.FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs.

AGO MEDICAL AND EDUCATIONAL CENTER-

BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO, respondents.

FACTS:

Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and Hermogenes Jun Alegre
(Alegre). Expos is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (FBNI).

With the supposed exposs, FBNI, Rima and Alegre transmitted malicious imputations, and as such, destroyed
plaintiffs (AMEC and Ago) reputation. Thus, AMEC and Angelita Ago (Ago), as Dean of AMECs College of Medicine,
filed a complaint for damages against FBNI, Rima and Alegre.

AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the selection and
supervision of its employees, particularly Rima and Alegre.

The trial court rendered a decision finding FBNI and Alegre liable for libel except Rima, it ordered them to pay
AMEC, among others, some determinate moral damages.

On appeal to the Court of Appeals (CA), the CA affirmed the trial courts judgment with modification. The CA
made Rima solidarily liable with FBNI and Alegre. The appellate court denied Agos claim for damages and attorneys
fees because the broadcasts were directed against AMEC, and not against her.

In its petition for review before the Supreme Court, one of the issues raised by FBNI is whether AMEC is entitled
to moral damages contending that it is not entitled because it is a corporation.

ISSUES:

Whether or not AMEC, as a corporation, is entitled to moral damages?

HELD:

Yes. A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral
shock.

In the case of Mambulao Lumber Co. v. PNB, et al., the Supreme Court held that a corporation may have a good
reputation which, if besmirched, may also be a ground for the award of moral damages.

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

Clearly, AMEC is entitled to moral damages.

 G.R. No. 142435 April 30, 2003

ESTELITA BURGOS LIPAT and ALFREDO LIPAT vs. PACIFIC BANKING CORPORATION,

Facts:

Spouses Alfredo and Estelita Lipat, owned "Bela's Export Trading" (BET), a single proprietorship engaged in
the manufacture of garments for domestic and foreign consumption. The Lipats also owned the "Mystical Fashions" in
the US which sells goods imported from the Philippines through BET.

To facilitate the convenient operation of BET, Estelita executed SPA appointing Teresita, her daughter, to
obtain loans and other credit accommodations from respondent Pacific Bank. She also authorized Teresita to execute
mortgage contracts on properties owned or co-owned by her as security for the obligations.

A loan was secured and as security therefore a Real Estate Mortgage (REM) was executed over the property
of the spouses. Sometime after, BET was incorporated into a family corporation named Bela’s Export Corporation
(BEC) and the loan was restructured in its name. Subsequent loans were obtained in behalf of BEC all secured by the
previous REM. BEC defaulted in its payments which led to the foreclosure and sale of the mortgaged property. The
spouses moved to annul the sale alleging that BEC is a distinct and separate personality from them and that the REM
was executed only to secure BET’s loan. Both trial court and CA ruled to pierce the corporate veil to hold petitioner
spouses liable for BEC’s obligation.

Issue:

Whether or not the doctrine of piercing the veil of corporate fiction is applicable in this case.

Held:

YES.

We find that the evidence on record demolishes, rather than buttresses, petitioners’ contention that BET and
BEC are separate business entities. Note that Estelita Lipat admitted that she and her husband, Alfredo, were the
owners of BET and were two of the incorporators and majority stockholders of BEC. It is also undisputed that Estelita
Lipat executed a special power of attorney in favor of her daughter, Teresita, to obtain loans and credit lines from
Pacific Bank on her behalf. Incidentally, Teresita was designated as executive-vice president and general manager of
both BET and BEC, respectively. It could not have been coincidental that BET and BEC are so intertwined with each
other in terms of ownership, business purpose, and management. Apparently, BET and BEC are one and the same
and the latter is a conduit of and merely succeeded the former. Petitioners’ attempt to isolate themselves from and
hide behind the corporate personality of BEC so as to evade their liabilities to Pacific Bank is precisely what the
classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

In our view, BEC is a mere continuation and successor of BET, and petitioners cannot evade their obligations
in the mortgage contract secured under the name of BEC on the pretext that it was signed for the benefit and under
the name of BET. We are thus constrained to rule that the Court of Appeals did not err when it applied the
instrumentality doctrine in piercing the corporate veil of BEC.

