1. Tayag v.

Benguet Consolidated
No. L-23145. | Nov. 29, 1968 | Fernando, J. Ratio:
Digest by: AVILLON ● The Constitution overrides a statute, to which, however, the judiciary
must yield deference, when appropriately invoked and deemed
Petitioners: Testate Estate of Idonah Slade Perkins, Renato Tayag
applicable. It would be most highly unorthodox, however, if a corporate
Respondents: Benguet Consolidated, Inc.
by-law would be accorded such a high estate in the jural order that a
court must not only take note of it but yield to its alleged controlling force.
Doctrine: A corporation as known to Philippine jurisprudence is a creature
● A corporation as known to Philippine jurisprudence is a creature without
without any existence until it has received the imprimatur of the state according
any existence until it has received the imprimatur of the state according to
to law. It is logically inconceivable therefore that it will have rights and
law. It is logically inconceivable therefore that it will have rights and
privileges of a higher priority than that of its creator. More than that, it cannot
privileges of a higher priority than that of its creator. More than that, it
legitimately refuse to yield obedience to acts of its state organs, certainly not
cannot legitimately refuse to yield obedience to acts of its state organs,
excluding the judiciary, whenever called upon to do so.
certainly not excluding the judiciary, whenever called upon to do so.
● A corporation once it comes into being comes more often within the ken
Facts: of the judiciary. It institutes the appropriate court action to enforce its
1) Idonah Slade Perkins died in NY City and left two stock certificates rights. It is not immune from judicial control in those instances, where a
covering 33,002 shares of Benguet Consolidated Inc. duty under the law as ascertained in an appropriate legal proceeding is
2) The certificates were in the possession of County Trust Company of New cast upon it.
York, which is the domiciliary administrator of the estate of the deceased.
3) Ancillary administration proceedings were instituted in the CFI Manila Dispositive:
and Renato Tayag was appointed the ancillary administrator. WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of
4) A dispute arose between the domiciliary administrator in New York the Court of First Instance, dated May 18, 1964, is affirmed. With costs against
(County Trust) and the ancillary administrator in the Philippines (Tayag) oppositor-appelant Benguet Consolidated, Inc.
as to which of them was entitled to the possession of the stock certificates.
5) The CFI ordered County Trust to produce and deposit the certificates with
Tayag.
6) County Trust refused to comply, which moved Tayag to pray that the CFI
issue an order declaring the certificates as lost.
7) The CFI declared the certificates as lost and cancelled and directed
Benguet Consolidated to issue new certificates to Tayag or to the court.
8) Benguet Consolidated argued that:
a) the certificates are not actually lost since they are with County
Trust
b) the issuing of new certificates would violate its by-laws
c) in the event of a contest or the pendency of an action regarding
ownership of such certificate or certificates of stock allegedly
lost, stolen or destroyed, the issuance of a new certificate would
await the final decision by a court regarding the ownership
thereof.

