G.R. No.

141994 January 17, 2005

FILIPINAS BROADCASTING NETWORK, INC., petitioner,

vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of the
Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14
December 1992 Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No.
8236. The Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters
Hermogenes Alegre and Carmelo Rima liable for libel and ordered them to solidarily pay Ago
Medical and Educational Center-Bicol Christian College of Medicine moral damages, attorney’s fees
and costs of suit.

The Antecedents

"Exposé" is a radio documentary4 program hosted by Carmelo ‘Mel’ Rima ("Rima") and Hermogenes
‘Jun’ Alegre ("Alegre").5 Exposé is aired every morning over DZRC-AM which is owned by Filipinas
Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over Legazpi City, the Albay municipalities
and other Bicol areas.6

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints
from students, teachers and parents against Ago Medical and Educational Center-Bicol Christian
College of Medicine ("AMEC") and its administrators. Claiming that the broadcasts were defamatory,
AMEC and Angelita Ago ("Ago"), as Dean of AMEC’s College of Medicine, filed a complaint for
damages7 against FBNI, Rima and Alegre on 27 February 1990. Quoted are portions of the allegedly
libelous broadcasts:

JUN ALEGRE:

Let us begin with the less burdensome: if you have children taking medical course at AMEC-
BCCM, advise them to pass all subjects because if they fail in any subject they will repeat
their year level, taking up all subjects including those they have passed already. Several
students had approached me stating that they had consulted with the DECS which told them that
there is no such regulation. If [there] is no such regulation why is AMEC doing the same?

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the course is not
recognized by DECS. xxx

Third: Students are required to take and pay for the subject even if the subject does not have
an instructor - such greed for money on the part of AMEC’s administration. Take the subject
Anatomy: students would pay for the subject upon enrolment because it is offered by the school.
However there would be no instructor for such subject. Students would be informed that course
would be moved to a later date because the school is still searching for the appropriate instructor.

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been
surviving for the past few years since its inception because of funds support from foreign
foundations. If you will take a look at the AMEC premises you’ll find out that the names of the
buildings there are foreign soundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio
Hall? That is a very concrete and undeniable evidence that the support of foreign foundations for
AMEC is substantial, isn’t it? With the report which is the basis of the expose in DZRC today, it
would be very easy for detractors and enemies of the Ago family to stop the flow of support of
foreign foundations who assist the medical school on the basis of the latter’s purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross purpose with its reason for being it
is possible for these foreign foundations to lift or suspend their donations temporarily.8

xxx

On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the
AMEC-Institute of Mass Communication in their effort to minimize expenses in terms of
salary are absorbing or continues to accept "rejects". For example how many teachers in AMEC
are former teachers of Aquinas University but were removed because of immorality? Does it mean
that the present administration of AMEC have the total definite moral foundation from catholic
administrator of Aquinas University. I will prove to you my friends, that AMEC is a dumping ground,
garbage, not merely of moral and physical misfits. Probably they only qualify in terms of intellect.
The Dean of Student Affairs of AMEC is Justita Lola, as the family name implies. She is too old to
work, being an old woman. Is the AMEC administration exploiting the very [e]nterprising or
compromising and undemanding Lola? Could it be that AMEC is just patiently making use of Dean
Justita Lola were if she is very old. As in atmospheric situation – zero visibility – the plane cannot
land, meaning she is very old, low pay follows. By the way, Dean Justita Lola is also the chairman of
the committee on scholarship in AMEC. She had retired from Bicol University a long time ago but
AMEC has patiently made use of her.

xxx

MEL RIMA:

xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit
people. What does this mean? Immoral and physically misfits as teachers.

May I say I’m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer
fit to teach. You are too old. As an aviation, your case is zero visibility. Don’t insist.

xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship committee
at that. The reason is practical cost saving in salaries, because an old person is not fastidious, so
long as she has money to buy the ingredient of beetle juice. The elderly can get by – that’s why she
(Lola) was taken in as Dean.

xxx
xxx On our end our task is to attend to the interests of students. It is likely that the students would be
influenced by evil. When they become members of society outside of campus will be liabilities
rather than assets. What do you expect from a doctor who while studying at AMEC is so much
burdened with unreasonable imposition? What do you expect from a student who aside from
peculiar problems – because not all students are rich – in their struggle to improve their social status
are even more burdened with false regulations. xxx9 (Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution. With the supposed
exposés, FBNI, Rima and Alegre "transmitted malicious imputations, and as such, destroyed
plaintiffs’ (AMEC and Ago) reputation." AMEC and Ago included FBNI as defendant for allegedly
failing to exercise due diligence in the selection and supervision of its employees, particularly Rima
and Alegre.

On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10 alleging
that the broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were
plainly impelled by a sense of public duty to report the "goings-on in AMEC, [which is] an institution
imbued with public interest."

Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo
Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on FBNI’s behalf. The trial
court denied the motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it
exercised due diligence 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 and training program after passing the interview. FBNI likewise claimed
that it always reminds its broadcasters to "observe truth, fairness and objectivity in their broadcasts
and to refrain from using libelous and indecent language." Moreover, FBNI requires all broadcasters
to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP") accreditation test and to secure a
KBP permit.

On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel
except Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the
broadcasters’ claim that their utterances were the result of straight reporting because it had no
factual basis. The broadcasters did not even verify their reports before airing them to show good
faith. In holding FBNI liable for libel, the trial court found that FBNI failed to exercise diligence in the
selection and supervision of its employees.

In absolving Rima from the charge, the trial court ruled that Rima’s only participation was when he
agreed with Alegre’s exposé. The trial court found Rima’s statement within the "bounds of freedom
of speech, expression, and of the press." The dispositive portion of the decision reads:

WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of
damages caused by the controversial utterances, which are not found by this court to be
really very serious and damaging, and there being no showing that indeed the enrollment of
plaintiff school dropped, defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broadcasting
Network (owner of the radio station DZRC), are hereby jointly and severally ordered to pay plaintiff
Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount
of ₱300,000.00 moral damages, plus ₱30,000.00 reimbursement of attorney’s fees, and to pay the
costs of suit.

SO ORDERED. 13 (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other,
appealed the decision to the Court of Appeals. The Court of Appeals affirmed the trial court’s
judgment with modification. The appellate court made Rima solidarily liable with FBNI and Alegre.
The appellate court denied Ago’s claim for damages and attorney’s fees because the broadcasts
were directed against AMEC, and not against her. The dispositive portion of the Court of Appeals’
decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that
broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.

SO ORDERED.14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26
January 2000 Resolution.

Hence, FBNI filed this petition.15

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial court’s ruling that the questioned broadcasts are libelous per
se and that FBNI, Rima and Alegre failed to overcome the legal presumption of malice. The Court of
Appeals found Rima and Alegre’s claim that they were actuated by their moral and social duty to
inform the public of the students’ gripes as insufficient to justify the utterance of the defamatory
remarks.

Finding no factual basis for the imputations against AMEC’s administrators, the Court of Appeals
ruled that the broadcasts were made "with reckless disregard as to whether they were true or false."
The appellate court pointed out that FBNI, Rima and Alegre failed to present in court any of the
students who allegedly complained against AMEC. Rima and Alegre merely gave a single name
when asked to identify the students. According to the Court of Appeals, these circumstances cast
doubt on the veracity of the broadcasters’ claim that they were "impelled by their moral and social
duty to inform the public about the students’ gripes."

The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a
dumping ground for morally and physically misfit teachers; (2) AMEC obtained the services of Dean
Justita Lola to minimize expenses on its employees’ salaries; and (3) AMEC burdened the students
with unreasonable imposition and false regulations."16

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision
of its employees for allowing Rima and Alegre to make the radio broadcasts without the proper KBP
accreditation. The Court of Appeals denied Ago’s claim for damages and attorney’s fees because
the libelous remarks were directed against AMEC, and not against her. The Court of Appeals
adjudged FBNI, Rima and Alegre solidarily liable to pay AMEC moral damages, attorney’s fees and
costs of suit.
1awphi1.nét

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

 II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEY’S FEES IS PROPER; and

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT
OF MORAL DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.

The Court’s Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre
against AMEC.17 While AMEC did not point out clearly the legal basis for its complaint, a reading of
the complaint reveals that AMEC’s cause of action is based on Articles 30 and 33 of the Civil Code.
Article 3018 authorizes a separate civil action to recover civil liability arising from a criminal offense.
On the other hand, Article 3319 particularly provides that the injured party may bring a separate civil
action for damages in cases of defamation, fraud, and physical injuries. AMEC also invokes Article
1920 of the Civil Code to justify its claim for damages. AMEC cites Articles 217621 and 218022 of the
Civil Code to hold FBNI solidarily liable with Rima and Alegre.

I.

Whether the broadcasts are libelous

A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or
any act or omission, condition, status, or circumstance tending to cause the dishonor, discredit, or
contempt of a natural or juridical person, or to blacken the memory of one who is dead.24

There is no question that the broadcasts were made public and imputed to AMEC defects or
circumstances tending to cause it dishonor, discredit and contempt. Rima and Alegre’s remarks such
as "greed for money on the part of AMEC’s administrators"; "AMEC is a dumping ground, garbage of
xxx moral and physical misfits"; and AMEC students who graduate "will be liabilities rather than
assets" of the society are libelous per se. Taken as a whole, the broadcasts suggest that AMEC is a
money-making institution where physically and morally unfit teachers abound.

However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre
were plainly impelled by their civic duty to air the students’ gripes. FBNI alleges that there is no
evidence that ill will or spite motivated Rima and Alegre in making the broadcasts. FBNI further
points out that Rima and Alegre exerted efforts to obtain AMEC’s side and gave Ago the opportunity
to defend AMEC and its administrators. FBNI concludes that since there is no malice, there is no
libel.

FBNI’s contentions are untenable.

Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately
their good intention and justifiable motive in airing the supposed gripes of the students. As hosts of a
documentary or public affairs program, Rima and Alegre should have presented the public issues
"free from inaccurate and misleading information."26 Hearing the students’ alleged complaints a
month before the exposé,27 they had sufficient time to verify their sources and information. However,
Rima and Alegre hardly made a thorough investigation of the students’ alleged gripes. Neither did
they inquire about nor confirm the purported irregularities in AMEC from the Department of
Education, Culture and Sports. Alegre testified that he merely went to AMEC to verify his report from
an alleged AMEC official who refused to disclose any information. Alegre simply relied on the words
of the students "because they were many and not because there is proof that what they are saying is
true."28 This plainly shows Rima and Alegre’s reckless disregard of whether their report was true or
not.

Contrary to FBNI’s claim, the broadcasts were not "the result of straight reporting." Significantly,
some courts in the United States apply the privilege of "neutral reportage" in libel cases involving
matters of public interest or public figures. Under this privilege, a republisher who accurately and
disinterestedly reports certain defamatory statements made against public figures is shielded from
liability, regardless of the republisher’s subjective awareness of the truth or falsity of the
accusation.29 Rima and Alegre cannot invoke the privilege of neutral reportage because unfounded
comments abound in the broadcasts. Moreover, there is no existing controversy involving AMEC
when the broadcasts were made. The privilege of neutral reportage applies where the defamed
person is a public figure who is involved in an existing controversy, and a party to that controversy
makes the defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v.
Court of Appeals,31 FBNI contends that the broadcasts "fall within the coverage of qualifiedly
privileged communications" for being commentaries on matters of public interest. Such being the
case, AMEC should prove malice in fact or actual malice. Since AMEC allegedly failed to prove
actual malice, there is no libel.

FBNI’s reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair
comment," thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an
action for libel or slander. The doctrine of fair comment means that while in general every
discreditable imputation publicly made is deemed false, because every man is presumed innocent
until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless,
when the discreditable imputation is directed against a public person in his public capacity, it is not
necessarily actionable. In order that such discreditable imputation to a public official may be
actionable, it must either be a false allegation of fact or a comment based on a false
supposition. If the comment is an expression of opinion, based on established facts, then it is
immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from
the facts.32 (Emphasis supplied)

True, AMEC is a private learning institution whose business of educating students is "genuinely
imbued with public interest." The welfare of the youth in general and AMEC’s students in particular is
a matter which the public has the right to know. Thus, similar to the newspaper articles in Borjal, the
subject broadcasts dealt with matters of public interest. However, unlike in Borjal, the questioned
broadcasts are not based on established facts. The record supports the following findings of the
trial court:

xxx Although defendants claim that they were motivated by consistent reports of students and
parents against plaintiff, yet, defendants have not presented in court, nor even gave name of a
single student who made the complaint to them, much less present written complaint or petition to
that effect. To accept this defense of defendants is too dangerous because it could easily give
license to the media to malign people and establishments based on flimsy excuses that there were
reports to them although they could not satisfactorily establish it. Such laxity would encourage
careless and irresponsible broadcasting which is inimical to public interests.
Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of
their duties, did not verify and analyze the truth of the reports before they aired it, in order to prove
that they are in good faith.

Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy
courses. Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more
than 2 years before the controversial broadcast, accreditation to offer Physical Therapy course had
already been given the plaintiff, which certificate is signed by no less than the Secretary of Education
and Culture herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have easily known
this were they careful enough to verify. And yet, defendants were very categorical and sounded too
positive when they made the erroneous report that plaintiff had no permit to offer Physical Therapy
courses which they were offering.

The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald
Foundation prove not to be true also. The truth is there is no Mcdonald Foundation existing.
Although a big building of plaintiff school was given the name Mcdonald building, that was only in
order to honor the first missionary in Bicol of plaintiffs’ religion, as explained by Dr. Lita Ago.
Contrary to the claim of defendants over the air, not a single centavo appears to be received by
plaintiff school from the aforementioned McDonald Foundation which does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when
medical students fail in one subject, they are made to repeat all the other subject[s], even those they
have already passed, nor their claim that the school charges laboratory fees even if there are no
laboratories in the school. No evidence was presented to prove the bases for these claims, at least
in order to give semblance of good faith.

