1.

ANG PUE & COMPANY, ET AL., plaintiffs-appellants,

vs.
SECRETARY OF COMMERCE AND INDUSTRY, defendant-appellee.

Facts:

Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue & Company for a
term of five years from May 1, 1953, extendible by their mutual consent. The purpose of the
partnership was "to maintain the business of general merchandising, buying and selling at wholesale
and retail, particularly of lumber, hardware and other construction materials for commerce, either
native or foreign.

On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided,
among other things, that, after its enactment, a partnership not wholly formed by Filipinos could
continue to engage in the retail business until the expiration of its term.

On April 15, 1958 — prior to the expiration of the five-year term of the partnership Ang Pue &
Company, but after the enactment of the Republic Act 1180, the partners already mentioned
amended the original articles of part ownership (Exhibit B) so as to extend the term of life of the
partnership to another five years. When the amended articles were presented for registration in the
Office of the Securities & Exchange Commission on April 16, 1958, registration was refused upon
the ground that the extension was in violation of the aforesaid Act.

Action for declaratory relief filed in the Court of First Instance of Iloilo by Ang Pue & Company, Ang
Pue and Tan Siong against the Secretary of Commerce and Industry to secure judgment "declaring
that plaintiffs could extend for five years the term of the partnership pursuant to the provisions of
plaintiffs' Amendment to the Article of Co-partnership."

Issue: Whether or not Ang Pue & Co. can rightfully extend the term of life of their partnership.

Held:No

To organize a corporation or a partnership that could claim a juridical personality of its own and
transact business as such, is not a matter of absolute right but a privilege which may be enjoyed
only under such terms as the State may deem necessary to impose. That the State, through
Congress, and in the manner provided by law, had the right to enact Republic Act No. 1180 and to
provide therein that only Filipinos and concerns wholly owned by Filipinos may engage in the retail
business can not be seriously disputed.

To argue that because the original articles of partnership provided that the partners could extend the
term of the partnership, the provisions of Republic Act 1180 cannot be adversely affect appellants
herein, is to erroneously assume that the aforesaid provision constitute a property right of which the
partners can not be deprived without due process or without their consent. The agreement contain
therein must be deemed subject to the law existing at the time when the partners came to agree
regarding the extension. In the present case, as already stated, when the partners amended the
articles of partnership, the provisions of Republic Act 1180 were already in force, and there can be
not the slightest doubt that the right claimed by appellants to extend the original term of their
partnership to another five years would be in violation of the clear intent and purpose of the law
aforesaid
2.

Malayang Samahan ng mga

Manggagawa sa M. Greenfield vs
Cresencio Ramos(NLRC), et al.
Facts:

This is petition for motion for partial reconsideration of the decision dated
February 28, 2000,[1] the dispositive portion of which reads:[2] WHEREFORE, the
petition is GRANTED; the decision of the National Labor Relations Commission in
Case No. NCR-00-09-04199-89 is REVERSED and SET ASIDE; and the respondent
company is hereby ordered to immediately reinstate the petitioners to their respective
positions. Should reinstatement be not feasible, respondent company shall pay
separation pay of one month salary for every year of service. Should reinstatement be
not feasible, their backwages shall be computed from the time petitioners were
terminated until the finality of this decision. Costs against the respondent company.

Petitioners allege that this Court committed patent and palpable error in holding that the
respondent company officials cannot be held personally liable for damages on account of
employees dismissal because the employer corporation has a personality separate and distinct
from its officers who merely acted as its agents whereas the records clearly established that
respondent company officers Saul Tawil, Carlos T. Javelosa and Renato C. Puangco have caused
the hasty, arbitrary and unlawful dismissal of petitioners from work; that as top officials of the
respondent company who handed down the decision dismissing the petitioners, they are
responsible for acts of unfair labor practice; that these respondent corporate officers should not
be considered as mere agents of the company but the wrongdoers.

ISSUE: Whether or not the officers of the corporation should be held solidarily liable

Held: No

Petitioners contention that respondent company officials should be made personally liable for damages
on account of petitioners dismissal is not impressed with merit. A corporation is a juridical entity with
legal personality separate and distinct from those acting for and in its behalf and, in general from the
people comprising it.[12] The rule is that obligations incurred by the corporation, acting through its
directors, officers and employees, are its sole liabilities.[13] True, solidary liabilities may at times be
incurred but only when exceptional circumstances warrant such as, generally, in the following cases:[14]

1. When directors and trustees or, in appropriate cases, the officers of a corporation
(a) Vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and
other persons.[15]

(2) When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.[16]

(3) When a director, trustee or officer has contractually agreed or stipulated to hold himself personally
and solidarily liable with the Corporation.[17]

(4) When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.[18]

In labor cases, particularly, the Court has held corporate directors and officers solidarily liable with the
corporation for the termination of employment of corporate employees done with malice or in bad
faith.[19] Bad faith or negligence is a question of fact and is evidentiary.[20] It has been held that bad
faith does not connote bad judgement or negligence; it imports a dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty thru some motive or interest
or ill will; it partakes of the nature of fraud.[21]

In the instant case, there is nothing substantial on record to show that respondent officers acted in
patent bad faith or were guilty of gross negligence in terminating the services of petitioners so as
to warrant personal liability. The Labor Arbiter found that petitioner union officers were justifiably
expelled from the federation for committing acts of disloyalty when it "undertook to disaffiliate from
the federation by charging ULGWP with failure to provide any legal, educational or organizational
support to the local. . . . and declared autonomy, wherein they prohibit the federation from interfering
in any internal and external affairs of the local union."20

It is well-settled that findings of facts of the NLRC are entitled to great respect and are generally
binding on this Court, but it is equally well-settled that the Court will not uphold erroneous
conclusions of the NLRC as when the Court finds insufficient or insubstantial evidence on record to
support those factual findings. The same holds true when it is perceived that far too much is
concluded, inferred or deduced from the bare or incomplete facts appearing of record.21
2.

