Corpo 7th Set

8/12/2019 Corpo 7th Set

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.R. No. L-60502 July 16, 1991

EDRO LOPEZ DEE, petitioner,s.ECURITIES AND EXCANGE CO!!ISSION, EARING O""ICER E!!ANUEL SISON, NAGA TELEPONE C

NC., CO!!UNICATION SER#ICES, INC., LUCIANO !AGGA$, AUGUSTO "EDERIS, NILDA RA!OS, "ELIPAA#ALERA, DESIDERIO SAA#EDRA, respondents.

.R. No. L-6%922 July 16, 1991

USTINO DE JESUS, SR., PEDRO LOPEZ DEE, JULIO LOPEZ DEE, &'( #ICENTE TORDILLA, JR., petitionerss.NTER!EDIATE APPELLATE COURT, LUCIANO !AGGA$, NILDA I. RA!OS, DESIDERIO SAA#EDRA,UGUSTO "EDERIS, ERNESTO !IGUEL, CO!!UNICATION SER#ICES, INC., &'( NAGA TELEPONEO!PAN$, INC., respondents.

ARAS,J.:p

hese are petitions for certiorariwith preliminary injunction and/or restraining order which seek to annul and set asid: (1) .!. "o. #$%$&, the order ) of the hearing officer dated 'ay , 1*&, setting the date for the election of the

rectors to +e held +y the stockholders on 'ay &&, 1*&, in - ase "o. 1* entitled 0edro 2ope3 4ee v. "agelephone o., 5nc. et al.06 and (&) .!. "o. #7&&, the decision ))of the 5ntermediate 8ppellate ourt dated 8pril 1*7 which annulled the judgment of the trial court on the contempt charge against the private respondents in .!. 91*#9!, entitled 02uciano 'aggay, et al. v. on. 4elfin ;ir unga, et al.0

s gathered from the records, the facts of these cases are as follows:

aga Telephone ompany, 5nc. was organi3ed in 1%, the authori3ed capital was 1$$,$$$.$$. 5n 1 "agaelephone o., 5nc. ("atelco for short) decided to increase its authori3ed capital to 7,$$$,$$$.$$. 8s ren ?anuary *, 1%, a decision was rendered in said case, approve said application su+ject to certain conditions, among which was:

7. That the issuance of the shares of stocks will +e for a period of one year from the date hereof, 0aftwhich no further issues will +e made without previous authority from this =oard.0

ursuant to the approval given +y the then =oard of ommunications, "atelco filed its 8mended 8rticles ofcorporation with the ecurities and -@change ommission (- for short). Ahen the amended articles were filede -, the original authori3ed capital of 1$$,$$$.$$ was already paid. >f the increased capital of &,$$,$$$.$$

u+scri+ers su+scri+ed to %*$,$$$.$$ of which 1%,$$$ was fully paid.

he capital stock of "atelco was divided into &17,$$$ common shares and *,$$$ preferred shares, +oth at a par vf 1$.$$ per shares.

n 8pril 1&, 1, "atelco entered into a contract with ommunication ervices, 5nc. (5 for short) for themanufacture, supply, delivery and installation0 of telephone e ase ">. 9* aforecited (Rollo, ;ol. 555, 'emorandum for private respondentatelco, pp. *19*1#).

n 'ay 1, 1, the stockholders of the "atelco held their annual stockholdersB meeting to elect their seven direct their =oard of 4irectors, for the year 191*$. 5n this election edro 2ope3 4ee (4ee for short) was unseated ahairman of the =oard and resident of the orporation, +ut was elected as one of the directors, together with his w

melia 2ope3 4ee (Rollo, ;ol. 555, 'emorandum for private respondents, p. *%6 p. &).


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the election 5 was a+le to gain control of "atelco when the latterBs legal counsel, 8tty. 2uciano 'aggay ('aggar short) won a seat in the =oard with the help of 5. 5n the reorgani3ation 8tty. 'aggay +ecame president (Ibid.,emorandum for rivate !espondent "atelco, p. *11).

he following were elected in the 'ay 1, 1 election: 8tty. 2uciano 'aggay, 'r. 8ugusto Cederis, 'rs. "ildaamos, 's. Celipa ?avalera, 'r. ?ustino de ?esus, r., 'r. edro 2ope3 4ee and 'rs 8melia . 2ope3 4ee. The laree named directors never attended the meetings of the 'aggay =oard. The mem+ers of the 'aggay =oard who

ttended its meetings were 'aggay. Cederis, !amos and ?avalera. The last two were and are 5 representativesbid., p. *1&).

etitioner 4ee having +een unseated in the election, filed a petition in the - docketed as - ase "o. 1*,uestioning the validity of the elections of 'ay 1, 1 upon the main ground that there was no valid list ofockholders through which the right to vote could +e determined (Rollo, ;ol. 5, pp. &%9&98). 8s prayed for in theetition (Ibid., p. &), a restraining order was issued +y the - placing petitioner and the other officers of the 1 "atelco =oard in hold9over capacity (Rollo, ;ol. 55, !eply, p. ##).

he - restraining order was elevated to the upreme ourt in .!. "o. %$**% where the enforcement of the -estraining order was restrained. rivate respondents therefore, replaced the hold9over officers (Rollo, ;ol. 11, p. *

uring the tenure of the 'aggay =oard, from ?une &&, 1 to 'arch 1$, 1*$, it did not reform the contract of 8pr, and entered into another contract with 5 for the supply and installation of additional e


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1. resident 2uciano 'aggay

&. ;ice9resident "ilda 5. !amos

7. ecretary 4esiderio aavedra

. Treasurer Celipa ?avalera

%. 8uditor 4aniel 5lano

(Rollo, ;ol. 1, pp. 7$&97$7)

espite service of the order of 'ay &%, 1*&, the 2ope3 4ee group headed +y 'essrs. ?ustino 4e ?esus and ?ulioope3 4ee kept insisting no elections were held and refused to vacate their positions (Rollo, ;ol. 555, p. *%6 p. 11).

n 'ay &*, 1*&, the - issued another order directing the hold9over directors and officers to turn over theirespective posts to the newly elected directors and officers and directing the heriff of "aga ity, with the assistanc and 5" of "aga ity, and other law enforcement agencies of the ity or of the rovince of amarines ur, tonforce the aforesaid order (Rollo, ;ol. 11, pp. %9%*).

n 'ay &, 1*&, the heriff of "aga ity, assisted +y law enforcement agencies, installed the newly elected directnd officers of the "atelco, and the hold9over officers peacefully vacated their respective offices and turned9over thenctions to the new officers (Rollo, ;ol. 555, p. *%6 pp. 1&917).

n ?une &, 1*&, a charge for contempt was filed +y petitioner ;illasenor alleging that private respondents have +eaiming in press conferences and over the radio airlanes that they actually held and conducted elections on 'ay &&*& in the ity of "aga and that they have a new set of officers, and that such acts of herein private respondentsonstitute contempt of court (.!. #7&&6 Rollo, pp. 7%97).

n eptem+er , 1*&, the lower court rendered judgment on the contempt charge, the dispositive portion of whicheads:

A-!-C>!-, judgment is here+y rendered:

1. 4eclaring respondents, 5 "ilda !amos, 2uciano 'aggay, 4esiderio aavedra, 8ugusto Cederis-rnesto 'iguel, guilty of contempt of court, and accordingly punished with imprisonment of si@ (#)months and to pay fine of 1,$$$.$$ each6 and

&. >rdering respondents, 5 "ilda !amos, 2uciano 'aggay, 4esiderio aavedra, 8ugusto Cederis -rnesto 'iguel, and those now occupying the positions of directors and officers of "8T-2> to vacatheir respective positions therein, and ordering them to reinstate the hold9over directors and officers o"8T-2>, such as edro 2ope3 4ee as resident, ?ustino de ?esus, r., as ;ice resident, ?ulio 24ee as Treasurer and ;icente Tordilla, ?r. as ecretary, and others referred to as hold9over directorsofficers of "8T-2> in the order dated 'ay &*, 1*& of - earing >fficer -mmanuel ison, in ase "o. 1* (-@h. #), +y way of !-T5TET5>", and conse referred to in the order dated 'ay &*, 1*& of - earing >fficer -mmanuelison.0 (Ibid.).

rivate respondents filed on eptem+er 1, 1*&, a petition for certiorariand prohi+ition with preliminary injunction

estraining order against the C5 ?udge of amarines ur, "aga ity and herein petitioners, with the then 5ntermedi


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ppellate ourt which issued a resolution ordering herein petitioners to comment on the petition, which was complieith, and at the same time temporarily refrained from implementing and/or enforcing the !-, judgment is here+y rendered as follows:

1. 8nnuling the judgment dated eptem+er , 1*& rendered +y respondent judge on the contemptcharge, and his order dated eptem+er 1$, 1*&, implementing said judgment6

&. >rdering the 0hold9over0 directors and officers of "8T-2> to vacate their respective offices6

7. 4irecting respondents to restore or re9esta+lish petitioners (private respondents in this case) who wejected on 'ay &&, 1*& to their respective offices in the "8T-2>, . . .6

. rohi+iting whoever may +e the successor of respondent ?udge from interfering with the proceedinof the ecurities and -@change ommission in -98 "o. $7#6

@@@ @@@ @@@

(Rollo, p. **).

he order of re9implementation was issued, and, finally, the 'aggay group has +een restored as the officers of theatelco (Rollo, .!. "o. #$%$&, p. *%6 p. 7).

ence, these petitions involve the same parties and practically the same issues. onse to 5 for violation of ec. &$ (h) of the u+lic ervice 8ct6

