G.R. No. L-56655 July 25, 1983 DATU TAGORANAO BENITO, petitioner, vs.

SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents FACTS: February 6, 1959: Articles of Incorporation (AIC) of Jamiatul Philippine-Al Islamia, Inc. (Jamiatul) (originally Kamilol Islam Institute, Inc.) were filed with the SEC December 14, 1962: approved AIC The corporation had an authorized capital stock of P200K divided into 20K shares at a par value of P10 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for Datu Tagoranao Benito subscribed to 460 shares worth P4,600 October 28, 1975: filed a certificate of increase of its capital stock from P200K to P1M November 25, 1975: stockholders meeting was held were P191,560.00 worth of shares were represented o P110,980 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000 Of the increased capital stock of P1M0, P160K worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto. November 18, 1976: Datu Tagoranao filed with SEC a petition alleging that the additional issue (worth P110,980) was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda SEC: o issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders o directed Jamiatul to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto ISSUES: 1. W/N the issuance of the P110,980 of authorized capital stock of P200,000 is in violation of pre-emptive right - NO 2. W/N the issuance of the increase in the authorized capital stock is in violation of pre-emptive right HELD: Dismissed for lack of merit 1. NO GR: pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares o Theory: when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest. 2. NO stockholders' meeting was held which included the increase of its capital stock from P200,000.00 to P1,000,000.00 o he was not notified of said meeting and that he never attended the same as he was out of the country at the time administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence Power to issue shares of stock in a corp is lodged in the BOD and no stockholdersmeeting is necessary to consider it because additional issuance of shares of stocks does not need approval of the SHS. By-laws authorize BOD to provide for issue and transfer of shares General rule : Pre-emptive right is recognized only with respect to new issue of shares and not with respect to additional shares of originally authorized shares In case at bar, the preemptive right was recognized with respect the increase in capital stock only; reason when SH invested, he did not contemplate that his shareholdings would change When the issue is in breach of trust Even if the preemptive right does not exist, either because the issue comes within the exceptions in Sec 39 or because it is denied or limited in the AI, an issue of shares may still be objectionable if the directors have acted in breach of trust and their primary purpose is to perpetuate or shift control of the corp or to freeze out the minority interest Remedies when right is violated 1) Injunction against the issue OR 2) Mandamus to allow SH to exercise his right OR 3) SEC or court may order the cancellation of the shares provided no innocent 3rd parties are prejudiced In any case, the suit should be individual and not derivative because the wrong done not to the corp but to the SHS individually. But a derivative suit has been held proper where the plaintiff claimed not only a violation of his preemptive right but also that such violation resulted in the waste of corporate assets or in giving fraudulent directors control of the corp

G.R. No. L-34192 June 30, 1988 NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO VILLATUYA MARIO Y. CONSING and ROBERTO S. BENEDICTO, petitioners, vs. HON. BENJAMIN AQUINO, in his official capacity as Presiding Judge of Branch VIII of the Court of First Instance of Rizal, BATJAK INC., GRACIANO A. GARCIA and MARCELINO CALINAWAN JR., respondents. G.R. No. L-34213 June 30, 1988 PHILIPPINE NATIONAL BANK, petitioner, vs.

