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CORPORATION LAW 2012-2013

PALAY INC. V CLAVE



FACTS: Petitioner Palay, Inc., through its President, Albert Onstott executed in favor of private
respondent, Nazario Dumpit, a Contract to Sell a parcel of Land. Such land was owned by said
corporation.
Paragraph 6 of the contract provided for automatic extrajudicial rescission upon default in payment of
any monthly installment after the lapse of 90 days from the expiration of the grace period of one month,
without need of notice and with forfeiture of all installments paid.
Dumpit defaulted in paying the instalments. Almost six (6) years later, private respondent wrote
petitioner offering to update all his overdue accounts with interest, and seeking its written consent to the
assignment of his rights to a certain Lourdes Dizon. He followed this up with another letter dated June
20, 1973 reiterating the same request. Replying petitioners informed respondent that his Contract to Sell
had long been rescinded pursuant to paragraph 6 of the contract, and that the lot had already been resold.
Dumpit filed a letter of complaint with the NHA questioning the validity of the rescission. NHA ruled in
favour of Dumpit, ordered Palay, Inc. and Alberto Onstott in his capacity as President of the corporation,
jointly and severally, to refund immediately to Nazario Dumpit the amount of P13,722.50 with 12%
interest.

ISSUE: Whether the President may be held personally liable because he appears to be the controlling
stockholder.

HELD: We come now to the third and fourth issues regarding the personal liability of petitioner Onstott
who was made jointly and severally liable with petitioner corporation for refund to private respondent of
the total amount the latter had paid to petitioner company. It is basic that a corporation is invested by
law with a personality separate and distinct from those of the persons composing it as wen as from that
of any other legal entity to which it may be related.
11
As a general rule, a corporation may not be made
to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be
connected and vice versa. However, the veil of corporate fiction may be pierced when it is used as a
shield to further an end subversive of justice
12
; or for purposes that could not have been intended by
the law that created it
13
; or to defeat public convenience, justify wrong, protect fraud, or defend
crime.
14
; or to perpetuate fraud or confuse legitimate issues
15
; or to circumvent the law or perpetuate
deception
16
; or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders.
17
We find no badges of fraud on petitioners' part. They had literally relied, albeit mistakenly, on paragraph
6 (supra) of its contract with private respondent when it rescinded the contract to sell extrajudicially and
had sold it to a third person.
In this case, petitioner Onstott was made liable because he was then the President of the corporation and
he a to be the controlling stockholder. No sufficient proof exists on record that said petitioner used the he a to be the controlling stockholder. No sufficient proof exists on record that said petitioner used the
corporation to defraud private respondent. He cannot, therefore, be made personally liable just because
he "appears to be the controlling stockholder". Mere ownership by a single stockholder or by another
corporation is not of itself sufficient ground for disregarding the separate corporate personality.
18
In this
respect then, a modification of the Resolution under review is called for.
WHEREFORE, the questioned Resolution of respondent public official, dated May 2, 1980, is hereby
modified. Petitioner Palay, Inc. is directed to refund to respondent Nazario M. Dumpit the amount of
modified. Petitioner Palay, Inc. is directed to refund to respondent Nazario M. Dumpit the amount of
P13,722.50, with interest at twelve (12%) percent per annum from November 8, 1974, the date of the
filing of the Complaint. The temporary Restraining Order heretofore issued is hereby lifted.
CRUZ VS DALISAY

FACTS:
In a sworn complaint dated July 23, 1984, Adelio Cruz (complainant) charged Quiterio Dalisay
(respondent), Senior Deputy Sheriff of Manila, with malfeasance in office, corrupt practices and serious
irregularities allegedly committed as follows:
Respondent attached and/or levied the money belonging to complainant Cruz when he was not himself
the judgment debtor in the final judgment of an NLRC case sought to be enforced but rather the
company known as Qualitrans Limousine Service, Inc..
Respondent also caused the service of the alias writ of execution upon complainant who is a resident of
Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and does not extend to
Pasay City.
In his Comment, respondent explained that when he garnished complainants cash deposit at the
Philtrust bank he was merely performing a ministerial duty. And that while it is true that said writ was
addressed to Qualitrans Limousine Service, Inc., it is also a fact that complainant had executed an
affidavit before the Pasay City assistant fiscal stating that he is the owner/ president of Qualitrans.
Because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice of
garnishment on the Philtrust bank. garnishment on the Philtrust bank.
On November 12, 1984 this case was referred to the executive judge of the RTC of Manila for
investigation, report and recommendation. However, prior to the termination of the proceedings,
complainant executed an affidavit of desistance stating that he is no longer interested in prosecuting the
case and that there was just a misunderstanding between complainant and respondent.
On May 29, 1986, acting on respondents motion the executive judge issued an order recommending the
dismissal of the case.

ISSUE:
WON the complaint should be dismissed based on complainants motion of desistance.

HELD: NO
It has been held that desistance of complainant does not preclude the taking of disciplinary action
against respondent.
Respondents actuation in enforcing a judgment against complainant who is not a judgment debtor in the
case calls for disciplinary action. What is incumbent upon respondent is to ensure that only the portion
of a decision ordained or decreed in the dispositive part should be the subject of the execution.
The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans
Limousine Service, inc., to reinstate the discharged employees and pay them full backwages.
Respondent, however, choose to pierce the veil of corporate entity usurping a power belonging to the
court and assumed improvidently that since the complainant is the owner/president of Qualitrans
Limousine Service, Inc., they are one and the same. It is a well settled doctrine both in law and equity
that as a legal entity, a corporation has a personality distinct and separate from its individual
stockholders or members.
The mere fact that one is president of the corporation does not render the property he owns or possesses The mere fact that one is president of the corporation does not render the property he owns or possesses
the property of the corporation, since that president, as an individual, and the corporation are separate
entities.
JOSE REMO, JR., petitioner, vs. THE HON. INTERMEDIATE APPELLATE COURT and E.B.
JOSE REMO, JR., petitioner, vs. THE HON. INTERMEDIATE APPELLATE COURT and E.B.
MARCHA TRANSPORT COMPANY, INC., represented by APIFANIO B.
MARCHA, respondents.

The board of directors of Akron Customs Brokerage Corporation (hereinafter referred to as Akron),
composed of petitioner Jose Remo, Jr., Ernesto Baares, Feliciano Coprada, Jemina Coprada, and Dario
Punzalan with Lucia Lacaste as Secretary, adopted a resolution authorizing the purchase of thirteen (13)
trucks for use in its business to be paid out of a loan the corporation may secure from any lending
institution. Coprada, as president of the corporation, purchased the thirteen trucks.
The obligation is further secured by a promissory note executed by Coprada in favor of Akron. It is
stated in the promissory note that the balance shall be paid from the proceeds of a loan obtained from the
Development Bank of the Philippines (DBP) withiIssuen sixty (60) days. After the lapse of 90 days,
private respondent tried to collect from Coprada but the latter promised to pay only upon the release of
the DBP loan. Upon inquiry, private respondent found that no loan application was ever filed by Akron
with DBP.
In the meantime, Akron paid rentals of P500.00 a day pursuant to a subsequent agreement, from April
27, 1978 (the end of the 90-day period to pay the balance) to May 31, 1978. Thereafter, no more rental
payments were made.
On June 17, 1978, Coprada wrote private respondent begging for a grace period of until the end of the
month to pay the balance of the purchase price.
The respondent filed a complaint against the corporation and its directors and officers. In the meanwhile,
petitioner sold all his shares in Akron to Coprada. It also appears that Akron amended its articles of
incorporation thereby changing its name to Akron Transport International, Inc. which assumed the
liability of Akron to private respondent.
The lower court ruled in favour of respondent.

ISSUE: Whether the IAC erred in disregarding the corporate fiction

HELD: The environmental facts of this case show that there is no cogent basis to pierce the corporate
veil of Akron and hold petitioner personally liable for its obligation to private respondent. While it is
true that in December, 1977 petitioner was still a member of the board of directors of Akron and that he
participated in the adoption of a resolution authorizing the purchase of 13 trucks for the use in the
brokerage business of Akron to be paid out of a loan to be secured from a lending institution, it does not
appear that said resolution was intended to defraud anyone and more particularly private respondent. It
was Coprada, President and Chairman of Akron, who negotiated with said respondent for the purchase
of 13 cargo trucks on January 25, 1978. It was Coprada who signed a promissory note to guarantee the
payment of the unpaid balance of the purchase price out of the proceeds of a loan he supposedly sought
from the DBP. The word "WE' in the said promissory note must refer to the corporation which Coprada
represented in the execution of the note and not its stockholders or directors. Petitioner did not sign the
said promissory note so he cannot be personally bound thereby.
Thus, if there was any fraud or misrepresentation that was foisted on private respondent in that there was
a forthcoming loan from the DBP when it fact there was none, it is Coprada who should account for the
same and not petitioner.
As to the amendment of the articles of incorporation of Akron thereby changing its name to Akron
Transport International, Inc., petitioner alleges that the change of corporate name was in order to include
trucking and container yard operations in its customs brokerage of which private respondent was duly
informed in a letter. 19Indeed, the new corporation confirmed and assumed the obligation of the old
corporation. There is no indication of an attempt on the part of Akron to evade payment of its obligation
to private respondent.



JAIME PABALAN AND EDUARDO LAGDAMEO v.
NATIONAL LABOR RELATIONS COMMISSION, et al.
G.R. No. 89879 April 20, 1990 FIRST DIVISION GANCAYCO, J.:
Not one of the above circumstances has been shown to be present. Hence petitioners can not be held
jointly and severally liable with the PIF corporation under the questioned decision and resolution of the
public respondent. In this particular case complainants did not allege or show that petitioners, as
officers of the corporation deliberately and maliciously designed to evade the financial obligation of the
corporation to its employees, or used the transfer of the employees as a means to perpetrate an illegal
act or as a vehicle for the evasion of existing obligations, the circumvention of statutes, or to confuse the
legitimate issues.
Once again the parameters of the liability of the officers of a corporation as to unpaid wages and other
claims of the employees of a corporation which has a separate and distinct personality are brought to
fore in this case.
On October 20, 1987, eighty-four (84) workers of the Philippine Inter-Fashion, Inc. (PIF) filed a
complaint against the PIF and Petitioners Jaime Pabalan (Pabalan) and Eduardo Lagdameo (Lagdameo)
for illegal transfer simultaneous with illegal dismissal without justifiable cause and in violation of the
provision of the Labor Code on security of tenure as well as the provisions of Batas Pambansa Blg. 130.
Complainants demanded reinstatement with full backwages, living allowance, 13th month pay and other
benefits under existing laws and/or separation pay.
On October 21, 1987, PIF, through its General Manager, was notified about the complaint and summons
for the hearing set for November 6, 1987. The hearing was re-set for November 27, 1987 for failure of
respondents to appear. By mutual agreement the hearing was re-set on December 21, 1987 but on said
date respondents and/or counsel failed to appear. The hearing was re-set on January 14, 1988 on which
date respondents were given a deadline to submit their position paper.
On May 5, 1988, with leave of the labor arbiter, complainants filed their supplemental position paper
impleading the petitioners as officers of the PIF in the complaint for their illegal transfer to a new firm.
The labor arbiter ruled against PIF and its officers, Pabalan and Lagdameo. NLRC affirmed the decision The labor arbiter ruled against PIF and its officers, Pabalan and Lagdameo. NLRC affirmed the decision
in toto. Hence, this petition.
ISSUE:
Whether Pabalan and Lagdameo as officers of the corporation, PIF should not be held liable because a
corporation has a personality separate and distinct from the persons composing it
HELD: Petition GRANTED
The settled rule is that the corporation is vested by law with a personality separate and distinct from the
persons composing it, including its officers as well as from that of any other legal entity to which it may
be related. Thus, a company manager acting in good faith within the scope of his authority in
terminating the services of certain employees cannot be held personally liable for damages. Mere
ownership by a single stockholder or by another corporation of all or nearly all capital stocks of the
corporation is not by itself sufficient ground for disregarding the separate corporate personality.
As a general rule, officers of a corporation are not personally liable for their official acts unless it is
shown that they have exceeded their authority. However, the legal fiction that a corporation has a
personality separate and distinct from stockholders and members may be disregarded as follows:
This finding does not ignore the legal fiction that a corporation has a personality separate and distinct
from its stockholders and members, for, as this Court had held "where the incorporators and directors
belong to a single family, the corporation and its members can be considered as one in order to avoid its
being used as an instrument to commit injustice," or to further an end subversive of justice. In the case
of Claparols vs. CIR involving almost similar facts as in this case, it was also held that the shield of
corporate fiction should be pierced when it is deliberately and maliciously designed to evade financial
obligations to employees.
When the notion of legal entity is used as a means to perpetrate fraud or an illegal act or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, and or (to) confuse legitimate issues
the veil which protects the corporation will be lifted.
In this particular case complainants did not allege or show that petitioners, as officers of the corporation
deliberately and maliciously designed to evade the financial obligation of the corporation to its
employees, or used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle
employees, or used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle
for the evasion of existing obligations, the circumvention of statutes, or to confuse the legitimate issues.
Indeed, in the questioned resolution of the NLRC dated June 30, 1989 there is no finding as to why
petitioners were being held jointly and severally liable for the liability and obligation of the corporation petitioners were being held jointly and severally liable for the liability and obligation of the corporation
except as to invocation of the ruling of this Court in A.C. Ransom Labor Union-CCLU vs. NLRC 6 in
that the liability in the cases of illegal termination of employees extends not only to the corporation as a
corporate entity but also to its responsible officers acting in the interest of the corporation or employer.
Not one of the above circumstances has been shown to be present. Hence petitioners can not be held
jointly and severally liable with the PIF corporation under the questioned decision and resolution of the
public respondent.
BUENAFLOR C. UMALI, et al v. COURT OF APPEALS and BORMAHECO, INC. et al
G.R. No. 89561 September 13, 1990 SECOND DIVISION REGALADO, J.:
In the case at bar, petitioners seek to pierce the Veil of corporate entity of Bormaheco, ICP and PM
Parts, alleging that these corporations employed fraud in causing the foreclosure and subsequent sale of
the real properties belonging to petitioners While we do not discount the possibility of the existence of
fraud in the foreclosure proceeding, neither are we inclined to apply the doctrine invoked by petitioners
in granting the relief sought. It is our considered opinion that piercing the veil of corporate entity is not
the proper remedy in order that the foreclosure proceeding may be declared a nullity under the
circumstances obtaining in the legal case at bar.
Petitioner Buenaflor M. Castillo (Buenaflor) is the judicial administratrix of the estate of Felipe Castillo
(Felipe) which involves four (4) parcels of land were the subject of the Deed of Extra-Judicial Partition
executed by the heirs of Felipe Castillo and by virtue thereof the titles thereto has been cancelled and in
lieu thereof, new titles in the name of Mauricia Meer Vda. de Castillo and of her children, namely:
Buenaflor, Bertilla, Victoria, Marietta and Leovina, all surnamed Castillo. Subsequently, the parcels of
land were submitted as guaranty in the Agreement of Counter-Guaranty with Chattel-Real Estate
Mortgage between Insurance Corporation of the Philippines (Insurance Corporation) and Slobec Realty
Corporation (Slobec Realty) represented by Santiago Rivera (Rivera). Based on the Certificate of Sale
issued by the Sheriff in favour of Insurance Corporation, the latter was able to transfer to itself the titles
over the lots which was later sold to PM Parts.
Rivera, in representation of the Slobec Realty & Development Corporation executed in favor of
Bormaheco, Inc., represented by its Vice-President Modesto N. Cervantes (Cervantes) a Chattel
Mortgage concerning one unit model CAT D7 Caterpillar Crawler Tractor as described therein as
security for the payment in favor of the mortgagee of the amount of P180,000.00 which was later
forfeited in favour of the corporation. Although it appears that the parcels of land was sold by Insurance forfeited in favour of the corporation. Although it appears that the parcels of land was sold by Insurance
Corporation of the Philippines in favor of PM Parts, Cervantes, formerly Vice- President and now
President of Bormaheco, Inc., sent his letter to Mauricia Meer Vda. de Castillo, a family member,
demanding that she and her children should vacate the premises;
Only after the lapse of four months that Mauricia, a member of the Castillo family sent a letter to
Modesto N. Cervantes (Cervantes, the Vice-President of Bormaheco, Inc. later President thereof, and
one of the Board of Directors of PM Parts her opposition to the sale. Such dispute resulted to filing of a
case by the Castillos with the RTC praying that the sale and issuance of titles be declared fraudulent and
simulated and arguing that there is a need to pierce the corporate veil to declare the foreclosure
proceedings void. The lower court favoured the Castillos but the Court of Appeals reversed the decision.
Hence, this petition.
ISSUE: Whether there is a need to pierce the veil of corporate fiction to declare a foreclosure
proceeding void.
HELD: Petition DENIED
Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal
fiction that a corporation is an entity with a juridical personality separate and distinct from its members
or stockholders may be disregarded. In such cases, the corporation will be considered as a mere
association of persons. The members or stockholders of the corporation will be considered as the
corporation, that is, liability will attach directly to the officers and stockholders. The doctrine applies
when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the legitimate issues or where a corporation is the mere
alter ego or business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another
corporation.
In the case at bar, petitioners seek to pierce the Veil of corporate entity of Bormaheco, ICP and PM
In the case at bar, petitioners seek to pierce the Veil of corporate entity of Bormaheco, ICP and PM
Parts, alleging that these corporations employed fraud in causing the foreclosure and subsequent sale of
the real properties belonging to petitioners While we do not discount the possibility of the existence of
fraud in the foreclosure proceeding, neither are we inclined to apply the doctrine invoked by petitioners
in granting the relief sought. It is our considered opinion that piercing the veil of corporate entity is not
the proper remedy in order that the foreclosure proceeding may be declared a nullity under the
circumstances obtaining in the legal case at bar. circumstances obtaining in the legal case at bar.
In the first place, the legal corporate entity is disregarded only if it is sought to hold the officers and
stockholders directly liable for a corporate debt or obligation. In the instant case, petitioners do not seek
to impose a claim against the individual members of the three corporations involved; on the contrary, it
is these corporations which desire to enforce an alleged right against petitioners. Assuming that
petitioners were indeed defrauded by private respondents in the foreclosure of the mortgaged properties,
this fact alone is not, under the circumstances, sufficient to justify the piercing of the corporate fiction,
since petitioners do not intend to hold the officers and/or members of respondent corporations personally
liable therefor. Petitioners are merely seeking the declaration of the nullity of the foreclosure sale, which
relief may be obtained without having to disregard the aforesaid corporate fiction attaching to
respondent corporations. Secondly, petitioners failed to establish by clear and convincing evidence that
private respondents were purposely formed and operated, and thereafter transacted with petitioners, with
the sole intention of defrauding the latter.
The mere fact, therefore, that the businesses of two or more corporations are interrelated is not a
justification for disregarding their separate personalities, absent sufficient showing that the corporate
entity was purposely used as a shield to defraud creditors and third persons of their rights.


INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO v.
VOLUNTARY ARBITRATOR TEODORICO P. CALICA and INDOPHIL TEXTILE MILLS,
INC.
G.R. No. 96490 February 3, 1992 FIRST DIVISION MEDIALDEA, J.:
In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the
creation of the corporation is a devise to evade the application of the CBA between petitioner Union and
private respondent Company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by
petitioner in granting the relief sought. The fact that the businesses of private respondent and Acrylic
are related, that some of the employees of the private respondent are the same persons manning and
providing for auxilliary services to the units of Acrylic, and that the physical plants, offices and facilities
are situated in the same compound, it is our considered opinion that these facts are not sufficient to are situated in the same compound, it is our considered opinion that these facts are not sufficient to
justify the piercing of the corporate veil of Acrylic.
Petitioner Indophil Textile Mill Workers Union-PTGWO (Indophil Union) is a legitimate labor
organization duly registered with the Department of Labor and Employment (DOLE) and the exclusive
bargaining agent of all the rank-and-file employees of Indophil Textile Mills, Incorporated
(IndophilTextile Mills). Respondent Teodorico P. Calica (Calica) is impleaded in his official capacity as
the Voluntary Arbitrator of the National Conciliation and Mediation Board of the DOLE while private
respondent Indophil Textile Mills, Inc. is a corporation engaged in the manufacture, sale and export of
yarns of various counts and kinds and of materials of kindred character and has its plants at Barrio
Lambakin. Marilao, Bulacan.
Petitioner Indophil Union and private respondent Indophil Textile Mills, Inc. executed a collective
bargaining agreement effective from April 1, 1987 to March 31, 1990. Subsequently, Indophil Acrylic
Manufacturing Corporation (Acrylic) was formed and registered with the Securities and Exchange
Commission. Subsequently, Acrylic applied for registration with the Board of Investments for incentives
under the 1987 Omnibus Investments Code. The application was approved on a preferred non-pioneer
status.
Acrylic became operational and hired workers according to its own criteria and standards. Sometime in
July, 1989, the workers of Acrylic unionized and a duly certified collective bargaining agreement was
executed. In 1990 or a year after the workers of Acrylic have been unionized and a CBA executed, the
Indophil Union claimed that the plant facilities built and set up by Acrylic should be considered as an
Indophil Union claimed that the plant facilities built and set up by Acrylic should be considered as an
extension or expansion of the facilities of private respondent Company which means that Acrylic is part
of the Indophil Unions bargaining unit. Acrylic, on the other hand argued that it is a juridical entity
separate and distinct from Indophil Union. The existing impasse led the petitioner and private
respondent to enter into a submission agreement on September 6, 1990. The parties jointly requested the
public respondent to act as voluntary arbitrator in the resolution of the pending labor dispute pertaining
to the proper interpretation of the CBA provision. The Voluntary Arbiter ruled against Indophil Union.
Hence, this petition.

ISSUE: Whether the operations in Indophil Acrylic Corporation are an extension or expansion of
private respondent Company making the rank-and-file employees working at Indophil Acrylic should be
recognized as part of, and/or within the scope of the bargaining unit.

HELD: Petition DENIED
Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal
fiction that a corporation is an entity with a juridical personality separate and distinct from its members
or stockholders may be disregarded. In such cases, the corporation will be considered as a mere
association of persons. The members or stockholders of the corporation will be considered as the
corporation, that is liability will attach directly to the officers and stockholders. The doctrine applies
when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere
alter ego or business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another
corporation.
In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the
creation of the corporation is a devise to evade the application of the CBA between petitioner Union and
private respondent Company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by
petitioner in granting the relief sought. The fact that the businesses of private respondent and Acrylic are
related, that some of the employees of the private respondent are the same persons manning and
providing for auxilliary services to the units of Acrylic, and that the physical plants, offices and facilities
are situated in the same compound, it is our considered opinion that these facts are not sufficient to
justify the piercing of the corporate veil of Acrylic.
In the same case of Umali, et al. v. Court of Appeals (supra), The Court already emphasized that "the
legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly
liable for a corporate debt or obligation." In the instant case, petitioner does not seek to impose a claim liable for a corporate debt or obligation." In the instant case, petitioner does not seek to impose a claim
against the members of the Acrylic.
Furthermore, The Court already ruled in the case of Diatagon Labor Federation Local 110 of the
ULGWP v. Ople(supra) that it is grave abuse of discretion to treat two companies as a single bargaining
unit when these companies are indubitably distinct entities with separate juridical personalities.
Hence, the Acrylic not being an extension or expansion of private respondent, the rank-and-file
employees working at Acrylic should not be recognized as part of, and/or within the scope of the
petitioner, as the bargaining representative of private respondent.
All premises considered, the Court is convinced that the public respondent Voluntary Arbitrator did not
commit grave abuse of discretion in its interpretation of Section l(c), Article I of the CBA that the
Acrylic is not an extension or expansion of private respondent.

EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P. DE GUZMAN, petitioner, vs.
HONARABLE COURT OF APPEALS (17th Division), ( Republic of the Philippines),
UNIVERSITY OF THE PHILIPPINES, respondents.
UNIVERSITY OF THE PHILIPPINES, respondents.
G.R. No. 103372, June 22, 1992, First Division (Cruz, J.)
FACTS
Petitioner EPG Construction Co., Inc. and the University of the Philippines (U.P.) entered into a
contract for the construction of the UP Law Library Building. After the construction was completed and
turned over to UP, the latter, however, complained to the petitioner that 6 air-conditioning units on the
third floor of the building were not cooling properly.
After its repeated demands remained unheeded, U.P. subsequently demanded from EPG reimbursement
of the cost of the repair for the said units plus an equal sum as liquidated damages. When the demand
was rejected, UP sued EPG and its president, Emmanuel P. de Guzman, in the Regional Trial Court of
Quezon City. De Guzman moved to dismiss the complaint as to him for lack of a cause of action.
Both RTC and QC adjudged the case against petitioners and held them jointly and severally liable for Both RTC and QC adjudged the case against petitioners and held them jointly and severally liable for
the amount and damages prayed for by UP.

ISSUE
Whether the ruling of respondent CA holding petitioner Emmanuel de Guzman jointly and severally
liable with the corporation.

HELD
No, Emmanuel de Guzman is not solidarily liable with petitioner-corporation (as the former only) acted
on its behalf within the scope of his authority and without any demonstrated malice or bad faith.
It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal
entity to be considered as separate and apart from the individual stockholders or members who compose
it, and is not affected by the personal rights, obligations and transactions of its stockholders or members.
When Emmanuel de Guzman moved to dismiss the complaint as to him, UP said in its opposition to the
motion that it was suing him "in his official capacity and not in his personal capacity." His inclusion as
President of the company was therefore superfluous because his acts as such were corporate acts
imputable to EPG itself as his principal. It is settled that: A corporation is invested by law with a
personality separate and distinct from those of the persons composing it as well as from that of any other
entity to which it may be related. Mere ownership by a single stockholder or by another corporation of
all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality.
The exception noted is where the official "had acted maliciously or in bad faith," in which event he may
be made personally liable for his own act. That exception is not applicable in the case at bar, because it
has not been proved that De Guzman acted maliciously or in bad faith when, as President of EPG, he
sought to protect its interests and resisted UP's claims. Whatever damage was caused to UP as a result of
his acts is the sole responsibility of EPG even though De Guzman was its principal officer and his acts is the sole responsibility of EPG even though De Guzman was its principal officer and
controlling stockholder.


REBECCA BOYER-ROXAS and GUILLERMO ROXAS, petitioners, vs. HON. COURT OF
APPEALS and HEIRS OF EUGENIA V. ROXAS, INC., respondents.
1992 July 14 G.R. No. 100866 GUTIERREZ, JR., J.:

FACTS:
The questioned properties belonged to Eugenia V. Roxas. After the death, the heirs of Eugenia V.
Roxas, among the petitioners herein, decided to form a corporation Heirs of Eugenia V. Roxas,
Roxas, among the petitioners herein, decided to form a corporation Heirs of Eugenia V. Roxas,
Incorporated (private respondent herein) with the inherited properties as capital of the corporation. The
corporation was incorporated on December 4, 1962 with the primary purpose of engaging in agriculture
to develop the inherited properties. The Articles of Incorporation of the respondent corporation were
amended in 1971 to allow it to engage in the resort business. Accordingly, the corporation put up a
resort known as Hidden Valley Springs Resort where the questioned properties are located.
In two (2) separate complaints for recovery of possession filed with the RTC against petitioners
Rebecca Boyer-Roxas and Guillermo Roxas respectively, respondent corporation, Heirs of Eugenia V.
Roxas, Inc., prayed for the ejectment of the petitioners from buildings inside the Hidden Valley Springs
Resort allegedly owned by the respondent corporation.
In the case of petitioner Rebecca Boyer-Roxas, the respondent corporation alleged that Rebecca is in
possession of two (2) houses, one of which is still under construction, built at the expense of the
respondent corporation; and that her occupancy on the two (2) houses was only upon the tolerance of the
respondent corporation.
In the case of petitioner Guillermo Roxas, the respondent corporation alleged that Guillermo
occupies a house which was built at the expense of the former during the time when Guillermo's father, occupies a house which was built at the expense of the former during the time when Guillermo's father,
Eriberto Roxas, was still living and was the general manager of the respondent corporation; that the
house was originally intended as a recreation hall but was converted for the residential use of Guillermo;
and that Guillermo's possession over the house and lot was only upon the tolerance of the respondent
corporation.
In both cases, the respondent corporation alleged that the petitioners never paid rentals for the use of
the buildings and the lots and that they ignored the demand letters for them to vacate the buildings.
In their separate answers, the petitioners traversed the allegations in the complaint by stating that
they are heirs of Eugenia V. Roxas and therefore, co-owners of the Hidden Valley Springs Resort; and
as co-owners of the property, they have the right to stay within its premises.
The petitioners maintain that their possession of the questioned properties must be respected in view
of their ownership of an aliquot portion of all the properties of the respondent corporation being
stockholders thereof. They propose that the veil of corporate fiction be pierced, considering the
circumstances under which the respondent corporation was formed.

ISSUE:
Whether respondent is entitled to recover the questioned premises.

HELD:
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. 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 any definite portion of its property
or assets. The stockholder is not a co-owner or tenant in common of the corporate property. A or assets. The stockholder is not a co-owner or tenant in common of the corporate property. A
corporation can therefore sue to recover real property being occupied by its former president (who was
also a significant stockholder) for it has a juridical personality separate and distinct from its stockholders
even tho in the past the corporation allowed the president to enjoy the possession of the property.
The petitioners' stay within the questioned properties was merely by tolerance of the respondent
corporation in deference to the wishes of Eufrocino Roxas, who during his lifetime, controlled and
managed the corporation. Eufrocino Roxas' actions could not have bound the corporation forever. The
petitioners have not cited any provision of the corporation by-laws or any resolution or act of the Board
of Directors which authorized Eufrocino Roxas to allow them to stay within the company premises
forever. We rule that in the absence of any existing contract between the petitioners and the respondent
corporation, the corporation may elect to eject the petitioners at any time it wishes for the benefit and
corporation, the corporation may elect to eject the petitioners at any time it wishes for the benefit and
interest of the respondent corporation.
RAUL SESBREO, petitioner, vs.HON. COURT OF APPEALS, DELTA MOTORS
CORPORATION AND PILIPINAS BANK, respondents.
G.R. No. 89252 May 24, 1993 FELICIANO, J.:

FACTS:
Petitioner Raul Sesbreo made a money market placement in the amount of P300,000.00 with the
Philippine Underwriters Finance Corporation (Philfinance); the placement, with a term of 32 days, and
also issued the following documents to petitioner:
(a) the Certificate of Confirmation of Sale, "without recourse," No. 20496 of one (1)
Delta Motors Corporation Promissory Note (DMC PN) No. 2731;
(b) the Certificate of securities Delivery Receipt No. 16587 indicating the sale of DMC
PN No. 2731 to petitioner, with the notation that the said security was in custodianship of
Pilipinas Bank, as per Denominated Custodian Receipt (DCR) No. 10805; and
(c) post-dated checks payable on 13 March 1981 (i.e., the maturity date of petitioner's
investment), with petitioner as payee, Philfinance as drawer, and Insular Bank of Asia investment), with petitioner as payee, Philfinance as drawer, and Insular Bank of Asia
and America as drawee, in the total amount of P304,533.33.
Petitioner sought to encash the postdated checks issued by Philfinance. However, the checks were
dishonored for having been drawn against insufficient funds.
Petitioner approached private respondent Pilipinas, and sent a demand letter informing the bank that his
placement with Philfinance in the amount reflected in the DCR No. 10805 had remained unpaid and
outstanding, and that he in effect was asking for the physical delivery of the underlying promissory note.
Delta, however, denied any liability to petitioner on the promissory note, and explained in turn that it
had previously agreed with Philfinance to offset its DMC PN No. 2731 (along with DMC PN No. 2730)
against Philfinance PN No. 143-A issued in favor of Delta.
In the meantime, Philfinance, was placed under the joint management of the SEC and the Central Bank.
Pilipinas delivered to the SEC DMC PN No. 2731, which to date apparently remains in the custody of
the SEC.

As petitioner had failed to collect his investment and interest thereon, he filed an action for damages
with the RTC, against private respondents Delta and Pilipinas.
RTC dismissed the complaint. CA affirmed RTC.

ISSUE:
Whether or not the Philfinance and private respondents Delta and Pilipinas should be treated as one
corporate entity.

HELD:
An assignee of a promissory note can not enforce payment thereof if the same had already been
extinguished by compensation as when the maker of the note and the assignor thereof are mutually
indebtedness to each other. The mere fact that two corporations have a common director is not a indebtedness to each other. The mere fact that two corporations have a common director is not a
sufficient basis for disregarding their separate juridical personalities.
It is not disputed that Philfinance and private respondents Delta and Pilipinas have been organized as
separate corporate entities. Petitioner asks us to pierce their separate corporate entities, but has been able
only to cite the presence of a common Director Mr. Ricardo Silverio, Sr., sitting on the Board of
Directors of all three (3) companies. Petitioner has neither alleged nor proved that one or another of the
three (3) concededly related companies used the other two (2) as mere alter egos or that the corporate
three (3) concededly related companies used the other two (2) as mere alter egos or that the corporate
affairs of the other two (2) were administered and managed for the benefit of one. There is simply not
enough evidence of record to justify disregarding the separate corporate personalities of delta and
Pilipinas and to hold them liable for any assumed or undetermined liability of Philfinance to petitioner.

