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G.R. No. 170782 June 22, 2009SIAIN ENTERPRISES, INC., Petitioner,vs.CUPERTINO REAT! CORP. "n# E$%IN R. CATACUTAN,Res&on#ents.$ E C I S I O NNAC'URA, J.:

A (or&., u&on (o)in* into e+isten(e, is investe# - "/ / "&erson"itse&"r"te "n# #istin(t ro) tose &ersons(o)&osin* it "s /e "s ro) "n- oter e*" entit- to /i(it )"- e re"te#. Tis se&"r"te "n# #istin(t &erson"itis,o/ever, )ere- " i(tion (re"te# - "/ or (onve-"n(e "n#to &ro)ote te en#s o 3usti(e 4Si"in Enter&rises, In(. v.Cu&ertino Re"t- Cor&. 4200955

$OCTRINE O6 PIERCING T'E EI O6 CORPORATE 6ICTIONSIAIN ENTERPRISES v. CUPERTINOG.R. No. 170782 June 22, 2009NAC'URA, This is a petition for review on certiorari under Rule 45 of theRules of Court assailing the decision of the Court of Appeals whichaffirmed the decision of the Regional Trial Court.

Siain Enterprises, Inc. otained a loan of !"#,$$$,$$$.$$ fromrespondent Cupertino Realt% Corporation&Cupertino' covered % a promissor% note signed % othpetitioner(s and Cupertino(s respectivepresidents, Cua )e )eng and*ilfredo )ua. The parties then e+ecuted an amendment to

promissor% notewhich provided for a seventeen percent &#-'interest per annum on the !"#,$$$,$$$.$$ loan. The amendmentto promissor% note was liewise signed % Cua )e )eng and*ilfredo )ua on ehalf of petitioner and Cupertino, respectivel%.

Another promissor% note was signed % Cua )e )eng in favor of Cupertino for !/$,$$$,$$$.$$. Cua )e )eng signed the secondpromissor% note as maer, on ehalf of petitioner, and as co0maer,liale to Cupertino in her personal capacit%.

1owever, on 2arch , 33/, through counsel, wrote Cupertino anddemanded the release of the !/$,$$$,$$$.$$ loan. In completerefutation, Cupertino, liewise through counsel, responded anddenied that it had %et to release the !/$,$$$,$$$.$$ loan.Cupertino maintained that petitioner had long otained theproceeds of the aforesaid loan. *ith this, Cupertino institutede+traudicial foreclosure proceedings over the properties suect of the amended real estate mortgage.

RTC rendered a decision dismissing petitioner(s complaintandordering it to pa% Cupertino !$$,$$$.$$ each for actual ande+emplar% damages, and !5$$,$$$.$$ as attorne%(s fees. The RTCrecalled and set aside its previous order declaring the notarial

foreclosure of the mortgaged properties as null and void. nappeal, the CA, as previousl% adverted to, affirmed the RTC(sruling. In this regard, the lower courts applied the doctrine of 6piercing theveil of corporate fiction7 to preclude petitioner from disavowingreceipt of the !/$,$$$,$$$.$$ and pa%ing its oligation under theamended real estate mortgage.

ISS8E9!etitioner asseverates that the lower courts erroneousl% applied thedoctrine of 6piercing the veil of corporate fiction7 when oth gavecredence to Cupertino(s evidence showing that petitioner(s affiliateswere the previous recipients of part of the !/$,$$$,$$$.$$indetedness of petitioner to Cupertino. Is this valid:

1E);9<es.As a general rule, a corporation will e deemed a separate legalentit% until sufficient reason to the contrar%appears. =ut the rule is not asolute. A corporation(s separate and distinctlegal personalit% ma% e disregarded and the veil of corporatefiction pierced when the notion of legal entit% is used to defeatpulic convenience, ustif% wrong, protect fraud, or defend crime.In this case, Cupertino presented overwhelming evidence thatpetitioner and its affiliate corporations had received the proceeds of the !/$,$$$,$$$.$$ loan increase which was then made the

consideration for the Amended Real Estate 2ortgage. The factsestalished in the case at ar has convinced the Court of thepropriet% to appl% the principle % virtue of which, the uridicalpersonalities of the various corporations involved are disregardedand the ensuing liailit% of the corporation to attach directl% to itsresponsile officers and stocholders

These are as follows9.That the checs, deit memos and the pledges of the ewelries,condominium units and trucs wereconstituted not e+clusivel% in the name of >petitioner? ut alsoeither in the name of <u%e 2anufacturingCorporation, Siain Transport, Inc., Cua )eleng and Alerto )im is of no moment.

@.Siain and Yuyek have [a] common set of [incorporators],stockholders and board of directors;

3.They have the same internal bookkeeper and accountant in the person of Rosemarie Raodon;

!.They have the same office address at 3"# $ose Ri%al St.,&andaluyon 'ity;

(.They have the same ma)ority stockholder and president in the person of 'ua *e *en; and

#.+n relation to Siain Transport, 'ua *e *en had the unauthority by and on herself, ithout authority from the -oard of irectors, to use the funds of Siain Truc

pay the obliation incurred by the[petitioner] corporation.

/.As such, >petitioner? corporation is now estopped from dthe aove apparent authorities of Cua )e)eng who holds herself to the pulic as possessing the powethose acts, against an% person whodealt in good faith as in the case of Cupertino.

6U TET:=efore us is a petition for review on certiorari under Rule 45Rules of Court assailing the decision of the Court of Appeals.R. CB o. #4@4 which affirmed the decision of the RTrial Court, =ranch @3, Iloilo Cit% in Civil Case o. @"@44.@

n April $, 335, petitioner Si"in Enter&rises, Inc. otloan of !"#,$$$,$$$.$$ from respondent Cu&ertino Cor&or"tion 4Cu&ertino' covered % a promissor% note sigoth petitioner(s and Cupertino(s respective presidents , Cen* "n# %ire#o u". The promissor% note auCupertino, as the creditor, to place in escrow the loan proc!"#,$$$,$$$.$$ with 2etropolitan =an Trust Compan% topetitioner(s loan oligation with $eveo&)ent ;"n< Pii&&ines 4$;P'. To secure the loan, petitioner, on thdate, e+ecuted a real estate mortgage over two &@' parcels and other immovales, such as eFuipment and machineries.

Two &@' da%s thereafter, or on April @, 335, the parties ean amendment to promissor% note which provided for a sevpercent &#-' interest per annum on the !"#,$$$,$$$.$The amendment to promissor% note was liewise signed % )eng and *ilfredo )ua on ehalf of petitioner and Curespectivel%.n August /, 335, Cu" e en* signed a second pronote in favor of Cu&ertino for !/$,$$$,$$$.$$. Cua )signed the second promissor% note as )"<er, on e&etitioner, and as (o=)"<er, i"e to Cu&ertino in her pcapacit%. This second promissor% note provides9!R2ISSR< TE

A28T ;

E 18;RE; SIGT< 2I))I !ESS&!1! /$,$$$,$$$.$$'HR BA)8E RECEIBE;, after one &' %ear from this dateAugust /, 33/, *E, SIAI ETER!RISES IC. with 2etrooffice address at "$/ .!. RiDal St., 2andalu%ong Cit%, repreherein % its dul% authoriDed !resident, 2s. )E)E C8A, &of her authorit% is hereto attached as Anne+ JAJ' and 2s. )C8A in her personal capacit%, a resident of I)I) CIT<, oiseverall%, unconditionall% promise to pa% C8!ERTI CR!RATI, or order, an e+isting corporation dul% orunder !hilippine laws, the amountKsum of E 18;RE;2I))I !ESS &!1! /$,$$$,$$$.$$', !hilippine C



without further need of an% demand, at the office of C8!ERTIREA)T< CR!RATILThe amountKsum of E 18;RE; SIGT< 2I))I !ESS &!1!/$,$$$,$$$.$$' shall earn a compounding interest of "$- perannum which interest shall e pa%ale to C8!ERTI REA)T<CR!RATI at its aove given address T1E HIRST ;A< HEBER< 2T1 *IT18T T1E EE; H ;E2A;.In case *e fail to pa% the principal amount of this note at maturit%or in the event of anruptc% or insolvenc%, receivership, lev% of e+ecution, garnishment or attachment or in case of conviction for acriminal offense carr%ing with it the penalt% of civil interdiction or inan% of the cases covered % Article 3M of the Civil Code of the!hilippines, then the entire principal of this note and other interestsand penalties due thereon shall, at the option of C8!ERTIREA)T< CR!RATI, immediatel% ecome due and pa%ale and*e ointl% and severall% agree to pa% additionall% a penalt% at therate of T1REE !ERCET &"-' per month on the total amountKsumdue until full% paid. Hurthermore, *e ointl% and severall% agree topa% an additional sum eFuivalent to @$- of the total amount dueut in no case less than !1! $$,$$$.$$ as and for attorne%(s feesin addition to e+penses and costs of suit.*e here% authoriDe and empower C8!ERTI REA)T<CR!RATI at its option at an% time, without notice, to appl% tothe pa%ment of this note and or an% other particular oligation oroligations of all or an% one of us to C8!ERTI REA)T<CR!RATI, as it ma% select, irrespective of the dates of maturit%, whether or not said oligations are then due, an% and allmone%s, checs, securities and things of value which are now orwhich ma% hereafter e in its hand on deposit or otherwise to thecredit of, or elonging to, oth or an% one of us, and C8!ERTIREA)T< CR!RATI is here% authoriDed to sell at pulic orprivate sale such checs, securities, or things of value for thepurpose of appl%ing the proceeds thereof to such pa%ments of thisnote.*e here% e+pressl% consent to an% e+tension andKor renewalshereof in whole or in part andKor partial pa%ment on account whichma% e reFuested % and granted to us or an% one of us for thepa%ment of this note as long as the remaining unpaid alance shallearn an interest of T1REE percent &"-' a month until full% paid.Such renewals or e+tensions shall, in no case, e understood as anovation of this note or an% provision thereof and *e will there%continue to e liale for the pa%ment of this note.*e sumit to the urisdiction of the Courts of the Cit% of 2anila orof the place of e+ecution of this note, at the option of C8!ERTIREA)T< CR!RATI without divesting an% other court of the its

urisdiction, for an% legal action which ma% arise out of this note. In

case of udical e+ecution of this oligation, or an% part of it, wehere% waive all our rights under the provisions of Rule "3, section@ of the Rules of Court.*e, who are ustl% indeted to C8!ERTI REA)T< CR!RATI,agree to e+ecute respectivel% a real estate mortgage and a pledgeor a chattel mortgage covering securities to serve as collaterals forthis loan and to e+ecute liewise an irrevocale pro+% to allowrepresentatives of the creditor to e ale to monitor acts of management so as to prevent an% premature call of this loan. *e

further undertae to e+ecute an% other ind of document whichC8!ERTI REA)T< CR!RATI ma% solel% e lieve is necessar%in order to effect an% securit% over an% collateral.Hor this purpose, 2s. )E)E C8A, upon the foregoing promissor%note, has this /th da% of Aug 335, pledged her shares of stocsin SIAI ETER!RISES, IC., worth !1! ,M$$,$$$.$$ which shehere% confesses as representing M$- of the total outstandingshares of the said compan%.In default of pa%ment of said note or an% part thereof at maturit%,2s. )E)E C8A here% authoriDes C8!ERTI REA)T<CR!RATI or its assigns, to dispose of said securit% or an% partthereof at pulic sale. The proceeds of such sale or sales shall,after pa%ment of all e+penses and commissions attending said saleor sales, e applied to this promissor% note and the alance, if an%,after pa%ment of this promissor% note and interest thereon, shalle returned to the undersigned, her heirs, successors andadministratorsL it shall e optional for the owner of the promissor%note to id for and purchase the securities or an% part thereof.

SIAI ETER!RISES, IC.

&signed')E)E C8AIn her personal capacit%C02ANER

=%9&signed')E)E C8A2ANER*ITESSES9&signed'E;AR; )8A

&signed'RSE 2ARIE RA;4

P"renteti("-, on even #"te, te &"rties e+e(ute# "n")en#)ent o re" est"te )ort*"*e, &rovi#in* in &ertinent&"rt:*1EREAS, on $ April 335, the >petitioner? e+ecuted, signed anddelivered a Real Estate 2ortgage to and in favor of >Cupertino? oncertain real estate properties to secure the pa%ment to >Cupertino?of a loan in the amount of T1IRT< SEBE 2I))I !ESS&!"#,$$$,$$$.$$' !hilippine Currenc%, granted % >Cupertino? wasratified &sic' on $ April 335 efore Constancio 2angoa, r.,otar% !ulic in 2aati Cit%, as ;oc. o. @4@L in !age o. 5$L =ooo., GBIL Series of 335, and dul% recorded in the ffice of theRegister of ;eeds for the said Cit% of I loiloL%'EREAS, te >&etitioner? "s in(re"se# its o"n &"-"e to>Cu&ertino? /i( no/ ")ounts to ONE 'UN$RE$ NINET!SEEN @IION PESOS 4197,000,000.005 "n#

*1EREAS, the >petitioner? and >Cupertino? intend to amend thesaid Real Estate 2ortgage in order to reflect the current total loansecured % the said Real Estate 2ortgageL*, T1EREHRE, for and in consideration of the foregoingpremises, the parties hereto have agreed and % these presents dohere% agree to amend said Real Estate 2ortgage dated $ April335 mentioned aove % sustituting the total amount of the loansecured % said Real Estate 2ortgage from !"#,$$$,$$$.$$ to!3#,$$$,$$$.$$.

It is here% e+pressl% understood that with the foamendment, all other terms and conditions of said Rea2ortgage dated $ April 335 are here% confirmed, ratifcontinued to e in full force and effect, and that this agreemmade an integral part of said Real Estate 2ortgage.5

Curious- o/ever, "n# (ontr"r- to te tenor ore*oin* o"n #o(u)ents, &etitioner, on @"r( 11,trou* (ounse, /rote Cu&ertino "n# #e)"n#e# te ro te P1B0,000,000.00 o"n in(re"se (overe# ")en#)ent o re" est"te )ort*"*e./ In the demandpetitioner(s counsel stated that despite repeated veral deCupertino had %et to release the !/$,$$$,$$$.$$ loan. n 33/, petitioner demanded anew from Cupertino the release!/$,$$$,$$$.$$ loan.#

In (o)&ete reut"tion, Cu&ertino, i<e/ise trou* (ores&on#e# "n# #enie# t"t it "# -et to ree"sP1B0,000,000.00 o"n. Cu&ertino )"int"ine# t"t &et"# on* ot"ine# te &ro(ee#s o te "ores"i#Cupertino declared petitioner(s demand as made to Jascona ust and valid oligation,J a mere afterthought, foCupertino(s letter demanding pa%ment of the !"#,$$$,$$$.covered % the first promissor% note which ecame over2arch 5, 33/.ot surprisingl%, Cu&ertino institute# e+tr"3u#i(i" ore(proceedings over the properties suect of the amended reamortgage. The auction sale was scheduled on ctoer with respondent otar% !ulic Edwin R. Catacutan commissiconduct the same. This prompted &etitioner to ie " (o)/it " &r"-er or " restr"inin* or#er to en3oin otar%Catacutan from proceeding with the pulic auction.The following are the parties( conflicting claims, summariDedRTC, and Fuoted veratim % the CA in its decision9JThe verified complaint alleges that >petitioner? is engaged)"nu"(turin* "n# ret"iin*/oes"in* usiness. oter "n#, Cu&ertino is en*"*e# in te re"t- usineson April $, 335, >petitioner? e+ecuted a Real Estate 2over its real properties covered % Transfer Certificates of tiT0#5$3 and T0#"4M &Jthe mortgage propertiesJ' of the Rof ;eeds of Iloilo in favor of Cupertino to secure the formeoligation to the latter in the amount of !hp"#,$$$,$$$.$$.has een the agreement etween >petitioner? and Cupertithe aforesaid loan will e non0interest earing. Accordinparties saw to it that the promissor% note &evidencing thagreement' did not provide an% stipulation with respect to in several occasions thereafter, >petitioner? made partial pato Cupertino in respect of the aforesaid loan oligation

former to the latter in the total amount of !hp#,3M5,there% leaving a alance of !hp@3,$4,3/$.3@. n Aug335, >petitioner? and Cupertino e+ecuted an amendment Estate 2ortgage &Anne+ JCJ' increasing the total loan covethe aforesaid RE2 from !hp"#,$$$,$$$.$$ to !3#,$$$,This amendment to RE2 was e+ecuted preparator% to the prrelease % Cupertino of additional loan proceeds to >petitiothe total amount of !hp/$,$$$,$$$.$$. 1owever, despe+ecution of the said amendment to RE2 and its su



registration with the Register of ;eeds of Iloilo Cit% andnotwithstanding the clear agreement etween >petitioner? andCupertino and the latter will release and deliver to the former theaforesaid additional loan proceeds of !/$,$$$,$$$.$$ after thesigning of pertinent documents and the registration of theamendment of RE2, Cu&ertino "ie# "n# reuse# to ree"sete s"i# "##ition" ")ount or no "&&"rent re"son "t ",(ontr"r- to its re&e"te# &ro)ises /i( >&etitioner?(ontinuous- reie# on. On account of Cupertino(s unfulfilledpromises, >petitioner? repeatedl% demanded from Cupertino therelease andKor deliver% of the said !hp/$,$$$,$$$.$$ to theformer. 1owever, Cupertino still failed and refused and continuousl%fails and refuses to release andKor deliver the !hp/$,$$$,$$$.$$

to >petitioner?. %en >&etitioner? ten#ere# &"-)ent o te")ount o P&29,01,9B0.92 /i( is te re)"inin* ""n(eo te P&D7,000,000.00 o"n su3e(t o te RE@, in or#er to#is("r*e te s")e, Cu&ertino unre"son"- "n#un3ustii"- reuse# "((e&t"n(e tereo on te *roun# t"tte &revious &"-)ent ")ountin* to P&7,98,0D9.08, /"s"&&ie# - Cu&ertino to "e*e# interests "n# not to &rin(i&"")ount, despite the fact that, as earlier stated, the aforesaid loan% agreement of the parties, is non0interest earing. *orst,unnown to >petitioner?, Cupertino was alread% maingarrangements with >respondent? otar% !ulic for the e+traudicialsale of the mortgage properties even as >petitioner? is more thanwilling to pa% the !hp@3,$4,3/$.3@ which is the remaining alanceof the !hp"#,$$$,$$$.$$ loan and notwithstanding Cupertino(sunustified refusal and failure to deliver to >petitioner? the amountof !hp/$,$$$,$$$.$$. In fact, a notarial sale of the mortgagedproperties is alread% scheduled on $4 ctoer 33/ %>respondent? otar% !ulic at his office located at Rm. $$, IloiloCasa !laDa, en )una St., Iloilo Cit%. In view of the foregoing,Cupertino has no legal right to foreclose the mortgaged properties.In "n- event, Cu&ertino ("nnot e+tr"3u#i(i"- ("use teore(osure - not"ri" s"e o te )ort*"*e &ro&erties ->res&on#ent? Not"r- Pui( "s tere is notin* in te RE@4#"te# 10 A&ri 1995 or in te ")en#)ent tereto t"t*r"nts Cu&ertino te s"i# ri*t.+ + + +J>Respondents? finall% filed "n "ns/er to te (o)&"int,"e*in* t"t te o"n "ve 4si(5 "n interest o 17F &er"nnu): t"t no &"-)ent /"s ever )"#e - >&etitioner?,t"t >&etitioner? "s "re"#- re(eive# te ")ount o teo"n &rior to te e+e(ution o te &ro)issor- note "n#")en#)ent o Re" Est"te @ort*"*e, +++.J>!etitioner? ie# " su&&e)ent" (o)&"int "e*in*

suseuent "(ts )"#e - #een#"nts ("usin* tesuseuent "u(tion s"e "n# re*isterin* te Certii("tes o Au(tion S"e &r"-in* t"t s"i# "u(tion s"e e #e("re# nu"n# voi# and ordering the Register of ;eeds to cancel theregistration and annotation of the Certificate of otarial Sale.JThereafter, the !re0Trial conference was set. =oth parties sumittedtheir respective =rief and the following facts were admitted, viD9. E+ecution of the mortgage dated April $, 335L@. Amendment of Real Estate 2ortgage dated August /, 335L

". E+ecution of an E+tra0udicial Horeclosure % the >Cupertino?L4. E+istence of two &@' promissor% notesL5. E+istence ut not the contents of the demand letter 2arch ,33/ addressed to 2r. *ilfredo )ua and receipt of the same %>Cupertino?L and/. otice of E+tra0udicial Horeclosure Sale.JHor failing to arrive at an amicale settlement, trial on the meritsensued. The parties presented oral and documentar% evidence tosupport their claims and contentions. >Petitioner? insiste# t"tse never re(eive# te &ro(ee#s o P&1B0,000,000.00,tus, te ore(osure o te su3e(t &ro&erties is nu "n#voi#. >Cu&ertino? on te oter "n# ("i)e# oter/ise.8

After trial, the RTC ren#ere# " #e(ision #is)issin* &etitionerHs

(o)&"int "n# or#erin* it to &"- Cu&ertino P 100,000.00e"( or "(tu" "n# e+e)&"r- #")"*es, "n# P 00,000.00 "s"ttorne-Hs ees. Te RTC re("e# "n# set "si#e its &reviousor#er #e("rin* te not"ri" ore(osure o te )ort*"*e#&ro&erties "s nu "n# voi#. On "&&e", te CA, "s &revious-"#verte# to, "ir)e# te RTCHs ruin*.In dismissing petitioner(s complaint and finding for Cupertino, oththe lower courts upheld the validit% of the amended real estatemortgage. The RTC found, as did the CA, that although theamended real estate mortgage fell within the e+ceptions to theparol evidence rule under Section 3, Rule "$ of the Rules of Court,petitioner still failed to overcome and deun Cupertino(s evidencethat the amended real estate mortgage had a consideration, andpetitioner #i# re(eive te ")ount o P1B0,000,000.00re&resentin* its in(urre# oi*"tion to Cu&ertino. ;ot(ourts rue# t"t "s et/een &etitionerHs "re #eni" "n#ne*"tive evi#en(e o non=re(ei&t o te P1B0,000,000.00,"n# Cu&ertinoHs "ir)"tive evi#en(e on te e+isten(e o te(onsi#er"tion, te "tter )ust e *iven )ore /ei*t "n#v"ue. In all, the lower courts gave credence to Cupertino(sevidence that the !/$,$$$,$$$.$$ proceeds were the total amountreceived % petitioner and its affiliate companies over the %earsfrom *ilfredo )ua, Cupertino(s president. In tis re*"r#, teo/er (ourts "&&ie# te #o(trine o &ier(in* te vei o (or&or"te i(tion to &re(u#e &etitioner ro) #is"vo/in*re(ei&t o te P1B0,000,000.00 "n# &"-in* its oi*"tionun#er te ")en#e# re" est"te )ort*"*e.8ndaunted, petitioner filed this appeal insisting on the nullit% of theamended real estate mortgage. !etitioner is adamant that theamended real estate mortgage is void as it did not receive theagreed consideration therefor i.e. !/$,$$$,$$$.$$. Petitioner"vers t"t te ")en#e# re" est"te )ort*"*e #oes not"((ur"te- ree(t te "*ree)ent et/een te &"rties "s, "t

te ti)e it si*ne# te #o(u)ent, it "(tu"- "# -et tore(eive te ")ount o P1B0,000,000.00. "st-, &etitioner"ssever"tes t"t te o/er (ourts erroneous- "&&ie# te#o(trine o &ier(in* te vei o (or&or"te i(tion /en ot*"ve (re#en(e to Cu&ertinoHs evi#en(e so/in* t"t&etitionerHs "ii"tes /ere te &revious re(i&ients o &"rt o te P1B0,000,000.00 in#ete#ness o &etitioner toCu&ertino.