HON. BENJAMIN H. AQUINO, in his capacity as Presiding Judge of the Court of First Instance of Rizal, Branch VIII and BATJAK INCORPORATED, respondents. National Investment and Development Corp. (NIDC) v.Aquino 30 June 1988| Ponente, Padilla, J. . FACTS 1 . I n 1 9 6 5 , t h e t o t a l i n d e b t e d n e s s o f B a t j a k a m o u n t e d to P 11.9M. As security, B a t j a k h a d m o r t a g e d i t s 3 coco-oil processing mills is Davao City, Misamis andL e y t e t o M a n i l a b a n k , R e p u b l i c B a n k and PCI Bank.Moreover, as it was necessary to place additionalc a p i t a l t o o p t i m i z e t h e o p e r a t i o n o f t h e m i l l s , Batjak obtained financial assistance from PNB.2 . P e r B a t j a k s a g r e e m e n t w i t h P N B , t h e f o l l o w i n g happened:a . N I D C ( a P N B s u b s i d i a r y ) i n v e s t e d P 6 . 7 M i n B a t j a k i n t h e f o r m o f p r e f e r r e d s h a r e s , c o n v e r t i b l e w i t h i n 5 y r s a t p a r i n t o c o m m o n stock.b. The 3 mortgagee banks released in favor of PNBthe mortgages they held; Batjak also executedfirst mortgages in favor of PNBc. PNB granted Batjak an export-advance line of P3M, later increased to P 5M.d. A voting trust agreement (VTA) was executed inf a v o r o f P N B b y t h e s t o c k h o l d e r s r e p r e s e n t i n g 60% of the outstanding paid-up and subscribedshares of Batjak. (The VTA was for a period of 5yrs, subject to renegotiation)4 . I n 1 9 6 5 , a s B a t j a k w a s i n s o l v e n t , P N B / N I D C foreclosed on the 3 mills. Subsequently, ownershipwas consolidated in NIDC.5 . I n 1 9 7 0 , B a t j a k w r o t e t o N I D C i n q u i r i n g i f i t w a s i n t e r e s t e d i n a r e n e g o t i a t i o n . H a v i n g r e c e i v e d n o reply, it wrote another letter informing NIDC that it( B a t j a k ) w o u l d s a f e l y a s s u m e t h a t N I D C w a s n o l o n g e r i n t e r e s t e d . I t t h e n s e n t a t h i r d l e t t e r a s k i n g for a complete accounting of the assets, properties,m a n a g e m e n t a n d o p e r a t i o n o f B a t j a k , p r e p a r a t o r y to the turn-over and transfer of the shares coveredby the VTA. NIDC replied and refused to comply.6. NIDC replied and refused to comply.7 . B a t j a k s u e d f o r m a n d a m u s . B a t j a k a l s o f i l e d a petition for receivership of property / assets.8 . N I D C f i l e s a m o t i o n t o d i s m i s s ; d e n i e d . S u b s e q u e n t k y , t h e C F I j u d g e g r a n t e d t h e p e t i t i o n for receivership, appointing 3 receivers. ISSUES 1. WON the denial of the motion to dismiss was proper. NO. 2. WON the grant of receivership was proper. NO.HELD / RATIO: I. Action must be dismissed1. PNBs / NIDCs basis for seeking dismissal:a. CFI has no jurisdictionb. Venue is improperly laidc. Batjak has no capacity to sued. Batjak has no cause of action2. Re: Jurisdiction:a . R u l e : T h e j u r i s d i c t i o n o f a C G I t o i s s u e a n i n j u n c t i o n i s c o n f i n e d t o t h e p r o v i n c e w h e r e the land in controversy is locatedb . I n this case: the subject properties, the 3 oilm i l l s a r e l o c a t e d i n 3 s e p a r a t e p r o v i n c e s (Davao, Misamis and Leyte)3. Re: Venue.- S h o u l d h a v e b e e n f i l e d w h e r e t h e o i l d m i l l s a r e located4. Re: capacity to sueT h e p a r t i e s t o t h e V T A a r e N I D C a n d t h e s t oc k h o l d e r s r e p r e s e n t i n g t h e 6 0 % s h a r e i n Batjak- R u l e 3 , S e c 2 : E v e r y a c t i o n m u s t b e p r o s e c u t e d a n d d e f e n d e d i n t h e n a m e o f t h e r e a l p a r t y i n interestT h e r e a l p a r t y i n i n t e r e s t h e r e i s t h u s t h e stockhplders of Batjak, not Batjak itself.5. Re: Cause of action- W h e n i s m a n d a m u s a v a i l a b l e : W h e n t h e r e i s a clear legal right sought to be enforced.- B u t h e r e : B a t j a k s e e k s t o r e c l a i m t h e 3 o i l m i l l s which were already validly obtained by NIDC byw a y o f f o r e c l o s u r e ; h e n c e B a t j a k h a s n o c l e a r legal right.II. Receivership improperly granted1 . W h e n i s r e c e i v e r s h i p a l l o w e d : A r e c e i v e r m a y b e a p p o i n t e d w h e n i t appears that the party applyingh a s a n i n t e r e s t i n t h e s u b j e c t p r o p e r t y , i e , a n interest that is present and existing.- Here, NIDC is the owner of the mills Batjak no longer has any right / interest2 . B u t B a t j a k o f f e r s t h e f o l l o w i n g t h e o r y : u n d e r t heV T A, NI DC was c onst i t ut ed t rus tee of t he as s ets ,

