12. SMITH, BELL & COMPANY (LTD.

) vs NATIVIDAD
G.R. No. 15574
September 17, 1919
Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a
motor vessel known as the Bato built for it in the Philippine Islands in 1916, of more than
fifteen tons gross The Bato was brought to Cebu in the present year for the purpose of
transporting plaintiff's merchandise between ports in the Islands. Application was made at
Cebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine
registry. The Collector refused to issue the certificate, giving as his reason that all the
stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the
Philippine Islands. The instant action is the result.
On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section of
this law amended section 1172 of the Administrative Code to read as follows:
SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic
ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be
issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the
taking of the certificate of Philippine register shall be optional with the owner.
"Domestic ownership," as used in this section, means ownership vested in some one or
more of the following classes of persons: (a) Citizens or native inhabitants of the Philippine
Islands; (b) citizens of the United States residing in the Philippine Islands; (c) any corporation
or company composed wholly of citizens of the Philippine Islands or of the United States or
of both, created under the laws of the United States, or of any State thereof, or of thereof,
or the managing agent or master of the vessel resides in the Philippine Islands
Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and
eighteen, had a certificate of Philippine register under existing law, shall likewise be deemed
a vessel of domestic ownership so long as there shall not be any change in the ownership
thereof nor any transfer of stock of the companies or corporations owning such vessel to
person not included under the last preceding paragraph.
The first paragraph of the Philippine Bill of Rights of the Philippine Bill, repeated again in the
first paragraph of the Philippine Bill of Rights as set forth in the Jones Law, provides "That no
law shall be enacted in said Islands which shall deprive any person of life, liberty, or property
without due process of law, or deny to any person therein the equal protection of the laws."
Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the
laws because it, in effect, prohibits the corporation from owning vessels, and because
classification of corporations based on the citizenship of one or more of their stockholders is
capricious, and that Act No. 2761 deprives the corporation of its properly without due
process of law because by the passage of the law company was automatically deprived of
every beneficial attribute of ownership in the Bato and left with the naked title to a boat it
could not use .
Issue/Held: WON the Government of the Philippine Islands, through its Legislature, can
deny the registry of vessel in its coastwise trade to corporations having alien
stockholders.- YES, this is a valid exercise of police power. Common carriers which in the
Philippines as in the United States and other countries are, as Lord Hale said, "affected

with a public interest," can only be permitted to use these public waters as a privilege and
under such conditions as to the representatives of the people may seem wise. Act No.
2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd.,
the right to register vessels in the Philippines coastwise trade, does not belong to that
vicious species of class legislation which must always be condemned, but does fall within
authorized exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.
Ratio: The guaranties of the Fourteenth Amendment and so of the first paragraph of the
Philippine Bill of Rights, are universal in their application to all person within the territorial
jurisdiction, without regard to any differences of race, color, or nationality. The word
"person" includes aliens. Private corporations, likewise, are "persons" within the scope of
the guaranties in so far as their property is concerned. Classification with the end in view of
providing diversity of treatment may be made among corporations, but must be based upon
some reasonable ground and not be a mere arbitrary selection. Examples of laws held
unconstitutional because of unlawful discrimination against aliens could be cited. Generally,
these decisions relate to statutes which had attempted arbitrarily to forbid aliens to engage
in ordinary kinds of business to earn their living.
One of the exceptions to the general rule, most persistent and far reaching in influence is,
that neither the Fourteenth Amendment to the United States Constitution, broad and
comprehensive as it is, nor any other amendment, "was designed to interfere with the
power of the State, sometimes termed its `police power,' to prescribe regulations to
promote the health, peace, morals, education, and good order of the people, and legislate
so as to increase the industries of the State, develop its resources and add to its wealth and
prosperity. From the very necessities of society, legislation of a special character, having
these objects in view, must often be had in certain districts." his is the same police power
which the United States Supreme Court say "extends to so dealing with the conditions which
exist in the state as to bring out of them the greatest welfare in of its people." For quite
similar reasons, none of the provision of the Philippine Organic Law could could have had
the effect of denying to the Government of the Philippine Islands, acting through its
Legislature, the right to exercise that most essential, insistent, and illimitable of powers, the
sovereign police power, in the promotion of the general welfare and the public interest.
Another notable exception permits of the regulation or distribution of the public domain or
the common property or resources of the people of the State, so that use may be limited to
its citizens. Even as to classification, it is admitted that a State may classify with reference to
the evil to be prevented; the question is a practical one, dependent upon experience.

G.R. No. L-19550

13. STONEHILL vs. DIOKNO

June 19, 1967

Facts: A total of 42 search warrants against petitioners herein and/or the corporations of
which they were officers, directed to the any peace officer, to search the persons abovenamed and/or the premises of their offices, warehouses and/or residences, and to seize and
take possession of the following personal property to wit:
Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other documents and/or papers showing all
business transactions including disbursements receipts, balance sheets and profit and loss

statements and Bobbins (cigarette wrappers).

as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or
"used or intended to be used as the means of committing the offense," which is described in
the applications adverted to above as "violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and the Revised Penal Code."
Petitioners allege that the search warrants are null and void because: (1) they do not
describe with particularity the documents, books and things to be seized; (2) cash money,
not mentioned in the warrants, were actually seized; (3) the warrants were issued to fish
evidence against the aforementioned petitioners in deportation cases filed against them; (4)
the searches and seizures were made in an illegal manner; and (5) the documents, papers
and cash money seized were not delivered to the courts that issued the warrants, to be
disposed of in accordance with law.
In their answer, respondents-prosecutors alleged, (1) that the contested search warrants are
valid and have been issued in accordance with law; (2) that the defects of said warrants, if
any, were cured by petitioners' consent; and (3) that, in any event, the effects seized are
admissible in evidence against herein petitioners, regardless of the alleged illegality of the
aforementioned searches and seizures.
The documents, papers, and things seized under the alleged authority of the warrants in
question may be split into two (2) major groups, namely: (a) those found and seized in the
offices of the aforementioned corporations, and (b) those found and seized in the residences
of petitioners herein.
Issues/Held: WON as to the first group, petitioners as officers of the Corporation have a
cause of action to assail the legality of the contested warrants and of the seizures made in
pursuance thereof.- NO
Ratio:

Said corporations have their respective personalities, separate and

distinct from the personality of herein petitioners, regardless of the
amount of shares of stock or of the interest of each of them in said
corporations, and whatever the offices they hold therein may be.

It is well settled that the legality of a seizure can be contested only by

the party whose rights have been impaired thereby, and that the
objection to an unlawful search and seizure is purely personal and
cannot be availed of by third parties. If these papers were unlawfully
seized and thereby the constitutional rights of or any one were invaded,
they were the rights of the corporation and not the rights of the other
defendants.

Consequently, petitioners herein may not validly object to the use in

evidence against them of the documents, papers and things seized from
the offices and premises of the corporations adverted to above, since
the right to object to the admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized effects belong, and
may not be invoked by the corporate officers in proceedings against
them in their individual capacity.

14. BATAAN SHIPYARD AND ENGINEERING vs. PCGG

G.R. No. 75885 May 27, 1987
Facts:

Challenged by a private corporation known as the Bataan Shipyard and Engineering Co., Inc.
are: (1) Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino
on February 28, 1986 and March 12, 1986, respectively, and (2) the sequestration, takeover,
and other orders issued, and acts done, in accordance with said executive orders by the
Presidential Commission on Good Government and/or its Commissioners and agents,
affecting said corporation.
BASECO describes itself in its petition as "a shiprepair and shipbuilding company * *
incorporated as a domestic private corporation * * (on Aug. 30, 1972) by a consortium of
Filipino shipowners and shipping executives. Its main office is at Engineer Island, Port Area,
Manila, where its Engineer Island Shipyard is housed, and its main shipyard is located at
Mariveles Bataan." Barely six months after its incorporation, BASECO acquired from National
Shipyard & Steel Corporation, or NASSCO, a government-owned or controlled corporation,
the latter's shipyard at Mariveles, Bataan, known as the Bataan National Shipyard (BNS), and
except for NASSCO's Engineer Island Shops and certain equipment of the BNS, consigned
for future negotiation all its structures, buildings, shops, quarters, houses, plants,
equipment and facilities, in stock or in transit. This it did in virtue of a "Contract of Purchase
and Sale with Chattel Mortgage" executed on February 13, 1973. The price was
P52,000,000.00.
Unaccountably, the price of P52,000,000.00 was reduced by more than one-half, to
P24,311,550.00, about eight (8) months later. A document to this effect was executed on
October 9, 1973, entitled "Memorandum Agreement," and was signed for NASSCO by Arturo
Pacificador, as Presiding Officer of the Board of Directors, and David R. Ines, as General
Manager. This agreement bore, at the top right corner of the first page, the word
"APPROVED" in the handwriting of President Marcos, followed by his usual full signature.
On October 1, 1974, BASECO acquired three hundred (300) hectares of land in Mariveles
from the Export Processing Zone Authority for the price of P10,047,940.00 of which, as set
out in the document of sale, P2,000.000.00 was paid upon its execution, and the balance
stipulated to be payable in installments.
Some nine months afterwards, or on July 15, 1975, to be precise, BASECO, again with the
intervention of President Marcos, acquired ownership of the rest of the assets of NASSCO
which had not been included in the first two (2) purchase documents. Transferred to
BASECO were NASSCO's "ownership and all its titles, rights and interests over all equipment
and facilities including structures, buildings, shops, quarters, houses, plants and expendable
or semi-expendable assets, located at the Engineer Island, known as the Engineer Island
Shops, including all the equipment of the Bataan National Shipyards (BNS) which were
excluded from the sale of NBS to BASECO but retained by BASECO and all other selected
equipment and machineries of NASSCO at J. Panganiban Smelting Plant."
Other evidence submitted to the Court by the Solicitor General proves that President
Marcos not only exercised control over BASECO, but also that he actually owns well nigh
one hundred percent of its outstanding stock.
The Solicitor General has drawn the Court's attention to the intriguing circumstance that
found in Malacanang shortly after the sudden flight of President Marcos, were certificates
corresponding to more than ninety-five percent (95%) of all the outstanding shares of stock
of BASECO, endorsed in blank, together with deeds of assignment of practically all the
outstanding shares of stock of the three (3) corporations above mentioned (which hold
95.82% of all BASECO stock), signed by the owners thereof although not notarized.
The Sequestration, Takeover, and Other Orders Complained of:
a. Basic sequestration order of various companies and The TAKEOVER
Order- While BASECO concedes that "sequestration without resorting to

judicial action, might be made within the context of Executive Orders

Nos. 1 and 2 before March 25, 1986 when the Freedom Constitution was
promulgated, under the principle that the law promulgated by the ruler
under a revolutionary regime is the law of the land, it ceased to be
acceptable when the same ruler opted to promulgate the Freedom
Constitution on March 25, 1986 wherein under Section I of the same,
Article IV (Bill of Rights) of the 1973 Constitution was adopted providing,
among others, that "No person shall be deprived of life, liberty and
property without due process of law." (Const., Art. I V, Sec. 1)."
b. Order of production of business documents and records- BASECO argues
that the order to produce corporate records from 1973 to 1986, which it
has apparently already complied with, was issued without court
authority and infringed its constitutional right against self-incrimination,
and unreasonable search and seizure.
c. BASECO contends that the PCGG had unduly interfered with its right of
dominion and management of its business affairs on the following
matters:
i. Orders Re Engineer Island1. Termination of Contract for Security Services
2. Change of Mode of Payment of Entry Charges
ii. Aborted contract for improvement of wharf at Engineer Island
iii. Order for Operation of Sesiman Rock Quarry, Mariveles,
Bataan
iv. Order to Dispose of Scrap, etc.
v. Termination of Services of BASECO Officers
Executive Order No. 1
Executive Order No. 1 stresses the "urgent need to recover all ill-gotten wealth," and
postulates that "vast resources of the government have been amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and
abroad." Upon these premises, the Presidential Commission on Good Government was
created, "charged with the task of assisting the President in regard to (certain specified)
matters," among which was precisely* * The recovery of all in-gotten wealth accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates, whether located
in the Philippines or abroad, including the takeover or sequestration of all business
enterprises and entities owned or controlled by them, during his administration, directly or
through nominees, by taking undue advantage of their public office and/or using their
powers, authority, influence, connections or relationship.
Executive Order No. 2
Executive Order No. 2 gives additional and more specific data and directions respecting "the
recovery of ill-gotten properties amassed by the leaders and supporters of the previous
regime." It declares that:
1) * * the Government of the Philippines is in possession of evidence showing that there are
assets and properties purportedly pertaining to former Ferdinand E. Marcos, and/or his wife
Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates,
dummies, agents or nominees which had been or were acquired by them directly or
indirectly, through or as a result of the improper or illegal use of funds or properties owned
by the government of the Philippines or any of its branches, instrumentalities, enterprises,
banks or financial institutions, or by taking undue advantage of their office, authority,

