1

CORPORATION LAW CASES SET 1

1. G.R. No. L-2832

November 24, 1906

REV. JORGE BARLIN, in his capacity as apostolic administrator of this vacant bishopric
and legal representative of the general interests of the Roman Catholic Apostolic Church
in the diocese of Nueva Caceres,Plaintiff-Appellee, vs. P. VICENTE RAMIREZ, ex-rector of
the Roman Catholic Apostolic Parochial Church of Lagonoy, AND THE MUNICIPALITY OF
LAGONOY,Defendants-Appellants.
Manly & Gallup for appellants.
Leoncio Imperial and Chicote, Miranda & Sierra for appellee.
WILLARD, J.:
There had been priests of the Roman Catholic Church in the pueblo of Lagonoy, in the Province
of Ambos Camarines, since 1839. On the 13th of January, 1869, the church and convent were
burned. They were rebuilt between 1870 and 1873. There was evidence that this was done by the
order of the provincial governor. The labor necessary for this reconstruction was performed by the
people of the pueblo the direction of the cabeza debarangay. Under the law then in force, each
man in the pueblo was required to work for the government, without compensation, for forty days
every year. The time spent in the reconstruction of these buildings was counted as a part of the
forty days. The material necessary was brought and paid for in part by the parish priest from the
funds of the church and in part was donated by certain individuals of the pueblo. After the
completion of the church it was always administered, until November 14, 1902, by a priest of a
Roman Catholic Communion and all the people of the pueblo professed that faith and belonged
to that church.chanroblesvirtualawlibrary chanrobles virtual law library
The defendant, Ramirez, having been appointed by the plaintiff parish priest, took possession of
the church on the 5th of July, 1901. he administered it as such under the orders of his superiors
until the 14th day of November, 1902. His successor having been then appointed, the latter made
a demand on this defendant for the delivery to him of the church, convent, and cemetery, and the
sacred ornaments, books, jewels, money, and other property of the church. The defendant, by a
written document of that date, refused to make such delivery. That document is as follows:
At 7 o'clock last night I received through Father Agripino Pisino your respected order of the 12th
instant, wherein I am advised of the appointment of Father Pisino as acting parish priest of this
town, and directed to turn over to him this parish and to report to you at the vicarage. In reply
thereto, I have the honor to inform you that the town of Lagonoy, in conjunction with the parish
priest thereof, has seen fit to sever connection with the Pope at Rome and his representatives in
these Islands, and join the Filipino Church, the head of which is at Manila. This resolution of the
people was reduced to writing and triplicate copies made, of which I beg to inclose a copy
herewith.chanroblesvirtualawlibrary chanrobles virtual law library
For this reason I regret to inform you that I am unable to obey your said order by delivering to
Father Agripino Pisino the parish property of Lagonoy which, as I understand, is now outside of
the control of the Pope and his representatives in these Islands. May God guard you many
years.chanroblesvirtualawlibrary chanrobles virtual law library
Lagonoy,
November
14,
(Signed) VICENTE RAMIREZ.chanroblesvirtualawlibrary chanrobles virtual law library

1902.

RT. REV. VICAR OF THIS DISTRICT.

The document, a copy of which is referred to in this letter, is as follows:
LAGONOY, November, 9, 1902. chanrobles virtual law library
The municipality of this town and some of its most prominent citizens having learned through the
papers from the capital of these Islands of the constitution of the Filipino National Church,
separate from the control of the Pope at Rome by reason of the fact that the latter has refused to
either recognize or grant the rights to the Filipino clergy which have many times been urged, and
it appearing to us that the reasons advanced why such offices should be given to the Filipino

2
clergy are evidently well-founded, we have deemed it advisable to consult with the parish priest of
this town as to whether it would be advantageous to join the said Filipino Church and to separate

from the control of the Pope as long as he continues to ignore the rights of the said Filipino clergy,
under the conditions that there will be no change in the articles of faith, and that the sacraments
and other dogmas will be recognized and particularly that of the immaculate conception of the
mother of our Lord. But the moment the Pope at Rome recognizes and grants the rights
heretofore denied to the Filipino clergy we will return to his control. In view of this, and subject to
this condition, the reverend parish priest, together with the people of the town, unanimously join in
declaring that from this date they separate themselves from the obedience and control of the
Pope and join the Filipino National Church. This assembly and the reverend parish priest have
accordingly adopted this resolution written in triplicate, and resolved to send a copy thereof to the
civil government of this province for its information, and do sign the same below. Vicente
Ramirez, Francisco Israel, Ambrosio Bocon, Florentino Relloso, Macario P. Ledesma, Cecilio
Obias, Balbino Imperial, Juan Preseada, Fernando Deudor, Mauricio Torres, Adriano Sabater.
At the meeting at which the resolution spoken of in this document was adopted, there were
present about 100 persons of the pueblo. There is testimony in the case that the population of the
pueblo was at that time 9,000 and that all but 20 of the inhabitants were satisfied with the action
there taken. Although it is of no importance in the case, we are inclined to think that the testimony
to this effect merely means that about 100 of the principal men of the town were in favor of the
resolution and about 20 of such principal men were opposed to it. After the 14th of November, the
defendant, Ramirez, continued in the possession of the church and other property and
administered the same under the directions of his superior, the Obispo Maximo of the
Independent Filipino Church. The rites and ceremonies and the manner of worship were the
same after the 14th day of November as they were before, but the relations between the Roman
Catholic
Church
and
the
defendant
had
been
entirely
severed.chanroblesvirtualawlibrary chanrobles virtual law library
In January, 1904, the plaintiff brought this action against the defendant, Ramirez, alleging in his
amended complaint that the Roman Catholic Church was the owner of the church building, the
convent, cemetery, the books, money, and other property belonging thereto, and asking that it be
restored to the possession thereof and that the defendant render an account of the property
which he had received and which was retained by him, and for other
relief.chanroblesvirtualawlibrary chanrobles virtual law library
The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the
complaint, admitted that he was in the possession and administration of the property described
therein with the authority of the municipality of Lagonoy and of the inhabitants of the same, who
were the lawful owners of the said property. After this answer had been presented, and on the 1st
day of November, 1904, the municipality of Lagonoy filed a petition asking that it be allowed to
intervene in the case and join with the defendant, Ramirez, as a defendant therein. This petition
been granted, the municipality of the 1st day of December filed an answer in which it alleged that
the defendant, Ramirez, was in possession of the property described in the complaint under the
authority and with the consent of the municipality of Lagonoy and that such municipality was the
owner thereof.chanroblesvirtualawlibrary chanrobles virtual law library
Plaintiff answered this complaint, or answer in intervention, and the case was tried and final
judgment in entered therein in favor of the plaintiff and against the defendants. The defendants
then brought the case here by a bill of exceptions.chanroblesvirtualawlibrary chanrobles virtual
law library
That the person in the actual possession of the church and other property described in the
complaint is the defendant, Ramirez, is plainly established by the evidence. It does not appear
that the municipality, as a corporate body, ever took any action in reference to this matter until
they presented their petition for intervention in this case. In fact, the witnesses for the defense,

3
when they speak of the ownership of the buildings, say that they are owned by the people of the
pueblo, and one witness, the president, said that the municipality as a corporation had nothing
whatever to do with the matter. That the resolution adopted on the 14th of November, and which
has been quoted above, was not the action of the municipality, as such, is apparent from an
inspection thereof.chanroblesvirtualawlibrary chanrobles virtual law library
The witnesses for the defenses speak of a delivery of the church by the people of the pueblo to
the defendant, Ramirez, but there is no evidence in the case of any such delivery. Their testimony
in regard to the delivery always refers to the action taken on the 14th of November, a record of
which appears that in the document above quoted. It is apparent that the action taken consisted
simply in separating themselves from the Roman Catholic Church, and nothing is said therein in
reference to the material property then in possession of the defendant,

Ramirez.chanroblesvirtualawlibrary chanrobles virtual law library

There
are
several
grounds
upon
which
this
affirmed.chanroblesvirtualawlibrary chanrobles virtual law library

judgment

must

be

(1) As to the defendant, Ramirez, it appears that he took possession of the property as the
servant or agent of the plaintiff. The only right which he had to the possession at the time he took
it, was the right which was given to him by the plaintiff, and he took possession under the
agreement to return that possession whenever it should be demanded of him. Under such
circumstances he will not be allowed, when the return of such possession is demanded by him
the plaintiff, to say that the plaintiff is not the owner of the property and is not entitled to have it
delivered back to him. The principle of law that a tenant can not deny his landlord's title, which is
found in section 333, paragraph 2, of the Code of Civil
Procedure, and also in the Spanish law, is applicable to a case of this kind. An answer of the
defendant, Ramirez, in which he alleged that he himself was the owner of the property at the time
he received it from the plaintiff, or in which he alleged that the pueblo was the owner of the
property at that time, would constitute no defense. There is no claim made by him that since the
delivery of the possession of the property to him by the plaintiff he has acquired the title thereto
by other means, nor does he is own behalf make any claim whatever either to the property or to
the possession thereof.chanroblesvirtualawlibrary chanrobles virtual law library
(2) The municipality of Lagonoy, in its answer, claims as such, to be the owner of the property. As
we have said before, the evidence shows that it never was in the physical possession of the
property. But waiving this point and assuming that the possession of Ramirez, which he alleges in
his answer is the possession of the municipality, gives the municipality the rights of a possessor,
the question still arises, Who has the better right to the present possession of the property? The
plaintiff, in 1902, had been in the lawful possession thereof for more than thirty years and during
all that time its possession had never been questioned or disturbed. That possession has been
taken away from it and it has the right now to recover the possession from the persons who have
so deprived it of such possession, unless the latter can show that they have a better right thereto.
This was the preposition which was discussed and settled in the case of Bishop of Cebu vs.
Mangaron, 1 No. 1748, decided June 1, 1906. That decision holds that as against one who has
been in possession for the length of the plaintiff has been in possession, and who had been
deprived of his possession, and who can not produce any written evidence of title, the mere fact
that the defendant is in possession does not entitle the defendant to retain that possession. In
order that he may continue in possession, he must show a better right
thereto.chanroblesvirtualawlibrary chanrobles virtual law library
The evidence in this case does not show that the municipality has, as such, any right of whatever
in the property in question. It has produced no evidence of ownership. Its claim of ownership is
rested in its brief in this court upon the following propositions: That the property in question
belonged prior to the treaty of Paris to the Spanish Government; that by the treaty of Paris the
ownership thereof passed to the Government of the United States; that by section 12 of the act of
Congress of July 1, 1902, such property was transferred to the Government of the Philippine

4
Islands, and that by the circular of that Government, dated November 11, 1902, the ownership
and the right to the possession of this property passed to the municipality of Lagonoy. If, for the
purposes of the argument, we should admit that the other propositions are true, there is no
evidence whatever to support the last proposition, namely that the Government of the Philippine
Islands has transferred the ownership of this church to the municipality of Lagonoy. We have
found no circular of the date above referred to. The one of February 10, 1903, which is probably
the one intended, contains nothing that indicates any such transfer. As to the municipality of
Lagonoy, therefore, it is very clear that it has neither title, ownership, nor right of
possession.chanroblesvirtualawlibrary chanrobles virtual law library
(3) We have said that it would have no such title or ownership ever admitting that the Spanish
Government was the owner of the property and it has passed by the treaty of Paris to the
American Government. But this assumption is not true. As a matter of law, the Spanish
Government at the time the treaty of peace was signed, was not the owner of this property, nor of
any other property like it, situated in the Philippine Islands.chanroblesvirtualawlibrary chanrobles
virtual law libray
It does not admit of doubt that from the earliest times the parish churches in the Philippine Islands
were built by the Spanish Government. Law 2, title 2, book 1, of the Compilation of the Laws of
the Indies is, in part, as follows:

Having erected all the churches, cathedrals, and parish houses of the Spaniards and natives of
our Indian possessions from their discovery at the cost and expense of our royal treasury, and
applied for their service and maintenance the part of the tithes belonging to us by apostolic
concession according to the division we have made.
Law 3 of the same title to the construction of parochial churches such as the one in question.
That law is as follows:
The parish churches which was erected in Spanish towns shall be of durable and decent
construction. Their costs shall be divided and paid in three parts: One by our royal treasury,
another by the residents and Indian encomenderos of the place where such churches are
constructed, and the other part by the Indians who abide there; and if within the limits of a city,
village, or place there should be any Indians incorporated to our royal crown, we command that
for our part there be contributed the same amount as the residents and encomenderos,
respectively, contribute; and the residents who have no Indians shall also contribute for this
purpose in accordance with their stations and wealth, and that which is so given shall be
deducted from the share of the Indians should pay.
Law 11 of the same title is as follows:
We command that the part of the tithes which belongs to the fund for the erection of churches
shall be given to their superintendents to be expended for those things necessary for these
churches with the advice of the prelates and officials, and by their warrants, and not otherwise.
And we request and charge the archbishops and bishops not to interfere in the collection and
disbursement thereof, but to guard these structures.
Law 4, title 3, book 6, is as follows:
In all settlements, even though the Indians are few, there shall be erected a church where mass
can be decently held, and it shall have a donor with a key, notwithstanding the fact that it be the
subject to or separate from a parish.
Not only were all the parish churches in the Philippines erected by the King and under his
direction, but it was made unlawful to erect a church without the license of the King. This
provision is contained in Law 2, title 6, book 1, which is as follows:
Whereas it is our intention to erect, institute, found, and maintain all cathedrals, parish churches,
monasteries, votive hospitals, churches, and religious and pious establishments where they are
necessary for the teaching, propagation, and preaching of the doctrine of our sacred Roman

5
Catholic faith, and to aid to this effect with out royal treasury whenever possible, and to receive
information of such places where they should be founded and are necessary, and the
ecclesiastical patronage of all our Indies belonging to us: chanrobles virtual law library
We command that there shall not be erected, instituted, founded, or maintained any cathedral,
parish church, monastery, hospital, or votive churches, or other pious or religious establishment
without our express permission as is provided in Law 1, title 2, and Law 1, title 3, of this book,
notwithstanding any permission heretofore given by our viceroy or other ministers, which in this
respect we revoke and make null, void, and of no effect.
By agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies
were given by the former to the latter and the disposition made the King of the fund thus created
is indicated by Law 1, title 16, book 1, which is as follows:
Whereas the ecclesiastical tithes from the Indies belong to us by the apostolic concessions of the
supreme pontiffs, we command the officials of our royal treasury of those provinces to collect and
cause to be collected all tithes due and to become due from the crops and flocks of the residents
in the manner in which it has been the custom to pay the same, and from these tithes the
churches shall be provided with competent persons of good character to serve them and with all
ornaments and things which may be necessary for divine worship, to the end that these churches
may be well served and equipped, and we shall be informed of God, our Lord; this order shall be
observed where the contrary has not already been directed by us in connection with the erection
of churches.
That the condition of things existing by virtue of the Laws of the Indies was continued to the
present time is indicated by the royal order of the 31st of January, 1856, and by the royal order of
the 13th of August, 1876, both relating to the construction and repair of churches, there being
authority for saying that the latter order was in force in the Philippines.chanroblesvirtualaw

library chanrobles virtual law library

This church, and other churches similarly situated in the Philippines, having been erected by the
Spanish Government, and under its direction, the next question to be considered is, To whom did
these churches belong? chanrobles virtual law library
Title 28 of the third partida is devoted to the ownership of things and, after discussing what can be
called public property and what can be called private property, speaks, in Law 12, of those things
which are sacred, religious, or holy. That law is as follows:
Law XII. - HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY ANY
PERSON.chanroblesvirtualawlibrary chanrobles virtual law library
No sacred, religious, or holy thing, devoted to the service of God, can be the subject of ownership
by any man, nor can it be considered as included in his property holdings. Although the priests
may have such things in their possession, yet they are not the owners thereof. They, hold them
thus as guardians or servants, or because they have the care of the same and serve God in or
without them. Hence they were allowed to take from the revenues of the church and lands what
was reasonably necessary for their support; the balance, belonging to God, was to be devoted to
pious purposes, such as the feeding and clothing of the poor, the support of orphans, the
marrying of poor virgins to prevent their becoming evil women because of their poverty, and for
the redemption of captives and the repairing of the churches, and the buying of chalices, clothing,
books, and others things which they might be in need of, and other similar charitable purposes.
And then taking up for consideration the first of the classes in to which this law has divided these
things, it defines in Law 13, title 28, third partida, consecrated things. That law is as follows:
Sacred things, we say, are those which are consecrated by the bishops, such as churches, the
altars therein, crosses, chalices, censers, vestments, books, and all other things which are in
tended for the service of the church, and the title to these things can not be alienated except in
certain specific cases as we have already shown in the first partida of this book by the laws
dealing with this subject. We say further that even where a consecrated church is razed, the
ground upon which it formerly stood shall always be consecrated ground. But if any consecrated

6
church should fall into the hands of the enemies of our faith it shall there and then cease to be
sacred as long as the enemy has it under control, although once recovered by the Christians, it
will again become sacred, reverting to its condition before the enemy seized it and shall have all
the right and privileges formerly belonging to it.
That the principles of the partida in reference to churches still exist is indicated by Sanchez
Roman, whose work on the Civil Law contains the following statement:
First Group. Spiritual and corporeal or ecclesiastical. A. Spiritual. - From early times distinction
has been made by authors and by law between things governed by divine law, called divine, and
those governed by human law, called human, and although the former can not be the subject of
civil juridical relations, their nature and species should be ascertained either to identify them and
exclude them from such relations or because they furnish a complete explanation of the foregoing
tabulated statement, or finally because the laws of the partida deal with them.
Divine things are those which are either directly or indirectly established by God for his service
and sanctification of men and which are governed by divine or canonical laws. This makes it
necessary to divide them into spiritual things, which are those which have a direct influence on
the religious redemption of man such as the sacrament, prayers, fasts, indulgences, etc., and
corporeal or ecclesiastical, which are those means more or less direct for the proper religious
salvation of man.
7. First Group. Divine things. B. Corporeal or ecclesiastical things (sacred, religious, holy, and
temporal belonging to the church). - Corporeal or ecclesiastical things are so
divided.chanroblesvirtualawlibrary chanrobles virtual law library
( a) Sacred things are those devoted to God, religion, and worship in general, such as temples,
altars, ornaments, etc. These things can not be alienated except for some pious purpose and in
such cases as are provided for in the laws, according to which their control pertains to the
ecclesiastical authorities, and in so far as their use is concerned, to the believers and the clergy.
(2 Derecho Civil Espaol, Sanchez Roman, p. 480; 8 Manresa, Commentaries on the Spanish
Civil Code, p. 636; 3 Alcubilla, Diccionario de la Administracion Espaola, p. 486.)

The partidas defined minutely what things belonged to the public in general and what belonged to
private persons. In the first group churches are not named. The present Civil Code declares in
article 338 that property is of public or private ownership. Article 339, which defines public
property, is as follows:
Property of public ownership is - chanrobles virtual law library
1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges
constructed by the State, and banks, shores, roadsteads, and that of similar
character.chanroblesvirtualawlibrary chanrobles virtual law library
2. That belonging exclusively to the state without being for public use and which is destined to
some public service, or to the development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until their concession has been granted.
The code also defines the property of provinces and of pueblos, and in defining what property is
of public use, article 344 declares as follows:
Property for public use in provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public works of general
service supported by the said towns or provinces.chanroble

7
All other property possessed by either is patrimonial, and shall be governed by the provisions of
this code, unless otherwise prescribe in special laws.
It will be noticed that in either one of these articles is any mention made of churches. When the
Civil Code undertook to define those things in a pueblo which were for the common use of the
inhabitants of the pueblo, or which belonged to the State, while it mentioned a great many other
things, it did not mention churches.chanroblesvirtualawlibrary chanrobles virtual law library
It has been said that article 25 of the Regulations for the Execution of the Mortgage Law indicates
that churches belong to the State and are public property. That article is as follows:
There shall be excepted from the record required by article 2 of the law: chanrobles virtual law
First. Property which belongs exclusively to the eminent domain of the State, and which is for the
use of all, such as the shores of the sea, islands, rivers and their borders, wagon roads, and the
roads of all kinds, with the exception of railroads; streets, parks, public promenades, and
commons of towns, provided they are not lands of common profit to the inhabitants; walls of cities
and parks, ports, and roadsteads, and any other analogous property during the time they are in
common and general use, always reserving the servitudes established by law on the shores of
the sea and borders of navigable rivers.chanroblesvirtualawlibrary chanrobles virtual law library
Second. Public temples dedicated to the Catholic faith.
A reading of this article shows that far from proving that churches belong to the State and to the
eminent domain thereof, it proves the contrary, for, if they had belonged to the State, they would
have been included in the first paragraph instead of being placed in a paragraph by
themselves.chanroblesvirtualawlibrary chanrobles virtual law library
The truth is that, from the earliest times down to the cession of the Philippines to the United
States, churches and other consecrated objects were considered outside of the commerce of
man. They were not public property, nor could they be subjects of private property in the sense
that any private person could the owner thereof. They constituted a kind of property distinctive
characteristic
of
which
was
that
it
was
devoted
to
the
worship
of
God.chanroblesvirtualawlibrary chanrobles virtual law library
But, being material things was necessary that some one should have the care and custody of
them and the administration thereof, and the question occurs, To whom, under the Spanish law,
was intrusted that possession and administration? For the purposes of the Spanish law there was
only one religion. That was the religion professed by the Roman Catholic Church. It was for the
purposes of that religion and for the observance of its rites that this church and all other churches
in the Philippines were erected. The possession of the churches, their care and custody, and the
maintenance of religious worship therein were necessarily, therefore, intrusted to that body. It
was, by virtue of the laws of Spain, the only body which could under any circumstances have
possession of, or any control over, any church dedicated to the worship of God. By virtue of those
laws this possession and right of control were necessarily exclusive. It is not necessary or
important to give any name to this right of possession and control exercised by the Roman
Catholic Church in the church buildings of the Philippines prior to 1898. It is not necessary to
show that the church as a juridical person was the owner of the buildings. It is sufficient to say
that this right to the exclusive possession and control of the same, for the purposes of its creation,
existed.chanroblesvirtualawlibrary chanrobles virtual law library
The right of patronage, existing in the King of Spain with reference to the churches in the
Philippines, did not give him any right to interfere with the material possession of these
buildings.chanroblesvirtualawlibrary chanrobles virtual law library
Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo Real de las
Indias. There is nothing in any one of the fifty-one laws which compose this title which in any way
indicates that the King of Spain was the owner of the churches in the Indies because he had
constructed them. These laws relate to the right of presentation to ecclesiastical charges and
offices. For example, Law 49 of the title commences as follows:
Because the patronage and right of presentation of all archbishops, bishops, dignitaries,
prevents, curates, and doctrines and all other beneficiaries and ecclesiastical offices whatsoever

8
belong to us, no other person can obtain or possess the same without our presentation as
provided in Law 1 and other laws of this title.
Title 15 of the first partida treats of the right of patronage vesting in private persons, but there is
nothing in any one of its fifteen laws which in any way indicates that the private patron is the
owner of the church.chanroblesvirtualawlibrary chanrobles virtual law library
When it is said that this church never belonged to the Crown of Spain, it is not intended to say
that the Government and had no power over it. It may be that by virtue of that power of eminent
domain which is necessarily resides in every government, it might have appropriated this church
and other churches, and private property of individuals. But nothing of this kind was ever
attempted in the Philippines.chanroblesvirtualawlibrary chanrobles virtual law library
It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic Church had
by law the exclusive right to the possession of this church and it had the legal right to administer
the same for the purposes for which the building was consecrated. It was then in the full and
peaceful possession of the church with the rights aforesaid. That these rights were fully protected
by the treaty of Paris is very clear. That treaty, in article 8, provides, among other things, as
follows:
And it is hereby declared that the relinquishment or cession, as the case may be, to which the
preceding paragraph refers, can not in any respect impair the property or rights which by law
belong to the peaceful possession of property of all kinds, or provinces, municipalities, public or
private establishments, ecclesiastical or civic bodies, or any other associations having legal
capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of
private individuals, or whatsoever nationality such individuals may be.
It is not necessary, however, to invoke the provisions of that treaty. Neither the Government of the
United States, nor the Government of these Islands, has ever attempted in any way to interfere
with the rights which the Roman Catholic Church had in this building when Spanish sovereignty
ceased in the Philippines. Any interference that has resulted has been caused by private
individuals,
acting
without
any
authority
from
the
Government.chanroblesvirtualawlibrary chanrobles virtual law library
No point is made in the brief of the appellant that any distinction should be made between the
church and the convent. The convent undoubtedly was annexed to the church and, as to it, the
provisions of Law 19, title 2, book 1, of the Compilation of the Laws of the Indies would apply.
That law is as follows:
We command that the Indians of each town or barrio shall construct such houses as may be
deemed sufficient in which the priests of such towns or barrios may live comfortably adjoining the
parish church of the place where that may be built for the benefit of the priests in charge of such
churches and engaged in the education and conversion of their Indian parishioners, and they
shall not be alienated or devoted to any other purpose.
The evidence in this case makes no showing in regard to the cemetery. It is always mentioned in
connection with the church and convent and no point is made by the possession of the church
and convent, he is not also entitled to recover possession of the cemetery. So, without discussing
the question as to whether the rules applicable to churches are all respects applicable to
cemeteries, we hold for the purpose of this case that the plaintiff has the same right to the
cemetery that he has to the church.chanrobles

virtualawlibrary chanrobles virtual law library

(4) It is suggested by the appellant that the Roman Catholic Church has no legal personality in
the Philippine Islands. This suggestion, made with reference to an institution which antedates by
almost a thousand years any other personality in Europe, and which existed "when Grecian
eloquence still flourished in Antioch, and when idols were still worshiped in the temple of Mecca,"
does not require serious consideration. In the preamble to the budget relating to ecclesiastical

