industrial Corporation v. Court of Appeals, 188 SCRA 709
[1990]; Tan Boon Bee & Co., Inc. v. Jarencio, 163 SCRA 205 [1988]; Yutivo Sons Hardware Company v.
Court of Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. v. Court of Industrial Relations,
13 SCRA 290 [1965]) There is no dispute that title over the questioned land where the Hidden Valley
Springs Resort is located is registered in the name of the corporation. The records also show that the staff
house being occupied by petitioner Rebecca Boyer-Roxas and the recreation hall which was later on
converted into a residential house occupied by petitioner Guillermo Roxas are owned by the respondent
corporation. Regarding properties owned by a corporation, we stated in the case of Stockholders of F.
Guanzon and Sons, Inc. v. Register of Deeds of Manila, (6 SCRA 373 [1962]):
xxx xxx xxx
. . . Properties registered in the name of the corporation are owned by it as an entity
separate and distinct from its members. While shares of stock constitute personal
property, they do not represent property of the corporation. The corporation has property
of its own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75;
Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part
of the corporation's property, or the right to share in its proceeds to that extent when
distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398,
56 So. 235), but its holder is not the owner of any part of the capital of the corporation
(Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite
portion of its property or assets (Gottfried V. Miller, 104 U.S., 521; Jones v. Davis, 35
Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate
property (Harton v. Johnston, 166 Ala., 317, 51 So. 992). (at pp. 375-376)
The petitioners point out that their occupancy of the staff house which was later used as the residence of
Eriberto Roxas, husband of petitioner Rebecca Boyer-Roxas and the recreation hall which was converted
into a residential house were with the blessings of Eufrocino Roxas, the deceased husband of Eugenia V.
Roxas, who was the majority and controlling stockholder of the corporation. In his lifetime, Eufrocino
Roxas together with Eriberto Roxas, the husband of petitioner Rebecca Boyer-Roxas, and the father of
petitioner Guillermo Roxas managed the corporation. The Board of Directors did not object to such an
arrangement. The petitioners argue that . . . the authority thus given by Eufrocino Roxas for the
conversion of the recreation hall into a residential house can no longer be questioned by the stockholders
of the private respondent and/or its board of directors for they impliedly but no leas explicitly delegated
such authority to said Eufrocino Roxas. (Rollo, p. 12)
Again, we must emphasize that the respondent corporation has a distinct personality separate from its
members. The corporation transacts its business only through its officers or agents. (Western Agro
Industrial Corporation v. Court of Appeals, supra). Whatever authority these officers or agents may have
is derived from the board of directors or other governing body unless conferred by the charter of the
corporation. An officer's power as an agent of the corporation must be sought from the statute, charter,
the by-laws or in a delegation of authority to such officer, from the acts of the board of directors, formally

20
expressed or implied from a habit or custom of doing business. (Vicente v. Geraldez, 52 SCRA 210
[1973])
In the present case, the record shows that Eufrocino V. Roxas who then controlled the management of
the corporation, being the majority stockholder, consented to the petitioners' stay within the questioned
properties. Specifically, Eufrocino Roxas gave his consent to the conversion of the recreation hall to a
residential house, now occupied by petitioner Guillermo Roxas. The Board of Directors did not object to
the actions of Eufrocino Roxas. The petitioners were allowed to stay within the questioned properties until
August 27, 1983, when the Board of Directors approved a Resolution ejecting the petitioners, to wit:
R E S O L U T I O N No. 83-12
RESOLVED, That Rebecca B. Roxas and Guillermo Roxas, and all persons claiming
under them, be ejected from their occupancy of the Hidden Valley Springs compound on
which their houses have been constructed and/or are being constructed only on tolerance
of the Corporation and without any contract therefor, in order to give way to the
Corporation's expansion and improvement program and obviate prejudice to the
operation of the Hidden Valley Springs Resort by their continued interference.
RESOLVED, Further that the services of Atty. Benito P. Fabie be engaged and that he be
authorized as he is hereby authorized to effect the ejectment, including the filing of the
corresponding suits, if necessary to do so. (Original Records, p. 327)
We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners' stay
within the questioned properties was merely by tolerance of the respondent corporation in deference to
the wishes of Eufrocino Roxas, who during his lifetime, controlled and managed the corporation.
Eufrocino Roxas' actions could not have bound the corporation forever. The petitioners have not cited any
provision of the corporation by-laws or any resolution or act of the Board of Directors which authorized
Eufrocino Roxas to allow them to stay within the company premises forever. We rule that in the absence
of any existing contract between the petitioners and the respondent corporation, the corporation may elect
to eject the petitioners at any time it wishes for the benefit and interest of the respondent corporation.
The petitioners' suggestion that the veil of the corporate fiction should be pierced is untenable. The
separate personality of the corporation may be disregarded only when the corporation is used "as a cloak
or cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or when
necessary for the protection of the creditors." (Sulong Bayan, Inc. v. Araneta, Inc., 72 SCRA 347 [1976]
cited in Tan Boon Bee & Co., Inc., v. Jarencio, supra and Western Agro Industrial Corporation v. Court of
Appeals, supra) The circumstances in the present cases do not fall under any of the enumerated
categories.
In the third assignment of error, the petitioners insist that as regards the unfinished building, Rebecca
Boyer-Roxas is a builder in good faith.
The construction of the unfinished building started when Eriberto Roxas, husband of Rebecca BoyerRoxas, was still alive and was the general manager of the respondent corporation. The couple used their
own funds to finance the construction of the building. The Board of Directors of the corporation, however,
did not object to the construction. They allowed the construction to continue despite the fact that it was
within the property of the corporation. Under these circumstances, we agree with the petitioners that the
provision of Article 453 of the Civil Code should have been applied by the lower courts.
Article 453 of the Civil Code provides:

21
If there was bad faith, not only on the part of the person who built, planted or sown on the
land of another but also on the part of the owner of such land, the rights of one and the
other shall be the same as though both had acted in good faith.
In such a case, the provisions of Article 448 of the Civil Code govern the relationship between petitioner
Rebecca-Boyer-Roxas and the respondent corporation, to wit:
Art. 448 The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the buildings or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
WHEREFORE, the present petition is partly GRANTED. The questioned decision of the Court of Appeals
affirming the decision of the Regional Trial Court of Laguna, Branch 37, in RTC Civil Case No. 802-84-C
is MODIFIED in that subparagraphs (c) and (d) of Paragraph 1 of the dispositive portion of the decision
are deleted. In their stead, the petitioner Rebecca Boyer-Roxas and the respondent corporation are
ordered to follow the provisions of Article 448 of the Civil Code as regards the questioned unfinished
building in RTC Civil Case No. 802-84-C. The questioned decision is affirmed in all other respects.
SO ORDERED.

G.R. No. 161838

April 7, 2010

22
REPUBLIC OF THE PHILIPPINES, represented by DANTE QUINDOZA, in his capacity as Zone
Administrator of the Bataan Economic Zone, Petitioner,
vs.
COALBRINE INTERNATIONAL PHILIPPINES, INC. and SHEILA F. NERI, Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari filed by petitioner is the Decision1 dated January 21, 2004
of the Court of Appeals in CA-G.R. SP No 74667, which affirmed the Order 2 dated September 24, 2002 of
the Regional Trial Court (RTC) of Balanga, Bataan, in Civil Case No. 548-ML, denying petitioner's Motion
to Dismiss.
The Export Processing Zone Authority (EPZA), predecessor of the Philippine Economic Zone Authority
(PEZA), is the owner of the Bataan Hilltop Hotel and Country Club, located at the Bataan Export
Processing Zone, Mariveles, Bataan. Dante M. Quindoza is the Zone Administrator of the Bataan
Economic Zone.
On August 4, 1994, EPZA, now PEZA, and respondent Coalbrine International Philippines, Inc. entered
into a contract in which the latter would rehabilitate and lease the Bataan Hilltop Hotel, Golf Course and
Clubhouse for twenty-five (25) years, which commenced on January 1, 1994, and renewable for another
twenty-five (25) years at the option of respondent Coalbrine. Respondent Sheila F. Neri was the
Managing Director of the hotel.
On July 11, 1996, the PEZA Board passed Resolution No. 96-231 rescinding the contract to rehabilitate
and lease, on the ground of respondent Coalbrine's repeated violations and non-performance of its
obligations as provided in the contract. Subsequently, PEZA sent respondent Coalbrine a notice to vacate
the premises and to pay its outstanding obligations to it.
On April 3, 1998, respondent Coalbrine filed with the RTC of Manila a Complaint for specific performance
with prayer for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction
with damages against PEZA and/or Bataan Economic Zone wherein respondent Coalbrine sought to
declare that PEZA had no valid cause to rescind the contract to rehabilitate and lease; and to enjoin
PEZA from taking over the hotel and country club and from disconnecting the water and electric services
to the hotel. The complaint is pending with Branch 17 of the RTC of Manila.
On April 24, 2002, respondents Coalbrine and Neri filed with the RTC of Balanga, Bataan, a Complaint for
damages with prayer for the issuance of a TRO and/or writ of preliminary prohibitory/mandatory injunction
against Zone Administrator Quindoza, docketed as Civil Case No. 548-ML. Respondent alleged that: in
October 2001, Quindoza started to harass the hotel's operations by causing the excavation of the entire
width of a cross-section of the only road leading to the hotel for the supposed project of putting up a one
length steel pipe; that such project had been stopped, which, consequently, paralyzed the hotel's
operations; respondent Neri undertook the construction of a temporary narrow access ramp in order that
the hotel guests and their vehicles could pass through the wide excavations; Quindoza had also placed a
big "ROAD CLOSED" sign near the hotel, which effectively blocked all access to and from the hotel and
created an impression that the hotel had been closed; in the last week of March 2002, Quindoza cut the
pipelines that supplied water to the hotel to the great inconvenience of respondents and the hotel guests,
and, subsequently, the pipelines were reconnected. Respondents prayed for the payment of damages, for
the issuance of a TRO and a writ of preliminary injunction to enjoin Quindoza from cutting or

