parents against Ago Medical and Educational Center-Bicol Christian
College of Medicine (AMEC) and its administrators. Claiming that the
[G.R. No. 141994. January 17, 2005]
FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs. AGO MEDICAL AND EDUCATIONAL CENTER-
BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents.
DECISION
CARPIO, J.:
The Case
This petition for review[1] assails the 4 January 1999
Decision[2] and 26 January 2000 Resolution of the Court of Appeals in
CA-G.R. CV No. 40151. The Court of Appeals affirmed with
modification the 14 December 1992 Decision[3] of the Regional Trial
Court of Legazpi City, Branch 10, in Civil Case No. 8236. The Court
of Appeals held Filipinas Broadcasting Network, Inc. and its
broadcasters Hermogenes Alegre and Carmelo Rima liable for libel
and ordered them to solidarily pay Ago Medical and Educational
Center-Bicol Christian College of Medicine moral damages, attorneys
fees and costs of suit.
The Antecedents
Expos is a radio documentary[4] program hosted by Carmelo Mel
Rima (Rima) and Hermogenes Jun Alegre (Alegre).[5] Expos is aired
every morning over DZRC-AM which is owned by Filipinas
Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi City,
the Albay municipalities and other Bicol areas.[6]
In the morning of 14 and 15 December 1989, Rima and Alegre
exposed various alleged complaints from students, teachers and
broadcasts were defamatory, AMEC and Angelita Ago (Ago), as Dean
of AMECs College of Medicine, filed a complaint for
damages[7] against FBNI, Rima and Alegre on 27 February 1990.
Quoted are portions of the allegedly libelous broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking
medical course at AMEC-BCCM, advise them to pass all subjects
because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already.
Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If
[there] is no such regulation why is AMEC doing the same?
xxx
Second: Earlier AMEC students in Physical Therapy had
complained that the course is not recognized by DECS. xxx
Third: Students are required to take and pay for the subject even if
the subject does not have an instructor - such greed for money on
the part of AMECs administration. Take the subject Anatomy:
students would pay for the subject upon enrolment because it is offered
by the school. However there would be no instructor for such subject.
Students would be informed that course would be moved to a later date
because the school is still searching for the appropriate instructor.
xxx
It is a public knowledge that the Ago Medical and Educational Center
has survived and has been surviving for the past few years since its
inception because of funds support from foreign foundations. If you
will take a look at the AMEC premises youll find out that the names of
the buildings there are foreign soundings. There is a McDonald Hall.
Why not Jose Rizal or Bonifacio Hall? That is a very concrete and
undeniable evidence that the support of foreign foundations for AMEC
is substantial, isnt it? With the report which is the basis of the expose
in DZRC today, it would be very easy for detractors and enemies of
the Ago family to stop the flow of support of foreign foundations who
assist the medical school on the basis of the latters purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross
purpose with its reason for being it is possible for these foreign
foundations to lift or suspend their donations temporarily.[8]
xxx
On the other hand, the administrators of AMEC-BCCM, AMEC
Science High School and the AMEC-Institute of Mass
Communication in their effort to minimize expenses in terms of
salary are absorbing or continues to accept rejects. For example
how many teachers in AMEC are former teachers of Aquinas
University but were removed because of immorality? Does it mean
that the present administration of AMEC have the total definite moral
foundation from catholic administrator of Aquinas University. I will
prove to you my friends, that AMEC is a dumping ground, garbage,
not merely of moral and physical misfits. Probably they only qualify
in terms of intellect. The Dean of Student Affairs of AMEC is Justita
Lola, as the family name implies. She is too old to work, being an old
woman. Is the AMEC administration exploiting the very [e]nterprising
or compromising and undemanding Lola? Could it be that AMEC is
just patiently making use of Dean Justita Lola were if she is very old.
As in atmospheric situation zero visibility the plane cannot land,
meaning she is very old, low pay follows. By the way, Dean Justita
Lola is also the chairman of the committee on scholarship in AMEC.
She had retired from Bicol University a long time ago but AMEC has
patiently made use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for
moral and physically misfit people. What does this mean? Immoral
and physically misfits as teachers.
May I say Im sorry to Dean Justita Lola. But this is the truth. The truth
is this, that your are no longer fit to teach. You are too old. As an
aviation, your case is zero visibility. Dont insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman
of the scholarship committee at that. The reason is practical cost
saving in salaries, because an old person is not fastidious, so long as
she has money to buy the ingredient of beetle juice. The elderly can
get by thats why she (Lola) was taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is
likely that the students would be influenced by evil. When they
become members of society outside of campus will be liabilities
rather than assets. What do you expect from a doctor who while
studying at AMEC is so much burdened with unreasonable
imposition? What do you expect from a student who aside from
peculiar problems because not all students are rich in their struggle to
improve their social status are even more burdened with false
regulations. xxx[9] (Emphasis supplied)
The complaint further alleged that AMEC is a reputable learning
institution. With the supposed exposs, FBNI, Rima and Alegre
transmitted malicious imputations, and as such, destroyed plaintiffs
(AMEC and Ago) reputation. AMEC and Ago included FBNI as
defendant for allegedly failing to exercise due diligence in the
selection and supervision of its employees, particularly Rima and
Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil
Lozares, filed an Answer[10] alleging that the broadcasts against
AMEC were fair and true. FBNI, Rima and Alegre claimed that they
were plainly impelled by a sense of public duty to report the goings-on
in AMEC, [which is] an institution imbued with public interest.
Thereafter, trial ensued. During the presentation of the evidence
for the defense, Atty. Edmundo Cea, collaborating counsel of Atty.
Lozares, filed a Motion to Dismiss[11] on FBNIs behalf. The trial court
denied the motion to dismiss. Consequently, FBNI filed a separate
Answer claiming that it exercised due diligence in the selection and
supervision of Rima and Alegre. FBNI claimed that before hiring a
broadcaster, the broadcaster should (1) file an application; (2) be
interviewed; and (3) undergo an apprenticeship and training program
after passing the interview. FBNI likewise claimed that it always
reminds its broadcasters to observe truth, fairness and objectivity in
their broadcasts and to refrain from using libelous and indecent
language. Moreover, FBNI requires all broadcasters to pass
the Kapisanan ng mga Brodkaster sa Pilipinas (KBP) accreditation
test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a
Decision[12] finding FBNI and Alegre liable for libel except Rima. The
trial court held that the broadcasts are libelous per se. The trial court
rejected the broadcasters claim that their utterances were the result of
straight reporting because it had no factual basis. The broadcasters did
not even verify their reports before airing them to show good faith. In
holding FBNI liable for libel, the trial court found that FBNI failed to
exercise diligence in the selection and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that Rimas
only participation was when he agreed with Alegres expos. The trial
court found Rimas statement within the bounds of freedom of speech,
expression, and of the press. The dispositive portion of the decision
reads:
WHEREFORE, premises considered, this court finds for the
plaintiff. Considering the degree of damages caused by the
controversial utterances, which are not found by this court to be
really very serious and damaging, and there being no showing that
indeed the enrollment of plaintiff school dropped, defendants
Hermogenes Jun Alegre, Jr. and Filipinas Broadcasting Network
(owner of the radio station DZRC), are hereby jointly and severally
ordered to pay plaintiff Ago Medical and Educational Center-Bicol
Christian College of Medicine (AMEC-BCCM) the amount
of P300,000.00 moral damages, plus P30,000.00 reimbursement of
attorneys fees, and to pay the costs of suit.
SO ORDERED. [13] (Emphasis supplied)
Both parties, namely, FBNI, Rima and Alegre, on one hand, and
AMEC and Ago, on the other, appealed the decision to the Court of
Appeals. The Court of Appeals affirmed the trial courts judgment with
modification. The appellate court made Rima solidarily liable with
FBNI and Alegre. The appellate court denied Agos claim for damages
and attorneys fees because the broadcasts were directed against
AMEC, and not against her. The dispositive portion of the Court of
Appeals decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED,
subject to the modification that broadcaster Mel Rima
is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes
Alegre.
SO ORDERED.[14]
FBNI, Rima and Alegre filed a motion for reconsideration which
the Court of Appeals denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition.[15]
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial courts ruling that the
questioned broadcasts are libelous per se and that FBNI, Rima and
Alegre failed to overcome the legal presumption of malice. The Court
of Appeals found Rima and Alegres claim that they were actuated by
their moral and social duty to inform the public of the students gripes
as insufficient to justify the utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMECs
administrators, the Court of Appeals ruled that the broadcasts were
made with reckless disregard as to whether they were true or false. The
appellate court pointed out that FBNI, Rima and Alegre failed to
present in court any of the students who allegedly complained against
AMEC. Rima and Alegre merely gave a single name when asked to
identify the students. According to the Court of Appeals, these
circumstances cast doubt on the veracity of the broadcasters claim that
they were impelled by their moral and social duty to inform the public
about the students gripes.
The Court of Appeals found Rima also liable for libel since he
remarked that (1) AMEC-BCCM is a dumping ground for morally and
physically misfit teachers; (2) AMEC obtained the services of Dean
Justita Lola to minimize expenses on its employees salaries; and (3)
AMEC burdened the students with unreasonable imposition and false
regulations.[16]
The Court of Appeals held that FBNI failed to exercise due
diligence in the selection and supervision of its employees for allowing
Rima and Alegre to make the radio broadcasts without the proper KBP
accreditation. The Court of Appeals denied Agos claim for damages
and attorneys fees because the libelous remarks were directed against
AMEC, and not against her. The Court of Appeals adjudged FBNI,
Rima and Alegre solidarily liable to pay AMEC moral damages,
attorneys fees and costs of suit.
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEYS FEES IS
PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA
AND ALEGRE FOR PAYMENT OF MORAL
DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.
The Courts Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly
defamatory remarks of Rima and Alegre against AMEC.[17] While
AMEC did not point out clearly the legal basis for its complaint, a
reading of the complaint reveals that AMECs cause of action is based
on Articles 30 and 33 of the Civil Code. Article 30[18] authorizes a
separate civil action to recover civil liability arising from a criminal
offense. On the other hand, Article 33[19]particularly provides that the
injured party may bring a separate civil action for damages in cases of
defamation, fraud, and physical injuries. AMEC also invokes Article
19[20] of the Civil Code to justify its claim for damages. AMEC cites
Articles 2176[21] and 2180[22] of the Civil Code to hold FBNI solidarily
liable with Rima and Alegre.
I.
Whether the broadcasts are libelous
A libel[23] is a public and malicious imputation of a crime, or of a
vice or defect, real or imaginary, or any act or omission, condition,
status, or circumstance tending to cause the dishonor, discredit, or
contempt of a natural or juridical person, or to blacken the memory of
one who is dead.[24]
There is no question that the broadcasts were made public and
imputed to AMEC defects or circumstances tending to cause it
dishonor, discredit and contempt. Rima and Alegres remarks such as
greed for money on the part of AMECs administrators; AMEC is a
dumping ground, garbage of xxx moral and physical misfits; and
AMEC students who graduate will be liabilities rather than assets of
the society are libelous per se. Taken as a whole, the broadcasts
suggest that AMEC is a money-making institution where physically
and morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious.
FBNI claims that Rima and Alegre were plainly impelled by their civic
duty to air the students gripes. FBNI alleges that there is no evidence
that ill will or spite motivated Rima and Alegre in making the
broadcasts. FBNI further points out that Rima and Alegre exerted
efforts to obtain AMECs side and gave Ago the opportunity to defend
AMEC and its administrators. FBNI concludes that since there is no
malice, there is no libel.
FBNIs contentions are untenable.
Every defamatory imputation is presumed malicious.[25] Rima and
Alegre failed to show adequately their good intention and justifiable
motive in airing the supposed gripes of the students. As hosts of a
documentary or public affairs program, Rima and Alegre should have
presented the public issues free from inaccurate and misleading
information.[26] Hearing the students alleged complaints a month
before the expos,[27] they had sufficient time to verify their sources and
information. However, Rima and Alegre hardly made a thorough
investigation of the students alleged gripes. Neither did they inquire
about nor confirm the purported irregularities in AMEC from the
Department of Education, Culture and Sports. Alegre testified that he
merely went to AMEC to verify his report from an alleged AMEC
official who refused to disclose any information. Alegre simply relied
on the words of the students because they were many and not because
there is proof that what they are saying is true.[28] This plainly shows
Rima and Alegres reckless disregard of whether their report was true
or not.
Contrary to FBNIs claim, the broadcasts were not the result of
straight reporting. Significantly, some courts in the United States apply
the privilege of neutral reportage in libel cases involving matters of
public interest or public figures. Under this privilege, a republisher
who accurately and disinterestedly reports certain defamatory
