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G.R. No. 82797 February 27, 1991 GOOD EARTH EMPORIUM INC., an !IM "A PING, petitioners, vs.

HONORA#!E COURT OF APPEA!$ an ROCE$%RE&E$ REA!T& INC., respondents. A.E. Dacanay for petitioners. Antonio Quintos Law Office for private respondent.

PARA$, J.:p This is a petition for review on certiorari of the December 29, 1987 decision ' of the Court of Appeals in CA !.". #o. 119$% entitled &"'C() "(*() "(A+T*, ,#C. vs. -'#'"A.+( /0D!( "(!,'#A+ T",A+ C'0"T '1 2A#,+A, ."A#C- 33, !''D (A"T- (24'",02, ,#C. and +,2 5A 4,#!& reversin6 the decision of respondent /ud6e '' of the "e6ional Trial Court of 2anila, .ranch 33 in Civil Case #o. 87 8%383, which reversed the resolution of the 2etropolitan Trial Court 'f 2anila, .ranch 28 in Civil Case #o. %9$89, ''' den9in6 herein petitioners: motion to ;uash the alias writ of e<ecution issued a6ainst them. As 6athered from the records, the antecedent facts of this case, are as follows= A +ease Contract, dated 'ctober 1$, 1981, was entered into b9 and between "'C() "(*() "(A+T*, ,#C., as lessor, and !''D (A"T(24'",02, ,#C., as lessee, for a term of three 9ears be6innin6 #ovember 1, 1981 and endin6 'ctober 81, 1983 at a monthl9 rental of 4$7,%%%.%% > Rollo, p. 82? Anne< &C& of 4etition@. The buildin6 which was the subAect of the contract of lease is a five store9 buildin6 located at the corner of "iBal Avenue and .ustos )treet in )ta. CruB, 2anila. 1rom 2arch 1988, up to the time the complaint was filed, the lessee had defaulted in the pa9ment of rentals, as a conse;uence of which, private respondent "'C() "(*() "(A+T*, ,#C., >hereinafter desi6nated as "'C() for brevit9@ filed on 'ctober 13, 1983, an eAectment case >0nlawful Detainer@ a6ainst herein petitioners, !''D (A"T- (24'",02, ,#C. and +,2 5A 4,#!, hereinafter desi6nated as !((, >Rollo, p. 21? Anne< &.& of the 4etition@. After the latter had tendered their responsive pleadin6, the lower court >2TC, 2anila@ on motion of "oces rendered Aud6ment on the pleadin6s dated April 17, 1983, the dispositive portion of which states= /ud6ment is hereb9 rendered orderin6 defendants >herein petitioners@ and all persons claimin6 title under him to vacate the premises and surrender the same to the plaintiffs >herein respondents@? orderin6 the defendants to pa9 the plaintiffs the rental of 4$7,%%%.%% a month be6innin6 2arch 1988 up to the time defendants actuall9 vacate the premises and deliver possession to the plaintiff? to pa9 attorne9:s fees in the amount of 47,%%%.%% and to pa9 the costs of this suit. >Rollo, p. 111? 2emorandum of "espondents@ 'n 2a9 1$, 1983, "oces filed a motion for e<ecution which was opposed b9 !(( on 2a9 28, 1983 simultaneous with the latter:s filin6 of a #otice of

Appeal >Rollo, p. 112, Ibid.@. 'n /une 18, 1983, the trial court resolved such motion rulin6= After considerin6 the motion for the issuance of a writ of e<ecution filed b9 counsel for the plaintiff >herein respondents@ and the opposition filed in relation thereto and findin6 that the defendant failed to file the necessar9 supersedeas bond, this court resolved to 6rant the same for bein6 meritorious. > Rollo, p. 112@ 'n /une 13, 1983, a writ of e<ecution was issued b9 the lower court. 2eanwhile, the appeal was assi6ned to the "e6ional Trial Court >2anila@ .ranch C+D,. -owever, on Au6ust 17, 1983, !(( thru counsel filed with the "e6ional Trial Court of 2anila, a motion to withdraw appeal citing as reason that the9 are satisfied with the decision of the 2etropolitan Trial Court of 2anila, .ranch CCD,,,, which said court 6ranted in its 'rder of Au6ust 27, 1983 and the records were remanded to the trial court > Rollo, p. 82? CA Decision@. 0pon an ex-parte 2otion of "'C(), the trial court issued an Alias Erit of (<ecution dated 1ebruar9 27, 1987 >Rollo, p. 1%3? Anne< &D& of 4etitioner:s 2emorandum@, which was implemented on 1ebruar9 27, 1987. !(( thru counsel filed a motion to ;uash the writ of e<ecution and notice of lev9 and an ur6ent Ex-parte )upplemental 2otion for the issuance of a restrainin6 order, on 2arch 7, and 2%, 1987, respectivel9. 'n 2arch 21, 1987, the lower court issued a restrainin6 order to the sheriff to hold the e<ecution of the Aud6ment pendin6 hearin6 on the motion to ;uash the writ of e<ecution >Rollo, p. 22? "TC Decision@. Ehile said motion was pendin6 resolution, !(( filed a 4etition for "elief from Aud6ment before another court, "e6ional Trial Court of 2anila, .ranch ,C, which petition was docFeted as Civil Case #o. 8% 8%%19, but the petition was dismissed and the inAunctive writ issued in connection therewith set aside. .oth parties appealed to the Court of Appeals? !(( on the order of dismissal and "oces on denial of his motion for indemnit9, both docFeted as CA !.". #o. 17878 CD. !oin6 bacF to the ori6inal case, the 2etropolitan Trial Court after hearin6 and disposin6 some other incidents, promul6ated the ;uestioned "esolution, dated April 8, 1987, the dispositive portion of which reads as follows= 4remises considered, the motion to ;uash the writ is hereb9 denied for lacF of merit. The restrainin6 orders issued on 2arch 11 and 28, 1987 are hereb9 recalled, lifted and set aside. > Rollo, p. 2%, 2TC Decision@ !(( appealed and b9 coincidence. was raffled to the same Court, "TC .ranch ,C. "oces moved to dismiss the appeal but the Court denied the motion. 'n certiorari, the Court of Appeals dismissed "oces: petition and remanded the case to the "TC. 2eantime, .ranch ,C became vacant and the case was re raffled to .ranch C+,D. 'n April $, 1987, the "e6ional Trial Court of 2anila, findin6 that the amount of 41 million evidenced b9 (<hibit &,& and another 41 million evidenced b9 the pacto de retro sale instrument >(<hibit &2&@ were in full satisfaction of the Aud6ment obli6ation, reversed the decision of the 2unicipal Trial Court, the dispositive portion of which reads= 4remises considered, Aud6ment is hereb9 rendered reversin6 the "esolution appealed from ;uashin6 the writ of e<ecution and orderin6 the cancellation of the notice of lev9 and declarin6 the

Aud6ment debt as havin6 been full9 paid andGor +i;uidated. > Rollo, p. 29@. 'n further appeal, the Court of Appeals reversed the decision of the "e6ional Trial Court and reinstated the "esolution of the 2etropolitan Trial Court of 2anila, the dispositive portion of which is as follows= E-("(1'"(, the Aud6ment appealed from is hereb9 "(D(")(D and the "esolution dated April 8, 1987, of the 2etropolitan Trial Court of 2anila .ranch CCC,,, is hereb9 "(,#)TAT(D. #o pronouncement as to costs. >Rollo, p. 3%@. !((:s 2otion for "econsideration of April 7, 1988 was denied > Rollo, p. 38@. -ence, this petition. The main issue in this case is whether or not there was full satisfaction of the Aud6ment debt in favor of respondent corporation which would Austif9 the ;uashin6 of the Erit of (<ecution. A careful stud9 of the common e<hibits >(<hibits 1GA and 2G.@ shows that nowhere in an9 of said e<hibits was there an9 writin6 alludin6 to or referrin6 to an9 settlement between the parties of petitioners: Aud6ment obli6ation >Rollo, pp. 37 38@. 2oreover, there is no indication in the receipt, (<hibit &1&, that it was in pa9ment, full or partial, of the Aud6ment obli6ation. +iFewise, there is no indication in the pacto de retro sale which was drawn in favor of /esus 2arcos "oces and 2arcos D. "oces and not the respondent corporation, that the obli6ation embodied therein had somethin6 to do with petitioners: Aud6ment obli6ation with respondent corporation. 1indin6 that the common e<hibit, (<hibit 1GA had been si6ned b9 persons other than Aud6ment creditors >"oces "e9es "ealt9, ,nc.@ coupled with the fact that said e<hibit was not even alle6ed b9 !(( and +im 5a 4in6 in their ori6inal motion to ;uash the alias writ of e<ecution >Rollo, p. 87@ but produced onl9 durin6 the hearin6 >Ibid.@ which production resulted in petitioners havin6 to claim belatedly that there was an &overpa9ment& of about half a million pesos >Rollo, pp. 27 27@ and remarFin6 on the utter absence of an9 writin6 in (<hibits &1GA& and &2G.& to indicate pa9ment of the Aud6ment debt, respondent Appellate Court correctl9 concluded that there was in fact no pa9ment of the Aud6ment debt. As aptl9 observed b9 the said court= Ehat immediatel9 catches one:s attention is the total absence of an9 writin6 alludin6 to or referrin6 to an9 settlement between the parties of private respondents: >petitioners:@ Aud6ment obli6ation. ,n movin6 for the dismissal of the appeal +im 5a 4in6 who was then assisted b9 counsel simpl9 stated that defendants >herein petitioners@ are satisfied with the decision of the 2etropolitan Trial Court >"ecords of CA, p. 73@. #otabl9, in private respondents: >petitioners:@ 2otion to Huash the Erit of (<ecution and #otice of +ev9 dated arc! "# $%&'# there is absolutel9 no reference to the alle6ed pa9ment of one million pesos as evidenced b9 (<hibit 1 dated (epte)ber *+# $%&,. As pointed out b9 petitioner >respondent corporation@ this was brou6ht out b9 +inda 4anutat, 2ana6er of !ood (arth onl9 in the course of the latter:s testimon9. > Rollo, p. 87@

Article 123% of the Civil Code of the 4hilippines provides that= 4a9ment shall be made to the person in whose favor the obli6ation has been constituted, or his successor in interest, or an9 person authoriBed to receive it. ,n the case at bar, the supposed pa9ments were not made to "oces "e9es "ealt9, ,nc. or to its successor in interest nor is there positive evidence that the pa9ment was made to a person authoriBed to receive it. #o such proof was submitted but merel9 inferred b9 the "e6ional Trial Court > Rollo, p. 27@ from 2arcos "oces havin6 si6ned the +ease Contract as 4resident which was witnessed b9 /esus 2arcos "oces. The latter, however, was no lon6er 4resident or even an officer of "oces "e9es "ealt9, ,nc. at the time he received the mone9 >(<hibit &1&@ and si6ned the sale with pacto de retro >(<hibit &2&@. -e, in fact, denied bein6 in possession of authorit9 to receive pa9ment for the respondent corporation nor does the receipt show that he si6ned in the same capacit9 as he did in the +ease Contract at a time when he was 4resident for respondent corporation > Rollo, p. 2%, 2TC decision@. 'n the other hand, /esus 2arcos "oces testified that the amount of 41 million evidenced b9 the receipt >(<hibit &1&@ is the pa9ment for a loan e<tended b9 him and 2arcos "oces in favor of +im 5a 4in6. The assertion is home b9 the receipt itself whereb9 the9 acFnowled6ed pa9ment of the loan in their names and in no other capacit9. A corporation has a personalit9 distinct and separate from its individual stocFholders or members. .ein6 an officer or stocFholder of a corporation does not maFe one:s propert9 also of the corporation, and vice versa, for the9 are separate entities >Traders "o9al .anF v. CA !.". #o. 78312, )eptember 2$, 1989? CruB v. Dalisa9, 172 )C"A 382@. )hareowners are in no le6al sense the owners of corporate propert9 >or credits@ which is owned b9 the corporation as a distinct le6al person >Concepcion 2a6sa9sa9 +abrador v. CA !.". #o. 781$8, December 19, 1989@. As a conse;uence of the separate Auridical personalit9 of a corporation, the corporate debt or credit is not the debt or credit of the stocFholder, nor is the stocFholder:s debt or credit that of the corporation >4rof. /ose #olledo:s &The Corporation Code of the 4hilippines, p. 7, 1988 (dition, citing 4rofessor .allantine@. The absence of a note to evidence the loan is e<plained b9 /esus 2arcos "oces who testified that the ,'0 was subse;uentl9 delivered to private respondents >Rollo, pp. 97 98@. Contrar9 to the "e6ional Trial Court:s premise that it was incumbent upon respondent corporation to prove that the amount was delivered to the "oces brothers in the pa9ment of the loan in the latter:s favor, the deliver9 of the amount to and the receipt thereof b9 the "oces brothers in their names raises the presumption that the said amount was due to them. There is a disputable presumption that mone9 paid b9 one to the other was due to the latter >)ec. 7>f@ "ule 181, "ules of Court@. ,t is for !(( and +im 5a 4in6 to prove otherwise. ,n other words, it is for the latter to prove that the pa9ments made were for the satisfaction of their Aud6ment debt and not vice versa. The fact that at the time pa9ment was made to the two "oces brothers, !(( was also indebted to respondent corporation for a lar6er amount, is not supportive of the "e6ional Trial Court:s conclusions that the pa9ment was in favor of the latter, especiall9 in the case at bar where the amount was not receipted for b9 respondent corporation and there is absolutel9 no indication in the receipt from which it can be reasonabl9 inferred, that said

pa9ment was in satisfaction of the Aud6ment debt. +iFewise, no such inference can be made from the e<ecution of the pacto de retro sale which was not made in favor of respondent corporation but in favor of the two "oces brothers in their individual capacities without an9 reference to the Aud6ment obli6ation in favor of respondent corporation. ,n addition, the totalit9 of the amount covered b9 the receipt >(<hibit &1GA&@ and that of the sale with pacto de retro>(<hibit &2G.&@ all in the sum of 42 million, far e<ceeds petitioners: Aud6ment obli6ation in favor of respondent corporation in the sum of 41,7$%,%%%.%% b9 433%,%%%.%%, which militates a6ainst the claim of petitioner that the aforesaid amount >422@ was in full pa9ment of the Aud6ment obli6ation. 4etitioners: e<planation that the e<cess is interest and advance rentals for an e<tension of the lease contract >Rollo, pp. 27 28@ is belied b9 the absence of an9 interest awarded in the case and of an9 a6reement as to the e<tension of the lease nor was there an9 such pretense in the 2otion to Huash the Alias Erit of (<ecution. 4etitioners: averments that the respondent court had 6ravel9 abused its discretion in arrivin6 at the assailed factual findin6s as contrar9 to the evidence and applicable decisions of this -onorable Court are therefore, patentl9 unfounded. "espondent court was correct in statin6 that it &cannot 6o be9ond what appears in the documents submitted b9 petitioners themselves >(<hibits &1& and &2&@ in the absence of clear and convincin6 evidence& that would support its claim that the Aud6ment obli6ation has indeed been full9 satisfied which would warrant the ;uashal of the Alias Erit of (<ecution. ,t has been an established rule that when the e<istence of a debt is full9 established b9 the evidence >which has been done in this case@, the burden of provin6 that it has been e<tin6uished b9 pa9ment devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor >herein respondent corporation@ >Chua Chienco v. Dar6as, 11 4hil. 219? "amos v. +edesma, 12 4hil. $7$? 4inon v. De 'sorio, 8% 4hil. 8$7@. 1or indeed, it is well entrenched in 'ur Aurisprudence that each part9 in a case must prove his own affirmative alle6ations b9 the de6ree of evidence re;uired b9 law >)tron6hold ,nsurance Co. v. CA, !.". #o. 8887$, 2a9 29,1989? Tai Ton6 Chuache I Co. v. ,nsurance Commission, 178 )C"A 8$$@. The appellate court cannot, therefore, be said to have 6ravel9 abused its discretion in findin6 lacF of convincin6 and reliable evidence to establish pa9ment of the Aud6ment obli6ation as claimed b9 petitioner. The burden of evidence restin6 on the petitioners to establish the facts upon which their action is premised has not been satisfactoril9 dischar6ed and therefore, the9 have to bear the conse;uences. 4"(2,)() C'#),D("(D, the petition is hereb9 D(#,(D and the Decision of the "espondent court is hereb9 A11,"2(D, reinstatin6 the April 8, 1987 "esolution of the 2etropolitan Trial Court of 2anila. )' '"D("(D. elencio--errera# .adilla# (ar)iento and Regalado# //.# concur.

A (. Ma))er No. R%181%P

*u+y ,1, 1987

ADE!IO C. CRU-, complainant, vs. .UITERIO !. DA!I$A&, De/u)y $0er122, RTC, Man1+a, respondents. "()'+0T,'#

FERNAN, J.: ,n a sworn complaint dated /ul9 28, 1983, Adelio C. CruB char6ed Huiterio +. Dalisa9, )enior Deput9 )heriff of 2anila, with &malfeasance in office, corrupt practices and serious irre6ularities& alle6edl9 committed as follows= 1. "espondent sheriff attached andGor levied the mone9 belon6in6 to complainant CruB when he was not himself the Aud6ment debtor in the final Aud6ment of #+"C #C" Case #o. 8 12889 91 sou6ht to be enforced but rather the compan9 Fnown as &Hualitrans +imousine )ervice, ,nc.,& a dul9 re6istered corporation? and, 2. "espondent liFewise caused the service of the alias writ of e<ecution upon complainant who is a resident of 4asa9 Cit9, despite Fnowled6e that

his territorial Aurisdiction covers 2anila onl9 and does not e<tend to 4asa9 Cit9. ,n his Comments, respondent Dalisa9 e<plained that when he 6arnished complainant:s cash deposit at the 4hiltrust banF, he was merel9 performin6 a ministerial dut9. Ehile it is true that said writ was addressed to Hualitrans +imousine )ervice, ,nc., 9et it is also a fact that complainant had e<ecuted an affidavit before the 4asa9 Cit9 assistant fiscal statin6 that he is the ownerGpresident of said corporation and, because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice of 6arnishment on the 4hiltrust banF. 'n #ovember 12, 1983, this case was referred to the (<ecutive /ud6e of the "e6ional Trial Court of 2anila for investi6ation, report and recommendation. 4rior to the termination of the proceedin6s, however, complainant e<ecuted an affidavit of desistance statin6 that he is no lon6er interested in prosecutin6 the case a6ainst respondent Dalisa9 and that it was Aust a &misunderstandin6& between them. 0pon respondent:s motion, the (<ecutive /ud6e issued an order dated 2a9 29, 198$ recommendin6 the dismissal of the case. ,t has been held that the desistance of complainant does not preclude the taFin6 of disciplinar9 action a6ainst respondent. #either does it dissuade the Court from imposin6 the appropriate corrective sanction. 'ne who holds a public position, especiall9 an office directl9 connected with the administration of Austice and the e<ecution of Aud6ments, must at all times be free from the appearance of impropriet9. 1 Ee hold that respondent:s actuation in enforcin6 a Aud6ment a6ainst complainant who is not the Aud6ment debtor in the case calls for disciplinar9 action. Considerin6 the ministerial nature of his dut9 in enforcin6 writs of e<ecution, what is incumbent upon him is to ensure that onl9 that portion of a decision ordained or decreed in the dispositive part should be the subAect of e<ecution.2 #o more, no less. That the title of the case specificall9 names complainant as one of the respondents is of no moment as e<ecution must conform to that directed in the dispositive portion and not in the title of the case. The tenor of the #+"C Aud6ment and the implementin6 writ is clear enou6h. ,t directed Hualitrans +imousine )ervice, ,nc. to reinstate the dischar6ed emplo9ees and pa9 them full bacFwa6es. "espondent, however, chose to &pierce the veil of corporate entit9& usurpin6 a power belon6in6 to the court and assumed improvidentl9 that since the complainant is the ownerGpresident of Hualitrans +imousine )ervice, ,nc., the9 are one and the same. ,t is a well settled doctrine both in law and in e;uit9 that as a le6al entit9, a corporation has a personalit9 distinct and separate from its individual stocFholders or members. The mere fact that one is president of a corporation does not render the propert9 he owns or possesses the propert9 of the corporation, since the president, as individual, and the corporation are separate entities.8 Anent the char6e that respondent e<ceeded his territorial Aurisdiction, suffice it to sa9 that the writ of e<ecution sou6ht to be implemented was dated /ul9 9, 1983, or prior to the issuance of Administrative Circular #o. 12 which restrains a sheriff from enforcin6 a court writ outside his territorial Aurisdiction without first notif9in6 in writin6 and seeFin6 the assistance of the sheriff of the place where e<ecution shall taFe place.

ACC'"D,#!+*, we find "espondent Deput9 )heriff Huiterio +. Dalisa9 #(!+,!(#T in the enforcement of the writ of e<ecution in #+"C Case #o. 8 12889 91, and a fine e;uivalent to three J8K months salar9 is hereb9 imposed with a stern warnin6 that the commission of the same or similar offense in the future will merit a heavier penalt9. +et a cop9 of this "esolution be filed in the personal record of the respondent. )' '"D("(D. 0utierre1# /r.# 2eliciano# 3idin and 4ortes# //.# concur.

3G.R. No. 1241,5. Mar60 ,1, 244,7

#AN" OF AMERICA NT8$A, #AN" OF AMERICA INTERNATIONA!, !TD., petitioners, vs. COURT OF APPEA!$, HON. MANUE! PADO!INA, EDUARDO !ITON*UA, $R., an AURE!IO ". !ITON*UA, *R., respondents. DECI$ION AU$TRIA%MARTINE-, J.9 This is a petition for review on certiorari under "ule 37 of the "ules of Court assailin6 the #ovember 29, 1993 decision of the Court of

AppealsJ1K and the April 28, 1997 resolution den9in6 petitionersL motion for reconsideration. The factual bacF6round of the case is as follows= 'n 2a9 1%, 1998, (duardo 5. +itonAua, )r. and Aurelio /. +itonAua >+itonAuas, for brevit9@ filed a ComplaintJ2K before the "e6ional Trial Court of 4asi6 a6ainst the .anF of America #TI)A and .anF of America ,nternational, +td. >defendant banFs for brevit9@ alle6in6 that= the9 were en6a6ed in the shippin6 business? the9 owned two vessels= Don Aurelio and (l Champion, throu6h their wholl9 owned corporations? the9 deposited their revenues from said business to6ether with other funds with the branches of said banFs in the 0nited 5in6dom and -on6Fon6 up to 1979? with their business doin6 well, the defendant banFs induced them to increase the number of their ships in operation, offerin6 them eas9 loans to ac;uire said vessels?J8K thereafter, the defendant banFs ac;uired, throu6h their >+itonAuasL@ corporations as the borrowers= >a@ (l Carrier J3K? >b@ (l !eneralJ7K? >c@ (l Challen6erJ$K? and >d@ (l Con;uerorJ7K? the vessels were re6istered in the names of their corporations? the operation and the funds derived therefrom were placed under the complete and e<clusive control and disposition of the petitioners?J8K and the possession the vessels was also placed b9 defendant banFs in the hands of persons selected and desi6nated b9 them >defendant banFs@.J9K The +itonAuas claimed that defendant banFs as trustees did not full9 render an account of all the income derived from the operation of the vessels as well as of the proceeds of the subse;uent foreclosure sale? J1%K because of the breach of their fiduciar9 duties andGor ne6li6ence of the petitioners andGor the persons desi6nated b9 them in the operation of private respondentsL si< vessels, the revenues derived from the operation of all the vessels declined drasticall9? the loans ac;uired for the purchase of the four additional vessels then matured and remained unpaid, promptin6 defendant banFs to have all the si< vessels, includin6 the two vessels ori6inall9 owned b9 the private respondents, foreclosed and sold at public auction to answer for the obli6ations incurred for and in behalf of the operation of the vessels? the9 >+itonAuas@ lost siBeable amounts of their own personal funds e;uivalent to ten percent >1%M@ of the ac;uisition cost of the four vessels and were left with the unpaid balance of their loans with defendant banFs.J11K The +itonAuas pra9ed for the accountin6 of the revenues derived in the operation of the si< vessels and of the proceeds of the sale thereof at the foreclosure proceedin6s instituted b9 petitioners? dama6es for breach of trust? e<emplar9 dama6es and attorne9Ls fees. J12K Defendant banFs filed a 2otion to Dismiss on 6rounds of foru) non conveniens and lacF of cause of action a6ainst them. J18K 'n December 8, 1998, the trial court issued an 'rder den9in6 the 2otion to Dismiss, thus= NE-("(1'"(, and in view of the fore6oin6 consideration, the 2otion to Dismiss is hereb9 D(#,(D. The defendant is therefore, 6iven a period of ten >1%@ da9s to file its Answer to the complaint. N)' '"D("(D.OJ13K ,nstead of filin6 an answer the defendant banFs went to the Court of Appeals on a N4etition for "eview on CertiorariO J17K which was aptl9 treated b9 the appellate court as a petition for certiorari. The9 assailed the above ;uoted order as well as the subse;uent denial of their 2otion for

"econsideration.J1$K The appellate court dismissed the petition and denied petitionersL 2otion for "econsideration. J17K -ence, herein petition anchored on the followin6 6rounds= N1. "()4'#D(#T C'0"T '1 A44(A+) 1A,+(D T' C'#),D(" T-( 1ACT T-AT T-( )(4A"AT( 4(")'#A+,T,() '1 T-( 4",DAT( "()4'#D(#T) >2("( )T'C5-'+D(")@ A#D T-( 1'"(,!# C'"4'"AT,'#) >T-( "(A+ .'""'E(")@ C+(A"+* )044'"T, .(*'#D A#* D'0.T, T-( 4"'4'),T,'# T-AT T-( 4",DAT( "()4'#D(#T) -AD( #' 4(")'#A+,T,() T' )0(. N2. T-( "()4'#D(#T C'0"T '1 A44(A+) 1A,+(D T' "(A+,P( T-AT E-,+( T-( 4",#C,4+( '1 1'"02 #'# C'#D(#,(#) ,) #'T 2A#DAT'"*, T-("( A"(, -'E(D(", )'2( !0,D(+,#() T' 1'++'E ,# D(T("2,#,#! E-(T-(" T-( C-',C( '1 1'"02 )-'0+D .( D,)T0".(D. 0#D(" T-( C,"C02)TA#C() )0""'0#D,#! T-( ,#)TA#T CA)(, D,)2,))A+ '1 T-( C'24+A,#T '# T-( !"'0#D '1 1'"02 #'# C'#D(#,(#) ,) 2'"( A44"'4",AT( A#D 4"'4(". N8. T-( 4",#C,4+( '1 "() /0D,CATA ,) #'T +,2,T(D T' 1,#A+ /0D!2(#T ,# T-( 4-,+,44,#(). ,# 1ACT, T-( 4(#D(#C* '1 1'"(,!# ACT,'# 2A* .( T-( +(!A+ .A),) 1'" T-( D,)2,))A+ '1 T-( C'24+A,#T 1,+(D .* T-( 4",DAT( "()4'#D(#T. C'"'++A"* T' T-,), T-( "()4'#D(#T C'0"T '1 A44(A+) 1A,+(D T' C'#),D(" T-( 1ACT T-AT 4",DAT( "()4'#D(#T) A"( !0,+T* '1 1'"02 )-'44,#!.O J18K As to the first assi6ned error= 4etitioners ar6ue that the borrowers and the re6istered owners of the vessels are the forei6n corporations and not private respondents +itonAuas who are mere stocFholders? and that the revenues derived from the operations of all the vessels are deposited in the accounts of the corporations. -ence, petitioners maintain that these forei6n corporations are the le6al entities that have the personalities to sue and not herein private respondents? that private respondents, bein6 mere shareholders, have no claim on the vessels as owners since the9 merel9 have an inchoate ri6ht to whatever ma9 remain upon the dissolution of the said forei6n corporations and after all creditors have been full9 paid and satisfied?J19K and that while private respondents ma9 have alle6edl9 spent amounts e;ual to 1%M of the ac;uisition costs of the vessels in ;uestion, their 1%M however represents their investments as stocFholders in the forei6n corporations.J2%K Anent the second assi6ned error, petitioners posit that while the application of the principle of foru) non conveniens is discretionar9 on the part of the Court, said discretion is limited b9 the 6uidelines pertainin6 to the private as well as public interest factors in determinin6 whether plaintiffsL choice of forum should be disturbed, as elucidated in 0ulf Oil 4orp. vs. 0ilbertJ21K and .iper Aircraft 4o. vs. Reyno#J22K to wit= N4rivate interest factors include= >a@ the relative ease of access to sources of proof? >b@ the availabilit9 of compulsor9 process for the attendance of unwillin6 witnesses? >c@ the cost of obtainin6 attendance of willin6 witnesses? or >d@ all other practical problems that maFe trial of a case eas9, e<peditious and ine<pensive. 4ublic interest factors include= >a@ the administrative difficulties flowin6 from court con6estion? >b@ the local interest in havin6 localiBed controversies decided at home? >c@ the avoidance of unnecessar9 problems in conflict of laws or in the application of forei6n law? or >d@ the unfairness of burdenin6 citiBens in an unrelated forum with Aur9 dut9.OJ28K

,n support of their claim that the local court is not the proper forum, petitioners alle6e the followin6= Ni@ The .anF of America .ranches involved, as clearl9 mentioned in the Complaint, are based in -on6Fon6 and (n6land. As such, the evidence and the witnesses are not readil9 available in the 4hilippines? Nii@ The loan transactions were obtained, perfected, performed, consummated and partiall9 paid outside the 4hilippines? Niii@ The monies were advanced outside the 4hilippines. 1urthermore, the mort6a6ed vessels were part of an offshore fleet, not based in the 4hilippines? Niv@ All the loans involved were 6ranted to the 4rivate "espondentsL forei6n C'"4'"AT,'#)? Nv@ The "estructurin6 A6reements were A++ 6overned b9 the laws of (n6land? Nvi@ The subse;uent sales of the mort6a6ed vessels and the application of the sales proceeds occurred and transpired outside the 4hilippines, and the deliveries of the sold mort6a6ed vessels were liFewise made outside the 4hilippines? Nvii@ The revenues of the vessels and the proceeds of the sales of these vessels were A++ deposited to the Accounts of the forei6n C'"4'"AT,'#) abroad? and Nviii@ .anF of America ,nternational +td. is not licensed nor en6a6ed in trade or business in the 4hilippines.O J23K 4etitioners ar6ue further that the loan a6reements, securit9 documentation and all subse;uent restructurin6 a6reements uniforml9, unconditionall9 and e<pressl9 provided that the9 will be 6overned b9 the laws of (n6land?J27K that 4hilippine Courts would then have to appl9 (n6lish law in resolvin6 whatever issues ma9 be presented to it in the event it reco6niBes and accepts herein case? that it would then be imposin6 a si6nificant and unnecessar9 e<pense and burden not onl9 upon the parties to the transaction but also to the local court. 4etitioners insist that the inconvenience and difficult9 of appl9in6 (n6lish law with respect to a wholl9 forei6n transaction in a case pendin6 in the 4hilippines ma9 be avoided b9 its dismissal on the 6round of foru) non conveniens. J2$K 1inall9, petitioners claim that private respondents have alread9 waived their alle6ed causes of action in the case at bar for their refusal to contest the forei6n civil cases earlier filed b9 the petitioners a6ainst them in -on6Fon6 and (n6land, to wit= N1.@ Civil action in (n6land in its -i6h Court of /ustice, HueenLs .ench Division Commercial Court >1992 1olio #o. 2%98@ a6ainst >a@ +,.(",A# T"A#)4'"T #AD,!AT,'#. )A.? >b@ ()-+(* C'24A#,A #AD,("A )A., >c@ (+ C-A++(#!(" )A? >d@ ()4",'#A )-,44,#! C'. )A? >e@ 4AC,1,C #AD,!AT') C'"4. )A? >f@ (DD,( #AD,!AT,'# C'"4. )A? >6@ (D0A"D' 5. +,T'#/0A I >h@ A0"(+,' 5. +,T'#/0A. N2.@ Civil action in (n6land in its -i6h Court of /ustice, HueenLs .ench Division, Commercial Court >1992 1olio #o. 2237@ a6ainst >a@ (+

C-A++(#!(" ).A., >b@ ()4",'#A )-,44,#! C'24A#* ).A., >c@ (D0A"D' 5AT,40#A# +,T'#/0A and >d@ A0"(+,' 5AT,40#A# +,T'#/0A. N8.@ Civil action in the )upreme Court of -on6Fon6 -i6h Court >Action #o. 3%89 of 1992@, a6ainst >a@ ()-+(* C'24A#,A #AD,("A ).A., >b@ (+ C-A++(#!(" ).A., >c@ ()4",'#A )-,44,#! C'24A#* ).A., >d@ 4AC,1,C #AD,!AT'") C'"4'"AT,'# >e@ (DD,( #AD,!AT,'# C'"4'"AT,'# ).A., >f@ +,T'#/0A C-A"T(",#! >(D*)-,4@ C'., ,#C., >6@ A0"(+,' 5AT,40#A# +,T'#/0A, /"., and >h@ (D0A"D' 5AT,40#A# +,T'#/0A. N3.@ A civil action in the )upreme Court of -on6 5on6 -i6h Court >Action #o. 3%3% of 1992@, a6ainst >a@ ()-+(* C'24A#,A #AD,("A ).A., >b@ (+ C-A++(#!(" ).A., >c@ ()4",'#A )-,44,#! C'24A#* ).A., >d@ 4AC,1,C #AD,!AT'") C'"4'"AT,'# >e@ (DD,( #AD,!AT,'# C'"4'"AT,'# ).A., >f@ +,T'#/0A C-A"T(",#! >(D*)-,4@ C'., ,#C., >6@ A0"(+,' 5AT,40#A# +,T'#/0A, "/., and >h@ (D0A"D' 5AT,40#A# +,T'#/0A.O and that private respondentsL alle6ed cause of action is alread9 barred b9 the pendenc9 of another action or b9 litis pendentia as shown above.J27K 'n the other hand, private respondents contend that certain material facts and pleadin6s are omitted andGor misrepresented in the present petition for certiorari? that the prefator9 statement failed to state that part of the securit9 of the forei6n loans were mort6a6es on a 89 hectare piece of real estate located in the 4hilippines? J28K that while the complaint was filed onl9 b9 the stocFholders of the corporate borrowers, the latter are wholl9 owned b9 the private respondents who are 1ilipinos and therefore under 4hilippine laws, aside from the said corporate borrowers bein6 but their alter e6os, the9 have interests of their own in the vessels. J29K 4rivate respondents also ar6ue that the dismissal b9 the Court of Appeals of the petition for certiorari was Austified because there was neither alle6ation nor an9 showin6 whatsoever b9 the petitioners that the9 had no appeal, nor an9 plain, speed9, and ade;uate remed9 in the ordinar9 course of law from the 'rder of the trial Aud6e den9in6 their 2otion to Dismiss? that the remed9 available to the petitioners after their 2otion to Dismiss was denied was to file an Answer to the complaint?J8%K that as upheld b9 the Court of Appeals, the decision of the trial court in not appl9in6 the principle of foru) non conveniens is in the lawful e<ercise of its discretion. J81K 1inall9, private respondents aver that the statement of petitioners that the doctrine of res 5udicata also applies to forei6n Aud6ment is merel9 an opinion advanced b9 them and not based on a cate6orical rulin6 of this Court? J82K and that herein private respondents did not actuall9 participate in the proceedin6s in the forei6n courts.J88K Ee den9 the petition for lacF of merit. ,t is a well settled rule that the order den9in6 the motion to dismiss cannot be the subAect of petition for certiorari. 4etitioners should have filed an answer to the complaint, proceed to trial and await Aud6ment before maFin6 an appeal. As repeatedl9 held b9 this Court= NAn order den9in6 a motion to dismiss is interlocutor9 and cannot be the subAect of the e<traordinar9 petition for certiorari or )anda)us. The remed9 of the a66rieved part9 is to file an answer and to interpose as defenses the obAections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case b9 appeal in due course. <<< 0nder certain situations, recourse to certiorari or )anda)us is considered appropriate, i.e., >a@ when the trial court issued the order without or in e<cess of Aurisdiction? >b@ where there is patent 6rave abuse of

discretion b9 the trial court? or >c@ appeal would not prove to be a speed9 and ade;uate remed9 as when an appeal would not promptl9 relieve a defendant from the inAurious effects of the patentl9 mistaFen order maintainin6 the plaintiffLs baseless action and compellin6 the defendant needlessl9 to 6o throu6h a protracted trial and clo66in6 the court docFets b9 another futile case.OJ83K "ecords show that the trial court acted within its Aurisdiction when it issued the assailed 'rder den9in6 petitionersL motion to dismiss. Does the denial of the motion to dismiss constitute a patent 6rave abuse of discretionQ Eould appeal, under the circumstances, not prove to be a speed9 and ade;uate remed9Q Ee will resolve said ;uestions in conAunction with the issues raised b9 the parties. 2irst issue. Did the trial court commit 6rave abuse of discretion in refusin6 to dismiss the complaint on the 6round that plaintiffs have no cause of action a6ainst defendants since plaintiffs are merel9 stocFholders of the corporations which are the re6istered owners of the vessels and the borrowers of petitionersQ #o. 4etitionersL ar6ument that private respondents, bein6 mere stocFholders of the forei6n corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lacF of personalit9 to sue upon proof that the plaintiff is not the real part9 in interest. +acF of personalit9 to sue can be used as a 6round for a 2otion to Dismiss based on the fact that the complaint, on the face thereof, evidentl9 states no cause of action. J87K ,n (an Loren1o 6illage Association# Inc. vs. 4ourt of Appeals# J8$K this Court clarified that a complaint states a cause of action where it contains three essential elements of a cause of action, namel9= >1@ the le6al ri6ht of the plaintiff, >2@ the correlative obli6ation of the defendant, and >8@ the act or omission of the defendant in violation of said le6al ri6ht. ,f these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the 6round of failure to state a cause of action.J87K To emphasiBe, it is not the lacF or absence of cause of action that is a 6round for dismissal of the complaint but rather the fact that the complaint states no cause of action. J88K N2ailure to state a cause of actionO refers to the insufficienc9 of alle6ation in the pleadin6, unliFe N lac7 of cause of actionO which refers to the insufficienc9 of factual basis for the action. N1ailure to state a cause of actionO ma9 be raised at the earliest sta6es of an action throu6h a motion to dismiss the complaint, while NlacF of cause of actionO ma9 be raised an9 time after the ;uestions of fact have been resolved on the basis of stipulations, admissions or evidence presented.J89K ,n the case at bar, the complaint contains the three elements of a cause of action. ,t alle6es that= >1@ plaintiffs, herein private respondents, have the ri6ht to demand for an accountin6 from defendants >herein petitioners@, as trustees b9 reason of the fiduciar9 relationship that was created between the parties involvin6 the vessels in ;uestion? >2@ petitioners have the obli6ation, as trustees, to render such an accountin6? and >8@ petitioners failed to do the same. 4etitioners insist that the9 do not have an9 obli6ation to the private respondents as the9 are mere stocFholders of the corporation? that the corporate entities have Auridical personalities separate and distinct from those of the private respondents. 4rivate respondents maintain that the corporations are wholl9 owned b9 them and prior to the incorporation of such entities, the9 were clients of petitioners which induced them to ac;uire loans from said petitioners to invest on the additional ships.