operations and management of Batjak; accordingly,w i t h t h e e x p i r a t i o n o f t h e V T A , N I D C s h o u l d relin q u i s h p o s s e s s i o n o f t h e s u b j e c t p r o p e r t i e s ( o i l mills) in favor of Batjak.3. SC refutes Batjaks theory: Per paragraphs 1 and 9 of the VTA, what was assigned to NIDC was the powert o v o t e t h e s h a r e s o f s t o c k r e p r e s e n t i n g 6 0 % shareh o l d i n g i n B a t j a k , i n c l u d e d w a s t h e a u t h o r i t y to execute any agreement that may be necessary toe x p r e s s c o n s e n t by the stockholders pertaining tos a i d 6 0 % . H o w e v e r , n o w e h e r e i n s a i d V T A d o e s i t appear that properties were ceded to NIDC.4. That no properties were ceded is buttressed by par.9o f t h e V T A ( t e r m i n a t i o n c l a u s e ) , w h i c h p r o v i d e s t h a t o n e x p i r a t i o n , w h a t a r e t o b e r e t u r n e d t o B a t j a k a r e o n l y t h e c e r t i f i c a t e s o f s t o c k representing 60% shareholding subject of the VTA.5. In any event, per Sec. 59, par1 of the Corp.Code av o t i n g t r u s t t r a n s f e r s o n l y v o t i n g o r o t h e r rightsp e r t a i n i n g t o t h e s h a r e s s u b j e c t o f t h e agreement, or control over the stock. 6. That PNB/NIDC ended up in possession of the mills isb e c a u s e o f i t s c a p a c i t y a s f o r e c l o s i n g c r e d i t o r a n d not as trustee per the VTA

G.R. No. L-37064 October 4, 1932 EUGENIO VERAGUTH, Director and Stockholder of the Isabela Sugar Company, Inc., petitioner, vs. ISABELA SUGAR COMPANY, INC., GIL MONTILLA, Acting President, and AGUSTIN B. MONTILLA, Secretary of the same corporation, respondents. Veraguth, a director and stockholder of the Isabela Sugar Company, Inc., filed a petition with the lower court praying that : a final and absolute writ of mandamus be issued to each and all of the respondent directors to notify him within the reglementary period, of all regular and special meetings of the board of directors of the Company, and to place at his disposal at reasonable hours the minutes, documents, and books of said corporation for his inspection as director and stockholder It appears that Veraguth has not been informed of previous meetings. He likewise contends that when asked that he be permitted to inspect the books of the Cop, he was denied access on the ground that the board of directors adopted a resolution providing for inspection of the books and the taking of copies only "by authority of the President of the corporation previously obtained in each case." As to the first issue, the SC held: no damage was caused to Veraguth by the action taken at the special meeting which he did not attend, since his interests were fully protected by the Philippine National Bank; and that as to meetings in the future it is to be presumed that the secretary of the company will fulfill the requirements of the resolutions of the company pertaining to regular and special meetings. It will, of course, be incumbent upon Veraguthto give formal notice to the secretary of his post-office address if he desires notice sent to a particular residence. Directors of a corporation have the unqualified right to inspect the books and records of the corporation at all reasonable times. Pretexts may not be put forward by officers of corporations to keep a director or shareholder from inspecting the books and minutes of the corporation, and the right of inspection is not to be denied on the ground that the director or shareholder is on unfriendly terms with the officers of the corporation whose records are sought to be inspected. A director or stockholder can of course make copies, abstracts, and memoranda of documents, books, and papers as an incident to the right of inspection, but cannot, without an order of a court, be permitted to take books from the office of the corporation. We do not conceive, however, that a director or stockholder has any absolute right to secure certified copies of the minutes of the corporation until these minutes have been written up and approved by the directors.

