A. DEFINITON TAYAG vs. BENGUET CONSOLIDATED, INC. G.R. No. L-23145 Novembe 2!, 1!

"# F$%&s' Idonah Slade Perkins, died in New York in 1960, left among others, two stock certificates covering 33,002 shares of eng!et "onsolidated, the certificates #eing in the $ossession of the "o!nt% &r!st "om$an% of New York, the domiciliar% administrator of the estate of the deceased' ( dis$!te arose #etween the domiciar% administrator in New York and the ancillar% administrator in the Phili$$ines as to which of them was entitled to the $ossession of the stock certificates in )!estion' (nciallr% administrator wanted $ossession of the shares so as to satisf% the legitimate claims of local creditors' *n +an!ar% 2,, 196-, the "o!rt of .irst Instance of /anila ordered the domiciliar% administrator, "o!nt% &r!st "om$an%, to 0$rod!ce and de$osit0 them with the ancillar% administrator or with the "lerk of "o!rt' &he domiciliar% administrator did not com$l% with the order, and on .e#r!ar% 11, 196-, the ancillar% administrator $etitioned the co!rt to 0iss!e an order declaring the certificate or certificates of stocks covering the 33,002 shares iss!ed in the name of Idonah Slade Perkins #% eng!et "onsolidated, Inc', #e declared 1or2 considered as lost'0 &he order of the 3ower "o!rt is of the following tenor4 5617 considers as lost for all $!r$oses in connection with the administration and li)!idation of the Phili$$ine estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of stock standing in her name in the #ooks of the eng!et "onsolidated, Inc', 627 orders said certificates cancelled, and 637 directs said cor$oration to iss!e new certificates in lie! thereof, the same to #e delivered #% said cor$oration to either the inc!m#ent ancillar% administrator or to the Pro#ate 8ivision of this "o!rt'0 ($$eal to the order was made #% eng!et "onsolidated' ($$ellant o$$osed the $etition of the ancillar% administrator #eca!se the said stock certificates are in e9istence, the% are toda% in the $ossession of the domiciliar% administrator, the "o!nt% &r!st "om$an%, in New York, :'S'(''''0 Iss(e) *e+,' -ON &.e $//e$+ 0s me 0&o 0o(s.- NO. T.e o ,e 1$s %$++e, 2o b3 &.e e$+0&0es o2 &.e s0&($&0o4. R$&0o' &he "o!rt took into acco!nt the fact!al circ!mstances in !$hoding the oder #% the 3ower "o!rt that the shares of stock #e considered lost t for all $!r$oses in connection with the administration and li)!idation of the Phili$$ine estate of Idonah Slade Perkins' 1' &erritorial sco$e of a!thorit% of administrator' It is a 0general r!le !niversall% recogni;ed0 that administration, whether $rinci$al or ancillar%, certainl% 0e9tends to the assets of a decedent fo!nd within the state or co!ntr% where it was granted,0 the corollar% #eing 0that an administrator a$$ointed in one state or co!ntr% has no $ower over $ro$ert% in another state or co!ntr%'0 Since the act!al sit!s of the shares of stock of a domestic cor$oration is in the Phili$$ines, it sho!ld #e administered #% the ancillar% admisnitrator' E+eme4& o2 20%&0o4 o2 +oss 0s 4e%ess$ 3 50ve4 &.e 2$%&($+ %0 %(ms&$4%es. Since there is a ref!sal, $ersistentl% adhered to #% the domiciliar% administrator in New York, to deliver the shares of stocks of a$$ellant cor$oration owned #% the decedent to the ancillar% administrator in the Phili$$ines, there was nothing !nreasona#le or ar#itrar% in considering them as lost and re)!iring the a$$ellant to iss!e new certificates in lie! thereof' *therwise, to %ield to the st!##orn ref!sal of the domicillar% administrator, the task inc!m#ent !nder the law of the ancillar% administrator co!ld not #e discharged and his res$onsi#ilit% f!lfilled' 3awf!l order of the co!rt overrides the #%<laws of eng!et "onsolidated' eng!et "onsolidated stresses that in the event of a contest or the $endenc% of an action regarding ownershi$ of s!ch certificate or certificates of stock allegedl% lost, stolen or destro%ed, the iss!ance of a new certificate or certificates wo!ld await the 0final decision #% 1a2 co!rt regarding the ownershi$ 1thereof2'0 S" held that eng!et "onsolidated=s o#edience to a lawf!l co!rt order certainl% constit!tes a valid defense, ass!ming that s!ch a$$rehension of a $ossi#le co!rt action against it co!ld $ossi#l% materiali;e' ( cor$oration is not imm!ne from >!dicial action'

2.

3.

-'

8efinitions of "or$oration4 0'''a cor$oration is an artificial #eing created #% o$eration of law''''0 It owes its life to the state, its #irth #eing $!rel% de$endent on its will' (s erle so a$tl% stated4 0"lassicall%, a cor$oration was conceived as an artificial $erson, owing its

e9istence thro!gh creation #% a sovereign $ower'0 6 erle, &he &heor% of ?nter$rise ?ntit%, -, "o' 3aw @ev' 3-3 6190,7' 0an artificial #eing, invisi#le, intangi#le, and e9isting onl% in contem$lation of law'0 6"hief +!stice /arshall, 8artmo!th "ollege v' Aoodward 7 0( cor$oration is not in fact and in realit% a $erson, #!t the law treats it as tho!gh it were a $erson #% $rocess of fiction, or #% regarding it as an artificial $erson distinct and se$arate from its individ!al stockholders'''' It owes its e9istence to law' It is an artificial $erson created #% law for certain s$ecific $!r$oses, the e9tent of whose e9istence, $owers and li#erties is fi9ed #% its charter'0 6.letcher, "%clo$edia "or$orations 7 5'''a >!ristic $erson, res!lting from an association of h!man #eings granted legal $ersonalit% #% the state, $!ts the matter neatl%'B 6Po!nd on +!ris$r!dence7

&here is th!s a re>ection of Cierke=s genossenchaft theor%, the #asic theme of which to )!ote from .riedmann, 0is the realit% of the gro!$ as a social and legal entit%, inde$endent of state recognition and concession'0 ( cor$oration as known to Phili$$ine >!ris$r!dence is a creat!re witho!t an% e9istence !ntil it has received the im$rimat!r of the state according to law' It is logicall% inconceiva#le therefore that it will have rights and $rivileges of a higher $riorit% than that of its creator' /ore than that, it cannot legitimatel% ref!se to %ield o#edience to acts of its state organs, certainl% not e9cl!ding the >!diciar%, whenever called !$on to do so' (s a matter of fact, a cor$oration once it comes into #eing, following (merican law still of $ers!asive a!thorit% in o!r >!risdiction, comes more often within the ken of the >!diciar% than the other two coordinate #ranches' It instit!tes the a$$ro$riate co!rt action to enforce its right' "orrelativel%, it is not imm!ne from >!dicial control in those instances, where a d!t% !nder the law as ascertained in an a$$ro$riate legal $roceeding is cast !$on it' &o assert that it can choose which co!rt order to follow and which to disregard is to confer !$on it not a!tonom% which ma% #e conceded #!t license which cannot #e tolerated' It is to arg!e that it ma%, when so minded, overr!le the state, the so!rce of its ver% e9istenceD it is to contend that what an% of its governmental organs ma% lawf!ll% re)!ire co!ld #e ignored at will' So e9travagant a claim cannot $ossi#l% merit a$$roval'

7ONFORT *ER7ANOS AGRICULTURAL DE8ELO97ENT COR9ORATION vs ANTONIO B. 7ONFORT III G.R. No. 152542 ' :(+3 #, 2;;4 G.R. No. 1554<2 ' :(+3 #, 2;;4 F$%&s' /onfort Eermanos (gric!lt!ral 8evelo$ment "or$oration, a domestic $rivate cor$oration, is the registered owner of a farm, fish$ond and s!gar cane $lantation known as Eaciendas San (ntonio II, /ara$ara, Pinanoag and &inam$a<an, all sit!ated in "adi; "it%' It also owns one !nit of motor vehicle and two !nits of tractors' &he same allowed @amon E' /onfort, its ?9ec!tive Fice President, to #reed and maintain fighting cocks in his $ersonal ca$acit% at Eacienda San (ntonio' In 199,, the gro!$ of (ntonio /onfort III, thro!gh force and intimidation, allegedl% took $ossession of the - Eaciendas, the $rod!ce thereon and the motor vehicle and tractors, as well as the fighting cocks of @amon E' /onfort' In C'@' No' 1GG-,24 &he "or$oration, re$resented #% its President, /a' (ntonia /' Salvatierra, and @amon E' /onfort, in his $ersonal ca$acit%, filed against the gro!$ of (ntonio /onfort III, a com$laint for deliver% of motor vehicle, tractors and 3,H fighting cocks, with $ra%er for in>!nction and damages' /otion to dismiss on the gro!nd of /a' (ntonia /' Salvatierra=s lack of ca$acit% to s!e on #ehalf of the "or$oration was denied' In C'@' No' 1G2G-24 /a' (ntonia /' Salvatierra filed on #ehalf of the "or$oration a com$laint for forci#le entr%, $reliminar% mandator% in>!nction with tem$orar% restraining order and damages against the gro!$ of (ntonio /onfort III' &he gro!$ of (ntonio /onfort III alleged that the% are $ossessing and controlling the Eaciendas and harvesting the $rod!ce therein on #ehalf of the cor$oration and not for themselves' &he% likewise raised the affirmative defense of lack of legal ca$acit% of /a' (ntonia /' Salvatierra to s!e on #ehalf of the "or$oration' "om$laint was event!all% dismissed' asis of claim of SalvatierraIs lack of ca$acit% to s!e4 &he gro!$ of (ntonio /onfort III claims that the /arch 31, 199, oard @esol!tion a!thori;ing /a' (ntonia /' Salvatierra andJor @amon E' /onfort to re$resent the "or$oration is void #eca!se the $!r$orted /em#ers of the oard who $assed the same were not validl% elected officers of the "or$oration' Iss(e) *e+,' -ON 7$. A4&o40$ 7. S$+v$&0e $ .$s &.e +e5$+ %$/$%0&3 &o s(e o4 be.$+2 o2 &.e Co /o $&0o4. -NO. 7$. A4&o40$ 7. S$+v$&0e $ 2$0+e, &o / ove &.$& 2o( o2 &.ose 1.o $(&.o 0=e, .e &o e/ ese4& &.e Co /o $&0o4 1e e &.e +$12(++3 e+e%&e, 7embe s o2 &.e Bo$ , o2 &.e Co /o $&0o4. As s(%., &.e3 %$44o& %o42e v$+0, $(&.o 0&3 2o .e &o s(e o4 be.$+2 o2 &.e %o /o $&0o4. R$&0o' A %o /o $&0o4 .$s 4o /o1e e>%e/& &.ose e>/ ess+3 %o42e e, o4 0& b3 &.e Co /o $&0o4 Co,e $4, &.ose &.$& $ e 0m/+0e, o 04%0,e4&$+ &o 0&s e>0s&e4%e. I4 &( 4, $ %o /o $&0o4 e>e %0ses s$0, /o1e s &. o(5. 0&s bo$ , o2 ,0 e%&o s $4,)o 0&s ,(+3 $(&.o 0=e, o220%e s $4, $5e4&s. T.(s, 0& .$s bee4 obse ve, &.$& &.e /o1e o2 $ %o /o $&0o4 &o s(e $4, be s(e, 04 $43 %o( & 0s +o,5e, 10&. &.e bo$ , o2 ,0 e%&o s &.$& e>e %0ses 0&s %o /o $&e /o1e s. I4 &( 4, /.3s0%$+ $%&s o2 &.e %o /o $&0o4, +0?e &.e s054045 o2 ,o%(me4&s, %$4 be /e 2o me, o4+3 b3 4$&( $+ /e so4s ,(+3 $(&.o 0=e, 2o &.e /( /ose b3 %o /o $&e b3-+$1s o b3 $ s/e%020% $%& o2 &.e bo$ , o2 ,0 e%&o s. "or$oration failed to com$l% with Section 26 of the "or$oration "ode, re)!iring s!#mission to the S?" within thirt% 6307 da%s after the election the names, nationalities and residences of the elected directors, tr!stees and officers of the "or$oration'

1.

