daniel-corporation law cases.docx

7/25/2019 daniel-corporation law cases.docx

1/117

G.R. No. L-37331 March 18, 1933

FRED M. HARDEN, J.D. HIGHSMITH, and JOHN . HART, !n "h#!r o$n %#ha&' and !n "ha" a&&

o"h#r ("oc)ho&d#r( o' "h# *a&a"oc M!n!n+ oan, #"c.,plaintifs-appellants,vs.*ENG/ET ONSOLIDATED MINING OM0AN, *ALATO MINING OM0AN, H. E. REN2, JOHN

. JA/SSERMANN, and A. . *EAM,deendants-appellees.

Gibbs and McDonough and Roman Ozaeta for appellants.

DeWitt, Perkins and Brad for appellees.

Ross, !a"rence and #elph for appellee Balatoc Mining $ompan.

STREET,J.:

This action was originally instituted in the Court o First Instance o the City o Manila by F. M. Harden,acting in his own behal and that o all other stocholders o the !alatoc Mining Co. who "ight #oin in theaction and contribute to the e$pense o the suit. %ith the plaintif Harden two others, &. '. Highs"ithand &ohn C. Hart, subse(uently associated the"selves. The deendants are the !enguet Consolidated

Mining Co., the !alatoc Mining Co., H. ). *en+, &ohn %. Hausser"ann, and . %. !ea". The principalpurpose o the original action was to annul a certicate covering //,/// shares o the stoc o the!alatoc Mining Co., which have been issued to the !enguet Consolidated Mining Co., and to secure tothe !alatoc Mining Co., the restoration o a large su" o "oney alleged to have been unlawullycollected by the !enguet Consolidated Mining Co., with legal interest, ater deduction therero" o thea"ount e$pended by the latter co"pany under a contract between the two co"panies, bearing date oMarch 0, 1023. The co"plaint was aterwards a"ended so as to include a prayer or the annul"ent othis contract. 4hortly prior to the institution o this lawsuit, the !enguet Consolidated Mining Co.,transerred to H. ). *en+, as trustee, the certicate or //,/// shares o the !alatoc Mining Co. whichconstitute the principal sub#ect "atter o the action. This was done apparently to acilitate the splittingup to the shares in the course o the sale or distribution. To prevent this the plaintifs, upon ling theiroriginal co"plaint, procured a preli"inary in#unction restraining the deendants, their agents and

servants, ro" selling, assigning or transerring the //,/// shares o the !alatoc Mining Co., or anypart thereo, and ro" re"oving said shares ro" the 5hilippine Islands. This e$plains the connection o*en+ with the case. The other individual deendants are "ade "erely as o6cials o the !enguetConsolidated Mining Co. 7pon hearing the cause the trial court dis"issed the co"plaint and dissolvedthe preli"inary in#unction, with costs against the plaintifs. Fro" this #udg"ent the plaintifs appealed.

The acts which have given rise this lawsuit are si"ple, as the nancial interests involve are i""ense.!rie8y told these acts are as ollows9 The !enguet Consolidated Mining Co. was organi+ed in &une, 10/:,as a sociedad anonimain conor"ity with the provisions o 4panish law; while the !alatoc Mining Co.was organi+ed in 'ece"ber 10251A each.

%hen the !alatoc Mining Co. was rst organi+ed the properties ac(uired by it were largely undeveloped;and the original stocholders were unable to supply the "eans needed or protable operation. For thisreason, the board o directors o the corporation ordered a suspension o all wor, efective &uly :1,102. In ?ove"ber o the sa"e year a general "eeting o the co"panyBs stocholders appointed aco""ittee or the purpose o interesting outside capital in the "ine. 7nder the authority o thisresolution the co""ittee approached . %. !ea", then president and general "anager o the !enguetCo"pany, to secure the capital necessary to the develop"ent o the !alatoc property. s a result o thenegotiations thus begun, a contract, or"ally authori+ed by the "anage"ent o both co"panies, wase$ecuted on March 0, 1023, the principal eatures o which were that the !enguet Co"pany was to

proceed with the develop"ent and construct a "illing plant or the !alatoc "ine, o a capacity o 1//tons o ore per day, and with an e$traction o at least < per cent o the gold content. The !enguetCo"pany also agreed to erect an appropriate power plant, with the aerial tra"lines and such othersurace buildings as "ight be needed to operate the "ine. In return or this it was agreed that the!enguet Co"pany should receive ro" the treasurer o the !alatoc Co"pany shares o a par value o5//,///, in pay"ent or the rst 5//,/// be thus advanced to it by the !enguet Co"pany.

The peror"ance o this contract was speedily begun, and by May :1, 1020, the !enguet Co"pany hadspent upon the develop"ent the su" o 51,@13,0


2/117

!enguet Co"pany in cash. Meanwhile dividends o the !alatoc Co"pany have been enriching itsstocholders, and at the ti"e o the ling o the co"plaint the value o its shares had increased in the"aret ro" a no"inal valuation to "ore than eleven pesos per share. %hile the !enguet Co"pany waspouring its "illion and a hal into the !alatoc property, the arrange"ents "ade between the twoco"panies appear to have been viewed by the plaintif Harden with co"placency, he being the owner o"any thousands o the shares o the !alatoc Co"pany. !ut as soon as the success o the develop"ent

had beco"e apparent, he began this litigation in which he has been #oined by two others o the eightyshareholders o the !alatoc Co"pany.

!rie8y, the legal point upon which the action is planted is that it is unlawul or the !enguet Co"pany tohold any interest in a "ining corporation and that the contract by which the interest here in (uestionwas ac(uired "ust be annulled, with the conse(uent obliteration o the certicate issued to the !enguetCo"pany and the corresponding enrich"ent o the shareholders o the !alatoc Co"pany.

%hen the 5hilippine Islands passed to the sovereignty o the 7nited 4tates, in the attention o the5hilippine Co""ission was early drawn to the act that there is no entity in 4panish law e$actlycorresponding to the notion o the corporation in )nglish and "erican law; and in the 5hilippine !ill,approved &uly 1, 10/2, the Congress o the 7nited 4tates inserted certain provisions, under the head o

Franchises, which were intended to control the law"aing power in the 5hilippine Islands in the "attero granting o ranchises, privileges and concessions. These provisions are ound in section 3@ and 3< othe ct. The provisions o section 3@ have been superseded by section 2 o the ct o Congress ougust 20, 101, but in section 3< there is a provision reerring to "ining corporations, which stillre"ains the law, as a"ended. This provisions, in its original or", reads as ollows9 D... it shall beunlawul or any "e"ber o a corporation engaged in agriculture or "ining and or any corporationorgani+ed or any purpose e$cept irrigation to be in any wise interested in any other corporationengaged in agriculture or in "ining.D

7nder the guidance o this and certain other provisions thus enacted by Congress, the 5hilippineCo""ission entered upon the enact"ent o a general law authori+ing the creation o corporations in the5hilippine Islands. This rather elaborate piece o legislation is e"bodied in what is called our Corporation

=aw >ct ?o. 1@?o. 1@


3/117

reor"ing and reorgani+ing under the Corporation =aw, should continue to be governed by the laws thatwere in orce prior to the passage o this ct Din relation to their organi+ation and "ethod o transactingbusiness and to the rights o "e"bers thereo as between the"selves, but their relations to the publicand public o6cials shall be governed by the provisions o this ct.D

s already observed, the provision above (uoted ro" section 3< o the ct Congress o &uly 1, 10/2

>5hilippine !illA, generally prohibiting corporations engaged in "ining and "e"bers o such ro" beinginterested in any other corporation engaged in "ining, was a"ended by section 3 o ct ?o. :e$cept or irrigationA o aninterest in any other corporation engaged in agriculture or in "ining was so "odied as to li"it therestriction to corporations organi+ed or the purpose o engaging in agriculture or in "ining.

s originally drawn, our Corporation =aw >ct ?o. 1@A o said ctas it now stands. "itting the proviso, which see"s not to be pertinent to the present controversy, saidprovision reads as ollows9

4)C. 10/ >A. Penalties. G The violation o any o the provisions o this ct and its a"end"entsnot otherwise penali+ed therein, shall be punished by a ne o not "ore than ve thousand pesosand by i"prison"ent or not "ore than ve years, in the discretion o the court. I the violation isco""itted by a corporation, the sa"e shall, upon such violation being proved, be dissolvedby *uo "arrantoproceedings instituted by the ttorney-Eeneral or by any provincial scal byorder o said ttorney-Eeneral9 . . . .

7pon a survey o the acts setched above it is obvious that there are two unda"ental (uestionsinvolved in this controversy. The rst is whether the plaintifs can "aintain an action based upon theviolation o law supposedly co""itted by the !enguet Co"pany in this case. The second is whether,assu"ing the rst (uestion to be answered in the a6r"ative, the !enguet Co"pany, which was

organi+ed as a sociedad anonima, is a corporation within the "eaning o the language used by theCongress o the 7nited 4tates, and later by the 5hilippine =egislature, prohibiting a "ining corporationro" beco"ing interested in another "ining corporation. It is obvious that, i the rst (uestion beanswered in the negative, it will be unnecessary to consider the second (uestion in this lawsuit.

7pon the rst point it is at once obvious that the provision reerred to was adopted by the law"aerswith a sole view to the public policy that should control in the granting o "ining rights. Further"ore, thepenalties i"posed in what is now section 10/ >A o the Corporation =aw or the violation o theprohibition in (uestion are o such nature that they can be enorced only by a cri"inal prosecution or byan action o *uo "arranto. !ut these proceedings can be "aintained only by the ttorney-Eeneral inrepresentation o the Eovern"ent.

%hat roo" then is let or the private action which the plaintifs see to assert in this case Thedeendant !enguet Co"pany has co""itted no civil wrong against the plaintifs, and i a public wronghas been co""itted, the directors o the !alatoc Co"pany, and the plaintif Harden hi"sel, were theactive inducers o the co""ission o that wrong. The contract, supposing it to have been unlawul inact, has been peror"ed on both sides, by the building o the !alatoc plant by the !enguet Co"panyand the delivery to the latter o the certicate o //,/// shares o the !alatoc Co"pany. There is nopossibility o really undoing what has been done. ?obody would suggest the de"olition o the "ill. The!alatoc Co"pany is secure in the possession o that i"prove"ent, and tal about putting the parties instatus *uo anteby restoring the consideration with interest, while the !alatoc Co"pany re"ains inpossession o what it obtained by the use o that "oney, does not (uite "eet the case. lso, to "ulct


4/117

the !enguet Co"pany in "any "illions o dollars in avor o individuals who have not the slighteste(uitable right to that "oney in a proposition to which no court can give a ready assent.