QUINTIN ROBLEDO, MARIO SINLAO, LEONARDO SAAVEDRA, VICENTE SECAPURI,
DANIEL AUSTRIA, ET AL., petitioners, vs. THE NATIONAL LABOR RELATIONS
COMMISSION, BACANI SECURITY AND ALLIED SERVICES CO., INC., AND BACANI
SECURITY AND PROTECTIVE AGENCY AND/OR ALICIA BACANI, respondents.
1994 Nov 9 G.R. No. 110358 MENDOZA, J.:

FACTS:
Petitioners were former employees of Bacani Security and Protective Agency (BSPA). They were
employed as security guards at different times during the period 1969 to December 1989 when BSPA
ceased to operate.
BSPA was a single proprietorship owned, managed and operated by the late Felipe Bacani. On
December 31, 1989, Felipe Bacani retired the business name and BSPA ceased to operate effective on
that day. At that time, respondent Alicia Bacani, daughter of Felipe Bacani, was BSPA's Executive
Directress.
When Felipe Bacani died, an intestate proceeding was instituted for the settlement of his estate before
the RTC. the RTC.
Earlier, on October 26, 1989, respondent Bacani Security and Allied Services Co., Inc. (BASEC) had
been organized and registered as a corporation with SEC. The following were the incorporators with
their respective shareholdings:

ALICIA BACANI 25,250 shares
LYDIA BACANI 25,250 shares
AMADO P. ELEDA 25,250 shares
VICTORIA B. AURIGUE 25,250 shares
FELIPE BACANI 20,000 shares

The primary purpose of the corporation was to "engage in the business of providing security" to persons
and entities. This was the same line of business that BSPA was engaged in. Most of the petitioners, after
losing their jobs in BSPA, were employed in BASEC.
Some of the petitioners filed a complaint with the Department of Labor and Employment for
underpayment of wages and nonpayment of overtime pay, legal holiday pay, separation pay and/or
retirement/resignation benefits, and for the return of their cash bond which they posted with BSPA.
Made respondents were BSPA and BASEC. Petitioners were subsequently joined by the rest of the
petitioners herein who filed supplementary complaints.
The Labor Arbiter rendered a decision upholding the right of the petitioners. NLRC reversed.

ISSUE:
Whether BASEC and Alicia Bacani can be held liable for claims of petitioners against BSPA.

HELD:
Petition is dismissed. Petition is dismissed.
As correctly found by the NLRC, BASEC is an entity separate and distinct from that of BSPA. BSPA is
a single proprietorship owned and operated by Felipe Bacani. Hence its debts and obligations were the
personal obligations of its owner. Petitioners' claim which are based on these debts and personal
personal obligations of its owner. Petitioners' claim which are based on these debts and personal
obligations, did not survive the death of Felipe Bacani on January 15, 1990 and should have been filed
instead in the intestate proceedings involving his estate.
According to the petitioners, the Bacani family merely continued the operation of BSPA by creating
BASEC in order to avoid the obligations of the former. The doctrine of piercing the veil of corporate
entity has no application to this case where the purpose is not to hold the individual stockholders liable
for the obligations of the corporation but, on the contrary, to hold the corporation liable for the
obligations of a stockholder or stockholders. Here, there is no reason to pierce the veil of corporate
entity because there is no question that petitioners' claims, assuming them to be valid, are the personal
liability of the late Felipe Bacani. It is immaterial that he was also a stockholder of BASEC.
There are several reasons why BASEC is not liable for the personal obligations of Felipe Bacani. For
one, BASEC came into existence before BSPA was retired as a business concern. Second, Felipe Bacani
was only one of the five (5) incorporators of BASEC. He owned the least number of shares in BASEC,
which included among its incorporators persons who are not members of his family. That his wife Lydia
and daughter Alicia were also incorporators of the same company is not sufficient to warrant the
conclusion that they hold their shares in his behalf. Third, there is no evidence to show that the assets of
BSPA were transferred to BASEC. If BASEC was a mere continuation of BSPA, all or at least a
substantial part of the latter's assets should have found their way to BASEC.
Where a corporation engaged in the security services was incorporated before the single proprietorship
owned by the one of its incorporators engaged in the same business ceased to operate, the incorporator
in question owned the least number of shares, and the assets of the single proprietorship where not
transferred to the corporation, its separate juridical personality cannot be disregarded. The doctrine of
piercing the corporate veil has no application to this case where the purpose is not to hold the individual
stockholders liable for the obligation to the corporation but on the contrary to hold the corporation liable
for the obligations of stockholders. Thus, the security guards of the single proprietorship can not be
considered employed. considered employed.
LAGUIO VS NLRC
FACTS:
petitioners who initially composed of seventy-seven employees filed a complaint for "illegal
shutdown/retrenchment/dismissal and unfair labor practice, petitioners amended their complaint to
implead private respondent Well World Toys, Inc. (Well World for brevity), a corporation also engaged
in the manufacture of stuffed toys for export with principal office located at Las Pias, Manila.
In their complaint, petitioners basically alleged that they were original probationary employees of Well
World but were later laid off in 1989 "for starting to organize themselves into a union". They applied
with and were thereafter hired by April. On February 2, 1990, and while under the employ of April,
petitioners conducted a certification election where their union, Alyansang Likha ng mga Anak ng
Bayan (ALAB), won as the exclusive bargaining agent for the workers. Petitioners thereafter submitted
a Collective Bargaining Agreement proposal which April rejected in view of its cessation of operation.
The closure, petitioners declared, is April's clever ploy to "defeat their right to self organization".
12
Petitioners further alleged that the original incorporators and principal officers of April were likewise
the original incorporators of Well World, thus both corporations should be treated as one corporation
liable for their claims.
To bolster their claim that April and Well World are one and the same corporation, petitioners argue that
both corporations have the same set of incorporators.
Petitioners also insist that the two corporations "are being managed by Mr. Jean Li Wang"
13
and that
their articles of incorporation, general information sheets and certificates of increase of capital stock
were notarized by the same Notary Public.

ISSUE:
Whether or not the two corporations having the same incorporators have the same liability


HELD:
It is basic that a corporation is invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it may be related. Mere
substantial identity of the incorporators of the two corporations does not necessarily imply fraud,
15
nor
warrant the piercing of the veil of corporate fiction. In the absence of clear and convincing evidence that
April and Well World's corporate personalities were used to perpetuate fraud, or circumvent the law said
corporations were rightly treated as distinct and separate from each other.
We can not fully subscribe to the above contention of the complainants. We do not believe that the
circumstances related by the complainants are sufficient indicia that the two corporations are one and the
same corporation although it appears that two of the original incorporators and stockholders of April
Toy, Inc. were incorporators and minority stockholders of Well-World Toy, Inc. Hence it does not mean
that the two (2) corporations are adjunct and conduit. There is not express provision under the
Corporation Law prohibiting stockholders or incorporators of a corporation to be a stockholder or
incorporator of another corporation.
The fiction that a corporation was a distinct and separate personality shall not be used as a subterfuge to
commit injustice and circumvent the law does not apply in the present case. There is no conclusive
evidence to convince us that respondent April Toy, Inc. was established and later on closed to defeat the
rights of the workers of Well-World Toy, Inc. which would otherwise support the charge of unfair labor
practice. Hence, we find that the two (2) corporations are separate and distinct entities.
1
7
MATUGUINA WOOD PRODUCTS VS CA

FACTS:
In 1973, license was issued to Milagros Matuguina to operate logging businesses under her group
Matuguina Logging Enterprises. MIWPI was established in 1974 with 7 stockholders. Milagros
Matuguina became the majority stockholder later on. Milagros later petitioned to have MLE be
transferred to MIWPI. Pending approval of MLEs petition, Davao Enterprises Corporation filed a transferred to MIWPI. Pending approval of MLEs petition, Davao Enterprises Corporation filed a
complaint against MLE before the District Forester (Davao) alleging that MLE has encroached upon the
area allotted for DAVENCORs timber concession. The Investigating Committee found MLE guilty as
charged and had recommended the Director to declare that MLE has done so. MLE appealed the case to
the Ministry of Natural Resources. During pendency, Milagrosa withdrew her shares from MIWPI.
Later, MNR Minister Ernesto Maceda found MLE guilty as charged. Pursuant to the finding,
DAVENCOR and Philip Co requested Maceda to order MLE and/or MIWPI to comply with the ruling
to pay the value in pesos of 2352.04 m
3
worth of timbers. The Minister then issued a writ of execution
against MIWPI. MIWPI filed a petition for prohibition before the Davao RTC. The RTC ruled in favor
of MIWPI and has ordered to enjoin the Minister from pursuing the execution of the writ. DAVENCOR
appealed and the CA reversed the ruling of the RTC. MIWPI averred that it is not a party to the original
case (as it was MLE that was sued a separate entity). That the issuance of the order of execution by the
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 MIWPIs constitutional rights
under the due process clause.

ISSUE:
Whether or not petitioner is an alter ego of Milagros Matuguina/MLE

HELD:
The issue of whether or not petitioner is an alter ego of Milagros Matuguina/MLE, is one of fact, and
which should have been threshed out in the administrative proceedings, and not in the prohibition
proceedings in the trial court, where it is precisely the failure of the respondent Minister of Natural
Resources to proceed as mandated by law in the execution of its order which is under scrutiny.
Resources to proceed as mandated by law in the execution of its order which is under scrutiny.
Assuming, arguendo, that prohibition is the proper remedy for determining the propriety of piercing the
separate personality of petitioner with its stockholders, the evidence presented at said trial does not
warrant such action. warrant such action.
It is settled that a corporation is clothed with a personality separate and distinct from that of persons
composing it. It may not generally be held liable for that of the persons composing it. It may not be
held liable for the personal indebtedness of its stockholders or those of the entities connected with it.
Conversely, a stockholder cannot be made to answer for any of its financial obligations even if he
should be its president. [37] But when the juridical personality of the corporation is used to defeat public
convenience, justify wrong, protect fraud or defend crime, the corporation shall be considered as a mere
association of persons (Koppel, Inc. vs. Yatco, 77 Phil 496, Palay, Inc. vs. Clave, G.R. No. 56076,
September 21, 1983, 124 SCRA 638), and its responsible officers and/or stockholders shall be
individually liable (Namarco vs. Associated Finance Co., Inc., G.R. No. L- 20886, April 27, 1967, 19
SCRA 962). For the same reasons, a corporation shall be liable for the obligations of a stockholder
(Palacio vs. Fely Transportation Co., G.R. No. L-15121, August 31, 1963, 5 SCRA 1011), or a
corporation and its successor-in-interest shall be considered as one and the liability of the former attach
to the latter.
But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be
clearly and convincingly established. It cannot be presumed.
In the case at bar, there is, insufficient basis for the appellate courts ruling that MIWPI is the same as
Matuguina
REPUBLIC VS SANDIGANBAYAN
FACTS:
PCGG issued the following communications, all dated May 9, 1986: (1) an Order of Sequestration
directed against all properties, assets, records and documents of PHI; (2) another Order sequestering
111,415 shares of stock of PTIC registered in the books of PTIC in the name of PHI.
On July 16, 1987, petitioner filed before the Sandiganbayan a Complaint for reconveyance,
reversion, accounting, restitution and damages against Spouses Ferdinand and Imelda Marcos,
Spouses Imelda (Imee) and Tomas Manotoc, Spouses Irene and Gregorio Ma. Araneta III, Ferdinand R.
Marcos Jr., Constante Rubio, Nemesio G. Co, Yeung Chun Kam, Yeung Chun Ho and Yeung Chun Fan.
Said Complaint, docketed as Civil Case No. 0002, principally sought to recover from defendants their Said Complaint, docketed as Civil Case No. 0002, principally sought to recover from defendants their
alleged ill-gotten wealth, consisting of funds and property which were manifestly out of proportion to
their salaries and other lawful income, having been allegedly acquired during the incumbency of the
Spouses Marcos as public officers. Among such properties mentioned in the Complaint were shares of
stock in various corporations, including PTIC and PLDT, a list of which was annexed to the Complaint.
An amended Complaint [7] filed on April 23, 1990, included in Civil Case No. 0002 as additional
parties-defendants herein Private Respondents Imelda Cojuangco, the estate of Ramon Cojuangco
represented by its administratrix Imelda Cojuangco, and Prime Holdings, Inc. The amended complaint
further alleged inter alia that these new defendants held shares of stock in PLDT, which in truth and in
fact belong to defendants Ferdinand Marcos and his family.

ISSUE:
Whether or not PCGG can sequester the assets of PTIC

HELD:
The Complaint for the recovery of ill-gotten wealth filed on July 16, 1987, did not implead any of
private respondents as parties thereto. Neither were they included in the annexed list of alleged ill-
gotten wealth. It was only on April 23, 1990, via an amended Complaint, that Imelda Cojuangco, the
estate of Ramon Cojuangco, and Prime Holdings, Inc., were made parties-defendants. By then, three
years -- well beyond the six months prescribed by the Constitution -- had passed since the issuance of
the sequestration orders against the PHI and the PTIC shares it owned.
the sequestration orders against the PHI and the PTIC shares it owned.
Second, even if PTIC was listed in the Annex to the Complaint, it must be understood that the case
refers only to the extent of the shares in PTIC illegally acquired by the original defendants.
As regards actions in which the complaints seek recovery of defendants shares of stock in existing
corporations (e.g., San Miguel Corporation, Benguet Corporation, Meralco, etc.) allegedly purchased
with misappropriated public funds, in breach of fiduciary duty, or otherwise under illicit or anomalous with misappropriated public funds, in breach of fiduciary duty, or otherwise under illicit or anomalous
conditions, the impleading of said firms would clearly appear to be unnecessary. If warranted by the
evidence, judgments may be handed against the corresponding defendants divesting them of ownership
of their stock, the acquisition thereof being illegal and consequently burdened with a constructive trust,
and imposing on them the obligation of surrendering them to the Government.
Thus, whether PHI itself -- an entirely different corporate entity, though a major investor in PTIC -- has
shareholdings unlawfully or anomalously acquired, or whether it was organized with ill-gotten wealth, is
a different matter. Notably, the individual respondents are the registered owners of PHI and, as earlier
stated, they had not been included as original defendants in Civil Case No. 0002. The judicial action
against them was belatedly instituted long after the lapse of the constitutional time frame.
In its Memorandum, petitioner vehemently argues that although PHI was not initially included in the
enumeration of the ill-gotten wealth of the Marcoses x x x in Annex A of the original complaint, it is
enough that PTIC and PLDT were included in said list of ill-gotten wealth of the principal defendants.
This argument is absolutely in contravention of the due process guarantee. PHI is a corporation
completely separate from PTIC and PLDT. Indeed, it has a personality distinct from said entities.
Petitioner has shown no commonality in
shareholding, management or operation among them. Neither has it alleged, much less proven, any
ground why the separate corporate personality of PHI should be set aside or pierced. And definitely, the
most basic considerations of due process prevent a suit against PTIC and PLDT from adversely affecting
and prejudicing the proprietary rights of PHI and its likewise unimpleaded shareholders




TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS GUARANTY
ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents. G.R. ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents. G.R.
No. 93397 March 3, 1997 (TORRES, JR., J).:

Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached Assignment in favor of
Philippine Underwriters Finance Corporation (Philfinance) whereby Filriters, as registered owner, sold
and delivered to Philfinance all its rights and title to a Central Bank Certificates of Indebtedness (CBCI).
Philfinance sold and transferred the same certificate of indebtedness to Traders Royal Bank (TRB)
which Philfinance failed to repurchase when the checks it issued were dishonored for insufficient funds.
Owing to the default of PhilFinance, it executed a Detached Assignment in favor of the TRB to enable
the latter to have its title completed and registered in the books of Central Bank (CB). CB failed and
refused to register the transfer notwithstanding petitioner's valid and just title over the same.
TRB prayed for the registration by the Central Bank of the subject CBCI in its name. The Regional Trial
Court (RTC) of Manila, found the assignment of in favor of Philfinance, and the subsequent assignment
of the same by Philfinance in favor of Traders Royal Bank null and void and of no force and effect. The
appellate court affirmed the ruling of the trial court upon finding that the assignment of the certificate
from Filriters to Philfinance was fictitious, having made without consideration because Philfinance
merely borrowed CBCI from Filriters, a sister corporation, to guarantee its financing operations.
On appeal to the Supreme Court,TRB raised the following contentions:
That Philfinance owns 90% of Filriters equity and the two corporations have identical corporate 1.)
That Philfinance owns 90% of Filriters equity and the two corporations have identical corporate
officers, thus demanding the application of the doctrine or piercing the veil of corporate fiction,
as to give validity to the transfer of the CBCI from registered owner to petitioner TRB. This
renders the payment by TRB to Philfinance of CBCI, as actual payment to Filriters. Thus, there
is no merit to the lower court's ruling that the transfer of the CBCI from Filriters to Philfinance
was null and void for lack of consideration.
That the transfer of the subject CBCI to TRB must upheld, as the respondent Filriters and
Philfinance, though separate corporate entities on paper, have used their corporate fiction to
defraud TRB into purchasing the subject CBCI, which purchase now is refused registration by
the Central Bank.
1.)
2.)
the Central Bank.
ISSUE:
Whether the ownership by a corporation of nearly all of the capital stock of another corporation is in
itself a sufficient reason for disregarding the fiction of separate corporate personalities.

HELD:
The corporate separateness between Filriters and Philfinance remains, despite the petitioners
insistence on the contrary. For one, other than the allegation that Filriters is 90% owned by Philfinance,
and the identity of one shall be maintained as to the other, there is nothing else which could lead the
court under circumstance to disregard their corporate personalities.
Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a
juridical personality separate from its stockholders and from other corporations may be disregarded,
19
in
the absence of such grounds, the general rule must upheld. The fact that Filfinance owns majority
shares in Filriters is not by itself a ground to disregard the independent corporate status of
Filriters.

THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), petitioner, vs.
HON. SANDIGANBAYAN and AEROCOM INVESTORS & MANAGERS, INC., respondents.
G.R. No. 125788. June 5, 1998. (MARTINEZ, J.:)

Petitioner Presidential Commission on Good Government (PCGG) filed a civil case before the
Sandiganbayan against several personalities among them are a certain Manuel H. Nieto and Jose L.
Africa (The other defendants were: Roberto S. Benedicto, Potenciano Ilusorio, Juan Ponce Enrile and
Ferdinand Marcos, Jr.) alleging, in substance, that said defendants acted as dummies of the late
strongman and devised schemes to monopolize the telecommunications industry. Annexed to strongman and devised schemes to monopolize the telecommunications industry. Annexed to
the complaint is a listing of the assets of defendants Nieto and Africa, among which are their shares of
stock in private respondent Aerocom Investors and Managers, Inc. (Aerocom).
PCGG obtained a sequestration order which was served and received under protest by Aerocoms
president. Seven (7) days after receipt of the sequestration order, Aerocom sought to nullify the same on
the ground that it was served on Aerocom beyond the period prescribed under the Constitution. PCGG
also sequestered the dividends pertaining to the shares of Aerocom in all corporations where it owns
shares of stock arguing that the fact that plaintiff (Aerocom) is mentioned in Annex A of the
complaint filed in the civil case is a clear indication that the shares thereof are likewise sequestered.
The Sandiganbayan ordered PCGG to release the dividends pertaining to Aerocom except the dividends
on the sequestered shares of stock registered in the names of Manuel Nieto and Jose Africa. Hence,
PCGG filed the present petition for certiorari assailing the order of the Sandiganbayan for the release of
the dividends as having been issued with grave abuse of discretion.

ISSUE:
Whether the inclusion in the complaint of specific allegations of corporations being used as dummies or
Whether the inclusion in the complaint of specific allegations of corporations being used as dummies or
the control of defendants named therein without actually impleading them as defendants, satisfy the
constitutional requirement that a sequestration order must be filed within six (6) months from the
ratification of the present Constitution (Section 26, Article XVIII)

HELD:
The suit against Mr. Nieto and Mr. Africa as shareholders in Aerocom is not and cannot ipso facto
be a suit against the unimpleaded Aerocom without violating the fundamental principle that a
corporation has a legal personality distinct and separate from its stockholders.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, OCEANIC WIRELESS
NETWORK, INC., DAVID M. CASTRO, MAXIMO A. MACEREN, CAESAR PARLADE, NETWORK, INC., DAVID M. CASTRO, MAXIMO A. MACEREN, CAESAR PARLADE,
MELQUIADES C. GUTIERREZ, EDUARDO M. VILLANUEVA, and EDILBERTO S.
ALEJANDRO, petitioners, vs. HONORABLE SANDIGANBAYAN (Third Division), JOSE L.
AFRICA MANUEL H. NIETO, JR., ANDRES L. AFRICA, AEROCOM INVESTORS AND
MANAGERS INC., POLYGON INVESTORS AND MANAGERS, INC., and BELGOR
INVESTMENT CORPORATION, respondents. [G.R. Nos. 119609-10. September 21, 2001]
PARDO, J.:
The Presidential Commission on Good Government (PCGG) ordered Atty. Africa, then the Corporate
Secretary of Oceanic Wireless Network, Inc. (OWNI), to send notices to all stockholders regarding a
special stockholders meeting. He was also required to issue one qualifying share each to PCGG
Commissioners. During the stockholders meeting, the PCGG nominees were elected as directors of
OWNI board which election was contested on the ground that they were not stockholders of OWNI.
PCGG sequestered the Class A shareholding in OWNI amounting to 63,573 shares out of the total
105,955 outstanding capital stock, or about 60% of the outstanding capital stock, and PCGG voted all
the Class A shares by virtue of several writs of sequestration.
Despite the election of the PCGG nominees as directors of the OWNI Board, the Class A stockholders
held an election wherein Manuel H. Nieto, Jr., Jose L. Africa

and Andres L. Africa were elected as until
their successors are elected and qualified. As directors, they notified the agencies with whom the PCGG
nominees transacted requesting them to hold in abeyance any transaction as the same was made by an
unauthorized board. PCGG, acting for itself and in behalf of OWNI, filed with the Sandiganbayan a
complaint seeking to enjoin said defendants from interfering with PCGGs management of OWNI
and/or representing themselves as directors.
The Sandiganbayan declared as null and void the PCGG writs of sequestration for the reason that the
said writs of sequestration were deemed automatically lifted for failure of the PCGG to commence the
necessary judicial action against the said corporations within the required six-month period pursuant to
Section 26 of Article XVIII of the 1987 Constitution and on the ground that the said order of
sequestration was signed only by PCGG Commissioner in violation of PCGG rules requiring the
signatures of at least two Commissioners on such order of sequestration.
Petitioners filed with the Sandiganbayan a motion for reconsideration, however the same was denied. On Petitioners filed with the Sandiganbayan a motion for reconsideration, however the same was denied. On
appeal to the Supreme Court, petitioners argued that Sandiganbayan should not have nullified the writs
of sequestration because there was no need to file a separate action against OWNI, Polygon, Aerocom
and Silangan since they had been included in the list of the ill-gotten wealth of defendants Jose L. Africa
and Manuel H. Nieto, Jr. in a prior case

ISSUE:
Whether or not the PCGGs takeover of OWNI is legal.

HELD:
We find the writ of sequestration issued against OWNI not valid because the suit against Manuel H.
Nieto and Jose L. Africa as shareholders in OWNI is not a suit against OWNI. This Court has held that
Nieto and Jose L. Africa as shareholders in OWNI is not a suit against OWNI. This Court has held that
failure to implead these corporations as defendants and merely annexing a list of such
corporations to the complaints is a violation of their right to due process for it would in effect be
disregarding their distinct and separate personality without a hearing.

UNION BANK OF THE PHILIPPINES, petitioner, vs.THE HONORABLE COURT OF
APPEALSet. Al., respondents. G.R. No. 131729 May 19, 1998 (ROMERO, J.:)

Private respondents EYCO Group of Companies ("EYCO"), Eulogio O. Yutingco, Caroline Yutingco-
Yao, and Theresa T. Lao (the "Yutingcos"), all of whom are controlling stockholders of the
aforementioned corporations, jointly filed with the SEC a Petition for the Declaration of Suspension of
Payment[s], Formation and Appointment of Rehabilitation Receiver/Committee, Approval of
Rehabilitation Plan alleging, among other things, the corporations inability to meet its obligation due to Rehabilitation Plan alleging, among other things, the corporations inability to meet its obligation due to
factors beyond the control and anticipation of the management.

In a footnote to said petition, the
Yutingcos justified their inclusion as co-petitioners before the SEC on the ground that they had
personally bound themselves to EYCO's creditors under a J.S.S. Clause (Joint Several Solidary
Guaranty). The Securities and Exchange Commission (SEC) directed the suspension of all actions,
claims and proceedings against private respondents pending before any court, tribunal, office, board
and/or commission.
Meanwhile, some of private respondents' creditors, composed mainly of twenty-two (22) domestic
banks (the "consortium") including herein petitioner Union Bank of the Philippines, also convened for
the purpose of deciding their course of action. The consortium agreed to form a management
committee to represent all the creditor banks. However, Union Bank decided to break away from the
group by suing private respondents in the regular courts.
Aside from commencing suits in the regular courts, petitioner also vehemently opposed private
respondents' petition for suspension of payments in the SEC arguing that SEC was bereft of jurisdiction
over such petition on the ground that the inclusion of the Yutingcos in the petition "cannot be allowed
since the authority and power of the Commission applies only to corporations, partnership[s] and other
forms of associations, and not to individual petitioners who are not clearly covered by P.D. 902-A as
amended. According to petitioner, what should have been applied instead was the provision on
suspension. Petitioner also disputed private respondents' recourse to suspension of payments alleging
that the latter prejudiced their creditors by fraudulently disposing of corporate properties within the 30-
day period prior to the filing of such petition.

ISSUE:
Whether the alleged disposition of a substantial portion of their properties prior to the filing of the
petition for suspension of payments with the SEC constitute fraud that will call for the application of the
doctrine of piercing the veil of corporate fiction

HELD:
Petitioner's allegations of fraudulent dispositions of private respondents' assets and the supposed
insolvency of the latter are hardly of any consequence to the assumption of jurisdiction by the SEC over
the nature or subject matter of the petition for suspension of payments. Aside from the fact that these
allegations are evidentiary in nature and still remains to be proved, we have likewise consistently ruled
that what determines the nature of an action, as well as which court or body has jurisdiction over it, are
the allegations of the complaint, or a petition as in this case, and the character of the relief sought.
35
That
the merits of the case after due proceedings are later found to veer away from the claims asserted by
EYCO in its petition, as when it is shown later that it is actually insolvent and may not be entitled to
suspension of payments, does not divest the SEC at all of its jurisdiction already acquired at its inception
suspension of payments, does not divest the SEC at all of its jurisdiction already acquired at its inception
through the allegations made in the petition.
Neither are we convinced by petitioner's reasoning that the Yutingcos and the corporate entities making
up the EYCO Group, on the basis of the footnote

that the former were filing the petition because they
bound themselves as surety to the corporate obligations, should be considered as mere individuals who
should file their petition for suspension of payments with the regular courts pursuant to Section 2 of the
Insolvency Law. We do not see any legal ground which should lead one to such conclusion. The
doctrine of piercing the veil of corporate fiction heavily relied upon by petitioner is entirely
misplaced, as said doctrine only applies when such corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend crime.
ASIONICS PHILIPPINES, INC. v. NLRC
G.R. No. 124950, 19 May 1998, FIRST DIVISION (Vitug, J.)

The president cannot be held solidarily and personally liable with the corporation if there
appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services
of employees.

FACTS:
API is a domestic corporation engaged in the business of assembling semi-conductor chips and
other electronic products mainly for export. Yolanda Boaquina and Juana Gayola started working for
API in 1979 and 1988, respectively, as material control clerk and as production operator.
A CBA was concluded between API and FFW. API was constrained to implement a company-
wide retrenchment. Yolanda Boaquina was one of those affected by the retrenchment. While Juana
Gayola was not supposed to be affected by the retrenchment, her services, nevertheless, were considered
to have been ended when she was ordered by API to take an indefinite leave of absence.
Boaquina and Gayola joined the "Lakas Union". Lakas Union staged a strike. API brought a
petition for declaration of illegality of the strike. Labor arbiter declared the strike illegal. Boaquina and
Gayola, a complaint for illegal dismissal. The Labor Arbiter found API guilty of illegal dismissal. Both
decisions were appealed in the NLRC. NLRC affirmed that the strike was illegal but Boaquina and
Gayola were validly terminated. private respondents were awarded separation pay and an additional one
(1) month salary in favor of Juana Gayola by way of indemnity for petitioner API's failure to properly
inform her of the retrenchment.

ISSUE:
Whether or not a stockholder/director/officer of a corporation can be held liable for the
obligation of the corporation absent any proof and finding of bad faith. No.

HELD:
The court cannot agree with the Solicitor-General in suggesting that even if Frank Yih had no
direct hand in the dismissal of the respondents he should be personally liable therefor on account alone
of his being the President and majority stockholder of the company. Where there is nothing on record to of his being the President and majority stockholder of the company. Where there is nothing on record to
indicate that the president and majority of the stockholders of a corporation had acted in bad faith or
with malice in carrying out the retrenchment program of the company, the president cannot be held
solidarily and personally liable with the corporation.



FRANCISCO MOTORS CORPORATION v. COURT OF APPEALS
G.R. No. 100812, 25 June 1999, SECOND DIVIDION (Quisumbing, J.)

The claim for legal fees against the concerned individual incorporators, officers and directors
could not be properly directed against the corporation.

FACTS:
Francisco Motors Corporation filed a complaint for Sum of Money against private respondents
spouses Gregorio and Librada Manuel for the balance of the jeep body purchased by them from the
petitioner, the cost of repair of the said vehicle and the costs of suit and attorneys fees. Spouses Manuel
filed their answer and interposed a counterclaim for unpaid legal services by Gregorio Manuel which
was not paid by the incorporators, directors and officers of the petitioner being the members of the
Francisco family whom he represented in the intestate estate proceedings of the late Benita Trinidad at
the time when he was still the Assistant Legal Officer of the petitioner. The trial court decided the case
by granting the claims of both sides. On appeal, the Court of Appeals affirmed the trial courts decision
applying the doctrine of piercing the veil of corporate fiction. Hence, this petition.

ISSUE: ISSUE:
Whether or not the lawyer of a stockholder of a corporation can sue the corporation for payment of his
attorneys fees. No.

HELD: Petition GRANTED.

The lawyer of the stockholder of a corporation in an estate case cannot sue the corporation for
payment of his attorneys fees nor apply such legal fees in payment of the purchase price of a vehicle he
bought from the corporation. The obligation of the stockholder is not the liability of the corporation
since the two have separate juridical personalities.
The personality of the corporation and those of its incorporators, directors and officers in their
personal capacities ought to be kept separate. The claim for legal fees against the concerned individual
incorporators, officers and directors could not be properly directed against the corporation without
violating basic principles governing corporations. Moreover, every action including a counterclaim
must be prosecuted or defended in the name of the real party-in-interest. It is plainly an error to lay the
claim for legal fees of private respondent Gregorio Manuel at the door of petitioner (FMC) rather than
individual members of the Francisco family.
COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION v. NLRC
G.R. No. 121315, 19 July 1999, FIRST DIVISION (Kapunan, J.)

The doctrine of piercing the corporate veil does not apply to enforce their monetary claims
against the second corporation simply because the 2 corporations have the same controlling
stockholders, common president, engaged in the same line of business and the latter hired some of the
displaced workers.

FACTS:
Complex regretfully informed the employees that it was left with no alternative but to close
down the operations of the Lite-On Line. The Union, on the other hand, pushed for a retrenchment pay
down the operations of the Lite-On Line. The Union, on the other hand, pushed for a retrenchment pay
equivalent to one (1) month salary for every year of service, which Complex refused. The machinery,
equipment and materials being used for production at Complex were pulled-out from the company
premises and transferred to the premises of Ionics Circuit, Inc. (Ionics) at Cabuyao, Laguna. The
following day, a total closure of company operation was effected at Complex.
A complaint was filed before the labor arbiter for unfair labor practice/illegal lockout, money
claims for vacation leave, sick leave, unpaid wages, 13th month pay, damages and attorneys fees.
Complainants alleged that the sudden pull out of the machinery, equipment and materials from the
company premises which resulted to the sudden closure of the company was in violation of the Labor
Code and existing CBA. After trial on the merits, the labor arbiter rendered a decision ordering
respondents Complex Electronics Corporation, Ionics Incorporated and Lawrence Qua, to reinstate the
531 employees to their former position and to pay the complainants. On appeal, the NLRC rendered a
decision ordering the respondent Complex Electronics Corporation to pay 531 complainants equivalent
to one month pay in lieu of notice and separation pay equivalent to one month pay for every year of
service and a fraction of six months as one whole year. Respondents Ionics and Lawrence Qua were
ordered excluded as parties solidarily liable with complex. Aggrieved by the decision, Complex, Ionics
and the complainants filed their respective motions for reconsideration, but were denied by respondent
NLRC. Hence these petitions.

ISSUE:
Whether or not the doctrine of piercing the corporate veil is applicable to enforce money claims against
the second corporation. No.

HELD: Petition DENIED.
It is settled that in the absence of malice or bad faith, a stockholder or an officer of a corporation cannot
be made personally liable for corporate liabilities. In the present case, while it may be true that the
equipment, materials and machinery were pulled-out of Complex and transferred to Ionics during the
night. Such acts of respondent Qua were, in fact, made pursuant to the demands of Complexs customers
who were already alarmed by the pending labor dispute and imminent strike to be stage by the laborers,
to have their equipment, machinery and materials pull out of Complex. As such, these acts were merely
done pursuant to his official functions and were not, in any way, made with evident bad faith. The Court
perceives no intention on the part of Lawrence Qua and the other officers of Complex to defraud the
employees and the Union. The prevailing labor unrest permeating within the premises of Complex left
the officers with no other choice but to pull them out of Complex at night to prevent their destruction.
Thus, the Court sees no reason to declare Lawrence Qua personally liable to the Union.

