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TITLE FACTS ISSUE/S RULING


LIVESEY V. BINSWANGER Petitioner filed a complaint for illegal (1) Whether or not the case is an (1) The issue is rendered moot and
PHILIPPINES, INC. AND dismissal with money claims against CBB. intra-corporate dispute therefore academic because of the compromise
ELIOT, G.R. No. 177493, CBB alleged that it engaged Livesey as a beyond the jurisdiction of the agreement between the parties.
March 19, 2014 corporate officer. CBB posited that the labor NLRC;
arbiter (LA) had no jurisdiction as the (2) YES, it is applicable. Piercing the veil of
complaint involved an intra-corporate (2) Whether or not the doctrine of corporate fiction is an equitable doctrine
dispute. The LA found that there was illegal piercing the veil of corporate developed to address situations where the
dismissal and to reinstate Livesey. They fiction is applicable in the case. separate corporate personality of a
entered into a compromise agreement. corporation is abused or used for wrongful
Under the agreement, Livesey was to purposes. Under the doctrine, the corporate
receive his money claim in an installment existence may be disregarded where the
basis and that CBB shall not: (1) SLEMPAD entity is formed or used for non-legitimate
of all or substantially all of its propertiess; (2) purposes, such as to evade a just and due
suspend, discontinue, or cease its entire, or obligation, or to justify a wrong, to shield or
a substantial portion of its business perpetrate fraud or to carry out similar or
operations; (3) substantially change the inequitable considerations, other
nature of its business; and (4) declare unjustifiable aims or intentions, in which
bankruptcy or insolvency. case, the fiction will be disregarded and the
individuals composing it and the two
CBB initially paid but company ceased corporations will be treated as identical.
operations. Livesey moved for the issuance
of a writ of execution. Invoking the doctrine In the present case, CBB ceased to exist
of piercing the veil of corporate fiction, only in name; it re-emerged in the person of
Livesey prayed that an alias writ of execution Binswanger to avoid payment by CBB of its
be issued against Binswanger and Keith monetary obligation to Livesey. It was not
Elliot, CBB’s former President, and now just coincidence that Binswanger is engaged
Binswanger’s President and CEO. 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) CBB’s key officers,
Elliot, no less, and Catral moved over to
Binswanger, performing the tasks they were
doing at CBB; (3) notwithstanding CBB’s
closure, Binswanger’s Web Editor, 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
CBB’s 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)
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Binswanger’s takeover of CBB’s project with


the PNB.
MANILA ELECTRIC Petitioner and TEC were parties to two Whether or not respondent TEC No. The court deems it proper to delete the
COMPANY V. T.E.A.M separate contracts for the Sale of Electric and TPC are entitled to moral award of moral damages. As a rule, a
ELECTRONICS Energy. Under the agreements, petitioner damages. corporation is not entitled to moral damages
CORPORATION, ET AL., undertook to supply TECs building DCIM because, not being a natural person, it
G.R. No. 131723, December with electric power. Another contract was cannot experience physical suffering or
13, 2007 entered into for the supply of electric power sentiments like wounded feelings, serious
to TEC’s NS Building. A team of petitioner’s anxiety, mental anguish and moral shock.
inspectors conducted a surprise inspection The only exception to this rule is when the
of the electric meters installed at the DCIM corporation has a reputation that is debased,
building. The two meters were found to be resulting in its humiliation in the business
allegedly tampered with and did not register realm. But in such a case, it is imperative for
the actual power consumption in the the claimant to present proof to justify the
building. Petitioner informed TEC and award. It is essential to prove the existence
demanded from the latter the differential of the factual basis of the damage and its
billing. TEC referred the letter to Ultra being causal relation to petitioner’s acts. In the
in possession during the covered period. present case, the records are bereft of any
Due to failure of TEC to pay the differential evidence that the name or reputation of
billing, petitioner disconnected the electricity TEC/TPC has been debased as a result of
supply to the DCIM building but eventually petitioner’s acts. Besides, the trial court
reconnected it when ordered by ERB and simply awarded moral damages in the
upon payment of TEC of 1M, under protest. dispositive portion of its decision without
Meanwhile, petitioner conducted another stating the basis thereof. PETITION
inspection, this time, in TECs NS Building. DENIED.
The inspection allegedly revealed that the
electric meters were not registering the
correct power consumption. Petitioner
demand payment but TEC denied
petitioner’s allegations. Petitioner, thus, sent
TEC another letter demanding payment of
the aforesaid amount, with a warning that the
electric service would be disconnected in
case of continued refusal to pay the
differential billing. TEC paid the amount,
under protest. TEC and TPC filed a
complaint for damages before the RTC of
Pasig. The trial court rendered a decision in
favor of respondents granting actual
damages, moral damages and exemplary
damages. TECs claim of moral damage was
premised allegedly on the damage to its
goodwill and reputation, that the name or
reputation of TEC/TPC has been debased
as a result of petitioners’ acts.
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PILIPINAS SHELL Respondent is a corporation duly organized Whether or not Petition for Yes. The Petition for Insolvency was
PETROLEUM and existing under the Philippine Law. Insolvency was properly filed. properly filed before the RTC of Manila.
CORPORATION V. ROYAL According to its Articles of Incorporation, Section 14 of the Insolvency Law specifies
FERRY SERVICES, INC., Royal Ferry’s principal place of business is that the proper venue for a petition for
G.R. No. 188146, February 1, located at Makati City. However, it currently voluntary insolvency is the RTC of the
2017 holds office at Intramuros, Manila. In 2005, province or city where the insolvent debtor
Royal Ferry filed a verified Petition for has resided in for six (6) months before the
Voluntary Insolvency before the RTC of filing of the petition. To determine the venue
Manila. It alleged that in 2000, it suffered of an insolvency proceeding, the residence
serious business losses that led to heavy of a corporation should be the actual place
debts. Royal Ferry ceased its operations in where its principal office has been located for
2002. The RTC declared Royal Ferry six (6) months before the filing of the petition.
insolvent in its order. On December 2005, If there is a conflict between the place stated
petitioner filed before the RTC of Manila a in the articles of incorporation and the
Formal Notice of Claim and a Motion to physical location of the corporation's main
Dismiss. In its Motion to Dismiss, Petitioner office, the actual place of business should
alleged that the Petition was filed in the control. Requiring a corporation to go back
wrong venue. It argued that the Insolvency to a place it has abandoned just to file a case
Law provides that a petition for insolvency is the very definition of inconvenience. There
should be filed before the court with territorial is no reason why an insolvent corporation
jurisdiction over the corporation's residence. should be forced to exert whatever meager
Since Royal Ferry's Articles of Incorporation resources it has to litigate in a city it has
stated that the corporation's principal office already left. In any case, the creditors deal
is located Makati City, the Petition should with the corporation's agents, officers, and
have been filed before the RTC of Makati employees in the actual place of business.
and not before the RTC of Manila. To compel a corporation to litigate in a city it
has already abandoned would create more
confusion. Moreover, the six (6)-month
qualification of the law's requirement of
residence shows intent to find the most
accurate location of the debtor's activities. If
the address in a corporation's articles of
incorporation is proven to be no longer
accurate, then legal fiction should give way
to fact. PETITION DENIED.
PEÑA V. CA, G.R. No. 91478, In 1962, the Pampanga Bus Company Whether or not the board No, the board resolution is void.
February 7, 1991 (PAMBUSCO) took out a loan from the resolution is valid. The by-laws are the laws of the corporation.
Development Bank of the Philippines (DBP). PAMBUSCO’s by-laws provide that a
PAMBUSCO used the parcels of land it quorum consists of at least four directors.
owned to secure the loan. In October 1974, The meeting was attended by only three
due to PAMBUSCO’s nonpayment, DBP directors did not comply with the required
foreclosed the parcels of land. Rosita Peña quorum. Thus, the three directors were not
was the highest bidder. Meanwhile, in able to come up with a valid resolution which
November 1974, the Board of Directors of could bind the corporation. Anent the issue
PAMBUSCO had a meeting. The meeting of Peña being a third person, she can
was attended by only 3 out of the 5 Directors. question the board resolution. The resolution
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In the said meeting, the Board, through a here is likened to a contract. Under the law,
resolution, authorized one of the directors, a person who is not a party obliged
Atty. Joaquin Briones, to assign the principally or subsidiarity in a contract may
properties of PAMBUSCO. Pursuant to the exercise an action for nullity of the contract if
resolution, Briones assigned PAMBUSCO’s he or she is prejudiced in his or her rights
assets to Marcelino Enriquez. Enriquez, with respect to one of the contracting parties,
knowing that the properties were previously and can show the detriment which would
mortgaged and foreclosed, exercised positively result to him or her from the
PAMBUSCO’s right to redeem. So in August contract in which he or she had no
1975, he redeemed the said properties and intervention.
thereafter he sold them to Rising Yap. Yap
then registered the properties under his Other findings: Furthermore, the sale of the
name. He then demanded Peña to vacate properties of PAMBUSCO did not comply
the properties. Peña refused to do and so with the procedure laid down by the
Yap filed a complaint. Corporation Law. Under the law, the sale or
disposition of an and/or substantially all
In her defense, Peña averred that Yap properties of the corporation requires, in
acquired no legal title over the property addition to a proper board resolution, the
because the board resolution issued by affirmative votes of the stockholders holding
PAMBUSCO in November 1974 was void at least two-thirds (2/3) of the voting power
because the resolution was issued without a in the corporation in a meeting duly called for
quorum; that there was no quorum because that purpose. No doubt, the questioned
under the by-laws of PAMBUSCO, a quorum resolution was not confirmed at a
requires the presence of 4 out of 5 directors subsequent stockholders meeting duly
and yet the meeting was only attended by called for the purpose by the affirmative
three directors. Thus, the authority granted votes of the stockholders holding at least
to Briones to assign the properties was void; two-thirds (2/3) of the voting power in the
that the subsequent assignment by Briones corporation. Further still, the Supreme Court
to Enriquez was void; that Enriquez acquired discovers a few other anomalies with
no title and hence thus Yap acquired no title. PAMBUSCO. One is that PAMBUSCO has
Yap insisted that Peña has no legal standing been inactive since 1949 as per the records
to question the board resolution because provided by the Securities and Exchange
she was not a stockholder. Commission. Its general information sheet
with the SEC has not been updated regularly
even. And the three directors present were
not even listed as current directors of
PAMBUSCO.
CARAG V. NLRC, G.R. No. National Federation of Labor Unions Whether or not Antonio Carag be The Supreme Court held that the rule is that
147590, April 2, 2007 (NAFLU) and Mariveles Apparel Corporation held solidarily liable for the a director is not personally liable for the
Labor Union (MACLU), on behalf of all of payment of the illegally dismissed debts of the corporation, which has a
MAC’s rank and file employees, filed a employees. separate legal personality of its own. Section
complaint against MAC for illegal dismissal 31 of the Corporation Code lays down the
brought about by its illegal closure of exceptions to the rule, as follows:
business. They included in their complaint
Mariveles Apparel Corporation’s Chairman Liability of directors, trustees or officers. -
of the Board Antonio Carag in order to be Directors or trustees who wilfully and
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solidarily liable for the illegal dismissal and knowingly vote for or assent to patently
illegal closure of business. According to the unlawful acts of the corporation or who are
Labor Union of MAC, the Corporation guilty of gross negligence or bad faith in
suddenly closed its business without directing the affairs of the corporation or
following the notice as laid down in the Labor acquire any personal or pecuniary interest in
Law of the Philippines. The Labor Arbiter conflict with their duty as such directors or
decided in favor of the Labor Union and held trustees shall be liable jointly and severally
that Antonio Carag being the owner of the for all damages resulting therefrom suffered
corporation be solidarily liable for the by the corporation, its stockholders or
payment of separation pay and backwages members and other persons.
of the rank and file employees. Antonio xxxx
Carag questioned the decision of the Labor Section 31 makes a director personally liable
Arbiter and alleged that the Corporation and for corporate debts if he wilfully and
its officers have separate and distinct knowingly votes for or assents to patently
personality and the latter cannot be held unlawful acts of the corporation. Section 31
liable solidarily in cases of payment of also makes a director personally liable if he
damages. is guilty of gross negligence or bad faith in
directing the affairs of the corporation.

Complainants did not allege in their


complaint that Carag wilfully and knowingly
voted for or assented to any patently
unlawful act of MAC. Complainants did not
present any evidence showing that Carag
wilfully and knowingly voted for or assented
to any patently unlawful act of MAC. Neither
did Arbiter Ortiguerra make any finding to
this effect in her Decision.

For a wrongdoing to make a director


personally liable for debts of the corporation,
the wrongdoing approved or assented to by
the director must be a patently unlawful act.
Mere failure to comply with the notice
requirement of labor laws on company
closure or dismissal of employees does not
amount to a patently unlawful act. Patently
unlawful acts are those declared unlawful by
law which imposes penalties for commission
of such unlawful acts. There must be a law
declaring the act unlawful and penalizing the
act.
METROBANK V. CENTRO In a special meeting of the board of directors Whether the requirements of No. Reading carefully the Secretary’s
DEVELOPMENT of respondent Centro, its president Go Eng Section 40 of the Corporation Certificate, it is clear that the main purpose
CORPORATION, ET AL, Uy was authorized to mortgage its properties Code was complied with in the of the directors Resolution was to appoint
and assets to secure the medium-term loan execution of the MTI. petitioner as the new trustee of the
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of ₱84M of Lucky Two Corporation and previously executed and amended MTI.
Lucky Two Repacking. Centro and BPI Going through the original and the revised
amended the MTI to allow an additional loan MTI, the Court find no substantial
of ₱36M and to include San Carlos Milling amendments to the provisions of the
Company, Inc. (San Carlos) as a borrower. contract. The Court agree with petitioner that
Centro and BPI again amended the MTI for the act of appointing a new trustee of the MTI
another loan of ₱24M, bringing the total was a regular business transaction. The
obligation to ₱144M. Meanwhile, respondent appointment necessitated only a decision of
Centro, represented by Go Eng Uy, at least a majority of the directors present at
approached petitioner Metrobank and the meeting in which there was a quorum,
proposed that the latter assume the role of pursuant to Section 25 of the Corporation
successor-trustee of the existing MTI. After Code. The second paragraph of the directors
petitioner Metrobank agreed to the proposal, Resolution No. 005, s. 1994, which
the board of directors of respondent Centro empowered Go Eng Uy to sign the Real
allegedly resolved to constitute petitioner as Estate Mortgage and all
successor-trustee of BPI. During the period documents/instruments with Metrobank, for
April 1998 to December 1998, San Carlos and in behalf of the Company which are
obtained loans in the total principal amount necessary and pertinent thereto, must be
of ₱812,793,513.23 from petitioner construed to mean that such power was
Metrobank. San Carlos failed to pay these limited by the conditions of the existing
outstanding obligations hence Metrobank as mortgage, and not that a new mortgage was
the successor trustee initiated foreclosure of thereby constituted, thus, Section 40 of the
the mortgaged executed for the loan. Before Corporation Code finds no application in the
the scheduled foreclosure date, respondents present case. Nevertheless, while the Court
herein filed a Complaint for the annulment of uphold the validity of the stockholders
the MTI with a prayer for a temporary Resolution appointing Metrobank as
restraining order (TRO) and preliminary successor-trustee, this is not to say that we
injunction. The bone of contention in Civil uphold the validity of the extrajudicial
Case No. 00-942 was that since the foreclosure of the mortgage.
mortgaged properties constituted all or
substantially all of the corporate assets, the
amendment of the MTI failed to meet the
requirements of Section 40 of the
Corporation Code on notice and voting
requirements. Under this provision, in order
for a corporation to mortgage all or
substantially all of its properties and assets,
it should be authorized by the vote of its
stockholders representing at least 2/3 of the
outstanding capital stock in a meeting held
for that purpose. Furthermore, there must be
a written notice of the proposed action and
of the time and place of the meeting. Thus,
respondents alleged, the representation of
Go Eng Uy that he was authorized by the
board of directors and/or stockholders of
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Centro was false. After trial on the merits, the


RTC dismissed the Complaint. On 30 August
2007, the CA promulgated the assailed
Decision. Petitioner’s Motion for
Reconsideration was likewise denied.
AFRICA V. PCGG ET AL., Shortly after the PCGG sequestered ETPI, Whether or not the issuance of the Yes, it is valid. In upholding the right of a
G.R. No. 83831, January 9, the sequestration order was partially lifted in subpoenas over the books of stockholder of a sequestered company to
1992 when 40% of the shares of stock owned by ETPI were valid. inspect and/or examine the records of a
Cable and Wireless, Ltd. were freed from the corporation pursuant to Section 74 of the
effects of sequestration. The remaining 60% Corporation Code, the Court found nothing
of the shares, however, remained under in Executive Orders Nos. 1, 2 and 14, to
sequestration. Subsequently, during the indicate an implied amendment of the
annual stockholders meeting pursuant to a Corporation Code, much less an implied
PCGG Resolution (January 28, 1988) which modification of a stockholder's right of
called for the resumption of the stockholders inspection as guaranteed by Section 74
meeting originally scheduled, Villanueva, as thereof. The only express limitation on the
PCGG nominee, Mabanta, and de los right of inspection, according to the Court, is
Angeles as nominees of the foreign that (1) the right of inspection should be
investors, and Africa were elected as exercised at reasonable hours on business
members of the board. The nomination and days; (2) the person demanding the right to
election of PCGG nominees to the ETPI examine and copy excerpts from the
Board, as well as the election of its new corporate records and minutes has not
officers, triggered a chain of contentious improperly used any information secured
proceedings before the Sandiganbayan (SB) through any previous examination of the
and the SC. records of such corporation; and (3) the
demand is made in good faith or for a
G.R. No. 85594: Africa et al. filed before the legitimate purpose.
SB action for injunction with prayer for a writ
of preliminary injunction/TRO. They
questioned the acts and orders of the PCGG
leading to the election of petitioners to the
ETPI Board. They, claimed to be the duly
elected members of the ETPI Board of
Directors during a special stockholders
meeting, prayed that Villanueva et al. be
removed from their ETPI positions, and that
an injunction be issued to perpetually
restrain the PCGG from electing,
designating and supporting the defendants
in their ETPI roles. While the motions to
dismiss remained pending and prior to the
hearing for the issuance of a writ /TRO, the
SB issued, upon request of Africa, et al. a
subpoena ordering the PCGG to appear and
testify before the SB and to produce the
stock and transfer book and all stubs of the
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outstanding stock certificates of ETPI.


Thereafter, another subpoena duces tecum
was issued upon an amended request for
subpoena ordering the Ass. SolGen to
appear before the SB and to produce the
minutes of all meetings of the Board and
Stockholders of held from January 29, 1988
to date. A petition for certiorari, was filed by
the before the Court, assailing the orders as
having been issued with grave abuse of
discretion on the ground that the SB has no
jurisdiction over the main action for damages
since it is in truth a suit against the State
without its consent. The PCGG also prayed
for the issuance of a TRO to enjoin the
respondents from enforcing/ executing the
subpoenas, the Court granted the TRO. All
in all, the petitions have substantially the
same relief sought that is to nullify the acts
and orders of PCGG which lead to the
election of the new members of the board
and officers of ETPI and to enjoin them from
exercising the powers of the said positions.
BLBT V. BITANGA The Potencianos, Delfin C. Yorro, and Maya Whether or not the stockholder’s The validity of the BLTB stockholders'
Industries, Inc., entered into a Sale and meeting held on May 19, 1998 meeting held on May 19, 1998 was
Purchase Agreement, whereby, they sold to was void since BMB Holdings, sustained, in light of the time-honored
BMB Property Holdings, Inc represented by Inc., represented by Bitanga doctrine in corporation law that a transfer of
its President, Benjamin Bitanga, their shares group was not present at the shares is not valid unless recorded in the
of stock in BLTB representing 47.98% of the meeting. books of the corporation. It is not disputed
total outstanding capital stock of BLTB. that the transfer of the shares of the group of
Barely a month after the Agreement was Dolores Potenciano to the Bitanga group has
executed, Bitanga and Monina Grace Lim not yet been recorded in the books of the
were elected as new directors. During a corporation. Hence, the group of Dolores
meeting of the Board, the newly elected Potenciano, in whose names those shares
directors scheduled the annual stockholders’ still stand, were the ones entitled to attend
meeting. Before the scheduled meeting, and vote at the stockholders' meeting of the
Michael Potenciano wrote Bitanga, BLTB on 19 May 1998. This being the case,
requesting for a postponement of the the Hearing Panel committed grave abuse of
stockholders’ meeting due to the absence of discretion in holding otherwise and in
a thirty-day advance notice. However, there concluding that there was no quorum in said
was no response on whether or not the meeting. The Court is in full accord with the
request for postponement was favorably SEC En Banc on this matter. Indeed, until
acted upon. On the scheduled date of the registration is accomplished, the transfer,
meeting, a notice of postponement of the though valid between the parties, cannot be
stockholders’ meeting was published in the effective as against the corporation. Thus,
Manila Bulletin. In as much as there was no the unrecorded transferee, the Bitanga
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notice of postponement prior to that, a total group in this case, cannot vote nor be voted
of 286 stockholders arrived and attended the for.
meeting. The majority of the stockholders
present rejected the postponement and
voted to proceed with the meeting. The
Potenciano group was re-elected to the
Board of Directors, however, the Bitanga
group refused to relinquish their positions
and continued to act as directors and officers
of BLTB. The Bitanga group filed with the
SEC a complaint for Damages which,
however, was denied. Likewise, the
Potenciano group filed a Complaint for
Injunction and Damages with Preliminary
Injunction and TRO with the SEC which
issued a TRO enjoining the Bitanga group
from acting as officers and directors of BLTB.
The Bitanga group filed another complaint
which was granted. It declared that the
stockholders’ meeting was void on the
grounds that, first, Michael Potenciano had
himself asked for its postponement due to
improper notice; and, second, there was no
quorum, since BMB Holdings, Inc.,
represented by the Bitanga group, which
then owned 50.26% of BLTB’s shares
having purchased the same from the
Potenciano group, was not present at the
said meeting. The Potenciano group filed a
petition for certiorari with the SEC En Banc.
The SEC En Banc set aside the Order of the
Hearing Panel and issued the writ of
preliminary injunction prayed for. The
Bitanga group immediately filed a a petition
for certiorari with the Court of Appeals which
reversed the assailed Orders of the SEC En
Banc and reinstating the Order of the
Hearing Panel. The Court of Appeals denied
petitioner’s Motion for Reconsideration.
Hence, this petition.
Villanueva v. Adre, G.R. No. The employees of South Cotabato W/N Velayo may be held Yes, he may be held liable had there been
80863, April 27, 1989 Integrated Port Services, Inc. (SCIPSI), Inc personally liable using the no off-court settlement rendering the petition
filed a case against SCIPSI and it's Doctrine of Piercing the Veil of moot and academic. In the case of A.C.
president, Velayo for the unpaid 13th month Corporate Fiction despite his Ransom Labor Union-CCLU v. NLRC it was
pays. The employees garnered a favorable contention that he is just the held that it is the president of the corporation
judgement. As a result, two lands owned by who responds personally for violation of the
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Velayo were levied upon by the sheriff. president and that he was never a labor pay laws. Art. 273 of the Labor Code
Velayo assailed the decision contending that party to the case provides that: "Any person violating any of
he was never a party to the labor case and the provisions of Art. 265 of this Code shall
that a corporation has a separate and distinct be punished by ... imprisonment". To apply
personality from its incorporators, this provision Art. 212. It states that
stockholders and officers. He also contends “Employer” includes any person acting in the
that he was never mentioned in the interest of an employer, directly or indirectly.
pleadings before the petitioner-labor arbiter In this case, just like RANSOM, SCIPSI is an
and therefore is a stranger to the case. Soon artificial being that acts through its officers.
After, the parties agreed to an off court RA 602 states that criminal responsibility is
settlement. with the "Manager or in his default, the
person acting as such", in this case, it would
be the president. Velayo cannot be excused
from payment of SCIPSI's liability by mere
reason of SCIPSI's separate corporate
existence. The theory of corporate entity, in
the first place, was not meant to promote
unfair objectives or otherwise, to shield
them. This Court has not hesitated in
penetrating the veil of corporate fiction when
it would defeat the ends envisaged by law,
not to mention the clear decree of the Labor
Code.
Ching v. CA, et al., G.R. No. Ching signed 13 trust receipts (granted by 1) Whether or not mere corporate 1) Yes. Section 13 of PD 115 states that, “If
164317, February 6, 2006 RCBC), as a surety for PBMI, covering the officers should be held liable for the violation or offense is committed by a
goods for importation by the latter. Ching the violation of PD No. 115 by the corporation, partnership, association or
was given the authority to sell but not by way corporation despite the principle other judicial entities, the penalty provided
of conditional sale, pledge or otherwise; and of separate corporate personality for in this Decree shall be imposed upon the
in case such goods were sold, to turn over 2) If they may be made liable, directors, officers, employees or other
the proceeds thereof as soon as received, to whether or not Ching is the proper officials or persons therein responsible for
apply against the relative acceptances and corporate officer to stand as a the offense, without prejudice to the civil
payment of other indebtedness to RCBC. defendant liabilities arising from the criminal offense.”
When the trust receipts matured, Ching A corporation cannot be proceeded against
failed to return the goods to RCBC, or to criminally because it cannot commit crime in
return their value. RCBC filed a criminal which personal violence or malicious intent
complaint for estafa against Ching. is required, criminal action is limited to the
He could be proceeded against in two ways: corporate agents guilty of an act amounting
as surety as determined by the Supreme to a crime and never against the corporation
Court or as the corporate official responsible itself.
for the offense under P.D. No. 115.
2) Yes, Ching is the proper corporate officer
to stand as defendant for the crime. Ching,
having participated in the negotiations for the
trust receipts and having received the goods
for PBMI, it was inevitable that he is the
proper corporate officer to be proceeded
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against by virtue of the PBMI’s violation of