statements made against public figures is shielded from liability,
regardless of the republishers subjective awareness of the truth or
falsity of the accusation.[29] Rima and Alegre cannot invoke the
privilege of neutral reportage because unfounded comments abound in
the broadcasts. Moreover, there is no existing controversy involving
AMEC when the broadcasts were made. The privilege of neutral
reportage applies where the defamed person is a public figure who is
involved in an existing controversy, and a party to that controversy
makes the defamatory statement.[30]
However, FBNI argues vigorously that malice in law does not
apply to this case. Citing Borjal v. Court of Appeals,[31] FBNI
contends that the broadcasts fall within the coverage of qualifiedly
privileged communications for being commentaries on matters of
public interest. Such being the case, AMEC should prove malice in
fact or actual malice. Since AMEC allegedly failed to prove actual
malice, there is no libel.
FBNIs reliance on Borjal is misplaced. In Borjal, the Court
elucidated on the doctrine of fair comment, thus:
[F]air commentaries on matters of public interest are privileged and
constitute a valid defense in an action for libel or slander. The doctrine
of fair comment means that while in general every discreditable
imputation publicly made is deemed false, because every man is
presumed innocent until his guilt is judicially proved, and every false
imputation is deemed malicious, nevertheless, when the discreditable
imputation is directed against a public person in his public capacity, it
is not necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it must either be
a false allegation of fact or a comment based on a false
supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
facts.[32] (Emphasis supplied)
True, AMEC is a private learning institution whose business of
educating students is genuinely imbued with public interest. The
welfare of the youth in general and AMECs students in particular is a
matter which the public has the right to know. Thus, similar to the
newspaper articles in Borjal, the subject broadcasts dealt with matters
of public interest. However, unlike in Borjal, the questioned
broadcasts are not based on established facts. The record supports the
following findings of the trial court:
xxx Although defendants claim that they were motivated by consistent
reports of students and parents against plaintiff, yet, defendants have
not presented in court, nor even gave name of a single student who
made the complaint to them, much less present written complaint or
petition to that effect. To accept this defense of defendants is too
dangerous because it could easily give license to the media to malign
people and establishments based on flimsy excuses that there were
reports to them although they could not satisfactorily establish it. Such
laxity would encourage careless and irresponsible broadcasting which
is inimical to public interests.
Secondly, there is reason to believe that defendant radio broadcasters,
contrary to the mandates of their duties, did not verify and analyze the
truth of the reports before they aired it, in order to prove that they are
in good faith.
Alegre contended that plaintiff school had no permit and is not
accredited to offer Physical Therapy courses. Yet, plaintiff produced a
certificate coming from DECS that as of Sept. 22, 1987 or more than 2
years before the controversial broadcast, accreditation to offer Physical
Therapy course had already been given the plaintiff, which certificate
is signed by no less than the Secretary of Education and Culture
herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could
have easily known this were they careful enough to verify. And yet,
defendants were very categorical and sounded too positive when they
made the erroneous report that plaintiff had no permit to offer Physical
Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign
foundations like Mcdonald Foundation prove not to be true also. The
truth is there is no Mcdonald Foundation existing. Although a big
building of plaintiff school was given the name Mcdonald building,
that was only in order to honor the first missionary in Bicol of
plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim
of defendants over the air, not a single centavo appears to be received
by plaintiff school from the aforementioned McDonald Foundation
which does not exist.
Defendants did not even also bother to prove their claim, though
denied by Dra. Ago, that when medical students fail in one subject,
they are made to repeat all the other subject[s], even those they have
already passed, nor their claim that the school charges laboratory fees
even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give
semblance of good faith.
As for the allegation that plaintiff is the dumping ground for misfits,
and immoral teachers, defendant[s] singled out Dean Justita Lola who
is said to be so old, with zero visibility already. Dean Lola testified in
court last Jan. 21, 1991, and was found to be 75 years old. xxx Even
older people prove to be effective teachers like Supreme Court Justices
who are still very much in demand as law professors in their late years.
Counsel for defendants is past 75 but is found by this court to be still
very sharp and effective. So is plaintiffs counsel.
Dr. Lola was observed by this court not to be physically decrepit yet,
nor mentally infirmed, but is still alert and docile.
The contention that plaintiffs graduates become liabilities rather than
assets of our society is a mere conclusion. Being from the place
himself, this court is aware that majority of the medical graduates of
plaintiffs pass the board examination easily and become prosperous
and responsible professionals.[33]
Had the comments been an expression of opinion based on
established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
facts.[34] However, the comments of Rima and Alegre were not backed
up by facts. Therefore, the broadcasts are not privileged and remain
libelous per se.
The broadcasts also violate the Radio Code[35] of the Kapisanan
ng mga Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the
Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND
COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free
from personal bias, prejudice and inaccurate and
misleading information. x x x Furthermore, the station
shall strive to present balanced discussion of issues. x x x.
 xxx
7. The station shall be responsible at all times in the
supervision of public affairs, public issues and
commentary programs so that they conform to the
provisions and standards of this code.
8. It shall be the responsibility of the newscaster, commentator,
host and announcer to protect public interest, general
welfare and good order in the presentation of public
affairs and public issues.[36] (Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the Radio
Code, which lays down the code of ethical conduct governing
practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast industry on
its own members. The Radio Code is a public warranty by the radio
broadcast industry that radio broadcast practitioners are subject to a
code by which their conduct are measured for lapses, liability and
sanctions.
The public has a right to expect and demand that radio broadcast
practitioners live up to the code of conduct of their profession, just like
other professionals. A professional code of conduct provides the
standards for determining whether a person has acted justly, honestly
and with good faith in the exercise of his rights and performance of his
duties as required by Article 19[37] of the Civil Code. A professional
code of conduct also provides the standards for determining whether a
person who willfully causes loss or injury to another has acted in a
manner contrary to morals or good customs under Article 21[38] of the
Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages
because it is a corporation.[39]
A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock.[40] The Court of Appeals
cites Mambulao Lumber Co. v. PNB, et al.[41] to justify the award of
moral damages. However, the Courts statement in Mambulao that a
corporation may have a good reputation which, if besmirched, may
also be a ground for the award of moral damages is an obiter
dictum.[42]
Nevertheless, AMECs claim for moral damages falls under item 7
of Article 2219[43] of the Civil Code. This provision expressly
authorizes the recovery of moral damages in cases of libel, slander or
any other form of defamation. Article 2219(7) does not qualify
whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for libel or
any other form of defamation and claim for moral damages.[44]
Moreover, where the broadcast is libelous per se, the law implies
damages.[45] In such a case, evidence of an honest mistake or the want
of character or reputation of the party libeled goes only in mitigation
of damages.[46] Neither in such a case is the plaintiff required to
introduce evidence of actual damages as a condition precedent to the
recovery of some damages.[47] In this case, the broadcasts are
libelous per se. Thus, AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages
unreasonable. The record shows that even though the broadcasts were
libelous per se, AMEC has not suffered any substantial or material
damage to its reputation. Therefore, we reduce the award of moral
damages from P300,000 to P150,000.
III.
Whether the award of attorneys fees is proper
FBNI contends that since AMEC is not entitled to moral damages,
there is no basis for the award of attorneys fees. FBNI adds that the
instant case does not fall under the enumeration in Article 2208[48] of
the Civil Code.
The award of attorneys fees is not proper because AMEC failed to
justify satisfactorily its claim for attorneys fees. AMEC did not adduce
evidence to warrant the award of attorneys fees. Moreover, both the
trial and appellate courts failed to explicitly state in their respective
decisions the rationale for the award of attorneys fees.[49] In Inter-Asia
Investment Industries, Inc. v. Court of Appeals,[50] we held that:
[I]t is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsels fees are not
to be awarded every time a party wins a suit. The power of the court
to award attorneys fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification, without which
the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture. In all events, the
court must explicitly state in the text of the decision, and not only in
the decretal portion thereof, the legal reason for the award of attorneys
fees.[51] (Emphasis supplied)
While it mentioned about the award of attorneys fees by stating
that it lies within the discretion of the court and depends upon the
circumstances of each case, the Court of Appeals failed to point out
any circumstance to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre
for moral damages, attorneys fees
and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre
for the payment of damages and attorneys fees because it exercised
due diligence in the selection and supervision of its employees,
particularly Rima and Alegre. FBNI maintains that its broadcasters,
including Rima and Alegre, undergo a very regimented process before
they are allowed to go on air. Those who apply for broadcaster are
subjected to interviews, examinations and an apprenticeship program.
FBNI further argues that Alegres age and lack of training are
irrelevant to his competence as a broadcaster. FBNI points out that the
minor deficiencies in the KBP accreditation of Rima and Alegre do not
in any way prove that FBNI did not exercise the diligence of a good
father of a family in selecting and supervising them. Rimas
accreditation lapsed due to his non-payment of the KBP annual fees
while Alegres accreditation card was delayed allegedly for reasons
attributable to the KBP Manila Office. FBNI claims that membership
in the KBP is merely voluntary and not required by any law or
government regulation.
FBNIs arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are
jointly and severally liable for the tort which they commit.[52] Joint tort
feasors are all the persons who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for
their benefit.[53] Thus, AMEC correctly anchored its cause of action
against FBNI on Articles 2176 and 2180 of the Civil Code.
As operator of DZRC-AM and employer of Rima and Alegre,
FBNI is solidarily liable to pay for damages arising from the libelous
broadcasts. As stated by the Court of Appeals, recovery for defamatory
statements published by radio or television may be had from
the owner of the station, a licensee, the operator of the station, or a
person who procures, or participates in, the making of the defamatory
statements.[54] An employer and employee are solidarily liable for a
defamatory statement by the employee within the course and scope of
his or her employment, at least when the employer authorizes or
ratifies the defamation.[55] In this case, Rima and Alegre were clearly
performing their official duties as hosts of FBNIs radio program Expos
when they aired the broadcasts. FBNI neither alleged nor proved that
Rima and Alegre went beyond the scope of their work at that time.
There was likewise no showing that FBNI did not authorize and ratify
the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI
exercised due diligence in the selection and supervision of its
employees, particularly Rima and Alegre. FBNI merely showed that it
exercised diligence in the selection of its broadcasters without
introducing any evidence to prove that it observed the same diligence
in the supervision of Rima and Alegre. FBNI did not show how it
exercised diligence in supervising its broadcasters. FBNIs alleged
constant reminder to its broadcasters to observe truth, fairness and
objectivity and to refrain from using libelous and indecent language is
not enough to prove due diligence in the supervision of its
broadcasters. Adequate training of the broadcasters on the industrys
code of conduct, sufficient information on libel laws, and continuous
evaluation of the broadcasters performance are but a few of the many
ways of showing diligence in the supervision of broadcasters.
FBNI claims that it has taken all the precaution in the selection of
Rima and Alegre as broadcasters, bearing in mind their qualifications.
However, no clear and convincing evidence shows that Rima and
Alegre underwent FBNIs regimented process of application.
Furthermore, FBNI admits that Rima and Alegre had deficiencies in
their KBP accreditation,[56] which is one of FBNIs requirements before
it hires a broadcaster. Significantly, membership in the KBP, while
voluntary, indicates the broadcasters strong commitment to observe the
broadcast industrys rules and regulations. Clearly, these circumstances
show FBNIs lack of diligence in selecting and supervising Rima and
Alegre. Hence, FBNI is solidarily liable to pay damages together with
Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the
Decision of 4 January 1999 and Resolution of 26 January 2000 of the
Court of Appeals in CA-G.R. CV No. 40151 with the
MODIFICATION that the award of moral damages is reduced
from P300,000 to P150,000 and the award of attorneys fees is deleted.
Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-
Santiago, and Azcuna, JJ., concur.
MANILA ELECTRIC COMPANY,

