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PALAY, INC vs. JACOBO C. CLAVE, G.R. No. L-56076, 124
SCRA 638, Sepe!"e# 21, 1$83
PALAY, INC. %&' ALBER( ONS(O((, petitioner,
vs.
JACOBO C. CLAVE,
G.R. No. L-56076 Sepe!"e# 21, 1$83
PALAY, INC. %&' ALBER( ONS(O((, petitioner,
vs.
JACOBO C. CLAVE, P#e)*'e&*%+ E,e-.*/e A))*)%&
NA(IONAL 0O1SING A1(0ORI(Y %&' NA2ARIO
314PI( respondents.
4ELENCIO-0ERRERA, J.:
The Resolution, dated May 2, 1980, issued by Presidential
Executive ssistant !acobo "lave in #.P. "ase $o. 1%&9,
directin' petitioners Palay, (nc. and lberto #nstott )ointly and
severally, to re*und to private respondent, $a+ario ,u-pit, the
a-ount o* P1.,/22.&0 0ith 121 interest per annu-, as
resolved by the $ational 2ousin' uthority in its Resolution o*
!uly 10, 19/9 in "ase $o. 213/, as 0ell as the Resolution o*
#ctober 28, 1980 denyin' petitioners4 Motion *or
Reconsideration o* said Resolution o* May 2, 1980, are bein'
assailed in this petition.
#n March 28, 193&, petitioner Palay, (nc., throu'h its
President, lbert #nstott executed in *avor o* private
respondent, $a+ario ,u-pit, a "ontract to 5ell a parcel o*
6and 76ot $o. 8, 8loc9 (:; o* the "restvie0 2ei'hts 5ubdivision
in ntipolo, Ri+al, 0ith an area o* 1,13& s<uare -eters, =
covered by T"T $o. 90%&%, and o0ned by said corporation.
The sale price 0as P2.,.00.00 0ith 91 interest per annu-,
payable 0ith a do0npay-ent o* P%,330.00 and -onthly
install-ents o* P2%3.%2 until *ully paid. Para'raph 3 o* the
contract provided *or auto-atic extra)udicial rescission upon
de*ault in pay-ent o* any -onthly install-ent a*ter the lapse o*
90 days *ro- the expiration o* the 'race period o* one -onth,
0ithout need o* notice and 0ith *or*eiture o* all install-ents
paid.
Respondent ,u-pit paid the do0npay-ent and several
install-ents a-ountin' to P1.,/22.&0. The last pay-ent 0as
-ade on ,ece-ber &, 193/ *or install-ents up to 5epte-ber
193/.
#n May 10, 19/., or al-ost six 73; years later, private
respondent 0rote petitioner o**erin' to update all his overdue
accounts 0ith interest, and see9in' its 0ritten consent to the
assi'n-ent o* his ri'hts to a certain 6ourdes ,i+on. 2e
*ollo0ed this up 0ith another letter dated !une 20, 19/.
reiteratin' the sa-e re<uest. Replyin' petitioners in*or-ed
respondent that his "ontract to 5ell had lon' been rescinded
pursuant to para'raph 3 o* the contract, and that the lot had
already been resold.
>uestionin' the validity o* the rescission o* the contract,
respondent *iled a letter co-plaint 0ith the $ational 2ousin'
uthority 7$2; *or reconveyance 0ith an altenative prayer *or
re*und 7"ase $o. 213/;. (n a Resolution, dated !uly 10, 19/9,
the $2, *indin' the rescission void in the absence o* either
)udicial or notarial de-and, ordered Palay, (nc. and lberto
#nstott in his capacity as President o* the corporation, )ointly
and severally, to re*und i--ediately to $a+ario ,u-pit the
a-ount o* P1.,/22.&0 0ith 121 interest *ro- the *ilin' o* the
co-plaint on $ove-ber 8, 19/%. Petitioners4 Motion *or
Reconsideration o* said Resolution 0as denied by the $2 in
its #rder dated #ctober 2., 19/9.
1
#n appeal to the #**ice o* the President, upon the alle'ation
that the $2 Resolution 0as contrary to la0 7#.P. "ase $o.
1%&9;, respondent Presidential Executive ssistant, on May 2,
1980, a**ir-ed the Resolution o* the $2. Reconsideration
sou'ht by petitioners 0as denied *or lac9 o* -erit. Thus, the
present petition 0herein the *ollo0in' issues are raised?
(
@hether notice or de-and is not -andatory under the
circu-stances and, there*ore, -ay be dispensed 0ith by
stipulation in a contract to sell.
((
@hether petitioners -ay be held liable *or the re*und o* the
install-ent pay-ents -ade by respondent $a+ario M. ,u-pit.
(((
@hether the doctrine o* piercin' the veil o* corporate *iction
has application to the case at bar.
(:
@hether respondent Presidential Executive ssistant
co--itted 'rave abuse o* discretion in upholdin' the decision
o* respondent $2 holdin' petitioners solidarily liable *or the
re*und o* the install-ent pay-ents -ade by respondent
$a+ario M. ,u-pit thereby denyin' substantial )ustice to the
petitioners, particularly petitioner #nstott
@e issued a Te-porary Restrainin' #rder on Aeb 11, 1981
en)oinin' the en*orce-ent o* the <uestioned Resolutions and
o* the @rit o* Execution that had been issued on ,ece-ber 2,
1980. #n #ctober 28, 1981, 0e dis-issed the petition but
upon petitioners4 -otion, reconsidered the dis-issal and 'ave
due course to the petition on March 1&, 1982.
#n the *irst issue, petitioners -aintain that it 0as )usti*ied in
cancellin' the contract to sell 0ithout prior notice or de-and
upon respondent in vie0 o* para'raph 3 thereo* 0hich
provides=
3. That in case the 8BCER *alls to satis*y any -onthly
install-ent or any other pay-ents herein a'reed upon, the
8BCER shall be 'ranted a -onth o* 'race 0ithin 0hich to
-a9e the pay-ent o* the t in arrears to'ether 0ith the one
correspondin' to the said -onth o* 'race. =(t shall be
understood, ho0ever, that should the -onth o* 'race herein
'ranted to the 8BCER expire, 0ithout the pay-ent D
correspondin' to both -onths havin' been satis*ied, an
interest o* ten 7101; per cent per annu- shall be char'ed on
the a-ounts the 8BCER should have paidE it is understood
*urther, that should a period o* $($ETC 790; ,C5 elapse to
be'in *ro- the expiration o* the -onth o* 'race hereinbe*ore
-entioned, and the 8BCER shall not have paid all the a-ounts
that the 8BCER should have paid 0ith the correspondin'
interest up to the date, the 5E66ER shall have the ri'ht to
declare this contract cancelled and o* no e**ect 0ithout notice,
and as a conse<uence thereo*, the 5E66ER -ay dispose o*
the lotFlots covered by this "ontract in *avor o* other persons,
as i* this contract had never been entered into. (n case o* such
cancellation o* this "ontract, all the a-ounts 0hich -ay have
been paid by the 8BCER in accordance 0ith the a'ree-ent,
to'ether 0ith all the i-prove-ents -ade on the pre-ises,
shall be considered as rents paid *or the use and occupation o*
the above -entioned pre-ises and *or li<uidated da-a'es
su**ered by virtue o* the *ailure o* the 8BCER to *ul*ill his part
o* this a'ree-ent ? and the 8BCER hereby renounces his ri'ht
to de-and or reclai- the return o* the sa-e and *urther
obli'ates peace*ully to vacate the pre-ises and deliver the
sa-e to the 5E66ER.
@ell settled is the rule, as held in previous )urisprudence,
2
that
)udicial action *or the rescission o* a contract is not necessary
0here the contract provides that it -ay be revo9ed and
cancelled *or violation o* any o* its ter-s and conditions.
2o0ever, even in the cited cases, there 0as at least a 0ritten
notice sent to the de*aulter in*or-in' hi- o* the rescission. s
stressed in University of the Philippines vs. Walfrido de los
Angeles
3
the act o* a party in treatin' a contract as cancelled
should be -ade 9no0n to the other. @e <uote the pertinent
excerpt?
#* course, it -ust be understood that the act o* a party in
treatin' a contract as cancelled or resolved in account o*
in*ractions by the other contractin' party must be made known
to the other and is always provisional being ever subject to
scrutiny and review by the proper court. If the other party
denies that rescission is justified it is free to resort to judicial
action in its own behalf, and bring the matter to court. Then,
should the court, a*ter due hearin', decide that the resolution
o* the contract 0as not 0arranted, the responsible party 0ill be
sentenced to da-a'esE in the contrary case, the resolution 0ill
be a**ir-ed, and the conse<uent inde-nity a0arded to the
party pre)udiced.
(n other 0ords, the party 0ho dee-s the contract violated -ay
consider it resolved or rescinded, and act accordin'ly, 0ithout
previous court action, but itproceeds at its own risk. Aor it is
only the *inal )ud'-ent o* the correspondin' court that 0ill
conclusively and *inally settle 0hether the action ta9en 0as or
0as not correct in la0. 8ut the la0 de*initely does not re<uire
that the contractin' party 0ho believes itsel* in)ured -ust *irst
*ile suit and 0ait *or a )ud'-ent be*ore ta9in' extra)udicial
steps to protect its interest. #ther0ise, the party in)ured by the
other4s breach 0ill have to passively sit and 0atch its da-a'es
accu-ulate durin' the pendency o* the suit until the *inal
)ud'-ent o* rescission is rendered 0hen the la0 itsel* re<uires
that he should exercise due dili'ence to -ini-i+e its o0n
da-a'es 7"ivil "ode, rticle 220.;.
@e see no con*lict bet0een this rulin' and the previous
)urisprudence o* this "ourt invo9ed by respondent declarin'
that )udicial action is necessary *or the resolution o* a
reciprocal obli'ation 7#ce)o Pere+ D "o., vs. (nternational
8an9in' "orp., ./ Phil. 3.1E Republic vs. 2ospital de 5an !uan
,e ,ios, et al., 8% Phil 820; since in every case where the
etrajudicial resolution is contested only the final award of the
court of competent jurisdiction can conclusively settle whether
the resolution was proper or not. (t is in this sense that )udicial
action 0in be necessary, as 0ithout it, the extra)udicial
resolution 0ill re-ain contestable and sub)ect to )udicial
invalidation unless attac9 thereon should beco-e barred by
ac<uiescense, estoppel or prescription.
Aears have been expressed that a stipulation providin' *or a
unilateral rescission in case o* breach o* contract -ay render
nu'atory the 'eneral rule re<uirin' )udicial action 7v. Aootnote,
Padilla "ivil 6a0, "ivil "ode nno., 193/ ed. :ol. (:, pa'e
1%0; but, as already observed, in case of abuse or error by the
rescinder the other party is not barred from !uestioning in
court such abuse or error, the practical effect of the stipulation
being merely to transfer to the defaulter the initiative of
instituting suit, instead of the rescinder 7E-phasis supplied;.
#* si-ilar i-port is the rulin' in "era vs. #acante
4
, readin'?
stipulation entitlin' one party to ta9e possession o* the land
and buildin' i* the other party violates the contract does not e
propio vigore con*er upon the *or-er the ri'ht to ta9e
possession thereo* i* ob)ected to 0ithout )udicial intervention
and deter-ination.
This 0as reiterated in $ulueta vs. %ariano
5
0here 0e held that
extra)udicial rescission has le'al e**ect 0here the other party
does not oppose it.
6
@here it is ob)ected to, a )udicial
deter-ination o* the issue is still necessary.
(n other 0ords, resolution o* reciprocal contracts -ay be -ade
extra)udicially unless success*ully i-pu'ned in "ourt. (* the
debtor i-pu'ns the declaration, it shall be sub)ect to )udicial
deter-ination.
7
(n this case, private respondent has denied that rescission is
)usti*ied and has resorted to )udicial action. (t is no0 *or the
"ourt to deter-ine 0hether resolution o* the contract by
petitioners 0as 0arranted.
@e hold that resolution by petitioners o* the contract 0as
ine**ective and inoperative a'ainst private respondent *or lac9
o* notice o* resolution, as held in the U.P. vs. Angeles case,
supra
Petitioner relies on &orralba vs. 'e los Angeles
8
0here it 0as
held that Gthere 0as no contract to rescind in court because
*ro- the -o-ent the petitioner de*aulted in the ti-ely pay-ent
o* the install-ents, the contract bet0een the parties 0as
dee-ed ipso facto rescinded.G 2o0ever, it should be noted
that even in that case notice in 0ritin' 0as -ade to the vendee
o* the cancellation and annul-ent o* the contract althou'h the
contract entitled the seller to i--ediate repossessin' o* the
land upon de*ault by the buyer.
The indispensability o* notice o* cancellation to the buyer 0as
to be later underscored in Republic ct $o. 3&&1 entitled Gn
ct to Provide Protection to 8uyers o* Real Estate on
(nstall-ent Pay-ents.G 0hich too9 e**ect on 5epte-ber 1%,
19/2, 0hen it speci*ically provided?
5ec. .7b; ... the actual cancellation o* the contract shall ta9e
place a*ter thirty days *ro- receipt by the buyer o* the notice of
cancellation or the de-and *or rescission o* the contract by a
notarial act and upon *ull pay-ent o* the cash surrender value
to the buyer. 7E-phasis supplied;.
The contention that private respondent had 0aived his ri'ht to
be noti*ied under para'raph 3 o* the contract is neither
-eritorious because it 0as a contract o* adhesion, a standard
*or- o* petitioner corporation, and private respondent had no
*reedo- to stipulate. 0aiver -ust be certain and
une<uivocal, and intelli'ently -adeE such 0aiver *ollo0s only
0here liberty o* choice has been *ully accorded.
$
Moreover, it
is a -atter o* public policy to protect buyers o* real estate on
install-ent pay-ents a'ainst onerous and oppressive
conditions. @aiver o* notice is one such onerous and
oppressive condition to buyers o* real estate on install-ent
pay-ents.
Re'ardin' the second issue on re*und o* the install-ent
pay-ents -ade by private respondent. rticle 1.8& o* the "ivil
"ode provides?
RT. 1.8&. Rescission creates the obli'ation to return the
thin's 0hich 0ere the ob)ect o* the contract, to'ether 0ith their
*ruits, and the price 0ith its interestE conse<uently, it can be
carried out only 0hen he 0ho de-ands rescission can return
0hatever he -ay be obli'ed to restore.
$either sha- rescission ta9e place 0hen the thin's 0hich are
the ob)ect o* the contract are le'ally in the possession o* third
persons 0ho did not act in bad *aith.
(n this case, inde-nity *or da-a'es -ay be de-anded *ro-
the person causin' the loss.
s a conse<uence o* the resolution by petitioners, ri'hts to the
lot should be restored to private respondent or the sa-e
should be replaced by another acceptable lot. 2o0ever,
considerin' that the property had already been sold to a third
person and there is no evidence on record that other lots are
still available, private respondent is entitled to the re*und o*
install-ents paid plus interest at the le'al rate o* 121
co-puted *ro- the date o* the institution o* the action.
10
(t
0ould be -ost ine<uitable i* petitioners 0ere to be allo0ed to
retain private respondent4s pay-ents and at the sa-e ti-e
appropriate the proceeds o* the second sale to another.
@e co-e no0 to the third and *ourth issues re'ardin' the
personal liability o* petitioner #nstott 0ho 0as -ade )ointly and
severally liable 0ith petitioner corporation *or re*und to private
respondent o* the total a-ount the latter had paid to petitioner
co-pany. (t is basic that a corporation is invested by la0 0ith a
personality separate and distinct *ro- those o* the persons
co-posin' it as 0en as *ro- that o* any other le'al entity to
0hich it -ay be related.
