ROBLEDO VS.

NLRC
(G.R. No. 110358, Nov. 9, 1994)

FACT OF THE CASE

Robledo ET. Al. filed a Petition for Review of the Decision of NLRC, setting aside the decision of the Labor Arbiter, which
held private respondents jointly and severally liable to the petitioners for overtime and legal holiday pay.
Petitioners were former employees of Bacani Security and Protective Agency (BPSA). They were employed as security
guards at different times during the period 1969 to December 1989 when BPSA ceased to operate. BPSA was a single
proprietorship owned, managed, and operated by the late Felipe Bacani. On December 31, 1989, Felipe Bacani retired
the business name and BSPA ceased to operate effective on that day. On Jan. 15, 1990 Felipe Bacani died. An intestate
proceeding was instituted for the settlement of his estate before Pasig-RTC. Earlier, on Oct. 26, 1989, respondent Bacani
Security and Allied Services Co., Inc. (BASEC) had been organized and registered as a corporation with SEC. Several of the
incorporator (3) surnamed Bacani, and that includes the daughter of the late Felipe Bacani. On July 5, 1990, the
petitioners filed a complaint with the DOLE for underpayment of wages and nonpayment of overtime pay and other
accrued benefits, and for the return of their cash bond, which they posted, with BPSA. Made respondents were BSPA and
BASEC. On March 1, 1992, the Labor Arbiter rendered a decision upholding the right of petitioners, finding the
complainants entitled to their money claims to be paid by all the respondents’ solidarily. On appeal, the NLRC reversed
the decision declaring that the Labor Arbiter is without jurisdiction and instead suggested that petitioners file their
claims with Pasig-RTC where an intestate proceeding of Bacani’s estate was pending. Petitioners moved for
reconsideration but their motion was denied for lack of merit. The case was elevated to the SC and was treated as a
special civil action of certiorari to determine whether the NLRC committed a grave abuse of discretion in reversing the
Labor Arbiter’s decision.
ISSUE
Whether Bacani Security and Allied Services, Inc. (BASEC) can be held liable for claims of petitioners against Bacani
Security and Protective Agency (BSPA).

RULING
No. Petitioners contend that public respondent, NLRC, erred in setting aside the Labor Arbiter’s judgment on the ground
that BASEC is the same entity as BSPA the latter being owned and controlled by one and the same family, the Bacani
family. For this reason they urge that corporate fiction should be disregarded and BASEC should be held liable for the
obligations of the defunct BSPA. As correctly found by the NLRC, BASEC is an entity separate and distinct from that of
BSPA. BSPA is a single proprietorship owned and operated by Felipe Bacani. Hence, its debts and obligations were the
personal obligations of its owner. Petitioner’s claims, which are based on these debts and personal obligations, did not
survive the death of Felipe Bacani on Jan. 15, 1990 and should have been filed instead in the intestate proceedings
involving his estate.

International Express Travel And Tour Services Inc. vs Court of Appeals

343 SCRA 674 [GR No. 119002 October 19, 2000]
Facts: On June 30, 1989, petitioner International Express Travel and Tours Services Inc., through its managing director,
wrote a letter to the Philippine Football Federation through its President Henri Kahn, wherein the former offered its
services as a travel agency to the latter. The offer was accepted. Petitioner secured the airline tickets for the trips of the
athletes and officials of the Federation to the South East Asian Games in Kuala Lumpur as well as various other trips to
the People’s Republic of China and Brisbane. The total cost of the tickets amounted to Php449,654.83. For the tickets
received, the Federation made two partial payments, both in September of 1989 in the total amount of Php176,467.50.
On October 4, 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the
amount of Php265,844.33. On October 30, 1989, the Federation, through the project gintong alay, paid the amount of
Php31,603. On December 27, 1989, Henri Kahn issued a personal check in the amount of Php50,000 as partial payment
for the outstanding balance of the Federation. Thereafter, no further payments were made despite repeated demands.
Hence, this petition.
Issue: Whether or not private respondent can be made personally liable for the liabilities of the Philippines Football
Federation.
Held: Yes. A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify a
contract. The contract entered into by its officers or agents on behalf of such association is binding or, as enforceable
against it. The officers or agents are themselves personally liable.
In attempting to prove the juridical existence of the Federation, Henri Kahn attached to his motion for reconsideration
before the trial court a copy of the constitution and by-laws of the Philippine Football Federation. Unfortunately, the
same does not prove that said Federation has indeed been recognized and accredited by either the Philippine Amateur
Athletic Federation or the Department of Youth and Sports Development. Accordingly, we rule that the Philippine
Football Federation is not a national sports association within the purview of the aforementioned laws and does not
have corporate existence of its own.
Thus being said, it follows that private respondent Henri Kahn should be liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled principle in corporation law that any person acting or
purporting to act on behalf of the corporation which has no valid existence assumed such privileges and becomes
personally liable for contract entered into or for other acts performed as such agent.

G.R. No. L-20214 March 17, 1923G. C. ARNOLD,

plaintiff-appellant,vs.
WILLITS & PATTERSON, LTD.,
defendant-appellee.
FACTS:
•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
showedthat 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.
ISSUE:
Whether plaintiff may collect from defendant corporation.
H E L D : Ye s .
•The proposition that a corporation has an existence separate and distinct from its membership has its limitations. It
must benoted that this separate existence is for parti cular 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 fi cti on. Whenever necessary for the interests of the
public or for theprotection or enforcement of the rights of the membership, courts will disregard this legal fiction and
operate upon both thecorporation and the persons composing it.
•He continued his employment and rendered his services after the corporation was organized and the second document
wassigned 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
controlledthem. After the document was signed it was recognized by Willits that the plaintiff's services were to be performed and
measuredby 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 andeffect 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 evermade
by anyone.

PSE VS CA (281 SCRA 232)