P.D. No. 115.

The crime defined in P.D. No. 115 is malum


prohibitum but is classified as estafa which
may be committed by a corporation.
However, the penalty for the crime is
imprisonment, which means that the penalty
provided for must be served by a natural
person. If the crime is committed by a
corporation or other juridical entity, the
directors, officers, employees or other
officers thereof responsible for the offense
shall be charged and penalized. Ching
signed the trust receipts in question. He
cannot, thus, hide behind the cloak of the
separate corporate personality of PBMI. In
the words of Chief Justice Earl Warren, a
corporate officer cannot protect himself
behind a corporation where he is the actual,
present and efficient actor.
Magsaysay-Labrador v. CA, The petitioners are the sisters of the late Whether or not the CA correctly The CA correctly denied such motion. The
G.R. No. 58168, December Sen. Magsaysay. The respondent is the denied the sisters' motion for petitioners have no legal interest in the
19, 1989 widow of Sen. Magsaysay. The respondent intervention subject matter in litigation so as to entitle
filed for the cancellation of the title of them to intervene in the proceedings. The
Pequena Island which was issued in the interest of petitioners is indirect, contingent,
name of Subic Land Corp. Such title was remote, conjectural, consequential and
allegedly acquired by the corp through fraud. collateral. At the very least, their interest is
The petitioners filed a motion for intervention purely inchoate, or in sheer expectancy of a
in the case contending that that their brother right in the management of the corporation
conveyed to them one-half (1/2 ) of his and to share in the profits thereof and in the
shareholdings in the corp. and as assignees properties and assets thereof on dissolution,
of around 41 % of the total outstanding after payment of the corporate debts and
shares of such stocks, they have a obligations. While a share of stock
substantial and legal interest in the subject represents a proportionate or aliquot interest
matter of litigation and that they have a legal in the property of the corporation, it does not
interest in the success of the suit. vest the owner thereof with any legal right or
title to any of the property, his interest in the
corporate property being equitable or
beneficial in nature. Shareholders are in no
legal sense the owners of corporate
property, which is owned by the corporation
as a distinct legal person.
Donnina Halley vs. Printwell, BMPI (Business Media Philippines Inc.) is a WON a stockholder who was in YES! Such stockholder should be made
Inc. (G.R. No 157549) May 30, corporation under the control of its active management of the liable up to the extent of her unpaid
2011 stockholders, including Donnina Halley. In business of the corporation and subscription. The stockholders cannot now
12

the course of its business, BMPI still has unpaid subscriptions claim the doctrine of corporate fiction
commissioned PRINTWELL to print should be made liable for the otherwise (to deny creditors to collect from
Philippines, Inc. (a magazine published and debts of the corporation by SH) it would create an injustice because
distributed by BMPI). PRINTWELL extended piercing the veil of corporate creditors would be at a loss (limbo) against
30-day credit accommodation in favor of fiction whom it would assert the right to collect.
BMPI and in a period of 9 mos. BMPI placed
several orders amounting to 316,000. On Piercing the Veil:
However, only 25,000 was paid hence a Although the corporation has a personality
balance of 291,000. separate and distinct from its SH, such
personality is merely a legal fiction (for the
PRINTWELL sued BMPI for collection of the convenience and to promote the ends of
unpaid balance and later on impleaded justice) which may be disregarded by the
BMPI’s original stockholders and courts if it is used as a cloak or cover for
incorporators to recover on their unpaid fraud, justification of a wrong, or an alter ego
subscriptions. It appears that BMPI has an for the sole benefit of the SH.
authorized capital stock of 3M divided into
300,000 shares with P10 par value. Only As to the Trust Fund Doctrine:
75,000 shares worth P750,000 were The RTC and CA correctly applied the Trust
originally subscribed of which P187,500 Fund Doctrine. Under which, corporate
were paid up capital. Halley subscribed to debtors might look to the unpaid
35,000 shares worth P350,000 but only paid subscriptions for the satisfaction of unpaid
P87,500. corporate debts. Subscriptions to the capital
of a corporation constitutes a trust fund for
Halley contends that they all had already the payment of the creditors (by mere
paid their subscriptions in full by presenting analogy) In reality, corporation is a simple
official receipts (O.R.), BMPI had a separate debtor. Moreover, the corporation has no
and distinct personality and BOD and SH legal capacity to release an original
had resolved to dissolve BMPI. subscriber to its capital stock from the
obligation of paying for his shares, in whole
RTC and CA both ruled that BMPI merely or in part, without valuable consideration, or
used the corporate fiction as a cloak/cover to fraudulently, to the prejudice of the creditors.
create an injustice (against PRINTWELL). The creditor is allowed to maintain an action
They also rejected the allegations of full upon any unpaid subscriptions and thereby
payment in view of irregularity in the steps into the shoes of the corporation for the
issuance of O.R.s (Payment made on a later satisfaction of its debt. The trust fund
date was covered by an O.R. with a lower doctrine is not limited to reaching the SH’s
serial number than payment made on an unpaid subscriptions. The scope of the
earlier date. doctrine when the corporation is insolvent
encompasses not only the capital stock but
also other property and assets generally
regarded in equity as a trust fund for the
payment of corporate debts.
HEIRS OF FE TAN UY vs. Respondent iBank granted loans to Hammer 1. Whether Uy can be held liable 1. No, Uy is not liable. Considering that the
INTERNATIONAL Garments, covered by PNs and deeds of 2. Whether Goldkey can be held only basis for holding Uy liable for the
EXCHANGE BANK (G.R. No. assignments pursuant to the letter- liable payment of the loan was proven to be a
166282) February 13, 2013 agreement between iBank and Hammer, falsified document, there was no sufficient
13

represented by its President and General justification for the RTC to have ruled that Uy
Manager, Chua, granting Hammer a P25M should be held jointly and severally liable to
credit line. The loans were secured by a iBank for the unpaid loan of Hammer. At
REM executed by Goldkey Dev’t Corp over most, Uy could have been charged with
several of its properties and a peso surety negligence in the performance of her duties
agreement signed by Chua and his wife (FE as treasurer of Hammer by allowing the
TAN UY). company to contract a loan despite its
precarious financial position. Uy’s
Hammer defaulted, iBank foreclosed shortcomings are not sufficient to justify the
Goldkey’s third party REM. The mortgaged piercing of the corporate veil, which requires
properties were sold for P12M, leaving a that the negligence of the officer must be so
balance of P13M. Hammer failed to pay the gross that it could amount to bad faith.
deficiency, iBank filed a complaint for sum of
money against Hammer, Chua, Uy and 2. Yes. It was apparent that Goldkey was
Goldkey. merely an adjunct of Hammer, and as such,
the legal fiction that it has a separate
Uy claimed she was not liable to iBank personality from that of Hammer should be
because she never executed a surety brushed aside as they are, undeniably, one
agreement in favor of iBank as her signature and the same.
was forged.Goldkey denies liability averring
that it acted only as a third party mortgagor
and that it was a corporation separate and
distinct from Hammer.

RTC held Uy liable despite forgery of


signature for being officer and stockholder of
Hammer Corporation. RTC came to the
conclusion that Hammer and Goldkey were
one and the same because both were family
corporations of Chua and Uy, both shared
the same office, assets of both corporations
were co-mingled, when Chua absconded,
both Hammer and Goldkey ceased to
operate. RTC held Hammer, Goldkey, Chua
and Uy liable to iBank. Affirmed by CA.
CHINA BANKING Dynetics, Inc. and Lim borrowed a total of Whether or not respondent Dyne- NO. The Court ruled that to disregard the
CORPORATION V. DYNE- P8,939,000 from petitioner. However, they Sem is an alter ego of Dynetics, separate juridical personality of a
SEM ELECTRONICS failed to pay when the obligations became Inc. corporation, the wrongdoing must be proven
CORPORATION due. Petitioner instituted a complaint for sum clearly and convincingly. In this case,
G.R. No. 149237, June 11, of money. Summons was not served on petitioner failed to prove that Dyne-Sem was
2006 Dynetics because it had already closed organized and controlled, and it’s affairs
down. In an amended complaint, petitioner conducted, in a manner that made it merely
impleaded respondent Dyne-Sem. an instrumentality, agency, conduit or
According to petitioner, respondent adjunct of Dynetics, or that it was established
organized to be Dynetics’ alter ego. to defraud Dynetics’ creditors, including
Respondent denied the allegations and petitioner.
14

claimed that they are totally different from


Dynetics, Inc. Court a quo ruled that Dyne- The similarity of business of the two
Sem is not an alter ego of Dynetics. CA corporations did not warrant a conclusion
dismissed the subsequent appeal filed by that respondent was but a conduit of
petitioner and affirmed the trial court’s Dynetics. Respondent’s acquisition of some
decision. 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. The
assets were not "diverted" to respondent as
an alter ego of Dynetics. The sales of
machineries and equipment were valid and
the transfers of the properties to respondent
legal and not in any way in contravention of
petitioner’s rights as Dynetics’ creditor.
BOY SCOUTS OF THE In a COA Resolution entitled "Defining the Whether or not BSP is a public YES. The Court ruled that BSP, under its
PHILIPPINES (BSP) V. Commission’s policy with respect to the audit corporation (GOCC, amended charter, continues to be a public
COMMISSION ON AUDIT of the Boy Scouts of the Philippines," which instrumentality, agency or corporation or a government instrumentality,
(COA) stated COA claimed that the character of the subdivision of the Government) hence, it is subject to the exercise by the
G.R. No. 177131, June 7, BSP’s purposes and functions which has a falling under the COA’s audit COA of its audit jurisdiction.
2011 public aspect and the statutory designation jurisdiction
of the BSP as a "public corporation". That the The purpose of the BSP as stated in its
SC, in a decided case involving BSP, has amended charter shows that it was created
elucidated that BSP is regarded as, both a in order to implement a State policy declared
"government-controlled corporation with an in the Constitution, which states the
original charter" and as an "instrumentality" recognition by the State of the vital role of the
of the Government. Therefore, subject to its youth in nation-building. Hence, BSP, which
audit jurisdiction. BSP sought was created by a special law to serve a
reconsideration of the COA resolution public purpose in pursuit of a constitutional
claiming that it is not subject to the mandate, comes within the class of "public
Commission’s jurisdiction. corporations" defined by paragraph 2, Art. 44
of the Civil Code and governed by the law
which creates it, pursuant to Article 45 of the
same Code.

BSP is a public corporation created by law


for a public purpose, attached to the DECS
pursuant to its Charter and the
Administrative Code of 1987. It is not a
private corporation which is required to be
owned or controlled by the government and
be economically viable to justify its existence
under a special law. Likewise, BSP meets
the minimum statutory requirement of an
15

attached government agency as the DECS


Secretary sits at the BSP Board ex officio,
thus facilitating the policy and program
coordination between the BSP and the
DECS.
Philippine National Bank vs DBP and PNB acquired substantially all the Whether or not there is sufficient There is no sufficient proof to pierce the veil
Hydro Resources Contractors assets of MMIC and resumed the business ground to pierce the veil of of corporate fiction. The doctrine of piercing
Corporation– G.R. No. operations by organizing Nonoc Mining and corporate fiction. the corporate veil applies in alter ego cases.
167530, March 13, 2013 Industrial Corporation (NMIC). DBP and Case law lays down a three-pronged test to
PNB owned 57% and 43% of the shares of determine the application of the alter ego
NMIC and the members of the Board of theory, which is also known as the
Directors of NMIC were either from DBP or instrumentality theory, namely:
PNB. NMIC engaged the services of Hercon, (1) Control or complete domination not only
Inc., (later on acquired by Hydro Resources of finances but of policy and business
Contractors Corporation in a merger) for practice in respect to the transaction
Mine Stripping and Road Construction attacked so that the corporate entity as to
Program. Hercon, Inc., found that NMIC still this transaction had at the time no separate
has unpaid balance and made several mind, will or existence of its own;
demands but it was unheeded. A complaint (2) Such control must have been used by the
for sum of money was filed where RTC and defendant to commit fraud or wrong, to
CA pierced the corporate veil of NMIC and perpetuate the violation of a statutory or
held DBP and PNB solidarily liable with other positive legal duty, or dishonest and
NMIC. unjust act in contravention of plaintiff’s legal
right; and
(3) The aforesaid control and breach of duty
must have proximately caused the injury or
unjust loss complained of.
This Court finds that none of the tests has
been satisfactorily met in this case.
Gosiaco vs Ching and Casta – Petitioner Gosiaco invested with ASB Whether or not a corporate officer Yes, a corporate officer who issues a
G.R. No. 173807, April 16, Holdings, Inc. by way of loan and in who signed a bouncing check be bouncing corporate check can only be held
2009, J. Tinga exchange ASB through its manager Ching held civilly liable under B.P. Blg. civilly liable when he is convicted. The Court
issued DBS checks. Upon maturity of the 22. ruled that the civil liability of a corporate
ASB checks, Gosiaco went to deposit the officer in a BP22 case is extinguished with
checks but the checks were dishonored. the criminal liability. Ching is discharge of
Gosiaco informed respondents and any civil liability arising from B.P. Blg. 22
demanded replacement checks or the return case filed against her on account of her
of the money but to no avail. Gosiaco filed a acquittal in the criminal charge and it is ASB
criminal complaint for violation of BP22. MTC who is civilly obligated to petitioner.
acquitted Ching of criminal liability but it did
not absolve her from civil liability because as
a corporate officer of ASB she is civilly liable
since she was a signatory to the checks.
RTC and CA affirmed the MTCs ruling and
exonerated Ching from civil liability.
16

ESGUERRA, ET AL. V. Esguerra filed an action to annul the Free Whether or not the Court of NO, The general rule is that a corporation
HOLCIM PHILIPPINES, INC Patent in the name of de Guzman alleging Appeals gravely erred in not can only exercise its powers and transact its
G.R. No. 182571, September himself to be the owner over the disputed lot dismissing Holcim’s petition for business through its board of directors and
2, 2013 in Matiktik, Norzagaray, Bulacan. De certiorari on the ground of lack of through its officers and agents when
Guzman sold the lot to herein respondents board resolution authorizing the authorized by a board resolution or its
who utilized the land extracted limestones filing of the petition bylaws. Absent the said board resolution, a
from it. The Court granted such action and petition may not be given due course.
remanded the case to the Trial Court for However, this admits to exceptions such as
execution. The RTC denied HOLCIM’s in the case at bar when the corporation
motion for reconsideration and motion for performed acts in substantial compliance to
ocular inspection. It held that the petitioners such requirement. While the board
proved their entitlement to the royalties resolution may not have been attached,
totaling to ₱91,872,576.72. CA, on the other HOLCIM complied just the same when it
hand, granted the petition which prompted attached the Secretary’s Certificate dated
petitioners to filed the case before the July 17, 2006, thus proving that O’Callaghan
Supreme Court. One of the claims of the had the authority from the board of directors
petitioner is that HOLCIM’s petition for to appoint the counsel to represent them in
certiorari in the CA failed to comply with the Civil Case No. 725-M-89.
rules on Verification and Certification of Non-
Forum Shopping because the latter did not
secure and/or attach a certified true copy of
a board resolution authorizing any of its
officers to file said petition. Thus, the CA
should have dismissed outright HOLCIM’s
petition before it.
RURAL BANK OF LIPA CITY Reynaldo Villanueva, Sr., a stockholder of Whether or not there was valid NO. For a valid transfer of stocks, there must
V. COURT OF APPEALS G.R. the Rural Bank of Lipa City assigned his transfer of the shares to the Bank be strict compliance with the mode of
No. 124535. September 28, shares, as well as those of 8 other that would deprive the Villanueva transfer prescribed by law. The requirements
2001 shareholders under his control with a total of spouses to exercise their rights as are: (a) There must be delivery of the stock
10,467 shares, in favor of the stockholders stockholders. certificate: (b) The certificate must be
of the Bank. Sometime thereafter, Reynaldo endorsed by the owner or his attorney-in-fact
Villanueva, Sr. and his wife, Avelina, or other persons legally authorized to make
executed an Agreement wherein they the transfer; and (c) To be valid against third
stipulated that said debt will be paid out of parties, the transfer must be recorded in the
the proceeds of the sale of their real property books of the corporation. As it is, compliance
described in the Agreement. The Villanueva with any of these requisites has not been
spouses also assured the Board on a clearly and sufficiently shown. Still, while the
subsequent meeting that their debt would be assignment may be valid and binding on the
paid on or before December 31 of that same bank, et al. and the Villanuevas, it does not
year; otherwise, the Bank would be entitled necessarily make the transfer effective.
to liquidate their shareholdings, including Consequently, the Villanuevas cannot, as
those under their control and any deficiency yet, be deprived of their rights as
shall be secured by other collateral sufficient stockholders, until and unless the issue of
therefor. The Villanuevas failed to make ownership and transfer of the shares in
good their obligation, thereafter their shares question is resolved with finality.
of stock were converted into Treasury
17

Stocks. Thereafter, the new set of officers of


the Bank informed Atty. Ignacio, counsel for
the Villanueva spouses that the latter were
no longer entitled to notice of the recently
held stockholder’s meeting since they had
relinquished their rights as stockholders in
favor of the Bank. Consequently, the
Villanueva spouses filed with the Securities
and Exchange Commission (SEC), a petition
for annulment of the stockholders' meeting
and election of directors and officers on 15
January 1994, with damages and prayer for
preliminary injunction.
Samahan ng Optometrists sa Acebedo filed an application with the Office WON Acebedo violates No.The fact that private respondent hires
Pilipinas vs Acebedo of the Mayor of Candon, Ilocos Sur, for the R.A.1998(OPTOMETRY LAW) optometrists who practice their profession in
International Corporation, G.R. issuance of a permit for the opening and and the Corporation Code when the course of their employment in private
No. 117097, March 21, 1997 operation of a branch of the Acebedo Optical it employs optometrists to engage respondent's optical shops, does not
in that municipality. The application was in the practice of optometry under translate into a practice of optometry by
opposed by the Samahan ng Optometrists its name and for its behalf. private respondent itself. The determination
sa Pilipinas (SOP) which contended that of the proper lenses to sell to private
respondent is a juridical entity not qualified respondent's clientele entails the
to practice optometry. Acebedo filed its employment of optometrists who have been
answer, arguing it is not the corporation, but precisely trained for that purpose. All told,
the optometrists employed by it, who would there is no law that prohibits the hiring by
be practicing optometry. corporations of optometrists or considers the
hiring by corporations of optometrists as a
practice by the corporation itself of the
profession of optometry.
Yamamoto v. Nishino Leather In 1983, Ruichi Yamamoto (Petitioner), Whether or not the veil of No.
Industries, Inc., G.R. No. organized under Philippine laws Wako corporate fiction should be The veil of corporate personality may be
150283, April 16, 2008 Enterprises Manila, Inc., a leather tanning pierced. pierced when the corporation is merely an
business. Later on in 1987, Yamamoto and adjunct, a business conduit, or alter ego of a
Ikuo Nishino (Respondent) entered into a person, but the mere ownership of a single
joint venture embodied in a Memorandum of stockholder of even all or nearly all of the
Agreement whereunder Nishino would capital stocks of a corporation is not by itself
acquire 70% of the authorized capital stock a sufficient ground to disregard the separate
of Wako. Eventually Ikuo Nishino and his corporate personality. In order for the
brother, Yoshinobu Nishino acquired more doctrine of piercing the veil of corporate
than 70% of the authorized capital stock and fiction to apply the following elements must
reduced Yamamoto’s equity to 10%. The be proven:
corporation was later renamed to Nishino
Leather Industries, Inc. (NLII, Respondent). a. There must be complete domination, not
only of finances but of policy and business
Pursuant to negotiations to the Nishinos’ practice so that the corporate entity had not
planned takeover the company, Yoshinobu separate mind, will or existence of its own.
Nishino, through his counsel sent a letter to
18

Yamamoto offering to the latter the return of b. Such domination or control was used by
equipment which were his capital the defendant to commit fraud or wrong, to
contributions to Wako. perpetuate the violation of a right of positive
legal duty
Yamamoto attempted to recover the said c. Said breach of duty was the proximate
equipment however, this attempt was cause of the injury complained of.
frustrated. This forced Yamamoto to file a The absence of either one of these elements
complaint for replevin against the prevents the application of the doctrine. It is
respondents on January 15, 1992, before not the form which the courts consider, but
the Regional Trial Court of Makati. rather, how the corporation operated and the
individual defendant’s relationship to that
The RTC ruled in favor of Yamamoto and operation.
declared him as the rightful owner and
possessor of the equipment. In this case, Yamamoto failed to show by
clear and convincing evidence the presence
On appeal, the Court of Appeals reversed of any of the elements aforementioned.
the RTC decision holding that the equipment There is no showing that Nishino used the
are corporate property of NLII and could not separate personality of NLII to unjustly act or
be retrieved without the authority of the NLII do wrong in contravention of Yamamoto’s
Board of Directors. It also held that the rights.
doctrine of piercing the veil of corporate
fiction does not apply. Finally, that
Yamamoto’s invocation of the doctrine of
promissory estoppel does not apply.