influence, connections or relationship, resulting in their unjust enrichment and causing grave
damage and prejudice to the Filipino people and the Republic of the Philippines:" and
2) * * said assets and properties are in the form of bank accounts, deposits, trust accounts,
shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates,
and other kinds of real and personal properties in the Philippines and in various countries of
the world."
Executive Order No. 14
PCGG is empowered, "with the assistance of the Office of the Solicitor General and other
government agencies, * * to file and prosecute all cases investigated by it * * as may be
warranted by its findings." All such cases, whether civil or criminal, are to be filed "with the
Sandiganbayan which shall have exclusive and original jurisdiction thereof."
Issue/Held: WON the issuance of the sequestration and take-over orders was valid- Yes
Ratio: In the light of the affirmative showing by the Government that, prima facie at least,
the stockholders and directors of BASECO as of April, 1986 were mere "dummies," nominees
or alter egos of President Marcos; at any rate, that they are no longer owners of any shares
of stock in the corporation, the conclusion cannot be avoided that said stockholders and
directors have no basis and no standing whatever to cause the filing and prosecution of the
instant proceeding; and to grant relief to BASECO, as prayed for in the petition, would in
effect be to restore the assets, properties and business sequestered and taken over by the
PCGG to persons who are "dummies," nominees or alter egos of the former president.
The facts herein stated at some length do indeed show that the private corporation known
as BASECO was "owned or controlled by former President Ferdinand E. Marcos * * during his
administration, * * through nominees, by taking advantage of * * (his) public office and/or
using * * (his) powers, authority, influence * *," and that NASSCO and other property of the
government had been taken over by BASECO; and the situation justified the sequestration as
well as the provisional takeover of the corporation in the public interest, in accordance with
the terms of Executive Orders No. 1 and 2, pending the filing of the requisite actions with
the Sandiganbayan to cause divestment of title thereto from Marcos, and its adjudication in
favor of the Republic pursuant to Executive Order No. 14.
Issue/Held: WON the Executive Orders are Bills of Attainder.- NO, Executive Orders not a
Bill of Attainder.
Ratio:
1.

2.

Nothing in the executive orders can be reasonably construed as a determination or

declaration of guilt. On the contrary, the executive orders, inclusive of Executive
Order No. 14, make it perfectly clear that any judgment of guilt in the amassing or
acquisition of "ill-gotten wealth" is to be handed down by a judicial tribunal, in this
case, the Sandiganbayan, upon complaint filed and prosecuted by the PCGG.
N o punishment is inflicted by the executive orders, as the merest glance at their
provisions will immediately make apparent. In no sense, therefore, may the
executive orders be regarded as a bill of attainder.

Issue/Held: WON there is a violation of right against self-incrimination and unreasonable

searches and seizure.- NO

Ratio:
It is elementary that the right against self-incrimination has no application to juridical
persons.
While an individual may lawfully refuse to answer incriminating questions unless protected
by an immunity statute, it does not follow that a corporation, vested with special privileges
and franchises, may refuse to show its hand when charged with an abuse of such privileges
Relevant jurisprudence is also cited by the Solicitor General.
* * corporations are not entitled to all of the constitutional protections which private
individuals have. * * They are not at all within the privilege against self-incrimination,
although this court more than once has said that the privilege runs very closely with the 4th
Amendment's Search and Seizure provisions. It is also settled that an officer of the company
cannot refuse to produce its records in its possession upon the plea that they will either
incriminate him or may incriminate it." (Oklahoma Press Publishing Co. v. Walling, 327 U.S.
186; emphasis, the Solicitor General's).
* * The corporation is a creature of the state. It is presumed to be incorporated for the
benefit of the public. It received certain special privileges and franchises, and holds them
subject to the laws of the state and the limitations of its charter. Its powers are limited by
law. It can make no contract not authorized by its charter. Its rights to act as a corporation
are only preserved to it so long as it obeys the laws of its creation. There is a reserve right in
the legislature to investigate its contracts and find out whether it has exceeded its powers. It
would be a strange anomaly to hold that a state, having chartered a corporation to make use
of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises
had been employed, and whether they had been abused, and demand the production of the
corporate books and papers for that purpose. The defense amounts to this, that an officer of
the corporation which is charged with a criminal violation of the statute may plead the
criminality of such corporation as a refusal to produce its books. To state this proposition is
to answer it. While an individual may lawfully refuse to answer incriminating questions
unless protected by an immunity statute, it does not follow that a corporation, vested with
special privileges and franchises may refuse to show its hand when charged with an abuse of
such privileges. (Wilson v. United States, 55 Law Ed., 771, 780 *emphasis, the Solicitor
General's+)
At any rate, Executive Order No. 14-A, amending Section 4 of Executive Order No. 14 assures
protection to individuals required to produce evidence before the PCGG against any possible
violation of his right against self-incrimination. It gives them immunity from prosecution on
the basis of testimony or information he is compelled to present. As amended, said Section
4 now provides that
xxx xxx xxx
The witness may not refuse to comply with the order on the basis of his privilege against
self-incrimination; but no testimony or other information compelled under the order (or any
information directly or indirectly derived from such testimony, or other information) may be
used against the witness in any criminal case, except a prosecution for perjury, giving a false
statement, or otherwise failing to comply with the order.
The constitutional safeguard against unreasonable searches and seizures finds no
application to the case at bar either. There has been no search undertaken by any agent or
representative of the PCGG, and of course no seizure on the occasion thereof.

fullest support of the judiciary and all sectors of society." The Court is likewise unanimous in
its judgment dismissing the petition to declare unconstitutional and void Executive Orders
Nos. 1 and 2 to annul the sequestration order of April 14, 1986. For indeed, the 1987
Constitution overwhelmingly adopted by the people at the February 2, 1987 plebiscite
expressly recognized in Article XVIII, section 26 thereof the vital functions of respondent
PCGG to achieve the mandate of the people to recover such ill-gotten wealth and properties
as ordained by Proclamation No. 3 promulgated on March 25, 1986. The Court is likewise
unanimous as to the general rule set forth in the main opinion that "the PCGG cannot
exercise acts of dominion over property sequestered, frozen or provisionally taken over" and
"(T)he PCGG may thus exercise only powers of administration over the property or business
sequestered or provisionally taken over, much like a court-appointed receiver, such as to
bring and defend actions in its own name; receive rents; collect debts due; pay outstanding
debts; and generally do such other acts and things as may be necessary to fulfill its mission
as conservator and administrator.
PADILLA, J., concurring:
The majority opinion penned by Mr. Justice Narvasa maintains and upholds the valid
distinction between acts of conservation and preservation of assets and acts of ownership.
Sequestration, freeze and temporary take-over encompass the first type of acts. They do not
include the second type of acts which are reserved only to the rightful owner of the assets
or business sequestered or temporarily taken over.
MELENCIO-HERRERA, J., concurring:
Melencio- Herrera qualifies the concurrence in so far as the voting of sequestered stork is
concerned.
The voting of sequestered stock is, to my mind, an exercise of an attribute of ownership. It
goes beyond the purpose of a writ of sequestration, which is essentially to preserve the
property in litigation (Article 2005, Civil Code). Sequestration is in the nature of a judicial
deposit (ibid.).
GUTIERREZ, JR., J., concurring and dissenting:
We are all agreed in the Court that the PCGG is not a judge. It is an investigator and
prosecutor. Sequestration is only a preliminary or ancillary remedy. There must be a
principal and independent suit filed in court to establish the true ownership of sequestered
properties. The factual premise that a sequestered property was ill-gotten by former
President Marcos, his family, relatives, subordinates, and close associates cannot be
assumed. The fact of ownership must be established in a proper suit before a court of
justice.
CRUZ, J., dissenting:
Cruz is convinced and so submit that the PCGG cannot at this time take over the BASECO
without any court order and exercise thereover acts of ownership without court supervision.
Voting the shares is an act of ownership. Reorganizing the board of directors is an act of
ownership. Such acts are clearly unauthorized. As the majority opinion itself stresses, the
PCGG is merely an administrator whose authority is limited to preventing the sequestered
properties from being dissipated or clandestinely transferred.

TEEHANKEE, CJ., concurring:

The Court is unanimous insofar as the judgment at bar upholds the imperative need of
recovering the ill-gotten properties amassed by the previous regime, which "deserves the

Facts:

15. PNB vs CA
G.R. No. L-27155 May 18, 1978

Defendant Rita Guenco Tapnio secured a crop loan from PNB. This crop loan was secured by

a mortgage on her standing crop including her sugar quota allocation for the agricultural
year corresponding to said standing crop. Philmagen executed its Bond, with defendant Rita
Gueco Tapnio as principal, in favor of the Philippine National Bank Branch at San Fernando,
Pampanga, to guarantee the payment of defendant Rita Gueco Tapnio's account with said
Bank. In turn, to guarantee the payment of whatever amount the bonding company would
pay to the Philippine National Bank, both defendants (Rita Gueco Tapnio and Cecilio Gueco)
executed the indemnity agreement.
It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum of
P2,000.00, plus accumulated interests unpaid, which she failed to pay despite demands. The
Bank wrote a letter of demand to Philmagen, whereupon Philmagen accordingly paid the full
amount due and owing in the sum of P2,379.91, for and on account of defendant Rita
Gueco's obligation.
Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however, when
demand was made upon her by plaintiff for her to pay her debt to the Bank, that she told
the Plaintiff that she did not consider herself to be indebted to the Bank at all because she
had an agreement with one Jacobo-Nazon whereby she had leased to the latter her unused
export sugar quota for the 1956-1957 agricultural year. his lease agreement, according to
her, was with the knowledge of the bank. But the Bank has placed obstacles to the
consummation of the lease, and the delay caused by said obstacles forced 'Nazon to
rescind the lease contract. Thus, Rita Gueco Tapnio filed her third-party complaint against
the Bank to recover from the latter any and all sums of money which may be adjudged
against her and in favor of the plaitiff plus moral damages, attorney's fees and costs.

Ratio: It has been clearly shown that when the Branch Manager of petitioner required the
parties to raise the consideration of the lease from P2.50 to P2.80 per picul, or a total of
P2,800-00, they readily agreed. Hence, in his letter to the Branch Manager of the Bank on
August 10, 1956, Tuazon informed him that the minimum lease rental of P2.80 per picul was
acceptable to him and that he even offered to use the loan secured by him from petitioner
to pay in full the sum of P2,800.00 which was the total consideration of the lease. This
arrangement was not only satisfactory to the Branch Manager but it was also approves by
Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita Gueco Tapnio
could have realized the amount of P2,800.00, which was more than enough to pay the
balance of her indebtedness to the Bank which was secured by the bond of Philamgen.
There is no question that Tapnio's failure to utilize her sugar quota for the crop year 19561957 was due to the disapproval of the lease by the Board of Directors of petitioner.
Time is of the essence in the approval of the lease of sugar quota allotments, since the same
must be utilized during the milling season, because any allotment which is not filled during
such milling season may be reallocated by the Sugar Quota Administration to other holders
of allotments. There was no proof that there was any other person at that time willing to
lease the sugar quota allotment of private respondents for a price higher than P2.80 per
picul. "The fact that there were isolated transactions wherein the consideration for the lease
was P3.00 a picul", according to the trial court, "does not necessarily mean that there are
always ready takers of said price." The unreasonableness of the position adopted by the
petitioner's Board of Directors is shown by the fact that the difference between the amount
of P2.80 per picul offered by Tuazon and the P3.00 per picul demanded by the Board
amounted only to a total sum of P200.00.
Issue/Held: WON PNB is liable for the damage caused.- YES

