G.R. No.

108670 September 21, 1994

LBC EXPRESS, INC., petitioner,
vs.
THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF
LABASON, INC., respondents.
In this Petition for Review on Certiorari, petitioner LBC questions the
decision 1 of respondent Court of Appeals affirming the judgment of the
Regional Trial Court of Dipolog City, Branch 8, awarding moral and exemplary
damages, reimbursement of P32,000.00, and costs of suit; but deleting the
amount of attorney's fees.
Private respondent Adolfo Carloto, incumbent President-Manager of private
respondent Rural Bank of Labason, alleged that on November 12, 1984, he
was in Cebu City transacting business with the Central Bank Regional Office.
He was instructed to proceed to Manila on or before November 21, 1984 to
follow-up the Rural Bank's plan of payment of rediscounting obligations with
Central Bank's main office in Manila. 2 He then purchased a round trip plane
ticket to Manila. He also phoned his sister Elsie Carloto-Concha to send him
ONE THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila
and some rediscounting papers thru petitioner's LBC Office at Dipolog City. 3

office. He was, however, advised that the money has been returned to LBC's
office in Dipolog City upon shipper's request. Again, he demanded for the ONE
THOUSAND PESOS (P1,000.00) and refund of FORTY-NINE PESOS (P49.00)
LBC revenue charges. He received the money only on December 15, 1984 less
the revenue charges.
Respondent Carloto claimed that because of the delay in the transmittal of the
cashpack, he failed to submit the rediscounting documents to Central Bank on
time. As a consequence, his rural bank was made to pay the Central Bank
THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest. 4 He
allegedly suffered embarrassment and humiliation.
Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via
PAL to LBC Cebu City branch on November 22, 1984. 5 On the same day, it
was delivered at respondent Carloto's residence at No. 2 Greyhound
Subdivision, Kinasangan, Pardo, Cebu City. However, he was not around to
receive it. The delivery man served instead a claim notice to insure he would
personally receive the money. This was annotated on Cashpack Delivery
Receipt No. 342805. Notwithstanding the said notice, respondent Carloto did
not claim the cashpack at LBC Cebu. On November 23, 1984, it was returned
to the shipper, Elsie Carloto-Concha at Dipolog City.

On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned
thru LBC Dipolog Branch the pertinent documents and the sum of ONE
THOUSAND PESOS (P1,000.00) to respondent Carloto at No. 2 Greyhound
Subdivision, Kinasangan, Pardo, Cebu City. This was evidenced by LBC Air
Cargo, Inc., Cashpack Delivery Receipt No. 34805.

Claiming that petitioner LBC wantonly and recklessly disregarded its obligation,
respondent Carloto instituted an action for Damages Arising from Nonperformance of Obligation docketed as Civil Case No. 3679 before the
Regional Trial Court of Dipolog City on January 4, 1985. On June 25, 1988, an
amended complaint was filed where respondent rural bank joined as one of the
plaintiffs and prayed for the reimbursement of THIRTY-TWO THOUSAND
PESOS (P32,000.00).

On November 17, 1984, the documents arrived without the cashpack.

Respondent Carloto made personal follow-ups on that same day, and also on
November 19 and 20, 1984 at LBC's office in Cebu but petitioner failed to
deliver to him the cashpack.

After hearing, the trial court rendered its decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered:

Consequently, respondent Carloto said he was compelled to go to Dipolog City

on November 24, 1984 to claim the money at LBC's office. His effort was once
more in vain. On November 27, 1984, he went back to Cebu City at LBC's

1. Ordering the defendant LBC Air Cargo, Inc. to pay unto

plaintiff Adolfo M. Carloto and Rural Bank of Labason, Inc.,

moral damages in the amount of P10,000.00; exemplary

damages in the amount of P5,000.00; attorney's fees in the
amount of P3,000.00 and litigation expenses of P1,000.00;
2. Sentencing defendant LBC Air Cargo, Inc., to reimburse
plaintiff Rural Bank of Labason, Inc. the sum of P32,000.00
which the latter paid as penalty interest to the Central Bank of
the Philippines as penalty interest for failure to rediscount its
due bills on time arising from the defendant's failure to deliver
the cashpack, with legal interest computed from the date of
filing of this case; and
3. Ordering defendant to pay the costs of these proceedings.
SO ORDERED. 6
On appeal, respondent court modified the judgment by deleting the award of
attorney's fees. Petitioner's Motion for Reconsideration was denied in a
Resolution dated January 11, 1993.
Hence, this petition raising the following questions, to wit:
1. Whether or not respondent Rural Bank of Labason Inc., being an artificial
person should be awarded moral damages.
2. Whether or not the award of THIRTY-TWO THOUSAND PESOS
(P32,000.00) was made with grave abuse of discretion.
3. Whether or not the respondent Court of Appeals gravely abused its discretion
in affirming the trial court's decision ordering petitioner LBC to pay moral and
exemplary damages despite performance of its obligation.
We find merit in the petition.
The respondent court erred in awarding moral damages to the Rural Bank of
Labason, Inc., an artificial person.

Moral damages are granted in recompense for physical suffering, mental

anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury. 7 A corporation, being an
artificial person and having existence only in legal contemplation, has no
feelings, no emotions, no senses; therefore, it cannot experience physical
suffering and mental anguish. 8 Mental suffering can be experienced only by
one having a nervous system and it flows from real ills, sorrows, and griefs of
life 9 all of which cannot be suffered by respondent bank as an artificial
person.
We can neither sustain the award of moral damages in favor of the private
respondents. The right to recover moral damages is based on equity. Moral
damages are recoverable only if the case falls under Article 2219 of the Civil
Code in relation to Article 21. 10 Part of conventional wisdom is that he who
comes to court to demand equity, must come with clean hands.
In the case at bench, respondent Carloto is not without fault. He was fully
aware that his rural bank's obligation would mature on November 21, 1984 and
his bank has set aside cash for these bills payable. 11 He was all set to go to
Manila to settle this obligation. He has received the documents necessary for
the approval of their rediscounting application with the Central Bank. He has
also received the plane ticket to go to Manila. Nevertheless, he did not
immediately proceed to Manila but instead tarried for days allegedly claiming
his ONE THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed
trip, he failed to submit the rediscounting papers to the Central Bank on time
and his bank was penalized THIRTY-TWO THOUSAND PESOS (P32,000.00)
for failure to pay its obligation on its due date. The undue importance given by
respondent Carloto to his ONE THOUSAND PESOS (P1,000.00) pocket money
is inexplicable for it was not indispensable for him to follow up his bank's
rediscounting application with Central Bank. According to said respondent, he
needed the money to "invite people for a snack or dinner." 12 The attitude of
said respondent speaks ill of his ways of business dealings and cannot be
countenanced by this Court. Verily, it will be revolting to our sense of ethics to
use it as basis for awarding damages in favor of private respondent Carloto and
the Rural Bank of Labason, Inc.

We also hold that respondents failed to show that petitioner LBC's late delivery
of the cashpack was motivated by personal malice or bad faith, whether
intentional or thru gross negligence. In fact, it was proved during the trial that
the cashpack was consigned on November 16, 1984, a Friday. It was sent to
Cebu on November 19, 1984, the next business day. Considering this
circumstance, petitioner cannot be charged with gross neglect of duty. Bad faith
under the law can not be presumed; it must be established by clearer and
convincing evidence. 13Again, the unbroken jurisprudence is that in breach of
contract cases where the defendant is not shown to have acted fraudulently or
in bad faith, liability for damages is limited to the natural and probable
consequences of the branch of the obligation which the parties had foreseen or
could reasonable have foreseen. The damages, however, will not include
liability for moral damages. 14
Prescinding from these premises, the award of exemplary damages made by
the respondent court would have no legal leg to support itself. Under Article
2232 of the Civil Code, in a contractual or quasi-contractual relationship,
exemplary damages may be awarded only if the defendant had acted in "a
wanton, fraudulent, reckless, oppressive, or malevolent manner." The
established facts of not so warrant the characterization of the action of
petitioner LBC.
IN VIEW WHEREOF, the Decision of the respondent court dated September
30, 1992 is REVERSED and SET ASIDE; and the Complaint in Civil Case No.
3679 is ordered DISMISSED. No costs.
SO ORDERED.
[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.
The Case

This petition for review[1] assails the 4 January 1999 Decision [2] 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
Decision[3] 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, attorneys fees and costs of suit.
The Antecedents
Expos is a radio documentary[4] program hosted by Carmelo Mel Rima
(Rima) and Hermogenes Jun Alegre (Alegre). [5] Expos is aired every morning
over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (FBNI).
Expos 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 AMECs College of Medicine, filed a
complaint for damages[7] 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
AMECs 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 youll 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, isnt 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 latters 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 Im 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. Dont 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 thats 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.
xxx[9] (Emphasis supplied)
The complaint further alleged that AMEC is a reputable learning institution.
With the supposed exposs, FBNI, Rima and Alegre transmitted malicious
imputations, and as such, destroyed plaintiffs (AMEC and Ago) reputation.
AMEC and Ago included FBNI as 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 Answer[10] 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 Dismiss[11] on FBNIs 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.
[12]

On 14 December 1992, the trial court rendered a Decision finding FBNI

and Alegre liable for libel except Rima. The trial court held that the broadcasts
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.

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 courts judgment with modification. The appellate
court made Rima solidarily liable with FBNI and Alegre. The appellate court
denied Agos claim for damages and attorneys 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

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

The Court of Appeals upheld the trial courts 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 Alegres 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.

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 P300,000.00 moral damages, plus P30,000.00 reimbursement of attorneys
fees, and to pay the costs of suit.

Finding no factual basis for the imputations against AMECs 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.

SO ORDERED. [13] (Emphasis supplied)

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 Agos claim for damages and attorneys 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, attorneys fees and costs of suit.
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 ATTORNEYS FEES IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE
FOR PAYMENT OF MORAL DAMAGES, ATTORNEYS FEES AND
COSTS OF SUIT.
The Courts 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
AMECs cause of action is based on Articles 30 and 33 of the Civil Code. Article
30[18] authorizes a separate civil action to recover civil liability arising from a
criminal offense. On the other hand, Article 33 [19] 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 19 [20] of the
Civil Code to justify its claim for damages. AMEC cites Articles 2176 [21] and
2180[22] of the Civil Code to hold FBNI solidarily liable with Rima and Alegre.

I.Whether the broadcasts are libelous

A libel[23] 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 Alegres remarks such as greed for money on the part of
AMECs 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 AMECs side and gave Ago the
opportunity to defend AMEC and its administrators. FBNI concludes that since
there is no malice, there is no libel.
FBNIs 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 expos, [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 Alegres reckless disregard of whether their report was true or
not.
Contrary to FBNIs 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 republishers 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.
FBNIs 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 AMECs 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 inBorjal, 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.
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 Code [35] 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
19[37] 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 21[38] 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 Courts statement
inMambulao 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, AMECs claim for moral damages falls under item 7 of Article
2219[43] 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 P300,000 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 P300,000 to P150,000.