11
s a 'eneral rule, a corporation -ay
not be -ade to ans0er *or acts or liabilities o* its stoc9holders
or those o* the le'al entities to 0hich it -ay be connected and
vice versa. 2o0ever, the veil o* corporate *iction -ay be
pierced 0hen it is used as a shield to *urther an end subversive
o* )ustice
12
E or *or purposes that could not have been intended
by the la0 that created it
13
E or to de*eat public convenience,
)usti*y 0ron', protect *raud, or de*end cri-e.
14
E or to
perpetuate *raud or con*use le'iti-ate issues
15
E or to
circu-vent the la0 or perpetuate deception
16
E or as an alter
e'o, ad)unct or business conduit *or the sole bene*it o* the
stoc9holders.
17
@e *ind no bad'es o* *raud on petitioners4 part. They had
literally relied, albeit -ista9enly, on para'raph 3 7supra; o* its
contract 0ith private respondent 0hen it rescinded the contract
to sell extra )udicially and had sold it to a third person.
(n this case, petitioner #nstott 0as -ade liable because he
0as then the President o* the corporation and have to be the
controllin' stoc9holder. $o su**icient proo* exists on record that
said petitioner used the corporation to de*raud private
respondent. 2e cannot, there*ore, be -ade personally liable
)ust because he Gappears to be the controllin' stoc9holderG.
Mere o0nership by a sin'le stoc9holder or by another
corporation is not o* itsel* su**icient 'round *or disre'ardin' the
separate corporate personality.
18
(n this respect then, a
-odi*ication o* the Resolution under revie0 is called *or.
@2EREA#RE, the <uestioned Resolution o* respondent public
o**icial, dated May 2, 1980, is hereby -odi*ied. Petitioner
Palay, (nc. is directed to re*und to respondent $a+ario M.
,u-pit the a-ount o* P1.,/22.&0, 0ith interest at t0elve
7121; percent per annu- *ro- $ove-ber 8, 19/%, the date o*
the *ilin' o* the "o-plaint. The te-porary Restrainin' #rder
hereto*ore issued is hereby li*ted.
$o costs.
5# #R,ERE,.
G.R. No. L-67626 Ap#*+ 18, 1$8$
JOSE RE4O, JR., petitioner,
vs.
(0E 0ON. IN(ER4E3IA(E APPELLA(E CO1R( %&' E.B.
4ARC0A (RANSPOR( CO4PANY, INC., #ep#e)e&e' "5
API6ANIO B. 4ARC0A, respondents.
(rbos, )abusora, 'umlao * +ta. Ana for petitioner.

GANCAYCO, J.:
corporation is an entity separate and distinct *ro- its
stoc9holders. @hile not in *act and in reality a person, the la0
treats a corporation as thou'h it 0ere a person by process o*
*iction or by re'ardin' it as an arti*icial person distinct and
separate *ro- its individual stoc9holders. 1
2o0ever, the corporate *iction or the notion o* le'al entity -ay
be disre'arded 0hen it Gis used to de*eat public convenience,
)usti*y 0ron', protect *raud, or de*end cri-eG in 0hich instances
Gthe la0 0ill re'ard the corporation as an association o*
persons, or in case o* t0o corporations, 0ill -er'e the- into
one.G The corporate *iction -ay also be disre'arded 0hen it is
the G-ere alter e'o or business conduit o* a person.G 2 There
are -any occasions 0hen this "ourt pierced the corporate veil
because o* its use to protect *raud and to )usti*y 0ron'. 3 The
herein petition *or revie0 o* a. resolution o* the (nter-ediate
ppellate "ourt dated Aebruary 8, 198% see9in' the reversal
thereo* and the reinstate-ent o* its earlier decision dated !une
.0, 198. in "=H.R. $o. 38%93=R 4 calls *or the application o*
the *ore'oin' principles.
(n the latter part o* ,ece-ber, 19// the board o* directors o*
9ron "usto-s 8ro9era'e "orporation 7hereina*ter re*erred to
as 9ron;, co-posed o* petitioner !ose Re-o, !r., Ernesto
8aIares, Aeliciano "oprada, !e-ina "oprada, and ,ario
Pun+alan 0ith 6ucia 6acaste as 5ecretary, adopted a
resolution authori+in' the purchase o* thirteen 71.; truc9s *or
use in its business to be paid out o* a loan the corporation -ay
secure *ro- any lendin' institution. 5
Aeliciano "oprada, as President and "hair-an o* 9ron,
purchased thirteen truc9s *ro- private respondent on !anuary
2&, 19/8 *or and in consideration o* P&2&,000.00 as evidenced
by a deed o* absolute sale. 6 (n a side a'ree-ent o* the sa-e
date, the parties a'reed on a do0npay-ent in the a-ount o*
P&0,000.00 and that the balance o* P%/&,000.00 shall be paid
0ithin sixty 730; days *ro- the date o* the execution o* the
a'ree-ent. The parties also a'reed that until said balance is
*ully paid, the do0n pay-ent o* P&0,000.00 shall accrue as
rentals o* the 1. truc9sE and that i* 9ron *ails to pay the
balance 0ithin the period o* 30 days, then the balance shall
constitute as a chattel -ort'a'e lien coverin' said car'o truc9s
and the parties -ay allo0 an extension o* .0 days and
therea*ter private respondent -ay as9 *or a revocation o* the
contract and the reconveyance o* all said truc9s. 7
The obli'ation is *urther secured by a pro-issory note
executed by "oprada in *avor o* 9ron. (t is stated in the
pro-issory note that the balance shall be paid *ro- the
proceeds o* a loan obtained *ro- the ,evelop-ent 8an9 o* the
Philippines 7,8P; 0ithin sixty 730; days. 8 *ter the lapse o* 90
days, private respondent tried to collect *ro- "oprada but the
latter pro-ised to pay only upon the release o* the ,8P loan.
Private respondent sent "oprada a letter o* de-and dated May
10, 19/8. $ (n his reply to the said letter, "oprada reiterated
that he 0as applyin' *or a loan *ro- the ,8P *ro- the
proceeds o* 0hich pay-ent o* the obli'ation shall be -ade. 10
Mean0hile, t0o o* the truc9s 0ere sold under a pacto de
retro sale to a certain Mr. 8ais o* the Perpetual 6oans and
5avin's 8an9 at 8aclaran. The sale 0as authori+ed by a board
resolution -ade in a -eetin' held on March 1&, 19/8.11
Bpon in<uiry, private respondent *ound that no loan application
0as ever *iled by 9ron 0ith ,8P. 12
(n the -eanti-e, 9ron paid rentals o* P&00.00 a day pursuant
to a subse<uent a'ree-ent, *ro- pril 2/, 19/8 7the end o* the
90=day period to pay the balance; to May .1, 19/8. Therea*ter,
no -ore rental pay-ents 0ere -ade.
#n !une 1/, 19/8, "oprada 0rote private respondent be''in'
*or a 'race period o* until the end o* the -onth to pay the
balance o* the purchase priceE that he 0ill update the rentals
0ithin the 0ee9E and in case he *ails, then he 0ill return the 1.
units should private respondent elect to 'et bac9 the
sa-e. 13 Private respondent, throu'h counsel, 0rote 9ron on
u'ust 1, 19/8 de-andin' the return o* the 1. truc9s and the
pay-ent o* P2&,000.00 bac9 rentals coverin' the period *ro-
!une 1 to u'ust 1, 19/8. 14
'ain, "oprada 0rote private respondent on u'ust 8, 19/8
as9in' *or another 'race period o* up to u'ust .1, 19/8 to
pay the balance, statin' as 0ell that he is expectin' the
approval o* his loan application *ro- a certain *inancin'
co-pany, and that ten 710; truc9s have been returned to
8a'ba', $ovaliches. 15 #n ,ece-ber 9, 19/8, "oprada
in*or-ed private respondent ane0 that he had returned ten
710; truc9s to 8a'ba' and that a resolution 0as passed by the
board o* directors con*ir-in' the deed o* assi'n-ent to private
respondent o* P%/&,000 *ro- the proceeds o* a loan obtained
by 9ron *ro- the 5tate (nvest-ent 2ouse, (nc. 16
(n due ti-e, private respondent *iled a co-pliant *or the
recovery o* P&2&,000.00 or the return o* the 1. truc9s 0ith
da-a'es a'ainst 9ron and its o**icers and directors, Aeliciano
"oprada, ,ario ,. Pun+alan, !e-ina "oprada, 6ucia 6acaste,
@il*redo 6ayu', rcadio de la "ru+, Arancisco "lave, :icente
Martine+, Paci*ico ,ollario and petitioner 0ith the then "ourt o*
Airst (nstance o* Ri+al. #nly petitioner ans0ered the co-plaint
denyin' any participation in the transaction and alle'in' that
9ron has a distinct corporate personality. 2e 0as, ho0ever,
declared in de*ault *or his *ailure to attend the pre=trial.
(n the -ean0hile, petitioner sold all his shares in 9ron to
"oprada. (t also appears that 9ron a-ended its articles o*
incorporation thereby chan'in' its na-e to 9ron Transport
(nternational, (nc. 0hich assu-ed the liability o* 9ron to
private respondent.
*ter an e parte reception o* the evidence o* the private
respondent, a decision 0as rendered on #ctober 28, 1980, the
dispositive part o* 0hich reads as *ollo0s?
Aindin' the evidence su**icient to prove the case o* the plainti**,
)ud'-ent is hereby rendered in *avor o* the plainti** and a'ainst
the de*endants, orderin' the- )ointly and severally to payE
a J the purchase price o* the truc9s in the a-ount o*
P&2&,000.00 0ith ... le'al rate 7o* interest; *ro- the *ilin' o* the
co-plaint until the *ull a-ount is paidE
b J rentals o* 8a'ba' property at P1,000.00 a -onth *ro-
u'ust 19/8 until the pre-ises is cleared o* the said truc9sE
c J attorneys *ees o* P10,000.00, and
d J costs o* suit.
The P&0,000.00 'iven as do0n pay-ent shall pertain as
rentals o* the truc9s *ro- !une 1 to u'ust 1, 19/8 0hich is
P2&,000.00 7see de-and letter o* tty. niano Exhibit GTG; and
the re-ainin' P2&,000.00 shall be *ro- u'ust 1, 19/8 until
the truc9s are re-oved totally *ro- the place.G 17
-otion *or ne0 trial *iled by petitioner 0as denied so he
appealed to the then (nter-ediate ppellate "ourt 7(";
0herein in due course a decision 0as rendered on !une .0, 1
98. settin' aside the said decision as *ar as petitioner is
conce-ed. 2o0ever, upon a -otion *or reconsideration *iled
by private respondent dent, the (", in a resolution dated
Aebruary 8,198%, set aside the decision dated !une .0, 198..
The appellate court entered another decision a**ir-in' the
appealed decision o* the trial court, 0ith costs a'ainst
petitioner.
2ence, this petition *or revie0 0herein petitioner raises the
*ollo0in' issues?
(. The (nter-ediate ppellate "ourt 7("; erred in disre'ardin'
the corporate *iction and in holdin' the petitioner personally
liable *or the obli'ation o* the "orporation 0hich decision is
patently contrary to la0 and the applicable decision thereon.
((. The (nter-ediate ppellate "ourt 7("; co--itted 'rave
error o* la0 in its decision by sanctionin' the -er'er o* the
personality o* the corporation 0ith that o* the petitioner 0hen
the latter 0as held liable *or the corporate debts. 18
@e reverse.
The environ-ental *acts o* this case sho0 that there is no
co'ent basis to pierce the corporate veil o* 9ron and hold
petitioner personally liable *or its obli'ation to private
respondent. @hile it is true that in ,ece-ber, 19// petitioner
0as still a -e-ber o* the board o* directors o* 9ron and that
he participated in the adoption o* a resolution authori+in' the
purchase o* 1. truc9s *or the use in the bro9era'e business o*
9ron to be paid out o* a loan to be secured *ro- a lendin'
institution, it does not appear that said resolution 0as intended
to de*raud anyone and -ore particularly private respondent. (t
0as "oprada, President and "hair-an o* 9ron, 0ho
ne'otiated 0ith said respondent *or the purchase o* 1. car'o
truc9s on !anuary 2&, 19/8. (t 0as "oprada 0ho si'ned a
pro-issory note to 'uarantee the pay-ent o* the unpaid
balance o* the purchase price out o* the proceeds o* a loan he
supposedly sou'ht *ro- the ,8P. The 0ord G@E4 in the said
pro-issory note -ust re*er to the corporation 0hich "oprada
represented in the execution o* the note and not its
stoc9holders or directors. Petitioner did not si'n the said
pro-issory note so he cannot be personally bound thereby.
Thus, i* there 0as any *raud or -isrepresentation that 0as
*oisted on private respondent in that there 0as a *orthco-in'
loan *ro- the ,8P 0hen it *act there 0as none, it is "oprada
0ho should account *or the sa-e and not petitioner.
s to the sale throu'h pacto de retro o* the t0o units to a third
person by the corporation by virtue o* a board resolution,
petitioner asserts that he never si'ned said resolution. 8e that
as it -ay, the sale is not inherently *raudulent as the 1. units
0ere sold throu'h a deed o* absolute sale to 9ron so that the
corporation is *ree to dispose o* the sa-e. #* course, it 0as
stipulated that in case o* de*ault in pay-ent to private
respondent o* the balance o* the consideration, a chattel
-ort'a'e lien sha' be constituted on the 1. units.
$evertheless, said -ort'a'e is a prior lien as a'ainst
the pacto de retro sale o* the 2 units.
s to the a-end-ent o* the articles o* incorporation o* 9ron
thereby chan'in' its na-e to 9ron Transport (nternational,
(nc., petitioner alle'es that the chan'e o* corporate na-e 0as
in order to include truc9in' and container yard operations in its
custo-s bro9era'e o* 0hich private respondent 0as duly
in*or-ed in a letter. 1$ (ndeed, the ne0 corporation con*ir-ed
and assu-ed the obli'ation o* the old corporation. There is no
indication o* an atte-pt on the part o* 9ron to evade pay-ent
o* its obli'ation to private respondent.
There is the *act that petitioner sold his shares in 9ron to
"oprada durin' the pendency o* the case. 5ince petitioner has
no personal obli'ation to private respondent, it is his inherent
ri'ht as a stoc9holder to dispose o* his shares o* stoc9 anyti-e
he so desires.
Mention is also -ade o* the alle'ed Gdu-pin'G o* 10 units in
the pre-ises o* private respondent at 8a'ba', $ovaliches
0hich to the -ind o* the "ourt does not prove *raud and
instead appears to be an atte-pt on the part o* 9ron to attend
to its obli'ations as re'ards the said truc9s. 'ain petitioner
has no part in this.
(* the private respondent is the victi- o* *raud in this
transaction, it has not been clearly sho0n that petitioner had
any part or participation in the perpetration o* the sa-e. Araud
-ust be established by clear and convincin' evidence. (* at all,
the principal character on 0ho- *ault should be attributed is
Aeliciano "oprada, the President o* 9ron, 0ho- private
respondent dealt 0ith personally all throu'h out. Aortunately,
private respondent obtained a )ud'-ent a'ainst hi- *ro- the
trial court and the said )ud'-ent has lon' been *inal and
executory.
@2EREA#RE, the petition is HR$TE,. The <uestioned
resolution o* the (nter-ediate ppellate "ourt dated Aebruary
8,198% is hereby set aside and its decision dated !une .0,198.
settin' aside the decision o* the trial court dated #ctober 28,
1980 inso*ar as petitioner is conce-ed is hereby reinstated
and a**ir-ed, 0ithout costs.
