PEOPLE V.
QUASHA (1953) fine of not more than 5,000 pesos shall be imposed
G.R. No. L-6055 June 12, 1953
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
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.
KILOSBAYAN INC VS TEOFISTO GUINGONA, JR.
232 SCRA 110 – Business Organization – Corporation
Law – PCSO’s Charter
In 1993, the Philippine Charity Sweepstakes Office
decided to put up an on-line lottery system which will
establish a national network system that will in turn
expand PCSO’s source of income.
A bidding was made. Philippine Gaming Management
Corporation (PGMC) won it. A contract of lease was
awarded in favor of PGMC.
Kilosbayan opposed the said agreement between PCSO
and PGMC as it alleged that:
PGMC does not meet the nationality requirement
because it is 75% foreign owned (owned by a Malaysian
firm Berjaya Group Berhad);
PCSO, under Section 1 of its charter (RA 1169), is
prohibited from holding and conducting lotteries “in
collaboration, association or joint venture with any
person, association, company or entity”;
The network system sought to be built by PGMC for
PCSO is a telecommunications network. Under the law
(Act No. 3846), a franchise is needed to be granted by
the Congress before any person may be allowed to set
up such;
PGMC’s articles of incorporation, as well as the Foreign
Investments Act (R.A. No. 7042) does not allow it to
install, establish and operate the on-line lotto and
telecommunications systems.
PGMC and PCSO, through Teofisto Guingona, Jr. and
Renato Corona, Executive Secretary and Asst. Executive
Secretary respectively, alleged that PGMC is not a
collaborator but merely a contractor for a piece of work,
i.e., the building of the network; that PGMC is a mere
lessor of the network it will build as evidenced by the
nature of the contract agreed upon, i.e., Contract of
Lease.
ISSUE: Whether or not Kilosbayan is correct.
HELD: Yes, but only on issues 2, 3, and 4.
On the issue of nationality, it seems that PGMC’s foreign
ownership was reduced to 40% though.
On issues 2, 3, and 4, Section 1 of R.A. No. 1169, as
amended by B.P. Blg. 42, prohibits the PCSO from
holding and conducting lotteries “in collaboration,
association or joint venture with any person,
association, company or entity, whether domestic or
foreign.” There is undoubtedly a collaboration between
PCSO and PGMC and not merely a contract of lease. The
relations between PCSO and PGMC cannot be defined
simply by the designation they used, i.e., a contract of
lease. Pursuant to the wordings of their agreement,
PGMC at its own expense shall build, operate, and
manage the network system including its facilities
needed to operate a nationwide online lottery system.
PCSO bears no risk and all it does is to provide its
franchise – in violation of its charter. Necessarily, the
use of such franchise by PGMC is a violation of Act No.
3846.
FRANCISCO TATAD VS JESUS GARCIA, JR.
243 SCRA 436 – Business Organization – Corporation
Law – Corporate Nationality – Public Utility – Nationality
Requirement in Nationalized Areas of Activity
In 1989, the government planned to build a railway
transit line along EDSA. No bidding was made but
certain corporations were invited to prequalify. The only
corporation to qualify was the EDSA LRT Consortium
which was obviously formed for this particular
undertaking. An agreement was then made between
the government, through the Department of
Transportation and Communication (DOTC), and EDSA
LRT Consortium. The agreement was based on the
Build-Operate-Transfer scheme provided for by law (RA
6957, amended by RA 7718). Under the agreement,
EDSA LRT Consortium shall build the facilities, i.e.,
railways, and shall supply the train cabs. Every phase
that is completed shall be turned over to the DOTC and
the latter shall pay rent for the same for 25 years. By the
end of 25 years, it was projected that the government
shall have fully paid EDSA LRT Consortium. Thereafter,
EDSA LRT Consortium shall sell the facilities to the
government for $1.00.