In the case at #ar, the fact that fo!r of the si9 /em#ers of the oard listed in the 1996 Ceneral Information Sheet are alread% dead at the time the /arch 31, 199, oard @esol!tion was iss!ed, does not a!tomaticall% make the fo!r signatories 6i.e', Pa!l /' /onfort, Yvete /' enedicto, +a)!eline /' Y!sa% and ?ster S' /onfort7 to the said oard @esol!tion 6whose name do not a$$ear in the 1996 Ceneral Information Sheet7 as among the inc!m#ent /em#ers of the oard' &his is #eca!se it was not esta#lished that the% were d!l% elected to re$lace the said deceased oard /em#ers'

&o correct the alleged error in the Ceneral Information Sheet, the retained acco!ntant of the "or$oration informed the S?" in its Novem#er 11, 199H letter that the non<incl!sion of the lawf!ll% elected directors in the 1996 Ceneral Information Sheet was attri#!ta#le to its oversight and not the fa!lt of the "or$oration' &his #elated attem$t, however, did not erase the do!#t as to whether an election was indeed held'

2.

Ahat f!rther militates against the $!r$orted election of those who signed the /arch 31, 199, oard @esol!tion was the #elated s!#mission of the alleged /in!tes of the *cto#er 16, 1996 meeting where the )!estioned officers were elected' &he iss!e of legal ca$acit% of /a' (ntonia /' Salvatierra was raised #efore the lower co!rt #% the gro!$ of (ntonio /onfort III as earl% as 1!!<, #!t the /in!tes of said *cto#er 16, 1996 meeting was $resented #% the "or$oration onl% in its Se/&embe 2!, 1!!! "omment #efore the "o!rt of ($$eals' /oreover, the "or$oration failed to $rove that the same *cto#er 16, 1996 /in!tes was s!#mitted to the S?"'

9*ILI99INE STOC@ EAC*ANGE, INC., vs. T*E *ONORABLE COURT OF A99EALS G.R. No. 1254"! O%&obe 2<, 1!!< F$%&s' &he P!erto (;!l 3and, Inc' 6P(3I7, a domestic real estate cor$oration, had so!ght to offer its shares to the $!#lic in order to raise f!nds allegedl% to develo$ its $ro$erties and $a% its loans with several #anking instit!tions' In +an!ar%, 199G, P(3I was iss!ed a Permit to Sell its shares to the $!#lic #% the Sec!rities and ?9change "ommission 6S?"7' &o facilitate the trading of its shares among investors, P(3I so!ght to co!rse the trading of its shares thro!gh the Phili$$ine Stock ?9change, Inc' 6PS?7, for which $!r$ose it filed with the said stock e9change an a$$lication to list its shares, with s!$$orting doc!ments attached' *n .e#r!ar% H, 1996, the 3isting "ommittee of the PS?, !$on a $er!sal of P(3I=s a$$lication, recommended to the PS?=s oard of Covernors the a$$roval of P(3I=s listing a$$lication' *n .e#r!ar% 1-, 1996, #efore it co!ld act !$on P(3I=s a$$lication, the oard of Covernors of the PS? received a letter from the heirs of .erdinand ?' /arcos, claiming that the late President /arcos was the legal and #eneficial owner of certain $ro$erties forming $art of the P!erto (;!l each Eotel and @esort "om$le9 which P(3I claims to #e among its assets and that the &ernate 8evelo$ment "or$oration, which is among the stockholders of P(3I, likewise a$$ears to have #een held and contin!e to #e held in tr!st #% one @e#ecco Panlilio for then President /arcos and now, effectivel% for his estate, and re)!ested P(3I=s a$$lication to #e deferred' P(3I was re)!ested to comment !$on the said letter' P(3I=s answer stated that the $ro$erties forming $art of the P!erto (;!l each Eotel and @esort "om$le9 were not claimed #% P(3I as its assets' *n the contrar%, the resort is act!all% owned #% .antasia .ili$ina @esort, Inc' and the P!erto (;!l "o!ntr% "l!#, entities distinct from P(3I' .!rthermore, the &ernate 8evelo$ment "or$oration owns onl% 1'20K of P(3I' &he oard of Covernors of the PS? reached its decision to re>ect P(3I=s a$$lication, citing the e9istence of serio!s claims, iss!es and circ!mstances s!rro!nding P(3I=s ownershi$ over its assets that adversel% affect the s!ita#ilit% of listing P(3I=s shares in the stock e9change' P(3I wrote a letter to the S?" addressed to the then (cting "hairman, Perfecto @' Yasa%, +r', #ringing to the S?"=s attention the action taken #% the PS?' S?" rendered its *rder, reversing the PS?=s decision' S?" ordered to immediatel% ca!se the listing of the P(3I shares in the ?9change' "(4 S?" had #oth >!risdiction and a!thorit% to look into the decision of the $etitioner PS?, for the $!r$ose of ens!ring fair administration of the e9change' oth as a cor$oration and as a stock e9change, the $etitioner is s!#>ect to $!#lic res$ondent=s >!risdiction, reg!lation and control' P(3I com$lied with all the re)!irements for $!#lic listing, affirming the S?"=s r!ling' Iss(e)*e+,' -ON SEC .$s &.e $(&.o 0&3 &o o ,e &.e 9SE &o +0s& &.e s.$ es o2 9ALI 04 &.e s&o%? e>%.$45e. - YES, b(& .e Co( & 204,s &.$& &.e SEC .$, $%&e, $ b0& $ 0+3 04 $ o5$&045 (4&o 0&se+2 &.e ,0s% e&0o4 o2 $// ov045 &.e $//+0%$&0o4 2o +0s&045 04 &.e 9SE o2 &.e / 0v$&e es/o4,e4& 9ALI, s04%e &.0s 0s $ m$&&e $,, esse, &o &.e so(4, ,0s% e&0o4 o2 &.e 9SE, $ %o /o $&0o4 e4&0&3, 1.ose b(s04ess B(,5me4&s $ e es/e%&e, 04 &.e $bse4%e o2 b$, 2$0&.. R$&0o'

1.

SEC 10&. B( 0s,0&0o4. It is !ndenia#le that the $etitioner PS? is not an ordinar% cor$oration, in that altho!gh it is clothed with the markings of a cor$orate entit%, it f!nctions as the $rimar% channel thro!gh which the vessels of ca$ital trade $l%' &he PS?=s relevance to the contin!ed o$eration and filtration of the sec!rities transactions in the co!ntr% gives it a distinct color of im$ortance s!ch that government intervention in its affairs #ecomes >!stified, if not necessaril%' Indeed, as the onl% o$erational stock e9change in the co!ntr% toda%, the PS? en>o%s a mono$ol% of sec!rities transactions, and as s!ch, it %ields an immense infl!ence !$on the co!ntr%=s econom%'

8!e to this s$ecial nat!re of stock e9changes, the co!ntr%=s lawmakers has seen it wise to give s$ecial treatment to the administration and reg!lation of stock e9changes Sections 3, 6, and 3H of P8 902<( give the S?" the s$ecial mandate to #e vigilant in the s!$ervision of the affairs of stock e9changes so that the interests of the investing $!#lic ma% #e f!ll% safeg!ard' Section 31 of Presidential 8ecree 902<(, standing alone, is eno!gh a!thorit% to !$hold the S?"=s challenged control a!thorit% over the $etitioner PS? even as it $rovides that 0the "ommission shall have a#sol!te >!risdiction, s!$ervision, and control over all cor$orations, $artnershi$s or associations, who are the grantees of $rimar% franchises andJor a license or $ermit iss!ed #% the government to o$erate in the Phili$$ines' ' '0 &he S?"=s reg!lator% a!thorit% over $rivate cor$orations

1&his (ct shall #e administered #% the 6Sec!rities and ?9change7 "ommission which shall contin!e to have the organi;ation, $owers, and f!nctions $rovided #%
Presidential 8ecree N!m#ered 902<(, 16G3, 1,GH, and 1,99 and ?9ec!tive *rder No' ,0H' &he "ommission shall, e9ce$t as otherwise e9$ressl% $rovided, have the $ower to $rom!lgate s!ch r!les and reg!lations as it ma% consider a$$ro$riate in the $!#lic interest for the enforcement of the $rovisions hereof'

encom$asses a wide margin of areas, to!ching nearl% all of a cor$oration=s concerns' &his a!thorit% s$rings from the fact that a cor$oration owes its e9istence to the concession of its cor$orate franchise from the state' &he S?"=s $ower to look into the s!#>ect r!ling of the PS?, therefore, ma% #e im$lied from or #e considered as necessar% or incidental to the carr%ing o!t of the S?"=s e9$ress $ower to ins!re fair dealing in sec!rities traded !$on a stock e9change or to ens!re the fair administration of s!ch e9change' It is, likewise, o#served that the $rinci$al f!nction of the S?" is the s!$ervision and control over cor$orations, $artnershi$s and associations with the end in view that investment in these entities ma% #e enco!raged and $rotected, and their activities for the $romotion of economic develo$ment' T.0s 0s 4o& &o s$3, .o1eve , &.$& &.e 9SECs m$4$5eme4& / e o5$&0ves $ e (4,e &.e $bso+(&e %o4& o+ o2 &.e SEC. T.e 9SE 0s, $+&e $++, $ %o /o $&0o4 $(&.o 0=e, b3 0&s %o /o $&e 2 $4%.0se &o e45$5e 04 0&s / o/ose, $4, ,(+3 $// ove, b(s04ess. ( cor$oration is #!t an association of individ!als, allowed to transact !nder an ass!med cor$orate name, and with a distinct legal $ersonalit%' In organi;ing itself as a collective #od%, it waives no constit!tional imm!nities and $er)!isites a$$ro$riate to s!ch a #od%' (s to its cor$orate and management decisions, therefore, the state will generall% not interfere with the same' L!estions of $olic% and of management are left to the honest decision of the officers and directors of a cor$oration, and the co!rts are witho!t a!thorit% to s!#stit!te their >!dgment for the >!dgment of the #oard of directors' &he #oard is the #!siness manager of the cor$oration, and so long as it acts in good faith, its orders are not reviewa#le #% the co!rts' &h!s, notwithstanding the reg!lator% $ower of the S?" over the PS?, and the res!ltant a!thorit% to reverse the PS?=s decision in matters of a$$lication for listing in the market, the S?" ma% e9ercise s!ch $ower onl% if the PS?=s >!dgment is attended #% #ad faith' In Board of Liquidators vs' Kalaw, it was held that #ad faith does not sim$l% connote #ad >!dgment or negligence' It im$orts a dishonest $!r$ose or some moral o#li)!it% and conscio!s doing of wrong' It means a #reach of a known d!t% thro!gh some motive or interest of ill will, $artaking of the nat!re of fra!d'

2.

T.e e 1$s 4o b$, 2$0&. 04 &.e ,e%0s0o4 o2 9SE 4o& &o $++o1 +0s&045 o2 9ALI s.$ es. In reaching its decision to den% the a$$lication for listing of P(3I, the PS? considered im$ortant facts, which, in the general scheme, #rings to serio!s )!estion the )!alification of P(3I to sell its shares to the $!#lic thro!gh the stock e9change' 8!ring the time for receiving o#>ections to the a$$lication, the PS? heard from the re$resentative of the late President .erdinand ?' /arcos and his famil% who claim the $ro$erties of the $rivate res$ondent to #e $art of the /arcos estate' In time, the P"CC confirmed this claim' In fact, an order of se)!estration has #een iss!ed covering the $ro$erties of P(3I, and s!it for reconve%ance to the state has #een filed in the Sandigan#a%an "o!rt' Eow the $ro$erties were effectivel% transferred, des$ite the se)!estration order, from the &8" and /S8" to @e#ecco Panlilio, and to the $rivate res$ondent P(3I, in onl% a short s$an of time, are not %et e9$lained to the "o!rt, #!t it is clear that s!ch circ!mstances give rise to serio!s do!#t as to the integrit% of P(3I as a stock iss!er' .or the $!r$ose of determining whether PS? acted correctl% in ref!sing the a$$lication of P(3I, the tr!e ownershi$ of the $ro$erties of P(3I need not #e determined as an a#sol!te fact' Ahat is material is that the !ncertaint% of the $ro$erties= ownershi$ and aliena#ilit% e9ists, and this $!ts to )!estion the )!alification of P(3I=s $!#lic offering'

