Corporation Law Case Digest 20 Cases For Merge

Atty.
Ventura MON-TUE 6:00-8:00
CORPORATION LAW case digest
1) Bourns vs. Carman, 7 Phils. 117 (1906)

1. PARTNERSHIP OF "CUENTAS EN PARTICIPACION." A partnership constituted
in such a manner that its existence was only known to those who had an interest
in the same, there being no mutual agreement between the partners, and without
a corporate name indicating to the public in some way that there were other
people besides the one who ostensibly managed and conducted the business, is
exactly the accidental partnership of cuentas en participacion defined in article 239
of
the
Code
of
Commerce.
2. ID. Those who contracted with the person in whose name the business of a
partnership of cuentas en participacion is conducted, shall have only the right of
action against such person and not against the other persons interested, and the
latter, on the other hand, shall have no right of action against the third person who
contracted with the manager unless such manager formally transferred his right to
them. (Art. 242, Code of Commerce.)
FACTS:
An action to recover the sum of $437.50 balance due on a contract for the sawing of lumber
yard of Lo-Chim-Lim was filed by Bourns (Plaintiff). The contract was entered into by Lo-ChimLim, acting as in his own name with the plaintiff, and it appears that Lo-Chim-Lim personally
agreed to pay for the work himself. The plaintiff brought the action against Lo-Chim-Lim and
his co-defendants jointly, alleging that at the time the contract was made, they were the joint
proprietors and operators of the said lumber yard engaged in the purchase and sale of lumber
under the name and style of Lo-Chim-Lim, hence were partners. The lower court dismissed the
action on the ground that defendants D.M. Carman, Fulgencio and Tan-Tongco, except Vicente
Palance and Go-Tauco were not the partners of Lo-Chim-Lim.
ISSUE:
Whether appellants are deemed partners of Lo-Chim-Lim and hence are liable to Bourns
HELD:
No. The alleged partnership between Lo-Chim-Lim and the appellants was formed by verbal
agreement only. There is no evidence tending to show that the said agreement was reduced to
writing, or that it was ever recorded in a public instrument. Moreover, the partnership had no
corporate name. The partnership was engaged in business under the name and style of LoChim-Lim only. Moreover, it does not appear that there was any mutual agreement between
the parties and if there were any, it has not been shown what the agreement was. The
contracts made with the plaintiff were made by Lo-Chim-Lim individually in his own name, and
there is no evidence that the partnership over contracted in any form. Hence, the partnership is
one of cuentasen participacion. It is but a simple business conducted by Lo-Chim-Lim
exclusively in his own name. A partnership constituted in such a manner, the existence of
which was only known to those who had an interest in the same, being no mutual agreements
between the partners and without a corporate name indicating to the public in some way that
there were other people besides the one who ostensibly managed and conducted the
business, is exactly the accidental partnership of cuentas en participacion defined in Art. 239 of
the Code of Commerce. Those who contract with the person under whose name the
business of such partnership of cuentas en participacion is conducted, shall have only
a right of action against such person and not against the other persons interested, and
the latter, on the other hand, shall have no right of action against the third person who
contracted with the manager unless such manager formally transfers his right to them.
2) HARDEN v BENGUET CONSOLIDATED MINING COMPANY G.R. No. L-37331, March

18, 1933
Section 1. Title of the Code. - This Code shall be known as "The Corporation Code of the
Philippines".
FACTS:
Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedad anonima in
conformity with the provisions of Spanish law. Balatoc Mining Co. was organized in
December 1925, as a corporation, in conformity with the provisions of the Corporation Law
(Act No. 1459). Both were organized for mining of gold and their respective properties are
located only a few miles apart in Benguet. Balatoc capital stock consists of one million shares
of the par value of one peso (P1) each.
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Atty. Ventura MON-TUE 6:00-8:00
When the Balatoc was first organized, its properties were largely undeveloped. To improve its
operations, the companys committee approached A. W. Beam, then president and general
manager of the Benguet Company, to secure the capital necessary to the development of the
Balatoc property. A contract was entered into wherein Benguet will (1) construct a milling plant
for the Balatoc mine, of a capacity of 100 tons of ore per day, and with an extraction of at least
85 per cent of the gold content; (2) erect an appropriate power plant. In return, Benguet will
receive from Balatoc shares of a par value of P600,000.
The total cost incurred by Benguet in developing Balatoc was P1,417,952.15. A certificate for
600,000 shares of the stock of the Balatoc Company was given to Benguet and the excess
value was paid to Benguet by Balatoc in cash. Due to the improvements made by Benguet, the
value of shares of Balatoc increased in the market (from P1 to more than P11) and dividends
enriched its stockholders. Harden, the owner of thousands of shares of Balatoc, questioned
the transfer of 600,000 shares to Benguet with the success of the development.
ISSUE: W/N it is unlawful for Benguet Company to hold any interest in a mining corporation.
W/N, assuming the first question to be answered in the affirmative, the Benguet
Company, which was organized as a sociedad anonima, is a corporation within the
meaning of the language used by the Congress of the United States, and later by the
Philippine Legislature, prohibiting a mining corporation from becoming interested
in another mining corporation?
RULING:
1st Issue: The defendant Benguet Company has committed no civil wrong against the plaintiffs,
and if a public wrong has been committed, the directors of the Balatoc Company, and the
plaintiff Harden himself, were the active inducers of the commission of that wrong. The
contract, supposing it to have been unlawful in fact, has been performed on both sides.
2nd Issue: Having shown that the plaintiffs in this case have no right of action against the
Benguet Company for the infraction of law supposed to have been committed, we forego any
discussion of the further question whether a sociedad anonima created under Spanish law,
such as the Benguet Company, is a corporation within the meaning of the prohibitory provision
already so many times mentioned.
A sociedad anonima is something very much like the English joint stock company, with
features resembling those of both the partnership is shown in the fact that sociedad, the
generic component of its name in Spanish, is the same word that is used in that language to
designate other forms of partnership, and in its organization it is constructed along the same
general lines as the ordinary partnership.
In section 75 of the Corporation Law, a provision is found making the sociedad anonima
subject to the provisions of the Corporation Law "so far as such provisions may be applicable",
and giving to the sociedades anonimas previously created in the Islands the option to continue
business as such or to reform and organize under the provisions of the Corporation Law.
The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill), generally
prohibiting corporations engaged in mining and members of such from being interested in any
other corporation engaged in mining, was amended by section 7 of Act No. 3518 of the
Philippine Legislature, approved by Congress March 1, 1929. The change in the law effected
by this amendment was in the direction of liberalization. Thus, the inhibition contained in the
original provision against members of a corporation engaged in agriculture or mining from
being interested in other corporations engaged in agriculture or in mining was so modified as
merely to prohibit any such member from holding more than fifteen per centum of the
outstanding capital stock of another such corporation. Moreover, the explicit prohibition against
the holding by any corporation (except for irrigation) of an interest in any other corporation
engaged in agriculture or in mining was so modified as to limit the restriction to corporations
organized for the purpose of engaging in agriculture or in mining.
Further and more importantly, the Corporation Law of 1925 provides that if the person who
allegedly violated the provisions of said law is a corporation, the proper action is a quo
Page 2 of 30
warranto which should be initiated by the Attorney-General or its deputized provincial fiscal and
not a private action as the one filed by Harden.
Benguet Mining contends that they have a vested right under the Code of Commerce of 1886
because they were organized under said law; that under said law, Benguet Mining is allowed to
extend its life by simply amending its articles of incorporation; that the prohibition in Section 18
of the Corporation Code of 1906 does not apply to sociedades anonimas already existing prior
to the Laws enactment; that even assuming that the prohibition applies to Benguet Mining, it
should be allowed to be reorganized as a corporation under the said Corporation Law.
ISSUE: Whether or not Benguet Mining is correct.
3) Benguet Consolidated Mining Co. Vs. Mariano Pineda 098 Phil 711 G.R. No. L7231 | 1956-03-28
HELD: No. Benguet Mining has no vested right to extend its life. It is a well settled rule
that no person has a vested interest in any rule of law entitling him to insist that it shall remain
unchanged for his benefit. Had Benguet Mining agreed to extend its life prior to the passage of
Benguet Consolidated Mining Company was organized in 1903 under the Spanish Code of
the Corporation Code of 1906 such right would have vested. But when the law was passed in
Commerce of 1886 as a sociedad anonima. It was agreed by the incorporators that Benguet
1906, Benguet Mining was already deprived of such right.
Mining was to exist for 50 years.
To allow Benguet Mining to extend its life will be inimical to the purpose of the law which
In 1906, Act 1459 (Corporation Law) was enacted which superseded the Code of Commerce
sought to render obsolete sociedades anonimas. If this is allowed, Benguet Mining will unfairly
of 1886. Act 1459 essentially introduced the American concept of a corporation. The purpose
do something which new corporations organized under the new Corporation Law cant do
of the law, among others, is to eradicate the Spanish Code and make sociedades
that is, exist beyond 50 years. Plus, it would have reaped the benefits of being a sociedad
anonimas obsolete.
anonima and later on of being a corporation. Further, under the Corporation Code of 1906,
In 1953, the board of directors of Benguet Mining submitted to the Securities and Exchange
Commission an application for them to be allowed to extend the life span of Benguet Mining .
Then Commissioner Mariano Pineda denied the application as it ruled that the extension
requested is contrary to Section 18 of the Corporation Law of 1906 which provides that the life
of a corporation shall not be extended by amendment beyond the time fixed in their original
existing sociedades anonimas during the enactment of the law must choose whether to
continue as such or be organized as a corporation under the new law. Once a sociedad
anonima chooses one of these, it is already proscribed from choosing the other. Evidently,
Benguet Mining chose to exist as a sociedad anonima hence it can no longer elect to
become a corporation when its life is near its end.
articles.
CONTENTION oF BENGUET:
4) Dante V. Liban, et al vs. Richard J. Gordon,GRN, 175352 , July 15, 2009 En Banc
Resolution of the Court in in the same case of Liban, issued on January 18, 2011
Page 3 of 30

DANTE V. LIBAN, REYNALDO
vs.
RICHARD J. GORDON
G.R. No. 175352.July 15, 2009
M.

BERNARDO,
and
SALVADOR
M.
VIARI
FACTS:
Petitioners filed with this Court a Petition to Declare Richard J. Gordon as Having
Forfeited His Seat in the Senate. Petitioners are officers of the Board of Directors of the
Quezon City Red Cross Chapter while respondent is Chairman of the Philippine National Red
Cross (PNRC) Board of Governors.
During respondents incumbency as a member of the Senate of the Philippines, he
was elected Chairman of the PNRC during the February 23, 2006 meeting of the PNRC Board
of Governors. Petitioners allege that by accepting the chairmanship of the PNRC Board
of Governors, respondent has ceased to be a member of the Senate as provided in
Section 13, Article VI of the Constitution, which reads: No Senator or Member of the House of
Representatives may hold any other office or employment in the Government, or any
subdivision, agency, or instrumentality thereof, including government-owned or controlled
corporations or their subsidiaries, during his term without forfeiting his seat. Neither shall he be
appointed to any office which may have been created or the emoluments thereof increased
during the term for which he was elected.
otherwise, it cannot merit the trust of all and cannot effectively carry out its mission as a
National Red Cross Society. It is imperative that the PNRC must be autonomous, neutral, and
independent in relation to the State.To ensure and maintain its autonomy, neutrality, and
independence, the PNRC cannot be owned or controlled by the government. Indeed, the
Philippine government does not own the PNRC. The PNRC does not have government assets
and does not receive any appropriation from the Philippine Congress. The PNRC is financed
primarily by contributions from private individuals and private entities obtained through
solicitation campaigns organized by its Board of Governors.The government does not control
the PNRC. Under the PNRC Charter, as amended, only six of the thirty members of the PNRC
Board of Governors are appointed by the President of the Philippines.
The PNRC is not government-owned but privately owned. The vast majority of the
thousands of PNRC members are private individuals, including students. Under the PNRC
Charter, those who contribute to the annual fund campaign of the PNRC are entitled to
membership in the PNRC for one year. Thus, the PNRC is a privately owned, privately funded,
and privately run charitable organization.
Hence, the office of the PNRC Chairman is not
a government office or an office in a government-owned or controlled corporation for
purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. However, since
the PNRC Charter is void insofar as it creates the PNRC as a private corporation, the PNRC
should incorporate under the Corporation Code and register with the Securities and Exchange
Commission if it wants to be a private corporation.
Petitioners cited the case of Camporedondo vs. NLRC, G.R. No. 129049,
decided August 6, 1999, which held that the PNRC is a GOCC, in supporting their argument
Formerly, in its Decision dated July 15, 2009, the Court, voting 7-5,[1] held thatthe
that respondent Gordon automatically forfeited his seat in the Senate when he accepted and
office of the PNRC Chairman is NOT a government office or an office in a GOCC for purposes
held the position of Chairman of the PNRC Board of Governors.
of the prohibition in Sec. 13, Article VI of the 1987 Constitution. The PNRC Chairman is elected
by the PNRC Board of Governors; he is not appointed by the President or by any subordinate
government official. Moreover, the PNRC is NOT a GOCC because it is a privately-owned,
ISSUE:
privately-funded, and privately-run charitable organization and because it is controlled by a
Whether or not the office of the PNRC Chairman is a government office or an office in
a government-owned or controlled corporation for purposes of the prohibition in Section 13,
Article VI of the Constitution.
Board of Governors four-fifths of which are private sector individuals. Therefore, respondent
Gordon did not forfeit his legislative seat when he was elected as PNRC Chairman during his
incumbency as Senator.
RULING:
NO.
The Court however held further that the PNRC Charter, R.A. 95, as amended
by PD 1264 and 1643, is void insofar as it creates the PNRC as a private corporation
PNRC is a Private Organization Performing Public Functions. The Republic of the

