Corpo Digests(2)

8/10/2019 Corpo Digests(2)

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12. SMITH, BELL & COMPANY (LTD.) vs NATIVIDAD

G.R. No. 15574 September 17, 1919

Facts:

Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the

Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a

motor vessel known as the Batobuilt for it in the Philippine Islands in 1916, of more than

fifteen tons gross The Bato was brought to Cebu in the present year for the purpose of

transporting plaintiff's merchandise between ports in the Islands. Application was made atCebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine

registry. The Collector refused to issue the certificate, giving as his reason that all the

stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the

Philippine Islands. The instant action is the result.

On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section of

this law amended section 1172 of the Administrative Code to read as follows:

SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic

ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be

issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the

taking of the certificate of Philippine register shall be optional with the owner.

"Domestic ownership," as used in this section, means ownership vested in some one or

more of the following classes of persons: (a) Citizens or native inhabitants of the Philippine

Islands; (b) citizens of the United States residing in the Philippine Islands; (c) any corporation

or company composed wholly of citizens of the Philippine Islands or of the United States or

of both, created under the laws of the United States, or of any State thereof, or of thereof,

or the managing agent or master of the vessel resides in the Philippine Islands

Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and

eighteen, had a certificate of Philippine register under existing law, shall likewise be deemed

a vessel of domestic ownership so long as there shall not be any change in the ownership

thereof nor any transfer of stock of the companies or corporations owning such vessel to

person not included under the last preceding paragraph.

The first paragraph of the Philippine Bill of Rights of the Philippine Bill, repeated again in the

first paragraph of the Philippine Bill of Rights as set forth in the Jones Law, provides "That no

law shall be enacted in said Islands which shall deprive any person of life, liberty, or propertywithout due process of law, or deny to any person therein the equal protection of the laws."

Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the

laws because it, in effect, prohibits the corporation from owning vessels, and because

classification of corporations based on the citizenship of one or more of their stockholders is

capricious, and that Act No. 2761 deprives the corporation of its properly without due

process of law because by the passage of the law company was automatically deprived of

every beneficial attribute of ownership in the Batoand left with the naked title to a boat it

could not use .

Issue/Held: WON the Government of the Philippine Islands, through its Legislature, can

deny the registry of vessel in its coastwise trade to corporations having alien

stockholders. -YES, this is a valid exercise of police power. Common carriers which in thePhilippines as in the United States and other countries are, as Lord Hale said, "affected

with a public interest," can only be permitted to use these public waters as a privilege and

under such conditions as to the representatives of the people may seem wise. Act No.

2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd.,

the right to register vessels in the Philippines coastwise trade, does not belong to that

vicious species of class legislation which must always be condemned, but does fall within

authorized exceptions, notably, within the purview of the police power, and so does not

offend against the constitutional provision.

Ratio:The guaranties of the Fourteenth Amendment and so of the first paragraph of the

Philippine Bill of Rights, are universal in their application to all person within the territorialjurisdiction, without regard to any differences of race, color, or nationality. The word

"person" includes aliens. Private corporations, likewise, are "persons" within the scope of

the guaranties in so far as their property is concerned.Classification with the end in view of

providing diversity of treatment may be made among corporations, but must be based upon

some reasonable ground and not be a mere arbitrary selection. Examples of laws held

unconstitutional because of unlawful discrimination against aliens could be cited. Generally,

these decisions relate to statutes which had attempted arbitrarily to forbid aliens to engage

in ordinary kinds of business to earn their living.

One of the exceptions to the general rule, most persistent and far reaching in influence is,

that neither the Fourteenth Amendment to the United States Constitution, broad and

comprehensive as it is, nor any other amendment, "was designed to interfere with the

power of the State, sometimes termed its `police power,' to prescribe regulations to

promote the health, peace, morals, education, and good order of the people, and legislate

so as to increase the industries of the State, develop its resources and add to its wealth and

prosperity. From the very necessities of society, legislation of a special character, having

these objects in view, must often be had in certain districts." his is the same police power

which the United States Supreme Court say "extends to so dealing with the conditions which

exist in the state as to bring out of them the greatest welfare in of its people." For quite

similar reasons, none of the provision of the Philippine Organic Law could could have had

the effect of denying to the Government of the Philippine Islands, acting through its

Legislature, the right to exercise that most essential, insistent, and illimitable of powers, the

sovereign police power, in the promotion of the general welfare and the public interest.

Another notable exception permits of the regulation or distribution of the public domain orthe common property or resources of the people of the State, so that use may be limited to

its citizens. Even as to classification, it is admitted that a State may classify with reference to

the evil to be prevented; the question is a practical one, dependent upon experience.

13. STONEHILL vs. DIOKNO

G.R. No. L-19550 June 19, 1967

Facts: A total of 42 search warrants against petitioners herein and/or the corporations of

which they were officers, directed to the any peace officer, to search the persons above -

named and/or the premises of t heir offices, warehouses and/or residences, and to seize and

take possession of the following personal property to wit:

Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,

portfolios, credit journals, typewriters, and other documents and/or papers showing allbusiness transactions including disbursements receipts, balance sheets and profit and loss


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statements and Bobbins (cigarette wrappers).

as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or

"used or intended to be used as the means of committing the offense," which is described in

the applications adverted to above as "violation of Central Bank Laws, Tariff and Customs

Laws, Internal Revenue (Code) and the Revised Penal Code."

Petitioners allege that the search warrants are null and void because: (1) they do not

describe with particularity the documents, books and things to be seized; (2) cash money,

not mentioned in the warrants, were actually seized; (3) the warrants were issued to fish

evidence against the aforementioned petitioners in deportation cases filed against them; (4)

the searches and seizures were made in an illegal manner; and (5) the documents, papersand cash money seized were not delivered to the courts that issued the warrants, to be

disposed of in accordance with law.

In their answer, respondents-prosecutors alleged, (1) that the contested search warrants are

valid and have been issued in accordance with law; (2) that the defects of said warrants, if

any, were cured by petitioners' consent; and (3) that, in any event, the effects seized are

admissible in evidence against herein petitioners, regardless of the alleged illegality of the

aforementioned searches and seizures.

The documents, papers, and things seized under the alleged authority of the warrants in

question may be split into two (2) major groups, namely: (a) those found and seized in the

offices of the aforementioned corporations, and (b) those found and seized in the residences

of petitioners herein.

Issues/Held: WON as to the first group, petitioners as officers of the Corporation have a

cause of action to assail the legality of the contested warrants and of the seizures made in

pursuance thereof.-NO

Ratio:

Said corporations have their respective personalities, separate and

distinct from the personality of herein petitioners, regardless of the

amount of shares of stock or of the interest of each of them in said

corporations, and whatever the offices they hold therein may be.

It is well settled that the legality of a seizure can be contested only by

the party whose rights have been impaired thereby, and that the

objection to an unlawful search and seizure is purely personal and

cannot be availed of by third parties. If these papers were unlawfully

seized and thereby the constitutional rights of or any one were invaded,

they were the rights of the corporation and not the rights of the otherdefendants.

Consequently, petitioners herein may not validly object to the use in

evidence against them of the documents, papers and things seized from

the offices and premises of the corporations adverted to above, since

the right to object to the admission of said papers in evidence belongs

exclusively to the corporations, to whom the seized effects belong, and

may not be invoked by the corporate officers in proceedings against

them in their individual capacity.

14. BATAAN SHIPYARD AND ENGINEERING vs. PCGG

G.R. No. 75885 May 27, 1987

Facts:

Challenged by a private corporation known as the Bataan Shipyard and Engineering Co., Inc.

are: (1) Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino

on February 28, 1986 and March 12, 1986, respectively, and (2) the sequestration, takeover,

and other orders issued, and acts done, in accordance with said executive orders by the

Presidential Commission on Good Government and/or its Commissioners and agents,

affecting said corporation.

BASECO describes itself in its petition as "a shiprepair and shipbuilding company

incorporated as a domestic private corporation (on Aug. 30, 1972) by a consortium of

Filipino shipowners and shipping executives. Its main office is at Engineer Island, Port Area,

Manila, where its Engineer Island Shipyard is housed, and its main shipyard is located atMariveles Bataan." Barely six months after its incorporation, BASECO acquired from National

Shipyard & Steel Corporation, or NASSCO, a government -owned or controlled corporation,

the latter's shipyard at Mariveles, Bataan, known as the Bataan National Shipyard (BNS), and

except for NASSCO's Engineer Island Shops and certain equipment of the BNS, consigned

for future negotiation all its structures, buildings, shops, quarters, houses, plants,

equipment and facilities, in stock or in transit. This it did in virtue of a "Contract of Purchase

and Sale with Chattel Mortgage" executed on February 13, 1973. The price was

P52,000,000.00.