5# #R,ERE,.
G.R. No. 78413 No/e!"e# 8, 1$8$
CAGAYAN VALLEY EN(ERPRISES, INC., Rep#e)e&e' "5
*) P#e)*'e&, Ro7e+*o 8. L*!, petitioner,
vs.
(0E 0ON. CO1R( O6 APPEALS %&' LA (ON3E9A,
INC., respondents.
REGALA3O, J.:
This petition *or revie0 on certiorari see9s the nulli*ication o*
the decision o* the "ourt o* ppeals o* ,ece-ber &, 1983 in
"=H.R. ": $o. 0338& 0hich reversed the decision o* the trial
court, and its resolution dated May &, 198/ denyin' petitioner4s
-otion *or reconsideration.
The *ollo0in' antecedent *acts 'enerative o* the present
controversy are not in dispute.
5o-eti-e in 19&., 6a TondeIa, (nc. 7herea*ter, 6T( *or short;
re'istered 0ith the Philippine Patent #**ice pursuant to
Republic ct $o. 32.
1
the .&0 c.c. 0hite *lint bottles it has
been usin' *or its 'in popularly 9no0n as GHinebra 5an
Mi'uelG. This re'istration 0as subse<uently rene0ed on
,ece-ber %, 19/%.
2
#n $ove-ber 10, 1981, 6T( *iled "ivil "ase $o. 2338 *or
in)unction and da-a'es in the then 8ranch 1, "ourt o* Airst
(nstance o* (sabela a'ainst "a'ayan :alley Enterprises, (nc.
7"a'ayan, *or brevity; *or usin' the .&0 c.c., 0hite *lint bottles
0ith the -ar9 G6a TondeIa (nc.G and GHinebra 5an Mi'uelG
sta-ped or blo0n=in therein by *illin' the sa-e 0ith "a'ayan4s
li<uor product bearin' the label G5onny 8oyG *or co--ercial
sale and distribution, 0ithout 6T(4s 0ritten consent and in
violation o* 5ection 2 o* Republic ct $o. 32., as a-ended by
Republic ct $o. &/00. #n the sa-e date, 6T( *urther *iled
an e parte petition *or the issuance o* a 0rit o* preli-inary
in)unction a'ainst the de*endant therein.
3
#n $ove-ber 13,
1981, the court a !uo issued a te-porary restrainin' order
a'ainst "a'ayan and its o**icers and e-ployees *ro- usin' the
.&0 c.c. bottles 0ith the -ar9s G6a TondeIaG and GHinebra 5an
Mi'uel.G
4
"a'ayan, in its ans0er,
5
alle'ed the
*ollo0in' de*enses?
1. 6T( has no cause o* action due to its *ailure to co-ply 0ith
5ection 21 o* Republic ct $o. 133 0hich re<uires the 'ivin' o*
notice that its a*oresaid -ar9s are re'istered by displayin' and
printin' the 0ords GRe'istered in the Phil. Patent #**iceG or
GRe' Phil. Pat. #**.,G hence no suit, civil or cri-inal, can be
*iled a'ainst "a'ayanE
2. 6T( is not entitled to any protection under Republic ct $o.
32., as a-ended by Republic ct $o. &/00, because its
products, consistin' o* hard li<uor, are not a-on' those
conte-plated therein. @hat is protected under said la0 are
bevera'es li9e "oca=cola, Royal Tru=#ran'e, 6e-=o=6i-e and
si-ilar bevera'es the bottles 0hereo* bear the 0ords GRe'
Phil. Pat. #**.EG
.. $o reservation o* o0nership on its bottles 0as -ade by 6T(
in its sales invoices nor does it re<uire any deposit *or the
retention o* said bottlesE and
%. There 0as no in*rin'e-ent o* the 'oods or products o* 6T(
since "a'ayan uses its o0n labels and trade-ar9 on its
product.
(n its subse<uent pleadin's, "a'ayan contended that the
bottles they are usin' are not the re'istered bottles o* 6T( since
the *or-er 0as usin' the bottles -ar9ed 0ith G6a TondeIa,
(nc.G and GHinebra 5an Mi'uelG but 0ithout the 0ords Gproperty
o*G indicated in said bottles as stated in the s0orn state-ent
attached to the certi*icate o* re'istration o* 6T( *or said bottles.
#n ,ece-ber 18, 1981, the lo0er court issued a 0rit o*
preli-inary in)unction, upon the *ilin' o* a bond by 6T( in the
su- o* P&0,000.00, en)oinin' "a'ayan, its o**icers and a'ents
*ro- usin' the a*oresaid re'istered bottles o* 6T(.
6
*ter a protracted trial, 0hich entailed *ive 7&; -otions *or
conte-pt *iled by 6T( a'ainst "a'ayan, the trial court rendered
)ud'-ent
7
in *avor o* "a'ayan, rulin' that the co-plaint does
not state a cause o* action and that "a'ayan 0as not 'uilty o*
conte-pt. Aurther-ore, it a0arded da-a'es in *avor o*
"a'ayan.
6T( appealed to the "ourt o* ppeals 0hich, on ,ece-ber &,
1983 rendered a decision in *avor o* said appellant, the
dispositive portion 0hereo* reads?
@2EREA#RE, the decision appealed *ro- is hereby 5ET
5(,E and )ud'-ent is rendered per-anently en)oinin' the
de*endant, its o**icers and a'ents *ro- usin' the .&0 c.c. 0hite
*lint bottles 0ith the -ar9s o* o0nership G6a TondeIa, (nc.G and
GHinebra 5an Mi'uelG, blo0n=in or sta-ped on said bottles as
containers *or de*endant4s products.
The 0rit o* preli-inary in)unction issued by the trial court is
there*ore -ade per-anent.
,e*endant is ordered to pay the a-ounts o*?
71; P1&,000.00 as no-inal or te-perate da-a'esE
72; P&0,000.00 as exe-plary da-a'esE
7.; P10,000.00 as attorney4s *eesE and
7%; "osts o* suit.
8
#n ,ece-ber 2., 1983, "a'ayan *iled a -otion *or
reconsideration 0hich 0as denied by the respondent court in
its resolution dated May &, 198/, hence the present petition,
0ith the *ollo0in' assi'n-ent o* errors?
(. The "ourt o* ppeals 'ravely erred in the decision 'rantin'
that Gthere is, there*ore, no need *or plainti** to display the
0ords GRe'. Phil. Pat. #**.G in order *or it to succeed in brin'in'
any in)unction suit a'ainst de*endant *or the ille'al use o* its
bottles. Rep. ct $o. 32., as a-ended by Rep. ct $o. &/00
si-ply provides and re<uires that the -ar9s or na-es shall be
sta-ped or -ar9ed on the containers.G
((. The "ourt o* ppeals 'ravely erred in decidin' that Gneither
is there a reason to distin'uish bet0een the t0o 72; sets o*
-ar9ed bottles=those 0hich contain the -ar9s GProperty o* 6a
TondeIa, (nc., Hinebra 5an Mi'uel,G and those si-ply -ar9ed
6a TondeIa (nc., Hinebra 5an Mi'uel4. 8y o-ittin' the 0ords
Gproperty o*G plainti** did not open itsel* to violation o* Republic
ct $o. 32., as a-ended, as havin' re'istered its -ar9s or
na-es it is protected under the la0.G
(((. The 2onorable "ourt o* ppeals 'ravely erred in decidin'
that the 0ords G6a TondeIa, (nc. and Hinebra 5an Mi'uelG are
su**icient notice to the de*endant 0hich should have in<uired
*ro- the plainti** or the Philippine Patent #**ice, i* it 0as la0*ul
*or it to re=use the e-pty bottles o* the plainti**.
(:. The 2onorable "ourt o* ppeals 'ravely erred in decidin'
that de*endant=appellee cannot clai- 'ood *aith *ro- usin' the
bottles o* plainti** 0ith -ar9s G6a TondeIa, (nc.G alone, short
*or the description contained in the s0orn state-ent o* Mr.
"arlos Palanca, !r., 0hich 0as a re<uisite o* its ori'inal and
rene0al re'istrations.
:. The 2onorable "ourt o* ppeals 'ravely erred in
acco--odatin' the appeal on the dis-issals o* the *ive 7&;
conte-pt char'es.
:(. The 2onorable "ourt o* ppeals 'ravely erred in decidin'
that the a0ard o* da-a'es in *avor o* the de*endant=appellee,
petitioner herein, is not in order. (nstead it a0arded no-inal or
te-perate, exe-plary da-a'es and attorney4s *ees 0ithout
proo* o* bad *aith.
$
The pertinent provisions o* Republic ct $o. 32., as a-ended
by Republic ct $o. &/00, provides?
5E"T(#$ 1. Persons en'a'ed or licensed to en'a'e in the
-anu*acture, bottlin', or sellin' o* soda 0ater, -ineral or
aerated 0aters, cider, -il9, crea- or other la0*ul bevera'es in
bottles, boxes, cas9s, 9e's, or barrels and other si-ilar
containers, or in the -anu*acturin', co-pressin' or sellin' o*
'ases such as oxy'en, acytelene, nitro'en, carbon dioxide
a--onia, hydro'en, chloride, heliu-, sulphur, dioxide, butane,
propane, *reon, -elthyl chloride or si-ilar 'ases contained in
steel cylinders, tan9s, *las9s, accu-ulators or si-ilar
containers, 0ith the na-e or the na-es o* their principals or
products, or other -ar9s o* o0nership sta-ped or -ar9ed
thereon, -ay re'ister 0ith the Philippine Patent #**ice a
description o* the na-es or -ar9s, and the purpose *or 0hich
the containers so -ar9ed and used by the-, under the sa-e
conditions, rules, and re'ulations, -ade applicable by la0 or
re'ulation to the issuance o* trade-ar9s.
5E". 2. (t shall be unla0*ul *or any person, 0ithout the 0ritten
consent o* the -anu*acturer, bottler, or seller, 0ho has
succes*ully re'istered the -ar9s o* o0nership in accordance
0ith the provisions o* the next precedin' section, to *ill such
bottles, boxes, 9e's, barrels, steel cylinders, tan9s, *las9s,
accu-ulators or other si-ilar containers so -ar9ed or
sta-ped, *or the purpose o* sale, or to sell, disposed o*, buy or
tra**ic in, or 0antonly destroy the sa-e, 0hether *illed or not, to
use the sa-e, *or drin9in' vessels or 'lasses or drain pipes,
*oundation pipes, *or any other purpose than that re'istered by
the -anu*acturer, bottler or seller. ny violation o* this section
shall be punished by a *ine o* not -ore than one thousand
pesos or i-prison-ent o* not -ore than one year or both.
5E". .. The use by any person other than the re'istered
-anu*acturer, bottler or seller, 0ithout 0ritten per-ission o* the
latter o* any such bottle, cas9, barrel, 9e', box, steel cylinders,
tan9s, *las9, accu-ulators, or other si-ilar containers, or the
possession thereo* 0ithout 0ritten per-ission o* the
-anu*acturer, by any )un9 dealer or dealer in cas9s, barrels,
9e's boxes, steel cylinders, tan9s, *las9s, accu-ulators or
other si-ilar containers, the sa-e bein' duly -ar9ed or
sta-ped and re'istered as herein provided, shall 'ive rise to
a prima facie presu-ption that such use or possession is
unla0*ul.
The above=<uoted provisions 'rant protection to a <uali*ied
-anu*acturer 0ho success*ully re'istered 0ith the Philippine
Patent #**ice its duly sta-ped or -ar9ed bottles, boxes, cas9s
and other si-ilar containers. The -ere use o* re'istered
bottles or containers 0ithout the 0ritten consent o* the
-anu*acturer is prohibited, the only exceptions bein' 0hen
they are used as containers *or Gsisi,G ba'oon',G GpatisG and
si-ilar native products.
10
(t is an ad-itted *act that herein petitioner "a'ayan buys *ro-
)un9 dealers and retailers bottles 0hich bear the -ar9s or
na-es 6a TondeIa (nc.G and GHinebra 5an Mi'uelG and uses
the- as containers *or its o0n li<uor products. The contention
o* "a'ayan that the a*ore-entioned bottles 0ithout the 0ords
Gproperty o*G indicated thereon are not the re'istered bottles o*
6T(, since they do not con*or- 0ith the state-ent or
description in the supportin' a**idavits attached to the ori'inal
re'istration certi*icate and rene0al, is untenable.
Republic ct $o. 32. 0hich 'overns the re'istration o* -ar9ed
bottles and containers -erely re<uires that the bottles, in order
to be eli'ible *or re'istration, -ust be sta-ped or -ar9ed 0ith
the na-es o* the -anu*acturers or the na-es o* their
principals or products, or other -ar9s o* o0nership. $o
dra0in's or labels are re<uired but, instead, t0o photo'raphs
o* the container, duly si'ned by the applicant, sho0in' clearly
and le'ibly the na-es and other -ar9s o* o0nership sou'ht to
be re'istered and a bottle sho0in' the na-e or other -ar9 or
o0nership, irre-ovably sta-ped or -ar9ed, shall be
sub-itted.
11
The ter- G$a-e or #ther Mar9 o* #0nershipG
12
-eans the
na-e o* the applicant or the na-e o* his principal, or o* the
product, or other -ar9 o* o0nership. The second set o* bottles
o* 6T( 0ithout the 0ords Gproperty o*G substantially co-plied
0ith the re<uire-ents o* Republic ct $o. 32., as a-ended,
since they bear the na-e o* the principal, 6a TondeIa (nc.,
and o* its product, Hinebra 5an Mi'uel. The o-itted 0ords
Gproperty o*G are not o* such vital indispensability such that the
o-ission thereo* 0ill re-ove the bottles *ro- the protection o*
the la0. The o0ner o* a trade=-ar9 or trade=na-e, and in this
case the -ar9ed containers, does not abandon it by -a9in'
-inor -odi*ications in the -ar9 or na-e itsel*.
13
@ith -uch
-ore reason 0ill this be true 0here 0hat is involved is the
-ere o-ission o* the 0ords Gproperty o*G since even 0ithout
said 0ords the o0nership o* the bottles is easily (denti*iable.
The 0ords G6a TondeIa (nc.G and GHinebra 5an Mi'uelG
sta-ped on the bottles, even 0ithout the 0ords Gproperty o*,G
are su**icient notice to the public that those bottles so -ar9ed
are o0ned by 6T(.
The clai- o* petitioner that hard li<uor is not included under the
ter- Gother la0*ul bevera'esG as provided in 5ection ( o*
Republic ct $o. 32., as a-ended by Republic ct $o. &/00,
is 0ithout -erit. The title o* the la0 itsel*, 0hich reads G n ct
to Re'ulate the Bse o* ,uly 5ta-ped or Mar9ed 8ottles,
8oxes, "as9s, Ke's, 8arrels and #ther 5i-ilar "ontainersG
clearly sho0s the le'islative intent to 'ive protection to all
-ar9ed bottles and containers o* all la0*ul bevera'es
re'ardless o* the nature o* their contents. The 0ords Gother
la0*ul bevera'esG is used in its 'eneral sense, re*errin' to all
bevera'es not prohibited by la0. 8evera'e is de*ined as a
li<uor or li<uid *or drin9in'.
14
2ard li<uor, althou'h re'ulated, is
not prohibited by la0, hence it is 0ithin the purvie0 and
covera'e o* Republic ct $o. 32., as a-ended.
Republic ct $o. 32., as a-ended, has *or its purpose the
protection o* the health o* the 'eneral public and the
prevention o* the spread o* conta'ious diseases. (t *urther
see9s to sa*e'uard the property ri'hts o* an i-portant sector o*
Philippine industry.
