Corp. Cases Sec. 36

Today is Thursday, January 18, 2018
THIRD DIVISION
DECISION
mber 29, 2002 which modified the trial court’s decision is whether defendant appellant-respondent Felipe Suzara can be made solidar
esident (the Republic), and the ISC, represented by its Executive Director Ramon Garcia, entered into a Memorandum of Agreement
ool buildings in the Cordillera Autonomous Region, Region 2 and Region 5.
on-interest earning account with ISC 70% of the contract price, with the balance of 30% to be remitted "after submission of monthly d
0 days from the release of funds "as specified in this agreement" and should it fail to comply therewith, the Republic may exact liqu
5,942,160.00 in the name of ISC which the latter had encashed.
ldings "lagged behind . . . time schedule."3
which check had been cleared.

ollowing conditions:
ust be completed within thirty (30) days for Cagayan and forty-five (45) days for Masbate. Those which are not yet started must be co
ded that the buildings shall strictly follow the standard design of the PSF school building program. If the ORGANIZATION fails to deliv
f one (0.1%) percent of the total amount for each day of delay.
x x x (Underscoring supplied)5
to honor its commitment under the MOA, as amended, drawing the Republic to file on December 8, 1993 a complaint for Damages b
perform them and had falsely represented to Presidential Management and Staff that they were financially capable and had all the te
e fact that they could not even start the construction of some school buildings and could not complete the construction of some of the
public’s motion, declared in default.
d in pars. 3.1 to 3.7 inclusive," they alleging as SPECIAL AND AFFIRMATIVE DEFENSES the following:
xxx
Chairman of ISC and did not at any time made (sic) any representation or undertakings in his personal capacity;
e subject school buildings, with the full knowledge and consent of plaintiff, was merely for purposes of supervision and monitoring;
e pertinent agreement entered into with the plaintiff;
for and paid by the defaulting contractors of the project concerned as contracted by defendant ISC;
x x x (Underscoring supplied)6
ublic, they were declared as in default.
ame.
h the case was raffled, following which it rendered a decision7 in favor of the Republic and disposed as follows:
he latter to pay the former, jointly and solidarily, the sum of ₱3,757,288.26 representing a return of the consideration of the Memoran
ages in the sum of ₱50,000.00. (Underscoring supplied)8
rs:
FIRST ASSIGNMENT OF ERROR

D WELL ESTABLISHED LEGAL DOCTRINE, THAT THE PLAINTIFF-APPELLEE, IN ESTABLISHING THE CAUSE OF ACTION AS
E PERCEIVED WEAKNESS OR INSUFFICIENCIES IN THE DEFENDANTS-APPELLANTS’ DEFENSES.
SECOND ASSIGNMENT OF ERROR.
S NO EVIDENCE TO SHOW THAT THE DEFENDANT-APPELLANT BENEFITTED FROM THE ALLEGED TRANSACTION.
THIRD ASSIGNMENT OF ERROR
DDUCE PREPONDERANCE EVIDENCE, TO ESTABLISH THE CAUSE OF ACTION ASSERTED IN ITS COMPLAINT AGAINST TH
FOURTH ASSIGNMENT OF ERROR
A, PETITION) AND LIKEWISE ERRED IN NOT GRANTING THE MOTION FOR RECONSIDERATION DATED MAY 2, 1995 FILED
FIFTH ASSIGNMENT OF ERROR
EFENDANTS-APPELLANTS, RATHER THAN APPLYING ITS ACCEPTED LIBERAL CONSTRUCITON.
SIXTH ASSIGNMENT OF ERROR
PERSONALLY LIABLE FOR THE OBLIGATIONS OF DEFENDANT–APPELLANT ISC WHEN HE MERELY ACTED IN A REPRE
ONAL CAPACITY.
SEVENTH ASSIGNMENT OF ERROR
E AND AGAINST DEFENDANTS-APPELLANTS FOR REIMBURSEMENT OF CONSIDERATION, LIQUIDATED AND EXEMPLARY
s, except No. 6, bereft of merit.
y and severally liable with ISC, for Suzara acted in his personal capacity as Chairman of ISC which has a separate and distinct person
als10 wherein this Court cited instances when, without necessarily piercing the veil of corporate fiction, personal civil liability can also l
ration may so validly attach, as a rule, only when —
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other perso
s not forthwith file with the corporate secretary his written objection thereto;
n,11
or the imposition of personal civil liability of Suzara, modified the trial court’s decision by sparing Suzara from liability.
PPEALS IS CORRECT IN NOT APPLYING THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY AND IN NOT ADJ
SC. (Underscoring supplied)12
terms that it is only respondent ISC that should be liable to the petitioner [and] by absolving even Ramon Garcia who did not appeal
by petitioner to respondent ISC intended for the construction of the buildings. There is a need to apply the doctrine of piercing the veil
tify their wrong deeds and in order to protect the fraud they committed. The purpose of respondent ISC, a non-stock, non-profit and n
onvenience. Respondent ISC was contracted by petitioner due to its being organized as a non-governmental organization. This privile
vested in securities through Philippine Commercial Capital Inc. This could not have happened without the knowledge and consent of
on is being used to defeat public convenience, justify wrong, protect fraud, or defend crime or to confuse legitimate issues, or that a c
nd its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.,15
n application of the doctrine of piercing the veil of corporate entity . . . not be[ing] allowed to in a way justify the wrong and protect the
ention whatsoever to perform them and had falsely represented . . . that they were financially capable and had all the technical exper
ation, he claiming that his participation in the execution of the MOA was limited to his official capacity as Chairman of ISC.
blic to prove the issue, inter alia, of whether Suzara’s participation in the MOA was limited to his official capacity as Chairman of ISC.
Rules of Court,16 the Republic had the burden of proving that first, Suzara, contrary to his claim, participated in the MOA not only in hi
aud cannot be presumed and it must be established by clear and sufficient evidence.17Courts never sustain findings of fraud upon circ
d, it may be inferred from the circumstances of the case.19
mendation" (Exh. "H-3") showing ISC Investments as of August 31, 1991,20 herein reproduced as follows:
by them from plaintiff and the amount of ₱223,022.60 as interest earned from investments";21 and "Financial analysis of investments
al, Inc. showing investments of defendants" (Exhs. "S-1" – "S-25"),23 the purpose of which was "To show that instead of using the fun
utions or Philippine Commercial Capital, Inc."
onstruction of the buildings by investing the same in certain financial institutions (Exhs. ‘S,’ ‘S-1’ to ‘S-24’) . . . naturally result[ing] in t
ctive . . ."24
documents – Exhs. "S-1" – "S-25" issued by Philippine Commercial Capital, Inc. indicate that placement of investments by ISC bega
9. And it paid ₱2,546,640.00 on July 5, 1990. There is no showing, however, that the same or part of the funds received from the Rep
nd this Court, that Suzara being then Chairman of ISC "clearly assented to a patently unlawful act" by agreeing "to divert the funds int
zara in the complaint was one arising from misrepresentation of financial capability and technical expertise and experience to constru
e was declared as in default. At all events, it is speculatory. As such, fraud as the Republic’s basis in urging the piercing the veil of co
ch cited Tramat Mercantile, Inc. v. CA26 enumerating instances when personal liability of a corporate director, trustee or officer along (
nt in Suzara’s case.
with . . . ISC," its attention is invited to Tropical Homes, Inc. v. Fortun et al.27 wherein this Court held:
on appeal is binding only on the parties in the appealed case and does not affect or inure to the benefit of those who did not join or w
party appealing without affecting the rights of his co-debtor, or where the rights and liabilities of the parties appealing are so interwove
exception which is based on a communality of interest of said parties is recognized in this jurisdiction.28
required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unle
the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof. (Underscoring supplied)
Republic of the Philippines

SUPREME COURT
THIRD DIVISION
,*TERESITA CU, and RICARDO P. GUEVARA and Spouse,** respondents.
DECISION
n relations), the claimants must establish the other party’s malice or bad faith by clear and convincing evidence.
1 Decision2 and the May 15, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 67482. The CA disposed as follows:
AFFIRMED."4
ng Corporation, the Pohang Iron and Steel Company and the Dongil Industries Company, Ltd., decided to forge a joint venture and e
pal offices in Iligan City. Ricardo P. Guevara was the President and Chairman of the Board of Directors of the Corporation. Jong-Won
nd Administration. So was Teresita R. Cu. On November 26, 1990, the Board of Directors of the Corporation approved a ‘Resolution’
g, to secure an omnibus line in the aggregate amount of ₱30,000,000.00 from the Solidbank x x x.
xxxxxxxxx
ned to ₱200,453,686.69 compared to its assets of only ₱65,476,000.00. On May 21, 1991, the Corporation secured an ordinary time
orporation on May 28, 1991, in the amount of ₱1,800,000.00 or in the total amount of ₱5,000,000.00, due on July 15 and 26, 1991, re
o (2) loan availments, the same payable on September 20, 1991. The Corporation executed ‘Promissory Note No. 96-91-00865-6’ in
ng-Won Hong affixed their signatures on the note. To secure the payment of the said loan, the Corporation, through Jong-Won Hong
:
h The Mitsubishi Bank Ltd. – Tokyo dated June 13, 1991 for the account of Ssangyong Japan Corporation, 7F. Matsuoka-Tamura-Ch
on bound and obliged to keep and hold, in trust for the Bank or its Order, ‘Ferrosilicon for US$197,679.00’. Jong-Won Hong and Tere
executed a ‘Trust Receipt Agreement’, by way of additional security for said loan, the Corporation undertaking to hold in trust, for the
rporation, Tokyo, Japan for US$197,679.00 Ferrosilicon to expire September 20, 1991.
poration failed to pay its loan availments from the Bank inclusive of accrued interest. On February 11, 1992, the Bank sent a letter to t
th the demand of the Bank. On November 23, 1992, the Bank sent another letter to the [Corporation] demanding payment of its acco
emand of the Bank.
Makati City, entitled and docketed as ‘Solidbank Corporation vs. Mindanao Ferroalloy Corporation, Sps. Jong-Won Hong and the Sps
ment. x x x
xxxxxxxxx
Defendants because, [among others]:

and also members of the company’s Board of Directors. They are impleaded as joint and solidary debtors of [petitioner] bank having
x x x x x x x x x’
Ricardo Guevara, Teresita R. Cu and Jong Won Hong x x x for ‘Violation of P.D. 115’. On April 14, 1993, the investigating Prosecutor
e quedan ‘were nonexistent’:
xxxxxxxxx
alleged, inter alia, that [petitioner] had no cause of action against them as:
hrough its duly authorized representatives, Ms. Teresita R. Cu and Mr. Jong-Won Hong, both Vice Presidents then of MINFACO. x x
xxxxxxxxx
action against them because: (a) Ricardo Guevara did not sign any of the documents in favor of [petitioner]; (b) Teresita Cu signed th
r and in behalf of the Defendant Corporation and, hence, was not personally liable to [petitioner].
City, for ‘Voluntary Insolvency’ x x x.
xxxxxxxxx
5. The Court issued an Order, on July 12, 1994, finding the Petition sufficient in form and substance x x x.
xxxxxxxxx
edings as against the Defendant Corporation but ordering the proceedings to proceed as against the individual defendants x x x.
xxxxxxxxx
ion of [petitioner] against the Spouses Jong-Won Hong, Teresita Cu and the Spouses Ricardo Guevara, x x x.
xxxxxxxxx
t [petitioner] failed to adduce a morsel of evidence to prove the personal liability of the said [respondents] for the claims of [petitioner]
e Defendant Corporation to pay its obligations to [petitioner].
on, the issue of whether or not the individual [respondents], are jointly and severally liable to [petitioner] for the loan availments of the
nding the proceedings as against the [respondent] Corporation. [Petitioner] filed a ‘Motion for Summary Judgment’ against the [respon
the decretal portion of which reads as follows:
mmary judgment filed by herein [petitioner]. Consequently, judgment is hereby rendered in favor of [Petitioner] SOLIDBANK CORPOR
ount of ₱7,086,686.70, representing the outstanding balance of the subject loan as of 24 September 1994, plus stipulated interest at t
% of the total amount due each year from 24 September 1994 until fully paid. Lastly, said [respondent] is hereby ordered to pay [petitio
y of the individual respondents, and (2) it was not liable for their counterclaims for damages and attorney’s fees.
the Mindanao Ferroalloy Corporation, because they had acted merely as officers of the corporation, which was the real party in intere
signment or the Quedan; he was merely authorized to represent Minfaco to negotiate with and secure the loans from the bank. On th
ries in their representative capacities as officers of Minfaco.
ecause (1) they had not received the proceeds of the irrevocable Letter of Credit, which was the subject of the Deed of Assignment; a
ial notice of the practice of banks and financing institutions to investigate, examine and assess all properties offered by borrowers as
aco’s loans, it presumed that petitioner had done its homework.
was clearly unfair on petitioner’s part to have impleaded the wives of Guevara and Hong, because the women were not privy to any o
nton act of pressuring individual respondents to settle the corporation’s obligations is a ground to award moral and exemplary damag
al respondents with Mindanao Ferroalloy Corporation.
7 of the New Civil Code providing for joint liability be applicable to the case at bar.
Court.
sure upon them to pay the obligations in lieu of MINFACO that is declared insolvent.
damages including payment for attorney’s fees.
ported by prevailing jurisprudence."7
olidarily, with the Mindanao Ferroalloy Corporation; and (2) whether the award of damages to the individual respondents is valid and
use their participation in the loan contract and the loan documents made them comakers; or because they committed fraud and decep
These tribunals found that, although he had not signed any document in connection with the subject transaction, Respondent Guevar
ned, among others, that their signatures on the loan documents other than the Deed of Assignment were not prefaced with the word
In the Promissory Note, they signed above the printed name of the corporation -- on the space provided for "Maker/Borrower," not o
act, which are thus deemed final and conclusive upon this Court and may not be reviewed on appeal.8
of each person composing9 or representing it.10 Equally fundamental is the general rule that corporate officers cannot be held person
e of their authority and in good faith.11 The separate corporate personality is a shield against the personal liability of corporate officers
oration may so validly attach, as a rule, only when —
directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
ile with the corporate secretary his written objection thereto;
ersonally liable for the contracts. First, it is beyond cavil that he was duly authorized to act on behalf of the corporation; and that in neg
ed to show that he had acted in bad faith or gross negligence in that negotiation. Third, he did not hold himself personally and solidari
ect corporate acts.
ing their signatures, atop the designation "Maker/Borrower" and the printed name of the corporation, as follows:
cities is negated by the following facts: 1) the name and the address of the corporation appeared on the space provided for "Maker/Bo
en two, if indeed they had intended to be bound solidarily -- the first as representatives of the corporation, and the second as themse
eir addresses reflected there; and 4) at the back of the Promissory Note, they signed above the words "Authorized Representative."
Code, "there is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires
of the obligation in this case, no conclusion of solidary liability can be made.
pointed out by the two lower courts, the evidence shows that there is only one debtor: the corporation. In a joint obligation, there mu
o a proportionate part of the credit.15
before the trial and the appellate courts. Before the lower courts, petitioner anchored its claim solely on the alleged joint and several
e on appeal, but seasonably in the proceedings before the trial court.16
nstruments Law, agents or representatives may sign for the principal. Their authority may be established, as in other cases of agency
acity x x x is not liable on the instrument if he was duly authorized."
established by the Resolution of Minfaco’s Board of Directors, stating that "Atty. Ricardo P. Guevara (President and Chairman), or Ms
ized for and in behalf of the Corporation to: 1. Negotiate with and obtain from (petitioner) the extension of an omnibus line in the aggr
ty and offered to the other on a "take it or leave it" basis. Following the general rule, the contract must be read against petitioner, bec
s.19
ely as representatives of Minfaco.
m liability will directly attach. The distinct and separate corporate personality may be disregarded, inter alia, when the corporate identi
be pierced when the corporation acts as a mere alter ego or business conduit of a person, or when it is so organized and controlled a
ut to disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established; it can
pondents. It argues that the CA failed to consider the following badges of fraud and evident bad faith: 1) the individual respondents m
were declining in the world market when they secured the loan in June 1991; 3) not a single centavo was paid for the loan; and 4) the
nt or misrepresentation -- that would lead an ordinarily prudent person into error after taking the circumstances into account.23 In cont
h the contract, in order to secure the consent of the other.25 Needless to say, the deceit employed must be serious. In contradistinctio
s not serious in character and without which the other party would have entered into the contract anyway.27
equate.28 Bad faith, on the other hand, imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, not simp
ted. It failed to establish that it was deceived into granting the loans because of respondents’ misrepresentations and/or insidious acti
ed long before the bank required the individual respondents to execute the Promissory Note, Trust Receipt Agreement, Quedan or D
hem prior to or simultaneous with the execution of the contract, or even as some accident or particular of the obligation.
nt corporation. In fact, ordinary business prudence required it to do so before granting the multimillion loans. It is of common knowled
well as appraisals of collaterals offered as securities for loans to ensure their prompt and satisfactory payment. To uphold petitioner’s c
condone its negligence.
anks in conducting background checks on borrowers and sureties. While a court is not mandated to take judicial notice of this practice
ule provides that a court, in its discretion, may take judicial notice of "matters which are of public knowledge, or ought to be known to
ly, it has noted that it is their uniform practice, before approving a loan, to investigate, examine and assess would-be borrowers’ cred
er Articles 19 to 21 of the Civil Code, on the basic premise that the suit was clearly malicious and intended merely to harass.
must, in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty
cordance with the proper norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a leg
s exercise in bad faith, and c) the sole intent of prejudicing or injuring another.34 Needless to say, absence of good faith35 must be suf
liable for damages. Upon the other hand, held liable for damages under Article 21 is one who "willfully causes loss or injury to anothe
r and convincing evidence36 that the action instituted by petitioner was clearly so unfounded and untenable as to amount to gross and
r sinister design to vex or humiliate and want of probable cause.38
pondents have not established that the suit was so patently malicious as to warrant the award of damages under the Civil Code’s Artic
bsence of adequate proof of malice, we find that petitioner impleaded the spouses because it honestly believed that the conjugal part
oes not amount to evident bad faith or malice; hence, an award for damages is not proper. The adverse result of an act per se neithe
pose a penalty on the right to litigate.40
absence of a stipulation, attorney’s fees cannot be recovered, except in any of the following circumstances:
cur expenses to protect his interest;
alid, just and demandable claim;

itigation should be recovered."
ard of moral and exemplary damages as well as attorney’s fees is DELETED. No costs.
ses’ Memorandum. Rollo, p. 222.
er of this Court) and concurred in by Justices Remedios Salazar-Fernando and Josefina Guevara-Salonga (members).
ceipt of the Memorandum of Respondents Teresita Cu and Guevara, signed by Atty. Antonio C. Pacis. The Memorandum of Respond
Frez, was filed on June 21, 2004. Petitioner’s Memorandum, signed by Atty. Maximino Z. Banaga Jr., was received by the Court on J
15, January 25, 2002; Roca v. CA, 350 SCRA 414, 420, January 29, 2001; Bañas v. CA, 382 Phil. 144, 154, February 10, 2000.
il. 153, 165, August 14, 2001; Consolidated Bank and Trust Corporation (Solidbank) v. CA, 356 SCRA 671, 682, April 19, 2001; Reah
and agents. See Monfort Hermanos Agricultural Development Corp. v. Monfort III, 434 SCRA 27, 31, July 8, 2004; Firme v. Bukal Ent
d Warehousing Co., Inc. v. CA, 357 Phil. 850, 863, October 7, 1998.
, Inc. v. NLRC, 357 Phil. 110, 127, September 25, 1998.