The "ost plausible presentation o the case o the plaintifs proceeds on the assu"ption that only one othe contracting parties has been guilty o a "isde"eanor, na"ely, the !enguet Co"pany, and that theother party, the !alatoc Co"pany, is wholly innocent to participation in that wrong. The plaintifs would

then have us apply the second paragraph o article 1:/< o the Civil Code which declares that aninnocent party to an illegal contract "ay recover anything he "ay have given, while he is not bound toulll any pro"ise he "ay have "ade. !ut, supposing that the rst hurdle can be saely vaulted, thegeneral re"edy supplied in article 1:/< o the Civil Code cannot be invoed where an ade(uate specialre"edy is supplied in a special law. It has been so held by this court in Go $hioco %s. Martinez>@< 5hil.,2?ational!an %s. Matthews, 0 7. 4., 21; eroot %s. Far"ers J M. !an, 21 7. 4., 21.A ther analogies pointin the sa"e direction. >4outh J la. *. Einniss %s. !. J M. Consol. etc. Mining Co., 20 Mont., @2; Hol"esJ Eriggs Mg. Co. %s. Hol"es J %essell Metal Co., 123 ?. K., 210 5orto *ico,1@:A, or the reason that this case arose under a provision o the Foraer ct, a law analogous to our5hilippine !ill. It appears that the registrar had reused to register two deeds in avor o the Co"paLia+ucarera on the ground that the land thereby conveyed was in e$cess o the area per"itted by law tothe co"pany. The 5orto *ican court reversed the ruling o the registrar and ordered the registration othe deeds, saying9

Thus it "ay be seen that a corporation li"ited by the law or by its charter has until the 4tate actsevery power and capacity that any other individual capable o ac(uiring lands, possesses. Thecorporation "ay e$ercise every act o ownership over such lands; it "ay sue in e#ect"ent orunlawul detainer and it "ay de"and specic peror"ance. It has an absolute title against all the

world e$cept the 4tate ater a proper proceeding is begun in a court o law. ... The ttorneyEeneral is the e$clusive o6cer in who" is conded the right to initiate proceedings or escheator attac the right o a corporation to hold land.

Having shown that the plaintifs in this case have no right o action against the !enguet Co"pany orthe inraction o law supposed to have been co""itted, we orego cny discussion o the urther (uestionwhether a sociedad anonimacreated under 4panish law, such as the !enguet Co"pany, is a corporationwithin the "eaning o the prohibitory provision already so "any ti"es "entioned. That i"portant(uestion should, in our opinion, be let until it is raised in an action brought by the Eovern"ent.

The #udg"ent which is the sub#ect o his appeal will thereore be a6r"ed, and it is so ordered, withcosts against the appellants.

+%ancea, $.-., illamor, Ostrand, illa/Real, +bad #antos, (ull, ickers, &mperial and Butte, --., concur.

G.R. No. L-18415 Oc"o%#r 36, 1954

STOHOLDERS OF F. G/AN2ON AND SONS, IN.,petitioners-appellants,vs.

REGISTER OF DEEDS OF MANILA, respondent-appellee.

Ramon $. )ernando for petitioners/appellants.O0ce of the #olicitor General for respondent/appellee.


5/117

*A/TISTA ANGELO,J.:

n 4epte"ber 10, 10/, the ve stocholders o the F. Euan+on and 4ons, Inc. e$ecuted a certicate oli(uidation o the assets o the corporation reciting, a"ong other things, that by virtue o a resolution othe stocholders adopted on 4epte"ber 13, 10/, dissolving the corporation, they have distributeda"ong the"selves in proportion to their shareholdings, as li(uidating dividends, the assets o said

corporation, including real properties located in Manila.

The certicate o li(uidation, when presented to the *egister o 'eeds o Manila, was denied registrationon seven grounds, o which the ollowing were disputed by the stocholders9

:. The nu"ber o parcels not certied to in the acnowledg"ent;

*ules o Court, *ule 1/@, 4ec. :A.

'eciding the consultaelevated by the stocholders, the Co""issioner o =and *egistration overruledground ?o. 3 and sustained re(uire"ents ?os. :, < and .

The stocholders interposed the present appeal.

s correctly stated by the Co""issioner o =and *egistration, the propriety or i"propriety o the threegrounds on which the denial o the registration o the certicate o li(uidation was predicated hinges onwhether or not that certicate "erely involves a distribution o the corporationBs assets or should beconsidered a transer or conveyance.

ppellants contend that the certicate o li(uidation is not a conveyance or transer but "erely adistribution o the assets o the corporation which has ceased to e$ist or having been dissolved. This isapparent in the "inutes or dissolution attached to the docu"ent. ?ot being a conveyance thecerticate need not contain a state"ent o the nu"ber o parcel o land involved in the distribution inthe acnowledg"ent appearing therein. Hence the a"ount o docu"entary sta"ps to be a6$edthereon should only be 5/.:/ and not 50@/.@?elson v. wen, 11: la., :32, 21 4o. 3Hall J Faley v. laba"a Ter"inal,13: la :0, Eottried v. Miller, 1/@ 7.4.,


6/117

corporation to the stocholders. It is, thereore, air and logical to consider the certicate o li(uidationas one in the nature o a transer or conveyance.

%H)*)F*), we a6r" the resolution appealed ro", with costs against appellants.

!abrador, $oncepcion, Rees, -.B.!., Paredes, Dizon, Regala and Makalintal, --.,concur.

Barrera, -.,too no part.

G.R. No. L-1141 A+(" 31, 1954

GREGORIO 0ALAIO, !n h!( o$n %#ha&' and !n %#ha&' o' h!( !nor ch!&d,

MARIO 0ALAIO,plaintifs-appellants,vs.

FEL TRANS0ORTATION OM0AN,deendant-appellee.

+ntonio +. #aba for plainti1s/appellants.

Mercado, er and Rees for defendant/appellee.

REGALA,J.:

This is an appeal by the plaintifs ro" the decision o the Court o First Instance o Manila whichdis"issed their co"plaint.

riginally taen to the Court o ppeals, this appeal was certied to this Court on the ground that itraises purely (uestions o law.

The parties in this case adopt the ollowing ndings o act o the lower court9

In their co"plaint led with this Court on May 1heavy dutyA and one heavy duty electric drill, or a sacrice sale o 511Athat there is no cause o action against the deendant co"pany, and >2A that the cause o action

is barred by prior #udg"ent..

In its rder, dated &une , 102A that the sale and transer o the

#eep C-3 by Isabelo Calingasan to the Fely Transportation was "ade on 'ece"ber 2@, 10


7/117

and cri"inal cases were si"ultaneously tried by agree"ent o the parties in said case. In theCounterclai" o the nswer, deendant alleges that in view o the ling o this co"plaint which isa clearly unounded civil action "erely to harass the deendant, it was co"pelled to engage theservices o a lawyer or an agreed a"ount o 5Cri"inal Case ?o. -1/@A an atte"pt was unsuccessully "ade by the prosecutionto prove "oral da"ages allegedly sufered by herein plaintif Eregorio 5alacio. =iewise anatte"pt was "ade in vain by the private prosecutor in that case to prove the agreed attorneyBsees between hi" and plaintif Eregorio 5alacio and the e$penses allegedly incurred by theherein plaintifs in connection with that case. 'uring the trial o this case, plaintif Eregorio5alacio testied substantially to the sa"e acts.

The Court o First Instance o ue+on City in its decision in Cri"inal Case ?o. 1/@ >)$hibit D2DAdeter"ined and thoroughly discussed the civil liability o the accused in that case. The dispositivepart thereo reads as ollows9

I? NI)% F TH) F*)EI?E, the Court nds the accused lredo Carillo y 'a"aso guilty beyondreasonable doubt o the cri"e charged in the inor"ation and he is hereby sentenced to suferi"prison"ent or a period o Two Months J ne 'ay o rresto Mayor; to inde"niy the ofendedparty, by way o conse(uential da"ages, in the su" o 5


8/117

"ain purpose in or"ing the corporation was to evade his subsidiary civil liability1resulting ro" theconviction o his driver, lredo Carillo. This conclusion is borne out by the act that the incorporators othe Fely Transportation are Isabelo Calingasan, his wie, his son, 'r. Calingasan, and his two daughters.%e believe that this is one case where the deendant corporation should not be heard to say that it hasa personality separate and distinct ro" its "e"bers when to allow it to do so would be to sanction theuse o the ction o corporate entity as a shield to urther an end subversive o #ustice. >=a Ca"pana

Cofee Factory, et al. v. aisahan ng "ga Manggagawa, etc., et al., E.*. ?o. =-culpa a*uilianaA G %e are convinced, ro" the discussion prayer in the brie on appeal,that they are insisting the subsidiary civil liability o the deendant. s a "atter o act, the record showsthat plaintifs "erely presented the transcript o the stenographic notes >)$hibit DDA taen at thehearing o the cri"inal case, which Eregorio 5alacio corroborated, in support o their clai" or da"ages.

This rules out the deense o res 7udicata, because such liability proceeds precisely ro" the #udg"ent inthe cri"inal action, where the accused was ound guilty and ordered to pay an inde"nity in the su"5


9/117

ti"e ater that %illits ca"e to Manila and organi+ed a corporation here nown as %illits J 5atterson,=td., in and to which he again subscribed or all o the capital stoc e$cept the no"inal shares necessaryto (ualiy the directors. In legal efect, the 4an Francisco corporation too over and ac(uired all o theassets and liabilities o the Manila corporation. t the ti"e that %illits was in Manila and while to allintents and purposes he was the sole owner o the stoc o corporations, there was a conerencebetween hi" and the plaintif over the disputed construction o )$hibit . s a result o which another

instru"ent, nown in the record as )$hibit !, was prepared in the or" o a letter which the plaintifaddressed to %illits at Manila on ?ove"ber 1/, 1010, the purpose o which was to "ore clearly deneand speciy the co"pensation which the plaintif was to receive or his services. %illits received andconr"ed this letter by signing the na"e o %illits J 5atterson, !y C.d. %illits. t the ti"e bothcorporations were legally organi+ed, and there is nothing in the corporate "inutes to show that )$hibit !was ever or"ally ratied or approved by either corporation. ter its organi+ation, the Manilacorporation e"ployed a regular accountant whose duty it was to audit the accounts o the co"pany andrender nancial state"ents both or the use o the local bans and the local and parent corporations at4an Francisco. Fro" ti"e to ti"e and in the ordinary course o business such state"ents o accountwere prepared by the accountant and duly orwarded to the ho"e o6ce, and a"ong other things was astate"ent o &uly :1, 1021, showing that there was due and owing the plaintif under )$hibit ! the su"o 51/,233.