When the business operations of the corporation ceased because of losses and labor dispute and its
customers transferred their orders for delivery of electronic products to another corporation engaged in
the same line of business, the displaced workers of the first corporation cannot apply the doctrine of
piercing the corporate veil to enforce their monetary claims against the second corporation simply
because the 2 corporations have the same controlling stockholders, common president, engaged in the
same line of business and the latter hired some of the displaced workers since it is established that the
second corporation was an independent company organized even prior to the labor dispute in the first
corporation. The union failed to show that the primary reason for the closure of the establishment was
due to the union activities of the employees.
RUFINA LUY LIM vs. COURT OF APPEALS
BUENA, J.:

FACTS: FACTS:
Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of probate
Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of probate
proceedings. Auto Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active
Distributing, Inc. and Action Company are corporations formed, organized and existing under Philippine
laws and which owned real properties covered under the Torrens system. Pastor Y. Lim died intestate.
Rufina, as surviving spouse and duly represented by her nephew George Luy filed for administration of
the estate of Pastor Lim.
Private respondent corporations, whose properties were included in the inventory of the estate of Pastor
Y. Lim filed a motion for the lifting of lis pendens and for exclusion of certain properties from the
estate of the decedent which was grated by the trial court and thereafter reinstated by it. The probate
court appointed Rufina Lim as special administrator and Miguel Lim and Lawyer Donald Lee, as co-
special administrators of the estate of Pastor Y. Lim, after which letters of administration were
accordingly issued and denied private respondents motion for exclusion. The CA reversed the decision
of the trial court upon the action of the private respondents thus the case at hand.

ISSUE:
W/N a corporation, in its universality, be the proper subject of and be included in the inventory of the
estate of a deceased person.

HELD:
It is settled that a corporation is clothed with personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of the persons composing it. It may not be held
liable for the personal indebtedness of its stockholders or those of the entities connected with it.
Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate
from its stockholders or members. In the same vein, a corporation by legal fiction and convenience is an
entity shielded by a protective mantle and imbued by law with a character alien to the persons entity shielded by a protective mantle and imbued by law with a character alien to the persons
comprising it.
Nonetheless, the shield is not at all times invincible. The exemption to this rule is th doctrine of
piercing the veil of corporate entity. Piercing the veil of corporate entity requires the court to see through
the protective shroud which exempts its stockholders from liabilities that ordinarily, they could be
subject to, or distinguishes one corporation from a seemingly separate one, were it not for the existing
corporate fiction. The corporate mask may be lifted and the corporate veil may be pierced when a
corporation is just but the alter ego of a person or of another corporation. Where badges of fraud exist,
where public convenience is defeated; where a wrong is sought to be justified thereby, the corporate
fiction or the notion of legal entity should come to naught.
Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is
as follows: 1) Control, not mere majority or complete stock control, but complete domination, not only
of finances but of policy and business practice in respect to the transaction attacked so that the corporate
entity as to this transaction had at the time no separate mind, will or existence of its own; (2) Such
control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal
right; and (3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of. The absence of any of these elements prevent "piercing the corporate veil".
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock
of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate
personalities. Moreover, to disregard the separate juridical personality of a corporation, the wrong-doing
must be clearly and convincingly established. It cannot be presumed.

MARUBENI CORPORATION vs. FELIX LIRAG

FACTS:
Marubeni Corporation (Marubeni) is a foreign corporation organized and existing under the laws of
Japan. It was doing business in the Philippines through its duly licensed, wholly owned subsidiary,
Marubeni Philippines Corporation. Petitioners Ryoichi Tanaka, Ryohei Kimura and Shoichi One were
officers of Marubeni assigned to its Philippine branch.
Felix Lirag filed with the Regional Trial Court, Makati a complaint for specific performance and
damages claiming that petitioners owed him the sum of P6,000,000.00 representing commission
pursuant to an oral consultancy agreement with Marubeni. Lirag claimed that Ryohei Kimura hired his
consultancy group for the purpose of obtaining government contracts of various projects. The
consultancy agreement was not reduced into writing because of the mutual trust between Marubeni and
the Lirag family.
As petitioners had been impressed with respondent's performance, six (6) additional projects
were given to his group under the same undertaking. One of the projects handled by Lirag, the Bureau of
Post project, amounting to P100,000,000.00 was awarded to the "Marubeni-Sanritsu tandem." Despite
respondent's repeated formal verbal demands for payment of the agreed consultancy fee, petitioners did
not pay. Pursuant to the consultancy agreement, respondent claimed a commission of six percent (6%)
of the total contract price, or a total of P6,000,000.00, or in the alternative, that he be paid the same
amount by way of damages or as the reasonable value of the services he rendered to petitioners and
attorneys fees.
Petitioners denied the consultancy agreement. Kimura did not have the authority to enter into
such agreement in behalf of Marubeni. Only that the general manager, upon issuance of a special power
of attorney by the principal office in Tokyo, Japan, could enter into any contract in behalf of the
corporation and said general manager did not discus with Lirag any of the matters alleged in the
complaint nor agreed to the payment of commission. The trial court promulgated a decision and ruled
that respondent is entitled to a commission. Respondent was led to believe that there existed an oral
consultancy agreement which decision was affirmed by the CA.

ISSUE:
(1) W/N there was a consultancy agreement between petitioners and respondent; and corollary to this
(2) W/N respondent is entitled to receive a commission if there was, in fact, a consultancy agreement.

HELD:
(1) An assiduous scrutiny of the testimonial and documentary evidence extant leads us to the conclusion
that the evidence could not support a solid conclusion that a consultancy agreement, oral or written, was
agreed between petitioners and respondent. Respondent attempted to fortify his own testimony by
presenting several corroborative witnesses. However, what was apparent in the testimonies of these
witnesses was the fact that they learned about the existence of the consultancy agreement only because
that was what respondent told them
(2) Assuming for the sake of argument that an oral consultancy agreement has been perfected between
the parties, respondent Lirag could not still claim fees on the project that has not been awarded to
Marubeni since the project was in fact awarded to Sanritsu not to Marubeni. Respondent tried to justify
his commission of roughly about P6,000,000.00 in the guise that Marubeni and Sanritsu are sister
corporations, thereby implying the need to pierce the veil of corporate fiction. Respondent claimed that
Marubeni as the supplier and real contractor of the project hired and sub-contracted the project to
Sanritsu.
To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and
convincingly established. It cannot be presumed. The separate personality of the corporation may be
disregarded only when the corporation is used as a cloak or cover for fraud or illegality, or to work
disregarded only when the corporation is used as a cloak or cover for fraud or illegality, or to work
injustice, or where necessary for the protection of creditors. We could not just rely on respondent's
testimony regarding the existence of the "Marubeni-Sanritsu tandem" to justify his claim for payment of
commission. This conclusion is too conjectural to be believed. Aside from the self-serving testimony of
respondent regarding the existence of a close working relationship between Marubeni and Sanritsu, there respondent regarding the existence of a close working relationship between Marubeni and Sanritsu, there
was nothing that would support the conclusion that Sanritsu was an agent of Marubeni.

LAND BANK OF THE PHILIPPINES vs. THE COURT OF APPEALS, ECO MANAGEMENT
CORPORATION and EMMANUEL C. OATE,

FACTS:
Land Bank of the Philippines (LBP) extended a series of credit accommodations to ECO. The proceeds
of the credit accommodations were received on behalf of ECO by appellee Oate. On the respective
maturity dates of the loans, ECO failed to pay the same. Oral and written demands were made, but ECO
was unable to pay due to financial dificulty.
ECO proposed and submitted to LBP a "Plan of Payment" whereby the former would set up a
financing company which would absorb the loan obligations. It was proposed that LBP would
participate in the scheme through the conversion of P9,000,000.00 which was part of the total loan, into
equity. LBP informed ECO that the latter may proceed with their plan of payment but that LBP shall not
participate in the undertaking in any manner whatsoever and they advise ECO to make necessary
revision in the aforementioned plan to which ECO assented. Nonetheless LBP resolved to reject the
revised plan of payment and filed a complaint for collection of sum of money against ECO. Trial court
decided in favor of LBP but Onate was absolved from personal liability.
LBP claimed that there was an error in computation in the amounts to be paid and questioned the
dismissal of the case with regard to Oate contending that the personalities of Emmanuel Oate and of
ECO Management Corporation should be treated as one, for the particular purpose of holding
respondent Oate liable for the loans incurred by corporate respondent ECO from Land Bank.
According to petitioner, the said corporation was formed ostensibly to allow Oate to acquire loans from
Land Bank which he used for his personal advantage. On the other hand, ECO questioned its being held
liable for the amount of the loan. CA affirmed the decision of the trial court. liable for the amount of the loan. CA affirmed the decision of the trial court.

ISSUE: W/N the corporate veil of ECO Management Corporation should be pierced.

HELD:
A corporation, upon coming into existence, is invested by law with a personality separate and distinct
from those persons composing it as well as from any other legal entity to which it may be related. By
this attribute, a stockholder may not, generally, be made to answer for acts or liabilities of the said
corporation, and vice versa.This separate and distinct personality is, however, merely a fiction created
by law for convenience and to promote the ends of justice. For this reason, it may not be used or
invoked for ends subversive to the policy and purpose behind its creation or which could not have been
intended by law to which it owes its being. This is particularly true when the fiction is used to defeat
public convenience, justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial
issues, perpetrate deception or otherwise circumvent the law. This is likewise true where the corporate
entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders
or of another corporate entity. In all these cases, the notion of corporate entity will be pierced or
or of another corporate entity. In all these cases, the notion of corporate entity will be pierced or
disregarded with reference to the particular transaction involved.
The burden is on petitioner to prove that the corporation and its stockholders are, in fact, using
the personality of the corporation as a means to perpetrate fraud and/or escape a liability and
responsibility demanded by law. In order to disregard the separate juridical personality of a corporation,
the wrongdoing must be clearly and convincingly established. In the absence of any malice or bad faith,
a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities.
The mere fact that Oate owned the majority of the shares of ECO is not a ground to conclude The mere fact that Oate owned the majority of the shares of ECO is not a ground to conclude
that Oate and ECO is one and the same. Mere ownership by a single stockholder of all or nearly all of
the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of separate
corporate personalities.

Neither is the fact that the name "ECO" represents the first three letters of
Oates name sufficient reason to pierce the veil. Even if it did, it does not mean that the said
corporation is merely a dummy of Oate. A corporation may assume any name provided it is lawful.
There is nothing illegal in a corporation acquiring the name or as in this case, the initials of one of its
shareholders.

PHILIPPINE NATIONAL BANK, petitioner, vs. RITRATTO GROUP INC., RIATTO
INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE, respondents.
G.R. No. 142616, July 31, 2001, [KAPUNAN, J.]

In any case, the parent-subsidiary relationship between PNB and PNB-IFL is not the significant legal
relationship involved in this case since the petitioner was not sued because it is the parent company of
PNB-IFL. Rather, the petitioner was sued because it acted as an attorney-in-fact of PNB-IFL in
initiating the foreclosure proceedings. A suit against an agent cannot without compelling reasons be
considered a suit against the principal. Under the Rules of Court, every action must be prosecuted or
defended in the name of the real party-in-interest, unless otherwise authorized by law or these Rules.

FACTS:
On May 29, 1996, PNB International Finance Ltd. (PNB-IFL) a subsidiary company of PNB, organized
and doing business in Hong Kong, extended a letter of credit in favor of the respondents Ritratto Group,
Inc., Riatto International, Inc. and Dadasan General Merchandise, domestic corporations, in the amount Inc., Riatto International, Inc. and Dadasan General Merchandise, domestic corporations, in the amount
of US$1,421,316.18 secured by real estate mortgages. Respondents made repayments of the loan
incurred by remitting those amounts to their loan account with PNB-IFL in Hong Kong.
Respondents failed to pay their obligations, so PNB-IFL, through its attorney-in-fact PNB, foreclosed
and sold the mortgaged properties at public auction. Respondents filed a complaint for injunction.
Petitioner filed a motion to dismiss on the ground of absence of privity between them since PNB-IFL
and PNB are separate entities.

ISSUE:
Whether the complaint may be filed against PNB who foreclosed on the mortgaged propety, being of the
same corporate existence as PNB-IFL.

HELD: NO. Petition GRANTED.
The contract questioned is one entered into between respondent and PNB-IFL, not PNB. In their
complaint, respondents admit that petitioner is a mere attorney-in-fact for the PNB-IFL with full power
and authority to, inter alia, foreclose on the properties mortgaged to secure their loan obligations with
and authority to, inter alia, foreclose on the properties mortgaged to secure their loan obligations with
PNB-IFL. It is not privy to the loan contracts entered into by respondents and PNB-IFL.
Aside from the fact that PNB-IFL is a wholly owned subsidiary of petitioner PNB, there is no showing
of the indicative factors that the former corporation is a mere instrumentality of the latter are present.
Neither is there a demonstration that any of the evils sought to be prevented by the doctrine of piercing
the corporate veil exists. Inescapably, therefore, the doctrine of piercing the corporate veil based on the
alter ego or instrumentality doctrine finds no application in the case at bar.
In any case, the parent-subsidiary relationship between PNB and PNB-IFL is not the significant legal
relationship involved in this case since the petitioner was not sued because it is the parent company of
PNB-IFL. Rather, the petitioner was sued because it acted as an attorney-in-fact of PNB-IFL in initiating
the foreclosure proceedings. A suit against an agent cannot without compelling reasons be considered a the foreclosure proceedings. A suit against an agent cannot without compelling reasons be considered a
suit against the principal.
RICARDO S. SILVERIO, JR., ESSES DEVELOPMENT CORPORATION, and TRI-
STAR FARMS, INC. v FILIPINO BUSINESS CONSULTANTS, INC.
G.R. No. 143312, August 12, 2005, FIRST DIVISION (Carpio, J.)

A procedural tug of war over a 62-hectare land (Calatagan Property) in Batangas has ensued. On
one side were Esses Development Corporation (Esses), Tri-Star Farms, Inc. (Tri-Star) and their
President Ricardo S. Silverio, Jr. (Silverio, Jr.) and on the other was Filipino Business Consultants Inc.
(FBCI).

On the last leg of a five year court battle over the Calatagan Property, FBCI informed the trial
court (RTC Balayan) that it is now the new owner of Esses and Tri-Star having purchased a substantial
and controlling shares of stocks of the two corporations. FBCI contends that such purchase, in effect, is
a supervening event that gives it the right of possession over the property in litigation.

ISSUE:

Whether the purchase of the controlling shares of stock in a corporation affects any change on
the buyer and the corporation with respect to corporation owned real properties.

HELD:

xxx

FBCIs acquisition of the substantial and controlling shares of stocks of Esses and Tri-Star FBCIs acquisition of the substantial and controlling shares of stocks of Esses and Tri-Star
does not create a substantial change in the rights or relations of the parties that would entitle FBCI to
possession of the Calatagan Property, a corporate property of Esses and Tri-Star. Esses and Tri-Star,
just like FBCI, are corporations. A corporation has a personality distinct from that of its stockholders.
As early as the case of Stockholders of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila, the
Court explained the principle of separate juridical personality in this wise:

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,
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 (Harton v. Hohnston, 166 Ala., 317, 51 So., 992).

xxx
JARDINE DAVIES, INC., Petitioners, vs. JRB REALTY, INC., Respondent.
G.R. No. 151438, July 15, 2005 [CALLEJO, SR., J.]

The existence of interlocking directors, corporate officers and shareholders, which the respondent court
considered, is not enough justification to pierce the veil of corporate fiction, in the absence of fraud or
other public policy considerations. other public policy considerations.

FACTS:
In 1979-1980, JRB Realty, Inc. built a nine-storey building, named Blanco Center, in Salcedo Village,
Makati City. An air conditioning system was needed for the Blanco Law Firm housed at the second floor
of the building. Through a contract with JRB, Aircon and Refrigeration Industries, Inc. (Aircon)
installed air conditioning equipment from US supplier Fedders Air Conditioners, which however could
not deliver the desired cooling temperature. Thereafter, Aircon stated that it would be replacing the units
currently installed with new ones using newer technology, at the earliest possible time. Regrettably,
however, it could not specify a date when delivery could be effected.
Later on, the respondent learned, through newspaper ads, that Maxim Industrial and Merchandising
Corporation (Maxim, for short) was the new and exclusive licensee of Fedders Air Conditioning USA in
the Philippines for the manufacture, distribution, sale, installation and maintenance of Fedders air
conditioners. The respondent requested that Maxim honor the obligation of Aircon, but the latter
refused.
JRB then instituted an action for specific performance with damages against Aircon & Refrigeration
Industries, Inc., Fedders Air Conditioning USA, Inc., Maxim Industrial & Merchandising Corporation
and petitioner Jardine Davies, Inc.

The latter was impleaded as defendant, considering that Aircon was a
subsidiary of the petitioner.
Of the four defendants, only the petitioner filed its Answer. The court did not acquire jurisdiction over
Aircon because the latter ceased operations, as its corporate life ended on December 31, 1986. Upon
motion, defendants Fedders Air Conditioning USA and Maxim were declared in default.

ISSUE: Whether Jardine Davies, Inc. was proper party in the case.
HELD: NO. Petition GRANTED. HELD: NO. Petition GRANTED.
While it is true that Aircon is a subsidiary of the petitioner, it does not necessarily follow that Aircons
corporate legal existence can just be disregarded. The records bear out that Aircon is a subsidiary of the
petitioner only because the latter acquired Aircons majority of capital stock. It, however, does not
exercise complete control over Aircon; nowhere can it be gathered that the petitioner manages the
business affairs of Aircon. Indeed, no management agreement exists between the petitioner and Aircon,
and the latter is an entirely different entity from the petitioner.
The existence of interlocking directors, corporate officers and shareholders, which the respondent court
considered, is not enough justification to pierce the veil of corporate fiction, in the absence of fraud or
other public policy considerations. But even when there is dominance over the affairs of the subsidiary,
the doctrine of piercing the veil of corporate fiction applies only when such fiction is used to defeat
public convenience, justify wrong, protect fraud or defend crime.

To warrant resort to this extraordinary
remedy, there must be proof that the corporation is being used as a cloak or cover for fraud or illegality,
remedy, there must be proof that the corporation is being used as a cloak or cover for fraud or illegality,
or to work injustice. In the instant case, there is no evidence that Aircon was formed or utilized with the
intention of defrauding its creditors or evading its contracts and obligations. There was nothing
fraudulent in the acts of Aircon in this case.
CHINA BANKING CORPORATION, Petitioner, vs. DYNE-SEM ELECTRONICS
CORPORATION, Respondent.
G.R. No. 149237, June 11, 2006, Second Division (Corona, J.)

FACTS
Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a sum of money from petitioner. By reason of its
failure to pay for the same, petitioner instituted a complaint for sum of money against them. Summons
was not served on Dynetics.
Petitioner then filed an amended complaint, impleading respondent Dyne-Sem Electronics Corporation
(Dyne-Sem) and its stockholders on the ground that Dyne-Sem was formed and organized to be
Dynetics alter ego as established by the following circumstances: x x x (theyre) both engaged in the Dynetics alter ego as established by the following circumstances: x x x (theyre) both engaged in the
same line of business (and) respondent acquired some of the machineries and equipment of Dynetics,
Inc., (among others) x x x.
Both trial court and appellate court dismissed the petition and held that Dyne-Sem is not not an alter ego
of Dynetics, Inc. and, thus, could not be held liable for its obligation with petitioner.

ISSUE
Whether the ruling of both courts is correct.

HELD
Yes, no factual and legal basis exists to hold respondent Dyne-Sem liable for the obligations of Dynetics
to petitioner.
The general rule is that a corporation has a personality separate and distinct from that of its stockholders
and other corporations to which it may be connected. This is a fiction created by law for convenience
and to prevent injustice.
Nevertheless, being a mere fiction of law, peculiar situations or valid grounds may exist to warrant the
disregard of its independent being and the piercing of the corporate veil. To disregard the separate
juridical personality of a corporation, the wrongdoing must be proven clearly and convincingly.
Petitioner failed to prove that Dyne-Sem was organized and controlled, and its affairs conducted, in a
manner that made it merely an instrumentality, agency, conduit or adjunct of Dynetics, or that it was
established to defraud Dynetics creditors, including petitioner.
The similarity of business of the two corporations did not warrant a conclusion that respondent was but a
conduit of Dynetics.
Likewise, respondents acquisition of some of the machineries and equipment of Dynetics was not proof
that respondent was formed to defraud petitioner. As the Court of Appeals found, no merger took place that respondent was formed to defraud petitioner. As the Court of Appeals found, no merger took place
between Dynetics and respondent Dyne-Sem. What took place was a sale of the assets of the former to
the latter. Merger is legally distinct from a sale of assets. Thus, where one corporation sells or otherwise
transfers all its assets to another corporation for value, the latter is not, by that fact alone, liable for the
debts and liabilities of the transferor.
SPOUSES RAMON M. NISCE v EQUITABLE PCI BANK, INC.
G.R. No. 167434, February 19, 2007, THIRD DIVISION (Callejo, Sr., J.)


Central in this case in so far as Corporation law and the doctrine of piercing the veil of corporate
fiction is concerned, is a dollar deposit account opened by Natividad Paras-Nisce (Natividad). In the
year 1984 Natividad needed facility in accessing her funds due to the fact that she often travels
internationally. According to her, she was convinced by the manager of PCI Bank Paseo de Roxas
Branch that once she opens an account, she can access her dollar deposit anywhere in the world.
Convinced, she deposited $20,500.00, 20,000.00 of which were transferred to PCI Capital Asia Ltd. in
Hong Kong via cable. Ten (10) years thereafter (1994), Equitable Banking Corporation and the PCIB
were merged under the corporate name Equitable PCI Bank.
The spouses Nisce secured two loans by mortgaging their property in Makati. The bank filed a
petition for extrajudicial foreclosure. This prompted the spouses to file with the Regional Trial Court
(RTC), a complaint (for "nullity of the Suretyship Agreement, damages and legal compensation") with a
prayer for injunctive relief against the Bank and the Sheriff. One of the spouses contentions is that the
dollar account of Natividad should have been set off against their debts. The RTC granted the spouses
prayer for injunction. The bank instead of filing for a motion for reconsideration opted to file a petition
for certiorari with the Court of Appeals (CA). The CA granted the petition for certiorari.

ISSUE:
Whether a bank may be held liable as a parent company for its debtors account deposited in a
subsidiary of said bank.

HELD: Petition DENIED.
xxx
Admittedly, PCI Capital is a subsidiary of respondent Bank. Even then, PCI Capital [PCI
Express Padala (HK) Ltd.] has an independent and separate juridical personality from that of the
respondent Bank, its parent company; hence, any claim against the subsidiary is not a claim against the
parent company and vice versa. The evidence on record shows that PCIB, which had been merged with
Equitable Bank, owns almost all of the stocks of PCI Capital. However, the fact that a corporation owns
all of the stocks of another corporation, taken alone, is not sufficient to justify their being treated as one
entity. If used to perform legitimate functions, a subsidiarys separate existence shall be respected, and
the liability of the parent corporation, as well as the subsidiary shall be confined to those arising in their
respective business. A corporation has a separate personality distinct from its stockholders and from
other corporations to which it may be conducted. This separate and distinct personality of a corporation
is a fiction created by law for convenience and to prevent injustice.
This Court, in Martinez v. Court of Appeals held that, being a mere fiction of law, peculiar
situations or valid grounds can exist to warrant, albeit sparingly, the disregard of its independent being
and the piercing of the corporate veil. The veil of separate corporate personality may be lifted when,
inter alia, the corporation is merely an adjunct, a business conduit or an alter ego of another corporation
or where the corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation; or when the corporation is
used as a cloak or cover for fraud or illegality; or to work injustice; or where necessary to achieve equity
or for the protection of the creditors. In those cases where valid grounds exist for piercing the veil of
corporate entity, the corporation will be considered as a mere association of persons. The liability will
directly attach to them.
The Court likewise declared in the same case that the test in determining the application of the The Court likewise declared in the same case that the test in determining the application of the
instrumentality or alter ego doctrine is as follows:
1. Control, not mere majority or complete stock control, but complete dominion, not only of finances but
of policy and business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of
plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complaint
of.
The Court emphasized that the absence of any one of these elements prevents "piercing the
corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with
reality and not form, with how the corporation operated and the individual defendants relationship to
that operation.
Petitioners failed to adduce sufficient evidence to justify the piercing of the veil of corporate
entity and render respondent Bank liable for the US$20,000.00 deposit of petitioner Natividad Nisce as
debtor.
xxx




SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners, vs. DON LUIS DISON
REALTY, INC., Respondent. REALTY, INC., Respondent.
G.R. No. 136409, March 14, 2008, [NACHURA, J.]

A corporation can still sue, notwithstanding the fact that its certificate of registration is suspended or
pending revocation. The suspension of corporate franchise and eventual revocation will not invalidate
the action for ejectment filed by the corporation for as long as the suit was initiated during its lifetime.

Lessor Don Luis Dison Realty, Inc (Don Luis Inc) and petitioners (Pasrichas) as lessees executed two
Contracts of Lease

whereby the former, as lessor, where the Pasrichas rented several units in the San
Luis Building, located at Ermita, Manila. The Pasrichas regularly paid their monthly rent and utility fees
to the general manager of Don Luis Realty.
Later on, however, despite repeated demands, petitioners continuously refused to pay the stipulated rent.
A complaint for ejectment was filed by Don Luis before the MeTC Manila. Pasrichas claimed that such
refusal was justified because of the internal squabble in Don Luis Inc as to the person authorized to
receive payment.

ISSUE:
Whether Don Luis Inc has standing to sue as a juridical person in view of the suspension and eventual
revocation of its certificate of registration.

HELD: Yes. Petition DENIED.
We uphold the capacity of respondent company to institute the ejectment case. Although the Securities
and Exchange Commission (SEC) suspended and eventually revoked respondents certificate of and Exchange Commission (SEC) suspended and eventually revoked respondents certificate of
registration records show that it instituted the action for ejectment before such revocation. Accordingly,
when the case was commenced, its registration was not yet revoked.
when the case was commenced, its registration was not yet revoked.
YAMAMOTO VS. NISHINO LEATHER INDUSTRIES, INC.
G.R. No. 150283, April 16, 2008, SECOND DIVISION, (Carpio-Morales, J.)

Under the Corporation Law, unless otherwise provided, corporate powers are exercised by the Board of
Directors.

Petitioner, Yamamoto, a Japanese national, organized under Philippine laws Wako Enterprises
Manila, Incorporated (WAKO), a corporation engaged principally in leather tanning, now known as
Nishino Leather Industries, Inc. (NLII), one of herein respondents.
Yamamoto and the other respondent, Nishino, also a Japanese national, forged a Memorandum
of Agreement under which they agreed to enter into a joint venture wherein Nishino would acquire such
number of shares of stock equivalent to 70% of the authorized capital stock of WAKO.
Eventually, Nishino and his brother

Yoshinobu acquired more than 70% of the authorized capital
stock of WAKO, reducing Yamamoto's investment therein. The corporate name of WAKO was later
changed to, as reflected earlier, its current name NLII. Negotiations subsequently ensued in light of a
planned takeover of NLII by Nishino who would buy-out the shares of stock of Yamamoto. In the
course of the negotiations, Yoshinobu and Nishino's counsel Atty. Doce advised Yamamoto that he
could obtain possession of certain corporate properties by way of return for his equity investment.
On the basis of such letter, Yamamoto attempted to recover the machineries and equipment
which were part of his investment in the corporation, but he was frustrated by respondents, drawing him
to file a complaint

against respondents for replevin.
Respondents claimed that the machineries and equipment subject of replevin form part of Respondents claimed that the machineries and equipment subject of replevin form part of
Yamamoto's capital contributions in consideration of his equity in NLII and should thus be treated as
corporate property; and that the above-said letter of Atty. Doce to Yamamoto was merely a proposal,
which proposal was yet to be authorized by the stockholders and Board of Directors of NLII.

ISSUE:
Whether the advice in the letter of Atty. Doce that Yamamoto may retrieve the machineries and
equipment bound the corporation.

HELD:
Without a Board Resolution authorizing respondent Nishino to act for and in behalf of the
corporation, he cannot bind the latter. Under the Corporation Law, unless otherwise provided, corporate
powers are exercised by the Board of Directors.
While the veil of separate corporate personality may be pierced when the corporation is merely
an adjunct, a business conduit, or alter ego of a person, the mere ownership by a single stockholder of
even all or nearly all of the capital stocks of a corporation is not by itself a sufficient ground to disregard
the separate corporate personality.
The elements determinative of the applicability of the doctrine of piercing the veil of corporate
fiction follow:
"1. Control, not mere majority or complete stock
control, but complete domination, not only of finances
but of policy and business practice in respect to the
but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will
or existence of its own;
2. Such control must have been used by the defendant
to commit fraud or wrong, to perpetuate the violation
of a statutory or other positive legal duty, or dishonest
and unjust act in contravention of the plaintiff's legal
rights; and
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained
of.

The absence of any one of these elements prevents "piercing the corporate veil." In
applying the `instrumentality' or `alter ego' doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant's relationship to that
operation."

VIRGILIO S. DELIMA, Petitioner, vs. Susan Mercaida Gois, Respondent.
G.R. No. 178352, June 17, 2008, Third Division (Ynares-Santiago, J.)

FACTS
A case for illegal dismissal was filed by petitioner Virgilio S. Delima against Golden Union Aquamarine
Corporation (Golden), Prospero Gois and herein respondent Susan Mercaida Gois before the Regional
Arbitration Branch No. VIII of the National Labor Relations Commission.
Labor Arbiter Philip B. Montaces rendered a decision ordering respondent Golden Union Aquamarine
Corporation to pay petitioner the amount representing backwages and separation pay, among others.
Golden failed to appeal the aforesaid decision; hence, it became final and executory. A writ of
execution was issued and an Isuzu Jeep with plate number PGE-531 was attached.
Thereafter, respondent Gois filed an Affidavit of Third Party Claim claiming that the attachment of the
vehicle was irregular because said vehicle was registered in her name and not Goldens.
As the Labor Arbiter denied respondents third-party claim. the latter filed an appeal before the NLRC,
but the latter also dismissed the same.
On appeal to the Court of Appeals, she claimed that by denying her third-party claim, she was in effect
condemned to pay a judgment debt issued against a corporation of which she is neither a president nor a
majority owner but merely a stockholder. She further argued that her personality is separate and distinct
from that of Golden; thus, the judgment ordering the corporation to pay the petitioner could not be
satisfied out of her personal assets.
The Court of Appeals found respondents appeal meritorious and annulled the resolution of the NLRC.


ISSUE
Whether the decision of the Court of Appeals is correct in finding that the property of the respondent,
though principally used in the business operations of the Corporation, cannot be the subject of
garnishment.

HELD
Yes, as the property belonging to a corporation cannot be attached to satisfy the debt of a stockholder
and vice versa, the latter having only an indirect interest in the assets and business of the former.
A corporation has a personality distinct and separate from its individual stockholders or members and
from that of its officers who manage and run its affairs. The rule is that obligations incurred by the
corporation, acting through its directors, officers and employees, are its sole liabilities.
Since the Decision of the Labor Arbiter dated April 29, 2005 directed only Golden to pay the petitioner
the sum of P115,561.05 and the same was not joint and solidary obligation with Gois, then the latter
could not be held personally liable since Golden has a separate and distinct personality of its own. It
remains undisputed that the subject vehicle was owned by Gois, hence it should not be attached to
answer for the liabilities of the corporation. Unless they have exceeded their authority, corporate
officers are, as a general rule, not personally liable for their official acts, because a corporation, by legal
fiction, has a personality separate and distinct from its officers, stockholders and members. No evidence
was presented to show that the termination of the petitioner was done with malice or in bad faith for it to
hold the corporate officers, such as Gois, solidarily liable with the corporation.
SEAOIL PETROLEUM CORPORATION VS. AUTOCORP GROUP, ET AL
G.R. No. 164326, October 17, 2008, THIRD DIVISION, (Nachura, J.)

The bad faith or wrongdoing of the director must be established clearly and convincingly. Bad faith is
never presumed.

Seaoil Petroleum Corporation (Seaoil) purchased one unit of ROBEX 200 LC Excavator, Model
1994 from Autocorp Group (Autocorp). The original cost of the unit was increased because it was paid 1994 from Autocorp Group (Autocorp). The original cost of the unit was increased because it was paid
in 12 monthly installments. The sales agreement was embodied in the Vehicle Sales Invoice and Vehicle
Sales Confirmation. Both documents were signed by Francis Yu (Yu), president of Seaoil, on behalf of
said corporation. Furthermore, it was agreed that despite delivery of the excavator, ownership thereof
was to remain with Autocorp until the obligation is fully settled. In this light, Seaoils contractor, Romeo
Valera, issued 12 postdated checks. However, Autocorp refused to accept the checks because they were
not under Seaoils name. Hence, Yu, on behalf of Seaoil, signed and issued 12 postdated checks with
Autocorp as payee.
The excavator was subsequently delivered by Autocorp and was received by Seaoil in its depot
in Batangas.
The relationship started to turn sour when the first check bounced. However, it was remedied
when Seaoil replaced it with a good check. The second check likewise was also good when presented for
payment. However, the remaining 10 checks were not honored by the bank since Seaoil requested that
payment be stopped.
Despite repeated demands, Seaoil refused to pay the remaining balance. Hence, Autocorp filed a
complaint for recovery of personal property with damages and replevin. The trial court ruled for
Autocorp.
Seaoil, on the other hand, alleges that the transaction is not as simple as described above. It
claims that Seaoil and Autocorp were only utilized as conduits to settle the obligation of one foreign
entity named Uniline Asia (Uniline), in favor of another foreign entity, Focus Point International,
entity named Uniline Asia (Uniline), in favor of another foreign entity, Focus Point International,
Incorporated (Focus). Paul Rodriguez (Rodriguez) is a stockholder and director of Autocorp. He is also
the owner of Uniline. On the other hand, Yu is the president and stockholder of Seaoil and is at the same
time owner of Focus. Allegedly, Uniline chartered MV Asia Property from its owner Focus. Uniline was
not able to settle the said amount. Hence, Uniline, through Rodriguez, proposed to settle the obligation
through conveyance of vehicles and heavy equipment. In short, Seaoil claims that the real transaction is
that Uniline, through Rodriguez, owed money to Focus. In lieu of payment, Uniline instead agreed to
convey the excavator to Focus. This was to be paid by checks issued by Seaoil but which in turn were to
be funded by checks issued by Uniline. Seaoil claims that Rodriguez issued a stop payment order on the
ten checks thus constraining the former to also order a stop payment order on the PBCOM checks. ten checks thus constraining the former to also order a stop payment order on the PBCOM checks.