TAN BOON BEE D CO., INC. vs. :ARENCIO G.R. No. L-4133< :(4e 3;, 1!## F$%&s' (nchor S!$$l% "o' sold on credit to Cra$hic P!#lishing, Inc $a$er $rod!cts' Partial $a%ments were made and the #alance was covered #% a $romissor% note' n the said $romissor% note, it was sti$!lated that the amo!nt will #e $aid on monthl% installments and that fail!re to $a% an% installment wo!ld make the amo!nt immediatel% demanda#le with an interest of 12K $er ann!m' .or fail!re of C@(PEI" to $a% an% installment, $etitioner filed with the ".I a collection case' &he trial co!rt ordered C@(PEI" to $a% the $etitioner the s!m of P30,36G'99 with 12K interest from /arch 30, 19,3 !ntil f!ll% $aid, $l!s the costs of s!it' ( writ of e9ec!tion was iss!ed' P!rs!ant to the said iss!ed alias writ of e9ec!tion, the e9ec!ting sheriff levied !$on one 617 !nit $rinting machine fo!nd in the $remises of C@(PEI"' &he $rinting machine was alread% sched!led for a!ction sale #!t Phili$$ine (merican 8r!g "om$an% 6P(8"* for short7 had informed the sheriff that the $rinting machine is its $ro$ert% and not that of C@(PEI", and accordingl%, advised the sheriff to cease and desist from carr%ing o!t the sched!led a!ction sale' Notwithstanding the said letter, the sheriff $roceeded with the sched!led a!ction sale, sold the $ro$ert% to the $etitioner, it #eing the highest #idder, and iss!ed a "ertificate of Sale in favor of $etitioner' /ore than five 6G7 ho!rs after the a!ction sale and the iss!ance of the certificate of sale, P(8"* filed an 0(ffidavit of &hird Part% "laim0 with the *ffice of the "it% SheriffD thereafter a /otion was filed to n!llif% the sale' @es$ondent >!dge r!led in favor of P(8"*D hence the a!ction sale was n!llified' &he $etitioner, however, contends that the controlling stockholders of the Phili$$ine (merican 8r!g "o' are also the same controlling stockholders of the Cra$hic P!#lishing, Inc' and, therefore, the lev% !$on the said machiner% which was fo!nd in the $remises occ!$ied #% the Cra$hic P!#lishing, Inc' sho!ld #e !$held' Iss(e) *e+,' -ON &.e es/o4,e4& B(,5e 5 $ve+3 $b(se, .0s ,0s% e&0o4 1.e4 .e e2(se, &o /0e %e &.e 9ADCOCs 60,e4&0&3E $4, ,es/0&e &.e $b(4,$4%e o2 ev0,e4%e %+e$ +3 s.o1045 &.$& 9ADCO 1$s %o4ve40e4&+3 s.0e+,045 (4,e &.e &.eo 3 o2 %o /o $&e /e&0&0o4.- YES, Res/o4,e4& B(,5e s.o(+, .$ve /0e %e, 9ADCOCs ve0+ o2 %o /o $&e I,e4&0&3. es/o4,e4& B(,5e s.o(+, .$ve /0e %e, 9ADCOCs ve0+ o2 %o /o $&e I,e4&0&3. R$&0o' It is tr!e that a cor$oration, !$on coming into #eing, is invested #% law with a $ersonalit% se$arate and distinct from that of the $ersons com$osing it as well as from an% other legal entit% to which it ma% #e related' (s a matter of fact, the doctrine that a cor$oration is a legal entit% distinct and se$arate from the mem#ers and stockholders who com$ose it is recogni;ed and res$ected in all cases which are within reason and the law' Eowever, this se$arate and distinct $ersonalit% is merel% a fiction created #% law for convenience and to $romote >!stice' (ccordingl%, this se$arate $ersonalit% of the cor$oration ma% #e disregarded, or the veil of cor$orate fiction $ierced, in cases where it is !sed as a cloak or cover for fra!d or illegalit%, or to work an in>!stice, or where necessar% to achieve e)!it% or when necessar% for the $rotection of creditors' "or$orations are com$osed of nat!ral $ersons and the legal fiction of a se$arate cor$orate $ersonalit% is not a shield for the commission of in>!stice and ine)!it%' 3ikewise, this is tr!e when the cor$oration is merel% an ad>!nct, #!siness cond!it or alter ego of another cor$oration' In s!ch case, the fiction of se$arate and distinct cor$oration entities sho!ld #e disregarded' .act!al indicators that P(8"* and C@(PEI" are one and the same entit%4 P(8"* was never engaged in the $rinting #!sinessD &he #oard of directors and the officers of C@(PEI" and P(8"* were the sameD P(8"* holds G0K share of stock of C@(PEI"' &he $rinting machine in )!estion had #een in the $remises of C@(PEI" since /a%, 196G, long #efore P(8"* even ac)!ired its alleged title on +!l% 11, 1966 from "a$itol P!#lishing' &hat the said machine was allegedl% leased #% P(8"* to C@(PEI" on +an!ar% 2-, 1966, even #efore P(8"* $!rchased it from "a$ital P!#lishing on +!l% 11, 1966, onl% serves to show that P(8"*=s claim of ownershi$ over the $rinting machine is not onl% farce and sham #!t also !n#elieva#le'

D. NATURE AND ATTRIBUTES

S7IT*, BELL D CO79ANY 6LTD.E vs NATI8IDAD G.R. No. 155<4 Se/&embe 1<, 1!1! F$%&s' Smith, ell M "o', 63td'7, is a cor$oration organi;ed and e9isting !nder the laws of the Phili$$ine Islands' A m$Bo 0&3 o2 0&s s&o%?.o+,e s $ e B 0&0s. s(bBe%&s' It is the owner of a motor vessel known as the Bato #!ilt for it in the Phili$$ine Islands in 1916, of more than fifteen tons gross &he Bato was #ro!ght to "e#! in the $resent %ear for the $!r$ose of trans$orting $laintiff=s merchandise #etween $orts in the Islands' ($$lication was made at "e#!, the home $ort of the vessel, to the "ollector of "!stoms for a certificate of Phili$$ine registr%' &he "ollector ref!sed to iss!e the certificate, giving as his reason that all the stockholders of Smith, ell M "o', 3td', were not citi;ens either of the :nited States or of the Phili$$ine Islands' &he instant action is the res!lt' *n .e#r!ar% 23, 191H, the Phili$$ine 3egislat!re enacted (ct No' 2,61' &he first section of this law amended section 11,2 of the (dministrative "ode to read as follows4
S?"' 11,2' Certificate of Philippine register. N :$on registration of a vessel of domestic ownershi$, and of more than fifteen tons gross, a certificate of Phili$$ine register shall #e iss!ed for it' If the vessel is of domestic ownershi$ and of fifteen tons gross or less, the taking of the certificate of Phili$$ine register shall #e o$tional with the owner' 08omestic ownershi$,0 as !sed in this section, means ownershi$ vested in some one or more of the following classes of $ersons4 6a7 "iti;ens or native inha#itants of the Phili$$ine IslandsD 6b7 citi;ens of the :nited States residing in the Phili$$ine IslandsD 6cE any corporation or company composed wholly of citizens of the Philippine Islands or of the United States or of both, created !nder the laws of the :nited States, or of an% State thereof, or of thereof, or the managing agent or master of the vessel resides in the Phili$$ine Islands (n% vessel of more than fifteen gross tons which on .e#r!ar% eighth, nineteen h!ndred and eighteen, had a certificate of Phili$$ine register !nder e9isting law, shall likewise #e deemed a vessel of domestic ownershi$ so long as there shall not #e an% change in the ownershi$ thereof nor an% transfer of stock of the com$anies or cor$orations owning s!ch vessel to $erson not incl!ded !nder the last $receding $aragra$h'

&he first $aragra$h of the Phili$$ine ill of @ights of the Phili$$ine ill, re$eated again in the first $aragra$h of the Phili$$ine ill of @ights as set forth in the +ones 3aw, $rovides 0&hat no law shall #e enacted in said Islands which shall de$rive an% $erson of life, li#ert%, or $ro$ert% witho!t d!e $rocess of law, or den% to an% $erson therein the e)!al $rotection of the laws'0 "o!nsel sa%s that (ct No' 2,61 denies to Smith, ell M "o', 3td', the e)!al $rotection of the laws #eca!se it, in effect, $rohi#its the cor$oration from owning vessels, and #eca!se classification of cor$orations #ased on the citi;enshi$ of one or more of their stockholders is ca$ricio!s, and that (ct No' 2,61 de$rives the cor$oration of its $ro$erl% witho!t d!e $rocess of law #eca!se #% the $assage of the law com$an% was a!tomaticall% de$rived of ever% #eneficial attri#!te of ownershi$ in the Bato and left with the naked title to a #oat it co!ld not !se ' Iss(e)*e+,' -ON &.e Gove 4me4& o2 &.e 9.0+0//04e Is+$4,s, &. o(5. 0&s Le50s+$&( e, %$4 ,e43 &.e e50s& 3 o2 vesse+ 04 0&s %o$s&10se & $,e &o %o /o $&0o4s .$v045 $+0e4 s&o%?.o+,e s.- YES, &.0s 0s $ v$+0, e>e %0se o2 /o+0%e /o1e . Commo4 %$ 0e s 1.0%. 04 &.e 9.0+0//04es $s 04 &.e U40&e, S&$&es $4, o&.e %o(4& 0es $ e, $s Lo , *$+e s$0,, F$22e%&e, 10&. $ /(b+0% 04&e es&,F %$4 o4+3 be /e m0&&e, &o (se &.ese /(b+0% 1$&e s $s $ / 0v0+e5e $4, (4,e s(%. %o4,0&0o4s $s &o &.e e/ ese4&$&0ves o2 &.e /eo/+e m$3 seem 10se. (ct No' 2,61 of the Phili$$ine 3egislat!re, in den%ing to cor$orations s!ch as Smith, ell M' "o' 3td', the right to register vessels in the Phili$$ines coastwise trade, does not #elong to that vicio!s s$ecies of class legislation which m!st alwa%s #e condemned, #!t does fall within a!thori;ed e9ce$tions, nota#l%, within the $!rview of the $olice $ower, and so does not offend against the constit!tional $rovision' R$&0o' &he g!aranties of the .o!rteenth (mendment and so of the first $aragra$h of the Phili$$ine ill of @ights, are !niversal in their a$$lication to all $erson within the territorial >!risdiction, witho!t regard to an% differences of race, color, or nationalit%' &he word 0$erson0 incl!des aliens' 9 0v$&e %o /o $&0o4s, +0?e10se, $ e F/e so4sF 10&.04 &.e s%o/e o2 &.e 5($ $4&0es 04 so 2$ $s &.e0 / o/e &3 0s %o4%e 4e,. "lassification with the end in view of $roviding diversit% of treatment ma% #e made among cor$orations, #!t m!st #e #ased !$on some reasona#le gro!nd and not #e a mere ar#itrar% selection' ?9am$les of laws held !nconstit!tional #eca!se of !nlawf!l discrimination against aliens co!ld #e cited' Cenerall%, these decisions relate to stat!tes which had attem$ted ar#itraril% to for#id aliens to engage in ordinar% kinds of #!siness to earn their living' *ne of the e9ce$tions to the general r!le, most $ersistent and far reaching in infl!ence is, that neither the .o!rteenth (mendment to the :nited States "onstit!tion, #road and com$rehensive as it is, nor an% other amendment, 0was designed to interfere with the $ower of the State, sometimes termed its O$olice $ower,= to $rescri#e reg!lations to $romote the health, $eace, morals, ed!cation, and good order of the $eo$le, and legislate so as to increase the ind!stries of the State, develo$

its reso!rces and add to its wealth and $ros$erit%' .rom the ver% necessities of societ%, legislation of a s$ecial character, having these o#>ects in view, m!st often #e had in certain districts'0 his is the same $olice $ower which the :nited States S!$reme "o!rt sa% 0e9tends to so dealing with the conditions which e9ist in the state as to #ring o!t of them the greatest welfare in of its $eo$le'0 .or )!ite similar reasons, none of the $rovision of the Phili$$ine *rganic 3aw co!ld co!ld have had the effect of den%ing to the Covernment of the Phili$$ine Islands, acting thro!gh its 3egislat!re, the right to e9ercise that most essential, insistent, and illimita#le of $owers, the sovereign $olice $ower, in the $romotion of the general welfare and the $!#lic interest' (nother nota#le e9ce$tion $ermits of the reg!lation or distri#!tion of the $!#lic domain or the common $ro$ert% or reso!rces of the $eo$le of the State, so that !se ma% #e limited to its citi;ens' ?ven as to classification, it is admitted that a State ma% classif% with reference to the evil to #e $reventedD the )!estion is a $ractical one, de$endent !$on e9$erience'