Sometimes, a planter harvest less sugar than her quota, so her excess quota is utilized by
another who pays her for its use. This is the arrangement entered into between Mrs. Tapnio
and Mr. Tuazon regarding the former's excess quota for 1956-1957.
Since the quota was mortgaged to the P.N.B., the contract of lease had to be approved by
said Bank, The same was submitted to the branch manager at San Fernando, Pampanga.
Consideration of the evidence discloses that when the branch manager of the Philippine
National Bank at San Fernando recommended the approval of the contract of lease at the
price of P2.80 per picul, whose recommendation was concurred in by the Vice-president of
said Bank, J. V. Buenaventura, the board of directors required that the amount be raised to
13.00 per picul. Mr. Tuazon asked for a reconsideration of the price per picul but thaw same
was not acted upon the PNBs BOD. The parties were notified of the refusal on the part of
the board of directors of the Bank to grant the motion for reconsideration. As such, Tuazon
wrote a letter to the Bank informing the Bank that he was no longer interested to continue
the deal, referring to the lease of sugar quota allotment in favor of defendant Rita Gueco
Tapnio. The result is that the latter lost the sum of P2,800.00 which she should have received
from Tuazon and which she could have paid the Bank to cancel off her indebtedness.
Issue/Held: WON the rescission of the lease contract of the 1,000 piculs of sugar quota
allocation of respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified
refusal of petitioner to approve said lease contract, and its unreasonable insistence on the
rental price of P3.00 instead of P2.80 per picul.- YES

Ratio: While petitioner had the ultimate authority of approving or disapproving the
proposed lease since the quota was mortgaged to the Bank, the latter certainly cannot
escape its responsibility of observing, for the protection of the interest of private
respondents, that degree of care, precaution and vigilance which the circumstances justly
demand in approving or disapproving the lease of said sugar quota.
The law makes it imperative that every person "must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith. This petitioner failed to do. Certainly, it knew that the agricultural year was about
to expire, that by its disapproval of the lease private respondents would be unable to utilize
the sugar quota in question.
In failing to observe the reasonable degree of care and vigilance which the surrounding
circumstances reasonably impose; petitioner is consequently liable for the damages caused
on private respondents. Under Article 21 of the New Civil Code, "any person who wilfully
causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage." The afore-cited provisions on
human relations were intended to expand the concept of torts in this jurisdiction by granting
adequate legal remedy for the untold number of moral wrongs which is impossible for
human foresight to specifically provide in the statutes.
A corporation is civilly liable in the same manner as natural persons for torts, because
"generally speaking, the rules governing the liability of a principal or master for a tort

committed by an agent or servant are the same whether the principal or master be a
natural person or a corporation, and whether the servant or agent be a natural or artificial
person. All of the authorities agree that a principal or master is liable for every tort which
he expressly directs or authorizes, and this is just as true of a corporation as of a natural
person, A corporation is liable, therefore, whenever a tortious act is committed by an
officer or agent under express direction or authority from the stockholders or members
acting as a body, or, generally, from the directors as the governing body."
16. Professional Services Inc. (PSI) v. Natividad and Enrique Agana
Natividad and Enrique Agana v. Juan Fuentes
Miguel Ampil v. Natividad and Enrique Agana
2007 / Sandoval-Gutierrez / Petition for review on certiorari of CA decisions
Standard of conduct > Experts > Medical professionals

FACTS:
Natividad Agana was rushed to Medical City because of difficulty of bowel movement and
bloody anal discharge. Dr. Ampil diagnosed her to be suffering from cancer of the sigmoid.
Dr. Ampil performed an anterior resection surgery on her, and finding that the malignancy
spread on her left ovary, he obtained the consent of her husband, Enrique, to permit Dr.
Fuentes to perform hysterectomy on her. After the hysterectomy, Dr. Fuentes showed his
work to Dr. Ampil, who examined it and found it in order, so he allowed Dr. Fuentes to leave
the operating room. Dr. Ampil was about to complete the procedure when the attending
nurses made some remarks on the Record of Operation: sponge count lacking 2; announced
to surgeon search done but to no avail continue for closure (two pieces of gauze were
missing). A diligent search was conducted but they could not be found. Dr. Ampil
then directed that the incision be closed.
A couple of days after, she complained of pain in her anal region, but the doctors told
her that it was just a natural consequence of the surgery. Dr. Ampil recommended that she
consult an oncologist to examine the cancerous nodes which were not removed during the
operation. After months of consultations and examinations in the US, she was told that she
was free of cancer. Weeks after coming back, her daughter found a piece of gauze (1.5 in)
protruding from her vagina, so Dr. Ampil manually extracted this, assuring Natividad that the
pains will go away. However, the pain worsened, so she sought treatment at a hospital,
where another 1.5 in piece of gauze was found in her vagina. She underwent another
surgery.
Sps. Agana filed a complaint for damages against PSI (owner of Medical City), Dr. Ampil,
and Dr. Fuentes, alleging that the latter are liable for negligence for leaving 2 pieces of gauze
in Natividads body, and malpractice for concealing their acts of negligence. Enrique Agana
also filed an administrative complaint for gross negligence and malpractice against the two
doctors with the PRC (although only the case against Dr. Fuentes was heard since Dr. Ampil
was abroad). Pending the outcome of the cases, Natividad died (now substituted by her
children). RTC found PSI and the two doctors liable for negligence and malpractice. PRC
dismissed the case against Dr. Fuentes. CA dismissed only the case against Fuentes.
ISSUE AND HOLDING:
1.

WON CA erred in holding Dr. Ampil liable for negligence and malpractice. NO;
DR. AMPIL IS GUILTY

2. WON CA erred in absolving Dr. Fuentes of any liability. NO

3. WON PSI may be held solidarily liable for Dr. Ampils negligence. YES
4.
RATIO
DR. AMPIL IS LIABLE FOR NEGLIGENCE AND MALPRACTICE
His arguments are without basis *did not prove that the American doctors were the ones
who put / left the gauzes; did not submit evidence to rebut the correctness of the operation
record (re: number of gauzes used); re: Dr. Fuentes' alleged negligence, Dr. Ampil examined
his work and found it in order+.
Leaving foreign substances in the wound after incision has been closed is at least prima
facie negligence by the operating surgeon. Even if it has been shown that a surgeon was
required to leave a sponge in his patients abdomen because of the dangers attendant upon
delay, still, it is his legal duty to inform his patient within a reasonable time by advising her of
what he had been compelled to do, so she can seek relief from the effects of the foreign
object left in her body as her condition might permit. Whats worse in this case is that he
misled her by saying that the pain was an ordinary consequence of her operation.

Medical negligence; standard of diligence

To successfully pursue this case of medical negligence, a patient must only prove that a
health care provider either failed to do something *or did something+ which a reasonably
prudent health care provider would have done *or wouldn't have done+, and that the failure
or action caused injury to the patient.
Duty - to remove all foreign objects from the body before closure of the incision; if
he fails to do so, it was his duty to inform the patient about it
Breach failed to remove foreign objects; failed to inform patient
Injury - suffered pain that necessitated examination and another surgery
Proximate Causation - breach caused this injury; could be traced from his act of
closing the incision despite information given by the attendant nurses that 2
pieces of gauze were still missing; what established causal link: gauze pieces later
extracted from patients vagina
DR. FUENTES NOT LIABLE
The res ipsa loquitur *thing speaks for itself+ argument of the Aganas does not convince the
court. Mere invocation and application of this doctrine does not dispense with the
requirement of proof of negligence.

Requisites for the applicability of res ipsa loquitur

1. Occurrence of injury
2. Thing which caused injury was under the control and management of the
defendant *DR. FUENTES+ LACKING SINCE CTRL+MGT WAS WITH DR. AMPIL
3. Occurrence was such that in the ordinary course of things, would not have
happened if those who had control or management used proper care
4. Absence of explanation by defendant
Under the Captain of the Ship rule, the operating surgeon is the person in complete charge
of the surgery room and all personnel connected with the operation. That Dr. Ampil
discharged such role is evident from the following:
He called Dr. Fuentes to perform a hysterectomy

He examined Dr. Fuentes work and found it in order

He granted Dr. Fuentes permission to leave
He ordered the closure of the incision
HOSPITAL OWNER PSI SOLIDARILY LIABLE WITH DR. AMPIL *NCC 2180+, AND DIRECTLY LIABLE
TO SPS. AGANAS *NCC 2176+
Previously, employers cannot be held liable for the fault or negligence of its professionals.
However, this doctrine has weakened since courts came to realize that modern hospitals are
taking a more active role in supplying and regulating medical care to its patients, by
employing staff of physicians, among others. Hence, there is no reason to exempt hospitals
from the universal rule of respondeat superior. Here are the Courts bases for sustaining PSIs
liability:
Ramos v. CA doctrine on E-E relationship

For purposes of apportioning responsibility in medical negligence cases,

an employer-employee relationship in effect exists between hospitals
and their attending and visiting physicians. *LABOR LESSON: power to
hire, fire, power of control+
Agency principle of apparent authority / agency by estoppel

o
o

Imposes liability because of the actions of a principal or employer in

somehow misleading the public into believing that the relationship or
the authority exists *see NCC 1869+
PSI publicly displays in the Medical City lobby the names and
specializations of their physicians. Hence, PSI is now estopped from
passing all the blame to the physicians whose names it proudly paraded
in the public directory, leading the public to believe that it vouched for
their skill and competence.

If doctors do well, hospital profits financially, so when

negligence mars the quality of its services, the hospital should
not be allowed to escape liability for its agents acts.
Doctrine of corporate negligence / corporate responsibility

o
o

This is the judicial answer to the problem of allocating hospitals liability

for the negligent acts of health practitioners, absent facts to support the
application of respondeat superior.
This provides for the duties expected *from hospitals+. In this case, PSI
failed to perform the duty of exercising reasonable care to protect from
harm all patients admitted into its facility for medical treatment. PSI
failed to conduct an investigation of the matter reported in the note of
the count nurse, and this established PSIs part in the dark conspiracy of
silence and concealment about the gauzes.

PSI has actual / constructive knowledge of the matter, through

the report of the attending nurses + the fact that the operation
was carried on with the assistance of various hospital staff
It also breached its duties to oversee or supervise all persons who

practice medicine within its walls and take an active step in fixing the
negligence committed
PSI also liable under NCC 2180

It failed to adduce evidence to show that it exercised the diligence of a

good father of the family in the accreditation and supervision of Dr.
Ampil
17. Executive Secretary vs. CA Gr#131719

Facts: The Omnibus Rules and Regulations Implementing the Migrant Workers and Overseas
Filipino Act of 1995 RA 8042 was, thereafter, published in the April 7, 1996 issue of the
Manila Bulletin. However, even before the law took effect, the Asian Recruitment Council
Philippine Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for declaratory relief
under Rule 63 of the Rules of Court with the Regional Trial Court of Quezon City to declare
as unconstitutional Section 2, paragraph (g), Section 6, paragraphs (a) to (j), (l) and (m),
Section 7, paragraphs (a) and (b), and Sections 9 and 10 of the law, with a plea for the
issuance of a temporary restraining order and/or writ of preliminary injunction enjoining the
respondents therein from enforcing the assailed provisions of the law.
Peitioner claims that great majority of the duly licensed recruitment agencies have
stopped or suspended their operations for fear of being prosecuted under the provisions of
a
law
that
are
unjust
and
unconstitutional.
On August 1, 1995, the trial court issued a temporary restraining order effective for a
period of only twenty (20) days therefrom. After the petitioners filed their comment on the
petition, the ARCO-Phil. filed an amended petition, the amendments consisting in the
inclusion in the caption thereof eleven (11) other corporations which it alleged were its
members and which it represented in the suit, and a plea for a temporary restraining order
enjoining the respondents from enforcing Section 6 subsection (i), Section 6 subsection (k)
and paragraphs 15 and 16 thereof, Section 8, Section 10, paragraphs 1 and 2, and Sections
11
and
40
of
Rep.
Act
No.
8042.
The respondent averred that the aforequoted provisions of Rep. Act No. 8042 violate
Section 1, Article III of the Constitution. 5 According to the respondent, Section 6(g) and (i)
discriminated against unskilled workers and their families and, as such, violated the equal
protection clause, as well as Article II, Section 12 6 and Article XV, Sections 1 7 and 3(3) of
the Constitution. 8 As the law encouraged the deployment of skilled Filipino workers, only
overseas skilled workers are granted rights. The respondent stressed that unskilled workers
also
have
the
right
to
seek
employment
abroad.
According to the respondent, the right of unskilled workers to due process is violated
because they are prevented from finding employment and earning a living abroad. It cannot
be argued that skilled workers are immune from abuses by employers, while unskilled
workers are merely prone to such abuses. It was pointed out that both skilled and unskilled
workers are subjected to abuses by foreign employers. Furthermore, the prohibition of the
deployment of unskilled workers abroad would only encourage fly-by-night illegal
recruiters.

in
According to the respondent, the grant of incentives to service contractors and manning
agencies to the exclusion of all other licensed and authorized recruiters is an invalid
classification. Licensed and authorized recruiters are thus deprived of their right to property
and due process and to the "equality of the person." It is understandable for the law to
prohibit illegal recruiters, but to discriminate against licensed and registered recruiters is
unconstitutional.
The respondent, likewise, alleged that Section 6, subsections (a) to (m) is unconstitutional
because licensed and authorized recruitment agencies are placed on equal footing with
illegal recruiters. It contended that while the Labor Code distinguished between recruiters
who are holders of licenses and non-holders thereof in the imposition of penalties, Rep. Act
No. 8042 does not make any distinction. The penalties in Section 7(a) and (b) being based on
an invalid classification are, therefore, repugnant to the equal protection clause, besides
being excessive; hence, such penalties are violative of Section 19(1), Article III of the
Constitution. 9 It was also pointed out that the penalty for officers/officials/employees of
recruitment agencies who are found guilty of economic sabotage or large-scale illegal
recruitment
under
Rep.
Act
No.
8042
is
life
imprisonment.

