Alegre contended that plaintiff school had no permit and is not Dr. Lola was observed by this court not to be physically decrepit yet,
accredited to offer Physical Therapy courses. Yet, plaintiff produced a nor mentally infirmed, but is still alert and docile.
certificate coming from DECS that as of Sept. 22, 1987 or more than 2
years before the controversial broadcast, accreditation to offer Physical The contention that plaintiffs graduates become liabilities rather than
Therapy course had already been given the plaintiff, which certificate assets of our society is a mere conclusion. Being from the place
is signed by no less than the Secretary of Education and Culture himself, this court is aware that majority of the medical graduates of
herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could plaintiffs pass the board examination easily and become prosperous
have easily known this were they careful enough to verify. And yet, and responsible professionals.[33]
defendants were very categorical and sounded too positive when they
made the erroneous report that plaintiff had no permit to offer Physical Had the comments been an expression of opinion based on
Therapy courses which they were offering. established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
The allegation that plaintiff was getting tremendous aids from foreign facts.[34] However, the comments of Rima and Alegre were not backed
foundations like Mcdonald Foundation prove not to be true also. The up by facts. Therefore, the broadcasts are not privileged and remain
truth is there is no Mcdonald Foundation existing. Although a big libelous per se.
building of plaintiff school was given the name Mcdonald building,
The broadcasts also violate the Radio Code[35] of the Kapisanan
that was only in order to honor the first missionary in Bicol of
ng mga Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the
plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim
Radio Code provides:
of defendants over the air, not a single centavo appears to be received
by plaintiff school from the aforementioned McDonald Foundation
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND
which does not exist.
COMMENTARIES
Defendants did not even also bother to prove their claim, though
1. x x x
denied by Dra. Ago, that when medical students fail in one subject,
they are made to repeat all the other subject[s], even those they have
4. Public affairs program shall present public issues free
already passed, nor their claim that the school charges laboratory fees
from personal bias, prejudice and inaccurate and
even if there are no laboratories in the school. No evidence was
misleading information. x x x Furthermore, the station
presented to prove the bases for these claims, at least in order to give
shall strive to present balanced discussion of issues. x x x.
semblance of good faith.
xxx A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
7. The station shall be responsible at all times in the suffering or such sentiments as wounded feelings, serious anxiety,
supervision of public affairs, public issues and mental anguish or moral shock.[40] The Court of Appeals
commentary programs so that they conform to the cites Mambulao Lumber Co. v. PNB, et al.[41] to justify the award of
provisions and standards of this code. moral damages. However, the Courts statement in Mambulao that a
corporation may have a good reputation which, if besmirched, may
8. It shall be the responsibility of the newscaster, commentator, also be a ground for the award of moral damages is an obiter
host and announcer to protect public interest, general dictum.[42]
welfare and good order in the presentation of public
Nevertheless, AMECs claim for moral damages falls under item 7
affairs and public issues.[36] (Emphasis supplied)
of Article 2219[43] of the Civil Code. This provision expressly
authorizes the recovery of moral damages in cases of libel, slander or
The broadcasts fail to meet the standards prescribed in the Radio
any other form of defamation. Article 2219(7) does not qualify
Code, which lays down the code of ethical conduct governing
whether the plaintiff is a natural or juridical person. Therefore, a
practitioners in the radio broadcast industry. The Radio Code is a
juridical person such as a corporation can validly complain for libel or
voluntary code of conduct imposed by the radio broadcast industry on
any other form of defamation and claim for moral damages.[44]
its own members. The Radio Code is a public warranty by the radio
broadcast industry that radio broadcast practitioners are subject to a Moreover, where the broadcast is libelous per se, the law implies
code by which their conduct are measured for lapses, liability and damages.[45] In such a case, evidence of an honest mistake or the want
sanctions. of character or reputation of the party libeled goes only in mitigation
of damages.[46] Neither in such a case is the plaintiff required to
The public has a right to expect and demand that radio broadcast
introduce evidence of actual damages as a condition precedent to the
practitioners live up to the code of conduct of their profession, just like
recovery of some damages.[47] In this case, the broadcasts are
other professionals. A professional code of conduct provides the
libelous per se. Thus, AMEC is entitled to moral damages.
standards for determining whether a person has acted justly, honestly
and with good faith in the exercise of his rights and performance of his However, we find the award of P300,000 moral damages
duties as required by Article 19[37] of the Civil Code. A professional unreasonable. The record shows that even though the broadcasts were
code of conduct also provides the standards for determining whether a libelous per se, AMEC has not suffered any substantial or material
person who willfully causes loss or injury to another has acted in a damage to its reputation. Therefore, we reduce the award of moral
manner contrary to morals or good customs under Article 21[38] of the damages from P300,000 to P150,000.
Civil Code.
II.
III.
