GLORIA V.

GOMEZ
vs.
PNOC DEVELOPMENT AND MANAGEMENT CORPORATION (PDMC) - (formerly
known as FILOIL DEVELOPMENT AND MANAGEMENT CORPORATION [FDMC])
G.R. No. 174044, November 27, 2009

FACTS:

Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of

Petron Corporation, then a government-owned corporation.  With Petron’s
privatization, she availed of the company’s early retirement program and left that
organization on April 30, 1994.  On the following day, May 1, 1994, however, Filoil
Refinery Corporation (Filoil), also a government-owned corporation, appointed her its
corporate secretary and legal counsel, with the same managerial rank, compensation,
and benefits that she used to enjoy at Petron. However, the privatization did not
materialize so Gomez continued to serve as corporate secretary of respondent PDMC. 
On March 29, 1999 the new board of directors of respondent PDMC removed
petitioner Gomez as corporate secretary.  Further, at the board’s meeting on October
21, 1999 the board questioned her continued employment as administrator.  In
answer, she presented the former president’s May 24, 1998 letter that extended her
term.  Dissatisfied with this, the board sought the advice of its legal department,
which expressed the view that Gomez’s term extension was an ultra vires act of the
former president.  It reasoned that, since her position was functionally that of a vice-
president or general manager, her term could be extended under the company’s by-
laws only with the approval of the board.  The legal department held that her “de
facto” tenure could be legally put to an end. Petitioner Gomez for her part conceded
that as corporate secretary, she served only as a corporate officer.  But, when they
named her administrator, she became a regular managerial employee.  Consequently,
the respondent PDMC’s board did not have to approve either her appointment as such
or the extension of her term in 1998.

ISSUE:

Whether or not Gomez is an ordinary employee whose complaint is within the

jurisdiction of the NLRC.

RULING:

YES.

The relationship of a person to a corporation, whether as officer or agent or

employee, is not determined by the nature of the services he performs but by the
incidents of his relationship with the corporation as they actually exist. That the
employee served concurrently as corporate secretary for a time is immaterial. A
corporation is not prohibited from hiring a corporate officer to perform services under
circumstances which will make him an employee. Indeed, it is possible for one to have
a dual role of officer and employee.  NLRC has jurisdiction over a complaint filed by
one who served both as corporate officer and employee, when the money claims were
made as an employee and not as a corporate officer.
 E. B. VILLAROSA & PARTNER CO., LTD.
vs.
HON. HERMINIO I. BENITO, in his capacity as Presiding Judge, RTC, Branch 132,
Makati City and IMPERIAL DEVELOPMENT CORPORATION
G.R. No. 136426, August 6, 1999

FACTS:

Petitioner E.B. Villarosa & Partner Co., Ltd. is a limited partnership. Petitioner
and private respondent executed a Deed of Sale with Development Agreement wherein
the former agreed to develop certain parcels of land belonging to the latter into a
housing subdivision for the construction of low cost housing units. They further
agreed that in case of litigation regarding any dispute arising therefrom, the venue
shall be in the proper courts of Makati. Subsequently, a complaint for breach of
contract was filed by the respondent against the plaintiff allegedly for failure of the
latter to comply with its contractual obligation in that, other than a few unfinished low
cost houses, there were no substantial developments. Summons, together with the
complaint, were served upon the defendant, through its Branch Manager Engr.
Wendell Sabulbero. The respondent moved for dismissal on the ground that there was
improper service of summons.
The trial court rendered decision denying the motion to dismiss. Hence this petition.

ISSUE:

Whether or not there was imporoper service of summons.

RULING:

YES.

Section 13, Rule 14 of the Rules of Court which provided that: Service upon
private domestic corporation or partnership, If the defendant is a corporation
organized under the laws of the Philippines or a partnership duly registered, service
may be made on the president, manager, secretary, cashier, agent, or any of its
directors.
The Court ruled that under such provision, it is clear upon whom the service of
summons should be made. The designation of persons or officers who are authorized
to accept summons for a domestic corporation or partnership is now limited and more
clearly specified. The rule now states "general manager" instead of only "manager";
"corporate secretary" instead of "secretary"; and "treasurer" instead of "cashier." The
phrase "agent, or any of its directors" is conspicuously deleted in the new rule. In this
case, since the summons was served upon a branch manager, who is not authorized
to accept the same, there was improper service of summons.
 SUPREME STEEL PIPE CORPORATION and REGAN SY
vs. ROGELIO BARDAJE
G.R. No. 170811, April 24, 2007

FACTS:

Petitioner Supreme Steel Pipe Corporation (SSPC) was primarily engaged in the
business of manufacturing steel pipes. It employed respondent Rogelio Bardaje as a
warehouseman on March 14, 1994. SSPC employees were required to wear a uniform
(a yellow t-shirt with a logo and the marking "Supreme") while at work.
Due to an incident, his employment was terminated on the ground of multiple
infractions of company rules. He thus filed a case for illegal dismissal. The LA ruled for
the respondent, while the NLRC reversed said decision. The CA ruled favoring the LA.

ISSUE:

Whether or not Regan Sy, the president of SSPC, may be held solidarily liable
with the latter.

RULING:

NO.

It appears that respondent impleaded SSPC President Regan Sy only because

he is an officer/agent of the company. However, the court ruled that he cannot be
made solidarily liable because for the termination of respondent’s employment, since
there is no showing that the dismissal was attended with malice or bad faith. The rule
still stand that the liabilities of a corporation should not be directly imputed to its
officers and it shall be borne entirely by the corporation itself.
 CAGAYAN VALLEY DRUG CORPORATION
vs.
COMMISSIONER OF INTERNAL REVENUE
G.R. No. 151413, February 13, 2008

FACTS:

Petitioner is a duly licensed retailer of medicine and other pharmaceutical

products. In compliance with Revenue Regulation No. (RR) 2-94, petitioner treated the
20% sales discounts granted to qualified senior citizens in 1995 as deductions from
the gross sales in order to arrive at the net sales, instead of treating them as tax credit
as provided by Section 4 of RA 7432. however, petitioner filed with the Bureau of
Internal Revenue (BIR) a claim for tax refund/tax credit of the full amount of the 20%
sales discount it granted to senior citizens for the year 1995, allegedly totalling to
P123,083.00. Because of the BIR’s inaction, the petitioner filed a petition for review
before the CTA, which denied its claim. The CA also denied the same on procedural
grounds, such that the person who signed the verification and certification of absence
of forum shopping, a certain Jacinto J. Concepcion, President of petitioner, failed to
adduce proof that he was duly authorized by the board of directors to do so.

ISSUE:

Whether petitioner’s president can sign the subject verification and certification
without the approval of its Board of Directors.

RULING:

YES.

In several cases the court has recognized the authority of some corporate
officers to sign the verification and certification against forum shopping. In these
cases, the court allowed the: (1) the Chairperson of the Board of Directors, (2) the
President of a corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case, to sign said
documents, without need of a board resolution.
Also in this case, an authorization was belatedly submitted. Although belated,
the court still accepts it as a valid and which it had cured the procedural infirmities of
the case.
 SALOME PABON and VICENTE CAMONAYAN
vs.
NATIONAL LABOR RELATIONS COMMISSION and SENIOR MARKETING
CORPORATION
G.R. No. 120457 September 24, 1998

FACTS:

On May 24, 1994 and June 22, 1994, complaints for illegal dismissal and non-
payment of benefits were filed by petitioners Salome Pabon and Vicente Camonayan
against private respondent Senior Marketing Corporation (SMC) and its Field Manager,
R-Jay Roxas Summons and notices of hearings were sent to Roxas at private
respondent's provincial office in 13 Valley Homes, Patul Road, Santiago, Isabela which
were received by its bookkeeper, Mina Villanueva.
On September 15, 1994, the Labor Arbiter rendered a judgment by default after
finding that private respondent tried to evade all the summons and orders of hearing
by refusing to claim all the registered mail addressed to it.

ISSUE:

Whether or not Petitioners herein are authorized to receive summons in behalf

of the corporation.

RULING:

YES.

Bookkeeper can be considered as an agent of private respondent corporation

within the purview of Section 13, Rule 14 of the old Rules of Court. The rationale of all
rules with respect to service of process on a corporation is that such service must be
made to an agent or a representative so integrated with the corporation sued as to
make it a priori supposable that he will realize his responsibilities and know what he
should do with any legal papers served on him. The bookkeeper's task is one under
consideration. The job of a bookkeeper is so integrated with the corporation that his
regular recording of the corporation's "business accounts" and "essential facts about
the transactions of a business or enterprise" safeguards the corporation from possible
fraud being committed adverse to its own corporate interest.
Although it may be true that the service of summons was made on a person not
authorized to receive the same in behalf of the petitioner, nevertheless since it appears
that the summons and complaint were in fact received by the corporation through its
said clerk, the Court finds that there was substantial compliance with the rule on
service of summons. Indeed the purpose of said rule as above stated to assure service
of summons on the corporation had thereby been attained. The need for speedy justice
must prevail over technicality.
 VLASON ENTERPRISES CORPORATION
vs.
COURT OF APPEALS and DURAPROOF SERVICES, represented by its General
Manager, Cesar Urbino Sr.
G.R. Nos. 121662-64. July 6, 1999

FACTS:

Poro Point Shipping Services, then acting as the local agent of Omega Sea
Transport Company of Honduras & Panama, a Panamanian company, (hereafter
referred to as Omega), requested permission for its vessel M/V Star Ace, which had
engine trouble, to unload its cargo and to store it at the Philippine Ports Authority
(PPA) compound in San Fernando, La Union while awaiting transshipment to Hong
Kong. The request was approved by the Bureau of Customs. Despite the approval, the
customs personnel boarded the vessel when it docked on January 7, 1989, on
suspicion that it was the hijacked M/V Silver Med owned by Med Line Philippines Co.,
and that its cargo would be smuggled into the country. The district customs collector
seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code.
They entered into a salvage agreement with private respondent to secure and
repair the vessel which was destroyed by the typhoons that hit the province at the
agreed consideration of $1 million and “fifty percent (50%) of the cargo after all
expenses, cost and taxes.” Subsequently, the seizure was lifted for want of fraud.

ISSUE:

Whether or not summons was properly served with Vlason Corporation.

RULING:

NO.

Sec 4 and 5 of the Rules of Court ideally requires a movant to address and
serve on the counsel of the adverse party the notice of hearing of its motion. Service of
a copy of a motion must contain a notice of the time and the place of hearing. There
are, however, exceptions to the rule: Where a rigid application will result in a manifest
failure or miscarriage of justice, especially if a party successfully shows that the
alleged defect in the questioned final and executory judgment is not apparent on its
face or from the recitals contained therein; Where the interest of substantial justice
will be served; Where the resolution of the motion is addressed solely to the sound and
judicious discretion of the court; Where the injustice to the adverse party is not
commensurate to the degree of his failure to comply with prescribed procedure
In this case, Vlason was not informed of any cause of action against it. It was
not validly summoned. Its vessels that it used for its salvaging business was levied
upon and sold in execution to satisfy a supposed judgment against it. To allow this to
happen simply because of its failure to comply with the notice requirement would
result into manifest injustice.
 Prime White Cement Corporation
vs.
Intermediate Appellate Court
GR 68555, 19 March 1993

FACTS: 

On or about 16 July 1969, Alejandro Te and Prime White Cement Corporation

(PWCC) thru its President, Mr. Zosimo Falcon and Justo C. Trazo, as Chairman of the
Board, entered into a dealership agreement whereby Te was obligated to act as the
exclusive dealer and/or distributor of PWCC of its cement products in the entire
Mindanao area for a term of 5 years.
Right after Te entered into the dealership agreement, he placed an
advertisement in a national, circulating newspaper the fact of his being the exclusive
dealer of PWWC's white cement products in Mindanao area, more particularly, in the
Manila Chronicle dated 16 August 1969 and was even congratulated by his business
associates, so much so, he was asked by some of his businessmen friends and close
associates if they can be his sub-dealer in the Mindanao area.