Issue/s:
● W/N Benguet Consolidated should issue the certificates - YES
CORP 2-D Digests | 1
 2. Villa Rey Transit, Inc. v. Ferrer
G.R. No. L-23893 | October 29, 1968 | Angeles, J.
Digest by: BALAGTAS
Petitioners: VILLA REY TRANSIT, INC.
Respondents: EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO.,
INC., and PUBLIC SERVICE COMMISSION
Doctrine:
When the fiction is urged as a means of perpetrating a fraud or an illegal act or
as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates
the corporation from the members or stockholders who compose it will be lifted
to allow for its consideration merely as an aggregation of individuals.
(Basically piercing of the corporate veil)
Facts: (DISCLAIMER: Ang dami talagang facts guys sorry)
1) Jose M. Villarama was an operator of a bus transportation, under the
business name Villa Rey Transit.
a) Pursuant to 2 Certificates of Public Convenience (CPC) granted
by the Public Service Commission (PSC), he was authorized to
operate 32 units.
2) Villarama then sold the 2 CPCs to Pangasinan Transportation Company,
Inc (Pantranco).
a) With the condition that Villarama shall not apply for any TPU
service identical or competing with Pantranco within 10 years.
3) 3 months after, a corporation called Villa Rey Transit, Inc. (VRTI) was
organized.
a) The incorporators were all family members of Jose Villarama.
4) VRTI was then registered in the SEC.
a) Then bought 5 CPCs and 49 buses from a certain Valentin
Fernando.
5) VRTI and Fernando then applied with the PSC for its approval.
a) The PSC provisionally approved the CPCs.
i) Subject to the condition that "it may be modified or
revoked by the Commission at any time, shall be subject
to whatever action that may be taken on the basic
application and shall be valid only during the pendency of
said application."
6) The Sheriff of Manila then levied on 2 of the 5 CPCs.
a) Pursuant to a writ of execution issued by the Pangasinan CFI in
favor of Eusebio Ferrer against Valentin Fernando.
7) Ferrer then sold the 2 CPCs to Pantranco.
a) Ferrer and Pantranco then applied for approval in the PSC.
8) PSC then jointly heard the applications of VRTI and Pantranco for the 2
CPCs.
a) PSC provisionally awarded it to Pantranco.
b) VRTI appealed to the SC
i) Ruled that ownership of the 2 CPCs must be properly
settled first in the proper court, and until then, VRTI
should be the one to operate the routes provisionally.
9) VRTI then filed in the CFI a complaint for annulment of the sheriff’s sale of
the 2 CPCs to Ferrer, and the sale of the latter to Pantranco.
10) Ferrer and Pantranco said that VRTI had no valid title to the CPCs.
a) Because the contract pursuant to which VRTI acquired them from
Fernando was subject to a suspensive condition:
i) Which was the approval of the PSC
which has not yet been fulfilled.
11) Pantranco also filed a third-party complaint against Jose Villarama
a) Alleging that Villarama and VRTI is one and the same.
b) That Villarama and VRTI was disqualified from operating the 2
CPCs due to the prior agreement between Villarama and
Pantranco.
i) that Villarama "shall not for a period of 10 years from the
date of this sale, apply for any TPU service identical or
competing with the buyer."
12) The CFI then declared VRTI to be the lawful owner of the 2 CPCs.
a) Also held that VRTI is a distinct and separate entity from Jose
Villarama .
b) Also held that the restriction against Villarama was void for being
an invalid restraint against trade.
Issue/s:
● W/N VRTI is a distinct and separate entity from Jose Villarama - NO.
Ratio:
1) The evidence has disclosed that:
a) Villarama, albeit was not an incorporator or stockholder of the
Corporation, alleging that he did not become such, because he
CORP 2-D Digests | 2
 did not have sufficient funds to invest, his wife, however, was an
incorporator with the least subscribed number of shares, and
was elected treasurer of the Corporation.
b) The finances of the Corporation which, under all concepts in the
law, are supposed to be under the control and administration of
the treasurer keeping them as trust fund for the Corporation,
were, nonetheless, manipulated and disbursed as if they were
the private funds of Villarama, in such a way and extent that
Villarama appeared to be the actual owner-treasurer of the
business without regard to the rights of the stockholders.
c) The evidence further show that the initial cash capitalization of
the corporation of P105,000.00 was mostly financed by Villarama.
i) Of the P105,000.00 deposited in the First National City
Bank of New York, representing the initial paid-up
capital of the Corporation, P85,000.00 was covered by
Villarama's personal check.
ii) The deposit slip for the said amount of P105,000.00
shows that P20,000.00 was paid in cash and P85,000.00
thereof was covered by a Check from the First National
City Bank of New York.
(1) The testimonies of 2 employees of said bank,
have proved that the drawer of the check was
Jose Villarama himself.
d) Another witness, the accountant of the Corporation, testified that
while in the books of the corporation there appears an entry that
the treasurer received P95,000.00 as second installment of the
paid-in subscriptions, and, subsequently, also P100,000.00 as the
first installment of the offer for second subscriptions worth
P200,000.00 from the original subscribers, yet Villarama directed
him (accountant) to make vouchers liquidating the sum.
i) Thus, it was made to appear that the P95,000.00 was
delivered to Villarama in payment for equipment
purchased from him, and the P100,000.00 was loaned as
advances to the stockholders.
ii) The said accountant, however, testified that he was not
aware of any amount of money that had actually passed
hands among the parties involved, and actually the only
money of the corporation was the P105,000.00 covered
by the deposit slip which, as mentioned above,
P85,000.00 was paid by Villarama's personal check.
e) Further, the evidence show that when the Corporation was in its
initial months of operation, Villarama purchased and paid with
his personal checks Ford trucks for the Corporation.
f) Photostatic copies of ledger entries and vouchers showing that
Villarama had co-mingled his personal funds and transactions
with those made in the name of the Corporation, are also very
illuminating evidence.
2) Taking account of the foregoing evidence, it would appear that:
a) Villarama supplied the organization expenses and the assets of
the Corporation, such as trucks and equipments;
b) there was no actual payment by the original subscribers of the
amounts of P95,000.00 and P100,000.00 as appearing in the
books;
c) Villarama made use of the money of the Corporation and
deposited them to his private accounts;
d) and the Corporation paid his personal accounts.
3) The foregoing circumstances are strong persuasive evidence showing
that Villarama has been too much involved in the affairs of the
Corporation to altogether negative the claim that he was only a part-time
general manager.
a) They show beyond doubt that the Corporation is his alter ego.
b) It is significant that not a single one of the acts enumerated above
as proof of Villarama's oneness with the Corporation has been
denied by him.
i) On the contrary, he has admitted them with offered
excuses.
c) Villarama's explanation on the matter of his involvement with the
corporate affairs of the Corporation only renders more credible
Pantranco's claim that his control over the corporation, especially
in the management and disposition of its funds, was so extensive
and intimate that it is impossible to segregate and identify which
money belonged to whom.
4) The interference of Villarama in the complex affairs of the corporation,
and particularly its finances, are much too inconsistent with the ends and
purposes of the Corporation Law, which, precisely, seeks to separate
personal responsibilities from corporate undertakings.
a) It is the very essence of incorporation that the acts and conduct of
the corporation be carried out in its own corporate name
because it has its own personality.
5) The doctrine that a corporation is a legal entity distinct and separate from
the members and stockholders who compose it is recognized and
respected in all cases which are within reason and the law.
CORP 2-D Digests | 3
 a) When the fiction is urged as a means of perpetrating a fraud or
an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of
knavery or crime, the veil with which the law covers and isolates
the corporation from the members or stockholders who compose
it will be lifted to allow for its consideration merely as an
aggregation of individuals.
6) The preponderance of evidence have shown that the Villa Rey Transit,
Inc. is an alter ego of Jose M. Villarama, and that the restrictive clause in
the contract entered into by Villarama and Pantranco is also enforceable
and binding against the said Corporation.
a) For the rule is that a seller or promissor may not make use of a
corporate entity as a means of evading the obligation of his
covenant. Where the Corporation is substantially the alter ego of
the covenantor to the restrictive agreement, it can be enjoined
from competing with the covenantee.

Dispositive:

PREMISES CONSIDERED, the judgment appealed from is hereby modified as

follows:

1. The sale of the two certificates of public convenience in question by Valentin

Fernando to Villa Rey Transit, Inc. is declared preferred over that made by the
Sheriff at public auction of the aforesaid certificate of public convenience in favor
of Eusebio Ferrer;

2. Reversed, insofar as it dismisses the third-party complaint led by Pangasinan

Transportation Co. against Jose M. Villarama, holding that Villa Rey Transit, Inc. is
an entity distinct and separate from the personality of Jose M. Villarama, and
insofar as it awards the sum of P5,000.00 as attorney's fees in favor of Villa Rey
Transit, Inc.;

3. The case is remanded to the trial court for the reception of evidence in
consonance with the above findings as regards the amount of damages suffered by
Pantranco; and

