331 Phil. 795
TORRES, JR., J.:
Milagros Matuguina became the majority stockholder of MIWPI on September 24, 1974, when the latter’s Board of Directors approved by Resolution the transfer of 1,000,000 shares from Henry Wee to Milagros Matuguina, thus giving her seventy percent (70%) stock ownership of MIWPI.
Name No. Of Shares Subscribed Amount of Capital Stock Subscribed 1. Henry Wee 1,160,000 1,160,000.00 2. Ma. Milagros Matuguina 400,000 400,000.00 3. Alejandro Chua Chun 200,000 200,000.00 4. Bernadita Chua 120,000 120,000.00 5. Domingo Herrera 40,000 40,000.00 6. Manuel Hernaez 40,000 40,000.00 7. Luis Valderama 40,000 40,000.00 2,000,000 2,000,000.00
When the Decision of the Minister of Natural Resources became final and executory, Philip Co and DAVENCOR requested the respondent Minister on October 30, 1986 to issue immediately a writ of execution against MLE and/or MIWPI.[9] The Order of Execution[10] was issued on January 6, 1987 by the Minister through the latter’s Assistant on Legal Affairs. The said Order directed the issuance of a writ of execution, not only against MLE, but likewise against MIWPI. The dispositive portion of the order provides:DECISION
"For our Resolution is the appeal by MATUGUINA LOGGING ENTERPRISES (MLR, for short) of the Order dated 15 July 1991 of the Director of Forest Development finding and declaring MLE to have encroached upon, and conducted illegal logging operations within the license or concession area of DAVAO ENTERPRISES CORPORATION. The aforesaid Order dispositively states:"WHEREFORE, there being a clear and convincing proof that Matuguina Conducted illegal operation within the licensed area of DAVENCOR, above named respondent is hereby ordered to pay to the complainant the equivalent value in pesos of 2,352.04 cubic meters of timber based on the market price obtaining, at the logpond of the respondent at the time of cutting, minus the cost of production, or to restitute to the complainant equal volume of 2,352.04 cubic meters of logs owned by respondent to be taken at respondent’s logpond. The respondent is hereby directed to comply with this Order within a period of ninety (90) days from receipt of this Order and after the lapse of the said period, no compliance has been made by the respondent, its logging operations shall ipso facto become automatically suspended until respondent shall have complied as directed.And that the dispositive portion of the said decision states;
The Regional Director of Region II, Davao City is hereby instructed to implement this Order and to submit his compliance report within ten (10) days after the lapse of the ninety (90) days period within which the respondent is directed to comply with this order"
"WHEREFORE, the Order dated 15 July 1981 of the Director of Forest Development is hereby AFFIRMED."
"WHEREFORE, let a Writ of Execution be issued against Matuguina Logging Enterprises and/or Matuguina Integrated Wood Products, Inc. For the satisfaction of the Decision of the Bureau of Forest Development dated 15 July 1981, and the Order of this office dated 1 October 1986.Subsequently, a writ of execution[11] dated January 8, 1987 was issued in favor of the respondent DAVENCOR, which states:
SO ORDERED."
"The City/Provincial SheriffOn February 11, 1987, MIWPI filed the instant complaint[12] for prohibition, damages and injunction, with prayer for restraining order, which case was docketed as Civil Case No. 18,457-87 in the Regional Trial Court -- Davao City, Branch 17. MIWPI stated its primary cause of action, the relevant portion of which reads, viz.:
Davao City
GREETINGS:
You are hereby directed to enforce, implement and execute the Order of Execution dated 06 June 1987 of this Office in the above-entitled case against Matuguina Logging Enterprises and/or Matuguina Integrated Wood Products, Inc. its officers or any person or corporation in its behalf and conformably with the Order dated 15 July 1981 of the Director of Forest Development, stating dispositively.xxx
You are hereby requested to submit your return to this Office within the period of sixty (60) days from your receipt hereof as to action taken hereon.
SO ORDERED."