Petitioners,
 - versus -
Electric Company (Meralco) is a utility company supplying electricity
T.E.A.M. ELECTRONICS
in the Metro Manila area.
CORPORATION, TECHNOLOGY
ELECTRONICS ASSEMBLY and
MANAGEMENT PACIFIC Petitioner and NS Electronics (Philippines), Inc., the
CORPORATION; and ULTRA predecessor-in-interest of respondent TEC, were parties to two
ELECTRONICS INSTRUMENTS,
INC., separate contracts denominated as Agreements for the Sale of Electric

Energy under the following account numbers: 09341-1322-

Respondents.
16[3] and 09341-1812-13.[4]Under the aforesaid agreements, petitioner
DECISION
undertook to supply TECs building known as Dyna Craft International
NACHURA, J.:
Manila (DCIM) located at Electronics Avenue, Food Terminal
This is a petition for review on certiorari under Rule 45 of the Complex, Taguig, Metro Manila, with electric power. Another contract
Rules of Court seeking the reversal of the Decision[1] of the Court of was entered into for the supply of electric power to TECs NS Building
Appeals (CA) dated June 18, 1997 and its under Account No. 19389-0900-10.
Resolution[2] dated December 3, 1997 in CA-G.R. CV No. 40282
In September 1986, TEC, under its former name National
denying the appeal filed by petitioner Manila Electric Company.
Semi-Conductors (Phils.) entered into a Contract of Lease[5] with
The facts of the case, as culled from the records, are as follows: respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the

formers DCIM building for a period of five years or until September

Respondent T.E.A.M. Electronics Corporation (TEC) was
1991. Ultra was, however, ejected from the premises on February 12,
formerly known as NS Electronics (Philippines), Inc. before 1982 and
1988 by virtue of a court order, for repeated violation of the terms and
National Semi-Conductors (Phils.) before 1988. TEC is wholly owned
conditions of the lease contract.
by respondent Technology Electronics Assembly and Management

Pacific Corporation (TPC). On the other hand, petitioner Manila On September 28, 1987, a team of petitioners inspectors

conducted a surprise inspection of the electric meters installed at the

DCIM building, witnessed by Ultras[6] representative, Mr. Willie
Abangan. The two meters covered by account numbers 09341-1322-16
and 09341-1812-13, were found to be allegedly tampered with and did
not register the actual power consumption in the building. The results
of the inspection were reflected in the Service Inspection
Reports[7] prepared by the team.
In a letter dated November 25, 1987, petitioner informed TEC
of the results of the inspection and demanded from the latter the
payment of P7,040,401.01 representing its unregistered consumption
from February 10, 1986 until September 28, 1987, as a result of the
alleged tampering of the meters.[8] TEC received the letters on January
7, 1988. Since Ultra was in possession of the subject building during
the covered period, TECs Managing Director, Mr. Bobby Tan, referred
the demand letter to Ultra[9] which, in turn, informed TEC that its
Executive Vice-President had met with petitioners representative.
Ultra further intimated that assuming that there was tampering of the
meters, petitioners assessment was excessive.[10] For failure of TEC to
pay the differential billing, petitioner disconnected the electricity
supply to the DCIM building on April 29, 1988.
TEC demanded from petitioner the reconnection of electrical
service, claiming that it had nothing to do with the alleged tampering
but the latter refused to heed the demand. Hence, TEC filed a
complaint on May 27, 1988 before the Energy Regulatory Board
(ERB) praying that electric power be restored to the DCIM
building.[11] The ERB immediately ordered the reconnection of the
service but petitioner complied with it only on October 12, 1988 after
TEC paid P1,000,000.00, under protest. The complaint before the ERB
was later withdrawn as the parties deemed it best to have the issues
threshed out in the regular courts. Prior to the reconnection, or on June
7, 1988, petitioner conducted a scheduled inspection of the questioned
meters and found them to have been tampered anew.[12]
Meanwhile, on April 25, 1988, petitioner conducted another
inspection, this time, in TECs NS Building. The inspection allegedly
revealed that the electric meters were not registering the correct power
consumption. Petitioner, thus, sent a letter dated June 18,
1988demanding payment of P280,813.72 representing the differential
billing.[13] TEC denied petitioners allegations and claim in a letter
dated June 29, 1988.[14] Petitioner, thus, sent TEC another letter
demanding payment of the aforesaid amount, with a warning that the
electric service would be disconnected in case of continued refusal to
pay the differential billing.[15] To avert the impending disconnection of
electrical service, TEC paid the above amount, under protest.[16]
 WHEREFORE, judgment is hereby rendered in this
On January 13, 1989, TEC and TPC filed a complaint for case in favor of the plaintiffs and against the defendants
damages against petitioner and Ultra[17] before the Regional Trial as follows:

Court (RTC) of Pasig. The case was raffled to Branch 162 and was

docketed as Civil Case No. 56851.[18] Upon the filing of the parties (1) Ordering both defendants
Meralco and ULTRA Electronics
answer to the complaint, pre-trial was scheduled.
Instruments, Inc. to jointly and
severally reimburse plaintiff TEC
At the pre-trial, the parties agreed to limit the issues, as
actual damages in the amount of ONE
follows: MILLION PESOS with legal rate of
interest from the date of the filing of
1. Whether or not the defendant Meralco is
this case on January 19, 1989 until the
liable for the plaintiffs disconnection of electric service
said amount shall have been fully paid;
at DCIM Building.
(2) Ordering defendant Meralco
to pay to plaintiff TEC the amount
2. Whether or not the plaintiff is liable for (sic) of P280,813.72 as actual damages with
the defendant for the differential billings in the amount legal rate of interest also from January
of P7,040,401.01. 19, 1989;

(3) Ordering defendant Meralco

to pay to plaintiff TPC the amount
3. Whether or not the plaintiff is liable to of P150,000.00 as actual damages with
defendant for exemplary damages.[19] interest at legal rate from January 19,
1989;
For failure of the parties to reach an amicable settlement, trial on the
(4) Condemning defendant
merits ensued. On June 17, 1992, the trial court rendered a Decision in Meralco to pay both plaintiffs moral
damages in the amount pf P500,000.00;
favor of respondents TEC and TPC, and against respondent Ultra and
(5) Condemning defendant
petitioner. The pertinent portion of the decision reads:
Meralco to pay both plaintiffs
corrective and/or exemplary damages
in the amount of P200,000.00;
 (6) Ordering defendant Meralco
to pay attorneys fees in the amount
of P200,000.00
Costs against defendant Meralco.
SO ORDERED.[20]
The trial court found the evidence of petitioner insufficient to
prove that TEC was guilty of tampering the meter installations. The
deformed condition of the meter seal and the existence of an opening
in the wire duct leading to the transformer vault did not, in themselves,
prove the alleged tampering, especially since access to the transformer
was given only to petitioners employees.[21] The sudden drop in TECs
(or Ultras) electric consumption did not, per se, show meter
tampering. The delay in the sending of notice of the results of the
inspection was likewise viewed by the court as evidence of
inefficiency and arbitrariness on the part of petitioner. More
importantly, petitioners act of disconnecting the DCIM buildings
electric supply constituted bad faith and thus makes it liable for
damages.[22] The court further denied petitioners claim of differential
billing primarily on the ground of equitable negligence.[23] Considering
that TEC and TPC paid P1,000,000.00 to avert the disconnection of
electric power; and because Ultra manifested to settle the claims of
petitioner, the court imposed solidary liability on both Ultra and
petitioner for the payment of the P1,000,000.00.
Ultra and petitioner appealed to the CA which affirmed the
RTC decision, with a modification of the amount of actual damages
and interest thereon. The dispositive portion of the CA decision
dated June 18, 1997, states:
WHEREFORE, this Court renders judgment
affirming in toto the Decision rendered by the trial court
with the slight modification that the interest at legal rate
shall be computed from January 13, 1989 and that
Meralco shall pay plaintiff T.E.A.M. Electronics
Corporation and Technology Electronics Assembly and
Management Pacific Corporation the sum
of P150,000.00 per month for five (5) months for actual
damages incurred when it was compelled to lease a
generator set with interest at the legal rate from the
above-stated date.
SO ORDERED.[24]
The appellate court agreed with the RTCs conclusion. In addition, it
considered petitioner negligent for failing to discover the alleged
defects in the electric meters; in belatedly notifying TEC and TPC of
the results of the inspection; and in disconnecting the electric power
without prior notice.
Petitioner now comes before this Court in this petition for review
9. In declaring that petitioner
on certiorari contending that:
MERALCO estopped from claiming any tampering of
The Court of Appeals committed grievous errors and the meters.
decided matters of substance contrary to law and the
10. In finding that the method employed by
rulings of this Honorable Court:
MERALCO to as certain (sic) the correct amount of
1. In finding that the issue in the case is whether there electricity consumed is questionable;
was deliberate tampering of the metering installations at
11. In declaring that MERALCO all throughout
the building owned by TEC.
its dealings with TEC took on an attitude which is
2. In not finding that the issue is: whether or not, based oppressive, wanton and reckless.
on the tampered meters, whether or not petitioner is
12. In declaring that MERALCO acted
entitled to differential billing, and if so, how much.
arbitrarily in inspecting TECs DCIM building and the
3. In declaring that petitioner ME RALCO had the NS building.
burden of proof to show by clear and convincing
13. In declaring that respondents TEC and TPC
evidence that with respect to the tampered meters that
are entitled to the damages which it awarded.
TEC and/or TPC authored their tampering.
14. In not declaring that petitioner is entitled to
4. In finding that petitioner Meralco should not have
the differential bill.
held TEC and/or TPC responsible for the acts of Ultra.
15. In not declaring that respondents are liable
5. In finding that TEC should not be held liable for the
to petitioner for exemplary damages, attorneys fee and
tampering of this electric meter in its DCIM Building.
expenses for litigation.[25]
6. In finding that there was no notice of disconnection.
The petition must fail.
7. In finding that petitioner MERALCO was negligent
in informing TEC of the alleged tampering.
The issues for resolution can be summarized as follows: 1) whether or
8. In making the finding that it is difficult to believe
that when petitioner MERALCO inspected on June 7, not TEC tampered with the electric meters installed at its DCIM and
1988 the meter installations, they were found to be NS buildings; 2) If so, whether or not it is liable for the differential
tampered.
billing as computed by petitioner; and 3) whether or not petitioner was
justified in disconnecting the electric power supply in TECs DCIM
building.
Petitioner insists that the tampering of the electric meters installed at
the DCIM and NS buildings owned by respondent TEC has been
established by overwhelming evidence, as specifically shown by the
shorting devices found during the inspection. Thus, says petitioner,
tampering of the meter is no longer an issue.
It is obvious that petitioner wants this Court to revisit the factual
findings of the lower courts. Well-established is the doctrine that under
Rule 45 of the Rules of Court, only questions of law, not of fact, may
be raised before the Court. We would like to stress that this Court is
not a trier of facts and may not re-examine and weigh anew the
respective evidence of the parties. Factual findings of the trial court,
especially those affirmed by the Court of Appeals, are binding on this
Court.[26]
Looking at the record, we note that petitioner claims to have
discovered three incidences of meter-tampering; twice in the DCIM
building on September 28, 1987 and June 7, 1988; and once in the NS
building on April 24, 1988.
The first instance was supposedly discovered on September 28,
1987. The inspector allegedly found the presence of a short circuiting
device and saw that the meter seal was deformed. In addition,
petitioner, through the Supervising Engineer of its Special Billing
Analysis Department,[27] claimed that there was a sudden and
unexplainable drop in TECs electrical consumption starting February
10, 1986. On the basis of the foregoing, petitioner concluded that the
electric meters were tampered with.
However, contrary to petitioners claim that there was a drastic and
unexplainable drop in TECs electric consumption during the affected
period, the Pattern of TECs Electrical Consumption[28] shows that the
sudden drop is not peculiar to the said period. Noteworthy is the
observation of the RTC in this wise:
In fact, in Account No. 09341-1812-13 (heretofore
referred as Account/Meter No. 2), as evidenced by
Exhibits 35 and 35-A, there was likewise a sudden drop
of electrical consumption from the year 1984 which
recorded an average 141,300 kwh/month to 1985 which
recorded an averagekwh/month at 87,600 or a
difference-drop of 53,700 kwh/month; from 1985s
87,600 recorded consumption, the same dropped to
18,600 kwh/month or a difference-drop of 69,000
kwh/month. Surely, a drop of 53,700 could be equally
categorized as a sudden drop amounting to 69,000
which, incidentally, the Meralco claimed as
unexplainable. x x x.[29]
 The witnesses for petitioner who testified on the alleged Even more revealing is the fact that TECs meters registered

tampering of the electric meters, declared that tampering is committed 9,300 kwh and 19,200 kwh consumption on the first and second
by consumers to prevent the meter from registering the correct amount accounts, respectively, a month prior to the inspection. On the first

of electric consumption, and result in a reduced monthly electric bill, month after the meters were corrected, TECs electric

while continuing to enjoy the same power supply. Only the registration consumption registered at 9,300 kwh and 22,200 kwh on the respective

of actual electric energy consumption, not the supply of electricity, is accounts. These figures clearly show that there was no palpably drastic

affected when a meter is tampered with.[30] The witnesses claimed that difference between the consumption before and after the inspection,

after the inspection, the tampered electric meters were corrected, so casting a cloud of doubt over petitioners claim of meter-tampering.

that they would register the correct consumption of TEC. Logically, Indeed, Ultras explanation that the corporation was losing; thus, it had

then, after the correction of the allegedly tampered meters, the lesser consumption of electric power appear to be the more plausible

customers registered consumption would go up. reason for the drop in electric consumption.