Unaccountably, the price of P52,000,000.00 was reduced by more than one -half, to

P24,311,550.00, about eight (8) months later. A document to this effect was executed on

October 9, 1973, entitled "Memorandum Agreement," and was signed for NASSCO by Arturo

Pacificador, as Presiding Officer of the Board of Directors, and David R. Ines, as General

Manager. This agreement bore, at the top right corner of the first page, the word

"APPROVED" in the handwriting of President Marcos,followed by his usual full signature.

On October 1, 1974, BASECO acquired three hundred (300) hectares of land in Mariveles

from the Export Processing Zone Authority for the price of P10,047,940.00 of which, as set

out in the document of sale, P2,000.000.00 was paid upon its execution, and the balance

stipulated to be payable in installments.

Some nine months afterwards, or on July 15, 1975, to be precise, BASECO, again with the

intervention of President Marcos, acquired ownership of the rest of the assets of NASSCO

which had not been included in the first two (2) purchase documents. Transferred to

BASECO were NASSCO's "ownership and all its titles, rights and interests over all equipment

and facilities including structures, buildings, shops, quarters, houses, plants and expendable

or semi-expendable assets, located at the Engineer Island, known as the Engineer Island

Shops, including all the equipment of the Bataan National Shipyards (BNS) which wereexcluded from the sale of NBS to BASECO but retained by BASECO and all other selected

equipment and machineries of NASSCO at J. Panganiban Smelting Plant."

Other evidence submitted to the Court by the Solicitor General proves that President

Marcos not only exercised control over BASECO, but also that he actually owns well nigh

one hundred percent of its outstanding stock.

The Solicitor General has drawn the Court's attention to the intriguing circumstance that

found in Malacanang shortly after the sudden flight of President Marcos, were certificates

corresponding to more than ninety-five percent (95%)of all the outstanding shares of stock

of BASECO, endorsed in blank, together with deeds of assignment of practically all the

outstanding shares of stock of the three (3) corporations above mentioned (which hold

95.82%of all BASECO stock), signed by the owners thereof although not notarized.

The Sequestration, Takeover, and Other Orders Complained of:

a. Basic sequestration order of various companies and The TAKEOVEROrder-While BASECO concedes that "sequestration without resorting to


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Ratio:

It is elementary that the right against self-incrimination has no application to juridical

persons.

While an individual may lawfully refuse to answer incriminating questions unless protected

by an immunity statute, it does not follow that a corporation, vested with special privileges

and franchises, may refuse to show its hand when charged with an abuse of such privileges

Relevant jurisprudence is also cited by the Solicitor General.

corporations are not entitled to all of the constitutional protections which private

individuals have. They are not at all within the privilege against self-incrimination,

although this court more than once has said that the privilege runs very closely with the 4thAmendment's Search and Seizure provisions. It is also settled that an officer of the company

cannot refuse to produce its records in its possession upon the plea that they will either

incriminate him or may incriminate it."(Oklahoma Press Publishing Co. v. Walling, 327 U.S.

186; emphasis, the Solicitor General's).

The corporation is a creature of the state. It is presumed to be incorporated for the

benefit of the public. It received certain special privileges and franchises, and holds them

subject to the laws of the state and the limitations of its charter. Its powers are limited by

law. It can make no contract not authorized by its charter. Its rights to act as a corporation

are only preserved to it so long as it obeys the laws of its creation. There is a reserve right in

the legislature to investigate its contracts and find out whether it has exceeded its powers. It

would be a strange anomaly to hold that a state, having chartered a corporation to make use

of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises

had been employed, and whether they had been abused, and demand the production of the

corporate books and papers for that purpose. The defense amounts to this, that an officer of

the corporation which is charged with a criminal violation of the statute may plead the

criminality of such corporation as a refusal to produce its books. To state this proposition is

to answer it. While an individual may lawfully refuse to answer incriminating questions

unless protected by an immunity statute, it does not follow that a corporation, vested with

special privileges and franchises may refuse to show its hand when charged with an abuse of

such privileges. (Wilson v. United States, 55 Law Ed., 771, 780 *emphasis, the Solicitor

General's+)

At any rate, Executive Order No. 14-A, amending Section 4 of Executive Order No. 14 assures

protection to individuals required to produce evidence before the PCGG against any possible

violation of his right against self-incrimination. It gives them immunity from prosecution on

the basis of testimony or information he is compelled to present. As amended, said Section4 now provides that

xxx xxx xxx

The witness may not refuse to comply with the order on the basis of his privilege against

self-incrimination; but no testimony or other information compelled under the order (or any

information directly or indirectly derived from such testimony, or other information) may be

used against the witness in any criminal case, except a prosecution for perjury, giving a false

statement, or otherwise failing to comply with the order.

The constitutional safeguard against unreasonable searches and seizures finds no

application to the case at bar either. There has been no search undertaken by any agent or

representative of the PCGG, and of course no seizure on t he occasion thereof.

TEEHANKEE, CJ., concurring:

The Court is unanimous insofar as the judgment at bar upholds the imperative need ofrecovering the ill-gotten properties amassed by the previous regime, which "deserves the

fullest support of the judiciary and all sectors of society." The Court is likewise unanimous in

its judgment dismissing the petition to declare unconstitutional and void Executive Orders

Nos. 1 and 2 to annul the sequestration order of April 14, 1986. For indeed, the 1987

Constitution overwhelmingly adopted by the people at the February 2, 1987 plebiscite

expressly recognized in Article XVIII, section 26 thereof the vital functions of respondent

PCGG to achieve the mandate of the people to recover such ill -gotten wealth and properties

as ordained by Proclamation No. 3 promulgated on March 25, 1986. The Court is likewise

unanimous as to the general rule set forth in the main opinion that "the PCGG cannot

exercise acts of dominion over property sequestered, frozen or provisionally taken over" and

"(T)he PCGG may thus exercise only powers of administration over the property or businesssequestered or provisionally taken over, much like a court-appointed receiver, such as to

bring and defend actions in its own name; receive rents; collect debts due; pay outstanding

debts; and generally do such other acts and things as may be necessary to fulfill its mission

as conservator and administrator.

PADILLA,J., concurring:

The majority opinion penned by Mr. Justice Narvasa maintains and upholds the valid

distinction between acts of conservation and preservation of assets and acts of ownership.

Sequestration, freeze and temporary take-over encompass the first type of acts. They do not

include the second type of acts which are reserved only to the rightful owner of the assets

or business sequestered or temporarily taken over.

MELENCIO-HERRERA,J., concurring:

Melencio-Herrera qualifies the concurrence in so far as the voting of sequestered stork is

concerned.

The voting of sequestered stock is, to my mind, an exercise of an attribute of ownership. It

goes beyond the purpose of a writ of sequestration, which is essentially to preserve the

property in litigation (Article 2005, Civil Code). Sequestration is in the nature of a judicial

deposit (ibid.).

GUTIERREZ, JR.,J., concurring and dissenting:

We are all agreed in the Court that the PCGG is not a judge. It is an investigator and

prosecutor. Sequestration is only a preliminary or ancillary remedy. There must be a

principal and independent suit filed in court to establish the true ownership of sequestered

properties. The factual premise that a sequestered property was ill -gotten by former

President Marcos, his family, relatives, subordinates, and close associates cannot be

assumed. The fact of ownership must be established in a proper suit before a court of

justice.CRUZ,J., dissenting:

Cruz is convinced and so submit that the PCGG cannot at this time take over the BASECO

without any court order and exercise thereover acts of ownership without court supervision.

Voting the shares is an act of ownership. Reorganizing the board of directors is an act of

ownership. Such acts are clearly unauthorized. As the majority opinion itself stresses, the

PCGG is merely an administrator whose authority is limited to preventing the sequestered

properties from being dissipated or clandestinely transferred.

