Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISION

G.R. No. 129459 September 29, 1998SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC.,petitioner,vs.COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT CORP. and JNM REALTY AND DEVELOPMENT CORP.,respondents.PANGANIBAN,J.:May corporate treasurer, by herself and without any authorization from he board of directors, validly sell a parcel of land owned by the corporation?. May the veil of corporate fiction be pierced on the mere ground that almost all of the shares of stock of the corporation are owned by said treasurer and her husband?The CaseThese questions are answered in the negative by this Court in resolving the Petition for Review onCertioraribefore us, assailing the March 18, 1997 Decision1of the Court of Appeals2in CA GR CV No. 46801 which, in turn, modified the July 18, 1994 Decision of the Regional Trial Court of Makati, Metro Manila, Branch 633in Civil Case No. 89-3511. The RTC dismissed both the Complaint and the Counterclaim filed by the parties. On the other hand, the Court of Appeals ruled:WHEREFORE, premises considered, the appealed decision is AFFIRMED WITH MODIFICATION ordering defendant-appellee Nenita Lee Gruenberg to REFUND or return to plaintiff-appellant the downpayment of P100,000.00 which she received from plaintiff-appellant. There is no pronouncement as to costs.4The petition also challenges the June 10, 1997 CA Resolution denying reconsideration.5The FactsThe facts as found by the Court of Appeals are as follows:Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc.'s amended complaint alleged that on 14 February 1989, plaintiff-appellant entered into an agreement with defendant-appellee Motorich Sales Corporation for the transfer to it of a parcel of land identified as Lot 30, Block 1 of the Acropolis Greens Subdivision located in the District of Murphy, Quezon City. Metro Manila, containing an area of Four Hundred Fourteen (414) square meters, covered by TCT No. (362909) 2876: that as stipulated in the Agreement of 14 February 1989, plaintiff-appellant paid the downpayment in the sum of One Hundred Thousand (P100,000.00) Pesos, the balance to be paid on or before March 2, 1989; that on March 1, 1989. Mr. Andres T. Co, president of plaintiff-appellant corporation, wrote a letter to defendant-appellee Motorich Sales Corporation requesting for a computation of the balance to be paid: that said letter was coursed through defendant-appellee's broker. Linda Aduca, who wrote the computation of the balance: that on March 2, 1989, plaintiff-appellant was ready with the amount corresponding to the balance, covered by Metrobank Cashier's Check No. 004223, payable to defendant-appellee Motorich Sales Corporation; that plaintiff-appellant and defendant-appellee Motorich Sales Corporation were supposed to meet in the office of plaintiff-appellant but defendant-appellee's treasurer, Nenita Lee Gruenberg, did not appear; that defendant-appellee Motorich Sales Corporation despite repeated demands and in utter disregard of its commitments had refused to execute the Transfer of Rights/Deed of Assignment which is necessary to transfer the certificate of title; that defendant ACL Development Corp. is impleaded as a necessary party since Transfer Certificate of Title No. (362909) 2876 is still in the name of said defendant; while defendant JNM Realty & Development Corp. is likewise impleaded as a necessary party in view of the fact that it is the transferor of right in favor of defendant-appellee Motorich Sales Corporation: that on April 6, 1989, defendant ACL Development Corporation and Motorich Sales Corporation entered into a Deed of Absolute Sale whereby the former transferred to the latter the subject property; that by reason of said transfer, the Registry of Deeds of Quezon City issued a new title in the name of Motorich Sales Corporation, represented by defendant-appellee Nenita Lee Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title No. 3571; that as a result of defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporation's bad faith in refusing to execute a formal Transfer of Rights/Deed of Assignment, plaintiff-appellant suffered moral and nominal damages which may be assessed against defendants-appellees in the sum of Five Hundred Thousand (500,000.00) Pesos; that as a result of defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporation's unjustified and unwarranted failure to execute the required Transfer of Rights/Deed of Assignment or formal deed of sale in favor of plaintiff-appellant, defendants-appellees should be assessed exemplary damages in the sum of One Hundred Thousand (P100,000.00) Pesos; that by reason of defendants-appellees' bad faith in refusing to execute a Transfer of Rights/Deed of Assignment in favor of plaintiff-appellant, the latter lost the opportunity to construct a residential building in the sum of One Hundred Thousand (P100,000.00) Pesos; and that as a consequence of defendants-appellees Nenita Lee Gruenberg and Motorich Sales Corporation's bad faith in refusing to execute a deed of sale in favor of plaintiff-appellant, it has been constrained to obtain the services of counsel at an agreed fee of One Hundred Thousand (P100,000.00) Pesos plus appearance fee for every appearance in court hearings.In its answer, defendants-appellees Motorich Sales Corporation and Nenita Lee Gruenberg interposed as affirmative defense that the President and Chairman of Motorich did not sign the agreement adverted to in par. 3 of the amended complaint; that Mrs. Gruenberg's signature on the agreement (ref: par. 3 of Amended Complaint) is inadequate to bind Motorich. The other signature, that of Mr. Reynaldo Gruenberg, President and Chairman of Motorich, is required: that plaintiff knew this from the very beginning as it was presented a copy of the Transfer of Rights (Annex B of amended complaint) at the time the Agreement (Annex B of amended complaint) was signed; that plaintiff-appellant itself drafted the Agreement and insisted that Mrs. Gruenberg accept the P100,000.00 as earnest money; that granting, without admitting, the enforceability of the agreement, plaintiff-appellant nonetheless failed to pay in legal tender within the stipulated period (up to March 2, 1989); that it was the understanding between Mrs. Gruenberg and plaintiff-appellant that the Transfer of Rights/Deed of Assignment will be signed only upon receipt of cash payment; thus they agreed that if the payment be in check, they will meet at a bank designated by plaintiff-appellant where they will encash the check and sign the Transfer of Rights/Deed. However, plaintiff-appellant informed Mrs. Gruenberg of the alleged availability of the check, by phone, only after banking hours.On the basis of the evidence, the courta quorendered the judgment appealed from[,] dismissing plaintiff-appellant's complaint, ruling that:The issue to be resolved is: whether plaintiff had the right to compel defendants to execute a deed of absolute sale in accordance with the agreement of February 14, 1989: and if so, whether plaintiff is entitled to damage.As to the first question, there is no evidence to show that defendant Nenita Lee Gruenberg was indeed authorized by defendant corporation. Motorich Sales, to dispose of that property covered by T.C.T. No. (362909) 2876. Since the property is clearly owned by the corporation. Motorich Sales, then its disposition should be governed by the requirement laid down in Sec. 40. of the Corporation Code of the Philippines, to wit:Sec. 40, Sale or other disposition of assets. Subject to the provisions of existing laws on illegal combination and monopolies, a corporation may by a majority vote of its board of directors . . . sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets including its goodwill . . . when authorized by the vote of the stockholders representing at least two third (2/3) of the outstanding capital stock . . .No such vote was obtained by defendant Nenita Lee Gruenberg for that proposed sale[;] neither was there evidence to show that the supposed transaction was ratified by the corporation. Plaintiff should have been on the look out under these circumstances. More so, plaintiff himself [owns] several corporations (tsn dated August 16, 1993, p. 3) which makes him knowledgeable on corporation matters.Regarding the question of damages, the Court likewise, does not find substantial evidence to hold defendant Nenita Lee Gruenberg liable considering that she did not in anyway misrepresent herself to be authorized by the corporation to sell the property to plaintiff (tsn dated September 27, 1991, p. 8).In the light of the foregoing, the Court hereby renders judgment DISMISSING the complaint at instance for lack of merit."Defendants" counterclaim is also DISMISSED for lack of basis. (Decision, pp. 7-8;Rollo, pp. 34-35)For clarity, the Agreement dated February 14, 1989 is reproduced hereunder:AGREEMENTKNOW ALL MEN BY THESE PRESENTS:This Agreement, made and entered into by and between:MOTORICH SALES CORPORATION, a corporation duly organized and existing under and by virtue of Philippine Laws, with principal office address at 5510 South Super Hi-way cor. Balderama St., Pio del Pilar. Makati, Metro Manila, represented herein by its Treasurer, NENITA LEE GRUENBERG, hereinafter referred to as the TRANSFEROR; and SAN JUAN STRUCTURAL & STEEL FABRICATORS, a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office address at Sumulong Highway, Barrio Mambungan, Antipolo, Rizal, represented herein by its President, ANDRES T. CO, hereinafter referred to as the TRANSFEREE.WITNESSETH, That:WHEREAS, the TRANSFEROR is the owner of a parcel of land identified as Lot 30 Block 1 of the ACROPOLIS GREENS SUBDIVISION located at the District of Murphy, Quezon City, Metro Manila, containing an area of FOUR HUNDRED FOURTEEN (414) SQUARE METERS, covered by a TRANSFER OF RIGHTS between JNM Realty & Dev. Corp. as the Transferor and Motorich Sales Corp. as the Transferee;NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have agreed as follows:1. That the purchase price shall be at FIVE THOUSAND TWO HUNDRED PESOS (P5,200.00) per square meter; subject to the following terms:a. Earnest money amounting to