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Types of Business Organization


INTERNATIONAL EXPRESS Philippine Football Federation (Federation) Whether or not the Philippine Football The Philippine Football Federation has no
TRAVEL &TOUR SERVICES, through its President Henri Kahn, secured the Federation is a juridical person? juridical personality. It is basic postulate that
INC. V. CA services of petitioner International Express before a corporation may acquire juridical
G.R. No. 119020, October 19, Travel and Tours Services as their travel agency. personality, the State must give its consent
2000 The latter secured the airline tickets for the trips either in the form of special law or general
of the athletes and officials of the Federation. enabling act. Before an entity may be
Federation made two partial payments. considered as a national sports association, such
Subsequently petitioner wrote a letter to the entity must be recognized by the accrediting
Federation for the demand of the remaining organization, the Philippine Amateur Athletic
balance thereof. Henri Kahn issued a personal Federation under R.A. 3135, and the Department
check in the amount of P50,000 as partial of Youth and Sports Development under P.D.
payments for the outstanding balance. 604. This fact of recognition, however, Henri
Thereafter, no further payments were made Kahn failed to substantiate. Accordingly, we rule
despite repeated demands. This prompted that the Philippine Football Federation is not a
petitioner to file a civil case before the RTC of national sports association within the purview of
Manila against Henri Kahn in his personal the aforementioned laws and does not have
capacity for the unpaid balance of the tickets on corporate existence of its own. Thus being said,
the ground that Henri Kahn as president of the it follows that private respondent Henry Kahn
Federation who allegedly guaranteed the said should be held liable for the unpaid obligations
obligations and impleaded the Federation as an of the unincorporated Philippine Football
alternative defendant. Henri Kahn denied to Federation. It is a settled principal in corporation
have guaranteed the obligation of the law that any person acting or purporting to act
Federation but acted merely as the latter’s agent on behalf of a corporation which has no valid
which has a separate and distinct personality. existence assumes such privileges and becomes
RTC holds Henri Kahn personally liable for the personally liable for contract entered into or for
unpaid obligation of the Federation on the other acts performed as such agent.
grounds that corporate existence of the
Federations 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.







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De Facto Corporation
PIONEER vs. CA G.R. No. Lim entered into a contract of sale with Japan Whether or not the failure of Lim, No, there was no de facto partnership that was
84197 July 28, 1989 Domestic Airlines (JDA) regarding aircrafts and Cervantes, Bormacheco and Maglana created. It was held that persons who attempt
spare parts. Pioneer Insurance executed and to incorporate automatically result to a but fail to form a corporation and who carry on
issued a surety bond in favor of JDA on behalf of de facto partnership business under the corporate name occupy the
Lim. Lim convinced Bormacheco, Cervantes position of partners inter se and their rights as
Brothers and Maglana to contribute funds to members of the company to the property
buy the two aircrafts and spare parts which acquired by the company will be recognized.
would form part of a new corporation that However, such a relation does not necessarily
would expand his airline business. Lim then exist, for ordinarily persons cannot be made to
executed in favor of Pioneer a chattel mortgage assume the relation of partners when their
stipulating that Lim transfers the two aircrafts purpose is that no partnership shall exist and it
and spareparts to Pioneer as a security for the should be implied only when necessary to do
suretyship. Lim defaulted on his payment. justice between the parties
Lim signing and executing the chattel 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.

Separate Juridical Personality


BENGUET ELECTRIC Peter Cosalan was elected General Manager of Whether or not the NLRC gravely YES. The Board of Directors of a corporation
COOPERATIVE v. NLRC, G.R. Benguet Electric Cooperative (BENECO). After abused its discretion by releasing the would not be held liable if they act for and in
No. 89070, May 18, 1992 receiving 3 audit documents from COA, Cosalan respondent board members from behalf of the corporation within the scope of its
adopted several measures to correct the liability. authority and in good faith. In this case, the
irregularities found by the COA. Because of this, Board of Directors cannot escape liability
the Board Members of BENECO adopted several because they were guilty of gross negligence and
resolutions depriving Cosalan of his salary and bad faith in directing the affairs of the
other benefits and suspending him indefinitely. corporation by dismissing Cosalan without cause
Later on, he was dismissed without being and due process. As such, they shall be solidarily
informed. He discovered it only later when he liable, as provided in Section 31 of the
demanded for his salary. Corporation 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.
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Yamamoto v. Nishino Leather In 1983, Ruichi Yamamoto, organized Wako Whether or not the veil of corporate No.
Industries, Inc., G.R. No. Enterprises Manila, Inc., a leather tanning fiction should be pierced. The veil of corporate personality may be pierced
150283, April 16, 2008 business. In 1987, Yamamoto and Ikuo Nishino when the corporation is merely an adjunct, a
(Respondent) entered into a joint venture business conduit, or alter ego of a person, but the
whereunder Nishino would acquire 70% of the mere ownership of a single stockholder of even
authorized capital stock of Wako. Eventually all or nearly all of the capital stocks of a
Ikuo Nishino and his brother, Yoshinobu Nishino corporation is not by itself a sufficient ground to
acquired more than 70% of the authorized disregard the separate corporate personality. In
capital stock and reduced Yamamoto’s equity to order for the doctrine of piercing the veil of
10%. The corporation was later renamed to corporate fiction to apply the following elements
Nishino Leather Industries, Inc. must be proven:

Pursuant Nishinos’ planned takeover the a. There must be complete domination, not only
company, Yoshinobu Nishino, sent a letter to of finances but of policy and business practice so
Yamamoto offering to the latter the return of that the corporate entity had not separate mind,
equipment, which were his capital contributions will or existence of its own.
to Wako Ent. b. Such domination or control was used by the
defendant to commit fraud or wrong, to
Yamamoto attempted to recover the said perpetuate the violation of a right of positive
equipment however, this attempt was legal duty
frustrated. This forced Yamamoto to file a c. Said breach of duty was the proximate cause
complaint for replevin. of the injury complained of.
The absence of either one of these elements
The RTC ruled in favor of Yamamoto and prevents the application of the doctrine. It is not
declared him as the rightful owner and the form which the courts consider, but rather,
possessor of the equipment. how the corporation operated and the individual
defendant’s relationship to that operation.
On appeal, the Court of Appeals reversed the
RTC, holding that the equipment are corporate In this case, Yamamoto failed to show by clear
property of NLII and could not be retrieved and convincing evidence the presence of any of
without the authority of the NLII Board of the elements aforementioned. There is no
Directors. It also held that the doctrine of showing that Nishino used the separate
piercing the veil of corporate fiction does not personality of NLII to unjustly act or do wrong in
apply. contravention of Yamamoto’s rights.

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

Petitioner filed a complaint with prayer for a
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.
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PANTRANCO EMPLOYEES Gonzales family owns Macris Realty as well as Whether or not the labor claims by the No. Pantranco Properties are not owned by the
ASSOCIATION, INC. V. NLRC, PNEI, which is engaged in transportation former employees of PNEI may be judgment debtor PNEI. Nowhere in the records
ET AL., - G.R. No. 170689, business with its terminal situated on the enforced against PNB, PNB-Madecor, was it shown that PNEI owned the Pantranco
March 17, 2009 Pantranco Properties registered under the name and Mega Prime. properties. PNB, PNB-Madecor, and Mega Prime
of Macris. Incurring huge financial losses, are corporations with personalities separate and
ownership over these corporations were distinct from that of PNEI and absent any valid
transferred to their creditors. Macris, reason, their separate identities must be
subsequently became PNB-Madecor, a maintained and they cannot be treated as one.
subsidiary of PNB. PNEI ceased its operations
resulting to labor claims filed by its former
employees. The Labor Arbiter issued Writ of
Execution commanding the 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.
Piercing the Veil of Corporate Fiction

A.C. RANSOM LABOR UNION- CIR held respondent RANSOM guilty of unfair Whether or not piercing of the veil of YES. The finding of this Court holding the officers
CCLU V. NLRC labor practice of interference and discrimination corporate fiction of the RANSOM and agents of RANSOM jointly and severally
G.R. No. L-69464, May 29, and ordered said corporation the payment of corporation is proper in the case at bar? liable for the payment of backwages does not
1987 backwages. Successive motions for execution ignore the legal fiction that a corporation has a
were filed by the prevailing Petitioner-UNION personality separate and distinct from its
but RANSOM opposed contending that it was stockholders and members, for, as this Court had
suffering from financial difficulties and has no held “where the incorporators and directors
necessary funds for the payment of the belong to a single family, the corporation and its
backwages. Subsequently, respondent RANSOM members can be considered as one in order to
filed before the Sec. of labor to cease operation avoid its being used as an instrument to commit
and terminate employment, which was then injustice,". When the notion of legal entity is
granted by the latter. Another motion for used as a means to perpetrate fraud or an illegal
executions were filed by the UNION alleging that act or as a vehicle for the evasion of an existing
although RANSOM had assumed a posture of obligation, the circumvention of statutes, and or
suffering from business reverse, its officers and confuse legitimate issues the veil which protects
principal stockholders had organized a new the corporation will be lifted
corporation namely the Rosario Industrial
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
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Execution and Garnishment praying that it be
issued against the Officers/Agents of Ransom
personally and or their estates. The 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.
Villanueva v. Adre, G.R. No. The employees of South Cotabato Integrated W/N Velayo may be held personally Yes, he may be held liable had there been no off-
80863, April 27, 1989 Port Services, Inc. (SCIPSI), Inc filed a case liable using the Doctrine of Piercing the court settlement rendering the petition moot
against SCIPSI and it's president, Velayo for the Veil of Corporate Fiction despite his and academic. In the case of A.C. Ransom Labor
unpaid 13th month pays. The employees contention that he is just the president Union-CCLU v. NLRC it was held that it is the
garnered a favorable judgement. As a result, two and that he was never a party to the president of the corporation who responds
lands owned by Velayo were levied upon by the case personally for violation of the labor pay laws. Art.
sheriff. Velayo assailed the decision contending 273 of the Labor Code provides that: "Any person
that he was never a party to the labor case and violating any of the provisions of Art. 265 of this
that a corporation has a separate and distinct Code shall be punished by ... imprisonment". To
personality from its incorporators, stockholders apply this provision Art. 212. It states that
and officers. He also contends that he was never “Employer” includes any person acting in the
mentioned in the pleadings before the interest of an employer, directly or indirectly. In
petitioner-labor arbiter and therefore is a this case, just like RANSOM, SCIPSI is an artificial
stranger to the case. Soon After, the parties being that acts through its officers. RA 602 states
agreed to an off court settlement. that criminal responsibility is 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.
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Phil. Veterans (PHIVIDEC) V. Violeta M. Borres was injured in an accident due Whether or not the PHIVIDEC and PRI
No PHIVIDEC and PRI are not distinct and
CA G.R No. 85266 January 30, to the negligence of Phividec Railways, Inc. (PRI). are entirely distinct and separate separate corporation. The court stated the rule
1990 Days prior to the accident Philippine Veterans corporations even though the latter is
that where it appears that two business
Invest Development Corporation (PHIVIDEC) its subsidiary enterprise are owned, conducted and controlled
sold all its rights and interests in the PRI to the by the same parties, both law and equity will,
Philippine Sugar Commission (PHILSUCOM). when necessary to protect the rights of the third
Philsucom then created a wholly-owned persons, disregard the legal fiction that two
subsidiary, Panay Railways to operate the corporations are distinct entities, and treat them
railway assets acquired from PHIVIDEC. Borres as identical.
filed a complaint for damages against PRI and PHIVIDEC’s act of selling PRI to PHILSUCOM
Panay Railways while the latter filed a third party shows that it had complete control of PRI’s
complaint against PHIVIDEC. business. It also clearly 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.
Indophil Textile Mill Workers Petitioner Indophil Textile Mill Workers Union- Whether or not the operations in No. Under the doctrine of piercing the veil of
Union-PTGWO, Petitioner, PTGWO is the exclusive bargaining agent of all Indophil Acrylic Corporation are an corporate entity, when valid grounds therefore
v. the rank-and-file employees of Indophil Textile extension or expansion of private exist, the legal fiction that a corporation is an
Voluntary Arbitrator Mills, Incorporated. Teodorico P. Calica is respondent. entity with a juridical personality separate and
Teodorico P. Calica And impleaded in his official capacity as the distinct from its members or stockholders may
Indophil Textile Mills, Inc., Voluntary Arbitrator, while private respondent be disregarded. In such cases, the corporation
Respondents. - G.R. No. 96490 Indophil Textile Mills, Inc. is a corporation will be considered as a mere association of
February 3, 1992 engaged in the manufacture, sale and export of persons. The members or stockholders of the
yarns of various counts and kinds and of corporation will be considered as the
materials of kindred character. Indophil Acrylic corporation that is liability will attach directly to
Manufacturing Corporation was formed and the officers and stockholders. The doctrine
registered with the Securities and Exchange applies when the corporate fiction is used to
Commission. In 1988, Acrylic became defeat public convenience, justify wrong, protect
operational and hired workers according to its fraud, or defend crime, or when it is made as a
own criteria and standards. Sometime in July, shield to confuse the legitimate issues, or where
1989, the workers of Acrylic unionized and a a corporation is the mere alter ego or business
duly certified collective bargaining agreement conduit of a person, or where the corporation is
was executed. In 1990, the petitioner union so organized and controlled and its affairs are so
claimed that the plant facilities built and set up conducted as to make it merely an
by Acrylic should be considered as an extension instrumentality, agency, conduit or adjunct of
or expansion of the facilities of private another corporation. In the case at bar,
respondent Company pursuant to Section 1(c), petitioner seeks to pierce the veil of corporate
Article I of the CBA. It is the petitioner's entity of Acrylic, alleging that the creation of the
contention that Acrylic is part of the Indophil corporation is a devise to evade the application
bargaining unit. The petitioner's contention was of the CBA between petitioner Union and private
opposed by private respondent which submits respondent Company. While we do not discount
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that Acrylic is not an alter ego or an adjunct or the possibility of the similarities of the businesses
business conduit of private respondent because of private respondent and Acrylic, neither are we
it has a separate legitimate business purpose. 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 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.
Concept Builders, Inc. V. NLRC Private respondents are laborers, carpenters WON the NLRC committed grave abuse No, While it is a recognized principle that a
G.R. No. 108734, May 29, and riggers of Concept Builders, Inc. (Petitioner). of discretion in issuing the break-open corporation is an entity separate and distinct
1996 In 1981, petitioner terminated the private order from its stockholders and from other
respondents from employment due to the corporations to which it may be connected, this
expiration of their contracts of employment and separate personality may be disregarded when it
the completion of the project in which they were is used to defeat public convenience, justify
hired. It was however found that at the time of wrong, protect fraud or defend crime, or is used
the termination that the project had not yet as a device to defeat the labor laws, or as an
been completed. adjunct, a business conduit or an alter ego of
another corporation.
Private respondents then filed a complaint for
illegal dismissal against petitioner. The Labor In this case, both the petitioner and HPPI
Arbiter (LA) ruled in favor of the private submitted on the same day their respective
respondents which decision became final and Information Sheets with SEC bearing the same
executory. A writ of execution was then issued, address and filed by the same person who
but service of the writ failed since the petitioner represents himself as the corporate secretary of
no longer occupies its premises. Also, the both corporations. Also, both corporations had
employees in the premises claimed Hydro Pipes the same president, the same board of directors,
Philippines, Inc. (HPPI) as their employer and not the same corporate officers, and substantially
petitioner. Subsequently, a certain Dennis the same subscribers. Clearly, petitioner ceased
Cuyegkeng filed a third-party claim with the LA its business operations in order to evade
alleging that the properties sought to be levied payment to private respondents of backwages
in the premises are owned by HPPI of which he and to bar their reinstatement to their former
is the Vice- President. positions. HPPI is obviously a business conduit of
petitioner and its emergence was skillfully
Private respondents then filed a "Motion for orchestrated to avoid the financial liability that
Issuance of a Break-Open Order," alleging that already attached to petitioner corporation. From
HPPI and petitioner are one and the same. HPPI the foregoing, the application of the doctrine of
opposed contending that HPPI is separate and
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distinct from petitioner. HPPI also argued that it piercing the veil of corporate fiction is warranted.
is engaged in manufacturing business while SC then upheld the break-open order.
petitioner was then engaged in construction. LA
denied the motion. On appeal, the NLRC
reversed.

CHINA BANKING Dynetics, Inc. and Lim borrowed a total of Whether or not respondent Dyne-Sem NO. The Court ruled that to disregard the
CORPORATION V. DYNE-SEM P8,939,000 from petitioner. However, they is an alter ego of Dynetics, Inc. separate juridical personality of a corporation,
ELECTRONICS CORPORATION failed to pay when the obligations became due. the wrongdoing must be proven clearly and
G.R. No. 149237, June 11, Petitioner instituted a complaint for sum of convincingly. In this case, petitioner failed to
2006 money. Summons was not served on Dynetics prove that Dyne-Sem was organized and
because it had already closed down. In an controlled, and it’s affairs conducted, in a
amended complaint, petitioner impleaded manner that made it merely an instrumentality,
respondent Dyne-Sem. According to petitioner, agency, conduit or adjunct of Dynetics, or that it
respondent organized to be Dynetics’ alter ego. was established to defraud Dynetics’ creditors,
Respondent denied the allegations and claimed including petitioner.
that they are totally different from Dynetics, Inc.
Court a quo ruled that Dyne-Sem is not an alter The similarity of business of the two corporations
ego of Dynetics. CA dismissed the subsequent did not warrant a conclusion that respondent
appeal filed by petitioner and affirmed the trial was but a conduit of Dynetics. Respondent’s
court’s decision. acquisition of some of the machineries and
equipment of Dynetics was not proof that
respondent was formed to defraud petitioner.
No merger took place between Dynetics and
respondent Dyne-Sem. What took place was a
sale of the assets of the former to the latter. 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.
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PRINCE TRANSPORT, Inc. v. Respondents alleged that they were employees Whether or not the CA err in applying No. The Court agrees with the CA that Lubas is a
GARCIA of Prince Transport, Inc. (PTI), a company the doctrine of piercing the corporate mere agent, conduit or adjunct of PTI. A settled
engaged in the business of transporting veil with respect to Lubas. formulation of the doctrine of piercing the
passengers by land, they were hired either as corporate veil is that when two business
drivers, conductors, mechanics or inspectors, enterprises are owned, conducted and
except for respondent Diosdado Garcia (Garcia), controlled by the same parties, both law and
who was assigned as Operations Manager; in equity will, when necessary to protect the rights
addition to their regular monthly income, of third parties, disregard the legal fiction that
respondents also received commissions these two entities are distinct and treat them as
equivalent to 8 to 10% of their wages; sometime identical or as one and the same. In the present
in October 1997, the said commissions were case, it may be true that Lubas is a single
reduced to 7 to 9%; this led respondents and proprietorship and not a corporation. However,
other employees of PTI to hold a series of petitioners’ attempt to isolate themselves from
meetings to discuss the protection of their and hide behind the supposed separate and
interests as employee. In order to block the distinct personality of Lubas so as to evade their
continued formation of the union, PTI caused liabilities is precisely what the classical doctrine
the transfer of all union members and of piercing the veil of corporate entity seeks to
sympathizers to one of its sub-companies, Lubas prevent and remedy.
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 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.
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 of
Hydro Resources Contractors assets of MMIC and resumed the business ground to pierce the veil of corporate corporate fiction. The doctrine of piercing the
Corporation– G.R. No. operations by organizing Nonoc Mining and fiction. corporate veil applies in alter ego cases. Case law
167530, March 13, 2013 Industrial Corporation (NMIC). DBP and PNB lays down a three-pronged test to determine the
owned 57% and 43% of the shares of NMIC and application of the alter ego theory, which is also
the members of the Board of Directors of NMIC known as the instrumentality theory, namely:
were either from DBP or PNB. NMIC engaged the (1) Control or complete domination not only of
services of Hercon, Inc., (later on acquired by finances but of policy and business practice in
Hydro Resources Contractors Corporation in a respect to the transaction attacked so that the
merger) for Mine Stripping and Road corporate entity as to this transaction had at the
Construction Program. Hercon, Inc., found that time no separate mind, will or existence of its
NMIC still has unpaid balance and made several own;
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demands but it was unheeded. A complaint for (2) Such control must have been used by the
sum of money was filed where RTC and CA defendant to commit fraud or wrong, to
pierced the corporate veil of NMIC and held DBP perpetuate the violation of a statutory or other
and PNB solidarily liable with NMIC. positive legal duty, or dishonest and 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.
LIVESEY V. BINSWANGER Petitioner filed a complaint for illegal dismissal (1) Whether or not the case is an intra- (1) The issue is rendered moot and academic
PHILIPPINES, INC. AND ELIOT, with money claims against CBB. CBB alleged that corporate dispute therefore beyond because of the compromise agreement between
G.R. No. 177493, March 19, it engaged Livesey as a corporate officer. CBB the jurisdiction of the NLRC; the parties.
2014 posited that the labor arbiter (LA) had no
jurisdiction as the complaint involved an intra- (2) Whether or not the doctrine of (2) YES, it is applicable. Piercing the veil of
corporate dispute. The LA found that there was piercing the veil of corporate fiction is corporate fiction is an equitable doctrine
illegal dismissal and to reinstate Livesey. They applicable in the case. developed to address situations where the
entered into a compromise agreement. Under separate corporate personality of a corporation
the agreement, Livesey was to receive his is abused or used for wrongful purposes. Under
money claim in an installment basis and that CBB the doctrine, the corporate existence may be
shall not: (1) SLEMPAD of all or substantially all disregarded where the entity is formed or used
of its propertiess; (2) suspend, discontinue, or for non-legitimate purposes, such as to evade a
cease its entire, or a substantial portion of its just and due obligation, or to justify a wrong, to
business operations; (3) substantially change the shield or perpetrate fraud or to carry out similar
nature of its business; and (4) declare or inequitable considerations, other unjustifiable
bankruptcy or insolvency. aims or intentions, in which case, the fiction will
be disregarded and the individuals composing it
CBB initially paid but company ceased and the two corporations will be treated as
operations. Livesey moved for the issuance of a identical.
writ of execution. Invoking the doctrine of
piercing the veil of corporate fiction, Livesey In the present case, CBB ceased to exist only in
prayed that an alias writ of execution be issued name; it re-emerged in the person of Binswanger
against Binswanger and Keith Elliot, CBB’s to avoid payment by CBB of its monetary
former President, and now Binswanger’s obligation to Livesey. It was not just coincidence
President and CEO. that Binswanger is engaged in the same line of
business CBB embarked on: (1) it even holds
office in the very same building and on the very
same floor where CBB once stood; (2) 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
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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)
Binswanger’s takeover of CBB’s project with the
PNB.
Pacific Rehouse Corporation A complaint was instituted with the Makati City WON E-Securities is a mere alter ego NO. An alter ego exists where one corporation is
vs Court of Appeals and Regional Trial Court (RTC) against EIB Securities Export Bank so organized and controlled and its affairs are
Export and Industry Bank, Inc. Inc. (E–Securities) for unauthorized sale of conducted so that it is, in fact, a mere
– G.R. No. 199687, March 24, 32,180,000 DMCI shares of Pacific Rehouse instrumentality or adjunct of the other. The
2014 Corporation, Pacific Concorde Corporation, control necessary to invoke the alter ego
Mizpah Holdings, Inc., Forum Holdings doctrine is not majority or even complete stock
Corporation, and East Asia Oil Company, Inc. RTC control but such domination of finances, policies
rendered judgment on the pleadings, directing and practices that the controlled corporation
the E–Securities to return to the petitioners has, so to speak, no separate mind, will or
32,180,000 DMCI shares, as of judicial demand. existence of its own, and is but a conduit for its
On the other hand, petitioners are directed to principal. In this case, the alleged control
reimburse the defendant the amount of exercised by Export Bank upon its subsidiary E–
[P]10,942,200.00, representing the buyback Securities, by itself, does not mean that the
price of the 60,790,000 KPP shares of stocks at controlled corporation is a mere instrumentality
[P]0.18 per share. The Resolution was ultimately or a business conduit of the mother company.
affirmed by the Supreme Court and attained Even control over the financial and operational
finality. However, the Writ of Execution was concerns of a subsidiary company does not by
returned unsatisfied. Pacific Rehouse moved for itself call for disregarding its corporate fiction.
the issuance of an alias writ of execution to hold There must be a perpetuation of fraud behind
Export and Industry Bank, Inc. (Export Bank) the control or at least a fraudulent or illegal
liable for the judgment obligation as E– purpose behind the control in order to justify
Securities is “a wholly–owned controlled and piercing the veil of corporate fiction. Such
dominated subsidiary of Export and Industry fraudulent intent is lacking in this case.
Bank, Inc., and is a mere alter ego and business Furthermore, ownership by Export Bank of a
conduit of the latter. E–Securities opposed the great majority or all of stocks of E-Securities and
motion, arguing that it has a corporate the existence of interlocking directorates may
personality that is separate and distinct from the serve as badges of control, but ownership of
respondent. another corporation, per se, without proof of
The RTC concluded that E–Securities is a mere actuality of the other conditions are insufficient
business conduit or alter ego of Export Bank, the to establish an alter ego relationship or
dominant parent corporation, which justifies connection between the two corporations,
13
piercing of the veil of corporate fiction, and which will justify the setting aside of the veil of
issued an alias writ of summons directing corporate fiction.
defendant EIB Securities, Inc., and/or Export and
Industry Bank, Inc., to fully comply therewith. It N.B. Control Test
ratiocinated that being one and the same entity 1. Control, not mere majority or complete stock
in the eyes of the law, the service of summons control, but complete domination, not only of
upon E–Securities has bestowed jurisdiction finances but of policy and business practice in
over both the parent and wholly–owned respect to the transaction attacked so that the
subsidiary.Export Bank filed before the Court of corporate entity as to this transaction had at the
Appeals (CA) a petition for certiorari with prayer time no separate mind, will or existence of its
for the issuance of a temporary restraining order own;
(TRO) seeking the nullification of the RTC Order 2. Such control must have been used by the
for having been made with grave abuse of defendant to commit fraud or wrong, to
discretion amounting to lack or excess perpetuate the violation of a statutory or other
jurisdiction. The CA reversed the RTC Order and positive legal duty, or dishonest and unjust act in
explained that the alter ego theory cannot be contravention of plaintiff’s legal right; and
sustained because ownership of a subsidiary by 3. The aforesaid control and breach of duty must
the parent company is not enough justification [have] proximately caused the injury or unjust
to pierce the veil of corporate fiction. There loss complained of.
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.
GERARDO LANUZA, JR. AND BF Corporation (BF) entered into several Whether or not petitioners as resigned Yes. A corporation is an individual with a
ANTONIO OBLES v. BF agreements with Shangri-la Properties, Inc. (SPI) directors of Shangri-la Properties personality that is distinct and separate from
CORPORATION, SHANGRI-LA for the construction of a mall and multilevel should be made parties to the other persons including its stockholders, officers,
PROPERTIES, INC., ALFREDO C. parking structure. Despite SPI's default in arbitration proceedings to determine directors, representatives, and other juridical
RAMOS, RUFO B. COLAYCO, payment, it induced BF to continue with the the distinction between the latter's entities. Because a corporation’s existence is
MAXIMO G. LICAUCO III, AND construction of the buildings using its own fund personality and its board of directors. only by fiction of law, it can only exercise its
BENJAMIN C. RAMOS (G.R. and credit. Accordingly, SPI misrepresented that rights and powers through its directors, officers,
No. 174938, October 1, 2014) it had funds to pay for its obligation, and that the or agents, who are all natural persons.
delay in payment was simply a matter of delayed
processing of the billing statements. BF A submission to arbitration is a contract. As such,
14
eventually completed the construction, and SPI the Agreement, containing the stipulation on
took possession of the buildings while still owing arbitration, binds the parties thereto, as well as
an outstanding balance to the former. their assigns and heirs. As a general rule, a
Notwithstanding BF's repeated demands, SPI corporation’s representative who did not
refused to pay the balance owed to it. personally bind himself or herself to an
arbitration agreement cannot be forced to
BF instituted an arbitration proceeding where participate in arbitration proceedings made
both parties failed to agree as to the law that pursuant to an agreement entered into by the
should govern the said proceedings. The trial corporation. However, there are instances when
court ordered the parties to conduct the the distinction between personalities of
proceedings in accordance with The Arbitration directors, officers, representatives and of the
Law (R.A. 876). SPI filed and omnibus motion, corporation are disregarded.
while BF filed an urgent motion for clarification,
both parties seeking to clarify the term "parties" When corporate veil is pierced, the corporation
and whether SPI's directors should be included and persons who are normally treated as distinct
in the arbitration proceedings. from the corporation are treated as one person,
such that when the corporation is adjudged
The trial court issued the order directing service liable, these persons, too become liable as if they
of demands upon all defendants in BF's were the corporation. When there are
complaint. Accordingly, SPI's directors were allegations of bad faith or malice against
interested parties who must also be included in corporate directors or representatives, it
arbitration proceedings to give them the becomes the duty of courts or tribunals to
opportunity to ventilate their side of the determine if these persons and the corporation
controversy, safeguard their interest and fend should be treated as one. Without a trial, courts
off their respective positions. Petitioners' and tribunals have no basis determining whether
motion for reconsideration was denied. Thus, the veil of corporate fiction should be pierced.
they filed a petition for certiorari with the Court
of Appeals. However, their petition and When the courts disregard the corporation’s
subsequent motion for reconsideration was distinct and separate personality from its
both dismissed. 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
15
petitioner’s and the other director’s solidarily
liable.

Hacienda Cataywa/ Rosario Lorezo was informed by the Social Whether or not the SSC committed Yes. SSC committed reversible error in finding
Villanueva, et al. v. Lorezo, Security System (SSS) Western Visayas Group reversible error in finding that Mancy & that Mancy & Sons Enterprises, Inc. and Manuel
G.R. No. 179640, March 18, that she cannot avail the retirement benefits Sons Enterprises, Inc. and Manuel Villanueva are one and the same.
2015 since she has only paid for 16 months, which is Villanueva are one and the same
104 months short of the minimum requirement This Court agrees with the petitioners that there
of 120 months to be entitled to the benefit. Her is no need to pierce the corporate veil.
employment under Hacienda Cataywa could not Respondent failed to substantiate her claim that
be confirmed as well because Manuel Villanueva Mancy and Sons Enterprises, Inc. and Manuel
was permanently residing in Manila and and Jose Marie Villanueva are one and the same.
Joemarie Villanueva denied having managed the She based her claim on the SSS form wherein
farm. She was also advised of her options: Manuel Villanueva appeared as employer.
continue paying contributions as voluntary However, this does not prove, in any way, that
member; request for refund; leave her the corporation is used to defeat public
contributions in-trust with the System or file a convenience, justify wrong, protect fraud, or
petition before the Social Security Commission defend crime, or when it is made as a shield to
(SSC) so that liabilities, if any, of her employer confuse the legitimate issues, warranting that its
may be determined. separate and distinct personality be set aside.
Also, it was not alleged nor proven that Mancy
Rosario Lorezo was informed by the Social and Sons Enterprises, Inc. functions only for the
Security System (SSS) Western Visayas Group benefit of Manuel Villanueva, thus, one cannot
that she cannot avail the retirement benefits be an alter ego of the other.
since she has only paid for 16 months, which is
104 months short of the minimum requirement While a corporation may exist for any lawful
of 120 months to be entitled to the benefit. Her purpose, the law will regard it as an association
employment under Hacienda Cataywa could not of persons or, in case of two corporations, merge
be confirmed as well because Manuel Villanueva them into one, when its corporate legal entity is
was permanently residing in Manila and used as a cloak for fraud or illegality. This is the
Joemarie Villanueva denied having managed the doctrine of piercing the veil of corporate fiction.
farm. She was also advised of her options: The doctrine applies only when such corporate
continue paying contributions as voluntary fiction is used to defeat public convenience,
member; request for refund; leave her justify wrong, protect fraud, or defend crime, or
contributions in-trust with the System or file a when it is made as a shield to confuse the
petition before the Social Security Commission legitimate issues, or where a corporation is the
16
(SSC) so that liabilities, if any, of her employer mere alter ego or business conduit of a person,
may be determined. 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 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.
Rights and Liabilities of a Corporation

Ching v. CA, et al., G.R. No. Ching signed 13 trust receipts (granted by RCBC), 1) Whether or not mere corporate 1) Yes. Section 13 of PD 115 states that, “If the
164317, February 6, 2006 as a surety for PBMI, covering the goods for officers should be held liable for the violation or offense is committed by a
importation by the latter. Ching was given the violation of PD No. 115 by the corporation, partnership, association or other
authority to sell but not by way of conditional corporation despite the principle of judicial entities, the penalty provided for in this
sale, pledge or otherwise; and in case such separate corporate personality Decree shall be imposed upon the directors,
goods were sold, to turn over the proceeds 2) If they may be made liable, whether officers, employees or other officials or persons
thereof as soon as received, to apply against the or not Ching is the proper corporate therein responsible for the offense, without
relative acceptances and payment of other officer to stand as a defendant prejudice to the civil liabilities arising from the
indebtedness to RCBC. When the trust receipts criminal offense.”
matured, Ching failed to return the goods to A corporation cannot be proceeded against
RCBC, or to return their value. RCBC filed a criminally because it cannot commit crime in
criminal complaint for estafa against Ching. which personal violence or malicious intent is
He could be proceeded against in two ways: as required, criminal action is limited to the
surety as determined by the Supreme Court or corporate agents guilty of an act amounting to a
as the corporate official responsible for the crime and never against the corporation itself.
offense under P.D. No. 115.
2) Yes, Ching is the proper corporate officer to
stand as defendant for the crime. Ching, having
17
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 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.
Recovery of Moral Damages
MANILA ELECTRIC COMPANY Petitioner and TEC were parties to two separate Whether or not respondent TEC and No. The court deems it proper to delete the
V. T.E.A.M ELECTRONICS contracts for the Sale of Electric Energy. Under TPC are entitled to moral damages. award of moral damages. As a rule, a corporation
CORPORATION, ET AL., G.R. the agreements, petitioner undertook to supply is not entitled to moral damages because, not
No. 131723, December 13, TECs building DCIM with electric power. Another being a natural person, it cannot experience
2007 contract was entered into for the supply of physical suffering or sentiments like wounded
electric power to TEC’s NS Building. A team of feelings, serious anxiety, mental anguish and
petitioner’s inspectors conducted a surprise moral shock. The only exception to this rule is
inspection of the electric meters installed at the when the corporation has a reputation that is
DCIM building. The two meters were found to be debased, resulting in its humiliation in the
allegedly tampered with and did not register the business realm. But in such a case, it is imperative
actual power consumption in the building. for the claimant to present proof to justify the
Petitioner informed TEC and demanded from award. It is essential to prove the existence of the
the latter the differential billing. TEC referred factual basis of the damage and its causal
the letter to Ultra being in possession during the relation to petitioner’s acts. In the present case,
covered period. Due to failure of TEC to pay the the records are bereft of any evidence that the
differential billing, petitioner disconnected the name or reputation of TEC/TPC has been
electricity supply to the DCIM building but debased as a result of petitioner’s acts. Besides,
eventually reconnected it when ordered by ERB the trial court simply awarded moral damages in
and upon payment of TEC of 1M, under protest.
18
Meanwhile, petitioner conducted another the dispositive portion of its decision without
inspection, this time, in TECs NS Building. The stating the basis thereof. PETITION DENIED.
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.
CRYSTAL V. BPI G.R. No. Sps. Raymundo and Desamparados Crystal (Sps. Whether or not CA correctly awarded No. A juridical person is generally not entitled to
172428, November 28, 2008 Crystal) bound themselves as sureties for the moral damages to BPI moral damages because, unlike a natural person,
loans obtained by Cebu Contractors Consortium it cannot experience physical suffering or such
Co. (CCCC) from the Bank of the Philippine sentiments as wounded feelings, serious anxiety,
Islands-Butuan branch (BPI-Butuan) and BPI - mental anguish or moral shock. In the case of
Cebu City branch (BPI-Cebu). People v. Manero and Mamulao Lumber v. PNB,
the SC ruled that it is only when a juridical person
CCCC failed to pay its loans to both BPI-Butuan has a good reputation that is debased, resulting
and BPI-Cebu when they became due. Thus, BPI in social humiliation, that moral damages may be
resorted to the foreclosure of the chattel awarded. It is for this reason that CA awarded
mortgage and the real estate mortgage. To moral damages to BPI after recognizing the
recover the deficiency, BPI filed a complaint for latter’s famliarity not only in the Philippines but
sum of money against the Sps.Crystal. RTC ruled also in the whole world.
in favor of BPI and ordered the foreclosure of
Sps. Crystal’s properties. However, in the more recent cases of ABS-CBN
Corp. v. Court of Appeals, et al. and Filipinas
Sps. Crystal then filed an action for Injunction Broadcasting Network, Inc. v. Ago Medical and
with Damages arguing that they are mere Educational Center-Bicol Christian College of
guarantors of CCCC and that BPI failed to first Medicine (AMEC-BCCM), the Court held that the
exhaust all the properties of CCCC. RTC ruled in statements in Manero and Mambulao were mere
favor of BPI and ordered Sps. Crystal to pay obiter dicta, implying that the award of moral
moral and exemplary damages. CA affirmed. damages to corporations is not a hard and fast
19
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 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.
Corporation created by special law/charter
BENGUET ELECTRIC
COOPERATIVE v. NLRC, G.R.
No. 89070, May 18, 1992

INTERNATIONAL EXPRESS
TRAVEL &TOUR SERVICES,
INC. V. CA
G.R. No. 119020, October 19,
2000


20
Non-Chartered GOCCs

BALUYOT V. HOLGANZA and During a spot audit conducted on March 21, Whether or not the Ombudsman has Yes. The Philippine National Red Cross is a
Office of the Ombudsman – 1977 by the Philippine National Red Cross jurisdiction over the subject matter of government owned and controlled corporation,
G.R. No. 136374, February 9, (PNRC) headquarters, a cash shortage of the controversy. with an original charter under Republic Act No.
2000 P154,350.13 was discovered in the funds of its 95, as amended. The test to determine whether
Bohol chapter. The chapter administrator, a corporation is government owned or
petitioner Francisca S. Baluyot, was held controlled, or private in nature is simple. Is it
accountable for the shortage. created by its own charter for the exercise of a
public function, or by incorporation under the
On January 8, 1998, Paul E. Holganza, a member general corporation law? Those with special
of the board of directors of the Bohol chapter, charters are government corporations subject to
filed an affidavit-complaint before the Office of its provisions, and its employees are under the
the Ombudsman charging petitioner of jurisdiction of the Civil Service Commission, and
malversation under Article 217 of the Revised are compulsory members of the Government
Penal Code and an administrative docket for Service Insurance System. The PNRC was not
dishonesty was also opened against petitioner. "impliedly converted to a private corporation"
Petitioner filed her counter-affidavit, raising the simply because its charter was amended to vest
defense that the ombudsman had no jurisdiction in it the authority to secure loans, be exempted
over the controversy. She argued that the from payment of all duties, taxes, fees and other
Ombudsman had authority only over charges of all kinds on all importations and
government-owned or controlled corporations, purchases for its exclusive use, on donations for
which the PNRC was not. its disaster relief work and other services and in
its benefits and fund raising drives, and be
The Ombudsman issued the first assailed Order allotted one lottery draw a year by the Philippine
denying petitioner's motion to dismiss. Charity Sweepstakes Office for the support of its
Petitioner filed a Motion for Reconsideration. disaster relief operation in addition to its existing
Public respondent likewise denied the Motion lottery draws for blood program. Clearly then,
for Reconsideration. Petitioner contends that public respondent has jurisdiction over the
the Ombudsman has no jurisdiction over the matter, pursuant to Section 13, of Republic Act
subject matter of the controversy since the No. 6770, otherwise known as "The Ombudsman
PNRC is allegedly a private voluntary Act of 1989", to wit:
organization that the PNRC falls under the Sec. 13. Mandate. — The Ombudsman and his
International Federation of Red Cross, a Deputies, as protectors of the people, shall act
Switzerland-based organization, and that the promptly on complaints filed in any form or
power to discipline employees accused of manner against officers or employees of the
misconduct, malfeasance, or immorality belongs Government, or of any subdivision, agency or
to the PNRC Secretary General. instrumentality thereof, including government-
owned or controlled corporations, and enforce
their administrative, civil and criminal liability in
every case where the evidence warrants in order
to promote efficient service by the Government
to the people.
21
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 amended
PHILIPPINES (BSP) V. Commission’s policy with respect to the audit of corporation (GOCC, instrumentality, charter, continues to be a public corporation or a
COMMISSION ON AUDIT the Boy Scouts of the Philippines," which stated agency or subdivision of the government instrumentality, hence, it is subject
(COA) COA claimed that the character of the BSP’s Government) falling under the COA’s to the exercise by the COA of its audit
G.R. No. 177131, June 7, 2011 purposes and functions which has a public audit jurisdiction jurisdiction.
aspect and the statutory designation of the BSP
as a "public corporation". That the SC, in a The purpose of the BSP as stated in its amended
decided case involving BSP, has elucidated that charter shows that it was created in order to
BSP is regarded as, both a "government- implement a State policy declared in the
controlled corporation with an original charter" Constitution, which states the recognition by the
and as an "instrumentality" of the Government. State of the vital role of the youth in nation-
Therefore, subject to its audit jurisdiction. BSP building. Hence, BSP, which was created by a
sought reconsideration of the COA resolution special law to serve a public purpose in pursuit of
claiming that it is not subject to the a constitutional mandate, comes within the class
Commission’s jurisdiction. of "public 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 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.
Carandang vs. Hon. Desierto In 1986, PCGG ordered the sequestration of Whether or not RPN was a government- No. A GOCC refer to any agency organized as a
(G.R. No. 153161, January 12, RPN’s properties, assets, and business. PCGG owned or -controlled corporation. stock or non-stock corporation vested with
2011) entered into a compromise agreement with functions relating to public needs whether
Benedicto, whereby he ceded to the governmental or proprietary in nature, and
Government all his shares of stock (72% shares) owned by the government directly or indirectly
in RPN. But Benedcto contended that the shared through its instrumentalities either wholly, or
was only 32%. Carandang assumed office as where applicable as in the case of stock
general manager and subsequently he was corporations to the extent of at least 51% of its
charged with grave misconduct and violation of capital stock. The definition mentions three (3)
RA 3019 before the Ombudsman and the requisites, namely, first, any agency organized as
Sandiganbayan respectively. Carandang moved a stock or non-stock corporation; second, vested
22
for the quashal of the informations alleging that with functions relating to public needs whether
the Ombudsman and Sandiganbayan do not governmental or proprietary in nature; and,
have jurisdiction 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.
Nationality of Corporations
23
PILIPINAS SHELL PETROLEUM Respondent is a corporation duly organized and Whether or not Petition for Insolvency Yes. The Petition for Insolvency was properly
CORPORATION V. ROYAL existing under the Philippine Law. According to was properly filed. filed before the RTC of Manila.
FERRY SERVICES, INC., G.R. its Articles of Incorporation, Royal Ferry’s Section 14 of the Insolvency Law specifies that
No. 188146, February 1, 2017 principal place of business is located at Makati the proper venue for a petition for voluntary
City. However, it currently holds office at insolvency is the RTC of the province or city
Intramuros, Manila. In 2005, Royal Ferry filed a where the insolvent debtor has resided in for six
verified Petition for Voluntary Insolvency before (6) months before the filing of the petition. To
the RTC of Manila. It alleged that in 2000, it determine the venue of an insolvency
suffered serious business losses that led to proceeding, the residence of a corporation
heavy debts. Royal Ferry ceased its operations in should be the actual place where its principal
2002. The RTC declared Royal Ferry insolvent in office has been located for six (6) months before
its order. On December 2005, petitioner filed the filing of the petition. If there is a conflict
before the RTC of Manila a Formal Notice of between the place stated in the articles of
Claim and a Motion to Dismiss. In its Motion to incorporation and the physical location of the
Dismiss, Petitioner alleged that the Petition was corporation's main office, the actual place of
filed in the wrong venue. It argued that the business should control. Requiring a corporation
Insolvency Law provides that a petition for to go back to a place it has abandoned just to file
insolvency should be filed before the court with a case is the very definition of inconvenience.
territorial jurisdiction over the corporation's There is no reason why an insolvent corporation
residence. Since Royal Ferry's Articles of should be forced to exert whatever meager
Incorporation stated that the corporation's resources it has to litigate in a city it has already
principal office is located Makati City, the left. In any case, the creditors deal with the
Petition should have been filed before the RTC corporation's agents, officers, and employees in
of Makati and not before the RTC of Manila. the actual place of business. 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.

Incorporation and Organization of Private Corporations


24
Mariano A. Albert vs Mariano A. Albert (Albert) and University 1. WON Aruego is a party to the case 1. Yes. Aruego is a party to the case. "University
University Publishing Co., Inc., Publishing Co., Inc. (University Publishing), 2. WON University Publishing is a Publishing Co., Inc." purported to come to court,
G.R. No. L-19118, January 30, through Jose M. Aruego (Aruego), its President, corporation by estoppel answering the complaint and litigating upon the
1965 entered into a contract to pay Albert P30,000.00 merits. But as stated, "University Publishing Co.,
for the exclusive right to publish his revised Inc." has no independent personality; it is just a
Commentaries on the Revised Penal Code and name. Jose M. Aruego was, in reality, the one
for his share in previous sales of the book's first who answered and litigated, through his own law
edition. Failure to pay one installment would firm as counsel. He was in fact, if not, in name,
render the rest due. University Publishing had the defendant. He had control over the
undertaken to pay in eight quarterly proceedings. Had Aruego been named as party
installments, however, failed to pay the second defendant instead of or together with the
installment. Albert sued University Publishing corporation, there would be no room for debate
for the breach of contract. University Publishing as to his personal liability. Since he was not so
admitted its corporate existence and execution named, matters of due process have arisen.
and terms of the contract but alleged that it was Parties to a suit are persons who have a right to
Albert who breached their contract by failing to control the proceedings, to make defense, to
deliver his manuscript. Albert died before trial adduce and cross-examine witnesses and to
and Justo R. Albert (Justo), his estate's appeal from a decision. Acting as representative
administrator, was substituted for him. CFI of a non-existent principal, Jose M. Aruego was
Manila rendered judgment in favor of Albert and the real party to the contract sued upon, he was
a writ of execution was issued against University the one who reaped the benefits resulting from
Publishing. Albert However, a writ of execution it, so much so that partial payments of the
was petitioned by Justo against Aruego, as the consideration were made by him, he violated its
real defendant, stating that there is no such terms, thereby precipitating the suit in question
entity as University Publishing Co. Inc. Justo and that in the litigation he was the real
annexed to the petition a certification from the defendant. Perforce, in line with the ends of
SEC saying that their records contain no such justice, responsibility under the judgment falls on
registered corporation. University Publishing him.
countered in its manifestation that Aruego is not
a party to the case and therefore, Justo’s 2. No. University Publishing is not a corporation
petition should be denied. In truth, University by estoppel. The corporation-by-estoppel
Publishing actually did not want Aruego to be doctrine has not been invoked in this case. At any
considered a party to the case because there rate, the same is inapplicable. Aruego
would then be a need to institute a separate represented a non-existent entity and induced
action against Aruego and if done, Justo can set not only to Albert but even the court to believe
up the defense of prescription under the Statute in such representation. He signed the contract as
of Limitations. "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
25
existing under the law, cannot thereafter set up
against his victim the principle of corporation by
estoppel.

Clavecillia Radio System, the New Cagayan Grocery filed a complaint Whether or not Clavecilla may be sued Yes. It is clear that the case for damages filed with
petitioner vs. Hon. Agustin against the Clavecilla Radio System alleging, in only in Manila and not in Cagayan de the city court is based upon tort and not upon a
Antillon, as City Judge of effect, that on March 12, 1963, the following Oro on the ground that it maintains its written contract. Section 1 of Rule 4 of the New
Municipal Court of Cagayan message, addressed to the former, was filed at principal office in Manila? Rules of Court, governing venue of actions in
de Oro City and New Cagayan the latter's Bacolod Branch Office for transmittal inferior courts, provides in its paragraph (b) (3)
Grocery, respondents - G.R. thru its branch office at Cagayan de Oro: that when "the action is not upon a written
No. L-22238, February 18, “REURTEL WASHED NOT AVAILABLE REFINED contract, then in the municipality where the
1967. TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER defendant or any of the defendants resides or
REPLY POHANG” may be served with summons." Settled is the
The Cagayan de Oro branch office having principle in corporation law that the residence of
received the said message omitted, in delivering a corporation is the place where its principal
the same to the New Cagayan Grocery, the word office is established. Since it is not disputed that
"NOT" between the words "WASHED" and the Clavecilla Radio System has its principal office
"AVAILABLE," thus changing entirely the in Manila, it follows that the suit against it may
contents and purport of the same and causing properly be filed in the City of Manila. The fact
the said addressee to suffer damages. Clavecilla that it maintains branch offices in some parts of
filed a motion to dismiss. Thereafter, the City the country does not mean that it can be sued in
Judge denied the motion to dismiss. In any of these places.
dismissing the 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.
26
MSCI-NACUSIP Local Chapter On January 11, 1990, Asturias Sugar Central, Inc. What is the correct paid-up capital of The correct paid-up capital is P5 million.
v. NWPC and Monomer Sugar (ASCI, for brevity), executed a Memorandum of MSCI for the pertinent period covered
Central, Inc.,G.R. No. 125198, Agreement with Monomer Trading Industries, by the application for exemption P5 By express provision of Section 13, paid-up
March 3, 1997 Inc. (MTII, for brevity), whereby MTII shall million or P64,688,528.00? capital is that portion of the authorized capital
acquire the assets of ASCI by way of a Deed of stock which has been both subscribed and paid.
Assignment provided that an entirely new To illustrate, where the authorized capital stock
organization in place of MTII shall be organized, of a corporation is worth P1 million and the total
which new corporation shall be the assignee of subscription amounts to P250,000.00, at least
the assets of ASCI. 25% of this 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 corporation the paid-up capital or what should more
was organized and incorporated on February 15, accurately be termed as "paid-up capital stock."
1990 under the corporate name Monomer Sugar
Central, Inc. or MSCI, the private respondent In the case under consideration, there is no
herein. dispute, and the Board even mentioned in its
August 17, 1993 Decision, that MSCI was
On January 16, 1991, MSCI applied for organized and incorporated on February 15,
exemption from the coverage of Wage Order 1990 with an authorized capital stock of P60
No. RO VI-01 issued by the Board on the ground million, P20 million of which was subscribed. Of
that it is a distressed employer. In support the P20 million subscribed capital stock, P5
thereto, MSCI submitted its audited financial million was paid-up. This fact is only too glaring
statements and income tax returns duly for the Board to have been misled into believing
stamped "received" by the Bureau of Internal that MSCI's paid-up capital stock was P64 million
Revenue (BIR) and the Securities and Exchange plus and not P5 million.
Commission (SEC) for the period beginning
February 15, 1990 and ending August 31, 1990, Not all funds or assets received by the
including the quarterly financial statements and corporation can be considered paid-up capital,
income tax returns for the two quarters ending for this term has a technical signification in
November 30, 1990 and February 28, 1991. Corporation Law. Such must form part of the
authorized capital stock of the corporation,
MSCI-NACUSIP Local Chapter (Union, for subscribed and then actually paid up.
brevity), in opposition, maintained that MSCI is
not distressed; that MSCI applicant has not The Commission aptly observed that the loans
complied with the requirements for exemption; and advances of MTII to respondent MSCI cannot
and that the financial statements submitted by be treated as investments unless the
MSCI do not reflect the true and valid financial corresponding shares of stocks are issued. But as
status of the company, and that the paid-up it turned out, such loans and advances were in
capital would have been higher than P5 million fact treated as liabilities of MSCI to MTII as
and thus impairment would have been lower shown in its 1990 audited financial statements.
than 25% had the pre-organization agreement The treatment by the Board of these loans as part
between ASCI and MTII been complied with. of MSCI's capital stock without satisfying certain
mandatory requirements is proscribed under
After hearings on the application for exemption, Section 38 of the Corporation Code.
27
the Board denied MSCI’s application based on
the finding that applicant's losses of The requirements set forth in Section 38 of the
P3,400,738.00 for the period February 15, 1990 Corporation Code, which are condition
to August 31, 1990 constitute an impairment of precedents before the capital stock of a
only 5.25% of its paid-up capital of corporation may be increased, were
P64,688,528.00, cannot be said to be sufficient unquestionably not observed in this case.
to meet the required 25% in order to qualify for Henceforth, the paid-up capital stock of MSCI for
the exemption, as provided in NWPC Guidelines the period covered by the application for
No. 01, Series of 1992 entitled REVISED exemption still stood at P5 million. The losses,
GUIDELINES ON EXEMPTION FROM therefore, amounting to P3,400,738.00 for the
COMPLIANCE WITH THE PRESCRIBED period February 15, 1990 to August 31, 1990
WAGE/COST OF LIVING ALLOWANCE INCREASES impaired MSCI's paid-up capital of P5 million by
GRANTED BY THE REGIONAL TRIPARTITE WAGES as much as 68%. Likewise, the losses incurred by
AND PRODUCTIVITY BOARDS. 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.
Samahan ng Optometrists sa Acebedo filed an application with the Office of WON Acebedo violates No.The fact that private respondent hires
Pilipinas vs Acebedo the Mayor of Candon, Ilocos Sur, for the issuance R.A.1998(OPTOMETRY LAW) and the optometrists who practice their profession in the
International Corporation, of a permit for the opening and operation of a Corporation Code when it employs course of their employment in private
G.R. No. 117097, March 21, branch of the Acebedo Optical in that optometrists to engage in the practice respondent's optical shops, does not translate
1997 municipality. The application was opposed by of optometry under its name and for its into a practice of optometry by private
the Samahan ng Optometrists sa Pilipinas (SOP) behalf. respondent itself. The determination of the
which contended that respondent is a juridical proper lenses to sell to private respondent's
entity not qualified to practice optometry. clientele entails the employment of optometrists
Acebedo filed its answer, arguing it is not the who have been precisely trained for that
corporation, but the optometrists employed by purpose. All told, there is no law that prohibits
it, who would be practicing optometry. the hiring by corporations of optometrists or
considers the hiring by corporations of
optometrists as a practice by the corporation
itself of the profession of optometry.


Board of Directors/Trustees
28
BENITO V. SEC and JAMIATUL The Articles of Incorporation of respondent 1. Whether or not the issuance of the 1.No. The questioned issuance of the
PHILIPPINE-AL ISLAMIA, INC. Jamiatul Philippine-Al Islamia, Inc. were filed 110, 980 shares without the consent of unsubscribed portion of the capital stock worth
G.R. No. L-56655, July 25, with the SEC and were approved. The the stockholders or of the Board of P110,980.00 is ' not invalid even if assuming that
1983 corporation had an authorized capital stock of Directors, and in the absence of it was made without notice to the stockholders
P200,000.00 divided into 20,000 shares at a par consideration, is null and void. as claimed by petitioner. The power to issue
value of P10.00 each. Petitioner Datu Tagoranao 2. Whether or not the increase in the shares of stocks in a corporation is lodged in the
Benito subscribed to 460 shares worth authorized capital stock from board of directors and no stockholders' meeting
P4,600.00. P200,000.00 to P1,000,000.00 without is necessary to consider it because additional
the consent or express waiver of the issuance of shares of stocks does not need
Respondent corporation filed a certificate of stockholders, is null and void. approval of the stockholders. The by-laws of the
increase of its capital stock from P200,000.00 to corporation itself states that 'the Board of
P1,000,000.00. It was shown in said certificate Trustees shall, in accordance with law, provide
that P191,560.00 worth of shares were for the issue and transfer of shares of stock of the
represented in the stockholders' meeting held Institute and shall prescribe the form of the
on November 25, 1975 at which time the certificate of stock of the Institute. The general
increase was approved. Thus, P110,980.00 rule is that pre-emptive right is recognized only
worth of shares were subsequently issued by the with respect to new issue of shares, and not with
corporation from the unissued portion of the respect to additional issues of originally
authorized capital stock of P200,000.00. Of the authorized shares.
increased capital stock of 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 without the
Petitioner Datu Tagoranao filed with respondent consent, expressed or implied, of the
SEC a petition alleging that the additional issue stockholders, it was the finding of the Securities
of previously subscribed shares of the and Exchange Commission that a stockholders'
corporation was made in violation of his pre- meeting was held on November 25,1975 and
emptive right to said additional issue and that among the many items taken up then were the
the increase in the authorized capital stock of change of name of the corporation, the increase
the corporation from P200,000.00 to of its capital stock from P200,000.00 to
P1,000,000.00 was illegal considering that the P1,000,000.00, and the increase of the number
stockholders of record were not notified of the of its Board of Trustees from five to nine.
meeting wherein the proposed increase was in "Despite the insistence of petitioner, this
the agenda. Commission is inclined to believe that there was
a stockholders' meeting on November 25, 1975
Petitioner prayed that the additional issue of which approved the increase. The petitioner had
shares of previously authorized capital stock and not sufficiently overcome the evidence of
the shares issued from the increase in capital respondents that such meeting was in fact held.
stock of respondent corporation be cancelled What petitioner successfully proved, however,
and that the corporation be ordered to render was the fact that he was not notified of said
an accounting of funds to the stockholders. The meeting and that he never attended the same.
SEC rendered a decision as follows: Another thing that petitioner was able to
disprove was the allegation in the certificate of
increase that all stockholders who did not
29
(a) That the issuance by the corporation of its subscribe to the increase of capital stock have
unissued shares was validly made and was not waived their pre-emptive right to do so. As far as
subject to the pre-emptive rights of stockholders the petitioner is concerned, he had not waived
(b) That there is no sufficient legal basis to set his pre-emptive right to subscribe as he could not
aside the certificate issued by this Commission have done so for the reason that he was not
authorizing the increase in capital stock of present at the meeting and had not executed a
respondent corporation from P200,000.00 to waiver, thereof. Not having waived such right
Pl,000,000.00. Considering, that petitioner has and for reasons of equity, he may still be allowed
not waived his pre-emptive right to subscribe to to subscribe to the increased capital stock
the increased capitalization, respondent proportionate to his present shareholdings.
corporation is directed to allow petitioner to
subscribe 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.
Sales vs. SEC (G.R. No. No. L- Sipalay Mining sold to the State Investment Whether the SEC has the power to Yes.The Court finds that the order of the SEC
54330, January 13, 1989) House 200,000,000 common shares of its capital create a committee composed of the creating the committee is fully supported by P.D.
stock in the amount of P2.6M with the condition SEC representative, as Chairman, to No. 902-A that the Commission shall have
that the stockbroker shall not sell more than supervise and control the conduct of absolute jurisdiction, supervision and control
1,000,000 shares per buyer but subsequently, the proceedings and perform the over all corporations, partnerships or
the restriction was modified to 5,000,000 shares functions of the Corporate Secretary, in associations, who are the grantees of primary
per buyer. SHI transferred its 200M common relation to the regular annual franchise and/or a license or permit issued by the
shares to Anslemo Trinidad & Co. who in turn, stockholders' meeting government to operate in the Philippines (1)
transferred its shares to Vulcan. Minority controversies arising out of intra-corporate or
stockholders of Sipalay Mining (petitioners) filed partnership relations, between and among
a petition to nullify the sale of the shares to stockholders members, or associates; between
VULCAN and to enjoin VULCAN from voting the any or all of them and the corporation,
shares. A Notice of Call was published, calling for partnership or association of which they are
the payment of (20%) of unpaid subscriptions in stockholders members or associates,
Sipalay Mining. SEC issued a resolution ordering respectively; and between such corporation,
the Board of Directors and officers of the partnership or association and the state insofar
corporation to call and hold said regular meeting as it concerns their individual franchise or right
and a Committee composed of one to exist as such entity and (2) Controversies in the
representative of the Securities and Exchange election or appointments of directors, trustees,
Commission, as Chairman, and one officers or managers of such corporations,
representatives each from the respondents and partnerships or associations.
the petitioners, as members, is hereby formed
to supervise and control the conduct of the As correctly pointed out by the Solicitor General,
proceedings and perform the functions of the the case before the SEC involves a controversy
Corporate Secretary. regarding the election of directors of a
corporation. It is apparent from the foregoing
30
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.
Villanueva v. Adre, G.R. No. The employees of South Cotabato Integrated W/N Velayo may be held personally Yes, he may be held liable had there been no off-
80863, April 27, 1989 Port Services, Inc. (SCIPSI), Inc filed a case liable using the Doctrine of Piercing the court settlement rendering the petition moot
against SCIPSI and it's president, Velayo for the Veil of Corporate Fiction despite his and academic. In the case of A.C. Ransom Labor
unpaid 13th month pays. The employees contention that he is just the president Union-CCLU v. NLRC it was held that it is the
garnered a favorable judgement. As a result, two and that he was never a party to the president of the corporation who responds
lands owned by Velayo were levied upon by the case personally for violation of the labor pay laws. Art.
sheriff. Velayo assailed the decision contending 273 of the Labor Code provides that: "Any person
that he was never a party to the labor case and violating any of the provisions of Art. 265 of this
that a corporation has a separate and distinct Code shall be punished by ... imprisonment". To
personality from its incorporators, stockholders apply this provision Art. 212. It states that
and officers. He also contends that he was never “Employer” includes any person acting in the
mentioned in the pleadings before the interest of an employer, directly or indirectly. In
petitioner-labor arbiter and therefore is a this case, just like RANSOM, SCIPSI is an artificial
stranger to the case. Soon After, the parties being that acts through its officers. RA 602 states
agreed to an off court settlement. that criminal responsibility is 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
31
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.

PEÑA V. CA, G.R. No. 91478, In 1962, the Pampanga Bus Company Whether or not the board resolution is No, the board resolution is void.
February 7, 1991 (PAMBUSCO) took out a loan from the valid. The by-laws are the laws of the corporation.
Development Bank of the Philippines (DBP). PAMBUSCO’s by-laws provide that a quorum
PAMBUSCO used the parcels of land it owned to consists of at least four directors. The meeting
secure the loan. In October 1974, due to was attended by only three directors did not
PAMBUSCO’s nonpayment, DBP foreclosed the comply with the required quorum. Thus, the
parcels of land. Rosita Peña was the highest three directors were not able to come up with a
bidder. Meanwhile, in November 1974, the valid resolution which could bind the
Board of Directors of PAMBUSCO had a meeting. corporation. Anent the issue of Peña being a
The meeting was attended by only 3 out of the 5 third person, she can question the board
Directors. In the said meeting, the Board, resolution. The resolution here is likened to a
through a resolution, authorized one of the contract. Under the law, a person who is not a
directors, Atty. Joaquin Briones, to assign the party obliged principally or subsidiarity in a
properties of PAMBUSCO. Pursuant to the contract may exercise an action for nullity of the
resolution, Briones assigned PAMBUSCO’s contract if he or she is prejudiced in his or her
assets to Marcelino Enriquez. Enriquez, knowing rights with respect to one of the contracting
that the properties were previously mortgaged parties, and can show the detriment which would
and foreclosed, exercised PAMBUSCO’s right to positively result to him or her from the contract
redeem. So in August 1975, he redeemed the in which he or she had no intervention.
said properties and thereafter he sold them to
Rising Yap. Yap then registered the properties Other findings: Furthermore, the sale of the
under his name. He then demanded Peña to properties of PAMBUSCO did not comply with
vacate the properties. Peña refused to do and so the procedure laid down by the Corporation Law.
Yap filed a complaint. Under the law, the sale or disposition of an
and/or substantially all properties of the
In her defense, Peña averred that Yap acquired corporation requires, in addition to a proper
no legal title over the property because the board resolution, the affirmative votes of the
board resolution issued by PAMBUSCO in stockholders holding at least two-thirds (2/3) of
November 1974 was void because the resolution the voting power in the corporation in a meeting
was issued without a quorum; that there was no duly called for that purpose. No doubt, the
quorum because under the by-laws of questioned resolution was not confirmed at a
PAMBUSCO, a quorum requires the presence of subsequent stockholders meeting duly called for
4 out of 5 directors and yet the meeting was only the purpose by the affirmative votes of the
32
attended by three directors. Thus, the authority stockholders holding at least two-thirds (2/3) of
granted to Briones to assign the properties was the voting power in the corporation. Further still,
void; that the subsequent assignment by Briones the Supreme Court discovers a few other
to Enriquez was void; that Enriquez acquired no anomalies with PAMBUSCO. One is that
title and hence thus Yap acquired no title. PAMBUSCO has been inactive since 1949 as per
Yap insisted that Peña has no legal standing to the records provided by the Securities and
question the board resolution because she was Exchange Commission. Its general information
not a stockholder. sheet with the SEC has not been updated
regularly even. And the three directors present
were not even listed as current directors of
PAMBUSCO.
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 through
G.R. No. 69999, April 30, 1991 formally organized in 1978 with Rivera holding a contract between the petitioners and its board of directors. "The law is settled that
majority interest in the corporation. The private respodents as to establish an contracts between a corporation and third
corporation immediately opened Fujiyama hotel employer- employee relationship persons must be made by or under the authority
and restaurant with Akasako as its chef and between the parties. of its board of directors and not by its
restaurant supervisor. Subsequently, operation stockholders. Hence, the action of the
and management of the corporation, including stockholders in such matters is only advisory and
control and possession of all its assets, were not in any wise binding on the corporation."
forcibly 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 preliminary solely by Jureidini and Tsuchiya allegedly, for and
injunction issued by RTC Manila. During the 1- in behalf of private respondent during the period
year period that they took over the corporation, from June, 1981 up to May 31, 1982 were not
before the original owners got the corporation binding upon respondent corporation.
back, they terminated the 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 illegal dismissal against the
corporation, akasako, jureidini, and tsuchiya.
33
Nora Bitong v. CA, G.R. No. Nora Bitong filed a derivative suit before the SEC 1. Whether or not Nora Bitong has the 1. No. The Certificate of Stock held by Bitong, was
123553, July 13, 1998 for the benefit of Mr. & Ms. Publishing Company legal personality to initiate and sold to her through a deed of sale executed by
Incorporated, against Sps. Eugenia and Jose prosecute the derivative suit for the JAKA Inc. in her favor in 1983. However, it was
Apostol (Respondents) for fraud, benefit of Mr.&Ms. Publishing Co., Inc. actually signed by the President of the
misrepresentation, disloyalty, evident bad faith, 2. Whether or not Nora Bitong was a corporation only on March 17, 1989, thus it was
conflict of interest, and mismanagement of the valid stockholder. only then that said Certificate of Stock could be
affairs of the said corporation when on several considered to have been legally issued to her. A
occasions, the respondents allegedly made Certificate of Stock shall be signed by the
fraudulent and other unauthorized transactions president or vice president, countersigned by the
and with the Philippine Daily Inquirer. secretary or assistant secretary, and sealed with
the seal of the corporation. Thus, at the time the
Respondents contended that Bitong is a mere acts complained of were committed, Bitong was
holder-in-trust of JAKA shares, thus she was not not qualified to institute a stockholder's
the proper party to initiate a derivative suit. derivative suit.

Bitong averred that she acquired legal and 2. No. Section 63 of the Corporation Code
beneficial ownership of 997 out of 4,088 provides that a formal Certificate of Stock can
outstanding shares by virtue of a deed of sale only be issued if it is signed by the President or
executed by JAKA in her favor on July 25, 1983, Vice-President, countersigned by the Secretary
and recorded in the Stock and Transfer Book of or Assistant Secretary, and sealed with the
Mr. & Ms. Corporation, under Certificate of Corporate Seal. In this case, the Certificate of
Stock No. 008. Stock which she allegedly owns was legally issued
on March 17, 1989, the date when it was actually
Respondents on the other hand countered that signed by the President of the corporation. Thus,
Eugenia D. Apostol signed Certificate of Stock Bitong was not a bona fide stockholder of Mr. &
No. 008 only on March 17 1989 and not in 1983. Ms. prior to March 1989.
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
34
Security Bank and Trust Sta. Ines Melale Corporation (‘Sta. Ines’) is in WON the 1989 Loan Agreement Yes. There is novation; indemnity agreement by
Company, Inc.vs Rodolfo M. logging operations & a holder of a Timber novated the original credit Cuenca is extinguished. Several incompatibilities
Cuenca, G.R. No. 138544, License Agreement. Security Bank granted Sta. accommodation and Cuenca’s liability between the 1989 Agreement and the 1980
October 3, 2000 Ines a credit line in the amount of 8M until under the Indemnity Agreement. original obligation demonstrate that the two
November 30, 1981 to meet capitalization cannot coexist(amount, purpose, and term).
requirements. To secure payment, it executed a Since Cuenca did not impliedly waive his consent
1)chattel mortgage over some of its machineries for the novated credit accommodation, such
and its President Rodolfo Cuenca 2)executed an clause should be understood in the context of
Indemnity agreement in favor of SecBank the ₱8 million limit and the November 30, 1981
whereby he bound himself jointly and severally term. It did not give the bank or Sta. Ines any
with Sta. Ines. When Cuenca resigned, Sta Ines license to modify the nature and scope of the
availed of its credit line however encountered original credit accommodation.
difficulty in making the 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).
ELCEE FARMS INC. V. NLRC, ET Private respondents were regular farm workers Whether or not Saguemuller is No. A corporation has a personality separate and
AL., G.R. No. 126428, January in Hacienda Trinidad, owned and operated by subsidiarily liable with Elcee Farms for distinct from those of the persons composing it
25, 2007 Elcee Farms. According to them, Corazon the payment of separation pay and as well as from that of any other legal entity to
Saguemuller was the president of Elcee Farms, damages. which it may be related. In Santos v. NLRC, a
but it was actually her son, Konrad, who was the corporate officer was not held liable for the
president thereof. Elcee Farms later entered obligations incurred by the corporation, where
into a lease agreement with Garnele but most of the corporate officer was not even shown to
the private respondents continued to work in have had a direct hand in the dismissal of the
Hacienda Trinidad. Garnele then sub-leased employee enough to attribute to him an unlawful
Hacienda Trinidad to Hilado, who operated act. No evidence was presented to prove that
HILLA. Private respondents were allowed to Saguemuller was truly the president of Elcee
continue working in Hacienda Trinidad under Farms. Nor was there even proof that she was in
HILLA’s management. Afterwards, Hilado and active management of the corporation and had
the United Sugar Farmers’ Organization (USFO) dictated policies for implementation by the
entered into a CBA, which contained a closed corporation. There is also no evidence on record
shop provision. Due to their refusal to join the that she had acted maliciously or in bad faith in
labor union, private respondents were terminating the services of the private
terminated by HILLA. Private respondents, filed respondents; nor has it been shown that she has
against Elcee Farms, Saguemuller, HILLA and two in any way consented to the simulated lease
of its officers a complaint for illegal dismissal contract which effectively terminated the
with reinstatement with back wages and services of the private respondents.
separation pay with damages.
35
CARAG V. NLRC, G.R. No. National Federation of Labor Unions (NAFLU) Whether or not Antonio Carag be held Section 31 makes a director personally liable for
147590, April 2, 2007 and Mariveles Apparel Corporation Labor Union solidarily liable for the payment of the corporate debts if he wilfully and knowingly
(MACLU), on behalf of all of MAC’s rank and file illegally dismissed employees. votes for or assents to patently unlawful acts of
employees, filed a complaint against MAC for the corporation. Section 31 also makes a director
illegal dismissal brought about by its illegal personally liable if he is guilty of gross negligence
closure of business. They included in their or bad faith in directing the affairs of the
complaint Mariveles Apparel Corporation’s corporation.
Chairman of the Board Antonio Carag in order to
be solidarily liable for the illegal dismissal and Complainants did not allege in their complaint
illegal closure of business. According to the that Carag wilfully and knowingly voted for or
Labor Union of MAC, the Corporation suddenly assented to any patently unlawful act of MAC.
closed its business without following the notice Complainants did not present any evidence
as laid down in the Labor Law of the Philippines. showing that Carag wilfully and knowingly voted
The Labor Arbiter decided in favor of the Labor for or assented to any patently unlawful act of
Union and held that Antonio Carag being the MAC. Neither did Arbiter Ortiguerra make any
owner of the corporation be solidarily liable for finding to this effect in her Decision.
the payment of separation pay and backwages
of the rank and file employees. Antonio Carag For a wrongdoing to make a director personally
questioned the decision of the Labor Arbiter and liable for debts of the corporation, the
alleged that the Corporation and its officers wrongdoing approved or assented to by the
have separate and distinct personality and the director must be a patently unlawful act. Mere
latter cannot be held liable solidarily in cases of failure to comply with the notice requirement of
payment of damages. 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.
Uy, et al. v. Villanueva, et al., Countrywide Bank of La Carlota Inc. is a private Whether or not they are corporate No. It has been held that an office is created by
G.R. No. 157851, June 29, rural bank. In 1998, it experienced liquidity officers of the bank and may be held the charter of the corporation and the officer is
2007 problems and its treasure department was liable for illegal dismissal. elected by the directors or stockholders. On the
unable to comply with its branches demands other hand, an employee usually occupies no
for fresh funds. Its various branches eventually office and generally is employed not by action of
experienced bank runs. Several depositors were the directors or stockholders, but by the
alarmed. Thus, a group holding 70% of the managing officer of the corporation, who also
bank’s deposit accounts met, and agreed to determines the compensation to be paid to such
organize themselves into a committee of employee. Given this distinction, petitioners are
depositors. Yusay was elected Chairman of the neither officers nor employees of the bank. They
board, while Uy was secretary. It was formed to are mere depositors who sought to manage the
protect their collective interests and to increase bank in order to save it.
their chances recovering their deposits.
36
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 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.
SEAOIL PETROLEUM VS Seaoil Petroleum Corporation bought one unit 1. Whether or not parol evidence can 1. No, parol evidence cannot be utilized to
AUTOCORP GR NO. 164326 of ROBEX Excavator from Autocorp Group. It was be used to incorporate into contract incorporate into contract additional
OCTOBER 17, 2008 paid in 12 monthly installments. The sales additional contemporaneous contemporaneous conditions. The rules provide
agreement was embodied in the Vehicle Sales conditions. that although parol evidence is admissible to
Invoice. Documents were signed by Francis Yu, 2. Whether or not, given the facts in explain the meaning of a contract, it cannot serve
president of Seaoil, on behalf of said evidence, the lower courts should have the purpose of incorporating into the contract
corporation. Furthermore, it was agreed that pierced the corporate veil. additional contemporaneous conditions which
despite delivery of the excavator, ownership are not mentioned at all in the writing unless
thereof was to remain with Autocorp until the there has been fraud or mistake. Evidence of a
obligation is fully settled. Seaoil, on the other prior or contemporaneous verbal agreement is
hand issued 12 checks which served as payment generally not admissible to vary, contradict or
thereof. The remaining 10 checks were not defeat the operation of a valid contract. The
honored by the bank since Seaoil requested that Vehicle Sales Invoice is the best evidence of the
payment be stopped. Seaoil alleged that the transaction.
transaction between Seaoil and Autocorp were 2. No. Rodriguez is a person separate and
only utilized as conduits to settle the obligation independent from Autocorp. Whatever
of one foreign entity named UnilineAsia in favor obligations Rodriguez contracted cannot be
of another foreign entity, Focus Point attributed to Autocorp and vice versa. The
International, Incorporated. The real transaction transaction under the Vehicle Sales Invoice is
is that Uniline, through Paul Rodriguez. separate and distinct from that under the Lease
Rodriguez is a stockholder and director of Purchase Agreement. In the former, it is Seaoil
Autocorp. He is also the owner of Uniline. On the that owes Autocorp, while in the latter, Uniline
other hand, Yu is the president and stockholder incurred obligations to Focus. There was never
of Seaoil and is at the same time owner of Focus. any allegation, much less any evidence, that
Allegedly, Uniline chartered MV Asia Property Autocorp was merely an alter ego of Uniline, or
from its owner Focus. Uniline was not able to that the two corporations’ separate personalities
settle the said amount. In short, Seaoil claims were being used as a means to perpetrate fraud
that the real transaction is that Uniline, through or wrongdoing. It is settled that a corporation
Rodriguez, owed money to Focus. In lieu of has a personality separate and distinct from its
payment, Uniline instead agreed to convey the individual stockholders or members, and is not
excavator to Focus. This was to be paid by checks affected by the personal rights, obligations and
37
issued by Seaoil but which in turn were to be transactions of the latter. The corporation may
funded by checks issued by Uniline. Autocorp not be held liable for the obligations of the
filed a complaint for recovery of personal persons composing it, and neither can its
property with damages and replevin in the stockholders be held liable for its obligation. This
Regional Trial Court. The trial court ruled in favor Court has recognized instances when the
of Autocorp Group stating that the transaction corporation’s separate personality may be
between Autocorp and Seaoil was a simple disregarded. However, we have also held that
contract of sale payable in installments. It also the same may only be done in cases where the
held that the obligation to pay plaintiff the corporate vehicle is being used to defeat public
remainder of the purchase price of the convenience, justify wrong, protect fraud, or
excavator solely devolves on Seaoil. Paul defend crime. Moreover, the wrongdoing must
Rodriguez, not being a party to the sale of the be clearly and convincingly established.
excavator, could not be held liable.
PEOPLE V. DUMLAO AND Respondent Dumlao, a member of the GSIS Whether or not the motion to dismiss is No, the motion to dismiss is not valid. The lease-
GONZALES Board of Trustees, executed a lease-purchase valid. purchase agreement was deemed executed.
G.R. No. 168918, March 2, agreement with respondent La'o over GSIS There's a difference between minutes of the
2009 properties consisting of three parcels of land meeting and a board resolution. A board
and their associated improvements. The Office resolution is a company act, approving a
of the Ombudsman determined that the lease- transaction of the corporation by its members.
purchase agreement was grossly advantageous The non-signing by the majority of the members
to the government and so charged Dumlao, La'o of the GSIS Board of Trustees of the said minutes
and the rest of the people involved in the lease- does not necessarily mean that the supposed
purchase agreement with violation of the Anti- resolution was not approved by the board. A
Graft and Corrupt Practices act. Dumlao in his board resolution affirming the lease-purchase
defense averred that the lease-purchase was agreement exists and is valid without a complete
non existent since only 3 out of 7 of the Board signing of the minutes of the meeting for the
of Trustees of the GSIS signed the minutes of the lease-purchase agreement.
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.
Gosiaco vs Ching and Casta – Petitioner Gosiaco invested with ASB Holdings, Whether or not a corporate officer who Yes, a corporate officer who issues a bouncing
G.R. No. 173807, April 16, Inc. by way of loan and in exchange ASB through signed a bouncing check be held civilly corporate check can only be held civilly liable
2009, J. Tinga its manager Ching issued DBS checks. Upon liable under B.P. Blg. 22. when he is convicted. The Court ruled that the
maturity of the ASB checks, Gosiaco went to civil liability of a corporate officer in a BP22 case
deposit the checks but the checks were is extinguished with the criminal liability. Ching is
dishonored. Gosiaco informed respondents and discharge of any civil liability arising from B.P.
demanded replacement checks or the return of Blg. 22 case filed against her on account of her
the money but to no avail. Gosiaco filed a acquittal in the criminal charge and it is ASB who
criminal complaint for violation of BP22. MTC is civilly obligated to petitioner.
38
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.

Dr. Hans Christian M. Señeres Melquiades Robles (Robles for brevity) was Whether the hold-over principle Yes, the hold-over principle applies in this case.
versus Commission on elected as BUHAY party-list’s president and applies in this case. Señeres’ contention that the CoN signed by
Elections and Melquiades A. chairperson. Under BUHAY’s constitution, all of Robles is null and void is untenable. As a general
Robles – G.R. No. 178678, its party officers shall have a term of three (3) rule, Sec. 23 of the Corporation code provides
April 16, 2009 years, without re-election. BUHAY participated that officers and directors of a corporation hold
in the 2002 and 2004 elections, with Robles as over after the expiration of their terms until such
its president. BUHAY’s manifestation to time as their successors are elected or
participate in the party-list election appointed. The holdover doctrine accords
(manifestation) and even the certificates of validity to what would otherwise be deemed as
nomination of representatives (CoN) for those dubious corporate acts and gives continuity to a
years carried Robles’ signature as its president. corporate enterprise in its relation to outsiders.
The voting members of BUHAY duly elected
For the May 2007 elections, BUHAY submitted Robles as party President in October 1999 and
its manifestation and CoN bearing Robles’ although his regular term as such President
signature again. However, two (2) days prior to expired in October 2002, no election was held to
Robles’ submission of his nominations, Dr. Hans replace him and the other original set of officers.
Christian Señeres (Señeres), holding himself as Further, BUHAY’s constitution and by-laws do
the acting president and secretary-general of not expressly or impliedly prohibit a hold-over
BUHAY, also filed a CoN with the COMELEC. situation. As such, since no successor was ever
Señeres then filed a petition to deny due course elected or qualified, Robles remained the
to Robles’ CoN with the COMELEC contending President of BUHAY in a hold-over capacity.
that said nominations were null and void for
they were made without authority for Robles’ The view is that one who continues with the
term already expired. BUHAY expelled Señeres discharge of the functions of an office after the
as party member for his act of submitting a CoN expiration of his or her legal term, having no
for the party without authority and nominating successor appointed or chosen in the meantime,
representatives not even members of the party. is commonly regarded as a de 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
39
submission of the manifestation and the CoN is,
therefore, valid and effective.

MAJORITY STOCK HOLDERS In 1983, Ruby Corporation is already Whether or not the extension of the No. Among the requirements for extension of
OF RUBY INDUSTRIAL CORP v. experiencing severe financial losses. It filed a corporate term was valid. corporate term is a vote of 2/3 of the
LIM. G.R. No. 165887, June 6, petition for suspension of payments with the Outstanding Capital Stock. The ratification by the
2011. Securities and Exchange Commission which majority stockholders of the board resolution for
granted it. A management committee was the extension was seriously disputed by the
formed to manage and control Ruby Corp. and minority stockholders (The 2/3 OCS was obtained
study and evaluate a rehabilitation plan. 2 by the majority only because of their wrongful
rehabilitation plans were submitted, one from increase of subscription, in other words, under
Benhar (by the majority stockholders), and the invalid additional subscriptions). The notice
another is the Alternative (by the minority). and quorum requirement were insufficient
and doubtful. No extension was validly made.
The Benhar plan was denied, and upon its The term has expired, which calls for the
revision, was executed/implemented by 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.
40
BARBA V. LICEO DE CAGAYAN Petitioner was hired as medical officer/school Whether or not her appointment is a NO. In respondent’s by-laws, there are four
UNIVERSITY, G.R. No. 193857, physician by Respondent. Later on, she was corporate office which divest officers specifically mentioned, namely, a
November 28, 2012 chosen by respondent to be the recipient of a jurisdiction from LA and NLRC. president, a vice president, a secretary and a
scholarship grant to pursue a three-year treasurer. In addition, it is provided that there
residency training in VMMC. Thereafter, she was shall be other appointive officials, a College
appointed Acting Dean and eventually Director and heads of departments whose
appointed as Dean of the College of Physical appointments, compensations, powers and
Therapy by respondent’s President, Dr. Golez. duties shall be determined by the board of
Because of drastic decreased of number of directors. A College Dean is not among the
student enrollees in her department during her corporate officers mentioned in respondent’s by-
tenure, she was informed that her deanship will laws. Petitioner, being an academic dean, also
terminate upon the end of school year. held an administrative post in the university but
Thereafter, the college ceased operations and not a corporate office as contemplated by law.
petitioner went on leave. A letter was sent to Petitioner was not directly elected nor appointed
petitioner informing her to return to work as by the board of directors to any corporate office
full-time faculty professor/member as also but her appointment was merely approved by
indicated in the grant of scholarship as an the board together with the other academic
agreement. Petitioner however claims for deans of respondent university in accordance
separation pay as there exists a demotion which with the procedure prescribed in respondent’s
constitutes dismissal. LA decided in favor of Administrative Manual. Moreover, the CA, in its
respondent finding no constructive dismissal. amended decision erroneously equated the
NLRC reversed the decision. Respondent filed an position of a College Director to that of a College
appeal before CA which decided that there was Dean thereby concluding that petitioner is an
no constructive dismissal but did not touch upon officer of respondent.
the petitioner's issue on jurisdiction of LA and
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.
VDA. DE ROXAS v. OUR LADY'S Salve Dealca Latosa was the owner of a Whether or not the CA erred in NO. A corporation is a juridical entity with a legal
FOUNDATION, G.R. No. residential lot in Our Lady's Village in Sorsogon. declaring the Notice of Garnishment personality separate and distinct from those
182378, March 06, 2013 A quarter of her lot (112 sq. meters) was void. acting for and on its behalf and, in general, of the
encroached upon by Atty. Henry Roxas, who did people comprising it. Hence, the obligations
so because 92 sq. meters of his land was taken incurred by the corporation are its own alone,
by Our Lady's Village for the construction of a and not of its directors, trustees, officers,
subdivision road. stockholders, or members.

Latosa filed a complaint against Atty. Roxas. Moreover, Arcilla-Maullon was not impleaded in
Atty. Roxas filed a third-party complaint against the original case. Absent any evidence of
Our Lady's Foundation (OLFI). After due hearing, wrongdoing on his part, the corporate fiction
Atty. Roxas was directed to return the subject cannot be pierced to make him personally liable.
41
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.

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 only
INTERNATIONAL EXCHANGE Garments, covered by PNs and deeds of 2. Whether Goldkey can be held liable basis for holding Uy liable for the payment of the
BANK (G.R. No. 166282) assignments pursuant to the letter-agreement loan was proven to be a falsified document, there
February 13, 2013 between iBank and Hammer, represented by its was no sufficient justification for the RTC to have
President and General Manager, Chua, granting ruled that Uy should be held jointly and severally
Hammer a P25M credit line. The loans were liable to iBank for the unpaid loan of Hammer. At
secured by a REM executed by Goldkey Dev’t most, Uy could have been charged with
Corp over several of its properties and a peso negligence in the performance of her duties as
surety agreement signed by Chua and his wife treasurer of Hammer by allowing the company to
(FE TAN UY). contract a loan despite its precarious financial
position. Uy’s shortcomings are not sufficient to
Hammer defaulted, iBank foreclosed Goldkey’s justify the piercing of the corporate veil, which
third party REM. The mortgaged properties were requires that the negligence of the officer must
sold for P12M, leaving a balance of P13M. be so gross that it could amount to bad faith.
Hammer failed to pay the deficiency, iBank filed
a complaint for sum of money against Hammer, 2. Yes. It was apparent that Goldkey was merely
Chua, Uy and Goldkey. an adjunct of Hammer, and as such, the legal
fiction that it has a separate personality from
Uy claimed she was not liable to iBank because that of Hammer should be brushed aside as they
she never executed a surety agreement in favor are, undeniably, one and the same.
of iBank as her signature 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
42
to operate. RTC held Hammer, Goldkey, Chua
and Uy liable to iBank. Affirmed by CA.

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 that:
ASSOCIATION V. DEL request for assistance of petitioner, conducted members of the Board of Directors of "When the offender is a corporation,
ROSARIO, ET AL., G.R. No. surveillance and investigation of ACCS Ideal Gas ACCS, must be criminally prosecuted partnership, or other juridical person, the
202639, November 9, 2016 Corporation (ACCS) for allegedly committing the for the latter's alleged violation/s of BP president, the general manager, managing
acts of illegal trading of petroleum products and 33 as amended. partner, or such other officer charged with the
underfilling of LPG cylinders in violation of BP 33, management of the business affairs thereof, or
as amended by PD 1865. A test-buy operation employee responsible for the violation shall be
was done and the inspection and evaluation of criminally liable. " Neither of the respondents
the refilled LPG cylinders revealed that they was the President, General Manager, or
were underfilled. Search warrants were issued Managing Partner of ACCS. Respondents who
against the officers of ACCS and a search and were mere members of the Board of Directors
seizure operation was conducted. Again, are not also shown to be charged with the
inspection and evaluation of the said filled LPG management of the business affairs.
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.
Ultra Vires

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 through
G.R. No. 69999, April 30, 1991 formally organized in 1978 with Rivera holding a contract between the petitioners and its board of directors. "The law is settled that
majority interest in the corporation. The private respodents as to establish an contracts between a corporation and third
corporation immediately opened Fujiyama hotel employer- employee relationship persons must be made by or under the authority
and restaurant with Akasako as its chef and between the parties. of its board of directors and not by its
restaurant supervisor. Subsequently, operation stockholders. Hence, the action of the
and management of the corporation, including stockholders in such matters is only advisory and
control and possession of all its assets, were not in any wise binding on the corporation."
forcibly 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 preliminary solely by Jureidini and Tsuchiya allegedly, for and
injunction issued by RTC Manila. During the 1- in behalf of private respondent during the period
year period that they took over the corporation, from June, 1981 up to May 31, 1982 were not
before the original owners got the corporation binding upon respondent corporation.
43
back, they terminated the 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.
Premium Marble Resources In 1982, Ayala Investment and Development WON the filing of the case for damages NO. By the express mandate of the Corporation
Inc. versus CA and Corporation (Ayala) issued 3 checks in the against ICB was authorized by a duly Code (Section 26), all corporations duly
International Corporate Bank - aggregate amount P31,663.88 payable to constituted Board of Directors of organized pursuant thereto are required to
G.R. No. 96551, November 4, Premium Marble Resources, Inc. (Premium) and Premium. submit within the period therein stated (30 days)
1996, drawn against Citibank. In 1982, former officers to the Securities and Exchange Commission the
of the Premium headed by Belen, without any names, nationalities and residences of the
authority whatsoever from Premium deposited directors, trustees and officers elected. In the
the above-mentioned checks to the current present case, although there were newly elected
account of his conduit corporation, Intervest officers for the year 1982, Premium failed to
Merchant Finance (Intervest) which the latter show proof that this election was reported to the
maintained with the International Corporate SEC. In fact, the last entry in their General
Bank (ICB). Although the checks were clearly Information Sheet with the SEC, as of 1986,
payable to the Premium and crossed on their showed Belen et. Al. as officers.
face and for payees account only, defendant
bank 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.
44
Maria Clara Pirovana Et Al Vs. Enrico Pirovano was the President and General Whether or not the defendant YES. The donation is valid and binding.
The De La Rama Steamship Manager of the De la Rama Steamship Company. corporation may give by way of The provisions second article (g) (j) of the articles
Co., Early in 1941 the company insured the life of donation the proceeds of said of incorporation of the Dela Rama Co. gives the
G.R. No. L-5377, December said Enrico Pirovano in various Philippine and insurance policies to the minor children corporation broad and almost unlimited powers
29, 1954 American Life Insurance companies. He was of the late Enrico Pirovano under the to carry out the purposes for which it was
killed by the Japanese. the current President of law or its articles of corporation, or is organized among them.
De la Rama Steamship proposed that it is but fit that donation an ultra vires act? Granting arguendo that the donation given by
and proper that the company which owes so Pirovano children is outside the scope of the
much to the deceased should make some powers of the defendant corporation, or the
provision for his children. He proposed that out scope of the powers that it may exercise under
of the proceeds of the insurance policies the the law, or it is an ultra vires act, still it may said
sum of P400,000 be set aside for Pirovano’s that the same cannot be invalidated, for the
minor children, said sum of money to be reason alone, it appearing that the donation
convertible into 4,000 shares of the stock of the represents not only the act of the Board of
Company, at par, or 1,000 shares for each child. Directors but of the stockholders by ratifying the
A resolution was adopted to carry out the resolution duly approved by the board. Such
proposal and submitted to the stockholders of ratification made the act perfectly valid and
the De la Rama company at a meeting properly enforceable.
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.
Doctrine of Apparent Authority

Ching v. CA, et al., G.R. No.


164317, February 6, 2006
45
Associated Bank versus Spouses Vaca executed a REM in favor of Whether Associated Bank is bound by Yes, AB is bound by the 2nd letter-agreement.
Spouses Rafael and Monaliza Associated Bank (AB) covering land in Quezon the 2nd letter-agreement signed by The general rule is that, in the absence of
Pronstroller – G.R. No. City. The Vacas’ defaulted which led to the Atty. Soluta under the doctrine of authority from the board of directors, no person,
148444, July 14, 2008 property’s foreclosure and auction where AB apparent authority. not even its officers, can validly bind a
was the highest bidder. Spouses Vaca, however, corporation. The power and responsibility to
filed an action for the nullification of the REM decide whether the corporation should enter
and the foreclosure sale. On the other hand, AB into a contract that will bind the corporation is
filed for a writ of possession which was denied lodged in the board of directors. However, just as
by the RTC. On appeal, the CA granted said writ a natural person may authorize another to do
which caused Spouses Vaca to appeal the CA certain acts for and on his behalf, the board may
decision. validly delegate some of its functions and powers
During the pendency of said cases, AB to officers, committees and agents.
advertised the property for sale to which
Respondents Pronstroller responded favorably AB had previously allowed Atty. Soluta to enter
through Atty. Soluta, AB’s VP, CorSec and Board into the first agreement without a board
member. The spouses then paid the resolution expressly authorizing him; thus, it had
downpayment. AB, through Atty. Soluta and clothed him with apparent authority to modify
respondents’, executed a letter-agreement the same via the second letter-agreement.
requiring that the balance of the purchase price Further, the two (2) letter-agreements were
be deposited under escrow agreement within 90 written on a paper with AB’s letterhead. It is not
days from date of the agreement. Prior to end of the quantity of similar acts which establishes
90day period, respondents proposed that the apparent authority, but the vesting of a
balance be due only upon service of a final corporate officer with the power to bind the
decision of the SC affirming AB’s right to possess corporation. By holding Atty. Soluta to possess
the property. Atty. Soluta referred this to the the authority to enter into the agreement which
bank’s ARRMC which merely deferred action. A led respondents to deal with him, AB is now
month after such proposal, Atty. Soluta, acting estopped from denying such authority.
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
46
performance against AB to enforce their 2nd
letter-agreement.
Westmond Bank v. Inland Respondent incurred loan obligations from WON Calo was clothed with apparent Yes. It was shown that Calo was the one assigned
Construction (March 23, 2009 petitioner secured by a Real Estage Mortgage authority to transact for the petitioner to transact on petitioner bank's behalf respecting
- G.R. 123650) and Promissory Notes. The president of Inland, bank. loan transactions of Inland, as well as those of
Aranda, executed a deed of assignment in favor Hanil-Gonzales and Abrantes. As such, there's a
of Abrantes, executive vice president and presumption that Calo had authority to sign the
general manager of Hanil-Gonzales Corporation. deed. It was also found that Abrantes notified the
Abrantes assumed other obligations of Inland petitioner bank of his assumption of Inland's
and Aranda including the Promissory Notes obligation and petitioner sent a reply approving
executed by Inland in favor of petitioner. the same. Petitioner did not prove by clear and
Respondent received a notice of sheriff's sale convincing evidence that it didn't cloth Calo with
foreclosing the REM, so respondent filed an apparent authority neither it did present any
injunction suit against petitioner. Petitioner resolution from the board confirming Calo's lack
bank alleged that it had no knowledge nor it did of authority.
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
committee failed to repudiate the assignment
within a reasonable time.

Powers of a Corporation

Maria Clara Pirovana Et Al Vs. Enrico Pirovano was the President and General Whether or not the defendant YES. The donation is valid and binding.
The De La Rama Steamship Manager of the De la Rama Steamship Company. corporation may give by way of The provisions second article (g) (j) of the articles
Co., Early in 1941 the company insured the life of donation the proceeds of said of incorporation of the Dela Rama Co. gives the
G.R. No. L-5377, December said Enrico Pirovano in various Philippine and insurance policies to the minor children corporation broad and almost unlimited powers
29, 1954 American Life Insurance companies.He was of the late Enrico Pirovano under the to carry out the purposes for which it was
killed by the Japanese. the current President of law or its articles of corporation, or is organized among them.
De la Rama Steamship proposed that it is but fit that donation an ultra vires act? Granting arguendo that the donation given by
and proper that the company which owes so Pirovano children is outside the scope of the
much to the deceased should make some powers of the defendant corporation, or the
provision for his children. He proposed that out scope of the powers that it may exercise under
of the proceeds of the insurance policies the the law, or it is an ultra vires act, still it may said
sum of P400,000 be set aside for Pirovano’s that the same cannot be invalidated, for the
minor children, said sum of money to be reason alone, it appearing that the donation
convertible into 4,000 shares of the stock of the represents not only the act of the Board of
Company, at par, or 1,000 shares for each child. Directors but of the stockholders by ratifying the
A resolution was adopted to carry out the resolution duly approved by the board. Such
proposal and submitted to the stockholders of ratification made the act perfectly valid and
the De la Rama company at a meeting properly enforceable.
47
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.
PNCC SKYWAY WORKERS PNCC Workers Organization (The Whether or not the verification and The union president has the authority file the
ORGANIZATION v. PNCC Union/Petitioner) and the PNCC Skyway (The certification against forum shopping is remedies with the courts. The late board
SKYWAY. G.R. No. 171231, employer/respondent) entered into their defective, having signed by the Union resolution of June 2006 was only a reiteration of
February 17, 2010. collective bargaining agreement. Under the said President who had no authority via the October 2005 resolution authorizing the
agreement, the employer shall schedule the board resolution. president to do so. The purpose of certification
vacation leaves for the employees, taking into against forum shopping is that the party litigant
consideration their preferences of schedule. shall not be allowed to pursue simultaneous
Also in the agreement was that the employees remedies in different fora. The union president
shall bear the expenses of the renewal of their has authority because of the following reasons:
license as security personnel. 1. It was granted via board resolution, 2. He is in
the position to know the truthfulness and
A labor dispute involving the validity of the correctness of the action, and 3. Assuming that
provisions of the CBA arose. When the case was there was no board resolution of Oct. 2005, the
already in the CA, the union authorized the authority was ratified in June 2006, thus curing
Union President to represent the petitioner the defects of the certification against forum
union (to sign the verification and certification shopping made in Feb. 2006.
against forum shopping). The CA ruled against
the petitioner in Jan. 2006. The union elevated it
to the SC in Feb. 2006.
METROBANK V. CENTRO In a special meeting of the board of directors of Whether the requirements of Section No. Reading carefully the Secretary’s Certificate,
DEVELOPMENT respondent Centro, its president Go Eng Uy was 40 of the Corporation Code was it is clear that the main purpose of the directors
CORPORATION, ET AL, authorized to mortgage its properties and assets complied with in the execution of the Resolution was to appoint petitioner as the new
to secure the medium-term loan of ₱84M of MTI. trustee of the previously executed and amended
Lucky Two Corporation and Lucky Two MTI. Going through the original and the revised
Repacking. Centro and BPI amended the MTI to MTI, the Court find no substantial amendments
allow an additional loan of ₱36M and to include to the provisions of the contract. The Court agree
San Carlos Milling Company, Inc. (San Carlos) as with petitioner that the act of appointing a new
a borrower. Centro and BPI again amended the trustee of the MTI was a regular business
MTI for another loan of ₱24M, bringing the total transaction. The appointment necessitated only
48
obligation to ₱144M. Meanwhile, respondent a decision of at least a majority of the directors
Centro, represented by Go Eng Uy, approached present at the meeting in which there was a
petitioner Metrobank and proposed that the quorum, pursuant to Section 25 of the
latter assume the role of successor-trustee of Corporation Code. The second paragraph of the
the existing MTI. After petitioner Metrobank directors Resolution No. 005, s. 1994, which
agreed to the proposal, the board of directors of empowered Go Eng Uy to sign the Real Estate
respondent Centro allegedly resolved to Mortgage and all documents/instruments with
constitute petitioner as successor-trustee of BPI. Metrobank, for and in behalf of the Company
During the period April 1998 to December 1998, which are necessary and pertinent thereto, must
San Carlos obtained loans in the total principal be construed to mean that such power was
amount of ₱812,793,513.23 from petitioner limited by the conditions of the existing
Metrobank. San Carlos failed to pay these mortgage, and not that a new mortgage was
outstanding obligations hence Metrobank as the thereby constituted, thus, Section 40 of the
successor trustee initiated foreclosure of the Corporation Code finds no application in the
mortgaged executed for the loan. Before the present case. Nevertheless, while the Court
scheduled foreclosure date, respondents herein uphold the validity of the stockholders
filed a Complaint for the annulment of the MTI Resolution appointing Metrobank as successor-
with a prayer for a temporary restraining order trustee, this is not to say that we uphold the
(TRO) and preliminary injunction. The bone of validity of the extrajudicial foreclosure of the
contention in Civil Case No. 00-942 was that mortgage.
since the 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 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.
49
ESGUERRA, ET AL. V. HOLCIM Esguerra filed an action to annul the Free Patent Whether or not the Court of Appeals NO, The general rule is that a corporation can
PHILIPPINES, INC G.R. No. in the name of de Guzman alleging himself to be gravely erred in not dismissing Holcim’s only exercise its powers and transact its business
182571, September 2, 2013 the owner over the disputed lot in Matiktik, petition for certiorari on the ground of through its board of directors and through its
Norzagaray, Bulacan. De Guzman sold the lot to lack of board resolution authorizing the officers and agents when authorized by a board
herein respondents who utilized the land filing of the petition resolution or its bylaws. Absent the said board
extracted limestones from it. The Court granted resolution, a petition may not be given due
such action and remanded the case to the Trial course. However, this admits to exceptions such
Court for execution. The RTC denied HOLCIM’s as in the case at bar when the corporation
motion for reconsideration and motion for performed acts in substantial compliance to such
ocular inspection. It held that the petitioners requirement. While the board resolution may
proved their entitlement to the royalties totaling not have been attached, HOLCIM complied just
to ₱91,872,576.72. CA, on the other hand, the same when it attached the Secretary’s
granted the petition which prompted Certificate dated July 17, 2006, thus proving that
petitioners to filed the case before the Supreme O’Callaghan had the authority from the board of
Court. One of the claims of the petitioner is that directors to appoint the counsel to represent
HOLCIM’s petition for certiorari in the CA failed them in Civil Case No. 725-M-89.
to comply with the 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.
PHILIPPINE RACE HORSE V. PRHTAI, through its president, Rogelio J. Whether or not Catajan exceeded his Contracts entered into by a corporate officer or
PIEDRAS NEGRAS G.R. No. Catajan, entered into a contract (first contract) authority when it agreed to pay PNCDC obligations assumed by such officer for and in
192659 December 2, 2015 with Fil-Estate involving the construction of an increased contract price in the behalf of the corporation are binding on said
housing units for P67,453,000.00. Fil-Estate then amount of P101,150,000.00 corporation, if such officer has acted within the
later assigned its rights and obligations under scope of his authority, or even if such officer has
the project to PNCDC, its subcontractor. A exceeded the limits of his authority, the
second contract was forged between PRHTAI corporation still ratifies such contracts or
and PNCDC for P80,324,788.00. Then PRHTAI obligations. The doctrine of apparent authority
and PNCDC signed the third contract for the provides that a corporation will be estopped
construction of the same housing units, but this from denying the agent’s authority if it knowingly
time for the revised amount of P101,150,000.00 permits one of its officers or any other agent to
act 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
50
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.

Trust Fund Doctrine



Ong Yong v. Tui 1. The construction of the Masagana Citimall in Whether or not rescission is proper? NO. FLADC was originally incorporated with an
Pasay City was threatened with stoppage and authorized capital stock of 500,000 shares with
incompletion when its owner, the First Landlink the Tius owning 450,200 shares representing the
Asia Development Corporation (FLADC), which paid-up capital. When the Tius invited the Ongs
was owned by the Tius, encountered dire to invest in FLADC as stockholders, an increase of
financial difficulties. the authorized capital stock became necessary to
2. The Tius invited the Ongs, to invest in FLADC. give each group equal (50-50) shareholdings as
Under the Pre-Subscription Agreement they agreed upon in the Pre-Subscription Agreement.
entered into, the Ongs and the Tius agreed to The authorized capital stock was thus increased
maintain equal shareholdings in FLADC. from 500,000 shares to 2,000,000 shares with a
3. In addition, there were agreements that some par value of P100 each, with the Ongs subscribing
positions like President, Vice president to 1,000,000 shares and the Tius to 549,800 more
secretary, treasurer among others, both ong shares in addition to their 450,200 shares to
yong and tuis will have representatives complete 1,000,000 shares. Thus, the subject
respectively matter of the contract was the 1,000,000
4. The relationship was short-lived when ong unissued shares of FLADC stock allocated to the
yong rescinded the contract on alleged dispute Ongs. Since these were unissued shares, the
and conflict regarding positions taken and parties Pre-Subscription Agreement was in fact a
disregarded. 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
51
(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 own
shares to them. It was FLADC that did.
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.
52
Yamamoto v. Nishino Leather
Industries, Inc., G.R. No.
150283, April 16, 2008
Donnina Halley vs. Printwell, BMPI (Business Media Philippines Inc.) is a WON a stockholder who was in active YES! Such stockholder should be made liable up
Inc. (G.R. No 157549) May 30, corporation under the control of its management of the business of the to the extent of her unpaid subscription. The
2011 stockholders, including Donnina Halley. In the corporation and still has unpaid stockholders cannot now claim the doctrine of
course of its business, BMPI commissioned subscriptions should be made liable for corporate fiction otherwise (to deny creditors to
PRINTWELL to print Philippines, Inc. (a magazine the debts of the corporation by piercing collect from SH) it would create an injustice
published and distributed by BMPI). PRINTWELL the veil of corporate fiction because creditors would be at a loss (limbo)
extended 30-day credit accommodation in favor against whom it would assert the right to collect.
of BMPI and in a period of 9 mos. BMPI placed
several orders amounting to 316,000. However, On Piercing the Veil:
only 25,000 was paid hence a balance of Although the corporation has a personality
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 justice)
unpaid balance and later on impleaded BMPI’s which may be disregarded by the courts if it is
original stockholders and incorporators to used as a cloak or cover for fraud, justification of
recover on their unpaid subscriptions. It appears a wrong, or an alter ego for the sole benefit of
that BMPI has an authorized capital stock of 3M the SH.
divided into 300,000 shares with P10 par value.
Only 75,000 shares worth P750,000 were As to the Trust Fund Doctrine:
originally subscribed of which P187,500 were The RTC and CA correctly applied the Trust Fund
paid up capital. Halley subscribed to 35,000 Doctrine. Under which, corporate debtors might
shares worth P350,000 but only paid P87,500. look to the unpaid subscriptions for the
satisfaction of unpaid corporate debts.
Halley contends that they all had already paid Subscriptions to the capital of a corporation
their subscriptions in full by presenting official constitutes a trust fund for the payment of the
receipts (O.R.), BMPI had a separate and distinct creditors (by mere analogy) In reality,
personality and BOD and SH had resolved to corporation is a simple debtor. Moreover, the
dissolve BMPI. corporation has no legal capacity to release an
original subscriber to its capital stock from the
RTC and CA both ruled that BMPI merely used obligation of paying for his shares, in whole or in
the corporate fiction as a cloak/cover to create part, without valuable consideration, or
an injustice (against PRINTWELL). They also fraudulently, to the prejudice of the creditors.
rejected the allegations of full payment in view The creditor is allowed to maintain an action
of irregularity in the issuance of O.R.s (Payment upon any unpaid subscriptions and thereby steps
made on a later date was covered by an O.R. into the shoes of the corporation for the
with a lower serial number than payment made satisfaction of its debt. The trust fund doctrine is
on an earlier date. not limited to reaching the SH’s unpaid
subscriptions. The scope of the doctrine when
the corporation is insolvent encompasses not
53
only the capital stock but also other property and
assets generally regarded in equity as a trust
fund for the payment of corporate debts.

Meetings
Simny G. Guy, V. Gilbert G. Petitioner Simny G. Guy (Simny) is a stockholder 1. Whether or not the stockholders 1. YES. Date of Sending: Sept 2
Guy\, G.R. No. 184068, April of record and member of the board of directors meeting was properly sent. Date of Meeting: Sept 7 or 5 days after
19, 2016 of the Goodland Company, Inc. (GCI). 2. Whether or not the meeting was Date of Receipt: Sept 22
Respondents are also GCI stockholders of record called by a proper person. The provisions only require the sending/mailing
who were allegedly elected as NEW directors by 3. Whether or not Grace Cheu is of the notice of a stockholders' meeting to the
virtue of the assailed stockholders' meeting held entitled to such notice. stockholders of the corporation.
on 7 September 2004. On 10 September 2004, Sending/mailing is different from ailing or service
Paulino Delfin Pe and Benjamin Lim under the Rules of Court. Had the lawmakers
(stockholders of record of GCI) informed intended to include the stockholder's receipt of
petitioner that they had received a notice dated the notice, they would have clearly reflected
31 August 2004 calling for the holding of a such requirement in the law. Absent that
special stockholders’ meeting on 7 September requirement, the word "send" should be
2004 at the Manila Diamond Hotel. On 22 understood in its plain meaning. For a
September 2004, or fifteen (15) days after the stockholders' special meeting to be valid, certain
stockholders’ meeting, petitioner received the requirements must be met with respect to
aforementioned notice. notice, quorum and place. In 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
54
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.
Stocks and Stockholders
55
GONZALES VS PNB G.R. NO. L- Gonzales instituted a suit, as a taxpayer, against Whether or not Petitioner may compel No. The right of inspection granted to a
33320 MAY 30, 1983 Sec. of Public Works and Communications, the PNB to produce its books and records stockholder under Section 51 of Act No. 1459 has
Commissioner of Public Highways, and PNB for upon request. been retained, but with some modification.
alleged anomalies committed regarding the SECTION 51: The record of all business
bank’s extension of credit to import public works transactions of the corporation and the minutes
equipment intended for the massive of any meeting shall be open to the inspection of
development program. Petitioner bought 1 any director, member or stockholder of the
share of PNB stocks in order to gain standing as corporation at reasonable hours.
a stockholder. The petitioner has alleged that his the new Code has prescribed limitations to the
written request for such examination was same. It is now expressly required as a condition
denied by the respondent. The bank answered for such examination that the one requesting it
denying his request for being not germane to his must not have been guilty of using improperly
interest and for the cloud of doubt as to his real any information through a prior examination,
intention and purpose in acquiring said share. and that the person asking for such examination
Petitioner thereafter sought to inquire and must be "acting in good faith and for a legitimate
ordered PNB to produce its books and records purpose in making his demand."
which the Bank refused, invoking the provisions The Philippine National Bank is not an ordinary
from its charter created by Congress. 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.
APODACA V. NLRC Petitioner was employed in respondent 1) Whether or not the National Labor 1) NO. The NLRC has no jurisdiction to determine
G.R.No. 80039, April 18, 1989 corporation. In that corporation, petitioner was Relations Commission (NLRC) has such intra-corporate dispute between the
convinced to subscribe to its shares of stock. jurisdiction to resolve a claim for non- stockholder and the corporation as in the matter
Petitioner paid P37,500 for the subscription. payment of stock subscriptions to a of unpaid subscriptions. This controversy is
Petitioner was appointed President and General corporation. within the exclusive jurisdiction of the Securities
Manager of the corporation, and after 10 years, and Exchange Commission.
he resigned. Petitioner then filed a case in the 2) Whether or not an obligation of an
NLRC for unpaid wages, allowances, and bonus employee to his employer, arising from 2) NO. The amount of P17,060.7 owed by the
compensation against Respondent corporation. an unpaid subscription, be offset employer to the employee representing the
Respondent corporation admitted it owed against a money claim of an employee unpaid wages, allowances and bonus
Petitioner P17,060.7. However respondent against the employer. compensation, cannot be deducted from the
corporation deducted that amount, to the amount of P95,439.93 representing the
amount owed by petitioner to the corporation remaining balance of unpaid subscribed shares
which is P95,439.93. The number P95,439.93 of stock.
represented the unpaid balance for the shares First, the set off or deduction was pre mature
of stock he previously subscribed to. since there was no call for payment of the unpaid
subscribed shares of stock from the respondent
corporation.
56
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.

Erquiaga v. CA, G.R. No. Santiago de Erquiaga was the owner of 100% or Whether or not the Court of Appeals No. The Court found no reversible error in the
47206, September 27, 1989 3,100 paid-up shares of stock of the Erquiaga erred in annulling the trial court's order Court of Appeals' decision in annulling the trial
Development Corporation which owns the allowing Erquiaga to vote the 3,100 court's order: (1) allowing Erquiaga to vote the
Hacienda San Jose in Irosin, Sorsogon. On shares of Erquiaga Development 3,100 shares of Erquiaga Development
November 4,1968, he entered into an Corporation without having effected Corporation without having effected the transfer
Agreement with Jose L. Reynoso to sell to the the transfer of those shares in his name of those shares in his name in the corporate
latter his 3,100 shares (or 100%) of Erquiaga in the corporate books? books; and (2) authorizing Erquiaga to call a
Development Corporation for P900,000 payable special meeting of the stockholders of the
in installments on definite dates fixed in the Erquiaga Development Corporation and to vote
contract but not later than November 30, 1968. the 3,100 shares, without the pre-requisite
Because Reynoso failed to pay the second and registration of the shares in his name. It is a
third installments on time, the total price of the fundamental rule in Corporation Law (Section 35)
sale was later increased to P971,371.70 payable that a stockholder acquires voting rights only
on or before December 17, 1969. The difference when the shares of stock to be voted are
of P71,371.70 represented brokers' commission registered in his name in the corporate books.
and interest.
Until registration is accomplished, the transfer,
As of December 17, 1968, Reynoso was able to though valid between the parties, cannot be
pay the total sum of P410,000 to Erquiaga who effective as against the corporation. Thus, the
thereupon transferred all his shares (3,100 paid- unrecorded transferee cannot enjoy the status of
up shares) in Erquiaga Development a stockholder; he cannot vote nor be voted for,
Corporation to Reynoso, as well as the and he will not be entitled to dividends.
possession of the Hacienda San Jose, the only
asset of the corporation. 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
57
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.
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 entity,
Dominador Santiago PCGG. Instead of filing an answer, respondents accordance with Rule 26. the same shall be answered by any officer
(November 21, 1991 - G.R. filed a motion to strike out some portions of the thereof competent to testify in its behalf.
90478) complaint and for bill of particulars. PCGG filed Therefore, the contention of PCGG that the
an opposition. Respondent then presented a interrogatories are addressed only to the latter,
motion for leave to file interrogatories. PCGG without naming any specific
filed a motion to strike out the motion and commissioner/officer thereof is utterly of no
interrogatories. Sandiganbayan denied both consequence.
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
58
that the interrogatories aren't specific and do
not name particular individuals to whom they
are propounded.

AFRICA V. PCGG ET AL., G.R. Shortly after the PCGG sequestered ETPI, the Whether or not the issuance of the Yes, it is valid. In upholding the right of a
No. 83831, January 9, 1992 sequestration order was partially lifted in when subpoenas over the books of ETPI were stockholder of a sequestered company to inspect
40% of the shares of stock owned by Cable and valid. and/or examine the records of a corporation
Wireless, Ltd. were freed from the effects of pursuant to Section 74 of the Corporation Code,
sequestration. The remaining 60% of the shares, the Court found nothing in Executive Orders Nos.
however, remained under sequestration. 1, 2 and 14, to indicate an implied amendment of
Subsequently, during the annual stockholders the Corporation Code, much less an implied
meeting pursuant to a PCGG Resolution (January modification of a stockholder's right of
28, 1988) which called for the resumption of the inspection as guaranteed by Section 74 thereof.
stockholders meeting originally scheduled, The only express limitation on the right of
Villanueva, as PCGG nominee, Mabanta, and de inspection, according to the Court, is that (1) the
los Angeles as nominees of the foreign investors, right of inspection should be exercised at
and Africa were elected as members of the reasonable hours on business days; (2) the
board. The nomination and election of PCGG person demanding the right to examine and copy
nominees to the ETPI Board, as well as the excerpts from the corporate records and minutes
election of its new officers, triggered a chain of has not improperly used any information secured
contentious proceedings before the through any previous examination of the records
Sandiganbayan (SB) and the SC. of such corporation; and (3) the demand is made
in good faith or for a legitimate purpose.
G.R. No. 85594: Africa et al. filed before the 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
59
/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
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.
Enrique Razon, petitioner, vs. E. Razon, Inc. was organized in 1962 by Whether or not Enrique Razon is the No. In the case of Embassy Farms, Inc. v. Court of
INTERMEDIATE APPELLATE petitioner Enrique Razon for the purpose of owner of the 1500 shares of stock? Appeals, Supreme Court ruled: ". . . For an
COURT and Vicente B. participating in the bidding for the arrastre effective, transfer of shares of stock the mode
Chuidian, in his capacity as services in South Harbor, Manila. The and manner of transfer as prescribed by law
Administrator of the Estate of incorporators were Enrique Razon, Enrique must be followed. As provided under Section 3 of
the Deceased Juan T. Valles, Luisa M. de Razon, Jose Tuazon, Jr., Victor the Corporation Code, shares of stock may be
Chuidian, respondents. - G.R. L. Lim, Jose F. Castro and Salvador Perez de transferred by delivery to the transferee of the
No. 74306 March 16, 1992. Tagle. According to the petitioner, some of the certificate properly indorsed. Title may be vested
incorporators withdrew from the said in the transferee by the delivery of the duly
corporation. The petitioner then distributed the indorsed certificate of stock. However, no
stocks previously placed in the names of the transfer shall be valid, except as between the
withdrawing nominal incorporators to some parties until the transfer is properly recorded in
friends, among them the late Juan T. Chuidian to the books of the corporation. In the instant case,
whom he gave 1,500 shares of stock. The shares there is no dispute that the questioned 1,500
of stock were registered in the name of Chuidian shares of stock of E. Razon, Inc. are in the name
only as nominal stockholder and with the of the late Juan Chuidian in the books of the
agreement that the said shares of stock were corporation. From the point of view of the
60
owned and held by the petitioner but Chuidian corporation, therefore, Chuidian was the owner
was given the option to buy the same. of the 1,500 shares of stock. In such a case, the
The petitioner maintains that his aforesaid oral petitioner who claims ownership over the
testimony as regards the true nature of his questioned shares of stock must show that the
agreement with the late Juan Chuidian on the same were transferred to him by proving that all
1,500 shares of stock of E. Razon, Inc. is the requirements for the effective transfer of
sufficient to prove his ownership over the said shares of stock in accordance with the
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.
RURAL BANK OF LIPA CITY V. Reynaldo Villanueva, Sr., a stockholder of the Whether or not there was valid transfer NO. For a valid transfer of stocks, there must be
COURT OF APPEALS G.R. No. Rural Bank of Lipa City assigned his shares, as of the shares to the Bank that would strict compliance with the mode of transfer
124535. September 28, 2001 well as those of 8 other shareholders under his deprive the Villanueva spouses to prescribed by law. The requirements are: (a)
control with a total of 10,467 shares, in favor of exercise their rights as stockholders. There must be delivery of the stock certificate:
the stockholders of the Bank. Sometime (b) The certificate must be endorsed by the
thereafter, Reynaldo Villanueva, Sr. and his wife, owner or his attorney-in-fact or other persons
Avelina, executed an Agreement wherein they legally authorized to make the transfer; and (c)
stipulated that said debt will be paid out of the To be valid against third parties, the transfer
proceeds of the sale of their real property must be recorded in the books of the
described in the Agreement. The Villanueva corporation. As it is, compliance with any of
spouses also assured the Board on a subsequent these requisites has not been clearly and
meeting that their debt would be paid on or sufficiently shown. Still, while the assignment
before December 31 of that same year; may be valid and binding on the bank, et al. and
otherwise, the Bank would be entitled to the Villanuevas, it does not necessarily make the
liquidate their shareholdings, including those transfer effective. Consequently, the Villanuevas
under their control and any deficiency shall be cannot, as yet, be deprived of their rights as
secured by other collateral sufficient therefor. stockholders, until and unless the issue of
The Villanuevas failed to make good their ownership and transfer of the shares in question
obligation, thereafter their shares of stock were is resolved with finality.
converted into Treasury 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
61
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.
Nora Bitong v. CA, G.R. No. Nora Bitong filed a derivative suit before the SEC 1. Whether or not Nora Bitong has the 1. No. The Certificate of Stock held by Bitong, was
123553, July 13, 1998 for the benefit of Mr. & Ms. Publishing Company legal personality to initiate and sold to her through a deed of sale executed by
Incorporated, against Sps. Eugenia and Jose prosecute the derivative suit for the JAKA Inc. in her favor in 1983. However, it was
Apostol (Respondents) for fraud, benefit of Mr.&Ms. Publishing Co., Inc. actually signed by the President of the
misrepresentation, disloyalty, evident bad faith, 2. Whether or not Nora Bitong was a corporation only on March 17, 1989, thus it was
conflict of interest, and mismanagement of the valid stockholder. only then that said Certificate of Stock could be
affairs of the said corporation when on several considered to have been legally issued to her. A
occasions, the respondents allegedly made Certificate of Stock shall be signed by the
fraudulent and other unauthorized transactions president or vice president, countersigned by the
and with the Philippine Daily Inquirer. secretary or assistant secretary, and sealed with
the seal of the corporation. Thus, at the time the
Respondents contended that Bitong is a mere acts complained of were committed, Bitong was
holder-in-trust of JAKA shares, thus she was not not qualified to institute a stockholder's
the proper party to initiate a derivative suit. derivative suit.

