SECOND DIVISION

G.R. No. 167291 January 12, 2011

PRINCE TRANSPORT, Inc. and Mr. RENATO CLAROS, Petitioners,

vs.
DIOSDADO GARCIA, LUISITO GARCIA, RODANTE ROMERO, REX BARTOLOME, FELICIANO GASCO, JR.,
DANILO ROJO, EDGAR SANFUEGO, AMADO GALANTO, EUTIQUIO LUGTU, JOEL GRAMATICA, MIEL
CERVANTES, TERESITA CABANES, ROE DELA CRUZ, RICHELO BALIDOY, VILMA PORRAS, MIGUELITO
SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO TORRES, ESMAEL RAMBOYONG, ROBETO* MANO,
ROGELIO BAGAWISAN, ARIEL SNACHEZ, ESTAQULO VILLAREAL, NELSON MONTERO, GLORIA ORANTE,
HARRY TOCA, PABLITO MACASAET and RONALD GARCITA Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court praying for the annulment of the
Decision1 and Resolution2 of the Court of Appeals (CA) dated December 20, 2004 and February 24, 2005, respectively, in
CA-G.R. SP No. 80953. The assailed Decision reversed and set aside the Resolutions dated May 30, 2003 3 and September
26, 20034 of the National Labor Relations Commission (NLRC) in CA No. 029059-01, while the disputed Resolution denied
petitioners' Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents charging petitioners with illegal dismissal,
unfair labor practice and illegal deductions and praying for the award of premium pay for holiday and rest day, holiday pay,
service leave pay, 13th month pay, moral and exemplary damages and attorney's fees.

Respondents alleged in their respective position papers and other related pleadings that they were employees of Prince
Transport, Inc. (PTI), a company engaged in the business of transporting passengers by land; respondents were hired either
as drivers, conductors, mechanics or inspectors, except for respondent Diosdado Garcia (Garcia), who was assigned as
Operations Manager; in addition to their regular monthly income, respondents also received commissions equivalent to 8
to 10% of their wages; sometime in October 1997, the said commissions were reduced to 7 to 9%; this led respondents and
other employees of PTI to hold a series of meetings to discuss the protection of their interests as employees; these meetings
led petitioner Renato Claros, who is the president of PTI, to suspect that respondents are about to form a union; he made
known to Garcia his objection to the formation of a union; in December 1997, PTI employees requested for a cash advance,
but the same was denied by management which resulted in demoralization on the employees' ranks; later, PTI acceded to
the request of some, but not all, of the employees; the foregoing circumstances led respondents to form a union for their
mutual aid and protection; in order to block the continued formation of the union, PTI caused the transfer of all union
members and sympathizers to one of its sub-companies, Lubas Transport (Lubas); despite such transfer, the schedule of
drivers and conductors, as well as their company identification cards, were issued by PTI; the daily time records, tickets and
reports of the respondents were also filed at the PTI office; and, all claims for salaries were transacted at the same office;
later, the business of Lubas deteriorated because of the refusal of PTI to maintain and repair the units being used therein,
which resulted in the virtual stoppage of its operations and respondents' loss of employment.

Petitioners, on the other hand, denied the material allegations of the complaints contending that herein respondents were
no longer their employees, since they all transferred to Lubas at their own request; petitioners have nothing to do with the
management and operations of Lubas as well as the control and supervision of the latter's employees; petitioners were not
aware of the existence of any union in their company and came to know of the same only in June 1998 when they were
served a copy of the summons in the petition for certification election filed by the union; that before the union was registered
on April 15, 1998, the complaint subject of the present petition was already filed; that the real motive in the filing of the
complaints was because PTI asked respondents to vacate the bunkhouse where they (respondents) and their respective
families were staying because PTI wanted to renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,5 the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and holiday premium,
service incentive leave pay and 13th month pay;

Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;

2. Dismissing the complaint for illegal dismissal against the respondents Prince Transport, Inc. and/or
Prince Transport Phils. Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy, Mario
Feranil and Peter Buentiempo;

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 3. Declaring that the complainants named below are illegally dismissed by Lubas Transport; ordering said
Lubas Transport to pay backwages and separation pay in lieu of reinstatement in the following amount:

Complainants Backwages Separation Pay

(1) Diosdado Garcia ₱222,348.70 ₱79,456.00
(2) Feliciano Gasco, Jr. 203,350.00 54,600.00
(3) Pablito Macasaet 145,250.00 13,000.00
(4) Esmael Ramboyong 221,500.00 30,000.00
(5) Joel Gramatica 221,500.00 60,000.00
(6) Amado Galanto 130,725.00 29,250.00
(7) Miel Cervantes 265,800.00 60,000.00
(8) Roberto Mano 221,500.00 50,000.00
(9) Roe dela Cruz 265,800.00 60,000.00
(10) Richelo Balidoy 130,725.00 29,250.00
(11) Vilma Porras 221,500.00 70,000.00
(12) Miguelito Salcedo 265,800.00 60,000.00
(13) Cristina Garcia 130,725.00 35,100.00
(14) Luisito Garcia 145,250.00 19,500.00
(15) Rogelio Bagawisan 265,800.00 60,000.00
(16) Rodante H. Romero 221,500.00 60,000.00
(17) Dindo Torres 265,800.00 50,000.00
(18) Edgar Sanfuego 221,500.00 40,000.00
(19) Ronald Gacita 221,500.00 40,000.00
(20) Harry Toca 174,300.00 23,400.00
(21) Amado Galanto 130,725.00 17,550.00
(22) Teresita Cabañes 130,725.00 17,550.00
(23) Rex Bartolome 301,500.00 30,000.00
(24) Mario Nazareno 221,500.00 30,000.00
(25) Eustaquio Villareal 145,250.00 19,500.00
(26) Ariel Sanchez 265,800.00 60,000.00
(27) Gloria Orante 263,100.00 60,000.00
(28) Nelson Montero 264,600.00 60,000.00
(29) Rizal Beato 295,000.00 40,000.00
(30) Eutiquio Lugtu 354,000.00 48,000.00
(31) Warlito Dickensomn 295,000.00 40,000.00
(32) Edgardo Belda 354,000.00 84,000.00
(33) Tita Go 295,000.00 70,000.00
(34) Alex Lodor 295,000.00 50,000.00
(35) Glenda Arguilles 295,000.00 40,000.00
(36) Erwin Luces 354,000.00 48,000.00
(37) Jesse Celle 354,000.00 48,000.00
(38) Roy Adorable 295,000.00 40,000.00
(39) Marlon Bangcoro 295,000.00 40,000.00
(40)Edgardo Bangcoro 354,000.00 36,000.00

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total monetary award;
and

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 6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.

SO ORDERED.6

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of evidence to show that they
violated respondents’ right to self-organization. The Labor Arbiter also held that Lubas is the respondents’ employer and
that it (Lubas) is an entity which is separate, distinct and independent from PTI. Nonetheless, the Labor Arbiter found that
Lubas is guilty of illegally dismissing respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held equally liable as
Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and disposed as follows:

WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the Decision appealed
from is SUSTAINED subject to the modification that Complainant-Appellant Edgardo Belda deserves refund of his boundary-
hulog in the amount of ₱446,862.00; and that Complainants-Appellants Danilo Rojo and Danilo Laurel should be included
in the computation of Complainants-Appellants claim as follows:

Complainants Backwages Separation Pay

41. Danilo Rojo ₱355,560.00 ₱48,000.00
42. Danilo Laurel ₱357,960.00 ₱72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

SO ORDERED.7

Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution 8 dated September 26, 2003.

Respondents then filed a special civil action for certiorari with the CA assailing the Decision and Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents' petition. The CA ruled
that petitioners are guilty of unfair labor practice; that Lubas is a mere instrumentality, agent conduit or adjunct of PTI; and
that petitioners’ act of transferring respondents’ employment to Lubas is indicative of their intent to frustrate the efforts of
respondents to organize themselves into a union. Accordingly, the CA disposed of the case as follows:

WHEREFORE, the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is hereby REVERSED and
SET ASIDE and another one ENTERED finding the respondents guilty of unfair labor practice and ordering them to reinstate
the petitioners to their former positions without loss of seniority rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the computation of petitioner's claim
for backwages and with respect to the portion ordering the refund of Edgardo Belda's boundary-hulog in the amount of
₱446,862.00, the NLRC decision is affirmed and maintained.

SO ORDERED.9

Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution 10 dated February 24, 2005.

Hence, the instant petition for review on certiorari based on the following grounds:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO THE
RESPONDENTS' PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE LABOR
ARBITER AND AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION

3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION
WITH RESPECT TO RESPONDENTS REX BARTOLOME, FELICIANO GASCO, DANILO ROJO,
EUTIQUIO LUGTU, AND NELSON MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE
NLRC

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B

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT, INC. AND
MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION AND THUS, LIABLE IN
SOLIDUM TO RESPONDENTS.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE REINSTATEMENT OF
RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE ISSUES RAISED IN RESPONDENTS'
PETITION FOR CERTIORARI.11

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC are accorded not only
respect but even finality; that the CA should have outrightly dismissed the petition filed before it because in certiorari
proceedings under Rule 65 of the Rules of Court it is not within the province of the CA to evaluate the sufficiency of evidence
upon which the NLRC based its determination, the inquiry being limited essentially to whether or not said tribunal has acted
without or in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can only pass upon
the factual findings of the NLRC if they are not supported by evidence on record, or if the impugned judgment is based on
misapprehension of facts — which circumstances are not present in this case. Petitioners also emphasize that the NLRC
and the Labor Arbiter concurred in their factual findings which were based on substantial evidence and, therefore, should
have been accorded great weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed error in re-evaluating the
NLRC’s factual findings since such findings are not in accord with the evidence on record and the applicable law or
jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of Court has been
settled as early as this Court’s decision in St. Martin Funeral Homes v. NLRC. 12 In said case, the Court held that the proper
vehicle for such review is a special civil action for certiorari under Rule 65 of the said Rules, and that the case should be
filed with the CA in strict observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section
9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA — pursuant to the exercise of its original
jurisdiction over petitions for certiorari — is specifically given the power to pass upon the evidence, if and when necessary,
to resolve factual issues.13 Section 9 clearly states:

xxxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. x x x

However, equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.14 But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard
of the evidence on record, they may be examined by the courts. 15 The CA can grant the petition for certiorari if it finds that
the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence. 16 It is within
the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings of the NLRC. 17

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are generally binding on the
appellate court, unless there was a showing that they were arrived at arbitrarily or in disregard of the evidence on record.
In respondents' petition for certiorari with the CA, these factual findings were reexamined and reversed by the appellate
court on the ground that they were not in accord with credible evidence presented in this case. To determine if the CA's
reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient basis, it is incumbent
upon this Court to make its own evaluation of the evidence on record.18

After a thorough review of the records at hand, the Court finds that the CA did not commit error in arriving at its own findings
and conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached verification and certificate
against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs in a case and the
signature of only one of them is insufficient, the Court has stressed that the rules on forum shopping, which were designed
to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective.19 Strict compliance with the provision regarding the certificate of non-forum
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shopping underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements
completely disregarded.20 It does not, however, prohibit substantial compliance therewith under justifiable circumstances,
considering especially that although it is obligatory, it is not jurisdictional. 21

In a number of cases, the Court has consistently held that when all the petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the certification against forum shopping
substantially complies with the rules.22 In the present case, there is no question that respondents share a common interest
and invoke a common cause of action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule
governing certificates of non-forum shopping. In the first place, some of the respondents actually executed a Special Power
of Attorney authorizing Garcia as their attorney-in-fact in filing a petition for certiorari with the CA.23

The Court, likewise, does not agree with petitioners' argument that the CA should not have given due course to the petition
filed before it with respect to some of the respondents, considering that these respondents did not sign the verification
attached to the Memorandum of Partial Appeal earlier filed with the NLRC. Petitioners assert that the decision of the Labor
Arbiter has become final and executory with respect to these respondents and, as a consequence, they are barred from
filing a petition for certiorari with the CA.

With respect to the absence of some of the workers’ signatures in the verification, the verification requirement is deemed
substantially complied with when some of the parties who undoubtedly have sufficient knowledge and belief to swear to the
truth of the allegations in the petition had signed the same. Such verification is deemed a sufficient assurance that the
matters alleged in the petition have been made in good faith or are true and correct, and not merely speculative. Moreover,
respondents' Partial Appeal shows that the appeal stipulated as complainants-appellants "Rizal Beato, et al.", meaning that
there were more than one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may be given due
course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice. 24 Indeed,
the absence of a verification is not jurisdictional, but only a formal defect, which does not of itself justify a court in refusing
to allow and act on a case.25 Hence, the failure of some of the respondents to sign the verification attached to their
Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with respect to Lubas,
because the said doctrine is applicable only to corporations and Lubas is not a corporation but a single proprietorship; that
Lubas had been found by the Labor Arbiter and the NLRC to have a personality which is separate and distinct from that of
PTI; that PTI had no hand in the management and operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A settled formulation
of the doctrine of piercing the corporate veil is that when two business enterprises are owned, conducted and controlled by
the same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction
that these two entities are distinct and treat them as identical or as one and the same. 26 In the present case, it may be true
that Lubas is a single proprietorship and not a corporation. However, petitioners’ attempt to isolate themselves from and
hide behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely what the
classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was Prince Transport who
made the decision to transfer its employees to the former? Besides, Prince Transport never regarded Lubas Transport as
a separate entity. In the aforesaid letter, it referred to said entity as "Lubas operations." Moreover, in said letter, it did not
transfer the employees; it "assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to
a new company but a "new management."27

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent from PTI why is it that
the latter decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner company admitted that
Lubas is one of its sub-companies.28 In addition, PTI, in its letters to its employees who were transferred to Lubas, referred
to the latter as its "New City Operations Bus."29

Moreover, petitioners failed to refute the contention of respondents that despite the latter’s transfer to Lubas of their daily
time records, reports, daily income remittances of conductors, schedule of drivers and conductors were all made, performed,
filed and kept at the office of PTI. In fact, respondents’ identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving different groups of
employees transferred by PTI to other companies, the Labor Arbiter handling the cases found that these companies and
PTI are one and the same entity; thus, making them solidarily liable for the payment of backwages and other money claims
awarded to the complainants therein.30

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Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it ordered petitioners to reinstate
respondents to their former positions, considering that the issue of reinstatement was never brought up before it and
respondents never questioned the award of separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking reinstatement. 31

In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought, but may add
a general prayer for such further or other reliefs as may be deemed just and equitable. Under this rule, a court can grant
the relief warranted by the allegation and the proof even if it is not specifically sought by the injured party; the inclusion of a
general prayer may justify the grant of a remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant. 321avvphi1

Moreover, in BPI Family Bank v. Buenaventura,33 this Court ruled that the general prayer is broad enough "to justify
extension of a remedy different from or together with the specific remedy sought." Even without the prayer for a specific
remedy, proper relief may be granted by the court if the facts alleged in the complaint and the evidence introduced so
warrant. The court shall grant relief warranted by the allegations and the proof even if no such relief is prayed for. The prayer
in the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not otherwise specifically
prayed for.34 In the instant case, aside from their specific prayer for reinstatement, respondents, in their separate complaints,
prayed for such reliefs which are deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to depart from the findings of
the CA that respondents’ transfer of work assignments to Lubas was designed by petitioners as a subterfuge to foil the
former’s right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of
unfair labor practice if it interferes with, restrains or coerces its employees in the exercise of their right to self-organization
or if it discriminates in regard to wages, hours of work and other terms and conditions of employment in order to encourage
or discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after respondents' transfer to
Lubas, petitioners left them high and dry insofar as the operations of Lubas was concerned. The Court finds no error in the
findings and conclusion of the CA that petitioners "withheld the necessary financial and logistic support such as spare parts,
and repair and maintenance of the transferred buses until only two units remained in running condition." This left
respondents virtually jobless.