Ee a6ree with private respondents. As held in the )an +orenBo case,J3%K N<<< assumin6 that the alle6ation of facts constitutin6 plaintiffsL cause of action is not as clear and cate6orical as would otherwise be desired, an9 uncertaint9 thereb9 arisin6 should be so resolved as to enable a full in;uir9 into the merits of the action.O As this Court has e<plained in the )an +orenBo case, such a course, would preclude multiplicit9 of suits which the law abhors, and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on account of the alle6ed fatal flaws of the complaint would obviousl9 be indecisive and would not end the controvers9, since the institution of another action upon a revised complaint would not be foreclosed.J31K (econd Issue. )hould the complaint be dismissed on the 6round of foru) non-conveniensQ #o. The doctrine of foru) non-conveniens, literall9 meanin6 Rthe forum is inconvenientL, emer6ed in private international law to deter the practice of 6lobal forum shoppin6,J32K that is to prevent non resident liti6ants from choosin6 the forum or place wherein to brin6 their suit for malicious reasons, such as to secure procedural advanta6es, to anno9 and harass the defendant, to avoid overcrowded docFets, or to select a more friendl9 venue. 0nder this doctrine, a court, in conflicts of law cases, ma9 refuse impositions on its Aurisdiction where it is not the most NconvenientO or available forum and the parties are not precluded from seeFin6 remedies elsewhere.J38K Ehether a suit should be entertained or dismissed on the basis of said doctrine depends lar6el9 upon the facts of the particular case and is addressed to the sound discretion of the trial court. J33K ,n the case of 4o))unication aterials and Design# Inc. vs. 4ourt of Appeals ,J37K this Court held that N<<< JaK 4hilippine Court ma9 assume Aurisdiction over the case if it chooses to do so? provided, that the followin6 re;uisites are met= >1@ that the 4hilippine Court is one to which the parties ma9 convenientl9 resort to? >2@ that the 4hilippine Court is in a position to maFe an intelli6ent decision as to the law and the facts? and, >8@ that the 4hilippine Court has or is liFel9 to have power to enforce its decision.O J3$K (videntl9, all these re;uisites are present in the instant case. 2oreover, this Court enunciated in .!ilsec. Invest)ent 4orporation vs. 4ourt of Appeals#J37K that the doctrine of foru) non conveniens should not be used as a 6round for a motion to dismiss because )ec. 1, "ule 1$ of the "ules of Court does not include said doctrine as a 6round. This Court further ruled that while it is within the discretion of the trial court to abstain from assumin6 Aurisdiction on this 6round, it should do so onl9 after vital facts are established, to determine whether special circumstances re;uire the courtLs desistance? and that the propriet9 of dismissin6 a case based on this principle of foru) non conveniens re;uires a factual determination, hence it is more properl9 considered a matter of defense. J38K 8!ird issue. Are private respondents 6uilt9 of forum shoppin6 because of the pendenc9 of forei6n actionQ #o. 1orum shoppin6 e<ists where the elements of litis pendentia are present and where a final Aud6ment in one case will amount to res 5udicata in the other.J39K 4arentheticall9, for litis pendentia to be a 6round for the dismissal of an action there must be= >a@ identit9 of the parties or at least such as to represent the same interest in both actions? >b@ identit9 of ri6hts asserted and relief pra9ed for, the relief bein6 founded on the same

acts? and >c@ the identit9 in the two cases should be such that the Aud6ment which ma9 be rendered in one would, re6ardless of which part9 is successful, amount to res 5udicata in the other.J7%K ,n case at bar, not all the re;uirements for litis pendentia are present. Ehile there ma9 be identit9 of parties, notwithstandin6 the presence of other respondents, J71K as well as the reversal in positions of plaintiffs and defendantsJ72K, still the other re;uirements necessar9 for litis pendentia were not shown b9 petitioner. ,t merel9 mentioned that civil cases were filed in -on6Fon6 and (n6land without however showin6 the identit9 of ri6hts asserted and the reliefs sou6ht for as well as the presence of the elements of res 5udicata should one of the cases be adAud6ed. As the Court of Appeals aptl9 observed= N<<< JTKhe petitioners, b9 simpl9 enumeratin6 the civil actions instituted abroad involvin6 the parties herein <<<, failed to provide this Court with relevant and clear specifications that would show the presence of the above ;uoted elements or re;uisites for res Audicata. Ehile it is true that the petitioners in their motion for reconsideration >CA "ollo, p. 72@, after enumeratin6 the various civil actions instituted abroad, did aver that NCopies of the forei6n Aud6ments are hereto attached and made inte6ral parts hereof as Anne<es R.L, RCL, LDL and R(LO, the9 failed, wittin6l9 or inadvertentl9, to include a sin6le forei6n Aud6ment in their pleadin6s submitted to this Court as anne<es to their petition. -ow then could Ee have been e<pected to rule on this issue even if Ee were to hold that forei6n Aud6ments could be the basis for the application of the aforementioned principle of res AudicataQOJ78K Conse;uentl9, both courts correctl9 denied the dismissal of herein subAect complaint. :HEREFORE, the petition is D(#,(D for lacF of merit. Costs a6ainst petitioners. $O ORDERED. 3ellosillo# 94!air)an:# endo1a# Quisu)bing and 4alle5o# (r.# //.# concur.

G.R. No. 1179,2 *u+y 24, 1995 A;ON DA!E GARMENT$, INC., petitioner, vs. NATIONA! !A#OR RE!ATION$ COMMI$$ION, !I!IA DUMANTA&, ET A!., respondents. "()'+0T,'#

FRANCI$CO, J.: This special civil action for certiorari seeFs to set aside the decision of the #ational +abor "elations Commission, dated Au6ust 81, 1993, in #+"C CA

%%7%$8 98, for alle6edl9 havin6 been rendered with 6rave abuse of discretion. 4rivate respondents were emplo9ees of petitioner Avon Dale !arments, ,nc. and its predecessor in interest, Avon Dale )hirt 1actor9. 1ollowin6 a dispute brou6ht about b9 the rotation of worFers, a compromise a6reement was entered into between petitioner and private respondents wherein the latter were terminated from service and 6iven their correspondin6 separation pa9. -owever, upon refusal of the petitioner to include in the computation of private respondents: separation pa9 the period durin6 which the latter were emplo9ed b9 Avon Dale )hirt 1actor9, private respondents filed a complaint with the labor arbiter claimin6 a deficienc9 in their separation pa9 >docFeted as #+"C #C" %% %2 %%81% 98@. Accordin6 to private respondents, their previous emplo9ment with petitioner:s predecessor in interest, Avon Dale )hirt 1actor9, should be credited in computin6 their separation pa9 considerin6 that Avon Dale )hirt factor9 was not dissolved and the9 were not in turn hired as new emplo9ees b9 Avon Dale !arments, ,nc. ,n its decision dated 2a9 13, 1998, the labor arbiter dismissed private respondents: complaint and held that Avon Dale )hirt 1actor9 and Avon Dale !arments, ,nc. are not one and the same entit9 as the former was in fact dissolved on December 27, 1978, when it filed its Articles of Dissolution with the )ecurities and (<chan6e Commission. 1 4rivate respondents appealed to the #+"C and the latter reversed the decision of the labor arbiter after findin6 that upon dissolution of Avon Dale )hirt 1actor9, ,nc., there was no showin6 that its terminated emplo9ees, as creditors insofar as their separation pa9 were concerned, were ever paid. Thus, petitioner Avon Dale !arments, ,nc., as successor in interest, was held liable for private respondents: unpaid claim. 2 The instant petition is now brou6ht before us b9 petitioner Avon Dale !arments, ,nc., anchored on the sole 6round that, as a separate and distinct entit9, it should not be held liable for private respondents: separation pa9 from Avon Dale )hirt 1actor9. 4endin6 resolution of the instant petition, counsel for private respondents, instead of filin6 a comment to the petition, filed a 2anifestation indicatin6 that the parties have alread9 reached an amicable settlement on December 27, 1993, wherein private respondents were paid their correspondin6 separation pa9, after which, the9 e<ecuted a waiver and ;uitclaim. , ,t appeared however, upon verification b9 the 'ffice of the )olicitor !eneral, that the aforementioned compromise a6reement was e<ecuted between the parties without the Fnowled6e and participation of the #+"C. < The established rule is that compromise a6reements involvin6 labor standard cases, liFe the one entered into b9 the parties herein, must be reduced in writin6 and si6ned in the presence of the "e6ional Director or his dul9 authoriBed representative. 'therwise, the9 are not deemed to be dul9 e<ecuted. 5 1or this reason, the compromise a6reement submitted b9 private respondents: counsel cannot be reco6niBed b9 this court for bein6 improperl9 e<ecuted. #evertheless, we find the petition to be without merit as the assailed decision is in complete accord with the law and evidence on record.

4etitioner failed to establish that Avon Dale !arments, ,nc., is a separate and distinct entit9 from Avon Dale )hirt 1actor9, absent an9 showin6 that there was indeed an actual closure and cessation of the operations of the latter. The mere filin6 of the Articles of Dissolution with the )ecurities and (<chan6e Commission, without more, is not enou6h to support the conclusion that actual dissolution of an entit9 in fact tooF place. 'n the contrar9, the prevailin6 circumstances in this case indicated that petitioner compan9 is not distinct from its predecessor Avon Dale )hirt 1actor9, but in fact merel9 continued the operations of the latter under the same owners, the same business venture, at same address =, and even continued to hire the same emplo9ees >herein private respondents@. Thus, conformabl9 with established Aurisprudence, the two entities cannot be deemed as separate and distinct where there is a showin6 that one is merel9 the continuation of the other. 7 ,n fact, even a chan6e in the corporate name does not maFe a new corporation, whether effected b9 a special act or under a 6eneral law, it has no effect on the identit9 of the corporation, or on its propert9, ri6hts, or liabilities. 8 "espondent #+"C therefore, did not commit an9 6rave abuse of discretion in holdin6 that petitioner should liFewise include private respondents: emplo9ment with Avon Dale )hirt 1actor9 in computin6 private respondents: separation pa9 as petitioner failed to substantiate its claim that it is a distinct entit9. ACC'"D,#!+*, the instant petition is hereb9 D,)2,))(D. )' '"D("(D. 2eliciano# Ro)ero# elo and 6itug# //.# concur.

3G.R. No. 1487,<. May 29, 199=7

CONCEPT #UI!DER$, INC., petitioner, vs. THE NATIONA! !A#OR RE!ATION$ COMMI$$ION, >F1r?) D1@1?1onAB an Norber)o Marabe, Ro o+2o RaCue+, Cr1?)oba+ R1eDo, Manue+ G1++eDo, Pa+6ron1o G1 u6o?, Pe ro Abo1Dar, Norber)o Co(en a or, RoDe++o $a+u), E(1+1o Gar61a, *r., Mar1ano R1o, Pau+1na #a?ea, A12re o A+bera, PaCu1)o $a+u), Do(1nDo Guar1no, Ro(eo Ga+@e, Do(1na or $ab1na, Fe+1/e Ra 1ana, Ga@1no $ua+1b1o, Moreno E?6are?, Fer 1nan Torre?, Fe+1/e #a?1+an, an Ruben Roba+o?, respondents. DECI$ION HERMO$I$IMA, *R., J.: The corporate masF ma9 be lifted and the corporate veil ma9 be pierced when a corporation is Aust but the alter e6o of a person or of another corporation. Ehere bad6es of fraud e<ist? where public convenience is defeated? where a wron6 is sou6ht to be Austified thereb9, the corporate fiction or the notion of le6al entit9 should come to nau6ht. The law in these instances will re6ard the corporation as a mere association of persons and, in case of two corporations, mer6e them into one. Thus, where a sister corporation is used as a shield to evade a corporationLs subsidiar9 liabilit9 for dama6es, the corporation ma9 not be heard to sa9 that it has a personalit9 separate and distinct from the other corporation. The piercin6 of the corporate veil comes into pla9. This special civil action ostensibl9 raises the ;uestion of whether the #ational +abor "elations Commission committed 6rave abuse of discretion when it issued a NbreaF open orderO to the sheriff to be enforced a6ainst personal propert9 found in the premises of petitionerLs sister compan9. 4etitioner Concept .uilders, ,nc., a domestic corporation, with principal office at ;'' 2a9san "oad, DalenBuela, 2etro 2anila, is en6a6ed in the construction business. 4rivate respondents were emplo9ed b9 said compan9 as laborers, carpenters and ri66ers. 'n #ovember, 1981, private respondents were served individual written notices of termination of emplo9ment b9 petitioner, effective on #ovember 8%, 1981. ,t was stated in the individual notices that their contracts of emplo9ment had e<pired and the proAect in which the9 were hired had been completed. 4ublic respondent found it to be, the fact, however, that at the time of the termination of private respondentLs emplo9ment, the proAect in which the9 were hired had not 9et been finished and completed. 4etitioner had to en6a6e the services of sub contractors whose worFers performed the functions of private respondents. A66rieved, private respondents filed a complaint for ille6al dismissal, unfair labor practice and non pa9ment of their le6al holida9 pa9, overtime pa9 and thirteenth month pa9 a6ainst petitioner. 'n December 19, 1983, the +abor Arbiter rendered Aud6ment 1 orderin6 petitioner to reinstate private respondents and to pa9 them bacF wa6es e;uivalent to one 9ear or three hundred worFin6 da9s. 'n #ovember 27, $%&'# the #ational +abor "elations Commission >#+"C@ dismissed the motion for reconsideration filed b9 petitioner on the 6round that the said decision had alread9 become final and e<ecutor9. 2

'n 'ctober 1$, 198$, the #+"C "esearch and ,nformation Department made the findin6 that private respondentsL bacFwa6es amounted to 4199,8%%.%%.8 'n 'ctober 29, 198$, the +abor Arbiter issued a writ of e<ecution directin6 the sheriff to e<ecute the Decision, dated December 19, 1983. The writ was partiall9 satisfied throu6h 6arnishment of sums from petitionerLs debtor, the 2etropolitan EaterworFs and )ewera6e Authorit9, in the amount of 481,887.83. )aid amount was turned over to the cashier of the #+"C. 'n 1ebruar9 1, 1989, an Alias Erit of (<ecution was issued b9 the +abor Arbiter directin6 the sheriff to collect from herein petitioner the sum of 4117,313.7$, representin6 the balance of the Aud6ment award, and to reinstate private respondents to their former positions. 'n /ul9 18, 1989, the sheriff issued a report statin6 that he tried to serve the alias writ of e<ecution on petitioner throu6h the securit9 6uard on dut9 but the service was refused on the 6round that petitioner no lon6er occupied the premises. 'n )eptember 2$, 198$, upon motion of private respondents, the +abor Arbiter issued a second alias writ of e<ecution. The said writ had not been enforced b9 the special sheriff because, as stated in his pro6ress report, dated #ovember 2, 1989= 1. All the emplo9ees inside petitionerLs premises at ;'' 2a9san "oad, DalenBuela, 2etro 2anila, claimed that the9 were emplo9ees of -9dro 4ipes 4hilippines, ,nc. >-44,@ and not b9 respondent? 2. +ev9 was made upon personal properties he found in the premises? 8. )ecurit9 6uards with hi6h powered 6uns prevented him from removin6 the properties he had levied upon.3 The said special sheriff recommended that a NbreaF open orderO be issued to enable him to enter petitionerLs premises so that he could proceed with the public auction sale of the aforesaid personal properties on #ovember 7, 1989. 'n #ovember $, 1989, a certain Dennis Cu9e6Fen6 filed a third part9 claim with the +abor Arbiter alle6in6 that the properties sou6ht to be levied upon b9 the sheriff were owned b9 -9dro >4hils.@, ,nc. >-44,@ of which he is the Dice 4resident. 'n #ovember 28, 1989, private respondents filed a N2otion for ,ssuance of a .reaF 'pen 'rder,O alle6in6 that -44, and petitioner corporation were owned b9 the same incorporatorS stocFholders. The9 also alle6ed that petitioner temporaril9 suspended its business operations in order to evade its le6al obli6ations to them and that private respondents were willin6 to post an indemnit9 bond to answer for an9 dama6es which petitioner and -44, ma9 suffer because of the issuance of the breaF open order. ,n support of their claim a6ainst -44,, private respondents presented dul9 certified copies of the !eneral ,nformations )heet, dated 2a9 17, 1987, submitted b9 petitioner to the )ecurities and (<chan6e Commission >)(C@ and the !eneral ,nformation )heet, dated 2a9 $'# 1987, submitted b9 -44, to the )ecurities and (<chan6e Commission. The !eneral ,nformation )heet submitted b9 the petitioner1 revealed the followin6=

N1.

.reaFdown of )ubscribed Capital

#ame of )tocFholder Amount )ubscribed -44, Antonio E. +im Dennis ). Cu9e6Fen6 (lisa C. +im Teodulo ". Dino Dir6ilio '. Casino 2. .oard of Directors Chairman 2ember 2ember 2ember 2ember 4$,999,7%%.%% 2,9%%,%%%.%% 8%%.%% 1%%,%%%.%% 1%%.%% 1%%.%%

Antonio E. +im Dennis ). Cu9e6Fen6 (lisa C. +im Teodulo ". Dino Dir6ilio '. Casino 8. Corporate 'fficers

Antonio E. +im Dennis ). Cu9e6Fen6 (lisa %. +im Dir6ilio '. Casino 3. 4rincipal 'ffice

4resident Assistant to the 4resident Treasurer Corporate )ecretar9

877 2a9san "oad DalenBuela, 2etro 2anila.O7 'n the other hand, the !eneral ,nformation )heet of -44, revealed the followin6= N1. .reaFdown of )ubscribed Capital

#ame of )tocFholder Amount )ubscribed Antonio E. +im (lisa C. +im AE+ Tradin6 Dennis ). Cu9e6Fen6 Teodulo ". Dino 43%%,%%%.%% 77,7%%.%% 377,%%%.%% 3%,1%%.%% 1%%.%%

Dir6ilio '. Casino 2. .oard of Directors

1%%.%%

Antonio E. +im (lisa C. +im Dennis ). Cu9e6Fen6 Dir6ilio '. Casino Teodulo ". Dino 8. Corporate 'fficers Antonio E. +im Dennis ). Cu9e6Fen6 (lisa '. +im Dir6ilio '. Casino 3. 4rincipal 'ffice

Chairman 2ember 2ember 2ember 2ember

4resident Assistant to the 4resident Treasurer Corporate )ecretar9

877 2a9san "oad, DalenBuela, 2etro 2anila.O$ 'n 1ebruar9 1, 199%, -44, filed an 'pposition to private respondentsL motion for issuance of a breaF open order, contendin6 that -44, is a corporation which is separate and distinct from petitioner. -44, also alle6ed that the two corporations are en6a6ed in two different Finds of businesses, i.e., -44, is a manufacturin6 firm while petitioner was then en6a6ed in construction. 'n 2arch 2, 199%, the +abor Arbiter issued an 'rder which denied private respondentsL motion for breaF open order. 4rivate respondents then appealed to the #+"C. 'n April 28, 1992, the #+"C set aside the order of the +abor Arbiter, issued a breaF open order and directed private respondents to file a bond. Thereafter, it directed the sheriff to proceed with the auction sale of the properties alread9 levied upon. ,t dismissed the third part9 claim for lacF of merit. 4etitioner moved for reconsideration but the motion was denied b9 the #+"C in a "esolution, dated December 8, 1992. -ence, the resort to the present petition. 4etitioner alle6es that the #+"C committed 6rave abuse of discretion when it ordered the e<ecution of its decision despite a third part9 claim on the levied propert9. 4etitioner further contends, that the doctrine of piercin6 the corporate veil should not have been applied, in this case, in the absence of an9 showin6 that it created -44, in order to evade its liabilit9 to private respondents. ,t also contends that -44, is en6a6ed in the manufacture and sale of steel, concrete and iron pipes, a business which is distinct and separate from petitionerLs construction business. -ence, it is of no conse;uence that petitioner and -44, shared the same premises, the same 4resident and the same set of officers and subscribers. 7 Ee find petitionerLs contention to be unmeritorious.

,t is a fundamental principle of corporation law that a corporation is an entit9 separate and distinct from its stocFholders and from other corporations to which it ma9 be connected. 8 .ut, this separate and distinct personalit9 of a corporation is merel9 a fiction created b9 law for convenience and to promote Austice. 9 )o, when the notion of separate Auridical personalit9 is used to defeat public convenience, Austif9 wron6, protect fraud or defend crime, or is used as a device to defeat the labor laws,1% this separate personalit9 of the corporation ma9 be disre6arded or the veil of corporate fiction pierced. 11 This is true liFewise when the corporation is merel9 an adAunct, a business conduit or an alter e6o of another corporation.12 The conditions under which the Auridical entit9 ma9 be disre6arded var9 accordin6 to the peculiar facts and circumstances of each case. #o hard and fast rule can be accuratel9 laid down, but certainl9, there are some probative factors of identit9 that will Austif9 the application of the doctrine of piercin6 the corporate veil, to wit= N1. 2. 8. 3. )tocF ownership b9 one or common ownership of both corporations. ,dentit9 of directors and officers. The manner of Feepin6 corporate booFs and records. 2ethods of conductin6 the business.O18

The )(C en banc e<plained the Ninstrumentalit9 ruleO which the courts have applied in disre6ardin6 the separate Auridical personalit9 of corporations as follows= <=!ere one corporation is so organi1ed and controlled and its affairs are conducted so t!at it is# in fact# a )ere instru)entality or ad5unct of t!e ot!er# t!e fiction of t!e corporate entity of t!e >instru)entality? )ay be disregarded. 8!e control necessary to invo7e t!e rule is not )a5ority or even co)plete stoc7 control but suc! do)ination of finances# policies and practices t!at t!e controlled corporation !as# so to spea7# no separate )ind# will or existence of its own# and is but a conduit for its principal. It )ust be 7ept in )ind t!at t!e control )ust be s!own to !ave been exercised at t!e ti)e t!e acts co)plained of too7 place. oreover# t!e control and breac! of duty )ust proxi)ately cause t!e in5ury or un5ust loss for w!ic! t!e co)plaint is )ade.@ The test in determinin6 the applicabilit9 of the doctrine of piercin6 the veil of corporate fiction is as follows= <$. 4ontrol# not )ere )a5ority or co)plete stoc7 control# but co)plete do)ination# not only of finances but of policy and business practice in respect to t!e transaction attac7ed so t!at t!e corporate entity as to t!is transaction !ad at t!e ti)e no separate )ind# will or existence of its ownA *. (uc! control )ust !ave been used by t!e defendant to co))it fraud or wrong# to perpetuate t!e violation of a statutory or ot!er positive legal duty# or dis!onest and un5ust act in contravention of plaintiff?s legal rig!tsA and ;. 8!e aforesaid control and breac! of duty )ust proxi)ately cause t!e in5ury or un5ust loss co)plained of. 8!e absence of any one of t!ese ele)ents prevents >piercing t!e corporate veil. > in applying t!e >instru)entality? or >alter ego? doctrine# t!e courts are

concerned wit! reality and not for)# wit! !ow t!e corporation operated and t!e individual defendant?s relations!ip to t!at operation. < 13 Thus, the ;uestion of whether a corporation is a mere alter e6o, a mere sheet or paper corporation, a sham or a subterfu6e is purel9 one of fact.17 ,n this case, the #+"C noted that, while petitioner claimed that it ceased its business operations on April 29, 198$, it filed an ,nformation )heet with the )ecurities and (<chan6e Commission on 2a9 17, 1987, statin6 that its office address is at ;'' 2a9san "oad, DalenBuela, 2etro 2anila. 'n the other hand, -44,, the third part9 claimant, submitted on the same da9, a similar information sheet statin6 that its office address is at ;'' 2a9san "oad, DalenBuela, 2etro 2anila. 1urthermore, the #+"C stated that= <3ot! infor)ation s!eets were filed by t!e sa)e 6irgilio O. 4asino as t!e corporate secretary of bot! corporations. It would also not be a)iss to note t!at bot! corporations !ad t!e sa)e president# t!e sa)e board of directors# t!e sa)e corporate officers# and substantially t!e sa)e subscribers. 2ro) t!e foregoing# it appears t!at# a)ong ot!er t!ings# t!e respondent 9!erein petitioner: and t!e t!ird-party clai)ant s!ared t!e sa)e address andBor pre)ises. Cnder t!is circu)stances# 9sic: it cannot be said t!at t!e property levied upon by t!e s!eriff were not of respondents. 1$ Clearl9, petitioner ceased its business operations in order to evade the pa9ment to private respondents of bacFwa6es and to bar their reinstatement to their former positions. -44, is obviousl9 a business conduit of petitioner corporation and its emer6ence was sFillfull9 orchestrated to avoid the financial liabilit9 that alread9 attached to petitioner corporation. The facts in this case are analo6ous to 4laparols v. 4ourt of Industrial Relations17 where we had the occasion to rule= <Respondent court?s findings t!at indeed t!e 4laparols (teel and Dail .lant# w!ic! ceased operation of /une ;+# $%'"# was (C44EEDED by t!e 4laparols (teel 4orporation effective t!e next day# /uly $# $%'"# up to Dece)ber "# $%E*# w!en t!e latter finally ceased to operate# were not disputed by petitioner. it is very clear t!at t!e latter corporation was a continuation and successor of t!e first entity x x x. 3ot! predecessors and successor were owned and controlled by petitioner Eduardo 4laparols and t!ere was no brea7 in t!e succession and continuity of t!e sa)e business. 8!is >avoidingt!e-liability? sc!e)e is very patent# considering t!at %+F of t!e subscribed s!ares of stoc7 of t!e 4laparols (teel 4orporation 9t!e second corporation: was owned by respondent x x x 4laparols !i)self# and all t!e assets of t!e dissolved 4laparols (teel and Dail .lant were turned over to t!e e)erging 4laparols (teel 4orporation. ,t is ver9 obvious that the second corporation seeFs the protective shield of a corporate fiction whose veil in the present case could, and should, be pierced as it was deliberatel9 and maliciousl9 desi6ned to evade its financial obli6ation to its emplo9ees.O ,n view of the failure of the sheriff, in the case at bar, to effect a lev9 upon the propert9 subAect of the e<ecution, private respondents had no other recourse but to appl9 for a breaF open order after the third part9 claim of -44, was dismissed for lacF of merit b9 the #+"C. This is in

consonance with )ection 8, "ule D,, of the #+"C 2anual of (<ecution of /ud6ment which provides that= <(!ould t!e losing party# !is agent or representative# refuse or pro!ibit t!e (!eriff or !is representative entry to t!e place w!ere t!e property sub5ect of execution is located or 7ept# t!e 5udg)ent creditor )ay apply to t!e 4o))ission or Labor Arbiter concerned for a brea7-open order.@ 1urthermore, our perusal of the records shows that the twin re;uirements of due notice and hearin6 were complied with. 4etitioner and the third part9 claimant were 6iven the opportunit9 to submit evidence in support of their claim. -ence, the #+"C did not commit an9 6rave abuse of discretion when it affirmed the breaF open order issued b9 the +abor Arbiter. 1inall9, we do not find an9 reason to disturb the rule that factual findin6s of ;uasi Audicial a6encies supported b9 substantial evidence are bindin6 on this Court and are entitled to 6reat respect, in the absence of showin6 of 6rave abuse of a discretion.18 :HEREFORE, the petition is D,)2,))(D and the assailed resolutions of the #+"C, dated April 28, 1992 and December 8, 1992, are A11,"2(D. $O ORDERED. .adilla 94!air)an:# 3ellosillo# 6itug# and Gapunan# //.# concur.