As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers,
defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility already. Dean
Lola testified in court last Jan. 21, 1991, and was found to be 75 years old. xxx Even older people
prove to be effective teachers like Supreme Court Justices who are still very much in demand as law
professors in their late years. Counsel for defendants is past 75 but is found by this court to be still
very sharp and effective. So is plaintiffs’ counsel.
l^vvphi1.net

Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but is still
alert and docile.

The contention that plaintiffs’ graduates become liabilities rather than assets of our society is a mere
conclusion. Being from the place himself, this court is aware that majority of the medical graduates
of plaintiffs pass the board examination easily and become prosperous and responsible
professionals.33

Had the comments been an expression of opinion based on established facts, it is immaterial that
the opinion happens to be mistaken, as long as it might reasonably be inferred from the
facts.34 However, the comments of Rima and Alegre were not backed up by facts. Therefore, the
broadcasts are not privileged and remain libelous per se.

The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa Pilipinas,
Ink. ("Radio Code"). Item I(B) of the Radio Code provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x
 4. Public affairs program shall present public issues free from personal bias, prejudice
and inaccurate and misleading information. x x x Furthermore, the station shall strive to
present balanced discussion of issues. x x x.

xxx

7. The station shall be responsible at all times in the supervision of public affairs, public
issues and commentary programs so that they conform to the provisions and standards of
this code.

8. It shall be the responsibility of the newscaster, commentator, host and announcer to

protect public interest, general welfare and good order in the presentation of public affairs
and public issues.36 (Emphasis supplied)

The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code
of ethical conduct governing practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast industry on its own members. The Radio
Code is a public warranty by the radio broadcast industry that radio broadcast practitioners are
subject to a code by which their conduct are measured for lapses, liability and sanctions.

The public has a right to expect and demand that radio broadcast practitioners live up to the code of
conduct of their profession, just like other professionals. A professional code of conduct provides the
standards for determining whether a person has acted justly, honestly and with good faith in the
exercise of his rights and performance of his duties as required by Article 1937 of the Civil Code. A
professional code of conduct also provides the standards for determining whether a person who
willfully causes loss or injury to another has acted in a manner contrary to morals or good customs
under Article 2138 of the Civil Code.

II.

Whether AMEC is entitled to moral damages

FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39

A juridical person is generally not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock.40 The Court of Appeals cites Mambulao Lumber Co. v. PNB, et
al.41 to justify the award of moral damages. However, the Court’s statement in Mambulao that "a
corporation may have a good reputation which, if besmirched, may also be a ground for the award of
moral damages" is an obiter dictum.42

Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 221943 of the Civil Code.
This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any
other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical
person. Therefore, a juridical person such as a corporation can validly complain for libel or any other
form of defamation and claim for moral damages.44

Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case,
evidence of an honest mistake or the want of character or reputation of the party libeled goes only in
mitigation of damages.46 Neither in such a case is the plaintiff required to introduce evidence of
actual damages as a condition precedent to the recovery of some damages.47 In this case, the
broadcasts are libelous per se. Thus, AMEC is entitled to moral damages.

However, we find the award of ₱300,000 moral damages unreasonable. The record shows that even
though the broadcasts were libelous per se, AMEC has not suffered any substantial or material
damage to its reputation. Therefore, we reduce the award of moral damages from ₱300,000 to
₱150,000.

III.

Whether the award of attorney’s fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of
attorney’s fees. FBNI adds that the instant case does not fall under the enumeration in Article
220848 of the Civil Code.

The award of attorney’s fees is not proper because AMEC failed to justify satisfactorily its claim for
attorney’s fees. AMEC did not adduce evidence to warrant the award of attorney’s fees. Moreover,
both the trial and appellate courts failed to explicitly state in their respective decisions the rationale
for the award of attorney’s fees.49 In Inter-Asia Investment Industries, Inc. v. Court of
Appeals ,50 we held that:

[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than
the rule, and counsel’s fees are not to be awarded every time a party wins a suit. The power of the
court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal and
equitable justification, without which the award is a conclusion without a premise, its basis
being improperly left to speculation and conjecture. In all events, the court must explicitly state
in the text of the decision, and not only in the decretal portion thereof, the legal reason for the award
of attorney’s fees.51 (Emphasis supplied)

While it mentioned about the award of attorney’s fees by stating that it "lies within the discretion of
the court and depends upon the circumstances of each case," the Court of Appeals failed to point
out any circumstance to justify the award.

IV.

Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney’s fees and costs
of suit

FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and
attorney’s fees because it exercised due diligence in the selection and supervision of its employees,
particularly Rima and Alegre. FBNI maintains that its broadcasters, including Rima and Alegre,
undergo a "very regimented process" before they are allowed to go on air. "Those who apply for
broadcaster are subjected to interviews, examinations and an apprenticeship program."

FBNI further argues that Alegre’s age and lack of training are irrelevant to his competence as a
broadcaster. FBNI points out that the "minor deficiencies in the KBP accreditation of Rima and
Alegre do not in any way prove that FBNI did not exercise the diligence of a good father of a family
in selecting and supervising them." Rima’s accreditation lapsed due to his non-payment of the KBP
annual fees while Alegre’s accreditation card was delayed allegedly for reasons attributable to the
KBP Manila Office. FBNI claims that membership in the KBP is merely voluntary and not required by
any law or government regulation.

FBNI’s arguments do not persuade us.

The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for the tort
which they commit.52 Joint tort feasors are all the persons who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who approve
of it after it is done, if done for their benefit.53Thus, AMEC correctly anchored its cause of action
against FBNI on Articles 2176 and 2180 of the Civil Code. 1a\^/phi1.net

As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for
damages arising from the libelous broadcasts. As stated by the Court of Appeals, "recovery for
defamatory statements published by radio or television may be had from the owner of the station, a
licensee, the operator of the station, or a person who procures, or participates in, the making of
the defamatory statements."54 An employer and employee are solidarily liable for a defamatory
statement by the employee within the course and scope of his or her employment, at least when the
employer authorizes or ratifies the defamation.55 In this case, Rima and Alegre were clearly
performing their official duties as hosts of FBNI’s radio program Exposé when they aired the
broadcasts. FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of their
work at that time. There was likewise no showing that FBNI did not authorize and ratify the
defamatory broadcasts.

Moreover, there is insufficient evidence on record that FBNI exercised due diligence in
the selection andsupervision of its employees, particularly Rima and Alegre. FBNI merely showed
that it exercised diligence in the selection of its broadcasters without introducing any evidence to
prove that it observed the same diligence in the supervision of Rima and Alegre. FBNI did not show
how it exercised diligence in supervising its broadcasters. FBNI’s alleged constant reminder to its
broadcasters to "observe truth, fairness and objectivity and to refrain from using libelous and
indecent language" is not enough to prove due diligence in the supervision of its broadcasters.
Adequate training of the broadcasters on the industry’s code of conduct, sufficient information on
libel laws, and continuous evaluation of the broadcasters’ performance are but a few of the many
ways of showing diligence in the supervision of broadcasters.

FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as
broadcasters, bearing in mind their qualifications." However, no clear and convincing evidence
shows that Rima and Alegre underwent FBNI’s "regimented process" of application. Furthermore,
FBNI admits that Rima and Alegre had deficiencies in their KBP accreditation,56 which is one of
FBNI’s requirements before it hires a broadcaster. Significantly, membership in the KBP, while
voluntary, indicates the broadcaster’s strong commitment to observe the broadcast industry’s rules
and regulations. Clearly, these circumstances show FBNI’s lack of diligence in
selecting andsupervising Rima and Alegre. Hence, FBNI is solidarily liable to pay damages together
with Rima and Alegre.

WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and
Resolution of 26 January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the
MODIFICATION that the award of moral damages is reduced from ₱300,000 to ₱150,000 and the
award of attorney’s fees is deleted. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.
Footnotes

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Corona Ibay-
Somera and Mariano M. Umali concurring.

3 Penned by Judge Antonio A. Arcangel.

4 As AMEC and Ago alleged in their Memorandum in the trial court. Records, p. 243.

5 Alegre substituted Larry (Plaridel) Brocales who was absent then.

6 Records, p. 2.

7 Docketed as Civil Case No. 8236.

8 Exhibit "A-2," Exhibits Folder, pp. 21-22.

9 Exhibit "A-3," Exhibits Folder, pp. 23-25.

10 Records, pp. 28-30.

11 Ibid., pp. 147-155.

12 Rollo, pp. 52-68.

13 Ibid., pp. 67-68.

14 Ibid., p. 48.

15 Rima and Alegre did not join the instant petition.

16 Rollo, p. 45.

17 In Lopez, etc., et al. v. CA, et al., 145 Phil. 219 (1970), the Court stated the following:

It was held in Lu Chu Sing v. Lu Tiong Gui, that "the repeal of the old Libel Law (Act No. 277)
did not abolish the civil action for libel." A libel was defined in that Act as a "malicious
defamation, expressed either in writing, printing, or by signs or pictures, or the like, ***,
tending to blacken the memory of one who is dead or to impeach the honesty, virtue, or
reputation, or publish the alleged or natural defects of one who is alive, and thereby expose
him to public hatred, contempt, or ridicule." There was an express provision in such
legislation for a tort or quasi-delict action arising from libel. There is reinforcement to such a
view in the new Civil Code providing for the recovery of moral damages for libel, slander or
any other form of defamation. (Emphasis supplied)
18Art. 30. When a separate civil action is brought to demand civil liability arising from a
criminal offense, and no criminal proceedings are instituted during the pendency of the civil
case, a preponderance of evidence shall likewise be sufficient to prove the act complained
of.

19Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party.
Such civil action shall proceed independently of the criminal prosecution, and shall require
only a preponderance of evidence.

20Art. 19. 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.

21Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.

22Art. 2180. The obligation imposed by article 2176 is demandable not only for one’s own
acts or omissions, but also for those of persons for whom one is responsible.

xxx

The owners and managers of an establishment or enterprise are likewise responsible

for damages caused by their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.

xxx

23Should be difamaciόn as stated in Lu Chu Sing and Lu Tian Chiong v. Lu Tiong Gui, 76 Phil. 669
(1946).

24 Article 353 of the Revised Penal Code.

25 Article 354 of the Revised Penal Code provides:

Art. 354. Requirement of publicity. – Every defamatory imputation is presumed to be

malicious, even if it be true, if no good intention and justifiable motive for making it is
shown, except in the following cases:

1. A private communication made by any person to another in the

performance of any legal, moral or social duty; and

2. A fair and true report, made in good faith, without any comments or
remarks, of any judicial, legislative or other official proceedings which are not
of confidential nature, or of any statement, report or speech delivered in said
 proceedings, or of any other act performed by public officers in the exercise
of their functions.

26 Radio Code of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink., Exhibit "4."

27TSN, 22 April 1991, pp. 15, 18-19. Rima, however, testified that he and Alegre made the
exposés after three or four days from the time the students approached them. (TSN, 26
September 1992, pp. 47-48).

28 TSN, 22 April 1991, p. 18.

29 50 Am Jur. 2d, Libel and Slander § 313.

30
Ibid.

31 361 Phil. 1 (1999).

32 Ibid.

33 Rollo, pp. 65-67.

34 Borjal v. Court of Appeals, supra note 31.

35 1989 Revised Edition, Exhibit "4."

36 Ibid.

37 Supra note 20.

38Article 21 of the Civil Code provides: "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."

39 Rollo, p. 28.

40 People v. Manero, Jr., G.R. Nos. 86883-85, 29 January 1993, 218 SCRA 85.

41130 Phil. 366 (1968). See also People v. Manero, Jr., G.R. Nos. 86883-85, 29 January
1993, 218 SCRA 85.

42 ABS-CBN Broadcasting Corp. v. CA, 361 Phil. 499 (1999).

43Article 2219(7) of the Civil Code provides: "Moral damages may be recovered in the
following and analogous cases: x x x (7) Libel, slander or any other form of defamation; x x
x."

See Yap, et al. v. Carreon, 121 Phil. 883 (1965), where the appellants included Philippine
44

Harvardian College which was an educational institution.

45See Phee v. La Vanguardia, 45 Phil. 211 (1923). See also Jimenez v. Reyes, 27 Phil. 52
(1914).

46 Phee v. La Vanguardia, 45 Phil. 211 (1923).

47 Ibid. Article 2216 of the Civil Code also provides that "No proof of pecuniary loss is
necessary in order that moral, xxx damages may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the discretion of the court, according to the
circumstances of each case."

48Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability
laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s
fees and expenses of litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable.

49Koa v. Court of Appeals, G.R. No. 84847, 5 March 1993, 219 SCRA 541 citing Central
Azucarera de Bais v. Court of Appeals, G.R. No. 87597, 3 August 1990, 188 SCRA 328. See
also Abrogar v. Intermediate Appellate Court, No. L-67970, 15 January 1988, 157 SCRA 57.

50 G.R. No. 125778, 10 June 2003, 403 SCRA 452.

51Ibid. See PNB v. CA, 326 Phil. 504 (1996). See also ABS-CBN Broadcasting Corp. v. CA,
361 Phil. 499 (1999).
52 Worcester v. Ocampo, 22 Phil. 42 (1912).

53 Ibid.

54 50 Am. Jur. 2d, Libel and Slander § 370.

55 Ibid., § 358.

56 Rollo, p. 31.
 EN BANC

G.R. No. L-23893 October 29, 1968

VILLA REY TRANSIT, INC., plaintiff-appellant,

vs.
EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE
COMMISSION,defendants.
EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC., defendants-appellants.

PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant,

vs.
JOSE M. VILLARAMA, third-party defendant-appellee.

Chuidian Law Office for plaintiff-appellant.

Bengzon, Zarraga & Villegas for defendant-appellant / third-party plaintiff-appellant.
Laurea & Pison for third-party defendant-appellee.

ANGELES, J.:

This is a tri-party appeal from the decision of the Court of First Instance of Manila, Civil Case No.
41845, declaring null and void the sheriff's sale of two certificates of public convenience in favor of
defendant Eusebio E. Ferrer and the subsequent sale thereof by the latter to defendant Pangasinan
Transportation Co., Inc.; declaring the plaintiff Villa Rey Transit, Inc., to be the lawful owner of the
said certificates of public convenience; and ordering the private defendants, jointly and severally, to
pay to the plaintiff, the sum of P5,000.00 as and for attorney's fees. The case against the PSC was
dismissed.

