pnb v court of appeals

7/29/2019 Pnb v Court of Appeals

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PNB v COURT OF APPEALS

Facts:Rita Gueco Tapnio had an export s ugar quota of 1,000 piculs for the

agri cul tur al yea r 195 6-1957. Since, she did not need it, she agreed to allow Mr. Jacobo

Tuazon to use the said quotafor cons iderat ion of 2 ,500. Her sugar cannot be

export ed withou t sugar quota allot ments .Sometimes, however a planter harvests

less sugar than her quota so her excess quota is usedby h er mother who pays for it.

This is her arrangement with Mr. Tuazon. At the time of theagreement, she

was indebted to PNB of San Fe rnando, Pampanga. Her indebtedness wasknown

as a crop loan and was secured by her sugar crop, and since her quota was mortgagedto

PNB, her arrangement with Mr. Tuazon had to be approved by the bank. Uponpresentmentof the lease arrangement, the PNB branch manager revised it by increasing

the lease amount to P2.80 per picul for a total of P2,800. Such increase was agreed to by

both Rita and Jacobo.However, when it was presented to the Board of Directors for

approval, they further increasedthe am ount to P3.00 per picul . J acobo asked for

the recon sider ation but he was denie d thesame. The matter stood as it was until

Jacobo informed Rita and PNB that he had lost interestin pursuing the deal. In the

meantime, the debt of Rita with the PNB matured. Since she had asurety agreement with

the Philippine American General Insurance Co. Inc. (Philamgen), thelatter paid her

outstanding debt. Philamgen in turn demanded from Rita the amount

whi chthey paid the bank. Instead of paying the bank, Rita claimed that she told

Phi lamgen that shedid not cons ider hers elf inde bte d t o t he bank sin ce

sh e ha d an ag re em en t wi th Ja co bo Tuazon. When such was discontinued, she

failed to realized the income with which she couldha ve pa id he r cr ed i to rs .Ph i l amgen f i l ed a comp la in t f o r the co l l e c t i on o f sum o f

moneyagainst Rita. Rita implicated PNB as a third party defendant claiming

tha t her fai lur e to pay was due to the fault or negligence of PNB.

Issue: WON PNB is liable for the damage caused to Rita.

He ld : There i s no que s t i o n t h a t R i t a s f a i l u r e t o u t i l i z e h e r

su ga r qu ot a wa s du e to t he d isapprova l o f the lease by the Board o f

Directors o f the petitioner, thus PNB should be held liable.

The Board justified the increase to P 3.00 per picul by saying that it was the prevalentrateat that time. However, there was no proof that any other person was willing to leasethesugar quota allotment of Rita for a price hi gher than P2.80 per picul. Just

because thereare isolated transactions where the lease price was P3.00 perpicul does not mean thatthere are always ready takers.

While PNB had the ultimate authority of approving or disapproving theproposed leases ince the quota was mortgaged to the bank, t he la t t erce rt ai nl y ca nn ot es ca pe it s responsibility of observing precaution and vigilancewhich the circumstances of the case justly demanded in approving or disapproving thelease of said sugar quota.

According to Art. 19 of the Civil Code, [e]very person must in the exerchis rightsand the performance of his duties, act with justice, give everyohis due and observehonesty and good faith. This the petitioner failed to do. As aconsequence, Art. 21 states,[a]ny person who willfully causes loss or injury to anothmanner that is contrary tomorals, good customs or public policy shall compensate thlatter for the damage.

On the liability of the corporation, the court ruled that, [a] corporation is civilly liab

inthe same manner as natural persons for torts, because generall y speak

the ru lesgoverning the liability of a principal or master for a tort committed by an a

or servantare the same whether the principal or master be a natural person or artific

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

he expresslydirects or authorizes , and this is just as true of a corporation

a natural person. Acorporation, is liable therefore, whenever a tortuous a

comm itt ed by an off ice r oragent under express direction or authority from the

stockholders or members acting as abody, or generally, from the directors as the

governing body.

NOTE: CLV te l l s u s tha t i t i s c l ea r f r om the ru l i ng o f the Cou r t i

th i s ca se t ha t no t ev er y tortuous act committed by an officer can be ascribed

corporation as its liability, for it isreasonable to presume that in the granting of auth

by the corporation to its agent, such agrant did not include a direction to commit tor

acts against third parties. Only when thecorporation has expressly directed the

commission of such tortuous act, would the damagesresulting therefrom be ascribabthe corporation. And such a direction by the corporation,is mani fes ted eit her by

board adopting a re solution to such effect, as in this case, orhaving taken

advantage of such a tortuous act the corporation, through its board, expresslyor imp

ratifies such an act or is estopped from impugning such an act.Our jurisprudence

wanting as to the definite scope of corporate tort. Essentially,tort co

in the violation of a right given or the omission of a duty imposed by law

abreach of a legal duty. The failure of the corporate employer to comply with the law

imposedduty u nder t he Labo r Code to g ran t se para t ion pay to

em pl oy ee s i n c as e o f c es sa ti on of operations constitutes tort and its

stockholder who was actively engaged in the managementor operation of the busine

should be held personally liable.

Q: When is a corporation liable for tort?A: A corporation is liable for tort when:(a) the act is committed by an officer or agent (2) underexpress direction of aut

from the stockholders or members acting as a body or through theBoard ofDirectors.


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Q: How can authority given to the agent of the corporation be determined?A: E i the r b y :(a ) such d i r ec t i on by the co rpo ra t i on i s man i f es ted , b y i t s b oa rdadopting aresolution to such effect(b) by having taki en advantage of such a tortious act , the corporation throughits board, has expressly or impliedly ratified such an act or estopped from impugningthesame.

Q: What is a derivative suit?A: Since, the act of the board is essentially that of the corporation and therefore corporateassetscannot e scape enf orcement o f the aw ard o f damage t o the to r t

vi ct im . As a re me dy , t he stockholders may institute a derivative suit against theresponsible board members and officersfor the damages suffered by the corporation as aresult of the tort suit.

G.R. No. L-41337 June 30, 1988TAN BOON BEE & CO., INC.,petitioner,vs.THE HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE OF BRANCHXVIII ofthe Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., andPHILIPPINEAMERICAN CAN DRUG COMPANY,respondents.PARAS,J.:

Petitioner herein, doing business under the name and style of Anchor Supply Co., soldon creditto herein private respondent Graphic Publishing, Inc. (GRAPHIC for short)paper products. For

failure of GRAPHIC to pay any installment, as agagreed on thecontract of sale, petitioner filed

with the then Court of First Instance of Manila for sum ofMoney. The trial court orderedGRAPHIC to pay the petitioner. On motion of petitioner,a writ of execution was issued and the

executing sheriff levied upon one (1) unit printingmachine Identified as "Original HeidelbergCylinder Press" Type H 222, NR 78048,found in the premises of GRAPHIC but herein private

respondent, Philippine AmericanDrug Company (PADCO for short) had informed the sheriff thatthe printing machine isits property and not that of GRAPHIC however the sheriff proceeded with

the scheduledauction sale, sold the property to the petitioner. PADCO filed an "Affidavit of Third

PartyClaim" with the Office of the City Sheriff. Thereafter, PADCO filed with the Court ofFirstInstance of Manila, a Motion to Nullify Sale on Execution (With Injunction) which

wasopposed by the petitioner. Respondent judge ruled in favor of PADCO hence theinstantpetition. Plaintiff contends that the controlling stockholders of the Philippine

AmericanDrug Co. are also the same controlling stockholders of the Graphic Publishing, Inc.

and,therefore, the levy upon the said machinery which was found in the premises occupiedbythe Graphic Publishing, Inc. should be upheld.ISSUE: Whether or not there is need to pierce thecorporate veil.HELD:It is true that a corporation, upon coming into being, is invested by law

with a personalityseparate and distinct from that of the persons composing it as well as from

any otherlegal entity to which it may be related. As a matter of fact, the doctrine that a

corporationis a legal entity distinct and separate from the members and stockholders whcomposeit is recognized and respected in all cases which are within reason and the

law.However, this separate and distinct personality is merely a fiction created by law

forconvenience and to promote justice. Accordingly, this separate personality of thecorpomay be disregarded, or the veil of corporate fiction pierced, in cases whereit is used as a c

or cover for fraud or illegality, or to work an injustice, or wherenecessary to achieve equitwhen necessary for the protection of creditors. Likewise,this is true when the corporation

merely an adjunct, business conduit or alter ego ofanother corporation. In such case, the of separate and distinct corporationentities should be disregarded.