*e are in complete accord with the lower courts( rulings.

*ell0entrenched in urisprudence is the rule that factual findthe trial court, especiall% when affirmed % the appellate coaccorded the highest degree of respect and are conconclusive etween the parties.3 A review of such findings Court is not warranted e+cept upon a showing of highl% mercircumstances, such as9 &' when the findings of a trial cogrounded entirel% on speculation, surmises or conecturwhen a lower court(s inference from its factual findmanifestl% mistaen, asurd or impossileL &"' when there ause of discretion in the appreciation of factsL &4' whfindings of the appellate court go e%ond the issues of the cfail to notice certain relevant facts which, if properl% conswill ustif% a different conclusionL &5' when there

misappreciation of factsL &/' when the findings of fconclusions without mention of the specific evidence on whiare ased, are premised on the asence of evidence, contradicted % evidence on record.$ one of these e+cnecessitating a reversal of the assailed decision otainsinstance.Conversel%, we cannot suscrie to petitioner(s fault% reasonHirst. All the loan documents, on their face, uneFuivocall% petitioner(s indetedness to Cupertino9. !romissor% ote dated April $, 335, prefaced with avalue received,J and the escrow arrangement for the releas!"#,$$$,$$$.$$ oligation in favor of ;=!, another crepetitioner.@. 2ortgage liewise dated April $, 335 e+ecuted % petitsecure its !"#,$$$,$$$.$$ loan oligation with Cupertino.". Amendment to !romissor% ote for !"#,$$$,$$$.$$ dat@, 335 which tentativel% sets the interest rate at sepercent &#-' per annum.4. !romissor% ote dated August /, 335, liewise prefacJ>f?or value received,J and unconditionall% promising Cupertino !/$,$$$,$$$.$$ with a stipulation on compinterest at thirt% percent &"$-' per annum. The !romissoreFuires, among others, the e+ecution of a real estate mortserve as collateral therefor. In case of default in papetitioner, specificall%, through its president, Cua )eauthoriDes Cupertino to Jdispose of said securit% or an% part at >a? pulic sale.J5. Amendment of Real Estate 2ortgage also dated August with a recital that the mortgagor, herein petitioner, has inits loan pa%ale to the mortgagee, Cupertino, from !"#,$$$to !3#,$$$,$$$.$$. In connection with the increase oligation, the parties confirmed and ratified the Real2ortgage dated April $, 335.

Un)ist"<"-, ro) te ore*oin* ("in o tr"ns"(t&resu)&tion "s "risen t"t te o"n #o(u)entssu&&orte# - " (onsi#er"tion.Rule ", Section " of the Rules of Court specifies that a dispresumption is satisfactor% if uncontradicted and not overcother evidence. Corollar% thereto, paragraphs &r' and &s' and Section @4 of the egotiale Instruments )aw read9SEC. ". ;isputale presumptions.O The following presumptisatisfactor% if uncontradicted, ut ma% e contradicte



overcome % other evidence9+ + + +&r5 T"t tere /"s sui(ient (onsi#er"tion or " (ontr"(t4s5 T"t " ne*oti"e instru)ent /"s *iven or in#orse# or "sui(ient (onsi#er"tion+ + +SEC. @4. !resumption of consideration.O Ever% negotialeinstrument is deemed prima facie to have een issued for avaluale considerationL and ever% person whose signature appearsthereon to have ecome a part% thereto for value.Second. The foregoing notwithstanding, petitioner insists that theAmended Real Estate 2ortgage was not supported % aconsideration, asserting non0receipt of the !/$,$$$,$$$.$$ loan

increase reflected in the Amended Real Estate 2ortgage. 1owever,petitioner(s are0faced assertion does not even dent, much less,overcome the aforesaid presumptions on consideration for acontract. As deftl% pointed out % the trial court9+ + + In tis ("se, tis Court in#s t"t te >&etitioner? "snot een "e to est"is its ("i) o non=re(ei&t - "&re&on#er"n(e o evi#en(e. Rather, the Court is inclined to givemore weight and credence to the affirmative and straightforwardtestimon% of >Cupertino? e+plaining in plain and categorical wordsthat the !hp3#,$$$,$$$.$$ loan represented % the amended RE2was the total sum of the deit memo, the checs, the real estatemortgage and the amended real estate mortgage, the pledges of

ewelries, the trucs and the condominiums plus the interests thatwill e incurred which all in all amounted to !hp3#,$$$,$$$.$$. Itis " "si( "+io) in tis 3uris#i(tion t"t "s et/een te&"intiHs ne*"tive evi#en(e o #eni" "n# te #een#"ntHs"ir)"tive evi#en(e on te e+isten(e o te (onsi#er"tion,te "tter )ust e *iven )ore /ei*t "n# v"ue. 2oreover,>Cupertino(s? foregoing testimon% on the e+istence of theconsideration of the !hp/$,$$$,$$$.$$ promissor% note has nevereen refuted nor denied % the >petitioner?, who while initiall%having manifested that it will present reuttal evidence eventuall%failed to do so, despite all availale opportunities accorded to it. ;-su( "iure to &resent reuttin* evi#en(e, >Cu&ertinoHs?testi)on- on te e+isten(e o te (onsi#er"tion o te")en#e# re" est"te )ort*"*e #oes not on- e(o)ei)&ie#- "#)itte# - te >&etitioner?, )ore si*nii("nt-, tote )in# o tis Court, it is " (e"r in#i("tion t"t>&etitioner? "s no (ounter evi#en(e to over(o)e "n# #ee"tte >Cu&ertinoHs? evi#en(e on te )"tter. therwise, there isno logic for >petitioner? to withhold it if availale . Assu)in* t"tin#ee# it e+ists, it )"- e s"e- "ssu)e# t"t su(evi#en(e "vin* een /iu- su&&resse# is "#verse i

&ro#u(e#.The presentation % >petitioner? of its cash ournal Receipt =oo asproof that it did not receive the proceeds of the !hp/$,$$$,$$$.$$promissor% note does not liewise persuade the Court. In the firstplace, the suect cash receipt ournal onl% contained cash receiptsfor the %ear 335. =ut as appearing from the various checs anddeit memos issued % *ilfredo )ua and his wife, Bic% )ua andfrom the former(s unreutted testimon% in Court, the issuance of the checs, deit memos, pledges of ewelries, condominium units,

trucs "n# te oter (o)&onents o te P&197,000,000.00")en#e# re" est"te )ort*"*e "# " t"<en &"(e &rior tote -e"r 199, en(e, te- (ou# not "ve een re(or#e#terein. %"t is )ore, te s"i# ("s re(ei&t 3ourn" "&&e"rsto e &re&"re# soe- "t te eest o te >&etitioner?,en(e, ("n e (onsi#ere# "s e)"n"tin* ro) " &oisonoustreeJ therefore self0serving and cannot e given an% seriouscrediilit%.

Significantl%, petitioner asseverates that the parol evidence rule,which e+cludes other evidence, apart from the written agreement,to prove the terms agreed upon % the parties contained therein, @

is not applicale to the Amended Real Estate 2ortgage. ;ot tetri" "n# "&&e"te (ourts "*ree# /it &etitioner "n# #i# not

"&&- te &"ro evi#en(e rue. !et, #es&ite te "o/"n(e to&resent evi#en(e "n# &rove te inv"i#it- o te A)en#e#Re" Est"te @ort*"*e, &etitioner sti "ie# to sust"nti"teits ("i) o non=re(ei&t o te &ro(ee#s o teP1B0,000,000.00 o"n in(re"se.2oreover, petitioner was the &"inti in te tri" (ourt, te&"rt- t"t rou*t suit "*"inst res&on#ent. A((or#in*-, it"# te ur#en o &roo, te #ut- to &resent "&re&on#er"n(e o evi#en(e to est"is its ("i).1D 1owever,petitioner(s evidence consisted onl% of a arefaced denial of receiptand a vaguel% drawn theor% that in their previous loan transactionwith respondent covered % the first promissor% note, it did notreceive the proceeds of the !"#,$$$,$$$.$$. !etitioner convenientl%ignores that this particular &ro)issor- note se(ure# - te re"est"te )ort*"*e /"s un#er "n es(ro/ "rr"n*e)ent "n#t"<en out to &"- its oi*"tion to $;P. Tus, &etitioner, uiteovious-, /ou# not e in &ossession o te &ro(ee#s o teo"n. Contrar% to petitioner(s contention, there is no precedent toe+plain its stance that respondent undertoo to release the!/$,$$$,$$$.$$ loan onl% after it had first signed the AmendedReal Estate 2ortgage.0avvphi0Tir#. Petitioner e/"is te o/er (ourtsH "&&i("tion o te#o(trine o &ier(in* te vei o (or&or"te i(tion.As " *ener" rue, " (or&or"tion /i e #ee)e# " se&"r"tee*" entit- unti sui(ient re"son to te (ontr"r- "&&e"rs.1

;ut te rue is not "soute. A (or&or"tionHs se&"r"te "n##istin(t e*" &erson"it- )"- e #isre*"r#e# "n# te vei o (or&or"te i(tion &ier(e# /en te notion o e*" entit- isuse# to #ee"t &ui( (onvenien(e, 3usti- /ron*, &rote(tr"u#, or #een# (ri)e.1

In this case, Cu&ertino &resente# over/e)in* evi#en(et"t &etitioner "n# its "ii"te (or&or"tions "# re(eive# te&ro(ee#s o te P 1B0,000,000.00 o"n in(re"se /i( /"s

ten )"#e te (onsi#er"tion or te A)en#e# Re" Est"te@ort*"*e. %e uote /it "vor te RTCHs "n# te CAHs#isuisitions on tis )"tter:T"t te (e(<s, #eit )e)os "n# te &e#*es o te 3e/eries, (on#o)iniu) units "n# tru(<s /ere (onstitute#not e+(usive- in te n")e o >&etitioner? ut "so eiter inte n")e o !u-e< @"nu"(turin* Cor&or"tion, Si"inTr"ns&ort, In(., Cu" een* and Aerto i) is o no )o)ent.Hor the facts estalished in the case at ar has convinced the Court

of the propriet% to appl% the principle nown as Jpiercing ththe corporate entit%J % virtue of which, the 3u&erson"ities o te v"rious (or&or"tions invove#isre*"r#e# "n# te ensuin* i"iit- o te (or&or""tt"( #ire(t- to its res&onsie oi(ers "n# sto(<o+ ++ + + +The conunction of the identit% of the >petitioner? corporarelation to Siain Transport, Inc. &Siain Transport', 2anufacturing Corp. &<u%e', as well as the individual persoof Cua )eleng and Alerto )im has een induital% showninstant case % the following estalished considerations, to w. Siain and <u%e have >a? common set of >incorpo

stocholders and oard of directorsL@. The% have the same internal ooeeper and accountanperson of Rosemarie RagodonL". The% have the same office address at "$/ ose Ri2andalu%ong Cit%L4. The% have the same maorit% stocholder and presidenperson of Cua )e )engL and5. In relation to Siain Transport, Cua )e )eng had the unauthorit% % and on herself, without authorit% from the =;irectors, to use the funds of Siain Trucing to pa% the oincurred % the >petitioner? corporation.Thus,

it is (r-st" (e"r t"t >&etitioner? (or&or"tion,

"n# Si"in Tr"ns&ort "re ("r"(terie# - onen

o&er"tions veste# in te &erson o teir (o))on &re

Cu" e en*, "n# unit- in te <ee&in* "n# )"inten"

teir (or&or"te oo<s "n# re(or#s trou* teir (o

"((ount"nt "n# oo<<ee&er, Rose)"rie R"

Conseuent-, tese (or&or"tions "re &roven to e te

"ter=e*o o teir &resi#ent Cu" een*, "n# (onsi#eri

Cu" een* "n# Aerto i) "ve een ivin* to*et

(o))on "/ s&ouses /it tree (i#ren, tis Court

t"t /ie Aerto i) #oes not "&&e"r to e "n o

Si"in "n# !u-e<, noneteess, is re(ei&t o (ert"in

"n# #eit )e)os ro) %iie u" "n# i(tori" u"(tu"- or te "((ount o is (o))on="/ /ie, Cu"

"n# er "ter e*o (or&or"tions. *hile this Court agreSiain that a corporation has a personalit% separate and from its individual stocholders or memers, this legacannot, however, e applied to its enefit in this case wherso would result to inustice and evasion of a valid oligatwell settled is the rule in this urisdiction that the veil of cofiction ma% e pierced when it is used as a shield to furthersuversive of ustice, or for purposes that could not hav

intended % the law that created itL or to ustif% wrong,evasion of an e+isting oligation. Resut"nt-, te oin(urre# "n#or te tr"ns"(tions entere# into eit!u-e<, or - Si"in Tru(<in*, or - Cu" een*, or - Ai) /it Cu&ertino "re #ee)e# to e t"t o te >&etititse.

Te s")e &rin(i&e eu"- "&&ies to Cu&ertino. Tusit "&&e"rs t"t te issu"n(e o te (e(<s "n# te)e)os "s /e "s te &e#*es o te (on#o)iniu) un



3e/eries, "n# te tru(<s "# o((urre# &rior to @"r( 2,199, te #"te /en Cu&ertino /"s in(or&or"te#, te s")e#oes not "e(t te v"i#it- o te su3e(t tr"ns"(tionse("use "&&-in* "*"in te &rin(i&e o &ier(in* te(or&or"te vei, te tr"ns"(tions entere# into - Cu&ertinoRe"t- Cor&or"tion, it ein* )ere- te "ter e*o o %ire#ou", "re #ee)e# to e te "tterHs &erson" tr"ns"(tions "n#vi(e=vers".1B

+ + + ++ + + Hirstl%. As ("n e vie/e# ro) te e+t"nt re(or# o teinst"nt ("se, Cu" een* is te )"3orit- sto(<o#er o tetree 4D5 (or&or"tions n")e-, !u-e< @"nu"(turin*Cor&or"tion, Si"in Tr"ns&ort, In(., "n# Si"in Enter&rises

In(., "t te s")e ti)e te Presi#ent tereo. Se(on#. ;ein*te )"3orit- sto(<o#er "n# te &resi#ent, Cu" e en* "ste uni)ite# &o/er, (ontro "n# "utorit- /itout te"&&rov" ro) te o"r# o #ire(tors to ot"in or "n# ine" o te >&etitioner? (or&or"tion ro) >Cu&ertino?tere- )ort*"*in* er 3e/eries, te (on#o)iniu)s o er(o))on "/ us"n#, Aerto i), te tru(<s re*istere# inte n")e o >&etitioner? (or&or"tionHs sister (o)&"n-, Si"inTr"ns&ort In(., te su3e(t ots re*istere# in te n")e o >&etitioner? (or&or"tion "n# er oi )i &ro&ert- "t IoioCit-. An#, to "&&- te &ro(ee#s tereo in /"tever /"-se /"nts, to te &re3u#i(e o te &ui(.As such, >petitioner? corporation is now estopped from den%ing theaove apparent authorities of Cua )e )eng who holds herself to thepulic as possessing the power to do those acts, against an%person who dealt in good faith as in the case of Cupertino.#

*1EREHRE, premises considered, the petition is ;EIE;. The;ecision of the Court of Appeals in CA0.R. CB o. #4@4 isAHHIR2E;. Costs against the petitioner.S R;ERE;.G.R. No. 197 J"nu"r- 29, 2007GENERA CRE$IT CORPORATION 4no/ PENTA CAPITA6INANCE CORPORATION5, Petitioner,vs.ASONS $EEOP@ENT "n# INEST@ENT CORPORATION"n# CCC EKUIT! CORPORATION, Res&on#ents.$ E C I S I O NGARCIA, J.:

eneral Credit Corp v. Alsons ;ev. and Investment Corp

HACTS9 !etitioner eneral Credit Corporation &CC', then nown as

Commercial Credit Corporation &CCC', estalished CCC franchisecompanies in different uran centers of the countr%. In furtheranceof its usiness, CC was ale to secure license from Central =an&C=' and SEC to engage also in Fuasianing activities. n theother hand, respondent CCC EFuit% Corporation &EP8IT<' wasorganiDed in % CC for the purpose of, among other things, taingover the operations and management of the various franchisecompanies. At a time material hereto, respondent Alsons

;evelopment and Investment Corporation &A)SS' and theAlcantara famil%, each owned, ust lie CC, shares in the aforesaidCC franchise companies, e.g., CCC ;avao and CCC Ceu. A)SSand the Alcantara famil%, for a consideration of !@2, sold theirshareholdings &$,35" shares', in the CCC franchise companies toEP8IT<. EP8IT< issued A)SS et al., a JearerJ promissor% notefor !@2 with a one0%ear maturit% date. 4 %ears later, the Alcantarafamil% assigned its rights and interests over the earer note toA)SS which ecame the holder thereof. =ut even efore thee+ecution of the assignment deal aforestated, letters of demand forinterest pa%ment were alread% sent to EP8IT<. EP8IT< no longerthen having assets or propert% to settle its oligation nor einge+tended financial support % CC, pleaded inailit% to pa%.

A)SS, having failed to collect on the earer noteaforementioned, filed a complaint for a sum of mone%M againstEP8IT< and CC. CC is eing impleaded as part%0defendant foran% udgment A)SS might secure against EP8IT< and, underthe doctrine of piercing the veil of corporate fiction, against CC,EP8IT< having een organiDed as a tool and mere conduit of CC.According to EP8IT< &cross0claim against CC'9 it acted merel% asintermediar% or ridge for loan transactions and other dealings of CC to its franchises and the investing pulicL and is solel%dependent upon CC for its funding reFuirements. 1ence, CC issolel% and directl% liale to A)SS, the former having failed toprovide QEP8IT< the necessar% funds to meet its oligations toA)SS. CC filed its AS*ER to Cross0claim, stressing that it is adistinct and separate entit% from EP8IT<. RTC, finding that EP8IT<was ut an instrumentalit% or adunct of CC and considering thelegal conseFuences and implications of such relationship, rendered

udgment for Alson. CA affirmed.

ISS8E9 * the doctrine of J!iercing the Beil of Corporate HictionJshould e applied in the case at ar.