3G.R. No. 1158<9. *anuary 2<, 199=7

FIR$T PHI!IPPINE INTERNATIONA! #AN" >For(er+y Pro u6er? #anE o2 )0e P01+1//1ne?A an MERCURIO RI;ERA, petitioners, vs. COURT OF APPEA!$, CAR!O$ E*ERCITO, 1n ?ub?)1)u)1on o2 DEMETRIO DEMETRIA, an *O$E *ANO!O, respondents. DECI$ION PANGANI#AN, J.9 ,n the absence of a formal deed of sale, ma9 commitments 6iven b9 banF officers in an e<chan6e of letters andGor in a meetin6 with the bu9ers constitute a perfected and enforceable contract of sale over 1%1 hectares of land in )ta. "osa, +a6unaQ Does the doctrine of Napparent authorit9O appl9 in this caseQ ,f so, ma9 the Central .anF appointed conservator of 4roducers .anF >now 1irst 4hilippine ,nternational .anF@ repudiate such Napparent authorit9O after said contract has been deemed perfectedQ Durin6 the pendenc9 of a suit for specific performance, does the filin6 of a Nderivative suitO b9 the )a5ority shareholders and directors of the distressed banF to prevent the enforcement or implementation of the sale violate the ban a6ainst forum shoppin6Q )impl9 stated, these are the maAor ;uestions brou6ht before this Court in the instant 4etition for review on certiorari under "ule 37 of the "ules of Court, to set aside the Decision promul6ated /anuar9 13, 1993 of the respondent Court of AppealsJ1K in CA !.". CD #o. 8777$ and the "esolution promul6ated /une 13, 1993 den9in6 the motion for reconsideration. The dispositive portion of the said Decision reads=

NE-("(1'"(, the decision of the lower court is 2'D,1,(D b9 the elimination of the dama6es awarded under para6raphs 8, 3 and $ of its dispositive portion and the reduction of the award in para6raph 7 thereof to 477,%%%.%%, to be assessed a6ainst defendant banF. ,n all other aspects, said decision is hereb9 A11,"2(D. NAll references to the ori6inal plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to le6all9 refer to the plaintiff appellee Carlos C. (Aercito. NCosts a6ainst appellant banF.O The dispositive portion of the trial courtLs J2K decision dated /ul9 1%, 1991, on the other hand, is as follows= NE-("(1'"(, premises considered, Aud6ment is hereb9 rendered in favor of the plaintiffs and a6ainst the defendants as follows= N1. Declarin6 the e<istence of a perfected contract to bu9 and sell over the si< >$@ parcels of land situated at Don /ose, )ta. "osa, +a6una with an area of 1%1 hectares, more or less, covered b9 and embraced in Transfer Certificates of Title #os. T 1%$982 to T 1%$987, inclusive, of the +and "ecords of +a6una, between the plaintiffs as bu9ers and the defendant 4roducers .anF for an a6reed price of 1ive and 'ne -alf 2illion >47,7%%,%%%.%%@ 4esos? N2. 'rderin6 defendant 4roducers .anF of the 4hilippines, upon finalit9 of this decision and receipt from the plaintiffs the amount of 47.7 2illion, to e<ecute in favor of said plaintiffs a deed of absolute sale over the aforementioned si< >$@ parcels of land, and to immediatel9 deliver to the plaintiffs the ownerLs copies of T.C.T. #os. T 1%$982 to T 1%$987, inclusive, for purposes of re6istration of the same deed and transfer of the si< >$@ titles in the names of the plaintiffs? N8. 'rderin6 the defendants, Aointl9 and severall9, to pa9 plaintiffs /ose A. /anolo and Demetrio Demetria the sums of 4 2%%,%%%.%% each in moral dama6es? N3. 'rderin6 the defendants, Aointl9 and severall9, to pa9 plaintiffs the sum of 4 1%%,%%%.%% as e<emplar9 dama6es? N7. 'rderin6 the defendants, Aointl9 and severall9, to pa9 the plaintiffs the amount of 43%%,%%%.%% for and b9 wa9 of attorne9Ls fees? N$. 'rderin6 the defendants to pa9 the plaintiffs, Aointl9 and severall9, actual and moderate dama6es in the amount of 42%,%%%.%%? NEith costs a6ainst the defendants.O After the parties filed their comment, repl9, reAoinder, sur reAoinder and repl9 to sur reAoinder, the petition was 6iven due course in a "esolution dated /anuar9 18, 1997. Thence, the parties filed their respective memoranda and repl9 memoranda. The 1irst Division transferred this case to the Third Division per resolution dated 'ctober 28, 1997. After carefull9 deliberatin6 on the aforesaid submissions, the Court assi6ned the case to the undersi6ned ponente for the writin6 of this Decision. T0e Par)1e?

4etitioner 1irst 4hilippine ,nternational .anF >formerl9 4roducers .anF of the 4hilippines? petitioner .anF, for brevit9@ is a banFin6 institution or6aniBed and e<istin6 under the laws of the "epublic of the 4hilippines. 4etitioner 2ercurio "ivera >petitioner "ivera, for brevit9@ is of le6al a6e and was, at all times material to this case, -ead 2ana6er of the 4ropert9 2ana6ement Department of the petitioner .anF. "espondent Carlos (Aercito >respondent (Aercito, for brevit9@ is of le6al a6e and is the assi6nee of ori6inal plaintiffs appellees Demetrio Demetria and /ose /anolo. "espondent Court of Appeals is the court which issued the Decision and "esolution sou6ht to be set aside throu6h this petition. T0e Fa6)? The facts of this case are summariBed in the respondent CourtLs Decision,J8K as follows= N>1@ ,n the course of its banFin6 operations, the defendant 4roducer .anF of the 4hilippines ac;uired si< parcels of land with a total area of 1%1 hectares located at Don /ose, )ta. "osa, +a6una, and covered b9 Transfer Certificates of Title #os. T 1%$982 to T 1%$987. The propert9 used to be owned b9 .*2( ,nvestment and Development Corporation which had them mort6a6ed with the banF as collateral fora loan. The ori6inal plaintiffs, Demetrio Demetria and /ose '. /anolo, wanted to purchase the propert9 and thus initiated ne6otiations for that purpose. N>2@ ,n the earl9 part of Au6ust 1987 said plaintiffs, upon the su66estion of .*2( ,nvestmentLs le6al counsel, /ose 1aAardo, met with defendant 2ercurio "ivera, 2ana6er of the 4ropert9 2ana6ement Department of the defendant banF. The meetin6 was held pursuant to plaintiffsL plan to bu9 the propert9 >T)# of /an. 1$, 199%, pp. 7 1%@. After the meetin6, plaintiff /anolo, followin6 the advice of defendant "ivera, made a formal purchase offer to the banF throu6h a letter dated Au6ust 8%, 1987 >(<h. N.O@, as follows= August ;+# $%&" 8!e .roducers 3an7 of t!e .!ilippines a7ati# etro anila Attn. r. ercurio Q. Rivera anager# .roperty anage)ent Dept.

0entle)enH I !ave t!e !onor to sub)it )y for)al offer to purc!ase your properties covered by titles listed !ereunder located at (ta. Rosa# Laguna# wit! a total area of $+$ !ectares# )ore or less. 848 DO. AREA $$;#'&+ "+#&%% '*#*,E %E#"E& $&"#$$, ,&$#,&$ sI.). sI.). sI.). sI.). sI.). sI.).

8-$+E%;* 8-$+E%;; 8-$+E%;, 8-$+E%;' 8-$+E%;E 8-$+E%;"

y offer is for .E(O(H 8-REE ILLIOD 2I6E -CDDRED 8-OC(ADD 9.;#'++#+++.++: .E(O(# in cas!. Gindly contact )e at 8elep!one Du)ber %*$-$;,,. N>8@ 'n )eptember 1, 1987, defendant "ivera made on behalf of the banF a formal repl9 b9 letter which is hereunder ;uoted >(<h. NCO@= (epte)ber $# $%&" /-. -. 0C8IERREJ ED8ER.RI(E( $,* 4!aris)a (t.# DoKa Andres II Rosario# .asig# etro anila AttentionH Dear (irH 8!an7 you for your letter-offer to buy our six 9E: parcels of acIuired lots at (ta. Rosa# Laguna 9for)erly owned by 3y)e industrial 4orp.:. .lease be infor)ed !owever t!at t!e ban7?s counter-offer is at .'.' )illion for )ore t!an $+$ !ectares on lot basis. =e s!all be very glad to !ear your position on t!e )atter. 3est regards. N>3@'n )eptember 17, 1987, plaintiff /anolo, respondin6 to "iveraLs afore;uoted repl9, wrote >(<h. (epte)ber $"# $%&" .roducers 3an7 .aseo de Roxas a7ati# etro anila AttentionH 0entle)enH In reply to your letter regarding )y proposal to purc!ase your $+$-!ectare lot located at (ta. Rosa Laguna# I would li7e to a)end )y previous offer and I now propose to buy t!e said lot at .,.*'+ )illion in 4A(-. -oping t!at t!is proposal )eets your satisfaction. N>7@ There was no repl9 to /anoloLs fore6oin6 letter of )eptember 17, 1987. Ehat tooF place was a meetin6 on )eptember 28, 1987 between the plaintiffs and +uis Co, the )enior Dice 4resident of defendant banF. "ivera as well as 1aAardo, the .*2( law9er, attended the meetin6. Two da9s later, or on )eptember 8%, 1987, plaintiff /anolo sent to the banF, throu6h "ivera, the followin6 letter >(<h. N(O@= 8!e .roducers 3an7 of t!e .!ilippines .aseo de Roxas# a7ati etro anila AttentionH ReH r. ercurio Rivera $+$ -ectares of Land in (ta. Rosa# Laguna r. ercurio Rivera /O(E O. /ADOLO Dear (irH

0entle)enH .ursuant to our discussion last *& (epte)ber $%&"# we are pleased to infor) you t!at we are accepting your offer for us to purc!ase t!e property at (ta. Rosa# Laguna# for)erly owned by 3y)e In-vest)ent# for a total price of .E(O(H 2I6E ILLIOD 2I6E -CDDRED 8-OC(ADD 9.'#'++#+++.++:. 8!an7 you. N>$@ 'n 'ctober 12, 1987, the conservator of the banF >which has been placed under conservatorship b9 the Central .anF since 1983@ was replaced b9 an Actin6 Conservator in the person of defendant +eonida T. (ncarnacion. 'n #ovember 3, 1987, defendant "ivera wrote plaintiff Demetria the followin6 letter >(<h. N1O@= AttentionH Dear (irH Lour proposal to buy t!e properties t!e ban7 foreclosed fro) 3y)e Invest)ent 4orp. located at (ta. Rosa# Laguna is under study yet as of t!is ti)e by t!e newly created co))ittee for sub)ission to t!e newly designated Acting 4onservator of t!e ban7. 2or your infor)ation. N>7@ Ehat thereafter transpired was a series of demands b9 the plaintiffs for compliance b9 the banF with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused b9 the banF. As detailed b9 the trial court in its decision, on #ovember 17, 1987, plaintiffs throu6h a letter to defendant "ivera >(<hibit N!O@ tendered pa9ment of the amount of 47.7 million Npursuant to >our@ perfected sale a6reement.O Defendants refused to receive both the pa9ment and the letter. ,nstead, the parcels of land involved in the transaction were advertised b9 the banF for sale to an9 interested bu9er >(<hs. N-O and N1O@. 4laintiffs demanded the e<ecution b9 the banF of the documents on what was considered as a Nperfected a6reement.O Thus= r. ercurio Rivera anager# .roducers 3an7 .aseo de Roxas# a7ati etro anila Dear r. RiveraH Atty. De)etrio De)etria

8!is is in connection wit! t!e offer of our client# r. /ose O. /anolo# to purc!ase your $+$-!ectare lot located in (ta. Rosa# Laguna# and w!ic! are covered by 848 Do. 8-$+E%;* to $+E%;". 2ro) t!e docu)ents at !and# it appears t!at your counter-offer dated (epte)ber $# $%&" of t!is sa)e lot in t!e a)ount of .'.' )illion was accepted by our client t!ru a letter dated (epte)ber ;+# $%&" and was received by you on October '# $%&". In view of t!e above circu)stances# we believe t!at an agree)ent !as been perfected. =e were also infor)ed t!at despite repeated follow-up to consu))ate t!e purc!ase# you now refuse to !onor your co))it)ent. Instead# you !ave advertised for sale t!e sa)e lot to ot!ers.

In be!alf of our client# t!erefore# we are )a7ing t!is for)al de)and upon you to consu))ate and execute t!e necessary actionsBdocu)entation wit!in t!ree 9;: days fro) your receipt !ereof =e are ready to re)it t!e agreed a)ount of .'.' )illion at your advice. Ot!erwise# we s!all be constrained to file t!e necessary court action to protect t!e interest of our client. =e trust t!at you will be guided accordingly. N>8@ Defendant banF, throu6h defendant "ivera, acFnowled6ed receipt of the fore6oin6 letter and stated, in its communication of December 2, 1987 >(<h. N,O@, that said letter has been Nreferred < < < to the office of our Conservator for proper disposition.O -owever, no response came from the Actin6 Conservator. 'n December 13, 1987, the plaintiffs made a second tender of pa9ment >(<hs. N+O and N+ 1O@, this time throu6h the Actin6 Conservator, defendant (ncarnacion. 4laintiffsL letter reads= .RODC4ER( 3ADG O2 8-E .-ILI..IDE( .aseo de Roxas# a7ati# etro anila Attn.H Atty. DIDA ED4ARDA4IOD 4entral 3an7 4onservator 0entle)enH =e are sending you !erewit!# in-be!alf of our client# r. /O(E O. /ADOLO# 384 4!ec7 Do. *'&;&" in t!e a)ount of .'.' )illion as our agreed purc!ase price of t!e $+$-!ectare lot covered by 848 Dos. $+E%;*# $+E%;;# $+E%;,# $+E%;'# $+E%;E and $+E%;" and registered under .roducers 3an7. 8!is is in connection wit! t!e perfected agree)ent conseIuent fro) your offer of .'.' illion as t!e purc!ase price of t!e said lots. .lease infor) us of t!e date of docu)entation of t!e sale i))ediately. Gindly ac7nowledge receipt of our pay)ent. N>9@ The fore6oin6 letter drew no response for more than four months. Then, on 2a9 8, 1988, plaintiff, throu6h counsel, made a final demand for compliance b9 the banF with its obli6ations under the considered perfected contract of sale >(<hibit N#O@. As recounted b9 the trial court >'ri6inal "ecord, p. $7$@, in a repl9 letter dated 2a9 12, 1988 >Anne< N3O of defendantLs answer to amended complaint@, the defendants throu6h Actin6 Conservator (ncarnacion repudiated the authorit9 of defendant "ivera and claimed that his dealin6s with the plaintiffs, particularl9 his counter offer of 47.7 2illion are unauthoriBed or ille6al. 'n that basis, the defendants Austified the refusal of the tenders of pa9ment and the non compliance with the obli6ations under what the plaintiffs considered to be a perfected contract of sale. N>1%@ 'n 2a9 1$, 1988, plaintiffs filed a suit for specific performance with dama6es a6ainst the banF, its 2ana6er "ivera and Actin6 Conservator (ncarnacion. The basis of the suit was that the transaction had with the banF resulted in a perfected contract of sale. The defendants tooF the position that there was no such perfected sale because the defendant "ivera is not authoriBed to sell the propert9, and that there was no meetin6 of the minds as to the price.O

'n 2arch 13, 1991, -enr9 +. Co >the brother of +uis Co@, throu6h counsel )9cip )alaBar -ernandeB and !atmaitan, filed a motion to intervene in the trial court, alle6in6 that as owner of 8%M of the .anFLs outstandin6 shares of stocF, he had a substantial interest in resistin6 the complaint. 'n /ul9 8, 1991, the trial court issued an order den9in6 the motion to intervene on the 6round that it was filed after trial had alread9 been concluded. ,t also denied a motion for reconsideration filed thereafter. 1rom the trial courtLs decision, the .anF, petitioner "ivera and conservator (ncarnacion appealed to the Court of Appeals which subse;uentl9 affirmed with modification the said Aud6ment. -enr9 Co did not appeal the denial of his motion for intervention. ,n the course of the proceedin6s in the respondent Court, Carlos (Aercito was substituted in place of Demetria and /anolo, in view of the assi6nment of the lattersL ri6hts in the matter in liti6ation to said private respondent. 'n /ul9 11, 1992, durin6 the pendenc9 of the proceedin6s in the Court of Appeals, -enr9 Co and several other stocFholders of the .anF, throu6h counsel An6ara Abello Concepcion "e6ala and CruB, filed an action >hereafter, the N)econd CaseO@ purportedl9 a Nderivative suitO with the "e6ional Trial Court of 2aFati, .ranch 183, docFeted as Civil Case #o. 92 1$%$, a6ainst (ncarnacion, Demetria and /anolo Nto declare an9 perfected sale of the propert9 as unenforceable and to stop (Aercito from enforcin6 or implementin6 the sale.OJ3K ,n his answer, /anolo ar6ued that the )econd Case was barred b9 litis pendentia b9 virtue of the case then pendin6 in the Court of Appeals. Durin6 the pre trial conference in the )econd Case, plaintiffs filed a 2otion for +eave of Court to Dismiss the Case Eithout 4reAudice. N4rivate respondent opposed this motion on the 6round, amon6 others, that plaintiffLs act of forum shoppin6 Austifies the dismissal of both cases, with preAudice.OJ7K 4rivate respondent, in his memorandum, averred that this motion is still pendin6 in the 2aFati "TC. ,n their 4etitionJ$K and 2emorandum,J7K petitioners summariBed their position as follows= I. NThe Court of Appeals erred in declarin6 that a contract of sale was perfected between (Aercito >in substitution of Demetria and /anolo@ and the banF. II. NThe Court of Appeals erred in declarin6 the e<istence of an enforceable contract of sale between the parties. III. NThe Court of Appeals erred in declarin6 that the conservator does not have the power to overrule or revoFe acts of previous mana6ement. I;. NThe findin6s and conclusions of the Court of Appeals do not conform to the evidence on record.O 'n the other hand, private respondents pra9ed for dismissal of the instant suit on the 6roundJ8K that=

I. N4etitioners have en6a6ed in forum shoppin6. II. NThe factual findin6s and conclusions of the Court of Appeals are supported b9 the evidence on record and ma9 no lon6er be ;uestioned in this case. III. NThe Court of Appeals correctl9 held that there was a perfected contract between Demetria and /anolo >substituted b9 respondent (Aercito@ and the banF. I;. NThe Court of Appeals has correctl9 held that the conservator, apart from bein6 estopped from repudiatin6 the a6enc9 and the contract, has no authorit9 to revoFe the contract of sale.O T0e I??ue? 1rom the fore6oin6 positions of the parties, the issues in this case ma9 be summed up as follows= 1@ Eas there forum shoppin6 on the part of petitioner .anFQ 2@ Eas there a perfected contract of sale between the partiesQ 8@ Assumin6 there was, was the said contract enforceable under the statute of fraudsQ 3@ Did the banF conservator have the unilateral power to repudiate the authorit9 of the banF officers andGor to revoFe the said contractQ 7@ Did the respondent Court commit an9 reversible error in its findin6s of factsQ T0e F1r?) I??ue9 :a? T0ere Foru(%$0o//1nDF ,n order to prevent the ve<ations of multiple petitions and actions, the )upreme Court promul6ated "evised Circular #o. 28 91 re;uirin6 that a part9 Nmust certif9 under oath < < < JthatK >a@ he has not >t@heretofore commenced an9 other action or proceedin6 involvin6 the same issues in the )upreme Court, the Court of Appeals, or an9 other tribunal or a6enc9? >b@ to the best of his Fnowled6e, no such action or proceedin6 is pendin6O in said courts or a6encies. A violation of the said circular entails sanctions that include the summar9 dismissal of the multiple petitions or complaints. To be sure, petitioners have included a D(",1,CAT,'#GC("T,1,CAT,'# in their 4etition statin6 Nfor the record>,@ the pendenc9 of Civil Case #o. 92 1$%$ before the "e6ional Trial Court of 2aFati, .ranch 183, involvin6 a derivative suit filed b9 stocFholders of petitioner .anF a6ainst the conservator and other defendants but which is the subAect of a pendin6 2otion to Dismiss Eithout 4reAudice.O J9K 4rivate respondent (Aercito vi6orousl9 ar6ues that in spite of this verification, petitioners are 6uilt9 of actual forum shoppin6 because the instant petition pendin6 before this Court involves Nidentical parties or

interests represented, ri6hts asserted and reliefs sou6ht >as that@ currentl9 pendin6 before the "e6ional Trial Court, 2aFati .ranch 183 in the )econd Case. ,n fact, the issues in the two cases are so intertwined that a Aud6ment or resolution in either case will constitute res 5udicata in the other.OJ1%K 'n the other hand, petitioners e<plain J11K that there is no forum shoppin6 because= 1@ ,n the earlier or N1irst CaseO from which this proceedin6 arose, the .anF was impleaded as a defendant, whereas in the N)econd CaseO >assumin6 the .anF is the real part9 in interest in a derivative suit@, it was the plaintiff? 2@ NThe derivative suit is not properl9 a suit for and in behalf of the corporation under the circumstancesO? 8@ Althou6h the C("T,1,CAT,'#GD(",1,CAT,'# >supra@ si6ned b9 the .anF president and attached to the 4etition identifies the action as a Nderivative suit,O it Ndoes not mean that it is oneO and N>t@hat is a le6al ;uestion for the courts to decideO? 3@ 4etitioners did not hide the )econd Case as the9 mentioned it in the said D(",1,CAT,'#GC("T,1,CAT,'#. Ee rule for private respondent. To be6in with, forum shoppin6 ori6inated as a concept in private international law,J12K where non resident liti6ants are 6iven the option to choose the forum or place wherein to brin6 their suit for various reasons or e<cuses, includin6 to secure procedural advanta6es, to anno9 and harass the defendant, to avoid overcrowded docFets, or to select a more friendl9 venue. To combat these less than honorable e<cuses, the principle of foru) non conveniens was developed whereb9 a court, in conflicts of law cases, ma9 refuse impositions on its Aurisdiction where it is not the most NconvenientO or available forum and the parties are not precluded from seeFin6 remedies elsewhere. ,n this li6ht, .lacFLs +aw Dictionar9J18K sa9s that forum shoppin6 Noccurs when a part9 attempts to have his action tried in a particular court or Aurisdiction where he feels he will receive the most favorable Aud6ment or verdict.O -ence, accordin6 to Eords and 4hrases, J13K Na liti6ant is open to the char6e of Rforum shoppin6L whenever he chooses a forum with sli6ht connection to factual circumstances surroundin6 his suit, and liti6ants should be encoura6ed to attempt to settle their differences without imposin6 undue e<pense and ve<atious situations on the courts.O ,n the 4hilippines, forum shoppin6 has ac;uired a connotation encompassin6 not onl9 a choice of venues, as it was ori6inall9 understood in conflicts of laws, but also to a choice of remedies. As to the first >choice of venues@, the "ules of Court, for e<ample, allow a plaintiff to commence personal actions Nwhere the defendant or an9 of the defendants resides or ma9 be found, or where the plaintiff or an9 of the plaintiffs resides, at the election of the plaintiffO >"ule 3, )ec. 2 JbK@. As to remedies, a66rieved parties, for e<ample, are 6iven a choice of pursuin6 civil liabilities independentl9 of the criminal, arisin6 from the same set of facts. A passen6er of a public utilit9 vehicle involved in a vehicular accident ma9 sue on culpa contractual, culpa a;uiliana or culpa criminal each remed9 bein6 available independentl9 of the others althou6h he cannot recover more than once.

N,n either of these situations >choice of venue or choice of remed9@, the liti6ant actuall9 shops for a forum of his action. This was the ori6inal concept of the term forum shoppin6. N(ventuall9, however, instead of actuall9 maFin6 a choice of the forum of their actions, liti6ants, throu6h the encoura6ement of their law9ers, file their actions in all available courts, or invoFe all relevant remedies simultaneousl9. This practice had not onl9 resulted to >sic@ conflictin6 adAudications amon6 different courts and conse;uent confusion enimical >sic@ to an orderl9 administration of Austice. ,t had created e<treme inconvenience to some of the parties to the action. NThus, Rforum shoppin6L had ac;uired a different concept which is unethical professional le6al practice. And this necessitated or had 6iven rise to the formulation of rules and canons discoura6in6 or alto6ether prohibitin6 the practice.OJ17K Ehat therefore ori6inall9 started both in conflicts of laws and in our domestic law as a le6itimate device for solvin6 problems has been abused and misused to assure schemin6 liti6ants of dubious reliefs. To avoid or minimiBe this unethical practice of subvertin6 Austice, the )upreme Court, as alread9 mentioned, promul6ated Circular 28 91. And even before that, the Court had proscribed it in the ,nterim "ules and !uidelines issued on/anuar9 11, 1988 and had strucF down in several casesJ1$K the inveterate use of this insidious malpractice. 1orum shoppin6 as Nthe filin6 of repetitious suits in different courtsO has been condemned b9 /ustice Andres ". #arvasa >now Chief /ustice@ in 2inister of #atural "esources, et al. vs. -eirs of 'rval -u6hes, et al., Nas a reprehensible manipulation of court processes and proceedin6s < < <.O J17K Ehen does forum shoppin6 taFe placeQ NThere is forum shoppin6 whenever, as a result of an adverse opinion in one forum, a part9 seeFs a favorable opinion >other than b9 appeal or certiorari@ in another. The principle applies not onl9 with respect to suits filed in the courts but also in connection with liti6ations commenced in the courts while an administrative proceedin6 is pendin6, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative rulin6 and a favorable court rulin6. This is speciall9 so, as in this case, where the court in which the second suit was brou6ht, has no Aurisdiction NJ18K The test for determinin6 whether a part9 violated the rule a6ainst forum shoppin6 has been laid down in the 198$ case of .uan vs. +opeB, J19K also b9 Chief /ustice #arvasa, and that is, forum shoppin6 e<ists where the elements of litis pendentia are present or where a final Aud6ment in one case will amount to res 5udicata in the other, as follows= NThere thus e<ists between the action before this Court and "TC Case #o. 8$ 8$7$8 identit9 of parties, or at least such parties as represent the same interests in both actions, as well as identit9 of ri6hts asserted and relief pra9ed for, the relief bein6 founded on the same facts, and the identit9 on the two precedin6 particulars is such that an9 Aud6ment rendered in the other action, will, re6ardless of which part9 is successful, amount to res ad5udicata in the action under consideration= all the re;uisites, in fine, of auter action pendant.O <<< <<< <<<

NAs alread9 observed, there is between the action at bar and "TC Case #o. 8$ 8$7$8, an identit9 as re6ards parties, or interests represented, ri6hts asserted and relief sou6ht, as well as basis thereof, to a de6ree sufficient to 6ive rise to the 6round for dismissal Fnown as auter action pendant or lis pendens. That same identit9 puts into operation the sanction of twin dismissals Aust mentioned. The application of this sanction will prevent an9 further dela9 in the settlement of the controvers9 which mi6ht ensue from attempts to seeF reconsideration of or to appeal from the 'rder of the "e6ional Trial Court in Civil Case #o. 8$ 8$7$8 promul6ated on /ul9 17, 198$, which dismissed the petition upon 6rounds which appear persuasive.O Conse;uentl9, where a liti6ant >or one representin6 the same interest or person@ sues the same part9 a6ainst whom another action or actions for the alle6ed violation of the same ri6ht and the enforcement of the same relief isGare still pendin6, the defense of litis pendencia in one case is a bar to the others? and, a final Aud6ment in one would constitute res 5udicata and thus would cause the dismissal of the rest. ,n either case, forum shoppin6 could be cited b9 the other part9 as a 6round to asF for summar9 dismissal of the twoJ2%K >or more@ complaints or petitions, and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinar9 action a6ainst the errin6 law9er. Appl9in6 the fore6oin6 principles in the case before us and comparin6 it with the )econd Case, it is obvious that there e<ist identit9 of parties or interests represented, identit9 of ri6hts or causes and identit9 of reliefs sou6ht. Der9 simpl9 stated, the ori6inal complaint in the court a Iuo which 6ave rise to the instant petition was filed b9 the bu9er >herein private respondent and his predecessors in interest@ a6ainst the seller >herein petitioners@ to enforce the alle6ed perfected sale of real estate. 'n the other hand, the complaintJ21K in the )econd Case seeFs to declare such purported sale involvin6 the same real propert9 Nas unenforceable as a6ainst the .anF,O which is the petitioner herein. ,n other words, in the )econd Case, the maAorit9 stocFholders, in representation of the .anF, are seeFin6 to accomplish what the .anF itself failed to do in the ori6inal case in the trial court. ,n brief, the obAective or the relief bein6 sou6ht, thou6h worded differentl9, is the same, namel9, to enable the petitioner .anF to escape from the obli6ation to sell the propert9 to respondent. ,n Danville ariti)e# Inc. vs. 4o))ission on Audit,J22K this Court ruled that the filin6 b9 a part9 of two apparentl9 different actions, but with the sa)e ob5ective, constituted forum shoppin6= N,n the attempt to maFe the two actions appear to be different, petitioner impleaded different respondents therein 4#'C in the case before the lower court and the C'A in the case before this Court and sou6ht what seems to be different reliefs. 4etitioner asFs this Court to set aside the ;uestioned letter directive of the C'A dated 'ctober 1%, 1988 and to direct said bod9 to approve the 2emorandum of A6reement entered into b9 and between the 4#'C and petitioner, while in the complaint before the lower court petitioner seeFs to enAoin the 4#'C from conductin6 a rebiddin6 and from sellin6 to other parties the vessel NTGT Andres .onifacio,O and for an e<tension of time for it to compl9 with the para6raph 1 of the memorandum of a6reement and dama6es. One can see t!at alt!oug! t!e relief prayed for in t!e two 9*: actions are ostensibly different# t!e ulti)ate ob5ective in bot! actions is t!e sa)e# t!at is# t!e approval of t!e sale of vessel in favor of petitioner# and to overturn t!e letter-directive of t!e 4OA of October $+# $%&& disapproving t!e sale.@>italics supplied@

,n an earlier case,J28K but with the same lo6ic and vi6or, we held= N,n other words, the filin6 b9 the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendenc9 of their action in the 2aFati "e6ional Trial Court, is a species of forum shoppin6. .oth actions un;uestionabl9 involve the same transactions, the same essential facts and circumstances. The petitionersL claim of absence of identit9 simpl9 because the 4C!! had not been impleaded in the "TC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. ,n the "TC action, as in the action before this Court, the validit9 of the contract to purchase and sell of )eptember 1, 198$, i.e., whether or not it had been efficaciousl9 rescinded, and the propriet9 of implementin6 the same >b9 pa9in6 the pled6ee banFs the amount of their loans, obtainin6 the release of the pled6ed shares, etc.@ were the basic issues. )o, too, the relief was the same= the prevention of such implementation andGor the restoration of the status Iuo ante. Ehen the acts sou6ht to be restrained tooF place an9wa9 despite the issuance b9 the Trial Court of a temporar9 restrainin6 order, the "TC suit did not become functus oflcio. ,t remained an effective vehicle for obtention of relief? and petitionersL remed9 in the premises was plain and patent= the filin6 of an amended and supplemental pleadin6 in the "TC suit, so as to include the 4C!! as defendant and seeF nullification of the acts sou6ht to be enAoined but nonetheless done. The remed9 was certainl9 not the institution of another action in another forum based on essentiall9 the same facts. The adoption of this latter recourse renders the petitioners amenable to disciplinar9 action and both their actions, in this Court as well as in the Court a Iuo, dismissible.O ,n the instant case before us, there is also identit9 of parties, or at least, of interests represented. Althou6h the plaintiffs in the )econd Case >-enr9 +. Co. et al.@ are not name parties in the 1irst Case, the9 represent the same interest and entit9, namel9, petitioner .anF, because= 2irstly, the9 are not suin6 in their personal capacities, for the9 have no direct personal interest in the matter in controvers9. The9 are not principall9 or even subsidiaril9 liable? much less are the9 direct parties in the assailed contract of sale? and (econdly, the alle6ations of the complaint in the )econd Case show that the stocFholders are brin6in6 a Nderivative suit.O ,n the caption itself, petitioners claim to have brou6ht suit Nfor and in behalf of the 4roducers .anF of the 4hilippines.OJ23K ,ndeed, this is the ver9 essence of a derivative suit= NAn individual stocFholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stocF in order to protect or vindicate corporate ri6hts, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. ,n such actions, the suin6 stocFholder is re6arded as a nominal part9, with the corporation as the real part9 in interest. >!amboa v. Dictoriano, 9% )C"A 3%, 37 J1979K? italics supplied@. ,n the face of the dama6in6 admissions taFen from the complaint in the )econd Case, petitioners, ;uite stran6el9, sou6ht to den9 that the )econd Case was a derivative suit, reasonin6 that it was brou6ht, not b9 the minorit9 shareholders, but b9 -enr9 Co et al., who not onl9 own, hold or control over 8%M of the outstandin6 capital stocF, but also constitute the maAorit9 in the .oard of Directors of petitioner .anF. That bein6 so, then

the9 reall9 represent the .anF. )o, whether the9 sued Nderivativel9O or directl9, there is undeniabl9 an identit9 of interestsGentit9 represented. 4etitioner also tried to seeF refu6e in the corporate fiction that the personalit9 of the .anF is separate and distinct from its shareholders. .ut the rulin6s of this Court are consistent= NEhen the fiction is ur6ed as a means of perpetratin6 a fraud or an ille6al act or as a vehicle for the evasion of an e<istin6 obli6ation, the circumvention of statutes, the achievement or perfection of a monopol9 or 6enerall9 the perpetration of Fnaver9 or crime, the veil with which the law covers and isolates the corporation from the members or stocFholders who compose it will be lifted to allow for its consideration merel9 as an a66re6ation of individuals.O J27K ,n addition to the man9 cases J2$K where the corporate fiction has been disre6arded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition a6ainst forum shoppin6. )hareholders, whether suin6 as the maAorit9 in direct actions or as the minorit9 in a derivative suit, cannot be allowed to trifle with court processes, particularl9 where, as in this case, the corporation itself has not been remiss in vi6orousl9 prosecutin6 or defendin6 corporate causes and in usin6 and appl9in6 remedies available to it. To rule otherwise would be to encoura6e corporate liti6ants to use their shareholders as fronts to circumvent the strin6ent rules a6ainst forum shoppin6. 1inall9, petitioner .anF ar6ued that there cannot be an9 forum shoppin6, even assumin6 arguendo that there is identit9 of parties, causes of action and reliefs sou6ht, Nbecause it >the .anF@ was the defendant in the >first@ case while it was the plaintiff in the other >)econd Case@,O citin6 as authorit9 6ictronics 4o)puters# Inc. vs. Regional 8rial 4ourt# 3ranc! E;# a7ati# etc. et al.,J27K where the Court held= NThe rule has not been e<tended to a defendant who, for reasons Fnown onl9 to him, commences a new action a6ainst the plaintiff instead of filing a responsive pleading in t!e ot!er case settin6 forth therein, as causes of action, specific denials, special and affirmative defenses or even counterclaims. Thus, Delha6enLs and 5in6Ls motion to dismiss Civil Case #o. 91 2%$9 b9 no means ne6ates the char6e of forum shoppin6 as such did not e<ist in the first place.O >italics supplied@ 4etitioner pointed out that since it was merel9 the defendant in the ori6inal case, it could not have chosen the forum in said case. "espondent, on the other hand, replied that there is a difference in factual settin6 between 6ictronics and the present suit. ,n the former, as underscored in the above ;uoted Court rulin6, the defendants did not file an9 responsive pleading in the first case. ,n other words, the9 did not maFe an9 denial or raise an9 defense or counter claim therein. ,n the case before us however, petitioners filed a responsive pleading to the complaint as a result of which, the issues were Aoined. ,ndeed, b9 pra9in6 for affirmative reliefs and interposin6 counter claims in their responsive pleadin6s, the petitioners became plaintiffs themselves in the ori6inal case, 6ivin6 unto themselves the ver9 remedies the9 repeated in the )econd Case. 0ltimatel9, what is trul9 important to consider in determinin6 whether forum shoppin6 e<ists or not is the ve<ation caused the courts and parties liti6ant b9 a part9 who asFs different courts andGor administrative a6encies to rule on the same or related causes andGor to 6rant the same or substantiall9 the same reliefs, in the process creatin6 the possibilit9 of

conflictin6 decisions bein6 rendered b9 the different fora upon the same issue. ,n this case, this is e<actl9 the problem= a decision reco6niBin6 the perfection and directin6 the enforcement of the contract of sale will directl9 conflict with a possible decision in the )econd Case barrin6 the parties from enforcin6 or implementin6 the said sale. ,ndeed, a final decision in one would constitute res 5udicata in the other.J28K The fore6oin6 conclusion findin6 the e<istence of forum shoppin6 notwithstandin6, the onl9 sanction possible now is the dismissal of both cases with preAudice, as the other sanctions cannot be imposed because petitionersL present counsel entered their appearance onl9 durin6 the proceedin6s in this Court, and the 4etitionLs D(",1,CAT,'#GC("T,1,CAT,'# contained sufficient alle6ations as to the pendenc9 of the )econd Case to show 6ood faith in observin6 Circular 28 91. The law9ers who filed the )econd Case are not before us? thus the rudiments of due process prevent us from )otu propio imposin6 disciplinar9 measures a6ainst them in this Decision. -owever, petitioners themselves >and particularl9 -enr9 Co, et al.@ as liti6ants are admonished to strictl9 follow the rules a6ainst forum shoppin6 and not to trifle with court proceedin6s and processes. The9 are warned that a repetition of the same will be dealt with more severel9. -avin6 said that, let it be emphasiBed that this petition should be dismissed not merel9 because of forum shoppin6 but also because of the substantive issues raised, as will be discussed shortl9. T0e $e6on I??ue9 Was The Contract Perfected?