In the instant case, petitioner's evidence established that PADCO was never engaged inth

printing business; that the board of directors and the officers of GRAPHIC andPADCO wersame; and that PADCO holds 50% share of stock of GRAPHIC.Petitioner likewise stressed

PADCO's own evidence shows that the printingmachine in question had been in the prem

GRAPHIC since May, 1965, longbefore PADCO even acquired its alleged title on July 11, 1from Capitol Publishing.That the said machine was allegedly leased by PADCO to GRAPHJanuary 24,1966, even before PADCO purchased it from Capital Publishing on July 11, 19

onlyserves to show that PADCO's claim of ownership over the printing machine is not only

and sham but also unbelievable.Considering the principles and circumstances mentionedrespondent judge shouldhave pierced PADCO's veil of corporate Identity.PREMISES

CONSIDERED, Order of the then Court of First Instance of Manila, isANNULLED and SET

ASIDE, and the Temporary Restraining Order issued is herebymade permanent.

Lidell Co. v. Collector of Internal Revenue

Facts: The case is an appeal from the decision of the Court of Tax Appeals imposingdeficiency liability of P1,317,629.61 on Liddell & Co., Inc.

The petitioner, Liddell & Co. Inc., (Liddell & Co. for short) is a domestic corporationestablish in the Philippines on February 1, 1946. From 1946 until November 22, 194when the purpose clause of the Articles of Incorporation of Liddell & Co. Inc., wasamended so as to limit its business activities to importations of automobiles and trucLiddell & Co. was engaged in business as an importer and at the same time retailer oOldsmobile and Chevrolet passenger cars and GMC and Chevrolet trucks.

On December 20, 1948, the Liddell Motors, Inc. was organized and registered with tSecurities and Exchange Commission with an authorized capital stock of P100,000 owhich P20,000 was subscribed and paid for as follows: Irene Liddell wife of Frank Lid19,996 shares and Messrs. Marcial P. Lichauco, E. K. Bromwell, V. E. del Rosario and

Esmenia Silva, 1 share each.

Beginning January, 1949, Liddell & Co. stopped retailing cars and trucks; it conveyedinstead to Liddell Motors, Inc. which in turn sold the vehicles to the public with a stemark-up. Since then, Liddell & Co. paid sales taxes on the basis of its sales to LiddeMotors Inc. considering said sales as its original sales.


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The Collector of Internal Revenue argued that the Lidell Motors, Inc. was but an alter egoof Liddell & Co. and concluded that for sales tax purposes, those sales made by LiddellMotors, Inc. to the public were considered as the original sales of Liddell & Co. hence theimposition of tax deficiency.

Issue: Whether or not Lidell Motors, Inc. is an alter ego of Lidell& Co. making it liable forthe said tax deficiency?

Held: The Court held that Lidell Motors, Inc. is an alter ego of Lidell& Co. hence makin itliable for tax deficiency based on the principle that to allow a taxpayer to deny tax liability

on the ground that the sales were made through an other and distinct corporation when itis proved that the latter is virtually owned by the former or that they are practically oneand the same is to sanction a circumvention of our tax laws which is consistent with theview of the US Supreme Court stating in one case that "a taxpayer may gain advantage ofdoing business thru a corporation if he pleases, but the revenue officers in proper cases,may disregard the separate corporate entity where it serves but as a shield for tax evasionand treat the person who actually may take the benefits of the transactions as the personaccordingly taxable."

The bulk of the business of Liddell & Co. was channeled through Liddell Motors, Inc. On

the other hand, Liddell Motors, Inc. pursued no activities except to secure cars, trucks,and spare parts from Liddell & Co. Inc. and then sell them to the general public. Thesesales of vehicles by Liddell & Co. to Liddell Motors, Inc. for the most part were shown tohave taken place on the same day that Liddell Motors, Inc. sold such vehicles to thepublic. We may even say that the cars and trucks merely touched the hands of Liddell

Motors, Inc. as a matter of formality.

The mere fact that Liddell & Co. and Liddell Motors, Inc. are corporations owned andcontrolled by Frank Liddell directly or indirectly is not by itself sufficient to justify thedisregard of the separate corporate identity of one from the other. There is, however, inthis instant case, a peculiar consequence of the organization and activities of LiddellMotors, Inc.

Under the law in force at the time of its incorporation the sales tax on original sales of cars(sections 184, 185 and 186 of the National Internal Revenue Code), was progressive, i.e.10% of the selling price of the car if it did not exceed P5000, and 15% of the price if morethan P5000 but not more than P7000, etc. This progressive rate of the sales tax naturallywould tempt the taxpayer to employ a way of reducing the price of the first sale. AndLiddell Motors, Inc. was the medium created by Liddell & Co. to reduce the price and thetax liability.

In Lidell& Co.:

(1) Frank Liddell had the authority to designate in the future the employee who couldreceive earnings of the corporation; to apportion among the stock holders the share in theprofits;

(2) that all certificates of stock in the names of the employees should be deposited wFrank Liddell duly indorsed in blank by the employees concerned;

(3) that each employee was required to sign an agreement with the corporation to teffect that, upon his death or upon his retirement or separation for any cause whatsfrom the corporation, the said corporation should, within a period of sixty days therehave the absolute and exclusive option to purchase and acquire the whole of the stointerest of the employees so dying, resigning, retiring or separating.

As to Liddell Motors, Inc Frank Lidell also owned it.

He supplied the original capital funds. It is not proven that his wife Irene, ostensiblysole incorporator of Liddell Motors, Inc. had money of her own to pay for her P20,00initial subscription. Her income in the United States in the years 1943 and 1944 and savings therefrom could not be enough to cover the amount of subscription, much leoperate an expensive trade like the retail of motor vehicles. The alleged sale of herproperty in Oregon might have been true, but the money received therefrom was neshown to have been saved or deposited so as to be still available at the time of theorganization of the Liddell Motors, Inc.

The evidence at hand also shows that Irene Liddell had scant participation in the affaLiddell Motors, Inc. She could hardly be said to possess business experience. The inctax forms record no independent income of her own. As a matter of fact, the checks

represented her salary and bonus from Liddell Motors, Inc. found their way into thepersonal account of Frank Liddell. Her frequent absences from the country negate an

active participation in the affairs of the Motors company.

Case Digest on Azcor Manufacturing vs. NLRC (303 SCRA 26)

July 27, 2010

Azcor Manufacturing Inc. vs. NLRC [303 SCRA 26 (Feb 11 1999)]Piercing the Veil of Corporate Fiction to prevent evasion of obligations or confuse thelegitimate issues

Facts: Capulso filed with the Labor Arbiter a complaint for constructive illegal dismisHe alleged that he worked for Azcor as ceramics worker for more than 2 years. Theto asthma, he filed a leave of absence. Upon returning to work, he was not permittedo so. He later on amended his complaint and impleaded Filipinas Paso as additiona

respondent.On the other hand, Azcor contends that Capulso validly resigned from the company,evidenced by a letter of resignation, for which Capulso then sought employment fromFilipinas Paso, from which he also resigned. The Labor Arbiter dismissed the case. Oappeal to the NLRC, it adjudged in favor of Capulso holding Filipinas Paso and Azcorsolidarily liable. Hence, this petition with the SC.


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Issue: Whether or not Filipinas Paso may be held jointly and severally liable with Azcor forback wages of Capulso.

Held: Yes. The doctrine that a corporation is a legal entity or a person in law distinctfrom the persons composing it is merely a legal fiction for purposes of convenience and tosubserve the ends of justice. This fiction cannot be extended to a point beyond its reasonand policy. Where, as in this case, the corporate fiction was used as a means toperpetrate a social injustice or as a vehicle to evade obligations or confuse the legitimateissues, it would be discarded and the 2 corporations would be merged as one, the firstbeing merely considered as the instrumentality, agency, conduit, or adjunct of the other.In the case at bar, there was much confusion as to the identity of Capulsos employer, but,

for sure, it was Filipinas Paso and Azcors own making. First, Capulso had no knowledgethat he was already working under Filipinas Paso since he continued to retain his AzcorID. Second, his pay slips contained the name of Azcor giving the impression that Azcorwas paying his salary. Third, he was paid the same salary and he performed the samekind of job, in the same work area, in the same location, using the same tools and underthe same supervisor.

R.F. Sugay & Co., Inc., vs. ReyesPost under case digests, Commercial Law at Thursday, February 23, 2012 Posted

by Schizophrenic Mind

Facts: Pablo C. Reyes and Cesar Curata were employees of R.F. Sugay and Co., Inc. whowere assigned to a painting job on the building of Pacific Products, Inc. In January 13,

1961, Reyes and Curata suffered burn injuries from a fire in the vicinity of Pacific Products

resulting from temporary disability from work. Because of this, Reyes and Curata filed a

claim for disability and medical expenses against R.F. Sugay and Co., Inc., Romulo Sugay

and Pacific Products.