1E);9 <ES. The notion of separate personalit%, however, ma% edisregarded under the doctrine Jpiercing the veil of corporatefictionJ as in fact the court will often loo at the corporation as amere collection of individuals or an aggregation of personsundertaing usiness as a group, disregarding the separate

uridical personalit% of the corporation unif%ing the group. Anotherformulation of this doctrine is that when two &@' usinessenterprises are owned, conducted and controlled % the sameparties, oth law and eFuit% will, when necessar% to protect therights of third parties, disregard the legal fiction that twocorporations are distinct entities and treat them as identical or oneand the same. Authorities are agreed on at least three &"' asicareas where piercing the veil, with which the law covers andisolates the corporation from an% other legal entit% to which it ma%e related, is allowed. These are9 ' defeat of pulic convenience,as when the corporate fiction is used as vehicle for the evasion of an e+isting oligationL @' fraud cases or when the corporate entit%is used to ustif% a wrong, protect fraud, or defend a crimeL or "'alter ego cases, where a corporation is merel% a farce since it is amere alter ego or usiness conduit of a person, or where thecorporation is so organiDed and controlled and its affairs are so

conducted as to mae it merel% an instrumentalit%, agenc%, or adunct of another corporation. The Court agrees wdisposition of the CA on the application of the piercing docthe transaction suect of this case. !er the Court(s count, tcourt enumerated no less than @$ documented circumstanctransactions, which, taen as a pacage, indeed strongl% suthe conclusion that respondent EP8IT< was ut an aduinstrumentalit% or usiness conduit of petitioner CC. This rin turn, provides a ustif%ing ground to pierce petitioner(s coe+istence as to A)SS( claim in Fuestion. Horemost of wtrial court referred to as Jcertain circumstancesJ acommonalit% of directors, officers and stocholders ansharing of office etween petitioner CC and respondent E

certain financing and management arrangements etween tallowing the petitioner to handle the funds of the latterL thedomination if not control wielded % the petitioner ovfinances, usiness policies and practices of respondent EP8Ithe estalishment of respondent EP8IT< % the petitiocircumvent C= rules. Beril%, indeed, as the relationships herein >respondent EP8IT< and petitioner CC? have eenJparent0susidiar% corporationsJ the foregoing principldoctrines find suitale applicailit% in the case at arL and, iteen satisfactoril% and induital% shown that the said relatihad een used to perform certain functions not characteriDlegitimac%, this Court Q feels ampl% ustified to Jpierce thecorporate entit%J and disregard the separate e+istence parent and susidiar% the latter having een so controlledparent that its separate identit% is hardl% discernile thus ea mere instrumentalit% or alter ego of the former.

6U TET: In this petition for review on certiorari under of the Rules of Court, petitioner Gener" Cre#it Cor&or"tionown as Pent" C"&it" 6in"n(e Cor&or"tion, sees toand set aside the ;ecision and Resolution@ dated April and August @$, @$$@, respectivel%, of the Court of Appeals '12.R. '4 5o. 306"0, affirming the ovemer M, 33$ decthe Regional Trial Court &RTC' of 2aati Cit% in its Civil Ca@#$#, an action for a sum of mone% thereat institutedherein respondent Asons $eveo&)ent "n# InveCor&or"tion against the petitioner and respondent CCC Cor&or"tion.

The facts9Shortl% after its incorporation in 35# as a finance and invecompan%, petitioner Gener" Cre#it Cor&or"tion 4GCshort', then nown as Co))er(i" Cre#it Cor&or"tion estalished CCC franchise companies in different uran centhe countr%." In furtherance of its usiness, CC had, as e3#4, applied for and was ale to secure license from thCentral =an &C=' of the !hilippines and the SecuritE+change Commission &SEC' to engage also in Fuasi0activities.4 n the other hand, respondent CCC Cor&or"tion 4EKUIT!, or revit-' was organiDed in o334 % CC for the &ur&ose o, ")on* oter tin*s, over te o&er"tions "n# )"n"*e)ent o te v



r"n(ise (o)&"nies. At a time material hereto, respondentAsons $eveo&)ent "n# Invest)ent Cor&or"tion 4ASONS,erein"ter5 "n# Conr"#o, Ni("sio, E#it" "n# "#is"/", "surn")e# A("nt"r", "n# Are#o #e ;or3" 4erein"ter teA("nt"r" ")i-, or (onvenien(e5, e"( o/ne#, 3ust i<eGCC, s"res in te "ores"i# GCC r"n(ise (o)&"nies , e.g.,CCC ;avao and CCC Ceu.In ;ecemer 3M$, A)SS and the Alcantara famil%, for aconsideration of Two 2illion &!@,$$$,$$$.$$' !esos, sold theirshareholdings a total of $,35" shares, more or less in theCCC franchise companies to EKUIT!.[(] n anuar% @, 3M,EKUIT! issue# ASONS et al ., " e"rer &ro)issor- noteor P2,000,000.00 /it " one=-e"r )"turit- #"te, at M-

interest per annum, with provisions for damages and litigationcosts in case of default./

Some four %ears later, the A("nt"r" ")i- "ssi*ne# its ri*ts"n# interests over te e"rer note to ASONS whichthenceforth ecame the holder thereof.# =ut even efore thee+ecution of the assignment deal aforestated, letters of demand forinterest pa%ment were alread% sent to EP8IT<, through its!resident, %ire#o ""-en, who pleaded inailit% to pa% thestipulated interest, EP8IT< no longer then having assets orpropert% to settle its oligation nor eing e+tended financialsupport % CC.*hat happened ne+t, as narrated in the assailed ;ecision of theCA, ma% e summariDed, as follows9

. n anuar% 4, 3M/, efore the RTC of 2aati, ASONS,"vin* "ie# to (oe(t on te e"rer note "ore)entione#,ie# " (o)&"int or " su) o )one-8 "*"inst EKUIT! "n#GCC. The case, doceted as Civil Case o. @#$#, was eventuall%raffled to =ranch 5M of the court. As stated in par. 4 of thecomplaint, CC is eing impleaded as part%0defendant for an%

udgment A)SS might secure against EP8IT< and, under thedoctrine of piercing the veil of corporate fiction, against CC,EP8IT< having een organiDed as a tool and mere conduit of CC.

@. Ans/erin* /it " (ross=("i) "*"inst GCC, EKUIT! st"te#- /"- o s&e(i" "n# "ir)"tive #eenses t"t it 4EKUIT!5:"5 /"s &ur&ose- or*"nie# - GCC or te "tter to "voi# C;Rues "n# Re*u"tions on $OSRI &;irectors, fficers,Stocholders and Related Interest' limitations, and that it actedmerel% as intermediar% or ridge for loan transactions and otherdealings of CC to its franchises and the investing pulicL and' is solel% dependent upon CC for its funding reFuirements, tosettle, among others, eFuit% purchases made % investors on thefranchisesL hence, CC is solel% and directl% liale to A)SS, theformer having failed to provide QEP8IT< the necessar% funds tomeet its oligations to A)SS.". GCC ie# its ANS%ER to Cross=("i), stressin* t"t it is "#istin(t "n# se&"r"te entit- ro) EKUIT! "n# "e*in*, inessence that the usiness relationships with each other werealwa%s at arm(s length. And following the denial of its motion todismiss A)SS( complaint, on the ground of lac of urisdictionand want of cause of action, CC filed its Answer thereto and set

up affirmative defenses with counterclaim for e+emplar% damagesand attorne%(s fees.Issues having een oined, trial ensued. !resented % A)SS, uttestif%ing as adverse witnesses, were C= and CC officers. Amongother things, A)SS( evidence, which included the EP8IT<0issuedJearerJ promissor% note mared as E+hiit JNJ and over si+t% &/$'other mared and suseFuentl% admitted documents,3 were to theeffect that five &5' incorporators, each contriuting ! $$,$$$.$$ asthe initial paid up capital of the compan%, organiDed EP8IT< tomanage, as it did manage, various CC franchises throughmanagement contracts. =efore EP8IT<(s incorporation, however,CC was alread% into the financing usiness as it was in factmanaging and operating various CCC franchises. !resented in

evidence, too, was the Septemer @3, 3M@ etter=re&- o one G.i"nuev", ten GCC Presi#ent, to EKUIT! Presi#ent%ire#o ""-en, e"rin* on te s"e o EKUIT! s"res totir# &"rties, part of the p roceeds of which the Alcantaras wantedapplied to liFuidate the promissor% note in Fuestion. In s"i#etter, @r. i"nuev" e+&"ine# t"t te GCC ;o"r# #enie#te A("nt"r"sH reuest to e &"i# out o su( &ro(ee#s, utnoneteess "utorie# EKUIT! to &"- te) interest out o EKUIT!Hs o&er"tion in(o)e, in &reeren(e over /"t /"s#ue GCC.10

Aleit EP8IT< presented its president, it opted to adopt thetestimon% of some of A)SS( witnesses, inclusive of thedocumentar% e+hiits testified to % each of them, as its evidence.Hor its part, CC called onl% %ire#o ""-en to testif%. It stucto its underl%ing defense of separateness and presenteddocumentar% evidence detailing the organiDational structures of oth CC and EP8IT<. And in a id to negate the notion that it wasconducting its usiness illegall%, CC presented C= and SEC0issuedlicenses authoring it to engage in financing and Fuasi0aningactivities. It also adduced evidence to prove that it was never apart% to an% of the actionale documents A)SS and itspredecessors0in0interest had in their possession and that theovemer @#, 3M5 deed of assignment of rights over thepromissor% note was unenforceale.Eventuall%, te tri" (ourt, on its in#in* t"t EKUIT! /"s ut"n instru)ent"it- or "#3un(t o GCC "n# (onsi#erin* tee*" (onseuen(es "n# i)&i("tions o su( re"tionsi&,(")e out /it its #e(ision on Nove)er 8, 1990, ren#erin* 3u#*)ent or ASONS, to /it:*1EREHRE, the foregoing premises considered, udgment ishere% rendered in favor of plaintiff >A)SS? and against thedefendants >EP8IT< and CC? who are here% ordered, ointl% andseverall%, to pa% plaintiff9. the principal sum of Two 2illion !esos &!@,$$$,$$$.$$' togetherwith the interest due thereon at the rate of eighteen percent &M-'annuall% computed from an. @, 3M until the oligation is full%paidL@. liFuidated damages due thereon eFuivalent to three percent&"-' monthl% computed from anuar% @, 3M@ until the oligationis full% paidL". attorne%(s fees in an amount eFuivalent to twent% four percent&@4-' of the total oligation dueL and

4. the costs of suit.IT IS S R;ERE;. &*ords in racets added.'Therefrom, CC went on appeal to the CA where its arecourse was doceted as CA0.R. CB o. "M$, ascriingtrial court the commission of the following errors9. In holding that there is a J!arent0Susidiar%J corelationship etween EP8IT< and CCL@. In not holding that EP8IT< and CC are distinct and secorporate entitiesL". In appl%ing the doctrine of J!iercing the Beil of Corporate in the case at arL and4. In not holding A)SS in estoppel to Fuestion the copersonalit% of EP8IT<.

n April , @$$@, the appellate court rendered the herein a;ecision, affirming that of the trial court, thus9*1EREHRE, &re)ises (onsi#ere#, te $e(ision oRe*ion" Tri" Court, ;r"n( 8, @"<"ti in Civi C"12707 is ere- A66IR@E$.S R;ERE;.In time, CC moved for reconsideration followed % a mooral argument, ut oth motions were denied % the CAeFuall% assailed Resolution of August @$, @$$@.@

1ence, CC(s present recourse anchored on the foarguments, issues andKor sumissions9. The motion for oral argument with motion for reconsidand its supplement were perfunctoril% denied % the CA

ustifiale asisL@. There is asolutel% no asis for piercing the veil of corfictionL". Respondent Alsons is not a real part%0in0interest promissor% note pa%ale to earer suect of the collectionut a simulated document andKor refers to another part%. 2the suect promissor% note is not admissile in evidence it has not een dul% authenticated and it is an altered docum4. The fact of full pa%ment stated in the ten &$' deeds of the shares of stoc is conclusive on the sellers, and % theevidence rule, the alleged fact of its non0pa%ment canintroduced in evidencedL and5. The counter0claim filed % CC against Alsons should e in the interest of ustice.Te &etition "n# te "r*u)ents "n#or issues oto*eter "re /itout )erit. The desired reversal of the adecision and resolution of the appellate court is acc;EIE;.Instead of raising distinctl% formulated Fuestions of lawe+pected of one seeing a review under Rule 45 of the RCourt of a final CA udgment," petitioner CC starts off %disappointment over the Jperfunctor%J denial % the CA of motions for reconsideration and oral argument. !etitionersure, cannot plausil% e+pect a reversal action premisedcursor% wa% its motions were denied, if such indeed were thSuch manner of denial, while perhaps far from ideal, is notrecogniDed ground for appeal % certiorari, unless a denialprocess ensues, which is not the case here. And lesoverlooed, the CA prefaced its assailed denial resolution w



clause9 J>H?inding no reversile error committed to warrant themodification andKor reversal of the April , @$$@ ;ecision,Jsuggesting that the appellate court gave the petitioner(s motion forreconsideration the attention it deserved. At the ver% least, thepetitioner was dul% apprised of the reasons wh% reconsiderationcould not e favoral% considered. An e+tended resolution was notreall% necessar% to dispose of the motion for reconsideration inFuestion.!etitioner(s lament aout eing deprived of procedural due processowing to the denial of its motion for oral argument is simpl%specious. 8nder the CA Internal Rules, the appellate court ma% tapan% of the three &"' alternatives therein provided to aid the court inresolving appealed cases efore it. It ma% rel% on availale records

alone, reFuire the sumission of memoranda or set the case fororal argument. The option the Internal Rules thus gives the CAnecessaril% suggests that the appellate court ma%, at its sounddiscretion, dispense with a tedious oral argument e+ercise. Rule BI,Section / of the @$$@ Internal Rules of the CA, provides9SEC. / udicial Action on Certain !etitions.0 &a' In petitions forreview, after the receipt of the respondent(s comment on thepetition, Q the Court >of Appeals? ma% dismiss the petition if itfinds the same to e patentl% without merit Q, otherwise, it shallgive due course to it.+++ +++ +++If the petition is given due course, the Court ma% consider the casesumitted for decision or reFuire the parties to sumit theirmemorandum or set the case for oral argument. +++. After the oralargument or upon sumission of the memoranda Q the case shalle deemed sumitted for decision.In the case at ench, records reveal that the appellate court, in line

with the prescription of its own rules, reFuired the parties to ustsumit, as the% did, their respective memoranda to properl%ventilate their separate causes. 8nder this scenario, the petitionercannot e validl% heard, having een deprived of due process.Just i<e te irst, te "st tree 4D5 "r*u)ents set ort inte &etition /i not ("rr- te #"- or te &etitioner. Inre"tion tere/it, te Court notes t"t tese "r*u)ents"n# te issues ein# te) /ere not r"ise# eore te tri"(ourt. This appellate maneuver cannot e allowed. Hor, well0settledis the rule that issues or grounds not raised elow cannot eresolved on review in higher courts.4 Springing surprises on theopposing part% is antithetical to the sporting idea of fair pla%,

ustice and due processL hence, the proscription against a part%shifting from one theor% at the trial court to a new and differenttheor% in the appellate level. n the same rationale, points of law,theories, issues not rought to the attention of the lower court or,in fine, not interposed during the trial cannot e raised for the firsttime on appeal.5

Tere "re, to e sure, e+(e&tions to te rue res&e(tin* /"t)"- e r"ise# or te irst ti)e on "&&e". "(< o 3uris#i(tion over /en te issues r"ise# &resent " )"tter o &ui( &oi(-1B (o)es i))e#i"te- to )in#. None o te /e=re(o*nie# e+(e&tions otain in this case, however.)est it e overlooed vis272vis the same last three arguments thuspressed, oth the trial court and the CA, ased on the evidence

adduced, adudged the petitioner and respondent EP8IT< ointl%and severall% liale to pa% what respondent A)SS is entitled tounder the JearerJ promissor% note. The udgment argues againstthe notion of the note eing simulated or altered or thatrespondent A)SS has no standing to sue on the note, not eingthe pa%ee of the JearerJ note. Hor, the declaration of liailit% notonl% presupposes the dul% estalished authenticit% and duee+ecution of the promissor% note over which A)SS, as the holderin due course thereof, has interest, ut also the untenailit% of thepetitioner(s counterclaim for attorne%(s fees and e+emplar%damages against A)SS. At otto), te &etitioner &re#i("te#su( (ounter=("i) on te &ostu"te t"t res&on#entASONS "# no ("use o "(tion, te su&&ose# &ro)issor-

note ein*, "((or#in* to te &etitioner, eiter " si)u"te# or"n "tere# #o(u)ent.In net effect, te #einitive (on(usion o te "&&e"te (ourt L"ir)"tor- o t"t o te tri" (ourt L /"s t"t te e"rer&ro)issor- note 4E+. M5 /"s " *enuine "n# "utenti(instru)ent &"-"e to te o#er tereo. Tis "(tu"#eter)in"tion, "s " )"tter o on* "n# soun# "&&e"te&r"(ti(e, #eserves *re"t /ei*t "n# s" not e #isture#on "&&e", s"ve or te )ost (o)&ein* re"sons,17 su( "s/en t"t #eter)in"tion is (e"r- /itout evi#enti"r-su&&ort or /en *r"ve "use o #is(retion "s een(o))itte#.M This is as it should e since the Court, in petitionsfor review of CA decisions under Rule 45 of the Rules of Court,usuall% limits its inFuir% onl% to Fuestions of law. Stated otherwise,it is not the function of the Court to anal%De and weigh all overagain the evidence or premises supportive of the factual holdings of lower courts.3

As nothing in the record indicates an% of the e+ceptions adverted toaove, the factual conclusion of the CA that the !@ 2illionpromissor% note in Fuestion was authentic and was issued at thefirst instance to respondent A)SS and the Alcantara famil% forthe amount stated on its face, must e affirmed. It sou# estresse# in tis re*"r# t"t even te issuin* entit-, i.e.,res&on#ent EKUIT!, never ("en*e# te *enuineness "n##ue e+e(ution o te note.This rings us to the remaining ut core issue tendered in this caseand aptl% raised % the petitioner, to wit9 whether there isasolutel% no asis for p iercing CC(s veil of corporate identit%.A (or&or"tion is "n "rtii(i" ein* veste# - "/ /it "&erson"it- #istin(t "n# se&"r"te ro) tose o te &ersons(o)&osin* it20 "s /e "s ro) t"t o "n- oter entit- to/i( it )"- e re"te#.21 Te irst (onseuen(e o te#o(trine o e*" entit- o te se&"r"te &erson"it- o te(or&or"tion is t"t " (or&or"tion )"- not e )"#e to "ns/eror "(ts "n# i"iities o its sto(<o#ers or tose o e*"entities to /i( it )"- e (onne(te# or vi(e vers".22

The notion of separate personalit%, however, ma% e disregardedunder the doctrine Jpiercing the veil of corporate fictionJ as infact the court will often loo at the corporation as a mere collectionof individuals or an aggregation of persons undertaing usiness asa group, disregarding the separate uridical personalit% of thecorporation unif%ing the group. Anoter or)u"tion o tis

#o(trine is t"t /en t/o 425 usiness enter&riso/ne#, (on#u(te# "n# (ontroe# - te s")e &"rties"/ "n# euit- /i, /en ne(ess"r- to &rote(t te ri*tir# &"rties, #isre*"r# te e*" i(tion t"(or&or"tions "re #istin(t entities "n# tre"t te) "s i#or one "n# te s")e.2D

%eter te se&"r"te &erson"it- o te (or&or"tion e &ier(e# in*es on ot"inin* "(ts, "&&ro&ri"te- &or &rove#. 1owever, an% piercing of the corporate veil hadone with caution, aleit the Court will not hesitate to disregcorporate veil when it is misused or when necessar% in the of ustice.@4 After all, the concept of corporate entit% was noto promote unfair oectives.

