Recognition and Disregard of Corporateness

7/23/2019 Recognition and Disregard of Corporateness

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G.R. No. 101699 March 13, 1996

BENJAMIN A. SANTOS, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER FRUCTUOSO

T. AURELLANO an MEL!IN ". MILLENA, respondents.

!ITUG, J.: p

In a petition for certiorari under Rule 65 of the Rules of Court, petitioner Benjamin A.

Santos, former President of the Mana Mining and evelopment Corporation !"MMC"#,

$uestions the resolution of the %ational &a'or Relations Commission !"%&RC"# a(rming

the de)ision of &a'or Ar'iter *ru)tuoso +. Aurellano ho, having held illegal the

termination of emplo-ment of private respondent Melvin . Millena, has ordered petitioner

MMC, as ell as its president !herein petitioner# and the ee)utive vi)e/president in their

personal )apa)ities, to pa- Millena his monetar- )laims.

Private respondent, on 01 2)to'er 1345, as hired to 'e the proje)t a))ountant for

MMCs mining operations in at'o, Ba)on, Sorsogon. 2n 17 August 1346, private

respondent sent to Mr. il A'a8o, the MMC )orporate treasurer, a memorandum )alling

the latters attention to the failure of the )ompan- to )ompl- ith the ithholding ta

re$uirements of, and to ma9e the )orresponding monthl- remittan)es to, the Bureau of

Internal Revenue !"BIR"# on a))ount of dela-ed pa-ments of a))rued salaries to the

)ompan-s la'orers and emplo-ees. 1

In a letter, dated 04 Septem'er 1346, A'a8o advised private respondent thusl-:

Regarding at'o operations, as -ou also are aare, the rain- season is

no upon us and the pea)e and order )ondition in Sorsogon has

deteriorated. It is therefore, the 'oards de)ision that it ould 'e useless

for us to )ontinue operations, espe)iall- if e ill ala-s 'e in the

"hole," so to spea9. 2ur ;rst funds re)eipts ill 'e used to pa- all our

de'ts. <e ill stop produ)tion until the advent of the dr- season, and

until the insurgen)- pro'lem )lears. <e ill underta9e onl- ne)essar-

maintenan)e and repair or9 and ill 9eep our overhead don to the

minimum managea'le level. =ntil e resume full/s)ale operations, e

ill not need a proje)t a))ountant as there ill 'e ver- little paper or9

at the site, hi)h )an 'e easil- handled at Ma9ati.

<e appre)iate the or9 -ou have done for Mana and e ill not

hesitate to ta9e -ou 'a)9 hen e resume or9 at at'o. >oever itould 'e unfair to -ou if e 9ept -ou in the pa-roll and deprive -ou of

the opportunit- to earn more, during this period of Manas )risis. #

Private respondent epressed "sho)9" over the termination of his emplo-ment. >e

)omplained that he ould not have resigned from the S-)ip, orres ? @ela-o a))ounting

;rm, here he as alread- a senior sta auditor, had it not 'een for the assuran)e of a

")ontinuous jo'" '- MMCs ngr. Rodillano . @elas$ue. Private respondent re$uested

that he 'e reim'ursed the "advan)es" he had made for the )ompan- and 'e paid his

"a))rued salariesD)laims. 3

+he )laim as not heededE on 70 2)to'er 1346, private respondent ;led ith the %&RC

Regional Ar'itration, Bran)h %o. @, in &egapi Cit-, a )omplaint for illegal dismissal,

unpaid salaries, 1Fth month pa-, overtime pa-, separation pa- and in)entive leave pa-

against MMC and its to top o()ials, namel-, herein petitioner Benjamin A. Santos !the

President# and Rodillano A. @elas$ue !the ee)utive vi)e/president#. in his )omplaint/

a(davit !position paper#, su'mitted on 7G 2)to'er 1346, Millena alleged, among other

things, that his dismissal as merel- an oshoot of his letter of 17 August 1346 to A'a8o

a'out the )ompan-s ina'ilit- to pa- its or9ers and to remit ithholding taes to the

BIR. $

A )op- of the noti)e and summons as served on therein respondents !MMC, Santos and

@elas$ue# on 73 2)to'er 1346. %

At the initial hearing on 1H %ovem'er 1346 'efore the&a'or Ar'iter, onl- the )omplainant, Millena, appearedE hoever, Att-. Romeo Pere, in

representation of the respondents, re$uested '- telegram that the hearing 'e reset to 01

e)em'er 1346. Although the re$uest as granted '- the &a'or Ar'iter, private

respondent as alloed, nevertheless, to present his eviden)e ex parte at that initial

hearing.

+he s)heduled 01st e)em'er 1346 hearing as itself later reset to 13 e)em'er 1346.

2n 05 e)em'er 1346, the %&RC in &egapi Cit- again re)eived a telegram from Att-.

Pere as9ing for ;fteen !15# da-s ithin hi)h to su'mit the respondents position paper.

2n 13 e)em'er 1346, Att-. Pere sent -et another telegram see9ing a further

postponement of the hearing and as9ing for a period until 15 anuar- 134G ithin hi)h to

su'mit the position paper.

2n 15 anuar- 134G, Att-. Pere advised the %&RC in &egapi Cit- that the position paper

had ;nall- 'een transmitted through the mail and that he as su'mitting the )ase for

resolution ithout further hearing. +he position paper as re)eived '- the &egapi Cit-

%&RC o()e on 13 anuar- 134G. Complainant Millena ;led, on 76 *e'ruar- 134G, his

rejoinder to the position paper.

2n 7G ul- 1344, &a'or Ar'iter *ru)tuoso +. Aurellano, ;nding no valid )ause for

terminating )omplainants emplo-ment, ruled, )iting this Courts pronoun)ement

in Construction & Development Corporation of the Philippines vs. Leogardo, Jr . 6 that a

partial )losure of an esta'lishment due to losses as a retren)hment measure that

rendered the emplo-er lia'le for unpaid salaries and other monetar- )laims. +he &a'or

Ar'iter adjudged



<>R*2R, the respondents are here'- ordered to pa- the petitioner

the amount of PFG,1F7.75 )orresponding to the latters unpaid salaries

and advan)esE P5,H00.00 for petitioners 1Fth month pa-E PF,FH0.35 as

servi)e in)entive leave pa-E and P5,H00.00 as separation pa-. +he

respondents are further ordered to pa- the petitioner 10J of the

monetar- aards as attorne-s fees.

All other )laims are dismissed for la)9 of su()ient eviden)e.

S2 2RR. &

Alleging a'use of dis)retion '- the &a'or Ar'iter, the )ompan- and its )o/respondents

;led a "motion for re)onsideration andDor appeal. ' +he motionDappeal as forthith

indorsed to the e)utive ire)tor of the %&RC in Manila.

In a resolution, dated 0H Septem'er 1343, the %&RC 9 a(rmed the de)ision of the &a'or

Ar'iter. It held that the reasons relied upon '- MMC and its )o/respondents in the

dismissal of Millena, i.e., the rain- season, deteriorating pea)e and order situation and

little paperor9, ere "not )auses mentioned under Arti)le 747 of the &a'or Code of the

Philippines" and that Millena, 'eing a regular emplo-ee, as "shielded '- the tenurial

)lause mandated under the la. 10

A rit of ee)ution )orrespondingl- issuedE hoever, it as returned unsatis;ed for the

failure of the sheri to lo)ate the o()es of the )orporation in the address indi)ated.

Another rit of ee)ution and an order of garnishment as thereupon served on petitioner

at his residen)e.

Contending that he had 'een denied due pro)ess, petitioner ;led a motion for

re)onsideration of the %&RCs resolution along ith a pra-er for the $uashal of the rit of

ee)ution and order of garnishment. >e averred that he had never re)eived an- noti)e,

summons or even a )op- of the )omplaintE hen)e, he said, the &a'or Ar'iter at no timehad a)$uired jurisdi)tion over him.

2n 16 August 1331, the %&RC 11 dismissed the motion for re)onsideration. Citing Se)tion

7, Rule 1F, 1# and Se)tion 1F, Rule 1H, 13 of the Rules of Court, it ruled that the Regional

Ar'itration o()e had not, in fa)t, 'een remiss in the o'servan)e of the legal pro)esses for

a)$uiring jurisdi)tion over the )ase and over the persons of the respondents therein. +he

%&RC as also )onvin)ed that Att-. Pere had 'een the authoried )ounsel of MMC and

its to most ran9ing o()ers.

In holding petitioner personally lia'le for private respondents )laim, the %&RC )ited Arti)le

743 1$

of the &a'or Code and the ruling in A.C. Ransom Labor nion!CCL vs. "LRC 1% to

the ee)t that "!t#he responsi'le o()er of an emplo-er )orporation !)ould# 'e heldpersonall-, not to sa- even )riminall-, lia'le for non/pa-ment of 'a)9ages," and that

of #ude$ vs. "LRC 16 hi)h ampli;ed that "here the emplo-er )orporation !as# no

longer eisting and una'le to satisf- the judgment in favor of the emplo-ee, the o()er

should 'e lia'le for a)ting on 'ehalf of the )orporation.

In the instant petition for certiorari, petitioner Santos reiterates that he should not have

'een adjudged personall- lia'le '- pu'li) respondents, the latter not having validl-

a)$uired jurisdi)tion over his person hether '- personal servi)e of summons or '-

su'stituted servi)e under Rule 13 of the Rules of Court.

Petitioners )ontention is una))epta'le. +he fa)t that Att-. Romeo B. Pere has 'een a'le

to timel- as9 for a deferment of the initial hearing on 1H %ovem'er 1346, )oupled ith his

su'se$uent a)tive parti)ipation in the pro)eedings, should disprove the supposed ant of

servi)e of legal pro)ess. Although as a rule, modes of servi)e of summons are stri)tl-

folloed in order that the )ourt ma- a)$uire jurisdi)tion over the person of a

defendant, 1&su)h pro)edural modes, hoever, are li'erall- )onstrued in %uasi!

udicial pro)eedings, su'stantial )omplian)e ith the same 'eing )onsidered

ade$uate. 1' Moreover, jurisdi)tion over the person of the defendant in )ivil )ases is

a)$uired not onl- '- servi)e of summons 'ut also '- voluntar- appearan)e in )ourt and

su'mission to its authorit-. 19 "Appearan)e" '- a legal advo)ate is su)h "voluntar-

su'mission to a )ourts jurisdi)tion."#0

It ma- 'e made not onl- '- a)tual ph-si)alappearan)e 'ut li9eise '- the su'mission of pleadings in )omplian)e ith the order of

the )ourt or tri'unal.

+o sa- that petitioner did not authorie Att-. Pere to represent him in the )ase #1 is to

undul- ta )redulit-. &i9e the Soli)itor eneral, the Court li9eise )onsiders it unli9el- that

Att-. Pere ould have 'een so irresponsi'le as to represent petitioner if he ere not, in

fa)t, authoried. ## Att-. Pere is an o()er of the )ourt, and he must 'e presumed to have

a)ted ith due propriet-. +he emplo-ment of a )ounsel or the authorit- to emplo- an

attorne-, it might 'e pointed out, need not 'e proved in ritingE su)h fa)t )ould 'e

inferred from )ir)umstantial eviden)e. #3 Petitioner as not just an ordinar- o()ial of the

MMCE he as the President of the )ompan-.

Petitioner, in an- event, argues that pu'li) respondents have gravel- a'used their

dis)retion "in ;nding petitioner solidaril- lia'le ith MMC even !in# the a'sen)e of 'ad

faith and mali)e on his part." #$

+here is merit in this plea.

A )orporation is a juridi)al entit- ith legal personalit- separate and distin)t from those

a)ting for and in its 'ehalf and, in general, from the people )omprising it. +he rule is that

o'ligations in)urred '- the )orporation, a)ting through its dire)tors, o()ers and

emplo-ees, are its sole lia'ilities. %evertheless, 'eing a mere ;)tion of la, pe)uliar

situations or valid grounds )an eist to arrant, albeit done sparingl-, the disregard of its

independent 'eing and the lifting of the )orporate veil. #% As a rule, this situation might

arise hen a )orporation is used to evade a just and due o'ligation or to justif- a

rong, #6 to shield or perpetrate fraud, #& to )arr- out similar other unjustifa'le aims or

intentions, or as a su'terfuge to )ommit injusti)e and so )ir)umvent the la.#'

In 'ramat(ercantile, )nc., vs. Court of Appeals, #9 the Court has )ollated the settled instan)es hen,

ithout ne)essaril- pier)ing the veil of )orporate ;)tion, personal )ivil lia'ilit- )an also 'e

said to lafull- atta)h to a )orporate dire)tor, trustee or o()erE to it: <hen K



!1# >e assents !a# to a patentl- unlaful a)t of the )orporation, or !'# for

'ad faith or gross negligen)e in dire)ting its aairs, or !)# for )onLi)t of

interest, resulting in damages to the )orporation, its sto)9holders or

other personsE

!7# >e )onsents to the issuan)e of atered sto)9s or ho, having

9noledge thereof, does not forthith ;le ith the )orporate se)retar-

his ritten o'je)tion theretoE

!F# >e agrees to hold himself personall- and solidaril- lia'le ith the

)orporationE or

!H# >e is made, '- a spe)i;) provision of la, to personall- anser for

his )orporate a)tion.

+he )ase of petitioner is a- o these e)eptional instan)es. It is not even shon

that petitioner has had a dire)t hand in the dismissal of private respondent

enough to attri'ute to him !petitioner# a patentl- unlaful a)t hile a)ting for

the )orporation. %either )an Arti)le 743 30 of the &a'or Code 'e applied sin)e this

la spe)i;)all- refers onl- to the imposition of penalties under the Code. It is

undisputed that the termination of petitioners emplo-ment has, instead, 'een

due, )olle)tivel-, to the need for a further mitigation of losses, the onset of the

rain- season, the insurgen)- pro'lem in Sorsogon and the la)9 of funds to further

support the mining operation in at'o.

It is true, there ere various )ases hen )orporate o()ers ere themselves held '- the

Court to 'e personall- a))ounta'le for the pa-ment of ages and mone- )laims to its

emplo-ees. In A.C. Ransom Labor nion!CCL vs. "LRC, 31 for instan)e, the Court ruled

that under the Minimum <age &a, the responsi'le o()er of an emplo-er )orporation

)ould 'e held personall- lia'le for nonpa-ment of 'a)9ages for "!i#f the poli)- of the la

ere otherise, the )orporation emplo-er !ould# have devious a-s for evadingpa-ment of 'a)9 ages." In the a'sen)e of a )lear identi;)ation of the o()er dire)tl-

responsi'le for failure to pa- the 'a)9ages, the Court )onsidered the President of the

)orporation as su)h o()er. +he )ase as )ited in Chua vs. "LRC 3# in holding personall-

lia'le the vi)e/president of the )ompan-, 'eing the highest and most ran9ing o()ial of

the )orporation net to the President ho as dismissed, for the latters )laim for unpaid

ages.

A revie of the a'ove e)eptional )ases ould readil- dis)lose the attendan)e of fa)ts

and )ir)umstan)es that )ould rightl- san)tion personal lia'ilit- an the part of the )ompan-

o()er. In A.C. Ransom, the )orporate entit- as a famil- )orporation and ee)ution

against it )ould not 'e implemented 'e)ause of the disposition posthaste of its levia'le

assets evidentl- in order to evade its just and due o'ligations. +he do)trine of "pier)ing

the veil of )orporate ;)tion" as thus )learl- appropriate. Chua li9eise involved anotherfamil- )orporation, and this time the )onLi)t as 'eteen to 'rothers o))up-ing the

highest ran9ing positions in the )ompan-. +here ere in)ontroverti'le fa)ts hi)h pointed

to etreme personal animosit- that resulted, evidentl- in 'ad faith, in the easing out from

the )ompan- of one of the 'rothers '- the other.

+he 'asi) rule is still that hi)h )an 'e dedu)ed from the Courts pronoun)ement in *unio

vs. "ational Labor Relations CommissionE 33 thus:

<e )ome no to the personal lia'ilit- of petitioner, Sunio, ho as

made jointl- and severall- responsi'le ith petitioner )ompan- and CIPI

for the pa-ment of the 'a)9ages of private respondents. +his is

reversi'le error. +he Assistant Regional ire)tors e)ision failed to

dis)lose the reason h- he as made personall- lia'le. Respondents,

hoever, alleged as grounds thereof, his the 'eing oner of one/half

!1D7# interest of said )orporation, and his alleged ar'itrar- dismissal of

private respondents.

Petitioner Sunio as impleaded in the Complaint in his )apa)it- as

eneral Manager of petitioner )orporation. +here appears to 'e no

eviden)e on re)ord that he a)ted mali)iousl- or in 'ad faith in

terminating the servi)es of private respondents. >is a)t, therefore, asithin the s)ope of his authorit- and as a )orporate a)t.

It is 'asi) that a )orporation is invested '- la ith a personalit-

separate and distin)t from those of the persons )omposing it as ell as

from that of another legal entit- to hi)h it ma- 'e related. Mere

onership '- a single sto)9holder or '- another )orporation of all or

nearl- all of the )apital sto)9 of a )orporation is not of itself su()ient

ground for disregarding the separate )orporate personalit-. Petitioner

Sunio, therefore, should not have 'een made personall- ansera'le for

the pa-ment of private respondents 'a)9 salaries.

+he Court, to 'e sure, did appear to have deviated somehat in #ude$vs. "LRCE 3$

hoever, it should 'e )lear from our re)ent pronoun)ement in (am Realty

Development Corporation and (anuel Centeno vs. "LRC 3% that the Sunio do)trine still

prevails.

<>R*2R, the instant petition for certiorari is given = C2=RS and the de)ision of

the &a'or Ar'iter, a(rmed '- the %&RC, is here'- M2I*I insofar as it holds herein

petitioner Benjamin Santos personall- lia'le ith Mana Mining and evelopment

Corporation, hi)h portion of the $uestioned judgment is no S+ ASI. In all other

respe)ts, the $uestioned de)ision remains unae)ted. %o )osts.

S2 2RR.



G.R. No. L(1'#16 Oc)o*+r 30, 196#

STOCHOL"ERS OF F. GUAN-ON AN" SONS, INC., petitioners/appellants,

vs.

REGISTER OF "EE"S OF MANILA, respondent/appellee.

Ramon C+ ernando for petitioners!appellants+

-.ce of the *olicitor #eneral for respondent!appellee+

BAUTISTA ANGELO, J.:

2n Septem'er 13, 1360, the ;ve sto)9holders of the *. uanon and Sons, In). ee)uted a

)erti;)ate of li$uidation of the assets of the )orporation re)iting, among other things, that'- virtue of a resolution of the sto)9holders adopted on Septem'er 1G, 1360, dissolving

the )orporation, the- have distri'uted among themselves in proportion to their

shareholdings, as li$uidating dividends, the assets of said )orporation, in)luding real

properties lo)ated in Manila.