R.F. Sugay & Co. claimed that it is not the employer of Reyes and Curata, but it is the

Pacific Products.

The Hearing Officer of the Workmens Compensation Commission dismissed the case

against Sugay and R.F. Sugay & Co. and found Pacific Product to be liable.

Pacific Products appealed to the Commission which reversed the order of the hearing

officer and found that R.F. Sugay & Co., Inc. is the statutory employer of Reyes and

Curata.

The Commission en banc, on September 19, 1962, denied the motion for reconsideration

of R. F. Sugay & Co.. Thus, this Petition.

In forwarding the argument that Pacific Products is the employer and not R.F. Sugay & Co,

the latter alleged that Romulo Sugay, its President, was the one who entered into a

contract of administration and supervision for the painting of the factory of the Pacific

Products, Inc., and making it appear that said Romulo F. Sugay acted as an agent

Pacific Products, Inc., and as such, the latter should be made answerable t

compensation due to the claimants.

Issue: Should the Doctrine of Piercing the Veil of Corporate Fiction be emploconnect the relationship of Romulo Sugay to R.F. Sugay and Co., Inc.?

Held: The Court agreed with the Commission that "the dual roles of Romulo F. should not be allowed to confuse the facts relating to employer-employee relations

is a legal truism that when the veil of corporate fiction is made as a shield to perpe

fraud and/or confuse legitimate issues (here, the relation of employer-employeesame should be pierced. Verily the R. F. Sugay & Co., Inc. is a business conduit o

Sugay.
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G.R. No. L-2294 May 25, 1951

FILIPINAS COMPAIA DE SEGUROS, petitioner,vs.CHRISTERN, HUENEFELD and CO., INC., respondent.

Ramirez and Ortigas for petitioner.Ewald Huenefeld for respondent.

PARAS, C.J.:

On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., afterpayment of corresponding premium, obtained from the petitioner ,Filipinas Cia. deSeguros, fire policy No. 29333 in the sum of P1000,000, covering merchandise containedin a building located at No. 711 Roman Street, Binondo Manila. On February 27, 1942, orduring the Japanese military occupation, the building and insured merchandise wereburned. In due time the respondent submitted to the petitioner its claim under the policy.The salvage goods were sold at public auction and, after deducting their value, the totalloss suffered by the respondent was fixed at P92,650. The petitioner refused to pay theclaim on the ground that the policy in favor of the respondent had ceased to be in force onthe date the United States declared war against Germany, the respondent Corporation(though organized under and by virtue of the laws of the Philippines) being controlled bythe German subjects and the petitioner being a company under American jurisdiction

when said policy was issued on October 1, 1941. The petitioner, however, in pursuance ofthe order of the Director of Bureau of Financing, Philippine Executive Commission, dated

April 9, 1943, paid to the respondent the sum of P92,650 on April 19, 1943.

The present action was filed on August 6, 1946, in the Court of First Instance of Manila forthe purpose of recovering from the respondent the sum of P92,650 above mentioned. Thetheory of the petitioner is that the insured merchandise were burned up after the policyissued in 1941 in favor of the respondent corporation has ceased to be effective becauseof the outbreak of the war between the United States and Germany on December 10,1941, and that the payment made by the petitioner to the respondent corporation duringthe Japanese military occupation was under pressure. After trial, the Court of FirstInstance of Manila dismissed the action without pronouncement as to costs. Upon appealto the Court of Appeals, the judgment of the Court of First Instance of Manila wasaffirmed, with costs. The case is now before us on appeal by certiorarifrom the decision ofthe Court of Appeals.

The Court of Appeals overruled the contention of the petitioner that the respondent

corporation became an enemy when the United States declared war against Germany,relying on English and American cases which held that a corporation is a citizen of thecountry or state by and under the laws of which it was created or organized. It rejectedthe theory that nationality of private corporation is determine by the character orcitizenship of its controlling stockholders.

There is no question that majority of the stockholders of the respondent corporationGerman subjects. This being so, we have to rule that said respondent became an encorporation upon the outbreak of the war between the United States and Germany. TEnglish and American cases relied upon by the Court of Appeals have lost their forceview of the latest decision of the Supreme Court of the United States in Clark vs. UeFinanz Korporation, decided on December 8, 1947, 92 Law. Ed. Advance Opinions, Npp. 148-153, in which the controls test has been adopted. In "Enemy Corporation" bMartin Domke, a paper presented to the Second International Conference of the LegProfession held at the Hague (Netherlands) in August. 1948 the following enlighteninpassages appear:

Since World War I, the determination of enemy nationality of corporations habeen discussion in many countries, belligerent and neutral. A corporation wasubject to enemy legislation when it was controlled by enemies, namely manunder the influence of individuals or corporations, themselves considered asenemies. It was the English courts which first the Daimlercase applied this nconcept of "piercing the corporate veil," which was adopted by the peace ofTreaties of 1919 and the Mixed Arbitral established after the First World War

The United States of America did not adopt the control test during the First WWar. Courts refused to recognized the concept whereby American-registeredcorporations could be considered as enemies and thus subject to domesticlegislation and administrative measures regarding enemy property.

World War II revived the problem again. It was known that German and otheenemy interests were cloaked by domestic corporation structure. It was not by legal ownership of shares that a material influence could be exercised on

management of the corporation but also by long term loans and other factuasituations. For that reason, legislation on enemy property enacted in variouscountries during World War II adopted by statutory provisions to the controland determined, to various degrees, the incidents of control. Court decisionsrendered on the basis of such newly enacted statutory provisions in determinenemy character of domestic corporation.

The United States did not, in the amendments of the Trading with the Enemyduring the last war, include as did other legislations the applications of the ctest and again, as in World War I, courts refused to apply this concept wherethe enemy character of an American or neutral-registered corporation isdetermined by the enemy nationality of the controlling stockholders.

Measures of blocking foreign funds, the so called freezing regulations, and otadministrative practice in the treatment of foreign-owned property in the UnStates allowed to large degree the determination of enemy interest in domescorporations and thus the application of the control test. Court decisionssanctioned such administrative practice enacted under the First War Powers 1941, and more recently, on December 8, 1947, the Supreme Court of the UStates definitely approved of the control theory. In Clark vs. Uebersee Finan


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Korporation, A. G., dealing with a Swiss corporation allegedly controlled byGerman interest, the Court: "The property of all foreign interest was placed withinthe reach of the vesting power (of the Alien Property Custodian) not to appropriatefriendly or neutral assets but to reach enemy interest which masqueraded underthose innocent fronts. . . . The power of seizure and vesting was extended to allproperty of any foreign country or national so that no innocent appearing devicecould become a Trojan horse."

It becomes unnecessary, therefore, to dwell at length on the authorities cited in support ofthe appealed decision. However, we may add that, in Haw Pia vs. China BankingCorporation,* 45 Off Gaz., (Supp. 9) 299, we already held that China Banking Corporation

came within the meaning of the word "enemy" as used in the Trading with the Enemy Actsof civilized countries not only because it was incorporated under the laws of an enemycountry but because it was controlled by enemies.

The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that"anyone except a public enemy may be insured." It stands to reason that an insurancepolicy ceases to be allowable as soon as an insured becomes a public enemy.

Effect of war, generally. All intercourse between citizens of belligerent powers

which is inconsistent with a state of war is prohibited by the law of nations. Suchprohibition includes all negotiations, commerce, or t rading with the enemy; all actswhich will increase, or tend to increase, its income or resources; all acts ofvoluntary submission to it; or receiving its protection; also all acts concerning thetransmission of money or goods; and all contracts relating thereto are therebynullified. It further prohibits insurance upon trade with or by the enemy, upon thelife or lives of aliens engaged in service with the enemy; this for the reason that

the subjects of one country cannot be permitted to lend their assistance to protectby insurance the commerce or property of belligerent, alien subjects, or to doanything detrimental too their country's interest. The purpose of war is to cripplethe power and exhaust the resources of the enemy, and it is inconsistent that onecountry should destroy its enemy's property and repay in insurance the value ofwhat has been so destroyed, or that it should in such manner increase theresources of the enemy, or render it aid, and the commencement of war

determines, for like reasons, all trading intercourse with the enemy, which priorthereto may have been lawful. All individuals therefore, who compose thebelligerent powers, exist, as to each other, in a state of utter exclusion, and arepublic enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.)

In the case of an ordinary fire policy, which grants insurance only from year, or for

some other specified term it is plain that when the parties become alien enemies,the contractual tie is broken and the contractual rights of the parties, so far as notvested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)

The respondent having become an enemy corporation on December 10, 1941, theinsurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippinecorporation) had ceased to be valid and enforcible, and since the insured goods were

burned after December 10, 1941, and during the war, the respondent was not entitleany indemnity under said policy from the petitioner. However, elementary rules of ju(in the absence of specific provision in the Insurance Law) require that the premiumby the respondent for the period covered by its policy from December 11, 1941, shoreturned by the petitioner.