WHEREFORE, the instant petition is denied. The assailed Decision and Resolution of the Court of Appeals, dated
December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953, are AFFIRMED.

SO ORDERED.

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 THIRD DIVISION

G.R. No. 157549 May 30, 2011

DONNINA C. HALLEY, Petitioner,

vs.
PRINTWELL, INC., Respondent.

DECISION

BERSAMIN, J:

Stockholders of a corporation are liable for the debts of the corporation up to the extent of their unpaid subscriptions. They
cannot invoke the veil of corporate identity as a shield from liability, because the veil may be lifted to avoid defrauding
corporate creditors.

Weaffirm with modification the decisionpromulgated on August 14, 2002, 1whereby the Court of Appeals(CA) upheld
thedecision of the Regional Trial Court, Branch 71, in Pasig City (RTC),2ordering the defendants (including the petitioner)to
pay to Printwell, Inc. (Printwell) the principal sum of ₱291,342.76 plus interest.

Antecedents

The petitioner wasan incorporator and original director of Business Media Philippines, Inc. (BMPI), which, at its incorporation
on November 12, 1987,3had an authorized capital stock of ₱3,000,000.00 divided into 300,000 shares each with a par value
of ₱10.00,of which 75,000 were initially subscribed, to wit:

Subscriber No. of shares Total subscription Amount paid

Donnina C. Halley 35,000 ₱ 350,000.00 ₱87,500.00
Roberto V. Cabrera, Jr. 18,000 ₱ 180,000.00 ₱45,000.00
Albert T. Yu 18,000 ₱ 180,000.00 ₱45,000.00
Zenaida V. Yu 2,000 ₱ 20,000.00 ₱5,000.00
Rizalino C. Vineza 2,000 ₱ 20,000.00 ₱5,000.00
TOTAL 75,000 ₱750,000.00 ₱187,500.00

Printwellengaged in commercial and industrial printing.BMPI commissioned Printwell for the printing of the magazine
Philippines, Inc. (together with wrappers and subscription cards) that BMPI published and sold. For that purpose, Printwell
extended 30-day credit accommodations to BMPI.

In the period from October 11, 1988 until July 12, 1989, BMPI placedwith Printwell several orders on credit, evidenced
byinvoices and delivery receipts totaling₱316,342.76.Considering that BMPI paidonly₱25,000.00,Printwell suedBMPIon
January 26, 1990 for the collection of the unpaid balance of ₱291,342.76 in the RTC. 4

On February 8, 1990,Printwell amended thecomplaint in order to implead as defendants all the original stockholders and
incorporators to recover on theirunpaid subscriptions, as follows: 5

Name Unpaid Shares

Donnina C. Halley ₱ 262,500.00
Roberto V. Cabrera, Jr. ₱135,000.00
Albert T. Yu ₱135,000.00
Zenaida V. Yu ₱15,000.00
Rizalino C. Viñeza ₱15,000.00
TOTAL ₱ 562,500.00

The defendants filed a consolidated answer,6averring that they all had paid their subscriptions in full; that BMPI had a
separate personality from those of its stockholders; thatRizalino C. Viñeza had assigned his fully-paid up sharesto a certain
Gerardo R. Jacinto in 1989; andthat the directors and stockholders of BMPI had resolved to dissolve BMPI during the annual
meetingheld on February 5, 1990.

To prove payment of their subscriptions, the defendantstockholderssubmitted in evidenceBMPI official receipt (OR) no. 217,
OR no. 218, OR no. 220,OR no. 221, OR no. 222, OR no. 223, andOR no. 227,to wit:

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In addition, the stockholderssubmitted other documentsin evidence, namely:(a) an audit report dated March 30, 1989
prepared by Ilagan, Cepillo & Associates (submitted to the SEC and the BIR); 7(b) BMPIbalance sheet8 and income
statement9as of December 31, 1988; (c) BMPI income tax return for the year 1988 (stamped "received" by the BIR);10(d)
journal vouchers;11(e) cash deposit slips;12 and(f)Bank of the Philippine Islands (BPI) savings account passbookin the name
of BMPI.13

Ruling of the RTC

On November 3, 1993, the RTC rendereda decision in favor of Printwell, rejecting the allegation of payment in full of the
subscriptions in view of an irregularity in the issuance of the ORs and observingthat the defendants had used BMPI’s
corporate personality to evade payment and create injustice, viz:

The claim of individual defendants that they have fully paid their subscriptions to defend[a]nt corporation, is not worthy of
consideration, because: —

a) in the case of defendants-spouses Albert and Zenaida Yu, it will be noted that the alleged payment made on May 13,
1988 amounting to ₱135,000.00, is covered by Official Receipt No. 218 (Exh. "2"), whereas the alleged payment made
earlier on November 5, 1987, amounting to ₱5,000.00, is covered by Official Receipt No. 222 (Exh. "3"). This is cogent proof
that said receipts were belatedly issued just to suit their theory since in the ordinary course of business, a receipt issued
earlier must have serial numbers lower than those issued on a later date. But in the case at bar, the receipt issued on
November 5, 1987 has serial numbers (222) higher than those issued on a later date (May 13, 1988).

b) The claim that since there was no call by the Board of Directors of defendant corporation for the payment of unpaid
subscriptions will not be a valid excuse to free individual defendants from liability. Since the individual defendants are
members of the Board of Directors of defendantcorporation, it was within their exclusive power to prevent the fulfillment of
the condition, by simply not making a call for the payment of the unpaid subscriptions. Their inaction should not work to their
benefit and unjust enrichment at the expense of plaintiff.

Assuming arguendo that the individual defendants have paid their unpaid subscriptions, still, it is very apparent that
individual defendants merely used the corporate fiction as a cloak or cover to create an injustice; hence, the alleged separate
personality of defendant corporation should be disregarded (Tan Boon Bee & Co., Inc. vs. Judge Jarencio, G.R. No. 41337,
30 June 1988).14

Applying the trust fund doctrine, the RTC declared the defendant stockholders liable to Printwell pro rata, thusly:

Defendant Business Media, Inc. is a registered corporation (Exhibits "A", "A-1" to "A-9"), and, as appearing from the Articles
of Incorporation, individual defendants have the following unpaid subscriptions:

and it is an established doctrine that subscriptions to the capital stock of a corporation constitute a fund to which creditors
have a right to look for satisfaction of their claims (Philippine National Bank vs. Bitulok Sawmill, Inc., 23 SCRA 1366) and,
in fact, a corporation has no legal capacity to release a subscriber to its capital stock from the obligation to pay for his
shares, and any agreement to this effect is invalid (Velasco vs. Poizat, 37 Phil. 802).

The liability of the individual stockholders in the instant case shall be pro-rated as follows:

The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants, ordering defendants to pay to
plaintiff the amount of ₱291,342.76, as principal, with interest thereon at 20% per annum, from date of default, until fully
paid, plus ₱30,000.00 as attorney’s fees, plus costs of suit.

Defendants’ counterclaims are ordered dismissed for lack of merit.

SO ORDERED.16

Ruling of the CA

All the defendants, except BMPI, appealed.

Spouses Donnina and Simon Halley, andRizalinoViñeza defined the following errors committed by the RTC, as follows:

I.

THE TRIAL COURT ERRED IN HOLDING APPELLANTS-STOCKHOLDERS LIABLE FOR THE LIABILITIES OF THE
DEFENDANT CORPORATION.

II.

8|Page
ASSUMING ARGUENDO THAT APPELLANTS MAY BE LIABLE TO THE EXTENT OF THEIR UNPAID SUBSCRIPTION
OF SHARES OF STOCK, IF ANY, THE TRIAL COURT NONETHELESS ERRED IN NOT FINDING THAT APPELLANTS-
STOCKHOLDERS HAVE, AT THE TIME THE SUIT WAS FILED, NO SUCH UNPAID SUBSCRIPTIONS.

On their part, Spouses Albert and Zenaida Yu averred:

I.

THE RTC ERRED IN REFUSING TO GIVE CREDENCE AND WEIGHT TO DEFENDANTS-APPELLANTS SPOUSES
ALBERT AND ZENAIDA YU’S EXHIBITS 2 AND 3 DESPITE THE UNREBUTTED TESTIMONY THEREON BY
APPELLANT ALBERT YU AND THE ABSENCE OF PROOF CONTROVERTING THEM.

II.

THE RTC ERRED IN HOLDING DEFENDANTS-APPELLANTS SPOUSES ALBERT AND ZENAIDA YU PERSONALLY
LIABLE FOR THE CONTRACTUAL OBLIGATION OF BUSINESS MEDIA PHILS., INC. DESPITE FULL PAYMENT BY
SAID DEFENDANTS-APPELLANTS OF THEIR RESPECTIVE SUBSCRIPTIONS TO THE CAPITAL STOCK OF
BUSINESS MEDIA PHILS., INC.

Roberto V. Cabrera, Jr. argued:

I.

IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO APPLY THE DOCTRINE OF PIERCING THE VEIL OF
CORPORATE PERSONALITY IN ABSENCE OF ANY SHOWING OF EXTRA-ORDINARY CIRCUMSTANCES THAT
WOULD JUSTIFY RESORT THERETO.

II.

IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO RULE THAT INDIVIDUAL DEFENDANTS ARE LIABLE
TO PAY THE PLAINTIFF-APPELLEE’S CLAIM BASED ON THEIR RESPECTIVE SUBSCRIPTION. NOTWITHSTANDING
OVERWHELMING EVIDENCE SHOWING FULL SETTLEMENT OF SUBSCRIBED CAPITAL BY THE INDIVIDUAL
DEFENDANTS.

On August 14, 2002, the CA affirmed the RTC, holding that the defendants’ resort to the corporate personality would
createan injustice becausePrintwell would thereby be at a loss against whom it would assert the right to collect, viz:

Settled is the rule that when the veil of corporate fiction is used as a means of perpetrating fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievements or perfection of monopoly
or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the
members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals
(First Philippine International Bank vs. Court of Appeals, 252 SCRA 259). Moreover, under this doctrine, the corporate
existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and
due obligations or to justify wrong (Claparols vs. CIR, 65 SCRA 613).

In the case at bench, it is undisputed that BMPI made several orders on credit from appellee PRINTWELL involving the
printing of business magazines, wrappers and subscription cards, in the total amount of P291,342.76 (Record pp. 3-5,
Annex "A") which facts were never denied by appellants’ stockholders that they owe appellee the amount of P291,342.76.
The said goods were delivered to and received by BMPI but it failed to pay its overdue account to appellee as well as the
interest thereon, at the rate of 20% per annum until fully paid. It was also during this time that appellants stockholders were
in charge of the operation of BMPI despite the fact that they were not able to pay their unpaid subscriptions to BMPI yet
greatly benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence
appellee in order to protect its right can collect from the appellants’ stockholders regarding their unpaid subscriptions. To
deny appellee from recovering from appellants would place appellee in a limbo on where to assert their right to collect from
BMPI since the stockholders who are appellants herein are availing the defense of corporate fiction to evade payment of its
obligations.17

Further, the CA concurred with the RTC on theapplicability of thetrust fund doctrine, under which corporate debtors might
look to the unpaid subscriptions for the satisfaction of unpaid corporate debts, stating thus:

It is an established doctrine that subscription to the capital stock of a corporation constitute a fund to which creditors have
a right to look up to for satisfaction of their claims, and that the assignee in insolvency can maintain an action upon any
unpaid stock subscription in order to realize assets for the payment of its debts (PNB vs. Bitulok Sawmill, 23 SCRA 1366).

Premised on the above-doctrine, an inference could be made that the funds, which consists of the payment of subscriptions
of the stockholders, is where the creditors can claim monetary considerations for the satisfaction of their claims. If these
funds which ought to be fully subscribed by the stockholders were not paid or remain an unpaid subscription of the
corporation then the creditors have no other recourse to collect from the corporation of its liability. Such occurrence was
evident in the case at bar wherein the appellants as stockholders failed to fully pay their unpaid subscriptions, which left the
9|Page
creditors helpless in collecting their claim due to insufficiency of funds of the corporation. Likewise, the claim of appellants
that they already paid the unpaid subscriptions could not be given weight because said payment did not reflect in the Articles
of Incorporations of BMPI that the unpaid subscriptions were fully paid by the appellants’ stockholders. For it is a rule that
a stockholder may be sued directly by creditors to the extent of their unpaid subscriptions to the corporation (Keller vs. COB
Marketing, 141 SCRA 86).

Moreover, a corporation has no power to release a subscription or its capital stock, without valuable consideration for such
releases, and as against creditors, a reduction of the capital stock can take place only in the manner and under the
conditions prescribed by the statute or the charter or the Articles of Incorporation. (PNB vs. Bitulok Sawmill, 23 SCRA
1366).18

The CAdeclared thatthe inconsistency in the issuance of the ORs rendered the claim of full payment of the subscriptions to
the capital stock unworthy of consideration; andheld that the veil of corporate fiction could be pierced when it was used as
a shield to perpetrate a fraud or to confuse legitimate issues, to wit:

Finally, appellants SPS YU, argued that the fact of full payment for the unpaid subscriptions was incontrovertibly established
by competent testimonial and documentary evidence, namely – Exhibits "1", "2", "3" & "4", which were never disputed by
appellee, clearly shows that they should not be held liable for payment of the said unpaid subscriptions of BMPI.

The reliance is misplaced.

Based on the above exhibits, we are in accord with the lower court’s findings that the claim of the individual appellants that
they fully paid their subscription to the defendant BMPI is not worthy of consideration, because, in the case of appellants
SPS. YU, there is an inconsistency regarding the issuance of the official receipt since the alleged payment made on May
13, 1988 amounting to ₱135,000.00 was covered by Official Receipt No. 218 (Record, p. 352), whereas the alleged payment
made earlier on November 5, 1987 amounting to ₱5,000.00 is covered by Official Receipt No. 222 (Record, p. 353). Such
issuance is a clear indication that said receipts were belatedly issued just to suit their claim that they have fully paid the
unpaid subscriptions since in the ordinary course of business, a receipt is issued earlier must have serial numbers lower
than those issued on a later date. But in the case at bar, the receipt issued on November 5, 1987 had a serial number (222)
higher than those issued on May 13, 1988 (218). And even assuming arguendo that the individual appellants have paid
their unpaid subscriptions, still, it is very apparent that the veil of corporate fiction may be pierced when made as a shield
to perpetuate fraud and/or confuse legitimate issues. (Jacinto vs. Court of Appeals, 198 SCRA 211). 19

Spouses Halley and Viñeza moved for a reconsideration, but the CA denied their motion for reconsideration.

Issues

Only Donnina Halley has come to the Court to seek a further review, positing the following for our
consideration and resolution, to wit:

I.