+he )erti;)ate of li$uidation, hen presented to the Register of eeds of Manila, as

denied registration on seven grounds, of hi)h the folloing ere disputed '- the

sto)9holders:

F. +he num'er of par)els not )erti;ed to in the a)9noledgmentE

5. PHF0.50 Reg. fees need 'e paidE

6. P3H0.H5 do)umentar- stamps need 'e atta)hed to the do)umentE

G. +he judgment of the Court approving the dissolution and dire)ting the

disposition of the assets of the )orporation need 'e presented !Rules of Court,

Rule 10H, Se). F#.

e)iding the consulta elevated '- the sto)9holders, the Commissioner of &and

Registration overruled ground %o. G and sustained re$uirements %os. F, 5 and 6.

+he sto)9holders interposed the present appeal.

As )orre)tl- stated '- the Commissioner of &and Registration, the propriet- or impropriet-

of the three grounds on hi)h the denial of the registration of the )erti;)ate of li$uidation



as predi)ated hinges on hether or not that )erti;)ate merel- involves a distri'ution of

the )orporations assets or should 'e )onsidered a transfer or )onve-an)e.

Appellants )ontend that the )erti;)ate of li$uidation is not a )onve-an)e or transfer 'ut

merel- a distri'ution of the assets of the )orporation hi)h has )eased to eist for having

'een dissolved. +his is apparent in the minutes for dissolution atta)hed to the do)ument.

%ot 'eing a )onve-an)e the )erti;)ate need not )ontain a statement of the num'er of

par)el of land involved in the distri'ution in the a)9noledgment appearing therein.

>en)e the amount of do)umentar- stamps to 'e a(ed thereon should onl- 'e P0.F0 and

not P3H0.H5, as re$uired '- the register of deeds. %either is it )orre)t to re$uire

appellants to pa- the amount of PHF0.50 as registration fee.

+he Commissioner of &and Registration, hoever, entertained a dierent opinion. >e

)on)urred in the vie epressed '- the register of deed to the ee)t that the )erti;)ate of

li$uidation in $uestion, though it involves a distri'ution of the )orporations assets, in the

last anal-sis represents a transfer of said assets from the )orporation to the sto)9holders.

>en)e, in su'stan)e it is a transfer or )onve-an)e.

<e agree ith the opinion of these to o()ials. A )orporation is a juridi)al person distin)tfrom the mem'ers )omposing it. Properties registered in the name of the )orporation are

oned '- it as an entit- separate and distin)t from its mem'ers. <hile shares of sto)9

)onstitute personal propert- the- do not represent propert- of the )orporation. +he

)orporation has propert- of its on hi)h )onsists )hieL- of real estate !%elson v. 2en,

11F Ala., FG7, 71 So. G5E Morro v. ould, 1H5 Ioa 1, 17F %.<. GHF#. A share of sto)9

onl- t-pi;es an ali$uot part of the )orporations propert-, or the right to share in its

pro)eeds to that etent hen distri'uted a))ording to la and e$uit- !>all ? *ale- v.

Ala'ama +erminal, 1GF Ala F34, 56 So., 7F5#, 'ut its holder is not the oner of an- part of

the )apital of the )orporation !Bradle- v. Bauder F6 2hio St., 74#. %or is he entitled to the

possession of ande;nite portion of its propert- or assets !ottfried v. Miller, 10H =.S.,

571E ones v. avis, F5 2hio St., HGH#. +he sto)9holder is not a )o/oner or tenant in

)ommon of the )orporate propert- !>alton v. >ohnston, 166 Ala F1G, 51 So 337#.

2n the 'asis of the foregoing authorities, it is )lear that the a)t of li$uidation made '- the

sto)9holders of the *. uanon and Sons, In). of the latters assets is not and )annot 'e

)onsidered a partition of )ommunit- propert-, 'ut rather a transfer or )onve-an)e of the

title of its assets to the individual sto)9holders. Indeed, sin)e the purpose of the

li$uidation, as ell as the distri'ution of the assets of the )orporation, is to transfer their

title from the )orporation to the sto)9holders in proportion to their shareholdings, K and

this is in ee)t the purpose hi)h the- see9 to o'tain from the Register of eeds of

Manila, K that transfer )annot 'e ee)ted ithout the )orresponding deed of )onve-an)e

from the )orporation to the sto)9holders. It is, therefore, fair and logi)al to )onsider the

)erti;)ate of li$uidation as one in the nature of a transfer or )onve-an)e.

G.R. No. L($#&'0 Janar/ 1&, 1936

MANILA GAS CORORATION, plainti/appellant,

vs.

THE COLLECTOR OF INTERNAL RE!ENUE, defendant/appellee.

MALCOLM, J.:

+his is an a)tion 'rought '- the Manila as Corporation against the Colle)tor of Internal

Revenue for the re)over- of P56,G5G.FG, hi)h the plainti as re$uired '- the defendant

to dedu)t and ithhold from the various sums paid it to foreign )orporations as dividends

and interest on 'onds and other inde'tedness and hi)h the plainti paid under protest.

2n the trial )ourt dismissing the )omplaint, ith )osts, the plainti appealed assigning as

the prin)ipal errors alleged to have 'een )ommitted the folloing:

1. +he trial )ourt erred in holding that the dividends paid '- the plainti

)orporation ere su'je)t to in)ome ta in the hands of its sto)9holders, 'e)ause

to impose the ta thereon ould 'e to impose a ta on the plainti, in violation

of the terms of its fran)hise, and ould, moreover, 'e oppressive and

ine$uita'le.

7. +he trial )ourt erred in not holding that the interest on 'onds and other

inde'tedness of the plainti )orporation, paid '- it outside of the Philippine

Islands to )orporations not residing therein, ere not, on the part of the

re)ipients thereof, in)ome from Philippine sour)es, and hen)e not su'je)t toPhilippine in)ome ta.



+he fa)ts, as stated '- the appellant and as a))epted '- the appellee, ma- 'e

summaried as follos: +he plainti is a )orporation organied under the las of the

Philippine Islands. It operates a gas plant in the Cit- of Manila and furnishes gas servi)e to

the people of the metropolis and surrounding muni)ipalities '- virtue of a fran)hise

granted to it '- the Philippine overnment. Asso)iated ith the plainti are the Islands

as and le)tri) Compan- domi)iled in %e or9, =nited States, and the eneral *inan)e

Compan- domi)iled in Nuri)h, Siterland. %either of these last mentioned )orporations isresident in the Philippines.

*or the -ears 13F0, 13F1, and 13F7, dividends in the sum of P1,FH4,4HG.50 ere paid '-

the plainti to the Islands as and le)tri) Compan- in the )apa)it- of sto)9holders upon

hi)h ithholding in)ome taes ere paid to the defendant totalling PH0,H60.0F *or the

same -ears interest on 'onds in the sum of PH11,600 as paid '- the plainti to the

Islands as and le)tri) Compan- upon hi)h ithholding in)ome taes ere paid to the

defendant totalling P17,FH4. *inall- for the stated time period, interest on other

inde'tedness in the sum of P1F1,6HH,30 as paid '- the plainti to the Islands as and

le)tri) Compan- and the eneral *inan)e Compan- respe)tivel- upon hi)h ithholding

in)ome taes ere paid to the defendant totalling PF,3H3.FH.

Some un)ertaint- eisting regarding the pla)e of pa-ment, e ill not go into this fa)tor

of the )ase at this point, e)ept to remar9 that the 'onds and other to9ens of

inde'tedness are not to 'e found in the re)ord. >oever, hi'its , *, and , )erti;ed

)orre)t '- the +reasurer of the Manila as Corporation, purport to prove that the pla)e of

pa-ment as the =nited States and Siterland.

+he appeal naturall- divides into to su'je)ts, one )overed '- the ;rst assigned error,

and the other '- the se)ond assigned error. <e shall dis)uss these su'je)ts and errors in

order.

1. Appellant ;rst )ontends that the dividends paid '- it to its sto)9holders, the

Islands as and le)tri) Compan- , ere not su'je)t to ta 'e)ause to impose a

ta thereon ould 'e to do so on the plainti )orporation, in violation of the

terms of its fran)hise and ould, moreover, 'e oppressive and ine$uita'le. +his

argument is predi)ated on the )onstitutional provision that no la impairing the

o'ligation of )ontra)ts shall 'e ena)ted. +he parti)ular portion of the fran)hise

hi)h is invo9ed provides:

+he grantee shall annuall- on the ;fth da- of anuar- of ea)h -ear pa-

to the Cit- of Manila and the muni)ipalities in the Provin)e of Rial in

hi)h gas is sold, to and one half per )entum of the gross re)eipts

ithin said )it- and muni)ipalities, respe)tivel-, during the pre)eding

-ear. Said pa-ment shall 'e in lieu of all taes, Insular, provin)ial and

muni)ipal, e)ept taes on the real estate, 'uildings, plant, ma)hiner-,

and other personal propert- 'elonging to the grantee.

+he trial judge as of the opinion that the instant )ase as governed '- our

previous de)ision in the )ase of Philippine 'elephone and 'elegraph Co+, vs+

Collector of )nternal Revenue !O13FF, 54 Phil. 6F3#. In this vie e )on)ur. It is

true that the ta eemption provision relating to the Manila as Corporation

herein'efore $uoted diers in phraseolog- from the ta eemption provision to

'e found in the fran)hise of the +elephone and +elegraph Compan-, 'ut the ratio

decidendi of the to )ases is su'stantiall- the same. As there held and as no)on;rmed, a )orporation has a personalit- distin)t from that of its sto)9holders,

ena'ling the taing poer to rea)h the latter hen there)eive dividends from

the )orporation. It must 'e )onsidered as settled in this jurisdi)tion that

dividends of a domesti) )orporation, hi)h are paid and delivered in )ash to

foreign )orporations as sto)9holders, are su'je)t to the pa-ment in the in)ome

ta, the eemption )lause in the )harter of the )orporation notithstanding.

*or the foreign reasons, e are led to sustain the de)ision of the trial )ourt and to

overrule appellants ;rst assigned error.

7. In support of its se)ond assignment of error, appellant )ontends that, as the

Islands as and le)tri) Compan- and the eneral *inan)e Compan- aredomi)iled in the =nited States and Siterland respe)tivel-, and as the interest

on the 'onds and other inde'tedness earned '- said )orporations has 'een paid

in their respe)tive domi)iles, this is not in)ome from Philippine sour)es ithin the

meaning of the Philippine In)ome +a &a. Citing se)tions 10 !a# and 1F !e# of A)t

%o. 74FF, the In)ome +a &a, appellant asserts that their appli)a'ilit- has 'een

s$uarel- determined '- de)isions of this )ourt in the )ases of (anila Railroad Co+

vs+ Collector of )nternal Revenue !%o. F1136, promulgated e)em'er 7, 1373,

nor reported#, and Philippine Rail/ay Co+ vs+ Posadas !%o. F4G66, promulgated

2)to'er F0, 13FF O54 Phil., 364# herein it as held that interest paid to non/

resident individuals or )orporations is not in)ome from Philippine sour)es, and

hen)e not su'je)t to the Philippine In)ome +a. +he Soli)itor/eneral ansers

ith the o'servation that the )ited de)isions interpreted the In)ome +a &a

'efore it as amended '- A)t %o. FG61 to )over the interest on 'onds and othero'ligations or se)urities paid "ithin or ithout the Philippine Islands." Appellant

re'uts this argument '- "assuming, for the sa9e of the argument, that '- the

amendment introdu)ed to se)tion 1F of A)t %o. 74FF '- A)t %o. FG61 the

&egislature intended the interest from Philippine sour)es and so is su'je)t to

ta," 'ut ith the ne)essar- se$uel that the amendator- statute is invalid and

un)onstitutional as 'eing the poer of the &egislature to ena)t.

+a9ing ;rst under o'servation that last point, it is to 'e o'served that neither in the

pleadings, the de)ision of the trial )ourt, nor the assignment of errors, as the $uestion of

the validit- of A)t %o. FG61 raised. =nder su)h )ir)umstan)es, and no jurisdi)tional issue

'eing involved, e do not feel that it is the dut- of the )ourt to pass on the )onstitutional

$uestion, and a))ordingl- ill refrain from doing so. !Cadaller/i'son &um'er Co. vs+ el

Rosario O131F, 76 Phil., 137E Ma)ondra- and Co. vs+ Benito and 2)ampo, P. 1FG, anteEState vs+ Bur9e O1317, 1G5 Ala., 561.#



As to the appli)a'ilit- of the lo)al )ases )ited and of the Porto Ri)an )ase of

omene)h vs+ =nited Porto Ri)an Sugar )o. !O13F7, 67 *. O7d, 557#, e need onl-

o'serve that these )ases announ)ed good la, 'ut that ea)h he must 'e de)ided on its

parti)ular fa)ts. In other ords, in the opinion of the majorit- of the )ourt, the fa)ts at 'ar

and the fa)ts in those )ases )an 'e )learl- dierentiated. Also, in the )ase at 'ar there is

some un)ertaint- )on)erning the pla)e of pa-ment, hi)h under one vie )ould 'e

)onsidered the Philippines and under another vie the =nited States and Siterland, 'uthi)h )annot 'e de;nitel- determined ithout the ne)essar- do)umentar- eviden)e

'efore, us.

+he approved do)trine is that no state ma- ta an-thing not ithin its jurisdi)tion ithout

violating the due pro)ess )lause of the )onstitution. +he taing poer of a state does not

etend 'e-ond its territorial limits, 'ut ithin su)h it ma- ta persons, propert-, in)ome,

or 'usiness. If an interest in propert- is taed, the situs of either the propert- or interest

must 'e found ithin the state. If an in)ome is taed, the re)ipient thereof must have a

domi)ile ithin the state or the propert- or 'usiness out of hi)h the in)ome issues must

'e situated ithin the state so that the in)ome ma- 'e said to have a situs therein.

Personal propert- ma- 'e separated from its oner, and he ma- 'e taed on its a))ount

at the pla)e here the propert- is although it is not the pla)e of his on domi)ile and

even though he is not a )itien or resident of the state hi)h imposes the ta. But de'ts

oing '- )orporations are o'ligations of the de'tors, and onl- possess value in the hands

of the )reditors. !*armers &oan Co. vs+ Minnesota O13F0, 740 =.S., 70HE =nion Refrigerator

+ransit Co. vs+ Qentu)9- O1305, 133 =.S., 13H State +a on *oreign held Bonds O14GF, 15

<all., F00E Bi)9 vs+ Bea)h O130G, 706 =. S., F37E State ex rel+ Manitoo) as Co. vs+ <ig.

+a Comm. O1315, 161 <is., 111E =nited States Revenue A)t of 13F7, se). 1HF.#

+hese vies )on)erning situs for taation purposes appl- as ell to an organied,

unin)orporated territor- or to a Commonealth having the status of the Philippines.

Pushing to one side that portion of A)t %o. FG61 hi)h permits taation of interest on

'onds and other inde'tedness paid ithout the Philippine Islands, the $uestion is if the

in)ome as derived from sour)es ithin the Philippine Islands.

In the judgment of the majorit- of the )ourt, the $uestion should 'e ansered in the

a(rmative. +he Manila as Corporation operates its 'usiness entirel- ithin the

Philippines. Its earnings, therefore )ome from lo)al sour)es. +he pla)e of material deliver-

of the interest to the foreign )orporations paid out of the revenue of the domesti)

)orporation is of no parti)ular moment. +he pla)e of pa-ment even if )on)eded to 'e

outside of tho )ountr- )annot alter the fa)t that the in)ome as derived from the

Philippines. +he ord "sour)e" )onve-s onl- one idea, that of origin, and the origin of the

in)ome as the Philippines.

In s-nthesis, therefore, e hold that )onditions have not 'een provided hi)h justif- the

)ourt in passing on the )onstitutional $uestion suggestedE that the fa)ts hile somehato's)ure dier from the fa)ts to 'e found in the )ases relied upon, and that the Colle)tor of

Internal Revenue as justi;ed in ithholding in)ome taes on interest on 'onds and other

inde'tedness paid to non/resident )orporations 'e)ause this in)ome as re)eived from

sour)es ithin the Philippine Islands as authoried '- the In)ome +a &a. *or the

foregoing reasons, the se)ond assigned error ill 'e overruled.

Before )on)luding, it is 'ut fair to state that the riters opinion on the ;rst su'je)t and

the ;rst assigned error herein dis)ussed is a))uratel- set forth, 'ut that his opinion on the

se)ond su'je)t and the se)ond assigned error is not a))uratel- reLe)ted, 'e)ause on this

last division his vies )oin)ide ith those of the appellant. >oever, in the interest of the

prompt disposition of this )ase, the de)ision has 'een ritten up in a))ordan)e ith

instru)tions re)eived from the )ourt.

udgment a(rmed, ith the )ost of this instan)e assessed against the appellant.



G.R. No. %'16' "+c+*+r 19, 19'9

CONCECION MAGSA2SA2(LABRA"OR, SOLE"A" MAGSA2SA2(CABRERA, LUISA

MAGSA2SA2(CORU-, a4)+ *+ h+r h*an, "r. Jo+ Cor5, FELICI"A" .

MAGSA2SA2, an MERCE"ES MAGSA2SA2("IA-, petitioners,

vs.

THE COURT OF AEALS an A"ELAI"A RO"RIGUE-(MAGSA2SA2, S5+c4a7

A4n4)ra)r48 o )h+ E)a)+ o )h+ 7a)+ G+naro F. Ma:a/a/ respondents.

FERNAN, C.J.:

In this petition for revie on )ertiorari, petitioners see9 to reverse and set aside O1 the

de)ision of the Court of Appeals dated ul- lF, 1341, 1 a(rming that of the Court of *irst

Instan)e of Nam'ales and 2longapo Cit- hi)h denied petitioners motion to intervene in

an annulment suit ;led '- herein private respondent, and O7 its resolution dated

Septem'er G, 1341, den-ing their motion for re)onsideration.

Petitioners are raising a purel- legal $uestionE hether or not respondent Court of Appeals

)orre)tl- denied their motion for intervention.

+he fa)ts are not )ontroverted.