ONE HUNDRED THOUSAND PESOS (P100,000.00), will be paid upon the execution of this agreement and shall form part of the total purchase price;b. Balance shall be payable on or before March 2, 1989;2. That the monthly amortization for the month of February 1989 shall be for the account of the Transferor; and that the monthly amortization starting March 21, 1989 shall be for the account of the Transferee;The transferor warrants that he [sic] is the lawful owner of the above-described property and that there [are] no existing liens and/or encumbrances of whatsoever nature;In case of failure by the Transferee to pay the balance on the date specified on 1, (b), the earnest money shall be forfeited in favor of the Transferor.That upon full payment of the balance, the TRANSFEROR agrees to execute a TRANSFER OF RIGHTS/DEED OF ASSIGNMENT in favor of the TRANSFEREE.IN WITNESS WHEREOF, the parties have hereunto set their hands this 14th day of February, 1989 at Greenhills, San Juan, Metro Manila, Philippines.MOTORICH SALES CORPORATION SAN JUAN STRUCTURAL & STEEL FABRICATORSTRANSFEROR TRANSFEREE[SGD.] [SGD.]By. NENITA LEE GRUENBERG By: ANDRES T. COTreasurer PresidentSigned In the presence of:[SGD.] [SGD.] 6In its recourse before the Court of Appeals, petitioner insisted:1. Appellant is entitled to compel the appellees to execute a Deed of Absolute Sale in accordance with the Agreement of February 14, 1989,2. Plaintiff is entitled to damages.7As stated earlier, the Court of Appeals debunked petitioner's arguments and affirmed the Decision of the RTC with the modification that Respondent Nenita Lee Gruenberg was ordered to refund P100,000 to petitioner, the amount remitted as "downpayment" or "earnest money." Hence, this petition before us.8The IssuesBefore this Court, petitioner raises the following issues:I. Whether or not the doctrine of piercing the veil of corporate fiction is applicable in the instant caseII. Whether or not the appellate court may consider matters which the parties failed to raise in the lower courtIII. Whether or not there is a valid and enforceable contract between the petitioner and the respondent corporationIV. Whether or not the Court of Appeals erred in holding that there is a valid correction/substitution of answer in the transcript of stenographic note[s].V. Whether or not respondents are liable for damages and attorney's fees9The Court synthesized the foregoing and will thus discuss themseriatimas follows:1. Was there a valid contract of sale between petitioner and Motorich?2. May the doctrine of piercing the veil of corporate fiction be applied to Motorich?3. Is the alleged alteration of Gruenberg's testimony as recorded in the transcript of stenographic notes material to the disposition of this case?4. Are respondents liable for damages and attorney's fees?The Court's RulingThe petition is devoid of merit.First Issue: Validity of AgreementPetitioner San Juan Structural and Steel Fabricators, Inc. alleges that on February 14, 1989, it entered through its president, Andres Co, into the disputed Agreement with Respondent Motorich Sales Corporation, which was in turn allegedly represented by its treasurer, Nenita Lee Gruenberg. Petitioner insists that "[w]hen Gruenberg and Co affixed their signatures on the contract they both consented to be bound by the terms thereof." Ergo, petitioner contends that the contract is binding on the two corporations. We do not agree.True, Gruenberg and Co signed on February 14, 1989, the Agreement, according to which a lot owned by Motorich Sales Corporation was purportedly sold. Such contract, however, cannot bind Motorich, because it never authorized or ratified such sale.A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of the corporation is not the property of its stockholders or members and may not be sold by the stockholders or members without express authorization from the corporation's board of directors.10Section 23 of BP 68, otherwise known as the Corporation Code of the Philippines, provides;Sec. 23.The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified.Indubitably, a corporation may act only through its board of directors or, when authorized either by its bylaws or by its board resolution, through its officers or agents in the normal course of business. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, bylaws, or relevant provisions of law.11Thus, this Court has held that "a corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that the authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred."12Furthermore, the Court has also recognized the rule that "persons dealing with an assumed agent, whether the assumed agency be a general or special one bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19)."13Unless duly authorized, a treasurer, whose powers are limited, cannot bind the corporation in a sale of its assets.14In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita Gruenberg, its treasurer, to sell the subject parcel of land.15Consequently, petitioner had the burden of proving that Nenita Gruenberg was in fact authorized to represent and bind Motorich in the transaction. Petitioner failed to discharge this burden. Its offer of evidence before the trial court contained no proof of such authority.16It has not shown any provision of said respondent's articles of incorporation, bylaws or board resolution to prove that Nenita Gruenberg possessed such power.That Nenita Gruenberg is the treasurer of Motorich does not free petitioner from the responsibility of ascertaining the extent of her authority to represent the corporation. Petitioner cannot assume that she, by virtue of her position, was authorized to sell the property of the corporation. Selling is obviously foreign to a corporate treasurer's function, which generally has been described as "to receive and keep the funds of the corporation, and to disburse them in accordance with the authority given him by the board or the properly authorized officers."17Neither was such real estate sale shown to be a normal business activity of Motorich. The primary purpose of Motorich is marketing, distribution, export and import in relation to a general merchandising business.18Unmistakably, its treasurer is not cloaked with actual or apparent authority to buy or sell real property, an activity which falls way beyond the scope of her general authority.Art. 1874 and 1878 of the Civil Code of the Philippines provides:Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing: otherwise, the sale shall be void.Art. 1878. Special powers of attorney are necessary in the following case:xxx xxx xxx(5) To enter any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;xxx xxx xxx.Petitioner further contends that Respondent Motorich has ratified said contract of sale because of its "acceptance of benefits," as evidenced by the receipt issued by Respondent Gruenberg.19Petitioner is clutching at straws.As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exceed their authority, their actions "cannot bind the corporation, unless it has ratified such acts or is estopped from disclaiming them."20In this case, there is a clear absence of proof that Motorich ever authorized Nenita Gruenberg, or made it appear to any third person that she had the authority, to sell its land or to receive the earnest money. Neither was there any proof that Motorich ratified, expressly or impliedly, the contract. Petitioner rests its argument on the receipt which, however, does not prove the fact of ratification. The document is a hand-written one, not a corporate receipt, and it bears only Nenita Gruenberg's signature. Certainly, this document alone does not prove that her acts were authorized or ratified by Motorich.Art. 1318 of the Civil Code lists the requisites of a valid and perfected contract: "(1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established." As found by the trial court21and affirmed by the Court of Appeals,22there is no evidence that Gruenberg was authorized to enter into the contract of sale, or that the said contract was ratified by Motorich. This factual finding of the two courts is binding on this Court.23As the consent of the seller was not obtained, no contract to bind the obligor was perfected. Therefore, there can be no valid contract of sale between petitioner and Motorich.Because Motorich had never given a written authorization to Respondent Gruenberg to sell its parcel of land, we hold that the February 14, 1989 Agreement entered into by the latter with petitioner is void under Article 1874 of the Civil Code. Being inexistent and void from the beginning, said contract cannot be ratified.24Second Issue:Piercing the Corporate Veil Not JustifiedPetitioner also argues that the veil of corporate fiction of Motorich should be pierced, because the latter is a close corporation. Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or almost all or 99.866% to be accurate, of the subscribed capital stock"25of Motorich, petitioner argues that Gruenberg needed no authorization from the board to enter into the subject contract.26It adds that, being solely owned by the Spouses Gruenberg, the company can treated as a close corporation which can be bound by the acts of its principal stockholder who needs no specific authority. The Court is not persuaded.First, petitioner itself concedes having raised the issue belatedly,27not having done so during the trial, but only when it filed its sur-rejoinder before the Court of Appeals.28Thus, this Court cannot entertain said issue at this late stage of the proceedings. It is well-settled the points of law, theories and arguments not brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal.29Allowing petitioner to change horses in midstream, as it were, is to run roughshod over the basic principles of fair play, justice and due process.Second, even if the above mentioned argument were to be addressed at this time, the Court still finds no reason to uphold it. True, one of the advantages of a corporate form of business organization is the limitation of an investor's liability to the amount of the investment.30This feature flows from the legal theory that a corporate entity is separate and distinct from its stockholders. However, the statutorily granted privilege of a corporate veil may be used only for legitimate purposes.31On equitable considerations, the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter ego or business conduit of a person or an instrumentality, agency or adjunct of another corporation.32Thus, the Court has consistently ruled that "[w]hen the fiction is used as a means of perpetrating a fraud or an illegal act or as vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals."33We stress that the corporate fiction should be set aside when it becomes a shield against liability for fraud, illegality or inequity committed on third persons. The question of piercing the veil of corporate fiction is essentially, then, a matter of proof. In the present case, however, the Court finds no reason to pierce the corporate veil of Respondent Motorich. Petitioner utterly failed to establish that said corporation was formed, or that it is operated, for the purpose of shielding any alleged fraudulent or illegal activities of its officers or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the expense of third persons like petitioner.Petitioner claims that Motorich is a close corporation. We rule that it is not. Section 96 of the Corporation Code defines a close corporation as follows:Sec. 96. Definition and Applicability of Title. A close corporation, within the meaning of this Code, is one whose articles of incorporation provide that: (1) All of the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) All of the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall be deemed not a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code. . . . .The articles of incorporation34of Motorich Sales Corporation does not contain any provision stating that (1) the number of stockholders shall not exceed 20, or (2) a preemption of shares is restricted in favor of any stockholder or of the corporation, or (3) listing its stocks in any stock exchange or making a public offering of such stocks is prohibited. From its articles, it is clear that Respondent Motorich is not a close corporation.35Motorich does not become one either, just because Spouses Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed capital stock. The "[m]ere ownership by a single stockholder or by another corporation of all or capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personalities."36So, too, a narrow distribution of ownership does not, by itself, make a close corporation.Petitioner citesManuel R. Dulay Enterprises, Inc. v. Court of Appeals37wherein the Court ruled that ". . . petitioner corporation is classified as a close corporation and, consequently, a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president."38But the factual milieu inDulayis not on all fours with the present case. InDulay, the sale of real property was contracted by the president of a close corporation with the knowledge and acquiescence of its board of directors.39In the present case, Motorich is not a close corporation, as previously discussed, and the agreement was entered into by the corporate treasurer without the knowledge of the board of directors.The Court is not unaware that there are exceptional cases where "an action by a director, who singly is the controlling stockholder, may be considered as a binding corporate act and a board action as nothing more than a mere formality."40The present case, however, is not one of them.As stated by petitioner, Spouses Reynaldo and Nenita Gruenberg own "almost 99.866%" of Respondent Motorich.41Since Nenita is not the sole controlling stockholder of Motorich, the aforementioned exception does not apply. Grantingarguendothat the corporate veil of Motorich is to be disregarded, the subject parcel of land would then be treated as conjugal property of Spouses Gruenberg, because the same was acquired during their marriage. There being no indication that said spouses, who appear to have been married before the effectivity of the Family Code, have agreed to a different property regime, their property relations would be governed by conjugal partnership of gains.42As a consequence, Nenita Gruenberg could not have effected a sale of the subject lot because "[t]here is no co-ownership between the spouses in the properties of the conjugal partnership of gains. Hence, neither spouse can alienate in favor of another his or interest in the partnership or in any property belonging to it; neither spouse can ask for a partition of the properties before the partnership has been legally dissolved."43Assuming further, for the sake of argument, that the spouses' property regime is the absolute community of property, the sale would still be invalid. Under this regime, "alienation of community property must have the written consent of the other spouse or he authority of the court without which the disposition or encumbrance isvoid."44Both requirements are manifestly absent in the instant case.Third Issue: Challenged Portion of TSN ImmaterialPetitioner calls our attention to the following excerpt of the transcript of stenographic notes (TSN):Q Did you ever represent to Mr. Co that you were authorized by the corporation to sell the property?A Yes, sir.45Petitioner claims that the answer "Yes" was crossed out, and, in its place was written a "No" with an initial scribbled above it.46This, however, is insufficient to prove that Nenita Gruenberg was authorized to represent Respondent Motorich in the sale of its immovable property. Said excerpt be understood in the context of her whole testimony. During her cross-examination. Respondent Gruenberg testified:Q So, you signed in your capacity as the treasurer?[A] Yes, sir.Q Even then you kn[e]w all along that you [were] not authorized?A Yes, sir.Q You stated on direct examination that you did not represent that you were authorized to sell the property?A Yes, sir.Q But you also did not say that you were not authorized to sell the property, you did not tell that to Mr. Co, is that correct?A That was not asked of me.Q Yes, just answer it.A I just told them that I was the treasurer of the corporation and it [was] also the president who [was] also authorized to sign on behalf of the corporation.Q You did not say that you were not authorized nor did you say that you were authorized?A Mr. Co was very interested to purchase the property and he offered to put up a P100,000.00 earnest money at that time. That was our first meeting.47Clearly then, Nenita Gruenberg did not testify that Motorich had authorized her to sell its property. On the other hand, her testimony demonstrates that the president of Petitioner Corporation, in his great desire to buy the property, threw caution to the wind by offering and paying the earnest money without first verifying Gruenberg's authority to sell the lot.Fourth Issue:Damages and Attorney's FeesFinally, petitioner prays for damages and attorney's fees, alleging that "[i]n an utter display of malice and bad faith, respondents attempted and succeeded in impressing on the trial court and [the] Court of Appeals that Gruenberg did not represent herself as authorized by Respondent Motorich despite the receipt issued by the former specifically indicating that she was signing on behalf of Motorich Sales Corporation. Respondent Motorich likewise acted in bad faith when it claimed it did not authorize Respondent Gruenberg and that the contract [was] not binding, [insofar] as it [was] concerned, despite receipt and enjoyment of the proceeds of Gruenberg's act."48Assuming that Respondent Motorich was not a party to the alleged fraud, petitioner maintains that Respondent Gruenberg should be held liable because she "acted fraudulently and in bad faith [in] representing herself as duly authorized by [R]espondent [C]orporation."49As already stated, we sustain the findings of both the trial and the appellate courts that the foregoing allegations lack factual bases. Hence, an award of damages or attorney's fees cannot be justified. The amount paid as "earnest money" was not proven to have redounded to the benefit of Respondent Motorich. Petitioner claims that said amount was deposited to the account of Respondent Motorich, because "it was deposited with the account of Aren Commercial c/o Motorich Sales Corporation."50Respondent Gruenberg, however, disputes the allegations of petitioner. She testified as follows:Q You voluntarily accepted the P100,000.00, as a matter of fact, that was encashed, the check was encashed.A Yes. sir, the check was paid in my name and I deposit[ed] it.Q In your account?A Yes, sir.51In any event, Gruenberg offered to return the amount to petitioner ". . . since the sale did not push through."52Moreover, we note that Andres Co is not a neophyte in the world of corporate business. He has been the president of Petitioner Corporation for more than ten years and has also served as chief executive of two other corporate entities.53Co cannot feign ignorance of the scope of the authority of a corporate treasurer such as Gruenberg. Neither can he be oblivious to his duty to ascertain the scope of Gruenberg's authorization to enter into a contract to sell a parcel of land belonging to Motorich.Indeed, petitioner's claim of fraud and bad faith is unsubstantiated and fails to persuade the Court. Indubitably, petitioner appears to be the victim of its own officer's negligence in entering into a contract with and paying an unauthorized officer of another corporation.As correctly ruled by the Court of Appeals, however, Nenita Gruenberg should be ordered to return to petitioner the amount she received as earnest money, as "no one shall enrich himself at the expense of another."54a principle embodied in Article 2154 of Civil Code.55Although there was no binding relation between them, petitioner paid Gruenberg on the mistaken belief that she had the authority to sell the property of Motorich.56Article 2155 of Civil Code provides that "[p]ayment by reason of a mistake in the contruction or application of a difficult question of law may come within the scope of the preceding article."WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 173463 October 13, 2010GLOBAL BUSINESS HOLDINGS, INC. (formerly Global Business Bank, Inc.), Petitioner,vs.SURECOMP SOFTWARE, B.V., Respondent.