&) Ahether or not the issuance of 117,*$$ shares of "atelco to 5 made during the pendency of - ase "o. 1the ecurities and -@change ommission was valid6

7) Ahether or not "atelco stockholders have a right of preemption to the 117,*$$ shares in


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is the contention of petitioner that the ecurities and -@change ommission En Banccommitted grave a+use ofscretion when, in its decision dated 8pril %, 1*&, in -98 "o. $7#, it refused to declare void the shares of stocsued +y "atelco to 5 allegedly in violation of ec. &$ (h) of the u+lic ervice 8ct. This section re


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he issuance of 117,*$$ shares of "atelco stock to 5 made during the pendency of - ase "o. 1* in theecurities and -@change ommission was valid. The findings of the - En Bancas to the issuance of the 117,*$hares of stock was stated as follows:

B$t t)e i''$ance o* ++!,00 ')are' -ere 'ic/ #$r'$ant to a Board Re'ol$tion and 'toc)older'1a##ro&al #rior to 2a( +", +"3" -)en 4SI -a' not (et in control o* t)e Board or o* t)e &otin ')are' .There is distinction +etween an order to i''$eshares on or +efore 'ay 1, 1 and act$al i''$ancethe shares after 'ay 1, 1. The actual issuance, it is true, came during the period when 5 was control of voting shares and the =oard (if they were in fact in control +ut only pursuant to the original=oard and stockholdersB orders, not on the initiative to the new =oard, elected 'ay 1, 1, which

petitioners are fficer. This fact is shown +y the heriffs return of a restraining order issued +y the ourt of Cirst 5nstance amarines ur in ase "o. 1%$% entitled 08ntonio ;illasenor v. ommunications ervice 5nc, et al.0 (Rollo, ;ol. 1, p$).

here is evidence of the fact that the "atelco special stockholdersB meeting and election of mem+ers of the =oard oirectors of the corporation were held at its office in "aga ity on 'ay &&, 1*& as shown when the earing >fficer

sued an order on 'ay &%, 1*&, declaring the stockholders named therein as corporate officers duly elected for thrm 1*&91*7.


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ore than that, private respondents were in fact charged with contempt of court and found guilty for holding the elecn 'ay &&, 1*&, in defiance of the restraining order issued +y ?udge unga (Rollo, ;ol. 55, p. %$).

is, therefore, very clear from the records that an election was held on 'ay &&, 1*& at the "atelco >ffices in "agaity and its officers were duly elected, there+y rendering the issue of election moot and academic, not to mention thct that the election of the =oard of 4irectors/>fficers has +een held annually, while this case was dragging for almdecade.

he contempt charge against herein private respondents was predicated on their failure to comply with the restrainirder issued +y the lower court on 'ay &1, 1*&, enjoining them from holding the election of officers and directors o

atelco scheduled on 'ay &&, 1*&. The - en banc, in its decision of 8pril %, 1*&, directed the holding of a newection which, through a conference attended +y the hold9over directors of "atelco accompanied +y their lawyers aresided +y a - hearing officer, was scheduled on 'ay &&, 1*& (Rollo, p. %). ontrary to the claim of petitioneat the case is within the jurisdiction of the lower court as it does not involve an intra9corporate matter +ut merely aaim of a private party of the right to repurchase common shares of stock of "atelco and that the restraining order wot meant to stop the election duly called for +y the -, it is undisputed that the main o+jective of the lower courtBsrder of 'ay &1, 1*& was precisely to restrain or stop the holding of said election of officers and directors of "atelcatter purely within the e@clusive jurisdiction of the - (.4. "o. $&98, ection %). The said restraining order reapart:

. . . 8 temporary restraining order is here+y issued, directin de*endant'(herein respondents), theiragents, attorneys a' -ell a' an(and all #er'on', -)et)er #$blic o**icer'or private individuals to

de'i'tfrom conducting and holding, in any manner whatsoever, an election of the directors and officeof the "aga Telephone o. ("atelco). . . . (Rollo, . 7&).

du+ita+ly, the aforesaid restraining order, aimed not only to prevent the stockholders of "atelco from conducting tection of its directors and officers, +ut it also amounted to an injunctive relief against the -, since it is clear thatven 0pu+lic officers0 (such as the earing >fficer of the -) are commanded to desist from conducting or holdingection 0under pain of punishment of contempt of court0 (Ibid.) The fact that the - or any of its officers has not +ted for contempt, along with the stockholders of "atelco, who chose to heed the lawful order of the - to go on we election as scheduled +y the latter, is of no moment, since it was precisely the acts of herein private respondent

one pursuant to an order lawfully issued +y an administrative +ody that have +een considered as contemptuous +ywer court prompting the latter to cite and punish them for contempt (Rollo, p. *).

oteworthy is the pertinent portion of the judgment of the lower court which states:

ertainly, this ourt will not tolerate, or much less countenance, a mere earing >fficer of the ecurand -@change ommission, to render a restraining order issued +y it (said ourt) within its jurisdictionugatory and ineffectual and a+et diso+edience and even defiance +y individuals and entities of thesame. . . . (Rollo, p. *).

nally, in the case of hilippine acific Cishing o., 5nc. vs. 2una, 1& !8 #$, #17 G1*7H, this Tri+unal stated clee following rule:

No-)ere doe' t)e la- (.4. "o. $&98) e%#o-er any ourt of Cirst 5nstance to interfere with the ordof the ommission (-). Not e&en on ro$nd' o* d$e #roce'' or $ri'diction. The ommission is,

conceding arguendo a possi+le claim of respondents, at the very least, a co7e8$al bod(with the ouof Cirst 5nstance. -ven a' '$c) co7e8$al, one -o$ld )a&e no #o-er to control t)e ot)er. =ut the truththe matter is that only the upreme ourt can enjoin and correct any actuation of the ommission.

ccordingly, it is clear that since the trial judge in the lower court (C5 of amarines ur) did not have jurisdiction insuing the


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!-'5- >"54-!-4, +oth petitioners are here+y 45'5-4 for lack of merit.


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.R. No. 1*666+ J&'u&y 2%, 200+

ON ". !LEOD, etitioner,s.ATIONAL LAOR RELATIONS CO!!ISSION /" D3o'4, "ILIPINAS S$NTETIC "IER CORPORATIO

"ILS$N4, "AR EASTERN TEXTILE !ILLS, INC., STA. ROSA TEXTILES, INC., /PEGG$ !ILLS, INC.4, PATRICII!, &'( ERIC U,!espondents.

4 - 5 5 > "

ARPIO, J.:

The ase

his is a petition for review1to set aside the 4ecision&dated 1% ?une &$$$ and the !esolution7dated & 4ecem+er$$$ of the ourt of 8ppeals in 89.!. "o. %%17$. The ourt of 8ppeals affirmed with modification the &ecem+er 1* 4ecisionof the "ational 2a+or !elations ommission ("2!) in "2! "! $&9$$9%.

The Cacts

he facts, as summari3ed +y the 2a+or 8r+iter and adopted +y the "2! and the ourt of 8ppeals, are as follows:

n Ce+ruary &, 1%, ?ohn C. 'c2eod filed a complaint for retirement +enefits, vacation and sick leave +enefits, noayment of unused airline tickets, holiday pay, underpayment of salary and 17th month pay, moral and e@emplaryamages, attorneyIs fees plus interest against Cilipinas ynthetic orporation (Cilsyn), Car -astern Te@tile 'ills, 5ncta. !osa Te@tiles, 5nc., atricio 2im and -ric u.

his osition aper, complainant alleged that he is an e@pert in te@tile manufacturing process6 that as early as 1%as hired as the 8ssistant pinning 'anager of Eniversal Te@tiles, 5nc. (ET-J)6 that he was promoted to enioranager and worked for ET-J till 1*$ under its resident, respondent atricio 2im6 that in 1* atricio 2im formeeggy 'ills, 5nc. with respondent Cilsyn having controlling interest6 that complainant was a+sor+ed +y eggy 'ills aice resident and lant 'anager of the plant at ta. !osa, 2aguna6 that at the time of his retirement complainant w

eceiving #$,$$$.$$ monthly with vacation and sick leave +enefits6 17th month pay, holiday pay and two round tripusiness class tickets on a 'anila92ondon9'anila itinerary every three years which is converti+le to casGhH if unusedat in ?anuary 1*#, respondents failed to pay vacation and leave credits and re


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espondent atricio 2im is the resident and =oard hairman of ta. !osa Te@tile orporation6 that respondent -rica Taiwanese and is 4irector of ta. !osa Te@tiles, 5nc.6 that complainant has no cause of action against Cilsyn, C

astern Te@tile 2td., ta. !osa Te@tile orporation and -ric u6 that ta. !osa only ac2- (8nne@ 0=0)6 that all employeeere given separation pay e@cept for complainant whose task was e@tended to 4ecem+er 71, 1& to wind up the


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ffairs of the company as per vouchers (8nne@es 00 and 0910)6 that respondent offered complainant his retiremenenefits under !8 #1 +ut complainant refused6 that the regular salaries of complainant from closure up to 4ecem1, 1& have offset whatever vacation and sick leaves he accumulated6 that his claim for unused plane tickets from* to 1& has no policy +asis, the companyIs formula of employees monthly rate @ 71 days over 1& monthsready included holiday pay6 that complainantIs unpaid portion of the 17th month pay in 17 has no +asis +ecauseas only an employee up to 4ecem+er 71, 1&6 that the 17th month pay was +ased on his last salary6 and thatomplainant is not entitled to damages.%

n 7 8pril 1*, the 2a+or 8r+iter rendered his decision with the following dispositive portion:

A-!-C>!-, premises considered, Ae hold all respondents as jointly and solidarily lia+le for complainantIs moneaims as adjudicated a+ove and computed +elow as follows:

!etirement =enefits (one month salary for every year of service)

#/*$ 9 11/7$/7 L 1 years

#$,$$$ @ 1.$ mos. MMMMMMMM *$,$$$.$$

;acation and ick 2eave (7 yrs.)