The Court of Appeals, in deciding the case, stated that the main issue hinges on thequestion of whether the policy in question became null and void upon the declaratiowar between the United States and Germany on December 10, 1941, and its judgmefavor of the respondent corporation was predicated on its conclusion that the policy not cease to be in force. The Court of Appeals necessarily assumed that, even if the

payment by the petitioner to the respondent was involuntary, its action is not tenabview of the ruling on the validity of the policy. As a matter of fact, the Court of Appeheld that "any intimidation resorted to by the appellee was not unjust but the exerciits lawful right to claim for and received the payment of the insurance policy," and thruling of the Bureau of Financing to the effect that "the appellee was entitled to paymfrom the appellant was, well founded." Factually, there can be no doubt that the Direof the Bureau of Financing, in ordering the petitioner to pay the claim of the respondmerely obeyed the instruction of the Japanese Military Administration, as may be sefrom the following: "In view of the findings and conclusion of this office contained in decision on Administrative Case dated February 9, 1943 copy of which was sent to yoffice and the concurrence therein of the Financial Department of the Japanese MilitaAdministration, and following the instruction of said authority, you are hereby orderepay the claim of Messrs. Christern, Huenefeld & Co., Inc. The payment of said claim,however, should be made by means of crossed check." (Emphasis supplied.)

It results that the petitioner is entitled to recover what paid to the respondent undercircumstances on this case. However, the petitioner will be entitled to recover only tequivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accorwith the rate fixed in the Ballantyne scale.

Wherefore, the appealed decision is hereby reversed and the respondent corporationordered to pay to the petitioner the sum of P77,208.33, Philippine currency, less theamount of the premium, in Philippine currency, that should be returned by the petiti

for the unexpired term of the policy in question, beginning December 11, 1941. Withcosts. So ordered.


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Indino vs. NLRC

Facts:The petitioner, Benjamin G. Indino, joined the Philippine National Construction

Corporation(PNCC) as a project personnel officer on December 12, 1974. On January 6, 1981,

he wastransferred to private respondent DISC, a sister corporation of PNCC, which assignedhim to itsPhilphos Project in Isabel, Leyte.On July 27, 1983, while the petitioner was on a paidvacation leave, he received a "letter-memorandum" from Roman B. Lopez, DISC personnel

manager, informing him that his serviceswere no longer needed at the Philphos Project in

Leyte. The memorandum letter stated that the

significant business reverses being experienced by the company makes (sic) it imperative totake drastic measures to reduce both its work force and operating costs.The petitioner filed with the NLRC a complaint for illegal dismissal against private

respondentDISC. The case, however, was prematurely terminated upon a joint motion to

dismiss drawn byboth parties agreeing that the petitioner will go back to work for the

respondent with back wages.Barely two months after his reinstatement, however, thepetitioner received another "letter-memorandum" from respondent DISC, again terminating his

services.The petitioner received from DISC the amount of P20,458.52 as separation benefits.

He however,refused to accept his termination, instead, he filed a complaint for illegal dismissal,unpaidwages, moral and exemplary damages, and attorney's fees against respondent DISC

and later onimpleaded the Philippine National Construction Corporation (PNCC) as additional

respondent.Labor Arbiter Ricardo C. Nora, to whom the case was assigned, dismissed thepetitioner'scomplaint for lack of merit. The petitioner appealed to the respondent NLRC which

affirmedLabor Arbiters decision. The petitioner then filed for a motion for reconsideration which wasalso denied. The case then was brought before the Supreme Court.Thepetitioner insists that his removal was unjustified and illegal and was carried out tocircumvent

the compromise agreement he had earlier entered into with respondent DISC whichprovided,

among others, his reinstatement in any of the offices or projects of respondent DISC.Theaforementioned compromise agreement, he avers, precludes his separation or dismissal.

.Moreover, the petitioner points out, the reason for his separation in the "letter-memorandum"

of December 14, 1983 is but a rehash of that in the first "letter-memorandum" of July 27,1983. Thepetitioner concludes that the later move by DISC at ostensible retrenchment had

been made inbad faith and manifested its thinly-veiled desire to dismiss him.Issues:1. Whetheror not DISC is justified in dismissing the respondent2. Whether

or not PNCCs inclusion as respondent in the case is justified

Issue no.1

No. While business reverses can be a just cause for terminating employees,13

they must besufficiently proven by the employer.14

This is precisely mandated under par. (b) of Article 277(formerly 278) of the LaborCode.Another point that makes the respondent DISC's cause suspect is that, as correctly

pointed out bythe petitioner, the reason it gave in its "letter-memorandum" dated Decem14, 1983terminating his services was simply a rehash of its (DISC'S) "letter-memorandu

dated July 27,1983, which ultimately produced the compromise agreement between theparties. It will be notedthat on July 27, 1983, the event (Ninoy Aquino's assassination) th

to the near collapse of the national economy, had not yet taken place. Respondent DISC'

of basically the samereason thus shows its all-too-apparent effort to remove the petitioneits payroll. Taken inthe light of the then just recently concluded compromise agreement

between the parties, the actof DISC in subsequently dismissing the petitioner just two m

and-a-half after hisreinstatement appears as having been made in bad faith.

Issue No. 2:

Yes. Considering that the petitioner started his employment originally with the

PhilippineNational Construction Company (PNCC) but was only transferred later to its sistcompany, therespondent DISC, the inclusion of the former as party respondent in this ac

justified andproper. The so-called separate and distinct personality of PNCC could be valid

ignored

inasmuch as it would unjustly prejudice the petitioner vis-a-vis whatever benefits he may

receive

by reason of his illegal dismissal. This has been demonstrated by the amount of the sepa

pay given to the petitioner by respondent DISC which appears to correspond only to the

inwhich the former was in the employ of the latter. The period when the petitioner was st

theemploy of PNCC was apparently ignored. This omission should not be allowed inasmuasthere is no showing that PNCC gave the petitioner separation benefits before he was

transferredto DISC. It should always be borne in mind that the fiction of law that a corporas a

juridical entity, has a distinct and separate personality, was envisaged for

convenience and to

serve justice; therefore, it should not be used as a subterfuge to commit injustice andcircumvent labor laws


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LYCEUM OF THE PHILS. V. CA

219 SCRA 610

FACTS:

1. Petitioner had sometime commenced before in the SEC a complaint against

Lyceum of Baguio, to require it to change its corporate name and to adoptanother name not similar or identical with that of petitioner. SEC decided in favor

of petitioner. Lyceum of Baguio filed petition for certiorari but was denied for

lack of merit.

2. Armed with the resolution of the Court, petitioner instituted before the SEC tocompel private respondents, which are also educational institutions, to delete

word Lyceum from their corporate names and permanently to enjoin them fromusing such as part of their respective names.

3. Hearing officer sustained the claim of petitioner and held that the wordLyceum was capable of appropriation and that petitioner had acquired anenforceable right to the use of that word.

4. In an appeal, the decision was reversed by the SEC En Banc. They held that

the word Lyceum to have become identified with petitioner as to render use

thereof of other institutions as productive of consfusion about the identity of theschools concerned in the mind of the general public.

5. Petitioner went to appeal with the CA but the latter just affirmed the decisionof the SEC En Banc.

HELD:

Under the corporation code, no corporate name may be allowed by the SEC if the

proposed name is identical or deceptively or confusingly similar to that of anyexisting corporation or to any other name already protected by law or is patentlydeceptive, confusing or contrary to existing laws. The policy behind this provision

is to avoid fraud upon the public, which would have the occasion to deal with the

entity concerned, the evasion of legal obligations and duties, and the reduction ofdifficulties of administration and supervision over corporations.

The corporate names of private respondents are not identical or deceptively or

confusingly similar to that of petitioners. Confusion and deception has been

precluded by the appending of geographic names to the word Lyceum.

Furthermore, the word Lyceum has become associated in time with schooother institutions providing public lectures, concerts, and public discussions.

Thus, it generally refers to a school or an institution of learning.

Petitioner claims that the word has acquired a secondary meaning in relation

petitioner with the result that the word, although originally generic, has becappropriable by petitioner to the exclusion of other institutions.