"5. That plaintiff which has a distinct and separate personality of its own under the law, and was never a party to the case between DAVENCOR and MLE, suddenly became a party to the case after the decision became final and executory with the issuance of Annex "B" hereof for reasons known to the defendants alone:MIWPI, likewise alleges that in wantonly and imprudently procuring the Writ of Execution against it, which DAVENCOR and Philip Co seek to enforce a 2.5 Million Peso liability of plaintiff, the latter has been constrained to bring the present action, thereby incurring damages in the sum of P500,000.00 in concept of actual and compensatory damages, and P250,000.00 in attorney’s fees, which amount petitioner now seeks to recover.
6. That the issuance of Annex ‘B’ hereof (the order of execution) by the defendant Minister has been made not only without or in excess of his authority but that the same was issued patently without any factual or legal basis, hence, a gross violation of plaintiff’s constitutional rights under the due process clause;
7. That plaintiff, in the face of the order (Annex ‘B’) complained of, there being no appeal or any plain, speedy, and adequate remedy in the ordinary course of law, does not have any alternative but to ventilate the present recourse;
8. That defendant Minister is doing, threatens or is about to do, or is procuring or suffering to be done, some act which definitely is in violation of the plaintiff’s rights respecting the subject matter of the action, and unless said act or acts are restrained or prohibited at least during the pendency of this case, said act or acts would probably work not only injustice to plaintiff but world tend to render the judgment of this Honorable court ineffectual;
9. That the commission or continuance of the acts complained of during the present litigation would not only cause great and irreparable injury, but will also work injustice to the plaintiff, and would complicate, aggravate and multiply the issues in this case;
10. That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consist in restraining the commission or continuance of the acts complained of, or in the performance of acts, either for a limited period or perpetually;
11. That great and irreparable injury would inevitably result to the plaintiff before the matter can be heard on notice, hence, immediate issuance of a restraining order is necessary and proper;
12. That the plaintiff is willing and able to file the necessary bond executed to the defendants, in an amount to be fixed by the Court, to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the court should finally decide that the plaintiff was not entitled thereto."
"7. That neither Milagros Matuguina nor Matuguina Integrated Wood Products, Inc. advised defendant Davencor of the change of name, and transfer of management of PTL No. 30. From Milagros Matuguina to Matuguina Integrated Wood Products, Inc., during the pendency of MNR Case No. 6540 before the Bureau of Forest Develoment and the Ministry of Natural Resources, notwithstanding that the lawyer of matuguina Integrated Wood Products, Inc., who was also a stockholder thereof, had appeared for Milagros Matuguina in said administrative case.Meanwhile, on June 2, 1987, the trial court issued an order[18] granting the petitioner’s prayer for the issuance of a writ of preliminary injunction against the private respondents and the Secretary of Natural Resources, ordering them to desist, refrain and prevent from enforcing respondent Secretary’s Decision dated October 1, 1986 as well as the writ of execution dated January 8, 1987.
8. That plaintiff has acted in bad faith and is now in estoppel from questioning the Writ of Execution issued against Milagros Matuguina (now Matuguina Integrated Wood Products, Inc.) to satisfy the judgment in MNR Case No. 6540.
9. This Honorable Court has no jurisdiction over the nature and subject matter of this action, especially because:
(a) The plaintiff has not exhausted administrative remedies available to it before initiating this action;
(b) In the guise of entertaining an action for damages, this Court is being misled by the plaintiff into deciding questions properly for the Department of Natural Resources to decide exclusively in the lawful exercise of its regulatory jurisdiction;
(c) The plaintiff is now precluded and estopped from filing this action.
10. The plaintiff has no cause of action against the defendants and has not stated any in its complaint, especially because:
(a) Having failed to exhaust administrative remedies, plaintiff is without a ripe cause of action that can be pleaded before this Honorable Court;
(b) In substance, there is no justifiable question raised under the facts and circumstances of this case.
