TIMOTEO H. SARONA v. NATIONAL LABOR RELATIONS COMMISSION G.R. No. 185280, January 18, 2012

TIMOTEO H. SARONA v.

NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 185280, January 18, 2012
Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Doctrine of Piercing the Veil of Corporate Fiction)

FACTS:

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was asked by Karen Therese Tan (Karen), Sceptre’s Operation Manager, to submit a resignation letter as the same was supposedly required for applying for a position at Royale. The petitioner was also asked to fill up Royale’s employment application form, which was handed to him by Royale’s General Manager, respondent Cesar Antonio Tan II (Cesar).

After several weeks of being in floating status, Royale’s Security Officer, Martin Gono (Martin), assigned the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the petitioner was transferred and assigned to Wide Wide World Express, Inc. (WWWE, Inc.).

On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been withdrawn because Royale had allegedly been replaced by another security agency. The petitioner, however, shortly discovered thereafter that Royale was never replaced as WWWE, Inc.’s security agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not relieved from his post.

On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short period from September 22, 2003 to September 30, 2003. Subsequently, when the petitioner reported at Royale’s office on October 1, 2003, Martin informed him that he would no longer be given any assignment per the instructions of Aida Sabalones-Tan (Aida), general manager of Sceptre. This prompted him to file a complaint for illegal dismissal on October 4, 2003.

ISSUE:

Whether or not Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his employment with Sceptre?

RULING:

Yes.

The doctrine of piercing the corporate veil applies in alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

The respondents’ scheme reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and recognize the petitioner’s length of service with Sceptre. The respondents cannot use the legal fiction of a separate corporate personality for ends subversive of the policy and purpose behind its creation53 or which could not have been intended by law to which it owed its being.

Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo became the owners of the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they executed with Roso.57 Royale, shortly after its incorporation, started to hold office in the same property. These, the respondents failed to dispute.

Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre and Royale are indeed separate entities, Sceptre should have released the petitioner’s cash bond when he resigned and Royale would have required the petitioner to post a new cash bond in its favor.

However, the manner by which the petitioner was made to resign from Sceptre and how he became an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality.

Royale is a continuation or successor of Sceptre.

PHILIPPINE NATIONAL BANK v. HYDRO RESOURCES CONTRACTORS CORPORATION G.R. No. 167530, March 13, 2013

PHILIPPINE NATIONAL BANK v. HYDRO RESOURCES CONTRACTORS CORPORATION

G.R. No. 167530, March 13, 2013
 Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Doctrine of Piercing the Veil of Corporate Fiction)

FACTS:

Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC and resumed the business operations of the defunct MMIC by organizing NMIC.7 DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except for five qualifying shares. As of September 1984, the members of the Board of Directors of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and Faustino Agbada, were either from DBP or PNB.

Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and Road Construction Program in 1985 for a total contract price of P35,770,120. After computing the payments already made by NMIC under the program and crediting the NMIC’s receivables from

Hercon, Inc., the latter found that NMIC still has an unpaid balance of P8,370,934.74.10 Hercon, Inc. made several demands on NMIC, including a letter of final demand dated August 12, 1986, and when these were not heeded, a complaint for sum of money was filed in the RTC of Makati, Branch 136 seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the amount owing Hercon, Inc.

Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger.

Thereafter, on December 8, 1986, then President Corazon C. Aquino issued Proclamation No. 50 creating the APT for the expeditious disposition and privatization of certain government corporations and/or the assets thereof. Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB executed their respective deeds of transfer in favor of the National Government assigning, transferring and conveying certain assets and liabilities, including their respective stakes in NMIC. In turn and on even date, the National Government transferred the said assets and liabilities to the APT as trustee under a Trust Agreement.

ISSUE:

Whether or not there is sufficient ground to pierce the veil of corporate fiction of NMIC and held DBP and PNB solidarily liable with NMIC?

RULING:

No.

From all indications, it appears that NMIC is a mere adjunct, business conduit or alter ego of both DBP and PNB. Thus, the DBP and PNB are jointly and severally liable with NMIC for the latter’s unpaid obligations to plaintiff.

Then concluded that, "in keeping with the concept of justice and fair play," the corporate veil of NMIC should be pierced.

For to treat NMIC as a separate legal entity from DBP and PNB for the purpose of securing beneficial contracts, and then using such separate entity to evade the payment of a just debt, would be the height of injustice and iniquity. Surely that could not have been the intendment of the law with respect to corporations.

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

THE DIRECTOR OF LANDS v. COURT OF APPEALS [G.R. No. 102858. July 28, 1997]

THE DIRECTOR OF LANDS v. COURT OF APPEALS

[G.R. No. 102858. July 28, 1997]

 

Land Titles and Deeds Case Digest by John Paul C. Ladiao (10 Sept 2015)

Topic: Notice of Initial Hearing – Publication, Opposition of and Default (Section 23)

FACTS:

On December 8, 1986, Private Respondent Teodoro Abistado filed a petition for original registration of his title over 648 square meters of land under Presidential Decree (PD) No. 1529. 

The land registration court in its decision dated June 13, 1989 dismissed the petition for want of jurisdiction. 

Consequently, the Court is of the well considered view that it has not legally acquired jurisdiction over the instant application for want of compliance with the mandatory provision requiring publication of the notice of initial hearing in a newspaper of general circulation."

The Court of Appeals ruled that it was merely procedural and that the failure to cause such publication did not deprive the trial court of its authority to grant the application.