9
obligations, presented by Montero Rios to the Cortes on the 1st of October 1871, speaking of the
Roman Catholic Church, he says:
Persecuted as an unlawful association since the early days of its existence up to the time of
Galieno, who was the first of the Roman emperors to admit it among the juridicial entities
protected by the laws of the Empire, it existed until then by the mercy and will of the faithful and
depended for such existence upon pious gifts and offerings. Since the latter half of the third
century, and more particularly since the year 313, when Constantine, by the edict of Milan,
inaugurated an era of protection for the church, the latter gradually entered upon the exercise of
such rights as were required for the acquisition, preservation, and transmission of property the
same as any other juridical entity under the laws of the Empire. (3 Dictionary of Spanish
Administration, Alcubilla, p. 211. See also the royal order of the 4th of December, 1890, 3
Alcubilla, 189.)
The judgment of the court below is affirmed, with the costs of this instance against the appellant.
After the expiration of twenty days from the date hereof let judgment be entered in accordance
herewith, and ten days thereafter the record be remanded to the court below for execution. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library
Arellano, C.J., Torres, Mapa and Tracey, JJ., concur.
Johnson, J., reserves his vote. chanrobles virtual law library

2. Sunio vs. NLRC

127 SCRA 391
FIRST DIVISION
G.R. No. L-57767 January 31, 1984
ALBERTO S. SUNIO and ILOCOS COMMERCIAL CORPORATION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NEMESIO VALENTON, SANTOS DEL
ROSARIO, VICENTE TAPUCOL, ANDRES SOLIS, CRESCENCIO SOLLER, CECILIO
LABUNI, SOTERO L. TUMANG, in his capacity as Asst. Regional Director for
Arbitration, Regional Office No. 1, Ministry of Labor & Employment, and AMBROSIO B.
SISON, in his capacity as Acting Regional Sheriff, Regional Office No. 1, Ministry of
Labor & Employment, respondents.
MELENCIO-HERRERA, J.:
In this special civil action for certiorari and Prohibition with Preliminary Injunction, petitioners
Alberto Sunio and Ilocos Commercial Corporation seek to set aside the Resolution of March
24, 1981 of the National Labor Relations Commission (NLRC), which affirmed the Decision
of the Assistant Regional Director, dated November 5, 1979, in NLRC Case No. RB-1-122878, directing petitioners and Cabugao Ice Plant Incorporated to reinstate private respondents
to their former position without loss of seniority and privileges and to pay them backwages
from February 1, 1978 to the date of their actual reinstatement.
The controversy arose from the following antecedents:
On July 30,1973, EM Ramos & Company, Inc. (EMRACO for brevity) and Cabugao Ice Plant,
Inc. (CIPI for short), sister corporations, sold an ice plant to Rizal Development and Finance
Corporation RDFC with a mortgage on the same properties constituted by the latter in favor
of the former to secure the payment of the balance of the purchase price. 1
By virtue of that sale, EMRACO-CIPI terminated the services of all their employees including
private respondents herein, and paid them their separation pay. RDFC hired its own own
employees and operated the plant.

10

On November 28, 1973, RDFC sold the ice plant to petitioner Ilocos Commercial Corporation
ICC headed by its President and General Manager, petitioner Alberto S. Sunio. Petitioners
also hired their own employees as private respondents were no longer in the plant. The sale
was subject to the mortgage in favor of EMRACO-CIPI. Both RDFC-ICC failed to pay the
balance of the purchase price, as a consequence of which, EMRACO-CIPI instituted
extrajudicial foreclosure proceedings. The properties were sold at public auction on August
30, 1974, the highest bidders being EMRACO CIPI. On the same date, said companies
obtained an ex-parte Writ of Possession from the Court of First Instance of Ilocos Sur in Civil
Case No. 3026-V.
On the same date, August 30, 1974, EMRACO-CIPI sold the ice plant to Nilo Villanueva,
suspect to the right of redemption of RDFC. Nilo Villanueva then re-hired private
respondents.
On August 27, 1975, RDFC redeemed the ice plant. Because of the gate to Nilo Villanueva,
EMRACO-CIPI were unable to turn over possession to RDFC and/or petitioners, prompting
the latter to file a complaint for recovery of possession against EMRACO-CIPI with the then
Court of First Instance of Ilocos Sur (Civil Case No. 81-KC). Nilo Villanueva intervened
Said Court ordered the issuance of a Writ of Preliminary Mandatory Injunction placing RDFC
in possession of the ice plant. EMPRACO-CIPI and Villanueva appealed to the Court of
Appeals (CA-GR No. 05880- SP which upheld the questionee, Order. A Petition for certiorari
with this Court (L-46376) assailing that Resolution was denied for lack of merit or January 6,
1978.
On February 1, 1978, RDFC and petitioners finally obtains possession of the ice plant by
virtue of the Mandatory Injunction previously issued, which ordered defendant "particularly
Nilo C. Villanueva and his agents representatives, or any person found in the premises to
vacate and surrender the property in litigation." 2Petitioners did not re-employ private
respondents.
Private respondents filed complaints against petitioners for illegal dismissal with the Regional
Office, Ministry of Labor & Employment, San Fernando, La Union.
On November 5, 1979, the Assistant Regional Director rendered a decision the decretal
portion of which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, respondents Cabugao
Ice Plant, Inc., Ilocos Commercial Corporation and/or Alberto Sunio, are
hereby directed to reinstate the complainants to their former positions without
loss of seniority privileges and to pay their backwages from February 1, 1978
to the date when they are actually reinstated
Petitioners appealed to the NLRC, which affirmed the Regional Director's decision and
dismissed the appeal for lack of merit on March 24, 1981 reasoning that when RDFC took
possession of the property and private respondents were terminated in 1973, the latter
already had a vested right to their security of tenure, and when they were rehired those
rights continued. 3
Petitioners are now before us assailing the Asst. Regional Director's Decision, dated
November 5, 1979, the Resolution of the NLRC, Second Division, dated March 24, 1981, as
well as the Writ of Execution issued pursuant thereto dated July 14, 1981, for P156,720.80
representing backwages. They raise as lone issue:
That respondent National Labor Relations Commission and/or Asst. Regional
Director Sotero Tumang acted in excess of jurisdiction and/or with grave
abuse of discretion amounting to lack of jurisdiction in rendering the decision
and the resolution in NLRC Case No. RB-1-1228-78, and in ordering the
execution of said decision

11

We issued a Temporary Restraining Order to maintain the status quo, resolved to give due
course to the Petition, and required the parties to submit their respective Briefs. Only
petitioners have complied.
Did public respondents' act with grave abuse of on amounting to lack of jurisdiction in
ordering the reinstatement of private respondents and the payment of their backwages?
Petitioners deny any employer-employee relationship with private respondents arguing that
no privity of contract exists between them, the latter being the employees of Nilo Villanueva
who re-hired them when he took over the operation of the ice plant from CIPI; that private
respondents should go after Nilo Villanueva for whatever rights they may be entitled to, or
the CIPI which is still existing, that no succession of rights and obligations took place
between Villanueva and petitioners as the transfer of possession was a consequence of the
exercise of the right of redemption; that the amount of backwages was determined without
petitioners being given a chance to be heard and that granting that respondents are entitled
to the reliefs adjudged, such award cannot be enforced against petitioner Sunio, who was
impleaded in the complaint as the General Manager of ICC.
Public respondent, in its Comment, countered that the sale of a business of 'a going concern
does not ipso factoterminate employer-employee relations when the successor-employer
continues the business operation of the predecessor-employer in an essentially unchanged
manner. Private respondents argue that the change of management or ownership of a
business entity is not one of the just causes for the termination of services of employees
under Article 283 of the Labor Code, as amended. Both respondents additionally claim that
petitioner Sunio, as the General Manager of ICC and owner of one half (1/2) of its interest, is
personally liable for his malicious act of illegally dismissing private respondents, for no
ground exists to justify their termination.
We sustain petitioners.
It is true that the sale of a business of a going concern does not ipso facto terminate the
employer-employee relations insofar as the successor-employer is concerned, and that
change of ownership or management of an establishment or company is not one of the just
causes provided by law for termination of employment. The situation here, however, was not
one of simple change of ownership. Of note is the fact that when, on July 30, 1973,
EMRACO-CIPI sold the plant to RDFC, CIPI had terminated the services of its employees,
including herein private respondents, giving them their separation pay which they had
accepted. When RDFC took over ownership and management, therefore, it hired its own
employees, not the private respondents, who were no longer there. RDFC subsequently sold
the property to petitioners on November 28, 1973. But by reason of their failure to pay the
balance of the purchase price, EMRACO-CIPI foreclosed on the mortgage over the ice plant;
the property was sold at public auction to EMRACO-CIPI as the highest bidders, and they
eventually re-possessed the plant on August 30, 1974. During all the period that RDFC and
petitioners were operating the plant from July 30, 1973 to August 30, 1974, they had their
own employees. CIPI-EMRACO then sold the plant, also on August 30, 1974, to Nilo
Villanueva, subject to RDFC's right of redemption. Nilo Villanueva then rehired private
respondents as employees of the plant, also in 1974.
In 1975, RDFC redeemed the property and demanded possession but EMRACO-CIPI and
Nilo Villanueva resisted so that petitioners were compelled to sue for recovery of possession,
obtaining it, however, only in 1978.
Under those circumstances, it cannot be justifiably said that the plant together with its staff
and personnel moved from one ownership to another. No succession of employment rights

12
and obligations can be said to have taken place between EMRACO-CIPI-Nilo Villanueva, on
the one hand, and petitioners on the other. Petitioners eventually acquired possession by
virtue of the exercise of their right of redemption and of a Mandatory Injunction in their favor
which ordered Nilo Villanueva and "any person found in the premises" to vacate. What is
more, when EMRACO-CIPI sold the ice plant to RDFC in 1973, private respondents'
employment was terminated by EMRACO-CIPI and they were given their separation pay,
which they accepted. During the thirteen months, therefore, that RDFC and petitioners were
in possession and operating the plant up to August, 1974, they hired their own employees,
not the private respondents. In fact, it may even be said that private respondents had slept
on their rights when they failed to contest such termination at the time of sale, if they
believed they had rights to protect. Further, Nilo Villanueva rehired private respondents in
August, 1974, subject to a resolutory condition. That condition having arisen, the rights of
private respondents who claim under him mast be deemed to have also ceased.

Private respondents can neither successfully invoke security of tenure in their favor. Their
tenure should not be reckoned from 1967 because they were already terminated in 1973.
Private respondents were only rehired in 1974 by Nilo Villanueva. Petitioners took over by
judicial process in 1978 so that private respondents had actually only four years of rehired
employment with Nilo Villanueva, during all of which period, petitioners fought hard against
Nilo Villanueva to recover possession of the plant. Insofar as petitioners are concerned
therefore, there was no tenurial security to speak of that would entitle private respondents to
reinstatement and backwages. We come now to the personal liability of petitioner, Sunio,
who was made jointly and severally responsible with petitioner company and CIPI for the
payment of the backwages of private respondents. This is reversible error. The Assistant
Regional Director's Decision failed to disclose the reason why he was made personally
liable. Respondents, however, alleged as grounds thereof, his being the owner of one-half
(1/2) interest of said corporation, and his alleged arbitrary dismissal of private respondents.
Petitioner Sunio was impleaded in the Complaint his capacity as General Manager of
petitioner corporation. where appears to be no evidence on record that he acted maliciously
or in bad faith in terminating the services of private respondents. His act, therefore, was
within the scope of his authority and was a corporate act.
It is basic that a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to which it
may be related. 4 Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality. 5 Petitioner Sunio, therefore, should not have been made
personally answerable for the payment of private respondents' back salaries.
WHEREFORE, the assailed Decision and Resolution, dated November 5, 1979 and March
24, 1981, respectively, and the consequent Writ of Execution are hereby SET ASIDE and the
Temporary Restraining Order heretofore issued by this Court hereby made permanent.
Public respondents are hereby ordered to return to petitioners the latter's levied properties in
their possession. No costs.
SO ORDERED.
Teehankee (Chairman), Plana, Relova and Gutierrez, Jr., JJ., concur.

