TITLE: Yutivo v CT

Facts:1. Yutivo Sons Hardware Co, a domestic corporation incorporated in 1916 under Philippine laws, wasengaged
in the importation and sale of hardware supplies and equipment
.2. After the first world war, it resumed its business and bought a number of cars and trucks fromGeneral
Motors(GM), an American Corporation licensed to do business in the Philippines. As importer,GM paid sales tax
prescribed by the Tax Code on the basis of its selling price to Yutivo. Yutivo paid nofurther sales tax on its sales to the
public.
3. On June 13, 1946, the Southern Motors Inc,(SM) was organized to engage in the business of sellingcars, trucks
and spare parts. One of the subscribers of stocks during its incorporation was Yu Khe Thai,
Yu Khe Siong and Hu Kho Jin, who are sons of Yu Tiong Yee, one of Yutivos founders.
4. After SMs incorporation and until the withdrawal of GM from the Philippines, the cars and trucks
purchased by Yutivo from GM were sold by Yutivo to SM which the latter sold to the public.
5. Yutivo was appointed importer for Visayas and Mindanao by the US manufacturer of cars and truckssold by GM.
Yutivo paid the sales tax prescribed on the basis of selling price to SM. SM paid no sales taxon its sales to the public.
6. An assessment of PhP 1.8 million was made upon Yutivo for deficiency sales tax plus surcharge. TheCollector of
Internal Revenue, contends that the taxable sales were the retail sales by SM to the publicand not the sales at
wholesale made by Yutivo to the latter inasmuch as SM and Yutivo were one andthe same corporation, the
former being a subsidiary of the latter.
7. Yutivo: Disputed the assessment.8. After reinvestigation, a second assessment was made, sustaining the validity
of the first assessment.9. Yutivo contested the second assessment, alleging that there is no valid ground to disregard
thecorporate personality of SM and to hold that it is an adjunct of
petitioner.
ISSUES:
1. Whether or not the corporate personality of SM could be disregarded for the purposes of taxation?Yes.
2. WON there was fraud on the part of Yutivo and SM? No, therefore no tax evasion.RATIO:
1. General Rule: A corporation is an entity separate and distinct from its stockholders and from other corporations
to which it may be connected. However, when the notion of legal entity is used to defea tpublic convenience,
justify wrong, protect fraud, or defend crime, the law will regard the corporation asan association of persons, or,
in the case of two corporations, merge them into one. When the corporation is a mere alter ego or business
conduit of a person, it may be disregarded
2. SC ruled that CTA was not justified in finding that SM was organized to defraud the Government. SM was
organized in June 1946, from that date until June 30, 1947, GM was the importer of the cars and trucks sold to
Yutivo, which in turn was sold to SM. GM, as importer was the one solely liable for sales taxes. Neither Yutivo
nor SM was subjectto the sales taxes. Yutivos liability arose only until July 1, 1947when it became the importer. Hence,
there was no tax to evade.
3. It should be stated that the intention to minimize taxes, when used in the context of fraud, must be proved to
exist by clear and convincing evidence amounting to more than mere preponderance, and cannot be justified by
a mere speculation. This is because fraud is never lightly to be presumed. Fraud is never imputed and the
courts never sustain findings of fraud upon circumstances which, at the most,create only suspicion.
4. TAX EVASION vs TAX AVOIDANCE: Tax evasion" is a term that connotes fraud thru the use of pretenses and
forbidden devices to lessen or defeat taxes. The transactions between Yutivo and SM, however, have always
been in the open, embodied in private and public documents, constantly subject to inspection by the tax
authorities. But the attempt to avoid tax does not necessarily establish fraud. It is a settled principle that a
taxpayer may diminish his liability by any means which the law permits (tax avoidance).
5. However, SC agreed with the respondent court that SM was actually owned and controlled by
Yutivo.Indications that Yutivo treated SM merely as its department or adjunct:
a.
The founders of the corporation are closely related to each other by blood and affinity
b.
The object and purpose of the business is the same; both are engaged in sale of vehicles, spare
parts,hardware supplies and equipment.

c.

