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3Republic of tbe !'bilippines

~upreme <!Court
;.ffianila

SECOND DIVISION

OLONGAPO CITY, G.R. No. 171626

Petitioner,
Present:

CARPIO, J., Chairperson,

-versus- BRION,
DEL CASTILLO,
PEREZ, and
PERLAS-BERNABE, JJ.
SUBIC WATER AND SEWERAGE CO.,
INC., Promulgated:

Respondent
x------------------------------------------------------
----------~~-~--~~--~~~-~O~
DECISION

BRION, J.:

We resolve in this petition for certiorari 1 under Rule 65 the

challenge to the July 6, 2005 decision 2 and the January 3, 2006
resolution 3 (assailed CA rulings) of the Court of Appeals (CA) in CA-
G.R. SP No. 80947.

These assailed CA rulings annulled and set aside: a) the July 29,
2003 order4 of the Regional Trial Court of Olongapo, Br. 75 (RTC
Olongapo ), which directed the issuance of a writ of execution in Civil
Case No. 582-0-90, against respondent Subic Water and Sewerage Co.,
Inc. (Subic Water); b) the July 31, 2003 writ of execution5 subsequently
issued by the same court; and c) the October 7, 2003 order6 of R TC
Olongapo, denying Subic Water's special appearance with motion to
Rollo, p. 3-19.
2
Penned by Associate Justice Marina L. Buzon, and concurred in by Associate Justices Mario L.
Guarifia and Santiago Javier Ranada; Id. at 20-30.
3
Id. at 48-51.
4
Id. at 121.
Id. at 240-241.
6
Id. at 122.

-..
~
Decision 2 G.R. No. 171626

reconsider order dated July 29, 2003 and to quash writ of execution
dated July 31, 2003.7

Factual Antecedents

On May 25, 1973, Presidential Decree No. 1988 (PD 198) took
effect. This law authorized the creation of local water districts which
may acquire, install, maintain and operate water supply and distribution
systems for domestic, industrial, municipal and agricultural uses.9

Pursuant to PD 198, petitioner Olongapo City (petitioner) passed

Resolution No. 161, which transferred all its existing water facilities
and assets under the Olongapo City Public Utilities Department
Waterworks Division, to the jurisdiction and ownership of the
Olongapo City Water District (OCWD).10

PD 198, as amended,11 allows local water districts (LWDs) which

have acquired an existing water system of a local government unit
(LGU) to enter into a contract to pay the concerned LGU. In lieu of the
LGUs share in the acquired water utility plant, it shall be paid by the
LWD an amount not exceeding three percent (3%) of the LWDs gross
receipts from water sales in any year.12

On October 24, 1990, petitioner filed a complaint for sum of

money and damages against OCWD. Among others, petitioner alleged
that OCWD failed to pay its electricity bills to petitioner and remit its
payment under the contract to pay, pursuant to OCWDs acquisition of
petitioners water system. In its complaint, petitioner prayed for the
following reliefs:

WHEREOF, it is respectfully prayed of this Honorable Court

that after due hearing and notice, judgment be rendered in favor of
plaintiff ordering the defendant to:

(a) pay the amount of P26,798,223.70 plus legal interests from

the filing of the Complaint to actual full payment;

(b) pay the amount of its in lieu share representing three

percent of the defendants gross receipts from water sales
starting 1981 up to present;

7
Id. at 242-252.
8
Declaring a National Policy Favoring Local Operation and Control of Water Systems; Authorizing
the Formation of Local Water Districts and Providing for the Government and Administration of such
Districts; Chartering a National Administration to Facilitate Improvement of Local Water Utilities;
Granting said Administration such Powers as are Necessary to Optimize Public Service from Water Utility
Operations, and for Other Purposes.
9
PD 198, section 5.
10
Rollo, p. 4.
11
PD 198 was subsequently amended by Presidential Decree No. 768 and Presidential Decree No.
1479.
12
PD 198, section 30 (b), as amended.
Decision 3 G.R. No. 171626