3. Luxuria Homes Inc. vs. CA

302 SCRA 315

DECISION
MARTINEZ, J.:

13
This petition for review assails the decision of the respondent Court of Appeals dated March
15, 1996,[1] which affirmed with modification the judgment of default rendered by the Regional
Trial Court of Muntinlupa, Branch 276, in Civil Case No. 92-2592 granting all the reliefs prayed for
in the complaint of private respondent James Builder Construction and/or Jaime T. Bravo.
As culled from the record, the facts are as follows:
Petitioner Aida M. Posadas and her two (2) minor children co-owned a 1.6 hectare property
in Sucat, Muntinlupa, which was occupied by squatters. Petitioner Posadas entered into
negotiations with private respondent Jaime T. Bravo regarding the development of the said
property into a residential subdivision. On May 3, 1989, she authorized private respondent to
negotiate with the squatters to leave the said property. With a written authorization, respondent
Bravo buckled down to work and started negotiations with the squatters.
Meanwhile, some seven (7) months later, on December 11, 1989, petitioner Posadas and
her two (2) children, through a Deed of Assignment, assigned the said property to petitioner
Luxuria Homes, Inc., purportedly for organizational and tax avoidance purposes. Respondent
Bravo signed as one of the witnesses to the execution of the Deed of Assignment and the Articles
of Incorporation of petitioner Luxuria Homes, Inc.

Then sometime in 1992, the harmonious and congenial relationship of petitioner Posadas
and respondent Bravo turned sour when the former supposedly could not accept the
management contracts to develop the 1.6 hectare property into a residential subdivision, the latter
was proposing. In retaliation, respondent Bravo demanded payment for services rendered in
connection with the development of the land. In his statement of account dated 21 August
1991[2] respondent demanded the payment of P1,708,489.00 for various services rendered, i.e.,
relocation of squatters, preparation of the architectural design and site development plan, survey
and fencing.
Petitioner Posadas refused to pay the amount demanded. Thus, in September 1992, private
respondents James Builder Construction and Jaime T. Bravo instituted a complaint for specific
performance before the trial court against petitioners Posadas and Luxuria Homes, Inc. Private
respondents alleged therein that petitioner Posadas asked them to clear the subject parcel of
land of squatters for a fee ofP1,100,000.00 for which they were partially paid the amount
of P461,511.50, leaving a balance of P638,488.50. They were also supposedly asked to prepare
a site development plan and an architectural design for a contract price of P450,000.00 for which
they were partially paid the amount of P25,000.00, leaving a balance of P425,000.00. And in
anticipation of the signing of the land development contract, they had to construct a bunkhouse
and warehouse on the property which amounted to P300,000.00, and a hollow blocks factory
for P60,000.00. Private respondents also claimed that petitioner Posadas agreed that private
respondents will develop the land into a first class subdivision thru a management contract and
that petitioner Posadas is unjustly refusing to comply with her obligation to finalize the said
management contract.
The prayer in the complaint of the private respondents before the trial court reads as follows:
WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that after
hearing/trial judgment be rendered ordering defendant to:
a) Comply with its obligation to deliver/finalize Management Contract of its land in Sucat,
Muntinlupa, Metro Manila and to pay plaintiff its balance in the amount of P1,708,489.00;

14
b) Pay plaintiff moral and exemplary damages in the amount of P500,000.00;
c) Pay plaintiff actual damages in the amount of P500,000.00 (Bunkhouse/warehouse
P300,000.00, Hollow-block factory P60,000.00, lumber, cement, etc., P120,000.00, guard
P20,000.00);
d) Pay plaintiff attorneys fee of P50,000 plus P700 per appearance in court and 5% of that which
may be awarded by the court to plaintiff re its monetary claims;
e) Pay cost of this suit.[3]
On September 27, 1993, the trial court declared petitioner Posadas in default and allowed
the private respondents to present their evidence ex-parte. On March 8, 1994, it ordered
petitioner Posadas, jointly and in solidum with petitioner Luxuria Homes, Inc., to pay private
respondents as follows:
1. x x x the balance of the payment for the various services performed by Plaintiff with respect to
the land covered by TCT NO. 167895 previously No. 158290 in the total amount
of P1,708,489.00.
2. x x x actual damages incurred for the construction of the warehouses/bunks, and for the
materials used in the total sum of P1,500,000.00.
3. Moral and exemplary damages of P500,000.00.
4. Attorneys fee of P50,000.00.
5. And cost of this proceedings.
Defendant Aida Posadas as the Representative of the Corporation Luxuria Homes, Incorporated,
is further directed to execute the management contract she committed to do, also in consideration
of the various undertakings that Plaintiff rendered for her. [4]

Aggrieved by the aforecited decision, petitioners appealed to respondent Court of Appeals,

which, as aforestated, affirmed with modification the decision of the trial court. The appellate
court deleted the award of moral damages on the ground that respondent James Builder
Construction is a corporation and hence could not experience physical suffering and mental
anguish. It also reduced the award of exemplary damages. The dispositive portion of the
decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the modification that the
award of moral damages is ordered deleted and the award of exemplary damages to the
plaintiffs-appellee should only be in the amount of FIFTY THOUSAND (P50,000.00) PESOS.[5]
Petitioners motion for reconsideration was denied, prompting the filing of this petition for
review before this Court.
On January 15, 1997, the Third Division of this Court denied due course to this petition for
failing to show convincingly any reversible error on the part of the Court of Appeals. This Court
however deleted the grant of exemplary damages and attorneys fees. The Court also reduced
the trial courts award of actual damages from P1,500,000.00 to P500,000.00 reasoning that the
grant should not exceed the amount prayed for in the complaint. In the prayer in the complaint
respondents asked for actual damages in the amount of P500,000.00 only.
Still feeling aggrieved with the resolution of this Court, petitioners filed a motion for
reconsideration. On March 17, 1997, this Court found merit in the petitioners motion for
reconsideration and reinstated this petition for review.

15
From their petition for review and motion for reconsideration before this Court, we now
synthesize the issues as follows:
1. Were private respondents able to present ex-parte sufficient evidence
substantiate the allegations in their complaint and entitle them to their prayers?

to

2. Can petitioner Luxuria Homes, Inc., be held liable to private respondents for the
transactions supposedly entered into between petitioner Posadas and private respondents?
3. Can petitioners be compelled to enter into a management contract with private
respondents?
Petitioners who were declared in default assert that the private respondents who presented
their evidence ex-parte nonetheless utterly failed to substantiate the allegations in their complaint
and as such cannot be entitled to the reliefs prayed for.
A perusal of the record shows that petitioner Posadas contracted respondents Bravo to
render various services for the initial development of the property as shown by vouchers
evidencing payments made by petitioner Posadas to respondents Bravo for squatter relocation,
architectural design, survey and fencing.
Respondents prepared the architectural design, site development plan and survey in
connection with petitioner Posadas application with the Housing and Land Regulatory Board
(HLRUB) for the issuance of the Development Permit, Preliminary Approval and Locational
Clearance.[6] Petitioner benefited from said services as the Development Permit and the
Locational Clearance were eventually issued by the HLURB in her favor. Petitioner Posadas is
therefore liable to pay for these services rendered by respondents. The contract price for the
survey of the land is P140,000.00. Petitioner made partial payments totaling P130,000.00 leaving
a payable balance of P10,000.00.
In his testimony,[7] he alleged that the agreed price for the preparation of the site
development plan is P500,000.00 and that the preparation of the architectural designs is
for P450,000, or a total ofP950,000.00 for the two contracts. In his complaint however,
respondent Bravo alleged that he was asked to prepare the site development plan and the
architectural designs x x x for a contract price ofP450,000.00 x x x.[8] The discrepancy or
inconsistency was never reconciled and clarified.
We reiterate that we cannot award an amount higher than what was claimed in the
complaint. Consequently for the preparation of both the architectural design and site
development plan, respondent is entitled to the amount of P450,000.00 less partial payments
made in the amount of P25,000.00. In Policarpio v. RTC of Quezon City,[9] it was held that a
court is bereft of jurisdiction to award, in a judgment by default, a relief other than that specifically
prayed for in the complaint.

As regards the contracts for the ejectment of squatters and fencing, we believe however that
respondents failed to show proof that they actually fulfilled their commitments therein. Aside from
the bare testimony of respondent Bravo, no other evidence was presented to show that all the
squatter were ejected from the property. Respondent Bravo failed to show how many shanties or
structures were actually occupying the property before he entered the same, to serve as basis for

16
concluding whether the task was finished or not. His testimony alone that he successfully
negotiated for the ejectment of all the squatters from the property will not suffice.
Likewise, in the case of fencing, there is no proof that it was accomplished as
alleged. Respondent Bravo claims that he finished sixty percent (60%) of the fencing project but
he failed to present evidence showing the area sought to be fenced and the actual area fenced by
him. We therefore have no basis to determining the veracity respondents allegations. We
cannot assume that the said services rendered for it will be unfair to require petitioner to pay the
full amount claimed in case the respondents obligations were not completely fulfilled.
For respondents failure to show proof of accomplishment of the aforesaid services, their
claims cannot be granted. In P.T. Cerna Corp. v. Court of Appeals,[10] we ruled that in civil
cases, the burden of proof rests upon the party who, as determined by the pleadings or the
nature of the case, asserts the affirmative of an issue. In this case the burden lies on the
complainant, who is duty bound to prove the allegations in the complaint. As this Court has held,
he who alleges a fact has the burden of proving it and A MERE ALLEGATION IS NOT
EVIDENCE.
And the rules do not change even if the defendant is declared in default. In the leading case
of Lopez v. Mendezona,[11] this Court ruled that after entry of judgment in default against a
defendant who has neither appeared nor answered, and before final judgment in favor of the
plaintiff, the latter must establish by competent evidence all the material allegations of his
complaint upon which he bases his prayer for relief. In De los Santos v. De la Cruz[12] this Court
declared that a judgment by default against a defendant does not imply a waiver of rights except
that of being heard and of presenting evidence in his favor. It does not imply admission by the
defendant of the facts and causes of action of the plaintiff, because the codal section requires the
latter to adduce his evidence in support of his allegations as an indispensable condition before
final judgment could be given in his favor. Nor could it be interpreted as an admission by the
defendant that the plaintiffs causes of action finds support in the law or that the latter is entitled to
the relief prayed for.
We explained the rule in judgments by default in Pascua v. Florendo,[13] where we said that
nowhere is it stated that the complainants are automatically entitled to the relief prayed for, once
the defendants are declared in default. Favorable relief can be granted only after the court has
ascertained that the evidence offered and the facts proven by the presenting party warrant the
grant of the same. Otherwise it would be meaningless to require presentation of evidence if
everytime the other party is declared in default, a decision would automatically be rendered in
favor of the non-defaulting party and exactly according to the tenor of his prayer. In Lim Tanhu
v. Ramolete[14] we elaborated and said that a defaulted defendant is not actually thrown out of
court. The rules see to it that any judgment against him must be in accordance with law. The
evidence to support the plaintiffs cause is, of course, presented in his absence, but the court is
not supposed to admit that which is basically incompetent. Although the defendant would not be
in a position to object, elementary justice requires that only legal evidence should be considered
against him. If the evidence presented should not be sufficient to justify a judgment for the
plaintiff, the complaint must be dismissed. And if an unfavorable judgment should be justifiable, it
cannot exceed the amount or be different in kind from what is prayed for in the complaint.
The prayer for actual damages in the amount of P500,000.00, supposedly for the
bunkhouse/warehouse, hollow-block factory, lumber, cement, guard, etc., which the trial court
granted and even increased to P1,500,000.00, and which this Court would have rightly reduced to
the amount prayed for in the complaint, was not established, as shown upon further review of the
record. No receipts or vouchers were presented by private respondents to show that they
actually spent the amount. In Salas v. Court of Appeals,[15] we said that the burden of proof of
the damages suffered is on the party claiming the same. It his duty to present evidence to
support his claim for actual damages. If he failed to do so, he has only himself to blame if no
award for actual damages is handed down.
In fine, as we declared in PNOC Shipping & Transport Corp. v. Court of Appeals,[16] basic
is the rule that to recover actual damages, the amount of loss must not only be capable of proof
but must actually be proven with reasonable degree of certainty, premised upon competent proof
or best evidence obtainable of the actual amount thereof.