&,$$$.$$ @ && days @ 7 yrs. MMMMM 17&,$$$.$$

Enderpayment of alaries (7 yrs.)

#$,$$$ 9 %$,% L ,%$%

,%$% @ 7#.$ mos. MMMMMMM... 7&,1*$.$$

oliday ay (7 yrs.)

&,$$$ @ 7$ days MMMMMMMMM. #$,$$$.$$

Enderpayment of 17th month pay (17) MM... 1%,*1#.*

'oral 4amages MMMMMMMMMMMM.. 7,$$$,$$$.$$

-@emplary 4amages MMMMMMMMMM.. 1,$$$,$$$.$$

1$N 8ttorneyIs Cees MMMMMMMMMM. 17*,.#*

T>T82 %,%&*,#.%%

Enused 8irline Tickets (7 yrs.)

(To +e converted in eso upon payment)

O&,%$.$$ @ 7.$ Gyrs.H..MMMMMM O,7%$.$$

> >!4-!-4.#

lipinas ynthetic Ci+er orporation (Cilsyn), Car -astern Te@tile 'ills, 5nc. (C-T'5), ta. !osa Te@tiles, 5nc. (!T5atricio 2. 2im (atricio), and -ric u appealed to the "2!. The "2! rendered its decision on & 4ecem+er 1us:
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A-!-C>!-, the 4ecision dated 7 8pril 1* is here+y !-;-!-4 and -T 854- and a new one is entered!4-!5" respondent eggy 'ills, 5nc. to pay complainant his retirement pay en 1% ?une &$$$, the ourt of 8ppeals rendered judgment as follows:

A-!-C>!-, the decision dated 4ecem+er &, 1* of the "2! is here+y 8CC5!'-4 with the '>45C58T5>"espondent atricio 2im is jointly and solidarily lia+le with eggy 'ills, 5nc., to pay the following amounts to petitioneohn C. 'c2eod:

1. retirement pay e!4-!-4.1$

he ourt of 8ppeals rejected 'c2eodIs theory that all respondent corporations are the same corporate entity whichould +e held solidarily lia+le for the payment of his monetary claims.

he ourt of 8ppeals ruled that the fact that (1) all respondent corporations have the same address6 (&) all wereepresented +y the same counsel, 8tty. 5sidro . -scano6 (7) 8tty. -scano holds office at respondent corporationsIddress6 and () all respondent corporations have common officers and key personnel, would not justify the applicaf the doctrine of piercing the veil of corporate fiction.

he ourt of 8ppeals held that there should +e clear and convincing evidence that !T5, C-T'5, and Cilsyn were +sed as alter ego, adjunct or +usiness conduit for the sole +enefit of eggy 'ills, 5nc. ('5), otherwise, saidorporations should +e treated as distinct and separate from each other.

he ourt of 8ppeals pointed out that the 8rticles of 5ncorporation of '5 show that it has si@ incorporators, namelyatricio, ?ose Pulo, ?r., arlos alanca, ?r., esar !. oncio, ?r., -. 8. icasso, and Aalter -uyang. >n the other he 8rticles of 5ncorporation of Cilsyn show that it has 1$ incorporators, namely, ?esus P. Pujuico, arlos alanca, ?atricio, 8ng =eng Eh, !amon 8. Pulo, onorio o+lador, ?r., ipriano 83ada, 'anuel Tomacru3, 5smael 'aningasnd =enigno Qialcita, ?r.

he ourt of 8ppeals pointed out that '5 and Cilsyn have only two interlocking incorporators and directors, namelyatricio and arlos alanca, ?r.

eiterating the ruling of this ourt in 2aguio v. "2!,11the ourt of 8ppeals held that mere su+stantial identity of thcorporators of two corporations does not necessarily imply fraud, nor warrant the piercing of the veil of corporatection.
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he ourt of 8ppeals also pointed out that when !T5 and '5 e@ecuted the 4ation in ayment with 2ease, it wasear that !T5 did not assume the lia+ilities '5 incurred +efore the e@ecution of the contract.

he ourt of 8ppeals held that 'c2eod failed to su+stantiate his claim that all respondent corporations should +eeated as one corporate

ntity. The ourt of 8ppeals thus upheld the "2!Is finding that no employer9employee relationship e@isted +etweec2eod and respondent corporations e@cept '5.

he ourt of 8ppeals ruled that -ric u, as an officer of '5, should +e e@onerated from any lia+ility, there +eing no

roof of malice or +ad faith on his part. The ourt of 8ppeals, however, ruled that 'c2eod was entitled to recover fr'5 and atricio, the companyIs hairman and resident.

he ourt of 8ppeals pointed out that atricio deli+erately and maliciously evaded '5Is financial o+ligation to 'c2he ourt of 8ppeals stated that, on several occasions, despite his approval, atricio refused and ignored to payc2eodIs retirement +enefits. The ourt of 8ppeals stated that the delay lasted for one year prompting 'c2eod toitiate legal action. The ourt of 8ppeals stated that although '5 offered to pay 'c2eod his retirement +enefits, thffer for 7$$,$$$ was still +elow the 0floor limits0 provided +y law. The ourt of 8ppeals held that an employee couemand payment of retirement +enefits as a matter of right.

he ourt of 8ppeals stated that considering that '5 was no longer in operation, its 0officer should +e held lia+le focting on +ehalf of the corporation.0

he ourt of 8ppeals also ruled that since '5 did not have a retirement program providing for retirement +enefits omployees, 8rticle &* of the 2a+or ode must +e followed. The ourt of 8ppeals thus upheld the "2!Is finding tc2eod was entitled to retirement pay e


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1. Ahether the challenged 4ecision and !esolution of the 1th 4ivision of the ourt of 8ppeals promulgated1% ?une &$$$ and & 4ecem+er &$$$, respectively, in 89.!. "o. %%17$ are in accord with law and

jurisprudence6

&. Ahether an employer9employee relationship e@ists +etween the private respondents and the petitioner forpurposes of determining employer lia+ility to the petitioner6

7. Ahether the private respondents may avoid their financial o+ligations to the petitioner +y invoking the veilcorporate fiction6

. Ahether petitioner is entitled to the relief he seeks against the private respondents6

%. Ahether the ruling of GthisH ourt in pecial olice and Aatchman 8ssociation (2E') Cederation v. "atio2a+or !elations ommission cited +y the >ffice of the olicitor eneral is applica+le to the case of petitioneand

#. Ahether the appeal taken +y the private respondents from the 4ecision of the la+or ar+iter meets themandatory re


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A-!-8, '5 is inde+ted to the 4evelopment =ank of the hilippines (04=0) and as security for such de+ts (the>+ligations0) has mortgaged its real properties covered +y TT "os. T97*#, T9717#, and T9717%, together witachineries and improvements found thereat, a complete listing of which is hereto attached as 8nne@ 080 (the

8ssets0)6

A-!-8, +y virtue of an inter9governmental agency arrangement, 4= transferred the >+ligations, including thessets, to the 8sset rivati3ation Trust (08T0) and the latter has received payment for the >+ligations from '5, uTIs 4irect 4e+t =uy9>ut (044=>0) program there+y causing 8T to completely discharge and cancel the mortgathe 8ssets and to release the titles of the 8ssets +ack to '56

A-!-8, '5 o+tained cash advances from !T in the total amount of TA> E"4!-4 T-" '5225>" ->&1$,$$$,$$$.$$) (the 08dvances0) to ena+le '5 to consummate the 44=> with 8T, with !T su+rogating 8s '5Is creditor there+y6

A-!-8, in payment to !T for '5Is lia+ility, '5 has agreed to transfer all its rights, title and interests in thessets +y way of a dation in payment to !T, provided that simultaneous with the dation in payment, !T shallrant unto '5 the right to lease the 8ssets under terms and conditions stated hereunder6

@ @ @ @

>A T-!-C>!-, for and in consideration of the foregoing premises, and of the terms and conditions hereinafterrth, the parties here+y agree as follows:

-5>". 5n consideration of the amount of TA> E"4!-4 T-" '5225>" -> (&1$,$$$,$$$.$$), '5ere+y cedes, conveys and transfers to !T all of its rights, title and interest in and to the 8ssets +y way of a datioayment.&%(-mphasis supplied)

s a rule, a corporation that purchases the assets of another will not +e lia+le for the de+ts of the selling corporationrovided the former acted in good faith and paid ade


17/56

the present case, there is no showing that the su+ject dation in payment involved any corporate merger oronsolidation. "either is there any showing of those indicative factors that !T5 is a mere instrumentality of '5.

oreover, !T5 did not e@pressly or impliedly agree to assume any of '5Is de+ts. ertinent portions of the su+jecteed of 4ation in ayment with 2ease provide, thus:

A8!!8"T5- 8"4 !-!--"T8T5>". '5 here+y warrants and represents the following:

@ @ @ @

e) '5 shall warrant that it will hold !T or its assigns, free and harmless from any lia+ility for claims of '5Isreditors, la+orers, and workers and for physical injury or injury to property arising from '5Is custody, possession,are, repairs, maintenance, use or operation of the 8ssets e@cept ordinary wear and tear6&*(-mphasis supplied)

lso, 'c2eod did not present any evidence to show the alleged renaming of 0eggy 'ills, 5nc.0 to 0ta. !osa [email protected]

ence, it is not correct for 'c2eod to treat '5 and !T5 as the same entity.

espondent corporations assert that !T5 hired 'c2eod as consultant after '5 stopped operations.&>n the otheand, 'c2eod asserts that he was respondent corporationsI employee from 1*$ to 7$ "ovem+er 17.7$oweverc2eod failed to present any proof of employer9employee relationship +etween him and Cilsyn, !T5, or C-T'5.

c2eod testified, thus:

TTP. -8">:

o you have any employment contract with Car -astern Te@tileR

A5T"-:

is my +elief up the present time.