10/117

contract )$hibit , and that the deendant corporation is not bound by the ter"s or provisions o )$hibit!, which is as ollows9

%I==IT4 J 5TT)*4?, =T'.

M?I=, 5. I., 8o%. 29, 2:2:.

CH4. '. %I==IT4, )s(.,

Present.

')* M*. %I==IT49 My understanding o the intent o "y agree"ent with %illits J5atterson is as under9

$ommissions.%illits J 5atterson, 4an Francisco, pay "e a co""ission o one per cent onall purchases "ade or the" in the 5hilippines or sales "ade to the" by Manila and oneper cent on all sales "ade or the" in the 5hilippines, or purchases "ade ro" the" byManila. I such purchases or sales are on an . o. b. basis the co""ission is on the . o. b.

price; i on a c. i. . basis the co""ission is co"puted on the c. i. . price

These co""issions are credited to "e in 4an Francisco.

I do not participate in any prots on business transacted between %illits J 5atterson, 4anFrancisco, and %illits J 5atterson, =td., Manila.

Pro;ts.n all business transacted between %illits J 5atterson, =td. and others than %illitsJ 5atterson, 4an Francisco, hal the prots are to be credited to "y account and hal tothe 5rot J =oss account o %illits J 5atterson, =td., Manila.

n all other business, such as the Cooperative Coconut 5roducts Co. account, or any otherbusiness we "ay undertae as agents or "anagers, hal the prots are to be credited to"y account and hal to the 5rot J =oss account o %illits J 5atterson, =td., Manila.

%here %illits J 5atterson, 4an Francisco, or %illits J 5atterson, =td., Manila, have theirown unds invested in the capital stoc or a corporation, I o course do not participate inthe earnings o such stoc, any "ore than %illits J 5atterson would participate in theearnings o stoc held by "e on "y account.

I the oregoing conor"s to your understanding o our agree"ent, please conr" below.

Kours aithully,

>4gd.A E. C. *?='

Conr"ed9

%I==IT4 J 5TT)*4?

!y >4gd.A CH4. '. %I==IT4

There is no dispute about any o the ollowing acts9 That at the inception C.'. %illits and I. =. 5attersonconstituted the r" o %illits J 5atterson doing business in the City o 4an Francisco; that later5atterson retired ro" the r", and %illits ac(uired all o his interests and thereater continued thebusiness under the na"e and style o %illits J 5atterson; that the original contract )$hibit was "adebetween the plaintif and the old r" at 4an Francisco on &uly :1, 101, to cover a period o ve years

ro" that date; that plaintif entered upon the discharged o his duties and continued his services in the5hilippine Islands to so"eone or the period o ve years; that on ?ove"ber 1/, 1010, and as a result oconerences between %illits and the plaintif, )$hibit ! was addressed and signed in the "anner andor" above stated in the City o Manila. short ti"e prior to that date %illits organi+ed a corporation in4an Francisco, in the 4tate o Caliornia, which too over and ac(uired all o the assets o the r"Bsbusiness in Caliornia then being conducted under the na"e and style o %illits J 5atterson; that hesubscribed or all o the capital stoc o the corporation, and that in truth and in act he was the ownero all o its capital stoc. ter this was done he caused a new corporation to be organi+ed under thelaws o the 5hilippine Islands with principal o6ce at Manila, which too over and ac(uired all thebusiness and assets o the r" o %illits J 5atterson in the 5hilippine Islands, in and to which, in legalefect, he subscribed or all o its capital stoc, and was the owner o all o its stoc. ter bothcorporations were organi+ed the above letter was drated and signed. The plaintif contends that the


11/117

signing o )$hibit ! in the "anner and under the conditions in which it was signed, and through thesubse(uent acts and conduct o the parties, was ratied and, in legal efect, beca"e and is now bindingupon the deendant.

It will be noted that )$hibit ! was e$ecuted in Manila, and that at the ti"e it was signed by %illits, hewas to all intents and purposes the legal owner o all the stoc in both corporations. It also appears ro"

the evidence that the parent corporation at 4an Francisco too over and ac(uired all o the assets andliabilities o the local corporation at Manila. That ater it was organi+ed the Manila corporation eptseparate records and account boos o its own, and that ro" ti"e to ti"e nancial state"ents were"ade and orwarded to the ho"e o6ce, ro" which it conclusively appears that plaintif was basing hisclai" or services upon )$hibit , as it was "odied by )$hibit !. That at no ti"e ater )$hibit ! wassigned was there ever any dispute between plaintif and %illits as to the co"pensation or plaintifBsservices. That is to say, as between the plaintif and %illits, )$hibit ! was approved, ollowed and at allti"es in orce and efect, ater it was signed ?ove"ber 1/, 1010. It appears ro" an analysis o )$hibit !that it was or the "utual interest o both parties. Fro" a s"all beginning, the business was then in avery 8ourishing conditions and growing ast, and the prots were very large and were running into big"oney.

"ong other things, )$hibit provided9 D>aA That the net prots ro" said coconut oil business shall be

divided in e(ual shares between the said parties hereto; >bA that rnold should receive a broerage o 1per cent ro" all purchases and sales o "erchandise, e$cept or the account o the coconut "ills; > cAthat the net prots ro" all other business should be divided in e(ual hal shares between the partieshereto.D

7nder the above provisions, the plaintif "ight well contend that he was entitled to one-hal o all theprots and a broerage o 1 per cent ro" all purchases and sales, e$cept those or the account o thecoconut oil "ills, which under the volu"e o business then e$isting would run into a very large su" o"oney. It was or such reason and ater personal conerences between the", and to settle all disputed(uestions, that )$hibit ! was prepared and signed.

The record recites that Dthe deendant ad"its that ro" &uly :1, 101 to &uly :1, 1021, the plaintifaithully peror"ed all the duties incu"bent upon hi" under his contract o e"ploy"ent, it being

understood, however, that this ad"ission does not include an ad"ission that the plaintif placed aproper interpretation upon his right to re"uneration under said contract o e"ploy"ent.D

It being ad"itted that the plaintif wored Dunder his contract o e"ploy"entD or the period o veyears, the (uestion naturally arises, or who" was he woring His contract was "ade with the originalr" o %illits J 5atterson, and that r" was dissolved and it ceased to e$ist, and all o its assets were"erged in, and taen over by, the parent corporation at 4an Francisco. In the very nature o things, aterthe corporation was or"ed, the plaintif could not and did not continue to wor or the r", and, yet, hecontinued his e"ploy"ent or the ull period o ve years. For who" did he wor ater the partnershipwas "erged in the corporation and ceased to e$ist

It is very apparent that, under the conditions then e$isting, the signing o )$hibit ! was or the "utualinterests o both parties, and that i the contract )$hibit was to be enorced according to its ter"s,that rnold "ight well contend or a "uch larger su" o "oney or his services. In truth and in act%illits and both corporations recogni+ed his e"ploy"ent and accepted the benets o his services. Hecontinued his e"ploy"ent and rendered his services ater the corporation were organi+ed and )$hibit !was signed #ust the sa"e as he did beore, and both corporations recogni+ed and accepted his services.lthough the plaintif was president o the local corporation, the testi"ony is conclusive that both othe" were what is nown as a one "an corporation, and %illits, as the owner o all o the stoc, was theorce and do"inant power which controlled the". ter )$hibit ! was signed it was recogni+ed by %illitsthat the plaintifBs services were to be peror"ed and "easured by its ter" and provisions, and therenever was any dispute between plaintif and %illits upon that (uestion.

The controversy rst arose ater the corporation was in nancial trouble and the appoint"ent o what isnown in the record as a DcreditorsB co""ittee.D There is no clai" or pretense that there was any raud

or collusion between plaintif and %illits, and it is very apparent that )$hibit ! was to the "utual interesto both parties. It is ele"entary law that i )$hibit ! is a binding contract between the plaintif and %illitsand the corporations, it is e(ually binding upon the creditorsB co""ittee. It would not have any higher orbetter legal right than the corporation itsel, and could not "ae any deense which it could not "ae. Itis very signicant that the clai" or deense which is now interposed by the creditorsB co""ittee wasnever "ade or asserted at any previous ti"e by the deendant, and that it never was "ade by %illits,and it is very apparent that i he had re"ained in control o the corporation, it would never have "adethe deense which is now "ade by the creditorsB co""ittee. The record is conclusive that at the ti"e hesigned )$hibit !, %illits was, in legal efect, the owner and holder o all the stoc in both corporations,and that he approved it in their interest, and to protect the" ro" the plaintif having and "aing a"uch larger clai" under )$hibit . s a "atter o act, it appears ro" the state"ent o Mr. =arin, the


12/117

accountant, in the record that i plaintifBs cause o action was now ounded upon )$hibit , he wouldhave a clai" or "ore than 51/,///.

Tho"pson on Corporations, 2d ed., vol. I, section 1/, says9

The proposition that a corporation has an e$istence separate and distinct ro" its "e"bership

has its li"itations. It "ust be noted that this separate e$istence is or particular purposes. It "ustalso be re"e"bered that there can be no corporate e$istence without persons to co"pose it;there can be no association without associates. This separate e$istence is to a certain e$tent alegal ction. %henever necessary or the interests o the public or or the protection orenorce"ent o the rights o the "e"bership, courts will disregard this legal ction and operateupon both the corporation and the persons co"posing it.

In the sa"e section, the author (uotes ro" a decision in @0 hio 4tate, 1:31; 1< =. *. ., 1@7. 4. Eypsu" Co. vs. Macay %all 5laster Co., 100 5ac., [email protected]

*uling Case =aw, vol. 3, section :, says9

%hile o course a corporation cannot ratiy a contract which is strictly ultra %ires, and which it inthe rst instance could not have "ade, it "ay by ratication render binding on it a contract,entered into on its behal by its o6cers or agents without authority. s a general rule suchratication need not be "aniested by any voted or or"al resolution o the corporation or beauthenticated by the corporate seal; no higher degree o evidence is re(uisite in establishingratication on the part o a corporation, than is re(uisite in showing an antecedent authori+ation.