nc. v. CA, 381 Phil. 282, 290, February 1, 2000).
May 11, 2000; Smith, Bell & Co., Inc. v. CA, 335 Phil. 194, 203, February 6, 1997; Sesbreño v. CA, 222 SCRA 466, 481, May 24, 199
, 327 Phil. 364, 373, June 26, 1996; Quiombing v. CA, 189 SCRA 325, 328, August 30, 1990; The Imperial Insurance, Inc. v. David, 2
sario v. Bonga, 350 SCRA 101, 108, January 23, 2001; Sanchez v. CA, 345 Phil. 155, 186, September 29, 1997.
ia, 423 Phil. 593, 599, December 14, 2001; Geraldez v. CA, 230 SCRA 320, 331, February 23, 1994.
Casa Montessori Internationale, 430 SCRA 262, 293, May 28, 2004); Philippine Commercial and International Bank v. CA, 350 SCRA
412-413, February 21, 1992.
ejia, supra, pp. 165-166; Francisco Motors Corp. v. CA, 368 Phil. 374, 384, June 25, 1999; Sulo ng Bayan, Inc. v. Araneta, Inc., 72 SC
7, 18, February 24, 1981.
a, p. 336.
de of the Philippines, 1991 ed., Vol. IV, p. 506.
362 Phil. 197, 204, February 2, 1999; Samson v. CA, supra.
oration on May 21, 1991, while the second loan of ₱1.8 million was granted on May 28, 1991.
ings & Trust Co. v. CA, GR No. 128354, April 26, 2005, p. 17; Rural Bank of Sta. Ignacia Inc. v. Dimatulac, 449 Phil. 800, 812, April 2
22, June 17, 2004; Rellosa v. Pellosis, 414 Phil. 786, 792, August 9, 2001; Sea Commercial Company, Inc. v. CA, 377 Phil. 221, 229
s defined as "an honest intention to abstain from taking undue advantage of another, even though the forms and technicalities of the
s."
A, 363 Phil. 399, 407, March 2, 1999. See also Article 2220 of the Civil Code.
an, 443 Phil. 463, 468, January 16, 2003; R & B Surety & Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA 736, 744-74
SECOND DIVISION
DECISION
urt of Appeals in CA-G.R. CV No. 22626 reversing the Decision2 of the Regional Trial Court of Marawi City, Branch 9, in Civil Case No
The Antecedents
rch at the Mindanao State University and Acting Director, National Science Museum, as Executive Vice-President of the Philippine A
by the Board of Directors. Saber was surprised because he did not apply for appointment to the position. He inquired from Executive
business and banking. He was told that he was chosen by the President from among forty applicants because of his proven persona
e academe, he plunged head-on into the turbulent and intricate world of business.
airman of the Screening Committee for Personnel. Martin Saludo, then Senior Vice-President of the Philippine National Bank (PNB),
Muslim pilgrimage (Hajj) to Mecca, and thus, avoid the fiascos that plagued previous such pilgrimages of Filipino Muslims in the past.
PAB Board of Directors Dr. Cesar A. Majul, that the bank had been designated to make appropriate preparations and arrangements
atter to undertake the appropriate arrangements for the pilgrimage.5 Saber was concerned because he had only two months to prepa
Saber had no experience thereon, the PAB Board of Directors designated Saludo as the head of the one-man oversight committee to
y. Lanang S. Ali, as Chairman and Pilgrimage Administrator; Dialel Basman, as Finance Officer; and Kuisan Go, as Trade and Invest
rimage and coordinate the same. This included Lugum Uka, as Vice-Chairman, and Alexander Lucman, as member.6 On October 4, 1
p.7
the PAB, as charter, Saber executed a Uniform Time-Charter on October 15, 1974 under which the PAB chartered the M/V Sweet H
he parties executed a Rider to Charter Party in which the PAB was allowed to load cargoes in the cargo hold of the vessel up to 500 m
conducted a massive information drive to inform the Muslims of the arrangements, including the accommodations on board the vesse
voyage and made partial payments for their tickets thereon.
charter any ship or aircraft bringing pilgrims to Jeddah, to avoid unfair competition with the PAB.10 However, President Marcos grante
s. Worse, Sacar Basman, the General Manager of the Arabian Gulf Export Agency Corporation (AGEAC) had been representing to th
V Sweet Homes and solicited fare payments from interested pilgrims.11
s disappointment over the turn of events – politicians being allowed to charter a private plane which was in direct competition with the
sed his apprehensions about the representations of Sacar Basman that he was one of pilgrimage directors, and that he was allotted 2
hat many prospective passengers, including 120 depositors of the PAB who were booked for the voyage on board the M/V Sweet Hom
t.13 When he learned of the foregoing developments, President Marcos was alarmed and ordered that pilgrims going to Mecca by plan
Dialel Basman and Ibrahim Mamao, to coordinate the arrangements for the pilgrimage. Rather than allow the vessel to leave for Mecc
1974, informing the Troika that he had reached an agreement with Basman that the latter would purchase forty (40) first class (ordina
mes, and that Basman would pay via a postdated check. Saber directed the Troika to implement the agreement. Saber issued a suppl
e tickets all of first class accommodations at P6,500.00 each under the following terms and conditions, tax FREE;
tal sum of SEVEN HUNDRED FIFTY-SIX THOUSAND (P756,000.00) PESOS, Philippine Currency, shall consist of the unsold ticke
ed by Datu Sacar Basman in favor of the Philippine Amanah Bank.16
ract which the PAB, through Saber, and the AGEAC, through Basman, its General Manager, executed without the approval of the PA
able/importable goods and other cargoes on its trip to Saudi Arabia and return, in consideration of P178,000 to be paid by AGEAC via
nt of the consideration referred to above within a period of ten (10) days from and after arrival in the Philippines in its return home trip
COND PART hereby agrees that the PARTY OF THE FIRST PART shall have a superior lien in the proceeds on the sale of the good
17
ight Contract with AGEAC –
Treasurer or his authorized representative which shall be made available to Datu Sacar Basman for use in payment for goods to be
urer or his authorized representative and all sums indicated in the postdated check/s issued by Datu Sacar Basman be deducted ther
of November 21, 1974 and in this addendum, likewise, in other contracts signed by the parties herein.18
he PAB, the Troika/Secretariat had to implement the Memoranda, and because of Saber’s insistence, gave the tickets to Basman. In
his account No. 10000008 payable to PAB with no amounts written thereon.19 Basman loaded exportable goods on board the vessel. W
boarded on boats and transported to the pier. Basman failed to unload and sell the exportable goods, much less purchase importabl
red.20 Basman, likewise, failed to pay for the freight charge for the exportable cargo of AGEAC to Saudi Arabia. Consequently, the PA
rimage in the total amount of P1,033,700, thus:

erations, approved Resolution No. 67, Series of 1975, without any objection, declaring Saber liable for the receivables on the ground
act with AGEAC. The Board directed Saber to collect the receivables himself, because of its perception that if the PAB endeavored to
the PAB, made verbal representations to the PAB Board of Directors to grant PAB Management Consultant and PAB Senior Vice-Pre
was only the Officer-in-Charge. He issued a Memorandum to the Board of Directors, through the Chairman of the Board, on February
udget of P5.53 million but the incumbent OIC authorized a total disbursement of P9.157 million or an excess of P3.62 million.
prise, that a number of employees have been retained in spite their not having the necessary qualifications for the positions; other[s] w
ch is so vital and essential at this crucial stage if we are to make the Amanah Bank truly responsive to the needs of our Muslim brothe
complished and such designation has become academic with the constitution of the PAB Board of Directors.22
k to the university. He applied for a clearance from the PAB. Assistant Auditor Rodolfo Ocampo signed the said clearance for and in b
he conditional clearance issued by the PAB, Saber was reinstated to his position as professor at the university with the salary of P34
n of the management of the bank for the creation of an Investigating Committee of five (5) members, chaired by Aradji, to look into th
he outcome of the investigation, Saber be given only a conditional clearance.24
s Report to the PAB Board of Directors that there was basis for Saber to be charged with violation of Republic Act No. 3019, otherwis
m. The management approved the recommendation of Aradji.
mendation of the PAB Management based on the Report of the Investigating Committee headed by Aradji. The resolution authorized
estify against Saber:
es Act (Republic Act 3019) be filed against Dr. Mamitua Saber and that Director Asgari A. Aradji, Chairman, Investigation Committee
he Bank the complaint against Dr. Mamitua Saber and thereafter to testify and represent the Bank. Should sufficient evidence be foun
d the addendum thereto mentioned above, that Messrs. Lanang Ali, Mañgawan Doro, Dialel Basman and other persons involved be
ga City against Saber for violation of Rep. Act No. 3019. The case was docketed as Slip No. 527-75. The complaint, as well as the re
ulation under the by-line of reporter Emilio Macaspac.26
nst the PAB,27 the Chairman and the members of its Board of Directors, its Managing Director Martin Saludo, Auditor Aramis Aguilar, a
ents for the pilgrimage; he had the implied authority to enter into transactions, including the authority to sell the tickets to Basman on c
f Directors to oversee the preparation of the pilgrimage, approved the said transactions; hence, he is not personally liable for the rece
dering the receivables in connection with the pilgrimage as his personal obligation and in approving Resolution No. 67. He further ave
he filing of the anti-graft charges against him by the PAB and its Board of Directors was devoid of any factual and legal basis. He claim
vestigating Committee’s report and the complaint caused him dishonor, shame, discredit and contempt, shock, besmirched reputation
that because of his preventive suspension, he failed to receive his salary from the Mindanao State University, causing him and his fa
against defendants, as follows:
Series of 1975’ contained in the Certificate of Clearance (Annex ‘E’);
y plaintiff, the following:
all have resumed his position in the Mindanao State University;
mplary damages;
d by the Honorable Court in favor of the plaintiff.
ust and equitable in the premises.28
ard of Directors.29
tickets on credit to Basman payable via postdated checks without authority from the PAB Board of Directors; defendant Martin Saludo
oard of Directors; the said lease contract, including the Freight Contract with AGEAC, was never approved by the PAB Board of Dire
ount of Saber’s unpaid personal obligations to the bank; contrary to Saber’s claim, there were factual and legal bases for the approva
he defendants therein) caused or in any way participated in the publication of the charges filed by the PAB against him; and, the defe
3019.
approving the reinstatement of Saber to his former position as Dean of Research, with the corresponding salary effective from the da
sued a Resolution dismissing the complaint in Slip No. 527-75.31 The petition for review thereon filed by the PAB was dismissed on Au
th the following recommendation:
ec. 3, par. (e) on three (3) counts (on the basis of the memoranda of November 21 and 28, 1974, and that of the freight contract, resp
AHIM MAMAO, TINDUG MACARAMBON, IBRAHIM MACADATAR and SACAR BASMAN, and that they are probably guilty thereof.
iled against respondents.33
, Tindug Macarambon and Ibrahim Macadatar in the Sandiganbayan for violation of Section 3(e) of Rep. Act No. 3019. The cases we
ed by law.
quitting Saber of the charge, the Sandiganbayan ruled:
ot approved by the Board of Directors of the BANK. For one thing, it is not the absence of such approval that made the transactions s
BANK or gave unwarranted benefits, advantage or preference to Sacar Basman through manifest partiality, evident bad faith or gros
hing, the time element and the fact that the members of the Board were themselves responsible officials of different government office
was then the Executive Vice President and Officer-in-Charge of the BANK and entrusted with the management of the Pilgrimage Pro
ect. A corporate officer, entrusted with the general management and control of its business, has implied authority to make any contrac
on. (Board of Liquidators vs. Kalaw, supra, citing 2 Fletcher Cyclopedia Corporations, p. 607.)36
st the PAB and Aradji, thus:
ntiff and against defendants, as follows:
ri Aradji, to pay plaintiff the amounts of:
erogatory and malicious publications against plaintiff; and (3) willful injury against plaintiff under the provisions of the New Civil Code o
8
to 1837, on the finding that the PAB and Aradji caused the publication of the filing of the criminal charges against Saber in the Office
when Saludo and other members of the Task Force prepared the budget for Amanah Bank, the salary of the President of the Bank w
48,000.00 but to pressure plaintiff from giving up his position, the Board was moved by Saludo to reduce his salary to only P30,000.0
endant Aradji assumed the position of Executive Vice-President, the same position which plaintiff held before he left the Bank. (pp. 4,
t Contract were with the prior approval of Martin Saludo, the head of the One-Man Oversight Committee, as well as Nestor Kalaw, wh
f the trial court. The CA ruled that Saber failed to prove bad faith and malice against the PAB and Aradji in the performance of their d
the PAB. The CA further ratiocinated that –
e duty to act for the bank with loyalty and dedication, and according to their best judgment. It is a well-known rule of law that question
on, and so long as they act in good faith, their orders are not reviewable by the courts.
malicious intent or by a sinister design to unduly harass plaintiff Saber, but only by a well-founded anxiety to protect the interests of t
mselves were such as would excite the belief in a reasonable mind that the person charged was guilty of the crimes for which he was
g out a case of malicious prosecution. (Almendra v. Alvero, 50 SCRA 62 [1965]).
ect is irrelevant, the only issue being whether or not there was probable cause in the filing of the criminal complaint.40
and Aradji, thus:
uction of his salary. As explained by defendants, PAB’s salary structure could not be made at par with that of the Philippine National B
ad only eight branches. It was therefore deemed necessary to rationalize the salary level of the bank’s officers and staff to make the
The Present Petition
on for review on certiorari of the decision of the CA, alleging that the appellate court erred in reversing the decision of the trial court:
hat under the environmental circumstances, the award of damages to plaintiff may not be sustained whether based on the principle o
on the principles of abuse of rights and malicious prosecution.
er was deprived of his right to be investigated by the impartial investigator. They pointed out that respondent Aradji, who was the Cha
entations to the Board of Directors of the respondent bank that he (Saber) be replaced by Saludo. The petitioners stress that respond
itioners also allege that Saber was denied due process, as he was never furnished with a copy of the Report of the Investigating Com
ary as PAB Executive Vice-President from P48,000 per annum to P24,000 per annum, and conspired to oust him from the said positio
espondent bank, while respondent Aradji wanted to be the Managing Director.
confirmed by the Sandiganbayan in its decision; yet, respondent PAB still approved Resolution No. 67, Series of 1975, holding Sabe
ondent bank merely made Saber as a scapegoat.
se (a) Saber alone was charged for violation of Rep. Act No. 3019, although there were others who were involved in the pilgrimage fia
heir appeal in the Tanodbayan who found probable cause against Saber which finding was barren of factual basis as confirmed by th
The Ruling of the Court
nd attorney’s fees, provides:
es, act with justice, give everyone his due, and observe honesty and good faith.
sed in bad faith; and (b) for the sole intent of prejudicing or injuring another. Malice or bad faith is at the core of said provision.43 Good
which is manifested by the acts of the individual concerned. It consists of the intention to abstain from taking an unconscionable and u
duties. Unless there is a clear showing of malice, bad faith or gross negligence, such public officer is not liable for moral and exemp
absent any clear showing that they were motivated by malice or gross negligence amounting to bad faith.47 Bad faith, on the other han
oing of a wrong, a breach of known duty due to some motives or interest or ill-will that partakes of the nature of fraud.48 Malice connote
faith or bad motive.49
s Chairperson of the Investigating Committee to investigate the pilgrimage fiasco. This is so because in his Memorandum to the Boar
upervision of Saber was mishandled and there were indications then that there was an apparent lack of exercise of effective leadersh
then proposed that Saludo exercise the powers of the president of the respondent bank in place of Saber. In fine, respondent Aradji a
he Board of Directors for respondent Aradji to be the Chairman of the Investigating Committee, or even asked for the latter’s inhibitio
less of any misconception of respondent Aradji. Besides, respondent Aradji was only the chairman of the committee, and there were
duced testimonial and documentary evidence in his behalf. Thus, Saber testified:
r what had happened in that pilgrimage.
port which had been submitted to the chairman of the bank, Dr. Majul.
at Mr. Aradji the same defendant in this case?
oard of Directors of the respondent PAB, and the subsequent publication of the said report in the Times Journal that Saber complain
ce in designating the respondent Aradji as chairman of the committee, and that the latter acted in bad faith or with malice in acceptin
other members of the Investigating Committee, one of whom was a lawyer, Atty. Arasad Alpad, Jr.; the other members were Executiv
on the evidence on record. Moreover, the report and recommendations of the committee were still subject to the review of the Board
still rule for Saber, based on the evidence on record.
irectors of the respondent PAB that Saludo, a Senior Vice-President of the PNB and PAB management consultant, to exercise the po
er-in-Charge. However, he did so not to spite Saber, but for good and justifiable reasons, thus:
e in the Bank. He is acceptable to both Christians and Muslims. I strongly believe that he is imminently qualified to exercise the duties
d to me his desire to exercise such duties and powers. On the contrary, his being connected with our Bank is an additional burden to
e other commercial banks in the country.
e Bank, which gesture could only be accomplished if we grant the men that executive freedom to act, and to exercise strong, positive
m his position as Assistant Vice-President of the respondent bank.
e receivables of P1,033,700. The evidence of Saber, no less, shows that he was present during the 16th Meeting of the Board of Direc
d resolved that Saber had no authority to enter into any agreement with Basman for the sale of the tickets on credit payable by postd
mously resolved not to ratify the agreements executed by Basman and Saber in behalf of the PAB and with AGEAC, and for Saber to
ken during the Board Meeting:
n this.
because it is part of my position as an officer of the Bank. There is not a single act that have not think (sic) to save the predicament o
his is the recourse, even my Legal Officer advised me, even the Auditor himself who is (sic) there in Zamboanga. If (sic) it was really
ire boat if the result was negative but the real intention is (sic) to help. We thought that we will make good for the Bank.
e officers and that of the Board. While it is true that you have certain discretionary powers but that is either affirmed or reviewed by th
ividual capacity because the Board refuses to share the responsibility.
s are subject to this restriction.
e staff.
ecommend?
ndug Macarambon, Project Accountant and Ibrahim Mamao. Anything they recommended that these are their needs I issued them be
od of the Bank.
artered even without the approval of the Board.
communication ordering the people to ride in the boat.

nk.
ou hire a super-duper lawyer at least you can easily win the case. We could ask for the assistance of the Office of the Solicitor Gener
s affair of the pilgrimage not in terms of loss but in terms of other things, what are the various outcome[s] of the pilgrimage.
is incurring losses, the other one is, there are people owing money. These are 2 different things. The way I look at it, the Bank is alre
explain why we are losing. I think every effort should be made because it involved not only you but also other people like Ambassador
in hand with other lawyers with their advice. If this is difficult, we have government lawyers, this is a government bank. We can seek
is exorbitant, if it is high. The question is how can the Bank recover? Shall the people owing the Bank pay? Even the Charter rate, it i
whether we like it or not, we have to collect.
idate? He is accountable, then we will decide later what course of action shall we take.
and it is reflected in the report, and efforts should be made on the Accounts Receivables. He is responsible to go after the people invo
ys?
ount.
se people have to liquidate the account within 30 days, failure on your part, then we resort on (sic) the other course[s] of action.
mplied authority as Executive Vice-President to sell tickets on credit via postdated checks and to allow Basman to load his cargoes in
espondent bank resorted to the dubious expedience of charging the receivables against the account of Saber, instead of availing itse
AB acted in bad faith or with malice.
ed to oust Saber as Executive Vice-President of the PAB and Officer-in-Charge. Saludo merely told Saber intimately that it was his am
came intimate friends:
, Your Honor. A practitioner should be fair. If he cross-examines, the purpose is to elicit the truth, not to distort. Here, in this case, we
6, 1980, you testified that Mr. Saludo allegedly manifested to you his desire to be president of the Philippine Amanah Bank. For the in
es to replace me, only his desire to become president of the Bank. He told me intimately, he said: "Brod, if President Marcos did not g
ld that to me intimately. It was intimate, the same as I was intimate with you.
m not keeping statistics of statements.
aludo tell you, what particular occasion?
nnot recall again as I said I did not put this in my diary.
Philippine Amanah Bank, were there other people around you in these alleged several occasions?
o testify because, as I said, this is between friends. Mr. Saludo confirmed his friendship to me and we became friends when we were
lary from P48,000 to P24,000 per annum. The budget of the bank was modified upon the advice of PNB President Panfilo Domingo a
he president of the Philippine Amanah Bank received?
of Directors with the advise of President Domingo of the Philippine National Bank and Vice-President Saludo reduced it to 50% and
at you have mentioned is receiving about P24,000.00 per annum?