15
s held by this "ourt in 'estileria Ayala,
Inc. vs. &an &ay * )o.,
16
the purpose o* then ct .0/0, 0as to
a**ord a person a -eans o* (denti*yin' the containers he uses
in the -anu*acture, preservation, pac9in' or sale o* his
products so that he -ay secure their re'istration 0ith the
8ureau o* "o--erce and (ndustry and thus prevent other
persons *ro- usin' the-. 5aid ct .0/0 0as substantially
reenacted as Republic ct $o. 32..
17
The proposition that Republic ct $o. 32., as a-ended,
protects only the containers o* the so*t drin9s enu-erated by
petitioner and those si-ilar thereto, is un0arranted and
specious. The rule o* ejusdem generis cannot be applied in this
case. To li-it the covera'e o* the la0 only to those
enu-erated or o* the sa-e 9ind or class as those speci*ically
-entioned 0ill de*eat the very purpose o* the la0. 5uch rule
o* ejusdem generis is to be resorted to only *or the purpose o*
deter-inin' 0hat the intent o* the le'islature 0as in enactin'
the la0. (* that intent clearly appears *ro- other parts o* the
la0, and such intent thus clearly -ani*ested is contrary to the
result 0hich 0ould be reached by the appreciation o* the rule
o* ejusdem generis, the latter -ust 'ive 0ay.
18
Moreover, the above conclusions are supported by the *act that
the Philippine Patent #**ice, 0hich is the proper and co-petent
'overn-ent a'ency vested 0ith the authority to en*orce and
i-ple-ent Republic ct $o. 32., re'istered the bottles o*
respondent 6T( as containers *or 'in and issued in its na-e a
certi*icate o* re'istration 0ith the *ollo0in' *indin's?
(t appearin', upon due exa-ination that the applicant is
entitled to have the said MRK5 #R $ME5 re'istered under
R.. $o. 32., the said -ar9s or na-es have been duly
re'istered this day in the PTE$T #AA("E under the said ct,
*or 'in, Hinebra 5an Mi'uel.
1$
@hile executive construction is not necessarily bindin' upon
the courts, it is entitled to 'reat 0ei'ht and consideration. The
reason *or this is that such construction co-es *ro- the
particular branch o* 'overn-ent called upon to i-ple-ent the
particular la0 involved.
20
!ust as i-puissant is petitioners contention that respondent
court erred in holdin' that there is no need *or 6T( to display
the 0ords GRe' Phil. Pat. #**.G in order to succeed in its
in)unction suit a'ainst "a'ayan *or the ille'al use o* the bottles.
To repeat, Republic ct $o. 32. 'overns the re'istration o*
-ar9ed bottles and containers and -erely re<uires that the
bottles andFor containers be -ar9ed or sta-ped by the na-es
o* the -anu*acturer or the na-es o* their principals or products
or other -ar9s o* o0nership. The o0ner upon re'istration o* its
-ar9ed bottles, is vested by la0 0ith an exclusive ri'ht to use
the sa-e to the exclusion o* others, except as a container *or
native products. violation o* said ri'ht 'ives use to a cause o*
action a'ainst the violator or in*rin'er.
@hile Republic ct $o. 32., as a-ended, provides *or a
cri-inal action in case o* violation, a civil action *or da-a'es is
proper under rticle 20 o* the "ivil "ode 0hich provides that
every person 0ho, contrary to la0, 0il*ully or ne'li'ently
causes da-a'e to another, shall inde-ni*y the latter *or the
sa-e. This particular provision o* the "ivil "ase 0as clearly
-eant to co-ple-ent all le'al provisions 0hich -ay have
inadvertently *ailed to provide *or inde-ni*ication or reparation
o* da-a'es 0hen proper or called *or. (n the lan'ua'e o* the
"ode "o--ission G7t;he *ore'oin' rule pervades the entire
le'al syste-, and renders it i-possible that a person 0ho
su**ers da-a'e because another has violated so-e le'al
provisions, should *ind hi-sel* 0ithout relie*.G
21
Moreover,
under 5ection 2. o* Republic ct $o. 133, as a-ended, a
person entitled to the exclusive use o* a re'istered -ar9 or
tradena-e -ay recover da-a'es in a civil action *ro- any
person 0ho in*rin'es his ri'hts. 2e -ay also, upon proper
sho0in', be 'ranted in)unction.
(t is true that the a*oresaid la0 on trade-ar9s provides?
5E". 21. ,e!uirements of notice of registration of trade-mark.=
The re'istrant o* a trade=-ar9, hereto*ore re'istered or
re'istered under the provisions o* this ct, shall 'ive notice
that his -ar9 is re'istered by displayin' 0ith the sa-e as used
the 0ords 4Re'istered in the Philippines Patent #**ice4 or 4Re'
Phil. Pat. #**.4E and in any suit *or in*rin'e-ent under this ct
by a re'istrant *ailin' so to -ar9 the 'oods bearin' the
re'istered trade=-ar9, no da-a'es shall be recovered under
the provisions o* this ct, unless the de*endant has actual
notice o* the re'istration.

Even assu-in' that said provision is applicable in this case,
the *ailure o* 6T( to -a9e said -ar9in' 0ill not bar civil action
a'ainst petitioner "a'ayan. The a*oresaid re<uire-ent is not a
condition sine !ua non *or *ilin' o* a civil action a'ainst the
in*rin'er *or other relie*s to 0hich the plainti** -ay be entitled.
The *ailure to 'ive notice o* re'istration 0ill not deprive the
a''rieved party o* a cause o* action a'ainst the in*rin'er but, at
the -ost, such *ailure -ay bar recovery o* da-a'es but only
under the provisions o* Republic ct $o. 133.
2o0ever, in this case an a0ard o* da-a'es to 6T( is
ineluctably called *or. Petitioner cannot clai- 'ood *aith. The
record sho0s that it had actual 9no0led'e that the bottles 0ith
the blo0n=in -ar9s G6a TondeIa (nc.G and GHinebra 5an
Mi'uelG are duly re'istered. (n "ivil "ase $o. 1028&9 o* the
"ourt o* Airst (nstance o* Manila, entitled G6a TondeIa (nc.
versus ,ie'o 6i-, doin' business under the na-e and style
4"a'ayan :alley ,istillery,4 G a decision 0as rendered in *avor
o* plainti** therein on the basis o* the ad-ission andFor
ac9no0led'-ent -ade by the de*endant that the bottles
-ar9ed only 0ith the 0ords G6a TondeIa (nc.G and GHinebra
5an Mi'uelG are re'istered bottles o* 6T(.
22
Petitioner cannot avoid the e**ect o* the ad-ission andFor
ac9no0led'-ent -ade by ,ie'o 6i- in the said case. @hile a
corporation is an entity separate and distinct *ro- its stoc9=
holders and *ro- other corporations 0ith 0hich it -ay be
connected, 0here the discreteness o* its personality is used to
de*eat public convenience, )usti*y 0ron', protect *raud, or
de*end cri-e, the la0 0ill re'ard the corporation as an
association o* persons, or in the case o* t0o corporations,
-er'e the- into one. @hen the corporation is the -ere alter
ego or business conduit o* a person, it -ay be disre'aded.
23
Petitioner4s clai- that it is separate and distinct *ro- the *or-er
"a'ayan :alley ,istillery is belied by the evidence on record.
The *ollo0in' *acts 0arrant the conclusion that petitioner, as a
corporate entity, and "a'ayan :alley ,istillery are one and the
sa-e. to 0it? 71; petitioner is bein' -ana'ed by Ro'elio 6i-,
the son o* ,ie'o 6i-, the o0ner and -ana'er o* "a'ayan
:alley ,istelleryE 72; it is a *a-ily corporationE
24
7.; it is an
ad-itted *act that be*ore petitioner 0as incorporated it 0as
under a sin'le proprietorshipE
25
7%; petitioner is en'a'ed in the
sa-e business as "a'ayan :alley ,istillery, the -anu*acture
o* 0ines and li<uorsE and 7&; the *actory o* petitioner is located
in the sa-e place as the *actory o* the *or-er "a'ayan :alley
,istillery.
(t is thus clear that herein petitioner is a -ere continuation and
successor o* "a'ayan :alley ,istillery. (t is li9e0ise indubitable
that the ad-ission -ade in the *or-er case, as earlier
explained, is bindin' on it as co'ent proo* that even be*ore the
*ilin' o* this case it had actual 9no0led'e that the bottles in
dispute 0ere re'istered containers o* 6T( s held in .a
)ampana )offee /actory, Inc., et al. vs. 0aisahan "g %ga
%anggagawa sa .a )ampana 100%2, et al.,
26
0here the -ain
purpose in *or-in' the corporation 0as to evade one4s
subsidiary liability *or da-a'es in a cri-inal case, the
corporation -ay not be heard to say that it has a personality
separate and distinct *ro- its -e-bers, because to allo0 it to
do so 0ould be to sanction the use o* the *iction o* corporate
entity as a shield to *urther an end subversive o* )ustice.
nent the several -otions o* private respondent 6T( to have
petitioner cited *or conte-pt, 0e re)ect the ar'u-ent o*
petitioner that an appeal *ro- a verdict o* ac<uittal in a
conte-pt, proceedin' constitutes double )eopardy. *ailure to
do so-ethin' ordered by the court *or the bene*it o* a party
constitutes civil conte-pt.
27
s 0e held in )onverse ,ubber
)orporation vs. 3acinto ,ubber * Plastics )o., Inc.4
...True it is that 'enerally, conte-pt proceedin's are
characteri+ed as cri-inal in nature, but the -ore accurate
)uridical concept is that conte-pt proceedin's -ay actually be
either civil or cri-inal, even i* the distinction bet0een one and
the other -ay be so thin as to be al-ost i-perceptible. 8ut it
does exist in la0. (t is cri-inal 0hen the purpose is to vindicate
the authority o* the court and protect its outra'ed di'nity. (t is
civil 0hen there is *ailure to do so-ethin' ordered by a court to
be done *or the bene*it o* a party 7. Moran Rules o* "ourt, pp.
.%.=.%%, 19/0 ed.E see also Per9ins vs. ,irector o* Prisons, &8
Phil. 2/2E 2arden vs. ,irector o* Prisons, 81 Phil. /%1.; nd
0ith this distinction in -ind, the *act that the in)unction in the
instant case is -ani*estly *or the bene*it o* plainti**s -a9es o*
the conte-pt herein involved civil, not cri-inal. ccordin'ly,
the conclusion is inevitable that appellees have been virtually
*ound by the trial court 'uilty o* civil conte-pt, not cri-inal
conte-pt, hence, the rule on double )eopardy -ay not be
invo9ed.
28
The conte-pt involved in this case is civil and constructive in
nature, it havin' arisen *ro- the act o* "a'ayan in violatin' the
0rit o* preli-inary in)unction o* the lo0er court 0hich clearly
de*ined the *orbidden act, to 0it?
$#@ T2EREA#RE, pendin' the resolution o* this case by the
court, you are en)oined *ro- usin' the .&0 c.c. 0hite *lint
bottles 0ith the -ar9s 6a TondeIa (nc.,4 and 4Hinebra 5an
Mi'uel4 blo0n=in or sta-ped into the bottles as containers *or
the de*endant4s products.
1$
#n this incident, t0o considerations -ust be borne in -ind.
Airstly, an in)unction duly issued -ust be obeyed, ho0ever
erroneous the action o* the court -ay be, until its decision is
overruled by itsel* or by a hi'her court.
30
5econdly, the
-erican rule that the po0er to )ud'e a conte-pt rests
exclusively 0ith the court conte-ned does not apply in this
!urisdiction. The provision o* the present 5ection %, Rule /1 o*
the Rules o* "ourt as to 0here the char'e -ay be *iled is
per-issive in nature and is -erely declaratory o* the inherent
po0er o* courts to punish contu-acious conduct. 5aid rules do
not extend to the deter-ination o* the )urisdiction o* Philippine
courts.
31
(n appropriate case there*ore, this "ourt -ay, in the
interest o* expedient )ustice, i-pose sanctions on conte-ners
o* the lo0er courts.
5ection . o* Republic ct $o. 32., as a-ended, creates
a prima facie presu-ption a'ainst "a'ayan *or its unla0*ul use
o* the bottles re'istered in the na-e o* 6T( "orollarily, the 0rit
o* in)unction directin' petitioner to desist *ro- usin' the sub)ect
bottles 0as properly issued by the trial court. 2ence, said 0rit
could not be si-ply disre'arded by "a'ayan 0ithout adducin'
proo* su**icient to overco-e the a*oresaid presu-ption. lso,
based on the *indin's o* respondent court, and the records
be*ore us bein' su**icient *or arbitra-ent 0ithout re-andin'
the incident to the court a !uopetitioner can be ad)ud'ed 'uilty
o* conte-pt and i-posed a sanction in this appeal since it is a
cherished rule o* procedure *or this "ourt to al0ays strive to
settle the entire controversy in a sin'le proceedin',
32
@e so
i-pose such penalty concordant 0ith the preservative principle
and as de-anded by the respect due the orders, 0rits and
processes o* the courts o* )ustice.
@2EREA#RE, )ud'-ent is hereby rendered ,E$C($H the
petition in this case and AA(RM($H the decision o*
respondent "ourt o* ppeals. Petitioner is hereby declared in
conte-pt o* court and #R,ERE, to pay a *ine o* #ne
Thousand Pesos 7P1,000.00;, 0ith costs.
5# #R,ERE,.
G.R. No. 80352 Sepe!"e# 2$, 1$8$
BENJA4IN G. IN3INO, petitioner,
vs.
NA(IONAL LABOR RELA(IONS CO44ISSION :SECON3
3IVISION;, %&' 3AS4ARI9AS IN31S(RIAL <
S(EEL=OR>S CORPORA(ION %&'?o# P0ILIPPINE
NA(IONAL CONS(R1C(ION CORPORA(ION :PNCC;,
6o#!e#+5 CONS(R1C(ION 3EVELOP4EN(
CORPORA(ION O6 (0E P0ILIPPINES
:C3CP;, respondents.
SAR4IEN(O, J.@
The -ain issue in this petition *or certiorari assailin' the t0o
resolutions dated u'ust 20, 198/
1
and #ctober &, 198/
2
o*
the respondent $ational 6abor Relations "o--ission 7$6R";
in $6R" "ase $o. 10=.238=8&, is the validity o* the petitioner4s
separation *ro- the e-ploy o* private respondent ,as-arinas
(ndustrial and 5teel0or9s "orporation 7,(5";.
The petitioner, 8en)a-in H. (ndino, )oined the Philippine
$ational "onstruction "orporation 7P$""; as a pro)ect
personnel o**icer on ,ece-ber 12, 19/%. #n !anuary 3, 1981,
he 0as trans*erred to private respondent ,(5", a sister
corporation o* P$"", 0hich assi'ned hi- to its Philphos
Pro)ect in (sabel, 6eyte.
#n !uly 2/, 198., 0hile the petitioner 0as on a paid vacation
leave, he received a Gletter=-e-orandu-G *ro- Ro-an 8.
6ope+, ,(5" personnel -ana'er, in*or-in' hi- that his
services 0ere no lon'er needed at the Philphos Pro)ect in
6eyte. The Gletter= -e-orandu-G reads?
,ate !uly 2/, 198.
The si'ni*icant business reverses bein' experienced by the
co-pany -a9es 7sic; it i-perative to ta9e drastic -easures to
reduce both its 0or9 *orce and operatin' costs. @e re'ret to
in*or- you, there*ore, that your e-ploy-ent 0ith ,(5" shall be
ter-inated at the close o* business hours on u'ust 2/,198.,
or a*ter thirty 7.0; days *ro- your receipt hereo*.