TTP. 8;-5228:

ay 5 re


18/56

TTP. -8">:

o, there is proof that you were in fact really employed +y eggy 'illsR

A5T"-:

es, sir.

TTP. -8">:

f course, my interest now is to whether or not there is a similar document to present that you were employed +y thther respondents like Cilsyn orporationR

A5T"-:

have no document, sir.

TTP. -8">:

Ahat a+out Car -astern Te@tile 'illsR

A5T"-:

have no document, sir.

TTP. -8">:

nd ta. !osa Te@tile 'illsR

A5T"-:

here is no document, sir.71

@ @ @ @

TTP. -8">:

Pes. 2et me +e more specific, 'r. 'c2eod. 4o you have a contract of employment from Car -astern Te@tiles, 5nc

"o, sir.

Ahat a+out ta. !osa Te@tile 'ills, do you have an employment contract from this companyR

"o, sir.

@ @ @ @

8nd what a+out respondent -ric u. ave you had any contract of employment from 'r. -ric uR

"ot a direct contract +ut 5 was taken in and 5 told to take over this from 'r. -ric u. 8utomatically, it confirms thatric u, in other words, was under the control of 'r. atricio 2im at that period of time.

"o documents to show, 'r. 'c2eodR

"o. "o documents, sir.7&
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c2eod could have presented evidence to support his allegation of employer9employee relationship +etween him any of Cilsyn, !T5, and C-T'5, +ut he did not. 8ppointment letters or employment contracts, payrolls, organi3ationharts, registration, personnel list, as well as testimony of co9employees, may serve as evidence of employeeatus.77

is a +asic rule in evidence that parties must prove their affirmative allegations. Ahile technical rules are not strictlyllowed in the "2!, this does not mean that the rules on proving allegations are entirely ignored. =are allegations

ot enough. They must +e supported +y su+stantial evidence at the very least.7

owever, 'c2eod claims that 0for purposes of determining employer lia+ility, all private respondents are one and th

ame employer0 +ecause: (1) they have the same address6 (&) they are all engaged in the same +usiness6 and (7) tave interlocking directors and officers.7%

his assertion is untena+le.

corporation is an artificial +eing invested +y law with a personality separate and distinct from that of its stockholdend from that of other corporations to which it may +e connected.7#

Ahile a corporation may e@ist for any lawful purpose, the law will regard it as an association of persons or, in case owo corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This e doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to

efeat pu+lic convenience, justify wrong, protect fraud, or defend crime,7or when it is made as a shield to confuse

gitimate issues, or where a corporation is the mere alter ego or +usiness conduit of a person, or where the corporaso organi3ed and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, con

r adjunct of another corporation.7*

o disregard the separate juridical personality of a corporation, the wrongdoing must +e esta+lished clearly andonvincingly. 5t cannot +e presumed.7

ere, we do not find any of the evils sought to +e prevented +y the doctrine of piercing the corporate veil.

espondent corporations may +e engaged in the same +usiness as that of '5, +ut this fact alone is not enougheason to pierce the veil of corporate fiction.$

5ndophil Te@tile 'ill Aorkers Enion v. alica,1the ourt ruled, thus:

the case at +ar, petitioner seeks to pierce the veil of corporate entity of 8crylic, alleging that the creation of theorporation is a devise to evade the application of the =8 +etween petitioner Enion and private respondent ompa

Ahile we do not discount the possi+ility of the similarities of the +usinesses of private respondent and 8crylic, neithere we inclined to apply the doctrine invoked +y petitioner in granting the relief sought. The fact that the +usinessesrivate respondent and 8crylic are related, that some of the employees of the private respondent are the same persanning and providing for au@iliary services to the units of 8crylic, and that the physical plants, offices and facilitiestuated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing oe corporate veil of 8crylic.&(-mphasis supplied)

lso, the fact that !T5 and '5 shared the same address, i.e., 11/C =892epanto =ldg., aseo de !o@as, 'akatiity,7can +e e@plained +y the two companiesI stipulation in their 4eed of 4ation in ayment with 2ease that

simultaneous with the dation in payment, !T shall grant unto '5 the right to lease the 8ssets under terms andonditions stated hereunder.0

s for the addresses of Cilsyn and C-T'5, Cilsyn held office at 1&th Cloor, =892epanto =ldg., aseo de !o@as, 'akity,%while C-T'5 held office at 1*C, Tun "an ommercial =uilding, 777 Tun wa outh !oad, ec. &, Taipei,aiwan, !.>..#ence, they did not have the same address as that of '5.

hat respondent corporations have interlocking incorporators, directors, and officers is of no moment.

he only interlocking incorporators of '5 and Cilsyn were atricio and arlos alanca, ?r.Ahile atricio was 4ire

nd =oard hairman of Cilsyn, !T5, and '5,*

he was never an officer of C-T'5.
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ric u, on the other hand, was 4irector of Cilsyn and !T5.e was never an officer of '5.

arialen . orpu3, CilsynIs Cinance >fficer,%$testified on cross9e@amination that (1) among all of CilsynIs officers, he was the one involved in the management of '56 (&) only she and atricio were the common officers +etweenlsyn and '56 and (7) Cilsyn and '5 are 0two separate companies.0%1

polinario 2. osio, '5Is hief 8ccountant, testified that 0!T5 is a different corporation from '5.0%&

t any rate, the e@istence of interlocking incorporators, directors, and officers is not enough justification to pierce theeil of corporate fiction, in the a+sence of fraud or other pu+lic policy considerations.%7

4el !osario v. "2!,%the ourt ruled that su+stantial identity of the incorporators of corporations does notecessarily imply fraud.

light of the foregoing, and there +eing no proof of employer9employee relationship +etween 'c2eod and respondorporations and -ric u, 'c2eodIs cause of action is only against his former employer, '5.

n atricioIs personal lia+ility, it is settled that in the a+sence of malice, +ad faith, or specific provision of law, aockholder or an officer of a corporation cannot +e made personally lia+le for corporate lia+ilities.%%

o reiterate, a corporation is a juridical entity with legal personality separate and distinct from those acting for and inehalf and, in general, from the people comprising it. The rule is that o+ligations incurred +y the corporation, acting

rough its directors, officers, and employees, are its sole lia+ilities.%#

ersonal lia+ility of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawfuf the corporation, or when they are guilty of +ad faith or gross negligence in directing its affairs, or when there is aonflict of interest resulting in damages to the corporation, its stockholders or other persons6 (&) they consent to thesuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporaecretary their written o+jection6 (7) they agree to hold themselves personally and solidarily lia+le with the corporatior () they are made +y specific provision of law personally answera+le for their corporate action.%

onsidering that 'c2eod failed to prove any of the foregoing e@ceptions in the present case, 'c2eod cannot holdatricio solidarily lia+le with '5.

he records are +ereft of any evidence that atricio acted with malice or +ad faith. =ad faith is a


21/56

+) ow can the foregoing provisions +e implemented when the employer is a corporationR The answer is found inrticle &1& (c) of the 2a+or ode which provides:

c) -mployerI includes any person acting in the interest of an employer, directly or indirectly. The term shall not incny la+or organi3ation or any of its officers or agents e@cept when acting as employer.0.

he foregoing was culled from ection & of !8 #$&, the 'inimum Aage 2aw. ince !8">' is an artificial personust have an officer who can +e presumed to +e the employer, +eing the 0person acting in the interest of (the)

mployer0 !8">'. The corporation, only in the technical sense, is the employer.

he responsi+le officer of an employer corporation can +e held personally, not to say even criminally, lia+le for non9ayment of +ack wages. That is the policy of the law.

@ @ @ @

c) 5f the policy of the law were otherwise, the corporation employer can have devious ways for evading payment ofack wages. I' '&' &, 7oul( &88& & RANSO!, ' 1969, o': 8o;ly o 8o;&; 8&y( ROSARIO o 8l& RANSO!, 7 l& o ;3'u&lly 8&( ou 22 = 7' &. !8">' actually ceased operations on 'ay 1, 17, afe 4ecem+er 1, 1& 4ecision of the ourt of 5ndustrial !elations was promulgated against !8">'.#$(-mphas

upplied)

learly, in 8.. !ansom, !8">', through its resident, organi3ed !>8!5> to evade payment of +ackwages to& strikers. This situation, or anything similar showing malice or +ad faith on the part of atricio, does not o+tain in tresent case. 5n Santo' &. N9R4,#1the ourt held, thus:

is true, there were various cases when corporate officers were themselves held +y the ourt to +e personallyccounta+le for the payment of wages and money claims to its employees. 5nA.C. Ransom Labor Union-CCLU vLRC, for instance, the ourt ruled that under the 'inimum Aage 2aw, the responsi+le officer of an employerorporation could +e held personally lia+le for nonpayment of +ackwages for 0(i)f the policy of the law were otherwise corporation employer (would) have devious ways for evading payment of +ackwages.0 5n the a+sence of a clearentification of the officer directly responsi+le for failure to pay the +ackwages, the ourt considered the resident e corporation as such officer. The case was cited in Chua vs. NLRCin holding personally lia+le the vice9presidene company, +eing the highest and most ranking official of the corporation ne@t to the resident who was dismisse

e latterIs claim for unpaid wages.