The doctrine of secondary meaning is a principle used in trademark law but

been extended to corporate names since the right to use a corporate name

exclusion of others is based upon the same principle, which underlies the riguse a particular trademark or tradename. Under this doctrine, a word or phr

originally incapable of exclusive appropriation with reference to an article in market, because geographical or otherwise descriptive might nevertheless h

been used for so long and so exclusively by one producer with reference to tarticle that, in that trade and to that group of purchasing public, the word o

phrase has come to mean that the article was his produce. The doctrine canbe made to apply where the evidence didn't prove that the business has

continued for so long a time that it has become of consequence and acquire

good will of considerable value such that its articles and produce have acquiwell known reputation, and confusion will result by the use of the disputed n

Petitioner didn't present evidence, which provided that the word Lyceum

acquired secondary meaning. The petitioner failed to adduce evidence that iexclusive use of the word. Even if petitioner used the word for a long period

time, it hadnt acquired any secondary meaning in its favor because the appfailed to prove that it had been using the same word all by i tself to the exclu

of others.

PHILIPS EXPORT VS. COURT OF APPEALS- Corporate Trade Name

A corporations right to use its corporate and trade name is a property right,right in rem, which it may assert and protect against the whole world.

FACTS:

Philips Export B.V. (PEBV) filed with the SEC for the cancellation of the word

Philips the corporate name of Standard Philips Corporation in view of its pregistration with the Bureau of Patents and the SEC. However, Standard Phi

refused to amend its Articles of Incorporation so PEBV filed with the SEC a


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petition for the issuance of a Writ of Preliminary Injunction, however this wasdenied ruling that it can only be done when the corporate names are identical

and they have at least 2 words different. This was affirmed by the SEC en bancand the Court of Appeals thus the case at bar.

ISSUE:

Whether or not Standard Philips can be enjoined from using Philips in its

corporate name

RULING: YES

A corporations right to use its corporate and trade name is a property right, a

right in rem, which it may assert and protect against the whole world. According

to Sec. 18 of the Corporation Code, no corporate name may be allowed if the

proposed name is identical or deceptively confusingly similar to that of anyexisting corporation or to any other name already protected by law or is patently

deceptive, confusing or contrary to existing law.

For the prohibition to apply, 2 requisites must be present:(1) the complainant corporation must have acquired a prior right over the use ofsuch corporate name and

(2) the proposed name is either identical or deceptively or confusingly similar to

that of any existing corporation or to any other name already protected by law orpatently deceptive, confusing or contrary to existing law.

With regard to the 1st requisite, PEBV adopted the name Philips part of its

name 26 years before Standard Philips. As regards the 2nd, the test for the

existence of confusing similarity is whether the similarity is such as to mislead aperson using ordinary care and discrimination. Standard Philips only contains one

word, Standard, different from that of PEBV. The 2 companies products arealso the same, or cover the same line of products. Although PEBV primarily deals

with electrical products, it has also shipped to its subsidiaries machines and partswhich fall under the classification of chains, rollers, belts, bearings and cutting

saw, the goods which Standard Philips also produce. Also, among Standard

Philips primary purposes are to buy, sell trade x x x electrical wiring deviceselectrical component, electrical supplies. Given these, there is nothing to pre

Standard Philips from dealing in the same line of business of electrical devic

The use of Philips by Standard Philips tends to show its intention to ride onpopularity and established goodwill of PEBV.

Universal Mills Corporation vs. Universal Textile Mills78 SCRA 62 (1977)

FACTS:

This is an appeal from the order of the Securities and Exchange Commission

granting a petition by the respondent to have the petitioners corporate nam

changed as it is confusingly and deceptively similar to that of the former.

On January 8, 1954, respondent Universal Textile Mills was issued a certifica

Corporation as a textile manufacturing fi rm. On the other hand, petitioner, w

deals in the production of hosieries and apparels, acquired its current name

amending its articles of incorporation, changing its name from Universal Hos

mills Corporation to Universal Mills corporation.

ISSUE:

Whether or not petioners trade name is confusingly similar with that of

respondents.

HELD:

Yes. The corporate names in question are not identical, but they are indispu

so similar that even under the test of reasonable care and observation as th

public generally are capable of using and may be expected to exercise invo

by appellant. We are apprehensive confusion will usually arise, considering t

x x appellant included among its primary purposes the manufacturing, dyeinfinishing and selling of fabrics of all kinds which respondent had been enga

for more than a decade ahead of petitioner.


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ARMCO STEEL CORPORATION (OF THE PHILIPPINES), petitioner,vs.SECURITIES AND EXCHANGE COMMISSION, ARMCO STEEL CORPORATION (ofOhio, U.S.A.) and ARMCO MARSTEEL ALLOY CORPORATION, respondents.

GANCAYCO,J.:

On July 1, 1965 ARMCO Steel Corporation, a corporation organized in Ohio, U.S.A.,hereinafter called ARMCO-OHIO, obtained from the Philippine Patent Office, Certificate ofRegistration No. 11750 for its trademark consisting of the word "ARMCO" and a triangulardevice for "ferrous metals and ferrous metal castings and forgings." On April 14, 1971,pursuant to trademark rules, the petitioner filed with the said patent office an "Affidavit ofUse" for said trademark, which was subsequently accepted and for which the Patent Officeissued the corresponding notice of acceptance of "Affidavit of Use."

ARMCO Marsteel-Alloy Corporation was also incorporated on July 11, 1972 under itsoriginal name Marsteel Alloy Company, Inc. but on March 28, 1973 its name was changedto ARMCO-Marsteel Alloy Corporation hereinafter called ARMCO-Marsteel, by amendmentof its Articles of Incorporation after the ARMCO-Ohio purchased 40% of its capital stock.Both said corporations are engaged in the manufacture of steel products. Its article ofincorporation in part reads as follows as to its purposes: "to manufacture, process ... and

deal in all kinds, form, and combinations of iron, steel or other metals and all or anyproducts or articles particularly consisting of iron, steel or other metals .... .

On the other hand ARMCO Steel Corporation was incorporated in the Philippines on April25, 1973, hereinafter called ARMCO-Philippines. A pertinent portion of its articles ofincorporation provides as among its purposes: "to contract, fabricate ... manufacture ...regarding pipelines, steel frames ... ."

ARMCO-Ohio and ARMCO-Marsteel then filed a petition in the Securities and ExchangeCommission (SEC) to compel ARMCO-Philippines to change its corporate name on theground that it is very similar, if not exactly the same as the name of one of thepetitioners, which is docketed as SEC Case No. 1187. In due course an order was issuedby the SEC on February 14, 1975 granting the petition, the dispositive part of which readsas follows:

In view of the foregoing, the respondent, ARMCO STEEL CORPORATION, ishereby ordered to take out 'ARMCO' and substitute another word in lieuthereof in its corporate name by amending the articles of incorporation tothat effect, within thirty (30) days from date of receipt of a copy of thisOrder; after which, three (3) copies of the amended articles ofincorporation, duly certified by a majority of the board of directors andcountersigned by the president and secretary of the corporation, shall besubmitted to this Commission, together with the corresponding filing fees,as required by law. 1

A motion for reconsideration of the said order was filed by said respondent on March1975 but this was denied in, an order of April 16, 1965 as the motion was filed out otime, a copy of the questioned order having been received by respondent on Februa1975 so that said order had become final and executory. 2 A motion for reconsideratfiled by respondent to set aside said order of April 16, 1965 was also denied by the SJune 23, 1975. 3 An appeal was interposed by respondent to the Court of Appeals wwas docketed as CA G.R. No. 04448-R but the appeal was dismissed in a resolution January 13, 1976, on the ground that the appeal was perfected beyond the reglemeperiod allowed by law.

On March 22, 1976 said respondent amended its articles of incorporation by changin

name to "ARMCO structures, Inc." which was filed with and approved by the SEC.

Nevertheless, in an order of January 6, 1977, the SEC issued an order requiringrespondent, its directors and officers to comply with the aforesaid order of the Commof February 14, 1975 within ten (10) days from notice thereof. 5

A manifestation and motion was filed by respondent informing SEC that it had alreadchanged its corporate name with the approval of the SEC to ARMCO Structures, Inc.substantial compliance with the said order or in the alternative prayed for a hearing

determine if there is a confusing similarity between the names of the petitioners on hand and the ARMCO Structures, Inc. on the other.