Seventh Day Adventist vs. Northeastern Mindanao Mission

July 21, 2006 GR 150416

Facts

On April 21, 1959, Felix Cosio and his wife, Felisa Cuysona donated their land to the South Philippine Union
Mission of Seventh Day Adventist Church of Bayugan (SPUM-SDA Baguyan). The donation was allegedly accepted by
Liberato Rayos, an elder of the Seventh Day Adventist Church.

However, after 21 years, the same parcel of land was sold by the spouses Cosio to the Seventh Day Adventist
Church of Northeastern Mindanao Mission (SDA-NEMM).

Petitioners were claiming ownership over the property as donees. This was opposed by respondents who
argued that at the time of the donation, SPUM-SDA Bayugan could not legally be a donee because, not having
incorporated yet, it had no juridical personality. Neither were petitioners members of the local church then, hence, the
donation could not have been made particularly to them.

Petitioners filed suit for cancellation of title, quieting of ownership and possession, declaratory relief and
reconveyance with prayer for preliminary injunction and damages. The RTC ruled upholding the sale in favor of
respondents.
 The CA affirmed the RTC decision but deleted award of moral damages and attorney’s fees.

Issue

Should the Seventh Day Adventist Church of Northeastern Mindanao Mission’s ownership of the lot be upheld?

Ruling

Yes. Transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery of the
property on February 28, 1980 when the sale was made through a public instrument. TCT No. 4468 was thereafter
issued and it remains in the name of SDA-NEMM.

Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a
property may be transferred by tradition as a consequence of a sale.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another
person who accepts it. The donation could not have been made in favor of an entity yet inexistent at the time it was
made. Nor could it have been accepted as there was yet no one to accept it.

In the case at bar, the SPUM-SDA Bayugan at the time of donation had neither juridical personality nor capacity
to accept such gift.

Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.

But there are stringent requirements before one can qualify as a de facto corporation:

(a) The existence of a valid law under which it may be incorporated;

(b) An attempt in good faith to incorporate; and

(c) Assumption of corporate powers.

The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the
existence of a de facto corporation. We have held that an organization not registered with the SEC cannot be considered
a corporation in any concept, not even as a corporation de facto. Petitioners themselves admitted that at the time of the
donation, they were not registered with the SEC.

No certificate of incorporation was ever issued to petitioners at the time of the donation. Neither could the
principle of separate juridical personality apply since there was never any corporation to speak of. And some of the
representatives of petitioner were not even members of the local church then, thus, they could not even claim that the
donation was particularly for them.

In view of the foregoing, petitioners arguments anchored on their supposed de facto status hold no water. We
are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.

David, Jason A. | Juris Doctor – 2B

VILLA REY TRANSIT, INC., plaintiff-appellant vs. FERRER, PANTRANCO and PSC, defendants-appellants.
PANTRANCO, third-party plaintiff-appellant, vs. VILLARAMA, third-party defendant-appellee.
G.R. No. L-23893 October 29, 1968 ANGELES, J.:

FACTS: Jose Villarama was an operator of a bus transportation pursuant to two certificates of public convenience
granted him by the Public Service Commission (PSC). Later, he sold the certificates to the Pangasinan Transportation
Company, Inc. (Pantranco) with the condition that the seller (Villarama) "shall not for a period of 10 years, apply for any
TPU service identical or competing with the buyer."
Barely three months thereafter, a corporation called Villa Rey Transit, Inc. (the Corporation) was organized with
a capital stock of P500,000.00 divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the
subscribed stock; Natividad Villarama (wife of Jose Villarama) was one of the incorporators, and she subscribed for
P1,000.00; the balance of P199,000.00 was subscribed by the brother and sister-in-law of Jose Villarama; of the
subscribed capital stock, P105,000.00 was paid to the treasurer of the corporation, Natividad.
In less than a month after its registration with the SEC, the Corporation bought five certificates of public
convenience and 49 buses from one Valentin Fernando. Later, the Sheriff of Manila levied on 2 of the 5 certificates, in
favor of Eusebio Ferrer, judgment creditor, against Fernando, judgment debtor. A public sale was conducted. Ferrer
was the highest bidder. Ferrer sold the two certificates to Pantranco.
The Corporation filed a complaint against Ferrer, Pantranco and the PSC for the annulment of the sheriff's sale.
Pantranco, on its part, filed a third-party complaint against Villarama, alleging that Villarama and/or the Corporation was
disqualified from operating the two certificates in question by virtue of the previous agreement. The trial court declared
null and void the sheriff's sale of two certificates of public convenience in favor of Ferrer and the subsequent sale thereof
by the latter to Pantranco and declaring Villa Rey Transit, Inc., to be the lawful owner of the said certificates of public
convenience.
Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey Transit, Inc. (Corporation)
is a distinct and separate entity from Villarama. Ferrer, for his part, challenges the decision insofar as it holds that the
sheriff's sale is null and void.