B$%.e $4, Co. v. R(0= GR No. L-324;! Feb ($ 3 2<, 1!<1 F$%&s' In their $etition ache M "o' 6Phil'7, Inc', a cor$oration d!l% organi;ed and e9isting !nder the laws of the Phili$$ines, and its President, .rederick ?' Seggerman, $ra% this "o!rt to4 617 declare n!ll and void the Search Aarrant iss!edD 627 order res$ondents to desist from enforcing the same andJor kee$ing the doc!ments, $a$ers and effects sei;ed #% virt!e thereof, as well as from enforcing the ta9 assessments on $etitioner cor$oration alleged #% $etitioners to have #een made on the #asis of the said doc!ments, $a$ers and effectsD and 637 order the ret!rn of the latter to $etitioners' (t that time the re)!est for the iss!ance of the Search Aarrant was made #% res$ondent 8e 3eon, with his witness 3ogronio, res$ondent +!dge was hearing a certain caseD so, #% means of a note, he instr!cted his 8e$!t% "lerk of "o!rt to take the de$ositions of res$ondents 8e 3eon and 3ogronio' (fter the session had ad>o!rned, res$ondent +!dge was informed that the de$ositions had alread% #een taken' &he stenogra$her, !$on re)!est of res$ondent +!dge, read to him her stenogra$hic notesD and thereafter, res$ondent +!dge asked res$ondent 3ogronio to take the oath and warned him that if his de$osition was fo!nd to #e false and witho!t legal #asis, he co!ld #e charged for $er>!r%' @es$ondent +!dge signed res$ondent de 3eon=s a$$lication for search warrant and res$ondent 3ogronio=s de$osition, the Search Aarrant was then sign #% res$ondent +!dge and accordingl% iss!ed' &hree da%s later, the I@ agents served the search warrant $etitioners at the offices of $etitioner cor$oration on (%ala (ven!e, /akati, @i;al' Petitioners= law%ers $rotested the search on the gro!nd that no formal com$laint or transcri$t of testimon% was attached to the warrant' &he agents nevertheless $roceeded with their search which %ielded si9 #o9es of doc!ments' 8oc!ments were !ses as #asis in assessing the "or$oration for ta9 deficiencies' Iss(e)*e+,' -ON $ %o /o $&0o4 0s e4&0&+e, &o / o&e%&0o4 $5$04s& (4 e$so4$b+e se$ %. $4, se0=( es.- YES. R$&0o' 0(ltho!gh, for the reasons a#ove stated, we are of the o$inion that an officer of a cor$oration which is charged with a violation of a stat!te of the state of its creation, or of an act of "ongress $assed in the e9ercise of its constit!tional $owers, cannot ref!se to $rod!ce the #ooks and $a$ers of s!ch cor$oration, we do not wish to #e !nderstood as holding that a cor$oration is not entitled to imm!nit%, !nder the -th (mendment, against !nreasona#le searches and sei;!res' ( cor$oration is, after all, #!t an association of individ!als !nder an ass!med name and with a distinct legal entit%' In organi;ing itself as a collective #od% it waives no constit!tional imm!nities a$$ro$riate to s!ch #od%' Its $ro$ert% cannot #e taken witho!t com$ensation' It can onl% #e $roceeded against #% d!e $rocess of law, and is $rotected, !nder the 1-th (mendment, against !nlawf!l discrimination ' ' '0 6Eale v' Eenkel, 201 :'S' -3, G0 3' ed' 6G2'7 0In 3inn v' :nited States, 163 "'"'(' -,0, 2G1 .ed' -,6, -H0, it was tho!ght that a different r!le a$$lied to a cor$oration, the gro!nd that it was not $rivileged from $rod!cing its #ooks and $a$ers' !t the rights of a cor$oration against !nlawf!l search and sei;!re are to #e $rotected even if the same res!lt might have #een achieved in a lawf!l wa%'0 6Silverthorne 3!m#er "om$an%, et al' v' :nited States of (merica, 2G1 :'S' 3HG, 6- 3' ed' 319'7 In Stonehill, et al' vs' 8iokno, et al', s!$ra, this "o!rt im$liedl% recogni;ed the right of a cor$oration to o#>ect against !nreasona#le searches and sei;!res, th!s4
0(s regards the first gro!$, we hold that $etitioners herein have no ca!se of action to assail the legalit% of the contested warrants and of the sei;!res made in $!rs!ance thereof, for the sim$le reason that said cor$orations have their res$ective $ersonalities, se$arate and distinct from the $ersonalit% of herein $etitioners, regardless of the amo!nt of shares of stock or the interest of each of them in said cor$orations, whatever, the offices the% hold therein ma% #e' Indeed, it is well settled that the legalit% of a sei;!re can #e contested onl% #% the $art% whose rights have #een im$aired there#%, and that the o#>ection to an !nlawf!l search and sei;!re is $!rel% $ersonal and cannot #e availed of #% third $arties' "onse)!entl%, $etitioners herein ma% not validl% o#>ect to the !se in evidence against them of the doc!ments, $a$ers and things sei;ed from the offices and $remises of the cor$orations adverted to a#ove, since the right to o#>ect to the admission of said $a$ers in evidence #elongs e9cl!sivel% to the cor$orations, to whom the sei;ed effects #elong, and ma% not #e invoked #% the cor$orate officers in $roceedings against them in their individ!al ca$acit% ' ' '0

In the Stonehill case onl% the officers of the vario!s cor$orations in whose offices doc!ments, $a$ers and effects were searched and sei;ed were the $etitioners' In the case at #ar, the cor$oration to whom the sei;ed doc!ments #elong, and whose rights have there#% #een im$aired, is itself a $etitioner' Iss(e)*e+,' -ON &.e Se$ %. -$ $4& 0s 4(++ $4, vo0,.- YES R$&0o' a) @es$ondent +!dge failed to $ersonall% e9amine the com$lainant and his witnessD his $artici$ation was limited to listening to the stenogra$her=s readings of her notes, to a few words of warning against the commission of $er>!r%,

#7 c7

and to administering the oath to the com$lainant and his witness' &his cannot #e considered a $ersonal e9amination' &he search warrant was iss!ed for more than one s$ecific offense' Search Aarrant was iss!ed for 01v2iolation of Sec' -66a7 of the National Internal @even!e "ode in relation to all other $ertinent $rovisions thereof $artic!larl% Secs' G3, ,2, ,3, 20H and 209'0 &he search warrant does not $artic!larl% descri#e the things to #e sei;ed'

BARREDO, :., %o4%( 045' Search Aarrant is n!ll and void' &he search warrant was iss!ed for more than one s$ecific offense'

10

STONE*ILL vs. DIO@NO2 G.R. No. L-1!55; :(4e 1!, 1!"< F$%&s' ( total of -2 search warrants against $etitioners herein andJor the cor$orations of which the% were officers, directed to the an% $eace officer, to search the $ersons a#ove<named andJor the $remises of their offices, wareho!ses andJor residences, and to sei;e and take $ossession of the following $ersonal $ro$ert% to wit4 ooks of acco!nts, financial records, vo!chers, corres$ondence, recei$ts, ledgers, >o!rnals, $ortfolios, credit >o!rnals, t%$ewriters, and other doc!ments andJor $a$ers showing all #!siness transactions incl!ding dis#!rsements recei$ts, #alance sheets and $rofit and loss statements and o##ins 6cigarette wra$$ers7' as 0the s!#>ect of the offenseD stolen or em#e;;led and $roceeds or fr!its of the offense,0 or 0!sed or intended to #e !sed as the means of committing the offense,0 which is descri#ed in the a$$lications adverted to a#ove as 0violation of "entral ank 3aws, &ariff and "!stoms 3aws, Internal @even!e 6"ode7 and the @evised Penal "ode'0 Petitioners allege that the search warrants are n!ll and void #eca!se4 617 the% do not descri#e with $artic!larit% the doc!ments, #ooks and things to #e sei;edD 627 cash mone%, not mentioned in the warrants, were act!all% sei;edD 637 the warrants were iss!ed to fish evidence against the aforementioned $etitioners in de$ortation cases filed against themD 6-7 the searches and sei;!res were made in an illegal mannerD and 6G7 the doc!ments, $a$ers and cash mone% sei;ed were not delivered to the co!rts that iss!ed the warrants, to #e dis$osed of in accordance with law' In their answer, res$ondents<$rosec!tors alleged, 617 that the contested search warrants are valid and have #een iss!ed in accordance with lawD 627 that the defects of said warrants, if an%, were c!red #% $etitioners= consentD and 637 that, in an% event, the effects sei;ed are admissi#le in evidence against herein $etitioners, regardless of the alleged illegalit% of the aforementioned searches and sei;!res' &he doc!ments, $a$ers, and things sei;ed !nder the alleged a!thorit% of the warrants in )!estion ma% #e s$lit into two 627 ma>or gro!$s, namel%4 6a7 those fo!nd and sei;ed in the offices of the aforementioned cor$orations, and 6#7 those fo!nd and sei;ed in the residences of $etitioners herein' Iss!esJEeld4 A*N as to the first gro!$, $etitioners as officers of the "or$oration have a ca!se of action to assail the legalit% of the contested warrants and of the sei;!res made in $!rs!ance thereof'< N* @atio4 S$0, %o /o $&0o4s .$ve &.e0 es/e%&0ve /e so4$+0&0es, se/$ $&e $4, ,0s&04%& 2 om &.e /e so4$+0&3 o2 .e e04 /e&0&0o4e s, e5$ ,+ess o2 &.e $mo(4& o2 s.$ es o2 s&o%? o o2 &.e 04&e es& o2 e$%. o2 &.em 04 s$0, %o /o $&0o4s, $4, 1.$&eve &.e o220%es &.e3 .o+, &.e e04 m$3 be. It is well settled that the legalit% of a sei;!re can #e contested only #% the $art% whose rights have #een im$aired there#%, and that the o#>ection to an !nlawf!l search and sei;!re is purely personal and cannot #e availed of #% third $arties' If these $a$ers were !nlawf!ll% sei;ed and there#% the constit!tional rights of or an% one were invaded, the% were the rights of the corporation and not the rights of the other defendants' "onse)!entl%, $etitioners herein ma% not validl% o#>ect to the !se in evidence against them of the doc!ments, $a$ers and things sei;ed from the offices and $remises of the cor$orations adverted to a#ove, since the right to o#>ect to the admission of said $a$ers in evidence #elongs exclusively to the cor$orations, to whom the sei;ed effects #elong, and ma% not #e invoked #% the cor$orate officers in $roceedings against them in their individ!al ca$acit%'

E(@@Y S' S&*N?EI33, @* ?@& P' @**PS, +*EN +' @**PS and P(@3 ?"P, $etitioners, vs' E*N' +*S? A' 8I*PN*, in his ca$acit% as S?"@?&(@Y *. +:S&I"?D +*S? 3:P (N, in his ca$acit% as (cting 8irector, National !rea! of InvestigationD SP?"I(3 P@*S?":&*@S P?8@* 8' "?NQ*N, ?.@?N I' P3(N( and /(N:?3 FI33(@?(3, +@' and (SS&' .IS"(3 /(N(S?S C' @?Y?SD +:8C? (/(8* @*(N, /!nici$al "o!rt of /anilaD +:8C? @*/(N "(NSIN*, /!nici$al "o!rt of /anilaD +:8C? E?@/*C?N?S "(3:(C, "o!rt of .irst Instance of @i;al<L!e;on "it% ranch, and +:8C? 8(/I(N +I/?N?Q, /!nici$al "o!rt of L!e;on "it%, res$ondents'