ernor Gregorio Licaros.56
he Board of Directors of the PAB or his formal investigation and the criminal complaint he filed against Saber for violation of Rep. Act
. When pressed to adduce evidence to prove that the news report was based on the press release issued by the respondent Aradji, S
e PAB:
face but he was among the newspaper men frequenting your office and my office.
riod when these newspaper men especially Emil Macaspac frequenting my office or your office?
d that before the news report was printed, he was frequenting your office, otherwise, where is the source of the news? He cannot get
uing a conditional clearance to Saber after his resignation from respondent PAB. Saber had not yet liquidated his accountability of P1
d terminate its investigation of Saber’s accountability, administrative or civil, for the pilgrimage fiasco. The respondent PAB had no dis
nce, caution and attention in the management of his affairs. In fact, the respondent PAB was duty bound to withhold such clearance
tained economic difficulties on account of the conditional clearance issued by the respondent PAB, the petitioners are not entitled to
ot of damnum et injuria.58
or devious design to vex and humiliate a person, and that it was initiated deliberately, knowing that the charges are false and groundl
secution.60 Lack of probable cause is an element separate and distinct from that of malice. One cannot be held liable for damages for m
cannot be made to rest solely on the fact that the trial court after trial decided to acquit the accused. Neither can lack of probable caus
stice or the Ombudsman as the case may be.62 The mere act of submitting the case to the authorities for prosecution does not make o
ful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate. If damages result
the respondent is probably guilty thereof and should be held for trial. A finding for probable cause needs only to rest on evidence sho
and convincing evidence beyond reasonable doubt. While probable cause demands more than mere suspicion, it does not require th
ite lack of probable cause therefor.
f Section 3(e) of Rep. Act No. 3019, which has the following enumerated elements:
mer;
er official duties or in relation to his or her public functions;
party;
to such parties; and
xcusable neglect.66
epublic Act No. 3019.67 Indeed, the evidence on record shows the following:
the objection of the Troika-Secretariat. The postdated checks were blank as to the amounts. As found by the Sandiganbayan:
f the Secretariat issued to Sacar Basman the seventy (70) tickets therein specified worth P392,000 (t.s.n., p. 23, August 11, 1981), fo
ed February 4, 1975, drawn against Sacar Basman’s account No. 10000008 but blank as to the amount (Exh. "I"). Under the ADDEN
hich Sacar Basman issued PAB Check No. 00378 payable to the BANK, similarly postdated February 4, 1975, drawn against the sam
with the respondent bank. When the checks were deposited by respondent PAB in its account, the said checks were dishonored.
8 postdated February 4, 1975, although the balance of the account of Basman in the respondent bank was only P1,834.55. AGEAC/B
ona Ibay-Somera (retired) and Rodrigo V. Cosico, concurring.

blic Act No. 6848 which was approved on January 26, 1990. Section 48 of R.A. No. 6848 provides that:
t, all the assets, liabilities and capital accounts of the Philippine Amanah Bank are hereby transferred to the A-1Amanah Islamic Inves
at Zamboanga City, Philippines, and within the jurisdiction of this Honorable Court, accused Mamitua Saber, then Executive Vice-Pre
d by the Philippine Government, with head offices at Zamboanga City, Philippines, (hereinafter called the "Bank") and who was then t
ter referred to as the "Project"), Atty. Lanang Ali, then Pilgrimage Administrator and Chairman, 1974 Mecca Pilgrimage Troika and Se
ctively as the "Troika-Secretariat"), Dialel Basman, then Project Treasurer-Finance Officer and Troika-Secretariat Member, Ibrahim M
nd Secretariat Member, and Ebrahim Macadatar, then Trading Officer and Secretariat member, all of whom are Bank Officers and em
cooperating with each other, and with the conspiracy, confederation, connivance and indispensable cooperation of Sacar Basman, th
hed to the Philippine Embassy in said country, with manifest partiality, evident bad faith and/or inexcusable negligence, did then and
e Amanah Bank, including the Government as the owner or controlling stockholder thereof, by preparing, executing, signing and deliv
cused Mamitua Saber, in favor of the Arabian Gulf Export Agency Corporation (hereinafter referred to as the "Corporation"), represen
di Arabia on the M/V Sweet Home, a luxury ship chartered by the Bank for the 1974 pilgrimage to Mecca, Saudi Arabia, and on the re
eventy-Eight Thousand Pesos (P178,000.00), but which contract is manifestly and grossly disadvantageous to the Bank considering t
Officials, who were dealing with the accused Sacar Basman directly, in advance, nor a portion thereof by way of down payment on the
by the said accused, except two (2) blank postdated checks (blank as to amount) numbered 00377 & 00378, respectively, both dated
hich current account contained only at the time a deposit totaling P1,834.55 the gross disadvantageousness of which contract was co
he Corporation, acting thru the accused Sacar Basman, within a period of ten (10) days after the arrival of the ship in the Philippines,
created by the contract, instead of being delivered and paid to the project treasurer, the accused Dialel Basman who was himself on
who was also on said trip, for himself and as the representative of the Corporation, to be used for the purchase of goods to be impor
ssly disadvantageous to the Bank and greatly favorable, beneficial and profitable to the accused Sacar Basman and the Corporation
wise known as the General Banking Act and the By-Laws of the Philippine Amanah Bank, as in fact, the Corporation and Sacar Basm
000.00, all of the above being the direct result of the accused Bank officials desire to vest to Sacar Basman and the Corporation unw
hrough manifest partiality, evident bad faith or gross inexcusable negligence which the accused Sacar Basman procured and knowin
k in the sum of P178,000.00.
language. Only the Information in Crim. Case No. 1836 is hereunder reproduced, with reference footnotes on material facts where it
at Zamboanga City, Philippines, and within the jurisdiction of this Honorable Court, accused Mamitua Saber, then Executive Vice-Pre
d by the Philippine Government with head offices at Zamboanga City, Philippines (hereinafter called the "Bank") and who was then th
ter referred to as the "Project"), Atty. Lanang Ali, then Pilgrimage Administrator and Chairman, 1974 Mecca Pilgrimage Troika and Se
llectively as the "Troika-Secretariat"), Dialel Basman, then Project Treasurer-Finance Officer and Troika-Secretariat member, Ibrahim
carambon, then Project Accountant and Secretariat member, and Ebrahim Macadatar, then Trading Officer and Secretariat member,
g, confederating, conniving and cooperating with each other and with the conspiracy, confederation, connivance and indispensable co
in the Republic of Gabon attached to the Philippine Embassy in said country, with manifest partiality, evident bad faith and/or inexcu
rejudice to the Philippine Amanah Bank, including the Government as the owner or controlling stockholder thereof by selling, issuing
with a total value of FOUR HUNDRED EIGHTY EIGHT THOUSAND PESOS (P488,000.00), Philippine Currency, to accused Sacar
to amount) numbered 00377 and 00378 both dated February 4, 1975 and drawn on Amanah Bank, when all the accused well knew
as the transaction subsequently ratified by the said Board, and that Sacar Basman at that time had on deposit in his current account n
n subjected to a credit worthiness and capability of fulfilling his commitment to the Bank contrary to and in direct violation of Section 7
Philippine Amanah Bank as, in fact, the accused failed to pay his outstanding obligation to the Bank representing the amount of the pi
to pay despite repeated demands, thus giving accused Sacar Basman, a private party, unwarranted benefits, advantage or preferen
uced the accused officials to grant him knowing the same to be unlawful, to the damage and prejudice of the Bank in the sum of P48

SUPREME COURT
Manila
EN BANC
utive Labor Arbiter, NAFLU, and MARIVELES APPAREL CORPORATION LABOR UNION, Respondents.
DECISION
The Case
ion dated 27 March 20013 of the Court of Appeals (appellate court) in CA-G.R. SP Nos. 54404-06. The appellate court affirmed the d
LRC) in NLRC CA No. L-007731-94.
Carag (Carag), and MAC's President Armando David (David) (collectively, respondents) are guilty of illegal closure and are solidarily
The Facts
(collectively, complainants), on behalf of all of MAC's rank and file employees, filed a complaint against MAC for illegal dismissal bro
nd file employees of [MAC]. That there is an existing valid Collective Bargaining Agreement (CBA) executed by the parties and that a
r.
sions of the Labor Code, [MAC], for reasons known only by herself [sic] ceased operations with the intention of completely closing its
e not paid their corresponding salaries/wages, which remain unpaid until time [sic] of this writing.
[MAC] at the time it decided to cease operations, benefits gained by the workers both by and under the CBA and by operations [sic] o
d had caused tremendous prejudice to all of the employees, who suffered both mental and financial anguish and who in view thereof m
with] the basic requirement of Notice of Closure.6 (Emphasis supplied)
ossible settlement. The non-appearance of respondents prompted Arbiter Ortiguerra to declare the case submitted for resolution "bas
ws:
strate that the individual complainants are entitled to the reliefs prayed for in their complaint. However, any favorable judgment the H
ddenly stopped business operation since [sic] 8 July 1993. Under this given circumstance, the complainants have no option left but to
at 10th Floor, Gamon Centre, Alfaro Street, Salcedo Village[,] Makati[,] Metro Manila although they may be collectively served with s
as party respondents in the present case is to guarantee the satisfaction of any judgment award on the basis of Article 212(c) of the P
wever, include any labor organization or any of its officers or agents except when acting as employer."
artificial person, it must have an officer who can be presumed to be the employer, being "the person acting in the interest of the emp
is no longer existing and unable to satisfy the judgment in favor of the employee, the officer should be held liable for acting on behalf
ble for the acts of the company, assuming it had [acted] illegally, because Camelcraft in a distinct and separate entity with a legal per
ration, being not only its president and general manager but also its owner." The responsible officer of an employer can be held pers
ansom Labor Union-CCLU V. NLRC, G.R. 69494, June 10, 1986). If no definite proof exists as to who is the responsible officer, the p
n his default, the person acting as such (Ibid.)7 (Emphasis supplied)
21 February 1994 and stated that complainants should not have impleaded Carag and David because MAC is actually owned by a co
he motion to implead Carag and David. In the same Decision, Arbiter Ortiguerra declared Carag and David solidarily liable with MAC
The Ruling of the Labor Arbiter
d by NAFLU and Mariveles Apparel Corporation Labor Union for and in behalf of all rank and file employees against respondents Ma
ick leave, his cases were re-raffled and the instant case was assigned to the sala of the undersigned. Upon receipt of the record of th
ant pleadings, thus this decision.
as a prelude to a final closing of the firm. The complainants allege that up to the present the company has remained closed.
s of work were not given their salaries and the same have remained unpaid.
notice to employees and to the Department of Labor and Employment at least one month before the intended date of closure. The re
e Bargaining Agreement between the complainants and the respondents.
wners and responsible officer[s] of respondent company to assure the satisfaction of the judgment, should a decision favorable to them
t was held that [a] corporate officer can be held liable for acting on behalf of the corporation when the latter is no longer in existence a
quently, their reinstatement must be ordered and their backwages must be paid. Should reinstatement be not feasible, the complaina
es "C" to "C-44", Complainants' Position Paper). The complainants also pray for the award to them of attorney's fee[s].
d prematurely. The respondents deny having totally closed and insist that respondent company is only on a temporary shut-down occ
are not the owners of Mariveles Apparel Corporation and they are only minority stockholders holding qualifying shares. Piercing the v
mplead Atty. Antonio C. Carag and Mr. Armando David as party respondents.
nants must prevail.
such posturing may have been initially true, it is not so anymore. The cessation of operations has clearly exceeded the six months pe
y, the respondents must pay the displaced employees separation pay in accordance with the computation prescribed in the CBA, to w
rally liable with respondent corporation. This bid is premised on the belief that the impleader of the aforesaid officers will guarantee p
wn as corporate fiction. Normally, officers acting for and in behalf of a corporation are not held personally liable for the obligation of th
which a judgment in favor of employees could be satisfied, corporate officers can be held jointly and severally liable with the compan
d claims of employees would not be defeated by the closure of respondent company.
ey failed to establish their entitlement to aforesaid reliefs when they did not adduce persuasive evidence on the matter.
f the illegal closure of respondent company, the complainants were compelled to litigate to secure benefits due them under pertinent
equent filing of the case to pay attorney's fee[s].
verally guilty of illegal closure and they are hereby ordered as follows:
year of service, a fraction of six (6) months to be considered as one (1) year in the total amount of ₱49,101,621.00; and
ward.
1994. Carag, through a separate counsel, filed an appeal dated 30 August 1994 before the NLRC. Carag reiterated the arguments in
David is the President, they are not the owners of MAC;
g and Mr. Armando David are only minority stockholders of the corporation, owning only qualifying shares;
cing the corporate veil its [sic] possible to hold the stockholders liable for the corporation's liabilities;
lders; piercing the corporate veil to hold the stockholders liable for corporate liabilities is only true [for] close corporations (family corp
nsion of shares to them are just qualifying shares to enable them to occupy subject position.9
The Ruling of the NLRC
bond. The NLRC stated that to grant a reduction of bond on the ground that the appeal is meritorious would be tantamount to ruling o
ack of merit. Respondents are directed to post cash or surety bond in the amount of forty eight million one hundred one thousand six
ourt. Carag filed his petition, docketed as G.R. No. 118820, on 13 February 1995. In the meantime, we granted MAC's prayer for the
G.R. No. 118839 (MAC v. NLRC, et al.) and G.R. No. 118880 (David v. Arbiter Ortiguerra, et al.). On 12 July 1999, after all the parties
appellate court.
The Ruling of the Appellate Court