The rather ramified circumstances of the instant case can best be understood by a chronological
narration of the essential facts, to wit:

Prior to 1959, Jose M. Villarama was an operator of a bus transportation, under the business name
of Villa Rey Transit, pursuant to certificates of public convenience granted him by the Public Service
Commission (PSC, for short) in Cases Nos. 44213 and 104651, which authorized him to operate a
total of thirty-two (32) units on various routes or lines from Pangasinan to Manila, and vice-versa. On
January 8, 1959, he sold the aforementioned two certificates of public convenience to the
Pangasinan Transportation Company, Inc. (otherwise known as Pantranco), for P350,000.00 with
the condition, among others, that the seller (Villarama) "shall not for a period of 10 years from the
date of this sale, apply for any TPU service identical or competing with the buyer."

Barely three months thereafter, or on March 6, 1959: a corporation called Villa Rey Transit, Inc.
(which shall be referred to hereafter as the Corporation) was organized with a capital stock of
P500,000.00 divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the
subscribed stock; Natividad R. Villarama (wife of Jose M. Villarama) was one of the incorporators,
and she subscribed for P1,000.00; the balance of P199,000.00 was subscribed by the brother and
sister-in-law of Jose M. Villarama; of the subscribed capital stock, P105,000.00 was paid to the
treasurer of the corporation, who was Natividad R. Villarama.

In less than a month after its registration with the Securities and Exchange Commission (March 10,
1959), the Corporation, on April 7, 1959, bought five certificates of public convenience, forty-nine
buses, tools and equipment from one Valentin Fernando, for the sum of P249,000.00, of which
P100,000.00 was paid upon the signing of the contract; P50,000.00 was payable upon the final
approval of the sale by the PSC; P49,500.00 one year after the final approval of the sale; and the
balance of P50,000.00 "shall be paid by the BUYER to the different suppliers of the SELLER."

The very same day that the aforementioned contract of sale was executed, the parties thereto
immediately applied with the PSC for its approval, with a prayer for the issuance of a provisional
authority in favor of the vendee Corporation to operate the service therein involved.1 On May 19,
1959, the PSC granted the provisional permit prayed for, upon the condition that "it may be modified
or revoked by the Commission at any time, shall be subject to whatever action that may be taken on
the basic application and shall be valid only during the pendency of said application." Before the
PSC could take final action on said application for approval of sale, however, the Sheriff of Manila,
on July 7, 1959, levied on two of the five certificates of public convenience involved therein, namely,
those issued under PSC cases Nos. 59494 and 63780, pursuant to a writ of execution issued by the
Court of First Instance of Pangasinan in Civil Case No. 13798, in favor of Eusebio Ferrer, plaintiff,
judgment creditor, against Valentin Fernando, defendant, judgment debtor. The Sheriff made and
entered the levy in the records of the PSC. On July 16, 1959, a public sale was conducted by the
Sheriff of the said two certificates of public convenience. Ferrer was the highest bidder, and a
certificate of sale was issued in his name.

Thereafter, Ferrer sold the two certificates of public convenience to Pantranco, and jointly submitted
for approval their corresponding contract of sale to the PSC.2 Pantranco therein prayed that it be
authorized provisionally to operate the service involved in the said two certificates.

The applications for approval of sale, filed before the PSC, by Fernando and the Corporation, Case
No. 124057, and that of Ferrer and Pantranco, Case No. 126278, were scheduled for a joint hearing.
In the meantime, to wit, on July 22, 1959, the PSC issued an order disposing that during the
pendency of the cases and before a final resolution on the aforesaid applications, the Pantranco
shall be the one to operate provisionally the service under the twocertificates embraced in the
contract between Ferrer and Pantranco. The Corporation took issue with this particular ruling of the
PSC and elevated the matter to the Supreme Court,3 which decreed, after deliberation, that until the
issue on the ownership of the disputed certificates shall have been finally settled by the proper court,
the Corporation should be the one to operate the lines provisionally.

On November 4, 1959, the Corporation filed in the Court of First Instance of Manila, a complaint for
the annulment of the sheriff's sale of the aforesaid two certificates of public convenience (PSC
Cases Nos. 59494 and 63780) in favor of the defendant Ferrer, and the subsequent sale thereof by
the latter to Pantranco, against Ferrer, Pantranco and the PSC. The plaintiff Corporation prayed
therein that all the orders of the PSC relative to the parties' dispute over the said certificates be
annulled.

In separate answers, the defendants Ferrer and Pantranco averred that the plaintiff Corporation had
no valid title to the certificates in question because the contract pursuant to which it acquired them
from Fernando was subject to a suspensive condition — the approval of the PSC — which has not
yet been fulfilled, and, therefore, the Sheriff's levy and the consequent sale at public auction of the
certificates referred to, as well as the sale of the same by Ferrer to Pantranco, were valid and
regular, and vested unto Pantranco, a superior right thereto.

Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama
and the Corporation, are one and the same; that Villarama and/or the Corporation was disqualified
from operating the two certificates in question by virtue of the aforementioned agreement between
said Villarama and Pantranco, which stipulated that Villarama "shall not for a period of 10 years from
the date of this sale, apply for any TPU service identical or competing with the buyer."
Upon the joinder of the issues in both the complaint and third-party complaint, the case was tried,
and thereafter decision was rendered in the terms, as above stated.

As stated at the beginning, all the parties involved have appealed from the decision. They submitted
a joint record on appeal.

Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey Transit, Inc.
(Corporation) is a distinct and separate entity from Jose M. Villarama; that the restriction clause in
the contract of January 8, 1959 between Pantranco and Villarama is null and void; that the Sheriff's
sale of July 16, 1959, is likewise null and void; and the failure to award damages in its favor and
against Villarama.

Ferrer, for his part, challenges the decision insofar as it holds that the sheriff's sale is null and void;
and the sale of the two certificates in question by Valentin Fernando to the Corporation, is valid. He
also assails the award of P5,000.00 as attorney's fees in favor of the Corporation, and the failure to
award moral damages to him as prayed for in his counterclaim.

The Corporation, on the other hand, prays for a review of that portion of the decision awarding only
P5,000.00 as attorney's fees, and insisting that it is entitled to an award of P100,000.00 by way of
exemplary damages.

After a careful study of the facts obtaining in the case, the vital issues to be resolved are: (1) Does
the stipulation between Villarama and Pantranco, as contained in the deed of sale, that the former
"SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE DATE OF THIS SALE, APPLY FOR ANY
TPU SERVICE IDENTICAL OR COMPETING WITH THE BUYER," apply to new lines only or does it
include existing lines?; (2) Assuming that said stipulation covers all kinds of lines, is such stipulation
valid and enforceable?; (3) In the affirmative, that said stipulation is valid, did it bind the Corporation?

For convenience, We propose to discuss the foregoing issues by starting with the last proposition.

The evidence has disclosed that Villarama, albeit was not an incorporator or stockholder of the
Corporation, alleging that he did not become such, because he did not have sufficient funds to
invest, his wife, however, was an incorporator with the least subscribed number of shares, and was
elected treasurer of the Corporation. The finances of the Corporation which, under all concepts in
the law, are supposed to be under the control and administration of the treasurer keeping them as
trust fund for the Corporation, were, nonetheless, manipulated and disbursed as if they were the
private funds of Villarama, in such a way and extent that Villarama appeared to be the actual owner-
treasurer of the business without regard to the rights of the stockholders. The following testimony of
Villarama,4together with the other evidence on record, attests to that effect:

Q. Doctor, I want to go back again to the incorporation of the Villa Rey Transit, Inc. You
heard the testimony presented here by the bank regarding the initial opening deposit of ONE
HUNDRED FIVE THOUSAND PESOS, of which amount Eighty-Five Thousand Pesos was a
check drawn by yourself personally. In the direct examination you told the Court that the
reason you drew a check for Eighty-Five Thousand Pesos was because you and your wife,
or your wife, had spent the money of the stockholders given to her for incorporation. Will you
please tell the Honorable Court if you knew at the time your wife was spending the money to
pay debts, you personally knew she was spending the money of the incorporators?

A. You know my money and my wife's money are one. We never talk about those things.
 Q. Doctor, your answer then is that since your money and your wife's money are one
money and you did not know when your wife was paying debts with the incorporator's
money?

A. Because sometimes she uses my money, and sometimes the money given to her she
gives to me and I deposit the money.

Q. Actually, aside from your wife, you were also the custodian of some of the
incorporators here, in the beginning?

A. Not necessarily, they give to my wife and when my wife hands to me I did not know it
belonged to the incorporators.

Q. It supposes then your wife gives you some of the money received by her in her
capacity as treasurer of the corporation?

A. Maybe.

Q. What did you do with the money, deposit in a regular account?

A. Deposit in my account.

Q. Of all the money given to your wife, she did not receive any check?

A. I do not remember.

Q. Is it usual for you, Doctor, to be given Fifty Thousand Pesos without even asking what
is this?

xxx xxx xxx

JUDGE: Reform the question.

Q. The subscription of your brother-in-law, Mr. Reyes, is Fifty-Two Thousand Pesos, did
your wife give you Fifty-two Thousand Pesos?

A. I have testified before that sometimes my wife gives me money and I do not know
exactly for what.

The evidence further shows that the initial cash capitalization of the corporation of P105,000.00 was
mostly financed by Villarama. Of the P105,000.00 deposited in the First National City Bank of New
York, representing the initial paid-up capital of the Corporation, P85,000.00 was covered by
Villarama's personal check. The deposit slip for the said amount of P105,000.00 was admitted in
evidence as Exh. 23, which shows on its face that P20,000.00 was paid in cash and P85,000.00
thereof was covered by Check No. F-50271 of the First National City Bank of New York. The
testimonies of Alfonso Sancho5 and Joaquin Amansec,6 both employees of said bank, have proved
that the drawer of the check was Jose Villarama himself.

Another witness, Celso Rivera, accountant of the Corporation, testified that while in the books of the
corporation there appears an entry that the treasurer received P95,000.00 as second installment of
the paid-in subscriptions, and, subsequently, also P100,000.00 as the first installment of the offer for
second subscriptions worth P200,000.00 from the original subscribers, yet Villarama directed him
(Rivera) to make vouchers liquidating the sums.7 Thus, it was made to appear that the P95,000.00
was delivered to Villarama in payment for equipment purchased from him, and the P100,000.00 was
loaned as advances to the stockholders. The said accountant, however, testified that he was not
aware of any amount of money that had actually passed hands among the parties involved,8 and
actually the only money of the corporation was the P105,000.00 covered by the deposit slip Exh. 23,
of which as mentioned above, P85,000.00 was paid by Villarama's personal check.

Further, the evidence shows that when the Corporation was in its initial months of operation,
Villarama purchased and paid with his personal checks Ford trucks for the Corporation. Exhibits 20
and 21 disclose that the said purchases were paid by Philippine Bank of Commerce Checks Nos.
992618-B and 993621-B, respectively. These checks have been sufficiently established by Fausto
Abad, Assistant Accountant of Manila Trading & Supply Co., from which the trucks were
purchased9 and Aristedes Solano, an employee of the Philippine Bank of Commerce,10as having
been drawn by Villarama.

Exhibits 6 to 19 and Exh. 22, which are photostatic copies of ledger entries and vouchers showing
that Villarama had co-mingled his personal funds and transactions with those made in the name of
the Corporation, are very illuminating evidence. Villarama has assailed the admissibility of these
exhibits, contending that no evidentiary value whatsoever should be given to them since "they were
merely photostatic copies of the originals, the best evidence being the originals themselves."
According to him, at the time Pantranco offered the said exhibits, it was the most likely possessor of
the originals thereof because they were stolen from the files of the Corporation and only Pantranco
was able to produce the alleged photostat copies thereof.

Section 5 of Rule 130 of the Rules of Court provides for the requisites for the admissibility of
secondary evidence when the original is in the custody of the adverse party, thus: (1) opponent's
possession of the original; (2) reasonable notice to opponent to produce the original; (3) satisfactory
proof of its existence; and (4) failure or refusal of opponent to produce the original in
court.11 Villarama has practically admitted the second and fourth requisites.12As to the third, he
admitted their previous existence in the files of the Corporation and also that he had seen some of
them.13 Regarding the first element, Villarama's theory is that since even at the time of the issuance
of the subpoena duces tecum, the originals were already missing, therefore, the Corporation was no
longer in possession of the same. However, it is not necessary for a party seeking to introduce
secondary evidence to show that the original is in the actual possession of his adversary. It is
enough that the circumstances are such as to indicate that the writing is in his possession or under
his control. Neither is it required that the party entitled to the custody of the instrument should, on
being notified to produce it, admit having it in his possession.14 Hence, secondary evidence is
admissible where he denies having it in his possession. The party calling for such evidence may
introduce a copy thereof as in the case of loss. For, among the exceptions to the best evidence rule
is "when the original has been lost, destroyed, or cannot be produced in court."15 The originals of the
vouchers in question must be deemed to have been lost, as even the Corporation admits such loss.
Viewed upon this light, there can be no doubt as to the admissibility in evidence of Exhibits 6 to 19
and 22.

Taking account of the foregoing evidence, together with Celso Rivera's testimony,16 it would appear
that: Villarama supplied the organization expenses and the assets of the Corporation, such as trucks
and equipment;17 there was no actual payment by the original subscribers of the amounts of
P95,000.00 and P100,000.00 as appearing in the books;18 Villarama made use of the money of the
Corporation and deposited them to his private accounts;19 and the Corporation paid his personal
accounts.20
Villarama himself admitted that he mingled the corporate funds with his own money.21 He also
admitted that gasoline purchases of the Corporation were made in his name22 because "he had
existing account with Stanvac which was properly secured and he wanted the Corporation to benefit
from the rebates that he received."23

The foregoing circumstances are strong persuasive evidence showing that Villarama has been too
much involved in the affairs of the Corporation to altogether negative the claim that he was only a
part-time general manager. They show beyond doubt that the Corporation is his alter ego.