11

BATAAN S*I9YARD AND ENGINEERING vs. 9CGG G.R. No. <5##5 7$3 2<, 1!#< F$%&s' "hallenged #% a $rivate cor$oration known as the ataan Shi$%ard and ?ngineering "o', Inc' are4 617 ?9ec!tive *rders N!m#ered 1 and 2, $rom!lgated #% President "ora;on "' ()!ino on .e#r!ar% 2H, 19H6 and /arch 12, 19H6, res$ectivel%, and 627 the se)!estration, takeover, and other orders iss!ed, and acts done, in accordance with said e9ec!tive orders #% the Presidential "ommission on Cood Covernment andJor its "ommissioners and agents, affecting said cor$oration' (S?"* descri#es itself in its $etition as 0a shi$re$air and shi$#!ilding com$an% R R incor$orated as a domestic $rivate cor$oration R R 6on (!g' 30, 19,27 #% a consorti!m of .ili$ino shi$owners and shi$$ing e9ec!tives' Its main office is at ?ngineer Island, Port (rea, /anila, where its ?ngineer Island Shi$%ard is ho!sed, and its main shi$%ard is located at /ariveles ataan'0 arel% si9 months after its incor$oration, (S?"* ac)!ired from National Shi$%ard M Steel "or$oration, or N(SS"*, a government<owned or controlled cor$oration, the latter=s shi$%ard at /ariveles, ataan, known as the ataan National Shi$%ard 6 NS7, and N e9ce$t for N(SS"*=s ?ngineer Island Sho$s and certain e)!i$ment of the NS, consigned for f!t!re negotiation N all its str!ct!res, #!ildings, sho$s, )!arters, ho!ses, $lants, e)!i$ment and facilities, in stock or in transit' &his it did in virt!e of a 0"ontract of P!rchase and Sale with "hattel /ortgage0 e9ec!ted on .e#r!ar% 13, 19,3' &he $rice was PG2,000,000'00' :nacco!nta#l%, the $rice of PG2,000,000'00 was red!ced #% more than one<half, to P2-,311,GG0'00, a#o!t eight 6H7 months later' ( doc!ment to this effect was e9ec!ted on *cto#er 9, 19,3, entitled 0/emorand!m (greement,0 and was signed for N(SS"* #% (rt!ro Pacificador, as Presiding *fficer of the oard of 8irectors, and 8avid @' Ines, as Ceneral /anager' &his agreement #ore, at the to$ right corner of the first $age, the word 0(PP@*F?80 in the handwriting of President Marcos, followed #% his !s!al f!ll signat!re' *n *cto#er 1, 19,-, (S?"* ac)!ired three h!ndred 63007 hectares of land in /ariveles from the ?9$ort Processing Qone (!thorit% for the $rice of P10,0-,,9-0'00 of which, as set o!t in the doc!ment of sale, P2,000'000'00 was $aid !$on its e9ec!tion, and the #alance sti$!lated to #e $a%a#le in installments' Some nine months afterwards, or on +!l% 1G, 19,G, to #e $recise, (S?"*, again with the intervention of President /arcos, ac)!ired ownershi$ of the rest of the assets of N(SS"* which had not #een incl!ded in the first two 627 $!rchase doc!ments' &ransferred to (S?"* were N(SS"*=s 0ownershi$ and all its titles, rights and interests over all e)!i$ment and facilities incl!ding str!ct!res, #!ildings, sho$s, )!arters, ho!ses, $lants and e9$enda#le or semi<e9$enda#le assets, located at the ?ngineer Island, known as the ?ngineer Island Sho$s, incl!ding all the e)!i$ment of the ataan National Shi$%ards 6 NS7 which were e9cl!ded from the sale of N S to (S?"* #!t retained #% (S?"* and all other selected e)!i$ment and machineries of N(SS"* at +' Pangani#an Smelting Plant'0 O&.e ev0,e4%e s(bm0&&e, &o &.e Co( & b3 &.e So+0%0&o Ge4e $+ / oves &.$& 9 es0,e4& 7$ %os 4o& o4+3 exercised control ove BASECO, b(& $+so &.$& .e actually owns 1e++ 405. o4e .(4, e, /e %e4& o2 0&s o(&s&$4,045 s&o%?. &he Solicitor Ceneral has drawn the "o!rt=s attention to the intrig!ing circ!mstance that fo!nd in /alacanang shortl% after the s!dden flight of President /arcos, were certificates corres$onding to more than ninety five percent !"#$% of all the o!tstanding shares of stock of (S?"*, endorsed in #lank, together with deeds of assignment of $racticall% all the o!tstanding shares of stock of the three 637 cor$orations a#ove mentioned 6which hold "#.&'$ of all (S?"* stock7, signed #% the owners thereof altho!gh not notari;ed' T.e SeG(es& $&0o4, T$?eove , $4, O&.e O ,e s Com/+$04e, o2'

a.

asic se)!estration order of vario!s com$anies and (he ()K*+,*- +rder< Ahile (S?"* concedes that .sequestration without resorting to /udicial action, 0ight be 0ade within the context of *xecutive +rders 1os. 2 and ' before March '#, 2"&3 when the .reedom "onstit!tion was $rom!lgated, !nder the $rinci$le that the law $rom!lgated #% the r!ler !nder a revol!tionar% regime is the law of the land, it ceased to be acceptable when the same r!ler o$ted to $rom!lgate the .reedom "onstit!tion on /arch 2G, 19H6 wherein !nder Section I of the same, (rticle IF 6 ill of @ights7 of the 19,3 "onstit!tion was ado$ted $roviding, among others, that 0No $erson shall #e de$rived of life, li#ert% and $ro$ert% witho!t d!e $rocess of law'0 6"onst', (rt' I F, Sec' 17'0 *rder of $rod!ction of #!siness doc!ments and records< (S?"* arg!es that the order to $rod!ce corporate records from 19,3 to 19H6, which it has a$$arentl% alread% com$lied with, was iss!ed witho!t co!rt a!thorit% and infringed its constit!tional right against self<incrimination, and !nreasona#le search and sei;!re' (S?"* contends that the P"CC had !nd!l% interfered with its right of dominion and management of its #!siness affairs on the following matters4

b. c.

12

i'

*rders @e ?ngineer Island< 2. '. (er0ination of Contract for 4ecurity 4ervices Change of Mode of Pay0ent of *ntry Charges

ii' iii. iv. v.

(#orted contract for im$rovement of wharf at ?ngineer Island +rder for +peration of 4esi0an -oc5 6uarry, Mariveles, Bataan +rder to 7ispose of 4crap, etc. (er0ination of 4ervices of B)4*C+ +fficers

Executive Order No. ?9ec!tive *rder No' 1 stresses the 0!rgent need to recover all ill<gotten wealth,0 and $ost!lates that 0vast reso!rces of the government have #een amassed #% former President .erdinand ?' /arcos, his immediate famil%, relatives, and close associates #oth here and a#road'0 :$on these $remises, the Presidential "ommission on Cood Covernment was created, 0charged with the task of assisting the President in regard to 6certain s$ecified7 matters,0 among which was $recisel%<
R R &he recover% of all in<gotten wealth acc!m!lated #% former President .erdinand ?' /arcos, his immediate famil%, relatives, s!#ordinates and close associates, whether located in the Phili$$ines or a#road, incl!ding the ta5eover or sequestration of all #!siness enter$rises and entities owned or controlled #% them, d!ring his administration, directl% or thro!gh nominees, #% taking !nd!e advantage of their $!#lic office andJor !sing their $owers, a!thorit%, infl!ence, connections or relationshi$'

Executive Order No. ! ?9ec!tive *rder No' 2 gives additional and more s$ecific data and directions res$ecting 0the recover% of ill<gotten $ro$erties amassed #% the leaders and s!$$orters of the $revio!s regime'0 It declares that4
17 R R the 8overn0ent of the Philippines is in possession of evidence showing that there are assets and $ro$erties $!r$ortedl% $ertaining to former .erdinand ?' /arcos, andJor his wife /rs' Imelda @om!alde; /arcos, their close relatives, s!#ordinates, #!siness associates, d!mmies, agents or nominees which had #een or were ac)!ired #% them directl% or indirectl%, thro!gh or as a res!lt of the im$ro$er or illegal !se of f!nds or $ro$erties owned #% the government of the Phili$$ines or an% of its #ranches, instr!mentalities, enter$rises, #anks or financial instit!tions, or #% taking !nd!e advantage of their office, a!thorit%, infl!ence, connections or relationshi$, res!lting in their !n>!st enrichment and ca!sing grave damage and $re>!dice to the .ili$ino $eo$le and the @e$!#lic of the Phili$$ines40 and 27 R R said assets and $ro$erties are in the form of #ank acco!nts, de$osits, tr!st acco!nts, shares of stocks, #!ildings, sho$$ing centers, condomini!ms, mansions, residences, estates, and other kinds of real and $ersonal $ro$erties in the Phili$$ines and in vario!s co!ntries of the world'0

Executive Order No. " P"CC is em$owered, 0with the assistance of the *ffice of the Solicitor Ceneral and other government agencies, R R to file and prosecute all cases investigated by it R R as ma% #e warranted #% its findings'0 (ll s!ch cases, whether civil or criminal, are to #e filed 0with the 4andiganbayan which shall have e9cl!sive and original >!risdiction thereof'0 Iss(e)*e+,' -ON &.e 0ss($4%e o2 &.e seG(es& $&0o4 $4, &$?e-ove o ,e s 1$s v$+0,- Yes R$&0o' In the light of the affirmative showing #% the Covernment that, pri0a facie at least, the stockholders and directors of (S?"* as of ($ril, 19H6 were mere 0d!mmies,0 nominees or alter egos of President /arcosD at an% rate, that the% are no longer owners of an% shares of stock in the cor$oration, the concl!sion cannot #e avoided that said stockholders and directors have no #asis and no standing whatever to ca!se the filing and $rosec!tion of the instant $roceedingD and to grant relief to (S?"*, as $ra%ed for in the $etition, wo!ld in effect #e to restore the assets, $ro$erties and #!siness se)!estered and taken over #% the P"CC to $ersons who are 0d!mmies,0 nominees or alter egos of the former $resident' &he facts herein stated at some length do indeed show that the $rivate cor$oration known as (S?"* was 0owned or controlled #% former President .erdinand ?' /arcos R R d!ring his administration, R R thro!gh nominees, #% taking advantage of R R 6his7 $!#lic office andJor !sing R R 6his7 $owers, a!thorit%, infl!ence R R,0 and that N(SS"* and other $ro$ert% of the government had #een taken over #% (S?"*D and the sit!ation >!stified the se)!estration as well as the $rovisional takeover of the cor$oration in the $!#lic interest, in accordance with the terms of ?9ec!tive *rders No' 1 and 2, $ending the filing of the re)!isite actions with the Sandigan#a%an to ca!se divestment of title thereto from /arcos, and its ad>!dication in favor of the @e$!#lic $!rs!ant to ?9ec!tive *rder No' 1-' Iss(e)*e+,' -ON &.e E>e%(&0ve O ,e s $ e B0++s o2 A&&$04,e .- NO, Executive Orders not a #ill of $ttainder.

13

R$&0o'

1.

2'

Nothing in the e9ec!tive orders can #e reasona#l% constr!ed as a determination or declaration of g!ilt' *n the contrar%, the e9ec!tive orders, incl!sive of ?9ec!tive *rder No' 1-, make it $erfectl% clear that an% >!dgment of g!ilt in the amassing or ac)!isition of 0ill<gotten wealth0 is to #e handed down #% a >!dicial tri#!nal, in this case, the 4andiganbayan, !$on com$laint filed and $rosec!ted #% the P"CC' N o $!nishment is inflicted #% the e9ec!tive orders, as the merest glance at their $rovisions will immediatel% make a$$arent' In no sense, therefore, ma% the e9ec!tive orders #e regarded as a #ill of attainder'

