SECOND DIVISION

[G.R. No. 151969. September 4, 2009.]

VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY
GAMBOA, AMADO M. SANTIAGO, JR., FORTUNATO DEE, AUGUSTO
SUNICO, VICTOR SALTA, FRANCISCO ORTIGAS III, ERIC ROXAS, in
their capacities as members of the Board of Directors of Valle Verde Country
Club, Inc., and JOSE RAMIREZ, petitioners, vs. VICTOR AFRICA, respondent.
DECISION
BRION, J p:
In this petition for review on certiorari, 1 the parties raise a legal question on corporate
governance: Can the members of a corporation's board of directors elect another
director to fill in a vacancy caused by the resignation of a hold-over director?
THE FACTUAL ANTECEDENTS
On February 27, 1996, during the Annual Stockholders' Meeting of petitioner Valle
Verde Country Club, Inc. (VVCC), the following were elected as members of the
VVCC Board of Directors: Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan),
Eduardo Makalintal (Makalintal), Francisco Ortigas III, Victor Salta, Amado M.
Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa. 2 In the years 1997,
1998, 1999, 2000, and 2001, however, the requisite quorum for the holding of the
stockholders' meeting could not be obtained. Consequently, the above-named directors
continued to serve in the VVCC Board in a hold-over capacity.
On September 1, 1998, Dinglasan resigned from his position as member of the VVCC
Board. In a meeting held on October 6, 1998, the remaining directors, still constituting
a quorum of VVCC's nine-member board, elected Eric Roxas (Roxas) to fill in the
vacancy created by the resignation of Dinglasan.
A year later, or on November 10, 1998, Makalintal also resigned as member of the
VVCC Board. He was replaced by Jose Ramirez (Ramirez), who was elected by the
remaining members of the VVCC Board on March 6, 2001. DHACES
Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas and
Ramirez as members of the VVCC Board with the Securities and Exchange
Commission (SEC) and the Regional Trial Court (RTC), respectively. The SEC case
questioning the validity of Roxas' appointment was docketed as SEC Case No. 01-99-
6177. The RTC case questioning the validity of Ramirez' appointment was docketed as
Civil Case No. 68726.
In his nullification complaint 3 before the RTC, Africa alleged that the election of
Roxas was contrary to Section 29, in relation to Section 23, of the Corporation Code of
the Philippines (Corporation Code). These provisions read:
Sec. 23.The board of directors or trustees. Unless
otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations
controlled and held by the board of directors or trustees to
be elected from among the holders of stocks, or where there
is no stock, from among the members of the corporation,
who shall hold office for one (1) year until their
successors are elected and qualified.
xxx xxx xxx
Sec. 29.Vacancies in the office of director or trustee.
Any vacancy occurring in the board of directors or
trustees other than by removal by the stockholders or
members or by expiration of term, may be filled by the
vote of at least a majority of the remaining directors or
trustees, if still constituting a quorum; otherwise, said
vacancies must be filled by the stockholders in a regular or
special meeting called for that purpose. A director or
trustee so elected to fill a vacancy shall be elected only for
the unexpired term of his predecessor in office. . . . .
[Emphasis supplied.]
Africa claimed that a year after Makalintal's election as member of the VVCC
Board in 1996, his [Makalintal's] term as well as those of the other members
of the VVCC Board should be considered to have already expired. Thus,
according to Africa, the resulting vacancy should have been filled by the
stockholders in a regular or special meeting called for that purpose, and not by the
remaining members of the VVCC Board, as was done in this case.
Africa additionally contends that for the members to exercise the authority to fill in
vacancies in the board of directors, Section 29 requires, among others, that there should
be an unexpired term during which the successor-member shall serve. Since
Makalintal's term had already expired with the lapse of the one-year term provided in
Section 23, there is no more "unexpired term" during which Ramirez could serve.
EcHIDT
Through a partial decision 4 promulgated on January 23, 2002, the RTC ruled in favor
of Africa and declared the election of Ramirez, as Makalintal's replacement, to the
VVCC Board as null and void.
Incidentally, the SEC issued a similar ruling on June 3, 2003, nullifying the election of
Roxas as member of the VVCC Board, vice hold-over director Dinglasan. While VVCC
manifested its intent to appeal from the SEC's ruling, no petition was actually filed with
the Court of Appeals; thus, the appellate court considered the case closed and
terminated and the SEC's ruling final and executory. 5
THE PETITION
VVCC now appeals to the Court to assail the RTC's January 23, 2002 partial decision
for being contrary to law and jurisprudence. VVCC made a direct resort to the Court via
a petition for review on certiorari, claiming that the sole issue in the present case
involves a purely legal question.
As framed by VVCC, the issue for resolution is whether the remaining directors of the
corporation's Board, still constituting a quorum, can elect another director to fill in a
vacancy caused by the resignation of a hold-over director.
Citing law and jurisprudence, VVCC posits that the power to fill in a vacancy created
by the resignation of a hold-over director is expressly granted to the remaining
members of the corporation's board of directors.
Under the above-quoted Section 29 of the Corporation Code, a vacancy occurring in the
board of directors caused by the expiration of a member's term shall be filled by the
corporation's stockholders. Correlating Section 29 with Section 23 of the same law,
VVCC alleges that a member's term shall be for one year and until his successor is
elected and qualified; otherwise stated, a member's term expires only when his
successor to the Board is elected and qualified. Thus, "until such time as [a successor
is] elected or qualified in an annual election where a quorum is present", VVCC
contends that "the term of [a member] of the board of directors has yet not expired".
As the vacancy in this case was caused by Makalintal's resignation, not by the
expiration of his term, VVCC insists that the board rightfully appointed Ramirez to fill
in the vacancy.