Autorities "re "*ree# on "t e"st tree 4D5 "si(/ere &ier(in* te vei, /it /i( te "/ (oveiso"tes te (or&or"tion ro) "n- oter e*" entit- toit )"- e re"te#, is "o/e#.2 Tese "re: 15 #ee"t o(onvenien(e,2B "s /en te (or&or"te i(tion is uvei(e or te ev"sion o "n e+istin* oi*"tion27 2("ses or /en te (or&or"te entit- is use# to 3u/ron*, &rote(t r"u#, or #een# " (ri)e28 or D5 "t("ses, /ere " (or&or"tion is )ere- " "r(e sin(e )ere "ter e*o or usiness (on#uit o " &erson, or /e(or&or"tion is so or*"nie# "n# (ontroe# "n# its ""so (on#u(te# "s to )"<e it )ere- "n instru)e"*en(-, (on#uit or "#3un(t o "noter (or&or"tion.29

The CA found valid grounds to pierce the corporate veil of peCC, there eing ustifiale asis for such action. *happellate court spoe of a ustif%ing factor, the reference what the trial court said in its decision, namel%9 the e+iste

Jcertain circumstances >which?, taen together, gave riseineluctale conclusion that Q >respondent? EKUIT! is instru)ent"it- or "#3un(t o >&etitioner? GCC.The Court agrees with the disposition of the appellate courtapplication of the piercing doctrine to the transaction sueccase. !er the Court(s count, te tri" (ourt enu)er"te# t"n 20 #o(u)ente# (ir(u)st"n(es "n# tr"ns"(tions,t"<en "s " &"(<"*e, in#ee# stron*- su&&orte(on(usion t"t res&on#ent EKUIT! /"s ut "n "#3uninstru)ent"it- or usiness (on#uit o &etitioner GCrelation, in turn, provides a ustif%ing ground to pierce peticorporate e+istence as to A)SS( claim in Fuestion. Horewhat the trial court referred to as Jcertain circumstancesJcommonalit% of directors, officers and stocholders ansharing of office etween petitioner CC and respondent Ecertain financing and management arrangements etween tallowing the petitioner to handle the funds of the latterL thedomination if not control wielded % the petitioner ovfinances, usiness policies and practices of respondent EP8Ithe estalishment of respondent EP8IT< % the petiticircumvent C= rules. Hor a perspective, the following arrelevant e+cerpts from the trial court(s decision setting fsome detail the tipping circumstances adverted to therein9It must e noted that as characteriDed % their relationship, >respondent? EP8IT< and >petitioner? C



common directors andKor officers as well as stocholders. This isrevealed % the proceedings recorded in SEC Case o. @50Mentitled JAvelina Ramoso, et al., vs. CC, et al., where it wasestalished, thru the testimon% of EP8IT<(s own !resident Q thatmore than 3$- of the stocholders of Q EP8IT< were alsostocholders of Q CC Q.. ;isclosed liewise is the fact that when>EP8IT<(s !resident? )aa%en sold the shareholdings of EP8IT< insaid franchise companies, practicall% the entire proceeds thereof were surrendered to CC, and not received % EP8IT< &EG1I=ITJRRJ' +++.It was liewise shown % a preponderance of evidence that not onl%had QCC financed Q EP8IT< and that the latter was heavil%indeted to the former ut EP8IT< was, in fact, a wholl% owned

susidiar% of QCC. Thus, as affirmed % EP8IT<(s !resident, Q thefunds invested % EP8IT< in the CCC franchise companies actuall%came from CCC !hils. or CC &E+hiit J<05J'Q. that, as disclosed %the Auditor(s report for 3M@, past due receivales alone of CCe+ceeded !$,$$$,$$$.$$ mostl% to CC affiliates especiall% CCCEP8IT<. QL that >C=(s? Report of E+amination dated ul% 4, 3##shows that Q EP8IT< which has a paid0up capital of onl%!5$$,$$$.$$ was the iggest orrower of CC with a total loan of !/.#$ 2illion Q.+++ +++ +++It has liewise een ampl% sustantiated % >respondent A)SS(?evidence that not onl% did Q CC cause the incorporation of QEP8IT<, ut, the latter had grossl% inadeFuate capital for thepursuit of its line of usiness to the e+tent that its usiness affairswere considered as CC(s own usiness endeavors. +++.+++ +++ +++A)SS has liewise shown Qthat the onuses of the officers and

directors of Q EP8IT< was ased on its total financial performancetogether with all its affiliatesQ oth firms were sharing one and thesame office when oth were still operational Q and that thedirectors and e+ecutives of Q EP8IT< never acted independentl% Qut too their orders from Q CCQ.The evidence has also induital% estalished that Q EP8IT< wasorganiDed % Q CC for the purpose of circumventing >C=? rulesand regulations and the Anti08sur% )aw. Thus, as disclosed % theAdvance Report Q on the result of Central =an(s perationsE+amination conducted on Q CC as of 2arch ", 3## &EG1I=ITSJHHHJ etc.', the latter violated >C=? rules and regulations % 9 &a'using as a conduit its non0Fuasi an affiliates Q. &' issuingwithout recourse facilities to enale CC to e+tend credit toaffiliates lie Q EP8IT< which go e%ond the single orrower(s limitwithout the need of showing outstanding alance in the oo of accounts. &Emphasis over words in racets added.'It ears to stress at this point that the facts and the inferencesdrawn therefrom, upon which the two &@' courts elow applied thepiercing doctrine, stand, for the most part, undisputed. Amongthese is, to reiterate, the matter of EP8IT< having eenincorporated to serve, as it did serve, as an instrumentalit% oradunct of CC. *ith the view we tae of this case, CC did notadduce an% evidence, let alone reut the testimonies anddocuments presented % A)SS, to estalish the prevailingcircumstances adverted to that provided the ustif%ing occasion to

pierce the veil of corporate fiction etween CC and EP8IT<. *eFuote the trial court9Beril%, indeed, as the relationships inding herein >respondentEP8IT< and petitioner CC? have een that of Jparent0susidiar%corporationsJ the foregoing principles and doctrines find suitaleapplicailit% in the case at arL and, it having een satisfactoril%and induital% shown that the said relationships had een used toperform certain functions not characteriDed with legitimac%, thisCourt Q feels ampl% ustified to Jpierce the veil of corporate entit%Jand disregard the separate e+istence of the percent &sic' andsusidiar% the latter having een so controlled % the parent thatits separate identit% is hardl% discernile thus ecoming a mereinstrumentalit% or alter ego of the former. ConseFuentl%, as the

parent corporation, >petitioner? CC ma%e &sic' held responsilefor the acts and contracts of its susidiar% >respondent? EP8IT< 0most especiall% if the latter &who had an%how acnowledged itsliailit% to A)SS' ma%e &sic' without sufficient propert% withwhich to settle its oligations. Hor, after all, CC was the entit%which initiated and enefited immensel% from the fraudulentscheme perpetrated in violation of the law. &*ords in parenthesis inthe originalL emphasis and raceted words added'.iven the foregoing considerations, it ehooves the petitioner, as amatter of law and eFuit%, to assume the legitimate financialoligation of a cash0strapped susidiar% corporation which itvirtuall% controlled to such a degree that the latter ecame itsinstrument or agent. The facts, as found % the courts a Fuo, andthe applicale law call for this ind of disposition. r else, the Courtwould e allowing the wrong use of the fiction of corporate veil.*1EREHRE, the instant petition is ;EIE; and the appealed;ecision and Resolution of the Court of Appeals are accordingl%

AHHIR2E;.Costs against the petitioner.S R;ERE;.



Pii&&ine N"tion" ;"n< vs. An#r"#" Ee(tri( En*ineerin* Co. >GR 129DB, 17 A&ri 2002?

Third ivision, 8ananiban 9$: 3 concur, 0 on official leave

Hacts9 n @/ August 3#5, the !hilippine national =an &!='acFuired the assets of the !ampanga Sugar 2ills &!AS82I)' thatwere earlier foreclosed % the ;evelopment =an of the !hilippines&;=!' under )I ". The != organiDed the ational Sugar;evelopment Corporation &AS8;EC' in Septemer 3#5, to taeownership and possession of the assets and ultimatel% tonationaliDe and consolidate its interest in other != controlledsugar mills. !rior to @3 ctoer 3#, !AS82I) engaged theservices of the Andrada Electric Engineering Compan% &AEEC' forelectrical rewinding and repair, most of which were partiall% paid %!AS82I), leaving several unpaid accounts with AEEC. n @3ctoer 3#, AEEC and !AS82I) entered into a contract for AEECto perform the &a' Construction of a power house uildingL "reinforced concrete foundation for " units "5$ N* diesel enginegenerating sets, " reinforced concrete foundation for the 5,$$$ N*and ,@5$ N* turo generator sets, among others. Aside from thewor contract, !AS82I) reFuired AEEC to perform e+tra wor, andprovide electrical eFuipment and spare parts. ut of the totaloligation of !###,@/".M$, !AS82I) had paid onl% !@5$,$$$.$$,leaving an unpaid alance, as of @# une 3#", amounting to!5@#,@/".M$. ut of said unpaid alance of !5@#,@/".M$, !AS82I)made a partial pa%ment to AEEC of !4,$$$.$$, in roenamounts, covering the period from 5 anuar% 3#4 up to @" 2a%

3#4, leaving an unpaid alance of !5",@/".M$. !AS82I) and!=, and now AS8;EC, allegedl% failed and refused to pa% AEECtheir ust, valid and demandale oligation &The !resident of theAS8;EC is also the Bice0!resident of the !=. AEEC esoughtsaid official to pa% the outstanding oligation of !AS82I),inasmuch as != and AS8;EC now owned and possessed theassets of !AS82I), and these defendants all enefited from thewors, and the electrical, as well as the engineering

Commercial )aw 0 Corporation )aw, @$$5 & 3 '

arratives &=erne uerrero'

and repairs, performed % AEEC'. =ecause of the failure and refusalof !=, !AS82I) andKor AS8;EC to pa% their oligations, AEECallegedl% suffered actual damages in the total amount of

!5",@/".M$L and that in order to recover these sums, AEEC wascompelled to engage the professional services of counsel, to whomAEEC agreed to pa% a sum eFuivalent to @5- of the amount of theoligation due % wa% of attorne%s fees. != and AS8;EC fileda oint motion to dismiss on the ground that the complaint failed tostate sufficient allegations to estalish a cause of action against!= and AS8;EC, inasmuch as there is lac or want of privit% of contract etween the them and AEEC. Said motion was denied %

the trial court in its @# ovemer order, and ordered !AS8;EC to file their answers within 5 da%s. Aftproceedings, the Trial Court rendered udgment in favor oand against !=, AS8;EC and !AS82I)L the latteordered to pa% ointl% and severall% the former &' the !5",/@".M$ plus interest thereon at the rate of 4- per anclaimed from @5 Septemer 3M$ until full% paidL &@' the !$@,#@4.#/ as attorne%s feesL and, &"' Costs. !AS8;EC appealed. The Court of Appeals affirmed the decthe trial court in its decision of # April @$$$ &CA0R CB != and AS8;EC filed the petition for review.

Issue9 *hether != and AS8;EC ma% e held lia!AS82I)(s liailit% to AEEC.

1eld9 =asic is the rule that a corporation has a legal perdistinct and separate from the persons and entities owningcorporate veil ma% e lifted onl% if it has een used to shielddefend crime, ustif% a wrong, defeat pulic convenience, iad faith or perpetuate inustice. Thus, the mere fact t!hilippine ational =an &!=' acFuired ownership or manaof some assets of the !ampanga Sugar 2ill &!AS82I)', whearlier een foreclosed and purchased at the resultingauction % the ;evelopment =an of the !hilippines &;=!', mae != liale for the !AS82I)s contractual dets to AElectric Engineering Compan% &AEEC'. !iercing the corporate fiction ma% e allowed onl% if the following econcur9 &' control O not mere stoc control, ut codomination O not onl% of finances, ut of polic% and

practice in respect to the transaction attaced, must havsuch that the corporate entit% as to this transaction had at tno separate mind, will or e+istence of its ownL &@' such must have een used % the defendant to commit a frauwrong to perpetuate the violation of a statutor% or other legal dut%, or a dishonest and an unust act in contravenplaintiffs legal rightL and &"' the said control and reach must have pro+imatel% caused the inur% or unust loss comof. The asence of the foregoing elements in the preseprecludes the piercing of the corporate veil. Hirst, other thfact that != and AS8;EC acFuired the assets of !Athere is no showing that their control over it warrants the diof corporate personalities. Second, there is no evidence th

uridical personalit% was used to commit a fraud or to do a or that the separate corporate entit% was farcicall% used as alter ego, usiness conduit or instrumentalit% of another eperson. Third, AEEC was not defrauded or inured when !

AS8;EC acFuired the assets of !AS82I). 1ence, althouassets of AS8;EC can e easil% traced to !AS82I), the tof the latters assets to != and AS8;EC was not fraudentered into in order to escape liailit% for its det to AEEC. was there an% merger or consolidation with respect to !AS82!=. The procedure prescried under Title IG of the CorpCode 53 was not followed. In fact, !AS82I)s corporate e+had not een legall% e+tinguished or terminated. Hurther,



!=s acFuisition of the foreclosed assets, !AS82I) had previousl%made partial pa%ments to AEEC for the formers oligation in theamount of !###,@/".M$. As of @# une 3#", !AS82I) had paid!@5$,$$$ to AEEC and, from 5 anuar% 3#4 to @" 2a% 3#4,another !4,$$$. either did != e+pressl% or impliedl% agree toassume the det of !AS82I) to AEEC. )I e+plicitl% providesthat != shall stud% and sumit recommendations on the claims of !AS82I)s creditors. Clearl%, the corporate separateness etween!AS82I) and != remains, despite AEECs insistence to thecontrar%.

6U TET:.R. o. 4@3"/ April #, @$$@!1I)I!!IE ATIA) =AN ATIA) S8AR ;EBE)!2ETCR!RATI, petitioners,vs.AN$RA$A EECTRIC ENGINEERING CO@PAN!, respondent.!AAI=A, $.=asic is the rule that a corporation has a legal personalit% distinctand separate from the persons and entities owning it. Thecorporate veil ma% e lifted onl% if it has een used to shield fraud,defend crime, ustif% a wrong, defeat pulic convenience, insulatead faith or perpetuate inustice. Thus, the mere fact that thePii&&ine N"tion" ;"n< 4PN;' acFuired ownership ormanagement of some assets of the P")&"n*" Su*"r @i4PASU@I5, which had earlier een foreclosed and purchased atthe resulting pulic auction % the $eveo&)ent ;"n< o tePii&&ines 4$;P', will not mae != liale for the !AS82I)(scontractual dets to respondent.

Statement of the Case=efore us is a !etition for Review assailing the April #, @$$$;ecision of the Court of Appeals &CA' in CA0R CB o. 5#/$. Thedecretal portion of the challenged ;ecision reads as follows9J*1EREHRE, the udgment appealed from is here% AHHIR2E;.J@

The HactsThe factual antecedents of the case are summariDed % the Courtof Appeals as follows9JIn its complaint, the &"inti >erein res&on#ent? alleged thatit is a partnership dul% organiDed, e+isting, and operating under thelaws of the !hilippines, with office and principal place of usiness atos. #340M@ ;el 2onte >A?venue, PueDon Cit%, while thedefendant >herein petitioner? Pii&&ine N"tion" ;"n< 4hereinreferred to as !=', is a semi0government corporation dul%organiDed, e+isting and operating under the laws of the !hilippines,with office and principal place of usiness at Escolta Street, Sta.CruD, 2anilaL whereas, the other defendant, te N"tion" Su*"r

$eveo&)ent Cor&or"tion &AS8;EC in rief', is also a semi0government corporation and the sugar arm of the !=, with officeand principal place of usiness at the @nd Hloor, Sampaguita=uilding, Cuao, PueDon Cit%L and the defendant P")&"n*"Su*"r @is 4PASU@I in sort', is a corporation organiDed,e+isting and operating under the 3#5 laws of the !hilippines, andhad its usiness office efore 3#5 at ;el Carmen, Hloridalanca,!ampangaL that the &"inti is engaged in the usiness of general

construction for the repairs andKor construction of different inds of machineries and uildingsL that on August @/, 3#5, the#een#"nt PN; acFuired the assets of the defendant PASU@I)that were earlier foreclosed % the $eveo&)ent ;"n< o tePii&&ines 4$;P5 under )I o. "L that the defendant !=organiDed the defendant NASU$ECO in Septemer, 3#5, to taeownership and possession of the assets and ultimatel% tonationaliDe and consolidate its interest in other != controlledsugar millsL that prior to ctoer @3, 3#, the #een#"ntPASU@I en*"*e# te servi(es o &"inti or ee(tri("re/in#in* "n# re&"ir, most of which were partiall% paid % thedefendant !AS82I), leaving several unpaid accounts with theplaintiffL that finall%, on ctoer @3, 3#, te &"inti "n# te

#een#"nt PASU@I entere# into " (ontr"(t or te &"inti to &eror) te oo/in*, to /it L

&a' Construction of one &' power house uildingL &' Construction of three &"' reinforced concrete foundation forthree &"' units "5$ N* diesel engine generating set>s?L

&c' Construction of three &"' reinforced concrete foundation for the5,$$$ N* and ,@5$ N* turo generator setsL

&d' Complete overhauling and reconditioning tests sum for three&"' "5$ N* diesel engine generating set>s?L

&e' Installation of turine and diesel generating sets includingtransformer, switchoard, electrical wirings and pipe provided thosestated units are completel% supplied with their accessoriesL

&f' Relocating of @,4$$ B transmission line, demolition of alle+isting concrete foundation and drainage canals, e+cavation, andearth fillings all for the total amount of !54",5$$.$$ as evidenced% a contract, >a? +ero+ cop% of which is hereto attached as Anne+

A( and made an integral part of this complaintL(

t"t "si#e ro) te /or< (ontr"(t )entione#="ove, te#een#"nt PASU@I reuire# te &"inti to &eror) e+tr"/or<, "n# &rovi#e ee(tri(" eui&)ent "n# s&"re &"rts,su( "s:

&a' Suppl% of electrical devicesL &' E+tra mechanical worsL &c' E+tra farication worsL &d' Suppl% of materials and consumale itemsL &e' Electrical shop repairL &f' Suppl% of parts and related wors for turine generatorL &g' Suppl% of electrical eFuipment for machiner%L &h' Suppl% of diesel engine parts and other related wors includingfarication of parts.( t"t out o te tot" oi*"tion o P777,2BD.80, te#een#"nt PASU@I "# &"i# on- P20,000.00, e"vin* "nun&"i# ""n(e, "s o June 27, 197D, ")ountin* toP27,2BD.80, as shown in the Certification of the chief accountant

of the !=, a machine cop% of which is appended as Anne+ C( of the complaintL that out of said unpaid alance of !5@#,@/".M$, thedefendant !AS82I) made a partial pa%ment to the plaintiff of !4,$$$.$$, in roen amounts, covering the period from anuar%5, 3#4 up to 2a% @", 3#4, leaving an unpaid alance of !5",@/".M$L that the defendant PASU@I "n# te #een#"ntPN;, "n# no/ te #een#"nt NASU$ECO, "ie# "n# reuse#to &"- te &"inti teir 3ust, v"i# "n# #e)"n#"e

oi*"tionL that the !resident of the AS8;EC is also th!resident of the !=, and this official holds office at the $tof the !=, Escolta, 2anila, and plaintiff esought this offpa% the outstanding oligation of the defendant !Ainasmuch as the defendant != and AS8;EC now ownpossessed the assets of the defendant !AS82I), anddefendants all enefited from the wors, and the electrical,as the engineering and repairs, performed % the plaintecause of the failure and refusal of the defendants to p

ust, valid, and demandale oligations, plaintiff suffereddamages in the total amount of !5",@/".M$L and that in orecover these sums, the plaintiff was compelled to engaprofessional services of counsel, to whom the plaintiff ag

pa% a sum eFuivalent to @5- of the amount of the oligat% wa% of attorne%(s fees. A((or#in*-, te &"inti &r"-e 3u#*)ent e ren#ere# "*"inst te #een#"ntsNASU$ECO, "n# PASU@I, 3oint- "n# sever"- to /it:

&' Sentencing the defendants to pa% the plaintiffs the !5",@/".M$, with annual interest of 4- from the tioligation falls due and demandaleL

&@' Condemning the defendants to pa% attorne%(s fees amto @5- of the amount claimL

&"' rdering the defendants to pa% the costs of the suit.( JThe #een#"nts PN; "n# NASU$ECO ie# " 3oint )o#is)iss te (o)&"int (ie- on te *roun# t(o)&"int "ie# to st"te sui(ient "e*"tions to est"("use o "(tion "*"inst ot #een#"nts, in"s)u( "sis "(< or /"nt o &rivit- o (ontr"(t et/een te &"n# te t/o #een#"nts, the != and AS8;ECdefendants citing Article " of the ew Civil Code, and th

law ruling in Salonga v. *arner =arnes Co., MM !hil. @2anila !ort Service, et al. v. Court of Appeals, et al., @[email protected] )otion to #is)iss /"s - te (ourt " uo #enie#Or#er o Nove)er 27, 1980 in te s")e or#er, t"t#ire(te# te #een#"nts to ie teir "ns/er to te (o)/itin 1 #"-s.In teir "ns/er, te #een#"nt NASU$ECO reiter"t*roun#s of its motion to dismiss, to wit9

That the complaint does not state a sufficient cause ofagainst the defendant AS8;EC ecause9 &a' AS8;EC + + priv% to the various electrical construction os eing sue% the plaintiff under the present complaintL &' te t"<in- NASU$ECO o te "ssets o #een#"nt PASU@Isoe- or te &ur&ose o re(on#itionin* te su*"r (en#een#"nt PASU@I &ursu"nt to )"rti" "/ &o/ers Presi#ent un#er te ConstitutionL &c' notin* in te

189=A 4"s /e "s in OI No. D115 "utorie# or (o))te PN; or its susi#i"r- (or&or"tion, te NASU$E"ssu)e te (or&or"te oi*"tions o PASU@I) as thainvolved in the present caseL and, &d' all that was mentiothe said etter o instru(tion inso"r "s te PAi"iities >/ere? (on(erne# >/"s? or te PN;, susi#i"r- (or&or"tion te NASU$ECO, to )"<e " stu"n# su)it >"? re(o))en#"tion on te &roe)s (on(



te s")e.HJ=% wa% of counterclaim, the AS8;EC averred that % reason of the filing % the plaintiff of the present suit, which it >laeled? asunfounded or aseless, the defendant AS8;EC was constrainedto litigate and incur litigation e+penses in the amount of !5$,$$$.$$, which plaintiff should e sentenced to pa%.Accordingl%, AS8;EC pra%ed that the complaint e dismissedand on its counterclaim, that the plaintiff e condemned to pa%!5$,$$$.$$ in concept of attorne%(s fees as well as e+emplar%damages.In its "ns/er, te #een#"nt PN; i<e/ise reiter"te# te*roun#s o its )otion to #is)iss, n")e-: 415 te (o)&"intst"tes no ("use o "(tion "*"inst te #een#"nt PN; 425

t"t PN; is not " &"rt- to te (ontr"(t "e*e# in &"r. B o te (o)&"int "n# t"t te "e*e# servi(es ren#ere# - te&"inti to te #een#"nt PASU@I u&on /i( &"intiHssuit is ere(te#, /"s ren#ere# on* eore PN; too<&ossession o te "ssets o te #een#"nt PASU@I un#erOI No. 189=A 4D5 t"t te PN; t"<e=over o te "ssets o te #een#"nt PASU@I un#er OI 189=A /"s soe- or te&ur&ose o re(on#itionin* te su*"r (entr" so t"t PASU@I)"- resu)e its o&er"tions in ti)e or te 197=7 )iin*se"son, "n# t"t notin* in te s"i# OI No. 189=A, "s /e"s in OI No. D11, "utorie# or #ire(te# PN; to "ssu)e te(or&or"te oi*"tions o PASU@I, et "one t"t or /i(te &resent "(tion is rou*t 45 t"t PN;Hs )"n"*e)ent"n# o&er"tion un#er OI No. D11 #i# not reer to "n- "sseto PASU@I /i( te PN; "# to "(uire "n# tere"ter>)"n"*e?, ut on- to tose /i( /ere ore(ose# - te$;P "n# /ere in turn re#ee)e# - te PN; ro) te $;P