ISSUE:
Whether the veil of corporate fiction should be pierced.

HELD:
Autocorps separate corporate personality cannot be disregarded and the veil of corporate fiction
pierced. Seaoil was not able to show that Autocorp was merely an alter ego of Uniline or that both
corporations were utilized to perpetrate a fraud. Rodriguez is a person separate and independent from
Autocorp. Whatever obligations Rodriguez contracted cannot be attributed to Autocorp and vice versa.
In fact, the obligation that petitioner proffers as its defense under the Lease Purchase Agreement was not
even incurred by Rodriguez or by Autocorp but by Uniline.
The Lease Purchase Agreement clearly shows that the parties thereto are two corporations not
parties to this case: Focus Point and Uniline. Under this Lease Purchase Agreement, it is Uniline, as
lessee/purchaser, and not Rodriguez, that incurred the debt to Focus Point. The obligation of Uniline to
Focus Point arose out of a transaction completely different from the subject of the instant case.
It is settled that a corporation has a personality separate and distinct from its individual
stockholders or members, and is not affected by the personal rights, obligations and transactions of the
latter. The corporation may not be held liable for the obligations of the persons composing it, and neither
can its stockholders be held liable for its obligation.
Of course, this Court has recognized instances when the corporations separate personality may
be disregarded. However, the same may only be done in cases where the corporate vehicle is being used
to defeat public convenience, justify wrong, protect fraud, or defend crime. Moreover, the wrongdoing
must be clearly and convincingly established. It cannot be presumed. There was never any allegation,
much less any evidence, that Autocorp was merely an alter ego of Uniline, or that the two corporations much less any evidence, that Autocorp was merely an alter ego of Uniline, or that the two corporations
separate personalities were being used as a means to perpetrate fraud or wrongdoing.
While Section 31 of the Corporation Code lays down the exceptions to the rule, the same does
not apply in this case. Section 31 makes a director personally liable for corporate debts if he willfully
and knowingly votes for or assents to patently unlawful acts of the corporation. Section 31 also makes a
director personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the
corporation. The bad faith or wrongdoing of the director must be established clearly and convincingly.
Bad faith is never presumed.



EXCELLENT QUALITY APPAREL, INC. VS. WIN MULTI-RICH BUILDERS INC.
G.R. No. 175048, February 10, 2009, SECOND DIVISION, (Tinga, J.)


In order for a corporation to be able to file suit and claim the receivables of its predecessor in business,
in this case a sole proprietorship, it must show proof that the corporation had acquired the assets and
liabilities of the sole proprietorship

Petitioner Excellent Quality Apparel, Inc. (petitioner) then represented by Max L.F. Ying, Vice-
President for Productions, and Alfiero R. Orden, Treasurer, entered into a contract with Multi-Rich
Builders (Multi-Rich) represented by Wilson G. Chua (Chua), its President and General Manager, for
the construction of a garment factory within the Cavite Philippine Economic Zone Authority (CPEZ).
The duration of the project was for a maximum period of five (5) months or 150 consecutive calendar
days. Included in the contract is an arbitration clause. However, in contrary to the agreement, the days. Included in the contract is an arbitration clause. However, in contrary to the agreement, the
construction of the factory building was completed within eight (8) months.
Respondent Win Multi-Rich Builders, Inc. (Win) was incorporated sometime later with the SEC
with Chua as its President and General Manager. Win then filed a complaint for a sum of money against
petitioner and Mr. Ying. It also prayed for the issuance of a writ of attachment claiming that Mr. Ying
was about to abscond and that petitioner was about to close.
In the hearing, the counsel of Win moved that its name in the case be changed from "Win Multi-
Rich Builders, Inc." to "Multi-Rich Builders, Inc." It was only then that petitioner apparently became
aware of the variance in the name of the plaintiff. In the Reply filed by petitioner, it moved to dismiss
the case since Win was not the contractor and neither a party to the contract, thus it cannot institute the
case. Petitioner obtained a Certificate of Non-Registration of Corporation/Partnership from the SEC
which certified that the latter did not have any records of a "Multi-Rich Builders, Inc." Moreover, Win
in its Rejoinder did not oppose the allegations in the Reply. Win admitted that it was only incorporated
on 20 February 1997 while the construction contract was executed on 26 March 1996. Likewise, it
admitted that at the time of execution of the contract, Multi-Rich was a registered sole proprietorship
and was issued a business permit by the Office of the Mayor of Manila.

ISSUE:
Whether Win have a legal personality to institute the case.

HELD:
Win admitted that the contract was executed between Multi-Rich and petitioner. It further
admitted that Multi-Rich was a sole proprietorship with a business permit issued by the Office of the
Mayor of Manila. A sole proprietorship is the oldest, simplest, and most prevalent form of business
enterprise. It is an unorganized business owned by one person. The sole proprietor is personally liable
for all the debts and obligations of the business. for all the debts and obligations of the business.
A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise. The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and requires
its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the
national government. The law does not vest a separate legal personality on the sole proprietorship or
empower it to file or defend an action in court.
The original petition was instituted by Win, which is a SEC-registered corporation. It filed a
collection of sum of money suit which involved a construction contract entered into by petitioner and
Multi-Rich, a sole proprietorship. The counsel of Win wanted to change the name of the plaintiff in the
suit to Multi-Rich. The change cannot be countenanced. The plaintiff in the collection suit is a
corporation. The name cannot be changed to that of a sole proprietorship. Again, a sole proprietorship is
not vested with juridical personality to file or defend an action.
Where an individual or sole trader organizes a corporation to take over his business and all his
Where an individual or sole trader organizes a corporation to take over his business and all his
assets, and it becomes in effect merely an alter ego of the incorporator, the corporation, either on the
grounds of implied assumption of the debts or on the grounds that the business is the same and is merely
being conducted under a new guise, is liable for the incorporator's preexisting debts and liabilities.
Clearly, where the corporation assumes or accepts the debt of its predecessor in business it is liable and
if the transfer of assets is in fraud of creditors it will be liable to the extent of the assets transferred. The
corporation is not liable on an implied assumption of debts from the receipt of assets where the
incorporator retains sufficient assets to pay the indebtedness, or where none of his assets are transferred
to the corporation, or where, although all the assets of the incorporator have been transferred, there is a
change in the persons carrying on the business and the corporation is not merely an alter ego of the
person to whose business it succeeded.
In order for a corporation to be able to file suit and claim the receivables of its predecessor in
business, in this case a sole proprietorship, it must show proof that the corporation had acquired the
assets and liabilities of the sole proprietorship. Win could have easily presented or attached any
document e.g., deed of assignment which will show whether the assets, liabilities and receivables of
Multi-Rich were acquired by Win. Having been given the opportunity to rebut the allegations made by Multi-Rich were acquired by Win. Having been given the opportunity to rebut the allegations made by
petitioner, Win failed to use that opportunity. Thus, we cannot presume that Multi-Rich is the
predecessor-in-business of Win and hold that the latter has standing to institute the collection suit.

PANTRANCO EMPLOYEES ASSOCIATION (PEA-PTGWO) and PANTRANCO
RETRENCHED EMPLOYEES ASSOCIATION (PANREA), v. NATIONAL LABOR
RELATIONS COMMISSION (NLRC), et al.
G.R. No. 170689, G.R. No. 170705, 17 March 2009, THIRD DIVISION (Nachura, J.)

The Gonzales family owned the Pantranco North Express, Inc. (PNEI). PNEI provided
transportation services to the public. The Gonzales family later incurred huge financial losses and their
creditors took over the management of PNEI and Macris, its sister company. Macris was later renamed
as the National Realty Development Corporation (Naredeco) and eventually merged with the National
Warehousing Corporation (Nawaco) to form the new PNB subsidiary, the PNB-Madecor. On the other
hand, full ownership of PNEI was transferred to one of their creditors, the National Investment
Development Corporation (NIDC), a subsidiary of the PNB. Later on, the NIDC sold PNEI to North
Express Transport, Inc. (NETI), a company owned by Gregorio Araneta III.

After EDSA 1, PNEI was privatized but eventually, PNEI ceased its operation. Along with the
cessation of business came the various labor claims commenced by the former employees of PNEI
where the latter obtained favorable decisions. The Labor Arbiter (LA) commanded the sheriffs through a
writ of execution to levy on the assets of PNEI (including the Pantranco properties in which its terminal
stands) in order to satisfy theP722,727,150.22 due its former employees, as full and final satisfaction of
the judgment awards in the labor cases. The sheriffs were likewise instructed to proceed against PNB,
PNB-Madecor and Mega Prime. Motions to quash the writ were separately filed by PNB-Madecor and
Mega Prime, and PNB. PNB-Madecor anchored its motion on its right as the registered owner of the Mega Prime, and PNB. PNB-Madecor anchored its motion on its right as the registered owner of the
Pantranco properties, and Mega Prime as the successor-in-interest. The LA declared that the subject
Pantranco properties were owned by PNB-Madecor. It being a corporation with a distinct and separate
personality, its assets could not answer for the liabilities of PNEI. Considering, however, that PNB-
Madecor executed a promissory note in favor of PNEI for P7,884,000.00, the writ of execution to the
extent of the said amount was concerned was considered valid. Both the NLRC and the Court of
Appeals affirmed the LA.

ISSUE:
Whether or not the laborers of PNEI can enforce their claims against the PNB
Whether or not the laborers of PNEI can enforce their claims against the PNB

HELD: Petition DENIED.
PNB, PNB-Madecor and Mega Prime are corporations with personalities separate and distinct
from that of PNEI. PNB is sought to be held liable because it acquired PNEI through NIDC at the time
when PNEI was suffering financial reverses. PNB-Madecor is being made to answer for PEA-
PTGWOs labor claims as the owner of the subject Pantranco properties and as a subsidiary of
PNB. Mega Prime is also included for having acquired PNBs shares over PNB-Madecor.
The general rule is that a corporation has a personality separate and distinct from those of
its stockholders and other corporations to which it may be connected. This is a fiction created by
law for convenience and to prevent injustice. Obviously, PNB, PNB-Madecor, Mega Prime, and PNEI
are corporations with their own personalities. PNB was only a stockholder of PNB-Madecor which later
sold its shares to Mega Prime and PNB-Madecor was the owner of the Pantranco properties. These
corporations are registered as separate entities and, absent any valid reason, we maintain their separate
identities and we cannot treat them as one.

Neither can we merge the personality of PNEI with PNB simply because the latter acquired the
former. Settled is the rule that where one corporation sells or otherwise transfers all its assets to another
corporation for value, the latter is not, by that fact alone, liable for the debts and liabilities of the
transferor.
Lastly, there are no peculiar circumstances or valid grounds that may exist to warrant the
piercing of the corporate veil.

Under the doctrine of piercing the veil of corporate fiction, the court
looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking
business as a group, disregarding the separate juridical personality of the corporation unifying the
group. Another formulation of this doctrine is that when two business enterprises are owned, conducted
and controlled by the same parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that two corporations are distinct entities and treat them as identical or
as one and the same.
However, any piercing of the corporate veil has to be done with caution, albeit the Court will not
hesitate to disregard the corporate veil when it is misused or when necessary in the interest of
justice. After all, the concept of corporate entity was not meant to promote unfair objectives.
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat
of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing
obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend
a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another
corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities.











CLAIM FOR MORAL DAMAGES
SIMEX INTERNATIONAL (MANILA), INCORPORATED, v. THE HONORABLE COURT OF
APPEALS and TRADERS ROYAL BANK
G.R. No. 88013, 19 March 1990, FIRST DIVISION (Cruz, J.)

Simex is a private corporation engaged in the exportation of food products. Most of its exports
are purchased by the Simex on credit. Simex was a depositor of Traders Royal Bank with a balance of
P190,380.00. Subsequently, Simex issued several checks against its deposit but was surprised to learn
later that they had been dishonored for insufficient funds. As a consequence, the California
Manufacturing Corporation sent a letter of demand to Simex, threatening prosecution if the dishonored
check issued to it was not made good. It also withheld delivery of the order made by Simex. Letters
were also sent by Malabon Long Life Trading and G. and U. Enterprises. Malabon also canceled were also sent by Malabon Long Life Trading and G. and U. Enterprises. Malabon also canceled
Simexs credit line. Subsequently, the pending orders of petitioner were also cancelled.
Simex complained to Traders Royal Bank. The investigation disclosed that the sum of
P100,000.00 deposited by the Simex had not been credited to it. The error was rectified and the
dishonored checks were paid after they were re-deposited. Simex demanded reparation from Traders
Royal Bank which was not met. Hence, Simex filed a complaint claiming from Traders Royal Bank
moral damages in the sum of P1,000,000.00, among others
The CFI denied the moral and exemplary damages but ordered the payment of nominal
damanges. The Court of Appeals affirmed this.

ISSUE:
Whether or not Simex is entitled to moral damages

HELD: Petition GRANTED.
The initial carelessness of the Traders Royal Bank, aggravated by the lack of promptitude in
repairing its error, justifies the grant of moral damages. This rather lackadaisical attitude toward the
complaining depositor constituted the gross negligence, if not wanton bad faith. The fact is that Simexs
credit line was canceled and its orders were not acted upon pending receipt of actual payment by the
suppliers. Its business declined. Its reputation was tarnished. Its standing was reduced in the business
community. All this was due to the fault of the respondent bank which was undeniably remiss in its duty
to the petitioner.
Article 2205 of the Civil Code provides that actual or compensatory damages may be received "
(2) for injury to the plaintiff s business standing or commercial credit." There is no question that Simex
did sustain actual injury as a result of the dishonored checks and that the existence of the loss having
been established "absolute certainty as to its amount is not required." Such injury should bolster all the been established "absolute certainty as to its amount is not required." Such injury should bolster all the
more the demand of Simex for moral damages.
Moral damages are not awarded to penalize Traders Royal Bank but to compensate Simex for the
injuries it may have suffered. Simex is seeking such damages for the prejudice sustained by it as a result
of Traders Royal Bank's fault. Moral damages are not susceptible of pecuniary estimation. Article
of Traders Royal Bank's fault. Moral damages are not susceptible of pecuniary estimation. Article
2216 of the Civil Code specifically provides that "no proof of pecuniary loss is necessary in order
that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated." That is
why the determination of the amount to be awarded (except liquidated damages) is left to the sound
discretion of the court, according to "the circumstances of each case."

A corporation is not as a rule entitled to moral damages because, not being a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings, serious
anxiety, mental anguish and moral shock. The only exception to this rule is where the corporation
has a good reputation that is debased, resulting in its social humiliation.
Simex did suffer injury because of Traders Royal Bank 's negligence that caused the dishonor of
the checks issued by it. The immediate consequence was that its prestige was impaired because of the
bouncing checks and confidence in it as a reliable debtor was diminished. Traders Royal Bank makes
much of the one instance when Simex was sued in a collection case, but that did not prove that it did not
have a good reputation that could not be marred, more so since that case was ultimately settled. It does
not appear that Simex is an unsavory and disreputable entity that has no good name to protect.


ABS-CBN BROADCASTING CORPORATION v. COURT OF APPELAS, et al.
G.R. No. 128690, 21 January 1999, FIRST DIVISION (Davide, C.J.) G.R. No. 128690, 21 January 1999, FIRST DIVISION (Davide, C.J.)

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby VIVA gave
ABS-CBN an exclusive right to exhibit 24 VIVA Films for TV telecast. Later, VIVA, through Vincent
del Rosario, offered ABS-CBN a list of 3 film packages (36 titles) from which ABS-CBN may exercise
its right of first refusal under their agreement. ABS-CBN ticked off 10 titles therefrom. Thereafter, Del
Rosario offered ABS-CBN airing rights over a package of 104 movies for P60 million. Del Rosario, and
Eugenio Lopez of ABS-CBN, met at a restaurant to discuss the package proposal. According to Lopez,
however, what they agreed upon was ABS-CBNs exclusive film rights to 14 films for P36 million. Del
Rosario denied the same. Del Rosario insisted that the discussion was on VIVAs offer of 104 films for
P60 million, to which ABSCBN later made a counterproposal but rejected by VIVAs Board of
Directors. Meanwhile, Mr. Graciano Gozon of Republic Broadcasting System (RBS) and Del Rosario
discussed the terms and conditions of Vivas offer to sell the 104 films, after the rejection of the same
package by ABS-CBN. Thus, RBS was granted the exclusive right to air 104 Viva-produced and/or
acquired films including the 14 films subject to the present case.

ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of
preliminary injunction and/or temporary restraining order against RBS, VIVA and Vicente del Rosario.
The RTC enjoined the airing of the 14 films. However, VIVA and RBS were allowed to post a P30
million counterbond Later, the RTC rendered a decision in favor of RBS and VIVA, ordering ABS-CBN
to pay RBS the amount it paid for the print advertisement and premium on the counterbond, moral
damages, exemplary damages and attorneys fee. The Court of Appeals affirmed the same.

ISSUE:
Whether or not RBS is entitled to moral damages Whether or not RBS is entitled to moral damages


HELD: Petition DENIED.
As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil
Code. Article 2217 thereof defines what are included in moral damages, while Article 2219 enumerates
the cases where they may be recovered. Article 2220 provides that moral damages may be recovered in
breaches of contract where the defendant acted fraudulently or in bad faith. RBSs claim for moral
damages could possibly fall only under item (10) of Article 2219.
Moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. The award is not meant to enrich
the complainant at the expense of the defendant, but to enable the injured party to obtain means,
diversion, or amusements that will serve to obviate the moral suffering he has undergone. It is aimed at
the restoration, within the limits of the possible, of the spiritual status quo ante, and should be
proportionate to the suffering inflictedTrial courts must then guard against the award of exorbitant
damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it
was due to passion, prejudice, or corruption or the part of the trial court.

The award of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal contemplation, it has no feelings, no
emotions, no senses. It cannot, therefore, experience physical suffering and mental anguish, which
can be experienced only by one having a nervous system. On this score alone the award for damages
must be set aside, since RBS is a corporation.



JARDINE DAVIES INC. v. COURT OF APPEALS and FAR EAST MILLS SUPPLY
CORPORATION and PURE FOODS CORPORATION v. COURT OF APPEALS and FAR
EAST MILLS SUPPLY CORPORATION
G.R. No. 128066, 19 June 2000, SECOND DIVISION ( Bellosillo, J.)

Moral damages may be awarded to a corporation whose reputation has been tarnished. In this
case, the corporation has sufficiently shown that its reputation was tarnished after it immediately
ordered equipment from its suppliers on account of the urgency of the project, only to be cancelled later
by the counter party to the contract.
The controversy started in 1992 at the height of the power crisis. To remedy and curtail further
losses due to the series of power failures, petitioner PURE FOODS CORPORATION
(PUREFOODS) decided to install two (2) 1500 KW generators in its food processing plant in San
Roque, Marikina City. Subsequently, bidding for the supply and installation of the generators was
held. Out of the eight (8) prospective bidders who attended the pre-bidding conference, only three (3)
bidders, namely, respondent FAR EAST MILLS SUPPLY CORPORATION (FEMSCO),
MONARK and ADVANCE POWER submitted bid proposals and gave bid bonds equivalent to 5% of
their respective bids, as required. Thereafter, PUREFOODS confirmed the award of contract to
FEMSCO. Immediately, FEMSCO submitted the required performance bond and contractors all-risk
insurance policy as well as the purchasing of the necessary materials.
However, in another letter, PUREFOODS unilaterally cancelled the award as significant factors
were uncovered and brought to their attention which dictate the cancellation and warrant the total review
and re-bid of the project. FEMSCO protested the cancellation. Yet, before a matter could be resolved,
PUREFOODS awarded the project with JARDINE NELL, a division of JARDINE DAVIES, Inc.
PUREFOODS awarded the project with JARDINE NELL, a division of JARDINE DAVIES, Inc.
(JARDINE) which was not one of the bidders. (JARDINE) which was not one of the bidders.
Thus, FEMSCO sued both PUREFOODS and JARDINE. The RTC granted Jardines demurrer
to evidence but found in favor of FEMSCO against PUREFOODS and ordered the indemnification. On
appeal, the CA affirmed the decision but ordered JARDINE to pay FEMSCO damages for inducing
PUREFOODS to violate the contract. It was ordered to pay moral damages. PUREFOODS was also
directed to pay FEMSCO moral and exemplary damages.

ISSUE:
Whether or not moral damages may be granted to corporation

HELD:
This Court has awarded in the past moral damages to a corporation whose reputation has been
besmirched. In the instant case, respondent FEMSCO has sufficiently shown that its reputation was
tarnished after it immediately ordered equipment from its suppliers on account of the urgency of the
project, only to be canceled later. We thus sustain respondent appellate court's award of moral damages.
We however reduce the award from P2,000,000.00 to P1,000,000.00, as moral damages are never
intended to enrich the recipient. Likewise, the award of exemplary damages by way of example for the
public good is excessive and should be reduced to P100,000.00.

NATIONAL POWER CORPORATION v. PHILIPP BROTHERS OCEANIC, INC.
G.R. No. 126204, 20 November 2001, THIRD DIVISION (Sandoval-Gutierrez, J.)

As a rule, moral damages are not granted to a corporation. while it is true that besmirched
reputation is included in moral damages, it cannot cause mental anguish to a corporation unlike in the
case of a natural person for a corporation has no reputation in the sense that an individual has and
besides it is inherently impossible for a corporation to suffer mental anguish.

In 1987, the National Power Corporation (NAPOCOR) issued invitations to bid for the supply
and delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired Thermal Power Plant
in Calaca, Batangas. The Philipp Brothers Oceanic, Inc. (PHIBRO) prequalified and was allowed to
participate as one of the bidders and latter on was accepted.
Subsequently, PHIBRO sent word to NAPOCOR regarding the industrial dispute that might soon
plague Australia which could hamper PHIBROs ability to supple the needed coal. It further apprised
NAPOCOR of the situation in Australia, particularly informing the latter that the ship owners therein are
not willing to load cargo unless a "strike-free" clause is incorporated in the charter party or the contract
of carriage. As such, instead of delivering the coal on or before the thirtieth day after receipt of the
Letter of Credit, PHIBRO effected its first shipment only in November 1987. In a subsequent bidding,
NAPOCOR disapproved PHIBROs application for not meeting the minimum requirements. Upon
further inquiry, PHIBRO found that the real reason for the disapproval was its purported failure to
satisfy NAPOCOR's demand for damages due to the delay in the delivery of the first coal shipment.
Thus, PHIBRO filed an action for damages with application for injunction against NAPOCOR.
Thus, PHIBRO filed an action for damages with application for injunction against NAPOCOR.
The TC rendered a decision in favor of PHIBRO. It ordered NAPOCOR to pay PHIBRO actual, moral
as well as exemplary damages. On appeal, the CA affirmed the decision in toto.

ISSUE: ISSUE:
Whether or not PHIBRO is entitled to the payment of moral damages

HELD:
The award of moral damages is improper. To reiterate, NAPOCOR did not act in bad faith.
Moreover, moral damages are not, as a general rule, granted to a corporation. While it is true that
besmirched reputation is included in moral damages, it cannot cause mental anguish to a corporation,
unlike in the case of a natural person, for a corporation has no reputation in the sense that an individual
has, and besides, it is inherently impossible for a corporation to suffer mental anguish. In LBC Express,
Inc. v. Court of Appeals, the Court ruled that moral damages are granted in recompense for physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot
experience physical suffering and mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot be
suffered by respondent bank as an artificial person."

FILIPINAS BROADCASTING NETWORK, INC. v. AGO MEDICAL AND EDUCATIONAL
CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO
G.R. No. 141994, 17 January 2005, FIRST DIVISION (Carpio, J.)

Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and
Hermogenes Jun Alegre (Alegre). It is aired every morning over DZRC-AM which is owned by
Filipinas Broadcasting Network, Inc. (FBNI) and is heard over Legazpi City, the Albay
municipalities and other Bicol areas.
In December 1989, Rima and Alegre exposed various alleged complaints from students, teachers
and parents against Ago Medical and Educational Center-Bicol Christian College of Medicine
(AMEC) and its administrators. Claiming that the broadcasts were defamatory, AMEC and Angelita
Ago (Ago), as Dean of AMECs College of Medicine, filed a complaint for damages against FBNI,
Rima and Alegre. Quoted are portions of the allegedly libelous broadcasts:

xxx
On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and
the AMEC-Institute of Mass Communication in their effort to minimize expenses in terms
of salary are absorbing or continues to accept rejects. For example, how many teachers in
AMEC are former teachers of Aquinas University but were removed because of immorality?
Does it mean that the present administration of AMEC have the total definite moral foundation
from catholic administrator of Aquinas University. I will prove to you my friends, that AMEC is
a dumping ground, garbage, not merely of moral and physical misfits. Probably they only
qualify in terms of intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family
name implies. She is too old to work, being an old woman. Is the AMEC administration
name implies. She is too old to work, being an old woman. Is the AMEC administration
exploiting the very [e]nterprising or compromising and undemanding Lola? Could it be that
AMEC is just patiently making use of Dean Justita Lola were if she is very old. As in
atmospheric situation zero visibility the plane cannot land, meaning she is very old, low pay
follows. By the way, Dean Justita Lola is also the chairman of the committee on scholarship in
AMEC. She had retired from Bicol University a long time ago but AMEC has patiently made use
of her.
xxx

MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit
people. What does this mean? Immoral and physically misfits as teachers.
May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no
longer fit to teach. You are too old. As an aviation, your case is zero visibility. Dont insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship
committee at that. The reason is practical cost saving in salaries, because an old person is not
fastidious, so long as she has money to buy the ingredient of beetle juice. The elderly can get by
thats why she (Lola) was taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is likely that the students
would be influenced by evil. When they become members of society outside of campus will
be liabilities rather than assets. What do you expect from a doctor who while studying at
AMEC is so much burdened with unreasonable imposition? What do you expect from a student
who aside from peculiar problems because not all students are rich in their struggle to
improve their social status are even more burdened with false regulations. xxx (Emphasis
supplied)

The complaint alleged that AMEC is a reputable learning institution. With the supposed
exposs, FBNI, Rima and Alegre transmitted malicious imputations, and as such, destroyed plaintiffs
(AMEC and Ago) reputation. AMEC and Ago included FBNI as defendant for allegedly failing to
exercise due diligence in the selection and supervision of its employees, particularly Rima and Alegre.
The TC rendered judgment in favor of AMEC finding FBNI and Alegre liable for libel except
Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the
broadcasters claim that their utterances were the result of straight reporting because it had no factual broadcasters claim that their utterances were the result of straight reporting because it had no factual
basis. The broadcasters did not even verify their reports before airing them to show good faith. In
holding FBNI liable for libel, the trial court found that FBNI failed to exercise diligence in the selection
and supervision of its employees. On appeal, the CA affirmed the decision. It denied Agos claim for
damages and attorneys fees because the broadcasts were directed against AMEC, and not against her.

ISSUE:
Whether or not AMEC is entitled to payment of moral damages

HELD:
A juridical person is generally not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental
anguish or moral shock. The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the
award of moral damages. However, the Courts statement in Mambulaothat a corporation may have a
good reputation which, if besmirched, may also be a ground for the award of moral damages is
good reputation which, if besmirched, may also be a ground for the award of moral damages is
an obiter dictum.
Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2219 of the Civil
Code. This provision expressly authorizes the recovery of moral damages in cases of libel, slander or
any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or
juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any
other form of defamation and claim for moral damages.
Moreover, where the broadcast is libelous per se, the law implies damages. In such a case, evidence
of an honest mistake or the want of character or reputation of the party libeled goes only in mitigation of
damages. Neither in such a case is the plaintiff required to introduce evidence of actual damages as a damages. Neither in such a case is the plaintiff required to introduce evidence of actual damages as a
condition precedent to the recovery of some damages. In this case, the broadcasts are libelous per se.
Thus, AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The record shows that even
though the broadcasts were libelous per se, AMEC has not suffered any substantial or material damage
to its reputation. Therefore, we reduce the award of moral damages from P300,000 to P150,000.


MANILA ELECTRIC COMPANY vs. T.E.A.M. ELECTRONICS CORPORATION, etc.
G.R. No. 131723 December 13, 2007
Meralco entered into an agreement with T.E.A.M. Electronics Corp. (TEC) to supply electric powers to
two of TECs buildings, Dyna Craft International Manila or DCIM and NS Building. DCIM was being
rented out by Ultra Electronics Industries, Inc.
One day, Meralco conducted a surprise inspection of the electric meters installed at the DCIM building
and the NS Building. The meters of both buildings were found to be allegedly tampered with and did not
register the actual power consumption in the building. Hence, Meralco demanded payment of P7.04
million (DCIM Building) and P280,000 (NS Building) from TEC, representing its unregistered
consumption. TEC however failed to pay the differential billing hence petitioner disconnected the
electricity supply to the DCIM building.
TEC demanded from petitioner the reconnection of electrical service, claiming that it had nothing to do
with the alleged tampering but the latter refused to heed the demand. It turned out that Ultra was the one
at fault for the DCIM Building. Hence, TEC filed a complaint before the Energy Regulatory Board for
the restoration of the electric power to the DCIM building.
TEC then filed a complaint for damages against petitioner and Ultra. TEC then filed a complaint for damages against petitioner and Ultra.
Both the trial court and the Court of Appeals ruled in favor of TEC, holding that the evidence of
petitioner was insufficient to prove that TEC was guilty of tampering the meter installations. Meralco
was asked to pay actual, exemplary damages, and moral damages.
ISSUE: Whether or not a corporation is entitled to moral damages.
HELD: As a general rule, NO.
TEC was entitled to actual damages having paid Meralco P1,000,000.00 and P280,813.72 under protest.
It is likewise entitled to the payment of exemplary damages to serve as an example that before a
disconnection of electrical supply can be effected by a public utility, the requisites of law (notice) must
be complied with.
We, however, deem it proper to delete the award of moral damages. TEC's claim was premised allegedly
on the damage to its goodwill and reputation. As a rule, a corporation is not entitled to moral damages
because, not being a natural person, it cannot experience physical suffering or sentiments like wounded
feelings, serious anxiety, mental anguish and moral shock. The only exception to this rule is when the
corporation has a reputation that is debased, resulting in its humiliation in the business realm. But in
corporation has a reputation that is debased, resulting in its humiliation in the business realm. But in
such a case, it is imperative for the claimant to present proof to justify the award. It is essential to prove
the existence of the factual basis of the damage and its causal relation to petitioner's acts. In the present
case, the records are bereft of any evidence that the name or reputation of TEC/TPC has been debased as
a result of petitioner's acts. Besides, the trial court simply awarded moral damages in the dispositive
portion of its decision without stating the basis thereof.







DOCTRINE OF PIERCING THE CORPORATE VEIL
VILLA REY TRANSIT, INC. vs. EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION
CO., INC. and PUBLIC SERVICE COMMISSION,
G.R. No. L-23893 October 29, 1968

Jose M. Villarama sold his bus transportation business to the Pangasinan Transportation Co. subject to
the condition that Villarama shall not, for a period of 10 years, apply for any TPU service identical or
competing with the buyer.
However, barely three months after the sale, a corporation called Villa Rey Transit, Inc. was organized.
Among the incorporators were Villaramas wife and brother and sister-in-law. Less than a month after
its registration, the corporation bought five certificates of public convenience, forty-nine buses, tools
and equipment from Valentin Fernando.
Before the PSC could approve its permit to operate, the Sheriff of Manila levied on two of the five
certificates of public convenience in favor of Eusebio Ferrer, plaintiff, judgment creditor, against
Valentin Fernando, defendant, judgment debtor. Thereafter, Ferrer sold the two certificates of public
convenience to Pantranco.
The PSC later issued an order disposing that during the pendency of the cases, the Pantranco shall be the
one to operate provisionally the service under the two certificates embraced in the contract between
Ferrer and Pantranco. Ferrer and Pantranco.
The Corporation filed in the Court of First Instance of Manila, a complaint for the annulment of the
sheriff's sale of the aforesaid two certificates of public convenience in favor of the defendant Ferrer, and
the subsequent sale thereof by the latter to Pantranco, against Ferrer, Pantranco and the PSC.
In separate answers, the defendants Ferrer and Pantranco averred that the plaintiff Corporation had no
valid title to the certificates in question because the contract pursuant to which it acquired them from
Fernando was subject to a suspensive condition the approval of the PSC which has not yet been
fulfilled, and, therefore, the Sheriff's levy and the consequent sale at public auction of the certificates
referred to, as well as the sale of the same by Ferrer to Pantranco, were valid and regular, and vested
unto Pantranco, a superior right thereto.
Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama
Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama
and the Corporation, are one and the same; that Villarama and/or the Corporation was disqualified from
operating the two certificates in question by virtue of the aforementioned agreement between said
Villarama and Pantranco, which stipulated that Villarama "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."

ISSUE:
Whether or not the stipulation on the 10-year ban is valid and whether the Corporation is bound by the
same.

HELD: Petition DENIED. Stipulation is Valid.
SC said the Corporation is Villaramas alger-ego based on the following:
The finances of the Corporation which are supposed to be under the control and administration
of the treasurer keeping them as trust fund for the Corporation, were, nonetheless, manipulated
and disbursed as if they were the private funds of Villarama.

and disbursed as if they were the private funds of Villarama.