e court identified two issues as essential: (1) whether Arbiter Ortiguerra properly held Carag and David, in their capacities as corpora
.
Carag and David to impute grave abuse of discretion. The appellate court found that Carag and David, as the most ranking officers o
ustifies their solidary liability with MAC. The appellate court also found that the circumstances of the present case do not warrant a re
tiguerra dated June 17, 1994, and the Resolution dated January 5, 1995, issued by the National Labor Relations Commission are he
ow sufficiently that the appellate court committed any reversible error to warrant the exercise of our discretionary appellate jurisdiction
motion for leave to file a second motion for reconsideration. This Court's First Division referred the motion to the Court En Banc. In a
e petition. On 25 November 2003, the Court En Banc resolved to suspend the rules to allow the second motion for reconsideration. T
The Issues
e this Court:
onally liable for over ₱50 million of the corporation's liability, merely as board chairman and solely on the basis of the motion to imple
NLRC Rules of Procedure, as to render the ruling null and void?
him solidarily liable supported by evidence when the only pleadings (not evidence) before the Labor Arbiter and that of the Court of A
ssue of personal liability, and even when bad faith or malice, as the only legal basis for personal liability, was expressly found absent
e appeal bond?14
The Ruling of the Court
n him, without requiring him to submit his position paper, without setting any hearing, without giving him notice to present his evidenc
MAC, and not Carag, to a conference for possible settlement. In her Decision, Arbiter Ortiguerra stated that she scheduled the confere
ve submitted their position paper before the conference since procedurally the Arbiter directs the submission of position papers only a
hus, Arbiter Ortiguerra could not have possibly summoned Carag to the conference.
y order of Arbiter Ortiguerra summoning Carag to the conference. A thorough search of the records of this case fails to show any ord
tion. In her Decision, Arbiter Ortiguerra granted complainants' motion to implead Carag and at the same time, in the same Decision,
ossible settlement, never required him to submit a position paper, never set the case for hearing, never notified him to present his ev
opted by Arbiter Ortiguerra completely prevented Carag from explaining his side and presenting his evidence. This alone renders Arbi
ocess such as affording respondents the opportunity to be heard. In Habana v. NLRC,22 we held:
process when the Labor Arbiter decided the case solely on the basis of the position paper and supporting documents submitted in ev
e desired in terms of respect for the right of private respondents to due process -
996. During the conference, the parties did not discuss at all the possibility of amicable settlement due to petitioner's stubborn insisten
are respondents in default and private respondents' motion for bill of particulars - for the consideration of the Labor Arbiter. The Labo
xxx
en by the Labor Arbiter in disposing the pending motions was ever received by private respondents. They were not declared in defaul
sition paper, nor an order informing the parties that the case was already submitted for decision. What private respondents received w
level, as the procedure adopted by the Labor Arbiter virtually prevented private respondents from explaining matters fully and presen
ate respondents presented their position paper and documentary evidence only for the first time on appeal to the NLRC.
mit any evidence he may have in support of his defense. Where, as in this case, sufficient opportunity to be heard either through oral
hich Arbiters dispose of cases before them is concededly a matter of discretion. However, that discretion must be exercised regularly
dure, all in the interest of justice and for the purpose of accuracy and correctness in adjudicating the monetary awards.
onciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given an opportunity to present his eviden
urt of Appeals to uphold Arbiter Ortiguerra's decision as against Carag.
rule is that a director is not personally liable for the debts of the corporation, which has a separate legal personality of its own. Sectio
ent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporat
ckholders or members and other persons.
xxxx
assents to patently unlawful acts of the corporation. Section 31 also makes a director personally liable if he is guilty of gross negligen
any patently unlawful act of MAC. Complainants did not present any evidence showing that Carag wilfully and knowingly voted for or
rs of MAC. Complainants did not present any evidence showing that Carag is guilty of gross negligence or bad faith in directing the a
d laws or when the company had already ceased operations and there is no way by which a judgment in favor of employees could be
ke any finding that Carag is guilty of bad faith or of wanton violation of labor standard laws. Arbiter Ortiguerra did not specify what act
n, the bad faith or wrongdoing of the director must be established clearly and convincingly.24 Bad faith is never presumed.25 Bad faith
Businessday Information Systems and Services, Inc. v. NLRC,27 we held:
sed. A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident
Garcia vs. NLRC, 153 SCRA 640), hence, he may not be held personally and solidarily liable with the company for the satisfaction of t
rement of labor laws on company closure or dismissal of employees. The failure to give notice is not an unlawful act because the law
ssal because it fails to comply with mandatory procedural requirements, but it is not illegal in the sense that it constitutes an unlawful
ved or assented to by the director must be a patently unlawful act. Mere failure to comply with the notice requirement of labor laws on
ul acts. There must be a law declaring the act unlawful and penalizing the act.
olation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code." Likew
One Thousand Pesos (₱1,000.00) nor more than Ten Thousand Pesos (₱10,000.00), or imprisonment of not less than three months
partment of Labor and Employment before any permanent closure of a company, does not state that non-compliance with the notice
ed or assented to any patently unlawful act to which the law attaches a penalty for its commission. On this score alone, Carag canno
s and there is no way by which a judgment in favor of employees could be satisfied, corporate officers can be held jointly and severall
says:
not include any labor organization or any of its officers or agents except when acting as employer. (Emphasis supplied)
12(e) of the Labor Code. This is the specific legal ground cited by complainants, and used by Arbiter Ortiguerra, in holding Carag per
bor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. The governing law on persona
tly unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a co
thwith file with the corporate secretary their written objection; (3) they agree to hold themselves personally and solidarily liable with th
zip%3E9,df%7C2007/jan2007/146667.htm -
xxx
TS/SUPREME_COURT/Decisions/2007/jan2007.zip%3E9,df%7C2007/jan2007/146667.htm - which the Court of Appeals cited, does
entitled to reinstatement with full backwages."

ot exceeding five hundred pesos and/or imprisonment for not less than one (1) day nor more than six (6) months."
s found in Article 212 (c) of the Labor Code which provides:
hall not include any labor organization or any of its officers or agents except when acting as employer."
cial person, it must have an officer who can be presumed to be the employer, being the "person acting in the interest of (the) employe
ble for non-payment of back wages. That is the policy of the law.
xxxx
payment of back wages. In the instant case, it would appear that RANSOM, in 1969, foreseeing the possibility or probability of
ons on May 1, 1973, after the December 19, 1972 Decision of the Court of Industrial Relations was promulgated against RANSOM.
9,df%7C2007/jan2007/146667.htm - (Emphasis supplied)
ckwages to the 22 strikers. This situation, or anything similar showing malice or bad faith on the part of Patricio, does not obtain in the
9,df%7C2007/jan2007/146667.htm - the Court held, thus:
sonally accountable for the payment of wages and money claims to its employees. In A.C. Ransom Labor Union-CCLU vs. NLRC, for
re otherwise, the corporation employer (would) have devious ways for evading payment of backwages." In the absence of a clear ide
liable the vice-president of the company, being the highest and most ranking official of the corporation next to the President who was
es that could rightly sanction personal liability on the part of the company officer. In A.C. Ransom, the corporate entity was a family co
ne of "piercing the veil of corporate fiction" was thus clearly appropriate. Chua likewise involved another family corporation, an
vidently in bad faith, in the easing out from the company of one of the brothers by the other.
abor Relations Commission, thus:
e with petitioner company and CIPI for the payment of the backwages of private respondents. This is reversible error. The Assistant R
orporation, and his alleged arbitrary dismissal of private respondents.
ation. There appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of private respo
persons composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single stockholder
been made personally answerable for the payment of private respondents' back salaries.http://elibrary.supremecourt.gov.ph/DOCUM
n is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith, or a specific p
y makes any corporate officer personally liable for the debts of the corporation. As this Court ruled in H.L. Carlos Construction, Inc. v.
2007.zip%3E9,df%7C2007/jan2007/146667.htm -
atas Pambansa Blg. 68) provides:
ote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith ... shall be liable jointly
ul act of the corporation; or (b) they are guilty of bad faith or gross negligence in directing its affairs; or (c) they incur conflict of interes
ble for the separation pay owed by MAC to complainants based alone on Article 212(e) of the Labor Code. Article 212(e) does not sta
the Corporation Code.
esolution dated 27 March 2001 of the Court of Appeals in CA-G.R. SP Nos. 54404-06 insofar as petitioner Antonio Carag is concerne
REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Asscociate Justice
ANGELINA SANDOVAL-GUTIERREZ MA. ALICIA AUSTRIA-MARTINEZ

RENATO C. CORONA CONCHITA CARPIO MORALES

ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA

DANTE O. TINGA MINITA V. CHICO-NAZARIO

CANCIO C. GARCIA PRESBITERO J. VELASCO, JR.