"WHEREFORE, in view of the foregoing, finding the evidence of plaintiff, Matuguina Integrated Wood Products, Inc. sufficient to sustain a preponderance of evidence, showing that the order of execution dated January 6, 1987, issued by the Minister of Natural Resources, through Alexander C. Castro, Assistant Minister for Legal Affairs, included therein, plaintiff Matuguina Integrated Wood Products, Inc., despite non-inclusion of plaintiff in the decision of the then Minister of Natural Resources, dated October 1, 1986, already final and executory before the issuance of the order and execution, said order or execution is hereby declared null and void and without any legal effect.Private respondents appealed the trial court’s decision on May 19, 1989. Their notice of appeal was approved by the trial court. The appealed case was docketed with respondent Honorable Court of Appeals as CA-G.R. SP No. 19887.
As a consequence thereof, the writ of preliminary injunction issued by this court, dated June 2, 1987 is hereby made permanent.
Moreover, as a result of the filing of this case, defendant Philip Co and Davencor Corporation, are ordered to jointly and severally pay the amount of P100,000.00 as actual and compensatory damages, along with another amount of P20,000.00 as attorney’s fees and costs of this action, in favor of plaintiff Matuguina Integrated Wood Products, Inc.
SO ORDERED."
"WHEREFORE, premises considered, the decision appealed from is reversed and set aside and the Order of Execution issued by the Minister of Natural Resources dated January 6, 1987 is affirmed. Without pronouncement as to costs.In due time, petitioner filed a motion for reconsideration.[21] Private respondents filed their opposition[22] to the same on April 2, 1991. In a Resolution[23] dated April 12, 1991, the motion was denied by the respondent Court.
SO ORDERED."
Private Respondent DAVENCOR and the public respondent Hon. Minister (now Secretary) of Natural Resources filed separate Comments[26] on September 5, 1991 and June 8, 1992 respectively.I
PETITIONER WAS DENIED DUE PROCESS OF LAW WHEN IT WAS MADE LIABLE BY RESPONDENT SECRETARY OF NATURAL RESOURCES IN HIS ORDER OF EXECUTION DATED 06 JANUARY 1987 (EXHIBIT "B" OF ATTACHMENT "O") ISSUED IN MNR CASE NO. 6540 DESPITE THE FACT THAT PETITIONER WAS NEVER A PARTY NOR A PARTICIPANT IN THE SAID CASE: IN FACT, PETITIONER NEVER HAD NOTICE OF THE PROCEEDINGS IN MNR CASE NO. 6540.II
THE FAILURE TO AFFORD PETITIONER THE OPPORTUNITY TO BE HEARD IN THE ADMINISTRATIVE LEVEL (MNR CASE NO. 6540) COULD NOT HAVE BEEN CURED BY THE INSTITUTION OF THE ACTION FOR PROHIBITION IN THE TRIAL COURT BECAUSE SAID COURT HAD NO JURISDICTION TO DETERMINE WHETHER PETITIONER WAS GUILTY OF ENCROACHMENT ON PRIVATE RESPONDENT DAVENCOR’S TIMBER CONCESSION; FURTHERMORE, THE QUESTION ON WHETHER PETITIONER WAS GUILTY OF ENCROACHMENT WAS NEVER PUT IN ISSUE IN THE CASE BEFORE THE TRIAL COURT.III
THE LIABILITY OF MILAGROS/MLE AS FOUND BY RESPONDENT SECRETARY IN ITS DECISION DATED 01 OCTOBER 1986 (EXHIBIT "A" OF THE ATTACHMENT "0") CANNOT BE IMPUTED AGAINST PETITIONER SINCE THE LATTER IS A CORPORATION HAVING A PERSONALITY SEPARATE AND DISTINCT FROM MILAGROS/MLE.IV
PETITIONER CANNOT BE MADE LIABLE TO PRIVATE RESPONDENTS UNDER THE DEED OF TRANSFER DATED 18 JULY 1975 (EXHIBIT "3" OF ATTACHMENT "P") AND SECTION 61 OF THE REVISED FORESTRY CODE OF THE PHILIPPINES (P.D. 705, AS AMENDED):
A. THE ALLEGED TRANSFER OF PTL NO. 30 FROM MILAGROS/MLE TO PETITIONER NEVER BECAME BINDING AND EFFECTIVE SINCE PTL NO. 30 REMAINED IN THE NAME OF MILAGROS/MLE UNTIL ITS EXPIRATION ON 30 JUNE 1977: THIS IS DUE TO THE FACT THAT SAID TRANSFER WAS NEVER APPROVED BY THE SECRETARY OF NATURAL RESOURCES.