However, Senators Francisco Tatad, John Osmeña, and
Rodolfo Biazon opposed the implementation of said
agreement as they averred that EDSA LRT Consortium is
a foreign corporation as it was organized under
Hongkong laws; that as such, it cannot own a public
utility such as the EDSA railway transit because this falls
under the nationalized areas of activities. The petition
was filed against Jesus Garcia, Jr. in his capacity as DOTC
Secretary.
ISSUE: Whether or not the petition shall prosper.
HELD: No. The Supreme Court made a clarification. The
SC ruled that EDSA LRT Consortium, under the
agreement, does not and will not become the owner of
a public utility hence, the question of its nationality is
misplaced. It is true that a foreign corporation cannot
own a public utility but in this case what EDSA LRT
Consortium will be owning are the facilities that it will
be building for the EDSA railway project. There is no
prohibition against a foreign corporation to own
facilities used for a public utility. Further, it cannot be
said that EDSA LRT Consortium will be the one operating
the public utility for it will be DOTC that will operate the
railway transit. DOTC will be the one exacting fees from
the people for the use of the railway and from the
proceeds, it shall be paying the rent due to EDSA LRT
Consortium. All that EDSA LRT Consortium has to do is
to build the facilities and receive rent from the use
thereof by the government for 25 years – it will not
operate the railway transit. Although EDSA LRT
Consortium is a corporation formed for the purpose of
building a public utility it does not automatically mean
that it is operating a public utility. The moment for
determining the requisite Filipino nationality is when
the entity applies for a franchise, certificate or any other
form of authorization for that purpose.
PACIFIC REHOUSE CORPORATION V. COURT OF
APPEALS
G.R. No. 199687, March 24, 2014.
FACTS: A complaint was instituted with the Makati City
Regional Trial Court (RTC), Branch 66, against EIB
Securities Inc. (E–Securities) for unauthorized sale of
32,180,000 DMCI shares of Pacific Rehouse Corporation,
Pacific Concorde Corporation, Mizpah Holdings, Inc.,
Forum Holdings Corporation, and East Asia Oil Company,
Inc. In its October 18, 2005 Resolution, the RTC
rendered judgment on the pleadings, directing the E–
Securities to return to the petitioners 32,180,000 DMCI
shares, as of judicial demand. On the other hand,
petitioners are directed to reimburse the defendant the
amount of [P]10,942,200.00, representing the buy back
price of the 60,790,000 KPP shares of stocks at [P]0.18
per share. The Resolution was ultimately affirmed by
the Supreme Court and attained finality.
When the Writ of Execution was returned unsatisfied,
petitioners moved for the issuance of an alias writ of
execution to hold Export and Industry Bank, Inc. liable
for the judgment obligation as E–Securities is “a wholly–
owned controlled and dominated subsidiary of Export
and Industry Bank, Inc., and is[,] thus[,] a mere alter ego
and business conduit of the latter. E–Securities opposed
the motion[,] arguing that it has a corporate personality
that is separate and distinct from the respondent.
The RTC eventually concluded that E–Securities is a
mere business conduit or alter ego of petitioner, the
dominant parent corporation, which justifies piercing of
the veil of corporate fiction, and issued an alias writ of
summons directing defendant EIB Securities, Inc.,
and/or Export and Industry Bank, Inc., to fully comply
therewith. It ratiocinated that being one and the same
entity in the eyes of the law, the service of summons
upon EIB Securities, Inc. (E–Securities) has bestowed
jurisdiction over both the parent and wholly–owned
subsidiary.
Export and Industry Bank, Inc. (Export Bank) filed before
the Court of Appeals a petition for certiorari with prayer
for the issuance of a temporary restraining order (TRO)
seeking the nullification of the RTC Order. The Court of
Appeals reversed the RTC Order and explained that the
alter ego theory cannot be sustained because
ownership of a subsidiary by the parent company is not
enough justification to pierce the veil of corporate
fiction. There must be proof, apart from mere
ownership, that Export Bank exploited or misused the
corporate fiction of E–Securities. The existence of
interlocking incorporators, directors and officers
between the two corporations is not a conclusive
indication that they are one and the same. The records
also do not show that Export Bank has complete control
over the business policies, affairs and/or transactions of
E–Securities. It was solely E–Securities that contracted
the obligation in furtherance of its legitimate corporate
purpose; thus, any fall out must be confined within its
limited liability.
