Corporation Cases on Definition of Corporation

8/13/2019 Corporation Cases on Definition of Corporation

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Republic of the PhilippinesSUPREME COURT

ManilaSECOND DIVISION

G.R. No. 126554 May 31, 2000ARB CONSTRUCTION CO., INC., and MARK MOLINA,petitioners,vs.COURT O APPEALS, TBS SECURIT! AN" IN#ESTIGATION AGENC! $%&$%'%n(%d )y CECILIA R.BACLA!,respondents.BELLOSILLO,J.R! CONS"R#C"ION CO., INC. $R!C% and MR& MO'IN, Vice President for Operations of R!C, in thisconsolidated petition, assail the Decision of the Court of ppeals in C().R. SP Nos. *+** and *+-/ as 0ell asthe orders of the trial court dated / Septe1ber 2//- and / Dece1ber 2//- 3rantin3 private respondent "!SSecurit4 and Investi3ation 3enc45s Motion for Leave to File Amended and Supplemental Complaintand den4in3petitioner Mar6 Molina5s Motion to Dismiss, respectivel4.On 27 u3ust 2//* "!S Securit4 and Investi3ation 3enc4 $"!SS% entered into t0o $8% Service Contracts 0ithR!C 0herein "!SS a3reed to provide and post securit4 3uards in the five $7% establish1ents bein3 1aintainedb4 R!C. Clause 2 of the Service Contracts provides 9

2. "his contract shall be effective for a period of one $2% 4ear co11encin3 fro1 27th u3ust2//* and shall be considered auto1aticall4 rene0ed for the sa1e period unless other0ise a0ritten notice of ter1ination shall have been 3iven b4 one part4 to the other part4 thirt4 $*% da4sin advance.

In a letter dated 8* :ebruar4 2//- R!C infor1ed "!SS of its desire to ter1inate the Service Contracts effectivethirt4 $*% da4s after receipt of the letter. lso, in a letter dated 88 March 2//-, R!C throu3h its Vice Presidentfor Operations, Mar6 Molina, infor1ed "!SS that it 0as replacin3 its securit4 3uards 0ith those of )lobal Securit4Investi3ation 3enc4 $)SI%.In response to both letters, "!SS infor1ed R!C that the latter could not preter1inate the Service Contracts norcould it post securit4 3uards fro1 )SI as it 0ould run counter to the provisions of their Service Contracts.On 8* March 2//- Molina 0rote "!SS concedin3 that indeed the ;securit4 contract dated 27 u3ust 2//*stipulates that the duration of the service shall be for a period of one 4ear, endin3 on 27 u3ust 2//- . . . andcould not be preter1inated until then.;2Nevertheless, Molina decreased the securit4 3uards to onl4 one $2%alle3edl4 pursuant to Clause 8 of the Service Contracts 0hich provides 9

8. "he )ENC< shall adopt a 3uardin3 s4ste1 and post 3uards in accordance thereof, in thepre1ises of the client throu3hout the 0hole 8- hours dail4, usin3 variable shifts of the 3uards atsuch hours as 1a4 be desi3nated b4 the C'IEN" or )ENCunction, in li6e tenor, be issued upon postin3 ofsuch bond as the onorable Court 1a4 re=uireAC. fter due hearin3, that >ud31ent be rendered 9

2. Declarin3 the t0o $8% contracts for Securit4 Services bet0een Plaintiff and R!Cto be subsistin3 until u3ust 27, 2//-A8. Orderin3 Defendant )'O!' to refrain fro1 ta6in3 over the securit4 services ofR!C and to 0ithdra0 its 3uards fro1 the pre1ises of R!C, if the4 have been

posted earlierA*. Orderin3 R!C to pa4 Plaintiff attorne45s fees in the a1ount of P7,. . . .*

In ns0er, R!C clai1ed that it decreased the nu1ber of securit4 3uards bein3 posted at its establish1ents toonl4 one $2% as the securit4 3uards assi3ned b4 "S!! 0ere found to be 3rossl4 ne3li3ent and inefficient, citin3the follo0in3 incidents 9

. On :ebruar4 +, 2//-, a Mitsubishi road3rader of herein defendant 0as stripped of partsa1ountin3 to P7,+-8.A/. On :ebruar4 87, 2//-, a concrete vibrator and 1ercur4 li3ht asse1bl4 0ere stolen fro1the construction site of the Multipurpose all beside the s0i11in3 pool of hereindefendant 0hich is 0orthP8,. . . . .-

In conclusion, it pra4ed that the co1plaint a3ainst it be dis1issed for lac6 of 1erit.On 2+ Ma4 2//- "!SS filed a Motion for Leave to File Attac!ed Amended and Supplemental Complaint. "!SS

sub1itted that it no0 desired to pursue a case for Sum of Moneyand Dama"esinstead of the one previousl4filed for Preliminary Injunction. It 1aintained that the Amended and Supplemental Complaint 0ould notsubstantiall4 alter its cause of action as both the ori3inal and a1ended co1plaint 0ere based on the sa1e set offacts.7

In addition to the alle3ations in its ori3inal co1plaint, "!SS alle3ed in itsAmended and Supplemental Complaintthat R!C ille3all4 deducted fro1 the pa4roll the a1ounts of P27,7. and P8,. representin3 the valueof one $2% unit concrete vibrator and cassette recorder, respectivel4. It further ar3ued that R!C 0ithheldadditional a1ounts fro1 its pa4roll as pa41ent for the parts of the 3rader that 0ere stolen. +"!SS 1aintainedthat R!C had an outstandin3 obli3ation of P-@8,.-+. Corollaril4, "!SS pra4ed for 1oral da1a3es ofP7,., e?e1plar4 da1a3es of P8.. and attorne45s fees of P7,..On 8 Ma4 2//- the trial court issued a te1porar4 restrainin3 order but due to the e?i3enc4 of the situation "!SSdecided to 0ithdra0 its securit4 contin3ent fro1 R!C5s pre1ises on 2* Ma4 2//-.R!C opposed the Motion for Leave to File Amended and Supplemental Complaint@contendin3 that the cause of

action had been substantiall4 altered.
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On / Septe1ber 2//- the R"C of Ma6ati, !r. 7/, 3ranted the 1otion of "!SS to file the 1ended andSupple1ental Co1plaint rationaliin3 thus 9

Should the court find the alle3ations in the pleadin3s to be inade=uate, the Court should allo0 thepart4 to file proper a1end1ents in accordance 0ith the 1andate of the Rules of Court thata1end1ents to pleadin3s are favored and should be liberall4 allo0ed, particularl4 in the earl4sta3es of the la0 suit, so that the actual 1erit of the controvers4 1a4 be speedil4 deter1ined0ithout re3ard to technicalities and in the 1ost e?peditious and ine?pensive 1anner . . . .

R!C filed a Motion for #econsideration but on * Nove1ber 2//- the 1otion 0as denied.Mean0hile, Mar6 Molina filed a Motion to Dismiss/ the Amended and Supplemental Complainton the 3roundthat it did not state a cause of action insofar as he 0as concerned. !ut on / Dece1ber 2//- the trial courtdenied the 1otion to, dis1iss and directed Molina instead to file his ans0er 0ithin ten $2% da4s fro1 receipt ofthe order.On * anuar4 2//7 R!C filed a Petition 20ith the Court of ppeals alle3in3 that the trial court co11itted3rave abuse of discretion in issuin3 the Orders of / Septe1ber 2//- and * Nove1ber 2//-. On 27 :ebruar42//7 Molina li6e0ise filed a Petition before the Court of ppeals si1ilarl4 attributin3 3rave abuse of discretion tothe trial court in issuin3 the order of / Dece1ber 2//-.Parentheticall4, upon 1otion of "!SS, the petition of Mar6 Molina in C().R. SP No. *+-- 0as consolidated 0iththe petition of R!C in C().R. SP No. *+**.On 2+ u3ust 2//+ the Court of ppeals rendered a Decision 22den4in3 both petitions of R!C and Molina. On *October 2//+ petitioners5 Motion for #econsideration 280as denied. ence, this petition.In their consolidated Petitionbefore this Court, petitioners first sub1it that "E CO#R" O: PPE'S ERRED INO'DIN) "" PRIV"E RESPONDEN" D "E RI)" "O CN)E I"S C#SE O: C"ION IN VIEB O: CN)E IN "E SI"#"ION O: "E PR"IES :"ER "E :I'IN) O: "E ORI)IN' COMP'IN". 2In support of thisassi3ned error petitioners insist that 9

. . . $"%here 0as not onl4 a substantial chan3e in private respondent5s cause of action but there0as even an alteration in the theor4 of the case . . . $B%hile in the ori3inal co1plaint the onl4 thin3alle3ed and is bein3 pra4ed for is for petitioner R! $R!C% to be en>oined fro1 replacin3 thesecurit4 3uards of private respondent . . . and for the t0o contracts . . . to be enforced untilu3ust 27, 2//- and for petitioner R! $R!C% to be ordered to pa4 . . . attorne45s fees, 0hat isalle3ed and is bein3 pra4ed for in the a1ended and supple1ental co1plaint is for both petitionersto be ordered to pa4 P2@2,7*. $for unpaid services% . . . and P*,88+.++ $for lost inco1e% . . .plus 1oral and e?e1plar4 da1a3es and attorne45s fees.Obviousl4, petitioner R! $R!C% is bein3 re=uired to ans0er for a liabilit4 or le3al obli3ationunder the a1ended and supple1ental co1plaint 0holl4 different fro1 that stated in the ori3inalco1plaint such as but not li1ited to the a1ount of P2@2,78. 0hich 0as never 1entioned inthe ori3inal contract. #nder these circu1stances, a different cause of action 0as introduced b4the a1end1ent.lso, there 0as a chan3e in the theor4 of the case. Bhereas in the ori3inal contract 0hat is sou3htfor b4 private respondent is the enforce1ent of the t0o $8% contracts 0hich is 0hat is 6no0n inle3al parlance as specific perfor1ance, in the a1ended and supple1ental co1plaint 0hat is foris . . . so a rescission of the contracts 0ith da1a3es . . . 2-

Be cannot subscribe to the contention of petitioners that the Amended and Supplemental Complaintsubstantiall4 chan3ed "!SS5 cause of action nor 0as there an4 alteration in the theor4 of the case. s correctl4observed b4 the Court of ppeals, ;the a1endator4 alle3ations are 1ere a1plifications of the cause of action forda1a3es . . . . n a1end1ent 0ill not be considered as statin3 a ne0 cause of action if the facts alle3ed in thea1ended co1plaint sho0 substantiall4 the sa1e 0ron3 0ith respect to the sa1e transaction, or if 0hat arealle3ed refer to the sa1e 1atter but are 1ore full4 and differentl4 stated, or 0here aver1ents 0hich 0erei1plied are 1ade in e?pressed ter1s, and the sub>ect of the controvers4 or the liabilit4 sou3ht to be enforcedre1ains the sa1e.; 27