ISSUE: 

Whether the "dealership agreement" referred by the President and Chairman of

the Board of PWCC is a valid and enforceable contract. 

RULING:

NO.

The “dealership agreement” is not valid and unenforceable. Under the

Corporation Law, which was then in force at the time the case arose, as well as under
the present Corporation Code, all corporate powers shall be exercised by the Board of
Directors, except as otherwise provided by law. Although it cannot completely abdicate
its power and responsibility to act for the juridical entity, the Board may expressly
delegate specific powers to its President or any of its officers.
In the absence of such express delegation, a contract entered into by its
President, on behalf of the corporation, may still bind the corporation if the board
should ratify the same expressly or impliedly. Implied ratification may take various
forms — like silence or acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing therefrom. Furthermore,
even in the absence of express or implied authority by ratification, the President as
such may, as a general rule, bind the corporation by a contract in the ordinary course
of business, provided the same is reasonable under the circumstances. These rules
are basic, but are all general and thus quite flexible. They apply where the President or
other officer, purportedly acting for the corporations, is dealing with a third person,
i.e., a person outside the corporation. The situation is quite different where a director
or officer is dealing with his own corporation. Herein, Te was not an ordinary
stockholder; he was a member of the Board of Directors and Auditor of the corporation
as well. He was what is often referred to as a "self-dealing" director.
 LOUIS VUITTON S.A.
vs.
JUDGE FRANCISCO DIAZ VILLANUEVA, presiding Judge, Branch 36, The
Metropolitan Trial Court at Quezon City, Metro Manila
A.M. No. MTJ-92-643 November 27, 1992

FACTS:

In Criminal Case No. XXXVI-62431, entitled "People of the Philippines vs. Jose
V. Rosario", Louis Vuitton, S.A. accused the latter of unfair competition as defined by
paragraph 1 of Article 189, Revised Penal Code.
Complainant also assailed respondent judge's findings that there was no unfair
competition because the elements of the crime were not met, and that he seized
articles did not come close to the appearance of a genuine Louis Vuitton product, the
counterfeit items having been poorly, done.

ISSUE:

Whether or not respondent judge is guilty of knowingly rendering a manifestly

unjust judgment.

RULING:

NO.

The ground which was relied upon by the trial court in acquitting the accused
finds basis in the well-settled doctrine that a corporation has a distinct personality
from that of its stockholders/owners. A corporation is vested by law with a personality
of its own, separate and distinct from that of its stockholders and from that of its
officers who manage and run its affairs. This decision is assailed to be unjust mainly
because it did not consider the Prosecution's Memorandum with Motion and Motion
for Early Resolution filed by private prosecutor, herein complainant, on February 8,
1991 and February 11, 1991, respectively. According to complainant, had respondent
judge taken the former motion into account, he would not have acquitted the accused,
Jose V. Rosario. Instead, he would have been held guilty for giving others an
opportunity engage in unfair competition as prescribed by Article 189 of the Revised
Penal Code.
In the first place, it would not have made any difference because Jose v. Rosario
was charged as owner/proprietor. COD is not a single proprietorship but one that is
run and owned by a corporation, Rosario Bros., Inc., of which the accused is
stockholder and Executive Vice-President. A stockholder generally does not have a
hand in the management of the corporate affairs. On the other hand, the Vice-
President had no inherent power to bind the corporation.
As general rule, his duties must be specified in the by-laws. In the criminal
case, the information did not specify his duties as Executive Vice-President. The trial
court had no basis for holding that as such, the accused entered into a contract with
the concessionaire thereby giving the latter an opportunity to practice unfair
competition. Whereas, Section 23 of the Corporation Code is explicit that the directors,
acting as a body, exercise corporation powers and conduct the corporation's business.
 Doctrine of Apparent Authority

VIOLETA BANATE et. al.

vs.
PHILIPPINE COUNTRYSIDE RURAL BANK
GR 163825, 13 July 2010

FACTS:

Sometime in November 1997 the spouses Maglasang and the spouses Cortel
asked PCRB’s permission to sell the properties which they mortgaged with the bank.
They likewise requested that the said properties be released from the mortgage since
the two other loans were adequately secured by the other mortgages. The spouses
Maglasang and the spouses Cortel claimed that the PCRB, acting through its Branch
Manager, Pancrasio Mondigo, verbally agreed to their request but required first the full
payment of the subject loan. They thereafter sold to petitioner Violeta Banate the
subject properties for P1,750,000.00 and used the amount to pay the subject loan
with PCRB. After settling the subject loan, PCRB gave the owner’s duplicate certificate
of title of Lot 12868-H-3-C to Banate, who was able to secure a new title in her name.
It, however, carried the mortgage lien in favor of PCRB, prompting the petitioners to
request from PCRB a Deed of Release of Mortgage. As PCRB refused to comply with
the petitioners’ request, the petitioners instituted an action for specific performance
before the RTC to compel PCRB to execute the release deed.
Accordingly, PCRB claimed that full payment of the three loans, obtained by the
spouses Maglasang, was necessary before any of the mortgages could be released; the
settlement of the subject loan merely constituted partial payment of the total
obligation. Thus, the payment does not authorize the release of the subject properties
from the mortgage lien.

ISSUE:

Whether or not Mondigo, as branch manager of PCRB, has the authority to

modify the original mortgage contract on behalf of the company.

RULING:

NO.

He is not authorized to modify the mortgage contract that would in effect cause
novation. Under the doctrine of apparent authority, acts and contracts of the agent, as
are within the apparent scope of the authority conferred on him, although no actual
authority to do such acts or to make such contracts has been conferred, bind the
principal. The principal’s liability, however, is limited only to third persons who have
been led reasonably to believe by the conduct of the principal that such actual
authority exists, although none was given. In other words, apparent authority is
determined only by the acts of the principal and not by the acts of the agent. There
can be no apparent authority of an agent without acts or conduct on the part of the
principal; such acts or conduct must have been known and relied upon in good faith
as a result of the exercise of reasonable prudence by a third party as claimant, and
such acts or conduct must have produced a change of position to the third party’s
detriment.
In the present case, the decision of the trial court was utterly silent on the
manner by which PCRB, as supposed principal, has “clothed” or “held out” its branch
manager as having the power to enter into an agreement, as claimed by petitioners. No
proof of the course of business, usages and practices of the bank about, or knowledge
that the board had or is presumed to have of, its responsible officers’ acts regarding
bank branch affairs, was ever adduced to establish the branch manager’s apparent
authority to verbally alter the terms of mortgage contracts. Neither was there any
allegation, much less proof, that PCRB ratified Mondigo’s act or is estopped to make a
contrary claim.
 SARGASSO CONSTRUCTION
vs.
PHILIPPINE PORTS AUTHORITY
GR 170530, 05 July 2010

FACTS:

Plaintiff Sargasso Construction and Development Corporation, Pick and Shovel,

Inc. and Atlantic Erectors, Inc., a joint venture, was awarded the construction of Pier 2
and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union, after a
public bidding conducted by the defendant PPA.
Plaintiff offered to undertake the reclamation between the Timber Pier and Pier
2 of the Port of San Fernando, La Union, as an extra work to its existing construction
of R.C. Pier 2 and Rock Causeway for a price of P36,294,857.03. The offer was
unacceptable to PPA and thereafter asked for its reduction to P30,794,230.89.
On August 26, 1993, a Notice of Award signed by PPA General Manager Rogelio
Dayan was sent to plaintiff for the phase I Reclamation Contract in the amount of
P30,794,230.89 and instructing it to “enter into and execute the contract agreement
with this Office” and to furnish the documents representing performance security and
credit line. PPA Management further set a condition [that] “the acceptance by the
contractor that mobilization/demobilization cost shall not be included in the contract
and that escalation shall be reckoned upon approval of the Supplemental Agreement.
Hence, then General Manager Carlos L. Agustin presented for consideration by the
PPA Board of Directors the contract proposal for the reclamation project.
At its meeting held on September 9, 1994, the Board decided not to approve the
contract proposal. The Board noted that the Pier 2 Project was basically for the
construction of a pier while the supplemental agreement refers to reclamation. Thus
there is no basis to compare the terms and conditions of the reclamation project with
the original contract (Pier 2 Project) of Sargasso.” Plaintiff filed a complaint for specific
performance and damages.

ISSUE:

Whether or not the Notice of Award made by the General Manager of PPA
binding with the entity.

RULING:

NO.

There is no perfected contract between the parties in this case. Likewise, the
General Manager of the PPA is not authorized to enter into contracts on behalf of the
agency. Petitioner’s invocation of the doctrine of apparent authority is misplaced. This
doctrine, in the realm of government contracts, has been restated to mean that the
government is NOT bound by unauthorized acts of its agents, even though within the
apparent scope of their authority. Under the law on agency, however, “apparent
authority” is defined as the power to affect the legal relations of another person by
transactions with third persons arising from the other’s manifestations to such third
person such that the liability of the principal for the acts and contracts of his agent
extendsto those which are within the apparent scope of the authority conferred on
him, although no actual authority to do such acts or to make such contracts has been
conferred.
The existence of apparent authority may be ascertained through (1) the general
manner in which the corporation holds out an officer or agent as having the power to
act or, in other words, the apparent authority to act in general, with which it clothes
him; or (2) the acquiescence in his acts of a particular nature, with actual or
constructive knowledge thereof, whether within or beyond the scope of his ordinary
powers. It requires presentation of evidence of similar act(s) executed either in its favor
or in favor of other parties. In this case, not a single act of respondent, acting through
its Board of Directors, was cited as having clothed its general manager with apparent
authority to execute the contract with it.
 ASSOCIATED BANK (now UNITED OVERSEAS BANK [PHILS.])
vs.
SPOUSES RAFAEL and MONALIZA PRONSTROLLER,
G.R. No. 148444, July 14, 2008

FACTS:

On April 21, 1988, spouses Vaca executed a Real Estate Mortgage (REM) in
favor of the petitioner over their parcel of residential land located at Quezon City. For
failure of the spouses Vaca to pay their obligation, the subject property was sold at
public auction with the petitioner as the highest bidder. The spouses Vaca, however,
commenced an action for the nullification of the real estate mortgage and the
foreclosure sale. During the pendency of the aforesaid cases, Respondents Rafael and
Monaliza Pronstroller offered to purchase the property for P7,500,000.00. Said offer
was made through Atty. Jose Soluta, Jr., petitioner’s Vice-President, Corporate
Secretary and a member of its Board of Directors. Petitioner accepted respondents’
offer of P7.5 million. Consequently, respondents paid petitioner P750,000.00, or 10%
of the purchase price, as down payment. On March 18, 1993, petitioner, through Atty.
Soluta, and respondents, executed a Letter-Agreement.

ISSUE:

Whether or not the petitioner is bound by the July 14, 1993 Letter-Agreement
signed by Atty. Soluta under the doctrine of apparent authority.

RULING:

YES.