(c) pay the amount of P1,000,000 as moral damages; and

(d) pay the cost of suit and other litigation expenses.13

In its answer,14 OCWD posed a counterclaim against petitioner

for unpaid water bills amounting to P3,080,357.00.15

In the interim, OCWD entered into a Joint Venture Agreement16

(JVA) with Subic Bay Metropolitan Authority (SBMA), Biwater
International Limited (Biwater), and D.M. Consunji, Inc. (DMCI) on
November 24, 1996. Pursuant to this agreement, Subic Water a new
corporate entity was incorporated, with the following equity
participation from its shareholders:

SBMA 19.99% or 20%

OCWD 9.99% or 10%
Biwater 29.99% or 30%
DMCI 39.99% or 40% 17

On November 24, 1996, Subic Water was granted the franchise to

operate and to carry on the business of providing water and sewerage
services in the Subic Bay Free Port Zone, as well as in Olongapo City.18
Hence, Subic Water took over OCWDs water operations in Olongapo
City.19

To finally settle their money claims against each other, petitioner

and OCWD entered into a compromise agreement20 on June 4, 1997. In
this agreement, petitioner and OCWD offset their respective claims and
counterclaims. OCWD also undertook to pay to petitioner its net
obligation amounting to P135,909,467.09, to be amortized for a period
of not exceeding twenty-five (25) years at twenty-four percent (24%)
per annum.21

The compromise agreement also contained a provision regarding

the parties request that Subic Water, Philippines, which took over the
operations of the defendant Olongapo City Water District be made the
co-maker for OCWDs obligations. Mr. Noli Aldip, then chairman of
Subic Water, acted as its representative and signed the agreement on
behalf of Subic Water.

13
Rollo, p. 56.
14
Id. at 58-61
15
Id. at 60.
16
Id. at 74-106.
17
Id. at 129; 214-215.
18
Id. at 128-129.
19
Id.
20
Id. at 108-109.
21
Id.
Decision 4 G.R. No. 171626

Subsequently, the parties submitted the compromise agreement to

RTC Olongapo for approval. In its decision dated June 13, 1997,22 the
trial court approved the compromise agreement and adopted it as its
judgment in Civil Case No. 580-0-90.

Pursuant to the compromise agreement and in payment of

OCWDs obligations to petitioner, petitioner and OCWD executed a
Deed of Assignment on November 24, 1997.23 OCWD assigned all of
its rights in the JVA in favor of the petitioner, including but not limited
to the assignment of its shares, lease payments, regulatory assistance
fees and other receivables arising out of or related to the Joint Venture
Agreement and the Lease Agreement.24 On December 15, 1998, OCWD
was judicially dissolved.25

On May 7, 1999, to enforce the compromise agreement, the

petitioner filed a motion for the issuance of a writ of execution26 with
the trial court. In its July 23, 1999 order,27 the trial court granted the
motion, but did not issue the corresponding writ of execution.

Almost four years later, on May 30, 2003, the petitioner, through
its new counsel, filed a notice of appearance with urgent
motion/manifestation28 and prayed again for the issuance of a writ of
execution against OCWD. A certain Atty. Segundo Mangohig,
claiming to be OCWDs former counsel, filed a manifestation alleging
that OCWD had already been dissolved and that Subic Water is now the
former OCWD.29

Because of this assertion, Subic Water also filed a manifestation

informing the trial court that as borne out by the articles of
incorporation and general information sheet of Subic Water x x x
defendant OCWD is not Subic Water.30 The manifestation also
indicated that OCWD was only a ten percent (10%) shareholder of
Subic Water; and that its 10% share was already in the process of being
transferred to petitioner pursuant to the Deed of Assignment dated
November 24, 1997. 31

The trial court granted the motion for execution and directed its
issuance against OCWD and/or Subic Water. Because of this
unfavorable order, Subic Water filed a special appearance with motion

22
Id. at 110-111.
23
Id. at 158-159.
24
Id. at 158.
25
Id. at 112-117.
26
Id. at 8.
27
Id. at 118.
28
Id. at 119.
29
Id.
30
Id. at 238.
31
Id.
Decision 5 G.R. No. 171626

to: (1) reconsider order dated July 29, 2003; and (2) quash writ of
execution dated July 31, 2003.32

The trial court denied Subic Waters special appearance, motion

for reconsideration, and its motion to quash. Subic Water then filed a
petition for certiorari33 with the CA, imputing grave abuse of discretion
amounting to lack or excess of jurisdiction to RTC Olongapo for
issuing its July 29, 2003 and October 7, 2003 orders as well as the writ
of execution dated July 31, 2003.