Yamamoto filed a Petition for Review on


Certiorari.
Nora Bitong v. CA, G.R. No. Nora Bitong filed a derivative suit before the 1. Whether or not Nora Bitong has 1. No. The Certificate of Stock held by
123553, July 13, 1998 SEC for the benefit of Mr. & Ms. Publishing the legal personality to initiate and Bitong, was sold to her through a deed of
Company Incorporated, against Sps. prosecute the derivative suit for sale executed by JAKA Inc. in her favor in
Eugenia and Jose Apostol (Respondents) the benefit of Mr.&Ms. Publishing 1983. However, it was actually signed by the
for fraud, misrepresentation, disloyalty, Co., Inc. President of the corporation only on March
evident bad faith, conflict of interest, and 2. Whether or not Nora Bitong 17, 1989, thus it was only then that said
mismanagement of the affairs of the said was a valid stockholder. Certificate of Stock could be considered to
corporation when on several occasions, the have been legally issued to her. A Certificate
respondents allegedly made fraudulent and of Stock shall be signed by the president or
other unauthorized transactions and with the vice president, countersigned by the
Philippine Daily Inquirer. secretary or assistant secretary, and sealed
with the seal of the corporation. Thus, at the
Respondents contended that Bitong is a time the acts complained of were committed,
mere holder-in-trust of JAKA shares, thus Bitong was not qualified to institute a
she was not the proper party to initiate a stockholder's derivative suit.
derivative suit.
2. No. Section 63 of the Corporation Code
Bitong averred that she acquired legal and provides that a formal Certificate of Stock
beneficial ownership of 997 out of 4,088 can only be issued if it is signed by the
19

outstanding shares by virtue of a deed of President or Vice-President, countersigned


sale executed by JAKA in her favor on July by the Secretary or Assistant Secretary, and
25, 1983, and recorded in the Stock and sealed with the Corporate Seal. In this case,
Transfer Book of Mr. & Ms. Corporation, the Certificate of Stock which she allegedly
under Certificate of Stock No. 008. owns was legally issued on March 17, 1989,
the date when it was actually signed by the
Respondents on the other hand countered President of the corporation. Thus, Bitong
that Eugenia D. Apostol signed Certificate of was not a bona fide stockholder of Mr. & Ms.
Stock No. 008 only on March 17 1989 and prior to March 1989.
not in 1983. Respondents also averred that
the Stock and Transfer Book which Bitong
presented in evidence was not registered
with the SEC, thus the entries therein, which
included Certificate of Stock No. 008 were
fraudulent.

SEC Hearing Panel dismissed the derivative


suit. SEC en banc reversed the Hearing
Panel's decision. CA reversed the SEC en
banc; Bitong not a stockholder thus, not a
real party-in-interest
G.R. No. 116631 October 28, Marsh Thomson was the EVP and, later on, WON CA erred in ordering MPC does not necessarily prohibit the
1998 the Mgt. Consultant of American Chamber of Thomson to transfer said share to transfer of proprietary shares by its
MARSH THOMSON vs. CA Commerce of the Philippines, Inc. AmCham’s nominees members. The Club only restricts
(AmCham) for over 10 years. While membership to deserving applicants in
Thomson was still working with AmCham, accordance with its rules, when the
his superior, A. Lewis Burridge, retired as amended AOI states that: "No transfer shall
AmCham's President. Burridge wanted to be valid except between the parties, and
transfer his proprietary share in the Manila shall be registered in the Membership Book
Polo Club to Thomson. However, through unless made in accordance with these
the intercession of Burridge, AmCham paid Articles and the By-Laws". Thus, as
for the share but had it listed in Thomson's between parties herein, there is no question
name. This was made clear in an that a transfer is feasible. Moreover,
employment advice. authority granted to a corporation to regulate
the transfer of its stock does not empower it
Burridge transferred said proprietary share to restrict the right of a stockholder to
to Thomson, as confirmed in a letter of transfer his shares, but merely authorizes
notification to the MPC. Upon his admission the adoption of regulations as to the
as a new member of the MPC, Thomson formalities and procedure to be followed in
paid the transfer fee of P40k from his own effecting transfer.
funds; but AmCham subsequently
reimbursed this amount. MPC issued a In this case, Thomson was the nominee of
Proprietary Membership Certificate Number AmCham to hold the share and enjoy the
in favor of Thomson but the latter failed to privileges of the club. But upon the expiration
execute a document recognizing AmCham's of Thomson's employment as officer and
beneficial ownership over said share. consultant of AmCham, the incentives that
20

Following AmCham's policy and practice, go with the position, including use of the
there was a yearly renewal of employment MPC share, also ceased to exist. It now
contract between Thomson and AmCham. behooves Thomson to surrender said share
Separate letters of employment advice in to AmCham's next nominee, another natural
various dates mentioned the MPC share. But person. Obviously this arrangement of trust
Thomson never acknowledged that and confidence cannot be defeated by
AmCham is the beneficial owner of the Thomson's citation of the MPC rules to
share. shield his untenable position, without doing
When Thomson's contract of employment violence to basic tenets of justice and fair
was up for renewal, he notified AmCham that dealing.
he would no longer be available as EVP. Petition for Review on Certiorari is DENIED
Still, AmCham asked Thomson to stay on for and AFFIRMED CA’s decision.
another 6 months. Thomson indicated his
acceptance of the consultancy arrangement
with a counter-proposal in his letter:
“Retention of the MPC share, subject to
reimbursing the purchase price to the
Chamber.” However, AmCham rejected
Thomson's counter-proposal. Pending the
negotiation for the consultancy arrangement,
AmCham executed a Release and
Quitclaim. The quitclaim, expressed in
general terms, did not mention specifically
the MPC share. AmCham, sent a letter to
Thomson demanding the return and delivery
of the MPC share which "AmCham owns and
placed in Thomson's name. Am Cham filed
a complaint against Thomson with RTC
Makati, which render judgment stating that:
(1) The ownership of the contested MPC
share is adjudicated in favor of Thomson;
and; (2) Thomson shall pay AmCham the
sum of P300k. RTC awarded the MPC share
to Thomson on the ground that the AOI and
By-laws of MPC prohibit artificial persons,
such as corporations, to be club members. It
was the intention of the parties that a
membership to MPC was to be secured by
AmCham for Thomson’s use. The latter was
to execute the necessary documents to
acknowledge ownership of the Polo
membership in favor of Thomson. However,
Thomson had second thoughts and decided
to keep the membership for himself.
AmCham appealed to CA. The latter
reversed RTC’s decsision and ordered
21

Thomson to transfer the MPC share to the


nominee of AmCham, since the latter
purchased the MPC share for the use of
Thomson and the latter expressly conformed
thereto. By such express conformity of
Thomson, he was bound to recognize
AmCham as the owner of the said share for
a contract has the force of law between the
parties. CA denied Thomson’s MR. Hence
this petition.
G.R. No. 184332 FEB. 17, Ting Ping purchased shares of TCL Sales WON the surrender of the A certificate of stock is a written instrument
2016 Corp: (1) 480 shares from Peter Chiu; (2) certificates of stock is a requisite signed by the proper officer of a corporation
ANNA TENG vs. SEC and 1,400 shares from his brother Teng Ching before registration of the transfer stating or acknowledging that the person
TING PING LAY Lay, TCL Pres. and operations manager; may be made in the corporate named in the document is the owner of a
and (3) 1,440 shares from Ismaelita Maluto. books and for the issuance of new designated number of shares of its stock. It
certificates in its stead. is prima facie evidence that the holder is a
Upon Ching Lay's death, his son Henry Teng shareholder of a corporation. A certificate is
took over the mgt. of TCL. To protect his merely a tangible evidence of ownership of
shareholdings with TCL, Ting Ping shares of stock. It is not a stock in the
requested TCL's Cor sec Anna Teng to enter corporation and merely expresses the
the transfer in the Stock and Transfer Book contract between the corporation and the
of TCL for the proper recording of his stockholder. The shares of stock evidenced
acquisition and demanded the issuance of by said certificates are regarded as property
new certificates of stock in his favor. TCL and the owner of such shares may, as a
and Teng refused despite repeated general rule, dispose of them as he sees fit,
demands. Because of their refusal, Ting unless the corporation has been dissolved,
Ping filed a petition for mandamus with SEC or unless the right to do so is properly
against TCL and Teng. restricted, or the owner's privilege of
disposing of his shares has been hampered
SEC granted Ting Ping's petition, ordering by his own action.
TCL and Teng to record in the Books of the Sec. 63 Corporation Code provides that: x x
Corporation, Ting Ping’s shares purchased x Shares of stock so issued are personal
and to issue corresponding new certificates property and may be transferred by delivery
of stocks. of the certificate or certificates indorsed by
the owner or his attorney-in-fact or other
TCL and Teng appealed to SEC en person legally authorized to make the
banc, which, the latter affirmed the SEC transfer. No transfer, however, shall be valid,
decision with modification, in that Teng was except as between the parties, until the
held solely liable. transfer is recorded in the books of the
corporation showing the names of the
TCL and Teng filed a petition for review with parties to the transaction, the date of the
CA which the latter dismissed finding no transfer, the number of the certificate or
cogent and justifiable grounds to disturb the certificates and the number of shares
findings of SEC en banc. A petition for transferred. No shares of stock against
review on certiorari under Rule 45 before SC which the corporation holds any unpaid
which promulgated its Decision in G.R. No. claim shall be transferable in the books of the
22

129777, denying the petition. After the corporation.


finality of SC's decision, the SEC issued a Under the provision, requisites must be
writ of execution addressed to the Sheriff of complied with for there to be a valid transfer
RTC Manila. of stocks, to wit: (a) there must be delivery of
the stock certificate; (b) the certificate must
Thereafter, Teng filed a complaint for be endorsed by the owner or his attorney-in-
interpleader with RTC Manila where Teng fact or other persons legally authorized to
sought to compel Henry and Ting Ping to make the transfer; and (c) to be valid against
interplead and settle the issue of ownership 3rd parties, the transfer must be recorded in
over the 1,400 shares previously owned by the books of the corporation.
Ching Lay. The deputized sheriff held in
abeyance the implementation of the writ of It is the delivery of the certificate, coupled
execution pending outcome of the civil case. with the endorsement by the owner or his
RTC Manila finding Henry to have a better duly authorized representative that is the
right to the shares of stock formerly owned operative act of transfer of shares from the
by Ching Lay. original owner to the transferee. In "a sale of
shares of stock, physical delivery of a stock
TIng Ping filed An Ex Parte Motion for the certificate is one of the essential requisites
Issuance of Alias Writ of Execution where he for the transfer of ownership of the stocks
sought the partial satisfaction of SEC en purchased." The delivery contemplated in
banc Order, ordering TCL and Teng to Sec. 63, however, pertains to the delivery of
record the 480 shares and 1,440 shares he the certificate of shares by the transferor to
acquired from Chiu and Maluto, respectively. the transferee, that is, from the original
SEC issued an Order granting Ting Ping’s stockholder named in the certificate to the
motion. person or entity the stockholder was
transferring the shares to, whether by sale or
Teng and TCL filed their respective motions some other valid form of absolute
to quash the alias, which was opposed by conveyance of ownership. "Shares of stock
Ting Ping, who is willing to surrender the may be transferred by delivery to the
original stock certificates of Chiu and Maluto transferee of the certificate properly
to facilitate and expedite the transfer of the indorsed. Title may be vested in the
shares in his favor. SEC denied the motions transferee by the delivery of the duly
to quash the alias. indorsed certificate of stock."

Teng filed a petition for certiorari and It is clear that Teng's position does not have
prohibition under Rule 65 ROC. SEC, legal basis. The delivery or surrender
through the OSG, filed a Comment which adverted to by Teng, i.e., from Ting Ping to
Teng moved to expunge. CA dismissed the TCL, is not a requisite before the
petition and denying the motion to expunge conveyance may be recorded in its books.
SEC's comment. To compel Ting Ping to deliver to the
corporation the certificates as a condition for
the registration of the transfer would amount
to a restriction on the right of Ting Ping to
have the stocks transferred to his name,
which is not sanctioned by law. The only
limitation imposed by Sec. 63 is when the
23

corporation holds any unpaid claim against


the shares intended to be transferred.
The right of a transferee/assignee to have
stocks transferred to his name is an inherent
right flowing from his ownership of the
stocks. If a corporation refuses to make such
transfer without good cause, it may, in fact,
even be compelled to do so by mandamus.
With more reason in this case where SC, in
G.R. No. 129777, already upheld Ting Ping's
definite and uncontested titles to the subject
shares. TCl and Teng could not repudiate
these documents. Hence, the transfer of
shares to Ting Ping must be recorded on the
corporation's stock and transfer book.
Teng cannot refuse registration of the
transfer. The respective duties of the
corporation and its secretary to transfer
stock are purely ministerial. To be valid
against 3rd parties and the corporation, the
transfer must be recorded or registered in
the books of corporation. Reasons why
registration of the transfer is necessary: (1)
to enable the transferee to exercise all the
rights of a stockholder; (2) to inform the
corporation of any change in share
ownership so that it can ascertain the
persons entitled to the rights and subject to
the liabilities of a stockholder; and (3) to
avoid fictitious or fraudulent
transfers, among others. Upon registration
of the transfer in the books of the
corporation, the transferee may now then
exercise all the rights of a stockholder, which
include the right to have stocks transferred
to his name. The stock and transfer book is
the basis for ascertaining the persons
entitled to the rights and subject to the
liabilities of a stockholder. Where a
transferee is not yet recognized as a
stockholder, the corporation is under no
specific legal duty to issue stock certificates
in the transferee's name. The manner of
issuance of certificates of stock is generally
regulated by the corporation's by-laws. Sec.
47 CC states: "a private corporation may
24

provide in its by-laws for x x x the manner of


issuing stock certificates." Sec. 63,
meanwhile, provides that "the capital stock
of stock corporations shall be divided into
shares for which certificates signed by the
president or vice president, countersigned
by the secretary or assistant secretary, and
sealed with the seal of the corporation shall
be issued in accordance with the by-laws."
SC outlined the procedure for the issuance
of new certificates of stock in the name of a
transferee:
1.the certificates must be signed by the Pres.
or VP, countersigned by the Sec. or Asst.
Sec, and sealed with the seal of the
corporation. Xxx
2.delivery of the certificate is an essential
element of its issuance. xxx
3.the par value, as to par value shares, or the
full subscription as to no par value shares,
must first be fully paid.
4.the original certificate must be surrendered
where the person requesting the issuance of
a certificate is a transferee from a
stockholder.
The surrender of the original certificate of
stock is necessary before the issuance of a
new one so that the old certificate may be
cancelled. A corporation is not bound and
cannot be required to issue a new certificate
unless the original certificate is produced
and surrendered. Surrender and
cancellation of the old certificates serve to
protect not only the corporation but the
legitimate shareholder and the public as
well, as it ensures that there is only one
document covering a particular share of
stock.
Ting Ping manifested from the start his
intention to surrender the subject certificates
of stock to facilitate the registration of the
transfer and for the issuance of new
certificates in his name. It would be
sacrificing substantial justice if SC were to
grant the petition simply because Ting Ping
is yet to surrender the subject certificates for
25

cancellation instead of ordering in this case


such surrender and cancellation, and the
issuance of new ones in his name. Teng, and
TCL have already deterred for so long Ting
Ping's enjoyment of his rights as a
stockholder. Ting Ping already requested
Teng to enter the transfer of the subject
shares in TCL's Stock and Transfer Book.
SC will not allow Teng and TCL to frustrate
Ting Ping's rights any longer.
Mariano A. Albert vs Mariano A. Albert (Albert) and University 1. WON Aruego is a party to the 1. Yes. Aruego is a party to the case.
University Publishing Co., Inc., Publishing Co., Inc. (University Publishing), case "University Publishing Co., Inc." purported to
G.R. No. L-19118, January 30, through Jose M. Aruego (Aruego), its 2. WON University Publishing is a come to court, answering the complaint and
1965 President, entered into a contract to pay corporation by estoppel litigating upon the merits. But as stated,
Albert P30,000.00 for the exclusive right to "University Publishing Co., Inc." has no
publish his revised Commentaries on the independent personality; it is just a name.
Revised Penal Code and for his share in Jose M. Aruego was, in reality, the one who
previous sales of the book's first edition. answered and litigated, through his own law
Failure to pay one installment would render firm as counsel. He was in fact, if not, in
the rest due. University Publishing had name, the defendant. He had control over
undertaken to pay in eight quarterly the proceedings. Had Aruego been named
installments, however, failed to pay the as party defendant instead of or together
second installment. Albert sued University with the corporation, there would be no room
Publishing for the breach of contract. for debate as to his personal liability. Since
University Publishing admitted its corporate he was not so named, matters of due
existence and execution and terms of the process have arisen. Parties to a suit are
contract but alleged that it was Albert who persons who have a right to control the
breached their contract by failing to deliver proceedings, to make defense, to adduce
his manuscript. Albert died before trial and and cross-examine witnesses and to appeal
Justo R. Albert (Justo), his estate's from a decision. Acting as representative of
administrator, was substituted for him. CFI a non-existent principal, Jose M. Aruego was
Manila rendered judgment in favor of Albert the real party to the contract sued upon, he
and a writ of execution was issued against was the one who reaped the benefits
University Publishing. Albert However, a writ resulting from it, so much so that partial
of execution was petitioned by Justo against payments of the consideration were made by
Aruego, as the real defendant, stating that him, he violated its terms, thereby
there is no such entity as University precipitating the suit in question and that in
Publishing Co. Inc. Justo annexed to the the litigation he was the real defendant.
petition a certification from the SEC saying Perforce, in line with the ends of justice,
that their records contain no such registered responsibility under the judgment falls on
corporation. University Publishing countered him.
in its manifestation that Aruego is not a party
to the case and therefore, Justo’s petition 2. No. University Publishing is not a
should be denied. In truth, University corporation by estoppel. The corporation-by-
Publishing actually did not want Aruego to be estoppel doctrine has not been invoked in
considered a party to the case because there this case. At any rate, the same is
26

would then be a need to institute a separate inapplicable. Aruego represented a non-


action against Aruego and if done, Justo can existent entity and induced not only to Albert
set up the defense of prescription under the but even the court to believe in such
Statute of Limitations. representation. He signed the contract as
"President" of "University Publishing Co.,
Inc.," stating that this was "a corporation duly
organized and existing under the laws of the
Philippines," and obviously misled Albert into
believing the same. One who has induced
another to act upon his willful
misrepresentation that a corporation was
duly organized and existing under the law,
cannot thereafter set up against his victim
the principle of corporation by estoppel.
Pacific Rehouse Corporation A complaint was instituted with the Makati WON E-Securities is a mere alter NO. An alter ego exists where one
vs Court of Appeals and City Regional Trial Court (RTC) against EIB ego Export Bank corporation is so organized and controlled
Export and Industry Bank, Inc. Securities Inc. (E–Securities) for and its affairs are conducted so that it is, in
– G.R. No. 199687, March 24, unauthorized sale of 32,180,000 DMCI fact, a mere instrumentality or adjunct of the
2014 shares of Pacific Rehouse Corporation, other. The control necessary to invoke the
Pacific Concorde Corporation, Mizpah alter ego doctrine is not majority or even
Holdings, Inc., Forum Holdings Corporation, complete stock control but such domination
and East Asia Oil Company, Inc. RTC of finances, policies and practices that the
rendered judgment on the pleadings, controlled corporation has, so to speak, no
directing the E–Securities to return to the separate mind, will or existence of its own,
petitioners 32,180,000 DMCI shares, as of and is but a conduit for its principal. In this
judicial demand. On the other hand, case, the alleged control exercised by Export
petitioners are directed to reimburse the Bank upon its subsidiary E–Securities, by
defendant the amount of [P]10,942,200.00, itself, does not mean that the controlled
representing the buyback price of the corporation is a mere instrumentality or a
60,790,000 KPP shares of stocks at [P]0.18 business conduit of the mother company.
per share. The Resolution was ultimately Even control over the financial and
affirmed by the Supreme Court and attained operational concerns of a subsidiary
finality. However, the Writ of Execution was company does not by itself call for
returned unsatisfied. Pacific Rehouse disregarding its corporate fiction. There must
moved for the issuance of an alias writ of be a perpetuation of fraud behind the control
execution to hold Export and Industry Bank, or at least a fraudulent or illegal purpose
Inc. (Export Bank) liable for the judgment behind the control in order to justify piercing
obligation as E–Securities is “a wholly– the veil of corporate fiction. Such fraudulent
owned controlled and dominated subsidiary intent is lacking in this case. Furthermore,
of Export and Industry Bank, Inc., and is a ownership by Export Bank of a great majority
mere alter ego and business conduit of the or all of stocks of E-Securities and the
latter. E–Securities opposed the motion, existence of interlocking directorates may
arguing that it has a corporate personality serve as badges of control, but ownership of
that is separate and distinct from the another corporation, per se, without proof of
respondent. actuality of the other conditions are
The RTC concluded that E–Securities is a insufficient to establish an alter ego
27