Malayang Samahan ng mga

Manggagawa sa M. Greenfield vs
Cresencio Ramos(NLRC), et al.
SHORTer VERSION

In February 1990, M. Greenfield, Inc. (MGI), through its officers Saul Tawil, Carlos
Javelosa, and Renato Puangco began terminating employees. The corporation closed down
one of their plants and so they said they have to retrench the number of employees.
Consequently, the Malayang Samahan ng mga Manggagawa sa M. Greenfield (MSMG-
UWP) filed an illegal dismissal case against MGI. The National Labor Relations
Commission, chaired by Cresencio Ramos, ruled against the union. But on appeal, the
decision of the NLRC was reversed and the corporation was ordered, among others, to pay
the employees’ backwages. The union further appealed as they contend that the officers of
the corporation should be held solidarily liable.
ISSUE: Whether or not the officers of the corporation should be held solidarily liable.
HELD: No. A corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general from the people comprising it. The rule is
that obligations incurred by the corporation, acting through its directors, officers and
employees are its sole liabilities. There is no question that MGI is guilty of illegal dismissal
but the officers cannot be held solidarily liable.
It’s true that there’s a plethora of illegal dismissal cases where the SC made corporate
officers personally liable but these cases usually involve corporate officers who acted in bad
faith in illegally dismissing employees. Corporate directors and officers may be solidarily
liable with the corporation for the termination of employment of corporate employees if the
same is done with malice or in bad faith.
3.

PHILIPPINE PRODUCTS COMPANY, plaintiff-appellant,

vs.
PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE EXTERIEUR: PRIMATERIA
(PHILIPPINES) INC., ALEXANDER G. BAYLIN and JOSE M. CRAME, defendants-appellees.

Primateria Societe Anonyme Pour Le Commerce Exterieur (Primateria Zurich, a sociedad

anonima formed in Zurich), through Alexander Baylin, entered into an agreement with
Philippine Products Company (PPC) whereby it was agreed that from 1951 to 1953, PPC
shall ship copra products abroad. Defendant failed to pay cost for the shipments made by
PPC. Thus an action was filed to recover from defendants the sum of P33,009.71 with
interest and attorney's fees of P8,000.00.

After trial, judgment was rendered by the lower court holding defendant Primateria Zurich liable to the
plaintiff for the sums of P31,009.71, with legal interest from the date of the filing of the complaint, and
P2,000.00 as and for attorney's fees; and absolving defendants Primateria (Phil.), Inc., Alexander G.
Baylin, and Jose M. Crame from any and all liability.

Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three
defendants.

It is plaintiff's theory that Primateria Zurich is a foreign corporation within the meaning of Sections 68
and 69 of the Corporation Law; and since it has transacted business in the Philippines without the
necessary license, as required by said provisions, its agents here are personally liable for contracts made
in its behalf.

Section 68 of the Corporation Law states: "No foreign corporation or

corporation formed, organized, or existing under any laws other than those
of the Philippines shall be permitted to transact business in the Philippines,
until after it shall have obtained a license for that purpose from the
Securities and Exchange Commission * * *", And under Section 69, any
officer, or agent of the corporation or any person transacting business for
any foreign corporation not having the license prescribed shall be punished
by imprisonment for etc. * * *.
ISSUE: Whether or not PPC is correct.
HELD: No. PPC was not able to prove that Primateria Zurich, a sociedad anonima, is a
foreign corporation. And as a sociedad anonima, Primateria Zurich is not a corporation
under our Corporation Law. As such, Sections 68 and 69 cannot be invoked in order to
make the alleged agents of Primateria Zurich be liable. PPC will have to enforce the
judgment against Primateria Zurich alone.
4.
BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner,
vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, CHAIRMAN JOVITO SALONGA,
COMMISSIONER MARY CONCEPCION BAUTISTA, COMMISSIONER RAMON DIAZ,
COMMISSIONER RAUL R. DAZA, COMMISSIONER QUINTIN S. DOROMAL, CAPT. JORGE B.
SIACUNCO, et al., respondents.
CASE DIGEST: BASECO VS. PCGG, GR NO. 75885, MAY 27, 1987

Facts:

BASECO describes itself in its petition as "a shiprepair and shipbuilding company * * incorporated as a
domestic private corporation * * (on Aug. 30, 1972) by a consortium of Filipino shipowners and shipping
executives. Its main office is at Engineer Island, Port Area, Manila, where its Engineer Island Shipyard is
housed, and its main shipyard is located at Mariveles Bataan. Its Articles of Incorporation disclose that
its authorized capital stock is P60,000,000.00 divided into 60,000 shares, of which 12,000 shares with a
value of P12,000,000.00 have been subscribed, and on said subscription, the aggregate sum of
P3,035,000.00 has been paid by the incorporators. The same articles Identify the incorporators,
numbering fifteen (15). By 1986, however, of these fifteen (15) incorporators, six (6) had ceased to be
stockholders. As of 1986, there were twenty (20) stockholders listed in BASECO's Stock and Transfer
Book.)

