Midterms Digest

CORPORATION LAW DIGEST – Compiled: Rheyne Robledo Page 1 of 48
Reynoso vs Court of Appeals The defense of separateness will be disregarded

345 SCRA 335 [GR No. 116124-25 November 23, when the business affairs of a subsidiary corporation
2000] are so controlled by the mother corporation to the
extent that it becomes an instrument or agent of its
Facts:
parent. But even when there is dominance over the
Sometime in early 1960s, the Commercial Credit affairs of the subsidiary, the doctrine of piercing the
Corporation (CCC), a financing company and veil of corporate fiction applies only when such fiction
investment firm, decided to organize franchise is used to defeat public convenience, justify wrong,
companies indifferent parts of the country, wherein it protect fraud or defend crime.
shall hold 30% equity. Employees of the CCC were
The organization of subsidiary corporations as what
designated as resident managers of the franchise
was done here is usually resorted to for aggrupation
companies. Petitioner Bibiano O. Reynoso IV was
of capital the ability to cover more territory and
designated as the resident manager of the franchise
population, the decentralization of activities best
in Quezon City, known as the Commercial Credit
decentralized, and the securing of other legitimate
Corporation of Quezon City. CCC-QC entered into an
advantages. But when the mother corporation and its
exclusive agreement management contract with CCC
subsidiary cease to act in good faith and honest
whereby the latter was granted the management and
business judgement, when the corporate device is
full control of the business activities of the former.
used by the parent to avoid its liability for legitimate
Under the contract, CCC-QC shall sell, discount
obligations of the subsidiary, and when the corporate
and/or assign its receivables to CCC. Subsequently,
fiction is used to perpetrate fraud or promote injustice,
however, this discounting arrangement was
the law steps in to remedy the problem. When that
discontinued pursuant to the so called DOSRI rule,
happens, the corporate character is not necessarily
prohibiting the lending of funds by corporations to its
abrogated. It continuous for legitimate objectives.
directors, officers, stockholders and other persons
However, it is pursued in order to remedy injustice,
with related interest therein. On account of the new
such as that inflicted in this case.
restrictions imposed by the Central Bank policy by
virtue of the DOSRI rule, CCC decided to form CCC
Equity Corporation, a wholly-owned subsidiary, to
______________ CASE ENDS HERE ___________
which CCC transferred its 30% equity in CCC-QC,
together with 2 seats in the latter’s Board of Directors.
A complaint for sum of money with preliminary
International Express Travel & Tour Services, Inc.
attachment was filed by CCC-equity against petitioner
vs. Court of Appeals [GR 119002, 19 October
and the latter was also dismissed from employment to
2000]
which the lower court’s decision was rendered in favor
of the petitioner and the same has become final and Facts:
executory. CCC changed its name to General Credit
On 30 June 1989, the International Express Travel
Corporation (GCC).
and Tour Services, Inc. (IETTSI), through its
managing director, wrote a letter to the Philippine
Football Federation (Federation), through its
Issue:
president, Henri Kahn, wherein the former offered its
Whether or not the judgement in favor of the petitioner services as a travel agency to the latter. The offer was
may be executed against respondent GCC. accepted. IETTSI 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
Ruling: as various other trips to the People's Republic of
China and Brisbane. The total cost of the tickets
Yes. A corporation is an artificial being created by
amounted to P449,654.83. For the tickets received,
operation of law, having the right of succession and
the Federation made two partial payments, both in
the powers, attributes, and properties expressly
September of 1989, in the total amount of
authorized by law or incident to its existence. It is an
P176,467.50. On 4 October 1989, IETTSI wrote the
artificial being invested by law with a personality
Federation, through Kahn a demand letter requesting
separate and distinct from those of the persons
for the amount of P265,894.33. On 30 October 1989,
composing it as well as from that of any other legal
the Federation, through the Project Gintong Alay, paid
entity to which it may be related. It was evolved to
the amount of P31,603.00. On 27 December 1989,
make possible the aggregation and assembling of
Henri Kahn issued a personal check in the amount of
huge amounts of capital upon which big business
P50,000 as partial payment for the outstanding
depends. It also has the advantage of non-
balance of the Federation.
dependence on the lives of those who compose it
even as it enjoys certain rights and conducts activities Thereafter, no further payments were made despite
of natural persons. repeated demands. This prompted IETTSI to file a
civil case before the Regional Trial Court of Manila.
Any piercing of the corporate veil has to be done with
IETTSI sued Henri Kahn in his personal capacity and
caution. However, the court will not hesitate to use its
as President of the Federation and impleaded the
supervisory and adjudicative powers where the
Federation as an alternative defendant. IETTSI
corporate fiction is used as an unfair device to
sought to hold Henri Kahn liable for the unpaid
achieve an inequitable result defraud creditors, evade
balance for the tickets purchased by the Federation
contracts and obligations, or to shield it from the
on the ground that Henri Kahn allegedly guaranteed
effects of a court decision. The corporate fiction has
the said obligation. Kahn filed his answer with
to be disregarded when necessary in the interest of
counterclaim, while the Federation failed to file its
justice.
answer and was declared in default by the trial court. [ GR No. 90580, Apr 08, 1991 ]
In due course, the trial court rendered judgment and RUBEN SAW v. CA +
ruled in favor of IETTSI and declared Henri Kahn
personally liable for the unpaid obligation of the
Facts:
Federation. The complaint of IETTSI against the
Philippine Football Federation and the counterclaims A collection suit with preliminary attachment was filed
of Henri Kahn were dismissed, with costs against by Equitable Banking Corporation against Freeman,
Kahn. Only Henri Kahn elevated the decision to the Inc. and Saw Chiao Lian, its President and General
Court of Appeals. On 21 December 1994, the Manager. The petitioners moved to intervene,
appellate court rendered a decision reversing the trial alleging that (1) the loan transactions between Saw
court. IETTSI filed a motion for reconsideration and as Chiao Lian and Equitable Banking Corp. were not
an alternative prayer pleaded that the Federation be approved by the stockholders representing at least
held liable for the unpaid obligation. The same was 2/3 of corporate capital; (2) Saw Chiao Lian had no
denied by the appellate court in its resolution of 8 authority to contract such loans; and (3) there was
February 1995. IETTSI filed the petition with the collusion between the officials of Freeman, Inc. and
Supreme Court. Equitable Banking Corp. in securing the loans. The
motion to intervene was denied, and the petitioners
appealed to the Court of Appeals.
Issue:
Meanwhile, Equitable and Saw Chiao Lian entered
Whether the Philippine Football Federation has a
into a compromise agreement which they submitted to
corporate existence of its own. .
and was approved by the lower court. But because it
was not complied with, Equitable secured a writ of
execution, and two lots owned by Freeman, Inc. were
Ruling:
levied upon and sold at public auction to Freeman
Both RA 3135 (the Revised Charter of the Philippine Management and Development Corp.
Amateur Athletic Federation) and PD 604 recognized
the juridical existence of national sports associations. The Court of Appeals[1] sustained the denial of the
This may be gleaned from the powers and functions petitioners' motion for intervention, holding that "the
granted to these associations (See Section 14 of RA compromise agreement between Freeman, Inc.,
3135 and Section 8 of PD 604). The powers and through its President, and Equitable Banking Corp.
functions granted to national sports associations will not necessarily prejudice petitioners whose rights
indicate that these entities may acquire a juridical to corporate assets are at most inchoate, prior to the
personality. The power to purchase, sell, lease and dissolution of Freeman, Inc. x x x. And intervention
encumber property are acts which may only be done under Sec. 2, Rule 12 of the Revised Rules of Court
by persons, whether natural or artificial, with juridical is proper only when one's right is actual, material,
capacity. However, while national sports associations direct and immediate and not simply contingent or
may be accorded corporate status, such does not expectant."
automatically take place by the mere passage of
these laws. It is a basic postulate that before a It also ruled against the petitioners' argument that
corporation may acquire juridical personality, the because they had already filed a notice of appeal, the
State must give its consent either in the form of a trial judge had lost jurisdiction over the case and
special law or a general enabling act. The Philippine could no longer issue the writ of execution.
Football Federation did not come into existence upon
. that was being sued by the creditor bank.
the passage of these laws. Nowhere can it be found
in RA 3135 or PD 604 any provision creating the
Philippine Football Federation. These laws merely
Issue:
recognized the existence of national sports
associations and provided the manner by which these
entities may acquire juridical personality. Section 11
Ruling:
of RA 3135 and Section 8 of PD 604 require that
before an entity may be considered as a national The well-known rule that shareholders cannot
sports association, such entity must be recognized by ordinarily sue in equity to redress wrongs done to the
the accrediting organization, the Philippine, Amateur corporation, but that the action must be brought by
Athletic Federation under RA 3135, and the the Board of Directors, x x x has its exceptions. [If]
Department of Youth and Sports Development under the corporation [were] under the complete control of
PD 604. This fact of recognition, however, Henri Kahn the principal defendants, x x x it is obvious that a
failed to substantiate. A copy of the constitution and demand upon the Board of Directors to institute action
by-laws of the Philippine Football Federation does not and prosecute the same effectively would have been
prove that said Federation has indeed been useless, and the law does not require litigants to
recognized and accredited by either the Philippine perform useless acts.
Amateur Athletic Federation or the Department of
Youth and Sports Development. Accordingly, the Equitable demurs, contending that the collection suit
Philippine Football Federation is not a national sports against Freeman, Inc. and Saw Chiao Lian is
association within the purview of the aforementioned essentially in personam and, as an action against
laws and does not have corporate existence of its defendants in their personal capacities, will not
own. prejudice the petitioners as stockholders of the
corporation. The Everettcase is not applicable
______________ CASE ENDS HERE ___________
because it involved an action filed by the minority
stockholders where the board of directors refused to ETCI shares. Moreover, in 1964, ETCI had increased
bring an action in behalf of the corporation. In the its capital stock from Php40,000 to Php360,000; and
case at bar, it was Freeman, Inc. that was being sued in 1987, from Php360,000 to Php40,000,000.
by the creditor bank.
Equitable also argues that the subject matter of the Issue:

intervention falls properly within the original and
Whether or not the transfers in 1987 of the shares of
exclusive jurisdiction of the Securities and Exchange
stock to the new stockholders amount to a transfer of
Commission under P.D. No. 902-A. In fact, at the
ETCI’s franchise which needs congressional approval
time the motion for intervention was filed, there was
pursuant to RA 2090.
pending between Freeman, Inc. and the petitioners
SEC Case No. 03577 entitled "Dissolution,
Accounting, Cancellation of Certificate of Registration
with Restraining Order or Preliminary Injunction and
Appointment of Receiver." It also avers in its Ruling:
Comment that the intervention of the petitioners could
No. Section 10 of RA 2090 is directed to the grantee
have only caused delay and prejudice to the principal
of the franchise, which is the corporation itself and
parties
refers to a sale, lease or assignment of that franchise.
It does not include the transfer or sale of shares of
stock of a corporation by the latter’s stockholders.
WHEREFORE, the petition is DENIED, with costs
against the petitioners. It is so ordered.
The sale of shares of stock of a public utility is
______________ CASE ENDS HERE ___________
governed by another law, in section 20 (h) of the
Public Service Act (CA 146). Pursuant thereto, the
public service commission (now NTC) is the
Philippine Long Distance Telephone Co. vs
government agency vested with the authority to
National Telecommunications Commission
approve the transfer of more than 40% of the
190 SCRA 717 [GR No. 88404 October 18, 1990]
subscribed capital stock of a telecommunications
company to a single transferee.
Facts: In other words, transfer of shares of a public utility
corporation need only NTC approval, not
On June 22, 1958, Republic Act No. 2090, was
congressional authorization. What transpired in ETCI
enacted otherwise known as “An Act Granting Felix
were a series of transfers of shares starting in 1964
Alberto and Company, Incorporated, a franchise to
until 1987. The approval of the NTC may be deemed
establish radio stations for domestic and transoceanic
to have been met when it authorized the issuance of
telecommunications.” Felix Alberto & Co. Inc. was the
the provisional authority to ETCI. There was full
original corporate name, which was changed to ETCI
disclosure before the NTC of the transfers. In fact, the
with amendment of the articles of incorporation in
NTC order of November 12,1987 required ETCI to
1964. Much later, “CELLCOM Inc.” was the name
submit its present capital and ownership structure.
sought to be adopted before the Securities and
Further, ETCI even filed a motion before the NTC,
Exchange Commission, but this was withdrawn and
dated November 8, 1987 or more than a year prior to
abandoned.. On May 13, 1987, alleging urgent public
the grant of provisional authority, seeking approval of
need, ETCI filed an application with public respondent
the increase in its capital stock from Php360,000 to
NTC for the issuance of a certificate of public
Php40,000,000 and the stock transfers made by its
convenience and necessity to construct, install,
stockholders.
establish, operate, and maintain a cellular mobile
telephone system and an alpha numeric paging A distinction should be made between shares of
system in Metro Manila and in the Southern Luzon stock, which are owned by stockholders, the sale of
regions, with prayer for provisional authority to which requires only NTC approval, and the franchise
operate phase A of its proposal within Metro Manila. itself which is owned by the corporation as the
PLDT filed an opposition with motion to dismiss, grantee thereof, the sale or transfer of which requires
however NTC over ruled it. NTC granted ETC congressional sanction. Since stockholders own the
provisional authority to install, operate, and maintain a shares of stock, they may dispose of the same as
cellular mobile telephone system initially in Metro they see fit. They may not, however, transfer or
Manila subject to terms and conditions, one of which assign the property of a corporation, like its franchise.
is that ETCI and PLDT shall enter into an In other words, even if the original stockholders had
interconnection agreement for the provision of transferred their shares to another group of
adequate interconnection facilities between shareholders, the franchise granted to the corporation
applicant’s cellular mobile telephone switch and the subsists as long as the corporation as an entity,
public switched telephone network and shall jointly continues to exist. The franchise is not thereby
submit such interconnection agreement to the invalidated by the transfer of shares. A corporation
commission for approval ETCI admits that in 1964, has a personality separate and distinct from that of
the Albertos, as original owners of more than 40% of each stockholder. It has the right to continuity or
the outstanding capital stock sold their holdings to perpetual succession.
Orbes. In 1968, the Albertos reacquired the shares
______________ CASE ENDS HERE ___________
they had sold to the Orbes. In 1987, the Albertos sold
more than 40% of their shares to Horacio Yalung.
Thereafter, the present stockholders acquired their
Edward J. Nell Co. v. Pacific Farms Inc. ego of the Insular Farms negates such consolidation
or merger, for a corporation cannot be its own alter
G.R. No. L-20850, November 29, 1965
ego.
______________ CASE ENDS HERE ___________
FACTS:
On October 9, 1958, appellant secured in Civil Case
No. 58579 of the Municipal Court of Manila against
Insular Farms, Inc. — hereinafter referred to as San Juan Structural and Steel Fabricators, Inc. vs
Insular Farms a judgment for the sum of P1,853.80 — Court of Appeals
representing the unpaid balance of the price of a 296 SCRA 631 [GR No. 129459 September 29,
pump sold by appellant to Insular Farms — with 1998]
interest on said sum, plus P125.00 as attorney's fees
Facts:
and P84.00 as costs. A writ of execution, issued after
the judgment had become final, was, on August 14, Plaintiff-appellant San Juan structural and steel
1959, returned unsatisfied, stating that Insular Farms fabricators Inc.’s amended complaint alleged that on
had no leviable property. Soon thereafter, or on February 14, 1989, plaintiff-appellant entered into an
November 13, 1959, appellant filed with said court the agreement with defendant-appellee Motorich Sales
present action against Pacific Farms, Inc. — Corporation for the transfer to it of a parcel of land
hereinafter referred to as appellee — for the collection identified as lot 30, Block 1 of the Acropolis Greens
of the judgment aforementioned, upon the theory that Subdivision located in the district of Murphy, Quezon
appellee is the alter ego of Insular Farms, which City, Metro Manila containing an area of 414 sqm,
appellee has denied. In due course, the municipal covered by TCT no. 362909; that as stipulated in the
court rendered judgment dismissing appellant's agreement of February 14, 1i989, plaintiff-appellant
complaint. 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
The record shows that, on March 21, 1958, appellee Plaintiff-appellant corporation, wrote a letter to
purchased 1,000 shares of stock of Insular Farms for defendant-appellee Motorich Sales Corporation
P285,126.99; that, thereupon, appellee sold said requesting a computation for the balance to be paid;
shares of stock to certain individuals, who forthwith that said letter was coursed through the defendant-
reorganized said corporation; and that the board of appellee’s broker.
directors thereof, as reorganized, then caused its
Linda Aduca who wrote the computation of the
assets, including its leasehold rights over a public
balance; that on March 2, 1989, plaintiff-appellant was
land in Bolinao, Pangasinan, to be sold to herein
ready with the amount corresponding to the balance,
appellee for P10,000.00.
covered by Metrobank cashier’s check no. 004223
payable to defendant-appellee Motorich Sales
Corporation; that plaintiff-appellant and defendant-
ISSUE:
appellee were supposed to meet in the plaintiff-
Whether or not that the appellee, Pacific Farms is an appellant’s office but defendant-appellee’s treasurer,
alter ego of Insular Farms? Nenita Lee Gruenbeg did not appear; that defendant-
appelle despite repeated demands and in utter
disregard of its commitments had refused to execute
Ruling: the transfer of rights/deed of assignment which is
necessary to transfer the certificate of title; that
defendant ACL development corporation is impleaded
NO. as a necessary party since TCT no. 362909 is still in
the name of said defendant; while defendant VNM
We agree with the Court of Appeals that these facts
Realty and Development Corporation is likewise
do not prove that the appellee is an alter ego of
impleaded as a necessary party in view of the fact
Insular Farms, or is liable for its debts. The rule is set
that it is the transferor of the right in favor of
forth in Fletcher Cyclopedia Corporations, Vol. 15,
defendant-appellee Motorich Sales Corporation; that
Sec. 7122, pp. 160-161, as follows:
on April 6, 1989 defendant ACL Development
Generally where one corporation sells or otherwise Corporation and Motorich Sales Corporation entered
transfers all of its assets to another corporation, the into a deed of absolute sale whereby the former
latter is not liable for the debts and liabilities of the transferred to the latter the subject property; that by
transferor, except: (1) where the purchaser expressly reason of said transfer; the registry of deeds of
or impliedly agrees to assume such debts; (2) where Quezon City issued a new title in the name of
the transaction amounts to a consolidation or merger Motorich Sales Corporation, represented by
of the corporations; (3) where the purchasing defendant-appellee Nenita Lee Gruenbeg and
corporation is merely a continuation of the selling Reynaldo L. Gruenbeg, under TCT no. 3751; that as a
corporation; and (4) where the transaction is entered result of defendants-appellees Nenita and Motorich’s
into fraudulently in order to escape liability for such bad faith in refusing to execute a formal transfer of
debts. rights/deed of assignment, plaintiff-appellant suffered
moral and nominal damages which may be assessed
Neither is it claimed that these transactions have
against defendant-appellees in the sum of P500,000;
resulted in the consolidation or merger of the Insular
that as a result of an unjustified and unwarranted
Farms and appellee herein. On the contrary,
failure to execute the required transfer or formal deed
appellant's theory to the effect that appellee is an alter
of sale in favor of plaintiff-appellant, defendant-
appellees should be assessed exemplary damages in present case, however, the court finds no reason to
the sum of P100,000; that by reason of the said bad pierce the corporate veil of respondent Motorich.
faith in refusing to execute a transfer in favor of Petitioner utterly failed to establish the said
plaintiff-appellant the latter lost opportunity to corporation was formed, or that it is operated for the
construct a residential building in the sum of purpose of shielding any alleged fraudulent or illegal
P100,000 and that as a consequence of such bad activities of its officers or stockholders; or that the said
faith, it has been constrained to obtain the services of veil was used to conceal fraud, illegality or inequity at
counsel at an agreed fee of P100,000 plus the expense of third persons like petitioner.’
appearance fee of for every appearance in court
______________ CASE ENDS HERE ___________
hearings.
Issue: Whether or not the corporation’s treasurer act