15. PNB vs CA

G.R. No. L-27155 May 18, 1978

Facts:

Defendant Rita Guenco Tapnio secured a crop loan from PNB. This crop loan was secured by


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a mortgage on her standing crop including her sugar quota allocation for the agricultural

year corresponding to said standing crop. Philmagen executed its Bond, with d efendant Rita

Gueco Tapnio as principal, in favor of the Philippine National Bank Branch at San Fernando,

Pampanga, to guarantee the payment of defendant Rita Gueco Tapnio's account with said

Bank. In turn, to guarantee the payment of whatever amount the bonding company would

pay to the Philippine National Bank, both defendants (Rita Gueco Tapnio and Cecilio Gueco)

executed the indemnity agreement.

It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum of

P2,000.00, plus accumulated interests unpaid, which she failed to pay despite demands. TheBank wrote a letter of demand to Philmagen, whereupon Philmagen accordingly paid the full

amount due and owing in the sum of P2,379.91, for and on account of defendant Rita

Gueco's obligation.

Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however, when

demand was made upon her by plaintiff for her to pay her debt to the Bank, that she told

the Plaintiff that she did not consider herself to be indebted to the Bank at all because she

had an agreement with one Jacobo-Nazon whereby she had leased to the latter her unused

export sugar quota for the 1956 -1957 agricultural year. his lease agreement, according to

her, was with the knowledge of the bank. But the Bank has placed obstacles to the

consummation of the lease, and the delay caused by said obstacles forced 'Nazon to

rescind the lease contract.Thus, Rita Gueco Tapnio filed her third -party complaint against

the Bank to recover from the latter any and all sums of money which may be adjudged

against her and in favor of the plaitiff plus moral damages, attorney's fees and costs.

Sometimes, a planter harvest less sugar than her quota, so her excess quota is utilized by

another who pays her for its use. This is the arrangement entered into between Mrs. Tapnio

and Mr. Tuazon regarding the former's excess quota for 1956-1957.

Since the quota was mortgaged to the P.N.B., the contract of lease had to be approved by

said Bank, The same was submitted to the branch manager at San Fernando, Pampanga.

Consideration of the evidence discloses that when the branch manager of the Philippine

National Bank at San Fernando recommended the approval of the contract of lease at the

price of P2.80 per picul, whose recommendation was concurred in by the Vice -president ofsaid Bank, J. V. Buenaventura, the board of directors required that the amount be raised to

13.00 per picul. Mr. Tuazon asked for a reconsideration of the price per picul but thaw same

was not acted upon the PNBs BOD. The parties were notified of the refusal on the part of

the board of directors of the Bank to grant the motion for reconsideration. As such, Tuazon

wrote a letter to the Bank informing the Bank that he was no longer interested to continue

the deal, referring to the lease of sugar quota allotment in favor of defendant Rita Gueco

Tapnio. The result is that t he latter lost the sum of P2,800.00 which she s hould have received

from Tuazon and which she could have paid the Bank to cancel off her indebtedness.

Issue/Held: WON the rescission of the lease contract of the 1,000 piculs of sugar quota

allocation of respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified

refusal of petitioner to approve said lease contract, and its unreasonable insistence on the

rental price of P3.00 instead of P2.80 per picul.-YES

Ratio:It has been clearly shown that when the Branch Manager of petitioner required the

parties to raise the consideration of the lease from P2.50 to P2.80 per picul, or a total of

P2,800-00, they readily agreed. Hence, in his letter to the Branch Manager of the Bank on

August 10, 1956, Tuazon informed him that the minimum lease rental of P2.80 per picul was

acceptable to him and that he even offered to use the loan secured by him from petitioner

to pay in full the sum of P2,800.00 which was the total consideration of the lease. This

arrangement was not only satisfactory to the Branch Manager but it was also approves by

Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita Gueco Tapnio

could have realized the amount of P2,800.00, which was more than enough to pay the

balance of her indebtedness to the Bank which was secured by the bond of Philamgen.There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-

1957 was due to the disapproval of the lease by the Board of Directors of petitioner.

Time is of the essence in the approval of the lease of sugar quota allotments, since the same

must be utilized during the milling season, because any allotment which is not filled during

such milling season may be reallocated by the Sugar Quota Administration to other holders

of allotments. There was no proof that there was any other person at that time willing to

lease the sugar quota allotment of private respondents for a price higher than P2.80 per

picul. "The fact that there were isolated transactions wherein the consideration for the lease

was P3.00 a picul", according to the trial court, "does not necessarily mean that there are

always ready takers of said price." The unreasonableness of the position adopted by the

petitioner's Board of Directors is shown by the fact that the difference between the amount

of P2.80 per picul offered by Tuazon and the P3.00 per picul demanded by the Board

amounted only to a total sum of P200.00.

Issue/Held: WON PNB is liable for the damage caused.-YES

Ratio: While petitioner had the ultimate authority of approving or disapproving the

proposed lease since the quota was mortgaged to the Bank, the latter certainly cannot

escape its responsibility of observing, for the protection of the interest of private

respondents, that degree of care, precaution and vigilance which the circumstances justly

demand in approving or disapproving the lease of said sugar quota.

The law makes it imperative that every person "must in the exercise of his rights and in the

performance of his duties, act with justice, give everyone his due, and observe honesty and

good faith. This petitioner failed to do. Certainly, it knew that the agricultural year was aboutto expire, that by its disapproval of the lease private respondents would be unable to utilize

the sugar quota in question.

In failing to observe the reasonable degree of care and vigilance which the surrounding

circumstances reasonably impose; petitioner is consequently liable for the damages caused

on private respondents. Under Article 21 of the New Civil Code, "any person who wilfully

causes loss or injury to another in a manner that is contrary to morals, good customs or

public policy shall compensate the latter for the damage." The afore -cited provisions on

human relations were intended to expand the concept of torts in this jurisdiction by granting

adequate legal remedy for the untold number of moral wrongs which is impossible for

human foresight to specifically provide in the statutes.

A corporation is civilly liable in the same manner as natural persons for torts, because"generally speaking, the rules governing the liability of a principal or master for a tort


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committed by an agent or servant are the same whether the principal or master be a

natural person or a corporation, and whether the servant or agent be a natural or artificial

person. All of the authorities agree that a principal or master is liable for every tort which

he expressly directs or authorizes, and this is just as true of a corporation as of a natural

person, A corporation is liable, therefore, whenever a tortious act is committed by an

officer or agent under express direction or authority from the stockholders or members

acting as a body, or, generally, from the directors as the governing body."

16. Professional Services Inc. (PSI) v. Natividad and Enrique Agana

Natividad and Enrique Agana v. Juan Fuentes Miguel Ampil v. Natividad and Enrique Agana

2007 / Sandoval-Gutierrez / Petition for review on certiorari of CA decisions

Standard of conduct > Experts > Medical professionals

FACTS:

Natividad Agana was rushed to Medical City because of difficulty of bowel movement and

bloody anal discharge. Dr. Ampil diagnosed her to be suffering from cancer of the sigmoid.

Dr. Ampil performed ananterior resection surgeryon her, and finding that the malignancy

spread on her left ovary, he obtained the consent of her husband, Enrique, to permit Dr.

Fuentes to performhysterectomy on her. After the hysterectomy, Dr. Fuentes showed his

work to Dr. Ampil, who examined it and found it in order, so he allowed Dr. Fuentes to leave

the operating room. Dr. Ampil was about to complete the procedure when the attending

nurses made some remarks on the Record of Operation: sponge count lacking 2; announced

to surgeon search done but to no avail continue for closure (two pieces of gauze were

missing). A diligent search was conducted but they could not be found. Dr. Ampil

thendirected that the incision be closed.

A couple of days after, she complained ofpain in her anal region, but the doctors told

her that it was just a natural consequence of the surgery. Dr. Ampil recommended that she

consult an oncologist to examine the cancerous nodes which were not removed during the

operation. After months of consultations and examinations in the US, she was told that she

was free of cancer. Weeks after coming back, her daughter found a piece of gauze(1.5 in)

protruding from her vagina, so Dr. Ampil manually extracted this, assuring Natividad that the

pains will go away. However, the pain worsened, so she sought treatment at a hospital,

where another 1.5 in piece of gauze was found in her vagina. She underwent anothersurgery.