2n *e'ruar- 3, 13G3, Adelaida Rodrigue/Magsa-sa-, ido and spe)ial administrati of

the estate of the late Senator enaro Magsa-sa-, 'rought 'efore the then Court of *irst

Instan)e of 2longapo an a)tion against Artemio Pangani'an, Su'i) &and Corporation

!S=BIC#, *ilipinas Manufa)turers Ban9 !*I&MA%BA%Q# and the Register of eeds of

Nam'ales. In her )omplaint, she alleged that in 1354, she and her hus'and a)$uired, thru

)onjugal funds, a par)el of land ith improvements, 9non as "Pe$uena Island", )overed

'- +C+ %o. F754E that after the death of her hus'and, she dis)overed Oa an annotation at

the 'a)9 of +C+ %o. F754 that "the land as a)$uired '- her hus'and from his separate

)apitalE" O' the registration of a eed of Assignment dated une 75, 13G6 purportedl-

ee)uted '- the late Senator in favor of S=BIC, as a result of hi)h +C+ %o. F754 as)an)elled and +C+ %o. 77HF1 issued in the name of S=BICE and O) the registration of

eed of Mortgage dated April 74, 13GG in the amount of P 7,G00,000.00 ee)uted '-

S=BIC in favor of *I&MA%BA%QE that the foregoing a)ts ere void and done in an attempt

to defraud the )onjugal partnership )onsidering that the land is )onjugal, her marital

)onsent to the annotation on +C+ %o. F754 as not o'tained, the )hange made '- the

Register of eeds of the titleholders as ee)ted ithout the approval of the

Commissioner of &and Registration and that the late Senator did not ee)ute the

purported eed of Assignment or his )onsent thereto, if o'tained, as se)ured '-

mista9e, violen)e and intimidation. She further alleged that the assignment in favor of

S=BIC as ithout )onsideration and )onse$uentl- null and void. She pra-ed that theeed of Assignment and the eed of Mortgage 'e annulled and that the Register of eeds

'e ordered to )an)el +C+ %o. 77HF1 and to issue a ne title in her favor.

2n Mar)h G, 13G3, herein petitioners, sisters of the late senator, ;led a motion for

intervention on the ground that on une 70, 13G4, their 'rother )onve-ed to them one/half

!1D7 # of his shareholdings in S=BIC or a total of H16,566.6 shares and as assignees of

around H1 J of the total outstanding shares of su)h sto)9s of S=BIC, the- have a

su'stantial and legal interest in the su'je)t matter of litigation and that the- have a legal

interest in the su))ess of the suit ith respe)t to S=BIC.

2n ul- 76, 13G3, the )ourt denied the motion for intervention, and ruled that petitioners

have no legal interest hatsoever in the matter in litigation and their 'eing allegedassignees or transferees of )ertain shares in S=BIC )annot legall- entitle them to

intervene 'e)ause S=BIC has a personalit- separate and distin)t from its sto)9holders.

2n appeal, respondent Court of Appeals found no fa)tual or legal justi;)ation to distur'

the ;ndings of the loer )ourt. +he appellate )ourt further stated that hatever )laims

the petitioners have against the late Senator or against S=BIC for that matter )an 'e

ventilated in a separate pro)eeding, su)h that ith the denial of the motion for

intervention, the- are not left ithout an- remed- or judi)ial relief under eisting la.

Petitioners motion for re)onsideration as denied. >en)e, the instant re)ourse.

Petitioners an)hor their right to intervene on the purported assignment made '- the lateSenator of a )ertain portion of his shareholdings to them as eviden)ed '- a eed of Sale

dated une 70, 13G4. # Su)h transfer, petitioners posit, )lothes them ith an interest,

prote)ted '- la, in the matter of litigation.

Invo9ing the prin)iple enun)iated in the )ase of P%B v. Phil. @eg. 2il Co., H3 Phil. 45G,467

? 45F !137G#, 3petitioners strongl- argue that their onership of H1.66J of the entire

outstanding )apital sto)9 of S=BIC entitles them to a signi;)ant vote in the )orporate

aairsE that the- are ae)ted '- the a)tion of the ido of their late 'rother for it

)on)erns the onl- tangi'le asset of the )orporation and that it appears that the- are more

vitall- interested in the out)ome of the )ase than S=BIC.

@ieed in the light of Se)tion 7, Rule 17 of the Revised Rules of Court, this Court a(rms

the respondent )ourts holding that petitioners herein have no legal interest in the su'je)t

matter in litigation so as to entitle them to intervene in the pro)eedings 'elo. In the )ase

of Batama *armers Cooperative Mar9eting Asso)iation, In). v. Rosal, $ e held: "As )learl-



stated in Se)tion 7 of Rule 17 of the Rules of Court, to 'e permitted to intervene in a

pending a)tion, the part- must have a legal interest in the matter in litigation, or in the

su))ess of either of the parties or an interest against 'oth, or he must 'e so situated as to

'e adversel- ae)ted '- a distri'ution or other disposition of the propert- in the )ustod-

of the )ourt or an o()er thereof ."

+o allo intervention, Oa it must 'e shon that the movant has legal interest in the

matter in litigation, or otherise $uali;edE and O' )onsideration must 'e given as to

hether the adjudi)ation of the rights of the original parties ma- 'e dela-ed or

prejudi)ed, or hether the intervenors rights ma- 'e prote)ted in a separate pro)eeding

or not. Both re$uirements must )on)ur as the ;rst is not more important than the

se)ond. %

+he interest hi)h entitles a person to intervene in a suit 'eteen other parties must 'e

in the matter in litigation and of su)h dire)t and immediate )hara)ter that the intervenor

ill either gain or lose '- the dire)t legal operation and ee)t of the judgment. 2therise,

if persons not parties of the a)tion )ould 'e alloed to intervene, pro)eedings ill 'e)ome

unne)essaril- )ompli)ated, epensive and intermina'le. And this is not the poli)- of the

la.6

+he ords "an interest in the su'je)t" mean a dire)t interest in the )ause of a)tion as

pleaded, and hi)h ould put the intervenor in a legal position to litigate a fa)t alleged in

the )omplaint, ithout the esta'lishment of hi)h plainti )ould not re)over. &

>ere, the interest, if it eists at all, of petitioners/movants is indire)t, )ontingent, remote,

)onje)tural, )onse$uential and )ollateral. At the ver- least, their interest is purel-

in)hoate, or in sheer epe)tan)- of a right in the management of the )orporation and to

share in the pro;ts thereof and in the properties and assets thereof on dissolution, after

pa-ment of the )orporate de'ts and o'ligations.

<hile a share of sto)9 represents a proportionate or ali$uot interest in the propert- of the)orporation, it does not vest the oner thereof ith an- legal right or title to an- of the

propert-, his interest in the )orporate propert- 'eing e$uita'le or 'ene;)ial in nature.

Shareholders are in no legal sense the oners of )orporate propert-, hi)h is oned '-

the )orporation as a distin)t legal person. '

Petitioners further )ontend that the availa'ilit- of other remedies, as de)lared '- the

Court of appeals, is totall- immaterial to the availa'ilit- of the remed- of intervention.

<e )annot give )redit to su)h averment. As earlier stated, that the movants interest ma-

'e prote)ted in a separate pro)eeding is a fa)tor to 'e )onsidered in alloing or

disalloing a motion for intervention. It is signi;)ant to note at this jun)ture that as per

re)ords, there are four pending )ases involving the parties herein, enumerated as follos:

O1 Spe)ial Pro)eedings %o. 177177 'efore the C*I of Manila, Bran)h II, entitled

"Con)ep)ion Magsa-sa-/&a'rador, et al. v. Su'i) &and Corp., et al.", involving the validit-

of the transfer '- the late enaro Magsa-sa- of one/half of his shareholdings in Su'i)

&and CorporationE O7 Civil Case %o. 75GG/0 'efore the C*I of Nam'ales, Bran)h III,

"Adelaida Rodrigue/Magsa-sa- v. Pangani'an, et).E Con)ep)ion &a'rador, et al.

Intervenors", see9ing to annul the purported eed of Assignment in favor of S=BIC and its

annotation at the 'a)9 of +C+ %o. F754 in the name of respondents de)eased hus'andE

OF SC Case %o. 001GG0, ;led '- respondent pra-ing, among other things that she 'e

de)lared in her )apa)it- as the surviving spouse and administratri of the estate of

enaro Magsa-sa- as the sole su's)ri'er and sto)9holder of S=BIC. +here, petitioners, '-motion, sought to intervene. +heir motion to re)onsider the denial of their motion to

intervene as grantedE OH SP %o. /76GF3 'efore the C*I of Rial, Bran)h I@, petitioners

herein ;ling a )ontingent )laim pursuant to Se)tion 5, Rule 46, Revised Rules of

Court. 9 Petitioners interests are no dou't ampl- prote)ted in these )ases.

%either do e lend )reden)e to petitioners argument that the- are more interested in the

out)ome of the )ase than the )orporation/assignee, oing to the fa)t that the latter is

illing to )ompromise ith ido/respondent and sin)e a )ompromise involves the giving

of re)ipro)al )on)essions, the onl- )on)eiva'le )on)ession the )orporation ma- give is a

total or partial relin$uishment of the )orporate assets. 10

Su)h )laim all the more 'olsters the )ontingent nature of petitioners interest in thesu'je)t of litigation.

+he fa)tual ;ndings of the trial )ourt are )lear on this point. +he petitioners )annot )laim

the right to intervene on the strength of the transfer of shares allegedl- ee)uted '- the

late Senator. +he )orporation did not 9eep 'oo9s and re)ords. 11 Perfor)e, no transfer as

ever re)orded, mu)h less ee)ted as to prejudi)e third parties. +he transfer must 'e

registered in the 'oo9s of the )orporation to ae)t third persons. +he la on )orporations

is epli)it. Se)tion 6F of the Corporation Code provides, thus: "%o transfer, hoever, shall

'e valid, e)ept as 'eteen the parties, until the transfer is re)orded in the 'oo9s of the

)orporation shoing the names of the parties to the transa)tion, the date of the transfer,

the num'er of the )erti;)ate or )erti;)ates and the num'er of shares transferred."

And even assuming arguendo that there as a valid transfer, petitioners are nonetheless

'arred from intervening inasmu)h as their rights )an 'e ventilated and ampl- prote)ted in

another pro)eeding.

<>R*2R, the instant petition is here'- %I. Costs against petitioners.

S2 2RR.



GOO" EARTH EMORIUM INC., an LIM A ING vs. HONORABLE COURT OFAEALS an ROCES(RE2ES REALT2 INC. ;G.R. No. '#&9&<

ARAS, J.:

+his is a petition for revie on certiorari of the e)em'er 73, 134G de)ision = of the Courtof Appeals in CA/.R. %o. 11360 entitled "R2CS/RS RA&+, I%C. vs. >2%2RAB&

= RI2%A& +RIA& C2=R+ 2* MA%I&A, BRA%C> HH, 22 AR+> MP2RI=M, I%C.and &IM QA PI%" reversing the de)ision of respondent udge == of the Regional +rial Courtof Manila, Bran)h HH in Civil Case %o. 45/F0H4H, hi)h reversed the resolution of theMetropolitan +rial Court 2f Manila, Bran)h 74 in Civil Case %o. 036F3, === den-ing hereinpetitioners motion to $uash the alias rit of ee)ution issued against them.

As gathered from the re)ords, the ante)edent fa)ts of this )ase, are as follos:

A &ease Contra)t, dated 2)to'er 16, 1341, as entered into '- and 'eteen R2CS/RS RA&+, I%C., as lessor, and 22 AR+> MP2RI=M, I%C., as lessee, for a term ofthree -ears 'eginning %ovem'er 1, 1341 and ending 2)to'er F1, 134H at a monthl-rental of P65,000.00 !Rollo, p. F7E Anne "C" of Petition#. +he 'uilding hi)h as thesu'je)t of the )ontra)t of lease is a ;ve/store- 'uilding lo)ated at the )orner of RialAvenue and Bustos Street in Sta. Cru, Manila.

*rom Mar)h 134F, up to the time the )omplaint as ;led, the lessee had defaulted in thepa-ment of rentals, as a )onse$uen)e of hi)h, private respondent R2CS/RS RA&+,I%C., !hereinafter designated as R2CS for 'revit-# ;led on 2)to'er 1H, 134H, an

eje)tment )ase !=nlaful etainer# against herein petitioners, 22 AR+> MP2RI=M,I%C. and &IM QA PI%, hereinafter designated as , !Rollo, p. 71E Anne "B" of thePetition#. After the latter had tendered their responsive pleading, the loer )ourt !M+C,Manila# on motion of Ro)es rendered judgment on the pleadings dated April 1G, 134H, thedispositive portion of hi)h states:

udgment is here'- rendered ordering defendants !herein petitioners# and allpersons )laiming title under him to va)ate the premises and surrender the sameto the plaintis !herein respondents#E ordering the defendants to pa- theplaintis the rental of P65,000.00 a month 'eginning Mar)h 134F up to the timedefendants a)tuall- va)ate the premises and deliver possession to the plaintiEto pa- attorne-s fees in the amount of P5,000.00 and to pa- the )osts of thissuit. !Rollo, p. 111E Memorandum of Respondents#

2n Ma- 16, 134H, Ro)es ;led a motion for ee)ution hi)h as opposed '- on Ma-74, 134H simultaneous ith the latters ;ling of a %oti)e of Appeal !Rollo, p. 117, )bid.#. 2n

une 1F, 134H, the trial )ourt resolved su)h motion ruling:

After )onsidering the motion for the issuan)e of a rit of ee)ution ;led '-)ounsel for the plainti !herein respondents# and the opposition ;led in relationthereto and ;nding that the defendant failed to ;le the ne)essar- supersedeas'ond, this )ourt resolved to grant the same for 'eing meritorious. !Rollo, p. 117#

2n une 1H, 134H, a rit of ee)ution as issued '- the loer )ourt. Meanhile, theappeal as assigned to the Regional +rial Court !Manila# Bran)h &@I. >oever, on August15, 134H, thru )ounsel ;led ith the Regional +rial Court of Manila, a motion toithdra appeal citing as reason that the- are satis;ed ith the de)ision of theMetropolitan +rial Court of Manila, Bran)h @III, hi)h said )ourt granted in its 2rder of

August 7G, 134H and the re)ords ere remanded to the trial )ourt !Rollo, p. F7E CAe)ision#. =pon an ex!parte Motion of R2CS, the trial )ourt issued an Alias <rit ofe)ution dated *e'ruar- 75, 1345 !Rollo, p. 10HE Anne "" of PetitionersMemorandum#, hi)h as implemented on *e'ruar- 7G, 1345. thru )ounsel ;led a



motion to $uash the rit of ee)ution and noti)e of lev- and an urgent 0x! parte Supplemental Motion for the issuan)e of a restraining order, on Mar)h G, and 70,1345, respe)tivel-. 2n Mar)h 71, 1345, the loer )ourt issued a restraining order to thesheri to hold the ee)ution of the judgment pending hearing on the motion to $uash therit of ee)ution !Rollo, p. 77E R+C e)ision#. <hile said motion as pending resolution, ;led a Petition for Relief from judgment 'efore another )ourt, Regional +rial Court ofManila, Bran)h I, hi)h petition as do)9eted as Civil Case %o. 40/F0013, 'ut the

petition as dismissed and the injun)tive rit issued in )onne)tion thereith set aside.Both parties appealed to the Court of AppealsE on the order of dismissal and Ro)es ondenial of his motion for indemnit-, 'oth do)9eted as CA/.R. %o. 154GF/C@. oing 'a)9 tothe original )ase, the Metropolitan +rial Court after hearing and disposing some otherin)idents, promulgated the $uestioned Resolution, dated April 4, 1345, the dispositiveportion of hi)h reads as follos:

Premises )onsidered, the motion to $uash the rit is here'- denied for la)9 ofmerit.

+he restraining orders issued on Mar)h 11 and 7F, 1345 are here'- re)alled,lifted and set aside. !Rollo, p. 70, M+C e)ision#

appealed and '- )oin)iden)e. as raTed to the same Court, R+C Bran)h I. Ro)esmoved to dismiss the appeal 'ut the Court denied the motion. 2n certiorari, the Court ofAppeals dismissed Ro)es petition and remanded the )ase to the R+C. Meantime, Bran)hI 'e)ame va)ant and the )ase as re/raTed to Bran)h &I@.

2n April 6, 134G, the Regional +rial Court of Manila, ;nding that the amount of P1 millioneviden)ed '- hi'it "I" and another P1 million eviden)ed '- the pacto de retro saleinstrument !hi'it "7"# ere in full satisfa)tion of the judgment o'ligation, reversed thede)ision of the Muni)ipal +rial Court, the dispositive portion of hi)h reads:

Premises )onsidered, judgment is here'- rendered reversing the Resolutionappealed from $uashing the rit of ee)ution and ordering the )an)ellation ofthe noti)e of lev- and de)laring the judgment de't as having 'een full- paidandDor &i$uidated. !Rollo, p. 73#.

2n further appeal, the Court of Appeals reversed the de)ision of the Regional +rial Courtand reinstated the Resolution of the Metropolitan +rial Court of Manila, the dispositiveportion of hi)h is as follos:

<>R*2R, the judgment appealed from is here'- R@RS and theResolution dated April 4, 1345, of the Metropolitan +rial Court of Manila Bran)hIII is here'- RI%S+A+. %o pronoun)ement as to )osts. ! Rollo, p. H0#.

s Motion for Re)onsideration of April 5, 1344 as denied !Rollo, p. HF#. >en)e, thispetition.

+he main issue in this )ase is hether or not there as full satisfa)tion of the judgment

de't in favor of respondent )orporation hi)h ould justif- the $uashing of the <rit ofe)ution.

A )areful stud- of the )ommon ehi'its !hi'its 1DA and 7DB# shos that nohere in an-of said ehi'its as there an- riting alluding to or referring to an- settlement 'eteenthe parties of petitioners judgment o'ligation !Rollo, pp. H5/H4#.

Moreover, there is no indi)ation in the re)eipt, hi'it "1", that it as in pa-ment, full orpartial, of the judgment o'ligation. &i9eise, there is no indi)ation in the pacto de

retro sale hi)h as dran in favor of esus Mar)os Ro)es and Mar)os @. Ro)es and notthe respondent )orporation, that the o'ligation em'odied therein had something to doith petitioners judgment o'ligation ith respondent )orporation.

*inding that the )ommon ehi'it, hi'it 1DA had 'een signed '- persons other than judgment )reditors !Ro)es/Re-es Realt-, In).# )oupled ith the fa)t that said ehi'it asnot even alleged '- and &im Qa Ping in their original motion to $uash the alias rit ofee)ution !Rollo, p. FG# 'ut produ)ed onl- during the hearing !)bid.# hi)h produ)tionresulted in petitioners having to )laim belatedly that there as an "overpa-ment" of a'outhalf a million pesos !Rollo, pp. 75/7G# and remar9ing on the utter a'sen)e of an- riting inhi'its "1DA" and "7DB" to indi)ate pa-ment of the judgment de't, respondent AppellateCourt )orre)tl- )on)luded that there as in fa)t nopa-ment of the judgment de't. As aptl-o'served '- the said )ourt:

<hat immediatel- )at)hes ones attention is the total a'sen)e of an- ritingalluding to or referring to an- settlement 'eteen the parties of privaterespondents !petitioners# judgment o'ligation. In moving for the dismissal of theappeal &im Qa Ping ho as then assisted '- )ounsel simpl- stated thatdefendants !herein petitioners# are satis;ed ith the de)ision of the Metropolitan

+rial Court !Re)ords of CA, p. 5H#.