"All business corporations shall keep and carefully preserve a record of all business transactions, and a minute of all meetings of directors, members, or stockholders, in which shall be set forth in detain the time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object, those present and absent, and every act done or ordered done at the meeting. ... "The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, member, or stockholder of the corporation at reasonable hours." Directors have the unqualified right to inspect the books and records of the corp at all reasonable times Right not to be denied on ground that director is on unfriendly terms with officers of corp whose records are sought to be inspected Director without court order cannot be permitted to take books out of the corp Nothing improper in secretarys refusal since the minutes of these prior meetings have to be verified, confirmed and signed by the directors then present so Veraguth has to wait until after the next meeting SH or director may make copies, extracts and memoranda of such records By-law cannot provide for inspection only upon authority of president of corp previously obtained in each case

G.R. No. L-22399 March 30, 1967 REPUBLIC BANK, represented in this action by DAMASO P. PEREZ, etc., plaintiff-appellant, vs. MIGUEL CUADERNO, BIENVENIDO DIZON, PABLO ROMAN, THE BOARD OF DIRECTORS OF THE REPUBLIC BANK AND THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES, defendants-appellees. Crispin D. Baizas and Associates and Halili, Bolinao and Associates for plaintiff-appellant. Facts: This is an appeal from a dismissal of the case against respondent Roman for alleged fraudulent grant of loans to relatives (while he was chairman of the Board of Directors of Republic Bank and its Executive Loan Committee) and for the selection of respondents Cuaderno and Dizon (as technical consultant and chairman of the board respectively) in order to shield himself from the alleged wrongdoing and from any prosecution that may be instituted against him. The complaint also alleges that the present composition of the board of directors of the bank are constituted by men chosen by respondent Roman so that it was futile to ask them, in the first place, to institute this action on behalf of the bank. Ruling: In a derivative suit, the corporation is the real party in interest and the stockholder is merely a nominal party. Normally, it is the corporation through its board of directors that should bring the suit. But where, as in this case and it is alleged in the complaint, that the members of the board of directors of the bank were the nominees and creatures of respondent Roman, thus, any demand for an intra-corporate remedy would be futile, the stockholder is permitted to bring a derivative suit. As to the question of should the corporation be made a party, the English practice is to make the corporation a party plaintiff while in the US the practice is to make it a party defendant. However, in our jurisdiction what is important is that the corporation should be made a party in order to make the courts judgment binding upon it, and thus bar future litigation of the issues. Misjoinder of parties (in a derivative suit) is not a ground to dismiss the action. G.R. No. L-18216 October 30, 1962 STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants, vs. REGISTER OF DEEDS OF MANILA, respondent-appellee. The five stockholders of F. Guanzon and Sons, Inc. (Guanzon) executed an Affidavit of Liquidation of the assets of the corporation. By virtue of the dissolution, they have distributed amongst themselves, in proportion to their shareholdings, the assets of the corporation, including real properties located in Manila. the Certificate of Liquidation was presented to the Register of Deeds but was denied registration on seven grounds, which were disputed by the stockholders: (a) The number of parcels of land not certified in the acknowledgment (b) Registration fees were not paid (c) Documentary stamps need to be attached to the instrument (d) The judgment of the court approving the dissolution needs to be presented.