17

We go to the second issue of whether Luxuria Homes, Inc., was a party to the transactions
entered into by petitioner Posadas and private respondents and thus could be held jointly and
severally with petitioner Posadas. Private respondents contend that petitioner Posadas
surreptitiously formed Luxuria Homes, Inc., and transferred the subject parcel of land to it to
evade payment and defraud creditors, including private respondents. This allegation does not
find support in the evidence on record.
On the contrary we hold that respondents Court of Appeals committed a reversible error
when it upheld the factual finding of the trial court that petitioners liability was aggravated by the
fact that Luxuria Homes, Inc., was formed by petitioner Posadas after demand for payment had
been made, evidently for her to evade payment of her obligation, thereby showing that the
transfer of her property to Luxuria Homes, Inc., was in fraud of creditors.
We easily glean from the record that private respondents sent demand letters on 21 August
1991 and 14 September 1991, or more than a year and a half after the execution of the Deed of
Assignment on 11 December 1989, and the issuance of the Articles of Incorporation of petitioner
Luxuria Homes on 26 January 1990. And, the transfer was made at the time the relationship
between petitioner Posadas and private respondents was supposedly very pleasant. In fact the
Deed of Assignment dated 11 December 1989 and the Articles of Incorporation of Luxuria Homes,
Inc., issued 26 January 1990 were both signed by respondent Bravo himself as witness. It
cannot be said then that the incorporation of petitioner Luxuria Homes and the eventual transfer
of the subject property to it were in fraud of private respondent as such were done with the full
knowledge of respondent Bravo himself.
Besides petitioner Posadas is not the majority stockholder of petitioner Luxuria Homes, Inc.,
as erroneously stated by the lower court. The Articles of Incorporation of petitioner Luxuria
Homes, Inc., clearly show that petitioner Posadas owns approximately 33% only of the capital
stock. Hence petitioner Posadas cannot be considered as an alter ego of petitioner Luxuria
Homes, Inc.
To disregard the separate juridical personality of a corporation, the wrongdoing must be
clearly and convincingly established. It cannot be presumed. This is elementary. Thus in BayerRoxas v. Court of Appeals,[17] we said that the separate personality of the corporation may be
disregarded only when the corporation is used as a cloak or cover for fraud or illegality, or to work
injustice, or where necessary for the protection of the creditors. Accordingly in Del Rosario v.
NLRC,[18] where the Philsa International Placement and Services Corp. was organized and
registered with the POEA in 1981, several years before the complainant was filed a case in 1985,
we held that this cannot imply fraud.
Obviously in the instant case, private respondents failed to show proof that petitioner
Posadas acted in bad faith. Consequently since private respondents failed to show that petitioner
Luxuria Homes, Inc., was a party to any of the supposed transactions, not even to the agreement
to negotiate with and relocate the squatters, it cannot be held liable, nay jointly and in solidum, to
pay private respondents. In this case since it was petitioner Aida M. Posadas who contracted
respondent Bravo to render the subject services, only she is liable to pay the amounts adjudged
herein.
We now resolved the third and final issue. Private respondents urge the court to compel
petitioners to execute a management contract with them on the basis of the authorization letter
dated May 3, 1989. The full text of Exh D reads:
I hereby certify that we have duly authorized the bearer, Engineer Bravo to negotiate, in our
behalf, the ejectment of squatters from our property of 1.6 hectares, more or less, in Sucat,
Muntinlupa. This authority is extended to him as the representatives of the Managers, under our
agreement for them to undertake the development of said area and the construction of housing
units intended to convert the land into a first class subdivision.

18
The aforecited document is nothing more than a to-whom-it-may-concern authorization
letter to negotiate with the squatters. Although it appears that there was an agreement for the
development of the area, there is no showing that same was never perfected and
finalized. Private respondents presented in evidence only drafts of a proposed management
contract with petitioners handwritten marginal notes but the management contract was not put in
its final form. The reason why there was no final uncorrected draft was because the parties could
not agree on the stipulations of said contract, which even the private respondents admitted as
found by the trial court.[19] As a consequence the management drafts submitted by the private
respondents should at best be considered as mere unaccepted offers. We find no cogent reason,
considering that the parties no longer are in a harmonious relationship, for the execution of a
contract to develop a subdivision.

It is fundamental that there can be no contract in the true sense in the absence of the
element of agreement, or of mutual assent of the parties. To compel petitioner Posadas, whether
as representatives of petitioners Luxuria Homes or in her personal capacity, to execute a
management contract under the terms and conditions of private respondents would be to violate
the principle of consensuality of contracts. In Philippine National bank v. Court of Appeals,
[20]
we held that if the assent is wanting on the part of one who contracts, his act has no more
efficacy than if it had been done under duress or by a person of unsound mind. In ordering
petitioner Posadas to execute a management contract with private respondents, the trial court in
effect is putting her under duress.
The parties are bound to fulfill the stipulations in a contract only upon its perfection. At
anytime prior to the perfection of a contract, unaccepted offers and proposals remain as such and
cannot be considered as binding commitments; hence not demandable.
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision dated March
15, 1996, of respondent Honorable Court of Appeals and its Resolution dated August 12, 1996,
are MODIFIED ordering PETITIONER AIDA M. POSADAS to pay PRIVATE RESPONDENTS the
amount of P435,000.00 as balance for the preparation of the architectural design, site
development plan and survey. All other claims of respondents are hereby DENIED for lack of
merit.
SO ORDERED
Melo, Kapunan, and Pardo, JJ., concur.
Davide, Jr., C.J. (Chairman), no part former counsel of a party.

4. Cease vs. CA et al.

93 SCRA 483 (Oct. 18, 1979)

G.R. No. L-33172 October 18, 1979
ERNESTO CEASE, CECILIA CEASE, MARION CEASE, TERESA CEASE-LACEBAL and the
F.L. CEASE PLANTATION CO., INC. as Trustee of properties of the defunct TIAONG
MILLING
&
PLANTATION
CO.,petitioners,
vs.
HONORABLE COURT OF APPEALS, (Special Seventh Division), HON. MANOLO L.
MADDELA, Presiding Judge, Court of First Instance of Quezon, BENJAMIN CEASE and
FLORENCE CEASE, respondents.
GUERRERO, J:

19
Appeal by certiorari from the decision of the Court of Appeals in CA-G.R. No. 45474, entitled
"Ernesto Cease, et al. vs. Hon. Manolo L. Maddela, Judge of the Court of First Instance of
Quezon, et al." 1 which dismissed the petition for certiorari, mandamus, and prohibition instituted
by the petitioners against the respondent judge and the private respondents.
The antecedents of the case, as found by the appellate court, are as follows:
IT RESULTING: That the antecedents are not difficult to understand; sometime in
June 1908, one Forrest L. Cease common predecessor in interest of the parties
together with five (5) other American citizens organized the Tiaong Milling and
Plantation Company and in the course of its corporate existence the company
acquired various properties but at the same time all the other original
incorporators were bought out by Forrest L. Cease together with his children
namely Ernest, Cecilia, Teresita, Benjamin, Florence and one Bonifacia Tirante
also considered a member of the family; the charter of the company lapsed in
June 1958; but whether there were steps to liquidate it, the record is silent; on 13
August 1959, Forrest L. Cease died and by extrajudicial partition of his shares,
among the children, this was disposed of on 19 October 1959; it was here where
the trouble among them came to arise because it would appear that Benjamin
and Florence wanted an actual division while the other children wanted

reincorporation; and proceeding on that, these other children Ernesto, Teresita

and Cecilia and aforementioned other stockholder Bonifacia Tirante proceeded to
incorporate themselves into the F.L. Cease Plantation Company and registered it
with the Securities and Exchange Commission on 9 December, 1959; apparently
in view of that, Benjamin and Florence for their part initiated a Special
Proceeding No. 3893 of the Court of First Instance of Tayabas for the settlement
of the estate of Forest L. Cease on 21 April, 1960 and one month afterwards on
19 May 1960 they filed Civil Case No. 6326 against Ernesto, Teresita and Cecilia
Cease together with Bonifacia Tirante asking that the Tiaong Milling and
Plantation Corporation be declared Identical to F.L. Cease and that its properties
be divided among his children as his intestate heirs; this Civil Case was resisted
by aforestated defendants and notwithstanding efforts of the plaintiffs to have the
properties placed under receivership, they were not able to succeed because
defendants filed a bond to remain as they have remained in possession; after
that and already, during the pendency of Civil Case No. 6326 specifically on 21
May, 1961 apparently on the eve of the expiry of the three (3) year period
provided by the law for the liquidation of corporations, the board of liquidators of
Tiaong Milling executed an assignment and conveyance of properties and trust
agreement in favor of F.L. Cease Plantation Co. Inc. as trustee of the Tiaong
Milling and Plantation Co. so Chat upon motion of the plaintiffs trial Judge
ordered that this alleged trustee be also included as party defendant; now this
being the situation, it will be remembered that there were thus two (2)
proceedings pending in the Court of First Instance of Quezon namely Civil Case
No. 6326 and Special Proceeding No. 3893 but both of these were assigned to
the Honorable Respondent Judge Manolo L. Maddela p. 43 and the case was
finally heard and submitted upon stipulation of facts pp, 34-110, rollo; and trial
Judge by decision dated 27 December 1969 held for the plaintiffs Benjamin and
Florence, the decision containing the following dispositive part:

20
VIEWED IN THE LIGHT OF ALL THE FOREGOING, judgment is
hereby rendered in favor of plaintiffs and against the defendants
declaring that:
1) The assets or properties of the defunct Tiaong Milling and
Plantation Company now appearing under the name of F.L.
Cease Plantation Company as Trustee, is the estate also of the
deceased Forrest L. Cease and ordered divided, share and
share alike, among his six children the plaintiffs and the
defendants in accordance with Rule 69, Rules of Court;
2) The Resolution to Sell dated October 12, 1959 and the
Transfer and Conveyance with Trust Agreement is hereby set
aside as improper and illegal for the purposes and effect that it
was intended and, therefore, null and void;
3) That F.L. Cease Plantation Company is removed as 'Trustee
for interest against the estate and essential to the protection of
plaintiffs' rights and is hereby ordered to deliver and convey all
the properties and assets of the defunct Tiaong Milling now
under its name, custody and control to whomsoever be
appointed as Receiver - disqualifying and of the parties herein the latter to act accordingly upon proper assumption of office;
and
4) Special Proceedings No. 3893 for administration is terminated
and dismissed; the instant case to proceed but on issues of
damages only and for such action inherently essential for
partition.
SO ORDERED.
Lucena City, December 27, 1969., pp. 122-a-123, rollo.

upon receipt of that, defendants there filled a notice of appeal p. 129, rollo
together with an appeal bond and a record on appeal but the plaintiffs moved to
dismiss the appeal on the ground that the judgment was in fact interlocutory and
not appealable p. 168 rollo and this position of defendants was sustained by trial
Judge, His Honor ruling that
IN VIEW OF THE FOREGOING, the appeal interposed by
plaintiffs is hereby dismissed as premature and the Record on
Appeal is necessarily disapproved as improper at this stage of
the proceedings.
SO ORDERED.
Lucena City, April 27, 1970.
and so it was said defendants brought the matter first to the Supreme Court, on
mandamus on 20 May, 1970 to compel the appeal and certiorari and prohibition
to annul the order of 27 April, 1970 on the ground that the decision was "patently
erroneous" p. 16, rollo; but the Supreme Court remanded the case to this Court
of Appeals by resolution of 27 May 1970, p. 173, and this Court of Appeals on 1
July 1970 p. 175 dismissed the petition so far as the mandamus was concerned
taking the view that the decision sought to be appealed dated 27 December,

21
1969 was interlocutory and not appealable but on motion for reconsideration of
petitioners and since there was possible merit so far as its prayer for certiorari
and prohibition was concerned, by resolution of the Court on 19 August, 1970, p.
232, the petition was permitted to go ahead in that capacity; and it is the position
of petitioners that the decision of 27 December, 1969 as well as the order of 27
April, 1970 suffered of certain fatal defects, which respondents deny and on their
part raise the preliminary point that this Court of Appeals has no authority to give
relief to petitioners because not
in aid of its appellate jurisdiction,and that the questions presented cannot be
raised for the first time before this Court of Appeals;
Respondent Court of Appeals in its decision promulgated December 9, 1970 dismissed the
petition with costs against petitioners, hence the present petition to this Court on the following
assignment of errors:
THE COURT OF APPEALS ERRED I. IN SANCTIONING THE WRONGFUL EXERCISE OF JURISDICTION BEYOND THE LIMITS
OF AUTHORITY CONFERRED BY LAW UPON THE LOWER COURT, WHEN IT PROCEEDED
TO HEAR, ADJUDGE AND ADJUDICATE (a) Special Proceedings No. 3893 for the settlement of the Estate of Forrest L.
Cease, simultaneously and concurrently with (b) Civil Case No. 6326, wherein the lower Court ordered Partition under Rule 69,
Rules of Court THE ISSUE OF LEGAL OWNERSHIP OF THE PROPERTIES COMMONLY INVOLVED IN BOTH
ACTIONS HAVING BEEN RAISED AT THE OUTSET BY THE TIAONG MILLING AND
PLANTATION COMPANY, AS THE REGISTERED OWNER OF SUCH PROPERTIES UNDER
ACT 496.
II. IN AFFIRMING - UNSUPPORTED BY ANY EVIDENCE WHATSOEVER NOR CITATION OF
ANY LAW TO JUSTIFY - THE UNWARRANTED CONCLUSION THAT SUBJECT PROPERTIES,
FOUND BY THE LOWER COURT AND THE COURT OF APPEALS AS ACTUALLY
REGISTERED IN THE NAME OF PETITIONER CORPORATION AND/OR ITS PREDECESSOR
IN INTEREST, THE TIAONG MILLING AND PLANTATION COMPANY, DURING ALL THE 50
YEARS OF ITS CORPORATE EXISTENCE "ARE ALSO PROPERTIES OF THE ESTATE OF
FOREST L. CEASE."