III. Whether the award of attorneys fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is
no basis for the award of attorneys fees. FBNI adds that the instant case does
not fall under the enumeration in Article 2208[48] of the Civil Code.
The award of attorneys fees is not proper because AMEC failed to justify
satisfactorily its claim for attorneys fees. AMEC did not adduce evidence to
warrant the award of attorneys fees. Moreover, both the trial and appellate
courts failed to explicitly state in their respective decisions the rationale for the
award of attorneys 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 counsels fees are not to be awarded every
time a party wins a suit. The power of the court to award attorneys 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 attorneys fees. [51]
(Emphasis supplied)
While it mentioned about the award of attorneys 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, attorneys fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the
payment of damages and attorneys 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 Alegres 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. Rimas accreditation lapsed due to his non-payment of the
KBP annual fees while Alegres 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.
FBNIs 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. [53] Thus, AMEC correctly anchored its cause of
action against FBNI on Articles 2176 and 2180 of the Civil Code.
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 FBNIs radio program
Expos 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 and supervision 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. FBNIs 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 industrys 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 FBNIs
regimented process of application. Furthermore, FBNI admits that Rima and
Alegre had deficiencies in their KBP accreditation,[56] which is one of FBNIs
requirements before it hires a broadcaster. Significantly, membership in the
KBP, while voluntary, indicates the broadcasters strong commitment to observe
the broadcast industrys rules and regulations. Clearly, these circumstances
show FBNIs lack of diligence in selecting and supervising 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 P300,000 to P150,000 and the award of attorneys
fees is deleted. Costs against petitioner.
SO ORDERED.

G.R. No. L-12719

May 31, 1962

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
THE CLUB FILIPINO, INC. DE CEBU, respondent.

This is a petition to review the decision of the Court of Tax Appeals,

reversing the decision of the Collector of Internal Revenue, assessing
against and demanding from the "Club Filipino, Inc. de Cebu", the sum of
P12,068.84 as fixed and percentage taxes, surcharge and compromise
penalty, allegedly due from it as a keeper of bar and restaurant.
As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu,"
(Club, for short), is a civic corporation organized under the laws of the
Philippines with an original authorized capital stock of P22,000.00, which
was subsequently increased to P200,000.00, among others, to it
"proporcionar, operar, y mantener un campo de golf, tenis, gimnesio
(gymnasiums), juego de bolos (bowling alleys), mesas de billar y pool, y
toda clase de juegos no prohibidos por leyes generales y ordenanzas
generales; y desarollar y cultivar deportes de toda clase y denominacion
cualquiera para el recreo y entrenamiento saludable de sus miembros y
accionistas" (sec. 2, Escritura de Incorporacion del Club Filipino, Inc. Exh.
A). Neither in the articles or by-laws is there a provision relative to
dividends and their distribution, although it is covenanted that upon its
dissolution, the Club's remaining assets, after paying debts, shall be
donated to a charitable Philippine Institution in Cebu (Art. 27, Estatutos del
Club, Exh. A-a.).
The Club owns and operates a club house, a bowling alley, a golf course
(on a lot leased from the government), and a bar-restaurant where it sells
wines and liquors, soft drinks, meals and short orders to its members and
their guests. The bar-restaurant was a necessary incident to the operation
of the club and its golf-course. The club is operated mainly with funds
derived from membership fees and dues. Whatever profits it had, were
used to defray its overhead expenses and to improve its golf-course. In
1951. as a result of a capital surplus, arising from the re-valuation of its real
properties, the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to the
stockholders. In 1952, a BIR agent discovered that the Club has never paid
percentage tax on the gross receipts of its bar and restaurant, although it
secured B-4, B-9(a) and B-7 licenses. In a letter dated December 22, 1852,
the Collector of Internal Revenue assessed against and demanded from the
Club, the following sums:
As percentage tax on its gross receipts

P9,599.07

without qualification, should be construed in its plain and ordinary meaning,

restricted to activities for profitor livelihood (The Coll. of Int. Rev. v. Manila
Surcharge therein
2,399.77 Lodge No. 761 of the BPOE [Manila Elks Club] & Court of Tax Appeals,
G.R. No. L-11176, June 29, 1959, giving full definitions of the word
As fixed tax for the years 1946 to 1952
70.00
"business"; Coll. of Int. Rev. v. Sweeney, et al. [International Club of Iloilo,
Compromise penalty
500.00 Inc.], G.R. No. L-12178, Aug. 21, 1959, the facts of which are similar to the
ones at bar; Manila Polo Club v. B. L. Meer, etc., No. L-10854, Jan. 27,
1960).
The Club wrote the Collector, requesting for the cancellation of the
assessment. The request having been denied, the Club filed the instant
Having found as a fact that the Club was organized to develop and cultivate
petition for review.
sports of all class and denomination, for the healthful recreation and
entertainment of its stockholders and members; that upon its dissolution, its
The dominant issues involved in this case are twofold:
remaining assets, after paying debts, shall be donated to a charitable
Philippine Institution in Cebu; that it is operated mainly with funds derived
1. Whether the respondent Club is liable for the payment of the sum of
from membership fees and dues; that the Club's bar and restaurant catered
12,068.84, as fixed and percentage taxes and surcharges prescribed in
only to its members and their guests; that there was in fact no cash
sections 182, 183 and 191 of the Tax Code, under which the assessment
dividend distribution to its stockholders and that whatever was derived on
was made, in connection with the operation of its bar and restaurant, during
retail from its bar and restaurant was used to defray its overall overhead
the periods mentioned above; and
expenses and to improve its golf-course (cost-plus-expenses-basis), it
stands to reason that the Club is not engaged in the business of an
2. Whether it is liable for the payment of the sum of P500.00 as
operator of bar and restaurant (same authorities, cited above).
compromise penalty.
It is conceded that the Club derived profit from the operation of its bar and
Section 182, of the Tax Code states, "Unless otherwise provided, every
restaurant, but such fact does not necessarily convert it into a profit-making
person engaging in a business on which the percentage tax is imposed
enterprise. The bar and restaurant are necessary adjuncts of the Club to
shall pay in full a fixed annual tax of ten pesos for each calendar year or
foster its purposes and the profits derived therefrom are necessarily
fraction thereof in which such person shall engage in said business."
incidental to the primary object of developing and cultivating sports for the
Section 183 provides in general that "the percentage taxes on business
healthful recreation and entertainment of the stockholders and members.
shall be payable at the end of each calendar quarter in the amount lawfully
That a Club makes some profit, does not make it a profit-making Club. As
due on the business transacted during each quarter; etc." And section 191,
has been remarked a club should always strive, whenever possible, to have
same Tax Code, provides "Percentage tax . . . Keepers of restaurants,
surplus (Jesus Sacred Heart College v. Collector of Int. Rev., G.R. No. Lrefreshment parlors and other eating places shall pay a tax three per
6807, May 24, 1954; Collector of Int. Rev. v. Sinco Educational Corp., G.R.
centum, and keepers of bar and cafes where wines or liquors are served
No. L-9276, Oct. 23, 1956).
five per centum of their gross receipts . . .". It has been held that the liability
for fixed and percentage taxes, as provided by these sections, does
It is claimed that unlike the two cases just cited (supra), which are nonnot ipso factoattach by mere reason of the operation of a bar and
stock, the appellee Club is a stock corporation. This is unmeritorious. The
restaurant. For the liability to attach, the operator thereof must be engaged
facts that the capital stock of the respondent Club is divided into shares,
in the business as a barkeeper and restaurateur. The plain and ordinary
does not detract from the finding of the trial court that it is not engaged in
meaning of business is restricted to activities or affairs where profit is the
the business of operator of bar and restaurant. What is determinative of
purpose or livelihood is the motive, and the term business when used
whether or not the Club is engaged in such business is its object or
during the tax years 1946 to 1951

1wph1.t

purpose, as stated in its articles and by-laws. It is a familiar rule that the
actual purpose is not controlled by the corporate form or by the commercial
aspect of the business prosecuted, but may be shown by extrinsic
evidence, including the by-laws and the method of operation. From the
extrinsic evidence adduced, the Tax Court concluded that the Club is not
engaged in the business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites must be complied
with, to wit: (1) a capital stock divided into shares and (2) an authority to
distribute to the holders of such shares, dividends or allotments of the
surplus profits on the basis of the shares held (sec. 3, Act No. 1459). In the
case at bar, nowhere in its articles of incorporation or by-laws could be
found an authority for the distribution of its dividends or surplus profits.
Strictly speaking, it cannot, therefore, be considered a stock corporation,
within the contemplation of the corporation law.
A tax is a burden, and, as such, it should not be deemed imposed upon
fraternal, civic, non-profit, nonstock organizations, unless the intent to the
contrary is manifest and patent" (Collector v. BPOE Elks Club, et al., supra),
which is not the case in the present appeal.
Having arrived at the conclusion that respondent Club is not engaged in the
business as an operator of a bar and restaurant, and therefore, not liable
for fixed and percentage taxes, it follows that it is not liable for any penalty,
much less of a compromise penalty.

This is a petition for certiorari to set aside the Resolution * dated July 3,
1987 of respondent National Labor Relations Commission (NLRC for
brevity) which affirmed the decision dated April 30, 1986 of Labor Arbiter
Vito J. Minoria of the NLRC, Regional Arbitration Branch No. VII at Cebu
City in Case No. RAB-VII-0556-85 entitled "Danilo Mercado, Complainant,
vs. Philippine National Oil Company-Energy Development Corporation,
Respondent", ordering the reinstatement of complainant Danilo Mercado
and the award of various monetary claims.
The factual background of this case is as follows:
Private respondent Danilo Mercado was first employed by herein petitioner
Philippine National Oil Company-Energy Development Corporation (PNOCEDC for brevity) on August 13, 1979. He held various positions ranging
from clerk, general clerk to shipping clerk during his employment at its
Cebu office until his transfer to its establishment at Palimpinon, Dumaguete,
Oriental Negros on September 5, 1984. On June 30, 1985, private
respondent Mercado was dismissed. His last salary was P1,585.00 a month
basic pay plus P800.00 living allowance (Labor Arbiter's Decision, Annex
"E" of Petition, Rollo, p. 52).
The grounds for the dismissal of Mercado are allegedly serious acts of
dishonesty committed as follows:

WHEREFORE, the decision appealed from is affirmed without costs.

G.R. No. 79182 September 11, 1991

PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and
DANILO MERCADO, respondents.