When EO 1 & 2 was promulgated by Pres. Corazon Aquino and respectively the sequestration, takeover
and other orders in relation to the EO done by the PCGG to the alleged Marcos controlled corporation
which is BASECO. The problem arose when the sequestration order was initiated. The sequestration
order was directed to 3 commissioners of the PCGG directing them to sequester the following 1. Bataan
Shipyard and Engineering Co., Inc. (Engineering Island Shipyard and Mariveles Shipyard) 2. Baseco
Quarry 3. Philippine Jai-Alai Corporation 4. Fidelity Management Co., Inc. 5. Romson Realty, Inc. 6.
Trident Management Co. 7. New Trident Management 8. Bay Transport 9. And all affiliate companies of
Alfredo "Bejo" Romualdez And were ordered to do the following:

1. To implement this sequestration order with a minimum disruption of these companies' business
activities.

2. To ensure the continuity of these companies as going concerns, the care and maintenance of these
assets until such time that the Office of the President through the Commission on Good Government
should decide otherwise.

3. To report to the Commission on Good Government periodically. Further, you are authorized to
request for Military/Security Support from the Military/Police authorities, and such other acts essential
to the achievement of this sequestration order.

Thereafter, the corporation was ordered by the PCGG to produce certain documents such as: 1. Stock
Transfer Book 2. Legal documents, such as: 2.1. Articles of Incorporation 2.2. By-Laws 2.3. Minutes of
the Annual Stockholders Meeting from 1973 to 1986 2.4. Minutes of the Regular and Special Meetings
of the Board of Directors from 1973 to 1986 and among others.

Petitioner now prays to the Court to: 1) declare unconstitutional and void Executive Orders Numbered 1
and 2;

2) annul the sequestration order dated April- 14, 1986, and all other orders subsequently issued and acts
done on the basis thereof, inclusive of the takeover order of July 14, 1986 and the termination of the
services of the BASECO executives.

3) the production of certain document infringed the right against self-incrimination

4) and that PCGG unduly interfered with its management and affairs and right of dominion.

Argument of BASECO: First, no notice and hearing was accorded * * (it) before its properties and
business were taken over; Second, the PCGG is not a court, but a purely investigative agency and
therefore not competent to act as prosecutor and judge in the same cause; Third, there is nothing in the
issuances which envisions any proceeding, process or remedy by which petitioner may expeditiously
challenge the validity of the takeover after the same has been effected; and Fourthly, being directed
against specified persons, and in disregard of the constitutional presumption of innocence and general
rules and procedures, they constitute a Bill of Attainder."

Issues: 1. Whether or not the order of production of documents would be self- incriminating to BASECO
2. Whether or not a corporation can avail the right against self-incrimination

ISSUES 1 & 2: The Court held that the right against self-incrimination has no application to
corporations, extensively quoted in Bataan Shipyard from Wilson v. United States, (55 4 L.Ed. 771, 780)
thus: * * * The corporation is a creature of the state. It is presumed to be incorporated for the benefit of
the public. It receives certain special privileges and franchises, and holds them subject to the laws of the
state and the limitations of its charter. Its power are limited by law. It can make no contract not
authorized by its charter. Its right to act as a corporation are only preserved to it so long as it obeys the
laws of its creation. There is a reserve right in the legislature to investigate its contracts and find out
whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered
a corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire how
these franchises had been employed, and whether they had been abused, and demand the production
of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the
corporation which is charged with a criminal violation of the statute may plead the criminality of such
corporation as a refusal to produce its books. To state this proposition is to answer it. While an
individual may lawfully refuse to answer incriminating questions unless protected by an immunity
statute, it does not follow that a corporation, vested with special privileges, and franchise may refuse to
show its hand when charged with an abuse of such privileges. . . (150 SCRA 181, 234-235, quoting from
Wilson v. United States, 55 Law Ed. 771, 780.) Every corporation is a direct creature of the law and
receives an individual franchise from the State. But a partnership, although is deemed to be a juridical
person by grant of the State, becomes a juridical person through a private contract of partnership
between and among the partners, without needing to register its existence with the State or any of its
organs. More importantly, the partnership “person” is a fiction of law given more for the convenience of
the partners, and thus can be dissolved by the will of the partners or by the happening of an event that
would constitute the termination of the contractual relationship, whereas, no corporation can be
dissolved without the consent of the State, and only after due notice and hearing. Likewise, the other
features of the partnership, mainly mutual agency, delectus personae and unlimited liability on the part
of the partners, that places a close identity between the persons of the partners and that of the
partnership. This is unlike in corporate setting, where the stockholders do not own corporate properties,
have no participation in management of corporate affairs, and 5 enjoy personal immunity from the
debts and liabilities of the corporation, and where basically the corporation “is its own person,” and acts
through a professional group of managers and agents called the Board of Directors. While therefore it is
understandable that a corporation, that has no heart, feels pain, and has no soul that can be damned,
cannot be expected to be entitled to the constitutional right against self-incrimination, it is quite
different in the case of the partnership, since its person is merely an extension of the group of partners,
who having come together in business, and acting still for such business enterprise, could not be
presumed to have waived their individual rights against self-incrimination.
5.

TIME, INC., petitioner,

vs.
HON. ANDRES REYES, as Judge of the Court of First Instance of Rizal, ELISEO S. ZARI, as
Deputy Clerk of Court, Branch VI, Court of First Instance of Rizal, ANTONIO J. VILLEGAS and
JUAN PONCE ENRILE, respondents.