23
disconnecting the reconnected water pipelines to the hotel and from committing further acts of
harassment; and to cause the construction of a reasonable access road at Quindoza's expense.
Administrator Quindoza, through the Solicitor General, filed a Motion to Dismiss 3 on the following
grounds:
1. The Honorable Court has no jurisdiction over the instant case;
2. The Honorable Court is an improper venue for the instant case;
3. Plaintiff (respondent Coalbrine) is guilty of forum shopping;
4. With respect to plaintiff (respondent) Neri, the complaint states no cause of action against
defendant;
5. The complaint is fatally defective for being unauthorized.
On September 24, 2002, the RTC issued an Order4 denying petitioner's motion to dismiss.
Administrator Quindoza filed a Motion for Reconsideration, which the RTC denied in its Order 5 dated
December 9, 2002.
On January 2, 2003, petitioner Republic of the Philippines, represented by Dante Quindoza, in his
capacity as Zone Administrator of the Bataan Economic Zone, filed with the CA a petition
for certiorari under Rule 65 seeking to annul the RTC Orders, reiterating the grounds raised by
Administrator Quindoza in the RTC.
On January 21, 2004, the CA issued its assailed Decision denying petitioner's petition for certiorari for
lack of merit.
Hence, petitioner is now before us in a petition for review on certiorari raising the lone issue of respondent
Neri's lack of proof of authority to file the complaint in the RTC of Balanga, Bataan, which was docketed
as Civil Case No. 548-ML.1avvphi1
In their Comment, respondents argue that the Republic of the Philippines was not a party to the civil case
subject of this petition, hence, it has no personality to file the instant petition for review; that the RTC
Order denying the motion to dismiss the complaint was a mere interlocutory order, thus, the same is not
appealable and not a proper subject of a petition for certiorari unless it was shown that there was a grave
abuse of discretion in its issuance; that petitioner had already filed an answer to the complaint
incorporating the grounds stated in their motion to dismiss; and that respondents had already presented
their evidence by way of an opposition to the motion to dismiss and in support of their application for the
issuance of a writ of preliminary mandatory injunction.
In its Reply, petitioner argues that it has the personality to file this petition, since Administrator Quindoza
is being sued for damages for certain acts he performed in an official capacity; that the denial of
petitioner's motion to dismiss was tainted with grave abuse of discretion, which justified the filing of a
petition for certiorari with the CA. The parties filed their respective memoranda as required under the
Resolution dated January 26, 2005.
In its Memorandum, petitioner raises the following arguments, to wit:

24
THE COMPLAINT IS FATALLY DEFECTIVE FOR BEING UNAUTHORIZED.
PETITIONER REPUBLIC OF THE PHILIPPINES IS THE REAL PARTY-IN-INTEREST IN THE CASE AT
BAR.
RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S
MOTION TO DISMISS, NECESSITATING THE FILING OF A PETITION FOR CERTIORARI UNDER
RULE 65 BEFORE THE HONORABLE COURT OF APPEALS.6
Petitioner claims that respondent Neri's signature in the verification and certification against non-forum
shopping attached to the complaint filed by respondents in the RTC was defective, since there was no
proof of her authority to institute the complaint on behalf of the corporation; and that respondent Neri is
not a real party-in-interest.
We agree.
The verification and certification against non-forum shopping reads:
xxxx
That I am the Managing Director of Bataan Hilltop Hotel and one of the plaintiffs in this case. 7
Notably, respondent Neri signed the verification/certification as one of the plaintiffs. However, we find that
respondent Neri is not a real party-in- interest. Section 2, Rule 3 of the Rules of Civil Procedure provides:
SEC. 2. Parties-in interest. A real party-in-interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law
or these Rules, every action must be prosecuted or defended in the name of the real party-in-interest.
And "interest," within the meaning of the rule, means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental
interest.8 Cases construing the real party-in-interest provision can be more easily understood if it is borne
in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be
prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. 9
The RTC based its conclusion that respondent Neri had a cause of action against petitioner on the
allegations in the complaint. The CA, however, did not rule on the matter despite the fact that it was raised
in petitioner's petition for certiorari filed before it and merely said that there was no necessity to discuss
such issue after deciding the other grounds raised in the petition.
We find the RTC in error. A reading of the allegations in the complaint shows that the acts complained of
and said to have been committed by petitioner against respondents have solely affected the hotel's
operations where respondent Neri was the hotel's Managing Director and whose interest in the suit was
incidental. Thus, we find that respondent Neri has no cause of action against petitioner. Consequently, the
plaintiff in this case would only be respondent Coalbrine.
A corporation has no power, except those expressly conferred on it by the Corporation Code and those
that are implied or incidental to its existence. In turn, a corporation exercises said powers through its
board of directors and/or its duly authorized officers and agents. 10 Thus, it has been observed that the
power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises

25
its corporate powers. In turn, physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific
act of the board of directors.11
In this case, respondent Coalbrine is a corporation. However, when respondent Neri filed the complaint in
the RTC, there was no proof that she was authorized to sign the verification and the certification against
non-forum shopping.
The Court has consistently held that the requirement regarding verification of a pleading is formal, not
jurisdictional. Such requirement is simply a condition affecting the form of the pleading, non-compliance
with which does not necessarily render the pleading fatally defective. 12 Verification is simply intended to
secure an assurance that the allegations in the pleading are true and correct, and not the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith. The court may order the
correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the
attending circumstances are such that strict compliance with the rules may be dispensed with in order that
the ends of justice may thereby be served.13
On the other hand, the lack of certification against non-forum shopping is generally not curable by mere
amendment of the complaint, but shall be a cause for the dismissal of the case without prejudice. 14 The
same rule applies to certifications against non-forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file the complaint on
behalf of the corporation.15
In Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the Philippines (FASAP),16 we
ruled that only individuals vested with authority by a valid board resolution may sign the certificate of nonforum shopping on behalf of a corporation. We also required that proof of such authority must be
attached. Failure to provide a certificate of non-forum shopping is sufficient ground to dismiss the petition.
Likewise, the petition is subject to dismissal if a certification was submitted unaccompanied by proof of
signatory's authority.
While there were instances where we have allowed the filing of a certificate against non-forum shopping
by someone on behalf of a corporation without the accompanying proof of authority at the time of its filing,
we did so on the basis of a special circumstance or compelling reason. Moreover, there was a
subsequent compliance by the submission of the proof of authority attesting to the fact that the person
who signed the certification was duly authorized.
In China Banking Corporation v. Mondragon International Philippines, Inc.,17 the CA dismissed the petition
filed by China Bank, since the latter failed to show that its bank manager who signed the certification
against non-forum shopping was authorized to do so. We reversed the CA and said that the case be
decided on the merits despite the failure to attach the required proof of authority, since the board
resolution which was subsequently attached recognized the pre-existing status of the bank manager as
an authorized signatory.
In Abaya Investments Corporation v. Merit Philippines,18 where the complaint before the Metropolitan Trial
Court of Manila was instituted by petitioner's Chairman and President, Ofelia Abaya, who signed the
verification and certification against non-forum shopping without proof of authority to sign for the
corporation, we also relaxed the rule. We did so taking into consideration the merits of the case and to
avoid a re-litigation of the issues and further delay the administration of justice, since the case had
already been decided by the lower courts on the merits. Moreover, Abaya's authority to sign the
certification was ratified by the Board.