The respondent Court correctl9 treated the ;uestion of whether or not there was, on the basis of the facts established, a perfected contract of sale as the ultimate issue. -oldin6 that a valid contract has been established, respondent Court stated= NThere is no dispute that the obAect of the transaction is that propert9 owned b9 the defendant banF as ac;uired assets consistin6 of si< >$@ parcels of land specificall9 identified under Transfer Certificates of Title #os. T 1%$982 to T 1%$987. ,t is liFewise be9ond cavil that the banF intended to sell the propert9. As testified to b9 the .anFLs Deput9 Conservator, /ose (ntereso, the banF was looFin6 for bu9ers of the propert9. ,t is definite that the plaintiffs wanted to purchase the propert9 and it was precisel9 for this purpose that the9 met with defendant "ivera, 2ana6er of the 4ropert9 2ana6ement Department of the defendant banF, in earl9 Au6ust 1987. The procedure in the sale of ac;uired assets as well as the nature and scope of the authorit9 of "ivera on the matter is clearl9 delineated in the testimon9 of "ivera himself, which testimon9 was relied upon b9 both the banF and b9 "ivera in their appeal briefs. Thus >T)# of /ul9 8%, 199%. pp. 19 2%@= A= The procedure runs this wa9= Ac;uired assets was turned over to me and then , published it in the form of an inter office memorandum distributed to all branches that these are ac;uired assets for sale. , was instructed to advertise ac;uired assets for sale so on that basis, , have to entertain offer? to accept offer, formal offer and upon havin6 been offered, , present it to the Committee. , provide the Committee with necessar9 information about the propert9 such as ori6inal loan of the borrower, bid price durin6 the foreclosure, total claim of the banF, the appraised value at the time the propert9 is bein6 offered for sale and then the information which are relative to the evaluation of the banF to bu9 which the Committee considers and it is the Committee that evaluate as a6ainst the e<posure of

the banF and it is also the Committee that submit to the Conservator for final approval and once approved, we have to e<ecute the deed of sale and it is the Conservator that si6n the deed of sale, sir. NThe plaintiffs, therefore, at that meetin6 of Au6ust 1987 re6ardin6 their purpose of bu9in6 the propert9, dealt with and talFed to the ri6ht person. #ecessaril9, the a6enda was the price of the propert9, and plaintiffs were dealin6 with the banF official authoriBed to entertain offers, to accept offers and to present the offer to the Committee before which the said official is authoriBed to discuss information relative to price determination. #ecessaril9, too, it bein6 inherent in his authorit9, "ivera is the officer from whom official information re6ardin6 the price, as determined b9 the Committee and approved b9 the Conservator, can be had. And "ivera confirmed his authorit9 when he talFed with the plaintiff in Au6ust 1987. The testimon9 of plaintiff Demetria is clear on this point >T)# of 2a9 81, 199%, pp. 27 28@= H= Ehen 9ou went to the 4roducers .anF and talFed with 2r. 2ercurio "ivera, did 9ou asF him point blanF his authorit9 to sell an9 propert9Q A= #o, sir. #ot point blanF althou6h it came from him. >E@hen , asFed him how lon6 it would taFe because he was sa9in6 that the matter of pricin6 will be passed upon b9 the committee. And when , asFed him how lon6 it will taFe for the committee to decide and he said the committee meets ever9 weeF. ,f , am not mistaFen Eednesda9 and in about two weeFLs >sic@ time, in effect what he was sa9in6 he was not the one who was to decide. .ut he would refer it to the committee and he would rela9 the decision of the committee to me. -e did not sa9 that he had the authorit9>.@ .ut he said he would refer the matter to the committee and he would rela9 the decision to me and he did Aust liFe that.

H= 4lease answer the ;uestion. A=

N4arentheticall9, the Committee referred to was the 4ast Due Committee of which +uis Co was the -ead, with /ose (ntereso as one of the members. NEhat transpired after the meetin6 of earl9 Au6ust 1987 are consistent with the authorit9 and the duties of "ivera and the banFLs internal procedure in the matter of the sale of banFLs assets. As advised b9 "ivera, the plaintiffs made a formal offer b9 a letter dated Au6ust 2%, 1987 statin6 that the9 would bu9 at the price of 48.7 2illion in cash. The letter was for the attention of 2ercurio "ivera who was tasFed to conve9 and accept such offers. Considerin6 an aspect of the official dut9 of "ivera as some sort of intermediar9 between the plaintiffs bu9ers with their proposed bu9in6 price on one hand, and the banF Committee, the Conservator and ultimatel9 the banF itself with the set price on the other, and considerin6 further the discussion of price at the meetin6 of Au6ust resultin6 in a formal offer of 48.7 2illion in cash, there can be no other lo6ical conclusion than that when, on )eptember 1, 1987, "ivera informed plaintiffs b9 letter that Nthe banFLs counter offer is at 47.7 2illion for more than 1%1 hectares on lot basis,O such counter offer price had been determined b9 the 4ast Due Committee and approved b9 the Conservator after "ivera had dul9 presented plaintiffsL offer for discussion b9 the Committee of such matters as ori6inal loan of borrower, bid price durin6 foreclosure, total claim of the banF, and marFet value. Tersel9 put, under the established facts, the price

of 47.7 2illion was, as clearl9 worded in "iveraLs letter >(<h. N(O@, the official and definitive price at which the banF was sellin6 the propert9. NThere were averments b9 defendants below, as well as before this Court, that the 47.7 2illion price was not discussed b9 the Committee and that it was merel9 ;uoted to start ne6otiations re6ardin6 the price. As correctl9 characteriBed b9 the trial court, this is not credible. The testimonies of +uis Co and /ose (ntereso on this point are at best e;uivocal and considerin6 the 6ratuitous and self servin6 character of these declarations, the banFLs submission on this point does not inspire belief. .oth Co and (ntereso, as members of the 4ast Due Committee of the banF, claim that the offer of the plaintiff was never discussed b9 the Committee. ,n the same vein, both Co and (ntereso openl9 admit that the9 seldom attend the meetin6s of the Committee. ,t is important to note that ne6otiations on the price had started in earl9 Au6ust and the plaintiffs had alread9 offered an amount as purchase price, havin6 been made to understand b9 "ivera, the official in char6e of the ne6otiation, that the price will be submitted for approval b9 the banF and that the banFLs decision will be rela9ed to plaintiffs. 1rom the facts, the amount of 47.7 2illion has a definite si6nificance. ,t is the official banF price. At an9 rate, the banF placed its official, "ivera, in a position of authorit9 to accept offers to bu9 and ne6otiate the sale b9 havin6 the offer officiall9 acted upon b9 the banF. The banF cannot turn around and later sa9, as it now does, that what "ivera states as the banFLs action on the matter is not in fact so. ,t is a familiar doctrine, the doctrine of ostensible authorit9, that if a corporation Fnowin6l9 permits one of its officers, or an9 other a6ent, to do acts within the scope of an apparent authorit9, and thus holds him out to the public as possessin6 power to do those acts, the corporation will, as a6ainst an9 one who has in 6ood faith dealt with the corporation throu6h such a6ent, he estopped from den9in6 his authorit9 >1rancisco v. !),), 7 )C"A 777, 788 783? 4#. v. Court of Appeals, 93 )C"A 877, 8$9 87%? 4rudential .anF v. Court of Appeals, !.". #o. 1%8977, /une 13, 1998@.OJ29K Article 1818 of the Civil Code enumerates the re;uisites of a valid and perfected contract as follows= N>1@ Consent of the contractin6 parties? >2@ 'bAect certain which is the subAect matter of the contract? >8@ Cause of the obli6ation which is established.O There is no dispute on re;uisite no. 2. The obAect of the ;uestioned contract consists of the si< >$@ parcels of land in )ta. "osa, +a6una with an a66re6ate area of about 1%1 hectares, more or less, and covered b9 Transfer Certificates of Title #os. T 1%$982 to T 1%$987. There is, however, a dispute on the first and third re;uisites. 4etitioners alle6e that Nthere is no counter offer made b9 the .anF, and an9 supposed counter offer which "ivera >or Co@ ma9 have made is unauthoriBed. )ince there was no counter offer b9 the .anF, there was nothin6 for (Aercito >in substitution of Demetria and /anolo@ to accept.OJ8%K The9 disputed the factual basis of the respondent CourtLs findin6s that there was an offer made b9 /anolo for 48.7 million, to which the .anF counter offered 47.7 million. Ee have perused the evidence but cannot find fault with the said CourtLs findin6s of fact. Deril9, in a petition under "ule 37 such as this, errors of fact if there be an9 are, as a rule, not reviewable. The mere fact that respondent Court >and the trial court as well@ chose to believe the evidence presented b9 respondent more than that presented b9 petitioners is not b9 itself a reversible error. in fact, such findin6s merit serious consideration b9 this Court, particularl9 where, as in

this case, said courts carefull9 and meticulousl9 discussed their findin6s. This is basic. .e that as it ma9, and in addition to the fore6oin6 dis;uisitions b9 the Court of Appeals, let us review the ;uestion of "iveraLs authorit9 to act and petitionerLs alle6ations that the 47.7 million counter offer was e<tin6uished b9 the 43.27 million revised offer of /anolo. -ere, there are ;uestions of law which could be drawn from the factual findin6s of the respondent Court. The9 also delve into the contractual elements of consent and cause. The authorit9 of a corporate officer in dealin6 with third persons ma9 be actual or apparent. The doctrine of Napparent authorit9,O with special reference to banFs, was laid out in 4rudential .anF vs. Court of Appeals, J81K where it was held that= NConformabl9, we have declared in countless decisions that the principal is liable for obli6ations contracted b9 the a6ent. The a6entLs apparent representation 9ields to the principalLs true representation and the contract is considered as entered into between the principal and the third person >citin6 #ational 1ood Authorit9 vs. ,ntermediate Appellate Court, 183 )C"A 1$$@. NA banF is liable for wron6ful acts of its officers done in the interests of the banF or in the course of dealin6s of the officers in their representative capacit9 but not for acts outside the scope of their authorit9 >9 C./.)., p. 317@. A banF holdin6 out its officers and a6ents as worth9 of confidence will not be permitted to profit b9 the frauds the9 ma9 thus be enabled to perpetrate in the apparent scope of their emplo9ment? nor will it be permitted to shirF its responsibilit9 for such frauds, even thou6h no benefit ma9 accrue to the banF therefrom >1% Am /ur 2d, p. 113@. Accordin6l9, a banFin6 corporation is liable to innocent third persons where the representation is made in the course of its business b9 an a6ent actin6 within the 6eneral scope of his authorit9 even thou6h, in the particular case, the a6ent is secretl9 abusin6 his authorit9 and attemptin6 to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit >2c,ntosh v. DaFota Trust Co., 72 #D 772, 2%3 #E 818, 3% A+" 1%21@. NApplication of these principles is especiall9 necessar9 because banFs have a fiduciar9 relationship with the public and their stabilit9 depends on the confidence of the people in their honest9 and efficienc9. )uch faith will be eroded where banFs do not e<ercise strict care in the selection and supervision of its emplo9ees, resultin6 in preAudice to their depositors.O 1rom the evidence found b9 respondent Court, it is obvious that petitioner "ivera has apparent or implied authorit9 to act for the .anF in the matter of sellin6 its ac;uired assets. This evidence includes the followin6= >a@ The petition itself in par. ,, 1 >p. 8@ states that "ivera was Nat all times material to this case, 2ana6er of the 4ropert9 2ana6ement Department of the .anF.O .9 his own admission, "ivera was alread9 the person in char6e of the .anFLs ac;uired assets >T)#, Au6ust $, 199%, pp. 8 9@? >b@ As observed b9 respondent Court, the land was definitel9 bein6 sold b9 the .anF. And durin6 the initial meetin6 between the bu9ers and "ivera, the latter su66ested that the bu9ersL offer should be no less than 48.8 million >T)#, April 2$, 199%, pp. 1$ 17@? >c@ "ivera received the bu9ersL letter dated Au6ust 8%, 1987 offerin6 48.7 million >T)#, 8% /ul9 199%, p. 11@?

>d@ "ivera si6ned the letter dated )eptember 1, 1987 offerin6 to sell the propert9 for 47.7 million >T)#, /ul9 8%, p. 11@? >e@ "ivera received the letter dated )eptember 17, 1987 containin6 the bu9ersL proposal to bu9 the propert9 for 43.27 million >T)#, /ul9 8%, 199%, p. 12@? >f@ "ivera, in a telephone conversation, confirmed that the 47.7 million was the final price of the .anF >T)#, /anuar9 1$, 199%, p. 18@? >6@ "ivera arran6ed the meetin6 between the bu9ers and +uis Co on )eptember 28, 1987, durin6 which the .anFLs offer of 47.7 million was confirmed b9 "ivera >T)#, April 2$, 199%, pp. 83 87@. At said meetin6, Co, a maAor shareholder and officer of the .anF, confirmed "iveraLs statement as to the finalit9 of the .anFLs counter offer of 47.7 million >T)#, /anuar9 1$, 199%, p. 21? T)#, April 2$, 199%, p. 87@? >h@ ,n its newspaper advertisements and announcements, the .anF referred to "ivera as the officer actin6 for the .anF in relation to parties interested in bu9in6 assets ownedGac;uired b9 the .anF. ,n fact, "ivera was the officer mentioned in the .anFLs advertisements offerin6 for sale the propert9 in ;uestion >cf. (<hs. N)O and N) ,O@. ,n the ver9 recent case of +imFetFai )ons 2illin6, ,nc. vs. Court of Appeals, et al.,J82K the Court, throu6h /ustice /ose A. ". 2elo, affirmed the doctrine of apparent authorit9 as it held that the apparent authorit9 of the officer of the .anF of 4.,. in char6e of ac;uired assets is borne out b9 similar circumstances surroundin6 his dealin6s with bu9ers. To be sure, petitioners attempted to repudiate "iveraLs apparent authorit9 throu6h documents and testimon9 which seeF to establish "iveraLs actual authorit9. These pieces of evidence, however, are inherentl9 weaF as the9 consist of "iveraLs self servin6 testimon9 and various inter office memoranda that purport to show his li)ited actual aut!ority, of which private respondent cannot be char6ed with Fnowled6e. ,n an9 event, since the issue is apparent authorit9, the e<istence of which is borne out b9 the respondent CourtLs findin6s, the evidence of actual authorit9 is immaterial insofar as the liabilit9 of a corporation is concerned. J88K 4etitioners also ar6ued that since Demetria and /anolo were e<perienced law9ers and their Nlaw firmO had once acted for the .anF in three criminal cases, the9 should be char6ed with actual Fnowled6e of "iveraLs limited authorit9. .ut the Court of Appeals in its Decision >p. 12@ had alread9 made a factual findin6 that the bu9ers had no notice of "iveraLs actual authorit9 prior to the sale. ,n fact, the .anF has not shown that the9 acted as its counsel in respect to an9 ac;uired assets? on the other hand, respondent has proven that Demetria and /anolo merel9 associated with a loose a66rupation of law9ers >not a professional partnership@, one of whose members >Att9. )usana 4arFer@ acted in said criminal cases. 4etitioners also alle6ed that DemetriaLs and /anoloLs 43.27 million counter offer in the letter dated )eptember 17, 1987 e<tin6uished the .anFLs offer of 47.7 million. J83K The9 disputed the respondent CourtLs findin6 that Nthere was a meetin6 of minds when on 8% )eptember 1987 Demetria and /anolo throu6h Anne< R+L >letter dated )eptember 8%, 1987@ RacceptedL "iveraLs counter offer of 47.7 million under Anne< R/L >letter dated )eptember 17, 1987@,O citin6 the late /ustice 4aras, J87K Art. 1819 of the Civil CodeJ8$K and related )upreme Court rulin6s startin6 with 3eau)ont vs. .rieto.J87K

-owever, the above cited authorities and precedents cannot appl9 in the instant case because, as found b9 the respondent Court which reviewed the testimonies on this point, what was NacceptedO b9 /anolo in his letter dated )eptember 8%, 1987 was the .anFLs offer of 47.7 million as confirmed and reiterated to Demetria and Att9. /ose 1aAardo b9 "ivera and Co durin6 their meetin6 on )eptember 28, 1987. #ote that the said letter of )eptember 8%, 1987 be6ins with N>p@ursuant to our discussion last 28 )eptember 1987 < < <.O 4etitioners insist that the respondent Court should have believed the testimonies of "ivera and Co that the )eptember 28, 1987 meetin6 Nwas meant to have the offerors improve on their position of 47.7 million.OJ88K -owever, both the trial court and the Court of Appeals found petitionersL testimonial evidence Nnot credible,O and we find no basis for chan6in6 this findin6 of fact. ,ndeed, we see no reason to disturb the lower courtsL >both the "TC and the CA@ common findin6 that private respondentsL evidence is more in Feepin6 with truth and lo6ic that durin6 the meetin6 on )eptember 28, 1987, +uis Co and "ivera Nconfirmed that the 47.7 million price has been passed upon b9 the Committee and could no lon6er be lowered >T)# of April 27, 199%, pp. 83 87@.OJ89K -ence, assumin6 arguendo that the counter offer of 43.27 million e<tin6uished the offer of 47.7 million, +uis CoLs reiteration of the said 47.7 million price durin6 the )eptember 28, 1987 meetin6 revived the said offer. And b9 virtue of the )eptember 8%, 1987 letter acceptin6 this revived offer, there was a meetin6 of the minds, as the acceptance in said letter was absolute and un;ualified. Ee note that the .anFLs repudiation, throu6h Conservator (ncarnacion, of "iveraLs authorit9 and action, particularl9 the latterLs counter offer of 47.7 million, as bein6 NunauthoriBed and ille6alO came onl9 on 2a9 12, 1988 or more than seven >7@ months after /anoloLs acceptance. )uch dela9, and the absence of an9 circumstance which mi6ht have Austifiabl9 prevented the .anF from actin6 earlier, clearl9 characteriBes the repudiation as nothin6 more than a last minute attempt on the .anFLs part to 6et out of a bindin6 contractual obli6ation. TaFen to6ether, the factual findin6s of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on )eptember 1, 1987 was carried throu6h durin6 the meetin6 of )eptember 28, 1987. This is the conclusion consistent with human e<perience, truth and 6ood faith. ,t also bears notin6 that this issue of e<tin6uishment of the .anFLs offer Rof 47.7 million was raised for the first time on appeal and should thus be disre6arded. NThis Court in several decisions has repeatedl9 adhered to the principle that points of law, theories, issues of fact and ar6uments not ade;uatel9 brou6ht to the attention of the trial court need not be, and ordinaril9 will not be, considered b9 a reviewin6 court, as the9 cannot be raised for the first time on appeal >)antos vs. ,AC, #o. 73238, #ovember 13, 198$, 137 )C"A 792@.OJ3%K N<<< ,t is settled Aurisprudence that an issue which was neither averred in the complaint nor raised durin6 the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair pla9, Austice and due process >Di!iansan vs. 4A, 178 )C"A 718 J1987K? Anc!uelo vs. IA4, 137 )C"A 383 J1987K? Dulos Realty M

Develop)ent 4orp. vs. 4A, 177 )C"A 327 J1988K? Ra)os vs. IA4, 177 )C"A 7% J1989K? 0evero vs. IA4, !.". 77%29, Au6ust 8%, 199%@.OJ31K )ince the issue was not raised in the pleadin6s as an affirmative defense, private respondent was not 6iven an opportunit9 in the trial court to controvert the same throu6h opposin6 evidence. ,ndeed, this is a matter of due process. .ut we passed upon the issue an9wa9, if onl9 to avoid decidin6 the case on purel9 procedural 6rounds, and we repeat that, on the basis of the evidence alread9 in the record and as appreciated b9 the lower courts, the inevitable conclusion is simpl9 that there was a perfected contract of sale. T0e T01r I??ue9 Is the Contract Enforceable?

The petition alle6ed=J32K N(ven assumin6 that +uis Co or "ivera did rela9 a verbal offer to sell at 47.7 million durin6 the meetin6 of 28 )eptember 1987, and it was this verbal offer that Demetria and /anolo accepted with their letter of 8% )eptember 1987, the contract produced thereb9 would be unenforceable b9 action there bein6 no note, memorandum or writin6 subscribed b9 the .anF to evidence such contract. >4lease see Article 13%8J2K, Civil Code.@O 0pon the other hand, the respondent Court in its Decision >p. 13@ stated= N< < < 'f course, the banFLs letter of )eptember 1, 1987 on the official price and the plaintiffsL acceptance of the price on )eptember 8%, 1987, are not, in themselves, formal contracts of sale. The9 are however clear embodiments of the fact that a contract of sale was perfected between the parties, such contract bein6 bindin6 in whatever form it ma9 have been entered into >case citations omitted@. )tated simpl9, the banFsL letter of )eptember 1, 1987, taFen to6ether with plaintiffsL letter dated )eptember 8%, 1987, constitute in law a sufficient memorandum of a perfected contract of sale.O The respondent Court could have added that the written communications commenced not onl9 from )eptember 1, 1987 but from /anoloLs Au6ust 2%, 1987 letter. Ee a6ree that, taFen to6ether, these letters constitute sufficient memoranda since the9 include the names of the parties, the terms and conditions of the contract, the price and a description of the propert9 as the obAect of the contract. .ut let it be assumed arguendo that the counter offer durin6 the meetin6 on )eptember 28, 1987 did constitute a NnewO offer which was accepted b9 /anolo on )eptember 8%, 1987. )till, the statute of frauds will not appl9 b9 reason of the failure of petitioners to obAect to oral testimon9 provin6 petitioner .anFLs counter offer of 47.7 million. -ence, petitioners b9 such utter failure to obAect are deemed to have waived an9 defects of the contract under the statute of frauds, pursuant to Article 13%7 of the Civil Code= NArt. 13%7. Contracts infrin6in6 the )tatute of 1rauds, referred to in #o. 2 of Article 13%8, are ratified b9 the failure to obAect to the presentation of oral evidence to prove the same, or b9 the acceptance of benefits under them.O As private respondent pointed out in his 2emorandum, oral testimon9 on the reaffirmation of the counter offer of 47.7 million is aplent9 and the

silence of petitioners all throu6hout the presentation maFes the evidence bindin6 on them thus= A *es, sir. , thinF it was )eptember 28, 1987 and , was a6ain present because Att9. Demetria told me to accompan9 him and we were able to meet +uis Co at the .anF. <<< H A H A <<< <<< #ow, what transpired durin6 this meetin6 with +uis Co of the 4roducers .anFQ Att9. Demetria asFed 2r. +uis Co whether the price could be reduced, sir. Ehat priceQ The 7.7 million pesos and 2r. +uis Co said that the amount cited b9 2r. 2ercurio "ivera is the final price and that is the price the9 intends >sic@ to have, sir. Ehat do 9ou meanQ That is the amount the9 want, sir. Ehat is the reaction of the plaintiff Demetria to +uis CoLs statment >sic@ that the defendant "iveraLs counter offer of 7.7 million was the defendantLs banF >sic@ final offerQ -e said in a da9 or two, he will maFe final acceptance, sir. Ehat is the response of 2r. +uis CoQ -e said he will wait for the position of Att9. Demetria, sir.

H A H

A H A

JDirect testimon9 of Att9. /ose 1aAardo, T)#, /anuar9 1$, 199%, at pp. 18 21.K % H A Ehat transpired durin6 that meetin6 between 9ou and 2r. +uis Co of the defendant .anFQ Ee went strai6ht to the point because he bein6 a bus9 person, , told him if the amount of 47.7 million could still be reduced and he said that was alread9 passed upon b9 the committee. Ehat the banF e<pects which was contrar9 to what 2r. "ivera stated. And he told me that is the final offer of the banF 47.7 million and we should indicate our position as soon as possible. Ehat was 9our response to the answer of 2r. +uis CoQ , said that we are 6oin6 to 6ive him our answer in a few da9s and he said that was it. Att9. 1aAardo and , and 2r. 2ercurio J"iveraK was with us at the time at his office. 1or the record, 9our -onor please, will 9ou tell this Court who was with 2r. Co in his 'ffice in 4roducers .anF .uildin6 durin6 this meetin6Q 2r. Co himself, 2r. "ivera, Att9. 1aAardo and ,. .9 2r. Co 9ou are referrin6 toQ 2r. +uis Co. After this meetin6 with 2r. +uis Co, did 9ou and 9our partner accede on >sic@ the counter offer b9 the banFQ

H A

A H A H

*es, sir, we did. Two da9s thereafter we sent our acceptance to the banF which offer we accepted, the offer of the banF which is 47.7 million.O

JDirect testimon9 of Att9. Demetria, T)#, 2$ April 199%, at pp. 83 8$.K % H Accordin6 to Att9. Demetrio Demetria, the amount of 47.7 million was reached b9 the Committee and it is not within his power to reduce this amount. Ehat can 9ou sa9 to that statement that the amount of 47.7 million was reached b9 the CommitteeQ ,t was not discussed b9 the Committee but it was discussed initiall9 b9 +uis Co and the 6roup of Att9. Demetrio Demetria and Att9. 4aAardo >sic@, in that )eptember 28, 1987 meetin6, sir.O

JDirect testimon9 of 2ercurio "ivera, T)#, 8% /ul9 199%, pp. 13 17.K T0e Four)0 I??ue9 May the Conservator Revo e the Perfected and Enforceable Contract? ,t is not disputed that the petitioner .anF was under a conservator placed b9 the Central .anF of the 4hilippines durin6 the time that the ne6otiation and perfection of the contract of sale tooF place. 4etitioners ener6eticall9 contended that the conservator has the power to revoFe or overrule actions of the mana6ement or the board of directors of a banF, under )ection 28 A of "epublic Act #o. 2$7 >otherwise Fnown as the Central .anF Act@ as follows= NEhenever, on the basis of a report submitted b9 the appropriate supervisin6 or e<aminin6 department, the 2onetar9 .oard finds that a banF or a non banF financial intermediar9 performin6 ;uasi banFin6 functions is in a state of continuin6 inabilit9 or unwillin6ness to maintain a state of li;uidit9 deemed ade;uate to protect the interest of depositors and creditors, the 2onetar9 .oard ma9 appoint a conservator to taFe char6e of the assets, liabilities, and the mana6ement of that institution, collect all monies and debts due said institution and e<ercise all powers necessar9 to preserve the assets of the institution, reor6aniBe the mana6ement thereof, and restore its viabilit9. -e shall have the power to overrule or revoFe the actions of the previous mana6ement and board of directors of the banF or non banF financial intermediar9 performin6 ;uasi banFin6 functions, an9 provision of law to the contrar9 notwithstandin6, and such other powers as the 2onetar9 .oard shall deem necessar9.O ,n the first place, this issue of the ConservatorLs alle6ed authorit9 to revoFe or repudiate the perfected contract of sale was raised for the first time in this 4etition as this was not liti6ated in the trial court or Court of Appeals. As alread9 stated earlier, issues not raised andGor ventilated in the trial court, let alone in the Court of Appeals, Ncannot be raised for the first time on appeal as it would be offensive to the basic rules of fair pla9, Austice and due process.OJ38K ,n the second place, there is absolutel9 no evidence that the Conservator, at the time the contract was perfected, actuall9 repudiated or overruled said contract of sale. The .anFLs actin6 conservator at the time, "odolfo "ome9, never obAected to the sale of the propert9 to Demetria and /anolo. Ehat petitioners are reall9 referrin6 to is the letter of Conservator (ncarnacion, who tooF over from "ome9 after the sale was perfected

on )eptember 8%, 1987 >Anne< D, petition@ which unilaterall9 repudiated not the contract but the authorit9 of "ivera to maFe a bindin6 offer and which unar6uabl9 came months after the perfection of the contract. )aid letter dated 2a9 12, 1988 is reproduced hereunder= < ay $*# $%&& <Atty. Doe 4. Jarate Jarate 4arandang .erlas M Ass. (uite ;*; Rufino 3uilding Ayala Avenue# a7ati# etro anila Dear Atty. JarateH 8!is pertains to your letter dated ay '# $%&& on be!alf of Attys. /anolo and De)etria regarding t!e six 9E: parcels of land located at (ta. Rosa# Laguna. =e deny t!at .roducers 3an7 !as ever )ade a legal counter-offer to any of your clients nor perfected a >contract to sell and buy? wit! any of t!e) for t!e following reasons. In t!e >Inter-Office e)orandu)? dated April *'# $%&E addressed to and approved by for)er Acting 4onservator r. Andres I. Rustia# .roducers 3an7 (enior anager .erfecto . .ascua detailed t!e functions of .roperty anage)ent Depart)ent 9. D: staff and officers 9Annex A:# you will i))ediately read t!at anager r. ercurio Rivera or any of !is subordinates !as no aut!ority# power or rig!t to )a7e any alleged counteroffer. In s!ort# your lawyer-clients did not deal wit! t!e aut!ori1ed officers of t!e ban7. oreover# under (ecs. *; and ;E of t!e 4orporation 4ode of t!e .!ilippines 93atas .a)bansa 3lg. E&: and (ec. *&-A of t!e 4entral 3an7 Act 9Rep. Act Do. *E'# as a)ended:# only t!e 3oard of DirectorsB4onservator )ay aut!ori1e t!e sale of any property of t!e corporationBban7. Our records do not s!ow t!at r. Rivera was aut!ori1ed by t!e old board or by any of t!e ban7 conservators 9starting /anuary# $%&,: to sell t!e aforesaid property to any of your clients. Apparently# w!at too7 place were 5ust preli)inary discussionsB consultations between !i) and your clients# w!ic! everyone 7nows cannot bind t!e 3an7?s 3oard or 4onservator. =e are# t!erefore# constrained to refuse any tender of pay)ent by your clients# as t!e sa)e is patently violative of corporate and ban7ing laws. =e believe t!at t!is is )ore t!an sufficient legal 5ustification for refusing said alleged tender. Rest assured t!at we !ave not!ing personal against your clients. All our acts are official# legal and in accordance wit! law. =e also !ave no personal interest in any of t!e properties of t!e 3an7. .lease be advised accordingly. 6ery truly yours# 9(gd.: Leonida 8. Encarnacion LEODIDA 8. ED4ARDA4IOD Acting 4onservator@

,n the third place, while admittedl9, the Central .anF law 6ives vast and far reachin6 powers to the conservator of a banF, it must be pointed out that such powers must be related to the N>preservation of@ the assets of the banF, >the reor6aniBation of@ the mana6ement thereof and >the restoration of@ its viabilit9.O )uch powers, enormous and e<tensive as the9 are, cannot e<tend to the post-facto repudiation of perfected transactions, otherwise the9 would infrin6e a6ainst the non impairment clause of the Constitution. J33K ,f the le6islature itself cannot revoFe an e<istin6 valid contract, how can it dele6ate such non e<istent powers to the conservator under )ection 28 A of said lawQ 'bviousl9, therefore, )ection 28 A merel9 6ives the conservator power to revoFe contracts that are, under e<istin6 law, deemed to be defective i.e., void, voidable, unenforceable or rescissible. -ence, the conservator merel9 taFes the place of a banFLs board of directors. Ehat the said board cannot do such as repudiatin6 a contract validl9 entered into under the doctrine of implied authorit9 the conservator cannot do either. ,neluctabl9, his power is not unilateral and he cannot simpl9 repudiate valid obli6ations of the .anF. -is authorit9 would be onl9 to brin6 court actions to assail such contracts as he has alread9 done so in the instant case. A contrar9 understandin6 of the law would simpl9 not be permitted b9 the Constitution. #either b9 common sense. To rule otherwise would be to enable a failin6 banF to become solvent, at the e<pense of third parties, b9 simpl9 6ettin6 the conservator to unilaterall9 revoFe all previous dealin6s which had one wa9 or another come to be considered unfavorable to the .anF, 9ieldin6 nothin6 to perfected contractual ri6hts nor vested interests of the third parties who had dealt with the .anF. T0e F12)0 I??ue9 Were There Reversible Errors of !act?