1. Facts of the Case:

The petition alleges that petitioner Time, Inc., is an American corporation with principal offices at
Rocketfeller Center, New York City, N. Y., and is the publisher of "Time", a weekly news magazine;
the petition, however, does not allege the petitioner's legal capacity to sue in the courts of the
Philippine. In the aforesaid civil case, therein plaintiffs-respondents Antonio J. Villegas and Juan
Ponce Enrile seek to recover from petitioner Time, Inc. damages upon an alleged libel arising from a
publication of Time (Asia Edition) magazine, in its issue of Aug. 18, 1967, of an essay, entitled
"Corruption in Asia", which talks about the investigation of Manila mayor Antonio Villegas due to the
discovery of his excessive and unreasonable resources. More specifically, the plaintiffs' complaint
alleges that Time magazine published a libelous article, publicly, falsely and maliciously imputing to
plaintiffs the commission of the crimes of graft, corruption and nepotism, that said publication
particularly referred to plaintiff Mayor Antonio J. Villegas as a case in point in connection with graft,
corruption and nepotism in Asia; that said publication without any doubt referred to co-plaintiff Juan
Ponce Enrile as the high government official who helped under curious circumstances plaintiff Mayor
Villegas in lending the latter approximately P30,000.00 without interest because he was the Mayor's
compadre; that the purpose of said Publications is to cause the dishonor, discredit and put in public
contempt the plaintiffs.

At the time of the publication of the allegedly offending essay, private respondents Antonio Villegas
and Juan Ponce Enrile were the Mayor Of the City of Manila and Undersecretary of Finance and
concurrently Acting Commissioner of Customs, respectively, with offices in the City of Manila. On
motion of the respondents-plaintiffs, the respondent judge of CFI-Rizal on November 25, 1967,
granted them leave to take the depositions "of Mr. Anthony Gonzales, Time-Life international", and
"Mr. Cesar B. Enriquez, Muller & Phipps (Manila) Ltd.", in connection with the activities and
operations in the Philippines of the petitioner, and, on November 27, 1967, issued a writ of
attachment on the real and personal estate of Time, Inc. Petitioner received the summons and a
copy of the complaint at its offices in New York on December 13, 1967. It filed a motion to dismiss
the complaint for lack of jurisdiction and improper venue on Dec. 27, 1967, relying upon the
provisions of Republic Act 4363. Private respondents opposed the motion.

On February 26, 1968, respondent court deferred the determination of the motion to dismiss until
after trial of the case on the merits, the court having considered that the grounds relied upon in the
motion do not appear to be indubitable. Petitioner moved for reconsideration of the deferment private
respondents again opposed. Respondent judge issued an order re-affirming the previous order of
deferment for the reason that "the rule laid down under Republic Act. No. 4363, amending Article
360 of the Revised Penal Code, is not applicable to actions against non-resident defendants, and
because questions involving harassment and inconvenience, as well as disruption of public service
do not appear indubitable. ..." Failing in its efforts to discontinue the taking of the depositions,
previously adverted to, and to have action taken, before trial, on its motion to dismiss, petitioner filed
the instant petition for certiorari and prohibition.
Issues: 1. Whether or not, under the provisions of RA 4363 the respondent CFI of Rizal has
jurisdiction to take cognizance of the civil suit for damages arising from an allegedly libelous
publication, considering that the action was instituted by public officers whose offices were in the
City of Manila at the time of the publication; if it has no jurisdiction, whether or not its erroneous
assumption of jurisdiction may be challenged by a foreign corporation by writ of certiorari or
prohibition;
2. Whether or not RA 4363 is applicable to action against a foreign corporation or non- resident
defendant.

RULING OF THE COURT:

Issue No. 1: The respondent Court of First Instance of Rizal is without jurisdiction to take cognizance
of its Civil Case. Provisions of RA No. 4363 provides that Art. 360 of the of the Revised Penal Code
is further amended to read that any person who shall publish, exhibit, or cause the publication or
exhibition of any defamation in writing or by similar means, shall be responsible for the same. The
complaint lodged in the court of Rizal by respondents does not allege that the libelous article was
printed and first published in the province of Rizal and, since the respondents-plaintiffs are public
officers with offices in Manila at the time of the commission of the alleged offense, it is clear that the
only place left for them wherein to file their action, is the Court of First Instance of Manila. The
limitation of the choices of venue, as introduced into the Penal Code through its amendments by
Republic Act 4363, was intended " to minimize or limit the filing of out-of-town libel suits" to protect
an alleged offender from "hardships, inconveniences and harassments" and, furthermore, to protect
"the interest of the public service" where one of the offended parties is a public officer. But since the
offending publication was not printed in the Philippines, the alternative venue was not open to
respondent Mayor Villegas of Manila and Undersecretary of Finance Enrile, who were the offended
parties.