"he ori3inal as 0ell as a1ended and supple1ental co1plaints readil4 disclose that the aver1ents containedtherein are al1ost identical. In the ori3inal co1plaint, "!SS pra4s, a1on3 others, that the t0o $8% ServiceContracts be declared as subsistin3 until 27 u3ust 2//- and that petitioners be 1ade to pa4 P7,. asattorne45s fees. 2+Si3nificantl4, in its penulti1ate para3raph, "!SS pra4s ;for such other reliefs that areconsidered >ust and e=uitable under the pre1ises.; "his is a ;catch(all; phrase 0hich definitel4 covers thea1plifications and additional aver1ents contained in theAmended and Supplemental Complaint. Due to eventssupervenin3 after the filin3 of the ori3inal co1plaint, it beca1e incu1bent upon "!SS to a1end its ori3inalco1plaint. One of the supervenin3 events 0as the 0ithholdin3 b4 petitioner R!C of so1e a1ounts intended forthe pa4roll of "!SS due to pilfera3e or losses 0hich alle3edl4 occurred due to the ne3li3ence and inefficienc4 of

"!SS5 securit4 3uards. Plainl4, this 0ithholdin3 of the pa4roll 0as onl4 an offshoot of the preter1ination of thet0o $8% Service Contracts on the part of R!C.Si3nificantl4, the preter1ination of the Service Contracts 0as alread4 alle3ed in the ori3inal co1plaint. In fact it0as one, if not the 1ost basic, issue discussed therein. Since the 0ithholdin3 of the pa4roll 0as onl4 an offshoot

of the issue on the preter1ination of the contract, 0e can safel4 conclude that the alle3ation on the 0ithholdin3of the pa4roll in the Amended and Supplemental Complaint0as onl4 an a1plification of an issue that 0asalread4 included and discussed in the ori3inal co1plaint. It 0as therefore error on the part of petitioners toconclude that private respondent chan3ed its cause of action in the Amended and Supplemental Complaint.Neither could the4 sa4 that the4 0ere bein3 1ade to ans0er for a liabilit4 or le3al obli3ation that 0as 0holl4different fro1 that stated in the ori3inal co1plaint.)rave abuse of discretion therefore could not be i1puted to the trial court for ad1ittin3 the Amended andSupplemental Complaint of private respondent "!SS. It also follo0s that the appellate court could not be faultedfor puttin3 its sta1p of approval on the order of the trial court ad1ittin3 the sa1e.Petitioners also ar3ue, as their second assi3ned error, that "E CO#R" O: PPE'S ERRED IN O'DIN) ""

"E ''E)"IONS IN "E MENDED ND S#PP'EMEN"' COMP'IN" BERE S#::ICIEN" "O O'D PE"I"IONERMO'IN 'I!'E "O PRIV"E RESPONDEN" IN IS PERSON' CPCI"


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respondent5s securit4 3uards and 0hen petitioner Molina replaced the said securit4 3uards . . .Molina 0as not actin3 in his personal capacit4 but . . . as officer of petitioner R! $R!C%.Since petitioner Molina did not so act in his personal capacit4 but onl4 in his official capacit4 asofficer of petitioner R! $R!C% then petitioner Molina cannot be held personall4 liable for thealle3ed liabilit4 of petitioner R! $R!C% . . . . 2

In affir1in3 the order of the trial court den4in3 petitioner Molina5s Motion to Dismiss, the appellate court ruled 9Si1ilarl4, Be find no error co11itted b4 respondent ud3e in den4in3 the 1otion to dis1iss.In para3raphs 7, 2@, 2 of the a1ended and supple1ental co1plaint, it is alle3edF

7. !ut fate 0ould have it that defendant R!C 0ould subse=uentl4 breach theaforesaid contracts b4 surreptitiousl4 preter1inatin3 the sa1e and as precursorthereto, defendant R!C, throu3h defendant Mar6 Molina, 0ould i1pute a3ainstplaintiff pretended and fabricated violations and baselessl4 bla1e plaintiff foralle3ed losses of co1pan4 properties b4 >ust deductin3 the values thereof fro1plaintiff5s billin3s 0ithout even co1pl4in3 0ith the procedure a3reed upon in thecontracts . . . .It 1a4 be pertinent to state that all these accusations and i1putations, albeit falseand concocted, 0ere 1ade b4 defendant Mar6 P. Molina . . . .

2@. Such unsalutar4 breach of contract b4 defendant R!C throu3h defendant Mar6 Molina hasresulted to plaintiff5s da1a3e and pre>udice b4 0a4 of lost inco1e consistin3 of the une?piredportion of the contract, i.e., up to u3ust 27, 2//-, entailin3 a total a1ount of P*,8++.++ . . . .

"he above alle3ations, particularl4 the subpara3raph, ;It 1a4 be pertinent to state that all theseaccusations and i1putations, albeit false and concocted, 0ere 1ade b4 defendant Mar6 P.Molina,; are sufficient state1ent of a cause of action a3ainst petitioner Mar6 Molina in hispersonal capacit4.2/

In this re3ard, 0e a3ree 0ith petitioners. It is basic that a corporation is invested b4 la0 0ith a personalit4separate and distinct fro1 those of the persons co1posin3 it as 0ell as fro1 that of an4 other le3al entit4 to0hich it 1a4 be related. s a 3eneral rule, a corporation 1a4 not be 1ade to ans0er for acts or liabilities of itsstoc6holders or those of the le3al entities to 0hich it 1a4 be connected and vice versa. o0ever, the veil ofcorporate fiction 1a4 be pierced 0hen it is used as a shield to further an end subversive of >usticeA or forpurposes that could not have been intended b4 the la0 that created itA or to defeat public convenience, >ustif40ron3, protect fraud, or defend cri1eA or to perpetuate deceptionA or as an alter e3o, ad>unct or businessconduit for the sole benefit of the stoc6holders. 8

Prescindin3 fro1 the fore3oin3, the 3eneral rule is that officers of a corporation are not personall4 liable for theirofficial acts unless it is sho0n that the4 have e?ceeded their authorit4. 82rticle *2 of the Corporation Code is inpoint 9

Sec. *2. Lia$ility of directors, trustees or officers. 9 Directors or trustees 0ho 0illfull4 and6no0in3l4 vote for or assent to patentl4 unla0ful acts of the corporation or 0ho are 3uilt4 of 3rossne3li3ence or bad faith in directin3 the affairs of the corporation or ac=uire an4 personal orpecuniar4 interest conflict 0ith their dut4 as such directors, or trustees shall be liable >ointl4 andseverall4 for all da1a3es resultin3 therefro1 suffered b4 the corporation, its stoc6holders or1e1bers and other persons . . . .

On the basis hereof, petitioner Molina could not be held >ointl4 and severall4 liable for an4 obli3ation 0hichpetitioner R!C 1a4 be held accountable for, absent an4 proof of bad faith or 1alice on his part. Corollaril4, it isalso incorrect on the part of the Court of ppeals to conclude that there 0as a sufficient cause of action a3ainstMolina as to 1a6e hi1 personall4 liable for his actuations as Vice President for Operations of R!C. cursor4readin3 of the records of the instant case 0ould reveal that Molina did not su11aril4 0ithhold certain a1ountsfro1 the pa4roll of "!SS. Instead, he enu1erated instances 880hich in his vie0 0ere enou3h bases to do so.:inall4, petitioners contend that "E CO#R" O: PPE'S ERRED IN O'DIN) "" "E "RI' CO#R" DID NO")RVE'< !#SE I"S DISCRE"ION IN )RN"IN) PRIV"E RESPONDEN"5S MO"ION :OR 'EVE "O :I'E MENDED

ND S#PP'EMEN"' COMP'IN" ND IN DEN


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2-Id., pp. 2(2/.27Id., pp. 2-/(277.2+SeeNote *.2@#ollo, p. *.2Id., p. 87.2/Id., pp. 272(27*.

8Pala4, Inc. v. Clave, ).R. No. 7+@+, 82 Septe1ber2/*, 28- SCR +-.82Nicario v. National 'abor Relations Co11ission,).R. No. 287*-, 2@ Septe1ber 2//, 8/7 SCR+82.88See Note -.8*Id., p. 8/.

Republic of the PhilippinesSUPREME COURT

:IRS" DIVISIONG.R. No. 1455*+ No%-)%$ 1+, 2005OSE C. TUPA/ I# and PETRONILA C. TUPA/,Petitioners,

vs.TE COURT O APPEALS and BANK O TE PILIPPINE ISLAN"S,Respondents.

DECISIONCARPIO,J.:T% Ca'%

"his is a petition for revie02of the Decision8of the Court of ppeals dated @ Septe1ber 8 and its Resolutiondated 2 October 8. "he @ Septe1ber 8 Decision affir1ed the rulin3 of the Re3ional "rial Court, Ma6ati,!ranch 2-- in a case for estafa under Section 2*, Presidential Decree No. 227. "he Court of ppealsG Resolutionof 2 October 8 denied petitionersG 1otion for reconsideration.T% a('

Petitioners ose C. "upa IV and Petronila C. "upa $;petitioners;% 0ere Vice(President for Operations and Vice(PresidentH"reasurer, respectivel4, of El Oro En3raver Corporation $;El Oro Corporation;%. El Oro Corporation hada contract 0ith the Philippine r14 to suppl4 the latter 0ith ;survival bolos.;

"o finance the purchase of the ra0 1aterials for the survival bolos, petitioners, on behalf of El Oro Corporation,applied 0ith respondent !an6 of the Philippine Islands $;respondent ban6;% for t0o co11ercial letters of credit.

"he letters of credit 0ere in favor of El Oro CorporationGs suppliers, "anchaoco Manufacturin3 Incorporated*

$;"anchaoco Incorporated;% and Maresco Rubber and Retreadin3 Corporation- $;Maresco Corporation;%.Respondent ban6 3ranted petitionersG application and issued 'etter of Credit No. 8(/+(* for P7+-,@2.7 to

