Bataan Shipyard Engineering Co., Inc. vs. PCGG (G.R. No. 75885 May 27, 1987)
Facts: Challenged in this special civil action of certiorari and prohibition by a private corporation known as the Bataan Shipyard and Engineering Co., Inc. are: (1) Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino on February 28, 1986 and March 12, 1986, respectively, and (2) the sequestration, takeover, and other orders issued, and acts done, in accordance with said executive orders by the Presidential Commission on Good Government and/or its Commissioners and agents, affecting said corporation. The sequestration order issued on April 14, 1986 was addressed to three of the agents of the Commission, ordering them to sequester several companies among which is Bataan Shipyard and Engineering Co., Inc. On the strength of the above sequestration order, several letters were sent to BASECO among which is that from Mr. Jose M. Balde, acting for the PCGG, addressed a letter dated April 18, 1986 to the President and other officers of petitioner firm, reiterating an earlier request for the production of certain documents. The letter closed with the warning that if the documents were not submitted within five days, the officers would be cited for "contempt in pursuance with Presidential Executive Order Nos. 1 and 2." BASECO contends that its right against self incrimination and unreasonable searches and seizures had been transgressed by the Order of April 18, 1986 which required it "to produce corporate records from 1973 to 1986 under pain of contempt of the Commission if it fails to do so." BASECO prays that the Court 1) declare unconstitutional and void Executive Orders Numbered 1 and 2; 2) annul the sequestration order dated April- 14, 1986, and all other orders subsequently issued and acts done on the basis thereof, inclusive of the takeover order of July 14, 1986 and the termination of the services of the BASECO executives.
Issue: Whether or not BASECO’s right against self-incrimination and unreasonable searches and seizures was violated.
Ruling: No. The order to produce documents was issued upon the authority of Section 3 (e) of Executive Order No. 1, treating of the PCGG's power to "issue subpoenas requiring * * the production of such books, papers, contracts, records, statements of accounts and other documents as may be material to the investigation conducted by the Commission. It is elementary that the right against self-incrimination has no application to juridical persons. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges. Corporations are not entitled to all of the constitutional protections, which private individuals have. They are not at all within the privilege against self-incrimination; although this court more than once has said that the privilege runs very closely with the 4th Amendment's Search and Seizure provisions. It is also settled that an officer of the company cannot refuse to produce its records in its possession upon the plea that they will either incriminate him or may incriminate it." The corporation is a creature of the state. It
is presumed to be incorporated for the benefit of the public. It received certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. It’s powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserve right in the legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the corporation which is charged with a criminal violation of the statute may plead the criminality of such corporation as a refusal to produce its books. To state this proposition is to answer it. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises may refuse to show its hand when charged with an abuse of such privileges. (Wilson v. United States, 55 Law Ed., 771, 780 [emphasis, the Solicitor General's]) The constitutional safeguard against unreasonable searches and seizures finds no application to the case at bar either. There has been no search undertaken by any agent or representative of the PCGG, and of course no seizure on the occasion thereof.
Firme vs Bukal Enterprises and Dev. Corp
414 SCRA 190 (2003)
This is a petition for review on certiorari of the Decision dated 3 January 2001 of the Court of Appeals in CA-G.R. CV No. 60747. The Court of Appeals reversed the Decision of the Regional Trial Court, Branch 223, Quezon City
Facts : Petitioner Spouses Constante and Azucena Firme ("Spouses Firme") are the
registered owners of a parcel of land ("Property") located on Dahlia Avenue, Fairview Park, Quezon City. Renato de Castro ("De Castro"), the vice president of Bukal Enterprises and Development Corporation ("Bukal Enterprises") authorized his friend, Teodoro Aviles ("Aviles"), a broker, to negotiate with the Spouses Firme for the purchase of the Property. Bukal Enterprises filed a complaint for specific performance and damages with the trial court and asked the trial court to order the Spouses Firme to execute the deed of sale and to deliver the title to the Property to Bukal Enterprises upon payment of the agreed purchase price.
Aviles , one of the witnesses, testified that he was authorized to represent Bukal Enterprises and he presented a draft of the Deed of Sale to the petitioners but such draft is rejected due to several objectionable conditions, including the payment of capital gains and other government taxes by the seller and the relocation of the squatters at the seller’s expense. Allegedly the petitioners accepted the second draft upon the deletion of the objectionable conditions and agreed that payment would be made at the Far East Bank and Trust Company ("FEBTC"), Padre Faura Branch, Manila. However, the scheduled payment had to be postponed due to problems in the transfer of funds and after that the spouses informed Aviles that they were no longer interested in selling the Property.Bukal Enterprises then filed a complaint for specific performance and damages.
On the other hand, Dr. Constante Firme ("Dr. Firme") was the sole witness for the defendant, testified that on 30 January 1995, he and his wife met with Aviles at the Aristocrat Restaurant in Quezon City. Aviles arranged the meeting with the Spouses Firme involving their Property in Fairview. Aviles offered to buy the Property at P2,500 per square meter. The Spouses Firme did not accept the offer because they were reserving the Property for their children. On 6 February 1995, the Spouses Firme met again with Aviles upon the latter’s insistence. Aviles showed the Spouses Firme a copy of a draft deed of sale ("Third Draft") which Aviles prepared.
Spouses Firme did not accept the Third Draft because they found its provisions one-sided. The Spouses Firme particularly opposed the provision on the delivery of the Property’s title to Bukal Enterprises for the latter to obtain a loan from the bank and use the proceeds to pay for the Property. The Spouses Firme repeatedly told Aviles that the Property was not for sale when Aviles called on 2 and 4 March 1995 regarding the Property. Upon visit in their property, the spouses saw that there are already improvements made and the squatters vacated the premises.
On 22 March 1995, the Spouses Firme received a letter dated 7 March 1995 from Bukal Enterprises demanding that they sell the Property and on 7 August 1998, the trial court rendered judgment against Bukal Enterprises dissmissing the complaint.