III. IN AFFIRMING THE ARBITRARY CONCLUSION OF THE LOWER COURT THAT ITS
DECISION OF DECEMBER 27,1969 IS AN "INTERLUCUTORY DECISION." IN DISMISSED NG
THE PETITION FOR WRIT OF MANDAMUS, AND IN AFFIRMING THE MANIFESTLY UNJUST
JUDGMENT RENDERED WHICH CONTRADICTS THE FINDINGS OF ULTIMATE FACTS
THEREIN CONTAINED.
During the period that ensued after the filing in this Court of the respective briefs and the
subsequent submission of the case for decision, some incidents had transpired, the summary of
which may be stated as follows:
1. Separate from this present appeal, petitioners filed a petition for certiorari and prohibition in this
Court, docketed as G.R. No. L-35629 (Ernesto Cease, et al. vs. Hon. Manolo L. Maddela, et al.)
which challenged the order of respondent judge dated September 27, 1972 appointing his Branch
Clerk of Court, Mr. Eleno M. Joyas, as receiver of the properties subject of the appealed civil
case, which order, petitioners saw as a virtual execution of the lower court's judgment (p. 92,

22
rollo). In Our resolution of November 13, 1972, issued in G.R. No. L-35629, the petition was
denied since respondent judge merely appointed an auxilliary receiver for the preservation of the
properties as well as for the protection of the interests of all parties in Civil Case No. 6326; but at
the same time, We expressed Our displeasure in the appointment of the branch clerk of court or
any other court personnel for that matter as receiver. (p. 102, rollo).
2. Meanwhile, sensing that the appointed receiver was making some attempts to take possession
of the properties, petitioners filed in this present appeal an urgent petition to restrain proceedings
in the lower court. We resolved the petition on January 29, 1975 by issuing a corresponding
temporary restraining order enjoining the court a quo from implementing its decision of December
27, 1969, more particularly, the taking over by a receiver of the properties subject of the litigation,
and private respondents Benjamin and Florence Cease from proceeding or taking any action on
the matter until further orders from this Court (pp. 99-100, rollo). Private respondents filed a
motion for reconsideration of Our resolution of January 29, 1975. After weighing the arguments of
the parties and taking note of Our resolution in G.R. No. L-35629 which upheld the appointment
of a receiver, We issued another resolution dated April 11, 1975 lifting effective immediately Our
previous temporary restraining order which enforced the earlier resolution of January 29, 1975
(pp. 140-141, rollo).
3. On February 6, 1976, private respondents filed an urgent petition to restrain proceedings below
in view of the precipitate replacement of the court appointed receiver Mayor Francisco Escueta
(vice Mr. Eleno M. Joyas) and the appointment of Mr. Guillermo Lagrosa on the eve of respondent
Judge Maddela's retirement (p. 166, rollo). The urgent petition was denied in Our resolution of
February 18, 1976 (p. 176, rollo).
4. Several attempts at a compromise agreement failed to materialize. A Tentative Compromise
Agreement dated July 30, 1975 was presented to the Court on August 6, 1976 for the signature of
the parties, but respondents "unceremoniously" repudiated the same by leaving the courtroom
without the permission of the court (Court of First Instance of Quezon, Branch 11) as a result of
which respondents and their counsel were cited for contempt (p. 195, 197, rollo) that respondents'
reason for the repudiation appears to be petitioners' failure to render an audited account of their
administration covering the period from May 31, 1961 up to January 29, 1974, plus the inclusion
of a provision on waiver and relinquishment by respondents of whatever rights that may have
accrued to their favor by virtue of the lower court's decision and the affirmative decision of the
appellate court.
We go now to the alleged errors committed by the respondent Court of Appeals.
As can be gleaned from petitioners' brief and the petition itself, two contentions underlie the first
assigned error. First, petitioners argue that there was an irregular and arbitrarte termination and
dismissal of the special proceedings for judicial administration simultaneously ordered in the
lower court . s decision in Civil Case No. 6326 adjudicating the partition of the estate, without
categorically, reasoning the opposition to the petition for administration Second, that the issue of
ownership had been raised in the lower court when Tiaong Milling asserted title over the
properties registered in its corporate name adverse to Forrest L. Cease or his estate, and that the
said issue was erroneously disposed of by the trial court in the partition proceedings when it
concluded that the assets or properties of the defunct company is also the estate of the deceased
proprietor.

The propriety of the dismissal and termination of the special proceedings for judicial
administration must be affirmed in spite of its rendition in another related case in view of the
established jurisprudence which favors partition when judicial administration become,
unnecessary. As observed by the Court of Appeals, the dismissal at first glance is wrong, for the
reason that what was actually heard was Civil Case No. 6326. The technical consistency,
however, it is far less importance than the reason behind the doctrinal rule against placing an
estate under administration. Judicial rulings consistently hold the view that where partition is

23
possible, either judicial or extrajudicial, the estate should not be burdened with an administration
proceeding without good and compelling reason. When the estate has no creditors or pending
obligations to be paid, the beneficiaries in interest are not bound to submit the property to judicial
administration which is always long and costly, or to apply for the appointment of an administrator
by the court, especially when judicial administration is unnecessary and superfluous. Thus When a person dies without leaving pending obligations to be paid, his heirs,
whether of age or not, are bound to submit the property to a judicial
administration, which is always long and costly, or to apply for the appointment of
an administrator by the court. It has been uniformly held that in such case the
judicial administration and the appointment of an administrator are superfluous
and unnecessary proceedings (Ilustre vs. Alaras Frondosa, 17 Phil., 321;
Malahacan vs. Ignacio, 19 Phil, 434; Bondad vs. Bondad, 34 Phil., 232;
Baldemor vs. Malangyaon, 34 Phil., 367; Fule vs. Fule, 46 Phil., 317). Syllabus,
Intestate estate of the deceased Luz Garcia. Pablo G. Utulo vs. Leona Pasion
Viuda de Garcia, 66 Phil. 302.
Where the estate has no debts, recourse may be had to an administration
proceeding only if the heirs have good reasons for not resorting to an action for
partition. Where partition is possible, either in or out of court, the estate should
not be burdened with an administration proceeding without good and compelling
reasons. (Intestate Estate of Mercado vs. Magtibay, 96 Phil. 383)
In the records of this case, We find no indication of any indebtedness of the estate. No creditor
has come up to charge the estate within the two-year period after the death of Forrest L. Cease,
hence, the presumption under Section 1, Rule 74 that the estate is free from creditors must apply.
Neither has the status of the parties as legal heirs, much less that of respondents, been raised as
an issue. Besides, extant in the records is the stipulation of the parties to submit the pleadings
and contents of the administration proceedings for the cognizance of the trial judge in
adjudicating the civil case for partition (Respondents' Brief, p, 20, rollo). As respondents observe,
the parties in both cases are the same, so are the properties involved; that actual division is the
primary objective in both actions; the theory and defense of the respective parties are likewise
common; and that both cases have been assigned to the same respondent judge. We feel that
the unifying effect of the foregoing circumstances invites the wholesome exception to the
structures of procedural rule, thus allowing, instead, room for judicial flexibility. Respondent
judge's dismissal of the administration proceedings then, is a judicious move, appreciable in
today's need for effective and speedy administration of justice. There being ample reason to
support the dismissal of the special proceedings in this appealed case, We cannot see in the
records any compelling reason why it may not be dismissed just the same even if considered in a
separate action. This is inevitably certain specially when the subject property has already been
found appropriate for partition, thus reducing the petition for administration to a mere
unnecessary solicitation.
The second point raised by petitioners in their first assigned error is equally untenable. In effect,
petitioners argue that the action for partition should not have prospered in view of the repudiation
of the co-ownership by Tiaong Milling and Plantation Company when, as early in the trial court, it
already asserted ownership and corporate title over the properties adverse to the right of
ownership of Forrest L. Cease or his estate. We are not unmindful of the doctrine relied upon by
petitioners in Rodriguez vs. Ravilan, 17 Phil. 63 wherein this Court held that in an action for
partition, it is assumed that the parties by whom it is prosecuted are all co-owners or coproprietors of the property to be divided, and that the question of common ownership is not to be
argued, not the fact as to whether the intended parties are or are not the owners of the property in
question, but only as to how and in what manner and proportion the said property of common
ownership shall be distributed among the interested parties by order of the Court. Consistent with
this dictum, it has been field that if any party to a suit for partition denies thepro-indiviso character
of the estate whose partition is sought, and claims instead, exclusive title thereto the action
becomes one for recovery of property cognizable in the courts of ordinary jurisdiction. 2

24
Petitioners' argument has only theoretical persuasion, to say the least, rather apparent than real.
It must be remembered that when Tiaong Milling adduced its defense and raised the issue of
ownership, its corporate existence already terminated through the expiration of its charter. It is
clear in Section 77 of Act No. 1459 (Corporation Law) that upon the expiration of the charter
period, the corporation ceases to exist and is dissolvedipso facto except for purposes connected
with the winding up and liquidation. The provision allows a three year, period from expiration of
the charter within which the entity gradually settles and closes its affairs, disposes and convey its
property and to divide its capital stock, but not for the purpose of continuing the business for
which it was established. At this terminal stage of its existence, Tiaong Milling may no longer
persist to maintain adverse title and ownership of the corporate assets as against the prospective
distributees when at this time it merely holds the property in trust, its assertion of ownership is not
only a legal contradiction, but more so, to allow it to maintain adverse interest would certainly
thwart the very purpose of liquidation and the final distribute loll of the assets to the proper,
parties.
We agree with the Court of Appeals in its reasoning that substance is more important than form
when it sustained the dismissal of Special Proceedings No. 3893, thus a) As to the dismissal of Special Proceedings No. 3893, of course, at first glance,
this was wrong, for the reason that the case trial had been heard was Civil Case
No. 6326; but what should not be overlooked either is Chat respondent Judge
was the same Judge that had before him in his own sala, said Special
Proceedings No. 3893, p. 43 rollo, and the parties to the present Civil Case No.
6326 had themselves asked respondent Judge to take judicial notice of the same
and its contents page 34, rollo; it is not difficult to see that when respondent
Judge in par. 4 of the dispositive part of his decision complained of, ordered that,
4) Special Proceedings No. 3893 for administration is terminated
and dismissed; the instant case to proceed but on issues of
damages only and for such action inherently essential or
partition. p. 123, rollo,
in truth and in fact, His Honor was issuing that order also within Civil Case No.
632 but in connection with Special Proceedings No. 389:3: for substance is more
important Chan form, the contending par ties in both proceedings being exactly
the same, but not only this, let it not be forgotten that when His Honor dismissed
Special Proceedings No. 3893, that dismissal precisely was a dismissal that
petitioners herein had themselves sought and solicited from respondent Judge as
petitioners themselves are in their present petition pp. 5-6, rollo; this Court must
find difficulty in reconciling petitioners' attack with the fact that it was they
themselves that had insisted on that dismissal; on the principle that not he who is
favored but he who is hurt by a judicial order is he only who should be heard to
complain and especially since extraordinary legal remedies are remedies in
extermies granted to parties ' who have been the victims not merely of errors but
of grave wrongs, and it cannot be seen how one who got what he had asked
could be heard to claim that he had been the victim of a wrong, petitioners should
not now complain of an order they had themselves asked in order to attack such
an order afterwards; if at all, perhaps, third parties, creditors, the Bureau of
Internal Revenue, might have been prejudiced, and could have had the
personality to attack that dismissal of Special Proceedings No. 3893, but not
petitioners herein, and it is not now for this Court of Appeals to protect said third
persons who have not come to the Court below or sought to intervene herein;
On the second assigned error, petitioners argue that no evidence has been found to support the
conclusion that the registered properties of Tiaong Milling are also properties of the estate of
Forrest L. Cease; that on the contrary, said properties are registered under Act No. 496 in the
name of Tiaong Milling as lawful owner and possessor for the last 50 years of its corporate
existence.