Unsatisfied, private respondents appealed to Respondent Court of Appeals which, set aside the decision of the trial court and ordered the registration of the title in the name of Teodoro Abistado.

The subsequent motion for reconsideration was denied in the challenged CA Resolution dated November 19, 1991.

The Director of Lands represented by the Solicitor General thus elevated this recourse to the Supreme Court.

ISSUE:

Whether or not the Director of Lands is correct that a newspaper publication of the notice of initial hearing in an original land registration case mandatory or directory?

HELD:

YES. The petition was granted.

Sec. 23. Notice of initial hearing, publication, etc. -- The court shall, within five days from filing of the application, issue an order setting the date and hour of the initial hearing which shall not be earlier than forty-five days nor later than ninety days from the date of the order.

The public shall be given notice of initial hearing of the application for land registration by means of (1) publication; (2) mailing; and (3) posting.

It should be noted further that land registration is a proceeding in rem.  Being in rem, such proceeding requires constructive seizure of the land as against all persons, including the state, who have rights to or interests in the property. An in rem proceeding is validated essentially through publication. This being so, the process must strictly be complied with. 

The Supreme Court has no authority to dispense with such mandatory requirement. The law is unambiguous and its rationale clear. Time and again, this Court has declared that where the law speaks in clear and categorical language, there is no room for interpretation, vacillation or equivocation; there is room only for application.  There is no alternative. Thus, the application for land registration filed by private respondents must be dismissed without prejudice to reapplication in the future, after all the legal requisites shall have been duly complied with.

SPOUSES CARPO v. AYALA LAND, INCORPORATED [G.R. No. 166577 February 3, 2010]

SPOUSES CARPO v. AYALA LAND, INCORPORATED

[G.R. No. 166577 February 3, 2010]

 

Land Titles and Deeds Case Digest by John Paul C. Ladiao (11 Sept 2015)

Topic: Survey of the Land – Forms and Contents (Section 15-19)

FACTS:

On February 16, 1995, petitioner spouses Morris and Socorro Carpo (Carpos) filed a Complaint for Quieting of Title  with the RTC of Makati City against Ayala Corporation, Ayala Property Ventures Corporation (APVC), and the Register of Deeds of Las Pias. 

In their Complaint, the Carpos claimed to be the owners of a 171,209-square meter parcel of land covered by Transfer Certificate of Title (TCT) No. 296463 issued in their names.  They further alleged that Ayala Corporation was claiming to have titles (specifically, TCT Nos. 125945, T-4366, T-4367 and T-4368) over the property covered by the Carpos TCT No. 296463 and that Ayala Corporation had made such property its equity contribution in APVC to be developed into a residential subdivision.

According to the complaint, TCT Nos. 125945, T-4366, T-4367 and T-4368 and their derivatives appear to have been issued in the name of Ayala and purport to cover and embrace the Carpos property or portion thereof duly covered registered under the already indefeasible and incontrovertible TCT [No.] 296463 are inherently invalid and enforceable (sic) for not being the duly issued derivatives of the Carpos title.  The Carpos additionally applied for a restraining order and writ of preliminary injunction to enjoin Ayala Corporation and APVC from doing construction and development works on the properties in purported violation of the Carpos rights. 

ISSUE:

Whether or not, THE TITLE OF RESPONDENT IS VALID EVEN WITHOUT THE REQUISITE SURVEY PLAN APPROVED BY THE DIRECTOR OF LANDS.

HELD:

NO. Petitioners clearly misunderstood or deliberately misread the CAs ruling on this point. It is the CAs view that the trial courts pronouncement that OCT No. 242 was issued without an approved survey plan was unwarranted in view of the presumption of regularity that said title enjoys.

It is admitted that a survey plan is one of the requirements for the issuance of decrees of registration, but upon the issuance of such decree, it can most certainly be assumed that said requirement was complied with by ALIs original predecessor-in-interest at the time the latter sought original registration of the subject property. Moreover, the land registration court must be assumed to have carefully ascertained the propriety of issuing a decree in favor of ALIs predecessor-in-interest, under the presumption of regularity in the performance of official functions by public officers. The court upon which the law has conferred jurisdiction, is deemed to have all the necessary powers to exercise such jurisdiction, and to have exercised it effectively. This is as it should be, because once a decree of registration is made under the Torrens system, and the time has passed within which that decree may be questioned the title is perfect and cannot later on be questioned. There would be no end to litigation if every litigant could, by repeated actions, compel a court to review a decree previously issued by another court forty-five (45) years ago. The very purpose of the Torrens system would be destroyed if the same land may be subsequently brought under a second action for registration, as what the court a quo did when it faulted ALIs failure to allege that its predecessor-in-interest submitted a survey plan approved by the Director of the Bureau of Lands in the original land registration case.

The Court need not emphasize that it is not for ALI to allege in its pleadings, much less prove, that its predecessor-in-interest complied with the requirements for the original registration of the subject property. A party dealing with a registered land need not go beyond the Certificate of Title to determine the true owner thereof so as to guard or protect his or her interest. Hence, ALI was not required to go beyond what appeared in the transfer certificate of title in the name of its immediate transferor. It may rely solely, as it did, on the correctness of the certificate of title issued for the subject property and the law will in no way oblige it to go behind the certificate of title to determine the condition of the property. This is the fundamental nature of the Torrens System of land registration, to give the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further.