1. On ApriI 12, 1985, Danilo Mercado was ordered to

purchase 1,400 pieces of nipa shingles from Mrs. Leonardo
Nodado of Banilad, Dumaguete City, for the total purchase
price of Pl,680.00. Against company policy, regulations and
specific orders, Danilo Mercado withdrew the nipa shingles
from the supplier but paid the amount of P1,000.00 only.
Danilo Mercado appropriated the balance of P680.00 for his
personal use;

2. In the same transaction stated above, the supplier agreed

to give the company a discount of P70.00 which Danilo
Mercado did not report to the company;
3. On March 28, 1985, Danilo Mercado was instructed to
contract the services of Fred R. Melon of Dumaguete City,
for the fabrication of rubber stamps, for the total amount of
P28.66. Danilo Mercado paid the amount of P20.00 to Fred
R. Melon and appropriated for his personal use the balance
of P8.66.
In addition, private respondent, Danilo Mercado violated
company rules and regulations in the following instances:
1. On June 5, 1985, Danilo Mercado was absent from work
without leave, without proper turn-over of his work, causing
disruption and delay of company work activities;
2. On June 15, 1985, Danilo Mercado went on vacation
leave without prior leave, against company policy, rules and
regulations. (Petitioner's Memorandum, Rollo, p. 195).
On September 23, 1985, private respondent Mercado filed a complaint for
illegal dismissal, retirement benefits, separation pay, unpaid wages, etc.
against petitioner PNOC-EDC before the NLRC Regional Arbitration Branch
No. VII docketed as Case No. RAB-VII-0556-85.
After private respondent Mercado filed his position paper on December 16,
1985 (Annex "B" of the Petition, Rollo, pp. 28-40), petitioner PNOC-EDC
filed its Position Paper/Motion to Dismiss on January 15, 1986, praying for
the dismissal of the case on the ground that the Labor Arbiter and/or the
NLRC had no jurisdiction over the case (Annex "C" of the Petition, Rollo,
pp. 41-45), which was assailed by private respondent Mercado in his
Opposition to the Position Paper/Motion to Dismiss dated March 12, 1986
(Annex "D" of the Petition, Rollo, pp. 46-50).

The Labor Arbiter ruled in favor of private respondent Mercado. The

dispositive onion of said decision reads as follows:
WHEREFORE, in view of the foregoing, respondents are
hereby ordered:
1) To reinstate complainant to his former position with full
back wages from the date of his dismissal up to the time of
his actual reinstatement without loss of seniority rights and
other privileges;
2) To pay complainant the amount of P10,000.00
representing his personal share of his savings account with
the respondents;
3) To pay complainants the amount of P30,000.00 moral
damages; P20,000.00 exemplary damages and P5,000.00
attorney's fees;
4) To pay complainant the amount of P792.50 as his
proportionate 13th month pay for 1985.
Respondents are hereby further ordered to deposit the
aforementioned amounts with this Office within ten days
from receipt of a copy of this decision for further disposition.
SO
(Labor Arbiter's Decision, Rollo, p. 56)

ORDERED.

The appeal to the NLRC was dismissed for lack of merit on July 3, 1987
and the assailed decision was affirmed.
Hence, this petition.
The issues raised by petitioner in this instant petition are:

1. Whether or not matters of employment affecting the

PNOC-EDC, a government-owned and controlled
corporation, are within the jurisdiction of the Labor Arbiter
and the NLRC.

The Civil Service embraces all branches, subdivision,

instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original
charters.

2. Assuming the affirmative, whether or not the Labor Arbiter

and the NLRC are justified in ordering the reinstatement of
private respondent, payment of his savings, and
proportionate 13th month pay and payment of damages as
well as attorney's fee.

such circumstances cannot give validity to the decision of the Labor Arbiter
(Ibid., pp. 192-193).

Petitioner PNOC-EDC alleges that it is a corporation wholly owned and

controlled by the government; that the Energy Development Corporation is
a subsidiary of the Philippine National Oil Company which is a government
entity created under Presidential Decree No. 334, as amended; that being a
government-owned and controlled corporation, it is governed by the Civil
Service Law as provided for in Section 1, Article XII-B of the 1973
Constitution, Section 56 of Presidential Decree No. 807 (Civil Service
Decree) and Article 277 of Presidential Decree No. 442, as amended
(Labor Code).
The 1973 Constitution provides:
The Civil Service embraces every branch, agency,
subdivision and instrumentality of the government including
government-owned or controlled corporations.
Petitioner PNOC-EDC argued that since Labor Arbiter Minoria rendered the
decision at the time when the 1973 Constitution was in force, said decision
is null and void because under the 1973 Constitution, government-owned
and controlled corporations were governed by the Civil Service Law. Even
assuming that PNOC-EDC has no original or special charter and Section
2(i), Article IX-B of the 1987 Constitution provides that:

This issue has already been laid to rest in the case of PNOC-EDC vs.
Leogardo, 175 SCRA 26 (July 5, 1989), involving the same petitioner and
the same issue, where this Court ruled that the doctrine that employees of
government-owned and/or con controlled corporations, whether created by
special law or formed as subsidiaries under the General Corporation law
are governed by the Civil Service Law and not by the Labor Code, has
been supplanted by the present Constitution. "Thus, under the present state
of the law, the test in determining whether a government-owned or
controlled corporation is subject to the Civil Service Law are the manner of
its creation, such that government corporations created by special charter
are subject to its provisions while those incorporated under the General
Corporation Law are not within its coverage."
Specifically, the PNOC-EDC having been incorporated under the General
Corporation Law was held to be a government owned or controlled
corporation whose employees are subject to the provisions of the Labor
Code (Ibid.).
The fact that the case arose at the time when the 1973 Constitution was still
in effect, does not deprive the NLRC of jurisdiction on the premise that it is
the 1987 Constitution that governs because it is the Constitution in place at
the time of the decision (NASECO v. NLRC, G.R. No. 69870, 168 SCRA
122 [1988]).
In the case at bar, the decision of the NLRC was promulgated on July 3,
1987. Accordingly, this case falls squarely under the rulings of the
aforementioned cases.

As regards the second issue, the record shows that PNOC-EDC's

accusations of dishonesty and violations of company rules are not
supported by evidence. Nonetheless, while acknowledging the rule that
administrative bodies are not governed by the strict rules of evidence,
petitioner PNOC-EDC alleges that the labor arbiter's propensity to decide
the case through the position papers submitted by the parties is violative of
due process thereby rendering the decision null and void (Ibid., p. 196).

784 [July 27, 1990]; Lopez Sugar Corporation vs. Federation of Free
Workers, 189 SCRA 179 [August 30, 1990]). Judicial review by this Court
does not go so far as to evaluate the sufficiency of the evidence but is
limited to issues of jurisdiction or grave abuse of discretion (Filipinas
Manufacturers Bank vs. NLRC, 182 SCRA 848 [February 28, 1990]). A
careful study of the records shows no substantive reason to depart from
these established principles.

On the other hand, private respondent contends that as can be seen from
petitioner's Motion for Reconsideration and/or Appeal dated July 28, 1986
(Annex "F" of the Petition, Rollo, pp. 57- 64), the latter never questioned the
findings of facts of the Labor Arbiter but simply limited its objection to the
lack of legal basis in view of its stand that the NLRC had no jurisdiction over
the case (Private Respondent's Memorandum, Rollo, p. 104).

While it is true that loss of trust or breach of confidence is a valid ground for
dismissing an employee, such loss or breach of trust must have some basis
(Gubac v. NLRC, 187 SCRA 412 [July 13, 1990]). As found by the Labor
Arbiter, the accusations of petitioner PNOC-EDC against private
respondent Mercado have no basis. Mrs. Leonardo Nodado, from whom
the nipa shingles were purchased, sufficiently explained in her affidavit
(Rollo, p. 36) that the total purchase price of P1,680.00 was paid by
respondent Mercado as agreed upon. The alleged discount given by Mrs.
Nodado is not supported by evidence as well as the alleged appropriation
of P8.66 from the cost of fabrication of rubber stamps. The Labor Arbiter,
likewise, found no evidence to support the alleged violation of company
rules. On the contrary, he found respondent Mercado's explanation in his
affidavit (Rollo, pp. 38-40) as to the alleged violations to be satisfactory.
Moreover, these findings were never contradicted by petitioner petitioner
PNOC-EDC.

Petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss dated

January 15, 1986 (Annex "C" of the Petition Rollo, pp. 41-45) before the
Regional Arbitration Branch No. VII of Cebu City and its Motion for
Reconsideration and/or Appeal dated July 28, 1986 (Annex "F" of the
Petition, Rollo, pp. 57-64) before the NLRC of Cebu City. Indisputably, the
requirements of due process are satisfied when the parties are given an
opportunity to submit position papers. What the fundamental law abhors is
not the absence of previous notice but rather the absolute lack of
opportunity to ventilate a party's side. There is no denial of due process
where the party submitted its position paper and flied its motion for
reconsideration (Odin Security Agency vs. De la Serna, 182 SCRA 472
[February 21, 1990]). Petitioner's subsequent Motion for Reconsideration
and/or Appeal has the effect of curing whatever irregularity might have been
committed in the proceedings below (T.H. Valderama and Sons, Inc. vs.
Drilon, 181 SCRA 308 [January 22, 1990]).
Furthermore, it has been consistently held that findings of administrative
agencies which have acquired expertise because their jurisdiction is
confined to specific matters are accorded not only respect but even finality
(Asian Construction and Development Corporation vs. NLRC, 187 SCRA

PREMISES CONSIDERED, the petition is DENIED and the resolution of

respondent NLRC dated July 3, 1987 is AFFIRMED with the modification
that the moral damages are reduced to Ten Thousand (P10,000.00) Pesos,
and the exemplary damages reduced to Five Thousand (P5,000.00) Pesos.
SO ORDERED.

G.R. No. L-22619

December 2, 1924

NATIONAL COAL COMPANY, plaintiff-appellee,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.
This action was brought in the Court of First Instance of the City of Manila
on the 17th day of July, 1923, for the purpose of recovering the sum of
P12,044.68, alleged to have been paid under protest by the plaintiff
company to the defendant, as specific tax on 24,089.3 tons of coal. Said
company is a corporation created by Act No. 2705 of the Philippine
Legislature for the purpose of developing the coal industry in the Philippine
Islands and is actually engaged in coal mining on reserved lands belonging
to the Government. It claimed exemption from taxes under the provision of
sections 14 and 15 of Act No. 2719, and prayed for a judgment ordering the
defendant to refund to the plaintiff said sum of P12,044.68, with legal
interest from the date of the presentation of the complaint, and costs
against the defendant.
The defendant answered denying generally and specifically all the material
allegations of the complaint, except the legal existence and personality of
the plaintiff. As a special defense, the defendant alleged (a) that the sum of
P12,044.68 was paid by the plaintiff without protests, and (b) that said sum
was due and owing from the plaintiff to the Government of the Philippine
Islands under the provisions of section 1496 of the Administrative Code and
prayed that the complaint be dismissed, with costs against the plaintiff.
Upon the issue thus presented, the case was brought on for trial. After a
consideration of the evidence adduced by both parties, the Honorable
Pedro Conception, judge, held that the words "lands owned by any person,
etc.," in section 15 of Act No. 2719 should be understood to mean
"lands held in lease or usufruct," in harmony with the other provision of said
Act; that the coal lands possessed by the plaintiff, belonging to the
Government, fell within the provisions of section 15 of Act No. 2719; and
that a tax of P0.04 per ton of 1,016 kilos on each ton of coal extracted
therefrom, as provided in said section, was the only tax which should be
collected from the plaintiff; and sentenced the defendant to refund to the