Sps. Agana filed acomplaint for damagesagainst PSI (owner of Medical City ), Dr. Ampil,

and Dr. Fuentes, alleging that the latter are liable fornegligencefor leaving 2 pieces of gauze

in Natividads body, andmalpracticefor concealing their acts of negligence. Enrique Agana

also filed anadministrative complaintfor gross negligence and malpractice against the two

doctors with the PRC (although only the case against Dr. Fuentes was heard since Dr. Ampil

was abroad). Pending the outcome of the cases, Natividad died(now substituted by her

children).RTC found PSI and the two doctors liable for negligence and malpractice. PRC

dismissed the case against Dr. Fuentes. CA dismissed only the case against Fuentes.

ISSUE AND HOLDING:

1.

WON CA erred in holding Dr. Ampil liable for negligence and malpractice. NO;DR. AMPIL IS GUILTY

2. WON CA erred in absolving Dr. Fuentes of any liability.NO

3. WON PSI may be held solidarily liable for Dr. Ampils negligence. YES

4.

RATIO

DR. AMPIL IS LIABLE FOR NEGLIGENCE AND MALPRACTICE

His arguments are without basis *did not prove that the American doctors were the ones

who put / left the gauzes; did not submit evidence to rebut the correctness of the operation

record (re: number of gauzes used); re: Dr. Fuentes' alleged negligence, Dr. Ampil examined

his work and found it in order+.

Leaving foreign substances in the wound after incision has been closed is at leastprimafacienegligence by the operating surgeon.Even if it has been shown that a surgeon was

required to leave a sponge in his patients abdomen because of the dangers attendant upon

delay, still, it is hislegal duty to inform his patient within a reasonable time by advising her of

what he had been compelled to do, so she can seek relief from the effects of the foreign

object left in her body as her condition might permit. Whats worse in this case is that he

misled her by saying that the pain was an ordinary consequence of her operation.

Medical negligence; standard of diligence

To successfully pursue this case of medical negligence, a patient must only prove that a

health care provider either failed to do something *or did something+ which a reasonably

prudent health care provider would have done *or wouldn't have done+, and that the failure

or action caused injury to the patient.

Duty-to remove all foreign objects from the body before closure of the incision; ifhe fails to do so, it was his duty to inform the patient about it

Breach failed to remove foreign objects; failed to inform patient

Injury-suffered pain that necessitated examination and another surgery

Proximate Causation-breach caused this injury;could be traced from his act ofclosing the incision despite information given by the attendant nurses that 2

pieces of gauze were still missing; what established causal link:gauze pieces later

extracted from patients vagina

DR. FUENTES NOT LIABLE

Theres ipsa loquitur*thing speaks for itself+argument of the Aganas does not convince the

court. Mere invocation and application of this doctrine does not dispense with the

requirement of proof of negligence.

Requisites for the applicability ofres ipsa loquitur

1. Occurrence of injury

2. Thing which caused injury was under the control and management of the

defendant *DR. FUENTES+LACKING SINCECTRLMGT WAS WITH DR. AMPIL

3. Occurrence was such that in the ordinary course of things, would not have

happened if those who had control or management used proper care

4. Absence of explanation by defendant

Under theCaptain of the Shiprule, theoperating surgeonis the personin complete charge

of the surgery room and all personnel connected with the operation. That Dr. Ampil

discharged such role is evident from the following: He called Dr. Fuentes to perform a hysterectomy


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He examined Dr. Fuentes work and found it in o rder

He granted Dr. Fuentes permission to leave

He ordered the closure of the incisionHOSPITAL OWNER PSI SOLIDARILY LIABLE WITH DR. AMPIL *NCC 2180+, AND DIRECTLY LIABLE

TO SPS. AGANAS *NCC 2176+

Previously, employers cannot be held liable for the fault or negligence of its professionals.

However, this doctrine has weakened since courts came to realize that modern hospitals are

taking a more active role in supplying and regulating medical care to its patients, by

employing staff of physicians, among others. Hence,there is no reason to exempt hospitals

from the universal rule ofrespondeat superior. Here are the Courts bases for sustaining PSIs

liability:

Ramos v. CAdoctrine on E-E relationship

o For purposes of apportioning responsibility in medical negligence cases,

anemployer-employee relationshipin effect exists between hospitals

and their attending and visiting physicians. *LABOR LESSON: power to

hire, fire, power of control+

Agency principle ofapparent authority / agency by estoppel

o Imposes liability because of the actions of a principal or employer in

somehow misleading the public into believing that the relationship or

the authority exists *see NCC 1869+

o PSI publicly displays in the Medical City lobby the names andspecializations of their physicians. Hence, PSI is now estopped from

passing all the blame to the physicians whose names it proudly paraded

in the public directory, leading the public to believe that it vouched for

their skill and competence.

o If doctors do well, hospital profits financially, so when

negligence mars the quality of its services, the hospital should

not be allowed to escape liability for its agents acts.

Doctrine ofcorporate negligence / corporate responsibility

o This is the judicial answer to the problem of allocating hospitals liabilityfor the negligent acts of health p ractitioners, absent facts to support the

application ofrespondeat superior.

o This provides for the duties expected *from hospitals+. In this case, PSIfailed to perform the duty of exercisingreasonable care to protect from

harm all patients admitted into its facility for medical treatment. PSI

failed to conduct an investigation of the matter reported in the note of

the count nurse, and this established PSIs part in the dark conspiracy of

silence and concealment about the gauzes.

o PSI has actual / constructive knowledge of the matter, through

the report of the attending nurses t he fact that the operation

was carried on with the assistance of various hospital staff

o It also breached its duties to oversee or supervise all persons who

practice medicine within its wallsandtake an active step in fixing the

negligence committed

PSI also liable underNCC 2180

o It failed to adduce evidence to show that it exercised the diligence of a

good father of the familyin the accreditation and supervision of Dr.

Ampil

17. Executive Secretary vs. CA Gr#131719

Facts: The Omnibus Rules and Regulations Implementing the Migrant Workers and Overseas

Filipino Act of 1995 RA 8042 was, thereafter, published in the April 7, 1996 issue of the

Manila Bulletin. However, even before the law took effect, the Asian Recruitment Council

Philippine Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for declaratory relief

under Rule 63 of the Rules of Court with the Regional Trial Court of Quezon City to declare

as unconstitutional Section 2, paragraph (g), Section 6, paragraphs (a) to (j), (l) and (m),

Section 7, paragraphs (a) and (b), and Sections 9 and 10 of the law, with a plea for the

issuance of a temporary restraining order and/or writ of preliminary injunction enjoining the

respondents therein from enforcing the assailed provisions of the law.

Peitioner claims that great majority of the duly licensed recruitment agencies have

stopped or suspended their operations for fear of being prosecuted under the provisions ofa law that are unjust and unconstitutional.

On August 1, 1995, the trial court issued a temporary restraining order effective for a

period of only twenty (20) days therefrom. After the petitioners filed their comment on the

petition, the ARCO-Phil. filed an amended petition, the amendments consisting in the

inclusion in the caption thereof eleven (11) other corporations which it alleged were its

members and which it represented in the suit, and a plea for a temporary restraining order

enjoining the respondents from enforcing Section 6 subsection (i), Section 6 subsection (k)

and paragraphs 15 and 16 thereof, Section 8, Section 10, paragraphs 1 and 2, and Sections

11 and 40 of Rep. Act No. 8042.

The respondent averred that the aforequoted provisions of Rep. Act No. 8042 violate

Section 1, Article III of the Constitution. 5 According to the respondent, Section 6(g) and (i)discriminated against unskilled workers and their families and, as such, violated the equal

protection clause, as well as Article II, Section 12 6 and Article XV, Sections 1 7 and 3(3) of

the Constitution. 8 As the law encouraged the deployment of skilled Filipino workers, only

overseas skilled workers are granted rights. The respondent stressed that unskilled workers

also have the right to seek employment abroad.

According to the respondent, the right of unskilled workers to due process is violated

because they are prevented from finding employment and earning a living a broad. It cannot

be argued that skilled workers are immune from abuses by employers, while unskilled

workers are merely prone to such abuses. It was pointed out that both skilled and unskilled

workers are subjected to abuses by foreign employers. Furthermore, the prohibition of the

deployment of unskilled workers abroad would only encourage fly-by-night illegal

recruiters.