"anchaoco Incorporated and 'etter of Credit No. 8(/2-(7 for P8/-, to Maresco Corporation.Si1ultaneous 0ith the issuance of the letters of credit, petitioners si3ned trust receipts in favor of respondentban6. On * Septe1ber 2/2, petitioner ose C. "upa IV $;petitioner ose "upa;% si3ned, in his personalcapacit4, a trust receipt correspondin3 to 'etter of Credit No. 8(/+(* $for P7+-,@2.7%. Petitioner ose "upabound hi1self to sell the 3oods covered b4 the letter of credit and to re1it the proceeds to respondent ban6, ifsold, or to return the 3oods, if not sold, on or before 8/ Dece1ber 2/2.On / October 2/2, petitioners si3ned, in their capacities as officers of El Oro Corporation, a trust receiptcorrespondin3 to 'etter of Credit No. 8(/2-(7 $for P8/-,%. Petitioners bound the1selves to sell the 3oodscovered b4 that letter of credit and to re1it the proceeds to respondent ban6, if sold, or to return the 3oods, ifnot sold, on or before Dece1ber 2/2.fter "anchaoco Incorporated and Maresco Corporation delivered the ra0 1aterials to El Oro Corporation,respondent ban6 paid the for1er P7+-,@2.7 and P8/-,, respectivel4.Petitioners did not co1pl4 0ith their underta6in3 under the trust receipts. Respondent ban6 1ade severalde1ands for pa41ents but El Oro Corporation 1ade partial pa41ents onl4. On 8@ une 2/* and 8 une 2/*,respondent ban6Gs counsel7and its representative+respectivel4 sent final de1and letters to El Oro Corporation.El Oro Corporation replied that it could not full4 pa4 its debt because the r1ed :orces of the Philippines haddela4ed pa4in3 for the survival bolos.Respondent ban6 char3ed petitioners 0ith estafa under Section 2*, Presidential Decree No. 227 $;Section 2*;% @

or "rust Receipts 'a0 $;PD 227;%. fter preli1inar4 investi3ation, the then Ma6ati :iscalGs Office found probablecause to indict petitioners. "he Ma6ati :iscalGs Office filed the correspondin3 Infor1ations $doc6eted as Cri1inalCase Nos. - and -/% 0ith the Re3ional "rial Court, Ma6ati, on 2@ anuar4 2/- and the cases 0ere raffledto !ranch 2-- $;trial court;% on 8 anuar4 2/-. Petitioners pleaded not 3uilt4 to the char3es and trial ensued.Durin3 the trial, respondent ban6 presented evidence on the civil aspect of the cases.T% Rn o7 (% T$a Co$(On 2+ ul4 2//8, the trial court rendered >ud31ent ac=uittin3 petitioners of estafa on reasonable doubt.o0ever, the trial court found petitioners solidaril4 liable 0ith El Oro Corporation for the balance of El OroCorporationGs principal debt under the trust receipts. "he dispositive portion of the trial courtGs DecisionprovidesFBERE:ORE, >ud31ent is hereb4 rendered C#I""IN) both accused ose C. "upa, IV and Petronila "upabased upon reasonable doubt.o0ever, El Oro En3raver Corporation, ose C. "upa, IV and Petronila "upa, are hereb4 ordered, >ointl4 andsolidaril4, to pa4 the !an6 of the Philippine Islands the outstandin3 principal obli3ation of P+8-,28/.2/ $as of

anuar4 8*, 2//8% 0ith the stipulated interest at the rate of 2J per annu1A plus 2J of the total a1ount dueas attorne4Gs feesA P7,. as e?penses of liti3ationA and costs of the suit.

In holdin3 petitioners civill4 liable 0ith El Oro Corporation, the trial court heldFKSLince the civil action for the recover4 of the civil liabilit4 is dee1ed i1pliedl4 instituted 0ith the cri1inalaction, as in fact the prosecution thereof 0as activel4 handled b4 the private prosecutor, the Court believes thatthe El Oro En3raver Corporation and both accused ose C. "upa and Petronila "upa, >ointl4 and solidaril4should be held civill4 liable to the !an6 of the Philippine Islands. "he 1ere fact that the4 0ere unable to collectin full fro1 the :P andHor the Depart1ent of National Defense the proceeds of the sale of the delivered survivalbolos 1anufactured fro1 the ra0 1aterials covered b4 the trust receipt a3ree1ents is no valid defense to thecivil clai1 of the said co1plainant and surel4 could not 0ipe out their civil obli3ation. fter all, the4 are free toinstitute an action to collect the sa1e./Petitioners appealed to the Court of ppeals. Petitioners contended thatF $2% their ac=uittal ;operates toe?tin3uish KtheirL civil liabilit4; and $8% at an4 rate, the4 are not personall4 liable for El Oro CorporationGs debts.

"he Rulin3 of the Court of ppeals
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In its Decision of @ Septe1ber 8, the Court of ppeals affir1ed the trial courtGs rulin3. "he appellate courtheldFIt is clear fro1 KSection 2*, PD 227L that civil liabilit4 arisin3 fro1 the violation of the trust receipt a3ree1ent isdistinct fro1 the cri1inal liabilit4 i1posed therein. In the case of ,intola vs* Insular 'an of Asia and America,our Supre1e Court held that ac=uittal in the estafa case $P.D. 227% is no bar to the institution of a civil action forcollection. "his is because in such cases, the civil liabilit4 of the accused does not arise ex delictobut ratherbased ex contractuand as such is distinct and independent fro1 an4 cri1inal proceedin3s and 1a4 proceedre3ardless of the result of the latter. "hus, an independent civil action to enforce the civil liabilit4 1a4 be fileda3ainst the corporation aside fro1 the cri1inal action a3ainst the responsible officers or e1plo4ees.???KBLe hereb4 hold that the ac=uittal of the accused(appellants fro1 the cri1inal char3e of estafa did not operateto e?tin3uish their civil liabilit4 under the letter of credit(trust receipt arran3e1ent 0ith plaintiff(appellee, 0ith0hich the4 dealt both in their personal capacit4 and as officers of El Oro En3raver Corporation, the letter ofcredit applicant and principal debtor.ppellants ar3ued that the4 cannot be held solidaril4 liable 0ith their corporation, El Oro En3raver Corporation,alle3in3 that the4 e?ecuted the sub>ect docu1ents includin3 the trust receipt a3ree1ents onl4 in their capacit4as such corporate officers. "he4 said that these instru1ents are 1ere pro-formaand that the4 e?ecuted theseinstru1ents on the stren3th of a board resolution of said corporation authoriin3 the1 to appl4 for the openin3of a letter of credit in favor of their suppliers as 0ell as to e?ecute the other docu1ents necessar4 to acco1plishthe sa1e.Such contention, ho0ever, is contradicted b4 the evidence on record. "he trust receipt a3ree1ent indicated inclear and un1ista6able ter1s that the accused si3ned the sa1e as surety for the corporation and that the4bound the1selves directl4 and i11ediatel4 liable in the event of default 0ith respect to the obli3ation under theletters of credit 0hich 0ere 1ade part of the said a3ree1ent, 0ithout need of de1and. Even in the applicationfor the letter of credit, it is li6e0ise clear that the underta6in3 of the accused is that of a suret4 as indicated KinLthe follo0in3 0ordsF ;In consideration of 4our establishin3 the co11ercial letter of credit herein applied forsubstantiall4 in accordance 0ith the fore3oin3, the undersi3ned pplicant and Suret4 hereb4 a3ree, >ointl4 andseverall4, to each and all stipulations, provisions and conditions on the reverse side hereof.;???avin3 contractuall4 a3reed to hold the1selves solidaril4 liable 0ith El Oro En3raver Corporation under thesub>ect trust receipt a3ree1ents 0ith appellee !an6 of the Philippine Islands, herein accused(appellants 1a4not, therefore, invo6e the separate le3al personalit4 of the said corporation to evade their civil liabilit4 under theletter of credit(trust receipt arran3e1ent 0ith said appellee, not0ithstandin3 their ac=uittal in the cri1inal casesfiled a3ainst the1. "he trial court thus did not err in holdin3 the appellants solidaril4 liable 0ith El Oro En3raverCorporation for the outstandin3 principal obli3ation of P+8-,28/.2/ $as of anuar4 8*, 2//8% 0ith the stipulatedinterest at the rate of 2J per annu1, plus 2J of the total a1ount due as attorne4Gs fees, P7,. ase?penses of liti3ation and costs of suit.2ence, this petition. Petitioners contend thatF2. #D)MEN" O: C#I""' OPER"EKSL "O E"IN)#IS "E CIVI' 'I!I'I"< O: PE"I"IONERSKAL8. )RN"IN) BI"O#" DMI""IN) "" "E #ES"IONED O!'I)"ION BS INC#RRED !< "E CORPOR"ION,

"E SME IS NO" uridical entit4, 1a4 act onl4 throu3h its directors, officers, and e1plo4ees. Debtsincurred b4 these individuals, actin3 as such corporate a3ents, are not theirs but the direct liabilit4 of thecorporation the4 represent.28s an e?ception, directors or officers are personall4 liable for the corporationGsdebts onl4 if the4 so contractuall4 a3ree or stipulate.2*

ere, the dorsal side of the trust receipts contains the follo0in3 stipulationF

"o the !an6 of the Philippine IslandsIn consideration of 4our releasin3 to under the ter1s of this "rust Receipt the 3oodsdescribed herein, IHBe, >ointl4 and severall4, a3ree and pro1ise to pa4 to 4ou, on de1and, 0hatever su1 orsu1s of 1one4 0hich 4ou 1a4 call upon 1eHus to pa4 to 4ou, arisin3 out of, pertainin3 to, andHor in an4 0a4connected 0ith, this "rust Receipt, in the event of default andHor non(fulfill1ent in an4 respect of thisunderta6in3 on the part of the said . IH0e further a3ree that 14Hour liabilit4 in this3uarantee shall be DIREC" ND IMMEDI"E, 0ithout an4 need 0hatsoever on 4our part to ta6e an4 steps ore?haust an4 le3al re1edies that 4ou 1a4 have a3ainst the said . before 1a6in3de1and upon 1eHus.2-$Capitaliation in the ori3inal%In the trust receipt dated / October 2/2, petitioners si3ned belo0 this clause as officers of El Oro Corporation.

"hus, under petitioner Petronila "upaGs si3nature are the 0ords ;Vice(Pres"reasurer; and under petitioner ose"upaGs si3nature are the 0ords ;Vice(PresOperations.; !4 so si3nin3 that trust receipt, petitioners did not bindthe1selves personall4 liable for El Oro CorporationGs obli3ation. In Ong v. Court of Appeals,27a corporate

representative si3ned a solidar4 3uarantee clause in t0o trust receipts in his capacit4 as corporate
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representative. "here, the Court held that the corporate representative did not underta6e to 3uaranteepersonall4 the pa41ent of the corporationGs debts, thusFKPLetitioner did not si3n in his personal capacit4 the solidar4 3uarantee clause found on the dorsal portion of thetrust receipts. Petitioner placed his si3nature after the t4pe0ritten 0ords ;RMCO IND#S"RI' CORPOR"ION;found at the end of the solidar4 3uarantee clause. Evidentl4, petitioner did not underta6e to 3uarant4 personall4the pa41ent of the principal and interest of RM)RIGs debt under the t0o trust receipts.ence, for the trust receipt dated / October 2/2, 0e sustain petitionersG clai1 that the4 are not personall4liable for El Oro CorporationGs obli3ation.:or the trust receipt dated * Septe1ber 2/2, the dorsal portion of 0hich petitioner ose "upa si3ned alone,0e find that he did so in his personal capacit4. Petitioner ose "upa did not indicate that he 0as si3nin3 as ElOro CorporationGs Vice(President for Operations. ence, petitioner ose "upa bound hi1self personall4 liable forEl Oro CorporationGs debts. Not bein3 a part4 to the trust receipt dated * Septe1ber 2/2, petitioner Petronila

"upa is not liable under such trust receipt.The Nature of Petitioner Jose Tupazs Liabilit!n"er the Trust Receipt #ate" $% &epte'ber ()*(s stated, the dorsal side of the trust receipt dated * Septe1ber 2/2 providesF

"o the !an6 of the Philippine IslandsIn consideration of 4our releasin3 to under the ter1s of this "rust Receipt the 3oodsdescribed herein, IHBe, >ointl4 and severall4, a3ree and pro1ise to pa4 to 4ou, on de1and, 0hatever su1 orsu1s of 1one4 0hich 4ou 1a4 call upon 1eHus to pa4 to 4ou, arisin3 out of, pertainin3 to, andHor in an4 0a4connected 0ith, this "rust Receipt, in the event of default andHor non(fulfill1ent in an4 respect of thisunderta6in3 on the part of the said . IH0e further a3ree that 14Hour liabilit4 in this3uarantee shall be DIREC" ND IMMEDI"E, 0ithout an4 need 0hatsoever on 4our part to ta6e an4 steps ore?haust an4 le3al re1edies that 4ou 1a4 have a3ainst the said . !efore1a6in3 de1and upon 1eHus. $#nderlinin3 suppliedA capitaliation in the ori3inal%

"he lo0er courts interpreted this to 1ean that petitioner ose "upa bound hi1self solidaril4 liable 0ith El OroCorporation for the latterGs debt under that trust receipt.