Issue No. 2: Time, Inc, argue that RA No. 4363 is not applicable where the action is against non-
existent defendant. They urge that, in enacting RA No. 4363, Congress did not intend to protect non-
resident defendants because since a non-resident defendant is not in a position to comply with the
conditions imposed for the effectivity of the statute, such defendant may not invoke its provisions.
Time Inc. also reasoned that a foreign corporation is not inconvenienced by an out-of-town libel suit
and that it would be absurd in the absence of an extradition treaty, for the law to give to public
officers with office in Manila the second option of filing a criminal case in the court of the place where
the libelous article is printed and first published if the defendant is a foreign corporation and that,
under the "single publication" rule which originated in the United States and imported into the
Philippines, the rule was understood to mean that publications in another state are not covered by
venue statutes of the forum. The Court see nothing in the text of the law that would sustain unequal
protection as invoked by Time, Inc. to some of those who may be charged with libel. In the
promulgation of RA 4364 no terms are employed therein to indicate that the law can or will be
effective only as to some, but not all, of those that may be charged with libeling public officers. The
assertion that a foreign corporation or a non-resident defendant is not inconvenienced by an out-of-
town suit is irrelevant and untenable, for venue and jurisdiction are not dependent upon convenience
or inconvenience to a party. Venue was fixed under RA 4363 to protect the interest of the public
service when the offended party is a public officer, by minimizing as much as possible any
interference with the discharge of his duties. The contention of Time, Inc. that respondents-plaintiffs
could not file a criminal case for libel against a non-resident defendant does not make RA No. 4363
incongruous or absurd, for such inability to file a criminal case against a non-resident natural person
equally exists in crimes other than libel. It is a fundamental rule of international jurisdiction that no
state can by its laws, and no court which is only a creature of the state, can by its judgments or
decrees, directly bind or affect property or persons beyond the limits of the state. But if the accused
is a corporation, no criminal action can lie against it, whether such corporation or resident or non-
resident. At any rate, the case filed by respondents-plaintiffs is case for damages. The rule is that
where a statute creates a right and provides a remedy for its enforcement, the remedy is exclusive.
And where it confers jurisdiction upon a particular court, that jurisdiction is likewise exclusive, unless
otherwise provided. Hence, the venue provisions of RA No. 4363 should be deemed mandatory for
the party bringing the action, unless the question of venue should be waived by the defendant, which
was not the case here. Only thus can the policy of the Act be upheld and maintained.
1. Respondents asked for the dismissal of the present petition on the ground that Time, Inc. as
a foreign corporation failed to allege its capacity to sue in the courts of the Philippines.
Respondents rely on Section 69 of the Corporation law, which provides that no foreign
corporation or corporations formed, organized, or existing under any laws other than those of
the Philippines shall be permitted to maintain by itself or assignee any suit for the recovery of
any debt, claim, or demand whatever, unless it shall have the license prescribed in the
section immediately preceding. Respondent also cited several jurisprudence stating that no
foreign corporation may be permitted to maintain any suit in the local courts unless it shall
have the license required by the law. The Court ruled that the respondents’ contention is
wrong since the petitioner Time, Inc. is not "maintaining any suit" but is merely defending one
against itself; it did not file any complaint but only a corollary defensive petition to prohibit the
lower court from further proceeding with a suit that it had no jurisdiction to entertain.
Petitioner's failure to aver its legal capacity to institute the present petition however is not
fatal, for a foreign corporation may, by writ of prohibition, seek relief against the wrongful
assumption of jurisdiction. The writ of preliminary injunction heretofore issued by this
Supreme Court is made permanent.
6.

LBC EXPRESS, INC., petitioner,

vs.
THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON,
INC., respondents.

Private respondent Adolfo Carloto, incumbent President-Manager of private respondent Rural Bank of
Labason, alleged that on November 12, 1984, he was in Cebu City transacting business with the Central Bank
Regional Office. He was instructed to proceed to Manila on or before November 21, 1984 to follow-up the
Rural Bank's plan of payment of rediscounting obligations with Central Bank's main office in Manila. 2 He
then purchased a round trip plane ticket to Manila. He also phoned his sister Elsie Carloto-Concha to send him
ONE THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila and some rediscounting papers
thru petitioner's LBC Office at Dipolog City. 3

On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned thru LBC Dipolog Branch the
pertinent documents and the sum of ONE THOUSAND PESOS (P1,000.00) to respondent Carloto at No. 2
Greyhound Subdivision, Kinasangan, Pardo, Cebu City. This was evidenced by LBC Air Cargo, Inc., Cashpack
Delivery Receipt No. 34805.

On November 17, 1984, the documents arrived without the cashpack. Respondent Carloto made personal
follow-ups on that same day, and also on November 19 and 20, 1984 at LBC's office in Cebu but petitioner
failed to deliver to him the cashpack.

Consequently, respondent Carloto said he was compelled to go to Dipolog City on November 24, 1984 to claim
the money at LBC's office. His effort was once more in vain. On November 27, 1984, he went back to Cebu City
at LBC's office. He was, however, advised that the money has been returned to LBC's office in Dipolog City
upon shipper's request. Again, he demanded for the ONE THOUSAND PESOS (P1,000.00) and refund of
FORTY-NINE PESOS (P49.00) LBC revenue charges. He received the money only on December 15, 1984 less
the revenue charges.

Respondent Carloto claimed that because of the delay in the transmittal of the cashpack, he failed to submit
the rediscounting documents to Central Bank on time. As a consequence, his rural bank was made to pay the
Central Bank THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest. 4 He allegedly suffered
embarrassment and humiliation.

Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via PAL to LBC Cebu City branch
on November 22, 1984. 5 On the same day, it was delivered at respondent Carloto's residence at No. 2
Greyhound Subdivision, Kinasangan, Pardo, Cebu City. However, he was not around to receive it. The delivery
man served instead a claim notice to insure he would personally receive the money. This was annotated on
Cashpack Delivery Receipt No. 342805. Notwithstanding the said notice, respondent Carloto did not claim the
cashpack at LBC Cebu. On November 23, 1984, it was returned to the shipper, Elsie Carloto-Concha at Dipolog
City.

Claiming that petitioner LBC wantonly and recklessly disregarded its obligation, respondent Carloto
instituted an action for Damages Arising from Non-performance of Obligation docketed as Civil Case No. 3679
before the Regional Trial Court of Dipolog City on January 4, 1985. On June 25, 1988, an amended complaint
was filed where respondent rural bank joined as one of the plaintiffs and prayed for the reimbursement of
THIRTY-TWO THOUSAND PESOS (P32,000.00).

ISSUES:

1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be awarded moral
damages.

2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made with grave abuse of
discretion.

3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming the trial court's
decision ordering petitioner LBC to pay moral and exemplary damages despite performance of its obligation.