26
In the present case, the RTC, in denying petitioner's motion to dismiss the complaint when the latter
raised respondent Neri's lack of authority to sign the certification, found that respondent Neri testified that
she was the Managing Director of the Bataan Hilltop Hotel which was being leased by respondent
Coalbrine, and that she was authorized by the Corporate Secretary to file the case. Notably, while the
matter of lack of authority was raised by petitioner in its petition for certiorari filed with the CA, it chose not
to tackle the issue after disposing of the other issues raised therein.
We cannot agree with the RTC's reasoning and find the certification signed by respondent Neri to be
defective. The authority of respondent Neri to file the complaint in the RTC had not been proven. First, the
certification against non-forum shopping did not even contain a statement that she was authorized by the
corporate secretary to file the case on behalf of Coalbrine as she claimed. More importantly, while she
testified that she was authorized by the corporate secretary, there was no showing that there was a valid
board resolution authorizing the corporate secretary to file the action, and to authorize respondent Neri to
file the action. In fact, such proof of authority had not been submitted even belatedly to show subsequent
compliance. Thus, there was no reason for the relaxation of the rule.
As to respondents' claim that petitioner Republic of the Philippines was not a party to the civil case
subject of this petition since Administrator Quindoza was the sole defendant therein and, thus, has no
personality to file this petition, their claim is not persuasive.
Notably, Administrator Quindoza was sued for damages for certain acts that he allegedly committed while
he was the Zone Administrator of the Bataan Export Processing Zone. Therefore, the complaint is in the
nature of suit against the State, and the Republic has the personality to file the petition.
Anent respondents' claim that the RTC Order denying a motion to dismiss is a mere interlocutory order,
thus, not appealable and may not be a subject of a petition for certiorari filed by the petitioner before the
CA, the same is also not meritorious.
While indeed, the general rule is that the denial of a motion to dismiss cannot be questioned in a special
civil action for certiorari, which is not intended to correct every controversial interlocutory ruling, 19 and that
the appropriate recourse is to file an answer and to interpose as defenses the objections raised in the
motion, to proceed to trial, and, in case of an adverse
decision, to elevate the entire case by appeal in due course, 20 this rule is not absolute.
Even when appeal is available and is the proper remedy, the Supreme Court has allowed a writ of
certiorari (1) where the appeal does not constitute a speedy and adequate remedy; (2) where the orders
were also issued either in excess of or without jurisdiction or with grave abuse of discretion; (3) for certain
special considerations, as public welfare or public policy; (4) where in criminal actions, the court rejects
rebuttal evidence for the prosecution as, in case of acquittal, there could be no remedy; (5) where the
order is a patent nullity; and (6) where the decision in the certiorari case will avoid future litigations. 21
In this case, we find that the RTC committed grave abuse of discretion amounting to lack of jurisdiction
when it failed to consider the lack of proof of authority of respondent Neri to file the action on behalf of the
corporation as we have discussed above.
WHEREFORE, the petition for review is GRANTED. The Decision dated January 21, 2004 of the Court of
Appeals in CA-G.R. SP No 74667 is REVERSED and SET ASIDE. The Complaint in Civil Case No. 548ML pending in the Regional Trial Court, Branch 4, Balanga, Bataan, is ordered DISMISSED.
SO ORDERED.

27

G.R. No. 82797

February 27, 1991

GOOD EARTH EMPORIUM INC., and LIM KA PING, petitioners,

vs.
HONORABLE COURT OF APPEALS and ROCES-REYES REALTY INC., respondents.
PARAS, J.:
This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals in
CA-G.R. No. 11960 entitled "ROCES-REYES REALTY, INC. vs. HONORABLE JUDGE REGIONAL TRIAL
COURT OF MANILA, BRANCH 44, GOOD EARTH EMPORIUM, INC. and LIM KA PING" reversing the
decision of respondent Judge ** of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 8530484, which reversed the resolution of the Metropolitan Trial Court Of Manila, Branch 28 in Civil Case
No. 09639, *** denying herein petitioners' motion to quash the alias writ of execution issued against them.
As gathered from the records, the antecedent facts of this case, are as follows:
A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES REALTY,
INC., as lessor, and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years beginning
November 1, 1981 and ending October 31, 1984 at a monthly rental of P65,000.00 (Rollo, p. 32; Annex
"C" of Petition). The building which was the subject of the contract of lease is a five-storey building
located at the corner of Rizal Avenue and Bustos Street in Sta. Cruz, Manila.
From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of
rentals, as a consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter
designated as ROCES for brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer)
against herein petitioners, GOOD EARTH EMPORIUM, INC. and LIM KA PING, hereinafter designated as
GEE, (Rollo, p. 21; Annex "B" of the Petition). After the latter had tendered their responsive pleading, the
lower court (MTC, Manila) on motion of Roces rendered judgment on the pleadings dated April 17, 1984,
the dispositive portion of which states:
Judgment is hereby rendered ordering defendants (herein petitioners) and all persons claiming
title under him to vacate the premises and surrender the same to the plaintiffs (herein
respondents); ordering the defendants to pay the plaintiffs the rental of P65,000.00 a month
beginning March 1983 up to the time defendants actually vacate the premises and deliver
possession to the plaintiff; to pay attorney's fees in the amount of P5,000.00 and to pay the costs
of this suit. (Rollo, p. 111; Memorandum of Respondents)
On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984
simultaneous with the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the trial
court resolved such motion ruling:

28
After considering the motion for the issuance of a writ of execution filed by counsel for the plaintiff
(herein respondents) and the opposition filed in relation thereto and finding that the defendant
failed to file the necessary supersedeas bond, this court resolved to grant the same for being
meritorious. (Rollo, p. 112)
On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was
assigned to the Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru
counsel filed with the Regional Trial Court of Manila, a motion to withdraw appeal citing as reason that
they are satisfied with the decision of the Metropolitan Trial Court of Manila, Branch XXVIII, which said
court granted in its Order of August 27, 1984 and the records were remanded to the trial court (Rollo, p.
32; CA Decision). Upon an ex-parte Motion of ROCES, the trial court issued an Alias Writ of Execution
dated February 25, 1985 (Rollo, p. 104; Annex "D" of Petitioner's Memorandum), which was implemented
on February 27, 1985. GEE thru counsel filed a motion to quash the writ of execution and notice of levy
and an urgent Ex-parte Supplemental Motion for the issuance of a restraining order, on March 7, and 20,
1985, respectively. On March 21, 1985, the lower court issued a restraining order to the sheriff to hold the
execution of the judgment pending hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC
Decision). While said motion was pending resolution, GEE filed a Petition for Relief from judgment before
another court, Regional Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No.
80-30019, but the petition was dismissed and the injunctive writ issued in connection therewith set aside.
Both parties appealed to the Court of Appeals; GEE on the order of dismissal and Roces on denial of his
motion for indemnity, both docketed as CA-G.R. No. 15873-CV. Going back to the original case, the
Metropolitan Trial Court after hearing and disposing some other incidents, promulgated the questioned
Resolution, dated April 8, 1985, the dispositive portion of which reads as follows:
Premises considered, the motion to quash the writ is hereby denied for lack of merit.
The restraining orders issued on March 11 and 23, 1985 are hereby recalled, lifted and set aside.
(Rollo, p. 20, MTC Decision)
GEE appealed and by coincidence. was raffled to the same Court, RTC Branch IX. Roces moved to
dismiss the appeal but the Court denied the motion. On certiorari, the Court of Appeals dismissed Roces'
petition and remanded the case to the RTC. Meantime, Branch IX became vacant and the case was reraffled to Branch XLIV.
On April 6, 1987, the Regional Trial Court of Manila, finding that the amount of P1 million evidenced by
Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2") were in full
satisfaction of the judgment obligation, reversed the decision of the Municipal Trial Court, the dispositive
portion of which reads:
Premises considered, judgment is hereby rendered reversing the Resolution appealed from
quashing the writ of execution and ordering the cancellation of the notice of levy and declaring the
judgment debt as having been fully paid and/or Liquidated. (Rollo, p. 29).
On further appeal, the Court of Appeals reversed the decision of the Regional Trial Court and reinstated
the Resolution of the Metropolitan Trial Court of Manila, the dispositive portion of which is as follows:
WHEREFORE, the judgment appealed from is hereby REVERSED and the Resolution dated
April 8, 1985, of the Metropolitan Trial Court of Manila Branch XXXIII is hereby REINSTATED. No
pronouncement as to costs. (Rollo, p. 40).
GEE's Motion for Reconsideration of April 5, 1988 was denied (Rollo, p. 43). Hence, this petition.
The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor of
respondent corporation which would justify the quashing of the Writ of Execution.