In support of its arguments, VVCC cites the Court's ruling in the 1927 El Hogar 6 case
which states: THAICD
Owing to the failure of a quorum at most of the general
meetings since the respondent has been in existence, it
has been the practice of the directors to fill in vacancies
in the directorate by choosing suitable persons from
among the stockholders. This custom finds its sanction in
Article 71 of the By-Laws, which reads as follows:
Art. 71.The directors shall elect from among the
shareholders members to fill the vacancies that
may occur in the board of directors until the
election at the general meeting.
xxx xxx xxx
Upon failure of a quorum at any annual meeting the
directorate naturally holds over and continues to function
until another directorate is chosen and qualified. Unless the
law or the charter of a corporation expressly provides that an
office shall become vacant at the expiration of the term of
office for which the officer was elected, the general rule is to
allow the officer to hold over until his successor is duly
qualified. Mere failure of a corporation to elect officers does
not terminate the terms of existing officers nor dissolve the
corporation. The doctrine above stated finds expression in
article 66 of the by-laws of the respondent which declares in
so many words that directors shall hold office "for the term
of one year or until their successors shall have been elected
and taken possession of their offices." . . . .
It results that the practice of the directorate of filling
vacancies by the action of the directors themselves is
valid. Nor can any exception be taken to the personality of
the individuals chosen by the directors to fill vacancies in
the body. [Emphasis supplied.]
Africa, in opposing VVCC's contentions, raises the same arguments that he did before
the trial court.
THE COURT'S RULING
We are not persuaded by VVCC's arguments and, thus, find its petition
unmeritorious.
To repeat, the issue for the Court to resolve is whether the remaining directors of a
corporation's Board, still constituting a quorum, can elect another director to fill in a
vacancy caused by the resignation of a hold-over director. The resolution of this legal
issue is significantly hinged on the determination of what constitutes a director's term of
office.
The holdover period is not part of the term of office of a member of
the board of directors
The word "term" has acquired a definite meaning in jurisprudence. In several cases, we
have defined "term" as the time during which the officer may claim to hold the
office as of right, and fixes the interval after which the several incumbents shall
succeed one another. 7 The term of office is not affected by the holdover. 8 The term
is fixed by statute and it does not change simply because the office may have become
vacant, nor because the incumbent holds over in office beyond the end of the term due
to the fact that a successor has not been elected and has failed to qualify. DCcHAa
Term is distinguished from tenure in that an officer's "tenure" represents the term
during which the incumbent actually holds office. The tenure may be shorter (or, in
case of holdover, longer) than the term for reasons within or beyond the power of the
incumbent.

Based on the above discussion, when Section 23 9 of the Corporation Code declares
that "the board of directors . . . shall hold office for one (1) year until their successors
are elected and qualified", we construe the provision to mean that the term of the
members of the board of directors shall be only for one year; their term expires one
year after election to the office. The holdover period that time from the lapse of one
year from a member's election to the Board and until his successor's election and
qualification is not part of the director's original term of office, nor is it a new term;
the holdover period, however, constitutes part of his tenure. Corollary, when an
incumbent member of the board of directors continues to serve in a holdover capacity,
it implies that the office has a fixed term, which has expired, and the incumbent is
holding the succeeding term. 10
After the lapse of one year from his election as member of the VVCC Board in 1996,
Makalintal's term of office is deemed to have already expired. That he continued to
serve in the VVCC Board in a holdover capacity cannot be considered as extending his
term. To be precise, Makalintal's term of office began in 1996 and expired in 1997, but,
by virtue of the holdover doctrine in Section 23 of the Corporation Code, he continued
to hold office until his resignation on November 10, 1998. This holdover period,
however, is not to be considered as part of his term, which, as declared, had already
expired.
With the expiration of Makalintal's term of office, a vacancy resulted which, by the
terms of Section 29 11 of the Corporation Code, must be filled by the stockholders of
VVCC in a regular or special meeting called for the purpose. To assume as VVCC
does that the vacancy is caused by Makalintal's resignation in 1998, not by the
expiration of his term in 1997, is both illogical and unreasonable. His resignation as a
holdover director did not change the nature of the vacancy; the vacancy due to the
expiration of Makalintal's term had been created long before his resignation.
The powers of the corporation's board of directors emanate from
its stockholders
VVCC's construction of Section 29 of the Corporation Code on the authority to fill up
vacancies in the board of directors, in relation to Section 23 thereof, effectively
weakens the stockholders' power to participate in the corporate governance by electing
their representatives to the board of directors. The board of directors is the directing and
controlling body of the corporation. It is a creation of the stockholders and derives its
power to control and direct the affairs of the corporation from them. The board of
directors, in drawing to themselves the powers of the corporation, occupies a position
of trusteeship in relation to the stockholders, in the sense that the board should exercise
not only care and diligence, but utmost good faith in the management of corporate
affairs. 12 TcIHDa
The underlying policy of the Corporation Code is that the business and affairs of a
corporation must be governed by a board of directors whose members have stood for
election, and who have actually been elected by the stockholders, on an annual basis.
Only in that way can the directors' continued accountability to shareholders, and the
legitimacy of their decisions that bind the corporation's stockholders, be assured. The
shareholder vote is critical to the theory that legitimizes the exercise of power by the
directors or officers over properties that they do not own. 13
This theory of delegated power of the board of directors similarly explains why, under
Section 29 of the Corporation Code, in cases where the vacancy in the corporation's
board of directors is caused not by the expiration of a member's term, the successor "so
elected to fill in a vacancy shall be elected only for the unexpired term of the his
predecessor in office". The law has authorized the remaining members of the board to
fill in a vacancy only in specified instances, so as not to retard or impair the
corporation's operations; yet, in recognition of the stockholders' right to elect the
members of the board, it limited the period during which the successor shall serve only
to the "unexpired term of his predecessor in office".
While the Court in El Hogar approved of the practice of the directors to fill vacancies
in the directorate, we point out that this ruling was made before the present Corporation
Code was enacted 14 and before its Section 29 limited the instances when the
remaining directors can fill in vacancies in the board, i.e., when the remaining directors
still constitute a quorum and when the vacancy is caused for reasons other than by
removal by the stockholders or by expiration of the term.
It also bears noting that the vacancy referred to in Section 29 contemplates a vacancy
occurring within the director's term of office. When a vacancy is created by the
expiration of a term, logically, there is no more unexpired term to speak of. Hence,
Section 29 declares that it shall be the corporation's stockholders who shall possess the
authority to fill in a vacancy caused by the expiration of a member's term.