The P105,000 initial cash capitalization of the corporation was mostly financed by Villarama and
was in fact covered by his personal check.
Another witness, Celso Rivera, accountant of the Corporation, testified that while in the books of
the corporation there appears an entry that the treasurer received P95,000.00 as second
installment of the paid-in subscriptions, and, subsequently, also P100,000.00 as the first
installment of the offer for second subscriptions worth P200,000.00 from the original
subscribers, yet Villarama directed him (Rivera) to make vouchers liquidating the sums. Thus, it
was made to appear that the P95,000.00 was delivered to Villarama in payment for equipment
purchased from him, and the P100,000.00 was loaned as advances to the stockholders.
Further, the evidence shows that when the Corporation was in its initial months of operation,
Villarama purchased and paid with his personal checks Ford trucks for the Corporation.
Villarama's lame explanations on the matter of his involvement with the corporate affairs of the
Corporation only renders more credible Pantranco's claim that his control over the corporation,
especially in the management and disposition of its funds, was so extensive and intimate that it is
impossible to segregate and identify which money belonged to whom. The interference of Villarama in
the complex affairs of the corporation, and particularly its finances, are much too inconsistent with the
ends and purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities
from corporate undertakings. It is the very essence of incorporation that the acts and conduct of the
corporation be carried out in its own corporate name because it has its own personality.
The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders
who compose it is recognized and respected in all cases which are within reason and the law.
29
When the
fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime,
30
the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow for its
consideration merely as an aggregation of individuals.

Upon the foregoing considerations, We are of the opinion, and so hold, that the preponderance of
evidence have shown that the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama, and that the
restrictive clause in the contract entered into by the latter and Pantranco is also enforceable and binding
against the said Corporation. For the rule is that a seller or promisor may not make use of a corporate
entity as a means of evading the obligation of his covenant.
31
Where the Corporation is substantially
the alter ego of the covenantor to the restrictive agreement, it can be enjoined from competing with the
covenantee.
covenantee.

A.C. RANSOM LABOR UNION-CCLU vs. NATIONAL LABOR RELATIONS COMMISSION\
G.R. No. L-69494 May 29, 1987

A.C. Ransom Philippine Corp. was found guilty of unfair labor practice and was ordered to pay the
backwages due to the 22 employees. RANSOM however manifested that it did not have the necessary
funds to pay the employees.
The UNION however alleged that although RANSOM had assumed a posture of suffering from business
reverse, its officers and principal stockholders had organized a new corporation, the Rosario Industrial
Corp. (ROSARIO), using the same equipment, personnel, business stocks and the same place of
business. RANSOM denied such allegation and said that ROSARIO is a distinct and separate
corporation, which was organized long before these instant cases were decided adversely against
RANSOM.
The UNION again filed an ex-parte Motion for Writ of Execution and Garnishment, this time, against
the Officers/Agents of RANSOM personally and or their estates, as the case may be, considering their
success in hiding or shielding the assets of said company.
The Labor Abiter granted the motion but was reversed by the NLRC. The latter ruled that as a general
rule, officers of the corporation are not liable personally for the official acts unless they have exceeded rule, officers of the corporation are not liable personally for the official acts unless they have exceeded
the scope of their authority. In the absence of evidence showing that the officers mentioned in the Order
of the Labor Arbiter have exceeded their authority, the writ of execution can not be enforced against
them, especially' so since they were not given a chance to be heard.
The Court of Appeals modified the NLRCs decision, ruling that the personal liability for the backwages
due the 22 strikers shall be limited to Ruben Hernandez, who was President of RANSOM in 1974,
jointly and severally with other Presidents of the same corporation who had been elected as such after
1972 or up to the time the corporate life was terminated.

ISSUE:
Whether the officers can be held liable.

HELD: Petition Granted.
Private respondents point out that they were never impleaded as parties in the Trial Court, and that their
personal liabilities were never at issue; that judgment holding Ruben Hernandez personally liable is
tantamount to deprivation of property without due process of law; and that he was not an officer of the
corporation at the time the unfair labor practices were committed.
Incontrovertible is the fact that RANSOM was found guilty by the CIR, in its Decision of August 19,
1972, of unfair labor practice; that its officers and agents were ordered to cease and desist from further
committing acts constitutive of the same, and to reinstate immediately the 22 union members to their
respective positions with backwages from July 25, 1969 until actually reinstated.
The CIR Decision became final, conclusive, and executory after this Court denied the RANSOM
petition for review in 1973. In other words, this Court upheld that portion of the judgment ordering
the officers and agents of RANSOM to reinstate the laborers concerned, with backwages. The inclusion
of the officers and agents was but proper since a corporation, as an artificial being, can act only through
them. It was also pursuant to the CIR Act (CA No. 103 ),
7
the Industrial Peace Act (R.A. 875)
8
the them. It was also pursuant to the CIR Act (CA No. 103 ),
7
the Industrial Peace Act (R.A. 875)
8
the
Minimum Wage Law (R.A. 602).
9
Consequently, when, in resolving the UNION's Motion for Writ of
Execution and Garnishment in the Order of March 11, 1980, Labor Arbiter Genilo named the seven (17)
private respondents herein as the RANSOM officers and agents, who should be held liable (supra), he
merely implemented the already final and executory CIR decision of August 19, 1972. The NLRC, on
appeal to it by RANSOM, could not have modified the CIR Decision, as affirmed by this Court, by
appeal to it by RANSOM, could not have modified the CIR Decision, as affirmed by this Court, by
relieving RANSOM's officers and agents of liability.
This finding does not ignore the legal fiction that a corporation has a personality separate and distinct
from its stockholders and members, for, as this Court had held "where the incorporators and directors
belong to a single family, the corporation and its members can be considered as one in order to avoid its
being used as an instrument to commit injustice," 10 or to further an end subversive of justice. 11 In the
case of Claparols vs. CIR 12involving almost similar facts as in this case, it was also held that the shield
of corporate fiction should be pierced when it is deliberately and maliciously designed to evade financial
obligations to employees, to perpetrate fraud or an illegal act, the circumvention of statutes, and or
confuse legitimate issues the veil which protects the corporation will be lifted.
The alleged bankruptcy of RANSOM furnishes no justification for non-payment of backwages to the
employees concerned taking into consideration Article 110 of the Labor Code, which provides that in
the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation,
any provision of law to the contrary notwithstanding.
The worker preference applies even if the employer's properties are encumbered by means of a mortgage
contract, as in this case
Aggravating RANSOM's clear evasion of payment of its financial obligations is the organization of a
"run-away corporation," ROSARIO, in 1969 at the time the unfair labor practice case was pending
before the CIR by the same persons who were the officers and stockholders of RANSOM, engaged in
the same line of business as RANSOM, producing the same line of products, occupying the same
compound, using the same machineries, buildings, laboratory, bodega and sales and accounts
departments used by RANSOM, and which is still in existence. Both corporations were closed
corporations owned and managed by members of the same family. Its organization proved to be a corporations owned and managed by members of the same family. Its organization proved to be a
convenient instrument to avoid payment of backwages and the reinstatement of the 22 workers. This is
another instance where the fiction of separate and distinct corporate entities should be disregarded.

INDINO v. NLRC
G.R. No. 80352 September 29, 1989

The petitioner, Benjamin G. Indino, joined the Philippine National Construction Corporation (PNCC) as
a project personnel officer on December 12, 1974. On January 6, 1981, he was transferred to private
respondent DISC, a sister corporation of PNCC, which assigned him to its Philphos Project in Isabel,
Leyte.
On July 27, 1983 petitioner received a letter-memorandum informing him of his termination from work
due to drastic business reverses. Thus, petitioner filed with the NLRC a complaint for illegal dismissal
against private respondent. Such complaint was dismissed due to the agreement of the parties for the
dismissal of the complaint and the reinstatement of petitioner Indino under the conditions set in the said
agreement.
In view of the agreement, petitioner returned to work. However on December 14, 1983 he received
another letter-memorandum informing him of his dismissal due to the critical economic situation
(referring to the assassination of Ninoy Aquino at that time). In this regard, petitioner filed a complaint
for illegal dismissal, unpaid wages, moral and exemplary damages, and attorney's fees against
respondent DISC. Later, he amended his complaint and impleaded the Philippine National Construction
Corporation (PNCC) as additional respondent.
Petitioner substantiates the inclusion of the Philippine National Construction Corporation (PNCC) as a
party respondent in the case with the fact that PNCC was originally his employer but which later
transferred him to respondent DISC, the PNCC sister company. This, according to the petitioner, shows
the link between the two respondents and for purposes of this case, deprives them of their separate
personality. personality.


ISSUE:
WON Philippine National Construction Corporation (PNCC) can be made a party to the case filed by
petitioner and that the separate personality of the corporation may be disregarded.

HELD: Petition GRANTED.
The so-called separate and distinct personality of PNCC could be validly ignored inasmuch as it would
unjustly prejudice the petitioner vis-a-vis whatever benefits he may receive by reason of his illegal
dismissal. This has been demonstrated by the amount of the separation pay given to the petitioner by
respondent DISC which appears to correspond only to the period in which the former was in the employ
of the latter. The period when the petitioner was still in the employ of PNCC was apparently ignored.
This omission should not be allowed inasmuch as there is no showing that PNCC gave the petitioner
separation benefits before he was transferred to DISC. It should always be borne in mind that the fiction
of law that a corporation, as a juridical entity, has a distinct and separate personality, was envisaged for
convenience and to serve justice; therefore, it should not be used as a subterfuge to commit injustice and
circumvent labor laws.

SHOEMART Inc. v. NLRC

MORIS Industries is an enterprise engaged in the production of leather products. The workers
UNION joined the Philippine Association of Free Labor Union (PAFLU), after which the said UNION
apprised MORIS Industries of its desire to enter into a collective bargaining agreement. Within two
days, it suddenly closed shop and ceased operations, claiming that such a closure had become inevitable
because of business reverses. because of business reverses.
Thus, the UNION failed a complaint before the Labor Arbiter for unfair labor practice. It impleaded
in its complaint SHOEMART, on the theory that said corporation and MORIS were one and the same
juridical entity, being owned by Mr. Henry Sy and the BOD are the same.
SHOEMART maintains that it had a corporate personality separate and distinct that of the MORIS,
and there was no employer-employee relationship between it and the UNIONs member.
The labor arbiter rendered a decision holding both MORIS and SHOEMART equally liable. Such
decision was affirmed by the NLRC.
In the appeal, petitioner contends that they were deny due process because they failed to complete
the cross-examination.

ISSUE:
WON the SHOEMART and MORIS may be regarded as one and the separate personality of
SHOEMART may be disregarded.

HELD: the petitions for certiorari are DENIED
With regard to issue of due process:
Under the circumstances, a claim of denial of due process on SHOEMART's part is completely
unavailing. The essence of due process is that a party be afforded a reasonable opportunity to be heard
and to submit any evidence he may have in support of his defense.
17
What is vital, in other words, is not
the opportunity to cross-examine a particular witness, but the opportunity to be heard of which, as
already stated, SHOEMART has extensively availed.
With regard to the issue of piercing the veil of corporate fiction:
The respondent Commission's conclusions on this point were drawn from the following facts, which it The respondent Commission's conclusions on this point were drawn from the following facts, which it
deemed to have been adequately established by the complainant UNION's evidence, to wit:
1. In his affidavit, Mr. (Cresencio) Edic testified that he was first employed as sample maker, by the
people who owned SM. His job was to make samples to be displayed on the window and only those
which appealed to the customers were mass produced. When he was promoted to over-all supervisor, the
factory was transferred to its present location and from then on, this production division was incorporated
separately and has undergone many changes in name, yet all throughout, the known owners of the factory
remain the same;
2. An examination of the Incorporation papers of SM Shoe Mart and Moris Manufacturing show (sic) that
except for Elizabeth Sy all other five (5) incorporators and directors of Morris Industries are major
stockholders of SM Shoe Mart as of July 20, 1985;
3. The SM Shoe Mart is the exclusive buyer of all of Moris' products;
4. Both are housed in one building and Moris for many years has been using the payrolls of SM Shoe
Mart. SM glibly excuses this fact by alleging that this was done without its knowledge. We, however,
considering the close relationship of parties, find this incredible.
The Court perceives no whimsicality or capriciousness in the manner by which the NLRC arrived at its
conclusions on the matter and will therefore decline to nullify or set them aside.
The Court ordered SHOEMART to pay the damages and backwages of the employees, because it cannot
reinstate the employees on the theory that the said corporation is not engaged in manufacturing and
MORIS is already a defunct corporation.


MANUEL R. DULAY ENTERPRISES INC., ETAL, V. COURT OF APPEALS,
G.R. No. 91889 August 27, 1993

Manuel Dulay with 19,960 shares was designated as the president of the Manuel R. Dulay
Enterprise. The remaining 40 shares are owned by the other four members of the Board of Directors
equally. The corporation owned a property known as the Dulay Apartment consisting of sixteen (16)
apartment units located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.
Manuel Dulay by virtue of Board Resolution sold the subject property to private respondents spouses
Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of
Absolute Sale.

Thereafter, a new TCT was issued to private respondent. Subsequently, Manuel Dulay
and private respondents spouses Veloso executed a memorandum giving Dulay 2 years to repurchase the
subject property, however, it was not annoted in either TCT.
Private respondent Maria Veloso, without knowledge of Manuel Dulay, mortgaged the property to
private respondent Manuel Torres which was duly annotated in the TCT. For failure of the Veloso to
pay the loan obtained from Torres, the latter cause the extrajudicial foreclosure of the mortgaged
property wherein he was the highest bidder. Veloso assigned their right to redeem the mortgaged
property to the Manuel Dulay.
For failure of Veloso nor her assignee Manuel Dulay to redeem the subject property within the
statutory period for redemption, respondent Torres filed an Affidavit of Consolidation of Ownership.
Torres filed a petition for the issuance of writ of possession against spouses Veloso and Manuel
Dulay. The trial court ordered private respondent Torres to implead petitioner corporation as an
indispensable party but the latter moved for the dismissal of his petition which was granted.
On July 21, 1980, petitioner corporation filed an action against private respondents spouses Veloso
and Torres for the cancellation of the Certificate of Sheriff's Sale. The lower court decided in favor of
Torres and applied the doctine of piercing of the veil of corporate entity.
Petitioners' claim that the sale of the subject property by its president, Manuel Dulay, to private
respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without
respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without
the knowledge and consent of the other members of the board of directors cannot be sustained.

ISSUE:
WON the doctrine of piercing of the veil of corporate entity in the instant case was applied properly.

HELD: Petition DENIED.
In the instant case, petitioner corporation is classified as a close corporation and consequently a board
resolution authorizing the sale or mortgage of the subject property is not necessary to bind the
corporation for the action of its president. At any rate, corporate action taken at a board meeting without
proper call or notice in a close corporation is deemed ratified by the absent director unless the latter
promptly files his written objection with the secretary of the corporation after having knowledge of the
meeting which, in his case, petitioner Virgilio Dulay failed to do.
It is relevant to note that although a corporation is an entity which has a personality distinct and separate
from its individual stockholders or members, the veil of corporate fiction may be pierced when it is used
to defeat public convenience justify wrong, protect fraud or defend crime. The privilege of being treated
as an entity distinct and separate from its stockholder or members is therefore confined to its legitimate
uses and is subject to certain limitations to prevent the commission of fraud or other illegal or unfair act.
When the corporation is used merely as an alter ego or business conduit of a person, the law will regard
the corporation as the act of that person. The Supreme Court had repeatedly disregarded the separate
personality of the corporation where the corporate entity was used to annul a valid contract executed by
one of its members.
Consequently, petitioner corporation is liable for the act of Manuel Dulay and the sale of the subject
property to private respondents by Manuel Dulay is valid and binding. As stated by the trial court:
. . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria Theresa V. Veloso and
Castrense C. Veloso, was a corporate act of the former and not a personal transaction of Manuel R.
Dulay. This is so because Manuel R. Dulay was not only president and treasurer but also the general
manager of the corporation.
GUATSON INTERNATIONAL TRAVEL & TOURS INC. v.
NATIONAL LABOR RELATIONS COMMISSION

Where three companies are owned by one family, such that majority of the officers of these companies
are the same, the companies are located in the one building and use the same messengerial services,
and there was no showing that the employee was paid separation pay when he resigned from one
company and then, transferred to the other, the separate juridical personalities of the 3 companies may
be disregarded.

FACTS:
Petitioners Guatson Travel and Tours, Inc. (hereinafter referred to as Guatson Travel), Philippine
Integrated Labor Assistance Corp. (Philac) and Mercury Express International Courier Services, Inc.
(MEREX) assail the Decision, rendered by the National Labor
Relations Commission entitled Jolly M. Almoradie vs. Guatsons Travel Company, Philac and
MEREX. In the questioned decision, the NLRC found that Mr. Henry Ociers (Vice-President and
General Manager of petitioner Guatson Travel) actuation of threatening and forcing private respondent,
Jolly M. Almoradie, to resign amounted to illegal dismissal and thus ordered petitioners to pay private
respondent backwages.
Jolly M. Almoradie was first employed by Mercury Express International Courier Service, Inc.
(MEREX) in October, 1983 as Messenger. When it closed its operations, Almoradie was absorbed by
(MEREX) in October, 1983 as Messenger. When it closed its operations, Almoradie was absorbed by
MEREXs sister company Philippine Integrated Labor Assistance Corp. (Philac), likewise as Messenger.
In September, 1986, Almoradie was transferred to Guatson Travel, allegedly also a sister company
of MEREX and Philac, as Liaison Officer. Thereafter, he was promoted to the position of Sales
Representative. Almoradie was issued three separate memoranda asking him to explain the reason why
he didnt want to sell but he answered that it was not true. He said that he was hampered in his sales
promotion and solicitation of customer, due to financial constraint considering that the kind and nature
of work entails much expenses for which he shouldered with his personal money. He also stated that he of work entails much expenses for which he shouldered with his personal money. He also stated that he
liked her position as a messenger and preferred to be returned to his messenger position.
Almoradie was reverted to the position of Messenger, yet sometime in September, 1988, he was
again given the position of Account Executive, the nature of work of which is similar to that of a sales
representative. Almoradie accepted the transfer with the understanding that he will solely discharge the
duties of an account executive and will no longer be required to do messengerial work.
On October 1, 1988, Almoradie was allegedly summoned by Henry Ocier to his office and was there
and then forced by the latter to resign. Ocier taunted Almoradie with threats that it he will not resign, he
will file charges against him which would adversely affect his chances of getting employed in the future.
Ocier allegedly even provided the pen and paper on which Almoradie wrote and signed the resignation
letter dictated by Ocier himself. Subsequently, Almoradie filed a complaint for Illegal Dismissal.
The Labor Arbiter, however Dismissed. Upon Almoradies appeal, the NLRC reversed the decision
of the Labor Arbiter on his finding that complainant was not forced to resign, anchoring its conclusion to
the fact that Almoradie was a permanent employee who has been working for the Ociers for five long
years; that he was receiving a fairly good salary considering that he is single; that he had no potential
employer at the time of his resignation; that there was no evidence to show that Mr. Henry Ocier was
indeed not in town on October 1, 1988, when he allegedly forced Almoradie to resign.


ISSUE:
Whether Jolly Almoradie was indeed illegally dismissed by being forced to resign. YES

HELD: The petition is hereby DISMISSED for lack of merit.
The SC agreed with the finding of NLRC that Jollys resignation was not voluntary.
When Almoradie was promoted as Sales Representative he had caught the ire of management, so much When Almoradie was promoted as Sales Representative he had caught the ire of management, so much
so that he was issued no less than three memoranda in one day ordering him to answer certain charges.
Why he was again promoted to the position of Account Executive after he was reverted back to the rank
of a messenger from being a Sales Representative is rather intriguing, unless it was a scheme of
management to really rid him from the company. Apparently, Almoradie is not cut out for a sales job,
and hence could be dismissed or forced to resign for failing to make good on his job in sales. On the
other hand, it would be difficult to dismiss him while being a messenger since he is a permanent
employee and there would not be enough basis to make him resign Henry Ocier did not only say that he
will file charges against Almoradie and that he has a good lawyer but he even threatened to block his
future employment should the latter not file his resignation. This threat is not farfetched.
We uphold the NLRC. The three companies are owned by one family, such that majority of the officers
of these companies are the same. The companies are located in one building and use the same
messengerial service. Moreover, there was no showing that private respondent was paid separation pay
when he was absorbed by Philac upon closure of Merex; nor was there evidence that he resigned from
Philac when he transferred to Guatson Travel. Under the doctrine of piercing the veil of corporate
fiction, when valid ground exists, the legal fiction that a corporation is an entity with a juridical
personality separate and distinct from its members or stockholders may be disregarded.
Where there is a finding of illegal dismissal, the employee is entitled to both reinstatement and award of
backwages from the time the compensation was withheld, in this case in 1988, up to a maximum of three
years.
years.
The Decision of the NLRC is hereby MODIFIED to the extent that the award of backwages should be
computed based on a three-year period, while the separation pay of one month for every year of service
should be computed from the time petitioner was employed by Merex and should include the three-year
period as backwages.

FIRST PHILIPPINE INTERNATIONAL BANK v. COURT OF APPEALS

The separate juridical personality of a corporation may be disregarded where the majority stockholder
filed a derivative suit in behalf of the corporation to declare the sale as unenforceable against the
corporation despite the fact that the trial court in another case had already ruled that the contract of
sale between the corporation and its buyer was deemed perfected. There is a forum shopping where the
stockholders, in a second case, and in representation of the corporation, seek to accomplish what the
corporation itself failed to do in the original case.

The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner
Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the
Philippines.
Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of
original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set
aside through this petition.

FACTS:
Petitioner First Philippine Internation Bank acquired six parcels of land located at Don Jose, Sta. Rosa,
Laguna. The property used to be owned by BYME Investment and Devt Co. which had them mortgaged
with the bank as collateral. The original plaintiffs, Demetrio Demetria and Jose Janolol, wanted to
purchase the property and thus initiated negotiations for that purpose.
BYME Investments legal counsel, Jose Fajardo met with petitioner Mercurio Rivera for the purpose of
buying the property. After the meeting, Jose Janolo made a formal purchase offer to the bank. A series buying the property. After the meeting, Jose Janolo made a formal purchase offer to the bank. A series
of demands for compliance by the bank with the plaintiff considered as a perfected contract of sale,
which demands were in one form or another refused by the bank.
The petitioner bank through its conservator repudiated the authority of petitioner Rivera and claimed
that his dealings with the plaintiffs were unauthorized or illegal. On that basis, the bank justified the
refusal of the tenders of payment and non compliance with the obligations.
Plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera and
Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a
perfected contract of sale. The petitioners took the position that there was no such perfected sale because
petitioner Rivera is not authorized to sell the property, and that there was no meeting of the minds as to
the price.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said
private respondent.
During the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action
purportedly a derivative suit - with the Regional Trial Court against Encarnacion, Demetria and Janolo
to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or
implementing the sale.

ISSUES:
Whether or not there was forum-shopping on the part of petitioner Bank. YES
Whether or not the corporate veil can be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. NO

HELD: PETITION DENIED.
1)
2)
HELD: PETITION DENIED.

The original complaint in the court a quo which gave rise to the instant petition was filed by the buyer
(herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to
enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case
seeks to declare such purported sale involving the same real property as unenforceable as against the
Bank, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original
case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the
same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to
respondent.
In the instant case before us, there is also identity of parties, or at least, of interests represented.
Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case,
they represent the same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the
matter in controversy. They are not principally or even subsidiarily liable; much less are they direct
parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
derivative suit.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate
and distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged
as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from
the members or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals
The corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against
forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a
derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in
using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants
to use their shareholders as fronts to circumvent the stringent rules against forum shopping.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is
the vexation caused the courts and parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or to grant the same or substantially the
same reliefs, in the process creating the possibility of conflicting decisions being rendered by the
different for upon the same issue. In this case, this is exactly the problem: a decision recognizing the
perfection and directing the enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a
final decision in one would constitute res judicata in the other.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed.
Having said that, let it be emphasized that this petition should be dismissed not merely because of
forum-shopping but also because of the substantive issues.

TOMAS LAO CONSTRUCTION v. NATIONAL LABOR RELATIONS COMMISSION

Where it appears that three business enterprises are owned, conducted and controlled by the same
family which were all engaged in the construction business and which used the same equipment,
services and workers, both law and equity will, when necessary to protect the rights of third persons,
disregard the legal fiction that the (three) corporations are distinct entities, and treat them as identical.

FACTS: FACTS:
From October to December 1990 private respondents individually filed complaints for illegal
dismissal against petitioners with the National Labor Relations Commission alleging that they were
hired for various periods as construction workers in different capacities.
Within the periods of their respective employments, they alternately worked for petitioners Tomas
Lao Corporation (TLC), Thomas and James Developers (T&J) and LVM Construction Corporation
(LVM), altogether informally referred to as the Lao Group of Companies, the three (3) entities
comprising a business conglomerate exclusively controlled and managed by members of the Lao family.
TLC, T&J and LVM are engaged in the construction of public roads and bridges. Under joint
venture agreements they entered into among each other, they would undertake their projects either
simultaneously or successively so that, whenever necessary, they would lease tools and equipment to
one another. Each one would also allow the utilization of their employees by the other two . With this
arrangement, workers were transferred whenever necessary to on-going projects of the same company or
of the others, or were rehired after the completion of the project or project phase to which they were
assigned. Soon after, however, TLC ceased its operations while T&J and LVM stayed on.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J, issued a
memorandum requiring all workers and company personnel to sign employment contract forms and
clearances. These were to be used allegedly for audit purposes pursuant to a joint venture agreement
between LVM and T&J. To ensure compliance with the directive, the company ordered the withholding
of the salary of any employee who refused to sign. Quite notably, the contracts expressly described the
construction workers as project employees whose employments were for a definite period, i.e., upon the
expiration of the contract period or the completion of the project for which the workers was hired.
Except for Florencio Gomez all private respondents refused to sign contending that this scheme
was designed by their employer to downgrade their status from regular employees to mere project
employees. Resultantly, their salaries were withheld. They were also required to explain why their
services should not be terminated for violating company rules and warned that failure to satisfactorily
explain would be construed as disinterest in continued employment with the company. Since the
workers stood firm in their refusal to comply with the directives their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private respondents were NLRC RAB VIII dismissed the complaints lodged before it, finding that private respondents were
project employees whose employments could be terminated upon completion of the projects or project
phase for which they were hired.
The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed by the Fourth Division of
NLRC and found that private respondents were regular employees who were dismissed without just
cause and denied due process. In granting monetary awards to complainants, NLRC disregarded the veil
of corporate fiction and treated the three (3) corporations as forming only one entity on the basis of the
admission of petitioners that the three (3) operated as one (1), intermingling and commingling all its
resources, including manpower facility.


ISSUE:
Whether or not the NLRC erred when it pierced the veil of corporate personality of petitioner-
corporations. NO

HELD: PETITION DENIED.

NLRC did not err in disregarding the veil of separate corporate personality and holding petitioners
jointly and severally liable for private respondents back wages and separation pay. The records
disclose that the three (3) corporations were in fact substantially owned and controlled by members of
the Lao family composed of Lao Hian Beng alias Tomas Lao, Chiu Siok Lian (wife of Tomas Lao),
Andrew C. Lao, Lao Y. Heng, Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and Ismaelita Maluto. A
majority of the outstanding shares of stock in LVM and T&J is owned by the Lao family. T&J is 100%
owned by the Laos as reflected in its Articles of Incorporation.
The Lao Group of Companies therefore is a closed corporation where the incorporators and directors
belong to a single family. Lao Hian Beng is the same Tomas Lao who owns Tomas Lao Corporation
and is the majority stockholder of T&J. Andrew C. Lao is the Managing Director of LVM Construction, and is the majority stockholder of T&J. Andrew C. Lao is the Managing Director of LVM Construction,
and President and Managing Director of the Lao Group of Companies. Petitioners are engaged in the
same line of business under one management and use the same equipment including manpower
services. Where it appears that [three] business enterprises are owned, conducted and controlled by the
same parties, both law and equity will, when necessary to protect the rights of third persons, disregard
the legal fiction that the [three] corporations are distinct entities, and treat them as identical.
The court held that the liability of petitioners extends to the responsible officers acting in the interest of
the corporations. In view of the peculiar circumstances of this case, we disregard the separate
personalities of the three (3) corporations and at the same time declare the members of the corporations
jointly and severally liable with the corporations for the monetary awards due to private respondents

CONCEPT BUILDERS, INC., petitioner, vs. THE NATIONAL LABOR RELATIONS
COMMISSION, (First Division); and Norberto Marabe, Rodolfo Raquel, Cristobal Riego, Manuel
Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogello Salut, Emilio Garcia,
Jr., Mariano Rio, Paulina Basea, Aifredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve,
Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe
Basilan, and Ruben Robalos, respondents.

FACTS:
Petitioner Concept Builders, Inc. is engaged in the construction business. Private respondents
were employed by said company as laborers, carpenters and riggers. On November, 1981, private
respondents were served individual written notices of termination of employment by petitioner, effective
on November 30, 1981 stating that their contracts of employment had expired and the project in which
they were hired had been completed. Public respondent found it to be, the fact, however, that at the time
of the termination of private respondents employment, the project in which they were hired had not yet
been finished and completed. Petitioner had to engage the services of sub-contractors whose workers
performed the functions of private respondents. performed the functions of private respondents.

Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and
non-payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner. The
Labor Arbiter rendered judgment ordering petitioner to reinstate private respondents and to pay them
back wages equivalent to one year or three hundred working days. The National Labor Relations
back wages equivalent to one year or three hundred working days. The National Labor Relations
Commission (NLRC) dismissed the motion for reconsideration filed by petitioner on the ground that the
said decision had already become final and executory. Subsequently, the Labor Arbiter issued a writ of
execution which was partially satisfied through garnishment of sums from petitioners debtor in the
amount of P81,385.34 said amount was turned over to the cashier of the NLRC. Subsequently, an Alias
Writ of Execution was issued by the Labor Arbiter directing the sheriff to collect from herein petitioner
the balance of the judgment award, and to reinstate private respondents to their former positions.
However, the sheriff failed to serve the alias writ of execution on petitioner through the security guard
on duty was refused on the ground that petitioner no longer occupied the premises. Consequently, upon
motion of private respondents, the Labor Arbiter issued a second alias writ of execution. However, such
writ had also not been enforced.

A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the
properties sought to be levied upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI) of which
he is the Vice-President. private respondents filed a Motion for Issuance of a Break-Open Order,
alleging that HPPI and petitioner corporation were owned by the same incorporator! stockholders. They
also alleged that petitioner temporarily suspended its business operations in order to evade its legal
obligations to them and that private respondents were willing to post an indemnity bond to answer for
any damages which petitioner and HPPI may suffer because of the issuance of the break-open order.
HPPI filed an Opposition to the motion for issuance of a break-open order, contending that HPPI is a
corporation which is separate and distinct from petitioner. HPPI also alleged that the two corporations
are engaged in two different kinds of businesses, i.e., HPPI is a manufacturing firm while petitioner was
then engaged in construction. The Labor Arbiter issued an Order which denied private respondents
motion for break-open order. Private respondents then appealed to the NLRC which set aside the order motion for break-open order. Private respondents then appealed to the NLRC which set aside the order
of the Labor Arbiter, issued a break-open order and directed private respondents to file a bond.
Thereafter, it directed the sheriff to proceed with the auction sale of the properties already levied upon.
It dismissed the third-party claim for lack of merit.
ISSUE:
Whether or not the separate juridical personalities of the two corporations may be disregarded?

HELD:
Where two corporations have the same address, the same office, the same directors and
substantially the same stockholders and the first corporation ceased operation to evade payment of back
wages to its employees, their separate juridical personalities may be disregarded. The test in determining
the applicability of the doctrine of piercing the veil of corporate fiction is as follows: (1) Control, not
mere majority or complete stock control, but complete domination, not only of finances but of policy
and business practice in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own; (2) Such control must have
been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal rights; and (3) The
aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
BIBIANO O. REYNOSO, IV, petitioner, vs. HON. COURT OF APPEALS and GENERAL
CREDIT CORPORATION, respondents.

FACTS:
Commercial Credit Corporation (CCC), a financing and investment firm, decided to organize
franchise companies in different parts of the country, wherein it shall hold thirty percent (30%) equity.
Employees of the CCC were designated as resident managers of the franchise companies. Petitioner Employees of the CCC were designated as resident managers of the franchise companies. Petitioner
Bibiano O. Reynoso, IV was designated as the resident manager of the franchise company in Quezon
City, known as the Commercial Credit Corporation of Quezon City (CCC-QC). CCC-QC entered into an
City, known as the Commercial Credit Corporation of Quezon City (CCC-QC). CCC-QC entered into an
exclusive management contract with CCC whereby the latter was granted the management and full
control of the business activities of the former. Under the contract, CCC-QC shall sell, discount and/or
assign its receivables to CCC. Subsequently, however, this discounting arrangement was discontinued
pursuant to the so-called DOSRI Rule, prohibiting the lending of funds by corporations to its
directors, officers, stockholders and other persons with related interests therein. On account of the new
restrictions imposed by the Central Bank policy by virtue of the DOSRI Rule, CCC decided to form
CCC Equity Corporation, (CCC-Equity), a wholly-owned subsidiary, to which CCC transferred its thirty
(30%) percent equity in CCC-QC, together with two seats in the latters Board of Directors.

Under the new set-up, several officials of Commercial Credit Corporation, including petitioner
Reynoso, became employees of CCC-Equity. While petitioner continued to be the Resident Manager of
CCC-QC, he drew his salaries and allowances from CCC-Equity. Furthermore, although an employee
of CCC-Equity, petitioner, as well as all employees of CCC-QC, became qualified members of the
Commercial Credit Corporation Employees Pension Plan. The business activities of CCC-QC pertain to
the acceptance of funds from depositors who are issued interest-bearing promissory notes. The amounts
deposited are then loaned out to various borrowers. Petitioner, in order to boost the business activities
of CCC-QC, deposited his personal funds in the company. In return, CCC-QC issued to him its interest-
bearing promissory notes.