The accounting system maintained by Yutivo shows that it maintained high degree of control over SM
accounts.
d.
d. Several correspondences have reference to Yutivo as the head office of SM. SM may even freely
useforms or stationery of Yutivo.
e. All cash collections of SMs branches are remitted directly to Yutivo.
f. The controlling majority of the Board of Directors of Yutivo is also the controlling majority of SM.
g. The principal officers of both corporations are identical. Both corporations have a common comptroller in
the person of Simeon Sy, who is a brother-inlaw of Yutivos president, Yu Khe Thai.
h. Yutivo, financed principally the business of SM and actually extended all the credit to the latter notonly in
the form of starting capital but also in the form of credits extended for the cars and vehiclesallegedly sold by
Yutivo to SM
.6. Southern Motors being but a mere instrumentality, or adjunct of Yutivo, the Court of Tax Appealscorrectly
disregarded the technical defense of separate corporate entity in order to arrive at the true taxliability of Yutivo. But
there is no basis for the imposition of the 50% fraud surcharge.
7. Where to impose the tax?Gross selling price or gross value in money. These terms, do not include the amount of
the sales tax, ifinvoiced separately. 'Gross selling price' or gross value in money' of the articles sold,
bartered,exchanged, transferred as the term is used in the aforecited sections (of the National Internal
RevenueCode, is the total amount of money or its equivalent which the purchaser pays to the vendor to receiveor get
the goods. However, if a manufacturer, producer, or importer, in fixing the gross selling price ofan article sold by him
has included an amount intended to cover the sales tax in the gross selling price ofthe articles, the sales tax shall be
based on the gross selling price less the amount intended to cover thetax, if the same is billed to the purchaser as a
separate item.DISPOSITIVE: CTA decision modified in that petitioner shall be ordered to pay to respondent the sum
ofP820,549.91, plus 25% surcharge thereon for late payment.

Good Earth Emporium Inc and Lim Ka Ping, petitionersv.CA and Roces-Reyes Realty Inc., respondents
This is a petition for review on certiorari of the decision CA reversing the decision of respondent Judge RTC of
Manila, whichreversed the resolution of the Metropolitan Trial Court Of Manila denying herein
GEEsmotion to quash the alias writ of execution issued against them.
Facts:
A lease contract was entered into between ROCES and GEE. A five-storey building was the subject of which, upon
failure of the latter to pay its rentals, ROCES filed an ejectment case against the petitioner. The MTC of Mla rendered
a decisionordering GEE and all persons under him to vacate the premises and surrender the same to ROCES and
pay the plaintiffs therental.GEE filed a motion to quash the writ of execution but the same was denied by the MTC for
lack of merit. In 1987 the RTC of Manila reversed the decision of the MTC finding that the amount of P1 million
evidenced by Exhibit "I" and another P1million evidenced by the pacto de retro sale instrument were in full
satisfaction of the judgment obligation.On further appeal, the CA reversed the decision of the RTC and reinstated the
Resolution of the MTC of Manila. GEEs m/rwas denied, hence this petition.
Issue:
Whether or not there was full satisfaction of the judgment debt in favor of respondent corporation which would justify
thequashing of the Writ of Execution
Ruling:
The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to respondent
corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that the payment was in
favor of the latter, especially where the amount was not receipted for by respondent corporation and there is
absolutely no indication in the receipt from which it can be reasonably inferred, that said payment was in satisfaction

of the judgment debt. Likewise, nosuch inference can be made from the execution of the pacto de retro sale which
was not made in favor of respondent corporation but in favor of the two Roces brothers in their individual capacities
without any reference to the judgment tobligation in favor of respondent corporation. Respondent court was correct in
stating that it "cannot go beyond what appears in the documents submitted by petitioners themselves in the absence
of clear and convincing evidence" that would support its claim that the judgment obligation hasindeed been fully
satisfied which would warrant the quashal of the Alias Writ of Execution.It has been an established rule that when the
existence of a debt is fully established by the evidence (which has been donein this case), the burden of proving that
it has been extinguished by payment devolves upon the debtor who offers such adefense to the claim of the plaintiff
creditor