45 t"t (onor)"- to OI No. D11, on Au*ust 1, 197,te PN; "n# te $eveo&)ent ;"n< o te Pii&&ines 4$;P5entere# into " Re#e)&tion A*ree)entH /ere- $;P so#,tr"nserre# "n# (onve-e# in "vor o te PN;, - /"- o re#e)&tion, " its 4$;P5 ri*ts "n# interest in "n# over teore(ose# re" "n#or &erson" &ro&erties o PASU@I, "sso/n in Anne+ CH /i( is )"#e "n inte*r" &"rt o te"ns/er 4B5 t"t "*"in, (onor)"- /it OI No. D11, PN;&ursu"nt to " $ee# o Assi*n)ent #"te# O(toer 21, 197,(onve-e#, tr"nserre#, "n# "ssi*ne# or v"u"e(onsi#er"tion, in "vor o NASU$ECO, " #istin(t "n#in#e&en#ent (or&or"tion, " its 4PN;5 ri*ts "n# interest in"n# un#er te "ove Re#e)&tion A*ree)ent.H Tis is so/nin Anne+ $H /i( is "so )"#e "n inte*r" &"rt o te"ns/er >7? t"t "s " (onseuen(e o te s"i# $ee# o Assi*n)ent, PN; on O(toer 21, 197 (e"se# to )"n"*e#"n# o&er"te te "ove=)entione# "ssets o PASU@I, /i(

un(tion /"s no/ "(tu"- tr"nserre# to NASU$ECO. In otherwords, so asserted !=, the complaint as to !=, had ecomemoot and academic ecause of the e+ecution of the said ;eed of AssignmentL >M? that moreover, )I o. " did not authoriDe ordirect != to assume the corporate oligations of !AS82I),including the alleged oligation upon which this present suit wasroughtL and >3? that, at most, what was granted to != in thisrespect was the authorit% to mae a stud% of and sumit

recommendation on the prolems concerning the claims of !AS82I) creditors,( under su0par. 5 )I o. ".JIn its counterclaim, the != averred that it was unnecessaril%constrained to litigate and to incur e+penses in this case, hence it isentitled to claim attorne%(s fees in the amount of at least!5$,$$$.$$. Accordingl%, != pra%ed that the complaint edismissedL and that on its counterclaim, that the plaintiff esentenced to pa% defendant != the sum of !5$,$$$.$$ asattorne%(s fees, aside from e+emplar% damages in such amountthat the court ma% seem ust and eFuitale in the premises.JSummons % pulication was made via the !hilippines ;ail%E+press, a newspaper with editorial office at "# =onifacio ;rive,!ort Area, 2anila, against the defendant !AS82I), which was

thereafter declared in default as shown in the August #, 3M rderissued % the Trial Court.JAfter due proceedings, the Trial Court rendered udgment, thedecretal portion of which reads9%'ERE6ORE, 3u#*)ent is ere- ren#ere# in "vor o &"inti "n# "*"inst te #een#"nt Cor&or"tion, Pii&&ineN"tion" ;"n< 4PN;5 NATIONA SUGAR $EEOP@ENTCORPORATION 4NASU$ECO5 "n# PA@PANGA SUGAR @IS4PASU@I5, or#erin* te "tter to &"- 3oint- "n# sever"-te or)er te oo/in*:

. The sum of !5",/@".M$ plus interest thereon at the rate of 4- per annum as claimed from Septemer @5, 3M$ until full%paidL

@. The sum of !$@,#@4.#/ as attorne%(s feesL and, ". Costs. S R;ERE;. 2anila, !hilippines, Septemer 4, 3M/.

&S;' EREST S. TEC udge(J"

Ruling of the Court of AppealsAir)in* te tri" (ourt, te CA e# t"t it /"s oensive tote "si( tenets o 3usti(e "n# euit- or " (or&or"tion tot"<e over "n# o&er"te te usiness o "noter (or&or"tion,/ie #is"vo/in* or re&u#i"tin* "n- res&onsiiit-,oi*"tion or i"iit- "risin* terero).

1ence, this !etition.5

IssuesIn their 2emorandum, petitioners raise the following errors for theCourt(s consideration9JIThe Court of Appeals gravel% erred in law in holding the hereinpetitioners liale for the unpaid corporate dets of !AS82I), a

corporation whose corporate e+istence has not een legall%e+tinguished or terminated, simpl% ecause of petitioners>(? tae0over of the management and operation of !AS82I) pursuant to themandates of )I o. M30A, as amended % )I o. ".JIIThe Court of Appeals gravel% erred in law in not appl%ing >to? thecase at ench the ruling enunciated in Edward . ell Co. v. !acificHarms, 5 SCRA 45.J/

Succinctl% put, the aforesaid errors oil down to the principof whether != is liale for the unpaid dets of !AS8respondent.This Court(s RulingThe !etition is meritorious.2ain Issue9*iability for 'orporate ebtsAs a general rule, Fuestions of fact ma% not e raised in a for review under Rule 45 of the Rules of Court.# To thhowever, there are some e+ceptions enumerated in <ue'ourt of 1ppeals.M After a careful scrutin% of the records apleadings sumitted % the parties, we find that the lowermisappreciated the evidence presented.3 verlooed %

were certain relevant facts that would ustif% a conclusion dfrom that reached in the assailed ;ecision.$

Petitioners &osit t"t te- sou# not e e# i"e (or&or"te #ets o PASU@I, e("use teir t"<eover"tterHs ore(ose# "ssets #i# not )"<e te) "ssi*nete oter "n#, res&on#ent "sserts t"t &etitionePASU@I sou# e tre"te# "s one entit- "n#, "s 3oint- "n# sever"- e# i"e or PASU@IHs oi*"tion.0=phi0.n>t As " rue, " (or&or"tion t"t &ur("ses te "ssets o "/i not e i"e or te #ets o te sein* (or&o&rovi#e# te or)er "(te# in *oo# "it "n# &"i# "#(onsi#er"tion or su( "ssets, e+(e&t /en "n- oo/in* (ir(u)st"n(es is &resent: 415 /ere te &ure+&ress- or i)&ie#- "*rees to "ssu)e te #e/ere te tr"ns"(tion ")ounts to " (onsoi#"tion or )o te (or&or"tions, 4D5 /ere te &ur("sin* (or&or"

)ere- " (ontinu"tion o te sein* (or&or"tion, "/ere te tr"ns"(tion is r"u#uent- entere# into into es("&e i"iit- or tose #ets.11 8iercin the 'orporate4eil 5ot ?arranted A corporation is an artificial eing created % operation ofpossesses the right of succession and such powers, attriutproperties e+pressl% authoriDed % law or incident to its e+isIt has a personalit% separate and distinct from the composing it, as well as from an% other legal entit% to whiche related." This is asic.Eu"- /e=sette# is te &rin(i&e t"t te (or&or"te)"- e re)ove# or te (or&or"te vei &ier(e# /(or&or"tion is 3ust "n "ter e*o o " &erson or o "n(or&or"tion.1 6or re"sons o &ui( &oi(- "n# in te ino 3usti(e, te (or&or"te vei /i 3ustii"- e i)&"e#/en it e(o)es " sie# or r"u#, ie*"it- or in

(o))itte# "*"inst tir# &ersons.1B

1ence, an% application of the doctrine of piercing the corporshould e done with caution.# A court should e mindfumilieu where it is to e applied.M It must e certain tcorporate fiction was misused to such an e+tent that infraud, or crime was committed against another, in disregarrights.3 The wrongdoing must e clearl% and convestalishedL it cannot e presumed. @$ therwise, an inust



was never unintended ma% result from an erroneous application.@

This Court has pierced the corporate veil to ward off a udgmentcredit,@@ to avoid inclusion of corporate assets as part of the estateof the decedent,@" to escape liailit% arising from a det, @4 or toperpetuate fraud andKor confuse legitimate issues@5 either topromote or to shield unfair oectives@/ or to cover up an otherwiselatant violation of the prohiition against forum0shopping.@# nl%in these and similar instances ma% the veil e pierced anddisregarded.@M

Te uestion o /eter " (or&or"tion is " )ere "ter e*o isone o "(t.29 Pier(in* te vei o (or&or"te i(tion )"- e"o/e# on- i te oo/in* ee)ents (on(ur: 415 (ontro ==not )ere sto(< (ontro, ut (o)&ete #o)in"tion == not on-

o in"n(es, ut o &oi(- "n# usiness &r"(ti(e in res&e(t tote tr"ns"(tion "tt"(<e#, )ust "ve een su( t"t te(or&or"te entit- "s to tis tr"ns"(tion "# "t te ti)e nose&"r"te )in#, /i or e+isten(e o its o/n 425 su( (ontro)ust "ve een use# - te #een#"nt to (o))it " r"u# or" /ron* to &er&etu"te te vio"tion o " st"tutor- or oter&ositive e*" #ut-, or " #isonest "n# "n un3ust "(t in(ontr"vention o &"intiHs e*" ri*t "n# 4D5 te s"i#(ontro "n# re"( o #ut- )ust "ve &ro+i)"te- ("use#te in3ur- or un3ust oss (o)&"ine# o.D0 *e elieve that the asence of the foregoing elements in thepresent case precludes the piercing of the corporate veil. <irst,other than the fact that petitioners acFuired the assets of !AS82I),there is no showing that their control over it warrants the disregardof corporate personalities." Second , there is no evidence that their

uridical personalit% was used to commit a fraud or to do a wrongLor that the separate corporate entit% was farcicall% used as a mere

alter ego, usiness conduit or instrumentalit% of another entit% orperson. "@ Third , respondent was not defrauded or inured whenpetitioners acFuired the assets of !AS82I)."" =eing the part% that ased for the piercing of the corporate veil,respondent had the urden of presenting clear and convincingevidence to ustif% the setting aside of the separate corporatepersonalit% rule."4 1owever, it utterl% failed to discharge thisurdenL"5 it failed to estalish % competent evidence thatpetitioner(s separate corporate veil had een used to conceal fraud,illegalit% or ineFuit%."/

*hile we agree with respondent(s claim that the assets of theational Sugar $eveo&)ent Cor&or"tion 4NASU$ECO5 ("n ee"si- tr"(e# to PASU@I,D7 /e "re not (onvin(e# t"t tetr"nser o te "tterHs "ssets to &etitioners /"s r"u#uent-entere# into in or#er to es("&e i"iit- or its #et tores&on#ent.D8

A ("reu revie/ o te re(or#s reve"s t"t $;P ore(ose#

te )ort*"*e e+e(ute# - PASU@I "n# "(uire# te "ssets"s te i*est i##er "t te &ui( "u(tion (on#u(te#. D9 Te"n< /"s 3ustiie# in ore(osin* te )ort*"*e, e("use tePASU@I "((ount "# in(urre# "rre"r"*es o )ore t"n 20&er(ent o te tot" outst"n#in* oi*"tion.0 Tus, $;P "#not on- " ri*t, ut "so " #ut- un#er te "/ to ore(osete su3e(t &ro&erties.1

!ursuant to )I o. M30A4@ as amended % OI No. D11,D PN;

"(uire# PASU@IHs "ssets t"t $;P "# ore(ose# "n#&ur("se# in te nor)" (ourse. Petitioner "n< /"si<e/ise t"s<e# to )"n"*e te)&or"ri- te o&er"tion o su("ssets eiter - itse or trou* " susi#i"r- (or&or"tion.

!=, as the se(on# )ort*"*ee, redeemed from ;=! theforeclosed !AS82I) assets pursuant to Section / of Act o. ""5.45

These assets were later conve%ed to != for a consideration, theterms of which were emodied in the Redemption Agreement.4/

!=, as successor0in0interest, stepped into the shoes of ;=! as!AS82I)(s creditor.4# =% wa% of a ;eed of Assignment,4M != thentransferred to AS8;EC all its rights under the RedemptionAgreement.In evelopment -ank of the 8hilippines v. 'ourt of 1ppeals ,43 we

had the occasion to resolve a similar issue. *e ruled that !=, ;=!and their transferees were not liale for 2arinduFue 2ining(sunpaid oligations to Remington Industrial Sales Corporation&Remington' after the two ans had foreclosed the assets of 2arinduFue 2ining. *e liewise held that Remington failed todischarge its urden of proving ad faith on the part of 2arinduFue2ining to ustif% the piercing of the corporate veil.In te inst"nt ("se, te CA erre# in "ir)in* te tri" (ourtHsitin* o te (or&or"te )"s<.0 Te CA #i# not &oint to "n-"(t evi#en(in* "# "it on te &"rt o PN; "n# itstr"nseree.1 Te (or&or"te i(tion /"s not use# to #ee"t&ui( (onvenien(e, 3usti- " /ron*, &rote(t r"u# or #een#(ri)e.2 None o te ore*oin* e+(e&tions /"s so/n toe+ist in te &resent ("se.D On te (ontr"r-, te itin* o te(or&or"te vei /ou# resut in )"niest in3usti(e. Tis /e("nnot "o/.5o &erer or 'onsolidation

Respondent further claims that petitioners should e held liale forthe unpaid oligations of !AS82I) % virtue of )I os. M30A and", which e+pressl% authoriDed !AS82I) and != to merge orconsolidate. n the other hand, petitioners contend that theirtaeover of the operations of !AS82I) did not involve an%corporate merger or consolidation, ecause the latter had neverlost its separate identit% as a corporation.A (onsoi#"tion is te union o t/o or )ore e+istin* entitiesto or) " ne/ entit- ("e# te (onsoi#"te# (or&or"tion. A)er*er, on te oter "n#, is " union /ere- one or )oree+istin* (or&or"tions "re "sore# - "noter (or&or"tiont"t survives "n# (ontinues te (o)ine# usiness. Te )er*er, o/ever, #oes not e(o)e ee(tive u&on te)ere "*ree)ent o te (onstituent (or&or"tions. Sin(e ")er*er or (onsoi#"tion invoves un#")ent" ("n*es inte (or&or"tion, "s /e "s in te ri*ts o sto(<o#ers "n#(re#itors, tere )ust e "n e+&ress &rovision o "/

"utoriin* te).B 6or " v"i# )er*er or (onsoi#"tion, te"&&rov" - te Se(urities "n# E+("n*e Co))ission 4SEC5o te "rti(es o )er*er or (onsoi#"tion is reuire#.7 Tese"rti(es )ust i<e/ise e #u- "&&rove# - " )"3orit- o teres&e(t ive sto(<o#ers o te (onstituent (or&or"tions.8 In the case at ar, we hold that there is no merger or consolidationwith respect to !AS82I) and !=. The procedure prescried underTitle IG of the Corporation Code53 was not followed.

In fact, !AS82I)(s corporate e+istence, as correctl% foundCA, had not een legall% e+tinguished or terminated./$ prior to !=(s acFuisition of the foreclosed assets, !AS82previousl% made partial pa%ments to respondent for the foligation in the amount of !###,@/".M$. As of une @#!AS82I) had paid !@5$,$$$ to respondent and, from an3#4 to 2a% @", 3#4, another !4,$$$.Neiter #i# &etitioner e+&ress- or i)&ie#- "*"ssu)e te #et o PASU@I to res&on#ent. B1 OI e+&i(it- &rovi#es t"t PN; s" stu#- "n# re(o))en#"tions on te ("i)s o PASU@IHs (re#Clearl%, the corporate separateness etween !AS82I) anremains, despite respondent(s insistence to the contrar%./"

*1EREHRE, the !etition is here% R15T@ and the ;ecision S@T 1S+@ . o pronouncement as to costs.S R;ERE;.



G.R. No. 1028D A&ri 1B, 2008

R!UIC'I !A@A@OTO, &etitioner,vs.NIS'INO EAT'ER IN$USTRIES, INC. "n# IMUONIS'INO, res&on#ents.

R!UIC'I !A@A@OTO v. NIS'INO EAT'ER IN$USTRIES, INC. "n# IMUO NIS'INO 1 SCRA 7420085

To disreard the separate )uridical personality of a corporation, therondoin or un)ust act in contravention of a plaintiffAs leal rihts must be clearly and convincinly established. 1lso, ithout acceptance, a mere offer produces no obliation.R%uichi <amamoto and Iuo ishino agreed to enter into a ointventure wherein ishino would acFuire such numer of shares of stoc eFuivalent to #$- of the authoriDed capital stoc of thecorporation. 1owever, ishino and his rother <oshinou ishinoacFuired more than #$- of the authoriDed capital stoc.egotiations suseFuentl% ensued in light of a planned taeover %

ishino who would u%0out the shares of stoc of <amamowas advised through a letter that he ma% tae all the eFumachiner% he had contriuted to the compan% &for his own sale' provided that the value of such machines is deductethe capital contriutions which will e paid to him. 1owevletter reFuested that he give his 6comments on all the soonest7. n the asis of the said letter, <amamoto attemrecover the machineries ut ishino hindered him to do so, dhim to file a *rit of Replevin. The Trial Court issued th1owever, on appeal, ishino claimed that the propertierecovered were owned % the corporation and the aove0sawas a mere proposal which was not %et authoriDed % the =;irectors. Thus, the Court of Appeals reversed the trial

decision despite <amamoto(s contention that the compan% isan instrumentalit% of the ishinos.

ISS8E9*hether or not <amamoto can recover the propertcontriuted to the compan% in view of the ;octrine of !iercBeil of Corporate Hiction and ;octrine of !romissor% Estoppe

1E);9ne of the elements determinative of the applicailit% doctrine of piercing the veil of corporate fiction is that contrhave een used % the defendant to commit fraud or wrperpetuate the violation of a statutor% or other positive legor dishonest and unust act in contravention of the plaintiffrights. To disregard the separate uridical personalit%corporation, the wrongdoing or unust act in contraventiplaintiff(s legal rights must e clearl% and convincingl% esta

it cannot e presumed. *ithout a demonstration that an%evils sought to e prevented % the doctrine is present, it dappl%. Estoppel ma% arise from the maing of a promise. 1oit ears noting that the letter was followed % a reFu<amamoto to give his 6comments on all the aove, soonestwas thus proffered to <amamoto was not a promise, ut offer, suect to his acceptance. *ithout acceptance, a meproduces no oligation. Thus, the machineries and eFuwhich comprised <amamoto(s investment, remained partcapital propert% of the corporation.

6U TET:

; E C I S I CAR!I 2RA)ES, $.9In 3M", petitioner, R-ui(i !")")oto &<amamoto', a a

national, organiDed under !hilippine laws %"<o Ente@"ni", In(or&or"te# 4%AMO5, a corporation engaged priin leather tanning, now nown as Nisino e"ter In#uIn(. &)II', one of herein respondents.In 3M#, !")")oto "n# te oter res&on#ent, I<uo N&ishino', also a apanese national, forged a @e)or"n#A*ree)ent under which the% agreed to enter into "venture /erein Nisino /ou# "(uire su( nu)



s"res o sto(< euiv"ent to 70F o te "utorie# ("&it"sto(< o %AMO.Eventuall%, ishino and his rother !osinou Nisino4!osinou5 acFuired more than #$- of the authoriDed capitalstoc of *AN, reducing <amamoto(s investment therein to, % hisclaim, $-,@ less than $- according to ishino."