Bukal Enterprises appealed to the Court of Appeals, which reversed and set aside the decision of the trial court.
Issue: Whether there is a perfected sale?if so is it valid despite there is a lack of
authorization from the Board of Directors?
Ruling: The Supreme Court ruled that there is no perfected contract of sale. Records
indubitably show that there was no consent on the part of the Spouses Firme. Spouses Firme found the terms and conditions unacceptable and told Aviles that they would not sell the property. De Castro also admitted that he was aware of the Spouses Firme’s refusal to sell the Property. The confusing testimony of Aviles taken together with De Castro’s admission that he was aware of the Spouses Firme’s refusal to sell the Property reinforces Dr. Firme’s testimony that he and his wife never consented to sell the Property. The
essence of consent is the conformity of the parties on the terms of the contract, the acceptance by one of the offer made by the other. The contract to sell is a bilateral
contract. Where there is merely an offer by one party, without the acceptance of the other, there is no consent. Assuming there is a valid sale, there was no approval from the Board of Directors of Bukal Enterprises as would finalize any transaction with the Spouses Firme. Aviles did not have the proper authority to negotiate for Bukal Enterprises. Aviles testified that his friend, De Castro, had asked him to negotiate with the Spouses Firme to buy the Property. However, there is no Board Resolution authorizing Aviles to negotiate and purchase the Property on behalf of Bukal Enterprises. It is the board of directors or trustees which exercises almost all the corporate powers in a corporation. The Corporation Code provides :
SEC. 23. The board of directors or trustees. — Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stock, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified.
SEC. 36. Corporate powers and capacity. — Every corporation incorporated under this Code has the power and capacity:
x x x
To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by the law and the Constitution.
Under these provisions, the power to purchase real property is vested in the board of directors or trustees. While a corporation may appoint agents to negotiate for the
purchase of real property needed by the corporation, the final say will have to be with the board, whose approval will finalize the transaction. A corporation can only exercise its powers and transact its business through its board of directors and through its officers and agents when authorized by a board resolution or its by-laws.
R.F. Sugay vs Reyes 12 SCRA 700 (1964)
An appeal from a decision of the Workmen's Compensation Commission
Facts : Respondents Pablo Reyes and Cesar Curata suffered burns of various degrees, while
painting the building of the Pacific Products, Inc., caused by a fire of accidental origin, resulting in their temporary disability from work. For said injuries they filed claims for disability and medical expenses against the R. F. Sugay & Co., Inc., Romulo F. Sugay and the Pacific Products, Inc. The R. F. Sugay & Co., Inc., answered the claim, alleging that the corporation was not the employer of the claimants but it was the Pacific Products, Inc., which had an administration and supervision job contract with Romulo F. Sugay, who, aside from being the President of the corporation, bearing his name, had also a business of his own, distinct and separate from said corporation; and that the Regional Office of the Department of Labor had no jurisdiction over the subject matter. Romulo Sugay voluntary appeared during the scheduled hearings and denied the liabilities. Pacific Products, Inc. on the other hand averred that its business was mainly in the manufacture and sale of lacquer and other painting materials. As defenses, it stated that the claimants were the employees of respondents R. F. Sugay Construction Co., Inc., and/or Romulo F. Sugay. The Hearing Officer dismissed the case and exempted R. F. Sugay Construction Co., Inc., and Romulo F. Sugay from any liability for lack of employer-employee relationship with the claimants. . The officer ordered Pacific Products to pay the injured workers. Pacific Products, Inc., appealed the above decision to the Commission and Commissioner Jose Sanchez rendered judgment affirming the compensability of the injuries and the amounts due them, but modified the decision of the Hearing Officer, by finding that R. F. Sugay & Co., Inc., was the statutory employer of the claimants and should be liable to them. Pacific Products, Inc., was absolved from all responsibility. R. F. Sugay Construction Co., Inc. filed a motion of reconsideration but the Commission en banc denied the motion.
Issue : Is R.F. Sugay construction Co., Inc. the employer of the injured workers? Is it liable?
Ruling: The Supreme Court ruled that R.F. Sugay construction Co., Inc. is the employer of
the workers. The Court find that the findings of facts made by the Commissioner and
concurred in by the Commission en banc are fully supported by the evidence on record which clearly points out that R. F. Sugay & Co., is the statutory employer of the claimants. The decisive elements showing that it is the employer, are present, such as selection and engagement; payment of wages; power of dismissal, and control.
There was a faint attempt by the petitioning corporation, to evade liability, by advancing the theory that Romulo P. Sugay, its President, was the one who entered into a contract of administration and supervision for the painting of the factory of the Pacific Products, Inc., and making it appear that said Romulo F. Sugay acted as an agent of the Pacific Products, Inc., and as such, the latter should be made answerable to the compensation due to the claimants. We, however, agree with the Commission that "the dual roles of Romulo F. Sugay should not be allowed to confuse the facts relating to employer-employee relationship." It is a legal truism that when the veil of corporate fiction is made as a shield to perpetrate a fraud and/or confuse legitimate issues (here, the relation of employer-employee), the same should be pierced. Verily the R. F. Sugay & Co., Inc. is a business conduit of R. F. Sugay.
RICARDO TANTONGCO, petitioner, v. KAISAHAN NG MGA MANGGAGAWA SA LA CAMPANA (KKM) and THE HONORABLE COURT OF INDUSTRIAL RELATIONS, respondents
GR No. L-13119 || September 22, 1959
The present case is a petition for Certiorari and prohibition with prayer for the issuance of a writ of preliminary injunction to prohibit the respondent Court of Industrial Relations from proceeding with the hearing of the contempt proceedings.