D E C I S I O N

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated May 5, 2006 and the Resolution2 dated July 10, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 75524.

The facts of the case are as follows:

On March 29, 1999, respondent Surecomp Software, B.V. (Surecomp), a foreign corporation duly organized and existing under the laws of the Netherlands, entered into a software license agreement with Asian Bank Corporation (ABC), a domestic corporation, for the use of its IMEX Software System (System) in the banks computer system for a period of twenty (20) years.3

In July 2000, ABC merged with petitioner Global Business Holdings, Inc. (Global),4 with Global as the surviving corporation. When Global took over the operations of ABC, it found the System unworkable for its operations, and informed Surecomp of its decision to discontinue with the agreement and to stop further payments thereon. Consequently, for failure of Global to pay its obligations under the agreement despite demands, Surecomp filed a complaint for breach of contract with damages before the Regional Trial Court (RTC) of Makati. The case was docketed as Civil Case No. 01-1278.5

In its complaint, Surecomp alleged that it is a foreign corporation not doing business in the Philippines and is suing on an isolated transaction. Pursuant to the agreement, it installed the System in ABCs computers for a consideration of US$298,000.00 as license fee. ABC also undertook to pay Surecomp professional services, which included on-site support and development of interfaces, and annual maintenance fees for five (5) subsequent anniversaries, and committed to purchase one (1) or two (2) Remote Access solutions at discounted prices. In a separate transaction, ABC requested Surecomp to purchase on its behalf a software called MF Cobol Runtime with a promise to reimburse its cost. Notwithstanding the delivery of the product and the services provided, Global failed to pay and comply with its obligations under the agreement. Thus, Surecomp demanded payment of actual damages amounting to US$319,955.00 and an additional amount of US$227,610.00 for Globals unilateral pretermination of the agreement, exemplary damages, attorneys fees and costs of suit.6

Instead of filing an answer, Global filed a motion to dismiss based on two grounds: (1) that Surecomp had no capacity to sue because it was doing business in the Philippines without a license; and (2) that the claim on which the action was founded was unenforceable under the Intellectual Property Code of the Philippines.7

On the first ground, Global argued that the contract entered into was not an isolated transaction since the contract was for a period of 20 years. Furthermore, Global stressed that it could not be held accountable for any breach as the agreement was entered into between Surecomp and ABC. It had not, in any manner, taken part in the negotiation and execution of the agreement but merely took over the operations of ABC as a result of the merger. On the second ground, Global averred that the agreement, being a technology transfer arrangement, failed to comply with Sections 87 and 88 of the Intellectual Property Code of the Philippines.8

In the interim, Global filed a motion for leave to serve written interrogatories to Surecomp in preparation for the hearing on the motion to dismiss, attaching thereto its written interrogatories.

After an exchange of pleadings on the motions filed by Global, on June 18, 2002, the RTC issued an Order,9 the pertinent portions of which read:

After a thorough and careful deliberation of the respective arguments advanced by the parties in support of their positions in these two (2) incidents, and since it cannot be denied that there is indeed a contract entered into between the plaintiff [Surecomp] and the defendant [Global], the latter as a successor in interest of the merging corporation Asian Bank, defendant [Global] is estopped from denying plaintiffs [Surecomps] capacity to sue it for alleged breach of that contract with damages. Its argument that it was not the one who actually contracted with the plaintiff [Surecomp] as it was the merging Asian Bank which did, is of no moment as it does not relieve defendant Global Bank of its contractual obligation under the Agreement on account of its undertaking under it:

"x x x shall be responsible for all the liabilities and obligations of ASIANBANK in the same manner as if the Merged Bank had itself incurred such liabilities or obligations, and any pending claim, action or proceeding brought by or against ASIANBANK may be prosecuted by or against the Merged Bank. The right of creditors or liens upon the property of ASIANBANK shall not be impaired by the merger; provided that the Merged Bank shall have the right to exercise all defenses, rights, privileges, set-offs and counter-claims of every kind and nature which ASIANBANK may have, or with the Merged Bank may invoke under existing laws."

It appearing however that the second ground relied upon by the defendant [Global], i.e., that the cause of action of the plaintiff is anchored on an unenforceable contract under the provision of the Intellectual Property Code, will require a hearing before the motion to dismiss can be resolved and considering the established jurisprudence in this jurisdiction, that availment of mode of discovery by any of the parties to a litigation, shall be liberally construed to the end that the truth of the controversy on hand, shall be ascertained at a less expense with the concomitant facility and expeditiousness, the motion to serve written interrogatories upon the plaintiff [Surecomp] filed by the defendant [Global] is GRANTED insofar as the alleged unenforceability of the subject contract is concerned. Accordingly, the latter is directed to serve the written interrogatories upon the plaintiff [Surecomp], which is required to act on it in accordance with the pertinent rule on the matter.

Necessarily, the resolution of the motion to dismiss is held in abeyance until after a hearing on it is property conducted, relative to the second ground aforementioned.

SO ORDERED.10

Surecomp moved for partial reconsideration, praying for an outright denial of the motion to dismiss, while Global filed a motion for reconsideration.11

On November 27, 2002, the RTC issued an Order,12 the fallo of which reads:

WHEREFORE, the Order of this Court dated 18 June 2002 is modified. Defendants [Globals] Motion to Dismiss dated 17 October 2001 is denied on the two grounds therein alleged. Defendant [Global] is given five (5) days from receipt of this Order within which to file its Answer.

The resolution of defendants [Globals] Motion to Serve Written Interrogatories is held in abeyance pending the filing of the Answer.

SO ORDERED.13

In partially modifying the first assailed Order, the RTC ratiocinated, viz.:

This court sees no reason to further belabor the issue on plaintiffs capacity to sue since there is a prima facie showing that defendant entered into a contract with defendant and having done so, willingly, it cannot now be made to raise the issue of capacity to sue [Merrill Lynch Futures, Inc. v. CA, 211 SCRA 824]. That defendant was not aware of plaintiffs lack of capacity to sue or that defendant did not benefit from the transaction are arguments that are hardly supported by the evidence already presented for the resolution of the Motion to Dismiss.

As to the issue of unenforceability of the subject contract under the Intellectual Property Code, this court finds justification in modifying the earlier Order allowing the further presentation of evidence. It appearing that the subject contract between the parties is an executed, rather than an executory, contract the statute of frauds therefore finds no application here.

x x x x

As to defendants Motion to Serve Written Interrogatories, this court finds that resort to such a discovery mechanism while laudable is premature as defendant has yet to file its Answer. As the case now stands, the issues are not yet joined and the disputed facts are not clear.14

Undaunted, Global filed a petition for certiorari with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction under Rule 65 of the Rules of Court before the CA, contending that the RTC abused its discretion and acted in excess of its jurisdiction.15

On May 5, 2006, the CA rendered a Decision,16 the dispositive portion of which reads:

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Orders dated June 18, 2002 and November 27, 2002 of the Regional Trial Court of Makati City, Branch 146, in Civil Case No. 01-1278 are hereby AFFIRMED.

SO ORDERED.17

A motion for reconsideration was filed by Global. On July 10, 2006, the CA issued a Resolution18 denying the motion for reconsideration for lack of merit.

Hence, this petition.

Global presents the following issues for resolution: (1) whether a special civil action for certiorari is the proper remedy for a denial of a motion to dismiss; and (2) whether Global is estopped from questioning Surecomps capacity to sue.19

The petition is bereft of merit.

I

An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a case as it leaves something to be done by the court before the case is finally decided on the merits. As such, the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari which is a remedy designed to correct errors of jurisdiction and not errors of judgment.20

To justify the grant of the extraordinary remedy of certiorari, the denial of the motion to dismiss must have been tainted with grave abuse of discretion. By "grave abuse of discretion" is meant such capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act all in contemplation of law.21

In the instant case, Global did not properly substantiate its claim of arbitrariness on the part of the trial court judge that issued the assailed orders denying the motion to dismiss. In a petition for certiorari, absent such showing of arbitrariness, capriciousness, or ill motive in the disposition of the trial judge in the case, we are constrained to uphold the courts ruling, especially because its decision was upheld by the CA.