The corporate name of *AN was later changed to, as reflectedearlier, its current name NII.egotiations suseFuentl% ensued in light of a planned taeover of )II % ishino who would u%0out the shares of stoc of <amamoto. In the course of the negotiations, !osinou "n#NisinoHs (ounse Att-. E))"nue G. $o(e 4Att-. $o(e5advised <amamoto % letter dated ctoer "$, 33, the pertinent

portions of which follow91ereunder is a simple memorandum of the suect mattersdiscussed with me % 2r. <oshinou ishino %esterda%, ctoer@3th, ased on the letter of 2r. Iuo ishino from apan, and whichI am now transmitting to %ou.4

+ + + +@. 2achiner% and EFuipment9The following machiner%KeFuipment have een contriuted % %outo the compan%9

Splitting machine 0 unit

Samming machine 0 unit

Horlift 0 unit

;rums 0 4 units

Toggling machine 0 @ units

Regarding the aove machines, %ou ma% tae them out with %ou&for %our own use and sale' if %ou want, provided, the value of suchmachines is deducted from %our and *ao(s capital contriutions,which will e paid to %ou.Nindl% let me now of %our comments on all the aove, soonest.+ + + +5 &Emphasis and underscoring supplied'n the asis of such letter, <amamoto attempted to recover themachineries and eFuipment which were, % <amamoto(s admission,part of his investment in the corporation,/ ut he was frustrated %respondents, #r"/in* !")")oto to ie on J"nu"r- 1, 1992eore te Re*ion" Tri" Court 4RTC5 o @"<"ti " (o)&"int 7

"*"inst te) or re&evin.=ranch 45 of the 2aati RTC issued a writ of replevin after

<amamoto filed a ond. M

In their Answer with Counterclaim,3 res&on#ents ("i)e# t"tte )"(ineries "n# eui&)ent su3e(t o re&evin or) &"rto !")")otoHs ("&it" (ontriutions in (onsi#er"tion o iseuit- in NII "n# sou# tus e tre"te# "s (or&or"te&ro&ert-L and that the aove0said letter of Att%. ;oce to<amamoto was merel% a proposal, J(on#itione# on>!")")otoHs? se=out to . . . Nisino o is entire euit-, 10

/i( &ro&os" /"s -et to e "utorie# - te sto(<o#ers"n# ;o"r# o $ire(tors o NII.=% wa% of Counterclaim, respondents, alleging that the% suffereddamage due to the seiDure via the implementation of the writ of replevin over the machineries and eFuipment, pra%ed for the awardto them of moral and e+emplar% damages, attorne%(s fees andlitigation e+penses, and costs of suit.Te tri" (ourt, - $e(ision o June 9, 199, #e(i#e# te ("sein "vor o !")")oto,11 #is&osin* tus:%'ERE6ORE, 3u#*)ent is ere- ren#ere#: 415 #e("rin*&"inti "s te ri*tu o/ner "n# &ossessor o te)"(ineries in uestion, "n# )"<in* te /rit o seiure&er)"nent 425 or#erin* #een#"nts to &"- &"inti

"ttorne-Hs ees "n# e+&enses o iti*"tion in te ")ount o 6it- Tous"n# Pesos 4P0,000.005, Pii&&ine Curren(- 4D5#is)issin* #een#"ntsH (ounter("i)s or "(< o )erit "n#45 or#erin* #een#"nts to &"- te (osts o suit.S R;ERE;.@ &8nderscoring supplied'On "&&e",1D te Court o A&&e"s e# in "vor o ereinres&on#ents "n# "((or#in*- reverse# te RTC #e(ision "n##is)isse# te (o)&"int.1 In so holding, the appellate courtfound that the machineries and eFuipment claimed % <amamotoare corporate propert% of )II and ma% not thus e retrievedwithout the authorit% of the )II =oard of ;irectorsL5 and thatpetitioner(s argument that ishino and <amamoto cannot hideehind the shield of corporate fiction does not lie,/ nor doespetitioner(s invocation of the doctrine of promissor% estoppel.# Atthe same time, the Court of Appeals found no ground to supportrespondents( Counterclaim.M

The Court of Appeals having denied3 his 2otion for

Reconsideration,@$ <amamoto filed the present petition,@ faultingthe Court of AppealsA.+ + + I 1);I T1AT T1E BEI) H CR!RATE HICTIS18); T =E !IERCE; I T1E CASE AT =AR.=.+ + + I 1);I T1AT T1E ;CTRIE H !R2ISSR<EST!!E) ;ES T A!!)< T T1E CASE AT =AR.C.+ + + I 1);I T1AT RES!;ETS ARE T )IA=)E HRATTRE<(S HEES.@@

Te resoution o te &etition in*es, in te )"in, on/eter te "#vi(e in te etter o Att-. $o(e t"t!")")oto )"- retrieve te )"(ineries "n# eui&)ent,/i( "#)itte#- /ere &"rt o is invest)ent, oun# te(or&or"tion. Te Court o#s in te ne*"tive.In#ee#, /itout " ;o"r# Resoution "utoriin* res&on#ent

Nisino to "(t or "n# in e" o te (or&or"tion, e ("nnotin# te "tter. Un#er te Cor&or"tion "/, uness oter/ise&rovi#e#, (or&or"te &o/ers "re e+er(ise# - te ;o"r# o $ire(tors.2D

Ur*in* tis Court to pierce the veil of corporate fiction,!")")oto "r*ues, viz :$urin* te ne*oti"tions, te issue "s to te o/nersi& o te@"(iner>ies? never (")e u&. Neiter #i# te issue on te

&ro&er &ro(e#ure to e t"<en to e+e(ute te (o)&eteover o te Co)&"n- (o)e u& sin(e I<uo, !osino!")")oto /ere te o/ners tereo, te &resen(e osto(<o#ers ein* on- or te &ur&ose o (o)&-inte )ini)u) reuire)ents o te "/.*hat course of action the Compan% decides to do or nodepends not on the Jother memers of the =oard of ;irecto#e&en#s on /"t I<uo "n# !osinou #e(i#e. Te Cois ut " )ere instru)ent"it- o I<uo >"n#? !osinou+ + + ++ + + The Compan% hardl% holds oard meetings. It has an oard, the directors are directors in name onl% and are therthe idding of the ish>i?nos, nothing more. Its minutes ar

minutes. + + +@5

+ + + +The fact that the parties started at a #$0"$ ratio and <ampercentage declined to $- does not mean the @$- wothers. + + + The @$- went to no one else ut Iuo himself<oshinou is the %ounger rother of Iuo and has no sa% the usiness. nl% Iuo maes the decisions. Theretherefore, no other memers of the =oard who have not givapproval.@/ &Emphasis and underscoring supplied'%ie te vei o se&"r"te (or&or"te &erson"it- )&ier(e# /en te (or&or"tion is )ere- "n "#3uusiness (on#uit, or "ter e*o o " &erson,27 teo/nersi& - " sin*e sto(<o#er o even " or ne"rte ("&it" sto(<s o " (or&or"tion is not - itse " su*roun# to #isre*"r# te se&"r"te (or&or"te &erson"itThe elements determinative of the applicailit% of the docpiercing the veil of corporate fiction follow9

"1. Control, not mere majority or complete stock contrcomplete domination , not only of finances but of polibusiness practice in respect to the transaction attacthat the corporate entity as to this transaction had time no separate mind, will or eistence of its own!. #uch control must have been used by the defendcommit fraud or wron$, to perpetuate the violatio statutory or other positive le$al duty, or dishoneunjust act in contravention of the plaintiff%s le$al ri$ht&. 'he aforesaid control and breach of duty

proimately cause the injury or unjust loss complaine'he absence of any one of these elements pr

"piercin$ the corporate veil ." ( n applyin the Binstrumeor Balter eoA doctrine, the courts are concerned ith realnot form, ith ho the corporation operated and the inddefendantAs relationship to that operation.C @3 &Italics in the oemphasis and underscoring supplied'

In re"tion to te se(on# ee)ent, to #isre*"r# te se 3uri#i(" &erson"it- o " (or&or"tion, te /ron*#oun3ust "(t in (ontr"vention o " &"intiHs e*" ri*te (e"r- "n# (onvin(in*- est"ise# it ("nn&resu)e#.D0 %itout " #e)onstr"tion t"t "n- o tsou*t to e &revente# - te #o(trine is &resent, inot "&&-.D1

In the case at ar, there is no showing that ishino u



separate personalit% of )II to unustl% act or do wrong to<amamoto in contravention of his legal rights.<amamoto argues, in another vein, that promissory estoppel liesagainst respondents, thus9Un#er te #o(trine o &ro)issor- esto&&e, + + + esto&&e)"- "rise ro) te )"<in* o " &ro)ise, even tou*/itout (onsi#er"tion, i it /"s inten#e# t"t te &ro)isesou# e reie# u&on "n# in "(t it /"s reie# u&on, "n# i "reus" to enor(e it /ou# e virtu"- to s"n(tion te&er&etr"tion o r"u# or /ou# resut in oter in3usti(e.+ + + Iuo and <oshinou wanted <amamoto out of the Compan%.Hor this purpose negotiations were had etween the parties. 1avinge+pressl% given <amamoto, through the )etter and through a

suseFuent meeting at the 2anila !eninsula where Iuo himself confirmed that <amamoto ma% tae out the 2achiner% from theCompan% an%time, respondents should not e allowed to turnaround and do the e+act opposite of what the% have representedthe% will do.In paragraph twelve &@' of the )etter, <amamoto was e+pressl%advised that he could tae out the 2achiner% if he wanted to so,provided that the value of said machines would e deducted fromhis capital contriution + + +.+ + + +Respondents cannot now argue that the% did not intend for<amamoto to rel% upon the )etter. That was the purpose of the)etter to egin with. !etitioner>s? in fact, relied upon said )etterand such reliance was further strengthened during their meeting atthe 2anila !eninsula.To sanction respondents( attempt to evade their oligation would eto sanction the perpetration of fraud and inustice against

petitioner."@

&8nderscoring supplied'It e"rs notin*, o/ever, t"t te "ore)entione#&"r"*r"& 12 o te etter is oo/e# - " reuest or!")")oto to *ive is (o))ents on " te "ove,soonest.DD %"t /"s tus &roere# to !")")oto /"s not " &ro)ise,ut " )ere oer, su3e(t to is "((e&t"n(e. %itout"((e&t"n(e, " )ere oer &ro#u(es no oi*"tion.D Thus, under Article M of the Civil Code, >i?n (on#ition"oi*"tions, te "(uisition o ri*ts, "s /e "s tee+tin*uis)ent or oss o tose "re"#- "(uire#, s"#e&en# u&on te "&&enin* o te event /i( (onstituteste (on#ition. In te ("se "t "r, tere is no so/in* o (o)&i"n(e /it te (on#ition or "o/in* !")")oto tot"<e te )"(ineries .R. o. /5#44 August , @$$MSCAR C. RE<ES, petitioner,vs.

1. REIA) TRIA) C8RT H 2ANATI, =ranch 4@, UEIT1IS8RACE CR!RATI, and R;RI C. RE<ES, respondents.; E C I S I

Re-es v. RTC o @"<"ti >G.R. No. 1B7. Au*ust 11, 2008?0DOCT.#"te

OSCAR C. RE!ES, petitioner ,vs.'ON. REGIONA TRIA COURT O6 @AMATI, ;r"n( 12,ENIT' INSURANCE CORPORATION "n# RO$RIGO C. RE!ES,respondents.>G.R. No. 1B7. Au*ust 11, 2008?6ACTS:!etitioner and private respondent were silings together with twoothers, namel% !edro and Anastacia, in a famil% usinessestalished as Uenith Insurance Corporation &Uenith', from whichthe% owned shares of stocs. The !edro and AnastaciasuseFuentl% died. The former had his estate udiciall% partitionedamong his heirs, ut the latter had not made the same in her

shareholding in Uenith. Uenith and Rodrigo filed a complaint withthe Securities and E+change Commission &SEC' against petitioner&' a derivative suit to otain accounting of funds and assets of Uenith, and &@' to determine the shares of stoc of deceased !edroand Anastacia that were aritraril% and fraudulentl% appropriated>% scar, and were unaccounted for?. In his answer withcounterclaim, petitioner denied the illegalit% of the acFuisition of shares of Anastacia and Fuestioned the urisdiction of SEC toentertain the complaint ecause it pertains to settlement of >Anastacia(s? estate. The case was transferred to. !etitioner filed2otion to ;eclare Complaint as uisance or 1arassment Suit andmust e dismissed. RTC denied the motion. The motion waselevated to the Court of Appeals % wa% of petition for certiorari,prohiition and mandamus, ut was again denied.ISS8ES92ercantile )aw&' *hether or not Rodrigo ma% e considered a stocholder of

Uenith with respect to the shareholdings originall% elonging toAnastacia.&@' *hether or not there is an intra0corporate relationshipetween the parties that would characteriDe the case as an intra0corporate dispute:Remedial )aw&' *hether or not the complaint is a mere nuisance orharassment suit that should e dismissed under the Interim Rulesof !rocedure of Intra0Corporate ControversiesL&@' *hether or not the complaint is a derivative suit within the

urisdiction of the RTC acting as a special commercial court.R8)IS92ercantile )aw&' o. Rodrigo must, hurdle two ostacles efore he can econsidered a stocholder of Uenith with respect to theshareholdings originall% elonging to Anastacia. <irst , he mustprove that there are shareholdings that will e left to him and his

co0heirs, and this can e determined onl% in a settlement of thedecedent(s estate. o such proceeding has een commenced todate. Second , he must register the transfer of the shares allotted tohim to mae it inding against the corporation. 1e cannot demandthat this e done unless and until he has estalished his specificallotment &and prima facie ownership' of the shares. *ithout thesettlement of Anastacia(s estate, there can e no definite partitionand distriution of the estate to the heirs. *ithout the partition

and distriution, there can e no registration of the transfwithout the registration, we cannot consider the transfereestocholder who ma% invoe the e+istence of an intra0corelationship as premise for an intra0corporate controvers%the urisdiction of a special commercial court. The suect shstoc &i.e., Anastacia(s shares' are concerned Rodrigo canconsidered a stocholder of Uenith.&@' o. Court cannot declare that an intra0corporate relae+ists that would serve as asis to ring this case within thecommercial court(s urisdiction under Section 5&' of !; 3$amended ecause Rodrigo(s complaint failed the relationsaove.Remedial )aw

&' <es. The rule is that a complaint must contain a plain, and direct statement of the ultimate facts constituting the pcause of action and must specif% the relief sought. SectionM of the Revised Rules of Court provides that in all avermfraud or mistae, the circumstances constituting fraud or must e stated with particularit%. These rules find application to Section 5&a' of !.;. o. 3$@0A which spcorporate devices or schemes that amount to framisrepresentation detrimental to the pulic andKor stocholders.Allegations of deceit, machination, false premisrepresentation, and threats are largel% conclusions of lawithout supporting statements of the facts to which the alleof fraud refer, do not sufficientl% state an effective caaction. Hraud and mistae are reFuired to e averreparticularit% in order to enale the opposing part% to controvparticular facts allegedl% constituting such fraud or mistae

against these standards, charges of fraud against scar wproperl% supported % the reFuired factual allegations. *complaint contained allegations of fraud purportedl% commhim, these allegations are not particular enough to rcontrovers% within the special commercial court(s urisdictioare not statements of ultimate facts, ut are mere concluslaw9 how and wh% the alleged appropriation of shares characteriDed as 6illegal and fraudulent7 were not e+plainelaorated on. The case must e dismissed.&@' o. The allegations of the present complaint do not ama derivative suit. <irst , as alread% discussed aove, Rodrigo shareholder with respect to the shareholdings originall% eto AnastaciaL he onl% stands as a transferee0heir whose rithe share are inchoate and unrecorded. Second , in orderstocholder ma% show a right to sue on ehalf of the corpohe must allege with some particularit% in his complaint thate+hausted his remedies ithin the corporation % ma

sufficient demand upon the directors or other officappropriate relief with the e+pressed intent to sue if rdenied. *astly , Court found no inur%, actual or threatened, to have een done to the corporation due to scar(s acts. Ifhe illegall% and fraudulentl% transferred Anastacia(s shareown name, then the damage is not to the corporation ut toheirsL the wrongful transfer did not affect the capital stocassets of Uenith.



In summar%, whether as an individual or as a derivative suit, theRTC sitting as special commercial court has no urisdiction tohear Rodrigo(s complaint since what is involved is the determinationand distriution of successional rights to the shareholdings of Anastacia Re%es. Rodrigo(s proper remed%, under thecircumstances, is to institute a special proceeding for thesettlement of the estate of the deceased Anastacia Re%es, a movethat is not foreclosed % the dismissal of his present complaint.;RION, J.:This !etition for Review on 'ertiorari under Rule 45 of the Rules of Court sees to set aside the ;ecision of the Court of Appeals &CA'

promulgated on 2a% @/, @$$4 in CA0.R. S! o. #43#$. The CA;ecision affirmed the rder of the Regional Trial Court &RT' ',

=ranch 4@, 2aati Cit% dated ovemer @3, @$$@@

in Civil Caseo. $$055" &entitled JAccounting of All Corporate Hunds andAssets, and ;amagesJ' which denied petitioner scar C. Re%es( &scar' 2otion to ;eclare Complaint as uisance or 1arassmentSuit.=ACNR8; HACTSOs("r "n# &riv"te res&on#ent Ro#ri*o C. Re-es &Rodrio' aretwo of the four children of the spouses Pe#ro "n# An"st"(i"Re-es. !edro, Anastacia, scar, and Rodrigo each owned shares of stoc of enit Insur"n(e Cor&or"tion 4enit', a domesticcorporation estalished % their famil%. !edro died in 3/4, whileAnastacia died in 33". Although !edro(s estate was udiciall%partitioned among his heirs sometime in the 3#$s, no similarsettlement and partition appear to have een made withAnastacia(s estate, which included her shareholdings in Uenith. Asof une "$, 33$, Anastacia owned "/,53M shares of UenithLscar and Rodrigo owned M,#5,/"# and 4,@5$ shares,

respectivel%."

n 2a% 3, @$$$, enit "n# Ro#ri*o ie# " (o)&"int /itte Se(urities "n# E+("n*e Co))ission 4SEC5 "*"instOs("r, doceted as SEC Case o. $50$$0//5. The complaint stated that it is Ca derivative suit initiated and filed by thecomplainant Rodrio '. Reyes to obtain an accountin of the fundsand assets of D@5+TE +5SFR15'@ 'GR8GR1T+G5 hich are no or formerly in the control, custody, andHor possession of respondent [herein petitioner Gscar] and to determine the shares of stock of deceased spouses 8edro and 1nastacia Reyes that ere arbitrarily and fraudulently appropriated [by Gscar] for himself [and] hichere not collated and taken into account in the partition,distribution, andHor settlement of the estate of the deceased spouses, for hich he should be ordered to account for all theincome from the time he took these shares of stock, and should no deliver to his brothers and sisters their )ust and respectiveshares.J5 >Emphasis supplied.?

In is Ans/er /it Counter("i),B Os("r #enie# te ("r*et"t e ie*"- "(uire# te s"res o An"st"(i" Re-es. 'e"sserte#, "s " #eense, t"t e &ur("se# te su3e(t s"res/it is o/n un#s ro) te unissue# sto(<s o enit, "n#t"t te suit is not " bona fide #eriv"tive suit e("use tereuisites tereor "ve not een (o)&ie# /it. 1e thusFuestioned the SEC(s urisdiction to entertain the complaintecause it pertains to the settlement of the estate of Anastacia

Re%es.*hen Repulic Act &R.1.' o. M#33# too effect, the SEC(s e+clusiveand original urisdiction over cases enumerated in Section 5 of !residential ;ecree &8..' o. 3$@0A was transferred to the RTCdesignated as a special commercial court.M The records of Rodrigo(sSEC case were thus turned over to the RTC, =ranch 4@, 2aati,and doceted as Civil Case o. $$055".n ctoer @@, @$$@, Os("r ie# " @otion to $e("reCo)&"int "s Nuis"n(e or '"r"ss)ent Suit. 3 1e claimed thatthe complaint is a mere nuisance or harassment suit and should,according to the Interim Rules of !rocedure for Intra0CorporateControversies, e dismissedL and t"t it is not " bona fide#eriv"tive suit "s it &"rt"<es o te n"ture o " &etition or

te sette)ent o est"te o te #e(e"se# An"st"(i" t"t isoutsi#e te 3uris#i(tion o " s&e(i" (o))er(i" (ourt. TheRTC, in its rder dated ovemer @3, @$$@ &RT' Grder ', #enie#te )otion in &"rt "n# #e("re#:A close reading of the Complaint disclosed the presence of two &@'causes of action, namel%9 a' a derivative suit for accounting of thefunds and assets of the corporation which are in the control,custod%, andKor possession of the respondent >herein petitionerscar? with pra%er to appoint a management committeeL and ' anaction for determination of the shares of stoc of deceased spouses!edro and Anastacia Re%es allegedl% taen % respondent, itsaccounting and the corresponding deliver% of these shares to theparties( rothers and sisters. The latter is not a derivative suit andshould properl% e threshed out in a petition for settlement of estate.A((or#in*-, te )otion is #enie#. 'o/ever, onte#eriv"tive suit (onsistin* o te irst ("use o "(tion /i e

t"<en (o*ni"n(e o - tis Court.10

scar thereupon went to the CA on a petition for certiorari ,prohiition, and mandamus and pra%ed that the RTC rder eannulled and set aside and that the trial court e prohiited fromcontinuing with the proceedings. Te "&&e"te (ourt "ir)e#te RTC Or#er "n# #enie# te &etition in its $e(ision #"te#@"- 2B, 200. It i<e/ise #enie# Os("rHs )otion orre(onsi#er"tion in " Resoution #"te# O(toer 21, 200.!etitioner now comes efore us on appeal through a petition forreview on certiorari under Rule 45 of the Rules of Court.ASSI2ET H ERRRS!etitioner scar presents the following points as conclusions the CAshould have made91. t"t te (o)&"int is " )ere nuis"n(e or "r"ss)ent suitt"t sou# e #is)isse# un#er te Interi) Rues o Pro(e#ure o Intr"=Cor&or"te Controversies "n#2. t"t te (o)&"int is not " bona fide #eriv"tive suit ut is

in "(t in te n"ture o " &etition or sette)ent o est"teen(e, it is outsi#e te 3uris#i(tion o te RTC "(tin* "s "s&e(i" (o))er(i" (ourt.Accordingl%, he pra%s for the setting aside and annulment of the CAdecision and resolution, and the dismissal of Rodrigo(s complaintefore the RTC.T1E C8RT(S R8)I%e in# te &etition )eritorious.