THE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION THAT DID NOTSTATE
THE FACTS AND THE LAW UPON WHICH THE JUDGMENT WAS BASED BUT MERELY COPIED THE
CONTENTS OF RESPONDENT’S MEMORANDUM ADOPTING THE SAME AS THE REASON FOR THE
DECISION

II.

THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT
WHICH ESSENTIALLY ALLOWED THE PIERCING OF THE VEIL OF CORPORATE FICTION

III.

THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE TRUST FUND DOCTRINE WHEN
THE GROUNDS THEREFOR HAVE NOT BEEN SATISFIED.

On the first error, the petitioner contends that the RTC lifted verbatim from the memorandum of Printwell; and submits that
the RTCthereby violatedthe requirement imposed in Section 14, Article VIII of the Constitution 20 as well as in Section 1,Rule
36 of the Rules of Court,21to the effect that a judgment or final order of a court should state clearly and distinctly the facts
and the law on which it is based. The petitioner claims that the RTC’s violation indicated that the RTC did not analyze the
case before rendering its decision, thus denying her the opportunity to analyze the decision; andthat a suspicion of partiality
arose from the fact that the RTC decision was but a replica of Printwell’s memorandum.She cites Francisco v. Permskul, 22
in which the Court has stated that the reason underlying the constitutional requirement, that every decision should clearly
and distinctly state the facts and the law on which it is based, is to inform the reader of how the court has reached its
decision and thereby give the losing party an opportunity to study and analyze the decision and enable such party to
appropriately assign the errors committed therein on appeal.

10 | P a g e
On the second and third errors, the petitioner maintains that the CA and the RTC erroneously pierced the veil of corporate
fiction despite the absence of cogent proof showing that she, as stockholder of BMPI, had any hand in transacting with
Printwell; thatthe CA and the RTC failed to appreciate the evidence that she had fully paid her subscriptions; and the CA
and the RTCwrongly relied on the articles of incorporation in determining the current list of unpaid subscriptions despite the
articles of incorporationbeing at best reflectiveonly of the pre-incorporation status of BMPI.

As her submissions indicate, the petitioner assails the decisions of the CA on: (a) the propriety of disregarding the separate
personalities of BMPI and its stockholdersby piercing the thin veil that separated them; and (b) the application of the trust
fund doctrine.

Ruling

The petition for review fails.

I
The RTC did not violate
the Constitution and the Rules of Court

The contention of the petitioner, that the RTC merely copied the memorandum of Printwell in writing its decision, and did
not analyze the records on its own, thereby manifesting a bias in favor of Printwell, is unfounded.

It is noted that the petition for review merely generally alleges that starting from its page 5, the decision of the RTC "copied
verbatim the allegations of herein Respondents in its Memorandum before the said court," as if "the Memorandum was the
draft of the Decision of the Regional Trial Court of Pasig,"23but fails to specify either the portions allegedly lifted verbatim
from the memorandum, or why she regards the decision as copied. The omission renders thepetition for review insufficient
to support her contention, considering that the mere similarityin language or thought between Printwell’s memorandum and
the trial court’s decisiondid not necessarily justify the conclusion that the RTC simply lifted verbatim or copied from
thememorandum.

It is to be observed in this connection that a trial or appellate judge may occasionally viewa party’s memorandum or brief
as worthy of due consideration either entirely or partly. When he does so, the judgemay adopt and incorporatein his
adjudicationthe memorandum or the parts of it he deems suitable,and yet not be guilty of the accusation of lifting or copying
from the memorandum.24 This isbecause ofthe avowed objective of the memorandum to contribute in the proper illumination
and correct determination of the controversy.Nor is there anything untoward in the congruence of ideas and views about
the legal issues between himself and the party drafting the memorandum.The frequency of similarities in argumentation,
phraseology, expression, and citation of authorities between the decisions of the courts and the memoranda of the parties,
which may be great or small, can be fairly attributable tothe adherence by our courts of law and the legal profession to
widely knownor universally accepted precedents set in earlier judicial actions with identical factual milieus or posing related
judicial dilemmas.

We also do not agree with the petitioner that the RTC’s manner of writing the decisiondeprivedher ofthe opportunity to
analyze its decisionas to be able to assign errors on appeal. The contrary appears, considering that she was able to impute
and assignerrors to the RTCthat she extensively discussed in her appeal in the CA, indicating her thorough analysis ofthe
decision of the RTC.

Our own readingof the trial court’s decision persuasively shows that the RTC did comply with the requirements regarding
the content and the manner of writing a decision prescribed in the Constitution and the Rules of Court. The decision of the
RTC contained clear and distinct findings of facts, and stated the applicablelaw and jurisprudence, fully explaining why the
defendants were being held liable to the plaintiff. In short, the reader was at once informed of the factual and legal reasons
for the ultimate result.

II
Corporate personality not to be used to foster injustice

Printwell impleaded the petitioner and the other stockholders of BMPI for two reasons, namely: (a) to reach the unpaid
subscriptions because it appeared that such subscriptions were the remaining visible assets of BMPI; and (b) to avoid
multiplicity of suits.25

The petitionersubmits that she had no participation in the transaction between BMPI and Printwell;that BMPI acted on its
own; and that shehad no hand in persuading BMPI to renege on its obligation to pay. Hence, she should not be personally
liable.

We rule against the petitioner’s submission.

Although a corporation has a personality separate and distinct from those of its stockholders, directors, or officers,26such
separate and distinct personality is merely a fiction created by law for the sake of convenience and to promote the ends of
justice.27The corporate personality may be disregarded, and the individuals composing the corporation will be treated as
individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality;as a justification for a wrong; as an
alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. 28 As a general rule, a corporation is

11 | P a g e
looked upon as a legal entity, unless and until sufficient reason to the contrary appears. Thus,the courts always presume
good faith, andfor that reason accord prime importance to the separate personality of the corporation, disregarding the
corporate personality only after the wrongdoing is first clearly and convincingly established. 29It thus behooves the courts to
be careful in assessing the milieu where the piercing of the corporate veil shall be done. 30

Although nowhere in Printwell’s amended complaint or in the testimonies Printwell offered can it be read or inferred from
that the petitioner was instrumental in persuading BMPI to renege onits obligation to pay; or that sheinduced Printwell to
extend the credit accommodation by misrepresenting the solvency of BMPI toPrintwell, her personal liability, together with
that of her co-defendants, remainedbecause the CA found her and the other defendant stockholders to be in charge of the
operations of BMPI at the time the unpaid obligation was transacted and incurred, to wit:

In the case at bench, it is undisputed that BMPI made several orders on credit from appellee PRINTWELL involving the
printing of business magazines, wrappers and subscription cards, in the total amount of ₱291,342.76 (Record pp. 3-5,
Annex "A") which facts were never denied by appellants’ stockholders that they owe(d) appellee the amount of ₱291,342.76.
The said goods were delivered to and received by BMPI but it failed to pay its overdue account to appellee as well as the
interest thereon, at the rate of 20% per annum until fully paid. It was also during this time that appellants stockholders were
in charge of the operation of BMPI despite the fact that they were not able to pay their unpaid subscriptions to BMPI yet
greatly benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence
appellee in order to protect its right can collect from the appellants stockholders regarding their unpaid subscriptions. To
deny appellee from recovering from appellants would place appellee in a limbo on where to assert their right to collect from
BMPI since the stockholders who are appellants herein are availing the defense of corporate fiction to evade payment of its
obligations.31

It follows, therefore, that whether or not the petitioner persuaded BMPI to renege on its obligations to pay, and whether or
not she induced Printwell to transact with BMPI were not gooddefensesin the suit.1avvphi1

III
Unpaid creditor may satisfy its claim from
unpaid subscriptions;stockholders must
prove full payment oftheir subscriptions

Both the RTC and the CA applied the trust fund doctrineagainst the defendant stockholders, including the petitioner.

The petitionerargues, however,that the trust fund doctrinewas inapplicablebecause she had already fully paid her
subscriptions to the capital stock of BMPI. She thus insiststhat both lower courts erred in disregarding the evidence on the
complete payment of the subscription, like receipts, income tax returns, and relevant financial statements.

The petitioner’s argumentis devoid of substance.

The trust fund doctrineenunciates a –

xxx rule that the property of a corporation is a trust fund for the payment of creditors, but such property can be called a trust
fund ‘only by way of analogy or metaphor.’ As between the corporation itself and its creditors it is a simple debtor, and as
between its creditors and stockholders its assets are in equity a fund for the payment of its debts.32

The trust fund doctrine, first enunciated in the American case of Wood v. Dummer, 33was adopted in our jurisdiction in
Philippine Trust Co. v. Rivera,34where thisCourt declared that:

It is established doctrine that subscriptions to the capital of a corporation constitute a fund to which creditors have a right to
look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts. (Velasco vs. Poizat, 37 Phil., 802) xxx 35

We clarify that the trust fund doctrineis not limited to reaching the stockholder’s unpaid subscriptions. The scope of the
doctrine when the corporation is insolvent encompasses not only the capital stock, but also other property and assets
generally regarded in equity as a trust fund for the payment of corporate debts.36All assets and property belonging to the
corporation held in trust for the benefit of creditors thatwere distributed or in the possession of the stockholders, regardless
of full paymentof their subscriptions, may be reached by the creditor in satisfaction of its claim.

Also, under the trust fund doctrine,a corporation has no legal capacity to release an original subscriber to its capital stock
from the obligation of paying for his shares, in whole or in part, 37 without a valuable consideration,38 or fraudulently, to the
prejudice of creditors.39The creditor is allowed to maintain an action upon any unpaid subscriptions and thereby steps into
the shoes of the corporation for the satisfaction of its debt. 40To make out a prima facie case in a suit against stockholders
of an insolvent corporation to compel them to contribute to the payment of its debts by making good unpaid balances upon
their subscriptions, it is only necessary to establish that thestockholders have not in good faith paid the par value of the
stocks of the corporation.41

The petitionerposits that the finding of irregularity attending the issuance of the receipts (ORs) issued to the other
stockholders/subscribers should not affect her becauseher receipt did not suffer similar irregularity.

12 | P a g e
Notwithstanding that the RTC and the CA did not find any irregularity in the OR issued in her favor,we still cannot sustain
the petitioner’s defense of full payment of her subscription.

In civil cases, theparty who pleads payment has the burden of proving it, that even where the plaintiff must allege
nonpayment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to
prove nonpayment. In other words, the debtor bears the burden of showing with legal certainty that the obligation has been
discharged by payment.42

Apparently, the petitioner failed to discharge her burden.

A receipt is the written acknowledgment of the fact of payment in money or other settlement between the seller and the
buyer of goods, thedebtor or thecreditor, or theperson rendering services, and theclient or thecustomer.43Althougha receipt
is the best evidence of the fact of payment, it isnot conclusive, but merely presumptive;nor is it exclusive
evidence,considering thatparole evidence may also establishthe fact of payment. 44

The petitioner’s ORNo. 227,presentedto prove the payment of the balance of her subscription, indicated that her supposed
payment had beenmade by means of a check. Thus, to discharge theburden to prove payment of her subscription, she had
to adduce evidence satisfactorily proving that her payment by check wasregardedas payment under the law.

Paymentis defined as the delivery of money.45Yet, because a check is not money and only substitutes for money, the
delivery of a check does not operate as payment and does not discharge the obligation under a judgment. 46 The delivery of
a bill of exchange only produces the fact of payment when the bill has been encashed.47The following passage fromBank
of Philippine Islands v. Royeca48is enlightening:

Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute
a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such
an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a
judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually
realized.

To establish their defense, the respondents therefore had to present proof, not only that they delivered the checks to the
petitioner, but also that the checks were encashed. The respondents failed to do so. Had the checks been actually encashed,
the respondents could have easily produced the cancelled checks as evidence to prove the same. Instead, they merely
averred that they believed in good faith that the checks were encashed because they were not notified of the dishonor of
the checks and three years had already lapsed since they issued the checks.

Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner
to prove non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party
upon whom it is lodged was able to adduce preponderant evidence to prove its claim.

Ostensibly, therefore, the petitioner’s mere submission of the receipt issued in exchange of the check did not satisfactorily
establish her allegation of full payment of her subscription. Indeed, she could not even inform the trial court about the identity
of her drawee bank,49and about whether the check was cleared and its amount paid to BMPI. 50In fact, she did not present
the check itself.

Theincome tax return (ITR) and statement of assets and liabilities of BMPI, albeit presented, had no bearing on the issue
of payment of the subscription because they did not by themselves prove payment. ITRsestablish ataxpayer’s liability for
taxes or a taxpayer’s claim for refund. In the same manner, the deposit slips and entries in the passbook issued in the name
of BMPI were hardly relevant due to their not reflecting the alleged payments.

It is notable, too, that the petitioner and her co-stockholders did not support their allegation of complete payment of their
respective subscriptions with the stock and transfer book of BMPI. Indeed, books and records of a corporation (including
the stock and transfer book) are admissible in evidence in favor of or against the corporation and its members to prove the
corporate acts, its financial status and other matters (like the status of the stockholders), and are ordinarily the best evidence
of corporate acts and proceedings.51Specifically, a stock and transfer book is necessary as a measure of precaution,
expediency, and convenience because it provides the only certain and accurate method of establishing the various
corporate acts and transactions and of showing the ownership of stock and like matters. 52That she tendered no explanation
why the stock and transfer book was not presented warrants the inference that the book did not reflect the actual payment
of her subscription.

Nor did the petitioner present any certificate of stock issued by BMPI to her. Such a certificate covering her subscription
might have been a reliable evidence of full payment of the subscriptions, considering that under Section 65 of the
Corporation Code a certificate of stock issues only to a subscriber who has fully paid his subscription. The lack of any
explanation for the absence of a stock certificate in her favor likewise warrants an unfavorable inference on the issue of
payment.

13 | P a g e
Lastly, the petitioner maintains that both lower courts erred in relying on the articles of incorporationas proof of the liabilities
of the stockholders subscribing to BMPI’s stocks, averring that the articles of incorporationdid not reflect the latest
subscription status of BMPI.

Although the articles of incorporation may possibly reflect only the pre-incorporation status of a corporation, the lower courts’
reliance on that document to determine whether the original subscribersalready fully paid their subscriptions or not was
neither unwarranted nor erroneous. As earlier explained, the burden of establishing the fact of full payment belonged not to
Printwell even if it was the plaintiff, but to the stockholders like the petitioner who, as the defendants, averredfull payment
of their subscriptions as a defense. Their failure to substantiate their averment of full payment, as well as their failure to
counter the reliance on the recitals found in the articles of incorporation simply meant their failure or inability to satisfactorily
prove their defense of full payment of the subscriptions.

To reiterate, the petitionerwas liablepursuant to the trust fund doctrine for the corporate obligation of BMPI by virtue of her
subscription being still unpaid. Printwell, as BMPI’s creditor,had a right to reachher unpaid subscription in satisfaction of its
claim.

IV
Liability of stockholders for corporate debts isup
to the extentof their unpaid subscription

The RTC declared the stockholders pro rata liable for the debt(based on the proportion to their shares in the capital stock
of BMPI); and held the petitionerpersonally liable onlyin the amount of ₱149,955.65.