The respondent court erred in awarding moral damages to the Rural Bank of Labason, Inc., an artificial
person.

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. 8 Mental suffering can be
experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life — all
of which cannot be suffered by respondent bank as an artificial person.

We can neither sustain the award of moral damages in favor of the private respondents. The right to recover
moral damages is based on equity. Moral damages are recoverable only if the case falls under Article 2219 of
the Civil Code in relation to Article 21. Part of conventional wisdom is that he who comes to court to demand
equity, must come with clean hands.

In the case at bench, respondent Carloto is not without fault. He was fully aware that his rural bank's
obligation would mature on November 21, 1984 and his bank has set aside cash for these bills payable. He
was all set to go to Manila to settle this obligation. He has received the documents necessary for the approval
of their rediscounting application with the Central Bank. He has also received the plane ticket to go to Manila.
Nevertheless, he did not immediately proceed to Manila but instead tarried for days allegedly claiming his
ONE THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed trip, he failed to submit the
rediscounting papers to the Central Bank on time and his bank was penalized THIRTY-TWO THOUSAND
PESOS (P32,000.00) for failure to pay its obligation on its due date. The undue importance given by
respondent Carloto to his ONE THOUSAND PESOS (P1,000.00) pocket money is inexplicable for it was not
indispensable for him to follow up his bank's rediscounting application with Central Bank. According to said
respondent, he needed the money to "invite people for a snack or dinner." The attitude of said respondent
speaks ill of his ways of business dealings and cannot be countenanced by this Court. Verily, it will be
revolting to our sense of ethics to use it as basis for awarding damages in favor of private respondent Carloto
and the Rural Bank of Labason, Inc.

We also hold that respondents failed to show that petitioner LBC's late delivery of the cashpack was
motivated by personal malice or bad faith, whether intentional or thru gross negligence. In fact, it was proved
during the trial that the cashpack was consigned on November 16, 1984, a Friday. It was sent to Cebu on
November 19, 1984, the next business day. Considering this circumstance, petitioner cannot be charged with
gross neglect of duty. Bad faith under the law can not be presumed; it must be established by clearer and
convincing evidence. Again, the unbroken jurisprudence is that in breach of contract cases where the
defendant is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the
natural and probable consequences of the branch of the obligation which the parties had foreseen or could
reasonable have foreseen. The damages, however, will not include liability for moral damages. Rescinding
from these premises, the award of exemplary damages made by the respondent court would have no legal leg
to support itself. Under Article 2232 of the Civil Code, in a contractual or quasi-contractual relationship,
exemplary damages may be awarded only if the defendant had acted in "a wanton, fraudulent, reckless,
oppressive, or malevolent manner." The established facts of not so warrant the characterization of the action
of petitioner LBC.
7.

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
WILLIAM H. QUASHA, defendant-appellant.

Lessons Applicable: Public Utilities (Corporate Law)

FACTS:
 William H. Quasha
 a member of the Philippine bar, committed a crime of falsification of a public and
commercial document for causing it to appear that Arsenio Baylon, a Filipino citizen, had
subscribed to and was the owner of 60.005 % of the subscribed capital stock of Pacific
Airways Corp. (Pacific) when in reality the money paid belongs to an American citizen
whose name did not appear in the article of incorporation,
 to circumvent the constitutional mandate that no corp. shall be authorize to operate as a
public utility in the Philippines unless 60% of its capital stock is owned by Filipinos.
 Found guilty after trial and sentenced to a term of imprisonment and a fine
 Quasha appealed to this Court
 Primary purpose: to carry on the business of a common carrier by air, land or water
 Baylon did not have the controlling vote because of the difference in voting power between
the preferred shares and the common shares
 ART. 171. Falsification by public officer, employee, or notary or ecclesiastic minister. —
The penalty of prision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any
public officer, employee, or notary who, taking advantage of his official position, shall
falsify a document by committing any of the following acts:
4. Making untruthful statements in a narration of facts.
 ART. 172. Falsification by private individuals and use of falsified documents. — The penalty
of prision correccional in its medium and maximum period and a fine of not more than 5,000
pesos shall be imposed upon:
1. Any private individual who shall commit any of the falsifications enumerated in the next
preceding
article in any public or official document or letter of exchange or any other kind of
commercial
document.

ISSUE: W/N Quasha should be criminally liable?

HELD: NO. Acquitted.

 falsification consists in not disclosing in the articles of incorporation that Baylon was a mere
trustee ( or dummy as the prosecution chooses to call him) of his American co-incorporators,
thus giving the impression that Baylon was the owner of the shares subscribed to by him
 For the mere formation of the corporation such revelation was not essential, and the
Corporation Law does not require it
 The moment for determining whether a corporation is entitled to operate as a public utility is
when it applies for a franchise, certificate, or any other form of authorization for that
purpose.
 that can be done after the corporation has already come into being and not while it is still
being formed
 so far as American citizens are concerned, the said act has ceased to be an offense within the
meaning of the law, so that defendant can no longer be held criminally liable therefor.
8.

PEDRO R. PALTING, petitioner,

vs.
SAN JOSE PETROLEUM INCORPORATED, respondent.