%ota'l-, in private respondents !petitioners# Motion to uash the <rit ofe)ution and %oti)e of &ev- dated (arch 1, 2345, there is a'solutel- noreferen)e to the alleged pa-ment of one million pesos as eviden)ed '- hi'it 1dated *eptember 67, 2348. As pointed out '- petitioner !respondent )orporation#this as 'rought out '- &inda Panutat, Manager of ood arth onl- in the )ourseof the latters testimon-. !Rollo, p. FG#

Arti)le 17H0 of the Civil Code of the Philippines provides that:

Pa-ment shall 'e made to the person in hose favor the o'ligation has 'een)onstituted, or his su))essor in interest, or an- person authoried to re)eive it.

In the )ase at 'ar, the supposed pa-ments ere not made to Ro)es/Re-es Realt-, In). orto its su))essor in interest nor is there positive eviden)e that the pa-ment as made to aperson authoried to re)eive it. %o su)h proof as su'mitted 'ut merel- inferred '- theRegional +rial Court !Rollo, p. 75# from Mar)os Ro)es having signed the &ease Contra)t asPresident hi)h as itnessed '- esus Mar)os Ro)es. +he latter, hoever, as no longerPresident or even an o()er of Ro)es/Re-es Realt-, In). at the time he re)eived the mone-!hi'it "1"# and signed the sale ith pacto de retro !hi'it "7"#. >e, in fa)t, denied 'eingin possession of authorit- to re)eive pa-ment for the respondent )orporation nor does there)eipt sho that he signed in the same )apa)it- as he did in the &ease Contra)t at a time

hen he as President for respondent )orporation !Rollo, p. 70, M+C de)ision#.



2n the other hand, esus Mar)os Ro)es testi;ed that the amount of P1 million eviden)ed'- the re)eipt !hi'it "1"# is the pa-ment for a loan etended '- him and Mar)os Ro)esin favor of &im Qa Ping. +he assertion is home '- the re)eipt itself here'- the-a)9noledged pa-ment of the loan in their names and in no other )apa)it-.

A )orporation has a personalit- distin)t and separate from its individual sto)9holders or

mem'ers. Being an o()er or sto)9holder of a )orporation does not ma9e ones propert-also of the )orporation, and vi)e/versa, for the- are separate entities !+raders Ro-al Ban9v. CA/.R. %o. G4H17, Septem'er 76, 1343E Cru v. alisa-, 157 SCRA H47#. Shareonersare in no legal sense the oners of )orporate propert- !or )redits# hi)h is oned '- the)orporation as a distin)t legal person !Con)ep)ion Magsa-sa-/&a'rador v. CA/.R. %o.54164, e)em'er 13, 1343#. As a )onse$uen)e of the separate juridi)al personalit- of a)orporation, the )orporate de't or )redit is not the de't or )redit of the sto)9holder, nor isthe sto)9holders de't or )redit that of the )orporation !Prof. ose %olledos "+heCorporation Code of the Philippines, p. 5, 1344 dition, citing Professor Ballantine#.

+he a'sen)e of a note to eviden)e the loan is eplained '- esus Mar)os Ro)es hotesti;ed that the I2= as su'se$uentl- delivered to private respondents !Rollo, pp. 3G/34#. Contrar- to the Regional +rial Courts premise that it as in)um'ent upon respondent)orporation to prove that the amount as delivered to the Ro)es 'rothers in the pa-mentof the loan in the latters favor, the deliver- of the amount to and the re)eipt thereof '-the Ro)es 'rothers in their names raises the presumption that the said amount as due tothem.29/phi2 +here is a disputa'le presumption that mone- paid '- one to the other asdue to the latter !Se). 5!f# Rule 1F1, Rules of Court#. It is for and &im Qa Ping to proveotherise. In other ords, it is for the latter to prove that the pa-ments made ere for thesatisfa)tion of their judgment de't and not vi)e versa.

+he fa)t that at the time pa-ment as made to the to Ro)es 'rothers, as alsoinde'ted to respondent )orporation for a larger amount, is not supportive of the Regional

+rial Courts )on)lusions that the pa-ment as in favor of the latter, espe)iall- in the )aseat 'ar here the amount as not re)eipted for '- respondent )orporation and there isa'solutel- no indi)ation in the re)eipt from hi)h it )an 'e reasona'l- inferred, that saidpa-ment as in satisfa)tion of the judgment de't. &i9eise, no su)h inferen)e )an 'emade from the ee)ution of the pacto de retro sale hi)h as not made in favor ofrespondent )orporation 'ut in favor of the to Ro)es 'rothers in their individual )apa)ities

ithout an- referen)e to the judgment o'ligation in favor of respondent )orporation.

In addition, the totalit- of the amount )overed '- the re)eipt !hi'it "1DA"# and that ofthe sale ith pacto de retro!hi'it "7DB"# all in the sum of P7 million, far e)eedspetitioners judgment o'ligation in favor of respondent )orporation in the sum ofP1,560,000.00 '- PHH0,000.00, hi)h militates against the )laim of petitioner that theaforesaid amount !P7M# as in full pa-ment of the judgment o'ligation.

Petitioners eplanation that the e)ess is interest and advan)e rentals for an etension of the lease )ontra)t !Rollo, pp. 75/74# is 'elied '- the a'sen)e of an- interest aarded inthe )ase and of an- agreement as to the etension of the lease nor as there an- su)hpretense in the Motion to uash the Alias <rit of e)ution.

Petitioners averments that the respondent )ourt had gravel- a'used its dis)retion inarriving at the assailed fa)tual ;ndings as )ontrar- to the eviden)e and appli)a'lede)isions of this >onora'le Court are therefore, patentl- unfounded. Respondent )ourtas )orre)t in stating that it ")annot go 'e-ond hat appears in the do)uments su'mitted

'- petitioners themselves !hi'its "1" and "7"# in the a'sen)e of )lear and )onvin)ingeviden)e" that ould support its )laim that the judgment o'ligation has indeed 'een full-satis;ed hi)h ould arrant the $uashal of the Alias <rit of e)ution.

It has 'een an esta'lished rule that hen the eisten)e of a de't is full- esta'lished '-the eviden)e !hi)h has 'een done in this )ase#, the 'urden of proving that it has 'een

etinguished '- pa-ment devolves upon the de'tor ho oers su)h a defense to the)laim of the plainti )reditor !herein respondent )orporation# !Chua Chien)o v. @argas, 11Phil. 713E Ramos v. &edesma, 17 Phil. 656E Pinon v. e 2sorio, F0 Phil. F65#. *or indeed, itis ell/entren)hed in 2ur jurispruden)e that ea)h part- in a )ase must prove his ona(rmative allegations '- the degree of eviden)e re$uired '- la !Stronghold Insuran)eCo. v. CA, .R. %o. 4FFG6, Ma- 73,1343E +ai +ong Chua)he ? Co. v. Insuran)e Commission,154 SCRA F66#. +he appellate )ourt )annot, therefore, 'e said to have gravel- a'used itsdis)retion in ;nding la)9 of )onvin)ing and relia'le eviden)e to esta'lish pa-ment of the

judgment o'ligation as )laimed '- petitioner. +he 'urden of eviden)e resting on thepetitioners to esta'lish the fa)ts upon hi)h their a)tion is premised has not 'eensatisfa)toril- dis)harged and therefore, the- have to 'ear the )onse$uen)es. PRMISSC2%SIR, the petition is here'- %I and the e)ision of the Respondent )ourt ishere'- A**IRM, reinstating the April 4, 1345 Resolution of the Metropolitan +rial Courtof Manila. S2 2RR.

G.R. No. L(301'' Oc)o*+r #, 19#'

FELIE TA2O, E"UAR"O BUENO, BAUTISTA TA2O, BERNAR"O SOL"E an

!ICENTE ELUM,petitioners,

vs.

NICOLAS CAISTRANO, ac)4n: a J:+ o F4r) In)anc+ o Or4+n)a7 N+:ro.

ALFRE"O B. CACNIO, a ro>4nc4a7 F4ca7 o Or4+n)a7 N+:ro, an JUAN

GA"IANI, respondents.

OSTRAN", J.:

+his is a petition for a rit of prohi'ition enjoining the respondent judge from ma9ing

)ognian)e of )ertain )ivil and )riminal ele)tion )ases in hi)h the petitioners are parties.

+he petitioners allege that the respondent judge, previous to this date, as appointed

judge of the Court of *irst Instan)e of 2riental %egros, to hold o()e during good 'ehavior

and until he should rea)h the age of 65 -earsE that he no has rea)hed that age and,

therefore, under the provisions of se)tion 1H4 of the Administrative Code as amended, is

dis$uali;ed from a)ting as a judge of the Court of *irst Instan)e. +he petitioners further

allege that in vie of the man- ele)tion protests and )riminal )ases for violation of the

ele)tion la ;led in the Court of *irst Instan)e of 2riental %egros arising in the Court of

*irst Instan)e of 2riental %egros arising from the last ele)tion of une 5, 1374, the

>onora'le Sito de la Costa as dul- designated and a)ted as auiliar- judge of the

Provin)e of 2riental %egrosE that 'eteen the auiliar- judge and the respondent judge

herein there as an understanding, and the assignment of the said auiliar- judge asmade ith this understanding, that the said auiliar- judge so designated ould hear and

ta9e )ognian)e of all ele)tion protests and )riminal a)tions then pending or to ;led

arising from the said last general ele)tion, and that the respondent >onora'le %i)olas



Capistrano ould tr- and hear the ordinar- )ases pending in the said )ourt, 'ut,

notithstanding this understanding or agreement, the respondent judge tried and is still

tr-ing to ta9e )ognian)e of the ele)tion protests an )riminal a)tions in said )ourtE that

the respondent judge de)lared in open )ourt that he ill tr- the )riminal )ases herein

mentioned for the reason that the auiliar- judge refused to tr- the same on the ground

that the preliminar- investigations ere held 'efore him, hen, in truth and in fa)t, the

said auiliar- judge did not ma9e the statement imputed to him and as and is still illingto tr- the ele)tion protests and )riminal )ases for violation of the ele)tion la pending in

the )ourt of the Provin)e of 2riental %egrosE that the respondent >onora'le %i)olas

Capistrano, in spite of the fa)t that he as holding and is no pretending to hold the

o()e of judge of the Court of *irst Instan)e of 2riental %egros, too9 great interest and

a)tive part in the ;ling of )riminal )harges against the petitioners herein to the

unjusti;a'le etent of appointing a deput- ;s)al, ho then ;led the proper informations,

hen the provin)ial ;s)al refused to ;le )riminal )harges against the petitioners for

violation of the ele)tion la for la)9 of su()ient eviden)e to sustain the sameE that said

respondent is neither a judge de ure nor de facto, 'ut that, notithstanding this fa)t, he

)ontinues to hold the o()e of judge of the Court of *irst Instan)e of 2riental %egros and

pretends to 'e dul- $uali;ed and a)ting judge of the said provin)eE and that he has tried,

and )ontinues to tr-, to a)t as su)h judge and that there is reasona'le ground to 'elieve

that he ill ta9e )ognian)e of the )ases in $uestion unless he 'e restrained '- order ofthis )ourtE that in a)ting as a dul- $uali;ed judge notithstanding the fa)ts alleged in the

;fth, sith, and seventh paragraphs hereof, the respondent judge a)ted and is a'out to

a)t ithout and in e)ess of jurisdi)tion and also after the loss of jurisdi)tion.

+o this petition the respondents demur on the ground that the fa)ts stated in that !1# none

of the fa)ts alleged in the petition divest the respondent judge of his jurisdi)tion to ta9e

)ognian)e of the )ases referred to in the )omplaint, and !7# even admitting as true, for

the sa9e of this demurrer, the fa)ts alleged in paragraph G of the petition, the respondent

judge is still a de facto judge and his title to the o()e and his jurisdi)tion to hear the

)ases referred to in the petition )annot 'e $uestioned '- prohi'ition, as this rit, even

hen dire)ted against persons a)ting as judges, )annot 'e treated as a su'stitute for %uo

/arranto, or 'e rightfull- )alled upon to perform an- of the fun)tions of that rit.

+he ground upon hi)h the petition rests ma- 'e redu)ed to three propositions. !1# +hat

the assignment of the Auiliar- udge, Sito de la Costa, to umaguete as made ith the

understanding that the he as to hear and ta9e )ognian)e of all ele)tion )ontests and

)riminal )auses for violation of the ele)tion la and that the respondent judge as to ta9e

)ognian)e of the ordinar- )ases and that there as an understanding 'eteen them that

this arrangement as to 'e folloed.

!7# +hat the respondent judge too9 great interest and an a)tive part in the ;ling

of the )riminal )harges against the petitioners herein to the unjusti;a'le etent

of appointing a deput- ;s)al ho ;led the proper informations hen the regular

provin)ial ;s)al refused to ;le them for la)9 of su()ient eviden)e.

!F# +hat the respondent judge is alread- over 65 -ears of age and has, therefore,

automati)all- )eased as judge of the Court of *irst Instan)e of 2riental %egros

and that he is neither a judge de ure nor de facto.

!a# But little need 'e said as to the ;rst proposition. A rit of prohi'ition

to a judge of an interior )ourt ill onl- lie in )ases here he a)ts ithout

or in e)ess of his jurisdi)tion !se)tion 776, Code of Civil Pro)edure#, and

it is o'vious that a mere "understanding" as to the distri'ution of )ases

for trial did not deprive the respondent judge of the jurisdi)tion

)onferred upon him '- la. It ma- 'e noted that it is not alleged that

another judge had ta9en )ognian)e of the )ases in $uestion or that

the- had 'een de;nitel- assigned to trial 'efore su)h other judge.

!'# +he se)ond proposition is e$uall- untena'le.2a/ph:l+net +hat the

respondent judge too9 great interest and an a)tive part in the ;ling of

the )riminal )harges against the petitioners to the etent of appointing

a deput- ;s)al hen the regular provin)ial ;s)al refused to ;le the

proper informations, did not dis$ualif- him from tr-ing the )ase in

$uestion. Se)tion 16G3 of the Administrative Code provides that "hena provin)ial ;s)al shall 'e dis$uali;ed '- personal interest to a)t in a

parti)ular )ase or hen for an- reason he shall 'e una'le, or shall fail,

to dis)harge an- of the duties of his position, the judge of the Court of

*irst Instan)e of the provin)e shall appoint an a)ting provin)ial

;s)al, . . . ." !mphasis ours.#

+he determination of the $uestion as to hether the ;s)al has failed to

dis)harge his dut- in the prose)ution of a )rime must ne)essaril-, to a

large etent, lie ithin the sound dis)retion of the presiding judge, and

there is no allegation in the petition that su)h dis)retion as a'used in

the present instan)e. It is true that it is stated that the appointment of

the a)ting ;s)al as "unjusti;a'le," 'ut that is onl- a )on)lusion of la

and not an allegation of fa)ts upon hi)h su)h a )on)lusion )an 'eformed and ma-, therefore, 'e disregarded. It follos that in appointing

an a)ting ;s)al, the respondent judge as ell ithin his jurisdi)tion.

!)# +he third ground upon hi)h the petition is 'ased is the most

important and merits some )onsideration. It is ell settled that the title

to the o()e of a judge, hether de ure or de facto, )an onl- 'e

determined in a pro)eeding in the nature of %uo /arranto and )annot 'e

tested '- prohi'ition. But )ounsel for the petitioners maintains that the

respondent judge is neither a judge de ure nor de facto and that,

therefore, prohi'ition ill lie. In this, )ounsel is undou'tedl- mista9en.

+he respondent judge has 'een dul- appointed to the o()e of udge of the Court of *irstInstan)e of 2riental %egros, 'ut se)tion 1H4 of the Administrative Code, as amended,

provides that "udges of the Court of *irst Instan)e and auiliar- judges shall 'e appointed

to serve until the- shall rea)h the age of sit-/;ve -ears." In vie of this provision and



assuming, as e must, that the allegations of the petition are true, it is evident that the

respondent is no longer a judge de ure, 'ut e do not thin9 that it )an 'e su))essfull-

disputed that he is still a judge de facto.

BrieL- de;ned, a de facto judge is one ho eer)ises the duties of a judi)ial o()e under

)olor of an appointment or ele)tion thereto !Bron vs. 2Connell, F6 Conn., HF7#. >e

diers, on the one hand, from a mere usurper ho underta9es to a)t o()iall- ithout an-

)olor of right, and on the other hand, from a judge de ure ho is in all respe)ts legall-

appointed and $uali;ed and hose term of o()e has not epired !State vs. Carroll, F4

Conn., HH3E enn- vs. Matton, 7 Allen OMass., F61E @an Sl-9e vs. *armers Mut. *ire Ins.

Co., F3 <is., F30#.

Apart from an- )onstitutional or statutor- regulation on the su'je)t there seems

to 'e a general rule of la that an in)um'ent of an o()e ill hold over after the

)on)lusion of his term until the el)tion and $uali;)ation of a su))essor !77 R. C.

&., pp. 55H/5#. <hen a judge in good faith remains in o()e after his title has

ended, he is a de facto o()er !Sheehans Case, 177 Mass., HH5#.

Appl-ing the prin)iples stated to the fa)ts set forth in the petition 'efore us, e )annotes)ape the )on)lusion that, on the assumption that said fa)ts are true, the respondent

judge must 'e )onsidered a judge de facto. >is term of o()e ma- have epired, 'ut his

su))essor has not 'een appointed, and as good faith is presumed, he must 'e regarded as

holding over in good faith. +he )ontention of )ounsel for the petitioners that the auiliar-

judge present in the distri)t must 'e )onsidered the regular judge seems o'viousl-

erroneous.

In these )ir)umstan)es the remed- pra-ed for )annot 'e granted. "+he rightful authorit-

of a judge, in the full eer)ise of his pu'li) judi)ial fun)tion, )annot 'e $uestioned '- an-

merel- private suitor, nor '- another, e)epting in the form espe)iall- provided '- la.

A judge de facto assumes the eer)ise of a part of the prerogative of sovereignt-, and the

legalit- of that assumption is open to the atta)9 of the sovereign poer alone.