plaintiff the sum of P11,081.11 which is the difference between the amount
collected under section 1496 of the Administrative Code and the amount
which should have been collected under the provisions of said section 15 of
Act No. 2719. From that sentence the defendant appealed, and now makes
the following assignments of error:
I. The court below erred in holding that section 15 of Act No. 2719 does not
refer to coal lands owned by persons and corporations.
II. The court below erred in holding that the plaintiff was not subject to the
tax prescribed in section 1496 of the Administrative Code.
The question confronting us in this appeal is whether the plaintiff is subject
to the taxes under section 15 of Act No. 2719, or to the specific taxes under
section 1496 of the Administrative Code.
The plaintiff corporation was created on the 10th day of March, 1917, by Act
No. 2705, for the purpose of developing the coal industry in the Philippine
Island, in harmony with the general plan of the Government to encourage
the development of the natural resources of the country, and to provided
facilities therefor. By said Act, the company was granted the general powers
of a corporation "and such other powers as may be necessary to enable it
to prosecute the business of developing coal deposits in the Philippine
Island and of mining, extracting, transporting and selling the coal contained
in said deposits." (Sec. 2, Act No. 2705.) By the same law (Act No. 2705)
the Government of the Philippine Islands is made the majority stockholder,
evidently in order to insure proper government supervision and control, and
thus to place the Government in a position to render all possible
encouragement, assistance and help in the prosecution and furtherance of
the company's business.
On May 14, 1917, two months after the passage of Act No. 2705, creating
the National Coal Company, the Philippine Legislature passed Act No. 2719
"to provide for the leasing and development of coal lands in the Philippine
Islands." On October 18, 1917, upon petition of the National Coal Company,

the Governor-General, by Proclamation No. 39, withdrew "from settlement,

entry, sale or other disposition, all coal-bearing public lands within the
Province of Zamboanga, Department of Mindanao and Sulu, and the Island
of Polillo, Province of Tayabas." Almost immediately after the issuance of
said proclamation the National Coal Company took possession of the coal
lands within the said reservation, with an area of about 400 hectares,
without any further formality, contract or lease. Of the 30,000 shares of
stock issued by the company, the Government of the Philippine Islands is
the owner of 29,809 shares, that is, of 99 1/3 per centum of the whole
capital stock.
If we understand the theory of the plaintiff-appellee, it is, that it claims to be
the owner of the land from which it has mined the coal in question and is
therefore subject to the provisions of section 15 of Act No. 2719 and not to
the provisions of the section 1496 of the Administrative Code. That
contention of the plaintiff leads us to an examination of the evidence upon
the question of the ownership of the land from which the coal in question
was mined. Was the plaintiff the owner of the land from which the coal in
question was mined? If the evidence shows the affirmative, then the
judgment should be affirmed. If the evidence shows that the land does not
belong to the plaintiff, then the judgment should be reversed, unless the
plaintiff's rights fall under section 3 of said Act.
The only witness presented by the plaintiff upon the question of the
ownership of the land in question was Mr. Dalmacio Costas, who stated that
he was a member of the board of directors of the plaintiff corporation; that
the plaintiff corporation took possession of the land in question by virtue of
the proclamation of the Governor-General, known as Proclamation No. 39
of the year 1917; that no document had been issued in favor of the plaintiff
corporation; that said corporation had received no permission from the
Secretary of Agriculture and Natural Resources; that it took possession of
said lands covering an area of about 400 hectares, from which the coal in
question was mined, solely, by virtue of said proclamation (Exhibit B, No.
39).

Said proclamation (Exhibit B) was issued by Francis Burton Harrison, then

Governor-General, on the 18th day of October, 1917, and provided:
"Pursuant to the provision of section 71 of Act No. 926, I hereby withdraw
from settlement, entry, sale, or other disposition, all coal-bearing public
lands within the Province of Zamboanga, Department of Mindanao and
Sulu, and the Island of Polillo, Province of Tayabas." It will be noted that
said proclamation only provided that all coal-bearing public lands within
said province and island should be withdrawn from settlement, entry, sale,
or other disposition. There is nothing in said proclamation which authorizes
the plaintiff or any other person to enter upon said reversations and to mine
coal, and no provision of law has been called to our attention, by virtue of
which the plaintiff was entitled to enter upon any of the lands so reserved by
said proclamation without first obtaining permission therefor.
The plaintiff is a private corporation. The mere fact that the Government
happens to the majority stockholder does not make it a public corporation.
Act No. 2705, as amended by Act No. 2822, makes it subject to all of the
provisions of the Corporation Law, in so far as they are not inconsistent with
said Act (No. 2705). No provisions of Act No. 2705 are found to be
inconsistent with the provisions of the Corporation Law. As a private
corporation, it has no greater rights, powers or privileges than any other
corporation which might be organized for the same purpose under the
Corporation Law, and certainly it was not the intention of the Legislature to
give it a preference or right or privilege over other legitimate private
corporations in the mining of coal. While it is true that said proclamation No.
39 withdrew "from settlement, entry, sale, or other disposition of coalbearing public lands within the Province of Zamboanga . . . and the Island
of Polillo," it made no provision for the occupation and operation by the
plaintiff, to the exclusion of other persons or corporations who might, under
proper permission, enter upon the operate coal mines.
On the 14th day of May, 1917, and before the issuance of said
proclamation, the Legislature of the Philippine Island in "an Act for the
leasing and development of coal lands in the Philippine Islands" (Act No.
2719), made liberal provision. Section 1 of said Act provides: "Coal-bearing

lands of the public domain in the Philippine Island shall not be disposed of
in any manner except as provided in this Act," thereby giving a clear
indication that no "coal-bearing lands of the public domain" had been
disposed of by virtue of said proclamation.

(6) That the National Coal Company entered upon said land and mined said
coal, so far as the record shows, without any lease or other authority from
either the Secretary of Agriculture and Natural Resources or any person
having the power to grant a leave or authority.

Neither is there any provision in Act No. 2705 creating the National Coal
Company, nor in the amendments thereof found in Act No. 2822, which
authorizes the National Coal Company to enter upon any of the reserved
coal lands without first having obtained permission from the Secretary of
Agriculture and Natural Resources.

From all of the foregoing facts we find that the issue is well defined between
the plaintiff and the defendant. The plaintiff contends that it was liable only
to pay the internal revenue and other fees and taxes provided for under
section 15 of Act No. 2719; while the defendant contends, under the facts of
record, the plaintiff is obliged to pay the internal revenue duty provided for
in section 1496 of the Administrative Code. That being the issue, an
examination of the provisions of Act No. 2719 becomes necessary.

lawphi1.net

The following propositions are fully sustained by the facts and the law:
(1) The National Coal Company is an ordinary private corporation organized
under Act No. 2705, and has no greater powers nor privileges than the
ordinary private corporation, except those mentioned, perhaps, in section
10 of Act No. 2719, and they do not change the situation here.
(2) It mined on public lands between the month of July, 1920, and the
months of March, 1922, 24,089.3 tons of coal.
(3) Upon demand of the Collector of Internal Revenue it paid a tax of P0.50
a ton, as taxes under the provisions of article 1946 of the Administrative
Code on the 15th day of December, 1922.
(4) It is admitted that it is neither the owner nor the lessee of the lands upon
which said coal was mined.
(5) The proclamation of Francis Burton Harrison, Governor-General, of the
18th day of October, 1917, by authority of section 1 of Act No. 926,
withdrawing from settlement, entry, sale, or other dispositon all coal-bearing
public lands within the Province of Zamboanga and the Island of Polillo,
was not a reservation for the benefit of the National Coal Company, but for
any person or corporation of the Philippine Islands or of the United States.

An examination of said Act (No. 2719) discloses the following facts

important for consideration here:
First. All "coal-bearing lands of the public domain in the Philippine Islands
shall not be disposed of in any manner except as provided in this Act."
Second. Provisions for leasing by the Secretary of Agriculture and Natural
Resources of "unreserved, unappropriated coal-bearing public lands," and
the obligation to the Government which shall be imposed by said Secretary
upon the lessee.
lawphi1.net

Third. The internal revenue duty and tax which must be paid upon coalbearing lands owned by any person, firm, association or corporation.
To repeat, it will be noted, first, that Act No. 2719 provides an internal
revenue duty and tax upon unreserved, unappropriated coal-bearing public
lands which may be leased by the Secretary of Agriculture and Natural
Resources; and, second, that said Act (No. 2719) provides an internal
revenue duty and tax imposed upon any person, firm, association or
corporation, who may be the owner of "coal-bearing lands." A reading of
said Act clearly shows that the tax imposed thereby is imposed upon two
classes of persons only lessees and owners.

The lower court had some trouble in determining what was the correct
interpretation of section 15 of said Act, by reason of what he believed to be
some difference in the interpretation of the language used in Spanish and
English. While there is some ground for confusion in the use of the
language in Spanish and English, we are persuaded, considering all the
provisions of said Act, that said section 15 has reference only to persons,
firms, associations or corporations which had already, prior to the existence
of said Act, become the owners of coal lands. Section 15 cannot certainty
refer to "holders or lessees of coal lands' for the reason that practically all of
the other provisions of said Act has reference to lessees or holders. If
section 15 means that the persons, firms, associations, or corporation
mentioned therein are holders or lessees of coal lands only, it is difficult to
understand why the internal revenue duty and tax in said section was made
different from the obligations mentioned in section 3 of said Act, imposed
upon lessees or holders.
From all of the foregoing, it seems to be made plain that the plaintiff is
neither a lessee nor an owner of coal-bearing lands, and is, therefore, not
subject to any other provisions of Act No. 2719. But, is the plaintiff subject
to the provisions of section 1496 of the Administrative Code?
Section 1496 of the Administrative Code provides that "on all coal and coke
there shall be collected, per metric ton, fifty centavos." Said section (1496)
is a part of article, 6 which provides for specific taxes. Said article provides
for a specific internal revenue tax upon all things manufactured or produced
in the Philippine Islands for domestic sale or consumption, and upon things
imported from the United States or foreign countries. It having been
demonstrated that the plaintiff has produced coal in the Philippine Islands
and is not a lessee or owner of the land from which the coal was produced,
we are clearly of the opinion, and so hold, that it is subject to pay the
internal revenue tax under the provisions of section 1496 of the
Administrative Code, and is not subject to the payment of the internal
revenue tax under section 15 of Act No. 2719, nor to any other provisions of
said Act.

Therefore, the judgment appealed from is hereby revoked, and the

defendant is hereby relieved from all responsibility under the complaint.
And, without any finding as to costs, it is so ordered.

