Concession theory (Sec.

2)

TESTATE ESTATE OF IDONAH SLADE PERKINS, DECEASED. RENATO D.

TAYAG, ANCILLARY ADMINISTRATOR-APPELLEE, VS. BENGUET
CONSOLIDATED, INC., OPPOSITOR-APPELLANT.

Facts:

On March 27, 1960, Idonah Slade Perkins died in New York City, left among others,
two stock certificates covering 33,002 shares of Benguet Consolidated, Inc. Said
certificates were in the possession of the County Trust Company of New York, the
domiciliary administrator of Perkins.

On August 12, 1960, Prospero Sanidad instituted ancillary administration

proceedings with the CFI Manila. Lazaro A. Marquez was appointed ancillary
administrator, but he was substituted by Renato D. Tayag. A dispute arose between
the County Trust Company of New York and Tayag as to which of them was entitled
to the possession of the stock certificates in question.

CFI Manila ordered the County Trust Company to 'produce and deposit' the stock
certificates with Tayag or with the COC. However, the County Trust Company did not
comply with the order. Tayag then petitioned the court to 'issue an order declaring
the certificates of stocks covering the 33,002 shares issued in the name of Idonah
Slade Perkins by Benguet Consolidated, Inc. be declared [or] considered as lost."

On May 18, 1964, CFI Manila issued an order:

1. Declaring the stock certificates covering the 33,002 shares of stocks standing
in the name of Perkins in the books of the Benguet Consolidated, Inc. as lost
for all purposes in connection with the administration and liquidation of the
Philippine estate of Perkins;

2. Orders said certificates cancelled; and

3. Directs Benguet to issue new certificates in lieu thereof, the same to be

delivered by Benguet to either Tayag or to the Probate Division of CFI Manila.

Benguet opposed the petition of Tayag because the said stock certificates are in
existence, they are today in the possession of County Trust Company in New York
City. Thus, the stock certificates cannot be declared or considered as lost. Moreover,
it would allege that there was a failure to observe certain requirements of its by-laws
before new stock certificates could be issued. Hence, this appeal.

Issue

Whether or not Benguet shall issue new certificates.

Ruling
Yes, Benguet must issue new certificates. While factually the old certificates still
exist, the same may by judicial fiction be considered as LOST — in view of the
refusal of County Trust Company to surrender them, despite a lawful order of our
courts. To deny the remedy would be derogatory to the dignity of the Philippine
judiciary.

Tayag is entitled to the possession of said certificates so that he can perform his
duty as such administrator. A contrary finding by any foreign court or entity would be
inimical to the honor of our country. After all, an administrator appointed in one state
has no power over property matters in another state.

Concession Theory – a corporation is a creation of and is purely dependent on the

State’s will. It is likewise a creation of statute that defines its powers and prescribes
rules for the regulation of its internal as well as its business affairs.

It is not, however, created by mere agreement of the incorporators nor by their

execution of the articles of incorporation. There ought to be a law from which the
corporation derives its legal existence.

Doctrine of corporate entity/separate personality; artificial being

As to property

WISE & COMPANY, INC. PLAINTIFF-APPELLANT, VS. MAN SUNG LUNG,

DEFENDANT. THE SHERIFF PROVINCIAL DE CAMARINES SUR, DEFENDANT-
APPEALED.

Facts

This is an appeal filed by Wise & Co. Inc. against the order of the CFI Manila
denying its motion for reconsideration that the provincial sheriff be ordered to sell the
different properties seized by him and the product of the sale be delivered to Wise &
Co., Inc.

It appears in the Sheriff's report that he delivered said properties to the insolvency
trustee of Man Sun Lung & Co., Inc., because he had seized such properties at the
store of Man Sun Lung & Co., Inc. It also appears in the Sheriff's response that he
made said delivery by virtue of the order of the Court of Camarines Sur and that said
assets have been sold by the trustee by order of the Court in said Insolvency matter
and its amount of P656.64 is in the possession of the notary, by order of the Court of
Camarines Sur dated January 20, 1937.