"his is error.In Pru"ential +an, v. -nter'e"iate Appellate Court,2+ the Court interpreted a substantiall4 identicalclause2@in a trust receipt si3ned b4 a corporate officer 0ho bound hi1self personall4 liable for the corporationGsobli3ation. "he petitioner in that case contended that the stipulation ;0e >ointl4 and severall4 a3ree andunderta6e; rendered the corporate officer solidaril4 liable 0ith the corporation. Be dis1issed this clai1 and heldthe corporate officer liable as 3uarantor onl4. "he Court further ruled that had there been 1ore than onesi3natories to the trust receipt, the solidar4 liabilit4 0ould e?ist bet0een the 3uarantors. Be heldFPetitioner KPrudential !an6L insists that b4 virtue of the clear 0ordin3 of the ??? clause ;? ? ? 0e >ointl4 andseverall4 a3ree and underta6e ? ? ?,; and the concludin3 sentence on e?haustion, KrespondentL ChiGs liabilit4therein is solidar4.???Our ??? readin3 of the =uestioned solidar4 3uarant4 clause 4ields no other conclusion than that the obli3ation ofChi is onl4 that of a "uarantor. "his is further bolstered b4 the last sentence 0hich spea6s of 0aiver ofe?haustion, 0hich, nevertheless, is ineffective in this case because the space therein for the part4 0hosepropert4 1a4 not be e?hausted 0as not filled up. #nder rticle 87 of the Civil Code, the defense of e?haustion$e?cussion% 1a4 be raised b4 a 3uarantor before he 1a4 be held liable for the obli3ation. Petitioner li6e0isead1its that the =uestioned provision is a solidary "uaranty clause, thereb4 clearl4 distin3uishin3 it fro1 acontract of suret4. It, ho0ever, described the 3uarant4 as solidar4 bet0een the 3uarantorsA this 0ould havebeen correct if t0o $8% 3uarantors had si3ned it. "he clause ;0e >ointl4 and severall4 a3ree and underta6e;refers to the underta6in3 of the t0o $8% parties 0ho are to si3n it or to the liabilit4 e?istin3 bet0een the1selves.It does not refer to the underta6in3 bet0een either one or both of the1 on the one hand and the petitioner onthe other 0ith respect to the liabilit4 described under the trust receipt. ???

:urther1ore, an4 doubt as to the i1port or true intent of the solidar4 3uarant4 clause should be resolveda3ainst the petitioner. "he trust receipt, to3ether 0ith the =uestioned solidar4 3uarant4 clause, is on a for1drafted and prepared solel4 b4 the petitionerA ChiGs participation therein is li1ited to the affi?in3 of his si3naturethereon. It is, therefore, a contract of adhesionA as such, it 1ust be strictl4 construed a3ainst the part4responsible for its preparation.2$#nderlinin3 suppliedA italiciation in the ori3inal%o0ever, respondent ban6Gs suit a3ainst petitioner ose "upa stands despite the CourtGs findin3 that he is liableas 3uarantor onl4. :irst, e?cussion is not a pre(re=uisite to secure >ud31ent a3ainst a 3uarantor. "he 3uarantorcan still de1and defer1ent of the e?ecution of the >ud31ent a3ainst hi1 until after the assets of the principaldebtor shall have been e?hausted.2/Second, the benefit of e?cussion 1a4 be 0aived.8#nder the trust receiptdated * Septe1ber 2/2, petitioner ose "upa 0aived e?cussion 0hen he a3reed that his ;liabilit4 in KtheL3uarant4 shall be DIREC" ND IMMEDI"E, 0ithout an4 need 0hatsoever on ??? KtheL part Kof respondent ban6Lto ta6e an4 steps or e?haust an4 le3al re1edies ???.; "he clear i1port of this stipulation is that petitioner ose

"upa 0aived the benefit of e?cussion under his 3uarantee.

s 3uarantor, petitioner ose "upa is liable for El Oro CorporationGs principal debt and other accessor4 liabilities$as stipulated in the trust receipt and as provided b4 la0% under the trust receipt dated * Septe1ber 2/2.

"hat trust receipt $and the trust receipt dated / October 2/2% provided for pa41ent of attorne4Gs feese=uivalent to 2J of the total a1ount due and an ;interest at the rate of @J per annum(or at such other rate asthe ban61a4 fi?, fro1 the date due until paid ???.;82In the applications for the letters of credit, the partiesstipulated that drafts dra0n under the letters of credit are sub>ect to interest at the rate of 2Jper annum.88

"he lo0er courts correctl4 applied the 2J interest rate per annumconsiderin3 that the face value of each ofthe trust receipts is based on the drafts dra0n under the letters of credit. !ased on the 3uidelines laid do0n inastern &hipping Lines/ -nc. v. Court of Appeals ,8*the accrued stipulated interest earns 28J interestperannum fro1 the ti1e of the filin3 of the Infor1ations in the Ma6ati Re3ional "rial Court on 2@ anuar4 2/-.:urther, the total a1ount due as of the date of the finalit4 of this Decision 0ill earn interest at 2J per annumuntil full4 paid since this 0as the stipulated rate in the applications for the letters of credit.8-

"he accountin3 of El Oro CorporationGs debts as of 8* anuar4 2//8, 0hich the trial court used, is no lon3er

useful as it does not specif4 the a1ounts o0in3 under each of the trust receipts. ence, in the e?ecution of this
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Decision, the trial court shall co1pute El Oro CorporationGs total liabilit4 under each of the trust receipts dated* Septe1ber 2/2 and / October 2/2 based on the follo0in3 for1ulaF87

"O"' MO#N" D#E Q Kprincipal interest interest on interestL partial pa41ents 1ade8+

Interest Q principal ? 2 J per annu1 ? no. of 4ears fro1 due date8@until finalit4 of >ud31entInterest on interest Q interest co1puted as of the filin3 of the co1plaint $2@ anuar4 2/-% ? 28J ? no. of 4earsuntil finalit4 of >ud31entttorne4Gs fees is 2J of the total a1ount co1puted as of finalit4 of >ud31ent

"otal a1ount due as of the date of finalit4 of >ud31ent 0ill earn an interest of 2J per annu1 until full4 paid.In so dele3atin3 this tas6, 0e reiterate 0hat 0e said in Rizal Co''ercial +an,ing Corporation v. Alfa RT01anufacturing Corporation80here 0e also ordered the trial court to co1pute the a1ount of obli3ation duebased on a for1ula substantiall4 si1ilar to that indicated aboveF

"he total a1ount due ??? KunderL the ??? contractKL ??? 1a4 be easil4 deter1ined b4 the trial court throu3h asi1ple 1athe1atical co1putation based on the for1ula specified above. Mathe1atics is an e?act science, theapplication of 0hich needs no further proof fro1 the parties.Petitioner Jose Tupazs Ac2uittal "i" not3tinguish his Civil Liabilit

"he rule is that 0here the civil action is i1pliedl4 instituted 0ith the cri1inal action, the civil liabilit4 is note?tin3uished b4 ac=uittal 9K0Lhere the ac=uittal is based on reasonable doubt ??? as onl4 preponderance of evidence is re=uired in civilcasesA 0here the court e?pressl4 declares that the liabilit4 of the accused is not cri1inal but onl4 civil in nature??? as, for instance, in the felonies of estafa, theft, and 1alicious 1ischief co11itted b4 certain relatives 0hothereb4 incur onl4 civil liabilit4 $See rt. **8, Revised Penal Code%A and, 0here the civil liabilit4 does not arisefro1 or is not based upon the cri1inal act of 0hich the accused 0as ac=uitted ???.8/$E1phasis supplied%ere, respondent ban6 chose not to file a separate civil action*to recover pa41ent under the trust receipts.Instead, respondent ban6 sou3ht to recover pa41ent in Cri1inal Case Nos. - and -/. lthou3h the trialcourt ac=uitted petitioner ose "upa, his ac=uittal did not e?tin3uish his civil liabilit4. s the Court of ppealscorrectl4 held, his liabilit4 arose not fro1 the cri1inal act of 0hich he 0as ac=uitted $ ex delito% but fro1 thetrust receipt contract $ex contractu% of * Septe1ber 2/2. Petitioner ose "upa si3ned the trust receipt of *Septe1ber 2/2 in his personal capacit4.On the other 1atters Petitioners RaisePetitioners raise for the first ti1e in this appeal the contention that El Oro CorporationGs debts under the trustreceipts are not 4et due and de1andable. lternativel4, petitioners assail the trust receipts as si1ulated. "heseassertions have no 1erit. #nder the ter1s of the trust receipts dated * Septe1ber 2/2 and / October 2/2,El Oro CorporationGs debts fell due on 8/ Dece1ber 2/2 and Dece1ber 2/2, respectivel4.Neither is there 1erit to petitionersG clai1 that the trust receipts 0ere si1ulated. Durin3 the trial, petitioners didnot den4 appl4in3 for the letters of credit and subse=uentl4 e?ecutin3 the trust receipts to secure pa41ent ofthe drafts dra0n under the letters of credit.8EREORE, 0e GRANT the petition in part. Be AIRM the Decision of the Court of ppeals dated @Septe1ber 8 and its Resolution dated 2 October 8 0ith the follo0in3 MO"IICATIONSF2% El Oro En3raver Corporation is principall4 liable for the total a1ount due under the trust receipts dated *Septe1ber 2/2 and / October 2/2, as co1puted b4 the Re3ional "rial Court, Ma6ati, !ranch 2--, upon finalit4of this Decision, based on the for1ula provided aboveA8% Petitioner ose C. "upa IV is liable for El Oro En3raver CorporationGs total debt under the trust receipt dated* Septe1ber 2/2 as thus co1puted b4 the Re3ional "rial Court, Ma6ati, !ranch 2--A and*% Petitioners ose C. "upa IV and Petronila C. "upa are not liable under the trust receipt dated / October2/2.SO OR"ERE".

N"ONIO ". CRPIOssociate ustice

8E CONCURFILARIO G. "A#I"E, R.Chief usticeChair1anLEONAR"O A. 9UISUMBING, CONSUELO !NARES:SANTIAGOssociate ustice ssociate usticeA"OLO S. A/CUNAssociate usticeCERTIICATIONPursuant to Section 2*, rticle VIII of the Constitution, it is hereb4 certified that the conclusions in the aboveDecision 0ere reached in consultation before the case 0as assi3ned to the 0riter of the opinion of the CourtGsDivision.ILARIO G. "A#I"E, R.