25

We do not agree. In reposing ownership to the estate of Forrest L. Cease, the trial court indeed
found strong support, one that is based on a well-entrenched principle of law. In sustaining
respondents' theory of "merger of Forrest L. Cease and The Tiaong Milling as one personality", or
that "the company is only the business conduit and alter ego of the deceased Forrest L. Cease
and the registered properties of Tiaong Milling are actually properties of Forrest L. Cease and
should be divided equally, share and share alike among his six children, ... ", the trial court did
aptly apply the familiar exception to the general rule by disregarding the legal fiction of distinct
and separate corporate personality and regarding the corporation and the individual member one
and the same. In shredding the fictitious corporate veil, the trial judge narrated the undisputed
factual premise, thus:
While the records showed that originally its incorporators were aliens, friends or
third-parties in relation of one to another, in the course of its existence, it
developed into a close family corporation. The Board of Directors and
stockholders belong to one family the head of which Forrest L. Cease always
retained the majority stocks and hence the control and management of its affairs.
In fact, during the reconstruction of its records in 1947 before the Security and
Exchange Commission only 9 nominal shares out of 300 appears in the name of
his 3 eldest children then and another person close to them. It is likewise
noteworthy to observe that as his children increase or perhaps become of age,
he continued distributing his shares among them adding Florence, Teresa and
Marion until at the time of his death only 190 were left to his name. Definitely,
only the members of his family benefited from the Corporation.
The accounts of the corporation and therefore its operation, as well as that of the
family appears to be indistinguishable and apparently joined together. As
admitted by the defendants (Manifestation of Compliance with Order of March 7,
1963 [Exhibit "21"] the corporation 'never' had any account with any banking
institution or if any account was carried in a bank on its behalf, it was in the name
of Mr. Forrest L. Cease. In brief, the operation of the Corporation is merged with
those of the majority stockholders, the latter using the former as his
instrumentality and for the exclusive benefits of all his family. From the foregoing
indication, therefore, there is truth in plaintiff's allegation that the corporation is
only a business conduit of his father and an extension of his personality, they are
one and the same thing. Thus, the assets of the corporation are also the estate of
Forrest L. Cease, the father of the parties herein who are all legitimate children of
full blood.
A rich store of jurisprudence has established the rule known as the doctrine of disregarding or
piercing the veil of corporate fiction. Generally, a corporation is invested by law with a personality
separate and distinct from that of the persons composing it as well as from that of any other legal
entity to which it may be related. By virtue of this attribute, a corporation may not, generally, be
made to answer for acts or liabilities of its stockholders or those of the legal entities to which it
may be connected, and vice versa. This separate and distinct personality is, however, merely a
fiction created by law for convenience and to promote the ends of justice (Laguna Transportation
Company vs. Social Security System, L-14606, April 28, 1960; La Campana Coffee Factory, Inc.
vs. Kaisahan ng mga Manggagawa sa La Campana, L-5677, May 25, 1953). For this reason, it
may not be used or invoked for ends subversive of the policy and purpose behind its creation
(Emiliano Cano Enterprises, Inc. vs. CIR, L-20502, Feb. 26, 1965) or which could not have been
intended by law to which it owes its being McConnel vs. Court of Appeals, L- 10510, March 17,
1961, 1 SCRA 722). This is particularly true where the fiction is used to defeat public
convenience, justify wrong, protect fraud, defend crime (Yutivo Sons Hardware Company vs.
Court of Tax Appeals, L-13203, Jan. 28, 1961, 1 SCRA 160), confuse legitimate legal or judicial
issues (R. F. Sugay & Co. vs. Reyes, L-20451, Dec. 28, 1964), perpetrate deception or otherwise
circumvent the law (Gregorio Araneta, Inc. vs. reason de Paterno, L-2886, Aug. 22, 1952, 49 O.G.
721). This is likewise true where the corporate entity is being used as an alter ego, adjunct, or
business conduit for the sole benefit of the stockholders or of another corporate entity (McConnel

26
vs. Court of Appeals, supra; Commissioner of Internal Revenue vs. Norton Harrison Co., L-7618,
Aug. 31, 1964).
In any of these cases, the notion of corporate entity will be pierced or disregarded, and the
corporation will be treated merely as an association of persons or, where there are two
corporations, they will be merged as one, the one being merely regarded as part or the
instrumentality of the otter (Koppel [Phil.] Inc. vs. Yatco, 77 Phil. 496, Yutivo Sons Hardware
Company vs. Court of Tax Appeals, supra).

So must the case at bar add to this jurisprudence. An indubitable deduction from the findings of
the trial court cannot but lead to the conclusion that the business of the corporation is largely, if
not wholly, the personal venture of Forrest L. Cease. There is not even a shadow of a showing
that his children were subscribers or purchasers of the stocks they own. Their participation as
nominal shareholders emanated solely from Forrest L. Cease's gratuitous dole out of his own
shares to the benefit of his children and ultimately his family.
Were we sustain the theory of petitioners that the trial court acted in excess of jurisdiction or
abuse of discretion amounting to lack of jurisdiction in deciding Civil Case No. 6326 as a case for
partition when the defendant therein, Tiaong Milling and Plantation Company, Inc. as registered
owner asserted ownership of the assets and properties involved in the litigation, which theory
must necessarily be based on the assumption that said assets and properties of Tiaong Milling
and Plantation Company, Inc. now appearing under the name of F. L. Cease Plantation Company
as Trustee are distinct and separate from the estate of Forrest L. Cease to which petitioners and
respondents as legal heirs of said Forrest L. Cease are equally entitled share and share alike,
then that legal fiction of separate corporate personality shall have been used to delay and
ultimately deprive and defraud the respondents of their successional rights to the estate of their
deceased father. For Tiaong Milling and Plantation Company shall have been able to extend its
corporate existence beyond the period of its charter which lapsed in June, 1958 under the guise
and cover of F. L, Cease Plantation Company, Inc. as Trustee which would be against the law,
and as Trustee shall have been able to use the assets and properties for the benefit of the
petitioners, to the great prejudice and defraudation. of private respondents. Hence, it becomes
necessary and imperative to pierce that corporate veil.
Under the third assigned error, petitioners claim that the decision of the lower court in the partition
case is not interlocutory but rather final for it consists of final and determinative dispositions of the
contentions of the parties. We find no merit in petitioners' stand.
Under the 1961 pronouncement and ruling of the Supreme Court in Vda. de Zaldarriaga vs.
Enriquez, 1 SCRA 1188 (and the sequel case of Vda. de Zaldarriaga vs. Zaldarriaga, 2 SCRA
356), the lower court's dismissal of petitioners' proposed appeal from its December 27, 1969
judgment as affirmed by the Court of Appeals on the ground of prematurity in that the judgment
was not final but interlocutory was in order. As was said in said case:
It is true that in Africa vs. Africa, 42 Phil. 934 and other cases it was held contrary to the rule laid down in Ron vs. Mojica, 8 Phil. 328; Rodriguez vs.
Ravilan, 17 Phil. 63 - that in a partition case where defendant relies on the
defense of exclusive ownership, the action becomes one for title and the decision
or order directing partition is final, but the ruling to this effect has been expressly
reversed in the Fuentebella case which, in our opinion, expresses the correct
view, considering that a decision or order directing partition is not final because it
leaves something more to be done in the trial court for the complete disposition
of the case, namely, the appointment of commissioners, the proceedings to be
had before them, the submission of their report which, according to law, must be
set for hearing. In fact, it is only after said hearing that the court may render a
final judgment finally disposing of the action (Rule 71, section 7, Rules of Court).
(1 SCRA at page 1193).

27
It should be noted, however, that the said ruling in Zaldarriaga as based on Fuentebella vs.
Carrascoso, XIV Lawyers Journal 305 (May 27, 1942), has been expressly abandoned by the
Court in Miranda vs. Court of Appeals, 71 SCRA 295; 331-333 (June 18, 1976) wherein Mr.
Justice Teehankee, speaking for the Court, laid down the following doctrine:
The Court, however, deems it proper for the guidance of the bench and bar to
now declare as is clearly indicated from the compelling reasons and
considerations hereinabove stated:
- that the Court considers the better rule to be that stated in H. E. Heacock Co.
vs. American Trading Co., to wit, that where the primary purpose of a case is to
ascertain and determine who between plaintiff and defendant is the true owner
and entitled to the exclusive use of the disputed property, "the judgment . . .
rendered by the lower court [is] a judgment on the merits as to those questions,
and [that] the order of the court for an accounting was based upon, and is
incidental to the judgment on the merits. That is to say, that the judgment . . . [is]
a final judgment ... that in this kind of a case an accounting is a mere incident to

the judgment; that an appeal lies from the rendition of the judgment as
rendered ... "(as is widely held by a great number of judges and members of the
bar, as shown by the cases so decided and filed and still pending with the Court)
for the fundamental reasons therein stated that "this is more in harmony with
the administration of justice and the spirit and intent of the [Rules]. If on appeal
the judgment of the lower court is affirmed, it would not in the least work an
injustice to any of the legal rights of [appellee]. On the other hand, if for any
reason this court should reverse the judgment of the lower court, the accounting
would be a waste of time and money, and might work a material injury to the
[appellant]; and
- that accordingly, the contrary ruling in Fuentebella vs. Carrascoso which
expressly reversed the Heacock case and a line of similar decisions and ruled
that such a decision for recovery of property with accounting "is not final but
merely interlocutory and therefore not appealable" and subsequent cases
adhering to the same must be now in turn abandoned and set aside.
Fuentebella adopted instead the opposite line of conflicting decisions mostly in
partition proceedings and exemplified by Ron vs. Mojica 8 Phil. 928 (under the
old Code of Civil Procedure) that an order for partition of real property is not final
and appealable until after the actual partition of the property as reported by the
court appointed commissioners and approved by the court in
its judgmentaccepting the report. lt must be especially noted that such rule
governing partitions is now so expressly provided and spelled out in Rule 69 of
the Rules of Court, with special reference to Sections 1, 2, 3, 6, 7 and 11, to wit,
that there must first be a preliminar, order for partition of the real estate (section
2) and where the parties-co-owners cannot agree, the court appointed
commissioners make a plan of actual partition which must first be passed upon
and accepted by the trial court and embodied in a judgment to be rendered by it
(sections 6 and 11). In partition cases, it must be further borne in mind that Rule
69, section 1 refers to "a person having the right to compel the partition of real
estate," so that the general rule of partition that an appeal will not lie until the
partition or distribution proceedings are terminated will not apply where appellant
claims exclusive ownership of the whole property and denies the adverse party's
right to any partition, as was the ruling in Villanueva vs. Capistrano and Africa
vs .Africa, supra, Fuentebellas express rehearsal of these cases must likewise
be deemed now also abandoned in view of the Court's expressed preference for
the rationale of the Heacock case.

28
The Court's considered opinion is that imperative considerations of public policy
and of sound practice in the courts and adherence to the constitutional
mandate of simplified, just, speedy and inexpensive determination of every action
call for considering such judgments for recovery of property with accounting as
final judgments which are duly appealable (and would therefore become final and
executory if not appealed within the reglementary period) with the accounting as
a mere incident of the judgment to be rendered during the course of the appeal
as provided in Rule 39, section 4 or to be implemented at the execution stage
upon final affirmance on appeal of the judgment (as in Court of Industrial
Relations unfair labor practice cases ordering the reinstatement of the worker
with accounting, computation and payment of his backwages less earnings
elsewhere during his layoff) and that the only reason given in Fuentebelia for the
contrary ruling, viz, "the general harm that would follow from throwing the door
open to multiplicity of appeals in a single case" of lesser import and
consequence. (Emphasis copied).
The miranda ruling has since then been applied as the new rule by a unanimous Court in Valdez
vs. Bagasao, 82 SCRA 22 (March 8, 1978).
If there were a valid genuine claim of Exclusive ownership of the inherited properties on the part
of petitioners to respondents' action for partition, then under the Miranda ruling, petitioners would
be sustained, for as expressly held therein " the general rule of partition that an appeal will not lie
until the partition or distribution proceedings are terminated will not apply where appellant claims
exclusive ownership of the whole property and denies the adverse party's right to any partition."