Issue

Whether or not the CFI failed to distinguish between the natural person Man Sung
Lung from the corporation Man Sung Lung & Co., Inc.

Ruling
No, the defendant Man Sung Lung is legally different and distinct from Man Sung
Lung & Co., Inc. The former is a natural person and the latter is a legal person with
distinct and independent personality from that of the person.
Not realizing that the assets seized by the Sheriff, believing that they were the
property of the defendant, were really his, the presumption is that they belong to the
corporation Man Sun Lung & Co., Inc., as part of the assets of said commercial
entity.

The SC declared that the articles or movable goods that were found in the store of
Man Sun Lung & Co., Inc. are presumed to be the property of the corporation and
not of any member of the corporation unless proven otherwise.

RUBEN SAW, DIONISIO SAW, LINA S. CHUA, LUCILA S. RUSTE AND EVELYN
SAW, PETITIONERS, VS. HON. COURT OF APPEALS, HON. BERNARDO P.
PARDO, PRESIDING JUDGE OF BRANCH 43, (REGIONAL TRIAL COURT OF
MANILA), FREEMAN MANAGEMENT AND DEVELOPMENT CORPORATION,
EQUITABLE BANKING CORPORATION, FREEMAN INCORPORATED, SAW
CHIAO LIAN, THE
REGISTER OF DEEDS OF CALOOCAN CITY, AND DEPUTY SHERIFF ROSALIO
G. SIGUA, RESPONDENTS.

Facts

A collection suit with preliminary attachment was filed by Equitable Banking

Corporation
against Freeman, Inc. and Saw Chiao Lian, its President and General Manager. The
petitioners moved to intervene, alleging that

1. the loan transactions between Saw Chiao Lian and Equitable Banking Corp.
were not approved by the stockholders representing at least 2/3 of corporate
capital;

2. Saw Chiao Lian had no authority to contract such loans; and

3. there was collusion between the officials of Freeman, Inc. and Equitable
Banking Corp. in securing the loans. The motion to intervene was denied,
and the petitioners appealed to the Court of Appeals.

Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement
which they submitted to and was approved by the RTC. But because it was not
complied with, Equitable secured a writ of execution, and two lots owned by
Freeman, Inc. were levied upon and sold at public auction to Freeman Management
and Development Corp.

CA sustained the denial of the petitioners' motion for intervention, holding that "the
compromise agreement between Freeman, Inc., through its President, and Equitable
Banking Corp. will not necessarily prejudice petitioners whose rights to corporate
assets are at most inchoate, prior to the dissolution of Freeman, Inc. x x x. And
intervention under Sec. 2, Rule 12 of the Revised Rules of Court is proper only when
one's right is actual, material, direct and immediate and not simply contingent or
expectant."

It also ruled against the petitioners' argument that because they had already filed a
notice of appeal, the trial judge had lost jurisdiction over the case and could no
longer issue the writ of execution.

Issue

Whether or not the rights of the stockholders of Freeman are merely inchoate and
not actual, material, direct and immediate prior to the dissolution of the corporation.

Ruling

Yes, the interest, if it exists at all, of petitioners-movants is indirect, contingent,

remote, conjectural, consequential and collateral. At the very least, their interest is
purely inchoate, or in sheer expectancy of a right in the management of the
corporation and to share in the profits thereof and in the properties and assets
thereof on dissolution, after payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of

the corporation, it does not vest the owner thereof with any legal right or title to any
of the property, his interest in the corporate property being equitable or beneficial in
nature. Shareholders are in no legal sense the owners of corporate property, which
is owned by the corporation as a distinct legal person.

As to obligations

ANTONIO VAZQUEZ, PETITIONER, VS. FRANCISCO DE BORJA, RESPONDENT.

Facts

An action to recover the total sum of P4,702.70 was filed by Francisco de Borja
against Antonio Vazquez and Fernando Busuego with the CFI Manila. In or about
the month of January 1932, the defendants jointly and severally obligated
themselves to sell to the plaintiff 4,000 cavans of palay at P2.10 per cavan, to be
delivered during the month of February 1932, the said defendants having
subsequently received from the plaintiff in virtue of said agreement the sum of
P8,400.