G.R. No. 41570

September 6, 1934

RED LINE TRANSPORTATION CO., petitioner-appellant,

vs.
RURAL TRANSIT CO., LTD., respondent-appellee.
BUTTE, J.:
This case is before us on a petition for review of an order of the Public
Service Commission entered December 21, 1932, granting to the Rural
Transit Company, Ltd., a certificate of public convenience to operate a
transportation service between Ilagan in the Province of Isabela and
Tuguegarao in the Province of Cagayan, and additional trips in its existing
express service between Manila Tuguegarao.
On June 4, 1932, the Rural Transit Company, Ltd., a Philippine corporation,
filed with the Public Company Service Commission an application in which
it is stated in substance that it is the holder of a certificate or public
convenience to operate a passenger bus service between Manila and
Tuguegarao; that it is the only operator of direct service between said points
and the present authorized schedule of only one trip daily is not sufficient;
that it will be also to the public convenience to grant the applicant a
certificate for a new service between Tuguegarao and Ilagan.
On July 22, 1932, the appellant, Red Line Transportation Company, filed an
opposition to the said application alleging in substance that as to the
service between Tuguegarao and Ilagan, the oppositor already holds a
certificate of public convenience and is rendering adequate and satisfactory

service; that the granting of the application of the Rural Transit Company,
Ltd., would not serve public convenience but would constitute a ruinous
competition for the oppositor over said route.
After testimony was taken, the commission, on December 21, 1932,
approved the application of the Rural Transit Company, Ltd., and ordered
that the certificate of public convenience applied for be "issued to the
applicant Rural Transit Company, Ltd.," with the condition, among others,
that "all the other terms and conditions of the various certificates of public
convenience of the herein applicant and herein incorporated are made a
part hereof."

Q.
Will you please answer the question whether it is the
Bachrach Motor Company operating under the trade name of the
Rural Transit Company, Limited, or whether it is the Rural Transit
Company, Limited in its own name this application was filed?
A.

The Bachrach Motor Company is the principal stockholder.

Q.

Please answer the question.

ESPELETA. Objecion porque la pregunta ya ha sido contestada.

JUEZ. Puede contestar.

On January 14, 1933, the oppositor Red Line Transportation Company filed
a motion for rehearing and reconsideration in which it called the
commission's attention to the fact that there was pending in the Court of
First Instance of Manila case N. 42343, an application for the voluntary
dissolution of the corporation, Rural Transit Company, Ltd. Said motion for
reconsideration was set down for hearing on March 24, 1933. On March 23,
1933, the Rural Transit Company, Ltd., the applicant, filed a motion for
postponement. This motion was verified by M. Olsen who swears "that he
was the secretary of the Rural Transit Company, Ltd., in the above entitled
case." Upon the hearing of the motion for reconsideration, the commission
admitted without objection the following documents filed in said case No.
42343 in the Court of First Instance of Manila for the dissolution of the Rural
Transit Company, Ltd. the petition for dissolution dated July 6, 1932, the
decision of the said Court of First Instance of Manila, dated February 28,
1933, decreeing the dissolution of the Rural Transit Company, Ltd.
At the trial of this case before the Public Service Commission an issue was
raised as to who was the real party in interest making the application,
whether the Rural Transit Company, Ltd., as appeared on the face of the
application, or the Bachrach Motor Company, Inc., using name of the Rural
Transit Company, Ltd., as a trade name. The evidence given by the
applicant's secretary, Olsen, is certainly very dubious and confusing, as
may be seen from the following:

A.
I do not know what the legal construction or relationship
existing between the two.
JUDGE. I do not know what is in your mind by not telling the real
applicant in this case?
A.

It is the Rural Transit Company, Ltd.

JUDGE. As an entity by itself and not by the Bachrach Motor

Company?
A.
I do not know. I have not given that phase of the matter
much thought, as in previous occassion had not necessitated.
JUDGE. In filing this application, you filed it for the operator on that
line? Is it not!
A.

Yes, sir.

JUDGE. Who is that operator?

A.

The Rural Transit Company, Ltd.

JUDGE. By itself, or as a commercial name of the Bachrach Motor

Company?
A.

I cannot say.

ESPELETA. The Rural Transit Company, Ltd., is a corporation duly

established in accordance with the laws of the Philippine Islands.
JUDGE. According to the records of this commission the Bachrach
Motor Company is the owner of the certificates and the Rural
Transit Company, Ltd., is operating without any certificate.
JUDGE. If you filed this application for the Rural Transit Company,
Ltd., and afterwards it is found out that the Rural Transit Company,
Ltd., is not an operator, everything will be turned down.
JUDGE. My question was, when you filed this application you
evidently made it for the operator?
A.

Yes, sir.

JUDGE. Who was that operator you had in mind?

A.
According to the status of the ownership of the certificates
of the former Rural Transit Company, the operator was the operator
authorized in case No. 23217 to whom all of the assets of the
former Rural Transit Company were sold.
JUDGE. Bachrach Motor Company?
A.
All actions have been prosecuted in the name of the Rural
Transit Company, Ltd.
JUDGE. You mean the Bachrach Motor Company, Inc., doing
business under the name of the Rural Transit Company, Ltd.?

A.

Yes, sir.

LOCKWOOD. I move that this case be dismissed, your Honor, on

the ground that this application was made in the name of one party
but the real owner is another party.
ESPELETA. We object to that petition.
JUDGE. I will have that in mind when I decide the case. If I agree
with you everything would be finished.
The Bachrach Motor Company, Inc., entered no appearance and ostensibly
took no part in the hearing of the application of the Rural Transit Company,
Ltd. It may be a matter of some surprise that the commission did not on its
own motion order the amendment of the application by substituting the
Bachrach Motor Company, Inc., as the applicant. However, the hearing
proceeded on the application as filed and the decision of December 2,
1932, was rendered in favor of the Rural Transit Company, Ltd., and the
certificate ordered to be issued in its name, in the face of the evidence that
the said corporation was not the real party in interest. In its said decision,
the commission undertook to meet the objection by referring to its
resolution of November 26, 1932, entered in another case. This resolution
in case No. 23217 concludes as follows:
Premises considered we hereby authorize the Bachrach Motor Co.,
Inc., to continue using the name of "Rural Transit Co., Ltd.," as its
trade name in all the applications, motions or other petitions to be
filed in this commission in connection with said business and that
this authority is given retroactive effect as of the date, of filing of the
application in this case, to wit, April 29, 1930.
We know of no law that empowers the Public Service Commission or any
court in this jurisdiction to authorize one corporation to assume the name of
another corporation as a trade name. Both the Rural Transit Company, Ltd.,
and the Bachrach Motor Co., Inc., are Philippine corporations and the very

law of their creation and continued existence requires each to adopt and
certify a distinctive name. The incorporators "constitute a body politic and
corporate under the name stated in the certificate." (Section 11, Act No.
1459, as amended.) A corporation has the power "of succession by its
corporate name." (Section 13, ibid.) The name of a corporation is therefore
essential to its existence. It cannot change its name except in the manner
provided by the statute. By that name alone is it authorized to transact
business. The law gives a corporation no express or implied authority to
assume another name that is unappropriated: still less that of another
corporation, which is expressly set apart for it and protected by the law. If
any corporation could assume at pleasure as an unregistered trade name
the name of another corporation, this practice would result in confusion and
open the door to frauds and evasions and difficulties of administration and
supervision. The policy of the law expressed in our corporation statute and
the Code of Commerce is clearly against such a practice. (Cf. Scarsdale
Pub. Co. Colonial Press vs. Carter, 116 New York Supplement, 731;
Svenska Nat. F. i. C. vs. Swedish Nat. Assn., 205 Illinois [Appellate Courts],
428, 434.)
The order of the commission of November 26, 1932, authorizing the
Bachrach Motor Co., Incorporated, to assume the name of the Rural Transit
Co., Ltd. likewise in corporated, as its trade name being void, and accepting
the order of December 21, 1932, at its face as granting a certificate of
public convenience to the applicant Rural Transit Co., Ltd., the said order
last mentioned is set aside and vacated on the ground that the Rural Transit
Company, Ltd., is not the real party in interest and its application was
fictitious.
In view of the dissolution of the Rural Transit Company, Ltd. by judicial
decree of February 28, 1933, we do not see how we can assess costs
against said respondent, Rural Transit Company, Ltd.

G.R. No. L-28351 July 28, 1977

UNIVERSAL MILLS CORPORATION, petitioner,

vs.
UNIVERSAL TEXTILE MILLS, INC., respondent.
Appeal from the order of the Securities and Exchange Commission in
S.E.C. Case No. 1079, entitled In the Matter of the Universal Textile Mills,
Inc. vs. Universal Mills Corporation, a petition to have appellant change its
corporate name on the ground that such name is "confusingly and
deceptively similar" to that of appellee, which petition the Commission
granted.
According to the order, "the Universal Textile Mills, Inc. was organ on
December 29, 1953, as a textile manufacturing firm for which it was issued
a certificate of registration on January 8, 1954. The Universal Mills
Corporation, on the other hand, was registered in this Commission on
October 27, 1954, under its original name, Universal Hosiery Mills
Corporation, having as its primary purpose the "manufacture and
production of hosieries and wearing apparel of all kinds." On May 24, 1963,
it filed an amendment to its articles of incorporation changing its name to
Universal Mills Corporation, its present name, for which this Commission
issued the certificate of approval on June 10, 1963.
The immediate cause of this present complaint, however, was the
occurrence of a fire which gutted respondent's spinning mills in Pasig,
Rizal. Petitioner alleged that as a result of this fire and because of the
similarity of respondent's name to that of herein complainant, the news
items appearing in the various metropolitan newspapers carrying reports on
the fire created uncertainty and confusion among its bankers, friends,
stockholders and customers prompting petitioner to make announcements,
clarifying the real Identity of the corporation whose property was burned.
Petitioner presented documentary and testimonial evidence in support of
this allegation.
On the other hand, respondent's position is that the names
of the two corporations are not similar and even if there be

some similarity, it is not confusing or deceptive; that the only

reason that respondent changed its name was because it
expanded its business to include the manufacture of fabrics
of all kinds; and that the word 'textile' in petitioner's name is
dominant and prominent enough to distinguish the two. It
further argues that petitioner failed to present evidence of
confusion or deception in the ordinary course of business;
that the only supposed confusion proved by complainant
arose out of an extraordinary occurrence a disastrous
fire. (pp. 16-&17, Record.)
Upon these premises, the Commission held:
From the facts proved and the jurisprudence on the matter,
it appears necessary under the circumstances to enjoin the
respondent Universal Mills Corporation from further using its
present corporate name. Judging from what has already
happened, confusion is not only apparent, but possible. It
does not matter that the instance of confusion between the
two corporate names was occasioned only by a fire or an
extraordinary occurrence. It is precisely the duty of this
Commission to prevent such confusion at all times and
under all circumstances not only for the purpose of
protecting the corporations involved but more so for the
protection of the public.

In today's modern business life where people go by

tradenames and corporate images, the corporate name
becomes the more important. This Commission cannot
close its eyes to the fact that usually it is the sound of all the
other words composing the names of business corporations
that sticks to the mind of those who deal with them. The
word "textile" in Universal Textile Mills, Inc.' can not possibly
assure the exclusion of all other entities with similar names
from the mind of the public especially so, if the business
they are engaged in are the same, like in the instant case.
This Commission further takes cognizance of the fact that
when respondent filed the amendment changing its name to
Universal Mills Corporation, it correspondingly filed a written
undertaking dated June 5, 1963 and signed by its President,
Mr. Mariano Cokiat, promising to change its name in the
event that there is another person, firm or entity who has
obtained a prior right to the use of such name or one similar
to it. That promise is still binding upon the corporation and
its responsible officers. (pp. 17-18, Record.)
It is obvious that the matter at issue is within the competence of the
Securities and Exchange Commission to resolve in the first instance in the
exercise of the jurisdiction it used to possess under Commonwealth Act 287
as amended by Republic Act 1055 to administer the application and
enforcement of all laws affecting domestic corporations and associations,
reserving to the courts only conflicts of judicial nature, and, of course, the
Supreme Court's authority to review the Commissions actuations in
appropriate instances involving possible denial of due process and grave
abuse of discretion. Thus, in the case at bar, there being no claim of denial
of any constitutional right, all that We are called upon to determine is
whether or not the order of the Commission enjoining petitioner to its
corporate name constitutes, in the light of the circumstances found by the
Commission, a grave abuse of discretion.