Whether AMEC is entitled to moral damages
Whether the award of attorneys fees is proper
Petitioners,
- versus -
Electric Company (Meralco) is a utility company supplying electricity
T.E.A.M. ELECTRONICS
in the Metro Manila area.
CORPORATION, TECHNOLOGY
ELECTRONICS ASSEMBLY and
MANAGEMENT PACIFIC Petitioner and NS Electronics (Philippines), Inc., the
CORPORATION; and ULTRA predecessor-in-interest of respondent TEC, were parties to two
ELECTRONICS INSTRUMENTS,
INC., separate contracts denominated as Agreements for the Sale of Electric
Pacific Corporation (TPC). On the other hand, petitioner Manila On September 28, 1987, a team of petitioners inspectors
Abangan. The two meters covered by account numbers 09341-1322-16 complaint on May 27, 1988 before the Energy Regulatory Board
and 09341-1812-13, were found to be allegedly tampered with and did (ERB) praying that electric power be restored to the DCIM
not register the actual power consumption in the building. The results building.[11] The ERB immediately ordered the reconnection of the
of the inspection were reflected in the Service Inspection service but petitioner complied with it only on October 12, 1988 after
Reports[7] prepared by the team. TEC paid P1,000,000.00, under protest. The complaint before the ERB
was later withdrawn as the parties deemed it best to have the issues
In a letter dated November 25, 1987, petitioner informed TEC
threshed out in the regular courts. Prior to the reconnection, or on June
of the results of the inspection and demanded from the latter the
7, 1988, petitioner conducted a scheduled inspection of the questioned
payment of P7,040,401.01 representing its unregistered consumption
meters and found them to have been tampered anew.[12]
from February 10, 1986 until September 28, 1987, as a result of the
alleged tampering of the meters.[8] TEC received the letters on January Meanwhile, on April 25, 1988, petitioner conducted another
7, 1988. Since Ultra was in possession of the subject building during inspection, this time, in TECs NS Building. The inspection allegedly
the covered period, TECs Managing Director, Mr. Bobby Tan, referred revealed that the electric meters were not registering the correct power
the demand letter to Ultra[9] which, in turn, informed TEC that its consumption. Petitioner, thus, sent a letter dated June 18,
Executive Vice-President had met with petitioners representative. 1988demanding payment of P280,813.72 representing the differential
Ultra further intimated that assuming that there was tampering of the billing.[13] TEC denied petitioners allegations and claim in a letter
meters, petitioners assessment was excessive.[10] For failure of TEC to dated June 29, 1988.[14] Petitioner, thus, sent TEC another letter
pay the differential billing, petitioner disconnected the electricity demanding payment of the aforesaid amount, with a warning that the
supply to the DCIM building on April 29, 1988. electric service would be disconnected in case of continued refusal to
pay the differential billing.[15] To avert the impending disconnection of
TEC demanded from petitioner the reconnection of electrical
electrical service, TEC paid the above amount, under protest.[16]
service, claiming that it had nothing to do with the alleged tampering
WHEREFORE, judgment is hereby rendered in this
On January 13, 1989, TEC and TPC filed a complaint for case in favor of the plaintiffs and against the defendants
damages against petitioner and Ultra[17] before the Regional Trial as follows:
Court (RTC) of Pasig. The case was raffled to Branch 162 and was
docketed as Civil Case No. 56851.[18] Upon the filing of the parties (1) Ordering both defendants
Meralco and ULTRA Electronics
answer to the complaint, pre-trial was scheduled.
Instruments, Inc. to jointly and
severally reimburse plaintiff TEC
At the pre-trial, the parties agreed to limit the issues, as
actual damages in the amount of ONE
follows: MILLION PESOS with legal rate of
interest from the date of the filing of
1. Whether or not the defendant Meralco is
this case on January 19, 1989 until the
liable for the plaintiffs disconnection of electric service
said amount shall have been fully paid;
at DCIM Building.
(2) Ordering defendant Meralco
to pay to plaintiff TEC the amount
2. Whether or not the plaintiff is liable for (sic) of P280,813.72 as actual damages with
the defendant for the differential billings in the amount legal rate of interest also from January
of P7,040,401.01. 19, 1989;
importantly, petitioners act of disconnecting the DCIM buildings The appellate court agreed with the RTCs conclusion. In addition, it
electric supply constituted bad faith and thus makes it liable for considered petitioner negligent for failing to discover the alleged
damages.[22] The court further denied petitioners claim of differential defects in the electric meters; in belatedly notifying TEC and TPC of
billing primarily on the ground of equitable negligence.[23] Considering the results of the inspection; and in disconnecting the electric power
that TEC and TPC paid P1,000,000.00 to avert the disconnection of without prior notice.