4. On equitable considerations, without costs.

So ordered.
CORP 2-D Digests | 4
 3. Employees Union of Bayer Phils. V. Bayer Phils., Inc. 5)
G.R. No. 162943 | December 6, 2010 | VILLARAMA, JR., J.
Digest by: BULATAO
6)
Petitioners: EMPLOYEES UNION OF BAYER PHILS., FFW and JUANITO S.
FACUNDO, in his capacity as President
7)
Respondents: BAYER PHILIPPINES, INC., DIETER J. LONISHEN (President),
8)
ASUNCION AMISTOSO (HRD Manager), AVELINA REMIGIO AND ANASTACIA
VILLAREAL
Doctrine:
An intra-union dispute refers to any conflict between and among union
members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of
the union’s constitution and by-laws, or disputes arising from chartering or
disaffiliation of the union.
A Collective Bargaining Agreement (CBA) is entered into in order to foster
stability and mutual cooperation between labor and capital.
An employer should not be allowed to rescind unilaterally its CBA with the duly
9)
certified bargaining agent it had previously contracted with, and decide to
bargain anew with a different group if there is no legitimate reason for doing so
10)
and without first following the proper procedure.
If such behavior would be tolerated, bargaining and negotiations between the
11)
employer and the union will never be truthful and meaningful, and no CBA
forged after arduous negotiations will ever be honored or be relied upon.
12)
Facts:
13)
1) Petitioner Employees Union of Bayer Philippines (EUBP) is the exclusive
bargaining agent of all rank-and-file employees of Bayer Philippines, and
is an affiliate of the Federation of Free Workers (FFW). 14)
2) In 1997, EUBP, headed by its president Facundo, negotiated with Bayer 15)
for the signing of a Collective Bargaining Agreement (CBA).
3) During the negotiations, the Union rejected Bayer’s 9.9% wage-increase 16)
proposal resulting in a bargaining deadlock.
4) EUBP staged a strike, prompting the Secretary of DOLE to assume
jurisdiction over the dispute. 17)
Pending the resolution of the dispute, respondent Remigio and 27 other
union members, without any authority from their union leaders, accepted
Bayer’s wage-increase proposal.
The DOLE Secretary issued an arbitral award ordering EUBP and Bayer to
execute a CBA.
Meanwhile, the rift between Facundo’s leadership and Remigio’s group
broadened.
Six (6) months from the signing of the new CBA, Remigio solicited
signatures from union members in support of a resolution containing the
decision of the signatories to:
1. Disaffiliate from FFW,
2. Rename the union as Reformed Employees Union of Bayer
Philippines (Reformed Union),
3. Adopt a new constitution and by-laws for the union,
4. Abolish all existing officer positions in the union and elect a new set
of interim officers, and
5. Authorize Reformed Union to administer the CBA between the
Union and Bayer. The said resolution was signed by 147 of the 257
local union members.
Both groups sought recognition from Bayer and demanded remittance of
the union dues collected from its rank-and-file members.
Bayer responded by deciding not to deal with either of the two groups,
and by placing the union dues collected in a trust account until the conflict
between the two groups is resolved.
EUBP filed a complaint for unfair labor practice (first unfair labor
practice case) against Bayer for non-remittance of union dues.
While the case was still pending and despite EUBP’s repeated request for
a grievance conference, Bayer decided to turn over the collected union
dues to Reformed Union.
Consequently, EUBP lodged a complaint against Remigio’s group before
the Industrial Relations Division of the DOLE praying for their expulsion
from the Union for commission of "acts that threaten the life of the union."
The Labor Arbiter (LA) dismissed this complaint for lack of jurisdiction.
EUBP filed the second unfair labor practice complaint against the
respondents.
EUBP complained that Bayer refused to remit the collected union dues to
them despite several demands sent to the management and that the latter
opted to negotiate instead with Remigio’s group.
Reformed Union and Bayer agreed to sign a new CBA.
CORP 2-D Digests | 5
 18) In response, EUBP immediately filed an urgent motion for the issuance of
a restraining order/injunction before the NLRC and the LA against
respondents.
19) Labor Arbiter (LA): Dismissed the Union’s second unfair labor practice
complaint for lack of jurisdiction.
20) NLRC: Denied EUBP’s appeal.
21) CA: Sustained both LA and the NLRCs rulings.
Issue/s:
1. W/N the LA and the NLRC have jurisdiction. - YES
2. W/N the instant case involves an intra-union dispute. - NO
3. W/N the company committed an act of unfair labor practice. - YES
1) Respondents Bayer Phils., Dieter J. Lonishen and Asuncion Amistoso are
found LIABLE for Unfair Labor Practice, and are hereby ORDERED to
remit to petitioners the amount of P254,857.15 representing the collected
union dues previously turned over to Avelina Remigio and Anastacia
Villareal. They are likewise ORDERED to pay petitioners nominal
damages in the amount of P250,000.00 and attorneys fees equivalent to
10% of the monetary award; and
2) The complaint, as against respondents Remigio and Villareal. is
DISMISSED due to the lack of jurisdiction of the Labor Arbiter and the
NLRC, the complaint being in the nature of an intra-union dispute.

Reference:
Ratio:
YES, the LA and the NLRC have jurisdiction over the unfair labor practice
complaint filed against Bayer.
● However, EUBP’s unfair labor practice complaint cannot prosper as
against respondents Remigio et al. because the issue, as against them,
essentially involves an intra-union dispute.
NO, the case at bar is not about an intra-union dispute.
● The issues raised by petitioners do not fall under any of the circumstances
constituting an intra-union dispute.
● More importantly, the EUBP does not seek a determination of whether it is
the Facundo group (EUBP) or the Remigio group (Reformed Union) which
is the true set of union officers.
● The issue raised pertain only to the validity of the acts of management.
● Employees Union of Bayer (EUBP) is the Collective Bargaining Agent
(CBA) of Bayer headed by Facundo.
● There was a breakaway group named Reformed Employees’ Union
headed by Remigio.
● The union dues collected by Bayer was then remitted to the Reformed
Union despite the existence of a CBA between the company and EUBP.
● EUBP then filed an unfair labor practice complaint against Bayer and
Remigio.
● Bayer was found guilty of unfair labor practice.
● The case against Remigio was dismissed because the rift between
Facundo’s group and Remigio’s group is an intra-union dispute.
● SEE DOCTRINE.

YES, the acts of the company constituted an unfair labor practice.

● When an employer proceeds to negotiate with a splinter union despite
the existence of its valid CBA with the duly certified and exclusive
bargaining agent, the former indubitably abandons its recognition of the
latter and terminates the entire CBA.

Dispositive:

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The

Decision dated December 15, 2003 and the Resolution dated March 23, 2004 of the
Court of Appeals in CA-G.R. SP No. 73813 are MODIFIED as follows:

CORP 2-D Digests | 6

 4. West Coast Life Ins. Co. v. Hurd
G.R. No. L-8527 | March 30, 1914 | Moreland, J.
Digest by: CAPACITE
Petitioners: West Coast Life Insurance Co. (West Coast)
Respondents: Geo Hurd, Judge of CFI
Doctrine:
To bring a corporation into court criminally requires many additions to the
present criminal procedure.
While it may be said to be the duty of courts to see to it that criminals are
punished, it is no less their duty to follow prescribed forms of procedure and not
to go out upon unauthorized ways or act in an unauthorized manner.
Facts:
Libel case
● West Coast is a corporation duly organized under the laws of the State of
California, doing business regularly in the Philippines pursuant to its
laws.
● Dec. 16, 1912 - Asst prosecuting atty of Manila filed an information in the
CFI against defendants West Coast, John Northcott (general agent of West
Coast for the Phils), and Manuel Grey (treasurer of the West Coast branch
in the Phils) for the crime of libel.
○ that during the months of Sept and Oct, said defendants printed
circulars and distributed to policy holders (and prospective
holders) of Insular Life Insurance Company a malicious
defamation in Spanish1 that Insular Life was in a dangerous
financial condition and on the point of going into insolvency
● Dec. 17, 1912 - Hurd as judge of the CFI issued a process (in the form of a
summons) for the defendants to appear on the 18th.
● Defendants filed a motion to quash the summons and the service thereof
on the ground that the court had no jurisdiction over West Coast, there
being no authority in the court for the issuance of the process.
○ that the order under which the process was issued was void
○ CFI denied
1 'First. For some time past various rumors are current to the effect that the Insular Life
Insurance Company is not in as good a condition as it should be at the present time, and that
really it is in bad shape. Nevertheless, the investigations made by the representative of the
"Bulletin" have failed fully to confirm these rumors. It is known that the Insular Auditor has
examined the books of the company and has found that its capital has diminished, and that by
direction of the said official the company has decided to double the amount of its capital, and
also to pay its reserve fund. All this is true.'
Writ of prohibition case
● West Coast prayed that a writ of prohibition be issued for Hurd to desist
from further proceedings against the former in the criminal case.
○ that the CFI has no power or authority to proceed against a
corporation criminally to bring it to court for the purpose of
making it amenable to the criminal laws
○ that issuance and service of the process were authorized by no
law and thus void
○ that the process was a mixture of civil and criminal process, not
properly signed, did not direct an arrest, and not in the form
required by law
Issue/s:
1. W/N the court may, of itself, create not only a process but a procedure by
which the process may be made effective - NO
Ratio:
1.
● Courts have only such authority in criminal matters as is expressly
conferred upon them by statute or which it is necessary to imply from
such authority in order to carry out fully the authority conferred.
○ CFIs have no authority to create new procedure and new
processes in criminal law.
● Even though there are various penal laws in the Phils which corporations
may violate, still the courts are not authorized to go to the extent of
creating special procedure and special processes for the purpose of
carrying out those penal statutes, when the legislature itself has neglected
to do so.
○ To bring a corporation into court criminally requires many
additions to the present criminal procedure.
○ While it may be said to be the duty of courts to see to it that
criminals are punished, it is no less their duty to follow
prescribed forms of procedure and not to go out upon
unauthorized ways or act in an unauthorized manner.
● The courts here have no common law jurisdiction or powers.
○ If they have any powers not conferred by statute, expressly or
impliedly, they would naturally come from Spanish and not from
common law sources.
■ Under the Spanish criminal law and procedure, a
corporation could not have been proceeded against
criminally, as such, it could not have committed a crime
CORP 2-D Digests | 7
 in which a willful purpose or a malicious intent was
required.
■ Criminal actions would have been restricted or limited,
under that system, to the officials of such corporations
and never would have been directed against the
corporation itself.