B. GRANTING ARGUENDO THAT THERE WAS AN EFFECTIVE TRANSFER OF PTL NO. 30 FROM MILAGROS/MLE TO PETITIONER, THE TRANSFER COULD NOT MAKE PETITIONER LIABLE FOR THE ALLEGED ENCROACHMENT OF PRIVATE RESPONDENT DAVENCOR’S TIMBER CONCESSION, SINCE:
1. SAID TRANSFER WAS EXECUTED PRIOR TO THE COMMISSION OF THE ALLEGED ENCROACHMENT AND THE FILING OF THE ADMINISTRATIVE COMPLAINT FOR ENCROACHMENT DATED 28 JULY 1975; THUS, PETITIONER CANNOT BE MADE LIABLE FOR OBLIGATONS OF MILAGROS/MLE WHICH WERE INCURRED AFTER DATE OF THE SAID TRANSFER.
2. SAID TRANSFER COVERED ONLY FORESTRY CHARGES AND OTHER GOVERNMENT FEES, AND DID NOT INCLUDE THE PERSONAL LIABILITY OF MILAGROS/MLE THAT AROSE FROM THE ENCROACHMENT OF THE TIMBER CONCESSION OF RESPONDENT DAVENCOR.[25]
As observed by the appellate court, to wit:Continuing, the said court stated further that:
"the appellant should have filed a Motion with the Minister with Notice to the appellee to include the latter as party liable for the judgment in order to afford the appellee an opportunity to be heard on its liability for the judgment rendered against Ma. Milagros Matuguina doing business under the name Matuguina Logging Enterprises.[34]
"Nevertheless, the failure to comply with the procedure in order to satisfy the requirements of due process was cured by the present action for prohibition where the liability of appellee has been ventilated."We do not agree. Essentially, Prohibition is a remedy to prevent inferior courts, corporations, boards or persons from usurping or exercising a jurisdiction or power with which they have not been vested by law[35] As we held in Mafinco Trading Corporation vs. Ople, et al,[36] in a certiorari or prohibition case, only issues affecting the jurisdiction of the tribunal, board and offices involved may be resolved on the basis of undisputed facts.
"Despite apparently opposing evidence of both parties, the Court gathered and finds, that defendant’s attempt to pierce the veil of corporate personality of plaintiff corporation, as to consider plaintiff corporations merely an adjunct or alter ego of Maria Milagros Matuguina Logging Enterprises, to justify defendants claim against plaintiff corporation, suffers heavily from insufficiency of evidence.In this jurisdiction, it is a settled rule that conclusions and findings of fact by trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.[41]
It is the vehement contention of defendants, to bolster its claim, that plaintiff corporation is the alter ego of Maria Milagros Matuguina Logging Enterprises, because when Milagros Matuguina became the Chairman of the Board of Directors of plaintiff corporation, she requested for the change of name and transfer of management of PTL No. 30, from her single proprietorship, to plaintiff corporation.
Secondly, when Milagros Matuguina executed the deed of transfer, transferring her forest concession under PTL No, 30, together with all the structures and improvements therein, to plaintiff corporation, for a consideration of P14,800.00 representing 148,000 shares of stocks of plaintiff corporation actually all existing shares of stocks of Milagros Matuguina, in plaintiff corporation represents 77.4% therein; suffice to say that plaintiff corporation practically became an alter ego of Milagros Matuguina.