The CAs Ruling

In its decision dated July 6, 2005,34 the CA granted Subic Waters

petition for certiorari and reversed the trial courts rulings.

The CA found that the writ of execution dated July 31, 200335 did
not comply with Section 6, Rule 39 of the Rules of Court, to wit:

Section 6. Execution by motion or by independent action. A final

and executory judgment or order may be executed on motion within
five (5) years from the date of its entry. After the lapse of such
time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may
also be enforced by motion within five (5) years from the date of its
entry and thereafter by action before it is barred by the statute of
limitations. (6a) [emphasis ours]

A judgment on a compromise agreement is immediately

executory and is considered to have been entered on the date it was
approved by the trial court. 36 Since the compromise agreement was
approved and adopted by the trial court on June 13, 1997, this should
be the reckoning date for the counting of the period for the filing of a
valid motion for issuance of a writ of execution. Petitioner thus had
until June 13, 2002, to file its motion.

The CA further remarked that while it was true that a motion for
execution was filed by petitioner on May 7, 1999, and the same was
granted by the trial court in its July 23, 1999 order,37 no writ of
execution was actually issued.

As the CA looked at the case, petitioner, instead of following up

with the trial court the issuance of the writ of execution, did not do
anything to secure its prompt issuance. It waited another four years to

32
Supra, note 7.
33
Id. at 125-157.
34
Supra, note 2.
35
Supra, note 5.
36
Manipor v. Ricafort, 454 Phil. 825, 833 (2003).
37
Supra, note 27.
Decision 6 G.R. No. 171626

file a second motion for execution on May 30, 2003.38 By this time, the
allowed period for the filing of a motion for the issuance of the writ
had already lapsed. Hence, the trial courts July 29, 2003 order granting
the issuance of the writ was null and void for having been issued by a
court without jurisdiction.

The CA denied petitioners subsequent motion for

reconsideration. Petitioner is now before us on a petition for certiorari
under Rule 65.
The Petition

The petitioner acknowledged the rule that the execution of a

judgment could no longer be made by mere motion after the prescribed
five-year period had already lapsed. However, it argued that the delay
for the issuance of the writ of execution was caused by OCWD and
Subic Water. The petitioner submitted that this Court had allowed
execution by mere motion even after the lapse of the five-year period,
when the delay was caused or occasioned by the actions of the
judgment debtor.39

Also, the petitioner asserted that although Subic Water was not a
party in the case, it could still be subjected to a writ of execution, since
it was identified as OCWDs co-maker and successor-in-interest in the
compromise agreement.40

Lastly, the petitioner contended that the compromise agreement

was signed by Mr. Noli R. Aldip, then Subic Waters chairman,
signifying Subic Waters consent to the agreement.

The Courts Ruling

We DISMISS the petition for being the wrong remedy and, in

any case, for lack of merit; what we have before us is a final judgment
that we can no longer touch unless there is grave abuse of discretion.

A. Procedural Law Aspect

Certiorari is not a substitute for a

lost appeal.

At the outset, we emphasize that the present petition, brought

under Rule 65, merits outright dismissal for having availed an improper
remedy.
The instant petition should have been brought under Rule 45 in a
petition for review on certiorari. Section 1 of this Rule mandates:
38
Id. at note 30.
39
Rollo, p. 12.
40
Id. at 14.
Decision 7 G.R. No. 171626

Section 1. Filing of petition with Supreme Court. A party

desiring to appeal by certiorari from a judgment or final order or
resolution of the Court of Appeals, the Sandiganbayan, the
Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law which must
be distinctly set forth. (1a, 2a) [emphasis supplied]

Supplementing Rule 45 are Sections 3 41 and 442 of Rule 56 which

govern the applicable procedure in the Supreme Court.