The general rule is that, in the absence of authority from the board of directors,
no person, not even its officers, can validly bind a corporation. The power and
responsibility todecide whether the corporation should enter into a contract that will
bind the corporation islodged in the board of directors. However, just as a natural
person may authorize another to do certain acts for and on his behalf, the board may
validly delegate some of its functions and powers to officers, committees and agents.
The authority of such individuals to bind the corporation is generally derived from law,
corporate bylaws or authorization from the board, either expressly or impliedly, by
habit, custom, or acquiescence, in the general course of business.The authority of a
corporate officer or agent in dealing with third persons may be actual or apparent.
The doctrine of “apparent authority,” with special reference to banks, had long
been recognized in this jurisdiction. Apparent authority is derived not merely from
practice. Its existence may be ascertained through 1) the general manner in which the
corporation holds out an officer or agent as having the power to act, or in other words,
the apparent authority to act in general, with which it clothes him; 2) the acquiescence
in his acts of a particular nature, with actual or constructive knowledge thereof,
within or beyond the scope of his ordinary powers. Accordingly, the authority to act for
and to bind a corporation may be presumed from acts of recognition in other
instances, wherein the power was exercised without any objection from its board or
shareholders.
 EMILIANO ACUÑA
vs.
BATAC PRODUCERS
GR L-20333, 30 June 1963

FACTS:

Acuña entered into a contract with Batac wherein he agreed to advance

P20,000.00 to the company for its tobacco planting and drying, provided that he shall
be assigned as the company’s representative in Manila and supervise the transport
and delivery of the goods in the said place. Batac’s Board of Directors are amenable
with the idea and thereafter issued a resolution authorizing Manager Leon Verano to
enter into the agreement on behalf of the corporation.
The necessary contract between Acuña and Verano was entered into, with some
of the Board of Directors acting as witness. Acuña then inquired if the contract needs
to be ratified by the Board, in which the counsel for Batac answered in the negative.
Acuña thereafter proceeded to perform his part of the contrac, including the
advancement of the amount promised, which was accepted by Batac.
Batac’s BoD, however, disapproved the contract. Acuña insisted on its
performance, but the corporation refused, stating that the contract is not binding by
reason that it was not ratified by the board.

ISSUE:

Whether or not the contract between Acuña and Verano is binding with the
corporation.

RULING:
YES.
A perusal of the complaint reveals that it contains sufficient allegations indicating
such approval or at least subsequent ratification. On the first point note the following
averments: that on May 9th the plaintiff met with each and all of the individual
defendants (who constituted the entire Board of Directors) and discussed with them
extensively the tentative agreement and he was made to understand that it was
acceptable to them, except as to plaintiff's remuneration; that it was finally agreed
between plaintiff and all said Directors that his remuneration would be P0.30 per kilo
(of tobacco); and that after the agreement was formally executed he was assured by
said Directors that there would be no need of formal approval by the Board. It should
be noted in this connection that although the contract required such approval it did
not specify just in what manner the same should be given.
On the question of ratification the complaint alleges that plaintiff delivered to
the defendant corporation the sum of P20,000.00 as called for in the contract; that he
rendered the services he was required to do; that he furnished said defendant 3,000
sacks at a cost of P6,000.00 and advanced to it the further sum of P5,000.00; and that
he did all of these things with the full knowledge, acquiescence and consent of each
and all of the individual defendants who constitute the Board of Directors of the
defendant corporation. There is abundant authority in support of the proposition that
ratification may be expressed or implied, and that implied ratification may take diverse
forms, such as by silence or acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing therefrom.
 \BOARD OF LIQUIDATORS
vs.
HEIRS OF MAXIMO KALAW
GR L-18805, 14 August 1967

FACTS:

National Coconut Corporation (NACOCO) is with Maximo Kalaw as its General

Manager and Chairman of the BOD. Under his tenure NACOCO entered into different
contracts involving the trade of coconuts. It failed, however, due to natural calamities
that greatly affected the production of coconuts. This led to some customers of
NACOCO suing the corporation for undelivered coconuts due to them under the
contracts that they signed. This was settled by NACOCO by paying the customers.
Thereafter, NACOCO seeks to recover the above sum of P1,343,274.52 from
general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar,
Casimiro Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902
of the old Civil Code (now Article 2176, new Civil Code); and defendant board
members, including Kalaw, with bad faith and/or breach trust for having approved the
contracts.

ISSUE:

Whether or not Kalaw may be held liable by NACOCO for the debts the
corporation incurred under his administration.

RULING:
NO.
They were done with implied authority from the BOD. These previous contracts,
it should be stressed, were signed by Kalaw without prior authority from the board.
Said contracts were known all along to the board members. Nothing was said by them.
The aforesaid contracts stand to prove one thing. Obviously NACOCO board met the
difficulties attendant to forward sales by leaving the adoption of means to end, to the
sound discretion of NACOCO's general manager Maximo M. Kalaw.
Settled jurisprudence has it that where similar acts have been approved by the
directors as a matter of general practice, custom, and policy, the general manager may
bind the company without formal authorization of the board of directors. In varying
language, existence of such authority is established, by proof of the course of
business, the usages and practices of the company and by the knowledge which the
board of directors has, or must be presumed to have, of acts and doings of its
subordinates in and about the affairs of the corporation.
Authorities, great in number, are one in the idea that "ratification by a
corporation of an unauthorized act or contract by its officers or others relates back to
the time of the act or contract ratified, and is equivalent to original authority;" and
that "[t]he corporation and the other party to the transaction are in precisely the same
position as if the act or contract had been authorized at the time." The language of one
case is expressive: "The adoption or ratification of a contract by a corporation is
nothing more nor less than the making of an original contract. The theory of corporate
ratification is predicated on the right of a corporation to contract, and any ratification
or adoption is equivalent to a grant of prior authority.
 TRINIDAD FRANCISCO
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM
GR L-18287, 30 March 1963

FACTS:

On 10 October 1956, the plaintiff, Trinidad J. Francisco, in consideration of a

loan in the amount of P400,000.00, out of which the sum of P336,100.00 was released
to her, mortgaged in favor of the defendant, GSIS, a parcel of land containing an area
of 18,232 square meters, with twenty-one (21) bungalows, known as Vic-Mari
Compound, located at Baesa, Quezon City, payable within ten (10) years in monthly
installments of P3,902.41, and with interest of 7% per annum compounded monthly.
On 6 January 1959, the System extrajudicially foreclosed the mortgage on the
ground that up to that date the plaintiff-mortgagor was in arrears on her monthly
installments in the amount of P52,000.00. Payments made by the plaintiff at the time
of foreclosure amounted to P130,000.00. The System itself was the buyer of the
property in the foreclosure sale.
Trinidad’s father, Vicente Francisco, offered to pay part of the arrears with
P30,000.00 with the remainder of the arrears plus the balance of the loan shall be
paid with the proceeds of the rents of the property which shall be administered by
GSIS. GSIS informed the plaintiff through a telegraph made its General Manager
Rodolfo Andal and accepted the tender of P30,000.00 but did not take over the
administration of the property. Meanwhile, Trinidad received the rents amounting to
P44,000.00 and remitted the same to GSIS, who issued a receipt thereto.
GSIS, however, notified the appellant that the time for redemption is about to
expire and requested the Franciscos to offer them a system of payment. Trinidad
questioned the action, standing by the validity of the proposal they made with GSIS,
whose acceptance of the payment amounted to estoppel. he defendant answered,
pleading that the binding acceptance of Francisco's offer was the resolution of the
Board, and that Andal's telegram, being erroneous, should be disregarded.

ISSUE:

Whether or not the approval of the proposal made by GSIS is valid.

RULING:

YES.

The terms of the offer were clear, and over the signature of defendant's general
manager, Rodolfo Andal, plaintiff was informed telegraphically that her proposal had
been accepted. There was nothing in the telegram that hinted at any anomaly, or gave
ground to suspect its veracity, and the plaintiff, therefore, cannot be blamed for
relying upon it. There is no denying that the telegram was within Andal's apparent
authority, but the defense is that he did not sign it, but that it was sent by the Board
Secretary in his name and without his knowledge. Assuming this to be true, how was
appellee to know it? Corporate transactions would speedily come to a standstill were
every person dealing with a corporation held duty-bound to disbelieve every act of its
responsible officers, no matter how regular they should appear on their face
 If a private corporation intentionally or negligently clothes its officers or agents
with apparent power to perform acts for it, the corporation will be estopped to deny
that such apparent authority is real, as to innocent third persons dealing in good faith
with such officers or agents. Knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment, and in relation to matters
within the scope of his authority, is notice to the corporation, whether he
communicates such knowledge or not.
 RURAL BANK OF MILAOR (CAMARINES SUR)
vs.
FRANCISCA OCFEMIA, et. al.
GR 137686, 08 February 2000

FACTS:

The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to
redeem the mortgaged properties consisting of seven (7) parcels of land from Milaor
and so the mortgage was foreclosed and thereafter ownership thereof was transferred
to the bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in
the possession of the Ocfemias because these were sold by the [petitioner] bank to the
parents of Marife Ocfemia Niño as evidenced by a Deed of Sale executed in January
1988.
Marife went to the Register of Deeds of Camarines Sur with the Deed of Sale
(Exh. C) in order to have the same registered. The Register of Deeds, however,
informed her that the document of sale cannot be registered without a board
resolution of the Bank. Marife then went to the bank, showed to it the Deed of Sale,
the tax declaration and receipt of tax payments and requested the bank for a board
resolution so that the property can be transferred to the name of Marife’s parents
Renato Ocfemia and Francisca Ocfemia.
The bank, after requiring so many requirements and making so many alibis to
Marife, refused to issue the board resolution. It claims that its bank manager Fe Tena
did not have authority to sell the properties to the Ocfemias therefore rendering the
deed of sale invalid.

ISSUE:

Whether or not the bank manager has authority to act on behalf of the bank.

RULING:

YES.

There was an apparent authority bestowed with Tena. The bank acknowledged,
by its own acts or failure to act, the authority of Fe S. Tena to enter into binding
contracts. After the execution of the Deed of Sale, respondents occupied the properties
in dispute and paid the real estate taxes due thereon. If the bank management
believed that it had title to the property, it should have taken some measures to
prevent the infringement or invasion of its title thereto and possession thereof.
Likewise, Tena had previously transacted business on behalf of the bank, and
the latter had acknowledged her authority. A bank is liable to innocent third persons
where representation is made in the course of its normal business by an agent like
Manager Tena, even though such agent is abusing her authority. Clearly, persons
dealing with her could not be blamed for believing that she was authorized to transact
business for and on behalf of the bank.
In this light, the bank is estopped from questioning the authority of the bank
manager to enter into the contract of sale. If a corporation knowingly permits one of its
officers or any other agent to act within the scope of an apparent authority, it holds
the agent out to the public as possessing the power to do those acts; thus, the
corporation will, as against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agent’s authority.
More so, the bank is in default for failing to answer the complaint of the
Ocfemias within the reglamentary period without any justifiable excuse.
 ARNEL TY, et al.
vs.
NBI AGENT MARTIN JAMIL, et al.
GR 182147, 15 December 2010

FACTS:

Acting on a complaint filed by various LPG manufacturers, the NBI conducted a

surveillance on the activities of Omni Gas, which is being accused of selling LPG tanks
without the required permit and below its required standards. Agents De Jemil and
Kawada attested to conducting surveillance of Omni and brought eight branded LPG
cylinders of Shellane, Petron Gasul, Totalgaz, and Superkalan Gaz to Omni for
refilling.  The branded LPG cylinders were refilled, for which agents paid P1,582 as
evidenced by Sales Invoice No. 90040issued by Omni on April 15, 2004.  The refilled
LPG cylinders were without LPG valve seals and one of the cylinders was actually
underfilled, as found by LPG Inspector Noel N. Navio of the Liquefied Petroleum Gas
Industry Association (LPGIA) who inspected the eight branded LPG cylinders.
The NBI's test-buy yielded positive results for violations of BP 33, Section 2(a) in
relation to Secs. 3(c) and 4, i.e., refilling branded LPG cylinders without authority; and
Sec. 2(c) in relation to Sec. 4, i.e., under delivery or under filling of LPG cylinders.
Petitioners Arnel Ty, Marie Antonette Ty, Jason Ong, Willy Dy, and Alvin Ty
questioned the case against that, claiming that being mere directors, they are not
liable to the case filed against Omni for they are not in charge of the management of
the said entity.

ISSUE:

Whether or not petitioners may be held liable for the actions of Omni.

RULING:

NO.