ANTONIO EDUARDO B. NACHURA

Associate Justice
CERTIFICATION
n had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
ces Conchita Carpio Morales (now Associate Justice of this Court) and Jose L. Sabio, Jr., concurring.
Conchita Carpio Morales (now Associate Justice of this Court ) and Jose L. Sabio, Jr., concurring.
assigned case, the Labor Arbiter shall summon the parties to a conference for the purpose of amicably settling the case upon a fair c
ry matters. The notice or summons shall specify the date, time and place of the preliminary conference/pretrial and shall be accompa
ute, the same shall be reduced to writing and signed by the parties and their respective counsels, if any before the Labor Arbiter. The
es thereof.
abor Arbiter before whom the case is pending shall be approved by him if, after confronting the parties, particularly the complainants,
ls, and public policies.
be final and binding upon the parties and the Order approving it shall have the effect of a judgment rendered by the Labor Arbiter in th
nated within thirty (30) calendar days from the date of the first conference.
ee upon an amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating there
raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documen
vidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits a
supporting documents and affidavits within fifteen (15) calendar days from the date of the last conference, with proof of having furnis
y the parties of their position papers/memorandum, the Labor Arbiter shall motu proprio determine whether there is need for a formal
t not limited to the subpoena of relevant documentary evidence, if any, from any party or witness.
xxxx
submitted their position papers and supporting documents, he shall issue and Order to that effect and shall inform the parties, stating
xxxx
uring his turn to present evidence, despite due notice, the case shall be considered submitted for decision on the basis of the eviden
80 Phil. 60 (2000) and Del Rosario v. NLRC, G.R. No. 85416, 24 July 1990, 187 SCRA 777.
so terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent lo
the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of terminatio
(1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or ce
(1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) wh

SUPREME COURT
Manila
SECOND DIVISION
aper Corporation, Petitioners,
DECISION
G.R. CV No. 71499 dated March 31, 2006 and the Resolution dated March 7, 2007.2 The Decision reversed and set aside the ruling o
Arma Traders) to pay Advance Paper Corporation (Advance Paper) the sum of ₱15,321,798.25 with interest, and ₱1,500,000.00 for
Factual Antecedents
ufacturing, distributing and selling of various paper products.4 Petitioner George Haw (Haw) is the President while his wife, Connie Ha
chool and office supplies, and novelty products.6 Respondent Antonio Tan (Tan) was formerly the President while respondent Uy Sen
Paper, for about 14 years.8
Vice-President, General Manager and Corporate Secretary, respectively.9
other paper products amounting to ₱7,533,001.49 from Advance Paper. 10

November 1994 in the amounts of ₱3,380,171.82, ₱1,000,000.00, and ₱3,408,623.94 or a total of ₱7,788,796.76.11 Arma Traders ne
good business relations with Arma Traders, Advance Paper extended the loans.13
ecks14payable to cash or to Advance Paper. Tan and Uy were Arma Traders’ authorized bank signatories who signed and issued thes
ncy of funds" or "account closed." Despite repeated demands, however, Arma Traders failed to settle its account with Advance Pape
for preliminary attachment against Arma Traders, Tan, Uy, Ting, Gui, and Ng.
Claims of the petitioners
e purchases and loan transactions knowing that they did not have sufficient funds with the drawee banks.18
corresponding sales invoices as their documentary evidence.19
a Traders paid the purchases in the form of postdated checks. Thus, he personally collected these checks on Saturdays and upon re
nvoices.20
er issued in favor of Arma Traders. The petitioners also filed a manifestation22 dated June 14, 1995, submitting a bank statement from
d to the account of Arma Traders as payee from October 1994 to December 1994.
ans without any collateral and loan agreement or promissory note, and only on the basis of the issuance of the postdated checks, he
revious checks ever bounced.23
Claims of the respondents
ere was no delivery of the ₱7,000,000.00 worth of notebooks and other paper products.24
m September to December 1994. He claimed that during this period, Arma Traders concentrated on Christmas items, not school and
rma Traders’ records and found no receipts involving the purchases of notebooks and other paper products from Advance Paper.25
and Uy to Advance Paper. These loans were never intended to benefit the respondents.
of Arma Traders did not issue a board resolution authorizing Tan and Uy to obtain the loans from Advance Paper. They claimed that t
the corporate officers are acting in excess of their authority or ultra vires. When the acts of the corporate officers are ultra vires, the c
s claimed that Advance Paper failed to verify Tan and Uy’s authority to transact business with them. Hence, Advance Paper should s
h a series of transactions known as rediscounting of postdated checks. In rediscounting, the respondents explained that Tan and Uy
depending on how long were the terms of repayment. The rediscounted percentage represented the interest or profit earned by the p
lt upon his failure to appear during the pre-trial. In his Answer, he admitted that Arma Traders together with its corporate officers have
ors for the past 13 years to issue checks in behalf of Arma Traders to pay its obligations with Advance Paper.30 Furthermore, he adm
cording to him, Advance Paper was informed beforehand that Arma Traders’ checks were funded out of the ₱20,000,000.00 worth of
Thus, he never participated in the company’s daily transactions.34
ion, testified that he investigated the transactions involving Tan and Uy and discovered that they were financing their own business u
le for their personal debts. He based this conclusion from the following: First, basic human experience and common sense tell us tha
in this case, petitioner Advance Paper. Second, there was no other document proving the existence of the loan other than the postda
checks did not tally. Fourth, he found out that the certified true copy of Advance Paper’s report with the Securities and Exchange Com
Uy and that several warrants of arrest had been issued against them.
w Tan and Uy conspired with the petitioners to defraud Arma Traders. However, the respondents did not present her on the witness
The RTC Ruling
petitioners. Hence, the RTC ordered Arma Traders to pay Advance Paper the sum of ₱15,321,798.25 with interest, and ₱1,500,000.0
t the sale invoices were forged or fictitious, and that the loan transactions were personal obligations of Tan and Uy. Nonetheless, the
elves, either jointly or solidarily, with Arma Traders for the payment of its account.38
The CA Ruling
ases on credit and loans based on the following grounds:
Uy to obtain the loan from Advance Paper.39 The CA acknowledged that Tan and Uy were Arma Traders’ authorized bank signatories.
authority to contract a loan.40
the purchases on credit since the sales invoices were hearsay.41 The CA pointed out that Haw’s testimony as to the identification of t
ed the sales invoices are already dead or unable to testify as required by the Rules of Court.42 Further, the CA noted that the secretar
badges of fraud." The CA averred that the petitioners failed to satisfactorily rebut the badges of fraud45 which include the inconsistenc
per but turned out to be a check payable to Top Line, Advance Paper’s sister company;46
it, whose photocopy failed to reflect the amount stated in the duplicate copy,47 and;
vables amounting to ₱219,705.19 only – an amount far from the claimed ₱15,321,798.25 receivables from Arma Traders.48
98.25, ₱1,500,000.00 for attorney’s fees, plus cost of suit.49 It affirmed the RTC decision dismissing the complaint against responden
ms of ₱250,000.00 as moral damages, ₱250,000.00 as exemplary damages, and ₱250,000.00 as attorney’s fees.51
The Petition
the respondents left the active and sole management of the company to Tan and Uy since 1984. In fact, Ng testified that Arma Trade
will be sustained, they will have the absurd power to question all the business transactions of Arma Traders.52 Citing Lipat v. Pacific B
gent to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; thus, th
ent’s authority.
nal knowledge of the assailed purchases and loan transactions because he dealt with the customers, and supervised and directed the
ver objected to the admissibility of the sales invoices on the ground that they were hearsay.55
ountered:
ate originals of the sales invoices amounting to ₱4,624.80 – an insignificant amount compared to the total purchases of ₱7,533,0
voices are uncontroverted. The petitioners also raise the point that this discrepancy is a nonissue because the duplicate originals w
f context.58 The petitioners argue that this maneuver is insufficient to discredit Haw’s entire testimony.59
r PBC check no. 091014. Moreover, Exhibit E-26 does not refer to PBC check no. 091014 but to PBC check no. 091032 payable to th
t the total obligation of ₱15,321,798.25 does not necessarily prove that the transactions are spurious.61
ma Traders’ obligation with Advance Paper was based on non-existent evidence because Exhibit 294-NG does not pertain to any bala
n." The respondents cannot escape their liability by simply pointing the SEC report because the petitioners have established their cau
honored checks to cover their debts, and they refused to settle their obligation with Advance Paper.63
The Case for the Respondents
wing procedural grounds: first, for failure to comply with A.M. No. 02-8-13-SC;64 and second, the CA decision is already final and execu
if the last day for filing of any pleading falls on a Saturday not a holiday, the same must be filed on said Saturday, as the Docket and
of its agents which it allowed to deal with the general public; this is only true if the person dealing with the agent dealt in good faith.66
Uy to make Arma Traders liable for the non-existent deliveries of notebooks and other paper products.67 They also insist that the sale
aper.69Moreover, while the three cashier’s checks were deposited in the account of Arma Traders, it is likewise true that Tan and Uy i
piracy to siphon Arma Traders corporate funds.70
as regards the sales invoices is hearsay because he did not personally prepare these documentary evidence.71Second, Haw suspici
why Advance Paper granted the ₱7,000,000.00 loan without requiring Arma Traders to present any collateral or guarantees.72
The Issues
02-8-13-SC.
motion for reconsideration with the CA on time.
hority.
reponderance of evidence.
The Court's Ruling
mendment of the 2004 Rules on Notarial Practice. It deleted the Community Tax Certificate among the accepted proof of identity of th
30869 in their Petition for Review.73 Nevertheless, the defective jurat in the Verification/Certification of Non-Forum Shopping is not a fa
ply ignore the millions of pesos at stake in this case. To do so might cause grave injustice to a party, a situation that this Court intend
review of the CA Resolution75 dated March 7, 2007, reveals that the petitioners’ Motion for Reconsideration was denied because the
d out of time.
authority if it knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, and it holds him
did not commit any acts or conduct which a third party knew and relied upon in good faith as a result of the exercise of reasonable p
e whether the corporation should enter into a contract that will bind the corporation is lodged in the board, subject to the articles of inc
rtain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to officers, co
bylaws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general cours
the extent that [the] authority to do so has been conferred upon him, and this includes powers as, in the usual course of the particular
sage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused person dealing
h (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words the appa
ctual or constructive knowledge thereof, within or beyond the scope of his ordinary powers. It requires presentation of evid
which establishes apparent authority, but the vesting of a corporate officer with the power to bind the corporation. [emphase
ent authority is applied when the petitioner, through its president Antonio Punsalan Jr., entered into the First Contract without first sec
s "clothing" its president with the power to bind the corporation.
ons, the strict rule that said officer has no inherent power to act for the corporation is slowly giving way to the realization that such off
e of a charter or bylaw provision to the contrary, the president is presumed to have the authority to act within the domain of
oans due to the lack of board resolution authorizing Tan and Uy to obtain the loans. To begin with, Arma Traders’ Articles of Incorpor
e issuance of bonds, promissory notes and other evidence of indebtedness. Likewise, it states that Tan and Uy are not just ordina
dents Ng and Ting, and Pedro Chao. Furthermore, the respondents, through Ng who is Arma Traders’ corporate secretary, incorporat
d the other officers never dealt with the business and management of Arma Traders for 14 years. He also confirmed that sinc
s meeting.83
rsons without the necessary written authority from its non-performing board of directors. Arma Traders failed to take precautions to p
ders is now estopped from denying Tan and Uy’s authority to obtain loan from Advance Paper.
records do not contain any evidence to prove that the loan transactions were personal to Tan and Uy. A different conclusion might h
dvance Paper been either Tan and/or Uy’s, or had the respondents presented convincing evidence to show how Tan and Uy conspir
Ong, the secretary of Tan and Uy, to testify on how Advance Paper connived with Tan and Uy. As mentioned, the respondents failed
own, disregard such evidence.85 When a party desires the court to reject the evidence offered, it must so state in the form of a timely
ly object, the evidence becomes part of the evidence in the case. Thereafter, all the parties are considered bound by any outcome ar
This principle, however, has been relaxed in cases where, in addition to the failure to object to the admissibility of the subject evidenc
issue. (emphasis and underscore ours; citation omitted)
ny was hearsay because he was not present during its preparation88 and the secretaries who prepared them were not presented to id
in the course of business" because the petitioners failed to show that the entrant was deceased or was unable to testify.89
or the respondents’ failure to object as to the admissibility of the sales invoices on the ground that they are hearsay.90Based on the rec
ot on the ground that they were hearsay.91
an Uy admitted that all the checks issued were in payments of the contractual obligations of the Arma Traders with Advance
themselves. For one, Arma Traders’ postdated checks evince the existence of the purchases on credit. Moreover, Haw testified that w
checks on Saturdays and upon receiving the checks, he surrendered to Arma Traders the original of the sales invoices while he reta
nd from the transcript of stenographic notes. However, we are not persuaded that these inconsistencies are sufficiently pervasive to a
in the better position to assess the credibility of witnesses as it heard the testimonies and observed the deportment and manner of te
e absence of any showing that the trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight and su
answered each propounded questions to him in the witness stand. Hence, the minor inconsistencies in Haw’s testimony notwithstand
us consideration." Besides, the respondents failed to convince us that the RTC judge overlooked, misunderstood, or misapplied some
oices and its duplicate copy have been sufficiently explained. Besides, this is already a non-issue since the duplicate copies were sur
of their obligation with Advance Paper is not inconsistent with the existence of the purchases and loan transactions.
ory of an alleged conspiracy between Tan, Uy and Haw to defraud Arma Traders. However, the records are bereft of supporting evid
oners' evidence that the respondents appear to have magnified. From these perspectives, the preponderance of evidence thus lies he
he resolution dated March 7, 2007 of the Court of Appeals in CA-G.R. CV No. 71499 are REVERSED and SET ASIDE. The Regional
ANTONIO T. CARPIO
Associate Justice
Chairperson
ESTELA M. PERLAS-BERNABE
Associate Justice
MARVIC MARIO VICTOR F. LEONEN