In this case, the period claimed to have been affected by the Petitioner likewise claimed that when the subject meters were

tampered electric meters is from February 1986 until September again inspected on June 7, 1988, they were found to have been

1987.Based on petitioners Billing Record[31] (for the DCIM building), tampered anew. The Court notes that prior to the inspection, TEC was

TECs monthly electric consumption on Account No. 9341-1322-16 informed about it; and months before the inspection, there was an

was between 4,500 and 27,000 kwh.[32] Account No. 9341-1812-13 unsettled controversy between TEC and petitioner, brought about by

showed a monthly consumption between 9,600 and 34,200 kwh.[33] It the disconnection of electric power and the non-payment of differential

is interesting to note that, after correction of the allegedly tampered billing.We are more disposed to accept the trial courts conclusion that

meters, TECs monthly electric consumption from October 1987 to it is hard to believe that a customer previously apprehended for
February 1988 (the last month that Ultra occupied the DCIM building) tampered meters and assessed P7 million would further jeopardize

was between 8,700 and 24,300 kwh in its first account, and 16,200 to itself in the eyes of petitioner.[34] If it is true that there was evidence of

46,800 kwh on the second account. tampering found on September 28, 1987 and again on June 7, 1988,
the better view would be that the defective meters were not actually In view of the negative finding on the alleged tampering of electric

corrected after the first inspection. If so, then Manila Electric meters on TECs DCIM and NS buildings, petitioners claim of
Company v. Macro Textile Mills Corporation[35] would apply, where differential billing was correctly denied by the trial and appellate

we said that we cannot sanction a situation wherein the defects in the courts. With greater reason, therefore, could petitioner not exercise the

electric meter are allowed to continue indefinitely until suddenly, the right of immediate disconnection.

public utilities demand payment for the unrecorded electricity utilized

The law in force at the time material to this controversy was
when they could have remedied the situation immediately. Petitioners
Presidential Decree (P.D.) No. 401[39] issued on March 1, 1974.[40] The
failure to do so may encourage neglect of public utilities to the
decree penalized unauthorized installation of water, electrical or
detriment of the consuming public. Corollarily, it must be underscored
telephone connections and such acts as the use of tampered electrical
that petitioner has the imperative duty to make a reasonable and proper
meters. It was issued in answer to the urgent need to put an end to
inspection of its apparatus and equipment to ensure that they do not
illegal activities that prejudice the economic well-being of both the
malfunction, and the due diligence to discover and repair defects
companies concerned and the consuming public.[41] P.D. 401 granted
therein. Failure to perform such duties constitutes negligence.[36] By
the electric companies the right to conduct inspections of electric
reason of said negligence, public utilities run the risk of forfeiting
meters and the criminal prosecution[42] of erring consumers who were
amounts originally due from their customers.[37]
found to have tampered with their electric meters. It did not expressly

As to the alleged tampering of the electric meter in TECs NS building, provide for more expedient remedies such as the charging of

suffice it to state that the allegation was not proven, considering that differential billing and immediate disconnection against erring

the meters therein were enclosed in a metal cabinet the metal seal of consumers. Thus, electric companies found a creative way of availing

which was unbroken, with petitioner having sole access to the said themselves of such remedies by inserting into their service contracts
meters.[38] (or agreements for the sale of electric energy) a provision for

differential billing with the option of disconnection upon non-payment

by the erring consumer. The Court has recognized the validity of such
stipulations.[43] However, recourse to differential billing with also be actually proven with a reasonable degree of certainty, premised

disconnection was subject to the prior requirement of a 48-hour written upon competent proof or the best evidence obtainable.[45]
notice of disconnection.[44]
Respondent TEC sufficiently established, and petitioner in fact

Petitioner, in the instant case, resorted to the remedy of disconnection admitted, that the former paid P1,000,000.00 and P280,813.72 under

without prior notice. While it is true that petitioner sent a demand letter protest, the amounts representing a portion of the latters claim of

to TEC for the payment of differential billing, it did not include any differential billing. With the finding that no tampering was committed

notice that the electric supply would be disconnected. In fine, and, thus, no differential billing due, the aforesaid amounts should be

petitioner abused the remedies granted to it under P.D. 401 and returned by petitioner, with interest, as ordered by the Court of

Revised General Order No. 1 by outrightly depriving TEC of electrical Appeals and pursuant to the guidelines set forth by the Court.[46]

services without first notifying it of the impending

However, despite the appellate courts conclusion that no tampering
disconnection. Accordingly, the CA did not err in affirming the RTC
was committed, it held Ultra solidarily liable with petitioner
decision.
for P1,000,000.00, only because the former, as occupant of the

As to the damages awarded by the CA, we deem it proper to modify building, promised to settle the claims of the latter. This ruling is

the same. Actual damages are compensation for an injury that will put erroneous.Ultras promise was conditioned upon the finding of defect

the injured party in the position where it was before the injury. They or tampering of the meters. It did not acknowledge any culpability and

pertain to such injuries or losses that are actually sustained and liability, and absent any tampered meter, it is absurd to make the

susceptible of measurement. Except as provided by law or by lawful occupant liable. It was petitioner who received the P1 million;

stipulation, a party is entitled to adequate compensation only for such thus, it alone should be held liable for the return of the amount.

pecuniary loss as is duly proven. Basic is the rule that to recover actual
TEC also sufficiently established its claim for the
damages, not only must the amount of loss be capable of proof; it must
reimbursement of the amount paid as rentals for the generator set it

was constrained to rent by reason of the illegal disconnection of

electrical service. The official receipts and purchase orders submitted experience physical suffering or sentiments like wounded feelings,

by TEC as evidence sufficiently show that such rentals were indeed serious anxiety, mental anguish and moral shock. The only exception
made. However, the amount of P150,000.00 per month for five to this rule is when the corporation has a reputation that is debased,

months, awarded by the CA, is excessive. Instead, a total sum resulting in its humiliation in the business realm.[51] But in such a case,

of P150,000.00, as found by the RTC, is proper. it is imperative for the claimant to present proof to justify the award. It

is essential to prove the existence of the factual basis of the damage

As to the payment of exemplary damages and attorneys fees,
and its causal relation to petitioners acts.[52] In the present case, the
we find no cogent reason to disturb the same. Exemplary damages are
records are bereft of any evidence that the name or reputation of
imposed by way of example or correction for the public good in
TEC/TPC has been debased as a result of petitioners acts. Besides, the
addition to moral, temperate, liquidated, or compensatory
trial court simply awarded moral damages in the dispositive portion of
damages.[47] In this case, to serve as an example that before a
its decision without stating the basis thereof.
disconnection of electrical supply can be effected by a public utility,

the requisites of law must be complied with we affirm the award WHEREFORE, the petition is DENIED. The Decision of the

of P200,000.00 as exemplary damages. With the award of exemplary Court of Appeals in CA-G.R. CV No. 40282 dated June 18, 1997 and

damages, the award of attorneys fees is likewise proper, pursuant to its Resolution dated December 3, 1997 are AFFIRMED with the

Article 2208[48] of the Civil Code. It is obvious that TEC needed the following MODIFICATIONS: (1) the award of P150,000.00 per

services of a lawyer to argue its cause through three levels of the month for five months as reimbursement for the rentals of the

judicial hierarchy. Thus, the award of P200,000.00 is in order.[49] generator set is REDUCED to P150,000.00; and (2) the award

of P500,000.00 as moral damages is hereby DELETED.

We, however, deem it proper to delete the award of moral

damages. TECs claim was premised allegedly on the damage to its SO ORDERED.
goodwill and reputation.[50] As a rule, a corporation is not entitled to