As correctly pointed out by the RTC, when remaining members of the VVCC Board
elected Ramirez to replace Makalintal, there was no more unexpired term to speak of,
as Makalintal's one-year term had already expired. Pursuant to law, the authority to fill
in the vacancy caused by Makalintal's leaving lies with the VVCC's stockholders, not
the remaining members of its board of directors. HCEaDI
WHEREFORE, we DENY the petitioners' petition for review on certiorari, and
AFFIRM the partial decision of the Regional Trial Court, Branch 152, Manila,
promulgated on January 23, 2002, in Civil Case No. 68726. Costs against the
petitioners.
SO ORDERED.
Quisumbing, Carpio Morales, Del Castillo and Abad, JJ., concur.

Footnotes

1.Filed under Rule 45 of the Rules of Court; rollo, pp. 11-23.
2.Also co-petitioners of VVCC in the present petition.
3.Africa's complaint before the RTC was denominated as "Nullification of the 'Election' of a
'New Regular/Hold-Over (?) Director' and Damages"; rollo, pp. 31-46.
4.Id., pp. 28-30.
5.CA Resolution dated August 27, 2003; id., p. 124.
6.Government of the Philippine Islands v. El Hogar Filipino, 50 Phil. 399 (1927).
7.See Topacio Nueno v. Angeles, 76 Phil. 12, 21-22 (1946); Alba v. Evangelista, 100 Phil.
683, 694 (1957); Paredes v. Abad, 155 Phil. 494 (1974); Aparri v. Court of
Appeals, No. L-30057, January 31, 1984, 127 SCRA 231.
8.Gaminde v. Commission on Audit, G.R. No. 140335, December 13, 2000, 347 SCRA 655.
9.The full text of which reads:
Sec. 23. Theboard of directors or trustees. Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised,
all business conducted and all property of such corporations controlled and held
by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation,
who shall hold office for one (1) year until their successors are elected and
qualified.
Every director must own at least one (1) share of the capital stock of the corporation of which
he is a director, which share shall stand in his name on the books of the
corporation. Any director who ceases to be the owner of at least one (1) share of
the capital stock of the corporation of which he is a director shall thereby cease
to be a director. Trustees of non-stock corporations must be members thereof. A
majority of the directors or trustees of all corporations organized under this Code
must be residents of the Philippines.
10.Words & Phrases, Vol. 19, p. 576.
11.The full text of which reads:
Sec. 29. Vacancies in theofficeof director or trustee. Any vacancy occurring in the board
of directors or trustees other than by removal by the stockholders or members or
by expiration of term, may be filled by the vote of at least a majority of the
remaining directors or trustees, if still constituting a quorum; otherwise, said
vacancies must be filled by the stockholders in a regular or special meeting
called for that purpose. A director or trustee so elected to fill a vacancy shall be
elected only or the unexpired term of his predecessor in office.
A directorship or trusteeship to be filled by reason of an increase in the number of directors or
trustees shall be filled only by an election at a regular or at a special meeting of
stockholders or members duly called for the purpose, or in the same meeting
authorizing the increase of directors or trustees if so stated in the notice of the
meeting.
12.Legarda v. La Previsora Filipina, 66 Phil. 173 (1938), citing Angeles v. Santos, 64 Phil.
697 (1937).
13.Comac Partners, L.P., et al., v. Ghaznavi, et al., Del. Ch., 793 A.2d 372 (2001), citing
Bentas v. Haseotes, Del. Ch., 769 A.2d 70, 76 (2000) and Blasius Indus., Inc. v.
Atlas Corp., Del. Ch., 564 A.2d 651, 659 (1988).
14.The Corporation Code or Batas Pambansa Blg. 68 was enacted on May 1, 1980.

(on w/n the employees of the dissolved corp are absorbed by the surviving corp in a
merger)
EN BANC
[G.R. No. 164301. October 11, 2011.*]
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-
FEDERATION OF UNIONS IN BPI UNIBANK,
respondent.
RESOLUTION
LEONARDO-DE CASTRO, J p:
In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for
reconsideration 1 of our Decision dated August 10, 2010, holding that former
employees of the Far East Bank and Trust Company (FEBTC) "absorbed" by BPI
pursuant to the two banks' merger in 2000 were covered by the Union Shop Clause in
the then existing collective bargaining agreement (CBA) 2 of BPI with respondent BPI
Employees Union-Davao Chapter-Federation of Unions in BPI Unibank (the Union).
To recall, the Union Shop Clause involved in this long standing controversy provided,
thus:
ARTICLE II
xxx xxx xxx
Section 2.Union Shop. New employees falling within the
bargaining unit as defined in Article I of this Agreement,
who may hereafter be regularly employed by the Bank
shall, within thirty (30) days after they become regular
employees, join the Union as a condition of their
continued employment. It is understood that membership in
good standing in the Union is a condition of their continued
employment with the Bank. 3 (Emphases supplied.)
The bone of contention between the parties was whether or not the "absorbed" FEBTC
employees fell within the definition of "new employees" under the Union Shop Clause,
such that they may be required to join respondent union and if they fail to do so, the
Union may request BPI to terminate their employment, as the Union in fact did in the
present case. Needless to state, BPI refused to accede to the Union's request. Although
BPI won the initial battle at the Voluntary Arbitrator level, BPI's position was rejected
by the Court of Appeals which ruled that the Voluntary Arbitrator's interpretation of the
Union Shop Clause was at war with the spirit and rationale why the Labor Code allows
the existence of such provision. On review with this Court, we upheld the appellate
court's ruling and disposed of the case as follows:
WHEREFORE, the petition is hereby DENIED, and the
Decision dated September 30, 2003 of the Court of Appeals
is AFFIRMED, subject to the thirty (30) day notice
requirement imposed herein. Former FEBTC employees
who opt not to become union members but who qualify for
retirement shall receive their retirement benefits in
accordance with law, the applicable retirement plan, or the
CBA, as the case may be. 4
Notwithstanding our affirmation of the applicability of the Union Shop Clause to
former FEBTC employees, for reasons already extensively discussed in the August 10,
2010 Decision, even now BPI continues to protest the inclusion of said employees in
the Union Shop Clause. cTADCH
In seeking the reversal of our August 10, 2010 Decision, petitioner insists that the
parties to the CBA clearly intended to limit the application of the Union Shop Clause
only to new employees who were hired as non-regular employees but later attained
regular status at some point after hiring. FEBTC employees cannot be considered new
employees as BPI merely stepped into the shoes of FEBTC as an employer purely as a
consequence of the merger. 5
Petitioner likewise relies heavily on the dissenting opinions of our respected colleagues,
Associate Justices Antonio T. Carpio and Arturo D. Brion. From both dissenting
opinions, petitioner derives its contention that "the situation of absorbed employees can
be likened to old employees of BPI, insofar as their full tenure with FEBTC was
recognized by BPI and their salaries were maintained and safeguarded from
diminution" but such absorbed employees "cannot and should not be treated in exactly
the same way as old BPI employees for there are substantial differences between them."