The Consulta, which was elevated to the Commissioner of Land Registration overruled ground number seven - judgment of court needs to be presented - and sustained the others. ISSUE: Whether the Certificate of Liquidation is a conveyance of transfer or not? RULING: The Court agrees with the opinion of the two officials. A corporation is a juridical person distinct from the members comprising it. Properties registered in the name of the corporation are owned by the corporation. While shares of stock constitute personal property, they do not represent the property of the corporation. The corporation has property of its own, which consists chiefly of real estate. A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity, but its holder is not the owner of any part of the capital of the corporation. Nor is he entitled to the possession of a definite portion of its property or assets. The stockholder is not a coowner or tenant in common of the corporate property. The act of liquidation made by the stockholders is not considered a partition of community property but rather a transfer or conveyance of the title of its assets to its stockholders. On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the assets of the corporation reciting, among other things, that by virtue of a resolution of the stockholders adopted on September 17, 1960, dissolving the corporation, they have distributed among themselves in proportion to their shareholdings, as liquidating dividends, the assets of said corporation, including real properties located in Manila. The certificate of liquidation, when presented to the Register of Deeds of Manila, was denied registration on seven grounds, of which the following were disputed by the stockholders: 3. The number of parcels not certified to in the acknowledgment; 5. P430.50 Reg. fees need be paid; 6. P940.45 documentary stamps need be attached to the document; 7. The judgment of the Court approving the dissolution and directing the disposition of the assets of the corporation need be presented (Rules of Court, Rule 104, Sec. 3). Deciding the consulta elevated by the stockholders, the Commissioner of Land Registration overruled ground No. 7 and sustained requirements Nos. 3, 5 and 6. The stockholders interposed the present appeal. As correctly stated by the Commissioner of Land Registration, the propriety or impropriety of the three grounds on which the denial of the registration of the certificate of liquidation was predicated hinges on whether or not that certificate merely involves a distribution of the corporation's assets or should be considered a transfer or conveyance. Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a distribution of the assets of the corporation which has ceased to exist for having been dissolved. This is apparent in the minutes for dissolution attached to the document. Not being a conveyance the certificate need not contain a statement of the number of parcel of land involved in the distribution in the acknowledgment appearing therein. Hence the amount of documentary stamps to be affixed thereon should only be P0.30 and not P940.45, as required by the register of deeds. Neither is it correct to require appellants to pay the amount of P430.50 as registration fee. The Commissioner of Land Registration, however, entertained a different opinion. He concurred in the view expressed by the register of deed to the effect that the certificate of liquidation in question, though it involves a distribution of the corporation's assets, in the last analysis represents a transfer of said assets from the corporation to the stockholders. Hence, in substance it is a transfer or conveyance. We agree with the opinion of these two officials. A corporation is a juridical person distinct from the members composing it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. While shares of stock constitute personal property they do not represent property of the corporation. The corporation has property of its own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala 398, 56 So., 235), but its holder is not the owner of any part of the capital of the corporation (Bradley v. Bauder 36 Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property or assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate property (Halton v. Hohnston, 166 Ala 317, 51 So 992). On the basis of the foregoing authorities, it is clear that the act of liquidation made by the stockholders of the F. Guanzon and Sons, Inc. of the latter's assets is not and cannot be considered a partition of community property, but rather a transfer or conveyance of the title of its assets to the individual stockholders. Indeed, since the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, and this is in effect the purpose which they seek to obtain from the Register of Deeds of Manila, that transfer cannot be effected without the corresponding deed of conveyance from the corporation to the stockholders. It is, therefore, fair and logical to consider the certificate of liquidation as one in the nature of a transfer or conveyance. G.R. No. L-17662 May 30, 1963 SAN TEODORO DEVELOPMENT ENTERPRISES, INC., petitioner-appellant, vs. SOCIAL SECURITY SYSTEM, respondent-appellee. N.A. Ferrera and P. N. Belmi for petitioner-appellant. Office of the Solicitor General and E. T. Duran, Social Security System Assistant Chief of the Legal Staff, for respondent. BAUTISTA ANGELO, J.: On January 8, 1959, the San Teodoro Sawmill Co., Inc., which was originally a limited partnership registered in the Register of Deeds of Oriental Mindoro as Chua Lam & Company then doing business under the name of "San Teodoro Sawmill", received a letter from the Acting Administrator of the Social Security System notifying it that it falls under the compulsory coverage of the Social Security Law effective September 1, 1957 and that the effective date of its coverage was August 1, 1957 