II

The determination of a corporations capacity is a factual question that requires the elicitation of a preponderant set of facts.22 As a rule, unlicensed foreign non-resident corporations doing business in the Philippines cannot file suits in the Philippines.23 This is mandated under Section 133 of the Corporation Code, which reads:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines, but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

A corporation has a legal status only within the state or territory in which it was organized. For this reason, a corporation organized in another country has no personality to file suits in the Philippines. In order to subject a foreign corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from the Securities and Exchange Commission and appoint an agent for service of process. Without such license, it cannot institute a suit in the Philippines.241avvphi1

The exception to this rule is the doctrine of estoppel. Global is estopped from challenging Surecomps capacity to sue.

A foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen or a Philippine entity that had contracted with and benefited from it.25 A party is estopped from challenging the personality of a corporation after having acknowledged the same by entering into a contract with it.26 The principle is applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract. 27

Due to Globals merger with ABC and because it is the surviving corporation, it is as if it was the one which entered into contract with Surecomp. In the merger of two existing corporations, one of the corporations survives and continues the business, while the other is dissolved, and all its rights, properties, and liabilities are acquired by the surviving corporation.28 This is particularly true in this case. Based on the findings of fact of the RTC, as affirmed by the CA, under the terms of the merger or consolidation, Global assumed all the liabilities and obligations of ABC as if it had incurred such liabilities or obligations itself. In the same way, Global also has the right to exercise all defenses, rights, privileges, and counter-claims of every kind and nature which ABC may have or invoke under the law. These findings of fact were never contested by Global in any of its pleadings filed before this Court.

WHEREFORE, in view of the foregoing, the Decision dated May 5, 2006 and the Resolution dated July 10, 2006 of the Court of Appeals in CA-G.R. SP No. 75524 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. Nos. 116124-25 November 22, 2000BIBIANO O. REYNOSO, IV, petitioner,vs.HON. COURT OF APPEALS and GENERAL CREDIT CORPORATION, respondents.