Philippines, adhering to the Geneva Conventions, established the PNRC as a voluntary
organization for the purpose contemplated in the Geneva Convention of 27 July 1929. The
PNRC must not appear to be an instrument or agency that implements government policy;
since Section 7, Article XIV of the 1935 Constitution states that [t]he Congress shall not,
except by general law, provide for the formation, organization, or regulation of private
corporations, unless such corporations are owned or controlled by the Government or any
Page 4 of 30
subdivision or instrumentality thereof. The Court thus directed the PNRC to incorporate under
the Corporation Code and register with the Securities and Exchange Commission if it wants to
be a private corporation. The fallo of the Decision read:
The issue of constitutionality of R.A. No. 95 was not raised by the parties, and was
not among the issues defined in the body of the Decision; thus, it was not the very lis mota of
the case. We have reiterated the rule as to when the Court will consider the issue of
WHEREFORE, we declare that the office of the Chairman of the Philippine National
constitutionality in Alvarez v. PICOP Resources, Inc., thus:
Red Cross is not a government office or an office in a government-owned or controlled

corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. We
This Court will not touch the issue of unconstitutionality unless it is the very lis mota. It
also declare that Sections 1, 2, 3, 4(a), 5, 6, 7, 8, 9, 10, 11, 12, and 13 of the Charter of the
is a well-established rule that a court should not pass upon a constitutional question and
Philippine National Red Cross, or Republic Act No. 95, as amended by Presidential Decree
decide a law to be unconstitutional or invalid, unless such question is raised by the parties and
Nos. 1264 and 1643, are VOID because they create the PNRC as a private corporation or
that when it is raised, if the record also presents some other ground upon which the court may
grant it corporate powers.
[rest] its judgment, that course will be adopted and the constitutional question will be left for
consideration until such question will be unavoidable.
Respondent Gordon filed a Motion for Clarification and/or for Reconsideration of

the Decision. The PNRC likewise moved to intervene and filed its own Motion for Partial
Reconsideration. They basically questioned the second part of the Decision with regard to the
pronouncement on the nature of the PNRC and the constitutionality of some provisions of
the PNRC Charter.
[T]his Court should not have declared void certain sections of . . . the PNRC
Charter. Instead, the Court should have exercised judicial restraint on this matter, especially
since there was some other ground upon which the Court could have based its
judgment. Furthermore, the PNRC, the entity most adversely affected by this declaration of
unconstitutionality, which was not even originally a party to this case, was being compelled, as
a consequence of the Decision, to suddenly reorganize and incorporate under the Corporation
II.
THE ISSUE
Was it correct for the Court to have passed upon and decided on the issue of the
constitutionality of the PNRC charter? Corollarily: What is the nature of the PNRC?
Code, after more than sixty (60) years of existence in this country.
Since its enactment, the PNRC Charter was amended several times, particularly on
June 11, 1953, August 16, 1971, December 15, 1977, and October 1, 1979, by virtue of R.A.
No. 855, R.A. No. 6373, P.D. No. 1264, and P.D. No. 1643, respectively. The passage of
III.
THE RULING
several laws relating to the PNRCs corporate existence notwithstanding the effectivity of the
[The Court GRANTED reconsideration and MODIFIED the dispositive portion of the Decision
constitutional proscription on the creation of private corporations by law is a recognition that
by deleting the second sentence thereof.]
the PNRC is not strictly in the nature of a private corporation contemplated by the aforesaid
constitutional ban.
NO, it was not correct for the Court to have decided on the constitutional issue
because it was not the very lis mota of the case. The PNRC is sui generis in nature; it is
neither strictly a GOCC nor a private corporation.
A closer look at the nature of the PNRC would show that there is none like it[,] not just
in terms of structure, but also in terms of history, public service and official status accorded to it
Page 5 of 30
by the State and the international community. There is merit in PNRCs contention that its
In sum, the PNRC enjoys a special status as an important ally and auxiliary of
structure is sui generis. It is in recognition of this sui generis character of the PNRC
the government in the humanitarian field in accordance with its commitments under
that R.A. No. 95 has remained valid and effective from the time of its enactment in March 22,
international law. This Court cannot all of a sudden refuse to recognize its existence,
1947 under the 1935 Constitution and during the effectivity of the 1973 Constitution and the
especially since the issue of the constitutionality of the PNRC Charter was never raised by the
1987 Constitution. The PNRC Charter and its amendatory laws have not been questioned or
parties. It bears emphasizing that the PNRC has responded to almost all national disasters
challenged on constitutional grounds, not even in this case before the Court now.
since 1947, and is widely known to provide a substantial portion of the countrys blood
requirements. Its humanitarian work is unparalleled. The Court should not shake its existence
[T]his Court [must] recognize the countrys adherence to the Geneva Convention and
to the core in an untimely and drastic manner that would not only have negative consequences
respect the unique status of the PNRC in consonance with its treaty obligations. The Geneva
to those who depend on it in times of disaster and armed hostilities but also have adverse
Convention has the force and effect of law. Under the Constitution, the Philippines adopts the
effects on the image of the Philippines in the international community. The sections of the
generally accepted principles of international law as part of the law of the land. This
PNRC Charter that were declared void must therefore stay.
constitutional provision must be reconciled and harmonized with Article XII, Section 16 of the
Constitution, instead of using the latter to negate the former. By requiring the PNRC to
[Thus, R.A. No. 95 remains valid and constitutional in its entirety. The Court
organize under the Corporation Code just like any other private corporation, the Decision of
MODIFIED the dispositive portion of the Decision by deleting the second sentence, to now
July 15, 2009 lost sight of the PNRCs special status under international humanitarian law and
read as follows:
as an auxiliary of the State, designated to assist it in discharging its obligations under the
Geneva Conventions.
WHEREFORE, we declare that the office of the Chairman of the Philippine National
Red Cross is not a government office or an office in a government-owned or controlled
The PNRC, as a National Society of the International Red Cross and Red Crescent
corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution.]
Movement, can neither be classified as an instrumentality of the State, so as not to lose its
character of neutrality as well as its independence, nor strictly as a private corporation since it
is regulated by international humanitarian law and is treated as an auxiliary of the State.
Although [the PNRC] is neither a subdivision, agency, or instrumentality of the
government, nor a GOCC or a subsidiary thereof . . . so much so that respondent, under the
5) Tayag v. Benguet Consolidated, 26 SCRa 242 (1968)

Corporation Law Domicile of a Corporation
Corporation is an Artificial Being
By Laws Must Yield To a Court Order
Decision, was correctly allowed to hold his position as Chairman thereof concurrently while he
Facts:
served as a Senator, such a conclusion does not ipso facto imply that the PNRC is a private
In March 1960, Idonah Perkins died in New York. She left behind properties here and abroad.
One property she left behind were two stock certificates covering 33,002 shares of stocks of
the Benguet Consolidated, Inc (BCI). Said stock certificates were in the possession of the
Country Trust Company of New York (CTC-NY). CTC-NY was the domiciliary administrator of
the estate of Perkins in the USA. Meanwhile, in 1963, Renato Tayag was appointed as the
ancillary administrator of the properties of Perkins she left behind in the Philippines. A
corporation within the contemplation of the provision of the Constitution, that must be
organized under the Corporation Code. [T]he sui generis character of PNRC requires us to
approach controversies involving the PNRC on a case-to-case basis.
Page 6 of 30
dispute arose between CTC-NY and Tayag as to who between them is entitled to possess the
stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn
over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a
petition to have said stock certificates be declared lost and to compel BCI to issue new stock
certificates in replacement thereof. The trial court granted Tayags petition.
BCI assailed said order as it averred that it cannot possibly issue new stock certificates
because the two stock certificates declared lost are not actually lost; that the trial court as well
Tayag acknowledged that the stock certificates exists and that they are with CTC- NY; that
according to BCIs by laws, it can only issue new stock certificates, in lieu of lost, stolen, or
destroyed certificates of stocks, only after court of law has issued a final and executory order
as to who really owns a certificate of stock.
ISSUE:
Arnold and Willits and Patterson, Ltd. entered into a contract by which plaintiff was appointed
agent for a period of 5 years. A dispute arose as to the amount which plaintiff should receive
for his services. Patterson retired and Willits became the sole owner of the assets of the firm.
Willits then organized a corporation. He became exclusive owner except for a few stocks
(nominal shares to qualify the directors) for organizational purposes. Another instrument
was executed between Arnold and Willits. Such defined and specified the compensation
of Arnold. Nothing shows that such was formally ratified or approved by the corporation. A
statement of the corporation's account showed that there was due and owing the plaintiff a
sum of money. The corporation's creditor's committee protested against such amount. Arnold
filed suit to collect. Willits argued that the document was signed without the authority of
the defendant corporation and also filed a counterclaim.
1916. The Firm Willits & Patterson in San Francisco entered into a contract with
Arnold whereby Arnold was to be employed for a period of five years as the agent of
Whether or not the arguments of Benguet Consolidated, Inc. are correct?
the firm here in the PI to operate an oil mill for which he was to receive a minimum
HELD:
salary of $200/mth, a 1% brokerage fee from all purchases and sales of merchandise,
No. Benguet Consolidated is a corporation who owes its existence to Philippine laws. It has
been given rights and privileges under the law. Corollary, it also has obligations under the law
and one of those is to follow valid legal court orders. It is not immune from judicial control
because it is domiciled here in the Philippines. BCI is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts. Its shares of stock
cannot therefore be considered in any wise as immune from lawful court orders. Further,
to allow BCIs opposition is to render the court order against CTC-NY a mere scrap of paper. It
will leave Tayag without any remedy simply because CTC-NY, a foreign entity refuses to
comply with a valid court order. The final recourse then is for our local courts to create a legal
fiction such that the stock certificates in issue be declared lost even though in reality they exist
in the hands of CTC-NY. This is valid. As held time and again, fictions which the law may rely
upon in the pursuit of legitimate ends have played an important part in its development. Further
still, the argument invoked by BCI that it can only issue new stock certificates in accordance
with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the order of the
court it simply refused to turn over the stock certificates hence ownership can be said to
have been settled in favor of estate of Perkins here. Also, assuming that there really is a
conflict between BCIs bylaws and the court order, what should prevail is the lawful
court order. It would be highly irregular if court orders would yield to the bylaws of a
corporation. Again, a corporation is not immune from judicial orders.
and half of the profits of the oil business and other businesses. provided if the
6) Arnold v. Willits & Patterson Limited, 44 Phils. 634 (1923)
business was at a loss, Arnold would receive $400/mth.

Later, Patterson retired and Willits acquired all interests of the business.
Willits organized a new Corp in San Francisco which took over and acquired all
assets of the Firm Willits & Patterson. Willits was the owner of all the capital stock.
New corp had the same name.

After, Willits, organized a new Corporation here in the PI to take over all the business
and assets of the firm here in the PI. Willits was the owner of all the capital stock.
Later, there was dispute with regard to the construction of the contract as a result, a
new contract in the form of a letter was entered into. Willits signed this.
The statements of account showed that 106K was due and owing to Arnold.
W&P Corp was in financial trouble and all assets were turned over to a creditors
committee.
1922. Arnold filed this complaint to recover 106K from W&P.
W&P argues that the 2nd contract was signed without authority. And as counterclaim
alleged that Arnold took 30K from the Corp but only 19.1K was due to him thus he
ISSUE:
owed 10.1K to W&P.