The respondent further argued that the 90-day period in Section 10, paragraph (1) within
which a labor arbiter should decide a money claim is relatively short, and could deprive
licensed and registered recruiters of their right to due process. The period within which the
summons and the complaint would be served on foreign employees and, thereafter, the
filing of the answer to the complaint would take more than 90 days. This would thereby shift
on local licensed and authorized recruiters the burden of proving the defense of foreign
employers.
The respondent asserted that the following provisions of the law are unconstitutional:
SEC. 9. Venue. A criminal action arising from illegal recruitment as defined herein shall
be filed with the Regional Trial Court of the province or city where the offense was
committed or where the offended party actually resides at the time of the commission of
the offense: Provided, That the court where the criminal action is first filed shall acquire
jurisdiction to the exclusion of other courts: Provided, however, That the aforestated
provisions shall also apply to those criminal actions that have already been filed in court at
the
time
of
the
effectivity
of
this
Act.
In their answer to the petition, the petitioners alleged, inter alia, that (a) the respondent
has no cause of action for a declaratory relief; (b) the petition was premature as the rules
implementing Rep. Act No. 8042 not having been released as yet; (c) the assailed provisions
do not violate any provisions of the Constitution; and, (d) the law was approved by Congress

exercise

of

the

police

power

of

the

State.

In opposition to the respondent's plea for injunctive relief, the petitioners averred that:
As earlier shown, the amended petition for declaratory relief is devoid of merit for failure of
petitioner to demonstrate convincingly that the assailed law is unconstitutional, apart from
the
defect
and
impropriety
of
the
petition.
On December 5, 1997, the appellate court came out with a four-page decision dismissing
the petition and affirming the assailed order and writ of preliminary injunction issued by the
trial court. The appellate court, likewise, denied the petitioners' motion for reconsideration
of
the
said
decision.

Issue: The core issue in this case is whether or not the trial court committed grave abuse of
its discretion amounting to excess or lack of jurisdiction in issuing the assailed order and the
writ
of
preliminary
injunction
on
a
bond
of
only
P50,000;
and

of
The respondent also posited that Section 6(m) and paragraphs (15) and (16), Sections 8, 9
and 10, paragraph 2 of the law violate Section 22, Article III of the Constitution 10
prohibiting ex-post facto laws and bills of attainder. This is because the provisions presume
that a licensed and registered recruitment agency is guilty of illegal recruitment involving
economic sabotage, upon a finding that it committed any of the prohibited acts under the
law. Furthermore, officials, employees and their relatives are presumed guilty of illegal
recruitment involving economic sabotage upon such finding that they committed any of the
said
prohibited
acts.

the

Whether or not the appellate court erred in affirming the trial court's order and the writ
preliminary
injunction
issued
by
it.

Held: IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of
the appellate court is REVERSED AND SET ASIDE. The Order of the Regional Trial Court dated
August 21, 1995 in Civil Case No. Q-95-24401 and the Writ of Preliminary Injunction issued
by it in the said case on August 24, 1995 are NULLIFIED. No costs.
SO

ORDERED.

Ratio: The matter of whether to issue a writ of preliminary injunction or not is addressed to
the sound discretion of the trial court. However, if the court commits grave abuse of its
discretion in issuing the said writ amounting to excess or lack of jurisdiction, the same may
be
nullified
via
a
writ
of
certiorari
and
prohibition.
The possible unconstitutionality of a statute, on its face, does not of itself justify an
injunction against good faith attempts to enforce it, unless there is a showing of bad faith,
harassment, or any other unusual circumstance that would call for equitable relief. The "on
its face" invalidation of statutes has been described as "manifestly strong medicine," to be
employed "sparingly and only as a last resort," and is generally disfavored.
To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to
be unconstitutional, the party must establish that it will suffer irreparable harm in the
absence of injunctive relief and must demonstrate that it is likely to succeed on the merits,
or that there are sufficiently serious questions going to the merits and the balance of
hardships
tips
decidedly
in
its
favor.
Just as the incidental "chilling effect" of such statutes does not automatically render them
unconstitutional, so the chilling effect that admittedly can result from the very existence of
certain laws on the statute books does not in itself justify prohibiting the State from carrying
out the important and necessary task of enforcing these laws against socially harmful
conduct that the State believes in good faith to be punishable under its laws and the

Constitution.
One who attacks a statute, alleging unconstitutionality must prove its invalidity beyond
reasonable doubt (Caleon v. Agus Development Corporation, 207 SCRA 748). All reasonable
doubts should be resolved in favor of the constitutionality of a statute (People v. Vera, 65
Phil. 56). This presumption of constitutionality is based on the doctrine of separation of
powers which enjoin upon each department a becoming respect for the acts of the other
departments
(Garcia
vs.
Executive
Secretary,
204
SCRA
516
*1991+).

In

view
of
petitioner's
standing
The petitioners contend that the respondent has no locus standi. It is a non-stock, nonprofit organization; hence, not the real party-in-interest as petitioner in the action. Although
the respondent filed the petition in the Regional Trial Court in behalf of licensed and
registered recruitment agencies, it failed to adduce in evidence a certified copy of its Articles
of Incorporation and the resolutions of the said members authorizing it to represent the said
agencies in the proceedings. Neither is the suit of the respondent a class suit so as to vest in
it a personality to assail Rep. Act No. 8042; the respondent is service-oriented while the
recruitment
agencies
it
purports
to
represent
are
profit-oriented.
The petition is meritorious. The respondent has locus standi to file the petition in the
RTC in representation of the eleven licensed and registered recruitment agencies
impleaded in the amended petition. The modern view is that an association has standing
to complain of injuries to its members. This view fuses the legal identity of an association
with that of its members. 16 An association has standing to file suit for its workers despite
its lack of direct interest if its members are affected by the action. An organization has
standing
to
assert
the
concerns
of
its
constituents.
We note that, under its Articles of Incorporation, the respondent was organized for the
purposes inter alia of promoting and supporting the growth and development of the
manpower recruitment industry, both in the local and international levels; providing,
creating and exploring employment opportunities for the exclusive benefit of its general
membership; enhancing and promoting the general welfare and protection of Filipino
workers; and, to act as the representative of any individual, company, entity or association
on matters related to the manpower recruitment industry, and to perform other acts and
activities
necessary
to
accomplish
the
purposes
embodied
therein.

In

view
of
standing
in
behalf
of
unskilled
workers
However, the respondent has no locus standi to file the petition for and in behalf of
unskilled workers. We note that it even failed to implead any unskilled workers in its
petition. Furthermore, in failing to implead, as parties-petitioners, the eleven licensed and
registered recruitment agencies it claimed to represent, the respondent failed to comply
with Section 2 of Rule 63 20 of the Rules of Court. Nevertheless, since the eleven licensed
and registered recruitment agencies for which the respondent filed the suit are specifically
named in the petition, the amended petition is deemed amended to avoid multiplicity of
suits.

In

view
of
retroactivity
In People v. Diaz, 24 we held that Rep. Act No. 8042 is but an amendment of the Labor
Code of the Philippines and is not an ex-post facto law because it is not applied retroactively.

In

view
of
equal
protection
clause
In any case, where the liberty curtailed affects at most the rights of property, the
permissible scope of regulatory measures is certainly much wider. To pretend that licensing
or accreditation requirements violates the due process clause is to ignore the settled
practice, under the mantle of the police power, of regulating entry to the practice of various
trades or professions. Professionals leaving for abroad are required to pass rigid written and
practical exams before they are deemed fit to practice their trade.
Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause
of the Constitution to support their argument that the government cannot enact the
assailed regulatory measures because they abridge the freedom to contract.
The equal protection clause is directed principally against undue favor and individual or
class privilege. It is not intended to prohibit legislation which is limited to the object to
which it is directed or by the territory in which it is to operate. It does not require absolute
equality, but merely that all persons be treated alike under like conditions both as to
privileges
conferred
and
liabilities
imposed.

In

view
of
the
VALIDITY
of
Sec.
6
of
RA
8042
The validity of Section 6 of R.A. No. 8042 which provides that employees of recruitment
agencies may be criminally liable for illegal recruitment has been upheld in People v.
Chowdury: An employee of a company or corporation engaged in illegal recruitment may be
held liable as principal, together with his employer, if it is shown that he actively and
consciously
participated
in
illegal
recruitment.
By its rulings, the Court thereby affirmed the validity of the assailed penal and procedural
provisions of Rep. Act No. 8042, including the imposable penalties therefor. Until the Court,
by final judgment, declares that the said provisions are unconstitutional, the enforcement of
the
said
provisions
cannot
be
enjoined.
Penalizing unlicensed and licensed recruitment agencies and their officers and employees
and their relatives employed in government agencies charged with the enforcement of the
law for illegal recruitment and imposing life imprisonment for those who commit large scale
illegal recruitment is not offensive to the Constitution. The accused may be convicted of
illegal recruitment and large scale illegal recruitment only if, after trial, the prosecution is
able
to
prove
all
the
elements
of
the
crime
charged.
The respondent merely speculated and surmised that licensed and registered recruitment
agencies would close shop and stop business operations because of the assailed penal
provisions of the law. A writ of preliminary injunction to enjoin the enforcement of penal
laws cannot be based on such conjectures or speculations. The respondent even failed to
adduce any evidence to prove irreparable injury because of the enforcement of Section
10(1)(2) of Rep. Act No. 8042. Its fear or apprehension that, because of time constraints, its

members would have to defend foreign employees in cases before the Labor Arbiter is based
on speculations. Even if true, such inconvenience or difficulty is hardly irreparable injury.

In the present case the information or complaint alleges that he, defendant, was
the manager of a corporation which was engaged in business as a merchant, and
as such manager, he made a false return, for purposes of taxation, of the total
amount of sale made by said false return. This declaration of false return and the
failure to pay taxes due to the government constitutes a violation of law. The
defendant, as the author of the illegal act, must necessarily answer for its
consequences, provided that the allegations are proven.

The ruling of the court below sustaining the demurrer to the complaint is
therefore reversed.

Preliminarily, the proliferation of illegal job recruiters and syndicates preying on innocent
people anxious to obtain employment abroad is one of the primary considerations that led
to the enactment of The Migrant Workers and Overseas Filipinos Act of 1995. Aimed at
affording greater protection to overseas Filipino workers, it is a significant improvement on
existing laws in the recruitment and placement of workers for overseas employment.
By issuing the writ of preliminary injunction against the petitioners sans any evidence, the
trial court frustrated, albeit temporarily, the prosecution of illegal recruiters and allowed
them to continue victimizing hapless and innocent people desiring to obtain employment
abroad as overseas workers, and blocked the attainment of the salutary policies 52
embedded
in
Rep.
Act
No.
8042.
The trial court committed a grave abuse of its discretion amounting to excess or lack of
jurisdiction in issuing the assailed order and writ of preliminary injunction. It is for this
reason that the Court issued a temporary restraining order enjoining the enforcement of the
writ of preliminary injunction issued by the trial court.
18. G.R. No. L-35262
March 15, 1930
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
TAN BOON KONG, defendant-appellee.
OSTRAND, J.:
FACTS:

Tan Boon Kong is the manager of a corporation engaged in the purchase and the
sale of sugar, "bayon," coprax, and other native products. In 1924 the corporation
thru the accused declare in 1924 for the purpose of taxation only the sum of
P2,352,761.94, although the total gross sales of said corporation during that year
amounted to P2,543,303.44, thereby failing to declare the amount of P190,541.50.

The accused failed to pay the Government the amount of P2,960.12,

corresponding to 1 per cent of said undeclared sales.