Petitioner now comes before this Court in this petition for review
9. In declaring that petitioner
on certiorari contending that:
MERALCO estopped from claiming any tampering of
The Court of Appeals committed grievous errors and the meters.
decided matters of substance contrary to law and the
10. In finding that the method employed by
rulings of this Honorable Court:
MERALCO to as certain (sic) the correct amount of
1. In finding that the issue in the case is whether there electricity consumed is questionable;
was deliberate tampering of the metering installations at
11. In declaring that MERALCO all throughout
the building owned by TEC.
its dealings with TEC took on an attitude which is
2. In not finding that the issue is: whether or not, based oppressive, wanton and reckless.
on the tampered meters, whether or not petitioner is
12. In declaring that MERALCO acted
entitled to differential billing, and if so, how much.
arbitrarily in inspecting TECs DCIM building and the
3. In declaring that petitioner ME RALCO had the NS building.
burden of proof to show by clear and convincing
13. In declaring that respondents TEC and TPC
evidence that with respect to the tampered meters that
are entitled to the damages which it awarded.
TEC and/or TPC authored their tampering.
14. In not declaring that petitioner is entitled to
4. In finding that petitioner Meralco should not have
the differential bill.
held TEC and/or TPC responsible for the acts of Ultra.
15. In not declaring that respondents are liable
5. In finding that TEC should not be held liable for the
to petitioner for exemplary damages, attorneys fee and
tampering of this electric meter in its DCIM Building.
expenses for litigation.[25]
6. In finding that there was no notice of disconnection.
The petition must fail.
7. In finding that petitioner MERALCO was negligent
in informing TEC of the alleged tampering.
The issues for resolution can be summarized as follows: 1) whether or
8. In making the finding that it is difficult to believe
that when petitioner MERALCO inspected on June 7, not TEC tampered with the electric meters installed at its DCIM and
1988 the meter installations, they were found to be NS buildings; 2) If so, whether or not it is liable for the differential
tampered.
billing as computed by petitioner; and 3) whether or not petitioner was
justified in disconnecting the electric power supply in TECs DCIM The first instance was supposedly discovered on September 28,
building. 1987. The inspector allegedly found the presence of a short circuiting
device and saw that the meter seal was deformed. In addition,
Petitioner insists that the tampering of the electric meters installed at
petitioner, through the Supervising Engineer of its Special Billing
the DCIM and NS buildings owned by respondent TEC has been
Analysis Department,[27] claimed that there was a sudden and
established by overwhelming evidence, as specifically shown by the
unexplainable drop in TECs electrical consumption starting February
shorting devices found during the inspection. Thus, says petitioner,
10, 1986. On the basis of the foregoing, petitioner concluded that the
tampering of the meter is no longer an issue.
electric meters were tampered with.
It is obvious that petitioner wants this Court to revisit the factual
However, contrary to petitioners claim that there was a drastic and
findings of the lower courts. Well-established is the doctrine that under
unexplainable drop in TECs electric consumption during the affected
Rule 45 of the Rules of Court, only questions of law, not of fact, may
period, the Pattern of TECs Electrical Consumption[28] shows that the
be raised before the Court. We would like to stress that this Court is
sudden drop is not peculiar to the said period. Noteworthy is the
not a trier of facts and may not re-examine and weigh anew the
observation of the RTC in this wise:
respective evidence of the parties. Factual findings of the trial court,
In fact, in Account No. 09341-1812-13 (heretofore
especially those affirmed by the Court of Appeals, are binding on this referred as Account/Meter No. 2), as evidenced by
Court.[26] Exhibits 35 and 35-A, there was likewise a sudden drop
of electrical consumption from the year 1984 which
Looking at the record, we note that petitioner claims to have recorded an average 141,300 kwh/month to 1985 which
recorded an averagekwh/month at 87,600 or a
discovered three incidences of meter-tampering; twice in the DCIM difference-drop of 53,700 kwh/month; from 1985s
building on September 28, 1987 and June 7, 1988; and once in the NS 87,600 recorded consumption, the same dropped to
18,600 kwh/month or a difference-drop of 69,000
building on April 24, 1988. kwh/month. Surely, a drop of 53,700 could be equally
categorized as a sudden drop amounting to 69,000
which, incidentally, the Meralco claimed as
unexplainable. x x x.[29]
The witnesses for petitioner who testified on the alleged Even more revealing is the fact that TECs meters registered
tampering of the electric meters, declared that tampering is committed 9,300 kwh and 19,200 kwh consumption on the first and second
by consumers to prevent the meter from registering the correct amount accounts, respectively, a month prior to the inspection. On the first
of electric consumption, and result in a reduced monthly electric bill, month after the meters were corrected, TECs electric
while continuing to enjoy the same power supply. Only the registration consumption registered at 9,300 kwh and 22,200 kwh on the respective
of actual electric energy consumption, not the supply of electricity, is accounts. These figures clearly show that there was no palpably drastic
affected when a meter is tampered with.[30] The witnesses claimed that difference between the consumption before and after the inspection,
after the inspection, the tampered electric meters were corrected, so casting a cloud of doubt over petitioners claim of meter-tampering.
that they would register the correct consumption of TEC. Logically, Indeed, Ultras explanation that the corporation was losing; thus, it had
then, after the correction of the allegedly tampered meters, the lesser consumption of electric power appear to be the more plausible
customers registered consumption would go up. reason for the drop in electric consumption.