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According to the respondent, the grant of incentives to service contractors and manning

agencies to the exclusion of all other licensed and authorized recruiters is an invalid

classification. Licensed and authorized recruiters are thus deprived of their right to property

and due process and to the "equality of the person." It is understandable for the law to

prohibit illegal recruiters, but to discriminate against licensed and registered recruiters is

unconstitutional.

The respondent, likewise, alleged that Section 6, subsections (a) to (m) is unconstitutional

because licensed and authorized recruitment agencies are placed on equal footing withillegal recruiters. It contended that while the Labor Code distinguished between recruiters

who are holders of licenses and non-holders thereof in the imposition of penalties, Rep. Act

No. 8042 does not make any distinction. The penalties in Section 7(a) and (b) being based on

an invalid classification are, therefore, repugnant to the equal protection clause, besides

being excessive; hence, such penalties are violative of Section 19(1), Article III of the

Constitution. 9 It was also pointed out that the penalty for officers/officials/employees of

recruitment agencies who are found guilty of economic sabotage or large-scale illegal

recruitment under Rep. Act No. 8042 is life imprisonment.

The respondent also posited that Section 6(m) and paragraphs (15) and (16), Sections 8, 9

and 10, paragraph 2 of the law violate Section 22, Article III of the Constitution 10

prohibiting ex-post facto laws and bills of attainder. This is because the provisions presume

that a licensed and registered recruitment agency is guilty of illegal recruitment involving

economic sabotage, upon a finding that it committed any of the prohibited acts under the

law. Furthermore, officials, employees and their relatives are presumed guilty of illegal

recruitment involving economic sabotage upon such finding that they committed any of the

said prohibited acts.

The respondent further argued that the 90 -day period in Section 10, paragraph (1) within

which a labor arbiter should decide a money claim is relatively short, and could deprive

licensed and registered recruiters of their right to due process. The period within which the

summons and the complaint would be served on foreign employees and, thereafter, the

filing of the answer to the complaint would take more than 90 days. This would thereby shift

on local licensed and authorized recruiters the burden of proving the defense of foreign

employers.

The respondent asserted that the following provisions of the law are unconstitutional:

SEC. 9. Venue. A criminal action arising from illegal recruitment as defined herein shall

be filed with the Regional Trial Court of the province or city where the offense was

committed or where the offended party actually resides at the time of the commission of

the offense: Provided, That the court where the criminal action is first filed shall acquire

jurisdiction to the exclusion of other courts: Provided, however, That the aforestated

provisions shall also apply to those criminal actions that have already been filed in court at

the time of the effectivity of this Act.

In their answer to the petition, the petitioners alleged, inter alia, that (a) the respondent

has no cause of action for a declaratory relief; (b) the petition was premature as the rules

implementing Rep. Act No. 8042 not having been released as yet; (c) the assailed provisionsdo not violate any provisions of the Constitution; and, (d) the law was approved by Congress

in the exercise of the police power of the State.

In opposition to the respondent's plea for injunctive relief, the petitioners averred that:

As earlier shown, the amended petition for declaratory relief is devoid of merit for failure of

petitioner to demonstrate convincingly that the assailed law is unconstitutional, apart from

the defect and impropriety of the petition.

On December 5, 1997, the appellate court came out with a four-page decision dismissing

the petition and affirming the assailed order and writ of preliminary injunction issued by the

trial court. The appellate court, likewise, denied the petitioners' motion for reconsiderationof the said decision.

Issue: The core issue in this case is whether or not the trial court committed grave abuse of

its discretion amounting to excess or lack of jurisdiction in issuing the assailed order and the

writ of preliminary injunction on a bond of only P50,000; and

Whether or not the appellate court erred in affirming the trial court's order and the writ

of preliminary injunction issued by it.

Held:IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of

the appellate court is REVERSED AND SET ASIDE. The Order of the Regional Trial Court dated

August 21, 1995 in Civil Case No. Q-95-24401 and the Writ of Preliminary Injunction issued

by it in the said case on August 24, 1995 are NULLIFIED. No costs.

SO ORDERED.

Ratio: The matter of whether to issue a writ of preliminary injunction or not is addressed to

the sound discretion of the trial court. However, if the court commits grave abuse of its

discretion in issuing the said writ amounting to excess or lack of jurisdiction, the same may

be nullified via a writ of certiorari and prohibition.

The possible unconstitutionality of a statute, on its face, does not of itself justify an

injunction against good faith attempts to enforce it, unless there is a showing of bad faith,

harassment, or any other unusual circumstance that would call for equitable relief. The "onits face" invalidation of statutes has been described as "manifestly strong medicine," to be

employed "sparingly and only as a last resort," and is generally disfavored.

To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to

be unconstitutional, the party must establish that it will suffer irreparable harm in the

absence of injunctive relief and must demonstrate that it is likely to succeed on the merits,

or that there are sufficiently serious questions going to the merits and the balance of

hardships tips decidedly in its favor.

Just as the incidental "chilling effect" of such statutes does not automatically render them

unconstitutional, so the chilling effect that admittedly can result from the very existence of

certain laws on the statute books does not in itself justify prohibiting the State from carrying

out the important and necessary task of enforcing these laws against socially harmfulconduct that the State believes in good faith to be punishable under its laws and the


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Constitution.

One who attacks a statute, alleging unconstitutionality must prove its invalidity beyond

reasonable doubt (Caleon v. Agus Development Corporation, 207 SCRA 748). All reasonable

doubts should be resolved in favor of the constitutionality of a statute (People v. Vera, 65

Phil. 56). This presumption of constitutionality is based on the doctrine of separation of

powers which enjoin upon each department a becoming respect for the acts of the other

departments (Garcia vs. Executive Secretary, 204 SCRA 516 *1991+).

In view of petitioner's standing

The petitioners contend that the respondent has no locus standi. It is a non -stock, non-

profit organization; hence, not the real party -in-interest as petitioner in the action. Although

the respondent filed the petition in the Regional Trial Court in behalf of licensed and

registered recruitment agencies, it failed to adduce in evidence a certified copy of its Articles

of Incorporation and the resolutions of the said members authorizing it to represent the said

agencies in the proceedings. Neither is the suit of the respondent a class suit so as to vest in

it a personality to assail Rep. Act No. 8042; the respondent is service -oriented while the

recruitment agencies it purports to represent are profit -oriented.

The petition is meritorious. The respondent has locus standi to file the petition in the

RTC in representation of the eleven licensed and registered recruitment agencies

impleaded in the amended petition. The modern view is that an association has standing

to complain of injuries to its members. This view fuses the legal identity of an association

with that of its members. 16 An association has standing to file suit for its workers despite

its lack of direct interest if its members are affected by the action. An organization has

standing to assert the concerns of its constituents.

We note that, under its Articles of Incorporation, the respondent was organized for the

purposes inter alia of promoting and supporting the growth and development of the

manpower recruitment industry, both in the local and international levels; providing,

creating and exploring employment opportunities for the exclusive benefit of its general

membership; enhancing and promoting the general welfare and protection of Filipino

workers; and, to act as the representative of any individual, company, entity or association

on matters related to the manpower recruitment industry, and to perform other acts andactivities necessary to accomplish the purposes embodied therein.

In view of standing in behalf of unskilled workers

However, the respondent has no locus standi to file the petition for and in behalf of

unskilled workers. We note that it even failed to implead any unskilled workers in its

petition. Furthermore, in failing to implead, as parties-petitioners, the eleven licensed and

registered recruitment agencies it claimed to represent, the respondent failed to comply

with Section 2 of Rule 63 20 of the Rules of Court. Nevertheless, since the eleven licensed

and registered recruitment agencies for which the respondent filed the suit are specifically

named in the petition, the amended petition is deemed amended to avoid multiplicity of

suits.

In view of retroactivity

In People v. Diaz, 24 we held that Rep. Act No. 8042 is but an amendment of the Labor

Code of the Philippines and is not an ex-post facto law because it is not applied retroactively.

In view of equal protection clause

In any case, where the liberty curtailed affects at most the rights of property, the

permissible scope of regulatory measures is certainly much wider. To pretend that licensing

or accreditation requirements violates the due process clause is to ignore the settled

practice, under the mantle of the police power, of regulating entry to the practice of varioustrades or professions. Professionals leaving for abroad are required to pass rigid written and

practical exams before they are deemed fit to practice their trade.

Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause

of the Constitution to support their argument that the government cannot enact the

assailed regulatory measures because they abridge the freedom to contract.