It is significant that not a single one of the acts enumerated above as proof of Villarama's oneness
with the Corporation has been denied by him. On the contrary, he has admitted them with offered
excuses.

Villarama has admitted, for instance, having paid P85,000.00 of the initial capital of the Corporation
with the lame excuse that "his wife had requested him to reimburse the amount entrusted to her by
the incorporators and which she had used to pay the obligations of Dr. Villarama (her husband)
incurred while he was still the owner of Villa Rey Transit, a single proprietorship." But with his
admission that he had received P350,000.00 from Pantranco for the sale of the two certificates and
one unit,24 it becomes difficult to accept Villarama's explanation that he and his wife, after
consultation,25 spent the money of their relatives (the stockholders) when they were supposed to
have their own money. Even if Pantranco paid the P350,000.00 in check to him, as claimed, it could
have been easy for Villarama to have deposited said check in his account and issued his own check
to pay his obligations. And there is no evidence adduced that the said amount of P350,000.00 was
all spent or was insufficient to settle his prior obligations in his business, and in the light of the
stipulation in the deed of sale between Villarama and Pantranco that P50,000.00 of the selling price
was earmarked for the payments of accounts due to his creditors, the excuse appears unbelievable.

On his having paid for purchases by the Corporation of trucks from the Manila Trading & Supply Co.
with his personal checks, his reason was that he was only sharing with the Corporation his credit
with some companies. And his main reason for mingling his funds with that of the Corporation and
for the latter's paying his private bills is that it would be more convenient that he kept the money to
be used in paying the registration fees on time, and since he had loaned money to the Corporation,
this would be set off by the latter's paying his bills. Villarama admitted, however, that the corporate
funds in his possession were not only for registration fees but for other important obligations which
were not specified.26

Indeed, while Villarama was not the Treasurer of the Corporation but was, allegedly, only a part-time
manager,27 he admitted not only having held the corporate money but that he advanced and lent
funds for the Corporation, and yet there was no Board Resolution allowing it.28

Villarama's explanation on the matter of his involvement with the corporate affairs of the Corporation
only renders more credible Pantranco's claim that his control over the corporation, especially in the
management and disposition of its funds, was so extensive and intimate that it is impossible to
segregate and identify which money belonged to whom. The interference of Villarama in the complex
affairs of the corporation, and particularly its finances, are much too inconsistent with the ends and
purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities from
corporate undertakings. It is the very essence of incorporation that the acts and conduct of the
corporation be carried out in its own corporate name because it has its own personality.

The doctrine that a corporation is a legal entity distinct and separate from the members and
stockholders who compose it is recognized and respected in all cases which are within reason and
the law.29 When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime,30 the veil with which the
law covers and isolates the corporation from the members or stockholders who compose it will be
lifted to allow for its consideration merely as an aggregation of individuals.

Upon the foregoing considerations, We are of the opinion, and so hold, that the preponderance of
evidence have shown that the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama, and that
the restrictive clause in the contract entered into by the latter and Pantranco is also enforceable and
binding against the said Corporation. For the rule is that a seller or promisor may not make use of a
corporate entity as a means of evading the obligation of his covenant.31 Where the Corporation is
substantially the alter ego of the covenantor to the restrictive agreement, it can be enjoined from
competing with the covenantee.32

The Corporation contends that even on the supposition that Villa Rey Transit, Inc. and Villarama are
one and the same, the restrictive clause in the contract between Villarama and Pantranco does not
include the purchase of existing lines but it only applies to application for the new lines. The clause
in dispute reads thus:

(4) The SELLER shall not, for a period of ten (10) years from the date of this sale apply for
any TPU service identical or competing with the BUYER. (Emphasis supplied)

As We read the disputed clause, it is evident from the context thereof that the intention of the parties
was to eliminate the seller as a competitor of the buyer for ten years along the lines of operation
covered by the certificates of public convenience subject of their transaction. The word "apply" as
broadly used has for frame of reference, a service by the seller on lines or routes that would
compete with the buyer along the routes acquired by the latter. In this jurisdiction, prior authorization
is needed before anyone can operate a TPU service,33whether the service consists in a new line or
an old one acquired from a previous operator. The clear intention of the parties was to prevent the
seller from conducting any competitive line for 10 years since, anyway, he has bound himself not to
apply for authorization to operate along such lines for the duration of such period.34

If the prohibition is to be applied only to the acquisition of new certificates of public convenience thru
an application with the Public Service Commission, this would, in effect, allow the seller just the
same to compete with the buyer as long as his authority to operate is only acquired thru transfer or
sale from a previous operator, thus defeating the intention of the parties. For what would prevent the
seller, under the circumstances, from having a representative or dummy apply in the latter's name
and then later on transferring the same by sale to the seller? Since stipulations in a contract is the
law between the contracting parties,

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. (Art. 19, New Civil
Code.)

We are not impressed of Villarama's contention that the re-wording of the two previous drafts of the
contract of sale between Villarama and Pantranco is significant in that as it now appears, the parties
intended to effect the least restriction. We are persuaded, after an examination of the supposed
drafts, that the scope of the final stipulation, while not as long and prolix as those in the drafts, is just
as broad and comprehensive. At most, it can be said that the re-wording was done merely for brevity
and simplicity.

The evident intention behind the restriction was to eliminate the sellers as a competitor, and this
must be, considering such factors as the good will35 that the seller had already gained from the riding
public and his adeptness and proficiency in the trade. On this matter, Corbin, an authority on
Contracts has this to say.36

When one buys the business of another as a going concern, he usually wishes to keep it
going; he wishes to get the location, the building, the stock in trade, and the customers. He
wishes to step into the seller's shoes and to enjoy the same business relations with other
men. He is willing to pay much more if he can get the "good will" of the business, meaning by
this the good will of the customers, that they may continue to tread the old footpath to his
door and maintain with him the business relations enjoyed by the seller.

... In order to be well assured of this, he obtains and pays for the seller's promise not to
reopen business in competition with the business sold.

As to whether or not such a stipulation in restraint of trade is valid, our jurisprudence on the
matter37says:

The law concerning contracts which tend to restrain business or trade has gone through a
long series of changes from time to time with the changing condition of trade and commerce.
With trifling exceptions, said changes have been a continuous development of a general rule.
The early cases show plainly a disposition to avoid and annul all contract which prohibited or
restrained any one from using a lawful trade "at any time or at any place," as being against
the benefit of the state. Later, however, the rule became well established that if the restraint
was limited to "a certain time" and within "a certain place," such contracts were valid and not
"against the benefit of the state." Later cases, and we think the rule is now well established,
have held that a contract in restraint of trade is valid providing there is a limitation upon either
time or place. A contract, however, which restrains a man from entering into business or
trade without either a limitation as to time or place, will be held invalid.

The public welfare of course must always be considered and if it be not involved and the
restraint upon one party is not greater than protection to the other requires, contracts like the
one we are discussing will be sustained. The general tendency, we believe, of modern
authority, is to make the test whether the restraint is reasonably necessary for the protection
of the contracting parties. If the contract is reasonably necessary to protect the interest of the
parties, it will be upheld. (Emphasis supplied.)

Analyzing the characteristics of the questioned stipulation, We find that although it is in the nature of
an agreement suppressing competition, it is, however, merely ancillary or incidental to the main
agreement which is that of sale. The suppression or restraint is only partial or limited: first, in scope,
it refers only to application for TPU by the seller in competition with the lines sold to the buyer;
second, in duration, it is only for ten (10) years; and third, with respect to situs or territory, the
restraint is only along the lines covered by the certificates sold. In view of these limitations, coupled
with the consideration of P350,000.00 for just two certificates of public convenience, and
considering, furthermore, that the disputed stipulation is only incidental to a main agreement, the
same is reasonable and it is not harmful nor obnoxious to public service.38 It does not appear that the
ultimate result of the clause or stipulation would be to leave solely to Pantranco the right to operate
along the lines in question, thereby establishing monopoly or predominance approximating thereto.
We believe the main purpose of the restraint was to protect for a limited time the business of the
buyer.

Indeed, the evils of monopoly are farfetched here. There can be no danger of price controls or
deterioration of the service because of the close supervision of the Public Service
Commission.39 This Court had stated long ago,40that "when one devotes his property to a use in
which the public has an interest, he virtually grants to the public an interest in that use and submits it
to such public use under reasonable rules and regulations to be fixed by the Public Utility
Commission."

Regarding that aspect of the clause that it is merely ancillary or incidental to a lawful agreement, the
underlying reason sustaining its validity is well explained in 36 Am. Jur. 537-539, to wit:

... Numerous authorities hold that a covenant which is incidental to the sale and transfer of a
trade or business, and which purports to bind the seller not to engage in the same business
in competition with the purchaser, is lawful and enforceable. While such covenants are
designed to prevent competition on the part of the seller, it is ordinarily neither their purpose
nor effect to stifle competition generally in the locality, nor to prevent it at all in a way or to an
extent injurious to the public. The business in the hands of the purchaser is carried on just as
it was in the hands of the seller; the former merely takes the place of the latter; the
commodities of the trade are as open to the public as they were before; the same
competition exists as existed before; there is the same employment furnished to others after
as before; the profits of the business go as they did before to swell the sum of public wealth;
the public has the same opportunities of purchasing, if it is a mercantile business; and
production is not lessened if it is a manufacturing plant.

The reliance by the lower court on tile case of Red Line Transportation Co. v. Bachrach41 and finding
that the stipulation is illegal and void seems misplaced. In the said Red Line case, the agreement
therein sought to be enforced was virtually a division of territory between two operators, each
company imposing upon itself an obligation not to operate in any territory covered by the routes of
the other. Restraints of this type, among common carriers have always been covered by the general
rule invalidating agreements in restraint of trade. 42

Neither are the other cases relied upon by the plaintiff-appellee applicable to the instant case.
In Pampanga Bus Co., Inc. v. Enriquez,43the undertaking of the applicant therein not to apply for the
lifting of restrictions imposed on his certificates of public convenience was not an ancillary or
incidental agreement. The restraint was the principal objective. On the other hand, in Red Line
Transportation Co., Inc. v. Gonzaga,44 the restraint there in question not to ask for extension of the
line, or trips, or increase of equipment — was not an agreement between the parties but a condition
imposed in the certificate of public convenience itself.

Upon the foregoing considerations, Our conclusion is that the stipulation prohibiting Villarama for a
period of 10 years to "apply" for TPU service along the lines covered by the certificates of public
convenience sold by him to Pantranco is valid and reasonable. Having arrived at this conclusion,
and considering that the preponderance of the evidence have shown that Villa Rey Transit, Inc. is
itself the alter ego of Villarama, We hold, as prayed for in Pantranco's third party complaint, that the
said Corporation should, until the expiration of the 1-year period abovementioned, be enjoined from
operating the line subject of the prohibition.

To avoid any misunderstanding, it is here to be emphasized that the 10-year prohibition upon
Villarama is not against his application for, or purchase of, certificates of public convenience, but
merely the operation of TPU along the lines covered by the certificates sold by him to Pantranco.
Consequently, the sale between Fernando and the Corporation is valid, such that the rightful
ownership of the disputed certificates still belongs to the plaintiff being the prior purchaser in good
faith and for value thereof. In view of the ancient rule of caveat emptor prevailing in this jurisdiction,
what was acquired by Ferrer in the sheriff's sale was only the right which Fernando, judgment
debtor, had in the certificates of public convenience on the day of the sale.45
Accordingly, by the "Notice of Levy Upon Personalty" the Commissioner of Public Service was
notified that "by virtue of an Order of Execution issued by the Court of First Instance of Pangasinan,
the rights, interests, or participation which the defendant, VALENTIN A. FERNANDO — in the above
entitled case may have in the following realty/personalty is attached or levied upon, to wit: The
rights, interests and participation on the Certificates of Public Convenience issued to Valentin A.
Fernando, in Cases Nos. 59494, etc. ... Lines — Manila to Lingayen, Dagupan, etc. vice versa."
Such notice of levy only shows that Ferrer, the vendee at auction of said certificates, merely stepped
into the shoes of the judgment debtor. Of the same principle is the provision of Article 1544 of the
Civil Code, that "If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property."

There is no merit in Pantranco and Ferrer's theory that the sale of the certificates of public
convenience in question, between the Corporation and Fernando, was not consummated, it being
only a conditional sale subject to the suspensive condition of its approval by the Public Service
Commission. While section 20(g) of the Public Service Act provides that "subject to established
limitation and exceptions and saving provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the approval and authorization of the
Commission previously had ... to sell, alienate, mortgage, encumber or lease its property, franchise,
certificates, privileges, or rights or any part thereof, ...," the same section also provides:

... Provided, however, That nothing herein contained shall be construed to prevent the
transaction from being negotiated or completed before its approval or to prevent the sale,
alienation, or lease by any public service of any of its property in the ordinary course of its
business.

It is clear, therefore, that the requisite approval of the PSC is not a condition precedent for the
validity and consummation of the sale.

Anent the question of damages allegedly suffered by the parties, each of the appellants has its or his
own version to allege.

Villa Rey Transit, Inc. claims that by virtue of the "tortious acts" of defendants (Pantranco and Ferrer)
in acquiring the certificates of public convenience in question, despite constructive and actual
knowledge on their part of a prior sale executed by Fernando in favor of the said corporation, which
necessitated the latter to file the action to annul the sheriff's sale to Ferrer and the subsequent
transfer to Pantranco, it is entitled to collect actual and compensatory damages, and attorney's fees
in the amount of P25,000.00. The evidence on record, however, does not clearly show that said
defendants acted in bad faith in their acquisition of the certificates in question. They believed that
because the bill of sale has yet to be approved by the Public Service Commission, the transaction
was not a consummated sale, and, therefore, the title to or ownership of the certificates was still with
the seller. The award by the lower court of attorney's fees of P5,000.00 in favor of Villa Rey Transit,
Inc. is, therefore, without basis and should be set aside.

Eusebio Ferrer's charge that by reason of the filing of the action to annul the sheriff's sale, he had
suffered and should be awarded moral, exemplary damages and attorney's fees, cannot be
entertained, in view of the conclusion herein reached that the sale by Fernando to the Corporation
was valid.