D E C I S I O NYNARES-SANTIAGO, J.:Assailed in this petition for review is the consolidated decision of the Court of Appeals dated July 7, 1994, which reversed the separate decisions of the Regional Trial Court of Pasig City and the Regional Trial Court of Quezon City in two cases between petitioner Reynoso and respondent General Credit Corporation (GCC).Sometime in the early 1960s, the Commercial Credit Corporation (hereinafter, CCC), a financing and investment firm, decided to organize franchise companies in different parts of the country, wherein it shall hold thirty percent (30%) equity. Employees of the CCC were designated as resident managers of the franchise companies. Petitioner Bibiano O. Reynoso, IV was designated as the resident manager of the franchise company in Quezon City, known as the Commercial Credit Corporation of Quezon City (hereinafter, CCC-QC).CCC-QC entered into an exclusive management contract with CCC whereby the latter was granted the management and full control of the business activities of the former. Under the contract, CCC-QC shall sell, discount and/or assign its receivables to CCC. Subsequently, however, this discounting arrangement was discontinued pursuant to the so-called DOSRI Rule, prohibiting the lending of funds by corporations to its directors, officers, stockholders and other persons with related interests therein.On account of the new restrictions imposed by the Central Bank policy by virtue of the DOSRI Rule, CCC decided to form CCC Equity Corporation, (hereinafter, CCC-Equity), a wholly-owned subsidiary, to which CCC transferred its thirty (30%) percent equity in CCC-QC, together with two seats in the latters Board of Directors.Under the new set-up, several officials of Commercial Credit Corporation, including petitioner Reynoso, became employees of CCC-Equity. While petitioner continued to be the Resident Manager of CCC-QC, he drew his salaries and allowances from CCC-Equity. Furthermore, although an employee of CCC-Equity, petitioner, as well as all employees of CCC-QC, became qualified members of the Commercial Credit Corporation Employees Pension Plan.As Resident Manager of CCC-QC, petitioner oversaw the operations of CCC-QC and supervised its employees. The business activities of CCC-QC pertain to the acceptance of funds from depositors who are issued interest-bearing promissory notes. The amounts deposited are then loaned out to various borrowers. Petitioner, in order to boost the business activities of CCC-QC, deposited his personal funds in the company. In return, CCC-QC issued to him its interest-bearing promissory notes.On August 15, 1980, a complaint for sum of money with preliminary attachment,[1] docketed as Civil Case No. Q-30583, was instituted in the then Court of First Instance of Rizal by CCC-QC against petitioner, who had in the meantime been dismissed from his employment by CCC-Equity. The complaint was subsequently amended in order to include Hidelita Nuval, petitioners wife, as a party defendant.[2] The complaint alleged that petitioner embezzled the funds of CCC-QC amounting to P1,300,593.11. Out of this amount, at least P630,000.00 was used for the purchase of a house and lot located at No. 12 Macopa Street, Valle Verde I, Pasig City. The property was mortgaged to CCC, and was later foreclosed.In his amended Answer, petitioner denied having unlawfully used funds of CCC-QC and asserted that the sum of P1,300,593.11 represented his money placements in CCC-QC, as shown by twenty-three (23) checks which he issued to the said company.[3]The case was subsequently transferred to the Regional Trial Court of Quezon City, Branch 86, pursuant to the Judiciary Reorganization Act of 1980.On January 14, 1985, the trial court rendered its decision, the decretal portion of which states:Premises considered, the Court finds the complaint without merit. Accordingly, said complaint is hereby DISMISSED.By reason of said complaint, defendant Bibiano Reynoso IV suffered degradation, humiliation and mental anguish.On the counterclaim, which the Court finds to be meritorious, plaintiff corporation is hereby ordered:a) to pay defendant the sum of P185,000.00 plus 14% interest per annum from October 2, 1980 until fully paid;b) to pay defendant P3,639,470.82 plus interest thereon at the rate of 14% per annum from June 24, 1981, the date of filing of Amended Answer, until fully paid; from this amount may be deducted the remaining obligation of defendant under the promissory note of October 24, 1977, in the sum of P9,738.00 plus penalty at the rate of 1% per month from December 24, 1977 until fully paid;c) to pay defendants P200,000.00 as moral damages;d) to pay defendants P100,000.00 as exemplary damages;e) to pay defendants P25,000.00 as and for attorneys fees; plus costs of the suit.SO ORDERED.Both parties appealed to the then Intermediate Appellate Court. The appeal of Commercial Credit Corporation of Quezon City was dismissed for failure to pay docket fees. Petitioner, on the other hand, withdrew his appeal.Hence, the decision became final and, accordingly, a Writ of Execution was issued on July 24, 1989.[4] However, the judgment remained unsatisfied,[5]prompting petitioner to file a Motion for Alias Writ of Execution, Examination of Judgment Debtor, and to Bring Financial Records for Examination to Court. CCC-QC filed an Opposition to petitioners motion,[6] alleging that the possession of its premises and records had been taken over by CCC.Meanwhile, in 1983, CCC became known as the General Credit Corporation.On November 22, 1991, the Regional Trial Court of Quezon City issued an Order directing General Credit Corporation to file its comment on petitioners motion for alias writ of execution.[7] General Credit Corporation filed a Special Appearance and Opposition on December 2, 1991,[8] alleging that it was not a party to the case, and therefore petitioner should direct his claim against CCC-QC and not General Credit Corporation. Petitioner filed his reply,[9] stating that the CCC-QC is an adjunct instrumentality, conduit and agency of CCC. Furthermore, petitioner invoked the decision of the Securities and Exchange Commission in SEC Case No. 2581, entitled, Avelina G. Ramoso, et al., Petitioner versus General Credit Corp., et al., Respondents, where it was declared that General Credit Corporation, CCC-Equity and other franchised companies including CCC-QC were declared as one corporation.On December 9, 1991, the Regional Trial Court of Quezon City ordered the issuance of an alias writ of execution.[10] On December 20, 1991, General Credit Corporation filed an Omnibus Motion,[11] alleging that SEC Case No. 2581 was still pending appeal, and maintaining that the levy on properties of the General Credit Corporation by the deputy sheriff of the court was erroneous.In his Opposition to the Omnibus Motion, petitioner insisted that General Credit Corporation is just the new name of Commercial Credit Corporation; hence, General Credit Corporation and Commercial Credit Corporation should be treated as one and the same entity.On February 13, 1992, the Regional Trial Court of Quezon City denied the Omnibus Motion.[12] On March 5, 1992, it issued an Order directing the issuance of an alias writ of execution.[13]Previously, on February 21, 1992, General Credit Corporation instituted a complaint before the Regional Trial Court of Pasig against Bibiano Reynoso IV and Edgardo C. Tanangco, in his capacity as Deputy Sheriff of Quezon City,[14] docketed as Civil Case No. 61777, praying that the levy on its parcel of land located in Pasig, Metro Manila and covered by Transfer Certificate of Title No. 29940 be declared null and void, and that defendant sheriff be enjoined from consolidating ownership over the land and from further levying on other properties of General Credit Corporation to answer for any liability under the decision in Civil Case No. Q-30583.The Regional Trial Court of Pasig, Branch 167, did not issue a temporary restraining order. Thus, General Credit Corporation instituted two (2) petitions for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27518[15] and CA-G.R. SP No. 27683. These cases were later consolidated.On July 7, 1994, the Court of Appeals rendered a decision in the two consolidated cases, the dispositive portion of which reads:WHEREFORE, in SP No. 27518 we declare the issue of the respondent courts refusal to issue a restraining order as having been rendered moot by our Resolution of 7 April 1992 which, by way of injunctive relief, provided that the respondents and their representatives are hereby enjoined from conducting an auction sale (on execution) of petitioners properties as well as initiating similar acts of levying (upon) and selling on execution other properties of said petitioner. The injunction thus granted, as modified by the words in parenthesis, shall remain in force until Civil Case No. 61777 shall have been finally terminated.In SP No. 27683, we grant the petition for certiorari and accordingly NULLIFY and SET ASIDE, for having been issued in excess of jurisdiction, the Order of 13 February 1992 in Civil Case No. Q-30583 as well as any other order or process through which the petitioner is made liable under the judgment in said Civil Case No. Q-30583.No damages and no costs.SO ORDERED.[16]Hence, this petition for review anchored on the following arguments:1. THE HONORABLE COURT OF APPEALS ERRED IN CA-G.R. SP NO. 27683 WHEN IT NULLIFIED AND SET ASIDE THE 13 FEBRUARY 1992 ORDER AND OTHER ORDERS OR PROCESS OF BRANCH 86 OF THE REGIONAL TRIAL COURT OF QUEZON CITY THROUGH WHICH GENERAL CREDIT CORPORATION IS MADE LIABLE UNDER THE JUDGMENT THAT WAS RENDERED IN CIVIL CASE NO. Q-30583.2. THE HONORABLE COURT OF APPEALS ERRED IN CA-G.R. SP NO. 27518 WHEN IT ENJOINED THE AUCTION SALE ON EXECUTION OF THE PROPERTIES OF GENERAL CREDIT CORPORATION AS WELL AS INITIATING SIMILAR ACTS OF LEVYING UPON AND SELLING ON EXECUTION OF OTHER PROPERTIES OF GENERAL CREDIT CORPORATION.3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT GENERAL CREDIT CORPORATION IS A STRANGER TO CIVIL CASE NO. Q-30583, INSTEAD OF, DECLARING THAT COMMERCIAL CREDIT CORPORATION OF QUEZON CITY IS THE ALTER EGO, INSTRUMENTALITY, CONDUIT OR ADJUNCT OF COMMERCIAL CREDIT CORPORATION AND ITS SUCCESSOR GENERAL CREDIT CORPORATION.At the outset, it must be stressed that there is no longer any controversy over petitioners claims against his former employer, CCC-QC, inasmuch as the decision in Civil Case No. Q-30583 of the Regional Trial Court of Quezon City has long become final and executory. The only issue, therefore, to be resolved in the instant petition is whether or not the judgment in favor of petitioner may be executed against respondent General Credit Corporation. The latter contends that it is a corporation separate and distinct from CCC-QC and, therefore, its properties may not be levied upon to satisfy the monetary judgment in favor of petitioner. In short, respondent raises corporate fiction as its defense. Hence, we are necessarily called upon to apply the doctrine of piercing the veil of corporate entity in order to determine if General Credit Corporation, formerly CCC, may be held liable for the obligations of CCC-QC.The petition is impressed with merit.A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.[17] It is an artificial being invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.[18] It was evolved to make possible the aggregation and assembling of huge amounts of capital upon which big business depends. It also has the advantage of non-dependence on the lives of those who compose it even as it enjoys certain rights and conducts activities of natural persons.Precisely because the corporation is such a prevalent and dominating factor in the business life of the country, the law has to look carefully into the exercise of powers by these artificial persons it has created.Any piercing of the corporate veil has to be done with caution. However, the Court will not hesitate to use its supervisory and adjudicative powers where the corporate fiction is used as an unfair device to achieve an inequitable result, defraud creditors, evade contracts and obligations, or to shield it from the effects of a court decision. The corporate fiction has to be disregarded when necessary in the interest of justice.In First Philippine International Bank v. Court of Appeals, et al.,[19] we held:When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals.Also in the above-cited case, we stated that this Court has pierced the veil of corporate fiction in numerous cases where it was used, among others, to avoid a judgment credit;[20] to avoid inclusion of corporate assets as part of the estate of a decedent;[21] to avoid liability arising from debt;[22] when made use of as a shield to perpetrate fraud and/or confuse legitimate issues;[23] or to promote unfair objectives or otherwise to shield them.