Only Arnel Ty may be held liable in his capacity as president of Omni, but not
the other directors. The corporate powers of a corporation are reposed in the board of
directors under the first paragraph of Sec. 23 of the Corporation Code, it is of common
knowledge and practice that the board of directors is not directly engaged or charged
with the running of the recurring business affairs of the corporation. Depending on
the powers granted to them by the Articles of Incorporation, the members of the board
generally do not concern themselves with the day-to-day affairs of the corporation,
except those corporate officers who are charged with running the business of the
corporation and are concomitantly members of the board, like the President.  Section
25of the Corporation Code requires the president of a corporation to be also a member
of the board of directors.
Evidently, petitioner Arnel, as President, who manages the business affairs of
Omni, can be held liable for probable violations by Omni of BP 33, as amended.  The
fact that petitioner Arnel is ostensibly the operations manager of Multi-Gas
Corporation, a family owned business, does not deter him from managing Omni as
well. It is well-settled that where the language of the law is clear and unequivocal, it
must be taken to mean exactly what it says. As to the other petitioners, unless
otherwise shown that they are situated under the catch-all "such other officer charged
with the management of the business affairs," they may not be held liable under BP
33, as amended, for probable violations. Consequently, with the exception of petitioner
Arnel, the charges against other petitioners must perforce be dismissed or dropped.
Also, under BP 33 (which regulates the production and sale of LPG), Directors
are not among those enumerated as criminally liable for the acts of the corporation.
 QUEENSLAND-TOKYO COMMODITIES et al.
vs.
THOMAS GEORGE
GR 172727, 08 September 2010

FACTS:

QTCI is a duly licensed broker engaged in the trading of commodity futures. In

1995, Guillermo Mendoza, Jr. (Mendoza) and Oniler Lontoc (Lontoc) of QTCI met with
respondent Thomas George (respondent), encouraging the latter to invest with QTCI.
On July 7, 1995, upon Mendoza's prodding, respondent finally invested with QTCI. On
the same day, Collado, in behalf of QTCI, and respondent signed the Customer's
Agreement. Forming part of the agreement was the Special Power of Attorney executed
by respondent, appointing Mendoza as his attorney-in-fact with full authority to trade
and manage his account.
On June 20, 1996, the Securities and Exchange Commission (SEC) issued a
Cease-and-Desist Order against QTCI.  Alarmed by the issuance of the CDO,
respondent demanded from QTCI the return of his investment, but it was not heeded. 
QTCI claimed that they were not aware of, nor were they privy to, any
arrangement which resulted in the account of respondent being handled by unlicensed
brokers.  They pointed out that respondent transacted business with QTCI for almost
a year, without questioning the license or the authority of the traders handling his
account, rendering him estopped.  It was only after it became apparent that QTCI
could no longer resume its business transactions by reason of the CDO that
respondent raised the alleged lack of authority of the brokers or traders handling his
account.

ISSUE:

Whether or not QTCI should be held liable for the loss incurred by George in the
investment he made with the corporation.

RULING:

YES.

It recognized Mendoza and Collado as its brokers. Petitioners did not object to,
and in fact recognized, Mendoza's appointment as respondent's attorney-in-fact.
Collado, in behalf of QTCI, concluded the Customer's Agreement despite the fact that
the appointed attorney-in-fact was not a licensed dealer. Worse, petitioners permitted
Mendoza to handle respondent's account.
Doctrine dictates that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it, such that, save for
certain exceptions, corporate officers who entered into contracts in behalf of the
corporation cannot be held personally liable for the liabilities of the latter.  Personal
liability of a corporate director, trustee, or officer, along (although not necessarily) with
the corporation, may validly attach, as a rule, only when - (1) he assents to a patently
unlawful act of the corporation, or when he is guilty of bad faith or gross negligence in
directing its affairs, or when there is a conflict of interest resulting in damages to the
corporation, its stockholders, or other persons; (2)  he consents to the issuance of
watered down stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto; (3) he agrees to hold himself
personally and solidarily liable with the corporation; or (4) he is made by a specific
provision of law personally answerable for his corporate action.
Romeo Lau, as president of [petitioner] QTCI, cannot feign innocence on the
existence of these unlawful activities within the company, especially so that Collado,
himself a ranking officer of QTCI, is involved in the unlawful execution of customers
orders.  Lau, being the chief operating officer, cannot escape the fact that had he
exercised a modicum of care and discretion in supervising the operations of QTCI, he
could have detected and prevented the unlawful acts of Collado and Mendoza.
 WENSHA SPA CENTER and/or XU ZHI JIE
vs.
LORETA YUNG
GR 185122, 16 August 2010

FACTS:

Loreta stated that she used to be employed by Manmen Services Co., Ltd. where
Xu was a client. Xu was apparently impressed by Loreta's performance. After he
established Wensha, he convinced Loreta to transfer and work at Wensha.  Loreta was
initially reluctant to accept Xu's offer because her job at Manmen was stable and she
had been with Manmen for seven years.  But Xu was persistent and offered her a
higher pay.  Enticed, Loreta resigned from Manmen and transferred to Wensha as Xu's
personal assistant and interpreter. Loreta introduced positive changes to Wensha
which resulted in increased business.  This pleased Xu so that she was promoted to
the position of Administrative Manager.
Wensha and Xu denied illegally terminating Loreta's employment. They claimed
that two months after Loreta was hired, they received various complaints against her
from the employees so that on August 10, 2004, they advised her to take a leave of
absence for one month while they conducted an investigation on the matter.  Based on
the results of the investigation, they terminated Loreta's employment on August 31,
2004 for loss of trust and confidence.
The Court ruled that indeed Loreta was illegally dismissed because Wensha
failed to substantially prove its claim that she committed wrongdoings with Wensha’s
employees, and that Loreta’s testimony as to her termination because her feng shui
aura does not match that of Xu is consistent. Xu failed to duly prove a valid ground
for the loss of trust and confidence with Loreta. Question lies if Xu should be held
liable together with Wensha.

ISSUE:

Whether or not Xu is liable together with the corporation.

RULING:

NO.

Xu is not liable together with the corporation. Elementary is the rule that a
corporation is invested by law with a personality separate and distinct from those of
the persons composing it and from that of any other legal entity to which it may be
related. "Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality."
In labor cases, corporate directors and officers may be held solidarily liable with
the corporation for the termination of employment only if done with malice or in bad
faith.Bad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a
known duty through some motive or interest or ill will; it partakes of the nature of
fraud.
 There is no finding of bad faith or malice on the part of Xu.  There is, therefore,
no justification for such a ruling.  To sustain such a finding, there should be an
evidence on record that an officer or director acted maliciously or in bad faith in
terminating the services of an employee.Moreover, the finding or indication that the
dismissal was effected with malice or bad faith should be stated in the decision itself.
 CEBU MACTAN MEMBERS CENTER
vs.
MASAHIRO TSUKAHARA
GR 159624, 17 July 2009

FACTS:

In February 1994, petitioner Cebu Mactan Members Center, Inc. (CMMCI),

through Mitsumasa Sugimoto (Sugimoto), the President and Chairman of the Board of
Directors of CMMCI, obtained a loan amounting to P6,500,000 from respondent
Masahiro Tsukahara. As payment for the loan, CMMCI issued seven postdated checks
of CMMCI payable to Tsukahara. On 13 April 1994, CMMCI, through Sugimoto,
obtained another loan amounting to P10,000,000 from Tsukahara. Sugimoto executed
and signed a promissory note in his capacity as CMMCI President and Chairman, as
well as in his personal capacity.
Upon maturity, the seven checks were presented for payment by Tsukahara,
but the same were dishonored by PNB, the drawee bank. After several failed attempts
to collect the loan amount totaling P16,500,000, Tsukahara filed the instant case for
collection of sum of money against CMMCI and Sugimoto.
Tsukahara alleged that the amount of P16,500,000 was used by CMMCI for the
improvement of its beach resort, which included the construction of a wave fence, the
purchase of air conditioners and curtains, and the provision of salaries of resort
employees. He also asserted that Sugimoto, as the President of CMMCI, "has the
power to borrow money for said corporation by any legal means whatsoever and to
sign, endorse and deliver all checks and promissory notes on behalf of the
corporation."
CMMCI, on the other hand, denied borrowing the amount from Tsukahara, and
claimed that both loans were personal loans of Sugimoto. The company also
contended that if the loans were those of CMMCI, the same should have been
supported by resolutions issued by CMMCI's Board of Directors.

ISSUE:

Whether or not CMMCI is liable to Tsukahara.

RULING:

YES.

It is because Sugimoto’s actions are binding with CMMCI. A corporation, being

a juridical entity, may act through its board of directors which exercises almost all
corporate powers, lays down all corporate business policies, and is responsible for the
efficiency of management. The general rule is that, in the absence of authority from
the board of directors, no person, not even its officers, can validly bind a corporation.
In this case, the corporate by-laws of CMMCI explicitly empowered the President to
enter into loans with third persons on behalf of the corporation without the necessity
of a board resolution. By-laws of a corporation should be construed and given effect
according to the general rules governing the construction of contracts. They, as the
self-imposed private laws of a corporation, have, when valid, substantially the same
force and effect as laws of the corporation, as have the provisions of its charter insofar
as the corporation and the persons within it are concerned. They are in effect written
into the charter and in this sense; they become part of the fundamental law of the
corporation. And the corporation and its directors (or trustees) and officers are bound
by and must comply with them.
The corporation is now estopped from denying the authority of its president to
bind the former into contractual relations.
 ARMANDO DAVID
vs.
NFLU, MARIVELES APPAREL CORPORATION LABOR UNION
GR 148263, 148271-72, 21 April 2009

FACTS:

MAC hired David as IMPEX and Treasury Manager on 16 September 1988.

David began serving as MAC's President in May 1990. David served as President in the
nature of a nominee as he did not own any of MAC's shares. David tendered his
irrevocable resignation from MAC on 30 September 1993. David's resignation was
made effective on 15 October 1993.
In a complaint for illegal dismissal dated 12 August 1993, National Federation
of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU)
alleged that MAC ceased operations on 8 July 1993 without prior notice to its
employees. MAC allegedly gave notice of its closure on the same day that it ceased
operations. MACLU and NAFLU further alleged that, at the time of MAC's closure,
employees who had rendered one to two weeks work were not paid their corresponding
salaries.
Atty. Joshua Pastores, as MAC's counsel, submitted a position paper dated 21
February 1994 and argued that Carag and David should not be held liable because
MAC is owned by a consortium of banks. Carag's and David's ownership of MAC
shares only served to qualify them to serve as officers in MAC.

ISSUE:

Whether or not David may be held liable for the illegal dismissal of MAC
employees.

RULING:

NO.

It is improper to hold David liable for MAC's obligations to its employees.

However, Article 212(e) of the Labor Code, by itself, does not make a corporate officer
personally liable for the debts of the corporation because Section 31 of the Corporation
Code is still the governing law on personal liability of officers for the debts of the
corporation. Section 31 of the Corporation Code provides: Directors or trustees who
willfully and knowingly vote for or assent to patently unlawful acts of the corporation
or who are guilty of gross negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary interest in conflict with their duty as
such directors, or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.
There was no showing of David willingly and knowingly voting for or assenting to
patently unlawful acts of the corporation, or that David was guilty of gross negligence
or bad faith.
Also, the NLRC never gained jurisdiction over David for there was an invalid
service of summons.
 HILARIO SORIANO AND ROSARIO ILAGAN
vs.
PEOPLE, BANGKO SENTRAL, PDIC
GR 159517-18, 30 June 2009

FACTS:

Hilario P. Soriano (Soriano) and Rosalinda Ilagan (Ilagan) were the President
and General Manager, respectively, of the Rural Bank of San Miguel (Bulacan), Inc.
(RBSM). Allegedly, on June 27, 1997 and August 21, 1997, during their incumbency
as president and manager of the bank, petitioners indirectly obtained loans from
RBSM. They falsified the loan applications and other bank records, and made it
appear that Virgilio J. Malang and Rogelio Mañaol obtained loans of P15,000,000.00
each, when in fact they did not.
Criminal charges were filed against them. They sought for its dismissal because
their action does not amount to any criminal action, and if it does, it will only render
them liable civilly. Also, their single act could not amount to multiple offenses.

ISSUE:

Whether or not the petitions may be held liable for their actions.

RULING:

YES.