A complaint for sum of money with preliminary attachment was instituted by CCC-QC against
petitioner, who had in the meantime been dismissed from his employment by CCC-Equity. The
complaint was subsequently amended in order to include Hidelita Nuval, petitioners wife, as a party
defendant. The complaint alleged that petitioner embezzled the funds of CCC-QC amounting to
P1,300,593.11. Out of this amount, at least P630,000.00 was used for the purchase of a house and lot
located in Pasig City. The property was mortgaged to CCC, and was later foreclosed. Petitioner denied located in Pasig City. The property was mortgaged to CCC, and was later foreclosed. Petitioner denied
having unlawfully used funds of CCC-QC and asserted that the sum of P1,300,593.11 represented his
money placements in CCC-QC, as shown by twenty-three (23) checks which he issued to the said
company. The trial court rendered its decision dismissing the complaint and awarding damages to
petitioner. The decision became final and, accordingly, a Writ of Execution was issued, however, the
judgment remained unsatisfied, prompting petitioner to file a Motion for Alias Writ of Execution,
Examination of Judgment Debtor, and to Bring Financial Records for Examination to Court. CCC-QC
filed an Opposition to petitioners motion, alleging that the possession of its premises and records had
been taken over by CCC. Meanwhile, in 1983, CCC became known as the General Credit Corporation.
General Credit Corporation filed a Special Appearance and Opposition, alleging that it was not a party
to the case, and therefore petitioner should direct his claim against CCC-QC and not General Credit
Corporation. Petitioner filed his reply, stating that the CCC-QC is an adjunct instrumentality, conduit
and agency of CCC.

ISSUE:
Whether or not the piercing the veil of corporate fiction is proper?

HELD:
The defense of separateness will be disregarded where the business affairs of a subsidiary
corporation are so controlled by the mother corporation to the extent that it becomes an instrument or
agent of its parent. A subsidiary is considered a mere instrumentality of the parent company if the latter
determines the personnel, administrative and finance policies, hires the employees, and funds the
operation of the former. The manager of the subsidiary could therefore enforce his claim against the
parent company even though his employment is with the subsidiary.


ESTELITA BURGOS LIPAT and ALFREDO LIPAT, petitioners, vs. PACIFIC BANKING
CORPORATION, REGISTER OF DEEDS, RTC EX-OFFICIO SHERIFF OF QUEZON CITY
and the Heirs of EUGENIO D. TRINIDAD, respondents.

FACTS:

Petitioners, the spouses Alfredo Lipat and Estelita Burgos Lipat, owned Belas Export Trading
(BET). BET was engaged in the manufacture of garments for domestic and foreign consumption. The
Lipats also owned the Mystical Fashions in the United States, which sells goods imported from the
Philippines through BET. Mrs. Lipat designated her daughter, Teresita B. Lipat, to manage BET in the
Philippines while she was managing Mystical Fashions in the United States. In order to facilitate the
convenient operation of BET, Estelita Lipat executed a special power of attorney appointing Teresita
Lipat as her attorney-in-fact to obtain loans and other credit accommodations from respondent Pacific
Banking Corporation (Pacific Bank). She likewise authorized Teresita to execute mortgage contracts on
properties owned or co-owned by her as security for the obligations to be extended by Pacific Bank
including any extension or renewal thereof.

Teresita, by virtue of the special power of attorney, was able to secure for and in behalf of her
mother, Mrs. Lipat and BET, a loan from Pacific Bank to buy fabrics to be manufactured by BET and
exported to Mystical Fashions in the United States. As security therefor, the Lipat spouses, as
represented by Teresita, executed a Real Estate Mortgage over their property located in Quezon City.
Said property was likewise made to secure other additional or new loans, discounting lines, overdrafts
and credit accommodations, of whatever amount, which the Mortgagor and/or Debtor may subsequently
obtain from the Mortgagee as well as any renewal or extension by the Mortgagor and/or Debtor of the
whole or part of said original, additional or new loans, discounting lines, overdrafts and other credit
accommodations, including interest and expenses or other obligations of the Mortgagor and/or Debtor
owing to the Mortgagee, whether directly, or indirectly, principal or secondary, as appears in the owing to the Mortgagee, whether directly, or indirectly, principal or secondary, as appears in the
accounts, books and records of the Mortgagee.

Subsequently, BET was incorporated into a family corporation named Belas Export Corporation
(BEC) in order to facilitate the management of the business. BEC was engaged in the business of
manufacturing and exportation of all kinds of garments of whatever kind and description and utilized the
same machineries and equipment previously used by BET. Its incorporators and directors included the
Lipat spouses who owned a combined 300 shares out of the 420 shares subscribed, Teresita Lipat who
owned 20 shares, and other close relatives and friends of the Lipats. Estelita Lipat was named president
of BEC, while Teresita became the vice-president and general manager. Eventually, the loan was later
restructured in the name of BEC and subsequent loans were obtained by BEC with the corresponding
promissory notes duly executed by Teresita on behalf of the corporation. A letter of credit was also
opened by Pacific Bank in favor of A. O. Knitting Manufacturing Co., Inc., upon the request of BEC
after BEC executed the corresponding trust receipt therefor. Export bills were also executed in favor of
Pacific Bank for additional finances. These transactions were all secured by the real estate mortgage
over the Lipats property. The promissory notes, export bills, and trust receipt eventually became due
and demandable. Unfortunately, BEC defaulted in its payments. After receipt of Pacific Banks
demand letters, Estelita Lipat went to the office of the banks liquidator and asked for additional time to
enable her to personally settle BECs obligations. The bank acceded to her request but Estelita failed to
fulfill her promise. Consequently, the real estate mortgage was foreclosed and after compliance with the
requirements of the law the mortgaged property was sold at public auction. A certificate of sale was
issued to respondent Eugenio D. Trinidad as the highest bidder. The spouses Lipat filed a complaint for
annulment of the real estate mortgage, extrajudicial foreclosure and the certificate of sale issued over the
property against Pacific Bank and Eugenio D. Trinidad. The complaint alleged that the promissory
notes, trust receipt, and export bills were all ultra vires acts of Teresita as they were executed without the
notes, trust receipt, and export bills were all ultra vires acts of Teresita as they were executed without the
requisite board resolution of the Board of Directors of BEC. The Lipats also averred that assuming said
acts were valid and binding on BEC, the same were the corporations sole obligation, it having a
personality distinct and separate from spouses Lipat. It was likewise pointed out that Teresitas
authority to secure a loan from Pacific Bank was specifically limited to Mrs. Lipats sole use and benefit
and that the real estate mortgage was executed to secure the Lipats and BETs P583,854.00 loan only. and that the real estate mortgage was executed to secure the Lipats and BETs P583,854.00 loan only.

ISSUE:
Whether or not the doctrine of piercing the veil of corporate fiction is applicable in this case?

HELD:
When the corporation is the mere alter ego or business conduit of a person, the separate
personality of the corporation may be disregarded. This is commonly referred to as the instrumentality
rule or the alter ego doctrine, which the courts have applied in disregarding the separate juridical
personality of corporations. Where the owner of a business operating as a single proprietorship
authorized her daughter to constitute a mortgage on the proprietors property to secure a loan and the
single proprietorship was eventually formed into a corporation, the loans incurred by the single
proprietorship should be considered obligations of the corporation where the proprietor and her husband
are the majority shareholders of the corporation; both firms were managed by their daughter, engaged in
the garment business and held office in the same building owned by the spouses; the business operations
of the corporations were so merged with the spouses; the corporate funds were held by the latter with the
corporation itself having no visible assets; and that the latter benefited from the loans secured from the
Bank to finance their business both locally and abroad, then the corporation should be treated as a
conduit of and having merely succeeded the single proprietorship. Thus, the obligations under the
mortgage contract secured under the name of the corporation cannot be evaded on the pretext that it was
signed for the benefit of and under the name of the single proprietorship only.

MAVEST (U.S.A.) INC., and MAVEST Manila Liaison Office vs.
SAMPAGUITA GARMENT CORPORATION SAMPAGUITA GARMENT CORPORATION
GARCIA, J.:

FACTS
Petitioner MAVEST (U.S.A.), Inc. (MAVEST, U.S.A., for short) is a corporation duly organized and
existing under the laws of the United States of America but registered with the Philippine Board of
Investments, while co-petitioner MAVEST Manila Liaison Office is MAVEST U.S.A.s representative
in the Philippines. On the other hand, respondent Sampaguita Garment Corporation is a domestic
corporation engaged in the business of manufacturing and exporting garments.
Sometime in July and August 1989, [petitioners Mavest U.S.A. and Mavest Manila Liaison
Office] entered into a series of transactions with [respondent] Sampaguita Garment Corporation, whereby
the former would furnish from abroad raw materials to be manufactured by the latter into finished
products, for shipment to [petitioners] foreign buyers, Sears Roebuck and JC Penney.
The orders of Sears Roebuck were duly paid in full by way of letter of credit. The JC Penney
orders consisting of 8,000 pcs. Cotton Woven Pants (Styles DJ-1 BR and DJ-1 XT x x x at $3.65 per
piece or a total of $29,200.00 were not covered by a letter of credit.)
Despite shipment and receipt by JC Penney of said orders, no payment was made, thus
prompting [respondent] to send demand letters which remained unheeded. On April 27, 1990,
[respondent] filed a complaint for collection of a sum of money amounting to US$29,200.00 with
damages [before the Regional Trial Court at Makati City against the herein petitioners and two (2) others,
damages [before the Regional Trial Court at Makati City against the herein petitioners and two (2) others,
namely, MAVEST International Co., LTD and Patrick Wang, former General Manager of MLO]. In their
Answer with Counterclaim filed on June 21, 1990, [petitioners and their two co-defendants] countered
that plaintiff [Sampaguita Garment Corporation] has already been paid by virtue of legal compensation,
and that it is plaintiff which owes defendants US5, 799.57due to the damages and losses it (sic) incurred
as a result of the breaches committed in the previous shipments to Sears Roebuck. The damages and
losses refer to: i) failure to observe specifications and quantity requirements; ii) delay in shipping out the
garments; iii) over declaration of value in Style No. 33303; iv) shortshipment of garments; v) failure to
return raw materials for the unshipped garments, amounting to US$34,999.57. Moreover, [petitioners and return raw materials for the unshipped garments, amounting to US$34,999.57. Moreover, [petitioners and
their co-defendants] alleged that they also suffered losses on account of delays in the JC
Penney shipments.

ISSUE
Whether or not Mavest Liaison office is solidarily liable with Mavest Usa, Inc.

HELD
In their fourth assigned error, petitioners submits that Mavest Manila Liaison Office (MLO),
being merely an agent of Mavest U.S.A, should not be held solidarily liable with the principal.
Petitioners were two (2) of the original four (4) defendants impleaded in the basic complaint, the
other two (2) being Mavest International Co., Ltd. (MICL), a firm organized under the laws of Taiwan,
and Mr. Patrick Wang, a former manager of MICL and MLO. Both MICL and Mr. Wang, while
adjudged liable in solidum with the petitioners by the trial court, were eventually absolved from any
liability by the Court of Appeals.
In holding MLO solidarily liable with Mavest U.S.A., the appellate court proceeded on the
postulate that MLO is the liaison office of Mavest U.S.A and the extension office of both Mavest U.S.A.
and MILC.
As it were, Mavest U.S.A. appears to have constituted MLO as its representative and its fully
subsidized extension office in the Philippines. As such, MLO can be charged for the liabilities incurred
by Mavest U.S.A. in the country. And if MLO can be so charged, there is no rhyme nor reason why it
cannot be adjudged, as did the appellate court, as solidarily liable with head office, Mavest U.S.A.


PAMPLONA PLANTATION COMPANY, INC. vs. RODEL TINGHIL
PANGANIBAN, J.:
FACTS
To protect the rights of labor, two corporations with identical directors, management, office and
payroll should be treated as one entity only. A suit by the employees against one corporation should be
deemed as a suit against the other. Also, the rights and claims of workers should not be prejudiced by
the acts of the employer that tend to confuse them about its corporate identity. The corporate fiction
must yield to truth and justice.
Sometime in 1993, [Petitioner] Pamplona Plantations Company, Inc. (company for brevity) was
organized for the purpose of taking over the operations of the coconut and sugar plantation of Hacienda
Pamplona located in Pamplona, Negros Oriental. It appears that Hacienda Pamplona was formerly
owned by a certain Mr. Bower who had in his employ several agricultural workers.
When the company took over the operation of Hacienda Pamplona in 1993, it did not absorb all the
workers of Hacienda Pamplona. Some, however, were hired by the company during harvest season as
coconut hookers or sakador, coconut filers, coconut haulers, coconut scoopers or lugiteros, and
charcoal makers.
Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose of
Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose of
engaging in the business of operating tourist resorts, hotels, and inns, with complementary facilities, such
as restaurants, bars, boutiques, service shops, entertainment, golf courses, tennis courts, and other land
and aquatic sports and leisure facilities.
On 15 December 1996, the Pamplona Plantation Labor Independent Union (PAPLIU) conducted an
organizational meeting wherein several [respondents] who are either union members or officers
participated in said meeting.
Upon learning that some of the [respondents] attended the said meeting, [Petitioner] Jose Luis Bondoc,
manager of the company, did not allow [respondents] to work anymore in the plantation.
Thereafter, on various dates, [respondents] filed their respective complaints with the NLRC, Sub-
Regional Arbitration Branch No. VII, Dumaguete City against [petitioners] for unfair labor practice, Regional Arbitration Branch No. VII, Dumaguete City against [petitioners] for unfair labor practice,
illegal dismissal, underpayment, overtime pay, premium pay for rest day and holidays, service incentive
leave pay, damages, attorneys fees and 13
th
month pay.
On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead Pamplona
Plantation Leisure Corporation x x x.
[Petitioners] appealed the Labor Arbiters decision to [the] NLRC. In the assailed decision dated 19
July 2000, the NLRCs Fourth Division reversed the Labor Arbiter, ruling that [respondents], except
Carlito Tinghil, failed to implead Pamplona Plantation Leisure Corporation, an indispensable party and
that there exist no employer-employee relation between the parties.

ISSUE
Whether the case should be dismissed for the non-joinder of the Pamplona Plantation Leisure
Corporation

HELD
Piercing the Corporate Veil
Petitioners contend that the CA should have dismissed the case for the failure of respondents (except
Carlito Tinghil) to implead the Pamplona Plantation Leisure Corporation, an indispensable party, for
being the true and real employer. Allegedly, respondents admitted in their Affidavits dated February 3,
1998, that they had been employed by the leisure corporation and/or engaged to perform activities that
pertained to its business.
Further, as the NLRC allegedly noted in their individual Complaints, respondents specifically
averred that they had worked in the golf course and performed related jobs in the recreational
facilities of the leisure corporation. Hence, petitioners claim that, as a sugar and coconut plantation
company separate and distinct from the Pamplona Plantation Leisure Corporation, the petitioner- company separate and distinct from the Pamplona Plantation Leisure Corporation, the petitioner-
company is not the real party in interest.
We are not persuaded.
An examination of the facts reveals that, for both the coconut plantation and the golf course, there is
only one management which the laborers deal with regarding their work. A portion of the plantation (also
called Hacienda Pamplona) had actually been converted into a golf course and other recreational
facilities. The weekly payrolls issued by petitioner-company bore the name Pamplona Plantation Co.,
Inc. It is also a fact that respondents all received their pay from the same person, Petitioner Bondoc --
the managing director of the company. Since the workers were working for a firm known as Pamplona
Plantation Co., Inc., the reason they sued their employer through that name was natural and
understandable.
True, the Petitioner Pamplona Plantation Co., Inc., and the Pamplona Plantation Leisure Corporation
appear to be separate corporate entities. But it is settled that this fiction of law cannot be invoked to
further an end subversive of justice.
The principle requiring the piercing of the corporate veil mandates courts to see through the
protective shroud that distinguishes one corporation from a seemingly separate one. The corporate mask
protective shroud that distinguishes one corporation from a seemingly separate one. The corporate mask
may be removed and the corporate veil pierced when a corporation is the mere alter ego of
another. Where badges of fraud exist, where public convenience is defeated, where a wrong is sought to
be justified thereby, or where a separate corporate identity is used to evade financial obligations to
employees or to third parties, the notion of separate legal entity should be set asideand the factual truth
upheld. When that happens, the corporate character is not necessarily abrogated. It continues for other
legitimate objectives. However, it may be pierced in any of the instances cited in order to promote
substantial justice.
In the present case, the corporations have basically the same incorporators and directors and are
headed by the same official. Both use only one office and one payroll and are under one management.
In their individual Affidavits, respondents allege that they worked under the supervision and control of
Petitioner Bondoc -- the common managing director of both the petitioner-company and the leisure
corporation. Some of the laborers of the plantation also work in the golf course. Thus, the attempt to
make the two corporations appear as two separate entities, insofar as the workers are concerned, should
be viewed as a devious but obvious means to defeat the ends of the law. Such a ploy should not be be viewed as a devious but obvious means to defeat the ends of the law. Such a ploy should not be
permitted to cloud the truth and perpetrate an injustice.

TIMES TRANSPORTATION COMPANY, INC., vs. SANTOS SOTELO
YNARES-SANTIAGO, J.:

FACTS
Petitioner Times Transportation Company, Inc. (Times) is a corporation engaged in the business of
land transportation. Prior to its closure in 1997, the Times Employees Union (TEU) was formed and
issued a certificate of union registration. Times challenged the legitimacy of TEU by filing a petition for
the cancellation of its union registration.
On March 3, 1997, TEU held a strike in response to Times alleged attempt to form a rival union and
its dismissal of the employees identified to be active union members. Upon petition by Times, then
Labor Secretary, and now Associate Justice of this Court, Leonardo A. Quisumbing, assumed jurisdiction
over the case and referred the matter to the NLRC for compulsory arbitration. A return-to-work order
was likewise issued on March 10, 1997.
In a certification election held on July 1, 1997, TEU was certified as the sole and exclusive collective
bargaining agent in Times. Consequently, TEUs president wrote the management of Times and
requested for collective bargaining. Times refused on the ground that the decision of the Med-Arbiter
upholding the validity of the certification election was not yet final and executory.
TEU filed a Notice of Strike on August 8, 1997. Another conciliation/mediation proceeding was
conducted for the purpose of settling the brewing dispute. In the meantime, Times management
implemented a retrenchment program and notices of retrenchment dated September 16, 1997 were sent to
some of its employees, including the respondents herein, informing them of their retrenchment effective
30 days thereafter.
On October 17, 1997, TEU held a strike vote on grounds of unfair labor practice on the part of On October 17, 1997, TEU held a strike vote on grounds of unfair labor practice on the part of
Times. For alleged participation in what it deemed was an illegal strike, Times terminated all the 123
striking employees by virtue of two notices dated October 26, 1997 and November 24, 1997.
[3]
On
November 17, 1997, then DOLE Secretary Quisumbing issued the second return-to-work order certifying
the dispute to the NLRC. While the strike was ended, the employees were no longer admitted back to
work.
In the meantime, by December 12, 1997, Mencorp Transport Systems, Inc. (Mencorp) had acquired
ownership over Times Certificates of Public Convenience and a number of its bus units by virtue of
several deeds of sale. Mencorp is controlled and operated by Mrs. Virginia Mendoza, daughter of
Santiago Rondaris, the majority stockholder of Times.

ISSUE
Whether or not it is proper to make the new owners liable in this regard

HELD
On the propriety of the piercing of the corporate veil, Times claims that to drag Mencorp, [Spouses]
Mendoza and Rondaris into the picture on the purported ground that a fictitious sale of Times assets in
their favor was consummated with the end in view of frustrating the ends of justice and for purposes of
evading compliance with the judgment is the height of judicial arrogance. The Court of Appeals
believes otherwise and reckons that Times and Mencorp failed to adduce evidence to refute allegations of
collusion between them.
We have held that piercing the corporate veil is warranted only in cases when the separate legal
entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the
case of two corporations, the law will regard the corporations as merged into one. It may be allowed only
if the following elements concur: (1) controlnot mere stock control, but complete dominationnot
only of finances, but of policy and business practice in respect to the transaction attacked; (2) such only of finances, but of policy and business practice in respect to the transaction attacked; (2) such
control must have been used to commit a fraud or a wrong to perpetuate the violation of a statutory or
other positive legal duty, or a dishonest and an unjust act in contravention of a legal right; and (3) the
said control and breach of duty must have proximately caused the injury or unjust loss complained of.
[28]
The following findings of the Labor Arbiter, which were cited and affirmed by the Court of Appeals,
have not been refuted by Times, to wit:
1. The sale was transferred to a corporation controlled by V. Mendoza, the daughter of respondent
S. Rondaris of [Times] where she is/was also a director, as proven by the articles of incorporation
of [Mencorp];
2. All of the stockholders/incorporators of [Mencorp]: Reynaldo M. Mendoza, Virginia R.
Mendoza, Vernon Gerard R. Mendoza, Vivian Charity R. Mendoza, Vevey Rosario R. Mendoza
are all relatives of respondent S. Rondaris;
3. The timing of the sale evidently was to negate the employees/complainants/members right to
organization as it was effected when their union (TEU) was just organized/requesting [Times] to
bargain;

5. [Mencorp] never obtained a franchise since its supposed incorporation in 10 May 1994 but at
present, all the buses of [Times] are already being run/operated by respondent [Mencorp], the
franchise of [Times] having been transferred to it.
[29]
We uphold the findings of the labor arbiter and the Court of Appeals. The sale of Times franchise
as well as most of its bus units to a company owned by Rondaris daughter and family members, right in
the middle of a labor dispute, is highly suspicious. It is evident that the transaction was made in order to
remove Times remaining assets from the reach of any judgment that may be rendered in the unfair labor
practice cases filed against it.



APEX MINING CO., INC. v. SOUTHEAST MINDANAO GOLD MINING CORP.
G.R. No. 152613 & No. 152628, 23 June 2006, FIRST DIVISION (Chico-Nazario, J.)

The doctrine of piercing the corporate veil cannot be used as a vehicle to commit prohibited acts
because these acts as the one which the doctrine seeks to prevent.

Banad and his group, who claimed to be the first to have discovered traces of gold in Mt Diwata filed a
Declaration of Location (DOL). They organized Balite. Apex entered into operating agreements with the
Banad group. Certain individuals, as well, applied for mining locations. MMC filed 16 DOLs for
mineral lands adjacent to that of the Banad Group but later abandoned the same because it covers forest
reserves. It instead applied for prospecting permit with BFA. The latter issued it and the permit
embraced the areas claims by Apex and other claimants.
MMC filed an Exploration Permit Application with BMG and was issued one. MMC thus filed a
Petition for Cancellation of Mining Claims of Apex and Small Lease Mining Permit. Apex filed a
motion to dismiss the petition. It was granted. DENR, on appeal, reversed the ruling. Apex appealed to
the OP. The latter affirmed DENRs ruling.
MMC assigned to SEM, a domestic corporation which is alleged to be a 100% owned subsidiary of
MMC EP 133. SEM then filed an MPSA application for the EP 133. It was denied.

ISSUE:
Whether or not the doctrine of piercing the corporate veil can be invoked to legitimize the prohibited
transfer or assignment of EP 133 transfer or assignment of EP 133

HELD:
Where the terms of a mining claim prohibit the assignment thereof except in favor of an agent and the
corporation, as holder of the mining claim, transferred its right to a wholly-owned subsidiary, the
separate legal personality of the subsidiary can not be pierced so that the latter shall be considered a
mere conduit or agent of the parent company to legitimize the prohibited transfer. The doctrine of
piercing the corporate veil cannot be used as a vehicle to commit prohibited acts because these acts as
the one which the doctrine seeks to prevent. To allow the subsidiary to avail itself of this doctrine and to
approve the validity of the assignment is tantamount to sanctioning illegal act which is what the doctrine
precisely seeks to forestall.

GCC v. ALSONS DEVELOPMENT AND INVESTMENT CORPORATION
G.R. No. 154975, 29 January 2007, FIRST DIVISION (Garcia, J.)

GCC established CCC Franchise companies in different urban centers of the country. In furtherance of
its business, it applied for and was granted license from CB and SEC to engage also in quasi banking
activities.
CCC-Equity was organized by GCC to take over the operations and management of the various
franchise companies. The Alsons and The Alcantara Family, each owned just like GCC, shares to CCC-
Equity. The latter issued P/N. Four years later, the Alcantaras assigned its rights and interest in the P/N
to Alsons. The latter having failed to collect from CCC-Equity, filed a complaint for sum of money
against CCC-Equity and GCC. The latter answered that it is a separate and distinct entity from CCC-
Equity.

ISSUE:
Whether there is absolutely no basis for piercing GCCs veil of corporate identity

HELD:
Commonality of directors, officers and stockholders and even sharing of office between GCC and
EQUITY; certain financing and management arrangements between the two, allowing GCC to handle
the funds of the latter; virtual domination if not control wielded by GCC over the finances, business
policies and practices of EQUITY; and the establishment of EQUITY by GCC to circumvent CB rules
are circumstances which justify the conclusion that Equity is just an instrumentality of GCC. Thus,
Alsons could enforce payment of the promissory note of Equity even against GCC.
STA. MONICA INDUSTRIAL AND DEVELOPMENT CORPORATION v. THE
DEPARTMENT OF AGRARIAN REFORM REGIONAL DIRECTOR FOR REGION III, et. al.
G.R. No. 164846, 18 June 2008, THIRD DIVISION (Reyes, R.T., J.)

Considering that Trinidad remained to be the true and legal owner of the agricultural land, there
is no need for another notice of coverage to be sent or furnished to Sta. Monica. At the very least, the
notice to her is already notice to Sta. Monica because the corporation acted as a mere conduit of
Trinidad.
Trinidad is the owner of five parcels of land with a total area of 4.69 hectares in Calumpit,
Bulacan. Private respondent Basilio De Guzman is the agricultural leasehold tenant of Trinidad. A
leasehold contract was executed between Trinidad and De Guzman.

As an agricultural leasehold tenant,
De Guzman was issued Certificates of Land Transfer. Desiring to have an emancipation patent over the De Guzman was issued Certificates of Land Transfer. Desiring to have an emancipation patent over the
land under his tillage, De Guzman filed a petition for the issuance of patent in his name with the Office
of the Regional Director of the DAR. DAR duly sent notices to Trinidad requiring her to comment.
Instead of complying, Trinidad filed a motion for bill of particulars. After due proceedings, the Regional
Director issued the Order granting the petition of De Guzman. Trinidad filed a motion for
reconsideration but her motion was denied.
A year later, petitioner Sta. Monica filed a petition for certiorari and prohibition with the CA
assailing the order of the Regional Director. Sta. Monica claimed that a portion of the Trinidad
landholding was sold to it. Sta. Monica asserted that there was a denial of due process of law because it
was not furnished a notice of coverage under the CARP law. De Guzman argued that the alleged sale of
the landholding is illegal due to the lack of requisite clearance from the DAR. The said clearance is
required under P.D. No. 27, the Tenant Emancipation Decree, which prohibits transfer of covered lands
except to tenant-beneficiaries.
CA dismissed Sta. Monicas petition to annul the DAR Order, holding that Sta. Monica is not a
real party-in-interest because it cannot be considered as an owner of the land it bought from Trinidad.
CA added that even assuming that Sta. Monica is a real party-in-interest, it was not denied due process
because it had constructive notice of the proceeding which involved its property, due to the fact
Asuncion Trinidad is the treasurer of petitioner, based on the corporations General Information Sheet.
While it cannot be said that there was proper notice to the corporation, being a corporate officer of the
petitioner, there was at least constructive notice of the fact that there was a proceeding which involved
the property of the corporation of which it may be deprived should an adverse decision be rendered by
the DAR.

ISSUE:
Whether Sta. Monica was denied due process for not receiving a notice of coverage from DAR

HELD: CA Decision AFFIRMED.
First, the sale to Sta. Monica is prohibited. P.D. No. 27, as amended, forbids the transfer or
alienation of covered agricultural lands after October 21, 1972 except to the tenant-beneficiary. The
agricultural land awarded to De Guzman is covered by P.D. No. 27. He was awarded a certificate of land
transfer in July 22, 1981. The sale to Sta. Monica in 1986 is void for being contrary to law. Trinidad
transfer in July 22, 1981. The sale to Sta. Monica in 1986 is void for being contrary to law. Trinidad
remained the owner of the agricultural land.
Second, buyer Sta. Monica is owned and controlled by Trinidad and her family. Records show
that Trinidad, her husband and two sons own more than 98% of the outstanding capital stock of Sta.
Monica. They are all officers of the corporation. There are only two non-related incorporators who own
less than one percent of the outstanding capital stock of Sta. Monica and who are not officers of the
corporation.
To be sure, Trinidad and her family exercise absolute control of the corporate affairs of Sta.
Monica. As owners of 98% of the outstanding capital stock, they are the beneficial owners of all the
assets of the company, including the agricultural land sold by Trinidad to Sta. Monica.
Third, Trinidad and her counsel failed to notify the DAR of the prior sale to Sta. Monica during
the administrative proceedings. Worse, Trinidad feigned ignorance of the sale by filing a motion for bill
of particulars seeking specifics from De Guzman of her alleged landholdings which are subject of his
petition with the DAR.
It is highly unusual and unbelievable for her not to know, or at least be aware, of the sale to Sta.
Monica. She herself signed the deed of sale as seller. She is also a stockholder and officer of Sta.
Monica. More importantly, she cannot feign ignorance of De Guzmans claim because he was her
agricultural tenant since the 1970s. She knows, or at least ought to know, that the subject matter of the
petition with the DAR was her own landholding, which she sold to Sta. Monica in direct violation of
P.D. No. 27.
The apparent lack of candor is heightened by the fact that both Trinidad and Sta. Monica are
represented by the same counsel, Atty. Ramon Gutierrez. We cannot stretch Our credulity on how
Trinidad filed a motion for bill of particulars with the DAR seeking specifics on the sale to Sta. Monica
when she herself signed for the vendor as a party to the transaction.
Fourth, it was only after an adverse decision against Trinidad that Sta. Monica suddenly filed a Fourth, it was only after an adverse decision against Trinidad that Sta. Monica suddenly filed a
petition for certiorari with the CA questioning the lack of notice of coverage under the CARP law. It is
highly unlikely that Sta. Monica, an artificial being acting only through its duly authorized
representatives, was not sufficiently informed or had no constructive knowledge of the DAR
proceedings.
Fifth, the ultimate factor that betrays Trinidad and Sta. Monica is the continued payment of lease
rentals by De Guzman. Records show that De Guzman paid and continued to pay lease rentals to
Trinidad even after she sold the land to Sta. Monica. The receipt dated May 30, 2002 discloses that De
Guzman paid 40 cavans of palay to Clodinaldo dela Cruz, the authorized representative of Trinidad, as
lease rentals for the agricultural land.
All these circumstances indicate that Trinidad has remained as the real owner of the agricultural
land sold to Sta. Monica. The sale to Sta. Monica is not valid because it is prohibited under P.D. No. 27.
More importantly, it must be deemed as a mere ploy to evade the applicable provisions of the agrarian
law.
It is a fiat that the corporate vehicle cannot be used as a shield to protect fraud or justify wrong.
Thus, the veil of corporate fiction will be pierced when it is used to defeat public convenience and
subvert public policy.
Considering that Trinidad remained to be the true and legal owner of the agricultural land, there
is no need for another notice of coverage to be sent or furnished to Sta. Monica. At the very least, the
notice to her is already notice to Sta. Monica because the corporation acted as a mere conduit of
Trinidad. The CA correctly dismissed the petition of Sta. Monica to annul the orders of the Regional
Director placing the agricultural land of Trinidad under the agrarian reform law.
SPS. PEDRO AND FLORENCIA VIOLAGO v. BA FINANCE CORPORATION and AVELINO
VIOLAGO
G.R. No. 158262, 21 July 2008, SECOND DIVISION (Velasco, Jr., J.)

The test in determining the applicability of the
The test in determining the applicability of the The test in determining the applicability of the
doctrine of piercing the veil of corporate fiction is as
follows:
1. Control, not mere majority or complete stock
control, but complete domination, not only of finances but
of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its
own;
2. Such control must have been used by the defendant
to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and
unjust acts in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained
of.

Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to
his cousin, Pedro F. Violago, and the latters wife, Florencia. Avelino explained that he needed to sell a
vehicle to increase the sales quota of VMSC, and that the spouses would just have to pay a down
payment of P60,500 while the balance would be financed by respondent BA Finance. The spouses payment of P60,500 while the balance would be financed by respondent BA Finance. The spouses
would pay the monthly installments to BA Finance while Avelino would take care of the documentation
and approval of financing of the car. Under these terms, the spouses then agreed to purchase a Toyota
Cressida Model 1983 from VMSC. The spouses and Avelino signed a promissory note under which they
bound themselves to pay jointly and severally to the order of VMSC the amount of P209,601 in 36
monthly installments of P5,822.25 a month. VMSC then issued a sales invoice in favor of the spouses.
In turn, the spouses executed a chattel mortgage over the car in favor of VMSC as security for the
remaining balance. VMSC, through Avelino, endorsed the promissory note to BA Finance. After
receiving the amount of P209,601, VMSC executed a Deed of Assignment of its rights and interests
under the promissory note and chattel mortgage in favor of BA Finance. The sales invoice was filed with
the Land Transportation Office in Baliwag, which issued a Certificate of Registration in the name of
Pedro. The spouses were unaware that the same car had already been sold previously to Esmeraldo
Violago, another cousin of Avelino, and registered in Esmeraldos name by the LTO in San Rafael.
Despite the spouses demand for the car and Avelinos repeated assurances, there was no delivery of the
vehicle. Since VMSC failed to deliver the car, Pedro did not pay any monthly amortization to BA
Finance.
BA Finance filed with the RTC a complaint for Replevin with Damages against the spouses. The
RTC issued an Order of Replevin. Eventually, the RTC rendered a decision in favor of BA Finance. A
writ of execution was thereafter issued. The spouses Violago filed a motion for reconsideration and
motion to quash writ of execution. The RTC denied the motions; CA, acting on a petition for certiorari
filed by the spouses under Rule 65, nullified the RTCs order.
The spouses then filed their Answer before the RTC, alleging the following: they never received
the vehicle from VMSC; the vehicle was previously sold to Esmeraldo; and the recourse of BA Finance
should be against VMSC. The Violago spouses, with prior leave of court, filed a Third Party Complaint
against Avelino praying that he be held liable to them in the event that they be held liable to BA
Finance. VMSC was not impleaded as third party defendant. Avelino contended that he was not a party
to the transaction personally, but VMSC. Avelinos motion was denied and the third party complaint
to the transaction personally, but VMSC. Avelinos motion was denied and the third party complaint
against him was entertained by the trial court. The RTC rendered a Decision finding for BA Finance.
The RTC, however, declared that they are entitled to be indemnified by Avelino. On appeal, the CA set
aside the trial courts order holding Avelino liable for damages to the spouses, without prejudice to the aside the trial courts order holding Avelino liable for damages to the spouses, without prejudice to the
action of the spouses against VMSC and Avelino in a separate action.