Buenaflor Umali vs. CA

Mauricia Castillo was the administratrix in charge over a parcel of land left be Felipe Castillo. Said land was
mortgaged to the Development Bank of the Philippines and was about to be foreclosed but then Mauricias nephew,
Santiago Rivera, proposed that they convert the land into 4 subdivisions so that they can raise the necessary money
to avoid foreclosure. Mauricia agreed. Rivera sought to develop said land through his company, Slobec Realty
Corporation (SRC), of which he was also the president. SRC then contracted with Bormaheco, Inc. for the purchase
of one tractor. Bormaheco agreed to sell the tractor on an installment basis. At the same time, SRC mortgaged said
tractor to Bormaheco as security just in case SRC will default. As additional security, Mauricia and other family
members executed a surety agreement whereby in case of default in paying said tractor, the Insurance Corporation
of thePhilippines (ICP) shall pay the balance. The surety bond agreement between Mauricia and ICP was secured by
Mauricias parcel of land (same land to be developed).
SRC defaulted in paying said tractor. Bormaheco foreclosed the tractor but it wasnt enough hence ICP paid the
deficiency. ICP then foreclosed the property of Mauricia. ICP later sold said property toPhilippine Machinery Parts
Manufacturing Corporation (PMPMC). PMPMC then demanded Mauricia et al to vacate the premises of said
property.
While all this was going on, Mauricia died. Her successor-administratrix, Buenaflor Umali, questioned the foreclosure
made by ICP. Umali alleged that all the transactions are void and simulated hence they were defrauded; that through
Bormahecos machinations, Mauricia was fooled into entering into a surety agreement with ICP; that Bormaheco
even made the premium payments to ICP for said surety bond; that the president of Bormaheco is a director of
PMPMC; that the counsel who assisted in all the transactions, Atty. Martin De Guzman, was the legal counsel of ICP,
Bormaheco, and PMPMC.
ISSUE: Whether or not the veil of corporate fiction should be pierced.
HELD: No. There is no clear showing of fraud in this case. The mere fact that Bormaheco paid said premium
payments to ICP does not constitute fraud per se. As it turned out, Bormaheco is an agent of ICP. SRC, through
Rivera, agreed that part of the payment of the mortgage shall be paid for the insurance. Naturally, when Rivera was
paying some portions of the mortgage to Bormaheco, Bormaheco is applying some parts thereof for the payment of
the premium and this was agreed upon beforehand.

Further, piercing the veil of corporate fiction is not the proper remedy in order that the foreclosure conducted by ICP
be declared a nullity. The nullity may be attacked directly without disregarding the separate identity of the
corporations involved. Further still, Umali et al are not enforcing a claim against the individual members of the
corporations. They are not claiming said members to be liable. Umali et al are merely questioning the validity of the
foreclosure.
The veil of corporate fiction cant be pierced also by the simple reason that the businesses of two or more
corporations are interrelated, absent sufficient showing that the corporate entity was purposely used as a shield to
defraud creditors and third persons of their rights. In this case, there is no justification for disregarding their separate
personalities.