Relatively, you can elect to sub-it a *or-al resi'nation in
0hich case you shall also be entitled to separation pay and
other bene*its applicable under existin' policies. Cou -ay also
ta9e advanta'e o* your earned leave durin' the period !uly
2/,198. to u'ust 2/, 198..
The Personnel d-inistration ,epart-ent 7P,;, 0ill be '(ad
to ans0er your <uestions pertainin' to your *or-al separation.
Please acco-plish the necessary clearance on or be*ore !uly
.0, 198..
5H,. R#M$ 8. 6#PEL
Personnel Mana'er
3
(--ediately a*ter receipt o* the Gletter=-e-orandu-,G the
petitioner *iled 0ith the $6R" a co-plaint *or ille'al dis-issal
a'ainst private respondent ,(5"E it 0as doc9eted as $6R"=
$"R "5E $o. /= .&90=8..
4
The case, ho0ever, 0as
pre-aturely ter-inated upon a )oint -otion to dis-iss, dated
5epte-ber .0, 198., *iled by the parties, and 0hich reads?
"o-es 7sic; no0 both parties in the above=entitled case and
unto this 2onorable "o--ission respect*ully state?
1. That both parties -utually a'reed to settle their di**erences
and petitionerFco-plainant a'reed to return to 0or9 to-orro0
#ctober 1, 198.. #n the other hand, respondent accepted his
0illin'ness to return to 0or9 at any pro)ect or o**ice 0here he
-ay be assi'nedE
2. That co-plainant li9e0ise a'reed to be paid only *i*ty
percent 7&01; o* his bac9 0a'esFsalaries and other allo0ances
by the respondent startin' !uly 2/, 198. up to 5epte-ber .0,
198., and by this !oint Motion to ,is-iss both parties are
*ore'oin' and condonin' 0hatever clai-s each party -ay
have a'ainst each other under $6R"=$"R "5E $o. /=.&90=
8.E
.. That both parties hereby -utually and )ointly -ove *or the
dis-issal o* the above=entitled case.
Ma9ati, Metro Manila
5epte-ber .0, 198..
5H,. 8E$!M($ H.($,($#
5H,. #R6$,# 8.
T(#$H5#$
"o-plainant President
,as-ariIas (ndustrial D
5teel0or9s "orp.
ssisted by?
5H,. !#5E .
"8TB$,# !R."ounsel
*or the respondent
5
#n the basis o* that a'ree-ent, the petitioner 0as reinstated
on #ctober 1, 198. at respondent ,(5"4s central o**ice,
occupyin' the position o* Pro)ect d-inistrative #**icer
(((.
6
8arely t0o -onths a*ter his reinstate-ent, ho0ever, or on
,ece-ber 1%, 198., the petitioner received another Gletter=
-e-orandu-G *ro- respondent ,(5", a'ain ter-inatin' his
services. The Gletter=-e-orandu-G states?
,ece-ber 1%,198.
s 0e have co-pleted -ost o* our -a)or pro)ects and about to
co-plete the Philippine Phosphate Aertili+er Pro)ect plus the
*act that there has been a lo0 pro)ect in salesF-ar9etin' due to
critical econo-ic situation, the co-pany is *orced to ta9e
drastic -easures to reduce both its 0or9 *orce and operatin'
costs. @e re'ret to in*or- you, there*ore, that your
e-ploy-ent 0ith ,(5" shall be ter-inated at the close o*
business hours on !anuary 1&, 198%, or thirty 7.0; days *ro-
your receipt hereo*.
Relatively, you can elect to sub-it a *or-al resi'nation in
0hich case you shall also be entitled to separation pay and
other bene*its applicable under existin' policies. Cou -ay also
ta9e advanta'e o* your earned leaves durin' the period
,ece-ber 1&, 198. to !anuary 1&,198%.
The Personnel d-inistration ,epart-ent 7P,; 0ill be 'lad to
ans0er your <uestions pertainin' to your *or-al separation.
Please acco-plish the necessary clearance on or be*ore
!anuary 1&, 198%.
75H,.; R#M$ 8. 6#PEL
Personnel Mana'er
7
ccordin'ly, pursuant to this G*or-al separation,G the petitioner
received *ro- ,(5" the a-ount o* P20,%&8.&2 as separation
bene*its.
8
The petitioner, ho0ever, re*used to accept his ter-inationE on
#ctober /, 198&, he *iled a co-plaint *or ille'al dis-issal,
unpaid 0a'es, -oral and exe-plary da-a'es, and attorney4s
*ees a'ainst respondent ,(5".
$
6ater, he a-ended his
co-plaint and i-pleaded the Philippine $ational "onstruction
"orporation 7P$""; as additional respondent.
10
#n Aebruary
10, 198/, 6abor rbiter Ricardo ". $ora, to 0ho- the case
0as assi'ned, dis-issed the petitioner4s co-plaint *or lac9 o*
-erit.
,issatis*ied 0ith the labor arbiter4s decision, the petitioner
appealed to the respondent $6R". The latter, ho0ever, *indin'
no error in the appealed )ud'-ent, issued a resolution on
u'ust 10, 198/ a**ir-in' the sa-e and denyin' the
petitioner4s appeal. -otion *or reconsideration seasonably
*iled by the petitioner 0as denied on #ctober &, 198/. 2ence,
this petition.
The petitioner insists that his re-oval 0as un)usti*ied and
ille'al and 0as carried out to circu-vent the co-pro-ise
a'ree-ent he had earlier entered into 0ith respondent ,(5"
0hich provided, a-on' others, his reinstate-ent in any o* the
o**ices or pro)ects o* respondent ,(5". The a*ore-entioned
co-pro-ise a'ree-ent, he avers, is already the la0 bet0een
the- and precludes his separation or dis-issal. Moreover, the
petitioner points out, the reason *or his separation in the Gletter=
-e-orandu-G o* ,ece-ber 1%, 198. is but a rehash o* that in
the *irst Gletter=-e-orandu-G o* !uly 2/, 198.. The petitioner
concludes that the later -ove by ,(5" at ostensible
retrench-ent had been -ade in bad *aith and -ani*ested its
thinly=veiled desire to dis-iss hi-. The petitioner li9e0ise
-a9es capital o* the *ailure o* the respondent ,(5" to sho0
that it 0as incurrin', or at least about to incur, losses, 0hich
0ould 0arrant its retrench-ent policy. s such, his re-oval
*ro- e-ploy-ent 0as un)usti*ied and a-ounted to an ille'al
dis-issal. Ainally, the petitioner substantiates the inclusion o*
the Philippine $ational "onstruction "orporation 7P$""; as a
party respondent in the case 0ith the *act that P$"" 0as
ori'inally his e-ployer but 0hich later trans*erred hi- to
respondent ,(5", the P$"" sister co-pany. This, accordin'
to the petitioner, sho0s the lin9 bet0een the t0o respondents
and *or purposes o* this case, deprives the- o* their separate
personality.
@e *ind the petition i-pressed 0ith -erit.
The *ailure o* the respondent ,(5" to sho0 proo* o* its actual
or i--inent losses that 0ould )usti*y drastic cuts in personnel
or costs, is *atal to its cause. rticle 28. 7then rticle 28%; o*
the 6abor "ode provides that an Ge-ployer -ay also ter-inate
the e-ploy-ent o* any e-ployee due to the installation o*
labor=savin' devices, redundancy, retrench-ent to prevent
losses or the closin' or cessation o* operation o* the
establish-ent or underta9in' unless the closin' is *or the
purpose o* circu-ventin' the provisions o* this title.G
11
"learly,
under the said provision o* la0, the ri'ht o* an e-ployer to
ter-inate the services o* any e-ployee is predicated on the
existence o* any o* the *ollo0in' causes? 71; installation o*
labor= savin' devicesE 72; redundancyE 7.; retrench-ent to
prevent lossesE and 7%; the closin' or cessation o* operation o*
the establish-ent or underta9in', unless the closin' is *or the
purpose o* circu-ventin' the provisions o* la0.
12
Thus, 0hile
business reverses can be a )ust cause *or ter-inatin'
e-ployees,
13
they -ust be su**iciently proven by the
e-ployer.
14
This is precisely -andated under par. 7b; o* rticle
2// 7*or-erly 2/8; o* the 6abor "ode 0hich states, a-on'
others, that G7T; he burden o* provin' that the ter-ination 0as
*or a valid or authori+ed cause shall rest on the e-ployer.G
d-ittedly, the assassination o*4 5enator 8eni'no G$inoyG
<uino on u'ust 21, 198. produced extre-ely adverse
political, social, and econo-ic conditions that resulted in
0idespread business *ailures. $ot all enterprises, ho0ever,
experienced severe econo-ic setbac9sE a nu-ber, in *act,
*lourished durin' that *inancially blea9 period.
(t is al-ost an in*lexible rule that e-ployers 0ho conte-plate
ter-inatin' the services o* their 0or9ers cannot be so arbitrary
and ruthless as to *ind *li-sy excuses *or their decisions. This
-ust be so considerin' that the dis-issal o* an e-ployee *ro-
0or9 involves not only the loss o* his position but -ore
i-portant, his -eans o* livelihood.
15
pplyin' this caveat to
the case at bar, it 0as there*ore incu-bent *or respondent
,(5", be*ore puttin' into e**ect any retrench-ent process on
its 0or9 *orce, to sho0 by convincin' evidence that it 0as
bein' 0rec9ed by serious *inancial proble-s. 5i-ply statin' its
state o* insolvency or its i-pendin' doo- 0ill not be su**icient.
To do so 0ould render the security o* tenure o* 0or9ers and
e-ployees illusory. (n a 'rander scale, to hold as valid and
le'al the respondent ,(5"4s act 0ould be disastrous to labor.
ny e-ployer desirous o* riddin' itsel* o* its e-ployees could
then easily do so 0ithout need to adduce proo* in support o* its
action. @e can not countenance this. 5ecurity o* tenure is a
ri'ht 'uaranteed to e-ployees and 0or9ers by the "onstitution
and should not be denied on the basis o* -ere speculation.
16
nother point that -a9es the respondent ,(5"4s cause
suspect is that, as correctly pointed out by the petitioner, the
reason it 'ave in its Gletter=-e-orandu-G dated ,ece-ber 1%,
198. ter-inatin' his services 0as si-ply a rehash o* its
7,(5"45; Gletter=-e-orandu-G dated !uly 2/, 198., 0hich
ulti-ately produced the co-pro-ise a'ree-ent bet0een the
parties. (t 0ill be noted that on !uly 2/, 198., the event 7$inoy
<uino4s assassination; that led to the near collapse o* the
national econo-y, had not yet ta9en place. Respondent
,(5"4s use o* basically the sa-e reason thus sho0s its all=too=
apparent e**ort to re-ove the petitioner *ro- its payroll. Ta9en
in the li'ht o* the then )ust recently concluded co-pro-ise
a'ree-ent bet0een the parties, the act o* ,(5" in
subse<uently dis-issin' the petitioner )ust t0o -onths=and=a=
hal* a*ter his reinstate-ent appears as havin' been -ade in
bad *aith. 5urely, i* the basis *or the second Gletter=
-e-orandu-G is the sa-e as that o* the *irst, there is no
reason 0hy the petitioner could not be retained as in the *irst
instance. The 'round o* ,(5"4s retrench-ent policy bein'
basically no di**erent *ro- the *irst, it is there*ore covered by
the co-pro-ise a'ree-ent reached by the parties earlier.
Ainally, considerin' that the petitioner started his e-ploy-ent
ori'inally 0ith the Philippine $ational "onstruction "o-pany
7P$""; but 0as only trans*erred later to its sister co-pany,
the respondent ,(5", the inclusion o* the *or-er as party
respondent in this action is )usti*ied and proper. The so=called
separate and distinct personality o* P$"" could be validly
i'nored inas-uch as it 0ould un)ustly pre)udice the petitioner
vis=a=vis 0hatever bene*its he -ay receive by reason o* his
ille'al dis-issal. This has been de-onstrated by the a-ount o*
the separation pay 'iven to the petitioner by respondent ,(5"
0hich appears to correspond only to the period in 0hich the
*or-er 0as in the e-ploy o* the latter. The period 0hen the
petitioner 0as still in the e-ploy o* P$"" 0as apparently
i'nored. This o-ission should not be allo0ed inas-uch as
there is no sho0in' that P$"" 'ave the petitioner separation
bene*its be*ore he 0as trans*erred to ,(5". (t should al0ays
be borne in -ind that the *iction o* la0 that a corporation, as a
)uridical entity, has a distinct and separate personality, 0as
envisa'ed *or convenience and to serve )usticeE there*ore, it
should not be used as a subter*u'e to co--it in)ustice and
circu-vent labor la0s.
17
@2EREA#RE, the petition is 'ranted, the assailed resolutions
o* the $ational 6abor Relations "o--ission dated u'ust 20,
198/ and #ctober &, 198/ are $$B66E, and 5ET 5(,E.
The respondent ,as-arinas (ndustrial D 5teel0or9s
"orporation is hereby #R,ERE, to RE($5TTE the petitioner
to his *or-er position 0ithout loss o* seniority ri'hts and
privile'es, and to PC the petitioner three 7.; years bac9
0a'es 0ithout any <uali*ications. "osts a'ainst the respondent
,as-arinas (ndustrial D 5teel0or9s "orporation.
5# #R,ERE,.
G.R. No. L-286$4 4%5 13, 1$81
(ELEP0ONE ENGINEERING < SERVICE CO4PANY, INC.,
petitioner,
vs.
=OR>4ENAS CO4PENSA(ION CO44ISSION,
PROVINCIAL S0ERI66 O6 RI2AL %&' LEONILA SAN(OS
GA(1S, Bo# Ce#)e+B %&' *& "eC%+B oB Ce# !*&o# -C*+'#e&,
(e#e)*%, A&o&*&% %&' Re5&%+'o, %++ ).#&%!e'
GA(1S,respondents.

4ELENCIO-0ERRERA, J.:1äwphï1.ñët
These certiorari proceedin's ste- *ro- the a0ard rendered
a'ainst petitioner Telephone En'ineerin' and 5ervices, "o.,
(nc. 7TE5"#; on #ctober 3, 193/ by the ctin' Re*eree o*
Re'ional #**ice $o. %, >ue+on "ity 5ub=Re'ional #**ice,
@or9-en4s "o-pensation 5ection, in *avor o* respondent
6eonila 5. Hatus and her children, dependents o* the
deceased e-ployee Paci*ico 6. Hatus. The principal contention
is that the a0ard 0as rendered 0ithout )urisdiction as there
0as no e-ployer=e-ployee relationship bet0een petitioner
and the deceased.
Petitioner is a do-estic corporation en'a'ed in the business o*
-anu*acturin' telephone e<uip-ent 0ith o**ices at 5heridan
5treet, Mandaluyon', Ri+al. (ts Executive :ice=President and
Heneral Mana'er is !ose 6uis 5antia'o. (t has a sister
co-pany, the Btilities Mana'e-ent "orporation 7BM"#R;,
0ith o**ices in the sa-e location. BM"#R is also under the
-ana'e-ent o* !ose 6uis 5antia'o.