We do not agree. The RTC lacked the legal and factual support for its prorating the liability. Hence, we need to modify the
extent of the petitioner’s personal liability to Printwell. The prevailing rule is that a stockholder is personally liable for the
financial obligations of the corporation to the extent of his unpaid subscription. 53In view ofthe petitioner’s unpaid subscription
being worth ₱262,500.00, shewas liable up to that amount.

Interest is also imposable on the unpaid obligation. Absent any stipulation, interest is fixed at 12% per annum from the date
the amended complaint was filed on February 8, 1990 until the obligation (i.e., to the extent of the petitioner’s personal
liability of ₱262,500.00) is fully paid.54

Lastly, we find no basis togrant attorney’s fees, the award for which must be supported by findings of fact and of law as
provided under Article 2208 of the Civil Code55incorporated in the body of decision of the trial court. The absence of the
requisite findings from the RTC decision warrants the deletion of the attorney’s fees.

ACCORDINGLY, we deny the petition for review on certiorari;and affirm with modification the decision promulgated on
August 14, 2002by ordering the petitionerto pay to Printwell, Inc. the sum of ₱262,500.00, plus interest of 12% per annum
to be computed from February 8, 1990 until full payment.

The petitioner shall paycost of suit in this appeal.

SO ORDERED.

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THIRD DIVISION

G.R. No. 115849 January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA,
petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO,
respondents.

DECISION

PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a
meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa,
Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed conservator of
Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been
deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the
majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate
the ban against forum-shopping?

Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under
Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals 1
in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The
dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded
under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof
to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby
AFFIRMED.

All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and
hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.

Costs against appellant bank.

The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:

1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at
Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in
Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna,

15 | P a g e
 between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One
Half Million (P5,500,000.00) Pesos;

2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of
T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of
the six (6) titles in the names of the plaintiffs;

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria
the sums of P200,000.00 each in moral damages;

4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary
damages ;

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by
way of attorney's fees;

6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the
amount of P20,000.00;

With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due
course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda.
The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully
deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this
Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a
banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera
(petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-Manager of the Property
Management Department of the petitioner Bank.

Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-
appellees Demetrio Demetria and Jose Janolo.

Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this
petition.

The Facts

The facts of this case are summarized in the respondent Court's Decision 3 as follows:

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six
parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME
Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan.
The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus
initiated negotiations for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel,
Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of
the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16,
1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:

August 30, 1987

The Producers Bank of the Philippines
Makati, Metro Manila

Attn. Mr. Mercurio Q. Rivera

Manager, Property Management Dept.

Gentleman:

16 | P a g e
 I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder
located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.

TCT NO. AREA

T-106932 113,580 sq. m.
T-106933 70,899 sq. m.
T-106934 52,246 sq. m.
T-106935 96,768 sq. m.
T-106936 187,114 sq. m.
T-106937 481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.

Kindly contact me at Telephone Number 921-1344.

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder
quoted (Exh. "C"):

September 1, 1987

JP M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO

Dear Sir:

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme
Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5 million for more than 101 hectares
on lot basis.

We shall be very glad to hear your position on the on the matter.

Best regards.

(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"):

September 17, 1987

Producers Bank
Paseo de Roxas
Makati, Metro Manila

Attention: Mr. Mercurio Rivera

Gentlemen:

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to
amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH..

Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September
28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the
BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through
Rivera, the following letter (Exh. "E"):

The Producers Bank of the Philippines

Paseo de Roxas, Makati
Metro Manila

Attention: Mr. Mercurio Rivera

Re: 101 Hectares of Land

in Sta. Rosa, Laguna

Gentlemen:

17 | P a g e
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us
to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).

Thank you.

(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank
since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4,
1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"):

Attention: Atty. Demetrio Demetria

Dear Sir:

Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is
under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator
of the bank.

For your information.

(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff
considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed
by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G")
tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement." Defendants refused to
receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the
bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the
documents on what was considered as a "perfected agreement." Thus:

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa,
Laguna, and which are covered by TCT No. T-106932 to 106937.

From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of
P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5,
1987.

In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that
despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have
advertised for sale the same lot to others.

In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary
actions/documentation within three (3) days from your receipt hereof. We are ready to remit the agreed amount of P5.5
million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our
client.

We trust that you will be guided accordingly.

(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its
communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our Conservator for
proper disposition" However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made
a second tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant Encarnacion.
Plaintiffs' letter reads:

PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila

Attn.: Atty. NIDA ENCARNACION

Central Bank Conservator

We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of
P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935,
106936 and 106937 and registered under Producers Bank.

This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the
said lots. Please inform us of the date of documentation of the sale immediately.

18 | P a g e
Kindly acknowledge receipt of our payment.

(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel,
made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale
(Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of
defendant's answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the
authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million
are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-
compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivers
and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a
perfected contract of sale, The defendants took the position that there was no such perfected sale because the defendant
Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed
a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a
substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration
filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the
Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of
his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo,
in view of the assignment of the latters' rights in the matter in litigation to said private respondent.

On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders
of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case")
— purportedly a "derivative suit" — with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-
1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to
stop Ejercito from enforcing or implementing the sale"4 In his answer, Janolo argued that the Second Case was barred by
litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second
Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed this
motion on the ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.

In their Petition6 and Memorandum7 , petitioners summarized their position as follows:

I.

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in
substitution of Demetria and Janolo) and the bank.

II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.

III.

The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke
acts of previous management.

IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on record.

On the other hand, petitioners prayed for dismissal of the instant suit on the ground 8 that:

I.

Petitioners have engaged in forum shopping.

II.

The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and
may no longer be questioned in this case.

19 | P a g e
 III.

The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo
(substituted by; respondent Ejercito) and the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating
the agency and the contract, has no authority to revoke the contract of sale.

The Issues

From the foregoing positions of the parties, the issues in this case may be summed up as follows:

1) Was there forum-shopping on the part of petitioner Bank?

2) Was there a perfected contract of sale between the parties?

3) Assuming there was, was the said contract enforceable under the statute of frauds?

4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or
to revoke the said contract?

5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-
91 requiring that a party "must certify under oath . . . [that] (a) he has not (t)heretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to
the best of his knowledge, no such action or proceeding is pending" in said courts or agencies. A violation of the said circular
entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have
included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil Case No. 92-
1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner
Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without
Prejudice.9

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping
because the instant petition pending before this Court involves "identical parties or interests represented, rights asserted
and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second Case. In
fact, the issues in the two cases are so interwined that a judgement or resolution in either case will constitute res judicata
in the other." 10

On the other hand, petitioners explain 11 that there is no forum-shopping because:

1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant,
whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit), it was
plaintiff;

2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances";

3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to
the Petition identifies the action as a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal
question for the courts to decide";

4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.

We rule for private respondent.

To begin with, forum-shopping originated as a concept in private international law.12 , where non-resident litigants are given
the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure
procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly
venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed whereby a
court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available
forum and the parties are not precluded from seeking remedies elsewhere.

20 | P a g e
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried in a
particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict." Hence, according to
Words and Phrases14 , "a litigant is open to the charge of "forum shopping" whenever he chooses a forum with slight
connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their
differences without imposing undue expenses and vexatious situations on the courts".

In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was originally
understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for
example, allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be
found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies,
aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the
same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa
aquiliana or culpa criminal — each remedy being available independently of the others — although he cannot recover more
than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of
his action, This was the original concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts
and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme
inconvenience to some of the parties to the action.

Thus, "forum shopping" had acquired a different concept — which is unethical professional legal practice.
And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether
prohibiting the practice. 15

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems
has been abused and mis-used to assure scheming litigants of dubious reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated
Circular 28-91. And even before that, the Court had prescribed it in the Interim Rules and Guidelines issued on January 11,
1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. Forum shopping as "the filing
of repetitious suits in different courts" has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister
of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits
filed in the courts but also in connection with litigations commenced in the courts while an administrative
proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an
unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where
the court in which the second suit was brought, has no jurisdiction. 18

The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of
Buan vs. Lopez 19 , also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia
are present or where a final judgment in one case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or
at least such parties as represent the same interests in both actions, as well as identity of rights asserted
and relief prayed for, the relief being founded on the same facts, and the identity on the two preceding
particulars is such that any judgment rendered in the other action, will, regardless of which party is
successful, amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter
action pendant.

xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards
parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree
sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same
identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction
will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek
reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive.

Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another
action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the
defense of litis pendencia in one case is bar to the others; and, a final judgment in one would constitute res judicata and
thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to
21 | P a g e
ask for summary dismissal of the two 20 (or more) complaints or petitions, and for imposition of the other sanctions, which
are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.

Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist
identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.

Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer
(herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged
perfected sale of real estate. On the other hand, the complaint 21 in the Second Case seeks to declare such purported sale
involving the same real property "as unenforceable as against the Bank", which is the petitioner herein. In other words, in
the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself
failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently,
is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In
Danville Maritime, Inc. vs. Commission on Audit. 22 , this Court ruled that the filing by a party of two apparently different
actions, but with the same objective, constituted forum shopping:

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents
therein — PNOC in the case before the lower court and the COA in the case before this Court and sought
what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of
the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement
entered into by and between the PNOC and petitioner, while in the complaint before the lower court
petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel
"T/T Andres Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the
memorandum of agreement and damages. One can see that although the relief prayed for in the two (2)
actions are ostensibly different, the ultimate objective in both actions is the same, that is, approval of the
sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10, 1988
disapproving the sale. (emphasis supplied).

In an earlier case 23 but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in
this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-
shopping. Both actions unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners' claim of absence of identity simply because the PCGG had not been
impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its
commencement, is specious. In the RTC action, as in the action before this Court, the validity of the contract
to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the
propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the
release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention
of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained
took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit
did not become functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy
in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit,
so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but
nonetheless done. The remedy was certainly not the institution of another action in another forum based
on essentially the same facts, The adoption of this latter recourse renders the petitioners amenable to
disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible.

In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in
the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity,
namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy.
They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and

Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit".
In the caption itself, petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24 .
Indeed, this is the very essence of a derivative suit:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he
holdsstock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse
to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v.
Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought
to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but by
Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority

22 | P a g e
in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of interests/entity represented.

Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its
shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or
an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates
the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals." 25

In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the instant case, and declare
herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-
shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be
allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in
vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise
would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum
shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of
parties, causes of action and reliefs sought, "because it (the Bank) was the defendant in the (first) case while it was the
plaintiff in the other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial Court, Branch 63,
Makati, etc. et al., 27 where Court held:

The rule has not been extended to a defendant who, for reasons known only to him, commences a new
action against the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein,
as causes of action, specific denials, special and affirmative defenses or even counterclaims, Thus,
Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-
shopping as such did not exist in the first place. (emphasis supplied)

Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said
case.

Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit.
In the former, as underscored in the above-quoted Court ruling, the defendants did not file any responsive pleading in the
first case. In other words, they did not make any denial or raise any defense or counter-claim therein In the case before us
however, petitioners filed a responsive pleading to the complaint — as a result of which, the issues were joined.

Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings, the petitioners
became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second
Case.

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused
the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or
related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting
decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem: a decision
recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision
in the Second Case barring the parties front enforcing or implementing the said sale. Indeed, a final decision in one would
constitute res judicata in the other 28 .

The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the
dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners' present counsel
entered their appearance only during the proceedings in this Court, and the Petition's VERIFICATION/CERTIFICATION
contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. The
Lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio
imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co,
et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings
and processes They are warned that a repetition of the same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also
because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a
perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court stated:

There is no dispute that the object of the transaction is that property owned by the defendant bank as
acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title
Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As

23 | P a g e
 testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of the
property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose
that they met with defendant Rivera, Manager of the Property Management Department of the defendant
bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature and scope
of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which
testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30,
1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over to me and then I published it in
the form of an inter-office memorandum distributed to all branches that these are acquired assets
for sale. I was instructed to advertise acquired assets for sale so on that basis, I have to entertain
offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I
provide the Committee with necessary information about the property such as original loan of the
borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time
the property is being offered for sale and then the information which are relative to the evaluation
of the bank to buy which the Committee considers and it is the Committee that evaluate as against
the exposure of the bank and it is also the Committee that submit to the Conservator for final
approval and once approved, we have to execute the deed of sale and it is the Conservator that
sign the deed of sale, sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property,
dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs
were dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to
the Committee before which the said official is authorized to discuss information relative to price
determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official
information regarding the price, as determined by the Committee and approved by the Conservator, can be
had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of
plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):

Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him
point-blank his authority to sell any property?

A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take
because he was saying that the matter of pricing will be passed upon by the committee. And when
I asked him how long it will take for the committee to decide and he said the committee meets every
week. If I am not mistaken Wednesday and in about two week's (sic) time, in effect what he was
saying he was not the one who was to decide. But he would refer it to the committee and he would
relay the decision of the committee to me.

Q — Please answer the question.

A — He did not say that he had the authority (.) But he said he would refer the matter to the
committee and he would relay the decision to me and he did just like that.

"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head,
with Jose Entereso as one of the members.

What transpired after the meeting of early August 1987 are consistent with the authority and the duties of
Rivera and the bank's internal procedure in the matter of the sale of bank's assets. As advised by Rivera,
the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price
of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and
accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between
the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the
Conservator and ultimately the bank itself with the set price on the other, and considering further the
discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be
no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that
"the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such counter-offer price
had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly
presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid
price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts,
the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price
at which the bank was selling the property.

There were averments by defendants below, as well as before this Court, that the P5.5 Million price was
not discussed by the Committee and that price. As correctly characterized by the trial court, this is not
credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's submission on this point does
not inspire belief. Both Co ad Entereso, as members of the Past Due Committee of the bank, claim that the
offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly
admit that they seldom attend the meetings of the Committee. It is important to note that negotiations on

24 | P a g e
 the price had started in early August and the plaintiffs had already offered an amount as purchase price,
having been made to understand by Rivera, the official in charge of the negotiation, that the price will be
submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. From the facts,
the official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept
offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot
turn around and later say, as it now does, that what Rivera states as the bank's action on the matter is not
in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation knowingly permits
one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds
him out to the public as possessing power to do those acts, the corporation will, as against any one who
has in good faith dealt with the corporation through such agent, he estopped from denying his authority
(Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential
Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993). 29

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the
contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is
established."

There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta.
Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of Title
Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.

Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co)
may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in substitution
of Demetria and Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings that there was an
offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have perused the evidence but
cannot find fault with the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact — if there
be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe
the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. In fact, such
findings merit serious consideration by this Court, particularly where, as in this case, said courts carefully and meticulously
discussed their findings. This is basic.

Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of Rivera's
authority to act and petitioner's allegations that the P5.5 million counter-offer was extinguished by the P4.25 million revised
offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the respondent Court.
They also delve into the contractual elements of consent and cause.

The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of "apparent
authority", with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals31 , where it was held that:

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted
by the agent. The agent's apparent representation yields to the principal's true representation and the
contract is considered as entered into between the principal and the third person (citing National Food
Authority vs. Intermediate Appellate Court, 184 SCRA 166).

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for acts outside the scape of their
authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy of confidence will
not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent
scope of their employment; nor will it be permitted to shirk its responsibility for such frauds even
though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the course of its
business by an agent acting within the general scope of his authority even though, in the particular
case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND
752, 204 NW 818, 40 ALR 1021).

