NATIONAL POWER CORPORATION vs. COURT OF APPEALS

I dunno. I think this is a very complicated case. For some reason I couldn't find any readied digested case online. Law students must have found this case an ordeal to read and condense the whole damn thing. Well I can't promise you anything but, let's see what I can do.

You may have noticed in my digested cases I don't usually give emphasis on the dates except when really needed in order to understand what really happened. In this case do make an exception.

Take note of 3 things. 1. The dates, 2. The companies and its acronyms, 3. The enabling law or the law creating the said body. 4. Its functions.

Here's the facts..

(CEPALCO)

On  1961, the Cagayan Electric and Power Light Company (CEPALCO) was enfranchised by Republic Act No. 3247 "to construct, maintain and operate an electric light, heat and power system for the purpose of generating and/or distributing electric light, heat and/or power for sale within the City of Cagayan de Oro   for fifty (50) years.  

So ito yung parang Meralco nila.. Meralco I think was enfranchised by Congress around 1903, it was an American owned company.  By this date 1961 eh.. I think binibili pa lang ni Eugenio Lopez Sr. ang Meralco noon. They were Philipinizing it, so to speak.

(PHIVIDEC)

P.D. 243, was issued on  1973 which created a "body corporate and politic" to be known as the Philippine Veterans Investment Development Corporation (PHIVIDEC) vested with authority to engage in commercial, industrial, mining, agricultural and other enterprises.

So panahon to ni Marcos.. in order to promote regional development, they were dispersing the industries and  encouraging them to go to the countryside, this is one of the reasons why they put up the export processing zone in Bataan.  Pero ewan ko ba kung bakit ang stakeholders nito mga veterans and retired AFP personnel. So..

(PIA). (PIE-MO)

On 1974, P.D. 538 was promulgated to create the PHIVIDEC Industrial Authority (PIA), a subsidiary of PHIVIDEC, to carry out the government policy to encourage, promote and sustain the economic and social growth of the country. Under Sec. 3 of P.D. No. 538, the first area for development shall be located in the municipalities of Tagoloan and Villanueva. This area forms part of the PHIVIDEC Industrial Estate Misamis Oriental (PIE-MO).

So they created a subsidiary under PHIVIDEC which is PIA. and the first area they aimed on was Misamis Oriental

So PHIVIDEC manages PIA and PIA manages PIE-MO. So syempre in order for PIA to get things done and execute its mandate kelangan mo ng contractors.. so kumuha sya ngayon ng contractors for PIE-MO. 

(PIE-MO), (FPI) and  (MAC)

As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI) and Metal Alloys Corporation (MAC) authority to operate in its area of development. 

Here comes the controversy.. Pasok ngayon ang CEPALCO ng Cagayan, (teka san ba Misamis Oriental sa Cagayan? aahhh...  Cagayan ang nasa Misamis Oriental, CDO is a municipality of the province of MO) 

On 1979, PIA granted CEPALCO a temporary authority to retail electric power to the industries operating within the PIE-MO. The Agreement executed by PIA and CEPALCO authorized CEPALCO "to operate, administer, construct and distribute electric power within the PHIVIDEC Industrial Estate, Misamis Oriental, such authority to be co-extensive with the territorial jurisdiction of PHIVIDEC Industrial Estate, as defined in Sec. 3 of P.D. No. 538 and shall be for a period of five (5) years, renewable for another five (5) years at the option of CEPALCO." 

So may infrastructure na  ang PIA and within the PIE-MO area kelangan nila ng kuryente and CEPALCO is the franchised so sino pa ba.. 

kaya lang may problema..

According to PIA, CEPALCO proved no match to the power demands of the industries in PIE-MO that most of these companies operating therein closed shop.

E siguro nagfaflactuate o kaya rasyon yun kuryente.. pag 6pm lang malakas pag di na ginagamit ng mga pabrika.. (I dunno, don't quote me on that I'm just inferring) tapos ang mahal-mahal pa.. so..

Impelled by a "desire to provide cheap power costs to power-intensive industries operating within the Estate," PIA applied with the National Power Corporation (NPC) for direct power connection which the latter in due course approved. One of the companies which entered into an agreement with the NPC for a direct sale and supply of power was the Ferrochrome Phils., Inc. (FPI).

So I think PIA entered into a MOA with FPI.. parang 'ikaw na mag apply GOCC ako eh wala sa charter ko yan.. basta I-directa mo lang saken lahat ng power supply' (hahaha gumawa ng storya).. 

Pasok ngayon si CEPALCO "p'taena nyo pinagkakaisahan nyo ako ah!!  Ako lang ang taga supply ng kuryete dito wala ng iba!!! sabi ng batas yan!!" (LOLs)

Contending that the said agreement violated its right as the authorized operator of an electric light and power system in the area and the national electrification policy, CEPALCO filed a petition for prohibition, mandamus and injunction before the QC-RTC against the NPC. Notwithstanding NPC's claim that it was authorized by its Charter to sell electric power "in bulk" to industrial enterprises.

Sabi ng NPC "Teka teka teka! may mandate ako ng batas na magbenta ah?"...

RTC rendered a decision favoring CEPALCO and restraining the NPC from supplying power directly to FPI upon the ground that such direct sale, supply and delivery of electric power by the NPC to FPI was violative of the rights of CEPALCO under its legislative franchise.

CA denied the appeal interposed by NPC on the ground that the statutory authority given to the NPC as regards direct supply of power to BOI-registered enterprises "should always be subordinate to the 'total-electrification-of-the-entire-country-on-an-area-coverage basis policy' enunciated in P. D. No. 40."


ISSUE

The principal and common question raised is whether or not the NPC may supply power directly to PIA through FPI in the PIE-MO area where CEPALCO has a franchise.