#n 5epte-ber 8, 193%, BM"#R e-ployed the late Paci*ica
6. Hatus as Purchasin' 'ent. #n May 13, 193&, Paci*ico 6.
Hatus 0as detailed 0ith petitioner co-pany. 2e reported bac9
to BM"#R on u'ust 1, 193&. #n !anuary 1., 193/, he
contracted illness and althou'h he retained to 0or9 on May 10,
193/, he died nevertheless on !uly 1%, 193/ o* Gliver cirrhosis
0ith -ali'nant de'eneration.G
#n u'ust /, 193/, his 0ido0, respondent 6eonila 5. Hatus,
*iled a G$otice and "lai- *or "o-pensationG 0ith Re'ional
#**ice $o. %, >ue+on "ity 5ub=Re'ional #**ice, @or9-en4s
"o-pensation 5ection, alle'in' therein that her deceased
husband 0as an e-ployee o* TE5"#, and that he died o* liver
cirrhosis.
1
#n u'ust 9, 193/, and #**ice 0rote petitioner
trans-ittin' the $otice and *or "o-pensation, and re<uirin' it
to sub-it an E-ployer4s Report o* ccident or 5ic9ness
pursuant to 5ection ./ o* the @or9-en4s "o-pensation ct
7ct $o. .%28;.
2
n GE-ployer4s Report o* ccident or
5ic9nessG 0as thus sub-itted 0ith BM"#R indicated as the
e-ployer o* the deceased. The Report 0as si'ned by !ose
6uis 5antia'o. (n ans0er to <uestions $os. 8 and 1/, the
e-ployer stated that it 0ould not controvert the clai- *or
co-pensation, and ad-itted that the deceased e-ployee
contracted illness Gin re'ular occupation.G
3
#n the basis o* this
Report, the ctin' Re*eree a0arded death bene*its in the
a-ount o* P&,/&9.&2 plus burial expenses o* P200.00 in *avor
o* the heirs o* Hatus in a letter=a0ard dated #ctober 3,
193/
4
a'ainst TE5"#.
Replyin' on #ctober 2/, 193/, TE5"#, throu'h !ose 6uis
5antia'o, in*or-ed the ctin' Re*eree that it 0ould avail o* the
1&=days=notice 'iven to it to state its non=con*or-ity to the
a0ard and contended that the cause o* the illness contracted
by Hatus 0as in no 0ay a''ravated by the nature o* his 0or9.
5
#n $ove-ber 3, 193/, TE5"# re<uested *or an extension o*
ten days 0ithin 0hich to *ile a Motion *or
Reconsideration,
6
and on $ove-ber 1&, 193/, as9ed *or an
additional extension o* *ive days.
7
TE5"# *iled its GMotion *or
Reconsideration andFor Petition to 5et side 0ardG on
$ove-ber 18, 193/, alle'in' as 'rounds there*or, that the
ad-ission -ade in the GE-ployer4s Report o* ccident or
5ic9nessG 0as due to honest -ista9e andFor excusable
ne'li'ence on its part, and that the illness *or 0hich
co-pensation is sou'ht is not an occupational disease, hence,
not co-pensable under the la0.
8
The extension re<uested
0as denied. The Motion *or Reconsideration 0as li9e0ise
denied in an #rder issued by the "hie* o* 5ection o* the
Re'ional #**ice dated ,ece-ber 28, 193/
$
predicated on t0o
'rounds? that the alle'ed -ista9e or ne'li'ence 0as not
excusable, and that the basis o* the a0ard 0as not the theory
o* direct causation alone but also on that o* a''ravation. #n
!anuary 28, 1938, an #rder o* execution 0as issued by the
sa-e #**ice.
#n Aebruary ., 1938, petitioner *iled an GBr'ent Motion to
"o-pel Re*eree to Elevate the Records to the @or9-en4s
"o-pensation "o--ission *or Revie0.G
10
Mean0hile, the
Provincial 5heri** o* Ri+al levied on and attached the properties
o* TE5"# on Aebruary 1/, 1938, and scheduled the sale o*
the sa-e at public auction on Aebruary 23, 1938. #n Aebruary
28, 1938, the "o--ission issued an #rder re<uirin' petitioner
to sub-it veri*ied or true copies o* the Motion *or
Reconsideration andFor Petition to 5et side 0ard and #rder
o* ,ece-ber 28, 193/, and to sho0 proo* that said Motion *or
Reconsideration 0as *iled 0ithin the re'le-entary period, 0ith
the 0arnin' that *ailure to co-ply 0ould result in the dis-issal
o* the Motion. 2o0ever, be*ore this #rder could be released,
TE5"# *iled 0ith this "ourt, on Aebruary 22, 1938, The
present petition *or G"ertiorari 0ith Preli-inary (n)unctionG
see9in' to annul the a0ard and to en)oin the 5heri** *ro-
levyin' and sellin' its properties at public auction.
#n Aebruary 29, 1938, this "ourt re<uired respondents to
ans0er the Petition but denied (n)unction.
11
TE5"#45 Br'ent
Motion dated pril 2, 1938, *or the issuance o* a te-porary
restrainin' order to en)oin the 5heri** *ro- proceedin' 0ith the
auction sale o* its properties 0as denied in our Resolution
dated May 8, 1938.
TE5"# asserts?
(. That the respondent @or9-en4s "o-pensation "o--ission
has no )urisdiction nor authority to render the a0ard 7nnex 4,4,
Petition; a'ainst your petitioner there bein' no e-ployer=
e-ployee relationship bet0een it and the deceased HatusE
((. That petitioner can never be estopped *ro- <uestionin' the
)urisdiction o* respondent co--ission especially considerin'
that )urisdiction is never con*erred by the acts or o-ission o*
the partiesE
(((. That this 2onorable "ourt has )urisdiction to nulli*y the
a0ard o* respondent co--ission.
TE5"# ta9es the position that the "o--ission has no
)urisdiction to render a valid a0ard in this suit as there 0as no
e-ployer=e-ployee relationship bet0een the-, the deceased
havin' been an e-ployee o* BM"#R and not o* TE5"#. (n
support o* this contention, petitioner sub-itted photostat
copies o* the payroll o* BM"#R *or the periods May 13=.1,
193/ and !une 1=1&, 193/
12
sho0in' the na-e o* the
deceased as one o* the three e-ployees listed under the
Purchasin' ,epart-ent o* BM"#R. (t also presented a
photostat copy o* a chec9 o* BM"#R payable to the
deceased representin' his salary *or the period !une 1% to !uly
1., 193/.
13
8oth public and private respondents contend, on the other
hand, that TE5"# is estopped *ro- clai-in' lac9 o* e-ployer
M e-ployee relationship.
To start 0ith, a *e0 basic principles should be re=stated the
existence o* e-ployer=e-ployee relationship is the
)urisdictional *oundation *or recovery o* co-pensation under
the @or9-en4s "o-pensation 6a0.
14
The lac9 o* e-ployer=
e-ployee relationship, ho0ever, is a -atter o* de*ense that the
e-ployer should properly raise in the proceedin's belo0. The
deter-ination o* this relationship involves a *indin' o* *act,
0hich is conclusive and bindin' and not sub)ect to revie0 by
this "ourt.
15
:ie0ed in the li'ht o* these criteria, 0e note that it is only in
this Petition be*ore us that petitioner denied, *or the *irst ti-e,
the e-ployer=e-ployee relationship. (n *act, in its letter dated
#ctober 2/, 193/ to the ctin' Re*eree, in its re<uest *or
extension o* ti-e to *ile Motion *or Reconsideration, in its
GMotion *or Reconsideration andFor Petition to 5et side
0ard,G and in its GBr'ent Motion to "o-pel the Re*eree to
Elevate Records to the "o--ission *or Revie0,G petitioner
represented and de*ended itsel* as the e-ployer o* the
deceased. $o0here in said docu-ents did it alle'e that it 0as
not the e-ployer. Petitioner even ad-itted that TE5"# and
BM"#R are sister co-panies operatin' under one sin'le
-ana'e-ent and housed in the sa-e buildin'. lthou'h
respect *or the corporate personality as such, is the 'eneral
rule, there are exceptions. (n appropriate cases, the veil o*
corporate *iction -ay be pierced as 0hen the sa-e is -ade as
a shield to con*use the le'iti-ate issues.
16
@hile, indeed, )urisdiction cannot be con*erred by acts or
o-ission o* the parties, TE5"#45 denial at this sta'e that it is
the e-ployer o* the deceased is obviously an a*terthou'ht, a
devise to de*eat the la0 and evade its obli'ations.
17
This denial
also constitutes a chan'e o* theory on appeal 0hich is not
allo0ed in this )urisdiction.
18
Moreover, issues not raised
be*ore the @or9-en4s "o-pensation "o--ission cannot be
raised *or the *irst ti-e on appeal.
1$
Aor that -atter, a *actual
<uestion -ay not be raised *or the *irst ti-e on appeal to the
5upre-e "ourt.
20
This certiorari proceedin' -ust also be held to have been
pre-aturely brou'ht. 8e*ore a petition *or certiorari can be
instituted, all re-edies available in the trial "ourt -ust be
exhausted *irst.
21
certiorari cannot be resorted to 0hen the
re-edy o* appeal is present.
22
@hat is sou'ht to be annulled
is the a0ard -ade by the Re*eree. 2o0ever, TE5"# did not
pursue the re-edies available to it under Rules 2., 2% and 2&
o* the Rules o* the @or9-en4s "o-pensation "o--ission,
na-ely, an appeal *ro- the a0ard o* the Re*eree, 0ithin *i*teen
days *ro- notice, to the "o--issionE a petition *or
reconsideration o* the latter4s resolution, i* adverse, to the
"o--ission en bancE and 0ithin ten days *ro- receipt o* an
un*avorable decision by the latter, an appeal to this "ourt. s
petitioner had not utili+ed these re-edies available to it,
certiorari 0in not he, it bein' pre-aturely *iled. s this "ourt
ruled in the case o* %anila 3ockey )lub, Inc. vs. 'el ,osario, 5
+),A 675 189782. 8:wph;8.<=t
n a''rieved party by the decision o* a "o--issioner should
see9 a reconsideration o* the decision by the "o--ission en
banc. (* the decision is adverse to hi-, he -ay appeal to the
5upre-e "ourt. n appeal brou'ht to the 5upre-e "ourt
0ithout *irst resortin' to the re-edy re*erred to is pre-ature
and -ay be dis-issed.
lthou'h this rule ad-its o* exceptions, as 0here public
0el*are and the advance-ent o* public policy so dictate, the
broader interests o* )ustice so re<uire, or 0here the #rders
co-plained o* 0ere *ound to be co-pletely null and void or
that the appeal 0as not considered the appropriate
re-edy,
23
the case at bar does not *an 0ithin any o* these
exceptions. @2EREA#RE, this Petition is hereby dis-issed.
5# #R,ERE,.
#ctober .0, 193%
H.R. $o. 6=1.&&%
COLLEC(OR O6 IN(ERNAL REVEN1E, petitioner,
vs.
1NIVERSI(Y O6 (0E VISAYAS, respondent.
,>?>+, 3.@..., 3.4
The "o--issioner o* (nternal Revenue has -oved *or the
reconsideration o* our decision in the above=entitled case
a**ir-in' the decision o* the "ourt o* Tax ppeals in its
interpretation and application o* 5ection 2/7e; o* the tax code,
and declarin'? 71; that appellee Bniversity o* the :isayas be
exe-pted *ro- inco-e tax under 5ection 2/7e; o* the (nternal
Revenue "odeE 72; annullin' the inco-e tax assess-ents *or
19%3 to 19&0 -ade a'ainst the BniversityE and 7.; orderin' the
re*und o* previous taxes collected *ro- it.
The petitioner=-ovant re=asserts his position that the
respondent Bniversity o* the :isayas is not tax=exe-pt
because the le'islature intended to re-ove *ro- the purvie0 o*
the exe-ption provided *or in 5ection 2/7e; o* the Revenue
"ode not only or'ani+ations or corporations distributin' cash
dividends to any stoc9holder or individual but also those 0hose
inco-e inures to the bene*it o* any stoc9holder or individual. (n
support thereo*, he e-phasi+es the di**erence bet0een the old
la0 7"o--. ct %33; thus?
7*; "orporation or association or'ani+ed and operated
exclusively *or reli'ious, charitable, scienti*ic, athletic, cultural,
or educational purposes, no part o* the net inco-e o* 0hich is
distributed to any private stoc9holder or individual?
and its a-end-ent by Republic ct $o. 82, as *ollo0s? .
7e; "orporation or association or'ani+ed and operated
exclusivelvy *or reli'ious, charitable, scienti*ic, athletic, cultural
or educational purposes, or *or the rehabilitation o* veterans no
part o* the net inco-e o* 0hich inures to the bene*it o* any
private stoc9holder or individual N .
and *inally cites, and relies on, the explanatory note to 2ouse
8ill $o. /29, 0hich beca-e Republic ct $o. 82. The pertinent
portions o* the explanatory note are hereunder <uoted?
The attached bill, there*ore, proposes to increase the present
rates o* inco-e tax and to -odi*y the other *eatures o* the
present la0 0ith a vie0 to providin' additional revenue. brie*
explanation o* the chan'es proposed to Title (( 7(nco-e Tax; o*
the $ational (nternal Revenue "ode is set *orth belo0.
%. -end-ent o* provision 'rantin' exe-ption in *avor o*
reli'ious, charitable, scienti*ic, athletic, cultural, or educational
or'ani+ations or institutions. M The present la0, section 2/ 7*;,
$ational (nternal Revenue "ode, exe-pts the or'ani+ations i*
no part o* their inco-e Ois distributed to any private
stoc9holders or individual.P This provision has been
authoritatively construed as exe-ptin' such or'ani+ation or
association *ro- pay-ent o* the inco-e tax *or any year in
0hich no dividends are distributed to stoc9holders. The present
la0 as so construed, there*ore, -a9es it possible *or a
corporation to avoid the pay-ent o* inco-e tax by si-ply
desistin' *ro- declarin' a dividend durin' any 'iven year,
not0ithstandin' the *act that it -ay have earned a very
substantial a-ount o* inco-e in that year. Aurther-ore, i* the
corporation desires to distribute dividends, it could e**ect the
distribution durin' a taxable year in 0hich it expects to su**er a
loss, or derive only a s-all inco-e, thus -a9in' it possible *or
such corporation to entirely avoid the pay-ent o* the inco-e
tax by availin' o* the loophole in the la0 to suit its advanta'e.
Bnder the proposed a-end-ent, the above=-entioned
corporations and associations 0ill pay inco-e tax on their
pro*its in any year althou'h no dividends are declared *or such
year. 7"on'ressional Record, 2ouse o* Representatives, 5ept.
9, 19%3, :ol. 1, $o. 39, p. 1&99;
The Revenue "o--issioner *urther ar'ues that the
undistributed dividends necessarily increase the value o* the
stoc9holdersQ e<uity, and that, in the particular case, it is not
denied that the -ar9et value o* the shares o* the Bniversity o*
the :isayas has increased considerablyE hence, it is ur'ed, the
undistributed dividends actually inured to the bene*it o* its
private stoc9holders, thus co-in' 0ithin the purvie0 o* the
statutory re<uisite *or taxability.
(n reply, the appellee Bniversity o* the :isayas ar'ues that the
*ore'oin' explanatory note lends no assistance to the -ovantQs
position because it -erely states the intended sa*e'uard or
re-edy a'ainst tax evasion 0ithout, ho0ever, expressin' that
the intent o* the le'islature 0as to 0ithdra0 the exe-ption *ro-
inco-e tax o* the corporations or institutions enu-erated in
5ection 2/ 7e;. The la0 itsel*, it is ar'ued, sanctions the
exe-ptions and i* the exe-ption 0ere 0ithdra0n, the la0
0ould have si-ply taxed educational institutions that produce a
net inco-e or pro*its. ppellee *urther ur'es that. literally
understood, the said 5ection 2/ 7e; 0ould tax all the
institutions -entioned therein that have any net inco-e
0hatever, since the production o* net inco-e naturally
7althou'h not necessarily; results in the increase o* the
stoc9holdersQ e<uity in the corporationE but such a literal
interpretation has no )usti*ication, and 0ould -a9e the la0
senseless in its application by 'rantin' and, at the sa-e ti-e,
0ithdra0in' the exe-ption.