Philippine Stock Exchange Inc. vs Court of Appeals
281 SCRA 232 [GR No. 125469 October 27, 1997]
Facts: The Puerto Azul Land Inc. (PALI), a domestic real estate corporation, had sought to offer its shares to the public in
order to raise funds allegedly to develop its properties and pay its loans with several banking institutions. In January,
1995, PALI was issued a permit to sell its shares to the public by the Securities and Exchange Commission (SEC). To
facilitate the trading of its shares among investors, PALI sought to course the trading of its shares through the Philippine
Stock Exchange Inc. (PSEi), for which purpose it filed with the said stock exchange an application to list its shares, with
supporting documents attached pending the approval of the PALI’s listing application, a letter was received by PSE from
the heirs of Ferdinand Marcos to which the latter claims to be the legal and beneficial owner of some of the properties
forming part of PALI’s assets. As a result, PSE denied PALI’s application which caused the latter to file a complaint before
the SEC. The SEC issued an order to PSE to grant listing application of PALI on the ground that PALI have certificate of title
over its assets and properties and that PALI have complied with all the requirements to enlist with PSE.
Issue: Whether or not the denial of PALI’s application is proper.
Held: Yes. This is in accord with the “Business Judgement Rule” whereby the SEC and the courts are barred from
intruding into business judgements of corporations, when the same are made in good faith. The same rule precludes the
reversal of the decision of the PSE, to which PALI had previously agreed to comply, the PSE retains the discretion to
accept of reject applications for listing. Thus, even if an issuer has complied with the PSE listing rules and requirements,
PSE retains the discretion to accept or reject the issuer’s listing application if the PSE determines that the listing shall not
serve the interests of the investing public.
It is undeniable that the petitioner PSE is not an ordinary corporation, in that although it is clothed with the markings of
a corporate entity, it functions as the primary channel through which the vessels of capital trade ply. The PSEi’s relevance
to the continued operation and filtration of the securities transaction in the country gives it a distinct color of importance
such that government intervention in its affairs becomes justified, if not necessarily. Indeed, as the only operational stock
exchange in the country today, the PSE enjoys monopoly of securities transactions, and as such it yields a monopoly of
securities transactions, and as such, it yields an immerse influence upon the country’s economy.
The SEC’s power to look into the subject ruling of the PSE, therefore, may be implied from or be considered as necessary
or incidental to the carrying out of the SEC’s express power to insure fair dealing in securities traded upon a stock
exchange or to ensure the fair administration of such exchange. It is likewise, observed that the principal function of the
SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment
in these entities may be encouraged and protected and their activities for the promotion of economic development.
A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a
distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and requisites
appropriate to such a body as to its corporate and management decisions, therefore, the state will generally not interfere
with the same. Questions of policy and management are left to the honest decision of the officers and directors of a
corporation, and the courts are without authority to substitute their judgements for the judgement of the board of
directors. The board is the business manager of the corporation and so long as it acts in good faith, its orders are not
reviewable by the courts.
In matters of application for listing in the market the SEC may exercise such power only if the PSE’s judgement is
attended by bad faith.
The petitioner was in the right when it refused application of PALI, for a contrary ruling was not to the best interest of the
general public.

Case outline: Republic of the Philippines v. Sandiganbayan, Major General Josephus Q. Ramas, Elizabeth Dimaano –
G.R. No. 104768

The Case
 Republic of the Philippines v. Sandiganbayan, Major General Josephus Q. Ramas, Elizabeth Dimaano – G.R.
No. 104768
 Before this Court is a petition for review on certiorari seeking to set aside the Resolutions of the
Sandiganbayan (First Division) dated 18 November 1991 and 25 March 1992 in Civil Case No. 0037.

 The first Resolution dismissed petitioners (Republic of the Philippines) Amended Complaint and ordered the
return of the confiscated items to respondent Elizabeth Dimaano, while the second Resolution denied
petitioners (Republic of the Philippines) Motion for Reconsideration.

 Petitioner prays for the grant of the reliefs sought in its Amended Complaint, or in the alternative, for
the remand of this case to the Sandiganbayan (First Division) for further proceedings allowing petitioner to
complete the presentation of its evidence.

Statement of Facts
 Presidential Commission on Good Governance (PCGG)

President Corazon C. Aquino, immediately upon assuming Malacañang, enacts Executive Order 1 (EO No. 1) or
the Presidential Commission on Good Governance (PCGG). It is mandated to recover all ill-gotten wealth of
former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates.

EO No. 1 vested the PCGG with the power:

(a) to conduct investigation as may be necessary in order to accomplish and carry out the purposes of this
order and the power

(h) to promulgate such rules and regulations as may be necessary to carry out the purpose of this order.

Accordingly, the PCGG, through its then Chairman Jovito R. Salonga, created an AFP Anti-Graft Board (AFP Board)
tasked to investigate reports of unexplained wealth and corrupt practices by AFP personnel, whether in the
active service or retired.
AFP Board

The AFP Board, in line with its mandate, investigates Major General Q. Josephus Ramas.

On July 1987, the AFP Board issues a resolution and findings on Ramas’ alleged ill gotten wealth. It submits the
following findings:

Evidence in the record showed that respondent is the owner of a house and lot located at 15-Yakan St., La
Vista, Quezon City. The aforementioned property in Quezon City may be estimated modestly at P700,000.00.

He is also the owner of a house and lot located in Cebu City. The lot has an area of 3,327 square meters.

Communication equipment and facilities are found in the premises of Elizabeth Dimaano, a Confidential
Agent of the Military Security Unit, and are confiscated by elements of the PC Command of Batangas.

These items could not have been in the possession of Elizabeth Dimaano if not given for her use by
respondent Commanding General of the Philippine Army.

Aside from the military equipment/items and communications equipment, the raiding team was also able to
confiscate money in the amount of P2,870,000.00 and $50,000 US Dollars in the house of Elizabeth Dimaano
on 3 March 1986.

Aside from the military equipment/items and communications equipment, the raiding team was also able to
confiscate money in the amount of P2,870,000.00 and $50,000 US Dollars in the house of Elizabeth Dimaano
on 3 March 1986.

Elizabeth Dimaano is allegedly Major General Q. Josephus Ramas’ mistress. She does not have any means to
acquire the communications equipment as well as the aforementioned money.

The AFP Board finds a prima facie case against Major General Josephus Ramas for ill gotten wealth and
unexplained wealth in the amount of P2,974,134.00 and $50,000 US Dollars.

Decision: It is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted and tried for violation of RA
3019, as amended, otherwise known as Anti-Graft and Corrupt Practices Act and RA 1379, as amended,
otherwise known as The Act for the Forfeiture of Unlawfully Acquired Property.

On 1 August 1987, the PCGG filed a petition for forfeiture under Republic Act No. 1379 (RA No. 1379) against
Ramas.

Amended Complaint: Amended Complaint further alleged that Ramas acquired funds, assets and properties
manifestly out of proportion to his salary as an army officer and his other income from legitimately acquired
property by taking undue advantage of his public office and/or using his power, authority and influence as such
officer of the Armed Forces of the Philippines and as a subordinate and close associate of the deposed President
Ferdinand Marcos.

The Amended Complaint also alleged that the AFP Board, after a previous inquiry, found reasonable ground to
believe that respondents have violated RA No. 1379. The Amended Complaint prayed for, among others, the
forfeiture of respondents properties, funds and equipment in favor of the State.

Ramas’ Answer:

Ramas contends that his property consisted only of a residential house at La Vista Subdivision, Quezon City,
valued at P700,000, which was not out of proportion to his salary and other legitimate income.

He denies ownership of any mansion in Cebu City and the cash, communications equipment and other items
confiscated from the house of Dimaano.

Dimaano filed her own Answer to the Amended Complaint. Admitting her employment as a clerk-typist in the
office of Ramas from January-November 1978 only, Dimaano claimed ownership of the monies, communications
equipment, jewelry and land titles taken from her house by the Philippine Constabulary raiding team.

The Sandiganbayan
On 13 April 1989, petitioner filed a motion for leave to amend the complaint in order to charge the delinquent
properties with being subject to forfeiture as having been unlawfully acquired by defendant Dimaano alone x x x.

Petitioner fails to present witnesses and delays the court for over a year.

on 18 May 1990, petitioner again expressed its inability to proceed to trial because it had no further evidence to
present. Again, in the interest of justice, the Sandiganbayan granted petitioner 60 days within which to file an
appropriate pleading. The Sandiganbayan, however, warned petitioner that failure to act would constrain the
court to take drastic action.

Private respondents then filed their motions to dismiss based on Republic v. Migrino.The Court held in Migrino
that the PCGG does not have jurisdiction to investigate and prosecute military officers by reason of mere position
held without a showing that they are subordinates of former President Marcos.

Dispositive: WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint, without
pronouncement as to costs. The counterclaims are likewise dismissed for lack of merit, but the confiscated sum
of money, communications equipment, jewelry and land titles are ordered returned to Elizabeth Dimaano.