ISSUE: Whether the stipulation between Villarama and Pantranco binds Villa Rey Transit, Inc.?

RULING: The Supreme Court decision in is the affirmative. The restrictive clause in the contract entered into by the
Villarama and Pantranco is also enforceable and binding against the said Corporation. The rule is that a seller or
promisor may not make use of a corporate entity as a means of evading the obligation of his covenant. The evidence
has disclosed that Villarama, albeit was not an incorporator or stockholder of the Corporation, his wife, however, was
an incorporator and was elected treasurer of the Corporation. The evidence further shows that the initial cash
capitalization of the corporation was mostly financed by Villarama; he supplied the organization expenses and the assets
of the Corporation, such as trucks and equipment; there was no actual payment by the original subscribers of the
amounts of P95,000.00 and P100,000.00 as appearing in the books; Villarama made use of the money of the
Corporation and deposited them to his private accounts; and the Corporation paid his personal accounts. The foregoing
circumstances are strong persuasive evidence showing that Villarama has been too much involved in the affairs of the
Corporation to altogether negate the claim that he was only a part-time general manager. They show beyond doubt that
the Corporation is his alter ego.
The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who
compose it is recognized and respected in all cases which are within reason and the law. When the fiction is urged as
a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention
of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to
allow for its consideration merely as an aggregation of individuals.

CLEMENTE, Marie Immaculate L.

JD-2B

CONCEPT BUILDERS, INC. vs. NLRC

G.R. No. 108734. May 29, 1996

FACTS:

Petitioner is a domestic corporation engaged in construction business. Private respondents were employed by
the said company as laborers, carpenters and riggers. Private respondents were served individual written notices of
termination of employment stating that their contracts of employment has expired and the projects in which they were
hired had been completed. Respondent however found out that at the time of termination, the project in which they were
hired had not yet finished and completed. Private respondent filed a complaint for illegal dismissal. Labor Arbiter
rendered a decision against the petitioner which was affirmed by the NLRC. Labor Arbiter issued a writ of execution
which was partially satisfied. The special sheriff recommended that a break open order be issued to enable him to enter
petitioner’s property.

Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied
by the sheriff were owned Hydro Pipes Philippines, Inc. (HPPI) of which he is the vice president. Private respondent
alleged that HPPI and petitioner were owned by the same incorporators/stockholders. HPPI filed an opposition to private
respondents motion contending that HPPI is a corporation separate and distinct from petitioner; that the doctrine of
piercing the veil should not be applied in the absence of any showing that HPPI was created in order to evade petitioner’s
liability to private respondent.

ISSUE: Whether or not veil of corporate fiction should be pierced?

RULING:

YES. Under the law a corporation the separate and distinct personality of a corporation is merely a fiction created
by law for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat
convenience and justify a wrong, protect fraud or defend a crime, this separate personality may be disregarded. This is
likewise true when the corporation is merely an adjunct business conduit or an alter ego of another corporation. In the
given case, petitioner claimed that it ceased its business operation on April 29, 1986, the same day when HPPI submitted
an information sheet containing the same office address as that of the petitioner. Clearly, petitioner ceased its operation
business in order to evade the payment to respondent backwages and to bar their reinstatement. HPPI is obviously a
business conduit of petitioner orchestrated to avoid the financial liability that is already attached to the petitioner.