CFI ordered Arnold to return the 10.1K.
Whether plaintiff may collect from defendant corporation.
FACTS:
Page 7 of 30
HELD: Yes.
The proposition that a corporation has an existence separate and distinct from its membership
has its limitations. It must be noted that this separate existence is for particular purposes. It
must also be remembered that there can be no corporate existence without persons to
compose it; there can be no association without associates.
This separate existence is to a certain extent a legal fiction. Whenever necessary for the
interests of the public or for the protection or enforcement of the rights of the membership,
courts will disregard this legal fiction and operate upon both the corporation and the persons
composing it.
He continued his employment and rendered his services after the corporation was organized
and the second document was signed just the same as he did before, and both corporations
recognized and accepted his services.
It was a one man corporation, and Willits, as the owner of all of the stock, was the force
and dominant power which controlled them. After the document was signed it was
recognized by Willits that the plaintiff's services were to be performed and measured by its
term and provisions, and there never was any dispute between plaintiff and Willits upon that
question.
Statements of account were made and prepared by the accountant on the assumption that the
document was in full force and effect as between the plaintiff and the defendant. Previous
financial statements show upon their face that the account of plaintiff was credited with several
small items on the same basis, and it was not until the 23d of March, 1921, that any objection
was ever made by anyone.
The first Philippine case to apply the piercing doctrine was actually
Arnold v. Willets and Patterson, Ltd., and it was clearly an alter ego case. It
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."
In Arnold the creditors' committee of the corporation opposed the payment
of compensation due to the plaintiff Arnold under a contract-letter signed by
Willits, the controlling stockholder, without board approval. The signing president
was the controlling stockholder of the corporation. The Court held the validity of
contract and "[a]lthough the plaintiff was the president of the local corporation, the
testimony is conclusive that both of them were what is known as a one man
corporation, and Willits, as the owner of all the stocks, was the force and dominant
power which controlled them."
7) Pantranco Employees Asso., et al. Vs. NLRC, et al.,G.R. No. 170689 | 2009-03-17
former employees of a company sought to satisfy their unpaid labor claims against another
company that eventually acquired, and then sold, the employer company.
The Gonzales family owned two corporations, namely, the Pantranco North Express, Inc.
(PNEI) and Macris Realty Corporation (Macris). PNEI provided transportation services to the
public, and had its bus terminal at the corner of Quezon and Roosevelt Avenues in Quezon
City. The terminal stood on four valuable pieces of real estate (known as Pantranco properties)
registered under the name of Macris. The Gonzales family later incurred huge financial
losses despite attempts of rehabilitation and loan infusion. In March 1975, their creditors
took over the management of PNEI and Macris. By 1978, full ownership was transferred to
one of their creditors, the National Investment Development Corporation (NIDC), a subsidiary
of the PNB.
Macris was later renamed as the National Realty Development Corporation (Naredeco) and
eventually merged with the National Warehousing Corporation (Nawaco) to form the new PNB
subsidiary, the PNB-Madecor.
In 1985, NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned by
Gregorio Araneta III. In 1986, PNEI was among the several companies placed under
sequestration by the Presidential Commission on Good Government (PCGG) shortly after
the historic events in EDSA. In January 1988, PCGG lifted the sequestration order to pave the
way for the sale of PNEI back to the private sector through the Asset Privatization Trust (APT).
APT thus took over the management of PNEI.
In 1992, PNEI applied with the Securities and Exchange Commission (SEC) for suspension of
payments. A management committee was thereafter created which recommended to the
SEC the sale of the company through privatization. As a cost-saving measure, the
committee likewise suggested the retrenchment of several PNEI employees. Eventually, PNEI
ceased its operation. Along with the cessation of business came the various labor
claims commenced by the former employees of PNEI where the latter obtained
favorable decisions.
Page 8 of 30
On July 5, 2002, the Labor Arbiter issued the Sixth Alias Writ of Execution commanding the
National Labor Relations Commission (NLRC) sheriffs to levy on the assets of PNEI in order to
satisfy the P722,727,150.22 due its former employees, as full and final satisfaction of the
judgment awards in the labor cases. The sheriffs were likewise instructed to proceed against
PNB, PNB-Madecor and Mega Prime. In implementing the writ, the sheriffs levied upon the
four valuable pieces of real estate located at the corner of Quezon and Roosevelt Avenues, on
which the former Pantranco Bus Terminal stood. These properties were covered by Transfer
Certificate of Title (TCT) Nos. 87881-87884, registered under the name of PNB-Madecor.
Subsequently, Notice of Sale of the foregoing real properties was published in the newspaper
and the sale was set on July 31, 2002.
Having been notified of the auction sale, motions to quash the writ were separately filed by
PNB-Madecor and Mega Prime, and PNB. They likewise filed their Third-Party Claims. PNBMadecor anchored its motion on its right as the registered owner of the Pantranco properties,
and Mega Prime as the successor-in-interest. For its part, PNB sought the nullification of the
writ on the ground that it was not a party to the labor case. In its Third-Party Claim, PNB
alleged that PNB-Madecor was indebted to the former and that the Pantranco properties would
answer for such debt.
On September 10, 2002, the Labor Arbiter declared that the subject Pantranco properties
were owned by PNB-Madecor. It being a corporation with a distinct and separate
personality, its assets could not answer for the liabilities of PNEI. Considering, however,
that PNB-Madecor executed a promissory note in favor of PNEI for P7,884,000.00, the writ of
execution to the extent of the said amount was concerned was considered valid. PNBs thirdparty claim to nullify the writ on the ground that it has an interest in the Pantranco properties
being a creditor of PNB-Madecor, on the other hand, was denied because it only had an
inchoate interest in the properties.
The NLRC affirmed the Labor Arbiters decision. The CA also affirmed the NLRCs decision.
The appellate court pointed out that PNB, PNB-Madecor and Mega Prime are corporations
with personalities separate and distinct from PNEI. As such, there being no cogent reason to
pierce the veil of corporate fiction, the separate personalities of the above corporations should
be maintained. The CA added that the Pantranco properties were never owned by PNEI;
rather, their titles were registered under the name of PNB-Madecor. If PNB and PNB-Madecor
could not answer for the liabilities of PNEI, with more reason should Mega Prime not be held
liable being a mere successor-in-interest of PNB-Madecor.
The former PNEI employees argued before the Supreme Court that PNB, through PNBMadecor, directly benefited from the operation of PNEI and had complete control over
the funds of PNEI. Hence, they are solidarily answerable with PNEI for the unpaid money
claims of the employees. Citing A.C. Ransom Labor Union-CCLU v. NLRC, the employees
insist that where the employer corporation ceases to exist and is no longer able to satisfy the
judgment awards in favor of its employees, the owner of the employer corporation should be
made jointly and severally liable.
RULING:The Supreme Court ruled that the former PNEI employees cannot attach the
properties (specifically the Pantranco properties) of PNB, PNB-Madecor and Mega Prime to
satisfy their unpaid labor claims against PNEI. According to the Supreme Court:
First, the subject property is not owned by the judgment debtor, that is, PNEI. Nowhere in
the records was it shown that PNEI owned the Pantranco properties. Petitioners, in fact, never
alleged in any of their pleadings the fact of such ownership. What was established, instead, in
PNB MADECOR v. Uy and PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime
Realty and Holdings Corporation v. PNB was that the properties were owned by Macris, the
predecessor of PNB-Madecor. Hence, they cannot be pursued against by the creditors of
PNEI. We would like to stress the settled rule that the power of the court in executing
judgments extends only to properties unquestionably belonging to the judgment debtor alone.
To be sure, one mans goods shall not be sold for another mans debts. A sheriff is not
authorized to attach or levy on property not belonging to the judgment debtor, and even incurs
liability if he wrongfully levies upon the property of a third person.
Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities
separate and distinct from that of PNEI. PNB is sought to be held liable because it acquired
PNEI through NIDC at the time when PNEI was suffering financial reverses. PNB-Madecor is
being made to answer for petitioners labor claims as the owner of the subject Pantranco
properties and as a subsidiary of PNB. Mega Prime is also included for having acquired PNBs
shares over PNB-Madecor.
The general rule is that a corporation has a personality separate and distinct from those of its
stockholders and other corporations to which it may be connected. This is a fiction created by
law for convenience and to prevent injustice. Obviously, PNB, PNB-Madecor, Mega Prime, and
PNEI are corporations with their own personalities. The separate personalities of the first
three corporations had been recognized by this Court in PNB v. Mega Prime Realty and
Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB where we stated
that PNB was only a stockholder of PNB-Madecor which later sold its shares to Mega
Page 9 of 30
Prime; and that PNB-Madecor was the owner of the Pantranco properties. Moreover,
these corporations are registered as separate entities and, absent any valid reason, we
maintain their separate identities and we cannot treat them as one.
Neither can we merge the personality of PNEI with PNB simply because the latter acquired the
former. Settled is the rule that where one corporation sells or otherwise transfers all its
assets to another corporation for value, the latter is not, by that fact alone, liable for the
debts and liabilities of the transferor.
Lastly, while we recognize that there are peculiar circumstances or valid grounds that may
exist to warrant the piercing of the corporate veil, none applies in the present case whether
between PNB and PNEI; or PNB and PNB-Madecor.
Under the doctrine of piercing the veil of corporate fiction, the court looks at the
corporation as a mere collection of individuals or an aggregation of persons undertaking
business as a group, disregarding the separate juridical personality of the corporation unifying
the group. Another formulation of this doctrine is that when two business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third parties, disregard the legal fiction that two corporations
are distinct entities and treat them as identical or as one and the same.
Whether the separate personality of the corporation should be pierced hinges on obtaining
facts appropriately pleaded or proved. However, any piercing of the corporate veil has to be
done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is
misused or when necessary in the interest of justice. After all, the concept of corporate entity
was not meant to promote unfair objectives.
As between PNB and PNEI, petitioners want us to disregard their separate personalities, and
insist that because the company, PNEI, has already ceased operations and there is no other
way by which the judgment in favor of the employees can be satisfied, corporate officers can
be held jointly and severally liable with the company. Petitioners rely on the pronouncement of
this Court in A.C. Ransom Labor Union-CCLU v. NLRC and subsequent cases.
This reliance fails to persuade. We find the aforesaid decisions inapplicable to the instant case.
For one, in the said cases, the persons made liable after the companys cessation of
operations were the officers and agents of the corporation. The rationale is that, since the
corporation is an artificial person, it must have an officer who can be presumed to be the
employer, being the person acting in the interest of the employer. The corporation, only in the
technical sense, is the employer. In the instant case, what is being made liable is another
corporation (PNB) which acquired the debtor corporation (PNEI).
Moreover, in the recent cases Carag v. National Labor Relations Commission and McLeod v.
National Labor Relations Commission, the Court explained the doctrine laid down in AC
Ransom relative to the personal liability of the officers and agents of the employer for the debts
of the latter. In AC Ransom, the Court imputed liability to the officers of the corporation on the
strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor
Code. Under the said provision, employer includes any person acting in the interest of an
employer, directly or indirectly, but does not include any labor organization or any of its officers
or agents except when acting as employer. It was clarified in Carag and McLeod that Article
212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the
debts of the corporation. It added that the governing law on personal liability of directors or
officers for debts of the corporation is still Section 31 of the Corporation Code.
More importantly, as aptly observed by this Court in AC Ransom, it appears that Ransom,
foreseeing the possibility or probability of payment of backwages to its employees, organized
Rosario to replace Ransom, with the latter to be eventually phased out if the strikers win their
case. The execution could not be implemented against Ransom because of the disposition
posthaste of its leviable assets evidently in order to evade its just and due obligations. Hence,
the Court sustained the piercing of the corporate veil and made the officers of Ransom
personally liable for the debts of the latter.
Clearly, what can be inferred from the earlier cases is that the doctrine of piercing the
corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is
merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another corporation. In the absence of malice,
bad faith, or a specific provision of law making a corporate officer liable, such corporate officer
cannot be made personally liable for corporate liabilities.
The Court ruled that assuming, for the sake of argument, that PNB may be held liable for the
debts of PNEI, petitioners still cannot proceed against the Pantranco properties, the same
being owned by PNB-Madecor, notwithstanding the fact that PNB-Madecor was a subsidiary of
PNB. The general rule remains that PNB-Madecor has a personality separate and distinct from
PNB. The mere fact that a corporation owns all of the stocks of another corporation, taken
alone, is not sufficient to justify their being treated as one entity. If used to perform legitimate
functions, a subsidiarys separate existence shall be respected, and the liability of the parent
Page 10 of 30
corporation as well as the subsidiary will be confined to those arising in their respective
businesses.
demanded to get his one day salary deposit but was told to secure a clearance which he failed
8) Ruperto Suldao Vs. Cimech System Construction, Inc., G.R. No. 171392 | 2006-10-30
ISSUE
FACTS
Respondent Cimech employed the services of petitioner Ruperto Suldao as a machinist with a
daily wage of P300.00 on a contractual status for a period of five months, but was later on
retained his services, making him a permanent employee.
Petitioner alleged that owing to a dearth in projects being handled by the respondent, he was
ordered by Ms. Elsa Labocay to take a leave of absence from November 1 to 6, 2002. He
reported for work on November 7, 2002 but was again ordered to take a leave of absence from
November 7 to 14, 2002. On November 15, 2002, he was purportedly ordered to make a
letter-request for field work transfer which he complied. The following day, he failed to report
back for work because he was sick. On November 17, 2002, he reported for work but
was allegedly barred from entering by the security guard on duty. On November 21,
2002, he was again barred from entering the premises. Hence he filed the instant complaint for
constructive dismissal.
to comply. Thereafter, petitioner filed the instant complaint for illegal dismissal.
Whether or not petitioner was constructively dismissed.