Pantranco, on the other hand, justifies its claim for damages with the allegation that when it
purchased ViIlarama's business for P350,000.00, it intended to build up the traffic along the lines
covered by the certificates but it was rot afforded an opportunity to do so since barely three months
had elapsed when the contract was violated by Villarama operating along the same lines in the
name of Villa Rey Transit, Inc. It is further claimed by Pantranco that the underhanded manner in
which Villarama violated the contract is pertinent in establishing punitive or moral damages. Its
contention as to the proper measure of damages is that it should be the purchase price of
P350,000.00 that it paid to Villarama. While We are fully in accord with Pantranco's claim of
entitlement to damages it suffered as a result of Villarama's breach of his contract with it, the record
does not sufficiently supply the necessary evidentiary materials upon which to base the award and
there is need for further proceedings in the lower court to ascertain the proper amount.

PREMISES CONSIDERED, the judgment appealed from is hereby modified as follows:

1. The sale of the two certificates of public convenience in question by Valentin Fernando to Villa
Rey Transit, Inc. is declared preferred over that made by the Sheriff at public auction of the aforesaid
certificate of public convenience in favor of Eusebio Ferrer;

2. Reversed, insofar as it dismisses the third-party complaint filed by Pangasinan Transportation Co.
against Jose M. Villarama, holding that Villa Rey Transit, Inc. is an entity distinct and separate from
the personality of Jose M. Villarama, and insofar as it awards the sum of P5,000.00 as attorney's
fees in favor of Villa Rey Transit, Inc.;

3. The case is remanded to the trial court for the reception of evidence in consonance with the above
findings as regards the amount of damages suffered by Pantranco; and

4. On equitable considerations, without costs. So ordered.

Concepcion, C. J., Reyes, J.B.L., Dizon, Makalintal, Castro and Fernando, JJ., concur.
Sanchez and Capistrano, JJ., took no part.
Zaldivar, J., is on leave.

Footnotes

1 Application for approval of sale docketed as PSC Case No. 124057.

2 PSC Case No. 126278.

3 G.R. Nos. L-17684-85, promulgated May 30, 1962.

4 TSN, pp. 1649-1651, Session of April 8, 1963.

5 TSN, pp. 1210, 1217-1218, Session of Oct. 8, 1962.

6 TSN, p. 1262, Session of Nov. 8, 1962.

7TSN, pp. 947-948, Session of Sept. 3, 1962; TSN, pp. 1022, 1025, 1027-1029, Session of
Sept. 7, 1962.

8 TSN, pp. 948-949.

9 TSN, pp. 899, 901, Session of Aug. 27, 1962.

10 TSN, pp. 1227-1228, Session of Oct. 8, 1962.

11 Francisco, Evidence, 1964, ed. p. 113.

12 Plaintiff-appellee's Brief, pp. 45-46.

13 TSN, pp. 1568-1569, Session of April 8, 1963.

14 See the Revised Rules of Court — Evidence by Francisco, 1964 ed., pp. 113-114.

15 Sec. 2(a), Rule 130, Rules of Court.

16It was Celso Rivera who prepared these documents as admitted by Villarama, TSN, pp.
1580-1581, Session of April 8, 1963.

17 Exh. 6.

18 Exhs. 8 to 8-C.

19 Exhs. 7 to 7-C.

20 Exhs. 10 to 19, 22; TSN, pp. 1709-1710, Session of April 16, 1963.

21 TSN, p. 1625, Session of April 8, 1963.

22 TSN, p. 1646, Session of April 8, 1963.

23 Brief for Plaintiff-appellee, p. 49.

24 TSN, pp. 1593, 1658, Session of April 8, 1963.

25 TSN, pp. 1660-1661, ditto

26 TSN, pp. 1699-1718, Session of April 16, 1963.

27 TSN, p. 1714, Session of April 16, 1963.

28 TSN, pp. 1627-1628, Session of April 8, 1963.

29 Borja v. Vasquez, 74 Phil. 56.

30Koppel Phil. v. Yatco, 77 Phil. 496; Lidell & Co. v. Collector, G.R. No. L-9687, June 30,
1961; Commissioner v. Norton & Harrison Company, G.R. No. L-17618, Aug. 31, 1964;
Guevarra, Phil. Corp. Law, 1961 ed., p. 7.

31 36 Am. Jur. 548; 18 Am. Jur. 2nd 563-564.

32 94 A. L. R. 346, 348.
33 Secs. 15 and 18, Com. Act 146.

34 The 10-year period will expire on January, 1969. Hence, it is practically over.

35Recent cases have enlarged the concept of good will over the behavioristic resort of old
customers to the old place of business. It is now recognized that "It may include in addition to
those factors all that goes with a business in excess of its mere capital and physical value,
such as reputation for promptness, fidelity, integrity, politeness, business sagacity and
commercial skill in the conduct of its affairs, solicitude for the welfare of customers and other
tangible elements which contribute to successful commercial venture." (Footnotes to p. 4592,
Williston on Contracts, Vol. 5, citing cases.)

36 Corbin on Contracts, Vol. 6, Sec. 1385, p. 483.

37 Del Castillo v. Richmon, 45 Phil. 683, citing Anchor Electric Co. v. Hawkes, 171 Mass. 101;
Alger v. Tacher, 19 Pickering (Mass.) 51; Taylor v. Blanchard, 13 Allen (Mass.) 370; Lurkin
Rule Co. v. Fringeli, 57 Ohio State 596; Fowle v. Park, 131 U. S. 88, 97; Diamond Match Co.
v. Reeber, 106 N. Y. 473; National Benefit Co. v. Union Hospital Co., 45 Minn. 272; Swigert
& Howard v. Tilden, 121 Iowa, 650. See also Ollendorf v. Abrahamson, 38 Phil. 585.

38Clearly, the greater part of said consideration was to compensate Villarama for not
competing with Pantranco for at least 10 years, within which period the latter would put up 31
other units (certificates contained authorization for 32 units), train drivers thereof and incur
such other expenses, so as to put the service along the lines acquired in good, operating and
competing condition.

39 See Secs. 16-C, 19 and 20-A, Com. Act 146.

40 National Coal Co. v. Public Utility Commission, 47 Phil. 356, 360.

41 67 Phil. 577.

42 See Negros Ice & Cold Storage Co., Inc v. PSC, 90 Phil. 138. See also 58 C. J. S. 1051.

43 66 Phil. 645.

44 G.R. No. L-10834, April 28, 1960.

45 See secs. 25 & 26, Rule 39, Rules of Court.

 SECOND DIVISION

G.R. No. 100812 June 25, 1999

FRANCISCO MOTORS CORPORATION, petitioner,

vs.
COURT OF APPEALS and SPOUSES GREGORIO and LIBRADA MANUEL, respondents.

QUISUMBING, J.:

This petition for review on certiorari, under Rule 45 of the Rules of Court, seeks to annul the
decision 1 of the Court of Appeals in C.A. G.R. CV No. 10014 affirming the
decision rendered by Branch 135, Regional Trial Court of Makati, Metro
Manila. The procedural antecedents of this petition are as follows:

against private respondents

On January 23, 1985, petitioner filed a complaint 2
to recover three thousand four hundred twelve and six
centavos (P3,412.06), representing the balance of the
jeep body purchased by the Manuels from petitioner; an
additional sum of twenty thousand four hundred fifty-four
and eighty centavos (P20,454.80) representing the unpaid
balance on the cost of repair of the vehicle; and six
thousand pesos (P6,000.00) for cost of suit and attorney's
fees. 3 To the original balance on the price of jeep body
were added the costs of repair. 4 In their answer, private
respondents interposed a counterclaim for unpaid legal
services by Gregorio Manuel in the amount of fifty
thousand pesos (P50,000) which was not paid by the
incorporators, directors and officers of the petitioner. The
trial court decided the case on June 26, 1985, in favor of
petitioner in regard to the petitioner's claim for money, but
also allowed the counter-claim of private respondents.
Both parties appealed. On April 15, 1991, the Court of
Appeals sustained the trial court's decision. 5 Hence, the
present petition.
For our review in particular is the propriety of the permissive counterclaim which private respondents
filed together with their answer to petitioner's complaint for a sum of money. Private respondent
Gregorio Manuel alleged as an affirmative defense that, while he was petitioner's Assistant Legal
Officer, he represented members of the Francisco family in the intestate estate proceedings of the
late Benita Trinidad. However, even after the termination of the proceedings, his services were not
paid. Said family members, he said, were also incorporators, directors and officers of petitioner.
Hence to petitioner's collection suit, he filed a counter permissive counterclaim for the unpaid
attorney's fees. 6

For failure of petitioner to answer the counterclaim, the trial court declared
petitioner in default on this score, and evidence ex-parte was presented on
the counterclaim. The trial court ruled in favor of private respondents and
found that Gregorio Manuel indeed rendered legal services to the Francisco
family in Special Proceedings Number 7803 — "In the Matter of Intestate
Estate of Benita Trinidad". Said court also found that his legal services were
not compensated despite repeated demands, and thus ordered petitioner to
pay him the amount of fifty thousand (P50,000.00) pesos. 7

Dissatisfied with the trial court's order, petitioner elevated the matter to the
Court of Appeals, posing the following issues:
I.

WHETHER OR NOT THE DECISION RENDERED BY THE LOWER COURT IS

NULL AND VOID AS IT NEVER ACQUIRED JURISDICTION OVER THE PERSON
OF THE DEFENDANT.

II.

WHETHER OR NOT PLAINTIFF-APPELLANT NOT BEING A REAL PARTY IN THE

ALLEGED PERMISSIVE COUNTERCLAIM SHOULD BE HELD LIABLE TO THE
CLAIM OF DEFENDANT-APPELLEES.

III.

WHETHER OR NOT THERE IS FAILURE ON THE PART OF PLAINTIFF-

APPELLANT TO ANSWER THE ALLEGED PERMISSIVE COUNTERCLAIM. 8

Petitioner contended that the trial court did not acquire jurisdiction over it
because no summons was validly served on it together with the copy of the
answer containing the permissive counterclaim. Further, petitioner questions
the propriety of its being made party to the case because it was not the real
party in interest but the individual members of the Francisco family concerned
with the intestate case.
In its assailed decision now before us for review, respondent Court of Appeals held that a
counterclaim must be answered in ten (10) days, pursuant to Section 4, Rule 11, of the Rules of
Court; and nowhere does it state in the Rules that a party still needed to be summoned anew if a
counterclaim was set up against him. Failure to serve summons, said respondent court, did not
effectively negate trial court's jurisdiction over petitioner in the matter of the counterclaim. It likewise
pointed out that there was no reason for petitioner to be excused from answering the counterclaim.
Court records showed that its former counsel, Nicanor G. Alvarez, received the copy of the answer
with counterclaim two (2) days prior to his withdrawal as counsel for petitioner. Moreover when
petitioner's new counsel, Jose N. Aquino, entered his appearance, three (3) days still remained
within the period to file an answer to the counterclaim. Having failed to answer, petitioner was
correctly considered in default by the trial
court. 9 Even assuming that the trial court acquired no jurisdiction over
petitioner, respondent court also said, but having filed a motion for
reconsideration seeking relief from the said order of default, petitioner was
estopped from further questioning the trial court's jurisdiction. 10

On the question of its liability for attorney's fees owing to private respondent
Gregorio Manuel, petitioner argued that being a corporation, it should not be
held liable therefor because these fees were owed by the incorporators,
directors and officers of the corporation in their personal capacity as heirs of
Benita Trinidad. Petitioner stressed that the personality of the corporation, vis-
a-vis the individual persons who hired the services of private respondent, is
separate and distinct, 11 hence, the liability of said individuals did not become an obligation chargeable against petitioner.
Nevertheless, on the foregoing issue, the Court of Appeals ruled as follows:

However, this distinct and separate personality is merely a fiction created by law for
convenience and to promote justice. Accordingly, this separate personality of the
corporation may be disregarded, or the veil of corporate fiction pierced, in cases
where it is used as a cloak or cover for found (sic) illegality, or to work an injustice, or
where necessary to achieve equity or when necessary for the protection of creditors.
(Sulo ng Bayan, Inc. vs. Araneta, Inc., 72 SCRA 347) Corporations are composed of
natural persons and the legal fiction of a separate corporate personality is not a
shield for the commission of injustice and inequity. (Chemplex Philippines, Inc. vs.
Pamatian, 57 SCRA 408).

In the instant case, evidence shows that the plaintiff-appellant Francisco Motors
Corporation is composed of the heirs of the late Benita Trinidad as directors and
incorporators for whom defendant Gregorio Manuel rendered legal services in the
intestate estate case of their deceased mother. Considering the aforestated
principles and circumstances established in this case, equity and justice demands
plaintiff-appellant's veil of corporate identity should be pierced and the defendant be
compensated for legal services rendered to the heirs, who are directors of the
plaintiff-appellant corporation. 12
Now before us, petitioner assigns the following errors:
I.

THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF PIERCING

THE VEIL OF CORPORATE ENTITY.

II.

THE COURT OF APPEALS ERRED IN AFFIRMING THAT THERE WAS

JURISDICTION OVER PETITIONER WITH RESPECT TO THE
COUNTERCLAIM. 13

Petitioner submits that respondent court should not have resorted to piercing
the veil of corporate fiction because the transaction concerned only
respondent Gregorio Manuel and the heirs of the late Benita Trinidad.
According to petitioner, there was no cause of action by said respondent
against petitioner; personal concerns of the heirs should be distinguished from
those involving corporate affairs. Petitioner further contends that the present
case does not fall among the instances wherein the courts may look beyond
the distinct personality of a corporation. According to petitioner, the services
for which respondent Gregorio Manuel seeks to collect fees from petitioner
are personal in nature. Hence, it avers the heirs should have been sued in
their personal capacity, and not involve the corporation. 14

With regard to the permissive counterclaim, petitioner also insists that there
was no proper service of the answer containing the permissive counterclaim.
It claims that the counterclaim is a separate case which can only be properly
served upon the opposing party through summons. Further petitioner states
that by nature, a permissive counterclaim is one which does not arise out of
nor is necessarily connected with the subject of the opposing party's claim.
Petitioner avers that since there was no service of summons upon it with
regard to the counterclaim, then the court did not acquire jurisdiction over
petitioner. Since a counterclaim is considered an action independent from the
answer, according to petitioner, then in effect there should be two
simultaneous actions between the same parties: each party is at the same
time both plaintiff and defendant with respect to the other, 15 requiring in each case separate
summonses.