PIA  asserts that it may receive power directly from the NPC because it is a public utility. It avers that P.D. No. 538, as amended, empowers PIA "as and to be a public utility to operate and serve the power needs within PIE-MO, i.e., a specific area constituting a small portion of petitioner's franchise coverage," without, however, specifying the particular provision which so empowers PIA.

So in a way PIA is saying, "we are created as a public utility pursuant to P.D.  538, as such we may be regulated but  let's not forget here, we have a mandate to serve the public. Our application with NPC  for a direct power connection presupposes the need for us to execute our mandate which carry with it public interest." (don't quote me I just added that)

HELD

A "public utility" is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. The term implies public use and service.

Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary functions." Sec. 4 of P.D. No. 538 specifically confers upon it the following powers To operate, administer and manage the PHIVIDEC

Clearly then, the PIA is authorized to render indirect service to the public by its administration of the PHIVIDEC industrial areas like the PIE-MO and may, therefore, be considered a public utility. As it is expressly authorized by law to perform the functions of a public utility, a certificate of public convenience, as suggested by the Court of Appeals, is not necessary for it to avail of a direct power connection from the NPC. However, such authority to be a public utility may not be exercised in such a manner as to prejudice the rights of existing franchisees. In fact, by its actions, PIA recognized the rights of the franchisees in the area.

Yan kase.. unahan ba daw naunang naenfranchised... although I don't think this will prejudice CEPALCO. Exclusivity of any public franchise has not always been favored by the Court.  

and..

Clearly, NPC's assertion that its "authority to entertain and hear direct connection applications is a necessary incident of its express authority to sell electric power in bulk" is  baseless.  It is certainly irregular, if not downright anomalous for the NPC itself to determine whether it should supply power directly to the PIA or the industries within the PIE-MO. 

Yan kase.. unahan ba daw DOE, that's like usurping the powers of the Department of Energy and arrogating it unto itself.. 

Court said ...

It simply cannot arrogate unto itself the authority to exercise non-rate fixing powers which now devolves upon the Department of Energy and to hear and eventually grant itself the right to supply power in bulk.

Petitions of both camps respectively were DENIED. The Department of Energy was directed to conduct a hearing with utmost dispatch to determine whether it is the CEPALCO or the NPC, through the PIA, which should supply electric power to the industries in the PIE-MO.

So.. Yun ang decision ng SC.. it was remanned to an administrative body which is the Department of Energy to determine which has a better right. Di ko na sinundan don.. tingnan nyo na lang decisions ng DOE.

As far as this case is concern, the petitions of both parties (co'z take note these are consolidated cases if you take a close look at the actual case in the image inserted) were denied. 

Who wins?.. that's for you to find out. Tsk! ;)

OMICTIN vs. COURT OF APPEALS

This is a case of intra-corporate dispute. A scene typical mostly in the private sector. Like five or six men puts up a corporation, something comes up, and the gentlemen couldn't handle their differences. So apparently everything comes to a still, assets liquidated, business dissolved.

Well not obviously in this case since the intra-corporate dispute had transpired in its foreign parent company but the repercussions had somehow resulted a domino effect on the Filipino key players in this case sending another intra-corporate dispute locally. This case is bombarded with so many inter-locking issues. Well one is should we apply the doctrine of primary jurisdiction?

Actually just the dissolution of it's local branch alone made the whole damn thing hugely complicated. You see that's the usual question when a company is dissolved. Whose handling who or what, who or which faction has a better right. And usually contractual stipulations in agreements and provisions on its charter are disregarded and set aside.

BTW The inserted image is the actual case. Mejo nakakalito pero try to take note of the highlighted words. The yellow are the names of the important characters in this case so you could easily track them down.  The green highlighted words are the companies. 3 lang naman yan and all are just 1 company they call Saag Corporation (BHD) originating in Malaysia.

SAAG CORPORATION (BHD) - Malaysia

SAAG (S) PTE. LTD. - Singapore

SAAG PHILIPPINES, INC. - Philippines

If you browse the company in the web their now called SAAG Consolidated (M) Bhd. An industrial firm engaged in engineering, procurement, and commissioning of turbo machinery, rigs, and other equipment related to the oil and gas. I dunno but, this case may have been an offshoot of that internal dispute which consequently have changed the Saag name from Corporation to Consolidated. Sorry, that's far as the inside story I could infer from this case.  

So obviously they have already successfully made expansion to another Asian country which is Singapore. And in this particuar case they're caught making expansion in our local soil.

The root of the argument is the refusal of the return of two company cars, but that's just the tip of the ice-berg, there's a deeper strain to it. Everybody couldn't just get along.

This is a battle between two Filipino Operations Managers. One has risen as company president and then defunct, the other appointed temporarily.

Let's take a look and see what eventually happened.

FACTS

Petitioner VINCENT OMICTIN, Operations Manager Ad Interim (Ad Interim meaning temporary capacity) of Saag Phils., Inc., filed a complaint for two counts of ESTAFA with the Prosecutor's Office of the City of Makati against private respondent GEORGE LAGOS. Take note.. Lagos is the ex-Operations Manager. Omictin alleged in his criminal complaint that Lagos, despite repeated demands, refused to return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc..

Private respondent filed a motion to recuse praying that Presiding Judge REINATO QUILALA inhibit himself from hearing the case, based on the order of the presiding judge which 1.  summarily denied respondent’s motion to defer issuance of the warrant of arrest and that 2. immediately before the issuance of the above-mentioned order, the presiding judge and Atty. Alex Y. Tan, SAAG Philippines, Inc.’s Ad Interim President, were seen together.