Associate Justice
ATTESTATION
assigned to the writer of the opinion of the Court's Division.
CERTIFICATION
y that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opini
der No. 1627 dated December 6, 2013.
ces Portia Alifio-Hormachuelos and Amelita G. Tolentino; id. at 46-69.

o, Jr.; id. at 75-77.
18, 1996.
," "B-1" to "B-30," "C" to "C-31" and "D" to "D-3.
ated November 18, 1996.
g’s Answer with Compulsory Counterclaim and Crossclaim dated February 23, 1996.
9.
nd Ng’s Answer with Compulsory Counterclaim and Crossclaim dated February 23, 1996.
r. dated May 12, 2000.
5888 dated September 11, 1995 which was marked as Exhibit "2."
Dieselman Freight Services, Co., G.R. No. 111448, January 16, 2002, 373 SCRA 385, 391, which held: "[C]ontracts or acts of a corp
d. Absent such valid delegation or authorization, the rule is that the declarations of an individual director relating to the affairs of the c
business. – Entries made at, or near the time of the transactions to which they refer, by a person deceased, or unable to testify, w
made the entries in his professional capacity or in the performance of duty and in the ordinary or regular course of business or duty."
d by the respondents referred to transactions which created obligations on the part of Arma Traders. So, when Haw was asked:
transaction," believing that he was being asked if there were other transactions that could be added to those he mentioned already, m
fiant’s identity because of its inherent unreliability; effective August 1, 2004.
upra note 53, at 350.

tober 7, 1998, 297 SCRA 170, 184-185, citing Francisco v. Government Service Insurance System, Nos. L-18287 and L-18155, Marc
SCRA 553, 566.
y 13, 2010, 625 SCRA 21, 34, citing Yun Kwan Byung v. Philippine Amusement and Gaming Corporation, G.R. No. 163553, Decemb
d Warehousing Co., Inc. v. Court of Appeals, supra note 76.
1975; and Cooper v. G.E. Construction Co., 158 SE 2d 305, 308, October 30, 1967.
SE 2d 607, 612, December 14, 1949; Cushman v. Cloverland Coal & Mining Co., 84 NE 759, 760, May 15, 1908; Ceedeer v. H.M. Lo
d 442, 445, November 29, 1955; Lloyd & Co. v. Matthews & Rice, 79 NE 172, 173, December 5, 1906, and National State Bank v. Vi
Products Corp.
ain Sharow Ong was supposed to testify on ‘how Antonio Tan and Uy Seng Kee Willy conspired with plaintiffs to defraud Arma Trader
r made either."
791, 805.
G.R. No. 163915, October 16, 2006, 504 SCRA 519, 524.
facturing, Inc. v. ECED, IRTI, S.A., Eutectic Corp., 222 Phil. 424, 347 (1985).
s, ‘B-1’ and its submarkings, "C-1" and its submarkings, and "D-1" and its submarkings, were prepared?
he invoices. I am not the one who saw to it the secretaries writing these invoices." (TSN, December 9, 1996, p. 5)
of transactions to which they refer, by a person deceased, or unable to testify, who was in a position to know the facts therein stated,
n the performance of duty and in the ordinary or regular course of business or duty." (italics supplied)
y of entries made in the course of business:

which they refer.
ntries.
r in the performance of his duty.
y.
he crossexamination:
t.

Corp. Cases Sec. 36

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Today is Thursday, January 18, 2018

5,942,160.00 in the name of ISC which the latter had encashed.

ldings "lagged behind . . . time schedule."3

which check had been cleared.

public’s motion, declared in default.

e pertinent agreement entered into with the plaintiff;

ublic, they were declared as in default.

FIRST ASSIGNMENT OF ERROR

SECOND ASSIGNMENT OF ERROR.

THIRD ASSIGNMENT OF ERROR

FOURTH ASSIGNMENT OF ERROR

FIFTH ASSIGNMENT OF ERROR

EFENDANTS-APPELLANTS, RATHER THAN APPLYING ITS ACCEPTED LIBERAL CONSTRUCITON.

SIXTH ASSIGNMENT OF ERROR

SEVENTH ASSIGNMENT OF ERROR

E AND AGAINST DEFENDANTS-APPELLANTS FOR REIMBURSEMENT OF CONSIDERATION, LIQUIDATED AND EXEMPLARY

s, except No. 6, bereft of merit.

ration may so validly attach, as a rule, only when —

d, it may be inferred from the circumstances of the case.19

Republic of the Philippines

,*TERESITA CU, and RICARDO P. GUEVARA and Spouse,** respondents.

Defendants because, [among others]:

City, for ‘Voluntary Insolvency’ x x x.

al respondents with Mindanao Ferroalloy Corporation.

damages including payment for attorney’s fees.

ported by prevailing jurisprudence."7

oration may so validly attach, as a rule, only when —

ile with the corporate secretary his written objection thereto;

ely as representatives of Minfaco.

cur expenses to protect his interest;

alid, just and demandable claim;

ses’ Memorandum. Rollo, p. 222.

, Inc. v. NLRC, 357 Phil. 110, 127, September 25, 1998.

7, 18, February 24, 1981.

de of the Philippines, 1991 ed., Vol. IV, p. 506.

362 Phil. 197, 204, February 2, 1999; Samson v. CA, supra.

Today is Thursday, January 18, 2018

ed by Datu Sacar Basman in favor of the Philippine Amanah Bank.16

ight Contract with AGEAC –

rimage in the total amount of P1,033,700, thus:

against defendants, as follows:

Series of 1975’ contained in the Certificate of Clearance (Annex ‘E’);

y plaintiff, the following:

all have resumed his position in the Mindanao State University;

d by the Honorable Court in favor of the plaintiff.

ust and equitable in the premises.28

quitting Saber of the charge, the Sandiganbayan ruled:

st the PAB and Aradji, thus:

ntiff and against defendants, as follows:

ri Aradji, to pay plaintiff the amounts of:

and Aradji, thus:

The Present Petition

on the principles of abuse of rights and malicious prosecution.

The Ruling of the Court

nd attorney’s fees, provides:

r what had happened in that pilgrimage.

at Mr. Aradji the same defendant in this case?

m his position as Assistant Vice-President of the respondent bank.

s are subject to this restriction.

artered even without the approval of the Board.

communication ordering the people to ride in the boat.

m not keeping statistics of statements.

aludo tell you, what particular occasion?