Chiefustice

oo(no(%'2#nder Rule -7 of the 2//@ Rules of Civil Procedure.8Penned b4 ssociate ustice Martin S. Villara1a, r.0ith ssociate ustices Salo1e . Monto4a andRo1eo . Calle>o, Sr., concurrin3.* Supplier of 8*,78- 6ilos of hi3h(3rade steel barsand *7 hi3h(carbon steel sheets. "anchaocoIncorporated is also referred to as "anchaocoManufacturin3 Incorporation and "anchaocoManufacturin3 Corporation in other parts of therecords.-

Supplier of /, 6ilos of specialied rubberco1pound.

7tt4. lfonso Verosa.+Manuel Maceda. It appears that the letter of 8

une 2/* 0as also si3ned b4 tt4. lfonso Verosa.@ ;Penalty clause. 9 "he failure of an entrustee toturn over the proceeds of the sale of the 3oods,docu1ents or instru1ents covered b4 a trust receiptto the e?tent of the a1ount o0in3 to the entrusteror as appears in the trust receipt or to return said3oods, docu1ents or instru1ents if the4 0ere notsold or disposed of in accordance 0ith the ter1s of

the trust receipt shall constitute the cri1e of estafa,punishable under the provisions of rticle "hree
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undred and :ifteen, Para3raph One $b% of ctNu1bered "hree "housand Ei3ht undred and:ifteen, as a1ended, other0ise 6no0n as theRevised Penal Code. If the violation or offense isco11itted b4 a corporation, partnership,association or other >uridical entities, the penalt4provided for in this Decree shall be i1posed uponthe directors, officers, e1plo4ees or other officials orpersons therein responsible for the offense, 0ithoutpre>udice to the civil liabilities arisin3 fro1 thecri1inal offense.;Records, pp. ++7(+++./I$id., p. ++7.2 Rollo, pp. 8(*. $Italiciation in the ori3inalAinternal citations o1itted%.22I$id*, p. 22.28MM Realt4 Devt. Corp. v. N'RC, *2- Phil. *$2//7%.2*I$id*2-Records, E?hs. ;D and M.;27--/ Phil. +/2 $8*%.2+).R. No. @-+, Dece1ber 2//8, 82+ SCR [email protected] v. Court of ppeals, supranote 27.2@ "he clause readsF ;In consideration of thePR#DEN"I' !N& ND "R#S" COMPN< co1pl4in30ith the fore3oin3, 0e >ointl4 and severall4 a3reeand underta6e to pa4 on de1and to thePR#DEN"I' !N& ND "R#S" COMPN< all su1s of1one4 0hich the said PR#DEN"I' !N& ND

"R#S" COMPN< 1a4 call upon us to pa4 arisin3 outof or pertainin3 to, andHor in an4 event connected0ith the default of andHor non(fulfill1ent in an4respect of the underta6in3 of the aforesaidFPI'IPPINE R


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Co1plainant is the President of :ive Star Mar6etin3 Corporation. On u3ust 88, 2//- herein respondent SheriffMala4o !. !antuas, pursuant to a Brit of E?ecution issued in Civil Case No. 2@2 filed a Notice of 'ev4 0ith theRe3ister of Deeds, Ili3an Cit4 over a parcel of land covered b4 "C" No. "(2/8/ and o0ned b4 :ive StarMar6etin3 Corporation. Co1plainant alle3ed that respondent sheriff, at the instance of plaintiff, for1er ud3e:elipe avier, proceeded to file the Notice of 'ev4 despite respondent sheriff5s 6no0led3e that the propert4 iso0ned b4 the corporation 0hich 0as not a part4 to the civil case.On ul4 *2, 2//7, the corporation throu3h the co1plainant reiterated to respondent sheriff that it 0as the o0nerof the propert4 and Rufino !ooc had no share or interest in the corporation. ence, the corporation de1andedthat respondent sheriff cancel the notice of lev4, other0ise the corporation 0ould ta6e the appropriate le3alsteps to protect its interest.Respondent sheriff, ho0ever, did not heed the corporation5s de1and inas1uch as on u3ust 8, 2/// thecorporation received a ;Notice of Sale on E?ecution of Real Propert4,; dated u3ust 22, 2///, coverin3 thesub>ect propert4. Respondent sheriff scheduled the public auction on u3ust *2, 2///. Conse=uentl4, thecorporation, to protect its ri3hts and interests, 0as co1pelled to file an action for uietin3 of "itle 0ith the R"C,!ranch - of Ili3an Cit4.Respondent sheriff, in his ans0er to the co1plaint filed a3ainst hi1 before the OC, said that he filed a Notice of'ev4 0ith the Re3ister of Deeds of Ili3an Cit4 on the share, ri3hts, interest and participation of Rufino !ooc in theparcel of land o0ned b4 :ive Star Mar6etin3 Corporation. Respondent sheriff clai1ed that Rufino !ooc is theo0ner of around 8 shares of stoc6 in said corporation accordin3 to a docu1ent issued b4 the Securities andE?chan3e Co11ission.Respondent sheriff stressed that the lev4 0as 1ade on the share, ri3hts andHor interest and participation 0hichRufino !ooc, as President and stoc6holder, 1a4 have in the parcel of land o0ned b4 :ive Star Mar6etin3Corporation. Clai1in3 that he 0as onl4 actin3 pursuant to his duties as sheriff, respondent cited Section 27, Rule*/ of the Rules of Court 0hich states that

? ? ? "he officer 1ust enforce an e?ecution of a 1one4 >ud31ent b4 lev4in3 on all the propert4, real andpersonal of ever4 na1e and nature 0hatsoever, and 0hich 1a4 be disposed of for value of the >ud31entdebtor not e?e1pt fro1 e?ecution.Real propert4 stoc6s, shares, debts, credits, and other personal propert4, or an4 interest in either real orpersonal propert4, 1a4 be levied upon in li6e 1anner and 0ith li6e effect as under a 0rit of e?ecution.

Respondent sheriff said that 0hile co1plainant Salvador !ooc 1ade a de1and for the cancellation of lev4 1ade,the for1er dee1ed it 0ise to have the >ud31ent satisfied in accordance 0ith Section */ of the Rules of CourtRespondent sheriff added that the trial court 0here the case for uietin3 of "itle filed b4 the corporation 0aspendin3 ordered the auction sale of the shares of stoc6 of Rufino !ooc. "he corporation alle3edl4 never=uestioned said order of the R"C.:inall4, respondent sheriff averred that the corporation is 1erel4 a du114 of Rufino !ooc and his brotherShei6din3 !ooc. Respondent sheriff sub1itted as an e?hibit an affidavit e?ecuted b4 Shei6din3 !ooc 0herein thelatter ad1itted that 0hen ud3e :elipe avier 0on in the civil case a3ainst Rufino !ooc, the latter si1ulated atransfer of his shares of stoc6 in :ive Star Mar6etin3 Corporation so that the propert4 1a4 not be levied upon. 2

Co1plainant, in his repl4 to respondent sheriffs co11ent belied the latter5s alle3ation that the corporationnever =uestioned the auction sale. Co1plainant averred that contrar4 to the respondent sheriff5s assertion, thetrial court in fact issued a restrainin3 order 0hich 0as 0ithdra0n after plaintiff5s counsel 1anifested that therespondent sheriff 0ould onl4 auction Rufino !ooc5s shares of stoc6 in the corporation and not the sub>ectpropert4.

"he OC found respondent sheriff liable for the char3es filed a3ainst hi1, statin3 that respondent sheriff actedin bad faith 0hen he auctioned the sub>ect propert4 inas1uch as ud3e Man3otara had alread4 0arned hi1 thatthe public auction should pertain onl4 to shares of stoc6 o0ned b4 Rufino !ooc in :ive Star Mar6etin3Corporation. Respondent sheriff, ho0ever, in violation of the order issued b4 ud3e Man3otara and in disre3ardof the 1anifestation filed b4 plaintiffs counsel that the sale should involve onl4 the shares of stoc6, proceeded toauction the sub>ect propert4. "he OC, thus, 1ade the reco11endation thatF

2% "he instant case be RE(DOC&E"ED as a re3ular ad1inistrative 1atterA and8% Respondent Sheriff Mala4o !. !antuas be :INED in the a1ount of "en "housand Pesos $P2,.% forconductin3 the auction sale in violation of the ter1s of the order issued b4 ctin3 Presidin3 ud3eMa1indiara P. Man3otara 0ith a S"ERN BRNIN) that a co11ission of the sa1e or si1ilar acts in thefuture shall be dealt 0ith 1ore severel4.

careful scrutin4 of the records sho0s that respondent sheriff, in filin3 a notice of lev4 on the sub>ect propert4as 0ell as in the certificate of sale, did not fail to 1ention that 0hat 0as bein3 levied upon and sold 0as0hatever shares, ri3hts, interests and participation Rufino !ooc, as president and stoc6holder in :ive StarMar6etin3 Corporation 1a4 have on sub>ect propert4. Respondent sheriff, ho0ever, overstepped his authorit40hen he disre3arded the distinct and separate personalit4 of the corporation fro1 that of Rufino !ooc asstoc6holder of the corporation b4 lev4in3 on the propert4 of the corporation. Respondent sheriff should not have1ade the lev4 based on 1ere con>ecture that since Rufino !ooc is a stoc6holder and officer of the corporation,then he 1i3ht have an interest or share in the sub>ect propert4.

It is settled that a corporation is clothed 0ith a personalit4 separate and distinct fro1 that of its stoc6holders. It1a4 not be held liable for the personal indebtedness of its stoc6holders. In the case of Del #osario vs* 'ascar( )r,80e i1posed the fine of P7,. on respondent sheriff !ascar for ;allocatin3 unto hi1self the po0er of thecourt to 5pierce the veil of corporate entit45 and i1providentl4 assu1in3 that since co1plainant Esperana delRosario is the treasurer of Miradel Develop1ent Corporation, the4 are one and the sa1e.; In the said case 0ereiterated the principle that the 1ere fact that one is a president of the corporation does not render the propert4he o0ns or possesses the propert4 of the corporation since the president, as an individual, and the corporationare separate entities.!ased on the fore3oin3, respondent Sheriff !antuas has clearl4 acted be4ond his authorit4 0hen he levied thepropert4 of :ive Star Mar6etin3 Corporation. "he fact, ho0ever, that respondent sheriff, in lev4in3 said propert4,had stated in the notice of lev4 as 0ell as in the certificate of sale that 0hat 0as bein3 levied upon and sold 0as0hatever ri3hts, shares interest andHor participation Rufino !ooc, as stoc6holder and president in thecorporation, 1a4 have on the sub>ect propert4, sho0s that respondent sheriff5s conduct 0as i1pelled partl4 b4

i3norance of Corporation 'a0 and partl4 b4 1ere overealousness to co1pl4 0ith his duties and not b4 bad faith


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or blatant disre3ard of the trial court5s order. ence, 0e dee1 that the penalt4 of a fine of :ive "housand Pesos$P7,.% to be i1posed on respondent sheriff 0ould suffice.BERE:ORE, respondent Mala4o !. !antuas, Sheriff IV of the R"C of Ili3an Cit4, !ranch *, is hereb4 :INED in thesu1 of :ive "housand Pesos $P7,.% 0ith the S"ERN BRNIN) that a repetition of the sa1e or si1ilar actsin the future 0ill be dealt 0ith 1ore severel4.SO ORDERED.'ellosillo( Mendo&a( +uisum$in" and 'uena( )) *(concur.

oo(no(%'2nne? ;D;.88+ SCR +@, +7 K2//8L.