.asic is the doctrine that in petitions for review under "ule 37 of the "ules of Court, findin6s of fact b9 the Court of Appeals are not reviewable b9 the )upreme Court. ,n Andres vs. 2anufacturers -anover I Trust Corporation,J37K we held= N< < <. The rule re6ardin6 ;uestions of fact bein6 raised with this Court in a petition for certiorari under "ule 37 of the "evised "ules of Court has been stated in "emalante vs. Tibe, !.". #o. 79713, 1ebruar9 27, 1988, 178 )C"A 188, thus= >8!e rule in t!is 5urisdiction is t!at only Iuestions of law )ay be raised in a petition for certiorari under Rule ,' of t!e Revised Rules of 4ourt.? >8!e 5urisdiction of t!e (upre)e 4ourt in cases broug!t to it fro) t!e 4ourt of Appeals is li)ited to reviewing and revising t!e errors of law i)puted to it# its findings of t!e fact being conclusive? >N4!an vs. 4ourt of Appeals# 0.R. Do. L-*",&&# /une ;+# $%"+# ;; (4RA ";"# reiterating a long line of decisionsO. 8!is 4ourt !as e)p!atically declared t!at? >it is not t!e function of t!e (upre)e 4ourt to analy1e or weig! suc! evidence all over again# its 5urisdiction being li)ited to reviewing errors of law t!at )ig!t !ave been co))itted by t!e lower court? 98iongco v. De la erced# 0.R. Do. L*,,*E# /uly *'# $%",# '& (4RA &%A 4orona vs. 4ourt of Appeals# 0.R. Do. LE*,&*# April *&# $%&;# $*$ (4RA &E'A 3aniIued vs. 4ourt of Appeals# 0.R. Do. L-,"';$# 2ebruary *+# $%&,# $*" (4RA '%E:.? >3arring# t!erefore# a s!owing t!at t!e findings co)plained of are totally devoid of support in t!e record# or t!at t!ey are so glaringly erroneous as to constitute serious abuse of discretion# suc! findings )ust stand# for t!is 4ourt is not expected or reIuired to exa)ine or contrast t!e oral and docu)entary evidence

sub)itted by t!e parties? >N(anta Ana# /r. vs. -ernande1# 0.R. Do. L$E;%,# Dece)ber $"# $%EE# $& (4RA %";O Nat pp. $,,-$,'.O@ +iFewise, in .ernardo vs. Court of Appeals, J3$K we held= NThe resolution of this petition invites us to closel9 scrutiniBe the facts of the case, relatin6 to the sufficienc9 of evidence and the credibilit9 of witnesses presented. This Court so held that it is not the function of the )upreme Court to anal9Be or wei6h such evidence all over a6ain. The )upreme CourtLs Aurisdiction is limited to reviewin6 errors of law that ma9 have been committed b9 the lower court. The )upreme Court is not a trier of facts. < < <O As held in the recent case of Chua Tion6 Ta9 vs. Court of Appeals and !oldrocF Construction and Development Corp.= J37K NThe Court has consistentl9 held that the factual findin6s of the trial court, as well as the Court of Appeals, are final and conclusive and ma9 not be reviewed on appeal. Amon6 the e<ceptional circumstances where a reassessment of facts found b9 the lower courts is allowed are when the conclusion is a findin6 6rounded entirel9 on speculation, surmises or conAectures? when the inference made is manifestl9 absurd, mistaFen or impossible? when there is 6rave abuse of discretion in the appreciation of facts? when the Aud6ment is premised on a misapprehension of facts? when the findin6s went be9ond the issues of the case and the same are contrar9 to the admissions of both appellant and appellee. After a careful stud9 of the case at bench, we find none of the above 6rounds present to Austif9 the re evaluation of the findin6s of fact made b9 the courts below.O ,n the same vein, the rulin6 of this Court in the recent case of )outh )ea )uret9 and ,nsurance Compan9, ,nc. vs. -on. Court of Appeals, et al. J38K is e;uall9 applicable to the present case= NEe see no valid reason to discard the factual conclusions of the appellate court. < < < >,@t is not the function of this Court to assess and evaluate all over a6ain the evidence, testimonial and documentar9, adduced b9 the parties, particularl9 where, such as here, the findin6s of both the trial court and the appellate court on the matter coincide.O >italics supplied@ 4etitioners, however, assailed the respondent CourtLs Decision as Nfrau6ht with findin6s and conclusions which were not onl9 contrar9 to the evidence on record but have no bases at all,O specificall9 the findin6s that >1@ the N.anFLs counter offer price of 47.7 million had been determined b9 the past due committee and approved b9 conservator "ome9, after "ivera presented the same for discussionO and >2@ Nthe meetin6 with Co was not to scale down the price and start ne6otiations anew, but a meetin6 on the alread9 determined price of 47.7 million.O -ence, citin6 4hilippine #ational .anF vs. Court of Appeals, J39K petitioners are asFin6 us to review and reverse such factual findin6s. The first point was clearl9 passed upon b9 the Court of Appeals, J7%K thus= NThere can be no other lo6ical conclusion than that when, on )eptember 1, 1987, "ivera informed plaintiffs b9 letter that Rthe banFLs counter offer is at 47.7 2illion for more than 1%1 hectares on lot basis,L such counter offer price had been determined b9 the 4ast Due Committee and approved b9 the Conservator after "ivera had dul9 presented plaintiffsL offer for discussion b9 the Committee < < <. Tersel9 put, under the established fact, the price of 47.7 2illion was, as clearl9 worded in "iveraLs letter >(<h. R(L@, the official

and definitive price at which the banF was sellin6 the propert9.O >p. 11, CA Decision@ <<< <<< <<<

N<<<. The ar6ument deserves scant consideration. As pointed out b9 plaintiff, durin6 the meetin6 of )eptember 28, 1987 between the plaintiffs, "ivera and +uis Co, the senior vice president of the banF, where the topic was the possible lowerin6 of the price, the banF official refused it and confirmed that the 47.7 2illion price had been passed upon b9 the Committee and could no lon6er be lowered >T)# of April 27, 199%, pp. 83 87@O >p. 17, CA Decision@. The respondent Court did not believe the evidence of the petitioners on this point, characteriBin6 it as Nnot credibleO and Nat best e;uivocal, and considerin6 the 6ratuitous and self servin6 character of these declarations, the banFLs submissions on this point do not inspire belief.O To become credible and une;uivocal, petitioners should have presented then Conservator "odolfo "ome9 to testif9 on their behalf, as he would have been in the best position to establish their thesis. 0nder the rules on evidence,J71K such suppression 6ives rise to the presumption that his testimon9 would have been adverse, if produced. The second point was s;uarel9 raised in the Court of Appeals, but petitionersL evidence was deemed insufficient b9 both the trial court and the respondent Court, and instead, it was respondentLs submissions that were believed and became bases of the conclusions arrived at. ,n fine, it is ;uite evident that the le6al conclusions arrived at from the findin6s of fact b9 the lower courts are valid and correct. .ut the petitioners are now asFin6 this Court to disturb these findin6s to fit the conclusion the9 are espousin6. This we cannot do. To be sure, there are settled e<ceptions where the )upreme Court ma9 disre6ard findin6s of fact b9 the Court of Appeals. J72K Ee have studied both the records and the CA Decision and we find no such e<ceptions in this case. 'n the contrar9, the findin6s of the said Court are supported b9 a preponderance of competent and credible evidence. The inferences and conclusions are reasonabl9 based on evidence dul9 identified in the Decision. ,ndeed, the appellate court patientl9 traversed and dissected the issues presented before it, lendin6 credibilit9 and dependabilit9 to its findin6s. The best that can be said in favor of petitioners on this point is that the factual findin6s of respondent Court did not correspond to petitionersL claims, but were closer to the evidence as presented in the trial court b9 private respondent. .ut this alone is no reason to reverse or i6nore such factual findin6s, particularl9 where, as in this case, the trial court and the appellate court were in common a6reement thereon. ,ndeed, conclusions of fact of a trial Aud6e as affirmed b9 the Court of Appeals are conclusive upon this Court, absent an9 serious abuse or evident lacF of basis or capriciousness of an9 Find, because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to e<amine the real evidence presented. E/1+oDue ,n summar9, there are two procedural issues involved forum shoppin6 and the raisin6 of issues for the first time on appeal JviB., the

e<tin6uishment of the .anFLs offer of 47.7 million and the conservatorLs powers to repudiate contracts entered into b9 the .anFLs officersK which per se could Austif9 the dismissal of the present case. Ee did not limit ourselves thereto, but delved as well into the substantive issues the perfection of the contract of sale and its enforceabilit9, which re;uired the determination of ;uestions of fact. Ehile the )upreme Court is not a trier of facts and as a rule we are not re;uired to looF into the factual bases of respondent CourtLs decisions and resolutions, we did so Aust the same, if onl9 to find out whether there is reason to disturb an9 of its factual findin6s, for we are onl9 too aware of the depth, ma6nitude and vi6or b9 which the parties, throu6h their respective elo;uent counsel, ar6ued their positions before this Court. Ee are not unmindful of the tenacious plea that the petitioner .anF is operatin6 abnormall9 under a 6overnment appointed conservator and Nthere is need to rehabilitate the .anF in order to 6et it bacF on its feet < < < as man9 people depend on >it@ for investments, deposits and well as emplo9ment. As of /une 1987, the .anFLs overdraft with the Central .anF had alread9 reached 41.%28 billion < < < and there were >other@ offers to bu9 the subAect properties for a substantial amount of mone9.O J78K Ehile we do not den9 our s9mpath9 for this distressed banF, at the same time, the Court cannot emotionall9 close its e9es to overridin6 considerations of substantive and procedural law, liFe respect for perfected contracts, non impairment of obli6ations and sanctions a6ainst forum shoppin6, which must be upheld under the rule of law and blind Austice. This Court cannot Aust 6loss over private respondentLs submission that, while the subAect properties ma9 currentl9 command a much hi6her price, it is e;uall9 true that at the time of the transaction in 1987, the price a6reed upon of 47.7 million was reasonable, considerin6 that the .anF ac;uired these properties at a foreclosure sale for no more than 4 8.7 million. J73K That the .anF procrastinated and refused to honor its commitment to sell cannot now be used b9 it to promote its own advanta6e, to enable it to escape its bindin6 obli6ation and to reap the benefits of the increase in land values. To rule in favor of the .anF simpl9 because the propert9 in ;uestion has al6ebraicall9 accelerated in price durin6 the lon6 period of liti6ation is to reward lawlessness and dela9s in the fulfillment of bindin6 contracts. Certainl9, the Court cannot stamp its imprimatur on such outra6eous proposition. :HEREFORE, findin6 no reversible error in the ;uestioned Decision and "esolution, the Court hereb9 D(#,() the petition. The assailed Decision is A11,"2(D. 2oreover, petitioner .anF is "(4",2A#D(D for en6a6in6 in forum shoppin6 and EA"#(D that a repetition of the same or similar acts will be dealt with more severel9. Costs a6ainst petitioners. $O ORDERED. Darvasa# 4./. 94!air)an:# Davide# /r.# elo# and 2rancisco# //.# concur.

"epublic of the 4hilippines $UPREME COURT 2anila )(C'#D D,D,),'# G.R. No. 144812 /une 27, 1999 FRANCI$CO MOTOR$ vs. COURT OF APPEA!$ an $POU$E$ MANUE!, respondents. DECI$ION QCI(C 3ID0# /.H This petition for review on certiorari, under "ule 37 of the "ules of Court, seeFs to annul the decision 1 of the Court of Appeals in C.A. !.". CD #o. 1%%13 affirmin6 the decision rendered b9 .ranch 187, "e6ional Trial Court of 2aFati, 2etro 2anila. The procedural antecedents of this petition are as follows= 'n /anuar9 28, 1987, petitioner filed a complaint 2 a6ainst private respondents to recover three thousand four hundred twelve and si< centavos >48,312.%$@, representin6 the balance of the Aeep bod9 purchased b9 the 2anuels from petitioner? an additional sum of twent9 thousand four hundred fift9 four and ei6ht9 centavos >42%,373.8%@ representin6 the unpaid balance on the cost of repair of the vehicle? and si< thousand pesos >4$,%%%.%%@ for cost of suit and attorne9Ls fees. , To the ori6inal balance on the price of Aeep bod9 were added the costs of repair. < ,n their answer, private respondents interposed a counterclaim for unpaid le6al services b9 !re6orio 2anuel in the amount of fift9 thousand pesos >47%,%%%@ which was not paid b9 the incorporators, directors and officers of the petitioner. The trial court decided the case on /une 2$, 1987, in favor of petitioner in re6ard to the petitionerLs claim for mone9, but also allowed the counter claim of private respondents. .oth parties appealed. 'n April 17, 1991, the Court of Appeals sustained the trial courtLs decision. 5 -ence, the present petition. 1or our review in particular is the propriet9 of the permissive counterclaim which private respondents filed to6ether with their answer to petitionerLs complaint for a sum of mone9. 4rivate respondent !re6orio 2anuel alle6ed as an affirmative defense that, while he was petitionerLs Assistant +e6al CORPORATION, petitioner, GREGORIO an !I#RADA

'fficer, he represented members of the 1rancisco famil9 in the intestate estate proceedin6s of the late .enita Trinidad. -owever, even after the termination of the proceedin6s, his services were not paid. )aid famil9 members, he said, were also incorporators, directors and officers of petitioner. -ence to petitionerLs collection suit, he filed a counter permissive counterclaim for the unpaid attorne9Ls fees. = 1or failure of petitioner to answer the counterclaim, the trial court declared petitioner in default on this score, and evidence ex-parte was presented on the counterclaim. The trial court ruled in favor of private respondents and found that !re6orio 2anuel indeed rendered le6al services to the 1rancisco famil9 in )pecial 4roceedin6s #umber 78%8 T N,n the 2atter of ,ntestate (state of .enita TrinidadO. )aid court also found that his le6al services were not compensated despite repeated demands, and thus ordered petitioner to pa9 him the amount of fift9 thousand >47%,%%%.%%@ pesos. 7 Dissatisfied with the trial courtLs order, petitioner elevated the matter to the Court of Appeals, posin6 the followin6 issues= ,. E-(T-(" '" #'T T-( D(C,),'# "(#D("(D .* T-( +'E(" C'0"T ,) #0++ A#D D',D A) ,T #(D(" ACH0,"(D /0",)D,CT,'# 'D(" T-( 4(")'# '1 T-( D(1(#DA#T. ,,. E-(T-(" '" #'T 4+A,#T,11 A44(++A#T #'T .(,#! A "(A+ 4A"T* ,# T-( A++(!(D 4("2,)),D( C'0#T("C+A,2 )-'0+D .( -(+D +,A.+( T' T-( C+A,2 '1 D(1(#DA#T A44(++((). ,,,. E-(T-(" '" #'T T-("( ,) 1A,+0"( '# T-( 4A"T '1 4+A,#T,11 A44(++A#T T' A#)E(" T-( A++(!(D 4("2,)),D( C'0#T("C+A,2. 8 4etitioner contended that the trial court did not ac;uire Aurisdiction over it because no summons was validl9 served on it to6ether with the cop9 of the answer containin6 the permissive counterclaim. 1urther, petitioner ;uestions the propriet9 of its bein6 made part9 to the case because it was not the real part9 in interest but the individual members of the 1rancisco famil9 concerned with the intestate case. ,n its assailed decision now before us for review, respondent Court of Appeals held that a counterclaim must be answered in ten >1%@ da9s, pursuant to )ection 3, "ule 11, of the "ules of Court? and nowhere does it state in the "ules that a part9 still needed to be summoned anew if a counterclaim was set up a6ainst him. 1ailure to serve summons, said respondent court, did not effectivel9 ne6ate trial courtLs Aurisdiction over petitioner in the matter of the counterclaim. ,t liFewise pointed out that there was no reason for petitioner to be e<cused from answerin6 the counterclaim. Court records showed that its former counsel, #icanor !. AlvareB, received the cop9 of the answer with counterclaim two >2@ da9s prior to his withdrawal as counsel for petitioner. 2oreover when petitionerLs new counsel, /ose #. A;uino, entered his appearance, three >8@ da9s still remained within the period to file an answer to the counterclaim. -avin6 failed to answer, petitioner was correctl9 considered in default b9 the trial court. 9 (ven assumin6 that the trial court ac;uired no Aurisdiction over petitioner, respondent court also said, but havin6 filed a motion for reconsideration seeFin6 relief from the said order of default, petitioner was estopped from further ;uestionin6 the trial courtLs Aurisdiction. 14

'n the ;uestion of its liabilit9 for attorne9Ls fees owin6 to private respondent !re6orio 2anuel, petitioner ar6ued that bein6 a corporation, it should not be held liable therefor because these fees were owed b9 the incorporators, directors and officers of the corporation in their personal capacit9 as heirs of .enita Trinidad. 4etitioner stressed that the personalit9 of the corporation, vis-a-vis the individual persons who hired the services of private respondent, is separate and distinct, 11 hence, the liabilit9 of said individuals did not become an obli6ation char6eable a6ainst petitioner. #evertheless, on the fore6oin6 issue, the Court of Appeals ruled as follows= -owever, this distinct and separate personalit9 is merel9 a fiction created b9 law for convenience and to promote Austice. Accordin6l9, this separate personalit9 of the corporation ma9 be disre6arded, or the veil of corporate fiction pierced, in cases where it is used as a cloaF or cover for found >sic@ ille6alit9, or to worF an inAustice, or where necessar9 to achieve e;uit9 or when necessar9 for the protection of creditors. >)ulo n6 .a9an, ,nc. vs. Araneta, ,nc., 72 )C"A 837@ Corporations are composed of natural persons and the le6al fiction of a separate corporate personalit9 is not a shield for the commission of inAustice and ine;uit9. >Chemple< 4hilippines, ,nc. vs. 4amatian, 77 )C"A 3%8@. ,n the instant case, evidence shows that the plaintiff appellant 1rancisco 2otors Corporation is composed of the heirs of the late .enita Trinidad as directors and incorporators for whom defendant !re6orio 2anuel rendered le6al services in the intestate estate case of their deceased mother. Considerin6 the aforestated principles and circumstances established in this case, e;uit9 and Austice demands plaintiff appellantLs veil of corporate identit9 should be pierced and the defendant be compensated for le6al services rendered to the heirs, who are directors of the plaintiff appellant corporation. 12 #ow before us, petitioner assi6ns the followin6 errors= ,. T-( C'0"T '1 A44(A+) (""(D ,# A44+*,#! T-( D'CT",#( '1 4,("C,#! T-( D(,+ '1 C'"4'"AT( (#T,T*. ,,. T-( C'0"T '1 A44(A+) (""(D ,# A11,"2,#! T-AT T-("( EA) /0",)D,CT,'# 'D(" 4(T,T,'#(" E,T- "()4(CT T' T-( C'0#T("C+A,2. 1, 4etitioner submits that respondent court should not have resorted to piercin6 the veil of corporate fiction because the transaction concerned onl9 respondent !re6orio 2anuel and the heirs of the late .enita Trinidad. Accordin6 to petitioner, there was no cause of action b9 said respondent a6ainst petitioner? personal concerns of the heirs should be distin6uished from those involvin6 corporate affairs. 4etitioner further contends that the present case does not fall amon6 the instances wherein the courts ma9 looF be9ond the distinct personalit9 of a corporation. Accordin6 to petitioner, the services for which respondent !re6orio 2anuel seeFs to collect fees from petitioner are personal in nature. -ence, it avers the heirs should have been sued in their personal capacit9, and not involve the corporation. 1< Eith re6ard to the permissive counterclaim, petitioner also insists that there was no proper service of the answer containin6 the permissive counterclaim. ,t claims that the counterclaim is a separate case which can onl9 be properl9 served upon the opposin6 part9 throu6h summons. 1urther petitioner states that b9 nature, a permissive counterclaim is one which does not arise out of nor is necessaril9 connected with the subAect of the opposin6 part9Ls claim. 4etitioner avers that since there was no service of

summons upon it with re6ard to the counterclaim, then the court did not ac;uire Aurisdiction over petitioner. )ince a counterclaim is considered an action independent from the answer, accordin6 to petitioner, then in effect there should be two simultaneous actions between the same parties= each part9 is at the same time both plaintiff and defendant with respect to the other, 15re;uirin6 in each case separate summonses. ,n their Comment, private respondents focus on the two ;uestions raised b9 petitioner. The9 defend the propriet9 of piercin6 the veil of corporate fiction, but den9 the necessit9 of servin6 separate summonses on petitioner in re6ard to their permissive counterclaim contained in the answer. 4rivate respondents maintain both trial and appellate courts found that respondent !re6orio 2anuel was emplo9ed as assistant le6al officer of petitioner corporation, and that his services were solicited b9 the incorporators, directors and members to handle and represent them in )pecial 4roceedin6s #o. 78%8, concernin6 the ,ntestate (state of the late .enita Trinidad. The9 assert that the members of petitioner corporation tooF advanta6e of their positions b9 not compensatin6 respondent !re6orio 2anuel after the termination of the estate proceedin6s despite his repeated demands for pa9ment of his services. The9 cite findin6s of the appellate court that support piercin6 the veil of corporate identit9 in this particular case. The9 assert that the corporate veil ma9 be disre6arded when it is used to defeat public convenience, Austif9 wron6, protect fraud, and defend crime. ,t ma9 also be pierced, accordin6 to them, where the corporate entit9 is bein6 used as an alter e6o, adAunct, or business conduit for the sole benefit of the stocFholders or of another corporate entit9. ,n these instances, the9 aver, the corporation should be treated merel9 as an association of individual persons. 1= 4rivate respondents dispute petitionerLs claim that its ri6ht to due process was violated when respondentsL counterclaim was 6ranted due course, althou6h no summons was served upon it. The9 claim that no provision in the "ules of Court re;uires service of summons upon a defendant in a counterclaim. 4rivate respondents ar6ue that when the petitioner filed its complaint before the trial court it voluntaril9 submitted itself to the Aurisdiction of the court. As a conse;uence, the issuance of summons on it was no lon6er necessar9. 4rivate respondents sa9 the9 served a cop9 of their answer with affirmative defenses and counterclaim on petitionerLs former counsel, #icanor !. AlvareB. Ehile petitioner would have the Court believe that respondents served said cop9 upon AlvareB after he had withdrawn his appearance as counsel for the petitioner, private respondents assert that this contention is utterl9 baseless. "ecords disclose that the answer was received two >2@ da9s before the former counsel for petitioner withdrew his appearance, accordin6 to private respondents. The9 maintain that the present petition is but a form of dilator9 appeal, to set off petitionerLs obli6ations to the respondents b9 runnin6 up more interest it could recover from them. 4rivate respondents therefore claim dama6es a6ainst petitioner. 17 To resolve the issues in this case, we must first determine the propriet9 of piercin6 the veil of corporate fiction. .asic in corporation law is the principle that a corporation has a separate personalit9 distinct from its stocFholders and from other corporations to which it ma9 be connected. 18 -owever, under the doctrine of piercin6 the veil of corporate entit9, the corporationLs separate Auridical personalit9 ma9 be disre6arded, for e<ample, when the corporate identit9 is used to defeat public convenience, Austif9 wron6, protect fraud, or defend crime. Also, where the corporation is a mere alter e6o or business conduit of a person,

or where the corporation is so or6aniBed and controlled and its affairs are so conducted as to maFe it merel9 an instrumentalit9, a6enc9, conduit or adAunct of another corporation, then its distinct personalit9 ma9 be i6nored. 19 ,n these circumstances, the courts will treat the corporation as a mere a66rupation of persons and the liabilit9 will directl9 attach to them. The le6al fiction of a separate corporate personalit9 in those cited instances, for reasons of public polic9 and in the interest of Austice, will be Austifiabl9 set aside. ,n our view, however, 6iven the facts and circumstances of this case, the doctrine of piercin6 the corporate veil has no relevant application here. "espondent court erred in permittin6 the trial courtLs resort to this doctrine. The rationale behind piercin6 a corporationLs identit9 in a 6iven case is to remove the barrier between the corporation from the persons comprisin6 it to thwart the fraudulent and ille6al schemes of those who use the corporate personalit9 as a shield for undertaFin6 certain proscribed activities. -owever, in the case at bar, instead of holdin6 certain individuals or persons responsible for an alle6ed corporate act, the situation has been reversed. ,t is the petitioner as a corporation which is bein6 ordered to answer for the personal liabilit9 of certain individual directors, officers and incorporators concerned. -ence, it appears to us that the doctrine has been turned upside down because of its erroneous invocation. #ote that accordin6 to private respondent !re6orio 2anuel his services were solicited as counsel for members of the 1rancisco famil9 to represent them in the intestate proceedin6s over .enita TrinidadLs estate. These estate proceedin6s did not involve an9 business of petitioner. #ote also that he sou6ht to collect le6al fees not Aust from certain 1rancisco famil9 members but also from petitioner corporation on the claims that its mana6ement had re;uested his services and he acceded thereto as an emplo9ee of petitioner from whom it could be deduced he was also receivin6 a salar9. -is move to recover unpaid le6al fees throu6h a counterclaim a6ainst 1rancisco 2otors Corporation, to offset the unpaid balance of the purchase and repair of a Aeep bod9 could onl9 result from an obvious misapprehension that petitionerLs corporate assets could be used to answer for the liabilities of its individual directors, officers, and incorporators. )uch result if permitted could easil9 preAudice the corporation, its own creditors, and even other stocFholders? hence, clearl9 ine;uitous to petitioner. 1urthermore, considerin6 the nature of the le6al services involved, whatever obli6ation said incorporators, directors and officers of the corporation had incurred, it was incurred in their personal capacit9. Ehen directors and officers of a corporation are unable to compensate a part9 for a personal obli6ation, it is far fetched to alle6e that the corporation is perpetuatin6 fraud or promotin6 inAustice, and be thereb9 held liable therefor b9 piercin6 its corporate veil. Ehile there are no hard and fast rules on disre6ardin6 separate corporate identit9, we must alwa9s be mindful of its function and purpose. A court should be careful in assessin6 the milieu where the doctrine of piercin6 the corporate veil ma9 be applied. 'therwise an inAustice, althou6h unintended, ma9 result from its erroneous application. The personalit9 of the corporation and those of its incorporators, directors and officers in their personal capacities ou6ht to be Fept separate in this case. The claim for le6al fees a6ainst the concerned individual incorporators, officers and directors could not be properl9 directed a6ainst the corporation without violatin6 basic principles 6overnin6 corporations. 2oreover, ever9 action T includin6 a counterclaim T must be prosecuted or defended in the name of the real part9 in interest. 24 ,t is plainl9 an error

to la9 the claim for le6al fees of private respondent !re6orio 2anuel at the door of petitioner >12C@ rather than individual members of the 1rancisco famil9. -owever, with re6ard to the procedural issue raised b9 petitionerLs alle6ation, that it needed to be summoned anew in order for the court to ac;uire Aurisdiction over it, we a6ree with respondent courtLs view to the contrar9. )ection 3, "ule 11 of the "ules of Court provides that a counterclaim or cross claim must be answered within ten >1%@ da9s from service. #othin6 in the "ules of Court sa9s that summons should first be served on the defendant before an answer to counterclaim must be made. The purpose of a summons is to enable the court to ac;uire Aurisdiction over the person of the defendant. Althou6h a counterclaim is treated as an entirel9 distinct and independent action, the defendant in the counterclaim, bein6 the plaintiff in the ori6inal complaint, has alread9 submitted to the Aurisdiction of the court. 1ollowin6 "ule 9, )ection 8 of the 1997 "ules of Civil 4rocedure, 21 if a defendant >herein petitioner@ fails to answer the counterclaim, then upon motion of plaintiff, the defendant ma9 be declared in default. This is what happened to petitioner in this case, and this Court finds no procedural error in the disposition of the appellate court on this particular issue. 2oreover, as noted b9 the respondent court, when petitioner filed its motion seeFin6 to set aside the order of default, in effect it submitted itself to the Aurisdiction of the court. As well said b9 respondent court= 1urther on the lacF of Aurisdiction as raised b9 plaintiff appellantJ,K JtKhe records show that upon its re;uest, plaintiff appellant was 6ranted time to file a motion for reconsideration of the disputed decision. 4laintiff appellant did file its motion for reconsideration to set aside the order of default and the Aud6ment rendered on the counterclaim. Thus, even if the court ac;uired no Aurisdiction over plaintiff appellant on the counterclaim, as it vi6orousl9 insists, plaintiff appellant is considered to have submitted to the courtLs Aurisdiction when it filed the motion for reconsideration seeFin6 relief from the court. >)oriano vs. 4alacio, 12 )C"A 337@. A part9 is estopped from assailin6 the Aurisdiction of a court after voluntaril9 submittin6 himself to its Aurisdiction. >TeAones vs. !ironella, 179 )C"A 1%%@. (stoppel is a bar a6ainst an9 claims of lacF of Aurisdiction. >.alais vs. .alais, 179 )C"A 87@.22 :HEREFORE, the petition is hereb9 GRANTED and the assailed decision is hereb9 RE;ER$ED insofar onl9 as it held 1rancisco 2otors Corporation liable for the le6al obli6ation owin6 to private respondent !re6orio 2anuel? but this decision is without preAudice to his filin6 the proper suit a6ainst the concerned members of the 1rancisco famil9 in their personal capacit9. #o pronouncement as to costs. $O ORDERED. 3ellosillo# .uno# endo1a and 3uena# //.# concur. ;+% (4RA "* P 3usiness Organi1ation P 4orporation Law P .iercing t!e 6eil of 4orporate 2iction 9Cpside Down: ,n 1987, 1rancisco 2otors Corporation >12C@ sued Att9. !re6orio 2anuel to recover from a him a sum of mone9 in the amount of 428,%%%.%%U. )aid amount was alle6edl9 owed to them b9 2anuel for the purchase of a Aeep bod9 plus repairs thereto. 2anuel filed a counterclaim in the amount of 47%,%%%.%%. ,n his counterclaim, 2anuel alle6ed that he was the Assistant +e6al 'fficer for 12C? that the 1rancisco 1amil9, owners of 12C, en6a6ed his services for the intestate estate proceedin6s of one .enita Trinidad? that he was not paid for his le6al services? that he is filin6 the counterclaim a6ainst 12C because said corporation was merel9 a conduit of the 1rancisco

1amil9. The trial court as well as the Court of Appeals 6ranted 2anuelLs counterclaim on the 6round that the le6al fees were owed b9 the incorporators of 12C >an application of the doctrine of piercin6 the veil of corporation fiction in a reversed manner@. I$$UE9 Ehether or not the doctrine of piercin6 the veil of corporate fiction was properl9 used b9 the Court of Appeals. HE!D9 #o. ,n the first place, the doctrine is to be used in disre6ardin6 corporate fiction and maFin6 the incorporators liable in appropriate circumstances. ,n the case at bar, the doctrine is applied upside down where the corporation is held liable for the personal obli6ations of the incorporators V such was uncalled for and erroneous. ,t must be noted that that Att9. 2anuelLs le6al services were secured b9 the 1rancisco 1amil9 to represent them in the intestate proceedin6s over .enita TrinidadLs estate. The indebtedness was incurred b9 the 1rancisco 1amil9 in their separate and personal capacit9. These estate proceedin6s did not involve an9 business of 12C. The proper remed9 is for 2anuel to sue the concerned members of the 1rancisco 1amil9 in their individual capacit9.

3G.R. No?. 11=12<%25. No@e(ber 22, 24447

#I#IANO O. RE&NO$O, I;, petitioner, vs. HON. COURT OF APPEA!$ an GENERA! CREDIT CORPORATION, respondents. DECI$ION &NARE$%$ANTIAGO, J.9 Assailed in this petition for review is the consolidated decision of the Court of Appeals dated /ul9 7, 1993, which reversed the separate decisions of the "e6ional Trial Court of 4asi6 Cit9 and the "e6ional Trial Court of HueBon Cit9 in two cases between petitioner "e9noso and respondent !eneral Credit Corporation >!CC@. )ometime in the earl9 19$%s, the Commercial Credit Corporation >hereinafter, NCCCO@, a financin6 and investment firm, decided to or6aniBe franchise companies in different parts of the countr9, wherein it shall hold thirt9 percent >8%M@ e;uit9. (mplo9ees of the CCC were desi6nated as resident mana6ers of the franchise companies. 4etitioner .ibiano '. "e9noso, ,D was desi6nated as the resident mana6er of the franchise compan9 in HueBon Cit9, Fnown as the Commercial Credit Corporation of HueBon Cit9 >hereinafter, NCCC HCO@. CCC HC entered into an e<clusive mana6ement contract with CCC whereb9 the latter was 6ranted the mana6ement and full control of the business activities of the former. 0nder the contract, CCC HC shall sell, discount andGor assi6n its receivables to CCC. )ubse;uentl9, however, this discountin6 arran6ement was discontinued pursuant to the so called ND')", "uleO, prohibitin6 the lendin6 of funds b9 corporations to its directors, officers, stocFholders and other persons with related interests therein. 'n account of the new restrictions imposed b9 the Central .anF polic9 b9 virtue of the D')", "ule, CCC decided to form CCC (;uit9 Corporation, >hereinafter, NCCC (;uit9O@, a wholl9 owned subsidiar9, to which CCC transferred its thirt9 >8%M@ percent e;uit9 in CCC HC, to6ether with two seats in the latterLs .oard of Directors. 0nder the new set up, several officials of Commercial Credit Corporation, includin6 petitioner "e9noso, became emplo9ees of CCC (;uit9. Ehile petitioner continued to be the "esident 2ana6er of CCC HC, he drew his salaries and allowances from CCC (;uit9. 1urthermore, althou6h an emplo9ee of CCC (;uit9, petitioner, as well as all emplo9ees of CCC HC, became ;ualified members of the Commercial Credit Corporation (mplo9ees 4ension 4lan. As "esident 2ana6er of CCC HC, petitioner oversaw the operations of CCC HC and supervised its emplo9ees. The business activities of CCC HC pertain to the acceptance of funds from depositors who are issued interest bearin6 promissor9 notes. The amounts deposited are then loaned out to various borrowers. 4etitioner, in order to boost the business activities of CCC HC, deposited his personal funds in the compan9. ,n return, CCC HC issued to him its interest bearin6 promissor9 notes. 'n Au6ust 17, 198%, a complaint for sum of mone9 with preliminar9 attachment,J1K docFeted as Civil Case #o. H 8%788, was instituted in the then Court of 1irst ,nstance of "iBal b9 CCC HC a6ainst petitioner, who had in the meantime been dismissed from his emplo9ment b9 CCC (;uit9. The complaint was subse;uentl9 amended in order to include -idelita #uval, petitionerLs wife, as a part9 defendant. J2K The complaint alle6ed that

petitioner embeBBled the funds of CCC HC amountin6 to 41,8%%,798.11. 'ut of this amount, at least 4$8%,%%%.%% was used for the purchase of a house and lot located at #o. 12 2acopa )treet, Dalle Derde ,, 4asi6 Cit9. The propert9 was mort6a6ed to CCC, and was later foreclosed. ,n his amended Answer, petitioner denied havin6 unlawfull9 used funds of CCC HC and asserted that the sum of 41,8%%,798.11 represented his mone9 placements in CCC HC, as shown b9 twent9 three >28@ checFs which he issued to the said compan9.J8K The case was subse;uentl9 transferred to the "e6ional Trial Court of HueBon Cit9, .ranch 8$, pursuant to the /udiciar9 "eor6aniBation Act of 198%. 'n /anuar9 13, 1987, the trial court rendered its decision, the decretal portion of which states= 4remises considered, the Court finds the complaint without merit. Accordin6l9, said complaint is hereb9 D,)2,))(D. .9 reason of said complaint, defendant .ibiano "e9noso ,D suffered de6radation, humiliation and mental an6uish. 'n the counterclaim, which the Court finds to be meritorious, plaintiff corporation is hereb9 ordered= a@ to pa9 defendant the sum of 4187,%%%.%% plus 13M interest per annum from 'ctober 2, 198% until full9 paid? b@ to pa9 defendant 48,$89,37%.82 plus interest thereon at the rate of 13M per annum from /une 23, 1981, the date of filin6 of Amended Answer, until full9 paid? from this amount ma9 be deducted the remainin6 obli6ation of defendant under the promissor9 note of 'ctober 23, 1977, in the sum of 49,788.%% plus penalt9 at the rate of 1M per month from December 23, 1977 until full9 paid? c@ d@ to pa9 defendants 42%%,%%%.%% as moral dama6es? to pa9 defendants 41%%,%%%.%% as e<emplar9 dama6es?

e@ to pa9 defendants 427,%%%.%% as and for attorne9:s fees? plus costs of the suit. )' '"D("(D. .oth parties appealed to the then ,ntermediate Appellate Court. The appeal of Commercial Credit Corporation of HueBon Cit9 was dismissed for failure to pa9 docFet fees. 4etitioner, on the other hand, withdrew his appeal. -ence, the decision became final and, accordin6l9, a Erit of (<ecution was issued on /ul9 23, 1989.J3K -owever, the Aud6ment remained unsatisfied, J7K promptin6 petitioner to file a 2otion for Alias Erit of (<ecution, (<amination of /ud6ment Debtor, and to .rin6 1inancial "ecords for (<amination to Court. CCC HC filed an 'pposition to petitionerLs motion, J$K alle6in6 that the possession of its premises and records had been taFen over b9 CCC. 2eanwhile, in 1988, CCC became Fnown as the !eneral Credit Corporation.