But this question has now been rendered moot and academic for the very issue of exclusive
ownership claimed by petitioners to deny and defeat respondents' right to partition - which is the
very core of their rejected appeal - has been squarely resolved herein against them, as if the
appeal had been given due course. The Court has herein expressly sustained the trial court's
findings, as affirmed by the Court of Appeals, that the assets or properties of the defunct
company constitute the estate of the deceased proprietor (supra at page 7) and the defunct
company's assertion of ownership of the properties is a legal contradiction and would but thwart
the liquidation and final distribution and partition of the properties among the parties hereof as
children of their deceased father Forrest L. Cease. There is therefore no further hindrance to
effect the partition of the properties among the parties in implementation of the appealed
judgment.
One last consideration. Parties are brothers and sisters, legal heirs of their deceased father,
Forrest L. Cease. By all rights in law and jurisprudence, each is entitled to share and share alike
in the estate, which the trial court correctly ordained and sustained by the appellate court. Almost
20 years have lapsed since the filing of Special Proceedings No. 3893 for the administration of
the Estate of Forrest L. Cease and Civil Case No. 6326 for liquidation and partition of the assets
of the defunct Tiaong Milling and Plantation Co., Inc. A succession of receivers were appointed by
the court to take, keep in possession, preserve and manage properties of the corporation which
at one time showed an income of P386,152.90 and expenses of P308,405.01 for the period
covering January 1, 1960 to August 31, 1967 as per Summary of Operations of Commissioner for
Finance appointed by the Court (Brief for Respondents, p. 38). In the meantime, ejectment cases
were filed by and against the heirs in connection with the properties involved, aggravating the
already strained relations of the parties. A prudent and practical realization of these
circumstances ought and must constrain the parties to give each one his due in law and with
fairness and dispatch that their basic rights be enjoyed. And by remanding this case to the court a
quo for the actual partition of the properties, the substantial rights of everyone of the heirs have
not been impaired, for in fact, they have been preserved and maintained.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby
AFFIRMED with costs against the petitioners.

29
SO ORDERED.
Teehankee, Actg. C.J., (Chairman), Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ.,
concur.

5. Palacio vs. Fely Transportation

G.R. L-15121, May 31, 1962

G.R. No. L-15121

August 31, 1962

GREGORIO PALACIO, in his own behalf and in behalf of his minor child,
MARIO PALACIO, plaintiffs-appellants,
vs.
FELY TRANSPORTATION COMPANY, defendant-appellee.
REGALA, J.:
This is an appeal by the plaintiffs from the decision of the Court of First Instance of Manila
which dismissed their complaint.
Originally taken to the Court of Appeals, this appeal was certified to this Court on the ground
that it raises purely questions of law.

The parties in this case adopt the following findings of fact of the lower court:
In their complaint filed with this Court on May 15, 1954, plaintiffs allege, among other
things, "that about December, 1952, the defendant company hired Alfredo Carillo as
driver of AC-787 (687) (a registration for 1952) owned and operated by the said
defendant company; that on December 24, 1952, at about 11:30 a.m., while the
driver Alfonso (Alfredo) Carillo was driving AC-687 at Halcon Street, Quezon City,
wilfully, unlawfully and feloniously and in a negligent, reckless and imprudent
manner, run over a child Mario Palacio of the herein plaintiff Gregorio Palacio; that on
account of the aforesaid injuries, Mario Palacio suffered a simple fracture of the right
tenor (sic), complete third, thereby hospitalizing him at the Philippine Orthopedic
Hospital from December 24, 1952, up to January 8, 1953, and continued to be
treated for a period of five months thereafter; that the plaintiff Gregorio Palacio herein
is a welder by occupation and owner of a small welding shop and because of the
injuries of his child he has abandoned his shop where he derives income of P10.00 a
day for the support of his big family; that during the period that the plaintiff's
(Gregorio Palacio's) child was in the hospital and who said child was under treatment
for five months in order to meet the needs of his big family, he was forced to sell one
air compressor (heavy duty) and one heavy duty electric drill, for a sacrifice sale of
P150.00 which could easily sell at P350.00; that as a consequence of the negligent
and reckless act of the driver Alfredo Carillo of the herein defendant company, the
herein plaintiffs were forced to litigate this case in Court for an agreed amount of
P300.00 for attorney's fee; that the herein plaintiffs have now incurred the amount of
P500.00 actual expenses for transportation, representation and similar expenses for
gathering evidence and witnesses; and that because of the nature of the injuries of
plaintiff Mario Palacio and the fear that the child might become a useless invalid, the

30
herein plaintiff Gregorio Palacio has suffered moral damages which could be
conservatively estimated at P1,200.00.
On May 23, 1956, defendant Fely Transportation Co., filed a Motion to Dismiss on
the grounds (1) that there is no cause of action against the defendant company, and
(2) that the cause of action is barred by prior judgment..
In its Order, dated June 8, 1956, this Court deferred the determination of the grounds
alleged in the Motion to Dismiss until the trial of this case.
On June 20, 1956, defendant filed its answer. By way of affirmative defenses, it
alleges (1) that complaint states no cause of action against defendant, and (2) that
the sale and transfer of the jeep AC-687 by Isabelo Calingasan to the Fely
Transportation was made on December 24, 1955, long after the driver Alfredo Carillo
of said jeep had been convicted and had served his sentence in Criminal Case No.
Q-1084 of the Court of First Instance of Quezon City, in which both the civil and
criminal cases were simultaneously tried by agreement of the parties in said case. In
the Counterclaim of the Answer, defendant alleges that in view of the filing of this
complaint which is a clearly unfounded civil action merely to harass the defendant, it
was compelled to engage the services of a lawyer for an agreed amount of P500.00.
During the trial, plaintiffs presented the transcript of the stenographic notes of the trial
of the case of "People of the Philippines vs. Alfredo Carillo, Criminal Case No. Q1084," in the Court of First Instance of Rizal, Quezon City (Branch IV), as Exhibit
"A".
1wph1.t

It appears from Exhibit "A" that Gregorio Palacio, one of the herein plaintiffs, testified
that Mario Palacio, the other plaintiff, is his son; that as a result of the reckless
driving of accused Alfredo Carillo, his child Mario was injured and hospitalized from
December 24, 1952, to January 8, 1953; that during all the time that his child was in
the hospital, he watched him during the night and his wife during the day; that during
that period of time he could not work as he slept during the day; that before his child
was injured, he used to earn P10.00 a day on ordinary days and on Sundays from
P20 to P50 a Sunday; that to meet his expenses he had to sell his compressor and
electric drill for P150 only; and that they could have been sold for P300 at the lowest
price.

During the trial of the criminal case against the driver of the jeep in the Court of First
Instance of Quezon City (Criminal Case No. Q-1084) an attempt was unsuccessfully
made by the prosecution to prove moral damages allegedly suffered by herein
plaintiff Gregorio Palacio. Likewise an attempt was made in vain by the private
prosecutor in that case to prove the agreed attorney's fees between him and plaintiff
Gregorio Palacio and the expenses allegedly incurred by the herein plaintiffs in
connection with that case. During the trial of this case, plaintiff Gregorio Palacio
testified substantially to the same facts.
The Court of First Instance of Quezon City in its decision in Criminal Case No. 1084
(Exhibit "2") determined and thoroughly discussed the civil liability of the accused in
that case. The dispositive part thereof reads as follows:
IN VIEW OF THE FOREGOING, the Court finds the accused Alfredo Carillo y
Damaso guilty beyond reasonable doubt of the crime charged in the information and

31
he is hereby sentenced to suffer imprisonment for a period of Two Months & One
Day of Arresto Mayor; to indemnify the offended party, by way of consequential
damages, in the sum of P500.00 which the Court deems reasonable; with subsidiary
imprisonment in case of insolvency but not to exceed / 3 of the principal penalty imposed; and to
pay the costs.

On the basis of these facts, the lower court held action is barred by the judgment in the
criminal case and, that under Article 103 of the Revised Penal Code, the person subsidiarily
liable to pay damages is Isabel Calingasan, the employer, and not the defendant corporation.
Against that decision the plaintiffs appealed, contending that:
THE LOWER COURT ERRED IN NOT SUSTAINING THAT THE DEFENDANTAPPELLEE IS SUBSIDIARILY LIABLE FOR DAMAGES AS A RESULT OF
CRIMINAL CASE NO. Q-1084 OF THE COURT OF FIRST INSTANCE OF QUEZON
CITY FOR THE REASON THAT THE INCORPORATORS OF THE FELY
TRANSPORTATION COMPANY, THE DEFENDANT-APPELLEE HEREIN, ARE
ISABELO CALINGASAN HIMSELF, HIS SON AND DAUGHTERS;
THE LOWER COURT ERRED IN NOT CONSIDERING THAT THE INTENTION OF
ISABELO CALINGASAN IN INCORPORATING THE FELY TRANSPORTATION
COMPANY, THE DEFENDANT-APPELLEE HEREIN, WAS TO EVADE HIS CIVIL
LIABILITY AS A RESULT OF THE CONVICTION OF HIS DRIVER OF VEHICLE AC687 THEN OWNED BY HIM:
THE LOWER COURT ERRED IN HOLDING THAT THE CAUSE OF ACTION OF
THE PLAINTIFFS-APPELLANTS IS BARRED BY PRIOR JUDGMENT.
With respect to the first and second assignments of errors, plaintiffs contend that the
defendant corporate should be made subsidiarily liable for damages in the criminal case
because the sale to it of the jeep in question, after the conviction of Alfred Carillo in Criminal
Case No. Q-1084 of the Court of First Instance of Quezon City was merely an attempt on the
part of Isabelo Calingasan its president and general manager, to evade his subsidiary civil
liability.
The Court agrees with this contention of the plaintiffs. Isabelo Calingasan and defendant
Fely Transportation may be regarded as one and the same person. It is evident that Isabelo
Calingasan's main purpose in forming the corporation was to evade his subsidiary civil
liability1 resulting from the conviction of his driver, Alfredo Carillo. This conclusion is borne out
by the fact that the incorporators of the Fely Transportation are Isabelo Calingasan, his wife,
his son, Dr. Calingasan, and his two daughters. We believe that this is one case where the
defendant corporation should not be heard to say that it has a personality separate and
distinct from its members when to allow it to do so would be to sanction the use of the fiction
of corporate entity as a shield to further an end subversive of justice. (La Campana Coffee
Factory, et al. v. Kaisahan ng mga Manggagawa, etc., et al., G.R. No. L-5677, May 25, 1953)
Furthermore, the failure of the defendant corporation to prove that it has other property than
the jeep (AC-687) strengthens the conviction that its formation was for the purpose above
indicated.

And while it is true that Isabelo Calingasan is not a party in this case, yet, is held in the case
of Alonso v. Villamor, 16 Phil. 315, this Court can substitute him in place of the defendant
corporation as to the real party in interest. This is so in order to avoid multiplicity of suits and
thereby save the parties unnecessary expenses and delay. (Sec. 2, Rule 17, Rules of Court;
Cuyugan v. Dizon. 79 Phil. 80; Quison v. Salud, 12 Phil. 109.)
Accordingly, defendants Fely Transportation and Isabelo Calingasan should be held
subsidiarily liable for P500.00 which Alfredo Carillo was ordered to pay in the criminal case
and which amount he could not pay on account of insolvency.

32
We also sustain plaintiffs' third assignment of error and hold that the present action is not
barred by the judgment of the Court of First Instance of Quezon City in the criminal case.
While there seems to be some confusion on part of the plaintiffs as to the theory on which
the is based whether ex-delito or quasi ex-delito (culpa aquiliana) We are convinced,
from the discussion prayer in the brief on appeal, that they are insisting the subsidiary civil
liability of the defendant. As a matter of fact, the record shows that plaintiffs merely
presented the transcript of the stenographic notes (Exhibit "A") taken at the hearing of the
criminal case, which Gregorio Palacio corroborated, in support of their claim for damages.
This rules out the defense of res judicata, because such liability proceeds precisely from the
judgment in the criminal action, where the accused was found guilty and ordered to pay an
indemnity in the sum P500.00.
WHEREFORE, the decision of the lower court is hereby reversed and defendants Fely
Transportation and Isabelo Calingasan are ordered to pay, jointly and severally, the plaintiffs
the amount of P500.00 and the costs.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon and
Makalintal, concur.
Reyes, J.B.L., J., took no part.