In their Comment, private respondents focus on the two questions raised by petitioner. They defend
the propriety of piercing the veil of corporate fiction, but deny the necessity of serving separate
summonses on petitioner in regard to their permissive counterclaim contained in the answer.

Private respondents maintain both trial and appellate courts found that respondent Gregorio Manuel
was employed as assistant legal officer of petitioner corporation, and that his services were solicited
by the incorporators, directors and members to handle and represent them in Special Proceedings
No. 7803, concerning the Intestate Estate of the late Benita Trinidad. They assert that the members
of petitioner corporation took advantage of their positions by not compensating respondent Gregorio
Manuel after the termination of the estate proceedings despite his repeated demands for payment of
his services. They cite findings of the appellate court that support piercing the veil of corporate
identity in this particular case. They assert that the corporate veil may be disregarded when it is used
to defeat public convenience, justify wrong, protect fraud, and defend crime. It may also be pierced,
according to them, where the corporate entity is being used as an alter ego, adjunct, or business
conduit for the sole benefit of the stockholders or of another corporate entity. In these instances,
they aver, the corporation should be treated merely as an association of individual persons. 16

Private respondents dispute petitioner's claim that its right to due process was
violated when respondents' counterclaim was granted due course, although
no summons was served upon it. They claim that no provision in the Rules of
Court requires service of summons upon a defendant in a counterclaim.
Private respondents argue that when the petitioner filed its complaint before
the trial court it voluntarily submitted itself to the jurisdiction of the court. As a
consequence, the issuance of summons on it was no longer necessary.
Private respondents say they served a copy of their answer with affirmative
defenses and counterclaim on petitioner's former counsel, Nicanor G. Alvarez.
While petitioner would have the Court believe that respondents served said
copy upon Alvarez after he had withdrawn his appearance as counsel for the
petitioner, private respondents assert that this contention is utterly baseless.
Records disclose that the answer was received two (2) days before the former
counsel for petitioner withdrew his appearance, according to private
respondents. They maintain that the present petition is but a form of dilatory
appeal, to set off petitioner's obligations to the respondents by running up
more interest it could recover from them. Private respondents therefore claim
damages against petitioner. 17

To resolve the issues in this case, we must first determine the propriety of
piercing the veil of corporate fiction.
Basic in corporation law is the principle that a corporation has a separate personality distinct from its
stockholders and from other corporations to which it may be connected. 18 However, under the
doctrine of piercing the veil of corporate entity, the corporation's separate
juridical personality may be disregarded, for example, when the corporate
identity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime. Also, where the corporation is a mere alter ego or business
conduit of a person, or where the corporation is so organized and controlled
and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation, then its distinct personality
may be ignored. 19 In these circumstances, the courts will treat the corporation as a mere aggrupation of persons and the
liability will directly attach to them. The legal fiction of a separate corporate personality in those cited instances, for reasons of public policy
and in the interest of justice, will be justifiably set aside.
In our view, however, given the facts and circumstances of this case, the doctrine of piercing the
corporate veil has no relevant application here. Respondent court erred in permitting the trial court's
resort to this doctrine. The rationale behind piercing a corporation's identity in a given case is to
remove the barrier between the corporation from the persons comprising it to thwart the fraudulent
and illegal schemes of those who use the corporate personality as a shield for undertaking certain
proscribed activities. However, in the case at bar, instead of holding certain individuals or persons
responsible for an alleged corporate act, the situation has been reversed. It is the petitioner as a
corporation which is being ordered to answer for the personal liability of certain individual directors,
officers and incorporators concerned. Hence, it appears to us that the doctrine has been turned
upside down because of its erroneous invocation. Note that according to private respondent
Gregorio Manuel his services were solicited as counsel for members of the Francisco family to
represent them in the intestate proceedings over Benita Trinidad's estate. These estate proceedings
did not involve any business of petitioner.

Note also that he sought to collect legal fees not just from certain Francisco family members but also
from petitioner corporation on the claims that its management had requested his services and he
acceded thereto as an employee of petitioner from whom it could be deduced he was also receiving
a salary. His move to recover unpaid legal fees through a counterclaim against Francisco Motors
Corporation, to offset the unpaid balance of the purchase and repair of a jeep body could only result
from an obvious misapprehension that petitioner's corporate assets could be used to answer for the
liabilities of its individual directors, officers, and incorporators. Such result if permitted could easily
prejudice the corporation, its own creditors, and even other stockholders; hence, clearly inequitous
to petitioner.

Furthermore, considering the nature of the legal services involved, whatever obligation said
incorporators, directors and officers of the corporation had incurred, it was incurred in their personal
capacity. When directors and officers of a corporation are unable to compensate a party for a
personal obligation, it is far-fetched to allege that the corporation is perpetuating fraud or promoting
injustice, and be thereby held liable therefor by piercing its corporate veil. While there are no hard
and fast rules on disregarding separate corporate identity, we must always be mindful of its function
and purpose. A court should be careful in assessing the milieu where the doctrine of piercing the
corporate veil may be applied. Otherwise an injustice, although unintended, may result from its
erroneous application.

The personality of the corporation and those of its incorporators, directors and officers in their
personal capacities ought to be kept separate in this case. The claim for legal fees against the
concerned individual incorporators, officers and directors could not be properly directed against the
corporation without violating basic principles governing corporations. Moreover, every action —
including a counterclaim — must be prosecuted or defended in the name of the real party in
interest. 20 It is plainly an error to lay the claim for legal fees of private respondent Gregorio Manuel at the door of petitioner (FMC) rather
than individual members of the Francisco family.

However, with regard to the procedural issue raised by petitioner's allegation, that it needed to be
summoned anew in order for the court to acquire jurisdiction over it, we agree with respondent
court's view to the contrary. Section 4, Rule 11 of the Rules of Court provides that a counterclaim or
cross-claim must be answered within ten (10) days from service. Nothing in the Rules of Court says
that summons should first be served on the defendant before an answer to counterclaim must be
made. The purpose of a summons is to enable the court to acquire jurisdiction over the person of the
defendant. Although a counterclaim is treated as an entirely distinct and independent action, the
defendant in the counterclaim, being the plaintiff in the original complaint, has already submitted to
the jurisdiction of the court. Following Rule 9, Section 3 of the 1997 Rules of Civil Procedure, 21 if a
defendant (herein petitioner) fails to answer the counterclaim, then upon
motion of plaintiff, the defendant may be declared in default. This is what
happened to petitioner in this case, and this Court finds no procedural error in
the disposition of the appellate court on this particular issue. Moreover, as
noted by the respondent court, when petitioner filed its motion seeking to set
aside the order of default, in effect it submitted itself to the jurisdiction of the
court. As well said by respondent court:
Further on the lack of jurisdiction as raised by plaintiff-appellant[,] [t]he records show
that upon its request, plaintiff-appellant was granted time to file a motion for
reconsideration of the disputed decision. Plaintiff-appellant did file its motion for
reconsideration to set aside the order of default and the judgment rendered on the
counterclaim.

Thus, even if the court acquired no jurisdiction over plaintiff-appellant on the

counterclaim, as it vigorously insists, plaintiff-appellant is considered to have
submitted to the court's jurisdiction when it filed the motion for reconsideration
seeking relief from the court. (Soriano vs. Palacio, 12 SCRA 447). A party is
estopped from assailing the jurisdiction of a court after voluntarily submitting himself
to its jurisdiction. (Tejones vs. Gironella, 159 SCRA 100). Estoppel is a bar against
any claims of lack of jurisdiction. (Balais vs. Balais, 159 SCRA 37). 22

WHEREFORE, the petition is hereby GRANTED and the assailed decision is

hereby REVERSED insofar only as it held Francisco Motors Corporation liable
for the legal obligation owing to private respondent Gregorio Manuel; but this
decision is without prejudice to his filing the proper suit against the concerned
members of the Francisco family in their personal capacity. No
pronouncement as to costs. 1âw phi 1.nêt

SO ORDERED.

Bellosillo, Puno, Mendoza and Buena, JJ., concur.

Footnotes

1 Dated April 15, 1991. Rollo, pp. 31-35. Reconsideration thereof was denied on July
1, 1991. Rollo, pp. 28-29.

2 Civil Case No. 9542. Records, RTC, pp. 1-3.

3 Rollo, p. 31.

4 Id., at 9.

5 Id., at 11.

6 Supra, note 4.
7 Supra note 5.

8 Rollo, pp. 32-33.

9 Id. at 32.

10 Id. at 34.

11 Ibid.

12 Rollo, pp. 34-35.

13 Id. at 12.

14 Id. at 12-16.

15 Id. at 18-21; See also Golden Ribbon Lumber Co., Inc. vs. Salvador S. Santos
and Rafaela M. Santos, C.A. — G. R. No. 12935 November 15, 1955.

16 Id. at 47-51.

17 Id. at 52-60.

18 Concept Builder's Inc. vs. NLRC 257 SCRA 149, 157 (1996); See also Emilio
Cano Enterprises, Inc. vs. CIR, 13 SCRA 290 (1965) and Yutivo Sons Hardware Co.
vs. CTA, 1 SCRA 160(1961).

19 Indophil Textile Mill Workers Union vs. Calica, 205 SCRA 697, 704 (1992); See
also Umali et al vs. CA, 189 SCRA 529, 542 (1990).

20 Sec. 2, Rule 3 of the RULES OF COURT; See also, De Leon vs. Court of
Appeals, 277 SCRA 478, 486 (1997).

21 In the Court of Appeals Decision, Section 3 of Rule 9 was still under Section 1 of
Rule 18 of the Rules of Court.

22 Rollo, p. 34.
 FIRST DIVISION

G.R. No. 167530 March 13, 2013

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
HYDRO RESOURCES CONTRACTORS CORPORATION, Respondent.

x-----------------------x

G.R. No. 167561

ASSET PRIVATIZATION TRUST, Petitioner,

vs.
HYDRO RESOURCES CONTRACTORS CORPORATION, Respondent.

x-----------------------x

G.R. No. 167603

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.
HYDRO RESOURCES CONTRACTORS CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

These petitions for review on certiorari1 assail the Decision2 dated November 30, 2004 and the
Resolution3 dated March 22, 2005 of the Court of Appeals in CA-G.R. CV No. 57553. The said
Decision affirmed the Decision4 dated November 6, 1995 of the Regional Trial Court (RTC) of Makati
City, Branch 62, granting a judgment award of ₱8,370,934.74, plus legal interest, in favor of
respondent Hydro Resources Contractors Corporation (HRCC) with the modification that the
Privatization and Management Office (PMO), successor of petitioner Asset Privatization Trust
(APT),5 has been held solidarily liable with Nonoc Mining and Industrial Corporation (NMIC)6 and
petitioners Philippine National Bank (PNB) and Development Bank of the Philippines (DBP), while
the Resolution denied reconsideration separately prayed for by PNB, DBP, and APT.

Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made on the
properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the foreclosure,
DBP and PNB acquired substantially all the assets of MMIC and resumed the business operations of
the defunct MMIC by organizing NMIC.7 DBP and PNB owned 57% and 43% of the shares of NMIC,
respectively, except for five qualifying shares.8As of September 1984, the members of the Board of
Directors of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and
Faustino Agbada, were either from DBP or PNB.9

Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and Road
Construction Program in 1985 for a total contract price of ₱35,770,120. After computing the
payments already made by NMIC under the program and crediting the NMIC’s receivables from
Hercon, Inc., the latter found that NMIC still has an unpaid balance of ₱8,370,934.74.10 Hercon, Inc.
made several demands on NMIC, including a letter of final demand dated August 12, 1986, and
when these were not heeded, a complaint for sum of money was filed in the RTC of Makati, Branch
136 seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the amount owing Hercon,
Inc.11 The case was docketed as Civil Case No. 15375.

Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger. This
prompted the amendment of the complaint to substitute HRCC for Hercon, Inc.12

Thereafter, on December 8, 1986, then President Corazon C. Aquino issued Proclamation No. 50
creating the APT for the expeditious disposition and privatization of certain government corporations
and/or the assets thereof. Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB
executed their respective deeds of transfer in favor of the National Government assigning,
transferring and conveying certain assets and liabilities, including their respective stakes in
NMIC.13 In turn and on even date, the National Government transferred the said assets and liabilities
to the APT as trustee under a Trust Agreement.14 Thus, the complaint was amended for the second
time to implead and include the APT as a defendant.

In its answer,15 NMIC claimed that HRCC had no cause of action. It also asserted that its contract
with HRCC was entered into by its then President without any authority. Moreover, the said contract
allegedly failed to comply with laws, rules and regulations concerning government contracts. NMIC
further claimed that the contract amount was manifestly excessive and grossly disadvantageous to
the government. NMIC made counterclaims for the amounts already paid to Hercon, Inc. and
attorney’s fees, as well as payment for equipment rental for four trucks, replacement of parts and
other services, and damage to some of NMIC’s properties.16

For its part, DBP’s answer17 raised the defense that HRCC had no cause of action against it because
DBP was not privy to HRCC’s contract with NMIC. Moreover, NMIC’s juridical personality is separate
from that of DBP. DBP further interposed a counterclaim for attorney’s fees.18

PNB’s answer19 also invoked lack of cause of action against it. It also raised estoppel on HRCC’s
part and laches as defenses, claiming that the inclusion of PNB in the complaint was the first time a
demand for payment was made on it by HRCC. PNB also invoked the separate juridical personality
of NMIC and made counterclaims for moral damages and attorney’s fees.20

APT set up the following defenses in its answer21: lack of cause of action against it, lack of privity
between Hercon, Inc. and APT, and the National Government’s preferred lien over the assets of
NMIC.22

After trial, the RTC of Makati rendered a Decision dated November 6, 1995 in favor of HRCC. It
pierced the corporate veil of NMIC and held DBP and PNB solidarily liable with NMIC:

On the issue of whether or not there is sufficient ground to pierce the veil of corporate fiction, this
Court likewise finds for the plaintiff.