can bind the corporation. G.R. No. 117660. December 18, 2000.*AGRO
CONGLOMERATES, INC. and MARIO SORIANO,
Whether or not the doctrine of piercing the veil of
petitioners, vs. THE HON. COURT OF APPEALS
corporate entity is applicable.
andREGENT SAVINGS and LOAN BANK, INC,
respondents.QUISUMBING, J.:
Ruling:
No. Such contract cannot bind Motorich, because it Facts:
never authorized or ratified such sale.
Petitioner Agro-Conglomerates, Inc. as vendor, sold
A corporation is a juridical person separate and two parcels of land to Wonderland Food
distinct from its stockholders or members. Industries,Inc. The vendor, the vendee, and
Accordingly, the property of the corporation is not the the respondent bank Regent Savings & Loan Bank,
property of the corporation is not the property of its executed anAddendum4 to the previous
stockholders or members and may not be sold by the Memorandum of Agreement. It provided, among
stockholders or members without express others, that the vendeeundertakes to pay the loan
authorization from the corporation’s board of procured in the name of the VENDOR, the VENDEE
directors. will be the one liable topay the entire proceeds thereof
including interest and other charges. Consequently,
Section 23 of BP 68 provides the Board of Directors
petitioner MarioSoriano signed as maker several
or Trustees – Unless otherwise provided in this code,
promissory notes,6 payable to the respondent bank.
the corporate powers of all corporations formed under
Thereafter, thebank released the proceeds of the loan
this code shall be exercised, all business conducted,
to petitioners. However, petitioners failed to
and all property of such corporations controlled and
meet theirobligations as they fell due Mario Soriano
held by the board of directors or trustees to be elected
manifested his intention to re-structure the loan, yet
from among the stockholders of stocks, or where
did notshow up nor submit his formal written request
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. .Issue:
As a general rule, the acts of corporate officers within Whether or not petitioner is liable as an
the scope of their authority are binding on the accommodation party.
corporation. But when these officers exceed their
authority, their actions, cannot bind the corporation,
unless it has ratified such acts as is estopped from Ruling:
disclaiming them.
By this time, we note a subsidiary contract of surety
Because Motorich had never given a written ship had taken effect since petitioners signed the
authorization to respondent Gruenbeg to sell its promissory notes as maker and accommodation party
parcel of land, we hold that the February 14, 1989 for the benefit of Wonderland. Petitioners became
agreement entered into by the latter with petitioner is liable as accommodation party. He has the right, after
void under Article 1874 of the Civil Code. Being paying the holder, to obtain reimbursement from the
inexistent and void from the beginning, said contract party accommodated, since the relation between
cannot be ratified. them has in effect become
The statutorily granted privilege of a corporate veil One of principal and surety, the accommodation party
may be used only for legitimate purposes. On being the surety. The surety’s liability to the Creditor
equitable consideration,the veil can be disregarded or promise of the principal is said to be direct, primary
when it is utilized as a shield to commit fraud, illegality and absolute; in other words, he is directly and
or inequity, defeat public convenience; confuse equally bound with the principal. And the creditor
legitimate issues; or serve as a mere alter ego or may proceed against any one of thesolidary debtors.
business conduit of a person or an instrumentality,
agency or adjunct of another corporation. An accommodation party is a person who has signed
the instrument as maker, acceptor, or indorser,
We stress that the corporate fiction should be set without receiving value therefor, and for the purpose
aside when it becomes a shield against liability for of lending his name to some other person and isliable
fraud, or an illegal act on inequity committed on third on the instrument to a holder for value,
person. The question of piercing the veil of corporate notwithstanding such holder at the time of taking the
fiction is essentially, then a matter of proof. In the
instrument knew (the signatory) to be an A corporation has a personality distinct and separate
accommodation party. from its individual stockholders or members. Being an
officer or stockholder of a corporation does not make
one’s property also of the corporation, and vice-versa,
______________ CASE ENDS HERE ___________ for they are separate entities. Share owners are in no
legal sense the owners corporate property which is
owned by the corporation as a distinct legal person.
Good Earth Emporium Inc. vs Court of Appeals As a consequence of the separate juridical personality
194 SCRA 544 [GR No. 82797 February 27, 1991] of a corporation, the corporate debt or credit is not the
debt or credit of the stockholder, nor is the
Facts: A lease contract, dated October 16, 1981, was
stockholder’s debt or credit that of the corporation.
entered into by and between Roces-Reyes Realty Inc.
as lessor, and Good Earth Emporium Inc. (GEE) as
lessee for a term of three years beginning November
______________ CASE ENDS HERE ___________
1, 1981 and ending October 31, 1984 at a monthly
rental of Php65,000. The building which was the
subject of the contract of lease is a five story building
Adelio C. Cruz vs Quiterio L. Dalisay
located at the corner of Rizal Avenue and Bustos
Street in Sta. Cruz, Manila. From March 1983 up to Adm. Matter No. R-181-P July 31, 1987
the complaint was filed, the lessee had defaulted in
the payment of rentals, as a consequence of which,
private respondent Roces-Reyes Realty Inc. filed on Facts:
October 14, 1984 an ejectment case against herein
A sworn complaint dated July 23, 1984 was filed by
petitioners, Good Earth Emporium Inc. and Lim Ka
Adelio Cruz charging Quiterio Dalisay, Senior Deputy
Ring. After the latter had tendered their responsive
Sheriff of Manila, with malfeasance in office, corrupt
pleading, the lower court on motion of Roces
practices and serious irregularities allegedly
rendered judgement on the pleadings dated April 17,
committed as follows:
1984 to which petitioners were ordered to vacate the
premises and surrender the same to the plaintiffs. On a. Respondent attached and/or levied the money
May 16, 1984, Roces filed a motion for execution belonging to complainant Cruz when he was not
which was opposed by petitioners on May 28, 1984 himself the judgment debtor in the final judgment of
simultaneous with the latter’s filing of a notice of an NLRC case sought to be enforced but rather the
appeal. However, on August 15, 1984, GEE thru company known as “Qualitrans Limousine Service,
counsel filed a motion to withdraw said appeal citing Inc.”; and
as reason that they are satisfied with the decision of
b. Respondent also caused the service of the alias
the lower court.
writ of execution upon complainant who is a resident
of Pasay City, despite knowledge that his territorial
jurisdiction covers Manila only and does not extend to
Issue:
Pasay City.
Whether or not the payment made by GEE to the
Respondent in his reply explained that when he
Roces brothers constitute payment to private
garnished complainant’s cash deposit at the Philtrust
respondent corporation which would result to the
bank he was merely performing a ministerial duty.
extinguishment of the obligation.
And that while it is true that said writ was addressed
to Qualitrans Limousine Service, Inc., it is also a fact
that complainant had executed an affidavit before the
Ruling:
Pasay City assistant fiscal stating that he is the
No. Under article 1240 of the civil code of the owner/ president of Qualitrans. Because of that
Philippines – Payment shall be made to the person in declaration, the counsel for the plaintiff in the labor
whose favor the obligation has been constituted, on case advised him to serve notice of garnishment on
his successor in interest or any person authorized to the Philtrust bank.
receive it.
In the case at bar, the supposed payments were not
Issue:
made to Roces-Reyes Realty Inc. or to its successors
in interest nor is there positive evidence that payment Whether or not the personal property of Cruz
was made to a person authorized to receive it. No (complainant) is properly levied or attached as owner
such proof was submitted but merely inferred by the of the corporation?
RTC from Marcos Roces having signed the lease
contract as President which was witnessed by Jesus
Marcos Roces. The later, however, was no longer
Ruling:
President or even an officer of the Roces-Realty Inc
at the time he received the money and signed the NO
sale with pacto de retro. He, in fact denied being in
Respondent’s actuation in enforcing a judgment
possession of authority to receive payment for the
against complainant who is not a judgment debtor in
respondent corporation nor does the receipt show that
the case calls for disciplinary action. What is
he signed in the same capacity as he did in the lease
incumbent upon respondent is to ensure that only the
contract at a time when he was President for
portion of a decision ordained or decreed in the
respondent corporation.
dispositive part should be the subject of the
execution. The tenor of the NLRC judgment and the
implementing writ is clear enough. It directed Whether or not the relations between Solidbank and
Qualitrans Limousine Service, Inc. in its judgment and LC Diaz, the depositor, is governed by quasi-delict in
not the owner thereof. determining the liability of Solidbank.
Respondent, however, choose to “pierce the veil of Ruling:

corporate entity” usurping a power belonging to the
No. Solidbank is liable for the loss of the P300k but
court and assumed improvidently that since the
it’s liability is grounded on culpa contractual.
complainant is the owner/president of Qualitrans
Limousine Service, Inc., they are one and the same. It The contract between the bank and its depositor is
is a well settled doctrine both in law and equity that as governed by the provisions of the Civil Code on
a legal entity, a corporation has a personality distinct simple loan (Article 1980, Civil Code). There is a
and separate from its individual stockholders or debtor-creditor relationship between the bank and its
members. depositor. The bank is the debtor and the depositor is
the creditor. The depositor lends the bank money and
the bank agrees to pay the depositor on
The mere fact that one is president of the corporation demand. The savings deposit agreement between
does not render the property he owns or possesses the bank and the depositor is the contract that
the property of the corporation, since that president, determines the rights and obligations of the parties.
as an individual, and the corporation are separate
Under their contract, it is the duty of LC Diaz to
entities.
secure its passbook. However, this duty is also
______________ CASE ENDS HERE ___________ applicable to Solidbank when it gains possession of
said passbook which it did when the messenger left it
to the bank’s possession through the bank’s teller.
CONSOLIDATED BANK V CA The act of the teller returning the passbook to
someone else other than Calapre, the firm’s
Facts:
authorized messenger, is a clear breach of contract.
L.C. Diaz and Company (LC Diaz), an accounting Such negligence binds the bank under the principle
firm, has a savings account with Consolidated Bank of respondeat superior or command responsibility.
and Trust Corporation (now called Solidbank
No contract of trust between bank and depositor
Corporation).
The Supreme Court emphasized that the contractual
On August 14, 1991, the firm’s messenger, a certain
relation between the bank and the depositor is that of
Ismael Calapre, deposited an amount with the bank
a simple loan. This is despite the wording of Section 2
but due to a long line and the fact that he still needs to
of Republic Act 8791 (The General Banking Law of
deposit a certain amount in another bank, the
2000) which states that the State recognizes the
messenger left the firm’s passbook with a teller of
“fiduciary nature of banking that requires high
Solidbank. But when the messenger returned, the
standards of integrity and performance.” That “the
passbook is already missing. Apparently, the teller
bank is under obligation to treat the accounts of its
returned the passbook to someone else.
depositors with meticulous care, always having in
On August 15, 1991, LC Diaz made a formal request mind the fiduciary nature of their relationship.”
ordering Solidbank not to honor any transaction
This fiduciary relationship means that the bank’s
concerning their account with them until the firm is
obligation to observe “high standards of integrity and
able to acquire a new passbook. It appears however
performance” is deemed written into every deposit
that in the afternoon of August 14, 1991, the amount
agreement between a bank and its depositor. The
of P300,000.00 was already withdrawn from the firm’s
fiduciary nature of banking requires banks to assume
account.
a degree of diligence higher than that of a good father
LC Diaz demanded Solidbank to refund the said of a family.
amount which the bank refused. LC Diaz then sued
However, the fiduciary nature of a bank-depositor
Solidbank.
relationship does not convert the contract between
In its defense, Solidbank contends that under their the bank and its depositors from a simple loan to a
banking rules, they are authorized to honor trust agreement, whether express or implied. Failure
withdrawals if presented with the passbook; that when by the bank to pay the depositor is failure to pay a
the P300k was withdrawn, the passbook was simple loan, and not a breach of trust.
presented. Further, the withdrawer presented a
In short, the General Banking Act simply imposes on
withdrawal slip which bore the signatures of the
the bank a higher standard of integrity and
representatives of LC Diaz.
performance in complying with its obligations under
The RTC ruled in favor of Solidbank. It found LC Diaz the contract of simple loan, beyond those required of
to be negligent in handling its passbook. The loss of non-bank debtors under a similar contract of simple
the P300k was not the result of Solidbank’s loan. The General Banking Law in no way modified
negligence. Article 1980 of the Civil Code.
On appeal, the Court of Appeals reversed the
decision of the RTC. The CA used the rules on quasi-
______________ CASE ENDS HERE ___________
delict (Article 2176 of the Civil Code).
ISSUE:
Sunio vs. NLRC [GR no. L-57767, January 31, does not apply where petitioner company took over
1984] ownership of a business after the respondents had
already accepted their separation pay from erstwhile
Facts:
owner of business without protest.
On July 30, 1973, EM Ramos & Company, Inc.
It cannot be justifiably said that the plant together with
(EMRACO) and Cabugao Ice Plant, Inc. (CIPI), sold
its staff and personnel from one ownership to another.
an ice plant to Rizal Development and Finance
No succession of employment rights and obligations
Corporation (RDFC). With a mortgage in favor of
can be said to have taken place between EMRACO-
EMRACO-CIPi to secure the payment of the balance
CIPI-VILLANUEVA, on one hand, and petitioners on
of the purchase price. By virtue of that sale,
the other.
EMRACO-CIPI terminated the services of all their
employees and paid them their separation pay. RDFC Petitioners eventually acquired possession by virtue
hired its own employees and operated the plant. Â· of the exercise of their right of redemption and of a
Months thereafter, RDFC sold the ice plant to mandatory injunction in their favor which ordered
petitioner, ILOCOS COMMERCIAL CORP. (ICC), Villanueva and any person found in the premises to
headed by its president and General manager, vacate. What is more, when EMRACO-CIPI sold ice
Petitioner Alberto Sunio. Petitioner also hired their plant to RDFC in 1973, private respondentsâ™
own employees as private respondent were no longer employment was terminated by Emraco-Cipi and they
in the plant. The sale was subject to the mortgage in were given their separation pay.
favor of EMRACO-CIPI.
During the 13 months, RDFC and petitioners were in
Both RDFC-ICC failed to pay the balance of the possession and operating the plant and hired their
purchase price. Subsequently, EMRACO-CIPI own employees, not the private respondents. Â·
instituted extra judicial foreclosure proceedings. Â· Further, Villanueva rehired private respondents which
The properties were sold at public auction and the are subject to a resolutory condition. The condition
highest bidder being EMRACO-CIPI. Then EMRACO- having arisen, the rights of private respondents who
CIPI sold the ice plant to NILO VILLANUEVA, subject claim under him must be deemed to have also
to right of redemption of RDFC. NILO rehired then ceased.
private respondents.
Private respondents can neither successfully invoke
RDFC redeemed the ice plant and EMRACO-CIPI security of tenure in their favor. Their tenure should
unable to turn over possession to RDFC which made not be reckoned from 1967 because they were
the latter to file a recovery of possession against already terminated in 1973. Â· Private respondents
EMRACO-CIPI with the CFI. Â· CFI ordered placing were only rehired in 1974 by Villanueva. Â·
RDFC in possession of the ice plant. EMRACO-CIPI Petitioners took over by judicial process in 1978 so
appealed to CA which denied the petition for lack of that private respondents had actually only four years
merit. of rehired employment with Villanueva, during which
period, petitioners fought hard against Villanueva to
RDFC and Petitioners finally obtained possession of
recover possession of the plant. Â· Insofar as
the ice plant. Which also ordered defendants or any
petitioners are concerned, there was n tenurial
person found in the premises to vacate and surrender
security to speak of that would entitle would entitle
the property in litigation. Petitioner did not re-employ
private respondents to reinstatement and backwages.
private respondent.
______________ CASE ENDS HERE ___________
PRIVATE RESPONDENTs filed complaints against
petitioners for illegal dismissal with the Regional
Office, Ministry of Labor and Employment.
REGIONAL DIRECTORâ™S DECISION: ICC and
alberto sunio are directed to reinstate the [G.R. No. 163981. August 12, 2005]
complainants to their former positions without loss of
CONSTRUCTION & DEVELOPMENT
seniority privilege and to pay their backwages . Sunio
CORPORATION OF THE PHILIPPINES (now
appealed to NLRC. NLRCâ™s Decision: affirmed
PHILIPPINE NATIONAL CONSTRUCTION
the Regional Directorâ™s decision and dismissed
CORPORATION), petitioner, vs. RODOLFO M.
the appeal for lack of merit. Reason: when the RDFC
CUENCA and MALAYAN INSURANCE CO.,
took possession of the property and private
INC., respondents.
respondents were terminated in 1973 the latter
already had a vested right to their security of tenure The Backdrop
and when they were rehired those rights continued.
Ultra International Trading Corporation (UITC) applied
Hence this petition before SC.
for a surety bond from Malayan Insurance Co., Inc.
ISSUE: (MICI), to guarantee its credits, indebtedness,
obligations and liabilities of any kind to Goodyear Tire
WHETHER PUBLIC RESPONDENT ACT WITH
and Rubber Company of the Philippines (Goodyear).
GRAVE ABUSE OF DISCRETION AMOUNTING TO
MICI approved the application and issued MICO Bond
LACK OF JURISDICTION IN ORDERING THE
No. 65734[2] for an amount not
REINSTATEMENT OF PRIVATE RESPONDENTS
exceeding P600,000.00. The surety bond was valid
AND THE PAYMENT OF THEIR BACKWAGES?
for 12 months, and was renewed several times, the
RULING: last time being on May 15, 1983.[3]
YES. To protect MICIs interests, UITC, Edilberto Cuenca,
and Rodolfo Cuenca, herein respondent, executed an
While a change of ownership or management is not a
Indemnity Agreement[4] in favor of MICI. Edilberto was
valid cause for termination of employment this rule
then the President, while Rodolfo was a member of said affiliated corporations, the Board under Res. No.
the Board of Directors of UITC. Edilberto signed the BD-59-77/78 made of record CDCPs assumption of
indemnity agreement in his official and personal all said guarantees and the liabilities and
capacity, while Rodolfo signed in his personal responsibilities arising therefrom. In the same vein,
capacity only. In the said agreement, UITC, Edilberto any guaranty fee that may be payable to said
and Rodolfo bound themselves jointly and severally to representatives shall accrue to CDCP.[18]
indemnify MICI of any payment it would make under
On August 26, 1983, UITC remitted to
the surety bond.
MICI P150,000.00 as partial payment of its obligation.
On February 18, 1983, Goodyear sent a letter[5] to [19]
Nonetheless, the parties failed to reach an
MICI informing it of UITCs default on its obligation. In amicable settlement of their respective claims.
the said letter, Goodyear requested MICI to
On January 6, 1994, the Regional Trial Court (RTC)
pay P600,000.00 under the surety bond. MICI sent
of Manila, Branch 51, rendered a decision holding
several demand letters to UITC, Edilberto and
UITC and PNCC, jointly and solidarily liable to MICI
Rodolfo, requiring them to immediately settle
under the indemnity agreement. The trial court ruled
Goodyears claim.[6] UITC, Edilberto and Rodolfo failed
that UITC was bound by the indemnity agreement
to settle the account with Goodyear. Thus, on April
entered into by its two officers, even though there was
25, 1983, MICI paid Goodyear P600,000.00.[7]
no board resolution specifically authorizing them to do
On May 3, 1983, MICI sent a demand letter to UITC, so because it had, in effect, ratified the acts of the
Edilberto and Rodolfo for reimbursement of the said officers. Moreover, UITC has acknowledged its
payment it made to Goodyear, plus legal interest. obligation to MICI in the letters it sent to the latter, and
[8]
UITC replied that Construction & Development when it had remitted P150,000.00 as partial payment.
Corporation of the Philippines (CDCP), now Philippine It also held PNCC solidarily liable with UITC on the
National Construction Corporation (PNCC), had basis of the board resolution attesting to the fact that
initiated a complete review of UITCs financial plans to PNCC had assumed all liabilities arising from the
enable it to pay its creditors, like MICI.[9] UITC was a guarantees made by its officers in other affiliated
subsidiary of petitioner PNCC,[10] with the latter corporations.[20] The trial court dismissed the
owning around 78% of the formers shares of stock. complaint as against the Cuencas. The dispositive
[11]
UITC requested MICI to delay the filing of any suit portion of the RTC decision reads:
against it, to give it time to work out an acceptable
WHEREFORE, in view of all the foregoing, judgment
repayment plan.[12] MICI agreed and gave UITC until
is hereby rendered in favor of plaintiff Malayan
May 20, 1983 to come up with an offer.[13]
Insurance Co., Inc. and against defendant ULTRA
However, UITC, Edilberto and Rodolfo still failed to and Third-Party defendant PNCC, ordering the latter
pay MICI. On July 1, 1983, MICI filed a to pay jointly and solidarily the former the following:
Complaint[14] for sum of money against UITC,
a) The sum of P600,000.00 but considering that
Edilberto and Rodolfo, praying for indemnity of the
defendant ULTRA had already advanced the amount
amount it paid to Goodyear, plus interest per annum
of P150,000.00 to plaintiff, their liability has then
compounded quarterly from April 25, 1983 until fully
reduced to the sum of P450,000.00 with legal interest
paid, and 20% of the amount involved as attorneys
from the date of the filing of the complaint until fully
fees and costs of the suit.
paid;
On July 23, 1983, UITC wrote MICI proposing the
b) The sum equivalent to 20% of all the amounts due
following:
and demandable as and for attorneys fees; and
a. Immediate payment of P150,000.00.
c) The costs of suit.
b. Balance payable P50,000.00 per month until the
The complaint against defendants Edilberto Cuenca
obligation is fully liquidated.
and Rodolfo Cuenca and their counter-claims are
c. Interest and penalty charges are to be waived.[15] hereby dismissed for lack of merit.
In the meantime, Rodolfo filed motion for leave to file SO ORDERED.[21]
a third-party complaint which the trial court granted.
[16] UITC and PNCC appealed the decision to the CA, but
The third-party complaint[17] against CDCP alleged
MICI did not. On October 28, 2003, the CA affirmed in
that it had assumed Rodolfos liability under the
toto the appealed decision.[22] The appellate court held
indemnity agreement as indicated in a board
that UITC had impliedly authorized Edilberto and
resolution. In support of this allegation, he presented
Rodolfo to procure the surety bond and the indemnity
in evidence a certification of Antonio Roque, Assistant
agreement; hence, UITC was liable. Moreover, UITC
Corporate Secretary of CDCP, attesting to the
was estopped from questioning Edilberto and
correctness of an excerpt from the minutes of the
Rodolfos authority to enter into the indemnity
Board of Directors meeting of January 10, 1978,
agreement in its behalf, considering that it had
which reads:
already partially paid P150,000.00 to MICI. The
GUARANTEE MADE BY CDCP appellate court added that Edilberto and Rodolfo,
REPRESENTATIVES IN OTHER CORPORATIONS having signed the indemnity agreement also in their
personal capacity, would ordinarily be personally
___________________________________________
liable under the said agreement; but because MICI
____________________
failed to appeal the decision, it had effectively waived
In fairness to the CDCP Board Members and/or its right to hold them liable on its claim.[23]
Officers who represent the Corporation in other
The CA further affirmed the trial courts finding that
affiliated corporations and who are made to sign
PNCC was liable under the indemnity agreement. The
jointly and severally guarantees for and in support of
appellate court noted that UITC was a subsidiary Article 2208 of the Civil Code when attorneys fees are
company of PNCC because the latter holds almost proper.[29]
78% of UITCs stocks. As such, UITC would purchase
For his part, respondent Cuenca reiterates that he is
materials from suppliers such as Goodyear, in behalf
not liable because the petitioner has already assumed
of PNCC. Finally, the CA held that the award of
his personal liability under the indemnity agreement,
attorneys fees was justified, considering that payment
as evidenced by a certification issued by the Assistant
of attorneys fees is specifically stated in the indemnity
Corporate Secretary attesting that CDCP Board
agreement.
Resolution No. BD-59-77/78 exists. He points out that
On June 3, 2004, the CA denied PNCCs motion for the petitioner has already admitted the due execution
reconsideration for lack of merit.[24] Hence, this petition and authenticity of the certification; hence, it cannot
for review, where the petitioner assigns the following now impugn the existence of the board resolution
errors: referred to therein.
I. Respondent Cuenca further argues that PNCC should
be liable because it was the one which benefited from
THE COURT OF APPEALS GRAVELY ERRED IN
the transaction, having received the materials
FINDING PETITIONER PNCC, JOINTLY AND
purchased from Goodyear; he did not derive any
SEVERALLY, LIABLE WITH ULTRA FOR THE
benefit from it. He emphasizes that the petitioners
INDEMNIFICATION AMOUNT REIMBURSABLE TO
liability arose out of its voluntary assumption of the
RESPONDENT MALAYAN AND IN EXEMPTING
liabilities of the guarantors under the indemnity
RESPONDENT RODOLFO CUENCA FROM ANY
agreement, and not from the fact that it is the majority
LIABILITY THEREFOR.
stockholder of UITC. Finally, he asserts that the CAs
II. decision holding UITC and the petitioner solidarily
liable for the payment of attorneys fees had factual
THE COURT OF APPEALS GRAVELY ERRED IN
and legal basis.[30]
FINDING PETITIONER PNCC, JOINTLY AND
SEVERALLY, LIABLE WITH ULTRA FOR THE On the other hand, respondent MICI avers that the
PAYMENT OF ATTORNEYS FEES AND COSTS OF petition is fatally defective for failure to implead as co-
SUIT.[25] respondent, UITC, an indispensable party to the case.
It, likewise, asserts that the petition raises no new
The sole issue in this petition is whether or not the
issues of law, and that the CA and the trial court have
petitioner is jointly and solidarily liable with UITC, a
amply ruled upon the issues raised in the petition.
subsidiary corporation, to respondent MICI under the
Further, MICI contends that, since the petitioner has
indemnity agreement for reimbursement, attorneys
assumed the liability of the UITC officers, it cannot
fees and costs.
now invoke the doctrine of separate personality.[31]
The petitioner maintains that it cannot be held liable
The petition is impressed with merit.
under the indemnity agreement primarily because it
was not a party to it. Likewise, it cannot answer for At the outset, we note that the petitioner became a
UITCs liability under the indemnity agreement merely party to this case only when respondent Cuenca, as
because it is the majority stockholder of UITC. It defendant, filed a third-party complaint against it on
maintains that it has a personality separate and the allegation that it had assumed his liability. Section
distinct from that of UITC; hence, it cannot be held 11, Rule 6 of the Rules of Court defines a third-party
liable for the latters obligations. The mere fact that the complaint as follows:
materials purchased from Goodyear were delivered to
SEC. 11. Third (fourth, etc.)-party complaint. A third
it does not warrant the piercing of the corporate veil
(fourth, etc.)-party complaint is a claim that a
so as to treat the two corporations as one entity,
defending party may, with leave of court, file against a
absent sufficient and clear showing that it was
person not a party to the action, called the third
purposely used as a shield to defraud creditors.[26]
(fourth, etc.)-party defendant, for contribution,
Further, the petitioner asserts that respondent indemnity, subrogation or any other relief, in respect
Cuencas claim that it has assumed his personal of his opponents claim.
liability under the indemnity agreement is unfounded.
In Firestone Tire and Rubber Company of the
It assails the reliability of Exhibit 5, the certification
Philippines v. Tempongko,[32] we emphasized the
attesting to the existence of the board resolution,
nature of a third-party complaint, particularly its
wherein the petitioner allegedly assumed the personal
independence from the main case:
guarantee of respondent Cuenca. The petitioner
avers that the certification is a mere excerpt of the The third-party complaint is, therefore, a procedural
alleged board resolution. It points out that even the device whereby a third party who is neither a party
CA did not rely on this certification when it held that nor privy to the act or deed complained of by the
the Cuencas should be liable, but were absolved of plaintiff, may be brought into the case with leave of
their liabilities because MICI had waived the cause of court, by the defendant, who acts as third-party
action against them.[27] Assuming that it has assumed plaintiff to enforce against such third-party defendant
the liability of respondent Cuenca, such liability is now a right for contribution, indemnity, subrogation or any
extinguished after MICI waived its claim against the other relief, in respect of the plaintiffs claim. The third-
said respondent.[28] party complaint is actually independent of and
separate and distinct from the plaintiffs
Finally, the petitioner asserts that there is no basis for
complaint. Were it not for this provision of the Rules of
the payment of attorneys fees and costs of suit. It was
Court, it would have to be filed independently and
not a party to the indemnity agreement and the case
separately from the original complaint by the
does not fall under the instances enumerated under
defendant against the third-party. But the Rules
permit defendant to bring in a third-party defendant or legal entity to which it may be related. [38] The veil of
so to speak, to litigate his separate cause of action in corporate fiction may only be disregarded in cases
respect of plaintiffs claim against a third party in the where the corporate vehicle is being used to defeat
original and principal case with the object of avoiding public convenience, justify a wrong, protect fraud, or
circuitry of action and unnecessary proliferation of defend a crime.[39] Mere ownership by a single
lawsuits and of disposing expeditiously in one stockholder or by another corporation of all or nearly
litigation the entire subject matter arising from one all of the capital stock of a corporation is not of itself
particular set of facts. When leave to file the third- sufficient ground for disregarding the separate
party complaint is properly granted, the Court renders corporate personality.[40] To disregard the separate
in effect two judgments in the same case, one on the juridical personality of a corporation, the wrongdoing
plaintiffs complaint and the other on the third-party must be clearly and convincingly established.[41]
complaint. When he finds favorably on both
Neither can the petitioner be made liable under the
complaints, as in this case, he renders judgment on
indemnity agreement on the ground that it had
the principal complaint in favor of plaintiff against
assumed the personal liability of respondent Cuenca.
defendant and renders another judgment on the third-
To reiterate, the decision of the CA dismissing the
party complaint in favor of defendant as third-party
case against respondent Cuenca has already become
plaintiff, ordering the third-party defendant to
final and executory. The Court has, likewise, pointed
reimburse the defendant whatever amount said
out that respondent Cuenca impleaded the petitioner
defendant is ordered to pay plaintiff in the
as a remedy over, and not as one directly liable to
case. Failure of any of said parties in such a case to
MICI. Since the petitioners liability is grounded on that
appeal the judgment as against him makes such
of respondent Cuencas, it is imperative that the latter
judgment final and executory.[33]
be first adjudged liable to MICI before the petitioner
It follows then that the plaintiff in the main action may may be held liable. Indeed, the Court ruled in Samala
not be regarded as a party to the third-party v. Victor,[42] thus:
complaint;[34] nor may the third-party defendant be
It is not indispensable in the premises that the
regarded as a party to the main action. As for the
defendant be first adjudged liable to the plaintiff
defendant, he is party to both the main action and the
before the third-party defendant may be held liable to
third-party complaint but in different capacities in the
the plaintiff, as precisely, the theory of defendant is
main action, he is the defendant; in the third-party
that it is the third party defendant, and not he, who is
complaint, he is the plaintiff.
directly liable to plaintiff. The situation contemplated
In the present case, the petitioner PNCC which was by appellants would properly pertain to situation (a)
the third-party defendant appealed before this Court above wherein the third party defendant is being sued
from the decision of the CA. Case law is that if only for contribution, indemnity or subrogation, or simply
the third-party defendant files an appeal, the decision stated, for a defendants remedy over.[43]
in the main case becomes final.[35] Therefore, the CAs
WHEREFORE, premises considered, the petition is
decision in the main action, holding UITC liable to
GRANTED. The decision of the Court of Appeals is
MICI and dismissing the case as against the
MODIFIED in that petitioner PNCC is absolved from
Cuencas, became final and executory when none of
any liability under the indemnity agreement. The third-
the said parties filed an appeal with this Court.
party complaint against the petitioner is DISMISSED
We do not agree with the CA ruling that the petitioner for lack of merit.
is liable under the indemnity agreement. On this point,
SO ORDERED.
the CA ratiocinated that the petitioner is liable,
considering that it is the majority stockholder of UITC ______________ CASE ENDS HERE ___________
and the materials from Goodyear were purchased by
UITC for and in its behalf.
This is clearly erroneous. The petitioner cannot be
made directly liable to MICI under the indemnity g.R. No. 180036 January 16, 2013
agreement on the ground that it is UITCs majority
SITUS DEV. CORPORATION, DAILY
stockholder. It bears stressing that the petitioner was
SUPERMARKET, INC. and COLOR LITHOGRAPH
not a party defendant in the main action. MICI did not
PRESS, INC.,Petitioners,
assert any claim against the petitioner, nor was the
vs.
petitioner impleaded in the third-party complaint on
ASIATRUST BANK, ALLIED BANKING
the ground of its direct liability to MICI. In the latter
CORPORATION, METROPOLITAN BANK AND
case, it would be as if the third-party defendant was
TRUST COMPANY and CAMERON GRANVILLE II
itself directly impleaded by the plaintiff as a
ASSET MANAGEMENT, INC.
defendant.[36] In the present case, petitioner PNCC
("CAMERON"), Respondents.
was brought into the action by respondent Cuenca
simply for a remedy over.[37] No cause of action was RESOLUTION
asserted by MICI against it. The petitioners liability
SERENO, CJ.:
could only be based on its alleged assumption of
respondent Cuencas liability under the indemnity For resolution is the Motion for Reconsideration 1 of
agreement. our 25 July 2012 Decision2 in the case involving
petitioners herein, Situs Development Corporation,
In any case, petitioner PNCC, as majority stockholder,
Daily Supermarket, Inc. and Color Lithographic Press,
may not be held liable for UITCs obligation. A
Inc.
corporation, upon coming into existence, is invested
by law with a personality separate and distinct from Most of the arguments raised by petitioners are too
those persons composing it as well as from any other insubstantial to merit our consideration or are merely
rehashed from their previous pleadings and have such enforcement is by court action or otherwise,
already been passed upon by this Court. However, against the debtor, its guarantors and sureties not
certain issues merit a brief discussion, to wit: solidarily liable with the debtor."7 Nowhere in the
Interim Rules is the rehabilitation court authorized to
1. That the properties belonging to petitioner
suspend foreclosure proceedings against properties
corporations’ majority stockholders may be included
of third-party mortgagors. In fact, we have expressly
in the rehabilitation plan pursuant to Metropolitan
ruled in Pacific Wide Realty and Development Corp.
Bank and Trust Company v. ASB Holdings, Inc.3 (the
v. Puerto Azul Land, Inc.8 that the issuance of a Stay
Metrobank Case);
Order cannot suspend the foreclosure of
2. That the subject properties should be included in accommodation mortgages. Whether or not the
the ambit of the Stay Order by virtue of the provisions properties subject of the third-party mortgage are
of the Financial Rehabilitation and Insolvency Act of used by the debtor corporation or are necessary for
2010 (FRIA), which should be given a retroactive its operation is of no moment, as the Interim Rules do
effect; and not make a distinction. To repeat, when the Stay
Order was issued, the rehabilitation court was only
3. That Allied Bank and Metro Bank were not the
empowered to suspend claims against the debtor, its
owners of the mortgaged properties when the Stay
guarantors, and sureties not solidarily liable with the
Order was issued by the rehabilitation court.
debtor. Thus, it was beyond the jurisdiction of the
On the first issue, petitioners incorrectly argue that the rehabilitation court to suspend foreclosure
properties belonging to their majority stockholders proceedings against properties of third-party
may be included in the rehabilitation plan, because mortgagors.
these properties were mortgaged to secure
The third issue, therefore, is
petitioners’ loans. In support of their argument, they
immaterial.1âwphi1 Whether or not respondent banks
cite a footnote appearing in the Metrobank Case,
had acquired ownership of the subject properties at
which states:4
the time of the issuance of the Stay Order, the same
In their petition for rehabilitation, the corporations conclusion will still be reached. The subject properties
comprising the ASB Group of Companies alleged that will still fall outside the ambit of the Stay Order issued
their allied companies … have joined in the said by the rehabilitation court.
petition ‘because they executed mortgages and/or
Since the subject properties are beyond the reach of
pledges over their real and personal properties to
the Stay Order, and since foreclosure and
secure the obligations of petitioner ASB Group of
consolidation of title may no longer be stalled,
Companies. Further, (they) agreed to contribute, to
petitioners’ rehabilitation plan is no longer feasible.
the extent allowed by law, some of their specified
We therefore affirm our earlier finding that the
properties and assets to help rehabilitate petitioner
dismissal of the Petition for the Declaration of State of
ASB Group of Companies.’ (Rollo, pp. 119-120)
Suspension of Payments with Approval of Proposed
A reading of the footnote shows that it is not a ruling Rehabilitation Plan is in order.
on the propriety of the joinder of parties; rather, it is a
WHEREFORE, the Court resolves to DENY WITH
statement of the fact that the afore-quoted allegation
FINALITY the instant Motion for Reconsideration for
was made in the petition for rehabilitation in that case.
lack of merit. No further pleadings shall be
On the second issue, petitioners argue that the trial entertained. Let entry of judgment be made in due
court was correct in including the subject properties in course.
the ambit of the Stay Order. Under the FRIA, the Stay
SO ORDERED.
Order may now cover third-party or accommodation
mortgages, in which the "mortgage is necessary for ______________ CASE ENDS HERE ___________
the rehabilitation of the debtor as determined by the
court upon recommendation by the rehabilitation
receiver."5 The FRIA likewise provides that its MR Holdings, Ltd. vs Sheriff Carlos Bajar
provisions may be applicable to further proceedings in
pending cases, except to the extent that, in the
opinion of the court, their application would not be Marcopper Mining Corporation was unable to pay its
feasible or would work injustice.6 loans from the Asian Development Bank (ADB). Later,
ADB transferred all its rights to collect from
Sec. 146 of the FRIA, which makes it applicable to "all
Marcopper to MR Holdings, Ltd. In order to pay MR
further proceedings in insolvency, suspension of
Holdings, Marcopper assigned all its assets to MR
payments and rehabilitation cases x x x except to the
Holdings and executed therefor a Deed of
extent that in the opinion of the court their application
Assignment in MR Holdings favor.
would not be feasible or would work injustice," still
presupposes a prospective application. The wording Meanwhile, another creditor of Marcopper, Solidbank
of the law clearly shows that it is applicable to all Corporation, won a case against Marcopper. The
further proceedings. In no way could it be made court then issued a writ of execution directing Sheriff
retrospectively applicable to the Stay Order issued by Carlos Bajar to levy Marcopper’s assets.
the rehabilitation court back in 2002. MR Holdings then filed an opposition asserting that it
At the time of the issuance of the Stay Order, the is now the owner of Marcopper’s assets hence, Bajar
rules in force were the 2000 Interim Rules of cannot levy them. The lower court denied MR
Procedure on Corporate Rehabilitation (the "Interim Holdings on the ground that the Deed of Assignment
Rules"). Under those rules, one of the effects of a was made in bad faith and that MR Holdings was a
Stay Order is the stay of the "enforcement of all foreign corporation doing business without a license
claims, whether for money or otherwise and whether in the Philippines (by virtue of the Deed of
Assignment) and as such cannot sue in the declared that the revocation of the SDP must, by
Philippines. application of the operative fact principle, give way to
the right of the original 6,296 qualified farmworkers-
beneficiaries (FWBs) to choose whether they want to
ISSUE: Whether or not MR Holdings may sue on this remain as HLI stockholders or [choose actual land
particular transaction. distribution]. It thus ordered the Department of
Agrarian Reform (DAR) to “immediately schedule
meetings with the said 6,296 FWBs and explain to
HELD: Yes. The Supreme Court emphasized the them the effects, consequences and legal or practical
following rules when it comes to foreign corporations implications of their choice, after which the FWBs will
doing business here in the Philippines: be asked to manifest, in secret voting, their choices in
1. if a foreign corporation does the ballot, signing their signatures or placing their
business in the Philippines without a license, thumbmarks, as the case may be, over their printed
it cannot sue before the Philippine courts; names.”
2. if a foreign corporation is not doing
business in the Philippines, it needs no license to The parties thereafter filed their respective
sue before Philippine courts on an isolated motions for reconsideration of the Court decision.
transaction or on a cause of action entirely
independent of any business transaction; ISSUE:
3. if a foreign corporation does Should the ruling in the July 5, 2011 Decision that the
business in the Philippines with the required license, qualified FWBs be given an option to remain as
it can sue before Philippine courts on any transaction. stockholders of HLI be reconsidered?
Being a mere assignee does not constitute “doing