TIR" "I#ISION>G.R. NO. 153535. y 2+, 2005?SOLI"BANK CORPORATION, Petitioners, v* MIN"ANAO ERROALLO! CORPORATION, S&o'%' ONG:8ON ONG and SOO:OK KIM ONG,@ TERESITA CU, and RICAR"O P. GUE#ARA and S&o'%,@@

#espondents." E C I S I O NPANGANIBAN,J.=

"o >ustif4 an a0ard for 1oral and e?e1plar4 da1a3es under rticles 2/ to 82 of the Civil Code $on hu1anrelations%, the clai1ants 1ust establish the other part45s 1alice or bad faith b4 clear and convincin3 evidence.

"he Case!efore us is a Petition for Revie02under Rule -7 of the Rules of Court, assailin3 the Dece1ber 82, 82

Decision

8

and the Ma4 27, 88 Resolution

*

of the Court of ppeals $C% in C()R CV No. +@-8. "he Cdisposed as follo0sFIN TE LIGT O ALL TE OREGOING, the appeal is "ISMISSE". "he Decision appealed fro1 isAIRME".;-

"he assailed Resolution, on the other hand, denied petitioner5s Motion for Reconsideration."he :acts"he C narrated the antecedents as follo0sF;"he Maria Cristina Che1ical Industries $MCCI% and three $*% &orean corporations, na1el4, the Ssan34on3Corporation, the Pohan3 Iron and Steel Co1pan4 and the Don3il Industries Co1pan4, 'td., decided to for3e a

>oint venture and establish a corporation, under the na1e of the Mindanao :erroallo4 Corporation $Corporationfor brevit4% 0ith principal offices in Ili3an Cit4. Ricardo P. )uevara 0as the President and Chair1an of the !oardof Directors of the Corporation. on3(Bon on3, the )eneral Mana3er of Ssan34on3 Corporation, 0as the Vice(President of the Corporation for :inance, Mar6etin3 and d1inistration. So 0as "eresita R. Cu. On Nove1ber 8+,2//, the !oard of Directors of the Corporation approved a 5Resolution5 authoriin3 its President and Chair1anof the !oard of Directors or "eresita R. Cu, actin3 to3ether 0ith on3(Bon on3, to secure an o1nibus line in thea33re3ate a1ount of P*,,. fro1 the Solidban6 ? ? ?.? ? ?;In the 1eanti1e, the Corporation started its operations so1eti1e in pril, 2//2. Its indebtedness ballooned toP8,-7*,++.+/ co1pared to its assets of onl4 P+7,-@+,.. On Ma4 82, 2//2, the Corporation secured anordinar4 ti1e loan fro1 the Solidban6 in the a1ount of P*,8,.. nother ordinar4 ti1e loan 0as 3rantedb4 the !an6 to the Corporation on Ma4 8, 2//2, in the a1ount of P2,,. or in the total a1ount ofP7,,., due on ul4 27 and 8+, 2//2, respectivel4.;o0ever, the Corporation and the !an6 a3reed to consolidate and, at the sa1e ti1e, restructure the t0o $8%loan avail1ents, the sa1e pa4able on Septe1ber 8, 2//2. "he Corporation e?ecuted 5Pro1issor4 Note No. /+(/2(+7(+5 in favor of the !an6 evidencin3 its loan in the a1ount of P7,2+,., pa4able on Septe1ber 8,2//2. "eresita Cu and on3(Bon on3 affi?ed their si3natures on the note. "o secure the pa41ent of the saidloan, the Corporation, throu3h on3(Bon on3 and "eresita Cu, e?ecuted a 5Deed of ssi3n1ent5 in favor of the!an6 coverin3 its ri3hts, title and interest to the follo0in3F5"he entire proceeds of drafts dra0n under Irrevocable 'etter of Credit No. M(S(-2(88 opened 0ith "heMitsubishi !an6 'td. 5"o64o dated une 2*, 2//2 for the account of Ssan34on3 apan Corporation, @:. Matsuo6a(

"a1ura(Cho !ld3., 88(2, 7(Cho1e, Shi1bashi, Minato(&u, "o64o, apan up to the e?tent of #ST2/@,+@/.5;"he Corporation li6e0ise e?ecuted a 5uedan5 , b4 0a4 of additional securit4, under 0hich the Corporationbound and obli3ed to 6eep and hold, in trust for the !an6 or its Order, 5:errosilicon for #ST2/@,+@/.5 . on3(Bon on3 and "eresita Cu affi?ed their si3natures thereon for the Corporation. "he Corporation, also, throu3h

on3(Bon on3 and "eresita Cu, e?ecuted a 5"rust Receipt 3ree1ent5, b4 0a4 of additional securit4 for saidloan, the Corporation underta6in3 to hold in trust, for the !an6, as its propert4, the follo0in3F52. "E MI"S#!ISI !N& '"D., "o64o 'HC No. M(S(-2(88 for account of Ssan34on3 apan Corporation,

"o64o, apan for #ST2/@,+@/. :errosilicon to e?pire Septe1ber 8, 2//2.58. SEC #EDN NO. /2(-@+ dated une 8+, 2//2 coverin3 the follo0in3F:errosilicon for #ST2/@,+@/.5

;o0ever, shortl4 after the e?ecution of the said deeds, the Corporation stopped its operations. "he Corporationfailed to pa4 its loan avail1ents fro1 the !an6 inclusive of accrued interest. On :ebruar4 22, 2//8, the !an6sent a letter to the Corporation de1andin3 pa41ent of its loan avail1ents inclusive of interests due. "heCorporation failed to co1pl4 0ith the de1and of the !an6. On Nove1ber 8*, 2//8, the !an6 sent another letterto the KCorporationL de1andin3 pa41ent of its account 0hich, b4 Nove1ber 8*, 2//8, had a1ounted toP@,8*,/2*.**. "he Corporation a3ain failed to co1pl4 0ith the de1and of the !an6.;On anuar4 +, 2//*, the !an6 filed a co1plaint a3ainst the Corporation 0ith the Re3ional "rial Court of Ma6atiCit4, entitled and doc6eted as 5Solid$an Corporation v* Mindanao Ferroalloy Corporation( Sps* )on"-.on /on"and t!e Sps* 0eresita #* Cu( Civil Case No. /*(*5 for 5Su1 of Mone45 0ith a plea for the issuance of a 0rit ofpreli1inar4 attach1ent. ? ? ?? ? ?;#nder its 51ended Co1plaint5, the Plaintiff alle3ed that it i1pleaded Ricardo )uevara and his 0ife asDefendants because, Ka1on3 othersLF
http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt1http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt2http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt3http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt4http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt1http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt2http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt3http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt4


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5Defendants ON)(BON ON) and "ERESI" C#, are the Vice(Presidents of defendant corporation, and also1e1bers of the co1pan45s !oard of Directors. "he4 are i1pleaded as >oint and solidar4 debtors of KpetitionerLban6 havin3 si3ned the Pro1issor4 Note, uedan, and "rust Receipt a3ree1ents 0ith KpetitionerL, in this case.? ? ? ? ? ? ? ? ?5;KPetitionerL li6e0ise filed a cri1inal co1plaint ? ? ? entitled and doc6eted as 5Solidban6 Corporation v. Ricardo)uevara, "eresita R. Cu and on3 Bon on3 ? ? ? for 5Violation of P.D. 2275. On pril 2-, 2//*, the investi3atin3Prosecutor issued a 5Resolution5 findin3 no probable cause for violation of P.D. 227 a3ainst the Respondents asthe 3oods covered b4 the =uedan 50ere none?istent5 F? ? ?;In their ns0er to the co1plaint Kin the civil caseL, the Spouses on3(Bon on3 and Soo(o6 &i1 on3 alle3ed,inter alia, that KpetitionerL had no cause of action a3ainst the1 asF5? ? ? the clean loan of P7.2 M obtained 0as a corporate underta6in3 of defendant MIN:CO e?ecuted throu3hits dul4 authoried representatives, Ms. "eresita R. Cu and Mr. on3(Bon on3, both Vice Presidents then ofMIN:CO. ? ? ?.5? ? ?;KOn their part, respondentsL "eresita Cu and Ricardo )uevara alle3ed that KpetitionerL had no cause of actiona3ainst the1 becauseF $a% Ricardo )uevara did not si3n an4 of the docu1ents in favor of KpetitionerLA $b%

"eresita Cu si3ned the 5Pro1issor4 Note5 , 5Deed of ssi3n1ent5 , 5"rust Receipt5 and 5uedan5 in blan6 and1erel4 as representative and, hence, for and in behalf of the Defendant Corporation and, hence, 0as notpersonall4 liable to KpetitionerL.;In the interi1, the Corporation filed, on une 8, 2//-, a 5Petition5 , 0ith the Re3ional "rial Court of Ili3an Cit4,for 5Voluntar4 Insolvenc45 ? ? ?.? ? ?;ppended to the Petition 0as a list of its creditors, includin3 KpetitionerL, for the a1ount of P,2--,/2+.7. "heCourt issued an Order, on ul4 28, 2//-, findin3 the Petition sufficient in for1 and substance ? ? ?.? ? ?;In vie0 of said develop1ent, the Court issued an Order, in Civil Case No. /*(*, suspendin3 the proceedin3sas a3ainst the Defendant Corporation but orderin3 the proceedin3s to proceed as a3ainst the individualdefendants ? ? ?.? ? ?;On Dece1ber 2, 2///, the Court rendered a Decision dis1issin3 the co1plaint for lac6 of cause of action ofKpetitionerL a3ainst the Spouses on3(Bon on3, "eresita Cu and the Spouses Ricardo )uevara, ? ? ?.? ? ?;In dis1issin3 the co1plaint a3ainst the individual KrespondentsL, the Court a uo found and declared thatKpetitionerL failed to adduce a 1orsel of evidence to prove the personal liabilit4 of the said KrespondentsL for theclai1s of KpetitionerL and that the latter i1pleaded the KrespondentsL, in its co1plaint and a1ended co1plaint,solel4 to put 1ore pressure on the Defendant Corporation to pa4 its obli3ations to KpetitionerL.;KPetitionerL ? ? ? interposed an appeal, fro1 the Decision of the Court a uoand posed, for ? ? ? resolution, theissue of 0hether or not the individual KrespondentsL, are >ointl4 and severall4 liable to KpetitionerL for the loanavail1ents of the KrespondentL Corporation, inclusive of accrued interests and penalties.;In the 1eanti1e, on 1otion of KpetitionerL, the Court set aside its Order, dated :ebruar4 8, 2//7, suspendin3the proceedin3s as a3ainst the KrespondentL Corporation. KPetitionerL filed a 5Motion for Su11ar4 ud31ent5a3ainst the KrespondentL Corporation. On :ebruar4 8, 8, the Court rendered a 5Su11ar4 ud31ent5 a3ainstthe KrespondentL Corporation, the decretal portion of 0hich reads as follo0sF5BERE:ORE, pre1ises considered, this Court hereb4 resolves to 3ive due course to the 1otion for su11ar4