Issue%&eld' (ON there is a violation of ri)ht a)ainst self*incrimination and unreasonable searches and seizure.* NO R$&0o' It is elementar% that the right against self<incrimination has no a$$lication to >!ridical $ersons' Ahile an individ!al ma% lawf!ll% ref!se to answer incriminating )!estions !nless $rotected #% an imm!nit% stat!te, it does not follow that a cor$oration, vested with s$ecial $rivileges and franchises, ma% ref!se to show its hand when charged with an a#!se of s!ch $rivileges @elevant >!ris$r!dence is also cited #% the Solicitor Ceneral' R R cor$orations are not entitled to all of the constit!tional $rotections which $rivate individ!als have' R R (hey are not at all within the privilege against self incri0ination, altho!gh this co!rt more than once has said that the $rivilege r!ns ver% closel% with the -th (mendment=s Search and Sei;!re $rovisions' 9t is also settled that an officer of the co0pany cannot refuse to produce its records in its possession upon the plea that they will either incri0inate hi0 or 0ay incri0inate it.. 6*klahoma Press P!#lishing "o' v' Aalling, 32, :'S' 1H6D em$hasis, the Solicitor Ceneral=s7' R R &he cor$oration is a creat!re of the state' It is $res!med to #e incor$orated for the #enefit of the $!#lic' It received certain s$ecial $rivileges and franchises, and holds them s!#>ect to the laws of the state and the limitations of its charter' Its $owers are limited #% law' It can make no contract not a!thori;ed #% its charter' Its rights to act as a cor$oration are onl% $reserved to it so long as it o#e%s the laws of its creation' &here is a reserve right in the legislat!re to investigate its contracts and find o!t whether it has e9ceeded its $owers' It wo!ld #e a strange anomal% to hold that a state, having chartered a cor$oration to make !se of certain franchises, co!ld not, in the e9ercise of sovereignt%, in)!ire how these franchises had #een em$lo%ed, and whether the% had #een a#!sed, and demand the $rod!ction of the cor$orate #ooks and $a$ers for that $!r$ose' &he defense amo!nts to this, that an officer of the cor$oration which is charged with a criminal violation of the stat!te ma% $lead the criminalit% of s!ch cor$oration as a ref!sal to $rod!ce its #ooks' &o state this $ro$osition is to answer it' :hile an individual 0ay lawfully refuse to answer incri0inating questions unless protected by an i00unity statute, it does not follow that a corporation, vested with special privileges and franchises 0ay refuse to show its hand when charged with an abuse of such privileges. 6Ailson v' :nited States, GG 3aw ?d', ,,1, ,H0 1em$hasis, the Solicitor Ceneral=s27 (t an% rate, ?9ec!tive *rder No' 1-<(, amending Section - of ?9ec!tive *rder No' 1- ass!res $rotection to individ!als re)!ired to $rod!ce evidence #efore the P"CC against an% $ossi#le violation of his right against self<incrimination' It gives them imm!nit% from $rosec!tion on the #asis of testimon% or information he is com$elled to $resent' (s amended, said Section - now $rovides that N 999 999 999 &he witness ma% not ref!se to com$l% with the order on the #asis of his $rivilege against self<incriminationD #!t no testimon% or other information com$elled !nder the order 6or an% information directl% or indirectl% derived from s!ch testimon%, or other information7 ma% #e !sed against the witness in an% criminal case, e9ce$t a $rosec!tion for $er>!r%, giving a false statement, or otherwise failing to com$l% with the order' &he constit!tional safeg!ard against !nreasona#le searches and sei;!res finds no a$$lication to the case at #ar either' &here has #een no search !ndertaken #% an% agent or re$resentative of the P"CC, and of co!rse no sei;!re on the occasion thereof' TEE*AN@EE, +,.- conc!rring4 &he "o!rt is !nanimo!s insofar as the >!dgment at #ar !$holds the im$erative need of recovering the ill<gotten $ro$erties amassed #% the $revio!s regime, which 0deserves the f!llest s!$$ort of the >!diciar% and all sectors of societ%'0 &he "o!rt is likewise !nanimo!s in its >!dgment dismissing the $etition to declare !nconstit!tional and void ?9ec!tive *rders Nos' 1 and 2 to ann!l the se)!estration order of ($ril 1-, 19H6' .or indeed, the 19H, "onstit!tion overwhelmingl% ado$ted #% the $eo$le

14

at the .e#r!ar% 2, 19H, $le#iscite e9$ressl% recogni;ed in (rticle SFIII, section 26 thereof the vital f!nctions of res$ondent P"CC to achieve the mandate of the $eo$le to recover s!ch ill<gotten wealth and $ro$erties as ordained #% Proclamation No' 3 $rom!lgated on /arch 2G, 19H6' &he "o!rt is likewise !nanimo!s as to the general r!le set forth in the main o$inion that 0the P"CC cannot e9ercise acts of dominion over $ro$ert% se)!estered, fro;en or $rovisionall% taken over0 and 06&7he P"CC ma% th!s e9ercise onl% $owers of administration over the $ro$ert% or #!siness se)!estered or $rovisionall% taken over, m!ch like a co!rt<a$$ointed receiver, s!ch as to #ring and defend actions in its own nameD receive rentsD collect de#ts d!eD $a% o!tstanding de#tsD and generall% do s!ch other acts and things as ma% #e necessar% to f!lfill its mission as conservator and administrator' 9ADILLA, ,.- conc!rring4 &he ma>orit% o$inion $enned #% /r' +!stice Narvasa maintains and !$holds the valid distinction #etween acts of conservation and $reservation of assets and acts of ownershi$' Se)!estration, free;e and tem$orar% take<over encom$ass the first t%$e of acts' &he% do not incl!de the second t%$e of acts which are reserved onl% to the rightf!l owner of the assets or #!siness se)!estered or tem$oraril% taken over' 7ELENCIO-*ERRERA, ,.- conc!rring4 /elencio< Eerrera )!alifies the conc!rrence in so far as the voting of se)!estered stork is concerned' &he voting of se)!estered stock is, to m% mind, an e9ercise of an attri#!te of ownershi$' It goes #e%ond the $!r$ose of a writ of se)!estration, which is essentiall% to $reserve the $ro$ert% in litigation 6(rticle 200G, "ivil "ode7' Se)!estration is in the nat!re of a >!dicial de$osit !ibid.%. GUTIERREH, :R., ,.- conc!rring and dissenting4 Ae are all agreed in the "o!rt that the P"CC is not a >!dge' It is an investigator and $rosec!tor' Se)!estration is onl% a $reliminar% or ancillar% remed%' &here m!st #e a $rinci$al and inde$endent s!it filed in co!rt to esta#lish the tr!e ownershi$ of se)!estered $ro$erties' &he fact!al $remise that a se)!estered $ro$ert% was ill<gotten #% former President /arcos, his famil%, relatives, s!#ordinates, and close associates cannot be assu0ed. &he fact of ownershi$ m!st #e esta#lished in a $ro$er s!it #efore a co!rt of >!stice' CRUH, ,.- dissenting4 "r!; is convinced and so s!#mit that the P"CC cannot at this time take over the (S?"* witho!t an% co!rt order and e9ercise thereover acts of ownershi$ witho!t co!rt s!$ervision' Foting the shares is an act of ownershi$' @eorgani;ing the #oard of directors is an act of ownershi$' S!ch acts are clearl% !na!thori;ed' (s the ma>orit% o$inion itself stresses, the P"CC is merel% an administrator whose a!thorit% is limited to $reventing the se)!estered $ro$erties from #eing dissi$ated or clandestinel% transferred'

15

9NB vs CA3 G.R. No. L-2<155 7$3 1#, 1!<#

F$%&s'

8efendant @ita C!enco &a$nio sec!red a cro$ loan from PN ' &his cro$ loan was sec!red #% a mortgage on her standing cro$ incl!ding her s!gar )!ota allocation for the agric!lt!ral %ear corres$onding to said standing cro$' Philmagen e9ec!ted its ond, with defendant @ita C!eco &a$nio as $rinci$al, in favor of the Phili$$ine National ank ranch at San .ernando, Pam$anga, to g!arantee the $a%ment of defendant @ita C!eco &a$nio=s acco!nt with said ank' In t!rn, to g!arantee the $a%ment of whatever amo!nt the #onding com$an% wo!ld $a% to the Phili$$ine National ank, #oth defendants 6@ita C!eco &a$nio and "ecilio C!eco7 e9ec!ted the indemnit% agreement'

It is not dis$!ted that defendant @ita C!eco &a$nio was inde#ted to the #ank in the s!m of P2,000'00, $l!s acc!m!lated interests !n$aid, which she failed to $a% des$ite demands' &he ank wrote a letter of demand to Philmagen, where!$on Philmagen accordingl% $aid the f!ll amo!nt d!e and owing in the s!m of P2,3,9'91, for and on acco!nt of defendant @ita C!eco=s o#ligation'

8efendant @ita C!eco &a$nio admitted all the foregoing facts' She claims, however, when demand was made !$on her #% $laintiff for her to $a% her de#t to the ank, that she told the Plaintiff that she did not consider herself to #e inde#ted to the ank at all #eca!se she had an agreement with one +aco#o<Na;on where#% she had leased to the latter her !n!sed e9$ort s!gar )!ota for the 19G6<19G, agric!lt!ral %ear' his lease agreement, according to her, was with the knowledge of the #ank' B(& &.e B$4? .$s /+$%e, obs&$%+es &o &.e %o4s(mm$&0o4 o2 &.e +e$se, $4, &.e ,e+$3 %$(se, b3 s$0, obs&$%+es 2o %e, CN$=o4 &o es%04, &.e +e$se %o4& $%&. &h!s, @ita C!eco &a$nio filed her third<$art% com$laint against the ank to recover from the latter an% and all s!ms of mone% which ma% #e ad>!dged against her and in favor of the $laitiff $l!s moral damages, attorne%=s fees and costs'

Sometimes, a $lanter harvest less s!gar than her )!ota, so her e9cess )!ota is !tili;ed #% another who $a%s her for its !se' &his is the arrangement entered into #etween /rs' &a$nio and /r' &!a;on regarding the former=s e9cess )!ota for 19G6< 19G,'

Since the )!ota was mortgaged to the P'N' ', the contract of lease had to #e a$$roved #% said s!#mitted to the #ranch manager at San .ernando, Pam$anga'

ank, &he same was

"onsideration of the evidence discloses that when the #ranch manager of the Phili$$ine National ank at San .ernando recommended the a$$roval of the contract of lease at the $rice of P2'H0 $er $ic!l, whose recommendation was conc!rred in #% the Fice<$resident of said ank, +' F' !enavent!ra, the #oard of directors re)!ired that the amo!nt #e raised to 13'00 $er $ic!l' /r' &!a;on asked for a reconsideration of the $rice $er $ic!l #!t thaw same was not acted !$on the PN Ts *8' &he $arties were notified of the ref!sal on the $art of the #oard of directors of the ank to grant the motion for reconsideration' (s s!ch, &!a;on wrote a letter to the ank informing the ank that he was no longer interested to contin!e the deal, referring to the lease of s!gar )!ota allotment in favor of defendant @ita C!eco &a$nio' &he res!lt is that the latter lost the s!m of P2,H00'00 which she sho!ld have received from &!a;on and which she co!ld have $aid the ank to cancel off her inde#tedness'

PEI3IPPIN? N(&I*N(3 (NP, $etitioner,vs &E? "*:@& *. (PP?(3S, @I&( C:?"* &(PNI*, "?"I3I* C:?"* and &E? PEI3IPPIN? (/?@I"(N C?N?@(3 INS:@(N"? "*/P(NY, IN"', res$ondents'

16

Iss(e)*e+,' -ON &.e es%0ss0o4 o2 &.e +e$se %o4& $%& o2 &.e 1,;;; /0%(+s o2 s(5$ G(o&$ $++o%$&0o4 o2 es/o4,e4& R0&$ G(e%o T$/40o b3 :$%obo C. T($=o4 1$s ,(e &o &.e (4B(s&020e, e2(s$+ o2 /e&0&0o4e &o $// ove s$0, +e$se %o4& $%&, $4, 0&s (4 e$so4$b+e 04s0s&e4%e o4 &.e e4&$+ / 0%e o2 93.;; 04s&e$, o2 92.#; /e /0%(+.- YES