We believe it is not. Indeed, it cannot be said that the impugned order is

arbitrary and capricious. Clearly, it has rational basis. The corporate names
in question are not Identical, but they are indisputably so similar that even
under the test of "reasonable care and observation as the public generally
are capable of using and may be expected to exercise" invoked by
appellant, We are apprehensive confusion will usually arise, considering
that under the second amendment of its articles of incorporation on August
14, 1964, appellant included among its primary purposes the
"manufacturing, dyeing, finishing and selling of fabrics of all kinds" in which
respondent had been engaged for more than a decade ahead of petitioner.
Factually, the Commission found existence of such confusion, and there is
evidence to support its conclusion. Since respondent is not claiming
damages in this proceeding, it is, of course, immaterial whether or not
appellant has acted in good faith, but We cannot perceive why of all names,
it had to choose a name already being used by another firm engaged in
practically the same business for more than a decade enjoying well earned
patronage and goodwill, when there are so many other appropriate names
it could possibly adopt without arousing any suspicion as to its motive and,
more importantly, any degree of confusion in the mind of the public which
could mislead even its own customers, existing or prospective. Premises
considered, there is no warrant for our interference.
As this is purely a case of injunction, and considering the time that has
elapsed since the facts complained of took place, this decision should not
be deemed as foreclosing any further remedy which appellee may have for
the protection of its interests.
WHEREFORE, with the reservation already mentioned, the appealed
decision is affirmed. Costs against petitioners.

G.R. No. 101897. March 5, 1993.

LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF
APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF

CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO,

INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM
OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC.
and WESTERN PANGASINAN LYCEUM, INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for
petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices
for respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF
PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR
TO THAT OF ANY EXISTING CORPORATION, PROHIBITED;
CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE
APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM".
The Articles of Incorporation of a corporation must, among other things, set
out the name of the corporation. Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned:
"Section 18. Corporate name. No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law or is patently deceptive, confusing
or contrary to existing laws. When a change in the corporate name is
approved, the Commission shall issue an amended certificate of
incorporation under the amended name." The policy underlying the
prohibition in Section 18 against the registration of a corporate name which
is "identical or deceptively or confusingly similar" to that of any existing
corporation or which is "patently deceptive" or "patently confusing" or
"contrary to existing laws," is the avoidance of fraud upon the public which
would have occasion to deal with the entity concerned, the evasion of legal

obligations and duties, and the reduction of difficulties of administration and

supervision over corporations. We do not consider that the corporate
names of private respondent institutions are "identical with, or deceptively
or confusingly similar" to that of the petitioner institution. True enough, the
corporate names of private respondent entities all carry the word "Lyceum"
but confusion and deception are effectively precluded by the appending of
geographic names to the word "Lyceum." Thus, we do not believe that the
"Lyceum of Aparri" can be mistaken by the general public for the Lyceum of
the Philippines, or that the "Lyceum of Camalaniugan" would be confused
with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD
"LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. It is claimed,
however, by petitioner that the word "Lyceum" has acquired a secondary
meaning in relation to petitioner with the result that word, although originally
a generic, has become appropriable by petitioner to the exclusion of other
institutions like private respondents herein. The doctrine of secondary
meaning originated in the field of trademark law. Its application has,
however, been extended to corporate names sine the right to use a
corporate name to the exclusion of others is based upon the same principle
which underlies the right to use a particular trademark or tradename. In
Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of
secondary meaning was elaborated in the following terms: " . . . a word or
phrase originally incapable of exclusive appropriation with reference to an
article on the market, because geographically or otherwise descriptive,
might nevertheless have been used so long and so exclusively by one
producer with reference to his article that, in that trade and to that branch of
the purchasing public, the word or phrase has come to mean that the article
was his product." The question which arises, therefore, is whether or not
the use by petitioner of "Lyceum" in its corporate name has been for such
length of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public (or
at least that portion of the general public which has to do with schools). The
Court of Appeals recognized this issue and answered it in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally

incapable of exclusive appropriation with reference to an article in the

market, because geographical or otherwise descriptive might nevertheless
have been used so long and so exclusively by one producer with reference
to this article that, in that trade and to that group of the purchasing public,
the word or phrase has come to mean that the article was his produce (Ana
Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred
to as the distinctiveness into which the name or phrase has evolved
through the substantial and exclusive use of the same for a considerable
period of time. . . . No evidence was ever presented in the hearing before
the Commission which sufficiently proved that the word 'Lyceum' has
indeed acquired secondary meaning in favor of the appellant. If there was
any of this kind, the same tend to prove only that the appellant had been
using the disputed word for a long period of time. . . . In other words, while
the appellant may have proved that it had been using the word 'Lyceum' for
a long period of time, this fact alone did not amount to mean that the said
word had acquired secondary meaning in its favor because the appellant
failed to prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented to prove
that confusion will surely arise if the same word were to be used by other
educational institutions. Consequently, the allegations of the appellant in its
first two assigned errors must necessarily fail." We agree with the Court of
Appeals. The number alone of the private respondents in the case at bar
suggests strongly that petitioner's use of the word "Lyceum" has not been
attended with the exclusivity essential for applicability of the doctrine of
secondary meaning. Petitioner's use of the word "Lyceum" was not
exclusive but was in truth shared with the Western Pangasinan Lyceum and
a little later with other private respondent institutions which registered with
the SEC using "Lyceum" as part of their corporation names. There may well
be other schools using Lyceum or Liceo in their names, but not registered
with the SEC because they have not adopted the corporate form of
organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE
WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO
ANOTHER CORPORATE ENTITY'S NAME. petitioner institution is not

entitled to a legally enforceable exclusive right to use the word "Lyceum" in

its corporate name and that other institutions may use "Lyceum" as part of
their corporate names. To determine whether a given corporate name is
"identical" or "confusingly or deceptively similar" with another entity's
corporate name, it is not enough to ascertain the presence of "Lyceum" or
"Liceo" in both names. One must evaluate corporate names in their entirety
and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or
"confusingly or deceptively similar" with each other.

Lyceum of Tuao, Inc. 28 March 1972

Lyceum of Camalaniugan 28 March 1972
The following private respondents were declared in default for failure to file
an answer despite service of summons:
Buhi Lyceum;
Central Lyceum of Catanduanes;

DECISION
Lyceum of Eastern Mindanao, Inc.; and
FELICIANO, J p:
Lyceum of Southern Philippines
Petitioner is an educational institution duly registered with the Securities
and Exchange Commission ("SEC"). When it first registered with the SEC
on 21 September 1950, it used the corporate name Lyceum of the
Philippines, Inc. and has used that name ever since.

Petitioner's original complaint before the SEC had included three (3) other
entities:
1. The Lyceum of Malacanay;

On 24 February 1984, petitioner instituted proceedings before the SEC to

compel the private respondents, which are also educational institutions, to
delete the word "Lyceum" from their corporate names and permanently to
enjoin them from using "Lyceum" as part of their respective names.
Some of the private respondents actively participated in the proceedings
before the SEC. These are the following, the dates of their original SEC
registration being set out below opposite their respective names:
Western Pangasinan Lyceum 27 October 1950
Lyceum of Cabagan 31 October 1962
Lyceum of Lallo, Inc. 26 March 1972
Lyceum of Aparri 28 March 1972

2. The Lyceum of Marbel; and

3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of
Malacanay and the Lyceum of Marbel, for failure to serve summons upon
these two (2) entities. The case against the Liceum of Araullo was
dismissed when that school motu proprio change its corporate name to
"Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner had
sometime before commenced in the SEC a proceeding (SEC-Case No.
1241) against the Lyceum of Baguio, Inc. to require it to change its
corporate name and to adopt another name not "similar [to] or identical"
with that of petitioner. In an Order dated 20 April 1977, Associate

Commissioner Julio Sulit held that the corporate name of petitioner and that
of the Lyceum of Baguio, Inc. were substantially identical because of the
presence of a "dominant" word, i.e., "Lyceum," the name of the
geographical location of the campus being the only word which
distinguished one from the other corporate name. The SEC also noted that
petitioner had registered as a corporation ahead of the Lyceum of Baguio,
Inc. in point of time, 1 and ordered the latter to change its name to another
name "not similar or identical [with]" the names of previously registered
entities.

attaching of geographical names to the word "Lyceum" served sufficiently to

distinguish the schools from one another, especially in view of the fact that
the campuses of petitioner and those of the private respondents were
physically quite remote from each other. 3

The Lyceum of Baguio, Inc. assailed the Order of the SEC before the
Supreme Court in a case docketed as G.R. No. L-46595. In a Minute
Resolution dated 14 September 1977, the Court denied the Petition for
Review for lack of merit. Entry of judgment in that case was made on 21
October 1977. 2

Before this Court, petitioner asserts that the Court of Appeals committed the
following errors:

Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then
wrote all the educational institutions it could find using the word "Lyceum"
as part of their corporate name, and advised them to discontinue such use
of "Lyceum." When, with the passage of time, it became clear that this
recourse had failed, petitioner instituted before the SEC SEC-Case No.
2579 to enforce what petitioner claims as its proprietary right to the word
"Lyceum." The SEC hearing officer rendered a decision sustaining
petitioner's claim to an exclusive right to use the word "Lyceum." The
hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc.
case (SEC-Case No. 1241) and held that the word "Lyceum" was capable
of appropriation and that petitioner had acquired an enforceable exclusive
right to the use of that word.
On appeal, however, by private respondents to the SEC En Banc, the
decision of the hearing officer was reversed and set aside. The SEC En
Banc did not consider the word "Lyceum" to have become so identified with
petitioner as to render use thereof by other institutions as productive of
confusion about the identity of the schools concerned in the mind of the
general public. Unlike its hearing officer, the SEC En Banc held that the

Petitioner then went on appeal to the Court of Appeals. In its Decision dated
28 June 1991, however, the Court of Appeals affirmed the questioned
Orders of the SEC En Banc. 4 Petitioner filed a motion for reconsideration,
without success.

1. The Court of Appeals erred in holding that the Resolution of the Supreme
Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this
case and in not holding that said Resolution bound subsequent
determinations on the right to exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western
Pangasinan Lyceum, Inc. was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not
acquired a secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word
cannot be appropriated by the petitioner to the exclusion of others. 5
We will consider all the foregoing ascribed errors, though not necessarily
seriatim. We begin by noting that the Resolution of the Court in G.R. No. L46595 does not, of course, constitute res adjudicata in respect of the case
at bar, since there is no identity of parties. Neither is stare decisis pertinent,
if only because the SEC En Banc itself has re-examined Associate
Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute
Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption
of the Sulit ruling.