A))ordingl-, it is a ell esta'lished prin)iple, dating from the earliest period and

repeatedl- )on;rmed '- an un'ro9en )urrent of de)isions, that the o()ial a)ts of a de

facto judge are just as valid for all purposes as those of a de ure judge, so far as the

pu'li) or third persons ho are interested therein are )on)erned. +he rule is the same in

)ivil )riminal )ases. +he prin)iple is one founded in poli)- and )onvenien)e, for the right of

no one )laiming a title or interest under or through the pro)eedings of an o()er having an

apparent authorit- to a)t ould 'e safe, if it ere ne)essar- in ever- )ase to eamine the

legalit- of the title of su)h o()er up to its original sour)e, and the title or interest of su)h

person ere held to 'e invalidated '- some a))idental defe)t or La in the appointment,

ele)tion or $uali;)ation of su)h o()er, or in the rights of those from hom his

appointment or ele)tion emanatedE nor )ould the suprema)- of the las 'e maintained,

or their ee)ution enfor)ed, if the a)ts of the judge having a )olora'le, 'ut not a legal

title, ere to 'e deemed invalid. As in the )ase of judges of )ourts of re)ord, the a)ts of a

justi)e de facto )annot 'e )alled in $uestion in an- suit to hi)h he is not a part-. +he

o()ial a)ts of a de facto justi)e )annot ' atta)9ed )ollaterall-. An e)eption to the general

rule that the title of a person assuming to a)t as judge )annot 'e $uestioned in a suit

'efore him is generall- re)ognied in the )ase of a spe)ial judge, and it is held that a

part- to an a)tion 'efore a spe)ial judge ma- $uestion his title to the o()e of a judge on

the pro)eedings 'efore him, and that the judgment ill 'e reversed on appeal, here

proper e)eptions are ta9en, if the person assuming to a)t as spe)ial judge is not a

judge de ure. +he title of a de facto o()er )annot 'e indire)tl- $uestioned in a

pro)eeding to o'tain a rit of prohi'ition to prevent him from doing an o()ial a)t nor in a

suit to enjoin the )olle)tion of a judgment rendered '- him. >aving at least )olora'le rightto the o()e his title )an 'e determined onl- in a $uo arranto pro)eeding or information

in the nature of a %uo /arranto at suit of the sovereign." !15 R. C. &., pp. 513/571.#

+he demurrer to the petition is sustained, and inasmu)h as it is evident that the ea9ness

of the petition )annot 'e )ured '- amendment the present pro)eedings are here'-

dismissed ith the )osts against the petitioners jointl- and severall-. +he preliminar-

injun)tion herein'efore issued is dissolved. So ordered.



G.R. No. L(#111$ No>+*+r #', 196&

FE"ERICO FERNAN"E-, plainti/appellant,

vs.

. CUER!A an CO., defendant/appellee.

#erardo P+ (oreno, Jr+ for plainti;!appellant+

"+-+ <ueno for defendant!appellee+

-AL"I!AR, J.:

+his is an appeal from the order of the Court of *irst Instan)e of Manila, dated anuar- 73,

136F, in its Civil Case %o. 573H6, dismissing the )omplaint upon the ground that the

a)tion in the ;rst to )auses of a)tion had pres)ri'ed and that it had no jurisdi)tion over

the third )ause of a)tion.

It appears that plainti *ederi)o *ernande as emplo-ed as salesman '- defendant P.

Cuerva ? Co. from Mar)h, 13H3 to 2)to'er, 1353. After his separation from the servi)e,

plainti ;led a )laim, on ul- 76, 1360, 'efore Regional 2()e %o. H of the epartment of

&a'or,1 do)9eted as &. S. Case %o. 73H0, to re)over unpaid salaries and )ommissions, andseparation pa-.

uring the penden)- of said )ase, or on e)em'er 1G, 1367, plainti again instituted a

similar )omplaint against the same defendant ith the Court of *irst Instan)e of Manila

!Civil Case %o. 573H6# alleging, among others, that he as emplo-ed '- defendant

)ompan- as salesman in Mar)h, 13H3 ith a salar- of P700.00 per month that 'eginning

une, 1355 until the termination of his servi)es in 2)to'er, 1353, his salar- as in)reased

to, PF00.00 monthl- and as given, in addition, a )ommission of 10J on his salesE that

the in)rease of P100.00 a month and the 10J )ommission ere not a)tuall- re)eived '-

him as there as a ver'al understanding 'eteen him and defendant )ompan- that the

same ould 'e retained '- the latter as 'ond or deposit for the goods 'eing handled '-

the formerE and that 'e)ause plainti as separated from the servi)e in 2)to'er, 1353,he sought to re)over the sum of P5,F00.00 representing the P100.00 monthl- dedu)tions

from his salar-E PH,GG0.00 )orresponding to his 10J )ommissions that ere ithheld, and

P1,500.00 as separation pa-, or the total sum of P11,5G0.00. +hese three items ere

respe)tivel- the su'je)t matter of the ;rst, se)ond and third )auses of a)tion of the

)omplaint.

2n anuar- 7, 136F, defendant ;led a motion to dismiss the )omplaint upon the grounds

that the a)tions had pres)ri'ed and that the )ourt had no jurisdi)tion over the )ase. +he

)ourt 'elo, after alloing the parties to su'mit their respe)tive memorandum on the

$uestions of pres)ription and jurisdi)tion, dismissed the )ase, in an order issued on

anuar- 73, 136F, holding that 'e)ause the )laim of plainti in the ;rst to )auses of

a)tion amounting to P10,0G0.00 represented the sum total of unauthoried dedu)tions

from his salaries and ithheld )ommissions, under Se)tion 10, paragraph !f# of Repu'li)

A)t %o. 607, otherise 9non as the Minimum <age &a, the a)tion to re)over the same

as alread- 'arred under Se)tion 1G of said A)t inasmu)h as it as not 'rought ithin

three -ears from the time the right of a)tion a))ruedE and that 'e)ause the remaining

)laim of plainti as limited to his separation pa- amounting onl- to P1,500.00, the a)tion

to )olle)t the same as not ithin the original jurisdi)tion of the )ourt.

2n *e'ruar- 1, 136F, plainti moved to re)onsider the a'ove/mentioned order, advan)ing

as his main argument the fa)t that his having ;led a similar )laim ith Regional 2()e %o.

H of the epartment of &a'or had suspended the running of the pres)riptive period insofaras his )laim for refund of unauthoried dedu)tions and ithheld )ommissions as

)on)erned K hi)h ere the su'je)t matters of the ;rst and se)ond )auses of a)tion that

ere dismissed '- the )ourt. +he defendant ;led an opposition to the motion for

re)onsideration. In an order dated *e'ruar- 15, 136F, the )ourt denied plaintis motion

for re)onsideration. >en)e this appeal '- the plainti dire)t to this Court on purel-

$uestions of la.

<e are in a))ord ith the )ourt a %uo that the la appli)a'le to the )ase at 'ar is Repu'li)

A)t 607 'e)ause the 'ond or deposit sought to 'e re)overed '- appellant as a)tuall- the

sum total of the unauthoried dedu)tions from his salaries and ithheld )ommissions

under Se)tion 10 thereof. =nder Se)tion 1G of said la, "an- a)tion . . . to enfor)e an-

)ause of a)tion under this A)t ma- 'e )ommen)ed ithin three -ears after the )ause of

a)tion a))rued, and ever- su)h a)tion shall 'e forever 'arred unless )ommen)ed ithinthree -ears after the )ause of a)tion a))rued." Sin)e a right of a)tion a))rues onl- from

the moment the right to )ommen)e the a)tion )omes into eisten)e, and pres)ription

'egins to run from that time,7 the $uestion to 'e resolved is: <hen did the right of a)tion

of plainti a))rueU

+o anser the foregoing $uer-, it is meet to re)all that hile the amounts ithheld '-

defendant ere a)tuall- dedu)tions from plaintis salaries and unpaid )ommissions, the-

ere, hoever, )onstituted as a 'ond or a deposit to anser for an- lia'ilit- that he might

in)ur in )onne)tion ith the goods handled '- him. +he 'ond andDor deposit as thus

ansera'le for mer)handise entrusted to plainti during the period of his emplo-ment

ith defendant. It as, therefore, not feasi'le for plainti to demand ever- month or

ever- pa-da-, or during the period of his emplo-ment ith the )ompan- the return or

refund of those amounts ithheld as )ontended '- defendant, 'e)ause the underta9ing

for hi)h the 'ond or deposit as )onstituted as still su'sisting. And so the right of

plainti to )ommen)e an a)tion for the return or refund of the amounts representing su)h



'ond or deposit ould a))rue onl- hen the same as no longer needed, and the time

hen it as no longer needed onl- )ame in 2)to'er 1353 hen plainti as separated

from the servi)e. >aving )eased to 'e emplo-ed '- the defendant, the 'ond put up '-

plainti there'- 'e)ame unne)essar- or useless.

It ould seem, hoever, that even if <e )ount from 2)to'er, 1353 in )omputing the

pres)riptive period, plaintis a)tion to re)over the amount held '- defendant as 'ond is

alread- 'arred 'e)ause more than three -ears had elapsed '- the time plainti instituted

the present )ase in the )ourt 'elo on e)em'er 1G, 1367. +he re)ord, hoever, shos

that on ul- 76, 1360, plainti ;led a similar )laim against the defendant ith Regional

2()e %o. H of the epartment of &a'or.

At this jun)ture, the $uestion posed is: id the ;ling '- plainti of that )laim ith the

regional o()e of the epartment of &a'or suspend the running of the period of

pres)riptionU

efendant ansers the $uestion in the negative. <hile defendant does not $uestion the

appli)a'ilit- to the )ase at 'ar of Arti)le 1155 of the Civil Code, hi)h provides that the

"pres)ription of a)tions is interrupted hen the- are ;led 'efore the Court," nevertheless,it )ontends that inasmu)h as plaintis )laim as lodged ith the regional o()e of the

epartment of &a'or, hi)h is not a )ourt, the same )ould not 'e )onsidered a judi)ial

demand that ould suspend the running of the pres)riptive period.

<e do not agree ith defendant. It is true that the )laim ;led '- plainti ith the regional

o()e of the epartment of &a'or is not a judi)ial demand in the same sense of the term

"judi)ial demand" 'e)ause the same as not instituted in a )ourt of justi)e. udi)ial noti)e,

hoever, should 'e ta9en that on e)em'er 10, 1356, Reorganiation Plan %o. 70/A as

promulgated pursuant to Repu'li) A)t 33G, and under Se)tion 75 of said reorganiation

plan ea)h regional o()e of the epartment of &a'or as vested ith original and

e)lusive jurisdi)tion over all )ases ae)ting all mone- )laims arising from violations of

la'or standards on or9ing )onditions su)h as unpaid ages, underpa-ment, overtime

and separation pa-, et)., to the e)lusion of )ourts.FConse$uentl-, hen plainti anted

to enfor)e his )laim after his dismissal from the servi)e in 2)to'er, 1353, he had no

)hoi)e 'ut to ;le the same ith Regional 2()e %o. H of the epartment of &a'or hi)h

as the agen)- then empoered to ta9e )ognian)e of the )laim. >e )ould not institute

the a)tion to re)over his )laim in the )ourt of justi)e 'e)ause of the provisions of

Reorganiation Plan %o. 70/A. At least it ma- 'e said that on ul- 76, 1360, hen plainti

;led his )laim ith Regional 2()e. %o. H of the epartment of &a'or, he a)ted in

a))ordan)e ith the pro)edure that as then pres)ri'ed under authorit- of la. =nder the

)ir)umstan)es, <e 'elieve that the ;ling '- plainti of his )laim 'efore the regional o()e

of the epartment of &a'or had the attri'utes of a judi)ial demand. And <e sa- this

'e)ause under the provisions of Se)tion 75 of Reorganiation Plan %o. 70/A ea)h regional

o()e of the epartment of &a'or as invested ith jurisdi)tion, similar to that of a )ourt,

to re)eive, determine, and adjudi)ate )laims arising out of emplo-er/emplo-ee relations

as spe)i;ed in said se)tion. <e $uote Se)tion 75 of Reorganiation Plan %o. 70/A:

a)h Regional 2()e shall have original and exclusive jurisdi)tion over all )ases

ae)ting all mone- )laims arising from violations of la'or standards on or9ing

)onditions, in)luding 'ut not restri)tive to: unpaid ages, underpa-ment,

overtime, separation pa-, and maternit- leave of emplo-eesDla'orers and unpaid

ages, overtime, separation pa-, va)ation pa-, and pa-ment for medi)al

servi)es of domesti) held. !mphasis supplied#

It )an 'e gathered from a reading of the a'ove/$uoted Se)tion 75 of Reorganiation Plan

%o. 70/A that some sort of judi)ial poers as )onferred upon the regional o()es of the

epartment of &a'or over mone- )laims mentioned in said se)tion. Certainl-, it )an 'e

)onsidered that ;ling a mone- )laim 'efore a regional o()e of the epartment of &a'or

pursuant to Se)tion 75 of Reorganiation Plan %o. 70/A is li9e ;ling a )omplaint in )ourt to

enfor)e said mone- )laim. <e 'elieve that the ;ling of a )laim 'efore an administrative

agen)- hi)h is vested ith authorit- to de)ide said )laim ould produ)e the ee)t of a

judi)ial demand for the purpose of interrupting the running of the period of pres)ription.

+he purpose of the la on pres)ription and the statute of limitations is to prote)t the

person ho is diligent and vigilant in asserting his right, and )onversel- to punish the

person ho sleeps on his right.H Indeed, it )annot 'e said that in the )ase 'efore =s the

plainti had slept on his right, 'e)ause shortl- after he as separated from the servi)e '-

the defendant he ;led his )laim 'efore the agen)- of the government that as at the time

)lothed ith e)lusive authorit- to pass upon his )laim.

<e have ta9en note of the fa)t that on une F0, 1361, Se)tion 75 of Reorganiation Plan

%o. 70/A had 'een de)lared un)onstitutional '- this Court in the )ase of Corominas, et al+

v+ 'he Labor *tandards Commission, et al+, supra. It appears, hoever, that the plainti

had ;led his )laim 'efore Regional 2()e %o. H of the epartment of &a'or on ul- 76,

1360, or a'out one -ear 'efore said Se)tion 75 had 'een de)lared un)onstitutional. +he

)ir)umstan)e that Se)tion 75 of Reorganiation Plan %o. 70/A had 'een de)lared

un)onstitutional should not 'e )ounted against the defendant in the present )ase. In the

)ase of (anila (otor Co+, )nc+ v+ lores, 33 Phil., GF4, this Court upheld the right of a part-

under the Moratorium &a hi)h had a))rued in his favor 'efore said la as de)lared

un)onstitutional '- this Court in the )ase of Rutter v+ 0steban, 3F Phil., 64. +his Court, inits de)ision in the Manila Motor )ase, $uoted the folloing do)trine:

Othere are several instan)es herein )ourts, out of e$uit-, have relaed its

operation !)f. note in Coole-s Constitutional &imitations 4th ed., p. F4F and

%otes 5F A.&.R., 7GF# or $uali;ed its ee)ts "sin)e the a)tual eisten)e of a

statute prior to su)h de)laration is an operative fa)t, and ma- have

)onse$uen)es hi)h )annot justl- 'e ignored" !Chi)ot Count- vs. Baster, F04

=.S., FG1# and a realisti) approa)h is eroding the general do)trine !<arring vs.

Colpo-s 1F6 Am. &a Rep., 1075, 10F0#.

<e 'elieve that it is onl- fair and just that the foregoing do)trine should 'e applied in

favor of the plainti in the present )ase.

<e have noted in the re)ord that it as pre)isel- 'e)ause Se)tion 75 of Reorganiation

Plan %o. 70/A as de)lared un)onstitutional '- this Court on une F0, 1361 that the



plainti, ithout aaiting the a)tion of Regional 2()e %o. H of the epartment of &a'or

on the )laim that he ;led on ul- 76, 1360, instituted his a)tion in the present )ase in the

)ourt 'elo on e)em'er 1G, 1367. +he move of plainti as pre)isel- intended to

prote)t his right of a)tion from the adverse ee)t of the de)ision of this Court. +he

Regional 2()e %o. H of the epartment of &a'or dismissed plaintis )laim on anuar- 16,

136F upon the ground that it had no more jurisdi)tion to pass upon the )laim as a result of

the ruling of this Court in the Corominas )ase.

Considering that from 2)to'er, 1353 hen plainti as separated from the servi)e up to

ul- 76, 1360 hen he ;led his )laim ith Regional 2()e %o. H of the epartment of

&a'or onl- eight months had elapsed, and that sin)e ul- 76, 1360 until the ;ling of the

)omplaint in the )ourt 'elo on e)em'er 1G, 1367 the running of pres)riptive period

as deemed interrupted, it is )lear that plaintis a)tion to enfor)e his )laim as not -et

'arred '- the statute of limitations hen he ;led his )omplaint in the )ourt 'elo.

Plaintis a)tion ma- 'e )onsidered as 'rought 'efore the )ourt still ithin the period of

three -ears from the time his right of a)tion a))rued in a))ordan)e ith the provisions of

Se)tion 1G of Repu'li) A)t 607 !Minimum <age &a#. 2nl- a'out nine months of the

three/-ear period provided in Se)tion 1G of Repu'li) A)t 607 ma- 'e )onsidered as having

lapsed hen plainti )ommen)ed his a)tion in the )ourt 'elo. And )onsidering further

that the amount sought to 'e re)overed in the )omplaint is more than P10,000.00, it

follos that the )ourt a %uo has the e)lusive and original jurisdi)tion to entertain the

a)tion of the plainti. +he loer )ourt, therefore, erred hen it dismissed plaintis

)omplaint.

<>R*2R, the order appealed from is set aside, and this )ase is remanded to the )ourt

'elo for further pro)eedings, ith )osts against the defendant/appellee. It is so ordered.

G.R. No. L(#%9' Jn+ #9, 19%0

C. ARNOL" HALL an BRA"LE2 . HALL, petitioners,

vs.

E"MUN"O S. ICCIO, J:+ o )h+ Cor) o F4r) In)anc+ o L+/)+, FRE"

BRO?N, EMMA BRO?N, HIOLITA CAUCIONG, 4n h4 ca5ac4)/ a r+c+4>+r o )h+

Far Ea)+rn L*+r an Co+rc4a7 Co., Inc.,respondents.

BENG-ON, J.@

+his is petition to set aside all the pro)eedings had in )ivil )ase %o. F41 of the Court of*irst Instan)e of &e-te and to enjoin the respondent judge from further a)ting upon the

same.

acts: !1# on Ma- 74, 13HG, the petitioners C. Arnold >all and Bradle- P. >all, and the

respondents *red Bron, mma Bron, >ipolita . Chapman and Ceferino S. A'ella,

signed and a)9noledged in &e-te, the arti)le of in)orporation of the *ar astern &um'er

and Commer)ial Co., In)., organied to engage in a general lum'er 'usiness to )arr- on as

general )ontra)tors, operators and managers, et). Atta)hed to the arti)le as an a(davit

of the treasurer stating that 7F,H74 shares of sto)9 had 'een su's)ri'ed and full- paid

ith )ertain properties transferred to the )orporation des)ri'ed in a list appended thereto.

!7# Immediatel- after the ee)ution of said arti)les of in)orporation, the )orporation

pro)eeded to do 'usiness ith the adoption of '-/las and the ele)tion of its o()ers.

!F# 2n e)em'er 7, 13HG, the said arti)les of in)orporation ere ;led in the o()e of the

Se)urities and )hange Commissioner, for the issuan)e of the )orresponding )erti;)ate

of in)orporation.

!H# 2n Mar)h 77, 13H4, pending a)tion on the arti)les of in)orporation '- the aforesaid

governmental o()e, the respondents *red Bron, mma Bron, >ipolita . Chapman and

Ceferino S. A'ella ;led 'efore the Court of *irst Instan)e of &e-te the )ivil )ase num'ered

F41, entitled "*red Bron et al. vs. Arnold C. >all et al.", alleging among other things that

the *ar astern &um'er and Commer)ial Co. as an unregistered partnershipE that the-

ished to have it dissolved 'e)ause of 'itter dissension among the mem'ers,

mismanagement and fraud '- the managers and heav- ;nan)ial losses.