The core Fuestion for our determination is whether the triasitting as a special commercial court, has urisdiction osuect matter of Rodrigo(s complaint. To resolve it, we rel%

udicial principle that Jurisdiction over the suect matter ofis conferred % law and is determined % the allegationscomplaint, irrespective of whether the plaintiff is entitled tsome of the claims asserted therein.J@

8RIS;ICTI H S!ECIA) C22ERCIA) C8RTS!.;. o. 3$@0A enumerates the cases over which the SEC &nRTC acting as a special commercial court' e+ercises e

urisdiction9SECTI 5. In addition to the regulator% and adudicative fuof the Securities and E+change Commission over corpo

partnership, and other forms of associations registered wie+pressl% granted under e+isting laws and decrees, it shaoriginal and e+clusive urisdiction to hear and decideinvolving9a' ;evices or schemes emplo%ed % or an% acts of the directors, usiness associates, its officers or partners, amoufraud and misrepresentation which ma% e detrimental interest of the pulic andKor of the stocholders, pmemers of associations or organiDations registered wCommission.' Controversies arising out of intra0corporate or parrelations, etween and among stocholders, memeassociatesL etween an% or all of them and the corppartnership or association of which the% are stocmemers, or associates, respectivel%L and etweencorporation, partnership or association and the State insofconcerns their individual franchise or right to e+ist as such

andc' Controversies in the election or appointment of ditrustees, officers, or managers of such corporations, partneor associations.The allegations set forth in Rodrigo(s complaint principall%Section 5, paragraphs &a' and &' aove as asis for the e+ethe RTC(s special court urisdiction. ur focus in e+aminallegations of the complaint shall therefore e on theprovisions.<raudulent evices and SchemesThe rule is that a complaint must contain a plain, concidirect statement of the ultimate facts constituting the pcause of action and must specif% the relief sought." SectionM of the Revised Rules of Court provides that in all avermfraud or mistae, the circumstances constituting fraud or must e stated with particularit%.4 These rules find application to Section 5&a' of !.;. o. 3$@0A which sp

corporate devices or schemes that amount to framisrepresentation detrimental to the pulic andKor stocholders.In an attempt to hold scar responsile for corporateRodrigo alleged in the complaint the following9". This is a complaintQto determine the shares of stocdeceased spouses !edro and Anastacia Re%es that were arand fraudulentl% appropriated for himself >herein petitioner



which were not collated and taen into account in the partition,distriution, andKor settlement of the estate of the deceasedSpouses !edro and Anastacia Re%es, for which he should eordered to account for all the income from the time he too theseshares of stoc, and should now deliver to his rothers and sisterstheir ust and respective shares with the corresponding eFuivalentamount of !#,$33,3"4.M@ plus interest thereon from 3#Mrepresenting his oligations to the Associated CitiDens( =an thatwas paid for his account % his late mother, Anastacia C. Re%es.This amount was not collated or taen into account in the partitionor distriution of the estate of their late mother, Anastacia C.Re%es.".. Respondent scar C. Re%es, through other schemes of fraud

including misrepresentation, unilaterall%, and for his own enefit,capriciousl% transferred and too possession and control of themanagement of Uenith Insurance Corporation which is consideredas a famil% corporation, and other properties and usinesseselonging to Spouses !edro and Anastacia Re%es.+ + + +4.. ;uring the increase of capitaliDation of Uenith InsuranceCorporation, sometime in 3/M, the propert% covered % TCT o.@@5"@4 was illegall% and fraudulentl% used % respondent as acollateral.+ + + +. Te (o)&"in"nt Ro#ri*o C. Re-es #is(overe# t"t -so)e )"ni&u"tive s(e)e, te s"reo#in*s o teir#e(e"se# )oter, $oQ" An"st"(i" C. Re-es, s"res o sto(<s"n# >si(? v"ue# in te (or&or"te oo<s "t P7,B99,9D.28,)ore or ess, e+(u#in* interest "n#or #ivi#en#s, "# eentr"nserre# soe- in te n")e o res&on#ent. ;- su(

r"u#uent )"ni&u"tions "n# misrepresentation, theshareholdings of said respondent Os("r C. Re-es "ru&t-in(re"se# to P8,71,BD7.00 >si(? "n# e(o)es >si(? te)"3orit- sto(<o#er o enit Insur"n(e Cor&or"tion, whichportion of said shares must e distriuted eFuall% amongst therothers and sisters of the respondent scar C. Re%es including thecomplainant herein.+ + + +3. The shareholdings of deceased Spouses !edro Re%es andAnastacia C. Re%es valued at !#,$33,3"4.@M were illegall% andfraudulentl% transferred solel% to the respondent(s >hereinpetitioner scar? name and installed himself as a maorit%stocholder of Uenith Insurance Corporation >and? there% deprivedhis rothers and sisters of their respective eFual shares thereof including complainant hereto.+ + + +$. =% refusal of the respondent to account of his >sic?

shareholdings in the compan%, he illegall% and fraudulentl%transferred solel% in his name wherein >sic? the shares of stoc of the deceased Anastacia C. Re%es >which? must e properl% collatedandKor distriuted eFuall% amongst the children, including thecomplainant Rodrigo C. Re%es herein, to their damage andpreudice.+ + + +. =% continuous refusal of the respondent to account of his >sic?

shareholding with Uenith Insurance Corporation>,? particularl% thenumer of shares of stocs illegall% and fraudulentl% transferred tohim from their deceased parents Sps. !edro and Anastacia Re%es>,?which are all suect for collation andKor partition in eFual sharesamong their children. >Emphasis supplied.?Ae*"tions o #e(eit, )"(in"tion, "se &retenses,)isre&resent"tion, "n# tre"ts "re "r*e- (on(usions o "/ t"t, /itout su&&ortin* st"te)ents o te "(ts to/i( te "e*"tions o r"u# reer, #o not sui(ient- st"te"n ee(tive ("use o "(tion.1 Te "te Justi(e Jose 6eri", "note# "utorit- in Re)e#i" "/, #e("re# t"t r"u# "n#)ist"<e "re reuire# to e "verre# /it &"rti(u"rit- inor#er to en"e te o&&osin* &"rt- to (ontrovert te

&"rti(u"r "(ts "e*e#- (onstitutin* su( r"u# or)ist"<e.1B

Tested against these standards, we find that the charges of fraudagainst scar were not properl% supported % the reFuired factualallegations. *hile the complaint contained allegations of fraudpurportedl% committed % him, these allegations are not particularenough to ring the controvers% within the special commercialcourt(s urisdictionL the% are not statements of ultimate facts, utare mere conclusions of law9 how and wh% the allegedappropriation of shares can e characteriDed as Jillegal andfraudulentJ were not e+plained nor elaorated on.Not ever- "e*"tion o r"u# #one in " (or&or"te settin* or&er&etr"te# - (or&or"te oi(ers /i rin* te ("se /itinte s&e(i" (o))er(i" (ourtHs 3uris#i(tion. To " /itintis 3uris#i(tion, tere )ust e sui(ient ne+us so/in*t"t te (or&or"tionHs n"ture, stru(ture, or &o/ers /ereuse# to "(iit"te te r"u#uent #evi(e or s(e)e. Contrar%

to this concept, the complaint presented a reverse situation. ocorporate power or office was alleged to have facilitated thetransfer of the sharesL rather, scar, as an individual and withoutreference to his corporate personalit%, was alleged to havetransferred the shares of Anastacia to his name, allowing him toecome the maorit% and controlling stocholder of Uenith, andeventuall%, the corporation(s !resident. This is the essence of thecomplaint read as a whole and is particularl% demonstrated underthe following allegations95. The complainant Rodrigo C. Re%es discovered that % somemanipulative scheme, the shareholdings of their deceased mother,;oVa Anastacia C. Re%es, shares of stocs and >sic? valued in thecorporate oos at !#,/33,3"4.@M, more or less, e+cluding interestandKor dividends, had een transferred solel% in the name of respondent. =% such f raudu lent manipulat ions andmisrepresentation, the shareholdings of said respondent scar C.Re%es aruptl% increased to !M,#5,/"#.$$ >sic? and ecomes >sic?

the maorit% stocholder of Uenith Insurance Corporation, whichportion of said shares must e distriuted eFuall% amongst therothers and sisters of the respondent scar C. Re%es including thecomplainant herein.+ + + +3. The shareholdings of deceased Spouses !edro Re%es andAnastacia C. Re%es valued at !#,$33,3"4.@M were illegall% andfraudulentl% transferred solel% to the respondent(s >herein

petitioner scar? name and installed himself as a mstocholder of Uenith Insurance Corporation >and? there% dhis rothers and sisters of their respective eFual shares including complainant hereto. >Emphasis supplied.?In or#in"r- ("ses, te "iure to s&e(ii("- "e*r"u#uent "(ts #oes not (onstitute " *roun# or #issin(e su( #ee(t ("n e (ure# - " i o &"rti(u("ses *overne# - te Interi) Rues o Pro(e#ure onCor&or"te Controversies, o/ever, " i o &"rti(u"&roiite# &e"#in*.# It is essential, therefore, for the coto show on its face what are claimed to e the fraudulent coacts if the complainant wishes to invoe the court(s commercial urisdiction.

*e note that twice in the course of this case, Rodrigo hagiven the opportunit% to stud% the propriet% of amenwithdrawing the complaint, ut he consistentl% refused. Thefunction in resolving issues of urisdiction is limited to the rethe allegations of the complaint and, on the asis oallegations, to the determination of whether the% are onature and suect that the% fall within the terms of tdefining the court(s urisdiction. Regretfull%, we cannot read complaint an% specificall% alleged corporate fraud that will the e+ercise of the court(s special commercial urisdiction. Tcannot affirm the RTC(s assumption of urisdiction over Rocomplaint on the asis of Section 5&a' of !.;. o. [email protected]

+ntra2'orporate 'ontroversy A review of relevant urisprudence shows a developmentCourt(s approach in classif%ing what constitutes an intra0cocontrovers%. Initiall%, the main consideration in detewhether a dispute constitutes an intra0corporate controve

limited to a consideration of the intra0corporate relae+isting etween or among the parties.3 The t%pes of relatemraced under Section 5&', as declared in the case olass I 'ontainer 'orp. v. S@' ,@$ were as follows9a' etween the corporation, partnership, or association apulicL' etween the corporation, partnership, or association stocholders, partners, memers, or officersLc' etween the corporation, partnership, or association aState as far as its franchise, permit or license to opeconcernedL andd' among the stocholders, partners, or associates them>Emphasis supplied.?The e+istence of an% of the aove intra0corporate relatiosufficient to confer urisdiction to the SEC, regardless of the matter of the dispute. Tis (")e to e <no/n "re"tionsi& test.

1owever, in the 3M4 case of &R' @nterprises v. @sta &ountain Reserve, +nc .,@ te Court intro#u(e# te n"te (ontrovers- test. *e declared in this case that it is n)ere e+isten(e o "n intr"=(or&or"te re"tionsi& t"rise to "n intr"=(or&or"te (ontrovers- to re- ore"tionsi& test "one /i #ivest te re*u"r (ourts o 3uris#i(tion or te soe re"son t"t te #is&ute invo(or&or"tion, its #ire(tors, oi(ers, or sto(<o#ers. %



t"t tere is no e*" sense in #isre*"r#in* or )ini)iin*te v"ue o te n"ture o te tr"ns"(tions /i( *ives riseto te #is&ute.Un#er te n"ture o te (ontrovers- test, te incidents o t"t re"tionsi& )ust "so e (onsi#ere# or te &ur&ose of ascertaining whether the controvers% itself is intra0corporate.@@ Te(ontrovers- )ust not on- e roote# in te e+isten(e o "nintr"=(or&or"te re"tionsi&, ut )ust "s /e &ert"in to teenor(e)ent o te &"rtiesH (orre"tive ri*ts "n#oi*"tions un#er te Cor&or"tion Co#e "n# te intern" "n#intr"=(or&or"te re*u"tor- rues o te (or&or"tion. I tere"tionsi& "n# its in(i#ents "re )erein(i#ent" to te(ontrovers- or i tere /i sti e (oni(t even i te

re"tionsi& #oes not e+ist, ten no intr"=(or&or"te(ontrovers- e+ists.The Court then comined the two tests and declared that

urisdiction should e determined % considering not onl% the statusor relationship of the parties, ut also the nature of the Fuestionunder controvers%.@" This two0tier test was adopted in the recentcase of Speed istribution, +nc. v. 'ourt of 1ppeals9@4

To #eter)ine /eter " ("se invoves "n intr"=(or&or"te(ontrovers-, "n# is to e e"r# "n# #e(i#e# - te r"n(eso te RTC s&e(ii("- #esi*n"te# - te Court to tr- "n##e(i#e su( ("ses, t/o ee)ents )ust (on(ur: 4"5 te st"tusor re"tionsi& o te &"rties "n# 425 te n"ture o teuestion t"t is te su3e(t o teir (ontrovers-.The first element reFuires that the controvers% must arise out of intra0corporate or partnership relations etween an% or all of theparties and the corporation, partnership, or association of whichthe% are stocholders, memers or associatesL etween an% or all

of them and the corporation, partnership, or association of whichthe% are stocholders, memers, or associates, respectivel%L andetween such corporation, partnership, or association and the Stateinsofar as it concerns their individual franchises. The secondelement reFuires that the dispute among the parties e intrinsicall%connected with the regulation of the corporation. If the nature of the controvers% involves matters that are purel% civil in character,necessaril%, the case does not involve an intra0corporatecontrovers%.iven these standards, we now tacle the Fuestion posed for ourdetermination under the specific circumstances of this case9

1pplication of the Relationship Test Is there an intra0corporate relationship etween the parties thatwould characteriDe the case as an intra0corporate dispute:*e point out at the outset that while Rodrigo holds shares of stocin Uenith, he holds them in two capacities9 in his own right withrespect to the 4,@5$ shares registered in his name, and as one of

the heirs of Anastacia Re%es with respect to the "/,53M sharesregistered in her name. %"t is )"teri" in resovin* teissues o tis ("se un#er te "e*"tions o te (o)&"int isRo#ri*oHs interest as an heir sin(e te su3e(t )"tter o te&resent (ontrovers- (enters on te s"res o sto(<seon*in* to An"st"(i", not on Ro#ri*oHs &erson"-=o/ne#s"res nor on is &erson"it- "s s"reo#er o/nin* teses"res. In this light, all reference to shares of stocs in this case

shall pertain to the shareholdings of the deceased Anastacia andthe parties( interest therein as her heirs.Article ### of the Civil Code declares that the successional rightsare transmitted from the moment of death of the decedent.Accordingl%, u&on An"st"(i"Hs #e"t, er (i#ren "(uire#e*" tite to er est"te 4/i( tite in(u#es ers"reo#in*s in enit5, "n# te- "re, &rior to te est"teHs&"rtition, #ee)e# (o=o/ners tereo.2 Tis st"tus "s (o=o/ners, o/ever, #oes not i))e#i"te- "n# ne(ess"ri-)"<e te) sto(<o#ers o te (or&or"tion. Uness "n# untitere is (o)&i"n(e /it Se(tion BD o te Cor&or"tion Co#eon te )"nner o tr"nserrin* s"res, te eirs #o note(o)e re*istere# sto(<o#ers o te (or&or"tion. Se(tion

BD &rovi#es:Section /". 'ertificate of stock and transfer of shares . The capitalstoc of stoc corporations shall e divided into shares for whichcertificates signed % the president or vice0president,countersigned % the secretar% or assistant secretar%, and sealedwith the seal of the corporation shall e issued in accordance withthe %0laws. S"res o sto(< so issue# "re &erson" &ro&ert-"n# )"- e tr"nserre# - #eiver- o te (ertii("te or(ertii("tes in#orse# - te o/ner or is "ttorne-=in="(t oroter &erson e*"- "utorie# to )"<e te tr"nser. otransfer, however, shall e valid, e+cept as etween the &"rties,unti te tr"nser is re(or#e# in te oo<s o te (or&or"tionso "s to so/ te n")es o te &"rties to te tr"ns"(tion,te #"te o te tr"nser, te nu)er o te (ertii("te or(ertii("tes, "n# te nu)er o s"res tr"nserre#. >Emphasissupplied.?o shares of stoc against which the corporation holds an% unpaid

claim shall e transferale in the oos of the corporation.Si)&- st"te#, te tr"nser o tite - )e"ns o su((ession,tou* ee(tive "n# v"i# et/een te &"rties invove#4i.e., et/een te #e(e#entHs est"te "n# er eirs5, #oes notin# te (or&or"tion "n# tir# &"rties. Te tr"nser )ust ere*istere# in te oo<s o te (or&or"tion to )"<e tetr"nseree=eir " sto(<o#er entite# to re(o*nition "s su(ot - te (or&or"tion "n# - tir# &"rties.2B *e note, in relation with the aove statement, that in 1be)o v.ela 'ru% @# and T'* Sales 'orporation v. 'ourt of 1ppeals@M we didnot reFuire the registration of the transfer efore considering thetransferee a stocholder of the corporation &in effect upholding thee+istence of an intra0corporate relation etween the parties andringing the case within the urisdiction of the SEC as an intra0corporate controvers%'. A mared difference, however, e+istsetween these cases and the present one.In Aeo and TC) Sales, the transferees held definite and

uncontested titles to a specific numer of shares of the corporationLafter the transferee had estalished prima facie ownership over theshares of stocs in Fuestion, registration ecame a mere formalit%in confirming their status as stocholders. In te &resent ("se,e"( o An"st"(i"Hs eirs o#s on- "n un#ivi#e# interest inte s"res. Tis interest, "t tis &oint, is sti in(o"te "n#su3e(t to te out(o)e o " sette)ent &ro(ee#in* te ri*to te eirs to s&e(ii(, #istriutive s"res o inerit"n(e /i

not e #eter)ine# unti " te #ets o te est"te #e(e#ent "re &"i#. In sort, te eirs "re on- entit/"t re)"ins "ter &"-)ent o te #e(e#entHs #/eter tere /i e resi#ue re)"ins to e seen. JJur"#o "&t- &uts it "s oo/s9o succession shall e declared unless and until a liFuidatioassets and dets left % the decedent shall have een made his creditors are full% paid. 8ntil a final liFuidation is madethe dets are paid, the right of the heirs to inherit rinchoate. This is so ecause under our rules of proliFuidation is necessar% in order to determine whether or decedent has left an% liFuid assets which ma% e transmitteheirs."$ >Emphasis supplied.?

Ro#ri*o )ust, tereore, ur#e t/o ost"(es eore e (onsi#ere# " sto(<o#er o enit /it res&e(t s"reo#in*s ori*in"- eon*in* to An"st"(i". )i)ust &rove t"t tere "re s"reo#in*s t"t /i e i) "n# is (o=eirs, "n# tis ("n e #eter)ine# onsette)ent o te #e(e#entHs est"te. No su( &ro(ee#ieen (o))en(e# to #"te. #econd , e )ust re*isttr"nser o te s"res "otte# to i) to )"<e it "*"inst te (or&or"tion. 'e ("nnot #e)"n# t"t tis uness "n# unti e "s est"ise# is s&e(ii( "o4"n# prima facie o/nersi&5 o te s"res. *itho settlement of +nastacia%s estate, there can be no d partition and distribution of the estate to the heirs. *the partition and distribution, there can be no re$istrathe transfer. +nd without the re$istration, we consider the transfereeheir a stockholder who may the eistence of an intracorporate relationship as p

for an intracorporate controversy within the jurisdica special commercial court.In sum, we find that insofar as the suect shares of stoAnastacia(s shares' are concerned Ro#ri*o ("nn(onsi#ere# " sto(<o#er o enit. Conseuent-, /e #e("re t"t "n intr"=(or&or"te re"tionsi& e+ist/ou# serve "s "sis to rin* tis ("se /itin te s(o))er(i" (ourtHs 3uris#i(tion un#er Se(tion 45902=A, "s ")en#e#. Ro#ri*oHs (o)&"int, tereore, "re"tionsi& test.

1pplication of the 5ature of 'ontroversy Test The od% rather than the title of the complaint determinature of an action." Our e+")in"tion o te (o)&"intte (on(usion t"t, )ore t"n "n-tin* ese, te (o)is about the protection and enforcement of succesri$hts. Te (ontrovers- it &resents is &ure- (ivi r"te(or&or"te, "tou* it is #eno)in"te# "s " (o)&"

"((ountin* o " (or&or"te un#s "n# "ssets.Contrar% to the findings of oth the trial and appellate couread onl% one cause of action alleged in the complaiJderivative suit for accounting of the funds and assetscorporation which are in the control, custod%, andKor possethe respondent >herein petitioner scar?J does not consseparate cause of action ut is, as correctl% claimed % scaan incident to the Jaction for determination of the shares o



of deceased spouses !edro and Anastacia Re%es allegedl% taen %respondent, its accounting and the corresponding deliver% of theseshares to the parties( rothers and sisters.J There can e nomistae of the relationship etween the JaccountingJ mentioned inthe complaint and the oective of partition and distriution whenRodrigo claimed in paragraph $. of the complaint that9$. =% refusal of the respondent to account of >sic? hisshareholdings in the compan%, he illegall% and fraudulentl%transferred solel% in his name wherein >sic? the shares of stoc of the deceased Anastacia C. Re%es >which? must e properl% collatedandKor distriuted eFuall% amongst the children including thecomplainant Rodrigo C. Re%es herein to their damage andpreudice.