In this case, the period claimed to have been affected by the Petitioner likewise claimed that when the subject meters were
tampered electric meters is from February 1986 until September again inspected on June 7, 1988, they were found to have been
1987.Based on petitioners Billing Record[31] (for the DCIM building), tampered anew. The Court notes that prior to the inspection, TEC was
TECs monthly electric consumption on Account No. 9341-1322-16 informed about it; and months before the inspection, there was an
was between 4,500 and 27,000 kwh.[32] Account No. 9341-1812-13 unsettled controversy between TEC and petitioner, brought about by
showed a monthly consumption between 9,600 and 34,200 kwh.[33] It the disconnection of electric power and the non-payment of differential
is interesting to note that, after correction of the allegedly tampered billing.We are more disposed to accept the trial courts conclusion that
meters, TECs monthly electric consumption from October 1987 to it is hard to believe that a customer previously apprehended for
February 1988 (the last month that Ultra occupied the DCIM building) tampered meters and assessed P7 million would further jeopardize
was between 8,700 and 24,300 kwh in its first account, and 16,200 to itself in the eyes of petitioner.[34] If it is true that there was evidence of
46,800 kwh on the second account. tampering found on September 28, 1987 and again on June 7, 1988,
the better view would be that the defective meters were not actually In view of the negative finding on the alleged tampering of electric
corrected after the first inspection. If so, then Manila Electric meters on TECs DCIM and NS buildings, petitioners claim of
Company v. Macro Textile Mills Corporation[35] would apply, where differential billing was correctly denied by the trial and appellate
we said that we cannot sanction a situation wherein the defects in the courts. With greater reason, therefore, could petitioner not exercise the
electric meter are allowed to continue indefinitely until suddenly, the right of immediate disconnection.
As to the alleged tampering of the electric meter in TECs NS building, provide for more expedient remedies such as the charging of
suffice it to state that the allegation was not proven, considering that differential billing and immediate disconnection against erring
the meters therein were enclosed in a metal cabinet the metal seal of consumers. Thus, electric companies found a creative way of availing
which was unbroken, with petitioner having sole access to the said themselves of such remedies by inserting into their service contracts
meters.[38] (or agreements for the sale of electric energy) a provision for
by the erring consumer. The Court has recognized the validity of such
stipulations.[43] However, recourse to differential billing with also be actually proven with a reasonable degree of certainty, premised
disconnection was subject to the prior requirement of a 48-hour written upon competent proof or the best evidence obtainable.[45]
notice of disconnection.[44]
Respondent TEC sufficiently established, and petitioner in fact
Petitioner, in the instant case, resorted to the remedy of disconnection admitted, that the former paid P1,000,000.00 and P280,813.72 under
without prior notice. While it is true that petitioner sent a demand letter protest, the amounts representing a portion of the latters claim of
to TEC for the payment of differential billing, it did not include any differential billing. With the finding that no tampering was committed
notice that the electric supply would be disconnected. In fine, and, thus, no differential billing due, the aforesaid amounts should be
petitioner abused the remedies granted to it under P.D. 401 and returned by petitioner, with interest, as ordered by the Court of
Revised General Order No. 1 by outrightly depriving TEC of electrical Appeals and pursuant to the guidelines set forth by the Court.[46]
As to the damages awarded by the CA, we deem it proper to modify building, promised to settle the claims of the latter. This ruling is
the same. Actual damages are compensation for an injury that will put erroneous.Ultras promise was conditioned upon the finding of defect
the injured party in the position where it was before the injury. They or tampering of the meters. It did not acknowledge any culpability and
pertain to such injuries or losses that are actually sustained and liability, and absent any tampered meter, it is absurd to make the
susceptible of measurement. Except as provided by law or by lawful occupant liable. It was petitioner who received the P1 million;
stipulation, a party is entitled to adequate compensation only for such thus, it alone should be held liable for the return of the amount.