Mambulao Lumber Company, plaintiff-appellantvs.Philippine Natl. Bank and Anacleto Heraldo, Deputy
Provincial Sheriff of Cam-Norte,def-appellees
This is an appeal from the decision of the CFI of Manila dismissing the complaint against bothdefendants and
sentencing the plaintiff to pay the defendant the sum of P3,582.52 with interestthereon at the rate of 6% per annum
from Dec. 22,1961 until fully paid and the costs of the suit.
Facts:
In seeking the reversal of the decision, the plaintiff contended that its total indebtedness to the PNBhas been paid by
the proceeds of the foreclosure sale of its real property and the additional amountremitted by it to the Bank.On the
belief that the proceeds of the abovestated sale is insufficient to cover the Plaintiffs debt,
PNBsent a letter to the Provincial Sheriff of Cam-Norte requesting him to take possession of the chattelsmortgaged
to it by the plaintiff and sell them at public auction.Plaintiff alleged that the auction sale of the chattels mortgaged is
void for being violative of theagreement provided in the mortgage contract:
in cases of both judicial and extra-judicial foreclosure under Act 1508, as amended, thecorresponding complaint for
foreclosure or the petition for sale should be filed with the courts or the
Sheriff of Manila, as the case may be
Herein appellant claims moral damages on account of the said violation.
Issue:
Whether Mambulao can validly claim for moral damages
Ruling:
No. An artificial person like herein appellant corporation cannot experience physical sufferings, mentalanguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which are basis of moral damagesA corporation
may have a good reputation which, if besmirched, may also be a ground for the award of moral damages. The same
cannot be considered under the facts of this case, however, not onlybecause it is admitted that herein appellant had
already ceased in its business operation at the time of the foreclosure sale of the chattels, but also for the reason that
whatever adverse effects of theforeclosure sale of the chattels could have upon its reputation or business standing
would undoubtedlybe the same whether the sale was conducted at Jose Panganiban, Camarines Norte, or in Manila
whichis the place agreed upon by the parties in the mortgage contract

Concept Builders Inc. vs. NLRC Case Digest

Concept Builders Inc. vs. National Labor Relations Commission

[GR 108734, 29 May 1996]

Facts: Concept Builders, Inc., (CBI) a domestic corporation, with principal office at 355 Maysan Road, Valenzuela,
Metro Manila, is engaged in the construction business while Norberto Marabe; Rodolfo Raquel, Cristobal Riego,
Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano
Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe
Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos were employed by
said company as laborers, carpenters and riggers. On November 1981, Marabe, et. al. were served individual written
notices of termination of employment by CBI, effective on 30 November 1981. It was stated in the individual notices
that their contracts of employment had expired and the project in which they were hired had been completed. The
National Labor Relations Commission (NLRC) found it to be, the fact, however, that at the time of the termination of
Marabe, et.al.'s employment, the project in which they were hired had not yet been finished and completed. CBI had
to engage the services of sub-contractors whose workers performed the functions of Marabe, et. al. Aggrieved,
Marabe, et. al. filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday pay,
overtime pay and thirteenth-month pay against CBI. On 19 December 1984, the Labor Arbiter rendered judgment
ordering CBI to reinstate Marabe et. al. and to pay them back wages equivalent to 1 year or 300 working days. On 27
November 1985, the NLRC dismissed the motion for reconsideration filed by CBI on the ground that the said decision
had already become final and executory.
On 16 October 1986, the NLRC Research and Information Department made the finding that Marabe, et. al.'s back
wages amounted to P199,800.00. On 29 October 1986, the Labor Arbiter issued a writ of execution directing the
sheriff to execute the Decision, dated 19 December 1984. The writ was partially satisfied through garnishment of
sums from CBI's debtor, the Metropolitan Waterworks and Sewerage Authority, in the amount of P81,385.34. Said
amount was turned over to the cashier of the NLRC. On 1 February 1989, an Alias Writ of Execution was issued by
the Labor Arbiter directing the sheriff to collect from CBI the sum of P117,414.76, representing the balance of the
judgment award, and to reinstate Marabe, et. al. to their former positions. On 13 July 1989, the sheriff issued a report
stating that he tried to serve the alias writ of execution on petitioner through the security guard on duty but the service
was refused on the ground that CBI no longer occupied the premises. On 26 September 1986, upon motion of
Marabe, et. al., the Labor Arbiter issued a second alias writ of execution. The said writ had not been enforced by the
special sheriff because, as stated in his progress report dated 2 November 1989, that all the employees inside CBI's
premises claimed that they were employees of Hydro Pipes Philippines, Inc. (HPPI) and not by CBI; that levy was
made upon personal properties he found in the premises; and that security guards with high-powered guns prevented
him from removing the properties he had levied upon. The said special sheriff recommended that a "break-open
order" be issued to enable him to enter CBI's premises so that he could proceed with the public auction sale of the
aforesaid personal properties on 7 November 1989. On 6 November 1989, a certain Dennis Cuyegkeng filed a thirdparty claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by
HPPI, of which he is the Vice-President. On 23 November 1989, Marabe, et. al. filed a "Motion for Issuance of a
Break-Open Order," alleging that HPPI and CBI were owned by the same incorporator/stockholders. They also
alleged that petitioner temporarily suspended its business operations in order to evade its legal obligations to them
and that Marabe, et. al. were willing to post an indemnity bond to answer for any damages which CBI and HPPI may
suffer because of the issuance of the break-open order. On 2 March 1990, the Labor Arbiter issued an Order which
denied Marabe, et. al.'s motion for break-open order.
Marabe, et. al. then appealed to the NLRC. On 23 April 1992, the NLRC set aside the order of the Labor Arbiter,
issued a break-open order and directed Marabe, et. al. to file a bond. Thereafter, it directed the sheriff to proceed with
the auction sale of the properties already levied upon. It dismissed the third-party claim for lack of merit. CBI moved
for reconsideration but the motion was denied by the NLRC in a Resolution, dated 3 December 1992. Hence, the
petition.
Issue: Whether the NLRC was correct in issuing the break-open order to levy the HPPI properties located at CBI
amd/or HPPIs premises at 355 Maysan Road, Valenzuela, Metro Manila.