business” in the Philippines. MR Holdings, a foreign RULING:
corporation, cannot be said to be doing business
simply because it became an assignee of Marcopper. YES, the ruling in the July 5, 2011 Decision that
MR Holdings was not doing anything else other than the qualified FWBs be given an option to remain
being a mere assignee. The only time that MR as stockholders of HLI should be reconsidered.
Holdings is considered to be doing business here is
that if it continues the business of Marcopper – which
it did not. [The Court reconsidered its earlier decision
that the qualified FWBs should be given an option to
Therefore, since it is not doing business here, remain as stockholders of HLI, inasmuch as these
pursuant to the rules above, it can sue without any qualified FWBs will never gain control [over the
license before Philippine courts on an isolated subject lands] given the present proportion of
transaction or on a cause of action entirely shareholdings in HLI. The Court noted that the share
independent of any business transaction. of the FWBs in the HLI capital stock is [just] 33.296%.
Anent the issue of bad faith, the same was not Thus, even if all the holders of this 33.296%
proven. It appears that the deed of assignment was unanimously vote to remain as HLI stockholders,
an earlier agreement incidental to the loan agreement which is unlikely, control will never be in the hands of
between ADB and Marcopper which precedes the the FWBs. Control means the majority of [sic] 50%
action brought by Solidbank against Marcopper. plus at least one share of the common shares and
other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will
______________ CASE ENDS HERE ___________ constitute the majority is 295,112,101 shares
(590,554,220 total HLI capital shares divided by 2
plus one [1] HLI share). The 118,391,976.85 shares
Hacienda Luisita Inc. (HLI) v. Presidential Agrarian subject to the SDP approved by PARC substantially
Reform Council (PARC), et al., G.R. No. 171101, fall short of the 295,112,101 shares needed by the
November 22, 2011 FWBs to acquire control over HLI.]
I. THE FACTS ______________ CASE ENDS HERE ___________
On July 5, 2011, the Supreme Court en banc

voted unanimously (11-0) to DISMISS/DENY the Hi-Cement Corp. V. Insular Bank (2007)
petition filed by HLI and AFFIRM with
MODIFICATIONS the resolutions of the PARC
revoking HLI’s Stock Distribution Plan (SDP) and FACTS:
placing the subject lands in Hacienda Luisita under
compulsory coverage of the Comprehensive Agrarian  Enrique Tan and Lilia Tan (spouses Tan)
Reform Program (CARP) of the government. were the controlling stockholders of E.T. Henry &
Co., Inc. (E.T. Henry), a company engaged in the
The Court however did not order outright land business of processing and distributing bunker
distribution. Voting 6-5, the Court noted that there are fuel.
operative facts that occurred in the interim and which  E.T. Henry's customers were Hi-Cement
the Court cannot validly ignore. Thus, the Court Corporation (Hi-Cement), Riverside Mills
Corporation (Riverside) and Kanebo Cosmetics
Philippines, Inc. (Kanebo) who issued postdated Macris was later renamed as the National Realty
checks for their purchases Development Corporation (Naredeco) and eventually
 Sometime in 1979: Insular Bank of Asia and merged with the National Warehousing Corporation
America (turned PCIB then Equitable PCI-Bank) (Nawaco) to form the new PNB subsidiary, the PNB-
granted E.T. Henry a credit facility known as Madecor.
“Purchase of Short Term Receivables.” (re-
PNEI applied with the Securities and Exchange
discounting arrangement)
Commission (SEC) for suspension of payments. A
 Through this, E.T. Henry was able to
management committee was thereafter created which
encash, with pre-deducted interest, the postdated
recommended to the SEC the sale of the company
checks of its clients.
through privatization. As a cost-saving measure, the
 For every transaction, E.T. Henry had
committee likewise suggested the retrenchment of
to execute a promissory note and a deed of
several PNEI employees. Eventually, PNEI ceased its
assignment
operation. Along with the cessation of business came
 1979-1981: E.T. Henry was able to re-
the various labor claims commenced by the former
discount its clients' checks
employees of PNEI where the latter obtained
 February 1981: 20 checks of Hi-Cement
favorable decisions.
(which were crossed and which bore the
restriction “deposit to payee’s account only”) were Labor Arbiter issued the Sixth Alias Writ of
dishonored. So were the checks of Riverside and Execution commanding the NLRC Sheriffs to levy on
Kanebo. the assets of PNEI due to its former employees. The
 Bank filed a complaint for sum of money in sheriffs were likewise instructed to proceed
CFI against E.T. Henry, the spouses Tan, Hi- against PNB, PNB-Madecor and Mega Prime. In
Cement (including its general manager and its implementing the writ, the sheriffs levied upon the four
treasurer as signatories of the postdated crossed valuable pieces of real estate owned by PNB-
checks), Riverside and Kanebo Madecor. PNB, PNB-Madecor and Mega Prime filed
 CA Affirmed RTC: Ordering E.T. Henry, motion to quash the writ and third-party claims.
spouses Tan, Hi-Cement, Riverside and Kanebo,
Labor Arbiter declared that the subject Pantranco
jointly and severally, to pay bank damages
properties were owned by PNB-Madecor. It being a
represented by the face value of the postdated
corporation with a distinct and separate personality,
checks plus interests, services, charges and
its assets could not answer for the liabilities of PNEI.
penalties until fully paid
Considering, however, that PNB-Madecor executed a
 G.R. 132403: RTC & CA
promissory note in favor of PNEI for P7,884,000.00,
 Hi-Cement authorized its general
the writ of execution to the extent of the said amount
manager and treasurer to issue the subject
was concerned was considered valid.
postdated crossed checks
 Hi-Cement was already estopped PNB’s third-party claim – to nullify the writ on the
from denying such authority since it never ground that it has an interest in the Pantranco
objected to the signatories' issuance of all properties being a creditor of PNB-Madecor, – on the
previous checks to E.T. Henry other hand, was denied because it only had an
 inchoate interest in the properties.
On appeal to the NLRC, the same was denied and
ISSUE:
the Labor Arbiter’s disposition was affirmed. MR
denied.
W/N Hi-Cement can still be made liable for the checks
– NO In view of the P7,884,000.00 debt of PNB-Madecor to
PNEI, an auction sale was conducted over the
the drawer of the postdated crossed Pantranco properties to satisfy the claim of the PNEI
checks was not liable to the holder who employees, wherein CPAR Realty was adjudged as
was deemed not a holder in due course the highest bidder
 may recover from the party who
On appeal, CA rule in favor of Respondents upholding
indorsed/encashed the checks “if
the separate and distinct personalities of Rs from
the latter has no valid excuse for
PNEI. As such, there being no cogent reason to
refusing payment - E.T. Henry had
pierce the veil of corporate fiction. MR denied.
no justification to refuse payment,
it should pay ISSUE: Whether former PNEI employees can attach
the properties of PNB, PNB-Madecor and Mega
______________ CASE ENDS HERE ___________ Prime to satisfy their unpaid labor claims against
PNEI.
DECISION: No. First, the subject property is not
PEA-PTGWO vs NLRC
owned by the judgment debtor, that is, PNEI. Second,
FACTS: Gonzales family owned two (2) PNB, PNB-Madecor and Mega Prime are
corporations, namely, the PNEI and Macris Realty corporations with personalities separate and distinct
Corporation (Macris). PNEI provided transportation from that of PNEI.
services to the public. They incurred huge financial
The general rule is that a corporation has a
losses and creditors took over the management of
personality separate and distinct from those of its
PNEI and Maricris. Full ownership was transferred to
stockholders and other corporations to which it may
one of their creditors, the National Investment
be connected. This is a fiction created by law for
Development Corporation (NIDC), a subsidiary of the
convenience and to prevent injustice.
PNB
Clearly, what can be inferred from the earlier cases is dependent on GCC on its business operations.
that the doctrine of piercing the corporate veil applies However, GCC claims that it has no liability on the
only in three (3) basic areas, namely: payment of stocks, being a separate entity from
Equity.
1) defeat of public convenience as when the
corporate fiction is used as a vehicle for the evasion
of an existing obligation;
Issue:
2) fraud cases or when the corporate entity is used to
The issue in this case is whether or not the doctrine of
justify a wrong, protect fraud, or defend a crime; or
piercing the veil of corporate fiction be applied to
3) alter ego cases, where a corporation is merely a Equity Corporation? Or in other words, whether Equity
farce since it is a mere alter ego or business conduit and GCC should both be regarded merely as an
of a person, or where the corporation is so organized aggregate of persons doing business enterprise?
and controlled and its affairs are so conducted as to
make it merely an instrumentality, agency, conduit or
adjunct of another corporation. In the absence of Court Ruling:
malice, bad faith, or a specific provision of law making
The Court held that the corporate veil of Equity
a corporate officer liable, such corporate officer
Corporation be pierced.
cannot be made personally liable for corporate
liabilities. The Court cites three basic areas where piercing the
veil of corporate fiction is allowed.
Assuming arguendo, that PNB may be held liable for
the debts of PNEI, petitioners still cannot proceed First, when it is used to defeat public convenience to
against the Pantranco properties, the same being evade existing operations or “equity piercing”
owned by PNB-Madecor, notwithstanding the fact that
second, in fraud cases where it is used to justify a
PNB-Madecor was a subsidiary of PNB. The general
wrong or “fraud piercing”
rule remains that PNB-Madecor has a personality
separate and distinct from PNB. The mere fact that a and third, in alter ego cases where the corporation is
corporation owns all of the stocks of another organized as to make it merely an instrumentality
corporation, taken alone, is not sufficient to agency.
justify their being treated as one entity. If used to
In this case, the Court has the right to pierce GCC’s
perform legitimate functions, a subsidiary’s
corporate veil because evidence point to the following
separate existence shall be respected, and the
facts: first, Equity is but an instrumentality of GCC and
liability of the parent corporation as well as the
has always been dependent on the latter for its
subsidiary will be confined to those arising in
operations, second, the commonality of directors,
their respective businesses.
stockholders and sharing of office between the two
companies shows that they should clearly be
regarded merely as an aggregate of persons in a
______________ CASE ENDS HERE ___________
business enterprise; third, the establishment of Equity
is primarily for GCC to circumvent Central Bank rules
specifically the Anti-Usury Law, using it as a conduit
GENERAL CREDIT V ALSONS DEV
to its non-quasi bank affiliates; and lastly, the funds
invested by Equity to GCC franchises are from GCC
funds as well.
Facts:
Applying the three basic areas of corporate veil
Petitioner General Credit Corporation (GCC), formerly
piercing, GCC clearly defeated public convenience
known as Commercial Credit Corporation (CCC),
when it established Equity to extend credit to its
established CCC franchise companies in urban areas
investors which in turn is not allowed by the law; it
around the country.
justified a wrong by fraudulently evading the Anti-
To further its business, it secured a license before the Usury Law established by the Central Bank to quasi-
Central Bank (CB) and the Securities and Exchange banking businesses, and lastly, Equity was but a
Commission (SEC) to also engage in quasi-banking mere instrumentality of GCC for it to get away with its
activities. obligations.
On the other hand, respondent CCC Equity ______________ CASE ENDS HERE ___________
Corporation (Equity) was established by GCC to take
over the operations of their franchises.
SPS. LIPAT V. PACIFIC BANKING CORPORATION
Meanwhile, respondent Alsons Development (Alsons)
(G.R. NO. 142435)
and the Alcantara family owned a total of 101,953
shares of GCC franchises. The Alcantara family Facts:
assigned its rights and interests of its shares to
Petitioner spouses Lipat owned Bela’s Export Trading
Alsons, making the latter the sole owner of the total
(BET) a single proprietorship engaged in the
shares.
manufacture of garments for domestic and foreign
Eventually, Alsons decided to sell these shares to consumption. The spouses by virtue of an SPA
Equity, which the latter promised to pay. Because of appointed and authorized their daughter to obtain
Equityâ™s failure to pay, Alsons then filed a loan from respondent Pacific Bank. A loan was
complaint for sums of money against Equity and secured and as security therefore a REM was
GCC. Equity claims that GCC should be liable for the executed over the property of the spouses. Sometime
payment of shares since it has always been after, BET was incorporated into a family corporation
named Bela’s Export Corporation (BEC) and the loan Hence the present petition, based on the following
was restructured in its name. Subsequent loans were arguments:
obtained in behalf of BEC all secured by the previous
I.
REM. BEC defaulted in its payments which led to the
foreclosure and sale of the mortgaged property. The THE COURT OF APPEALS SERIOUSLY ERRED
spouses moved to annul the sale alleging that BEC is WHEN IT AFFIRMED THE DECISION OF THE
a distinct and separate personality from them and that TRIAL COURT THAT PETITIONER DASSAD DID
the REM was executed only to secure BET’s loan. NOT EXERCISE THE DILIGENCE OF A GOOD
Both trial court and CA ruled to pierce the corporate FATHER OF A FAMILY IN THE SELECTION AND
veil to hold petitioner spouses liable for BEC’s SUPERVISION OF ITS EMPLOYEES WHICH IS
obligations. NOT IN ACCORDANCE WITH ARTICLE 2180 OF
Issue: THE NEW CIVIL CODE AND RELATED
JURISPRUDENCE ON THE MATTER.
Whether or not the doctrine of piercing the veil of
corporate fiction is applicable in this case. Ruling:
Ruling: YES. Based on the foregoing provisions, when an injury is
caused by the negligence of an employee, there
We find that the evidence on record demolishes,
instantly arises a presumption that there was
rather than buttresses, petitioners’ contention that
negligence on the part of the employer either in the
BET and BEC are separate business entities. Note
selection of his employee or in the supervision over
that Estelita Lipat admitted that she and her husband,
him after such selection.
Alfredo, were the owners of BET and were two of the
incorporators and majority stockholders of BEC. It is The presumption, however, may be rebutted by a
also undisputed that Estelita Lipat executed a special clear showing on the part of the employer that it
power of attorney in favor of her daughter, Teresita, to exercised the care and diligence of a good father of a
obtain loans and credit lines from Pacific Bank on her family in the selection and supervision of his
behalf. Incidentally, Teresita was designated as employee. Hence, to evade solidary liability for quasi-
executive-vice president and general manager of both delict committed by an... employee, the employer
BET and BEC, respectively. must adduce sufficient proof that it exercised such
degree of care.[6]
It could not have been coincidental that BET and BEC
are so intertwined with each other in terms of In the selection of prospective employees, employers
ownership, business purpose, and management. are required to examine them as to their
Apparently, BET and BEC are one and the same and qualifications, experience, and service records.[13]
the latter is a conduit of and merely succeeded the
On the other hand, with respect to the supervision of
former. Petitioners’ attempt to isolate themselves from
employees, employers should formulate... standard
and hide behind the corporate personality of BEC so
operating procedures, monitor their implementation,
as to evade their liabilities to Pacific Bank is precisely
and impose disciplinary measures for breaches
what the classical doctrine of piercing the veil of
thereof. To establish these factors in a trial involving
corporate entity seeks to prevent and remedy.
the issue of vicarious liability, employers must submit
In our view, BEC is a mere continuation and concrete proof, including documentary evidence.
successor of BET and petitioners cannot evade their
Principles:
obligations in the mortgage contract secured under
the name of BEC on the pretext that it was signed for Article 2176 of the Civil Code provides:
the benefit and under the name of BET. We are thus
Whoever by act or omission causes damage to
constrained to rule that the Court of Appeals did not
another, there being fault or negligence, is obliged to
err when it applied the instrumentality doctrine in
pay for the damage done. Such fault or negligence, if
piercing the corporate veil of BEC.
there is no pre-existing contractual relation between
______________ CASE ENDS HERE ___________ the parties, is called a quasi-delict and is governed
by... the provisions of this Chapter.
On the other hand, Article 2180, in pertinent part,
RAYMUNDO ODANI SECOSA v. HEIRS OF ERWIN
states:
SUAREZ FRANCISCO, GR No. 160039, 2004-06-29
The obligation imposed by article 2176 is demandable
Facts:
not only for one's own acts or omissions, but also for
Traveling behind the motorcycle driven by Francisco those of persons for whom one is responsible x x x.
was a sand and gravel truck, which in turn was being
Employers shall be liable for the damages caused by
tailed by the Isuzu truck driven by Secosa.
their employees and household helpers acting within
The three vehicles were traversing the southbound the scope of their assigned tasks, even though the
lane at a fairly high speed. When Secosa overtook the former are not engaged in any business or industry x
sand and gravel truck, he... bumped the motorcycle x x.
causing Francisco to fall. The rear wheels of the Isuzu
The responsibility treated of in this article shall cease
truck then ran over Francisco, which resulted in his
when the persons herein mentioned prove that they
instantaneous death. Fearing for his life, petitioner
observed all the diligence of a good father of a family
Secosa left his truck and fled the scene of the
to prevent damage.
collision.
Petitioner's attempt to prove its "deligentissimi patris
Issues:
familias" in the selection and supervision of
employees through oral evidence must fail as it was ROBLEDO VS. NLRC
unable to buttress... the same with any other
evidence, object or documentary, which might obviate (G.R. No. 110358, Nov. 9, 1994)
the apparent biased nature of the testimony.[10]...
employers must submit concrete proof, including FACT OF THE CASE
documentary evidence.
______________ CASE ENDS HERE ___________ 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
Traders Royal Bank vs Court of Appeals and severally liable to the petitioners for overtime and
legal holiday pay.
Filriters Guaranty Assurance Corporation (FGAC) is Petitioners were former employees of Bacani Security
the owner of several Central Bank Certificates of and Protective Agency (BPSA). They were employed
Indebtedness (CBCI). These certificates are actually as security guards at different times during the period
proof that FGAC has the required reserve investment 1969 to December 1989 when BPSA ceased to
with the Central Bank to operate as an insurer and to operate. BPSA was a single proprietorship owned,
protect third persons from whatever liabilities FGAC managed, and operated by the late Felipe Bacani. On
may incur. In 1979, FGAC agreed to assign said December 31, 1989, Felipe Bacani retired the
CBCI to Philippine Underwriters Finance Corporation business name and BSPA ceased to operate effective
(PUFC). Later, PUFC sold said CBCI to Traders on that day. On Jan. 15, 1990 Felipe Bacani died. An
Royal Bank (TRB). Said sale with TRB comes with a intestate proceeding was instituted for the settlement
right to repurchase on a date certain. However, when of his estate before Pasig-RTC. Earlier, on Oct. 26,
the day to repurchase arrived, PUFC failed to 1989, respondent Bacani Security and Allied Services
repurchase said CBCI hence TRB requested the Co., Inc. (BASEC) had been organized and registered
Central Bank to have said CBCI be registered in as a corporation with SEC. Several of the incorporator
TRB’s name. Central Bank refused as it alleged that (3) surnamed Bacani, and that includes the daughter
the CBCI are not negotiable; that as such, the transfer of the late Felipe Bacani. On July 5, 1990, the
from FGAC to PUFC is not valid; that since it was petitioners filed a complaint with the DOLE for
invalid, PUFC acquired no valid title over the CBCI; underpayment of wages and nonpayment of overtime
that the subsequent transfer from PUFC to TRB is pay and other accrued benefits, and for the return of
likewise invalid. their cash bond, which they posted, with BPSA. Made
TRB then filed a petition for mandamus to compel the respondents were BSPA and BASEC. On March 1,
Central Bank to register said CBCI in TRB’s name. 1992, the Labor Arbiter rendered a decision upholding
TRB averred that PUFC is the alter ego of FGAC; that the right of petitioners, finding the complainants
PUFC owns 90% of FGAC; that the two corporations entitled to their money claims to be paid by all the
have identical sets of directors; that payment of said respondents’ solidarily. On appeal, the NLRC
CBCI to PUFC is like a payment to FGAC hence the reversed the decision declaring that the Labor Arbiter
sale between PUFC and TRB is valid. In short, TRB is without jurisdiction and instead suggested that
avers that that the veil of corporate fiction, between petitioners file their claims with Pasig-RTC where an
PUFC and FGAC, should be pierced because the two intestate proceeding of Bacani’s estate was pending.
corporations allegedly used their separate identity to Petitioners moved for reconsideration but their motion
defraud TRD into buying said CBCI. 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
ISSUE: Whether or not Traders Royal Bank is correct. grave abuse of discretion in reversing the Labor
Arbiter’s decision.
HELD: No. Traders Royal Bank failed to show that ISSUE