$ $ $ $ $ $ $ $ $

4)C. . The assent or approval o a corporation to acts done on its account "ay be inerred inthe sa"e "anner that the absent o a natural person "ay be, and it is well settled that where acorporation with ull nowledge o the unauthori+ed act o its o6cer or agents ac(uiesces in andconsents to such acts, it thereby raties the", especially where the ac(uiescence results inpre#udice to a third person.

$ $ $ $ $ $ $ $ $

4)C. 0. 4o, when, in the usual course o business o a corporation, an o6cer has been allowedin his o6cial capacity to "anage its afair, his authority to represent the corporation "ay beinerred ro" the "anner in which he has been per"itted by the directors to transact itsbusiness.

4)C.


13/117

*atication by a corporation o a transaction not previously authori+ed is "ore easily inerredwhere the corporation receives and retains property under it, and as a general rule where acorporation, through its proper o6cers or board, taes and retains the benets o theunauthori+ed act or contract o an o6cer or agent, with ull nowledge o all the "aterial acts, itthereby raties and beco"es bound by such act o contract, together with all the liabilities andburdens resulting therero", and in so"e #urisdiction this rule is, in efect, declared by statute.

Thus the corporation is liable on the ground o ratication where, with nowledge o the acts, itaccepts the benet o services rendered under an unauthori+ed contract o e"ploy"ent . . . .

pplying the law to the acts.

Mr. =arin, an e$perienced accountant, was e"ployed by the local corporation, and ro" ti"e to ti"eand in the ordinary course o business "ade and prepared nancial state"ents showing its assets andliabilities, true copies o which were sent to the ho"e o6ce in 4an Francisco. It appears upon their acethat plaintifBs co"pensation was "ade and ounded on )$hibit !, and that such state"ents were "adeand prepared by the accountant on the assu"ption that )$hibit ! was in ull orce and efect as betweenthe plaintif and the deendant. In the course o business in the early part o 102/, plaintif, as "anagero the deendant, sold


14/117

+raullo, $. -., #treet, Malcolm, +%ancea, Ostrand, and Romualdez, --., concur.

EN *AN

=G.R. No. ;4;46. No>#%#r 46, 1935.?

ALTER A. SMITH O., IN., Plaintif-Appellee, >. J. . FORD, Deendant-Appellant.

J.. F#rr!#r 'orAppellant.

Ana"o&!o G. A&co%a 'orAppellee.

SLLA*/S

1. ==)ETI?4; &7*I4'ICTI?; %IN)* F *IEHT T !&)CT T N)?7). G )ven granting that theplaintif co"pany had no branch in the City o Manila at the ti"e o the ling o the co"plaint, thee$istence thereo not having been proven, the Court o First Instance o Manila did not thereby lac

#urisdiction to tae cogni+ance o said co"plaint because when said deendantSs de"urrer had beenoverruled and he was ordered to answer the co"plaint, he led an answer wherein, aside ro" denying

generally and specically the allegations contained in each and every paragraph o the co"plaint in(uestion, he interposed two special deenses. This is e(uivalent to a waiver o his right to ob#ect to the#urisdiction o the court a (uo over his person and a sub"ission to the #urisdiction o said court >3Corpus &uris, 1:1A.

2. I'.; 47FFICI)?CK F )NI')?C) I? 4755*T F TH) CM5=I?T. G It having been proven that all thelu"ber the value o which is clai"ed by the plaintif co"pany was invoiced in the deendantSs na"e ordelivered at his address, the "ere answer that he neither new nor re"e"bered whether or not so"e othose who signed the receipts or delivery thereo were his e"ployees cannot overco"e the evidenceor the plaintif.

D E I S I O N

@ILLA-REAL,J.:

The deendant &.%. Ford appeals to this court ro" the #udg"ent o the Court o First Instance o Manilathe dispositive part o which reads9#gc9chanrobles.co".ph

D%hereore, the court orders the herein deendant to pay to the plaintif %alter . 4"ith Co., Inc., thesu" o two thousand our hundred eighty-nine pesos and ninety-two centavos >52,@0.02A, with interestthereon at 1 per cent a "onth ro" the dates o the invoices in (uestion, with costs. 4o ordered.Dcralawvirtua1aw library

In support o his appeal, the appellant assigns the ollowing alleged errors as co""itted by the court a(uo in its decision in (uestion, to wit9#gc9chanrobles.co".ph

D1. In overruling deendantSs de"urrer and "otion to dis"iss.

D2. In declaring that deendant had not only ailed to deny but had ad"itted that he had received all the"erchandise described in the inovices.

D:. In conde"ning the deendant to pay plaintif the su" o 52,@0.02 with interest thereon at 1 percent per annu" ro" the respective dates o the invoices, and to pay the costs.

D@. In not absolving the deendant ro" the co"plaint particularly or the reason that plaintif no longerhas any clai" against said deendant.

D)$hibits , -:, !, !-:, C,C-2, C-@, ', ), )- 2, )-@, F, F-:, E, H, I, &, &-:, , -:, - and =-1A, the corresponding receipts having beensigned as ollows9 )$hibit -1 by ?icolas 'ignadice, )$hibit -@ by Manuel 4olatorio, )$hibit !-1 by


15/117

Manuel 4olatorio, )$hibit !-@ by Eeo. E. Martin, )$hibit C-1 by &.%. Ford, )$hibit C-: by a person thesignature o which is illegible, )$hibit C-< by ndres Nele+, )$hibits '-1, )-1, and )-: by &.%. Fordhi"sel, )$hibit F-< by Cornelio Flores, )$hibit H-1 by &.%. Ford hi"sel, )$hibit I-1 by Thic Ford, )$hibitI-2 by Fran F. Ford, )$hibits &-1 and )&-@ by Eabino 5ullantis, )$hibit by Fran Ford, )$hibit -@ by &uan4ala+ar, )$hibit -3 by Mariano Mo(uera, )$hibit =-1 by Mrs. Marcela Ford. 4o"e o said receipts, thosesigned by the deendant &. %. Ford, bear under the signature thereo the words Don accountD >)$hibit )-

1A, Dct. =oan J sia =u"ber Co.D >)$hibit )-:A, Dn ct.D >)$hibit F-1A, Dn ct. ?ote ro" sia =u"berCo.D >)$hibit H-1A. The value o said lu"ber had not yet been paid either totally or partially on the dateo the ling o the a"ended co"plaint.

The deendant &.%. Ford denies having received all said lu"ber. He ad"its having received only thatappearing in )$hibits -1 signed by ?icolas 'ignadice; -@ signed by Manuel 4olatario; !-1 also signedby Manuel 4olatario; !-@ signed by Eeo E. Martin; C-1 signed by &.%. Ford; C-< signed by ndres Nele+;'-1, )-1 and )-: signed by &.%. Ford; )-< signed by Fran Ford; F-1 signed by &.%. Ford; F-2 signed byFran Ford; F-@ signed by &.%. Ford; F-< signed by Cornelio Flores; H- 1 signed by &.%. Ford; I-2 signed byFran F. Ford; &-1 signed by Eabino 5ullantis; signed by Fran Ford; -3 signed by Mariano Mo(uera; =-1signed by Marcela de Ford. The lu"ber consigned in the receipts )$hibits C-: with an illegible signature;E and E-1 which are unsigned; &-: also unsigned; &-@ signed by Eabino 5ullantis, and -: and -@ signedby &uan 4ala+ar, was not received by hi" inas"uch as he does not now the persons whose signaturesappear in said receipts. 7pon being (uestioned by his attorney regarding the signature o ?icolas'ignadice in )$hibit -1, the deendant &.%. Ford stated that he did not re"e"ber said na"e but that it"ust be that o one o his e"ployees. %ith respect to Manuel 4olatario whose signature appears in thereceipt )$hibit -@, Eeo. E. Martin whose signature appears in the receipt )$hibit !-@; and ndres Nele+whose signature appears in )$hibit C-


16/117

the legislature, in enacting section :33, to re(uire the courts to loo at the intent and purpose o theappearing party and to deal with hi" accordingly, leaving out o account all technicalities which woulddeprive hi" o that which he really desired to secure by his appearance. Further"ore, there does notsee" to be any provision in the Code o Civil 5rocedure with respect to change o venue in cases lie thepresent, the re"edy appearing to be a dis"issal o the action on the ground that the #urisdiction, i any,which the court obtained over the person o the deendant by the service o the su""ons within the

#urisdiction o the court, is divested by ob#ection in conor"ity with the provisions o section :33.Dcralawvirtua1aw library

It will be seen that in said case the deendant co"pany only appeared specially to ob#ect to the#urisdiction o the court as to the place where the co"plaint was led and its person. It neither led anyanswer, not set up any deense whether general or special with a prayer or relie. In the present casethe deendant answered the co"plaint by denying generally and specically all the allegationscontained therein and interposed special deenses praying that the plaintif co"panySs clai" againsthi" be co"pensated by what the "anager o the co"pany, %alter . 4"ith, owed hi". In the case oMar(ue+ =i" Cay v. 'el *osario >Manila *ailroad Co"pany v. ttorney-Eeneral, 2/ 5hil., 4ee also 4a"son v.Carratala,


17/117

/TI@O SONS HARDARE OM0AN,petitioner,vs.O/RT OF TA A00EALS and OLLETOR OF INTERNAL RE@EN/E,respondents.

#cip,


18/117

'eciency4ales Ta$

3FirstA o ?ove"ber 3,10)$h. DTDA that Das early as 10@< it was nown thatEM was preparing to leave the 5hilippines and ter"inate its business o i"porting vehicles,D the courtbelow speculated that Kutivo anticipated the withdrawal o EM ro" business in the 5hilippines in &une,10@3. This observation, which was "ade only in the resolution on the "otion or reconsideration,however, nds no basis in the record. n the other hand, EM had been an i"porter o cars in the5hilippines even beore the war and had but recently resu"ed its operation in the 5hilippines in 10@under an a"bitious plan to e$pand its operation by establishing an asse"bly plant here, so that it couldnot have been e$pected to "ae so drastic a turnabout o not "erely abandoning the asse"bly plantpro#ect but also totally ceasing to do business as an i"porter. Moreover, the newspaper clipping, )$h.