Application of these principles is especially necessary because banks have a fiduciary relationship with the
public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith
will be eroded where banks do not exercise strict care in the selection and supervision of its employees,
resulting in prejudice to their depositors.

From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to act
for the Bank in the matter of selling its acquired assets. This evidence includes the following:

(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case, Manager of
the Property Management Department of the Bank". By his own admission, Rivera was already the person
in charge of the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);

25 | P a g e
 (b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial
meeting between the buyers and Rivera, the latter suggested that the buyers' offer should be no less than
P3.3 million (TSN, April 26, 1990, pp. 16-17);

(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p.11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July
30, p. 11);

(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to buy the property
for P4.25 million (TSN, July 30, 1990, p. 12);

(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN,
January 16, 1990, p. 18);

(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994, during which the
Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co,
a major shareholder and officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting
for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera
was the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. Exhs.
"S" and "S-1").

In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 , the Court, through Justice Jose A. R.
Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I. in
charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers.

To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to
establish Rivera's actual authority. These pieces of evidence, however, are inherently weak as they consist of Rivera's self-
serving testimony and various inter-office memoranda that purport to show his limited actual authority, of which private
respondent cannot be charged with knowledge. In any event, since the issue is apparent authority, the existence of which
is borne out by the respondent Court's findings, the evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned 33 .

Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted for
the Bank in three criminal cases, they should be charged with actual knowledge of Rivera's limited authority. But the Court
of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Rivera's actual authority
prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any acquired assets; on the
other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a
professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.

Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated September 17, 1987
extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent Court's finding that "there was a meeting of
minds when on 30 September 1987 Demetria and Janolo through Annex "L" (letter dated September 30, 1987) "accepted"
Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the late Justice Paras35 ,
Art. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. Prieto 37 .

However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the respondent
Court which reviewed the testimonies on this point, what was "accepted" by Janolo in his letter dated September 30, 1987
was the Bank's offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during
their meeting on September 28, 1987. Note that the said letter of September 30, 1987 begins with"(p)ursuant to our
discussion last 28 September 1987 . . .

Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28,
1987 meeting "was meant to have the offerors improve on their position of P5.5. million." 38 However, both the trial court and
the Court of Appeals found petitioners' testimonial evidence "not credible", and we find no basis for changing this finding of
fact.

Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private respondents'
evidence is more in keeping with truth and logic — that during the meeting on September 28, 1987, Luis Co and Rivera
"confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of
April 27, 1990, pp. 34-35)"39 . Hence, assuming arguendo that the counter-offer of P4.25 million extinguished the offer of
P5.5 million, Luis Co's reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said
offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting of the minds, as the
acceptance in said letter was absolute and unqualified.

26 | P a g e
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action, particularly the
latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came only on May 12, 1988 or more than seven (7)
months after Janolo' acceptance. Such delay, and the absence of any circumstance which might have justifiably prevented
the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank's
part to get out of a binding contractual obligation.

Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners that
the written offer made on September 1, 1987 was carried through during the meeting of September 28, 1987. This is the
conclusion consistent with human experience, truth and good faith.

It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the first time on appeal
and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues
of fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily
will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos
vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).40

. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the
trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic
rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175
SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).41

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an opportunity
in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due process. But we passed
upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat that, on the basis of
the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion is simply that there was
a perfected contract of sale.

The Third Issue: Is the Contract Enforceable?

The petition alleged42 :

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of
28 September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30
September 1987, the contract produced thereby would be unenforceable by action — there being no note,
memorandum or writing subscribed by the Bank to evidence such contract. (Please see article 1403[2],
Civil Code.)

Upon the other hand, the respondent Court in its Decision (p, 14) stated:

. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs' acceptance of
the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear
embodiments of the fact that a contract of sale was perfected between the parties, such contract being
binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks'
letter of September 1, 1987, taken together with plaintiffs' letter dated September 30, 1987, constitute in
law a sufficient memorandum of a perfected contract of sale.

The respondent Court could have added that the written communications commenced not only from September 1, 1987 but
from Janolo's August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient memoranda — since
they include the names of the parties, the terms and conditions of the contract, the price and a description of the property
as the object of the contract.

But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a "new"
offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure
of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence, petitioners — by such
utter failure to object — are deemed to have waived any defects of the contract under the statute of frauds, pursuant to
Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the
failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits
under them.

As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5 million
is a plenty — and the silence of petitioners all throughout the presentation makes the evidence binding on them thus;

27 | P a g e
 A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria told me to
accompany him we were able to meet Luis Co at the Bank.

xxx xxx xxx

Q Now, what transpired during this meeting with Luis Co of the Producers Bank?

A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.

Q What price?

A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price
and that is the price they intends (sic) to have, sir.

Q What do you mean?.

A That is the amount they want, sir.

Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's
counter-offer of 5.5 million was the defendant's bank (sic) final offer?

A He said in a day or two, he will make final acceptance, sir.

Q What is the response of Mr. Luis Co?.

A He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]

Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?

A We went straight to the point because he being a busy person, I told him if the amount of P5.5 million
could still be reduced and he said that was already passed upon by the committee. What the bank expects
which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million
and we should indicate our position as soon as possible.

Q What was your response to the answer of Mr. Luis Co?

A I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I
and Mr. Mercurio [Rivera] was with us at the time at his office.

Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers
Bank Building during this meeting?

A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.

Q By Mr. Co you are referring to?

A Mr. Luis Co.

Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the
bank?

A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we accepted, the
offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it
is not within his power to reduce this amount. What can you say to that statement that the amount of P5.5
million was reached by the Committee?

A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty.
Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987 meeting, sir.

28 | P a g e
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract.

It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the
time that the negotiation and perfection of the contract of sale took place. Petitioners energetically contended that the
conservator has the power to revoke or overrule actions of the management or the board of directors of a bank, under
Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:

Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions
is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take
charge of the assets, liabilities, and the management of that institution, collect all monies and debts due
said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the
management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of
the previous management and board of directors of the bank or non-bank financial intermediary performing
quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as
the Monetary Board shall deem necessary.

In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was
raised for the first time in this Petition — as this was not litigated in the trial court or Court of Appeals. As already stated
earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised for the first
time on appeal as it would be offensive to the basic rules of fair play, justice and due process." 43

In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, actually
repudiated or overruled said contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, never objected to
the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex V, petition) which
unilaterally repudiated — not the contract — but the authority of Rivera to make a binding offer — and which unarguably
came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila

Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6)
parcels of land located at Sta. Rosa, Laguna.

We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a
"contract to sell and buy" with any of them for the following reasons.

In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former Acting
Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the
functions of Property Management Department (PMD) staff and officers (Annex A.), you will immediately
read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make
any alleged counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank.

Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. 68.) and
Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator
may authorize the sale of any property of the corportion/bank..

Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place
were just preliminary discussions/consultations between him and your clients, which everyone knows
cannot bind the Bank's Board or Conservator.

We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently
violative of corporate and banking laws. We believe that this is more than sufficient legal justification for
refusing said alleged tender.

29 | P a g e
 Rest assured that we have nothing personal against your clients. All our acts are official, legal and in
accordance with law. We also have no personal interest in any of the properties of the Bank.

Please be advised accordingly.

Very truly yours,

(Sgd.) Leonida T. Encarnacion

LEONIDA T. EDCARNACION
Acting Conservator

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank,
it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank, (the reorganization
of) the management thereof and (the restoration of) its viability." Such powers, enormous and extensive as they are, cannot
extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment
clause of the Constitution 44 . If the legislature itself cannot revoke an existing valid contract, how can it delegate such non-
existent powers to the conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place
of a bank's board of directors. What the said board cannot do — such as repudiating a contract validly entered into under
the doctrine of implied authority — the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot
simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts —
as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the
expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or
another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested
interests of the third parties who had dealt with the Bank.

The Fifth Issue: Were There Reversible Errors of Facts?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of Appeals
are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45 , we held:

. . . The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule
45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25,
1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule
45 of the Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the
Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact
being conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating
a long line of decisions]. This Court has emphatically declared that "it is not the function of the Supreme
Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of
law that might have been committed by the lower court" (Tiongco v. De la Merced, G. R. No. L-24426, July
25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865;
Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring, therefore,
a showing that the findings complained of are totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is
not expected or required to examine or contrast the oral and documentary evidence submitted by the
parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-
145.]

Likewise, in Bernardo vs. Court of Appeals 46 , we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency
of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the
Supreme Court to analyze or weigh such evidence all over again. The Supreme Court's jurisdiction is limited
to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a
trier of facts. . . .

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp. 47 :

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals,
are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where
a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken
or impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is
premised on a misapprehension of facts; when the findings went beyond the issues of the case and the

30 | P a g e
 same are contrary to the admissions of both appellant and appellee. After a careful study of the case at
bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made
by the courts below.

In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company Inc. vs. Hon. Court
of Appeals, et al. 48 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not the function
of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by
the parties, particularly where, such as here, the findings of both the trial court and the appellate court on
the matter coincide. (emphasis supplied)

Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions which were not
only contrary to the evidence on record but have no bases at all," specifically the findings that (1) the "Bank's counter-offer
price of P5.5 million had been determined by the past due committee and approved by conservator Romey, after Rivera
presented the same for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations
anew, but a meeting on the already determined price of P5.5 million" Hence, citing Philippine National Bank vs. Court of
Appeals 49 , petitioners are asking us to review and reverse such factual findings.

The first point was clearly passed upon by the Court of Appeals 50 , thus:

There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs
by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis, "such
counter-offer price had been determined by the Past Due Committee and approved by the Conservator
after Rivera had duly presented plaintiffs' offer for discussion by the Committee . . . Tersely put, under the
established fact, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property. (p. 11, CA Decision)

xxx xxx xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September
28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic
was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price
had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-
35) (p. 15, CA Decision).

The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as "not credible" and "at
best equivocal and considering the gratuitous and self-serving character of these declarations, the bank's submissions on
this point do not inspire belief."

To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on their
behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence 51 , such suppression
gives rise to the presumption that his testimony would have been adverse, if produced.

The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed insufficient by both
the trial court and the respondent Court, and instead, it was respondent's submissions that were believed and became
bases of the conclusions arrived at.

In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and
correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing, This
we cannot do.

To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals
52 . We have studied both the records and the CA Decision and we find no such exceptions in this case. On the contrary,

the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and
conclusions are seasonably based on evidence duly identified in the Decision. Indeed, the appellate court patiently traversed
and dissected the issues presented before it, lending credibility and dependability to its findings. The best that can be said
in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners' claims,
but were closer to the evidence as presented in the trial court by private respondent. But this alone is no reason to reverse
or ignore such factual findings, particularly where, as in this case, the trial court and the appellate court were in common
agreement thereon. Indeed, conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are conclusive
upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is
in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real
evidence presented.

Epilogue.

In summary, there are two procedural issues involved forum-shopping and the raising of issues for the first time on appeal
[viz., the extinguishment of the Bank's offer of P5.5 million and the conservator's powers to repudiate contracts entered into

31 | P a g e
by the Bank's officers] — which per se could justify the dismissal of the present case. We did not limit ourselves thereto, but
delved as well into the substantive issues — the perfection of the contract of sale and its enforceability, which required the
determination of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to look
into the factual bases of respondent Court's decisions and resolutions, we did so just the same, if only to find out whether
there is reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by which
the parties through their respective eloquent counsel, argued their positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed
conservator and "there is need to rehabilitate the Bank in order to get it back on its feet . . . as many people depend on (it)
for investments, deposits and well as employment. As of June 1987, the Bank's overdraft with the Central Bank had already
reached P1.023 billion . . . and there were (other) offers to buy the subject properties for a substantial amount of money." 53

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its eyes
to overriding considerations of substantive and procedural law, like respect for perfected contracts, non-impairment of
obligations and sanctions against forum-shopping, which must be upheld under the rule of law and blind justice.

This Court cannot just gloss over private respondent's submission that, while the subject properties may currently command
a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed upon of P5.5 million was
reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more than P3.5 million 54 . That
the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage,
to enable it to escape its binding obligation and to reap the benefits of the increase in land values. To rule in favor of the
Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to
reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on
such outrageous proposition.

WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the petition.
The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping and
WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against petitioners.

SO ORDERED.

SECOND DIVISION

January 20, 2016

GR. No. 174909

MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO and RAUL A. MUYCO, Petitioners,
vs.
ROGELIO M. FLORETE, IMELDA C. FLORETE, DIAMEL CORPORATION, ROGELIO C. FLORETE JR., and
MARGARET RUTH C. FLORETE, Respondents.

x-----------------------x

G.R. No. 177275

ROGELIO M. FLORETE SR., Petitioner,

vs.
MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO AND RAUL A. MUYCO, Respondents.

32 | P a g e
DECISION

LEONEN, J.:

A stockholder may suffer from a wrong done to or involving a corporation, but this does not vest in the aggrieved stockholder
a sweeping license to sue in his or her own capacity. The determination of the stockholder’s appropriate remedy—whether
it is an individual suit, a class suit, or a derivative suit—hinges on the object of the wrong done. When the object of the
wrong done is the corporation itself or "the whole body of its stock and property without any severance or distribution among
individual holders,"1 it is a derivative suit, not an individual suit or class/representative suit, that a stockholder must resort
to.

This resolves consolidated cases involving a Complaint for Declaration of Nullity of Issuances, Transfers and Sale of Shares
in People’s Broadcasting Service, Inc. and All Posterior Subscriptions and Increases thereto with Damages. 2 The Complaint
did not implead as parties the concerned corporation, some of the transferees, transferors and other parties involved in the
assailed transactions. The Petition3 docketed as G.R. No. 174909 assails the Court of Appeals Decision affirming the
dismissal of the Complaint and sustaining the award of ₱25,000,000.00 as moral damages and ₱5,000,000.00 as exemplary
damages in favor of Rogelio Florete, Sr. The Petition4 docketed as G.R. No. 177275 assails the Court of Appeals Decision
that disallowed the immediate execution of the same award of damages.