They committed grave abuse of discretion in the exercise of their duties. As

aptly pointed out by the BSP in its memorandum, there are differences between the
two (2) offenses. A DOSRI violation consists in the failure to observe and comply with
procedural, reportorial or ceiling requirements prescribed by law in the grant of a loan
to a director, officer, stockholder and other related interests in the bank, i.e. lack of
written approval of the majority of the directors of the bank and failure to enter such
approval into corporate records and to transmit a copy thereof to the BSP supervising
department. The elements of abuse of confidence, deceit, fraud or false pretenses, and
damage, which are essential to the prosecution for estafa, are not elements of a DOSRI
violation. The filing of several charges against Soriano was, therefore, proper.
 CEBU COUNTRY CLUB et al.
vs. RICARDO ELIZAGAQUE
GR 160273, 18 January 2008

FACTS:

Sometime in 1987, San Miguel Corporation, a special company proprietary

member of CCCI, designated respondent Ricardo F. Elizagaque, its Senior Vice
President and Operations Manager for the Visayas and Mindanao, as a special non-
proprietary member. The designation was thereafter approved by the CCCI’s Board of
Directors.
In 1996, respondent filed with CCCI an application for proprietary membership.
As the price of a proprietary share was around the P5 million range, Benito Unchuan,
then president of CCCI, offered to sell respondent a share for only P3.5 million.
Respondent, however, purchased the share of a certain Dr. Butalid for only P3 million.
Consequently, on September 6, 1996, CCCI issued Proprietary Ownership Certificate
No. 1446 to respondent. On August 1, 1997, respondent received a letter from Julius
Z. Neri, CCCI’s corporate secretary, informing him that the Board disapproved his
application for proprietary membership.
On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a
letter of reconsideration. As CCCI did not answer, respondent, on October 7, 1997,
wrote another letter of reconsideration. Still, CCCI kept silent. On November 5,
1997, respondent again sent CCCI a letter inquiring whether any member of the Board
objected to his application. Again, CCCI did not reply.

ISSUE:

Whether or not the Board of Directors of Cebu Country Club are liable to
Elizagawue for damages.

RULING:

YES.

There is bad faith among the members of the board. As shown by the records,
the Board adopted a secret balloting known as the “black ball system” of voting
wherein each member will drop a ball in the ballot box. A white ball represents
conformity to the admission of an applicant, while a black ball means disapproval.
Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the directors
is required. When respondent’s application for proprietary membership was voted
upon during the Board meeting on July 30, 1997, the ballot box contained one (1)
black ball. Thus, for lack of unanimity, his application was disapproved.
Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has
the right to approve or disapprove an application for proprietary membership. But
such right should not be exercised arbitrarily.
It is thus clear that respondent was left groping in the dark wondering why his
application was disapproved. He was not even informed that a unanimous vote of the
Board members was required. When he sent a letter for reconsideration and an
inquiry whether there was an objection to his application, petitioners apparently
ignored him. Certainly, respondent did not deserve this kind of treatment. Having
been designated by San Miguel Corporation as a special non-proprietary member of
CCCI, he should have been treated by petitioners with courtesy and civility. At the very
least, they should have informed him why his application was disapproved.
The exercise of a right, though legal by itself, must nonetheless be in
accordance with the proper norm. When the right is exercised arbitrarily, unjustly or
excessively and results in damage to another, a legal wrong is committed for which the
wrongdoer must be held responsible.
 CALTEX (CHEVRON) PHILIPPINES, INC.
vs.
NLRC and ROMEO STO. TOMAS
GR 159641, 15 October 2007

FACTS:

In a letter dated October 21, 1996, Caltex informed the Department of Labor
and Employment (DOLE) of its plan to implement a redundancy program in its
Marketing Division and some departments in its Batangas Refinery for the period
starting October 1996 to December 1998. The letter alleged that the redundancy
program is a response to the market situation which constrained petitioner to
rationalize and simplify its business processes.
Santo Tomas was notified of his termination effective July 31, 1997 due to the
redundancy of his position and awarded him a separation package in the amount of
P559,458.90. On June 8, 1998, respondent filed with the Labor Arbiter a complaint for
illegal dismissal against petitioner and its President and Chief Executive Officer, Mr.
Clifton Hon. Private respondent alleged that: being petitioner’s regular employee, he is
entitled to security of tenure; he did not commit any serious misconduct, willful
disobedience, gross and habitual neglect of duty or fraud and willful breach of trust to
warrant the penalty of dismissal from employment; there was no independent proof or
evidence presented by petitioner to substantiate its claim of redundancy nor was he
afforded due process as he was not given any opportunity to present his side; he was
dismissed due to his active participation in union activities; petitioner opened
positions for hiring some of which offered jobs that are the same as what private
respondent was performing; petitioner failed to give written notice to him and DOLE at
least one month before the intended date of termination as required by the Labor
Code.

ISSUE:

Whether or not Santo Tomas was illegally dismissed.

RULING:

YES.

Caltex failed to prove the necessity of the redundancy program. It is the rule
that the characterization of an employee’s services as no longer necessary or
sustainable, and therefore, properly terminable, is an exercise of business judgment
on the part of the employer, and that the wisdom or soundness of such
characterization or decision is not subject to discretionary review. However, such
characterization may be rejected if the same is found to be in violation of law or is
arbitrary or malicious.
In the instant case, there was no substantial evidence presented by petitioner to
justify private respondent's dismissal due to redundancy. As correctly found by the
CA, petitioner’s evidence to show redundancy merely consisted of a copy of petitioner’s
letter to the DOLE informing the latter of its intention to implement a redundancy
program and nothing more. The letter which merely stated that petitioner undertook a
review, restructuring and streamlining of its organization which resulted in
consolidation, abolition and outsourcing of certain functions; and which resulted in
identified and redundant positions instead of simplifying its business process
restructuring, does not satisfy the requirement of substantial evidence, that is, the
amount of evidence which a reasonable mind might accept as adequate to justify a
conclusion.
Petitioner failed to demonstrate the superfluity of private respondent’s position
as there was nothing in the records that would establish any concrete and real factors
recognized by law and relevant jurisprudence, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise, which were adopted
by petitioner in implementing the redundancy program.
 ATRIUM MANAGEMENT CORPORATION
vs.
COURT OF APPEALS, E.T. HENRY AND CO., et al.
GR 109491, 28 February 2001

FACTS:

Hi-Cement Corporation through its corporate signatories, petitioner Lourdes M.

de Leon, treasurer, and the late Antonio de las Alas, Chairman, issued checks in favor
of E.T. Henry and Co. Inc., as payee. E.T. Henry and Co., Inc., in turn, endorsed the
four checks to petitioner Atrium Management Corporation for valuable consideration.
Upon presentment for payment, the drawee bank dishonored all four checks for the
common reason "payment stopped". Atrium, thus, instituted an action after its
demand for payment of the value of the checks was denied.
At the trial, Atrium presented as its witness Carlos C. Syquia who testified that
in February 1981, Enrique Tan of E.T. Henry approached Atrium for financial
assistance, offering to discount four RCBC checks in the total amount of P2 million,
issued by Hi-Cement in favor of E.T. Henry. Atrium agreed to discount the checks,
provided it be allowed to confirm with Hi-Cement the fact that the checks represented
payment for petroleum products which E.T. Henry delivered to Hi-Cement. Carlos C.
Syquia identified two letters, dated February 6, 1981 and February 9, 1981 issued by
Hi-Cement through Lourdes M. de Leon, as treasurer, confirming the issuance of the
four checks in favor of E.T. Henry in payment for petroleum products.
Lourdes M. de Leon claimed she is not solidarilly liable with Hi-Cement for the
amount of the check and that Atrium was an ordinary holder, not a holder in due
course of the rediscounted checks.

ISSUE:

Whether or not de Leon may be held liable.

RULING:

YES.

Due to negligence. Lourdes M. de Leon and Antonio de las Alas as treasurer and
Chairman of Hi-Cement were authorized to issue the checks. However, Ms. de Leon
was negligent when she signed the confirmation letter requested by Mr. Yap of Atrium
and Mr. Henry of E.T. Henry for the rediscounting of the crossed checks issued in
favor of E.T. Henry. She was aware that the checks were strictly endorsed for deposit
only to the payee's account and not to be further negotiated. What is more, the
confirmation letter contained a clause that was not true, that is, "that the checks
issued to E.T. Henry were in payment of Hydro oil bought by Hi-Cement from E.T.
Henry". Her negligence resulted in damage to the corporation. Hence, Ms. de Leon may
be held personally liable therefor.
"Personal liability of a corporate director, trustee or officer along (although not
necessarily) with the corporation may so validly attach, as a rule, only when: He
assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to
the corporation, its stockholders or other persons; He consents to the issuance of
watered down stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto; He agrees to hold himself
personally and solidarily liable with the corporation; or He is made, by a specific
provision of law, to personally answer for his corporate action.
However, as to the claim of Atrium, it cannot be upheld because it is not a
holder of the check in due course due to the fact that the same was crossed in favor of
E.T. Henry, and therefore only payable to the latter’s account.
 ARB CONSTRUCTION and MARK MOLINA
vs.
COURT OF APPEALS, TBS SECURITY AND INVESTIGATION
GR 126554, 31 May 2000

FACTS:

On 15 August 1993 TBS Security and Investigation Agency (TBSS) entered into
two (2) Service Contracts with ARBC wherein TBSS agreed to provide and post security
guards in the five (5) establishments being maintained by ARBC. The contract shall be
effective for one (1) year and shall be considered renewed for the same period unless
the same is terminated after a notice is given to the parties thirty (30) days in advance.
In a letter dated 23 February 1994 ARBC informed TBSS of its desire to
terminate the Service Contracts effective thirty (30) days after receipt of the letter.
Also, in a letter dated 22 March 1994, ARBC through its Vice President for Operations,
Mark Molina, informed TBSS that it was replacing its security guards with those of
Global Security Investigation Agency (GSIA).
In response to both letters, TBSS informed ARBC that the latter could not
preterminate the Service Contracts nor could it post security guards from GSIA as it
would run counter to the provisions of their service contracts. Nevertheless, Molina
decreased the security guards to only one (1) as a right provided under the service
contract. TBSS thereafter filed a case for breach of contract against ARBC and Mark
Molina.

ISSUE:

Whether or not Mark Molina should be held liable together with ARBC.

RULING:

NO.

He merely acted within his capacity as an officer of the corporation. It is basic

that a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to
which it may be related. As a general rule, a corporation may not be made to answer
for acts or liabilities of its stockholders or those of the legal entities to which it may be
connected and vice versa. However, the veil of corporate fiction may be pierced when it
is used as a shield to further an end subversive of justice; or for purposes that could
not have been intended by the law that created it; or to defeat public convenience,
justify wrong, protect fraud, or defend crime; or to perpetuate deception; or as an alter
ego, adjunct or business conduit for the sole benefit of the stockholders.
On the basis hereof, petitioner Molina could not be held jointly and severally
liable for any obligation which petitioner ARBC may be held accountable for, absent
any proof of bad faith or malice on his part. Corollarily, it is also incorrect on the part
of the Court of Appeals to conclude that there was a sufficient cause of action against
Molina as to make him personally liable for his actuations as Vice President for
Operations of ARBC
 RUFINA LUY LIM
vs.
COURT OF APPEALS, AUTO TRUCK TBA CORP., et al.
GR 124715, 24 January 2000

FACTS:

On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving

spouse and duly represented by her nephew George Luy, filed on 17 March 1995, a
joint petition for the administration of the estate of Pastor Y. Lim before the Regional
Trial Court of Quezon City.
Private respondent corporations, whose properties were included in the
inventory of the estate of Pastor Y. Lim, then filed a motion6 for the lifting of lis
pendens and motion for exclusion of certain properties from the estate of the decedent.
Although the defendant corporations dealt and engaged in business with the
public as corporations, all their capital, assets and equity were however, personally
owned by the late Pastor Y Lim. Hence the alleged stockholders and officers appearing
in the respective articles of incorporation of the above business entities were mere
dummies of Pastor Y. Lim, and they were listed therein only for purposes of
registration with the Securities and Exchange Commission.
Petitioner argues that the parcels of land covered under the Torrens system and
registered in the name of private respondent corporations should be included in the
inventory of the estate of the decedent Pastor Y. Lim, alleging that after all the
determination by the probate court of whether these properties should be included or
not is merely provisional in nature, thus, not conclusive and subject to a final
determination in a separate action brought for the purpose of adjudging once and for
all the issue of title.