>ud31ent filed b4 herein KpetitionerL. Conse=uentl4, >ud31ent is hereb4 rendered in favor of KPetitionerLSO'ID!N& CORPOR"ION and a3ainst KRespondentL MINDNO :ERRO''O< CORPOR"ION, orderin3 thelatter to pa4 the for1er the a1ount of P@,+,++.@, representin3 the outstandin3 balance of the sub>ect loanas of 8- Septe1ber 2//-, plus stipulated interest at the rate of 2+J per annu1 to be co1puted fro1 the

aforesaid date until full4 paid to3ether 0ith an a1ount e=uivalent to 28J of the total a1ount due each 4earfro1 8- Septe1ber 2//- until full4 paid. 'astl4, said KrespondentL is hereb4 ordered to pa4 KpetitionerL thea1ount of P87,. to KpetitionerL as reasonable attorne45s fees as 0ell as cost of liti3ation.;7In its appeal, petitioner ar3ued that $2% it had adduced the re=uisite evidence to prove the solidar4 liabilit4 of theindividual respondents, and $8% it 0as not liable for their counterclai1s for da1a3es and attorne45s fees.Rulin3 of the Court of ppealsffir1in3 the R"C, the appellate court ruled that the individual respondents 0ere not solidaril4 liable 0ith theMindanao :erroallo4 Corporation, because the4 had acted 1erel4 as officers of the corporation, 0hich 0as thereal part4 in interest. Respondent )uevara 0as not even a si3nator4 to the Pro1issor4 Note, the "rust Receipt3ree1ent, the Deed of ssi3n1ent or the uedanA he 0as 1erel4 authoried to represent Minfaco to ne3otiate0ith and secure the loans fro1 the ban6. On the other hand, the C noted that Respondents Cu and on3 hadnot si3ned the above docu1ents as co1a6ers, but as si3natories in their representative capacities as officers ofMinfaco.

'i6e0ise, the C held that the individual respondents 0ere not liable to petitioner for da1a3es, si1pl4 because$2% the4 had not received the proceeds of the irrevocable 'etter of Credit, 0hich 0as the sub>ect of the Deed ofssi3n1entA and $8% the 3oods sub>ect of the "rust Receipt 3ree1ent had been found to be none?istent. "heappellate court too6 >udicial notice of the practice of ban6s and financin3 institutions to investi3ate, e?a1ineand assess all properties offered b4 borro0ers as collaterals, in order to deter1ine the feasibilit4 and advisabilit4of 3rantin3 loans. !efore a3reein3 to the consolidation of Minfaco5s loans, it presu1ed that petitioner had doneits ho1e0or6.s to the a0ard of da1a3es to the individual respondents, the C upheld the trial court5s findin3s that it 0asclearl4 unfair on petitioner5s part to have i1pleaded the 0ives of )uevara and on3, because the 0o1en 0erenot priv4 to an4 of the transactions bet0een petitioner and Minfaco. #nder rticles 2/, 8 and 888/ of the CivilCode, such rec6less and 0anton act of pressurin3 individual respondents to settle the corporation5s obli3ations isa 3round to a0ard 1oral and e?e1plar4 da1a3es, as 0ell as attorne45s fees.ence this Petition.+

IssuesIn its Me1orandu1, petitioner raises the follo0in3 issuesF
http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt5http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt6http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt5http://www.chanrobles.com/scdecisions/jurisprudence2005/jul2005/153535.php#fnt6


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;. Bhether or not there is a1ple evidence on record to support the >oint and solidar4 liabilit4 of individualrespondents 0ith Mindanao :erroallo4 Corporation.;!. In the absence of >oint and solidar4 liabilit4K,L 0ill the provision of rticle 28 in relation to rticle 28@ ofthe Ne0 Civil Code providin3 for >oint liabilit4 be applicable to the case at bar.;C. Ma4 ban6 practices be the proper sub>ect of >udicial notice under Sec. 2 KofL Rule 28/ of the Rules of Court.;D. Bhether or not there is evidence to sustain the clai1 that respondents 0ere i1pleaded to appl4 pressureupon the1 to pa4 the obli3ations in lieu of MIN:CO that is declared insolvent.;E. Bhether or not there are sufficient bases for the a0ard of various 6inds of and substantial a1ounts inda1a3es includin3 pa41ent for attorne45s fees.;:. Bhether or not respondents co11itted fraud and 1isrepresentations and acted in bad faith.;). Bhether or not the inclusion of respondents spouses is proper under certain circu1stances and supported b4prevailin3 >urisprudence.;@In su1, there are t0o 1ain =uestionsF $2% 0hether the individual respondents are liable, either >ointl4 orsolidaril4, 0ith the Mindanao :erroallo4 CorporationA and $8% 0hether the a0ard of da1a3es to the individualrespondents is valid and le3al.

"he Court5s Rulin3"he Petition is partl4 1eritorious.:irst IssueFLia$ility of Individual #espondentsPetitioner ar3ues that the individual respondents 0ere >ointl4 or solidaril4 liable 0ith Minfaco, either becausetheir participation in the loan contract and the loan docu1ents 1ade the1 co1a6ersA or because the4co11itted fraud and deception, 0hich >ustifies the piercin3 of the corporate veil.

"he first contention hin3es on certain factual deter1inations 1ade b4 the trial and the appellate courts. "hesetribunals found that, althou3h he had not si3ned an4 docu1ent in connection 0ith the sub>ect transaction,Respondent )uevara 0as authoried to represent Minfaco in ne3otiatin3 for a P* 1illion loan fro1 petitioner.s to Cu and on3, it 0as deter1ined, a1on3 others, that their si3natures on the loan docu1ents other thanthe Deed of ssi3n1ent 0ere not prefaced 0ith the 0ord ;b4,; and that there 0ere no other si3natures toindicate 0ho had si3ned for and on behalf of Minfaco, the principal borro0er. In the Pro1issor4 Note, the4si3ned above the printed na1e of the corporation ( ( on the space provided for ;Ma6erH!orro0er,; not on thatprovided for ;Co(1a6er.;Petitioner has not sho0n an4 e?ceptional circu1stance that sanctions the disre3ard of these findin3s of fact,0hich are thus dee1ed final and conclusive upon this Court and 1a4 not be revie0ed on appeal.1o Personal Lia$ilityfor Corporate Deeds!asic is the principle that a corporation is vested b4 la0 0ith a personalit4 separate and distinct fro1 that ofeach person co1posin3/or representin3 it.2E=uall4 funda1ental is the 3eneral rule that corporate officerscannot be held personall4 liable for the conse=uences of their acts, for as lon3 as these are for and on behalf ofthe corporation, 0ithin the scope of their authorit4 and in 3ood faith. 22"he separate corporate personalit4 is ashield a3ainst the personal liabilit4 of corporate officers, 0hose acts are properl4 attributed to the corporation.280ramat Mercantile v* Court of Appeals2*held thusF;Personal liabilit4 of a corporate director, trustee or officer alon3 $althou3h not necessaril4% 0ith the corporation1a4 so validl4 attach, as a rule, onl4 0hen552. e assents $a% to a patentl4 unla0ful act of the corporation, or $b% for bad faith or 3ross ne3li3ence indirectin3 its affairs, or $c% for conflict of interest, resultin3 in da1a3es to the corporation, its stoc6holders orother personsA58. e consents to the issuance of 0atered stoc6s or 0ho, havin3 6no0led3e thereof, does not forth0ith file 0iththe corporate secretar4 his 0ritten ob>ection theretoA5*. e a3rees to hold hi1self personall4 and solidaril4 liable 0ith the corporationA or5-. e is 1ade, b4 a specific provision of la0, to personall4 ans0er for his corporate action. 5;

Consistent 0ith the fore3oin3 principles, 0e sustain the C5s rulin3 that Respondent )uevara 0as not personall4liable for the contracts. First, it is be4ond cavil that he 0as dul4 authoried to act on behalf of the corporationAand that in ne3otiatin3 the loans 0ith petitioner, he did so in his official capacit4. Second, no sufficient andspecific evidence 0as presented to sho0 that he had acted in bad faith or 3ross ne3li3ence in that ne3otiation.0!ird, he did not hold hi1self personall4 and solidaril4 liable 0ith the corporation. Neither is there an4 specificprovision of la0 1a6in3 hi1 personall4 ans0erable for the sub>ect corporate acts.On the other hand, Respondents Cu and on3 si3ned the Pro1issor4 Note 0ithout the 0ord ;b4; precedin3 theirsi3natures, atop the desi3nation ;Ma6erH!orro0er; and the printed na1e of the corporation, as follo0sF

$S3d% CuHon3$Ma6erH!orro0er%MINDNO :ERRO''Oect to the condition that it shall use the said a1ount for its intended purpose.*. "hat the "reasurer of the MSM) shall be authoried to collect fro1 the *7+ union 1e1bers the a1ountof P7. as penalt4 for their failure to attend the 3eneral 1e1bership asse1bl4 on pril 2@, 2/.o0ever, if the MSM) Officers could present the individual 0ritten authoriations of the *7+ union1e1bers, then the co1pan4 is obli3ed to deduct fro1 the salaries of the *7+ union 1e1bers the P7.fine.+

On appeal, Director Pura(:errer Calle>a issued a Resolution dated :ebruar4 @, 2//, 0hich 1odified in part theearlier disposition, to 0itF

BERE:ORE, pre1ises considered, the appealed portion is hereb4 1odified to the e?tent that theco1pan4 should re1it the a1ount of five thousand pesos $P7,.% of the P2,. 1onthl4 laboreducation pro3ra1 fund to #')BP and the other P7,. to MSM), both unions to use the sa1e for itsintended purpose.@

Mean0hile, on Septe1ber 8, 2/, several local unions $"op :or1, M. )reenfield, )rosb4, "riu1ph International,)eneral Millin3, and Vander ons chapters% filed a Petition for udit and E?a1ination of the federation andeducation funds of #')BP 0hich 0as 3ranted b4 Med(rbiter Rasidali bdullah on Dece1ber 87, 2/ in anOrder 0hich directed the audit and e?a1ination of the boo6s of account of #')BP.On Septe1ber *, 2/, the officials of #')BP called a Special National E?ecutive !oard Meetin3 at Nasipit,3usan del Norte 0here a Resolution 0as passed placin3 the MSM) under trusteeship and appointin3respondent Cesar Clarete as ad1inistrator.On October 8@, 2/, the said ad1inistrator 0rote the respondent co1pan4 infor1in3 the latter of itsdesi3nation of a certain lfredo &alin36in3 as local union president and ;disauthoriin3; the incu1bent unionofficers fro1 representin3 the e1plo4ees. "his action b4 the national federation 0as protested b4 the petitionersin a letter to respondent co1pan4 dated Nove1ber 22, 2/.On Nove1ber 2*, 2/, the petitioner union officers received identical letters fro1 the ad1inistrator re=uirin3the1 to e?plain 0ithin @8 hours 0h4 the4 should not be re1oved fro1 their office and e?pelled fro1 union1e1bership.On Nove1ber 8+, 2/, petitioners repliedF

$a% uestionin3 the validit4 of the alle3ed National E?ecutive !oard Resolution placin3 their union undertrusteeshipA$b% ustif4in3 the action of their union in declarin3 a 3eneral autono14 fro1 #')BP due to the latter5sinabilit4 to 3ive proper educational, or3aniational and le3al services to its affiliates and the pendenc4 ofthe audit of the federation fundsA$c% dvisin3 that their union did not co11it an4 act of dislo4alt4 as it has re1ained an affiliate of #')BPA$d% )ivin3 #')BP a period of five $7% da4s to cease and desist fro1 further co11ittin3 acts of coercion,inti1idation and harass1ent.

o0ever, as earl4 as Nove1ber 82, 2/, the officers 0ere e?pelled fro1 the #')BP. "he ter1ination letterreadF

Effective toda4, Nove1ber 82, 2/, 4ou are hereb4 e?pelled fro1 #NI"ED '#M!ER ND )ENER'BOR&ERS O: "E PI'IPPINES $#')BP% for co11ittin3 acts of dislo4alt4 andHor acts ini1ical to theinterest and violative to the Constitution and b4(la0s of 4our federation.