The defendants delivered to the plaintiff during the months of February, March, and
April, 1932, only 2,488 cavans of palay of the value of P5,224.80 and refused to
deliver the balance of 1,512 cavans of the value of P3,175.20 notwithstanding
repeated demands.

Because of the defendants’ refusal to deliver to the plaintiff the said 1,512 cavans of
palay within the period above mentioned, the plaintiff suffered damages in the sum of
P1,000.
On account of the agreement above mentioned the plaintiff delivered to the
defendants 4,000 empty sacks, of which they returned to the plaintiff only 2,490 and
refused to deliver to the plaintiff the balance of 1,510 sacks or to pay their value
amounting to P377.50; and that on account of such refusal the plaintiff suffered
damages in the sum of P150.
Defendant Antonio Vazquez denied having entered into the contract mentioned in
the first cause of action in his own individual and personal capacity, either solely or
together with his co-defendant Fernando Busuego (treasurer of the corporation), and
alleging that the agreement for the purchase of 4,000 cavans of palay and the
payment of the price of P8,400 were made by the plaintiff with the Natividad-
Vazquez Sabani Development Co., Inc., a corporation organized and existing under
the laws of the Philippines, of which defendant Vazquez was the acting manager at
the time the transaction took place.

By way of counterclaim, the said defendant alleged that he suffered damages in the
sum of P1,000 on account of the filing of this action against him by the plaintiff with
full knowledge that the said defendant had nothing to do whatever with any and all of
the transactions mentioned in the complaint in his own individual and personal
capacity.

The CFI ordered defendant Vasquez to pay to the plaintiff the sum of P3,175.20 plus
the sum of P377.50, with legal interest on both sums, and absolving the defendant
Busuego from the complaint and the plaintiff from defendant Vazquez' counterclaim.

Upon appeal to the CA, the latter modified the judgment by reducing it to the total
sum of P3,314.78, with legal interest thereon and the costs. But by a subsequent
resolution upon the defendant's motion for reconsideration, the CA set aside its
judgment and ordered that the case be remanded to the court of origin for further
proceedings.

Defendant Vazquez, not being agreeable to that result, filed the present petition for
certiorari (G. R. No. 48930); and the plaintiff, excepting to the resolution of the CA
whereby its original judgment was set aside and the case was ordered remanded to
the court of origin for further proceedings, filed a cross-petition for certiorari (G. R,
No. 48931) to maintain the original judgment of the CA.

Issue

Whether or not the plaintiff entered into the contract with defendant Vazquez in his
personal capacity.

Ruling

No, based on the preponderance of evidence found by the CA, "the sale made by
Antonio Vazquez in favor of Francisco de Borja was in his capacity as acting
president and manager of the corporation Natividad-Vazquez Sabani Development
Co., Inc."
The action being on a contract, and that the party liable on the contract is the
Natividad-Vazquez Sabani Development Co., Inc., which is not a party herein, the
complaint should have been dismissed.

It is well known that a corporation is an artificial being invested by law with a

personality of its own, separate and distinct from that of its stockholders and from
that of its officers who manage and run its affairs. The mere fact that its personality is
owing to a legal fiction and that it necessarily has to act thru its agents, does not
make the latter personally liable on a contract duly entered into, or for an act lawfully
performed, by them for and in its behalf.
The legal fiction by which the personality of a corporation is created is a practical
reality and necessity. Without it no corporate entities may exist and no corporate
business may be transacted. Such legal fiction may be disregarded only when an
attempt is made to use it as a cloak to hide an unlawful or fraudulent purpose.

No such thing has been alleged or proven in this case. It has not been alleged nor
even intimated that Vazquez personally benefited by the contract of sale in question
and that he is merely invoking the legal fiction to avoid personal liability. Neither is it
contended that he entered into said contract for the corporation in bad faith and with
intent to defraud the plaintiff. The SC finds no legal and factual basis upon which to
hold him liable on the contract either principally or subsidiarily.