19/117

DTD, was published on March 2@, 10@3, and clipping, "erely reported a ru"ored plan that EM wouldabandon the asse"bly plant pro#ect in the 5hilippines. There was no "ention o the cessation obusiness by EM which "ust not be conused with the abandon"ent o the asse"bly plant pro#ect. )venas respect the asse"bly plant, the newspaper clipping was (uite e$plicit in saying that the ctingManager reused to conr" that ru"or as late as March 2@, 10@3, al"ost a year ater 4M was organi+ed.

t this #uncture, it should be stated that the intention to "ini"i+e ta$es, when used in the conte$t oraud, "ust be proved to e$ist by clear and convincing evidence a"ounting to "ore than "erepreponderance, and cannot be #ustied by a "ere speculation. This is because raud is never lightly tobe presu"ed. >Nitelli J 4ons vs. 7.4 22dA


20/117

It is true that the arrastre charges constitute e$penses o Kutivo and its non-inclusion in the selling priceby Kutivo cost the Eovern"ent 5@.// per vehicle, but said non-inclusion was e$plained to have been dueto an inadvertent accounting o"ission, and could hardly be considered as proo o willul channellingand raudulent evasion o sales ta$. Mere understate"ent o ta$ in itsel does not prove raud. >&a"es?icholson, :2 !T :33, a6r"ed 0/ F. >2A 03, cited in MertenBs 4ec. 4ee Insular =u"ber Co. vs. Collector, E.*. ?o. =-310,pril 2, 10


21/117

Kutivo. ny and all receipts o cash by 4M including its branches were trans"itted or transerredi""ediately and directly to Kutivo in Manila upon receipt thereo. =iewise, all e$penses, purchases orother obligations incurred by 4M are reerred to Kutivo which in turn prepares the correspondingdisburse"ent vouchers and pay"ents in relation there, the pay"ent being "ade out o the cashdeposits o 4M with Kutivo, i any, or in the absence thereo which occurs generally, a correspondingcharge is "ade against the account o 4M in KutivoBs boos. The pay"ents or and charges against 4M

are "ade by Kutivo as a "atter o course and without need o any urther re(uest, the latter wouldadvance all such cash re(uire"ents or the benet o 4M. ny and all pay"ents and cash vouchers are"ade on Kutivo stationery and "ade under authority o KutivoBs corporate o6cers, without any copythereo being urnished to 4M. ll detailed records such as cash disburse"ents, such as e$penses,purchases, etc. or the account o 4M, are ept by Kutivo and 4M "erely eeps a su""ary record thereoon the basis o inor"ation received ro" Kutivo.

ll the above plainly show that cash or unds o 4M, including those o its branches which are directlyre"itted to Kutivo, are placed in the custody and control o Kutivo, resources and sub#ect to withdrawalonly by Kutivo. 4MBs being under KutivoBs control, the or"erBs operations and e$istence beca"edependent upon the latter.

Consideration o various other circu"stances, especially when taen together, indicates that Kutivo

treated 4M "erely as its depart"ent or ad#unct. For one thing, the accounting syste" "aintained byKutivo shows that it "aintained a high degree o control over 4M accounts. ll transactions betweenKutivo and 4M are recorded and efected by "ere debit or credit entries against the reciprocal account"aintained in their respective boos o accounts and indicate the dependency o 4M as branch upon

Kutivo.

part ro" the accounting syste", other acts corroborate or independently show that 4M is a branch ordepart"ent o Kutivo. )ven the branches o 4M in !acolod, Iloilo, Cebu, and 'avao treat Kutivo G Manilaas their DHead 6ceD or DHo"e 6ceD as shown by their letters o re"ittances or othercorrespondences. These correspondences were actually received by Kutivo and the reerence to Kutivoas the head or ho"e o6ce is obvious ro" the act that all cash collections o the 4MBs branches arere"itted directly to Kutivo. dded to this act, is that 4M "ay reely use or"s or stationery o Kutivo

The act that 4M is a "ere depart"ent or ad#unct o Kutivo is "ade "ore patent by the act that arrastreconveying, and charges paid or the Doperation o receiving, loading or unloadingD o i"ported cars andtrucs on piers and wharves, were charged against 4M. verti"e charges or the unloading o cars andtrucs as re(uested by Kutivo and incurred as part o its ac(uisition cost thereo, were liewise chargedagainst and treated as e$penses o 4M. I Kutivo were the i"porter, these arrastre and overti"e chargeswere KutivoBs e$penses in i"porting goods and not 4MBs. !ut since those charges were "ade against 4M,it plainly appears that Kutivo had sole authority to allocate its e$penses even as against 4M in the sensethat the latter is a "ere ad#unct, branch or depart"ent o the or"er.

5roceeding to another aspect o the relation o the parties, the "anage"ent ees due ro" 4M to Kutivowere taen up as e$penses o 4M and credited to the account o Kutivo. I it were to be assu"ed that thetwo organi+ations are separate #uridical entities, the corresponding receipts or receivables should havebeen treated as inco"e on the part o Kutivo. !ut such "anage"ent ees were recorded as D*eserve or

!onusD and were thereore a liability reserve and not an inco"e account. This reserve or bonus weresubse(uently distributed directly to and credited in avor o the e"ployees and directors o Kutivo,thereby clearly showing that the "anage"ent ees were paid directly to Kutivo o6cers and e"ployees.

!rie8y stated, Kutivo nanced principally, i not wholly, the business o 4M and actually e$tended all thecredit to the latter not only in the or" o starting capital but also in the or" o credits e$tended or thecars and vehicles allegedly sold by Kutivo to 4M as well as advances or loans or the e$penses o thelatter when the capital had been e$hausted. Thus, the increases in the capital stoc were "ade inadvances or DEuaranteeD pay"ents by Kutivo and credited in avor o 4M. The unds o 4M were all"erged in the cash und o Kutivo. t all ti"es Kutivo thru o6cers and directors co""on to it and 4M,e$ercised ull control over the cash unds, policies, e$penditures and obligations o the latter.

4outhern Motors being but a "ere instru"entality, or ad#unct o Kutivo, the Court o Ta$ ppealscorrectly disregarded the technical deense o separate corporate entity in order to arrive at the true ta$liability o Kutivo.

5etitioner contends that the respondent Collector had lost his right or authority to issue the disputedassess"ent by reason o prescription. The contention, in our opinion, cannot be sustained. It will benoted that the rst assess"ent was "ade on ?ove"ber 3, 10


22/117

4ecretary o Finance and the !oard o Ta$ ppeals, pursuant to the provisions o section 0 o )$ecutiverder ?o. @/1-, series o 10cA o the*evised d"inistrative Code, he has Ddirect control, direction and supervision over all bureaus ando6ces under his #urisdiction and "ay, any provision o e$isting law to the contrary not withstanding,repeal or "odiy the decision o the chie o said !ureaus or o6ces when advisable in public interest.D

It should here also be stated that the assess"ent in (uestion was consistently protested by petitioner,"aing several re(uests or reinvestigation thereo. 7nder the circu"stances, petitioner "ay beconsidered to have waived the deense o prescription.

D)stoppel has been e"ployed to prevent the application o the statute o li"itations against thegovern"ent in certain instances in which the ta$payer has taen so"e a6r"ative action toprevent the collection o the ta$ within the statutory period. It is generally held that a ta$payer isestopped to repudiate waivers o the statute o li"itations upon which the govern"ent relied.

The cases re(uently involve dissolved corporations. I no waiver has been given, the casesusually show co"e conduct directed to a postpone"ent o collection, such, or e$a"ple, as so"evariety o re(uest to apply an overassess"ent. The ta$payer has BbenetedB and Bis not in aposition to contestB his ta$ liability. denite representation o i"plied authority "ay beinvolved, and in "any cases the ta$payer has received the BbenetB o being saved ro" theinconvenience, i not hardship o i""ediate collection. D

Conceivably even in these cases a ully inor"ed Co""issioner "ay err to the sorrow o therevenues, but generally speaing, the cases present a strong co"bination o e(uities against theta$payer, and ew will seriously (uarrel with their application o the doctrine o estoppel.D>Mertens =aw o Federal Inco"e Ta$ation, Nol. 1/-, pp. 1


23/117

He received R1,///.// as down pay"ent. The sale o this property or the price "entioned would havenetted the corporation a handso"e prot on which a large corporate inco"e ta$ would have to be paid.n the aternoon o February 2:, 10@/, when the Millers and the Fines got together or the e$ecution othe docu"ent o sale, the Millers announced that their attorney had called their attention to the largecorporate ta$ which would have to be paid i the sale was "ade by the corporation itsel. 4o instead oproceeding with the sale as planned, the Millers approved a resolution to declare a dividend to

the"selves Dpayable in the assets o the corporation, in co"plete li(uidation and surrender o all theoutstanding corporate stoc.D The building, which as above stated was the only property o thecorporation, was then transerred to Mr. and Mrs. Miller who in turn sold it to Mr. and Mrs. Fine or e$actlythe sa"e price and under the sa"e ter"s as had been previously agreed upon between the corporationand the Fines.

The return led by the Court Holding Co. with the respondent Co""issioner o Internal *evenuereported no ta$able gain as having been received ro" the sale o its assets. The Millers, o course,reported a long ter" capital gain on the e$change o their corporate stoc with the corporate property.

The Co""issioner o Internal *evenue contended that the li(uidating dividend to stocholders had nopurpose other than that o ta$ avoidance and that, thereore, the sale by the Millers to the Fines o thecorporationBs property was in substance a sale by the corporation itsel, or which the corporation issub#ect to the ta$able prot thereon. In re(uiring the corporation to pay the ta$able prot on account o

the sale, the Co""issioner o Internal *evenue, i"posed a surcharge o 2sees. [email protected], Ta$ CodeA i"pose a ta$ on original sales "easured by Dgrossselling priceD or Dgross value in "oneyD. These ter"s, as interpreted by the respondent Collector, do notinclude the a"ount o the sales ta$, i invoiced separately. Thus, Eeneral Circular ?o. @:1 o the !ureauo Internal *evenue dated &uly 20, 10:0, which i"ple"ents sections [email protected] o the Ta$ Code provides9 D

. . .BEross selling priceB or gross value in "oneyB o the articles sold, bartered, e$changed,transerred as the ter" is used in the aorecited sections >sections 1@, 1< and 1A o the?ational Internal *evenue Code, is the total a"ount o "oney or its e(uivalent which the


24/117

purchaser pays to the vendor to receive or get the goods. However, i a "anuacturer, producer,or i"porter, in $ing the gross selling price o an article sold by hi" has included an a"ountintended to cover the sales ta$ in the gross selling price o the articles, the sales ta$ shall bebased on the gross selling price less the a"ount intended to cover the ta$, i the sa"e is billed tothe purchaser as a separate ite".