ISSUE: Whether or not E-Securities is merely an alter
ego of Export Bank so that “piercing the veil of
corporate fiction” is proper.
RULING: NO. An alter ego exists where one corporation
is so organized and controlled and its affairs are
conducted so that it is, in fact, a mere instrumentality or
adjunct of the other. The control necessary to invoke the
alter ego doctrine is not majority or even complete
stock control but such domination of finances, policies
and practices that the controlled corporation has, so to
speak, no separate mind, will or existence of its own,
and is but a conduit for its principal.
The Court has laid down a three–pronged control test to
establish when the alter ego doctrine should be
operative:
Control, not mere majority or complete stock control,
but complete domination, not only of finances but of
policy and business practice in respect to the
transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will
or existence of its own;
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 and
unjust act in contravention of plaintiff’s legal right; and
The aforesaid control and breach of duty must [have]
proximately caused the injury or unjust loss complained
of.
The absence of any one of these elements prevents
‘piercing the corporate veil’ in applying the
‘instrumentality’ or ‘alter ego’ doctrine, the courts are
concerned with reality and not form, with how the
corporation operated and the individual defendant’s
relationship to that operation. Hence, all three elements
should concur for the alter ego doctrine to be
applicable.
In this case, the alleged control exercised by Export Bank
upon its subsidiary E–Securities, by itself, does not mean
that the controlled corporation is a mere
instrumentality or a business conduit of the mother
company. Even control over the financial and
operational concerns of a subsidiary company does not
by itself call for disregarding its corporate fiction. There
must be a perpetuation of fraud behind the control or at
least a fraudulent or illegal purpose behind the control
in order to justify piercing the veil of corporate fiction.
Such fraudulent intent is lacking in this case.
While the courts have been granted the colossal
authority to wield the sword which pierces through the
veil of corporate fiction, concomitant to the exercise of
this power, is the responsibility to uphold the doctrine
of separate entity, when rightly so; as it has for so long
encouraged businessmen to enter into economic
endeavors fraught with risks and where only a few
dared to venture.
The decision of the Court of Appeals in favor of Export
Bank (reversing the RTC Order) is affirmed.
LANUZA JR. VS BF CORPORATION
(G.R. NO. 174938 OCTOBER 1, 2014)
Lanuza Jr. vs BF Corporation
G.R. No. 174938 October 1, 2014
Facts: In 1993, BF Corporation filed a collection
complaint with the Regional Trial Court against Shangri-
La and the members of its board of directors: Alfredo C.
Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo
Lanuza, Jr., Maximo G. Licauco III, and Benjamin C.
Ramos. BF Corporation alleged in its complaint that on
December 11, 1989 and May 30, 1991, it entered into
agreements with Shangri-La wherein it undertook to
construct for Shangri-La a mall and a multilevel parking
structure along EDSA.Shangri-La had been consistent in
paying BF Corporation in accordance with its progress
billing statements. However, by October 1991, Shangri-
La started defaulting in payment. BF Corporation alleged
that Shangri-La induced BF Corporation to continue with
the construction of the buildings using its own funds
and credit despite Shangri-La’s default. According to BF
Corporation, Shangri-La misrepresented that it had
funds to pay for its obligations with BF Corporation, and
the delay in payment was simply a matter of delayed
processing of BF Corporation’s progress billing
statements. BF Corporation eventually completed the
construction of the buildings. Shangri-La allegedly took
possession of the buildings while still owing BF
Corporation an outstanding balance. BF Corporation
alleged that despite repeated demands, Shangri-La
refused to pay the balance owed to it.It also alleged that
the Shangri-La’s directors were in bad faith in directing
Shangri-La’s affairs. Therefore, they should be held
jointly and severally liable with Shangri-La for its
obligations as well as for the damages that BF
Corporation incurred as a result of Shangri-La’s default.