HELD
YES
The SC held that petitioner was constructively dismissed.
Constructive dismissal or a constructive discharge has been defined as quitting because
continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay. In the instant case, there is constructive
dismissal because the continued employment of petitioner is rendered impossible so as
to foreclose any choice on his part except to resign from such employment.
While the decision to transfer employees to other areas of its operations forms part of the well
recognized prerogatives of management, it must be stressed, however, that the managerial
prerogative to transfer personnel must not be exercised with grave abuse of discretion, bearing
On the other hand, respondent alleged that due to lack of available work in the machine
in mind the basic elements of justice and fair play. Having the right should not be confused
shop, petitioner was temporarily transferred to its fabrication department sometime in
with the manner in which that right is exercised. Thus it cannot be used as a subterfuge by the
November 2002. Petitioner refused to accept the transfer and insisted to work as a machinist.
employer to rid himself of an undesirable worker.
Because of petitioners arrogant and unruly behavior, he was led away by a guard. When
petitioner returned for work, he purportedly demanded a salary increase and wages for the
In the instant case, while petitioners transfer was valid, the manner by which respondent
days that he did not work. Respondent considered the actuations of petitioner tantamount to
unjustifiably prevented him from returning to work on several occasions runs counter to the
insubordination, hence, it suspended the petitioner for six days.
claim of good faith on the part of respondent corporation. By reporting for work, petitioner
manifested his willingness to comply with the regulations of the corporation and his desire to
After his suspension on November 28, 2002, petitioner accepted his transfer to the fabrication
continue working for the latter. However, he was barred from entering the premises without
department but worked for only one day. During the companys Christmas party on December
any explanation. This is a clear manifestation of disdain and insensibility on the part of an
21, 2002, petitioner came and asked for his 13th month pay. On January 13, 2003, petitioner
employer towards a particular employee and a veritable hallmark of constructive dismissal.
Page 11 of 30
Petition is granted
9) Mambulao Lumber Co. v. PNB. 22 SCRA 359 (1969)

MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL
BANK and ANACLETO HERALDO Deputy Provincial Sheriff of Camarines
Norte, defendants-appellees. G.R. No. L-22973, January 30, 1968
ANGELES, J.:
FACTS: On May 5, 1956 the plaintiff applied for an industrial loan of P155,000
(approved for a loan of P100,000 only) with the Naga Branch of defendant PNB. To
secure payment, the plaintiff mortgaged a parcel of land, together with the
buildings and improvements existing thereon, situated in the poblacion of Jose
Panganiban (formerly Mambulao), province of Camarines Norte. The PNB released
from the approved loan the sum of P27,500, and another release of P15,500.
The plaintiff failed to pay the amortization on the amounts released to and
received by it. It was found that the plaintiff had already stopped operation about
the end of 1957 or early part of 1958.
The unpaid obligation of the plaintiff as of September 22, 1961, amounted to
P57,646.59, excluding attorney's fees. A foreclosure sale of the parcel of land,
together with the buildings and improvements thereon was, held on November 21,
1961, and the said property was sold to the PNB for the sum of P56,908.00,
subject to the right of the plaintiff to redeem the same within a period of one year.
The plaintiff sent a letter reiterating its request that the foreclosure sale of the
mortgaged chattels be discontinued on the grounds that the mortgaged
indebtedness had been fully paid and that it could not be legally effected at a
place other than the City of Manila.
The trial court sentenced the Mambulao Lumber Company to pay to the defendant
PNB the sum of P3,582.52 with interest thereon at the rate of 6% per annum. The
plaintiff on appeal advanced that its total indebtedness to the PNB as of November
21, 1961, was only P56,485.87 and not P58,213.51 as concluded by the court a
quo; hence, the proceeds of the foreclosure sale of its real property alone in the
amount of P56,908.00 on that date, added to the sum of P738.59 it remitted to the
PNB thereafter was more than sufficient to liquidate its obligation, thereby
rendering the subsequent foreclosure sale of its chattels unlawful;
That for the acts of the PNB in proceeding with the sale of the chattels, in utter
disregard of plaintiff's vigorous opposition thereto, and in taking possession thereof
after the sale thru force, intimidation, coercion, and by detaining its "man-incharge" of said properties, the PNB is liable to plaintiff for damages and
attorney's fees.
ISSUE: Whether or not PNB may be held liable to plaintiff Corporation for damages
and attorneys fees.
HELD: Herein appellant's claim for moral damages, seems to have no legal or
factual basis. Obviously, an artificial person like herein appellant
corporation cannot experience physical sufferings, mental anguish,
fright, serious anxiety, wounded feelings, moral shock or social
humiliation which are basis of moral damages. A corporation may have a
good reputation which, if besmirched, may also be a ground for the award of moral
damages. The same cannot be considered under the facts of this case,
however, not only because it is admitted that herein appellant had
already ceased in its business operation at the time of the foreclosure
sale of the chattels, but also for the reason that whatever adverse effects
of the foreclosure sale of the chattels could have upon its reputation or
business standing would undoubtedly be the same whether the sale was
conducted at Jose Panganiban, Camarines Norte, or in Manila which is the place
agreed upon by the parties in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy sheriff of
Camarines Norte in proceeding with the sale in utter disregard of the agreement to
have the chattels sold in Manila as provided for in the mortgage contract, to which
their attentions were timely called by herein appellant, and in disposing of the
chattels in gross for the miserable amount of P4,200.00, herein appellant should be
awarded exemplary damages in the sum of P10,000.00. The circumstances of the
case also warrant the award of P3,000.00 as attorney's fees for herein appellant.
10) ABS-CBN v. Court of Appeals, 310 SCRA 572 (1999)
Page 12 of 30
Case: ABS-CBN BROADCASTING CORP. v. CA, REPUBLIC BROADCASTING CORP.,

VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO (301 SCRA 589)
Date: January 21, 1999
Ponente: C.J. Davide, Jr.
Issue: WON a contract was perfected between ABS-CBN and VIVA and WON moral damages
may be awarded to a corporation
Held: Both NO.
Facts:
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby VIVA
gave ABS-CBN an exclusive right to exhibit some VIVA films. According to the agreement,
ABS-CBN shall have the right of first refusal to the next 24 VIVA films for TV telecast under
such terms as may be agreed upon by the parties, however, such right shall be exercised by
ABS-CBN from the actual offer in writing.
Sometime in December 1991, VIVA, through Vicente Del Rosario (Executive
Producer), offered ABS-CBN through VP Charo Santos-Concio, a list of 3 film packages from
which ABS-CBN may exercise its right of first refusal. ABS-CBN, however through Mrs.
Concio, tick off only 10 titles they can purchase among which is the film Maging Sino Ka Man
which is one of the subjects of the present case, therefore, it did not accept the said list as per
the rejection letter authored by Mrs. Concio sent to Del Rosario.
Subsequently, Del Rosario approached Mrs. Concio with another list consisting of 52
original movie titles and 104 re-runs, proposing to sell to ABS-CBN airing rights for P60M
(P30M in cash and P30M worth of television spots). Del Rosario and ABS-CBNs General
Manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in QC to discuss the
package proposal but to no avail.
Four days later, Del Rosario and Mr. Graciano Gozon, Senior VP of Finance of
Republic Broadcasting Corporation (RBS/Channel 7) discussed the terms and conditions of
VIVAs offer. A day after that, Mrs. Concio sent the draft of the contract between ABS-CBN and
VIVA which contained a counter-proposal covering 53 films for P35M. VIVAs Board of
Directors rejected the counter-proposal as it would not sell anything less than the package of
104 films for P60M. After said rejection, ABS-CBN closed a deal with RBS including the 14
films previously ticked off by ABS-CBN.
Consequently, ABS-CBN filed a complaint for specific performance with prayer for a
writ of preliminary injunction and/or TRO against RBS, VIVA and Del Rosario. RTC then
enjoined the latter from airing the subject films. RBS posted a P30M counterbond to dissolve
the injunction. Later on, the trial court as well as the CA dismissed the complaint holding that
there was no meeting of minds between ABS-CBN and VIVA, hence, there was no basis for
ABS-CBNs demand, furthermore, the right of first refusal had previously been exercised.
Hence, the present petition, ABS-CBN argued that an agreement was made during
the meeting of Mr. Lopez and Del Rosario jotted down on a napkin (this was never produced
in court). Moreover, it had yet to fully exercise its right of first refusal since only 10 titles were
chosen from the first list. As to actual, moral and exemplary damages, there was no clear basis
in awarding the same.
Ratio:
Contracts that are consensual in nature are perfected upon mere meeting of the
minds. Once there is concurrence between the offer and the acceptance upon the subject
matter, consideration, and terms of payment a contract is produced. The offer must be
certain. To convert the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance
of any sort from the proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the original
offer. Consequently, when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer.
After Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN to discuss the package of
films, ABS-CBN, sent through Ms. Concio, counter-proposal in the form a draft contract. This
counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his
conference with Del Rosario. Clearly, there was no acceptance of VIVAs offer, for it was met
by a counter-offer which substantially varied the terms of the offer.
In the case at bar, VIVA through its Board of Directors, rejected such
counter-offer. Even if it be conceded arguendo that Del Rosario had
accepted the counter-offer, the acceptance did not bind VIVA, as there
was no proof whatsoever that Del Rosario had the specific authority to do
so.
Under the Corporation Code, unless otherwise provided by said
Code, corporate powers, such as the power to enter into contracts, are
exercised by the Board of Directors. However, the Board may delegate
such powers to either an executive committee or officials or contracted
managers. The delegation, except for the executive committee, must be
for specific purposes. Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the binding effects of
their acts would apply. For such officers to be deemed fully clothed by the
corporation to exercise a power of the Board, the latter must specially authorize
them to do so. That Del Rosario did not have the authority to accept ABSCBNs counter-offer was best evidenced by his submission of the draft
contract to VIVAs Board of Directors for the latters approval. In any
event, there was between Del Rosario and Lopez III no meeting of minds.
Page 13 of 30
The testimony of Mr. Lopez and the allegations in the complaint are clear
admissions that what was supposed to have been agreed upon at the Tamarind
Grill between Mr. Lopez and Del Rosario was not a binding agreement. It is as it
should be because corporate power to enter into a contract is lodged in
the Board of Directors. (Sec. 23, Corporation Code). Without such board
approval by the Viva board, whatever agreement Lopez and Del Rosario
arrived at could not ripen into a valid contact binding upon Viva.
However, the Court find for ABS-CBN on the issue of damages. Moral
damages 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 award
of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no senses. It cannot,
therefore, experience physical suffering and mental anguish, which can
be experienced only by one having a nervous system. The statement that a
corporation may recover moral damages if it has a good reputation that is
debased, resulting in social humiliation is an obiter dictum. On this score alone
the award for damages must be set aside, since RBS is a corporation.
unwilling to load their cargo. In order to hasten the transfer of coal, they should share
the burden of the "strike-free" clause but NAPOCOR refused.
November 17, 1987: PHIBRO effected its first shipment which was suppose to be on
the 30th dat after receipt of the letter of credit of which it received on August 6, 1987
October 1987: NAPOCOR once more advertised for the delivery of coal to its
Calaca thermal plant of which PHIBRO applied but was rejected since it was not
able to satisfy the demand for damages on its delay.
PHIBRO filed for damages in the RTC alleging that the rejection was tainted with
malice and bad faith
RTC: favored PHIBRO. Ordering NAPCOR to reinstate PHIBRO as accredited bidder,

to pay $864,000 actual damages, $100,000 moral damages, $50,000 exemplary
damages, $73,231.91 reimbursement for expenses, cost of litigation and attorney's
fees, cost of suit and dismissed counterclaim of NAPOCOR.
CA: affirmed in toto. "Strikes" are undoubtedly included in the force majeure clause of
the Bidding Terms and Specifications
ISSUE: W/N PHIBRO is entitled to damages.

HELD: NO. Modified actual, moral and exemplary damages, reimbursement for expenses, cost
of litigation and attorney's fees, and costs of suit, is DELETED
11. NAPOCOR VS CA
G.R. No. 126204
November 20, 2001
Lessons Applicable: Who may recover (Torts and Damages)

FACTS:
Since there is no evidence to prove bad faith and arbitrariness on the part of the
petitioners in evaluating the bids, we rule that the private respondents are not entitled
to damages representing lost profits
May 14, 1987: National Power Corporation (NAPOCOR) issued invitations to bid for
the supply and delivery of 120,000 metric tons of imported coal for its Batangas CoalFired Thermal Power Plant of which Philipp Brothers Oceanic, Inc. (PHIBRO) bidded
and was accepted.
NAPOCOR's act of disapproving PHIBRO's application for pre-qualification to bid was

without any intent to injure or a purposive motive to perpetrate damage. Apparently,
NAPOCOR acted on the strong conviction that PHIBRO had a "seriously-impaired"
track record
July 10, 1987: PHIBRO told NAPOCOR that disputes might soon plague Australia
that will seriously hamper its ability to supply coal
July 23 to July 31, 1987: PHIBRO informed NAPOCOR that unless a "strike-free"
clause is incorporated in the charter party or the contract of carriage shipowners are
The circumstances under which NAPOCOR disapproved PHIBRO's prequalification to bid do not show an intention to cause damage to the latter. The
measure it adopted was one of self-protection. Consequently, we cannot
penalize NAPOCOR for the course of action it took. NAPOCOR cannot be made
liable for actual, moral and exemplary damages.
Page 14 of 30
Corollarily, in awarding to PHIBRO actual damages in the amount of $864,000, the

Regional Trial Court computed what could have been the profits of PHIBRO had
NAPOCOR allowed it to participate in the subsequent public bidding. - Erroneous
o

-
Basic is the rule that to recover actual damages, the amount of loss
must not only be capable of proof but must actually be proven with
reasonable degree of certainty, premised upon competent proof or best
evidence obtainable of the actual amount thereof.
Moral damages are granted in recompense for physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions, no senses;
therefore, it cannot experience physical suffering and mental anguish. Mental
suffering can be experienced only by one having a nervous system and it flows from
real ills, sorrows, and griefs of life
a winning party may be awarded attorney's fees only in case plaintiff's action or
defendant's stand is so untenable as to amount to gross and evident bad faith - none
here
12. MANILA ELECTRIC COMPANY vs. T.E.A.M. ELECTRONICS CORPORATION,

TECHNOLOGY ELECTRONICS ASSEMBLY and MANAGEMENT PACIFIC
CORPORATION; and ULTRA ELECTRONICS INSTRUMENTS, INC.
T.E.A.M. Electronics Corporation (TEC) was formerly known as NS Electronics

(Philippines), Inc. before 1982 and National Semi-Conductors (Phils.) before 1988.
o
TEC is wholly owned by respondent Technology Electronics Assembly and

Management Pacific Corporation (TPC).
On the other hand, petitioner Manila Electric Company (Meralco) is a utility company
supplying electricity in the Metro Manila area.
petitioner undertook to supply TEC's building known as Dyna Craft