ISSUE:
Whether the veil of corporate entity may be pierced considering the fraud and deception of Avelino

HELD: RTC Decision REINSTATED and AFFIRMED.
xxx The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as
follows:
1. Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or dishonest and unjust acts in
contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
This case meets the foregoing test. VMSC is a family-owned corporation of which Avelino was
president. Avelino committed fraud in selling the vehicle to petitioners, a vehicle that was previously
sold to Avelinos other cousin, Esmeraldo. Nowhere in the pleadings did Avelino refute the fact that the
vehicle in this case was already previously sold to Esmeraldo; he merely insisted that he cannot be held
liable because he was not a party to the transaction. The fact that Avelino and Pedro are cousins, and
that Avelino claimed to have a need to increase the sales quota, was likely among the factors which
motivated the spouses to buy the car. Avelino, knowing fully well that the vehicle was already sold, and
with abuse of his relationship with the spouses, still proceeded with the sale and collected the down with abuse of his relationship with the spouses, still proceeded with the sale and collected the down
payment from petitioners. The trial court found that the vehicle was not delivered to the spouses.
Avelino clearly defrauded petitioners. His actions were the proximate cause of petitioners loss. He
cannot now hide behind the separate corporate personality of VMSC to escape from liability for the
amount adjudged by the trial court in favor of petitioners.
The fact that VMSC was not included as defendant in petitioners third party complaint does not
preclude recovery by petitioners from Avelino; neither would such non-inclusion constitute a bar to the
application of the piercing-of-the-corporate-veil doctrine.


CLAUDE P. BAUTISTA v. AUTO PLUS TRADERS, INCORPORATED
G.R. No. 166405, 6 August 2008, SECOND DIVISION (Quisumbing, J.)

Generally, the stockholders and officers are not personally liable for the obligations of the
corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or
illegality, or to work injustice.

These situations, however, do not exist in this case.
Petitioner Claude P. Bautista, in his capacity as President and Presiding Officer of Cruiser Bus
Lines and Transport Corporation, purchased various spare parts from private respondent Auto Plus
Traders, Inc. and issued two postdated checks to cover his purchases. The checks were subsequently
Traders, Inc. and issued two postdated checks to cover his purchases. The checks were subsequently
dishonored. Auto Plus then executed an affidavit-complaint for violation of Batas Pambansa Blg.
22 against Bautista. Consequently, two Informations for violation of BP Blg. 22 were filed with the
Municipal Trial Court in Cities (MTCC) of Davao City against Bautista.
Bautista pleaded not guilty. Trial on the merits ensued. After the presentation of the prosecution's
evidence, Bautista filed a demurrer to evidence. The MTCC granted the demurrer and ordered Cruiser
Bus Line[s] and Transport Corporation, through the accused, to pay Auto Plus. Bautista moved for Bus Line[s] and Transport Corporation, through the accused, to pay Auto Plus. Bautista moved for
partial reconsideration but his motion was denied. Thereafter, both parties appealed to the RTC. The
RTC modified the MTCC decision, ordering Bautista directly to pay and/or reimburse Auto Plus until
the account is paid in full. Bautista moved for reconsideration, but his motion was denied. Bautista
elevated the case to the CA, which affirmed the RTC. Hence, this petition.
Bautista asserts that BP Blg. 22 merely pertains to the criminal liability of the accused and that
the corporation, which has a separate personality from its officers, is solely liable for the value of the
two checks. Auto Plus counters that Bautista should be held personally liable for both checks for issuing
the two postdated checks: a personal check in his name for the amount of P151,200 and a corporation
check under the account of Cruiser Bus Lines and Transport Corporation for the amount of P97,500.
Auto Plus contends that Bautista, by issuing his check to cover the obligation of the corporation, became
an accommodation party.

ISSUE:
Whether Bautista, as an officer of the corporation, is personally and civilly liable to Auto Plus for the
value of the two checks

HELD: Petition GRANTED.
At the outset, we note that Auto Plus' allegation that Bautista issued a personal check disputes
the factual findings of the MTCC. The MTCC found that the two checks belong to Cruiser Bus Lines
and Transport Corporation while the RTC found that one of the checks was a personal check of the
petitioner.
A perusal of the two check return slips in conjunction with the Current Account
Statements would show that the check for P151,200 was drawn against the current account of Claude
Bautista while the check for P97,500 was drawn against the current account of Cruiser Bus Lines and
Transport Corporation. Hence, we sustain the factual finding of the RTC.
Nonetheless, we find the appellate court in error for affirming the decision of the RTC holding Nonetheless, we find the appellate court in error for affirming the decision of the RTC holding
petitioner liable for the value of the checks considering that petitioner was acquitted of the crime
charged and that the debts are clearly corporate debts for which only Cruiser Bus Lines and Transport
Corporation should be held liable.
Juridical entities have personalities separate and distinct from its officers and the persons
composing it. Generally, the stockholders and officers are not personally liable for the obligations of the
corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or
illegality, or to work injustice.

These situations, however, do not exist in this case. The evidence shows
that it is Cruiser Bus Lines and Transport Corporation that has obligations to Auto Plus Traders, Inc. for
tires. There is no agreement that petitioner shall be held liable for the corporation's obligations in his
personal capacity. Hence, he cannot be held liable for the value of the two checks issued in payment for
the corporation's obligation in the total amount of P248,700.
Likewise, contrary to Auto Plus' contentions, Bautista cannot be considered liable as an
accommodation party xxx. An accommodation party lends his name to enable the accommodated party
to obtain credit or to raise money; he receives no part of the consideration for the instrument but
assumes liability to the other party/ies thereto. xxx All that the evidence shows is that petitioner signed
Check No. 58832, which is drawn against his personal account. The said check, dated December 15,
2000, corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and Transport
Corporation on August 29, 2000. There is no showing of when petitioner issued the check and in what
capacity. In the absence of concrete evidence it cannot just be assumed that petitioner intended to lend
capacity. In the absence of concrete evidence it cannot just be assumed that petitioner intended to lend
his name to the corporation. Hence, petitioner cannot be considered as an accommodation party.
Cruiser Bus Lines and Transport Corporation, however, remains liable for the checks especially
since there is no evidence that the debts covered by the subject checks have been paid.
SIAIN ENTERPRISES, INC., Petitioner, v. CUPERTINO REALTY CORP. and EDWIN R.
CATACUTAN, Respondents.
NACHURA, J.

Petitioner Siain is engaged in the manufacturing and retailing/wholesaling business. On the other Petitioner Siain is engaged in the manufacturing and retailing/wholesaling business. On the other
hand, Cupertino is engaged in the realty business. Petitioner executed a Real Estate Mortgage over its
real properties in favor of Cupertino to secure the formers loan obligation to the latter. Both executed an
amendment of Real Estate Mortgage increasing the total loan covered by the aforesaid REM. This
amendment to REM was executed preparatory to the promised release by Cupertino of additional loan
proceeds to petitioner in. However, Cupertino failed to release the said additional amount contrary to its
promise.
When petitioner tendered payment of the remaining balance of the loan subject of the REM in order to
discharge the same, Cupertino refused acceptance and instead sought for the extrajudicial sale of the
mortgage properties.
After trial, the RTC dismissed petitioners complaint and declared the foreclosure of the mortgaged
properties as valid. On appeal, the CA affirmed the RTCs ruling. Hence, this petition.

ISSUE:
Whether the lower courts erroneously applied the doctrine of piercing the veil of corporate fiction
when both gave credence to Cupertinos evidence showing that petitioners affiliates were the previous
recipients of part of the indebtedness of petitioner to Cupertino.

HELD: The petition is DENIED.
As a general rule, a corporation will be deemed a separate legal entity until sufficient reason to the
contrary appears. But the rule is not absolute. A corporations separate and distinct legal personality may
be disregarded and the veil of corporate fiction pierced when the notion of legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime.
In this case, Cupertino presented overwhelming evidence that petitioner and its affiliate corporations had
received the proceeds of the loan increase which was then made the consideration for the Amended Real
Estate Mortgage. We quote with favor the RTCs and the CAs disquisitions on this matter: Estate Mortgage. We quote with favor the RTCs and the CAs disquisitions on this matter:

That the checks, debit memos and the pledges of the
jewelries, condominium units and trucks were constituted
not exclusively in the name of [petitioner] but also either in
the name of Yuyek Manufacturing Corporation, Siain
Transport, Inc., Cua Le Leng and Alberto Lim is of no
moment. For the facts established in the case at bar has
convinced the Court of the propriety to apply the principle
known as piercing the veil of the corporate entity by
virtue of which, the juridical personalities of the various
corporations involved are disregarded and the ensuing
corporations involved are disregarded and the ensuing
liability of the corporation to attach directly to its
responsible officers and stockholders. x x x
x x x x
The conjunction of the identity of the [petitioner]
corporation in relation to Siain Transport, Inc. (Siain
Transport), Yuyek Manufacturing Corp. (Yuyek), as well
as the individual personalities of Cua Le Leng and Alberto
Lim has been indubitably shown in the instant case by the Lim has been indubitably shown in the instant case by the
following established considerations, to wit:

Siain and Yuyek have [a] common set of
[incorporators], stockholders and board
of directors;
They have the same internal bookkeeper
and accountant in the person of
Rosemarie Ragodon;
They have the same office address at 306
Jose Rizal St., Mandaluyong City;
They have the same majority stockholder
and president in the person of Cua Le
Leng; and
In relation to Siain Transport, Cua Le
Leng had the unlimited authority by and
on herself, without authority from the
Board of Directors, to use the funds of
Siain Trucking to pay the obligation
incurred by the [petitioner] corporation.
1.
2.
3.
4.
5.
incurred by the [petitioner] corporation.

Thus, it is crystal clear that [petitioner]
corporation, Yuyek and Siain Transport are
characterized by oneness of operations vested in
the person of their common president, Cua Le
Leng, and unity in the keeping and
maintenance of their corporate books and
records through their common accountant and
records through their common accountant and
bookkeeper, Rosemarie Ragodon. Consequently,
these corporations are proven to be the mere
alter-ego of their president Cua Le Leng, and
considering that Cua Le Leng and Alberto Lim
have been living together as common law
spouses with three children, this Court believes
that while Alberto Lim does not appear to be an
officer of Siain and Yuyek, nonetheless, his
receipt of certain checks and debit memos from
Willie Lua and Victoria Lua was actually for
the account of his common-law wife, Cua Le
Leng and her alter ego corporations. While this Leng and her alter ego corporations. While this
Court agrees with Siain that a corporation has a
personality separate and distinct from its
individual stockholders or members, this legal
fiction cannot, however, be applied to its benefit
in this case where to do so would result to
injustice and evasion of a valid obligation, for
well settled is the rule in this jurisdiction that
the veil of corporate fiction may be pierced
when it is used as a shield to further an end
subversive of justice, or for purposes that could
not have been intended by the law that created
it; or to justify wrong, or for evasion of an
existing obligation. Resultantly, the obligation
incurred and/or the transactions entered into
either by Yuyek, or by Siain Trucking, or by
Cua Le Leng, or by Alberto Lim
with Cupertino are deemed to be that of the
[petitioner] itself.

The same principle equally applies to Cupertino.
Thus, while it appears that the issuance of the checks and
the debit memos as well as the pledges of the condominium
units, the jewelries, and the trucks had occurred prior to
March 2, 1995, the date when Cupertino was incorporated,
the same does not affect the validity of the subject
the same does not affect the validity of the subject
transactions because applying again the principle of
piercing the corporate veil, the transactions entered into by
Cupertino Realty Corporation, it being merely the alter ego
of Wilfredo Lua, are deemed to be the latters personal
transactions and vice-versa.
x x x x
x x x Firstly. As can be viewed from the extant record of
the instant case, Cua Le Leng is the majority stockholder of
the three (3) corporations namely, Yuyek Manufacturing
Corporation, Siain Transport, Inc., and Siain Enterprises
Inc., at the same time the President thereof. Second. Being
the majority stockholder and the president, Cua Le Leng
has the unlimited power, control and authority without the
approval from the board of directors to obtain for and in approval from the board of directors to obtain for and in
behalf of the [petitioner] corporation from [Cupertino]
thereby mortgaging her jewelries, the condominiums of her
common law husband, Alberto Lim, the trucks registered in
the name of [petitioner] corporations sister company, Siain
Transport Inc., the subject lots registered in the name of
[petitioner] corporation and her oil mill property at Iloilo
City. And, to apply the proceeds thereof in whatever way
she wants, to the prejudice of the public.
As such, [petitioner] corporation is now estopped
from denying the above apparent authorities of Cua Le
Leng who holds herself to the public as possessing the
power to do those acts, against any person who dealt in
good faith as in the case of Cupertino.

















D. GOVERNMENT CORPORATION
RAMON A. GONZALES, petitioner, v. THE PHILIPPINE NATIONAL BANK, respondent.
VASQUEZ, J.

Petitioner addressed a letter to the President of the Bank, requesting submission to look into the records
of its transactions covering the purchase of a sugar central by the Southern Negros Development Corp.
to be financed by Japanese suppliers and financiers; its financing of the Cebu-Mactan Bridge to be
constructed by V.C. Ponce, Inc. and the construction of the Passi Sugar Mills in Iloilo. The Asst. Vice-
President and Legal Counsel of the Bank answered petitioner's letter denying his request for being not
germane to his interest as a one-share stockholder and for the cloud of doubt as to his real intention and
purpose in acquiring said share.
In view of the Bank's refusal the petitioner instituted this action.
The court a quo denied the prayer of the petitioner on the grounds that the right of a stockholder to
inspect the record of the business transactions of a corporation granted under Section 51 of the former
Corporation Law is not absolute, but is limited to purposes reasonably related to the interest of the
stockholder, must be asked for in good faith for a specific and honest purpose and not gratify curiosity
or for speculative or vicious purposes; that such examination would violate the confidentiality of the
records of the respondent bank as provided in Section 16 of its charter, Republic Act No. 1300, as
amended; and that the petitioner has not exhausted his administrative remedies. Hence, this petition.

ISSUE:
Whether petitioners alleged improper motive in asking for an examination of the books and records of
the respondent bank disqualifies him to exercise the right of a stockholder to such inspection under
Section 51 of Act No. 1459, as amended.

HELD: The petition is DISMISSED.
Petitioner may no longer insist on his interpretation of Section 51 of Act No. 1459, as amended,
regarding the right of a stockholder to inspect and examine the books and records of a corporation. The
former Corporation Law (Act No. 1459, as amended) has been replaced by Batas Pambansa Blg. 68, former Corporation Law (Act No. 1459, as amended) has been replaced by Batas Pambansa Blg. 68,
otherwise known as the "Corporation Code of the Philippines."
The right of inspection granted to a stockholder under Section 51 of Act No. 1459 has been retained,
but with some modifications. The second and third paragraphs of Section 74 of Batas Pambansa Blg. 68
provide the following:
The records of all business transactions of the corporation and the minutes of any meeting shall
be open to inspection by any director, trustee, stockholder or member of the corporation at
reasonable hours on business days and he may demand, in writing, for a copy of excerpts from
said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder
or member of the corporation to examine and copy excerpts from its records or minutes, in
accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder
or member for damages, and in addition, shall be guilty of an offense which shall be punishable
under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or
order of the board of directors or trustees, the liability under this section for such action shall be
imposed upon the directors or trustees who voted for such refusal; and Provided, further, That it
shall be a defense to any action under this section that the person demanding to examine and copy
excerpts from the corporation's records and minutes has improperly used any information secured
through any prior examination of the records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a legitimate purpose in making his demand.

As may be noted from the above-quoted provisions, among the changes introduced in the new Code
with respect to the right of inspection granted to a stockholder are the following the records must be kept
at the principal office of the corporation; the inspection must be made on business days; the stockholder
may demand a copy of the excerpts of the records or minutes; and the refusal to allow such inspection
shall subject the erring officer or agent of the corporation to civil and criminal liabilities. However,
while seemingly enlarging the right of inspection, the new Code has prescribed limitations to the same.
It is now expressly required as a condition for such examination that the one requesting it must not have
been guilty of using improperly any information through a prior examination, and that the person asking been guilty of using improperly any information through a prior examination, and that the person asking
for such examination must be "acting in good faith and for a legitimate purpose in making his demand."
The unqualified provision on the right of inspection previously contained in Section 51, Act No.
1459, as amended, no longer holds true under the provisions of the present law. The argument of the
petitioner that the right granted to him under Section 51 of the former Corporation Law should not be
dependent on the propriety of his motive or purpose in asking for the inspection of the books of the
respondent bank loses whatever validity it might have had before the amendment of the law. If there is
any doubt in the correctness of the ruling of the trial court that the right of inspection granted under
Section 51 of the old Corporation Law must be dependent on a showing of proper motive on the part of
the stockholder demanding the same, it is now dissipated by the clear language of the pertinent provision
contained in Section 74 of Batas Pambansa Blg. 68.
Although the petitioner has claimed that he has justifiable motives in seeking the inspection of the
books of the respondent bank, he has not set forth the reasons and the purposes for which he desires such
inspection, except to satisfy himself as to the truth of published reports regarding certain transactions
entered into by the respondent bank and to inquire into their validity. The circumstances under which he
acquired one share of stock in the respondent bank purposely to exercise the right of inspection do not
argue in favor of his good faith and proper motivation. Admittedly he sought to be a stockholder in order
to pry into transactions entered into by the respondent bank even before he became a stockholder. His
obvious purpose was to arm himself with materials which he can use against the respondent bank for
acts done by the latter when the petitioner was a total stranger to the same. He could have been impelled
by a laudable sense of civic consciousness, but it could not be said that his purpose is germane to his
interest as a stockholder.
We also find merit in the contention of the respondent bank that the inspection sought to be
exercised by the petitioner would be violative of the provisions of its charter. (Republic Act No. 1300, as
amended.) Sections 15, 16 and 30 of the said charter provide respectively as follows:
Sec. 15. Inspection by Department of Supervision and Examination of the Central Bank. The
National Bank shall be subject to inspection by the Department of Supervision and Examination
of the Central Bank'
Sec. 16. Confidential information. The Superintendent of Banks and the Auditor General, or
Sec. 16. Confidential information. The Superintendent of Banks and the Auditor General, or
other officers designated by law to inspect or investigate the condition of the National Bank, shall other officers designated by law to inspect or investigate the condition of the National Bank, shall
not reveal to any person other than the President of the Philippines, the Secretary of Finance, and
the Board of Directors the details of the inspection or investigation, nor shall they give any
information relative to the funds in its custody, its current accounts or deposits belonging to
private individuals, corporations, or any other entity, except by order of a Court of competent
jurisdiction,'
Sec. 30. Penalties for violation of the provisions of this Act. Any director, officer, employee, or
agent of the Bank, who violates or permits the violation of any of the provisions of this Act, or
any person aiding or abetting the violations of any of the provisions of this Act, shall be punished
by a fine not to exceed ten thousand pesos or by imprisonment of not more than five years, or
both such fine and imprisonment.
The Philippine National Bank is not an ordinary corporation. Having a charter of its own, it is not
governed, as a rule, by the Corporation Code of the Philippines. Section 4 of the said Code provides:
SEC. 4. Corporations created by special laws or charters. Corporations created by special
laws or charters shall be governed primarily by the provisions of the special law or charter
creating them or applicable to them. supplemented by the provisions of this Code, insofar as they
are applicable.
The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code with respect to the
right of a stockholder to demand an inspection or examination of the books of the corporation may not
be reconciled with the abovequoted provisions of the charter of the respondent bank. It is not correct to
claim, therefore, that the right of inspection under Section 74 of the new Corporation Code may apply in
a supplementary capacity to the charter of the respondent bank.
FELICIANO VS. COMMISSION ON AUDIT
G.R. no. 147402 January 14, 2004, En Banc, Carpio, (J)

FACTS:
A Special Audit Team from Commission on Audit (COA) Regional Office No. VIII audited the A Special Audit Team from Commission on Audit (COA) Regional Office No. VIII audited the
accounts of the Leyte Metropolitan Water District (LMWD). Subsequently, LMWD received a letter
from COA dated 19 July 1999 requesting payment of auditing fees. Petitioner and General Manager of
LMWD, Engr. Ranulfo C. Feliciano sent a reply dated 12 October 1999 informing Regional Director of
COA that the water district could not pay the auditing fees. He cited as basis for his action Sections 6
and 20 of PD 198, as well as Section 18 of RA 6758. The Regional Director referred the reply to the
COA Chairman on 18 October 1999. On 19 October 1999, Feliciano wrote COA through the Regional
Director asking for refund of all auditing fees LMWD previously paid to COA. On 16 March 2000,
Feliciano received COA Chairman Gangnans Resolution dated 3 January 2000 denying his request for
COA to cease all audit services, and to stop charging auditing fees, to LMWD. The COA also denied the
request for COA to refund all auditing fees previously paid by LMWD. Feliciano filed a motion for
reconsideration on 31 March 2000, which COA denied on 30 January 2001. On 13 March 2001,
Felicaino filed the petition for certiorari.

ISSUE:
Whether a Local Water District ("LWD) is a government-owned or controlled corporation

HELD:
Petitioner seeks to revive a well-settled issue. Petitioner asks for a re-examination of a doctrine
backed by a long line of cases culminating in Davao City Water District v. Civil Service
Commission and just recently reiterated in De Jesus v. Commission on Audit.

Petitioner maintains that
LWDs are not government-owned and controlled corporations with original charters. Petitioner even
LWDs are not government-owned and controlled corporations with original charters. Petitioner even
argues that LWDs are private corporations. Petitioner asks the Court to consider certain interpretations
of the applicable laws, which would give a "new perspective to the issue of the true character of water
districts.
The Constitution recognizes two classes of corporations. The first refers to private corporations The Constitution recognizes two classes of corporations. The first refers to private corporations
created under a general law. The second refers to government-owned or controlled corporations created
by special charters. Section 16, Article XII of the Constitution provides: Sec. 16. The Congress
shall not, except by general law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of economic viability.
The Constitution emphatically prohibits the creation of private corporations except by a general
law applicable to all citizens. The purpose of this constitutional provision is to ban private corporations
created by special charters, which historically gave certain individuals, families or groups special
privileges denied to other citizens. Thus, Congress cannot enact a law creating a private corporation with
a special charter. Such legislation would be unconstitutional. Private corporations may exist only under a
general law. If the corporation is private, it must necessarily exist under a general law. Stated differently,
only corporations created under a general law can qualify as private corporations. Under existing laws,
that general law is the Corporation Code, except that the Cooperative Code governs the incorporation of
cooperatives. The Constitution authorizes Congress to create government-owned or controlled
corporations through special charters. Since private corporations cannot have special charters, it follows
that Congress can create corporations with special charters only if such corporations are government-
owned or controlled.
Obviously, LWDs are not private corporations because they are not created under the
Corporation Code. LWDs are not registered with the Securities and Exchange Commission. Section 14
of the Corporation Code states that "[A]ll corporations organized under this code shall file with the
Securities and Exchange Commission articles of incorporation x x x." LWDs have no articles of
incorporation, no incorporators and no stockholders or members. There are no stockholders or members
to elect the board directors of LWDs as in the case of all corporations registered with the Securities and
Exchange Commission. The local mayor or the provincial governor appoints the directors of LWDs for a
fixed term of office. LWDs exist by virtue of PD 198, which constitutes their special charter. Since
under the Constitution only government-owned or controlled corporations may have special charters,
LWDs can validly exist only if they are government-owned or controlled. To claim that LWDs are LWDs can validly exist only if they are government-owned or controlled. To claim that LWDs are
private corporations with a special charter is to admit that their existence is constitutionally infirm.
Unlike private corporations, which derive their legal existence and power from the Corporation Code,
LWDs derive their legal existence and power from PD 198.


















E. INCORPORATIONMARIANO A. ALBERT vs. UNIVERSITY PUBLISHING
CO., INC.
G.R. No. L-19118, January 30, 1965, En Banc, BENGZON, J.P., J.:

FACTS:
Mariano A. Albert sued University Publishing Co., Inc. Plaintiff alleged inter alia that defendant
was a corporation duly organized and existing under the laws of the Philippines. On July 19, 1948,
defendant, through Jose M. Aruego, its President, entered into a contract with plaintif whereby
defendant agreed to pay plaintiff P30,000.00 for the exclusive right to publish his revised Commentaries
on the Revised Penal Code. Defendant had undertaken to pay in eight quarterly installments of
P3,750.00 starting July 15, 1948. The contract stipulated that failure to pay one installment would render
the rest due. Later, defendant had failed to pay the second installment so plaintiff sued for collection and
won. Defendant admitted plaintiff's allegation of defendant's corporate existence; admitted the execution
and terms of the contract dated July 19, 1948 but alleged that it was plaintiff who breached their contract
by failing to deliver his manuscript. Plaintiff died before trial and Justo R. Albert, his estate's
administrator, was substituted for him. The Court of First Instance of Manila, after trial, rendered
decision in favor of plaintiff and against the defendant the University Publishing Co., Inc. However,
upon execution, it was found that University was not registered with the SEC. Plaintiff petitioned for a
writ of execution against Jose M. Aruego as the real defendant. University opposed, on the ground that writ of execution against Jose M. Aruego as the real defendant. University opposed, on the ground that
Aruego was not a party to the case.
ISSUE:
Is the University Publishing Co., Inc. a de facto corporation?

HELD: No. On account of the non-registration it cannot be considered a corporation, not even a
corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no personality separate from Jose
M. Aruego; it cannot be sued independently. The corporation-by-estoppel doctrine has not been invoked.
At any rate, the same is inapplicable here. Aruego represented a non-existent entity and induced not only
the plaintiff but even the court to believe in such representation. He signed the contract as "President" of
"University Publishing Co., Inc.," stating that this was "a corporation duly organized and existing under
the laws of the Philippines," and obviously misled plaintiff into believing the same. One who has
induced another to act upon his willful misrepresentation that a corporation was duly organized and
existing under the law, cannot thereafter set up against his victim the principle of corporation by
estoppel (Salvatiera vs. Garlitos, 56 O.G. 3069). "University Publishing Co., Inc." purported to
estoppel (Salvatiera vs. Garlitos, 56 O.G. 3069). "University Publishing Co., Inc." purported to
come to court, answering the complaint and litigating upon the merits. But as stated, "University
Publishing Co., Inc." has no independent personality; it is just a name. Jose M. Aruego was, in reality,
the one who answered and litigated, through his own law firm as counsel. He was in fact, if not, in
name, the defendant.
In Salvatiera vs. Garlitos, the court ruled: "A person acting or purporting to act on behalf
of a corporation which has no valid existence assumes such privileges and obligations and becomes
personally liable for contracts entered into or for other acts performed as such agent." Had Jose M.
Aruego been named as party defendant instead of, or together with, "University Publishing Co., Inc.,"
there would be no room for debate as to his personal liability. Since he was not so named, the matters of
"day in court" and "due process" have arisen. In this connection, it must be realized that parties to a suit "day in court" and "due process" have arisen. In this connection, it must be realized that parties to a suit
are "persons who have a right to control the proceedings, to make defense, to adduce and cross-examine
witnesses, and to appeal from a decision" (67 C.J.S. 887) and Aruego was, in reality, the person who
had and exercised these rights. Clearly, then, Aruego had his day in court as the real defendant; and due
process of law has been substantially observed.
MSCI-NACUSIP Local Chapter vs. NATIONAL WAGES AND PRODUCTIVITY
COMMISSION and MONOMER SUGAR CENTRAL, INC.
G.R. No. 125198, March 3, 1997, First Division , HERMOSISIMA, JR., J.

FACTS:
On January 11, 1990, Asturias Sugar Central, Inc. (ASCI, for brevity), executed a Memorandum of
Agreement with Monomer Trading Industries, Inc. (MTII, for brevity), whereby MTII shall acquire the
assets of ASCI by way of a Deed of Assignment provided that an entirely new organization in place of
MTII shall be organized, which new corporation shall be the assignee of the assets of ASCI. By virtue of
this Agreement, Monomer Sugar Central, Inc. or MSCI, the private respondent herein, was organized.
On January 16, 1991, MSCI applied for exemption from the coverage of Wage Order No. RO VI-01
issued by the Board on the ground that it is a distressed employer. The petitioner herein MSCI-
NACUSIP Local Chapter (Union, for brevity), in opposition, maintained that MSCI is not distressed;
that respondent applicant has not complied with the requirements for exemption; and that the financial
statements submitted by MSCI do not reflect the true and valid financial status of the company, and that
the paid-up capital would have been higher than P5 million and thus impairment would have been lower
than 25% had the pre-organization agreement between ASCI and MTII been complied with. Petitioners
argue that the paid-up capital should be P64M rather than P5M thus making it impossible for the
corporation to apply for a distressed employer because at P64M, the loss would only be at 5.25% which
does not reach the required 25% loss.
On August 17, 1993, the Board denied MSCI's application for exemption based on the finding that On August 17, 1993, the Board denied MSCI's application for exemption based on the finding that
the applicant's losses of P3,400,738.00 for the period February 15, 1990 to August 31, 1990 constitute
an impairment of only 5.25% of its paid-up capital of P64,688,528.00, can not be said to be sufficient to
meet the required 25% in order to qualify for the exemption. The motion for reconsideration, filed by
MSCI on September 20, 1993, was denied by the Board on October 12, 1993. A timely appeal was
brought before the public respondent Commission which reversed and set aside the foregoing orders of
the Board, and granted MSCI's application for exemption from Wage Order No. RO VI-01, for a period
of one (1) year from its effectivity. Petitioner has come before us by way of a Petition
for Certiorari under Rule 65.

ISSUE:
Whether or not respondent MSCI can qualify as a distressed employer from February 15, 1990 to
August 31, 1990 as well as during the interim period from September 1, 1990 to November 30, 1990 and
August 31, 1990 as well as during the interim period from September 1, 1990 to November 30, 1990 and
thus be entitled to exemption from compliance with Wage Order No. RO VI-01

HELD:
To resolve this issue, however, a pivotal determination must first be made: What is the correct paid-
up capital of MSCI for the pertinent period covered by the application for exemption P5 million
or P64,688,528.00?
The Board held that the paid-up capital of MSCI on the aforesaid dates was
actually P64,688,528.00 and not P5 million as claimed by MSCI in its application for exemption and,
thus, the established losses amounting to P3,400,738.00 constitute an impairment of only 5.25% of the
true paid-up capital of P64 million plus which losses are not enough to meet the required 25% true paid-up capital of P64 million plus which losses are not enough to meet the required 25%
impairment requirement. This conclusion is anchored on the belief of the Board that the value of the
assets of ASCI, party to the Memorandum of Agreement, transferred to MSCI on March 28, 1990
should be taken into consideration in computing the paid-up capital of MSCI to reflect its true financial
structure. Moreover, the loans or advances extended by MTII, the other party to the Agreement, to
MSCI should allegedly be treated as additional investments to MSCI and must therefore be included in
computing respondent's paid-up capital.
Public respondent-Commission thought otherwise. In reversing the Board and granting the
exemption, the Commission held that the Board exceeded its authority in computing and giving new
valuation to what should be the paid-up capital of MSCI. It stressed that RA No. 6727, or the Wage
Rationalization Act, and its implementing guidelines have not conferred upon the Board the authority to
change the paid-up capital of a corporation. The foregoing asseveration of the parties considered, we
find no grave abuse of discretion on the part of the Commission in setting aside the findings of the
Board and granting full exemption to MSCI from Wage Order No. RO VI-01.
Since the paid-up capital is the portion of the capital which has been subscribed and paid, the assets
transferred to and the loans extended to a corporation should not be considered in computing the paid-up
capital of the corporation. Not all funds or assets received by the corporation can be considered as paid-
up capital for this term has a technical signification in Corporation Law. Such must form part of the
authorized capital of the corporation, subscribed and then actually paid-up. The same test should also be
applied in determining if the paid-up capital of the Corporation has been impaired so as to qualify it for
the exemption from the increase in the minimum wages. The paid-up capital stock of MSCI for the
period covered by the application for exemption still stood at P5M. The impairment is has incurred
reached 271.08% which is beyond the 25% requirement to be an applicant.
SAMAHAN NG OPTOMETRISTS SA PILIPINAS, ILOCOS SUR-ABRA CHAPTER vs.
ACEBEDO INTERNATIONAL CORPORATION
G.R. No. 117097, 21 March 1997, J. HERMOSISIMA, JR., FIRST DIVISION

Acebedo International Corporation (Acebedo) filed an application with the Office of the Mayor
of Candon, Ilocos Sur, for the issuance of a permit for the opening and operation of a branch of the
Acebedo Optical in that municipality. The application was opposed by the Samahan ng Optometrists sa
Pilipinas (SOP) which contended that Acebedo is a juridical entity not qualified to practice optometry.
Acebedo filed its answer, arguing it is not the corporation, but the optometrists employed by it, who
would be practicing optometry.
The Mayor of Candon created a committee to pass on Acebedo's application. The committee denied
Acebedo's application. The trial court upheld the decision of the committee. Acebedo appealed
therefrom and asked the Court of Appeals to reverse the same. CA reversed the decision of the trial
court and ruled for Acebedo.


ISSUE:
Whether Acebedo, by hiring optometrists whose role in the operation of its shop is to administer
the proper eye examination in order to determine the correct type and grade of lenses to prescribe to
persons purchasing the same from their optical shop, is engaged in the practice of optometry

HELD:
Petition DISMISSED.
The fact that Acebedo hires optometrists who practice their profession in the course of their
employment in Acebedo's optical shops, does not translate into a practice of optometry by Acebedo
itself. Acebedo is a corporation created and organized for the purpose of conducting the business of
selling optical lenses or eyeglasses, among others. The clientele of Acebedo understandably, would
largely be composed of persons with defective vision and thus need the proper lenses to correct the same
and enable them to gain normal vision. The determination of the proper lenses to sell to Acebedo's
clientele entails the employment of optometrists who have been precisely trained for that purpose. clientele entails the employment of optometrists who have been precisely trained for that purpose.
Acebedo's business is not the determination itself of the proper lenses needed by persons with defective
vision. Acebedo's business, rather, is the buying and importing of eyeglasses and lenses and other
similar or allied instruments from suppliers thereof and selling the same to consumers.
For SOPs' argument to hold water, there need be clear showing that RA. No. 1998 prohibits a
corporation from hiring optometrists, for only then would it be undeniably evident that the intention of
the legislature is to preclude the formation of the so-called optometry corporations because such is
tantamount to the practice of the profession of optometry which is legally exercisable only by natural
persons and professional partnerships. The Court had carefully reviewed RA. No. 1998 however, and the
Court finds nothing therein that supports SOP's insistent claims.
It is significant to note that even under RA. No. 8050, known as the Revised Optometry Law, we
find no prohibition against the hiring by corporations of optometrists.

DOCTORS ROSA P. ALFAFARA, et al. vs. ACEBEDO OPTICAL, CO., INC.
G.R. No. 148384, 17 April 2002, J. MENDOZA, SECOND DIVISION
Acebedo Optical Co., Inc. (Acebedo) opened several optical shops in Cebu and announced to the
public the availability of ready-to-wear eyeglasses for sale at P60.00 each and free services by
optometrists in such outlets. Thereafter, members of the Samahan ng Optometrists sa Pilipinas-Cebu
Chapter filed an injuctive suit to enjoin Acebedo and its agents, representatives, and/or employees from
practicing optometry in the province of Cebu. Petitioners claimed that, through the licensed optometrists
under its employ, Acebedo had been engaging in the practice of optometry. They contended that such
acts of Acebedo were done in violation of the Optometry Law (R.A. No. 1998) and the Code of Ethics
for Optometrists.
The trial court found that the hiring of licensed optometrists by the Acebedo was unlawful because
it resulted in the practice of the optometry profession by Acebedo, a juridical person. The Court of
Appeals reversed the decision of the trial court and dismissed the complaint of petitioners Appeals reversed the decision of the trial court and dismissed the complaint of petitioners

ISSUE:
Whether the hiring of licensed optometrists by the Acebedo was unlawful because it resulted in
the practice of the optometry profession by a juridical person

HELD:
Petition DENIED.
An optometrist is a person who has been certified by the Board of Optometry and registered with
the Professional Regulation Commission as qualified to practice optometry in the Philippines. Thus,
only natural persons can engage in the practice of optometry and not corporations. Acebedo, which is
not a natural person, cannot take the licensure examinations for optometrist and, therefore, it cannot be
registered as an optometrist under R.A. No. 1998. It is noteworthy that, in Apacionado, the Court did
not find Acebedo to be engaged in the practice of optometry. The optometrists in that case were found
guilty of unprofessional conduct and their licenses were suspended for two (2) years for having
participated, in their capacities as optometrists, in the implementation of the promotional advertisement
of Acebedo. In contrast, in the case at bar, Acebedo is merely engaged in the business of selling optical
products, not in the practice of optometry, whether directly or indirectly, through its hired optometrists.
While the optometrists are employees of Acebedo, their practice of optometry is separate and
distinct from the business of Acebedo of selling optical products. They are personally liable for acts
done in the course of their practice in the same way that if Acebedo is sued in court in connection with
its business of selling optical products, the optometrists need not be impleaded as party defendants. In
that regard, the Board of Optometry and the Professional Regulation Commission regulate their practice that regard, the Board of Optometry and the Professional Regulation Commission regulate their practice
and have exclusive original jurisdiction over them.




ISLAMIC DIRECTORATE OF THE PHILIPPINES, et al. vs. COURT OF APPEALS
G.R. No. 117897, 14 May 1997, J. HERMOSISIMA, JR., FIRST DIVISION

Islamic leaders of all Muslim major tribal groups in the Philippines organized and incorporated
the ISLAMIC DIRECTORATE OF THE PHILIPPINES (IDP), the primary purpose of which is to
establish an Islamic Center in Quezon City so as to facilitate the effective practice of Islamic faith in the
area. The Libyan government donated money to the IDP to purchase land.
After martial law, two Muslim groups sprung, the Carpizo Group and the Abbas Group. The
Securities and Exchange Commission (SEC) declared the election of both groups as IDP board members
to be null and void. No valid election of the members of the Board of Trustees of IDP was ever called.
The Carpizo Group caused to be signed an alleged Board Resolution of the IDP authorizing the
sale of the subject two parcels of land to Iglesia Ni Cristo (INC). The 1971 IDP Board of Trustees or the
Tamano Group, filed a petition before the SEC seeking to declare null and void the Deed of Absolute
Sale since they were not the legitimate Board of Trustees of the IDP.
Meanwhile, INC filed an action for Specific Performance with Damages against the vendor, Carpizo
Group. The IDP-Tamano Group sought to intervene but was denied. The trial court rendered Partial Group. The IDP-Tamano Group sought to intervene but was denied. The trial court rendered Partial
Judgment in favor of INC.
The SEC finally came out with a Decision declaring the sale of the two (2) parcels of land in
Quezon City covered by the Deed of Absolute Sale entered into by Iglesia ni Kristo and the Islamic
Directorate of the Philippines, Inc null and void, among others. INC sought to intervene, but was
denied. The case was elevated to the Court of Appeals (CA). It granted INCs petition. The portion of
denied. The case was elevated to the Court of Appeals (CA). It granted INCs petition. The portion of
the SEC Decision which declared the sale of the two (2) lots in question to INC as void was ordered set
aside by the CA.

ISSUE:
Whether the sale of the two (2) parcels of land in Quezon City covered by the Deed of Absolute
Sale entered into by Iglesia ni Cristo and the Islamic Directorate of the Philippines, Inc - Carpizo
Group null and void

HELD:
Petition GRANTED.
If the SEC can declare who is the legitimate IDP Board, then by parity of reasoning, it can also
declare who is not the legitimate IDP Board. This is precisely what the SEC did in SEC Case No. 4012
when it adjudged the election of the Carpizo Group to the IDP Board of Trustees to be null and void. By
this ruling, the SEC in effect made the unequivocal finding that the IDP-Carpizo Group is a bogus Board
of Trustees. Consequently, the Carpizo Group is bereft of any authority whatsoever to bind IDP in any
kind of transaction including the sale or disposition of IDP property.
Premises considered, all acts carried out by the Carpizo Board, particularly the sale of the Tandang Premises considered, all acts carried out by the Carpizo Board, particularly the sale of the Tandang
Sora property, allegedly in the name of the IDP, have to be struck down for having been done without
the consent of the IDP thru a legitimate Board of Trustees. Article 1318 of the New Civil Code lays
down the essential requisites of contracts:
There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
All these elements must be present to constitute a valid contract. For, where even one is absent, the
contract is void. As succinctly put by Tolentino, consent is essential for the existence of a contract, and
where it is wanting, the contract is non-existent. In this case, the IDP, owner of the subject parcels of
land, never gave its consent, thru a legitimate Board of Trustees, to the disputed Deed of Absolute Sale
executed in favor of INC. This is, therefore, a case not only of vitiated consent, but one where consent
on the part of one of the supposed contracting parties is totally wanting. Ineluctably, the subject sale is
void and produces no effect whatsoever.
The Carpizo Group-INC sale is further deemed null and void ab initio because of the Carpizo
Groups failure to comply with Section 40 of the Corporation Code pertaining to the disposition of all or
substantially all assets of the corporation:
Sec. 40. Sale or other disposition of assets. - Subject to the provisions of existing laws
on illegal combinations and monopolies, a corporation may, by a majority vote of its
board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise
dispose of all or substantially all of its property and assets, including its goodwill, upon dispose of all or substantially all of its property and assets, including its goodwill, upon
terms and conditions and for such consideration, which may be money, stocks, bonds or
other instruments for the payment of money or other property or consideration, as its
board of directors or trustees may deem expedient, when authorized by the vote of the
board of directors or trustees may deem expedient, when authorized by the vote of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in
case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a
stockholders or members meeting duly called for the purpose. Written notice of the
proposed action and of the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown on the books of the corporation
and deposited to the addressee in the post office with postage prepaid, or served
personally: Provided, That any dissenting stockholder may exercise his appraisal right
under the conditions provided in this Code.
A sale or other disposition shall be deemed to cover substantially all the corporate
property and assets if thereby the corporation would be rendered incapable of continuing
the business or accomplishing the purpose for which it was incorporated. xxx
The Tandang Sora property, it appears from the records, constitutes the only property of the
IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate property and assets of
IDP falling squarely within the contemplation of the foregoing section. For the sale to be valid, the
majority vote of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of the bona
fide members of the corporation should have been obtained. These twin requirements were not met as
the Carpizo Group which voted to sell the Tandang Sora property was a fake Board of Trustees, and
those whose names and signatures were affixed by the Carpizo Group together with the sham Board
Resolution authorizing the negotiation for the sale were, from all indications, not bona fide members of
the IDP as they were made to appear to be. Apparently, there are only fifteen (15) official members of
the petitioner corporation including the eight (8) members of the Board of Trustees.
All told, the disputed Deed of Absolute Sale executed by the fake Carpizo Board and private All told, the disputed Deed of Absolute Sale executed by the fake Carpizo Board and private
respondent INC was intrinsically void ab initio.



INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs. HON.
COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, respondents.

FACTS
International Express Travel and Tour Services, Inc. wrote a letter to the President of the
Philippine Football Federation, Henry Kahn because the former wanted to offer its services as a travel
agency to the latter. Kahn agreed so the travel agency procured the airline tickets for the athletes for the
South East Asian games in Kulala Lumpur as well as tickets to China and Brisbane. The federation
made partial payments. Kahn also issued a personal check for the remaining balance. Unfortunately the
federation and Kahn defaulted as to the remaining balance. The travel agency sued Kahn in his personal
capacity. Petitioner sought to hold Henri Kahn liable for the unpaid balance for the tickets purchased by
the Federation on the ground that Henri Kahn allegedly guaranteed the said obligation. The trial court
held Kahn personally liable but such decision was reversed by the CA ruling that the federation is a
corporate entity which has a personality separate from its officers.

ISSUE
Whether the federation is a corporate entity
Whether the federation is a corporate entity

HELD: The decision appealed from is REVERSED and SET ASIDE.
The above powers and functions granted to national sports associations clearly indicate that these
entities may acquire a juridical personality. The power to purchase, sell, lease and encumber property
are acts which may only be done by persons, whether natural or artificial, with juridical capacity.
However, while we agree with the appellate court that national sports associations may be accorded
corporate status, such does not automatically take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical personality, the State must
give its consent either in the form of a special law or a general enabling act. We cannot agree with the
view of the appellate court and the private respondent that the Philippine Football Federation came into
existence upon the passage of these laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any
provision creating the Philippine Football Federation. These laws merely recognized the existence of
national sports associations and provided the manner by which these entities may acquire juridical
personality. Section 11 of R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and
recognition. - A National Association shall be organized for
each individual sports in the Philippines in the manner
hereinafter provided to constitute the Philippine Amateur
Athletic Federation. Applications for recognition as a
National Sports' Association shall be filed with the
executive committee together with, among others, a copy of
the constitution and by-laws and a list of the members of
the proposed association, and a filing fee of ten pesos.
The Executive Committee shall give the recognition applied for if it is satisfied that said association will The Executive Committee shall give the recognition applied for if it is satisfied that said association will
promote the purposes of this Act and particularly section three thereof. No application shall be held
pending for more than three months after the filing thereof without any action having been taken thereon
by the executive committee. Should the application be rejected, the reasons for such rejection shall be
clearly stated in a written communication to the applicant. Failure to specify the reasons for the rejection
shall not affect the application which shall be considered as unacted upon: Provided, however, That until
the executive committee herein provided shall have been formed, applications for recognition shall be
passed upon by the duly elected members of the present executive committee of the Philippine Amateur
Athletic Federation. The said executive committee shall be dissolved upon the organization of the
executive committee herein provided: Provided, further, That the functioning executive committee is
charged with the responsibility of seeing to it that the National Sports' Associations are formed and
organized within six months from and after the passage of this Act.
Section 7 of P.D. 604, similarly provides:
SEC. 7. National Sports Associations. - Application for
accreditation or recognition as a national sports association
for each individual sport in the Philippines shall be filed
with the Department together with, among others, a copy of
the Constitution and By-Laws and a list of the members of
the proposed association.
The Department shall give the recognition applied for if it is satisfied that the national sports association
to be organized will promote the objectives of this Decree and has substantially complied with the rules
and regulations of the Department: Provided, That the Department may withdraw accreditation or
and regulations of the Department: Provided, That the Department may withdraw accreditation or
recognition for violation of this Decree and such rules and regulations formulated by it.
The Department shall supervise the national sports association: Provided, That the latter shall have
exclusive technical control over the development and promotion of the particular sport for which they
are organized. are organized.
Clearly the above cited provisions require that before an entity may be considered as a national
sports association, such entity must be recognized by the accrediting organization, the Philippine
Amateur Athletic Federation under R.A. 3135, and the Department of Youth and Sports Development
under P.D. 604. This fact of recognition, however, Henri Kahn failed to substantiate. In attempting to
prove the juridical existence of the Federation, Henri Kahn attached to his motion for reconsideration
before the trial court a copy of the constitution and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation has indeed been recognized and accredited
by either the Philippine Amateur Athletic Federation or the Department of Youth and Sports
Development. Accordingly, we rule that the Philippine Football Federation is not a national sports
association within the purview of the aforementioned laws and does not have corporate existence of its
own.
Thus being said, it follows that private respondent Henry Kahn should be held liable for the unpaid
obligations of the unincorporated Philippine Football Federation. It is a settled principal in corporation
law that any person acting or purporting to act on behalf of a corporation which has no valid existence
assumes such privileges and becomes personally liable for contract entered into or for other acts
performed as such agent














F. CORPORATE NAME





REPUBLIC PLANTERS BANK, petitioner, vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

FACTS FACTS
Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief
Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of
Board Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent
Fermin Canlas were authorized to apply for credit facilities with the petitioner Republic Planters Bank in
the forms of export advances and letters of credit/trust receipts accommodations. Petitioner bank issued
nine promissory notes worded as:

___________, after date, for value received, I/we,
jointly and severaIly promise to pay to the ORDER of the
REPUBLIC PLANTERS BANK, at its office in Manila,
Philippines, the sum of ___________ PESOS(....)
Philippine Currency...
On the right bottom margin of the promissory notes
appeared the signatures of Shozo Yamaguchi and Fermin
Canlas above their printed names with the phrase "and (in)
his personal capacity" typewritten below. At the bottom of
the promissory notes appeared: "Please credit proceeds of
this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6 No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP.

Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing
Corporation. Due to the default of the corporation, the petitioner bank filed a complaint for sum of
money against the corporation. The complaint was amended in order to drop Worldwide Manufacturing,
Inc. as defendant and substitute Pinch Manufacturing Corporation it its place. Canlas contends that he
did not issue the promissory notes for he was not an officer of Pinch Manufacturing Corporation, but
instead of Worldwide Garment Manufacturing, Inc., and that when he issued said promissory notes in
behalf of Worldwide Garment Manufacturing, Inc. The RTC ruled for petitioner bank but such decision
was reversed by the CA. Hence this petition

ISSUE
Whether private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch
Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes.


DECISION
Petition granted. We hold that private respondent Fermin Canlas is solidarily liable on each of
the promissory notes bearing his signature. Finally, the respondent Court made a grave error in holding
that an amendment in a corporation's Articles of Incorporation effecting a change of corporate name, in
this case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation extinguished
the personality of the original corporation.
The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the
original corporation. It is the same corporation with a different name, and its character is in no respect
changed.
10
changed.
10
A change in the corporate name does not make a new corporation, and whether effected by special act or
under a general law, has no affect on the identity of the corporation, or on its property, rights, or
liabilities.
11
The corporation continues, as before, responsible in its new name for all debts or other liabilities which
it had previously contracted or incurred.
12
As a general rule, officers or directors under the old corporate name bear no personal liability for acts
done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such
officers acted in their capacity as agent of the old corporation and the change of name meant only the
continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts
of its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a person
signing as an agent is specifically provided for as follows:
Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal , or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words
describing him as an agent, or as filling a representative character, without disclosing his principal, does
not exempt him from personal liability.
Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting
in a representative capacity or the name of the third party for whom he might have acted as agent, the
agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was
merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's
personal liability.
13



INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and
REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.

FACTS
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly
organized on October 13, 1976 for the purpose of engaging in the business of manufacturing, producing,
selling, exporting and otherwise dealing in any and all refractory bricks, its by-products and derivatives.
On June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name
Synclaire Manufacturing Corporation. It amended its Articles of Incorporation on August 23, 1985 to
change its corporate name to Industrial Refractories Corp. of the Philippines. It is engaged in the
business of manufacturing all kinds of ceramics and other products, except paints and zincs.
business of manufacturing all kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix. Discovering that petitioner was
using such corporate name, respondent RCP filed on April 14, 1988 with the Securities and Exchange
Commission (SEC) a petition to compel petitioner to change its corporate name on the ground that its
corporate name is confusingly similar with that of petitioners such that the public may be confused or
deceived into believing that they are one and the same corporation. The SEC ruled for respondent but
after petitioner appealed it ordered respondent to drop the word refractories from its name. Petitioner
also questioned the jurisdiction of the SEC over such matters. Petitioner appealed to the CA but the
latter still ruled in favor of respondent. Hence this petition.

ISSUE
Whether there is no confusing or deceptive similarity between petitioner and respondent RCPs
corporate names. corporate names.
Whether SEC has jurisdiction.

HELD
Petitioners argument on the SECs jurisdiction over the case is utterly myopic. The
jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of P.D.
902-A, as amended.[19] By express mandate, it has absolute jurisdiction, supervision and control over
all corporations.[20] It also exercises regulatory and administrative powers to implement and enforce the
Corporation Code,[21] one of which is Section 18, which provides:
SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. When a change in the corporate name is approved, the Commission shall
issue an amended certificate of incorporation under the amended name.
It is the SECs duty to prevent confusion in the use of corporate names not only for the protection
of the corporations involved but more so for the protection of the public, and it has authority to de-
register at all times and under all circumstances corporate names which in its estimation are likely to
generate confusion.[22] Clearly therefore, the present case falls within the ambit of the SECs regulatory
powers.[23]
Likewise untenable is petitioners argument that there is no confusing or deceptive similarity
between petitioner and respondent RCPs corporate names. Section 18 of the Corporation Code
expressly prohibits the use of a corporate name which is identical or deceptively or confusingly similar
to that of any existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. The policy behind the foregoing prohibition is to
avoid fraud upon the public that will have occasion to deal with the entity concerned, the evasion of
legal obligations and duties, and the reduction of difficulties of administration and supervision over
corporation.[24] corporation.[24]


P.C. JAVIER & SONS, INC., SPS. PABLO C. JAVIER, SR. and ROSALINA F.
JAVIER, petitioners, vs. HON. COURT OF APPEALS, PAIC SAVINGS & MORTGAGE BANK,
INC., SHERIFFS GRACE BELVIS, SOFRONIO VILLARIN, PIO MARTINEZ and NICANOR
BLANCO, respondents.
This Court cannot impose on a bank that changes its corporate name to notify a debtor of such
change absent any law, circular or regulation requiring it. Such act would be judicial
legislation. The formal notification is, therefore, discretionary on the bank.

FACTS:
CHICO-NAZARIO, J.:
In February, 1981, Plaintiff P.C. Javier and Sons Services, Inc., Plaintiff Corporation, for short, applied
with First Summa Savings and Mortgage Bank, later on renamed as PAIC Savings and Mortgage Bank,
Defendant Bank, for short, for a loan accommodation under the Industrial Guarantee Loan Fund (IGLF)
for P1.5 Million.
Plaintiff Corporation defaulted in the payment of its IGLF loan with Defendant Bank
Bank initiated extrajudicial foreclosure of the real estate mortgage executed by Plaintiff spouses and
accordingly the auction sale of the property covered by TCT No. 473216 was scheduled by the Ex
Officio Sheriff on May 9, 1984.
Petitioners argue that they are legally justified to withhold their amortized payments to the respondent
bank until such time they would have been properly notified of the change in the corporate name of First
Summa Savings and Mortgage Bank. They claim that they have never received any formal notice of the
alleged change of corporate name of First Summa Savings and Mortgage Bank to PAIC Savings & alleged change of corporate name of First Summa Savings and Mortgage Bank to PAIC Savings &
Mortgage Bank, Inc.
The RTC declared that First Summa Savings and Mortgage Bank and PAIC Savings and Mortgage
Bank, Inc. are one and the same entity and that petitioner corporation is liable to respondent bank for the
unpaid balance of its Industrial Guarantee Loan Fund (IGLF) loans.
Petitioners appealed the decision to the Court of Appeals. The latter affirmed in toto the decision of
the lower court. It also denied petitioners motion for reconsideration.

ISSUE:
Whether or not P.C. JAVIER & SONS, INC. Was justified in withholding payment of a due and
demandable debt due to the lack of notice of the change of name of their creditors corporation.

HELD:
Their defense that they should first be formally notified of the change of corporate name of First
Summa Savings and Mortgage Bank to PAIC Savings and Mortgage Bank, Inc., before they will
continue paying their loan obligations to respondent bank presupposes that there exists a requirement
under a law or regulation ordering a bank that changes its corporate name to formally notify all its
debtors. After going over the Corporation Code and Banking Laws, as well as the regulations and
circulars of both the SEC and the Bangko Sentral ng Pilipinas (BSP), we find that there is no such
requirement. This being the case, this Court cannot impose on a bank that changes its corporate name to
notify a debtor of such change absent any law, circular or regulation requiring it. Such act would be
judicial legislation. The formal notification is, therefore, discretionary on the bank. Unless there is a
law, regulation or circular from the SEC or BSP requiring the formal notification of all debtors of banks
of any change in corporate name, such notification remains to be a mere internal policy that banks may
or may not adopt.
In the case at bar, though there was no evidence showing that petitioners were furnished copies of In the case at bar, though there was no evidence showing that petitioners were furnished copies of
official documents showing the First Summa Savings and Mortgage Banks change of corporate name to
PAIC Savings and Mortgage Bank, Inc., evidence abound that they had notice or knowledge thereof.
Several documents establish this fact. First, letter dated 16 July 1983 signed by Raymundo V. Blanco,
Accountant of petitioner corporation, addressed to PAIC Savings and Mortgage Bank, Inc. Part of said
letter reads: In connection with your inquiry as to the utilization of funds we obtained from the former
First Summa Savings and Mortgage Bank, . . . Second, Board Resolutionof petitioner corporation
signed by Pablo C. Javier, Sr. on 24 August 1983 authorizing him to execute a Chattel Mortgage over
certain machinery in favor of PAIC Savings and Mortgage Bank, Inc. Third, Secretarys
Certificate signed by Fortunato E. Gabriel, Corporate Secretary of petitioner corporation, on 01
September 1983, certifying that a board resolution was passed authorizing Mr. Pablo C. Javier, Sr. to
September 1983, certifying that a board resolution was passed authorizing Mr. Pablo C. Javier, Sr. to
execute a chattel mortgage on the corporations equipment that will serve as collateral to cover the IGLF
loan with PAIC Savings and Mortgage Bank, Inc. Fourth, undated letter signed by Pablo C. Javier, Sr.
and addressed to PAIC Savings and Mortgage Bank, Inc., authorizing Mr. Victor F. Javier, General
Manager of petitioner corporation, to secure from PAIC Savings and Mortgage Bank, Inc. certain
documents for his signature.
From the foregoing documents, it cannot be denied that petitioner corporation was aware of First
Summa Savings and Mortgage Banks change of corporate name to PAIC Savings and Mortgage Bank,
Inc. Knowing fully well of such change, petitioner corporation has no valid reason not to pay because
the IGLF loans were applied with and obtained from First Summa Savings and Mortgage Bank. First
Summa Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc., are one and the same
bank to which petitioner corporation is indebted. A change in the corporate name does not make a new
corporation, whether effected by a special act or under a general law. It has no effect on the identity of
the corporation, or on its property, rights, or liabilities.
[21]
The corporation, upon such change in its
name, is in no sense a new corporation, nor the successor of the original corporation. It is the same
corporation with a different name, and its character is in no respect changed.

HYATT ELEVATORS AND ESCALATORS CORPORATION Petitioner, vs. GOLDSTAR
ELEVATORS, PHILS., INC., Respondent. ELEVATORS, PHILS., INC., Respondent.
[G.R. No. 161026 October 24, 2005]

Well established in our jurisprudence is the rule that the residence of a corporation is the place where
its principal office is located, as stated in its Articles of Incorporation.

FACTS:
PANGANIBAN, J.:


On February 23, 1999, HYATT filed a Complaint for unfair trade practices and damages
under Articles 19, 20 and 21 of the Civil Code of the Philippines against LG Industrial Systems
Co. Ltd. (LGISC) and LG International Corporation (LGIC), alleging among others, that: in
1988, it was appointed by LGIC and LGISC as the exclusive distributor of LG elevators and
escalators in the Philippines under a Distributorship Agreement
Likewise, the motion averred that x x x GOLDSTAR was being utilized by LG OTIS and
LGIC in perpetrating their unlawful and unjustified acts against HYATT. Consequently, in order
to afford complete relief, GOLDSTAR was to be additionally impleaded as a party-defendant.
Hence, in the Amended Complaint, HYATT impleaded x x x GOLDSTAR as a party-defendant,
and all references to LGISC were correspondingly replaced with LG OTIS.
On March 17, 1999, LGISC and LGIC filed a Motion to Dismiss raising the following
grounds: (1) lack of jurisdiction over the persons of defendants, summons not having been
served on its resident agent; (2) improper venue; and (3) failure to state a cause of action. The
[trial] court denied the said motion in an Order dated January 7, 2000.
In the Order dated May 27, 2002, which is the main subject of the present petition, the In the Order dated May 27, 2002, which is the main subject of the present petition, the
[trial] court denied the motion to dismiss.
According to the appellate court, since Makati was the principal place of business of both
respondent and petitioner, as stated in the latters Articles of Incorporation.

ISSUE:
ISSUE:
Whether or not a corporation can have a place of residence, for the purpose of determining the venue of
an action.

HELD:
The resolution of this case rests upon a proper understanding of Section 2 of Rule 4 of the 1997
Revised Rules of Court:
Sec. 2. Venue of personal actions. All other actions
may be commenced and tried where the plaintiff or any of
the principal plaintiff resides, or where the defendant or any
of the principal defendant resides, or in the case of a non-
resident defendant where he may be found, at the election
of the plaintiff.

Since both parties to this case are corporations, there is a need to clarify the meaning of
residence. The law recognizes two types of persons: (1) natural and (2) juridical.
Corporations come under the latter in accordance with Article 44(3) of the Civil Code. Corporations come under the latter in accordance with Article 44(3) of the Civil Code.
Residence is the permanent home -- the place to which, whenever absent for business or
pleasure, one intends to return. Residence is vital when dealing with venue. A corporation,
however, has no residence in the same sense in which this term is applied to a natural person.
This is precisely the reason why the Court inYoung Auto Supply Company v. Court of
Appeals ruled that for practical purposes, a corporation is in a metaphysical sense a resident of
the place where its principal office is located as stated in the articles of incorporation. Even
before this ruling, it has already been established that the residence of a corporation is the place
where its principal office is established.
This Court has also definitively ruled that for purposes of venue, the term residence is
synonymous with domicile. Correspondingly, the Civil Code provides:

Art. 51. When the law creating or recognizing them, or
any other provision does not fix the domicile of juridical
persons, the same shall be understood to be the place where
their legal representation is established or where they
exercise their principal functions.

It now becomes apparent that the residence or domicile of a juridical person is fixed by the law
creating or recognizing it. Under Section 14(3) of the Corporation Code, the place where the principal
office of the corporation is to be located is one of the required contents of the articles of incorporation,
which shall be filed with the Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence of respondent. What needs to be
examined is that of petitioner. Admittedly, the latters principal place of business is Makati, as indicated
in its Articles of Incorporation. Since the principal place of business of a corporation determines its
residence or domicile, then the place indicated in petitioners articles of incorporation becomes residence or domicile, then the place indicated in petitioners articles of incorporation becomes
controlling in determining the venue for this case.
Allowing petitioners arguments may lead precisely to what this Court was trying to avoid in Young
Allowing petitioners arguments may lead precisely to what this Court was trying to avoid in Young
Auto Supply Company v. CA: the creation of confusion and untold inconveniences to party litigants.
Thus enunciated the CA:
x x x. To insist that the proper venue is the actual
principal office and not that stated in its Articles of
Incorporation would indeed create confusion and work
untold inconvenience. Enterprising litigants may, out of
some ulterior motives, easily circumvent the rules on venue
by the simple expedient of closing old offices and opening
new ones in another place that they may find well to suit
their needs.
We find it necessary to remind party litigants, especially corporations, as follows:
The rules on venue, like the other procedural rules, are
designed to insure a just and orderly administration of
justice or the impartial and evenhanded determination of
every action and proceeding. Obviously, this objective will
not be attained if the plaintiff is given unrestricted freedom
to choose the court where he may file his complaint or
petition.
The choice of venue should not be left to the plaintiffs
whim or caprice. He may be impelled by some ulterior
motivation in choosing to file a case in a particular court
even if not allowed by the rules on venue.

MARISSA R. UNCHUAN, petitioner vs. ANTONIO J.P. LOZADA, ANITA LOZADA and THE
REGISTER OF DEEDS OF CEBU CITY, Respondents. [G.R. No. 172671, April 16, 2009]

A corporation organized under the laws of the Philippines of which at least 60% of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a
Philippine National.

FACTS:
QUISUMBING, J.:
Sisters Anita Lozada Slaughter and Peregrina Lozada Saribay were the registered co-owners of Lot
Nos. 898-A-3 and 898-A-4 in Cebu City.
The sisters, who were based in the United States, sold the lots to their nephew Antonio J.P. Lozada
(Antonio). Armed with a Special Power of Attorney from Anita, Peregrina went to the house of their
brother, Dr. Antonio Lozada (Dr. Lozada). Dr. Lozada agreed to advance the purchase price of
US$367,000 or P10,000,000 for Antonio, his nephew. Accordingly, TCT Nos. 128322 and
128323 were issued in the name of Antonio Lozada.
Pending registration of the deed, petitioner Marissa R. Unchuan caused the annotation of an adverse
claim on the lots. Marissa claimed that Anita donated an undivided share in the lots to her under an
claim on the lots. Marissa claimed that Anita donated an undivided share in the lots to her under an claim on the lots. Marissa claimed that Anita donated an undivided share in the lots to her under an
unregistered Deed of Donation

dated February 4, 1987.
Antonio and Anita brought a case against Marissa for quieting of title with application for
preliminary injunction and restraining order. Marissa for her part, filed an action to declare the Deed of
Sale void and to cancel TCT Nos. 128322 and 128323.
At the trial, respondents presented a notarized and duly authenticated sworn statement, and a
videotape where Anita denied having donated land in favor of Marissa. Dr. Lozada testified that he
agreed to advance payment for Antonio in preparation for their plan to form a corporation. The lots are
to be eventually infused in the capitalization of Damasa Corporation, where he and Antonio are to have
40% and 60% stake, respectively.
RTC Judge Leonardo B. Caares ruled in favour of Antonio Lozada.
On motion for reconsideration by petitioner, the RTC of Cebu City, Branch 10, with Hon. Jesus S.
dela Pea as Acting Judge, issued an Orderdated April 5, 1999. Said order declared the Deed of Sale
void, ordered the cancellation of the new TCTs in Antonios name
Petitioner appealed to the Court of Appeals. On February 23, 2006 the appellate court affirmed with
modification the Order of the RTC

ISSUE:
Whether or not the agreement between Antonio and Dr. Lozada resulted in Dr. Lozada owning the lands
in violation of the prohibition against aliens to own lands

HELD:
In this case, we find nothing to show that the sale between the sisters Lozada and their nephew
Antonio violated the public policy prohibiting aliens from owning lands in thePhilippines. Even as Dr.
Lozada advanced the money for the payment of Antonios share, at no point were the lots registered in Lozada advanced the money for the payment of Antonios share, at no point were the lots registered in
Dr. Lozadas name. Nor was it contemplated that the lots be under his control for they are actually to be
included as capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are
to hold 60% and 40% of the shares in said corporation, respectively. Under Republic Act No. 7042,
particularly Section 3, a corporation organized under the laws of the Philippines of which at least 60% of
the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is
considered a Philippine National. As such, the corporation may acquire disposable lands in the
Philippines. Neither did petitioner present proof to belie Antonios capacity to pay for the lots subjects
of this case.