29
A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said exhibits
was there any writing alluding to or referring to any settlement between the parties of petitioners'
judgment obligation (Rollo, pp. 45-48).
Moreover, there is no indication in the receipt, Exhibit "1", that it was in payment, full or partial, of the
judgment obligation. Likewise, there is no indication in the pacto de retro sale which was drawn in favor of
Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the obligation
embodied therein had something to do with petitioners' judgment obligation with respondent corporation.
Finding that the common exhibit, Exhibit 1/A had been signed by persons other than judgment creditors
(Roces-Reyes Realty, Inc.) coupled with the fact that said exhibit was not even alleged by GEE and Lim
Ka Ping in their original motion to quash the alias writ of execution (Rollo, p. 37) but produced only during
the hearing (Ibid.) which production resulted in petitioners having to claim belatedly that there was an
"overpayment" of about half a million pesos (Rollo, pp. 25-27) and remarking on the utter absence of any
writing in Exhibits "1/A" and "2/B" to indicate payment of the judgment debt, respondent Appellate Court
correctly concluded that there was in fact nopayment of the judgment debt. As aptly observed by the said
court:
What immediately catches one's attention is the total absence of any writing alluding to or
referring to any settlement between the parties of private respondents' (petitioners') judgment
obligation. In moving for the dismissal of the appeal Lim Ka Ping who was then assisted by
counsel simply stated that defendants (herein petitioners) are satisfied with the decision of the
Metropolitan Trial Court (Records of CA, p. 54).
Notably, in private respondents' (petitioners') Motion to Quash the Writ of Execution and Notice of
Levy dated March 7, 1985, there is absolutely no reference to the alleged payment of one million
pesos as evidenced by Exhibit 1 dated September 20, 1984. As pointed out by petitioner
(respondent corporation) this was brought out by Linda Panutat, Manager of Good Earth only in
the course of the latter's testimony. (Rollo, p. 37)
Article 1240 of the Civil Code of the Philippines provides that:
Payment shall be made to the person in whose favor the obligation has been constituted, or his
successor in interest, or any person authorized to receive it.
In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its successor
in interest nor is there positive evidence that the payment was made to a person authorized to receive it.
No such proof was submitted but merely inferred by the Regional Trial Court (Rollo, p. 25) from Marcos
Roces having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. The
latter, however, was no longer President or even an officer of Roces-Reyes Realty, Inc. at the time he
received the money (Exhibit "1") and signed the sale with pacto de retro (Exhibit "2"). He, in fact, denied
being in possession of authority to receive payment for the respondent corporation nor does the receipt
show that he signed in the same capacity as he did in the Lease Contract at a time when he was
President for respondent corporation (Rollo, p. 20, MTC decision).
On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt
(Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. The
assertion is home by the receipt itself whereby they acknowledged payment of the loan in their names
and in no other capacity.
A corporation has a personality distinct and separate from its individual stockholders or members. Being
an officer or stockholder of a corporation does not make one's property also of the corporation, and viceversa, for they are separate entities (Traders Royal Bank v. CA-G.R. No. 78412, September 26, 1989;
Cruz v. Dalisay, 152 SCRA 482). Shareowners are in no legal sense the owners of corporate property (or

30
credits) which is owned by the corporation as a distinct legal person (Concepcion Magsaysay-Labrador v.
CA-G.R. No. 58168, December 19, 1989). As a consequence of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the
stockholder's debt or credit that of the corporation (Prof. Jose Nolledo's "The Corporation Code of the
Philippines, p. 5, 1988 Edition, citing Professor Ballantine).
The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that the
IOU was subsequently delivered to private respondents (Rollo, pp. 97-98). Contrary to the Regional Trial
Court's premise that it was incumbent upon respondent corporation to prove that the amount was
delivered to the Roces brothers in the payment of the loan in the latter's favor, the delivery of the amount
to and the receipt thereof by the Roces brothers in their names raises the presumption that the said
amount was due to them.1wphi1 There is a disputable presumption that money paid by one to the other
was due to the latter (Sec. 5(f) Rule 131, Rules of Court). It is for GEE and Lim Ka Ping to prove
otherwise. In other words, it is for the latter to prove that the payments made were for the satisfaction of
their judgment debt and not vice versa.
The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to
respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions
that the payment was in favor of the latter, especially in the case at bar where the amount was not
receipted for by respondent corporation and there is absolutely no indication in the receipt from which it
can be reasonably inferred, that said payment was in satisfaction of the judgment debt. Likewise, no such
inference can be made from the execution of the pacto de retro sale which was not made in favor of
respondent corporation but in favor of the two Roces brothers in their individual capacities without any
reference to the judgment obligation in favor of respondent corporation.
In addition, the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale with pacto
de retro(Exhibit "2/B") all in the sum of P2 million, far exceeds petitioners' judgment obligation in favor of
respondent corporation in the sum of P1,560,000.00 by P440,000.00, which militates against the claim of
petitioner that the aforesaid amount (P2M) was in full payment of the judgment obligation.
Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease
contract (Rollo, pp. 25-28) is belied by the absence of any interest awarded in the case and of any
agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash
the Alias Writ of Execution.
Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the
assailed factual findings as contrary to the evidence and applicable decisions of this Honorable Court are
therefore, patently unfounded. Respondent court was correct in stating that it "cannot go beyond what
appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in the absence of
clear and convincing evidence" that would support its claim that the judgment obligation has indeed been
fully satisfied which would warrant the quashal of the Alias Writ of Execution.
It has been an established rule that when the existence of a debt is fully established by the evidence
(which has been done in this case), the burden of proving that it has been extinguished by payment
devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor (herein
respondent corporation) (Chua Chienco v. Vargas, 11 Phil. 219; Ramos v. Ledesma, 12 Phil. 656; Pinon v.
De Osorio, 30 Phil. 365). For indeed, it is well-entrenched in Our jurisprudence that each party in a case
must prove his own affirmative allegations by the degree of evidence required by law (Stronghold
Insurance Co. v. CA, G.R. No. 83376, May 29,1989; Tai Tong Chuache & Co. v. Insurance Commission,
158 SCRA 366).
The appellate court cannot, therefore, be said to have gravely abused its discretion in finding lack of
convincing and reliable evidence to establish payment of the judgment obligation as claimed by petitioner.