!5# +he defendants in the suit, namel-, C. Arnold >all and Bradle- P. >all, ;led a motion to

dismiss, )ontesting the )ourts jurisdi)tion and the su()ientl- of the )ause of a)tion.

!6# After hearing the parties, the >on. dmund S. Pi))io ordered the dissolution of the

)ompan-E and at the re$uest of plaintis, appointed of the properties thereof, upon the

;ling of a P70,000 'ond.

!G# +he defendants therein !petitioners herein# oered to ;le a )ounter/'ond for the

dis)harge of the re)eiver, 'ut the respondent judge refused to a))ept the oer and to

dis)harge the re)eiver. <hereupon, the present spe)ial )ivil a)tion as instituted in this

)ourt. It is 'ased upon to main propositions, to it:

!a# +he )ourt had no jurisdi)tion in )ivil )ase %o. F41 to de)ree the dissolution of the

)ompan-, 'e)ause it 'eing ade facto )orporation, dissolution thereof ma- onl- 'e ordered

in a %uo /arranto pro)eeding instituted in a))ordan)e ith se)tion 13 of the Corporation

&a.

!b# Inasmu)h as respondents *red Bron and mma Bron had signed the arti)le of

in)orporation 'ut onl- a partnership.

Discussion: +he se)ond proposition ma- at on)e 'e dismissed. All the parties are informed

that the Se)urities and )hange Commission has not, so far, issued the )orresponding

)erti;)ate of in)orporation. All of them 9no, or sought to 9no, that the personalit- of a

)orporation 'egins to eist onl- from the moment su)h )erti;)ate is issued K not 'efore

!se). 11, Corporation &a#. +he )omplaining asso)iates have not represented to the

others that the- ere in)orporated an- more than the latter had made similar

representations to them. And as no'od- as led to 'elieve an-thing to his prejudi)e and

damage, the prin)iple of estoppel does not appl-. 2'viousl- this is not an instan)e

re$uiring the enfor)ement of )ontra)ts /ith the corporation through the rule of estoppel.

+he ;rst proposition a'ove stated is premised on the theor- that, inasmu)h as the *arastern &um'er and Commer)ial Co., is a de facto )orporation, se)tion 13 of the

Corporation &a applies, and therefore the )ourt had not jurisdi)tion to ta9e )ognian)e of

said )ivil )ase num'er F41. Se)tion 13 reads as follos:

. . . +he due in)orporation of an- )orporations )laiming in good faith to 'e a

)orporation under this A)t and its right to eer)ise )orporate poers shall not 'e

in$uired into )ollaterall- in an- private suit to hi)h the )orporation ma- 'e a

part-, 'ut su)h in$uir- ma- 'e had at the suit of the Insular overnment on

information of the Attorne-/eneral.

+here are least to reasons h- this se)tion does not govern the situation. %ot having

o'tained the )erti;)ate of in)orporation, the *ar astern &um'er and Commer)ial Co. K

even its sto)9holders K ma- not pro'a'l- )laim "in good faith" to 'e a )orporation.

=nder our statue it is to 'e noted !Corporation &a, se). 11# that it is the

issuan)e of a )erti;)ate of in)orporation '- the ire)tor of the Bureau of

Commer)e and Industr- hi)h )alls a )orporation into 'eing. +he immunit- if

)ollateral atta)9 is granted to )orporations ")laiming in good faith to 'e a

)orporation under this a)t." Su)h a )laim is )ompati'le ith the eisten)e of

errors and irregularitiesE 'ut not ith a total or su'stantial disregard of the la.

=nless there has 'een an evident attempt to )ompl- ith the la the )laim to 'ea )orporation "under this a)t" )ould not 'e made "in good faith." !*isher on the

Philippine &a of Sto)9 Corporations, p. G5. *ee also >umphre-s vs. re, 53

*la., 735E 57 So., F67.#

Se)ond, this is not a suit in hi)h the corporation is a part-. +his is a litigation 'eteen

sto)9holders of the alleged )orporation, for the purpose of o'taining its dissolution. ven

the eisten)e of a de ure )orporation ma- 'e terminated in a private suit for its

dissolution 'eteen sto)9holders, ithout the intervention of the state.

+here might 'e room for argument on the right of minorit- sto)9holders to sue for

dissolutionE1 'ut that $uestion does not ae)t the )ourts jurisdi)tion, and is a matter for

de)ision '- the judge, su'je)t to revie on appeal. <h9)h 'rings us to one prin)ipalreason h- this petition ma- not prosper, namel-: the petitioners have their remed- '-

appealing the order of dissolution at the proper time.

+here is a se)ondar- issue in )onne)tion ith the appointment of a re)eiver. But it must

'e admitted that re)eivership is proper in pro)eedings for dissolution of a )ompan- or

)orporation, and it as no error to reje)t the )ounter/'ond, the )ourt having de)lared the

dissolution. As to the amount of the 'ond to 'e demanded of the re)eiver, mu)h depends

upon the dis)retion of the trial )ourt, hi)h in this instan)e e do not 'elieve has 'een

)learl- a'used.

Judgment : +he petition ill, therefore, 'e dismissed, ith )osts. +he preliminar- injun)tion

heretofore issued ill 'e dissolved.

G.R. No. ##106 S+5)+*+r 11, 19#$

ASIA BANING CORORATION, plainti/appellee,vs.STAN"AR" RO"UCTS, CO., INC., defendant/appellant.

Charles C+ De *elms for appellant+#ibbs & (cDonough and Roman -$aeta for appellee+

OSTRAN", J.:

+his a)tion is 'rought to re)over the sum of P7H,GF6.HG, the 'alan)e due on the folloingpromissor- note:



PFG,G5G.77

MA%I&A, P. I., %ov. 74, 1371.

MA%I&A, P. I., %ov. 74, 1371.

2n demand, after date e promise to pa- to the Asia Ban9ing Corporation, ororder, the sum of thirt-/seven thousand seven hundred ;ft-/seven and 77D100pesos at their o()e in Manila, for value re)eived, together ith interest at therate of ten per )ent per annum.

%o. VVVVVVVV ue VVVVVVVVVV

+> S+A%AR PR2=C+S C2., I%C. B- !Sgd.# 2R >. SA@R

<y President

+he )ourt 'elo rendered judgment in favor of the plainti for the sum demanded in the)omplaint, ith interest on the sum of P7H,1HG.FH from %ovem'er 1, 137F, at the rate of10 per )ent per annum, and the )osts. *rom this judgment the defendant appeals to this)ourt.

At the trial of the )ase the plainti failed to prove a(rmativel- the )orporate eisten)e ofthe parties and the appellant insists that under these )ir)umstan)es the )ourt erred in;nding that the parties ere )orporations ith juridi)al personalit- and assigns same asreversi'le error.

+here is no merit hatever in the appellants )ontention. +he general rule is that in thea'sen)e of fraud a person ho has )ontra)ted or otherise dealt ith an asso)iation insu)h a a- as to re)ognie and in ee)t admit its legal eisten)e as a )orporate 'od- isthere'- estopped to den- its )orporate eisten)e in an- a)tion leading out of or involvingsu)h )ontra)t or dealing, unless its eisten)e is atta)9ed for )ause hi)h have arisensin)e ma9ing the )ontra)t or other dealing relied on as an estoppel and this applies toforeign as ell as to domesti) )orporations. !1H C. ., 77GE Chinese Cham'er ofCommer)e vs+ Pua +e Ching, 1H Phil., 777.#

+he defendant having re)ognied the )orporate eisten)e of the plainti '- ma9ing apromissor- note in its favor and ma9ing partial pa-ments on the same is thereforeestopped to den- said plaintis )orporate eisten)e. It is, of )ourse, also estopped from

den-ing its on )orporate eisten)e. =nder these )ir)umstan)es it as unne)essar- forthe plainti to present other eviden)e of the )orporate eisten)e of either of the parties. Itma- 'e noted that there is no eviden)e shoing )ir)umstan)es ta9ing the )ase out of therules stated.

+he judgment appealed from is a(rmed, ith the )osts against the appellant. So ordered.



G.R. No. L(11$$# Ma/ #3, 19%'

MANUELA T. !"A. "E SAL!ATIERRA, petitioner,

vs.

HON. LOREN-O C. GARLITOS, 4n h4 ca5ac4)/ a J:+ o )h+ Cor) o F4r)

In)anc+ o L+/)+, Branch II, an SEGUN"INO REFUER-O, respondents.

Jimene$, 'antuico, Jr+ and 'olete for petitioner+

rancisco Astilla for respondent *egundino Refuer$o+

FELI, J.@

+his is a petition for certiorari ;led '- Manuela +. @da. de Salvatierra see9ing to nullif- the

order of the Court of *irst Instan)e of &e-te in Civil Case %o. 1317, dated Mar)h 71, 1356,

relieving Segundino Refuero of lia'ilit- for the )ontra)t entered into 'eteen the former

and the Philippine *i'ers Produ)ers Co., In)., of hi)h Refuero is the president. +he fa)ts

of the )ase are as follos:

Manuela +. @da. de Salvatierra appeared to 'e the oner of a par)el of land lo)ated at

Magho'as, Po'la)ion, Burauen, +e-te. 2n Mar)h G, 135H, said landholder entered into a

)ontra)t of lease ith the Philippine *i'ers Produ)ers Co., In)., allegedl- a )orporation

"dul- organied and eisting under the las of the Philippines, domi)iled at Burauen,

&e-te, Philippines, and ith 'usiness address therein, represented in this instan)e '- Mr.

Segundino . Refuero, the President". It as provided in said )ontra)t, among other

things, that the lifetime of the lease ould 'e for a period of 10 -earsE that the land ould

'e planted to 9enaf, ramie or other )rops suita'le to the soilE that the lessor ould 'e

entitled to F0 per )ent of the net in)ome a))ruing from the harvest of an-, )rop ithout

'eing responsi'le for the )ost of produ)tion thereofE and that after ever- harvest, the

lessee as 'ound to de)lare at the earliest possi'le time the in)ome derived therefrom

and to deliver the )orresponding share due the lessor.

Apparentl-, the aforementioned o'ligations imposed on the alleged )orporation ere not

)omplied ith 'e)ause on April 5, 1355, Alanuela +. @da, de Salvatierra ;led ith the

Court of *irst Instan)e of &e-te a )omplaint against the Philippine *i'ers Produ)ers Co.,

In)., and Segundino . Refuero, for a))ounting, res)ission and damages !Civil Case %o.

1317#. She averred that sometime in April, 135H, defendants planted 9enaf on F he)tares

of the leased propert- hi)h )rop as, at the time of the )ommen)ement of the a)tion,

alread- harvested, pro)essed and sold '- defendantsE that notithstanding that fa)t,

defendants refused to render an a))ounting of the in)ome derived therefrom and to

deliver the lessors shareE that the estimated gross in)ome as PH,500, and the

dedu)ti'le epenses amounted to P1,000E that as defendants refusal to underta9e su)h

tas9 as in violation of the terms of the )ovenant entered into 'eteen the plainti and

defendant )orporation, a res)ission as 'ut proper.

As defendants apparentl- failed to ;le their anser to the )omplaint, of hi)h the- ere

allegedl- noti;ed, the Court de)lared them in default and pro)eeded to re)eive plaintis

eviden)e. 2n June 4, 2355, the loer Court rendered judgment granting plaintis pra-er,

and re$uired defendants to render a )omplete a))ounting of the harvest of the land

su'je)t of the pro)eeding ithin 15 da-s from re)eipt of the de)ision and to deliver F0 per

)ent of the net in)ome realied from the last harvest to plainti, ith legal interest from

the date defendants re)eived pa-ment for said )rop. It as further provide that upon

defendants failure to a'ide '- the said re$uirement, the gross in)ome ould 'e ;ed at

PH,700 or a net in)ome of PF,700 after dedu)ting the epenses for produ)tion, F0 per )entof hi)h or P360 as held to 'e due the plainti pursuant to the aforementioned )ontra)t

of lease, hi)h as de)lared res)inded.

%o appeal therefrom having 'een perfe)ted ithin the reglementar- period, the Court,

upon motion of plainti, issued a rit of ee)ution, in virtue of hi)h the Provin)ial Sheri

of &e-te )aused the atta)hment of F par)els of land registered in the name of Segundino

Refuero. %o propert- of the Philippine *i'ers Produ)ers Co., In)., as found availa'le for

atta)hment. 2n anuar- F1, 1356, defendant Segundino Refuero ;led a motion )laiming

that the de)ision rendered in said Civil Case %o. 1317 as null and void ith respe)t to

him, there 'eing no allegation in the )omplaint pointing to his personal lia'ilit- and thus

pra-ed that an order 'e issued limiting su)h lia'ilit- to defendant )orporation. 2ver

plaintis opposition, the Court a %uo granted the same and ordered the Provin)ial Sheri

of &e-te to release all properties 'elonging to the movant that might have alread- 'eenatta)hed, after ;nding that the eviden)e on re)ord made no mention or referred to an-

fa)t hi)h might hold movant personall- lia'le therein. As plaintis petition for relief from

said order as denied, Manuela +. @da. de Salvatierra instituted the instant a)tion

asserting that the trial udge in issuing the order )omplained of, a)ted ith grave a'use of

dis)retion and pra-ed that same 'e de)lared a nullit-.

*rom the foregoing narration of fa)ts, it is )lear that the order sought to 'e nulli;ed as

issued '- tile respondent udge upon motion of defendant Refuero, o'viousl- pursuant to

Rule F4 of the Rules of Court. Se)tion F of said Rule, hoever, in providing for the period

ithin hi)h su)h a motion ma- 'e ;led, pres)ri'es that:

SC. F. <>% P+I+I2% *I&E C2%+%+S A% @RI*ICA+I2%. K A petitionprovided for in either of the pre)eding se)tions of this rule must 'e veri;ed,

;led /ithin sixty days after the petitioner learns of the udgment, order, or other

proceeding to be set aside, and not more than six months after such udgment or

order /as entered, or su)h pro)eeding as ta9enE and must 'e must 'e

a))ompanied ith a(davit shoing the fraud, a))ident, mista9e, or e)usa'le

negligen)e relied upon, and the fa)ts )onstituting the petitioner is good and

su'stantial )ause of a)tion or defense, as the )ase ma- 'e, hi)h he ma- prove

if his petition 'e granted". !Rule F4#

+he afore$uoted provision treats of 7 periods, i.e., 60 da-s after petitioner learns of the

judgment, and not more than 6 months after the judgment or order as rendered, 'oth of

hi)h must 'e satis;ed. As the de)ision in the )ase at 'ar as under date of une 4, 1355,

hereas the motion ;led '- respondent Refuero as dated anuar- F1, 1356, or after the

lapse of G months and 7F da-s, the ;ling of the aforementioned motion as )learl- made

'e-ond the pres)riptive period provided for '- the rules. +he remed- alloed '- Rule F4



to a part- adversel- ae)ted '- a de)ision or order is )ertainl- an alert of gra)e or

'enevolen)e intended to aord said litigant a penultimate opportunit- to prote)t his

interest. Considering the nature of su)h relief and the purpose 'ehind it, the periods ;ed

'- said rule are non/etendi'le and never interruptedE nor )ould it 'e su'je)ted to an-

)ondition or )ontingen)- 'e)ause it is of itself devised to meet a )ondition or )ontingen)-

!Palomares vs. imene,W .R. %o. &/H51F, anuar- F1, 1357#. 2n this s)ore alone,

therefore, the petition for a rit of certiorari ;led herein ma- 'e granted. >oever, ta9ingnote of the $uestion presented '- the motion for relief involved herein, <e deem it ise

to delve in and pass upon the merit of the same.

Refuero, in pra-ing for his eoneration from an- lia'ilit- resulting from the non/ful;llment

of the o'ligation imposed on defendant Philippine *i'ers Produ)ers Co., In)., interposed

the defense that the )omplaint ;led ith the loer )ourt )ontained no allegation hi)h

ould hold him lia'le personall-, for hile it as stated therein that he as a signator- to

the lease )ontra)t, he did so in his )apa)it- as president of the )orporation. And this

allegation as found '- the Court a $uo to 'e supported '- the re)ords. Plainti on the

other hand tried to refute this averment '- )ontending that her failure to spe)if-

defendants personal lia'ilit- as due to the fa)t that all the time she as under the

impression that the Philippine *i'ers Produ)ers Co., In)., represented '- Refuero as a

dul- registered )orporation as appearing in the )ontra)t, 'ut a su'se$uent in$uir- fromthe Se)urities and )hange Commission -ielded otherise. <hile as a general rule a

person ho has )ontra)ted or dealt ith an asso)iation in su)h a a- as to re)ognie its

eisten)e as a )orporate 'od- is estopped from den-ing the same in an a)tion arising out

of su)h transa)tion or dealing, !Asia Ban9ing Corporation vs. Standard Produ)ts Co., H6

Phil., 11HE Compania Agri)ola de =ltramar vs. Re-es, H Phil., 1E 2hta evelopment Co.E vs.

Steamship Pompe-, H3 Phil., 11G#, -et this do)trine ma- not 'e held to 'e appli)a'le

here fraud ta9es a part in the said transa)tion. In the instant )ase, on plaintis )harge

that she as unaare of the fa)t that the Philippine *i'ers Produ)ers Co., In)., had no

juridi)al personalit-, defendant Refuero gave no )on;rmation or denial and the

)ir)umstan)es surrounding the ee)ution of the )ontra)t lead to the ines)apa'le

)on)lusion that plainti Manuela +. @da. de Salvatierra as reall- made to 'elieve that

su)h )orporation as dul- organied in a))ordan)e ith la.

+here )an 'e no $uestion that a )orporation ith registered has a juridi)al personalit-

separate and distin)t from its )omponent mem'ers or sto)9holders and o()ers su)h that

a )orporation )annot 'e held lia'le for the personal inde'tedness of a sto)9holder even if

he should 'e its president !<alter A. Smith Co. vs. *ord, SC/.R. %o. H7H70# and

)onversel-, a sto)9holder or mem'er )annot 'e held personall- lia'le for an- ;nan)ial

o'ligation 'e, the )orporation in e)ess of his unpaid su's)ription. But this rule is

understood to refer merel- to registered )orporations and )annot 'e made appli)a'le to

the lia'ilit- of mem'ers of an unin)orporated asso)iation. +he reason 'ehind this do)trine

is o'vious/sin)e an organiation hi)h 'efore the la is non/eistent has no personalit-

and ould 'e in)ompetent to a)t and appropriate for itself the poers and attri'ute of a

)orporation as provided '- laE it )annot )reate agents or )onfer authorit- on another to

a)t in its 'ehalfE thus, those ho a)t or purport to a)t as its representatives or agents doso ithout authorit- and at their on ris9. And as it is an elementar- prin)iple of la that

a person ho a)ts as an agent ithout authorit- or ithout a prin)ipal is himself regarded

as the prin)ipal, possessed of all the rights and su'je)t to all the lia'ilities of a prin)ipal, a

person a)ting or purporting to a)t on 'ehalf of a )orporation hi)h has no valid eisten)e

assumes su)h privileges and o'ligations and )omes personall- lia'le for )ontra)ts entered

into or for other a)ts performed as su)h, agent !*a- vs. %o'le, G Cushing OMass. 144.