Eeneral Circular ?o. @@/ o the sa"e !ureau reads9

"ount intended to cover the ta$ "ust be billed as a separate e" so as not to pay a ta$ on theta$. G n sales "ade ater he third (uarter o 10:0, the a"ount intended to cover the sales ta$"ust be billed to the purchaser as separate ite"s in the, invoices in order that the reductionthereo ro" the gross ailing price "ay be allowed in the co"putation o the "erchantsBpercentage ta$ on the sales. 7nless billed to the purchaser as a separate ite" in the invoice, thea"ounts intended to cover the sales ta$ shall be considered as part o the gross selling price othe articles sold, and deductions thereo will not be allowed, >Cited in 'alupan, ?at. Int. *ev.Code, nnotated, Nol. II, pp. it isA practically i"posing ta$ on a ta$ already paid. !esides, theadoption o the procedure would in certain cases elevate the bracet under which the ta$ isbased. The late pay"ent is already penali+ed, thru the i"position o surcharges, by adopting thetheory o the Collector, we will be creating an additional penalty not conte"plated by law.D

I the ta$es based on the sales o 4M are co"puted in accordance with Een. Circulars ?os. @:1 and @@/the total deciency sales ta$es, e$clusive o the 2


25/117

TT= 52/,22/,@1:.33 51,/0,2/2A to act as agents o "anuacturers in the 7nited 4tates and


26/117

oreign countries; and >:A to carry on and conduct a general wholesale and retail "ercantileestablish"ent in the 5hilippines. &acbilt is, liewise, a corporation organi+ed on February 1, 10@pri"arily or the purpose o "aing, producing and "anuacturing concrete blocs. 7nder date o &uly23, 10@. ?orton and &acbilt entered into an agree"ent whereby ?orton was "ade the sole ande$clusive distributor o concrete blocs "anuactured by &acbilt. 5ursuant to this agree"ent, wheneveran order or concrete blocs was received by the ?orton J Harrison Co. ro" a custo"er, the order was

trans"itted to &acbilt which delivered the "erchandise direct to the custo"er. 5ay"ent or the goodsis, however, "ade to ?orton, which in turn pays &acbilt the a"ount charged the custo"er less a certaina"ount, as its co"pensation or prot. To e$e"pliy the sales procedures adopted by the ?orton and

&acbilt, the ollowing "ay be cited. In the case o the sale o @2/ pieces o concrete blocs to the"erican !uilders on pril 1, 10


27/117

ta$ should have been assessed against &C!I=T and not against petitioner which "erely actedas the or"erBs agent.

$ $ $ $ $ $ $ $ $

5residing &udge ?able o the sa"e Court e$pressed a partial dissent, stating9

7pon the aorestated circu"stances, which disclose ?ortonBs control over and direction o&acbiltBs afairs, the corporate personality o &acbilt should be disregarded, and the transactionsbetween these two corporations relative to the concrete blocs should be ignored in deter"iningthe percentage ta$ or which ?orton is liable. Conse(uently, the percentage ta$ should beco"puted on the basis o the sales o &acbilt blocs to the public.

The "a#ority opinion is now beore 7s on appeal by the Co""issioner o Internal *evenue, on our >@Aassigned errors, all o which pose the ollowing propositions9 >1A whether the ac(uisition o all the stocso the &acbilt by the ?orton J Harrison Co., "erged the two corporations into a single corporation; >2Awhether the basis o the co"putation o the deciency sales ta$ should be the sale o the blocs to thepublic and not to ?orton.

It has been settled that the ownership o all the stocs o a corporation by another corporation does notnecessarily breed an identity o corporate interest between the two co"panies and be considered as asu6cient ground or disregarding the distinct personalities >=iddell J Co., Inc. v. Coll. o Int. *ev. =-03,

&une :/, 101A. However, in the case at bar, we nd su6cient grounds to support the theory that theseparate identities o the two co"panies should be disregarded. "ong these circu"stances, which wend not successully reuted by appellee ?orton are9 >aA ?orton and Harrison owned all the outstandingstocs o &acbilt; o the 1


28/117

separate balance sheets and prot and loss state"ents. These e$planations notwithstanding an over-allappraisal o the circu"stances presented by the acts o the case, yields to the conclusion that the

&acbilt is "erely an ad#unct, business conduit or alter ego, o ?orton and Harrison and that the ction ocorporate entities, separate and distinct ro" each, should be disregarded. This is a case where thedoctrine o piercing the veil o corporate ction, should be "ade to apply. In the case o !iddell = $o.&nc. %. $oll. of &nt. Re%.,supra, it was held9

There are (uite a series o conspicuous circu"stances that "ilitates against the separate anddistinct personality o =iddell Motors Inc., ro" =iddell J Co. %e notice that the bul o thebusiness o =iddell J Co. was channel *ed through =iddell Motors, Inc. n the other hand, =iddellMotors Inc. pursued no activities e$cept to secure cars, trucs, and spare parts ro" =iddell J Co.,Inc. and then sell the" to the general public. These sales o vehicles by =iddell J Co, to =iddellMotors. Inc. or the "ost part were shown to have taen place on the sa"e day that =iddellMotors, Inc. sold such vehicles to the public. %e "ay even say that the cars and trucs "erelytouched the hands o =iddell Motors, Inc. as a "atter o or"ality.

$ $ $ $ $ $ $ $ $

ccordingly, the "ere act that =iddell J Co. and =iddell Motors, Inc. are corporations owned andcontrolled by Fran =iddell directly or indirectly is not by itsel su6cient to #ustiy the disregard othe separate corporate identity o one ro" the other. There is however, in this instant case, apeculiar se(uence o the organi+ation and activities o =iddell Motors, Inc.

s opined in the case o Gregor %. (el%ering Dthe legal right o a ta$ payer to decrease thea"ount o what otherwise would be his ta$es, or altogether avoid the", by "eans which the lawper"its, cannot be doubtedD. !ut as held in another case, Dwhere a corporation is a du""y, isunreal or a sha" and serves no business purpose and is intended only as a blind, the corporateor" "ay be ignored or the law cannot countenance a or" that is bald and a "ischievousctionsD.

... a ta$payer "ay gain advantage o doing business thru a corporation i he pleases, but therevenue o6cers in proper cases, "ay disregard the separate corporate entity where it serves butas a shield or ta$ evasion and treat the person who actually "ay tae benets o thetransactions as the person accordingly ta$able.

... to allow a ta$payer to deny ta$ liability on the ground that the sales were "ade throughanother and distinct corporation when it is proved that the latter is virtually owned by the or"eror that they are practically one and the sa"e is to sanction a circu"vention o our ta$ laws. >andcases cited therein.A

In the case o Auti%o #ons (ard"are $o. %. $ourt of @a6 +ppeals , =-1:2/:, &an. 2, 101, this Court "adea si"ilar ruling where the circu"stances o unity o corporate identities have been shown and which are

identical to those obtaining in the case under consideration. Therein, this Court said9

%e are, however, inclined to agree with the court below that 4M was actually owned andcontrolled by petitioner as to "ae it a "ere subsidiary or branch o the latter created or thepurpose o selling the vehicles at retail >here concrete blocsA ... .

It "ay not be a"iss to state in this connection, the advantages to ?orton in "aintaining a se"blance oseparate entities. I the inco"e o ?orton should be considered separate ro" the inco"e o &acbilt,then each would declare such earning separately or inco"e ta$ purposes and thus pay lesser inco"eta$. The co"bined ta$able ?orton-&acbilt inco"e would sub#ect ?orton to a higher ta$. !ased upon the10


29/117

Co""issioner o Internal *evenue, plus 212 ". &ur. 1/-11A.

actor that should not be overlooed is that )"ilio and *odolo Cano are here indicted, not in theirprivate capacity, but as president and "anager, respectively, o )"ilio Cano )nterprises, Inc. Havingbeen sued o6cially their connection with the case "ust be dee"ed to be i"pressed with therepresentation o the corporation. In act, the courtBs order is or the" to reinstate Honorata Cru+ to heror"er position in the corporation and incidentally pay her the wages she had been deprived o duringher separation. Nerily, the order against the" is in efect against the corporation. ?o benet can be


30/117

attained i this case were to be re"anded to the court a *uo"erely in response to a technicalsubstitution o parties or such would only cause an unwarranted delay that would wor to HonorataBspre#udice. This is contrary to the spirit o the law which en#oins a speedy ad#udication o labor casesdisregarding as "uch as possible the technicalities o procedure. %e, thereore, nd un"eritorious therelie herein prayed or.

%H)*)F*), petition is dis"issed, with costs.

Bengzon, $.-., $oncepcion, Rees, -.B.!., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, -.P., and

aldi%ar, --., concur.

Foo"no"#(

G.R. No. L-196 Jn# 19, 1957

HARR S. STONEHILL, RO*ERT 0. *ROOS, JOHN J. *ROOS and ARL *E,petitioners,vs.HON. JOSE . DIONO, !n h!( caac!" a( SERETAR OF J/STIEB JOSE L/*AN, !n h!(

caac!" a( Ac"!n+ D!r#c"or, Na"!ona& *r#a o' In>#("!+a"!onB S0EIAL 0ROSE/TORS 0EDRO

D. EN2ON, EFREN I. 0LANA and MAN/EL @ILLAREAL, JR. and ASST. FISAL MANASES G.

REESB J/DGE AMADO ROAN, Mn!c!a& or" o' Man!&aB J/DGE ROMAN ANSINO, Mn!c!a&

or" o' Man!&aB J/DGE HERMOGENES AL/AG, or" o' F!r(" In("anc# o' R!Ca&-#Con !"

*ranch, and J/DGE DAMIAN JIMENE2, Mn!c!a& or" o' #Con !",respondents.

Paredes, Poblador, $ruz and 8azareno and Meer, Meer and Meer and -uan @. Da%id for petitioners.