As to rights

HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J. BROOKS AND KARL

BECK, PETITIONERS, VS. HON. JOSE W. DIOKNO, IN HIS CAPACITY AS
SECRETARY OF JUSTICE; JOSE LUKBAN IN HIS CAPACITY AS ACTING
DIRECTOR, NATIONAL BUREAU OF INVESTIGATION; SPECIAL
PROSECUTORS PEDRO D. CENZON, EFREN I. PLANAAND MANUEL
VILLAREAL, JR., AND ASST. FISCAL MANASES G. REYES; JUDGE AMADO
ROAN, MUNICIPAL COURT OF MANILA; JUDGE ROMAN CANSINO, MUNICIPAL
COURT OF MANILA; JUDGE HERMOGENES CALUAG, COURT OF FIRST
INSTANCE OF RIZAL-QUEZON CITY BRANCH, AND JUDGE DAMIAN JIMENEZ,
MUNICIPAL COURT OF QUEZON CITY, RESPONDENTS.

Facts

Upon application of the officers of the government, issued on different dates, 42

search warrants against petitioners herein and/or the corporations of which they
were officers, to search the persons above-named and/or the premises of their
offices, warehouses
and/or residences, and to seize and take possession of several personal properties.

Alleging that the search warrants are null and void, as contravening the Constitution
and the Rules of Court, the petitioners filed with the SC petition for certiorari,
prohibition, mandamus and injunction, and prayed that, pending final disposition of
the present case, a writ of preliminary injunction be issued restraining Respondent-
Prosecutors from using the effects seized or any copies thereof, in the deportation
cases already adverted to, and that, in due course, thereafter, decision be rendered
quashing the contested search warrants and declaring the same null and void, and
commanding the respondents to return to the petitioners, in accordance with Section
3, Rule 67, of the Rules of Court, the documents, papers, things and cash moneys
seized or confiscated under the search warrants in question.

SC issued the writ of preliminary injunction prayed for in the petition. However, by
resolution dated June 29, 1962, the writ was partially lifted or dissolved, insofar as
the papers, documents and things seized from the offices of the corporations are
concerned; but the injunction was maintained as regards the papers, documents and
things found and seized in the residences of the petitioners.

Thus, the documents, papers, and things seized under the alleged authority of the
warrants in question may be split into two (2) major groups, namely: (a) those found
and seized in the offices of the corporations, and (b) those found and seized in the
residences of the petitioners.

Ruling
As regards the first group, the petitioners have no cause of action to assail the
legality of the contested warrants and of the seizures made in pursuance thereof, for
the simple reason that said corporations have their respective personalities, separate
and distinct from the personality of herein petitioners, regardless of the amount of
shares of stock or of the interest of each of them in said corporations, and whatever
the offices they hold therein may be.

Indeed, it is well settled that the legality of a seizure can be contested only by the
party whose rights have been impaired thereby, and that the objection to an unlawful
search and seizure is purely personal and cannot be availed of by third parties.

Consequently, the petitioners may not validly object to the use in evidence against
them of the documents, papers and things seized from the offices and premises of
the corporations, since the right to object to the admission of said papers in evidence
belongs exclusively to the corporations, to whom the seized effects belong, and may
not be invoked by the corporate officers in proceedings against them in their
individual capacity.

With respect to the things seized in the residences of the petitioners, the search
warrant is invalid. The Constitution provides that the right of the people to be secure
in their persons, houses, papers, and effects against unreasonable searches and
seizures shall not be violated, and no warrants shall issue but upon probable cause,
to be determined by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the
place to be searched, and the persons or things to be seized.

Two points must be stressed in connection with this constitutional mandate, namely:
(1) that no warrant shall issue but upon probable cause, to be determined by the
judge in the manner set forth in said provision; and (2) that the warrant shall
particularly describe the things to be seized.

None of these requirements has been complied with in the contested warrants.
Indeed,
the same were issued upon applications stating that the natural and juridical persons
therein named had committed a violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and Revised Penal Code.