ISSUE:

Whether or not the properties of the corporation-defendants be included in the

estate of the deceased.

RULING:

NO.

They hold separate personalities from the deceased. In as much as the real
properties included in the inventory of the estate of the late Pastor Y. Lim are in the
possession of and are registered in the name of private respondent corporations,
which under the law possess a personality separate and distinct from their
stockholders, and in the absence of any cogency to shred the veil of corporate fiction,
the presumption of conclusiveness of said titles in favor of private respondents should
stand undisturbed.
Notwithstanding that the real properties were duly registered under the Torrens
system in the name of private respondents, and as such were to be afforded the
presumptive conclusiveness of title, the probate court obviously opted to shut its eyes
to this gleamy fact and still proceeded to issue the impugned orders.
 Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities.
 ADALIA FRANCISCO and MERRYLAND DEVELOPMENT
vs. RITA MEJIA
GR 141617, 14 August 2001

FACTS:

On 21 December 1964, Gutierrez and Cardale Financing and Realty

Corporation (Cardale) executed a Deed of Sale with Mortgage for the consideration of
P800,000.00 to be paid in several installments within five years from the date of the
deed, at an interest of nine percent per annum “based on the successive unpaid
principal balances.” Thereafter, the titles of Gutierrez were cancelled new ones were
issued in favor of Cardale.
On 26 August 1968, owing to Cardale’s failure to settle its mortgage obligation,
Gutierrez filed a complaint for rescission of the contract. During the pendency of the
rescission case, Gutierrez died and was substituted by her executrix, respondent Rita
C. Mejia (Mejia). However, Cardale, which was represented by petitioner Adalia B.
Francisco (Francisco) in her capacity as Vice-President and Treasurer of Cardale, lost
interest in proceeding with the presentation of its evidence and the case lapsed into
inactive status for a period of about fourteen years.
In the meantime, the mortgaged parcels of land became delinquent in the
payment of real estate taxes, which culminated in their levy and auction sale in
satisfaction of the tax arrears. The highest bidder for the three parcels of land was
petitioner Merryland Development Corporation, whose President and majority
stockholder is Francisco.
Mejia filed for damages against Francisco who controlled Cardale and
Merryland and that she had employed fraud by intentionally causing Cardale to
default in its payment of real property taxes on the mortgaged properties so that
Merryland could purchase the same by means of a tax delinquency sale.

ISSUE:

Whether or not Francisco is liable for damages.

RULING:

YES.

The totality of the circumstances appertaining conduce to the inevitable

conclusion that petitioner Francisco acted in bad faith. The events leading up to the
loss by the Gutierrez estate of its mortgage security attest to this. It has been
established that Cardale failed to comply with its obligation to pay the balance of the
purchase price for the four parcels of land it bought from Gutierrez. This prompted
Gutierrez to file an action for rescission of the Deed of Sale with Mortgage, but the
case dragged on for about fourteen years when Cardale, as represented by Francisco,
who was Vice-President and Treasurer of the same, lost interest in completing its
presentation of evidence
That Merryland acquired the property at the public auction only serves to shed
more light upon Francisco’s fraudulent purposes. Based on the findings of the Court
of Appeals, Francisco is the controlling stockholder and President of Merryland. Thus,
aside from the instrumental role she played as an officer of Cardale, in evading that
corporation’s legitimate obligations to Gutierrez, it appears that Francisco’s actions
were also oriented towards securing advantages for another corporation in which she
had a substantial interest.
Under the doctrine of piercing the veil of corporate entity, when valid grounds
therefore exist, the legal fiction that a corporation is an entity with a juridical
personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere association of
persons. The members or stockholders of the corporation will be considered as the
corporation, that is, liability will attach directly to the officers and stockholders.

DEVELOPMENT BANK OF THE PHILIPPINES

vs.
COURT OF APPEALS, REMINGTON INDUSTRIAL SALES
GR 126200, 16 August 2001

FACTS:

Between July 1981 and April 1984, Marinduque Mining entered into 3
mortgage agreements with PNB and DBP involving its real properties located in
Surigao del Norte, Negros Occidental, and Rizal, as well as its equipments located
therein. Marinduque failed to pay its loans, causing the foreclosure of the said
mortgages. PNB and DBP thereafter gained control of the said properties.
In the meantime, between July 16, 1982 to October 4, 1983, Marinduque
Mining purchased and caused to be delivered construction materials and other
merchandise from Remington Industrial Sales Corporation. The purchases remained
unpaid as of August 1, 1984 when Remington filed a complaint for a sum of money
and damages against Marinduque Mining for the value of the unpaid construction
materials and other merchandise purchased by Marinduque Mining, as well as
interest, attorney’s fees and the costs of suit.
Remington’s original complaint was amended to include PNB, DBP, Maricalum
Mining Corporation and Island Cement Corporation as co-defendants. Remington
asserted that Marinduque Mining, PNB, DBP, Nonoc Mining, Maricalum Mining and
Island Cement must be treated in law as one and the same entity by disregarding the
veil of corporate fiction since the personnel, key officers and rank-and-file workers and
employees of co-defendants NMIC, Maricalum and Island Cement creations of co-
defendants PNB and DBP were the personnel of co-defendant MMIC such that
practically there has only been a change of name for all legal purpose and intents.

ISSUE:

Whether or not the take over of PNB and DBP over Marinduque Mining is in bad
faith.

RULING:

NO.

Their actions are mandated under the law. Where the corporations have
directors and officers in common, there may be circumstances under which their
interest as officers in one company may disqualify them in equity from representing
both corporations in transactions between the two. Thus, where one corporation was
‘insolvent and indebted to another, it has been held that the directors of the creditor
corporation were disqualified, by reason of self-interest, from acting as directors of the
debtor corporation in the authorization of a mortgage or deed of trust to the former to
secure such indebtedness In the same manner that when the corporation is insolvent,
its directors who are its creditors cannot secure to themselves any advantage or
preference over other creditors. They cannot thus take advantage of their fiduciary
relation and deal directly with themselves, to the injury of others in equal right.
Directors of insolvent corporation, who are creditors of the company, can not
secure to themselves any preference or advantage over other creditors in the payment
of their claims. It is not good morals or good law. The governing body of officers
thereof are charged with the duty of conducting its affairs strictly in the interest of its
existing creditors, and it would be a breach of such trust for them to undertake to give
any one of its members any advantage over any other creditors in securing the
payment of his debts in preference to all others. When validity of these mortgages, to
secure debts upon which the directors were indorsers, was questioned by other
creditors of the corporation, they should have been classed as instruments rendered
void by the legal principle which prevents directors of an insolvent corporation from
giving themselves a preference over outside creditors.

AMERICAN HOSPITAL SUPPLIES/PHILIPPINES et al.

vs.
COURT OF APPEALS, ALFONSO BAYANI
GR 111807, 14 June 1996

FACTS:

American Hospital Supplies was engaged in the sale and manufacture of

medicines and pharmaceuticals in the country and did substantial business with
government hospitals. On 1 June 1970 it hired Alfonso Bayani as an Area Manager for
Visayas and Mindanao, and later appointed him Manager of its Cebu branch. On 30
January 1978 private respondent was dismissed from the service. At that time he was
receiving a monthly compensation of P3,180.00.
On 5 May 1978 private respondent filed a complaint for damages before the
trial court alleging that in the course of their business petitioners were directly
encouraging, abetting and promoting bribery in the guise of "commissions,"
"entertainment expenses" and "representation expenses" which were given to various
government hospital officials in exchange for favorable recommendations, approvals
and actual purchases of medicines and pharmaceuticals. For his refusal to take direct
and personal hand in giving "bribe money" he was dismissed. He then implicated AHS
President Gervacio Amistoso and Vice President Constancio Halili as responsible for
his illegal dismissal.

ISSUE:

Whether or not Amistoso and Halili be held solidarily liable with the
corporation.
RULING:

NO.

Corporate officers are not personally liable for money claims of discharged
corporate employees unless they acted with evident malice and bad faith in
terminating their employment. In the case at bar, while petitioners Amistoso and
Halili may have had a hand in the relief of respondent. Bayani, there are no
indications of malice and bad faith on their part. We take exception to the conclusion
of respondent Court of Appeals that "the manner by which Halili and Amistoso acted is
characterized by bad faith and malice, thus binding them personally liable to plaintiff-
appellee,'' On the contrary it is apparent that the relief order was a business judgment
on the part of the officers, with the best interest of the corporation in mind, based on
their opinion that respondent Bayani had failed to perform the duties expected of him.
Hence both the trial court and respondent Court of Appeals committed a reversible
error in holding petitioners Amistoso and Halili jointly and solidarily liable with
Petitioner Corporation.

COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION

vs.
NLRC, et al.
GR 121315, 19 July 1999

FACTS:

Complex informed its Lite-On personnel that a request from Lite On Philippines
to lower their selling price by 10% was not feasible as they were already incurring
losses at the present prices of their products. Under such circumstances, Complex
regretfully informed the employees that it was left with no alternative but to close
down the operations of the Lite-On Line. The Union, however, decried the decision and
voted to declare a strike. Labor unrest within the company eventually ensued.
In the evening of April 6, 1992, the machinery, equipment and materials being
used for production at Complex were pulled-out from the company premises and
transferred to the premises of Ionics Circuit, Inc. at Cabuyao, Laguna. The following
day, a total closure of company operation was effected at Complex.
 A complaint was, thereafter, filed with the Labor Arbitration Branch of the
NLRC for unfair labor practice, illegal closure/illegal lockout, money claims for
vacation leave, sick leave, unpaid wages, 13th month pay, damages and attorney's
fees. Ionics was impleaded as a party defendant because the officers and management
personnel of Complex were also holding office at Ionics with Lawrence Qua as the
President of both companies.
Ionics contended that it was an entity separate and distinct from Complex and
had been in existence since July 5, 1984 or eight (8) years before the labor dispute
arose at Complex. Like Complex, it was also engaged in the semi-conductor business
where the machinery, equipment and materials were consigned to them by their
customers. While admitting that Lawrence Qua, the President of Complex was also
the President of Ionics, the latter denied having Qua as their owner since he had no
recorded subscription of P1,200,000.00 in Ionics as claimed by the Union.

ISSUE:

Whether or not Lawrence Qua should be held liable for the alleged illegal
transfer of machineries of Complex to Ionics.

RULING:

NO.

It is settled that in the absence of malice or bad faith, a stockholder or an officer

of a corporation cannot be made personally liable for corporate liabilities. The fact that
the pull-out of the machinery, equipment and materials was effected during nighttime
is not per se an indicia of bad faith on the part of respondent Qua since he had no
other recourse, and the same was dictated by the prevailing mood of unrest as the
laborers were already vandalizing the equipment, bent on picketing the company
premises and threats to lock out the company officers were being made. Such acts of
respondent Qua were, in fact, made pursuant to the demands of Complex's customers
who were already alarmed by the pending labor dispute and imminent strike to be
stage by the laborers, to have their equipment, machinery and materials pull out of
Complex. As such, these acts were merely done pursuant to his official functions and
were not, in any way, made with evident bad faith.
As to the juridical personality of the corporations, Ionics may be engaged in the
same business as that of Complex, but this fact alone is not enough reason to pierce
the veil of corporate fiction of the corporation. Well-settled is the rule that a
corporation has a personality separate and distinct from that of its officers and
stockholders. Likewise, mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality.