The equal protection clause is directed principally against undue favor and individual or

class privilege. It is not intended to prohibit legislation which is limited to the object to

which it is directed or by the territory in which it is to operate. It does not require absolute

equality, but merely that all persons be treated alike under like conditions both as to

privileges conferred and liabilities imposed.

In view of the VALIDITY of Sec. 6 of RA 8042

The validity of Section 6 of R.A. No. 8042 which provides that employees of recruitment

agencies may be criminally liable for illegal recruitment has been upheld in People v.

Chowdury: An employee of a company or corporation engaged in illegal recruitment may be

held liable as principal, together with his employer, if it is shown that he actively and

consciously participated in illegal recruitment.

By its rulings, the Court thereby affirmed the validity of the assailed penal and procedural

provisions of Rep. Act No. 8042, including the imposable penalties therefor. Until the Court,

by final judgment, declares that t he said provisions are unconstitutional, the enforcement of

the said provisions cannot be enjoined.

Penalizing unlicensed and licensed recruitment agencies and their officers and employees

and their relatives employed in government agencies charged with the enforcement of the

law for illegal recruitment and imposing life imprisonment for those who commit large scale

illegal recruitment is not offensive to the Constitution. The accused may be convicted of

illegal recruitment and large scale illegal recruitment only if, after trial, the prosecution is

able to prove all the elements of the crime charged.

The respondent merely speculated and surmised that licensed and registered recruitment

agencies would close shop and stop business operations because of the assailed penal

provisions of the law. A writ of preliminary injunction to enjoin the enforcement of penal

laws cannot be based on such conjectures or speculations. The respondent even failed to

adduce any evidence to prove irreparable injury because of the enforcement of Section10(1)(2) of Rep. Act No. 8042. Its fear or apprehension that, because of time constraints, its


10/21

members would have to defend foreign employees in cases before the Labor Arbiter is based

on speculations. Even if true, such inconvenience or difficulty is hardly irreparable injury.

Preliminarily, the proliferation of illegal job recruiters and syndicates preying on innocent

people anxious to obtain employment abroad is one of the primary considerations that led

to the enactment of The Migrant Workers and Overseas Filipinos Act of 1995. Aimed at

affording greater protection to overseas Filipino workers, it is a significant improvement on

existing laws in the recruitment and placement of workers for overseas employment.

By issuing the writ of preliminary injunction against the petitioners sans any evidence, thetrial court frustrated, albeit temporarily, the prosecution of illegal recruiters and allowed

them to continue victimizing hapless and innocent people desiring to obtain employment

abroad as overseas workers, and blocked the attainment of the salutary policies 52

embedded in Rep. Act No. 8042.

The trial court committed a grave abuse of its discretion amounting to excess or lack of

jurisdiction in issuing the assailed order and writ of preliminary injunction. It is for this

reason that the Court issued a temporary restraining order enjoining the enforcement of the

writ of preliminary injunction issued by the trial court.

18. G.R. No. L-35262 March 15, 1930

THE PEOPLE OF THE PHILIPPINE ISLANDS,plaintiff-appellant,

vs.

TAN BOON KONG,defendant-appellee.

OSTRAND,J.:

FACTS:

Tan Boon Kong is the manager of a corporation engaged in the purchase and the

sale of sugar, "bayon," coprax, and other native products. In 1924 the corporation

thru the accused declare in 1924 for the purpose of taxation only the sum of

P2,352,761.94, although the total gross sales of said corporation during that year

amounted to P2,543,303.44, thereby failing to declare the amount of P190,541.50.

The accused failed to pay the Government the amount of P2,960.12,corresponding to 1 per cent of said undeclared sales.

ISSUE:

Whether the defendant, as manager of the corporation is criminallyliable under

section 2723 (Failure to make true return of receipts and sales) of Act No. 2711 for

violation of section 1458 (Payment of percentage taxes) of the same act for the

benefit of said corporation.

HELD:

The court below based the appealed ruling on t he ground that the o ffense charged

must be regarded as committed by the corporation and not by its officials or

agents. This view is in direct conflict with the great weight of authority that a

corporation can act only through its officers and agents, and where the business

itself involves a violation of the law, the correct rule is that all who participate in it

are liable.

In the present case the information or complaint alleges that he, defendant, was

the manager of a corporation which was engaged in business as a merchant, and

as such manager, he made a false return, for purposes of taxation, of the total

amount of sale made by said false return. This declaration of false return and the

failure to pay taxes due to the government constitutes a violation of law. The

defendant, as the author of the illegal act, must necessarily answer for its

consequences, provided that the allegations are proven.

The ruling of the court below sustaining the demurrer to the complaint istherefore reversed.

19. SIA vs. PEOPLE

G.R. No. L-30896

April 28, 1983

FACTS:

Petitioner, Jose O. Sia, was the president and general manager of Metal

Manufacturing of the Philippines (MEMAP). He was convicted of estafa for his

failure to return the cold rolled steel sheets or account for the proceeds of those

which were sold, to Continental Bank, herein complainant. Petitioner contended

that he cannot be made liable for the crime charged as he only acted for and in

behalf of MEMAP as its president.

ISSUE:

Whether petitioner could be held liable for estafa.

RULING:

The Court ruled in the negative.

The case of People vs. Tan Boon Kong (54 Phil. 607) provides for the

general principle that for crimes committed by a corporation, the responsible

officers thereof would personally bear the criminal liability as a corporation is an

artificial person, an abstract being. However, the Court ruled that such principle is

not applicable in this case because the act alleged to be a crime is not in the

performance of an act directly ordained by law to be performed by the

corporation. The act is imposed by agreement of parties, as a practice observed in

the usual pursuit of a business or a commercial transaction. The offense may arise,

if at all, from the peculiar terms and condition agreed upon by the parties to thetransaction, not by direct provision of the law. In the absence of an express

provision of law making the petitioner liable for the criminal offense committed by

the corporation of which he is a president as in fact there is no such provisions in

the Revised Penal Code under which petitioner is being prosecuted, the existence

of a criminal liability on his part may not be said to be beyond any doubt. In all

criminal prosecutions, the existence of criminal liability for which the accused is

made answerable must be clear and certain. Further, the civil liability imposed by

the trust receipt is exclusively on the Metal Company. Speaking of such liability

alone, the petitioner was never intended to be equally liable as the corporation.

Without being made so liable personally as the corporation is, there would then

be no basis for holding him criminally liable, for any violation of the trust receipt.

*G.R. No. 119858. April 29, 2003+


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20. EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF

THE PHILIPPINES, respondents.

Facts:

Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and

Benito Ong with two counts of estafa under separate Informations dated 11

October 1991.

In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ongof the crime of estafa committed as follows:

That on or about July 23, 1990, in the City of Manila, Philippines, the said accused,

representing ARMAGRI International Corporation, conspiring and confederating

together did then and there willfully, unlawfully and feloniously defraud the

SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a

corporation duly organized and existing under the laws of the Philippines located

at Juan Luna Street, Binondo, this City, in the following manner, to wit: the said

accused received in trust from said SOLIDBANK Corporation the following, to wit:

10,000 bags of urea valued at P2,050,000.00specified in a Trust Receipt

Agreement and covered by a Letter of Credit No. DOM GD 90 -009 in favor of the

Fertiphil Corporation.

In Criminal Case No. 92-101990, the Information likewise charges petitioner of the

crime of estafa committed as follows:

That on or about July 6, 1990, in the City of Manila, Philippines, the said accused,

representing ARMAGRI International Corporation, defraud the SOLIDBANK

Corporation represented by its Accountant, DEMETRIO LAZARO. The said accused

received in trust from said SOLIDBANK Corporation the following goods, to wit:

125 pcs. Rear diff. assy RNZO 49 50 pcs. Front & Rear diff assy. Isuzu Elof, 85 units

1-Beam assy. Isuzu Spz all valued at P2,532,500.00 specified in a Trust Receipt

Agreement and covered by a Domestic Letter of Credit No. DOM GD 90-006 in

favor of the Metropole Industrial Sales with address at P.O. Box AC 219, Quezon

City.

Issue: WON PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE

OFFENSE, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND

SIGNED FOR THE ENTRUSTEE CORPORATION.