In other words, no specific offense had been alleged in said applications. The
averments thereof with respect to the offense committed were abstract. As a
consequence, it was impossible for the judges who issued the warrants to have
found the existence of probable cause, for the same presupposes the introduction of
competent proof that the party against whom it is sought has performed particular
acts, or committed specific omissions, violating a given provision of our criminal
laws.

As a matter of fact, the applications involved in this case does not allege any specific
acts performed by the petitioners. It would be a legal heresy, of the highest order, to
convict anybody of a "violation of Central Bank Laws, Tariff and Customs Laws,
Internal Revenue (Code) and Revised Penal Code," - as alleged in the
aforementioned applications - without reference to any determinate provision of said
laws or codes.

MANILA GAS CORPORATION, PETITIONER VS. COLLECTOR OF INTERNAL

REVENUE, RESPONDENT.

Facts

Petitioner is the grantee of a franchise, authorizing it to construct, maintain and

operate a gas system for the furnishing of gas, heat and power in the City of Manila
and the Province of Rizal, as provided in its charter.

Under its charter, petitioner is required to pay annually to the City of Manila and to
the municipalities of Rizal served by it, 21/2 per centum of its gross receipts, said
payment to be in lieu of all taxes, insular, provincial and municipal, "except taxes on
its real estate, buildings, plant, machinery" and other personal properties. The
amount of taxes involved in the appeal was by stipulation of the parties, limited to
P40,407.89, paid within the two-year period from November 21, 1953 to October 11,
1955.

The CIR made the assessment and collected the amount involved as a
compensating tax, on the theory that it is a property tax not covered by the
exemption "in lieu of all taxes, insular, provincial and municipal," which exemption
refers to taxes "that may be imposed on the business covered by the franchise."

On the other hand, petitioner contends that the compensating tax, far from being a
property tax is an excise tax or tax on the business from which it is exempt under its
charter; as evidence that it is an excise tax, while the taxes on personal property are
the specific taxes provided for under Title IV of the NIRC, the compensating tax
provided for in Section 190 of the NIRC comes under Title V under the heading
"Privilege Taxes on Business and Occupation".
This same question has been raised before the CTA and decided by it against the
theory of petitioner in the case of Central Azucarrera de Tarlac vs. CIR.

The CIR denied the claim for refund of compensating taxes assessed against and
paid by the petitioner on machinery, equipment and materials purchased from
abroad and used in connection with its business. On appeal, the CTA affirmed the
decision of the CIR.

As to torts

PHILIPPINE NATIONAL BANK, PETITIONER, VS. THE COURT OF APPEALS,

RITA GUECO TAPNIO, CECILIO GUECO AND THE PHILIPPINE AMERICAN
GENERAL INSURANCE COMPANY, INC., RESPONDENTS.

Facts
Plaintiff executed its Bond with defendant Rita Gueco Tapnio as principal, in favor of
the PNB San Fernando, Pampanga Branch, to guarantee the payment of defendant
Tapnio's account with said Bank. In turn, to guarantee the payment of whatever
amount the bonding company would pay to the PNB, both defendants executed the
indemnity agreement.
Under the terms of this indemnity agreement, the original amount of the bond was for
P4,000.00; but the amount was later reduced to P2,000.00.

"Defendant Tapnio was indebted to the bank in the sum of P2,000.00, plus
accumulated interests unpaid, which she failed to pay despite demands. The Bank
wrote a letter of demand to plaintiff; whereupon, plaintiff paid the bank on September
18, 1957, the full amount due and owing in the sum of P2,379.91, for and on account
of defendant Tapnio’s obligation. "Plaintiff, in turn, made several demands, both
verbal and written, upon defendants, but to no avail.

"Defendant Tapnio admitted all the foregoing facts. She claims, however, when
demand was made upon her by plaintiff for her to pay her debt to the Bank, she told
the plaintiff that she did not consider herself to be indebted to the Bank at all
because she had an agreement with one Jacobo Tuazon whereby she had leased to
the latter her unused export sugar quota for the 1956-1957 agricultural year,
consisting of 1,000 piculs at the rate of P2.80 per picul, or for a total of P2,800.00,
which was already in excess of her obligation guaranteed by plaintiff's bond.