Spouses Marcelino Florete, Sr. and Salome Florete (now both deceased) had four (4) children: Marcelino Florete, Jr.
(Marcelino, Jr.), Maria Elena Muyco (Ma. Elena), Rogelio Florete, Sr. (Rogelio, Sr.), and Teresita Menchavez (Teresita),
now deceased.5

People’s Broadcasting Service, Inc. (People’s Broadcasting) is a private corporation authorized to operate, own, maintain,
install, and construct radio and television stations in the Philippines. 6 In its incorporation on March 8, 1966,7 it had an
authorized capital stock of ₱250,000.00 divided into 2,500 shares at ₱100.00 par value per share. 8 Twenty-five percent
(25%) of the corporation’s authorized capital stock were then subscribed to as follows:

Stockholder Number of Shares

Marcelino Florete, Sr. (Marcelino, Sr.) 250 shares
Salome Florete (Salome) 100 shares
Ricardo Berlin (Berlin) 50 shares
Pacifico Sudario (Sudario) 50 shares
Atty. Santiago Divinagracia (Divinagracia), now deceased9 50 shares10

On November 17, 1967, Berlin and Sudario resigned from their positions as General Manager and Station Supervisor,
respectively.11 Berlin and Sudario each transferred 20 shares to Raul Muyco and Estrella Mirasol. 12

Salome died on November 22, 1980.13 Marcelino, Sr. suffered a stroke on July 12, 1982, which left him paralyzed and
bedridden until his death on October 3, 1990. 14 After Marcelino, Sr.’s stroke, their son, Rogelio, Sr. started managing the
affairs of People’s Broadcasting.15

In October 1993, People’s Broadcasting sought the services of the accounting and auditing firm Sycip Gorres Velayo and
Co. in order to determine the ownership of equity in the corporation. 16 On November 2, 1994, Sycip Gorres Velayo and Co.
submitted a report detailing the movements of the corporation’s shares from November 23, 1967 to December 8, 1989. 17
The relevant portion of this report reads:

B. PEOPLE’S BROADCASTING SERVICE, INC. (PBS)

The movements in the capital stock accounts (by beneficial stockholders) are as follows:

1âwphi1

Transfer Transfer
of Transfer of
Additional
Shareholdings Shares of Shares
Beneficial Subscription Increase Shareholdings
Nov. 27, 1967 of Stock Shares of Stock
Stockholder Sept. 1, (F) Oct. 31, 1993
(A) March of Stock June 5,
1982 (B)
1, 1983 (D) 1987
(C) (E)
Marcelino M. 560 - 750 (680) - 62,344.19 62,974.19
Florete, Sr.
Salome M. 30 (30) - - -
Florete

33 | P a g e
 Rogelio M. 20 5 1110 370 (5) 149,624.75 151,124.75
Florete
Ma. Elena F. 20 5 - - (25) 2,493.68 2,493.68
Muyco
Teresita F. - 5 - 20 (25) 2,493.69 2,493.69
Menchavez
Marcelino M. - 5 - 20 (20) 2,493.44 2,493.44
Florete, Jr.
Santiago C. 20 - - 270 75 29,925.25 30,290.25
Divinagracia
Newsound 610 - (610)
Broadcasting18
Consolidated - 1,250 (1,250)
Broadcasting
Total 1,260 1,250 249,375.00 251,875.00

(A) The People’s Broadcasting Service, Inc. was incorporated in 1965 with an authorized capital stock of P250,000 divided
into 2,500 shares at P100 par value. As of November 23, 1967, the total subscribed shares of stock was [sic] 1,260. The
610 shares issued in the name of [Newsounds Broadcasting Network, Inc.] was [sic] authorized by the Board of Directors
in payment for the obligation of the Corporation to [Newsounds Broadcasting Network, Inc.].

....

(B) On August 5, 1982, the Board of Directors passed Resolution No. 4 which authorized Atty. Divinagracia to negotiate the
purchase of two stations of Consolidated Broadcasting System, Inc. (CBS), DYMF and DXMF in Cebu and Davao,
respectively. In consideration thereof, [People’s Broadcasting Service, Inc.] shall issue 1,250 shares of stock in favor of
[Consolidated Broadcasting System, Inc.]. In pursuance thereof, on September 1, 1982, the Corporation issued the
remaining 1,240 shares of unissued capital stock to [Consolidated Broadcasting System, Inc.]. To complete the
consideration of 1,250 shares, it was explained that [Salome] transferred her 10 shares to [Consolidated Broadcasting
System, Inc.] and distributed her remaining 20 shares to her children, at 5 shares each.

(C) On March 1, 1983, all the 610 shares of [Newsounds Broadcasting Network, Inc.] were transferred to [Rogelio, Sr.]. We
were not able to determine the person who endorsed the certificate in [sic] behalf [of] [Newsounds Broadcasting Network,
Inc.] as the certificate was not found on file. On the same day, the entire investment of [Consolidated Broadcasting System,
Inc.] were transferred to [Marcelino, Sr.] and [Rogelio, Sr.] at the proportion of 750 shares and 500 shares, respectively.
The cancelled certificates of [Consolidated Broadcasting System, Inc.] were endorsed by [Rogelio, Sr.] in [sic] its behalf.

(D) On February 28 and August 1, 1983, [Marcelino, Sr.] transferred 680 shares from his block to the following:

Transferee No. of Shares Date of Transfer

Rogelio M. Florete [Sr.] 370 February 28, 1983

Santiago C. Divinagracia 270 August 1, 1983
Marcelino M. Florete, Jr. 20 August 1, 1983
Teresita F. Menchavez 20 August 1, 1983
Total 680

(E) On June 3, 1987, the Corporation effected the transfer of 75 shares to [Divinagracia] by virtue of the deeds of sale
executed by the transferors concerned in his favor.

(F) On December 8, 1989, the [Securities and Exchange Commission] approved the application of the Corporation to
increase the authorized capital stock to ₱100,000,000.00 divided into 1,000,000 shares at ₱100 par value. Of the increase,
249,375 shares were subscribed for ₱24,937,500 and ₱6,234,375 thereof was paid-up. The subscribers to the increase
were as indicated in the foregoing.

There were no other transactions affecting the interest of the beneficial stockholders up to October 31, 1993 except transfers
to and from designated nominees[.]19

34 | P a g e
Even as it tracked the movements of shares, Sycip Gorres Velayo and Co. declined to give a categorical statement on
equity ownership as People’s Broadcasting’s corporate records were incomplete. 20 The report contained the following
disclaimer on the findings regarding the corporation’s capital structure:

Because the procedures included certain assumptions as represented by the corporate secretaries mentioned in Attachment
I and we have not verified the documents supporting some of the transactions, we do not express an opinion on the capital
stock accounts of the respective companies [including People’s Broadcasting] as at October 31, 1993. 21 (Emphasis
supplied)

On February 1, 1997, the Board of Directors of People’s Broadcasting approved Sycip Gorres Velayo and Co.’s report. 22

In the meantime, Rogelio, Sr. transferred a portion of his shareholdings to the members of his immediate family, namely:
Imelda Florete, Rogelio Florete, Jr., and Margaret Ruth Florete, as well as to Diamel Corporation, a corporation owned by
Rogelio, Sr.’s family.23

As of April 27, 2002, the stockholders of record of People’s Broadcasting were the following:24

Stockholder No. of Shares

1. Diamel Corporation 30,000.00
2. Rogelio Florete [Sr.] 153,881.53
3. Marcelino Florete, Jr. 18,240.99
4. Ma. Elena Muyco 18,227.23
5. Santiago Divinagracia 30,289.25
6. Imelda Florete 1,000.00
7. Rogelio Florete, Jr. 100.00
8. Margaret Ruth Florete 100.00
9. Raul Muyco 10.00
10. Manuel Villa, Jr. 10.00
11. Gregorio Rubias 1.00
12. Cyril Regaldao 1.00
13. Jose Mari Treñas 1.00
14. Enrico Jacomille 1.00
15. Joseph Vincent Go 1.00
16. Jerry Treñas 1.00
17. Efrain Treñas 10.00

On June 23, 2003, Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group) filed before the Regional Trial Court a
Complaint25 for Declaration of Nullity of Issuances, Transfers and Sale of Shares in People’s Broadcasting Service, Inc. and
All Posterior Subscriptions and Increases thereto with Damages26 against Diamel Corporation, Rogelio, Sr., Imelda Florete,
Margaret Florete, and Rogelio Florete, Jr. (Rogelio, Sr. Group).

On July 25, 2003, the Rogelio, Sr. Group filed their Answer with compulsory counterclaim. 27

On August 2, 2005, the Regional Trial Court issued a Decision (which it called a "Placitum") dismissing the Marcelino, Jr.
Group’s Complaint. It ruled that the Marcelino, Jr. Group did not have a cause of action against the Rogelio, Sr. Group and
that the former is estopped from questioning the assailed movement of shares of People’s Broadcasting. It also ruled that
indispensible parties were not joined in their Complaint.

According to the trial court, the indispensable parties would include:

[Marcelino, Sr.] and/or his estate and/or his heirs, [Salome] and/or her estate and/or her heirs, [Divinagracia] and/or his
estate and/or his successors-in-interest, [Teresita] and/or her estate and/or her own successors-in-interest, the other
[People’s Broadcasting Service, Inc.] stockholders who may be actually beneficial owners and not purely nominees, all the
so called nominal stockholders. . . [and] the various [People’s Broadcasting Service, Inc.] Corporate Secretaries[.]" 28

The Regional Trial Court granted Rogelio, Sr.’s compulsory counterclaim for moral and exemplary damages amounting to
₱25,000,000.00 and ₱5,000,000.00, respectively, reasoning that Rogelio, Sr. suffered from the besmirching of his personal
and commercial reputation.29

35 | P a g e
The dispositive portion of the Regional Trial Court Decision reads:

WHEREFORE, premises duly considered, the instant "Complaint" of the plaintiffs is hereby DISMISSED for lack of merit.

The "Counterclaim" of defendant Rogelio Florete Sr. is hereby given DUE COURSE but only insofar as the claims for moral
and exemplary damages are concerned. Consequently, the plaintiffs herein are hereby ordered to pay, jointly and severally,
defendant Rogelio Florete Sr., the following sums, to wit:

1. TWENTY FIVE MILLION PESOS (P25,000,000.00) as and for MORAL DAMAGES; and,

2. FIVE MILLION PESOS (P5,000,000.00) as and for EXEMPLARY DAMAGES.

The "Counterclaim(s)" of the other defendants and the prayer for the recovery of attorney’s fees and litigation expenses of
defendant Rogelio Florete, Sr. are hereby DISMISSED likewise for lack of merit.

SO ORDERED.30

On August 15, 2005, Rogelio, Sr. filed a Motion for the immediate execution of the award of moral and exemplary damages
pursuant to Rule I, Section 431 of the Interim Rules of Procedure Governing Intra-Corporate Controversies.32

On September 8, 2005, the Marcelino, Jr. Group filed before the Court of Appeals a Petition for Review33 with a prayer for
the issuance of a temporary restraining order and/or writ of preliminary injunction to deter the immediate execution of the
trial court Decision awarding damages to Rogelio, Sr. 34 The Court of Appeals issued a temporary restraining order and,
subsequently, a writ of preliminary injunction. 35

In its Decision36 dated March 29, 2006, the Court of Appeals denied the Marcelino, Jr. Group’s Petition and affirmed the trial
court Decision.37 It also lifted the temporary restraining order and writ of preliminary injunction. 38

The Court of Appeals ruled that the Marcelino, Jr. Group did not have a cause of action against those whom they have
impleaded as defendants. It also noted that the principal obligors in or perpetrators of the assailed transactions were persons
other than those in the Rogelio, Sr. Group who have not been impleaded as parties. Thus, the Court of Appeals emphasized
that the following parties were indispensable to the case: People’s Broadcasting; Marcelino, Sr.; Consolidated Broadcasting
System, Inc.; Salome; Divinagracia; Teresita; and "other stockholders of [People’s Broadcasting] to whom the shares were
transferred or the nominees of the stockholders."39

The Court of Appeals further emphasized that the estates of Marcelino, Sr. and Salome had long been settled, with those
in the Marcelino, Jr. Group participating (in their capacity as heirs). As the Marcelino, Jr. Group failed to act to protect their
supposed interests in shares originally accruing to Marcelino, Sr. and Salome, the group is estopped from questioning the
distribution of Marcelino, Sr.’s and Salome’s assets. 40 Furthering the conclusion that the Marcelino, Jr. Group was bound
by estoppel, the Court of Appeals noted that the Marcelino, Jr. Group was well aware of the matters stated in the report
furnished by Sycip Gorres Velayo and Co. but failed to act on any supposed error in the report. Instead, the Marcelino, Jr.
Group waited ten (10) years before filing their Complaint. In the interim, they even participated in the affairs of People’s
Broadcasting, voting their shares and electing members of the Board of Directors. 41

On April 26, 2006, the Marcelino, Jr. Group filed a Motion for Reconsideration dated April 24, 2006. 42

Pending resolution of the Marcelino, Jr. Group’s Motion for Reconsideration, Rogelio, Sr. filed before the Regional Trial
Court a Motion to resolve his earlier motion for the immediate execution of the awards of moral and exemplary damages,
which was filed on August 15, 2005.43 The Regional Trial Court granted the Motion in its Order dated May 18, 2006. 44 On
May 23, 2006, a Writ of Execution was issued to enforce the award of moral and exemplary damages. 45

The Marcelino, Jr. Group filed a Petition for Certiorari 46 before the Court of Appeals questioning the Regional Trial Court
Order to immediately execute its Decision.47 On June 13, 2006, the Court of Appeals issued a temporary restraining order
and, subsequently, a writ of preliminary injunction.48 The Court of Appeals reversed the trial court Order of immediate
execution in the Decision promulgated on November 28, 2006. 49 It also annulled the writ of execution issued pursuant to
the Order of immediate execution. Rogelio, Sr. filed a Motion for Reconsideration, 50 but it was denied on February 23,
2007.51

On September 15, 2006, the Court of Appeals denied the Marcelino, Jr. Group’s Motion for Reconsideration dated April 24,
2006.52

Hence, on November 17, 2006, the Marcelino, Jr. Group filed the Petition 53 docketed as G.R. No. 174909.

Since the Court of Appeals Decision disallowed the immediate execution of the Regional Trial Court Decision, Rogelio, Sr.
filed on May 7, 2007 the Petition54 docketed as G.R. No. 177275.

On March 16, 2009, this court ordered the consolidation of the Petitions docketed as G.R. No. 174909 and G.R. No. 177275.

36 | P a g e
For resolution are the following issues:

First, whether it was proper for the Regional Trial Court to dismiss the Complaint filed by the Marcelino, Jr. Group;

Second, assuming that it was error for the Regional Trial Court to dismiss the Complaint and that the case may be decided
on the merits, whether the transfers of shares assailed by the Marcelino, Jr. Group should be nullified; and

Lastly, whether the Regional Trial Court’s award of moral and exemplary damages in favor of Rogelio, Sr. may be executed
at this juncture of the proceedings.

The Marcelino, Jr. Group insists that they have sufficiently established causes of action accruing to them and against the
Rogelio, Sr. Group.55 They add that they have impleaded all indispensable parties.56 Thus, they claim that it was an error
for the Regional Trial Court to dismiss their Complaint. They assert that a resolution of the case on the merits must ensue.