moral damages because, not being a natural person, it cannot

G.R. No. L-67626 April 18, 1989
JOSE REMO, JR., petitioner,
vs.
THE HON. INTERMEDIATE APPELLATE COURT and E.B.
MARCHA TRANSPORT COMPANY, INC., represented by
APIFANIO B. MARCHA, respondents.
Orbos, Cabusora, Dumlao & Sta. Ana for petitioner.
GANCAYCO, J.:
A corporation is an entity separate and distinct from its stockholders.
While not in fact and in reality a person, the law treats a corporation 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. 1
However, the corporate fiction or the notion of legal entity may be
disregarded when it "is used to defeat public convenience, justify
wrong, protect fraud, or defend crime" in which instances "the law will
regard the corporation as an association of persons, or in case of two
corporations, will merge them into one." The corporate fiction may
also be disregarded when it is the "mere alter ego or business conduit
of a person." 2 There are many occasions when this Court pierced the
corporate veil because of its use to protect fraud and to justify
wrong. 3 The herein petition for review of a. resolution of the
Intermediate Appellate Court dated February 8, 1984 seeking the
reversal thereof and the reinstatement of its earlier decision dated June
30, 1983 in AC-G.R. No. 68496-R 4 calls for the application of the
foregoing principles.
In the latter part of December, 1977 the board of directors of Akron
Customs Brokerage Corporation (hereinafter referred to as Akron),
composed of petitioner Jose Remo, Jr., Ernesto Bañares, Feliciano
Coprada, Jemina Coprada, and Dario Punzalan with Lucia Lacaste as
Secretary, adopted a resolution authorizing the purchase of thirteen
(13) trucks for use in its business to be paid out of a loan the
corporation may secure from any lending institution. 5
Feliciano Coprada, as President and Chairman of Akron, purchased
thirteen trucks from private respondent on January 25, 1978 for and in
consideration of P525,000.00 as evidenced by a deed of absolute
sale. 6 In a side agreement of the same date, the parties agreed on a
downpayment in the amount of P50,000.00 and that the balance of
P475,000.00 shall be paid within sixty (60) days from the date of the
execution of the agreement. The parties also agreed that until said
balance is fully paid, the down payment of P50,000.00 shall accrue as
rentals of the 13 trucks; and that if Akron fails to pay the balance
within the period of 60 days, then the balance shall constitute as a
chattel mortgage lien covering said cargo trucks and the parties may
allow an extension of 30 days and thereafter private respondent may
ask for a revocation of the contract and the reconveyance of all said
trucks. 7
The obligation is further secured by a promissory note executed by
Coprada in favor of Akron. It is stated in the promissory note that the
balance shall be paid from the proceeds of a loan obtained from the
Development Bank of the Philippines (DBP) within sixty (60)
days. 8 After the lapse of 90 days, private respondent tried to collect
from Coprada but the latter promised to pay only upon the release of
the DBP loan. Private respondent sent Coprada a letter of demand
dated May 10, 1978. 9 In his reply to the said letter, Coprada reiterated
that he was applying for a loan from the DBP from the proceeds of
which payment of the obligation shall be made. 10
Meanwhile, two of the trucks were sold under a pacto de retro sale to a
certain Mr. Bais of the Perpetual Loans and Savings Bank at Baclaran.
The sale was authorized by a board resolution made in a meeting held
on March 15, 1978. 11
Upon inquiry, private respondent found that no loan application was
ever filed by Akron with DBP. 12
In the meantime, Akron paid rentals of P500.00 a day pursuant to a
subsequent agreement, from April 27, 1978 (the end of the 90-day
period to pay the balance) to May 31, 1978. Thereafter, no more rental
payments were made.
On June 17, 1978, Coprada wrote private respondent begging for a
grace period of until the end of the month to pay the balance of the
purchase price; that he will update the rentals within the week; and in
case he fails, then he will return the 13 units should private respondent
elect to get back the same. 13 Private respondent, through counsel,
wrote Akron on August 1, 1978 demanding the return of the 13 trucks
and the payment of P25,000.00 back rentals covering the period from
June 1 to August 1, 1978. 14
Again, Coprada wrote private respondent on August 8, 1978 asking for
another grace period of up to August 31, 1978 to pay the balance,
stating as well that he is expecting the approval of his loan application
from a certain financing company, and that ten (10) trucks have been
returned to Bagbag, Novaliches. 15 On December 9, 1978, Coprada
informed private respondent anew that he had returned ten (10) trucks
to Bagbag and that a resolution was passed by the board of directors
confirming the deed of assignment to private respondent of P475,000
from the proceeds of a loan obtained by Akron from the State
Investment House, Inc. 16
In due time, private respondent filed a compliant for the recovery of
P525,000.00 or the return of the 13 trucks with damages against Akron
and its officers and directors, Feliciano Coprada, Dario D. Punzalan,
Jemina Coprada, Lucia Lacaste, Wilfredo Layug, Arcadio de la Cruz,
Francisco Clave, Vicente Martinez, Pacifico Dollario and petitioner
with the then Court of First Instance of Rizal. Only petitioner
answered the complaint denying any participation in the transaction
and alleging that Akron has a distinct corporate personality. He was,
however, declared in default for his failure to attend the pre-trial.
In the meanwhile, petitioner sold all his shares in Akron to Coprada. It
also appears that Akron amended its articles of incorporation thereby
changing its name to Akron Transport International, Inc. which
assumed the liability of Akron to private respondent.
After an ex parte reception of the evidence of the private respondent, a
decision was rendered on October 28, 1980, the dispositive part of
which reads as follows:
Finding the evidence sufficient to prove the case of the plaintiff,
judgment is hereby rendered in favor of the plaintiff and against the
defendants, ordering them jointly and severally to pay;
a — the purchase price of the trucks in the amount of
P525,000.00 with ... legal rate (of interest) from the
filing of the complaint until the full amount is paid;
b — rentals of Bagbag property at P1,000.00 a month
from August 1978 until the premises is cleared of the
said trucks;
c — attorneys fees of P10,000.00, and
d — costs of suit.
The P50,000.00 given as down payment shall pertain as rentals of the
trucks from June 1 to August 1, 1978 which is P25,000.00 (see
demand letter of Atty. Aniano Exhibit "T") and the remaining
P25,000.00 shall be from August 1, 1978 until the trucks are removed
totally from the place." 17
A motion for new trial filed by petitioner was denied so he appealed to
the then Intermediate Appellate Court (IAC) wherein in due course a
decision was rendered on June 30, 1 983 setting aside the said decision
as far as petitioner is concemed. However, upon a motion for
reconsideration filed by private respondent dent, the IAC, in a
resolution dated February 8,1984, set aside the decision dated June 30,
1983. The appellate court entered another decision affirming the
appealed decision of the trial court, with costs against petitioner.
Hence, this petition for review wherein petitioner raises the following
issues:
 I. The Intermediate Appellate Court (IAC) erred in
disregarding the corporate fiction and in holding the
petitioner personally liable for the obligation of the
Corporation which decision is patently contrary to law
and the applicable decision thereon.
II. The Intermediate Appellate Court (IAC) committed
grave error of law in its decision by sanctioning the
merger of the personality of the corporation with that of
the petitioner when the latter was held liable for the
corporate debts. 18
We reverse.
The environmental facts of this case show that there is no cogent basis
to pierce the corporate veil of Akron and hold petitioner personally
liable for its obligation to private respondent. While it is true that in
December, 1977 petitioner was still a member of the board of directors
of Akron and that he participated in the adoption of a resolution
authorizing the purchase of 13 trucks for the use in the brokerage
business of Akron to be paid out of a loan to be secured from a lending
institution, it does not appear that said resolution was intended to
defraud anyone and more particularly private respondent. It was
Coprada, President and Chairman of Akron, who negotiated with said
respondent for the purchase of 13 cargo trucks on January 25, 1978. It
was Coprada who signed a promissory note to guarantee the payment
of the unpaid balance of the purchase price out of the proceeds of a
loan he supposedly sought from the DBP. The word "WE' in the said
promissory note must refer to the corporation which Coprada
represented in the execution of the note and not its stockholders or
directors. Petitioner did not sign the said promissory note so he cannot
be personally bound thereby.
Thus, if there was any fraud or misrepresentation that was foisted on
private respondent in that there was a forthcoming loan from the DBP
when it fact there was none, it is Coprada who should account for the
same and not petitioner.
As to the sale through pacto de retro of the two units to a third person
by the corporation by virtue of a board resolution, petitioner asserts
that he never signed said resolution. Be that as it may, the sale is not
inherently fraudulent as the 13 units were sold through a deed of
absolute sale to Akron so that the corporation is free to dispose of the
same. Of course, it was stipulated that in case of default in payment to
private respondent of the balance of the consideration, a chattel
mortgage lien shag be constituted on the 13 units. Nevertheless, said
mortgage is a prior lien as against the pacto de retro sale of the 2 units.
As to the amendment of the articles of incorporation of Akron thereby
changing its name to Akron Transport International, Inc., petitioner
alleges that the change of corporate name was in order to include
trucking and container yard operations in its customs brokerage of
which private respondent was duly informed in a letter. 19Indeed, the
new corporation confirmed and assumed the obligation of the old
corporation. There is no indication of an attempt on the part of Akron
to evade payment of its obligation to private respondent.
There is the fact that petitioner sold his shares in Akron to Coprada
during the pendency of the case. Since petitioner has no personal
obligation to private respondent, it is his inherent right as a stockholder
to dispose of his shares of stock anytime he so desires.
Mention is also made of the alleged "dumping" of 10 units in the
premises of private respondent at Bagbag, Novaliches which to the
mind of the Court does not prove fraud and instead appears to be an
attempt on the part of Akron to attend to its obligations as regards the
said trucks. Again petitioner has no part in this.
If the private respondent is the victim of fraud in this transaction, it has
not been clearly shown that petitioner had any part or participation in
the perpetration of the same. Fraud must be established by clear and
convincing evidence. If at all, the principal character on whom fault
should be attributed is Feliciano Coprada, the President of Akron,
whom private respondent dealt with personally all through out.
Fortunately, private respondent obtained a judgment against him from
the trial court and the said judgment has long been final and executory.
WHEREFORE, the petition is GRANTED. The questioned resolution G.R. No. 103372 June 22, 1992
of the Intermediate Appellate Court dated February 8,1984 is hereby
set aside and its decision dated June 30,1983 setting aside the decision EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P.
of the trial court dated October 28, 1980 insofar as petitioner is DE GUZMAN, petitioner,
concemed is hereby reinstated and affirmed, without costs. vs.
HONARABLE COURT OF APPEALS (17th Division), ( Republic
SO ORDERED. of the Philippines), UNIVERSITY OF THE
PHILIPPINES, respondents.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

CRUZ, J.:

Petitioner EPG Construction Co., Inc. and the University of the

Philippines, herein private respondent, entered into a contract for the
construction of the UP Law Library Building for the stipulated price of
P7,545,000.00. The agreement included the following provision:

ARTICLE XI

GUARANTEE

CONTRACTOR guarantees that the work completed

under the contract and any change order, thereto, shall
be in accordance with the plans and specification
prepared by ARCHITECT, and shall conform to the
specific requirements, performances, and capacities
required by the contract, and shall be free from
imperfect workmanship or materials. CONTRACTOR
shall repair at his own cost and expenses for a period of
one (1) year from date of substantial completion and
acceptance of the work by the OWNER, all the work
covered under the contract and change orders that may
prove defective except maintenance works. The
CONTRACTOR shall be liable in accordance with Art.
1723 of the Civil Code in case, within 15 years from
completion of the project, the building collapses on
account of defects in the construction or the use of
 materials of inferior quality furnished by him or due to
any violation of the terms of contract.
Upon its completion, the building was formally turned over by EPG to
the private respondent. UP issued a certification of acceptance dated
January 13, 1983, reading as follows:
This is to certify that the General Construction Work of
the College of Law Library Annex Building, University
of the Philippines, Diliman, Quezon City, has been
satisfactorily completed as per plans and specifications
as of January 11, 1983 without any defects whatsoever
and therefore accepted.
Release of the 10% retention is hereby recommended in
favor of EPG Construction, Inc.
Sometime in July, 1983, the private respondent complained to the
petitioner that 6 air-conditioning units on the third floor of the building
were not cooling properly. After inspection of the equipment, EPG
agreed to shoulder the expenses for their repair, including labor and
materials, in the amount of P38.000.00.
For whatever reason, the repair was never undertaken. UP repeated its
complaints to EPG, which again sent its representatives to assess the
defects. Finally, it made UP a written offer to repair the system for
P194,000.00.
UP insisted that EPG was obligated to repair the defects at its own
expense under the guarantee provision in their contract. EPG
demurred. UP then contracted with another company, which repaired
the defects for P190,000.00.
The private respondent subsequently demanded from EPG
reimbursement of the said amount plus an equal sum as liquidated
damages. When the demand was rejected, UP sued EPG and its
president, Emmanuel P. de Guzman, in the Regional Trial Court of
Quezon City. De Guzman moved to dismiss the complaint as to him
for lack of a cause of action, but the motion was denied.
After trial, judgment was rendered by Judge Antonio P. Solano
requiring both defendants jointly and severally to pay the plaintiff
P190,000.00 as actual damages, P50,000.00 as liquidated damages,
P10,000.00 as attorney's fees, and costs.
The petitioners appealed to the Court of Appeals, which sustained the
trial court. 1 They then came to this Court to fault the respondent court
for not holding that: 1) UP was estopped by its certificate of
acceptance from imputing liability to EPG for the defects; 2) the
defects were due to force majeure or fortuitous event; and 3)
Emmanuel de Guzman has a separate personality from that of EPG
Construction Co., Inc.
The petitioners argue that by issuing the certificate of acceptance, UP
waived the guarantee provision and is now estopped from invoking it.
The argument is absurd. All UP certified to was that the building was
in good condition at the time it was turned over to it on January 13,
1983. It did not thereby relieve the petitioners of liability for any
defect that might arise or be discovered later during the one-year
period of the guarantee. Any other interpretation would make the
guarantee provision useless to begin with as it would have
automatically become functus officio with the turn-over of the
construction.
The petitioners bolster their argument by quoting Article 1719 of the
Civil Code thus, "Acceptance of the work by the employer relieves the
contractor of liability . . . " and stopping there. The Article reads in full
as follows:
Art. 1719. Acceptance of the work by the employer
relieves the contractor of liability for any defect in the
work, unless:
(1) The defect is hidden and the employer is not, by his
special knowledge, expected to recognize the same; or
(2) The employer expressly reserves his rights against
the contractor by reason of the defect.
The exceptions were omitted by the petitioners for obvious reasons.
The defects complained against were hidden and the employer was not
expected to recognize them at the time the work was accepted.
Moreover, there was an express reservation by UP of its right to hold
the contractor liable for the defects during a period of one year.
The petitioners' contention that the defects were caused by force
majeure or fortuitous event as a result of the frequent brown-outs in
Metro Manila is not meritorious. The Court is not prepared to accept
that the recurrent power cut-offs can be classified as force majeure or a
fortuitous event, We agree that the real cause of the problem,
according to the petitioners' own subcontractor, was poor
workmanship, as discovered upon inspection of the cooling system,
Among the detects noted were improper interlocking of the entire
electrical system in all the six units; wrong specification of the time
delay relay, also in all the six units; incorrect wiring connections on
the oil pressure switches; improper setting of the Hi and Lo pressure
switches; and many missing parts like bolts and screws of panels, and
the compressor terminal insulation, and the terminal screws of a circuit
breaker. 2
Curiously, it has not been shown that the cooling system in buildings
within the same area have been similarly damaged by the power cut-
offs. The brown-outs have become an intolerable annoyance, but they
cannot excuse all contractual irregularities, including the petitioners'
shortcomings.
The petitioners also claim that the breakdown of the cooling system
was caused by the failure of UP to do maintenance work thereon. We
do not see how mere maintenance work could have corrected the
above-mentioned defects. At any rate, whether the repairs in the air-
conditioning system can be considered mere maintenance work is a
factual issue. The resolution thereof by the lower courts is binding
upon this Court in the absence of a clear showing that it comes under
the accepted exceptions to the rule. There is no such showing here.
The final point of the petition is that Emmanuel P. de Guzman has a
separate legal personality from EPG Construction Co., Inc. and should
not be held solidarity liable with it. He stresses that the acts of the
company are its own responsibility and there is no reason why any
liability arising from such acts should be ascribed to him. Thus:
It is a doctrine well-established and obtains both at law
and in equity that a corporation is a distinct legal entity
to be considered as separate and apart from the
individual stockholders or members who compose it,
and is not affected by the personal rights, obligations
and transactions of its stockholders or members. 3
The trial court did not explain why Emmanuel de Guzman was held
solidarity liable with EPG Construction Co., Inc., and neither did the
respondent court when it affirmed the appealed decision, In its
Comment on the present petition, UP also did not refute the petitioners'
argument and simply passed upon it sub silentio although the matter
was squarely raised and discussed in the petition.
Notably, when Emmanuel de Guzman moved to dismiss the complaint
as to him, UP said in its opposition to the motion that it was suing him
"in his official capacity and not in his personal capacity." His inclusion
as President of the company was therefore superfluous, as De Guzman
correctly contended, because his acts as such were corporate acts
imputable to EPG itself as his principal. It is settled that;
A corporation is invested by law with a personality
separate and distinct from those of the persons
composing it as well as from that of any other entity to
which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all
of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate
corporate personality. The general manager of a
corporation therefore should not be made personally
answerable for the payment of the employee's
backwages unless he had acted maliciously or in bad
faith in terminating the services of the employee. 4
The exception noted is where the official "had acted maliciously or in
bad faith," in which event he may be made personally liable for his
own act. That exception is not applicable in the case at bar, because it
has not been proved that De Guzman acted maliciously or in bad faith
when, as President of EPG, he sought to protect its interests and
resisted UP's claims. Whatever damage was caused to UP as a result of
his acts is the sole responsibility of EPG even though De Guzman was
its principal officer and controlling stockholder.

In sum, we hold that the lower court did not err in holding EPG liable
for the repair of the air-conditioning system at its expense pursuant to
the guarantee provision in the construction contract with UP. However,
Emmanuel de Guzman is not solidarily liable with it, having acted on
its behalf within the scope of his authority and without any
demonstrated malice or bad faith.

WHEREFORE, the appealed decision is AFFIRMED but with the

modification that EPG Construction Co., Inc. shall be solely liable for
the damages awarded in favor of the University of the Philippines. It is
so ordered.

Griño-Aquino, Medialdea and Bellosillo, JJ., concur.