Dispositive:
It is adjudged that the Court of First Instance of the city of Manila be and it is
hereby enjoined and prohibited from proceeding further in the criminal cause
which is before us in this proceeding, entitled United States vs. West Coast Life
Insurance Company, a corporation, John Northcott and Manuel C. Grey, so far as
said proceedings relate to the said West Coast Life Insurance Company, a
corporation, the plaintiff in the case.

Notes:
● There are many cases cited by counsel for the defendant (Hurd) which
show that corporations have been proceeded against criminally by
indictment and otherwise and have been punished as malefactors by the
courts.
○ In those cases, the statute, by express words or by necessary
intendment, included corporations within the persons who could
offend against the criminal laws; and the legislature, at the same
time established a procedure applicable to corporations.

CORP 2-D Digests | 8

 5. Philippine National Bank (PNB) v. Court of Appeals
G.R. No. L-27155 | May 18, 1978 | Antonio, J.
Digest by: CASAMA
Petitioners: Philippine National Bank
Respondents: CA, Rita Gueco Tapnio, Cecilio Gueco and Phil. American
General Insurance Company Inc. (Philamgen)
Doctrine:
A corporation is civilly liable in the same manner as natural persons for torts,
because "generally speaking, the rules governing the liability of a principal or
master for a tort committed by an agent or servant are the same whether the
principal or master be a natural person or a corporation, and whether the
servant or agent be a natural or artificial person.
All of the authorities agree that a principal or master is liable for every tort
which he expressly directs or authorizes, and this is just as true of a corporation
as of a natural person, A corporation is liable, therefore, whenever a tortious act
is committed by an officer or agent under express direction or authority from
the stockholders or members acting as a body, or, generally, from the directors
as the governing body."
Facts:
22) Philamgen executed a bond with Rita as principal in favor of PNB Branch
at San Fernando Pampanga to guarantee the payment of Rita’s account
with PNB
23) In turn, Rita and Cecilio executed an indemnity agreement to guarantee
the payment of whatever amount the bonding company would pay to PNB
24) The original amount of the bond was 4k but was reduced to 2k
25) Rita was indebted to the bank in the sum of 2k plus accumulated interest
unpaid which she failed to pay despite demands
26) The bank wrote a letter of demand to Philamgen and Philamgen paid the
bank
27) Rita claims however that when demand was made upon her by Philamgen
for her to pay her debt to the bank, she told Philamgen that she did not
consider herself to be indebted to the bank at all because she had an
agreement with Jacobo-Nazon whereby she had leased to the latter her
unused export sugar quota for the 1956-1957 agricultural year for a total
of P2,800 which was already an excess of her obligation guaranteed by
Philamgen’s bond.
- She further claims that this was done with the knowledge of the
bank but the bank has placed obstacles to the consummation of
the lease and the delay caused Nazon to rescind the lease
contract
- Rita filed then her third-party complaint against PNB to recover
all sums of money which may be adjudged against her and in
favor of Philamgen
● The lower court found based on evidence that Rita had an export sugar
quota of 1k piculs for the agri year 1956-1957 which she did not need so
she allowed Jacobo Tuazon to use said quota for P2,500 (Contract of lease
of sugar allotment)
● At the time of the agreement, Rita was indebted to PNB and this
indebtedness was known as a crop loan and was secured by a mortgage
on her standing crop including her sugar quota allocation for the
agricultural year corresponding to said standing crop (this means that
PNB has a lien on the harvests of Rita)
● Her sugar cannot be exported without sugar quota allotment so when she
harvests less sugar than her quota, her excess quota is utilized by another
(Jacobo)
● Since the quota was mortgaged to PNB, the contract of lease had to be
approved by the bank but the bank required the parties to raise the
consideration to P2,800 informing them that the minimum lease rental
acceptable is P2.80 per picul.
● Mr. Jacobo agreed to raising the consideration and was read to pay said
amount as the funds were in his folder which was kept in the bank
● Mr. Jacobo explained regarding the funds that he had an approved loan
from the bank but he had not yet utilized it as he was intending to use it to
pay for the quota.
● Hence, when Mr. Jacobo said the amount needed to pay Rita was in his
folder which was in the bank, he meant and the bank manager
understood and knew he had an approved loan available to be used in
payment of the quota.
● However, when the bank manager recommended the approval of the
contract of lease, the board of directors of PNB required that the amount
be raised to P3 per picul
● Mr. Jacobo asked for reconsideration but it was unacted upon.
● Because of this, he was no longer interested to continue the lease so Rita
lost the sum of P2,800 which could be the payment for her indebtedness
● Lower courts ruled in favor of Rita
Issue/s:
● Whether PNB is liable for the damage caused? YES
CORP 2-D Digests | 9
Ratio:
● Time is of the essence in the approval of the lease of sugar quota
allotments, since the same must be utilized during the milling season,
because any allotment which is not filled during such milling season may
be reallocated by the Sugar Quota Administration to other holders of
allotments.
● The unreasonableness of the position adopted by the petitioner's Board of
Directors is shown by the fact that the difference between the amount of
P2.80 per picul offered by Tuazon and the P3.00 per picul demanded by
the Board amounted only to a total sum of P200.00.
● Considering that all the accounts of Rita Gueco Tapnio with the Bank were
secured by chattel mortgage on standing crops, assignment of leasehold
rights and interests on her properties, and surety bonds and that she had
apparently "the means to pay her obligation to the Bank, as shown by the
fact that she has been granted several sugar crop loans of the total value
of almost P80,000.00 for the agricultural years from 1952 to 1956", there
was no reasonable basis for the Board of Directors of petitioner to have
rejected the lease agreement because of a measly sum of P200.00.
● Although PNB had the ultimate authority of approving or disapproving the
proposed lease, the latter cannot escape its responsibility of observing,
for the protection of the interest of private respondents, that degree of
care, precaution and vigilance which the circumstances justly demand in
approving the lease of said sugar quota.
● PNB acted in bad faith because it knew that the agricultural year was
about to expire and that by its disapproval of the lease, private
respondents would be unable to utilize the sugar quota
● PNB is liable for damages under Article 21 of NCC, any person who
willfully causes loss or injury to another in a manner that is contrary to
morals, good customs, and public policy shall compensate the latter for
the damage
● DOCTRINE
Dispositive:
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is
hereby AFFIRMED.