Appeals from judgments or final orders or resolutions of the CA

should be made through a verified petition for review on certiorari
under Rule 45.43 In this case, petitioner questioned the July 6, 2005
decision44 and the January 3, 2006 resolution45 of the CA which
declared as null and void the writ of execution issued by the trial court.
Since the CAs pronouncement completely disposed of the case and
the issues raised by the parties, it was the proper subject of a Rule 45
petition. It was already a final order that resolved the subject matter in
its entirety, leaving nothing else to be done.

A petition for certiorari under Rule 65 is appropriate only if

there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law available to the aggrieved party. As we have
distinctly explained in the case of Pasiona v. Court of Appeals:46

The aggrieved party is proscribed from assailing a decision or final

order of the CA via Rule 65 because such recourse is proper only if
the party has no plain, speedy and adequate remedy in the course of
law. In this case, petitioner had an adequate remedy, namely, a
petition for review on certiorari under Rule 45 of the Rules of
Court. A petition for review on certiorari, not a special civil
action for certiorari was, therefore, the correct remedy.

xxxx

Settled is the rule that where appeal is available to the aggrieved

party, the special civil action for certiorari will not be
entertained remedies of appeal and certiorari are mutually
exclusive, not alternative or successive. Hence, certiorari is not
and cannot be a substitute for a lost appeal, especially if one's
own negligence or error in one's choice of remedy occasioned such
loss or lapse.47 [emphasis ours]

41
Section 3. Mode of appeal. An appeal to the Supreme Court may be taken only by a petition
for review on certiorari, except in criminal cases where the penalty imposed is death, reclusion perpetua
or life imprisonment. [emphasis ours]
42
Section 4. Procedure. The appeal shall be governed by and disposed of in accordance with
the applicable provisions of the Constitution, laws, Rules 45, 48, sections 1, 2, and 5 to 11 of Rule 51,
52 and this Rule. [emphasis ours]
43
San Pedro and Dopeo v. Asdala, G.R. No. 164560, July 22, 2009, 593 SCRA 397, 401.
44
Supra, note 2.
45
Supra, note 3.
46
G.R. No. 165471, 581 Phil. 124 (2008).
47
Ibid at 138.
Decision 8 G.R. No. 171626

The petitioner received the CAs assailed resolution denying its

motion for reconsideration on January 9, 2006. Following Rule 45,
Section 2 of the Rules of Court,48 the petitioner had until January 24,
2006 to file its petition for review. It could have even filed a motion
for a 30-day extension of time, a motion that this Court grants for
justifiable reasons.49 But all of these, it failed to do. Thus, the assailed
CA rulings became final and executory and could no longer be the
subject of an appeal.

Apparently, to revive its lost appeal, petitioner filed the present

petition for certiorari that under Rule 65 may be filed within sixty
days from the promulgation of the assailed CA resolution (on January
3, 2006). A Rule 65 petition for certiorari, however, cannot be a
substitute for a lost appeal. With the lapse of the prescribed period for
appeal without an action from the petitioner, the present petition for
certiorari a mere replacement must be dismissed.

But even without the procedural infirmity, the present recourse to

us has no basis on the merits and must be denied.

Execution by motion is only

available within the five-year
period from entry of judgment.

Under Rule 39, Section 6,50 a judgment creditor has two modes in
enforcing the courts judgment. Execution may be either through
motion or an independent action.

These two modes of execution are available depending on the

timing when the judgment creditor invoked its right to enforce the
courts judgment. Execution by motion is only available if the
enforcement of the judgment was sought within five (5) years from
the date of its entry. On the other hand, execution by independent
action is mandatory if the five-year prescriptive period for execution by
motion had already elapsed.51 However, for execution by independent
action to prosper the Rules impose another limitation the action
must be filed before it is barred by the statute of limitations which,

48
Section 2. Time for filing; extension. The petition shall be filed within fifteen (15) days from
notice of the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion
for new trial or reconsideration filed in due time after notice of the judgment. On motion duly filed and
served, with full payment of the docket and other lawful fees and the deposit for costs before the expiration
of the reglementary period, the Supreme Court may for justifiable reasons grant an extension of thirty (30)
days only within which to file the petition. (1a, 5a)
49
Id.
50
Section 6. Execution by motion or by independent action. A final and executory judgment or
order may be executed on motion within five (5) years from the date of its entry. After the lapse of such
time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The
revived judgment may also be enforced by motion within five (5) years from the date of its entry and
thereafter by action before it is barred by the statute of limitations. (6a)
51
Id.
Decision 9 G.R. No. 171626

under the Civil Code, is ten (10) years from the finality of the
judgment.52

On May 7, 1999, within the five-year period from the trial courts
judgment, petitioner filed its motion for the issuance of a writ of
execution. However, despite the grant of the motion, the court did not
issue an actual writ. It was only on May 30, 2003 that petitioner filed a
second motion to ask again for the writs issuance. By this time, the
allowed five-year period for execution by motion had already lapsed.