Ainally, appellee ar'ues that under the interpretation
advocated by the Revenue "o--issioner, only educational
institutions 0ithout net inco-e 0ould be exe-ptedE and that
the increase o* a stoc9holderQs e<uity in the corporation is not
only theoretical 0hile the shares are not disposed o*, or the
corporation li<uidated, but -ay arise *ro- causes unconnected
0ith its net inco-e. That 0hat is re*erred to by the phrase Onet
inco-e inures to the bene*it o* any private stoc9holder or
individualP is the disposition or channelin' o* the net inco-e o*
the corporation to the bene*it o* the stoc9holder or individual in
an indirect or -anipulative -anner.
@e have care*ully reexa-ined the records o* this case, and
reached the conclusion that 0hile the ar'u-ents advanced by
the appellee educational institution are deservin' o* care*ul
consideration and bear 0ei'ht, the peculiar circu-stances o*
the present case clearly indicate that said ori'inal appellee is
not entitled to clai- exe-ption, contrary to our ori'inal
decision. The reason is that the *acts o* record prove that the
corporation is under absolute control o* the president and his
i--ediate *a-ily 70ho hold 8&1, o* the capital stoc9; to an
extent that 0arrants the conclusion that the corporate entity is
but an alter e'o or a business conduit *or said stoc9holdersE
0here*ore, a disre'ard o* the corporate *iction is )usti*ied, and
the net inco-e o* the corporation -ay 0ell be vie0ed as that o*
the controllin' 'roup 7c*. Koppel RPhil.S (nc. vs. Catco, // Phil.
%93, and authorities cited;.
The operation o* the appellee educational enterprise 0as
indeed li-ited to educational purpose, and the inco-e derived
solely *ro- ad-ission, tuition, diplo-a, laboratory and R#T"
*ees paid by students. 2o0ever, the net inco-e o*
P.02,%/9.02 *ro- 19%3 to 19&0, 0ith the exception o* the
relatively s-all a-ount o* P28,000 intended *or operatin'
expenses, 0ere invested in the purchase o* real properties.
5aid properties, it is ad-itted, belon' to the university, but they
have been placed in the na-e o* the president alone, or in the
na-e o* his 0i*e, or both. The reason is that, as the president
truth*ully ad-itted, he is the university and the university
belon's to hi-. 5hares o* stoc9 belon'in' to other
stoc9holders 0ere ac<uired by the president, and althou'h not
at their -ar9et value, nevertheless, at prices very -uch -ore
than par value. $o less than the president testi*ied that *or
every peso share the value is no0 P119. This increase in value
is due not only to the operation o* the educational enterprise
but also to the increase o* its per-anent assets, includin'
those that had been placed in the na-e o* the president, his
0i*e, or both. #ne o* the *acts clearly denotin' that the
personality o* the university and that o* the president are one is
that the board o* directors o* the university had once proposed
the issuance o* additional shares on the accu-ulated net
inco-e or pro*its. The president, ho0ever, ob)ected to this
proposal o* the -a)ority o* the persons co-posin' the board
*or the reason that the sa-e 0ould be a useless and
unnecessary 'esture, as he 0as practically the corporation.
The ob)ection o* the president de*eated the proposal.
"onsiderin' that the net inco-e, except *or the su- o*
P28,000.00 set aside *or operational expenses, 0as invested
in per-anent assets placed in the na-e o* the president, his
0i*e, or both, it is very obvious that such net inco-e reali+ed
by the university inured to the bene*it o* the president and his
*a-ily. (t is thus per*ectly understandable that the president
0ould decline to declare dividends. 2avin' the per-anent
assets consistin' o* seven buildin's in his na-e, or that o* his
0i*e, he is certainly bene*ited by desistin' *ro- declarin' any
9ind o* dividend. (* dividends had been declared and distributed
the *unds and assets o* the university 0ould be di-inished,
inso*ar as the president and his *a-ily are concerned, to the
a-ount althou'h insi'ni*icant, that has to be distributed to the
stoc9holders holdin' 1&1 o* the shares. 2o0ever, i* no
dividends are declared or distributed, 1001 o* the net inco-e
or accu-ulated *unds or assets o* the corporation 0ould
re-ain 0ith hi-, so that he 0ould bene*it not only *ro- his
8&1 holdin's but also *ro- the 1&1 holdin's o* others.
The *ore'oin' proves, in a clear -anner, not only on the basis
o* a state-ent under oath but also on the history o* the
respondent institution *ro- incipiency to the present ti-e 0hen
the tax is bein' collected, the existence o* a setup desi'ned to
avoid the pay-ent o* taxes. (* the net inco-e o* the institution
inured to the bene*it o* the university, as clai-ed by its
president under the a*ore-entioned circu-stances it li9e0ise
inured to the bene*it o* the president, as the t0o are ad-ittedly,
and sho0n to be, the sa-e. 2ence, the university is liable *or
inco-e tax under the a-end-ent.
(n vie0 o* the *ore'oin' considerations, the ori'inal decision o*
28 Aebruary 1931 is hereby considered and set aside and
another one entered 7a; reversin' the decision o* the "ourt o*
Tax ppeals, in "T "ebu "ivil "ase $o. R=.%.%, and
declarin' ' appellee Bniversity o* the :isayas not entitled to
the re*und o* P1.,811..1, *or inco-e taxes previously paidE 7b;
denyin' the re*und a*oresaidE 7c; declarin' that the
"o--issioner o* (nternal Revenue 0as la0*ully e-po0ered to
assess and collect inco-e taxes *ro- the appellee, Bniversity
o* the :isayasE and 7d; orderin' the said appellee to pay the
a-ount o* P./,212.03, as taxes on its inco-e *or the years
19%3 to 19&0, to'ether 0ith one per centu- 711; -onthly
interest on the su- o* P.1,/80./2 until paid, plus the su-s o*
P%0 and P100 as ad-inistrative penalties *or lateness in *ilin'
returns and pay-ent. $o costs.
8en'+on, ".!., "oncepcion, 8arrera, Paredes, ,i+on, Re'ala,
Ma9alintal, 8en'+on, !.P., and Laldivar, !!., concur.
8autista n'elo, !., too9 no part.
G.R. No. L-30822 J.+5 31, 1$75
E31AR3O CLAPAROLS, RO41LO AGSA4 %&'?o#
CLAPAROLS S(EEL AN3 NAIL PLAN(, petitioners,
vs.
CO1R( O6 IN31S(RIAL RELA(IONS, ALLIE3 =OR>ERSA
ASSOCIA(ION %&'?o# 3E4E(RIO GARLI(OS, AL6RE3O
ONGS1CO, JORGE SE4ILLANO, SALVA3OR 3ORO(EO,
ROSEN3O ESPINOSA, L13OVICO BALOPENOS, ASER
A4ANCIO, 4ADI4O 81IOYO, GA13ENCIO 81IOYO, %&'
IGNACIO 81IOYO, respondents.
4A>ASIAR, J.:
petition *or certiorari to set aside the order o* respondent
"ourt o* (ndustrial Relations dated May .0, 1939 directin'
petitioners to pay bac9 0a'es and bonuses to private
respondents as 0ell as its resolution o* !uly &, 1939 denyin'
the -otion *or reconsideration o* said order in "ase $o. .2=
B6P=(loilo entitled Gllied @or9ers4 ssociation, et. al., versus
Eduardo "laparols, et. al..G
(t appears that on u'ust 3, 19&/, a co-plaint *or un*air labor
practice 0as *iled by herein private respondent llied @or9ers4
ssociation, respondent ,e-etrio Harlitos and ten 710;
respondent 0or9ers a'ainst herein petitioners on account o*
the dis-issal o* respondent 0or9ers *ro- petitioner "laparols
5teel and $ail Plant.
#n 5epte-ber 13, 193., respondent "ourt rendered its
decision *indin' GMr. "laparols 'uilty o* union bustin' andG o*
havin' Gdis-issed said co-plainants because o* their union
activities,G and orderin' respondents G71; To cease and desist
*ro- co--ittin' un*air labor practices a'ainst their e-ployees
and laborersE 72; To reinstate said co-plainants to their *or-er
or e<uivalent )obs, as soon as possible, 0ith bac9 0a'es *ro-
the date o* their dis-issal up to their actual reinstate-entG 7p.
12, ,ecisionE p. 2/, rec.;.
-otion to reconsider the above decision 0as *iled by herein
petitioners, 0hich respondent "ourt, sittin' en banc, denied in
a resolution dated !anuary 2/, 193%.
#n March .0, 193%, counsel *or herein respondent 0or9ers
7co-plainants in the B6P case; *iled a -otion *or execution o*
respondent "ourt4s 5epte-ber 13, 193. decision.
#n May 1%, 193%, respondent "ourt, in its order o* 5epte-ber
13, 193., 'ranted execution and directed herein petitioners
to reinstate the above co-plainants to their *or-er or
e<uivalent )obs 0ithin *ive 7&; days a*ter receipt o* a copy o*
this order. (n order to i-ple-ent the a0ard o* bac9 0a'es, the
"hie* o* the Exa-inin' ,ivision or any o* his assistants is
hereby directed to proceed to the o**ice o* the respondents at
Matab=an', Talisay, $e'ros #ccidental, and exa-ine its
payrolls and other pertinent records and co-pute the bac9
0a'es o* the co-plainants in accordance 0ith the decision
dated 5epte-ber 13, 193., and, upon ter-ination, to sub-it
his report as soon as possible *or *urther disposition 7p. /, 8rie*
*or Respondents, p. 11., rec.;.
0hich 0as reiterated by respondent "ourt in a subse<uent
order dated $ove-ber 10, 193% 7pp. /=8, 8rie* *or
Respondents, p. 11., rec.;.
#n ,ece-ber 1%, 193%, respondent 0or9ers 0ere
acco-panied by the "hie* o* Police o* Talisay, $e'ros
#ccidental to the co-pound o* herein petitioner co-pany to
report *or reinstate-ent per order o* the court. Respondent
0or9ers 0ere, ho0ever, re*used reinstate-ent by co-pany
accountant Arancisco "usi *or he had no order *ro- plant
o0ner Eduardo "laparols nor *ro- his la0yer tty. Plaridel
Katalbas, to reinstate respondent 0or9ers.
'ain, on ,ece-ber 1&, 193%, respondent 0or9ers 0ere
acco-panied by a police o**icer to the co-pany co-pound,
but then, they 0ere a'ain re*used reinstate-ent by "usi on the
sa-e 'round.
#n !anuary 1&, 193&, the "(R "hie* Exa-iner 5ub-itted his
report containin' three co-putations, to 0it?
The *irst co-putation covers the period Aebruary 1, 19&/ to
#ctober .1, 193%. The second is up to and includin'
,ece-ber /, 1932, 0hen the corporation stopped operations,
0hile the third is only up to !une .0, 19&/ 0hen the "laparols
5teel and $ail Plant ceased to operate 7nnex 8, Petition *or
Revie0 on)ertiorari, p. 1%, 8rie* *or appellees, p. 11., rec.;.
0ith the explanation that?
3. 5ince the records o* the "laparols 5teel "orporation sho0
that it 0as established on !uly 1, 19&/ succeedin' the
"laparols 5teel and $ail Plant 0hich ceased operations on
!une .0, 19&/, and that the "laparols 5teel "orporation
stopped operations on ,ece-ber /, 1932, three 7.;
co-putations are presented herein *or the consideration o* this
2onorable "ourt 7p. 2, Report o* Exa-iner, p. 29, rec.;.
#n !anuary 2., 193&, petitioners *iled an opposition alle'in'
that under the circu-stances presently en'ul*in' the co-pany,
petitioner "laparols could not personally reinstate respondent
0or9ersE that assu-in' the 0or9ers are entitled to bac9 0a'es,
the sa-e should only be li-ited to three -onths pursuant to
the court rulin' in the case o* 5ta. "ecilia 5a0-ills vs. "(R 76=
192/.=/%, Aebruary 20, 193%;E and that since "laparols 5teel
"orporation ceased to operate on ,ece-ber /, 1932, re=
e-ploy-ent o* respondent 0or9ers cannot 'o beyond
,ece-ber /, 1932.
reply to petitioner4s opposition 0as *iled by respondent
0or9ers, alle'in' a-on' others, that "laparols 5teel and $ail
Plant and "laparols 5teel and $ail "orporation are one and
the sa-e corporation controlled by petitioner "laparols, 0ith
the latter corporation succeedin' the *or-er.
#n $ove-ber 28, 1933, a*ter conductin' a series o* hearin's
on the report o* the exa-iner, respondent "ourt issued an
order, the dispositive portion o* 0hich reads?
@2EREA#RE, the Report o* the. Exa-iner *iled on !anuary
1&, 193&, is hereby approved sub)ect to the *ore'oin' *indin's
and dispositions. "onse<uently, the "orporation uditin'
Exa-iner is directed to reco-pute the bac9 0a'es o*
co-plainants ,e-etrio Harlitos and l*redo #n'suco on the
basis o* P200.00 and P2/0.00 a -onth, respectivelyE to
co-pute those o* co-plainant ('nacio >uioyo as a*oresaidE to
co-pute the deductible earnin's o* co-plainants #n'suco,
!or'e 5e-illano and Harlitos, as *ound in the body o* this
orderE and to co-pute the bonuses o* each and every
co-plainant, except 2onorato >uioyo. Therea*ter, as soon as
possible, the Exa-iner should sub-it a report in co-pliance
here0ith o* the "ourt4s *urther disposition 7p. 2%, 8rie* *or
Respondents, p. 11., rec.;.
#n ,ece-ber /, 1933, a -otion *or reconsideration 0as *iled
by petitioner, assailin' respondent "ourt4s rulin' that 71; the
rulin' in the case o* 5ta. "ecilia 5a0-ills (nc. "(R, et. al, does
not apply in the case at barE and 72; that bonus should be
included in the recoverable 0a'es.
#n ,ece-ber 1%, 1933, a counter=opposition 0as *iled by
private respondents alle'in' that petitioners4 -otion *or
reconsideration 0as pro forma, it not -a9in' express re*erence
to the testi-ony or docu-entary evidence or to the provision o*
la0 alle'ed to be contrary to such *indin's or conclusions o*
respondent "ourt.
#n Aebruary 8, 193/, respondent "ourt o* (ndustrial Relations
dis-issed petitioners4 -otion *or reconsideration *or bein' pro
forma.
Whereupon, petitioners filed a petition for certiorari with this
)(U,& in A.,. "o. .-5B5B5 to set aside the "ovember 5C,
8977 order of respondent )ourt, as well as its /ebruary C,
897B resolution. Petitioners assigned therein as errors of law
the very same assignment of errors it raises in the present
case, to wit4
(
T2E RE5P#$,E$T "#BRT ERRE, $,F#R "TE, @(T2
HR:E 8B5E #A ,(5"RET(#$, M#B$T($H T# 6"K
#A !BR(5,("T(#$, ($ 2#6,($H ($ T2E #R,ER B$,ER
RE:(E@ T2T 8#$B5E5 52#B6, 8E P(, T# T2E
RE5P#$,E$T @#RKER5 ,E5P(TE T2E A"T T2T T2E
5ME @5 $#T ,!B,("TE, ($ (T5 #R(H($6
,E"(5(#$.