CORP 2-D Digests | 10

 6. Sergio F. Naguiat v. NLRC
G.R. No. 116123 | March 13, 1997 | Panganiban, J.
Digest by: CHANG
Petitioners: Sergio F. Naguiat doing business under the name and style Sergio
F. Naguiat Ent., Inc., & Clark Field Taxi, Inc. (CFTI)
Respondents: National Labor Relations Commission (NLRC), National
Organization Of Workingmen And Its Members, Leonardo T. Galang, et al.
Doctrine: The Court here finds no application to the rule that a corporate officer
cannot be held solidarity liable with a corporation in the absence of evidence
that he had acted in bad faith or with malice. In the present case, Sergio Naguiat
is held solidarily liable for corporate tort because he had actively engaged in
the management and operation of CFTI, a close corporation.
Facts:
1) CFTI held a concessionaire's contract with the Army Air Force Exchange
Services (AAFES) for the operation of taxi services within Clark Air Base.
Sergio F. Naguiat was CFTI's president, while Antolin T. Naguiat was its
vice-president. Like Sergio F. Naguiat Enterprises, Incorporated (Naguiat
Enterprises), a trading firm, it was a family-owned corporation.
2) Individual respondents were previously employed by CFTI as taxicab
drivers. However, in their complaint, they alleged that they were regular
employees of Naguiat Enterprises, although their individual applications
for employment were approved by CFTI. (Note, that CFTI and Naguiat
Ent, are different, but both are owned by Sergio.)
3) Due to the phase-out of the US military bases in the Philippines, from
which Clark Air Base was not spared, the AAFES was dissolved, and the
services of individual respondents were officially terminated on
November 26, 1991.
4) The Drivers' Union and CFTI held negotiations and they arrived at an
agreement that the separated drivers will be given P500.00 for every year
of service as severance pay. Most of the drivers accepted said amount in
December 1991 and January 1992. However, individual respondents
herein refused to accept theirs.
5) Individual respondents disaffiliated themselves from the drivers' union
and, through the National Organization of Workingmen ("NOWM"), a
labor organization, filed a complaint against Sergio Naguiat and CFTI for
payment of separation pay due to termination/phase-out. (They wanted
to be paid P1,200.00 instead of P500.00)
Issue/s:
● W/N Sergio F. Naguiat Enterprises, Inc. is a separate and distinct juridical
entity which cannot be held jointly and severally liable for the obligations
of CFTI? YES, Naguiat Enterprises is not liable.
● W/N Sergio F. Naguiat was merely an officer and stockholder of CFTI and,
thus, could not be held personally accountable for corporate debts? NO,
he is solidarily liable.
Ratio:
Naguiat Enterprises Not Liable
● From the evidence proffered by both parties, there is no substantial basis
to hold that Naguiat Enterprises is an indirect employer of individual
respondents much less a labor only contractor.
● On the contrary, petitioners submitted documents such as the drivers'
applications for employment with CFTI, and social security remittances
and payroll of Naguiat Enterprises showing that none of the individual
respondents were its employees.
● Private respondents failed to substantiate their claim that Naguiat
Enterprises managed, supervised and controlled their employment. It
appears that they were confused on the personalities of Sergio F. Naguiat
as an individual who was the president of CFTI, and Sergio F. Naguiat
Enterprises, Inc., as a separate corporate entity with a separate business.
● A closer look at the records show that Sergio F. Naguiat, in supervising
the drivers and determining their employment terms, was rather carrying
out his responsibilities as president of CFTI. Hence, Naguiat Enterprises
as a separate corporation does not appear to be involved at all in the taxi
business.
CFTI president solidarily liable
● In the case A.C. Ransom Labor Union-CCLU vs. NLRC the union asked that
officers and agents of the company be held personally liable for payment
of the backwages. This was granted by the labor arbiter and was further
upheld by the SC.
○ Mme. Justice Melencio-Herrera, ratiocinated this way:
"(b) How can the foregoing Arts 265 and 273 of the Labor Code
provisions be implemented when the employer is a corporation?
The answer is found in Article 212(c) of the Labor Code which
provides:
'(c) 'Employer' includes any person acting in the interest of an
employer, directly or indirectly. The term shall not include any labor
organization or any of its officers or agents except when acting as
employer.'
CORP 2-D Digests | 11
 The foregoing was culled from Section 2 of RA 602, the Minimum the present case, Sergio Naguiat is held solidarily liable for corporate tort
Wage Law. Since RANSOM is an artificial person, it must have an because he had actively engaged in the management and operation of
officer who can be presumed to be the employer, being the 'person CFTI, a close corporation.
acting in the interest of (the) employer' RANSOM. The corporation,
only in the technical sense, is the employer. Antolin Naguiat not personally liable
The responsible officer of an employer corporation can be held ● Although he carried the title of "general manager" and was the vice
personally, not to say even criminally, liable for nonpayment of back president, it had not been shown that he had acted in such capacity.
wages. That is the policy of the law. x x x ● Furthermore, no evidence on the extent of his participation in the
(c) If the policy of the law were otherwise, the corporation employer management or operation of the business was proffered. In this light, he
can have devious ways for evading payment of back wages. x x x cannot be held solidarily liable for the obligations of CFTI and Sergio
(d) The record does not clearly identify 'the officer or officers' of Naguiat to the private respondents.
RANSOM directly responsible for failure to pay the back wages of
the 22 strikers. In the absence of definite proof in that regard, we Dispositive:
believe it should be presumed that the responsible officer is the WHEREFORE, the foregoing premises considered, the petition is PARTLY
President of the corporation who can be deemed the chief operation GRANTED. The assailed February 28, 1994 Resolution of the NLRC is hereby
officer thereof.Thus, in RA 602, criminal responsibility is with the MODIFIED as follows:
'Manager or in his default, the person acting as such.' In RANSOM, (1) Petitioner Clark Field Taxi, Incorporated, and Sergio F. Naguiat, president and
the President appears to be the Manager." co-owner thereof, are ORDERED to pay, jointly and severally, the individual
respondents their separation pay computed at US$120.00 for every year of
● Our jurisprudence is wanting as to the definite scope of "corporate tort." service, or its peso equivalent at the time of payment or satisfaction of the
Essentially, "tort" consists in the violation of a right given or the omission judgment;
of a duty imposed by law. Simply stated, tort is a breach of a legal duty. (2) Petitioner Sergio F. Naguiat Enterprises, Incorporated, and Antolin T. Naguiat