 [G.R. No. 124950. May 19, 1998]
ASIONICS PHILIPPINES, INC. and/or FRANK YIH, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION,
YOLANDA BOAQUINA, and JUANA
GAYOLA, respondents.
RESOLUTION
VITUG, J.:
In this special civil action of certiorari, petitioners Asionics
Philippines, Inc. (API), and its President and majority stockholder,
Frank Yih, seek to annul and set aside the decision,[1] dated 19 May
1996, of the National Labor Relations Commission ("NLRC") which
has ordered, inter alia, that they grant separation pay, computed
at one-half (1/2) month per year of service, to private respondents
Yolanda Boaquina and Juana Gayola.Concomitantly being contested is
the subsequent 16th April 1996 resolution[2] of the NLRC denying
petitioners' motion for reconsideration.
API is a domestic corporation engaged in the business of
assembling semi-conductor chips and other electronic products mainly
for export.Yolanda Boaquina and Juana Gayola started working for
API in 1979 and 1988, respectively, as material control clerk and as
production operator.During the third quarter of 1992, API commenced
negotiations with the duly recognized bargaining agent of its
employees, the Federation of Free Workers ("FFW"), for a Collective
Bargaining Agreement ("CBA"). A deadlock, however, ensued and the
union decided to file a notice of strike. Thisevent prompted the two
customers of API, Indala and CP Clare Theta J, to thereupon refrain
from sending to API additional kits or materials for assembly. API,
given the circumstance that its assembly line had to thereby grind to a
halt, was forced to suspend operations pursuant to Article 286[3] of the
Labor Code. Private respondents Boaquina and Gayola were among
the employees asked to take a leave from work.
Upon the resolution of the bargaining deadlock in October of
1992, a CBA was concluded between API and FFW. The contract was
signed on 30 October 1992 by the parties. Respondent Boaquina was
directed to report back since her previous assignment pertained to the
issuance of raw materials needed for the production of electronic items
being ordered by Indala, one of API's client which promptly resumed
its business with API. On the other hand, Juana Gayola, among other
employees, could not be recalled forthwith because the CP Clare/Theta
J account, where she was assigned as the production operator, had yet
to renew its production orders.
Inasmuch as its business activity remained critical, API was
constrained to implement a company-wide retrenchment affecting one
hundred five (105) employees from a work force that otherwise
totalled three hundred four (304). The selection was based on
productivity/performance standards pursuant to the CBA. Yolanda
Boaquina was one of those affected by the retrenchment and API,
through its Personnel Manager Beatriz G. Torro, advised her of such
fact in its letter of 29 December 1992. In that letter, Boaquina was
informed that her services were to be dispensed with effective 31
January 1993[4] although she did not have to render any service for the
month of January she being by then already considered to be on leave
with pay. While Juana Gayola was not supposed to be affected by the
retrenchment in view of her high performance rating, her services,
nevertheless, were considered to have been ended on 04 September
1992[5] when she was ordered by API to take an indefinite leave of
absence.She had not since been recalled.
Dissatisfied with their union (FFW), Boaquina and
Gayola, together with some of other co-employees, joined the Lakas
ng Manggagawa sa Pilipinas Labor Union ("Lakas Union") where they
eventually became members of its Board of Directors.
On 06 January 1993, Lakas Union filed a notice of strike against
API on the ground of unfair labor practice (ULP) allegedly committed
by the latter, specifically, for union busting, termination of union
officers/members, harassment and discrimination.[6] A conciliation
meeting was scheduled for 08 January 1993 by the National
Conciliation and Mediation Board ("NCMB") to address the problem
which meeting, however, was reset to 14 January 1993 for failure of
any representative or member of Lakas Union to appear. On 10
January 1993, Lakas Union staged a strike.
Claiming that the strike staged by Lakas Union was illegal, API
on 11 January 1993, brought before the NLRC National Capital
Region Arbitration a petition, docketed NLRC NCR Case No. 00-01-
00402-93, for declaration of illegality of the strike. Lakas Union
countered that their strike was valid and staged as a measure of self-
preservation and as self-defense against the illegal dismissal of
petitioners aimed at union busting in the guise of a retrenchment
program.
On 23 June 1994, Labor Arbiter Villarente, Jr., to whose sala the
case was raffled, promulgated a decision[7] declaring the strike staged
by Lakas Union to be illegal. He declared:
WHEREFORE, judgment is hereby rendered declaring that the strike
staged by respondents Federation of Free Workers and the Lakas
Manggagawa ng Pilipinas on January 10, 1993 and thereafter, was
ILLEGAL.
Accordingly, all the registered officers of the two respondent-Unions
at the time of the strike are hereby declared to have lost their
employment status (aside from the fact that ten of them earlier
mentioned had settled their cases amicably with petitioner).
Insofar as the striking members are concerned and who did not settle
their cases amicably, their separation from the service of petitioner
API is hereby declared VALID under the company-wide retrenchment
program which was earlier made known to proper authorities.
SO ORDERED.[8]
Meanwhile, at the instance of several employees which included
private respondents Boaquina and Gayola, a complaint for illegal
dismissal, violation of labor standards and separation pay, as well as
for recovery of moral and exemplary damages, was filed against API
and/or Frank Yih before the NLRC National Capital Region
Arbitration Branch. The illegal dismissal case, docketed NLRC NCR
Case No. 00-05-03326 and No. 00-03-01952-93, was assigned to
Labor Arbiter Potenciano S. Canizares, Jr.
On 22 June 1994, Labor Arbiter Canizares rendered his
decision[9] holding petitioners guilty of illegal dismissal. He ordered
petitioners to pay private respondent Yolanda Boaquina separation pay
of one-half (1/2) month pay for every year of service, plus overtime
pay, and to reinstate private respondent Juana Gayola with full
backwages from the time her salaries were withheld from her until her
actual reinstatement.
The decision of Labor Arbiter Villarente, Jr., and that of Labor
Arbiter Canizares were both appealed to the NLRC.
On 20 April 1995, the Third Division of NLRC promulgated its
resolution[10] which affirmed the finding of Labor Arbiter Villarente,
Jr., that the strike staged by Lakas Union was illegal. On 19 March
1996, the same Third Division of NLRC, in the illegal dismissal case,
rendered a decision[11]modifying the decision of Labor Arbiter
Canizares by declaring that private respondents were not illegally
dismissed but were validly terminated due to the retrenchment policy
implemented by API. Accordingly, private respondents were awarded
separation pay and an additional one (1) month salary in favor of Juana
Gayola by way of indemnity for petitioner API's failure to properly
inform her of the retrenchment. The NLRC dismissed the claim of
petitioners that private respondents should not be entitled to separation
pay because of their involvement in the strike which was declared
illegal .
On 01 April 1996, petitioners moved for a reconsideration of the
19th March 1996 NLRC decision; the motion, however, was denied by
the NLRC in its resolution of 16 April 1996.
In this recourse, the following issues have been raised by
petitioners; to wit:
"WHETHER OR NOT PRIVATE RESPONDENTS WHO ARE
OFFICERS OF THE UNION ARE STILL ENTITLED TO
SEPARATION PAY AND INDEMNITY DESPITE HAVING
PARTICIPATED IN A STRIKE THAT HAS BEEN DECLARED
ILLEGAL?
"WHETHER OR NOT A STOCKHOLDER/DIRECTOR/OFFICER
OF A CORPORATION CAN BE HELD LIABLE FOR THE
OBLIGATION OF THE CORPORATION ABSENT ANY PROOF
AND FINDING OF BAD FAITH?[12]
The position advanced by petitioners on the first issue is bereft of
merit. It is quite evident that the termination of employment of private
respondents was due to the retrenchment policy adopted by API and
not because of the former's union activities. In a letter, dated 29
December 1992, API itself advised respondent Boaquina that she was
one of those affected by the retrenchment program of the company and
that her services were to be deemed terminated effective 31 January
1993. In their pleadings submitted to Labor Arbiter Canizares, Jr., in
connection with the illegal dismissal case, petitioners firmly averred
that the services of private respondents were being dispensed with not
by reason of their union activities but in view of the retrenchment
policy of the company. The Solicitor-General correctly pointed out
the admissions made by petitioners; thus:
The fact is, complainant Boaquina was in fact part of the first batch of
retrenchees. She was duly notified of her retrenchment, as well as the
proper labor authorities.Ms. Boaquina alleged in her position
paper/affidavit that:
[O]n September 12, 1992, I was illegally laid-off for no reason that I
know other than my union activities. I was recalled on October 6, 1992
and again I was laid-off in a memorandum of January 4, 1993 effective
the end of said month.
Complainant Boaquina of course failed, obvious wittingly, to tell her
story truthfully. In the first place, she was never terminated for her
union activities. Asionics just concluded its CBA with the employees
bargaining representative. Asionics were also too preoccupied with
more earthshaking and exigent problems, principally that of getting the
business back on its feet, to concern themselves with potential
(whether real or imagined) entanglements/complications with the
union, much less of one individual member. Moreover, for academic
discussion, let us say that indeed complainant Boaquina was targeted
for termination due to union activities.Under the circumstances, she
would have just been terminated outright, without recall. The truth of
the matter is, Boaquina was made to go on leave in September 1992
precisely because of the pull-out of CP Clare Theta-J which resulted in
work shortage. If she was recalled before she was finally retrenched, it
only shows that the company had been trying its best to accommodate
the most possible number of employees in its payroll, even given that
it was in dire financial straits. Of course, the company cannot just let
the workers go to work and pay them their dues even though there is
nothing to do.
Complainant Gayola on the other hand was separated from service
owing to the fact that production totally ceased by virtue of the
blockade caused by the strike and the pull-out of Asionics last
customer. In short, the strike aggravated a bad situation by making it
worse and eventually, the worst possible nightmare for any business
enterprise. There being no work whatsoever to do, complainant
Gayola, like the other employees, had to be terminated from
work.[13] (italized portions found in the text)
The decision of Labor Arbiter Villarente, Jr., declaring private
respondents to have lost their employment status due to their
participation in an illegal strike is of no really significance to
petitioners. It should suffice to say, as so aptly observed by the NLRC,
that the retrenchment of private respondents has, in fact, preceded the
declaration of strike.
It is, instead, on the issue of joint and solidary liability of
petitioner Frank Yih with API that the Court has decided to give due
course to the instant petition. The court cannot agree with the
Solicitor-General in suggesting that even if Frank Yih had no direct
hand in the dismissal of the respondents he should be personally liable
therefor on account alone of his being the President and majority
stockholder of the company. The disquisition by the Court in Santos
vs. NLRC[14] is quite succinct and clear. Thus -
"A corporation is a juridical entity with legal personality separate and
distinct from those acting for and in its behalf and, in general, from the
people comprising it.The rule is that obligations incurred by the
corporation, acting through its directors, officers and employees, are
its sole liabilities. Nevertheless, being a mere fiction of law, peculiar
situations or valid grounds can exist to warrant, albeit done sparingly,
the disregard of its independent being and the lifting of the corporate
veil. As a rule, this situation might arise when a corporation is used to
evade a just and due obligation or to justify a wrong, to shield or
perpetrate fraud, to carry out similar unjustifiable aims or intentions, or
as a subterfuge to commit injustice and so circumvent the law."
"xxx xxx xxx"
It is true, there were various cases when corporate officers were
themselves held by the Court to be personally accountable for the
payment of wages and money claims to its employees. In A.C. Ransom
Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under
the Minimum Wage Law, the responsible officer of an employer
corporation could be held personally liable for nonpayment of
backwages for `(i)f the policy of the law were otherwise, the
corporation employer (would) have devious ways for evading payment
of back wages. In the absence of a clear identification of the officer
directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case
was cited in Chua vs. NLRC in holding personally liable the vice-
president of the company, being the highest and most ranking official
of the corporation next to the President who was dismissed, for the
latters claim for unpaid wages.
A review of the above exceptional cases would readily disclose the
attendance of facts and circumstances that could rightly sanction
personal liability on the part of the company officer. In A.C. Ransom,
the corporate entity was a family corporation and execution against it
could not be implemented because of the disposition posthaste of its
leviable assets evidently in order to evade its just and due
obligations. The doctrine of `piercing the veil of corporate fiction was
this clearly appropriate. Chua likewise involved another family
corporation, and this time the conflict was between two brothers
occupying the highest ranking positions in the company. There were
incontrovertible facts which pointed to extreme personal animosity
that resulted, evidently in bad faith, in the easing out from the
company of one of the brothers by the other.
The basic rule is still that which can deduced from the Courts
pronouncement in Sunio vs. National Labor Relations Commission
(127 SCRA 390), thus:
We come now to the personal liability of petitioner, Sunio, who was
made jointly and severally responsible with petitioner company and
CIPI for the payment of the backwages of private respondents. This is
reversible error. The Assistant Regional Directors Decision failed to
disclose the reason why he was made personally liable. Respondents,
however, alleged as grounds thereof, his being the owner of one-half
(1/2) interest of said corporation, and his alleged arbitrary dismissal of
private respondents.
Petitioner Sunio was impleaded in the Complaint in his capacity as
General Manager of petitioner corporation. There appears to be no
evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act, therefore, was
within the scope of his authority and was a corporate act.
It is basic that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it as well as
from that of any other legal entity to which it may be related. Mere
ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality. Petitioner
Sunio, therefore, should not have been made personally answerable for
the payment of private respondents back salaries.
The Court, to be sure, did appear to have deviated somewhat in Gudez
vs. NLRC (183 SCRA 644), however, it should be clear from our
recent pronouncement in Mam Realty Development Corporation and
Manuel Centeno vs. NLRC (244 SCRA 797), that the Sunio doctrine
still prevails.[15]
Nothing on record is shown to indicate that Frank Yih has acted in
bad faith or with malice in carrying out the retrenchment program of
the company. His having been held by the NLRC to be solidarily and
personally liable with API is thus legally unjustified.
 WHEREFORE, the questioned decision of the NLRC is
MODIFIED insofar as it holds herein petitioner Frank Yih personally
liable with Asionics Philippines, Inc., which portion of the decision is
SET ASIDE; in all other respects, however, the questioned decision is
AFFIRMED and remains unaffected. No costs.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo,
Panganiban, and Quisumbing, JJ., concur.