the corporate fiction is used by the two corporations to
defeat public convenience, justify wrong, protect fraud Whether Bacani Security and Allied Services, Inc.
or defend crime or where a corporation is a mere alter (BASEC) can be held liable for claims of petitioners
ego or business conduit of a person. TRB merely against Bacani Security and Protective Agency
showed that PUFC owns 90% of FGAC and that their (BSPA).
directors are the same. The identity of PUFC can’t be
maintained as that of FGAC because of this mere
fact; there is nothing else which could lead the court
under the circumstance to disregard their corporate
RULING
personalities. Further, TRB can’t argue that it was
defrauded into buying those certificates. In the first
place, TRB as a banking institution is not ignorant No. Petitioners contend that public respondent,
about these types of transactions. It should know for a NLRC, erred in setting aside the Labor Arbiter’s
fact that a certificate of indebtedness is not negotiable judgment on the ground that BASEC is the same
because the payee therein is inscribed specifically entity as BSPA the latter being owned and controlled
and that the Central Bank is obliged to pay the named by one and the same family, the Bacani family. For
payee only and no one else. this reason they urge that corporate fiction should be
disregarded and BASEC should be held liable for the
______________ CASE ENDS HERE ___________ 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 improper venue, res judicata, or lack of jurisdiction as
owned and operated by Felipe Bacani. Hence, its in the case at bar.
debts and obligations were the personal obligations of
its owner. Petitioner’s claims, which are based on In determining which has jurisdiction over a case, the
these debts and personal obligations, did not survive averments of the complaint“counterclaim” taken as a
the death of Felipe Bacani on Jan. 15, 1990 and whole are considered.
should have been filed instead in the intestate
proceedings involving his estate. With regards to Mel Velarde‘s claim for unpaid
______________ CASE ENDS HERE ___________ salaries, unpaid share in net income, reasonable
return on the stock ownership plan and other benefits
MEL V. VELARDE v. LOPEZ, INC. for services rendered to Sky Vision, jurisdiction
thereon pertains to the Securities and Exchange
Commission even if the complaint by a corporate
419 SCRA 422, 14 January 2004, THIRD DIVISION
officer includes money claims since such claims are
actually part of the prerequisite of his position and,
Lopez Inc., granted a loan to Mel V. Velarde (Mel), therefore interlinked with his relations with the
the General Manager of Sky Vision which is a corporation. The question of remunerations involving
subsidiary company owned by Lopez Inc. However, a person who is not a mere employee but a
Mel was not able to pay the loan and Lopez Inc. stockholder and officer of the corporation is not a
proposed that he may use his retirement benefits to simple labor problem but a matter that comes within
partially settle his loan, but because of disagreement the area of corporate affairs and management as is in
on the amount of his retirement benefits, Mel refused fact a corporate controversy in contemplation of the
the proposal which led Lopez Inc. Corporation Code.
to file a complaint for the claim of the payment with
interest. On his answer, Mel claims that the loan was
Mel Velarde argues nevertheless that jurisdiction over
only a ”cover document” and that it was really a
the subsidiary is justified by piercing the veil of
reward for his loyalty and excellent performance in the
corporate fiction. Piercing the veil of corporate fiction
company and counterclaimed that he was entitled to a
is warranted, however, only in cases when the
much larger amount of retirement benefits than what
separate legal entity is used to defeat public
Lopez Inc., was alleging.
convenience, justify wrong, protect fraud, or defend
crime, such that in the case of two corporations, the
Lopez Inc., petitioned to dismiss the case for lack of law will regard the corporations as merged into one.
jurisdiction which drew MEL to assert that the veil of
corporate fiction must be pierced to hold Lopez Inc., ______________ CASE ENDS HERE ___________
liable for his counterclaims. The Regional Trial Court
denied the motion to dismiss and the motion for PNB V. RITRATTO – G.R. NO. 142616 – 362
reconsideration. Lopez Inc., then filed a petition for SCRA 216
certiorari to the Court of Appealswhich held that
Lopez Inc., is not a real party-in-interest on the Facts:
counterclaim and that there was a failure to show the
presence of any of the circumstances to justify PNB-IFL, a subsidiary company of PNB extended
the application of the principle of ”piercing the veil of credit to Ritratto and secured by the real estate
corporate fiction.” mortgages on four parcels of land. Since there was
default, PNB-IFL thru PNB, foreclosed the property
ISSUE: and were subject to public auction. Ritratto Group
filed a complaint for injunction. PNB filed a motion to
Whether or not Mel Velarde, on a complaint for dismiss on the grounds of failure to state a cause of
collection of sum of money can raise a counterclaim action and the absence of any privity between
for retirement benefits, unpaid salaries and incentives respondents and petitioner.
arising from services rendered by him in a subsidiary
company of Lopez Inc. Issue:
HELD: Is PNB privy to the loan contracts entered into by

respondent & PNB-IFL being that PNB-IFL is owned
While Mel Velarde correctly invokes the ruling in by PNB?
Atienza v. Court of Appeals to postulate that not every
denial of a motion to dismiss can be corrected by Held:
certiorari under Rule 65 and that, as a general rule,
the remedy from such denial is to appeal in due No. The contract questioned is one entered into
course after a decision has been rendered on the between Ritratto and PNB-IFL. PNB was admittedly
merits, there are exceptionsthereto, as when the court an agent of the latter who acted as an agent with
in denying the motion to dismiss acted without or in limited authority and specific duties under a special
excess of jurisdiction or with patent grave abuse of power of attorney incorporated in the real estate
discretion, or when the assailed interlocutory order is mortgage.
patently erroneous and the remedy of appeal would
not afford adequate and expeditious relief, or when
The mere fact that a corporation owns all of the
the ground for the motion to dismiss is
stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If
used to perform legitimate functions, a subsidiary’s decision. It also denied the motion for reconsideration
separate existence may be respected, and the liability on May 8, 2001.
of the parent corporation as well as the subsidiary will
be confined to those arising in their respective Issue:
business. The courts may, in the exercise of judicial
discretion, step in to prevent the abuses of separate Whether or not the length of service of a retired
entity privilege and pierce the veil of corporate entity. employee in a dissolved company (his former
______________ CASE ENDS HERE ___________ employer) should be included in his length of service
with his last employer for purposes of computing the
ENRIQUEZ SECURITY SERVICES, INC., vs. retirement pay.10
VICTOR A. CABOTAJE G.R. No. 147993 July 21,
2006 Held:
Facts: We find no merit in the petition.
Sometime in January 1979, respondent Victor A. It is a well-entrenched doctrine that the Supreme
Cabotaje was employed as a security guard by Court does not pass upon questions of fact in an
Enriquez Security and Investigation Agency (ESIA). appeal by certiorari under Rule 45.12 It is not our
On November 13, 1985, petitioner Enriquez Security function to assess and evaluate the evidence all over
Services, Inc. (ESSI) was incorporated. Respondent again13 where the findings of the quasi-judicial
continued to work as security guard in petitionerâs agency and the appellate court on the matter
agency. On reaching the age of 60 in July 1997, coincide. The consistent rulings of the labor arbiter,
respondent applied for retirement. Petitioner the NLRC and the appellate court should be
acknowledged that respondent was entitled to respected and petitionerâs veil of corporate fiction
retirement benefits but opposed his claim that the should likewise be pierced. These are based on the
computation of such benefits must be reckoned from following uncontroverted facts: (1) respondent worked
January 1979 when he started working for ESIA. It with ESIA and petitioner ESSI; (2) his employment
claimed that the benefits must be computed only from with both security agencies was continuous and
November 13, 1985 when ESSI was incorporated. uninterrupted; (3) both agencies were owned by the
Enriquez family and (4) petitioner ESSI maintained its
Respondent consequently filed a complaint in the office in the same place where ESIA previously held
National Labor Relations Commission (NLRC) office.14 The attempt to make the security agencies
seeking the payment of retirement benefits under appear as two separate entities, when in reality they
Republic Act No. (RA) 7641, otherwise known as the were but one, was a devise to defeat the law and
Retirement Pay Law.2 On January 15, 1999, labor should not be permitted. Although respect for
arbiter Eduardo Carpio decided in respondentâs corporate personality is the general rule, there are
favor: Complainant is entitled to retirement pay. This exceptions. In appropriate cases, the veil of corporate
entitlement was not denied by respondents. xxx The fiction may be pierced as when it is used as a means
computation of this benefits shall cover the entire to perpetrate a social injustice or as a vehicle to
period of his employment from January 1979 up to evade obligations. Petitioner was thus correctly
July 16, 1997 based on his latest monthly salary of ordered to pay respondentâs retirement under RA
P5,383.15 per the payroll sheet submitted by 7641, computed from January 1979 up to the time he
respondents. While respondents claim that applied for retirement in July 1997. WHEREFORE,
respondent corporation was merely registered with the petition is hereby DENIED. The assailed decision
the DOTC on November 13, 1985, they did not deny and resolution of the Court of Appeals are
however that complainant was an employee of the AFFIRMED.
then Enriquez Security and Investigation Agency, and ______________ CASE ENDS HERE ___________
that complainantâs services with the said security
agency up to the present respondent corporation was Heirs of Durano Sr. vs Spouses Uy
uninterrupted. The obligation of the new company 344 SCRA 238 [GR No. 136456 October 24, 2000]
involves not only to absorb the workers of the
dissolved company, but also to include the length of
Facts: As far back as August 1970, a 128 hectare of
service earned by the absorbed employee with their
land located in the barrios of Dunga and
former employer as well. To rule otherwise would be
Cahumayhumayan, Danao City. On December 27,
manifestly less than fair, certainly less than just and
1973, the late Congressman Ramon Durano Sr.
equitable.
together with his son Ramon Durano III, and the
latter’s wide Elizabeth Hotchkins-Durano, instituted an
On appeal, the NLRC set aside the labor arbiterâs action for damages against spouses Angeles
award of one-month salary for every year of service Sepulveda Uy and Emigdio Beng Sing Uy, Spouses
for being excessive. It ruled that under RA 7641, Faustino Alatan and Valeriana Garro, Spouses Rufino
respondent Cabotaje was entitled to retirement pay Lavador and Aurelia Mata, Silvestre Ramos,
equivalent only to one-half month salary for every Hermogenes Tito, Teotimo Gonzales, Primitiva Garro,
year of service. Thus: On March 15, 2000, the NLRC Julian Garro, Ismael Garro, Bienvido Castro, Glicerio
denied petitionerâs motion for reconsideration. On Alcala, Felemon Lavador, Candelario Lumantao,
May 25, 2000, petitioner filed a special civil action for Garino Quimbo, Justino Tito, Marcelino Gonzales,
certiorari with the Court of Appeals. On September Salvador Duyday, Venancia Repaso, Leodegracia
26, 2000, the appellate court affirmed the NLRC Gonzales, Jose dela Calzada, Restituta Gonzales,
and Cosme Ramos before branch XVII of the then
Court of First Instance of Cebu, Danao City.. Herein G.R. No. 161057September 12, 2008
respondents are the possessors of the subject parcel
of land which they are cultivating, it was used to be FACTS
owned by CEPCO who later sold the same to Durano
& Co. On September 15, 1990, Durano & Co sold the Betty Go Gabionza (Gabionza) and Isabelita Tan
disputed property to petitioner Ramon Durano III, who (Tan) filed a complaint charging respondents Luke
procured the registration of these lands in his name Roxas (Roxas) and Evelyn Nolasco (Nolasco) with
under TCT no. T-103 and T-104. The different parts of several criminal acts. Roxas was the president of ASB
the entire land was bulldozed by the petitioner’s Holdings, Inc. (ASBHI) while Nolasco was thesenior
company resulting to the destruction of plants and vice president and treasurer of the same
other products that were placed by the respondents. corporation.Gabionza and Tan had previously placed
Hence, a claim for damages was lodged against monetary investment with the Bank of Southeast Asia
herein petitioner. The respondents presented tax (BSA). They alleged that theywere convinced by the
declaration covering the different areas of the parcel officers of ASBHI to lend or deposit money with the
of land that is titled in each of them as proof that they corporation. they were issued receipts reflecting
are entitled for the said damages. thename “ASB Realty Development” which they were
told was the same entity as BSA or was connected
Issue: Whether or not the doctrine of piercing the veil therewith but beginning inMarch 1998, the receipts
of corporate entity can be applied in order to make were issued in the name of ASBHI.
Durano & Co liable for damages.
DBS Bank started to refuse to pay for the checks
Held: Yes. The court of appeals applied the well- purportedly by virtue of “stop payment” orders from
recognized principle of piercing the corporate veil, i.e. ASBHI. ASBHI filed a petition for rehabilitation
the law will regard the act of the corporation as the ac and receivership with the Securities and Exchange
of its individual stockholders, when it is shown that the Commission (SEC), and it was able to obtain anorder
corporation was used merely as an alter ego by those enjoining it from paying its outstanding liabilities. This
persons in the commission of fraud or other illegal lead to the filing of complaints by the petitioners and
acts. others againstASBHI. The complaints were for estafa
under Article 315(2)(a) and (2)(d) of the Revised
That the test in determining the applicability of the Penal Code, estafa underPresidential Decree No.
doctrine of piercing the veil of corporate fiction is as 1689, violation of the Revised Securities Act and
follows: violation of the General Banking Act.Task Force on
Financial Fraud (Task Force), was created by
1. Control, not mere majority or complete stock the Department of Justice (DOJ) which dismissed the
control, but complete domination, not only of saidcomplaints. Such dismissal was concurred by the
finances but of policy and business practice in in by the assistant chief state prosecutor and
respect to the transaction attacked so that the approved by the chief state prosecutor.
corporate entity as to this transaction had at Petitioners filed a motion for reconsideration but it
the time no separate mind, will or existence of was denied.With respect to the charges of estafa
its own. under Article 315(2) of the Revised Penal Code and
2. Such control must, have been used by the of violation of the Revised SecuritiesAct the Task
defendant to commit fraud or wrong, to Force concluded that the subject transactions were
perpetrate the violation of statutory or other loans which gave rise only to civil liability; that
positive legal duty, on dishonest and unjust petitioners weresatisfied with the arrangement x x x;
acts in contravention of plaintiff’s legal right; that petitioners never directly dealt with Nolasco and
and Roxas; and that a check was not asecurity as
contemplated by the Revised Securities Act.However,
3. The aforesaid control and breach of duty must the DOJ made a Resolution alleging that it also made
proximately cause the injury or unjust loss it clear that the false representations have been made
complained of. to petitioners prior to or simultaneously with the comm
ission of the fraud.
The assurance given to them by ASBHI that it is awort
The absence of any one of these elements prevents
hy credit partner occurred before they parted with
the piercing the corporate veil. In applying the
their money. Relevantly, ASBHI is not the entity with
instrumentality or alter ego doctrine, the courts are
whom petitionersinitially transacted with, and
concerned with reality not form, with how the
they averred that they had to be convinced with such
corporation operated and the individual defendants
representations that Roxas and the same
relationship to that operation.
group behind BSA were also involved with ASBHI.
______________ CASE ENDS HERE ___________
ISSUE
WON the charges against the corporation can also be

pinned against Roxas and Nolasco likewise.
BETTY GABIONZA and ISABELITA TANv.COURT HELD