The Articles of Incorporation of a corporation must, among other things, set

out the name of the corporation. 6 Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned:
"SECTION 18. Corporate name. No corporate name may be allowed by
the Securities an Exchange Commission if the proposed name is identical
or deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law or is patently deceptive, confusing
or contrary to existing laws. When a change in the corporate name is
approved, the Commission shall issue an amended certificate of
incorporation under the amended name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the registration
of a corporate name which is "identical or deceptively or confusingly similar"
to that of any existing corporation or which is "patently deceptive" or
"patently confusing" or "contrary to existing laws," is the avoidance of fraud
upon the public which would have occasion to deal with the entity
concerned, the evasion of legal obligations and duties, and the reduction of
difficulties of administration and supervision over corporations. 7
We do not consider that the corporate names of private respondent
institutions are "identical with, or deceptively or confusingly similar" to that
of the petitioner institution. True enough, the corporate names of private
respondent entities all carry the word "Lyceum" but confusion and
deception are effectively precluded by the appending of geographic names
to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri"
can be mistaken by the general public for the Lyceum of the Philippines, or
that the "Lyceum of Camalaniugan" would be confused with the Lyceum of
the Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion
which in turn referred to a locality on the river Ilissius in ancient Athens
"comprising an enclosure dedicated to Apollo and adorned with fountains
and buildings erected by Pisistratus, Pericles and Lycurgus frequented by
the youth for exercise and by the philosopher Aristotle and his followers for

teaching." 8 In time, the word "Lyceum" became associated with schools

and other institutions providing public lectures and concerts and public
discussions. Thus today, the word "Lyceum" generally refers to a school or
an institution of learning. While the Latin word "lyceum" has been
incorporated into the English language, the word is also found in Spanish
(liceo) and in French (lycee). As the Court of Appeals noted in its Decision,
Roman Catholic schools frequently use the term; e.g., "Liceo de Manila,"
"Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de
Albay." 9 "Lyceum" is in fact as generic in character as the word "university."
In the name of the petitioner, "Lyceum" appears to be a substitute for
"university;" in other places, however, "Lyceum," or "Liceo" or "Lycee"
frequently denotes a secondary school or a college. It may be (though this
is a question of fact which we need not resolve) that the use of the word
"Lyceum" may not yet be as widespread as the use of "university," but it is
clear that a not inconsiderable number of educational institutions have
adopted "Lyceum" or "Liceo" as part of their corporate names. Since
"Lyceum" or "Liceo" denotes a school or institution of learning, it is not
unnatural to use this word to designate an entity which is organized and
operating as an educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has acquired a
secondary meaning in relation to petitioner with the result that that word,
although originally a generic, has become appropriable by petitioner to the
exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark law.
Its application has, however, been extended to corporate names sine the
right to use a corporate name to the exclusion of others is based upon the
same principle which underlies the right to use a particular trademark or
tradename. 10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11
the doctrine of secondary meaning was elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation with
reference to an article on the market, because geographically or otherwise
descriptive, might nevertheless have been used so long and so exclusively

by one producer with reference to his article that, in that trade and to that
branch of the purchasing public, the word or phrase has come to mean that
the article was his product." 12
The question which arises, therefore, is whether or not the use by petitioner
of "Lyceum" in its corporate name has been for such length of time and with
such exclusivity as to have become associated or identified with the
petitioner institution in the mind of the general public (or at least that portion
of the general public which has to do with schools). The Court of Appeals
recognized this issue and answered it in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article in the
market, because geographical or otherwise descriptive might nevertheless
have been used so long and so exclusively by one producer with reference
to this article that, in that trade and to that group of the purchasing public,
the word or phrase has come to mean that the article was his produce (Ana
Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred
to as the distinctiveness into which the name or phrase has evolved
through the substantial and exclusive use of the same for a considerable
period of time. Consequently, the same doctrine or principle cannot be
made to apply where the evidence did not prove that the business (of the
plaintiff) has continued for so long a time that it has become of
consequence and acquired a good will of considerable value such that its
articles and produce have acquired a well-known reputation, and confusion
will result by the use of the disputed name (by the defendant) (Ang Si Heng
vs. Wellington Department Store, Inc., 92 Phil. 448).
With the foregoing as a yardstick, [we] believe the appellant failed to satisfy
the aforementioned requisites. No evidence was ever presented in the
hearing before the Commission which sufficiently proved that the word
'Lyceum' has indeed acquired secondary meaning in favor of the appellant.
If there was any of this kind, the same tend to prove only that the appellant
had been using the disputed word for a long period of time. Nevertheless,
its (appellant) exclusive use of the word (Lyceum) was never established or

proven as in fact the evidence tend to convey that the cross-claimant was
already using the word 'Lyceum' seventeen (17) years prior to the date the
appellant started using the same word in its corporate name. Furthermore,
educational institutions of the Roman Catholic Church had been using the
same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno,
Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started
using the word 'Lyceum'. The appellant also failed to prove that the word
'Lyceum' has become so identified with its educational institution that
confusion will surely arise in the minds of the public if the same word were
to be used by other educational institutions.
In other words, while the appellant may have proved that it had been using
the word 'Lyceum' for a long period of time, this fact alone did not amount to
mean that the said word had acquired secondary meaning in its favor
because the appellant failed to prove that it had been using the same word
all by itself to the exclusion of others. More so, there was no evidence
presented to prove that confusion will surely arise if the same word were to
be used by other educational institutions. Consequently, the allegations of
the appellant in its first two assigned errors must necessarily fail." 13
(Underscoring partly in the original and partly supplied)
We agree with the Court of Appeals. The number alone of the private
respondents in the case at bar suggests strongly that petitioner's use of the
word "Lyceum" has not been attended with the exclusivity essential for
applicability of the doctrine of secondary meaning. It may be noted also that
at least one of the private respondents, i.e., the Western Pangasinan
Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the
petitioner registered its own corporate name with the SEC and began using
the word "Lyceum." It follows that if any institution had acquired an
exclusive right to the word "Lyceum," that institution would have been the
Western Pangasinan Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan
Lyceum, Inc. failed to reconstruct its records before the SEC in accordance
with the provisions of R.A. No. 62, which records had been destroyed

during World War II, Western Pangasinan Lyceum should be deemed to

have lost all rights it may have acquired by virtue of its past registration. It
might be noted that the Western Pangasinan Lyceum, Inc. registered with
the SEC soon after petitioner had filed its own registration on 21 September
1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed
to have lost its rights under its original 1933 registration, appears to us to
be quite secondary in importance; we refer to this earlier registration simply
to underscore the fact that petitioner's use of the word "Lyceum" was
neither the first use of that term in the Philippines nor an exclusive use
thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in
truth shared with the Western Pangasinan Lyceum and a little later with
other private respondent institutions which registered with the SEC using
"Lyceum" as part of their corporation names. There may well be other
schools using Lyceum or Liceo in their names, but not registered with the
SEC because they have not adopted the corporate form of organization.
We conclude and so hold that petitioner institution is not entitled to a legally
enforceable exclusive right to use the word "Lyceum" in its corporate name
and that other institutions may use "Lyceum" as part of their corporate
names. To determine whether a given corporate name is "identical" or
"confusingly or deceptively similar" with another entity's corporate name, it
is not enough to ascertain the presence of "Lyceum" or "Liceo" in both
names. One must evaluate corporate names in their entirety and when the
name of petitioner is juxtaposed with the names of private respondents,
they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
WHEREFORE, the petitioner having failed to show any reversible error on
the part of the public respondent Court of Appeals, the Petition for Review
is DENIED for lack of merit, and the Decision of the Court of Appeals dated
28 June 1991 is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 96161 February 21, 1992

PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and

PHILIPS INDUSTRIAL DEVELOPMENT, INC.,petitioners,
vs.
COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and
STANDARD PHILIPS CORPORATION,respondents.
Petitioners challenge the Decision of the Court of Appeals, dated 31 July
1990, in CA-GR Sp. No. 20067, upholding the Order of the Securities and
Exchange Commission, dated 2 January 1990, in SEC-AC No. 202,
dismissing petitioners' prayer for the cancellation or removal of the word
"PHILIPS" from private respondent's corporate name.
Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under
the laws of the Netherlands, although not engaged in business here, is
the registered owner of the trademarks PHILIPS and PHILIPS SHIELD
EMBLEM under Certificates of Registration Nos. R-1641 and R-1674,
respectively issued by the Philippine Patents Office (presently known as the
Bureau of Patents, Trademarks and Technology Transfer). Petitioners
Philips Electrical Lamps, Inc. (Philips Electrical, for brevity) and Philips
Industrial Developments, Inc. (Philips Industrial, for short), authorized users
of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM, were
incorporated on 29 August 1956 and 25 May 1956, respectively. All
petitioner corporations belong to the PHILIPS Group of Companies.
Respondent Standard Philips Corporation (Standard Philips), on the other
hand, was issued a Certificate of Registration by respondent Commission
on 19 May 1982.
On 24 September 1984, Petitioners filed a letter complaint with the
Securities & Exchange Commission (SEC) asking for the cancellation of the
word "PHILIPS" from Private Respondent's corporate name in view of the
prior registration with the Bureau of Patents of the trademark "PHILIPS" and
the logo "PHILIPS SHIELD EMBLEM" in the name of Petitioner, PEBV, and
the previous registration of Petitioners Philips Electrical and Philips
Industrial with the SEC.

As a result of Private Respondent's refusal to amend its Articles of

Incorporation, Petitioners filed with the SEC, on 6 February 1985, a Petition
(SEC Case No. 2743) praying for the issuance of a Writ of Preliminary
Injunction, alleging, among others, that Private Respondent's use of the
word PHILIPS amounts to an infringement and clear violation of Petitioners'
exclusive right to use the same considering that both parties engage in the
same business.
In its Answer, dated 7 March 1985, Private Respondent countered that
Petitioner PEBV has no legal capacity to sue; that its use of its corporate
name is not at all similar to Petitioners' trademark PHILIPS when
considered in its entirety; and that its products consisting of chain rollers,
belts, bearings and cutting saw are grossly different from Petitioners'
electrical products.
After conducting hearings with respect to the prayer for Injunction; the SEC
Hearing Officer, on 27 September 1985, ruled against the issuance of such
Writ.
On 30 January 1987, the same Hearing Officer dismissed the Petition for
lack of merit. In so ruling, the latter declared that inasmuch as the SEC
found no sufficient ground for the granting of injunctive relief on the basis of
the testimonial and documentary evidence presented, it cannot order the
removal or cancellation of the word "PHILIPS" from Private Respondent's
corporate name on the basis of the same evidence adopted in toto during
trial on the merits. Besides, Section 18 of the Corporation Code (infra) is
applicable only when the corporate names in question are identical. Here,
there is no confusing similarity between Petitioners' and Private
Respondent's corporate names as those of the Petitioners contain at least
two words different from that of the Respondent. Petitioners' Motion for
Reconsideration was likewise denied on 17 June 1987.