pecuniary loss as is duly proven. Basic is the rule that to recover actual
TEC also sufficiently established its claim for the
damages, not only must the amount of loss be capable of proof; it must
reimbursement of the amount paid as rentals for the generator set it
by TEC as evidence sufficiently show that such rentals were indeed serious anxiety, mental anguish and moral shock. The only exception
made. However, the amount of P150,000.00 per month for five to this rule is when the corporation has a reputation that is debased,
months, awarded by the CA, is excessive. Instead, a total sum resulting in its humiliation in the business realm.[51] But in such a case,
of P150,000.00, as found by the RTC, is proper. it is imperative for the claimant to present proof to justify the award. It
the requisites of law must be complied with we affirm the award WHEREFORE, the petition is DENIED. The Decision of the
of P200,000.00 as exemplary damages. With the award of exemplary Court of Appeals in CA-G.R. CV No. 40282 dated June 18, 1997 and
damages, the award of attorneys fees is likewise proper, pursuant to its Resolution dated December 3, 1997 are AFFIRMED with the
Article 2208[48] of the Civil Code. It is obvious that TEC needed the following MODIFICATIONS: (1) the award of P150,000.00 per
services of a lawyer to argue its cause through three levels of the month for five months as reimbursement for the rentals of the
judicial hierarchy. Thus, the award of P200,000.00 is in order.[49] generator set is REDUCED to P150,000.00; and (2) the award
damages. TECs claim was premised allegedly on the damage to its SO ORDERED.
goodwill and reputation.[50] As a rule, a corporation is not entitled to
In the latter part of December, 1977 the board of directors of Akron Upon inquiry, private respondent found that no loan application was
Customs Brokerage Corporation (hereinafter referred to as Akron), ever filed by Akron with DBP. 12
composed of petitioner Jose Remo, Jr., Ernesto Bañares, Feliciano
Coprada, Jemina Coprada, and Dario Punzalan with Lucia Lacaste as In the meantime, Akron paid rentals of P500.00 a day pursuant to a
Secretary, adopted a resolution authorizing the purchase of thirteen subsequent agreement, from April 27, 1978 (the end of the 90-day
period to pay the balance) to May 31, 1978. Thereafter, no more rental After an ex parte reception of the evidence of the private respondent, a
payments were made. decision was rendered on October 28, 1980, the dispositive part of
which reads as follows:
On June 17, 1978, Coprada wrote private respondent begging for a
grace period of until the end of the month to pay the balance of the Finding the evidence sufficient to prove the case of the plaintiff,
purchase price; that he will update the rentals within the week; and in judgment is hereby rendered in favor of the plaintiff and against the
case he fails, then he will return the 13 units should private respondent defendants, ordering them jointly and severally to pay;
elect to get back the same. 13 Private respondent, through counsel,
wrote Akron on August 1, 1978 demanding the return of the 13 trucks a — the purchase price of the trucks in the amount of
and the payment of P25,000.00 back rentals covering the period from P525,000.00 with ... legal rate (of interest) from the
June 1 to August 1, 1978. 14 filing of the complaint until the full amount is paid;
Again, Coprada wrote private respondent on August 8, 1978 asking for b — rentals of Bagbag property at P1,000.00 a month
another grace period of up to August 31, 1978 to pay the balance, from August 1978 until the premises is cleared of the
stating as well that he is expecting the approval of his loan application said trucks;
from a certain financing company, and that ten (10) trucks have been
returned to Bagbag, Novaliches. 15 On December 9, 1978, Coprada c — attorneys fees of P10,000.00, and
informed private respondent anew that he had returned ten (10) trucks
to Bagbag and that a resolution was passed by the board of directors d — costs of suit.
confirming the deed of assignment to private respondent of P475,000
from the proceeds of a loan obtained by Akron from the State The P50,000.00 given as down payment shall pertain as rentals of the
Investment House, Inc. 16 trucks from June 1 to August 1, 1978 which is P25,000.00 (see
demand letter of Atty. Aniano Exhibit "T") and the remaining
In due time, private respondent filed a compliant for the recovery of P25,000.00 shall be from August 1, 1978 until the trucks are removed
P525,000.00 or the return of the 13 trucks with damages against Akron totally from the place." 17
and its officers and directors, Feliciano Coprada, Dario D. Punzalan,
Jemina Coprada, Lucia Lacaste, Wilfredo Layug, Arcadio de la Cruz, A motion for new trial filed by petitioner was denied so he appealed to
Francisco Clave, Vicente Martinez, Pacifico Dollario and petitioner the then Intermediate Appellate Court (IAC) wherein in due course a
with the then Court of First Instance of Rizal. Only petitioner decision was rendered on June 30, 1 983 setting aside the said decision
answered the complaint denying any participation in the transaction as far as petitioner is concemed. However, upon a motion for
and alleging that Akron has a distinct corporate personality. He was, reconsideration filed by private respondent dent, the IAC, in a
however, declared in default for his failure to attend the pre-trial. resolution dated February 8,1984, set aside the decision dated June 30,
1983. The appellate court entered another decision affirming the
In the meanwhile, petitioner sold all his shares in Akron to Coprada. It appealed decision of the trial court, with costs against petitioner.