'n #ovember 22, 1991, the "e6ional Trial Court of HueBon Cit9 issued an 'rder directin6 !eneral Credit Corporation to file its comment on petitionerLs motion for alias writ of e<ecution. J7K!eneral Credit Corporation filed a )pecial Appearance and 'pposition on December 2, 1991, J8K alle6in6 that it was not a part9 to the case, and therefore petitioner should direct his claim a6ainst CCC HC and not !eneral Credit Corporation. 4etitioner filed his repl9,J9K statin6 that the CCC HC is an adAunct instrumentalit9, conduit and a6enc9 of CCC. 1urthermore, petitioner invoFed the decision of the )ecurities and (<chan6e Commission in )(C Case #o. 2781, entitled, <Avelina 0. Ra)oso# et al.# .etitioner versus 0eneral 4redit 4orp.# et al.# Respondents#@ where it was declared that !eneral Credit Corporation, CCC (;uit9 and other franchised companies includin6 CCC HC were declared as one corporation. 'n December 9, 1991, the "e6ional Trial Court of HueBon Cit9 ordered the issuance of an alias writ of e<ecution. J1%K 'n December 2%, 1991, !eneral Credit Corporation filed an 'mnibus 2otion, J11K alle6in6 that )(C Case #o. 2781 was still pendin6 appeal, and maintainin6 that the lev9 on properties of the !eneral Credit Corporation b9 the deput9 sheriff of the court was erroneous. ,n his 'pposition to the 'mnibus 2otion, petitioner insisted that !eneral Credit Corporation is Aust the new name of Commercial Credit Corporation? hence, !eneral Credit Corporation and Commercial Credit Corporation should be treated as one and the same entit9. 'n 1ebruar9 18, 1992, the "e6ional Trial Court of HueBon Cit9 denied the 'mnibus 2otion.J12K 'n 2arch 7, 1992, it issued an 'rder directin6 the issuance of an alias writ of e<ecution. J18K 4reviousl9, on 1ebruar9 21, 1992, !eneral Credit Corporation instituted a complaint before the "e6ional Trial Court of 4asi6 a6ainst .ibiano "e9noso ,D and (d6ardo C. Tanan6co, in his capacit9 as Deput9 )heriff of HueBon Cit9,J13K docFeted as Civil Case #o. $1777, pra9in6 that the lev9 on its parcel of land located in 4asi6, 2etro 2anila and covered b9 Transfer Certificate of Title #o. 2993% be declared null and void, and that defendant sheriff be enAoined from consolidatin6 ownership over the land and from further lev9in6 on other properties of !eneral Credit Corporation to answer for an9 liabilit9 under the decision in Civil Case #o. H 8%788. The "e6ional Trial Court of 4asi6, .ranch 1$7, did not issue a temporar9 restrainin6 order. Thus, !eneral Credit Corporation instituted two >2@ petitions for certiorari with the Court of Appeals, docFeted as CA !.". )4 #o. 27718J17K and CA !.". )4 #o. 27$88. These cases were later consolidated. 'n /ul9 7, 1993, the Court of Appeals rendered a decision in the two consolidated cases, the dispositive portion of which reads= E-("(1'"(, in )4 #o. 27718 we declare the issue of the respondent court:s refusal to issue a restrainin6 order as havin6 been rendered moot b9 our "esolution of 7 April 1992 which, b9 wa9 of inAunctive relief, provided that &the respondents and their representatives are hereb9 enAoined from conductin6 an auction sale >on e<ecution@ of petitioner:s properties as well as initiatin6 similar acts of lev9in6 >upon@ and sellin6 on e<ecution other properties of said petitioner&. The inAunction thus 6ranted, as modified b9 the words in parenthesis, shall remain in force until Civil Case #o. $1777 shall have been finall9 terminated. ,n )4 #o. 27$88, we 6rant the petition for certiorari and accordin6l9 #0++,1* and )(T A),D(, for havin6 been issued in e<cess of Aurisdiction, the 'rder of 18 1ebruar9 1992 in Civil Case #o. H 8%788 as well as an9 other order or

process throu6h which the petitioner is made liable under the Aud6ment in said Civil Case #o. H 8%788. #o dama6es and no costs. )' '"D("(D.J1$K -ence, this petition for review anchored on the followin6 ar6uments= 1. T-( -'#'"A.+( C'0"T '1 A44(A+) (""(D ,# CA !.". )4 #'. 27$88 E-(# ,T #0++,1,(D A#D )(T A),D( T-( 18 1(."0A"* 1992 '"D(" A#D 'T-(" '"D(") '" 4"'C()) '1 ."A#C- 8$ '1 T-( "(!,'#A+ T",A+ C'0"T '1 H0(P'# C,T* T-"'0!- E-,C- !(#("A+ C"(D,T C'"4'"AT,'# ,) 2AD( +,A.+( 0#D(" T-( /0D!2(#T T-AT EA) "(#D("(D ,# C,D,+ CA)( #'. H 8%788. 2. T-( -'#'"A.+( C'0"T '1 A44(A+) (""(D ,# CA !.". )4 #'. 27718 E-(# ,T (#/',#(D T-( A0CT,'# )A+( '# (C(C0T,'# '1 T-( 4"'4("T,() '1 !(#("A+ C"(D,T C'"4'"AT,'# A) E(++ A) ,#,T,AT,#! ),2,+A" ACT) '1 +(D*,#! 04'# A#D )(++,#! '# (C(C0T,'# '1 'T-(" 4"'4("T,() '1 !(#("A+ C"(D,T C'"4'"AT,'#. 8. T-( -'#'"A.+( C'0"T '1 A44(A+) (""(D ,# -'+D,#! T-AT !(#("A+ C"(D,T C'"4'"AT,'# ,) A )T"A#!(" T' C,D,+ CA)( #'. H 8%788, ,#)T(AD '1, D(C+A",#! T-AT C'22("C,A+ C"(D,T C'"4'"AT,'# '1 H0(P'# C,T* ,) T-( A+T(" (!', ,#)T"02(#TA+,T*, C'#D0,T '" AD/0#CT '1 C'22("C,A+ C"(D,T C'"4'"AT,'# A#D ,T) )0CC())'" !(#("A+ C"(D,T C'"4'"AT,'#. At the outset, it must be stressed that there is no lon6er an9 controvers9 over petitionerLs claims a6ainst his former emplo9er, CCC HC, inasmuch as the decision in Civil Case #o. H 8%788 of the "e6ional Trial Court of HueBon Cit9 has lon6 become final and e<ecutor9. The onl9 issue, therefore, to be resolved in the instant petition is whether or not the Aud6ment in favor of petitioner ma9 be e<ecuted a6ainst respondent !eneral Credit Corporation. The latter contends that it is a corporation separate and distinct from CCC HC and, therefore, its properties ma9 not be levied upon to satisf9 the monetar9 Aud6ment in favor of petitioner. ,n short, respondent raises corporate fiction as its defense. -ence, we are necessaril9 called upon to appl9 the doctrine of piercin6 the veil of corporate entit9 in order to determine if !eneral Credit Corporation, formerl9 CCC, ma9 be held liable for the obli6ations of CCC HC. The petition is impressed with merit. A corporation is an artificial bein6 created b9 operation of law, havin6 the ri6ht of succession and the powers, attributes, and properties e<pressl9 authoriBed b9 law or incident to its e<istence. J17K ,t is an artificial bein6 invested b9 law with a personalit9 separate and distinct from those of the persons composin6 it as well as from that of an9 other le6al entit9 to which it ma9 be related.J18K ,t was evolved to maFe possible the a66re6ation and assemblin6 of hu6e amounts of capital upon which bi6 business depends. ,t also has the advanta6e of non dependence on the lives of those who compose it even as it enAo9s certain ri6hts and conducts activities of natural persons. 4recisel9 because the corporation is such a prevalent and dominatin6 factor in the business life of the countr9, the law has to looF carefull9 into the e<ercise of powers b9 these artificial persons it has created.

An9 piercin6 of the corporate veil has to be done with caution. -owever, the Court will not hesitate to use its supervisor9 and adAudicative powers where the corporate fiction is used as an unfair device to achieve an ine;uitable result, defraud creditors, evade contracts and obli6ations, or to shield it from the effects of a court decision. The corporate fiction has to be disre6arded when necessar9 in the interest of Austice. ,n 2irst .!ilippine International 3an7 v. 4ourt of Appeals# et al.# J19K we held= Ehen the fiction is ur6ed as a means of perpetratin6 a fraud or an ille6al act or as a vehicle for the evasion of an e<istin6 obli6ation, the circumvention of statutes, the achievement or perfection of a monopol9 or 6enerall9 the perpetration of Fnaver9 or crime, the veil with which the law covers and isolates the corporation from the members or stocFholders who compose it will be lifted to allow for its consideration merel9 as an a66re6ation of individuals. Also in the above cited case, we stated that this Court has pierced the veil of corporate fiction in numerous cases where it was used, amon6 others, to avoid a Aud6ment credit? J2%K to avoid inclusion of corporate assets as part of the estate of a decedent? J21K to avoid liabilit9 arisin6 from debt? J22K when made use of as a shield to perpetrate fraud andGor confuse le6itimate issues?J28K or to promote unfair obAectives or otherwise to shield them.J23K ,n the appealed Aud6ment, the Court of Appeals sustained respondentLs ar6uments of separateness and its character as a different corporation which is a non part9 or stran6er to this case. The defense of separateness will be disre6arded where the business affairs of a subsidiar9 corporation are so controlled b9 the mother corporation to the e<tent that it becomes an instrument or a6ent of its parent. .ut even when there is dominance over the affairs of the subsidiar9, the doctrine of piercin6 the veil of corporate fiction applies onl9 when such fiction is used to defeat public convenience, Austif9 wron6, protect fraud or defend crime.J27K Ee stated in 8o)as Lao 4onstruction v. Dational Labor Relations 4o))ission#J2$K that the le6al fiction of a corporation bein6 a Audicial entit9 with a distinct and separate personalit9 was envisa6ed for convenience and to serve Austice. Therefore, it should not be used as a subterfu6e to commit inAustice and circumvent the law. 4recisel9 for the above reasons, we 6rant the instant petition. ,t is obvious that the use b9 CCC HC of the same name of Commercial Credit Corporation was intended to publicl9 identif9 it as a component of the CCC 6roup of companies en6a6ed in one and the same business, i.e., investment and financin6. Aside from CCC HueBon Cit9, other franchise companies were or6aniBed such as CCC #orth 2anila and CCC Ca6a9an Dalle9. The or6aniBation of subsidiar9 corporations as what was done here is usuall9 resorted to for the a66rupation of capital, the abilit9 to cover more territor9 and population, the decentraliBation of activities best decentraliBed, and the securin6 of other le6itimate advanta6es. .ut when the mother corporation and its subsidiar9 cease to act in 6ood faith and honest business Aud6ment, when the corporate device is used b9 the parent to avoid its liabilit9 for le6itimate obli6ations of the subsidiar9, and when the corporate fiction is used to perpetrate fraud or promote inAustice, the law steps in to remed9 the problem. Ehen that happens, the corporate character is not necessaril9 abro6ated. ,t continues for le6itimate

obAectives. -owever, it is pierced in order to remed9 inAustice, such as that inflicted in this case. 1actuall9 and le6all9, the CCC had dominant control of the business operations of CCC HC. The e<clusive mana6ement contract insured that CCC HC would be mana6ed and controlled b9 CCC and would not deviate from the commands of the mother corporation. ,n addition to the e<clusive mana6ement contract, CCC appointed its own emplo9ee, petitioner, as the resident mana6er of CCC HC. 4etitionerLs desi6nation as Nresident mana6erO implies that he was placed in CCC HC b9 a superior authorit9. ,n fact, even after his assi6nment to the subsidiar9 corporation, petitioner continued to receive his salaries, allowances, and benefits from CCC, which later became respondent !eneral Credit Corporation. #ot onl9 that. 4etitioner and the other permanent emplo9ees of CCC HC were ;ualified members and participants of the (mplo9ees 4ension 4lan of CCC. There are other indications in the record which attest to the applicabilit9 of the identit9 rule in this case, namel9= the unit9 of interests, mana6ement, and control? the transfer of funds to suit their individual corporate conveniences? and the dominance of polic9 and practice b9 the mother corporation insure that CCC HC was an instrumentalit9 or a6enc9 of CCC. As petitioner stresses, both CCC and CCC HC were en6a6ed in the same principal line of business involvin6 a sin6le transaction process. 0nder their discountin6 arran6ements, CCC financed the operations of CCC HC. The subsidiar9 sold, discounted, or assi6ned its accounts receivables to CCC. The testimon9 of /oselito D. +iwana6, accountant and auditor of CCC since 1971, shows the pervasive and intensive auditin6 function of CCC over CCC HC.J27K The two corporations also shared the same office space. CCC HC had no office of its own. The complaint in Civil Case #o. H 8%788, instituted b9 CCC HC, was even verified b9 the director representative of CCC. The law9ers who filed the complaint and amended complaint were all in house law9ers of CCC. The challen6ed decision of the Court of Appeals states that CCC, now !eneral Credit Corporation, is not a formal part9 in the case. The reason for this is that the complaint was filed b9 CCC HC a6ainst petitioner. The choice of parties was with CCC HC. The Aud6ment award in this case arose from the counterclaim which petitioner set up a6ainst CCC HC. The circumstances which led to the filin6 of the aforesaid complaint are ;uite revealin6. As narrated above, the discountin6 a6reements throu6h which CCC controlled the finances of its subordinates became unlawful when Central .anF adopted the D')", prohibitions. 0nder this rule the directors, officers, and stocFholders are prohibited from borrowin6 from their compan9. ,nstead of adherin6 to the letter and spirit of the re6ulations b9 avoidin6 D')", loans alto6ether, CCC used the corporate device to continue the prohibited practice. CCC or6aniBed still another corporation, the CCC (;uit9 Corporation. -owever, as a wholl9 owned subsidiar9, CCC (;uit9 was in fact onl9 another name for CCC. 5e9 officials of CCC, includin6 the resident mana6ers of subsidiar9 corporations, were appointed to positions in CCC (;uit9. ,n order to circumvent the Central .anFLs disapproval of CCC HCLs mode of reducin6 its D')", lender accounts and its directive to follow Central .anF re;uirements, resident mana6ers, includin6 petitioner, were told to observe a pseudo compliance with the phasin6 out orders. 1or his

unwillin6ness to satisfactoril9 conform to these directives and his reluctance to resort to ille6al practices, petitioner earned the ire of his emplo9ers. (ventuall9, his services were terminated, and criminal and civil cases were filed a6ainst him. 4etitioner issued twent9 three checFs as mone9 placements with CCC HC because of difficulties faced b9 the firm in implementin6 the re;uired phase out pro6ram. 1unds from his current account in the 1ar (ast .anF and Trust Compan9 were transferred to CCC HC. These monies were alle6ed in the criminal complaints a6ainst him as havin6 been stolen. Complaints for ;ualified theft and estafa were brou6ht b9 CCC HC a6ainst petitioner. These criminal cases were later dismissed. )imilarl9, the civil complaint which was filed with the Court of 1irst ,nstance of 4asi6 and later transferred to the "e6ional Trial Court of HueBon Cit9 was dismissed, but his counterclaims were 6ranted. 1aced with the financial obli6ations which CCC HC had to satisf9, the mother firm closed CCC HC, in obvious fraud of its creditors. CCC HC, instead of opposin6 its closure, cooperated in its own demise. Convenientl9, CCC HC stated in its opposition to the motion for alias writ of e<ecution that all its properties and assets had been transferred and taFen over b9 CCC. 0nder the fore6oin6 circumstances, the contention of respondent !eneral Credit Corporation, the new name of CCC, that the corporate fiction should be appreciated in its favor is without merit. 4araphrasin6 the rulin6 in 4laparols v. 4ourt of Industrial Relations# reiterated in 4oncept 3uilders Inc. v. Dational Labor Relations ,J29K it is ver9 obvious that respondent NseeFs the protective shield of a corporate fiction whose veil the present case could, and should, be pierced as it was deliberatel9 and maliciousl9 desi6ned to evade its financial obli6ation of its emplo9ees.O
J28K

,f the corporate fiction is sustained, it becomes a hand9 deception to avoid a Aud6ment debt and worF an inAustice. The decision raised to us for review is an invitation to multiplicit9 of liti6ation. As we stated in Isla)ic Directorate vs. 4ourt of Appeals# J8%K the ends of Austice are not served if further liti6ation is encoura6ed when the issue is determinable based on the records. A court Aud6ment becomes useless and ineffective if the emplo9er, in this case CCC as a mother corporation, is placed be9ond the le6al reach of the Aud6ment creditor who, after protracted liti6ation, has been found entitled to positive relief. Courts have been or6aniBed to put an end to controvers9. This purpose should not be ne6ated b9 an inapplicable and wron6 use of the fiction of the corporate veil. :HEREFORE, the decision of the Court of Appeals is hereb9 "(D(")(D and A),D(. The inAunction a6ainst the holdin6 of an auction sale for the e<ecution of the decision in Civil Case #o. H 8%788 of properties of !eneral Credit Corporation, and the lev9in6 upon and sellin6 on e<ecution of other properties of !eneral Credit Corporation, is +,1T(D. $O ORDERED. Davide# /r.# 4./.# 94!air)an:# .uno# Gapunan# and .ardo# //.# concur.

"e9noso ,D v. CA I !eneral Credit Corporation J837 )C"A 887 >#ov.22, 2%%%@K )eparate /uridical (ntit9

)ufficienc9 of 4roof to 4ierce the Deil of Corporate 1iction 1acts= Commercial Credit Corporation >CCC@, a financin6 I investment firm, decided to or6aniBe franchise companies in different parts of the countr9, wherein it shall hold 8%M e;uit9. (mplo9ees of CCC were desi6nated as resident mana6ers of the franchise companies V .ibiano "e9noso ,D was resident mana6er in CCC HC. Due to the D')", "ule prohibitin6 lendin6 of funds b9 a corporation to its directors, officers, )hare -olders I other persons with related interests therein, CCC decided to form CCC (;uit9 Corporation, a wholl9 owned subsidiar9 to which CCC transferred its 8%M e;uit9 in CCC HC to6ether with 2 seats on the .oD. ,n the new set up, several emplo9ees of CCC became emplo9ees of CCC (;uit9. A complaint for a sum of mone9 was later field b9 CCC HC a6ainst "e9noso, who in the meantime was dismissed from CCC (;uit9, I wife for embeBBlement of funds which were used to bu9 a house in Dalle Derde. "e9noso claims the mone9 he used represented his mone9 placements in CCC HC shown b9 28 checFs he issued to CCC HC. "TC dismissed the case a6ainst "e9noso and found his counterclaim for dama6es to be meritorious hence 6ranted it. 1or failin6 to pa9 the docFet fees, CCC HCLs appeal to the ,AC was dismissed hence the "TC decision became final I e<ecutor9. -owever, the Aud6ment became remained unsatisfied promptin6 "e9noso to file a 2otion for Alias Erit of (<ecution. CCC HC opposed sa9in6 that its premises I records had been taFen over b9 CCC. CCC meanwhile became Fnown as !eneral Credit Corporation. )o, when the "TC ordered !CC to file its comment on the petition of "e9noso, it claimed that it was not a part9 to the case I "e9noso should direct his claim a6ainst CCC HC. "e9noso replied sa9in6 that CCC HC is in adAunct instrumentalit9, conduit I a6enc9 of CCC I invoFed the rulin6 in "amoso v. !CC where the )C declared that !CC, CCC (;uit9 I other franchised companies includin6 CCC HC were declared as 1 corp. "e9noso claimed that !CC is Aust the new name of CCC hence both should be treated as 1 entit9. Cases were filed in the "TC of 4asi6 I HC to lev9 on the properties of !CC. CA on the other hand enAoins the auction sale of the properties. ,ssue= >1@ E'# the piercin6 the veil of corporate fiction was proper. -eld= CA decision reversed and set aside. ,nAunction a6ainst lev9in6 on properties of !CC I their auction sale lifted. The use b9 CCC HC of the same name of Commercial Credit Corporation was intended to publicl9 identif9 it as a component of the CCC 6roup of companies en6a6ed in one I the same business= investment I financin6. Ehen the mother corporation I its subsidiar9 corporations cease to act in 6ood faith and honest business Aud6ment, when the corporate fiction is used to perpetuate fraud or promote inAustice, the law steps in to remed9 the inAustice. The corporate character is not necessaril9 abro6ated. ,t continues for le6itimate obAectives? however pierced, to remed9 inAustices. A court Aud6ment becomes useless I ineffective if the emplo9er, in this case CCC as a mother corporation, is placed be9ond the le6al reach of the Aud6ment creditor who after protracted liti6ation, has been found entitled to positive relief. Courts have been or6aniBed to put an end to controvers9. This should not be ne6ated b9 an inapplicable and wron6 use of the fiction of the corporate veil. The defense of separateness will be disre6arded where the business affairs of a subsidiar9 corporation are so controlled b9 the mother corporation to the e<tent that it becomes an instrument or a6ent of its parent. .ut even when there us dominance over the affairs of the subsidiar9, the doctrine of piercin6 the veil of corporate fiction applies onl9 when used to defeat public convenience, Austif9 wron6, protect fraud, or defend crime.

1actuall9 I le6all9, CCC had dominant control of the business operations of CCC HC= a. the e<clusive mana6ement contract insured that CCC HC would be mana6ed I controlled b9 CCC I not deviate from the commands of the mother corp b. CCC appointed its own emplo9ee as the resident mana6er of CCC HC c. )alaries, pensions, benefits, etc were from CCC, which later became !CC d. 0nit9 of interest, mana6ement, control, intensive auditin6 function of CCC over CCC HC, sharin6 of office space e. +aw9ers of the CCC HC case were all in house counsels of CCC 1,")T D,D,),'#

3G.R. No. 112==1. May ,4, 24417

$IMEON DE !EON, EFREN A#AD, *AIME A#AD, *E$$IE A#A&%A#A&, RO!ANDO A#IO!A, A!ICIO A#I$O, CE!EDONIO A#$A!ON, *EREMIA$ ADO, ;ICENTE ADO, ;ICENTE AGGA#AO, EFRAIN AGUIRRE, A!EGANDER A!ATA, ERNE$TO A!CA!DE, !OREN-O A!CO&, A!MARIO A!ICIO, CE$AR AMADOR, *O$E AMANTE, E$TE!ITO AM#RO$IO, ;ICENTE ANAPI, ARNE! ANCHETA, ROGE!IO ANCHETA, :I!FREDO ANONUE;O, DOMINGO ANTIGRO, MARGARITO ANTIGRO, ROGE!IO AN-ANO, ANTONIO APO$TO!, OR!ANDO A.UINO, *UAN ARCA!A$, #ONIFACIO ARIO!A, EDGAR ARIO!A, #ONIFACIO ARMA$A, FERNANDO #ACCA&, MARIO #ACUD, RUPERTO #ACUDAN, NI!O #A!AG, ARGE! #A!TA-AR, DEMETRIO #ARA&OGA, FE!IG #ARNEDO, F!ORENTINO #ARTE, $ARRI #A$IRU!, MARCE!O #ATANE$, RECTO #A&ONA, ;ICTORIO #ERMUNDO, I$MAE! #ERNA!, !ERIO #ER$A#E, FIDE! #O$E, MARIANO #OTACION, DANI!O #RA-I!, RE&NA!DO #RUNIO, MARIO #UENA;ENTURA, AR$ENIO #U!ATAO, FRANCI$CO #U!ATAO, CAR!O$ CA*ARA, RO$ENDO CAMACHO, RU#EN CAMACHO, NE$TOR CAPI!O$, DOMINGO CA$TRO, MAGIMIANO DE CA$TO, EDINO CA$TUERA, -A!D& CERDON, ANTONIO DERU*ANO, ;ICTOR CIPRIANO, *UANITO CORPU-, A!FREDO CRU-, FERNANDO DE!A CRU-, MARIO CU$TOPA&, RO$AURO CU$TODIO, FRAN"!IN CU$TODIO, A!FREDO DAPRO-A, RENATO DA;AG, NOE! DEMINGO&, GENE DIE$TRO, E$TE#AN DION$ON, RAMON DI-A, *EREMIA$ DOROMA!, MANUE! EDATO, FERNANDO EDORA, CONRADO ENRI.UE-, NICOMEDE- ENRI.UE-, RO!ITO E$PIE!, !AURO E$PANO!, NONITO E$P!ANA, E!PIDIO E$PANO!, DIO!ITO E$TOPERE-, ODI!ON EU$TE, HENR& FACTOR, ;IRGI!IO FA;ORITO, ARI$TOT!E FERNANDE-, RODOF!O FORMA!E*O, *UNE FU!A&, RUI$ FUTO!, *E$U$ GA#A, RODRIGO GA#AT, RO$A!IA GA#AT, C!EMENTE GA$PAR, RODRIGO GA;IO!A, E!!EN GODE!O$ON, $A!;ADOR GUE!A, EDUARDO GU-MAN, #A!TA-AR DE GU-MAN, -O$IMO DE GU-MAN, RE&AN!DO HAGUIRING, CAR!O$ GINDAP, #ERNARDINO GIPIT, :I!FREDO HERNANDE-, IMMANUE! I#RING, PEPITO IMPERIO, MAGTANGGO! IN$ORIO, RODE!&N *ACUNTO, MARIO *ARAPAN, MAGIMO *IMENE-, A!E*ANDRO *UD!OMAN, *UAN !AOAGAN, DANTE !ARIO$A, E!INO !A$AGA, *O$EPH !EGA$PINA, -O$IMO

!EPA!AM, #EN*AMIN !I#AN, EFREN !IGUE, C!ETO !INGA, ROMEO !!AGA$, !UCIO !!ARENA, A!FREDO !OPE-, FE!IG !OPE-, $ANTO$ !OPE-, RU#EN !OREN-O, NI!O !UGANA, CANCIO MAATU#ANG, ANTONIO MACA$IO, RO#ERTO MACATUNGGA!, ;IRGI!IO MACA!INAO, RAMON MACO&, *O$E MAGA!ONA, A!E*O MANAGUE!OD, DOMINGO MANA!O, EMI!IANO MANA!O, $U!PICIO MANTA!A#A, EDITO MANUE!, ROMU!O MANUE!, FE!INO MARANA, CAR!ITO MARGA*A, ROMARE$ MARIANO, CERME!O MARTINE-, MODE$TO MA$U!IT, A!MA MATU$A!EM, F!A;IANO MEDE!, DO!CIANO MEDINA, DO!ORO$A MEDINA, NOR!INDO ME*ARITO, PEDRITO MENDO-A, GUARDITO MERANO, A!#ERTO DE ME$A, CHAR!IE MINANO, *O$E MONTERO$O, RO$ENDO MORA!E$, CE$AR NARDA, DOMINADOR NAGA!, EDEMIO NARI$MA, DINI$IO NA;A$CA, REGINO NEPICON, *R., *E$$IE CRI$ NI!O, *ER:&N ORARIO, EUGENIO OR#EGO-O, IRENEO ORGANI$TA, CATA!INO O*ENDRA$, :I!!IAM O!I;ARE$, *UANITO ORIO, :I!!IAM ORTI-O, RO.UE PA!%PA!!ATOC, ROGE!IO PAE!, !OREN-O PAMINTUAN, ;IRGI!IO PANTA!EON, ANTONIO PAPA, EMMANUE! PA$CUA!, FRANCI$CO PECUNDO, RUFINO PE!ICER, !EONARDO PEPITO, PA#!ITO PERA!TA, EDI!#ERTO PERE-, !O!ITO PERE-, PE!AGIO PERE-, *R., FERNANDO PINEDA, CARMEN PIO, A!E*ANDRO .UIAMCO, ;IRGI!IO .UI!A!ANG, *EREMEA$ .UINE$, -ENAIDA RA.UINE, DOMINGO RANO!A, $A#INO RANU!O, EDDIE RA-ONA#E, A!#ERTO RE#AU!A, #ENIGNO REGI$, PERFECTO RE#O&O, ;ITA!IANO RE&E$, -O$IMO RE&E$, ED:IN RO#ERT$, RO#ERT RO*O, GODOFREDO RO!IO, ANATA!IA RO$ANTO, DOMINADOR RO$ANTO, RAMON RO$ANTO, $R., RODRIGO RO$ANTO, *U!IO RU#IO, DANTE RU-O!, ;ENU$ RU-O!, ROMU!O $A#INO, CIPRIANO $ACUI!!E$, $R., PRIMO $A!A-AR, GA$PAR $AMU&A, ANTONIO $ANCHE-, C!AUDIO $ANCHE-, &O!ANDA $AN !UI$, RO#ERTO $ANTO$, #ENITO $EGUDIENTE, EDGAR $I#A!, GREGORIO $I#A!, ;A!ENTINO $I#A!, $ONN& $INGH, ROMEO $OMERA, EDGAR TA#A.UE, #ENITO TACATA, MATI!DE TACATA, ANDRE$ITO TA!AM, ANTO!IN TA!I$IC, PA#!O TAMA&O, *U!IE TAMIE-A, ROGE!IO TA&O, CE!$O TE, ENRI.UE TRIPU!CA, ARMANDO TUI#EO, NICANOR TUMAMAO, EDUARDO TUM#A!E, RAMON TURIRIT, !ONGENIO UMACAM, TO!ENTINO UNDAUNDO, DIO!ITO ;A!ENCIA, ERNE$TO ;ARGA$, #I!!& ;A$.UE-, TOMA$ ;E!INA, MARCO$ DE ;ERA, IRENEO ;I!E!A, NICANDRO ;I!!AFRANCA, DANN& ;I!!ANUE;A, !O!ITA ;ITA!ICO, A!IPIO &GOT, AGO$TO &ROMA, FE!IG -AM#A!E$, an GUI!!ERMO -IPANGAN, petioners, vs. NATIONA! !A#OR RE!ATION$ COMMI$$ION >N!RCA, an FORTUNE TO#ACCO CORPORATION an Hor MAGNUM INTEGRATED $ER;ICE$, INC. >2or(er+y FORTUNE INTEGRATED $ER;ICE$, INC.A, respondents. DECI$ION PUNO, J.9 This case stemmed from a complaint for ille6al dismissal, unfair labor practice and refund of cash bond filed b9 petitioners a6ainst respondents before the Arbitration .ranch of the #ational +abor "elations Commission >#+"C@. The petition at bar seeFs the annulment of the resolution of the #+"C dated /ul9 7, 1998 reversin6 the decision of the +abor Arbiter findin6

respondents liable for the char6es, and its resolution dated Au6ust 1%, 1998 den9in6 petitioners: motion for reconsideration. The undisputed facts are as follows= 'n Au6ust 28, 198%, 1ortune Tobacco Corporation >1TC@ and 1ortune ,nte6rated )ervices, ,nc. >1,),@ entered into a contract for securit9 services where the latter undertooF to provide securit9 6uards for the protection and securit9 of the former. The petitioners were amon6 those en6a6ed as securit9 6uards pursuant to the contract. 'n 1ebruar9 1, 1991, the incorporators and stocFholders of 1,), sold out locF, stocF and barrel to a 6roup of new stocFholders b9 e<ecutin6 for the purpose a &Deed of )ale of )hares of )tocF&. 'n the same date, the Articles of ,ncorporation of 1,), was amended chan6in6 its corporate name to 2a6num ,nte6rated )ervices, ,nc. >2,),@. A new b9 laws was liFewise adopted and approved b9 the )ecurities and (<chan6e Commission on /une 3, 1998. 'n 'ctober 17, 1991, 1TC terminated the contract for securit9 services which resulted in the displacement of some five hundred ei6ht9 two >782@ securit9 6uards assi6ned b9 1,),G2,), to 1TC, includin6 the petitioners in this case. 1TC en6a6ed the services of two >2@ other securit9 a6encies, Asian )ecurit9 A6enc9 and +i6ali6 )ecurit9 )ervices, whose securit9 6uards were posted on 'ctober 17, 1991 to replace 1,),:s securit9 6uards. )ometime in 'ctober 1991, the 1ortune Tobacco +abor 0nion, an affiliate of the #ational 1ederation of +abor 0nions >#A1+0@, and claimin6 to be the bar6ainin6 a6ent of the securit9 6uards, sent a #otice of )triFe to 1,),G2,),. 'n #ovember 13, 1991, the members of the union which include petitioners picFeted the premises of 1TC. The "e6ional Trial Court of 4asi6, however, issued a writ of inAunction to enAoin the picFet. 'n #ovember 29, 1991, )imeon de +eon, to6ether with si<teen >1$@ other complainants instituted the instant case before the Arbitration .ranch of the #+"C. The complaint was later amended to allow the inclusion of other complainants. The parties submitted the followin6 issues for resolution= >1@ Ehether petitioners were ille6all9 dismissed? >2@ Ehether respondents are 6uilt9 of unfair labor practice? and >8@ Ehether petitioners are entitled to the refund of their cash bond deposited with respondent 1,),. 4etitioners alle6ed that the9 were re6ular emplo9ees of 1TC which was also usin6 the corporate names 1ortune ,nte6rated )ervices, ,nc. and 2a6num ,nte6rated )ervices, ,nc. The9 were assi6ned to worF as securit9 6uards at the compan9:s main factor9 plant, its tobacco redr9in6 plant and warehouse. The9 averred that the9 performed their duties under the control and supervision of 1TC:s securit9 supervisors. Their services, however, were severed in 'ctober 1991 without valid cause and without due process. 4etitioners claimed that their dismissal was part of respondents: desi6n to bust their newl9 or6aniBed union which sou6ht to enforce their ri6hts under the +abor )tandards law. J1K "espondent 1TC, on the other hand, maintained that there was no emplo9er emplo9ee relationship between 1TC and petitioners. ,t said that at the time of the termination of their services, petitioners were the emplo9ees of 2,), which was a separate and distinct corporation from 1TC. -ence, petitioners had no cause of action a6ainst 1TC. J2K