Defendants’ arguments on this peripheral aspect of corporate existence, do not at all indicate that such a legal fiction, was granted.
In the first place the alleged control of plaintiff corporation was not evident in any particular corporate acts of plaintiff corporation, wherein Maria Milagros Matuguina Logging Enterprises using plaintiff corporation, executed acts or powers directly involving plaintiff corporation.
Neither was there any evidence of defendants, that Maria Milagros Matuguina Logging Enterprises, using the facilities and resources of plaintiff corporation, involved itself in transaction using both single proprietorship and plaintiff corporation in such particular line of business undertakings.
As stated by this court in resolving plaintiff’s prayer for issuance of a writ of preliminary injunction, said:
‘There is actually, no evidence presented by defendant, showing that sometime on March 15, 1986, to January 1987, during which period, the subject decision of Hon. Secretary of Natural Resources and corresponding writ of execution, Maria Milagros Matuguina was a stockholder of plaintiff corporation in such amount or was she an officer of plaintiff corporation in whatever capacity.’
The above circumstances is relevant and significant to assume any such justification of including plaintiff corporation in the subject writ of execution, otherwise as maintained by defendants, what matters most was the control of Milagros Matuguina Logging Enterprises of plaintiff corporation in 1974 and 1975, when the administrative case was pending, this circumstance alone without formally including plaintiff corporation in said case, will not create any valid and sufficient justification for plaintiff corporation, to have been supposedly included in the suit against defendants and Maria Milagros Matuguina Logging Enterprises, in the administrative case.
Yet, granting as claimed by defendants, that in 1974 or in 1975, Maria Milagros Matuguina became the controlling stockholder of plaintiff corporation, on account of the change of name and transfer of management of PTL No. 30, this circumstance, we repeat, does not of itself prove that plaintiff corporation was the alter ego of Maria Milagros Matuguina Logging Enterprise, as enunciated in various decisions of this Court, to wit:
‘It is important to bear in mind that mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stocks of the corporation, is not itself a sufficient warrant for disregarding the fiction of separate personality. (Liddel and Co. vs. Collector of Internal revenue, G.R. No. 9687, June 30, 1961).’
It is recognized as lawful to obtain a corporation charter, even with a single substantial stockholder, to engage in specific activity and such activity may co-exist with other private activities of the stockholders.
If the corporation is substantial one, conducted lawfully; without fraud on another, its separate identity is to be respected.[40]
"It is the general rule that the protective mantle of a corporation’s separate and distinct personality could only be pierced and liability attached directly to its officers and/or members - stockholders, when the same is used for fraudulent, unfair, or illegal purpose. In the case at bar, there is no showing that the Association entered into the transaction with the private respondent for the purpose of defrauding the latter of his goods or the payment thereof. xxx. Therefore, the general rule on corporate liability, not the exception, should be applied in resolving this case. (G.R. No. 49834, June 22, 1989)The respondents cite Section 61 of P.D. 705 to establish MIWPI’s succession to the liability of Milagros Matuguina/MLE:
"SEC. 61. Transfer. "Unless authorized by the Department Head, no licensee, lessee, or permittee may transfer, exchange, sell, or convey his license agreement, license, lease or permit, or any of his rights or interest therein, or any of his assets used in connection therewith.Even if it is mandated in the abovestated provision that "the transferee shall assume all the obligations of the transferor" this does not mean that all obligations are assumed, indiscriminately.
The licensee, lessee, or permittee shall be allowed to transfer or convey his license agreement, license, lease, or permit only if he has not violated any forestry law, rule or regulation; has been faithfully complying with the terms and conditions of the license agreement, license, lease or permit; the transferee has all the qualifications and none of the disqualifications to hold a license agreement, license, lease or permit; there is no evidence that such transfer or conveyance is being made for purposes of speculation; and the transferee shall assume all the obligations of the transferor.
The transferor shall forever be barred from acquiring another license agreement, license, lease or permit."