As will be discussed below, since the second motion was filed

beyond the five-year prescriptive period set by the Rules, then the writ
of execution issued by the trial court on July 31, 2003 was null and
void for having been issued by a court already ousted of its jurisdiction.

In Arambulo v. Court of First Instance of Laguna,53 we explained

the rule that the jurisdiction of a court to issue a writ of execution by
motion is only effective within the five-year period from the entry of
judgment. Outside this five-year period, any writ of execution issued
pursuant to a motion filed by the judgment creditor, is null and void. If
no writ of execution was issued by the court within the five-year
period, even a motion filed within such prescriptive period would not
suffice. A writ issued by the court after the lapse of the five-year
period is already null and void.54 The judgment creditors only
recourse then is to file an independent action, which must also be
within the prescriptive period set by law for the enforcement of
judgments.

This Court subsequently reiterated its Arambulo ruling in Ramos

v. Garciano,55 where we said:

There seems to be no serious dispute that the 4th alias writ of

execution was issued eight (8) days after the lapse of the five (5)
year period from the date of the entry of judgment in Civil Case No.
367. As a general rule, after the lapse of such period a judgment
may be enforced only by ordinary action, not by mere motion
(Section 6, Rule 39, Rules of Court).

xxxx

The limitation that a judgment be enforced by execution within

five years, otherwise it loses efficacy, goes to the very jurisdiction
of the Court. A writ issued after such period is void, and the failure
to object thereto does not validate it, for the reason that jurisdiction
of courts is solely conferred by law and not by express or implied
will of the parties. 56 [emphasis supplied]

52
CIVIL CODE, article 1144 in relation to article 1152.
53
G.R. No. L-31814, 53 Phil. 302 (1929).
54
Ibid at 305-306.
55
G.R. No. L-22341, 137 Phil. 814 (1969).
56
Ibid at 818-819.
Decision 10 G.R. No. 171626

To clearly restate these rulings, for execution by motion to be

valid, the judgment creditor must ensure the accomplishment of two
acts within the five-year prescriptive period. These are: a) the filing of
the motion for the issuance of the writ of execution; and b) the
courts actual issuance of the writ. In the instances when the Court
allowed execution by motion even after the lapse of five years, we only
recognized one exception, i.e., when the delay is caused or occasioned
by actions of the judgment debtor and/or is incurred for his benefit or
advantage.57 However, petitioner failed to show or cite circumstances
showing how OCWD or Subic Water caused it to belatedly file its
second motion for execution.

Strictly speaking, the issuance of the writ should have been a

ministerial duty on the part of the trial court after it gave its July 23,
1999 order, approving the first motion and directing the issuance of
such writ. The petitioner could have easily compelled the court to
actually issue the writ by filing a manifestation on the existence of the
July 23, 1999 order. However, petitioner idly sat and waited for the
five-year period to lapse before it filed its second motion. Having slept
on its rights, petitioner had no one to blame but itself.

A writ of execution cannot affect a

non- party to a case.

Strangers to a case are not bound by the judgment rendered in it.

Thus, a writ of execution can only be issued against a party and not
against one who did not have his day in court.58

Subic Water never participated in the proceedings in Civil Case

No. 580-0-90, where OCWD and petitioner were the contending
parties. Subic Water only came into the picture when one Atty.
Segundo Mangohig, claiming to be OCWDs former counsel,
manifested before the trial court that OCWD had already been
judicially dissolved and that Subic Water assumed OCWDs
personality.