Petitioners then filed a comment to said manifestation alleging that the change of nasaid respondent was not done in good faith and is not in accordance with the order o

Commission of February 14, 1975 so that drastic action should be taken against therespondent and its officers. Subsequently, petitioners filed a motion to cite saidrespondent, its directors and officers in contempt for disobeying the orders of Febru1975 and January 6, 1977. In an order of August 31, 1977, the SEC finding that therespondent, its directors, and officers have not complied with the final order of Febru14, 1975 required them to appeal before the Commission on September 22, 1977 at10:00 o'clock in the morning to show cause why they should not be punished for conby the Commission. 6

After the hearing the parties submitted their respective memoranda. In another ordeJanuary 17, 1979, the SEC finding that the respondent did not make the proper discof the circumstances when it amended its articles of incorporation and submitted thefor the approval of the SEC thus said respondent, its directors, and officers were ordwithin ten (10) days from notice to comply with the order of February 14, 1975. An awas interposed by the respondent to the SEC en banc. The Commission en banc in a

order of December 14, 1979 dismissed the appeal for lack of merit.7

Hence, the herein petition for review filed by ARMCO-Philippines wherein it seeks thereversal of the orders of the SEC of December 14, 1979 and August 6, 1980 and thaorder of February 14, 1975 be declared functus oficio for having been substantiallycomplied with by the petitioner. The grounds of the petition are as follows:


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I

THE SECURITIES AND EXCHANGE COMMISSION ERRED WHEN IT DID NOTCONSIDER ITS ORDER DATED FEBRUARY 14,1975 FUNCTUS OFFICIOPURSUANT TO THE LEGAL MAXIM CESSANTE LEGIS RATIONE CESSAT ETIPSA LEX' AFTER PETITIONER HAD SUBSTANTIALLY COMPLIED IN GOODFAITH WITH SAID ORDER AND SAID COMPLIANCE HAD ACHIEVED THEPURPOSE OF THE ORDER, BY CHANGING ITS CORPORATE NAME WITHTHE APPROVAL OF SAID COMMISSION.

II

THE COMMISSION ERRED WHEN IT DID NOT FIND THAT ITS APPROVALOF PETITIONER'S AMENDED ARTICLES OF INCORPORATION CHANGINGPETITIONER'S CORPORATE NAME FROM "ARMCO STEEL CORPORATION"TO "ARMCO STRUCTURES, INCORPORATED" WAS REGULAR AND LEGAL.

III

THE COMMISSION ERRED WHEN IT DID NOT FIND THAT PRIVATERESPONDENTS WERE NO LONGER ENTITLED TO THE RELIEF AWARDED BYTHE ORDER DATED FEBRUARY 14,1975 CONSIDERING THAT SAID ORDERHAD BECOME FUNCTUS OFFICIO AND FURTHER ENFORCEMENT THEREOFWILL BE INEQUITABLE AS IT WILL DEPRIVE PETITIONER OF EQUALPROTECTION OF LAWS.

IV

THE COMMISSION ERRED WHEN, THERE BEING A DISPUTE AS TOWHETHER OR NOT THE PURPOSE OF THE ORDER DATED FEBRUARY14,1975 HAD BEEN COMPLIED WITH AND WHETHER THERE WAS STILLCONFUSING SIMILARITY BETWEEN THE CORPORATE NAMES OFRESPONDENTS AND THE NEW NAME OF PETITIONER, IT DID NOT GRANTPETITIONER'S PRAYER THAT A HEART NG BE HELD TO THRESH THEISSUE."

The Court finds no merit in the petition.

The order of the public respondent SEC of February 14, 1975 which has long become final

and executory clearly spells out that petitioner must "take out ARMCO and substituteanother word in lieu thereof in its corporate name by amending the articles ofincorporation to that effect, ... ." Far from complying with said order petitioner amendedits corporate name into ARMCO Structures, Inc., and secured its approval by the SEC onMarch 22, 1976. That this amendment was made by petitioner without the knowledge ofthe proper authorities of the SEC is home by the fact that thereafter on January 6, 1977an order was issued by the SEC requiring petitioner, its board of directors, and officers to

comply with the order of the Commission of February 14, 1975. When the attention SEC was called by petitioner that the change of corporate name had been undertaketo ARMCO Structures, Inc. and asked that it be considered as a substantial complianwith the order of February 14, 1975, the SEC in its order of January 17, 1979 speakthrough its hearing officer Antonio R. Manabat ruled as follows:

The Order of February 14, 1975, cannot but be clearer than what itpurports to require or demand from respondent. Under in no distinctterms, it enjoins the removal or deletion of the word 'Armco' fromrespondent's corporate name, which was not so complied with. TheCommission, therefore, cannot give i ts imprimatur to the new corpo

name because there was no compliance at all.

The fact that the Securities and Exchange Commission issued its cerof filing of amended articles of incorporation on March 22, 1976, is nbut an illusory approval of the change of corporate name and a self-induced protection from the Commission to further exact compliance

Order of February 14, 1975. Craftily, the Securities and ExchangeCommission and/or its administrative personnel were made to issue certificate during its unguarded moment. Verily, the certificate couldhave been issued were it not for such lapses or had respondent beengood faith by making the proper disclosures of the circumstances whled it to amend its articles of incorporation.

Correctly pointed out by petitioners, a 'new determination as to whenot there is confusing similarity between petitioners' names and that

'Armco Structures, Incorporated,' cannot be ordered without transgron the rule of, or the decisional law on, finality of judgment. 8

The Court finds that the said amendment in the corporate name of petitioner is not isubstantial compliance with the order of February 14, 1975. Indeed it is in contraventherewith. To repeat, the order was for the removal of the word "ARMCO" from thecorporate name of the petitioner which it failed to do. And even if this change of corpname was erroneously accepted and approved in the SEC it cannot thereby legalize change what is clearly unauthorized if not contemptuous act of petitioner in securingregistration of a new corporate name against the very order of the SEC of February 1975. Certainly the said order of February 14, 1975 is not rendered functus oficio thHad petitioner revealed at the time of the registration of its amended corporate namthere was the said order, the registration of the amended corporate name could not been accepted and approved by the persons in-charge of the registration. The actuain this respect of petitioner are far from regular much less in good faith.

The arguments of the petitioner that the SEC had approved the registration of severother entities with one principal word common to all as "ARMCO," and that there is nconfusing similarity between the corporate names of respondents and the new namepetitioner, would indeed in effect be reopening the final and executory order of the S


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February 14, 1975 which had already foreclosed the issue. Indeed, in said final order theSEC made the following findings which are conclusive and well-taken:

The only question for resolution in this case is whether therespondent'sname ARMCO STEEL CORPORATION is similar, if not Identical with that ofpetitioner, ARMCO STEEL CORPORATION (of Ohio, U.S.A.) and ofpetitioner, ARMCO-MARSTEEL ALLOY CORPORATION, as to createuncertainty and confusion in the minds of the public.

By mere looking at the names it is clear that the name of petitioner,

ARMCO STEEL CORPORATION (of Ohio, U.S.A.), and that of the

respondent, ARMCO STEEL CORPORATION, are not only similar butIdentical and the words "of Ohio, U.S.A.," are being used only to Identifypetitioner ARMCO STEEL-OHIO as a U.S. corporation.

It is indisputable that ARMCO-STEEL-OHIO, having patented the term'Armco' as part of its trademark on its steel products, is entitled toprotection in the use thereof in the Philippines. The term "Armco" is nowbeing used on the products being manufactured and sold in this country byArmco-Marsteel by virtue of its tie-up with ARMCO-STEEL-OHIO. Clearly,

the two companies have the right to the exclusive use and enjoyment ofsaid term.

ARMCO STEEL-PHILIPPINES, has not only an Identical name but also asimilar line of business, as shown above, as that of ARMCO STEEL- OHIO.People who are buying and using products bearing the trademark "Armco"might be led to believe that such products are manufactured by therespondent, when in fact, they might actually be produced by thepetitioners. Thus, the goodwill that should grow and inure to the benefit ofpetitioners could be impaired and prejudiced by the continued use of thesame term by the respondent.

Obviously, the petition for review is designed to further delay if not simply evadecompliance with the said final and executory SEC order. Petitioner also seeks a review ofthe orders of execution of the SEC of the said February 14, 1975 order. An order orresolution granting execution of the final judgment cannot be appealed 9 otherwise therewill be no end to the litigation. 10

WHEREFORE, the petition is DISMISSED for lack of merit with costs against petitioner. Thisdecision is immediately executory.

SO ORDERED.

Republic Planters Bank vs. Agana Case DigestRepublic Planters Bank vs. Agana

[GR 51765, 3 March 1997]

Facts: On 18 September 1961, the Robes-Francisco Realty & Development Corpo(RFRDC) secured a loan from the Republic Planters Bank in the amount of P120,000

part of the proceeds of the loan, preferred shares of stocks were issued to RFRDC thits officers then, Adalia F. Robes and one Carlos F. Robes. In other words, instead of

the legal tender totaling to the full amount of the loan, which is P120,000.00, the

lent such amount partially in the form of money and partially in the form of

certificates numbered 3204 and 3205, each for 400 shares with a par value of P10

share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were

name of Adalia F. Robes and Carlos F. Robes, who subsequently, however, endors

shares in favor of Adalia F. Robes.