From the documentary evidence adduced by the plaintiff, some of which were even adopted by
defendants and DBP and PNB as their own evidence (Exhibits "I", "I-1", "I-2", "I-3", "I-4", "I-5", "I5-A",
"I-5-B", "I-5-C", "I-5-D" and submarkings, inclusive), it had been established that except for five (5)
qualifying shares, NMIC is owned by defendants DBP and PNB, with the former owning 57%
thereof, and the latter 43%. As of September 24, 1984, all the members of NMIC’s Board of
Directors, namely, Messrs. Jose Tengco, Jr., Rolando M. Zosa, Ruben Ancheta, Geraldo Agulto,
and Faustino Agbada are either from DBP or PNB (Exhibits "I-5", "I-5-C", "I-5-D").
The business of NMIC was then also being conducted and controlled by both DBP and PNB. In fact,
it was Rolando M. Zosa, then Governor of DBP, who was signing and entering into contracts with
third persons, on behalf of NMIC.

In this jurisdiction, it is well-settled that "where it appears that the business enterprises are owned,
conducted and controlled by the same parties, both law and equity will, when necessary to protect
the rights of third persons, disregard legal fiction that two (2) corporations are distinct entities, and
treat them as identical." (Phil. Veterans Investment Development Corp. vs. CA, 181 SCRA 669).

From all indications, it appears that NMIC is a mere adjunct, business conduit or alter ego of both
DBP and PNB. Thus, the DBP and PNB are jointly and severally liable with NMIC for the latter’s
unpaid obligations to plaintiff.23

Having found DBP and PNB solidarily liable with NMIC, the dispositive portion of the Decision of the
trial court reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiff HYDRO
RESOURCES CONTRACTORS CORPORATION and against the defendants NONOC

MINING AND INDUSTRIAL CORPORATION, DEVELOPMENT BANK OF THE PHILIPPINES and

PHILIPPINE NATIONAL BANK, ordering the aforenamed defendants, to pay the plaintiff jointly and
severally, the sum of ₱8,370,934.74 plus legal interest thereon from date of demand, and attorney’s
fees equivalent to 25% of the judgment award.

The complaint against APT is hereby dismissed. However, APT, as trustee of NONOC MINING AND
INDUSTRIAL CORPORATION is directed to ensure compliance with this Decision.24

DBP and PNB filed their respective appeals in the Court of Appeals. Both insisted that it was wrong
for the RTC to pierce the veil of NMIC’s corporate personality and hold DBP and PNB solidarily liable
with NMIC.25

The Court of Appeals rendered the Decision dated November 30, 2004, affirmed the piercing of the
veil of the corporate personality of NMIC and held DBP, PNB, and APT solidarily liable with NMIC. In
particular, the Court of Appeals made the following findings:

In the case before Us, it is indubitable that [NMIC] was owned by appellants DBP and PNB to the
extent of 57% and 43% respectively; that said two (2) appellants are the only stockholders, with the
qualifying stockholders of five (5) consisting of its own officers and included in its charter merely to
comply with the requirement of the law as to number of incorporators; and that the directorates of
DBP, PNB and [NMIC] are interlocked.

xxxx

We find it therefore correct for the lower court to have ruled that:

"From all indications, it appears that NMIC is a mere adjunct, business conduit or alter ego of both
DBP and PNB. Thus, the DBP and PNB are jointly and severally liable with NMIC for the latter’s
unpaid obligation to plaintiff."26(Citation omitted.)

The Court of Appeals then concluded that, "in keeping with the concept of justice and fair play," the
corporate veil of NMIC should be pierced, ratiocinating:
For to treat NMIC as a separate legal entity from DBP and PNB for the purpose of securing
beneficial contracts, and then using such separate entity to evade the payment of a just debt, would
be the height of injustice and iniquity. Surely that could not have been the intendment of the law with
respect to corporations. x x x.27

The dispositive portion of the Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED. The
judgment in favor of appellee Hydro Resources Contractors Corporation in the amount of
₱8,370,934.74 with legal interest from date of demand is hereby AFFIRMED, but the dismissal of the
case as against Assets Privatization Trust is REVERSED, and its successor the Privatization and
Management Office is INCLUDED as one of those jointly and severally liable for such indebtedness.
The award of attorney’s fees is DELETED.

All other claims and counter-claims are hereby DISMISSED.

Costs against appellants.28

The respective motions for reconsideration of DBP, PNB, and APT were denied.29

Hence, these consolidated petitions.30

All three petitioners assert that NMIC is a corporate entity with a juridical personality separate and
distinct from both PNB and DBP. They insist that the majority ownership by DBP and PNB of NMIC
is not a sufficient ground for disregarding the separate corporate personality of NMIC because NMIC
was not a mere adjunct, business conduit or alter ego of DBP and PNB. According to them, the
application of the doctrine of piercing the corporate veil is unwarranted as nothing in the records
would show that the ownership and control of the shareholdings of NMIC by DBP and PNB were
used to commit fraud, illegality or injustice. In the absence of evidence that the stock control by DBP
and PNB over NMIC was used to commit some fraud or a wrong and that said control was the
proximate cause of the injury sustained by HRCC, resort to the doctrine of "piercing the veil of
corporate entity" is misplaced.31

DBP and PNB further argue that, assuming they may be held solidarily liable with NMIC to pay
NMIC’s exclusive and separate corporate indebtedness to HRCC, such liability of the two banks was
transferred to and assumed by the National Government through the APT, now the PMO, under the
respective deeds of transfer both dated February 27, 1997 executed by DBP and PNB pursuant to
Proclamation No. 50 dated December 8, 1986 and Administrative Order No. 14 dated February 3,
1987.32

For its part, the APT contends that, in the absence of an unqualified assumption by the National
Government of all liabilities incurred by NMIC, the National Government through the APT could not
be held liable for NMIC’s contractual liability. The APT asserts that HRCC had not sufficiently shown
that the APT is the successor-in-interest of all the liabilities of NMIC, or of DBP and PNB as
transferors, and that the adjudged liability is included among the liabilities assigned and transferred
by DBP and PNB in favor of the National Government.33

HRCC counters that both the RTC and the CA correctly applied the doctrine of "piercing the veil of
corporate fiction." It claims that NMIC was the alter ego of DBP and PNB which owned, conducted
and controlled the business of NMIC as shown by the following circumstances: NMIC was owned by
DBP and PNB, the officers of DBP and PNB were also the officers of NMIC, and DBP and PNB
financed the operations of NMIC. HRCC further argues that a parent corporation may be held liable
for the contracts or obligations of its subsidiary corporation where the latter is a mere agency,
instrumentality or adjunct of the parent corporation.34

Moreover, HRCC asserts that the APT was properly held solidarily liable with DBP, PNB, and NMIC
because the APT assumed the obligations of DBP and PNB as the successor-in-interest of the said
banks with respect to the assets and liabilities of NMIC.35 As trustee of the Republic of the
Philippines, the APT also assumed the responsibility of the Republic pursuant to the following
provision of Section 2.02 of the respective deeds of transfer executed by DBP and PNB in favor of
the Republic:

SECTION 2. TRANSFER OF BANK’S LIABILITIES

xxxx

2.02 With respect to the Bank’s liabilities which are contingent and those liabilities where the Bank’s
creditors consent to the transfer thereof is not obtained, said liabilities shall remain in the books of
the BANK with the GOVERNMENT funding the payment thereof.36

After a careful review of the case, this Court finds the petitions impressed with merit.

A corporation is an artificial entity created by operation of law. It possesses the right of succession
and such powers, attributes, and properties expressly authorized by law or incident to its
existence.37 It has a personality separate and distinct from that of its stockholders and from that of
other corporations to which it may be connected.38 As a consequence of its status as a distinct legal
entity and as a result of a conscious policy decision to promote capital formation,39 a corporation
incurs its own liabilities and is legally responsible for payment of its obligations.40 In other words, by
virtue of the separate juridical personality of a corporation, the corporate debt or credit is not the debt
or credit of the stockholder.41 This protection from liability for shareholders is the principle of limited
liability.42

Equally well-settled is the principle that the corporate mask may be removed or the corporate veil
pierced when the corporation is just an alter ego of a person or of another corporation. For reasons
of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it
becomes a shield for fraud, illegality or inequity committed against third persons.43

However, the rule is that a court should be careful in assessing the milieu where the doctrine of the
corporate veil may be applied. Otherwise an injustice, although unintended, may result from its
erroneous application.44 Thus, cutting through the corporate cover requires an approach
characterized by due care and caution:

Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A
court should be mindful of the milieu where it is to be applied. It must be certain that the corporate
fiction was misused to such an extent that injustice, fraud, or crime was committed against another,
in disregard of its rights. The wrongdoing must be clearly and convincingly established; it cannot be
presumed. x x x.45 (Emphases supplied; citations omitted.)

Sarona v. National Labor Relations Commission46 has defined the scope of application of the
doctrine of piercing the corporate veil:

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of
public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing
obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or
defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter
ego or business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation. (Citation omitted.)

Here, HRCC has alleged from the inception of this case that DBP and PNB (and the APT as
assignee of DBP and PNB) should be held solidarily liable for using NMIC as alter ego.47 The RTC
sustained the allegation of HRCC and pierced the corporate veil of NMIC pursuant to the alter ego
theory when it concluded that NMIC "is a mere adjunct, business conduit or alter ego of both DBP
and PNB."48 The Court of Appeals upheld such conclusion of the trial court.49 In other words, both the
trial and appellate courts relied on the alter ego theory when they disregarded the separate
corporate personality of NMIC.

In this connection, case law lays down a three-pronged test to determine the application of the alter
ego theory, which is also known as the instrumentality theory, namely:

(1) Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of
its own;

(2) Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act
in contravention of plaintiff’s legal right; and

(3) The aforesaid control and breach of duty must have proximately caused the injury or
unjust loss complained of.50 (Emphases omitted.)

The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be
completely under the control and domination of the parent.51 It examines the parent corporation’s
relationship with the subsidiary.52 It inquires whether a subsidiary corporation is so organized and
controlled and its affairs are so conducted as to make it a mere instrumentality or agent of the parent
corporation such that its separate existence as a distinct corporate entity will be ignored.53 It seeks to
establish whether the subsidiary corporation has no autonomy and the parent corporation, though
acting through the subsidiary in form and appearance, "is operating the business directly for itself."54

The second prong is the "fraud" test. This test requires that the parent corporation’s conduct in using
the subsidiary corporation be unjust, fraudulent or wrongful.55 It examines the relationship of the
plaintiff to the corporation.56 It recognizes that piercing is appropriate only if the parent corporation
uses the subsidiary in a way that harms the plaintiff creditor.57 As such, it requires a showing of "an
element of injustice or fundamental unfairness."58

The third prong is the "harm" test. This test requires the plaintiff to show that the defendant’s control,
exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered.59 A
causal connection between the fraudulent conduct committed through the instrumentality of the
subsidiary and the injury suffered or the damage incurred by the plaintiff should be established. The
plaintiff must prove that, unless the corporate veil is pierced, it will have been treated unjustly by the
defendant’s exercise of control and improper use of the corporate form and, thereby, suffer
damages.60
To summarize, piercing the corporate veil based on the alter ego theory requires the concurrence of
three elements: control of the corporation by the stockholder or parent corporation, fraud or
fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the
fraudulent or unfair act of the corporation. The absence of any of these elements prevents piercing
the corporate veil.61

This Court finds that none of the tests has been satisfactorily met in this case.

In applying the alter ego doctrine, the courts are concerned with reality and not form, with how the
corporation operated and the individual defendant’s relationship to that operation.62 With respect to
the control element, it refers not to paper or formal control by majority or even complete stock control
but actual control which amounts to "such domination of finances, policies and practices that the
controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a
conduit for its principal."63 In addition, the control must be shown to have been exercised at the time
the acts complained of took place.64

Both the RTC and the Court of Appeals applied the alter ego theory and penetrated the corporate
cover of NMIC based on two factors: (1) the ownership by DBP and PNB of effectively all the stocks
of NMIC, and (2) the alleged interlocking directorates of DBP, PNB and NMIC.65 Unfortunately, the
conclusion of the trial and appellate courts that the DBP and PNB fit the alter ego theory with respect
to NMIC’s transaction with HRCC on the premise of complete stock ownership and interlocking
directorates involved a quantum leap in logic and law exposing a gap in reason and fact.

While ownership by one corporation of all or a great majority of stocks of another corporation and
their interlocking directorates may serve as indicia of control, by themselves and without more,
however, these circumstances are insufficient to establish an alter ego relationship or connection
between DBP and PNB on the one hand and NMIC on the other hand, that will justify the puncturing
of the latter’s corporate cover. This Court has declared that "mere ownership by a single stockholder
or by another corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality."66 This Court has likewise ruled
that the "existence of interlocking directors, corporate officers and shareholders is not enough
justification to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations."67

True, the findings of fact of the Court of Appeals are conclusive and cannot be reviewed on appeal
to this Court, provided they are borne out of the record or are based on substantial evidence.68 It is
equally true that the question of whether one corporation is merely an alter ego of another is purely
one of fact. So is the question of whether a corporation is a paper company, a sham or subterfuge or
whether the requisite quantum of evidence has been adduced warranting the piercing of the veil of
corporate personality.69 Nevertheless, it has been held in Sarona v. National Labor Relations
Commission70 that this Court has the power to resolve a question of fact, such as whether a
corporation is a mere alter ego of another entity or whether the corporate fiction was invoked for
fraudulent or malevolent ends, if the findings in the assailed decision are either not supported by the
evidence on record or based on a misapprehension of facts.