ISSUE:

HELD:

Whether the defendant, as manager of the corporation is criminallyliable under

section 2723 (Failure to make true return of receipts and sales) of Act No. 2711 for
violation of section 1458 (Payment of percentage taxes) of the same act for the
benefit of said corporation.
The court below based the appealed ruling on the ground that the offense charged
must be regarded as committed by the corporation and not by its officials or
agents. This view is in direct conflict with the great weight of authority that a
corporation can act only through its officers and agents, and where the business
itself involves a violation of the law, the correct rule is that all who participate in it
are liable.

19. SIA vs. PEOPLE

G.R. No. L-30896
April 28, 1983
FACTS:
Petitioner, Jose O. Sia, was the president and general manager of Metal
Manufacturing of the Philippines (MEMAP). He was convicted of estafa for his
failure to return the cold rolled steel sheets or account for the proceeds of those
which were sold, to Continental Bank, herein complainant. Petitioner contended
that he cannot be made liable for the crime charged as he only acted for and in
behalf of MEMAP as its president.
ISSUE:
Whether petitioner could be held liable for estafa.
RULING:
The Court ruled in the negative.
The case of People vs. Tan Boon Kong (54 Phil. 607) provides for the
general principle that for crimes committed by a corporation, the responsible
officers thereof would personally bear the criminal liability as a corporation is an
artificial person, an abstract being. However, the Court ruled that such principle is
not applicable in this case because 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. 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. Further, the civil liability imposed by
the trust receipt is exclusively on the Metal Company. Speaking of such liability
alone, the petitioner was never intended to be equally liable as the corporation.
Without being made so liable personally as the corporation is, there would then
be no basis for holding him criminally liable, for any violation of the trust receipt.
*G.R. No. 119858. April 29, 2003+

20. EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF
THE PHILIPPINES, respondents.

receipts if the goods are not sold.*18+ The mere failure to account or return gives
rise to the crime which is malumprohibitum.*19+ There is no requirement to prove
intent to defraud.*20+

Facts:
The Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law
makes the officers or employees or other persons responsible for the offense
liable to suffer the penalty of imprisonment. The reason is obvious: corporations,
partnerships, associations and other juridical entities cannot be put to jail. Hence,
the criminal liability falls on the human agent responsible for the violation of the
Trust
Receipts
Law.

Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and
Benito Ong with two counts of estafa under separate Informations dated 11
October 1991.
In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ong
of the crime of estafa committed as follows:
That on or about July 23, 1990, in the City of Manila, Philippines, the said accused,
representing ARMAGRI International Corporation, conspiring and confederating
together did then and there willfully, unlawfully and feloniously defraud the
SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a
corporation duly organized and existing under the laws of the Philippines located
at Juan Luna Street, Binondo, this City, in the following manner, to wit: the said
accused received in trust from said SOLIDBANK Corporation the following, to wit:
10,000 bags of urea valued at P2,050,000.00 specified in a Trust Receipt
Agreement and covered by a Letter of Credit No. DOM GD 90-009 in favor of the
Fertiphil Corporation.
In Criminal Case No. 92-101990, the Information likewise charges petitioner of the
crime of estafa committed as follows:

21. CHING vs. SECRETARY OF JUSTICE

G. R. No. 164317
February 6, 2006
Facts:
Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime
in September to October 1980, PBMI, through petitioner, applied with the Rizal Commercial
Banking Corporation (respondent bank) for the issuance of commercial letters of credit to
finance its importation of assorted goods.
RCBC approved the application, and irrevocable letters of credit were issued in favor of
petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13
trust receipts as surety, acknowledging delivery of respective goods.

That on or about July 6, 1990, in the City of Manila, Philippines, the said accused,
representing ARMAGRI International Corporation, defraud the SOLIDBANK
Corporation represented by its Accountant, DEMETRIO LAZARO. The said accused
received in trust from said SOLIDBANK Corporation the following goods, to wit:
125 pcs. Rear diff. assy RNZO 49 50 pcs. Front & Rear diff assy. Isuzu Elof, 85 units
1-Beam assy. Isuzu Spz all valued at P2,532,500.00 specified in a Trust Receipt
Agreement and covered by a Domestic Letter of Credit No. DOM GD 90-006 in
favor of the Metropole Industrial Sales with address at P.O. Box AC 219, Quezon
City.

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with
authority to sell but not by way of conditional sale, pledge or otherwise; and in case such
goods were sold, to turn over the proceeds thereof as soon as received, to apply against the
relative acceptances and payment of other indebtedness to respondent bank. In case the
goods remained unsold within the specified period, the goods were to be returned to
respondent bank without any need of demand. Thus, said "goods, manufactured products
or proceeds thereof, whether in the form of money or bills, receivables, or accounts
separate and capable of identification" were respondent banks property.

Issue: WON PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE
OFFENSE, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND
SIGNED FOR THE ENTRUSTEE CORPORATION.

When the trust receipts matured, petitioner failed to return the goods to respondent bank,
or to return their value amounting to P6,940,280.66 despite demands. Thus, a criminal case
for estafa was filed against the Senior VP.

Held: Section 13 of the Trust Receipts Law which provides: x xx. If the violation is
committed by a corporation, partnership, association or other juridical entities,
the penalty provided for in this Decree shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible for the
offense, without prejudice to the civil liabilities arising from the offense. We hold
that petitioner is a person responsible for violation of the Trust Receipts Law.
The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over
the proceeds of the sale of the goods, or (2) return the goods covered by the trust

The RTC, however, granted the Motion to Quash the Informations filed by petitioner on the
ground that the material allegations therein did not amount to estafa.
In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoez,
holding that the penal provision of P.D. No. 115 encompasses any act violative of an
obligation covered by the trust receipt; it is not limited to transactions involving goods
which are to be sold (retailed), reshipped, stored or processed as a component of a product

ultimately sold. The Court also ruled that "the non-payment of the amount covered by a
trust receipt is an act violative of the obligation of the entrustee to pay."

thus, the civil liability imposed on respondent in RCBC vs. Court of Appeals
case is clearly separate and distinct from his criminal liability under PD
115."

Thus, the criminal complaint for estafa was re-filed.

Issue: WON the Honorable Secretary of Justice correctly ruled that petitioner Alfredo
Ching is the officer responsible for the offense charged.- NO
Ratio:
Assertions of Petitioner that he had no direct participation in the transaction other than
being the Senior VP of the PBMI is too dull that it cannot even just dent the findings of the
respondent Secretary, viz:
"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:
xxx If the violation or offense is committed by a corporation, partnership,
association or other judicial entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other
officials or persons therein responsible for the offense, without prejudice
to the civil liabilities arising from the criminal offense.
"There is no dispute that it was the respondent, who as senior vicepresident of PBM, executed the thirteen (13) trust receipts. As such, the
law points to him as the official responsible for the offense. Since a
corporation cannot be proceeded against criminally because it cannot
commit crime in which personal violence or malicious intent is required,
criminal action is limited to the corporate agents guilty of an act
amounting to a crime and never against the corporation itself (West Coast
Life Ins. Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes, 39 SCRA 303).
Thus, the execution by respondent of said receipts is enough to indict him
as the official responsible for violation of PD 115.
xxx
"In regard to the other assigned errors, we note that the respondent
bound himself under the terms of the trust receipts not only as a
corporate official of PBM but also as its surety. It is evident that these are
two (2) capacities which do not exclude the other. Logically, he can be
proceeded against in two (2) ways: first, as surety as determined by the
Supreme Court in its decision in RCBC vs. Court of Appeals, 178 SCRA 739;
and, secondly, as the corporate official responsible for the offense under
PD 115, the present case is an appropriate remedy under our penal law.
"Moreover, PD 115 explicitly allows the prosecution of corporate officers
without prejudice to the civil liabilities arising from the criminal offense

The Court rules that although petitioner signed the trust receipts merely as Senior VicePresident of PBMI and had no physical possession of the goods, he cannot avoid prosecution
1
for violation of P.D. No. 115.
The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It
may be committed by a corporation or other juridical entity or by natural persons.
Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,
employees or other officers or persons responsible for the offense, without prejudice to the
civil liabilities of such corporation and/or board of directors, officers, or other officials or
employees responsible for the offense. The rationale is that such officers or employees are
vested with the authority and responsibility to devise means necessary to ensure
compliance with the law and, if they fail to do so, are held criminally accountable; thus, they
have a responsible share in the violations of the law.
If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and
penalized for the crime, precisely because of the nature of the crime and the penalty
therefor. A corporation cannot be arrested and imprisoned; hence, cannot be penalized
for a crime punishable by imprisonment. However, a corporation may be charged and
prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribes both
fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty,
may be fined.

22. Consolidated Bank vs CA

Date: April 19, 2001
Petitioner: The Consolidated Bank and Trust Corporation
Respondents: Court of Appeals, Continental Cement Corporation, Gregory Lim and spouse
1

The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,
documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as
appears in the trust receipt or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable
under the provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered Three
thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. If the
violation or offense is committed by a corporation, partnership, association or other juridical entities, the
penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials
or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal
offense.

Ponente: Ynares- Santiago

Facts:
- On July 13, 1982, Continental Cement Corporation and Gregory T. Lim obtained
from Consolidated Bank and Trust Corporation a letter of credit in the amount of P
1,068,150. On the same date, Corporation paid a marginal deposit of P320,445.00 to
petitioner. The letter of credit was used to purchase around 500,000 liters of bunker fuel oil
from Petrophil Corporation. In relation to the same transaction, a trust receipt for the
amount of P 1,001,520.93 was executed by the Corporation, with Lim as signatory.
- Claiming that respondents failed to turn over the goods covered by the trust receipt or the
proceeds thereof, petitioner filed a complaint for sum of money with application for
preliminary attachment before the RTC. Respondents averred that the transaction between
them was a simple loan and not a trust receipt transaction, and that the amount claimed by
petitioner did not take into account payments already made by them. The trial court
dismissed the complaint and ordered petitioner to pay respondents P490,228.90
representing overpayment of respondent Corporation, with interest thereon at the legal
rate from July 26, 1988. The CA affirmed but deleted the award of attorneys fees.
Issue:

WON the floating rate of interest exhorted by petitioner is valid

Held:

No

Ratio:
Neither do we find error when the lower court and the CA set aside as invalid the
floating rate of interest exhorted by petitioner to be applicable. The pertinent provision in
the trust receipt agreement of the parties fixing the interest rate states: I, WE jointly and
severally agree to any increase or decrease in the interest rate which may occur after July 1,
1981, when the Central Bank floated the interest rate, and to pay additionally the penalty of
1% per month until the amount/s or instalments/s due and unpaid under the trust receipt
on the reverse side hereof is/are fully paid.
- We agree with the CA that the foregoing stipulation is invalid, there being no reference
rate set either by it or by the Central Bank, leaving the determination thereof at the sole will
and control of petitioner.
- While it may be acceptable, for practical reasons given the fluctuating economic
conditions, for banks to stipulate that interest rates on a loan not be fixed and instead be
made dependent upon prevailing market conditions, there should always be a reference
rate upon which to peg such variable interest rates. A provision may be upheld
notwithstanding that it may partake of the nature of an escalation clause, because at the
same time it provides for the decrease in the interest rate in case the prevailing market
rates dictate its reduction. In other words, unlike the stipulation subject of the instant case,
acceptable floating interest is designed to be based on the prevailing market rate. On the
other hand, a stipulation ostensibly signifying an agreement to "any increase or decrease in
the interest rate," without more, cannot be accepted by this Court as valid for it leaves
solely to the creditor the determination of what interest rate to charge against an
outstanding loan.
Issue:

WON the parties entered into a simple loan

Ratio:
- Prior to the date of execution of the trust receipt, ownership over the goods was
already transferred to the debtor. This situation is inconsistent with what normally obtains
in a pure trust receipt transaction, wherein the goods belong in ownership to the bank and
are only released to the importer in trust after the loan is granted.
- The danger in characterizing a simple loan as a trust receipt transaction was explained in
Colinares, to wit: The Trust Receipts Law does not seek to enforce payment of the loan,
rather it punishes the dishonesty and abuse of confidence in the handling of money or
goods to the prejudice of another regardless of whether the latter is the owner. Here, it is
crystal clear that on the part of Petitioners there was neither dishonesty nor abuse of
confidence in the handling of money to the prejudice of PBC. Petitioners continually
endeavored to meet their obligations, as shown by several receipts issued by PBC
acknowledging payment of the loan.
- Similarly, the Corporation cannot be said to have been dishonest in its dealings with
petitioner. Neither has it been shown that it has evaded payment of its obligations. Indeed,
it continually endeavored to meet the same, as shown by the various receipts issued by
petitioner acknowledging payment on the loan. Certainly, the payment of the sum of
P1,832,158.38 on a loan with a principal amount of only P681,075.93 negates any badge of
dishonesty , abuse of confidence or mishandling of funds on the part of respondent
Corporation, which are the gravamen of a trust receipt violation. Furthermore, the
Corporation is not an importer, which acquired the bunker fuel oil for re-sale; it needed the
oil for its own operations. More importantly, at no time did title over the oil pass to
petitioner, but directly to respondent Corporation to which the oil was directly delivered
long before the trust receipt was executed. The fact that ownership of the oil belonged to
the Corporation, through its President, Gregory Lim, was acknowledged by petitioner's own
account officer on the witness stand, to wit:
- By all indications, then, it is apparent that there was really no trust receipt transaction that
took place. Evidently, the Corporation was required to sign the trust receipt simply to
facilitate collection by petitioner of the loan it had extended to the former.
23. COMETA VS CA
FACTS:
Reynaldo Cometa is the president of State Investment Trust, Inc. (SITI), a lending firm.
Reynaldo Guevara is the president of Honeycomb Builders, Inc. (HBI), a real estate
developer. Guevara is also the chairman of the board of Guevent Industrial Development
Corp., (GIDC).
GIDC took out a loan from SITI and secured the loan by mortgaging some of its properties to
SITI. GIDC defaulted in paying and so SITI foreclosed the mortgaged assets. GIDC later sued
SITI as it alleged that the foreclosure was irregular. While the case was pending, the parties
entered into a compromise agreement where GIDC accepted HBIs offer to purchase the
mortgaged assets. But SITI did not approve of said proposal.