Held: Section 13 of the Trust Receipts Law which provides: x xx. If the violation is

committed by a corporation, partnership, association or other juridical entities,

the penalty provided for in this Decree shall be imposed upon the directors,

officers, employees or other officials or persons therein responsible for the

offense, without prejudice to the civil liabilities arising from the offense. We hold

that petitioner is a person responsible for violation of the Trust Receipts Law.

The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn overthe proceeds of the sale of the goods, or (2) return the goods covered by the trust

receipts if the goods are not sold.*18+ The mere failure to account or return gives

rise to the crime which is malumprohibitum.*19+ There is no requirement to prove

intent to defraud.*20+

The Trust Receipts Law recognizes the impossibility of imposing the penalty of

imprisonment on a corporation. Hence, if the entrustee is a corporation, the law

makes the officers or employees or other persons responsible for the offense

liable to suffer the penalty of imprisonment. The reason is obvious: corporations,

partnerships, associations and other juridical entities cannot be put to jail. Hence,

the criminal liability falls on the human agent responsible for the violation of theTrust Receipts Law.

21. CHING vs. SECRETARY OF JUSTICE

G. R. No. 164317 February 6, 2006

Facts:

Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime

in September to October 1980, PBMI, through petitioner, applied with the Rizal Co mmercial

Banking Corporation (respondent bank) for the issuance of commercial letters of credit to

finance its importation of assorted goods.

RCBC approved the application, and irrevocable letters of credit were issued in favor of

petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13

trust receiptsas surety, acknowledging delivery of respective goods.

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with

authority to sell but not by way of conditional sale, pledge or otherwise; and in case such

goods were sold, to turn over the proceeds thereof as soo n as received, to apply against the

relative acceptances and payment of other indebtedness to respondent bank. In case the

goods remained unsold within the specified period, the goods were to be returned to

respondent bank without any need of demand. Thus, said "goods, manufactured products

or proceeds thereof, whether in the form of money or bills, receivables, or accounts

separate and capable of identification" were respondent banks property.

When the trust receipts matured, petitioner failed to return the goods to respondent bank,

or to return their value amounting to P6,940,280.66 despite demands. Thus, a criminal case

for estafa was filedagainst the Senior VP.

The RTC, however, granted the Motion to Quash the Informations filed by petitioner on the

ground that the material allegations therein did not amount to estafa.

In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoez,

holding that the penal provision of P.D. No. 115 encompasses any act violative of an

obligation covered by the trust receipt; it is not limited to transactions involving goods

which are to be sold (retailed), reshipped, stored or processed as a component of a product


12/21

ultimately sold. The Court also ruled that "the non-payment of the amount covered by a

trust receipt is an act violative of the obligation of the entrustee to pay."

Thus, the criminal complaint for estafa was re-filed.

Issue: WON the Honorable Secretary of Justice correctly ruled that petitioner Alfredo

Ching is the officer responsible for the offense charged.- NO

Ratio:

Assertions of Petitioner that he had no direct participation in the transaction other than

being the Senior VP of the PBMI is too dull that it cannot even just dent the findings of the

respondent Secretary, viz:

"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:

xxx If the violation or offense is committed by a corporation, partnership,

association or other judicial entities, the penalty provided for in this

Decree shall be imposed upon the directors, officers, employees or other

officials or persons therein responsible for the offense, without prejudice

to the civil liabilities arising from the criminal offense.

"There is no dispute that it was the respondent, who as senior vice-

president of PBM, executed the thirteen (13) trust receipts. As such, the

law points to him as the official responsible for the offense. Since a

corporation cannot be proceeded against criminally because it cannot

commit crime in which personal violence or malicious intent is required,

criminal action is limited to the corporate agents guilty of an act

amounting to a crime and never against the corporation itself (West Coast

Life Ins. Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes, 39 SCRA 303).

Thus, the execution by respondent of said receipts is eno ugh to indict him

as the official responsible for violation of PD 115.

xxx

"In regard to the other assigned errors, we note that the respondent

bound himself under the terms of the trust receipts not only as a

corporate official of PBM but also as its surety. It is evident that these are

two (2) capacities which do not exclude the other. Logically, he can be

proceeded against in two (2) ways: first, as surety as determined by the

Supreme Court in its decision in RCBC vs. Court of Appeals, 178 SCRA 739;

and, secondly, as the corporate official responsible for the offense under

PD 115, the present case is an appropriate remedy under our penal law.

"Moreover, PD 115 explicitly allows the prosecution of corporate officerswithout prejudice to the civil liabilities arising from the criminal offense

thus, the civil liability imposed on respondent in RCBC vs. Court of Appeals

case is clearly separate and distinct from his criminal liability under PD

115."

The Court rules that although petitioner signed the trust receipts merely as Senior Vice-

President of PBMI and had no physical possession of the goods, he cannot avoid prosecution

for violation of P.D. No. 115.1

The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under

paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It

may be committed by a corporation or other juridical entity or by natural persons.

Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,

employees or other officers or persons responsible for the offense, without prejudice to the

civil liabilities of such corporation and/or board of directors, officers, or other officials or

employees responsible for the offense. The rationale is that such officers or employees are

vested with the authority and responsibility to devise means necessary to ensure

compliance with the law and, if they fail to do so, are held criminally accountable; thus, they

have a responsible share in the violations of the law.

If the crime is committed by a corporation or other juridical entity, the directors, officers,

employees or other officers thereof responsible for the offense shall be charged and

penalized for the crime, precisely because of the nature of the crime and the penalty

therefor. A corporation cannot be arrested and imprisoned; hence, cannot be penalized

for a crime punishable by imprisonment.However, a corporation may be charged and

prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribes both

fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty,

may be fined.

22. Consolidated Bank vs CA

Date: April 19, 2001

Petitioner: The Consolidated Bank and Trust CorporationRespondents: Court of Appeals, Continental Cement Corporation, Gregory Lim and spouse

1The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or asappears in the trust receipt or to return said goods, documents or instruments if they were not sold ordisposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishableunder the provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered Threethousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. If theviolation or offense is committed by a corporation, partnership, association or other juridical entities, thepenalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officialsor persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminaloffense.


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Ponente: Ynares- Santiago

Facts: - On July 13, 1982, Continental Cement Corporation and Gregory T. Lim obtained

from Consolidated Bank and Trust Corporation a letter of credit in the amount of P

1,068,150. On the same date, Corporation paid a marginal deposit of P320,445.00 to

petitioner. The letter of credit was used to purchase around 500,000 liters of bunker fuel oil

from Petrophil Corporation. In relation to the same transaction, a trust receipt for the

amount of P 1,001,520.93 was executed by the Corporation, with Lim as signatory.

- Claiming that respondents failed to turn over the goods covered by the trust receipt or the

proceeds thereof, petitioner filed a complaint for sum of money with application forpreliminary attachment before the RTC. Respondents averred that the transaction between

them was a simple loan and not a trust receipt transaction, and that the amount claimed by

petitioner did not take into account payments already made by them. The trial court

dismissed the complaint and ordered petitioner to pay respondents P490,228.90

representing overpayment of respondent Corporation, with interest thereon at the legal

rate from July 26, 1988. The CA affirmed but deleted the award of attorneys fees.

Issue: WON the floating rate of interest exhorted by petitioner is valid

Held: No

Ratio: Neither do we find error when the lower court and the CA set aside as invalid the

floating rate of interest exhorted by petitioner to be applicable. The pertinent provision in

the trust receipt agreement of the parties fixing the interest rate states: I, WE jointly and

severally agree to any increase or decrease in the interest rate which may occur after July 1,

1981, when the Central Bank floated the interest rate, and to pay additionally the penalty of

1% per month until the amount/s or instalments/s due and unpaid under the trust receipt

on the reverse side hereof is/are fully paid.

- We agree with the CA that the foregoing stipulation is invalid, there being no reference

rate set either by it or by the Central Bank, leaving the determination thereof at the sole will

and control of petitioner.

- While it may be acceptable, for practical reasons given the fluctuating economic

conditions, for banks to stipulate that interest rates on a loan not be fixed and instead be

made dependent upon prevailing market conditions, there should always be a reference

rate upon which to peg such variable interest rates. A provision may be upheld

notwithstanding that it may partake of the nature of an escalation clause, because at the

same time it provides for the decrease in the interest rate in case the prevailing market

rates dictate its reduction. In other words, unlike the stipulation subject of the instant case,

acceptable floating interest is designed to be based on the prevailing market rate. On the

other hand, a stipulation ostensibly signifying an agreement to "any increase or decrease in

the interest rate," without more, cannot be accepted by this Court as valid for it leaves

solely to the creditor the determination of what interest rate to charge against an

outstanding loan.