R$&0o' It has #een clearl% shown that when the ranch /anager of $etitioner re)!ired the $arties to raise the consideration of the lease from P2'G0 to P2'H0 $er $ic!l, or a total of P2,H00<00, the% readil% agreed' Eence, in his letter to the ranch /anager of the ank on (!g!st 10, 19G6, &!a;on informed him that the minim!m lease rental of P2'H0 $er $ic!l was acce$ta#le to him and that he even offered to !se the loan sec!red #% him from $etitioner to $a% in f!ll the s!m of P2,H00'00 which was the total consideration of the lease' &his arrangement was not onl% satisfactor% to the ranch /anager #!t it was also a$$roves #% Fice<President +' F' !enavent!ra of the PN ' :nder that arrangement, @ita C!eco &a$nio co!ld have reali;ed the amo!nt of P2,H00'00, which was more than eno!gh to $a% the #alance of her inde#tedness to the ank which was sec!red #% the #ond of Philamgen' &here is no )!estion that &a$nio=s fail!re to !tili;e her s!gar )!ota for the cro$ %ear 19G6<19G, was d!e to the disa$$roval of the lease #% the oard of 8irectors of $etitioner' &ime is of the essence in the a$$roval of the lease of s!gar )!ota allotments, since the same m!st #e !tili;ed d!ring the milling season, #eca!se an% allotment which is not filled d!ring s!ch milling season ma% #e reallocated #% the S!gar L!ota (dministration to other holders of allotments' &here was no $roof that there was an% other $erson at that time willing to lease the s!gar )!ota allotment of $rivate res$ondents for a $rice higher than P2'H0 $er $ic!l' 0&he fact that there were isolated transactions wherein the consideration for the lease was P3'00 a $ic!l0, according to the trial co!rt, 0does not necessaril% mean that there are alwa%s read% takers of said $rice'0 &he !nreasona#leness of the $osition ado$ted #% the $etitioner=s oard of 8irectors is shown #% the fact that the difference #etween the amo!nt of P2'H0 $er $ic!l offered #% &!a;on and the P3'00 $er $ic!l demanded #% the oard amo!nted onl% to a total s!m of P200'00' Iss(e)*e+,' -ON 9NB 0s +0$b+e 2o &.e ,$m$5e %$(se,.- YES R$&0o' Ahile $etitioner had the !ltimate a!thorit% of a$$roving or disa$$roving the $ro$osed lease since the )!ota was mortgaged to the ank, the latter certainl% cannot esca$e its res$onsi#ilit% of o#serving, for the $rotection of the interest of $rivate res$ondents, that degree of care, $reca!tion and vigilance which the circ!mstances >!stl% demand in a$$roving or disa$$roving the lease of said s!gar )!ota' &he law makes it im$erative that ever% $erson 0m!st in the e9ercise of his rights and in the $erformance of his d!ties, act with >!stice, give ever%one his d!e, and o#serve honest% and good faith' &his $etitioner failed to do' "ertainl%, it knew that the agric!lt!ral %ear was a#o!t to e9$ire, that #% its disa$$roval of the lease $rivate res$ondents wo!ld #e !na#le to !tili;e the s!gar )!ota in )!estion' In failing to o#serve the reasona#le degree of care and vigilance which the s!rro!nding circ!mstances reasona#l% im$oseD $etitioner is conse)!entl% lia#le for the damages ca!sed on $rivate res$ondents' :nder (rticle 21 of the New "ivil "ode, 0an% $erson who wilf!ll% ca!ses loss or in>!r% to another in a manner that is contrar% to morals, good c!stoms or $!#lic $olic% shall com$ensate the latter for the damage'0 &he afore<cited $rovisions on h!man relations were intended to e9$and the conce$t of torts in this >!risdiction #% granting ade)!ate legal remed% for the !ntold n!m#er of moral wrongs which is im$ossi#le for h!man foresight to s$ecificall% $rovide in the stat!tes' A %o /o $&0o4 0s %0v0++3 +0$b+e 04 &.e s$me m$44e $s 4$&( $+ /e so4s 2o &o &s, be%$(se F5e4e $++3 s/e$?045, &.e (+es 5ove 4045 &.e +0$b0+0&3 o2 $ / 04%0/$+ o m$s&e 2o $ &o & %omm0&&e, b3 $4 $5e4& o se v$4& $ e &.e s$me 1.e&.e &.e / 04%0/$+ o m$s&e be $ 4$&( $+ /e so4 o $ %o /o $&0o4, $4, 1.e&.e &.e se v$4& o $5e4& be $ 4$&( $+ o $ &020%0$+ /e so4. A++ o2 &.e $(&.o 0&0es $5 ee &.$& $ / 04%0/$+ o m$s&e 0s +0$b+e 2o eve 3 &o & 1.0%. .e e>/ ess+3 ,0 e%&s o $(&.o 0=es, $4, &.0s 0s B(s& $s & (e o2 $ %o /o $&0o4 $s o2 $ 4$&( $+ /e so4, A %o /o $&0o4 0s +0$b+e, &.e e2o e, 1.e4eve $ &o &0o(s $%& 0s %omm0&&e, b3 $4 o220%e o $5e4& (4,e e>/ ess ,0 e%&0o4 o $(&.o 0&3 2 om &.e s&o%?.o+,e s o membe s $%&045 $s $ bo,3, o , 5e4e $++3, 2 om &.e ,0 e%&o s $s &.e 5ove 4045 bo,3.F

17

C*ING vs. SECRETARY OF :USTICE G. R. No. 1"431< Feb ($ 3 ", 2;;" F$%&s' Petitioner was the Senior Fice<President of Phili$$ine looming /ills, Inc' 6P /I7' Sometime in Se$tem#er to *cto#er 19H0, P /I, thro!gh $etitioner, a$$lied with the @i;al "ommercial anking "or$oration 6res$ondent #ank7 for the iss!ance of commercial letters of credit to finance its im$ortation of assorted goods' @" " a$$roved the a$$lication, and irrevoca#le letters of credit were iss!ed in favor of $etitioner' &he goods were $!rchased and delivered in tr!st to P /I' Petitioner signed 13 tr!st recei$ts as s!ret%, acknowledging deliver% of res$ective goods' :nder the recei$ts, $etitioner agreed to hold the goods in tr!st for the said #ank, with a!thorit% to sell #!t not #% wa% of conditional sale, $ledge or otherwiseD and in case s!ch goods were sold, to t!rn over the $roceeds thereof as soon as received, to a$$l% against the relative acce$tances and $a%ment of other inde#tedness to res$ondent #ank' In case the goods remained !nsold within the s$ecified $eriod, the goods were to #e ret!rned to res$ondent #ank witho!t an% need of demand' &h!s, said 0goods, man!fact!red $rod!cts or $roceeds thereof, whether in the form of mone% or #ills, receiva#les, or acco!nts se$arate and ca$a#le of identification0 were res$ondent #ankTs $ro$ert%' Ahen the tr!st recei$ts mat!red, $etitioner failed to ret!rn the goods to res$ondent #ank, or to ret!rn their val!e amo!nting to P6,9-0,2H0'66 des$ite demands' &h!s, a criminal case for estafa was filed against the Senior FP' &he @&", however, granted the /otion to L!ash the Informations filed #% $etitioner on the gro!nd that the material allegations therein did not amo!nt to estafa' In the meantime, the "o!rt rendered >!dgment in (llied anking "or$oration v' *rdoUe;, holding that the $enal $rovision of P'8' No' 11G encom$asses an% act violative of an o#ligation covered #% the tr!st recei$tD it is not limited to transactions involving goods which are to #e sold 6retailed7, reshi$$ed, stored or $rocessed as a com$onent of a $rod!ct !ltimatel% sold' &he "o!rt also r!led that 0the non<$a%ment of the amo!nt covered #% a tr!st recei$t is an act violative of the o#ligation of the entr!stee to $a%'0 &h!s, the criminal com$laint for estafa was re<filed' Iss(e' -ON &.e *o4o $b+e Se% e&$ 3 o2 :(s&0%e %o e%&+3 es/o4s0b+e 2o &.e o22e4se %.$ 5e,.- NO R$&0o' (ssertions of Petitioner that he had no direct $artici$ation in the transaction other than #eing the Senior FP of the P /I is too d!ll that it cannot even >!st dent the findings of the res$ondent Secretar%, vi;4
09 9 9 it is a$ro$os to )!ote section 13 of P8 11G which states in $art, vi;4 V999 If the violation or offense is committed #% a cor$oration, $artnershi$, association or other >!dicial entities, the $enalt% $rovided for in this 8ecree shall #e im$osed !$on the directors, officers, em$lo%ees or other officials or $ersons therein res$onsi#le for the offense, witho!t $re>!dice to the civil lia#ilities arising from the criminal offense'T 0&here is no dis$!te that it was the res$ondent, who as senior vice<$resident of P /, e9ec!ted the thirteen 6137 tr!st recei$ts' (s s!ch, the law $oints to him as the official res$onsi#le for the offense' Since a cor$oration cannot #e $roceeded against criminall% #eca!se it cannot commit crime in which $ersonal violence or malicio!s intent is re)!ired, criminal action is limited to the cor$orate agents g!ilt% of an act amo!nting to a crime and never against the cor$oration itself 6Aest "oast 3ife Ins' "o' vs' E!rd, 2, Phil' -01D &imes, 1I2nc' v' @e%es, 39 S"@( 3037' &h!s, the e9ec!tion #% res$ondent of said recei$ts is eno!gh to indict him as the official res$onsi#le for violation of P8 11G' 999 0In regard to the other assigned errors, we note that the res$ondent #o!nd himself !nder the terms of the tr!st recei$ts not onl% as a cor$orate official of P / #!t also as its s!ret%' It is evident that these are two 627 ca$acities which do not e9cl!de the other' 3ogicall%, he can #e $roceeded against in two 627 wa%s4 first, as s!ret% as determined #% the S!$reme "o!rt in its decision in @" " vs' "o!rt of ($$eals, 1,H S"@( ,39D and, secondl%, as the cor$orate official res$onsi#le for the offense !nder P8 11G, the $resent case is an a$$ro$riate remed% !nder o!r $enal law' 0/oreover, P8 11G e9$licitl% allows the $rosec!tion of cor$orate officers Vwitho!t $re>!dice to the civil lia#ilities arising from the criminal offenseT th!s, the civil lia#ilit% im$osed on res$ondent in @" " vs' "o!rt of ($$eals case is clearl% se$arate and distinct from his criminal lia#ilit% !nder P8 11G'T0

(+e, &.$& /e&0&0o4e

A+2 e,o C.045 0s &.e o220%e

18

&he "o!rt r!les that altho!gh $etitioner signed the tr!st recei$ts merel% as Senior Fice<President of P /I and had no $h%sical $ossession of the goods, he cannot avoid $rosec!tion for violation of P'8' No' 11G'&he crime defined in P'8' No' 11G is mal!m $rohi#it!m #!t is classified as estafa !nder $aragra$h 16#7, (rticle 31G of the @evised Penal "ode, or estafa with a#!se of confidence' It ma% #e committed #% a cor$oration or other >!ridical entit% or #% nat!ral $ersons' &ho!gh the entr!stee is a cor$oration, nevertheless, the law s$ecificall% makes the officers, em$lo%ees or other officers or $ersons res$onsi#le for the offense, witho!t $re>!dice to the civil lia#ilities of s!ch cor$oration andJor #oard of directors, officers, or other officials or em$lo%ees res$onsi#le for the offense' &he rationale is that s!ch officers or em$lo%ees are vested with the a!thorit% and res$onsi#ilit% to devise means necessar% to ens!re com$liance with the law and, if the% fail to do so, are held criminall% acco!nta#leD th!s, the% have a res$onsi#le share in the violations of the law' I2 &.e % 0me 0s %omm0&&e, b3 $ %o /o $&0o4 o o&.e B( 0,0%$+ e4&0&3, &.e ,0 e%&o s, o220%e s, em/+o3ees o o&.e o220%e s &.e eo2 es/o4s0b+e 2o &.e o22e4se s.$++ be %.$ 5e, $4, /e4$+0=e, 2o &.e % 0me, / e%0se+3 be%$(se o2 &.e 4$&( e o2 &.e % 0me $4, &.e /e4$+&3 &.e e2o . A %o /o $&0o4 %$44o& be $ es&e, $4, 0m/ 0so4e,I .e4%e, %$44o& be /e4$+0=e, 2o $ % 0me /(40s.$b+e b3 0m/ 0so4me4&. *o1eve , $ %o /o $&0o4 m$3 be %.$ 5e, $4, / ose%(&e, 2o $ % 0me 02 &.e 0m/os$b+e /e4$+&3 0s 204e. Eve4 02 &.e s&$&(&e / es% 0bes bo&. 204e $4, 0m/ 0so4me4& $s /e4$+&3, $ %o /o $&0o4 m$3 be / ose%(&e, $4,, 02 2o(4, 5(0+&3, m$3 be 204e,.

4 &he $enalt% cla!se of the law, Section 13 of P'8' No' 11G reads4
Section 13' Penalt% "la!se' &he fail!re of an entr!stee to t!rn over the $roceeds of the sale of the goods, doc!ments or instr!ments covered #% a tr!st recei$t to the e9tent of the amo!nt owing to the entr!ster or as a$$ears in the tr!st recei$t or to ret!rn said goods, doc!ments or instr!ments if the% were not sold or dis$osed of in accordance with the terms of the tr!st recei$t shall constit!te the crime of estafa, $!nisha#le !nder the $rovisions of (rticle &hree h!ndred and fifteen, $aragra$h one 6#7 of (ct N!m#ered &hree tho!sand eight h!ndred and fifteen, as amended, otherwise known as the @evised Penal "ode' If the violation or offense is committed #% a cor$oration, $artnershi$, association or other >!ridical entities, the $enalt% $rovided for in this 8ecree shall #e im$osed !$on the directors, officers, em$lo%ees or other officials or $ersons therein res$onsi#le for the offense, witho!t $re>!dice to the civil lia#ilities arising from the criminal offense'

19

9RI7E -*ITE CE7ENT COR9. vs. IAC G.R. No. L-"#555 7$ %. 1!, 1!!3 F$%&s' Plaintiff and defendant cor$oration 6Prime Ahite "ement "or$'7 thr! its 9 es0,e4&, 7 . Hos0mo F$+%o4 $4, :(s&o C. T $=o, $s C.$0 m$4 o2 &.e Bo$ ,, entered into a dealershi$ agreement where#% said $laintiff was o#ligated to act as the e9cl!sive dealer andJor distri#!tor of the said defendant cor$oration of its cement $rod!cts in the entire /indanao area for a &e m o2 20ve 65E 3e$ s. 6&erms4 20,000 cement #ags at Ph$9',0 eachD a 3etter of "redit shall #e o$ened #% Plaintiff7 &he Plaintiff (le>andro &e was not an ordinar% stockholder of Prime Ahite "ementD he was a mem#er of the 8irectors and (!ditor of the cor$oration as well' Ee was what is often referred to as a 0self<dealing0 director' oard of

