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Coastal Pacific Trading, Inc. vs. Southern Rolling Mills Co.G.R. No. 118692July 28, 2006

FACTS: Southern Rolling Mills was renamed into Visayan Integrated Steel Corp (VISCO). On Dec. 11,1961-VISCO obtained a loan from DBP amounting to P836,000. It was secured by a Real EstateMortgage covering VISCO's 3 parcels of land including the machinery and equipments therein. SecondLoan: VISCO entered a Loan Agreement with respondent banks ( referred as "Consortium") to finance

its importation for various raw materials. VISCO executed a second mortgage over the previousproperties mentioned, however they were unrecorded VISCO was unable to pay its second mortgage with

the consortium, which resulted in the latter acquiring 90% of the equity of VISCO giving the Consortiumthe control and management of VISCO. Despite the acquisition, VISCO still remained indebted to theConsortium.

Transaction to Coastal: Between 1964 to 1965, VISCO entered a processing agreement with Coastalwherein Coastal delivered 3,000 metric tons of hot rolled steel coils which VISCO would process into

block iron sheets. However, VISCO was only able to return 1,600 metric tons of those sheets.

On the loan to DBP: To pay its first mortgage with DBP, VISCO sold 2 of its generators to FILMAGPhils, Inc. DBP executed a Deed of Assignment of the mortgage in favor of the consortium. TheConsortium foreclosed the mortgage and was the highest bidder in an auction sale of VISCO's properties.The Consortium later sold the properties in favor of National Steel Corporation.

Coastal files a civil action for Annulment or Rescission of Sale, Damages with Preliminary Injunction.Coastal imputes bad faith on the action of the Consortium, the latter being able to sell the properties ofVISCO despite the attachment of the properties, placing them beyond the reach of VISCO's other

creditors.The lower court ruled in favor of VISCO, declaring the sale valid and legal. The CA affirmed this.ISSUE 1: Whether the consortium disposed VISCO's assets in fraud of creditors?HELD: Yes. What the consortium did was to pay to them the proceeds from the sale of the generator setswhich in turn they used to pay DBP. Due to the Deed of Assignment issued by DBP, the respondent banks

recovered what they remitted to DBP & it allowed the Consortium to acquire DBP's primary lien on themortgaged properties. Allowing them as unsecured creditors ( as the mortgage was unrecorded) toforeclose on the assets of the corporation without regard to inferior claimsISSUE 2: Whether petitioner is entitled to moral damages?

No. As a rule, a corporation is not entitled to moral damages because, not being a natural person, itcannot experience physical suffering or sentiments like wounded feelings, serious anxiety, mental anguishand moral shock. The only exception to this rule is when the corporation has a good reputation that isdebased, resulting in its humiliation in the business realm. In the present case, the records do not show

any evidence that the name or reputation of petitioner has been sullied as a result of the Consortium'sfraudulent acts. Accordingly, moral damages are not warranted.

Petitioner was able to recover exemplary damages.

SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES, INC., and/orrepresented byMANASSEH C. ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO M. LUCENARA, DIONICESO. TIPGOS, LORESTO C.MURILLON, ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T. ORBISO, LORETOPAEL and JOEL BACUBAS, petitioners

vs. NORTHEASTERN MINDANAO MISSION OF SEVENTH DAYADVENTIST, INC., and/or represented by JOSUE A. LAYON, WENDELL M.SERRANO, FLORANTE P. TYand JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERNMINDANAOMISSION, RespondentsG.R. No. 150416 July 21, 2006

FACTS: This case involves two supposed transfers of the lot previously owned by the spouses Cosio. Thefirst transfer wasa donation to petitioners alleged predecessors-in-interest in 1959 while the secondtransfer was through a contract of sale to respondents in1980. A TCT was later issued in the name of respondents.Claiming to be the alleged donees successors-in-interest, petitioners filed a case forcancellation of title, quieting of ownership and

possession, declaratory relief and reconveyance withprayer for preliminary injunction and damages against respondents.Respondents, on the other hand,argued that at the time of the donation, petitioners predecessors-in-interest has no juridicalpersonalityto accept the donation because it was not yet incorporated. Moreover, petitioners were not membersof the local churchthen.The RTC upheld the sale in favor of respondents, which was affirmed by the Court of Appeals, onthe ground that all the essential

requisites of a contract were present and it also applied theindefeasibility of title.