review of the a+ove e@ceptional cases would readily disclose the attendance of facts and circumstances that coughtly sanction personal lia+ility on the part of the company officer. 5nA.C. Ransom, the corporate entity was a famorporation and e@ecution against it could not +e implemented +ecause of the disposition posthaste of its levia+lessets evidently in order to evade its just and due o+ligations. The doctrine of 0piercing the veil of corporate fiction0 us clearly appropriate. Chualikewise involved another family corporation, and this time the conflict was +etween t

rothers occupying the highest ranking positions in the company. There were incontroverti+le facts which pointed to@treme personal animosity that resulted, evidently in +ad faith, in the easing out from the company of one of therothers +y the other.

he +asic rule is still that which can +e deduced from the ourtIs pronouncement in Sunio vs. National Laborelations Commission6 thus:

Ae come now to the personal lia+ility of petitioner, unio, who was made jointly and severally responsi+le withetitioner company and 55 for the payment of the +ackwages of private respondents. This is reversi+le error. Thessistant !egional 4irectorIs 4ecision failed to disclose the reason why he was made personally lia+le. !espondenowever, alleged as grounds thereof, his +eing the owner of one9half (U) interest of said corporation, and his alleger+itrary dismissal of private respondents.

etitioner unio was impleaded in the omplaint in his capacity as eneral 'anager of petitioner corporation. Therppears to +e no evidence on record that he acted maliciously or in +ad faith in terminating the services of privateespondents. is act, therefore, was within the scope of his authority and was a corporate act.
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is +asic that a corporation is invested +y law with a personality separate and distinct from those of the personsomposing it as well as from that of any other legal entity to which it may +e related. 'ere ownership +y a singleockholder or +y another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficientround for disregarding the separate corporate personality. etitioner unio, therefore, should not have +een madeersonally answera+le for the payment of private respondentsI +ack salaries.#&(-mphasis supplied)

hus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate fiction is used toefeat pu+lic convenience, justify wrong, protect fraud, or defend crime. 5n the a+sence of malice, +ad faith, or apecific provision of law making a corporate officer lia+le, such corporate officer cannot +e made personally lia+le foorporate lia+ilities. "either 8rticle &1&(c) nor 8rticle &7 (now &&) of the 2a+or ode e@pressly makes any corpora

fficer personally lia+le for the de+ts of the corporation. 8s this ourt ruled in H.9. 4arlo' 4on'tr$ction, Inc. &. 2arinro#ertie' 4or#oration:#7

Ae concur with the 8 that these two respondents are not lia+le. ection 71 of the orporation ode (=atas am+lg. #*) provides:

ection 71. 9iabilit( o* director', tr$'tee' or o**icer'. 9 4irectors or trustees who willfully and knowingly vote for orssent to patently unlawful acts of the corporation or who are guilty of gross negligence or +ad faith ... shall +e lia+leintly and severally for all damages resulting therefrom suffered +y the corporation, its stockholders and otherersons.0

he personal lia+ility of corporate officers validly attaches only when (a) they assent to a patently unlawful act of the

orporation6 or (+) they are guilty of +ad faith or gross negligence in directing its affairs6 or (c) they incur conflict ofterest, resulting in damages to the corporation, its stockholders or other persons.

he records are +ereft of any evidence that Typoco acted in +ad faith with gross or ine@cusa+le negligence, or that cted outside the scope of his authority as company president. The unilateral termination of the ontract during the@istence of the T!> was indeed contempti+le V for which ' should have merely +een cited for contempt of coue most V and a preliminary injunction would have then stopped work +y the second contractor. =esides, there is n

howing that the unilateral termination of the ontract was null and void.#

c2eod is not entitled to payment of vacation leave and sick leave as well as to holiday pay. 8rticle *&, Title 5, =ookhree of the 2a+or ode, on Aorking onditions and !est eriods, provides:

overage. W The provisions of this title shall apply to employees in all esta+lishments and undertakings whether forrofit or not, +ut not to government employees, managerial employees, field personnel, mem+ers of the family of themployer who are dependent on him for support, domestic helpers, persons in the personal service of another, andorkers who are paid +y results as determined +y the ecretary of 2a+or in appropriate regulations.

s used herein, 0managerial employees0 refer to those whose primary duty consists of the management of thesta+lishment in which they are employed or of a department or su+division thereof, and to other officers or mem+ee managerial staff. (-mphasis supplied)

s ;ice resident/lant 'anager, 'c2eod is a managerial employee who is e@cluded from the coverage of Title 5, =hree of the 2a+or ode. 'c2eod is entitled to payment of vacation leave and sick leave only if he and '5 had agn it. The payment of vacation leave and sick leave depends on the policy of the employer or the agreement +etweee employer and employee.#%5n the present case, there is no showing that 'c2eod and '5 had an agreement

oncerning payment of these +enefits.

c2eodIs assertion of underpayment of his 17th month pay in 4ecem+er 17 is unavailing.##8s already stated, 'opped plant operations in 1&. 'c2eod himself testified that he received his last salary from '5 in 4ecem+er 1fter the termination of the employer9employee relationship +etween 'c2eod and '5, !T5 hired 'c2eod asonsultant and not as employee. ince 'c2eod was no longer an employee, he was not entitled to the 17th monthay.#=esides, there is no evidence on record that 'c2eod indeed received his alleged 0reduced 17th month payf ,1*7.#70 in 4ecem+er 17.#*

lso unavailing is 'c2eodIs claim that he was entitled to the 0unpaid monetary e


23/56

acation to 2ondon1could not +e deemed as an esta+lished practice considering that it happened only once. To +eonsidered a 0regular practice,0 the giving of the +enefits should have +een done over a long period, and must +ehown to have +een consistent and deli+erate.&

8merican Aire and a+le 4aily !ated -mployees Enion v. 8merican Aire and a+le o., 5nc.,7the ourt held tr a +onus to +e enforcea+le, the employer must have promised it, and the parties must have e@pressly agreed up

r it must have had a fi@ed amount and had +een a long and regular practice on the part of the employer.

the present case, there is no showing that '5 ever promised 'c2eod that it would continue to grant him the +en


24/56

8s far as you remem+er, 'r. osio, was there any complaint +y 'r. 'c2eod +ecause of this reduced amount of halary at that timeR

5 donIt have any personal knowledge of any complaint, sir.

8t least, that is in so far as you were concerned, he said nothing when he signed the voucher in


25/56

oral damages are recovera+le only if the defendant has acted fraudulently or in +ad faith, or is guilty of grossegligence amounting to +ad faith, or in wanton disregard of his contractual o+ligations. The +reach must +e wantoeckless, malicious, or in +ad faith, oppressive or a+usive.*1Crom the records of the case, the ourt finds no ultimatcts to support a conclusion of +ad faith on the part of '5.

ecords disclose that '5 had long offered to pay 'c2eod his money claims. 5n their omment, respondents asserat they offered to pay 'c2eod the sum of *$,$$$, as 0separation +enefits, and not 7$$,$$$, if only to +uy pea

nd to forestall any complaint0 that 'c2eod may initiate +efore the "2!. 'c2eod admitted at the hearing +efore tha+or 8r+iter that '5 has made this offer W

TTP. -8">:

@ @ 8ccording to your own statement in your osition aper and 5 am referring to page *, your unpaid retirementenefit for fourteen (1) years of service at #$,$$$.$$ per year is *$,$$$.$$, is that correctR

A5T"-:

hat is correct, sir.

TTP. -8">:

nd this amount is correct *$,$$$.$$, according to your osition aperR

A5T"-:

hat is correct, sir.

TTP. -8">:

he :

o this was offered to you, is that correctR

A5T"-:

was told that a fi@ed sum of *$,$$$.$$ was offered.

TTP. -8">:

nd , of course, the reason, if 5 may assume, that you declined this offer was that, according to you, there are otheraims which you would like to raise against the !espondents which, +y your impression, they were not willing to paddition to this particular amountR

A5T"-:

es, sir.

TTP. -8">:
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he


27/56

erely a rundown of the contents of the re


28/56

of Incorporation of petitioner corporation. With the nullification of the election of the respondents, the approved by-laws wh

ey certified to this Commission as members of the Board of Trustees must necessarily be likewise declared null and

oid. However, before any election of the members of the Board of Trustees could be conducted, there must be an approved by

ws to govern the internal government of the association including the conduct of election. And since the election of both

etitioners and respondents have been declared null and void, a vacuum is created as to who should adopt the by-laws and certi

doption. To remedy this unfortunate situation that the association has found itself in, the members of the petitioning corporati

e hereby authorized to prepare and adopt their by-laws for submission to the Commission. nce approved, an election of the

embers of the Board of Trustees shall immediately be called pursuant to the approved by-laws.

"#$"$#.%&'(

"either group, however, took the necessary steps prescri+ed +y the - in its >cto+er 7, 1*# 4ecision, us, no valid election of the mem+ers of the =oard of Trustees of 54 was ever called. 8lthough the arroupG1$Hattempted to su+mit a set of +y9laws, the - found that, aside from -ngineer Carouk arpi3o and 8tty. 'uat, those who prepared and adopted the +y9laws were not bona *ide mem+ers of the 54, thus renderingdoption of the +y9laws likewise null and void.

>n 8pril &$, 1*, without having +een properly elected as new mem+ers of the =oard of Trustees of 54arpi3o roup caused to +e signed an alleged =oard !esolutionG11Hof the 54, authori3ing the sale of the su+jecarcels of land to the private respondent 5" for a consideration of &&,77,$$.$$, which sale was evidenced eed of 8+solute aleG1&Hdated 8pril &$, 1*.