The records of this case are hereby remanded and referred to the Hon. Ombudsman, who has primary
jurisdiction over the forfeiture cases under R.A. No. 1379, for such appropriate action as the evidence warrants.
This case is also referred to the Commissioner of the Bureau of Internal Revenue for a determination of any tax
liability of respondent Elizabeth Dimaano in connection herewith.

Ruling of the Sandiganbayan

(1.) The actions taken by the PCGG are not in accordance with the rulings of the Supreme Court in Cruz, Jr. v.
Sandiganbayan[10] and Republic v. Migrino[11] which involve the same issues.

(2.) No previous inquiry similar to preliminary investigations in criminal cases was conducted against Ramas
and Dimaano.

(3.) The evidence adduced against Ramas does not constitute a prima facie case against him.

(4.) There was an illegal search and seizure of the items confiscated.

Issues
1. PCGG’s Jurisdiction to Investigate Private Respondents
2. Propriety of Dismissal of Case Before Completion of Presentation of Evidence — Petitioner also contends
that the Sandiganbayan erred in dismissing the case before completion of the presentation of petitioners
evidence.

3. Third Issue: Legality of the Search and Seizure — Petitioner claims that the Sandiganbayan erred in declaring
the properties confiscated from Dimaanos house as illegally seized and therefore inadmissible in evidence.
This issue bears a significant effect on petitioners case since these properties comprise most of petitioners
evidence against private respondents. Petitioner will not have much evidence to support its case against
private respondents if these properties are inadmissible in evidence.Ruling

1. First issue:

The PCGG, through the AFP Board, can only investigate the unexplained wealth and corrupt practices of AFP
personnel who fall under either of the two categories mentioned in Section 2 of EO No. 1. These are: (1) AFP
personnel who have accumulated ill-gotten wealth during the administration of former President Marcos by
being the latters immediate family, relative, subordinate or close associate, taking undue advantage of their
public office or using their powers, influence x x x; or (2) AFP personnel involved in other cases of graft and
corruption provided the President assigns their cases to the PCGG.

Ramas case should fall under the first category of AFP personnel before the PCGG could exercise its jurisdiction
over him. Petitioner argues that Ramas was undoubtedly a subordinate of former President Marcos because of
his position as the Commanding General of the Philippine Army. Petitioner claims that Ramas position enabled
him to receive orders directly from his commander-in-chief, undeniably making him a subordinate of former
President Marcos.
We hold that Ramas was not a subordinate of former President Marcos in the sense contemplated under EO No.
1 and its amendments.

Mere position held by a military officer does not automatically make him a subordinate as this term is used in EO
Nos. 1, 2, 14 and 14-A absent a showing that he enjoyed close association with former President Marcos.

Second issue:

Based on the findings of the Sandiganbayan and the records of this case, we find that petitioner has only itself to
blame for non-completion of the presentation of its evidence. First, this case has been pending for four years
before the Sandiganbayan dismissed it.

Third issue:

On 3 March 1986, the Constabulary raiding team served at Dimaanos residence a search warrant captioned
Illegal Possession of Firearms and Ammunition. Dimaano was not present during the raid but Dimaanos cousins
witnessed the raid. The raiding team seized the items detailed in the seizure receipt together with other items
not included in the search warrant. The raiding team seized these items: one baby armalite rifle with two
magazines; 40 rounds of 5.56 ammunition; one pistol, caliber .45; communications equipment, cash consisting of
P2,870,000 and US$50,000, jewelry, and land titles.

Petitioner wants the Court to take judicial notice that the raiding team conducted the search and seizure on
March 3, 1986 or five days after the successful EDSA revolution. Petitioner argues that a revolutionary
government was operative at that time by virtue of Proclamation No. 1 announcing that President Aquino and
Vice President Laurel were taking power in the name and by the will of the Filipino people. Petitioner asserts
that the revolutionary government effectively withheld the operation of the 1973 Constitution which
guaranteed private respondents exclusionary right.

Moreover, petitioner argues that the exclusionary right arising from an illegal search applies only beginning 2
February 1987, the date of ratification of the 1987 Constitution. Petitioner contends that all rights under the Bill
of Rights had already reverted to its embryonic stage at the time of the search. Therefore, the government may
confiscate the monies and items taken from Dimaano and use the same in evidence against her since at the time
of their seizure, private respondents did not enjoy any constitutional right.

Petitioner is partly right in its arguments.

The correct issues are: (1) whether the revolutionary government was bound by the Bill of Rights of the 1973
Constitution during the interregnum, that is, after the actual and effective take-over of power by the
revolutionary government following the cessation of resistance by loyalist forces up to 24 March 1986
(immediately before the adoption of the Provisional Constitution); and (2) whether the protection accorded to
individuals under the International Covenant on Civil and Political Rights (Covenant) and the Universal
Declaration of Human Rights (Declaration) remained in effect during the interregnum.

We hold that the Bill of Rights under the 1973 Constitution was not operative during the interregnum. However,
we rule that the protection accorded to individuals under the Covenant and the Declaration remained in effect
during the interregnum.

During the interregnum, the directives and orders of the revolutionary government were the supreme law
because no constitution limited the extent and scope of such directives and orders. With the abrogation of the
1973 Constitution by the successful revolution, there was no municipal law higher than the directives and orders
of the revolutionary government. Thus, during the interregnum, a person could not invoke any exclusionary right
under a Bill of Rights because there was neither a constitution nor a Bill of Rights during the interregnum.

As the Court explained in Letter of Associate Justice Reynato S. Puno:A revolution has been defined as the
complete overthrow of the established government in any country or state by those who were previously subject
to it or as a sudden, radical and fundamental change in the government or political system, usually effected with
violence or at least some acts of violence. In Kelsen’s book, General Theory of Law and State, it is defined as that
which occurs whenever the legal order of a community is nullified and replaced by a new order . . . a way not
prescribed by the first order itself.

During the interregnum, the government in power was concededly a revolutionary government bound by no
constitution. No one could validly question the sequestration orders as violative of the Bill of Rights because
there was no Bill of Rights during the interregnum. However, upon the adoption of the Freedom Constitution,
the sequestered companies assailed the sequestration orders as contrary to the Bill of Rights of the Freedom
Constitution.

The revolutionary government did not repudiate the Covenant or the Declaration during the interregnum.
Whether the revolutionary government could have repudiated all its obligations under the Covenant or the
Declaration is another matter and is not the issue here. Suffice it to say that the Court considers the Declaration
as part of customary international law, and that Filipinos as human beings are proper subjects of the rules of
international law laid down in the Covenant. The fact is the revolutionary government did not repudiate the
Covenant or the Declaration in the same way it repudiated the 1973 Constitution. As the de jure government,
the revolutionary government could not escape responsibility for the States good faith compliance with its treaty
obligations under international law.

During the interregnum when no constitution or Bill of Rights existed, directives and orders issued by
government officers were valid so long as these officers did not exceed the authority granted them by the
revolutionary government. The directives and orders should not have also violated the Covenant or the
Declaration. In this case, the revolutionary government presumptively sanctioned the warrant since the
revolutionary government did not repudiate it. The warrant, issued by a judge upon proper application,
specified the items to be searched and seized. The warrant is thus valid with respect to the items specifically
described in the warrant.