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The burden of evidence resting on the petitioners to establish the facts upon which their action is
premised has not been satisfactorily discharged and therefore, they have to bear the consequences.
PREMISES CONSIDERED, the petition is hereby DENIED and the Decision of the Respondent court is
hereby AFFIRMED, reinstating the April 8, 1985 Resolution of the Metropolitan Trial Court of Manila.
SO ORDERED.

Adm. Matter No. R-181-P

July 31, 1987

ADELIO C. CRUZ, complainant,

vs.
QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.
RESOLUTION
FERNAN, J.:
In a sworn complaint dated July 23, 1984, Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy
Sheriff of Manila, with "malfeasance in office, corrupt practices and serious irregularities" allegedly
committed as follows:
1. Respondent sheriff attached and/or levied the money belonging to complainant Cruz when he was not
himself the judgment debtor in the final judgment of NLRC NCR Case No. 8-12389-91 sought to be
enforced but rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered
corporation; and,
2. Respondent likewise caused the service of the alias writ of execution upon complainant who is a
resident of Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and does not
extend to Pasay City.
In his Comments, respondent Dalisay explained that when he garnished complainant's cash deposit at
the Philtrust bank, he was merely performing a ministerial duty. While it is true that said writ was
addressed to Qualitrans Limousine Service, Inc., yet it is also a fact that complainant had executed an
affidavit before the Pasay City assistant fiscal stating that he is the owner/president of said corporation
and, because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice
of garnishment on the Philtrust bank.
On November 12, 1984, this case was referred to the Executive Judge of the Regional Trial Court of
Manila for investigation, report and recommendation.
Prior to the termination of the proceedings, however, complainant executed an affidavit of desistance
stating that he is no longer interested in prosecuting the case against respondent Dalisay and that it was
just a "misunderstanding" between them. Upon respondent's motion, the Executive Judge issued an order
dated May 29, 1986 recommending the dismissal of the case.
It has been held that the desistance of complainant does not preclude the taking of disciplinary action
against respondent. Neither does it dissuade the Court from imposing the appropriate corrective sanction.

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One who holds a public position, especially an office directly connected with the administration of justice
and the execution of judgments, must at all times be free from the appearance of impropriety.1
We hold that respondent's actuation in enforcing a judgment against complainant who is not the judgment
debtor in the case calls for disciplinary action. Considering the ministerial nature of his duty in enforcing
writs of execution, what is incumbent upon him is to ensure that only that portion of a decision ordained or
decreed in the dispositive part should be the subject of execution. 2 No more, no less. That the title of the
case specifically names complainant as one of the respondents is of no moment as execution must
conform to that directed in the dispositive portion and not in the title of the case.
The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans
Limousine Service, Inc. to reinstate the discharged employees and pay them full backwages.
Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging to the
court and assumed improvidently that since the complainant is the owner/president of Qualitrans
Limousine Service, Inc., they are one and the same. It is a well-settled doctrine both in law and in equity
that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders
or members. The mere fact that one is president of a corporation does not render the property he owns or
possesses the property of the corporation, since the president, as individual, and the corporation are
separate entities.3
Anent the charge that respondent exceeded his territorial jurisdiction, suffice it to say that the writ of
execution sought to be implemented was dated July 9, 1984, or prior to the issuance of Administrative
Circular No. 12 which restrains a sheriff from enforcing a court writ outside his territorial jurisdiction
without first notifying in writing and seeking the assistance of the sheriff of the place where execution shall
take place.
ACCORDINGLY, we find Respondent Deputy Sheriff Quiterio L. Dalisay NEGLIGENT in the enforcement
of the writ of execution in NLRC Case-No. 8-12389-91, and a fine equivalent to three [3] months salary is
hereby imposed with a stern warning that the commission of the same or similar offense in the future will
merit a heavier penalty. Let a copy of this Resolution be filed in the personal record of the respondent.
SO ORDERED.

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