ISSUE: Whether or not the donation was void.

HELD: Yes, the donation was void because the local church had neither juridical personality nor capacityto accept such gift sinceit was inexistent at the time it was made.

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The Court denied petitioners contention that there exists a de facto corporation.While thereexisted the old Corporation Law (Act 1459), a law under which the local church could have beenorganized,

petitioners admitted that they did not even attempt to incorporate at that time nor theorganization was registered at the Securities

and Exchange Commission. Hence, petitioners obviouslycould not have claimed succession to an entity that never came to exist.And since some of therepresentatives of petitioner Seventh Day Adventist Conference Church of Southern Philippines, Inc.werenot even members of the local church then, it necessarily follows that they could not even claimthat the donation was particularlyfor them

Times Transportation Company, Inc. v. Santos Sotelo, et al.

G.R. No. 163786 February 16, 2005

FACTS:Times Transportation Company, Inc. (Times) is a corporation engaged in thebusiness of land transportation. Times Employees

Union (TEU) was formed and issueda certificate of union registration. Times challenged the legitimacy of TEU by filingapetition for thecancellation of its union registration. TEU held a strike in response to Times alleged attempt toform a rival unionand its dismissal of the employeesidentified to be active union members.The Labor Secretary assumed jurisdiction overthe caseand referred the matter to the NLRC for compulsory arbitration. A return-to-work order was likewise issued. In a certification

election, TEU was certified as thesole and exclusive collective bargaining agent in Times.Consequently, TEUs presidentwrotethe management of Times and requested for collective bargaining. Timesrefused. TEU filed a Notice of Strike. Anotherconciliation/mediation proceeding wasconducted for the purpose of settling the brewing dispute. Times managementimplemented a retrenchment program and notices of retrenchment were sent to some of its employees. TEU held a strike vote on

groundsof unfair labor practice on the part of Times. For alleged participation in an illegalstrike, Times terminated all the 123striking employees. The DOLE Secretary issuedthe second return-to-work order certifying the dispute to the NLRC. While thestrikewas ended, the employees were no longer admitted back to work. MencorpTransportSystems, Inc. (Mencorp) had acquiredownership over Times Certificates of PublicConvenience and a number of its bus units by virtue of several deeds of sale.Mencorpis controlled and operated by Mrs. Virginia Mendoza, daughter of Santiago Rondaris,the majority stockholder of Times.

Meanwhile, the NLRC rendered a decision declaringthe first strikeLEGAL and the second ILLEGAL. Times and TEU bothappealed thedecision of the NLRC,which CA affirmed. Upon denial of its motion for reconsideration, Times filed a petition forreview on certiorari.After the closure of Times, the retrenched employees filed cases for illegaldismissal, money claims andunfair labor practices against Times before theRegionalArbitration Branch in San Fernando City, La Union. The employees

withdrewtheir complaints with leave of court and filed a new set of cases before the NationalCapital Region ArbitrationBranch,impleading Mencorp and the Spouses Mendoza. Times sought the dismissal of these cases on the ground of litis pendencia and

forumshopping. The Labor Arbiter ruled that the dismissals of complainants Times, effected,participated in, authorized or ratifiedby Santiago Rondaris constituted the prohibitedact of unfair labor practice and hence, illegal and that thesale of said

respondentcompany to respondents Mencorp Transport Systems Company (sic),Inc. and/orVirginia Mendoza and ReynaldoMendoza was simulated and/or effected in badfaith. Times, Mencorp and the Spouses Mendoza submitted their respectivememorandum of appeal to the NLRC. NLRC rendered its decision remanding the records of theconsolidated cases to theArbitration Branch of origin for disposition and for theconduct of appropriateproceedings. NLRC denied the Motion for

Reconsideration. Thus,the employees appealed tothe CA by way of a petition for certiorari, which ganted thepetition and setaside the decision of the N LRC. Times, Mencorp and the SpousesMendoza filed Motions for Reconsideration, which weredenied. Hence, this petition forreview on certiorari.

ISSUE:Whether or not piercing the corporate veil in this case was proper.

HELD:

Yes. We have held that piercing the corporate veil is warranted only in casesw h e n t h e s e p a r a t e l e g a l e n t i t y i s u s e dt o de fea t pu bl i c con ven i en ce , j u s t i fy wro ng ,pro t ec t f raud, or defendcr i me , such that in the case oftwo corporations, the law will