It is obvious from the testimony of Captain Sebastian that the warrant did not include the monies,
communications equipment, jewelry and land titles that the raiding team confiscated. The search warrant did
not particularly describe these items and the raiding team confiscated them on its own authority. The raiding
team had no legal basis to seize these items without showing that these items could be the subject
of warrantless search and seizure. Clearly, the raiding team exceeded its authority when it seized these
items.The seizure of these items was therefore void, and unless these items are contraband per se, and they are
not, they must be returned to the person from whom the raiding seized them. However, we do not declare that
such person is the lawful owner of these items, merely that the search and seizure warrant could not be used as
basis to seize and withhold these items from the possessor. We thus hold that these items should be returned
immediately to Dimaano.

The Dispositive

WHEREFORE, the petition for certiorari is DISMISSED. The questioned Resolutions of the Sandiganbayan dated 18
November 1991 and 25 March 1992 in Civil Case No. 0037, remanding the records of this case to the Ombudsman for
such appropriate action as the evidence may warrant, and referring this case to the Commissioner of the Bureau of
Internal Revenue for a determination of any tax liability of respondent Elizabeth Dimaano, are AFFIRMED.

im vs Court of Appeals
323 SCRA 102 [GR No. 124715 January 24, 2000]
Facts: Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of probate
proceedings in special proceedings Q-95-23334 entitled, “In re: Intestate Estate Of Pastor Y. Lim Rufina Luy Lim,
represented by George Luy, petitioner.” Private respondents auto truck corporation, alliance marketing corporation,
speed distributing inc, active distributing inc, and action company are corporations formed, organized and existing under
Philippine laws and which owned real properties covered under the Torrens system. On June 11, 1994, Pastor Y. Lim died
intestate. Herein petitioner, as surviving spouse and duly represented by her nephew, George Luy filed on March 17,
1995, a joint petition for the administration of the estate of Pastor Y. Lim before the Regional Trial Court of Quezon City.
Private respondents corporations whose properties were included in the inventory of the estate of Pastor Y. Lim, then
filed a motion for the lifting of his pendens an motion for exclusion of certain properties fromthe estate of the decedent.
Issue: Whether or not the doctrine of piercing the veil of corporate entity is applicable to be able to include in the
probate proceedings the company formed by deceased Pastor Y. Lim.
Held: No. It is settled that a corporation is clothed with personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of the persons composing it. It may not be held liable for the
personal indebtedness of its stockholders or those of the entities connected with it.
Rudimentary is the rule that a corporation is invested by law with a personality distinct and separate from its
stockholders or members. In the same vein, a corporation by legal fiction and convenience is an entity shielded by
protective mantle and imbued with by law with a character alien to the persons comprising it.
Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could subject to, or distinguishes one corporation from a seemingly
separate one, were it not for the existing corporate fiction.
The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a
person or of another corporation. Where badges of fraud exist, where public convenience is defeated; where a wrong is
sought to be justified thereby, the corporate fiction or the notion of the legal entity should come to naught.
Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: 1.)
Control, not merely the 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 so separate mind, will or existence of its own; 2.) Such control must have been used by the defendant to commit
fraud on wrong to perpetuate the violation of a statutory or other positive legal duty, on dishonest and unjust act in
contravention of plaintiffs legal right; and 3.) The aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of. The absence of any of these elements prevent “piercing the corporate veil.”
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation
is not of itself a sufficient reason for disregarding the fiction of separate personalities.
Moreover, to disregard the separate juridical personality of a corporation, the wrong doing must be clearly and
convincingly established, it cannot be presumed.

COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION VS. NLRC, ET AL

310 SCRA 403 (1999)

FACTS OF THE CASE

Complex informed its Lite-On personnel that a request from Lite on Philippines to lower their selling price by 10% was
not feasible as they were already incurring losses at the present prices of their products. Under such circumstances,
Complex regretfully informed the employees that it was left with no alternative but to close down the operations of the
Lite-On Line. The Union, however, decried the decision and voted to declare a strike. Labor unrest within the company
eventually ensued.

In the evening of April 6, 1992, the machinery, equipment and materials being used for production at Complex were
pulled-out from the company premises and transferred to the premises of Ionics Circuit, Inc. at Cabuyao, Laguna. The
following day, a total closure of company operation was effected at Complex.

A complaint was, thereafter, filed with the Labor Arbitration Branch of the NLRC for unfair labor practice, illegal
closure/illegal lockout, money claims for vacation leave, sick leave, unpaid wages, 13th month pay, damages and
attorney's fees. Ionics was impleaded as a party defendant because the officers and management personnel of Complex
were also holding office at Ionics with Lawrence Qua as the President of both companies.

Ionics contended that it was an entity separate and distinct from Complex and had been in existence since July 5, 1984 or
eight (8) years before the labor dispute arose at Complex. Like Complex, it was also engaged in the semi-conductor
business where the machinery, equipment and materials were consigned to them by their customers. While admitting
that Lawrence Qua, the President of Complex was also the President of Ionics, the latter denied having Qua as their
owner since he had no recorded subscription of P1,200,000.00 in Ionics as claimed by the Union.

ISSUE
Whether there is a clear ground to pierce the veil of corporate fiction and whether Lawrence Qua should be held liable
for the alleged illegal transfer of machineries of Complex to Ionics.

RULING
It is settled that in the absence of malice or bad faith, a stockholder or an officer of a corporation cannot be made
personally liable for corporate liabilities. The fact that the pull-out of the machinery, equipment and materials was
effected during night-time is not per se an indicia of bad faith on the part of respondent Qua since he had no other
recourse, and the same was dictated by the prevailing mood of unrest as the laborers were already vandalizing the
equipment, bent on picketing the company premises and threats to lock out the company officers were being
made. Such acts of respondent qua were, in fact, made pursuant to the demands of Complex's customers who were
already alarmed by the pending labor dispute and imminent strike to be stage by the labourers, to have their equipment,
machinery and materials pull out of Complex. As such, these acts were merely done pursuant to his official functions
and were not, in any way, made with evident bad faith.
As to the juridical personality of the corporations, Ionics may be engaged in the same business as that of Complex, but
this fact alone is not enough reason to pierce the veil of corporate fiction of the corporation. Well-settled is the rule that
a corporation has a personality separate and distinct from that of its officers and stockholders. Likewise, mere ownership
by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality.