International Manila (DCIM) with electric power.
Another contract was entered into for the supply of electric power to
TEC's NS Building under Account No. 19389-0900-10.
TEC, under its former name National Semi-Conductors (Phils.) entered into a
Contract of Lease with respondent Ultra Electronics Industries, Inc. for the use
of the former's DCIM building for a period of five years or until September 1991.
o
Ultra was, however, ejected from the premises on February 12, 1988 by
virtue of a court order, for repeated violation of the terms and conditions of
the lease contract.
On September 28, 1987, a team of petitioner's inspectors conducted a surprise

inspection of the electric meters installed at the DCIM building which were found to be
allegedly tampered with and did not register the actual power consumption in
the building.
MERALCO informed TEC of the results of the inspection and demanded from the
latter the payment representing its unregistered consumption from February 10,
1986 until September 28, 1987, as a result of the alleged tampering of the meters.
Since Ultra was in possession of the subject building during the covered
period, TEC's Managing Director, Mr. Bobby Tan, referred the demand letter to
Ultra.
For failure of TEC to pay the differential billing, petitioner disconnected the electricity
supply to the DCIM building.
TEC demanded from petitioner the reconnection of electrical service, claiming that it
had nothing to do with the alleged tampering but the latter refused to heed the
demand.
FACTS:
-
MERALCO and NS Electronics (Philippines), Inc., the predecessor-in-interest of

respondent TEC, entered into two separate contracts denominated as Agreements for
the Sale of Electric Energy wherein:
Page 15 of 30
Hence, TEC filed a complaint before the Energy Regulatory Board (ERB) which
immediately ordered the reconnection of the service.
However, prior to the reconnection, petitioner conducted a scheduled inspection of

the questioned meters and found them to have been tampered anew.
HELD: The petition must fail.
Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time, in
TEC's NS Building. The inspection allegedly revealed that the electric meters
were not registering the correct power consumption.
MERALCO sent a letter demanding payment of representing the differential billing.
TEC denied petitioner's allegations and claim.
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.
To avert the impending disconnection of electrical service, TEC paid the above
amount, under protest.
TEC and TPC filed a complaint for damages against petitioner and Ultra before the
RTC which rendered a decision in their favor and affirmed by CA.
Petitioner now comes before this Court in this petition for review on certiorari.
ISSUES:
1) whether or not TEC tampered with the electric meters installed at its DCIM and NS
buildings;
2) If so, whether or not it is liable for the differential billing as computed by petitioner; and
As to the alleged tampering of the electric meter in TEC's NS building, suffice it to state that
the allegation was not proven, considering that the meters therein were enclosed in a metal
cabinet the metal seal of which was unbroken, with petitioner having sole access to the said
meters.38
In view of the negative finding on the alleged tampering of electric meters on TEC's DCIM and
NS buildings, petitioner's claim of differential billing was correctly denied by the trial and
appellate courts. With greater reason, therefore, could petitioner not exercise the right of
immediate disconnection.
However, recourse to differential billing with disconnection was subject to the prior requirement
of a 48-hour written notice of disconnection.44
Petitioner, in the instant case, resorted to the remedy of disconnection without prior
notice. While it is true that petitioner sent a demand letter to TEC for the payment of
differential billing, it did not include any notice that the electric supply would be disconnected.
In fine, petitioner abused the remedies granted to it under P.D. 401 and Revised General
Order No. 1 by outrightly depriving TEC of electrical services without first notifying it of
the impending disconnection. Accordingly, the CA did not err in affirming the RTC
decision.
We, however, deem it proper to delete the award of moral damages. TEC's claim was
premised allegedly on the damage to its goodwill and reputation.50 As a rule, a corporation
is not entitled to moral damages because, not being a natural person, it cannot experience
physical suffering or sentiments like wounded feelings, serious anxiety, mental anguish and
moral shock. The only exception to this rule is when the corporation has a reputation that is
debased, resulting in its humiliation in the business realm.51 But in such a case, it is imperative
for the claimant to present proof to justify the award. It is essential to prove the existence of the
factual basis of the damage and its causal relation to petitioner's acts.52 In the present case,
the records are bereft of any evidence that the name or reputation of TEC/TPC has been
debased as a result of petitioner's acts. Besides, the trial court simply awarded moral damages
in the dispositive portion of its decision without stating the basis thereof.
3) whether or not petitioner was justified in disconnecting the electric power supply in TEC's
DCIM building.
13. Ching vs Secretary of Justice
Page 16 of 30
Lessons Applicable: Corp. Officers or employees, through whose act, default or omission the
corp. commits a crime, are themselves individually guilty of the crime (Corporate Law)
FACTS:
Sept-Oct 1980: PBMI, through Ching, Senior VP of Philippine Blooming Mills, Inc.
(PBMI), applied with the Rizal Commercial Banking Corporation (RCBC) for the
issuance of commercial letters of credit to finance its importation of assorted goods
RCBC approved the application, and irrevocable letters of credit were issued in favor
of Ching.
The goods were purchased and delivered in trust to PBMI.

o
Ching signed 13 trust receipts as surety, acknowledging delivery of the

goods
Under the receipts, Ching agreed to hold the goods in trust for RCBC, with
authority to sell but not by way of conditional sale, pledge or otherwise
In case such goods were sold, to turn over the proceeds thereof as
soon as received, to apply against the relative acceptances and
payment of other indebtedness to respondent bank.
In case the goods remained unsold within the specified period, the
goods were to be returned to RCBC without any need of demand.
goods, manufactured products or proceeds thereof, whether in the

form of money or bills, receivables, or accounts separate and
capable of identification - RCBCs property
When the trust receipts matured, Ching failed to return the goods to RCBC, or to
return their value amounting toP6,940,280.66 despite demands.
o
RCBC filed a criminal complaint for estafa against petitioner in the Office of
the City Prosecutor of Manila.
December 8, 1995: no probable cause to charge petitioner with

violating P.D. No. 115, as petitioners liability was only civil, not
criminal, having signed the trust receipts as surety
RCBC appealed the resolution to the Department of Justice (DOJ) via petition for
review
o
On July 13, 1999: reversed the assailed resolution of the City Prosecutor
execution of said receipts is enough to indict the Ching as the official

responsible for violation of P.D. No. 115
April 22, 2004: CA dismissed the petition for lack of merit and on procedural grounds
Ching filed a petition for certiorari, prohibition and mandamus with the CA
ISSUE: W/N Ching should be held criminally liable.

HELD: YES. DENIED for lack of merit
There is no dispute that it was the Ching executed the 13 trust receipts.
o
law points to him as the official responsible for the offense
Since a corporation CANNOT be proceeded against criminally because it

CANNOT commit crime in which personal violence or malicious intent is
required, criminal action is limited to the corporate agents guilty of an act
amounting to a crime and never against the corporation itself
execution by Ching of receipts is enough to indict him as the official

responsible for violation of PD 115
RCBC is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for
use in manufacture.
Page 17 of 30

o
Moreover, PD 115 explicitly allows the prosecution of corporate officers

without prejudice to the civil liabilities arising from the criminal offense thus,
the civil liability imposed on respondent in RCBC vs. Court of Appeals case
is clearly separate and distinct from his criminal liability under PD 115
Chings being a Senior Vice-President of the Philippine Blooming Mills does not
exculpate him from any liability
The crime defined in P.D. No. 115 is malum prohibitum but is classified
as estafa under paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with
abuse of confidence. It may be committed by a corporation or other juridical entity or
by natural persons. However, the penalty for the crime is imprisonment for the periods
provided in said Article 315.
law specifically makes the officers, employees or other officers or persons responsible
for the offense, without prejudice to the civil liabilities of such corporation and/or board
of directors, officers, or other officials or employees responsible for the offense
o
rationale: officers or employees are vested with the authority and

responsibility to devise means necessary to ensure compliance with the law
and, if they fail to do so, are held criminally accountable; thus, they have a
responsible share in the violations of the law
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 for the crime, precisely because of the nature of the crime and
the penalty therefor. A corporation cannot be arrested and imprisoned; hence, cannot
be penalized for a crime punishable by imprisonment. However, a corporation may
be charged and prosecuted for a crime if the imposable penalty is fine. Even if the
statute prescribes both fine and imprisonment as penalty, a corporation may be
prosecuted and, if found guilty, may be fined
When a criminal statute designates an act of a corporation or a crime and prescribes

punishment therefor, it creates a criminal offense which, otherwise, would not exist
and such can be committed only by the corporation. But when a penal statute does
not expressly apply to corporations, it does not create an offense for which a
corporation may be punished. On the other hand, if the State, by statute, defines a
crime that may be committed by a corporation but prescribes the penalty therefor to
be suffered by the officers, directors, or employees of such corporation or other
persons responsible for the offense, only such individuals will suffer such penalty.
Corporate officers or employees, through whose act, default or omission the
corporation commits a crime, are themselves individually guilty of the crime. The
principle applies whether or not the crime requires the consciousness of wrongdoing.
It applies to those corporate agents who themselves commit the crime and to those,
who, by virtue of their managerial positions or other similar relation to the corporation,
could be deemed responsible for its commission, if by virtue of their relationship to the
corporation, they had the power to prevent the act. Benefit is not an operative fact
14. JG Summit Holdings INC. vs. Court of Appeals G.R. No. 124293 January 31, 2005
Facts:
The National Investment and Development Corporation (NIDC), a government corporation,
entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe,
Japan (KAWASAKI) for the construction, operation and management of the Subic National
Shipyard Inc., (SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO).
Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of
PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant
to
the parties of the right of first refusal should either of them decide to sell, assign or transfer its
interest in the joint venture.
NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National
Bank
(PNB). Such interests were subsequently transferred to the National Government pursuant to
an
Administrative Order.
When the former President Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of,
conserve, manage and dispose of non-performing assets of the National Government, a trust
agreement was entered into between the National Government and the APT wherein the
latter
was named the trustee of the National Governments share in PHILSECO.
In the interest of the national economy and the government, the COP and the APT deemed it
best to sell the National Governments share in PHILSECO to private entities. After a series of
negotiations between the APT and KAWASAKI , they agreed that the latters right of first
refusal under the JVA be exchanged for the right to top by 5%, the highest bid for the
said shares.
They further agreed that KAWASAKI woul.d be entitled to name a company in which it was a
stockholder, which could exercise the right to top. KAWASAKI then informed APT that
Philyards Holdings, Inc. (PHI) would exercise its right to top.
Page 18 of 30
At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion
and
Thirty Million Pesos (Php2,030,000,000.00) with an acknowledgement of
KAWASAKI/PHILYARDS right to top.
As petitioner was declared the highest bidder, the COP approved the sale subject to the right
of
Kawasaki Heavy Industries, Inc. / PHILYARDS Holdings Inc. to top JGs bid by 5% as specified
in the bidding rules.
On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the
said
shares timely exercised the same.
Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the
maintenance of
the 60%-40% relationship between the NIDC and KAWASAKI arising from the
Constitution
because PHILSECO is a landholding corporation and need not be a public utility to be
bound by
the 60%-40% constitutional limitation.
ISSUE:
o
Whether or not PHILSECO is a public utility
Whether or not Kawasaki/PHI can purchase beyond 40% of PHILSECOs

stocks
HELD:
In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec. 13, CA
No. 146. On the other hand, Kawasaki/PHI argued that PD No. 666 explicitly stated that a
shipyard was not a public utility. But the SC stated that sec. 1 of PD No. 666 was expressly
repealed by sec. 20, BP Blg. 391 and when BP Blg. 391 was subsequently repealed by EO
226, the latter law did not revive sec. 1 of PD No. 666. Therefore, the law that states that a
shipyard is a public utility still stands.
A shipyard such as PHILSECO being a public utility as provided by law is therefore required to
comply with the 60%-40% capitalization under the Constitution. Likewise, the JVA between
NIDC and Kawasaki manifests an intention of the parties to abide by this constitutional
mandate. Thus, under the JVA, should the NIDC opt to sell its shares of stock to a third party,
Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock
would not exceed 40% of the entire shares of stock. The NIDC, on the other hand, may
purchase even beyond 60% of the total shares. As a government corporation and necessarily a
100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even
beyond 60% of the capitalization as the Constitution clearly limits only foreign capitalization.
Kawasaki was bound by its contractual obligation under the JVA that limits its right of first
refusal to 40% of the total capitalization of PHILSECO. Thus, Kawasaki cannot purchase
beyond 40% of the capitalization of the joint venture on account of both constitutional and
contractual proscriptions.
15. General Credit Corp v. Alsons Dev. and Investment Corp
FACTS:
Petitioner General Credit Corporation (GCC), then known as Commercial
Credit
Corporation
(CCC), established CCC franchise companies in different
urban centers of the country. In furtherance of its business, GCC was able to secure
license from Central Bank (CB) and SEC to engage also in quasi-banking activities.
On the other hand, respondent CCC Equity Corporation (EQUITY) was
organized in by GCC for the purpose of, among other things, taking over
the operations and management of the various franchise companies. At a
time material hereto, respondent Alsons Development and Investment Corporation
(ALSONS) and the Alcantara family, each owned, just like GCC, shares in the
aforesaid GCC franchise companies, e.g., CCC Davao and CCC Cebu.
ALSONS and the Alcantara family, for a consideration of P2M, sold their
shareholdings (101,953 shares), in the CCC franchise companies to EQUITY.
EQUITY issued ALSONS et al., a "bearer" promissory note for P2M with a one-year
maturity date.4 years later, the Alcantara family assigned its rights and interests
over the bearer note to ALSONS which became the holder thereof. But even before
the execution of the assignment deal aforestated, letters of demand for interest
payment were already sent to EQUITY. EQUITY no longer then having assets or
property to settle its obligation nor being extended financial support by
GCC, pleaded inability to pay. ALSONS, having failed to collect on the
bearer note aforementioned, filed a complaint for a sum of money against
EQUITY and GCC. GCC is being impleaded as party-defendant for any judgment
ALSONS might secure against EQUITY and, under the doctrine of piercing
Page 19 of 30

the
veil
of corporate
fiction,
against
organized as a tool and mere conduit of GCC.