>n 'ay 7$, 11, the petitioner 11 54 =oard of Trustees headed +y former enator 'amintal Tamano, oamano roup, filed a petition +efore the -, docketed as - ase "o. $1&, seeking to declare null and voideed of 8+solute ale signed +y the arpi3o roup and the 5" since the group of -ngineer arpi3o was nogitimate =oard of Trustees of the 54.

'eanwhile, private respondent 5", pursuant to the 4eed of 8+solute ale e@ecuted in its favor, filed an actiopecific erformance with 4amages against the vendor, arpi3o roup, +efore =ranch *1 of the !egional Trial ouue3on ity, docketed as ivil ase "o. S9$9#7, to compel said group to clear the property of s


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?udge elia 2ipana9!eyes of =ranch *1, !egional Trial ourt of Sue3on ity, denied petitionerIs motiotervene on the ground of lack of juridical personality of the 549Tamano roup and that the issues +eing raiseay of intervention are intra9corporate in nature, jurisdiction thereto properly pertaining to the -.G1%H

8pprised of the pendency of - ase "o. $1& involving the controverted status of the 549arpi3o roupithout waiting for the outcome of said case, ?udge !eyes, on eptem+er 1&, 11, rendered artial ?udgment inase "o. S9$9#7 ordering the 549arpi3o roup to comply with its o+ligation under the 4eed of ale of clee su+ject lots of s


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Ahile the a+ove petition was pending, however, the upreme ourt rendered judgment in .!. "o. 1$%1 onetition filed +y 'rs. 2eticia . 2igon. The 4ecision, dated ?une 1, 1%, denied the 2igon petition and affirmedcto+er &*, 1& 4ecision of the ourt of 8ppeals in 89.!. "o. 9&7 which sustained the >rder of ?ueyes compelling mortgagee 2igon to surrender the ownerIs duplicate copies of TT "os. !T9%&1 (1$%#) and#%&$ (1##1#) to the !egister of 4eeds of Sue3on ity so that the 4eed of 8+solute ale in 5"Is favor maroperly registered.

=efore we rule upon the main issue posited in this petition, we would like to point out that our disposition in o. 1$%1 entitled, X9ion &. 4o$rt o* A##eal',Y promulgated on ?une 1, 1%, in no wise constitutes re' $dicataat the petition under consideration would +e +arred if it were the case. Suite the contrary, the reri'to, :lainti** &. I'la%ic Directorate o* t)e :)ili##ine', De*endant,?G71Hthe 54 can not +e considssentially a formal party thereto for the simple reason that it was not duly represented +y a legitimate =oarustees in that case. 8s a necessary conse


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ho were not parties to it.G7&H-lsewise put, no person (natural or juridical) shall +e affected +y a proceeding to whica stranger.G77H

ranting ar$endo, that 54 may +e considered a principal party in 9ion, re' $dicata as a X+ar +y fodgmentY will still not set in on the ground that the cause of action in the two cases are different. The cause of acti.!. "o. 1$%1 is the surrender of the ownerIs duplicate copy of the transfer certificates of title to the rigossessor thereof, whereas the cause of action in the present case is the validity of the arpi3o roup95" 4ee+solute ale.

Re' @$dicatain the form of Xconclusiveness of judgmentY cannot likewise apply for the reason that any mentiol in 9ionas to the validity of the disputed arpi3o =oard95" sale may only +e deemed incidental to the resolutio

e primary issue posed in said case which is: Aho +etween 2igon and 5" has the +etter right of possession ovewnerIs duplicate copy of the TTs covering the 54 propertyR .!. "o. 1$%1 cannot +e considered determinnd conclusive on the matter of the validity of the sale for this particular issue was not the principal thrust of 9ionule otherwise would +e to cause grave and irrepara+le injustice to 54 which never gave its consent to the sale, thgitimate =oard of Trustees.

5n any case, while it is true that the principle of re' $dicatais a fundamental component of our judicial systehould +e disregarded if its rigid application would involve the sacrifice of justice to technicality.G7H

The main cto+er 7, 1*#, the -, in ase "o. *,G7#Hin a suit +etweearpi3o roup and the 8++as roup, already declared the election of the arpi3o roup (as well as the 8++as r

o the 54 =oard as null and void for +eing violative of the 8rticles of 5ncorporation. G7H"othing thus +ecomes mettled than that the 549arpi3o roup with whom private respondent 5" contracted is a fake =oard.

remises considered, all acts carried out +y the arpi3o =oard, particularly the sale of the Tandang ora proplegedly in the name of the 54, have to +e struck down for having +een done without the consent of the 54 thgitimate =oard of Trustees. 8rticle 171* of the "ew ivil ode lays down the essential re


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Consent of the contractin parties#

b5ect certain which is the sub5ect matter of the contract6

Cause of the obligation which is established.%

ll these elements must +e present to constitute a valid contract. Cor, where even one is a+sent, the contraoid. 8s succinctly put +y Tolentino, consent is essential for the e@istence of a contract, and where it is wantingontract is [email protected]*H5n this case, the 54, owner of the su+ject parcels of land, never gave its consent, thgitimate =oard of Trustees, to the disputed 4eed of 8+solute ale e@ecuted in favor of 5". This is, therefore, a

ot only of vitiated consent, +ut one where consent on the part of one of the supposed contracting parties is toanting. 5nelucta+ly, the su+ject sale is void and produces no effect whatsoever.

The arpi3o roup95" sale is further deemed null and void ab initio+ecause of the arpi3o roupIs failuomply with ection $ of the orporation ode pertaining to the disposition of all or su+stantially all assets oforporation:

!ec. 98. $ale or other disposition of assets. - !ub5ect to the provisions of e*isting laws on illegal combinations and monopoliorporation may, by a majority vote of its board of directors or trustees, sell,lease, e*change, mortgage, pledge or otherwise

spose of all or substantially all of its property and assets, including its goodwill, upon terms and conditions and for such

onsideration, which may be money, stoc1s, bonds or other instruments for the payment of money or other property or

onsideration, as its board of directors or trustees may deem e*pedient, when authori%ed by the vote of the stockholdersepresentin at least two-thirds &'()* of the outstandin capital stock# or in case of non-stock corporation, by the vote of at leas

wo-thirds &'()* of the members, in a stockholders+ or members+ meetin duly called for the purpose. =ritten notice of the

roposed action and of the time and place of the meeting shall be addressed to each stoc1holder or member at his place of resid

shown on the boo1s of the corporation and deposited to the addressee in the post office with postage prepaid, or served

ersonallyE rovided, That any dissenting stoc1holder may e*ercise his appraisal right under the conditions provided in this Co

sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation

ould be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated.

@ @ @ @ @ @ @ @ @.Y

The Tandang ora property, it appears from the records, constitutes the only property of the 54. ence, itso a third9party is a sale or disposition of all the corporate property and assets of 54 falling s


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ourt.G$H8s a result, the motion for intervention was denied. Ahen the 4ecision in - ase "o. $1&, cameullifying the sale, 5" came forward, this time,


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@G.R. No. 1*29%6. A8l 1+, 2002

ILIPPINE NATIONAL ANB NATIONAL SUGAR DE#ELOP!ENT CORPORATION,petitionersANDRADA ELECTRIC ENGINEERING CO!PAN$, respondent.

D E C I S I O N

ANGANIAN,J.

=asic is the rule that a corporation has a legal personality distinct and separate from the persons and enwning it. The corporate veil may +e lifted only if it has +een used to shield fraud, defend crime, justify a wrong, deu+lic convenience, insulate +ad faith or perpetuate injustice. Thus, the mere fact that the hilippine "ational ="=) ac


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n their answer, the defendant 3A!G#$C reiterated the grounds of its motion to dismiss, to witE

That the complaint does not state a sufficient cause of action against the defendant 3A!G#$C becauseE a 3A!G#$C is

* privy to the various electrical construction 5obs being sued upon by the plaintiff under the present complaint6 b the ta1ing

y 3A!G#$C of the assets of defendant 2A!G/> was solely for the purpose of reconditioning the sugar central of defenda

A!G/> pursuant to martial law powers of the 2resident under the Constitution6 c nothing in the > 3o. :'-A as well as

3o. 7:: authorized or commanded the 23B or its subsidiary corporation, the 3A!G#$C, to assume the corporate

bligations of 2A!G/> as that being involved in the present case6 and, d all that was mentioned by the said letter of instruct

sofar as the 2A!G/> liabilities &were( concerned &was( for the 23B, or its subsidiary corporation the 3A!G#$C, to ma1

udy of, and submit &a( recommendation on the problems concerning the same.;

By way of counterclaim, the 3A!G#$C averred that by reason of the filing by the plaintiff of the present suit, which it &labe

unfounded or baseless, the defendant 3A!G#$C was constrained to litigate and incur litigation e*penses in the amount

f 28,888.88, which plaintiff should be sentenced to pay. Accordingly, 3A!G#$C prayed that the complaint be dismissed

n its counterclaim, that the plaintiff be condemned to pay 28,888.88 in concept of attorney;s fees as well as e*emplary dama

n its answer, the defendant 23B li1ewise reiterated the grounds of its motion to dismiss, namelyE : the complaint states no c

f action against the defendant 23B6 + that 23B is not a party to the contract alleged in par. of the complaint and that the

leged services rendered by the plaintiff to the defendant 2A!G/> upon which plaintiff;s suit is erected, was rendered long

efore 23B too1 possession of the assets of the defendant 2A!G/> under > 3o. :'-A6 7 that the 23B ta1e-over of the

sets of the defendant 2A!G/> under > :'-A was solely for the purpose of reconditioning the sugar central so that

A!G/> may resume its operations in time for the :'@9-@ milling season, and that nothing in the said > 3o. :'-A, as we

> 3o. 7::, authorized or directed 23B to assume the corporate obligation?s of 2A!G/>, let alone that for which the prection is brought6 9 that 23B;s management and operation under > 3o. 7:: did not refer to any asset of 2A!G/> which

3B had to acFuire and thereafter &manage(, but only to those which were foreclosed by the #B2 and were in turn redeemed by

3B from the #B26 that conformably to > 3o. 7::, on August :, :'@, the 23B and the #evelopment Ban1 of thehilippines #B2 entered into a 3o. 7::.

n its counterclaim, the 23B averred that it was unnecessarily constrained to litigate and to incur e*penses in this case, hence i

ntitled to claim attorney;s fees in the amount of at least 28,888.88. Accordingly, 23B prayed that the complaint be dismisse

nd that on its counterclaim, that the plaintiff be sentenced to pay defendant 23B the sum of 28,888.88 as attorney;s fees, asid

om e*emplary damages in such amount that the court may seem 5ust and eFuitable in the premises.