GIDC then filed a request for clarification with the trial court and the latter directed SITI to
accept the proposal. Meanwhile, HBI filed a request with the HLURB asking the latter to
grant them the right to develop the mortgaged assets. HBI submitted an affidavit allegedly
signed by Cometa. The affidavit purported that Cometa and SITI is not opposing HBIs
petition with the HLURB.
Cometa assailed the affidavit as it was apparently forged as proven by an NBI investigation.
Subsequently, Cometa filed a criminal action for falsification of public document against
Guevara. The prosecutor initially did not file the information as he finds no cause of action
but the then DOJ Secretary (Drilon) directed the fiscal to file an information against
Guevara.
The case was dismissed. In turn, Guevara filed a civil case for malicious prosecution against
Cometa. Guevara, in his complaint, included HBI as a co-plaintiff.
ISSUE: Whether or not HBI is appropriately added as a co-plaintiff.
HELD: Yes. It is true that a criminal case can only be filed against the officers of a
corporation and not against the corporation itself. But it does not follow that the
corporation cannot be a real-party-in-interest for the purpose of bringing a civil action for
malicious prosecution. As pointed out by the trial judge, and as affirmed by the Court of
Appeals, the allegation by Cometa that Guevara has no cause of action with HBI not being a
real party in interest is a matter of defense which can only be decisively determined in a full
blown trial.
24. ABS CBN vs CA
FACTS:
In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-Concio,
requested Viva Production, Inc. to allow ABS-CBN to air at least 14 films produced by Viva.
Pursuant to this request, a meeting was held between Vivas representative (Vicente Del
Rosario) and ABS-CBNs Eugenio Lopez (General Manager) and Santos-Concio was held on
April 2, 1992. During the meeting Del Rosario proposed a film package which will allow ABSCBN to air 104 Viva films for P60 million. Later, Santos-Concio, in a letter to Del Rosario,
proposed a counterproposal of 53 films (including the 14 films initially requested) for P35
million. Del Rosario presented the counter offer to Vivas Board of Directors but the Board
rejected the counter offer. Several negotiations were subsequently made but on April 29,
1992, Viva made an agreement with Republic Broadcasting Corporation (referred to as RBS
or GMA 7) which gave exclusive rights to RBS to air 104 Viva films including the 14 films
initially requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that there
is already a perfected contract between Viva and ABS-CBN in the April 2, 1992 meeting.
Lopez testified that Del Rosario agreed to the counterproposal and he (Lopez) even put the
agreement in a napkin which was signed and given to Del Rosario. ABS-CBN also filed an

injunction against RBS to enjoin the latter from airing the films. The injunction was granted.
RBS now filed a countersuit with a prayer for moral damages as it claimed that its reputation
was debased when they failed to air the shows that they promised to their viewers. RBS
relied on the ruling in People vs Manero and Mambulao Lumber vs PNB which states that a
corporation may recover moral damages if it has a good reputation that is debased,
resulting in social humiliation. The trial court ruled in favor of Viva and RBS. The Court of
Appeals affirmed the trial court.

ISSUE:
1.
Whether or not a contract was perfected in the April 2, 1992 meeting between the
representatives
of
the
two
corporations.
2.
Whether or not a corporation, like RBS, is entitled to an award of moral damages
upon grounds of debased reputation.
HELD:
1. No. There is no proof that a contract was perfected in the said meeting. Lopez testimony
about the contract being written in a napkin is not corroborated because the napkin was
never produced in court. Further, there is no meeting of the minds because Del Rosarios
offer was of 104 films for P60 million was not accepted. And that the alleged counter-offer
made by Lopez on the same day was not also accepted because theres no proof of such.
The counter offer can only be deemed to have been made days after the April 2 meeting
when Santos-Concio sent a letter to Del Rosario containing the counter-offer. Regardless,
there was no showing that Del Rosario accepted. But even if he did accept, such acceptance
will not bloom into a perfected contract because Del Rosario has no authority to do so.
As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the
Board of Directors. But this power may be delegated to a corporate committee, a corporate
officer or corporate manager. Such a delegation must be clear and specific. In the case at
bar, there was no such delegation to Del Rosario. The fact that he has to present the
counteroffer to the Board of Directors of Viva is proof that the contract must be accepted
first by the Vivas Board. Hence, even if Del Rosario accepted the counter-offer, it did not
result to a contract because it will not bind Viva sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal contemplation, it has no feelings,
no emotions, no senses, It cannot, therefore, experience physical suffering and mental
anguish, which call be experienced only by one having a nervous system. No moral damages
can be awarded to a juridical person. The statement in the case of People vs Manero and
Mambulao Lumber vs PNB is a mere obiter dictum hence it is not binding as a jurisprudence.
25. G.R. No. 172428

November 28, 2008

HERMAN C. CRYSTAL, LAMBERTO C. CRYSTAL, ANN GEORGIA C. SOLANTE, and DORIS C.

MAGLASANG, as Heirs of Deceased SPOUSES RAYMUNDO I. CRYSTAL and
DESAMPARADOS C. CRYSTAL, petitioners,
vs.
BANK OF THE PHILIPPINE ISLANDS, respondent.
DECISION

1981, Insular Bank of Asia and America (IBAA), through its Vice-President for Legal and
Corporate Affairs, offered to buy the lot subject of the two (2) real
estate mortgages and to pay directly the spouses indebtedness in exchange for the release
13
of the mortgages. BPI rejected IBAAs offer to pay.
BPI filed a complaint for sum of money against CCCC and the spouses before the Regional
Trial Court of Butuan City (RTC Butuan), seeking to recover the deficiency of the loan of
CCCC and the spouses with BPI-Butuan. The trial court ruled in favor of BPI. Pursuant to the
14
decision, BPI instituted extrajudicial foreclosure of the spouses mortgaged property.

TINGA, J.:
1

Before us is a Petition for Review of the Decision and Resolution of the Court of Appeals
dated 24 October 2005 and 31 March 2006, respectively, in CA G.R. CV No. 72886, which
4
affirmed the 8 June 2001 decision of the Regional Trial Court, Branch 5, of Cebu City.
The facts, as culled from the records, follow.
On 28 March 1978, spouses Raymundo and Desamparados Crystal obtained a P300,000.00
loan in behalf of the Cebu Contractors Consortium Co. (CCCC) from the Bank of the
Philippine Islands-Butuan branch (BPI-Butuan). The loan was secured by a chattel mortgage
on heavy equipment and machinery of CCCC. On the same date, the spouses executed in
5
favor of BPI-Butuan a Continuing Suretyship where they bound themselves as surety of
CCCC in the aggregate principal sum of not exceeding P300,000.00. Thereafter, or on 29
6
March 1979, Raymundo Crystal executed a promissory note for the amount
of P300,000.00, also in favor of BPI-Butuan.
Sometime in August 1979, CCCC renewed a previous loan, this time from BPI, Cebu City
7
branch (BPI-Cebu City). The renewal was evidenced by a promissory note dated 13 August
1979, signed by the spouses in their personal capacities and as managing partners of CCCC.
The promissory note states that the spouses are jointly and severally liable with CCCC. It
appears that before the original loan could be granted, BPI-Cebu City required CCCC to put
up a security.
However, CCCC had no real property to offer as security for the loan; hence, the spouses
8
9
executed a real estate mortgage over their own real property on 22 September 1977. On 3
October 1977, they executed another real estate mortgage over the same lot in favor of BPI10
Cebu City, to secure an additional loan of P20,000.00 of CCCC.
CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City when they became due.
CCCC, as well as the spouses, failed to pay their obligations despite demands. Thus, BPI
resorted to the foreclosure of the chattel mortgage and the real estate mortgage. The
foreclosure sale on the chattel mortgage was initially stalled with the issuance of a
11
restraining order against BPI. However, following BPIs compliance with the necessary
requisites of extrajudicial foreclosure, the foreclosure sale on the chattel mortgage was
consummated on 28 February 1988, with the proceeds amounting to P240,000.00 applied
12
to the loan from BPI-Butuan which had then reached P707,393.90. Meanwhile, on 7 July

On 10 April 1985, the spouses filed an action for Injunction With Damages, With A Prayer
15
For A Restraining Order and/ or Writ of Preliminary Injunction. The spouses claimed that
the foreclosure of the real estate mortgages is illegal because BPI should have exhausted
CCCCs properties first, stressing that they are mere guarantors of the renewed loans. They
also prayed that they be awarded moral and exemplary damages, attorneys fees, litigation
expenses and cost of suit. Subsequently, the spouses filed an amended
16
complaint, additionally alleging that CCCC had opened and maintained a foreign currency
savings account (FCSA-197) with bpi, Makati branch (BPI-Makati), and that said FCSA was
used as security for a P450,000.00 loan also extended by BPI-Makati. The P450,000.00 loan
was allegedly paid, and thereafter the spouses demanded the return of the FCSA passbook.
BPI rejected the demand; thus, the spouses were unable to withdraw from the said account
to pay for their other obligations to BPI.
The trial court dismissed the spouses complaint and ordered them to pay moral and
17
exemplary damages and attorneys fees to BPI. It ruled that since the spouses agreed to
bind themselves jointly and severally, they are solidarily liable for the loans; hence, BPI can
validly foreclose the two real estate mortgages. Moreover, being guarantors-mortgagors,
the spouses are not entitled to the benefit of exhaustion. Anent the FCSA, the trial court
found that CCCC originally had FCDU SA No. 197 with BPI, Dewey Boulevard branch, which
was transferred to BPI-Makati as FCDU SA 76/0035, at the request of Desamparados Crystal.
FCDU SA 76/0035 was thus closed, but Desamparados Crystal failed to surrender the
passbook because it was lost. The transferred FCSA in BPI-Makati was the one used as
security for CCCCs P450,000.00 loan from BPI-Makati. CCCC was no longer allowed to
withdraw from FCDU SA No. 197 because it was already closed.
The spouses appealed the decision of the trial court to the Court of Appeals, but their
18
appeal was dismissed. The spouses moved for the reconsideration of the decision, but the
19
Court of Appeals also denied their motion for reconsideration. Hence, the present
petition.
Before the Court, petitioners who are the heirs of the spouses argue that the failure of the
spouses to pay the BPI-Cebu City loan of P120,000.00 was due to BPIs illegal refusal to
accept payment for the loan unless the P300,000.00 loan from BPI-Butuan would also be
paid. Consequently, in view of BPIs unjust refusal to accept payment of the BPI-Cebu City
loan, the loan obligation of the spouses was extinguished, petitioners contend.