This lease agreement was with the knowledge of the bank. But the Bank has placed
obstacles to the consummation of the lease, and the delay caused by said obstacles
forced Tuazon to rescind the lease contract.

Thus, defendant Tapnio filed her third-party complaint against the Bank to recover
from the latter any and all sums of money which may be adjudged against her and in
favor of the plaintiff, plus moral damages, attorney's fees and costs.

The CFI Manila held that failure of the negotiation for the lease of the sugar quota
allocation of Tapnio to Tuazon was due to the fault of the directors of the PNB. The
refusal on the part of the bank to approve the lease at the rate of P2.80 per picul
would have enabled Tapnio to realize the amount of P2,800.00 which was more than
sufficient to pay off her indebtedness to the Bank, and its insistence on the rental
price of P3.00 per picul thus unnecessarily increasing the value by only a difference
of P200.00, inevitably brought about the rescission of the lease contract to the
damage and prejudice of Tapnio in the aforesaid sum of P2,800.00.

CA denied the MR of the PNB, hence, this petition.

Issue

Whether or not petitioner is liable for the damage caused.

Ruling

Yes, while petitioner had the ultimate authority of approving or disapproving the
proposed lease since the quota was mortgaged to the Bank, the latter certainly
cannot escape its responsibility of observing, for the protection of the interest of
private respondents, that degree of care, precaution and vigilance which the
circumstances justly demand in approving or disapproving the lease of said sugar
quota.

The law makes it imperative that every person "must in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."

This petitioner failed to do. Certainly, it knew that the agricultural year was about to
expire, that by its disapproval of the lease private respondents would be unable to
utilize the sugar quota in question. In failing to observe the reasonable degree of
care and vigilance which the surrounding circumstances reasonably impose,
petitioner is consequently liable for the damages caused on private respondents.

Under Article 21 of theNew Civil Code, "any person who wilfully causes loss or injury
to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage."

The afore-cited provisions on human relations were intended to expand the concept
of torts in this jurisdiction by granting adequate legal remedy for the untold number of
moral wrongs which is impossible for human foresight to specifically provide in the
statutes.

A corporation is civilly liable in the same manner as natural persons for torts,
because "generally speaking, the rules governing the liability of a principal or master
for a tort committed by an agent or servant are the same whether the principal or
master be a natural person or a corporation, and whether the servant or agent be a
natural or artificial person.

All of the authorities agree that a principal or master is liable for every tort which he
expressly directs or authorizes, and this is just as true of a corporation as of a natural
person. A corporation is liable, therefore, whenever a tortious act is committed by an
officer or agent under express direction or authority from the stockholders or
members acting as a body, or, generally, from the directors as the governing body."
Entitlement to moral damages

MANILA ELECTRIC COMPANY, PETITIONERS, VS. T.E.A.M. ELECTRONICS

CORPORATION, TECHNOLOGY ELECTRONICS ASSEMBLY AND
MANAGEMENT PACIFIC CORPORATION; AND ULTRA ELECTRONICS
INSTRUMENTS, INC., RESPONDENTS.

Facts

Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest of TEC,

were parties to two separate contracts for the Sale of Electric Energy.

Under the aforesaid agreements, petitioner undertook to supply TEC’s building

known as Dyna Craft International Manila (DCIM) with electric power. Another
contract was entered into for the supply of electric power to TEC’s NS Building.
In September 1986, TEC, under its former name National Semi-Conductors (Phils.)
entered into a Contract of Lease with respondent Ultra Electronics Industries, Inc.
(Ultra) for the use of the former’s DCIM building for a period of five years or until
September 1991. Ultra was, however, ejected from the premises on February 12,
1988 by virtue of a court order, for repeated violation of the terms and conditions of
the lease contract.