!ummons by publication was made via the 2hilippines #aily $*press, a newspaper with editorial office at 7@: Bonifacio #riv

ort Area, /anila, against the defendant 2A!G/>, which was thereafter declared in default as shown in the August @, :':

sued by the Trial Court.

After due proceedings, the Trial Court rendered 5udgment, the decretal portion of which readsE

=H$"$0"$, 5udgment is hereby rendered in favor of plaintiff and against the defendant Corporation, 2hilippine 3ational B

23B 3AT3A> !GMA" #$I$>2/$3T C"2"AT3 3A!G#$C and 2A/2A3MA !GMA" />>!

2A!G/>, ordering the latter to pay 5ointly and severally the former the followingE


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3o.

II

The Court of Appeals gravely erred in law in not applying &to( the case at bench the ruling enunciated in $dward J. 3ell C

2acific 0arms, : !C"A 9:.%&(

uccinctly put, the aforesaid errors +oil down to the principal issue of whether "= is lia+le for the unpaid de+8E'52 to respondent.

T CouF Rul':

The etition is meritorious.

!&' IuLiability for Corporate Debts

8s a general rule, verlooked +y the 8 were certain relevant facts that would justify a conclusion different at reached in the assailed 4ecision.G1$H
http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1997/feb1997/109849.htmhttp://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1997/feb1997/109849.htmhttp://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/2002/apr2002/142936.htm#_edn10


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etitioners posit that they should not +e held lia+le for the corporate de+ts of 8E'52, +ecause their takeove latterIs foreclosed assets did not make them assignees. >n the other hand, respondent asserts that petitioners8E'52 should +e treated as one entity and, as such, jointly and severally held lia+le for 8E'52Is un+ligation.

8s a rule, a corporation that purchases the assets of another will not +e lia+le for the de+ts of the seorporation, provided the former acted in good faith and paid ade


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ecause the 8E'52 account had incurred arrearages of more than &$ percent of the total outstanding o+ligaHThus, 4= had not only a right, +ut also a duty under the law to foreclose the su+ject properties.G1H

ursuant to 2>5 "o. 1*98G&Has amended +y 2>5 "o. 711,G7H"= ac5 "os. 1*98 and 711, which e@pressly authori3ed 8E'52 and "= to merge or consolidate. >n the other hetitioners contend that their takeover of the operations of 8E'52 did not involve any corporate mergeonsolidation, +ecause the latter had never lost its separate identity as a corporation.

8 consolidation is the union of two or more e@isting entities to form a new entity called the consolidorporation. 8 merger, on the other hand, is a union where+y one or more e@isting corporations are a+sor+enother corporation that survives and continues the com+ined +usiness.G%H

The merger, however, does not +ecome effective upon the mere agreement of the constituent corporatiHince a merger or consolidation involves fundamental changes in the corporation, as well as in the righockholders and creditors, there must +e an e@press provision of law authori3ing them.G%#HCor a valid mergonsolidation, the approval +y the ecurities and -@change ommission (-) of the articles of mergeonsolidation is re


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.R. No. L-21601 D


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05n the event of inundations, floodings of mine, typhoon, earth" held the view that, on account of the war, the contract was suspended during the war6 hence the lof the contract should +e considered e@tended for such time of the period of suspension. >n the other hand,2-8"T> contended that the contract should e@pire in 1 as originally agreed upon +ecause the period o

suspension accorded +y virtue of the war did not operate to e@tend further the life of the contract.

"o understanding appeared from the record to have +een +ad +y the parties to resolve the disagreement. 5nmeantime, 2-8"T> re+uilt and reconstructed the mines and was a+le to +ring the property into operation in ?une of 1*, . . . .

ppellant in its +rief makes an alternative assignment of errors depending on whether or not the management contrasis of the action has +een e@tended for a period e


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e date of the li+eration of the mine was 8ugust 1, 1% although at the time there were still many +oo+yaps.7imilarly, in a report su+mitted +y the defendant to its stockholders dated 8ugust &%, 1*, the followingppears: 0Pour 4irectors take pleasure in reporting that ?une , 1* marked the official return to operations of thiompany of its properties in 'ankayan, 'ountain rovince, hilippines.0

is, therefore, clear from the foregoing that the 2epanto mines were li+erated on 8ugust 1, 1%, +ut +ecause of theriod of reha+ilitation and reconstruction that had to +e made as a result of the destruction of the mill, power plant ther necessary e


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ontrary to what appellantBs evidence reflects insofar as the interpretation of the *orce %ae$re clause is concernedowever, appellee gives Es an opposite interpretation invoking in support thereof not only a letter 8tty. 4eAitt sent ielson on >cto+er &$, 1%,wherein he e@pressed for the first time an opinion contrary to what he reported to theoard of 4irectors of 2epanto ompany as stated in the portion of the minutes of its =oard of 4irectors as cto+er &$, 1% wherein apparently he changed his miecause there he stated that the contract was merely suspended, +ut not e@tended, +y reason of the war, contrary te opinion he e@pressed in the meeting of the =oard of 4irectors already adverted to, +ut +etween the two opinionstty. 4eAitt Ae are inclined to give more weight and validity to the former not only +ecause such was given +y himgainst his own interest +ut also +ecause it was given +efore the =oard of 4irectors of 2epanto and in the presenceome "ielson officials 1$who, on that occasion were naturally led to +elieve that that was the true meaning of theuspension clause, while the second opinion was merely self9serving and was given as a mere afterthought.

ppellee also claims that the issue of true intent of the parties was not +rought out in the complaint, +ut anent this

atter suffice it to state that in paragraph "o. 1 of the complaint appellant pleaded that the contract was@tended. 11This is a sufficient allegation considering that the rules on pleadings must as a rule +e li+erally construe

is likewise noteworthy that in this issue of the intention of the parties regarding the meaning and usage concerninge*orce %ae$re clause, the testimony adduced +y appellant is uncontradicted. 5f such were not true, appellee sho

ave at least attempted to offer contradictory evidence. This it did not do. "ot even 2epantoBs resident, 'r. ;. -.ednicky who took the witness stand, contradicted said evidence.

holding that the suspension of the agreement meant the e@tension of the same for a period e


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hus, in ictoria' :lanter' A''ociation &'. ictoria' 2illin 4o%#an(, %1 >.. $1$, there was no evidence at allegarding the intention of the parties to e@tend the contract e


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hare in the profits from the 11 operation1+y reason of which negotiations had taken place for the settlement of aim1%and it was only on ?une &%, 1% that appellee finally denied the claim. There is, therefore, only a period of lan one year that had elapsed from the date of the final denial of the claim to the date of the filing of the complaint,hich certainly cannot +e considered as unreasona+le delay.

he third element of laches is a+sent in this case. 5t cannot +e said that appellee 2epanto did not know that appellaould assert its rights on which it +ased suit. The evidence shows that "ielson had +een claiming for some time itsghts under the contract, as already shown a+ove.

either is the fourth element present, for if there has +een some delay in +ringing the case to court it was mainly du

e attempts at ar+itration and negotiation made +y +oth parties. 5f 2epantoBs documents were lost, it was not causee delay of the filing of the suit +ut +ecause of the war.

nother reason why appellant "ielson cannot +e held guilty of laches is that the delay in the filing of the complaint iresent case was the inevita+le of the protracted negotiations +etween the parties concerning the settlement of theifferences. 5t appears that "ielson asked for ar+itration1#which was granted. 8 committee consisting of 'essrs.eAitt, Carnell and =lessing was appointed to act on said differences +ut 'r. 4eAitt always tried to evade thesue1until he was taken ill and died. 'r. Carnell offered to "ielson the sum of 17,$$$.%* +y way of compromise os claim arising from the management contract1*+ut apparently the offer was refused. "egotiations continued with t@change of letters +etween the parties +ut with no satisfactory result.15t can +e said that the delay due to protractegotiations was caused +y +oth parties. 2epanto, therefore, cannot +e permitted to take advantage of such delay ouestion the propriety of the action taken +y "ielson. The defense of laches is an e


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oming now to the


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nent the third claim relative to the 1$N participation of "ielson on the sum of 1,#.$*, which appears in 2epannual report for 1* 7&and entered as profit for prior years in the statement of income and surplus, which amountonsisted 0almost in its entirety of proceeds of copper concentrates shipped to the Enited tates during 1,0 thisaim should to denied +ecause the amount is not 0dividend declared and paid0 within the purview of the managemeontract.