6 Although petitioner admits that there are similarities between absorbed and new
employees, they insist there are marked differences between them as well. Thus,
adopting Justice Brion's stance, petitioner contends that the absorbed FEBTC
employees should be considered "a sui generis group of employees whose classification
will not be duplicated until BPI has another merger where it would be the surviving
corporation." 7 Apparently borrowing from Justice Carpio, petitioner propounds that
the Union Shop Clause should be strictly construed since it purportedly curtails the
right of the absorbed employees to abstain from joining labor organizations. 8
Pursuant to our directive, the Union filed its Comment 9 on the Motion for
Reconsideration. In opposition to petitioner's arguments, the Union, in turn, adverts to
our discussion in the August 10, 2010 Decision regarding the voluntary nature of the
merger between BPI and FEBTC, the lack of an express stipulation in the Articles of
Merger regarding the transfer of employment contracts to the surviving corporation,
and the consensual nature of employment contracts as valid bases for the conclusion
that former FEBTC employees should be deemed new employees. 10 The Union argues
that the creation of employment relations between former FEBTC employees and BPI
(i.e., BPI's selection and engagement of former FEBTC employees, its payment of their
wages, power of dismissal and of control over the employees' conduct) occurred after
the merger, or to be more precise, after the Securities and Exchange Commission's
(SEC) approval of the merger. 11 The Union likewise points out that BPI failed to offer
any counterargument to the Court's reasoning that:
The rationale for upholding the validity of union shop
clauses in a CBA, even if they impinge upon the individual
employee's right or freedom of association, is not to protect
the union for the union's sake. Laws and jurisprudence
promote unionism and afford certain protections to the
certified bargaining agent in a unionized company because a
strong and effective union presumably benefits all
employees in the bargaining unit since such a union would
be in a better position to demand improved benefits and
conditions of work from the employer. . . . .
. . . Nonetheless, settled jurisprudence has already swung the
balance in favor of unionism, in recognition that ultimately
the individual employee will be benefited by that policy. In
the hierarchy of constitutional values, this Court has
repeatedly held that the right to abstain from joining a labor
organization is subordinate to the policy of encouraging
unionism as an instrument of social justice. 12
While most of the arguments offered by BPI have already been thoroughly addressed in
the August 10, 2010 Decision, we find that a qualification of our ruling is in order only
with respect to the interpretation of the provisions of the Articles of Merger and its
implications on the former FEBTC employees' security of tenure.
Taking a second look on this point, we have come to agree with Justice Brion's view
that it is more in keeping with the dictates of social justice and the State policy of
according full protection to labor to deem employment contracts as automatically
assumed by the surviving corporation in a merger, even in the absence of an express
stipulation in the articles of merger or the merger plan. In his dissenting opinion, Justice
Brion reasoned that: aDECHI
To my mind, due consideration of Section 80 of the
Corporation Code, the constitutionally declared policies on
work, labor and employment, and the specific FEBTC-BPI
situation i.e., a merger with complete "body and soul"
transfer of all that FEBTC embodied and possessed and
where both participating banks were willing (albeit by deed,
not by their written agreement) to provide for the affected
human resources by recognizing continuity of employment
should point this Court to a declaration that in a complete
merger situation where there is total takeover by one
corporation over another and there is silence in the merger
agreement on what the fate of the human resource
complement shall be, the latter should not be left in legal
limbo and should be properly provided for, by compelling
the surviving entity to absorb these employees. This is what
Section 80 of the Corporation Code commands, as the
surviving corporation has the legal obligation to assume all
the obligations and liabilities of the merged constituent
corporation.
Not to be forgotten is that the affected employees managed,
operated and worked on the transferred assets and properties
as their means of livelihood; they constituted a basic
component of their corporation during its existence. In a
merger and consolidation situation, they cannot be treated
without consideration of the applicable constitutional
declarations and directives, or, worse, be simply disregarded.
If they are so treated, it is up to this Court to read and
interpret the law so that they are treated in accordance with
the legal requirements of mergers and consolidation, read in
light of the social justice, economic and social provisions of
our Constitution. Hence, there is a need for the surviving
corporation to take responsibility for the affected employees
and to absorb them into its workforce where no appropriate
provision for the merged corporation's human resources
component is made in the Merger Plan. 13
By upholding the automatic assumption of the non-surviving corporation's existing
employment contracts by the surviving corporation in a merger, the Court strengthens
judicial protection of the right to security of tenure of employees affected by a merger
and avoids confusion regarding the status of their various benefits which were among
the chief objections of our dissenting colleagues. However, nothing in this Resolution
shall impair the right of an employer to terminate the employment of the absorbed
employees for a lawful or authorized cause or the right of such an employee to resign,
retire or otherwise sever his employment, whether before or after the merger, subject to
existing contractual obligations. In this manner, Justice Brion's theory of automatic
assumption may be reconciled with the majority's concerns with the successor
employer's prerogative to choose its employees and the prohibition against involuntary
servitude.
Notwithstanding this concession, we find no reason to reverse our previous
pronouncement that the absorbed FEBTC employees are covered by the Union Shop
Clause.
Even in our August 10, 2010 Decision, we already observed that the legal fiction in the
law on mergers (that the surviving corporation continues the corporate existence of the
non-surviving corporation) is mainly a tool to adjudicate the rights and obligations
between and among the merged corporations and the persons that deal with them. 14
Such a legal fiction cannot be unduly extended to an interpretation of a Union Shop
Clause so as to defeat its purpose under labor law. Hence, we stated in the Decision
that:
In any event, it is of no moment that the former FEBTC
employees retained the regular status that they possessed
while working for their former employer upon their
absorption by petitioner. This fact would not remove them
from the scope of the phrase "new employees" as
contemplated in the Union Shop Clause of the CBA,
contrary to petitioner's insistence that the term "new
employees" only refers to those who are initially hired as
non-regular employees for possible regular employment.