Held: It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of
a corporation is merely a fiction created by law for convenience and to promote justice. So, when the notion of
separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is
used as a device to defeat the labor laws, this separate personality of the corporation may be disregarded or the veil
of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an
alter ego of another corporation. The conditions under which the juridical entity may be disregarded vary according to
the peculiar facts and circumstances of each case. No hard and fast rule can be accurately laid down, but certainly,
there are some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil,
to wit: (1) Stock ownership by one or common ownership of both corporations; (2) Identity of directors and officers;
(3) The manner of keeping corporate books and records; and (4) Methods of conducting the business. The SEC en
banc explained the "instrumentality rule" which the courts have applied in disregarding the separate juridical
personality of corporations as "Where one corporation is so organized and controlled and its affairs are conducted so
that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the
"instrumentality" may be disregarded. The control necessary to invoke the rule is not majority or even complete stock
control but such domination of instances, policies and practices that the controlled corporation has, so to speak, no
separate mind, will or existence of its own, and is but a conduit for its principal. It must be kept in mind that the
control must be shown to have been exercised at the time the acts complained of took place. Moreover, the control
and breach of duty must proximately cause the injury or unjust loss for which the complaint is made." The test in
determining the applicability of the doctrine of piercing the veil of corporate fiction is as (1) Control, not mere majority
or complete stock control, but complete domination, not only of finances but of policy and business practice in
respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own; (2) Such control must have been used by the defendant to commit fraud or wrong,
to perpetuate the violation of a statutory or other positive legal duty or dishonest and unjust act in contravention of
plaintiff's legal rights; and (3) The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of. The absence of any one of these elements prevents "piercing the corporate veil." In applying the
"instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with how the corporation
operated and the individual defendant's relationship to that operation. Thus the question of whether a corporation is a
mere alter ego, a mere sheet or paper corporation, a sham or a subterfuge is purely one of fact. Here, while CBI
claimed that it ceased its business operations on 29 April 1986, it filed an Information Sheet with the Securities and
Exchange Commission on 15 May 1987, stating that its office address is at 355 Maysan Road, Valenzuela, Metro
Manila. On the other hand, HPPI, the third-party claimant, submitted on the same day, a similar information sheet
stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila. Further, both information sheets
were filed by the same Virgilio O. Casio as the corporate secretary of both corporations. Both corporations had the
same president, the same board of directors, the same corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the CBI and the HPPI shared the same address and/or
premises. Under these circumstances, it cannot be said that the property levied upon by the sheriff were not of CBI's.
Clearly, CBI ceased its business operations in order to evade the payment to Marabe, et. al. of back wages and to
bar their reinstatement to their former positions. HPPI is obviously a business conduit of CBI and its emergence was
skillfully orchestrated to avoid the financial liability that already attached to CBI.