he fifth assignment of error of appellant refers to the failure of the lower court to order 2epanto to pay its managemes for ?anuary, 1&, and for the full period of e@tension amounting to 1%$,$$$.$$, or &,%$$.$$ a month for si@t

#$) months, D a total of 1%&,%$$.$$ D with interest thereon from the date of judicial demand.

is true that the claim of management fee for ?anuary, 1& was not among the causes of action in the complaint, asmuch as the contract was suspended in Ce+ruary, 1& and the management fees asked for included that ofanuary, 1&, the fact that such claim was not included in a specific manner in the complaint is of no moment +ecan appellate court may treat the pleading as amended to conform to the evidence where the facts show that the plaentitled to relief other than what is asked for in the complaint (8lon3o vs. ;illamor, 1# hil. 71%). The evidence shat the last payment made +y 2epanto for management fee was for "ovem+er and 4ecem+er, 11. 775f, as Ae h

eclared, the management contract was suspended +eginning Ce+ruary 1&, it follows that "ielson is entitled to thanagement fee for ?anuary, 1&.

et us now come to the management fees claimed +y "ielson for the#eriod o* eten'ion. 5n this respect, it has +eehown that the management contract was e@tended from ?une &, 1* to ?une , 1%7, or for a period of si@ty (#onths. 4uring this period "ielson had a right to continue in the management of the mining properties of 2epanto a

epanto was under o+ligation to let "ielson do it and to pay the corresponding management fees. 8ppellant "ielsonsisted in performing its part of the contract +ut 2epanto prevented it from doing so. ence, +y virtue of 8rticle 11*#e ivil ode, there was a constructive fulfillment an the part of "ielson of its o+ligation to manage said mining

roperties in accordance with the contract and 2epanto had the reciprocal o+ligation to pay the correspondinganagement fees and other +enefits that would have accrued to "ielson if 2epanto allowed it ("ielson) to continue e management of the mines during the e@tended period of five (%) years.

Ae find that the preponderance of evidence is to the effect that "ielson had insisted in managing the mining properoon after li+eration. 5n the report 7of 2epanto, su+mitted to its stockholders for the period from 11 to 'arch 17,#, are stated the activities of "ielsonBs officials in relation to "ielsonBs insistence in continuing the management. eport was admitted in evidence without o+jection. Ae find the following in the report:

r. =lessing, in 'ay, 1%, accompanied lark and tanford to an Cernando (2a Enion) to await the li+eration of tines. ('r. =lessing was the Treasurer and 'etallurgist of "ielson). =lessing with lark and tanford went to the

roperty on ?uly 1# and found that while the mill site had +een cleared of the enemy the latter was still holding the around the staff houses and putting up a strong defense. 8s a result, they returned to an Cernando and later wentack to the mines on ?uly . 'r. =lessing made the report, dated 8ugust #, recommending a program of operationielson himself spent a day in the mine early in 4ecem+er, 1% and reiterated the program which 'r. =lessing hadutlined. Two or three weeks +efore the date of the report, 'r. oldren of the "ielson organi3ation also visited the mnd told resident . 8. 4eAitt of 2epanto that he thought that the mine could +e put in condition for the delivery ofre within ten (1$) days. 8nd according to 'ark "estle, a witness of appellant, "ielson had several men includingngineers to do the jo+ in the mines and to resume the work. These engineers were in fact sent to the mine site andu+mitted reports of what they had done. 7%

n the other hand, appellee claims that "ielson was not ready and a+le to resume the work in the mines, relying man the testimony of 4r. ?uan "a+ong, former secretary of +oth "ielson and 2epanto, given in the separate case ofancy 5rving !omero vs. 2epanto onsolidated 'ining ompany (ivil ase "o. #%&, C5, =aguio), to the effect thar as he knew 0"ielson and ompany had not attempted to operate the 2epanto onsolidated 'ining ompany

ecause 'r. "ielson was not here in the hilippines after the last war. e came +ack later,0 and that "ielson andompany had no money nor stocks with which to start the operation. e was asked +y counsel for the appellee if head testified that way in ivil ase "o. #%& of the ourt of Cirst 5nstance of =aguio, and he answered that he did noonfirm it fully. Ahen this witness was asked +y the same counsel whether he confirmed that testimony, he said thahen he testified in that case he was not fully aware of what happened and that after he learned more a+out thefficials of the corporation it was only then that he +ecame aware that "ielson had really sent his men to the minesong with 'r. =lessing and that he was aware of this fact personally. e further said that 'r. "ielson was here in 1nd 0he was going out and contacting his people.0 7#


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epanto admits, in its own +rief, that "ielson had really insisted in taking over the management and operation of theines +ut that it (2epanto) une


49/56

ccording to the terms of the management contract as modified, appellant is entitled to 1$N of the 1,$$$,$$$.$$ash dividends that had +een distri+uted, as stated in the a+ove9mentioned report, or the sum of 1,$$,$$$.$$.

Aith regard to the second category, the stock dividends declared +y 2epanto during the period of e@tension of theontract are: >n "ovem+er &*, 1, the stock dividend declared was %$N of the outstanding authori3ed capital of&,$$$,$$$.$$ of the company, or stock dividends worth 1,$$$,$$$.$$6 and on 8ugust &&, 1%$, the stock divideneclared was ##9&/7N of the standing authori3ed capital of 7,$$$,$$$.$$ of the company, or stock dividends worth&,$$$,$$$.$$. $

ppellantBs claim that it should +e given 1$N of the cash value of said stock dividends with interest thereon at #N fr

e+ruary #, 1%* cannot +e granted for that would not +e in accordance with the management contract which entitleielson to 1$N of any dividends declared paid, -)en and as paid. "ielson, therefore, is entitled to 1$N of the stockvidends and to the fruits that may have accrued to said stock dividends pursuant to 8rticle 11# of the ivil ode.ence to "ielson is due shares of stock worth 1$$,$$$.$$, as per stock dividends declared on "ovem+er &*, 1nd all the fruits accruing to said shares after said date6 and also shares of stock worth &$$,$$$.$$ as per stockvidends declared on 8ugust &$, 1%$ and all fruits accruing thereto after said date.

nent the third category, the depletion reserve appearing in the statement of income and surplus su+mitted +y 2epaorresponding to the years covered +y the period of e@tension of the contract, may +e itemi3ed as follows:

5n 1*, as per -@h. C, p. 7# and -@h. S, p. %, the depletion reserve set up was 11,#$&.*$.

5n 1, as per -@h. , p. and -@h. S, p. %, the depletion reserve set up was 77,%%#.$.

5n 1%$, as per -@h. , p. 7, -@h. S, p. # and -@h. 5, p. 7, the depletion reserve set up was *,#7.7$.

5n 1%1, as per -@h. 5, p. %, -@h. S, p. #, and -@h. ?, p. %, the depletion reserve set up was 1&,$*.**.

5n 1%&, as per -@h. ?, p. %, -@h. S, p. # and -@h. K p. 1, the depletion reserve was 1,11.%.

5n 1%7, as per -@h. K, p. 1, and -@h. S, p. #, the depletion reserve set up as &,7.&%.

egarding the depletion reserve set up in 1* it should +e noted that the amount given was for the whole year.asmuch as the contract was e@tended only for the last half of the year 1*, said amount of 11,#$&.*$ should +evided +y two, and so "ielson is only entitled to 1$N of the half amounting to %,*$1.$.

kewise, the amount of depletion reserve for the year 1%7 was for the whole year and since the contract was@tended only until the first half of the year, said amount of &,7.&% should +e divided +y two, and so "ielson isnly entitled to 1$N of the half amounting to 17*,#.#&. umming up the entire depletion reserves, from the middf 1* to the middle of 1%7, we would have a total of %7,&*.*1, of which "ielson is entitled to 1$N, or to the sf %7,&*.**.

nally, with regard to the fourth category, there is no figure in the record representing the value of the fi@ed assets e +eginning of the period of e@tension on ?une &, 1*. 5t is possi+le, however, to arrive at the amount needed +

dding to the value of the fi@ed assets as of 4ecem+er 71, 1 one9half of the amount spent for capital account in

ear 1*. 8s of 4ecem+er 71, 1, the value of the fi@ed assets was 1,$#1,**.**

1

and as of 4ecem+er 71, 1e value of the fi@ed assets was 7,&$,$*.$. &ence, the increase in the value of the fi@ed assets for the year* was &,&$*,%&.1, one9half of which is 1,1$,.%, which amount represents the e@penses for capitalccount for the first half of the year 1*. 5f to this amount we add the fi@ed assets as of 4ecem+er 71, 1 amoun 1,$#1,**.**, we would have a total of &,1##,17. which represents the fi@ed assets at the +eginning of the

econd half of the year 1*.

here is also no figure representing the value of the fi@ed assets when the contract, as etended, ended on ?une %76 +ut this may +e computed +y getting one9half of the e@penses for capital account made in 1%7 and adding thame to the value of the fi@ed assets as of 4ecem+er 71, 1%7 is ,%%,*$.1 7which the value of the fi@ed asses of 4ecem+er 71, 1%& is *,#7,1.*&, the difference +eing 1,&&,$*.#. >ne9half of this amount is##,$.7 which would represent the e@penses for capital account up to ?une, 1%7. This amount added to the v


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f the fi@ed assets as of 4ecem+er 71, 1%& would give a total of ,1$,1.1# which would +e the value of fi@edssets at the end of ?une, 1%7.

he increase, therefore, of the value of the fi@ed assets of 2epanto from ?une, 1* to ?une, 1%7 is #,7,#.#hich amount represents the difference +etween the value of the fi@ed assets of 2epanto in the year 1* and in thear 1%7, as stated a+ove. >n this amount "

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