[24]In the appealed judgment, the Court of Appeals sustained respondents arguments of separateness and its character as a different corporation which is a non-party or stranger to this case.The defense of separateness will be disregarded where the business affairs of a subsidiary corporation are so controlled by the mother corporation to the extent that it becomes an instrument or agent of its parent. But even when there is dominance over the affairs of the subsidiary, the doctrine of piercing the veil of corporate fiction applies only when such fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime.[25]We stated in Tomas Lao Construction v. National Labor Relations Commission,[26] that the legal fiction of a corporation being a judicial entity with 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 and circumvent the law.Precisely for the above reasons, we grant the instant petition.It is obvious that the use by CCC-QC of the same name of Commercial Credit Corporation was intended to publicly identify it as a component of the CCC group of companies engaged in one and the same business, i.e., investment and financing. Aside from CCC-Quezon City, other franchise companies were organized such as CCC-North Manila and CCC-Cagayan Valley. The organization of subsidiary corporations as what was done here is usually resorted to for the aggrupation of capital, the ability to cover more territory and population, the decentralization of activities best decentralized, and the securing of other legitimate advantages. But when the mother corporation and its subsidiary cease to act in good faith and honest business judgment, when the corporate device is used by the parent to avoid its liability for legitimate obligations of the subsidiary, and when the corporate fiction is used to perpetrate fraud or promote injustice, the law steps in to remedy the problem. When that happens, the corporate character is not necessarily abrogated. It continues for legitimate objectives. However, it is pierced in order to remedy injustice, such as that inflicted in this case.Factually and legally, the CCC had dominant control of the business operations of CCC-QC. The exclusive management contract insured that CCC-QC would be managed and controlled by CCC and would not deviate from the commands of the mother corporation. In addition to the exclusive management contract, CCC appointed its own employee, petitioner, as the resident manager of CCC-QC.Petitioners designation as resident manager implies that he was placed in CCC-QC by a superior authority. In fact, even after his assignment to the subsidiary corporation, petitioner continued to receive his salaries, allowances, and benefits from CCC, which later became respondent General Credit Corporation. Not only that. Petitioner and the other permanent employees of CCC-QC were qualified members and participants of the Employees Pension Plan of CCC.There are other indications in the record which attest to the applicability of the identity rule in this case, namely: the unity of interests, management, and control; the transfer of funds to suit their individual corporate conveniences; and the dominance of policy and practice by the mother corporation insure that CCC-QC was an instrumentality or agency of CCC.As petitioner stresses, both CCC and CCC-QC were engaged in the same principal line of business involving a single transaction process. Under their discounting arrangements, CCC financed the operations of CCC-QC. The subsidiary sold, discounted, or assigned its accounts receivables to CCC.The testimony of Joselito D. Liwanag, accountant and auditor of CCC since 1971, shows the pervasive and intensive auditing function of CCC over CCC-QC.[27] The two corporations also shared the same office space. CCC-QC had no office of its own.The complaint in Civil Case No. Q-30583, instituted by CCC-QC, was even verified by the director-representative of CCC. The lawyers who filed the complaint and amended complaint were all in-house lawyers of CCC.The challenged decision of the Court of Appeals states that CCC, now General Credit Corporation, is not a formal party in the case. The reason for this is that the complaint was filed by CCC-QC against petitioner. The choice of parties was with CCC-QC. The judgment award in this case arose from the counterclaim which petitioner set up against CCC-QC.The circumstances which led to the filing of the aforesaid complaint are quite revealing. As narrated above, the discounting agreements through which CCC controlled the finances of its subordinates became unlawful when Central Bank adopted the DOSRI prohibitions. Under this rule the directors, officers, and stockholders are prohibited from borrowing from their company. Instead of adhering to the letter and spirit of the regulations by avoiding DOSRI loans altogether, CCC used the corporate device to continue the prohibited practice. CCC organized still another corporation, the CCC-Equity Corporation. However, as a wholly owned subsidiary, CCC-Equity was in fact only another name for CCC. Key officials of CCC, including the resident managers of subsidiary corporations, were appointed to positions in CCC-Equity.In order to circumvent the Central Banks disapproval of CCC-QCs mode of reducing its DOSRI lender accounts and its directive to follow Central Bank requirements, resident managers, including petitioner, were told to observe a pseudo-compliance with the phasing out orders. For his unwillingness to satisfactorily conform to these directives and his reluctance to resort to illegal practices, petitioner earned the ire of his employers. Eventually, his services were terminated, and criminal and civil cases were filed against him.Petitioner issued twenty-three checks as money placements with CCC-QC because of difficulties faced by the firm in implementing the required phase-out program. Funds from his current account in the Far East Bank and Trust Company were transferred to CCC-QC. These monies were alleged in the criminal complaints against him as having been stolen. Complaints for qualified theft and estafa were brought by CCC-QC against petitioner. These criminal cases were later dismissed. Similarly, the civil complaint which was filed with the Court of First Instance of Pasig and later transferred to the Regional Trial Court of Quezon City was dismissed, but his counterclaims were granted.Faced with the financial obligations which CCC-QC had to satisfy, the mother firm closed CCC-QC, in obvious fraud of its creditors. CCC-QC, instead of opposing its closure, cooperated in its own demise. Conveniently, CCC-QC stated in its opposition to the motion for alias writ of execution that all its properties and assets had been transferred and taken over by CCC.Under the foregoing circumstances, the contention of respondent General Credit Corporation, the new name of CCC, that the corporate fiction should be appreciated in its favor is without merit.Paraphrasing the ruling in Claparols v. Court of Industrial Relations,[28] reiterated in Concept Builders Inc. v. National Labor Relations,[29] it is very obvious that respondent seeks the protective shield of a corporate fiction whose veil the present case could, and should, be pierced as it was deliberately and maliciously designed to evade its financial obligation of its employees.If the corporate fiction is sustained, it becomes a handy deception to avoid a judgment debt and work an injustice. The decision raised to us for review is an invitation to multiplicity of litigation. As we stated in Islamic Directorate vs. Court of Appeals,[30] the ends of justice are not served if further litigation is encouraged when the issue is determinable based on the records.A court judgment becomes useless and ineffective if the employer, in this case CCC as a mother corporation, is placed beyond the legal reach of the judgment creditor who, after protracted litigation, has been found entitled to positive relief. Courts have been organized to put an end to controversy. This purpose should not be negated by an inapplicable and wrong use of the fiction of the corporate veil.WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and ASIDE. The injunction against the holding of an auction sale for the execution of the decision in Civil Case No. Q-30583 of properties of General Credit Corporation, and the levying upon and selling on execution of other properties of General Credit Corporation, is LIFTED.SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. 142616 July 31, 2001PHILIPPINE NATIONAL BANK,petitioner,vs.RITRATTO GROUP INC., RIATTO INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE,respondents.KAPUNAN,J.:In a petition for review on certiorari under Rule 45 of the Revised Rules of Court, petitioner seeks to annul and set aside the Court of Appeals' decision in C.A. CV G.R. S.P. No. 55374 dated March 27, 2000, affirming the Order issuing a writ of preliminary injunction of the Regional Trial Court of Makati, Branch 147 dated June 30, 1999, and its Order dated October 4, 1999, which denied petitioner's motion to dismiss.The antecedents of this case are as follows:Petitioner Philippine National Bank is a domestic corporation organized and existing under Philippine law. Meanwhile, respondents Ritratto Group, Inc., Riatto International, Inc. and Dadasan General Merchandise are domestic corporations, likewise, organized and existing under Philippine law.On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a subsidiary company of PNB, organized and doing business in Hong Kong, extended a letter of credit in favor of the respondents in the amount of US$300,000.00 secured by real estate mortgages constituted over four (4) parcels of land in Makati City. This credit facility was later increased successively to US$1,140,000.00 in September 1996; to US$1,290,000.00 in November 1996; to US$1,425,000.00 in February 1997; and decreased to US$1,421,316.18 in April 1998. Respondents made repayments of the loan incurred by remitting those amounts to their loan account with PNB-IFL in Hong Kong.However, as of April 30, 1998, their outstanding obligations stood at US$1,497,274.70. Pursuant to the terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact PNB, notified the respondents of the foreclosure of all the real estate mortgages and that the properties subject thereof were to be sold at a public auction on May 27, 1999 at the Makati City Hall.On May 25, 1999, respondents filed a complaint for injunction with prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order before the Regional Trial Court of Makati. The Executive Judge of the Regional Trial Court of Makati issued a 72-hour temporary restraining order. On May 28, 1999, the case was raffled to Branch 147 of the Regional Trial Court of Makati. The trial judge then set a hearing on June 8, 1999. At the hearing of the application for preliminary injunction, petitioner was given a period of seven days to file its written opposition to the application. On June 15, 1999, petitioner filed an opposition to the application for a writ of preliminary injunction to which the respondents filed a reply. On June 25, 1999, petitioner filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of any privity between the petitioner and respondents. On June 30, 1999, the trial court judge issued an Order for the issuance of a writ of preliminary injunction, which writ was correspondingly issued on July 14, 1999. On October 4, 1999, the motion to dismiss was denied by the trial court judge for lack of merit.Petitioner, thereafter, in a petition forcertiorariand prohibition assailed the issuance of the writ of preliminary injunction before the Court of Appeals. In the impugned decision,1the appellate court dismissed the petition. Petitioner thus seeks recourse to this Court and raises the following errors:1.THE COURT OF APPEALS PALPABLY ERRED IN NOT DISMISSING THE COMPLAINTA QUO, CONSIDERING THAT BY THE ALLEGATIONS OF THE COMPLAINT, NO CAUSE OF ACTION EXISTS AGAINST PETITIONER, WHICH IS NOT A REAL PARTY IN INTEREST BEING A MERE ATTORNEY-IN-FACT AUTHORIZED TO ENFORCE AN ANCILLARY CONTRACT.2.THE COURT OF APPEALS PALPABLY ERRED IN ALLOWING THE TRIAL COURT TO ISSUE IN EXCESS OR LACK