also appears that Akron amended its articles of incorporation thereby
changing its name to Akron Transport International, Inc. which Hence, this petition for review wherein petitioner raises the following
assumed the liability of Akron to private respondent. issues:
I. The Intermediate Appellate Court (IAC) erred in As to the sale through pacto de retro of the two units to a third person
disregarding the corporate fiction and in holding the by the corporation by virtue of a board resolution, petitioner asserts
petitioner personally liable for the obligation of the that he never signed said resolution. Be that as it may, the sale is not
Corporation which decision is patently contrary to law inherently fraudulent as the 13 units were sold through a deed of
and the applicable decision thereon. absolute sale to Akron so that the corporation is free to dispose of the
same. Of course, it was stipulated that in case of default in payment to
II. The Intermediate Appellate Court (IAC) committed private respondent of the balance of the consideration, a chattel
grave error of law in its decision by sanctioning the mortgage lien shag be constituted on the 13 units. Nevertheless, said
merger of the personality of the corporation with that of mortgage is a prior lien as against the pacto de retro sale of the 2 units.
the petitioner when the latter was held liable for the
corporate debts. 18 As to the amendment of the articles of incorporation of Akron thereby
changing its name to Akron Transport International, Inc., petitioner
We reverse. alleges that the change of corporate name was in order to include
trucking and container yard operations in its customs brokerage of
The environmental facts of this case show that there is no cogent basis which private respondent was duly informed in a letter. 19Indeed, the
to pierce the corporate veil of Akron and hold petitioner personally new corporation confirmed and assumed the obligation of the old
liable for its obligation to private respondent. While it is true that in corporation. There is no indication of an attempt on the part of Akron
December, 1977 petitioner was still a member of the board of directors to evade payment of its obligation to private respondent.
of Akron and that he participated in the adoption of a resolution
authorizing the purchase of 13 trucks for the use in the brokerage There is the fact that petitioner sold his shares in Akron to Coprada
business of Akron to be paid out of a loan to be secured from a lending during the pendency of the case. Since petitioner has no personal
institution, it does not appear that said resolution was intended to obligation to private respondent, it is his inherent right as a stockholder
defraud anyone and more particularly private respondent. It was to dispose of his shares of stock anytime he so desires.
Coprada, President and Chairman of Akron, who negotiated with said
respondent for the purchase of 13 cargo trucks on January 25, 1978. It Mention is also made of the alleged "dumping" of 10 units in the
was Coprada who signed a promissory note to guarantee the payment premises of private respondent at Bagbag, Novaliches which to the
of the unpaid balance of the purchase price out of the proceeds of a mind of the Court does not prove fraud and instead appears to be an
loan he supposedly sought from the DBP. The word "WE' in the said attempt on the part of Akron to attend to its obligations as regards the
promissory note must refer to the corporation which Coprada said trucks. Again petitioner has no part in this.
represented in the execution of the note and not its stockholders or
directors. Petitioner did not sign the said promissory note so he cannot If the private respondent is the victim of fraud in this transaction, it has
be personally bound thereby. not been clearly shown that petitioner had any part or participation in
the perpetration of the same. Fraud must be established by clear and
Thus, if there was any fraud or misrepresentation that was foisted on convincing evidence. If at all, the principal character on whom fault
private respondent in that there was a forthcoming loan from the DBP should be attributed is Feliciano Coprada, the President of Akron,
when it fact there was none, it is Coprada who should account for the whom private respondent dealt with personally all through out.
same and not petitioner. Fortunately, private respondent obtained a judgment against him from
the trial court and the said judgment has long been final and executory.
WHEREFORE, the petition is GRANTED. The questioned resolution G.R. No. 103372 June 22, 1992
of the Intermediate Appellate Court dated February 8,1984 is hereby
set aside and its decision dated June 30,1983 setting aside the decision EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P.
of the trial court dated October 28, 1980 insofar as petitioner is DE GUZMAN, petitioner,
concemed is hereby reinstated and affirmed, without costs. vs.
HONARABLE COURT OF APPEALS (17th Division), ( Republic
SO ORDERED. of the Philippines), UNIVERSITY OF THE
PHILIPPINES, respondents.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.
CRUZ, J.:
ARTICLE XI
GUARANTEE
The private respondent subsequently demanded from EPG (1) The defect is hidden and the employer is not, by his
reimbursement of the said amount plus an equal sum as liquidated special knowledge, expected to recognize the same; or
damages. When the demand was rejected, UP sued EPG and its
president, Emmanuel P. de Guzman, in the Regional Trial Court of (2) The employer expressly reserves his rights against
Quezon City. De Guzman moved to dismiss the complaint as to him the contractor by reason of the defect.
for lack of a cause of action, but the motion was denied.