Cited in II +olentinos Commer)ial &as of the Philippines, *ifth d., P. 643/630#.

Considering that defendant Refuero, as president of the unregistered )orporation

Philippine *i'ers Produ)ers Co., In)., as the moving spirit 'ehind the )onsummation of

the lease agreement '- a)ting as its representative, his lia'ilit- )annot 'e limited orrestri)ted that imposed upon )orporate shareholders. In a)ting on 'ehalf of a )orporation

hi)h he 9ne to 'e unregistered, he assumed the ris9 of reaping the )onse$uential

damages or resultant rights, if an-, arising out of su)h transa)tion.

<herefore, the order of the loer Court of Mar)h 71, 1356, amending its previous de)ision

on this matter and ordering the Provin)ial Sheri of &e-te to release an- and all properties

of movant therein hi)h might have 'een atta)hed in the ee)ution of su)h judgment, is

here'- set aside and nulli;ed as if it had never 'een issued. <ith )osts against

respondent Segundino Refuero. It is so ordered.



G.R. No. L(1911' Janar/ 30, 196%

MARIANO A. ALBERT, plainti/appellant,

vs.

UNI!ERSIT2 UBLISHING CO., INC., defendant/appellee.

y & Artiaga and Antonio (+ (olina for plainti;!appellant+

Aruego, (amaril & Associates for defendant!appellees+

BENG-ON, J.., J.:

%o less than three times have the parties here appealed to this Court.

In Albert vs+ niversity Publishing Co+, )nc+, &/3F00, April 14, 1354, e found plainti

entitled to damages !for 'rea)h of )ontra)t# 'ut redu)ed the amount from P7F,000.00 to

P15,000.00.

+hen in Albert vs+ niversity Publishing Co+, )nc+, &/157G5, 2)to'er 7H, 1360, e held that

the judgment for P15,000.00 hi)h had 'e)ome ;nal and ee)utor-, should 'e ee)uted

to its full amount, sin)e in ;ing it, pa-ment alread- made had 'een )onsidered.

%o e are as9ed hether the judgment ma- 'e ee)uted against ose M. Aruego,

supposed President of =niversit- Pu'lishing Co., In)., as the real defendant.

*ifteen -ears ago, on Septem'er 7H, 13H3, Mariano A. Al'ert sued =niversit- Pu'lishing

Co., In). Plainti allegedinter alia that defendant as a )orporation dul- organied and

eisting under the las of the PhilippinesE that on ul- 13, 13H4, defendant, through ose

M. Aruego, its President, entered into a )ontra)t ith plainti;fE that defendant had there'-

agreed to pa- plainti PF0,000.00 for the e)lusive right to pu'lish his revised

Commentaries on the Revised Penal Code and for his share in previous sales of the 'oo9s;rst editionE that defendant had underta9en to pa- in eight $uarterl- installments of

PF,G50.00 starting ul- 15, 13H4E that per )ontra)t failure to pa- one installment ould

render the rest dueE and that defendant had failed to pa- the se)ond installment.

efendant admitted plaintis allegation of defendants )orporate eisten)eE admitted the

ee)ution and terms of the )ontra)t dated ul- 13, 13H4E 'ut alleged that it as plainti

ho 'rea)hed their )ontra)t '- failing to deliver his manus)ript. *urthermore, defendant

)ounter)laimed for damages.2=/ph>2+?@t

Plainti died 'efore trial and usto R. Al'ert, his estates administrator, as su'stituted for

him.

+he Court of *irst Instan)e of Manila, after trial, rendered de)ision on April 76, 135H,

stating in the dispositive portion K

I% @I< 2* A&& +> *2R2I%, the Court renders judgment in favor of the

plainti and against the defendant the =niversit- Pu'lishing Co., In)., ordering

the defendant to pa- the administrator usto R. Al'ert, the sum of P7F,000.00

ith legal Orate of interest from the date of the ;ling of this )omplaint until the

hole amount shall have 'een full- paid. +he defendant shall also pa- the )osts.

+he )ounter)laim of the defendant is here'- dismissed for la)9 of eviden)e.

As aforesaid, e redu)ed the amount of damages to P15,000.00, to 'e ee)uted in full.

+hereafter, on ul- 77, 1361, the )ourt a %uo ordered issuan)e of an ee)ution rit against=niversit- Pu'lishing Co., In). Plainti, hoever, on August 10, 1361, petitioned for a rit

of ee)ution against Jose (+ Aruego, as the real defendant , stating, "plaintis )ounsel and



the Sheri of Manila dis)overed that there is no such entity as niversity Publishing Co+,

)nc+" Plainti anneed to his petition a )erti;)ation from the se)urities and )hange

Commission dated ul- F1, 1361, attesting: "+he re)ords of this Commission do not sho

the registration of =%I@RSI+ P=B&IS>I% C2., I%C., either as a )orporation or

partnership." "=niversit- Pu'lishing Co., In)." )ountered '- ;ling, through )ounsel !ose M.

Aruegos on la ;rm#, a "manifestation" stating that "ose M. Aruego is not a part- to

this )ase," and that, therefore, plaintis petition should 'e denied.

Parentheti)all-, it is not hard to de)ipher h- "=niversit- Pu'lishing Co., In).," through

)ounsel, ould not ant ose M. Aruego to 'e )onsidered a part- to the present )ase:

should a separate a)tion 'e no instituted against ose M. Aruego, the plainti ill have

to re)9on ith the statute of limitations.

+he )ourt a %uo denied the petition '- order of Septem'er 3, 1361, and from this, plainti

has appealed.

+he fa)t of non!registration of =niversit- Pu'lishing Co., In). in the Se)urities and

)hange Commission has not 'een disputed. efendant ould onl- raise the point that

"=niversit- Pu'lishing Co., In).," and not ose M. Aruego, is the part- defendantE there'-assuming that "=niversit- Pu'lishing Co., In)." is an eisting )orporation ith an

independent juridi)al personalit-. Pre)isel-, hoever, on a))ount of the non/registration it

)annot 'e )onsidered a )orporation, not even a )orporation de facto !>all vs. Pi))io, 46

Phil. 60F#. It has therefore no personalit- separate from ose M. AruegoE it )annot 'e sued

independentl-.

+he )orporation/'-/estoppel do)trine has not 'een invo9ed. At an- rate, the same is

inappli)a'le here. Aruego represented a non/eistent entit- and indu)ed not onl- the

plainti 'ut even the )ourt to 'elieve in su)h representation. >e signed the )ontra)t as

"President" of "=niversit- Pu'lishing Co., In).," stating that this as "a )orporation dul-

organied and eisting under the las of the Philippines," and o'viousl- misled plainti

!Mariano A. Al'ert# into 'elieving the same. 2ne ho has indu)ed another to a)t upon his

ilful misrepresentation that a )orporation as dul- organied and eisting under the la,)annot thereafter set up against his vi)tim the prin)iple of )orporation '- estoppel

!Salvatiera vs. arlitos, 56 2.. F063#.

"=niversit- Pu'lishing Co., In)." purported to )ome to )ourt, ansering the )omplaint and

litigating upon the merits. But as stated, "=niversit- Pu'lishing Co., In)." has no

independent personalit-E it is just a name. ose M. Aruego as, in realit-, the one ho

ansered and litigated, through his on la ;rm as )ounsel. >e as in fa)t, if not, in

name, the defendant.

ven ith regard to )orporations dul- organied and eisting under the la, e have in

man- a )ase pier)ed the veil of )orporate ;)tion to administer the ends of justi)e. W And

in *alvatiera vs+ #arlitos, supra, p. F0GF, e ruled: "A person a)ting or purporting to a)ton 'ehalf of a )orporation hi)h has no valid eisten)e assumes such privileges and

obligations and becomes personally liable for )ontra)ts entered into or for other a)ts

performed as su)h agent." >ad ose M. Aruego 'een named as part- defendant instead of,

or together ith, "=niversit- Pu'lishing Co., In).," there ould 'e no room for de'ate as to

his personal lia'ilit-. Sin)e he as not so named, the matters of "da- in )ourt" and "due

pro)ess" have arisen.

In this )onne)tion, it must 'e realied that parties to a suit are "persons ho have a right

to )ontrol the pro)eedings, to ma9e defense, to addu)e and )ross/eamine itnesses, andto appeal from a de)ision" !6G C..S. 44G# K and Aruego as, in realit-, the person ho

had and eer)ised these rights. Clearl-, then, Aruego had his da- in )ourt as the real

defendantE and due pro)ess of la has 'een su'stantiall- o'served.

B- "due pro)ess of la" e mean " "a la hi)h hears 'efore it )ondemnsE hi)h

pro)eeds upon in$uir-, and renders judgment onl- after trial. ... ." !H <heaton, =.S. 514,

541.#"E or, as this Court has said, " "ue pro)ess of la" )ontemplates noti)e and

opportunit- to 'e heard 'efore judgment is rendered, ae)ting ones person or propert-"

!&ope vs. ire)tor of &ands, HG Phil. 7F, F7#." !Si)at vs. Re-es, &/1107F, e). 1H, 1356.#

And it ma- not 'e amiss to mention here also that the "due pro)ess" )lause of the

Constitution is designed to se)ure justi)e as a living realit-E not to sa)ri;)e it '- pa-ing

undue homage to formalit-. *or substance must prevail over form. It ma- no 'e trite, 'ut

none the less apt, to $uote hat long ago e said in Alonso vs+ illamor , 16 Phil. F15,

F71/F77:

A litigation is not a game of te)hni)alities in hi)h one, more deepl- s)hooled

and s9illed in the su'tle art of movement and position, entraps and destro-s the

other. It is, rather, a )ontest in hi)h ea)h )ontending part- full- and fairl- la-s

'efore the )ourt the fa)ts in issue and then, 'rushing side as holl- trivial and

inde)isive all imperfe)tions of form and te)hni)alities of pro)edure, as9s that

usti)e 'e done upon the merits. &asuits, unli9e duels, are not to 'e on '- a

rapiers thrust. +e)hni)alit-, hen it deserts its proper o()e as an aid to justi)e

and 'e)omes its great hindran)e and )hief enem-, deserves s)ant )onsideration

from )ourts. +here should 'e no vested rights in te)hni)alities.

+he eviden)e is patentl- )lear that ose M. Aruego, a)ting as representative of a non/

eistent prin)ipal, as the real part- to the )ontra)t sued uponE that he as the one ho

reaped the 'ene;ts resulting from it, so mu)h so that partial pa-ments of the

)onsideration ere made '- himE that he violated its terms, there'- pre)ipitating the suit

in $uestionE and that in the litigation he as the real defendant. Perfor)e, in line ith the

ends of justi)e, responsi'ilit- under the judgment falls on him.

<e need hardl- state that should there 'e persons ho under the la are lia'le to Aruego

for reim'ursement or )ontri'ution ith respe)t to the pa-ment he ma9es under the

judgment in $uestion, he ma-, of )ourse, pro)eed against them through proper remedial

measures.

PRMISS C2%SIR, the order appealed from is here'- set aside and the )ase

remanded ordering the loer )ourt to hold supplementar- pro)eedings for the purpose of



)arr-ing the judgment into ee)t against =niversit- Pu'lishing Co., In). andDor ose M.

Aruego. So ordered.

LIM TONG LIM, petitioner, vs. HILIINE FISHING GEAR IN"USTRIES,

INC., respondent .

" E C I S I O N

ANGANIBAN, J.@

A partnership ma- 'e deemed to eist among parties ho agree to 'orro mone- to

pursue a 'usiness and to divide the pro;ts or losses that ma- arise therefrom, even if it isshon that the- have not )ontri'uted an- )apital of their on to a ")ommon fund." +heir

)ontri'ution ma- 'e in the form of )redit or industr-, not ne)essaril- )ash or ;ed

assets. Being partners, the- are all lia'le for de'ts in)urred '- or on 'ehalf of the

partnership. +he lia'ilit- for a )ontra)t entered into on 'ehalf of an unin)orporated

asso)iation or ostensi'le )orporation ma- lie in a person ho ma- not have dire)tl-

transa)ted on its 'ehalf, 'ut reaped 'ene;ts from that )ontra)t.

Th+ Ca+

In the Petition for Revie on Certiorari 'efore us, &im +ong &im assails the %ovem'er 76,

1334 e)ision of the Court of Appeals in CA/R C@ H1HGG,O1 hi)h disposed as follos:

<>R*2R, Othere 'eing no reversi'le error in the appealed de)ision, the same is

here'- a(rmed.O7

http://sc.judiciary.gov.ph/jurisprudence/1999/nov99/136448.htm#_edn1







+he de)retal portion of the ueon Cit- Regional +rial Court !R+C# ruling, hi)h as

a(rmed '- the CA, reads as follos:

<>R*2R, the Court rules:

1. +hat plainti is entitled to the rit of preliminar- atta)hment issued '- this Court on

Septem'er 70, 1330E

7. +hat defendants are jointl- lia'le to plainti for the folloing amounts, su'je)t to the

modi;)ations as hereinafter made '- reason of the spe)ial and uni$ue fa)ts and

)ir)umstan)es and the pro)eedings that transpired during the trial of this )aseE

a. P5F7,0H5.00 representing Othe unpaid pur)hase pri)e of the ;shing nets )overed '-

the Agreement plus P64,000.00 representing the unpaid pri)e of the Loats not )overed '-

said AgreementE

'. 17J interest per annum )ounted from date of plaintis invoi)es and )omputed on their

respe)tive amounts as follos:

i. A))rued interest of PGF,771.00 on Invoi)e %o. 1HH0G for PF45,FGG.40 dated *e'ruar- 3,

1330E

ii. A))rued interest of P7G,30H.07 on Invoi)e %o. 1HH1F for P1H6,464.00 dated *e'ruar-

1F, 1330E

iii. A))rued interest of P17,370.00 on Invoi)e %o. 1HH76 for P64,000.00 dated *e'ruar- 13,

1330E

). P50,000.00 as and for attorne-s fees, plus P4,500.00 representing P500.00 per

appearan)e in )ourtE

d. P65,000.00 representing P5,000.00 monthl- rental for storage )harges on the nets

)ounted from Septem'er 70, 1330 !date of atta)hment# to Septem'er 17, 1331 !date of

au)tion sale#E

e. Cost of suit.

<ith respe)t to the joint lia'ilit- of defendants for the prin)ipal o'ligation or for the

unpaid pri)e of nets and Loats in the amount of P5F7,0H5.00 and P64,000.00,

respe)tivel-, or for the total amount ofP600,0H5.00, this Court noted that these items

ere atta)hed to guarantee an- judgment that ma- 'e rendered in favor of the plainti

'ut, upon agreement of the parties, and, to avoid further deterioration of the nets duringthe penden)- of this )ase, it as ordered sold at pu'li) au)tion for not less

than P300,000.00 for hi)h the plainti as the sole and inning 'idder. +he pro)eeds of

the sale paid for '- plainti as deposited in )ourt. In ee)t, the amount of P300,000.00

repla)ed the atta)hed propert- as a guarant- for an- judgment that plainti ma- 'e a'le

to se)ure in this )ase ith the onership and possession of the nets and Loats aarded

and delivered '- the sheri to plainti as the highest 'idder in the pu'li) au)tion sale. It

has also 'een noted that onership of the nets Oas retained '- the plainti until full

pa-ment Oas made as stipulated in the invoi)esE hen)e, in ee)t, the plainti atta)hed

its on properties. It Oas for this reason also that this Court earlier ordered the

atta)hment 'ond ;led '- plainti to guarant- damages to defendants to 'e )an)elled andfor the P300,000.00 )ash 'idded and paid for '- plainti to serve as its 'ond in favor of

defendants.

*rom the foregoing, it ould appear therefore that hatever judgment the plainti ma- 'e

entitled to in this )ase ill have to 'e satis;ed from the amount of P300,000.00 as this

amount repla)ed the atta)hed nets and Loats. Considering, hoever, that the total

judgment o'ligation as )omputed a'ove ould amount to onl- P4H0,716.37, it ould 'e

ine$uita'le, unfair and unjust to aard the e)ess to the defendants ho are not entitled

to damages and ho did not put up a single )entavo to raise the amount of P300,000.00

aside from the fa)t that the- are not the oners of the nets and Loats. *or this reason, the

defendants are here'- relieved from an- and all lia'ilities arising from the monetar-

judgment o'ligation enumerated a'ove and for plainti to retain possession and

onership of the nets and Loats and for the reim'ursement of the P300,000.00 deposited'- it ith the Cler9 of Court.

S2 2RR. OF

Th+ Fac)

2n 'ehalf of "2)ean uest *ishing Corporation," Antonio Chua and Peter ao entered

into a Contra)t dated *e'ruar- G, 1330, for the pur)hase of ;shing nets of various sies

from the Philippine *ishing ear Industries, In). !herein respondent#. +he- )laimed that

the- ere engaged in a 'usiness venture ith Petitioner &im +ong &im, ho hoever as

not a signator- to the agreement. +he total pri)e of the nets amounted to P5F7,0H5. *our

hundred pie)es of Loats orth P64,000 ere also sold to the Corporation.OH

+he 'u-ers, hoever, failed to pa- for the ;shing nets and the LoatsE hen)e, private

respondent ;led a )olle)tion suit against Chua, ao and Petitioner &im +ong &im ith a

pra-er for a rit of preliminar- atta)hment. +he suit as 'rought against the three in their

)apa)ities as general partners, on the allegation that 2)ean uest *ishing Corporation

as a noneistent )orporation as shon '- a Certi;)ation from the Se)urities and

)hange Commission.O5 2n Septem'er 70, 1330, the loer )ourt issued a <rit of

Preliminar- Atta)hment, hi)h the sheri enfor)ed '- atta)hing the ;shing nets on

'oard B< Lourdes hi)h as then do)9ed at the *isheries Port, %avotas, Metro Manila.