On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo
B. Colayco, Maximo G. Licauco III, and Benjamin C.
Ramos filed a motion to suspend the proceedings in
view of BF Corporation’s failure to submit its dispute to
arbitration, in accordance with the arbitration clause
provided in its contract. Petitioners filed their comment
on Shangri-La’s and BF Corporation’s motions, praying
that they be excluded from the arbitration proceedings
for being non-parties to Shangri-La’s and BF
Corporation’s agreement.
Issue: Whether or not petitioners as directors of
Shangri-La is personally liable for the contractual
obligations entered into by the corporation.
Held: No. Because a corporation’s existence is only by
fiction of law, it can only exercise its rights and powers
through its directors, officers, or agents, who are all
natural persons. A corporation cannot sue or enter into
contracts without them.
A consequence of a corporation’s separate personality is
that consent by a corporation through its
representatives is not consent of the representative,
personally. Its obligations, incurred through official acts
of its representatives, are its own. A stockholder,
director, or representative does not become a party to a
contract just because a corporation executed a contract
through that stockholder, director or representative.
Hence, a corporation’s representatives are generally not
bound by the terms of the contract executed by the
corporation. They are not personally liable for
obligations and liabilities incurred on or in behalf of the
corporation.
A submission to arbitration is a contract. As such, the
Agreement, containing the stipulation on arbitration,
binds the parties thereto, as well as their assigns and
heirs.
When there are allegations of bad faith or malice
against corporate directors or representatives, it
becomes the duty of courts or tribunals to determine if
these persons and the corporation should be treated as
one. Without a trial, courts and tribunals have no basis
for determining whether the veil of corporate fiction
should be pierced. Courts or tribunals do not have such
prior knowledge. Thus, the courts or tribunals must first
determine whether circumstances exist towarrant the
courts or tribunals to disregard the distinction between
the corporation and the persons representing it. The
determination of these circumstances must be made by
one tribunal or court in a proceeding participated in by
all parties involved, including current representatives of
the corporation, and those persons whose personalities
are impliedly the sameas the corporation. This is
because when the court or tribunal finds that
circumstances exist warranting the piercing of the
corporate veil, the corporate representatives are treated
as the corporation itself and should be held liable for
corporate acts. The corporation’s distinct personality is
disregarded, and the corporation is seen as a mere
aggregation of persons undertaking a business under
the collective name of the corporation.
A corporation is an artificial entity created by fiction of
law. This means that while it is not a person, naturally,
the law gives it a distinct personality and treats it as
such. A corporation, in the legal sense, is an individual
with a personality that is distinct and separate from
other persons including its stockholders, officers,
directors, representatives, and other juridical entities.
The law vests in corporations rights,powers, and
attributes as if they were natural persons with physical
existence and capabilities to act on their own. For
instance, they have the power to sue and enter into
transactions or contracts. Section 36 of the Corporation
Code enumerates some of a corporation’s powers, thus:
Section 36. Corporate powers and capacity.– Every
corporation incorporated under this Code has the
power and capacity: 1. To sue and be sued in its
corporate name; 2. Of succession by its corporate name
for the period of time stated in the articles of
incorporation and the certificate ofincorporation; 3. To
adopt and use a corporate seal; 4. To amend its articles
of incorporation in accordance with the provisions of
this Code; 5. To adopt by-laws, not contrary to law,
morals, or public policy, and to amend or repeal the
same in accordance with this Code; 6. In case of stock
corporations, to issue or sell stocks to subscribers and to
sell treasury stocks in accordance with the provisions of
this Code; and to admit members to the corporation if it
be a non-stock corporation; 7. To purchase, receive, take
or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property,
including securities and bonds of other corporations, as
the transaction of the lawful business of the corporation
may reasonably and necessarily require, subject to the
limitations prescribed by law and the Constitution; 8. To
enter into merger or consolidation with other
corporations as provided in this Code; 9. To make
reasonable donations, including those for the public
welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation,
domestic or foreign, shall give donations in aid of any
political party or candidate or for purposes of partisan
political activity; 10. To establish pension, retirement,
and other plans for the benefit of its directors, trustees,
officers and employees; and 11. To exercise such other
powers as may be essential or necessary to carry out its
purpose or purposes as stated in its articles of
incorporation.