O0ce of the #olicitor General +rturo +. +lafriz, +ssistant #olicitor General Paci;co P. de $astro, +ssistant#olicitor General )rine $. aballero, #olicitor $amilo D. cigarette wrappersA.

as Dthe sub#ect o the ofense; stolen or e"be++led and proceeds or ruits o the ofense,D or Dused orintended to be used as the "eans o co""itting the ofense,D which is described in the applicationsadverted to above as Dviolation o Central !an =aws, Tarif and Custo"s =aws, Internal *evenue >CodeAand the *evised 5enal Code.D

lleging that the aore"entioned search warrants are null and void, as contravening the Constitutionand the *ules o Court G because, inter alia9 >1A they do not describe with particularity the docu"ents,boos and things to be sei+ed; >2A cash "oney, not "entioned in the warrants, were actually sei+ed; >:Athe warrants were issued to sh evidence against the aore"entioned petitioners in deportation casesled against the"; >@A the searches and sei+ures were "ade in an illegal "anner; and >


31/117

petitionersB consent; and >:A that, in any event, the efects sei+ed are ad"issible in evidence againstherein petitioners, regardless o the alleged illegality o the aore"entioned searches and sei+ures.

n March 22, 102, this Court issued the writ o preli"inary in#unction prayed or in the petition.However, by resolution dated &une 20, 102, the writ was partially lited or dissolved, insoar as thepapers, docu"ents and things sei+ed ro" the o6ces o the corporations above "entioned are

concerned; but, the in#unction was "aintained as regards the papers, docu"ents and things ound andsei+ed in the residences o petitioners herein.3

Thus, the docu"ents, papers, and things sei+ed under the alleged authority o the warrants in (uestion"ay be split into two >2A "a#or groups, na"ely9 >aA those ound and sei+ed in the o6ces o theaore"entioned corporations, and >bA those ound and sei+ed in the residences o petitioners herein.

s regards the rst group, we hold that petitioners herein have no cause o action to assail the legalityo the contested warrants and o the sei+ures "ade in pursuance thereo, or the si"ple reason that saidcorporations have their respective personalities, separate and distinct ro" the personality o hereinpetitioners, regardless o the a"ount o shares o stoc or o the interest o each o the" in saidcorporations, and whatever the o6ces they hold therein "ay be. Indeed, it is well settled that the

legality o a sei+ure can be contested onl by the party whose rights have been i"paired thereby, 0andthat the ob#ection to an unlawul search and sei+ure ispurel personal and cannot be availed o by thirdparties. 1/Conse(uently, petitioners herein "ay not validly ob#ect to the use in evidence against the" othe docu"ents, papers and things sei+ed ro" the o6ces and pre"ises o the corporations adverted toabove, since the right to ob#ect to the ad"ission o said papers in evidence belongse6clusi%el to thecorporations, to who" the sei+ed efects belong, and "ay not be invoed by the corporate o6cers inproceedings against the" in their individual capacity. 11Indeed, it has been held9

. . . that the Eovern"entBs action in gaining possession o papers belonging tothe corporation did not relate to nor did it afect thepersonal deendants. I these papers wereunlawully sei+ed and thereby the constitutional rights o or any one were invaded, they were therights o the corporation and not the rights o the other defendants. ?e$t, it is clear that a

(uestion o the lawulness o a sei+ure can be raised onl by one "hose rights ha%e beenin%aded. Certainly, such a sei+ure, i unlawul, could not afect the constitutional rights odeendants "hose propert had not been seized or the pri%ac of "hose homes had not beendisturbed; nor could they clai" or the"selves the benets o the Fourth "end"ent, when itsviolation, i any, was with reerence to the rights o another. Remus %s. >nited #tates >C.C..A201F. 2A i"portant (uestions need be settled,na"ely9 >1A whether the search warrants in (uestion, and the searches and sei+ures "ade under theauthority thereo, are valid or not, and >2A i the answer to the preceding (uestion is in the negative,whether said docu"ents, papers and things "ay be used in evidence against petitionersherein.23"ph42.5t

5etitioners "aintain that the aore"entioned search warrants are in the nature o general warrants andthat accordingly, the sei+ures efected upon the authority there o are null and void. In this connection,the Constitution1:provides9

The right o the people to be secure in their persons, houses, papers, and efects againstunreasonable searches and sei+ures shall not be violated, and no warrants shall issue but uponprobable cause, to be deter"ined by the #udge ater e$a"ination under oath or a6r"ation o theco"plainant and the witnesses he "ay produce, and particularly describing the place to besearched, and the persons or things to be sei+ed.

Two points "ust be stressed in connection with this constitutional "andate, na"ely9 >1A that no warrantshall issue but upon probable cause, to be deter"ined by the #udge in the "anner set orth in saidprovision; and >2A that the warrant shallparticularl describe the things to be sei+ed.


32/117

?one o these re(uire"ents has been co"plied with in the contested warrants. Indeed, the sa"e wereissued upon applications stating that the natural and #uridical person therein na"ed had co""itted aDviolation o Central !an =aws, Tarif and Custo"s =aws, Internal *evenue >CodeA and *evised 5enalCode.D In other words, nospeci;c ofense had been alleged in said applications. The aver"ents thereowith respect to the ofense co""itted were abstract. s a conse(uence, it was impossible or the #udgeswho issued the warrants to have ound the e$istence o probable cause, or the sa"e presupposes the

introduction o co"petent proo that the party against who" it is sought has peror"edparticular acts,or co""itted speci;c o"issions, violating a given provision o our cri"inal laws. s a "atter o act, theapplications involved in this case do not allege any specic acts peror"ed by herein petitioners. Itwould be the legal heresy, o the highest order, to convict anybody o a Dviolation o Central !an =aws,

Tarif and Custo"s =aws, Internal *evenue >CodeA and *evised 5enal Code,D G as alleged in theaore"entioned applications G without reerence to any deter"inate provision o said laws or

To uphold the validity o the warrants in (uestion would be to wipe out co"pletely one o the "ostunda"ental rights guaranteed in our Constitution, or it would place the sanctity o the do"icile and theprivacy o co""unication and correspondence at the "ercy o the whi"s caprice or passion o peaceo6cers. This is precisely the evil sought to be re"edied by the constitutional provision above (uoted Gto outlaw the so-called general warrants. It is not di6cult to i"agine what would happen, in ti"es o

een political strie, when the party in power eels that the "inority is liely to wrest it, even though bylegal "eans.

4uch is the seriousness o the irregularities co""itted in connection with the disputed search warrants,that this Court dee"ed it t to a"end 4ection : o *ule 122 o the or"er *ules o Court 1@by providingin its counterpart, under the *evised *ules o Court 1


33/117

In act, over thirty >:/A years beore, the Federal 4upre"e Court had already declared9

I letters and private docu"ents can thus be sei+ed and held and used in evidence against aciti+en accused o an ofense, the protection o the @th "end"ent, declaring his rights to besecure against such searches and sei+ures, is o no %alue, and, so ar as those thus placed areconcerned, "ight as well be stricen ro" the Constitution. @he e1orts of the courts and their

o0cials to bring the guilt to punishment, praise"orth as the are, are not to be aided b thesacri;ce of those great principles established b ears of endea%or and su1ering "hich ha%e

resulted in their embodiment in the fundamental la" of the land.10

This view was, not only reiterated, but, also, broadened in subse(uent decisions on the sa"e FederalCourt. 2/ter reviewing previous decisions thereon, said Court held, in Mapp %s. Ohio >supra.A9

. . . Today we once again e$a"ine the %olBs constitutional docu"entation o the right o privacyree ro" unreasonable state intrusion, and ater its do+en years on our boos, are led by it toclose the only courtroo" door re"aining open to evidence secured by o6cial lawlessness in8agrant abuse o that basic right, reserved to all persons as a specic guarantee against thatvery sa"e unlawul conduct. %e hold that all evidence obtained by searches and sei+ures in

violation o the Constitution is, by that sa"e authority, inad"issible in a 4tate.

4ince the Fourth "end"entBs right o privacy has been declared enorceable against the 4tatesthrough the 'ue 5rocess Clause o the Fourteenth, it is enorceable against the" by the sa"esanction o e$clusion as it used against the Federal Eovern"ent. %ere it otherwise, then #ust aswithout the %ees rule the assurance against unreasonable ederal searches and sei+ures wouldbe Da or" o words,D valueless and underserving o "ention in a perpetual charter o inesti"ablehu"an liberties, so too, "ithout that rule the freedom from state in%asions of pri%ac "ould beso ephemeral and so neatl se%ered from its conceptual ne6us "ith the freedom from all brutish

means of coercing e%idence as not to permit this $ourtCs high regard as a freedom Dimplicit inthe concept of ordered libert.D t the ti"e that the Court held in %ol that the a"end"ent wasapplicable to the 4tates through the 'ue 5rocess Clause, the cases o this Court as we have seen,

had steadastly held that as to ederal o6cers the Fourth "end"ent included the e$clusion othe evidence sei+ed in violation o its provisions. )ven %ol Dstoutly adheredD to that proposition.

The right to when conceded operatively enorceable against the 4tates, was not susceptible odestruction by avulsion o the sanction upon which its protection and en#oy"ent had always beendee"ed dependent under the !oyd, %ees and 4ilverthorne Cases. Thereore, in e$tending thesubstantive protections o due process to all constitutionally unreasonable searches G state orederal G it was logically and constitutionally necessarily that the e$clusion doctrine G anessential part o the right to privacy G be also insisted upon as an essential ingredient o theright newly recogni+ed by the %ol Case. In short, the admission of the ne" constitutional Rightb Wolf could not tolerate denial of its most important constitutional pri%ilege, namel, thee6clusion of the e%idence "hich an accused had been forced to gi%e b reason of the unla"ful

seizure. @o hold other"ise is to grant the right but in realit to "ithhold its pri%ilege and

en7oment. nly last year the Court itsel recogni+ed that the purpose of the e6clusionar ruleto Dis to deter to compel respect for the constitutional guarant in the onl e1ecti%ela%ailable "a b remo%ing the incenti%e to disregard itD . . . .