The exceptions were omitted by the petitioners for obvious reasons. company are its own responsibility and there is no reason why any
The defects complained against were hidden and the employer was not liability arising from such acts should be ascribed to him. Thus:
expected to recognize them at the time the work was accepted.
Moreover, there was an express reservation by UP of its right to hold It is a doctrine well-established and obtains both at law
the contractor liable for the defects during a period of one year. and in equity that a corporation is a distinct legal entity
to be considered as separate and apart from the
The petitioners' contention that the defects were caused by force individual stockholders or members who compose it,
majeure or fortuitous event as a result of the frequent brown-outs in and is not affected by the personal rights, obligations
Metro Manila is not meritorious. The Court is not prepared to accept and transactions of its stockholders or members. 3
that the recurrent power cut-offs can be classified as force majeure or a
fortuitous event, We agree that the real cause of the problem, The trial court did not explain why Emmanuel de Guzman was held
according to the petitioners' own subcontractor, was poor solidarity liable with EPG Construction Co., Inc., and neither did the
workmanship, as discovered upon inspection of the cooling system, respondent court when it affirmed the appealed decision, In its
Among the detects noted were improper interlocking of the entire Comment on the present petition, UP also did not refute the petitioners'
electrical system in all the six units; wrong specification of the time argument and simply passed upon it sub silentio although the matter
delay relay, also in all the six units; incorrect wiring connections on was squarely raised and discussed in the petition.
the oil pressure switches; improper setting of the Hi and Lo pressure
switches; and many missing parts like bolts and screws of panels, and Notably, when Emmanuel de Guzman moved to dismiss the complaint
the compressor terminal insulation, and the terminal screws of a circuit as to him, UP said in its opposition to the motion that it was suing him
breaker. 2 "in his official capacity and not in his personal capacity." His inclusion
as President of the company was therefore superfluous, as De Guzman
Curiously, it has not been shown that the cooling system in buildings correctly contended, because his acts as such were corporate acts
within the same area have been similarly damaged by the power cut- imputable to EPG itself as his principal. It is settled that;
offs. The brown-outs have become an intolerable annoyance, but they
cannot excuse all contractual irregularities, including the petitioners' A corporation is invested by law with a personality
shortcomings. separate and distinct from those of the persons
composing it as well as from that of any other entity to
The petitioners also claim that the breakdown of the cooling system which it may be related. Mere ownership by a single
was caused by the failure of UP to do maintenance work thereon. We stockholder or by another corporation of all or nearly all
do not see how mere maintenance work could have corrected the of the capital stock of a corporation is not of itself
above-mentioned defects. At any rate, whether the repairs in the air- sufficient ground for disregarding the separate
conditioning system can be considered mere maintenance work is a corporate personality. The general manager of a
factual issue. The resolution thereof by the lower courts is binding corporation therefore should not be made personally
upon this Court in the absence of a clear showing that it comes under answerable for the payment of the employee's
the accepted exceptions to the rule. There is no such showing here. backwages unless he had acted maliciously or in bad
faith in terminating the services of the employee. 4
The final point of the petition is that Emmanuel P. de Guzman has a
separate legal personality from EPG Construction Co., Inc. and should The exception noted is where the official "had acted maliciously or in
not be held solidarity liable with it. He stresses that the acts of the bad faith," in which event he may be made personally liable for his
own act. That exception is not applicable in the case at bar, because it
has not been proved that De Guzman acted maliciously or in bad faith
when, as President of EPG, he sought to protect its interests and
resisted UP's claims. Whatever damage was caused to UP as a result of
his acts is the sole responsibility of EPG even though De Guzman was
its principal officer and controlling stockholder.
In sum, we hold that the lower court did not err in holding EPG liable
for the repair of the air-conditioning system at its expense pursuant to
the guarantee provision in the construction contract with UP. However,
Emmanuel de Guzman is not solidarily liable with it, having acted on
its behalf within the scope of his authority and without any
demonstrated malice or bad faith.
The fact is, complainant Boaquina was in fact part of the first batch of The decision of Labor Arbiter Villarente, Jr., declaring private
retrenchees. She was duly notified of her retrenchment, as well as the respondents to have lost their employment status due to their
proper labor authorities.Ms. Boaquina alleged in her position participation in an illegal strike is of no really significance to
paper/affidavit that: petitioners. It should suffice to say, as so aptly observed by the NLRC,
that the retrenchment of private respondents has, in fact, preceded the
[O]n September 12, 1992, I was illegally laid-off for no reason that I declaration of strike.
know other than my union activities. I was recalled on October 6, 1992
It is, instead, on the issue of joint and solidary liability of
and again I was laid-off in a memorandum of January 4, 1993 effective
petitioner Frank Yih with API that the Court has decided to give due
the end of said month.