and that of its qualified employees September 1, 1957. In response to the letter, the counsel for the San Teodoro Sawmill, Inc., which by then was changed to San Teodoro Development Enterprises, Inc., stated that his client was exempt from the compulsory coverage provided for in Section 9 of the Social Security Act (Republic Act 1161, as amended) because it was only incorporated on January 2, 1957 it being an entity distinct and separate from Chua Lam & Company, Ltd. which was organized as a partnership on June 23, 1951, their rights and liabilities being separate and distinct from one another, and that, if at all, the San Teodoro Development Enterprises, Inc. can only be considered as covered by the law, not from September 1, 1957, as intimated, but only from January 3, 1959. After the company and the counsel for the Commission had submitted memoranda in support of their respective contentions, on July 12, 1960, the Social Security Commission entered a resolution upholding the stand of the counsel of the Administrator of the Social Security System. It held that "the substance of the juridical person owning and operating the business remain the same although its legal personality was changed," and that the San Teodoro Development Enterprises, Inc. was but the continuation of the original entity Chua Lam & Company, Ltd. and so it comes within the purview of the compulsory, coverage of the law beginning August 1, 1957. Hence, the company's petition for exemption was denied. Its motion for reconsideration having been denied, the company interposed the present petition for review. Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t The pertinent facts, as may be gathered from the stipulation of the parties, are: Chua Lam & Company, Ltd. was a limited partnership registered on August 3, 1951. The persons composing it with their capital contribution as follows: Chua Lam, P25,000.00; Chua Tu, P15,000.00; Chua Guan,

P25,000.00; Vicente Keh Ho, P15,000.00; and Lim Te, P5,000.00. Its domicile was San Teodoro, Oriental Mindoro. Its purpose was "to engage in, operate and conduct a lumber sawmill for the purpose of sawing logs, lumber or timber or the like." It was agreed that the partnership will operate its sawmill in the name of "San Teodoro Sawmill." On December 15, 1956, the partners agreed to dissolve the partnership and to appoint Chua Lam as its liquidator. On July 19, 1957, the partnership was formally dissolved. On January 2, 1957, the San Teodoro Sawmill Co., Inc. was organized, its articles of incorporation having been registered on said date with the Securities and Exchange Commission. Four out of the eight incorporators were former partners of the dissolved partnership. Of the five original directors, three were former partners, and of the eight original subscribers to the capital of the corporation four were former partners of the partnership. It also appears that of the entire capital stock of the new corporation amounting to P150,000.00, the amount of P101,000.00 was subscribed by the former partners, and of the initial paid up capital of the corporation amounting to P45,000.00, the amount of P24,500.00 was paid by the former partners of the partnership. It also appears that the primary purposes of the new corporation were to engage in the buying and selling of logs and lumber, to operate sawmills, to lease and operate its concession, to purchase or lease real properties, and to construct buildings and warehouses for office and storage purposes. On January 23, 1958, the articles of incorporation of the new corporation were amended by changing its name to San Teodoro Development Enterprises, Inc. and by adding new purposes such as to conduct and carry on the business of mining, concentrating, converting, treating and dealing in gold, silver, copper, iron, oils and gas and the like. And on June 4, 1957, Chua Lam & Company, Ltd. executed a deed of absolute sale of the great bulk of the materials and equipment of the partnership in favor of the San Teodoro Sawmill, Inc. for the sum of P140,000.00. On the strength of the foregoing facts, the Social Security Commission found that the dissolution of the partnership and the organization of the corporation were effected in such sequence as to insure the smooth and orderly transfer of the business from the partnership to the corporation without interruption in the function of the business; that the entire business of the partnership, including the materials and equipment used in connection therewith, were transferred to the corporation ostensibly for a valuable consideration; and that even the name of the corporation was the same as the tradename of the partnership, and apparently their employees are also the same. All these, the Commission said, coupled with the fact that four out of the five members of the partnership do not only own the controlling stock of the corporation but also hold positions having to do with the management and control of the corporation, indicated in a conclusive manner that there was merely a change in the juridical personality of the entity operating the business, so that it may be said that the substance of the juridical person owning and operating the business remain the same even if its legal personality was changed. Petitioner disagrees with the foregoing conclusions contending that they run counter to the very nature of the organization of the two entities. But in so doing it merely relies on the theory that the defunct partnership Chua Lam & Company, Ltd., doing business under the style of San Teodoro Sawmill, has a juridical personality separate and distinct from that of the new corporation, which is petitioner herein, the latter having been organized at a much later date, and having assumed liabilities and obligations different from those of the former. But this corporate fiction cannot help petitioner any if its desire is to escape its liability