The Union Shop Clause in the CBA simply states that "new
employees" who during the effectivity of the CBA "may be
regularly employed" by the Bank must join the union within
thirty (30) days from their regularization. There is nothing in
the said clause that limits its application to only new
employees who possess non-regular status, meaning
probationary status, at the start of their employment.
Petitioner likewise failed to point to any provision in the
CBA expressly excluding from the Union Shop Clause new
employees who are "absorbed" as regular employees from
the beginning of their employment. What is indubitable from
the Union Shop Clause is that upon the effectivity of the
CBA, petitioner's new regular employees (regardless of the
manner by which they became employees of BPI) are
required to join the Union as a condition of their continued
employment. 15 cACDaH
Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor
employer as if the former had been the employer of the latter's employees from the
beginning it must be emphasized that, in reality, the legal consequences of the merger
only occur at a specific date, i.e., upon its effectivity which is the date of approval of
the merger by the SEC. Thus, we observed in the Decision that BPI and FEBTC
stipulated in the Articles of Merger that they will both continue their respective
business operations until the SEC issues the certificate of merger and in the event no
such certificate is issued, they shall hold each other blameless for the non-
consummation of the merger. 16 We likewise previously noted that BPI made its
assignments of the former FEBTC employees effective on April 10, 2000, or after the
SEC approved the merger. 17 In other words, the obligation of BPI to pay the salaries
and benefits of the former FEBTC employees and its right of discipline and control
over them only arose with the effectivity of the merger. Concomitantly, the obligation
of former FEBTC employees to render service to BPI and their right to receive benefits
from the latter also arose upon the effectivity of the merger. What is material is that all
of these legal consequences of the merger took place during the life of an existing and
valid CBA between BPI and the Union wherein they have mutually consented to
include a Union Shop Clause.
From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers
employees who (a) enter the employ of BPI during the term of the CBA; (b) are part of
the bargaining unit (defined in the CBA as comprised of BPI's rank and file
employees); and (c) become regular employees without distinguishing as to the manner
they acquire their regular status. Consequently, the number of such employees may
adversely affect the majority status of the Union and even its existence itself, as already
amply explained in the Decision.
Indeed, there are differences between (a) new employees who are hired as probationary
or temporary but later regularized, and (b) new employees who, by virtue of a merger,
are absorbed from another company as regular and permanent from the beginning of
their employment with the surviving corporation. It bears reiterating here that these
differences are too insubstantial to warrant the exclusion of the absorbed employees
from the application of the Union Shop Clause. In the Decision, we noted that:
Verily, we agree with the Court of Appeals that there are no
substantial differences between a newly hired non-regular
employee who was regularized weeks or months after his
hiring and a new employee who was absorbed from another
bank as a regular employee pursuant to a merger, for
purposes of applying the Union Shop Clause. Both
employees were hired/employed only after the CBA was
signed. At the time they are being required to join the Union,
they are both already regular rank and file employees of BPI.
They belong to the same bargaining unit being represented
by the Union. They both enjoy benefits that the Union was
able to secure for them under the CBA. When they both
entered the employ of BPI, the CBA and the Union Shop
Clause therein were already in effect and neither of them had
the opportunity to express their preference for unionism or
not. We see no cogent reason why the Union Shop Clause
should not be applied equally to these two types of new
employees, for they are undeniably similarly situated. 18
Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop
Clause would dilute its efficacy and put the certified union that is supposedly being
protected thereby at the mercy of management. For if the former FEBTC employees
had no say in the merger of its former employer with another bank, as petitioner BPI
repeatedly decries on their behalf, the Union likewise could not prevent BPI from
proceeding with the merger which undisputedly affected the number of employees in
the bargaining unit that the Union represents and may negatively impact on the Union's
majority status. In this instance, we should be guided by the principle that courts must
place a practical and realistic construction upon a CBA, giving due consideration to the
context in which it is negotiated and purpose which it is intended to serve. 19
We now come to the question: Does our affirmance of our ruling that former FEBTC
employees absorbed by BPI are covered by the Union Shop Clause violate their right to
security of tenure which we expressly upheld in this Resolution? We answer in the
negative. AaITCS
In Rance v. National Labor Relations Commission, 20 we held that:
It is the policy of the state to assure the right of workers to
"security of tenure" (Article XIII, Sec. 3 of the New
Constitution, Section 9, Article II of the 1973 Constitution).
The guarantee is an act of social justice. When a person has
no property, his job may possibly be his only possession or
means of livelihood. Therefore, he should be protected
against any arbitrary deprivation of his job. Article 280 of
the Labor Code has construed security of tenure as
meaning that "the employer shall not terminate the
services of an employee except for a just cause or when
authorized by" the Code. . . . (Emphasis supplied.)
We have also previously held that the fundamental guarantee of security of tenure and
due process dictates that no worker shall be dismissed except for a just and authorized
cause provided by law and after due process is observed. 21 Even as we now recognize
the right to continuous, unbroken employment of workers who are absorbed into a new
company pursuant to a merger, it is but logical that their employment may be
terminated for any causes provided for under the law or in jurisprudence without
violating their right to security of tenure. As Justice Carpio discussed in his dissenting
opinion, it is well-settled that termination of employment by virtue of a union security
clause embodied in a CBA is recognized in our jurisdiction. 22 In Del Monte
Philippines, Inc. v. Saldivar, 23 we explained the rationale for this policy in this wise:
Article 279 of the Labor Code ordains that "in cases of
regular employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by [Title I, Book Six of the Labor Code]."
Admittedly, the enforcement of a closed-shop or union
security provision in the CBA as a ground for
termination finds no extension within any of the
provisions under Title I, Book Six of the Labor Code. Yet
jurisprudence has consistently recognized, thus: "It is
State policy to promote unionism to enable workers to
negotiate with management on an even playing field and
with more persuasiveness than if they were to individually
and separately bargain with the employer. For this reason,
the law has allowed stipulations for 'union shop' and 'closed
shop' as means of encouraging workers to join and support
the union of their choice in the protection of their rights and
interests vis-a-vis the employer." 24 (Emphasis supplied.)