TIMES TRANSPORTATION COMPANY, INC., petitioner,

vs.
SANTOS SOTELO

G.R. No. 163786 February 16, 2005 YNARES-SANTIAGO, J.:

FACTS:

Petitioner Times Transportation Company, Inc. (Times) is a corporation engaged in the business of land
transportation. Prior to its closure in 1997, the Times Employees Union (TEU) was formed and issued a certificate of
union registration. Times challenged the legitimacy of TEU by filing a petition for the cancellation of its union
registration.

In a certification election held on July 1, 1997, TEU was certified as the sole and exclusive collective bargaining agent
in Times. Consequently, TEU’s president wrote the management of Times and requested for collective bargaining.
Times refused on the ground that the decision of the Med-Arbiter upholding the validity of the certification election was
not yet final and executory.

TEU filed a Notice of Strike on August 8, 1997. Another conciliation/mediation proceeding was conducted for the
purpose of settling the brewing dispute. In the meantime, Times’ management implemented a retrenchment program
and notices of retrenchment.

On October 17, 1997, TEU held a strike vote on grounds of unfair labor practice on the part of Times. For alleged
participation in what it deemed was an illegal strike, Times terminated all the 123 striking employees by virtue of two
notices dated October 26, 1997 and November 24, 1997. On November 17, 1997, then DOLE Secretary Quisumbing
issued the second return-to-work order certifying the dispute to the NLRC. While the strike was ended, the employees
were no longer admitted back to work.

In the meantime, by December 12, 1997, Mencorp Transport Systems, Inc. (Mencorp) had acquired ownership over
Times’ Certificates of Public Convenience and a number of its bus units by virtue of several deeds of sale. 4 Mencorp is
controlled and operated by Mrs. Virginia Mendoza, daughter of Santiago Rondaris, the majority stockholder of Times.

On May 21, 1998, the NLRC rendered a decision5 in the cases certified to it by the DOLE, the dispositive portion of
which read:

WHEREFORE, the respondents’ first strike, conducted from March 3, 1997 to March 12, 1997, is hereby declared
LEGAL; its second strike, which commenced on October 17, 1997, is hereby declared ILLEGAL. Consequently, those
… 23 persons who participated in the illegal strike … are deemed to have lost their employment status and were
therefore validly dismissed from employment: …

Times and TEU both appealed the decision of the NLRC, which the Court of Appeals affirmed on November 17, 2000.

NLRC DECISION: WHEREFORE, premises considered, judgment is hereby entered FINDING that the dismissals of
complainants, excluding the expunged ones, by respondent Times Transit (sic) Company, Inc. effected, participated
in, authorized or ratified by respondent Santiago Rondaris constituted the prohibited act of unfair labor practice under
Article 248(a) and (e) of the Labor Code, as amended and hence, illegal and that the sale of said respondent company
to respondents Mencorp Transport Systems Company (sic), Inc. and/or Virginia Mendoza and Reynaldo Mendoza
was simulated and/or effected in bad faith, ORDERING:The monetary award amounted to P43,347,341.69.

On March 4, 2002, Times, Mencorp and the Spouses Mendoza submitted their respective memorandum of appeal to
the NLRC with motions to reduce the bond. Mencorp posted a P5 million bond issued by Security Pacific Assurance
Corp. (SPAC).

On April 30, 2002, the NLRC issued an order disposing of the said motion, thus: WHEREFORE, premises considered,
the Urgent Motion for Reduction of Bond is denied for lack of merit.

On May 18, 2002, Times moved to reconsider said order arguing mainly that it did not have sufficient funds to put up
the required bond. On July 26, 2002, Mencorp and the Spouses Mendoza posted an additional P10 million appeal
bond. Thus far, the total amount of bond posted was P15 million.

August 7, 2002, the NLRC granted the Motion for Reduction of Bond and approved the P10 million additional appeal
bond.

On September 17, 2002, the NLRC rendered its decision, stating:

WHEREFORE, the foregoing premises duly considered, the decision appealed from is hereby VACATED.