The Marcelino, Jr. Group seeks to nullify the following transactions on the shares of stock of People’s Broadcasting, as
noted in the report of Sycip Gorres Velayo and Co.:

(a) Issuance of 1,240 shares to Consolidated Broadcasting System, Inc. on September 1, 1982,

(b) Transfer of 10 shares from Salome to Consolidated Broadcasting System, Inc. on September 1, 1982,

(c) Issuance of 610 shares to Newsounds Broadcasting Network, Inc. on November 17, 1967,

(d) Transfer of 610 shares from Newsounds Broadcasting Network, Inc. to Rogelio, Sr. on March 1, 1983,

(e) Transfer of 750 shares from Consolidated Broadcasting System, Inc. to Marcelino, Sr. on March 1, 1983,

(f) Transfer of 500 shares from Consolidated Broadcasting System, Inc. to Rogelio, Sr.,

(g) Transfer of 680 shares from Marcelino, Sr. to the following: 370 shares to Rogelio, Sr., 270 shares to
Divinagracia, 20 shares to Marcelino, Jr., and 20 shares to Teresita, and

(h) Increase in the authorized capital stock to ₱100,000,000.00 divided into 1,000,000 shares with a par
value of ₱100.00 per share on December 8, 1989, and the resulting subscriptions. 57

For the issuance of 1,250 shares to Consolidated Broadcasting System, Inc., the Marcelino, Jr. Group argues that Board
Resolution No. 4 dated August 5, 1982, the basis for the issuance of the 1,250 shares in favor of Consolidated Broadcasting
System, Inc., was a forgery: it was simulated, unauthorized, and issued without a quorum as required under Section 25 of
the Corporation Code.58 They add that Salome, who allegedly transferred her 10 shares to complete the 1,250 share
transfer, was already dead at the time of the alleged transfer on September 1, 1982. 59 The Marcelino, Jr. Group claims that
no member of the Board attended the meeting referred to in Board Resolution No. 4.60 They further allege that the signature
of Marcelino, Sr. in Board Resolution No. 4 is a forgery.61 They argue that Marcelino, Sr. could not have attended the
meeting on August 5, 1982 because from July 12, 1982 to August 26, 1982, 62 he was confined in Gov. B. Lopez Memorial
Hospital for quadriparesis and motor aphasia.63 They also supplied the trial court with specimen signatures of Marcelino,
Sr. to prove that the signature appearing on Board Resolution No. 4 was forged. 64

The Marcelino, Jr. Group alleges that from the time Marcelino, Sr. suffered a stroke on July 12, 1982 until his death on
October 3, 1990, he was no longer capable of giving consent because of his quadriparesis and motor aphasia. 65 As they
emphasized, "[q]uadriparesis means weakness of the upper and lower extremities with spasticity and tremors. Motor
aphasia means that the patient could not communicate, unable to talk, nor responds [sic] to question or simple commands." 66
Thus, they conclude that all of the issuances of shares in favor of Marcelino, Sr. and all of the transfers of shares to and
from Marcelino, Sr. from July 12, 1982 are void for lack of consent.

With respect to the issuance of 610 shares to Newsounds Broadcasting Network, Inc. and the subsequent transfer of 610
shares to Rogelio, Sr., the Marcelino, Jr. Group argues that there is no deed of conveyance to support the transfer and that
the stock certificates representing the 610 shares are missing. They conclude that because of the absence of the stock
certificates, there is no valid delivery and endorsement as required by Section 63 of the Corporation Code. 67 Hence, the
transfer is invalid.

Regarding the increase in the authorized capital stock of People’s Broadcasting, the Marcelino, Jr. Group argues that the
increase was procured by fraud because it was made "by the new Board of Directors who were elected by stockholders
who were transferees of the illegal, fraudulent and anomalous transfers, and therefore have no power and authority to
procure such increase."68 They also pray that the subscriptions to the increase be nullified. 69

After a declaration that the issuances and transfers are void, the Marcelino, Jr. Group prays that the capital structure of
People’s Broadcasting System be corrected to reflect the following:70

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 Beneficial Stockholder No. of Shares %
Marcelino Florete, Sr. 660 81.48
Salome Florete 100 12.35
Santiago Divinagracia 50 6.17
Total 810 100.00

The Marcelino, Jr. Group further claims that the award of moral and exemplary damages is erroneous. 71 They add that the
amounts of ₱25,000,000.00 as moral damages and ₱5,000,000.00 as exemplary damages are excessive. 72

The Rogelio, Sr. Group seeks the denial of the Petition filed by the Marcelino, Jr. Group, claiming that it raises factual
questions that may not be taken cognizance of in a petition for review on certiorari under Rule 45. 73

They further argue that the Marcelino, Jr. Group has no cause of action against them. 74 They insist that indispensable parties
have not been impleaded75 and that the Marcelino Jr. Group’s claims should have been raised during the settlement of the
estates of deceased Spouses Marcelino, Sr. and Salome Florete.76 They also argue that the Marcelino, Jr. Group is already
estopped from questioning Sycip Gorres Velayo and Co.’s report because they allowed 10 years to lapse before questioning
the truthfulness of the report. They add that the Marcelino, Jr. Group’s members have been voting their shares since 1963
without making any reservation.77

In G.R. No. 177275, Rogelio, Sr. argues that the Court of Appeals erred in disallowing the immediate execution of the
Regional Trial Court Decision. He argues that the Petition filed by the Marcelino, Jr. Group before the Court of Appeals
should not have been accepted because Rule 65 petitions require that there no longer be any appeal nor any plain, speedy,
and adequate remedy in the ordinary course of law.78 He alleges that when the Petition was filed by the Marcelino, Jr.
Group, there was still a pending appeal before the Court of Appeals to resolve the main case. 79 Rogelio, Sr. adds that the
filing of a new petition despite the pendency of the main case is a violation of the rule against forum shopping. 80

The sufficiency of the Marcelino, Jr. Group’s plea for relief, through their Complaint for Declaration of Nullity of Issuances,
Transfers and Sale of Shares in People’s Broadcasting Service, Inc. and All Posterior Subscriptions and Increases thereto
with Damages,81 hinges on a characterization of the suit or action they initiated. This characterization requires a
determination of the cause of action through which the Marcelino, Jr. Group came to court for relief. It will, thus, clarify the
parties who must be included in their action and the procedural and substantive requirements they must satisfy if their action
is to prosper.

A stockholder suing on account of wrongful or fraudulent corporate actions (undertaken through directors, associates,
officers, or other persons) may sue in any of three (3) capacities: as an individual; as part of a group or specific class of
stockholders; or as a representative of the corporation.

Villamor v. Umale82 distinguished individual suits from class or representative suits:

Individual suits are filed when the cause of action belongs to the individual stockholder personally, and not to the
stockholders as a group or to the corporation, e.g., denial of right to inspection and denial of dividends to a stockholder. If
the cause of action belongs to a group of stockholders, such as when the rights violated belong to preferred stockholders,
a class or representative suit may be filed to protect the stockholders in the group. 83

Villamor further explained that a derivative suit "is an action filed by stockholders to enforce a corporate action."84 A
derivative suit, therefore, concerns "a wrong to the corporation itself." 85 The real party in interest is the corporation, not the
stockholders filing the suit. The stockholders are technically nominal parties but are nonetheless the active persons who
pursue the action for and on behalf of the corporation.

Remedies through derivative suits are not expressly provided for in our statutes—more specifically, in the Corporation Code
and the Securities Regulation Code—but they are "impliedly recognized when the said laws make corporate directors or
officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties." 86 They are
intended to afford reliefs to stockholders in instances where those responsible for running the affairs of a corporation would
not otherwise act:

However, in cases of mismanagement where the wrongful acts are committed by the directors or trustees themselves, a
stockholder or member may find that he has no redress because the former are vested by law with the right to decide
whether or not the corporation should sue, and they will never be willing to sue themselves. The corporation would thus be
helpless to seek remedy. Because of the frequent occurrence of such a situation, the common law gradually recognized the
right of a stockholder to sue on behalf of a corporation in what eventually became known as a "derivative suit." It has been
proven to be an effective remedy of the minority against the abuses of management. Thus, an individual stockholder is
permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate
corporate rights, whenever officials of the corporation refuse to sue or are the ones to be sued or hold the control of the

38 | P a g e
corporation. In such actions, the suing stockholder is regarded as the nominal party, with the corporation as the party in
interest.87

The distinction between individual and class/representative suits on one hand and derivative suits on the other is crucial.
These are not discretionary alternatives. The fact that stockholders suffer from a wrong done to or involving a corporation
does not vest in them a sweeping license to sue in their own capacity. The recognition of derivative suits as a vehicle for
redress distinct from individual and representative suits is an acknowledgment that certain wrongs may be addressed only
through acts brought for the corporation:

Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the value of his
interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of action since the
corporation is a person distinct and separate from him, and can and should itself sue the wrongdoer. 88

In Asset Privatization Trust v. Court of Appeals,89 the reasons for disallowing a direct individual suit were further explained:

The reasons given for not allowing direct individual suit are:

(1) . . . "the universally recognized doctrine that a stockholder in a corporation has no title legal or equitable
to the corporate property; that both of these are in the corporation itself for the benefit of the stockholders."
In other words, to allow shareholders to sue separately would conflict with the separate corporate entity
principle;

(2) . . . that the prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the case of
Evangelista v. Santos, that ‘the stockholders may not directly claim those damages for themselves for that
would result in the appropriation by, and the distribution among them of part of the corporate assets before
the dissolution of the corporation and the liquidation of its debts and liabilities, something which cannot be
legally done in view of Section 16 of the Corporation Law. . .";

(3) the filing of such suits would conflict with the duty of the management to sue for the protection of all
concerned;

(4) it would produce wasteful multiplicity of suits; and

(5) it would involve confusion in ascertaining the effect of partial recovery by an individual on the damages
recoverable by the corporation for the same act.90

The avenues for relief are, thus, mutually exclusive. The determination of the appropriate remedy hinges on the object of
the wrong done. When the object is a specific stockholder or a definite class of stockholders, an individual suit or
class/representative suit must be resorted to. When the object of the wrong done is the corporation itself or "the whole body
of its stock and property without any severance or distribution among individual holders," 91 it is a derivative suit that a
stockholder must resort to. In Cua, Jr. v. Tan:92

Indeed, the Court notes American jurisprudence to the effect that a derivative suit, on one hand, and individual and class
suits, on the other, are mutually exclusive, viz.:

As the Supreme Court has explained: "A shareholder's derivative suit seeks to recover for the benefit of the corporation and
its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of
failure of the corporation to act. Thus, ‘the action is derivative, i.e., in the corporate right, if the gravamen of the complaint
is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among
individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’" In contrast,
"a direct action [is one] filed by the shareholder individually (or on behalf of a class of shareholders to which he or she
belongs) for injury to his or her interest as a shareholder. . . . [T]he two actions are mutually exclusive: i.e., the right of action
and recovery belongs to either the shareholders (direct action) or the corporation (derivative action)."

Thus, in Nelson v. Anderson, the minority shareholder alleged that the other shareholder of the corporation negligently
managed the business, resulting in its total failure. The appellate court concluded that the plaintiff could not maintain the
suit as a direct action: "Because the gravamen of the complaint is injury to the whole body of its stockholders, it was for the
corporation to institute and maintain a remedial action. A derivative action would have been appropriate if its responsible
officials had refused or failed to act." The court went on to note that the damages shown at trial were the loss of corporate
profits. Since "[s]hareholders own neither the property nor the earnings of the corporation," any damages that the plaintiff
alleged that resulted from such loss of corporate profits "were incidental to the injury to the corporation." 93 (Emphasis
supplied, citations omitted)

Villamor recalls the requisites for filing derivative suits:

Rule 8, Section 1 of the Interim Rules of Procedure for Intra Corporate Controversies (Interim Rules) provides the five (5)
requisites for filing derivative suits:

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SECTION 1. Derivative action.—A stockholder or member may bring an action in the name of a corporation or association,
as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of the action
occurred and at the time the action was filed;

(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to
exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing
the corporation or partnership to obtain the relief he desires;

(3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit.

In case of nuisance or harassment suit, the court shall forthwith dismiss the case.

The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the first paragraph of Rule 8,
Section 1 of the Interim Rules: The action brought by the stockholder or member must be "in the name of [the] corporation
or association. . . ." This requirement has already been settled in jurisprudence.

Thus, in Western Institute of Technology, Inc., et al. v. Salas, et al., this court said that "[a]mong the basic requirements for
a derivative suit to prosper is that the minority shareholder who is suing for and on behalf of the corporation must allege in
his complaint before the proper forum that he is suing on a derivative cause of action on behalf of the corporation and all
other shareholders similarly situated who wish to join [him]." . . .

Moreover, it is important that the corporation be made a party to the case.94 (Citations omitted)

II

The greater number of cases that sustained stockholders’ recourse to derivative suits involved corporate acts amounting to
mismanagement by either the corporation’s directors or officers in relations to third persons. Several cases serve as
examples.

Hi-Yield Realty v. Court of Appeals95 affirmed the Regional Trial Court’s and Court of Appeals’ characterization of a Petition
for Annulment of Real Estate Mortgage and Foreclosure Sale 96 as a derivative suit. The Petition was initiated by private
respondent Roberto H. Torres, a stockholder, on behalf of the corporation Honorio Torres & Sons, Inc. Petitioner Hi-Yield
Realty, Inc. was among the defendants to the Petition, along with the related parties, Leonora, Ma. Theresa, Glenn, and
Stephanie, all surnamed Torres, as well as the Registers of Deeds of Marikina and of Quezon City. Against Hi-Yield Realty,
Inc.’s claims, this court sustained the respondent’s position that the Petition was "primarily a derivative suit to redress the
alleged unauthorized acts of its corporate officers and major stockholders in connection with the lands." 97

Cua, Jr. considered two corporate acts to be valid objects of a derivative suit. The first was a resolution of the Board of
Directors of the corporation Philippine Racing Club, Inc. to acquire up to 100% of the common shares of another corporation,
JTH Davies Holdings, Inc., as well as to appoint Santiago Cua, Jr. "to act as attorney-in-fact and proxy who could vote all
the shares of [Philippine Racing Club, Inc.] in [JTH Davies Holdings, Inc.], as well as nominate, appoint, and vote into office
directors and/or officers during regular and special stockholders meetings of [JTH Davies Holdings, Inc.]." 98 The second
was another resolution of Philippine Racing Club, Inc.’s Board of Directors "approving the property-for-shares exchange
between P[hilippine] R[acing] C[lub], I[nc]. and [JTH Davies Holdings, Inc.]." 99

In Cua, Jr., the derivative suit grounded on the first was dismissed by this court for being moot and academic. 100 The suit
grounded on the second was similarly dismissed for failure to comply with one of the requisites for instituting a derivative
suit. The plaintiffs "made no mention at all of appraisal rights, which could or could not have been available to them[,]"
thereby violating Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies.101

As with Hi-Yield Realty and Cua, Go v. Distinction Properties Development and Construction, Inc.102 concerned a corporate
action taken in relation to a third person.

Petitioners Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim filed before the Housing and Land Use Regulatory Board a
Complaint, which they claimed was one for specific performance intended to compel the developer of Phoenix Heights
Condominium, Distinction Properties Development and Construction, Inc. (Distinction Properties), to fulfill its contractual
obligations. The Complaint was filed in the wake of an agreement entered into by Distinction Properties with the
condominium corporation Phoenix Heights Condominium Corporation (PHCC). PHCC "approved a settlement offer from
[Distinction Properties] for the set-off of the latter’s association dues arrears with the assignment [from Distinction Properties]
of title over [two saleable commercial units/spaces originally held by Distinction Properties] and their conversion into
common areas."103

This court clarified that the true purpose of the petitioners’ action was not to compel Distinction Properties to fulfill its
contractual obligations. Instead, "petitioners [we]re actually seeking to nullify and invalidate the duly constituted acts of
PHCC - the April 29, 2005 Agreement entered into by PHCC with DPDCI and its Board Resolution which authorized the
40 | P a g e
acceptance of the proposed offsetting/settlement of DPDCI’s indebtedness and approval of the conversion of certain units
from saleable to common areas." This court thereby concluded that "the cause of action rightfully pertains to PHCC [and
that] [p]etitioners cannot exercise the same except through a derivative suit."104

The prevalence of derivative suits arising from corporate actions taken in relation to third persons is to be expected. After
all, it is easier to perceive the wrong done to a corporation when third persons unduly gain an advantage. However, this
does not mean that derivative suits cannot arise with respect to conflicts among a corporation’s directors, officers, and
stockholders.