ERNESTINA CRISOLOGO-JOSE
vs.
COURT OF APPEALS, RICARDO SANTOS, JR.
GR 80599, 15 September, 1989

FACTS:
 In 1980, Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises,
Inc. in-charge of marketing and sales; and the president of the said corporation was
Atty. Oscar Z. Benares. On April 30, 1980, Atty. Benares, in accommodation of his
clients, the spouses Jaime and Clarita Ong, a check drawn against Traders Royal
Bank, dated June 14, 1980, in the amount of P45,000.00 payable to Ernestina
Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the
same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of
the said corporation. However, since at that time, the treasurer of Mover Enterprises
was not available, Atty. Benares prevailed upon Santos, Jr., to sign the aforesaid
check as an alternate signatory, who did sign the same.
It appears that the check to Crisologo-Jose in consideration of the waiver or
quitclaim by said defendant over a certain property which the Government Service
Insurance System (GSIS) agreed to sell to the clients of Atty. Oscar Benares, the
spouses Jaime and Clarita Ong, with the understanding that upon approval by the
GSIS of the compromise agreement with the spouses Ong, the check will be encashed
accordingly. However, since the compromise agreement was not approved within the
expected period of time, the aforesaid check was replaced by Atty. Benares with
another Traders Royal Bank check dated August 10, 1980, in the same amount. This
replacement check was also signed by Atty. Benares and by Santos, Jr. When Jose
deposited this replacement check with her account, it was dishonored for insufficiency
of funds. A subsequent redepositing of the said check was likewise dishonored by the
bank for the same reason.

ISSUE:

Whether or not Movers Enterprises should be held liable to the bounced checks
which are personal liabilities of Atty. Bañares.

RULING:

NO.

The provision of the Negotiable Instruments Law which holds an

accommodation party liable on the instrument to a holder for value, although such
holder at the time of taking the instrument knew him to be only an accommodation
party, does not include nor apply to corporations which are accommodation parties.
This is because the issue or indorsement of negotiable paper by a corporation without
consideration and for the accommodation of another is ultra vires. Hence, one who
has taken the instrument with knowledge of the accommodation nature thereof cannot
recover against a corporation where it is only an accommodation party.
By way of exception, an officer or agent of a corporation shall have the power to
execute or indorse a negotiable paper in the name of the corporation for the
accommodation of a third person only if specifically authorized to do so.. Since such
accommodation paper cannot thus be enforced against the corporation, especially
since it is not involved in any aspect of the corporate business or operations, the
inescapable conclusion in law and in logic is that the signatories thereof shall be
personally liable therefor, as well as the consequences arising from their acts in
connection therewith.
 Instead, Jose should direct her claim against Bañares and Santos. Santos,
however, is exculpated from criminal liability under BP 22 for he successfully and
legally consigned the amount of the check with the Court within the reglamentary
period.

FCY CONSTRUCTION GROUP and FRANCIS YU

vs.
COURT OF APPEALS, HON. JOSE DE LA RAMA
GR 123358, 01 February 2000

FACTS:

On June 29, 1993, Ley Construction and Development Corporation filed a

complaint for collection of a sum of money with application for preliminary attachment
against petitioner FCY Construction Group, Inc. and Francis C. Yu. Ley alleged that it
had a joint venture agreement with petitioner FCY Construction Group, Inc. (wherein
petitioner Francis C. Yu served as President) over the Tandang Sora Commonwealth
Flyover government project for which it had provided funds and construction
materials. The Complaint was filed in order to compel petitioners to pay its half share
in the collections received in the project as well as those yet to be received therein. In
support of its application for a writ of attachment, private respondent alleged that
petitioners were guilty of fraud in incurring the obligation and had fraudulently
misapplied or converted the money paid them, to which it had an equal share.
FCY denied the allegation, and also moved for the dropping of Francis Yu as one
of the defendants, claiming that the hornbook law that corporate personality is a
shield against personal liability of its officers.

ISSUE:

Whether or not Francis Yu may be held solidarily liable with FCY.

RULING:

NO.

FCY has a separate juridical entity from that of Francis. Francis Yu cannot be
made liable in his individual capacity if he indeed entered into and signed the contract
in his official capacity as President, in the absence of stipulation to that effect, due to
the personality of the corporation being separate and distinct from the persons
composing it. However, while Yu cannot be held solidarily liable with petitioner
corporation merely because he is the President thereof and was involved in the
transactions with private corporation, there exists instances when corporate officers
may be held personally liable for corporate acts.
Personal liability of a corporate director, trustee or officer along (although not
necessarily) with the corporation may so validly attach, as a rule. The attendance of
these circumstances, however, cannot be determined at this stage and should properly
be threshed out during the trial on the merits. Also, there was no fraud on the part of
FCY in the performance of its obligations with Ley, therefore rendering attachment as
improper.
 RICARDO LLAMADO
vs.
COURT OF APPEALS, PEOPLE OF THE PHILIPPINES
GR 99032, 26 March 1997

FACTS:

Private complainant, Leon Gaw, delivered to accused the amount of

P180,000.00, with the assurance of Aida Tan, the secretary of the accused in the
corporation, that it will be repaid on 4 November 1983. Upon delivery of the money,
accused Ricardo Llamado took it and placed it inside a deposit box. Accused Jacinto
Pascual and Ricardo Llamado signed Philippine Trust Company Check No. 047809,
postdated 4 November 1983, in the amount of P186,500.00 in the presence of private
complainant.
The aforesaid check was issued in payment of the cash money delivered to the
accused by private complainant, plus interests thereon for sixty (60) days in the
amount of P6,500.00.
On 4 November 1983, private complainant deposited the check in his current
account with the Equitable Banking Corporation which later informed the
complainant that said check was dishonored by the drawee bank because payment
was stopped, and that the check was drawn against insufficient funds. Private
complainant was also notified by the Equitable Banking Corporation that his current
account was debited for the amount of P186,500.00 because of the dishonor of the
said check.
Private complainant returned to Aida Tan to inform her of the dishonor of the
check. Aida Tan received the check from private complainant with the assurance that
she will have said check changed with cash. However, upon his return to Aida Tan,
the latter informed him that she had nothing to do with the check.
Llamado alleges that he should not be held personally liable for the amount of
the check because it was a check of the Pan Asia Finance Corporation and he signed
the same in his capacity as Treasurer of the corporation.

ISSUE:
 Whether or not Llamado should be held liable under BP 22.

RULING:

YES.

He is mere act of signing the check held him liable under BP 22. Where the
check is drawn by a corporation, company or entity, the person or persons who
actually signed the check in behalf of such drawer shall be liable under this Act.

MAM REALTY CORPORATION

vs.
NLRC, CELSO BALBASTRO
GR 114787, 02 June 1995

FACTS:

Celso B. Balbastro filed a case against MAM Realty Development Corporation

("MAM") and its Vice President Manuel P. Centeno, for unfair labor practice in violation
of the Labor Code. Balbastro alleged that he was employed by MAM as a pump
operator in 1982 and had since performed such work at its Rancho Estate, Marikina,
Metro manila.
MAM countered that Balbastro had previously been employed by Francisco
Cacho and co., Inc., the developer of Rancho Estates. Sometime in May 1982, his
services were contracted by MAM for the operation of the Rancho Estates' water pump.
He was engaged, however, not as an employee, but as a service contractor, at an
agreed fee of P1,590.00 a month. Similar arrangements were likewise entered into by
MAM with one Rodolfo Mercado and with a security guard of Rancho Estates III
Homeowners' Association. Under the agreement, Balbastro was merely made to open
and close on a daily basis the water supply system of the different phases of the
subdivision in accordance with its water rationing scheme. He worked for only a
maximum period of three hours a day, and he made use of his free time by offering
plumbing services to the residents of the subdivision. He was not at all subject to the
control or supervision of MAM for, in fact, his work could so also be done either by
Mercado or by the security guard. On 23 May 1990, prior to the filing of the complaint,
MAM executed a Deed of Transfer, 1 effective 01 July 1990, in favor of the Rancho
Estates Phase III Homeowners Association, Inc., conveying to the latter all its rights
and interests over the water system in the subdivision.
NLRC found the corporation guilty as charged, and likewise held Centeno liable
together with said corporation.

ISSUE:

Whether or not Centeno should be held liable together with MAM Realty.

RULING:

NO.

A corporation, being a juridical entity, may act only through its directors,
officers and employees. Obligations incurred by them, acting as such corporate
agents, are not theirs but the direct accountabilities of the corporation they represent.
True, solidarily liabilities may at times be incurred but only when exceptional
circumstances. In labor cases, for instance, the Court has held corporate directors and
officers solidarily liable with the corporation for the termination of employment of
employees done with malice or in bad faith.
In the case at bench, there is nothing substantial on record that can justify,
prescinding from the foregoing, petitioner Centeno's solidary liability with the
corporation. Nothing states that he acted in bad faith.
Although the Court found that there is an employer-employee relationship
between Balbastro and MAM Realty, the case was remanded to NLRC for the
recomputation of Balbastro’s monetary awards, such as backwages and wage
differentials.

SERGIO NAGUIAT
vs.
CLARK FIELD TAXI, INC.
GR 116123, 13 March 1997

FACTS:

Petitioner CFTI held a concessionaire's contract with the Army Air Force
Exchange Services ("AAFES") for the operation of taxi services within Clark Air Base.
Sergio F. Naguiat was CFTI's president, while Antolin T. Naguiat was its vice-
president. Like Sergio F. Naguiat Enterprises, Incorporated ("Naguiat Enterprises"), a
trading firm, it was a family-owned corporation.
Individual respondents were previously employed by CFTI as taxicab drivers.
Due to the phase-out of the US military bases in the Philippines, from which Clark Air
Base was not spared, the AAFES was dissolved, and the services of individual
respondents were officially terminated on November 26, 1991.
The AAFES Taxi Drivers Association ("drivers' union"), through its local
president, Eduardo Castillo, and CFTI held negotiations as regards separation benefits
that should be awarded in favor of the drivers. They arrived at an agreement that the
separated drivers will be given P500.00 for every year of service as severance pay. Most
of the drivers accepted said amount in December 1991 and January 1992. However,
individual respondents herein refused to accept theirs.
Instead, after disaffiliating themselves from the drivers' union and filed a
complaint against "Sergio F. Naguiat doing business under the name and style Sergio
F. Naguiat Enterprises, Inc., and CFTI with Antolin T. Naguiat as vice president and
general manager, as party respondent.

ISSUE:

Whether or not Sergio Naguiat may be held liable for the claims instituted by
the taxi drivers against his company.

RULING:

YES.

As provided for under the fifth paragraph of Section 100 of the Corporation
Code specifically imposes personal liability upon the stockholder actively managing or
operating the business and affairs of the close corporation.
In fact, in posting the surety bond required by this Court for the issuance of a
temporary restraining order enjoining the execution of the assailed NLRC Resolutions,
only Sergio F. Naguiat, in his individual and personal capacity, principally bound
himself to comply with the obligation thereunder, i.e., "to guarantee the payment to
private respondents of any damages which they may incur by reason of the issuance
of a temporary restraining order sought, if it should be finally adjudged that said
principals were not entitled thereto.
The Court here finds no application to the rule that a corporate officer cannot
be held solidarily liable with a corporation in the absence of evidence that he had
acted in bad faith or with malice. In the present case, Sergio Naguiat is held solidarily
liable for corporate tort because he had actively engaged in the management and
operation of CFTI, a close corporation.
Antolin Naguiat, however, could not be held liable. Although he carried the title
of "general manager" as well, it had not been shown that he had acted in such
capacity. Furthermore, no evidence on the extent of his participation in the
management or operation of the business was preferred. In this light, he cannot be
held solidarily liable for the obligations of CFTI and Sergio Naguiat to the private
respondents.
 PROGRESS HOMES and ERMELO ALMEDA
vs.
NLRC, et al.
GR 106212, 07 March 1997

FACTS:

Private respondents allegedly were among the workers employed by Progress

Homes in their construction and development of the subdivision from 1986 to 1988.
They were paid varying salaries.
Forty of these workers, including private respondents, filed before the NLRC
Arbitration Branch a petition for reinstatement, salary adjustment, ECOLA, overtime
pay and 13th month pay. Petitioners amicably settled the case with thirty-three of the
laborers, leaving private respondents as the only claimants. Private respondents
alleged that they worked as laborers and carpenters for 8.5 hours a day at a salary
below the minimum wage and that when they demanded payment of the benefits due
them, they were summarily dismissed and barred from entering the workplace. It also
denied that private respondents were regular employees claiming that they were only
project employees and that there was no employer-employee relationship between
them.
The Labor Arbiter and the NLRC ruled that Progress is liable to the
respondents, with Almeda jointly and severally liable.