On appeal, the SEC en banc affirmed the dismissal declaring that the
corporate names of Petitioners and Private Respondent hardly breed
confusion inasmuch as each contains at least two different words and,
therefore, rules out any possibility of confusing one for the other.
On 30 January 1990, Petitioners sought an extension of time to file a
Petition for Review on Certiorari before this Court, which Petition was later
referred to the Court of Appeals in a Resolution dated 12 February 1990.
In deciding to dismiss the petition on 31 July 1990, the Court of
Appeals 1 swept aside Petitioners' claim that following the ruling in Converse
Rubber Corporation v. Universal Converse Rubber Products, Inc., et al, (G. R.
No. L-27906, January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be
used as part of Private Respondent's corporate name as the same constitutes a
dominant part of Petitioners' corporate names. In so holding, the Appellate
Court observed that the Converse case is not four-square with the present case
inasmuch as the contending parties in Converse are engaged in a similar
business, that is, the manufacture of rubber shoes. Upholding the SEC, the
Appellate Court concluded that "private respondents' products consisting of
chain rollers, belts, bearings and cutting saw are unrelated and non-competing
with petitioners' products i.e. electrical lamps such that consumers would not in
any probability mistake one as the source or origin of the product of the other."
The Appellate Court denied Petitioners' Motion for Reconsideration on 20
November 1990, hence, this Petition which was given due course on 22
April 1991, after which the parties were required to submit their
memoranda, the latest of which was received on 2 July 1991. In December
1991, the SEC was also required to elevate its records for the perusal of
this Court, the same not having been apparently before respondent Court of
Appeals.
We find basis for petitioners' plea.
As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115
(1927), the Court declared that a corporation's right to use its corporate and
trade name is a property right, a right in rem, which it may assert and

protect against the world in the same manner as it may protect its tangible
property, real or personal, against trespass or conversion. It is regarded, to
a certain extent, as a property right and one which cannot be impaired or
defeated by subsequent appropriation by another corporation in the same
field (Red Line Transportation Co. vs. Rural Transit Co., September 8,
1934, 20 Phil 549).
A name is peculiarly important as necessary to the very existence of a
corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed
317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First
National Bank vs. Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its
name is one of its attributes, an element of its existence, and essential to its
identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations
is that each corporation must have a name by which it is to sue and be
sued and do all legal acts. The name of a corporation in this respect
designates the corporation in the same manner as the name of an
individual designates the person (Cincinnati Cooperage Co. vs. Bate. 96 Ky
356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird. 10 NH 123);
and the right to use its corporate name is as much a part of the corporate
franchise as any other privilege granted (Federal Secur. Co. vs. Federal
Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese
Beneficial Association, 18 RI 165, 26 A 36).
A corporation acquires its name by choice and need not select a name
identical with or similar to one already appropriated by a senior corporation
while an individual's name is thrust upon him (See Standard Oil Co. of New
Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A
corporation can no more use a corporate name in violation of the rights of
others than an individual can use his name legally acquired so as to
mislead the public and injure another (Armington vs. Palmer, 21 RI 109. 42
A 308).
Our own Corporation Code, in its Section 18, expressly provides that:

No corporate name may be allowed by the Securities and

Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law
or is patently deceptive, confusing or contrary to existing
law.Where a change in a corporate name is approved, the
commission shall issue an amended certificate of
incorporation under the amended name. (Emphasis
supplied)
The statutory prohibition cannot be any clearer. To come within its scope,
two requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of
such corporate name; and
(2) the proposed name is either:
(a) identical; or
(b) deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law; or
(c) patently deceptive, confusing or contrary to existing law.
The right to the exclusive use of a corporate name with freedom from
infringement by similarity is determined by priority of adoption (1 Thompson,
p. 80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco
Oyster House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there
is no doubt with respect to Petitioners' prior adoption of' the name
''PHILIPS" as part of its corporate name. Petitioners Philips Electrical and
Philips Industrial were incorporated on 29 August 1956 and 25 May 1956,
respectively, while Respondent Standard Philips was issued a Certificate of
Registration on 12 April 1982, twenty-six (26) years later (Rollo, p. 16).
Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps

of all types and their accessories since 30 September 1922, as evidenced

by Certificate of Registration No. 1651.
The second requisite no less exists in this case. In determining the
existence of confusing similarity in corporate names, the test is whether the
similarity is such as to mislead a person, using ordinary care and
discrimination. In so doing, the Court must look to the record as well as the
names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d
298). While the corporate names of Petitioners and Private Respondent are
not identical, a reading of Petitioner's corporate names, to wit: PHILIPS
EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS
INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to conclude that
"PHILIPS" is, indeed, the dominant word in that all the companies affiliated
or associated with the principal corporation, PEBV, are known in the
Philippines and abroad as the PHILIPS Group of Companies.
Respondents maintain, however, that Petitioners did not present an iota of
proof of actual confusion or deception of the public much less a single
purchaser of their product who has been deceived or confused or showed
any likelihood of confusion. It is settled, however, that proof of actual
confusion need not be shown. It suffices that confusion is probably or likely
to occur (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of
cases).
It may be that Private Respondent's products also consist of chain rollers,
belts, bearing and the like, while petitioners deal principally with electrical
products. It is significant to note, however, that even the Director of Patents
had denied Private Respondent's application for registration of the
trademarks "Standard Philips & Device" for chain, rollers, belts, bearings
and cutting saw. That office held that PEBV, "had shipped to its subsidiaries
in the Philippines equipment, machines and their parts which fall under
international class where "chains, rollers, belts, bearings and cutting saw,"
the goods in connection with which Respondent is seeking to register
'STANDARD PHILIPS' . . . also belong" ( Inter Partes Case No. 2010, June
17, 1988, SEC Rollo).

Furthermore, the records show that among Private Respondent's primary

purposes in its Articles of Incorporation (Annex D, Petition p. 37, Rollo) are
the following:
To buy, sell, barter, trade, manufacture, import, export, or
otherwise acquire, dispose of, and deal in and deal with any
kind of goods, wares, and merchandise such as but not
limited to plastics, carbon products, office stationery and
supplies, hardware parts, electrical wiring devices, electrical
component parts, and/or complement of industrial,
agricultural or commercial machineries, constructive
supplies, electrical supplies and other merchandise which
are or may become articles of commerce except food, drugs
and cosmetics and to carry on such business as
manufacturer,
distributor,
dealer,
indentor,
factor,
manufacturer's representative capacity for domestic or
foreign companies. (emphasis ours)
For its part, Philips Electrical also includes, among its primary purposes, the
following:
To develop manufacture and deal in electrical products,
including electronic, mechanical and other similar products .
. . (p. 30, Record of SEC Case No. 2743)
Given Private Respondent's aforesaid underlined primary purpose, nothing
could prevent it from dealing in the same line of business of electrical
devices, products or supplies which fall under its primary purposes.
Besides, there is showing that Private Respondent not only manufactured
and sold ballasts for fluorescent lamps with their corporate name printed
thereon but also advertised the same as, among others, Standard Philips
(TSN, before the SEC, pp. 14, 17, 25, 26, 37-42, June 14, 1985; pp. 16-19,
July 25, 1985). As aptly pointed out by Petitioners, [p]rivate respondent's
choice of "PHILIPS" as part of its corporate name [STANDARD PHILIPS
CORPORATION] . . . tends to show said respondent's intention to ride on

the popularity and established goodwill of said petitioner's business

throughout the world" (Rollo, p. 137). The subsequent appropriator of the
name or one confusingly similar thereto usually seeks an unfair advantage,
a free ride of another's goodwill (American Gold Star Mothers, Inc. v.
National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488).

510). Notably, too, Private Respondent's name actually contains only a

single word, that is, "STANDARD", different from that of Petitioners
inasmuch as the inclusion of the term "Corporation" or "Corp." merely
serves the Purpose of distinguishing the corporation from partnerships and
other business organizations.

In allowing Private Respondent the continued use of its corporate name,

the SEC maintains that the corporate names of Petitioners PHILIPS
ELECTRICAL LAMPS. INC. and PHILIPS INDUSTRIAL DEVELOPMENT,
INC. contain at least two words different from that of the corporate name of
respondent STANDARD PHILIPS CORPORATION, which words will readily
identify Private Respondent from Petitioners and vice-versa.

The fact that there are other companies engaged in other lines of business
using the word "PHILIPS" as part of their corporate names is no defense
and does not warrant the use by Private Respondent of such word which
constitutes an essential feature of Petitioners' corporate name previously
adopted and registered and-having acquired the status of a well-known
mark in the Philippines and internationally as well (Bureau of Patents
Decision No. 88-35 [TM], June 17, 1988, SEC Records).

True, under the Guidelines in the Approval of Corporate and Partnership

Names formulated by the SEC, the proposed name "should not be similar
to one already used by another corporation or partnership. If the proposed
name contains a word already used as part of the firm name or style of a
registered company; the proposed name must contain two other words
different from the company already registered" (Emphasis ours). It is then
pointed out that Petitioners Philips Electrical and Philips Industrial have two
words different from that of Private Respondent's name.
What is lost sight of, however, is that PHILIPS is a trademark or trade name
which was registered as far back as 1922. Petitioners, therefore, have the
exclusive right to its use which must be free from any infringement by
similarity. A corporation has an exclusive right to the use of its name, which
may be protected by injunction upon a principle similar to that upon which
persons are protected in the use of trademarks and tradenames (18 C.J.S.
574). Such principle proceeds upon the theory that it is a fraud on the
corporation which has acquired a right to that name and perhaps carried on
its business thereunder, that another should attempt to use the same name,
or the same name with a slight variation in such a way as to induce persons
to deal with it in the belief that they are dealing with the corporation which
has given a reputation to the name (6 Fletcher [Perm Ed], pp. 3940, citingBorden Ice Cream Co. v. Borden's Condensed Milk Co., 210 F

In support of its application for the registration of its Articles of Incorporation

with the SEC, Private Respondent had submitted an undertaking
"manifesting its willingness to change its corporate name in the event
another person, firm or entity has acquired a prior right to the use of the
said firm name or one deceptively or confusingly similar to it." Private
respondent must now be held to its undertaking.
As a general rule, parties organizing a corporation must
choose a name at their peril; and the use of a name similar
to one adopted by another corporation, whether a business
or a nonbusiness or non-profit organization if misleading
and likely to injure it in the exercise in its corporate
functions, regardless of intent, may be prevented by the
corporation having the prior right, by a suit for injunction
against the new corporation to prevent the use of the name
(American Gold Star Mothers, Inc. v. National Gold Star
Mothers, Inc., 89 App DC 269, 191 F 2d 488, 27 ALR 2d
948).
WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990,
and its Resolution dated 20 November 1990, are SET ASIDE and a new

one entered ENJOINING

feature of its corporate
Exchange Commission
Incorporation by deleting
private respondent.

private respondent from using "PHILIPS" as a

name, and ORDERING the Securities and
to amend private respondent's Articles of
the word PHILIPS from the corporate name of

No costs.
SO ORDERED.