mere business conduit or alter ego of Export relationship or connection between the two
Bank, the dominant parent corporation, corporations, which will justify the setting
which justifies piercing of the veil of aside of the veil of corporate fiction.
corporate fiction, and issued an alias writ of
summons directing defendant EIB N.B. Control Test
Securities, Inc., and/or Export and Industry 1. Control, not mere majority or complete
Bank, Inc., to fully comply therewith. It stock control, but complete domination, not
ratiocinated that being one and the same only of finances but of policy and business
entity in the eyes of the law, the service of practice in respect to the transaction
summons upon E–Securities has bestowed attacked so that the corporate entity as to
jurisdiction over both the parent and wholly– this transaction had at the time no separate
owned subsidiary.Export Bank filed before mind, will or existence of its own;
the Court of Appeals (CA) a petition for 2. Such control must have been used by the
certiorari with prayer for the issuance of a defendant to commit fraud or wrong, to
temporary restraining order (TRO) seeking perpetuate the violation of a statutory or
the nullification of the RTC Order for having other positive legal duty, or dishonest and
been made with grave abuse of discretion unjust act in contravention of plaintiff’s legal
amounting to lack or excess jurisdiction. The right; and
CA reversed the RTC Order and explained 3. The aforesaid control and breach of duty
that the alter ego theory cannot be sustained must [have] proximately caused the injury or
because ownership of a subsidiary by the unjust loss complained of.
parent company is not enough justification to
pierce the veil of corporate fiction. There
must be proof, apart from mere ownership,
that Export Bank exploited or misused the
corporate fiction of E–Securities. The
existence of interlocking incorporators,
directors and officers between the two
corporations is not a conclusive indication
that they are one and the same. The records
also do not show that Export Bank has
complete control over the business policies,
affairs and/or transactions of E–Securities. It
was solely E–Securities that contracted the
obligation in furtherance of its legitimate
corporate purpose; thus, any fall out must be
confined within its limited liability.
ELCEE FARMS INC. V. Private respondents were regular farm Whether or not Saguemuller is No. A corporation has a personality separate
NLRC, ET AL., G.R. No. workers in Hacienda Trinidad, owned and subsidiarily liable with Elcee and distinct from those of the persons
126428, January 25, 2007 operated by Elcee Farms. According to Farms for the payment of composing it as well as from that of any other
them, Corazon Saguemuller was the separation pay and damages. legal entity to which it may be related. In
president of Elcee Farms, but it was actually Santos v. NLRC, a corporate officer was not
her son, Konrad, who was the president held liable for the obligations incurred by the
thereof. Elcee Farms later entered into a corporation, where the corporate officer was
lease agreement with Garnele but most of not even shown to have had a direct hand in
the private respondents continued to work in the dismissal of the employee enough to
28

Hacienda Trinidad. Garnele then sub-leased attribute to him an unlawful act. No evidence
Hacienda Trinidad to Hilado, who operated was presented to prove that Saguemuller
HILLA. Private respondents were allowed to was truly the president of Elcee Farms. Nor
continue working in Hacienda Trinidad under was there even proof that she was in active
HILLA’s management. Afterwards, Hilado management of the corporation and had
and the United Sugar Farmers’ Organization dictated policies for implementation by the
(USFO) entered into a CBA, which contained corporation. There is also no evidence on
a closed shop provision. Due to their refusal record that she had acted maliciously or in
to join the labor union, private respondents bad faith in terminating the services of the
were terminated by HILLA. Private private respondents; nor has it been shown
respondents, filed against Elcee Farms, that she has in any way consented to the
Saguemuller, HILLA and two of its officers a simulated lease contract which effectively
complaint for illegal dismissal with terminated the services of the private
reinstatement with back wages and respondents.
separation pay with damages.
FEDERATED LPG DEALERS The CIDG-AFCCD of the PNP acting on the Whether or not respondents, as No. Section 4 of BP 33, as amended, states
ASSOCIATION V. DEL request for assistance of petitioner, members of the Board of that: "When the offender is a corporation,
ROSARIO, ET AL., G.R. No. conducted surveillance and investigation of Directors of ACCS, must be partnership, or other juridical person, the
202639, November 9, 2016 ACCS Ideal Gas Corporation (ACCS) for criminally prosecuted for the president, the general manager, managing
allegedly committing the acts of illegal latter's alleged violation/s of BP 33 partner, or such other officer charged with
trading of petroleum products and as amended. the management of the business affairs
underfilling of LPG cylinders in violation of thereof, or employee responsible for the
BP 33, as amended by PD 1865. A test-buy violation shall be criminally liable. " Neither
operation was done and the inspection and of the respondents was the President,
evaluation of the refilled LPG cylinders General Manager, or Managing Partner of
revealed that they were underfilled. Search ACCS. Respondents who were mere
warrants were issued against the officers of members of the Board of Directors are not
ACCS and a search and seizure operation also shown to be charged with the
was conducted. Again, inspection and management of the business affairs.
evaluation of the said filled LPG cylinders
showed that they were underfilled.
Complaints were filed against respondents,
as members of the BOD of ACCS, for illegal
trading of petroleum products and for
underfilling of LPG cylinders under BP 33, as
amended.
Associated Bank versus Spouses Vaca executed a REM in favor of Whether Associated Bank is Yes, AB is bound by the 2nd letter-
Spouses Rafael and Monaliza Associated Bank (AB) covering land in bound by the 2nd letter- agreement. The general rule is that, in the
Pronstroller – G.R. No. Quezon City. The Vacas’ defaulted which led agreement signed by Atty. Soluta absence of authority from the board of
148444, July 14, 2008 to the property’s foreclosure and auction under the doctrine of apparent directors, no person, not even its officers,
where AB was the highest bidder. Spouses authority. can validly bind a corporation. The power
Vaca, however, filed an action for the and responsibility to decide whether the
nullification of the REM and the foreclosure corporation should enter into a contract that
sale. On the other hand, AB filed for a writ of will bind the corporation is lodged in the
possession which was denied by the RTC. board of directors. However, just as a natural
On appeal, the CA granted said writ which person may authorize another to do certain
29

caused Spouses Vaca to appeal the CA acts for and on his behalf, the board may
decision. validly delegate some of its functions and
During the pendency of said cases, AB powers to officers, committees and agents.
advertised the property for sale to which
Respondents Pronstroller responded AB had previously allowed Atty. Soluta to
favorably through Atty. Soluta, AB’s VP, enter into the first agreement without a board
CorSec and Board member. The spouses resolution expressly authorizing him; thus, it
then paid the downpayment. AB, through had clothed him with apparent authority to
Atty. Soluta and respondents’, executed a modify the same via the second letter-
letter-agreement requiring that the balance agreement. Further, the two (2) letter-
of the purchase price be deposited under agreements were written on a paper with
escrow agreement within 90 days from date AB’s letterhead. It is not the quantity of
of the agreement. Prior to end of 90day similar acts which establishes apparent
period, respondents proposed that the authority, but the vesting of a corporate
balance be due only upon service of a final officer with the power to bind the corporation.
decision of the SC affirming AB’s right to By holding Atty. Soluta to possess the
possess the property. Atty. Soluta referred authority to enter into the agreement which
this to the bank’s ARRMC which merely led respondents to deal with him, AB is now
deferred action. A month after such estopped from denying such authority.
proposal, Atty. Soluta, acting for AB, and
respondents executed a 2nd letter-
agreement adopting the proposal of
respondents.

AB reorganized its management and Atty.


Dayday became its Assistant VP while Atty.
Soluta was relieved of his duties. Atty.
Dayday reviewed respondents’ record and
learned of their failure to deposit the balance.
Respondents Pronstroller presented the 2nd
letter-agreement wherein they were granted
an extension but Atty. Dayday claimed that
Atty. Soluta was not authorized to give such
extension. Subsequently, the SC affirmed
AB’s right to possess the property which led
respondents to file an action for specific
performance against AB to enforce their 2nd
letter-agreement.
Dr. Hans Christian M. Señeres Melquiades Robles (Robles for brevity) was Whether the hold-over principle Yes, the hold-over principle applies in this
versus Commission on elected as BUHAY party-list’s president and applies in this case. case. Señeres’ contention that the CoN
Elections and Melquiades A. chairperson. Under BUHAY’s constitution, signed by Robles is null and void is
Robles – G.R. No. 178678, all of its party officers shall have a term of untenable. As a general rule, Sec. 23 of the
April 16, 2009 three (3) years, without re-election. BUHAY Corporation code provides that officers and
participated in the 2002 and 2004 elections, directors of a corporation hold over after the
with Robles as its president. BUHAY’s expiration of their terms until such time as
manifestation to participate in the party-list their successors are elected or appointed.
30

election (manifestation) and even the The holdover doctrine accords validity to
certificates of nomination of representatives what would otherwise be deemed as
(CoN) for those years carried Robles’ dubious corporate acts and gives continuity
signature as its president. to a corporate enterprise in its relation to
outsiders. The voting members of BUHAY
For the May 2007 elections, BUHAY duly elected Robles as party President in
submitted its manifestation and CoN bearing October 1999 and although his regular term
Robles’ signature again. However, two (2) as such President expired in October 2002,
days prior to Robles’ submission of his no election was held to replace him and the
nominations, Dr. Hans Christian Señeres other original set of officers. Further,
(Señeres), holding himself as the acting BUHAY’s constitution and by-laws do not
president and secretary-general of BUHAY, expressly or impliedly prohibit a hold-over
also filed a CoN with the COMELEC. situation. As such, since no successor was
Señeres then filed a petition to deny due ever elected or qualified, Robles remained
course to Robles’ CoN with the COMELEC the President of BUHAY in a hold-over
contending that said nominations were null capacity.
and void for they were made without
authority for Robles’ term already expired. The view is that one who continues with the
BUHAY expelled Señeres as party member discharge of the functions of an office after
for his act of submitting a CoN for the party the expiration of his or her legal term, having
without authority and nominating no successor appointed or chosen in the
representatives not even members of the meantime, is commonly regarded as a de
party. facto officer, even where no provision is
made by law for his holding over and there is
nothing to indicate the contrary. By fiction of
law, the acts of such de facto officer are
considered valid and effective. Hence,
Robles merely acted as a hold-over
president for BUHAY and his acts of causing
the submission of the manifestation and the
CoN is, therefore, valid and effective.
PIONEER vs. CA G.R. No. Lim entered into a contract of sale to Japan Whether or not the failure of Lim, No, there was no de facto partnership that
84197 July 28, 1989 Domestic Airlines (JDA) regarding aircrafts Cervantes, Bormacheco and was created. It was held that persons who
and spare parts. Pioneer Insurance Maglana to incorporate attempt but fail to form a corporation and
executed and issued a surety bond in favor automatically result to a de facto who carry on business under the corporate
of JDA on behalf of Lim. Lim convinced partnership name occupy the position of partners inter se
Bormacheco, Cervantes Brothers and and their rights as members of the company
Maglana to contribute funds to buy the two to the property acquired by the company will
aircrafts and spare parts which would form be recognized. However, such a relation
part of a new corporation that would expand does not necessarily exist, for ordinarily
his airline business. Lim then executed in persons cannot be made to assume the
favor of Pioneer a chattel mortgage relation of partners when their purpose is
stipulating that Lim transfers the two aircrafts that no partnership shall exist and it should
and spareparts to Pioneer as a security for be implied only when necessary to do justice
the suretyship. Lim defaulted on his between the parties
payment. Lim signing and executing the chattel
31

mortgage and surety bond in his own


personal capacity shows he was acting on
his own and not in behalf of his other would-
be incorporators in transacting the sale of the
aircrafts and spare parts.
PHIVIDEC V. CA G.R No. Violeta M. Borres was injured in an accident Whether or not the PHIVIDEC and No PHIVIDEC and PRI are not distinct and
85266 January 30, 1990 due to the negligence of Phividec Railways, PRI are entirely distinct and separate corporation. The court stated the
Inc. (PRI). Days prior to the accident separate corporations even rule that where it appears that two business
Philippine Veterans Invest Development though the latter is its subsidiary enterprise are owned, conducted and
Corporation (PHIVIDEC) sold all its rights controlled by the same parties, both law and
and interests in the PRI to the Philippine equity will, when necessary to protect the
Sugar Commission (PHILSUCOM). rights of the third persons, disregard the
Philsucom then created a wholly-owned legal fiction that two corporations are distinct
subsidiary, Panay Railways to operate the entities, and treat them as identical.
railway assets acquired from PHIVIDEC. PHIVIDEC’s act of selling PRI to
Borres filed a complaint for damages against PHILSUCOM shows that it had complete
PRI and Panay Railways while the latter filed control of PRI’s business. It also clearly
a third party complaint against PHIVIDEC. stipulated between the agreement of
PHIVIDEC and PHILSUCOM that the former
will assume liability for any claim or liability
arising out of any act or transaction prior to
the turnover of PRI.
PRINCE TRANSPORT, Inc. v. Respondents alleged that they were Whether or not the CA err in No. The Court agrees with the CA that Lubas
GARCIA employees of Prince Transport, Inc. (PTI), a applying the doctrine of piercing is a mere agent, conduit or adjunct of PTI. A
company engaged in the business of the corporate veil with respect to settled formulation of the doctrine of piercing
transporting passengers by land, they were Lubas. the corporate veil is that when two business
hired either as drivers, conductors, enterprises are owned, conducted and
mechanics or inspectors, except for controlled by the same parties, both law and
respondent Diosdado Garcia (Garcia), who equity will, when necessary to protect the
was assigned as Operations Manager; in rights of third parties, disregard the legal
addition to their regular monthly income, fiction that these two entities are distinct and
respondents also received commissions treat them as identical or as one and the
equivalent to 8 to 10% of their wages; same. In the present case, it may be true that
sometime in October 1997, the said Lubas is a single proprietorship and not a
commissions were reduced to 7 to 9%; this corporation. However, petitioners’ attempt to
led respondents and other employees of PTI isolate themselves from and hide behind the
to hold a series of meetings to discuss the supposed separate and distinct personality
protection of their interests as employee. In of Lubas so as to evade their liabilities is
order to block the continued formation of the precisely what the classical doctrine of
union, PTI caused the transfer of all union piercing the veil of corporate entity seeks to
members and sympathizers to one of its sub- prevent and remedy.
companies, Lubas Transport (Lubas);
despite such transfer, the schedule of drivers
and conductors, as well as their company
identification cards, were issued by PTI; the
daily time records, tickets and reports of the
32

respondents were also filed at the PTI office;


and, all claims for salaries were transacted
at the same office; later, the business of
Lubas deteriorated because of the refusal of
PTI to maintain and repair the units being
used therein, which resulted in the virtual
stoppage of its operations and respondents'
loss of employment.
Indophil Textile Mill Workers Petitioner Indophil Textile Mill Workers Whether or not the operations in No. Under the doctrine of piercing the veil of
Union-PTGWO, Petitioner, Union-PTGWO is the exclusive bargaining Indophil Acrylic Corporation are corporate entity, when valid grounds
v. agent of all the rank-and-file employees of an extension or expansion of therefore exist, the legal fiction that a
Voluntary Arbitrator Teodorico Indophil Textile Mills, Incorporated. private respondent. corporation is an entity with a juridical
P. Calica And Indophil Textile Teodorico P. Calica is impleaded in his personality separate and distinct from its
Mills, Inc., Respondents. - official capacity as the Voluntary Arbitrator, members or stockholders may be
G.R. No. 96490 February 3, while private respondent Indophil Textile disregarded. In such cases, the corporation
1992 Mills, Inc. is a corporation engaged in the will be considered as a mere association of
manufacture, sale and export of yarns of persons. The members or stockholders of
various counts and kinds and of materials of the corporation will be considered as the
kindred character. Indophil Acrylic corporation that is liability will attach directly
Manufacturing Corporation was formed and to the officers and stockholders. The
registered with the Securities and Exchange doctrine applies when the corporate fiction is
Commission. In 1988, Acrylic became used to defeat public convenience, justify
operational and hired workers according to wrong, protect fraud, or defend crime, or
its own criteria and standards. Sometime in when it is made as a shield to confuse the
July, 1989, the workers of Acrylic unionized legitimate issues, or where a corporation is
and a duly certified collective bargaining the mere alter ego or business conduit of a
agreement was executed. In 1990, the person, or where the corporation is so
petitioner union claimed that the plant organized and controlled and its affairs are
facilities built and set up by Acrylic should be so conducted as to make it merely an
considered as an extension or expansion of instrumentality, agency, conduit or adjunct of
the facilities of private respondent Company another corporation. In the case at bar,
pursuant to Section 1(c), Article I of the CBA. petitioner seeks to pierce the veil of
It is the petitioner's contention that Acrylic is corporate entity of Acrylic, alleging that the
part of the Indophil bargaining unit. The creation of the corporation is a devise to
petitioner's contention was opposed by evade the application of the CBA between
private respondent which submits that petitioner Union and private respondent
Acrylic is not an alter ego or an adjunct or Company. While we do not discount the
business conduit of private respondent possibility of the similarities of the
because it has a separate legitimate businesses of private respondent and
business purpose. Acrylic, neither are we inclined to apply the
doctrine invoked by petitioner in granting the
relief sought. The fact that the businesses of
private respondent and Acrylic are related,
that some of the employees of the private
respondent are the same persons manning
and providing for auxiliary services to the
33

units of Acrylic, and that the physical plants,


offices and facilities are situated in the same
compound, it is our considered opinion that
these facts are not sufficient to justify the
piercing of the corporate veil of Acrylic.
BALUYOT V. HOLGANZA and During a spot audit conducted on March 21, Whether or not the Ombudsman Yes. The Philippine National Red Cross is a
Office of the Ombudsman – 1977 by the Philippine National Red Cross has jurisdiction over the subject government owned and controlled
G.R. No. 136374, February 9, (PNRC) headquarters, a cash shortage of matter of the controversy. corporation, with an original charter under
2000 P154,350.13 was discovered in the funds of Republic Act No. 95, as amended. The test
its Bohol chapter. The chapter administrator, to determine whether a corporation is
petitioner Francisca S. Baluyot, was held government owned or controlled, or private
accountable for the shortage. in nature is simple. Is it created by its own
charter for the exercise of a public function,
On January 8, 1998, Paul E. Holganza, a or by incorporation under the general
member of the board of directors of the corporation law? Those with special charters
Bohol chapter, filed an affidavit-complaint are government corporations subject to its
before the Office of the Ombudsman provisions, and its employees are under the
charging petitioner of malversation under jurisdiction of the Civil Service Commission,
Article 217 of the Revised Penal Code and and are compulsory members of the
an administrative docket for dishonesty was Government Service Insurance System. The
also opened against petitioner. Petitioner PNRC was not "impliedly converted to a
filed her counter-affidavit, raising the private corporation" simply because its
defense that the ombudsman had no charter was amended to vest in it the
jurisdiction over the controversy. She argued authority to secure loans, be exempted from
that the Ombudsman had authority only over payment of all duties, taxes, fees and other
government-owned or controlled charges of all kinds on all importations and
corporations, which the PNRC was not. purchases for its exclusive use, on donations
for its disaster relief work and other services
The Ombudsman issued the first assailed and in its benefits and fund raising drives,
Order denying petitioner's motion to dismiss. and be allotted one lottery draw a year by the
Petitioner filed a Motion for Reconsideration. Philippine Charity Sweepstakes Office for
Public respondent likewise denied the the support of its disaster relief operation in
Motion for Reconsideration. Petitioner addition to its existing lottery draws for blood
contends that the Ombudsman has no program. Clearly then, public respondent
jurisdiction over the subject matter of the has jurisdiction over the matter, pursuant to
controversy since the PNRC is allegedly a Section 13, of Republic Act No. 6770,
private voluntary organization that the PNRC otherwise known as "The Ombudsman Act
falls under the International Federation of of 1989", to wit:
Red Cross, a Switzerland-based Sec. 13. Mandate. — The Ombudsman and
organization, and that the power to discipline his Deputies, as protectors of the people,
employees accused of misconduct, shall act promptly on complaints filed in any
malfeasance, or immorality belongs to the form or manner against officers or
PNRC Secretary General. employees of the Government, or of any
subdivision, agency or instrumentality
thereof, including government-owned or
controlled corporations, and enforce their
34

administrative, civil and criminal liability in


every case where the evidence warrants in
order to promote efficient service by the
Government to the people.
Carandang vs. Hon. Desierto In 1986, PCGG orderedordered the Whether or not RPN was a No. A GOCC refer to any agency organized
(G.R. No. 153161, January 12, sequestration of RPN’s properties, assets, government-owned or -controlled as a stock or non-stock corporation vested
2011) and business. PCGG entered into a corporation. with functions relating to public needs
compromise agreement with Benedicto, whether governmental or proprietary in
whereby he ceded to the Government all his nature, and owned by the government
shares of stock (72% shares) in RPN. But directly or indirectly through its
Benedcto contended that the shared was instrumentalities either wholly, or where
only 32%. Carandang assumed office as applicable as in the case of stock
general manager and subsequently he was corporations to the extent of at least 51% of
charged with grave misconduct and violation its capital stock. The definition mentions
of RA 3019 before the Ombudsman and the three (3) requisites, namely, first, any
Sandiganbayan respectively. Carandang agency organized as a stock or non-stock
moved for the quashal of the informations corporation; second, vested with functions
alleging that the Ombudsman and relating to public needs whether
Sandiganbayan do not have jurisdiction governmental or proprietary in nature; and,
because RPN is not a GOCC. third, owned by the Government directly or
through its instrumentalities either wholly, or,
where applicable as in the case of stock
corporations, to the extent of at least fifty-one
(51) of its capital stock.