Presidential Commission on Good Government vs. Sandiganbayan

April 12, 2005
455 SCRA 526

Facts:
General Bank and Trust Company was declared insolvent by the Central Bank and subjected it to liquidation. A
public bidding followed, which was bought by the highest bidder, Lucio Tan. Thereafter, the government, represented by
then Solicitor General, Estelito Mendoza, filed a petition with the trial court praying for the assistance and supervision of
the court in GENBANK’s liquidation docketed as Special Proceeding No. 107812.
After the end of the Marcos administration, and the election of Corazon Aquino as president, Presidential
Commision on Good Governance (PCGG) was formed to recover the alleged ill-gotten wealth of the Marcos family and
his cronies.
One of the first civil cases filed by the PCGG in the Sandiganbayan was a complaint for reversion, reconveyance,
restitution, accounting and damages against respondents Tan et al. and the then First Couple, Ferdinand and Imelda
Marcos together with several others.
By the time Civil Cases Nos. 0005 and 0096-0099 were filed, Estelito Mendoza has returned to his private life
together into the private practice of law. He was engaged as counsel for respondents Tan, et al. and thereafter filed
petitions for certiorari, prohibition and injunction to annul the writs of sequestration issued by the PCGG.
This led to the filing of several motions by the PCGG to disqualify Mendoza from the cases he was representing
for the respondents, alleging that as former Solicitor General, he actively intervened in the liquidation proceedings of
GENBANK (currently Allied Bank) that was acquired by the same group of Tan et al.
The allegation of the government in its motions stresses that as former Solicitor General, and acting as counsel
for Central Bank, he advised the Central Bank’s officials on how to go about with the procedure of the liquidation. In
doing so, PCGG says that he violated Rule 6.03 of the Code of Professional Responsibility, prohibiting former government
lawyers from accepting engagement or employment in connection with any matter in which he had intervened while in
said service.
The Sandinbayan, through a resolution, denied the motion to disqualify which led to the filing of a petition for
certiorari and prohibition before the Supreme Court.
Issues:
Whether or not the definitions of “matter” and “intervene” as interpreted by the PCGG are the same as the definitions
contemplated by the Code of Professional Responsibility
And,
Whether or not Estelito Mendoza violated Rule 6.03 of the Code of Professional Responsibility in his engagement with
the civil cases involving Tan, et al.
Held:

The issues were resolved both in the negative.

The Court resolved the case by going through the history of the adoption of the Code of the Professional
Conduct from the American System and stating the rationale behind Rule 6.03. The evil sought to be prevented is that a
government lawyer’s actions be influenced by the temptation to take action on behalf of the government client that
latter could be to the advantage of parties who might later become private practice clients.
In the adoption of the said rule from Canon 36 paragraph 2 of the American Bar Association’s Canons of
Professional Ethics, the Integrated Bar of the Philippines replaced the phrase “investigated and passed upon” with the
word “intervened”.
This led to the explanation behind the phrasing of the canon in the American Legal System where members of
the ABA addressed the issues of “revolving door”, “adverse-interest conflicts”, and “congruent-interest conflicts”.
ABA further defined the following terms:
Revolving Door: the process by which lawyers and others temporarily enter the government service from private
life then leave it for large fees in private practice, where they can exploit information, contacts and influence
gathered while in government service.
Adverse-interest conflicts: exists when a former government lawyer represents a client in private practice in
which the matter is substantially related to a matter that the lawyer dealt with while employed by the
government and the interests of the current and former are adverse
 Congruent-interest conflicts: where former government lawyers are prohibited from representing a client in
private practice even if the interests of the former government client and new client are entirely parallel.
It was through the definitions that the Court ruled that Mendoza’s case does not involve an adverse-interest
conflict because he has not shown any adverse interest when he acted as Solicitor General in the Special Proceeding case
and as counsel for the Civil cases pending before the Sandiganbayan.
As to the violation of Rule 6.03 of the Code of Professional Responsibility, the Court shed light through the
definitions of “matter” and “intervention” based on the Formal Opinion 342 of the American Bar Association.
“Matter” is any discrete, isolatable act as well as identifiable transaction or conduct involving a particular
situation and specific party and not merely an act of drafting, enforcing, or interpreting government or agency
procedures, regulations or laws, or briefing abstract principles of law.
“Intervention” was classified in two definitions.
The first includes the participation in a proceeding even if the intervention is irrelevant or has no effect or little
influence as implied from the definition of intervene which is “to occur, fall, or come in between points of time or
events”.
While the second includes an act of a person who has the power to influence the subject proceeding which is
rooted from the definition of intervene “to come in or between by way of hindrance or modification and that
interference which may affect the interests of others.”
The Court said that it is beyond doubt that “matter” or the act of Mendoza as Solicitor General in the liquidation
case, advising the Central Bank on how to proceed with it, is not the “matter” contemplated by Rule 6.03 of the Code of
Professional Responsibility.
The ABA Formal Opinion No. 342 stressed that the matter which will not disqualify a lawyer would be the mere
“drafting, enforcing, or interpreting government or agency procedures, regulations or laws, or briefing abstract principles
of law. “
The “matter” where Mendoza got himself involved with was in acting as counsel for the Central Bank; he
informed them of the proper procedure provided by law to liquidate GENBANK through the filing of the necessary
petition in the RTC of Manila.
Mendoza is not privy to the decision of the Central Bank to liquidate GENBANK nor was he involved in the sale of
GENBANK to presently Allied Bank. Furthermore, the matter of liquidation involved in the Special Proceeding case is
entirely different from the matter of sequestration involved in the Civil Cases.
Moreover, Rule 6.03 of the Code of Professional Responsibility cannot apply to Mendoza because his alleged
intervention as Solicitor General is an intervention on a matter different from the sequestration of stocks as ill-gotten
wealth in the Civil Case. The Court opines that the second interpretation of intervention is more fitting to the intention of
the law based on its historical background.
There can be no intervention when a government lawyer acts only in “drafting, enforcing, or interpreting
government or agency procedures, regulations or laws.” It has to be that the lawyer participated personally and
substantially in a matter related to his office. To this, the PCGG failed to substantiate that Mendoza played a significant
and substantial intervention in the Special Proceeding case.
Acting as Solicitor General, he had to sign the petition as an initiatory pleading for the Central Bank. The
assistance extended to the Central Bank by Mendoza was only that of an agent of the government more than a court
litigator acting in behalf of the government. It is still the Central Bank that has the sole authority and jurisdiction to
promulgate the rules and regulations in the liquidation of insolvent banks.
For these reasons, the Court denied the petitions of the PCGG in disqualifying Estelito Mendoza as counsel for
respondents Tan, et al.
Heirs of Durano Sr. vs Spouses Uy
344 SCRA 238 [GR No. 136456 October 24, 2000]
Facts: As far back as August 1970, a 128 hectare of land located in the barrios of Dunga and Cahumayhumayan, Danao
City. On December 27, 1973, the late Congressman Ramon Durano Sr. together with his son Ramon Durano III, and the
latter’s wide Elizabeth Hotchkins-Durano, instituted an action for damages against spouses Angeles Sepulveda Uy and
Emigdio Beng Sing Uy, Spouses Faustino Alatan and Valeriana Garro, Spouses Rufino Lavador and Aurelia Mata, Silvestre
Ramos, Hermogenes Tito, Teotimo Gonzales, Primitiva Garro, Julian Garro, Ismael Garro, Bienvido Castro, Glicerio Alcala,
Felemon Lavador, Candelario Lumantao, Garino Quimbo, Justino Tito, Marcelino Gonzales, Salvador Duyday, Venancia
Repaso, Leodegracia Gonzales, Jose dela Calzada, Restituta Gonzales, and Cosme Ramos before branch XVII of the then
Court of First Instance of Cebu, Danao City.. Herein respondents are the possessors of the subject parcel of land which
they are cultivating, it was used to be owned by CEPCO who later sold the same to Durano & Co. On September 15, 1990,
Durano & Co sold the disputed property to petitioner Ramon Durano III, who procured the registration of these lands in
his name under TCT no. T-103 and T-104. The different parts of the entire land was bulldozed by the petitioner’s company
resulting to the destruction of plants and other products that were placed by the respondents. Hence, a claim for
damages was lodged against herein petitioner. The respondents presented tax declaration covering the different areas of
the parcel of land that is titled in each of them as proof that they are entitled for the said damages.
Issue: Whether or not the doctrine of piercing the veil of corporate entity can be applied in order to make Durano & Co
liable for damages.
Held: Yes. The court of appeals applied the well-recognized principle of piercing the corporate veil, i.e. the law will regard
the act of the corporation as the ac of its individual stockholders, when it is shown that the corporation was used merely
as an alter ego by those persons in the commission of fraud or other illegal acts.
 That the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:
1. 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.
2. Such control must, have been used by the defendant to commit fraud or wrong, to perpetrate the violation of
statutory or other positive legal duty, on dishonest and unjust acts in contravention of plaintiff’s legal right; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents the piercing the corporate veil. In applying the instrumentality or
alter ego doctrine, the courts are concerned with reality not form, with how the corporation operated and the individual
defendants relationship to that operation.