GCC,
EQUITY
having
been
According to EQUITY (cross-claim against GCC): it acted merely as

intermediary or bridge for loan transactions and other dealings of GCC to
its franchises and the investing public; and is solely dependent upon GCC
for its funding requirements. Hence, GCC is solely and directly liable to
ALSONS, the former having failed to provide EQUITY the necessary funds to meet
its obligations to ALSONS. GCC filed its ANSWER to Cross-claim, stressing that
it is a distinct and separate entity from EQUITY.
RTC, finding that EQUITY was but an instrumentality or adjunct of GCC
and considering the legal consequences and implications of such
relationship, rendered judgment for Alson.
CA affirmed.
ISSUE: WON the doctrine of "Piercing the Veil of Corporate Fiction" should be
applied in the case at bar.
HELD: YES.
The notion of separate personality, however, may be disregarded under the
doctrine "piercing the veil of corporate fiction" as in fact the court will often look
at the corporation as a mere collection of individuals or an aggregation of persons
undertaking business as a group, disregarding the separate juridical personality of
the corporation unifying the group.
Another formulation of this doctrine is that when two (2) business enterprises
are owned, conducted and controlled
by
the
same parties,
both
law and equity will, when necessary to protect the rights of
third
parties, disregard the legal fiction that two corporations are
distinct entities and treat them as identical or one and the same.
Authorities are agreed on at least three (3) basic areas where piercing the veil,
with which the law covers and isolates the corporation from any other legal entity
to which it may be related, is allowed.
3) alter ego cases, where a corporation is merely a farce since it is a mere

alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another
corporation.
The CA found valid grounds to pierce the corporate veil of petitioner GCC, there
being justifiable basis for such action. When the appellate court spoke of a
justifying factor, the reference was to what the trial court said in its decision,
namely: the existence of certain circumstances [which], taken together, gave
rise to the ineluctable conclusion that [respondent] EQUITY is but an
instrumentality or adjunct of [petitioner] GCC.
The Court agrees with the disposition of the CA on the application of the piercing
doctrine to the transaction subject of this case. Per the Courts count, the trial
court
enumerated no
less
than 20 documented
circumstances and
transactions, which, taken as a package, indeed strongly supported the conclusion
that respondent EQUITY was but an adjunct, an instrumentality or business conduit
of petitioner GCC. This relation, in turn, provides a justifying ground to pierce
petitioners corporate existence as to ALSONS claim in question. Foremost of what
the trial court referred to as "certain circumstances" are the commonality of
directors, officers and stockholders and even sharing of office between
petitioner GCC and respondent EQUITY; certain financing and
management arrangements between the two, allowing the petitioner to
handle
the funds of the latter; the virtual domination if not control
wielded by the petitioner over the finances, business policies and
practices
of
respondent
EQUITY;
and
the
establishment
of
respondent EQUITY by the petitioner to circumvent CB rules.
Some of the detailed circumstances:
-
These are:
1) defeat of public convenience, as when the corporate fiction is used as

vehicle for the evasion of an existing obligation;
2) fraud cases or when the corporate entity is used to justify a wrong,

protect fraud, or defend a crime; or
[respondent] EQUITY and [petitioner] GCC had common directors

and/or officers as well as stockholders. Disclosed likewise is the
fact that when [EQUITYs President] Labayen sold the shareholdings of
EQUITY in said franchise companies, practically the entire proceeds
thereof were surrendered to GCC, and not received by EQUITY
GCC financed EQUITY and EQUITY was, in fact, a wholly owned
subsidiary of GCC, funds invested by EQUITY in the CCC
franchise companies actually came from CCC Phils. or GCC
GCC cause the incorporation of EQUITY and its business affairs were
considered as GCCs own business endeavors.
EQUITY never acted independently but took their orders from
GCC
Page 20 of 30
EQUITY was organized by GCC for the purpose of circumventing

[CB] rules and regulations and the Anti-Usury Law ((a) using as a
conduit its non-quasi bank affiliates . (b) issuing without recourse
facilities to enable GCC to extend credit to affiliates like EQUITY which
go beyond the single borrowers limit without the need of showing
outstanding balance in the book of accounts.)
There being a parent-subsidiary corporation relationship between EQUITY and GCC,
GCC maybe held responsible for the acts and contracts of its subsidiary EQUITY,
especially that the latter has no sufficient property to settle its obligations.For,
after all, GCC was the entity which initiated and benefited immensely from the
fraudulent scheme perpetrated in violation of the law.
-
16) Mel Velarde vs Lopez Inc, G.R. No. 153886 | 2004-01-14

FACTS: On January 6, 1997, Eugenio Lopez Jr., then President of respondent Lopez,
Inc., as LENDER, and petitioner Mel Velarde, then General Manager of Sky
Vision Corporation, a subsidiary of respondent, as BORROWER, forged a
notarized loan agreement covering the amount of P10,000,000.00. The
agreement expressly provided for, among other things, the manner of payment
and the circumstances constituting default which would give the lender the right to
declare the loan together with accrued interest immediately due and payable. As
petitioner failed to pay the instalments as they became due, respondent,
apparently in answer to a proposal of petitioner respecting the
settlement of the loan, advised him by letter dated July 15, 1998 that he
may use his retirement benefits in Sky Vision in partial settlement of his
loan after he settles his accountabilities to the latter and gives his written
instructions to it. Petitioner protested the computation indicated in the July 15,
1998 letter, he asserting that the imputed unliquidated advances from Sky Vision
had already been properly liquidated. On August 18, 1998, respondent filed a
complaint for collection of sum of money with damages at the RTC of Pasig City
against petitioner because of failure to comply with the loan agreement and refusal
to pay upon demand. Respondent filed a manifestation and a motion to dismiss the
counterclaim for want of jurisdiction, which drew petitioner to assert in his
comment and opposition thereto that the veil of corporate fiction must be pierced
to hold respondent liable for his counterclaims.
failure to show the presence of any of the circumstances to justify the application
of the principle of "piercing the veil of corporate fiction." Motion for
Reconsideration was likewise denied. Hence this Petition for Review on Certiorari.
ISSUE: Whether or not the veil of corporate fiction must be pierced to hold
respondent liable.
RULING: In applying the doctrine of piercing the veil of corporate fiction, the
following requisites must be established: (1) control, not merely majority or
complete stock control; (2) such control must have been used by the
defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest acts in contravention of
plaintiffs legal rights; and (3) the aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.
Nowhere, however, in the pleadings and other records of the case can it
be gathered that respondent has complete control over Sky Vision, not
only of finances but of policy and business practice in respect to the
transaction attacked, so that Sky Vision had at the time of the
transaction no separate mind, will or existence of its own. The existence of
interlocking directors, corporate officers and shareholders is not enough
justification to pierce the veil of corporate fiction in the absence of fraud or other
public policy considerations.
Petitioner muddles the issues by arguing that respondent fraudulently took
advantage of the control over the matter of compensation and benefits of an
employee of Sky Vision to deceive petitioner into signing the loan agreement on
the misleading assurance that it was merely for the purpose of documenting the
reward to him of ten million pesos. This argument does not persuade. Petitioner,
being a lawyer, is presumed to know the legal and binding effects of loan
agreements.
RTC of Pasig denied respondents motion to dismiss the counterclaim and ruled
that there is identity of interest between respondent and Sky Vision to merit the
piercing of the veil of corporate fiction. Respondents motion for reconsideration
having been denied, it filed a Petition for Certiorari at the CA which held that
respondent is not the real party-in-interest on the counterclaim and that there was
Page 21 of 30
As for the trial courts ruling that the agreement to set-off is an amendment of the
loan agreement resulting to an identity of interest between respondent and Sky
Vision and, therefore, sufficient to pierce the veil of corporate fiction, it is
untenable. In the letter sent to petitioner it was mentioned that, to effect
a set-off, it is a condition sine qua non that the approval thereof by
"Sky/Central" must be obtained, and that petitioner liquidate his
advances from Sky Vision. These conditions hardly manifest that
respondent possessed that degree of control over Sky Vision as to make
the latter its mere instrumentality, agency or adjunct.
17. Heirs of Ramon Durano, Sr. vs. Uy (344 SCRA 238)

July 27, 2010
Separate Juridical Personality
Alter Ego: Piercing the Veil of Corporate Fiction
Facts: Ramon Durano III & wife instituted an action for damages against Uy, etc. accusing
them of officiating a hate campaign against them by lodging complaints in the police for
invasion of property; sending complaints to the Office of the President depicting them as
oppressors, landgrabbers & usurpers; spreading false rumors & damaging tales w/c put them
into public contempt & ridicule.
In their answer, Uy, etc. lodged affirmative defenses, demanded the return of their property &
made counterclaims for actual, moral & exemplary damages. They claim that in the first week
of August 1970, they received mimeographed notices signed by Durano, Sr. informing them
that the land they were tilling, formerly owned by Cepco was purchased by Durano & Co,
directing them to immediately turn over the property. Even before they could vacate, Durano &
Co. proceeded to bulldoze & destroy their property & fire at air even. September 15, 1970
Durano & Co. sold the property to Durano III who proceeded to register the lands in his name.
They claim that they were deprived of their independent source of income, were made victims
of serious violence & demanded damages for cost of improvements on the land that were
destroyed.
The Duranos moved for the dismissal of their complaint w/c the trial court granted w/o
prejudice to the right of Uy, etc. to maintain their counterclaim. The counterclaim was later
upheld. This decision was affirmed by the CA. Hence this petition.
Issue: WON Durano can invoke the doctrine of separate corporate personality to evade
liability for damages
Held: Denied & CA decision modified. The Duranos hinge their claim on the TCTs issued in
the name of Durano III. Their validity was put into serious doubt by the ff: a) the certificates
reveal the lack of registered title of Cepoc to the Properties; b) alleged reconstituted titles of
Cepoc were not produced in evidence; c) deed of sale between Cepoc & Durano & Co. was
unnotarized & thus unregisterable
Fraud in the issuance of a certificate of title may be raised only in an action expressly instituted
for that purpose; and not collaterally as in an action for reconveyance & damages. The rule on
indefeasibility of title Torrens titles can only be attacked for fraud w/in 1 year from the date of
issuance of the decree of registration; an action for reconveyance may prosper if a property
wrongfully registered has not passed to an innocent purchaser for value. The purchase of
Durano & Co. could not be said to have been in good faith since it is not disputed that Durano
III acquired the property w/ full knowledge of Uys occupancy thereon. Uys action for
reconveyance will prosper, it being clear that the property, wrongfully registered in the name of
Durano III, has not passed to an innocent purchaser for value.
Notarization of the deed of sale is essential to its registrability, & the action of the RD in
allowing the registration of the unacknowledged deed of sale was unauthorized & did not
render validity to the registration of the document.
A buyer who could not have failed to know or discover that the land sold to him was in the
adverse possession of another is a buyer in bad faith. A purchaser cannot just close his eyes
to facts w/c should put a reasonable man upon his guard, such as when the subject of the sale
is in the possession of persons other than the seller. Uy & company were in open possession
& occupancy of the properties when Durano & Co. supposedly purchased the same from
Cepoc.
In applying the instrumentality or alter ego doctrine, the courts are concerned w/ reality
& not form, w/ how the corp operated & the individual defendants relationship to that
operation.
Whether a corporation is a mere alter ego is purely one of fact. Shortly after the sale by
Cepco to Durano & Co., the latter sold the property to Durano III, who immediately
procured the registration of the property in his name. Obviously, Durano & Co. was
used by Durano III,etc. as an instrumentality to appropriate the disputed property for
themselves.
Test to enable piercing of the veil, except in express agency, estoppel or direct tort:
Page 22 of 30
a)Control, not mere majority or complete domination; b)Such control must have e=been used
by the defendant to commit fraud or wrong, etc.; c)The aforesaid control & breach of duty must
approximately cause the injury or unjust loss complained of.
May 25, 1999: Ritratto Group, Inc filed a complaint for injunction with prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining order before the RTC. -granted
72-hour TRO
RTC and CA: dismissed motion to dismiss
Sec.8 Rule 51 indicates that the CA is not limited to reviewing only those errors assigned by
appellant but also those closely related to or dependent on an assigned error. CA is imbued w/
sufficient discretion to review matters.
Ordinary acquisitive prescription, in the case of immovable property, requires possession of
the thing in good faith & w/ just title for a period of 10 years.
Remedies of an owner on whose land somebody has built in bad faith: a) appropriate what
has been built w/o any obligation to pay indemnity; b) demand that the builder remove what he
had built; c) compel the builder to pay the value of the land. In any case, landowner is entitled
to damages (Art.451)
PNB-IFL, is a wholly owned subsidiary of defendant Philippine National Bank, the suit
against the defendant PNB is a suit against PNB-IFL
Rittratto: entire credit facility is void as it contains stipulations in violation of the principle of
mutuality of contracts
ISSUE: W/N PNB is an alter ego of PNB-IFL
HELD: NO. Petition is granted
18. PNB VS RITRATTO GROUP
PNB is an agent with limited authority and specific duties under a special power of attorney
incorporated in the real estate mortgage.
FACTS:
not privy to the loan contracts entered into by PNB-IFL.
May 29, 1996: PNB International Finance Ltd. (PNB-IFL) a subsidiary company of PNB,
organized and doing business in Hong Kong, extended a letter of credit in favor of the
Ritratto Group, Inc. (Ritartto) in the amount of US$300K secured by real estate mortgages
constituted over 4 parcels of land in Makati City
September 1996: increased successively to US$1,140,000.00
US$1,290,000.00
February 1997: US$1,425,000.00
November 1996: to
April 1998: decreased to US$1,421,316.18
mere fact that a corporation owns all of the stocks of another corporation, taken alone
is not sufficient to justify their being treated as one entity.
If used to perform legitimate functions, a subsidiary's separate existence may be respected,
and the liability of the parent corporation as well as the subsidiary will be confined to those
arising in their respective business.
Ritratto Group, Inc. made repayments of the loan incurred by remitting those amounts to their
loan account with PNB-IFL in Hong Kong.
general rule the stock ownership alone by one corporation of the stock of another does not
thereby render the dominant corporation liable for the torts of the subsidiary unless the
separate corporate existence of the subsidiary is a mere sham, or unless the control of the
subsidiary is such that it is but an instrumentality or adjunct of the dominant corporation.
April 30, 1998: outstanding amounted to US$1,497,274.70
The Circumstance rendering the subsidiary an instrumentality (common circumstances)
PNB-IFL, through its attorney-in-fact PNB, notified them of the foreclosure of all the real
estate mortgages and that the properties subjected
(a) The parent corporation owns all or most of the capital stock of the subsidiary.
(b) The parent and subsidiary corporations have common directors or officers.
(c) The parent corporation finances the subsidiary.
Page 23 of 30
(d) The parent corporation subscribes to all the capital stock of the subsidiary or
otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses of the
subsidiary.
(g) The subsidiary has substantially no business except with the parent corporation or
no assets except those conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is
described as a department or division of the parent corporation, or its business or
financial responsibility is referred to as the parent corporation's own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently in the interest of
the subsidiary but take their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
19) Sunio vs.NLRC,127 SCRA 390