RPN was neither a government-owned nor a


controlled corporation because of the
Government’s total share in RPN’s capital
stock being only 32.4%. RPN-9 was
organized for private needs and profits, and
not for public needs and was not specifically
vested with functions relating to public
needs. Lastly, the conclusion that
Carandang was a public official by virtue of
his having been appointed as general
manager and chief operating officer of RPN
by President Estrada deserves no
consideration. President Estrada’s
intervention was merely to recommend
Carandang’s designation as general
manager and chief operating officer of RPN
to the PCGG.
BENITO V. SEC and The Articles of Incorporation of respondent 1. Whether or not the issuance of 1.No. The questioned issuance of the
JAMIATUL PHILIPPINE-AL Jamiatul Philippine-Al Islamia, Inc. were filed the 110, 980 shares without the unsubscribed portion of the capital stock
ISLAMIA, INC. G.R. No. L- with the SEC and were approved. The consent of the stockholders or of worth P110,980.00 is ' not invalid even if
56655, July 25, 1983 corporation had an authorized capital stock the Board of Directors, and in the assuming that it was made without notice to
35

of P200,000.00 divided into 20,000 shares at absence of consideration, is null the stockholders as claimed by petitioner.
a par value of P10.00 each. Petitioner Datu and void. The power to issue shares of stocks in a
Tagoranao Benito subscribed to 460 shares 2. Whether or not the increase in corporation is lodged in the board of
worth P4,600.00. the authorized capital stock from directors and no stockholders' meeting is
P200,000.00 to P1,000,000.00 necessary to consider it because additional
Respondent corporation filed a certificate of without the consent or express issuance of shares of stocks does not need
increase of its capital stock from waiver of the stockholders, is null approval of the stockholders. The by-laws of
P200,000.00 to P1,000,000.00. It was and void. the corporation itself states that 'the Board of
shown in said certificate that P191,560.00 Trustees shall, in accordance with law,
worth of shares were represented in the provide for the issue and transfer of shares
stockholders' meeting held on November 25, of stock of the Institute and shall prescribe
1975 at which time the increase was the form of the certificate of stock of the
approved. Thus, P110,980.00 worth of Institute. The general rule is that pre-emptive
shares were subsequently issued by the right is recognized only with respect to new
corporation from the unissued portion of the issue of shares, and not with respect to
authorized capital stock of P200,000.00. Of additional issues of originally authorized
the increased capital stock of shares.
P1,000,000.00, P160,000.00 worth of
shares were subscribed. 2.No. With respect to the claim that the
increase in the authorized capital stock was
Petitioner Datu Tagoranao filed with without the consent, expressed or implied, of
respondent SEC a petition alleging that the the stockholders, it was the finding of the
additional issue of previously subscribed Securities and Exchange Commission that a
shares of the corporation was made in stockholders' meeting was held on
violation of his pre-emptive right to said November 25,1975 and among the many
additional issue and that the increase in the items taken up then were the change of
authorized capital stock of the corporation name of the corporation, the increase of its
from P200,000.00 to P1,000,000.00 was capital stock from P200,000.00 to
illegal considering that the stockholders of P1,000,000.00, and the increase of the
record were not notified of the meeting number of its Board of Trustees from five to
wherein the proposed increase was in the nine. "Despite the insistence of petitioner,
agenda. this Commission is inclined to believe that
there was a stockholders' meeting on
Petitioner prayed that the additional issue of November 25, 1975 which approved the
shares of previously authorized capital stock increase. The petitioner had not sufficiently
and the shares issued from the increase in overcome the evidence of respondents that
capital stock of respondent corporation be such meeting was in fact held. What
cancelled and that the corporation be petitioner successfully proved, however, was
ordered to render an accounting of funds to the fact that he was not notified of said
the stockholders. The SEC rendered a meeting and that he never attended the
decision as follows: same. Another thing that petitioner was able
(a) That the issuance by the corporation of to disprove was the allegation in the
its unissued shares was validly made and certificate of increase that all stockholders
was not subject to the pre-emptive rights of who did not subscribe to the increase of
stockholders capital stock have waived their pre-emptive
right to do so. As far as the petitioner is
36

(b) That there is no sufficient legal basis to concerned, he had not waived his pre-
set aside the certificate issued by this emptive right to subscribe as he could not
Commission authorizing the increase in have done so for the reason that he was not
capital stock of respondent corporation from present at the meeting and had not executed
P200,000.00 to Pl,000,000.00. Considering, a waiver, thereof. Not having waived such
that petitioner has not waived his pre- right and for reasons of equity, he may still
emptive right to subscribe to the increased be allowed to subscribe to the increased
capitalization, respondent corporation is capital stock proportionate to his present
directed to allow petitioner to subscribe shareholdings.
thereto, at par value, proportionate to his
present shareholdings.
(c) To direct respondent corporation to
comply with the requirement of filing annual
financial statements under pain of a more
drastic action.
MAJORITY STOCK In 1983, Ruby Corporation is already Whether or not the extension of No. Among the requirements for extension of
HOLDERS OF RUBY experiencing severe financial losses. It filed the corporate term was valid. corporate term is a vote of 2/3 of the
INDUSTRIAL CORP v. a petition for suspension of payments with Outstanding Capital Stock. The ratification
LIM. G.R. No. 165887, June 6, the Securities and Exchange Commission by the majority stockholders of the board
2011. which granted it. A management committee resolution for the extension was seriously
was formed to manage and control Ruby disputed by the minority stockholders (The
Corp. and study and evaluate a rehabilitation 2/3 OCS was obtained by the majority only
plan. 2 rehabilitation plans were submitted, because of their wrongful increase of
one from Benhar (by the majority subscription, in other words, under the
stockholders), and another is the Alternative invalid additional subscriptions). The notice
(by the minority). and quorum requirement were insufficient
and doubtful. No extension was validly
The Benhar plan was denied, and upon its made. The term has expired, which calls for
revision, was executed/implemented by the the liquidation of the corporation.
majority despite the contention of the
minority stockholders and the creditors of the
corporation. The validity of it was made an
issue in the courts. Meanwhile, the majority
stockholders increased the subscription
without notifying the minority, so the majority
got a 2/3 of the OCS. Using that, they
extended the corporate term in 1996 for
another 25 years. The term was supposed to
end in 1997. In 1998, the Benhar plan's
validity was finally adjudicated and was
declared null and void.
PNCC SKYWAY WORKERS PNCC Workers Organization (The Whether or not the verification The union president has the authority file the
ORGANIZATION v. PNCC Union/Petitioner) and the PNCC Skyway and certification against forum remedies with the courts. The late board
SKYWAY. G.R. No. 171231, (The employer/respondent) entered into shopping is defective, having resolution of June 2006 was only a
February 17, 2010. their collective bargaining agreement. Under signed by the Union President reiteration of the October 2005 resolution
the said agreement, the employer shall authorizing the president to do so. The
37

schedule the vacation leaves for the who had no authority via board purpose of certification
employees, taking into consideration their resolution. against forum shopping is that the party
preferences of schedule. Also in the litigant shall not be allowed to pursue
agreement was that the employees shall simultaneous remedies in different fora. The
bear the expenses of the renewal of their union president has authority because of the
license as security personnel. following reasons: 1. It was granted via
board resolution, 2. He is in the position to
A labor dispute involving the validity of the know the truthfulness and correctness of the
provisions of the CBA arose. When the case action, and 3. Assuming that there was no
was already in the CA, the union authorized board resolution of Oct. 2005, the authority
the Union President to represent the was ratified in June 2006, thus curing the
petitioner union (to sign the verification and defects of the certification against forum
certification against forum shopping). The shopping made in Feb. 2006.
ruled against the petitioner in Jan. 2006. The
union elevated it to the SC in Feb. 2006.
A.C. RANSOM LABOR CIR held respondent RANSOM guilty of Whether or not piercing of the veil Piercing the veil of the corporate fiction is
UNION-CCLU V. NLRC unfair labor practice of interference and of corporate fiction of the proper. The finding of this Court holding the
G.R. No. L-69464, May 29, discrimination and ordered said corporation RANSOM corporation is proper in officers and agents of RANSOM jointly and
1987 the payment of backwages. Successive the case at bar? severally liable for the payment of
motions for execution were filed by the backwages does not ignore the legal fiction
prevailing Petitioner-UNION but RANSOM that a corporation has a personality separate
opposed contending that it was suffering and distinct from its stockholders and
from financial difficulties and has no members, for, as this Court had held “where
necessary funds for the payment of the the incorporators and directors belong to a
backwages. Subsequently, respondent single family, the corporation and its
RANSOM filed before the Sec. of labor to members can be considered as one in order
cease operation and terminate employment, to avoid its being used as an instrument to
which was then granted by the latter. commit injustice,". When the notion of legal
Another motion for executions were filed by entity is used as a means to perpetrate fraud
the UNION alleging that although RANSOM or an illegal act or as a vehicle for the
had assumed a posture of suffering from evasion of an existing obligation, the
business reverse, its officers and principal circumvention of statutes, and or confuse
stockholders had organized a new legitimate issues the veil which protects the
corporation namely the Rosario Industrial corporation will be lifted
Corporation (ROSARIO) using the same
equipment, personnel, business stocks and
the same place of business. RANSOM
declared that ROSARIO is a distinct and
separate corporation which was organized
long before the cases were decided
adversely against RANSOM.

The UNION filed its ex parte Motion for Writ


of Execution and Garnishment praying that it
be issued against the Officers/Agents of
Ransom personally and or their estates. The
38

Labor Arbiter ruled in favor of the UNION


thereby holds the respondent corporation’s
officers and agents liable. NLRC on appeal,
modified the decision by relieving the officers
and agents liable. Motion for reconsideration
was filed by the petitioner but was denied
hence ghis special civil action for Certiorari.
INTERNATIONAL EXPRESS Philippine Football Federation (Federation) Whether or not the Philippine The Philippine Football Federation has no
TRAVEL &TOUR SERVICES, through its President Henri Kahn, secured Football Federation is a juridical juridical personality. It is basic postulate that
INC. V. CA the services of petitioner International person? before a corporation may acquire juridical
G.R. No. 119020, October 19, Express Travel and Tours Services as their personality, the State must give its consent
2000 travel agency. The latter secured the airline either in the form of special law or general
tickets for the trips of the athletes and enabling act. Before an entity may be
officials of the Federation. Federation made considered as a national sports association,
two partial payments. Subsequently such entity must be recognized by the
petitioner wrote a letter to the Federation for accrediting organization, the Philippine
the demand of the remaining balance Amateur Athletic Federation under R.A.
thereof. Henri Kahn issued a personal check 3135, and the Department of Youth and
in the amount of P50,000 as partial Sports Development under P.D. 604. This
payments for the outstanding balance. fact of recognition, however, Henri Kahn
Thereafter, no further payments were made failed to substantiate. Accordingly, we rule
despite repeated demands. This prompted that the Philippine Football Federation is not
petitioner to file a civil case before the RTC a national sports association within the
of Manila against Henri Kahn in his personal purview of the aforementioned laws and
capacity for the unpaid balance of the tickets does not have corporate existence of its
on the ground that Henri Kahn as president own. Thus being said, it follows that private
of the Federation who allegedly guaranteed respondent Henry Kahn should be held
the said obligations and impleaded the liable for the unpaid obligations of the
Federation as an alternative defendant. unincorporated Philippine Football
Henri Kahn denied to have guaranteed the Federation. It is a settled principal in
obligation of the Federation but acted merely corporation law that any person acting or
as the latter’s agent which has a separate purporting to act on behalf of a corporation
and distinct personality. RTC holds Henri which has no valid existence assumes such
Kahn personally liable for the unpaid privileges and becomes personally liable for
obligation of the Federation on the grounds contract entered into or for other acts
that corporate existence of the Federations performed as such agent.
was not proved. Henri Kahn elevated the
lower court’s decision before the Court of
Appeals. Finding for Henri Kahn, the CA
recognized the juridical existence of the
Federation. Petitioner filed for a motion for
reconsideration but was denied. Hence, this
petition.
CIR vs. CA G.R. No. 108576. Don Andres Soriano formed the corporation WON redemption of stocks from Yes. As a rule, a stock dividend representing
January 20, 1999 A. Soriano Y Cia corporation predecessor of the stockholder is equivalent to the transfer of surplus to capital account
ANSCOR. ANSCOR has an initial of 1M the distribution of taxable shall not be subject to tax. However, if a
39

capitalization divided into 10,000 common dividend, making the proceeds corporation cancels or redeems stock issued
shares at par value of 100 per share. Don taxable. as a dividend at such time and in such
Andres subscribed to 4,963 shares of the manner as to make the distribution and
5,000 shares originally issued. Eventually, cancellation or redemption, in whole or in
ANSCOR’s authorized capital stock was part, essentially equivalent to the distribution
increased to which Don Andres subscribed of a taxable dividend, the amount so
after the other stockholders waived in favor distributed in redemption or cancellation of
of the former their pre-emptive rights to the stock shall be considered as taxable
subscribe to the new issues. ANSCOR income to the extent it represents.
declared stock dividends. For exempting clause to apply Sec. 83 a)
Later on, Don Andres died. The record there is redemption or cancellation b)
reveals that he has 185,154 shares, 50,495 transaction involves stock dividends c) time
of which are original issues and the balance and manner of the transaction makes it
of 134,659 shares as stock dividend equivalent to a distribution of taxable
declaration.One –half of the shareholdings dividends.
92,577 were transferred to his wife Doa
Carmen Soriano as her conjugal share. The In the case at bar, it is undisputed that at the
other formed part of his estate. time of the last redemption, the original
common shares owned by the estate were
Doa Carmen exchanged her whole common only 25,247.5. This means that from the total
shares into preferred shares. As well as the of 108,000 shares redeemed from the
estate of Don Andres, thus, reducing his estate, the balance of 82,725.5 must have
estate common shares to 127,727. come from stock dividends hence, proceeds
of the redemption is additional wealth, for it
A board resolution was passed redeeming is not merely a return of capital but a gain.
the common shares from the estate of Don
Andres twice. The purpose for both The purposes invoked by ANSCOR to justify
redemptions as stated is to partially retire redemptions are no excuse for its tax liability.
stocks as treasury shares in order to reduce
the company’s foreign exchange
remittances in case cash dividends are
declared.

Revenue examiners assessed ANSCOR for


deficiency withholding tax at source,
pursuant to sections 53 and 54 of the 1939
Revenue Code based on the transactions of
exchange and redemption stocks.
Concorde Condominium vs. Concorde Condominium Inc is a duly WON the case involves intra- No. The relationship and nature of
Baculio G.R. No. 203678, constituted corporation or association which corporate controversy hence, controversy test can be applied in
February 17, 2016 owns common ares in the project comprising RTC as Special Commercial determining whether a dispute constitute
lot 1 where the condominium stands and lot Court has jurisdiction over the intra-corporate controversy. The Court
2 which serves as the parking lot of the unit case. agreed with RTC Branch 149 that injunction
owners and Concorde Condominium with damages is an ordinary civil case.
Building that was developed by Pulp and Based on the allegations in the petition no
Paper Distributors now New PPI Corp. intra-corporate relations exist between the
40

opposing parties namely 1) petitioner


PPI as developer engaged in real estate condominium corporation and its unit owners
business practice, altered the condominium and 2) respondent New PPI Corp., together
plan to segregate lot 2 from the common with other respondents such as City Fire
areas and cause the issuance of separate Marshal of Makati City, Regional Director of
title thereof in the name of PPI. bureau of fire protection and the private
agebcy. Clearly the suit involves conflicting
CCI questioned the said act of PPI in claims of ownership over the lots of
HLURB. The same case was elevated on Concorde Condominium and violations of
appeal to HLRUB board commissioners. In National Building Code resulted in the
both cases HLURB ruled in favor of CCI. PPI revocation of the occupancy permit.
did not appeal from the decision of HLURB
board of commissioners to the office of the
president thus, it became final and
executory.

At present, Baculio by himself and on behalf


of New PPI Corp., misrepresents to the
public and gov’t offices/agencies that the lot
where the building stands and the parking lot
are owned by the New PPI Corp., Baculio
requested that the building be subjected to
ocular inspection, the demolition of the
building as it is already 40 yrs old, cutting off
the electricity, and stationed security guards
on a rotation basis for 24 hrs within the
perimeter of the building.

CCI/ all unit owners urgently seek the SC for


the issuance of TRO /WPI against
respondents. And to hold them solidarily
liable for actual, moral, exemplary damages,
atty’s fees litigation expenses and cost of
suit.

The case was raffled to RTC Makati Branch


149 which was designated as Special
Commercial Court.

Baculio and New PPI Corp., filed an urgent


motion to re-raffle, claiming that it is a regular
court which has jurisdiction over the case.
BENGUET ELECTRIC Peter Cosalan was elected General Whether or not the NLRC gravely YES. The Board of Directors of a corporation
COOPERATIVE v. NLRC, Manager of Benguet Electric Cooperative abused its discretion by releasing would not be held liable if they act for and in
G.R. No. 89070, May 18, 1992 (BENECO). After receiving 3 audit the respondent board members behalf of the corporation within the scope of
documents from COA, Cosalan adopted from liability. its authority and in good faith. In this case,
41

several measures to correct the irregularities the Board of Directors cannot escape liability
found by the COA. Because of this, the because they were guilty of gross
Board Members of BENECO adopted negligence and bad faith in directing the
several resolutions depriving Cosalan of his affairs of the corporation by dismissing
salary and other benefits and suspending Cosalan without cause and due process. As
him indefinitely. Later on, he was dismissed such, they shall be solidarily liable, as
without being informed. He discovered it only provided in Section 31 of the Corporation
later when he demanded for his salary. Code.

Cosalan filed a complaint before the Labor


Arbiter. It found BENECO and respondent
board members liable. The NLRC reversed,
saying only BENECO is liable.
VDA. DE ROXAS v. OUR Salve Dealca Latosa was the owner of a Whether or not the CA erred in NO. A corporation is a juridical entity with a
LADY'S FOUNDATION, G.R. residential lot in Our Lady's Village in declaring the Notice of legal personality separate and distinct from
No. 182378, March 06, 2013 Sorsogon. A quarter of her lot (112 sq. Garnishment void. those acting for and on its behalf and, in
meters) was encroached upon by Atty. general, of the people comprising it. Hence,
Henry Roxas, who did so because 92 sq. the obligations incurred by the corporation
meters of his land was taken by Our Lady's are its own alone, and not of its directors,
Village for the construction of a subdivision trustees, officers, stockholders, or members.
road.
Moreover, Arcilla-Maullon was not
Latosa filed a complaint against Atty. Roxas. impleaded in the original case. Absent any
Atty. Roxas filed a third-party complaint evidence of wrongdoing on his part, the
against Our Lady's Foundation (OLFI). After corporate fiction cannot be pierced to make
due hearing, Atty. Roxas was directed to him personally liable.
return the subject portion of land to Latosa,
and OLFI was directed to reimburse Atty.
Roxas.

The RTC issued notices of garnishment


against Bishop Robert Arcilla-Maullon,
general manager of OLFI. On appeal, CA
declared the said notices as null and void.
Sales vs. SEC (G.R. No. No. Sipalay Mining sold to the State Investment Whether the SEC has the power Yes.The Court finds that the order of the
L-54330, January 13, 1989) House 200,000,000 common shares of its to create a committee composed SEC creating the committee is fully
capital stock in the amount of P2.6M with the of the SEC representative, as supported by P.D. No. 902-A that the
condition that the stockbroker shall not sell Chairman, to supervise and Commission shall have absolute jurisdiction,
more than 1,000,000 shares per buyer but control the conduct of the supervision and control over all corporations,
subsequently, the restriction was modified to proceedings and perform the partnerships or associations, who are the
5,000,000 shares per buyer. SHI transferred functions of the Corporate grantees of primary franchise and/or a
its 200M common shares to Anslemo Secretary, in relation to the license or permit issued by the government
Trinidad & Co. who in turn, transferred its regular annual stockholders' to operate in the Philippines (1)
shares to Vulcan. Minority stockholders of meeting controversies arising out of intra-corporate
Sipalay Mining (petitioners) filed a petition to or partnership relations, between and among
nullify the sale of the shares to VULCAN and stockholders members, or associates;
42

to enjoin VULCAN from voting the shares. A between any or all of them and the
Notice of Call was published, calling for the corporation, partnership or association of
payment of (20%) of unpaid subscriptions in which they are stockholders members or
Sipalay Mining. Sec issued a resolution associates, respectively; and between such
ordering the Board of Directors and officers corporation, partnership or association and
of the corporation to call and hold said the state insofar as it concerns their
regular meeting and a Committee composed individual franchise or right to exist as such
of one representative of the Securities and entity and (2) Controversies in the election or
Exchange Commission, as Chairman, and appointments of directors, trustees, officers
one representatives each from the or managers of such corporations,
respondents and the petitioners, as partnerships or associations.
members, is hereby formed to supervise and
control the conduct of the proceedings and As correctly pointed out by the Solicitor
perform the functions of the Corporate General, the case before the SEC involves a
Secretary. controversy regarding the election of
directors of a corporation. It is apparent from
the foregoing that a controversy in the
election of directors of Sipalay Mining came
about because it was petitioners themselves
who had asked the Commission not to allow
the disputed 198,500,000 shares to be voted
on at the July 18, 1979 annual stockholders'
meeting of the corporation. . Respondent
Commission had to address itself to the
controversy by issuing its questioned order
dated June 13, 1980, directing the holding of
the annual stockholders' meeting of Sipalay
Mining for the year 1980 as mandated in its
by-laws, and creating a committee to
supervise and control the conduct of the
proceedings to insure an orderly
stockholders meeting and forestall possible
controversy in the sending of notices,
processing and validation of proxies and
closing of the stock and transfer book.
Certainly, the Commission cannot be
faulted, much less can it be said that it
exceeded its jurisdiction, for having taken all
proper measures to insure that an orderly
meeting and election are held in Sipalay
Mining in the light of the issues raised in SEC
Case No. 1751 pending before the
Commission.
Fil-Estate Golf and FEGDI was the developer of the Forest Hills Whether or not the delay in the Yes. The Court cited Raquel-Santos v. Court
Development, Inc. v. Vertex Golf and Country Club and, in consideration issuance of a stock certificate can of Appeals where it held that in “a sale of
for its financing support and construction be considered a substantial shares of stock, physical delivery of a stock
43

Sales and Trading, Inc., G.R. efforts, was issued several shares of stock of breach as to warrant rescission of certificate is one of the essential requisites
No.202079, June 10, 2013 Forest Hills. the contract of sale? for the transfer of ownership of the stocks
purchased.”
Sometime in August 1997, FEGDI sold, on
installment, to RS Asuncion Construction In this case, Vertex fully paid the purchase
Corporation one Class “C” Common Share price by February 11, 1999 but the stock
of Forest Hills for P1,100,000.00. Prior to the certificate was only delivered on January 23,
full payment of the purchase price, RSACC 2002 after Vertex filed an action for
sold, on February 11, 1999, the Class “C” rescission against FEGDI.
Common Share to respondent Vertex Sales
and Trading, Inc.. RSACC advised FEGDI of Under these facts, considered in relation to
the sale to Vertex and FEGDI, in turn, the governing law, FEGDI clearly failed to
instructed Forest Hills to recognize Vertex as deliver the stock certificates, representing
a shareholder. For this reason, Vertex the shares of stock purchased by Vertex,
enjoyed membership privileges in Forest within a reasonable time from the point the
Hills. shares should have been delivered. This
was a substantial breach of their contract
Despite Vertex’s full payment, the share that entitles Vertex the right to rescind the
remained in the name of FEGDI. Seventeen sale under Article 1191 of the Civil Code.
(17) months after the sale (or on July 28,
2000), Vertex wrote FEDGI a letter
demanding the issuance of a stock
certificate in its name. FELI replied, initially
requested Vertex to first pay the necessary
fees for the transfer. Although Vertex
complied with the request, no certificate was
issued. This prompted Vertex to make a final
demand on March 17, 2001.
Erquiaga v. CA, G.R. No. Santiago de Erquiaga was the owner of Whether or not the Court of No. The Court found no reversible error in
47206, September 27, 1989 100% or 3,100 paid-up shares of stock of the Appeals erred in annulling the trial the Court of Appeals' decision in annulling
Erquiaga Development Corporation which court's order allowing Erquiaga to the trial court's order: (1) allowing Erquiaga
owns the Hacienda San Jose in Irosin, vote the 3,100 shares of Erquiaga to vote the 3,100 shares of Erquiaga
Sorsogon. On November 4,1968, he entered Development Corporation without Development Corporation without having
into an Agreement with Jose L. Reynoso to having effected the transfer of effected the transfer of those shares in his
sell to the latter his 3,100 shares (or 100%) those shares in his name in the name in the corporate books; and (2)
of Erquiaga Development Corporation for corporate books? authorizing Erquiaga to call a special
P900,000 payable in installments on definite meeting of the stockholders of the Erquiaga
dates fixed in the contract but not later than Development Corporation and to vote the
November 30, 1968. Because Reynoso 3,100 shares, without the pre-requisite
failed to pay the second and third registration of the shares in his name. It is a
installments on time, the total price of the fundamental rule in Corporation Law
sale was later increased to P971,371.70 (Section 35) that a stockholder acquires
payable on or before December 17, 1969. voting rights only when the shares of stock
The difference of P71,371.70 represented to be voted are registered in his name in the
brokers' commission and interest. corporate books.
44

As of December 17, 1968, Reynoso was Until registration is accomplished, the


able to pay the total sum of P410,000 to transfer, though valid between the parties,
Erquiaga who thereupon transferred all his cannot be effective as against the
shares (3,100 paid-up shares) in Erquiaga corporation. Thus, the unrecorded
Development Corporation to Reynoso, as transferee cannot enjoy the status of a
well as the possession of the Hacienda San stockholder; he cannot vote nor be voted for,
Jose, the only asset of the corporation. and he will not be entitled to dividends.
However, as provided in paragraph 3,
subparagraph (c) of the contract to sell,
Reynoso pledged 1,500 shares in favor of
Erquiaga as security for the balance of his
obligation. Reynoso failed to pay the balance
of P561,321.70 on or before December 17,
1969, as provided in the promissory notes he
delivered to Erquiaga. So, on March 2, 1970,
Erquiaga, through counsel, formally
informed Reynoso that he was rescinding
the sale of his shares in the Erquiaga
Development Corporation.

Subsequently, judgment was rendered in


favor of the plaintiff and against the
defendant Jose L. Reynoso, rescinding the
sale of 3,100 paid up shares of stock of the
Erquiaga Development Corporation to the
defendant, render a full accounting of the
fruits he received by virtue of said shares,
and to return said fruits received by him to
Erquiaga and pay Erquiaga actual damages.
CFI also authorized the plaintiff to vote not
only the 1,500 shares of stock in his name
but also the 1,600 shares in the name and
possession of the defendants.

On May 31, 1976, the Court of Appeals


rendered judgment holding that CFI of
Sorsogon acted with grave abuse of
discretion or in excess of jurisdiction in giving
private respondent voting rights on the 3,100
shares of stock of the Erquiaga
Development Corporation without first
divesting petitioners of their title thereto and
ordering the registration of the same in the
corporation books in the name of private
respondent.
45

Rural Bank of Salinas v. CA Clemente Guerrero executed a special WON SEC was correct to grant Yes, Sec. 63 provides that “shares of stock
(G.R. No. 96674, June 26, power of attorney in favor of his wife, Melania the writ of mandamus. issued are personal property and may be
1992) Guerrero, granting her the full power to sell transferred by delivery of the certificate
473 shares of Rural Bank of Salinas. indorsed by the owner, attorney-in-fact, or
Melania, as attorney in fact, executed two other leaglly authorized person to make the
Deeds of Assignment for the 473 shares and transfer.” The court interpreted Sec. 63 that
subsequently presented the said deeds for the owner is at liberty to dispose shares
registration to the bank with a request for (1) without restrictions or limitations except
the transfer in the Bank’s stock and transfer when the corporation holds any unpaid
book, (2) cancellation of the certificates of claims. The right of a transferee to have
stock under the name of Clemente, and (3) stocks transferred flows from his ownership,
issuance of new certificates in the name of thus, whenever a corporation refuses to
the petitioners. However, the bank denied transfer and register stocks, which duty is
said request. ministerial on its part, mandamus may lie.

Melania then filed with the SEC an action for


mandamus against the corporation and the
corporate secretary which SEC granted.
SIAIN ENTERPRISES, INC. v. Siain Enterprises, Inc. (Siain) obtained a Whether or not the lower courts' Yes. As a general rule, a corporation will be
CUPERTINO REALTY CORP. loan from Cupertino Realty Corporation application of the doctrine of deemed a separate legal entity until
AND EDWIN R. CATACUTAN (Cupertino) covered by a promissory note piercing the veil of corporation sufficient reason to the contrary appears.
(G.R. No. 170782, June 22, signed by their respective presidents. As a fiction is proper. Such separate and distinct legal personality
2009) security for the loan, a real estate mortgage of a corporation may be disregarded and the
over 2 parcels of land and other immovable veil of corporate fiction pierced when the
was executed by the petitioner. notion of legal entity is used to defeat public
Subsequently, a second promissory note convenience, justify wrong, protect fraud or
was signed in favor of Cupertino wherein defend crime.
Siain's president signed it as a maker on
behalf of the corporation, and as a co-maker, Cupertino presented overwhelming
liable to Cupertino in her personal capacity. evidence that petitioner and its affiliate
The parties then executed an amendment of corporation had received proceeds of the
the real estate mortgage to reflect the increased loan. Sian, Yuyek Manufacturing
increased amount of the loan. Corporation, and Siain Transport are
characterized by oneness of operations
Siain repeatedly demanded the release of vested in the person of a common president,
the loan covered by the amended real estate and unity in the keeping and maintenance of
mortgage. However, Cupertino contended their corporate books and records through
that it had long released the loan and their common bookkeeper. Thus, it was
declared that petitioner's demand as made sufficiently shown that the foregoing
to abscond from a just and valid obligation. corporations are mere alter-ego of their
As a result, Cupertino instituted an president.
extrajudicial foreclosure proceedings over
the properties subject of the amended real
estate mortgage.

Petitioner filed a complaint with prayer for a


46

restraining order to enjoin the Notary Public


from proceeding with the public auction sale.
The Regional Trial Court (RTC) rendered a
decision dismissing petitioner's complaint.
On appeal, the Court of Appeals affirmed the
RTC's ruling. Both the lower courts upheld
the validity of the amended real estate
mortgage. In giving credence to Cupertino's
evidence that the additional loan proceeds
were received by Siain, the lower courts
applied the doctrine of piercing the veil of
corporate fiction to preclude petitioner from
disavowing receipt of the additional loan and
paying its obligation under the amended real
estate mortgage.
ANG-ABAYA, ET AL. VS. Petitioners and private respondent are Whether or not petitioners may be No, petitioners may not be held liable.
ANG - G.R. No. 178511, shareholders, officers and members of the held liable under Sec. 74 of the Stockholder's right to inspect corporate
December 4, 2008 board of directors of family-owned Corporation Code for refusing to books is not without limitations. The Court
corporations. These corporations filed a allow private respondent to found that the allegations of petitioners that
petition for damages with prayer for issuance examine the corporate books and respondent is conniving with some other
of TRO against respondent alleging among records. persons to fraudulently wrest control or
others, of conniving to fraudulently wrest management of the corporations are
control or management of the corporations. supported by official and other documents.
During its pendency, respondent sought Hence, their refusal is justified on the
permission for the inspection of the grounds that private respondent was not
corporate books of the corporations which acting in good faith and for a legitimate
was denied by the petitioners, arguing that purpose in making his demand for inspection
respondent was not acting in good faith and of the corporate books.
for a legitimate purpose in making his
demand for inspection of the corporate
books. Hence, respondent filed a complaint
against petitioners for violating Section 74, in
relation to Section 144, of the Corporation
Code.
PANTRANCO EMPLOYEES Gonzales family owns Macris Realty as well Whether or not the labor claims by No. Pantranco Properties are not owned by
ASSOCIATION, INC. V. as PNEI, which is engaged in transportation the former employees of PNEI the judgment debtor PNEI. Nowhere in the
NLRC, ET AL., - G.R. No. business with its terminal situated on the may be enforced against PNB, records was it shown that PNEI owned the
170689, March 17, 2009 Pantranco Properties registered under the PNB-Madecor, and Mega Prime. Pantranco properties. PNB, PNB-Madecor,
name of Macris. Incurring huge financial and Mega Prime are corporations with
losses, ownership over these corporations personalities separate and distinct from that
were transferred to their creditors. Macris, of PNEI and absent any valid reason, their
subsequently became PNB-Madecor, a separate identities must be maintained and
subsidiary of PNB. PNEI ceased its they cannot be treated as one.
operations resulting to labor claims filed by
its former employees. The Labor Arbiter
issued Writ of Execution commanding the
47

NLRC Sherrifs to levy on the assets of PNEI


and also to proceed against PNB, PNB-
Madecor, and Mega Prime. The sherrifs then
proceeded to levy upon the Pantranco
Properties.
Villamor v. Umale (G.R. No. Pasig Printing Corporation (PPC) obtained WON Balmores filed a derivative NO, a derivative suit provides for the
172843, Sept. 24, 2014) an option to lease with Mid-land Pasig which suit. following requisites:
covered the area where MC Home Depot is
leasing. PPC issued a resolution waiving its 1. That a stockholder brings an action in the
rights, interests and participation in the name of the corporation;
option to lease in favor of Atty. Villamor. MC 2. That he was a stockholder when the
Home Depot issued post dated checks transactions, subject of action, occurred and
covering the rentals and gave them to whenthe complaint was filed;
Villamor, who in turn did not turnover these 3. That he exerted all the reasonable efforts
checks nor its equivalent amount to PPC to exhaust all remedies available;
upon encashment. 4. That no appraisal rights are available for
the act;
Hernando Balmores, a stockholder and 5. That the suit is not a nuisance not a
director of PPC, wrote a letter to PPC’s harassment suit.
directors informing them that Villamor should Balmores’ action failed to satisfy all
be made to deliver siad checks. Due to the requisites specifically exhausting all
directors’ inaction, he filed an intra-corporate remedies available for failing to show such
controversy complaint before the RTC and naming or impleading PPC as an
alleging that because of Villamor’s schemes indispensable party nor did he allege that he
and devices amounting to fraud abd was filing in behalf of PPC.
misrepresentation, PPC’s assets have been
actually dissipated.
GERARDO LANUZA, JR. BF Corporation (BF) entered into several Whether or not petitioners as Yes. A corporation is an individual with a
AND ANTONIO OBLES v. BF agreements with Shangri-la Properties, Inc. resigned directors of Shangri-la personality that is distinct and separate from
CORPORATION, SHANGRI- (SPI) for the construction of a mall and Properties should be made other persons including its stockholders,
LA PROPERTIES, INC., multilevel parking structure. Despite SPI's parties to the arbitration officers, directors, representatives, and other
ALFREDO C. RAMOS, RUFO default in payment, it induced BF to continue proceedings to determine the juridical entities. Because a corporation’s
B. COLAYCO, MAXIMO G. with the construction of the buildings using distinction between the latter's existence is only by fiction of law, it can only
LICAUCO III, AND BENJAMIN its own fund and credit. Accordingly, SPI personality and its board of exercise its rights and powers through its
C. RAMOS (G.R. No. 174938, misrepresented that it had funds to pay for directors. directors, officers, or agents, who are all
October 1, 2014) its obligation, and that the delay in payment natural persons.
was simply a matter of delayed processing
of the billing statements. BF eventually A submission to arbitration is a contract. As
completed the construction, and SPI took such, the Agreement, containing the
possession of the buildings while still owing stipulation on arbitration, binds the parties
an outstanding balance to the former. thereto, as well as their assigns and heirs.
Notwithstanding BF's repeated demands, As a general rule, a corporation’s
SPI refused to pay the balance owed to it. representative who did not personally bind
himself or herself to an arbitration agreement
BF instituted an arbitration proceeding cannot be forced to participate in arbitration
where both parties failed to agree as to the proceedings made pursuant to an
48

law that should govern the said proceedings. agreement entered into by the corporation.
The trial court ordered the parties to conduct However, there are instances when the
the proceedings in accordance with The distinction between personalities of
Arbitration Law (R.A. 876). SPI filed and directors, officers, representatives and of the
omnibus motion, while BF filed an urgent corporation are disregarded.
motion for clarification, both parties seeking
to clarify the term "parties" and whether SPI's When corporate veil is pierced, the
directors should be included in the arbitration corporation and persons who are normally
proceedings. treated as distinct from the corporation are
treated as one person, such that when the
The trial court issued the order directing corporation is adjudged liable, these
service of demands upon all defendants in persons, too become liable as if they were
BF's complaint. Accordingly, SPI's directors the corporation. When there are allegations
were interested parties who must also be of bad faith or malice against corporate
included in arbitration proceedings to give directors or representatives, it becomes the
them the opportunity to ventilate their side of duty of courts or tribunals to determine if
the controversy, safeguard their interest and these persons and the corporation should be
fend off their respective positions. treated as one. Without a trial, courts and
Petitioners' motion for reconsideration was tribunals have no basis determining whether
denied. Thus, they filed a petition for the veil of corporate fiction should be
certiorari with the Court of Appeals. pierced.
However, their petition and subsequent
motion for reconsideration was both When the courts disregard the corporation’s
dismissed. distinct and separate personality from its
directors or officers, the courts do not say
that the corporation, in all instances and for
all purposes, is the same as its directors,
stockholders, officers and agents. Courts
merely discount the distinction and treat
them as one, in relation to a specific act, in
order to extend the terms of the contract and
the liabilities for all damages to erring
corporate officials who participated in the
corporation’s illegal acts.

In this case, the Arbitral Tribunal rendered a


decision finding that BF failed to prove the
existence of circumstances that render
petitioner’s and the other director’s solidarily
liable.
Concept Builders, Inc. V. Private respondents are laborers, carpenters WON the NLRC committed grave No, While it is a recognized principle that a
NLRC G.R. No. 108734, May and riggers of Concept Builders, Inc. abuse of discretion in issuing the corporation is an entity separate and distinct
29, 1996 (Petitioner). In 1981, petitioner terminated break-open order from its stockholders and from other
the private respondents from employment corporations to which it may be connected,
due to the expiration of their contracts of this separate personality may be
employment and the completion of the disregarded when it is used to defeat public
49

project in which they were hired. It was convenience, justify wrong, protect fraud or
however found that at the time of the defend crime, or is used as a device to
termination that the project had not yet been defeat the labor laws, or as an adjunct, a
completed. business conduit or an alter ego of another
corporation.
Private respondents then filed a complaint
for illegal dismissal against petitioner. The The test in determining the applicability of
Labor Arbiter (LA) ruled in favor of the private the doctrine of piercing the veil of corporate
respondents which decision became final fiction is as follows: (1) Control which is the
and executory. A writ of execution was then complete domination of policy and business
issued, but service of the writ failed since the practice in respect to the transaction
petitioner no longer occupies its premises. attacked in such a manner that the
Also, the employees in the premises claimed corporation had at the time no separate
Hydro Pipes Philippines, Inc. (HPPI) as their mind, will or existence of its own; (2) Such
employer and not petitioner. Subsequently, a control must have been used by the
certain Dennis Cuyegkeng filed a third-party defendant to commit fraud or wrong in
claim with the LA alleging that the properties contravention of plaintiff’s legal rights; and
sought to be levied in the premises are (3) the aforesaid control and breach of duty
owned by HPPI of which he is the Vice- must proximately cause the injury or unjust
President. loss complained of.

Private respondents then filed a "Motion for In this case, both the petitioner and HPPI
Issuance of a Break-Open Order," alleging submitted on the same day their respective
that HPPI and petitioner are one and the Information Sheets with SEC bearing the
same. HPPI opposed contending that HPPI same address and filed by the same person
is separate and distinct from petitioner. HPPI who represents himself as the corporate
also argued that it is engaged in secretary of both corporations. Also, both
manufacturing business while petitioner was corporations had the same president, the
then engaged in construction. LA denied the same board of directors, the same corporate
motion. On appeal, the NLRC reversed. officers, and substantially the same
subscribers. Clearly, petitioner ceased its
business operations in order to evade
payment to private respondents of
backwages and to bar their reinstatement to
their former positions. HPPI is obviously a
business conduit of petitioner and its
emergence was skillfully orchestrated to
avoid the financial liability that already
attached to petitioner corporation. From the
foregoing, the application of the doctrine of
piercing the veil of corporate fiction is
warranted. SC then upheld the break-open
order.
CRYSTAL V. BPI G.R. No. Sps. Raymundo and Desamparados Crystal Whether or not CA correctly No. A juridical person is generally not entitled
172428, November 28, 2008 (Sps. Crystal) bound themselves as sureties awarded moral damages to BPI to moral damages because, unlike a natural
for the loans obtained by Cebu Contractors person, it cannot experience physical
50

Consortium Co. (CCCC) from the Bank of suffering or such sentiments as wounded
the Philippine Islands-Butuan branch (BPI- feelings, serious anxiety, mental anguish or
Butuan) and BPI - Cebu City branch (BPI- moral shock. In the case of People v. Manero
Cebu). and Mamulao Lumber v. PNB, the SC ruled
that it is only when a juridical person has a
CCCC failed to pay its loans to both BPI- good reputation that is debased, resulting in
Butuan and BPI-Cebu when they became social humiliation, that moral damages may
due. Thus, BPI resorted to the foreclosure of be awarded. It is for this reason that CA
the chattel mortgage and the real estate awarded moral damages to BPI after
mortgage. To recover the deficiency, BPI recognizing the latter’s famliarity not only in
filed a complaint for sum of money against the Philippines but also in the whole world.
the Sps.Crystal. RTC ruled in favor of BPI
and ordered the foreclosure of Sps. Crystal’s However, in the more recent cases of ABS-
properties. CBN Corp. v. Court of Appeals, et al. and
Filipinas Broadcasting Network, Inc. v. Ago
Sps. Crystal then filed an action for Medical and Educational Center-Bicol
Injunction with Damages arguing that they Christian College of Medicine (AMEC-
are mere guarantors of CCCC and that BPI BCCM), the Court held that the statements
failed to first exhaust all the properties of in Manero and Mambulao were mere obiter
CCCC. RTC ruled in favor of BPI and dicta, implying that the award of moral
ordered Sps. Crystal to pay moral and damages to corporations is not a hard and
exemplary damages. CA affirmed. fast rule. Indeed, while the Court may allow
the grant of moral damages to corporations,
it is not automatically granted; there must still
be proof of the existence of the factual basis
of the damage and its causal relation to the
defendant's acts. This is so because moral
damages, though incapable of pecuniary
estimation, are in the category of an award
designed to compensate the claimant for
actual injury suffered and not to impose a
penalty on the wrongdoer.

The spouses' complaint against BPI proved


to be unfounded, but it does not
automatically entitle BPI to moral damages.
Although the institution of a clearly
unfounded civil suit can at times be a legal
justification for an award of attorney's fees,
such filing, however, has almost invariably
been held not to be a ground for an award of
moral damages. The rationale for the rule is
that the law could not have meant to impose
a penalty on the right to litigate. Otherwise,
moral damages must every time be awarded
in favor of the prevailing defendant against
51

an unsuccessful plaintiff. BPI may have been


inconvenienced by the suit, but we do not
see how it could have possibly suffered
besmirched reputation on account of the
single suit alone. Hence, the award of moral
damages should be deleted.
Clavecillia Radio System, the New Cagayan Grocery filed a complaint Whether or not Clavecilla may be Yes. It is clear that the case for damages
petitioner vs. Hon. Agustin against the Clavecilla Radio System sued only in Manila and not in filed with the city court is based upon tort and
Antillon, as City Judge of alleging, in effect, that on March 12, 1963, Cagayan de Oro on the ground not upon a written contract. Section 1 of Rule
Municipal Court of Cagayan the following message, addressed to the that it maintains its principal office 4 of the New Rules of Court, governing
de Oro City and New Cagayan former, was filed at the latter's Bacolod in Manila? venue of actions in inferior courts, provides
Grocery, respondents - G.R. Branch Office for transmittal thru its branch in its paragraph (b) (3) that when "the action
No. L-22238, February 18, office at Cagayan de Oro: “REURTEL is not upon a written contract, then in the
1967. WASHED NOT AVAILABLE REFINED municipality where the defendant or any of
TWENTY FIFTY IF AGREEABLE SHALL the defendants resides or may be served
SHIP LATER REPLY POHANG” with summons." Settled is the principle in
The Cagayan de Oro branch office having corporation law that the residence of a
received the said message omitted, in corporation is the place where its principal
delivering the same to the New Cagayan office is established. Since it is not disputed
Grocery, the word "NOT" between the words that the Clavecilla Radio System has its
"WASHED" and "AVAILABLE," thus principal office in Manila, it follows that the
changing entirely the contents and purport of suit against it may properly be filed in the City
the same and causing the said addressee to of Manila. The fact that it maintains branch
suffer damages. Clavecilla filed a motion to offices in some parts of the country does not
dismiss. Thereafter, the City Judge denied mean that it can be sued in any of these
the motion to dismiss. In dismissing the places.
case, the lower court held that the Clavecilla
Radio System may be sued either in Manila
where it has its principal office or in Cagayan
de Oro City where it may be served. In
appealing, the Clavecilla Radio System
contends that the suit against it should be
filed in Manila where it holds its principal
office.
Enrique Razon, petitioner, vs. E. Razon, Inc. was organized in 1962 by Whether or not Enrique Razon is No. In the case of Embassy Farms, Inc. v.
INTERMEDIATE APPELLATE petitioner Enrique Razon for the purpose of the owner of the 1500 shares of Court of Appeals, Supreme Court ruled: ". . .
COURT and Vicente B. participating in the bidding for the arrastre stock? For an effective, transfer of shares of stock
Chuidian, in his capacity as services in South Harbor, Manila. The the mode and manner of transfer as
Administrator of the Estate of incorporators were Enrique Razon, Enrique prescribed by law must be followed. As
the Deceased Juan T. Valles, Luisa M. de Razon, Jose Tuazon, Jr., provided under Section 3 of the Corporation
Chuidian, respondents. - G.R. Victor L. Lim, Jose F. Castro and Salvador Code, shares of stock may be transferred by
No. 74306 March 16, 1992. Perez de Tagle. According to the petitioner, delivery to the transferee of the certificate
some of the incorporators withdrew from the properly indorsed. Title may be vested in the
said corporation. The petitioner then transferee by the delivery of the duly
distributed the stocks previously placed in indorsed certificate of stock . However, no
the names of the withdrawing nominal transfer shall be valid, except as between the
52

incorporators to some friends, among them parties until the transfer is properly recorded
the late Juan T. Chuidian to whom he gave in the books of the corporation. In the instant
1,500 shares of stock. The shares of stock case, there is no dispute that the questioned
were registered in the name of Chuidian only 1,500 shares of stock of E. Razon, Inc. are
as nominal stockholder and with the in the name of the late Juan Chuidian in the
agreement that the said shares of stock were books of the corporation. From the point of
owned and held by the petitioner but view of the corporation, therefore, Chuidian
Chuidian was given the option to buy the was the owner of the 1,500 shares of stock.
same. In such a case, the petitioner who claims
The petitioner maintains that his aforesaid ownership over the questioned shares of
oral testimony as regards the true nature of stock must show that the same were
his agreement with the late Juan Chuidian on transferred to him by proving that all the
the 1,500 shares of stock of E. Razon, Inc. is requirements for the effective transfer of
sufficient to prove his ownership over the shares of stock in accordance with the
said 1,500 shares of stock. corporation's by laws, if any, were followed.
The law is clear that in order for a transfer of
stock certificate to be effective, the certificate
must be properly indorsed and that title to
such certificate of stock is vested in the
transferee by the delivery of the duly
indorsed certificate of stock. Since the
certificate of stock covering the questioned
1,500 shares of stock registered in the name
of the late Juan Chuidian was never indorsed
to the petitioner, the inevitable conclusion is
that the questioned shares of stock belong to
Chuidian.
Westmond Bank v. Inland Respondent incurred loan obligations from WON Calo was clothed with Yes. It was shown that Calo was the one
Construction (March 23, 2009 petitioner secured by a Real Estage apparent authority to transact for assigned to transact on petitioner bank's
- G.R. 123650) Mortgage and Promissory Notes. The the petitioner bank. behalf respecting loan transactions of Inland,
president of Inland, Aranda, executed a as well as those of Hanil-Gonzales and
deed of assignment in favor of Abrantes, Abrantes. As such, there's a presumption
executive vice president and general that Calo had authority to sign the deed. It
manager of Hanil-Gonzales Corporation. was also found that Abrantes notified the
Abrantes assumed other obligations of petitioner bank of his assumption of Inland's
Inland and Aranda including the Promissory obligation and petitioner sent a reply
Notes executed by Inland in favor of approving the same. Petitioner did not prove
petitioner. Respondent received a notice of by clear and convincing evidence that it
sheriff's sale foreclosing the REM, so didn't cloth Calo with apparent authority
respondent filed an injunction suit against neither it did present any resolution from the
petitioner. Petitioner bank alleged that it had board confirming Calo's lack of authority.
no knowledge nor it did give its conformity to
the alleged assignment of obligation covered
by the promissory note. RTC found that
petitioner bank ratified the acts of its
accounting officer, Calo, when its executive
53

committee failed to repudiate the


assignment within a reasonable time.
Republic (PCGG) vs. Private respondents are defendants in a civil WON petitioner can object to the No. Rule 26, Section 1 states that if the party
Sandiganbayan, Tantoco Jr., case before Sandiganbayan commenced by interrogatories served on it in served with interrogatories is a juridical
Dominador Santiago PCGG. Instead of filing an answer, accordance with Rule 26. entity, the same shall be answered by any
(November 21, 1991 - G.R. respondents filed a motion to strike out some officer thereof competent to testify in its
90478) portions of the complaint and for bill of behalf. Therefore, the contention of PCGG
particulars. PCGG filed an opposition. that the interrogatories are addressed only to
Respondent then presented a motion for the latter, without naming any specific
leave to file interrogatories. PCGG filed a commissioner/officer thereof is utterly of no
motion to strike out the motion and consequence.
interrogatories. Sandiganbayan denied both
motions. Respondent then again filed an
amended interrogatories to plaintiff which
was now admitted by Sandiganbayan.
PCGG filed an opposition. Sandiganbayan
issued a resolution reiterating by implication
the permission to serve the amended
interrogatories on PCGG. PCGG now filed a
petition for certiorari alleging that the
interrogatories aren't specific and do not
name particular individuals to whom they are
profounded.
Uy, et al. v. Villanueva, et al., Countrywide Bank of La Carlota Inc. is a Whether or not they are corporate No. It has been held that an office is created
G.R. No. 157851, June 29, private banking corporation engaged in rural officers of the bank and may be by the charter of the corporation and the
2007 banking and other allied services through its held liable for illegal dismissal. officer is elected by the directors or
branches nationwide. Sometime in 1998, it stockholders. On the other hand, an
experienced liquidity problems and its employee usually occupies no office and
treasure department was unable to comply generally is employed not by action of the
with its branches demands for fresh funds. directors or stockholders, but by the
Its various branches eventually experienced managing officer of the corporation, who
bank runs. Several depositors were alarmed. also determines the compensation to be paid
Thus, a group holding 70% of the bank’s to such employee. Given this distinction,
deposit accounts met, and agreed to petitioners are neither officers nor
organize themselves into a committee of employees of the bank. They are mere
depositors. Yusay was elected Chairman of depositors who sought to manage the bank
the board, while Uy was secretary. It was in order to save it.
formed to protect their collective interests
and to increase their chances recovering
their deposits. Realizing that their bid to
rehabilitate the bank had failed, the
committee disbanded. Eventually, 3 cases
for illegal dismissal were filed. One of which
was Villanueva. She avers that she was a
regular employee of countrywide bank,
south cotabato branch. She received a
54

memorandum accepting her courtesy


resignation, but she denies having submitted
one. Subsequently, Uy and Yusay were
made solidarily liable with the bank. Hence,
this petition.
Visayan, et al. v. NLRC, et al., Fujiyama Hotel and Restaurant, Inc. was Whether or not there is privity of There is none. A corporation can act only
G.R. No. 69999, April 30, formally organized in 1978 with Rivera contract between the petitioners through its board of directors. "The law is
1991 holding a majority interest in the corporation. and private respodents as to settled that contracts between a corporation
The corporation immediately opened establish an employer- employee and third persons must be made by or under
Fujiyama hotel and restaurant with Akasako relationship between the parties. the authority of its board of directors and not
as its chef and restaurant supervisor. by its stockholders. Hence, the action of the
Subsequently, operation and management stockholders in such matters is only advisory
of the corporation, including control and and not in any wise binding on the
possession of all its assets, were forcibly corporation."
taken by Jureidini and Tsuchiya from the In the case at bar, We hold that all acts done
owners thereof by virtue of a writ of solely by Jureidini and Tsuchiya allegedly,
preliminary injunction issued by RTC Manila. for and in behalf of private respondent during
During the 1-year period that they took over the period from June, 1981 up to May 31,
the corporation, before the original owners 1982 were not binding upon respondent
got the corporation back, they terminated the corporation.
original employees of the corporation who
were validly hired by its board of directors,
and hired new employees to replace the
original employees. When the original
owners took control of the corporation, it
reinstated the previous employees hired by
it, and replaced the employees hired by
Jureidini and Tsuchiya. Thus, the terminated
employees filed a complaint for nillegal
dismissal against the corporation, akasako,
jureidini, and tsuchiya.
APODACA V. NLRC Petitioner was employed in respondent 1) Whether or not the National 1) NO. The NLRC has no jurisdiction to
G.R.No. 80039, April 18, 1989 corporation. In that corporation, petitioner Labor Relations Commission determine such intra-corporate dispute
was convinced to subscribe to its shares of (NLRC) has jurisdiction to resolve between the stockholder and the corporation
stock. Petitioner paid P37,500 for the a claim for non-payment of stock as in the matter of unpaid subscriptions. This
subscription. Petitioner was appointed subscriptions to a corporation. controversy is within the exclusive
President and General Manager of the jurisdiction of the Securities and Exchange
corporation, and after 10 years, he resigned. 2) Whether or not an obligation of Commission.
Petitioner then filed a case in the NLRC for an employee to his employer,
unpaid wages, allowances, and bonus arising from an unpaid 2) NO. The amount of P17,060.7 owed by
compensation against Respondent subscription, be offset against a the employer to the employee representing
corporation. Respondent corporation money claim of an employee the unpaid wages, allowances and bonus
admitted it owed Petitioner P17,060.7. against the employer. compensation, cannot be deducted from the
However responded corporation deducted amount of P95,439.93 representing the
that amount, to the amount owed by remaining balance of unpaid subscribed
petitioner to the corporation which is shares of stock.
55

P95,439.93. The number P95,439.93 First, the set off or deduction was pre mature
represented the unpaid balance for the since there was no call for payment of the
shares of stock he previously subscribed to. unpaid subscribed shares of stock from the
respondent corporation.
Second, the set off or deduction was
unlawful since Article 113 of the Labor Code
does not allow such a deduction from the
wages of the employees by the employer.
PEOPLE V. DUMLAO AND Respondent Dumlao, a member of the GSIS Whether or not the motion to No, the motion to dismiss is not valid. The
GONZALES Board of Trustees, executed a lease- dismiss is valid. lease-purchase agreement was deemed
G.R. No. 168918, March 2, purchase agreement with respondent La'o executed. There's a difference between
2009 over GSIS properties consisting of three minutes of the meeting and a board
parcels of land and their associated resolution. A board resolution is a company
improvements. The Office of the act, approving a transaction of the
Ombudsman determined that the lease- corporation by its members. The non-signing
purchase agreement was grossly by the majority of the members of the GSIS
advantageous to the government and so Board of Trustees of the said minutes does
charged Dumlao, La'o and the rest of the not necessarily mean that the supposed
people involved in the lease-purchase resolution was not approved by the board. A
agreement with violation of the Anti-Graft board resolution affirming the lease-
and Corrupt Practices act. Dumlao in his purchase agreement exists and is valid
defense averred that the lease-purchase without a complete signing of the minutes of
was non existent since only 3 out of 7 of the the meeting for the lease-purchase
Board of Trustees of the GSIS signed the agreement.
minutes of the meeting for the lease-
purchase agreement. 4 out of 7 must sign
the minutes of the meeting according to
Dumlao before the lease-purchase can be
deemed executed. Dumlao then filed a
motion to dismiss grounded on the above as
basis.
Maria Clara Pirovana Et Al Vs. Enrico Pirovano was the President and Whether or not the defendant YES. The donation is valid and binding.
The De La Rama Steamship General Manager of the De la Rama corporation may give by way of The provisions second article (g) (j) of the
Co., Steamship Company. Early in 1941 the donation the proceeds of said articles of incorporation of the Dela Rama
G.R. No. L-5377, December company insured the life of said Enrico insurance policies to the minor Co. gives the corporation broad and almost
29, 1954 Pirovano in various Philippine and American children of the late Enrico unlimited powers to carry out the purposes
Life Insurance companies.He was killed by Pirovano under the law or its for which it was organized among them.
the Japanese. the current President of De la articles of corporation, or is that Granting arguendo that the donation given
Rama Steamship proposed that it is but fit donation an ultra vires act? by Pirovano children is outside the scope of
and proper that the company which owes so the powers of the defendant corporation, or
much to the deceased should make some the scope of the powers that it may exercise
provision for his children. He proposed that under the law, or it is an ultra vires act, still it
out of the proceeds of the insurance policies may said that the same cannot be
the sum of P400,000 be set aside for invalidated, for the reason alone, it
Pirovano’s minor children, said sum of appearing that the donation represents not
money to be convertible into 4,000 shares of only the act of the Board of Directors but of
56

the stock of the Company, at par, or 1,000 the stockholders by ratifying the resolution
shares for each child. A resolution was duly approved by the board. Such ratification
adopted to carry out the proposal and made the act perfectly valid and enforceable.
submitted to the stockholders of the De la
Rama company at a meeting properly
convened, and on that same date the same
was duly approved. SEC rendered its
opinion that the donation was void because
the corporation could not dispose of its
assets by gift and therefore the corporation
acted beyond the scope of its corporate
powers.
In 1951, in view of the failure of compliance
with the conditions to which the above
donation was made subject, and in view of
the opinion of the SEC Commissioner, the
majority of the stockholders' voted to revoke
the resolution approving the donation to the
Pirovano children.
BARBA V. LICEO DE Petitioner was hired as medical Whether or not her appointment is NO. In respondent’s by-laws, there are four
CAGAYAN UNIVERSITY, officer/school physician by Respondent. a corporate office which divest officers specifically mentioned, namely, a
G.R. No. 193857, November Later on, she was chosen by respondent to jurisdiction from LA and NLRC. president, a vice president, a secretary and
28, 2012 be the recipient of a scholarship grant to a treasurer. In addition, it is provided that
pursue a three-year residency training in there shall be other appointive officials, a
VMMC. Thereafter, she was appointed College Director and heads of departments
Acting Dean and eventually appointed as whose appointments, compensations,
Dean of the College of Physical Therapy by powers and duties shall be determined by
respondent’s President, Dr. Golez. Because the board of directors. A College Dean is not
of drastic decreased of number of student among the corporate officers mentioned in
enrollees in her department during her respondent’s by-laws. Petitioner, being an
tenure, she was informed that her deanship academic dean, also held an administrative
will terminate upon the end of school year. post in the university but not a corporate
Thereafter, the college ceased operations office as contemplated by law. Petitioner
and petitioner went on leave. A letter was was not directly elected nor appointed by the
sent to petitioner informing her to return to board of directors to any corporate office but
work as full-time faculty professor/member her appointment was merely approved by
as also indicated in the grant of scholarship the board together with the other academic
as an agreement. Petitioner however claims deans of respondent university in
for separation pay as there exists a demotion accordance with the procedure prescribed in
which constitutes dismissal. LA decided in respondent’s Administrative Manual.
favor of respondent finding no constructive Moreover, the CA, in its amended decision
dismissal. NLRC reversed the decision. erroneously equated the position of a
Respondent filed an appeal before CA which College Director to that of a College Dean
decided that there was no constructive thereby concluding that petitioner is an
dismissal but did not touch upon the officer of respondent.
petitioner's issue on jurisdiction of LA and
57

NLRC, considering her appointment is a


corporate office. On motion for
reconsideration, the CA reversed its own
ruling, favorably to petitioner, this time
conceding to the fact that LA or NLRC has
no jurisdiction.
Simny G. Guy, V. Gilbert G. Petitioner Simny G. Guy (Simny) is a 1. Whether or not the 1. YES. Date of Sending: Sept 2
Guy\, G.R. No. 184068, April stockholder of record and member of the stockholders meeting was Date of Meeting: Sept 7 or 5 days after
19, 2016 board of directors of the Goodland properly sent. Date of Receipt: Sept 22
Company, Inc. (GCI). Respondents are also 2. Whether or not the meeting was The provisions only require the
GCI stockholders of record who were called by a proper person. sending/mailing of the notice of a
allegedly elected as NEW directors by virtue 3. Whether or not Grace Cheu is stockholders' meeting to the stockholders of
of the assailed stockholders' meeting held on entitled to such notice. the corporation. Sending/mailing is different
7 September 2004. On 10 September 2004, from ailing or service under the Rules of
Paulino Delfin Pe and Benjamin Lim Court. Had the lawmakers intended to
(stockholders of record of GCI) informed include the stockholder's receipt of the
petitioner that they had received a notice notice, they would have clearly reflected
dated 31 August 2004 calling for the holding such requirement in the law. Absent that
of a special stockholders’ meeting on 7 requirement, the word "send" should be
September 2004 at the Manila Diamond understood in its plain meaning. For a
Hotel. On 22 September 2004, or fifteen (15) stockholders' special meeting to be valid,
days after the stockholders’ meeting, certain requirements must be met with
petitioner received the aforementioned respect to notice, quorum and place. In
notice. relation to the above provision of B.P. 68,
one of the requirements is a previous written
notice sent to all stockholders at least one (1)
week prior to the scheduled meeting, unless
otherwise provided in the by-laws.
Under the by-laws of GCI, the notice of
meeting shall be mailed not less than five (5)
days prior to the date set for the special
meeting.
2. Yes. Under Section 3, Article IV of the By-
laws of Goodland, respondent Gilbert G.
Guy as Vice President of the corporation is
qualified to act as president.
Section 3 which provides that "the Vice
President, if qualified, shall exercise all of the
functions and perform all the duties of the
President, in the absence or disability, for
any cause, of the latter." As correctly pointed
out by defendants [respondents], the
applicable provisions of the by-laws of
Goodland are Article II, Sec. 2 which
provides that the "special meeting of the
stockholders may be called . . . by order of
58

the President and must be called upon the


written request of stockholders registered as
the owners of one-third (1/3). Defendant
Gilbert [respondent Guy] is the owner of
more than one-third (1/3) of the outstanding
stock of Goodland. In fact, it is around
79.99%. Thus, pursuant to Art. II, Sec. 2 of
the By-laws of Goodland, defendant Gilbert
[respondent Guy] may validly call such
special stockholders' meeting.
3. No, Cheu was not a stockholder of record
of GCI and was therefore not entitled to any
notice of meeting. Section 63 of the
Corporation Code provides:
Xxx
No transfer, however, shall be valid, except
as between the parties, until the transfer is
recorded in the books of the corporation so
as to show the names of the parties to the
transaction, the date of the transfer, the
number of the certificate or certificates and
the number of shares transferred.

The evidence presented by Cheu to prove


that she was a stockholder of record — valid,
existing and uncancelled Goodland Stock
Certificate does not satisfy the requirements
imposed by the Corporation Code and the
by-laws of GCI. A "stockholder of record" is
defined as follows: A person who desires to
be recognized as stockholder for the
purpose of exercising stockholders' right
must secure standing by having his
ownership of share recorded on the stock
and transfer book. Thus, only those whose
ownership of shares are duly registered in
the stock and transfer book are considered
stockholders of record and are entitled to all
rights of a stockholder.
GONZALES VS PNB G.R. Gonzales instituted a suit, as a taxpayer, Whether or not Petitioner may No. The right of inspection granted to a
NO. L-33320 MAY 30, 1983 against Sec. of Public Works and compel PNB to produce its books stockholder under Section 51 of Act No.
Communications, the Commissioner of and records upon request. 1459 has been retained, but with some
Public Highways, and PNB for alleged modification.
anomalies committed regarding the bank’s SECTION 51: The record of all business
extension of credit to import public works transactions of the corporation and the
equipment intended for the massive minutes of any meeting shall be open to the
59

development program. Petitioner bought 1 inspection of any director, member or


share of PNB stocks in order to gain standing stockholder of the corporation at reasonable
as a stockholder. The petitioner has alleged hours.
that his written request for such examination the new Code has prescribed limitations to
was denied by the respondent. The bank the same. It is now expressly required as a
answered denying his request for being not condition for such examination that the one
germane to his interest and for the cloud of requesting it must not have been guilty of
doubt as to his real intention and purpose in using improperly any information through a
acquiring said share. Petitioner thereafter prior examination, and that the person
sought to inquire and ordered PNB to asking for such examination must be "acting
produce its books and records which the in good faith and for a legitimate purpose in
Bank refused, invoking the provisions from making his demand."
its charter created by Congress. The Philippine National Bank is not an
ordinary corporation. Having a charter of its
own, it is not governed, as a rule, by the
Corporation Code of the Philippines. Section
4 of the said Code. The inspection sought to
be exercised by the petitioner would be
violative of the provisions of its charter of
PNB.
SEAOIL PETROLEUM VS Seaoil Petroleum Corporation bought one 1. Whether or not parol evidence 1. No, parol evidence cannot be utilized to
AUTOCORP GR NO. 164326 unit of ROBEX Excavator from Autocorp can be used to incorporate into incorporate into contract additional
OCTOBER 17, 2008 Group. It was paid in 12 monthly contract additional contemporaneous conditions. The rules
installments. The sales agreement was contemporaneous conditions. provide that although parol evidence is
embodied in the Vehicle Sales Invoice. 2. Whether or not, given the facts admissible to explain the meaning of a
Documents were signed by Francis Yu, in evidence, the lower courts contract, it cannot serve the purpose of
president of Seaoil, on behalf of said should have pierced the corporate incorporating into the contract additional
corporation. Furthermore, it was agreed that veil. contemporaneous conditions which are not
despite delivery of the excavator, ownership mentioned at all in the writing unless there
thereof was to remain with Autocorp until the has been fraud or mistake. Evidence of a
obligation is fully settled. Seaoil, on the other prior or contemporaneous verbal agreement
hand issued 12 checks which served as is generally not admissible to vary, contradict
payment thereof. The remaining 10 checks or defeat the operation of a valid contract.
were not honored by the bank since Seaoil The Vehicle Sales Invoice is the best
requested that payment be stopped. Seaoil evidence of the transaction.
alleged that the transaction between Seaoil 2. No. Rodriguez is a person separate and
and Autocorp were only utilized as conduits independent from Autocorp. Whatever
to settle the obligation of one foreign entity obligations Rodriguez contracted cannot be
named UnilineAsia in favor of another attributed to Autocorp and vice versa. The
foreign entity, Focus Point International, transaction under the Vehicle Sales Invoice
Incorporated. The real transaction is that is separate and distinct from that under the
Uniline, through Paul Rodriguez. Rodriguez Lease Purchase Agreement. In the former, it
is a stockholder and director of Autocorp. He is Seaoil that owes Autocorp, while in the
is also the owner of Uniline. On the other latter, Uniline incurred obligations to Focus.
hand, Yu is the president and stockholder of There was never any allegation, much less
Seaoil and is at the same time owner of any evidence, that Autocorp was merely an
60

Focus. Allegedly, Uniline chartered MV Asia alter ego of Uniline, or that the two
Property from its owner Focus. Uniline was corporations’ separate personalities were
not able to settle the said amount. In short, being used as a means to perpetrate fraud
Seaoil claims that the real transaction is that or wrongdoing. It is settled that a corporation
Uniline, through Rodriguez, owed money to has a personality separate and distinct from
Focus. In lieu of payment, Uniline instead its individual stockholders or members, and
agreed to convey the excavator to Focus. is not affected by the personal rights,
This was to be paid by checks issued by obligations and transactions of the latter.
Seaoil but which in turn were to be funded by The corporation may not be held liable for
checks issued by Uniline. Autocorp filed a the obligations of the persons composing it,
complaint for recovery of personal property and neither can its stockholders be held
with damages and replevin in the Regional liable for its obligation. This Court has
Trial Court. The trial court ruled in favor of recognized instances when the corporation’s
Autocorp Group stating that the transaction separate personality may be disregarded.
between Autocorp and Seaoil was a simple However, we have also held that the same
contract of sale payable in installments. It may only be done in cases where the
also held that the obligation to pay plaintiff corporate vehicle is being used to defeat
the remainder of the purchase price of the public convenience, justify wrong, protect
excavator solely devolves on Seaoil. Paul fraud, or defend crime. Moreover, the
Rodriguez, not being a party to the sale of wrongdoing must be clearly and convincingly
the excavator, could not be held liable. established.
Security Bank and Trust Sta. Ines Melale Corporation (‘Sta. Ines’) is WON the 1989 Loan Agreement Yes. There is novation; indemnity agreement
Company, Inc.vs Rodolfo M. in logging operations & a holder of a Timber novated the original credit by Cuenca is extinguished. Several
Cuenca, G.R. No. 138544, License Agreement. Security Bank granted accommodation and Cuenca’s incompatibilities between the 1989
October 3, 2000 Sta. Ines a credit line in the amount of 8M liability under the Indemnity Agreement and the 1980 original obligation
until November 30, 1981 to meet Agreement. demonstrate that the two cannot
capitalization requirements. To secure coexist(amount, purpose, and term).
payment, it executed a 1)chattel mortgage Since Cuenca did not impliedly waive his
over some of its machineries and its consent for the novated credit
President Rodolfo Cuenca 2)executed an accommodation, such clause should be
Indemnity agreement in favor of SecBank understood in the context of the ₱8 million
whereby he bound himself jointly and limit and the November 30, 1981 term. It did
severally with Sta. Ines. When Cuenca not give the bank or Sta. Ines any license to
resigned, Sta Ines availed of its credit line modify the nature and scope of the original
however encountered difficulty in making the credit accommodation.
payments; so they requested SecBank for a
complete restructuring of its credit line. It was
then approved but without notice to or the
prior consent of Cuenca (being surety of
previous credit line).
PONCE VS. ALSONS Fausto Gaid was an incorporator of ACC Whether or not the transfer of A transfer of shares of stock not recorded in
CEMENT CORPORATION having subscribed to and fully paid 239,500 shares of stock not recorded in the stock and transfer book of the
G.R. No. 105774 December shares. Vicente Ponce and Fausto Gaid the stock and transfer book of the corporation is non-existent as far as the
10, 2002 executed a “Deed of Undertaking” and corporation is nonexistent insofar corporation is concerned. As between the
“Indorsement” whereby the latter as the corporation is concerned corporation on the one hand, and its
acknowledges that the former is the owner of and no certificate of stock can be shareholders and third persons on the other,
61

said shares and he was therefore issued in the name of the the corporation looks only to its books for the
assigning/endorsing the same to Ponce. No transferee purpose of determining who its shareholders
certificates of stock corresponding to the are. It is only when the transfer has been
239,500 subscribed and fully paid shares of recorded in the stock and transfer book that
Gaid were issued in the name of Fausto G. a corporation may rightfully regard the
Gaid and/or Ponce. Despite repeated transferee as one of its stockholders.
demands, the defendants refused and
continue to refuse without any justifiable
reason to issue to Ponce the certificates of
stocks corresponding to the 239,500 shares
of Gaid, in violation of Ponce’s right to secure
the corresponding certificate of stock in his
name.
PHILIPPINE RACE HORSE V. PRHTAI, through its president, Rogelio J. Whether or not Catajan exceeded Contracts entered into by a corporate officer
PIEDRAS NEGRAS G.R. No. Catajan, entered into a contract (first his authority when it agreed to pay or obligations assumed by such officer for
192659 December 2, 2015 contract) with Fil-Estate involving the PNCDC an increased contract and in behalf of the corporation are binding
construction of housing units for price in the amount of on said corporation, if such officer has acted
P67,453,000.00. Fil-Estate then later P101,150,000.00 within the scope of his authority, or even if
assigned its rights and obligations under the such officer has exceeded the limits of his
project to PNCDC, its subcontractor. A authority, the corporation still ratifies such
second contract was forged between contracts or obligations. The doctrine of
PRHTAI and PNCDC for P80,324,788.00. apparent authority provides that a
Then PRHTAI and PNCDC signed the third corporation will be estopped from denying
contract for the construction of the same the agent’s authority if it knowingly permits
housing units, but this time for the revised one of its officers or any other agent to act
amount of P101,150,000.00 within the scope of an apparent authority,
and it holds him out to the public as
possessing the power to do those acts.
Apparent authority is derived not merely
from practice. Its existence may be
ascertained through (1) the general manner
in which the corporation holds out an officer
or agent as having the power to act or, in
other words, the apparent authority to act in
general, with which it clothes him; or (2) the
acquiescence in his acts of a particular
nature, with actual or constructive
knowledge thereof, whether within or beyond
the scope of his ordinary powers.
Premium Marble Resources In 1982, Ayala Investment and Development WON the filing of the case for NO. By the express mandate of the
Inc. versus CA and Corporation (Ayala) issued 3 checks in the damages against ICB was Corporation Code (Section 26), all
International Corporate Bank - aggregate amount P31,663.88 payable to authorized by a duly constituted corporations duly organized pursuant
G.R. No. 96551, November 4, Premium Marble Resources, Inc. (Premium) Board of Directors of Premium. thereto are required to submit within the
1996, and drawn against Citibank. In 1982, former period therein stated (30 days) to the
officers of the Premium headed by Belen, Securities and Exchange Commission the
without any authority whatsoever from names, nationalities and residences of the
62

Premium deposited the above-mentioned directors, trustees and officers elected. In


checks to the current account of his conduit the present case, although there were newly
corporation, Intervest Merchant Finance elected officers for the year 1982, Premium
(Intervest) which the latter maintained with failed to show proof that this election was
the International Corporate Bank (ICB). reported to the SEC. In fact, the last entry in
Although the checks were clearly payable to their General Information Sheet with the
the Premium and crossed on their face and SEC, as of 1986, showed Belen et. Al. as
for payees account only, defendant bank officers.
accepted the checks to be deposited to the
current account of Intervest and thereafter
presented the same for collection from ICB
which subsequently cleared the same thus
allowing Intervest to make use of the funds
to the prejudice of the Premium. Premium
has demanded upon the ICB to restitute the
amount representing the value of the checks
but latter refused. As a result of the illegal
and irregular acts perpetrated by the ICB, the
Premium was damaged.
Aquilino Rivera, Isamu Aquilino Rivera (Rivera) and four other 1. WON the Corporation may 1. Yes. Under Sec. 63 of the Corporation
Akasako and Fujiyama Hotel incorporators organized the Fujiyama Hotel refuse the registration of the Code, shares of stock may be transferred by
& Restaurant vs The Hon. & Restaurants, Inc (Fujiyama), which was respondents’ shares. delivery of the certificate after indorsement
Alfredo Florendo (CFI Manila), registered under Philippine Laws. Isamu by the owner or his attorney-in-fact or other
Lourdes Jureidini and Milagros Akasako (Akasako), a Japanese national person legally authorized to make the
Tsuchiya - G.R. No. L-57586, and the alleged real owner of the shares of transfer. By this provision it is evident that
October 8, 1986, stock in the name of Rivera, sold 2,550 Rivera’s indorsement must be obtained
shares of stocks to Milagros Tsuchiya before any transfer of the questioned shares
(Tsuchiya) and Lourdes Jureidini (Jureidini) is effected. Thus, the Corporation’s refusal
for a consideration of Php 440,000 with the for the registration of the shares of stock in
assurance that Tsuchiya will be made the names of Jureidini and Tsuchiya is
President, and Jureidini will be made director proper. Also, special action for mandamus
of the corporation after the purchase of the as a remedy to compel Rivera's indorsement
shares of stocks. Rivera assured Tsuchiya is not proper. The proper action should be
that he would sign the stock certificates as specific performance.
the shares of stocks were registered under
Rivera’s name. After the sale was complete,
Rivera refused to make the indorsement
unless he is also paid. The buyers attempted
to register the stock certificates with the
corporation but it was refused.Tsuchiya and
Jureidini filed a special action for Mandamus
and damages with preliminary injunction
and/or receivership against the petitioners
with the CFI Manila. The CFI granted the
preliminary mandatory injunction, allowing
63

the buyers to manage the business upon


filing a bond.
Ong Yong v. Tui 1. The construction of the Masagana Citimall Whether or not rescission is NO. FLADC was originally incorporated with
in Pasay City was threatened with stoppage proper? an authorized capital stock of 500,000
and incompletion when its owner, the First shares with the Tius owning 450,200 shares
Landlink Asia Development Corporation representing the paid-up capital. When the
(FLADC), which was owned by the Tius, Tius invited the Ongs to invest in FLADC as
encountered dire financial difficulties. stockholders, an increase of the authorized
2. The Tius invited the Ongs, to invest in capital stock became necessary to give each
FLADC. Under the Pre-Subscription group equal (50-50) shareholdings as
Agreement they entered into, the Ongs and agreed upon in the Pre-Subscription
the Tius agreed to maintain equal Agreement. The authorized capital stock
shareholdings in FLADC. was thus increased from 500,000 shares to
3. In addition, there were agreements that 2,000,000 shares with a par value of P100
some positions like President, Vice president each, with the Ongs subscribing to
secretary, treasurer among others, both ong 1,000,000 shares and the Tius to 549,800
yong and tuis will have representatives more shares in addition to their 450,200
respectively shares to complete 1,000,000 shares. Thus,
4. The relationship was short-lived when ong the subject matter of the contract was the
yong rescinded the contract on alleged 1,000,000 unissued shares of FLADC stock
dispute and conflict regarding positions allocated to the Ongs. Since these were
taken and disregarded. unissued shares, the parties Pre-
Subscription Agreement was in fact a
subscription contract as defined under
Section 60, Title VII of the Corporation Code:
Any contract for the acquisition of unissued
stock in an existing corporation or a
corporation still to be formed shall be
deemed a subscription within the meaning of
this Title, notwithstanding the fact that the
parties refer to it as a purchase or some
other contract (Italics supplied).
A subscription contract necessarily involves
the corporation as one of the contracting
parties since the subject matter of the
transaction is property owned by the
corporation its shares of stock. Thus, the
subscription contract (denominated by the
parties as a Pre-Subscription Agreement)
whereby the Ongs invested P100 million for
1,000,000 shares of stock was, from the
viewpoint of the law, one between the Ongs
and FLADC, not between the Ongs and the
Tius. Otherwise stated, the Tius did not
contract in their personal capacities with the
Ongs since they were not selling any of their
64

own shares to them. It was FLADC that did.


Considering therefore that the real
contracting parties to the subscription
agreement were FLADC and the Ongs
alone, a civil case for rescission on the
ground of breach of contract filed by the Tius
in their personal capacities will not prosper.
Assuming it had valid reasons to do so, only
FLADC (and certainly not the Tius) had the
legal personality to file suit rescinding the
subscription agreement with the Ongs
inasmuch as it was the real party in interest
therein. Article 1311 of the Civil Code
provides that contracts take effect only
between the parties, their assigns and heirs
Therefore, a party who has not taken part in
the transaction cannot sue or be sued for
performance or for cancellation thereof,
unless he shows that he has a real interest
affected thereby.
The Corporation Code, SEC rules and even
the Rules of Court provide for appropriate
and adequate intra-corporate remedies,
other than rescission, in situations like this.
Rescission is certainly not one of them,
specially if the party asking for it has no legal
personality to do so and the requirements of
the law therefor have not been met.A
contrary doctrine will tread on extremely
dangerous ground because it will allow just
any stockholder, for just about any real or
imagined offense, to demand rescission of
his subscription and call for the distribution
of some part of the corporate assets to him
without complying with the requirements of
the Corporation Code.
Rescission will violate the Trust Fund
Doctrine and the procedures for the valid
distribution of assets and property under the
Corporation Code.
Hacienda Cataywa/ Rosario Lorezo was informed by the Social Whether or not the SSC Yes. SSC committed reversible error in
Villanueva, et al. v. Lorezo, Security System (SSS) Western Visayas committed reversible error in finding that Mancy & Sons Enterprises, Inc.
G.R. No. 179640, March 18, Group that she cannot avail the retirement finding that Mancy & Sons and Manuel Villanueva are one and the
2015 benefits since she has only paid for 16 Enterprises, Inc. and Manuel same.
months, which is 104 months short of the Villanueva are one and the same
minimum requirement of 120 months to be This Court agrees with the petitioners that
65

entitled to the benefit. Her employment there is no need to pierce the corporate veil.
under Hacienda Cataywa could not be Respondent failed to substantiate her claim
confirmed as well because Manuel that Mancy and Sons Enterprises, Inc. and
Villanueva was permanently residing in Manuel and Jose Marie Villanueva are one
Manila and Joemarie Villanueva denied and the same. She based her claim on the
having managed the farm. She was also SSS form wherein Manuel Villanueva
advised of her options: continue paying appeared as employer. However, this does
contributions as voluntary member; request not prove, in any way, that the corporation is
for refund; leave her contributions in-trust used to defeat public convenience, justify
with the System or file a petition before the wrong, protect fraud, or defend crime, or
Social Security Commission (SSC) so that when it is made as a shield to confuse the
liabilities, if any, of her employer may be legitimate issues, warranting that its
determined. separate and distinct personality be set
aside. Also, it was not alleged nor proven
Rosario Lorezo was informed by the Social that Mancy and Sons Enterprises, Inc.
Security System (SSS) Western Visayas functions only for the benefit of Manuel
Group that she cannot avail the retirement Villanueva, thus, one cannot be an alter ego
benefits since she has only paid for 16 of the other.
months, which is 104 months short of the
minimum requirement of 120 months to be While a corporation may exist for any lawful
entitled to the benefit. Her employment purpose, the law will regard it as an
under Hacienda Cataywa could not be association of persons or, in case of two
confirmed as well because Manuel corporations, merge them into one, when its
Villanueva was permanently residing in corporate legal entity is used as a cloak for
Manila and Joemarie Villanueva denied fraud or illegality. This is the doctrine of
having managed the farm. She was also piercing the veil of corporate fiction. The
advised of her options: continue paying doctrine applies only when such corporate
contributions as voluntary member; request fiction is used to defeat public convenience,
for refund; leave her contributions in-trust justify wrong, protect fraud, or defend crime,
with the System or file a petition before the or when it is made as a shield to confuse the
Social Security Commission (SSC) so that legitimate issues, or where a corporation is
liabilities, if any, of her employer may be the mere alter ego or business conduit of a
determined. 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. To disregard the
separate juridical personality of a
corporation, the wrongdoing must be
established clearly and convincingly. It
cannot be presumed.

This Court has cautioned against the


inordinate application of this doctrine,
reiterating the basic rule that "the corporate
veil may be pierced only if it becomes a
66

shield for fraud, illegality or inequity


committed against a third person.

The Court has expressed the language of


piercing doctrine when applied to alter ego
cases, as follows: Where the stock of a
corporation is owned by one person whereby
the corporation functions only for the benefit
of such individual owner, the corporation and
the individual should be deemed the same.
MSCI-NACUSIP Local On January 11, 1990, Asturias Sugar What is the correct paid-up capital The correct paid-up capital is P5 million.
Chapter v. NWPC and Central, Inc. (ASCI, for brevity), executed a of MSCI for the pertinent period
Monomer Sugar Central, Memorandum of Agreement with Monomer covered by the application for By express provision of Section 13, paid-up
Inc.,G.R. No. 125198, March Trading Industries, Inc. (MTII, for brevity), exemption P5 million or capital is that portion of the authorized
3, 1997 whereby MTII shall acquire the assets of P64,688,528.00? capital stock which has been both
ASCI by way of a Deed of Assignment subscribed and paid. To illustrate, where the
provided that an entirely new organization in authorized capital stock of a corporation is
place of MTII shall be organized, which new worth P1 million and the total subscription
corporation shall be the assignee of the amounts to P250,000.00, at least 25% of this
assets of ASCI. amount, namely, P62,500.00 must be paid
up per Section 13. The latter, P62,500.00, is
By virtue of this Agreement, a new the paid-up capital or what should more
corporation was organized and incorporated accurately be termed as "paid-up capital
on February 15, 1990 under the corporate stock."
name Monomer Sugar Central, Inc. or MSCI,
the private respondent herein. In the case under consideration, there is no
dispute, and the Board even mentioned in its
On January 16, 1991, MSCI applied for August 17, 1993 Decision, that MSCI was
exemption from the coverage of Wage Order organized and incorporated on February 15,
No. RO VI-01 issued by the Board on the 1990 with an authorized capital stock of P60
ground that it is a distressed employer. In million, P20 million of which was subscribed.
support thereto, MSCI submitted its audited Of the P20 million subscribed capital stock,
financial statements and income tax returns P5 million was paid-up. This fact is only too
duly stamped "received" by the Bureau of glaring for the Board to have been misled
Internal Revenue (BIR) and the Securities into believing that MSCI's paid-up capital
and Exchange Commission (SEC) for the stock was P64 million plus and not P5
period beginning February 15, 1990 and million.
ending August 31, 1990, including the
quarterly financial statements and income Not all funds or assets received by the
tax returns for the two quarters ending corporation can be considered paid-up
November 30, 1990 and February 28, 1991. capital, for this term has a technical
signification in Corporation Law. Such must
MSCI-NACUSIP Local Chapter (Union, for form part of the authorized capital stock of
brevity), in opposition, maintained that MSCI the corporation, subscribed and then
is not distressed; that MSCI applicant has actually paid up.
not complied with the requirements for
67

exemption; and that the financial statements


submitted by MSCI do not reflect the true The Commission aptly observed that the
and valid financial status of the company, loans and advances of MTII to respondent
and that the paid-up capital would have been MSCI cannot be treated as investments
higher than P5 million and thus impairment unless the corresponding shares of stocks
would have been lower than 25% had the are issued. But as it turned out, such loans
pre-organization agreement between ASCI and advances were in fact treated as
and MTII been complied with. liabilities of MSCI to MTII as shown in its
1990 audited financial statements. The
After hearings on the application for treatment by the Board of these loans as part
exemption, the Board denied MSCI’s of MSCI's capital stock without satisfying
application based on the finding that certain mandatory requirements is
applicant's losses of P3,400,738.00 for the proscribed under Section 38 of the
period February 15, 1990 to August 31, 1990 Corporation Code.
constitute an impairment of only 5.25% of its
paid-up capital of P64,688,528.00, cannot The requirements set forth in Section 38 of
be said to be sufficient to meet the required the Corporation Code, which are condition
25% in order to qualify for the exemption, as precedents before the capital stock of a
provided in NWPC Guidelines No. 01, Series corporation may be increased, were
of 1992 entitled REVISED GUIDELINES ON unquestionably not observed in this case.
EXEMPTION FROM COMPLIANCE WITH Henceforth, the paid-up capital stock of
THE PRESCRIBED WAGE/COST OF MSCI for the period covered by the
LIVING ALLOWANCE INCREASES application for exemption still stood at P5
GRANTED BY THE REGIONAL million. The losses, therefore, amounting to
TRIPARTITE WAGES AND P3,400,738.00 for the period February 15,
PRODUCTIVITY BOARDS. 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%,[8] 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.