RUSTAN PULP & PAPER MILLS INC v.

IAC
ISSUE:
HOLDING PERSONALLY LIABLE UNDER THE CONTRACT OF SALE PETITIONER
TANTOCO WHO SIGNED MERELY AS REPRESENTATIVE OF PETITIONER RUSTAN, AND
PETITIONER VERGARA WHO DID NOT SIGN AT ALL;
HELD:
Petitioners argue next that Tantoco and Vergara should not have been adjudged to
pay moral damages and attorney's fees because Tantoco merely represented the
interest of Rustan Pulp and Paper Mills, Inc. while Romeo S. Vergara was not privy to
the contract of sale. On this score, We have to agree with petitioners' citation of
authority to the effect that the President and Manager of a corporation who entered
into and signed a contract in his official capacity, cannot be made liable thereunder
in his individual capacity in the absence of stipulation to that effect due to the
personality of the corporation being separate and distinct from the person
composing it (Bangued Generale Belge vs. Walter Bull and Co., Inc., 84 Phil. 164).
And because of this precept, Vergara's supposed non-participation in the contract of
sale although he signed the letter dated September 30, 1968 is completely
immaterial. The two exceptions contemplated by Article 1897 of the New Civil Code
where agents are directly responsible are absent and wanting.
SUNIO, ILOCOS COMMERCIAL CORPORATION v. NLRC
CORPORATION LAW; CORPORATE ACTS; LIABILITY OF OFFICERS ACTING WITHIN SCOPE OF AUTHORITY;
CASE AT BAR. Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of
petitioner corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act, therefore, was within the scope of his authority and
was a corporate act. 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.4 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.
Petitioner Sunio, therefore, should not have been made personally answerable for the payment of private
respondents back salaries.
HELD:
We come now to the personal liability of petitioner, Sunio, who was made jointly and severally responsible
with petitioner company and CIPI for the payment of the backwages of private respondents. This is
reversible error. The Assistant Regional Directors Decision failed to disclose the reason why he was made
personally liable. Respondents, however, alleged as grounds thereof, his being the owner of one-half ()
interest of said corporation, and his alleged arbitrary dismissal of private respondents.
Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner
corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act, therefore, was within the scope of his authority and
was
a
corporate
act.
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. 4 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. 5 Petitioner
Sunio, therefore, should not have been made personally answerable for the payment of private respondents
back salaries.
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SULO ng BAYAN INC v. GREGORIO ARANETA

HELD:
Viewed in the light of existing law and jurisprudence, We find that the trial court correctly dismissed
the amended complaint.
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. 4 The property of the corporation is its property and not that of the
stockholders, as owners, although they have equities in it. Properties registered in the name of the
corporation are owned by it as an entity separate and distinct from its members. 5 Conversely, a
corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the
corporation, "even in the case of a one-man corporation. 6 The mere fact that one is president of a
corporation does not render the property which he owns or possesses the property of the corporation,
since the president, as individual, and the corporation are separate similarities. 7 Similarly, stockholders in
a corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder
thereof to an allotment in the distribution of the land of the corporation upon surrender of their stock
certificates were considered not to have such legal or equitable title or interest in the land, as would
support a suit for title, especially against parties other than the corporation. 8
It must be noted, however, that the juridical personality of the corporation, as separate and distinct
from the persons composing it, is but a legal fiction introduced for the purpose of convenience and to
subserve the ends of justice. 9 This separate personality of the corporation may be disregarded, or the
veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to
work -an injustice, or where necessary to achieve equity. 10
Thus, when "the notion of legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, ... the law will regard the corporation as an association of persons, or in the
case of two corporations, merge them into one, the one being merely regarded as part or
instrumentality of the other. 11 The same is true where a corporation is a dummy and serves no business
purpose and is intended only as a blind, or an alter ego or business conduit for the sole benefit of the
stockholders. 12 This doctrine of disregarding the distinct personality of the corporation has been applied
by the courts in those cases when the corporate entity is used for the evasion of taxes 13 or when the veil
of corporate fiction is used to confuse legitimate issue of employer-employee relationship, 14 or when
necessary for the protection of creditors, in which case the veil of corporate fiction may be pierced and the
funds of the corporation may be garnished to satisfy the debts of a principal stockholder. 15 The aforecited
principle is resorted to by the courts as a measure protection for third parties to prevent fraud, illegality or
injustice. 16
It has not been claimed that the members have assigned or transferred whatever rights they may
have on the land in question to the plaintiff corporation. Absent any showing of interest, therefore, a
corporation, like plaintiff-appellant herein, has no personality to bring an action for and in behalf of its
stockholders or members for the purpose of recovering property which belongs to said stockholders
or members in their personal capacities.

It is fundamental that there cannot be a cause of action 'without an antecedent primary legal right
conferred' by law upon a person. 17 Evidently, there can be no wrong without a corresponding right, and
no breach of duty by one person without a corresponding right belonging to some other person. 18 Thus,
the essential elements of a cause of action are legal right of the plaintiff, correlative obligation of the
defendant, an act or omission of the defendant in violation of the aforesaid legal right. 19 Clearly, no right
of action exists in favor of plaintiff corporation, for as shown heretofore it does not have any interest in the
subject matter of the case which is material and, direct so as to entitle it to file the suit as a real party in
interest.
MAMBULAO
LUMBER
vs. PHILIPPINE NATIONAL BANK

COMPANY,

HELD
Herein appellant's claim for moral damages, however, seems to have no legal or factual basis.
Obviously, an artificial person like herein appellant corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social
humiliation which are basis of moral damages. 21 A corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages. The same cannot be
considered under the facts of this case, however, not only because it is admitted that herein
appellant had already ceased in its business operation at the time of the foreclosure sale of the
chattels, but also for the reason that whatever adverse effects of the foreclosure sale of the chattels
could have upon its reputation or business standing would undoubtedly be the same whether the
sale was conducted at Jose Panganiban, Camarines Norte, or in Manila which is the place agreed
upon by the parties in the mortgage contract.
PEOPLE V. MANERO
The award of moral damages in the amount of P100,000.00 to the congregation, the Pontifical
Institute of Foreign Mission (PIME) Brothers, is not proper. There is nothing on record which
indicates that the deceased effectively severed his civil relations with his family, or that he
disinherited any member thereof, when he joined his religious congregation. As a matter of fact, Fr.
Peter Geremias of the same congregation, who was then a parish priest of Kidapawan, testified that
"the religious family belongs to the natural family of origin." 31 Besides, as We already held, 32 a juridical
person is not 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 or moral
shock. It is only when a juridical person has a good reputation that is debased, resulting in social
humiliation, that moral damages may be awarded.
SOLID HOMES v. CA

Both parties appealed from the trial courts decision. Solid Homes raised a lone question
contesting the denial of its claim for damages. Such damages allegedly resulted from the bad
faith and malice of State Financing in deliberately failing to annotate Solid Homes right to
repurchase the subject properties in the formers consolidated titles thereto. As a result of the
non-annotation, Solid Homes claimed to have been prevented from generating funds from
prospective buyers to enable it to comply with the Agreement and to redeem the subject
properties.
ISSUE: Solid Homes repeats its arguments before the Court of Appeals. It claims damages
allegedly arising from the non-annotation of its right of repurchase in the consolidated titles
issued to private respondent

In fact, petitioner has not even bothered to support with evidence its claim for actual, moral
and punitive/nominal damages as well as exemplary damages and attorneys fees. It is basic
that the claim for these damages must each be independently identified and justified; such
claims cannot be dealt with in the aggregate, since they are neither kindred or analogous terms
nor governed by a coincident set of rules.[18]
The trial court found, and the Court of Appeals affirmed, that petitioners claim for actual
damages was baseless. Solid Homes utterly failed to prove that respondent corporation had
maliciously and in bad faith caused the non-annotation of petitioners right of repurchase so as to
prevent the latter from exercising such right. On the contrary, it is admitted by both parties that
State Financing informed petitioner of the registration with the Register of Deeds of Pasig of
their Memorandum of Agreement/Dacion en Pago and the issuance of new certificates of title in
the name of the respondent corporation. Petitioner exchanged communications and held
conferences with private respondent in order to draw a mutually acceptable payment
arrangement for the formers repurchase of the subject properties. A written offer from another
corporation alleging willingness to avail itself of petitioners right of repurchase was even
attached to one of these communications. Clearly, petitioner was not prejudiced by the nonannotation of such right in the certificates of titles issued in the name of State
Financing.Besides, as the Court of Appeals noted, it was not the function of respondent
corporation to cause said annotation. It was equally the responsibility of petitioner to protect its
own rights by making sure that its right of repurchase was indeed annotated in the consolidated
titles of private respondent.
The only legal transgression of State Financing was its failure to observe the proper
procedure in effecting the consolidation of the titles in its name. But this does not automatically
entitle the petitioner to damages absent convincing proof of malice and bad faith[19] on the part
of private respondent and actual damages suffered by petitioner as a direct and probable
consequence thereof. In fact, the evidence proffered by petitioner consist of mere conjectures
and speculations with no factual moorings. Furthermore, such transgression was addressed by
the lower courts when they nullified the consolidation of ownership over the subject properties in
the name of respondent corporation, because it had been effected in contravention of the
provisions of Article 1607[20] of the Civil Code. Such rulings are consistent with law and
jurisprudence.
Neither can moral damages be awarded to petitioner. Time and again, we have held that a
corporation -- being an artificial person which has no feelings, emotions or senses, and which
cannot experience physical suffering or mental anguish -- is not entitled to moral damages.[21]
While the amount of exemplary damages need not be proved, petitioner must show that he
is entitled to moral or actual damages;[22] but the converse obtains in the instant case. Award of
attorneys fees is likewise not warranted when moral and exemplary damages are eliminated
and entitlement thereto is not demonstrated by the claimant.[23]

Lastly, (n)ominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.[24] As elaborated above and
in the decisions of the two lower courts, no right of petitioner was violated or invaded by
respondent corporation.
SAW v. CA
FACTS:
A collection suit with preliminary attachment was filed by Equitable Banking Corporation against
Freeman, Inc. and Saw Chiao Lian, its President and General Manager. The petitioners moved to
intervene, alleging that (1) the loan transactions between Saw Chiao Lian and Equitable Banking
Corp. were not approved by the stockholders representing at least 2/3 of corporate capital; (2) Saw
Chiao Lian had no authority to contract such loans; and (3) there was collusion between the officials
of Freeman, Inc. and Equitable Banking Corp. in securing the loans. The motion to intervene was
denied, and the petitioners appealed to the Court of Appeals.
HELD:
Intervention is "an act or proceeding by which a third person is permitted to become a party to an
action or proceeding between other persons, and which results merely in the addition of a new party
or parties to an original action, for the purpose of hearing and determining at the same time all
conflicting claims which may be made to the subject matter in litigation.
4

It is not an independent proceeding, but an ancillary and supplemental one which, in the nature of
things, unless otherwise provided for by the statute or Rules of Court, must be in subordination to
the main proceeding. It may be laid down as a general rule that an intervenor is limited to the field of
litigation open to the original parties.
5

In the case at bar, there is no more principal action to be resolved as a writ of execution had already
been issued by the lower court and the claim of Equitable had already been satisfied. The decision
of the lower court had already become final and in fact had already been enforced. There is
therefore no more principal proceeding in which the petitioners may intervene.

To allow intervention, [a] it must be shown that the movant has legal interest in the matter in
litigation, or otherwise qualified; and [b] consideration must be given as to whether the adjudication
of the rights of the original parties may be delayed or prejudiced, or whether the intervenor's rights
may be protected in a separate proceeding or not. Both requirements must concur as the first is not
more important than the second.
The interest which entitles a person to intervene in a suit between other parties must be in the matter
in litigation and of such direct and immediate character that the intervenor will either gain or lose by
the direct legal operation and effect of the judgment. Otherwise, if persons not parties of the action
could be allowed to intervene, proceedings will become unnecessarily complicated, expensive and
interminable. And this is not the policy of the law.

The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and
which would put the intervenor in a legal position to litigate a fact alleged in the complaint, without
the establishment of which plaintiff could not recover.
Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their interest is purely inchoate, or in sheer
expectancy of a right in the management of the corporation and to share in the profits thereof and in
the properties and assets thereof on dissolution, after payment of the corporate debts and
obligations.
While a share of stock represents a proportionate or aliquot interest in the property of the
corporation, it does not vest the owner thereof with any legal right or title to any of the property, his
interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal
sense the owners of corporate property, which is owned by the corporation as a distinct legal person.

When President Corazon Aquino took power, the Presidential Commission on

Good Government (PCGG) was formed in order to recover ill gotten wealth
allegedly acquired by former President Marcos and his cronies. Aquino then
issued two executive orders in 1986 and pursuant thereto, a sequestration and a
takeover order were issued against Bataan Shipyard & engineering Co., Inc.
(BASECO). BASECO was alleged to be in actuality owned and controlled by the
Marcoses through the Romualdez family, and in turn, through dummy
stockholders.
The sequestration order issued in 1986 required, among others, that BASECO
produce corporate records from 1973 to 1986 under pain of contempt of the
PCGG if it fails to do so. BASECO assails this order as it avers, among others,
that it is against BASECOs right against self incrimination and unreasonable
searches and seizures.
ISSUE: Whether or not BASECO is correct.
HELD: No. First of all, PCGG has the right to require the production of such
documents pursuant to the power granted to it. Second, and more importantly,
right against self-incrimination has no application to juridical persons. There is a
reserve right in the legislature to investigate the contracts of a corporation and
find out whether it has exceeded its powers. It would be a strange anomaly to
hold that a state, having chartered a corporation like BASECO to make use of
certain franchises, could not, in the exercise of sovereignty, inquire how these
franchises had been employed, and whether they had been abused, and
demand the production of the corporate books and papers for that purpose.

Neither is the right against unreasonable searches and seizures applicable here.
There were no searches made and no seizure pursuant to any search was ever
made. BASECO was merely ordered to produce the corporate records.