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for the dis1issal of the said union officers. So1e union 1e1bers left their 0or6 posts and 0al6ed out of theco1pan4 pre1ises.On the other hand, the :ederation, havin3 achieved its ob>ective, 0ithdre0 the Notice of Stri6e filed 0ith theNCM!.On March , 2//, the petitioners filed a Notice of Stri6e 0ith the NCM!, DO'E, Manila, doc6eted as Case No.NCM!(NCR(NS(*(82+(/, alle3in3 the follo0in3 3rounds for the stri6eF

$a% Discri1ination$b% Interference in union activities$c% Mass dis1issal of union officers and shop ste0ards$d% "hreats, coercion and inti1idation$e% #nion bustin3

"he follo0in3 da4, March /, 2//, a stri6e vote referendu1 0as conducted and out of 8, 2* union 1e1bers0ho cast their votes, 8,+ 1e1bers voted to declare a stri6e.On March 2, 2//, the thirt4 $*% dis1issed union officers filed an ur3ent petition, doc6eted as Case No. NCM!(NCR(NS(*(82+(/, 0ith the Office of the Secretar4 of the Depart1ent of 'abor and E1plo41ent pra4in3 for thesuspension of the effects of their ter1ination fro1 e1plo41ent. o0ever, the petition 0as dis1issed b4 thenSecretar4 :ran6lin Drilon on pril 22, 2//, the pertinent portion of 0hich stated as follo0sF

t this point in ti1e, it is clear that the dispute at M. )reenfield is purel4 an intra(union 1atter. No 1assla4(off is evident as the ter1inations have been li1ited to those alle3edl4 leadin3 the secessionist 3roupleavin3 MSM)(#')BP to for1 a union under the &M#. . . .? ? ? ? ? ? ? ? ?BERE:ORE, findin3 no sufficient >urisdiction to 0arrant the e?ercise of our e?traordinar4 authorit4 underrticle 8@@ $b% of the 'abor Code, as a1ended, the instant Petition is hereb4 DISMISSED for lac6 of 1erit.SO ORDERED.22

On March 2* and 2-, 2//, a total of @ union shop ste0ards 0ere placed under preventive suspension b4respondent co1pan4. "his pro1pted the union 1e1bers to a3ain sta3e a 0al6(out and resulted in the officialdeclaration of stri6e at around *F* in the afternoon of March 2-, 2//. "he stri6e 0as attended 0ith violence,force and inti1idation on both sides resultin3 to ph4sical in>uries to several e1plo4ees, both stri6in3 and non(stri6in3, and da1a3e to co1pan4 properties.

"he e1plo4ees 0ho participated in the stri6e and alle3edl4 fi3ured in the violent incident 0ere placed underpreventive suspension b4 respondent co1pan4. "he co1pan4 also sent return(to(0or6 notices to the ho1eaddresses of the stri6in3 e1plo4ees thrice successivel4, on March 8@, pril and pril *2, 2//, respectivel4.o0ever, respondent co1pan4 ad1itted that onl4 8+2 e1plo4ees 0ere eventuall4 accepted bac6 to 0or6.

"hose 0ho did not respond to the return(to(0or6 notice 0ere sent ter1ination letters dated Ma4 2@, 2//,reproduced belo0F

M. )reenfield Inc., $!%&1. 2-, Merville Rd., ParaXa=ue, M.M.Ma4 2@, 2//? ? ? ? ? ? ? ? ?On March 2-, 2//, 0ithout >ustifiable cause and 0ithout due notice, 4ou left 4our 0or6assi3n1ent at the pre>udice of the Co1pan45s operations. On March 8@, pril 22, and pril 82,2//, 0e sent 4ou notices to report to the Co1pan4. Inspite of 4our receipt of said notices, 0ehave not heard fro1 4ou up to this date.ccordin3l4, for 4our failure to report, it is construed that 4ou have effectivel4 abandoned 4oure1plo41ent and the Co1pan4 is, therefore, constrained to dis1iss 4ou for said cause.Ver4 trul4 4ours,M. )REEN:IE'D, INC., $!%!4F

BENE' S"EPEN 'I)O"

sst. RD Mana3er28On u3ust @, 2//, the petitioners filed a verified co1plaint 0ith the rbitration !ranch, National Capital Re3ion,DO'E, Manila, doc6eted as Case No. NCR((/(-2//(/, char3in3 private respondents of unfair labor practice0hich consists of union bustin3, ille3al dis1issal, ille3al suspension, interference in union activities,discri1ination, threats, inti1idation, coercion, violence, and oppression.fter the filin3 of the co1plaint, the lease contracts on the respondent co1pan45s office and factor4 at MervilleSubdivision, ParaXa=ue e?pired and 0ere not rene0ed. #pon de1and of the o0ners of the pre1ises, theco1pan4 0as co1pelled to vacate its office and factor4.

"hereafter, the co1pan4 transferred its ad1inistration and accountHclient servicin3 depart1ent at :P(RS!SIndustrial Par6 in "a3ui3, Metro Manila. :or failure to find a suitable place in Metro Manila for relocation of itsfactor4 and 1anufacturin3 operations, the co1pan4 0as constrained to 1ove the said depart1ents to "acloban,'e4te. ence, on pril 2+, 2//, respondent co1pan4 accordin3l4 notified its e1plo4ees of a te1porar4shutdo0n in operations. E1plo4ees 0ho 0ere interested in relocatin3 to "acloban 0ere advised to enlist on or

before pril 8*, 2//."he co1plaint for unfair labor practice 0as assi3ned to 'abor rbiter Manuel suncion but 0as thereafterreassi3ned to 'abor rbiter Cresencio Ra1os 0hen respondents 1oved to inhibit hi1 fro1 actin3 on the case.On Dece1ber 27, 2//8, findin3 the ter1ination to be valid in co1pliance 0ith the union securit4 clause of thecollective bar3ainin3 a3ree1ent, 'abor rbiter Cresencio Ra1os dis1issed the co1plaint.Petitioners then appealed to the N'RC. Durin3 its pendenc4, Co11issioner Ro1eo Puton3 retired fro1 theservice, leavin3 onl4 t0o co11issioners, Co11issioner Vicente Veloso III and on. Chair1an !artolo1e Caralein the :irst Division. Bhen Co11issioner Veloso inhibited hi1self fro1 the case, Co11issioner oa=uin "anodraof the "hird Division 0as te1poraril4 desi3nated to sit in the :irst Division for the proper disposition of the case.

"he :irst Division affir1ed the 'abor rbiter5s disposition. Bith the denial of their 1otion for reconsideration onanuar4 8, 2//-, petitioners elevated the case to this Court, attributin3 3rave abuse of discretion to publicrespondent N'RC inF

I. #PO'DIN) "E DISMISS' O: "E #NION O::ICERS !< RESPONDEN" COMPN< S V'IDA

II. O'DIN) "" "E S"RI&E S")ED !< "E PE"I"IONERS S I''E)'A


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23/76

Dis1issals 1ust not be arbitrar4 and capricious. Due process 1ust be observed in dis1issin3 ane1plo4ee because it affects not onl4 his position but also his 1eans of livelihood. E1plo4ers shouldrespect and protect the ri3hts of their e1plo4ees, 0hich include the ri3ht to labor.

In the case under scrutin4, petitioner union officers 0ere e?pelled b4 the federation for alle3edl4 co11ittin3acts of dislo4alt4 andHor ini1ical to the interest of #')BP and in violation of its Constitution and !4(la0s. #ponde1and of the federation, the co1pan4 ter1inated the petitioners 0ithout conductin3 a separate andindependent investi3ation. Respondent co1pan4 did not in=uire into the cause of the e?pulsion and 0hether ornot the federation had sufficient 3rounds to effect the sa1e. Rel4in3 1erel4 upon the federation5s alle3ations,respondent co1pan4 ter1inated petitioners fro1 e1plo41ent 0hen a separate in=uir4 could have revealed ifthe federation had acted arbitraril4 and capriciousl4 in e?pellin3 the union officers. Respondent co1pan45salle3ation that petitioners 0ere accorded due process is belied b4 the ter1ination letters received b4 thepetitioners 0hich state that the dis1issal shall be i11ediatel4 effective.s held in the aforecited case of CariXo, ;the ri3ht of an e1plo4ee to be infor1ed of the char3es a3ainst hi1and to reasonable opportunit4 to present his side in a controvers4 0ith either the co1pan4 or his o0n union isnot 0iped a0a4 b4 a union securit4 clause or a union shop clause in a collective bar3ainin3 a3ree1ent. ne1plo4ee is entitled to be protected not onl4 fro1 a co1pan4 0hich disre3ards his ri3hts but also fro1 his o0nunion the leadership of 0hich could 4ield to the te1ptation of s0ift and arbitrar4 e?pulsion fro1 1e1bershipand 1ere dis1issal fro1 his >ob.Bhile respondent co1pan4 1a4 validl4 dis1iss the e1plo4ees e?pelled b4 the union for dislo4alt4 under theunion securit4 clause of the collective bar3ainin3 a3ree1ent upon the reco11endation b4 the union, thisdis1issal should not be done hastil4 and su11aril4 thereb4 erodin3 the e1plo4ees5 ri3ht to due process, self(or3aniation and securit4 of tenure. "he enforce1ent of union securit4 clauses is authoried b4 la0 providedsuch enforce1ent is not characteried b4 arbitrariness, and al0a4s 0ith due process. 2+Even on the assu1ptionthat the federation had valid 3rounds to e?pel the union officers, due process re=uires that these union officersbe accorded a separate hearin3 b4 respondent co1pan4.In its decision, public respondent also declared that if co1plainants $herein petitioners% have an4 recourse inla0, their ri3ht of action is a3ainst the federation and not a3ainst the co1pan4 or its officers, rel4in3 on thefindin3s of the 'abor Secretar4 that the issue of e?pulsion of petitioner union officers b4 the federation is apurel4 intra(union 1atter.3ain, such a contention is untenable. Bhile it is true that the issue of e?pulsion of the local union officers isori3inall4 bet0een the local union and the federation, hence, intra(union in character, the issue 0as later onconverted into a ter1ination dispute 0hen the co1pan4 dis1issed the petitioners fro1 0or6 0ithout the benefitof a separate notice and hearin3. s a 1atter of fact, the records reveal that the ter1ination 0as effective onthe sa1e da4 that the ter1ination notice 0

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