Instead of ansering the Complaint, Chua ;led a Manifestation admitting his lia'ilit-

and re$uesting a reasona'le time ithin hi)h to pa-. >e also turned over to respondentsome of the nets hi)h ere in his possession. Peter ao ;led an Anser, after hi)h he

as deemed to have aived his right to )ross/eamine itnesses and to present eviden)e










on his 'ehalf, 'e)ause of his failure to appear in su'se$uent hearings. &im +ong &im, on

the other hand, ;led an Anser ith Counter)laim and Cross)laim and moved for the

lifting of the <rit of Atta)hment.O6 +he trial )ourt maintained the <rit, and upon motion of

private respondent, ordered the sale of the ;shing nets at a pu'li) au)tion. Philippine

*ishing ear Industries on the 'idding and deposited ith the said )ourt the sales

pro)eeds of P300,000.OG

2n %ovem'er 14, 1337, the trial )ourt rendered its e)ision, ruling that Philippine

*ishing ear Industries as entitled to the <rit of Atta)hment and that Chua, ao and &im,

as general partners, ere jointl- lia'le to pa- respondent.O4

+he trial )ourt ruled that a partnership among &im, Chua and ao eisted 'ased !1#

on the testimonies of the itnesses presented and !7# on a Compromise Agreement

ee)uted '- the threeO3 in Civil Case %o. 1H37/M% hi)h Chua and ao had 'rought

against &im in the R+C of Mala'on, Bran)h G7, for !a# a de)laration of nullit- of )ommer)ial

do)umentsE !'# a reformation of )ontra)tsE !)# a de)laration of onership of ;shing 'oatsE

!d# an injun)tion and !e# damages.O10 +he Compromise Agreement provided:

a# +hat the parties plaintis ? &im +ong &im agree to have the four !H# vessels sold in theamount of P5,G50,000.00 in)luding the ;shing net. +his P5,G50,000.00 shall 'e applied as

full pa-ment forPF,750,000.00 in favor of & >oldings Corporation andDor &im +ong &imE

'# If the four !H# vesselOs and the ;shing net ill 'e sold at a higher pri)e

than P5,G50,000.00 hatever ill 'e the e)ess ill 'e divided into F: 1DF &im +ong &imE

1DF Antonio ChuaE 1DF Peter aoE

)# If the pro)eeds of the sale the vessels ill 'e less than P5,G50,000.00 hatever the

de;)ien)- shall 'e shouldered and paid to & >olding Corporation '- 1DF &im +ong &imE 1DF

Antonio ChuaE 1DF Peter ao.O11

+he trial )ourt noted that the Compromise Agreement as silent as to the nature of their o'ligations, 'ut that joint lia'ilit- )ould 'e presumed from the e$ual distri'ution of

the pro;t and loss.O17

&im appealed to the Court of Appeals !CA# hi)h, as alread- stated, a(rmed the

R+C.

Ruling of the Court of Appeals

In a(rming the trial )ourt, the CA held that petitioner as a partner of Chua and ao

in a ;shing 'usiness and ma- thus 'e held lia'le as a su)h for the ;shing nets and Loats

pur)hased '- and for the use of the partnership. +he appellate )ourt ruled:

+he eviden)e esta'lishes that all the defendants in)luding herein appellant &im +ong &im

undertoo9 a partnership for a spe)i;) underta9ing, that is for )ommer)ial ;shing

. 2'viousl-, the ultimate underta9ing of the defendants as to divide the pro;ts among

themselves hi)h is hat a partnership essentiall- is . B- a )ontra)t of partnership,

to or more persons 'ind themselves to )ontri'ute mone-, propert- or industr- to a

)ommon fund ith the intention of dividing the pro;ts among themselves !Arti)le 1G6G,

%e Civil Code#.O1F

>en)e, petitioner 'rought this re)ourse 'efore this Court. O1H

Th+ I+

In his Petition and Memorandum, &im as9s this Court to reverse the assailed e)ision

on the folloing grounds:

I +> C2=R+ 2* APPA&S RR I% >2&I%, BAS 2% A C2MPR2MIS ARM%+

+>A+ C>=A, A2 A% P+I+I2%R &IM %+R I%+2 I% A SPARA+ CAS, +>A+ A

PAR+%RS>IP ARM%+ IS+ AM2% +>M.

II SI%C I+ <AS 2%& C>=A <>2 RPRS%+ +>A+ > <AS AC+I% *2R 2CA% =S+

*IS>I% C2RP2RA+I2% <>% > B2=>+ +> %+S *R2M P>I&IPPI% *IS>I%, +>

C2=R+ 2* APPA&S <AS =%=S+I*I I% IMP=+I% &IABI&I+ +2 P+I+I2%R &IM AS <&&.

III +> +RIA& C2=R+ IMPR2PR& 2RR +> SIN=R A% A++AC>M%+ 2*

P+I+I2%R &IMS 22S.

In determining hether petitioner ma- 'e held lia'le for the ;shing nets and Loats

pur)hased from respondent, the Court must resolve this 9e- issue: hether '- their a)ts,

&im, Chua and ao )ould 'e deemed to have entered into a partnership.

Th4 Cor) R74n:

+he Petition is devoid of merit.

F4r) an S+con I+@ Existence of a Partnership and Petitioner's Liability

In arguing that he should not 'e held lia'le for the e$uipment pur)hased from

respondent, petitioner )ontroverts the CA ;nding that a partnership eisted 'eteen him,

Peter ao and Antonio Chua. >e asserts that the CA 'ased its ;nding on the Compromise

Agreement alone. *urthermore, he dis)laims an- dire)t parti)ipation in the pur)hase of

the nets, alleging that the negotiations ere )ondu)ted '- Chua and ao onl-, and that he

has not even met the representatives of the respondent )ompan-. Petitioner further

argues that he as a lessor, not a partner, of Chua and ao, for the "Contra)t of &ease"

dated *e'ruar- 1, 1330, shoed that he had merel- leased to the to the main asset of

the purported partnership // the ;shing 'oat B< Lourdes+ +he lease as for si months,

ith a monthl- rental of PFG,500 plus 75 per)ent of the gross )at)h of the 'oat.
























<e are not persuaded '- the arguments of petitioner. +he fa)ts as found '- the to

loer )ourts )learl- shoed that there eisted a partnership among Chua, ao and him,

pursuant to Arti)le 1G6G of the Civil Code hi)h provides:

Arti)le 1G6G / B- the )ontra)t of partnership, to or more persons 'ind themselves to

)ontri'ute mone-, propert-, or industr- to a )ommon fund, ith the intention of dividing

the pro;ts among themselves.

Spe)i;)all-, 'oth loer )ourts ruled that a partnership among the three eisted

'ased on the folloing fa)tual ;ndings:O15

!1# +hat Petitioner &im +ong &im re$uested Peter ao ho as engaged in )ommer)ial

;shing to join him, hile Antonio Chua as alread- aos partnerE

!7# +hat after )onvening for a fe times, &im Chua, and ao ver'all- agreed to a)$uire to

;shing 'oats, the < Lourdes and the < "elson for the sum of PF.F5 millionE

!F# +hat the- 'orroed PF.75 million from esus &im, 'rother of Petitioner &im +ong &im, to

;nan)e the venture.

!H# +hat the- 'ought the 'oats from CM* *ishing Corporation, hi)h ee)uted a eed of

Sale over these to !7# 'oats in favor of Petitioner &im +ong &im onl- to serve as se)urit-

for the loan etended '- esus &imE

!5# +hat &im, Chua and ao agreed that the refur'ishing , re/e$uipping, repairing, dr-

do)9ing and other epenses for the 'oats ould 'e shouldered '- Chua and aoE

!6# +hat 'e)ause of the unavaila'ilit- of funds, esus &im again etended a loan to the

partnership in the amount of P1 million se)ured '- a )he)9, 'e)ause of hi)h, ao and

Chua entrusted the onership papers of to other 'oats, Chuas < Lady Anne (el and

aos < 'racy to &im +ong &im.

!G# +hat in pursuan)e of the 'usiness agreement, Peter ao and Antonio Chua 'ought nets

from Respondent Philippine *ishing ear, in 'ehalf of "2)ean uest *ishing Corporation,"

their purported 'usiness name.

!4# +hat su'se$uentl-, Civil Case %o. 1H37/M% as ;led in the Mala'on R+C, Bran)h G7 '-

Antonio Chua and Peter ao against &im +ong &im for !a# de)laration of nullit- of

)ommer)ial do)umentsE !'# reformation of )ontra)tsE !)# de)laration of onership of

;shing 'oatsE !H# injun)tionE and !e# damages.

!3# +hat the )ase as ami)a'l- settled through a Compromise Agreement ee)uted

'eteen the parties/litigants the terms of hi)h are alread- enumerated a'ove.

*rom the fa)tual ;ndings of 'oth loer )ourts, it is )lear that Chua, ao and &im had

de)ided to engage in a ;shing 'usiness, hi)h the- started '- 'u-ing 'oats orth PF.F5

million, ;nan)ed '- a loan se)ured from esus &im ho as petitioners 'rother. In their

Compromise Agreement, thesu'se$uentl- revealed their intention to pa- the loan ith

the pro)eeds of the sale of the 'oats, and to divide e$uall- among them the e)ess or

loss. +hese 'oats, the pur)hase and the repair of hi)h ere ;nan)ed ith 'orroed

mone-, fell under the term )ommon fund under Arti)le 1G6G. +he )ontri'ution to su)hfund need not 'e )ash or ;ed assetsE it )ould 'e an intangi'le li9e )redit or industr-. +hat

the parties agreed that an- loss or pro;t from the sale and operation of the 'oats ould

'e divided e$uall- among them also shos that the- had indeed formed a partnership.

Moreover, it is )lear that the partnership etended not onl- to the pur)hase of the

'oat, 'ut also to that of the nets and the Loats. +he ;shing nets and the Loats, 'oth

essential to ;shing, ere o'viousl- a)$uired in furtheran)e of their 'usiness. It ould

have 'een in)on)eiva'le for &im to involve himself so mu)h in 'u-ing the 'oat 'ut not in

the a)$uisition of the aforesaid e$uipment, ithout hi)h the 'usiness )ould not have

pro)eeded.

iven the pre)eding fa)ts, it is )lear that there as, among petitioner, Chua and ao,

a partnership engaged in the ;shing 'usiness. +he- pur)hased the 'oats, hi)h

)onstituted the main assets of the partnership, and the- agreed that the pro)eeds from

the sales and operations thereof ould 'e divided among them.

<e stress that under Rule H5, a petition for revie li9e the present )ase should

involve onl- $uestions of la. +hus, the foregoing fa)tual ;ndings of the R+C and the CA

are 'inding on this Court, a'sent an- )ogent proof that the present a)tion is em'ra)ed '-

one of the e)eptions to the rule.O16 In assailing the fa)tual ;ndings of the to loer

)ourts, petitioner ee)tivel- goes 'e-ond the 'ounds of a petition for revie under Rule

H5.

Compromise Agreement ot the !ole "asis of Partnership

Petitioner argues that the appellate )ourts sole 'asis for assuming the eisten)e of a

partnership as the Compromise Agreement. >e also )laims that the settlement as

entered into onl- to end the dispute among them, 'ut not to adjudi)ate their preeisting

rights and o'ligations. >is arguments are 'aseless. 'he Agreement /as but an

embodiment of the relationship extant among the parties prior to its execution+

A proper adjudi)ation of )laimants rights mandates that )ourts must revie and

thoroughl- appraise all relevant fa)ts. Both loer )ourts have done so and have found,

)orre)tl-, a preeisting partnership among the parties. In impl-ing that the loer )ourts

have de)ided on the 'asis of one pie)e of do)ument alone, petitioner fails to appre)iate

that the CA and the R+C delved into the histor- of the do)ument and eplored all the

possi'le )onse$uential )om'inations in harmon- ith la, logi) and fairness. @eril-, theto loer )ourts fa)tual ;ndings mentioned a'ove nulli;ed petitioners argument that the

eisten)e of a partnership as 'ased onl- on the Compromise Agreement.








Petitioner #as a Partner, ot a Lessor

<e are not )onvin)ed '- petitioners argument that he as merel- the lessor of the

'oats to Chua and ao, not a partner in the ;shing venture. >is argument allegedl- ;nds

support in the Contra)t of &ease and the registration papers shoing that he as the

oner of the 'oats, in)luding B< Lourdes here the nets ere found.

>is allegation de;es logi). In ee)t, he ould li9e this Court to 'elieve that he

)onsented to the sale of his o/n 'oats to pa- a de't of Chua and ao, ith the e)ess of

the pro)eeds to 'e divided amongthe three of them. %o lessor ould do hat petitioner

did. Indeed, his )onsent to the sale proved that there as a preeisting partnership

among all three.

@eril-, as found '- the loer )ourts, petitioner entered into a 'usiness agreement

ith Chua and ao, in hi)h de'ts ere underta9en in order to ;nan)e the a)$uisition and

the upgrading of the vessels hi)h ould 'e used in their ;shing 'usiness. +he sale of the

'oats, as ell as the division among the three of the 'alan)e remaining after the pa-ment

of their loans, proves 'e-ond )avil that B< Lourdes, though registered in his name, as

not his on propert- 'ut an asset of the partnership. It is not un)ommon to register theproperties a)$uired from a loan in the name of the person the lender trusts, ho in this

)ase is the petitioner himself. After all, he is the 'rother of the )reditor, esus &im.

<e stress that it is unreasona'le indeed, it is a'surd // for petitioner to sell his

propert- to pa- a de't he did not in)ur, if the relationship among the three of them as

merel- that of lessor/lessee, instead of partners.

Corporation by Estoppel

Petitioner argues that under the do)trine of )orporation '- estoppel, lia'ilit- )an 'e

imputed onl- to Chua and ao, and not to him. Again, e disagree.

Se)tion 71 of the Corporation Code of the Philippines provides:

Se). 71. Corporation by estoppel. / All persons ho assume to a)t as a )orporation

9noing it to 'e ithout authorit- to do so shall 'e lia'le as general partners for all de'ts,

lia'ilities and damages in)urred or arising as a result thereof: Provided ho/ever, +hat

hen an- su)h ostensi'le )orporation is sued on an- transa)tion entered '- it as a

)orporation or on an- tort )ommitted '- it as su)h, it shall not 'e alloed to use as a

defense its la)9 of )orporate personalit-.

2ne ho assumes an o'ligation to an ostensi'le )orporation as su)h, )annot resist

performan)e thereof on the ground that there as in fa)t no )orporation.

+hus, even if the ostensi'le )orporate entit- is proven to 'e legall- noneistent, a

part- ma- 'e estopped from den-ing its )orporate eisten)e. +he reason 'ehind this

do)trine is o'vious / an unin)orporated asso)iation has no personalit- and ould 'e

in)ompetent to a)t and appropriate for itself the poer and attri'utes of a )orporation as

provided '- laE it )annot )reate agents or )onfer authorit- on another to a)t in its 'ehalfE

thus, those ho a)t or purport to a)t as its representatives or agents do so ithout

authorit- and at their on ris9. And as it is an elementar- prin)iple of la that a person

ho a)ts as an agent ithout authorit- or ithout a prin)ipal is himself regarded as the

prin)ipal, possessed of all the right and su'je)t to all the lia'ilities of a prin)ipal, a persona)ting or purporting to a)t on 'ehalf of a )orporation hi)h has no valid eisten)e

assumes su)h privileges and o'ligations and 'e)omes personall- lia'le for )ontra)ts

entered into or for other a)ts performed as su)h agent.O1G

+he do)trine of )orporation '- estoppel ma- appl- to the alleged )orporation and to

a third part-. In the ;rst instan)e, an unin)orporated asso)iation, hi)h represented itself

to 'e a )orporation, ill 'e estopped from den-ing its )orporate )apa)it- in a suit against

it '- a third person ho relied in good faith on su)h representation. It )annot allege la)9

of personalit- to 'e sued to evade its responsi'ilit- for a )ontra)t it entered into and '-

virtue of hi)h it re)eived advantages and 'ene;ts.

2n the other hand, a third party /ho, no/ing an association to be unincorporated,

nonetheless treated it as a corporation and received beneEts from it, may be barred from

denying its corporate existence in a suit brought against the alleged corporation+ In su)h

)ase, all those ho 'ene;ted from the transa)tion made '- the ostensi'le )orporation,

despite 9noledge of its legal defe)ts, ma- 'e held lia'le for )ontra)ts the- impliedl-

assented to or too9 advantage of.

+here is no dispute that the respondent, Philippine *ishing ear Industries, is entitled

to 'e paid for the nets it sold. +he onl- $uestion here is hether petitioner should 'e held

jointl-O14 lia'le ith Chua and ao. Petitioner )ontests su)h lia'ilit-, insisting that onl-

those ho dealt in the name of the ostensi'le )orporation should 'e held lia'le. Sin)e his

name does not appear on an- of the )ontra)ts and sin)e he never dire)tl- transa)ted ith

the respondent )orporation, ergo, he )annot 'e held lia'le.

=n$uestiona'l-, petitioner 'ene;ted from the use of the nets found inside B<

Lourdes, the 'oat hi)h has earlier 'een proven to 'e an asset of the partnership. >e in

fa)t $uestions the atta)hment of the nets, 'e)ause the <rit has ee)tivel- stopped his

use of the ;shing vessel.

It is di()ult to disagree ith the R+C and the CA that &im, Chua and ao de)ided to

form a )orporation. Although it as never legall- formed for un9non reasons, this fa)t

alone does not pre)lude the lia'ilities of the three as )ontra)ting parties in representation

of it. Clearl-, under the la on estoppel, those a)ting on 'ehalf of a )orporation and those

'ene;ted '- it, 9noing it to 'e ithout valid eisten)e, are held lia'le as general

partners.

+e)hni)all-, it is true that petitioner did not directly act on 'ehalf of the

)orporation. Fo/ever, having reaped the beneEts of the contract entered into by persons







/ith /hom he previously had an existing relationship, he is deemed to be part of said

association and is covered by the scope of the doctrine of corporation by estoppel+ <e

reiterate the ruling of the Court in Alonso v+ illamor :O13

A litigation is not a game of te)hni)alities in hi)h one, more deepl- s)hooled and s9illed

in the su'tle art of movement and position , entraps and destro-s the other. It is, rather, a

)ontest in hi)h ea)h )ontending part- full- and fairl- la-s 'efore the )ourt the fa)ts inissue and then, 'rushing aside as holl- trivial and inde)isive all imperfe)tions of form

and te)hni)alities of pro)edure, as9s that justi)e 'e done upon the merits. &asuits, unli9e

duels, are not to 'e on '- a rapiers thrust. +e)hni)alit-, hen it deserts its proper o()e

as an aid to justi)e and 'e)omes its great hindran)e and )hief enem-, deserves s)ant

)onsideration from )ourts. +here should 'e no vested rights in te)hni)alities.

Th4r I+@ $alidity of Attachment

*inall-, petitioner )laims that the <rit of Atta)hment as improperl- issued against

the nets. <e agree ith the Court of Appeals that this issue is no moot and a)ademi). As

previousl- dis)ussed, B< Lourdes as an asset of the partnership and that it as pla)ed

in the name of petitioner, onl- to assure pa-ment of the de't he and his partnersoed. +he nets and the Loats ere spe)i;)all- manufa)tured and tailor/made a))ording

to their on design, and ere 'ought and used in the ;shing venture the- agreed

upon. >en)e, the issuan)e of the <rit to assure the pa-ment of the pri)e stipulated in the

invoi)es is proper. Besides, '- spe)i;) agreement, onership of the nets remained ith

Respondent Philippine *ishing ear, until full pa-ment thereof.

?HEREFORE, the Petition is D0")0D and the assailed e)ision A)R(0D. Costs

against petitioner.

SO OR"ERE".



Documents

Recognition and Disregard of Corporateness