course to the instant petition. The court cannot agree with the
Solicitor-General in suggesting that even if Frank Yih had no direct
Complainant Boaquina of course failed, obvious wittingly, to tell her
hand in the dismissal of the respondents he should be personally liable
story truthfully. In the first place, she was never terminated for her
therefor on account alone of his being the President and majority
union activities. Asionics just concluded its CBA with the employees
stockholder of the company. The disquisition by the Court in Santos
bargaining representative. Asionics were also too preoccupied with
vs. NLRC[14] is quite succinct and clear. Thus -
more earthshaking and exigent problems, principally that of getting the
business back on its feet, to concern themselves with potential
"A corporation is a juridical entity with legal personality separate and
(whether real or imagined) entanglements/complications with the
distinct from those acting for and in its behalf and, in general, from the
union, much less of one individual member. Moreover, for academic
people comprising it.The rule is that obligations incurred by the
discussion, let us say that indeed complainant Boaquina was targeted
corporation, acting through its directors, officers and employees, are
for termination due to union activities.Under the circumstances, she
its sole liabilities. Nevertheless, being a mere fiction of law, peculiar The basic rule is still that which can deduced from the Courts
situations or valid grounds can exist to warrant, albeit done sparingly, pronouncement in Sunio vs. National Labor Relations Commission
the disregard of its independent being and the lifting of the corporate (127 SCRA 390), thus:
veil. As a rule, this situation might arise when a corporation is used to
evade a just and due obligation or to justify a wrong, to shield or We come now to the personal liability of petitioner, Sunio, who was
perpetrate fraud, to carry out similar unjustifiable aims or intentions, or made jointly and severally responsible with petitioner company and
as a subterfuge to commit injustice and so circumvent the law." CIPI for the payment of the backwages of private respondents. This is
reversible error. The Assistant Regional Directors Decision failed to
"xxx xxx xxx" disclose the reason why he was made personally liable. Respondents,
however, alleged as grounds thereof, his being the owner of one-half
It is true, there were various cases when corporate officers were (1/2) interest of said corporation, and his alleged arbitrary dismissal of
themselves held by the Court to be personally accountable for the private respondents.
payment of wages and money claims to its employees. In A.C. Ransom
Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under Petitioner Sunio was impleaded in the Complaint in his capacity as
the Minimum Wage Law, the responsible officer of an employer General Manager of petitioner corporation. There appears to be no
corporation could be held personally liable for nonpayment of evidence on record that he acted maliciously or in bad faith in
backwages for `(i)f the policy of the law were otherwise, the terminating the services of private respondents. His act, therefore, was
corporation employer (would) have devious ways for evading payment within the scope of his authority and was a corporate act.
of back wages. In the absence of a clear identification of the officer
directly responsible for failure to pay the backwages, the Court It is basic that a corporation is invested by law with a personality
considered the President of the corporation as such officer. The case separate and distinct from those of the persons composing it as well as
was cited in Chua vs. NLRC in holding personally liable the vice- from that of any other legal entity to which it may be related. Mere
president of the company, being the highest and most ranking official ownership by a single stockholder or by another corporation of all or
of the corporation next to the President who was dismissed, for the nearly all of the capital stock of a corporation is not of itself sufficient
latters claim for unpaid wages. ground for disregarding the separate corporate personality. Petitioner
Sunio, therefore, should not have been made personally answerable for
A review of the above exceptional cases would readily disclose the the payment of private respondents back salaries.
attendance of facts and circumstances that could rightly sanction
personal liability on the part of the company officer. In A.C. Ransom, The Court, to be sure, did appear to have deviated somewhat in Gudez
the corporate entity was a family corporation and execution against it vs. NLRC (183 SCRA 644), however, it should be clear from our
could not be implemented because of the disposition posthaste of its recent pronouncement in Mam Realty Development Corporation and
leviable assets evidently in order to evade its just and due Manuel Centeno vs. NLRC (244 SCRA 797), that the Sunio doctrine
obligations. The doctrine of `piercing the veil of corporate fiction was still prevails.[15]
this clearly appropriate. Chua likewise involved another family
corporation, and this time the conflict was between two brothers Nothing on record is shown to indicate that Frank Yih has acted in
occupying the highest ranking positions in the company. There were bad faith or with malice in carrying out the retrenchment program of
incontrovertible facts which pointed to extreme personal animosity the company. His having been held by the NLRC to be solidarily and
that resulted, evidently in bad faith, in the easing out from the personally liable with API is thus legally unjustified.
company of one of the brothers by the other.
WHEREFORE, the questioned decision of the NLRC is
MODIFIED insofar as it holds herein petitioner Frank Yih personally
liable with Asionics Philippines, Inc., which portion of the decision is
SET ASIDE; in all other respects, however, the questioned decision is
AFFIRMED and remains unaffected. No costs.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo,
Panganiban, and Quisumbing, JJ., concur.