Article 283 of the Labor Code mandates the employer to grant separation are ABSOLVED from liability in the payment of separation pay to individual
pay to employees in case of closure or cessation of operations of respondents.
establishment or undertaking not due to serious business losses or SO ORDERED.
financial reverses, which is the condition obtaining at bar. CFTI failed to
comply with this law-imposed duty or obligation. Consequently, its
stockholder who was actively engaged in the management or
operation of the business should be held personally liable.
● A corporation, being a juridical entity, may act only through its directors,
officers and employees. Obligations incurred by them, acting as such
corporate agents, are not theirs but the direct accountabilities of the
corporation they represent.
● True, solidary liabilities may at times be incurred but only when
exceptional circumstances warrant such as, generally, in the following
cases: . . . 4. When a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate action."
● The Corporation Code specifically imposes personal liability upon the
stockholder actively managing or operating the business and affairs of
the close corporation. The Court here finds no application to the rule that
a corporate officer cannot be held solidarity liable with a corporation in
the absence of evidence that he had acted in bad faith or with malice. In
CORP 2-D Digests | 12
 7. Republic Gas Corp. v. Petron Corp.
G.R. No. | Date | Ponente
Digest by: CORPUS
Petitioners: Republic Gas Corporation, Arnel U. Ty, Mari Antonette N. Ty,
Orlando Reyes, Ferrer Suazo and Alvin U. Ty
Respondents: Petron Corporation, Pilipinas Shell Petroleum Corporation, And
Shell International Petroleum Company Limited
Doctrine: Corporate officers and/or directors, through whose act, default or
omission the corporation commits a crime, may themselves be individually held
answerable for the crime. The existence of the corporate entity does not shield
from prosecution the corporate agent who knowingly and intentionally caused
the corporation to commit a crime.
Facts:
1) Petron Corporation and Pilipinas Shell are two of the largest bulk
suppliers and producers of LPG in the Philippines.
a) Petron is the registered owner in the Philippines of the
trademarks GASUL and GASUL cylinders used for its LGP
products.
b) Pilipinas Shell is the authorized user in the Philippines of the
tradename, trademarks, symbols or designs of its principal, Shell
International Petroleum Company Limited, including the marks
SHELLANE and SHELL device in connection with the production,
sale and distribution of SHELLANE LPGs.
2) REGASCO is engaged in the business of refilling, buying, selling,
distributing and marketing at wholesale and retail of LPG.
3) LPG Dealers Associations received reports that certain entities were
engaged in the unauthorized refilling, sale and distribution of LPG
cylinders bearing the registered tradenames and trademarks of the
Petron and Shell. They filed a letter-complaint in the NBI regarding the
alleged illegal trading of petroleum products and/or underdelivery or
underfilling in the sale of LPG products.
4) NBI conducted investigations which showed that several persons and/or
establishments, including REGASCO, were suspected of having violated
provisions of B.P. 33.
a) REGASCO LPG Refilling Plant in Malabon was engaged in the
refilling and sale of LPG cylinders bearing the registered marks
of the Petron and Shell without authority from the latter.
5) Subsequently, the NBI lodged a complaint in the DOJ against the
corporate officers of REGASCO for alleged violations of Sections 155 and
168 of Republic Act (RA) No. 8293, otherwise known as the Intellectual
Property Code of the Philippines.
6) The Assistant City Prosecutor recommended the dismissal of the
complaint, finding that there was no proof introduced by Petron and Shell
that would show that REGASCO was engaged in selling petitioner’s
products or that it imitated and reproduced the registered trademarks of
the petitioners.
7) On appeal, the DOJ Secretary affirmed the prosecutor’s dismissal of the
complaint in a Resolution
a) Refilling the empty cylinders is by no means an offense in itself –
it being the legitimate business of Regasco to engage in the
refilling and marketing of liquefied petroleum gas. They did not
pass off the goods as those of complainants’ as no other act was
done other than to refill them in the normal course of its business.
b) A corporation has a personality separate and distinct from its
stockholders. To sustain the allegations, the acts complained of
must be shown to have been committed by respondents in their
individual capacity by clear and convincing evidence.
8) Petron and Shell sought recourse to the CA through a petition for
certiorari. CA granted the petition and set aside the DOJ Resolution.
9) REGASCO then filed a motion for reconsideration, which was denied by
the CA. Hence, this petition
Issue/s:
● Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable
for the offense charged. - YES!
.Ratio:
● The Court found that REGASCO has actually committed trademark
infringement and unfair competition.
○ Trademark infringement - when they refilled, without the
respondents’ consent, the LPG containers bearing the registered
marks of the respondents. REGASCO’s acts will inevitably
confuse the consuming public, since they have no way of
knowing that the gas contained in the LPG tanks bearing
respondents’ marks is in reality not the latter’s LPG product after
the same had been illegally refilled.
○ Unfair competition – by refilling and selling LPG cylinders
bearing their registered marks, petitioners are selling goods by
giving them the general appearance of goods of another
manufacturer.
CORP 2-D Digests | 13
 ● The Court also found that there is sufficient evidence to warrant the
prosecution of REGASCO’s corporate officers, considering that
REGASCO, being a corporation, possesses a personality separate and
distinct from the person of its officers, directors and stockholders.
○ Being corporate officers and/or directors, through whose act,
default or omission the corporation commits a crime, may
themselves be individually held answerable for the crime. Being
in direct control and supervision in the management and conduct
of the affairs of the corporation, these officers must have known
or are aware that the corporation is engaged in the act of refilling
LPG cylinders bearing the marks of Petron and Shell without
authority or consent from the latter.
○ The existence of the corporate entity does not shield from
prosecution the corporate agent who knowingly and intentionally
caused the corporation to commit a crime. Thus, petitioners
cannot hide behind the cloak of the separate corporate
personality of the corporation to escape criminal liability. A
corporate officer cannot protect himself behind a corporation
where he is the actual, present and efficient actor.

Dispositive:
WHEREFORE, premises considered, the petition is hereby DENIED and the
Decision dated July 2, 2010 and Resolution dated October 11, 2010 of the Court of
Appeals in CA-G.R. SP No. 106385 are AFFIRMED.