This is what seems to be happening:

Actually before the institution of the criminal action, there was a pending proceeding with an administrative body. LAGOS earlier had filed with the SEC a petition for the declaration of nullity of the respective appointments of ALEX Y. TAN and petitioner OMICTIN  as President Ad Interim and Operations Manager Ad Interim of Saag Phils., Inc., Lagos averred that SAAG (S) PTE. LTD. is a foreign corporation organized and existing under the laws of Singapore, and is fully owned by SAAG CORPORATION (BHD).  LAGOS filed a motion to suspend this administrative body proceedings on the basis of a prejudicial question because of a pending petition with the SEC involving the same parties.

Here's what really happened:

Previously  LAGOS was appointed as Area Sales Manager in the Philippines by THIANG SHIANG HIANG, manager of the Singaporean based SAAG (S) PTE. LTD. And pursuant to his appointment, LAGOS was authorized to organize a local joint venture corporation to be known as SAAG PHILIPPINES, INC. for the wholesale trade and service of industrial products for oil, gas and power industries in the Philippines.

So clearly a joint venture agreement (JVA) between LAGOS and the Singaporean based SAAG (S) PTE. LTD through Thiang Shiang Hiang  started this whole thing.

SAAG PHILIPPINES, INC. was incorporated with SAAG (S) PTE. LTD. as the majority stockholder. Private respondent LAGOS was appointed to the board of directors, along with Rommel I. Lagos, Jose E. Geronimo, Gan Ching Lai and Thiang Shiang Hiang, (Take note: Gan & Thiang are stockholders to the Malaysian corp and key men in the Singaporean corp  Gan is the director, and Thiang the  Executive Director of SAAG (S) PTE. LTD.)  and was elected president of the domestic corporation.

Due to intra-corporate disputes, GAN and THIANG resigned and divested their shares in SAAG CORPORATION (BHD), thereby resulting in a change in the controlling interest in SAAG (S) PTE. LTD.

take note:

Barely 3 months after the Gan-Thiang incident, LAGOS resigned his post as president of SAAG PHILS., INC. while still retaining his position as a director of the company.

And there lies the controversy. 

LAGOS was retaining his position as a director of the company because According to him the joint venture agreement (JVA) between him or SAAG PHILS., INC. and SAAG (S) PTE. LTD. provided that should the controlling interest in the latter company, or its parent company SAAG CORP. (BHD), be acquired by any other person or entity without his prior consent, he has the option either to require the other stockholders to purchase his shares or to terminate the JVA and dissolve SAAG PHILS., INC. altogether. 

Thus, pursuant to this provision, since LAGOS did not give his consent as regards the transfer of shares made by Gan and Thiang, he made several requests to NICHOLAS NG, who replaced Gan as director, and JANIFER YEO, Executive Director of SAAG (S) PTE. LTD., to call for a board meeting in order to discuss implementation of the board resolution declaring dividends and the acquisition of his (LAGOS) shares by SAAG (S) PTE. LTD.;  and the dissolution of SAAG PHILS., INC.; and the termination of the JVA.

O nga naman. Iwanan ba ako sa ere? Porket nakuha nyo na shares nyo mga lintik na hinayupak kayo! 

Eto matinde..

NG and YEO failed to appear in the scheduled board meetings. And instead, they issued a letter appointing ALEX Y. TAN as President Ad Interim of SAAG PHILS., INC. Tan, in turn, appointed petitioner OMICTIN as the company’s Operations Manager Ad Interim.

And dun nagkagulu-gulo..

Citing as a reason the absence of a board resolution authorizing the continued operations of SAAG PHILS., INC., LAGOS  retained his possession of the office equipment of the company in a fiduciary capacity as director of the corporation pending its dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the locks of the offices of the company allegedly to prevent Tan and petitioner from seizing company property.

E kaya naman pala ayaw isurender pati yun 2 company car. Yan and Pinoy! Lumalaban. 

LAGOS stressed that TAN’s appointment was invalid because it was in derogation of the company by-laws requiring that the president must be chosen from among the directors, and elected by the affirmative vote of a majority of all the members of the board of directors. As Tan’s appointment did not have the acquiescence of the board of directors, PETITIONER’S APPOINTMENT BY THE FORMER IS LIKEWISE ALLEGEDLY INVALID. Thus, neither has the power or the authority to represent or act for SAAG PHILS., Inc. in any transaction or action before the SEC or any court of justice.

Here's the 2 main point argument of petitioner OMICTIN in this case:

1. The action before the SEC and the criminal case before the trial court do not involve any prejudicial question.13 SEC Case No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte. Ltd., the appointment of a receiver, the distribution of profits, and the authority of petitioner and Tan to represent Saag Phils., Inc. The entity which is being sued is Saag (S) Pte. Ltd., a foreign corporation over which the SEC has yet to acquire jurisdiction. Hence, any decision that may be rendered in the SEC case will neither be determinative of the innocence or guilt of the accused nor bind Saag Phils., Inc. because the same was not made a party to the action even if the former is its holding corporation;

2. Saag Phils., Inc. has a separate corporate existence and is to be treated as a separate entity from its holding or parent company, Saag (S) Pte. Ltd. The mere fact that one or more corporations are owned or controlled by the same or single stockholder is not a sufficient ground for disregarding separate corporate personalities;

RTC denied LAGOS’ motion to suspend proceedings and motion to recuse. 

LAGOS therefore filed with the CA a petition for certiorari assailing the aforesaid orders. CA modified the RTC ruling and GRANTED LAGOS’ motion to suspend proceedings because A PREJUDICIAL QUESTION EXISTS IN THE SEC CASE. BUT the denial of the motion to recuse was AFFIRMED.

Petitioner OMICTIN  question the CA decision alleging grave abuse of discretion amounting to lack or excess of jurisdiction and elevates the case to the Supreme Court.