"espondent 1,),, meanwhile, denied the char6e of ille6al dismissal and unfair labor practice. ,t ar6ued that petitioners were not dismissed from service but were merel9 placed on floatin6 status pendin6 re assi6nment to other posts. ,t alle6ed that the temporar9 displacement of petitioners was not due to its fault but was the result of the pretermination b9 1TC of the contract for securit9 services.J8K The +abor Arbiter found respondents liable for the char6es. "eAectin6 1TC:s ar6ument that there was no emplo9er emplo9ee relationship between 1TC and petitioners, he ruled that 1,), and 1TC should be considered as a sin6le emplo9er. -e observed that the two corporations have common stocFholders and the9 share the same business address. ,n addition, 1,), had no client other than 1TC and other corporations belon6in6 to the 6roup of companies owned b9 +ucio Tan. The +abor Arbiter thus found respondents 6uilt9 of union bustin6 and ille6al dismissal. -e observed that not lon6 after the stocFholders of 1,), sold all their stocFs to a new set of stocFholders, 1TC terminated the contract of securit9 services and en6a6ed the services of two other securit9 a6encies. 1TC did not 6ive an9 reason for the termination of the contract. The +abor Arbiter 6ave credence to petitioners: theor9 that respondents: precipitate termination of their emplo9ment was intended to bust their union. Conse;uentl9, the +abor Arbiter ordered respondents to pa9 petitioners their bacFwa6es and separation pa9, to refund their cash bond deposit, and to pa9 attorne9:s fees.J3K 'n appeal, the #+"C reversed and set aside the decision of the +abor Arbiter. 1irst, it held that the +abor Arbiter erred in appl9in6 the &sin6le emplo9er& principle and concludin6 that there was an emplo9er emplo9ee relationship between 1TC and 1,), on one hand, and petitioners on the other hand. ,t found that at the time of the termination of the contract of securit9 services on 'ctober 17, 1991, 1,), which, at that time, had been renamed 2a6num ,nte6rated )ervices, ,nc. had a different set of stocFholders and officers from that of 1TC. The9 also had separate offices. The #+"C held that the principle of &sin6le emplo9er& and the doctrine of piercin6 the corporate veil could not appl9 under the circumstances. ,t further ruled that the pro<imate cause for the displacement of petitioners was the termination of the contract for securit9 services b9 1TC on 'ctober 17, 1991. 1,), could not be faulted for the severance of petitioners: assi6nment at the premises of 1TC. Conse;uentl9, the #+"C held that the char6e of ille6al dismissal had no basis. As re6ards the char6e of unfair labor practice, the #+"C found that petitioners who had the burden of proof failed to adduce an9 evidence to support their char6e of unfair labor practice a6ainst respondents. -ence, it ordered the dismissal of petitioners: complaint. J7K The petitioners filed a motion for reconsideration of the resolution of the #+"C but the same was denied.J$K -ence, this petition. Ee 6ave due course to the petition on 2a9 17, 1997. Thus, the rulin6 in (t. artin 2uneral -o)e vs. DLR4J7K remandin6 all petitions for certiorari from the decision of the #+"C to the Court of Appeals does not appl9 to the case at bar. The petition is impressed with merit. An e<amination of the facts of this case reveals that there is sufficient 6round to conclude that respondents were 6uilt9 of interferin6 with the ri6ht of petitioners to self or6aniBation which constitutes unfair labor practice under Article 238 of the +abor Code. J8K 4etitioners have been emplo9ed with 1,), since the 198%s and have since been posted at the premises of 1TC its main factor9 plant, its tobacco redr9in6 plant and warehouse. ,t appears

from the records that 1,),, while havin6 its own corporate identit9, was a mere instrumentalit9 of 1TC, tasFed to provide protection and securit9 in the compan9 premises. The records show that the two corporations had identical stocFholders and the same business address. 1,), also had no other clients e<cept 1TC and other companies belon6in6 to the +ucio Tan 6roup of companies. 2oreover, the earl9 pa9slips of petitioners show that their salaries were initiall9 paid b9 1TC. J9K To enforce their ri6htful benefits under the laws on +abor )tandards, petitioners formed a union which was later certified as bar6ainin6 a6ent of all the securit9 6uards. 'n 1ebruar9 1, 1991, the stocFholders of 1,), sold all their participations in the corporation to a new set of stocFholders which renamed the corporation 2a6num ,nte6rated )ervices, ,nc. 'n 'ctober 17, 1991, 1TC, without an9 reason, /re)er(1na)e its contract of securit9 services with 2,), and contracted two other a6encies to provide securit9 services for its premises. This resulted in the displacement of petitioners. As 2,), had no other clients, it failed to 6ive new assi6nments to petitioners. 4etitioners have remained unemplo9ed since then. All these facts indicate a concerted effort on the part of respondents to remove petitioners from the compan9 and thus abate the 6rowth of the union and blocF its actions to enforce their demands in accordance with the +abor )tandards laws. The Court held in Insular Life Assurance 4o.# Ltd.# E)ployees Association-DA8C vs. Insular Life Assurance 4o.# Ltd.=J1%K NThe test of whether an emplo9er has interfered with and coerced emplo9ees within the meanin6 of section >a@ >1@ is whether the emplo9er has en6a6ed in conduct which it ma9 reasonabl9 be said tends to interfere with the free e<ercise of emplo9ees: ri6hts under section 8 of the Act, and it is not necessar9 that there be direct evidence that an9 emplo9ee was in fact intimidated or coerced b9 statements of threats of the emplo9er if there is a reasonable inference that anti union conduct of the emplo9er does have an adverse effect on self or6aniBation and collective bar6ainin6.O J11K Ee are not persuaded b9 the ar6ument of respondent 1TC den9in6 the presence of an emplo9er emplo9ee relationship. Ee find that the +abor Arbiter correctl9 applied the doctrine of piercin6 the corporate veil to hold all respondents liable for unfair labor practice and ille6al termination of petitioners: emplo9ment. ,t is a fundamental principle in corporation law that a corporation is an entit9 separate and distinct from its stocFholders and from other corporations to which it is connected. -owever, when the concept of separate le6al entit9 is used to defeat public convenience, Austif9 wron6, protect fraud or defend crime, the law will re6ard the corporation as an association of persons, or in case of two corporations, mer6e them into one. The separate Auridical personalit9 of a corporation ma9 also be disre6arded when such corporation is a mere alter e6o or business conduit of another person.J12K ,n the case at bar, it was shown that 1,), was a mere adAunct of 1TC. 1,),, b9 virtue of a contract for securit9 services, provided 1TC with securit9 6uards to safe6uard its premises. -owever, records show that 1,), and 1TC have the same owners and business address, and 1,), provided securit9 services onl9 to 1TC and other companies belon6in6 to the +ucio Tan 6roup of companies. The purported sale of the shares of the former stocFholders to a new set of stocFholders who chan6ed the name of the corporation to 2a6num ,nte6rated )ervices, ,nc. appears to be part of a scheme to terminate the services of 1,),:s securit9 6uards posted at the premises of 1TC and bust their newl9 or6aniBed union which was then be6innin6 to become active in demandin6 the compan9:s compliance with +abor )tandards laws. 0nder these circumstances, the Court cannot allow

1TC to use its separate corporate personalit9 to shield itself from liabilit9 for ille6al acts committed a6ainst its emplo9ees. Thus, we find that the termination of petitioners: services was without basis and therefore ille6al. 0nder Article 279 of the +abor Code, an emplo9ee who is unAustl9 dismissed from worF is entitled to reinstatement without loss of seniorit9 ri6hts and other privile6es, and to his full bacFwa6es, inclusive of allowances, and to his other benefits or their monetar9 e;uivalent computed from the time his compensation was witheld from him up to the time of his actual reinstatement. -owever, if reinstatement is no lon6er possible, the emplo9er has the alternative of pa9in6 the emplo9ee his separation pa9 in lieu of reinstatement. J18K IN ;IE: :HEREOF, the petition is !"A#T(D. The assailed resolutions of the #+"C are )(T A),D(. "espondents are hereb9 ordered to pa9 petitioners their full bacFwa6es, and to reinstate them to their former position without loss of seniorit9 ri6hts and privile6es, or to award them separation pa9 in case reinstatement is no lon6er feasible. $O ORDERED. Davide# /r.# 4./. >Chairman@# .ardo and Lnares-(antiago# //.# concur. Gapunan /.# on leave. T-,"D D,D,),'# G.R. No. 1<29,=. A/r1+ 17, 2442 PHI!IPPINE NATIONA! #AN" 8 NATIONA! $UGAR DE;E!OPMENT CORPORATION, petitioners, vs. ANDRADA E!ECTRIC 8 ENGINEERING COMPAN&, respondent. PANGANI#AN, J.: .asic is the rule that a corporation has a le6al personalit9 distinct and separate from the persons and entities ownin6 it. The corporate veil ma9 be lifted onl9 if it has been used to shield fraud, defend crime, Austif9 a wron6, defeat public convenience, insulate bad faith or perpetuate inAustice. Thus, the mere fact that the 4hilippine #ational .anF >4#.@ ac;uired ownership or mana6ement of some assets of the 4ampan6a )u6ar 2ill >4A)02,+@, which had earlier been foreclosed and purchased at the resultin6 public auction b9 the Development .anF of the 4hilippines >D.4@, will not maFe 4#. liable for the 4A)02,+Ls contractual debts to respondent. $)a)e(en) o2 )0e Ca?e .efore us is a 4etition for "eview assailin6 the April 17, 2%%% Decision 1 of the Court of Appeals >CA@ in CA !" CD #o. 77$1%. The decretal portion of the challen6ed Decision reads as follows= &E-("(1'"(, the Aud6ment appealed from is hereb9 A11,"2(D.&2 T0e Fa6)? The factual antecedents of the case are summariBed b9 the Court of Appeals as follows= &,n its complaint, the plaintiff Jherein respondentK alle6ed that it is a partnership dul9 or6aniBed, e<istin6, and operatin6 under the laws of the 4hilippines, with office and principal place of business at #os. 793 812 Del 2onte JAKvenue, HueBon Cit9, while the defendant Jherein petitionerK 4hilippine #ational .anF >herein referred to as 4#.@, is a semi 6overnment corporation dul9 or6aniBed, e<istin6 and operatin6 under the laws of the 4hilippines, with office and principal place of business at (scolta )treet, )ta. CruB, 2anila? whereas, the other

defendant, the #ational )u6ar Development Corporation >#A)0D(C' in brief@, is also a semi 6overnment corporation and the su6ar arm of the 4#., with office and principal place of business at the 2nd 1loor, )ampa6uita .uildin6, Cubao, HueBon Cit9? and the defendant 4ampan6a )u6ar 2ills >4A)02,+ in short@, is a corporation or6aniBed, e<istin6 and operatin6 under the 1977 laws of the 4hilippines, and had its business office before 1977 at Del Carmen, 1loridablanca, 4ampan6a? that the plaintiff is en6a6ed in the business of 6eneral construction for the repairs andGor construction of different Finds of machineries and buildin6s? that on Au6ust 2$, 1977, the defendant 4#. ac;uired the assets of the defendant 4A)02,+ that were earlier foreclosed b9 the Development .anF of the 4hilippines >D.4@ under +', #o. 811? that the defendant 4#. or6aniBed the defendant #A)0D(C' in )eptember, 1977, to taFe ownership and possession of the assets and ultimatel9 to nationaliBe and consolidate its interest in other 4#. controlled su6ar mills? that prior to 'ctober 29, 1971, the defendant 4A)02,+ en6a6ed the services of plaintiff for electrical rewindin6 and repair, most of which were partiall9 paid b9 the defendant 4A)02,+, leavin6 several unpaid accounts with the plaintiff? that finall9, on 'ctober 29, 1971, the plaintiff and the defendant 4A)02,+ entered into a contract for the plaintiff to perform the followin6, to wit V R>a@ Construction of one >1@ power house buildin6? R>b@ Construction of three >8@ reinforced concrete foundation for three >8@ units 87% 5E diesel en6ine 6eneratin6 setJsK? R>c@ Construction of three >8@ reinforced concrete foundation for the 7,%%% 5E and 1,27% 5E turbo 6enerator sets? R>d@ Complete overhaulin6 and reconditionin6 tests sum for three >8@ 87% 5E diesel en6ine 6eneratin6 setJsK? R>e@ ,nstallation of turbine and diesel 6eneratin6 sets includin6 transformer, switchboard, electrical wirin6s and pipe provided those stated units are completel9 supplied with their accessories? R>f@ "elocatin6 of 2,3%% D transmission line, demolition of all e<istin6 concrete foundation and draina6e canals, e<cavation, and earth fillin6s V all for the total amount of 4738,7%%.%% as evidenced b9 a contract, JaK <ero< cop9 of which is hereto attached as Anne< RAL and made an inte6ral part of this complaint?L that aside from the worF contract mentioned above, the defendant 4A)02,+ re;uired the plaintiff to perform e<tra worF, and provide electrical e;uipment and spare parts, such as= R>a@ )uppl9 of electrical devices? R>b@ (<tra mechanical worFs? R>c@ (<tra fabrication worFs? R>d@ )uppl9 of materials and consumable items? R>e@ (lectrical shop repair? R>f@ )uppl9 of parts and related worFs for turbine 6enerator? R>6@ )uppl9 of electrical e;uipment for machiner9? R>h@ )uppl9 of diesel en6ine parts and other related worFs includin6 fabrication of parts.L that out of the total obli6ation of 4777,2$8.8%, the defendant 4A)02,+ had paid onl9 427%,%%%.%%, leavin6 an unpaid balance, as of /une 27,

1978, amountin6 to 4727,2$8.8%, as shown in the Certification of the chief accountant of the 4#., a machine cop9 of which is appended as Anne< RCL of the complaint? that out of said unpaid balance of 4727,2$8.8%, the defendant 4A)02,+ made a partial pa9ment to the plaintiff of 413,%%%.%%, in broFen amounts, coverin6 the period from /anuar9 7, 1973 up to 2a9 28, 1973, leavin6 an unpaid balance of 4718,2$8.8%? that the defendant 4A)02,+ and the defendant 4#., and now the defendant #A)0D(C', failed and refused to pa9 the plaintiff their Aust, valid and demandable obli6ation? that the 4resident of the #A)0D(C' is also the Dice 4resident of the 4#., and this official holds office at the 1%th 1loor of the 4#., (scolta, 2anila, and plaintiff besou6ht this official to pa9 the outstandin6 obli6ation of the defendant 4A)02,+, inasmuch as the defendant 4#. and #A)0D(C' now owned and possessed the assets of the defendant 4A)02,+, and these defendants all benefited from the worFs, and the electrical, as well as the en6ineerin6 and repairs, performed b9 the plaintiff? that because of the failure and refusal of the defendants to pa9 their Aust, valid, and demandable obli6ations, plaintiff suffered actual dama6es in the total amount of 4718,2$8.8%? and that in order to recover these sums, the plaintiff was compelled to en6a6e the professional services of counsel, to whom the plaintiff a6reed to pa9 a sum e;uivalent to 27M of the amount of the obli6ation due b9 wa9 of attorne9Ls fees. Accordin6l9, the plaintiff pra9ed that Aud6ment be rendered a6ainst the defendants 4#., #A)0D(C', and 4A)02,+, Aointl9 and severall9 to wit= R>1@ )entencin6 the defendants to pa9 the plaintiffs the sum of 4718,2$8.8%, with annual interest of 13M from the time the obli6ation falls due and demandable? R>2@ Condemnin6 the defendants to pa9 attorne9Ls fees amountin6 to 27M of the amount claim? R>8@ 'rderin6 the defendants to pa9 the costs of the suit.L &The defendants 4#. and #A)0D(C' filed a Aoint motion to dismiss the complaint chiefl9 on the 6round that the complaint failed to state sufficient alle6ations to establish a cause of action a6ainst both defendants, inasmuch as there is lacF or want of privit9 of contract between the plaintiff and the two defendants, the 4#. and #A)0D(C', said defendants citin6 Article 1811 of the #ew Civil Code, and the case law rulin6 in )alon6a v. Earner .arnes I Co., 88 4hil. 127? and 2anila 4ort )ervice, et al. v. Court of Appeals, et al., 2% )C"A 1213. &The motion to dismiss was b9 the court a ;uo denied in its 'rder of #ovember 27, 198%? in the same order, that court directed the defendants to file their answer to the complaint within 17 da9s. &,n their answer, the defendant #A)0D(C' reiterated the 6rounds of its motion to dismiss, to wit= RThat the complaint does not state a sufficient cause of action a6ainst the defendant #A)0D(C' because= >a@ #A)0D(C' is not < < < priv9 to the various electrical construction Aobs bein6 sued upon b9 the plaintiff under the present complaint? >b@ the taFin6 over b9 #A)0D(C' of the assets of defendant 4A)02,+ was solel9 for the purpose of reconditionin6 the su6ar central of defendant 4A)02,+ pursuant to martial law powers of the 4resident under the Constitution? >c@ nothin6 in the +', #o. 189 A >as well as in +', #o. 811@ authoriBed or commanded the 4#. or its subsidiar9 corporation, the #A)0D(C', to assume the corporate obli6ations of 4A)02,+ as that bein6 involved in the present case? and, >d@ all

that was mentioned b9 the said letter of instruction insofar as the 4A)02,+ liabilities JwereK concerned JwasK for the 4#., or its subsidiar9 corporation the #A)0D(C', to maFe a stud9 of, and submit JaK recommendation on the problems concernin6 the same.L &.9 wa9 of counterclaim, the #A)0D(C' averred that b9 reason of the filin6 b9 the plaintiff of the present suit, which it JlabeledK as unfounded or baseless, the defendant #A)0D(C' was constrained to liti6ate and incur liti6ation e<penses in the amount of 47%,%%%.%%, which plaintiff should be sentenced to pa9. Accordin6l9, #A)0D(C' pra9ed that the complaint be dismissed and on its counterclaim, that the plaintiff be condemned to pa9 47%,%%%.%% in concept of attorne9Ls fees as well as e<emplar9 dama6es. &,n its answer, the defendant 4#. liFewise reiterated the 6rounds of its motion to dismiss, namel9= >1@ the complaint states no cause of action a6ainst the defendant 4#.? >2@ that 4#. is not a part9 to the contract alle6ed in par. $ of the complaint and that the alle6ed services rendered b9 the plaintiff to the defendant 4A)02,+ upon which plaintiffLs suit is erected, was rendered lon6 before 4#. tooF possession of the assets of the defendant 4A)02,+ under +', #o. 189 A? >8@ that the 4#. taFe over of the assets of the defendant 4A)02,+ under +', 189 A was solel9 for the purpose of reconditionin6 the su6ar central so that 4A)02,+ ma9 resume its operations in time for the 1973 77 millin6 season, and that nothin6 in the said +', #o. 189 A, as well as in +', #o. 811, authoriBed or directed 4#. to assume the corporate obli6ationGs of 4A)02,+, let alone that for which the present action is brou6ht? >3@ that 4#.Ls mana6ement and operation under +', #o. 811 did not refer to an9 asset of 4A)02,+ which the 4#. had to ac;uire and thereafter Jmana6eK, but onl9 to those which were foreclosed b9 the D.4 and were in turn redeemed b9 the 4#. from the D.4? >7@ that conformabl9 to +', #o. 811, on Au6ust 17, 1977, the 4#. and the Development .anF of the 4hilippines >D.4@ entered into a R"edemption A6reementL whereb9 D.4 sold, transferred and conve9ed in favor of the 4#., b9 wa9 of redemption, all its >D.4@ ri6hts and interest in and over the foreclosed real andGor personal properties of 4A)02,+, as shown in Anne< RCL which is made an inte6ral part of the answer? >$@ that a6ain, conformabl9 with +', #o. 811, 4#. pursuant to a Deed of Assi6nment dated 'ctober 21, 1977, conve9ed, transferred, and assi6ned for valuable consideration, in favor of #A)0D(C', a distinct and independent corporation, all its >4#.@ ri6hts and interest in and under the above R"edemption A6reement.L This is shown in Anne< RDL which is also made an inte6ral part of the answer? J7K that as a conse;uence of the said Deed of Assi6nment, 4#. on 'ctober 21, 1977 ceased to mana6ed and operate the above mentioned assets of 4A)02,+, which function was now actuall9 transferred to #A)0D(C'. ,n other words, so asserted 4#., the complaint as to 4#., had become moot and academic because of the e<ecution of the said Deed of Assi6nment? J8K that moreover, +', #o. 811 did not authoriBe or direct 4#. to assume the corporate obli6ations of 4A)02,+, includin6 the alle6ed obli6ation upon which this present suit was brou6ht? and J9K that, at most, what was 6ranted to 4#. in this respect was the authorit9 to RmaFe a stud9 of and submit recommendation on the problems concernin6 the claims of 4A)02,+ creditors,L under sub par. 7 +', #o. 811. &,n its counterclaim, the 4#. averred that it was unnecessaril9 constrained to liti6ate and to incur e<penses in this case, hence it is

entitled to claim attorne9Ls fees in the amount of at least 47%,%%%.%%. Accordin6l9, 4#. pra9ed that the complaint be dismissed? and that on its counterclaim, that the plaintiff be sentenced to pa9 defendant 4#. the sum of 47%,%%%.%% as attorne9Ls fees, aside from e<emplar9 dama6es in such amount that the court ma9 seem Aust and e;uitable in the premises. &)ummons b9 publication was made via the 4hilippines Dail9 (<press, a newspaper with editorial office at 871 .onifacio Drive, 4ort Area, 2anila, a6ainst the defendant 4A)02,+, which was thereafter declared in default as shown in the Au6ust 7, 1981 'rder issued b9 the Trial Court. &After due proceedin6s, the Trial Court rendered Aud6ment, the decretal portion of which reads= RE-("(1'"(, Aud6ment is hereb9 rendered in favor of plaintiff and a6ainst the defendant Corporation, 4hilippine #ational .anF >4#.@ #AT,'#A+ )0!A" D(D(+'42(#T C'"4'"AT,'# >#A)0D(C'@ and 4A24A#!A )0!A" 2,++) >4A)02,+@, orderin6 the latter to pa9 Aointl9 and severall9 the former the followin6= R1. The sum of 4718,$28.8% plus interest thereon at the rate of 13M per annum as claimed from )eptember 27, 198% until full9 paid? R2. The sum of 41%2,723.7$ as attorne9Ls fees? and, R8. Costs. R)' '"D("(D. R2anila, 4hilippines, )eptember 3, 198$. :>)!D@ ("#()T' ). T(#!C' R/ud6eL&8 Ru+1nD o2 )0e Cour) o2 A//ea+? Affirmin6 the trial court, the CA held that it was offensive to the basic tenets of Austice and e;uit9 for a corporation to taFe over and operate the business of another corporation, while disavowin6 or repudiatin6 an9 responsibilit9, obli6ation or liabilit9 arisin6 therefrom. 3 -ence, this 4etition.7 I??ue? ,n their 2emorandum, petitioners raise the followin6 errors for the CourtLs consideration= &, The Court of Appeals 6ravel9 erred in law in holdin6 the herein petitioners liable for the unpaid corporate debts of 4A)02,+, a corporation whose corporate e<istence has not been le6all9 e<tin6uished or terminated, simpl9 because of petitionersJLK taFe over of the mana6ement and operation of 4A)02,+ pursuant to the mandates of +', #o. 189 A, as amended b9 +', #o. 811. &,, The Court of Appeals 6ravel9 erred in law in not appl9in6 JtoK the case at bench the rulin6 enunciated in (dward /. #ell Co. v. 4acific 1arms, 17 )C"A 317.&$ )uccinctl9 put, the aforesaid errors boil down to the principal issue of whether 4#. is liable for the unpaid debts of 4A)02,+ to respondent.

T01? Cour)I? Ru+1nD The 4etition is meritorious. Ma1n I??ue9 "iability for Corporate #ebts As a 6eneral rule, ;uestions of fact ma9 not be raised in a petition for review under "ule 37 of the "ules of Court.7 To this rule, however, there are some e<ceptions enumerated in 2uentes v. 4ourt of Appeals.8 After a careful scrutin9 of the records and the pleadin6s submitted b9 the parties, we find that the lower courts misappreciated the evidence presented. 9 'verlooFed b9 the CA were certain relevant facts that would Austif9 a conclusion different from that reached in the assailed Decision. 1% 4etitioners posit that the9 should not be held liable for the corporate debts of 4A)02,+, because their taFeover of the latterLs foreclosed assets did not maFe them assi6nees. 'n the other hand, respondent asserts that petitioners and 4A)02,+ should be treated as one entit9 and, as such, Aointl9 and severall9 held liable for 4A)02,+Ls unpaid obli6ation. As a rule, a corporation that purchases the assets of another will not be liable for the debts of the sellin6 corporation, provided the former acted in 6ood faith and paid ade;uate consideration for such assets, e<cept when an9 of the followin6 circumstances is present= >1@ where the purchaser e<pressl9 or impliedl9 a6rees to assume the debts, >2@ where the transaction amounts to a consolidation or mer6er of the corporations, >8@ where the purchasin6 corporation is merel9 a continuation of the sellin6 corporation, and >3@ where the transaction is fraudulentl9 entered into in order to escape liabilit9 for those debts. 11 Piercin$ the Corporate %eil &ot Warranted A corporation is an artificial bein6 created b9 operation of law. ,t possesses the ri6ht of succession and such powers, attributes, and properties e<pressl9 authoriBed b9 law or incident to its e<istence. 12 ,t has a personalit9 separate and distinct from the persons composin6 it, as well as from an9 other le6al entit9 to which it ma9 be related. 18 This is basic. (;uall9 well settled is the principle that the corporate masF ma9 be removed or the corporate veil pierced when the corporation is Aust an alter e6o of a person or of another corporation. 13 1or reasons of public polic9 and in the interest of Austice, the corporate veil will Austifiabl9 be impaled 17 onl9 when it becomes a shield for fraud, ille6alit9 or ine;uit9 committed a6ainst third persons.1$ -ence, an9 application of the doctrine of piercin6 the corporate veil should be done with caution.17 A court should be mindful of the milieu where it is to be applied.18 ,t must be certain that the corporate fiction was misused to such an e<tent that inAustice, fraud, or crime was committed a6ainst another, in disre6ard of its ri6hts. 19 The wron6doin6 must be clearl9 and convincin6l9 established? it cannot be presumed. 2% 'therwise, an inAustice that was never unintended ma9 result from an erroneous application. 21 This Court has pierced the corporate veil to ward off a Aud6ment credit, 22 to avoid inclusion of corporate assets as part of the estate of the decedent, 28 to escape liabilit9 arisin6 from a debt, 23 or to perpetuate fraud andGor confuse le6itimate issues27 either to promote or to shield unfair obAectives 2$ or to cover up an otherwise blatant violation of the prohibition a6ainst forum shoppin6.27 'nl9 in these and similar instances ma9 the veil be pierced and disre6arded.28

The ;uestion of whether a corporation is a mere alter e6o is one of fact. 29 4iercin6 the veil of corporate fiction ma9 be allowed onl9 if the followin6 elements concur= >1@ control not mere stocF control, but complete domination not onl9 of finances, but of polic9 and business practice in respect to the transaction attacFed, must have been such that the corporate entit9 as to this transaction had at the time no separate mind, will or e<istence of its own? >2@ such control must have been used b9 the defendant to commit a fraud or a wron6 to perpetuate the violation of a statutor9 or other positive le6al dut9, or a dishonest and an unAust act in contravention of plaintiffLs le6al ri6ht? and >8@ the said control and breach of dut9 must have pro<imatel9 caused the inAur9 or unAust loss complained of.8% Ee believe that the absence of the fore6oin6 elements in the present case precludes the piercin6 of the corporate veil. 2irst, other than the fact that petitioners ac;uired the assets of 4A)02,+, there is no showin6 that their control over it warrants the disre6ard of corporate personalities. 81 (econd, there is no evidence that their Auridical personalit9 was used to commit a fraud or to do a wron6? or that the separate corporate entit9 was farcicall9 used as a mere alter e6o, business conduit or instrumentalit9 of another entit9 or person.82 8!ird, respondent was not defrauded or inAured when petitioners ac;uired the assets of 4A)02,+. 88 .ein6 the part9 that asFed for the piercin6 of the corporate veil, respondent had the burden of presentin6 clear and convincin6 evidence to Austif9 the settin6 aside of the separate corporate personalit9 rule. 83 -owever, it utterl9 failed to dischar6e this burden?87 it failed to establish b9 competent evidence that petitionerLs separate corporate veil had been used to conceal fraud, ille6alit9 or ine;uit9.8$ Ehile we a6ree with respondentLs claim that the assets of the #ational )u6ar Development Corporation >#A)0D(C'@ can be easil9 traced to 4A)02,+,87 we are not convinced that the transfer of the latterLs assets to petitioners was fraudulentl9 entered into in order to escape liabilit9 for its debt to respondent.88 A careful review of the records reveals that D.4 foreclosed the mort6a6e e<ecuted b9 4A)02,+ and ac;uired the assets as the hi6hest bidder at the public auction conducted.89 The banF was Austified in foreclosin6 the mort6a6e, because the 4A)02,+ account had incurred arreara6es of more than 2% percent of the total outstandin6 obli6ation. 3% Thus, D.4 had not onl9 a ri6ht, but also a dut9 under the law to foreclose the subAect properties. 31 4ursuant to +', #o. 189 A32 as amended b9 +', #o. 811,38 4#. ac;uired 4A)02,+Ls assets that D.4 had foreclosed and purchased in the normal course. 4etitioner banF was liFewise tasFed to mana6e temporaril9 the operation of such assets either b9 itself or throu6h a subsidiar9 corporation.33 4#., as the second mort6a6ee, redeemed from D.4 the foreclosed 4A)02,+ assets pursuant to )ection $ of Act #o. 8187. 37 These assets were later conve9ed to 4#. for a consideration, the terms of which were embodied in the "edemption A6reement.3$ 4#., as successor in interest, stepped into the shoes of D.4 as 4A)02,+Ls creditor. 37 .9 wa9 of a Deed of Assi6nment,38 4#. then transferred to #A)0D(C' all its ri6hts under the "edemption A6reement. ,n Develop)ent 3an7 of t!e .!ilippines v. 4ourt of Appeals ,39 we had the occasion to resolve a similar issue. Ee ruled that 4#., D.4 and their transferees were not liable for 2arindu;ue 2inin6Ls unpaid obli6ations to "emin6ton ,ndustrial )ales Corporation >"emin6ton@ after the two banFs had

foreclosed the assets of 2arindu;ue 2inin6. Ee liFewise held that "emin6ton failed to dischar6e its burden of provin6 bad faith on the part of 2arindu;ue 2inin6 to Austif9 the piercin6 of the corporate veil. ,n the instant case, the CA erred in affirmin6 the trial courtLs liftin6 of the corporate masF.7% The CA did not point to an9 fact evidencin6 bad faith on the part of 4#. and its transferee.71 The corporate fiction was not used to defeat public convenience, Austif9 a wron6, protect fraud or defend crime. 72 #one of the fore6oin6 e<ceptions was shown to e<ist in the present case. 78 'n the contrar9, the liftin6 of the corporate veil would result in manifest inAustice. This we cannot allow. &o Mer$er or Consolidation "espondent further claims that petitioners should be held liable for the unpaid obli6ations of 4A)02,+ b9 virtue of +', #os. 189 A and 811, which e<pressl9 authoriBed 4A)02,+ and 4#. to mer6e or consolidate. 'n the other hand, petitioners contend that their taFeover of the operations of 4A)02,+ did not involve an9 corporate mer6er or consolidation, because the latter had never lost its separate identit9 as a corporation. A consolidation is the union of two or more e<istin6 entities to form a new entit9 called the consolidated corporation. A mer6er, on the other hand, is a union whereb9 one or more e<istin6 corporations are absorbed b9 another corporation that survives and continues the combined business. 73 The mer6er, however, does not become effective upon the mere a6reement of the constituent corporations.77 )ince a mer6er or consolidation involves fundamental chan6es in the corporation, as well as in the ri6hts of stocFholders and creditors, there must be an e<press provision of law authoriBin6 them.7$ 1or a valid mer6er or consolidation, the approval b9 the )ecurities and (<chan6e Commission >)(C@ of the articles of mer6er or consolidation is re;uired.77 These articles must liFewise be dul9 approved b9 a maAorit9 of the respective stocFholders of the constituent corporations. 78 ,n the case at bar, we hold that there is no mer6er or consolidation with respect to 4A)02,+ and 4#.. The procedure prescribed under Title ,C of the Corporation Code79 was not followed. ,n fact, 4A)02,+Ls corporate e<istence, as correctl9 found b9 the CA, had not been le6all9 e<tin6uished or terminated. $% 1urther, prior to 4#.Ls ac;uisition of the foreclosed assets, 4A)02,+ had previousl9 made partial pa9ments to respondent for the formerLs obli6ation in the amount of 4777,2$8.8%. As of /une 27, 1978, 4A)02,+ had paid 427%,%%% to respondent and, from /anuar9 7, 1973 to 2a9 28, 1973, another 413,%%%. #either did petitioner e<pressl9 or impliedl9 a6ree to assume the debt of 4A)02,+ to respondent.$1 +', #o. 11 e<plicitl9 provides that 4#. shall stud9 and submit recommendations on the claims of 4A)02,+Ls creditors. $2 Clearl9, the corporate separateness between 4A)02,+ and 4#. remains, despite respondentLs insistence to the contrar9. $8 :HEREFORE, the 4etition is hereb9 'R(&TE# and the assailed Decision )ET ()I#E. #o pronouncement as to costs. $O ORDERED. 6itug# (andoval-0utierre1# and 4arpio# //.# concur. elo# /.# Abroad, on official leave. PN#, NA$UDECO @?. An ra a E+e6)r16 an >2442A Do6)r1ne9 EnD1neer1nD Co(/any