In the present case, the compromise agreement, although signed

by Mr. Noli Aldip, did not carry the express conformity of Subic
Water. Mr. Aldip was never given any authorization to conform to or
bind Subic Water in the compromise agreement. Also, the agreement
merely labeled Subic Water as a co-maker. It did not contain any
provision where Subic Water acknowledged its solidary liability with
OCWD.

Lastly, Subic Water did not voluntarily submit to the courts

jurisdiction. In fact, the motion it filed was only made as a special
57
Republic v. Court of Appeals, G.R. No. 91885, 329 Phil. 115, 122 (1996).
58
Salamat Vda. de Medina v. Judge Cruz, G.R. No. L-39272, 244 Phil. 40, 48 (1988).
Decision 11 G.R. No. 171626

appearance, precisely to avoid the courts acquisition of jurisdiction

over its person. Without any participation in the proceedings below, it
cannot be made liable on the writ of execution issued by the court a
quo.

B. Substantive Law Aspect

Solidary liability must be expressly stated.

The petitioner also argued that Subic Water could be held

solidarily liable under the writ of execution since it was identified as
OCWDs co-maker in the compromise agreement. The petitioners
basis for this is the following provision of the agreement:

4. Both parties also request that Subic Water, Philippines which

took over the operations of the defendant Olongapo City Water
District be made as co-maker for the obligation herein above-
cited.59 [emphasis supplied]

As the rule stands, solidary liability is not presumed. This stems

from Art. 1207 of the Civil Code, which provides:

Art. 1207. x x x There is a solidary liability only when the

obligation expressly so states, or when the law or the nature of the
obligation requires solidarity. [emphasis supplied]

In Palmares v. Court of Appeals,60 the Court did not hesitate to

rule that although a party to a promissory note was only labeled as a co-
maker, his liability was that of a surety, since the instrument expressly
provided for his joint and several liability with the principal.

In the present case, the joint and several liability of Subic Water
and OCWD was nowhere clear in the agreement. The agreement
simply and plainly stated that petitioner and OCWD were only
requesting Subic Water to be a co-maker, in view of its assumption of
OCWDs water operations. No evidence was presented to show that
such request was ever approved by Subic Waters board of directors.

Under these circumstances, petitioner cannot proceed after Subic

Water for OCWDs unpaid obligations. The law explicitly states that
solidary liability is not presumed and must be expressly provided
for. Not being a surety, Subic Water is not an insurer of OCWDs
obligations under the compromise agreement. At best, Subic Water
was merely a guarantor against whom petitioner can claim, provided it
was first shown that: a) petitioner had already proceeded after the
properties of OCWD, the principal debtor; b) and despite this, the
obligation under the compromise agreement, remains to be not fully
59
Supra, note 20.
60
G.R. No. 126490, 351 Phil. 664 (1998).
Decision 12 G.R. No. 171626

satisfied.61 But as will be discussed next, Subic Water could not also
be recognized as a guarantor of OCWDs obligations.

An officers actions can only bind

the corporation if he had been
authorized to do so.

An examination of the compromise agreement reveals that it was

not accompanied by any document showing a grant of authority to Mr.
Noli Aldip to sign on behalf of Subic Water.

Subic Water is a corporation. A corporation, as a juridical entity,

primarily acts through its board of directors, which exercises its
corporate powers. In this capacity, the general rule is that, in the
absence of authority from the board of directors, no person, not even its
officers, can validly bind a corporation.62 Section 23 of the Corporation
Code provides:

Section 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 until their successors are elected and qualified. (28a) [emphasis
supplied]

In Peoples Aircargo and Warehousing Co., Inc. v. Court of

Appeals,63 we held that under Section 23 of the Corporation Code, the
power and responsibility to decide whether a corporation can enter
into a binding contract is lodged with the board of directors, subject
to the articles of incorporation, by-laws, or relevant provisions of law.
As we have clearly explained in another case:

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.64 [emphasis ours]

61
Spouses Ong v. PCIB, G.R. No. 160466, 489 Phil. 673, 677 (2005).
62
Cebu Mactan Members Center, Inc. v. Tsukahara, G.R. No. 159624, July 17, 2009, 593 SCRA
172, 176.
63
G.R. No. 117847, 357 Phil. 850 (1998).
64
Supra, note 62, at 177-178.
Decision 13 G.R. No. 171626