((
T2E RE5P#$,E$T "#BRT ERRE, $,F#R "TE, @(T2
HR:E 8B5E #A ,(5"RET(#$, M#B$T($H T# 6"K
#A !BR(5,("T(#$, ($ $#T PP6C($H T2E ,#"TR($E
6(, ,#@$ 8C T2(5 2#$#R86E TR(8B$6 ($ T2E
"5E #A G5T. "E"(6( 5@M(665, ($". :5. ".(.R., ET.
6.,G H.R. $o.
6=192/.=/%, PR#MB6HTE, #$ AE8RBRC 29, 193% 7pp.
10=11, rec.;.
#n pril 2/, 193/, the 5upre-e "ourt denied petitioners4
petition *or certiorari 7p. //, rec. o* 6=2/2/2;, 0hich 0as
reiterated on May 19, 193/ 7p. 2/, Respondent4s 8rie*, p. 11.,
rec.E p. 81, rec. o* 6=2/2/2;.
#n May ., 193/, private respondents -oved to have the
0or9ers4 bac9 0a'es properly reco-puted. -otion to the
sa-e end 0as reiterated by private respondents on !une 1%,
193/.
#n !uly 1., 193/, respondent "ourt directed a reco-putation
o* the bac9 0a'es o* respondent 0or9ers in accordance 0ith
its order dated $ove-ber 28, 1933. The said order in part
reads?
@2EREA#RE, the "hie* uditin' Exa-iner o* the "ourt or
any o* his assistants, is hereby directed to reco-pute the bac9
0a'es o* the 0or9ers involved in this case in accordance 0ith
the #rder o* $ove-ber 28, 1933 0ithin 20 days *ro- receipt o*
a copy o* this #rder 7p. 28, 8rie* *or Respondents, p. 11., rec.;.
Then on March 21, 1938, the "hie* Exa-iner ca-e out 0ith his
report, the disputed portion o* 0hich 7re'ardin' bonuses;
reads?
xxx xxx xxx
%. The yearly bonuses o* the e-ployees and laborers o*
respondent corporation are 'iven on the *ollo0in' basis?
8asic dditional?
a. Aor every dependent 11 o* -onthly salary
b. Aor every dependent in ele-entary 'rade 21 o* -onthly
salary
c. Aor every dependent in hi'h school .1 o* -onthly salary
d. Aor every dependent in colle'e &1 o* -onthly salary
xxx xxx xxx
/. The co-puted ... bonuses a*ter deductin' the earnin's
else0here o* Messrs. #n'suco, Harlitos and 5e-illano are as
*ollo0s?
$a-e x x x 8onuses x x x
1. l*redo #n'suco P1,320.00
2. ,e-etrio Harlitos 1,200.00
.. ('nacio >uioyo %&&.2.
%. ser bancio %31.00
&. 6udovico 8elopeIos /&2.0&
3. 5alvador ,oroteo /1%./0
/. Rosendo Espinosa 1,0/&.%0
8. Haudencio >uioyo 1,13/.92
9. !or'e 5e-illano 1,212.08
10. Maxi-o >uioyo %%9.%1
Total P9,10/./9
7Pp. .0=.1, Respondent4s 8rie*, p. 11., rec.;
#n pril 13, 1938, petitioners *iled their opposition to the report
o* the Exa-iner dated March 21, 1938 on 'rounds already
re)ected by respondent "ourt in its order dated $ove-ber 28,
1933, and by the 5upre-e "ourt also in its rulin' in H.R. $o.
6=2/2/2.
#n May %, 1938, a re)oinder to petitioners4 opposition 0as *iled
by private respondents, alle'in' a-on' others Gthat the
'rounds o* petitioners4 opposition 0ere the sa-e 'rounds
raised by the- be*ore and passed upon by respondent "ourt
and this 2onorable TribunalE that this order o* $ove-ber 28,
1933 0hich passed upon these issues beca-e *inal and
executory on !une ., 193/ *ro- the 2onorable 5upre-e "ourt.
7#rder o* respondent "ourt dated !uly 1., 193/;. Rp. .2, 8rie*
*or Respondents, p. 11., rec.S.
#n !uly 23, 1938, private respondents *iled their -otion *or
approval o* the Report o* the Exa-iner sub-itted on March 21,
1938, alle'in', a-on' others, that petitioners, in their
opposition, did not actually dispute the data elicited by the
"hie* Exa-iner but rather harped on 'rounds 0hich, as
already stated, had already been turned do0n by the 5upre-e
"ourt.
#n #ctober 19, 1938, herein private respondents *iled their
G"onstanciaG, sub-ittin' the case *or resolution o* respondent
"ourt o* (ndustrial Relations.
#n May .0, 1939, respondent "ourt issued an order, sub)ect o*
the present appeal, the dispositive portion o* 0hich reads?
@2EREA#RE, there bein' no proo* o**ered to substantiate
respondent Eduardo "laparols4 opposition, the Exa-iner4s
Report should be, and it is hereby, PPR#:E,.
"onse<uently, pursuant to the decision dated 5epte-ber 13,
193., respondent ... 7petitioners herein; are hereby directed to
pay the respective back wages and bonuses of the
complainants 7respondents herein; ... 7p. .&, 8rie* *or
RespondentsE p. 11., rec.E e-phasis supplied;.8:wph;8.<=t
#n !une /, 1939, petitioners *iled a -otion *or reconsideration
on practically the sa-e 'rounds previously raised by the-.
#n !une .0, 1939, respondents *iled an opposition to
petitioners4 -otion *or reconsideration, 0ith the *ollo0in'
alle'ations?
1. The issues raised, na-ely, 0hether bonuses should be
included in the a0ard *or bac9 0a'es had already been
resolved by respondent court in its orders dated $ove-ber 28,
1933, and ,ece-ber /, 1933, and in the Resolution o* the
2onorable 5upre-e "ourt in H.R. $o. 6=2/2/2 dated pril 23,
193/ and May 19, 193/, and the sa-e is already a settled and
*inal issue.
2. Petitioners4 -otion *or reconsideration is -erely a rehash o*
previous ar'u-ents, e**ete and unre)uvenated, pro forma, and
intended -erely to delay the proceedin's.
s correctly contended by private respondents, the present
petition is barred by #ur resolutions o* pril 23, 193/ and May
19, 193/ in H.R. $o. 6=2/2/2 7Eduardo "laparols, et. al. vs.
"(R, et. al.; Rpp. //=8., rec. o* 6= 2/2/2S, dis-issin' said case,
0herein said petitioners invo9ed the applicability o* the doctrine
in +ta. )ecilia +awmills, Inc. vs. )I,, et. al. 76=192/.=/%, Aeb.
29, 193%, 10 5"R %..; and i-pu'ned the ille'ality o* the
order o* respondent "ourt dated $ove-ber 28, 1933 directin'
the co-putation and pay-ent o* the bonuses, aside *ro- bac9
0a'es on the 'round that these bonuses 0ere not included in
the decision o* 5epte-ber 13, 193., 0hich had lon' beco-e
*inal.
The a*oresaid resolutions in H.R. $o. 6=2/2/2 constitute the
la0 o* the instant case, 0herein herein petitioners raised a'ain
practically the sa-e issues invo9ed in the above-entioned
case. The denial o* the petition in H.R. $o. 6=2/2/2 su**ices to
0arrant the denial o* the present petitionE and @e need not 'o
any *urther.
2o0ever, 0ithout lendin' a sy-pathetic ear to the obvious
desire o* herein petitioners o* this "ourt to re=exa-ine J 0hich
0ould be an exercise in *utility J the *inal rulin' in H.R. $o. 6=
2/2/2, 0hich as above=stated is the la0 o* the instant case,
but solely to re-ind herein petitioners, @e reiterate the
'overnin' principles.
@E uni*or-ly held that Ga bonus is not a de-andable and
en*orceable obli'ation, ecept when it is a part of the wage or
salary compensationG 7Philippine Education "o. vs. "(R and
the Bnion o* Philippine "o. E-ployees R$6BS, 92 Phil. .81E
nsay, et. al. vs. $ational ,evelop-ent "o., et. al., 10/ Phil.
998, 999E E-phasis supplied;.
(n Atok @ig Wedge %ining )o. vs. Atok @ig Wedge %utual
@enefit Association 792 Phil. /&%;, this "ourt, thru !ustice
6abrador, held?
@hether or not bonus *or-s part o* 0a'es depends upon the
condition or circu-stance *or its pay-ent.If it is an additional
compensation WDI)D &D> >%P.(?>, P,(%I+>' A"'
AA,>>' to give without any condition imposed for its
payment ... then it is part of the wage. 7E-phasis
supplied;.8:wph;8.<=t
(n Altomonte vs. Philippine American 'rug )o. 7103 Phil. 1./;,
the 5upre-e "ourt held that an e-ployee is not entitled to
bonus 0here there is no sho0in' that it had been 'ranted by
the e-ployer to its e-ployees periodically or re'ularly as to
beco-e part o* their 0a'es or salaries. The clear i-plication is
that bonus is recoverable as part o* the 0a'e or salary 0here
the e-ployer re'ularly or periodically 'ives it to e-ployees.
-erican )urisprudence e<ually re'ards bonuses as part o*
co-pensation or recoverable 0a'es.
Thus, it 0as held that G... it *ollo0s that in deter-inin' the
re'ular rate o* pay, a bonus which in fact constitutes PA,& (/
A" >%P.(?>>E+ compensation, rather than a true gift or
gratuity, has to be taken into consideration.G 7%8 -. !ur. 2d,
6abor and 6abor Relations, $o. 1&&&, citin' the cases o* Triple
GG "o. vs. @irt+ and 2aber vs. -ericana "orporationE
E-phasis supplied;. (t 0as *urther held that G... the regular rate
includes incentive bonuses paid to the employees in addition
to the guaranteed base rates regardless of any contract
provision to the contrary and even though such bonuses could
not be determined or paid until such time after the pay dayG 7%8
-. !ur. 2d, 6abor and 6abor Relations, $o. 1&&&, citin' the
case o* @allin' vs. 2arnisch*e'er "orp., .2& B5 %2/, 89 6 Ed
1/11, 3& 5 "t. 12%3E E-phasis supplied;.8:wph;8.<=t
Petitioners in the present case do not dispute that as a -atter
o* tradition, the co-pany has been dolin' out bonuses to
e-ployees. (n *act, the co-pany balance sheets *or the years
19&3 to 1932 contained bonus and pension co-putations
0hich 0ere never repudiated or <uestioned by petitioners. s
such, bonus *or a 'iven year ear-ar9ed as a -atter o* tradition
*or distribution to e-ployees has *or-ed part o* their
recoverable 0a'es *ro- the co-pany. Moreover, 0ith 'reater
reason, should recovery o* bonuses as part o* bac9 0a'es be
observed in the present case since the co-pany, in the li'ht o*
the very ad-ission o* co-pany accountant Arancisco "usi,
distributes bonuses to its e-ployees even i* the co-pany has
su**ered losses. 5peci*ically, petitioner co-pany has done this
in 1932 7t.s.n., p. 1%9, 5ept. 20, 193&;.
5ince bonuses are part o* bac9 0a'es o* private respondents,
the order o* May .0, 1939, directin' the pay-ent o* their
bonuses, did not a-end the decision o* 5epte-ber 13, 193. o*
respondent "ourt directin' pay-ent o* their 0a'es, 0hich has
lon' beco-e *inal and executory, in the sa-e 0ay that the
previous order o* May 1%, 193% 'rantin' execution o* said
decision o* 5epte-ber 13, 193. also directed the co-putation
o* the 0a'es to be paid to private respondents as decreed by
the decision o* 5epte-ber 13, 193.. ll the orders o* May .0,
1939, $ove-ber 28, 1933 and May 1%, 193% -erely
i-ple-ent the already *inal and executory decision o*
5epte-ber 13, 193..
Petitioners insist that @e adopt the rulin' in the 5ta. "ecilia
5a0-ills case 0herein the recoverable bac9 0a'es 0ere
li-ited to only three 7.; -onthsE because as in the 5ta. "ecilia
5a0-ills case, the "laparols 5teel and $ail Plant ceased
operations due to enor-ous business reverses.
Respondent "ourt4s *indin's that indeed the "laparols 5teel
and $ail Plant, 0hich ceased operation o* !une .0, 19&/, 0as
5B""EE,E, by the "laparols 5teel "orporation e**ective the
next day, !uly 1, 19&/ up to ,ece-ber /, 1932, 0hen the latter
*inally ceased to operate, 0ere not disputed by petitioners. (t is
very clear that the latter corporation 0as a continuation and
successor o* the *irst entity, and its e-er'ence 0as s9ill*ully
ti-ed to avoid the *inancial liability that already attached to its
predecessor, the "laparols 5teel and $ail Plant. 8oth
predecessors and successor 0ere o0ned and controlled by the
petitioner Eduardo "laparols and there 0as no brea9 in the
succession and continuity o* the sa-e business. This
Gavoidin'=the=liabilityG sche-e is very patent, considerin' that
901 o* the subscribed shares o* stoc9s o* the "laparols 5teel
"orporation 7the second corporation; 0as o0ned by
respondent 7herein petitioner; "laparols hi-sel*, and all the
assets o* the dissolved "laparols 5teel and $ail Plant 0ere
turned over to the e-er'in' "laparols 5teel "orporation.
(t is very obvious that the second corporation see9s the
protective shield o* a corporate *iction 0hose veil in the present
case could, and should, be pierced as it 0as deliberately and
-aliciously desi'ned to evade its *inancial obli'ation to its
e-ployees.
(t is 0ell re-e-berin' that in ?utivo * +ons Dardware
)ompany vs. )ourt of &a Appeals 76=1.20., !an. 28, 1931, 1
5"R 130;, @e held that 0hen the notion o* le'al entity is
used to de*eat public convenience, )usti*y 0ron', protect *raud,
or de*end cri-e, the la0 0ill re'ard the corporation as an
association or persons, or, in the case of two corporations, will
merge them into one.
(n .iddel * )ompany, Inc. vs. )ollector of Internal ,evenue 76=
938/, !une .0, 1931, 2 5"R 3.2;, this "ourt li9e0ise held
that 0here a corporation is a du--y and serves no business
purpose and is intended only as a blind, the corporate *iction
-ay be i'nored.
(n )ommissioner of Internal ,evenue vs. "orton and Darrison
)ompany 76=1/318, u'. .1, 193%, 11 5"R /1%;, @e ruled
that 0here a corporation is -erely an ad)unct, business conduit
or alter e'o o* another corporation, the *iction o* separate and
distinct corporate entities should be disre'arded.
To the sa-e uni*or- e**ect are the decisions in the cases
o* ,epublic vs. ,aFon 76=1/%32, May 29, 193/, 20 5"R 2.%;
and A.'. +antos, Inc. vs. #as!ueF 76=2.&83, March 20, 1938,
22 5"R 11&3;.
@E a'ree 0ith respondent "ourt o* (ndustrial Relations,
there*ore, that the a-ount o* bac9 0a'es recoverable by
respondent 0or9ers *ro- petitioners should be the a-ount
accruin' up to ,ece-ber /, 1932 0hen the "laparols 5teel
"orporation ceased operations.
@2EREA#RE, PET(T(#$ (5 2ERE8C ,E$(E, @(T2
TRE86E "#5T5 H($5T PET(T(#$ER5 T# 8E P(, 8C
T2E(R "#B$5E6.
)astro 1)hairman2, >sguerra, %u<oF Palma and %artin, 33.,
concur.
&eehankee, 3., is on leave.

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