FACTS La Campana Starch Factory and La Campana Coffee Factory (La Campana for
Brevity) are two separate entities run by a single management under the leadership of Ramon Tantongco. Kaisahan ng mga Manggagawa sa La Campana (Kaisahan for brevity), on the other hand, is a labor union with members from the two companies. Sometime in June,
1951, representatives of Kaisahan approached the management of La Campana to demand higher wages and more benefits. A deadlock ensued since none of the parties is willing to give concessions. The dispute was certified to the Court of Industrial Relations (CIR). La Campana filed a motion to dismiss before the CIR claiming that the CIR has no jurisdiction because only those from the coffee factory were presenting the demands there were only 14 employees in said factory. This was done in light of the requirement that at least 31 employees should present the demands. The motion was denied by the CIR. According to the CIR, the Kaisahan was the one that presented the demands and not just the workers in the coffee factory. The Supreme Court affirmed the order of the CIR citing that although the two entities are separate, there is only one management. The entire membership of the Kaisahan is therefore to be counted and not simply those employed in the coffee factory. Additional incidental cases were filed by Kaisahan before the CIR including a petition for the reinstatement of some employees. Ramon Tantongco died some time in 1956. The administrator of the estate of Ramon Tantongco, herein petitioner Ricardo Tantongco, was ordered included as respondent in the cases pending before the CIR. The CIR rendered a decision on the incidental cases and ordered the reinstatement of the dismissed employees. When the employees reported to work, the management refused them admittance. Kaisahan then filed a petition to cite the management in contempt before the CIR. Hence this petition.
CONTENTIONS Petitioner: The two companies ceased to exist upon the death of Ramon
Tantongco. The Supreme Court held in GR No. L-5677 that La Campana and Ramon Tantongco are one based on the doctrine of piercing the veil of corporate existence. Therefore, the death of Ramon Tantongco meant the death of La Campana. Since La Campana already ceased to exist, the CIR no longer has jurisdiction over it. The claims should have been filed with the probate court.
Defendant: La Campana continues to exist despite the death of Ramon Tantongco. The CIR therefore has jurisdiction when it rendered its decision on the incidental cases. The non-compliance by La Campana therefore amounted to contempt of court.
ISSUE
1.
WON La Campana ceased to exist upon the death of Ramon Tantongco;2.
WON the Doctrine of Piercing the Veil of Corporate Existence applies to the present case; and3.
WON the contempt of court proceedings in the CIR should proceed.RULING The Supreme Court DENIED the Petition for Certiorari and Prohibition. It ruled that
La Camapana continued to exist despite the death of Ramon Tantongco. It further ruled that the Doctrine of Piercing the Veil of Corporate Existence is not applicable in the present case. Finally, it allowed the CIR to proceed with the contempt hearing.
1 and 2
The death of Ramon Tantongco did not end the existence of La Campana. The Supreme Court applied the Doctrine of Piercing the Veil of Corporate Existence in GR no. L-5677 to avoid the use of technicality to defeat the jurisdiction of the CIR. In the said case, the Court determined that although La Campana are two separate companies, they are being managed by only one management. Furthermore, the workers of both factories were interchangeably assigned. In the present case, however, the Court ruled that despite the obvious fact that La Campana was run by the same people, they still are two different companies with separate personalities from Ramon Tantongco. La Campana was owned not only by Ramon but others as well including Ricardo Tantongco. Lastly, the Court ruled that petitioner is under estoppel and cannot claim that La Campana and Ramon are one and the same since he has represented La Campana as separate entities in numerous dealings.
3. Ricardo Tantongco should still face the contempt proceedings because under Section 6 of Commonwealth Act No. 143, “In case the employer (or landlord) committing any such violation or contempt is an association or corporation, the manager or the person who has the charge of the management of the business of the association or corporation and the officers of directors thereof who have ordered or authorized the violation of contempt shall be liable. . . .” Since Tantongco is the General Manager of La Campana, he is still obliged to appear at the contempt proceedings.
G.R. No. L-67626 April 18, 1989
JOSE REMO, JR., petitioner, vs. THE HON. INTERMEDIATE APPELLATE COURT and E.B. MARCHA TRANSPORT COMPANY, INC., represented by APIFANIO B. MARCHA, respondents.
Nature: Petition for review, seeking the reversal of the decision of the Intermediate
Appellate Court
Facts:On December, 1977, the board of directors of Akron Customs Brokerage Corporation,
of which petitioner Jose Remo, Jr. was a member, adopted a resolution authorizing the purchase of thirteen (13) trucks for use in its business to be paid out of a loan the corporation may secure from any lending institution.
Feliciano Coprada, as President and Chairman of Akron, purchased the 13 trucks from private respondent for P525,000.00 as evidenced by a deed of absolute sale. In a side agreement of the same date, the parties agreed on a downpayment of P50,000.00 and that the balance of P475,000.00 to be paid within sixty (60) days from the date of the execution of the agreement. The parties also agreed that until said balance is fully paid, the down payment of P50,000.00 shall accrue as rentals of the 13 trucks; and failure of Akron to pay the balance within the period of 60 days shall create a chattel mortgage lien covering said cargo trucks and the parties may allow an extension of 30 days and thereafter private respondent may ask for a revocation of the contract and the reconveyance of all said trucks. The obligation is secured by a promissory note executed by Coprada in favor of Akron. It is stated in the promissory note that the balance shall be paid from the proceeds of a loan obtained from the Development Bank of the Philippines (DBP) within sixty (60) days.
After the lapse of 90 days, private respondent tried to collect from Coprada but the latter promised to pay only upon the release of the DBP loan. Private respondent sent Coprada a letter of demand dated May 10, 1978. In his reply to the said letter, Coprada reiterated that he was applying for a loan from the DBP from the proceeds of which payment of the obligation shall be made.