OF JURISDICTION A WRIT OF PRELIMINARY INJUNCTION OVER AND BEYOND WHAT WAS PRAYED FOR IN THE COMPLAINT A QUO CONTRARY TOCHIEF OF STAFF, AFP VS. GUADIZ JR., 101 SCRA 827.2Petitioner prays,inter alia, that the Court of Appeals' Decision dated March 27, 2000 and the trial court's Orders dated June 30, 1999 and October 4, 1999 be set aside and the dismissal of the complaint in the instant case.3In their Comment, respondents argue that even assumingarguendothat petitioner and PNB-IFL are two separate entities, petitioner is still the party-in-interest in the application for preliminary injunction because it is tasked to commit acts of foreclosing respondents' properties.4Respondents maintain that the entire credit facility is void as it contains stipulations in violation of the principle of mutuality of contracts.5In addition, respondents justified the act of the courta quoin applying the doctrine of "Piercing the Veil of Corporate Identity" by stating that petitioner is merely analter egoor a business conduit of PNB-IFL.6The petition is impressed with merit.Respondents, in their complaint, anchor their prayer for injunction on alleged invalid provisions of the contract:GROUNDSITHE DETERMINATION OF THE INTEREST RATES BEING LEFT TO THE SOLE DISCRETION OF THE DEFENDANT PNB CONTRAVENES THE PRINCIPAL OF MUTUALITY OF CONTRACTS.IITHERE BEING A STIPULATION IN THE LOAN AGREEMENT THAT THE RATE OF INTEREST AGREED UPON MAY BE UNILATERALLY MODIFIED BY DEFENDANT, THERE WAS NO STIPULATION THAT THE RATE OF INTEREST SHALL BE REDUCED IN THE EVENT THAT THE APPLICABLE MAXIMUM RATE OF INTEREST IS REDUCED BY LAW OR BY THE MONETARY BOARD.7Based on the aforementioned grounds, respondents sought to enjoin and restrain PNB from the foreclosure and eventual sale of the property in order to protect their rights to said property by reason of void credit facilities as bases for the real estate mortgage over the said property.8The contract questioned is one entered into between respondent and PNB-IFL, not PNB. In their complaint, respondents admit that petitioner is a mere attorney-in-fact for the PNB-IFL with full power and authority to,inter alia, foreclose on the properties mortgaged to secure their loan obligations with PNB-IFL. In other words, herein petitioner is an agent with limited authority and specific duties under a special power of attorney incorporated in the real estate mortgage. It is not privy to the loan contracts entered into by respondents and PNB-IFL.The issue of the validity of the loan contracts is a matter between PNB-IFL, the petitioner's principal and the party to the loan contracts, and the respondents. Yet, despite the recognition that petitioner is a mere agent, the respondents in their complaint prayed that the petitioner PNB be ordered to re-compute the rescheduling of the interest to be paid by them in accordance with the terms and conditions in the documents evidencing the credit facilities, and crediting the amount previously paid to PNB by herein respondents.9Clearly, petitioner not being a part to the contract has no power to re-compute the interest rates set forth in the contract. Respondents, therefore, do not have any cause of action against petitioner.The trial court, however, in its Order dated October 4, 1994, ruled that since PNB-IFL, is a wholly owned subsidiary of defendant Philippine National Bank, the suit against the defendant PNB is a suit against PNB-IFL.10In justifying its ruling, the trial court, citing the case ofKoppel Phil. Inc. vs. Yatco,11reasoned that the corporate entity may be disregarded where a corporation is the mere alter ego, or business conduit of a person or where the corporation is so organized and controlled and its affairs are so conducted, as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.12We disagree.The general rule is that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter.13The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiary's separate existence may be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The courts may in the exercise of judicial discretion step in to prevent the abuses of separate entity privilege and pierce the veil of corporate entity.We find, however, that the ruling inKoppelfinds no application in the case at bar. In said case, this Court disregarded the separate existence of the parent and the subsidiary on the ground that the latter was formed merely for the purpose of evading the payment of higher taxes. In the case at bar, respondents fail to show any cogent reason why the separate entities of the PNB and PNB-IFL should be disregarded.While there exists no definite test of general application in determining when a subsidiary may be treated as a mere instrumentality of the parent corporation, some factors have been identified that will justify the application of the treatment of the doctrine of the piercing of the corporate veil. The case ofGarrett vs. Southern Railway Co.14is enlightening. The case involved a suit against the Southern Railway Company. Plaintiff was employed by Lenoir Car Works and alleged that he sustained injuries while working for Lenoir. He, however, filed a suit against Southern Railway Company on the ground that Southern had acquired the entire capital stock of Lenoir Car Works, hence, the latter corporation was but a mere instrumentality of the former. The Tennessee Supreme Court stated that as a general rule the stock ownership alone by one corporation of the stock of another does not thereby render the dominant corporation liable for the torts of the subsidiary unless the separate corporate existence of the subsidiary is a mere sham, or unless the control of the subsidiary is such that it is but an instrumentality or adjunct of the dominant corporation. Said Court then outlined the circumstances which may be useful in the determination of whether the subsidiary is but a mere instrumentality of the parent-corporation:The Circumstance rendering the subsidiary an instrumentality. It is manifestly impossible to catalogue the infinite variations of fact that can arise but there are certain common circumstances which are important and which, if present in the proper combination, are controlling.These are as follows:(a) The parent corporation owns all or most of the capital stock of the subsidiary.(b) The parent and subsidiary corporations have common directors or officers.(c) The parent corporation finances the subsidiary.(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.(e) The subsidiary has grossly inadequate capital.(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.(g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation.(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own.(i) The parent corporation uses the property of the subsidiary as its own.(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take their orders from the parent corporation.(k) The formal legal requirements of the subsidiary are not observed.The Tennessee Supreme Court thus ruled:In the case at bar only two of the eleven listed indicia occur, namely, the ownership of most of the capital stock of Lenoir by Southern, and possibly subscription to the capital stock of Lenoir. . . The complaint must be dismissed.Similarly, in this jurisdiction, we have held that the doctrine of piercing the corporate veil is an equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the merealter egoor business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.15InConcept Builders, Inc. v. NLRC,16we have laid the test in determining the applicability of the doctrine of piercing the veil of corporate fiction, to wit:1. Control, not mere majority or complete control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own.2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and, unjust act in contravention of plaintiffs legal rights; and,3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.The absence of any one of these elements prevents "piercing the corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to the operation.17Aside from the fact that PNB-IFL is a wholly owned subsidiary of petitioner PNB, there is no showing of the indicative factors that the former corporation is a mere instrumentality of the latter are present. Neither is there a demonstration that any of the evils sought to be prevented by the doctrine of piercing the corporate veil exists. Inescapably, therefore, the doctrine of piercing the corporate veil based on the alter ego or instrumentality doctrine finds no application in the case at bar.In any case, the parent-subsidiary relationship between PNB and PNB-IFL is not the significant legal relationship involved in this case since the petitioner was not sued because it is the parent company of PNB-IFL. Rather, the petitioner was sued because it acted as an attorney-in-fact of PNB-IFL in initiating the foreclosure proceedings. A suit against an agent cannot without compelling reasons be considered a suit against the principal. Under the Rules of Court, every action must be prosecuted or defended in the name of the real party-in-interest, unless otherwise authorized by law or these Rules.18In mandatory terms, the Rules require that "parties-in-interest without whom no final determination can be had, an action shall be joined either as plaintiffs or defendants."19In the case at bar, the injunction suit is directed only against the agent, not the principal.Anent the issuance of the preliminary injunction, the same must be lifted as it is a mere provisional remedy but adjunct to the main suit.20A writ of preliminary injunction is an ancillary or preventive remedy that may only be resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action. The dismissal of the principal action thus results in the denial of the prayer for the issuance of the writ. Further, there is no showing that respondents are entitled to the issuance of the writ. Section 3, Rule 58, of the 1997 Rules of Civil Procedure provides:SECTION 3.Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established:(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually,(b) That the commission, continuance or non-performance of the acts or acts complained of during the litigation would probably work injustice to the applicant; or(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.Thus, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation.21Respondents do not deny their indebtedness. Their properties are by their own choice encumbered by real estate mortgages. Upon the non-payment of the loans, which were secured by the mortgages sought to be foreclosed, the mortgaged properties are properly subject to a foreclosure sale. Moreover, respondents questioned the alleged void stipulations in the contract only when petitioner initiated the foreclosure proceedings. Clearly, respondents have failed to prove that they have a right protected and that the acts against which the writ is to be directed are violative of said right.22The Court is not unmindful of the findings of both the trial court and the appellate court that there may be serious grounds to nullify the provisions of the loan agreement. However, as earlier discussed, respondents committed the mistake of filing the case against the wrong party, thus, they must suffer the consequences of their error.All told, respondents do not have a cause of action against the petitioner as the latter is not privy to the contract the provisions of which respondents seek to declare void. Accordingly, the case before the Regional Trial Court must be dismissed and the preliminary injunction issued in connection therewith, must be lifted.IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED. The Orders dated June 30, 1999 and October 4, 1999 of the Regional Trial Court of Makati, Branch 147 in Civil Case No. 99-1037 are hereby ANNULLED and SET ASIDE and the complaint in said case DISMISSED.SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 150283 April 16, 2008RYUICHI YAMAMOTO,petitioner,vs.NISHINO LEATHER INDUSTRIES, INC. and IKUO NISHINO,respondents.D E C I S I O NCARPIO MORALES,J.:In 1983, petitioner, Ryuichi Yamamoto (Yamamoto), a Japanese national, organized under Philippine laws Wako Enterprises Manila, Incorporated (WAKO), a corporation engaged principally in leather tanning, now known as Nishino Leather Industries, Inc. (NLII), one of herein respondents.In 1987, Yamamoto and the other respondent, Ikuo Nishino (Nishino), also a Japanese national, forged a Memorandum of Agreement under which they agreed to enter into a joint venture wherein Nishino would acquire s