CORP 2-D Digests | 14

 8. People v. Tan Boon Kong
G.R. No. L-35262| March 15, 1930 | Ostrand J.
Digest by: CRUZ
Petitioners: The People of the Philippine Islands
Respondents: Tan Boon Kong
Doctrine: A corporation can act only through its officers and agents, and where
the business itself involves a violation of the law, the correct rule is that all who
participate in it are liable
Facts:
1) People appealed the grant of demurrer to an information charging the
Tan Boon Kong with the violation of section 1458 of Act No. 2711 as
amended.
2) The information reads as follows: That on and during the four quarters of
the year 1924, in the municipality of Iloilo, Province of Iloilo, Philippine
Islands, the said accused, as corporation organized under the laws of the
Philippine Islands and engaged in the purchase and the sale of sugar,
"bayon," coprax, and other native products and as such object to the
payment of internal-revenue taxes upon its sales, did then and there
voluntarily, illegally, and criminally declare in 1924 for the purpose of
taxation only the sum of P2,352,761.94, when in truth and in fact, and the
accused well knew that the total gross sales of said corporation during
that year amounted to P2,543,303.44, thereby failing to declare for the
purpose of taxation the amount of P190,541.50, and voluntarily and
illegally not paying the Government as internal-revenue percentage
taxes the sum of P2,960.12, corresponding to 1½ per cent of said
undeclared sales.
amount of the receipts or earnings of his business during the preceeding
quarter and pay the tax due thereon. . . . (Act No. 2711.)
● SEC. 2723. Failure to make true return of receipts and sales. — Any person
who, being required by law to make a return of the amount of his
receipts, sales, or business, shall fail or neglect to make such return
within the time required, shall be punished by a fine not exceeding two
thousand pesos or by imprisonment for a term not exceeding one year, or
both.
● And any such person who shall make a false or fraudulent return shall be
punished by a fine not exceeding ten thousand pesos or by imprisonment
for a term not exceeding two years, or both. (Act No. 2711.)
● The court below based the appealed ruling on the ground that the offense
charged must be regarded as committed by the corporation and not by
its officials or agents.
● A corporation can act only through its officers and agents, and where the
business itself involves a violation of the law, the correct rule is that all
who participate in it are liable
● In the present case the information or complaint alleges that he defendant
was the manager of a corporation which was engaged in business as a
merchant, and as such manager, he made a false return, for purposes of
taxation, of the total amount of sale
●
Dispositive: The ruling of the court below sustaining the demurrer to the
complaint is therefore reversed, and the case will be returned to said court for
further proceedings not inconsistent with our view as hereinafter stated. Without
costs. So ordered.

Issue/s:
● W/N information sets forth facts rendering the Tan Boon Kong, as
manager of the corporation liable criminally - YEEEEssssss
Ratio:
● SEC. 1458. Payment of percentage taxes — Quarterly reports of earnings.
— The percentage taxes on business shall be payable at the end of each
calendar quarter in the amount lawfully due on the business transacted
during each quarter; and it shall be on the duty of every person
conducting a business subject to such tax, within the same period as
is allowed for the payment of the quarterly installments of the fixed
taxes without penalty, to make a true and complete return of the

CORP 2-D Digests | 15

 9. People v. Chowdury
G.R. No. | Date | Ponente
Digest by: CUA
Petitioners:People of the Philippines
Respondents: Bulu Chowdury
Issue/s:
Doctrine:
Where it is shown that the employee was merely acting under the direction of
his superiors and was unaware that his acts constituted a crime, he may not be
Ratio:
held criminally liable for an act done for and in behalf of his employer.
Facts:
28) Bulu Chowdury and Josephine Ong were charged with illegal recruitment
in large scale
29) They were likewise charged with three counts of estafa against private
complainants but the charges against Chosdury were dismissed and an
amended information indicted only Ong for the offense
30) Chowdury was arraigned while Ong remained at large. Chowdury
pleaded not guilty to the charge of recruitment in large scale
31) Prosecution presented four witnesses private complainants Aser Sasis,
Estrella Alleja and Melvin Miranda and Labor Employment Officer
Abbelyn Caguitla
32) Sasis, Alleja and Miranda testified that they were all interviewed by
Chowdury for employment at Craftrade Overseas Developer in South
Korea as factory workers. They had to submit various documents
(passport, NBI clearance, passport picture and medical certificate) and
had to pay fees. Sasis paid 16k to Craftrade as processing fee. Alleja paid
20k as placement fee. Miranda paid 25k as processing fee.
33) Labor Employment officer Abbelyn Caguitla testified that she prepared a
certificate saying Chowdury and Ong were not in their personal
capacities licensed recruiters nor were they connected with any licensed
agency. Craftrade was previously licensed to recruit workers from
abroad but it had expired. Temporary license was given but POEA later
suspended it.
34) Chowdury testified that he worked as an interviewer at Craftrade. As an
employee he followed the instructions given by his superiors Mr.
Emmanuel Geslani, the agency’s President and General Manager and Mr.
Utkal Chowdury, the agency’s Managing Director. He conducted
interviews and submitted forms based on the applicant responses to Mr.
Utkal Chowdury. He claimed to never have received money from
applicants.
35) Trial court found Chowdury guilty
36) Chowdury appealed
a) He contends that he may not be held liable as he was merely an
employee of Craftrade and he only performed the tasks assigned
by his superiors. He argues that the officers having control,
management and direction of the agency should be liable
● W/N Chowdury is guilty of large scale recruitment? NO
● Elements of illegal recruitment in large scale:
(1) The accused undertook any recruitment activity defined under Article
13 (b) or any prohibited practice enumerated under Article 34 of the
Labor Code;
(2) He did not have the license or authority to lawfully engage in the
recruitment and placement of workers; and
(3) He committed the same against three or more persons, individually or
as a group.
● Sec 6 RA 8042: The persons criminally liable for the above offenses are
the principals, accomplices and accessories. In case of juridical
persons, the officers having control, management or direction of
their business shall be liable
● An employee of a company or corporation engaged in illegal recruitment
may be held liable as principal, together with his employer, if it is shown
that he actively and consciously participated in illegal recruitment
● Evidence shows that accused appellant interviewed private complainants
at Craftrade’s office. At the time he was employed as interviewer,
Craftrade was also then operating under temporary authority given by
the POEA pending renewal of its license.
● He was convicted based on the fact that he was not registered with POEA
as employee of Craftrade nor in his personal capacity licensed to recruit
overseas workers.
● Section 10 Rule II Book II of the Rules and Regulation Governing Overseas
Employment (1991) requires that every change, termination or
appointment of officers, representatives and personnel of licensed
agencies be registered with the POEA. Agents or representatives
appointed by a licensed recruitment agency whose appointments are not
previously approved by the POEA are considered "non-licensee " or
"non-holder of authority" and therefore not authorized to engage in
recruitment activity
CORP 2-D Digests | 16
 ● Prosecution failed to prove that accused appellant was aware of
Craftrade’s failure to register his name with the POEA and that he actively
engaged to recruit despite this knowledge
● The obligation to register personnel with POEA belongs to the officers of
the agency as a mere employee cannot be expected to know the legal
requirements.
● Evidence shows that accused appellant carried out his duties as
interviewer believing that the agency was duly licensed by the POEA.
● He merely interviewed applicants and informed them of requirements. He
never received money as payments were received by the agency’s
cashier, Josephine Ong. His tasks furthermore were under supervision of
its president and managing director.
● DOJ may still file a complaint against the officers having control,
management or direction of the business so long as the offense has not
yet prescribed.