%e &"rti(u"r- note t"t te (o)&"int (ont"ine# nosui(ient "e*"tion t"t 3ustiie# te nee# or "n "((ountin*other than to #eter)ine te e+tent o An"st"(i"Hss"reo#in*s or &ur&oses o #istriution.Another significant indicator that points us to the real nature of thecomplaint are Rodrigo(s repeated claims of ille$al and fraudulent transfers of +nastacia%s shares by -scar to the prejudice of the other heirs of the decedent! he cited these alle$edly fraudulent acts as basis for his demand for the collation and distribution of +nastacia%s shares to the heirs. 'hese claimstell us uneuivocally that the present controversy arosefrom the parties% relationship as heirs of +nastacia and not as shareholders of /enith. Ro#ri*o, in iin* te (o)&"int, isenor(in* is ri*ts "s " (o=eir "n# not "s " sto(<o#er o enit. The inur% he sees to remed% is one suffered % an heir&for the impairment of his successional rights' and not % thecorporation nor % Rodrigo as a shareholder on record.

@ore t"n te )"tters o in3ur- "n# re#ress, /"t Ro#ri*o(e"r- "i)s to "((o)&is trou* is "e*"tions o ie*""(uisition - Os("r is te #istriution o An"st"(i"Hss"reo#in*s /itout " &rior sette)ent o er est"te L "no3e(tive t"t, - "/ "n# est"ise# 3uris&ru#en(e, ("nnote #one. Te RTC o @"<"ti, "(tin* "s " s&e(i" (o))er(i"(ourt, "s no 3uris#i(tion to sette, &"rtition, "n# #istriutete est"te o " #e(e"se#. A relevant provision Section @ of Rule 3$ of the Revised Rules of Court that contemplatesproperties of the decedent held % one of the heirs declares9Kuestions "s to "#v"n(e)ent )"#e or "e*e# to "ve een)"#e - te #e(e"se# to "n- eir )"- e e"r# "n##eter)ine# - te court havin$ jurisdiction of the estate proceedin$s "n# te in" or#er o te (ourt tereon s"e in#in* on te &erson r"isin* te uestions "n# on teeir. >E)&"sis su&&ie#.?*orth noting are this Court(s statements in the case of 5atcher v.

'ourt of 1ppeals"@

2atters which involve settlement and distriution of the estate of the decedent fall within the e+clusive province of the proate courtin the e+ercise of its limited urisdiction.+ + + +It is clear that trial courts tr%ing an ordinar% action cannot resolveto perform acts pertaining to a special proceeding ecause it issuect to specific prescried rules. >Emphasis supplied.?

That an accounting of the funds and assets of Uenith to determinethe e+tent and value of Anastacia(s shareholdings will eundertaen % a proate court and not % a special commercialcourt is completel% consistent with the proate court(s limited

urisdiction. It has the power to enforce an accounting as anecessar% means to its authorit% to determine the propertiesincluded in the inventor% of the estate to e administered, dividedup, and distriuted. =e%ond this, the determination of title orownership over the suect shares &whether elonging to Anastaciaor scar' ma% e conclusivel% settled % the proate court as aFuestion of collation or advancement. *e had occasion to recogniDethe court(s authorit% to act on Fuestions of title or ownership in acollation or advancement situation in 'oca v. 8anilinan"" where we

ruled9It should e clarified that whether a particular matter should eresolved % the Court of Hirst Instance in the e+ercise of its general

urisdiction or of its limited proate urisdiction is in realit% not a urisdictional Fuestion. In essence, it is a procedural Fuestioninvolving a mode of practice Jwhich ma% e waived.JAs " *ener" rue, te uestion "s to tite to &ro&ert- sou#not e &"sse# u&on in te test"te or intest"te &ro(ee#in*.T"t uestion sou# e venti"te# in " se&"r"te "(tion. T"t*ener" rue "s u"ii("tions or e+(e&tions 3ustiie# -e+&e#ien(- "n# (onvenien(e.Tus, te &ro"te (ourt )"- &rovision"- &"ss u&on in "nintest"te or test"te &ro(ee#in* te uestion o in(usion in,or e+(usion ro), te inventor- o " &ie(e o &ro&ert-/itout &re3u#i(e to its in" #eter)in"tion in " se&"r"te"(tion.Although generall%, a proate court ma% not decide a Fuestion of

title or ownership, %et if the interested parties are all heirs, or theFuestion is one of collation or advancement, or the parties consentto the assumption of urisdiction % the proate court and therights of third parties are not impaired, the proate court iscompetent to decide the Fuestion of ownership. >Citations omitted.Emphasis supplied.?In sum, we hold that the nature of the present controvers% is notone which ma% e classified as an intra0corporate dispute and ise%ond the urisdiction of the special commercial court to resolve.In short, Rodrigo(s complaint also fails the nature of thecontrovers% test.$ERIATIE SUITRo#ri*oHs "re ("i) t"t te (o)&"int is " #eriv"tive suit/i not sui(e to (oner 3uris#i(tion on te RTC 4"s " s&e(i"(o))er(i" (ourt5 i e ("nnot (o)&- /it te reuisitesor te e+isten(e o " #eriv"tive suit. Tese reuisites "re:". te &"rt- rin*in* suit sou# e " s"reo#er #urin* te

ti)e o te "(t or tr"ns"(tion (o)&"ine# o, te nu)er o s"res not ein* )"teri". te &"rt- "s trie# to e+"ust intr"=(or&or"te re)e#ies,i.e., "s )"#e " #e)"n# on te o"r# o #ire(tors or te"&&ro&ri"te reie, ut te "tter "s "ie# or reuse# toee# is &e" "n#(. te ("use o "(tion "(tu"- #evoves on te (or&or"tionte /ron*#oin* or "r) "vin* een or ein* ("use# to te

(or&or"tion "n# not to te &"rti(u"r sto(<o#er rte suit.D

;"se# on tese st"n#"r#s, /e o# t"t te "e*"tite &resent (o)&"int #o not ")ount to " #eriv"tive s)irst , as already discussed above, 0odri$o is shareholder with respect to the shareholdin$s oribelon$in$ to +nastacia! he only stands as a transferewhose ri$hts to the share are inchoate and unrec*ith respect to his own individuallyheld shareho0odri$o has not alle$ed any individual cause or bas shareholder on record to proceed a$ainst -scar.#econd , in order that a stockholder may show a ri$ht on behalf of the corporation, he must alle$e with

particularity in his complaint that he has ehaustremedies within the corporation by makin$ a sudemand upon the directors or other officers for approrelief with the epressed intent to sue if relief is de2ara$raph 3 of the complaint hardly satisfiesreuirement since what the rule contemplates ehaustion of remedies within the corporate settin$:3. +s members of the same family, complainant 0od0eyes has resorted 4to5 and ehausted all le$al meresolvin$ the dispute with the end view of amicably sethe case, but the dispute between them ensued.6astly , we find no injury, actual or threatened, allehave been done to the corporation due to -scar%s aindeed he ille$ally and fraudulently transferred +nas shares in his own name, then the dama$e is not corporation but to his coheirs! the wron$ful transfer daffect the capital stock or the assets of /enith. +s a

mentioned, neither has 0odri$o alle$ed any particularor wron$doin$ a$ainst the corporation that he can chain his capacity as a shareholder on record.&7 In summar%, whether as an individual or as a derivative sRTC sitting as special commercial court has no urisdihear Rodrigo(s complaint since what is involved is the determand distriution of successional rights to the shareholdAnastacia Re%es. Rodrigo(s proper remed%, undecircumstances, is to institute a special proceeding fsettlement of the estate of the deceased Anastacia Re%es, that is not foreclosed % the dismissal of his present compla*1EREHRE, we here% RAT the petition and REBERdecision of the Court of Appeals dated 2a% @/, @$$4 in CA0o. #43#$. The complaint efore the Regional Trial Court, 4@, 2aati, doceted as Civil Case o. $$055", is ;IS2ISSE; for lac of urisdiction.S R;ERE;.and eFuipment, namel%, his agreement

deduction of their value from his capital contriution due himu%0out of his interests in )II. <amamoto(s allegation agreed to the condition"5 remained ust that, no proof having een presented.The machineries and eFuipment, which comprised <aminvestment in )II,"/ thus remained part of the capital propthe corporation."#

It is settled that the propert% of a corporation is not the prop



its stocholders or memers."M 8nder the trust fund doctrine, thecapital stoc, propert%, and other assets of a corporation areregarded as eFuit% in trust for the pa%ment of corporate creditorswhich are preferred over the stocholders in the distriution of corporate assets."3 The distriution of corporate assets andpropert% cannot e made to depend on the whims and caprices of the stocholders, officers, or directors of the corporation unless theindispensale conditions and procedures for the protection of corporate creditors are followed.4$

*1EREHRE, the petition is ;EIE;.Costs against petitioner.S R;ERE;.

SECON$ $IISIONG.R. No. 1B88BD June 2D, 2009'I=!IE$ REAT!, INCORPORATE$, Petitioner,vs.'ON. COURT O6 APPEAS, 'ON. CESAR O. UNTin is ("&"(it- "s PRESI$ING JU$GE O6 RTC=@A;RANC' 12, 'ONORIO TORRES SONS, INCRO;ERTO '. TORRES, Res&on#ents.; E C I S I P8IS82=I, $.This is a special civil action for certiorari seeing to nullif% aaside the ;ecision dated 2arch $, @$$5 and Resolution



2a% @/, @$$5 of the Court of Appeals in CA0.R. S!. o. M"33.The appellate court had dismissed the petition for certiorari andprohiition filed % petitioner and denied its reconsideration.The antecedent facts of the case are undisputed.

n ul% ", @$$", Roerto '. Torres 4Roerto5, for and onehalf of 'onorio Torres Sons, In(. 4'TSI5, filed a Petitionor Annu)ent o Re" Est"te @ort*"*e "n# 6ore(osureS"eD over two parcels of land located in 2ariina and PueDon Cit%.The suit was filed against eonor", @". Teres", Genn "n#Ste&"nie, " surn")e# Torres, te Re*ister o $ee#s o @"ri<in" "n# Kueon Cit-, "n# &etitioner 'i=!ie# Re"t-,In(. &1i0<ield'. It was doceted as Civil Case o. $"0M3@ with

=ranch 4M of the Regional Trial Court &RTC' of 2aati Cit%.n Septemer 5, @$$", petitioner moved to dismiss the petitionon grounds of improper venue and pa%ment of insufficient docetfees. The RTC denied said motion in an rder 4 dated anuar% @@,@$$4. The trial court held that the case was, in nature, a real actionin the or) o " #eriv"tive suit (o*ni"e - " s&e(i"(o))er(i" (ourt &ursu"nt to A#)inistr"tive @"tter No. 00=11=0D=SC. Petitioner sou*t re(onsi#er"tion, ut its )otion/"s #enie# in "n Or#erB #"te# A&ri 27, 200.

Thereafter, petitioner filed a petition for certiorari and prohiitionefore the Court of Appeals. In a ;ecision dated 2arch $, @$$5,the appellate court agreed with the RTC that the case was aderivative suit. It further ruled that the pra%er for annulment of mortgage and foreclosure proceedings was merel% incidental to themain action. The dispositive portion of said decision reads9*1EREHRE, premises considered, this !etition is here%

;IS2ISSE;. 1owever, pulic respondent is here% ;IRECTE; toinstruct his Cler of Court to compute the proper docet fees andthereafter, to order the private respondent to pa% the sameI22E;IATE)<.S R;ERE;.#

!etitioner(s motion for reconsiderationM was denied in a Resolutiondated 2a% @/, @$$5.1ence, this petition which raises the following issues9I.*1ET1ER T1E 1RA=)E C8RT H A!!EA)S RABE)< A=8SE;ITS ;ISCRETI I T ;IS2ISSI T1E CASE AAIST 1I0<IE); HR I2!R!ER BE8E ;ES!ITE HI;IS =< T1E TRIA)C8RT T1AT T1E ACTI IS A REA) ACTI.II.*1ET1ER T1E 1RA=)E C8RT H A!!EA)S ERRE; I T;IS2ISSI T1E C2!)AIT AS AAIST 1I0<IE); EBE IH T1E

I;ER H !ARTIES I T1E C2!)AIT BI)ATE; T1E R8)ES BE8E.III.*1ET1ER T1E 1RA=)E C8RT H A!!EA)S ERRE; I1);I T1AT T1E A8)2ET H REA) ESTATE 2RTAE A;HREC)S8RE SA)E I T1E C2!)AIT IS 2ERE)< ICI;ETA)>T? T1E ;ERIBATIBE S8IT.3

The pivotal issues for resolution are as follows9 &' whether venuewas properl% laidL &@' whether there was proper oinder of partiesLand &"' whether the action to annul the real estate mortgage andforeclosure sale is a mere incident of the derivative suit.!etitioner imputes grave ause of discretion on the Court of Appeals for not dismissing the case against it even as the trial courtfound the same to e a real action. It e+plains that the rule onvenue under the Rules of Court prevails over the rule prescriingthe venue for intra0corporate controversiesL hence, 'TSI erre#/en it ie# its suit on- in @"<"ti /en te "n#s su3e(tso te ("se "re in @"ri<in" "n# Kueon Cit-. Hurther, petitionerargues that the appellate court erred in ruling that the action ismainl% a derivative suit and the annulment of real estate mortgage

and foreclosure sale is merel% incidental thereto. It points out thatthe caption of the case, sustance of the allegations, and relief pra%ed for revealed that the main thrust of the action is to recoverthe lands. )astl%, petitioner asserts that it should e dropped as apart% to the case for it has een wrongl% impleaded as a non0stocholder defendant in the intra0corporate dispute.

n the other hand, respondents maintain that the action isprimaril% a derivative suit to redress the alleged unauthoriDed actsof its corporate officers and maor stocholders in connection withthe lands. The% postulate that the nullification of the mortgage andforeclosure sale would ust e a logical conseFuence of a decisionadverse to said officers and stocholders.After careful consideration, we are in agreement that the petitionmust e dismissed.

A petition for certiorari is proper if a triunal, oard or officer

e+ercising udicial or Fuasi0udicial functions acted without or ine+cess of urisdiction or with grave ause of discretion amountingto lac or e+cess of urisdiction and there is no appeal, or an% plain,speed% and adeFuate remed% in the ordinar% course of law.$

!etitioner sought a review of the trial court(s rders dated anuar%@@, @$$4 and April @#, @$$4 via a petition for certiorari efore theCourt of Appeals. In ren#erin* te "ss"ie# #e(ision "n#resoution, te Court o A&&e"s /"s "(tin* un#er its(on(urrent 3uris#i(tion to entert"in &etitions or (ertior"riun#er &"r"*r"& 2,11 Se(tion o Rue B o te Rues o Court. Tus, i erroneous, te #e(ision "n# resoution o te"&&e"te (ourt sou# &ro&er- e "ss"ie# - )e"ns o "&etition or revie/ on (ertior"ri un#er Rue o te Rueso Court. Te #istin(tion is (e"r: " &etition or (ertior"risee<s to (orre(t errors o 3uris#i(tion /ie " &etition orrevie/ on (ertior"ri see<s to (orre(t errors o 3u#*)ent(o))itte# - te (ourt a uo.@ Indeed, this Court has often

reminded memers of the ench and ar that a special civil actionfor certiorari under Rule /5 lies onl% when there is no appeal norplain, speed% and adeFuate remed% in the ordinar% course of law."

In the case at hand, petitioner impetuousl% filed a petition forcertiorari efore us when a petition for review was availale as aspeed% and adeFuate remed%. otal%, petitioner filed the presentpetition 5M4 da%s after it received a cop% of the assailed resolutiondated 2a% @/, @$$5. To our mind, this elated action evidences

petitioner(s effort to sustitute for a lost appeal this peticertiorari.Hor the e+traordinar% remed% of certiorari to lie % reason oause of discretion, the ause of discretion must e so pategross as to amount to an evasion of positive dut%, or arefusal to perform the dut% enoined or to act in contemplalaw, or where the power is e+ercised in an aritrar% and dmanner % reason of passion and personal hostilit%. 5 *e grave ause of discretion on the part of the appellate courtcase.Si)&-, te resoution o te issues &ose# - &etitioneon " #eter)in"tion o te n"ture o te &etition res&on#ents in te RTC. ;ot te RTC "n# Court o A

rue# t"t te "(tion is in te or) o " #eriv"tiv"tou* ("&tione# "s " &etition or "nnu)ent o re" )ort*"*e "n# ore(osure s"e.A #eriv"tive "(tion is " suit - " s"reo#er to en(or&or"te ("use o "(tion.1B Un#er te Cor&or"tion/ere " (or&or"tion is "n in3ure# &"rt-, its &o/er too#*e# /it its o"r# o #ire(tors or trustees. ;in#ivi#u" sto(<o#er )"- e &er)itte# to insti#eriv"tive suit on e" o te (or&or"tion in or&rote(t or vin#i("te (or&or"te ri*ts /enever te oo te (or&or"tion reuse to sue, or "re te ones to eor o# (ontro o te (or&or"tion. In su( "(tion(or&or"tion is te re" &"rt-=in=interest /ie testo(<o#er, on e" o te (or&or"tion, is on- " n&"rt-.17

In the case of <ilipinas 8ort Services, +nc. v. o, M we enumthe foregoing reFuisites efore a stocholder can file a de

suit9

"5 te &"rt- rin*in* suit sou# e " s"reo#er "sti)e o te "(t or tr"ns"(tion (o)&"ine# o, te nu)is s"res not ein* )"teri"5 e "s trie# to e+"ust intr"=(or&or"te re)e#ies, i)"#e " #e)"n# on te o"r# o #ire(tors or te "&&roreie ut te "tter "s "ie# or reuse# to ee# i"n#(5 te ("use o "(tion "(tu"- #evoves on te (or&ote /ron*#oin* or "r) "vin* een, or ein* ("use#(or&or"tion "n# not to te &"rti(u"r sto(<o#er rte suit.19

Even then, not ever% suit filed on ehalf of the corporatderivative suit. 6or " #eriv"tive suit to &ros&er, te )sto(<o#er suin* or "n# on e" o te (or&or"tion"e*e in is (o)&"int t"t e is suin* on " #eriv"tive

o "(tion on e" o te (or&or"tion "n# "sto(<o#ers si)i"r- situ"te# /o )"- /is to 3oin te suit.20 Te Court in#s t"t Roerto "# s"tisiereuire)ent in &"r"*r"& ive 45 o is &etitionre"#s:5. Individual petitioner, eing a minorit% stocholder, is insthe instant proceeding % wa% of a derivative suit to wrongs done to petitioner corporation and vindicate co



rights due to the mismanagement and auses committed against it% its officers and controlling stocholders, especiall% %respondent 6eonora 8. 'orres 96eonora, for brevity who,without authority from the ;oard of <irectors, arro$ated upon herself the power to bind petitioner corporation fromincurrin$ loan obli$ations and later allow company properties to be foreclosed as hereinafter set forth!1

6urter, /ie it is true t"t te (o)&"inin* sto(<o#er)ust s"tis"(tori- so/ t"t e "s e+"uste# " )e"ns tore#ress is *riev"n(es /itin te (or&or"tion su( re)e#-is no lon$er necessary where the corporation itself is under the complete control of the person a$ainst whom the suit isbein$ filed. Te re"son is ovious: a demand upon the board to institute an action and prosecute the same effectively would have been useless and an eercise infuti lity .22 1avvphi1

1ere, Roerto alleged in his petition that earnest efforts were madeto reach a compromise among famil% memersKstocholders eforehe filed the case. 1e also maintained that eonor" Torres e#F o te outst"n#in* s"res /ie @". Teres", Genn

"n# Ste&"nie e+(u#e# i) ro) te ""irs o te(or&or"tion. @ven more larin as the fact that from $une 0",0JJK, hen the first mortae deed as eLecuted until $uly K3,K""K, hen the properties mortaed ere foreclosed, the -oard of irectors of ETS+ did nothin to rectify the alleed unauthori%ed transactions of *eonora. 'learly, Roberto could not eLpect relief from the board.

$eriv"tive suits "re *overne# - " s&e(i" set o rues un#erA.@. No. 01=2=0=SC2D oter/ise <no/n "s te Interi) Rueso Pro(e#ure Governin* Intr"=Cor&or"te Controversiesun#er Re&ui( A(t No. 8799.@4 Section ,@5 Rule thereof e+pressl% lists derivative suits among the cases covered % it.As regards the venue of derivative suits, Section 5, Rule of A.2.o. $0@0$40SC states9

SEC. 5. 4enue. = A "(tions (overe# - tese Rues s" e(o))en(e# "n# trie# in te Re*ion" Tri" Court /i( "s 3uris#i(tion over te &rin(i&" oi(e o te (or&or"tion,&"rtnersi&, or "sso(i"tion (on(erne#. %ere te &rin(i&"oi(e o te (or&or"tion, &"rtnersi& or "sso(i"tion is

re*istere# in te Se(urities "n# E+("n*e Co))iss@etro @"ni", te "(tion )ust e ie# in te ()uni(i&"it- /ere te e"# oi(e is o("te#.Thus, the Court of Appeals #i# not (o))it *r"ve "discretion when it found that respondents correctl% fiderivative suit efore the @"<"ti RTC /ere 'TSI &rin(i&" oi(e.There eing no showing of an% grave ause of discretionpart of the Court of Appeals the other alleged errors will noe passed upon as mere errors of udgment are not proper sof a petition for certiorari.*1EREHRE, the instant petition is here% ;IS2ISSE;ecision dated 2arch $, @$$5 and the Resolution dated 2@$$5 of the Court of Appeals in CA0.R. S!. o. M"3AHHIR2E;.o pronouncement as to costs.S R;ERE;.

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