On September 28, 1987, a team of petitioner’s inspectors conducted a surprise

inspection of the electric meters installed at the DCIM building, witnessed by Ultra’s.
The two meters covered were found to be allegedly tampered with and did not
register the actual power consumption in the building.

In a letter dated November 25, 1987, petitioner informed TEC of the results of the
inspection and demanded from the latter the payment of P7,040,401.01 representing
its unregistered consumption from February 10, 1986 until September 28, 1987, as a
result of the alleged tampering of the meters.

TEC received the letters on January 7, 1988. Since Ultra was in possession of the
subject building during the covered period, TEC’s Managing Director referred the
demand letter to Ultra which, in turn, informed TEC that its EVP had met with
petitioner’s representative. Ultra further intimated that assuming that there was
tampering of the meters, petitioner’s assessment was excessive.

For failure of TEC to pay the differential billing, petitioner disconnected the electricity
supply to the DCIM building on April 29, 1988. TEC demanded from petitioner the
reconnection of electrical service, claiming that it had nothing to do with the alleged
tampering but the latter refused to heed the demand. Hence, TEC filed a complaint
on May 27, 1988 before the Energy Regulatory Board (ERB) praying that electric
power be restored to the DCIM building.

The ERB immediately ordered the reconnection of the service but petitioner
complied with it only on October 12, 1988 after TEC paid P1,000,000.00, under
protest. The complaint before the ERB was later withdrawn as the parties deemed it
best to have the issues threshed out in the regular courts. Prior to the reconnection,
or on June 7, 1988, petitioner conducted a scheduled inspection of the questioned
meters and found them to have been tampered anew.

Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time, in
TEC’s NS Building. The inspection allegedly revealed that the electric meters were
not registering the correct power consumption. Petitioner, thus, sent a letter dated
June 18, 1988 demanding payment of P280,813.72 representing the differential
billing. TEC denied petitioner’s allegations and claim in a letter dated June 29, 1988.

Petitioner, thus, sent TEC another letter demanding payment of the aforesaid
amount, with a warning that the electric service would be disconnected in case of
continued refusal to pay the differential billing. To avert the impending disconnection
of electrical service, TEC paid the above amount, under protest.

TEC and TPC filed a complaint for damages against petitioner and Ultra before the
RTC Pasig. The RTC ruled in favor of respondents TEC and TPC. Ultra and
petitioner appealed to the CA which affirmed the RTC decision, with a modification of
the amount of actual damages and interest thereon. Hence, this petition.

Issue

Whether or not TEC is entitled to moral damages.

Ruling

No, the records are bereft of any evidence that the name or reputation of TEC/TPC
has been debased as a result of petitioner’s acts. Besides, the trial court simply
awarded moral damages in the dispositive portion of its decision without stating the
basis thereof.

As a rule, a corporation is not entitled to moral damages because, not being a

natural person, it cannot experience physical suffering or sentiments like wounded
feelings, serious anxiety, mental anguish and moral shock. The only exception to this
rule is when the corporation has a reputation that is debased, resulting in its
humiliation in the business realm.

But in such a case, it is imperative for the claimant to present proof to justify the
award. It is essential to prove the existence of the factual basis of the damage and
its causal relation to petitioner’s acts.

Hence, the SC deleted the moral damages amounting to P500,000.00 for lack of
basis.

ETERNAL GARDENS MEMORIAL PARK CORP., PETITIONER, VS. KATHERINE

JUNETTE B. PERLAS, KATHRYN JACQUELYN F. BOISER, AND SPOUSES
CLAUDIO AND ROSITA BONIFACIO, RESPONDENTS.

Facts
During her lifetime, Zenaida purchased from Eternal Gardens 24 burial lots.
However, Zenaida died. Boiser siblings found out that the subject property was sold
to spouses Spouses Bonifacio by Kathryn's former live-in partner, Michael
Magpantay (Magpantay). This prompted the filing of a Complaint5 for nullification of
contract by Boiser siblings against Magpantay, Spouses Bonifacio, and Eternal
Gardens before the RTC.