In this case, nothing in the records shows that the corporate finances, policies and practices of NMIC
were dominated by DBP and PNB in such a way that NMIC could be considered to have no separate
mind, will or existence of its own but a mere conduit for DBP and PNB. On the contrary, the
evidence establishes that HRCC knew and acted on the knowledge that it was dealing with NMIC,
not with NMIC’s stockholders. The letter proposal of Hercon, Inc., HRCC’s predecessor-in-interest,
regarding the contract for NMIC’s mine stripping and road construction program was addressed to
and accepted by NMIC.71 The various billing reports, progress reports, statements of accounts and
communications of Hercon, Inc./HRCC regarding NMIC’s mine stripping and road construction
program in 1985 concerned NMIC and NMIC’s officers, without any indication of or reference to the
control exercised by DBP and/or PNB over NMIC’s affairs, policies and practices.72

HRCC has presented nothing to show that DBP and PNB had a hand in the act complained of, the
alleged undue disregard by NMIC of the demands of HRCC to satisfy the unpaid claims for services
rendered by HRCC in connection with NMIC’s mine stripping and road construction program in 1985.
On the contrary, the overall picture painted by the evidence offered by HRCC is one where HRCC
was dealing with NMIC as a distinct juridical person acting through its own corporate officers.73

Moreover, the finding that the respective boards of directors of NMIC, DBP, and PNB were
interlocking has no basis. HRCC’s Exhibit "I-5,"74 the initial General Information Sheet submitted by
NMIC to the Securities and Exchange Commission, relied upon by the trial court and the Court of
Appeals may have proven that DBP and PNB owned the stocks of NMIC to the extent of 57% and
43%, respectively. However, nothing in it supports a finding that NMIC, DBP, and PNB had
interlocking directors as it only indicates that, of the five members of NMIC’s board of directors, four
were nominees of either DBP or PNB and only one was a nominee of both DBP and PNB.75 Only two
members of the board of directors of NMIC, Jose Tengco, Jr. and Rolando Zosa, were established to
be members of the board of governors of DBP and none was proved to be a member of the board of
directors of PNB.76 No director of NMIC was shown to be also sitting simultaneously in the board of
governors/directors of both DBP and PNB.

In reaching its conclusion of an alter ego relationship between DBP and PNB on the one hand and
NMIC on the other hand, the Court of Appeals invoked Sibagat Timber Corporation v.
Garcia,77 which it described as "a case under a similar factual milieu."78 However, in Sibagat Timber
Corporation, this Court took care to enumerate the circumstances which led to the piercing of the
corporate veil of Sibagat Timber Corporation for being the alter ego of Del Rosario & Sons Logging
Enterprises, Inc. Those circumstances were as follows: holding office in the same building, practical
identity of the officers and directors of the two corporations and assumption of management and
control of Sibagat Timber Corporation by the directors/officers of Del Rosario & Sons Logging
Enterprises, Inc.

Here, DBP and PNB maintain an address different from that of NMIC.79 As already discussed, there
was insufficient proof of interlocking directorates. There was not even an allegation of similarity of
corporate officers. Instead of evidence that DBP and PNB assumed and controlled the management
of NMIC, HRCC’s evidence shows that NMIC operated as a distinct entity endowed with its own
legal personality. Thus, what obtains in this case is a factual backdrop different from, not similar to,
Sibagat Timber Corporation.

In relation to the second element, to disregard the separate juridical personality of a corporation, the
wrongdoing or unjust act in contravention of a plaintiff’s legal rights must be clearly and convincingly
established; it cannot be presumed. Without a demonstration that any of the evils sought to be
prevented by the doctrine is present, it does not apply.80

In this case, the Court of Appeals declared:

We are not saying that PNB and DBP are guilty of fraud in forming NMIC, nor are we implying that
NMIC was used to conceal fraud. x x x.81

Such a declaration clearly negates the possibility that DBP and PNB exercised control over NMIC
which DBP and PNB used "to commit fraud or wrong, to perpetuate the violation of a statutory or
other positive legal duty, or dishonest and unjust act in contravention of plaintiff’s legal rights." It is a
recognition that, even assuming that DBP and PNB exercised control over NMIC, there is no
evidence that the juridical personality of NMIC was used by DBP and PNB to commit a fraud or to do
a wrong against HRCC.

There being a total absence of evidence pointing to a fraudulent, illegal or unfair act committed
against HRCC by DBP and PNB under the guise of NMIC, there is no basis to hold that NMIC was a
mere alter ego of DBP and PNB. As this Court ruled in Ramoso v. Court of Appeals82:

As a general rule, a corporation will be looked upon as a legal entity, unless and until sufficient
reason to the contrary appears. When the notion of legal entity is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of
persons. Also, the corporate entity may be disregarded in the interest of justice in such cases as
fraud that may work inequities among members of the corporation internally, involving no rights of
the public or third persons. In both instances, there must have been fraud, and proof of it. For the
separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and
convincingly established. It cannot be presumed.

As regards the third element, in the absence of both control by DBP and PNB of NMIC and fraud or
fundamental unfairness perpetuated by DBP and PNB through the corporate cover of NMIC, no
harm could be said to have been proximately caused by DBP and PNB on HRCC for which HRCC
could hold DBP and PNB solidarily liable with NMIC. 1âw phi1

Considering that, under the deeds of transfer executed by DBP and PNB, the liability of the APT as
transferee of the rights, titles and interests of DBP and PNB in NMIC will attach only if DBP and PNB
are held liable, the APT incurs no liability for the judgment indebtedness of NMIC. Even HRCC
recognizes that "as assignee of DBP and PNB 's loan receivables," the APT simply "stepped into the
shoes of DBP and PNB with respect to the latter's rights and obligations" in NMIC.83 As such
assignee, therefore, the APT incurs no liability with respect to NMIC other than whatever liabilities
may be imputable to its assignors, DBP and PNB.

Even under Section 2.02 of the respective deeds of transfer executed by DBP and PNB which
HRCC invokes, the APT cannot be held liable. The contingent liability for which the National
Government, through the APT, may be held liable under the said provision refers to contingent
liabilities of DBP and PNB. Since DBP and PNB may not be held solidarily liable with NMIC, no
contingent liability may be imputed to the APT as well. Only NMIC as a distinct and separate legal
entity is liable to pay its corporate obligation to HRCC in the amount of ₱8,370,934.74, with legal
interest thereon from date of demand.

As trustee of the. assets of NMIC, however, the APT should ensure compliance by NMIC of the
judgment against it. The APT itself acknowledges this.84

WHEREFORE, the petitions are hereby GRANTED.

The complaint as against Development Bank of the Philippines, the Philippine National Bank, and
the Asset Privatization Trust, now the Privatization and Management Office, is DISMISSED for lack
of merit. The Asset Privatization Trust, now the Privatization and Management Office, as trustee of
Nonoc Mining and Industrial Corporation, now the Philnico Processing Corporation, is DIRECTED to
ensure compliance by the Nonoc Mining and Industrial Corporation, now the Philnico Processing
Corporation, with this Decision.

SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1 Under Rule 45 of the Rules of Court.

2Rollo (G.R. No. 167530), pp. 56-68; penned by Associate Justice Romeo A. Brawner with
Associate Justices Mariano C. del Castillo (now a member of this Court) and Magdangal M.
de Leon, concurring.

3 Id. at 70.

4 Id. at 122-136; penned by Judge Roberto C. Diokno.

5 For purposes of these petitions, the PMO will be referred to as the APT.

6 Now, the Philnico Processing Corporation. (Rollo [G.R. No. 167561], p. 46.)

7 Rollo (G.R. No. 167530), p. 57.

8 Id. at 65.

9 Id. at 135.

10 Id. at 57.
11 Id. at 123 and 133.

12 Id. at 122.

13 Rollo (G.R. No. 167561), pp. 78-103 and 104-113, respectively.

14 Rollo (G.R. No. 167530), pp. 116-121.

15 Records, Vol. I, pp. 79-87.

16 Id. at 81-85.

17 Id. at 56-64.

18 Id. at 58-60.

19 Id. at 47-51.

20 Id. at 49-50.

21 Id., Vol. II, pp. 432-436.

22 Id. at 434.

23 Rollo (G.R. No. 167530), p. 135.

24 Id. at 136.

Briefs for Defendant-Appellants Philippine National Bank and Development Bank of the
25

Philippines. (CA rollo, pp. 104-127 and 167-190, respectively.)

26 Rollo (G.R. No. 167530), pp. 65-66.

27 Id. at 66.

28 Id. at 67.

29 Id. at 70.

30Upon motion of HRCC, the petitions separately filed by DBP, PNB, and APT have been
consolidated pursuant to this Court’s Resolution dated September 26, 2005.

31Rollos (G.R. No. 167530), pp. 40-46, (G.R. No. 167561), pp. 42-46 and (G.R. No. 167603),
pp. 37-44.

32 Rollos (G.R. No. 167530), pp. 46-50 and (G.R. No. 167603), pp. 45-47.

33 Rollo (G.R. No. 167561), pp. 49-50.

34 Rollo (G.R. No. 167530), pp. 185-188.

35 Id. at 188.

36 Id. at 84.

Sarona v. National Labor Relations Commission, G.R. No. 185280, January 18, 2012, 663
37

SCRA 394, 416.

38 Francisco v. Mallen, Jr., G.R. No. 173169, September 22, 2010, 631 SCRA 118, 125.

39 Rands,William, Domination of a Subsidiary by a Parent, 32 Ind. L. Rev. 421, 423 (1999)

citing Philip I. Blumberg, Limited Liability and Corporate Groups, 11 J. Corp. L. 573, 575-576
(1986) and Stephen Presser, Thwarting the Killing of the Corporation: Limited Liability,
Democracy and Economics, 87 NW. U. L. Rev. 148, 155 (1992).

40 Id.

Good Earth Emporium, Inc. v. Court of Appeals, G.R. No. 82797, February 27, 1991, 194
41

SCRA 544, 550.

42 Rands,William, supra note 39.

43Philippine National Bank v. Andrada Electric & Engineering Company, 430 Phil. 882, 894
(2002).

44 Francisco Motors Corporation v. Court of Appeals, 368 Phil. 374, 386 (1999).

45
Philippine National Bank v. Andrada Electric Engineering Company, supra note 43 at 894-
895.

46 Supra note 37 at 417.

See paragraphs 8(b) and 9 of the original Complaint and of the first and second Amended
47

Complaints. (Records, Vol. I, pp. 3-4, 190-191 and 334-335, respectively.)

48 Rollo (G.R. No. 167530), p. 135.

49 Id. at 66.

50 Concept Builders, Inc. v. National Labor Relations Commission, 326 Phil. 955, 966 (1996).

51Reed, Bradley, Clearing Away the Mist: Suggestions for Developing a Principled Veil
Piercing Doctrine in China, Vanderbilt Journal of International Law 39: 1643, citing Stephen
Presser, PIERCING THE CORPORATE VEIL, § 1:6, West (2004).

Id., citing White v. Jorgenson, 322 N.W.2d 607, 608 (Minn. 1982) and Multimedia
52

Publishing of South Carolina, Inc. v. Mullins, 431 S.E.2d 569, 571 (S.C. 1993).

Id. citing Maurice Wormser, DISREGARD OF THE CORPORATE FICTION AND ALLIED
53

CORPORATE PROBLEMS (1929).

54 Id.

55 Id.

56 White v. Jorgenson, supra note 52.

57 Reed, Bradley, supra note 51.

58White v. Jorgenson, supra note 52, citing Victoria Elevator Co. v. Meriden Grain Co., 283
N.W.2d 509, 512 (Minn. 1979).

59Olthoff, Mark, Beyond the Form: Should the Corporate Veil Be Pierced?, 64 UMKC L. Rev.
311, 318 (1995).

60 Id.

61 Concept Builders, Inc. v. National Labor Relations Commission, supra note 50 at 966.

62 Nisce v. Equitable PCI Bank, Inc., 545 Phil. 138, 166 (2007).

63 Concept Builders, Inc. v. National Labor Relations Commission, supra note 50 at 966.

64 Id.

65 Rollo (G.R. No. 167530), p. 65.

66 Francisco v. Mejia, 415 Phil. 153, 170 (2001).

67 Velarde v. Lopez, Inc., 464 Phil. 525, 538 (2004).

68 Republic v. Hon. Mangotara, G.R. No. 170375, July 7, 2010, 624 SCRA 360, 431.

69 Sarona v. National Labor Relations Commission, supra note 37 at 414.

70 Id.

71Exhibits "A" (letter proposal dated January 31, 1985 of Hercon, Inc., through Earl Pitcock,
Hercon’s President) and "B" (letter of acceptance dated February 11, 1985 by the NMIC,
through Rolando Zosa, the NMIC’s President. (Records, Vol. II, pp. 737-742.)

72Exhibits "C," "C-1" to "C-22" and their respective submarkings, "D" and "D-1" and its
submarkings. (Id. at 743-838.)

73 Id.

74 Id. at 903-904.

75Id. In particular, those listed as members of the board of directors of NMIC were Jose
Tengco, Jr. (DBP), Rolando M. Zosa (DBP), Ruben Ancheta (DBP/PNB), Geraldo Agulto
(PNB), and Faustino Agbada (DBP).
76This fact was admitted by NMIC and DBP in their respective answers and in paragraph 6
of DBP’s Reply to Request for Admission of HRCC. (Records, Vol. I, pp. 56, 73 and 308.)

77 G.R. No. 98185, December 11, 1992, 216 SCRA 470, 474.

78 Rollo (G.R. No. 167530), p. 65.

79Paragraph 2 of the original Complaint and of the first and second Amended Complaints
identify the address of NMIC as "2283 Pasong Tamo Ext., Makati, Metro Manila;" that of
DBP as "Makati Avenue corner Sen. Gil J. Puyat Avenue, Makati, Metro Manila;" and that of
PNB as "Escolta, Manila." (Records, Vol. I, pp. 1, 188 and 332, respectively.)

80Yamamoto v. Nishino Leather Industries, Inc., G.R. No. 150283, April 16, 2008, 551 SCRA
447, 454-455.

81 Rollo (G.R. No. 167530), p. 65.

82 400 Phil. 1260, 1268 (2000).

83 Paragraph 14 of Amended Complaint. (Records, Vol. I, p. 336.)

84 Rollo (G.R. No. 167561), pp. 47-48.