@ight after, the $laintiff entered into the aforesaid dealershi$ agreement, he $laced an advertisement in a national, circ!lating news$a$er the fact of his #eing the e9cl!sive dealer of the defendant cor$oration=s white cement $rod!cts in /indanao area' @el%ing heavil% on the dealershi$ agreement, $laintiff sometime in the months of Se$tem#er, *cto#er, and 8ecem#er, 1969, entered into a written agreement with several hardware stores dealing in #!%ing and selling white cement in the "ities of 8avao and "aga%an de *ro which wo!ld th!s ena#le him to sell his allocation of 20,000 #ags reg!lar s!$$l% of the said commodit%, #% Se$tem#er, 19,0' Plaintiff wrote defendant that it is alread% in the $rocess of a$$l%ing for a 3etter of "redit' &he *8 of the defendant, however, re$lied that4 617 *nl% H,000 #ags of white cement $er month for onl% a $eriod of three 637 months will #e deliveredD 627 &he $rice of white cement was $riced at P13'30 $er #agD 637 &he $rice of white cement is s!#>ect to read>!stment !nilaterall% on the $art of the defendantD 6-7 &he letter of credit ma% #e o$ened onl% with the Pr!dential ank, /akati ranchD among others' Several demands to com$l% with the dealershi$ agreement were made #% the $laintiff to the defendant, however, defendant ref!sed to com$l% with the same, and $laintiff #% force of circ!mstances was constrained to cancel his agreement for the s!$$l% of white cement with third $arties, which were concl!ded in antici$ation of, and $!rs!ant to the said dealershi$ agreement' Iss(e)*e+,' -ON &.e F,e$+e s.0/ $5 eeme4&F e2e e, b3 &.e 9 es0,e4& $4, C.$0 m$4 o2 &.e Bo$ , o2 ,e2e4,$4&/e&0&0o4e %o /o $&0o4 0s $ v$+0, $4, e42o %e$b+e %o4& $%&.-NO. R$&0o' Ge4e $+ R(+e' :nder the "or$oration 3aw, which was then in force at the time this case arose, as well as !nder the $resent "or$oration "ode, all cor$orate $owers shall #e e9ercised #% the oard of 8irectors, e9ce$t as otherwise $rovided #% law' (ltho!gh it cannot com$letel% a#dicate its $ower and res$onsi#ilit% to act for the >!ridical entit%, the oard ma% e9$ressl% delegate s$ecific $owers to its President or an% of its officers' In the a#sence of s!ch e9$ress delegation, a contract entered into #% its President, on #ehalf of the cor$oration, ma% still #ind the cor$oration if the #oard sho!ld ratif% the same e9$ressl% or im$liedl%' Im$lied ratification ma% take vario!s forms N like silence or ac)!iescenceD #% acts showing a$$roval or ado$tion of the contractD or #% acce$tance and retention of #enefits flowing therefrom' .!rthermore, even in the a#sence of e9$ress or im$lied a!thorit% #% ratification, the President as s!ch ma%, as a general r!le, #ind the cor$oration #% a contract in the ordinar% co!rse of #!siness, $rovided the same is reasona#le !nder the circ!mstances' &hese r!les are #asic, #!t are all general and th!s )!ite fle9i#le' &he% a$$l% where the President or other officer, $!r$ortedl% acting for the cor$oration, is dealing with a third person, i. e', a $erson outside the cor$oration' E>%e/&0o4' &he sit!ation is )!ite different where a director or officer is dealing with his own cor$oration' E>%e/&0o4 &o &.e e>%e/&0o4' ( director=s contract with his cor$oration is not in all instances void or voida#le' If the contract is fair and reasona#le !nder the circ!mstances, it ma% #e ratified #% the stockholders $rovided a f!ll disclos!re of his adverse interest is made' ( director of a cor$oration holds a $osition of tr!st and as s!ch, he owes a d!t% of lo%alt% to his cor$oration' In case his interests conflict with those of the cor$oration, he cannot sacrifice the latter to his own advantage and #enefit' (s cor$orate managers, directors are committed to seek the ma9im!m amo!nt of $rofits for the cor$oration' &his tr!st relationshi$ 0is not a matter of stat!tor% or technical law' It s$rings from the fact that directors have the control and g!idance of cor$orate affairs and $ro$ert% and hence of the $ro$ert% interests of the stockholders'0 In the $resent case, contract was neither fair nor reasona#le'
@es$ondent &e is a #!sinessman himself and m!st have known, or at least m!st #e $res!med to know, that at that time, $rices of commodities in general, and white cement in $artic!lar, were not sta#le and were e9$ected to rise' (t the time of the contract, $etitioner cor$oration had not even commenced the man!fact!re of white cement, the reason wh%

20

deliver% was not to #egin !ntil 1- months later' Ee m!st have known that within that $eriod of si9 %ears, there wo!ld #e a considera#le rise in the $rice of white cement'

(s a res!lt of this action which has #een $roven to #e witho!t legal #asis, $etitioner cor$oration=s re$!tation and goodwill have #een $re>!diced' *o1eve , &.e e %$4 be 4o $1$ , 2o mo $+ ,$m$5es (4,e A &0%+e 221< $4, s(%%ee,045 $ &0%+es o4 Se%&0o4 1 o2 C.$/&e 3 o2 T0&+e A8III o2 &.e C0v0+ Co,e 04 2$vo o2 $ %o /o $&0o4.

21

FILI9INAS BROADCASTING NET-OR@ vs. AGO 7EDICAL AND EDUCATIONAL CENTER G.R. No. 141!!4. :$4($ 3 1<, 2;;5 F$%&s' In their radio doc!mentar% show, @ima and (legre e9$osed vario!s alleged com$laints from st!dents, teachers and $arents against (go /edical and ?d!cational "enter< icol "hristian "ollege of /edicine 6(/?"=7 and its administrators' "laiming that the #roadcasts were defamator%, (/?" and (ngelita (go 6(go=7, as 8ean of (/?"=s "ollege of /edicine, filed a com$laint for damages against . NI, @ima and (legre on 2, .e#r!ar% 1990' ?9cer$ts of the alleged li#elo!s statements, as follows4

5if %o! have children taking medical co!rse at (/?"< ""/, advise them to $ass all s!#>ects #eca!se if the% fail in an% s!#>ect the% will re$eat their %ear level, taking !$ all s!#>ects incl!ding those the% have $assed alread%'B 5?arlier (/?" st!dents in Ph%sical &hera$% had com$lained that the co!rse is not recogni;ed #% 8?"S'B 5St!dents are re)!ired to take and $a% for the s!#>ect even if the s!#>ect does not have an instr!ctor < s!ch greed for mone% on the $art of (/?"=s administration'B 5*n the other hand, the administrators of (/?"< ""/, (/?" Science Eigh School and the (/?"<Instit!te of /ass "omm!nication in their effort to minimi;e e9$enses in terms of salar% are a#sor#ing or contin!es to acce$t =re>ects= W (/?" is a d!m$ing gro!nd, gar#age, not merel% of moral and $h%sical misfits'B 5Ahen the% #ecome mem#ers of societ% o!tside of cam$!s will #e lia#ilities rather than assets'B

Iss(es)*e+,' 1' A*N the statements are li#elo!s'< Y?S 2. -ON A7EC 0s e4&0&+e, &o mo $+ ,$m$5es.- YES 3. A*N award of (tt%Ts fees is $ro$er'< N*

4.
R$&0o'

A*N . NI is solidaril% lia#le with @ima and (legre for $a%ment of moral damages, attorne%=s fees and costs of s!it'< Y?S

1.

S&$&eme4&s $ e +0be+o(s. @ima and (legre failed to show ade)!atel% their good intention and >!stifia#le motive in airing the s!$$osed gri$es of the st!dents' (s hosts of a doc!mentar% or $!#lic affairs $rogram, @ima and (legre sho!ld have $resented the $!#lic iss!es =free from inaccurate and misleading information' &r!e, (/?" is a $rivate learning instit!tion whose #!siness of ed!cating st!dents is =gen!inel% im#!ed with $!#lic interest' &he welfare of the %o!th in general and (/?"=s st!dents in $artic!lar is a matter which the $!#lic has the right to know' Eowever, in contrast with the case of or>al, the )!estioned #roadcasts are 4o& #ased on es&$b+0s.e, 2$%&s' In #or.al , the "o!rt el!cidated on the =doctrine of fair comment, th!s4 1.2air commentaries on matters of $!#lic interest are $rivileged and constit!te a valid defense in an action for li#el or slander' &he doctrine of fair comment means that while in general ever% discredita#le im$!tation $!#licl% made is deemed false, #eca!se ever% man is $res!med innocent !ntil his g!ilt is >!diciall% $roved, and ever% false im$!tation is deemed malicio!s, nevertheless, when the discredita#le im$!tation is directed against a $!#lic $erson in his $!#lic ca$acit%, it is not necessaril% actiona#le' I4 o ,e &.$& s(%. ,0s% e,0&$b+e 0m/(&$&0o4 &o $ /(b+0% o220%0$+ m$3 be $%&0o4$b+e, 0& m(s& e0&.e be $ 2$+se $++e5$&0o4 o2 2$%& o $ %omme4& b$se, o4 $ 2$+se s(//os0&0o4. I2 &.e %omme4& 0s $4 e>/ ess0o4 o2 o/040o4, b$se, o4 es&$b+0s.e, 2$%&s, then it is immaterial that the o$inion ha$$ens to #e mistaken, as long as it might reasona#l% #e inferred from the facts'

2.

G0ve4 &.e %0 %(ms&$4%es o2 &.e %$se, A7EC 0s e4&0&+e, &o mo $+ ,$m$5es o2 9./15;,;;;. Ge4e $+ R(+e' ( >!ridical $erson is generall% not entitled to moral damages #eca!se, !nlike a nat!ral $erson, it cannot e9$erience $h%sical s!ffering or s!ch sentiments as wo!nded feelings, serio!s an9iet%, mental ang!ish or moral shock'G E>%e/&0o4' Item , of (rticle 2219 of the "ivil "ode4 /oral damages ma% #e recovered in the following and analogo!s cases4 9 9 9 6,7 3i#el, slander or an% other form of defamationD 9 9 9' &his $rovision e9$ressl% a!thori;es the recover% of moral damages in cases of li#el, slander or an% other form of defamation' (rticle 22196,7 does not )!alif% whether the $laintiff is a nat!ral or >!ridical $erson' &herefore, a

&he "o!rt of ($$eals cites /ambulao 0umber +o. v. PN#- et al ' to >!stif% the award of moral damages' Eowever, the "o!rt=s statement in /ambulao that =a cor$oration ma% have a good re$!tation which, if #esmirched, ma% also #e a gro!nd for the award of moral damages= is an obiter dictu0'

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>!ridical $erson s!ch as a cor$oration can validl% com$lain for li#el or an% other form of defamation and claim for moral damages' /oreover, where the #roadcast is li#elo!s per se, the law im$lies damages' In s!ch a case, evidence of an honest mistake or the want of character or re$!tation of the $art% li#eled goes onl% in mitigation of damages' Neither in s!ch a case is the $laintiff re)!ired to introd!ce evidence of act!al damages as a condition $recedent to the recover% of some damages' In this case, the #roadcasts are li#elo!s per se' &h!s, (/?" is entitled to moral damages'

3. 4.

A1$ , o2 $&&3Js 2ees 0s 4o& / o/e . (/?" failed to >!stif% satisfactoril% its claim for attorne%=s fees' (/?" did not add!ce evidence to warrant the award of attorne%=s fees' FBNI 0s so+0,$ 0+3 +0$b+e 10&. R0m$ $4, A+e5 e. &he #asis of the $resent action is a tort' +oint tort feasors are >ointl% and severall% lia#le for the tort which the% commit' +oint tort feasors are all the $ersons who command, instigate, $romote, enco!rage, advise, co!ntenance, coo$erate in, aid or a#et the commission of a tort, or who a$$rove of it after it is done, if done for their #enefit' &h!s, (/?" correctl% anchored its ca!se of action against . NI on (rticles 21,6 and 21H0 of the "ivil "ode' a' (n em$lo%er and em$lo%ee are solidaril% lia#le for a defamator% statement #% the em$lo%ee within the co!rse and sco$e of his or her em$lo%ment, at least when the em$lo%er a!thori;es or ratifies the defamation' b. &here is ins!fficient evidence on record that . NI e9ercised d!e diligence in the se+e%&0o4 and s(/e v0s0o4 of its em$lo%ees, $artic!larl% @ima and (legre'

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