FRANCISCO MOTORS CORPORATION VS COURT OF
APPEALS
309 SCRA 72 – Business Organization – Corporation Law
– Piercing the Veil of Corporate Fiction (Upside Down)
In 1985, Francisco Motors Corporation (FMC) sued Atty.
Gregorio Manuel to recover from a him a sum of money
in the amount of P23,000.00+. Said amount was
allegedly owed to them by Manuel for the purchase of a
jeep body plus repairs thereto. Manuel filed a
counterclaim in the amount of P50,000.00. In his
counterclaim, Manuel alleged that he was the Assistant
Legal Officer for FMC; that the Francisco Family, owners
of FMC, engaged his services for the intestate estate
proceedings of one Benita Trinidad; that he was not
paid for his legal services; that he is filing the
counterclaim against FMC because said corporation was
merely a conduit of the Francisco Family. The trial court
as well as the Court of Appeals granted Manuel’s
counterclaim on the ground that the legal fees were
owed by the incorporators of FMC (an application of the
doctrine of piercing the veil of corporation fiction in a
reversed manner).
ISSUE: Whether or not the doctrine of piercing the veil
of corporate fiction was properly used by the Court of
Appeals.
HELD: No. In the first place, the doctrine is to be used in
disregarding corporate fiction and making the
incorporators liable in appropriate circumstances. In the
case at bar, the doctrine is applied upside down where
the corporation is held liable for the personal
obligations of the incorporators – such was uncalled for
and erroneous. It must be noted that that Atty. Manuel’s
legal services were secured by the Francisco Family to
represent them in the intestate proceedings over Benita
Trinidad’s estate. The indebtedness was incurred by the
Francisco Family in their separate and personal capacity.
These estate proceedings did not involve any business
of FMC. The proper remedy is for Manuel to sue the
concerned members of the Francisco Family in their
individual capacity.
BUENAFLOR UMALI VS COURT OF APPEALS
189 SCRA 529 – Business Organization – Corporation
Law – Piercing the Veil of Corporate Fiction
Mauricia Castillo was the administratrix in charge over a
parcel of land left be Felipe Castillo. Said land was
mortgaged to the Development Bank of the Philippines
and was about to be foreclosed but then Mauricia’s
nephew, Santiago Rivera, proposed that they convert
the land into 4 subdivisions so that they can raise the
necessary money to avoid foreclosure. Mauricia agreed.
Rivera sought to develop said land through his company,
Slobec Realty Corporation (SRC), of which he was also
the president. SRC then contracted with Bormaheco,
Inc. for the purchase of one tractor. Bormaheco agreed
to sell the tractor on an installment basis. At the same
time, SRC mortgaged said tractor to Bormaheco as
security just in case SRC will default. As additional
security, Mauricia and other family members executed a
surety agreement whereby in case of default in paying
said tractor, the Insurance Corporation of the
Philippines (ICP) shall pay the balance. The surety bond
agreement between Mauricia and ICP was secured by
Mauricia’s parcel of land (same land to be developed).
SRC defaulted in paying said tractor. Bormaheco
foreclosed the tractor but it wasn’t enough hence ICP
paid the deficiency. ICP then foreclosed the property of
Mauricia. ICP later sold said property to Philippine
Machinery Parts Manufacturing Corporation (PMPMC).
PMPMC then demanded Mauricia et al to vacate the
premises of said property.
While all this was going on, Mauricia died. Her
successor-administratrix, Buenaflor Umali, questioned
the foreclosure made by ICP. Umali alleged that all the
transactions are void and simulated hence they were
defrauded; that through Bormaheco’s machinations,
Mauricia was fooled into entering into a surety
agreement with ICP; that Bormaheco even made the
premium payments to ICP for said surety bond; that the
president of Bormaheco is a director of PMPMC; that
the counsel who assisted in all the transactions, Atty.