ISSUE:

W/N NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DELAYING THE RESOLUTION OF TIMES
MOTION FOR RECONSIDERATION, THAT NLRC UNNECESSARILY PROLONGED THE PERIOD OF APPEAL.

W/N THE SALE OF TIMES TO TRANSPORTATION COMPANY INC. TO MENCORP TRANSPORT SYSTEM INC IS
VALID

HELD:

1.) YES. NLRC COMITTED A GRAVE ABUSE OF DISCRETION IN PROLONGING THE PERIOD OF THE APPEAL.

Article 223 of the Labor Code provides that in case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company
duly accredited by the NLRC in the amount equivalent to the monetary award in the judgment appealed from. The
perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but also
jurisdictional, and failure to perfect an appeal has the effect of making the judgment final and executory.

The records reveal that Times, Mencorp and the Spouses Mendoza’s motion to reduce the bond was denied and the
NLRC ordered them to post the required amount within an unextendible period of ten (10) days.21 However, instead of
complying with the directive, Times filed another motion for reconsideration of the order of denial. Several weeks later,
Mencorp posted an additional bond, which was still less than the required amount. Three (3) months after the filing of
the motion for reconsideration, the NLRC reversed its previous order and granted the motion for reduction of
bond.1awphi1.nét

From the decision of the Labor Arbiter, it took the NLRC four months to rule on the "motion" for exemption to pay bond
and another four months to decide the merits of the case. This Court has repeatedly ruled that delay in the settlement
of labor cases cannot be countenanced. Not only does it involve the survival of an employee and his loved ones who
are dependent on him…, it also wears down the meager resources of the workers...

We agree with the Court of Appeals that the foregoing constitutes grave abuse of discretion on the part of the NLRC.
By delaying the resolution of Times’ motion for reconsideration, it has unnecessarily prolonged the period of appeal.
We have held that to extend the period of appeal is to prolong the resolution of the case, a circumstance which would
give the employer the opportunity to wear out the energy and meager resources of the workers to the point that they
would be constrained to give up for less than what they deserve in law. 22 The NLRC is well to take notice of our
pronouncement in Santos v. Velarde:23

2.) NO. THE SALE OF TIMES TO TRANSPORTATION COMPANY INC. TO MENCORP TRANSPORT SYSTEM INC
IS INVALID/ VOID

We have held that piercing the corporate veil is warranted only in cases when the separate legal entity is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the
law will regard the corporations as merged into one.27 It may be allowed only if the following elements concur: (1)
control—not mere stock control, but complete domination—not only of finances, but of policy and business practice in
respect to the transaction attacked; (2) such control must have been used to commit a fraud or a wrong to perpetuate
the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of a legal right;
and (3) the said control and breach of duty must have proximately caused the injury or unjust loss complained of. 28

The following findings of the Labor Arbiter, which were cited and affirmed by the Court of Appeals, have not been
refuted by Times, to wit:

1. The sale was transferred to a corporation controlled by V. Mendoza, the daughter of respondent S.
Rondaris of [Times] where she is/was also a director, as proven by the articles of incorporation of [Mencorp];

2. All of the stockholders/incorporators of [Mencorp]: Reynaldo M. Mendoza, Virginia R. Mendoza, Vernon

Gerard R. Mendoza, Vivian Charity R. Mendoza, Vevey Rosario R. Mendoza are all relatives of respondent S.
Rondaris;

3. The timing of the sale evidently was to negate the employees/complainants/members’ right to organization
as it was effected when their union (TEU) was just organized/requesting [Times] to bargain;

4. [Mencorp] never obtained a franchise since its supposed incorporation in 10 May 1994 but at present, all
the buses of [Times] are already being run/operated by respondent [Mencorp], the franchise of [Times] having
been transferred to it.29

THEREFORE, We uphold the findings of the labor arbiter and the Court of Appeals. The sale of Times’ franchise as
well as most of its bus units to a company owned by Rondaris’ daughter and family members, right in the middle of a
labor dispute, is highly suspicious. It is evident that the transaction was made in order to remove Times’ remaining
assets from the reach of any judgment that may be rendered in the unfair labor practice cases filed against it.