Dispositive:
IN VIEW WHEREOF, the assailed decision of the Regional Trial Court is
REVERSED and SET ASIDE. Accused-appellant is hereby ACQUITTED. The
Director of the Bureau of Corrections is ordered to RELEASE accused-appellant
unless he is being held for some other cause, and to REPORT to this Court
compliance with this order within ten (10) days from receipt of this decision. Let a
copy of this Decision be furnished the Secretary of the Department of Justice for
his information and appropriate action.

CORP 2-D Digests | 17

 10. Ching v. Secretary of Justice
G.R. No.164317 | Feb. 6,2006 | CALLEJO SR., J.
Digest by: DA SILVA
Petitioners: Alfredo Ching
Respondents: Secretary of Justice, Rizal Commercial Banking Corp.
Doctrine:
If the crime is committed by a corporation of other juridical entities, the
directors, officers, employees or other officers responsible for the
offense shall be penalized for the crime. A corporation cannot be
arrested and imprisoned, and cannot be penalized for a crime
punishable by imprisonment. A corporation however, may charged
and prosecuted for a crime if the imposable penalty is fine only. In case
the penalty is both fine and imprisonment, a corporation may be
prosecuted, and if found guilty, it may be fined.
Finally, when a criminal statute does not expressly apply to
corporations, it does may not be applied against corporations. When
the law provides a crime which may be committed by corporations, but
states that the officers, among others, who are responsible for the
crime, then only said individuals will suffer the penalty prescribed if
found guilty.
Facts:
1) Petitioner Alfredo Ching was the Senior Vice-President of Philippine
Blooming Mills, Inc. (PBMI)
a) Signing as Vice-President of PBMI, he applied with Rizal
Commercial Banking Corporation for issuance of commercial
letters of credit to finance its importation of assorted goods.
b) Respondent bank approved said application.
2) The goods for importation were then purchased and delivered in trust to
PBMI.
a) Ching, as Vice-President of PBMI, signed 13 trust receipts as
surety acknowledging the delivery of the imported goods.
b) Petitioner agreed to hold the goods in trust for the bank, with
authority to sell but not by way of conditional sale, pledge or
otherwise; and in case such goods were sold, to turn over the
proceeds as soon as received to apply against the relative
acceptances and payment of indebtedness.
Issue/s:
3) When the trust receipts matured, petitioner failed to return the goods to
the respondent bank, or to return their value amounting to Php
6,940,280.66
4) Respondent filed a complaint for Estafa with the City Prosecutor of Manila.
(in case sir asks):
a) Prosecutor found probable cause
b) Petitioner appealed to Minister of justice - denied
c) Petitioner filed a Motion for Reconsideration - granted
i) Minister ordered prosecutor to file a motion for
withdrawal
d) Bank filed a motion for reconsideration with Minister of Justice -
denied
e) RTC granted petitioner’s subsequent Motion to Quash the
Information on the ground that the material allegations do not
amount to estafa.
5) The SC rendered judgment in Allied Banking Corporation v. Ordonez
during the pendency of this case.
a) here it was ruled that PD 115 (Trust Receipts Law) encompasses
any act violative of an obligation covered by the trust receipt; it
is not limited to transactions involving goods to be sold.
b) It was also ruled here that non-payment of the amount covered
by a trust receipt is violative of the obligation of the entrustee to
pay.
6) Because of said ruling, respondent re-filed the complaint for estafa
a) Prosecutor found no probable cause since petitioner’s liability
was only civil and not criminal
b) DOJ on petition for review reversed the findings of the City
Prosecutor, and found probable cause to indict petitioner for
violation of PD 115.
7) Petitioner thus contends that the Secretary of Justice committed grave
abuse of discretion in issuing the resolution
a) Petitioner alleged that the transaction between PBMI and Rizal
Banking Commercial Corporation does not fall under PD 115.
b) He further alleged that he merely signed as Senior VP of PBMI,
and had no physical possession of the goods, and therefore,
should not be prosecuted. He alleges, as a result, that PBMI, as a
corporation, is the entrustee, and therefore, he should not be
prosecuted for PBMI’s failure to perform its obligation under the
trust receipts law.
CORP 2-D Digests | 18
 ● W/N The Secretary of Justice committed grave abuse of discretion when SO ORDERED.
he found probable cause to indict petitioner under PD 115 – NO
NOTE: This case began during the Marcos era, hence the term “Minister of
Justice,”
Ratio:
● A. The transaction between petitioner and respondent falls under the trust
receipt transactions contemplated by PD 115. Under said law, the failure
of a person to turn over the proceeds of the sale of goods covered by a
trust receipts, or to return said goods if not sold, is a public nuisance to be
abated by the imposition of penal sanctions. The Court likewise ruled in
Allied Banking v Ordonez that the law applies to any act violative of an
obligation covered by the trust receipt; it is not limited to transactions
involving goods to be sold. Furthermore, it also applies to non-payment
of the amount covered by a trust receipt, and is considered by the law as
violative of the obligation of the entrustee to pay.
● B. Though petitioner signed the trust receipts as Senior VP of PBMI, he
cannot avoid prosecution. Though the entrustee is a corporation, the law
specifically makes the officers, employees or other officers or persons
responsible for the offense without prejudice to the civil liabilities of the
corporation and/or board of directors. This is because said officers are
vested with the authority and responsibility to devise means necessary to
ensure compliance with the law, and their obligations under the trust
receipts. Failure to do so renders them criminally liable.

If the crime is committed by a corporation of other juridical entities, the

directors, officers, employees or other officers responsible for the offense
shall be penalized for the crime. A corporation cannot be arrested and
imprisoned, and cannot be penalized for a crime punishable by
imprisonment. A corporation however, may charged and prosecuted for a
crime if the imposable penalty is fine only. In case the penalty is both fine
and imprisonment, a corporation may be prosecuted, and if found guilty,
it may be fined.

Finally, when a criminal statute does not expressly apply to corporations,

it does may not be applied against corporations. When the law provides a
crime which may be committed by corporations, but states that the
officers, among others, who are responsible for the crime, then only said
individuals will suffer the penalty prescribed if found guilty.

Dispositive:
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioner.
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