Palting v. San Jose Petroleum

G.R. No. L-14441 December 17, 1966

Lessons Applicable:

 Up to what level do you apply the grandfather rule? (Corporation Law)

 Pre-Corporation Code (Corporation Law)

FACTS:
 September 7, 1956: San Jose Petroleum (SJP) filed with the Philippine Securities and Exchange
Commission a sworn registration statement, for the registration and licensing for sale in the Philippines
Voting Trust Certificates representing 2,000,000 shares of its capital stock of a par value of $0.35 a share,
at P1.00 per share
 It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to
finance the operations of San Jose Oil Company, Inc. (Domestic Mining Oil Company)
 express condition of the sale that every purchaser of the securities shall not receive a stock certificate, but
a registered or bearer-voting-trust certificate from the voting trustees James L. Buckley and Austin G.E.
Taylor
 June 20, 1958: SJP amended Statement increasing 2,000,000 to 5,000,000, at a reduced offering price of
from P1.00 to P0.70 per share
 Pedro R. Palting together with other investors in the share of SJP filed with the SEC an opposing the
registration and licensing of the securities on the grounds that:
1. tie-up between the issuer, SJP, a Panamanian corp. and San Jose Oil (SJO), a domestic corporation,
violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949
2. issuer has not been licensed to transact business in the Philippines
3. sale of the shares of the issuer is fraudulent, and works or tends to work a fraud upon Philippine
purchasers
4. issuer as an enterprise, as well as its business, is based upon unsound business principles
ISSUES:
1. W/N Pedro R. Palting, as a "prospective investor" in SJP's securities, has personality to file -YES
2. W/N the tie-up violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act
of 1949 (Up to what level do you apply the grandfather rule?) - YES
HELD: motion of respondent to dismiss this appeal, is denied and the orders of the Securities and Exchange
Commissioner, allowing the registration of Respondent's securities and licensing their sale in the Philippines
are hereby set aside. The case is remanded to the Securities and Exchange Commission for appropriate action
in consonance with this decision.
1. YES
 any person (who may not be "aggrieved" or "interested" within the legal acceptation of the word) is
allowed or permitted to file an opposition to the registration of securities for sale in the Philippines
 eliminating the word "aggrieved" appearing in the old Rule, being procedural in nature, and in view of the
express provision of Rule 144 that the new rules made effective on January 1, 1964 shall govern not only
cases brought after they took effect but all further proceedings in cases then pending, except to the extent
that in the opinion of the Court their application would not be feasible or would work injustice, in which
event the former procedure shall apply
*amiscus curae -stranger to the case

2. YES
 SJO (domestic)- 90% owned by SJP (foreign) wholly owned by Pantepec Oil Co. and Pancoastel
Petroleum, both organized and existing under the laws of Venezuela
 CANNOT go beyond the level of what is reasonable
 SJO is not a party and it is not necessary to do so to dispose of the present controversy.
 SJP actually lost $4,550,000.00, which was received by SJO
 Articles of Incorporation of SJP is unlawful:

1. the directors of the Company need not be shareholders;

2. that in the meetings of the board of directors, any director may be represented and may vote through a
proxy who also need not be a director or stockholder; and
3. that no contract or transaction between the corporation and any other association or partnership will be
affected, except in case of fraud, by the fact that any of the directors or officers of the corporation is
interested in, or is a director or officer of, such other association or partnership, and that no such contract
or transaction of the corporation with any other person or persons, firm, association or partnership shall
be affected by the fact that any director or officer of the corporation is a party to or has an interest in,
such contract or transaction, or has in anyway connected with such other person or persons, firm,
association or partnership; and finally, that all and any of the persons who may become director or
officer of the corporation shall be relieved from all responsibility for which they may otherwise be liable
by reason of any contract entered into with the corporation, whether it be for his benefit or for the benefit
of any other person, firm, association or partnership in which he may be interested.
9.

SOL LAGUIO, RENE LAOLAO, ANNALIZA ENSANDO, EDELIZA ASAS,

LILIA MARAY, EVELYN UNTALAN, ROSARIO CHICO, REYNALDO *

GARCIA, MERLITA DE LOS SANTOS,* JOSEPHINE DERONG,* GEMMA

TIBALAO BANTOLO, LUCY ALMONTE,* CRISPINA VANQUARDIA,
NARCISA VENZON, NORMA ELEGANTE,* AMELIA MORENO,* ABNER
PETILOS, NARCISO HILAPO, DOLORES OLAES, MELINDA LLADOC,
ERNA AZARCON, and APRIL TOY, INC. WORKERS UNION
ALAB, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
WELL WORLD TOYS, INC., APRIL TOYS, INC., YU SHENG LING, JENN
L. WANG, EUCLIFF CHENG, CHI SHENG LIN, NENITA C. AGUIRRE,
MA. THERESA R. CADIENTE and GLICERIA R.
AGUIRRE, respondents.
Private respondent April Toy, Inc. (April for brevity) is a domestic corporation incorporated on
January 6, 1989, for the purpose of manufacturing, importing, exporting, buying, selling, sub-
contracting or otherwise dealing in, at wholesale and retail,[1] stuffed toys, with principal place of
business at Paraaque, Manila. On December 20, 1989, or after almost a year of
operation, April posted a memorandum[2] within its premises and circulated a copy of the same
among its employees informing them of its dire financial condition. To avert further business
reverses, April decided to shorten its corporate term up to February 28, 1990,[3] submitted a
notice of dissolution to the Securities and Exchange Commission and published the same in a
newspaper of general circulation[4].