The contention has no merit. Petitioners rely on IBAAs offer to purchase the mortgaged lot
20
from them and to directly pay BPI out of the proceeds thereof to settle the loan. BPIs
refusal to agree to such payment scheme cannot extinguish the spouses loan obligation. In
the first place, IBAA is not privy to the loan agreement or the promissory note between the
spouses and BPI. Contracts, after all, take effect only between the parties, their successors
in interest, heirs
21

and assigns. Besides, under Art. 1236 of the Civil Code, the creditor is not bound to accept
payment or performance by a third person who has no interest in the fulfillment of the
obligation, unless there is a stipulation to the contrary. We see no stipulation in the
promissory note which states that a third person may fulfill the spouses obligation. Thus, it
is clear that the spouses alone bear responsibility for the same.
In any event, the promissory note is the controlling repository of the obligation of the
spouses. Under the promissory note, the spouses defined the parameters of their obligation
as follows:
On or before June 29, 1980 on demand, for value received, I/we promise to pay, jointly and
severally, to the BANK OF THE PHILIPPINE ISLANDS, at its office in the city of Cebu
Philippines, the sum of ONE HUNDRED TWENTY THOUSAND PESOS (P120,0000.00),
Philippine Currency, subject to periodic installments on the principal as follows: P30,000.00
22
quarterly amortization starting September 28, 1979. x xx
A solidary obligation is one in which each of the debtors is liable for the entire obligation,
and each of the creditors is entitled to demand the satisfaction of the whole obligation from
23
any or all of the debtors. A liability is solidary "only when the obligation expressly so
states, when the law so provides or when the nature of the
24

obligation so requires." Thus, when the obligor undertakes to be "jointly and severally"
25
liable, it means that the obligation is solidary, such as in this case. By stating "I/we promise
to pay, jointly and severally, to the BANK OF THE PHILIPPINE ISLANDS," the spouses agreed
to be sought out and be demanded payment from, by BPI. BPI did demand payment from
them, but they failed to comply with their obligation, prompting BPIs valid resort to the
foreclosure of the chattel mortgage and the real estate mortgages.
More importantly, the promissory note, wherein the spouses undertook to be solidarily
liable for the principal loan, partakes the nature of a suretyship and therefore is an
additional security for the loan. Thus we held in one case that if solidary liability was
instituted to "guarantee" a principal obligation, the law deems the contract to be one of
26
suretyship. And while a contract of a surety is in essence secondary only to a valid
principal obligation, the suretys liability to the creditor or promisee of the principal is said
to be direct, primary, and absolute; in other words, the surety is directly and equally bound
with the principal. The surety therefore becomes liable for the debt or duty of another even
if he possesses no direct or personal interest over the obligations nor does he receive any
27
benefit therefrom.

Petitioners contend that the Court of Appeals erred in not granting their counterclaims,
considering that they suffered moral damages in view of the unjust refusal of BPI to accept
the payment scheme proposed by IBAA and the allegedly unjust and illegal foreclosure of
28
the real estate mortgages on their property. Conversely, they argue that the Court of
Appeals erred in awarding moral damages to BPI, which is a corporation, as well as
29
exemplary damages, attorneys fees and expenses of litigation.
We do not agree. Moral damages are meant to compensate the claimant for any physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
30
moral shock, social humiliation and similar injuries unjustly caused. Such damages, to be
recoverable, must be the proximate result of a wrongful act or omission the factual basis for
31
which is satisfactorily established by the aggrieved party. There being no wrongful or
unjust act on the part of BPI in demanding payment from them and in seeking the
foreclosure of the chattel and real estate mortgages, there is no lawful basis for award of
damages in favor of the spouses.
Neither is BPI entitled to moral damages. A juridical person is generally not entitled to moral
damages because, unlike a natural person, it cannot experience physical suffering or such
32
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. The
Court of Appeals found BPI as "being famous and having gained its familiarity and respect
not only in the Philippines but also in the whole world because of its good will and good
reputation must protect and defend the same against any unwarranted suit such as the case
33
at bench." In holding that BPI is entitled to moral damages, the Court of Appeals relied on
34
the case of People v. Manero, wherein the Court ruled that "[i]t is only when a juridical
person has a good reputation that is debased, resulting in social humiliation, that moral
35
damages may be awarded."
We do not agree with the Court of Appeals. A statement similar to that made by the Court
36
in Manerocan be found in the case of Mambulao Lumber Co. v. PNB, et al., thus:
x xx Obviously, an artificial person like herein appellant corporation cannot experience
physical sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock
or social humiliation which are basis of moral damages. A corporation may have good
reputation which, if besmirched may also be a ground for the award of moral damages. x
xx (Emphasis supplied)
Nevertheless, in the more recent cases of ABS-CBN Corp. v. Court of Appeals, et
37
al., and Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center-Bicol
38
Christian College of Medicine (AMEC-BCCM), the Court held that the statements in Manero
and Mambulao were mere obiter dicta, implying that the award of moral damages to
corporations is not a hard and fast rule. Indeed, while the Court may allow the grant of
moral damages to corporations, it is not automatically granted; there must still be proof of
the existence of the factual basis of the damage and its causal relation to the defendants
acts. This is so because moral damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant for actual injurysuffered and
39
not to impose a penalty on the wrongdoer.

The spouses complaint against BPI proved to be unfounded, but it does not automatically
entitle BPI to moral damages. Although the institution of a clearly unfounded civil suit can at
times be a legal
justification for an award of attorney's fees, such filing, however, has almost invariably been
held not to be a ground for an award of moral damages. The rationale for the rule is that the
law could not have meant to impose a penalty on the right to litigate. Otherwise, moral
damages must every time be awarded in favor of the prevailing defendant against an
40
unsuccessful plaintiff. BPI may have been inconvenienced by the suit, but we do not see
how it could have possibly suffered besmirched reputation on account of the single suit
alone. Hence, the award of moral damages should be deleted.
The awards of exemplary damages and attorneys fees, however, are proper. Exemplary
damages, on the other hand, are imposed by way of example or correction for the public
good, when the party to a contract acts in a wanton, fraudulent, oppressive or malevolent
manner, while attorneys fees are allowed when exemplary damages are awarded and when
41
the party to a suit is compelled to incur expenses to protect his interest. The spouses
instituted their complaint against BPI notwithstanding the fact that they were the ones who
failed to pay their obligations. Consequently, BPI was forced to litigate and defend its
interest. For these reasons, BPI is entitled to the awards of exemplary damages and
attorneys fees.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals
dated 24 October 2005 and 31 March 2006, respectively, are hereby AFFIRMED, with the
MODIFICATION that the award of moral damages to Bank of the Philippine Islands is
DELETED.
Costs against the petitioners.
SO ORDERED.

26. Filipinas Broadcasting Network Inc. vs. Ago Medical and Educational Center-Bicol
Christian
College of Medicine (AMEC-BCCM) [GR 141994, 17 January 2005]

Medical and Educational Center-Bicol ChristianCollege of Medicine (AMEC) and its

administrators. Claiming that the broadcasts were defamatory,AMEC and Angelita Ago
(Ago), as Dean of AMECs College of Medicine, filed a complaint for damagesagainst FBNI,
Rima and Alegre on 27 February 1990. The complaint further alleged that AMEC is a
reputablelearning institution. With the supposed exposs, FBNI, Rima and Alegre
transmitted malicious imputations,and as such, destroyed plaintiffs (AMEC and Ago)
reputation. AMEC and Ago included FBNI as defendantfor allegedly failing to exercise due
diligence in the selection and supervision of its employees, particularlyRima and Alegre. On
18 June 1990, FBNI, Rima and Alegre, through Atty.RozilLozares, filed an Answeralleging that
the broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they
wereplainly impelled by a sense of public duty to report the goings-on in AMEC, [which is]
an institution imbuedwith public interest. Thereafter, trial ensued. During the presentation
of the evidence for the defense, AttyEdmundoCea, collaborating counsel of Atty. Lozares,
filed a Motion to Dismiss on FBNIs behalf. The trialcourt denied the motion to dismiss.
Consequently, FBNI filed a separate Answer claiming that it exercised duediligence in the
selection and supervision of Rima and Alegre. FBNI claimed that before hiring a
broadcaster,the broadcaster should (1) file an application; (2) be interviewed; and (3)
undergo an apprenticeship andtraining program after passing the interview. FBNI likewise
claimed that it always reminds its broadcasters toobserve truth, fairness and objectivity in
their broadcasts and to refrain from using libelous and indecentlanguage. Moreover, FBNI
requires all broadcasters to pass the Kapisanan ng mgaBrodkastersaPilipinas(KBP)
accreditation test and to secure a KBP permit. On 14 December 1992, the trial court
rendered a
Decision finding FBNI and Alegre liable for libel except Rima. The trial court held that the
broadcasts arelibelous per se. The trial court rejected the broadcasters claim that their
utterances were the result of straightreporting because it had no factual basis. The
broadcasters did not even verify their reports before airing themto show good faith. In
holding FBNI liable for libel, the trial court found that FBNI failed to exercisediligence in the
selection and supervision of its employees. In absolving Rima from the charge, the trial
courtruled that Rimas only participation was when he agreed with Alegres expos. The trial
court found Rimasstatement within the bounds of freedom of speech, expression, and of
the press. Both parties, namely,FBNI, Rima and Alegre, on one hand, and AMEC and Ago,
on the other, appealed the decision to the Court ofAppeals. The Court of Appeals affirmed
the trial courts judgment with modification. The appellate courtmade Rima solidarily liable
with FBNI and Alegre. The appellate court denied Agos claim for damages andattorneys
fees because the broadcasts were directed against AMEC, and not against her. FBNI, Rima
andAlegre filed a motion for reconsideration which the Court of Appeals denied in its 26
January 2000Resolution. Hence, FBNI filed the petition for review.

Facts:

Issue: Whether AMEC is entitled to moral damages.

Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and
HermogenesJun Alegre (Alegre). Expos is aired every morning over DZRC-AM which is
owned by FilipinasBroadcasting Network, Inc. (FBNI). Expos is heard over Legazpi City,
the Albay municipalities anCommercial Law - Corporation Law, 2005 ( 17 )Narratives (Berne
Guerrero)other Bicol areas. In the morning of 14 and 15 December 1989, Rima and Alegre
exposed various allegedcomplaints from students, teachers and parents against Ago

Held: A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannotexperience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish ormoral shock. The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al. to justify the award of moraldamages. However, the Courts
statement in Mambulao that a corporation may have a good reputationwhich, if
besmirched, may also be a ground for the award of moral damages is an obiter dictum.

Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2219 of the Civil
Code. Thisprovision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form ofdefamation. Article 2219(7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, ajuridical person such as a corporation
can validly complain for libel or any other form of defamation andclaim for moral damages.
Moreover, where the broadcast is libelous per se, the law implies damages. In sucha case,
evidence of an honest mistake or the want of character or reputation of the party libeled
goes only inmitigation of damages. Neither in such a case is the plaintiff required to
introduce evidence of actual damagesas a condition precedent to the recovery of some
damages. In this case, the broadcasts are libelous per se.
Thus, AMEC is entitled to moral damages. However, the Court found the award of P300,000
moral damagesunreasonable. The record shows that even though the broadcasts were
libelous per se, AMEC has not sufferedCommercial Law - Corporation Law, 2005 ( 18
)Narratives (Berne Guerrero)any substantial or material damage to its reputation.
Therefore, the Court reduced the award of moral damagesfrom P300,000 to P150,000.

27. G.R. No. 195580

April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND

DEVELOPMENT, INC., and MCARTHUR MINING, INC., Petitioners, vs.REDMONT
CONSOLIDATED MINES CORP., Respondent.