The ignoble shortcut to conviction let open to the 4tate tends to destroy the entire syste" oconstitutional restraints on which the liberties o the people rest. Having once recogni+ed that theright to privacy e"bodied in the Fourth "end"ent is enorceable against the 4tates, and thatthe right to be secure against rude invasions o privacy by state o6cers is, thereoreconstitutional in origin, "e can no longer permit that right to remain an empt promise. !ecauseit is enorceable in the sa"e "anner and to lie efect as other basic rights secured by its 'ue5rocess Clause, "e can no longer permit it to be re%ocable at the "him of an police o0cer "ho,in the name of la" enforcement itself, chooses to suspend its en7oment. Our decision, founded

on reason and truth, gi%es to the indi%idual no more than that "hich the $onstitution guarantees

him to the police o0cer no less than that to "hich honest la" enforcement is entitled, and, to

the courts, that 7udicial integrit so necessar in the true administration of 7ustice . >e"phasisours.A

Indeed, the non-e$clusionary rule is contrary, not only to the letter, but also, to the spirit o theconstitutional in#unction against unreasonable searches and sei+ures. To be sure, i the applicant or asearch warrant has co"petent evidence to establish probable cause o the co""ission o a given cri"eby the party against who" the warrant is intended, then there is no reason why the applicant should notco"ply with the re(uire"ents o the unda"ental law. 7pon the other hand, i he has no suchco"petent evidence, then it is not possible or the &udge to nd that there is probable cause, and,


34/117

hence, no #ustication or the issuance o the warrant. The only possible e$planation >not #usticationAor its issuance is the necessity o ;shing evidence o the co""ission o a cri"e. !ut, then, this shinge$pedition is indicative o the absence o evidence to establish a probable cause.

Moreover, the theory that the cri"inal prosecution o those who secure an illegal search warrant andPor"ae unreasonable searches or sei+ures would su6ce to protect the constitutional guarantee under

consideration, overloos the act that violations thereo are, in general, co""itted !y agents o theparty in power, or, certainly, those belonging to the "inority could not possibly abuse a power they donot have. *egardless o the handicap under which the "inority usually G but, understandably G ndsitsel in prosecuting agents o the "a#ority, one "ust not lose sight o the act that the psychologicaland "oral efect o the possibility 21o securing their conviction, is watered down by the pardoningpower o the party or whose benet the illegality had been co""itted.

In their Motion or *econsideration and "end"ent o the *esolution o this Court dated &une 20, 102,petitioners allege that *oo"s ?os. 1 and 01 o Car"en part"ents, House ?o. 2//, 'ewey !oulevard,House ?o. 1@:, Colorado 4treet, and *oo" ?o. :/@ o the r"y-?avy Club, should be included a"ongthe pre"ises considered in said *esolution as residences o herein petitioners, Harry 4. 4tonehill, *obert5. !roo, &ohn &. !roos and arl !ec, respectively, and that, urther"ore, the records, papers and other

efects sei+ed in the o6ces o the corporations above reerred to include personal belongings o saidpetitioners and other efects under their e$clusive possession and control, or the e$clusion o whichthey have a standing under the latest rulings o the ederal courts o ederal courts o the 7nited4tates. 22

%e note, however, that petitionersB theory, regarding their alleged possession o and control over theaore"entioned records, papers and efects, and the alleged DpersonalD nature thereo, has !eendvanced, notin their petition or a"ended petition herein, but in the Motion or *econsideration and"end"ent o the *esolution o &une 20, 102. In other words, said theory would appear to beread#ust"ent o that ollowed in said petitions, to suit the approach inti"ated in the *esolution sought tobe reconsidered and a"ended. Then, too, so"e o the a6davits or copies o alleged a6davits attachedto said "otion or reconsideration, or sub"itted in support thereo, contain either inconsistent

allegations, or allegations inconsistent with the theory now advanced by petitioners herein.

7pon the other hand, we are not satised that the allegations o said petitions said "otion orreconsideration, and the contents o the aore"entioned a6davits and other papers sub"itted insupport o said "otion, have su6ciently established the acts or conditions conte"plated in the casesrelied upon by the petitioners; to warrant application o the views therein e$pressed, should we agreethereto. t any rate, we do not dee" it necessary to e$press our opinion thereon, it being best to leavethe "atter open or deter"ination in appropriate cases in the uture.

%e hold, thereore, that the doctrine adopted in the Moncado case "ust be, as it is hereby, abandoned;that the warrants or the search o three >:A residences o herein petitioners, as specied in the*esolution o &une 20, 102, are null and void; that the searches and sei+ures therein "ade are illegal;

that the writ o preli"inary in#unction heretoore issued, in connection with the docu"ents, papers andother efects thus sei+ed in said residences o herein petitioners is hereby "ade per"anent; that thewrits prayed or are granted, insoar as the docu"ents, papers and other efects so sei+ed in theaore"entioned residences are concerned; that the aore"entioned "otion or *econsideration and"end"ent should be, as it is hereby, denied; and that the petition herein is dis"issed and the writsprayed or denied, as regards the docu"ents, papers and other efects sei+ed in the twenty-nine >20Aplaces, o6ces and other pre"ises enu"erated in the sa"e *esolution, without special pronounce"entas to costs.

It is so ordered.

Rees, -.B.!., Dizon, Makalintal, Bengzon, -.P., aldi%ar and #anchez, --., concur.

ASTRO, J.,concurring and dissenting9

Fro" "y analysis o the opinion written by Chie &ustice *oberto Concepcion and ro" the i"port o thedeliberations o the Court on this case, I gather the ollowing distinct conclusions9

1.+ll the search warrants served by the ?ational !ureau o Investigation in this case are generalwarrants and are thereore proscribed by, and in violation o, paragraph : o section 1 o rticle III>!ill o *ightsA o the Constitution;


35/117

2. ll the searches and sei+ures conducted under the authority o the said search warrants wereconse(uently illegal;

:. The non-e$clusionary rule enunciated in Moncado %s. People, / 5hil. 1, should be, and isdeclared, abandoned;

@. The search warrants served at the three residences o the petitioners are e6pressl declarednull and void the searches and sei+ures therein "ade are e6pressl declared illegal; and the writo preli"inary in#unction heretoore issued against the use o the docu"ents, papers and efectsei+ed in the said residences is "ade per"anent; and

aA ownership o docu"ents, papers and efects gives Dstanding;D >bA ownership andPor controlor possession G actual or constructive G o pre"ises searched gives DstandingD; and >cA the DaggrievedpersonD doctrine where the search warrant and the sworn application or search warrant are Dpri"arilyDdirected solely and e$clusively against the Daggrieved person,D gives Dstanding.D

n e$a"ination o the search warrants in this case will readily show that, e$cepting three, all weredirected against the petitioners personally. In so"e o the", the petitioners were na"ed personally,ollowed by the designation, Dthe 5resident andPor Eeneral ManagerD o the particular corporation. Thethree warrants e$cepted na"ed three corporate deendants. !ut the Do6cePhousePwarehousePpre"isesD"entioned in the said three warrants were also the sa"e Do6cePhousePwarehousePpre"isesD declared tobe owned by or under the control o the petitioners in all the other search warrants directed against thepetitioners andPor Dthe 5resident andPor Eeneral ManagerD o the particular corporation. >see pages


36/117

O"nership of matters seized gi%es Dstanding.D

wnership o the properties sei+ed alone entitles the petitioners to bring a "otion to return andsuppress, and gives the" standing as persons aggrieved by an unlawul search and sei+ure regardlesso their location at the ti"e o sei+ure.-ones %s. >nited #tates, :2 7.4. 210/A >narcoticsstored in the apart"ent o a riend o the deendantA; (enzel %s. >nited #tates, 20 F. 2d. 10narcotics sei+ed in an apart"ent not belongingto the deendantA; Pielo" %s. >nited #tates, F. 2d @02, @0: >0th Cir. 102boos sei+ed ro" thedeendantBs sister but belonging to the deendantA; C. illano %s. >nited #tates, :1/ F. 2d /, : >1/thCir. 102A >papers sei+ed in des neither owned by nor in e$clusive possession o the deendantA.

In a very recent case >decided by the 7.4. 4upre"e Court on 'ece"ber 12, 10A, it was held that underthe constitutional provision against unlawul searches and sei+ures, a person places hi"sel or hisproperty within a constitutionally protected area, be it his ho"e or his o6ce, his hotel roo" or hisauto"obile9

%here the argu"ent alls is in its "isapprehension o the unda"ental nature and scope o

Fourth "end"ent protection. %hat the Fourth "end"ent protects is the security a "an reliesupon when heplaces himself or his propert "ithin a constitutionall protected area, be it hishome or his o0ce, his hotel room or his automobile. There he is protected ro" unwarrantedgovern"ental intrusion. nd when he puts so"e thing in his ling cabinet, in his des drawer, orin his pocet, he has the right to now it will be secure ro" an unreasonable search or anunreasonable sei+ure. 4o it was that the Fourth "end"ent could not tolerate the warrantlesssearch o the hotel roo" in-e1ers, the purloining o the petitionerBs private papers in Gouled, orthe surreptitious electronic surveilance in #il%erman. Countless other cases which have co"e tothis Court over the years have involved a "yriad o difering actual conte$ts in which theprotections o the Fourth "end"ent have been appropriately invoed. ?o doubt, the uture willbring countless others. !y nothing we say here do we either oresee or oreclose actualsituations to which the Fourth "end"ent "ay be applicable. >(o1a %s. >.#., 3 4. Ct. @/

>'ece"ber 12, 10A. 4ee also >.#. %s. -e1ers, :@2 7.4. @, 32 4. Ct. 0: >?ove"ber 1:, 10)"phasis suppliedA.

$ontrol of premises searched gi%es Estanding.E

Independent o ownership or other personal interest in the records and docu"ents sei+ed, thepetitioners have standing to "ove or return and suppression by virtue o their proprietary or leaseholdinterest in "any o the pre"ises searched. These proprietary and leasehold interests have beensu6ciently set orth in their "otion or reconsideration and need not be recounted here, e$cept toe"phasi+e that the petitioners paid rent, directly or indirectly, or practically all the pre"ises searched>*oo" 01, @ Car"en pts; *oo" :/@, r"y J ?avy Club; 5re"ises 2//, 'ewey !oulevard; 1@:Colorado 4treetA; "aintained personal o6ces within the corporate o6ces >I!MC, 74TCA; had "ade

i"prove"ents or urnished such o6ces; or had paid or the ling cabinets in which the papers werestored >*oo" 2/@, r"y J ?avy ClubA; and individually, or through their respe

Documents

daniel-corporation law cases.docx