Although it is accepted that non-compliance with a union security clause is a valid
ground for an employee's dismissal, jurisprudence dictates that such a dismissal must
still be done in accordance with due process. This much we decreed in General Milling
Corporation v. Casio, 25 to wit:
The Court reiterated in Malayang Samahan ng mga
Manggagawa sa M. Greenfield v. Ramos that:
While respondent company may validly dismiss
the employees expelled by the union for
disloyalty under the union security clause of the
collective bargaining agreement upon the
recommendation by the union, this dismissal
should not be done hastily and summarily
thereby eroding the employees' right to due
process, self-organization and security of tenure.
The enforcement of union security clauses is
authorized by law provided such enforcement
is not characterized by arbitrariness, and
always with due process. Even on the
assumption that the federation had valid grounds
to expel the union officers, due process requires
that these union officers be accorded a separate
hearing by respondent company.
The twin requirements of notice and hearing constitute the
essential elements of procedural due process. The law
requires the employer to furnish the employee sought to be
dismissed with two written notices before termination of
employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions
for which his dismissal is sought in order to afford him an
opportunity to be heard and to defend himself with the
assistance of counsel, if he desires, and (2) a subsequent
notice informing the employee of the employer's decision to
dismiss him. This procedure is mandatory and its absence
taints the dismissal with illegality.
Irrefragably, GMC cannot dispense with the requirements
of notice and hearing before dismissing Casio, et al. even
when said dismissal is pursuant to the closed shop
provision in the CBA. The rights of an employee to be
informed of the charges against him and to reasonable
opportunity to present his side in a controversy with either
the company or his own union are not wiped away by a
union security clause or a union shop clause in a collective
bargaining agreement. . . . 26 (Emphases supplied.) EScaIT
In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty
(30)-day period from notice of finality of the Decision given to the affected FEBTC
employees to join the Union before the latter can request petitioner to terminate the
former's employment, petitioner must still accord said employees the twin requirements
of notice and hearing on the possibility that they may have other justifications for not
joining the Union. Similar to our August 10, 2010 Decision, we reiterate that our ruling
presupposes there has been no material change in the situation of the parties in the
interim.
WHEREFORE, the Motion for Reconsideration is DENIED. The Decision dated
August 10, 2010 is AFFIRMED, subject to the qualifications that:
(a)Petitioner is deemed to have assumed the employment contracts of the Far East Bank
and Trust Company (FEBTC) employees upon effectivity of the merger without break
in the continuity of their employment, even without express stipulation in the Articles
of Merger; and
(b)Aside from the thirty (30) days, counted from notice of finality of the August 10,
2010 Decision, given to former FEBTC employees to join the respondent, said
employees shall be accorded full procedural due process before their employment may
be terminated.
SO ORDERED.
Corona, C.J., Velasco, Jr., Peralta, Abad, Villarama, Jr., Mendoza and Perlas-
Bernabe, JJ., concur.
Carpio, J., I reiterate my dissenting opinion.
Brion, J., in light of modification.
Bersamin and Perez, JJ., are on official leave.
Sereno, J., joins J. Carpio.
Del Castillo, J., is on leave.
Reyes, J., took no part.

Footnotes

1.Rollo, pp. 249-258.
2.The term of the CBA in question covered the period April 1, 1996 to March 31, 2001.
3.Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank, G.R. No. 164301, August 10, 2010, 627 SCRA 590,
613.
4.Id. at 649.
5.Rollo, pp. 251-252; Motion for Reconsideration, pp. 3-4.
6.Id. at 253; id. at 5.
7.Justice Brion's Dissenting Opinion, Bank of the Philippine Islands v. BPI Employees Union-
Davao Chapter-Federation of Unions in BPI Unibank, supra note 3 at 693;
quoted in Motion for Reconsideration, id.
8.Rollo, pp. 254-256.
9.Id. at 262-278.
10.Id. at 264-271.
11.Id. at 275.
12.Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank, supra note 3 at 647-648.
13.Id. at 683-684.
14.Id. at 630-631.
15.Id. at 632.
16.Id. at 634.
17.Id.
18.Id. at 635-636.
19.Marcopper Mining Corporation v. National Labor Relations Commission, 325 Phil. 618,
632 (1996).
20.246 Phil. 287, 292-293 (1988), cited in Gatus v. Quality House Inc., G.R. No. 156766,
April 16, 2009, 585 SCRA 177, 199 and Perez v. Philippine Telegraph and
Telephone Company, G.R. No. 152048, April 7, 2009, 584 SCRA 110, 150.
21.Cosep v. National Labor Relations Commission, 353 Phil. 148, 157 (1998); Archbuild
Masters and Construction, Inc. v. National Labor Relations Commission, 321
Phil. 869, 877 (1995).
22.Justice Carpio's Dissenting Opinion, Bank of the Philippine Islands v. BPI Employees
Union-Davao Chapter-Federation of Unions in BPI Unibank, supra note 3 at
667, citing Alabang Country Club, Inc. v. National Labor Relations Commission,
G.R. No. 170287, February 14, 2008, 545 SCRA 351, 361.
23.G.R. No. 158620, October 11, 2006, 504 SCRA 192.
24.Id. at 203-204.
25.G.R. No. 149552, March 10, 2010, 615 SCRA 13.
26.Id. at 34-35.

FIRST DIVISION
[G.R. No. 160273. January 18, 2008.]
CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D.
ALMENDRAS, JULIUS Z. NERI, DOUGLAS L. LUYM, CESAR T. LIBI,
RAMONTITO * E. GARCIA and JOSE B. SALA, petitioners, vs. RICARDO F.
ELIZAGAQUE, respondent.
D E C I S I O N
SANDOVAL-GUTIERREZ, J p:
For our resolution is the instant Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, assailing the Decision 1 dated January 31,
2003 and Resolution dated October 2, 2003 of the Court of Appeals in CA-G.R. CV
No. 71506. ESHAcI
The facts are:
Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a
non-profit and non-stock private membership club, having its principal place of
business in Banilad, Cebu City. Petitioners herein are members of its Board of
Directors.
Sometime in 1987, San Miguel Corporation, a special company proprietary member of
CCCI, designated respondent Ricardo F. Elizagaque, its Senior Vice President and
Operations Manager for the Visayas and Mindanao, as a special non-proprietary
member. The designation was thereafter approved by the CCCI's Board of Directors.
In 1996, respondent filed with CCCI an application for proprietary membership. The
application was indorsed by CCCI's two (2) proprietary members, namely: Edmundo T.
Misa and Silvano Ludo. ESCacI
As the price of a proprietary share was around the P5 million range, Benito Unchuan,
then president of CCCI, offered to sell respondent a share for only P3.5 million.
Respondent, however, purchased the share of a certain Dr. Butalid for only P3 million.
Consequently, on September 6, 1996, CCCI issued Proprietary Ownership Certificate
No. 1446 to respondent.
During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of
Directors, action on respondent's application for proprietary membership was deferred.
In another Board meeting held on July 30, 1997, respondent's application was voted
upon. Subsequently, or on August 1, 1997, respondent received a letter from Julius Z.
Neri, CCCI's corporate secretary, informing him that the Board disapproved his
application for proprietary membership.
On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of
reconsideration. As CCCI did not answer, respondent, on October 7, 1997, wrote
another letter of reconsideration. Still, CCCI kept silent. On November 5, 1997,
respondent again sent CCCI a letter inquiring whether any member of the Board
objected to his application. Again, CCCI did not reply.
Consequently, on December 23, 1998, respondent filed with the Regional Trial Court
(RTC), Branch 71, Pasig City a complaint for damages against petitioners, docketed as
Civil Case No. 67190.
After trial, the RTC rendered its Decision dated February 14, 2001 in favor of
respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of
plaintiff:
1. Ordering defendants to pay, jointly and severally, plaintiff
the amount of P2,340,000.00 as actual or compensatory
damages.
2. Ordering defendants to pay, jointly and severally, plaintiff
the amount of P5,000,000.00 as moral damages. acHDTA
3. Ordering defendants to pay, jointly and severally, plaintiff
the amount of P1,000,000.00 as exemplary damages.
4. Ordering defendants to pay, jointly and severally, plaintiff
the amount of P1,000,000.00 as and by way of attorney's
fees and P80,000.00 as litigation expenses.
5. Costs of suit.
Counterclaims are hereby DISMISSED for lack of merit.
SO ORDERED. 2
On appeal by petitioners, the Court of Appeals, in its Decision dated January 31, 2003,
affirmed the trial court's Decision with modification, thus:
WHEREFORE, premises considered, the assailed Decision
dated February 14, 2001 of the Regional Trial Court, Branch
71, Pasig City in Civil Case No. 67190 is hereby
AFFIRMED with MODIFICATION as follows:
1. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the amount of P2,000,000.00 as
moral damages;
2. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the amount of P1,000,000.00 as
exemplary damages;
3. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the amount of P500,000.00 as
attorney's fees and P50,000.00 as litigation expenses; and
4. Costs of the suit.
The counterclaims are DISMISSED for lack of merit.
SO ORDERED. 3
On March 3, 2003, petitioners filed a motion for reconsideration and motion for leave
to set the motion for oral arguments. In its Resolution 4 dated October 2, 2003, the
appellate court denied the motions for lack of merit. cTDaEH
Hence, the present petition.
The issue for our resolution is whether in disapproving respondent's application for
proprietary membership with CCCI, petitioners are liable to respondent for damages,
and if so, whether their liability is joint and several.
Petitioners contend, inter alia, that the Court of Appeals erred in awarding exorbitant
damages to respondent despite the lack of evidence that they acted in bad faith in
disapproving the latter's application; and in disregarding their defense of damnum
absque injuria.
For his part, respondent maintains that the petition lacks merit, hence, should be denied.
CCCI's Articles of Incorporation provide in part:
SEVENTH: That this is a non-stock corporation and
membership therein as well as the right of participation in its
assets shall be limited to qualified persons who are duly
accredited owners of Proprietary Ownership Certificates
issued by the corporation in accordance with its By-Laws.
Corollary, Section 3, Article 1 of CCCI's Amended By-Laws provides:
SECTION 3. HOW MEMBERS ARE ELECTED The
procedure for the admission of new members of the Club
shall be as follows:
(a) Any proprietary member, seconded by another voting
proprietary member, shall submit to the Secretary a written
proposal for the admission of a candidate to the "Eligible-
for-Membership List";
(b) Such proposal shall be posted by the Secretary for a
period of thirty (30) days on the Club bulletin board during
which time any member may interpose objections to the
admission of the applicant by communicating the same to
the Board of Directors; cHAaCE
(c) After the expiration of the aforesaid thirty (30) days, if
no objections have been filed or if there are, the Board
considers the objections unmeritorious, the candidate shall
be qualified for inclusion in the "Eligible-for-Membership
List";
(d) Once included in the "Eligible-for-Membership List" and
after the candidate shall have acquired in his name a valid
POC duly recorded in the books of the corporation as his
own, he shall become a Proprietary Member, upon a non-
refundable admission fee of P1,000.00, provided that
admission fees will only be collected once from any person.
On March 1, 1978, Section 3 (c) was amended to read as follows:
(c) After the expiration of the aforesaid thirty (30) days, the
Board may, by unanimous vote of all directors present at
a regular or special meeting, approve the inclusion of the
candidate in the "Eligible-for-Membership List".
As shown by the records, the Board adopted a secret balloting known as the "black ball
system" of voting wherein each member will drop a ball in the ballot box. A white ball
represents conformity to the admission of an applicant, while a black ball means
disapproval. Pursuant to Section 3 (c), as amended, cited above, a unanimous vote of
the directors is required. When respondent's application for proprietary membership
was voted upon during the Board meeting on July 30, 1997, the ballot box contained
one (1) black ball. Thus, for lack of unanimity, his application was disapproved.
Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has the
right to approve or disapprove an application for proprietary membership. But such
right should not be exercised arbitrarily. Articles 19 and 21 of the Civil Code on the
Chapter on Human Relations provide restrictions, thus: DECcAS
Article 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.
Article 21. Any person who willfully 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.
In GF Equity, Inc. v. Valenzona, 5 we expounded Article 19 and correlated it with
Article 21, thus:
This article, known to contain what is commonly referred to
as the principle of abuse of rights, sets certain standards
which must be observed not only in the exercise of one's
rights but also in the performance of one's duties. These
standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith.