FACTS:
Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a
domestic corporation organized and existing under Philippine laws, took interest in mining
and exploring certain areas of the province of Palawan. After inquiring with the Department
of Environment and Natural Resources (DENR), it learned that the areas where it wanted to
undertake exploration and mining activities where already covered by Mineral Production
Sharing Agreement (MPSA) applications of petitioners Narra, Tesoro and McArthur.
Petitioner McArthur Narra and Tesoro, filed an application for an MPSA and Exploration
Permit (EP) which was subsequently issued.

since it knows that it can only participate in mining activities through corporations which are
deemed Filipino citizens. Redmont argued that given that petitioners capital stocks were
mostly owned by MBMI, they were likewise disqualified from engaging in mining activities
through MPSAs, which are reserved only for Filipino citizens.
Petitioners averred that they were qualified persons under Section 3(aq) of Republic Act No.
(RA) 7942 or the Philippine Mining Act of 1995. They stated that their nationality as
applicants is immaterial because they also applied for Financial or Technical Assistance
Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur, AFTA-IVB-08 for Tesoro and
AFTA-IVB-07 for Narra, which are granted to foreign-owned corporations. Nevertheless,
they claimed that the issue on nationality should not be raised since McArthur, Tesoro and
Narra are in fact Philippine Nationals as 60% of their capital is owned by citizens of the
Philippines.
On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining
MPSAs. The POA considered petitioners as foreign corporations being "effectively
controlled" by MBMI, a 100% Canadian company and declared their MPSAs null and void.
Pending the resolution of the appeal filed by petitioners with the MAB, Redmont filed a
Complaint with the Securities and Exchange Commission (SEC), seeking the revocation of
the certificates for registration of petitioners on the ground that they are foreign-owned or
controlled corporations engaged in mining in violation of Philippine laws.
CA found that there was doubt as to the nationality of petitioners when it realized that
petitioners had a common major investor, MBMI, a corporation composed of 100%
Canadians. Pursuant to the first sentence of paragraph 7 of Department of Justice (DOJ)
Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the exploitation of natural
resources, the CA used the "grandfather rule" to determine the nationality of petitioners.
In determining the nationality of petitioners, the CA looked into their corporate structures
and their corresponding common shareholders. Using the grandfather rule, the CA
discovered that MBMI in effect owned majority of the common stocks of the petitioners
as well as at least 60% equity interest of other majority shareholders of petitioners
through joint venture agreements. The CA found that through a "web of corporate
layering, it is clear that one common controlling investor in all mining corporations
involved x xx is MBMI."Thus, it concluded that petitioners McArthur, Tesoro and Narra are
also in partnership with, or privies-in-interest of, MBMI.
ISSUE:

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three
(3) separate petitions for the denial of petitioners applications for MPSA.
Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra are
owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation.
Redmont reasoned that since MBMI is a considerable stockholder of petitioners, it was the
driving force behind petitioners filing of the MPSAs over the areas covered by applications

Whether or notthe Court of Appeals ruling that Narra, Tesoro and McArthur are foreign
corporations based on the "Grandfather Rule" is contrary to law, particularly the express
mandate of the Foreign Investments Act of 1991, as amended, and the FIA Rules.
HELD:

No. There are two acknowledged tests in determining the nationality of a corporation: the
control test and the grandfather rule. Paragraph 7 of DOJ Opinion No. 020, Series of 2005,
adopting the 1967 SEC Rules which implemented the requirement of the Constitution and
other laws pertaining to the controlling interests in enterprises engaged in the exploitation
of natural resources owned by Filipino citizens, provides:

A Filipino citizen executed a deed of donation in favor of the Ung Siu Si Temple, an
unregistered religious organization that operated through three trustees all of Chinese
nationality. The Register of Deeds refused to record the deed of donation executed in due
form arguing that the Consitution provides that acquisition of land is limited to Filipino
citizens, or to corporations or associations at least 60% of which is owned by such citizens.

Shares belonging to corporations or partnerships at least 60% of the capital of which is

owned by Filipino citizens shall be considered as of Philippine nationality (CONTROL TEST),
but if the percentage of Filipino ownership in the corporation or partnership is less than
60%, only the number of shares corresponding to such percentage shall be counted as of
Philippine nationality (GRANDFATHER RULE). Thus, if 100,000 shares are registered in the
name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as
owned by Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the
corporation or partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall
be counted as owned by Filipinos and the other 50,000 shall be recorded as belonging to
aliens.

ISSUE:

The grandfather rule, petitioners reasoned, has no leg to stand on in the instant
case since the definition of a "Philippine National" under Sec. 3 of the FIA does not provide
for it. They further claim that the grandfather rule "has been abandoned and is no longer
the applicable rule." They also opined that the last portion of Sec. 3 of the FIA admits the
application of a "corporate layering" scheme of corporations. Petitioners claim that the clear
and unambiguous wordings of the statute preclude the court from construing it and prevent
the courts use of discretion in applying the law. They said that the plain, literal meaning of
the statute meant the application of the control test is obligatory.
SC disagreed. "Corporate layering" is admittedly allowed by the FIA; but if it is used to
circumvent the Constitution and pertinent laws, then it becomes illegal. Further, the
pronouncement of petitioners that the grandfather rule has already been abandoned must
be discredited for lack of basis.
Petitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a 100% Canadian
corporation, owns 60% or more of their equity interests. Such conclusion is derived from
grandfathering petitioners corporate owners, namely: MMI, SMMI and PLMDC. The
"control test" is still the prevailing mode of determining whether or not a corporation is a
Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to
undertake the exploration, development and utilization of the natural resources of the
Philippines. When in the mind of the Court there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino-equity ownership in the corporation, then it
may apply the "grandfather ru

Whether a deed of donation of a parcel of land executed in favor of a religious organization

whose founder, trustees and administrator are Chinese citizens should be registered or not.
RULING:
Sec. 5, Art. 13 of the Constitution provides that save in cases of hereditary succession, no
private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations qualified to hold lands of the public domain in the
Philippines. The Constitution does not make any exception in favor of religious
associations.

The fact that appellant has no capital stock does not exempt it from the Constitutional
inhibition, since its member are of foreign nationality. The purpose of the 60% requirement
is to ensure that corporations or associations allowed to acquire agricultural lands or to
exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution
demands that in the absence of capital stock, controlling membership should be
composed of Filipino citizens.

As to the complaint that the disqualification under Art. 13 of the Constitution violated the
freedom of religion, the Court was not convinced that land tenure is indispensable to the
free exercise and enjoyment of religious profession or worship.
29. Roman Catholic Apostolic Administrator Of Davao V. LRC (1957)
FACTS:

28. REGISTER OF DEEDS vs UNG SIU SI TEMPLE

GR. No. L-6776
FACTS:

May 21,1955

October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of the City
of Davao, executed a deed of sale of a parcel of land in favor of the Roman
Catholic Apostolic Administrator of Davao Inc.(Roman), a corporation sole
organized and existing in accordance with Philippine Laws, with Msgr. Clovis
Thibault, a Canadian citizen, as actual incumbent.
The Register of Deeds of Davao for registration, having in mind a previous
resolution of the CFI in Carmelite Nuns of Davao were made to prepare an
affidavit to the effect that 60% of the members of their corp. were Filipino citizens

when they sought to register in favor of their congregation of deed of donation of

a parcel of land, required it to submit a similar affidavit declaring the same.
June 28, 1954: Roman in the letter expressed willingness to submit an affidavit but
not in the same tenor as the Carmelite Nuns because it had five incorporators
while as a corporation sole it has only one and it was ownership through donation
and this was purchased
As the Register of the Land Registration Commissioner (LRC) : Deeds has some
doubts as to the registerability, the matter was referred to the Land Registration
Commissioner en consulta for resolution (section 4 of Republic Act No. 1151)
LRC:
In view of the provisions of Section 1 and 5 of Article XIII of the
Philippine Constitution, the vendee was not qualified to acquire private
lands in the Philippines in the absence of proof that at least 60 per
centum of the capital, property, or assets of the Roman
Catholic Apostolic Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question that the present
incumbent of the corporation sole was a Canadian citizen
ordered the Registered Deeds of Davao to deny registration of the deed
of sale in the absence of proof of compliance with such condition
action for mandamus was instituted by Roman alleging the land is held in true for
the benefit of the Catholic population of a place

nor effects the citizenship of the faithful connected with their respective dioceses
or corporation sole.

ISSUE: W/N Roman is qualified to acquire private agricultural lands in the Philippines
pursuant to the provisions of Article XIII of the Constitution

Constitution demands that in the absence of capital stock, the

controlling membership should be composed of Filipino citizens. (Register of
Deeds of Rizal vs. Ung Sui Si Temple)
undeniable proof that the members of the Roman Catholic Apostolic faith within
the territory of Davao are predominantly Filipino citizens
presented evidence to establish that the clergy and lay members of this
religion fully covers the percentage of Filipino citizens required by the
Constitution
fact that the law thus expressly authorizes the corporations sole to receive
bequests or gifts of real properties (which were the main source that the friars
had to acquire their big haciendas during the Spanish regime), is a clear indication
that the requisite that bequests or gifts of real estate be for charitable,
benevolent, or educational purposes, was, in the opinion of the legislators,
considered sufficient and adequate protection against the revitalization of
religious landholdings.
as in respect to the property which they hold for the corporation, they stand in
position of TRUSTEES and the courts may exercise the same supervision as in
other cases of trust
30. People V. Quasha (1953)
G.R. No. L-6055

June 12, 1953

Lessons Applicable: Public Utilities (Corporate Law)

HELD: YES. Register of Deeds of the City of Davao is ordered to register the deed of sale

1.

2.

3.

A corporation sole consists of one person only, and his successors (who will always
be one at a time), in some particular station, who are incorporated by law in order
to give them some legal capacities and advantages, particularly that of perpetuity,
which in their natural persons they could not have had.
In this sense, the king is a sole corporation; so is a bishop, or dens,
distinct from their several chapters
corporation sole
composed of only one persons, usually the head or bishop of the diocese, a unit
which is not subject to expansion for the purpose of determining any percentage
whatsoever
only the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole and such temporalities are
administered for and on behalf of the faithful residing in the diocese or territory of
the corporation sole
has no nationality and the citizenship of the incumbent and ordinary has nothing
to do with the operation, management or administration of the corporation sole,

FACTS:

William H. Quasha
a member of the Philippine bar, committed a crime of falsification of a
public and commercial document for causing it to appear that Arsenio
Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005
% of the subscribed capital stock of Pacific Airways Corp. (Pacific) when
in reality the money paid belongs to an American citizen whose name
did not appear in the article of incorporation,
to circumvent the constitutional mandate that no corp. shall
be authorize to operate as a public utility in the Philippines
unless 60% of its capital stock is owned by Filipinos.
Found guilty after trial and sentenced to a term of imprisonment and a
fine
Quasha appealed to this Court
Primary purpose: to carry on the business of a common carrier by air, land or
water
Baylon did not have the controlling vote because of the difference in voting power
between the preferred shares and the common shares

ART. 171. Falsification by public officer, employee, or notary or ecclesiastic

minister. The penalty of prision mayor and a fine not to exceed 5,000 pesos
shall be imposed upon any public officer, employee, or notary who, taking
advantage of his official position, shall falsify a document by committing any of
the following acts:

utility to not more than 40%. Then, in 2011, the court ruled the case in favor of the
petitioner, hence this new case, resolving the motion for reconsideration for the 2011
decision filed by the respondents.
Issue: Whether or not the Court made an erroneous interpretation of the term capital in its
2011 decision?

4. Making untruthful statements in a narration of facts.

ART. 172. Falsification by private individuals and use of falsified documents. The
penalty of prisioncorreccional in its medium and maximum period and a fine of not
more than 5,000 pesos shall be imposed upon:

1. Any private individual who shall commit any of the falsifications enumerated in the
next preceding article in any public or official document or letter of exchange or any other
kind of commercial document.
ISSUE: W/N Quasha should be criminally liable
HELD: NO. Acquitted.

falsification consists in not disclosing in the articles of incorporation that Baylon

was a mere trustee ( or dummy as the prosecution chooses to call him) of his
American co-incorporators, thus giving the impression that Baylon was the owner
of the shares subscribed to by him
For the mere formation of the corporation such revelation was not essential, and
the Corporation Law does not require it
The moment for determining whether a corporation is entitled to operate as a
public utility is when it applies for a franchise, certificate, or any other form of
authorization for that purpose.
that can be done after the corporation has already come into being and
not while it is still being formed
so far as American citizens are concerned, the said act has ceased to be an offense
within the meaning of the law, so that defendant can no longer be held criminally
liable therefor.
31. Gamboa v. Tevesetal., GR No. 176579, October 9, 2012

Facts:
The issue started when petitioner Gamboa questioned the indirect sale of shares involving
almost 12 million shares of the Philippine Long Distance Telephone Company (PLDT) owned
by PTIC to First Pacific. Thus, First Pacifics common shareholdings in PLDT increased from
30.7 percent to 37 percent, thereby increasing the total common shareholdings of
foreigners in PLDT to about 81.47%. The petitioner contends that it violates the
Constitutional provision on filipinazation of public utility, stated in Section 11, Article XII of
the 1987 Philippine Constitution, which limits foreign ownership of the capital of a public

Held/Reason: The Court said that the Constitution is clear in expressing its State policy of
developing an economyeffectively controlled by Filipinos. Asserting the ideals that our
Constitutions Preamble want to achieve, that is - to conserve and develop our patrimony ,
hence, the State should fortify a Filipino-controlled economy. In the 2011 decision, the
Court finds no wrong in the construction of the term capital which refers to the shares
with voting rights, as well as with full beneficial ownership (Art. 12, sec. 10) which implies
that the right to vote in the election of directors, coupled with benefits, is tantamount to an
effective control. Therefore, the Courts interpretation of the term capital was not
erroneous. Thus, the motion for reconsideration is denied.