ISSUE

1. WAS THERE REALLY  A PREJUDICIAL QUESTION EXISTING IN THE SEC CASE FILED BY PRIVATE RESPONDENT AGAINST SAAG (S) PTE. LTD., A FOREIGN CORPORATION, 

2. ALTHOUGH THE PRIVATE COMPLAINANT IN THE CRIMINAL CASE FOR ESTAFA (WHERE PRIVATE RESPONDENT IS THE ACCUSED THEREIN) IS ACTUALLY SAAG PHILIPPINES, INC. A DOMESTIC CORPORATION WITH A SEPARATE JURIDICAL PERSONALITY OF ITS OWN AND WHICH IS NOT EVEN A PARTY IN THE SEC CASE

HELD

A prejudicial question is defined as that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another tribunal. Here, the case which was lodged originally before the SEC and which is now pending before the RTC of Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately related to those upon which the criminal prosecution is based.

Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt or innocence of private respondent in the crime of estafa filed against him by petitioner before the RTC of Makati. As correctly stated by the CA, one of the elements of the crime of estafa with abuse of confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended party to the offender:

The elements of Estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as follows:
1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return the same;
2. That there be misrepresentation or conversion of such money or property by the offender, or denial on his part of such receipt;
3. That such misappropriation or conversion or denial is to the prejudice of another; and
4. That there is a demand made by the offended party to the offender.

Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity of the demand for the delivery of the subject vehicles rests upon the authority of the person making such a demand on the company’s behalf. Private respondent is challenging petitioner’s authority to act for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong. 

Taken in this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever made, hence, the prosecution for estafa cannot prosper.

Moreover, the mere failure to return the thing received for safekeeping or on commission, or for administration, or under any other obligation involving the duty to deliver or to return the same or deliver the value thereof to the owner could only give rise to a civil action and does not constitute the crime of estafa.  This is because the crime is committed by misappropriating or converting money or goods received by the offender under a lawful transaction.

As stated in the case of United States v. Bleibel: 

The crime of estafa is not committed by the failure to return the things received for sale on commission, or to deliver their value, but, as this class of crime is defined by law, by misappropriating or converting the money or goods received on commission. Delay in the fulfillment of a commission or in the delivery of the sum on such account received only involves civil liability. So long as the money that a person is under obligation to deliver is not demanded of him, and he fails to deliver it for having wrongfully disposed of it, there is no estafa, whatever be the cause of the debt.

I know it's applicable but wag na tayo pumunta sa Doctrine of Primary Jurisdiction in this case okay? Corpo aspect lang tayo, and whether the criminal suit has basis.

So in view of the foregoing, the Court finds no substantial basis in petitioner’s contention that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction. 

So the petition was DISMISSED. The CA decision and resolution was AFFIRMED.

Lagos wins this case.

ASJ CORPORATION and ANTONIO SAN JUAN vs. SPS. EVANGELISTA

My neph accidentally left his e-cigarette in the cab the other day. That thing cost roughly around 8 thousand bucks so I got bit alarmed.

Called me up and told me what happened. I said "Did you get the plate number?" "I did tito" "The cab name?" "Yup" "GOOD THINKING. Text me the details I'll take it from here". So... the next 5 minutes I was hunting down the damn cab line's address driving down the road listening to the 'ever dependable traffic router and accurately gas consuming' lady of Waze. (but geez.. if I could get an app voice that changes it to the butler Alfred or C3Po I would... 'I believe you have to turn right Master Bruce'... or 'In about 200 meters turn right Luke.... t..t.. I said turn right... right... turn right you neencumpoop!!' LOL). 

Got there talked to the office peeps, took it and shook hands.. not much explaining to do, happened that my neph was already communicating with them beforehand before I reached them people. That's my boy! Tsk.. my neph really knows what to do.

About 3 minutes I was checkin' the damn thing. I didn't know my neph got such exquisite taste he's usually hiphop look at the Versace mark. But my question is how on earth can this thing be so cool when a stick of cigarette is way much cooler to look at between a man's mouth and fingers.

Within in 10 minutes I was parked at an SM lot smoking the damn thing.  "Geez.. this is cool" They even got pandan flavor. And without a doubt the thing looks really good in your hand when you're just chilling out in Starbucks... or whut? Starbooks?  I better get one of these! :)

Anyway. Let's get back to the cases. This is another Corporation Law case. Let's get back to the Doctrine of Piercing the Veil of Corporate Fiction. I like the sound of it. And since we started talking about 'porma' lets talk about chicks.

OVERVIEW:

WHAT ARE THE PROBATIVE FACTORS OF IDENTITY IN JUSTIFYING THE APPLICATION OF THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE  FICTION 

FACTS:

Respondents, Spouses EVANGELISTA runs a poultry business called R.M. Sy Chicks. It’s a large-scale business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg by-products in Bulacan and Nueva Ecija. 

They availed of the hatchery services of petitioner ASJ CORP. for the incubation and hatching of these eggs.  respondents a corporation duly registered in the name of Antonio San Juan and his family.

So Respondents delivered to Petitioners various quantities of eggs at an agreed service fee of 80 centavos per egg, hatched or not. Each delivery was reflected in a Setting Report indicating the records. Service fees were paid upon release of the eggs and by-products to respondents. 

But as  business went along, respondents Evangelista occurred delays on payments which were tolerated by San Juan, who just carried over the balance, in keeping of goodwill with respondents.

Here’s where it all started.

Respondent Evangelista went to the hatchery to pick up the chicks and by-products covered by Setting Report No. 108, but San Juan REFUSED TO RELEASE the same due to respondents failure to settle accrued service fees on several setting reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial payment for the accrued service fees.

A lien now is being enforced. 

Evangelista returned to the hatchery to pick up the chicks and by-products covered by Setting Report No. 109, but San Juan again refused to release the same unless respondents fully settle their accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and by-products. She explained that she was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted on the full settlement of respondents accounts before releasing the chicks and by-products. 