Said certificates of stock bear the following terms and conditions: "The Preferred

shall have the following rights, preferences, qualifications and limitations, to wit: 1.

right to receive a quarterly dividend of 1%, cumulative and participating. xxx 2. Thapreferred shares may be redeemed, by the system of drawing lots, at any time a

years from the date of issue at the option of the Corporation." On 31 January

RFRDC and Robes proceeded against the Bank and filed a complaint anchored o

alleged rights to collect dividends under the preferred shares in question and to ha

bank redeem the same under the terms and conditions of the stock certificates. Th

filed a Motion to Dismiss 3 private respondents' Complaint on the following ground

that the trial court had no jurisdiction over the subject-matter of the action; (2) th

action was unenforceable under substantive law; and (3) that the action was barred

statute of limitations and/or laches. The bank's Motion to Dismiss was denied by th

court in an order dated 16 March 1979. The bank then filed its Answer on 2 May

Thereafter, the trial court gave the parties 10 days from 30 July 1979 to submi

respective memoranda after the submission of which the case would be deemed sub

for resolution. On 7 September 1979, the trial court rendered the decision in fa

RFRDC and Robes; ordering the bank to pay RFRDC and Robes the face value of the

certificates as redemption price, plus 1% quarterly interest thereon until full payme

bank filed the petition for certiorari with the Supreme Court, essentially on pure qu

of law.


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Issue:

1. Whether the bank can be compelled to redeem the preferred shares issued toRFRDC and Robes.

2. Whether RFRDC and Robes are entitled to the payment of certain rate of intereston the stocks as a matter of right without necessity of a prior declaration ofdividend.

Held:

1. While the stock certificate does allow redemption, the option to do so was clearly vested

in the bank. The redemption therefore is clearly the type known as "optional". Thus,

except as otherwise provided in the stock certificate, the redemption rests entirely with

the corporation and the stockholder is without right to either compel or refuse the

redemption of its stock. Furthermore, the terms and conditions set forth therein use the

word "may". It is a settled doctrine in statutory construction that the word "may" denotes

discretion, and cannot be construed as having a mandatory effect. The redemption of said

shares cannot be allowed. The Central Bank made a finding that the Bank has been

suffering from chronic reserve deficiency, and that such finding resulted in a directive,

issued on 31 January 1973 by then Gov. G. S. Licaros of the Central Bank, to the

President and Acting Chairman of the Board of the bank prohibiting the latter from

redeeming any preferred share, on the ground that said redemption would reduce the

assets of the Bank to the prejudice of its depositors and creditors. Redemption of

preferred shares was prohibited for a just and valid reason. The directive issued by the

Central Bank Governor was obviously meant to preserve the status quo, and to prevent

the financial ruin of a banking institution that would have resulted in adverse

repercussions, not only to its depositors and creditors, but also to the banking industry as

a whole. The directive, in limiting the exercise of a right granted by law to a corporate

entity, may thus be considered as an exercise of police power.

2. Both Section 16 of the Corporation Law and Section 43 of the present Corporation Code

prohibit the issuance of any stock dividend without the approval of stockholders,

representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or

special meeting duly called for the purpose. These provisions underscore the fact that

payment of dividends to a stockholder is not a matter of right but a matter of consensus.Furthermore, "interest bearing stocks", on which the corporation agrees absolutely to pay

interest before dividends are paid to common stockholders, is legal only when construed

as requiring payment of interest as dividends from net earnings or surplus only. In

compelling the bank to redeem the shares and to pay the corresponding dividends, the

Trial committed grave abuse of discretion amounting to lack or excess of jurisdiction in

ignoring both the terms and conditions specified in the stock certificate, as well

clear mandate of the law.

SAMAHAN NG OPTOMETRISTS SA PILIPINAS, ILOCOS SUR-ABRA CHAPTER,EDUARDO MA. GUIRNALDA, DANTE G. PACQUING and OCTAVIO A. DE PERAL

petitioners, vs. ACEBEDO INTERNATIONAL CORPORATION and the HON. COOF APPEALS, respondents.

D E C I S I O N

HERMOSISIMA, JR.,J.:

Before us is a petition seeking the review and ultimately the reversal of the decisionthe Court of Appealsii[2] which rejected what petitioners vehemently claim to be aprohibition, under Republic Act (RA.) No. 1998, popularly known as the old OptometLaw, against the employment by corporations, usually optical shops and eyeware stoof optometrists, such practice, according to petitioners, being an indirect violation ofrule against corporations exercising professions reserved only to natural persons.Petitioners understandably did not welcome the herein assailed decision because thehave, earlier, obtained a decisioniii[3] favorable to them from the Regional Trial CouCandon, Ilocos Sur, Branch 23, presided over by Judge Gabino Balbin, Jr. The said juhad, in the main, ruled that the operations of private respondent Acebedo InternatioCorporation involves the practice of optometry which is precluded by RA. No. 1998.

The undisputed facts of the case, as found by the respondent Court of Appeals and q

by petitioners, are as follows:

"On February 22, 1991, x x x [private respondent] filed an application with the Officthe Mayor of Candon, Ilocos Sur, for the issuance of a permit for the opening andoperation of a branch of the Acebedo Optical in that municipality.

The application was opposed by the x x x [petitioner] Samahan ng Optometrists saPilipinas (SOP) which contended that x x x [private respondent] is a juridical entity nqualified to practice optometry.

On March 6, 1991, x x x [private respondent] filed its answer, arguing it is not thecorporation, but the optometrists employed by it, who would be practicing optometr

On April 17, 1991, the Mayor of Candon created a committee, composed of "public

respondents Eduardo Ma. Guirnalda, Dante G. Pacquing and Octavio de Peralta, to pa[private respondent's] application.

On September 26, 1991 the committee rendered a decision denying [private responapplication for a mayor's permit to operate a branch in Candon and ordering x x x [prespondent] to close its establishment within fifteen (15) days from receipt of the deAcebedo moved for a reconsideration but its motion was denied on November 14, 19


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x x [Private respondent] was ordered to close its establishment within ten (10) days fromreceipt of the order.

On December 9, 1991, x x x [private respondent] filed with the Court of Appeals a petitionfor certiorari(CA G.R SP No. 26782), questioning the decision of respondent committee.Its petition, however, was referred to the court a quo, which on December 16, 1992,dismissed Acebedo's petition. Hence, x x x [the] appeal [to the respondent Court ofAppeals]."iv[4]

The singular issue, admittedly extensively debated and intensely contested not only by the

members of the optometry profession and the players in the business of selling optical

ware, supplies, substances and instruments but also by the members of the Senate duringthe deliberations respecting R A. 8050, otherwise known as Revised New Optometry Law,is this: May corporations, engaged in the business of selling optical wares, supplies,substances and instruments which, as an incident to and in the ordinary course of thebusiness hire optometrists, be said to be practicing the profession of optometry which, bylegal mandate, may only be engaged in by natural persons possessed of specific legalqualifications?

The trial court resolved this issue in the affirmative. In so finding, it explained, thus:

"The denial of the application of Acebedo rested on the grounds that it is operating anoptical shop and it is practicing optometry where its charter does not grant to it authority

to practice the former. Acebedo submits that the findings of the Commission have no basisboth in law and in fact. It argues that the hiring of optometrists by the petitioner is merelyincidental to its main business which is the sale of optical products. Acebedo contendsfurther that its employees have a personality separate and distinct from that of Acebedowhich is a juridical entity, and it cannot therefore be considered as engaged in optometry.

The Court disagrees.

Quoted for the enlightenment of both parties is a portion of the contested Decision, to wit:

'The visit revealed the following:

1. The establishment was manned by three personnel: Dr. Salvador Pagarigan,optometrist; Miss Lilibeth Begonia, receptionist; and a laboratory technician, who refusedto give his name;

2. There were several shelves containing eyeglasses;

3. There were benches where, according to Miss Begonia, would-be clients can sitwhile waiting for their turn to be examined;

4. An examination room complete with an optical chair and optical charts; and,

5. An optical laboratory.'

The Court is very much aware of the existence of several shops owned by Acebedo. are operating up to the present. But the Court has to rely in this case on the findingthe Commission created by the Mayor of Candon in the absence of proof that the samwas arrived at hastily and without regard for the rights of the parties. In fact, thecontested Decision was issued only after an ocular inspection was conducted and theparties have submitted their respective memorandum.

The findings of the Commission reveal that the operation of Acebedo's local shop inv

the practice of optometry. If indeed Acebedo is engaged in the sale of optical produc

absence of sales clerks more than demonstrate its real business. In the contestedDecision, the floor plan of the shop was even commented on as that of an optical shnoted by the members of the Commission, there was also a banner in front of the shprominently display advertising free consultations (libreng consulta sa mata). These taken together, denote that Acebedo was operating in Candon an optical shop contralaw.