Bitong averred that she acquired legal and 2. No. Section 63 of the Corporation Code
beneficial ownership of 997 out of 4,088 provides that a formal Certificate of Stock can
outstanding shares by virtue of a deed of sale only be issued if it is signed by the President or
executed by JAKA in her favor on July 25, 1983, Vice-President, countersigned by the Secretary
and recorded in the Stock and Transfer Book of or Assistant Secretary, and sealed with the
Mr. & Ms. Corporation, under Certificate of Corporate Seal. In this case, the Certificate of
Stock No. 008. Stock which she allegedly owns was legally issued
on March 17, 1989, the date when it was actually
Respondents on the other hand countered that signed by the President of the corporation. Thus,
Eugenia D. Apostol signed Certificate of Stock Bitong was not a bona fide stockholder of Mr. &
No. 008 only on March 17 1989 and not in 1983. Ms. prior to March 1989.
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.
62
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, the WON CA erred in ordering Thomson to MPC does not necessarily prohibit the transfer of
1998 Mgt. Consultant of American Chamber of transfer said share to AmCham’s proprietary shares by its members. The Club only
MARSH THOMSON vs. CA Commerce of the Philippines, Inc. (AmCham) for nominees restricts membership to deserving applicants in
over 10 years. While Thomson was still working accordance with its rules, when the amended
with AmCham, his superior, A. Lewis Burridge, AOI states that: "No transfer shall be valid except
retired as AmCham's President. Burridge between the parties, and shall be registered in
wanted to transfer his proprietary share in the the Membership Book unless made in
Manila Polo Club to Thomson. However, through accordance with these Articles and the By-
the intercession of Burridge, AmCham paid for Laws". Thus, as between parties herein, there is
the share but had it listed in Thomson's name. no question that a transfer is feasible. Moreover,
This was made clear in an employment advice. authority granted to a corporation to regulate
the transfer of its stock does not empower it to
Burridge transferred said proprietary share to restrict the right of a stockholder to transfer his
Thomson, as confirmed in a letter of notification shares, but merely authorizes the adoption of
to the MPC. Upon his admission as a new regulations as to the formalities and procedure
member of the MPC, Thomson paid the transfer to be followed in effecting transfer.
fee of P40k from his own funds; but AmCham
subsequently reimbursed this amount. MPC In this case, Thomson was the nominee of
issued a Proprietary Membership Certificate AmCham to hold the share and enjoy the
Number in favor of Thomson but the latter failed privileges of the club. But upon the expiration of
to execute a document recognizing AmCham's Thomson's employment as officer and
beneficial ownership over said share. consultant of AmCham, the incentives that go
Following AmCham's policy and practice, there with the position, including use of the MPC share,
was a yearly renewal of employment contract also ceased to exist. It now behooves Thomson
between Thomson and AmCham. Separate to surrender said share to AmCham's next
letters of employment advice in various dates nominee, another natural person. Obviously this
mentioned the MPC share. But Thomson never arrangement of trust and confidence cannot be
acknowledged that AmCham is the beneficial defeated by Thomson's citation of the MPC rules
owner of the share. to shield his untenable position, without doing
When Thomson's contract of employment was violence to basic tenets of justice and fair
up for renewal, he notified AmCham that he dealing.
would no longer be available as EVP. Still, Petition for Review on Certiorari is DENIED and
AmCham asked Thomson to stay on for another AFFIRMED CA’s decision.
63
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 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.
64
CIR vs. CA G.R. No. 108576. Don Andres Soriano formed the corporation A. WON redemption of stocks from the Yes. As a rule, a stock dividend representing the
January 20, 1999 Soriano Y Cia corporation predecessor of stockholder is equivalent to the transfer of surplus to capital account shall not be
ANSCOR. ANSCOR has an initial of 1M distribution of taxable dividend, making subject to tax. However, if a corporation cancels
capitalization divided into 10,000 common the proceeds taxable. or redeems stock issued as a dividend at such
shares at par value of 100 per share. Don Andres time and in such manner as to make the
subscribed to 4,963 shares of the 5,000 shares distribution and cancellation or redemption, in
originally issued. Eventually, ANSCOR’s whole or in part, essentially equivalent to the
authorized capital stock was increased to which distribution of a taxable dividend, the amount so
Don Andres subscribed after the other distributed in redemption or cancellation of the
stockholders waived in favor of the former their stock shall be considered as taxable income to
pre-emptive rights to subscribe to the new the extent it represents.
issues. ANSCOR declared stock dividends. For exempting clause to apply Sec. 83 a) there is
Later on, Don Andres died. The record reveals redemption or cancellation b) transaction
that he has 185,154 shares, 50,495 of which are involves stock dividends c) time and manner of
original issues and the balance of 134,659 shares the transaction makes it equivalent to a
as stock dividend declaration.One –half of the distribution of taxable dividends.
shareholdings 92,577 were transferred to his
wife Doa Carmen Soriano as her conjugal share. In the case at bar, it is undisputed that at the time
The other formed part of his estate. of the last redemption, the original common
shares owned by the estate were only 25,247.5.
Doa Carmen exchanged her whole common This means that from the total of 108,000 shares
shares into preferred shares. As well as the redeemed from the estate, the balance of
estate of Don Andres, thus, reducing his estate 82,725.5 must have come from stock dividends
common shares to 127,727. hence, proceeds of the redemption is additional
wealth, for it is not merely a return of capital but
A board resolution was passed redeeming the a gain.
common shares from the estate of Don Andres
twice. The purpose for both redemptions as The purposes invoked by ANSCOR to justify
stated is to partially retire stocks as treasury redemptions are no excuse for its tax liability.
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.
65
BLBT V. BITANGA The Potencianos, Delfin C. Yorro, and Maya Whether or not the stockholder’s The validity of the BLTB stockholders' meeting
Industries, Inc., entered into a Sale and Purchase meeting held on May 19, 1998 was void held on May 19, 1998 was sustained, in light of
Agreement, whereby, they sold to BMB Property since BMB Holdings, Inc., represented the time-honored doctrine in corporation law
Holdings, Inc represented by its President, by Bitanga group was not present at the that a transfer of shares is not valid unless
Benjamin Bitanga, their shares of stock in BLTB meeting. recorded in the books of the corporation. It is not
representing 47.98% of the total outstanding disputed that the transfer of the shares of the
capital stock of BLTB. Barely a month after the group of Dolores Potenciano to the Bitanga
Agreement was executed, Bitanga and Monina group has not yet been recorded in the books of
Grace Lim were elected as new directors. During the corporation. Hence, the group of Dolores
a meeting of the Board, the newly elected Potenciano, in whose names those shares still
directors scheduled the annual stockholders’ stand, were the ones entitled to attend and vote
meeting. Before the scheduled meeting, at the stockholders' meeting of the BLTB on 19
Michael Potenciano wrote Bitanga, requesting May 1998. This being the case, the Hearing Panel
for a postponement of the stockholders’ committed grave abuse of discretion in holding
meeting due to the absence of a thirty-day otherwise and in concluding that there was no
advance notice. However, there was no quorum in said meeting. The Court is in full
response on whether or not the request for accord with the SEC En Banc on this matter.
postponement was favorably acted upon. On Indeed, until registration is accomplished, the
the scheduled date of the meeting, a notice of transfer, though valid between the parties,
postponement of the stockholders’ meeting was cannot be effective as against the corporation.
published in the Manila Bulletin. In as much as Thus, the unrecorded transferee, the Bitanga
there was no notice of postponement prior to group in this case, cannot vote nor be voted for.
that, a total of 286 stockholders arrived and
attended the 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
66
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.
PONCE VS. ALSONS CEMENT Fausto Gaid was an incorporator of ACC having Whether or not the transfer of shares A transfer of shares of stock not recorded in the
CORPORATION G.R. No. subscribed to and fully paid 239,500 shares. of stock not recorded in the stock and stock and transfer book of the corporation is
105774 December 10, 2002 Vicente Ponce and Fausto Gaid executed a transfer book of the corporation is non-existent as far as the corporation is
“Deed of Undertaking” and “Indorsement” nonexistent insofar as the corporation concerned. As between the corporation on the
whereby the latter acknowledges that the is concerned and no certificate of stock one hand, and its shareholders and third persons
former is the owner of said shares and he was can be issued in the name of the on the other, the corporation looks only to its
therefore assigning/endorsing the same to transferee books for the purpose of determining who its
Ponce. No certificates of stock corresponding to shareholders are. It is only when the transfer has
the 239,500 subscribed and fully paid shares of been recorded in the stock and transfer book
Gaid were issued in the name of Fausto G. Gaid that a corporation may rightfully regard the
and/or Ponce. Despite repeated demands, the transferee as one of its stockholders.
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.
G.R. No. 184332 FEB. 17, 2016 Ting Ping purchased shares of TCL Sales Corp: (1) WON the surrender of the certificates Sec. 63 Corporation Code provides that: x x x
ANNA TENG vs. SEC and TING 480 shares from Peter Chiu; (2) 1,400 shares of stock is a requisite before Shares of stock so issued are personal property
PING LAY from his brother Teng Ching Lay, TCL Pres. and registration of the transfer may be and may be transferred by delivery of the
operations manager; and (3) 1,440 shares from made in the corporate books and for certificate or certificates indorsed by the owner
Ismaelita Maluto. the issuance of new certificates in its or his attorney-in-fact or other person legally
stead. authorized to make the transfer. No transfer,
Upon Ching Lay's death, his son Henry Teng took however, shall be valid, except as between the
over the mgt. of TCL. To protect his parties, until the transfer is recorded in the books
shareholdings with TCL, Ting Ping requested of the corporation showing the names of the
TCL's Cor sec Anna Teng to enter the transfer in parties to the transaction, the date of the
67
the Stock and Transfer Book of TCL for the transfer, the number of the certificate or
proper recording of his acquisition and certificates and the number of shares
demanded the issuance of new certificates of transferred. No shares of stock against which the
stock in his favor. TCL and Teng refused despite corporation holds any unpaid claim shall be
repeated demands. Because of their refusal, transferable in the books of the corporation.
Ting Ping filed a petition for mandamus with SEC Under the provision, requisites must be complied
against TCL and Teng. with for there to be a valid transfer of stocks, to
wit: (a) there must be delivery of the stock
SEC granted Ting Ping's petition, ordering TCL certificate; (b) the certificate must be endorsed
and Teng to record in the Books of the by the owner or his attorney-in-fact or other
Corporation, Ting Ping’s shares purchased and persons legally authorized to make the transfer;
to issue corresponding new certificates of and (c) to be valid against 3rd parties, the
stocks. transfer must be recorded in the books of the
corporation.
TCL and Teng appealed to SEC en banc, which,
the latter affirmed the SEC decision with It is the delivery of the certificate, coupled with
modification, in that Teng was held solely liable. the endorsement by the owner or his duly
authorized representative that is the operative
TCL and Teng filed a petition for review with CA act of transfer of shares from the original owner
which the latter dismissed finding no cogent and to the transferee. The delivery contemplated in
justifiable grounds to disturb the findings of Sec. 63, however, pertains to the delivery of the
SEC en banc. A petition for review certificate of shares by the transferor to the
on certiorari under Rule 45 before SC which transferee, that is, from the original stockholder
promulgated its Decision in G.R. No. 129777, named in the certificate to the person or entity
denying the petition. After the finality of SC's the stockholder was transferring the shares to,
decision, the SEC issued a writ of execution whether by sale or some other valid form of
addressed to the Sheriff of RTC Manila. absolute conveyance of ownership.

Thereafter, Teng filed a complaint for It is clear that Teng's position does not have legal
interpleader with RTC Manila where Teng basis. The delivery or surrender adverted to by
sought to compel Henry and Ting Ping to Teng, i.e., from Ting Ping to TCL, is not a requisite
interplead and settle the issue of ownership before the conveyance may be recorded in its
over the 1,400 shares previously owned by books. To compel Ting Ping to deliver to the
Ching Lay. The deputized sheriff held in corporation the certificates as a condition for the
abeyance the implementation of the writ of registration of the transfer would amount to a
execution pending outcome of the civil case. RTC restriction on the right of Ting Ping to have the
Manila finding Henry to have a better right to stocks transferred to his name, which is not
the shares of stock formerly owned by Ching sanctioned by law. The only limitation imposed
Lay. by Sec. 63 is when the corporation holds any
unpaid claim against the shares intended to be
TIng Ping filed An Ex Parte Motion for the transferred.
Issuance of Alias Writ of Execution where he The right of a transferee/assignee to have stocks
sought the partial satisfaction of SEC en transferred to his name is an inherent right
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banc Order, ordering TCL and Teng to record the flowing from his ownership of the stocks. If a
480 shares and 1,440 shares he acquired from corporation refuses to make such transfer
Chiu and Maluto, respectively. SEC issued an without good cause, it may, in fact, even be
Order granting Ting Ping’s motion. compelled to do so by mandamus. With more
reason in this case where SC, in G.R. No. 129777,
Teng and TCL filed their respective motions to already upheld Ting Ping's definite and
quash the alias, which was opposed by Ting Ping, uncontested titles to the subject shares. TCl and
who is willing to surrender the original stock Teng could not repudiate these
certificates of Chiu and Maluto to facilitate and documents. Hence, the transfer of shares to Ting
expedite the transfer of the shares in his favor. Ping must be recorded on the corporation's stock
SEC denied the motions to quash the alias. and transfer book.
Teng cannot refuse registration of the transfer.
Teng filed a petition for certiorari and The respective duties of the corporation and its
prohibition under Rule 65 ROC. SEC, through the secretary to transfer stock are purely
OSG, filed a Comment which Teng moved to ministerial. To be valid against 3rd parties and
expunge. CA dismissed the petition and denying the corporation, the transfer must be recorded
the motion to expunge SEC's comment. 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.
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
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.
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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.
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
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.
Concorde Condominium vs. Concorde Condominium Inc is a duly constituted WON the case involves intra-corporate No. The relationship and nature of controversy
Baculio G.R. No. 203678, corporation or association which owns common controversy hence, RTC as Special test can be applied in determining whether a
February 17, 2016 shares in the project comprising lot 1 where the Commercial Court has jurisdiction over dispute constitute intra-corporate controversy.
condominium stands and lot 2 which serves as the case. The Court agreed with RTC Branch 149 that
the parking lot of the unit owners and Concorde injunction with damages is an ordinary civil case.
Condominium Building that was developed by Based on the allegations in the petition no intra-
Pulp and Paper Distributors now New PPI Corp. corporate relations exist between the opposing
parties namely 1) petitioner condominium
PPI as developer engaged in real estate business corporation and its unit owners and 2)
practice, altered the condominium plan to respondent New PPI Corp., together with other
segregate lot 2 from the common areas and respondents such as City Fire Marshal of Makati
cause the issuance of separate title thereof in City, Regional Director of bureau of fire
the name of PPI. protection and the private agebcy. Clearly the
suit involves conflicting claims of ownership over
CCI questioned the said act of PPI in HLURB. The the lots of Concorde Condominium and
same case was elevated on appeal to HLRUB violations of National Building Code resulted in
board commissioners. In both cases HLURB the revocation of the occupancy permit.
ruled in favor of CCI. PPI did not appeal from the
decision of HLURB board of commissioners to
the office of the president thus, it became final
and executory.
70

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.
Corporate Books and Records
ANG-ABAYA, ET AL. VS. ANG - Petitioners and private respondent are Whether or not petitioners may be held No, petitioners may not be held liable.
G.R. No. 178511, December 4, shareholders, officers and members of the liable under Sec. 74 of the Corporation Stockholder's right to inspect corporate books is
2008 board of directors of family-owned Code for refusing to allow private not without limitations. The Court found that the
corporations. These corporations filed a petition respondent to examine the corporate allegations of petitioners that respondent is
for damages with prayer for issuance of TRO books and records. conniving with some other persons to
against respondent alleging among others, of fraudulently wrest control or management of the
conniving to fraudulently wrest control or corporations are supported by official and other
management of the corporations. During its documents. Hence, their refusal is justified on
pendency, respondent sought permission for the grounds that private respondent was not
the inspection of the corporate books of the acting in good faith and for a legitimate purpose
corporations which was denied by the in making his demand for inspection of the
petitioners, arguing that respondent was not corporate books.
acting in good faith and 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.

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