Case Digest (G.R. No. L-23893)
Facts:
Villa Rey Transit, Inc. v. Eusebio E. Ferrer, Pangasinan Transportation Co., Inc., and Public Service Commission, G.R. No. L-23893, October 29, 1968, the Supreme Court En Banc, Angeles, J., writing for the Court.Prior to 1959, Jose M. Villarama operated a bus business under the trade name Villa Rey Transit pursuant to two certificates of public convenience (PSC Cases Nos. 44213 and 104651) authorizing 32 units on Pangasinan–Manila lines. On January 8, 1959 Villarama sold those two certificates to Pangasinan Transportation Co., Inc. (Pantranco) for P350,000 with a covenant that the seller "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or competing with the buyer."
On March 6, 1959 the corporation Villa Rey Transit, Inc. (the Corporation) was organized; its initial paid-in capital showed P105,000 deposited, of which P85,000 was covered by a personal check of Villarama. On April 7, 1959 the Corporation contracted to buy five certificates, forty-nine buses and equipment from Valentin A. Fernando for P249,000; the parties promptly sought PSC approval and provisional authority. The PSC granted provisional authority May 19, 1959, conditioned on later final action.
While PSC approval was pending, the Sheriff of Manila, pursuant to a writ of execution out of the Court of First Instance of Pangasinan in favor of Eusebio E. Ferrer against Fernando, levied on two of the five certificates (PSC Cases Nos. 59494 and 63780) on July 7, 1959 and conducted a public auction July 16, 1959 where Ferrer was the highest bidder. Ferrer then sold those two certificates to Pantranco and submitted the sale for PSC approval. The PSC set joint hearings on the competing applications (Fernando→Corporation, Ferrer→Pantranco) and issued an interim order July 22, 1959 that Pantranco provisionally operate the two certificates; the Corporation elevated that interim ruling to the Supreme Court (G.R. Nos. L-17684-85), which directed that the Corporation operate provisionally pending final judicial determination of ownership.
On November 4, 1959 the Corporation filed Civil Case No. 41845 in the Court of First Instance of Manila to annul the sheriff's sale to Ferrer and the subsequent sale to Pantranco, and to annul related PSC orders. Ferrer and Pantranco answered that the Corporation's sale from Fernando was conditional on PSC approval (a suspensive condition) and thus title remained with Fernando at the time of levy and sale; Pantranco filed a third-party complaint against Villarama alleging the Corporation was his alter ego and that Villarama breached the January 8 restriction.
The CFI, after trial, declared the sheriff's sale and Ferrer's subsequent sale null and void, adjudged the Corporation the lawful owner of the disputed certificates, ordered the private defendants jointly and severally to pay P5,000 attorney's fees to the Corporation, and dismissed the case against the PSC. All parties appealed; a joint record on appeal was filed with the Supreme Court. The principal fa...(Pro-only)
Issues:
- Is Villa Rey Transit, Inc. the alter ego of Jose M. Villarama so that Villarama's restrictive covenant binds the Corporation?
- Does the restrictive clause in the January 8, 1959 deed — that the seller "shall not for a period of ten (10) years from the date of this sale apply for any TPU service identical or competing with the buyer" — apply only to applications for new lines or does it include existing lines (including acquisition/transfer-based operation)?
- If the restriction covers existing...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)