While it is also true that a corporation has a personality separate and distinct from tits personnel, the veil of corporate fiction cannot be used for the purpose of some ille

activity. The veil of corporate fiction can be pierced, as in this case, and the acts of tpersonnel of the corporation will be considered as those of the corporation. Acebedois engaged in the practice of optometry."v[5]

Disagreeing with the foregoing decision of the trial court, private respondent appealtherefrom and asked the respondent Court of Appeals to reverse the same on the grthat the court a quo erred in concluding that private respondent was engaged in thepractice of optometry by operating an optical shop.

Respondent appellate court found that private respondent's contentions merited thereversal of the court a quo's decision. The respondent court, speaking through CourtAppeals Presiding Justice, now Supreme Court Associate Justice Vicente V. Mendoza,ratiocinated in this wise:

"First. x x x [Private respondent] maintains that it is not practicing optometry nor ioperating an optical clinic. The contention has merit. The amended Articles ofIncorporation of x x x [private respondent] in part states:

PRIMARY PURPOSES

1. To own, maintain, conduct, operate and carry on the business of dispensingopticians and optical establishments, and in the course of the business, to buy, sell, store and otherwise use, deal in, acquire and dispose of every kind of optical, ophthand scientific instrument, glass, lens, optical solutions or equipment necessary orconvenient to the operation and conduct of the general business of dispensing optici


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SECONDARY PURPOSES

. . . .

3. To do all and everything necessary, suitable or proper for the accomplishment ofany of the purposes, the attainment of any of the objects, or in the exercise of any of thepowers herein set forth, either alone or in conjunction with other corporations, firms orindividuals and either as principal or agents and to do every other act or acts, thing orthings, incidental or appurtenant to or growing out of or connected with theabovementioned objects, purposes or powers.

Clearly, the corporation is not an optical clinic. Nor is it but rather the optometristsemployed by it who are engaged in the practice of optometry. Petitioner-appellantsimply dispenses optical and ophthalmic instruments and supplies.

Indeed, the Optometry Law (Rep. Act No. 1998), which x x x [petitioners] cite, does notprohibit corporations, like x x x [private respondent; from employing licensedoptometrists.

What it prohibits is the practice of the profession without license by those engaged in it.This is clear from Sec. 2 of the law which provides:

No person shall practice or attempt to practice optometry as defined in this Act, withoutholding a valid certificate of registration as optometrist issued to him by the Board ofExaminers in Optometry herein created and in accordance with the provisions hereof:

Provided, that valid certificates of registration as optometrists shall be issued tooptometrists of good moral character now registered in accordance with the provisions ofchapter thirty-three of the Revised Administrative Code, who shall, by application within aperiod of one year from the effectivity of this Act, be exempt from the provisions ofsections eleven, twelve and twenty-three of this Act. . . .

The prohibition is thus addressed to natural persons who are required to have a validcertificate of registration as optometrist' and who must be of 'good moral character'. Theprohibition can have no application to x x x [private respondent] which is not itselfengaged in the practice of optometry. As the Professional Regulation Commission said,"Acebedo Optical, Acebedo Optical Clinic, Acebedo Optical Co., Inc. and AcebedoInternational, Inc. are not natural persons who can take the Optometrist licensureexaminations. They are not, and cannot be registered as Optometrist under RA 1998 [TheOptometry Law].'"vi[6]

Petitioners filed a Motion for Reconsideration of the aforegoing decision. It was, however,denied by respondent appellate court. Hence, this petition anchored on the following soleground:

"ISSUE

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAPRIVATE RESPONDENT ACEBEDO INTERNATIONAL CORPORATION DOES NOT VIOLATHE OPTOMETRY LAW (R. A. NO. 1998) WHEN IT EMPLOYS OPTOMETRISTS TO ENGAIN THE PRACTICE OF OPTOMETRY UNDER ITS NAME AND FOR ITS BEHALF

The herein petitioner most respectfully submits that the private respondent AcebedoInternational Corporation flagrantly violates R. A. No. 1998 and the Corporation Codthe Philippines when it employs optometrists to engage in the practice of optometryits name and for its behalf."vii[7]

We hold that the petition lacks merit.

Private respondent does not deny that it employs optometrists whose role in theoperations of its optical shops is to administer the proper eye examination in order tdetermine the correct type and grade of lenses to prescribe to persons purchasing thsame from private respondent's optical shops. Petitioners vehemently insist that in semploying said optometrists, private respondent is in effect itself practicing optometSuch practice, petitioners conclude, is in violation of RA. No. 1998, which, it must beat this juncture, has been repealed and superseded by RA. 8050.

Petitioners' contentions are, however, untenable. The fact that private respondent hioptometrists who practice their profession in the course of their employment in privarespondent's optical shops, does not translate into a practice of optometry by privat

respondent itself. Private respondent is a corporation created and organized for thepurpose of conducting the business of selling optical lenses or eyeglasses, among otThe clientele of private respondent understably, would largely be composed of persowith defective vision and thus need the proper lenses to correct the same and enablto gain normal vision. The determination of the proper lenses to sell to privaterespondent's clientele entails the employment of optometrists who have been precistrained for that purpose. Private respondent's business is not the determination itsethe proper lenses needed by persons with defective vision. Private respondent's busrather, is the buying and importing of eyeglasses and lenses and other similar or alliinstruments from suppliers thereof and selling the same to consumers.

For petitioners' argument to hold water, there need be clear showing that RA. No. 19prohibits a corporation from hiring optometrists, for only then would it be undeniablyevident that the intention of the legislature is to preclude the formation of the so-caoptometry corporations because such is tantamount to the practice of the professionoptometry which is legally exercisable only by natural persons and professionalpartnerships. We have carefully reviewed RA. No. 1998 however, and we find nothin

therein that supports petitioner's insistent claims.viii[8]

It is significant to note that even under RA. No. 8050, known as the Revised OptomeLaw,ix[9] we find no prohibition against the hiring by corporations of optometrists. Tpertinent provisions of RA. No. 8050, regarding the practice of optometry, are reprobelow for ready reference:


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"THE PRACTICE OF OPTOMETRY

SEC. 4. Acts Constituting the practice of Optometry. Any of the following acts constitutethe practice of optometry:

a) The examination of the human eye through the employment of subjective andobjective procedures, including the use of specific topical diagnostic pharmaceutical agentsor drugs and instruments, tools, equipment, implements, visual aids, apparatuses,machines, ocular exercises and related devices, for the purpose of determining thecondition and acuity of human vision to correct and improve the same in accordance with

subsections (b), (c) and (d) hereof; vision to correct and improve the same in accordance

with subsections (b), (c) and (d) hereof;

b) The prescription and dispensing of ophthalmic lenses, prisms, contact lenses andtheir accessories and solutions, frames and their accessories, and supplies for the purposeof correcting and treating defects, deficiencies and abnormalities of vision.

c) The conduct of ocular exercises and vision training, the provision of orthoptics andother devices and procedures to aid and correct abnormalities of human vision, and theinstallation of prosthetic devices;

d) The counseling of patients with regard to vision and eye care and hygiene;

e) The establishment of offices, clinics, and similar places where optometric servicesare offered; and

f) The collection of professional fees for the performance of any of the actsmentioned in paragraphs (a), (b), (c) and (d) of this section.

SEC. 5. Prohibition Against the Unauthorized Practice of Optometry. - No person shall

practice optometry as defined in Section 3 of this Act nor perform any of the acts,constituting the practice of optometry as setforth in Section 4 hereof, without having beenfirst admitted to the practice of this profession under the provisions of this Act and itsimplementing rules and regulations: Provided, That this prohibition shall not apply toregularly licensed and duly registered physicians who have received post-graduate trainingin the diagnosis and treatment of eye diseases: Provided, however, That the examinationof the human eye by duly registered physicians in connection with the physicalexamination of patients shall not be considered as practice of optometry: Provided,further, That public health workers trained and involved in the government's blindnessprevention program may conduct only visual acuity test and visual screening.

SEC. 6 Disclosure of Authority to Practice. An optometrist shall be required to indicatehis professional license number and the date of its expiration in the documents he issuesor signs in connection with the practice of his profession. He shall also display hiscertificate of registration in a conspicuous area of his clinic or office."

All told, there is no law that prohibits the hiring by corporations of optometrists orconsiders the hiring by corporations of optometrists as a practice by the corporationof the profession of optometry.

WHEREFORE, the instant petition is hereby DISMISSED.

Costs against the petitioners.

SO ORDERED.


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pnb v court of appeals

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