Acme Shoe and Plastic Corpo vs. Ca

Contracts of Security: Chattel Mortgage
The rule on after-incurred obligations
Is a corporation entitled to moral damages?

FACTS:
Chua Pac, president and general manager of Acme Shoe, Rubber and Plastic Corporation, executed a chattel
mortgage in favor of Producers Bank of the Philippines, as a security for a corporate loan in the amount of P3M. The
chattel mortgage contained a clause that provided for the mortgage to stand as security for all other obligations
contracted before, during and after the constitution of the mortgage.
The P3M was paid. Subsequently, the corporation obtained additional financial accommodations totalling P2.7M. This
was also paid on the due date. Again, the bank extended another loan to the corporation in the amount of P1M,
covered by four promissory notes. However, the corporation was unable to pay this at maturity. Thereupon, the bank
applied for an extra-judicial foreclosure of mortgage.
For its part, the corporation filed an action for injunction with prayer for damages. The lower court ultimately
dismissed the case and ordered the extra-judicial foreclosure of mortgage. Hence, this appeal.
ISSUEs:
W/N extra-judicial foreclosure of the chattel mortgage is proper
If not proper, W/N the corporation is entitled to damages as a result of the extra-judicial foreclosure
HELD:
Contracts of Security
Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or suretyship,
the faithful performance of the obligation by the principal debtor is secured by the personal commitment of another
(the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment
is secured by an encumbrance of property -- in pledge, the placing of movable property in the possession of the
creditor; in chattel mortgage by the execution of the corresponding and substantially in teh form prescribed by law; in
real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in
antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property
with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the principal of his credit
-- upon the essential condition that if the obligation becomes due and the debtor defaults, then the property
encumbered can be alienated for the payment of the obligation, but that should the obligation be duly paid, then the
contract is automatically extinguished proceeding from the accessory character of the agreement. As the law so puts
it, once the obligation is complied with, then the contract of security becomes, ipso facto, null and void.
After-incurred Obligations
While a pledge, real estate mortgage, or antichresis may exceptionaly secure after-incurred obligations so long as
these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the
time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to
be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come
into existence or arise until after a chattel mortgage agreement covered the newly contracted debt is executed either
by concluding a fresh chattel mortgage or by amending the old contract conformably with the Chattel Mortgage Law.
Refusal on the part of borrower to execute the agreement so as to cover the after-incurred obligation can constitute
as an act of default on the part of the borrower of the financing agreement wherein the promise is written, but, of
course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the
chattel mortgage sought to be foreclosed.
In the case at bar, the chattel mortgage was terminated when payment for the P3M loan was made so there was no
chattel mortgage to even foreclose at the time the bank instituted the extra-judicial foreclosure.

Damages
In its complaint, the corporation asked for moral damages sustained "as a result of the unlawful action taken by the
respondent bank against it." The court said -"Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an
artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore
it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having
a nervous system and it flows from real ills and sorrows and griefs of life -- all of which cannot be suffered by
respondent bank as an artificial person.
"Although Chua Pac was included in the case, he was only so named as a party in representation of the corporation."