San Juan Structural and Steel Fabricators, Inc. vs Court of Appeals

296 SCRA 631 [GR No. 129459 September 29, 1998]
Facts: Plaintiff-appellant San Juan structural and steel fabricators Inc.’s amended complaint alleged that on February 14,
1989, plaintiff-appellant entered into an agreement with defendant-appellee Motorich Sales Corporation for the transfer
to it of a parcel of land identified as lot 30, Block 1 of the Acropolis Greens Subdivision located in the district of Murphy,
Quezon City, Metro Manila containing an area of 414 sqm, covered by TCT no. 362909; that as stipulated in the
agreement of February 14, 1i989, plaintiff-appellant paid the down payment in the sum of P100,000, the balance to be
paid on or before March 2, 19889; that on March 1, 1989,Mr. Andres T. Co, president of Plaintiff-appellant corporation,
wrote a letter to defendant-appellee Motorich Sales Corporation requesting a computation for the balance to be paid;
that said letter was coursed through the defendant-appellee’s broker. Linda Aduca who wrote the computation of the
balance; that on March 2, 1989, plaintiff-appellant was ready with the amount corresponding to the balance, covered by
Metrobank cashier’s check no. 004223 payable to defendant-appellee Motorich Sales Corporation; that plaintiff-
appellant and defendant-appellee were supposed to meet in the plaintiff-appellant’s office but defendant-appellee’s
treasurer, Nenita Lee Gruenbeg did not appear; that defendant-appelle despite repeated demands and in utter disregard
of its commitments had refused to execute the transfer of rights/deed of assignment which is necessary to transfer the
certificate of title; that defendant ACL development corporation is impleaded as a necessary party since TCT no. 362909
is still in the name of said defendant; while defendant VNM Realty and Development Corporation is likewise impleaded
as a necessary party in view of the fact that it is the transferor of the right in favor of defendant-appellee Motorich Sales
Corporation; that on April 6, 1989 defendant ACL Development Corporation and Motorich Sales Corporation entered into
a deed of absolute sale whereby the former transferred to the latter the subject property; that by reason of said transfer;
the registry of deeds of Quezon City issued a new title in the name of Motorich Sales Corporation, represented by
defendant-appellee Nenita Lee Gruenbeg and Reynaldo L. Gruenbeg, under TCT no. 3751; that as a result of defendants-
appellees Nenita and Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of assignment, plaintiff-
appellant suffered moral and nominal damages which may be assessed against defendant-appellees in the sum of
P500,000; that as a result of an unjustified and unwarranted failure to execute the required transfer or formal deed of
sale in favor of plaintiff-appellant, defendant-appellees should be assessed exemplary damages in the sum of P100,000;
that by reason of the said bad faith in refusing to execute a transfer in favor of plaintiff-appellant the latter lost
opportunity to construct a residential building in the sum of P100,000 and that as a consequence of such bad faith, it has
been constrained to obtain the services of counsel at an agreed fee of P100,000 plus appearance fee of for every
appearance in court hearings.
Issues: Whether or not the corporation’s treasurer act can bind the corporation.
Whether or not the doctrine of piercing the veil of corporate entity is applicable.
Held: No. Such contract cannot bind Motorich, because it never authorized or ratified such sale.
A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the property of
the corporation is not the property of the corporation is not the property of its stockholders or members and may not be
sold by the stockholders or members without express authorization from the corporation’s board of directors.
Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise provided in this code, the corporate
powers of all corporations formed under this code shall be exercised, all business conducted, and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the stockholders of
stocks, or where there is no stock, from among the members of the corporations, who shall hold office for 1 year and
until their successors are elected and qualified.
As a general rule, the acts of corporate officers within the scope of their authority are binding on the corporation. But
when these officers exceed their authority, their actions, cannot bind the corporation, unless it has ratified such acts as is
estopped from disclaiming them.
Because Motorich had never given a written authorization to respondent Gruenbeg to sell its parcel of land, we hold that
the February 14, 1989 agreement entered into by the latter with petitioner is void under Article 1874 of the Civil Code.
Being inexistent and void from the beginning, said contract cannot be ratified.
The statutorily granted privilege of a corporate veil may be used only for legitimate purposes. On equitable
consideration,the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or inequity, defeat
 public convenience; confuse legitimate issues; or serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation.
We stress that the corporate fiction should be set aside when it becomes a shield against liability for fraud, or an illegal
act on inequity committed on third person. The question of piercing the veil of corporate fiction is essentially, then a
matter of proof. In the present case, however, the court finds no reason to pierce the corporate veil of respondent
Motorich. Petitioner utterly failed to establish the said corporation was formed, or that it is operated for the purpose of
shielding any alleged fraudulent or illegal activities of its officers or stockholders; or that the said veil was used to conceal
fraud, illegality or inequity at the expense of third persons like petitioner.

Concept Builders Inc. vs National Labor Relations Commission

257 SCRA 149 [G.R. No. 108734. May 29, 1996]
Facts: Petitioner Concept Builders Inc., a domestic corporation with principal office at 355 Maysan Road, Valenzuela,
Metro Manila is engaged in the construction business. Private respondents were employed by said company as laborers,
carpenters, and niggers. On November 1981, private respondents were served with individual written notices of
termination of employment by petitioner, effective on November 30, 1981. It was stated in the individual notices that
their contracts of employment had expired and the project in which they were hired had been completed. Public
respondent found it to be the fact, however, at the time of the termination of private respondents’ employment, the
project in which they were hired had not yet been finished and completed. Petitioner had to engage the services of the
subcontractors whose workers performed the functions of private respondents. Aggrieved, private respondents filed a
complaint for illegal dismissal, unfair labor practices and non-payment of their holiday pay, overtime pay, and 13th
month pay against petitioners. The labor arbiter rendered decision in favor of the private respondents. When the same
became final and executory, a writ of execution was issued, however, the same was refused by the security guard on duty
on the ground that the petitioners no longer occupied the premises. A break-open order was then recommended.
Issue: Whether or not the alias writ of execution can be issued against the sister company of the petitioners, HPPI.
Held: Yes. It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of a
corporation is merely a fiction created by law for convenience and to promote justice. So, when the notion of separate
juridical personality is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or is used as a
device to defeat labor laws, this separate personality of the corporation may be disregarded or the veil of corporate
fiction pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of
another corporation.
The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and in
circumstances laid down, but certainly there are some probative factors of identity that will justify the application of the
doctrine of piercing the corporate veil, to wit:
1. Stock ownership by one or common ownership of both corporations.
2. Identity of directors and officers.
3. The names of keeping corporate books and records
4. Methods of conducting the business.
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 fiction of the corporate entity of the instrumentality may be disregarded. The
control necessary to invoke the rule is not majority or even complete stock control but such domination of instances,
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. It must be kept in mind that the control must be shown to have been exercised at the
time the acts complained of took place. Moreover, the control and breach of duty must proximately cause the injury or
unjust loss for which the complaint is made.
The test in determining the applicability of the doctrine of piercing the veil of corporate fiction as follows:
1. 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 on exercise of its own;
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 and unjust act in contravention of plaintiff’s legal rights.
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any of these elements prevents “piercing the corporate veil” of the corporation. 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.