Martin De Guzman, was the legal counsel of ICP,
Bormaheco, and PMPMC.
ISSUE: Whether or not the veil of corporate fiction
should be pierced.
HELD: No. There is no clear showing of fraud in this
case. The mere fact that Bormaheco paid said premium
payments to ICP does not constitute fraud per se. As it
turned out, Bormaheco is an agent of ICP. SRC, through
Rivera, agreed that part of the payment of the mortgage
shall be paid for the insurance. Naturally, when Rivera
was paying some portions of the mortgage to
Bormaheco, Bormaheco is applying some parts thereof
for the payment of the premium – and this was agreed
upon beforehand.
Further, piercing the veil of corporate fiction is not the
proper remedy in order that the foreclosure conducted
by ICP be declared a nullity. The nullity may be attacked
directly without disregarding the separate identity of
the corporations involved. Further still, Umali et al are
not enforcing a claim against the individual members of
the corporations. They are not claiming said members
to be liable. Umali et al are merely questioning the
validity of the foreclosure.
The veil of corporate fiction can’t be pierced also by the
simple reason that the businesses of two or more
corporations are interrelated, absent sufficient showing
that the corporate entity was purposely used as a shield
to defraud creditors and third persons of their rights. In
this case, there is no justification for disregarding their
separate personalities.
BOYER – ROXAS VS. COURT OF APPEALS
211 SCRA 470 (1992)
FACTS OF THE CASE
When Eugenia V. Roxas died, her heirs formed a
corporation under the name and style of Heirs of
Eugenia V. Roxas, Inc. using her estate as the capital of
the corporation, the private respondent herein. It was
primarily engaged in agriculture business, however it
amended its purpose to enable it to engage in resort
and restaurant business. Petitioners are stockholders of
the corporation and two of the heirs of Eugenia. By
tolerance, they were allowed to occupy some of the
properties of the corporation as their residence.
However, the board of directors of the corporation
passed a resolution evicting the petitioners from the
property of the corporation because the same will be
needed for expansion.
At the RTC, private respondent presented its evidence
averring that the subject premises are owned by the
corporation. Petitioners failed to present their evidence
due to alleged negligence of their counsel. RTC handed
a decision in favor of private respondent.
Petitioners appealed to the Court of Appeals but the
latter denied the petition and affirmed the ruling of the
RTC. Hence, they appealed to the Supreme Court. In
their appeal, petitioners argues that the CA made a
mistake in upholding the decision of the RTC, and that
their occupancy of the subject premises should be
respected because they own an aliquot part of the
corporation as stockholders, and that the veil of
corporate fiction must be pierced by virtue thereof.
ISSUE
1. Whether petitioner’s contention were correct as
regards the piercing of the corporate veil.
2. Whether petitioners were correct in their contention
that they should be respected as regards their
occupancy since they own an aliquot part of the
corporation.

RULING

1.Petitioner’s contention to pierce the veil of corporate

fiction is untenable. As aptly held by the court: “..The
separate personality of a corporation may ONLY be
disregarded when the corporation is used as a cloak or
cover for fraud or illegality, or to work injustice, or when
necessary to achieve equity or when necessary for the
protection of creditors.”

2. As regards petitioners contention that they should be

respected on their occupancy by virtue of an aliquot
part they own on the corporation as stockholders, it also
fails to hold water. The court held that “properties
owned by a corporation are owned by it as an entity
separate and distinct from its members. While shares of
stocks are personal property, they do not represent
property of the corporation. A share of stock only
typifies an aliquot part of the corporation’s property, or
the right to share in its proceeds to that extent when
distributed according to law and equity, but its holder is
not the owner of any part of the capital of the
corporation. Nor is he entitled to the possession of any
definite portion of its property or assets. The holder is
not a co-owner or a tenant in common of the corporate
property.”