In their complaint, petitioners basically alleged that they were original probationary emplyees[10] of
Well World but were later laid off in 1989 for starting to organize themselves into a union.[11] They
applied with and were thereafter hired by April. On February 2, 1990, and while under the employ of
April, petitioners conducted a certification election where their union, Alyansang Likha ng mga Anak ng
Bayan (ALAB), won as the exclusive bargaining agent for the workers. Petitioners thereafter submitted a
Collective Bargaining Agreement proposal which April rejected in view of its cessation of operation. The
closure, petitioners declared, is Aprils clever ploy to defeat their right to self organization.[12]
Petitioners further alleged that the original incorporators and principal officers of April were likewise the
original incorporators of Well World, thus both corporations should be treated as one corporation liable
for their claims. In his decision dated December 20, 1991, the Labor Arbiter found as valid the closure of
April, and treated April and Well World as two distinct corporations. While the seventy-seven
complainants were ruled to be the employees of April, the Labor Arbiter, nevertheless, ordered Well
World to give financial assistance to its former forty-nine probationary employees who were found to
have been laid off in 1989 due to business losses. April was likewise ordered to pay its separated
employees their separation pay and, together with Well World, assessed for attorneys fees. Petitioners
appealed before the National Labor Relations Commission (NLRC), but to no avail. Hence, this petition,
supported by the Office of the Solicitor General, anchored solely on the NLRCs purported grave abuse of
discretion in not finding April and Well World as one corporation liable for their grievances.

To bolster their claim that April and Well World are one and the same corporation, petitioners argue
that both corporations have the same set of incorporators.

Held

We are not persuaded.

A cursory examination of the composition of April and Well Worlds
incorporators and the number of shares they own hardly supports petitioners
asseveration. In fact, petitioners allegation that both corporations were
managed by a single individual, Mr. Jen Li Weng, contradicts paragraphs 7
and 8 of their petition which state:

7. Respondents Yu-Sheng Ling, Jen Li Weng (Alias James Wang), Eucliff Cheng and
Chia Sheng Lin are the President, Managing Director, Treasurer and Secretary
respectively of respondent Well World Toy, Inc., all of whom are holding office at
399-B Real St., Talon, Las Pinas, Metro Manila. x x x.

8. Respondents Nenita C. Aguirre, Ma. Theresa R. Cadiente and Gliceria R. Aguirre

are the President, Treasurer and Secretary, respectively of respondent April Toy, Inc.
all of whom are holding office at No. 6-C Ascie Avenue, Severina Industrial Estate,
Km. 16 South Superhighway Paranaque. x x x. [14]

What clearly appears therefrom is that the two corporations have two different
set of officers managing their respective affairs in two separate offices.
It is basic that 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 substantial identity of the
incorporators of the two corporations does not necessarily imply fraud, nor [15]

warrant the piercing of the veil of corporation fiction. In the absence of clear
and convincing evidence that April and Well Worlds corporate personalities
were used to perpetuate fraud, or circumvent the law said corporations were
rightly treated as distinct and separate from each other. Further, petitioners
emphatic reliance with the case of La Campana is misplaced. In La Campana,
unlike in this case, the two corporations, i.e., La Campana Coffee Factory, Inc.
and La Campana Gaugau Packing, were not only owned by the same person,
but moreover have a single management, business office and a single payroll
for both businesses. Indeed, the workers of La Campana Gaugau Packing
were interchangeable, that is, the laborers from gaugau factory were
sometimes transferred to the coffee factory and vice-versa. [16]

We thus quote with approval the observation made by the Labor Arbiter as
follows:

We can not fully subscribe to the above contention of the complainants. We do not
believe that the circumstances related by the complainants are sufficient indicia that
the two corporations are one and the same corporation although it appears that the two
of the original incorporators and stockholders of April Toy, Inc. were incorporators
and minority stockholders of Well-World Toy, Inc. Hence it does not mean that the
two (2) corporations are adjunct and conduit. There is not express provision under the
Corporation law prohibiting stockholders or incorporators of a corporation to be a
stockholder or incorporator of another corporation.

The fiction that a corporation was a distinct and separate personality shall not be used as a
subterfuge to commit injustice and circumvent the law does not apply in the present case. There
is no conclusive evidence to convince us that respondent April Toy, Inc. was established and
later on closed to defeat the rights of the workers of Well-World Toy, Inc. which would
otherwise support the charge of unfair labor practice. Hence, we find that the two (2)
corporations are separate and distinct entities.[17]
10.

ADELIO C. CRUZ, complainant,

vs.

QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.

 In 1984, the National Labor Relations Commission issued an order against Qualitrans
Limousine Service, Inc. (QLSI) ordering the latter to reinstate the employees it
terminated and to pay them backwages.

 Quiterio Dalisay, Deputy Sheriff of the court, to satisfy the backwages, then garnished
the bank account (Philtrust bank) of Adelio Cruz who was not the judgment debtor.
Rather, the judgment debtor in that case was the company QLSI .

Dalisay justified his act by arguing that:

a. Cruz was the owner and president of QLSI

b. The counsel for the discharged employees advised him to garnish the account of Cruz

ISSUE: Should the personal property of Cruz (president) of the corporation be levied?

HELD:

 No. Respondent sheriff Dalisay incorrectly chose to pierce the veil of corporate entity and
usurped a power belonging to the court.
 He wrongly assumed that since Cruz is the owner/president of the company, that they are
one and the same.
 As a legal entity, a corporation has a personality distinct and separate from its
individual stockholder/members.
  Just because that he is the president of the corporation does not mean that the property he
owns or possesses is also the property of the corporation.
 Since the president, as an individual, and the corporation are separate entities.

Notes:

 A corporation incurs its own liabilities and is legally responsible for payment of its
obligations. In other words, by virtue of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt or credit of the stockholder.
This protection from liability for shareholders is the principle of limited liability

 Equally well-settled is the principle that the corporate mask may be removed or the
corporate veil pierced when the corporation is just an alter ego of a person or of
another corporation. For reasons of public policy and in the interest of justice, the
corporate veil will justifiably be impaled only when it becomes a shield for fraud,
illegality or inequity committed against third persons.