NPC vs. CA
GR 124378
Facts: By virtue of Memorandum Order No. 398 - "Prescribing Measures to Preserve the Lake Lanao Watershed, To
Enforce the Reservation of Areas Around the Lake Below Seven Hundred And Two Meters Elevation, and for Other
Purposes.", petitioner herein built and operated the Agus Regulation Dam at the mouth of Agus River in Lanao del Sur, at
a normal maximum water level of Lake Lanao at 702 meters elevation in 1978. In 1986, private respondents fishponds
and other improvements were washed away when the water level of the lake escalated and the subject lakeshore area
was flooded. NPC refused to compensate them so they filed an action for damages, alleging that the negligence and
inexperience of NPC’s employees assigned to operate the Agus Regulation Dam were the proximate causes of the
damage caused to their properties and livelihood. NPC denied the allegations and alleged that: 1) the water level of Lake
Lanao never went beyond 702 meters, 2) their employees were not negligent, 3) private respondents fishponds were
located below the 702-water level, which is prohibited.

Issue: WON, NPC is liable for damages.

Ruling: Yes. By virtue of MO 398, NPC had two duties: 1) maintain the normal maximum lake elevation at 702 meters,
and 2) build benchmarks to warn the inhabitants in the area that cultivation of land below said elevation is forbidden.
Now upon ocular inspection by the lower courts, it was established that in the subject areas, the benchmarks as pointed
out by the NPC representative, could not be seen nor reached because they were totally covered with water. Thus, an
application of the doctrine of res ipsa loquitur, the thing speaks for itself, is proper. The doctrine states that: Where the
thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the
ordinary course of things does not happen if those who have the management use proper care, it affords reasonable
evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. In the case at
bar, the fact that the benchmarks could not be seen nor reached, is by itself, constitute proof that the water level did rise
above the benchmarks and inundated the properties in the area. Thus, In the absence of any clear explanation on what
other factors could have explained the flooding in the neighboring properties of the dam, it is fair to reasonably infer that
the incident happened because of want of care on the part of NPC to maintain the water level of the dam within the
benchmarks at the maximum normal lake elevation of 702 meters.

TRADERS ROYAL BANK V. CA

269 SCRA 15

FACTS:

Filriters through a Detached Agreement transferred ownership to Philfinance a Central Bank Certificate of
Indebtedness. It was only through one of its officers by which the CBCI was conveyed without authorization from the
company. Petitioner and Philfinance later entered into a Repurchase agreement, on which petitioner bought
the CBCI from Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the petitioner tried to
have it registered in its name in the CB, the latter didn't want to recognize the transfer.

HELD:

The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the registered owner
Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words of negotiability which should
have served as an expression of the consent that the instrument may be transferred by negotiation.

The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to
circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of
holders in due course, and the freedom of negotiability is the foundation for the protection, which the law throws
around a holder in due course. This freedom in negotiability is totally absent in a certificate of indebtedness as it
merely acknowledges to pay a sum of money to a specified person or entity for a period of time.

The transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the
negotiable instruments law. The pertinent question then is—was the transfer of the CBCI from Filriters to
Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the
CBCI registered in its name with the Central Bank? Clearly shown in the record is the fact that Philfinance’s title
over CBCI is defective since it acquired the instrument from Filriters fictitiously. Although the deed of assignment
stated that the transfer was for ‘value received‘, there was really no consideration involved. What happened was
Philfinance merely borrowed CBCI from Filriters, a sister corporation. Thus, for lack of any consideration, the
assignment made is a complete nullity. Furthermore, the transfer wasn't in conformity with the regulations set by
the CB. Giving more credence to rule that there was no valid transfer or assignment to petitioner.
Umali vs Court of Appeals
189 SCRA 529 [GR No. 89561 September 13, 1990]
Facts: Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Mur Vda. de Castillo. The Castillo family are the owners
of parcel of land located in Lucena City which was given as security for a loan from the development Bank of the
Philippines (DBP) for their failure to pay the amortization, foreclosure of the said property was about to be initiated. This
problem was made known to Santiago Rivera, who proposed to them the conversion into subdivision of the four parcels
of land adjacent to the mortgaged property to raise the necessary fund. The idea was accepted by the Castillo family and
to carry out the project, a memorandum of agreement was executed by and between Slobec Realty and Development
Inc. represented by its president Santiago Rivera and Castillo family. In this agreement, Santiago Rivera obliged himself to
pay the Castillo family the sum of P70,000 immediately after the execution of the agreement and to pay additional
amount of P40,000 after the property has been converted into a subdivision. Rivera, with agreement approached Mr.
Modesto Cervantes, president of defendant Bormaheco and proposed to purchase from Bormaheco two tractors model
D7 and D8 subsequently a sales agreement was executed on December 28, 1970. On January 3, 1971, Slobec, through
Rivera, executed in favor of Bormaheco a chattel mortgage over the said equipment as security for the payment of the
aforesaid balance of P180,000. As further security of the aforementioned unpaid balance, Slobec obtained from
insurance corporation of the Philippines a security bond, with Insurance Corporation of the Philippines (ICP) as surety
and Slobec as principal, in favor of Bormaheco, as borne out of by Exhibit 8. The aforesaid surety bond was in turn
secured by an agreement of counter-guaranty with real estate mortgage executed by Rivera as President of Slobec and
Mauricia Mur Vda. de Castillo, Buenaflor Castillo Umali, Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and
Leovina Castillo Jalbuena as mortgagors and insurance corporation of the Philippines as mortgagee. In this agreement,
ICP guaranteed the obligation of Slobec with Bormaheco in the amount of P180,000. In giving the bond, ICP required that
the Castillos mortgage to them the properties in question, namely, four parcels of land covered by TCT in the name of the
aforementioned mortgagors, namely TCT no. 13114, 13115, 13116, and 13117 all of the Register of Deeds of Lucena City.
Meanwhile, for violation of the terms and conditions of the counter-guaranty agreement, the properties of the Castillos
were foreclosed by ICP as the highest bidder with a bid of P285,212, a certificate of sale was issued by the provincial
sheriff of Lucena City and TCT over the subject parcels of land were issued.
Issue: Whether or not the foreclosure is proper so as to apply the doctrine of piercing the veil of corporate entity.
Held: No. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exists, the legal fiction
that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere association of persons. The members or
stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers
and stockholders. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, on when it is made as a shield to confuse the legitimate issues or where a corporation is
the 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 case at bar, petitioners seek to pierce the veil of corporate entity of Bormaheco, ICP and PM parts, alleging that
these corporations employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to
petitioners while we do not discount the possibility of existence of fraud in the foreclosure proceeding, neither are we
inclined to apply the doctrine invoked by petitioners in granting the relief sought. It is our considered opinion that
piercing the veil of corporate entity is not the proper remedy in order that the foreclosure proceeding may be declared a
nullity under the circumstances obtaining in the legal case at bar.
The mere fact, therefore, that the business of two or more corporations are interrelated is not a justification for
disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a
shield to defraud creditors and third persons of their rights.