Now here’s what aggravated it.

Believing firmly that the total value of the eggs delivered was more than sufficient to cover the outstanding balance, Evangeista promised to settle their accounts only upon proper accounting by San Juan. San Juan disliked the idea and threatened to impound their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with him.

Wait, there’s more.

Respondents directed their errand boy, to pick up the chicks and by-products covered by Setting Report No. 110 and also to ascertain if San Juan was still willing to settle amicably their differences. Unfortunately, San Juan was firm in his refusal and reiterated his threats on respondents. Fearing San Juan’s threats, respondents never went back to the hatchery.

The parties tried to settle amicably their differences before police authorities, but to no avail. 

So now we’re faced with Evangelista filing with the RTC an action for damages based on PETITIONERS RETENTION OF THE CHICKS AND BY-PRODUCTS COVERED BY SETTING REPORT NOS. 108 TO 113 which ruled in favor of Evangelista and made the following findings: 

(1) as of Setting Report No. 107, respondents owed petitionersP102,336.80;

(2) petitioners withheld the release of the chicks and by-products covered by Setting Report Nos. 108-113; and

(3) the retention of the chicks and by-products was unjustified and accompanied by threats and intimidations on respondents.

The RTC DISREGARDED THE CORPORATE FICTION OF ASJ CORP., and held it and San Juan solidarily liable to respondents for actual & moral damages, & attorneys fees, plus interests and costs of suit.  

Both parties appealed to CA. Respondents prayed for an additional actual damages for the cost of other unreturned by-products and another amount as unrealized profits, while petitioners prayed for the reversal of the trial courts entire decision.

CA denied both appeals for lack of merit and affirmed the RTC decision, with the slight modification of including an award of exemplary damages in favor of respondents.

CA applying the DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION, considered ASJ Corp. and San Juan as one entity, after finding that there was no bona fide intention to treat the corporation as separate and distinct from San Juan and his wife Iluminada.  

  

ISSUE:  

First, Did CA err when it PIERCED THE VEIL OF CORPORATE FICTION and held ASJ Corp. and Antonio San Juan as one entity? 

Second, was it proper to hold petitioners solidarily liable to respondents for the payment of P529,644.80 and other damages?

RULING:

(First) The first set is factual. Petitioners seek to establish a set of facts contrary to the factual findings of the trial and appellate courts. However, as well established in our jurisprudence, only errors of law are reviewable by this Court in a petition for review under Rule 45. The trial court, having had the opportunity to personally observe and analyze the demeanor of the witnesses while testifying, is in a better position to pass judgment on their credibility. More importantly, factual findings of the trial court, when amply supported by evidence on record and affirmed by the appellate court, are binding upon this Court and will not be disturbed on appeal. While there are exceptional circumstances when these findings may be set aside, none of them is present in this case.

Furthermore, although no hard and fast rule can be accurately laid down under which the juridical personality of a corporate entity may be disregarded.

THE FOLLOWING PROBATIVE FACTORS OF IDENTITY JUSTIFY THE APPLICATION OF THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION IN THIS CASE: 

(1) San Juan and his wife own the bulk of shares of ASJ Corp.; 

(2) The lot where the hatchery plant is located is owned by the San Juan spouses; 

(3) ASJ Corp. had no other properties or assets, except for the hatchery plant and the lot where it is located; 

(4) San Juan is in complete control of the corporation; 

(5) There is no bona fide intention to treat ASJ Corp. as a different entity from San Juan; and 

(6) The corporate fiction of ASJ Corp. was used by San Juan to insulate himself from the legitimate claims of respondents, defeat public convenience, justify wrong, defend crime, and evade a corporations subsidiary liability for damages. 

These findings, being purely one of fact, should be respected. We need not assess and evaluate the evidence all over again where the findings of both courts on these matters coincide.

(Second) On the second set of issues, petitioners contend that the retention was justified and did not constitute an abuse of rights since it was respondents who failed to comply with their obligation. Respondents, for their part, aver that all the elements on abuse of rights were present. They further state that despite their offer to partially satisfy the accrued service fees, and the fact that the value of the chicks and by-products was more than sufficient to cover their unpaid obligations, petitioners still chose to withhold the delivery.

The crux of the controversy, in our considered view, is simple enough. WAS PETITIONERS RETENTION OF THE CHICKS AND BY-PRODUCTS ON ACCOUNT OF RESPONDENTS FAILURE TO PAY THE CORRESPONDING SERVICE FEES UNJUSTIFIED?

While the trial and appellate courts had the same decisions on the matter, suffice it to say that a modification is proper.

Worth stressing, petitioners act of withholding the chicks and by-products is entirely different from petitioners unjustifiable acts of threatening respondents.

THE RETENTION HAD LEGAL BASIS; THE THREATS HAD NONE.

PEOPLE'S AIRCARGO AND WAREHOUSING CO. INC. VS. COURT OF APPEALS

14 of Feb.. what can we post?.. except a case :) This is not social media please. BTW, don't bother to click the pic to read. It's the same baloney! :D Happy Valentines guys! Enjoy the dinners.

FACTS: 

People's Aircargo and Warehousing Co. Inc. (PAWCI) is a domestic corporation,  organized in  1986 to operate a customs bonded warehouse at the old Manila International Airport in Pasay City. 

Now, to obtain a license for the corporation from the Bureau of Customs, ANTONIO PUNSALAN JR., the corporation president, solicited a proposal from STEFANI SAÑO for the preparation of a feasibility study. Saño submitted a letter of proposal   ("First Contract") to Punsalan, for the project feasibility study (market, technical, and financial feasibility) and preparation of pertinent documentation requirements for the application, worth P350,000. 

Initially, Cheng Yong, the majority stockholder of PAWCI, objected to Saño's offer, as another company priced a similar proposal at only P15,000. However, Punsalan preferred Saño's services because of the latter's membership in the task force, which was supervising the transition of the Bureau of Customs from the Marcos government to the Aquino Administration.   PAWCI, through Punsalan, sent Saño a letter confirming their agreement. Accordingly, Saño prepared a feasibility study for PAWCI which eventually paid him the balance of the contract price. 

Upon Punsalan's request, Saño sent PAWCI another letter-proposal ("Second Contract") formalizing its proposal for consultancy services in the amount of P400,000. ANDY VILLACEREN, vice president of PAWCI, received the operations manual prepared by Saño. PAWCI submitted said operations manual to the Bureau of Customs in connection with the former's application to operate a bonded warehouse where thereafter, the Bureau issued to it a license to operate, enabling it to become one of the three public customs bonded warehouses at the international airport. Saño also conducted, in the warehouse of PAWCI, a three-day training seminar for the latter's employees. 

Thereafter, Saño joined the Bureau of Customs as special assistant to then Commissioner ALEX PADILLA, a position he held until he became technical assistant to then Commissioner MIRIAM DEFENSOR-SANTIAGO.

Meanwhile, Punsalan sold his shares in PAWCI and resigned as its president in 1987. 

 Saño thereupon, filed a collection suit against PAWCI. He alleged that he had prepared an operations manual for PAWCI, conducted a seminar-workshop for its employees and delivered to it a computer program; but that, despite demand, PAWCI refused to pay him for his services. 

PAWCI, in its answer, denied that Saño had prepared an operations manual and a computer program or conducted a seminar-workshop for its employees. It further alleged that THE LETTER-AGREEMENT WAS SIGNED BY PUNSALAN WITHOUT AUTHORITY, IN COLLUSION WITH SAÑO in order to unlawfully get some money from PAWCI, and despite his knowledge that a group of employees of the company had been commissioned by the board of directors to prepare an operations manual. 

RTC of Pasay City rendered a Decision declaring the Second Contract unenforceable or simulated. However, since Saño had actually prepared the operations manual and conducted a training seminar for PAWCI and its employees, the trial court awarded P60,000 to the former, on the ground that no one should be unjustly enriched at the expense of another (Article 2142, Civil Code). The trial Court determined the amount "in light of the evidence presented by defendant on the usual charges made by a leading consultancy firm on similar services." 

Upon appeal,  the appellate court modified the decision of the trial court, and declared the Second Contract valid and binding on PAWCI, which was held liable to Saño in the full amount of P400,000, representing payment of Saño services in preparing the manual of operations and in the conduct of a seminar for PAWCI. 

PAWCI filed the Petition for Review. 

ISSUE: 

Whether a single instance where the corporation had previously allowed its president to enter into a contract with another without a board resolution expressly authorizing him, has clothed its president with apparent authority to execute the subject contract. 

RULING: 

APPARENT AUTHORITY is derived not merely from practice. Its existence may be ascertained through 

(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 apparent authority to act in general, with which it clothes him; or 

(2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. 

It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties. 

It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer with the power to bind the corporation. 

What happened here is that PAWCI, through its president Antonio Punsalan Jr., entered into the First Contract without first securing board approval. Despite such lack of board approval, PAWCI DID NOT OBJECT TO OR REPUDIATE SAID CONTRACT, THUS "CLOTHING" ITS PRESIDENT WITH THE POWER TO BIND THE CORPORATION.  The grant of apparent authority to Punsalan is evident in the testimony of Yong — senior vice president, treasurer and major stockholder of PAWCI. 

The First Contract was consummated, implemented and paid without a hitch. Hence, Sano should not be faulted for believing that Punsalan's conformity to the contract in dispute was also binding on petitioner. IT IS FAMILIAR DOCTRINE THAT IF A CORPORATION KNOWINGLY PERMITS ONE OF ITS OFFICERS, OR ANY OTHER AGENT, TO ACT WITHIN THE SCOPE OF AN APPARENT AUTHORITY, IT HOLDS HIM OUT TO THE PUBLIC AS POSSESSING THE POWER TO DO THOSE ACTS; AND THUS, THE CORPORATION WILL, AS AGAINST  ANYONE WHO HAS IN GOOD FAITH DEALT WITH IT THROUGH SUCH AGENT, BE ESTOPPED FROM DENYING THE AGENT'S AUTHORITY. 

Furthermore, Saño prepared an operations manual and conducted a seminar for the employees of PAWCI in accordance with their contract. PAWCI accepted the operations manual, submitted it to the Bureau of Customs and allowed the seminar for its employees. AS A RESULT OF ITS AFOREMENTIONED ACTIONS, PAWCI WAS GIVEN BY THE BUREAU OF CUSTOMS A LICENSE TO OPERATE A BONDED WAREHOUSE. 

Granting arguendo then that the Second Contract was outside the usual powers of the president, PAWCI'S RATIFICATION OF SAID CONTRACT AND ACCEPTANCE OF BENEFITS HAVE MADE IT BINDING, NONETHELESS. The enforceability of contracts under Article 1403(2) is ratified "by the acceptance of benefits under them" under Article 1405.

TUPAZ vs. COURT OF APPEALS (2001)

Signing as corporate representative, can it hold you personally liable for the debt you are signing for in behalf of the company in a commercial credit transaction? Not if it's stipulated.

Facts: 

Jose C. Tupaz IV - VP for Operations and Petronila C. Tupaz  -VP/Treasurer of EL ORO Engraver Corporation, entered into a contract with the AFP - Armed Forces Of The Philippines  to supply the latter with “survival bolos.”  

To finance the purchase of the raw materials for the bolos, Jose Tupaz and Petronila Tupaz on behalf of EL ORO Corporation, applied with respondent bank BPI - Bank of the Philippine Islands  for 2 commercial Letters of Credit.  The LCs were in favor of El Oro Corporation’s suppliers, TANCHAOCO Manufacturing Incorporated. 

Simultaneous with the issuance of the LCs, the 2 Tupazes (sama yata pakinggan) Jose Tupaz and Petronila Tupaz.. ,(okay) petitioners hereto signed TRUST RECEIPTS in favor of respondent bank BPI.  

Now here comes the issue. Jose C. Tupaz IV  signed, in his personal capacity, a trust receipt corresponding to a Letter of Credit for P564,871.  

The problem was, petitioners did not comply with their undertaking under the TRUST RECEIPTS. Respondent bank naturally made several demands for payments but EL ORO Corporation made partial payments only. 

So as a consequence, respondent bank BPI sent final demand letters to EL ORO Corporation where EL ORO replied that it could not fully pay its debt because the AFP (Armed Forces of the Philippines) had delayed paying for the survival bolos. (in short, naipit sya)

Issue: 

Did Petitioners herein stated bind themselves personally with regard to the company debt herein described when they signed the Trust Receipts?

Held: 

NO.

A CORPORATE REPRESENTATIVE signing as a solidary guarantee as corporate representative did not undertake to guarantee personally the payment of the corporation’s debts. 

In the aforementioned trust receipt, petitioners signed below its clause as officers of El Oro Corporation. Thus, under petitioner Petronila Tupaz’s signature are the words “Vice-Pres–Treasurer” and under petitioner Jose Tupaz’s signature are the words “Vice-Pres–Operations.” By so signing that trust receipt, PETITIONERS DID NOT BIND THEMSELVES PERSONALLY LIABLE FOR EL ORO CORPORATION’S OBLIGATION. 

In Ong v. Court of Appeals, a corporate representative signed a solidary guarantee clause in two trust receipts in his capacity as corporate representative. There, the Court held that the corporate representative did not undertake to guarantee personally the payment of the corporation’s debts.

A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent. 

(exception)

As an exception, directors or officers are personally liable for the corporation’s debts only if they so contractually agree or stipulate.

The 'Tupazes' won this case.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs. CA & FIRESTONE

FACTS:

(Let's digest quick.. I have a class today)

Petitioner NDC (National Development Corp.)  a GOCC owned & had in its disposal a 10 hectar property  which is the NDC Compound.  

A portion of which was leased to private respondent FIRESTONE CORPORATION for ceramic manufacturing business. Both parties entered into a contract of lease for a term of 10 years renewable for another 10 years. Firestone built several warehouses and facilities therein. 

Prior to the expiration of the said lease contract, Firestone wrote NDC requesting for an extension of their lease agreement. Since business between NDC and FIRESTONE went smooth, the lease was twice renewed, this time conferring upon Firestone an express grant the first option to purchase the leased premise in the event that NDC decided to dispose and sell the properties including the lot. So Firestone now has the right of first refusal. 

Eventually though, a Memorandum Order No. 214 was issued by then President Corazon Aquino ordering the transfer of the whole NDC compound to the National Government.  The order of conveyance would automatically result in the cancellation of NDC's total obligation in favor of the National Government. The memorandum order was in consideration of NDC’s P57M debt. 

And so, pursuant thereto, NDC had no choice but to transfer the property to Polytechnic University of the Philippines, another GOCC, and in need of expansion.  

Firestone therefore instituted an action for specific performance to compel NDC to sell the leased property in its favor. 

ISSUE:

Whether or not there is a valid sale between NDC and PUP. 

The answer is: WELL YES, BUT...

RULING:

All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor.

1. consent is manifested by the Memo Order No. 214, 

2. the subject matter was the property subject of the dispute.

3. the cancellation of liabilities constituted consideration

But the argument of PUP and NDC was untenable.  GOCCs have personalities separate and distinct from the government. “Sale” brings within its grasp the whole gamut of transfers where ownership of a thing is ceded for consideration.  

Since a sale was involved, the right of first refusal in favor of Firestone must be respected. It forms an integral part of the lease and is supported by consideration—Firestone having made substantial investments therein. 

Only when Firestone fails to exercise such right may the sale to PUP proceed.

So here we see that GOCCs even though ‘government owned & controlled’ has a personality of its own distinct and separate from that of the government. 

And the intervention in a transaction of the Office of the President thru the Executive Secretary DOES NOT CHANGE THE INDEPENDENT EXISTENCE of a government entity as it deals with another government entity. 

VILLA REY TRANSIT vs. FERRER

This is a corporation law case. A fraud piercing case with an alter-ego issue. No not the Batman-Bruce Wayne type. And 'fraud piercing' meaning, in order to get into the bottom of it all and expose the corporate fraud the court decides to pierce its veil of corporate fiction of what it seems to be. 

Question: Is the DOCTRINE THAT A CORPORATION IS A LEGAL ENTITY DISTINCT AND SEPARATE FROM THE MEMBERS AND STOCKHOLDERS A hard fast rule? Well not all the time. 

It's kinda bit complicated when you read this case. But here's what's its all about. It's all about FOUR CONTRACTS OF SALE:

1. Villarama → PANTRANCO (Conditional Sale - 2 Certificates)

2. CORPORATION ← Fernando  ( 5 Certificates)

3. SHERIFF  → Ferrer  (Public Bidding - 2 Certificates)

4. Ferrer → PANTRANCO (Subsequent Sale - 2 Certificates)

Just pay attention to the first one, co'z the crux of this case lies in  it. Let me give you an overview of this case:

Jose Villarama was a bus operator, under the business name of Villa Rey Transit. He  operated 32 bus units on various route lines from Pangasinan to Manila, vice-versa, by virtue of 2 certificates of public convenience granted him by the Public Service Commission (PSC). 

Now, he sold the 2 certificates of public convenience to the Pangasinan Transportation Company, Inc. (PANTRANCO), for P350 grand. PANTRANCO? remember? Fisherman's Mall? (NOW TAKE NOTE) this is a conditional sale with a stipulated condition that the seller (Villarama) "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or competing with the buyer." This simply means NO COMPETITION WITH BUYER FOR 10 YEARS. 

But barely 3 months thereafter, a corporation called VILLA REY TRANSIT INC. (let's call this 'the Corporation' as differentiated from the previous Villa Rey Transit ) was organized with a capital stock of P500,000.00 where Natividad Villarama (wife of JoseVillarama) was one of the incorporators other than the brother and sister-in-law of Jose Villarama.

And in less than a month after its registration with the SEC the Corporation,   bought 5 certificates of public convenience, 49 buses, tools and equipment from one Valentin Fernando, for the sum of P249 grand.  Wow. So there you go, sold at high bought at low. The guy really knows what he's doing. 

So, the very same day the contract of sale was executed, the parties to the sale immediately applied with the PSC for approval of the sale coupled with a permit to operate provisionally while the case is pending. (Q: Why approval of the sale? A: Because public transport involves public interest therefore the government must come in to regulate)

 But before PSC could take final action on said application for approval, however, the Sheriff of Manila, pursuant to a writ of execution issued by the CFI of Pangasinan, levied on 2 of the 5 certificates of public convenience  in favor of Eusebio Ferrer (respondent in this case) against Valentin Fernando (vendor of 5 certificates). So.. simply, the 2 of 5 certificates sold by Fernando to the Corporation was under litigation in a pending case which was newly decided and now executed. (Bummer huh? Too bad for Villarama). 

So consequently the Sheriff conducted a public sale for the said 2 certificates of public convenience. And Ferrer was the highest bidder, therefore a certificate of sale was issued in his name.

And here's what Ferrer did. He sold the 2 certificates of public convenience to none other than PANTRANCO. 

So.. nagsabay ngayon... the applications for approval of sale, filed before the PSC, by Fernando and the Corporation,  for the supposed 5 certificates  and that of Ferrer and Pantranco, for the subsequent 2 certificate sale, and both were scheduled for a joint hearing. 

And here's what irked Villarama. In the meantime during the pendency of the case the PSC issued an order disposing that  before a final resolution on the aforesaid applications, PANTRANCO shall be the one to operate provisionally the service under the two certificates embraced in the contract between Ferrer and Pantranco.

The Corporation took issue with this particular ruling of the PSC and elevated the matter to the Supreme Court, which decreed, that until the issue on the ownership of the disputed certificates shall have been finally settled by the proper court, the CORPORATION should be the one to operate the lines provisionally.

So the PSC was pro-PANTRANCO and the SC was pro-CORPORATION.

Now to get an upper-hand on this case, the Corporation filed in the CFI of Manila, a complaint praying for the annulment of the :

1. sheriff's sale of the aforesaid two certificates of public convenience in favor of Ferrer,

2. the subsequent sale thereof by the latter to Pantranco.

3. that all the orders of the PSC relative to the parties' dispute over the said certificates

And BOOM! The CFI of Manila declared the sheriff's sale of two certificates of public convenience in favor of Ferrer and the subsequent sale thereof by the latter to Pantranco NULL AND VOID; declared the Corporation to be the lawful owner of the said certificates of public convenience; and ordered Ferrer and Pantranco, jointly and severally, to pay the Corporation, the sum of P5,000.00 as and for attorney's fees. 

The case against the PSC was dismissed. All parties appealed. And PANTRANCO rested it's defense on the very first contract of sale zeroing in on the 10 year prescriptive period of competition between vendor and vendee stipulated in the very first conditional sale, assailing the DISTINCT AND SEPARATE PERSONALITY and therefore LIMITED LIABILITY of  the members and stockholders of the corporation from the corporation it self, since the seller of the 2 certificates in the conditional sale are one and the same with their competitor CORPORATION (Villa Rey Transit Inc.)

So clearly this is an alter-ego issue. And Villarama committed fraud by creating another company which is merely a fictional corporation in order to evade the 10 year prescriptive period stipulated in the conditional sale.   

Issue:

Whether the stipulation, "SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE DATE OF THIS SALE, APPLY FOR ANY TPU SERVICE IDENTICAL OR COMPETING WITH THE BUYER" in the contract between Villarama and Pantranco, binds the Corporation (the Villa Rey Transit, Inc.).

Held:  

The court answered YES. And therefore PIERCED THE VEIL OF CORPORATE FICTION. 

1. Villarama supplied the organization expenses and the assets of the Corporation, where he himself made use of the money of the Corporation and deposited them to his private accounts. The Corporation furthermore paid his personal accounts. 

Villarama himself admitted that HE MINGLED THE CORPORATE FUNDS WITH HIS OWN MONEY. These circumstances are strong persuasive evidence showing that Villarama has been too much involved in the affairs of the Corporation to altogether negative the claim that he was only a part-time general manager.

2. They show beyond doubt that the Corporation is his alter ego. The interference of Villarama in the complex affairs of the corporation, and particularly its finances, are much too inconsistent with the ends and purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities from corporate undertakings.

3.  It is the very essence of incorporation that the acts and conduct of the corporation be carried out in its own corporate name because it has its own personality. The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in all cases which are within reason and the law.

4. 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.

5. Hence, the Villa Rey Transit, Inc. is an alter ego of Jose Villarama, and that the restrictive clause in the contract entered into by the latter and Pantranco is also enforceable and binding against the said Corporation.