EM Ramos & Co., Inc (EMRACO) and Cabugao Ice Plant, Inc. (CIPI), sister corporations,
sold an ice plant to Rizal Development and Finance, Corp. (RDFC). To secure RDFCs
payment of the purchase price, the ice plant was mortgaged to EMRACO-CIPI. Because of
the sale, EMRACO-CIPI terminated all of their employees, including private respondents.
Later, RDFC sold the ice plant, subject to the mortgage in favor of EMRACO-CIPI, to
petitioner Ilocos Commercial Corp. (ICC).
When RDFC and ICC defaulted on the payment of the balance of the purchase price,
EMRACO-CIPI extrajudicially foreclosed the ice plant. It then sold it to Nilo Villanueva, subject
to RDFCs right of redemption. Nilo Villanueva rehired private respondents.
When RDFC redeemend the ice plant, private respondents were again dismissed. Thus, the
latter filed complaints against the petitioner corporation, and its President and General
Manager, Alberto Sunio, for illegal dismissal.
The Assistance Regional Director of the Ministry of Labor and Employment ordered petitioners
to reinstate private respondents. NLRC affirmed. Petitioner Sunio, who owned of ICC,
was made jointly and severally liable with ICC and CIPI for the payment of backwages.
RATIO: A corporation is invested by law with a personality separate and distinct from those of
the persons composing it as well as from that of any other legal entity to which it may be
related. Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not itself sufficient ground for
disregarding the separate corporate personality. Therefore, Sunio should not have been
made personally liable for the payment of backwages to private respondents.
20. G. No. L-12719
May 31, 1962
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs.

THE CLUB FILIPINO, INC. DE CEBU, respondent.
This is a petition to review the decision of the Court of Tax Appeals, reversing the decision of
the Collector of Internal Revenue, assessing against and demanding from the "Club
Filipino, Inc. de Cebu", the sum of P12,068.84 as fixed and percentage taxes, surcharge and
compromise penalty, allegedly due from it as a keeper of bar and restaurant.
As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu," (Club, for short), is a
civic corporation organized under the laws of the Philippines with an original authorized capital
stock of P22,000.00, which was subsequently increased to P200,000.00, among others, to it
"proporcionar, operar, y mantener un campo de golf, tenis, gimnesio (gymnasiums), juego de
bolos (bowling alleys), mesas de billar y pool, y toda clase de juegos no prohibidos por leyes
generales y ordenanzas generales; y desarollar y cultivar deportes de toda clase y
denominacion cualquiera para el recreo y entrenamiento saludable de sus miembros y
accionistas" (sec. 2, Escritura de Incorporacion del Club Filipino, Inc. Exh. A). Neither in the
articles or by-laws is there a provision relative to dividends and their distribution, although it is
covenanted that upon its dissolution, the Club's remaining assets, after paying debts, shall be
donated to a charitable Philippine Institution in Cebu (Art. 27, Estatutos del Club, Exh. A-a.).
The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from
the government), and a bar-restaurant where it sells wines and liquors, soft drinks, meals and
short orders to its members and their guests. The bar-restaurant was a necessary incident to
the operation of the club and its golf-course. The club is operated mainly with funds derived
from membership fees and dues. Whatever profits it had, were used to defray its
overhead expenses and to improve its golf-course. In 1951. as a result of a capital surplus,
arising from the re-valuation of its real properties, the value or price of which increased, the
Club declared stock dividends; but no actual cash dividends were distributed to the
Page 24 of 30
stockholders. In 1952, a BIR agent discovered that the Club has never paid percentage tax on
the gross receipts of its bar and restaurant, although it secured B-4, B-9(a) and B-7 licenses.
The Club wrote the Collector, requesting for the cancellation of the assessment. The request
having been denied, the Club filed the instant petition for review.
The dominant issues involved in this case are twofold:
1. Whether the respondent Club is liable for the payment of the sum of 12,068.84, as fixed and
percentage taxes and surcharges prescribed in sections 182, 183 and 191 of the Tax Code,
under which the assessment was made, in connection with the operation of its bar and
restaurant, during the periods mentioned above; and
2. Whether it is liable for the payment of the sum of P500.00 as compromise penalty.
Section 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a
business on which the percentage tax is imposed shall pay in full a fixed annual tax of ten
pesos for each calendar year or fraction thereof in which such person shall engage in said
business." Section 183 provides in general that "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; etc." And section 191, same Tax Code, provides "Percentage
tax . . . Keepers of restaurants, refreshment parlors and other eating places shall pay a
tax three per centum, and keepers of bar and cafes where wines or liquors are served
five per centum of their gross receipts . . .".
It has been held that the liability for fixed and percentage taxes, as provided by these
sections, does not ipso facto attach by mere reason of the operation of a bar and
restaurant. For the liability to attach, the operator thereof must be engaged in the
business as a barkeeper and restaurateur. The plain and ordinary meaning of business
is restricted to activities or affairs where profit is the purpose or livelihood is the
motive, and the term business when used without qualification, should be construed in
its plain and ordinary meaning, restricted to activities for profit or livelihood (The Coll. of
Int. Rev. v. Manila Lodge No. 761 of the BPOE [Manila Elks Club] & Court of Tax Appeals, G.R.
No. L-11176, June 29, 1959, giving full definitions of the word "business"; Coll. of Int. Rev. v.
Sweeney, et al. [International Club of Iloilo, Inc.], G.R. No. L-12178, Aug. 21, 1959, the facts of
which are similar to the ones at bar; Manila Polo Club v. B. L. Meer, etc., No. L-10854, Jan. 27,
1960).
Having found as a fact that the Club was organized to develop and cultivate sports of all class
and denomination, for the healthful recreation and entertainment of its stockholders and
members; that upon its dissolution, its remaining assets, after paying debts, shall be donated
to a charitable Philippine Institution in Cebu; that it is operated mainly with funds derived from
membership fees and dues; that the Club's bar and restaurant catered only to its members and
their guests; that there was in fact no cash dividend distribution to its stockholders and that
whatever was derived on retail from its bar and restaurant was used to defray its overall
overhead expenses and to improve its golf-course (cost-plus-expenses-basis), it stands to
reason that the Club is not engaged in the business of an operator of bar and restaurant
(same authorities, cited above).
It is conceded that the Club derived profit from the operation of its bar and restaurant, but such
fact does not necessarily convert it into a profit-making enterprise. The bar and restaurant are
necessary adjuncts of the Club to foster its purposes and the profits derived therefrom are
necessarily incidental to the primary object of developing and cultivating sports for the healthful
recreation and entertainment of the stockholders and members. That a Club makes some
profit, does not make it a profit-making Club. As has been remarked a club should always
strive, whenever possible, to have surplus (Jesus Sacred Heart College v. Collector of Int.
Rev., G.R. No. L-6807, May 24, 1954; Collector of Int. Rev. v. Sinco Educational Corp., G.R.
No. L-9276, Oct. 23, 1956).1wph1.t
It is claimed that unlike the two cases just cited (supra), which are non-stock, the appellee Club
is a stock corporation. This is unmeritorious. The facts that the capital stock of the
respondent Club is divided into shares, does not detract from the finding of the trial
court that it is not engaged in the business of operator of bar and restaurant. What is
determinative of whether or not the Club is engaged in such business is its object or
purpose, as stated in its articles and by-laws. It is a familiar rule that the actual purpose is
not controlled by the corporate form or by the commercial aspect of the business prosecuted,
but may be shown by extrinsic evidence, including the by-laws and the method of operation.
From the extrinsic evidence adduced, the Tax Court concluded that the Club is not engaged in
the business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites must be complied with, to wit: (1) a
capital stock divided into shares and (2) an authority to distribute to the holders of such shares,
dividends or allotments of the surplus profits on the basis of the shares held (sec. 3, Act No.
1459). In the case at bar, nowhere in its articles of incorporation or by-laws could be
found an authority for the distribution of its dividends or surplus profits. Strictly
speaking, it cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.
A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, nonprofit, nonstock organizations, unless the intent to the contrary is manifest and patent"
(Collector v. BPOE Elks Club, et al., supra), which is not the case in the present appeal.
Having arrived at the conclusion that respondent Club is not engaged in the business as an
operator of a bar and restaurant, and therefore, not liable for fixed and percentage taxes, it
follows that it is not liable for any penalty, much less of a compromise penalty.
Page 25 of 30
WHEREFORE, the decision appealed from is affirmed without costs.
was subsequently affirmed by the Court of Appeals, the defendants-successors-in-interest of