Issue: WON the parties entered into a simple loan

Ratio: -Prior to the date of execution of the trust receipt, o wnership over the goods was

already transferred to the debtor. This situation is inconsistent with what normally obtains

in a pure trust receipt transaction, wherein the goods belong in ownership to the bank and

are only released to the importer in t rust after the loan is granted.

- The danger in characterizing a simple loan as a trust receipt transaction was explained in

Colinares, to wit: The Trust Receipts Law does not seek to enforce payment of the loan,

rather it punishes the dishonesty and abuse of confidence in the handling of money or

goods to the prejudice of another regardless of whether the latter is the owner. Here, it is

crystal clear that on the part of Petitioners there was neither dishonesty nor abuse ofconfidence in the handling of money to the prejudice of PBC. Petitioners continually

endeavored to meet their obligations, as shown by several receipts issued by PBC

acknowledging payment of the loan.

- Similarly, the Corporation cannot be said to have been dishonest in its dealings with

petitioner. Neither has it been shown that it has evaded payment of its obligations. Indeed,

it continually endeavored to meet the same, as shown by the various receipts issued by

petitioner acknowledging payment on the loan. Certainly, the payment of the sum of

P1,832,158.38 on a loan with a principal amount of only P681,075.93 negates any badge of

dishonesty , abuse of confidence or mishandling of funds on the part of respondent

Corporation, which are the gravamen of a trust receipt violation. Furthermore, the

Corporation is not an importer, which acquired the bunker fuel oil for re-sale; it needed theoil for its own operations. More importantly, at no time did title over the oil pass to

petitioner, but directly to respondent Corporation to which the oil was directly delivered

long before the trust receipt was executed. The fact that ownership of the oil belonged to

the Corporation, through its President, Gregory Lim, was acknowledged by petitioner's own

account officer on the witness stand, to wit:

- By all indications, then, it is apparent that there was really no trust receipt transaction that

took place. Evidently, the Corporation was required to sign the trust receipt simply to

facilitate collection by petitioner of the loan it had extended to the former.

23. COMETA VS CA

FACTS:

Reynaldo Cometa is the president of State Investment Trust, Inc. (SITI), a lending firm.

Reynaldo Guevara is the president of Honeycomb Builders, Inc. (HBI), a real estate

developer. Guevara is also the chairman of the board of Guevent Industrial Development

Corp., (GIDC).

GIDC took out a loan from SITI and secured the loan by mortgaging some of its properties to

SITI. GIDC defaulted in paying and so SITI foreclosed the mortgaged assets. GIDC later sued

SITI as it alleged that the foreclosure was irregular. While the case was pending, the parties

entered into a compromise agreement where GIDC accepted HBIs offer to purchase the

mortgaged assets. But SITI did not approve of said proposal.


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GIDC then filed a request for clarification with the trial court and the latter directed SITI to

accept the proposal. Meanwhile, HBI filed a request with the HLURB asking the latter to

grant them the right to develop the mortgaged assets. HBI submitted an affidavit allegedly

signed by Cometa. The affidavit purported that Cometa and SITI is not opposing HBIs

petition with the HLURB.

Cometa assailed the affidavit as it was apparently forged as proven by an NBI investigation.

Subsequently, Cometa filed a criminal action for falsification of public document against

Guevara. The prosecutor initially did not file the information as he finds no cause of action

but the then DOJ Secretary (Drilon) directed the fiscal to file an information againstGuevara.

The case was dismissed. In turn, Guevara filed a civil case for malicious prosecution against

Cometa. Guevara, in his complaint, included HBI as a co-plaintiff.

ISSUE: Whether or not HBI is appropriately added as a co-plaintiff.

HELD: Yes. It is true that a criminal case can only be filed against the officers of a

corporation and not against the corporation itself. But it does not follow that the

corporation cannot be a real-party-in-interest for the purpose of bringing a civil action for

malicious prosecution. As pointed out by the trial judge, and as affirmed by the Court of

Appeals, the allegation by Cometa that Guevara has no cause of action with HBI not being a

real party in interest is a matter of defense which can only be decisively determined in a full

blowntrial.

24. ABS CBN vs CA

FACTS:

In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-Concio,

requested Viva Production, Inc. to allow ABS-CBN to air at least 14 films produced by Viva.

Pursuant to this request, a meeting was held between Vivas representative (Vicente Del

Rosario) and ABS-CBNs Eugenio Lopez (General Manager) and Santos -Concio was held on

April 2, 1992. During the meeting Del Rosario proposed a film package which will allow ABS -

CBN to air 104 Viva films for P60 million. Later, Santos-Concio, in a letter to Del Rosario,

proposed a counterproposal of 53 films (including the 14 films initially requested) for P35

million. Del Rosario presented the counter offer to Vivas Board of Directors but the Board

rejected the counter offer. Several negotiations were subsequently made but on April 29,

1992, Viva made an agreement with Republic Broadcasting Corporation (referred to as RBS

or GMA 7) which gave exclusive rights to RBS to air 104 Viva films including the 14 films

initially requested by ABS-CBN.

ABS-CBN now filed a complaint for specific performance against Viva as it alleged that there

is already a perfected contract between Viva and ABS-CBN in the April 2, 1992 meeting.

Lopez testified that Del Rosario agreed to the counterproposal and he (Lopez) even put the

agreement in a napkin which was signed and given to Del Rosario. ABS-CBN also filed an

injunction against RBS to enjoin the latter from airing the films. The injunction was granted.

RBS now filed a countersuit with a prayer for moral damages as it claimed that its reputation

was debased when they failed to air the shows that they promised to their viewers. RBS

relied on the ruling in People vs Manero and Mambulao Lumber vs PNB which states that a

corporation may recover moral damages if it has a good reputation that is debased,

resulting in social humiliation. The trial court ruled in favor of Viva and RBS. The Court of

Appeals affirmed the trial court.

ISSUE:

1. Whether or not a contract was perfected in the April 2, 1992 meeting between the

representatives of the two corporations.

2. Whether or not a corporation, like RBS, is entitled to an award of moral damages

upon grounds of debased reputation.

HELD:

1. No. There is no proof that a contract was perfected in the said meeting. Lopez testimony

about the contract being written in a napkin is not corroborated because the napkin wasnever produced in court. Further, there is no meeting of the minds because Del Rosarios

offer was of 104 films for P60 million was not accepted. And that the alleged counter-offer

made by Lopez on the same day was not also accepted because theres no proof of such.

The counter offer can only be deemed to have been made days after the April 2 meeting

when Santos-Concio sent a letter to Del Rosario containing the counter-offer. Regardless,

there was no showing that Del Rosario accepted. But even if he did accept, such acceptance

will not bloom into a perfected contract because Del Rosario has no authority to do so.

As a rule, corporate powers, such as the power; to enter into contracts; are exercised by th e

Board of Directors. But this power may be delegated to a corporate committee, a corporate

officer or corporate manager. Such a delegation must be clear and specific. In the case at

bar, there was no such delegation to Del Rosario. The fact that he has to present the

counteroffer to the Board of Directors of Viva is proof that the contract must be accepted

first by the Vivas Board. Hence, even if Del Rosario accepted the counter-offer, it did not

result to a contract because it will not bind Viva sans authorization.

2. No. The award of moral damages cannot be granted in favor of a corporation because,

being an artificial person and having existence only in legal contemplation, it has no feelings,

no emotions, no senses, It cannot, therefore, experience physical suffering and mental

anguish, which call be experienced only by one having a nervous system. No moral damages

can be awarded to a juridical person. The statement in the case of People vs Manero and

Mambulao Lumber vs PNB is a mere o biter dictum hence it is not binding as a jurisprudence.

25. G.R. No. 172428 November 28, 2008


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HERMAN C. CRYSTAL, LAMBERTO C. CRYSTAL, ANN GEORGIA C. SOLANTE, and DORIS C.

MAGLASANG, as Heirs of Deceased SPOUSES RAYMUNDO I. CRYSTAL and

DESAMPARADOS C. CRYSTAL,petition

Corpo Digests(2)

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Transcript of Corpo Digests(2)