Ching and Wellington v. Subic Bay Golf and Country Club 105 sustained the Regional Trial Court’s and Court of Appeals’
characterization of the Complaint filed by stockholders against officers of the corporation as a derivative suit. Nestor Ching
and Andrew Wellington filed a Complaint in their own names and in their right as individual stockholders assailing an
amendment introduced into Subic Bay Golf and Country Club’s articles of incorporation, which supposedly "takes away the
right of the shareholders to participate in the pro-rata distribution of the assets of the corporation after its dissolution." 106
They anchored their action on Section 5(a) of Presidential Decree No. 902-A.107 They claimed that this statutory provision
"allows any stockholder to file a complaint against the Board of Directors for employing devices or schemes amounting to
fraud and misrepresentation which is detrimental to the interest of the public and/or the stockholders."108

This court did not sustain Nestor Ching’s and Andrew Wellington’s claim of a right to sue in their own capacity. Concluding
that the petitioners’ action was a derivative suit, this court explained:

The reliefs sought in the Complaint, namely that of enjoining defendants from acting as officers and Board of Directors of
the corporation, the appointment of a receiver, and the prayer for damages in the amount of the decrease in the value of
the shares of stock, clearly show that the Complaint was filed to curb the alleged mismanagement of [Subic Bay Gold and
Country Club]. The causes of action pleaded by petitioners do not accrue to a single shareholder or a class of shareholders
but to the corporation itself.109 (Emphasis supplied)

We are mindful that in 1979, in Gamboa v. Victoriano,110 this court characterized an action to nullify the sale of 823 unissued
shares on the ground of violating the plaintiffs’ pre-emptive rights and in violation of the voting requirement for the Board of
Directors as not a derivative suit. This court characterized the action as one in which "the plaintiffs are alleging and
vindicating their own individual interests or prejudice, and not that of the corporation." 111

This pronouncement cannot be considered as a binding precedent for holding actions of the sort filed by the plaintiffs therein
to not be derivative suit. This point in Gamboa was mere obiter dictum. The main issue in Gamboa was the validity of the
trial court’s denial of the Motion to Dismiss filed by four of the seven defendants after the plaintiffs entered into a compromise
agreement with the three other defendants. The resolution of this issue was contingent on the determination of whether the
compromise amounted to the plaintiff’s waiver and estoppel for having conceded the validity of the sale. Besides, this court
itself acknowledged that the statement it made characterizing the action brought by the plaintiffs was premature.
Immediately after saying that "the plaintiffs are alleging and vindicating their own individual interests or prejudice, and not
that of the corporation[,]"112 this court stated: "At any rate, it is yet too early in the proceedings since the issues have not
been joined."113

III

In this case, the Marcelino, Jr. Group anchored their Complaint on violations of and liabilities arising from the Corporation
Code, specifically: Section 23114 (on corporate decision-making being vested in the board of directors), Section 25 115
(quorum requirement for the transaction of corporate business), Sections 39116 and 102117 (both on stockholders’ pre-
emptive rights), Section 62118 (stipulating the consideration for which stocks must be issued), Section 63 119 (stipulating that
no transfer of shares "shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation"), and Section 65120 (on liabilities of directors and officers "to the corporation and its creditors" for the issuance
of watered stocks) in relation to provisions in People’s Broadcasting’s Articles of Incorporation and By-Laws as regards
conditions for issuances of and subscription to shares. The Marcelino, Jr. Group ultimately prays that People’s
Broadcasting’s entire capital structure be reconfigured to reflect a status quo ante. 121

As with Ching and Wellington, the actions being assailed by the Marcelino, Jr. Group pertain to parties that are not
extraneous to People’s Broadcasting. They assail and seek to nullify acts taken by various iterations of People’s
Broadcasting’s Board of Directors. All these acts and incidents concern the capital structure of People’s Broadcasting.
These acts reconfigured, through redistribution and enlargement, the structure of People’s Broadcasting’s equity ownership.
These acts also admitted into People’s Broadcasting new equity holders such as Consolidated Broadcasting System, Inc.
and Newsounds Broadcasting Network, Inc.

As Ching and Wellington exemplifies, the action should be a proper derivative suit even if the assailed acts do not pertain
to a corporation’s transactions with third persons. Cua, Jr. established that the pivotal consideration is whether the wrong
done as well as the cause of action arising from it accrues to the corporation itself or to the whole body of its stockholders.
Ching and Wellington states that if "[t]he causes of action pleaded . . . do not accrue to a single shareholder or a class of
shareholders but to the corporation itself,"122 the action should be deemed a derivative suit. Also, in Go, an action "seeking
to nullify and invalidate the duly constituted acts [of a corporation]" entails a cause of action that "rightfully pertains to [the
corporation itself and which stockholders] cannot exercise . . . except through a derivative suit." 123

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These are the same conditions in this case. What the Marcelino, Jr. Group asks is the complete reversal of a number of
corporate acts undertaken by People’ Broadcasting’s different boards of directors. These boards supposedly engaged in
outright fraud or, at the very least, acted in such a manner that amounts to wanton mismanagement of People’s
Broadcasting’s affairs. The ultimate effect of the remedy they seek is the reconfiguration of People’s Broadcasting’s capital
structure.

The remedies that the Marcelino, Jr. Group seeks are for People’s Broadcasting itself to avail. Ordinarily, these reliefs may
be unavailing because objecting stockholders such as those in the Marcelino, Jr. Group do not hold the controlling interest
in People’s Broadcasting. This is precisely the situation that the rule permitting derivative suits contemplates: minority
shareholders having no other recourse "whenever the directors or officers of the corporation refuse to sue to vindicate the
rights of the corporation or are the ones to be sued and are in control of the corporation."124

The Marcelino, Jr. Group points to violations of specific provisions of the Corporation Code that supposedly attest to how
their rights as stockholders have been besmirched. However, this is not enough to sustain a claim that the Marcelino, Jr.
Group initiated a valid individual or class suit. To reiterate, whether stockholders suffer from a wrong done to or involving a
corporation does not readily vest in them a sweeping license to sue in their own capacity.

The specific provisions adverted to by the Marcelino, Jr. Group signify alleged wrongdoing committed against the
corporation itself and not uniquely to those stockholders who now comprise the Marcelino, Jr. Group. A violation of Sections
23 and 25 of the Corporation Code—on how decision-making is vested in the board of directors and on the board’s quorum
requirement—implies that a decision was wrongly made for the entire corporation, not just with respect to a handful of
stockholders. Section 65 specifically mentions that a director’s or officer’s liability for the issuance of watered stocks in
violation of Section 62 is solidary "to the corporation and its creditors," not to any specific stockholder. Transfers of shares
made in violation of the registration requirement in Section 63 are invalid and, thus, enable the corporation to impugn the
transfer. Notably, those in the Marcelino, Jr. Group have not shown any specific interest in, or unique entitlement or right to,
the shares supposedly transferred in violation of Section 63.

Also, the damage inflicted upon People’s Broadcasting’s individual stockholders, if any, was indiscriminate. It was not unique
to those in the Marcelino, Jr. Group. It pertained to "the whole body of [People’s Broadcasting’s] stock." 125 Accordingly, it
was upon People’s Broadcasting itself that the causes of action now claimed by the Marcelino Jr. Group accrued. While
stockholders in the Marcelino, Jr. Group were permitted to seek relief, they should have done so not in their unique capacity
as individuals or as a group of stockholders but in place of the corporation itself through a derivative suit. As they, instead,
sought relief in their individual capacity, they did so bereft of a cause of action. Likewise, they did so without even the
slightest averment that the requisites for the filing of a derivative suit, as spelled out in Rule 8, Section 1 of the Interim Rules
of Procedure for Intra-Corporate Controversies, have been satisfied. Since the Complaint lacked a cause of action and
failed to comply with the requirements of the Marcelino, Jr. Group’s vehicle for relief, it was only proper for the Complaint to
have been dismissed.

IV

Erroneously pursuing a derivative suit as a class suit not only meant that the Marcelino, Jr. Group lacked a cause of action;
it also meant that they failed to implead an indispensable party.

In derivative suits, the corporation concerned must be impleaded as a party. As explained in Asset Privatization Trust:

Not only is the corporation an indispensible party, but it is also the present rule that it must be served with process. The
reason given is that the judgment must be made binding upon the corporation in order that the corporation may get the
benefit of the suit and may not bring a subsequent suit against the same defendants for the same cause of action. In other
words the corporation must be joined as party because it is its cause of action that is being litigated and because judgment
must be a res ajudicata [sic] against it.126

We have already discussed Go where this court concluded that an action brought by three individual stockholders was, in
truth, a derivative suit. There, this court further explained that a case cannot prosper when the proper party is not impleaded:

As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for failure to implead the proper party,
PHCC.

An indispensable party is defined as one who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest. In the recent case of Nagkakaisang
Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation, the Court had the occasion to
state that:

Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of an
action shall be joined as plaintiffs or defendants." If there is a failure to implead an indispensable party, any judgment
rendered would have no effectiveness. It is "precisely ‘when an indispensable party is not before the court (that) an action
should be dismissed.’ The absence of an indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even to those present." The purpose of the rules on joinder of
indispensable parties is a complete determination of all issues not only between the parties themselves, but also as regards

42 | P a g e
other persons who may be affected by the judgment. A decision valid on its face cannot attain real finality where there is
want of indispensable parties.

Similarly, in the case of Plasabas v. Court of Appeals, the Court held that a final decree would necessarily affect the rights
of indispensable parties so that the Court could not proceed without their presence. In support thereof, the Court in Plasabas
cited the following authorities, thus:

The general rule with reference to the making of parties in a civil action requires the joinder of all indispensable parties
under any and all conditions, their presence being a sine qua non of the exercise of judicial power. For this reason, our
Supreme Court has held that when it appears of record that there are other persons interested in the subject matter of the
litigation, who are not made parties to the action, it is the duty of the court to suspend the trial until such parties are m ade
either plaintiffs or defendants. x x x Where the petition failed to join as party defendant the person interested in sustaining
the proceeding in the court, the same should be dismissed. x x x When an indispensable party is not before the court, the
action should be dismissed.

Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or
defendants. The burden of procuring the presence of all indispensable parties is on the plaintiff. The evident purpose of the
rule is to prevent the multiplicity of suits by requiring the person arresting a right against the defendant to include with him,
either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute
may be determined once and for all in one litigation.

From all indications, PHCC is an indispensable party and should have been impleaded, either as a plaintiff or as a defendant,
in the complaint filed before the HLURB as it would be directly and adversely affected by any determination therein. To
belabor the point, the causes of action, or the acts complained of, were the acts of PHCC as a corporate body[.] 127 (Citations
omitted)

There are two consequences of a finding on appeal that indispensable parties have not been joined. First, all subsequent
actions of the lower courts are null and void for lack of jurisdiction. 128 Second, the case should be remanded to the trial court
for the inclusion of indispensable parties. It is only upon the plaintiff’s refusal to comply with an order to join indispensable
parties that the case may be dismissed.129

All subsequent actions of lower courts are void as to both the absent and present parties. 130 To reiterate, the inclusion of an
indispensable party is a jurisdictional requirement:

While the failure to implead an indispensable party is not per se a ground for the dismissal of an action, considering that
said party may still be added by order of the court, on motion of the party or on its own initiative at any stage of the action
and/or such times as are just, it remains essential — as it is jurisdictional — that any indispensable party be impleaded in
the proceedings before the court renders judgment. This is because the absence of such indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to
those present.131 (Emphasis supplied, citation omitted)

In Metropolitan Bank and Trust Co. v. Alejo132 and Arcelona v. Court of Appeals,133 this court clarified that the courts must
first acquire jurisdiction over the person of an indispensable party. Any decision rendered by a court without first obtaining
the required jurisdiction over indispensable parties is null and void for want of jurisdiction: "the presence of indispensable
parties is necessary to vest the court with jurisdiction, which is ‘the authority to hear and determine a cause, the right to act
in a case.’"134

In Divinagracia v. Parilla,135 Macawadib v. Philippine National Police Directorate for Personnel and Records Management,136
People v. Go,137 and Valdez-Tallorin v. Heirs of Tarona,138 among others, this court annulled judgments rendered by lower
courts in the absence of indispensible parties.

The second consequence is unavailing in this case. While "[n]either misjoinder nor non-joinder of parties is ground for
dismissal of an action"139 and is, thus, not fatal to the Marcelino, Jr. Group’s action, we have shown that they lack a cause
of action. This warrants the dismissal of their Complaint.

The first consequence, however, is crucial. It determines the validity of the Regional Trial Court’s award of damages to
Rogelio, Sr.

Since the Regional Trial Court did not have jurisdiction, the decision awarding damages in favor of Rogelio, Sr. is
void.1âwphi1

Apart from this, there is no basis in jurisprudence for awarding moral and exemplary damages in cases where individual
suits that were erroneously filed were dismissed. In the analogous cases that we previously discussed—Hi-Yield Realty,
Cua, Jr., Go, and Ching and Wellington—the dismissal alone of the erroneously filed complaints sufficed. This court never
saw the need to award moral and exemplary damages. This is in keeping with the Civil Code provisions that stipulate when
the award of such damages is proper. We find no reason to conclude that the Marcelino, Jr. Group acted in so malevolent,

43 | P a g e
oppressive, or reckless a manner that moral and exemplary damages must be awarded in such huge amounts as the
Regional Trial Court did.

From the conclusion that the Decision awarding damages is void and unwarranted, it necessarily follows that the Order of
the Regional Trial Court to immediately execute its Decision is likewise null and void. In Arcelona, the Decision sought to
be annulled was already being executed. However, this court found that the assailed Decision was promulgated without
indispensable parties being impleaded. Hence, the Decision was ruled to have been made without jurisdiction. This court
nullified the judgment and declared:

A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any
obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never
become final and any writ of execution based on it is void: x x x it may be said to be a lawless thing which can be treated
as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head. 140 (Emphasis supplied)

Accordingly, the subsequent Order of the Decision’s immediate execution is also void for lack of jurisdiction. Contrary to
Rogelio Sr.’s claim in its Petition, execution cannot ensue. For this reason, the Petition docketed as G.R. No. 177275 must
be denied.

WHEREFORE, the Petition docketed as G.R. No. 174909 is PARTLY GRANTED and the Petition docketed as G.R. No.
177275 is DENIED.

The Complaint filed by Marcelino M. Florete, Jr., Maria Elena F. Muyco, and Raul A. Muyco for Declaration of Nullity of
Issuances, Transfers and Sale of Shares in People's Broadcasting Service, Inc. and All Posterior Subscriptions and
Increases thereto with Damages is dismissed as the complainants have no cause of action. The award of P25,000,000.00
as moral damages and PS,000,000.00 as exemplary damages in favor of Rogelio Florete, Sr. is deleted. The Regional Trial
Court Order dated May 18, 2006 ordering the immediate execution of its Decision dated August 2, 2005 is set aside.

SO ORDERED.

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