Rafael Galvez have no valid title over the property covered by OCT No. 0-381, and the
subsequent Torrens titles issued in their names should be consequently cancelled.
21. Shipside Inc vs. Court of Appeals, G.R. No. 1433 | 2001-02-20
Doctrine:
Prescription of action does not run against the State: it is not applicable to artificial
bodies created by the State for special purpose.
Facts:
On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael
Galvez, over four parcels of land - Lot 1; Lot 2,; Lot 3; and Lot 4,. On April 11, 1960, Lots No. 1
and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra Llana, Regina
Bustos, and Erlinda Balatbat in a deed of sale . August 16, 1960, Mamaril, et al. sold Lots No.
1 and 4 to Lepanto Consolidated Mining Company.
On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First
Instance of La Union, issued an order declaring OCT No. 0-381 of the Registry of Deeds for
the Province of La Union issued in the name of Rafael Galvez, null and void, and ordered the
cancellation thereof.
On October 28, 1963, Lepanto Consolidated Mining Company sold to Shipside Inc
(petitioner) Lots No. 1 and 4. In the meantime, Rafael Galvez filed his motion for
reconsideration against the order issued by the trial court declaring OCT No. 0-381 null and
void. The motion was denied. The Court of Appeals ruled in favor of the Republic of the
Philippines.
Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated
August 14, 1973 became final and executory on October 23, 1973. Twenty four long years, on
January 14, 1999, the Office of the Solicitor General received a letter dated January 11, 1999
from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development Corporation,
stating that the aforementioned orders and decision of the trial court in L.R.C. No. N-361 have
not been executed by the Register of Deeds, San Fernando, La Union despite receipt of the
writ of execution. On April 21, 1999, the Office of the Solicitor General filed a complaint for
revival of judgment and cancellation of titles before the Regional Trial Court of the First
Judicial Region (Branch 26, San Fernando, La Union)
In its complaint in Civil Case No. 6346, the Solicitor General argued that since the trial court in
LRC Case No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling
On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following
grounds: (1) the complaint stated no cause of action because only final and executory
judgments may be subject of an action for revival of judgment; (2) the plaintiff is not the real
party-in-interest because the real property covered by the Torrens titles sought to be cancelled,
allegedly part of Camp Wallace (Wallace Air Station), were under the ownership and
administration of the Bases Conversion Development Authority (BCDA) under Republic Act No.
7227; (3) plaintiffs cause of action is barred by prescription; (4) twenty-five years having lapsed
since the issuance of the writ of execution, no action for revival of judgment may be instituted
because under Paragraph 3 of Article 1144 of the Civil Code, such action may be brought only
within ten (10) years from the time the judgment had been rendered.
An opposition to the motion to dismiss was filed by the Solicitor General on August 23,
1999, alleging among others, that: (1) the real party-in-interest is the Republic of the
Philippines;and (2) prescription does not run against the State.
Court of Appeals denied petitioners motion for reconsideration on the
grounds that: (1) a complaint filed on behalf of a corporation can be made only if
authorized by its Board of Directors, and in the absence thereof, the petition
cannot prosper and be granted due course;and (2) petitioner was unable to show
that it had substantially complied with the rule requiring proof of authority to
institute an action or proceeding
Issue:
Whether or not the Republic may still for revival of judgment.
RULING
The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo
Balbin, the resident manager for petitioner, who was the signatory in the verification
and certification on non-forum shopping, failed to show proof that he was authorized by
petitioners board of directors to file such a petition.
A corporation, such as petitioner, has no power except those expressly conferred on it
by the Corporation Code and those that are implied or incidental to its existence. In turn,
a corporation exercises said powers through its board of directors and / or its duly authorized
officers and agents. Thus, it has been observed that the power of a corporation to sue
Page 26 of 30
and be sued in any court is lodged with the board of directors that exercises its
corporate powers (Premium Marble Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn,
physical acts of the corporation, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the
board of directors.
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed
the petition, there was no proof attached thereto that Balbin was authorized to sign the
verification and non-forum shopping certification therein, as a consequence of which the
petition was dismissed by the Court of Appeals. However, subsequent to such dismissal,
petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its
board secretary
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45
of the 1997 Rules of Civil Procedure provides that the failure of the petitioner to
submit the required documents that should accompany the petition, including the
certification against forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said
signatory is authorized to file a petition on behalf of the corporation
In the instant case, the merits of petitioners case should be considered special
circumstances or compelling reasons that justify tempering the requirement in regard
to the certificate of non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the
Court excused non-compliance with the requirement as to the certificate of non-forum
shopping. With more reason should we allow the instant petition since petitioner herein
did submit a certification on non-forum shopping, failing only to show proof that the
signatory was authorized to do so. That petitioner subsequently submitted a secretarys
certificate attesting that Balbin was authorized to file an action on behalf of petitioner
likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping
is mandatory, nonetheless the requirements must not be interpreted too literally and thus
defeat the objective of preventing the undesirable practice of forum-shopping (Bernardo v.
NLRC, 255 SCRA 108 [1996]). Lastly, technical rules of procedure should be used to promote,
not frustrate justice. While the swift unclogging of court dockets is a laudable objective, the
granting of substantial justice is an even more urgent ideal.
Second Issue:
The action instituted by the Solicitor General in the trial court is one for revival of judgment
which is governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997
Rules on Civil Procedure. Article 1144(3) provides that an action upon a judgment must be
brought within 10 years from the time the right of action accrues." On the other hand, Section
6, Rule 39 provides that a final and executory judgment or order may be executed on motion
within five (5) years from the date of its entry, but that after the lapse of such time, and before it
is barred by the statute of limitations, a judgment may be enforced by action. Taking these two
provisions into consideration, it is plain that an action for revival of judgment must be
brought within ten years from the time said judgment becomes final.
From the records of this case, it is clear that the judgment sought to be revived became final
on October 23, 1973. On the other hand, the action for revival of judgment was instituted only
in 1999, or more than twenty-five (25) years after the judgment had become final. Hence, the
action is barred by extinctive prescription considering that such an action can be instituted only
within ten (10) years from the time the cause of action accrues.
The Solicitor General, nonetheless, argues that the States cause of action in the
cancellation of the land title issued to petitioners predecessor-in-interest is imprescriptible
because it is included in Camp Wallace, which belongs to the government.
The argument is misleading.
While it is true that prescription does not run against the State, the same may not be invoked
by the government in this case since it is no longer interested in the subject matter. While
Camp Wallace may have belonged to the government at the time Rafael Galvezs title was
ordered cancelled in Land Registration Case No. N-361, the same no longer holds true today.
Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of
1992, created the Bases Conversion and Development Authority. Section 4 pertinently
provides:
Section 4. Purposes of the Conversion Authority. The Conversion Authority shall have the
following purposes:
Page 27 of 30
(a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air
Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta.
Rita Station (Hermosa, Bataan) and those portions of Metro Manila military camps which may
be transferred to it by the President;
Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:
Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development
Authority. All areas covered by the Wallace Air Station as embraced and defined by the 1947
Military Bases Agreement between the Philippines and the United States of America, as
amended, excluding those covered by Presidential Proclamations and some 25-hectare area
for the radar and communication station of the Philippine Air Force, are hereby transferred to
the Bases Conversion Development Authority
With the transfer of Camp Wallace to the BCDA, the government no longer has a right or
interest to protect. Consequently, the Republic is not a real party in interest and it may not
institute the instant action. Nor may it raise the defense of imprescriptibility, the same
being applicable only in cases where the government is a party in interest. Under Section
2 of Rule 3 of the 1997 Rules of Civil Procedure, every action must be prosecuted or defended
in the name of the real party in interest. To qualify a person to be a real party in interest in
whose name an action must be prosecuted, he must appear to be the present real owner of
the right sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668 [1989]). A real party in
interest is the party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. And by real interest is meant a present substantial
interest, as distinguished from a mere expectancy, or a future, contingent, subordinate or
consequential interest (Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]). Being the owner of
the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority,
not the Government, which stands to be benefited if the land covered by TCT No. T-5710
issued in the name of petitioner is cancelled.
Section 3. Creation of the Bases Conversion and Development Authority. There is hereby
created a body corporate to be known as the Conversion Authority which shall have the
attribute of perpetual succession and shall be vested with the powers of a corporation.
It may not be amiss to state at this point that the functions of government have been classified
into governmental or constituent and proprietary or ministrant. While public benefit and public
welfare, particularly, the promotion of the economic and social development of Central Luzon,
may be attributable to the operation of the BCDA, yet it is certain that the functions performed
by the BCDA are basically proprietary in nature. The promotion of economic and social
development of Central Luzon, in particular, and the countrys goal for enhancement, in
general, do not make the BCDA equivalent to the Government. Other corporations have been
created by government to act as its agents for the realization of its programs, the SSS, GSIS,
NAWASA and the NIA, to count a few, and yet, the Court has ruled that these entities, although
performing functions aimed at promoting public interest and public welfare, are not
government-function corporations invested with governmental attributes. It may thus be said
that the BCDA is not a mere agency of the Government but a corporate body performing
proprietary functions.
Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to
cancel petitioners title, not the Republic, the former being the real party in interest. One having
no right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an
action (Ralla v. Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if the plaintiff or the
defendant is not a real party in interest. If the suit is not brought in the name of the real party in
interest, a motion to dismiss may be filed, as was done by petitioner in this case, on the ground
that the complaint states no cause of action (Tanpingco v. IAC, 207 SCRA 652 [1992]).
Moreover, to recognize the Government as a proper party to sue in this case would set a bad
precedent as it would allow the Republic to prosecute, on behalf of government-owned or
controlled corporations, causes of action which have already prescribed, on the pretext that the
Government is the real party in interest against whom prescription does not run, said
corporations having been created merely as agents for the realization of government
programs.
We, however, must not lose sight of the fact that the BCDA is an entity invested with a
personality separate and distinct from the government. Section 3 of Republic Act No. 7227
reads:
Page 28 of 30
Parenthetically, petitioner was not a party to the original suit for cancellation of title
commenced by the Republic twenty-seven years for which it is now being made to answer,
nay, being made to suffer financial losses.
As the Register of the Land Registration Commissioner (LRC) : Deeds has some
doubts as to the registerability, the matter was referred to the Land Registration
Commissioner en consulta for resolution (section 4 of Republic Act No. 1151)
LRC:
It should also be noted that petitioner is unquestionably a buyer in good faith and for value,
having acquired the property in 1963, or 5 years after the issuance of the original certificate of
title, as a third transferee. If only not to do violence and to give some measure of respect to the
Torrens System, petitioner must be afforded some measure of protection.
In view of the provisions of Section 1 and 5 of Article XIII of the Philippine

Constitution, the vendee was not qualified to acquire private lands in the
Philippines in the absence of proof that at least 60 per centum of the capital,
property, or assets of the Roman Catholic Apostolic Administrator of Davao,
Inc., was actually owned or controlled by Filipino citizens, there being no
question that the present incumbent of the corporation sole was a Canadian
citizen
ordered the Registered Deeds of Davao to deny registration of the deed of

sale in the absence of proof of compliance with such condition
One more point.

Since the portion in dispute now forms part of the property owned and administered by the
Bases Conversion and Development Authority, it is alienable and registerable real property.
We find it unnecessary to rule on the other matters raised by the herein parties.
22. Roman Catholic Apostolic vs. Register of Deeds of Davao
G.R. No. L-8451
December 20, 1957
Lesson Applicable: Exploitation of Natural Resources (Corporate Law)
FACTS:
October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of the City of Davao,
executed a deed of sale of a parcel of land in favor of the Roman Catholic
Apostolic Administrator of Davao Inc.(Roman), a corporation sole organized and
existing in accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian
citizen, as actual incumbent.
The Register of Deeds of Davao for registration, having in mind a previous resolution
of the CFI in Carmelite Nuns of Davao were made to prepare an affidavit to the effect
that 60% of the members of their corp. were Filipino citizens when they sought to
register in favor of their congregation of deed of donation of a parcel of land, required
it to submit a similar affidavit declaring the same.
June 28, 1954: Roman in the letter expressed willingness to submit an affidavit but
not in the same tenor as the Carmelite Nuns because it had five incorporators while
as a corporation sole it has only one and it was ownership through donation and this
was purchased
action for mandamus was instituted by Roman alleging the land is held in true for the
benefit of the Catholic population of a place
ISSUE: W/N Roman is qualified to acquire private agricultural lands in the Philippines pursuant
to the provisions of Article XIII of the Constitution
HELD: YES. Register of Deeds of the City of Davao is ordered to register the deed of
sale
A corporation sole consists of one person only, and his successors (who will always
be one at a time), in some particular station, who are incorporated by law in order to
give them some legal capacities and advantages, particularly that of perpetuity, which
in their natural persons they could not have had.
o
In this sense, the king is a sole corporation; so is a bishop, or dens, distinct

from their several chapters
corporation sole
1.
composed of only one persons, usually the head or bishop of the diocese, a unit
which is not subject to expansion for the purpose of determining any percentage
whatsoever
Page 29 of 30
2.
only the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole and such temporalities are administered
for and on behalf of the faithful residing in the diocese or territory of the corporation
sole
3.
has no nationality and the citizenship of the incumbent and ordinary has nothing
to do with the operation, management or administration of the corporation sole, nor
effects the citizenship of the faithful connected with their respective dioceses or
corporation sole.
Constitution demands that in the absence of capital stock, the controlling membership
should be composed of Filipino citizens. (Register of Deeds of Rizal vs. Ung Sui Si
Temple)
presented evidence to establish that the clergy and lay members of this
religion fully covers the percentage of Filipino citizens required by the
Constitution
fact that the law thus expressly authorizes the corporations sole to receive bequests
or gifts of real properties (which were the main source that the friars had to acquire
their big haciendas during the Spanish regime), is a clear indication that the requisite
that bequests or gifts of real estate be for charitable, benevolent, or educational
purposes, was, in the opinion of the legislators, considered sufficient and adequate
protection against the revitalization of religious landholdings.
as in respect to the property which they hold for the corporation, they stand in position
of TRUSTEES and the courts may exercise the same supervision as in other cases of
trust
undeniable proof that the members of the Roman Catholic Apostolic faith within the
territory of Davao are predominantly Filipino citizens
Page 30 of 30

Corporation Law Case Digest 20 Cases For Merge

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Corporation Law Case Digest 20 Cases For Merge

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Atty.

Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

1) Bourns vs. Carman, 7 Phils. 117 (1906)

2) HARDEN v BENGUET CONSOLIDATED MINING COMPANY G.R. No. L-37331, March

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

1906, Benguet Mining was already deprived of such right.

Mining was to exist for 50 years.

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

held the position of Chairman of the PNRC Board of Governors.

privately-funded, and privately-run charitable organization and because it is controlled by a

PNRC is a Private Organization Performing Public Functions. The Republic of the

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

constitutionality in Alvarez v. PICOP Resources, Inc., thus:

Red Cross is not a government office or an office in a government-owned or controlled

grant it corporate powers.

Respondent Gordon filed a Motion for Clarification and/or for Reconsideration of

constitutional proscription on the creation of private corporations by law is a recognition that

by deleting the second sentence thereof.]

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

PNRC Charter that were declared void must therefore stay.

5) Tayag v. Benguet Consolidated, 26 SCRa 242 (1968)

By Laws Must Yield To a Court Order

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Whether or not the arguments of Benguet Consolidated, Inc. are correct?

6) Arnold v. Willits & Patterson Limited, 44 Phils. 634 (1923)

business was at a loss, Arnold would receive $400/mth.

New corp had the same name.

owed 10.1K to W&P.

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Whether or not petitioner was constructively dismissed.

shop, petitioner was temporarily transferred to its fabrication department sometime in

employer to rid himself of an undesirable worker.

insubordination, hence, it suspended the petitioner for six days.

employer towards a particular employee and a veritable hallmark of constructive dismissal.

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

9) Mambulao Lumber Co. v. PNB. 22 SCRA 359 (1969)

10) ABS-CBN v. Court of Appeals, 310 SCRA 572 (1999)

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

Case: ABS-CBN BROADCASTING CORP. v. CA, REPUBLIC BROADCASTING CORP.,

Atty. Ventura MON-TUE 6:00-8:00

CORPORATION LAW case digest

RTC: favored PHIBRO. Ordering NAPCOR to reinstate PHIBRO as accredited bidder,

ISSUE: W/N PHIBRO is entitled to damages.

G.R. No. 126204

November 20, 2001

Lessons Applicable: Who may recover (Torts and Damages)