Mr. Noli Aldip signed the compromise agreement purely in his

own capacity. Moreover, the compromise agreement did not expressly
provide that Subic Water consented to become OCWDs co-maker. As
worded, the compromise agreement merely provided that both parties
[also] request Subic Water, Philippines, which took over the operations
of Olongapo City Water District be made as co-maker [for the
obligations above-cited]. This request was never forwarded to Subic
Waters board of directors. Even if due notification had been made
(which does not appear in the records), Subic Waters board does not
appear to have given any approval to such request. No document such
as the minutes of Subic Waters board of directors meeting or a
secretarys certificate, purporting to be an authorization to Mr. Aldip to
conform to the compromise agreement, was ever presented. In effect,
Mr. Aldips act of signing the compromise agreement was outside of
his authority to undertake.

Since Mr. Aldip was never authorized and there was no showing
that Subic Waters articles of incorporation or by-laws granted him
such authority, then the compromise agreement he signed cannot bind
Subic Water. Subic Water cannot likewise be made a surety or even a
guarantor for OCWDs obligations. OCWDs debts under the
compromise agreement are its own corporate obligations to petitioner.

OCWD and Subic Water are two

separate and different entities.

Petitioner practically suggests that since Subic Water took over

OCWDs water operations in Olongapo City, it also acquired OCWDs
juridical personality, making the two entities one and the same.

This is an interpretation that we cannot make or adopt under the

facts and the evidence of this case. Subic Water clearly demonstrated
that it was a separate corporate entity from OCWD.

OCWD is just a ten percent (10%) shareholder of Subic Water.

As a mere shareholder, OCWDs juridical personality cannot be
equated nor confused with that of Subic Water. It is basic in
corporation law that a corporation is a juridical entity vested with a
legal personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it.65

Under this corporate reality, Subic Water cannot be held liable

for OCWDs corporate obligations in the same manner that OCWD
cannot be held liable for the obligations incurred by Subic Water as a
separate entity. The corporate veil should not and cannot be pierced
unless it is clearly established that the separate and distinct personality
65
Heirs of Tan Uy v. International Exchange Bank, G.R. No. 166282 & 166283, February 13, 2013,
690 SCRA 519, 525.
Decision 14 G.R. No. 17162.5

of the corporation was used to justify a wrong, protect fraud, or

perpetrate a deception. 66

In Concept Builders, Inc. v. NLRC, 67 the Court enumerated the

possible probative factors of identity which could justify the
application of the doctrine of piercing the corporate veil. These are:

(1) Stock ownership by one or common ownership of both

corporations;

(2) Identity of directors and officers;

(3) The manner of keeping corporate books and records; and

(4) Methods of conducting the business. 68

The burden of proving the presence of any of these probative

factors lies with the one alleging it. Unfortunately, petitioner simply
claimed that Subic Water took over OCWD's water operations in
Olongapo City. Apart from this allegation, petitioner failed to
demonstrate any link to justify the construction that Subic Water and
OCWD are one and the same.

Under this evidentiary situation, our duty is to respect the

separate and distinct personalities of these two juridical entities.

We thus deny the present petition. The writ of execution issued

by RTC Olongapo, Br. 75, in favor of Olongapo City, is hereby
confirmed to be null and void. Accordingly, respondent Subic Water
cannot be made liable under this writ.

WHEREFORE, premises considered, we hereby DISMISS the

petition. The Court of Appeals' decision dated July 6, 2005 and
resolution dated January 3, 2006, annulling and setting aside the
orders of the Regional Trial Court of Olongapo, Branch 75 dated
July 29, 2003 and October 7, 2003, and the writ of execution dated
July 31, 2003, are hereby AFFIRMED. Costs against the City of
Olongapo.

SO ORDERED.

~~~
Associate Justice

66
Ibid at 528-529.
67
G.R. No. 108734, 326 Phil. 955 (1996).
68
Ibid at 965.
Decision 15 G.R. No. 171626

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

Associate Justice

,Aa,~
ESTELA M."}tERLAS-BERNABE
Associate Justice

ATTEST A TI ON

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.
oz:,
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice