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GALA vs. ELLICE AGRO-INDUSTRIAL CORP.

G.R. No. 156819, December 11, 2003

FACTS: On March 28, 1979, Ellice Agro-Industrial Corporation was formed and organized. The
total subscribed capital stock of the corporation was initially pegged at 35,000 shares at
P3,500,000.00. Subsequently, on September 16, 1982, Margo Management and Development
Corporation was incorporated with a total subscribed capital stock of 20,000 shares at
P200,000.
Later on, Manuel Gala who is among the majority shareholder of Ellice sold some of its
share to Margo, followed by Alicia Gala, who is also a shareholder of Ellice. Years later Manuel
Gala transferred all of his remaining holdings in Ellice to Raul Gala, who is one of the
corporators of Margo.
On June 23, 1990, during a special stockholders meeting of Margo, a new board of
director was elected. At the same day, the newly-elected board elected a new set of officers.
Raul Gala was elected as chairman, president, and general manager.
Similarly, a special stockholders meeting of Ellice was held on August 24, 1990 to elect
a new board of directors. Raul Gala was also elected as chairman, president and general
manager of Ellice.
On March 27, 1990, a petition for the dissolution of Ellice was filed before the Securities
and Exchange Commission for alleged mismanagement, diversion of funds, financial losses
and the dissipation of assets. Likewise in 1991, the petitioners filed a case against respondent
before the SEC for the nullification of the elections of directors and officers of both Margo and
Ellice, including all board resolutions issued then until present.
While the case was pending before the SEC, the shares of stock of Alicia and Ofelia Gala
in Ellice were levied and sold at public auction to satisfy a judgment rendered against them by
the Regional Trial Court.
The petitioners filed a case before the Court to disregard the separate juridical
personalities of Ellice and Margo for the purpose of treating all property purportedly owned by
said corporations as property solely owned by the Gala spouses. In addition, they contend that
the purposes for which Ellice and Margo were organized should be declared as illegal and
contrary to public policy. They claim that the respondents never pursued exemption from land
reform coverage in good faith and instead merely used the corporations as tools to circumvent
land reform laws and to avoid estate taxes.

ISSUE: Are the purposes of creation of Ellice and Margo illegal and against public policy?

RULING: No. The best proof of the purpose of a corporation is its articles of incorporation and
by-laws. The articles of incorporation must state the primary and secondary purposes of the
corporation, while the by-laws outline the administrative organization of the corporation,
which, in turn, is supposed to insure or facilitate the accomplishment of said purpose.
A perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the
allegedly illegal purposes that petitioners are complaining of. It is well to note that, if a
corporations purpose as stated in the Articles of Incorporation, is lawful, then the SEC has no
authority to inquire whether the corporation has purposes other than those stated, and
mandamus will lie to compel it to issue the certificate of incorporation.
The Court stated that the doctrine of primary jurisdiction precludes a court from
arrogating unto itself the authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special competence.
The petitioners allegation that Ellice and Margo were run without any of the typical
corporate formalities, even if true, would not merit the grant of any of the relief set forth in
their prayer. The Court cannot disregard the corporate entities of Ellice and Margo. Even if
Ellice and Margo were organized for the purpose of exempting the properties of the Gala
spouses from the coverage of land reform legislation and avoiding estate taxes, the Court still
cannot disregard their separate juridical personalities.
Based on the foregoing, the Court denied the petition.
HEIRS OF ANTONIO PAEL vs. COURT OF APPEALS
G.R. No. 133547, December 7, 2001

FACTS: PFINA claims that it acquired the properties from the Heirs of Pael by virtue of a deed
of assignment dated January 25, 1983. It is worthy to note, that before PFINA filed its motion
for intervention, or for a long period of fifteen (15) years, PFINA and the Heirs of Pael were
totally silent about the alleged deed of assignment. No steps were taken by either of them to
register the deed or secure transfer certificate of title evidencing the change of ownership
during this long period of time.
At the time PFINA acquired the disputed properties in 1983, its corporate name was
PFINA Mining and Exploration, Inc., a mining company which had no valid grounds to engage
in the highly speculative business of urban real estate development.

ISSUE: Whether the 1983 transfer produces legal effect.

RULING: The decisions of the Court of Appeals and the Supreme Court show that the alleged
transfer in 1983 was not only dubious and fabricated; it could produce no legal effect. As
stated, the Paels were no longer owners of the land they allegedly assigned.
Since the purpose of development of real property is not indicated in the Articles of
Incorporation of PFINA, it cannot be considered as valid. The primary purpose of PFINA is on
Mining and exploration and real property development is not an incidental activity related to
mining activity thus such secondary purpose should have been indicated or stated in the
Articles of Incorporation of PFINA.
During the pendency of the motions for reconsideration, the University of the
Philippines filed a motion for intervention, alleging that the properties under protest form part
of the vast tract of land that is the U.P. Campus, registered under the name of U.P.
The Court granted the motion for intervention of U.P. and acknowledged the decision
in Roberto A. Pael, et al. vs. Court of Appeals, et al., supra, wherein the title of the Paels was
declared to be of dubious origin and a fabrication. Hence, since respondents derive their titles
from a defective title, their titles should also be null and void.
Due to conflicting claims between U.P. and the respondents Chin and Mallari, the Court
remanded the case to the Court of Appeals for reception of evidence on the conflicting claims.
The motions for reconsideration filed by petitioners are denied for lack of merit.
SIULIONG vs. DIRECTOR OF COMMERCE AND INDUSTRY
G.R. No. L-15429, December 1, 1919

FACTS: As stipulated in the petition, the petitioners had been associated together as partners,
which partnership known as mercantile regular colectiva, under the style and firm name of
Siuliong y Cia. The petitioners wanted to dissolve the said partnership and to form a
corporation composed of the same persons as incorporators to be known as Siuliong y
Compaia, Incorporada. It was further stated that the purpose of said corporation is to acquire
the business of the partnership and to continue said business with some of its objects or
purposes.
The respondent in his argument in support of the demurrer contends that the proposed
articles of incorporation presented for file and registry permitted the petitioners to engage in a
business which had for its end more than one purpose; that it permitted the petitioners to
engage in the banking business, and to deal in real estate, in violation of the Act of Congress.
The petitioners while insisting that said proposed articles of incorporation do not
permit it to enter into the banking business nor to engage in the purchase and sale of real
estate in violation of said Act of Congress, expressly renounced in open court their right to
engage in such business under their article of incorporation.

ISSUE: Did the Articles of Incorporation of Siuliong y Cia, Inc. permitted it to engage in a
business with more than one purpose?

RULING: Yes. Upon reading the proposed Articles of Incorporation, it is clear that the principal
purpose of said corporation is to engage in a mercantile business, with the power to do and
perform the particular acts enumerated in said sub-paragraphs.
The Court is of the opinion and decided that a corporation may be organized under the
laws of the Philippine Islands for mercantile purposes, and to engage in such incidental
business as may be necessary and advisable to give effect to, and aid in, the successful
operation and conduct of the principal business.
In this case, the Court is fully persuaded that all the power and authority included in the
articles of incorporation of Siuliong y Cia, Inc., are only incidental to the principal purpose of
said proposed incorporation The purchase and sale, importation and exportation of the
products of the country, as well as of foreign countries, might make it necessary to purchase
and discount promissory notes, bills of exchange, bonds, negotiable instruments, stock, and
interest in other mercantile and industrial associations. It might also become important and
advisable for the successful operation of the corporation to act as agent for insurance
companies as well as to buy, sell, and equip boats and to buy and sell other establishments,
and industrial and mercantile businesses.
The Court is satisfied that the articles of incorporation does not contain anything
violate of the provisions of the laws of the Philippines, thus, petitioners are entitled to have
such articles of incorporation filed and registered as prayed for by them and to have issued to
them a certificate under seal of the office of the respondent, setting forth that such articles of
incorporation have been duly filed in his office.
ASUNCION, ET AL. vs. DE YRIARTE
G.R. No. 9321, September 24, 1914

FACTS: The municipality of Pasig as recognized by law contains within its limits several barrios
and small settlements, like Pulo or San Miguel, which have no local government of their own
but are governed by the municipality of Pasig through its municipal president and council. The
municipality of Pasig is a municipal corporation organized by law. It has control of all property
of the municipality. If there is any public property situated in the barrio of Pulo or San Miguel
not belonging to the general government or the province, it belongs to the municipality of
Pasig and the sole authority to manage and administer the same resides in that municipality.
The petitioners filed an action for mandamus to compel the chief of the division of
archives of the Executive Bureau to file the articles of incorporation of the barrio of Pulo or San
Miguel. The application for registration of the articles of incorporation was denied by the
respondent because the proposed purpose of the Corporation is unlawful. The trial court
affirmed the decision of the defendant and stating that respondents duty is ministerial in
character but can still act on the lawfulness of the purposes of the proposed corporation.

ISSUE: Whether the purposes stated in the articles of incorporation are valid.

RULING: The object of the proposed corporation, as appears from the articles offered for
registration, is to make of the barrio of Pulo or San Miguel a corporation which will become the
owner of and have the right to control and administer any property belonging to the
municipality of Pasig found within the limits of that barrio. The Supreme Court ruled that this
cannot be permitted. Otherwise municipalities as now established by law could be deprived of
the property which they now own and administer. Each barrio of the municipality would
become under the scheme proposed, a separate corporation, would take over the ownership,
administration, and control of that portion of the municipal territory within its limits. This
would disrupt, in a sense, the municipalities of the Islands by dividing them into a series of
smaller municipalities entirely independent of the original municipality.
What the law does not permit cannot be obtained by indirection. The object of the
proposed corporation is clearly repugnant to the provisions of the Municipal Code and the
governments of municipalities as they have been organized.
The judgment appealed from is affirmed.
DAVAO LIGHT & POWER CO., INC., vs. COURT OF APPEALS
G.R. No. 111685, August 20, 2001

FACTS: On April 10, 1992, Davao Light & Power Co., Inc., filed a complaint for damages
against Francisco Tesorero before the Regional Trial Court of Cebu City. In lieu of an answer,
respondent filed a motion to dismiss claiming among others that the case was filed in an
improper venue.
The case was dismissed by the trial court on the ground of improper venue.
Plaintiff being a private corporation has its principal place of business in Banilad, Cebu
City as alleged in the complaint and which for purposes of venue is considered as its residence.
However, in defendants motion to dismiss, it is alleged and submitted that the
principal office of plaintiff is at 163-165 P. Reyes Street, Davao City as borne out by the
Contract of Lease and another Contract of Lease of Generating Equipment executed by the
plaintiff with the NAPOCOR. Thus, the case should be filed in Davao City and not in Cebu City.

ISSUE: Whether the case was filed in an improper venue.

RULING: No. The case was not filed by Davao Light & Power Co., Inc., in an improper venue. It
cannot be disputed that petitioners principal office is in Cebu City, per its amended articles of
incorporation and by-laws. An action for damages being a personal action, venue is
determined pursuant to Rule 4, Section 2 of the Rules of Court, to wit:
Venue of personal actions. All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
Private respondent is not a party to any of the contracts presented before the Court. He
is a complete stranger to the covenants executed between petitioner and NAPOCOR, despite
his protestations that he is privy thereto, on the rather flimsy ground that he is a member of
the public for whose benefit the electric generating equipment subject of the contracts were
leased or acquired. The Court is likewise not persuaded by respondents argument that the
allegation or representation made by petitioner in either the complaints or answers it filed in
several civil cases that its residence is in Davao City should estop it from filing the damage suit
before the Cebu courts. Besides there is no showing that private respondent is a party in those
civil cases or that he relied on such representation by petitioner.
Thus, the petition is granted and the trial court of Cebu City is directed to proceed with
the Civil Case against respondent.
CLAVECILLIA RADIO SYSTEM, vs. HON. AGUSTIN ANTILLON
G.R. No. L-22238, February 18, 1967

FACTS: On June 22, 1963, the New Cagayan Grocery filed a complaint against the Clavecilla
Radio System alleging that on March 12, 1963, the following message, addressed to the
former, was filed at the latter's Bacolod Branch Office for transmittal thru its branch office at
Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL
SHIP LATER REPLY POHANG
The Cagayan de Oro branch office having received the said message omitted, in
delivering the same to the New Cagayan Grocery, the word "NOT" between the words
"WASHED" and "AVAILABLE," thus changing entirely the contents and purport of the same
and causing the said addressee to suffer damages.
After service of summons, the Clavecilla Radio System filed a motion to dismiss the
complaint on the grounds that it states no cause of action and that the venue is improperly
laid. The City Judge, on September 18, 1963, denied the motion to dismiss for lack of merit and
set the case for hearing. Hence, the Clavecilla Radio System filed a petition for prohibition with
preliminary injunction with the Court of First Instance praying that the City Judge, Honorable
Agustin Antillon, be enjoined from further proceeding with the case on the ground of improper
venue. The respondents filed a motion to dismiss the petition but this was opposed by the
petitioner. Later, the motion was submitted for resolution on the pleadings.

ISSUE: Whether or not the proper venue where the suit should be filed is in the City of Manila

HELD: Yes. Settled is the principle in corporation law that the residence of a corporation is the
place where its principal office is established. Since it is not disputed that the Clavecilla Radio
System has its principal office in Manila, it follows that the suit against it may properly be filed
in the City of Manila. The term "may be served with summons" does not apply when the
defendant resides in the Philippines for, in such case, he may be sued only in the municipality
of his residence, regardless of the place where he may be found and served with summons. As
any other corporation, the Clavecilla Radio System maintains a residence which is Manila in
this case, and a person can have only one residence at a time. The fact that it maintains branch
offices in some parts of the country does not mean that it can be sued in any of these places.
To allow an action to be instituted in any place where a corporate entity has its branch offices
would create confusion and work untold inconvenience to the corporation.
JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION v. TYSON ENTERPRISES, INC.
G.R. No. L-56763, December 15, 1982

FACTS: On August 29, 1979, Tyson Enterprises, Inc. filed against John Sy and Universal Parts
Supply Corporation in the Court of First Instance of Rizal, Pasig Branch XXI, a complaint for the
collection of P288,534.58 plus interest, attorney's fees and litigation expenses. John Sy, doing
business under the trade name, Universal Parts Supply, is a resident of Fuentebella
Subdivision, Bacolod City and that his co-defendant, Universal Parts Supply Corporation,
allegedly controlled by Sy, is doing business in Bacolod City. There is no allegation in the
complaint as to the office or place of business of plaintiff Tyson Enterprises, Inc., a firm actually
doing business at 1024 Magdalena, now G. Masangkay Street, Binondo, Manila.
What is alleged is the postal address or residence of Dominador Ti, the president and
general manager of plaintiff firm, which is at 26 Xavier Street, Greenhills Subdivision, San Juan,
Rizal. The evident purpose of alleging that address and not mentioning the place of business of
plaintiff firm was to justify the filing of the suit in Pasig, Rizal instead of in Manila.
Defendant Sy and Universal Parts Supply Corporation filed a motion to dismiss on the
ground of improper venue.To strengthen that ground, they also cited the stipulation in the
sales invoice that "the parties expressly submit to the jurisdiction of the Courts of the City of
Manila for any legal action arising out of" the transaction which stipulation is quoted in
paragraph 4 of plaintiff's complaint.
The plaintiff opposed the motion to dismiss on the ground that the defendants had
waived the objection based on improper venue because they had previously filed a motion for
a bill of particulars which was not granted.

ISSUE: Whether or not the collection suit should be filed in Pasig

HELD: The collection suit should have been filed in Manila, the residence of plaintiff
corporation and the place designated in its sales invoice, or it could have been filed also in
Bacolod City, the residence of defendant Sy. The place of business of plaintiff Tyson
Enterprises, Inc., which for purposes of venue is considered as its residence because a
corporation has a personality separate and distinct from that of its officers and stockholders.
The choice of venue should not be left to the plaintiff's 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.
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.
YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA v. COURT OF APPEALS
G.R. No. 104175, June 25, 1993

FACTS: Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its president,
Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing &
Development Corporation (CMDC) to Roxas. After the execution of the agreement, Roxas took
full control of the four markets of CMDC. However, the vendors held on to the stock
certificates of CMDC as security pending full payment of the balance of the purchase
price.Roxas sold one of the markets to a third party. Out of the proceeds of the sale, YASCO
received P600,000.00, leaving a balance of P3,400,000.00.
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the
proceeds of the sale of the CMDC shares to Nemesio Garcia. On June 10, 1988, petitioners filed
a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu City, praying that Roxas
be ordered to pay petitioners the sum of P3,400,00.00 or that full control of the three markets
be turned over to YASCO and Garcia. On August 22, 1988, Roxas filed a motion to dismiss on
the ground that the venue was improperly laid.

ISSUE:Whether or not the venue should be in Pasay City, and not in Cebu City, where both
petitioners/plaintiffs are residents

HELD: No. The suit is properly filed in Cebu, City. A corporation has no residence in the same
sense in which this term is applied to a natural person. But 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. The Corporation Code precisely requires each corporation to
specify in its articles of incorporation the "place where the principal office of the corporation is
to be located which must be within the Philippines". The purpose of this requirement is to fix
the residence of a corporation in a definite place, instead of allowing it to be ambulatory.
In this case, The Article of Incorporation of YASCO states: That the place where the
principal office of the corporation is to be established or located is at Cebu City, Philippines (as
amended on December 20, 1980 and further amended on December 20, 1984). If it was Roxas
who sued YASCO in Pasay City and the latter questioned the venue on the ground that its
principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel
because it misled Roxas to believe that Pasay City was its principal place of business. But this is
not the case before us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City,
where its principal place of business is located, it becomes unnecessary to decide whether
Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the
choice of Cebu City as the venue.
ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC. v. SECURITIES &
EXCHANGE COMMISSION
G.R. No. L-23606, July 29, 1968

FACTS: Petitioner Alhambra Cigar and Cigarette Manufacturing Company, Inc. (Alhambra) was
duly incorporated under Philippine laws on January 15, 1912. By its corporate articles it was to
exist for fifty (50) years from incorporation. Its term of existence expired on January 15, 1962.
On that date, it ceased transacting business, entered into a state of liquidation. Thereafter, a
new corporation. Alhambra Industries, Inc. was formed to carry on the business of
Alhambra.
On June 20, 1963 within Alhambra's three-year statutory period for liquidation -
Republic Act 3531 was enacted into law. It amended Section 18 of the Corporation Law; it
empowered domestic private corporations to extend their corporate life beyond the period
fixed by the articles of incorporation for a term not to exceed fifty years in any one instance.
Previous to Republic Act 3531, the maximum non-extendible term of such corporations was
fifty years.
On July 15, 1963, at a special meeting, Alhambra's board of directors resolved to amend
paragraph "Fourth" of its articles of incorporation to extend its corporate life for an additional
fifty years, or a total of 100 years from its incorporation.
On October 28, 1963, Alhambra's articles of incorporation as so amended certified
correct by its president and secretary and a majority of its board of directors, were filed with
respondent Securities and Exchange Commission (SEC).
On November 18, 1963, SEC, however, returned said amended articles of incorporation
to Alhambra's counsel with the ruling that Republic Act 3531 "which took effect only on June
20, 1963, cannot be availed of by the said corporation, for the reason that its term of existence
had already expired when the said law took effect in short, said law has no retroactive effect."

ISSUE: Whether or not Alhambra can extend its corporate life for an additional fifty years

HELD: No. Under the law, no corporation in a state of liquidation can act in any way; much
less amend its articles, "for the purpose of continuing the business for which it was
established".
Since the privilege of extension is purely statutory, all of the statutory conditions
precedent must be complied with in order that the extension may be effectuated. And,
generally these conditions must be complied with, and the steps necessary to effect the
extension must be taken, during the life of the corporation, and before the expiration of the term
of existence as original fixed by its charter or the general law, since, as a rule, the corporation is
ipso facto dissolved as soon as that time expires. So where the extension is by amendment of
the articles of incorporation, the amendment must be adopted before that time. And, similarly,
the filing and recording of a certificate of extension after that time cannot relate back to the
date of the passage of a resolution by the stockholders in favor of the extension so as to save
the life of the corporation. The contrary is true, however, and the doctrine of relation will
apply, where the delay is due to the neglect of the officer with whom the certificate is required
to be filed, or to a wrongful refusal on his part to receive it. And statutes in some states
specifically provide that a renewal may be had within a specified time before or after the time
fixed for the termination of the corporate existence.
MSCI-NACUSIP vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION
G.R. No. 125198, March 3, 1997

FACTS: On January 11, 1990, Asturias Sugar Central, Inc. (ASCI), executed a Memorandum of
Agreement with Monomer Trading Industries, Inc. (MTII), 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, a new corporation was organized and incorporated on
February 15, 1990 under the corporate name Monomer Sugar Central, Inc. or MSCI, the private
respondent herein.
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), 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.
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,
cannot be said to be sufficient to meet the required 25% in order to qualify for the exemption.

ISSUE: Whether or not the correct paid-up capital of MSCI for the pertinent period covered by
the application for exemption is P5 million or P64,688,528.00

HELD: By express provision of Section 13, paid-up capital is that portion of the authorized
capital stock which has been both subscribed and paid. In the case under consideration, there
is no dispute, and the Board even mentioned that MSCI was organized and incorporated on
February 15, 1990 with an authorized capital stock of P60 million, P20 million of which was
subscribed. Of the P20 million subscribed capital stock, P5 million was paid-up. This fact is only
too glaring for the Board to have been misled into believing that MSCI's paid-up capital stock
was P64 million plus and not P5 million.
Not all funds or assets received by the corporation can be considered paid-up capital,
for this term has a technical signification in Corporation Law. Such must form part of the
authorized capital stock of the corporation, subscribed and then actually paid up.
The paid-up capital stock of MSCI for the period covered by the application for
exemption still stood at P5 million. The losses, therefore, amounting to P3,400,738.00 for the
period February 15, 1990 to August 31, 1990 impaired MSCI's paid-up capital of P5 million by as
much as 68%. Likewise, the losses incurred by MSCI for the interim period from September 1,
1990 to November 30, 1990, as found by the Commission, per MSCI's quarterly income
statements, amounting to P13,554,337.33 impaired the company's paid-up capital of P5 million
by a whopping 271.08%, more than enough to qualify MSCI as a distressed employer.
Respondent Commission thus acted well within its jurisdiction in granting MSCI full exemption
from Wage Order No. RO VI-01 as a distressed employer.
Zuellig Freight v. National Labor Relations Commission
G.R. No. 157900 July 22, 2013

FACTS: Ronaldo San Miguel brought a complaint for unfair labor practice/illegal dismissal
against Zeta Brokerage Corporation (old name of petitioner). He alleged that he had been a
checker/customs representative of Zeta and that he, together of some of the employees, was
terminated from employments because the business will stop operations. He contended that
the amendments of the article of incorporation of Zeta for purposes of changing the
corporation name, broadening the primary functions, and increasing the capital stock does not
mean that the corporation is dissolve resulting to the cessation of business operation.
Zuellig contends that the termination of respondent is for a valid cause authorized by
the Labor Code which is cessation of business operation. That the termination of employees is
a valid management prerogative and that they offered employment to respondent but the
latter failed to signify his acceptance at the designated period of time.

ISSUE: Whether the amendment of article of incorporation and the change of name of a
corporation warrants closure of business operation.

HELD: No. The amendments of the article of incorporation of Zeta to change the corporation
name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of the former
corporation. For sure, the Corporation Code defined and delineated the different modes of
dissolution of a corporation, and amendment of articles of incorporation was not one of them.
The effect of the change of name was not a change of the corporate being. Zeta and petitioner
remains the same corporation. The change of name did not give petitioner the license to
terminate the employees of Zeta like respondent without authorized cause Despite its new
name, Zuellig was mere continuation of Zetas corporate being, and still held the obligation to
honor all of Zetas obligations, one of which was to respect respondents security of tenure.
Hence, San Miguel was illegally dismissed.
Republic v. Court of Appeals
G.R. No. 93073, December 21, 1992

FACTS: Yamaguchi and Fermin Canlas, President and Treasurer respectively of Worldwide
Garment Manufacturing, Inc. By virtue of a board resolution, they were authorized to apply for
credit facilities with the Republic Planters Bank in the form of exports advances and letters of
credit/trust receipts accommodation. Nine promissory notes were issued by the bank. The
note became due and no payment was made.
On February 5, 1982, petitioner bank filed a complaint against the Worldwide Garment
Manufacturing, Inc., Canlas and Yamaguchi for recovery of sums of money covered by the nine
promissory notes. But the claim against the corporation later on was dropped. On December
20, 1982, Worldwide Garment Manufacturing, Inc. changed its name to Pinch Manufacturing
Corporation.
Pinch Manufacturing Corporation, together with Canlas and Yamaguchi, was made
solidarily liable for the payment of the nine promissory notes.
Canlas, in his defense, averred that he should not be held liable for such authorized
corporate acts that he performed inasmuch as he signed the promissory notes in his capacity
as officer of the defunct Worldwide Garment Manufacturing.

ISSUE: Whether Canlas should be held liable for the promissory notes.

HELD: Yes. Canlas is solidarily liable on the promissory note that bears his signature. Under
the Negotiable lnstruments Law, persons who write their names on the face of promissory
notes are makers and are liable as such. By signing the notes, the maker promises to pay to
the order of the payee or any holder according to the tenor thereof. This was made clearer and
certain, without reason for ambiguity, by the presence of the phrase joint and several as
describing the unconditional promise to pay to the order of Republic Planters Bank. Where an
instrument containing the words I promise to pay is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
As to the liability of Pinch Manufacturing Corporation, such is not extinguished when
the article of incorporation of the latter was amended and corporate name was changed.
The corporation, upon such change in the name, is no sense a new corporation, nor the
successor of the original corporation. It is the same corporation with a different name, and its
character was not changed. A change in the corporate name does not make a new corporation.
Such has no effect in its rights and liabilities.
Philippine National Bank v. Hydro Resources Contractor
G.R. No. 167530, March 13, 2013

FACTS: Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made
on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the
foreclosure, DBP and PNB acquired substantially all the assets of MMIC and resumed the
business operations of the defunct MMIC by organizing NMIC. DBP and PNB owned 57% and
43% of the shares of NMIC, respectively, except for five qualifying shares. As of September
1984, the members of the Board of Directors of NMIC were either from DBP or PNB.
Subsequently, NMIC engaged the services of Hercon, Inc., for NMICs Mine Stripping
and Road Construction Program in 1985 for a total contract price of P35,770,120. After
computing the payments already made by NMIC under the program and crediting the NMICs
receivables from Hercon, Inc., the latter found that NMIC still has an unpaid balance of
P8,370,934.74.10, the former made several demands on NMIC, including a letter of final
demand dated August 12, 1986, and when these were not heeded, a complaint for sum of
money was filed in the RTC of Makati, Branch 136 seeking to hold petitioners NMIC, DBP, and
PNB solidarily liable for the amount owing Hercon, Inc.
Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a
merger.
Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB executed their
respective deeds of transfer in favor of the National Government assigning, transferring and
conveying certain assets and liabilities, including their respective stakes in NMIC. In turn and
on even date, the National Government transferred the said assets and liabilities to the APT as
trustee under a Trust Agreement.
NMIC claimed that HRCC had no cause of action. It also asserted that its contract with
HRCC was entered into by its then President without any authority.
DBPs answer, it contended that NMICs juridical personality is separate from that of
DBP.

ISSUES: Whether NMIC is an alter ego.


Whether there is sufficient ground to pierce the veil of corporate fiction of NMIC and
held DBP and PNB solidarily liable with NMIC.

HELD: No. Case law lays down a three-pronged test to determine the application of the alter
ego theory, which is also known as the instrumentality theory, namely:
(1) Control or instrumentality test.
This test requires that the subsidiary be completely under the control and domination of the
parent. It seeks to establish whether the subsidiary corporation has no autonomy and the
parent corporation, though acting through the subsidiary in form and appearance, is operating
the business directly for itself. This must have been exercised at the time the acts complained
of took place.
(2) Fraud test.
This test requires that the parent corporations conduct in using the subsidiary corporation be
unjust, fraudulent or wrongful. It recognizes that piercing is appropriate only if the parent
corporation uses the subsidiary in a way that harms the plaintiff creditor
(3) The aforesaid control and breach of duty must have proximately caused the injury or
unjust loss complained of. (Harm Test)
This test requires the plaintiff to show that the defendants control, exerted in a fraudulent,
illegal or otherwise unfair manner toward it, caused the harm suffered. A causal connection
between the fraudulent conduct committed through the instrumentality of the subsidiary and
the injury suffered or the damage incurred by the plaintiff should be established.
These tests had not been satisfactory met in the present case. The absence of any of
these elements prevent piercing the corporate veil. There is nothing in the records shows that
the corporate finances, policies and practices of NMIC were dominated by DBP and PNB in
such a way that NMIC could be considered to have no separate mind, will or existence of its
own but a mere conduit for DBP and PNB. On the contrary, the evidence establishes that
HRCC knew and acted on the knowledge that it was dealing with NMIC, not with NMICs
stockholders.
DBP and PNB maintain an address different from that of NMIC. There was insufficient
proof of interlocking directorates. There was not even an allegation of similarity of corporate
officers. HRCCs evidence shows that NMIC operated as a distinct entity endowed with its own
legal personality.
Under the deeds of transfer executed by DBP and PNB, the liability of the APT as
transferee of the rights, titles and interests of DBP and PNB in NMIC will attach only if DBP and
PNB are held liable, the APT incurs no liability for the judgment indebtedness of NMIC. As such
assignee, therefore, the APT incurs no liability with respect to NMIC other than whatever
liabilities may be imputable to its assignors, DBP and PNB.
Lastly, as to contingent liability for which the National Government may be held liable
for, this refers to contingent liabilities of DBP and PNB. Since DBP and PNB may not be held
solidarily liable with NMIC, no contingent liability may be imputed to the APT as well. Only
NMIC as a distinct and separate legal entity is liable to pay its corporate obligation to HRCC in
the amount of P8,370,934.74, with legal interest thereon from date of demand.
Livesey v. Binswanger
G.R. No. 177493, March 19, 2014

FACTS: Livesey was hired by CBB \Philippines Strategic Property Services, Inc. (CBB) as
Director and Head of Business Space Development. Later on, he was designated Manging
Director. Allegedly, despite the several deals for CBB he drew up, CBB failed to pay him a
significant portion of his salary. He was compelled to resign and filed a complaint for illegal
dismissal with money claims.
CBB deny liability and alleged that it engaged Livesey as a corporate officer in April
2001: he was elected Vice-President, and thereafter, he became President. It claimed that
Livesey was later designated as Managing Director when it became an extension office of its
principal in Hongkong.
There was a compromise agreement reached by the parties. But it was not fully
complied with thus Livesey filed for a writ of execution alleging that in the process of serving
respondents the writ, he learned that respondents, in an attempt to avoid their liabilities to
complainant have organized another corporation, Binswanger Philippines, Inc. He claimed that
there was evidence showing that CBB and Binswanger Philippines, Inc. (Binswanger) are one
and the same corporation, pointing out that CBB stands for Chesterton Blumenauer
Binswanger. Invoking the doctrine of piercing the veil of corporate fiction, Livesey prayed that
an alias writ of execution be issued against respondents Binswanger and Keith Elliot, CBBs
former President, and now Binswangers President and Chief Executive Officer (CEO).

ISSUE: Whether the piercing of corporate fiction is applicable.

HELD: Yes. While it is true that 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
comprising it, the shield, however, is not at all times impenetrable and cannot be extended to a
point beyond its reason and policy. Circumstances might deny a claim for corporate
personality, under the "doctrine of piercing the veil of corporate fiction."
Piercing the veil of corporate fiction is an equitable doctrine developed to address
situations where the separate corporate personality of a corporation is abused or used for
wrongful purposes. Under the doctrine, the corporate existence may be disregarded where the
entity is formed or used for non-legitimate purposes, such as to evade a just and due
obligation, or to justify a wrong, to shield or perpetrate fraud or to carry out similar or
inequitable considerations, other unjustifiable aims or intentions, in which case, the fiction will
be disregarded and the individuals composing it and the two corporations will be treated as
identical.
In the present case, there is indubitable link between CBBs closure and Binswangers
incorporation. CBB ceased to exist in name only; it re-emerged in the person of Binswanger. It
was not just coincidence that Binswanger is engaged in the same line of business CBB
embarked on: (1) it even holds office in the very same building and on the very same floor
where CBB once stood; (2) CBBs key officers, Elliot, no less, and Catral moved over to
Binswanger, performing the tasks they were doing at CBB; (3) notwithstanding CBBs closure,
Binswangers Web Editor (Young), in an e-mail correspondence, supplied the information that
Binswanger is "now known" as either CBB (Chesterton Blumenauer Binswanger or as
Chesterton Petty, Ltd., in the Philippines; (4) the use of Binswanger of CBBs paraphernalia
(receiving stamp) in connection with a labor case where Binswanger was summoned by the
authorities, although Elliot claimed that he bought the item with his own money; and (5)
Binswangers takeover of CBBs project with the PNB.
To pave way for CBBs reappearance as Binswanger, it is very much evident in CBBs
demise and Binswangers creation. It is quite obvious then that the purpose of closing and
putting up new corporation by CBB is to evade CBBs liabilities to Livesey and its other financial
liabilities.
WPM International Trading, Inc. v. Fe Corazon Labayen
G.R. No. 182770, September 17, 2014

FACTS: Labayen is the owner of H.B.O. Systems Consultants, a management and consultant
firm. WPM entered into a management agreement with respondent by virtue of which the
respondent was authorized to operate, manage and rehabilitate Quickbite, a restaurant owned
and operated by WPM. As part of her tasks, the respondent looked for a contractor who would
renovate the two existing Quickbite outlets in Divisoria, Manila and Lepanto St., University
Belt, Manila. Pursuant to the agreement, the respondent engaged the services of CLN
Engineering Services (CLN) to renovate Quickbite-Divisoria at the cost of P432,876.02. This
amount was not fully paid when the renovation was finished. Hence, complaint for collection
of sum of money was instituted against respondent. Respondent in turn instituted a complaint
for damages against WPM and Manlapaz alleging that she be reimbursed.
Manlapaz, the president of WPM alleged that he cannot be liable because WMP has a
separate and distinct personality.

ISSUES:
(1) Whether WPM is a mere instrumentality, alter-ego, and business conduit of
Manlapaz
(2) Whether Manlapaz is jointly and severally liable with WPM to the respondent for
reimbursement, damages and interest

HELD: No. WPM is not a mere alter ego of Manlapaz. Manlapaz is only a principal stockholder
of WPM. Records do not show that WPM was organized and controlled, and its affairs
conducted in a manner that made it merely an instrumentality, agency, conduit or adjunct of
Manlapaz. As held in Martinez v. Court of Appeals, 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. To disregard the separate juridical personality
of a corporation, the wrongdoing must be clearly and convincingly established.
Manlapaz had no control/domination over WPM or its finances. Thus, the control
necessary to invoke the instrumentality or alter ego rule is not majority or even complete stock
control but such domination of finances, policies and practices that the controlled corporation
has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its
principal. The control must be shown to have been exercised at the time the acts complained
of took place. Moreover, the control and breach of duty must proximately cause the injury or
unjust loss for which the complaint is made.
On the contrary, the evidence establishes that CLN and the respondent knew and acted
on the knowledge that they were dealing with WPM for the renovation of the latters
restaurant, and not with Manlapaz.
Since there is no proof that WPM attempts to avoid liability or has no property against
which to proceed, Manlapaz should not be held liable jointly and severally to respondent. Only
WPM is liable to indemnify the respondent.
Lanuza v. BF Corporation
G.R. No. 174938; October 1, 2014

FACTS: In 1993, BF Corporation filed a collection complaint with the Regional Trial Court
against Shangri-La and the members of its board of directors: Alfredo C. Ramos, Rufo B.
Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G. Licauco III, and Benjamin C.
Ramos.
BF Corporation alleged in its complaint that on December 11, 1989 and May 30, 1991, it
entered into agreements with Shangri-La wherein it undertook to construct for Shangri-La a
mall and a multilevel parking structure along EDSA.
Shangri-La had been consistent in paying BF Corporation in accordance with its
progress billing statements. However, by October 1991, Shangri-La started defaulting in
payment.
BF Corporation alleged that Shangri-La induced BF Corporation to continue with the
construction of the buildings using its own funds and credit despite Shangri-Las default.
According to BF Corporation, Shangri-La misrepresented that it had funds to pay for its
obligations with BF Corporation, and the delay in payment was simply a matter of delayed
processing of BF Corporations progress billing statements.
BF Corporation eventually completed the construction of the buildings. Shangri-La
allegedly took possession of the buildings while still owing BF Corporation an outstanding
balance.
BF Corporation alleged that despite repeated demands, Shangri-La refused to pay the
balance owed to it. It also alleged that the Shangri-Las directors were in bad faith in directing
Shangri-Las affairs. Therefore, they should be held jointly and severally liable with Shangri-La
for its obligations as well as for the damages that BF Corporation incurred as a result of
Shangri-Las default.
On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco
III, and Benjamin C. Ramos filed a motion to suspend the proceedings in view of BF
Corporations failure to submit its dispute to arbitration, in accordance with the arbitration
clause provided in its contract.

ISSUE: Whether or not petitioners should be made parties to the arbitration proceedings,
pursuant to the arbitration clause provided in the contract between BF Corporation and
Shangri-La

HELD: The court ruled that petitioners may be compelled to submit to the arbitration
proceedings in accordance with Shangri-La and BF Corporations agreement, in order to
determine if the distinction between Shangri-Las personality and their personalities should be
disregarded.
This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to
avoid litigation and settle disputes amicably and more expeditiously by themselves and
through their choice of arbitrators. In view of our policy to adopt arbitration as a manner of
settling disputes, arbitration clauses are liberally construed to favor arbitration.
A corporation is an artificial entity created by fiction of law. This means that while it is
not a person, naturally, the law gives it a distinct personality and treats it as such. A
corporation, in the legal sense, is an individual with a personality that is distinct and separate
from other persons including its stockholders, officers, directors, representatives, and other
juridical entities. Because a corporations existence is only by fiction of law, it can only exercise
its rights and powers through its directors, officers, or agents, who are all natural persons. A
corporation cannot sue or enter into contracts without them.
A consequence of a corporations separate personality is that consent by a corporation
through its representatives is not consent of the representative, personally. Its obligations,
incurred through official acts of its representatives, are its own. A stockholder, director, or
representative does not become a party to a contract just because a corporation executed a
contract through that stockholder, director or representative. Hence, a corporations
representatives are generally not bound by the terms of the contract executed by the
corporation. They are not personally liable for obligations and liabilities incurred on or in behalf
of the corporation.
As a general rule, therefore, a corporations representative who did not personally bind
himself or herself to an arbitration agreement cannot be forced to participate in arbitration
proceedings made pursuant to an agreement entered into by the corporation. He or she is
generally not considered a party to that agreement.
However, there are instances when the distinction between personalities of directors,
officers, and representatives, and of the corporation, are disregarded. We call this piercing the
veil of corporate fiction.
Piercing the corporate veil is warranted when "the separate personality of a corporation
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, or to confuse legitimate issues." It is also
warranted in 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."
When corporate veil is pierced, the corporation and persons who are normally treated
as distinct from the corporation are treated as one person, such that when the corporation is
adjudged liable, these persons, too, become liable as if they were the corporation.
When there are allegations of bad faith or malice against corporate directors or
representatives, it becomes the duty of courts or tribunals to determine if these persons and
the corporation should be treated as one. Without a trial, courts and tribunals have no basis for
determining whether the veil of corporate fiction should be pierced.
In ruling that petitioners may be compelled to submit to the arbitration proceedings,
we are not overturning Heirs of Augusto Salas wherein this court affirmed the basic arbitration
principle that only parties to an arbitration agreement may be compelled to submit to
arbitration. In that case, this court recognized that persons other than the main party may be
compelled to submit to arbitration, e.g., assignees and heirs. Assignees and heirs may be
considered parties to an arbitration agreement entered into by their assignor because the
assignors rights and obligations are transferred to them upon assignment.
The issue of whether the corporations acts in violation of complainants rights, and the
incidental issue of whether piercing of the corporate veil is warranted, should be determined in
a single proceeding. Such finding would determine if the corporation is merely an aggregation
of persons whose liabilities must be treated as one with the corporation.
Thus, in cases alleging solidary liability with the corporation or praying for the piercing
of the corporate veil, parties who are normally treated as distinct individuals should be made to
participate in the arbitration proceedings in order to determine if such distinction should
indeed be disregarded and, if so, to determine the extent of their liabilities.
In this case, the Arbitral Tribunal rendered a decision, finding that BF Corporation failed
to prove the existence of circumstances that render petitioners and the other directors,
solidarily liable. It ruled that petitioners and Shangri-Las other directors were not liable for the
contractual obligations of Shangri-La to BF Corporation. The Arbitral Tribunals decision was
made with the participation of petitioners, albeit with their continuing objection. In view of our
discussion above, we rule that petitioners are bound by such decision.
Ramirez v. Mar Fishing, Inc.
G.R. No. 168208; June 13, 2012

FACTS: On 28 June 2001, respondent Mar Fishing Co., Inc. engaged in the business of fishing
and canning of tuna, sold its principal assets to co-respondent Miramar Fishing Co., Inc.
through public bidding. The proceeds of the sale were paid to the Trade and Investment
Corporation of the Philippines to cover Mar Fishings outstanding obligation in the amount of P
897,560,041.26.2 In view of that transfer, Mar Fishing issued a Memorandum dated 23 October
2001 informing all its workers that the company would cease to operate by the end of the
month. On 29 October 2001 or merely two days prior to the months end, it notified the DOLE
of the closure of its business operations.
Thereafter, Mar Fishings labor union, Mar Fishing Workers Union NFL and Miramar
entered into a Memorandum of Agreement. The Agreement provided that the acquiring
company, Miramar, shall absorb Mar Fishings regular rank and file employees whose
performance was satisfactory, without loss of seniority rights and privileges previously
enjoyed.
Unfortunately, petitioners, who worked as rank and file employees, were not hired or
given separation pay by Miramar. Thus, petitioners filed Complaints for illegal dismissal with
money claims.

ISSUE: Whether or not Mar Fishing and Miramar are solidarily liable to pay petitioners
monetary claims

HELD: Petitioners assert that these companies are one and the same entity, given the
commonality of their directors and the similarity of their business venture in tuna canning
plant operations.
At the fore, the question of whether one corporation is merely an alter ego of another is
purely one of fact generally beyond the jurisdiction of this Court. In any case, given only these
bare reiterations, this Court sustains the ruling of the LA as affirmed by the NLRC that Miramar
and Mar Fishing are separate and distinct entities, based on the marked differences in their
stock ownership. Also, the fact that Mar Fishings officers remained as such in Miramar does
not by itself warrant a conclusion that the two companies are one and the same. As this Court
held in Sesbreo v. Court of Appeals, the mere showing that the corporations had a common
director sitting in all the boards without more does not authorize disregarding their separate
juridical personalities.
Neither can the veil of corporate fiction between the two companies be pierced by the
rest of petitioners submissions, namely, the alleged take-over by Miramar of Mar Fishings
operations and the evident similarity of their businesses. At this point, it bears emphasizing
that since piercing the veil of corporate fiction is frowned upon, those who seek to pierce the
veil must clearly establish that the separate and distinct personalities of the corporations are
set up to justify a wrong, protect a fraud, or perpetrate a deception. This, unfortunately,
petitioners have failed to do.
Having been found by the trial courts to be a separate entity, Mar Fishing and not
Miramar is required to compensate petitioners. Indeed, the back wages and retirement pay
earned from the former employer cannot be filed against the new owners or operators of an
enterprise.
Sarona v. NLRC
G.R. No. 185280; January 18, 2012

FACTS: On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard
sometime in April 1976, was asked by Karen Therese Tan, Sceptres Operation Manager, to
submit a resignation letter as the same was supposedly required for applying for a position at
Royale. The petitioner was also asked to fill up Royales employment application form, which
was handed to him by Royales General Manager, respondent Cesar Antonio Tan II.
After several weeks of being in floating status, Royales Security Officer, Martin Gono,
assigned the petitioner at Highlight Metal Craft, Inc. from July 29, 2003 to August 8, 2003.
Thereafter, the petitioner was transferred and assigned to Wide Wide World Express, Inc.
During his assignment at Highlight Metal, the petitioner used the patches and agency cloths of
Sceptre and it was only when he was posted at WWWE, Inc. that he started using those of
Royale.
On September 17, 2003, the petitioner was informed that his assignment at WWWE,
Inc. had been withdrawn because Royale had allegedly been replaced by another security
agency. The petitioner, however, shortly discovered thereafter that Royale was never replaced
as WWWE, Inc.s security agency. When he placed a call at WWWE, Inc., he learned that his
fellow security guard was not relieved from his post.
On September 21, 2003, the petitioner was once again assigned at Highlight Metal,
albeit for a short period from September 22, 2003 to September 30, 2003. Subsequently, when
the petitioner reported at Royales office on October 1, 2003, Martin informed him that he
would no longer be given any assignment per the instructions of Aida Sabalones-Tan, general
manager of Sceptre. This prompted him to file a complaint for illegal dismissal on October 4,
2003.

ISSUE: Whether or not Royales corporate fiction should be pierced for the purpose of
compelling it to recognize the petitioners length of service with Sceptre and for holding it
liable for the benefits that have accrued to him arising from his employment with Sceptre

HELD: Any application of the doctrine of piercing the corporate veil should be done with
caution. A court should be mindful of the milieu where it is to be applied. It must be certain
that the corporate fiction was misused to such an extent that injustice, fraud, or crime was
committed against another, in disregard of rights. The wrongdoing must be clearly and
convincingly established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.
Whether the separate personality of the corporation should be pierced hinges on
obtaining facts appropriately pleaded or proved. 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.
As correctly pointed out by the petitioner, it was Aida who exercised control and
supervision over the affairs of both Sceptre and Royale. Aidas control over Sceptre and Royale
does not, by itself, call for a disregard of the corporate fiction. There must be a showing that a
fraudulent intent or illegal purpose is behind the exercise of such control to warrant the
piercing of the corporate veil. However, the manner by which the petitioner was made to
resign from Sceptre and how he became an employee of Royale suggest the perverted use of
the legal fiction of the separate corporate personality. It is undisputed that the petitioner
tendered his resignation and that he applied at Royale at the instance of Karen and Cesar and
on the impression they created that these were necessary for his continued employment. They
orchestrated the petitioners resignation from Sceptre and subsequent employment at Royale,
taking advantage of their ascendancy over the petitioner and the latters lack of knowledge of
his rights and the consequences of his actions. Furthermore, that the petitioner was made to
resign from Sceptre and apply with Royale only to be unceremoniously terminated shortly
thereafter leads to the ineluctable conclusion that there was intent to violate the petitioners
rights as an employee, particularly his right to security of tenure. The respondents scheme
reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be
merged as a single entity, compelling Royale to credit and recognize the petitioners length of
service with Sceptre. The respondents cannot use the legal fiction of a separate corporate
personality for ends subversive of the policy and purpose behind its creation or which could not
have been intended by law to which it owed its being.
As ruled in Prince Transport, Inc., et al. v. Garcia, et al., it is the act of hiding behind the
separate and distinct personalities of juridical entities to perpetuate fraud, commit illegal acts,
evade ones obligations that the equitable piercing doctrine was formulated to address and
prevent:
A settled formulation of the doctrine of piercing the corporate veil 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 these two entities are distinct and treat them as identical or as one
and the same. In the present case, it may be true that Lubas is a single proprietorship
and not a corporation. However, petitioners attempt to isolate themselves from and
hide behind the supposed separate and distinct personality of Lubas so as to evade
their liabilities is precisely what the classical doctrine of piercing the veil of corporate
entity seeks to prevent and remedy.
Taking the foregoing in conjunction with Aidas control over Sceptres and Royales
business affairs, it is patent that Royale was a mere subterfuge for Aida. Since a sole
proprietorship does not have a separate and distinct personality from that of the owner of the
enterprise, the latter is personally liable. This is what she sought to avoid but cannot prosper.
Effectively, the petitioner cannot be deemed to have changed employers as Royale and
Sceptre are one and the same.
Gold Line Tours v. Heirs of Lacsa
G.R. No. 159108; June 18, 2012

FACTS: On August 2, 1993, Ma. Concepcion Lacsa and her sister, Miriam Lacsa, boarded a
Goldline passenger bus owned and operated by Travel &Tours Advisers, Inc. They were
enroute from Sorsogon to Cubao, Quezon City. At the time, Concepcion, having just obtained
her degree of Bachelor of Science in Nursing was proceeding to Manila to take the nursing
licensure board examination. Upon reaching the highway at Barangay San Agustin in Pili,
Camarines Sur, the Goldline bus, driven by Rene Abania, collided with a passenger jeepney
coming from the opposite direction and driven by Alejandro Belbis. As a result, a metal part of
the jeepney was detached and struck Concepcion in the chest, causing her instant death.
On August 23, 1993, Concepcions heirs, represented by Teodoro Lacsa, instituted in
the RTC a suit against Travel & Tours Advisers Inc. and Abania to recover damages arising from
breach of contract of carriage. The complaint, entitled Heirs of Concepcion Lacsa, represented
by Teodoro Lacsa v. Travel & Tours Advisers, Inc. (Goldline) and Rene Abania, alleged that the
collision was due to the reckless and imprudent manner by which Abania had driven the
Goldline bus.In support of the complaint, Miriam testified that Abania had been occasionally
looking up at the video monitor installed in the front portion of the Goldline bus despite driving
his bus at a fast speed; that in Barangay San Agustin, the Goldline bus had collided with a
service jeepney coming from the opposite direction while in the process of overtaking another
bus; that the impact had caused the angle bar of the jeepney to detach and to go through the
windshield of the bus directly into the chest of Concepcion who had then been seated behind
the drivers seat; that concerned bystanders had hailed another bus to rush Concepcion to the
Ago Foundation Hospital in Naga City because the Goldline bus employees and her co-
passengers had ignored Miriams cries for help; and that Concepcion was pronounced dead
upon arrival at the hospital.
To refute the plaintiffs allegations, the defendants presented SPO1 Pedro Corporal of
the Philippine National Police Station in Pili, Camarines Sur, and William Cheng, the operator
of the Goldline bus. SPO1 Corporal opined that based on his investigation report, the driver of
the jeepney had been at fault for failing to observe precautionary measures to avoid the
collision; and suggested that criminal and civil charges should be brought against the operator
and driver of the jeepney. On his part, Cheng attested that he had exercised the required
diligence in the selection and supervision of his employees; and that he had been engaged in
the transportation business since 1980 with the use of a total of 60 units of Goldline buses,
employing about 100 employees (including drivers, conductors, maintenance personnel, and
mechanics);that as a condition for regular employment, applicant drivers had undergone a
one-month training period and a six-month probationary period during which they had gotten
acquainted with Goldlines driving practices and demeanor; that the employees had come
under constant supervision, rendering improbable the claim that Abania, who was a regular
employee, had been glancing at the video monitor while driving the bus; that the incident
causing Concepcions death was the first serious incident his (Cheng) transportation business
had encountered, because the rest had been only minor traffic accidents; and that immediately
upon being informed of the accident, he had instructed his personnel to contact the family of
Concepcion.
The defendants blamed the death of Concepcion to the recklessness of Bilbes as the
driver of the jeepney, and of its operator, Salvador Romano; and that they had consequently
brought a third-party complaint against the latter.

ISSUE: Whether or not Goldline Tours Inc. (petitioner) is considered a third-party claimant in
the case Heirs of Concepcion Lacsa, represented by Teodoro Lacsa v. Travel & Tours Advisers,
Inc., et al.

HELD: The main contention of Third Party Claimant is that it is the owner of the Bus and
therefore, it should not be seized by the sheriff because the same does not belong to the
defendant Travel & Tours Advisers, Inc. (GOLDLINE) as the third party claimant and defendant
are two separate corporation with separate juridical personalities. Upon the other hand, this
Court had scrutinized the documents submitted by the Third party Claimant and found out
that William Ching who claimed to be the operator of the Travel & Tours Advisers, Inc.
(GOLDLINE) is also the President/Manager and incorporator of the Third Party Claimant
Goldline Tours Inc. and he is joined by his co-incorporators who are "Ching" and "Dy" thereby
this Court could only say that these two corporations are one and the same corporations. This
is of judicial knowledge that since Travel & Tours Advisers, Inc. came to Sorsogon it has been
known as GOLDLINE.
This Court is not persuaded by the proposition of the third party claimant that a
corporation has an existence separate and/or distinct from its members insofar as this case at
bar is concerned, for the reason that whenever necessary for the interest of the public or for
the protection of enforcement of their rights, the notion of legal entity should not and is not to
be used to defeat public convenience, justify wrong, protect fraud or defend crime.
In Palacio vs. Fely Transportation Co., where the Supreme Court held:
"Where the main purpose in forming the corporation was to evade ones
subsidiary liability for damages in a criminal case, the corporation may not be heard to
say that it has a personality separate and distinct from its members, because to allow it
to do so would be to sanction the use of fiction of corporate entity as a shield to further
an end subversive of justice (La Campana Coffee Factory, et al. v. Kaisahan ng mga
Manggagawa, etc., et al., L-5677, May 25, 1953). The Supreme Court can even
substitute the real party in interest in place of the defendant corporation in order to
avoid multiplicity of suits and thereby save the parties unnecessary expenses and delay.
(Alfonso vs. Villamor, 16 Phil. 315)."
This is what the third party claimant wants to do including the defendant in this case, to
use the separate and distinct personality of the two corporation as a shield to further an end
subversive of justice by avoiding the execution of a final judgment of the court.
As we see it, the RTC had sufficient factual basis to find that petitioner and Travel and
Tours Advisers, Inc. were one and the same entity, specifically: (a) documents submitted by
petitioner in the RTC showing that William Cheng, who claimed to be the operator of Travel
and Tours Advisers, Inc., was also the President/Manager and an incorporator of the petitioner;
and (b) Travel and Tours Advisers, Inc. had been known in Sorsogon as Goldline. On its part,
the CA cogently observed:
As stated in the (RTC) decision supra, William Ching disclosed during the trial of
the case that defendant Travel & Tours Advisers, Inc. (Goldline), of which he is an
officer, is operating sixty (60) units of Goldline buses. That the Goldline buses are used
in the operations ofdefendant company is obvious from Mr. Chengs admission. The
Amended Articles of Incorporation of Gold Line Tours, Inc. disclose that the following
persons are the original incorporators thereof: Antonio O. Ching, Maribel Lim Ching,
witness William Ching, Anita DyChing and ZosimoChing. (Rollo, pp. 105-108) We see no
reason why defendant company would be using Goldline buses in its operations unless
the two companies are actually one and the same.
Moreover, the name Goldline was added to defendants name in the Complaint. There
was no objection from William Ching who could have raised the defense that Gold Line Tours,
Inc. was in no way liable or involved. Indeed it appears to this Court that rather than Travel &
Tours Advisers, Inc. it is Gold Line Tours, Inc., which should have been named party defendant.
Be that as it may, We concur in the trial courts finding that the two companies are
actually one and the same, hence the levy of the bus in question was proper.
The RTC thus rightly ruled that petitioner might not be shielded from liability under the
final judgment through the use of the doctrine of separate corporate identity. Truly, this fiction
of law could not be employed to defeat the ends of justice.
Hacienda Luisita v. Presidential Agrarian Reform Council
G.R. No. 171101; November 22, 2011

FACTS: On July 5, 2011, this Court promulgated a Decision, denying the petition filed by
Hacienda Luisita Inc. (HLI) and affirming Presidential Agrarian Reform Council (PARC)
Resolutions with the modification that the original 6,296 qualified farmworker-beneficiaries of
Hacienda Luisita (FWBs) shall have the option to remain as stockholders of HLI.
In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI raises
the following issues for Our consideration:
A.IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE
ORIGINAL FWBs OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS
OF THE SALE OF THE 500 HECTARES AND 80.51 HECTARES OF THE HLI LAND,
BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION,
HLI, AS CORPORATE CAPITAL AND ASSETS IN SUBSTITUTION FOR THE
PORTIONS OF ITS LAND ASSET WHICH WERE SOLD TO THIRD PARTY;
(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS
OF THE LAND ASSET TO THE FWBs, WHO ARE STOCKHOLDERS OF HLI, IS
TO DISSOLVE THE CORPORATION AND DISTRIBUTE THE PROCEEDS AS
LIQUIDATING DIVIDENDS WITHOUT EVEN PAYING THE CREDITORS OF THE
CORPORATION;
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT
PROVISIONS OF THE CORPORATION CODE AND CORPORATE PRACTICE.

ISSUES:
1. Whether or not the original 6,296 qualified farmworker-beneficiaries of Hacienda
Luisita (FWBs) shall have the option to remain as stockholders of HLI
2. Whether or not the unspent balance of the proceeds of the sale of the 500 hectares
and 80.51 hectares of the HLI land should be distributed to the original 6,296 qualified
farmworker-beneficiaries of Hacienda Luisita (FWBs)

HELD:
1. In its Resolution, the Court PARTIALLY GRANTED the motions for reconsideration of
respondents PARC, et al. with respect to the option granted to the original farmworkers-
beneficiaries (FWBs) of Hacienda Luisita to remain with petitioner HLI, which option the Court
thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified FWBs
should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs
will never gain control over the subject lands given the present proportion of shareholdings in
HLI. The Court noted that the share of the FWBs in the HLI capital stock is just 33.296%. Thus,
even if all the holders of this 33.296% unanimously vote to remain as HLI stockholders, which is
unlikely, control will never be in the hands of the FWBs. Control means the majority of 50%
plus at least one share of the common shares and other voting shares. Applying the formula to
the HLI stockholdings, the number of shares that will constitute the majority is 295,112,101
shares (590,554,220 total HLI capital shares divided by 2 plus one [1] HLI share). The
118,391,976.85 shares subject to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control over HLI.
2. Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability
to the FWBs for the price received for the 500-hectare converted lot and the 80.51-hectare
SCTEX lot. However, as We have established in Our July 5, 2011 Decision, the rights,
obligations and remedies of the parties in the instant case are primarily governed by RA 6657
and HLI cannot shield itself from the CARP coverage merely under the convenience of being a
corporate entity. In this regard, it should be underscored that the agricultural lands held by HLI
by virtue of the SDP are no ordinary assets. These are special assets, because, originally, these
should have been distributed to the FWBs were it not for the approval of the SDP by PARC.
Thus, the government cannot renege on its responsibility over these assets. Likewise, HLI is no
ordinary corporation as it was formed and organized precisely to make use of these agricultural
lands actually intended for distribution to the FWBs. Thus, it cannot shield itself from the
coverage of CARP by invoking the Corporation Code. As explained by the Court:
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply with RA
6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP. It
is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under the guise of being a corporate
entity.
Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the parties
arising from the SDP should not be made to supplant or circumvent the agrarian reform
program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other hand, RA
6657 is the special law on agrarian reform. As between a general and special law, the
latter shall prevailgeneralia specialibus non derogant. Besides, the present impasse
between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents
questioned before the DAR is the proper implementation of the SDP and HLIs
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the
instant case.
Considering that the 500-hectare converted land, as well as the 80.51-hectare SCTEX
lot, should have been included in the compulsory coverage were it not for their conversion and
valid transfers, then it is only but proper that the price received for the sale of these lots should
be given to the qualified FWBs. In effect, the proceeds from the sale shall take the place of the
lots.
The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the
payment of taxes and expenses relating to the transfer of the land, as well as HLIs statement
that most, if not all, of the proceeds were used for legitimate corporate purposes. Accordingly,
We ordered the deduction of the taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and Centennary for legitimate corporate
purposes, among others.
PANTRANCO EMPLOYEES ASSOCIATION (PEA-PTGWO) and PANTRANCO
RETRENCHED EMPLOYEES ASSOCIATION (PANREA) vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC), PANTRANCO NORTH EXPRESS, INC. (PNEI), PHILIPPINE
NATIONAL BANK (PNB), PHILIPPINE NATIONAL BANK-MANAGEMENT AND
DEVELOPMENT CORPORATION (PNB-MADECOR), and MEGA PRIME REALTY AND
HOLDINGS CORPORATION
G.R. No. 170689, March 17, 2009

FACTS: The Gonzales family owned two corporations, namely, the PNEI and Macris Realty
Corporation (Macris). PNEI provided transportation services to the public, and had its bus
terminal at the corner of Quezon and Roosevelt Avenues in Quezon City. The terminal stood
on four valuable pieces of real estate registered under the name of Macris. The Gonzales family
later incurred huge financial losses despite attempts of rehabilitation and loan infusion. In
1975, their creditors took over the management of PNEI and Macris. By 1978, full ownership
was transferred to one of their creditors, the National Investment Development Corporation
(NIDC), a subsidiary of the PNB.
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. NIDC sold PNEI to North Express Transport, Inc. (NETI), a
company owned by Gregorio Araneta III. PNEI was among the several companies placed under
sequestration by the Presidential Commission on Good Government (PCGG) shortly after the
historic events in EDSA. PCGG lifted the sequestration order to pave the way for the sale of
PNEI back to the private sector through the Asset Privatization Trust (APT). APT thus took
over the management of PNEI.
PNEI applied with the Securities and Exchange Commission for suspension of
payments. A management committee was thereafter created which recommended to the SEC
the sale of the company through privatization. As a cost-saving measure, the committee
likewise suggested the retrenchment of several PNEI employees. 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 issued the Sixth Alias Writ of Execution commanding the NLRC
Sheriffs to levy on the assets of PNEI in order to satisfy the P722,727,150.22 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. In
implementing the writ, the sheriffs levied upon the four valuable pieces of real estate, on which
the former Pantranco Bus Terminal stood. Subsequently, Notice of Sale of the foregoing real
properties was published in the newspaper. 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 Pantranco properties, and Mega Prime as the successor-in-interest.
For its part, PNB sought the nullification of the writ on the ground that it was not a party to the
labor case. PNB alleged that PNB-Madecor was indebted to the former and that the Pantranco
properties would answer for such debt. As such, the scheduled auction sale of the aforesaid
properties was not legally in order.
The Labor Arbiter 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.
On appeal to the NLRC, the same was denied and the Labor Arbiters disposition was
affirmed.
In view of the P7,884,000.00 debt of PNB-Madecor to PNEI, on June 23, 2004, an
auction sale was conducted over the Pantranco properties to satisfy the claim of the PNEI
employees, wherein CPAR Realty was adjudged as the highest bidder.

ISSUE: Whether or not the employees can attach the properties (specifically the Pantranco
properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid labor claims against
PNEI

HELD: The Court answer in the negative. First, the subject property is not owned by the
judgment debtor, that is, PNEI. Nowhere in the records was it shown that PNEI owned the
Pantranco properties. Petitioners, in fact, never alleged in any of their pleadings the fact of
such ownership. The properties were owned by Macris, the predecessor of PNB-Madecor.
Hence, they cannot be pursued against by the creditors of PNEI. The power of the court in
executing judgments extends only to properties unquestionably belonging to the judgment
debtor alone. To be sure, one mans goods shall not be sold for another mans debts. A sheriff
is not authorized to attach or levy on property not belonging to the judgment debtor, and even
incurs liability if he wrongfully levies upon the property of a third person.
Second, 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 petitioners 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. The
separate personalities of the first three corporations had been recognized by this Court in PNB
v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation
v. PNB where we stated that PNB was only a stockholder of PNB-Madecor which later sold its
shares to Mega Prime; and that PNB-Madecor was the owner of the Pantranco properties.
Moreover, 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, while we recognize that there are peculiar circumstances or valid grounds that
may exist to warrant the piercing of the corporate veil; none applies in the present case
whether between PNB and PNEI; or PNB and PNB-Madecor.
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. Whether the separate
personality of the corporation should be pierced hinges on obtaining facts appropriately
pleaded or proved. 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.
CAGAYAN VALLEY DRUG CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 151413, February 13, 2008

FACTS: Petitioner, a corporation duly organized and existing under Philippine laws, is a duly
licensed retailer of medicine and other pharmaceutical products.
Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior
citizens on purchases of medicine pursuant to Republic Act No. (RA) 7432[3] and its
implementing rules and regulations. Petitioner treated the 20% sales discounts granted to
qualified senior citizens in 1995 as deductions from the gross sales in order to arrive at the net
sales, instead of treating them as tax credit as provided by Section 4 of RA 7432. However,
petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax refund/tax credit of
the full amount of the 20% sales discount it granted to senior citizens for the year 1995,
allegedly totaling to PhP 123,083 in accordance with Sec. 4 of RA 7432.
The BIRs inaction on petitioners claim for refund/tax credit compelled petitioner to file
a petition for review in order to forestall the two-year prescriptive period provided.
The CTA rendered a Decision dismissing the petition for review for lack of merit. The
CTA sustained petitioners contention that pursuant to Sec. 4 of RA 7432, the 20% sales
discounts petitioner extended to qualified senior citizens in 1995 should be treated as tax credit
and not as deductions from the gross sales as erroneously interpreted in RR 2-94. The CTA
reiterated its consistent holdings that RR 2-94 is an invalid administrative interpretation of the
law it purports to implement as it contravenes and does not conform to the standards RA 7432
prescribes.

ISSUES:
(1) Whether petitioners president can sign the subject verification and certification sans
the approval of its Board of Directors.
(2) Whether the CTA committed reversible error in denying and dismissing petitioners
action for refund or tax credit in C.T.A. Case No. 5581.

HELD: It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code,
clearly enunciates that all corporate powers are exercised, all business conducted, and all
properties controlled by the board of directors. A corporation has a separate and distinct
personality from its directors and officers and can only exercise its corporate powers through
the board of directors. Thus, it is clear that an individual corporate officer cannot solely
exercise any corporate power pertaining to the corporation without authority from the board
of directors. This has been our constant holding in cases instituted by a corporation.
In a slew of cases, however, we have recognized the authority of some corporate
officers to sign the verification and certification against forum shopping. The Court recognizes
the authority of a general manager or acting general manager to sign the verification and
certificate against forum shopping; in Pfizer v. Galan, the Court upheld the validity of a
verification signed by an employment specialist who had not even presented any proof of her
authority to represent the company; in Novelty Philippines, Inc., v. CA, the Court ruled that a
personnel officer who signed the petition but did not attach the authority from the company is
authorized to sign the verification and non-forum shopping certificate; and in Lepanto
Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), the Court
ruled that the Chairperson of the Board and President of the Company can sign the verification
and certificate against non-forum shopping even without the submission of the boards
authorization.
In sum, the Court held that the following officials or employees of the company can
sign the verification and certification without need of a board resolution: (1) the Chairperson of
the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting
General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the
verification and certification required by the rules, the determination of the sufficiency of the
authority was done on a case to case basis. The rationale applied in the foregoing cases is to
justify the authority of corporate officers or representatives of the corporation to sign the
verification or certificate against forum shopping, being in a position to verify the truthfulness
and correctness of the allegations in the petition.
Only individuals vested with authority by a valid board resolution may sign the
certificate of non-forum shopping on behalf of a corporation. The action can be dismissed if
the certification was submitted unaccompanied by proof of the signatorys authority. We
believe that appending the board resolution to the complaint or petition is the better
procedure to obviate any question on the authority of the signatory to the verification and
certification. The required submission of the board resolution is grounded on the basic precept
that corporate powers are exercised by the board of directors, and not solely by an officer of
the corporation. Hence, the power to sue and be sued in any court or quasi-judicial tribunal is
necessarily lodged with the said board.
Petitioner substantially complied with Sections 4 and 5, Rule 7 of the 1997 Revised
Rules on Civil Procedure. First, the requisite board resolution has been submitted albeit
belatedly by petitioner. Second, we apply our ruling in Lepanto with the rationale that the
President of petitioner is in a position to verify the truthfulness and correctness of the
allegations in the petition. Third, the President of petitioner has signed the complaint before
the CTA at the inception of this judicial claim for refund or tax credit.
THE HEIRS OF THE LATE PANFILO V. PAJARILLO vs. THE HON. COURT OF APPEALS,
NATIONAL LABOR RELATIONS COMMISSION and SAMAHAN NG MGA MANGGAGAWA
NG PANFILO V. PAJARILLO
G.R. No. 155056-57, October 19, 2007

FACTS: Panfilo V. Pajarillo was the owner and operator of several buses plying certain routes in
Metro Manila. He used the name PVP Liner in his buses. Private respondents were employed as
drivers, conductors and conductresses by Panfilo.
During their employment with Panfilo, private respondents worked at least four times a
week or for an average of fifteen working days per month. They were required to observe a
work schedule starting from 4:00 in the morning up to 10:00 in the evening on a straight time
basis. Private respondent drivers were paid a daily commission of 10%, while private
respondent conductors and conductresses received a daily commission of 7%. In sum, each of
the private respondents earned an average daily commission of about P150.00 a day. They
were not given emergency cost of living allowance (ECOLA), 13th month pay, legal holiday pay
and service incentive leave pay.
The following were deducted from the private respondents daily commissions: (a) costs
of washing the assigned buses; (b) terminal fees; (c) fees for sweeping the assigned buses; (d)
fees paid to the barangay tanod at bus terminals; and (e) rental fees for the use of stereo in the
assigned buses. Any employee who refused such deductions were either barred from working
or dismissed from work.
Thereafter, private respondents and several co-employees formed a union called
SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO. The Department of Labor
and Employment (DOLE) issued a Certificate of Registration in favor of the respondent union.
Upon learning of the formation of respondent union, Panfilo and his children ordered
some of the private respondents to sign a document affirming their trust and confidence in
Panfilo and denying any irregularities on his part. Other private respondents were directed to
sign a blank document which turned out to be a resignation letter. Private respondents refused
to sign the said documents, hence, they were barred from working or were dismissed without
hearing and notice. Panfilo and his children and relatives also formed a company union where
they acted as its directors and officers.
The union and several employees filed a Complaint for unfair labor practice and illegal
deduction before the Labor Arbiter with Panfilo V. Pajarillo Liner as party-respondent. Another
Complaint was filed for violation of labor standard laws claiming non-payment of (1) ECOLA,
(2) 13th month pay, (3) overtime pay, (4) legal holiday pay, (5) premium pay, and (6) service
incentive leave. The party-respondents in this complaint were PVP LINER INC. and PANFILO V.
PAJARILLO, as its General Manager/Operator.
Notifications and summons were addressed and sent to PANFILO V. PAJARILLO,
President/Manager, Panfilo V. Pajarillo Liner, Pasig Line St., Sta. Ana, Manila. The Registry
Return Receipt was addressed to Panfilo V. Pajarillo, and a signature therein appears on top of
the signature of the name of the addressee. With regard to NLRC Case, notifications and
summonses were addressed and sent to THE PRESIDENT/MANAGER, PVP Liner Inc. and
Panfilo V. Pajarillo, 2175 Zamora Street, Sta. Ana, Manil. The Registry Return Receipt was
addressed to PVP Liner Inc. and was signed by a certain Irene G. Pajarillo as the addressees
agent.
Panfilo denied the charges in the complaints. He maintained that private respondents
were not dismissed from work on account of their union activities; that private respondents
and several of their co-employees either resigned or were separated from work, or simply
abandoned their employment long before the respondent union was organized and registered
with the DOLE; that the private respondents are not entitled to ECOLA and 13th month pay
because they received wages above the minimum provided by law; that the private
respondents are not entitled to overtime and legal holiday pay because these are already
included in their daily commissions; that the private respondents are not entitled to five days
incentive leave pay because they work only four days a week; that no deductions were made in
the daily commissions of the private respondents; that the private respondents voluntarily and
directly paid certain individuals for barangay protection and for the cleaning of the assigned
buses; that he had no participation in these activities/arrangements; that the private
respondents were not dismissed from work; and that the private respondents either
abandoned their jobs or voluntarily resigned from work.

ISSUES:
a. Whether or not PVP LINER INC. was properly mispleaded, which is a non-existing
corporation
b. Whether or not there was proper service of summons
c. Whether or not the CA erred in piercing the veil or Corporate entity of PVP Pajarillo
Liner, Inc.

HELD:
a. Petitioners are precluded from questioning the inclusion of PVP Liner Inc. as party-
respondent as well as the jurisdiction of Arbiter Asuncion and the NLRC over them
under the principle of estoppel. It is settled that the active participation of a party
against whom the action was brought, coupled with his failure to object to the
jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the court or
bodys jurisdiction. This Court has time and again frowned upon the undesirable
practice of a party submitting his case for decision and then accepting the judgment
only if favorable, and attacking it for lack of jurisdiction when adverse.
It is apparent that Panfilo V. Pajarillo Liner and PVP Liner Inc. are one and the
same entity belonging to one and the same person, Panfilo. When PVP Liner Inc. and
Panfilo V. Pajarillo Liner were impleaded as party-respondents, it was Panfilo, through
counsel, who answered the complaints and filed the position papers, motions for
reconsideration and appeals. It was also Panfilo, through counsel, who participated in
the hearings and proceedings. In fact, Abel Pajarillo (Abel), son of Panfilo, testified
before Arbiter Asuncion that he was the operations manager of PVP Liner Inc. Further,
both Panfilo and PVP Liner Inc. were charged jointly and severally in the aforesaid
complaints.

b. Records show that Irene received the summons in behalf of PVP Liner Inc. These
summonses were addressed and sent to THE PRESIDENT/MANAGER, PVP Liner Inc.
and Panfilo V. Pajarillo, The Registry Return Receipt was addressed to PVP Liner Inc.
and was signed by Irene as the addressees agent. Abel, one of the heirs of Panfilo and
the Operations Manager of PVP Liner Inc., testified during the hearing before Arbiter
Asuncion that Irene was one of the secretaries of PVP Liner Inc. Hence, there was a
valid service of summons.

c. It is a fundamental principle of corporation law that a corporation is an entity separate


and distinct from its stockholders and from other corporations to which it may be
connected. However, this separate and distinct personality of a corporation is merely a
fiction created by law for convenience and to promote justice. Hence, when the notion
of separate juridical personality is used to defeat public convenience, justify wrong,
protect fraud or defend crime, or is used as a device to defeat labor laws, this separate
personality of the corporation may be disregarded or the veil of the corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation. The corporate mask may be lifted and
the corporate veil may be pierced when a corporation is but the alter ego of a person or
another corporation.
It is apparent that Panfilo started his transportation business as the sole owner
and operator of passenger buses utilizing the name PVP Liner for his buses. After being
charged by respondent union of unfair labor practice, illegal deductions, illegal
dismissal and violation of labor standard laws, Panfilo transformed his transportation
business into a family corporation, namely, P.V. Pajarillo Liner Inc. He and petitioners
were the incorporators, stockholders and officers therein. P.V. Pajarillo Inc. and the sole
proprietorship of Panfilo have the same business address. P.V. Pajarillo Inc. also uses
the name PVP Liner in its buses. Further, the license to operate or franchise of the sole
proprietorship was merely transferred to P.V. Pajarillo Liner Inc.
It is clear from the foregoing that P.V. Pajarillo Liner Inc. was a mere
continuation and successor of the sole proprietorship of Panfilo. It is also quite obvious
that Panfilo transformed his sole proprietorship into a family corporation in a
surreptitious attempt to evade the charges of respondent union. Given these
considerations, Panfilo and P.V. Pajarillo Liner Inc. should be treated as one and the
same person for purposes of liability.
CHINA BANKING CORPORATION vs. DYNE-SEM ELECTRONICS CORPORATION
G.R. No. 149237, June 11, 2006

FACTS: On June 19 and 26, 1985, Dynetics, Inc. and Elpidio O. Lim borrowed a total of
P8,939,000 from petitioner China Banking Corporation. The loan was evidenced by six
promissory notes.
The borrowers failed to pay when the obligations became due. Petitioner consequently
instituted a complaint for sum of money against them. The complaint sought payment of the
unpaid promissory notes plus interest and penalties.
Summons was not served on Dynetics, however, because it had already closed down.
Lim, on the other hand, filed his answer denying that he promised to pay [the obligations]
jointly and severally to petitioner.
An amended complaint was filed by petitioner impleading respondent Dyne-Sem
Electronics Corporation and its stockholders Vicente Chuidian, Antonio Garcia and Jacob
Ratinoff. According to petitioner, respondent was formed and organized to be Dynetics alter
ego as established by the following circumstances:
Dynetics, Inc. and respondent are both engaged in the same line of business of
manufacturing, producing, assembling, processing, importing, exporting, buying,
distributing, marketing and testing integrated circuits and semiconductor devices; the
principal office and factory site of Dynetics, Inc. located at Avocado Road, FTI Complex,
Taguig, Metro Manila, were used by respondent as its principal office and factory site;
respondent acquired some of the machineries and equipment of Dynetics, Inc. from
banks which acquired the same through foreclosure; respondent retained some of the
officers of Dynetics, Inc.

ISSUES:
a. What is the quantum of evidence needed for the trial court to determine if the veil of
corporate fiction should be pierced?

b. Whether or not the Regional Trial Court and the Court of Appeals have ruled in
accordance with law and/or applicable jurisprudence to the extent that the Doctrine of
Piercing the Veil of Corporate Fiction is not applicable in the case at bar

HELD: The question of whether one corporation is merely an alter ego of another is purely one
of fact. So is the question of whether a corporation is a paper company, a sham or subterfuge
or whether petitioner adduced the requisite quantum of evidence warranting the piercing of
the veil of respondents corporate entity.
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.
The veil of separate corporate personality may be lifted when such personality is used
to defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield
to confuse the legitimate issues; or when 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 such cases, the corporation will be considered as a mere
association of persons. The liability will directly attach to the stockholders or to the other
corporation. To disregard the separate juridical personality of a corporation, the wrongdoing
must be proven clearly and convincingly.
In this case, 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. The mere fact 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.
Likewise, respondents acquisition of some of the machineries and equipment of
Dynetics was not proof that respondent was formed to defraud petitioner. 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.
Petitioner itself admits that respondent acquired the machineries and equipment not
directly from Dynetics but from the various corporations which successfully bidded for them in
an auction sale. The contracts of sale executed between the winning bidders and respondent
showed that the assets were sold for considerable amounts.The assets were not diverted to
respondent as an alter ego of Dynetics. The machineries and equipment were transferred and
disposed of by the winning bidders in their capacity as owners. The sales were therefore valid
and the transfers of the properties to respondent legal and not in any way in contravention of
petitioners rights as Dynetics creditor.
Finally, it may be true that respondent later hired Dynetics former Vice-President
Luvinia Maglaya and Assistant Corporate Counsel Virgilio Gesmundo. From this, however, we
cannot conclude that respondent was an alter ego of Dynetics. In fact, even the overlapping of
incorporators and stockholders of two or more corporations will not necessarily lead to such
inference and justify the piercing of the veil of corporate fiction. Much more has to be proven.
MARUBENI CORPORATION vs. FELIX LIRAG
G.R. No. 130998, August 10, 2001

FACTS: Petitioner Marubeni Corporation (hereafter, 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. On January 27, 1989, respondent 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 on February 2,
1987, petitioner Ryohei Kimura hired his consultancy group for the purpose of obtaining
government contracts of various projects.

Lirag claims that he was able to get the Marubeni-Sanritsu tandem government
projects amounting to P 100 M from which his claim for P 6M commission if based upon.
Marubeni contends that petitioner Ryoichi Tanaka was not authorized by Marubeni to enter
into such agreement in its behalf. It is only Mr. Morihiko Maruyama, the general manager,
upon issuance of a special power of attorney by the principal office in Tokyo, Japan, could
enter into such agreement in behalf of Marubeni. Marubeni also contends that the corporation
did not participate in that bidding nor did it benefit from it. Lirag insists that Sanritsu, is a sister
company of Marubeni and was representing Marubeni in the bid thus, the award of the bid to
Sanritsu gives him the right to claim his commission from Marubeni.

ISSUE: Whether or not Lirag has a claim to his alleged commission

RULING: No, Lirag is not entitled to the commission. The court held that Lirags justification
that Sanritsu and Marubeni are sister corporations does not give rise for the need to pierce the
veil of corporate fiction. Not because two foreign companies came from the same country and
closely worked together on certain projects will lead to the conclusion that one was the conduit
of the other, thus piercing of the corporate veil of corporate fiction. To disregards 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 injustice, or where necessary for the protection of creditors. We could not just rely on
respondents 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.
FRANCISCO vs. MEJIA
G.R. No. 141617. August 14, 2001

FACTS: Adalia Francisco was the Treasurer of Cardale Financing and Realty Corporation
(Cardale). Cardale, through Francisco, contracted with Andrea Gutierrez for the latter to
execute a deed of sale over certain parcels of land in favor of Cardale. It was agreed that
Gutierrez shall hand over the titles to Cardale but Cardale shall only give a downpayment, and
later on full payment in installment. As security, Gutierrez shall retain a lien over the properties
by way of mortgage. Nonetheless, Cardale defaulted in its payment. Gutierrez then filed a
petition with the trial court to have the Deed rescinded.
While the case was pending, Gutierrez died, and Rita Mejia, being the executrix of the will of
Gutierrez took over the affairs of the estate.
In the meantime, the mortgaged parcels of land became delinquent in the payment of real
estate taxes, which culminated in their levy and auction sale in satisfaction of the tax arrears.
The highest bidder for the three parcels of land was petitioner Merryland Development
Corporation, whose President and majority stockholder is Francisco.

ISSUE: Whether or not Merryland and Francisco are solidarily liable

HELD: No. Only Francisco shall be held liable to pay the indebtedness to the Gutierrez estate.
What was only proven was that Francisco defrauded the Gutierrez estate as clearly shown by
the dubious circumstances which caused the encumbered properties to be auctioned. By not
disclosing the tax delinquency, Francisco left Gutierrez in the dark. She obviously acted in bad
faith. Franciscos elaborate act of defaulting payment, disregarding the case, not paying realty
taxes (since as treasurer of Cardale, shes responsible for paying the real estate taxes for
Cardale), and failure to advise Gutierrez of the tax delinquencies all constitute bad faith. The
attendant fraud and bad faith on the part of Francisco necessitates the piercing of the veil of
corporate fiction in so far as Cardale and Francisco are concerned. Cardale and Francisco
cannot escape liability now that Cardale has been dissolved. Francisco shall then pay Guttierez
estate the outstanding balance with interest.
As regards Merryland however, there was no proof that it is merely an alter ego or a
business conduit of Francisco. Merryland acquired the property through a public auction which
only sheds more light upon Francsicos fraudulent purposes. Time and again it has been
reiterated that 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. Hence, Merryland cant be held solidarily liable with
Francisco
PHILIPPINE NATIONAL BANK vs. ANDRADA ELECTRIC & ENGINEERING COMPANY
G.R. No. 142936, April 17, 2002

FACTS: Respondent is a partnership duly organized, existing, and operating under the laws of
the Philippines is a semi-government corporation duly organized, existing and operating under
the laws of the Philippines; whereas, NASUDECO is also a semi-government corporation and
the sugar arm of the PNB; and the defendant Pampanga Sugar Mills (PASUMIL in short), is a
corporation organized, existing and operating under the 1975 laws of the Philippines; that the
plaintiff is engaged in the business of general construction for the repairs and/or construction
of different kinds of machineries and buildings.
PASUMIL engaged the services of Andrada Electric for electric rewinding and repair.
The services were partially paid by PASUMIL, leaving several unpaid accounts with the
Andrada Electric. The unpaid balance was refused to be paid by PASUMIL, and PNB and
NASUDECO. Andrada contends that in as much as PNB and NASUDECO now owns PASUMIL,
and that they benefited from the services rendered as well, thus, they the three corporation
are solidarily liable to Andrada Electric. NASUDECO contends that it is not liable to Andrada
Electric, the corporation being a stranger to the contract between PASUMIL and Andra
Electric. PNB alleges the same as well.

ISSUE: Whether or not PNB, PASUMIL and NASUDECO are solitarily liable to Andrada electric

HELD: No, the three corporations are not liable to Andrada Electric. PASUMIL as a corporation
still exits and was not terminated, there was also no merger or consolidation of PASUMIL and
PNB.
A consolidation is the union of two or more existing entities to form a new entity called
the consolidated corporation. A merger, on the other hand, is a union whereby one or more
existing corporations are absorbed by another corporation that survives and continues the
combined business.
The merger, however, does not become effective upon the mere agreement of the
constituent corporations. Since a merger or consolidation involves fundamental changes in the
corporation, as well as in the rights of stockholders and creditors, there must be an express
provision of law authorizing them. For a valid merger or consolidation, the approval by the
Securities and Exchange Commission (SEC) of the articles of merger or consolidation is
required. These articles must likewise be duly approved by a majority of the respective
stockholders of the constituent corporations
Basic is the rule that a corporation has a legal personality distinct and separate from the
persons and entities owning it. The corporate veil may be lifted only if it has been used to
shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or
perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired
ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which had
earlier been foreclosed and purchased at the resulting public auction by the Development Bank
of the Philippines (DBP), will not make PNB liable for the PASUMILs contractual debts to
respondent.
As a rule, a corporation that purchases the assets of another will not be liable for the
debts of the selling corporation, provided the former acted in good faith and paid adequate
consideration for such assets, except when any of the following circumstances is present: (1)
where the purchaser expressly or impliedly agrees to assume the debts, (2) where the
transaction amounts to a consolidation or merger of the corporations, (3) where the
purchasing corporation is merely a continuation of the selling corporation, and (4) where the
transaction is fraudulently entered into in order to escape liability for those debts
AZCOR MANUFACTURING INC., vs. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 117963, February 11, 1999

FACTS: Candido Capulso filed with the Labor Arbiter a complaint for constructive illegal
dismissal and illegal deduction of P50.00 per day for the period April to September
1989.Petitioners Azcor Manufacturing, Inc. (AZCOR) and Arturo Zuluaga who were
respondents before the Labor Arbiter (Filipinas Paso was not yet a party then in that case)
moved to dismiss the complaint on the ground that there was no employer-employee
relationship between AZCOR and herein respondent Capulso; that the latter became an
employee of Filipinas Paso effective 1 March 1990 but voluntarily resigned therefrom a year
after. Capulso later amended his complaint by impleading Filipinas Paso as additional
respondent before the Labor Arbiter. Petitioners contend that they could not be held jointly
and severally liable to Capulso since AZCOR and Filipinas Paso are separate and distinct
corporations with different corporate personalities.

ISSUE: Whether or not petitioners are solidarily liable to Candido Capulso

HELD: Yes, the two corporations are solidarily liable to Capulso. The doctrine that a
corporation is a legal entity or a person in law distinct from the persons composing it is merely
a legal fiction for purposes of convenience and to subserve the ends of justice. This fiction
cannot be extended to a point beyond its reason and policy. Where, as in this case, the
corporate fiction was used as a means to perpetrate a social injustice or as a vehicle to evade
obligations or confuse the legitimate issues, it would be discarded and the two (2) corporations
would be merged as one, the first being merely considered as the
instrumentality, agency, conduit or adjunct of the other.
Interestingly, petitioners likewise argue that it was grave abuse of discretion for the
NLRC to hold them solidarily liable to Capulso when the latter himself testified that he was not
even an employee of Filipinas Paso. After causing much confusion, petitioners have the
temerity to use as evidence the ignorance of Capulso in identifying his true employer. It is
evident from the foregoing discussion that Capulso was led into believing that while he was
working with Filipinas Paso, his real employer was AZCOR. Petitioners never dealt with him
openly and in good faith, nor were he informed of the developments within the company, i.e.,
his alleged transfer to Filipinas Paso and the closure of AZCORs manufacturing operations
beginning 1 March 1990. Understandably, he sued AZCOR alone and was constrained to
implead Filipinas Paso as additional respondent only when it became apparent that the latter
also appeared to be his employer.
In fine, the court saw in the totality of the evidence a veiled attempt by petitioners to
deprive Capulso of what he had earned through hard labor by taking advantage of his low level
of education and confusing him as to who really was his true employer - such a callous and
despicable treatment of a worker who had rendered faithful service to their company.
CLAPAROLS vs. COURT OF INDUSTRIAL RELATIONS
G.R. No. L-30822 July 31, 1975

FACTS: On August 6, 1957, a complaint for unfair labor practice was filed by herein private
respondent Allied Workers' Association, respondent Demetrio Garlitos and ten (10) respondent
workers against herein petitioners on account of the dismissal of respondent workers from
petitioner Claparols Steel and Nail Plant. On May 1964, the court ruled in favor of the workers
and ordered the reinstatement of the said employees. The employees were however refused
reinstatement on the ground that Mr. Cusi had not received any order from owner Eduardo
Claparols or the corporate counsel to reinstate the said employees.
On January 23, 1965, petitioners filed an opposition alleging that under the
circumstances presently engulfing the company, petitioner Claparols could not personally
reinstate respondent workers; that assuming the workers are entitled to back wages, the same
should only be limited to three months pursuant to the court ruling in the case of Sta. Cecilia
Sawmills vs. CIR (L-19273-74, February 20, 1964); and that since Claparols Steel Corporation
ceased to operate on December 7, 1962, re-employment of respondent workers cannot go
beyond December 7, 1962. The employees filed their reply stated that that Claparols Steel and
Nail Plant and Claparols Steel and Nail Corporation are one and the same corporation
controlled by petitioner Claparols, with the latter corporation succeeding the former.

ISSUE: Whether or not the two corporations are one and the same

HELD: The two are therefore, one and the same. Claparols Steel and Nail Plant, which ceased
operation of June 30, 1957, was SUCCEEDED by the Claparols Steel Corporation effective the
next day, July 1, 1957 up to December 7, 1962, when the latter finally ceased to operate, were
not disputed by petitioners. It is very clear that the latter corporation was a continuation and
successor of the first entity, and its emergence was skillfully timed to avoid the financial
liability that already attached to its predecessor, the Claparols Steel and Nail Plant. Both
predecessors and successor were owned and controlled by the petitioner Eduardo Claparols
and there was no break in the succession and continuity of the same business. This "avoiding-
the-liability" scheme is very patent, considering that 90% of the subscribed shares of stocks of
the Claparols Steel Corporation (the second corporation) was owned by respondent (herein
petitioner) Claparols himself, and all the assets of the dissolved Claparols Steel and Nail Plant
were turned over to the emerging Claparols Steel Corporation.
It is very obvious that the second corporation seeks the protective shield of a corporate
fiction whose veil in the present case could, and should, be pierced as it was deliberately and
maliciously designed to evade its financial obligation to its employees.
CIR vs. Norton and Harrison
G.R. No. L-17618, August 31, 1964

FACTS: Norton and Harrison is a corporation organized in 1911, to buy and sell at wholesale
and retail, all kinds of goods, wares, and merchandise; to act as agents of manufacturers in the
United States and foreign countries; and to carry on and conduct a general wholesale and retail
mercantile establishment in the Philippines. While Jackbilt is a corporation organized on
February 16, 1948 primarily for the purpose of making, producing and manufacturing concrete
blocks.
Norton and Jackbilt entered into an agreement whereby Norton was made the sole and
exclusive distributor of concrete blocks manufactured by Jackbilt. Thus, whenever an order for
concrete blocks was received by the Norton & Harrison Co. from a customer, the order was
transmitted to Jackbilt which delivered the merchandise direct to the customer. Payment for
the goods is, however, made to Norton, which in turn pays Jackbilt the amount charged the
customer less a certain amount, as its compensation or profit. When the agency agreement
was terminated, a management agreement was entered into by the parties. The management
agreement provided that Norton would sell concrete blocks for Jackbilt, for a fixed monthly fee
of P2,000.00, which was later increased to P5,000.00.
During the existence of the distribution or agency agreement, Norton & Harrison
acquired by purchase all the outstanding shares of stock of Jackbilt. Due to this transaction,
the Commissioner of Internal Revenue, after conducting an investigation, assessed the
respondent Norton & Harrison for deficiency sales tax and surcharges in the amount of P32,
662.90. The Commissioner considered the sale of Norton to the public as the original sale and
not the transaction from Jackbilt.
The Commissioner of Internal Revenue contends that since Jackbilt was owned and
controlled by Norton & Harrison, the corporate personality of the Jackbilt should be
disregarded for sales tax purposes, and the sale of Jackbilt blocksto the public must be
considered as the original sales from which the sales tax should be computed. The Norton &
Harrison Company contended otherwise, that is, the transaction subject to tax is the sale from
Jackbilt to Norton.

ISSUE: Whether or not the separate identities of Jackbilt and Norton should be disregarded

HELD: Yes. It has been settled that the ownership of all the stocks of a corporation by another
corporation does not necessarily breed an identity of corporate interest between the two
companies and be considered as a sufficient ground for disregarding the distinct. However, in
the case at bar, we find sufficient grounds to support the theory that the separate identities of
the two companies should be disregarded. Among these circumstances, which we find not
successfully refuted by Norton are:
(a) Norton and Harrison owned all the outstanding stocks of Jackbilt; of the 15,000
authorized shares of Jackbilt on March 31, 1958, 14,993 shares belonged to Norton and
Harrison and one each to seven others;
(b) Norton constituted Jackbilt's board of directors in such a way as to enable it to actually
direct and manage the other's affairs by making the same officers of the board for both
companies;
(c) Norton financed the operations of the Jackbilt, and this is shown by the fact that the
loans obtained from the RFC and Bank of America were used in the expansion program of
Jackbilt, to pay advances for the purchase of equipment, materials rations and salaries of
employees of Jackbilt and other sundry expenses;
(d) Norton treats Jackbilt employees as its own. Evidence shows that Norton paid the
salaries of Jackbilt employees and gave the same privileges as Norton employees, an
indication that Jackbilt employees were also Norton's employees;
(e) Compensation given to board members of Jackbilt, indicate that Jackbilt is merely a
department of Norton.
Norton and Harrison tried to explain that the control over the affairs of Jackbilt was not
made in order to evade payment of taxes; that the loans obtained by it which were given to
Jackbilt, were necessary for the expansion of its business in the manufacture of concrete
blocks, which would ultimately benefit both corporations; that the transactions and practices
just mentioned, are not unusual and extraordinary, but pursued in the regular course of
business and trade; that there could be no confusion in the present set up of the two
corporations, because they have separate Boards, their cash assets are entirely and strictly
separate; cashiers and official receipts and bank accounts are distinct and different; they have
separate income tax returns, separate balance sheets and profit and loss statements. These
explanations notwithstanding an over-all appraisal of the circumstances presented by the facts
of the case, yields to the conclusion that the Jackbilt is merely an adjunct, business conduit or
alter ego, of Norton and Harrison and that the fiction of corporate entities, separate and
distinct from each, should be disregarded. This is a case where the doctrine of piercing the veil
of corporate fiction, should be made to apply.
Concept Builder vs. NLRC
G.R. No. 108734, May 29, 1996

FACTS: Concept Builders, Inc., a domestic corporation 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. It was stated in the
individual notices that their contracts of employment had expired and the project in which
they were hired had been completed.
However, public respondent found out 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.
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 decision in favor of the private respondents. When the
same became final and executory, a writ of execution was issued, however, the same was
refused by the security guard on duty on the ground that the petitioners no longer occupied
the premises. A break-open order was then recommended.
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. On November 23, 1989, 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. On February 1, 1990, HPPI filed an Opposition to private
respondents 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.

ISSUE: Whether or not the doctrine of piercing the corporate veil should not have been applied

HELD: No. It is a fundamental principle of corporation law that a corporation is an entity


separate and distinct from its stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a corporation is merely a fiction
created by law for convenience and to promote justice. So, when the notion of separate
juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend
crime, or is used as a device to defeat the labor laws, this separate personality of the
corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise
when the corporation is merely an adjunct, a business conduit or an alter ego of another
corporation.
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.
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.
In this case, the NLRC noted that, while petitioner claimed that it ceased its
business operations on April 29, 1986, it filed an Information Sheet with the Securities and
Exchange Commission on May 15, 1987, stating that its office address is at 355 Maysan
Road, Valenzuela, Metro Manila. On the other hand, HPPI, the third-party claimant,
submitted on the same day, a similar information sheet stating that its office address is at
355 Maysan Road, Valenzuela, Metro Manila.
Furthermore, the NLRC stated that:
Both information sheets were filed by the same Virgilio O. Casino as the
corporate secretary of both corporations. It would also not be amiss to note that both
corporations had the same president, the same board of directors, the same
corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein
petitioner) and the third-party claimant shared the same address and/or premises.
Under this circumstances, (sic) it cannot be said that the property levied upon by the
sheriff were not of respondents.
Clearly, petitioner ceased its business operations in order to evade the payment to private
respondents of backwages and to bar their reinstatement to their former positions. HPPI is
obviously a business conduit of petitioner corporation and its emergence was skillfully
orchestrated to avoid the financial liability that already attached to petitioner corporation.
It is very obvious that the second corporation seeks the protective shield of a corporate
fiction whose veil in the present case could, and should, be pierced as it was deliberately and
maliciously designed to evade its financial obligation to its employees.
Complex Electronics Employees Association vs. NLRC
G.R. No. 121315, July 19, 1999

FACTS: Complex Electronics Corporation (Complex) was engaged in the manufacture of


electronic products. It was actually a subcontractor of electronic products where its customers
gave their job orders, sent their own materials and consigned their equipment to it. The
customers were foreign-based companies with different product lines and specifications
requiring the employment of workers with specific skills for each product line. Thus, there was
the AMS Line for the Adaptive Micro System, Inc., the Heril Line for Heril Co., Ltd., the Lite-On
Line for the Lite-On Philippines Electronics Co., etc.
The rank and file workers of Complex were organized into a union known as the
Complex Electronics Employees Association (Union). On March 4, 1992, Complex received a
facsimile message from Lite-On Philippines Electronics Co., requiring it to lower its price by
10%.Consequently, a meeting was held between Complex and the personnel of the Lite-On
Production Line. Complex informed its Lite-On personnel that such request of lowering their
selling price by 10% was not feasible as they were already incurring losses at the present prices
of their products. Under such circumstances, 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,
however, decried the decision and voted to declare a strike. Labor unrest within the company
eventually ensued.
In the evening of April 6, 1992, 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, thereafter, filed with the Labor Arbitration Branch of the NLRC for
unfair labor practice, illegal closure/illegal lockout, money claims for vacation leave, sick leave,
unpaid wages, 13th month pay, damages and attorney's fees. Ionics was impleaded as a party
defendant because the officers and management personnel of Complex were also holding
office at Ionics with Lawrence Qua as the President of both companies. Ionics contended that
it was an entity separate and distinct from Complex and had been in existence since July 5,
1984 or eight (8) years before the labor dispute arose at Complex.

ISSUE: Whether or not there is a clear ground to pierce the veil of corporate fiction

HELD: No. The mere fact that one or more corporations are owned or controlled by the same
or single stockholder is not a sufficient ground for disregarding separate corporate
personalities. Ionics may be engaged in the same business as that of Complex, but this fact
alone is not enough reason to pierce the veil of corporate fiction of the corporation. Well-
settled is the rule that a corporation has a personality separate and distinct from that of its
officers and stockholders. This fiction of corporate entity can only be disregarded in certain
cases such as when it is used to defeat public convenience, justify wrong, protect fraud, or
defend crime. To disregard said separate juridical personality of a corporation, the wrongdoing
must be clearly and convincingly established.
As to the additional documentary evidence which consisted of a newspaper clipping
filed by petitioner Union, we agree with respondent Ionics that the photo/newspaper clipping
itself does not prove that Ionics and Complex are one and the same entity. The
photo/newspaper clipping merely showed that some plants of Ionics were recertified to ISO
9002 and does not show that there is a relation between Complex and Ionics except for the fact
that Lawrence Qua was also the president of Ionics. However, the mere fact that both of the
corporations have the same president is not in itself sufficient to pierce the veil of corporate
fiction of the two corporations.
Cordon vs. Balicanta
A.C. No. 2797, October 4, 2002

FACTS: Complainant and her daughter inherited 21 parcels of land located in Zamboanga City
when her husband died. The lawyer who helped her settle the estate of her late husband was
respondent Jesus Balicanta. Respondent enticed complainant and her daughter to organize a
corporation that would develop the said real properties into a high-scale commercial complex
with a beautiful penthouse for complainant. Relying on these apparently sincere proposals,
complainant and her daughter assigned 19 parcels of land to Rosaura Enterprises,
Incorporated, a newly-formed and duly registered corporation in which they assumed majority
ownership. The subject parcels of land were then registered in the name of the corporation.
Respondent single-handedly ran the affairs of the corporation in his capacity as
Chairman of the Board, President, General Manager and Treasurer. The respondent also made
complainant sign a document which turned out to be a voting trust agreement and a special
power of attorney to sell and mortgage some of the parcels of land she inherited from her
deceased husband. She later discovered that respondent transferred the titles of the
properties to a certain TionSuy Ong who became the new registered owner thereof.
Respondent never accounted for the proceeds of said transfers.
Respondent, using a spurious board resolution, contracted a loan from the Land Bank
of the Philippines (LBP) in the amount of Two Million Two Hundred Twenty Pesos (P2,220,000)
using as collateral 9 of the real properties that the complainant and her daughter contributed
to the corporation. The respondent ostensibly intended to use the money to construct the
Baliwasan Commercial Center (BCC). Complainant later on found out that the structure was
made of poor materials such as sawali, coco lumber and bamboo which could not have cost the
corporation anything close to the amount of the loan secured. He failed to pay a single
installments on the loan and therefore LBP foreclosed. He did not attempt to redeem, and sold
the rights to redeem said property. Worse, he sold the corporations right to redeem the
mortgaged properties to a certain Hadji Mahmud Jammang through a fake board resolution
dated January 14, 1989 which clothed himself with the authority to do so. Complainant and her
daughter, the majority stockholders, were never informed of the alleged meeting held on that
date.
Complainants daughter discovered that their ancestral home had been demolished
and that her mother was detained in a small nipa hut. With the help of an attorney Lim she
found her mother. They terminated respondents services and threatened him with legal
action.

ISSUE: Whether or not the respondent has separate personality from the corporation

HELD: respondent cannot invoke the separate personality of the corporation to absolve him
from exercising these duties over the properties turned over to him by complainant. He
blatantly used the corporate veil to defeat his fiduciary obligation to his client, the
complainant. Toleration of such fraudulent conduct was never the reason for the creation of
said corporate fiction.
The massive fraud perpetrated by respondent on the complainant leaves us no choice but
to set aside the veil of corporate entity. For purposes of this action therefore, the properties
registered in the name of the corporation should still be considered as properties of
complainant and her daughter. The respondent merely held them in trust for complainant
(now an ailing 83-year-old) and her daughter. The properties conveyed fraudulently and/or
without the requisite authority should be deemed as never to have been transferred, sold or
mortgaged at all. Respondent shall be liable, in his personal capacity, to third parties who may
have contracted with him in good faith.
Delpher Trades vs. IAC
G.R. No. L-69259, January 26, 1988

FACTS: Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27, 169 square
meters of real estate in the Malinta Estate in the Municipality of Polo. The co-owners leased to
Construction Components International Inc. the property and providing that during the
existence or after the term of this lease the lessor should he decide to sell the property leased
shall first offer the same to the lessee and the letter has the priority to buy under similar
conditions. Lessee Construction Components International, Inc. assigned its rights and
obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed
conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco.
A deed of exchange was executed between lessors Delfin and Pelagia Pacheco and
defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased
property together with another parcel of land also located in Malinta Estate, Valenzuela, Metro
Manila for 2,500 shares of stock of defendant corporation with a total value of P1,500,000.00.
On the ground that it was not given the first option to buy the leased property pursuant
to the proviso in the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an
amended complaint for reconveyance of Lot. No. 1095 in its favor under conditions similar to
those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and
Delphin Pacheco.
The petitioners contend that there was actually no transfer of ownership of the subject
parcel of land since the Pachecos remained in control of the property. Thus, the petitioners
allege: "Considering that the beneficial ownership and control of petitioner corporation
remained in the hands of the original co-owners, there was no transfer of actual ownership
interests over the land when the same was transferred to petitioner corporation in exchange
for the latter's shares of stock.
The private respondent argues that Delpher Trades Corporation is a corporate entity
separate and distinct from the Pachecos. Thus, it contends that it cannot be said that Delpher
Trades Corporation is the Pacheco's same alter ego or conduit; that petitioner Delfin Pacheco,
having treated Delpher Trades Corporation as such a separate and distinct corporate entity, is
not a party who may allege that this separate corporate existence should be disregarded. It
maintains that there was actual transfer of ownership interests over the leased property when
the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of
stock.

ISSUE: Whether or not petitioner corporation is a mere alter ego of the Pacheco co-owners

HELD: Yes. After incorporation, one becomes a stockholder of a corporation by subscription or


by purchasing stock directly from the corporation or from individual owners thereof. In the
case at bar, in exchange for their properties, the Pachecos acquired 2,500 original unissued no
par value shares of stocks of the Delpher Trades Corporation. Consequently, the Pachecos
became stockholders of the corporation by subscription "The essence of the stock subscription
is an agreement to take and pay for original unissued shares of a corporation, formed or to be
formed." It is significant that the Pachecos took no par value shares in exchange for their
properties.
It is to be stressed that by their ownership of the 2,500 no par shares of stock, the
Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the
other stockholders, who also belong to the same family group. In effect, the Delpher Trades
Corporation is a business conduit of the Pachecos. What they really did was to invest their
properties and change the nature of their ownership from unincorporated to incorporated
form by organizing Delpher Trades Corporation to take control of their properties and at the
same time save on inheritance taxes.
The "Deed of Exchange" of property between the Pachecos and Delpher Trades
Corporation cannot be considered a contract of sale. There was no transfer of actual ownership
interests by the Pachecos to a third party. The Pacheco family merely changed their ownership
from one form to another. The ownership remained in the same hands. Hence, the private
respondent has no basis for its claim of a light of first refusal under the lease contract.
MATUGUINA INTEGRATED WOOD PRODUCTS, INC., vs. The HON. COURT OF APPEALS,
DAVAO ENTERPRISES CORPORATION, The HON. MINISTER, (NOW SECRETARY) of
NATURAL RESOURCES AND PHILLIP CO
G.R. No. 98310. October 24, 1996

FACTS: The Acting Director of the Bureau of Forest Development issued Provisional Timber
License (PTL) No. 30, covering an area of 5,400 hectares to Ms. Milagros Matuguina who was
then doing business under the name of MLE, a sole proprietorship venture. A portion, covering
1,900 hectares, of the said area adjoined the timber concession of Davao Enterprises
Corporation (DAVENCOR), the private respondent in this case. On July 10, 1974, petitioner
Matuguina Integrated Wood Products, Inc. (MIWPI), was incorporated, having an authorized
capital stock of Ten Million Pesos (P10,000,000.00). Milagros Matuguina became the majority
stockholder of MIWPI having (70%) stock ownership of MIWPI. Milagros Matuguina requested
the Director for a change of name and transfer of management of PTL No. 30, from a single
proprietorship under her name, to that of MIWPI which was approved. Milagros Matuguina and
petitioner MIWPI executed a Deed of Transfer transferring all of the formers rights, interests,
ownership and participation in PLT No. 30 to the latter for and in consideration of 148,000
shares of stocks in MIWPI. DAVENCOR complained that Milagros Matuguina/MLE had
encroached into and was conducting logging operations in DAVENCORs timber concession.
The Director ruled in favor or DAVENCOR. Milagros Matuguina disposed of her shares in
petitioner MIWPI, thereby ceasing to be a stockholder of the petitioner.

ISSUE: Is the petitioner a transferee of MLE's interest, as to make it liable for the latters illegal
logging operations in DAVENCORs timber concession, or more specifically, is it possible to
pierce the veil of MIWPIs corporate existence, making it a mere conduit or successor of MLE?
HELD: No. 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. It is the vehement contention of defendants, to bolster its claim, that plaintiff
corporation is the alter ego of Maria Milagros Matuguina Logging Enterprises, because when
Milagros Matuguina became the Chairman of the Board of Directors of plaintiff corporation,
she requested for the change of name and transfer of management of PTL No. 30, from her
single proprietorship, to plaintiff corporation. In the first place the alleged control of plaintiff
corporation was not evident in any particular corporate acts of plaintiff corporation, wherein
Maria Milagros Matuguina Logging Enterprises using plaintiff corporation, executed acts or
powers directly involving plaintiff corporation. Neither was there any evidence of defendants,
that Maria Milagros Matuguina Logging Enterprises, using the facilities and resources of
plaintiff corporation, involved itself in transaction using both single proprietorship and plaintiff
corporation in such particular line of business undertakings. Yet, granting as claimed by
defendants, that in 1974 or in 1975, Maria Milagros Matuguina became the controlling
stockholder of plaintiff corporation, on account of the change of name and transfer of
management of PTL No. 30, this circumstance does not of itself prove that plaintiff corporation
was the alter ego of Maria Milagros Matuguina Logging Enterprise. It is important to bear in
mind that mere ownership by a single stockholder or by another corporation of all or nearly all
of the capital stocks of the corporation, is not itself a sufficient warrant for disregarding the
fiction of separate personality. It is likewise improper to state that the MIWPI is the privy or the
successor-in-interest of MLE, as the liability for the encroachment over DAVENCORs timber
concession is concerned, by reason of the transfer of interest in PTL No. 30 from MLE to
MIWPI. First at all, it does not appear indubitable that the said transfer ever became effective,
since PTL No. 30 remained in the name of Milagros Matuguina/MLE until it expired on June 30,
1977. More importantly, even if it is deemed that there was a valid change of name and transfer
of interest in the PTL No. 30, this only signifies a transfer of authority, from MLE to MIWPI, to
conduct logging operations in the area covered by PTL No. 30. It does not show indubitable
proof that MIWPI was a mere conduit or successor of Milagros Matuguina/MLE, as far the
latters liability for the encroachment upon DAVENCORs concession is concerned. The
petitioner is a corporate entity separate and distinct from Milagros Matuguina/Matuguina
Logging Enterprises, there being no clear basis for considering it as a mere conduit or alter ego
of Matuguina/MLE, and therefore, cannot be made liable for the obligations of the same for
encroachment over the timber concession of private respondent DAVENCOR.
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. vs. NATIONAL LABOR
RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS
G.R. No. 120077, October 13, 2000

FACTS: In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos")
was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of
Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's
Republic of China and later terminated due to retrenchment. Petitioners are the Manila Hotel
Corporation (hereinafter referred to as "MHC") and the Manila Hotel International Company,
Limited (hereinafter referred to as "MHICL"). When the case was filed in 1990, MHC was still a
government-owned and controlled corporation duly organized and existing under the laws of
the Philippines. MHICL is a corporation duly organized and existing under the laws of Hong
Kong. MHC is an "incorporator" of MHICL, owning 50% of its capital stock. By virtue of a
"management agreement" with the Palace Hotel (Wang Fu Company Limited), MHICL trained
the personnel and staff of the Palace Hotel at Beijing, China. Santos filed a complaint for illegal
dismissal against MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.

ISSUE: Whether or not MHC is liable

HELD: No. True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital
stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and
MHC. Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend a
crime. It is done only when a corporation is a mere alter ego or business conduit of a person or
another corporation. The tests in determining whether the corporate veil may be pierced
are: First, the defendant must have control or complete domination of the other corporation's
finances, policy and business practices with regard to the transaction attacked. There must be
proof that the other corporation had no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant to commit fraud or
wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury
or loss complained of. The absence of any of the elements prevents the piercing of the
corporate veil. It is basic that a corporation has a personality separate and distinct from those
composing it as well as from that of any other legal entity to which it may be related. Clear and
convincing evidence is needed to pierce the veil of corporate fiction. In this case, there is no
evidence to show that MHICL and MHC are one and the same entity.
COMMISSIONER OF INTERNAL REVENUE vs. NORTON and HARRISON COMPANY
G.R. No. L-17618, August 31, 1964

FACTS: Norton and Harrison is a corporation organized in 1911, (1) to buy and sell at wholesale
and retail, all kinds of goods, wares, and merchandise; (2) to act as agents of manufacturers in
the United States and foreign countries; and (3) to carry on and conduct a general wholesale
and retail mercantile establishment in the Philippines. Jackbilt is, likewise, a corporation
organized on February 16, 1948 primarily for the purpose of making, producing and
manufacturing concrete blocks. On July 27, 1948, Norton and Jackbilt entered into an
agreement whereby Norton was made the sole and exclusive distributor of concrete blocks
manufactured by Jackbilt. Pursuant to this agreement, whenever an order for concrete blocks
was received by the Norton & Harrison Co. from a customer, the order was transmitted to
Jackbilt which delivered the merchandise direct to the customer. Payment for the goods is,
however, made to Norton, which in turn pays Jackbilt the amount charged the customer less a
certain amount, as its compensation or profit. During the existence of the distribution or
agency agreement, or on June 10, 1949, Norton & Harrison acquired by purchase all the
outstanding shares of stock of Jackbilt. Apparently, due to this transaction, the Commissioner
of Internal Revenue, after conducting an investigation, assessed the respondent Norton &
Harrison for deficiency sales tax and surcharges in the amount of P32,662.90, making as basis
thereof the sales of Norton to the Public. In other words, the Commissioner considered the sale
of Norton to the public as the original sale and not the transaction from Jackbilt. The
Commissioner of Internal Revenue contends that since Jackbilt was owned and controlled by
Norton & Harrison, the corporate personality of the former (Jackbilt) should be disregarded for
sales tax purposes, and the sale of Jackbilt blocks by petitioner to the public must be
considered as the original sales from which the sales tax should be computed. The Norton &
Harrison Company contended otherwise that is, the transaction subject to tax is the sale
from Jackbilt to Norton.

ISSUE: Whether the corporate personality should be disregarded.

HELD: Yes. It has been settled that the ownership of all the stocks of a corporation by another
corporation does not necessarily breed an identity of corporate interest between the two
companies and be considered as a sufficient ground for disregarding the distinct personalities.
However, in the case at bar, there are sufficient grounds to support the theory that the
separate identities of the two companies should be disregarded. Among these circumstances,
are: (a) Norton and Harrison owned all the outstanding stocks of Jackbilt; of the 15,000
authorized shares of Jackbilt on March 31, 1958, 14,993 shares belonged to Norton and
Harrison and one each to seven others; (b) Norton constituted Jackbilt's board of directors in
such a way as to enable it to actually direct and manage the other's affairs by making the same
officers of the board for both companies. For instance, James E. Norton is the President,
Treasurer, Director and Stockholder of Norton. He also occupies the same positions in Jackbilt
corporation, the only change being, in the Jackbilt, he is merely a nominal stockholder. (c)
Norton financed the operations of the Jackbilt. (d) Norton treats Jackbilt employees as its own.
Evidence shows that Norton paid the salaries of Jackbilt employees and gave the same
privileges as Norton employees, an indication that Jackbilt employees were also Norton's
employees. (e) Compensation given to board members of Jackbilt, indicate that Jackbilt is
merely a department of Norton. The income tax return of Norton for 1954 shows that as
President and Treasurer of Norton and Jackbilt, he received from Norton P56,929.95, but
received from Jackbilt the measly amount of P150.00, a circumstance which points out that
remuneration of purported officials of Jackbilt are deemed included in the salaries they
received from Norton. The offices of Norton and Jackbilt are located in the same compound.
Payments were effected by Norton of accounts for Jackbilt and vice versa. Payments were also
made to Norton of accounts due or payable to Jackbilt and vice versa.
SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC, vs. COURT OF APPEALS,
MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT
CORP. and JNM REALTY AND DEVELOPMENT CORP.,
G.R. No. 129459, September 29, 1998

FACTS: Plaintiff-appellant San Juan Structural and Steel Fabricators entered into an
agreement with defendant-appellee Motorich Sales Corporation for the transfer to it of a
parcel of land identified as Lot 30, Block 1. Plaintiff-appellant paid the down payment in the
sum of P100,000.00 Pesos, the balance to be paid on or before March 2, 1989; that on March 2,
1989, plaintiff-appellant was ready with the amount payable to defendant-appellee Motorich
Sales Corporation; that plaintiff-appellant and defendant-appellee Motorich Sales Corporation
were supposed to meet in the office of plaintiff-appellant but defendant-appellees treasurer,
Nenita Lee Gruenberg, did not appear; that defendant-appellee Motorich Sales Corporation
despite repeated demands and in utter disregard of its commitments had refused to execute
the Transfer of Rights/Deed of Assignment which is necessary to transfer the certificate of
title; that defendant ACL Development Corp. is impleaded as a necessary party since Transfer
Certificate of Title No. (362909) 2876 is still in the name of said defendant; while defendant
JNM Realty & Development Corp. is likewise impleaded as a necessary party in view of the fact
that it is the transferor of right in favor of defendant-appellee Motorich Sales Corporation; that
on April 6, 1989, defendant ACL Development Corporation and Motorich Sales Corporation
entered into a Deed of Absolute Sale whereby the former transferred to the latter the subject
property; that by reason of said transfer, the Registry of Deeds of Quezon City issued a new
title in the name of Motorich Sales Corporation, represented by defendant-appellee Nenita
Lee Gruenberg and Reynaldo L. Gruenberg; that as a result of defendants-appellees Nenita
Lee Gruenberg and Motorich Sales Corporations bad faith in refusing to execute a formal
Transfer of Rights/Deed of Assignment, plaintiff-appellant suffered damages.

ISSUE: May the veil of corporate fiction be pierced on the mere ground that almost all of the
shares of stock of the corporation are owned by said treasurer and her husband?

HELD: No. First, petitioner itself concedes having raised the issue belatedly, not having done
so during the trial, but only when it filed its sur-rejoinder before the Court of Appeals. Second,
even if the above-mentioned argument were to be addressed at this time, the Court still finds
no reason to uphold it. True, one of the advantages of a corporate form of business
organization is the limitation of an investors liability to the amount of the investment. This
feature flows from the legal theory that a corporate entity is separate and distinct from its
stockholders. However, the statutorily granted privilege of a corporate veil may be used only
for legitimate purposes. The corporate fiction should be set aside when it becomes a shield
against liability for fraud, illegality or inequity committed on third persons. The question of
piercing the veil of corporate fiction is essentially, then, a matter of proof. In the present case,
however, the Court finds no reason to pierce the corporate veil of Respondent
Motorich. Petitioner utterly failed to establish that said corporation was formed, or that it is
operated, for the purpose of shielding any alleged fraudulent or illegal activities of its officers
or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the
expense of third persons, like petitioner. Also, Motorich is not a close corporation. The articles
of incorporation of Motorich Sales Corporation does not contain any provision stating that (1)
the number of stockholders shall not exceed 20, or (2) a preemption of shares is restricted in
favor of any stockholder or of the corporation, or (3) listing its stocks in any stock exchange or
making a public offering of such stocks is prohibited. From its articles, it is clear that
Respondent Motorich is not a close corporation. Motorich does not become one either, just
because Spouses Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed capital
stock. The 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 personalities. So too, a narrow distribution of ownership does not, by itself,
make a close corporation.
TAN BOON BEE & CO., INC., vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING
JUDGE OF BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING,
INC., and PHILIPPINE AMERICAN CAN DRUG COMPANY
G.R. No. L-41337, June 30, 1988

FACTS: Petitioner, doing business under the name and style of Anchor Supply Co., sold on
credit to private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products. For
failure of GRAPHIC to pay any installment, petitioner filed for a Sum of Money. The trial court
ordered GRAPHIC to pay the petitioner. On motion of petitioner, a writ of execution was
issued by respondent judge; but the aforestated writ having expired without the sheriff finding
any property of GRAPHIC, an alias writ of execution was issued. Pursuant to the said issued
alias writ of execution, the executing sheriff levied upon one (1) unit printing machine found in
the premises of GRAPHIC. In a Notice of Sale of Execution of Personal Property, said printing
machine was scheduled for auction sale but private respondent, Philippine American Drug
Company (PADCO for short) had informed the sheriff that the printing machine is its property
and not that of GRAPHIC, and accordingly, advised the sheriff to cease and desist from
carrying out the scheduled auction sale. Notwithstanding the said letter, the sheriff proceeded
with the scheduled auction sale, sold the property to the petitioner. PADCO filed a Motion to
Nullify Sale on Execution. The petitioner, however, contends that the controlling stockholders
of the Philippine American Drug Co. are also the same controlling stockholders of the Graphic
Publishing, Inc. and, therefore, the levy upon the said machinery which was found in the
premises occupied by the Graphic Publishing, Inc. should be upheld.

ISSUE: Whether or not PADCO's veil of corporate Identity should be pierced

HELD: Yes. Petitioner's evidence established that PADCO was never engaged in the printing
business; that the board of directors and the officers of GRAPHIC and PADCO were the same;
and that PADCO holds 50% share of stock of GRAPHIC. Petitioner likewise stressed that
PADCO's own evidence shows that the printing machine in question had been in the premises
of GRAPHIC since May, 1965, long before PADCO even acquired its alleged title on July 11,
1966 from Capitol Publishing. That the said machine was allegedly leased by PADCO to
GRAPHIC on January 24, 1966, even before PADCO purchased it from Capital Publishing on
July 11, 1966, only serves to show that PADCO's claim of ownership over the printing machine
is not only farce and sham but also unbelievable.
TELEPHONE ENGINEERING & SERVICE COMPANY, INC., vs. WORKMEN'S
COMPENSATION COMMISSION
G.R. No. L-28694, May 13, 1981

FACTS: Petitioner is a domestic corporation engaged in the business of manufacturing


telephone equipment with offices at Sheridan Street, Mandaluyong, Rizal. Its Executive Vice-
President and General Manager is Jose Luis Santiago. It has a sister company, the Utilities
Management Corporation (UMACOR), with offices in the same location. UMACOR is also
under the management of Jose Luis Santiago.
On September 8, 1964, UMACOR employed the late Pacifica L. Gatus as Purchasing
Agent. On May 16, 1965, Pacifico L. Gatus was detailed with Telephone Engineering & Service
Company. He reported back to UMACOR on August 1, 1965. On January 13, 1967, he
contracted illness and although he retained to work on May 10, 1967, he died nevertheless on
July 14, 1967 of "liver cirrhosis with malignant degeneration."
On August 7, 1967, his widow, respondent Leonila S. Gatus, filed a "Notice and Claim
for Compensation" with Regional Office No. 4, Quezon City Sub-Regional Office, Workmen's
Compensation Section, alleging therein that her deceased husband was an employee of
TESCO, and that he died of liver cirrhosis.
An "Employer's Report of Accident or Sickness" was thus submitted with UMACOR
indicated as the employer of the deceased. The Report was signed by Jose Luis Santiago. The
employer stated that it would not controvert the claim for compensation, and admitted that
the deceased employee contracted illness "in regular occupation."
On the basis of this Report, the Acting Referee awarded death benefits in the amount
of P5,759.52 plus burial expenses of P200.00 in favor of the heirs of Gatus in a letter-award
dated October 6, 1967 against TESCO.
Replying on October 27, 1967, TESCO, through Jose Luis Santiago, informed the Acting
Referee that it would avail of the 15-days-notice given to it to state its non-conformity to the
award and contended that the cause of the illness contracted by Gatus was in no way
aggravated by the nature of his work.
On November 6, 1967, TESCO requested for an extension of ten days within which to
file a Motion for Reconsideration, and on November 15, 1967, asked for an additional extension
of five days. TESCO filed its "Motion for Reconsideration and/or Petition to Set Aside Award"
on November 18, 1967, alleging as grounds therefor, that the admission made in the
"Employer's Report of Accident or Sickness" was due to honest mistake and/or excusable
negligence on its part, and that the illness for which compensation is sought is not an
occupational disease, hence, not compensable under the law. The extension requested was
denied. The Motion for Reconsideration was likewise denied in an Order issued by the Chief of
Section of the Regional Office dated December 28, 1967 predicated on two grounds: that the
alleged mistake or negligence was not excusable, and that the basis of the award was not the
theory of direct causation alone but also on that of aggravation. On January 28, 1968, an Order
of execution was issued by the same Office.
On February 3, 1968, petitioner filed an "Urgent Motion to Compel Referee to Elevate
the Records to the Workmen's Compensation Commission for Review." Meanwhile, the
Provincial Sheriff of Rizal levied on and attached the properties of TESCO on February 17,
1968, and scheduled the sale of the same at public auction on February 26, 1968.
TESCO filed with this Court, on February 22, 1968, the present petition for "Certiorari
with Preliminary Injunction" seeking to annul the award and to enjoin the Sheriff from levying
and selling its properties at public auction.

ISSUE: Whether or not there is an employer-employee relationship between the parties

HELD: To start with, a few basic principles should be re-stated the existence of employer-
employee relationship is the jurisdictional foundation for recovery of compensation under the
Workmen's Compensation Law. The lack of employer-employee relationship, however, is a
matter of defense that the employer should properly raise in the proceedings below. The
determination of this relationship involves a finding of fact, which is conclusive and binding
and not subject to review by the Supreme Court.
Viewed in the light of these criteria, we note that it is only in this Petition before us that
petitioner denied, for the first time, the employer-employee relationship. In fact, in its letter
dated October 27, 1967 to the Acting Referee, in its request for extension of time to file Motion
for Reconsideration, in its "Motion for Reconsideration and/or Petition to Set Aside Award,"
and in its "Urgent Motion to Compel the Referee to Elevate Records to the Commission for
Review," petitioner represented and defended itself as the employer of the deceased.
Nowhere in said documents did it allege that it was not the employer. Petitioner even
admitted that TESCO and UMACOR are sister companies operating under one single
management and housed in the same building. Although respect for the corporate personality
as such, is the general rule, there are exceptions. In appropriate cases, the veil of corporate
fiction may be pierced as when the same is made as a shield to confuse the legitimate issues.
While, indeed, jurisdiction cannot be conferred by acts or omission of the parties,
TESCO'S denial at this stage that it is the employer of the deceased is obviously an
afterthought, a devise to defeat the law and evade its obligations. This denial also constitutes
a change of theory on appeal which is not allowed in this jurisdiction. Moreover, issues not
raised before the Workmen's Compensation Commission cannot be raised for the first time on
appeal.
BUENAFLOR C. UMALI vs. COURT OF APPEALS
G.R. No. 89561, September 13, 1990

FACTS: The original complaint for annulment of title filed in the court a quo by herein
petitioners included as party defendants the Philippine Machinery Parts Manufacturing Co.,
Inc. (PM Parts), Insurance Corporation of the Philippines (ICP), Bormaheco, Inc., (Bormaheco)
and Santiago M. Rivera (Rivera). A Second Amended Complaint was filed, this time impleading
Santiago M. Rivera as party plaintiff.
On January 23, 1971, Bormaheco, Inc. and Slobec Realty and Development, Inc.,
represented by its President, Santiago Rivera, executed a Sales Agreement over one unit of
Caterpillar Tractor D-7. As shown by the contract, the price was P230,000.00 of which
P50,000.00 was to constitute a down payment, and the balance of P180,000.00 payable in
eighteen monthly installments. On the same date, Slobec, through Rivera, executed in favor of
Bormaheco a Chattel Mortgage over the said equipment as security for the payment of the
aforesaid balance of P180,000.00. As further security of the aforementioned unpaid balance,
Slobec obtained from Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance
Corporation of the Phil.) as surety and Slobec as principal, in favor of Bormaheco. The
aforesaid surety bond was in turn secured by an Agreement of Counter-Guaranty with Real
Estate Mortgage executed by Rivera as president of Slobec and Mauricia Meer Vda. de
Castillo, Buenaflor Castillo Umali, Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and
Leovina Castillo Jalbuena, as mortgagors and Insurance Corporation of the Philippines (ICP) as
mortgagee. In this agreement, ICP guaranteed the obligation of Slobec with Bormaheco in the
amount of P180,000.00. In giving the bond, ICP required that the Castillos mortgage to them
the properties in question, namely, four parcels of land covered by TCTs in the name of the
aforementioned mortgagors.
On April 10, 1975, Insurance Corporation of the Phil. ICP sold to Phil. Machinery Parts
Manufacturing Co. (PM Parts) the four (4) parcels of land and by virtue of said conveyance, PM
Parts transferred unto itself the titles over the lots in dispute.
Thereafter, PM Parts, through its President, Mr. Modesto Cervantes, sent a letter
dated August 9,1976 addressed to plaintiff Mrs. Mauricia Meer Castillo requesting her and her
children to vacate the subject property, who (Mrs. Castillo) in turn sent her reply expressing her
refusal to comply with his demands.
On September 29, 1976, the heirs of the late Felipe Castillo, particularly plaintiff
Buenaflor M. Castillo Umali as the appointed administratrix of the properties in question filed
an action for annulment of title. After trial, the court a quo rendered judgment in favor of the
plaintiffs and against the defendants

ISSUE: Whether the title issued in the name of Insurance Corporation of the Philippines, are
likewise null and void.
HELD: There is absolute simulation, which renders the contract null and void, when the parties
do not intend to be bound at all by the same. The basic characteristic of this type of simulation
of contract is the fact that the apparent contract is not really desired or intended to either
produce legal effects or in any way alter the juridical situation of the parties.
The subsequent act of Rivera in receiving and making use of the tractor subject matter
of the Sales Agreement and Chattel Mortgage, and the simultaneous issuance of a surety bond
in favor of Bormaheco, concomitant with the execution of the Agreement of Counter-Guaranty
with Chattel/Real Estate Mortgage, conduce to the conclusion that petitioners had every
intention to be bound by these contracts. The occurrence of these series of transactions
between petitioners and private respondents is a strong indication that the parties actually
intended, or at least expected, to exact fulfillment of their respective obligations from one
another.
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 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.
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
VLASON ENTERPRISES CORPORATION vs. COURT OF APPEALS
G.R. Nos. 121662-64, July 6, 1999

FACTS: Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport
Company of Honduras & Panama, a Panamanian company, requested permission for its
vessel M/V Star Ace, which had engine trouble, to unload its cargo and to store it at the
Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting
transhipment to Hongkong.
Despite the approval, the customs personnel boarded the vessel when it docked on
January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line
Philippines Co., and that its cargo would be smuggled into the country.
The district customs collector seized said vessel and its cargo pursuant to Tariff and
Customs Code. A notice of hearing of SFLU Seizure Identification was served on its consignee,
Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand.
While seizure proceedings were ongoing, La Union was hit by three typhoons, and the
vessel ran aground and was abandoned. On June 8, 1989, its authorized representative, Frank
Cadacio, entered into a salvage agreement with private respondent to secure and repair the
vessel at the agreed consideration of $1 million and fifty percent (50%) of the cargo after all
expenses, cost and taxes.
Finding that no fraud was committed, the District Collector of Customs, Aurelio M.
Quiray, lifted the warrant of seizure on July 16, 1989. However, in a Second Indorsement dated
November 11, 1989, then Customs Commissioner Salvador M. Mison declined to issue a
clearance for Quirays Decision; instead, he forfeited the vessel and its cargo in accordance with
Section 2530 of the Tariff and Customs Code. Accordingly, acting District Collector of Customs
John S. Sy issued a Decision decreeing the forfeiture and the sale of the cargo in favor of the
government.
To enforce its preferred salvors lien, herein Private Respondent Duraproof Services filed
with the Regional Trial Court of Manila a Petition for Certiorari, Prohibition
and Mandamus assailing the actions of Commissioner Mison and District Collector Sy. Also
impleaded as respondents were PPA Representative Silverio Mangaoang and Med Line
Philippines, Inc.
On January 10, 1989, private respondent amended its Petition to include former District
Collector Quiray; PPA Port Manager Adolfo Ll. Amor Jr; Petitioner Vlason Enterprises as
represented by its president, Vicente Angliongto; Singkong Trading Company as represented
by Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co., Inc.; Thai-Nan Enterprises
Ltd. and Thai-United Trading Co., Ltd. In both Petitions, private respondent plainly failed to
include any allegation pertaining to petitioner, or any prayer for relief against it.
Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med
Line Philippines: Angliongto (through his secretary, Betty Bebero), Atty. Tamondong and
Commissioner Mison. Upon motion of the private respondent, the trial court allowed summons
by publication to be served upon the alien defendants who were not residents and had no
direct representatives in the country.
On January 29, 1990, private respondent moved to declare respondents in default, but
the trial court denied the motion in its February 23, 1990 Order because Mangaoang and Amor
had jointly filed a Motion to Dismiss, while Mison and Med Line had moved separately for an
extension to file a similar motion. Later it rendered an Order dated July 2, 1990, giving due
course to the motions to dismiss filed by Mangaoang and Amor on the ground of litis
pendentia, and by the commissioner and district collector of customs on the ground of lack of
jurisdiction. In another Order, the trial court dismissed the action against Med Line Philippines
on the ground of litis pendentia.
Private respondent again moved to declare the following in default: petitioner, Quiray,
Sy and Mison on March 26, 1990; and Banco Du Brazil, Dusit International Co., Inc., Thai-Nan
Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24, 1990.
Petitioner filed another Motion for leave to amend the petition, alleging that its counsel
failed to include the following necessary and/or indispensable parties: Omega represented by
Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain.
Aside from impleading these additional respondents, private respondent also alleged
in the Second (actually, third) Amended Petition that the owners of the vessel intended to
transfer and alienate their rights and interests over the vessel and its cargo, to the detriment of
the private respondent.
The trial court granted leave to private respondent to amend its Petition, but only to
exclude the customs commissioner and the district collector. Instead, private respondent filed
the Second Amended Petition with Supplemental Petition against Singkong Trading
Company; and Omega and M/V Star Ace, to which Cadacio and Rada filed a Joint Answer.
Declared in default in an Order issued by the trial court on January 23, 1991, were the
following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega. Private
respondent filed, and the trial court granted, an ex parte Motion to present evidence against
the defaulting respondents. Only private respondent, Atty. Tamondong, Commissioner Mison,
Omega and M/V Star Ace appeared in the next pretrial hearing; thus, the trial court declared
the other respondents in default and allowed private respondent to present evidence against
them.
Cesar Urbino, general manager of private respondent, testified and adduced evidence
against the other respondents, including herein petitioner. As regards petitioner, he declared:
Vlason Enterprises represented by Atty. Sy and Vicente Angliongto thru constant intimidation and
harassment of utilizing the PPA Management of San Fernando, La Union x x x further delayed,
and [private respondent] incurred heavy overhead expenses due to direct and incidental expenses
xxx causing irreparable damages of about P3,000,000 worth of ship tackles, rigs, and
appurtenances including radar antennas and apparatuses, which were taken surreptitiously by
persons working for Vlason Enterprises or its agents.
On December 29, 1990, private respondent and Rada, representing Omega, entered
into a Memorandum of Agreement stipulating that Rada would write and notify Omega
regarding the demand for salvage fees of private respondent; and that if Rada did not receive
any instruction from his principal, he would assign the vessel in favor of the salvor.

ISSUE: Whether or not the doctrine of piercing the corporate veil applies

HELD: The sheriffs return shows that Angliongto who was president of petitioner corporation,
through his secretary Betty Bebero, was served summons on January 18, 1990.
Petitioner claims that this service was defective for two reasons: (1) Bebero was an
employee of Vlasons Shipping, Inc., which was an entity separate and distinct from Petitioner
Vlason Enterprises Corporation (VEC); and (2) the return pertained to the service of summons
for the amended Petition, not for the Second Amended Petition with Supplemental Petition,
the latter pleading having superseded the former.
A corporation may be served summons through its agents or officers who under the
Rules are designated to accept service of process. A summons addressed to a corporation and
served on the secretary of its president binds that corporation. This is based on the rationale
that service must be made on a representative so integrated with the corporation sued, that it
is safe to assume that said representative had sufficient responsibility and discretion to realize
the importance of the legal papers served and to relay the same to the president or other
responsible officer of the corporation being sued. The secretary of the president satisfies this
criterion. This rule requires, however, that the secretary should be an employee of the
corporation sought to be summoned. Only in this manner can there be an assurance that the
secretary will bring home to the corporation [the] notice of the filing of the action against it.
In the present case, Bebero was the secretary of Angliongto, who was president of both
VSI and petitioner, but she was an employee of VSI, not of petitioner.
The piercing of the corporate veil cannot be resorted to when serving summons.
Doctrinally, a corporation is a legal entity distinct and separate from the members and
stockholders who compose it. However, when the corporate fiction is used as a means of
perpetrating a fraud, evading an existing obligation, circumventing a statute, achieving or
perfecting a monopoly or, in generally perpetrating a crime, the veil will be lifted to expose the
individuals composing it. None of the foregoing exceptions has been shown to exist in the
present case. Quite the contrary, the piercing of the corporate veil in this case will result in
manifest injustice. This we cannot allow. Hence, the corporate fiction remains.
Petitioner claims that the trial court did not acquire jurisdiction over it, because the
former had not been served summons anew for the Second Amended Petition or for the
Second Amended Petition with Supplemental Petition. In the records, it appears that only
Atty. Tamondong, counsel for Singkong Trading, and was furnished a copy of the Second
Amended Petition. The corresponding sheriffs return indicates that only Omega, M/V Star
Ace and Capt. Rada were served summons and copies of said Petition.
We disagree. Although it is well-settled that an amended pleading supersedes the
original one, which is thus deemed withdrawn and no longer considered part of the record, it
does not follow ipso facto that the service of a new summons for amended petitions or
complaints is required. Where the defendants have already appeared before the trial court by
virtue of a summons on the original complaint, the amended complaint may be served upon
them without need of another summons, even if new causes of action are alleged. After it is
acquired, a courts jurisdiction continues until the case is finally terminated. Conversely, when
defendants have not yet appeared in court and no summons has been validly served, new
summons for the amended complaint must be served on them. It is not the change of cause of
action that gives rise to the need to serve another summons for the amended complaint, but
rather the acquisition of jurisdiction over the persons of the defendants. If the trial court has
not yet acquired jurisdiction over them, a new service of summons for the amended complaint
is required.
In this case, the trial court obviously labored under the erroneous impression that
petitioner had already been placed under its jurisdiction since it had been served summons
through the secretary of its president. Thus, it dispensed with the service on petitioner of new
summons for the subsequent amendments of the Petition. We have already ruled, however,
that the first service of summons on petitioner was invalid. Therefore, the trial court never
acquired jurisdiction, and the said court should have required a new service of summons for the
amended Petitions.
Petitioner insists that the trial court never declared it in default.
We agree. The trial court denied the January 29, 1990 Motion of private respondent to
declare all the defendants in default, but it never acted on the latters subsequent Motion to
declare petitioner likewise. During the pretrial on January 23, 1993, the RTC declared in default
only Atty. Eddie Tamondong, as well as the other defendants Hon. Salvador Mison, M/V Star
Ace, Omega Sea Transport Co., Inc. of Panama and Sinkong Trading Co., [but] despite xxx due
notice to them, [they] failed to appear. Even private respondent cannot pinpoint which trial
court order held petitioner in default.
More important, the trial court, in its Resolution dated May 22, 1991, admitted that it
never declared petitioner in default, viz.:
xxx It is in this light that this court made an in-depth reflection and assessment of the premises
or reasons raised by [petitioner] VEC[;] and after a re-examination of the facts and evidence
spread on the records, it has come to the considered conclusion that the questioned default-
judgment has been improvidently issued. [Based on] the records, the claim of [private
respondent] that [its] January 29, 1990 Ex-Parte Motion to Declare Defendants In Default (pp.
174-177, records, Vol. 1) including VEC had been granted is belied by the February 23, 1990
Order (pp. 214-215, records, ibid) par. 2, thereof, xxx
Not even petitioners November 23, 1990 Ex-Parte Motion To Present Evidence Against
Defaulting Defendants (page 489, records, Vol. 2) [can] be deemed as a remedy [for] the fact
that there never was issued an order of default against respondents including [petitioner]
VEC. Having thus established that there ha[d] been no order of default against VEC as
contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13, Revised Rules of Court, there
could not have been any valid default-judgment rendered against it. The issuance of an order
of default is a condition sine qua non in order [that] a judgment by default be clothed with
validity. Further, records show that this court never had authorized [private respondent] to
adduce evidence ex-parte against [Petitioner] VEC. In sum, the February 18, 1991 decision by
default is null and void as against [Petitioner] VEC. xxxx.
The aforementioned default judgment refers to the February 18, 1989 Decision, not to
the Order finding petitioner in default as contended by private respondent. Furthermore, it is a
legal impossibility to declare a party-defendant to be in default before it was validly served
summons.
VILLA REY TRANSIT v. FERRER
GR No. L-23893, OCTOBER 29, 1968

FACTS: Jose M. Villarama was an operator of bus transportation, under the business name of
Villa Rey Transit, pursuant to certificates of public convenience granted him by the Public
Service Commission (PSC) which authorized him to operate a total of thirty-two (32) units on
various routes or lines from Pangasinan to Manila, and vice-versa.
He sold the aforementioned two certificates of public convenience to the Pangasinan
Transportation Company, Inc. (Pantranco), for P350,000.00 with the condition, among others,
that the seller (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."
Barely three months thereafter a corporation called Villa Rey Transit, Inc. (which shall
be referred to hereafter as the Corporation) was organized with a capital stock of P500,000.00
divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the subscribed
stock; Natividad R. Villarama (wife of Jose M. Villarama) was one of the incorporators, and she
subscribed for P1,000.00; the balance of P199,000.00 was subscribed by the brother and sister-
in-law of Jose M. Villarama; of the subscribed capital stock, P105,000.00 was paid to the
treasurer of the corporation, who was Natividad R. Villarama.
In less than a month after its registration with the Securities and Exchange
Commission, the Corporation, bought five certificates of public convenience, forty-nine buses,
tools and equipment from one Valentin Fernando, for the sum of P249,000.00, of which
P100,000.00 was paid upon the signing of the contract; P50,000.00 was payable upon the final
approval of the sale by the PSC; P49,500.00 one year after the final approval of the sale; and
the balance of P50,000.00 "shall be paid by the BUYER to the different suppliers of the
SELLER."
The very same day that the aforementioned contract of sale was executed, the parties
thereto immediately applied with the PSC for its approval, with a prayer for the issuance of a
provisional authority in favor of the vendee Corporation to operate the service therein involved
PSC granted the provisional permit prayed for, upon the condition that "it may be modified or
revoked by the Commission at any time, shall be subject to whatever action that may be taken
on the basic application and shall be valid only during the pendency of said application." Before
the PSC could take final action on said application for approval of sale, however, the Sheriff of
Manila levied on two of the five certificates of public convenience involved pursuant to a writ of
execution issued by the Court of First Instance of Pangasinan in favor of Eusebio Ferrer,
plaintiff, judgment creditor, against Valentin Fernando, defendant, judgment debtor. A public
sale was conducted by the Sheriff of the said two certificates of public convenience. Ferrer was
the highest bidder, and a certificate of sale was issued in his name.
Thereafter, Ferrer sold the two certificates of public convenience to Pantranco, and
jointly submitted for approval their corresponding contract of sale to the PSC Pantranco
therein prayed that it be authorized provisionally to operate the service involved in the said
two certificates.
In the meantime, the PSC issued an order disposing that during the pendency of the cases and
before a final resolution on the aforesaid applications, the Pantranco shall be the one to
operate provisionally the service under the two certificates embraced in the contract between
Ferrer and Pantranco. The Corporation took issue with this particular ruling of the PSC and
elevated the matter to the Supreme Court, which decreed, after deliberation, that until the
issue on the ownership of the disputed certificates shall have been finally settled by the proper
court, the Corporation should be the one to operate the lines provisionally.
The Corporation filed 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. The plaintiff Corporation prayed therein
that all the orders of the PSC relative to the parties' dispute over the said certificates be
annulled.
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, 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."
Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey
Transit, Inc. (Corporation) is a distinct and separate entity from Jose M. Villarama; that the
restriction clause in the contract between Pantranco and Villarama is null and void; that the
Sheriff's sale is likewise null and void; and the failure to award damages in its favor and against
Villarama.

ISSUES:
1. Whether or not the corporation is a separate and distinct entity from that of Villarama
2. Whether or not the stipulation is valid and binding
3. Whether or not the stipulation is a restriction of trade

RULING:
1. The evidence has disclosed that Villarama, albeit was not an incorporator or
stockholder of the Corporation, alleging that he did not become such, because he did not have
sufficient funds to invest, his wife, however, was an incorporator with the least subscribed
number of shares, and was elected treasurer of the Corporation. 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, in such a way and extent that Villarama appeared
to be the actual owner-treasurer of the business without regard to the rights of the
stockholders. The following testimony of Villarama together with the other evidence on
record, attests to that effect.
The evidence further shows that the initial cash capitalization of the corporation of
P105,000.00 was mostly financed by Villarama. Of the P105,000.00 deposited in the First
National City Bank of New York, representing the initial paid-up capital of the Corporation,
P85,000.00 was covered by Villarama's personal check.
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. It would appear that Villarama supplied the organization expenses and the assets
of the Corporation, such as trucks and equipment; there was no actual payment by the original
subscribers of the amounts of P95,000.00 and P100,000.00 as appearing in the books;
Villarama made use of the money of the Corporation and deposited them to his private
accounts; and the Corporation paid his personal accounts.
Villarama himself admitted that he mingled the corporate funds with his own money.
The foregoing circumstances are strong persuasive evidence showing that Villarama has been
too much involved in the affairs of the Corporation to altogether negative the claim that he
was only a part-time general manager. They show beyond doubt that the Corporation is his
alter ego.
Villarama's explanation 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. 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. Upon the foregoing considerations, the court holds that the Villa
Rey Transit, Inc. is an alter ego of Jose M. Villarama.
2. 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. Where the Corporation is substantially the alter ego of the covenantor to the
restrictive agreement, it can be enjoined from competing with the covenantee.

3. The law concerning contracts which tend to restrain business or trade has gone through
a long series of changes from time to time with the changing condition of trade and
commerce. With trifling exceptions, said changes have been a continuous development of a
general rule. However, the rule became well established that if the restraint was limited to "a
certain time" and within "a certain place," such contracts were valid and not "against the benefit
of the state." Later cases, and we think the rule is now well established, have held that a contract
in restraint of trade is valid providing there is a limitation upon either time or place. A contract,
however, which restrains a man from entering into business or trade without either a limitation
as to time or place, will be held invalid.
Analyzing the characteristics of the questioned stipulation, the court finds that
although it is in the nature of an agreement suppressing competition, it is, however, merely
ancillary or incidental to the main agreement which is that of sale. The suppression or restraint
is only partial or limited.
There can be no danger of price controls or deterioration of the service because of the
close supervision of the Public Service Commission. This Court had stated long ago, that "when
one devotes his property to a use in which the public has an interest, he virtually grants to the
public an interest in that use and submits it to such public use under reasonable rules and
regulations to be fixed by the Public Utility Commission."
ARNOLD HALL vs. PICCIO
G.R. No. L-2598, JUNE 29, 1950

FACTS: Petitioners C. Arnold Hall and Bradley P. Hall, and the respondents Fred Brown, Emma
Brown, Hipolita D. Chapman and Ceferino S. Abella, signed and acknowledged in Leyte, the
article of incorporation of the Far Eastern Lumber and Commercial Co., Inc., organized to
engage in a general lumber business to carry on as general contractors, operators and
managers, etc. Attached to the article was an affidavit of the treasurer stating that 23,428
shares of stock had been subscribed and fully paid with certain properties transferred to the
corporation described in a list appended thereto.
Immediately after the execution of said articles of incorporation, the corporation
proceeded to do business with the adoption of by-laws and the election of its officers.
On December 2, 1947, the said articles of incorporation were filed in the office of the
Securities and Exchange Commissioner, for the issuance of the corresponding certificate of
incorporation. Pending action on the articles of incorporation by the aforesaid governmental
office, the respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella
filed before the Court of First Instance of Leyte the civil case alleging among other things that
the Far Eastern Lumber and Commercial Co. was an unregistered partnership; that they
wished to have it dissolved because of bitter dissension among the members, mismanagement
and fraud by the managers and heavy financial losses.
The defendants in the suit, namely, C. Arnold Hall and Bradley P. Hall, filed a motion to
dismiss, contesting the court's jurisdiction and the sufficiently of the cause of action.

ISSUE: Whether or not the court has jurisdiction to decree the dissolution of the company,
because it is a de facto corporation, dissolution therefore may only be ordered in quo warranto
proceeding

RULING: The first proposition above stated is premised on the theory that, inasmuch as the
Far Eastern Lumber and Commercial Co., is a de facto corporation, section 19 of the
Corporation Law applies, and therefore the court had no jurisdiction to take cognizance of said
civil case number 381. Section 19 reads as follows:
. . . The due incorporation of any corporations claiming in good faith to be a corporation
under this Act and its right to exercise corporate powers shall not be inquired into collaterally
in any private suit to which the corporation may be a party, but such inquiry may be had at the
suit of the Insular Government on information of the Attorney-General.
There are least two reasons why this section does not govern the situation. Not having
obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co. even
its stockholders may not probably claim "in good faith" to be a corporation.
Under our statue it is to be noted (Corporation Law, sec. 11) that it is the issuance of a
certificate of incorporation by the Director of the Bureau of Commerce and Industry which calls
a corporation into being. The immunity if collateral attack is granted to corporations "claiming
in good faith to be a corporation under this act." Such a claim is compatible with the existence
of errors and irregularities; but not with a total or substantial disregard of the law. Unless there
has been an evident attempt to comply with the law the claim to be a corporation "under this
act" could not be made "in good faith."
Second, this is not a suit in which the corporation is a party. This is a litigation between
stockholders of the alleged corporation, for the purpose of obtaining its dissolution. Even the
existence of a de jure corporation may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the state.
There might be room for argument on the right of minority stockholders to sue for
dissolution; but that question does not affect the court's jurisdiction, and is a matter for
decision by the judge, subject to review on appeal. Which brings us to one principal reason why
this petition may not prosper, namely: the petitioners have their remedy by appealing the
order of dissolution at the proper time.

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