OF APPEALS, LUKE ROXAS nad EVELYN
NOLASCO YES.The material misrepresentations have been
made by the agents or employees of ASBHI to
petitioners, to the effect that thecorporation was received in 1997. It was only in 1998 that Nalda was
structurally sound and financially able to undertake employed by CKCS. Since Menguito did not legally
the series of loan transactions that it induced deny the receipt of the FAN, the presumption that he
petitioners toenter into.The false representations actually received it still subsists. Further, based on the
made by the ASB agents who dealt with the records, Menguito, in the stipulation of facts,
complainant-petitioners and who inveigled them into acknowledged the receipt of the FAN.
investing their funds in ASB are properly imputable to
Anent the issue of the non-issuance of the PAN, the
respondents Roxas and Nolasco, because they, as
same is not vital to due process. The Supreme Court
ASB’s president and senior vice president/treasurer,
ruled that the strict requirement of proving that an
respectively, respectively, in charge of its operations,
assessment is sent and received by the taxpayer is
directed its agents to make the falserepresentations
only applicable to FANs and to PANs. The issuance
to the public, including the complainant-petitioners, in
of a valid formal assessment is a substantive
order to convince them to invest their moneys in ASB.
prerequisite to tax collection, for it contains not only a
It isdifficult to make a different conclusion, judging
computation of tax liabilities but also a demand for
from the fact that respondents Roxas and Nolasco
payment within a prescribed period, thereby signaling
authorized and accepted forASB the fraud-induced
the time when penalties and interests begin to accrue
loans
against the taxpayer and enabling the latter to
______________ CASE ENDS HERE ___________ determine his remedies therefor. A PAN or a post-
assessment notice does not bear the gravity of a
Commissioner of Internal Revenue vs Dominador FAN. Neither notice contains a declaration of the tax
Menguito liability of the taxpayer or a demand for payment
thereof. Hence, the lack of such notices inflicts no
Dominador Menguito and his wife are the owners of prejudice on the taxpayer for as long as the latter is
Copper Kettle Catering Services, Inc. (CKCSI). They properly served a formal assessment notice.
also operate several restaurant branches in the
Philippines. One such branch was the Copper Kettle NOTE: In the case of CIR vs Metro Star
Cafeteria Specialist (CKCS) in Club John Hay, Baguio Superama (December 2010), the Supreme Court
City. The branch was registered as a sole held that the due issuance of the PAN is part of due
proprietorship. In September 1997, a formal process. Hence, this superseded the ruling in this
assessment notice (FAN) was issued against the case as regards the issuance of PANs. (CIR vs
spouses and they were adjudged to pay P34 million in Menguito is a September 2008 case).
deficiency taxes for the years 1991 to 1993. The ______________ CASE ENDS HERE ___________
Bureau of Internal Revenue found that in order for
CKCS to operate in Club John Hay, a contract was
JG SUMMIT V CA
entered into by CKCSI and Club John Hay; hence,
CKCS and CKCSI are one and the same.
Mrs. Menguito then sent a letter to the BIR FACTS:
acknowledging receipt of the assessment notice. She
asked for more time to sort the issue. Later, when The National Investment and Development
Menguito eventually filed a protest, he denied, Corporation (NIDC), a government corporation,
through his witness (Ma. Therese Nalda, CKCS entered into a Joint Venture Agreement (JVA) with
employee), receiving the FAN; that the FAN was Kawasaki Heavy Industries, Ltd. for the construction,
addressed to the wrong person because it was operation and management of the Subic National
addressed to CKCSI not CKCS. He presented as Shipyard, Inc., later became the Philippine Shipyard
evidence a photocopy of the articles of incorporation and Engineering Corporation (PHILSECO). Under the
(AOI) of CKCSI. JVA, NIDC and Kawasaki would maintain a
On the other hand, the Commissioner of Internal shareholding proportion of 60%-40% and that the
Revenue (CIR) presented proof of the due mailing of parties have the right of first refusal in case of a sale.
the FAN. It however was not able to prove that it
issued a pre-assessment notice (PAN) or a post- Through a series of transfers, NIDC’s rights, title and
assessment notice. interest in PHILSECO eventually went to the National
Government. In the interest of national economy, it
ISSUE: Whether or not due process was observed by was decided that PHILSECO should be privatized by
the Commissioner of Internal Revenue. selling 87.67% of its total outstanding capital stock to
HELD: Yes. The veil of corporate fiction is pierced private entities. After negotiations, it was agreed that
because it was proven that CKCSI is actively Kawasaki’s right of first refusal under the JVA be
managing CKCS. Further, CKCS is more known as “exchanged” for the right to top by five percent the
CKCSI. Also, the photocopy of the AOI presented by highest bid for said shares. Kawasaki that Philyards
Menguito is not a conclusive proof of the separate Holdings, Inc. (PHI), in which it was a stockholder,
personality of CKCSI and CKCS. would exercise this right in its stead.
More importantly, Menguito and his wife are in During bidding, Kawasaki/PHI Consortium is the
estoppel because they already acknowledged the losing bidder. Even so, because of the right to top by
receipt of the FAN through the letter sent by Mrs. 5% percent the highest bid, it was able to top JG
Menguito to the BIR. They cannot later on deny the Summit’s bid. JG Summit protested, contending that
receipt of the FAN. Worse, it should be Menguito who PHILSECO, as a shipyard is a public utility and,
should be directly denying the receipt and not through hence, must observe the 60%-40% Filipino-foreign
an employee (Nalda) who was not even an employee capitalization. By buying 87.67% of PHILSECO’s
of the spouses when the FAN was issued and capital stock at bidding, Kawasaki/PHI in effect now
owns more than 40% of the stock. Office of the Department of Environment and Natural
Resources (DENR). Subsequently, SMMI was issued
ISSUE: MPSA-AMA-IVB-153 covering an area of over 1,782
hectares in Barangay Sumbiling, Municipality of
Bataraza, Province of Palawan and EPA-IVB-44
which includes an area of 3,720 hectares in Barangay
o Whether or not PHILSECO is a public utility Malatagao, Bataraza, Palawan. The MPSA and EP
o Whether or not Kawasaki/PHI can purchase were then transferred to Madridejos Mining
beyond 40% of PHILSECO’s stocks Corporation (MMC) and, on November 6, 2006,
assigned to petitioner McArthur. Petitioner Narra
acquired its MPSA from Alpha Resources and
Development Corporation and Patricia Louise Mining
HELD: & Development Corporation (PLMDC) which
previously filed an application for an MPSA with the
In arguing that PHILSECO, as a shipyard, was a MGB, Region IV-B, DENR on January 6, 1992.
public utility, JG Summit relied on sec. 13, CA No. Through the said application, the DENR issued
146. On the other hand, Kawasaki/PHI argued that MPSA-IV-1-12 covering an area of 3.277 hectares in
PD No. 666 explicitly stated that a “shipyard” was not barangays Calategas and San Isidro, Municipality of
a “public utility.” But the SC stated that sec. 1 of PD Narra, Palawan. Subsequently, PLMDC conveyed,
No. 666 was expressly repealed by sec. 20, BP Blg. transferred and/or assigned its rights and interests
391 and when BP Blg. 391 was subsequently over the MPSA application in favor of Narra. Another
repealed by EO 226, the latter law did not revive sec. MPSA application of SMMI was filed with the DENR
1 of PD No. 666. Therefore, the law that states that a Region IV-B, labeled as MPSA-AMA-IVB-154
shipyard is a public utility still stands. (formerly EPA-IVB-47) over 3,402 hectares in
Barangays Malinao and PrincesaUrduja, Municipality
A shipyard such as PHILSECO being a public utility of Narra, Province of Palawan. SMMI subsequently
as provided by law is therefore required to comply conveyed, transferred and assigned its rights and
with the 60%-40% capitalization under the interest over the said MPSA application to Tesoro. On
Constitution. Likewise, the JVA between NIDC and January 2, 2007, Redmont filed before the Panel of
Kawasaki manifests an intention of the parties to Arbitrators (POA) of the DENR three (3) separate
abide by this constitutional mandate. Thus, under the petitions for the denial of petitioners’ applications for
JVA, should the NIDC opt to sell its shares of stock to MPSA designated as AMA-IVB-153, AMA-IVB-154
a third party, Kawasaki could only exercise its right of and MPSA IV-1-12. In the petitions, Redmont alleged
first refusal to the extent that its total shares of stock that at least 60% of the capital stock of McArthur,
would not exceed 40% of the entire shares of stock. Tesoro and Narra are owned and controlled by MBMI
The NIDC, on the other hand, may purchase even Resources, Inc. (MBMI), a 100% Canadian
beyond 60% of the total shares. As a government corporation. Redmont reasoned that since MBMI is a
corporation and necessarily a 100% Filipino-owned considerable stockholder of petitioners, it was the
corporation, there is nothing to prevent its purchase of driving force behind petitioners’ filing of the MPSAs
stocks even beyond 60% of the capitalization as the over the areas covered by applications since it knows
Constitution clearly limits only foreign capitalization. that it can only participate in mining activities through
corporations which are deemed Filipino citizens.
Kawasaki was bound by its contractual obligation Redmont argued that given that petitioners’ capital
under the JVA that limits its right of first refusal to stocks were mostly owned by MBMI, they were
40% of the total capitalization of PHILSECO. Thus, likewise disqualified from engaging in mining activities
Kawasaki cannot purchase beyond 40% of the through MPSAs, which are reserved only for Filipino
capitalization of the joint venture on account of both citizens.
constitutional and contractual proscriptions.
______________ CASE ENDS HERE ___________ Issue: Whether or not the petitioner corporations are
Filipino and can validly be issued MPSA and EP.
Narra Nickel Mining and Development Corp.
vsRedmont Consolidated Mines Corporation Held: No. The SEC Rules provide for the manner of
G.R. No. 195580 April 21, 2014 calculating the Filipino interest in a corporation for
purposes, among others, of determining compliance
Facts: Sometime in December 2006, respondent with nationality requirements (the ‘Investee
Redmont Consolidated Mines Corp. (Redmont), a Corporation’). Such manner of computation is
domestic corporation organized and existing under necessary since the shares in the Investee
Philippine laws, took interest in mining and exploring Corporation may be owned both by individual
certain areas of the province of Palawan. After stockholders (‘Investing Individuals’) and by
inquiring with the Department of Environment and corporations and partnerships (‘Investing
Natural Resources (DENR), it learned that the areas Corporation’). The said rules thus provide for the
where it wanted to undertake exploration and mining determination of nationality depending on the
activities where already covered by Mineral ownership of the Investee Corporation and, in certain
Production Sharing Agreement (MPSA) applications instances, the Investing Corporation.
of petitioners Narra, Tesoro and McArthur. Petitioner
McArthur, through its predecessor-in-interest Sara Under the SEC Rules, there are two cases in
Marie Mining, Inc. (SMMI), filed an application for an determining the nationality of the Investee
MPSA and Exploration Permit (EP) with the Mines Corporation. The first case is the ‘liberal rule’, later
and Geo-Sciences Bureau (MGB), Region IV-B, coined by the SEC as the Control Test in its 30 May
1990 Opinion, and pertains to the portion in said On 20 October 2000 and 22 November 2000, the
Paragraph 7 of the 1967 SEC Rules which states, PNCC Board of Directors (PNCC Board) passed
‘(s)hares belonging to corporations or partnerships at Board Resolutions admitting PNCC’s liability to
least 60% of the capital of which is owned by Filipino Marubeni. Previously, for two decades the PNCC
citizens shall be considered as of Philippine Board consistently refused to admit any liability for the
nationality.’ Under the liberal Control Test, there is no Marubeni loans.
need to further trace the ownership of the 60% (or
more) Filipino stockholdings of the Investing In January 2001, Marubeni assigned its entire credit
Corporation since a corporation which is at least 60% to Radstock Securities Limited (Radstock), a foreign
Filipino-owned is considered as Filipino. corporation. Radstock immediately sent a notice and
demand letter to PNCC.
The second case is the Strict Rule or the Grandfather
Rule Proper and pertains to the portion in said PNCC and Radstock entered into a Compromise
Paragraph 7 of the 1967 SEC Rules which states, Agreement. Under this agreement, PNCC shall pay
“but if the percentage of Filipino ownership in the Radstock the reduced amount of P6,185,000,000.00
corporation or partnership is less than 60%, only the in full settlement of PNCC’s guarantee of CDCP
number of shares corresponding to such percentage Mining’s debt allegedly totaling P17,040,843,968.00
shall be counted as of Philippine nationality.” Under (judgment debt as of 31 July 2006). To satisfy its
the Strict Rule or Grandfather Rule Proper, the reduced obligation, PNCC undertakes to (1) "assign
combined totals in the Investing Corporation and the to a third party assignee to be designated by
Investee Corporation must be traced (i.e., Radstock all its rights and interests" to the listed real
“grandfathered”) to determine the total percentage of properties of PNCC; (2) issue to Radstock or its
Filipino ownership. Moreover, the ultimate Filipino assignee common shares of the capital stock of
ownership of the shares must first be traced to the PNCC issued at par value which shall comprise 20%
level of the Investing Corporation and added to the of the outstanding capital stock of PNCC; and (3)
shares directly owned in the Investee Corporation. assign to Radstock or its assignee 50% of PNCC’s
6% share, for the next 27 years, in the gross toll
In other words, based on the said SEC Rule and DOJ revenues of the Manila North Tollways Corporation.
Opinion, the Grandfather Rule or the second part of
the SEC Rule applies only when the 60-40 Filipino- Strategic Alliance Development Corporation
foreign equity ownership is in doubt (i.e., in cases (STRADEC) moved for reconsideration. STRADEC
where the joint venture corporation with Filipino and alleged that it has a claim against PNCC as a bidder
foreign stockholders with less than 60% Filipino of the National Government’s shares, receivables,
stockholdings [or 59%] invests in other joint venture securities and interests in PNCC.
corporation which is either 60-40% Filipino-alien or
the 59% less Filipino). Stated differently, where the Issue
60-40 Filipino- foreign equity ownership is not in
doubt, the Grandfather Rule will not apply. Whether or not the Compromise Agreement between
PNCC and Radstock is valid in relation to the
______________ CASE ENDS HERE ___________
Constitution, existing laws, and public policy
STRADEC vs. Radstock; G.R. No. 178158 and Held
180428; December 4, 2009; Natural Resources;
Land Ownership; Public funds; Appropriation The Compromise Agreement is contrary to the
Constitution, existing laws and public policy.
Facts
PNCC’s toll fees are public funds. PNCC cannot use
Construction Development Corporation of the public funds like toll fees that indisputably form part of
Philippines (CDCP) was incorporated in 1966. It was the General Fund, to pay a private debt of CDCP
granted a franchise to construct, operate and maintain Mining to Radstock. Such payment cannot qualify as
toll facilities in the North and South Luzon Tollways expenditure for a public purpose. The toll fees are
and Metro Manila Expressway. merely held in trust by PNCC for the National
Government, which is the owner of the toll fees.
CDCP Mining Corporation (CDCP Mining), an affiliate Considering that there is no appropriation law passed
of CDCP, obtained loans from Marubeni Corporation by Congress for the compromise amount, the
of Japan (Marubeni). A CDCP official issued letters of Compromise Agreement is void for being contrary to
guarantee for the loans although there was no CDCP law, specifically Section 29(1), Article VI of the
Board Resolution authorizing the issuance of such Constitution. And since the payment pertains to
letters of guarantee. CDCP Mining secured the CDCP Mining’s private debt to Radstock, the
Marubeni loans when CDCP and CDCP Mining were Compromise Agreement is also void for being
still privately owned and managed. contrary to the fundamental public policy that
government funds or property shall be spent or used
In 1983, CDCP’s name was changed to Philippine solely for public purposes.
National Construction Corporation (PNCC) in order to
reflect that the Government already owned 90.3% of Radstock is not qualified to own land in the
PNCC and only 9.70% is under private ownership. Philippines. Consequently, Radstock is also
Meanwhile, the Marubeni loans to CDCP Mining disqualified to own the rights to ownership of lands in
remained unpaid. the Philippines. Radstock cannot own the rights to
ownership of any land in the Philippines because
Radstock cannot lawfully own the land itself. recognizing the constitutional prohibition of foreign
Otherwise, there will be a blatant circumvention of the ownership in the industry of mass media
Constitution, which prohibits a foreign private
PDRs are financial instruments that foreign funds can
corporation from owning land in the Philippines. In
buy into, allowing media and other Filipino firms that
addition, Radstock cannot transfer the rights to
must keep foreign ownership at 40%, to raise funds
ownership of land in the Philippines if it cannot own
globally
the land itself. It is basic that an assignor or seller
cannot assign or sell something he does not own at PDRs are not evidences or statements nor certificates
the time the ownership, or the rights to the ownership, of ownership of a corporation. However, each PDR
are to be transferred to the assignee or buyer. The represents a share, even in a restricted company, and
third party assignee under the Compromise when bought by a foreign entity, gives the buyer the
Agreement who will be designated by Radstock can right to all the dividends due the shares of stock
only acquire rights duplicating those which its acquired
assignor is entitled by law to exercise. Thus, the
On July 8, 2017 the SEC created a “special panel” to
assignee can acquire ownership of the land only if its
conduct a "formal, in-depth examination of Rappler
assignor owns the land. Clearly, the assignment by
Inc and its parent, Rappler Holdings Corporation, as
PNCC of the real properties to a nominee to be
to possible violations of nationality restrictions on
designated by Radstock is a circumvention of the
ownership and/or control of Mass Media entities.
Constitutional prohibition against a private foreign
corporation owning lands in the Philippines. The said On July 8, 2017 the SEC created a “special panel” to
circumvention renders the Compromise Agreement conduct a "formal, in-depth examination of Rappler
void. Inc and its parent, Rappler Holdings Corporation, as
to possible violations of nationality restrictions on
______________ CASE ENDS HERE ___________
ownership and/or control of Mass Media entities."
RAPPLER CASE DIGEST

DECISION:
FACTS:
On Monday, January 15, 2018, the SEC released an
In 2015, Rappler, Inc. (RI) and Rappler Holdings (RH, En Banc decision which voided the Omidyar
owns RI) filed SEC 10-1 Notice of Application for Philippine Depositary Receipts (PDRs) and revoked
Confirmation Exempt Transactions reporting some 20 Rappler's Certificate of Incorporation, in effect
million PDRs issued to NBM Rappler and Omidyar cancelling its license to operate. It also immediately
Network Fund LLC variously. forwarded its decision to the Department of Justice for
appropriate investigation.
RHC issued Philippine Depositary Receipts (PDRs) to
North Base Media and Omidyar Network. These were The SEC cited “substantial evidence” that Rappler
duly disclosed by Rappler in the following stories: and Rappler Holdings had intentionally created an
elaborate scheme upon which its receipt of more than
 Top journalists' independent media fund
$1 million from a foreign investor would be
invests in Rappler
theoretically defensible.
 Omidyar Network invests in Rappler
Under the scheme, “the investor would never own
Omidyar has 5.5% of RHC's PDRs while North Base stock and would never receive dividends and he
Media has 9.2%. would never become an officer or director, but
respondents would still be able to give him his
In December 2016, the SEC received a letter from the
money’s worth in the form of negative control and
Solicitor General asking for an investigation into the
cash contributions, all through a private contractual
Rappler PDRs “for any possible contravention of the
arrangement,”
1987 Constitution (Ibid.).”
Here, the stockholders must have prior discussion
The 1987 Constitution states that “ownership and
with and approval of at least two-thirds of the PDR
management of mass media shall be limited to
Holdings, meaning Rappler is at the very least under
citizens of the Philippines, or to corporations,
obligation to consult with Omidyar Network.
cooperatives or associations, wholly owned and
managed by such citizens.” “The stockholder has become, in effect, subservient
to the holder. It is neither 100-percent control by the
The SEC investigation focused on the covenant
Filipino stockholders nor is it zero-percent control by
between Rappler and the NBM/Omidyar PDRs (called
the foreigner PDS holders,”
the ON PDRs) that said that RH/RI will “not without
prior good faith discussion with ON PDR holders and “The foreign equity restriction is very clear. Anything
without the approval of at least 2/3 of ON PDR less than 100-percent Filipino control is a violation.
Holders alter, modify or otherwise change the Conversely, anything more than exactly zero-percent
Company (RH/RI) Articles of Incorporation or By- foreign control is a violation,”
Laws or take any other action where such alteration,
______________ CASE ENDS HERE ___________
modification or action will prejudice the rights in
relation to the ON PDRs. Professional Services Inc., v. Court of Appeals,
G.R. No. 126297,
There are at least three high-profile media
corporations namely ABS-CBN, GMA, and Rappler 126297
that have used Philippine Depository Receipts (PDRs)
February 2, 2010Lessons Applicable: Liability for
to obtain foreign investment, even at the expense of
Torts (Corporate Law)
FACTS: Court of Appeals was inadequate, having been signed

only by Petron, through Atty. Cruz.
Enrique Agana told his wife Natividad Agana to go
look for their neighbor, Dr. Ampil, a surgeon
staff member of Medical City, a prominent and known But, while procedural requirements such as that of
hospital submittal of a certificate of non-forum shopping
cannot be totally disregarded, they may be deemed
Natividad suffered from injury due to 2 gauges left substantially complied with under justifiable
inside her body so they sued Professional Inc.(PSI) circumstances. One of these circumstances is where
Despite, the report of 2 missing gauzes after the petitioners filed a collective action in which they
the operation PSI did NOT initiate an investigation share a common interest in its subject matter or raise
a common cause of action. In such a case, the
certification by one of the petitioners may be deemed
ISSUE: W/N PSI should be liable for tort. sufficient.
Here, KPE and Petron shared a common cause of

HELD: YES. 15M + 12% int. until full satisfaction. action against petitioners Espiritu, et al., namely, the
violation of their proprietary rights with respect to the
use of Gasul tanks and trademark. Furthermore, Atty.
While PSI had no power to control the means/method Cruz said in his certification that he was executing it
by which Dr. Ampil conducted the surgery “for and on behalf of the Corporation, and co-
onNatividad, they had the power to review or cause petitioner Carmen J. Doloiras.” Thus, the object of the
the review requirement – to ensure that a party takes no
PSI had the duty to tread on as captain of the ship for recourse to multiple forums – was substantially
the purpose of ensuing the safety of the achieved. Besides, the failure of KPE to sign the
patientsavailing themselves of its services and certificate of non-forum shopping does not render the
facilities petition defective with respect to Petron which signed
it through Atty. Cruz. The Court of Appeals, therefore,
PSI defined its standards of corporate conduct: acted correctly in giving due course to the petition
1.Even after her operation to ensure her safety as before it.
a patient
______________ CASE ENDS HERE ___________
2.NOT limited to record the 2 missing gauzes
".
Extended to determining Dr. Ampils role in it, bringing
the matter to his attention andcorrecting his Ching V. Sec. Of Justice (2006)
negligence
FACTS:
Sept-Oct 1980: PBMI, through Ching, Senior VP of
Admission bars itself from arguing that its corp. resp. Philippine Blooming Mills, Inc. (PBMI), applied with
is NOT yet in existence at the time the Rizal Commercial Banking Corporation (RCBC)
Natividadunderwent treatment for the issuance of commercial letters of credit to
finance its importation of assorted goods
Dr. Ampil - medial negligence

 RCBC approved the application, and irrevocable
letters of credit were issued in favor of Ching.
 The goods were purchased and delivered in trust to
PSI - Corporate Negligence
PBMI.
NOTE:  Ching signed 13 trust receipts as surety,

acknowledging delivery of the goods
Liability unique to this case because of implied
agency and admitted corporate duty  Under the receipts, Ching agreed to hold the goods
26 years already and Dr. Ampil's status could in trust for RCBC, with authority to sell but not by way
no longer be ascertained of conditional sale, pledge or otherwise
______________ CASE ENDS HERE ___________
 In case such goods were sold, to turn over the
proceeds thereof as soon as received, to apply
against the relative acceptances and payment of
other indebtedness to respondent bank.
Espiritu v Petron  In case the goods remained unsold within the

specified period, the goods were to be returned to
RCBC without any need of demand.
Petitioners Espiritu, et al. point out that the certificate
of non-forum shopping that respondents KPE and  goods, manufactured products or proceeds thereof,
Petron attached to the petition they filed with the whether in the form of money or bills, receivables, or
accounts separate and capable of identification -  Ching’s being a Senior Vice-President of the
RCBC’s property Philippine Blooming Mills does not exculpate him from
any liability
 When the trust receipts matured, Ching failed to
return the goods to RCBC, or to return their value  The crime defined in P.D. No. 115 is malum
amounting toP6,940,280.66 despite demands. prohibitum but is classified as estafa under paragraph
1(b), Article 315 of the Revised Penal Code,
 RCBC filed a criminal complaint for estafa against or estafa with abuse of confidence. It may be
petitioner in the Office of the City Prosecutor of committed by a corporation or other juridical entity or
Manila. by natural persons. However, the penalty for the
crime is imprisonment for the periods provided in said
 December 8, 1995: no probable cause to charge Article 315.
petitioner with violating P.D. No. 115, as petitioner’s
liability was only civil, not criminal, having signed the  law specifically makes the officers, employees
trust receipts as surety or other officers or persons responsible for the
offense, without prejudice to the civil liabilities of such
 RCBC appealed the resolution to the Department of corporation and/or board of directors, officers, or other
Justice (DOJ) via petition for review officials or employees responsible for the offense
 On July 13, 1999: reversed the assailed resolution  rationale: officers or employees are
of the City Prosecutor vested with the authority and responsibility to devise
means necessary to ensure compliance with the law
and, if they fail to do so, are held criminally
 execution of said receipts is enough to indict the
accountable; thus, they have a responsible share in
Ching as the official responsible for violation of P.D.
the violations of the law
No. 115
 If the crime is committed by a corporation or
 April 22, 2004: CA dismissed the petition for lack of
other juridical entity, the directors, officers, employees
merit and on procedural grounds
or other officers thereof responsible for the offense
shall be charged and penalized for the crime,
 Ching filed a petition for certiorari, prohibition and precisely because of the nature of the crime and the
mandamus with the CA penalty therefor. A corporation cannot be arrested
and imprisoned; hence, cannot be penalized for a
ISSUE: W/N Ching should be held criminally liable. crime punishable by imprisonment. However, a
corporation may be charged and prosecuted for a
crime if the imposable penalty is fine. Even if the
HELD: YES. DENIED for lack of merit statute prescribes both fine and imprisonment as
penalty, a corporation may be prosecuted and, if
 There is no dispute that it was the Ching found guilty, may be fined
executed the 13 trust receipts.
 When a criminal statute designates an act of a
 law points to him as the official corporation or a crime and prescribes punishment
responsible for the offense therefor, it creates a criminal offense which,
otherwise, would not exist and such can be committed
only by the corporation. But when a penal statute
 Since a corporation CANNOT be
does not expressly apply to corporations, it does not
proceeded against criminally because it CANNOT
create an offense for which a corporation may be
commit crime in which personal violence or malicious
punished. On the other hand, if the State, by statute,
intent is required, criminal action is limited to the
defines a crime that may be committed by a
corporate agents guilty of an act amounting to a crime
corporation but prescribes the penalty therefor to be
and never against the corporation itself
suffered by the officers, directors, or employees of
such corporation or other persons responsible for the
 execution by Ching of receipts is offense, only such individuals will suffer such penalty.
enough to indict him as the official responsible for Corporate officers or employees, through whose act,
violation of PD 115 default or omission the corporation commits a crime,
are themselves individually guilty of the crime. The
 RCBC is estopped to still contend that principle applies whether or not the crime requires the
PD 115 covers only goods which are ultimately consciousness of wrongdoing. It applies to those
destined for sale and not goods, like those imported corporate agents who themselves commit the crime
by PBM, for use in manufacture. and to those, who, by virtue of their managerial
positions or other similar relation to the corporation,
 Moreover, PD 115 explicitly allows the could be deemed responsible for its commission, if by
prosecution of corporate officers ‘without prejudice to virtue of their relationship to the corporation, they had
the civil liabilities arising from the criminal offense’ the power to prevent the act. Benefit is not an
thus, the civil liability imposed on respondent in RCBC operative fact.
vs. Court of Appeals case is clearly separate and
distinct from his criminal liability under PD 115 ______________ CASE ENDS HERE ___________
BATAAN SHIPYARD & ENGINEERING CO., INC. business were taken over; Second, the PCGG is not a
(BASECO), petitioner, court, but a purely investigative agency and therefore
vs. not competent to act as prosecutor and judge in the
PRESIDENTIAL COMMISSION ON GOOD same cause; Third, there is nothing in the issuances
GOVERNMENT, CHAIRMAN JOVITO SALONGA, which envisions any proceeding, process or remedy
COMMISSIONER MARY CONCEPCION BAUTISTA, by which petitioner may expeditiously challenge the
COMMISSIONER RAMON DIAZ, COMMISSIONER validity of the takeover after the same has been
RAUL R. DAZA, COMMISSIONER QUINTIN S. effected; and Fourthly, being directed against
DOROMAL, CAPT. JORGE B. SIACUNCO, et al., specified persons, and in disregard of the
respondents. constitutional presumption of innocence and general
rules and procedures, they constitute a Bill of
FACTS Attainder.”
Challenged in this special civil action of certiorari and It argues that the order to produce corporate records
prohibition by a private corporation known as the from 1973 to 1986, which it has apparently already
Bataan Shipyard and Engineering Co., Inc. are: (1) complied with, was issued without court authority and
Executive Orders Numbered 1 and 2, promulgated by infringed its constitutional right against self-
President Corazon C. Aquino on February 28, 1986 incrimination, and unreasonable search and seizure.
and March 12, 1986, respectively, and (2) the 14
sequestration, takeover, and other orders issued, and
acts done, in accordance with said executive orders BASECO further contends that the PCGG had unduly
by the Presidential Commission on Good Government interfered with its right of dominion and management
and/or its Commissioners and agents, affecting said of its business affairs.
corporation.
ISSUE
The sequestration order which, in the view of the
petitioner corporation, initiated all its misery was Whether or not the sequestration order dated April 14,
issued on April 14, 1986 by Commissioner Mary 1986, and all other orders subsequently issued and
Concepcion Bautista. acts done on the basis thereof, inclusive of the
takeover order of July 14, 1986 and the termination of
On the strength of the above sequestration order, Mr. the services of the BASECO executives are valid;
Jose M. Balde, acting for the PCGG, addressed a
letter dated April 18, 1986 to the President and other DECISION
officers of petitioner firm, reiterating an earlier request
for the production of certain documents such as Stock Yes. The petition cannot succeed. The writs of
Transfer Book and other Legal documents (Articles of certiorari and prohibition prayed for will not be issued.
Incorporation, By-Laws, etc.) Other evidence submitted to the Court by the Solicitor
General proves that President Marcos not only
Orders were also issued in connection with the exercised control over BASECO, but also that he
sequestration and takeover, such as termination of actually owns well nigh one hundred percent of its
Contract for Security Services and abortion of outstanding stock.
contract for Improvement of Wharf at Engineer Island;
Change of Mode of Payment of Entry Charges; Executive Orders Not a Bill of Attainder – In the first
Operation of Sesiman Rock Quarry, Mariveles, Bataa; place, nothing in the executive orders can be
disposal of scrap, etc.; and the provisional takeover reasonably construed as a determination or
by the PCGG of BASECO, “the Philippine Dockyard declaration of guilt. On the contrary, the executive
Corporation and all their affiliated companies.” orders, inclusive of Executive Order No. 14, make it
perfectly clear that any judgment of guilt in the
While BASECO concedes that “sequestration without amassing or acquisition of “ill-gotten wealth” is to be
resorting to judicial action, might be made within the handed down by a judicial tribunal, in this case, the
context of Executive Orders Nos. 1 and 2 before Sandiganbayan, upon complaint filed and prosecuted
March 25, 1986 when the Freedom Constitution was by the PCGG. In the second place, no punishment is
promulgated, under the principle that the law inflicted by the executive orders, as the merest glance
promulgated by the ruler under a revolutionary regime at their provisions will immediately make apparent. In
is the law of the land, it ceased to be acceptable when no sense, therefore, may the executive orders be
the same ruler opted to promulgate the Freedom regarded as a bill of attainder.
Constitution on March 25, 1986 wherein under
Section I of the same,y Article IV (Bill of Rights) of the No Violation of Right against Self-Incrimination and
1973 Constitution was adopted providing, among Unreasonable Searches and Seizures – It is
others, that “No person shall be deprived of life, liberty elementary that the right against self-incrimination has
and property without due process of law.” (Const., Art. no application to juridical persons. While an individual
I V, Sec. 1).” may lawfully refuse to answer incriminating questions
unless protected by an immunity statute, it does not
It declares that its objection to the constitutionality of follow that a corporation, vested with special
the Executive Orders “as well as the Sequestration privileges and franchises, may refuse to show its
Order * * and Takeover Order * * issued purportedly hand when charged with an abuse ofsuchprivileges *
under the authority of said Executive Orders, rests on *
four fundamental considerations: First, no notice and
hearing was accorded * * (it) before its properties and Scope and Extent of Powers of the PCGG – PCGG
cannot exercise acts of dominion over property ABS-CBN Broadcasting Corporation vs Court of
sequestered, frozen or provisionally taken over. AS Appeals
already earlier stressed with no little insistence, the
act of sequestration; freezing or provisional takeover In 1992, ABS-CBN Broadcasting Corporation, through
of property does not import or bring about a its vice president Charo Santos-Concio, requested
divestment of title over said property; does not make Viva Production, Inc. to allow ABS-CBN to air at least
the PCGG the owner thereof. 14 films produced by Viva. Pursuant to this request, a
meeting was held between Viva’s representative
The PCGG may thus exercise only powers of (Vicente Del Rosario) and ABS-CBN’s Eugenio Lopez
administration over the property or business (General Manager) and Santos-Concio was held on
sequestered or provisionally taken over, much like a April 2, 1992. During the meeting Del Rosario
court-appointed receiver, such as to bring and defend proposed a film package which will allow ABS-CBN to
actions in its own name; receive rents; collect debts air 104 Viva films for P60 million. Later, Santos-
due; pay outstanding debts; and generally do such Concio, in a letter to Del Rosario, proposed a
other acts and things as may be necessary to fulfill its counterproposal of 53 films (including the 14 films
mission as conservator and administrator. initially requested) for P35 million. Del Rosario
presented the counter offer to Viva’s Board of
Powers over Business Enterprises Taken Over by Directors but the Board rejected the counter offer.
Marcos or Entities or Persons Close to him; Several negotiations were subsequently made but on
Limitations Thereon – Now, in the special instance of April 29, 1992, Viva made an agreement with
a business enterprise shown by evidence to have Republic Broadcasting Corporation (referred to as
been “taken over by the government of the Marcos RBS – or GMA 7) which gave exclusive rights to RBS
Administration or by entities or persons close to to air 104 Viva films including the 14 films initially
former President Marcos,” the PCGG is given power requested by ABS-CBN.
and authority, as already adverted to, to “provisionally
take (it) over in the public interest or to prevent * * (its)
disposal or dissipation;” and since the term is ABS-CBN now filed a complaint for specific
obviously employed in reference to going concerns, or performance against Viva as it alleged that there is
business enterprises in operation, something more already a perfected contract between Viva and ABS-
than mere physical custody is connoted; the PCGG CBN in the April 2, 1992 meeting. Lopez testified that
may in this case exercise some measure of control in Del Rosario agreed to the counterproposal and he
the operation, running, or management of the (Lopez) even put the agreement in a napkin which
business itself. But even in this special situation, the was signed and given to Del Rosario. ABS-CBN also
intrusion into management should be restricted to the filed an injunction against RBS to enjoin the latter
minimum degree necessary to accomplish the from airing the films. The injunction was granted. RBS
legislative will, which is “to prevent the disposal or now filed a countersuit with a prayer for moral
dissipation” of the business enterprise. damages as it claimed that its reputation was
debased when they failed to air the shows that they
Voting of Sequestered Stock; Conditions Therefor – promised to their viewers. RBS relied on the ruling in
So, too, it is within the parameters of these conditions People vs Manero and Mambulao Lumber vs PNB
and circumstances that the PCGG may properly which states that a corporation may recover moral
exercise the prerogative to vote sequestered stock of damages if it “has a good reputation that is debased,
corporations, granted to it by the President of the resulting in social humiliation”. The trial court ruled in
Philippines through a Memorandum dated June 26, favor of Viva and RBS. The Court of Appeals affirmed
1986. In the case at bar, there was adequate the trial court.
justification to vote the incumbent directors out of
office and elect others in their stead because the ISSUE:
evidence showed prima facie that the former were just
tools of President Marcos and were no longer owners 1. Whether or not a contract was perfected in the
of any stock in the firm, if they ever were at all. April 2, 1992 meeting between the representatives of
the two corporations.
No Sufficient Showing of Other Irregularities -As to 2. Whether or not a corporation, like RBS, is
the other irregularities complained of by BASECO, entitled to an award of moral damages upon grounds
i.e., the cancellation or revision, and the execution of of debased reputation.
certain contracts, inclusive of the termination of the
employment of some of its executives, this Court
HELD:
cannot, in the present state of the evidence on record,
pass upon them. It is not necessary to do so. The
issues arising therefrom may and will be left for initial 1. No. There is no proof that a contract was perfected
determination in the appropriate action. in the said meeting. Lopez’ testimony about the
contract being written in a napkin is not corroborated
WHEREFORE, the petition is dismissed. The because the napkin was never produced in court.
temporary restraining order issued on October 14, Further, there is no meeting of the minds because Del
1986 is lifted. Rosario’s offer was of 104 films for P60 million was
not accepted. And that the alleged counter-offer made
by Lopez on the same day was not also accepted
______________ CASE ENDS HERE ___________
because there’s no proof of such. The counter offer
can only be deemed to have been made days after
the April 2 meeting when Santos-Concio sent a letter
to Del Rosario containing the counter-offer. Medicine (AMEC) and its administrators. Claiming
Regardless, there was no showing that Del Rosario that the broadcasts were defamatory, AMEC and
accepted. But even if he did accept, such acceptance Angelita Ago (Ago), as Dean of AMECs College of
will not bloom into a perfected contract because Del Medicine, filed a complaint for damages [7] against
Rosario has no authority to do so. FBNI, Rima and Alegre on 27 February 1990. Quoted
are portions of the allegedly libelous broadcasts
As a rule, corporate powers, such as the power; to
enter into contracts; are exercised by the Board of
Directors. But this power may be delegated to a Issue:
corporate committee, a corporate officer or corporate I. WHETHER AMEC IS ENTITLED TO MORAL
manager. Such a delegation must be clear and DAMAGES;
specific. In the case at bar, there was no such
delegation to Del Rosario. The fact that he has to
present the counteroffer to the Board of Directors of Ruling:
Viva is proof that the contract must be accepted first
by the Viva’s Board. Hence, even if Del Rosario FBNI contends that AMEC is not entitled to moral
accepted the counter-offer, it did not result to a damages because it is a corporation.[39]
contract because it will not bind Viva sans A juridical person is generally not entitled to moral
authorization. damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as
2. No. The award of moral damages cannot be wounded feelings, serious anxiety, mental anguish or
granted in favor of a corporation because, being an moral shock.[40] The Court of Appeals
artificial person and having existence only in legal cites Mambulao Lumber Co. v. PNB, et al.[41] to
contemplation, it has no feelings, no emotions, no justify the award of moral damages. However, the
senses, It cannot, therefore, experience physical Courts statement in Mambulao that a corporation
suffering and mental anguish, which call be may have a good reputation which, if besmirched,
experienced only by one having a nervous may also be a ground for the award of moral
system. No moral damages can be awarded to a damages is an obiter dictum.[42]
juridical person. The statement in the case of People Nevertheless, AMECs claim for moral damages falls
vs Manero and Mambulao Lumber vs PNB is a mere under item 7 of Article 2219[43] of the Civil Code. This
obiter dictum hence it is not binding as a provision expressly authorizes the recovery of moral
jurisprudence. damages in cases of libel, slander or any other form
of defamation. Article 2219(7) does not qualify
______________ CASE ENDS HERE ___________ whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation
can validly complain for libel or any other form of
FILIPINAS BROADCASTING NETWORK, defamation and claim for moral damages.[44]
INC., petitioner, vs. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL CHRISTIAN Moreover, where the broadcast is libelous per se, the
COLLEGE OF MEDICINE, (AMEC-BCCM) and law implies damages.[45] In such a case, evidence of
ANGELITA F. AGO, respondents. an honest mistake or the want of character or
reputation of the party libeled goes only in mitigation
The Case of damages.[46] Neither in such a case is the plaintiff
This petition for review[1] assails the 4 January 1999 required to introduce evidence of actual damages as
Decision[2] and 26 January 2000 Resolution of the a condition precedent to the recovery of some
Court of Appeals in CA-G.R. CV No. 40151. The damages.[47] In this case, the broadcasts are
Court of Appeals affirmed with modification the 14 libelous per se. Thus, AMEC is entitled to moral
December 1992 Decision[3] of the Regional Trial damages.
Court of Legazpi City, Branch 10, in Civil Case No. However, we find the award of P300,000 moral
8236. The Court of Appeals held Filipinas damages unreasonable. The record shows that even
Broadcasting Network, Inc. and its broadcasters though the broadcasts were libelous per se, AMEC
Hermogenes Alegre and Carmelo Rima liable for libel has not suffered any substantial or material damage
and ordered them to solidarily pay Ago Medical and to its reputation. Therefore, we reduce the award of
Educational Center-Bicol Christian College of moral damages from P300,000 to P150,000.
Medicine moral damages, attorneys fees and costs of
suit. ______________ CASE ENDS HERE ___________
The Antecedents
Expos is a radio documentary [4] program hosted by Acebedo Optical Co. vs. Court of Appeals, G.R.
Carmelo Mel Rima (Rima) and Hermogenes Jun No. 100152, March 31, 2000
Alegre (Alegre).[5] Expos is aired every morning over Facts:
DZRC-AM which is owned by Filipinas Broadcasting
Petitioner applied with the Office of the City Mayor of
Network, Inc. (FBNI). Expos is heard over Legazpi
Iligan for a business permit. After consideration of
City, the Albay municipalities and other Bicol areas. [6]
petitioner's application and the opposition interposed
In the morning of 14 and 15 December 1989, Rima thereto by local optometrists, respondent City Mayor
and Alegre exposed various alleged complaints from issued Business Permit No. 5342 subject to the
students, teachers and parents against Ago Medical following conditions: (1) Since it is a corporation,
and Educational Center-Bicol Christian College of Acebedo cannot put up an optical clinic but only a
commercial store; (2) It cannot examine and/or State within the contemplation of the general welfare
prescribe reading and similar optical glasses for clause of the Local Government Code.
patients, because these are functions of optical
clinics; (3) It cannot sell reading and similar
eyeglasses without a prescription having first been What is sought by petitioner from respondent City
made by an independent optometrist or independent Mayor is a permit to engage in the business of
optical clinic. Acebedo can only sell directly to the running an optical shop. It does not purport to seek a
public, without need of a prescription, Ray-Ban and license to engage in the practice of optometry. The
similar eyeglasses; (4) It cannot advertise optical objective of the imposition of subject conditions on
lenses and eyeglasses, but can advertise Ray-Ban petitioner's business permit could be attained by
and similar glasses and frames; (5) It is allowed to requiring the optometrists in petitioner's employ to
grind lenses but only upon the prescription of an produce a valid certificate of registration as
independent optometrist. optometrist, from the Board of Examiners in
Optometry. A business permit is issued primarily to
regulate the conduct of business and the City Mayor
On December 5, 1988, private respondent Samahan cannot, through the issuance of such permit, regulate
ng Optometrist Sa Pilipinas (SOPI lodged a complaint the practice of a profession. Such a function is within
against the petitioner alleging that Acebedo had the exclusive domain of the administrative agency
violated the conditions set forth in its business permit specifically empowered by law to supervise the
and requesting the cancellation and/or revocation of profession, in this case the Professional Regulations
such permit. On July 19, 1989, the City Mayor sent Commission and the Board of Examiners in
petitioner a Notice of Resolution and Cancellation of Optometry.
Business Permit effective as of said date and giving
petitioner three (3) months to wind up its affairs.
Ruling: WHEREFORE, the petition is GRANTED; the
Decision of the Court of Appeals in CA-GR SP No.
Issue: 22995 REVERSED: and the respondent City Mayor is
hereby ordered to reissue petitioner's business permit
Whether the City Mayor has the authority to impose
in accordance with law and with this disposition. No
special conditions, as a valid exercise of police power,
pronouncement as to costs.
in the grant of business permits
Doctrine: The scope of police power has been held to