ISSUE:

Whether or not Almeda may be held liable.

RULING:

NO.

It amounted to grave abuse of discretion. The Court has held that corporate
directors and officers are solidarily liable with the corporation for the termination of
employment of employees only if the termination is done with malice or in bad faith.
The Labor Arbiter's decision failed to disclose why Almeda was made personally
liable. There appears no evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. Almeda, therefore, should not have
been made personally answerable for the payment of private respondents' salaries.
The decision of the Labor Arbiter and the NLRC, however, should be set aside
because of denial of due process on the part of Progress Homes.
 REAHS CORP., SEVERO CASTULO, et al.
vs.
NLRC, BONIFACIO RED, et al.
GR 117473, 15 April 1997

FACTS:

Private respondents sued Reahs Corp. for unfair labor practice and illegal
dismissal. They claim that they were unlawfully dismissed and were not awarded nor
given any separation pay.
On the other hand, respondents allege that sometime in 1986, a certain Ms
Soledad Domingo, the sole proprietress and operator of Rainbow Sauna located at 316
Araneta Avenue, Quezon City, offered to sell her business to respondent Reah's
Corporation After the sale, all the assets of Ms Domingo were turned over to
respondent Reah's, which put a sing-along coffee shop and massage clinic; that
complainant Red started his employment on the first week of December 1988 as a
room boy at P50.00/day and was given living quarters inside the premises as he
requested; that sometime in March 1989, complainant Red asked permission to go to
Bicol for a period of ten (10) days, which was granted, and was given an advance
money of P1,200.00 to bring some girls from the province to work as attendants at the
respondent's massage clinic, that it was only on January 1, 1990 that complainant
Red returned and was re-hired under the same terms and conditions of his previous
employment with the understanding that he will have to refund the P1,200.00 cash
advance given to him; that due to poor business, increase in the rental cost and the
failure of Meralco to reconnect the electrical services in the establishment, it suffered
losses leading to its closure.
The NLRC ruled in favor of respondents. Together with the corporation, the
NLRC also held Castulo, Romeo Pascua, and Daniel Valenzuela solidarily liable due to
their capacity as Chairman, Board Member and Accountant, and Acting Manager,
respectively.

ISSUE:

Whether or not Pascua, Castulo, and Valenzuela, may be held liable.

RULING:

YES.
 They acted in bad faith in dismissing the respondents. As a general rule
established by legal fiction, the corporation has a personality separate and distinct
from its officers, stockholders and members. Hence, officers of a corporation are not
personally liable for their official acts unless it is shown that they have exceeded their
authority. This fictional veil, however, can be pierced by the very same law which
created it when "the notion of the legal entity is used as a means to perpetrate fraud,
an illegal act, as a vehicle for the evasion of an existing obligation, and to confuse
legitimate issues". Under the Labor Code, for instance, when a corporation violates a
provision declared to be penal in nature, the penalty shall be imposed upon the guilty
officer or officers of the corporation.
In the case at bar, the thrust of petitioners' arguments was aimed at confining
liability solely to the corporation, as if the entity were an automaton designed to
perform functions at the push of a button. The issue, however, is not limited to
payment of separation pay under Article 283 but also payment of labor standard
benefits such as underpayment of wages, holiday pay and 13th month pay to two of
the private respondents. While there is no sufficient evidence to conclude that
petitioners have indiscriminately stopped the entity's business, at the same time,
petitioners have opted to abstain from presenting sufficient evidence to establish the
serious and adverse financial condition of the company.

BENJAMIN SANTOS
vs.
NLRC, MELVIN MILLENA
GR 101699, 13 March 1996

FACTS:

Melvin Millena, on 01 October 1985, was hired to be the project accountant for
Mana Mining and Development Corp.’s mining operations in Gatbo, Bacon, Sorsogon.
On 12 August 1986, private respondent sent to Mr. Gil Abaño, the MMDC corporate
treasurer, a memorandum calling the latter's attention to the failure of the company to
comply with the withholding tax requirements of, and to make the corresponding
monthly remittances to, the Bureau of Internal Revenue ("BIR") on account of delayed
payments of accrued salaries to the company's laborers and employees.
Albaño responded that the mining operations in Sorsogon shall be stopped
pending the end of the wet season and the normalization of the peace and order
situation in the province. Therefore, MMDC is dispensing the services of Millena
because of lack of work load.
Private respondent expressed "shock" over the termination of his employment.
He complained that he would not have resigned from the Sycip, Gorres & Velayo
accounting firm, where he was already a senior staff auditor, had it not been for the
assurance of a "continuous job" by MMDC's Engr. Rodillano E. Velasquez. Private
respondent requested that he be reimbursed the "advances" he had made for the
company and be paid his "accrued salaries/claims
With his demands left unheeded, Millena filed a complaint for illegal dismissal,
unpaid salaries, 13th month pay, overtime pay, separation pay and incentive leave pay
against MMDC and its two top officials, namely, herein petitioner Benjamin A. Santos
(the President) and Rodillano A. Velasquez (the executive vice-president).

ISSUE:

Whether or not the impleaded officials of MMDC may be held liable.

RULING:

NO.

It was not proven that they acted in bad faith. A corporation is a juridical entity
with legal personality separate and distinct from those acting for and in its behalf and,
in general, from the people comprising it. Nevertheless, being a mere fiction of law,
peculiar situations or valid grounds can exist to warrant, albeit done sparingly, the
disregard of its independent being and the lifting of the corporate veil. The Court also
has collated the settled instances when, without necessarily piercing the veil of
corporate fiction, personal civil liability can also be said to lawfully attach to a
corporate director, trustee or officer.
The case of petitioner is way off these exceptional instances. It is not even
shown that petitioner has had a direct hand in the dismissal of private respondent
enough to attribute to him (petitioner) a patently unlawful act while acting for the
corporation. It is undisputed that the termination of petitioner's employment has,
instead, been due, collectively, to the need for a further mitigation of losses, the onset
of the rainy season, the insurgency problem in Sorsogon and the lack of funds to
further support the mining operation in Gatbo.

JOSE SIA
vs.
PEOPLE OF THE PHILIPPINES
GR L-30896, 28 April 1983

FACTS:

Jose O. Sia sometime prior to 24 May, 1963, was General Manager of the Metal
Manufacturing Company of the Philippines, Inc. engaged in the manufacture of steel
office equipment; on 31 May, 1963, because his company was in need of raw materials
to be imported from abroad, he applied for a letter of credit to import steel sheets from
Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan, the application being directed to the
Continental Bank, herein complainant, and his application having been approved, the
letter of credit was opened on 5 June, 1963 in the amount of $18,300. The goods
arrived sometime in July, 1963 according to accused himself, now from here on there
is some debate on the evidence; according to Complainant Bank, there was permitted
delivery of the steel sheets only upon execution of a trust receipt, while according to
the accused, the goods were delivered to him sometime before he executed that trust
receipt in fact they had already been converted into steel office equipment by the time
he signed said trust receipt. But there is no question - and this is not debated — that
the bill of exchange issued for the purpose of collecting the unpaid account thereon
having fallen due neither accused nor his company having made payment thereon
notwithstanding demands, and the accounts having reached the sum in pesos of
P46,818.68 after deducting his deposit valued at P28,736.47.

ISSUE:

Whether or not Sia should be held liable.

RULING:

NO.

The bank is transacting with Metal Manufacturing and not with him. The case
cited by the Court of Appeals in support of its stand - Tan Boon Kong case, supra -
may however not be squarely applicable to the instant case in that the corporation was
directly required by law to do an act in a given manner, and the same law makes the
person who fails to perform the act in the prescribed manner expressly liable
criminally. The performance of the act is an obligation directly imposed by the law on
the corporation. Since it is a responsible officer or officers of the corporation who
actually perform the act for the corporation, they must of necessity be the ones to
assume the criminal liability; otherwise this liability as created by the law would be
illusory, and the deterrent effect of the law, negated.
In the present case, a distinction is to be found with the Tan Boon Kong case in
that the act alleged to be a crime is not in the performance of an act directly ordained
by law to be performed by the corporation. The act is imposed by agreement of parties,
as a practice observed in the usual pursuit of a business or a commercial transaction.
The offense may arise, if at all, from the peculiar terms and condition agreed upon by
the parties to the transaction, not by direct provision of the law. The intention of the
parties, therefore, is a factor determinant of whether a crime was committed or
whether a civil obligation alone intended by the parties. With this explanation, the
distinction adverted to between the Tan Boon Kong case and the case at bar should
come out clear and meaningful. In the absence of an express provision of law making
the petitioner liable for the criminal offense committed by the corporation of which he
is a president as in fact there is no such provisions in the Revised Penal Code under
which petitioner is being prosecuted, the existence of a criminal liability on his part
may not be said to be beyond any doubt. In all criminal prosecutions, the existence of
criminal liability for which the accused is made answerable must be clear and certain.
The maxim that all doubts must be resolved in favor of the accused is always of
compelling force in the prosecution of offenses.

TRAMAT MERCANTILE, INC. and DAVID HONG

vs.
COURT OF APPEALS, MELCHOR DE LA CUESTA
GR 111008, 07 November 1994
FACTS:

On 09 April 1984, Melchor de la Cuesta, doing business under the name and
style of "Farmers Machineries," sold to Tramat Mercantile, Inc. one unit Hinomoto
Tractor Model MB 1100D powered by a 13 H.P. diesel engine. In payment, David Ong,
Tramat's president and manager, issued a check for P33,500.00 (apparently replacing
an earlier postdated check for P33,080.00). Tramat, in turn, sold the tractor, together
with an attached lawn mower fabricated by it, to the Metropolitan Waterworks and
Sewerage System/NAWASA for P67,000.00. David Ong caused a stop payment of the
check when NAWASA refused to pay the tractor and lawn mower after discovering
that, aside from some stated defects of the attached lawn mower, the engine (sold by
de la Cuesta) was a reconditioned unit.
On 28 May 1985, de la Cuesta filed an action for the recovery of P33,500.00, as
well as attorney's fees of P10,000.00, and the costs of suit. Ong, in his answer,
averred, among other things, that de la Cuesta had no cause of action; that the
questioned transaction was between plaintiff and Tramat Mercantile, Inc., and not
with Ong in his personal capacity; and that the payment of the check was stopped
because the subject tractor had been priced as a brand new, not as a reconditioned
unit.

ISSUE:

Whether or not Ong should be held liable for the unpaid tractor.

RULING:

NO.

It is an error to hold David Ong jointly and severally liable with TRAMAT to de
la Cuesta under the questioned transaction. Ong had acted, not in his personal
capacity, but as an officer of a corporation, TRAMAT, with a distinct and separate
personality. As such, it should only be the corporation, not the person acting for and
on its behalf, that properly could be made liable thereon.
Tramat, however, should be held liable for the unpaid tractor because at the
time of the purchase, the appellants did not reveal to the appellee the true purpose for
which the tractor would be used. Granting that the appellants informed the appellee
that they would be reselling the unit to the MWSS, an entity admittedly not engaged in
farming, and that they ordered the tractor without the power tiller, an indispensable
accessory if the tractor would be used in farming, these in themselves would not
constitute the required implied notice to the appellee as seller.