BPI VS. CASA MONTESSORI INTERNATIONAL

FACTS: On November 8, 1982, CASA Montessori International opened Current AccouNT with BPI with CASAs
President Lebron as one of its authorized signatories. In 1991, after conducting an investigation, plaintiff discovered
that nine of its checks had been encashed by a certain Sonny D. Santos since 1990 in the total amount of
P782,000.00. It turned out that Santos with account at BPI Greenbelt Branch was a fictitious name used by third
party defendant Leonardo T. Yabut who worked as external auditor of CASA. Third party defendant voluntarily
admitted that he forged the signature of Lebron and encashed the checks. In 1991, plaintiff filed Complaint for
Collection with Damages against defendant bank praying that the latter be ordered to reinstate the amount of
P782,500.00 with interest. RTC rendered decision in favor of the plaintiff. CA modified decision holding CASA as
contributory negligent hence ordered Yabut to reimburse BPI half the total amount claimed and CASA, the other half.
It also disallowed attorneys fees and moral and exemplary damages.
ISSUE: W/N moral and exemplary damages and attorneys fees should be awarded.
RULING: Moral and exemplary damages denied but atty.s fees granted.
In the absence of a wrongful act or omission, or of fraud or bad faith, moral damages cannot be awarded. The
adverse result of an action does not per se make the action wrongful, or the party liable for it.CASA was unable to
identify the particular instance upon which its claim for moral damages is predicated. Neither bad faith nor negligence
so gross that it amounts to malice can be imputed to BPI.
Imposed by way of correction for the public good, exemplary damages cannot be recovered as a matter of right.
There is no bad faith on the part of BPI for paying the checks of CASA upon forged signatures. Therefore, the former
cannot be said to have acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The latter, having
no right to moral damages, cannot demand exemplary damages.
When the act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latters
interest, or where the court deems it just and equitable, attorneys fees may be recovered. In the present case, BPI
persistently denied the claim of CASA under the NIL to recredit the latters account for the value of the forged checks.

This denial constrained CASA to incur expenses and exert effort for more than ten years in order to protect its
corporate interest in its bank account.

Filipinas Broadcasting vs. Ago Medical Center

GRN 141994 January 17, 2005

Carpio, J.:

FACTS:

Rima & Alegre were host of FBNI radio program Expose. Respondent Ago was the owner of the Medical &
Educational center, subject of the radio program Expose. AMEC claimed that the broadcasts were defamatory and
owner Ago and school AMEC claimed for damages. The complaint further alleged that AMEC is a reputable learning
institution. With the supposed expose, FBNI, Rima and Alegre transmitted malicious imputations and as such,
destroyed plaintiffs reputation. FBNI was included as defendant for allegedly failing to exercise due diligence in the
selection and supervision of its employees. The trial court found Rimas statements to be within the bounds of
freedom of speech and ruled that the broadcast was libelous. It ordered the defendants Alegre and FBNI to pay
AMEC 300k for moral damages.
ISSUE:
Whether or not AMEC is entitled to moral damages.
RULING:
A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
Nevertheless, AMECs claim, or moral damages fall under item 7 of Art 2219 of the NCC.
This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of
defamation. Art 2219 (7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical
person such as a corporation can validly complain for libel or any other form of defamation and claim for moral

damages. Moreover, where the broadcast is libelous per se, the law implied damages. In such a case, evidence of an
honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages. In this
case, the broadcasts are libelous per se. thus, AMEC is entitled to moral damages. However, we find the award
P500,000 moral damages unreasonable. The record shows that even though the broadcasts were libelous, per se,
AMEC has not suffered any substantial or material damage to its reputation. Therefore, we reduce the award of moral
damages to P150k.
v JOIN TORT FEASORS are all the persons who command, instigate, promote, encourage, advice countenance,
cooperate in, aid or abet the commission of a tort, as who approve of it after it is done, for its benefit.