.asic is the rule that a corporation has a le6al personalit9 distinct andseparate from the persons and entities ownin6 it. The corporate veil ma9 be lifted onl9 if it has been used to shield fraud, defend crime, Austif9 a wron6, defeat publicconvenience, insulate bad faith or perpetuate inAustice. Thus, the mere fact that the4hilippine #ational .anF >4#.@ ac;uired ownership or mana6ement of some assets of the 4ampan6a )u6ar 2ill >4A)02,+@, which had earlier been foreclosed and purchasedat the resultin6 public auction b9 the Development .anF of the 4hilippines >D.4@, willnot maFe 4#. liable for the 4A)02,+Ls contractual debts to respondent. Fa6)?9 1.4A)02,+ >4ampan6a )u6ar 2ills@ en6a6ed the services of Andrada (lectric for electrical rewindin6, repair, the construction of a power house buildin6,installation of turbines, transformers, amon6 others. 2ost of the services werepartiall9 paid b9 4A)02,+, leavin6 several unpaid accounts. 2. 'n Au6ust 1977, 4#., a semi 6overnment corporation, ac;uired the assets of 4A)02,+ Tassets that were earlier foreclosed b9 the D.4. 8. 'n )eptember 1977, 4#. or6aniBed #A)0D(C' >#ational )u6ar DevelopmentCorporation@, under +', #o. 811 to taFe ownership and possession of the assetsand ultimatel9, to nationaliBe and consolidate its interest in other 4#. controlledsu6ar mills. #A)0D(C' is a semi 6overnment corporation and the su6ar arm of the 4#..3.Andrada (lectric alle6es that 4#. and #A)0D(C' should be liable for 4A)02,+Ls unpaid obli6ation amountin6 to 7%%5 php, dama6es, and attorne9Lsfees, havin6 owned and possessed the assets of 4A)02,+. I??ue9 Ehether 4#. and #A)0D(C' ma9 be held liable for 4A)02,+Ls liabilit9 to Andrada(lectric and (n6ineerin6 Compan9. He+ 9NO. .asic is the rule that a corporation has a le6al personalit9 distinct and separate from thepersons and entities ownin6 it. The corporate veil ma9 be lifted onl9 if it has been usedto shield fraud, defend crime, Austif9 a wron6, defeat public convenience, insulate badfaith or perpetuate inAustice.Thus, the mere fact that the 4hilippine #ational .anF >4#.@ ac;uired ownership or mana6ement of some assets of the 4ampan6a )u6ar 2ill >4A)02,+@, which had earlier been foreclosed and purchased at the resultin6 public auction b9 the Development .anFof the 4hilippines >D.4@, J1++ no) (aEe PN# +1ab+e 2or )0e PA$UMI!K? 6on)ra6)ua+ eb)? to Andrada (lectric I (n6ineerin6 Compan9 >A((C@. )(C'#D D,D,),'#

3G.R. No. 1<2<,5. A/r1+ ,4, 244,7

E$TE!ITA #URGO$ !IPAT an A!FREDO !IPAT, petitioners, vs. PACIFIC #AN"ING CORPORATION, REGI$TER OF DEED$, RTC EG% OFFICIO $HERIFF OF .UE-ON CIT& an )0e He1r? o2 EUGENIO D. TRINIDAD, respondents. DECI$ION .UI$UM#ING, J.9 This petition for review on certiorari seeFs the reversal of the DecisionJ1K dated 'ctober 21, 1999 of the Court of Appeals in CA !.". CD #o. 3178$ which dismissed herein petitionersL appeal from the Decision J2K dated 1ebruar9 1%, 1998 of the "e6ional Trial Court >"TC@ of HueBon Cit9, .ranch

83, in Civil Case #o. H 89 3172. The trial court had dismissed petitionersL complaint for annulment of real estate mort6a6e and the e<tra Audicial foreclosure thereof. +iFewise brou6ht for our review is the J8K "esolution dated 1ebruar9 28, 2%%% of the Court of Appeals which denied petitionersL motion for reconsideration. The facts, as culled from records, are as follows= 4etitioners, the spouses Alfredo +ipat and (stelita .ur6os +ipat, owned N.elaLs (<port Tradin6O >.(T@, a sin6le proprietorship with principal office at #o. 813 Aurora .oulevard, Cubao, HueBon Cit9. .(T was en6a6ed in the manufacture of 6arments for domestic and forei6n consumption. The +ipats also owned the N29stical 1ashionsO in the 0nited )tates, which sells 6oods imported from the 4hilippines throu6h .(T. 2rs. +ipat desi6nated her dau6hter, Teresita .. +ipat, to mana6e .(T in the 4hilippines while she was mana6in6 N29stical 1ashionsO in the 0nited )tates. ,n order to facilitate the convenient operation of .(T, (stelita +ipat e<ecuted on December 13, 1978, a special power of attorne9 appointin6 Teresita +ipat as her attorne9 in fact to obtain loans and other credit accommodations from respondent 4acific .anFin6 Corporation >4acific .anF@. )he liFewise authoriBed Teresita to e<ecute mort6a6e contracts on properties owned or co owned b9 her as securit9 for the obli6ations to be e<tended b9 4acific .anF includin6 an9 e<tension or renewal thereof. )ometime in April 1979, Teresita, b9 virtue of the special power of attorne9, was able to secure for and in behalf of her mother, 2rs. +ipat and .(T, a loan from 4acific .anF amountin6 to4788,873.%% to bu9 fabrics to be manufactured b9 .(T and e<ported to N29stical 1ashionsO in the 0nited )tates. As securit9 therefor, the +ipat spouses, as represented b9 Teresita, e<ecuted a "eal (state 2ort6a6e over their propert9 located at #o. 813 Aurora .lvd., Cubao, HueBon Cit9. )aid propert9 was liFewise made to secure Nother additional or new loans, discountin6 lines, overdrafts and credit accommodations, of whatever amount, which the 2ort6a6or andGor Debtor ma9 subse;uentl9 obtain from the 2ort6a6ee as well as an9 renewal or e<tension b9 the 2ort6a6or andGor Debtor of the whole or part of said ori6inal, additional or new loans, discountin6 lines, overdrafts and other credit accommodations, includin6 interest and e<penses or other obli6ations of the 2ort6a6or andGor Debtor owin6 to the 2ort6a6ee, whether directl9, or indirectl9, principal or secondar9, as appears in the accounts, booFs and records of the 2ort6a6ee.OJ3K 'n )eptember 7, 1979, .(T was incorporated into a famil9 corporation named .elaLs (<port Corporation >.(C@ in order to facilitate the mana6ement of the business. .(C was en6a6ed in the business of manufacturin6 and e<portation of all Finds of 6arments of whatever Find and descriptionJ7K and utiliBed the same machineries and e;uipment previousl9 used b9 .(T. ,ts incorporators and directors included the +ipat spouses who owned a combined 8%% shares out of the 32% shares subscribed, Teresita +ipat who owned 2% shares, and other close relatives and friends of the +ipats.J$K (stelita +ipat was named president of .(C, while Teresita became the vice president and 6eneral mana6er. (ventuall9, the loan was later restructured in the name of .(C and subse;uent loans were obtained b9 .(C with the correspondin6 promissor9 notes dul9 e<ecuted b9 Teresita on behalf of the corporation. A letter of credit was also opened b9 4acific .anF in favor of A. '. 5nittin6 2anufacturin6 Co., ,nc., upon the re;uest of .(C after .(C e<ecuted the correspondin6 trust receipt therefor. (<port bills were also e<ecuted in

favor of 4acific .anF for additional finances. These transactions were all secured b9 the real estate mort6a6e over the +ipatsL propert9. The promissor9 notes, e<port bills, and trust receipt eventuall9 became due and demandable. 0nfortunatel9, .(C defaulted in its pa9ments. After receipt of 4acific .anFLs demand letters, (stelita +ipat went to the office of the banFLs li;uidator and asFed for additional time to enable her to personall9 settle .(CLs obli6ations. The banF acceded to her re;uest but (stelita failed to fulfill her promise. Conse;uentl9, the real estate mort6a6e was foreclosed and after compliance with the re;uirements of the law the mort6a6ed propert9 was sold at public auction. 'n /anuar9 81, 1989, a certificate of sale was issued to respondent (u6enio D. Trinidad as the hi6hest bidder. 'n #ovember 28, 1989, the spouses +ipat filed before the HueBon Cit9 "TC a complaint for annulment of the real estate mort6a6e, e<traAudicial foreclosure and the certificate of sale issued over the propert9 a6ainst 4acific .anF and (u6enio D. Trinidad. The complaint, which was docFeted as Civil Case #o. H 89 3172, alle6ed, amon6 others, that the promissor9 notes, trust receipt, and e<port bills were all ultra vires acts of Teresita as the9 were e<ecuted without the re;uisite board resolution of the .oard of Directors of .(C. The +ipats also averred that assumin6 said acts were valid and bindin6 on .(C, the same were the corporationLs sole obli6ation, it havin6 a personalit9 distinct and separate from spouses +ipat. ,t was liFewise pointed out that TeresitaLs authorit9 to secure a loan from 4acific .anF was specificall9 limited to 2rs. +ipatLs sole use and benefit and that the real estate mort6a6e was e<ecuted to secure the +ipatsL and .(TLs4788,873.%% loan onl9. ,n their respective answers, 4acific .anF and Trinidad alle6ed in common that petitioners +ipat cannot evade pa9ments of the value of the promissor9 notes, trust receipt, and e<port bills with their propert9 because the9 and the .(C are one and the same, the latter bein6 a famil9 corporation. "espondent Trinidad further claimed that he was a bu9er in 6ood faith and for value and that petitioners are estopped from den9in6 .(CLs e<istence after holdin6 themselves out as a corporation. After trial on the merits, the "TC dismissed the complaint, thus= E-("(1'"(, this Court holds that in view of the facts contained in the record, the complaint filed in this case must be, as is hereb9, dismissed. 4laintiffs however has five >7@ months and seventeen >17@ da9s recFoned from the finalit9 of this decision within which to e<ercise their ri6ht of redemption. The writ of inAunction issued is automaticall9 dissolved if no redemption is effected within that period. The counterclaims and cross claim are liFewise dismissed for lacF of le6al and factual basis. #o costs. ,T ,) )' '"D("(D.J7K The trial court ruled that there was convincin6 and conclusive evidence provin6 that .(C was a famil9 corporation of the +ipats. As such, it was a mere e<tension of petitionersL personalit9 and business and a mere alter ego or business conduit of the +ipats established for their own benefit. -ence, to allow petitioners to invoFe the theor9 of separate corporate personalit9 would sanction its use as a shield to further an end

subversive of Austice.J8K Thus, the trial court pierced the veil of corporate fiction and held that .elaLs (<port Corporation and petitioners >+ipats@ are one and the same. 4acific .anF had transacted business with both .(T and .(C on the supposition that both are one and the same. -ence, the +ipats were estopped from disclaimin6 an9 obli6ations on the theor9 of separate personalit9 of corporations, which is contrar9 to principles of reason and 6ood faith. The +ipats timel9 appealed the "TC decision to the Court of Appeals in CA !.". CD #o. 3178$. )aid appeal, however, was dismissed b9 the appellate court for lacF of merit. The Court of Appeals found that there was ample evidence on record to support the application of the doctrine of piercin6 the veil of corporate fiction. ,n affirmin6 the findin6s of the "TC, the appellate court noted that 2rs. +ipat had full control over the activities of the corporation and used the same to further her business interests. J9K ,n fact, she had benefited from the loans obtained b9 the corporation to finance her business. ,t also found unnecessar9 a board resolution authoriBin6 Teresita +ipat to secure loans from 4acific .anF on behalf of .(C because the corporationLs b9 laws allowed such conduct even without a board resolution. 1inall9, the Court of Appeals ruled that the mort6a6e propert9 was not onl9 liable for the ori6inal loan of 4788,873.%% but liFewise for the value of the promissor9 notes, trust receipt, and e<port bills as the mort6a6e contract e;uall9 applies to additional or new loans, discountin6 lines, overdrafts, and credit accommodations which petitioners subse;uentl9 obtained from 4acific .anF. The +ipats then moved for reconsideration, but this was denied b9 the appellate court in its "esolution of 1ebruar9 28, 2%%%. J1%K -ence, this petition, with petitioners submittin6 that the court a Iuo erredT 1@ W.,# -'+D,#! T-AT T-( D'CT",#( '1 4,("C,#! T-( D(,+ '1 C'"4'"AT( 1,CT,'# A44+,() ,# T-,) CA)(. 2@ W.,# -'+D,#! T-AT 4(T,T,'#(")L 4"'4("T* CA# .( -(+D +,A.+( 0#D(" T-( "(A+ ()TAT( 2'"T!A!( #'T '#+* 1'" T-( A2'0#T '1 4788,873.%% .0T A+)' 1'" T-( 10++ DA+0( '1 4"'2,))'"* #'T(), T"0)T "(C(,4T) A#D (C4'"T .,++) '1 .(+AL) (C4'"T C'"4'"AT,'#. 8@ W.,# -'+D,#! T-AT NT-( ,24'),T,'# '1 17M ATT'"#(*L) 1(() ,# T-( (CT"A /0D,C,A+ 1'"(C+')0"( ,) .(*'#D T-,) C'0"TL) /0",)D,CT,'# 1'" ,T ,) .(,#! "A,)(D 1'" T-( 1,")T T,2( ,# T-,) A44(A+.O 3@ W.,# -'+D,#! 4(T,T,'#(" A+1"(D' +,4AT +,A.+( T' 4A* T-( D,)40T(D 4"'2,))'"* #'T(), T-( D'++A" ACC'22'DAT,'#) A#D T"0)T "(C(,4T) D()4,T( T-( (D,D(#T 1ACT T-AT T-(* E("( #'T ),!#(D .* -,2 A#D T-("(1'"( A"( #'T DA+,D '" A"( #'T .,#D,#! T' -,2. 7@ W.,# D(#*,#! 4(T,T,'#(")L 2'T,'# 1'" "(C'#),D("AT,'# A#D ,# -'+D,#! T-AT )A,D 2'T,'# 1'" "(C'#),D("AT,'# ,) NA# 0#A0T-'",P(D 2'T,'#, A 2("( )C"A4 '1 4A4(" E-,C- CA# #(,T-(" .,#D #'" .( '1 A#* C'#)(H0(#C( T' A44(++A#T).OJ11K ,n sum, the followin6 are the relevant issues for our resolution= 1. Ehether or not the doctrine of piercin6 the veil of corporate fiction is applicable in this case?

2. Ehether or not petitioners: propert9 under the real estate mort6a6e is liable not onl9 for the amount of 4788,873.%% but also for the value of the promissor9 notes, trust receipt, and e<port bills subse;uentl9 incurred b9 .(C? and 8. Ehether or not petitioners are liable to pa9 the 17M attorne9Ls fees stipulated in the deed of real estate mort6a6e. 'n the first issue, petitioners contend that both the appellate and trial courts erred in holdin6 them liable for the obli6ations incurred b9 .(C throu6h the application of the doctrine of piercin6 the veil of corporate fiction absent an9 clear showin6 of fraud on their part. "espondents counter that there is clear and convincin6 evidence to show fraud on part of petitioners 6iven the findin6s of the trial court, as affirmed b9 the Court of Appeals, that .(C was or6aniBed as a business conduit for the benefit of petitioners. 4etitionersL contentions fail to persuade this Court. A careful readin6 of the Aud6ment of the "TC and the resolution of the appellate court show that in findin6 petitionersL mort6a6ed propert9 liable for the obli6ations of .(C, both courts below relied upon the alter ego doctrine or instrumentalit9 rule, rather than fraud in piercin6 the veil of corporate fiction. Ehen the corporation is the mere alter ego or business conduit of a person, the separate personalit9 of the corporation ma9 be disre6arded. J12K This is commonl9 referred to as the Ninstrumentalit9 ruleO or the alter egodoctrine, which the courts have applied in disre6ardin6 the separate Auridical personalit9 of corporations. As held in one case, Ehere one corporation is so or6aniBed and controlled and its affairs are conducted so that it is, in fact, a mere instrumentalit9 or adAunct of the other, the fiction of the corporate entit9 of the Rinstrumentalit9L ma9 be disre6arded. The control necessar9 to invoFe the rule is not maAorit9 or even complete stocF control but such domination of finances, policies and practices that the controlled corporation has, so to speaF, no separate mind, will or e<istence of its own, and is but a conduit for its principal. <<< J18K Ee find that the evidence on record demolishes, rather than buttresses, petitionersL contention that .(T and .(C are separate business entities. #ote that (stelita +ipat admitted that she and her husband, Alfredo, were the owners of .(TJ13K and were two of the incorporators and maAorit9 stocFholders of .(C.J17K ,t is also undisputed that (stelita +ipat e<ecuted a special power of attorne9 in favor of her dau6hter, Teresita, to obtain loans and credit lines from 4acific .anF on her behalf. J1$K ,ncidentall9, Teresita was desi6nated as e<ecutive vice president and 6eneral mana6er of both .(T and .(C, respectivel9.J17K Ee note further that= >1@ (stelita and Alfredo +ipat are the owners and maAorit9 shareholders of .(T and .(C, respectivel9? J18K >2@ both firms were mana6ed b9 their dau6hter, Teresita? J19K >8@ both firms were en6a6ed in the 6arment business, suppl9in6 products to N29stical 1ashion,O a 0.). firm established b9 (stelita +ipat? >3@ both firms held office in the same buildin6 owned b9 the +ipats? J2%K >7@ .(C is a famil9 corporation with the +ipats as its maAorit9 stocFholders? >$@ the business operations of the .(C were so mer6ed with those of 2rs. +ipat such that the9 were practicall9 indistin6uishable? >7@ the corporate funds were held b9 (stelita +ipat and the corporation itself had no visible assets? >8@ the board of directors of .(C was composed of the .ur6os and +ipat famil9 members? J21K >9@ (stelita had full control over the activities of and decided business matters of the corporation?J22K and that >1%@ (stelita +ipat had benefited from the loans secured from 4acific .anF to finance her business abroad J28K and

from the e<port bills secured b9 .(C for the account of N29stical 1ashion.OJ23K ,t could not have been coincidental that .(T and .(C are so intertwined with each other in terms of ownership, business purpose, and mana6ement. Apparentl9, .(T and .(C are one and the same and the latter is a conduit of and merel9 succeeded the former. 4etitionersL attempt to isolate themselves from and hide behind the corporate personalit9 of .(C so as to evade their liabilities to 4acific .anF is precisel9 what the classical doctrine of piercin6 the veil of corporate entit9 seeFs to prevent and remed9. ,n our view, .(C is a mere continuation and successor of .(T, and petitioners cannot evade their obli6ations in the mort6a6e contract secured under the name of .(C on the prete<t that it was si6ned for the benefit and under the name of .(T. Ee are thus constrained to rule that the Court of Appeals did not err when it applied the instrumentalit9 doctrine in piercin6 the corporate veil of .(C. 'n the second issue, petitioners contend that their mort6a6ed propert9 should not be made liable for the subse;uent credit lines and loans incurred b9 .(C because, first, it was not covered b9 the mort6a6e contract of .(T which onl9 covered the loan of 4788,873.%% and which alle6edl9 had alread9 been paid? and, second, it was secured b9 Teresita +ipat without an9 authoriBation or board resolution of .(C. Ee find petitionersL contention untenable. As found b9 the Court of Appeals, the mort6a6ed propert9 is not limited to answer for the loan of 4788,873.%%. Thus= 1inall9, the e<tent to which the +ipatsL propert9 can be held liable under the real estate mort6a6e is not limited to 4788,873.%%. ,t can be held liable for the value of the promissor9 notes, trust receipt and e<port bills as well. 1or the mort6a6e was e<ecuted not onl9 for the purpose of securin6 the .elaLs (<port Tradin6Ls ori6inal loan of 4788,873.%%, but also for Nother additional or new loans, discountin6 lines, overdrafts and credit accommodations, of whatever amount, which the 2ort6a6or andGor Debtor ma9 subse;uentl9 obtain from the mort6a6ee as well as an9 renewal or e<tension b9 the 2ort6a6or andGor Debtor of the whole or part of said ori6inal, additional or new loans, discountin6 lines, overdrafts and other credit accommodations, includin6 interest and e<penses or other obli6ations of the 2ort6a6or andGor Debtor owin6 to the 2ort6a6ee, whether directl9, or indirectl9 principal or secondar9, as appears in the accounts, booFs and records of the mort6a6ee.J27K As a 6eneral rule, findin6s of fact of the Court of Appeals are final and conclusive, and cannot be reviewed on appeal b9 the )upreme Court, provided the9 are borne out b9 the record or based on substantial evidence. J2$K As noted earlier, .(C merel9 succeeded .(T as petitionersL alter ego? hence, petitionersL mort6a6ed propert9 must be held liable for the subse;uent loans and credit lines of .(C. 1urther, petitionersL contention that the ori6inal loan had alread9 been paid, hence, the mort6a6ed propert9 should not be made liable to the loans of .(C, is unsupported b9 an9 substantial evidence other than (stelita +ipatLs self servin6 testimon9. Two disputable presumptions under the rules on evidence wei6h a6ainst petitioners, namel9= >a@ that a person taFes ordinar9 care of his concerns? J27K and >b@ that thin6s have happened accordin6 to the ordinar9 course of nature and the ordinar9 habits of life. J28K -ere, if the ori6inal loan had indeed been paid, then lo6icall9, petitioners would have asFed from 4acific .anF for the re;uired documents evidencin6 receipt and pa9ment of the loans and, as owners of the mort6a6ed propert9, would have immediatel9 asFed for the cancellation of the

mort6a6e in the ordinar9 course of thin6s. -owever, the records are bereft of an9 evidence contradictin6 or overcomin6 said disputable presumptions. 4etitioners contend further that the mort6a6ed propert9 should not bind the loans and credit lines obtained b9 .(C as the9 were secured without an9 proper authoriBation or board resolution. The9 also blame the banF for its la<it9 and complacenc9 in not re;uirin6 a board resolution as a re;uisite for approvin6 the loans. )uch contentions deserve scant consideration. 1irstl9, it could not have been possible for .(C to release a board resolution since per admissions b9 both petitioner (stelita +ipat and Alice .ur6os, petitionersL rebuttal witness, no business or stocFholderLs meetin6s were conducted nor were there election of officers held since its incorporation. ,n fact, not a sin6le board resolution was passed b9 the corporate boardJ29K and it was (stelita +ipat andGor Teresita +ipat who decided business matters.J8%K )econdl9, the principle of estoppel precludes petitioners from den9in6 the validit9 of the transactions entered into b9 Teresita +ipat with 4acific .anF, who in 6ood faith, relied on the authorit9 of the former as mana6er to act on behalf of petitioner (stelita +ipat and both .(T and .(C. Ehile the power and responsibilit9 to decide whether the corporation should enter into a contract that will bind the corporation is lod6ed in its board of directors, subAect to the articles of incorporation, b9 laws, or relevant provisions of law, 9et, Aust as a natural person ma9 authoriBe another to do certain acts for and on his behalf, the board of directors ma9 validl9 dele6ate some of its functions and powers to officers, committees, or a6ents. The authorit9 of such individuals to bind the corporation is 6enerall9 derived from law, corporate b9 laws, or authoriBation from the board, either e<pressl9 or impliedl9 b9 habit, custom, or ac;uiescence in the 6eneral course of business.J81KApparent authorit9, is derived not merel9 from practice. ,ts e<istence ma9 be ascertained throu6h >1@ the 6eneral manner in which the corporation holds out an officer or a6ent as havin6 the power to act or, in other words, the apparent authorit9 to act in 6eneral, with which it clothes him? or >2@ the ac;uiescence in his acts of a particular nature, with actual or constructive Fnowled6e thereof, whether within or be9ond the scope of his ordinar9 powers. J82K ,n this case, Teresita +ipat had dealt with 4acific .anF on the mort6a6e contract b9 virtue of a special power of attorne9 e<ecuted b9 (stelita +ipat. "ecall that Teresita +ipat acted as the mana6er of both .(C and .(T and had been decidin6 business matters in the absence of (stelita +ipat. 1urther, the e<port bills secured b9 .(C were for the benefit of N29stical 1ashionO owned b9 (stelita +ipat. J88K -ence, 4acific .anF cannot be faulted for rel9in6 on the same authorit9 6ranted to Teresita +ipat b9 (stelita +ipat b9 virtue of a special power of attorne9. ,t is a familiar doctrine that if a corporation Fnowin6l9 permits one of its officers or an9 other a6ent to act within the scope of an apparent authorit9, it holds him out to the public as possessin6 the power to do those acts? thus, the corporation will, as a6ainst an9one who has in 6ood faith dealt with it throu6h such a6ent, be estopped from den9in6 the a6entLs authorit9. J83K Ee find no necessit9 to e<tensivel9 deal with the liabilit9 of Alfredo +ipat for the subse;uent credit lines of .(C. )uffice it to state that Alfredo +ipat never disputed the validit9 of the real estate mort6a6e of the ori6inal loan? hence, he cannot now dispute the subse;uent loans obtained usin6 the same mort6a6e contract since it is, b9 its ver9 terms, a continuin6 mort6a6e contract.

'n the t!ird and final issue, petitioners assail the decision of the Court of Appeals for not taFin6 co6niBance of the issue on attorne9Ls fees on the 6round that it was raised for the first time on appeal. Ee find the conclusion of the Court of Appeals to be in accord with settled Aurisprudence. .asic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal. J87K A close perusal of the complaint 9ields no alle6ations disputin6 the attorne9Ls fees imposed under the real estate mort6a6e and petitioners cannot now alle6e that the9 have impliedl9 disputed the same when the9 sou6ht the annulment of the contract. ,n sum, we find no reversible error of law committed b9 the Court of Appeals in renderin6 the decision and resolution herein assailed b9 petitioners. :HEREFORE, the petition is D(#,(D. The Decision dated 'ctober 21, 1999 and the "esolution dated 1ebruar9 28, 2%%% of the Court of Appeals in CA !.". CD #o. 3178$ are A11,"2(D. Costs a6ainst petitioners. $O ORDERED. 3ellosillo# 94!air)an:# Austria- artine1# and 4alle5o# (r.# //.# concur.

!1/a) @?. Pa61216 #anE1nD Cor/ora)1on J!" 132387, 8% April 2%%8K Q, Huisumbin6 >/@= 8 concur 1acts= The spouses Alfredo +ipat and (stelita .ur6os +ipat, owned &.ela:s (<port Tradin6& >.(T@, a sin6le proprietorship with principal office at #o. 813 Aurora .oulevard, Cubao, HueBon Cit9. .(T was en6a6ed in the manufacture of 6arments for domestic and forei6n consumption. The +ipats also owned the &29stical 1ashions& in the 0nited )tates, which sells 6oods imported from the 4hilippines throu6h .(T. 2rs. +ipat desi6nated her dau6hter, Teresita .. +ipat, to mana6e .(T in the 4hilippines while she was mana6in6 &29stical 1ashions& in the 0nited )tates. ,n order to facilitate the convenient operation of .(T, (stelita +ipat e<ecuted on 13 December 1978, a special power of attorne9 appointin6 Teresita +ipat as her attorne9 in fact to obtain loans and other credit accommodations from 4acific .anFin6 Corporation >4acific .anF@. )he liFewise authoriBed Teresita to e<ecute mort6a6e contracts on properties owned or co owned b9 her as securit9 for the obli6ations to be e<tended b9 4acific .anF includin6 an9 e<tension or renewal thereof. )ometime in April 1979, Teresita, b9 virtue of the special power of attorne9, was able to secure for and in behalf of her mother, 2rs. +ipat and .(T, a loan from 4acific .anF amountin6 to 4788,873.%% to bu9 fabrics to be manufactured b9 .(T and e<ported to &29stical 1ashions& in the 0nited )tates. As securit9 therefor, the +ipat spouses, as represented b9 Teresita, e<ecuted a "eal (state 2ort6a6e over their propert9 located at #o. 813 Aurora .lvd., Cubao, HueBon Cit9. )aid propert9 was liFewise made to

secure other additional or new loans, etc. 'n 7 )eptember 1979, .(T was incorporated into a famil9 corporation named .ela:s (<port Corporation >.(C@ in order to facilitate the mana6ement of the business. .(C was en6a6ed in the business of manufacturin6 and e<portation of all Finds of 6arments of whatever Find and description and utiliBed the same machineries and e;uipment previousl9 used b9 .(T. ,ts incorporators and directors included the +ipat spouses who owned a combined 8%% shares out of the 32% shares subscribed, Teresita +ipat who owned 2% shares, and other close relatives and friends of the +ipats. (stelita +ipat was named president of .(C, while Teresita became the vice president and 6eneral mana6er. (ventuall9, the loan was later restructured in the name of .(C and subse;uent loans were obtained b9 .(C with the correspondin6 promissor9 notes dul9 e<ecuted b9 Teresita on behalf of the corporation. A letter of credit was also opened b9 4acific .anF in favor of A. '. 5nittin6 2anufacturin6 Co., ,nc., upon the re;uest of .(C after .(C e<ecuted the correspondin6 trust receipt therefor. (<port bills were also e<ecuted in favor of 4acific .anF for additional finances. These transactions were all secured b9 the real estate mort6a6e over the +ipats: propert9. The promissor9 notes, e<port bills, and trust receipt eventuall9 became due and demandable. 0nfortunatel9, .(C defaulted in its pa9ments. After receipt of 4acific .anF:s demand letters, (stelita +ipat went to the office of the banF:s li;uidator and asFed for additional time to enable her to personall9 settle .(C:s obli6ations. The banF acceded to her re;uest but (stelita failed to fulfill her promise. Conse;uentl9, the real estate mort6a6e was foreclosed and after compliance with the re;uirements of the law the mort6a6ed propert9 was sold at public auction. 'n 81 /anuar9 1989, a certificate of sale was issued to respondent (u6enio D. Trinidad as the hi6hest bidder. 'n 28 #ovember 1989, the spouses +ipat filed before the HueBon Cit9 "TC a complaint for annulment of the real estate mort6a6e, e<traAudicial foreclosure and the certificate of sale issued over the propert9 a6ainst 4acific .anF and (u6enio D. Trinidad. The complaint alle6ed, amon6 others, that the promissor9 notes, trust receipt, and e<port bills were all ultra vires acts of Teresita as the9 were e<ecuted without the re;uisite board resolution of the .oard of Directors of .(C. The +ipats also averred that assumin6 said acts were valid and bindin6 on .(C, the same were the corporation:s sole obli6ation, it havin6 a personalit9 distinct and separate from spouses +ipat. ,t was liFewise pointed out that Teresita:s authorit9 to secure a loan from 4acific .anF was specificall9 limited to 2rs. +ipat:s sole use and benefit and that the real estate mort6a6e was e<ecuted to secure the +ipats: and .(T:s 4788,873.%% loan onl9. ,n their respective answers, 4acific .anF and Trinidad alle6ed in common that petitioners +ipat cannot evade pa9ments of the value of the promissor9 notes, trust receipt, and e<port bills with their propert9 because the9 and the .(C are one and the same, the latter bein6 a famil9 corporation. Trinidad further claimed that he was a bu9er in 6ood faith and for value and that the +ipat spouses are estopped from den9in6 .(C:s e<istence after holdin6 themselves out as a corporation. After trial on the merits, the "TC dismissed the complaint. The +ipats timel9 appealed the "TC decision to the Court of Appeals in CA !.". CD 3178$. )aid appeal, however, was dismissed b9 the appellate court for lacF of merit. The +ipats then moved for reconsideration, but this was denied b9 the appellate court in its "esolution of 28 1ebruar9 2%%%. The +ipat spouses filed the petition for review on certiorari. ,ssue= Ehether .(C and .(T are separate business entities, and thus the +ipt spouses can isolate themselves behind the corporate personalit9 of .(C.

-eld= Ehen the corporation is the mere alter e6o or business conduit of a person, the separate personalit9 of the corporation ma9 be disre6arded. This is commonl9 referred to as the &instrumentalit9 rule& or the alter e6o doctrine, which the courts have applied in disre6ardin6 the separate Auridical personalit9 of corporations. As held in one case, where one corporation is so or6aniBed and controlled and its affairs are conducted so that it is, in fact, a mere instrumentalit9 or adAunct of the other, the fiction of the corporate entit9 of the :instrumentalit9: ma9 be disre6arded. The control necessar9 to invoFe the rule is not maAorit9 or even complete stocF control but such domination of finances, policies and practices that the controlled corporation has, so to speaF, no separate mind, will or e<istence of its own, and is but a conduit for its principal. The evidence on record shows .(T and .(C are not separate business entities. >1@ (stelita and Alfredo +ipat are the owners and maAorit9 shareholders of .(T and .(C, respectivel9? >2@ both firms were mana6ed b9 their dau6hter, Teresita? 19 >8@ both firms were en6a6ed in the 6arment business, suppl9in6 products to &29stical 1ashion,& a 0.). firm established b9 (stelita +ipat? >3@ both firms held office in the same buildin6 owned b9 the +ipats? >7@ .(C is a famil9 corporation with the +ipats as its maAorit9 stocFholders? >$@ the business operations of the .(C were so mer6ed with those of 2rs. +ipat such that the9 were practicall9 indistin6uishable? >7@ the corporate funds were held b9 (stelita +ipat and the corporation itself had no visible assets? >8@ the board of directors of .(C was composed of the .ur6os and +ipat famil9 members? >9@ (stelita had full control over the activities of and decided business matters of the corporation? and that >1%@ (stelita +ipat had benefited from the loans secured from 4acific .anF to finance her business abroad and from the e<port bills secured b9 .(C for the account of &29stical 1ashion.& ,t could not have been coincidental that .(T and .(C are so intertwined with each other in terms of ownership, business purpose, and mana6ement. Apparentl9, .(T and .(C are one and the same and the latter is a conduit of and merel9 succeeded the former. The spouses: attempt to isolate themselves from and hide behind the corporate personalit9 of .(C so as to evade their liabilities to 4acific .anF is precisel9 what the classical doctrine of piercin6 the veil of corporate entit9 seeFs to prevent and remed9. .(C is a mere continuation and successor of .(T, and the +ipat spouses cannot evade their obli6ations in the mort6a6e contract secured under the name of .(C on the prete<t that it was si6ned for the benefit and under the name of .(T.