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.”

Ramoso vs Court of Appeals

CCC is a lending and investment firm. CCC contracted with its franchise branches for the latter to assign its receivables to
CCC. But this practice was discontinued due to a prohibition (DOSRI rule) issued by the Central Bank where corporations
are prohibited from lending funds to persons with related interests, among others. To circumvent this, CCC incorporated
CCC Equity, a wholly owned subsidiary to manage the franchise branches. CCC later changed its name to General Credit
Corporation (GCC).

In 1981, Ramoso et al alleged that they discovered several bad business practices being conducted by GCC; that such
questionable practices divested GCC of its assets thereby placing the franchise branches at a disadvantage; that GCC,
through CCC Equity mismanaged the franchise branches thereby causing imminent losses to the investors.

Ramoso et al then sued GCC before the Securities and Exchange Commission. The hearing officer ruled in favor of
Ramoso et al. He pierced the veil of corporate fiction and he declared that the franchise branches, GCC, and CCC equity
are one and the same corporation; that as such, the franchise branches, in whom Ramoso et al invested, are not liable to
the obligations incurred by GCC. The SEC en banc however reversed the ruling of the hearing officer. The Court of
Appeals affirmed the SEC en banc.

ISSUE: Whether or not the veil of corporate fiction should be pierced.

HELD: No. Ramoso et al did not properly plead their cause. They merely alleged that CCC Equity is a conduit of GCC. As
found by the SEC en banc, Ramoso et al were not able to prove that CCC Equity was incorporated in order to perpetrate
fraud against them. Whether the existence of the corporation should be pierced depends on questions of facts,
appropriately pleaded. Mere allegation that a corporation is the alter ego of the individual stockholders is insufficient.
The presumption is that the stockholders or officers and the corporation are distinct entities. The burden of proving
otherwise is on the party seeking to have the court pierce the veil of the corporate entity. It was not shown that the
debts incurred by GCC were actually incurred in bad faith. Further, there is a pending case relating to the liability of
Ramoso et al as guarantors – that will be the proper forum to raise their respective liability as regards said debts.

ADALIA B. FRANCISCO and MERRYLAND DEVELOPMENT CORPORATION, petitioners, vs. RITA C. MEJIA, as Executrix of
Testate Estate of ANDREA CORDOVA VDA. DE GUTERREZ, respondent. G.R. No. 141617, August 14, 2001

GONZAGA-REYES,J.:

FACTS: Andrea Cordova Vda. de Gutierrez (Gutierrez) was the registered owner of a parcel of land in Camarin, Caloocan
City. Gutierrez and Cardale Financing and Realty Corporation (Cardale) executed a Deed of Sale with Mortgage relating to
the lots for the consideration of P800,000.00.

Owing to Cardale's failure to settle its mortgage obligation, Gutierrez filed a complaint for rescission of the contract.
However, Cardale, which was represented by petitioner Adalia B. Francisco (Francisco) in her capacity as Vice-President
and Treasurer of Cardale, lost interest in proceeding with the presentation of its evidence and the case lapsed into
inactive status for a period of about fourteen years.

In the meantime, the mortgaged parcels of land became delinquent in the payment of real estate taxes which culminated
in their levy and auction sale in satisfaction of the tax arrears. The highest bidder for the three parcels of land was
petitioner Merryland Development Corporation (Merryland), whose President and majority stockholder is Francisco.

Thereafter, Francisco filed an undated Manifestation to the effect that the properties subject of the mortgage had been
levied upon and sold at a tax delinquency sale. Francisco further claimed that the delinquency sale had rendered the
issues in Civil Case moot and academic.

Mejia, in her capacity as executrix of the Estate of Gutierrez, filed with the RTC of Quezon City a complaint for damages
with prayer for preliminary attachment against Francisco, Merryland and the Register of Deeds of Caloocan City.

The RTC held that plaintiff Mejia, as executrix of Gutierrez's estate, failed to establish by clear and convincing evidence
her allegations that Francisco controlled Cardale and Merryland and that she had employed fraud by intentionally
causing Cardale to default in its payment of real property taxes on the mortgaged properties so that Merryland could
purchase the same by means of a tax delinquency sale.

There are times when the corporate fiction will be disregarded: (1) where all the members or stockholders commit illegal
act; (2) where the corporation is used as dummy to commit fraud or wrong; (3) where the corporation is an agency for a
parent corporation; and (4) where the stock of a corporation is owned by one person.

The RTC held that none of the foregoing reasons can be applied to the incidents in this case and the stock of either of the
two corporation is not owned by one person (defendant Francisco). Except for defendant Adalia B. Francisco, the
incorporators and stockholders of one corporation are different from the other.

The Court of Appeals, reversed the trial court, holding that the corporate veil of Cardale and Merryland must be pierced
in order to hold Francisco and Merryland solidarily liable since these two corporations were used as dummies by
Francisco.

ISSUE #1: Whether or not petitioner Francisco acted in bad faith in her dealings.

HELD: YES. The Court, after an assiduous study of this case, is convinced that the totality of the circumstances
appertaining conduce to the inevitable conclusion that petitioner Francisco acted in bad faith.

Not only did Francisco allow the auction sale to take place, but she used her other corporation (Merryland) in
participating in the auction sale and in acquiring the very properties which her first corporation (Cardale) had mortgaged
to Gutierrez.

It is dicta in corporation law that a corporation is a juridical person with a separate and distinct personality from that of
the stockholders or members who compose it. However, when the legal fiction of the separate corporate personality is
abused, such as when the same is used for fraudulent or wrongful ends, the courts have not hesitated to pierce the
corporate veil. If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked
upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but, when the notion of legal
entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the
corporation as an association of persons.

Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal fiction that a
corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere association of persons. The members or
stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers
and stockholders. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is
the merealter 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.

It is exceedingly apparent to the Court that the totality of Francisco's actions clearly betray an intention to conceal the
tax delinquencies, levy and public auction of the subject properties from the estate of Gutierrez and the trial court in
Civil Case No. Q-12366 until after the expiration of the redemption period when the remotest possibility for the recovery
of the properties would be extinguished. Consequently, Francisco had effectively deprived the estate of Gutierrez of its
rights as mortgagee over the three parcels of land which were sold to Cardale.

ISSUE #2: Whether or not Merryland may be held solidarily liable with Francisco.

HELD: NO. We cannot agree, however, with the Court of Appeals' decision to hold Merryland solidarily liable with
Francisco. The only act imputable to Merryland in relation to the mortgaged properties is that it purchased the same and
this by itself is not a fraudulent or wrongful act. No evidence has been adduced to establish that Merryland was a mere
alter ego or business conduit of Francisco.

Time and again it has been reiterated that mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality. Neither has it been alleged or proven that Merryland is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or adjunct of Cardale. Even assuming that the
businesses of Cardale and Merryland are interrelated, this alone is not justification for disregarding their separate
personalities, absent any showing that Merryland was purposely used as a shield to defraud creditors and third persons
of their rights.32 Thus, Merryland's separate juridical personality must be upheld.