The law, therefore, recognizes a primordial limitation on all
rights; that in their exercise, the norms of human conduct set
forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such,
may nevertheless become the source of some illegality.
When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and
results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must be held
responsible. But while Article 19 lays down a rule of
conduct for the government of human relations and for the
maintenance of social order, it does not provide a remedy for
its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper. (Emphasis in the
original)
In rejecting respondent's application for proprietary membership, we find that
petitioners violated the rules governing human relations, the basic principles to be
observed for the rightful relationship between human beings and for the stability of
social order. The trial court and the Court of Appeals aptly held that petitioners
committed fraud and evident bad faith in disapproving respondent's applications. This
is contrary to morals, good custom or public policy. Hence, petitioners are liable for
damages pursuant to Article 19 in relation to Article 21 of the same Code. ACTESI

It bears stressing that the amendment to Section 3 (c) of CCCI's Amended By-Laws
requiring the unanimous vote of the directors present at a special or regular meeting
was not printed on the application form respondent filled and submitted to CCCI.
What was printed thereon was the original provision of Section 3 (c) which was silent
on the required number of votes needed for admission of an applicant as a proprietary
member.
Petitioners explained that the amendment was not printed on the application form due
to economic reasons. We find this excuse flimsy and unconvincing. Such amendment,
aside from being extremely significant, was introduced way back in 1978 or almost
twenty (20) years before respondent filed his application. We cannot fathom why such a
prestigious and exclusive golf country club, like the CCCI, whose members are all
affluent, did not have enough money to cause the printing of an updated application
form.
It is thus clear that respondent was left groping in the dark wondering why his
application was disapproved. He was not even informed that a unanimous vote of the
Board members was required. When he sent a letter for reconsideration and an inquiry
whether there was an objection to his application, petitioners apparently ignored him.
Certainly, respondent did not deserve this kind of treatment. Having been designated by
San Miguel Corporation as a special non-proprietary member of CCCI, he should have
been treated by petitioners with courtesy and civility. At the very least, they should
have informed him why his application was disapproved.
The exercise of a right, though legal by itself, must nonetheless be in accordance with
the proper norm. When the right is exercised arbitrarily, unjustly or excessively and
results in damage to another, a legal wrong is committed for which the wrongdoer must
be held responsible. 6 It bears reiterating that the trial court and the Court of Appeals
held that petitioners' disapproval of respondent's application is characterized by bad
faith. EcHIDT
As to petitioners' reliance on the principle of damnum absque injuria, or damage
without injury, suffice it to state that the same is misplaced. In Amonoy v. Gutierrez, 7
we held that this principle does not apply when there is an abuse of a person's right,
as in this case.
As to the appellate court's award to respondent of moral damages, we find the same in
order. Under Article 2219 of the New Civil Code, moral damages may be recovered,
among others, in acts and actions referred to in Article 21. We believe respondent's
testimony that he suffered mental anguish, social humiliation and wounded feelings as a
result of the arbitrary denial of his application. However, the amount of P2,000,000.00
is excessive. While there is no hard-and-fast rule in determining what would be a fair
and reasonable amount of moral damages, the same should not be palpably and
scandalously excessive. Moral damages are not intended to impose a penalty to the
wrongdoer, neither to enrich the claimant at the expense of the defendant. 8 Taking into
consideration the attending circumstances here, we hold that an award to respondent of
P50,000.00, instead of P2,000,000.00, as moral damages is reasonable.
Anent the award of exemplary damages, Article 2229 allows it by way of example or
correction for the public good. Nonetheless, since exemplary damages are imposed not
to enrich one party or impoverish another but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions, 9 we reduce the amount from
P1,000,000.00 to P25,000.00 only.
On the matter of attorney's fees and litigation expenses, Article 2208 of the same Code
provides, among others, that attorney's fees and expenses of litigation may be recovered
in cases when exemplary damages are awarded and where the court deems it just and
equitable that attorney's fees and expenses of litigation should be recovered, as in this
case. In any event, however, such award must be reasonable, just and equitable. Thus,
we reduce the amount of attorney's fees (P500,000.00) and litigation expenses
(P50,000.00) to P50,000.00 and P25,000.00, respectively. IHEDAT
Lastly, petitioners' argument that they could not be held jointly and severally liable for
damages because only one (1) voted for the disapproval of respondent's application
lacks merit.
Section 31 of the Corporation Code provides:
SEC. 31. Liability of directors, trustees or officers.
Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who
are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation,
its stockholders or members and other persons. (Emphasis
ours)
WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 71506 are AFFIRMED with modification in the
sense that (a) the award of moral damages is reduced from P2,000,000.00 to
P50,000.00; (b) the award of exemplary damages is reduced from P1,000,000.00 to
P25,000.00; and (c) the award of attorney's fees and litigation expenses is reduced from
P500,000.00 and P50,000.00 to P50,000.00 and P25,000.00, respectively. HEISca
Costs against petitioners.
SO ORDERED.
Puno, C.J., Corona, Azcuna and Leonardo-de Castro, JJ., concur.

Footnotes

*Also referred to as "Ramonito" in the records of the case.
1.Penned by Associate Justice Remedios A. Salazar-Fernando and concurred in by then
Associate Justice Ruben T. Reyes (now a member of this Court) and Associate
Justice Edgardo F. Sundiam.
2.Annex "C" of the petition, rollo, pp. 65-91.
3.Annex "A" of the petition, id., pp. 40-62.
4.Annex "B" of the petition, id., pp. 63-64.
5.G.R. No. 156841, June 30, 2005, 462 SCRA 466.
6.Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28,
2005, 464 SCRA 409, 428, citing Metropolitan Waterworks and Sewerage
System v. Act Theater, Inc., 432 SCRA 418, 422 (2004).
7.G.R. No. 140420, February 15, 2001, 351 SCRA 731.
8.Lamis v. Ong, G.R. No. 148923, August 11, 2005, 466 SCRA 510, 519.
9.Country Bankers Insurance Corporation v. Lianga Bay and Community Multi-Purpose
Cooperative, Inc., G.R. No. 136914, January 25, 2002, 374 SCRA 653.