under the law. Thus, in one case this Court observed: "while it is true that a corporation once formed is conferred a juridical personality separate and distinct from the persons composing it, it is but a legal fiction introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be extended to be point beyond its reasons and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the court."1 And in support hereof the Court cited with approval the following ruling: "If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons." (1 Fletcher, CYC. CORP. [Perm. Ed.], 135136; U.S. Milwaukee Refrigeration Transit Co., 242 Fed. 247, cited in Koppel Philippines, Inc. v. Yatco, 43 O.G., 4604.) In support of its theory that it is separate and distinct from the defunct partnership Chua Lam & Company, Ltd., petitioner advances the following points: (1) the San Teodoro Sawmill, Inc., which later became the San Teodoro Development Enterprises, Inc., was organized on June 2, 1957, whereas the partnership was dissolved only on July 19, 1957; (2) the partnership and the new corporation entered into a contract of sale covering the former's assets and equipment on June 4, 1957; (3) not all the partners of the defunct partnership are members of the new corporation; (4) petitioner did not assume the liabilities of the defunct partnership; and (5) petitioner was not organized to evade its liabilities under the law. But these points were squarely made by the Government in the following lucid refutation, to which we agree: The defunct partnership under the Articles of Partnership which was entered into by the partnership on June 22, 1951, has for its object "to engage in, operate and conduct a lumber sawmill for the purpose of sawing logs, lumber or timber or the like, for a valuable consideration, in San Teodoro, Oriental Mindoro," under the style of "San Teodoro Sawmill". Before the term of the partnership expired, the partners agreed among themselves at their meeting on December 15, 1956, to dissolve the partnership and appointed its managing partner, Mr. Chua Lam as the liquidator of its assets and liabilities. It was pursuant to the agreement of the partners to dissolve the partnership that the liquidator, by a Deed of Absolute Sale dated June 4, 1957 (Rec. on Appeal, pp. 128-134), sold all the assets of the partnership to the San Teodoro Sawmill, Inc., later to become San Teodoro Development Enterprises, Inc., petitioner-appellant herein. And although the latter company, which is composed mostly of the partners together with others, was formally organized only on June 2, 1957 by the issuances of its Certificate of Incorporation, it is significant that four out of the five members of the partnership actually signed the Articles of Incorporation on November 7, 1956, or before the partners agreed to dissolve the partnership on December 15, 1956. These circumstances clearly show the intention of four out of the five partners at least, to expand the business of the partnership by the formation of a corporation and the addition of new stockholders. This purpose to expand the business of the partnership is shown and bolstered by the Execution of the Amendment to the Articles of Incorporation (R.A. pp. 115-128), whereby it was sought to authorize the company to acquire agricultural lands, either public or private, through lease or purchase, for the purpose of development, and to engage in the manufacture of its product at wholesale only, to acquire, exploit and develop forest concessions from the government, and to conduct and carry on the business of mining, etc. It should also be noted that of the eight incorporators of the petitioner-appellant, four as already stated, were former partners of the defunct partnership, and of the five original directors of the petitioner-appellant, three were former partners of the partnership. Moreover, Chua Guan and Chua Tu, who were former members of the partnership, are now the General Manager and Treasurer, respectively, of petitioner-appellant, and, more significantly, the four former members of the partnership own the controlling stocks of petitioner-appellant. It is furthermore significant that, as in theLaguna Transportation Co. case, supra, the firm name "San Teodoro Sawmill" was not altered when the petitioner-appellant was first organized, except with the addition of the word "Inc." to indicate that it was duly incorporated under existing laws. Petitioner contends that it has acted in good faith because it was organized on June 2, 1957 whereas Republic Act 1161, the Social Security Law, was enacted only on June 22, 1957, so that it cannot be presumed that it adopted the scheme which is now denounced as a mere ruse to evade its liability under the law. . Republic Act No. 1161 was enacted not on June 22, 1957, but on June 18, 1954, or before the partners had decided to dissolve the partnership to organize a new corporation. While it may not have been the intention of petitioner to evade a statutory obligation, yet in substance its theory that it has a separate and distinct personality from the defunct partnership would precisely result in such an evasion that cannot but defeat the purpose of the law. Such is what this Court intended to prevent when it made the following pronouncement in the Laguna Transportation Co. case supra: "To adopt petitioner's argument would defeat, rather than promote, the ends for which the Social Security Act was enacted. An employer could easily circumvent the statute by simply changing his form of organization every other year, and then claim exemption from contribution to the System as required, on the theory that, as a new entity, it has not been in operation for a period of at least 2 years. The door to fraudulent circumvention of the statute would, thereby, be opened." WHEREFORE, the resolution of the Social Security Commission is hereby affirmed, with costs against petitioner..