Upon inquiry, private respondent found that no loan application was ever filed by Akron with DBP. Coprada wrote private respondent begging for a grace period of until the end of the month to pay the balance of the purchase price, promising that he will update the rentals within the week; and in case he fails, then he will return the 13 units should private respondent elect to get back the same. Private respondent, through counsel, wrote Akron on August 1, 1978 demanding the return of the 13 trucks and the payment of P25,000.00 back rentals covering the period from June 1 to August 1, 1978. Coprada again asked for another grace period stating as well that he is expecting the approval of his loan
application from a certain financing company, and that ten (10) trucks have been returned to Bagbag, Novaliches.
In due time, private respondent filed a compliant for the recovery of P525,000.00 or the return of the 13 trucks with damages against Akron and its officers and directors with the then Court of First Instance of Rizal. Only petitioner answered the complaint denying any participation in the transaction and alleging that Akron has a distinct corporate personality. He was, however, declared in default for his failure to attend the pre-trial. Petitioner on the other hand, sold all his shares in Akron to Copranda. Akron thenafter changed its name to Akron Transport International, Inc.
The trial court ruled in favor of private respondents, ordering petitioner to pay the purchase price for the 13 trucks, rentals, attorney's fees and the cost of suit. On appeal, the IAC reversed the decision of the trial court. However, on motion for reconsideration, the IAC affirmed the appealed decision of the CFI.
Issue: Was the IAC correct in disregarding corporate fiction and holding petitioner
personally liable for the obligation of the Corporation?
Was the IAC correct in sanctioning the merger of the personality of the corporation with that of the petitioner when the latter was held liable for the corporate debts?
Petitioner's contention: Akron has a distinct corporate personality. As such, he cannot be
held personally liable for the liabilities of the corporation.
Private respondent's contention: It is a victim of fraud, which merits the piercing of
corporate fiction
Held: Petitioner cannot be held personally liable. There is no basis to pierce the corporate
veil of Akron and hold petitioner personally liable for its obligation to private respondent. While it is true that petitioner was still a member of the board of directors of Akron when a resolution was adopted authorizing the purchase of 13 trucks, it does not appear that said resolution was intended to defraud anyone and more particularly private respondent. It was Coprada, President and Chairman of Akron, who negotiated with said respondent for the purchase of 13 cargo trucks, who signed a promissory note to guarantee the payment of the unpaid balance of the purchase price out of the proceeds of a loan he supposedly sought from the DBP. The word "WE' in the said promissory note must refer to the corporation which Coprada represented in the execution of the note and not its stockholders or directors. Petitioner did not sign the said promissory note so he cannot be personally bound thereby. It is Coprada who should account for the same and not petitioner.
As to the amendment of the articles of incorporation of Akron thereby changing its name to Akron Transport International, Inc., petitioner alleges that the change of corporate name was in order to include trucking and container yard operations in its customs brokerage of which private respondent was duly informed in a letter. 19 Indeed, the new corporation confirmed and assumed the obligation of the old corporation. There is no indication of an attempt on the part of Akron to evade payment of its obligation to private respondent.
There is the fact that petitioner sold his shares in Akron to Coprada during the pendency of the case. Since petitioner has no personal obligation to private respondent, it is his inherent right as a stockholder to dispose of his shares of stock anytime he so desires.
Ruling: WHEREFORE, the petition is GRANTED. The questioned resolution of the
Intermediate Appellate Court dated February 8,1984 is hereby set aside and its decision dated June 30,1983 setting aside the decision of the trial court dated October 28, 1980 insofar as petitioner is concemed is hereby reinstated and affirmed, without costs.
G.R. No. 124293 January 31, 2005 J.G. SUMMIT HOLDINGS, INC., petitioner,
vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC., respondents.
R E S O L U T I O N
PUNO, J.:
I. Facts
January 27, 1997: National Investment and Development Corporation (NIDC), a
government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will contribute P330 million for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant to the parties of the right
of first refusal should either of them decide to sell, assign or transfer its interest in the
joint venture.
November 25, 1986: NIDC transferred all its rights, title and interest in PHILSECO to the
PNB, interests transferred to the National Government pursuant to Admin Order No. 14. On December 8, 1986, Pres. Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government. Thereafter, on February 27, 1987, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Government's share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations to PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government's 87.6% share in PHILSECO (896,869,942 outstanding capital stock) to private entities in the Indicative Price Bidding Basis of P1,300,000,000.00. After a series of negotiations between the APT and KAWASAKI, they agreed that the latter's right of first refusal under the JVA be "exchanged" for the right to top by 5% the highest bid for the said shares. They further agreed that KAWASAKI would be entitled to name a company in which it was a stockholder, which could exercise the right to top. On September 7, 1990, KAWASAKI informed APT that PHILYARDS Holdings, Inc. (PHI) would exercise its right to top. A pre-bidding conference was held on September 18, 1993. The highest bid, as well as the buyer, will be subject to final approval of both APT and COP, and APT reserves the right in its sole discretion to reject any or all bids.
xxx xxx xxx
The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest Bid," they shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten percent (10%) of the highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's notice within which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their "Option to Top the Highest Bid" within the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.
xxx xxx xxx
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. submitted P2,030,000,000.00 bid with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top. xxx
As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 "subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules."
December 29, 1993: Petitioner informed APT that it was protesting the offer of PHI to top
its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], xx violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and prejudicing the weak winning bidder;
(b) only KAWASAKI could exercise the right to top; (c) giving the same option to top to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale;
February 2, 1994: Petitioner was notified that PHI had fully paid the balance of the
purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement.
November 20, 2000: this Court reversed CA’ ruling that shipyard (PHILSECO) is a public
utility whose capitalization must be 60% Filipino-owned. Consequently, the right to top granted to KAWASAKI drafted for the sale of 87.67% equity of the National Government in PHILSECO is illegal- because it allows foreign corporations to own more than 40% equity in the shipyard. This Court voided the transfer of the national government's 87.67% share in
PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said shares, viz:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI. SO ORDERED.
II. Issues
Respondents submitted four basic issues for Resolution: (1) Whether PHILSECO is a public utility;
(2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total capitalization of PHILSECO; and
(3) Whether the right to top granted to KAWASAKI violates the principles of competitive bidding.
(4) that the maintenance of the 60%-40% relationship between the National Investment and Development Corporation (NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation. Whether the exercise of its right of first refusal by KAWASAKI of the 40% PHILSECO shares, a landholding corporation, violates Constitutional provisions on foreign equity ratio of 60%-40% and yet owns long-term leasehold rights which are real rights and also continues to own real property.
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. (1) We held that Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility and that no law declares a shipyard to be a public utility.
(2) We found nothing in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECO’s total capitalization.
(3) We held that the right to top granted to KAWASAKI in exchange for its right of first refusal did not violate the principles of competitive bidding.
(4) No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land.
Even if PHILYARDS owned land at the time of bidding, KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and KAWASAKI can exceed 40% of PHILSECO’s equity, even it may have previously held land but divested such landholdings, or retained, the right of first refusal, being a property right, could be assigned to a qualified party. The mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves a right of first refusal over shares of stock, not an option to buy the land itself. The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. As discussed earlier, there is a distinction between the shareholder’s ownership of shares and the corporation’s ownership of land arising from the separate juridical personalities of the corporation and its shareholders.
We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The
agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations.
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain."
32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the
public domain are corporations at least 60% of which is owned by Filipino citizens (Sec. 22,
Commonwealth Act 141, as amended)
The prohibition in the Constitution applies only to ownership of land. It does not extend to
immovable or real property as defined under Article 415 of the Civil Code. Otherwise, we
would have a strange situation where the ownership of immovable property such as trees, plants and growing fruit attached to the land would be limited to Filipinos and Filipino corporations only.
PHILSECO still owns land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. Alternatively, In fact, it can even be said that if the foreign shareholdings of a landholding
corporation exceeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own land – that is, the
corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. This is the clear import of the following provisions in the Constitution:
Section 2. xxx The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. xxx
xxx xxx xxx
The petitioner further argues that "an option to buy land is void in itself. The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first refusal, is also void." The case of Lui She did not that say "an option to buy land is void in itself," for it is held that Lease to an alien for a reasonable period is valid, and an option giving an alien the right to buy real property is not completely excluded by Constitution from the use of lands for residential purpose, and its temporary
residence may be given temporary rights such as lease contract which is not forbidden by the same.
LIDDELL & CO., INC., petitioner-appellant, vs. THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
(G.R. No. L-9687, 30 June 1961)
This is an appeal from the decision of the Court of Tax Appeals imposing a tax deficiency liability on Liddell & Co., Inc.
FACTS: The petitioner, Liddell & Co. Inc., (Liddell & Co. for short) is a domestic corporation
establish in the Philippines on February 1, 1946, with an authorized capital of P100,000 divided into 1000 share at P100 each. Of this authorized capital, 196 shares valued at P19,600 were subscribed and paid by Frank Liddell while the other four shares were in the name of Charles Kurz, E.J. Darras, Angel Manzano and Julian Serrano at one shares each. Its purpose was to engage in the business of importing and retailing Oldsmobile and Chevrolet passenger cars and GMC and Chevrolet trucks. After its incorporation, Lidell & Co. was able to declare stock dividends, thereby increasing the issued capital stock of the said corporation, which were duly approved by the Securities and Exchange Commission. There has also been an agreement executed by Frank Lidell on one hand, and Messrs. Kurz, Darras, Manzano and Serrano on the other, which was further supplemented by two other agreements wherein Frank Liddell transferred to various employees of Liddell & Co. shares of stock. On the basis of the agreement, "40%" of the earnings available for dividends accrued to Frank Liddell although at the time of the execution of said instrument, Frank Liddell owned all of the shares in said corporation. From 1946 until November 22, 1948, when the purpose clause of the Articles of Incorporation of Liddell & Co. Inc., was amended so as to limit its business activities to importations of automobiles and trucks, Liddell & Co. was engaged in business as an importer and at the same time retailer of Oldsmobile and Chevrolet passenger cars and GMC and Chevrolet trucks. On December 20, 1948, the Liddell Motors, Inc. was organized and registered with the Securities and Exchange Commission with an authorized capital stock of P100,000 of which P20,000 was subscribed and paid for as follows: Irene Liddell wife of Frank Liddell 19,996 shares and Messrs. Marcial P. Lichauco, E. K. Bromwell, V. E. del Rosario and Esmenia Silva, 1 share each. At about the end of the year 1948, Messrs. Manzano, Kurz and Kernot resigned from their respective positions in the Retail Dept. of Liddell & Co. and they were taken in and employed by Liddell Motors, Inc. Beginning January, 1949, Liddell & Co. stopped retailing cars and trucks; it conveyed them instead to Liddell Motors, Inc. which in turn sold the
vehicles to the public with a steep mark-up. Since then, Liddell & Co. paid sales taxes on the basis of its sales to Liddell Motors Inc. considering said sales as its original sales.
PETITIONER-APPELLANT: Petitioner filed an appeal on the decision of the Court of Tax Appeals affirming the position taken by the Collector of Internal Revenue.
RESPONDENT-APPELLEE: Upon review of the transactions between Liddell & Co. and Liddell Motors, Inc. the Collector of Internal Revenue determined that the latter was but an alter ego of Liddell & Co. Wherefore, he concluded, that for sales tax purposes, those sales made by Liddell Motors, Inc. to the public were considered as the original sales of Liddell & Co. Accordingly, the Collector of Internal Revenue assessed against Liddell & Co. a sales tax deficiency, including surcharges. In the computation, the gross selling price of Liddell Motors, Inc. to the general public from January 1, 1949 to September 15, 1950, was made the basis without deducting from the selling price, the taxes already paid by Liddell & Co. in its sales to the Liddell Motors Inc.
ISSUE: Whether or not Liddell Motors, Inc. is the alter ego of Liddell & Co. Inc.?
RULING: There are quite a series of conspicuous circumstances that militate against the
separate and distinct personality of Liddell Motors, Inc. from Liddell & Co. We notice that the bulk of the business of Liddell & Co. was channeled through Liddell Motors, Inc. On the other hand, Liddell Motors, Inc. pursued no activities except to secure cars, trucks, and spare parts from Liddell & Co. Inc. and then sell them to the general public. These sales of vehicles by Liddell & Co. to Liddell Motors, Inc. for the most part were shown to have taken place on the same day that Liddell Motors, Inc. sold such vehicles to the public. We may even say that the cars and trucks merely touched the hands of Liddell Motors, Inc. as a matter of formality.
It is of course accepted that the mere fact that one or more corporations are owned and controlled by a single stockholder is not of itself sufficient ground for disregarding separate corporate entities. Authorities support the rule that it is lawful to obtain a corporation charter, even with a single substantial stockholder, to engage in a specific activity, and such activity may co-exist with other private activities of the stockholder. If the corporation is a substantial one, conducted lawfully and without fraud on another, its separate identity is to be respected. Accordingly, the mere fact that Liddell & Co. and Liddell Motors, Inc. are
corporations owned and controlled by Frank Liddell directly or indirectly is not by itself sufficient to justify the disregard of the separate corporate identity of one from the other. There is, however, in this instant case, a peculiar consequence of the organization and activities of Liddell Motors, Inc.
Under the law in force at the time of its incorporation the sales tax on original sales of cars (sections 184, 185 and 186 of the National Internal Revenue Code), was progressive, i.e. 10% of the selling price of the car if it did not exceed P5000, and 15% of the price if more than P5000 but not more than P7000, etc. This progressive rate of the sales tax naturally would tempt the taxpayer to employ a way of reducing the price of the first sale. And Liddell Motors, Inc. was the medium created by Liddell & Co. to reduce the price and the tax liability.
As opined in the case of Gregory v. Helvering, "the legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them by means which the law permits, cannot be doubted." But, as held in another case, "where a corporation is a dummy, is unreal or a sham and serves no business purpose and is intended only as a blind, the corporate form may be ignored for the law cannot countenance a form that is bald and a mischievous fiction." Consistently with this view, the United States Supreme Court held that "a taxpayer may gain advantage of doing business thru a corporation if he pleases, but the revenue officers in proper cases, may disregard the separate corporate entity where it serves but as a shield for tax evasion and treat the person who actually may take the benefits of the transactions as the person accordingly taxable."
Thus, we repeat: to allow a taxpayer to deny tax liability on the ground that the sales were made through another and distinct corporation when it is proved that the latter is virtually owned by the former or that they are practically one and the same is to sanction a circumvention of our tax laws.
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC. vs. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION.
[G.R. No. 119002. October 19, 2000] KAPUNAN, J.:
Facts: On June 30 1989, International Express Travel and Tour Services, Inc., wrote a
letter to the Philippine Football Federation’s (Federation) president Henri Kahn, offering its services as a travel agency to the latter. The Federation secured the airline tickets for the trips to the South East Asian Games in Kuala Lumpur as well as trips to the People's Republic of China and Brisbane. The total cost of the tickets amounted to P449,654.83. For
the tickets received, the Federation made two partial payments, both in September of 1989, in the total amount of P176,467.50.
On 4 October 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the amount of P265,894.33. On 30 October 1989, the Federation, through the Project Gintong Alay, paid the amount of P31,603.00. On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000 as partial payment for the outstanding balance. No further payments were made despite repeated demands prompting the Travel Agency to file a civil case before the Regional Trial Court of Manila. The Travel Agency sued Henri Kahn in his personal capacity and as President of the Federation and impleaded the Federation as an alternative defendant. The Travel Agency sought to hold Henri Kahn liable on the ground that he allegedly guaranteed the said obligation.
While not denying the allegation that the Federation owed the unpaid balance in the amount of P207,524.20, Kahn averred that there was no cause of action against him either in his personal capacity or in his official capacity as president of the Federation. He maintained that he did not guarantee payment but merely acted as an agent of the Federation which has a separate and distinct juridical personality. The Federation was declared in default for failing to file an answer.
The trial court ruled in favor of the travel agency and held Kahn personally liable for the Federation’s obligation. It reasoned that Kahn failed to adduce proof of the corporate existence of the Federation, which was a mere sports association. Thus, a voluntary unincorporated association, like the Federation has no power to enter into, or to ratify, a contract. The contract entered into by its officers or agents on behalf of such association is not binding on, or enforceable against it. The officers or agents are themselves personally liable.
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21 December 1994, the respondent court rendered a decision reversing the trial court. The Court of Appeals recognized the juridical existence of the Federation and absolved Kahn from personal liability. It rationalized that since petitioner failed to prove that Henri Kahn guaranteed the obligation of the Federation, he should not be held liable for the same as said entity has a separate and distinct personality from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held liable for the unpaid obligation. The same was denied by the appellate court on the grounds that the trial court dismissed the complaint against the federation, which was not appealed. Thus, the federation was not a party to this appeal.
Issue: Whether the Court of Appeal erred in finding that the Federation was a juridical
entity?
Held: Yes. The Court of Appeals cited Republic Act 3135, Revised Charter of the
Philippine Amateur Athletic Federation, and Presidential Decree No. 604 as the laws from which said Federation derives its existence. Above stated laws indicate that sports associations, such as the Federation, may acquire a juridical personality. However, national sports associations may be accorded corporate status, such does not automatically take place by the mere passage of these laws.
Before a corporation may acquire juridical personality, the State must give its
consent either in the form of a special law or a general enabling act. We do not agree
with the appellate court that the Philippine Football Federation came into existence upon the passage of these laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any provision creating the Philippine Football Federation.
Above stated laws require that before an entity may be considered as a national sports association, such entity must be recognized by the accrediting organization, the Philippine Amateur Athletic Federation under R.A. 3135, and the Department of Youth and Sports Development under P.D. 604. This fact of recognition, however, Henri Kahn failed to substantiate. He attempted to by attaching with motion for reconsideration before the trial court a copy of the constitution and by-laws of the Federation. Unfortunately, that does not prove that the Federation has been recognized and accredited. Accordingly, we rule that the Philippine Football Federation is not a national sports association within the purview of the aforementioned laws and does not have corporate existence of its own.
Thus, Henry Kahn should be held liable for the unpaid obligations of the Federation. It is a
settled principal in corporation law that any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. As
president, Henri Kahn is presumed to have known about the corporate existence or non-existence of the Federation. We cannot subscribe to the position taken by the appellate court that even assuming that the Federation was defectively incorporated, the petitioner cannot deny the corporate existence of the Federation because it had contracted and dealt
with the Federation in such a manner as to recognize and in effect admit its existence. The
doctrine of corporation by estoppel is mistakenly applied by the respondent court to the
petitioner. The application of the doctrine applies to a third party only when he tries to
escape liability on a contract from which he has benefited on the irrelevant ground of defective incorporation. In the case at bar, the petitioner is not trying to escape liability
from the contract but rather is the one claiming from the contract.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Manila, Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.
G.R. No. 116123 March 13, 1997
SERGIO F. NAGUIAT, doing business under the name and style SERGIO F. NAGUIAT ENT., INC., & CLARK FIELD TAXI, INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), NATIONAL ORGANIZATION OF WORKINGMEN and its members, LEONARDO T. GALANG, et al., respondents.
Facts: Petitioner Clark Field Taxi, Inc. (CFTI), the president of whom was Sergio Naguiat, held a concessionaire's contract to operate a taxi service within Clark Air Base with Army Air Force Exchange Services (AAFES). CFTI, like Sergio F. Naguiat Enterprises, was a family corporation. For this purpose, petitioners hired private respondents as taxi drivers, working for at least 3 or 4 times in a week.
Due to the phase-out of US military bases in the Philippines, AAFES was dissolved. As a result, private respondents' services were terminated. Private respondents' drivers' union and CFTI agreed to award separation benefits to their drivers in the amount of 500 pesos for every year of service. Although majority of the members accepted their severance pay, private respondents refused, subsequently disaffiliating from the drivers' union, joining the National Organization of Workingmen (NOWM) and filing a complaint against petitioners for payment of separation pay due to termination/phase out.
Petitioner, by way of position paper, averred that the cessation of their business was due to great financial loss and lost business opportunities resulting from the phase-out. They further reiterated that CFTI had agreed with the drivers' union to award 500 pesos for every year of service as severance pay.
The Labor Arbiter ruled in favor of private respondents, ordering petitioners to pay 1,200 pesos solidarily, to private respondents in lieu of separation pay for humanitarian conditions. On appeal, the NLRC modified the decision of the Labor Arbiter and ordered petitioners to pay separation pay in the amount agreed upon.
Issue: Whether or not the resolution of the NLRC was contrary to law
Wheter or not officers of corporations are ipso facto liable jointly and severally with the companies they represent for the payment of separation pay.
Private respondents' contention: They are regular employees of Naguiat Enterprises, despite their individual applications of employment were approved by CFTI, for the former exercised control, management and supervision over their employment. Further, Naguiat Enterprises, as indirect employer, is solidarily liable to pay them separation pay.
Petitioners' contention: Sergio F. Naguiat Enterprises is a separate juridical entity that cannot be held solidarily liable. Further, Sergio and Antolin Naguiat, as President and Vice-President of the Corporation, are merely officers of the same and cannot be held personally liable.
Held: Naguiat Enterprises is not liable. Based on the factual findings of the parties, private respondents were regular employees of CFTI who received wages on a boundary or commission basis. There is, therefore, no substantial basis to hold Naguiat Enterprises as an indirect employer. Sufficient evidence was shown that none of the private respondents
were empolyees of Naguiat Enterprises. By virtue of the concessionaire's contract, CFTI purchased the fleet of vehicles from AAFES and became the owner thereof.
Private respondents failed to substantiate their claim that Naguiat Enterprises managed, supervised and controlled their employment. Further, in reading through the case, it seems as if private respondents were merely confused as to the personalities of Sergio F. Naguiat as an individual and as a separate corporate juridical entity. Closer scrutiny and analysis of the records evince the truth that Sergio F. Naguiat, in supervising the taxi drivers and determining their employment terms, was carrying out his responsibilities as president of CFTI. From the foregoing, the ineludible conclusion is that CFTI was the actual and direct employer of individual respondents, and that Naguiat Enterprises was neither their indirect employer nor labor-only contractor. It was not involved at all in the taxi business.
As to the liability of their officers, the Court ruled that in the the broader interest of justice, CFTI President Sergio Naguiat should be held liable. Following the ruling in A.C. Ransom Labor Union v. NLRC, the rule is that in the absence of definite proof as to which officer/s should be held directly responsible for the payment of backwages, it should be presumed that the responsible officer is the President of the corporation who can be deemed the chief operation officer thereof.
Further, following the ruling in MAM Realty v. NLRC, a director or officer of a corporation maybe held liable solidarily if it is made by a specific provision of law. Section 100 of the Corporation Code specifically imposes personal liability upon the stockholder actively managing or operating the business and affairs of the close corporation.
As to Antolin Naguiat, the Court ruled that he was not personally liable, for it had not been shown that he had acted in the capacity of a general manager, as well as lack of evidence that his participation in the management and operation of the businesss was preferred.
Ruling: (1) Petitioner Clark Field Taxi, Incorporated, and Sergio F. Naguiat, president and co-owner thereof, are ORDERED to pay, jointly and severally, the individual respondents their separation pay computed at US$120.00 for every year of service, or its peso equivalent at the time of payment or satisfaction of the judgment;
(2)
Petitioner Sergio F. Naguiat Enterprises, Incorporated, and Antolin T. Naguiat are ABSOLVED from liability in the payment of separation pay to individual respondents.(3)
HAW PIA, plaintiff-appellant, v. THE CHINA BANKING CORPORATION, defendant-appellee
GR No. L-554 || April 9, 1948
This is an appeal of the decision of the trial court holding plaintiff-appellant Haw Pia liable to pay the amount P5,103.35 to herein respondent China Banking Corporation. Plaintiff-appellant prays that the defendant-appellee be compelled to execute a deed of cancellation of the mortgaged property.
FACTS
Plaintiff-appellant Haw Pia incurred debts amounting to P5,103.35 from defendant-appellee China Banking Corporation due to an overdraft in his current account during or before World War II when the Philippines was under occupation by the Japanese Imperial Army. During the occupation, the Japanese military authorities ordered the liquidation of China Banking Corporation as part of its efforts to stem Filipino resistance to the occupation. They appointed and authorized the Bank of Taiwan, Ltd. as liquidator of the defendant-appellee. Since the defendant-appellee was in the process of liquidation, plaintiff-appellant paid his debt to the Bank of Taiwan. After the war, the defendant-appellee instituted a court action seeking payment from the plaintiff-appellant of the P5,103.35 debt. The defendant-appellee took the position that the payment to the Bank of Taiwan did not extinguish the obligation of the plaintiff-appellant to it. The trial court rendered the assailed decision finding that the payment to the Bank of Taiwan did not constitute payment to the defendant-appellee. According to the court, there was no evidence presented to show that the defendant-appellee authorized the Bank of Taiwan to receive payment on its behalf. Furthermore, the Bank of Taiwan was an agent of the Japanese Imperial Army and was not allowed to liquidate the business of the
defendant-appellee. Plaintiff-appellant was ordered to pay P5,103.35 to defendant-appellee within 90 days or the mortgaged property will be sold in a public auction.
CONTENTIONS
Petitioner-appellant: The appointment of the Bank of Taiwan as liquidator of the defendant-appellee is valid under international laws. Since the Bank of Taiwan was the duly appointed liquidator of the defendant-appellee, tendering payment to it is equivalent to tendering payment to the defendant-appellee itself.
Defendant-appellee: The liquidation of the China Banking Corporation and the subsequent appointment of the Bank of Taiwan as its liquidator are incorrect as the occupying Japanese forces had no authority to do so. Since there was no valid liquidation, any payment made to the Bank of Taiwan cannot be deemed as payment made to the defendant-appellee.
ISSUES
4.
WON the liquidation of the China Banking Corporation and the subsequent appointment of the Bank of Taiwan as liquidator are valid;5.
WON the payment made to the Bank of Taiwan as the liquidator of the China Banking Corporation constitutes payment to China Banking Corporation itself; and6.
How is this related to Nationality and Citizenship of Corporations (syllabus)?RULING
The Supreme Court REVERSED the decision of the trial court. It ordered the defendant-appellee to execute the deed of cancellation of mortgage of the mortgaged property and
to deliver to the plaintiff-appellant TCT No. 47634 with the annotation of mortgage therein already cancelled.
1.
The Supreme Court held that the Japanese military authorities had the power to order the liquidation of the China Banking Corporation. The Hague Convention II which entered into force on September 4, 1900 prohibits the confiscation of private properties of the residents of the occupied territories by the occupying forces. Liquidation, however, cannot be considered the same as confiscation. Sequestration contemplates a scenario where the occupying forces take possession of the properties of the citizens of the occupied territories with the intention of conserving such properties. The sequestered properties may be subject to further disposition by treaty between the belligerents at the end of war. Liquidation serves a basic purpose during an occupation – to reduce the ability of the enemy to fight back. It is a part of economic warfare and has been practiced by major powers. In fact, the United States has the Trading with the Enemy Act. Under the said Act, the United States may order the liquidation, reorganization, and reopening of enemy banks within occupied territories whenever appropriate. Since the United States has the Trading with the Enemy Act, it is presumed that Japan has an equivalent law under the principle that “what is permitted to one belligerent is allowed to the other.” The liquidation of the China Banking System and the appointment of a liquidator are therefore valid.
2.
The Supreme Court held that payment made to the Bank of Taiwan is equivalent to paying directly to the China Banking Corporation. Under Article 1162 (now 1240) of the then Civil Code, payment shall be made to the person in whose favor the obligation was constituted, or his successors in interest, or any person authorized to receive it. The Bank of Taiwan, as the liquidator of the defendant-appellee, is a person authorized to receive the payment.
3.
The Supreme Court determined that China Banking Corporation qualified as an ENEMY
CORPORATION in the eyes of the Japanese military authorities. Under the Trading with the
Enemy Act, an enemy corporation is a corporation incorporated within such territory of any nation with which the United States is at war. Applying the principle that what is permitted to one belligerent is allowed to the other, the defendant-appellee was an enemy to the Japanese. Not only was it controlled by Japan’s enemies, it was also incorporated under the laws of a country with which Japan was at war.
Professional Services Inc v Agana
These are three consolidated petitions for review on certiorari from the decision of the Court of Appeals.
Facts:
On April 4, 1984, Natividad Agana was rushed to the Medical City Hospital because of difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, diagnosed her to be suffering from "cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital, performed an anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had spread on her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband, Enrique Agana, to permit Dr. Juan Fuentes, to perform hysterectomy on her. After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision. However, the operation appeared to be flawed. The records show that the nurse informed Dr. Ampil of 2 missing sponge but the doctor continued in closing the operation.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of the surgery. Natividadthen went to the United States to seek further treatment. Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze measuring 1.5 inches in width. He then assured her that the pains would soon vanish.