Ratio:
be so comprehensive as to encompass almost all
Police power as an inherent attribute of sovereignty matters affecting the health, safety, peace, order,
is the power to prescribe regulations to promote the morals, comfort and convenience of the community.
health, morals, peace, education, good order or safety Police power is essentially regulatory in nature and
and general welfare of the people. It is essentially the power to issue licenses or grant business permits,
regulatory in nature and the power to issue licenses if exercised for a regulatory and not revenue-raising
or grant business permits, if exercised for a regulatory purpose, is within the ambit of this power.
and not revenue-raising purpose, is within the ambit
of this power. The authority of city mayors to issue or
grant licenses and business permits is beyond cavil. Requisites
However, the power to grant or issue licenses or
business permits must always be exercised in
accordance with law, with utmost observance of the 1 - LAWFUL SUBJECT: The interests of the public
rights of all concerned to due process and equal generally, as distinguished from those of a particular
protection of the law. class, require the exercise of the police power
In the case under consideration, the business permit 2 - LAWFUL MEANS: The means employed are
granted by respondent City Mayor to petitioner was reasonably necessary for the accomplishment of the
burdened with several conditions. Petitioner agrees purpose and not unduly oppressive upon individuals
with the holding by the Court of Appeals that
______________ CASE ENDS HERE ___________
respondent City Mayor acted beyond his authority in
imposing such special conditions in its permit as the
SAPPARI K. SAWADJAAN V. CA (G.R. NO. 141735)
same have no basis in the law or ordinance. Public
respondents and private respondent SOPI are one in
saying that the imposition of said special conditions is Facts:
well within the authority of the City Mayor as a valid Petitioner Sawadjaan was an appraiser/investigator in
exercise of police power. the Philippine Amanah Bank (PAB) when on the basis
of his report, a credit line was granted to Compressed
Air Machineries and Equipment Corporation (CAMEC)
The issuance of business licenses and permits by a by virtue of the two parcels of land it offered as
municipality or city is essentially regulatory in nature. collaterals. Meanwhile, Congress passed a law which
The authority, which devolved upon local government created Al-Amanah Investment Bank of the
units to issue or grant such licenses or permits, is Philippines (AIIBP) and repealed the law creating
essentially in the exercise of the police power of the PAB, transferring all its assets, liabilities and capital
accounts to AIIBP. Later, AIIBP discovered that the
collaterals were spurious, thus conducted an a Philippine corporation and a company servicing ML
investigation and found petitioner Sawadjaan at fault. Futures' customers;" (3) that from the outset, the Lara
Petitioner appealed before the SC which ruled against Spouses "knew and were duly advised that Merrill
him. Petitioner moved for a new trial claiming he Lynch Philippines, Inc. was not a broker in futures
recently discovered that AIIBP had not yet adopted its contracts," and that it "did not have a license from the
corporate by-laws and since it failed to file within 60 Securities and Exchange Commission to operate as a
days from the passage of its law, it had forfeited its commodity trading advisor (i.e., "and entity which, not
franchise or charter and thus has no legal standing to being a broker, furnishes advice on commodity
initiate an administrative case. The motion was futures to persons who trade in futures contracts"); (4)
denied. that in line with the above mentioned agreement and
through said Merill Lynch Philippines, Inc., the Lara
Issue: Spouses actively traded in futures contracts, including
Whether or not the failure of AIIBP to file its by-laws "stock index futures" for four years or so, i.e., from
within the period prescribed results to a nullity of all 1983 to October, 1987, there being more or less
actions and proceedings it has initiated. regular accounting and corresponding remittances of
money (or crediting or debiting) made between the
Ruling: NO. spouses and ML FUTURES; (5) that because of a
The AIIBP was created by Rep. Act No. 6848. It has a loss amounting to US $160,749.69 incurred in respect
main office where it conducts business, has of 3 transactions involving "index futures," and after
shareholders, corporate officers, a board of directors, setting this off against an amount of US $75,913.42
assets, and personnel. It is, in fact, here represented then owing by ML FUTURES to the Lara Spouses,
by the Office of the Government Corporate Counsel, said spouses became indebted to ML FUTURES for
“the principal law office of government-owned the ensuing balance of US $84,836.27, which the
corporations, one of which is respondent bank.” At the latter asked them to pay; (6) that the Lara Spouses
very least, by its failure to submit its by-laws on time, however refused to pay this balance, "alleging that the
the AIIBP may be considered a de facto corporation transactions were null and void because Merrill Lynch
whose right to exercise corporate powers may not be Philippines, Inc., the Philippine company servicing
inquired into collaterally in any private suit to which accounts of ML Futures, had no license to operate as
such corporations may be a party. a "commodity and/or financial futures broker."
Moreover, a corporation which has failed to file its by-
laws within the prescribed period does not ipso On the foregoing essential facts, ML FUTURES
facto lose its powers as such. The SEC Rules on prayed (1) for a preliminary attachment against the
Suspension/Revocation of the Certificate of spouses' properties "up to the value of at least
Registration of Corporations, details the procedures P2,267,139.50," and (2) for judgment, after trial,
and remedies that may be availed of before an order sentencing the spouses to pay ML FUTURES: (a) the
of revocation can be issued. There is no showing that Philippine peso equivalent of $84,836.27 at the
such a procedure has been initiated in this case. applicable exchange rate on date of payment, with
Adv legal interest from the date of demand until full
payment; (b) exemplary damages in the sum of at
least P500,000,00; and (c) attorney's fees and
______________ CASE ENDS HERE ___________
expenses of litigation as may be proven at the trial.
Preliminary attachment issued ex parte on 2
December 1987, and the spouses were duly served
Merrill Lynch Futures vs. Court of Appeals
with summons. The spouses filed a motion to dismiss
[GR 97816, 24 July 1992]
dated 18 December 1987 on the grounds that (1) ML
FUTURES had "no legal capacity to sue" and (2) its
Facts: On 23 November 1987, Merrill Lynch futures,
"complaint states no cause of action since it is not the
Inc. (ML FUTURES) filed a complaint with the
real party in interest." On 12 January 1988, the Trial
Regional Trial Court at Quezon City against the
Court promulgated an Order sustaining the motion to
Spouses Pedro M. Lara and Elisa G. Lara for the
dismiss, directing the dismissal of the case and
recovery of a debt and interest thereon, damages,
discharging the writ of preliminary attachment. It later
and attorney's fees. In its complaint ML FUTURES
denied ML FUTURES's motion for reconsideration, by
described itself as (a) "a non-resident foreign
Order dated 29 February 1988. ML FUTURES
corporation, not doing business in the Philippines,
appealed to the Court of Appeals. In its own decision
duly organized and existing under and by virtue of the
promulgated on 27 November 1990, the Court of
laws of the state of Delaware, U.S.A.;" as well as (b) a
Appeals affirmed the Trial Court's judgment. Its
'futures commission merchant' duly licensed to act as
motion for reconsideration having been denied, ML
such in the futures markets and exchanges in the
FUTURES appealed to the Supreme Court on
United States, . . . essentially functioning as a broker
certiorari.
(executing) orders to buy and sell futures contracts
received from its customers on U.S. futures
Issue:
exchanges." In its complaint ML FUTURES alleged
Whether – in light of the fact that the Laras
(1) that on 28 September 1983 it entered into a
were fully aware of its lack of license to do
Futures Customer Agreement with the spouses
business in the Philippines, and in relation to
(Account 138-12161), in virtue of which it agreed to
those transactions had made payments to,
act as the latter's broker for the purchase and sale of
and received money from it for several years –
futures contracts in the U.S.; (2) that pursuant to the
the Lara Spouses are estopped to impugn ML
contract, orders to buy and sell futures contracts were
FUTURES capacity to sue them in the courts
transmitted to ML FUTURES by the Lara Spouses
of the forum.
"through the facilities of Merrill Lynch Philippines, Inc.,
Held:
Held:
The Laras received benefits generated by their
business relations with ML FUTURES. Those NO. While it is true that prescription does not
business relations, according to the Laras run against the State, the same may not be invoked
themselves, spanned a period of 7 years; and they by the government in this case since it is no longer
evidently found those relations to be of such interested in the subject matter. While Camp
profitability as warranted their maintaining them for Wallance may have belonged to the government at
that not insignificant period of time; otherwise, it is the time Galvez’ title was ordered cancelled, the same
reasonably certain that they would have terminated no longer holds true today.
their dealings with ML FUTURES much, much earlier.
In fact, even as regards their last transaction, in which RA 7277 created Bases Conversion and
the Laras allegedly suffered a loss in the sum of Development Authority (BSDA). With the transfer of
US$160,749.69, the Laras nonetheless still received Camp Wallance to the BCDA, the government has no
some monetary advantage, for ML FUTURES longer a right or protect.
credited them with the amount of US $75,913.42 then
due to them, thus reducing their debt to US The rule that prescription does not run against
$84,836.27. Given these facts, and assuming that the the State does not apply to corporations or artificial
Lara Spouses were aware from the outset that ML bodies created by the State for special purposes, it
FUTURES had no license to do business in this being said that when the title of the Republic has
country and MLPI, no authority to act as broker for it, been divested, its grantees, although artificial bodies
it would appear quite inequitable for the Laras to of its own creation, are in the same category as
evade payment of an otherwise legitimate ordinary persons.
indebtedness due and owing to ML FUTURES upon
the plea that it should not have done business in this
country in the first place, or that its agent in this ______________ CASE ENDS HERE ___________
country, MLPI, had no license either to operate as a
BALUYOT V HOLGANZA
"commodity and/or financial futures broker."
Considerations of equity dictate that, at the very least,
the issue of whether the Laras are in truth liable to ML
The facts are:
FUTURES and if so in what amount, and whether
they were so far aware of the absence of the requisite
During a spot audit conducted on March 21, 1977 by
licenses on the part of ML FUTURES and its
a team of auditors from the Philippine National Red
Philippine correspondent, MLPI, as to be estopped
Cross (PNRC) headquarters, a cash shortage of
from alleging that fact as a defense to such liability,
P154,350.13 was discovered in the funds of its Bohol
should be ventilated and adjudicated on the merits by
chapter. The chapter administrator, petitioner
the proper trial court.
Francisca S. Baluyot, was held accountable for the
shortage. Thereafter, on January 8, 1998, private
______________ CASE ENDS HERE ___________
respondent Paul E. Holganza, in his capacity as a
member of the board of directors of the Bohol
Shipside Incorporated vs. The Court of Appeals chapter, filed an affidavit-complaint [1] before the Office
352 SCRA 334, February 20, 2011 of the Ombudsman charging petitioner of
malversation under Article 217 of the Revised Penal
Doctrine: Code. The complaint was docketed as OMB-VIS-
CRIM-98-0022. However, upon recommendation by
Prescription of action does not run against the State: respondent Anna Marie P. Militante, Graft
it is not applicable to artificial bodies created by the Investigation Officer I, an administrative docket for
State for special purpose. dishonesty was also opened against petitioner;
hence, OMB-VIS-ADM-98-0063.[2]
Facts:
On February 6, 1998, public respondent issued an
OCTs were issued in favor of Rafael Galvez Order[3] requiring petitioner to file her counter-affidavit
over four parcels of land. Lots 1 and 4 were to the charges of malversation and dishonesty within
conveyed by Galvez to Mamaril, who later sold the ten days from notice, with a warning that her failure to
same Order declaring his OCT null and void. Lepanto comply would be construed as a waiver on her part to
sold Lots 1 and 4 to herein petitioner. refute the charges, and that the case would be
resolved based on the evidence on record. On March
Galvez filed a Motion for Reconsideration 14, 1998, petitioner filed her counter-affidavit, [4] raising
against the Order declaring his OCT null and void. principally the defense that public respondent had no
The motion was denied. On appeal, the CA ruled in jurisdiction over the controversy. She argued that the
favor of the Republic and issued a writ of execution. Ombudsman had authority only over government-
The order was not executed. After twenty-five long owned or controlled corporations, which the PNRC
years, the Sol Gen filed a complaint for revival of was not, or so she claimed.
judgment and cancellation of titles.
On August 21, 1998, public respondent issued the
Issue: first assailed Order[5] denying petitioner's motion to
dismiss. It further scheduled a clarificatory hearing on
Whether or not the Republic may still for the criminal aspect of the complaint and a preliminary
revival of judgment. conference on its administrative aspect on September
2, 1998. Petitioner received the order on August 26, government corporations subject to its provisions, and
1998 and she filed a motion for reconsideration[6] the its employees are under the jurisdiction of the Civil
next day. Service Commission, and are compulsory members
of the Government Service Insurance System. The
On October 28, 1998, public respondent issued the PNRC was not "impliedly converted to a private
second assailed Order[7] denying petitioner's motion corporation" simply because its charter was amended
for reconsideration. Hence, this recourse. to vest in it the authority to secure loans, be exempted
from payment of all duties, taxes, fees and other
We dismiss the petition. charges of all kinds on all importations and purchases
for its exclusive use, on donations for its disaster relief
Petitioner contends that the Ombudsman has no work and other services and in its benefits and fund
jurisdiction over the subject matter of the controversy raising drives, and be allotted one lottery draw a year
since the PNRC is allegedly a private voluntary by the Philippine Charity Sweepstakes Office for the
organization. The following circumstances, she support of its disaster relief operation in addition to its
insists, are indicative of the private character of the existing lottery draws for blood program."
organization: (1) the PNRC does not receive any Clearly then, public respondent has jurisdiction over
budgetary support from the government, and that all the matter, pursuant to Section 13, of Republic Act
money given to it by the latter and its instrumentalities No. 6770, otherwise known as "The Ombudsman Act
become private funds of the organization; (2) funds of 1989", to wit:
for the payment of personnel's salaries and other
emoluments come from yearly fund campaigns, "SEC. 13. Mandate. - The Ombudsman and his
private contributions and rentals from its properties; Deputies, as protectors of the people, shall act
and (3) it is not audited by the Commission on Audit. promptly on complaints filed in any form or manner
Petitioner states that the PNRC falls under the against officers or employees of the Government, or
International Federation of Red Cross, a Switzerland- of any subdivision, agency or instrumentality
based organization, and that the power to discipline thereof, includinggovernment-owned or controlled
employees accused of misconduct, malfeasance, or corporations, and enforce their administrative, civil
immorality belongs to the PNRC Secretary General by and criminal liability in ever case where the evidence
virtue of Section "G", Article IX of its by-laws. [8] She warrants in order to promote efficient service by the
threatens that "to classify the PNRC as a government- Government to the people."[11]
owned or controlled corporation would create a WHEREFORE, the petition for certiorari is
dangerous precedent as it would lose its neutrality, hereby DISMISSED. Costs against petitioner.
independence and impartiality xxx."[9]
______________ CASE ENDS HERE ___________
Practically the same issue was addressed
in Camporedondo v. National Labor Relations REPUBLIC OF THE PHILIPPINES, represented by
Commission, et. al.,[10] where an almost identical set the Director of Lands, petitioner-appellant,
of facts obtained. Petitioner therein was the vs.
administrator of the Surigao del Norte chapter of the JUDGE CANDIDO P. VILLANUEVA, of the Court of
PNRC. An audit conducted by a field auditor revealed First Instance of Bulacan, Malolos Branch VII, and
a shortage in the chapter funds in the sum of IGLESIA NI CRISTO, as a corporation sole,
P109,000.00. When required to restitute the amount represented by ERAÑO G. MANALO, as Executive
of P135,927.78, petitioner therein instead applied for Minister, respondents-appellees.
early retirement, which was denied by the Secretary
General of the PNRC. Subsequently, the petitioner
filed a complaint for illegal dismissal and damages Like L-49623, Manila Electric Company vs. Judge
against PNRC before the National Labor Relations Castro-Bartolome, this case involves the prohibition in
Commission. In turn, PNRC moved to dismiss the section 11, Article XIV of the Constitution that "no
complaint on the ground of lack of jurisdiction, private corporation or association may hold alienable
averring that PNRC was a government corporation lands of the public domain except by lease not to
whose employees are embraced by civil service exceed one thousand hectares in area".
regulation. The labor arbiter dismissed the complaint,
and the Commission sustained his order. The
Lots Nos. 568 and 569, located at Barrio Dampol,
petitioner assailed the dismissal of his complaint via a
Plaridel, Bulacan, with an area of 313 square meters
petition for certiorari, contending that the PNRC is a
and an assessed value of P1,350 were acquired by
private organization and not a government-owned or
the Iglesia Ni Cristo on January 9, 1953 from Andres
controlled corporation. In dismissing the petition, we
Perez in exchange for a lot with an area of 247
ruled thus:
square meters owned by the said church (Exh. D).
"Resolving the issue set out in the opening paragraph
The said lots were already possessed by Perez in
of this opinion, we rule that the Philippine National
1933. They are not included in any military
Red Cross (PNRC) is a government owned and
reservation. They are inside an area which was
controlled corporation, with an original charter under
certified as alienable or disposable by the Bureau of
Republic Act No. 95, as amended. The test to
Forestry in 1927. The lots are planted to santol and
determine whether a corporation is government
mango trees and banana plants. A chapel exists on
owned or controlled, or private in nature is simple. Is it
the said land. The land had been declared for realty
created by its own charter for the exercise of a public
tax purposes. Realty taxes had been paid therefor
function, or by incorporation under the general
(Exh. N).
corporation law? Those with special charters are
On September 13, 1977, the Iglesia Ni Cristo, a As correctly contended by the Solicitor General, the
corporation sole, duly existing under Philippine laws, Iglesia Ni Cristo, as a corporation sole or a juridical
filed with the Court of First Instance of Bulacan an person, is disqualified to acquire or hold alienable
application for the registration of the two lots. It lands of the public domain, like the two lots in
alleged that it and its predecessors-in-interest had question, because of the constitutional prohibition
possessed the land for more than thirty years. It already mentioned and because the said church is not
invoked section 48(b) of the Public Land Law, which entitled to avail itself of the benefits of section 48(b)
provides: which applies only to Filipino citizens or natural
persons. A corporation sole (an "unhappy freak of
Chapter VIII.—Judicial confirmation of English law") has no nationality (Roman Catholic
imperfect or incomplete titles. Apostolic Adm. of Davao, Inc. vs. Land Registration
Commission, 102 Phil. 596. See Register of Deeds
xxx xxx xxx vs. Ung Siu Si Temple, 97 Phil. 58 and sec. 49 of the
Public Land Law).
SEC. 48. The following-
described citizens of the Philippines, The contention in the comments of the Iglesia Ni
occupying lands of the public domain Cristo (its lawyer did not file any brief) that the two lots
or claiming to own any such lands or are private lands, following the rule laid down in Susi
an interest therein, but whose titles vs. Razon and Director of Lands, 48 Phil. 424, is not
have not been perfected or completed, correct. What was considered private land in
may apply to the Court of First the Susi case was a parcel of land possessed by a
Instance of the province where the Filipino citizen since time immemorial, as in Cariño
land is located for confirmation of their vs. Insular Government, 212 U.S. 449, 53 L. ed. 594,
claims and the issuance of a 41 Phil. 935 and 7 Phil. 132. The lots sought to be
certificate of title therefore, under the registered in this case do not fall within that category.
Land Register Act, to wit: They are still public lands. A land registration
proceeding under section 48(b) "presupposes that the
land is public" (Mindanao vs. Director of Lands, L-
xxx xxx xxx
19535, July 10, 1967, 20 SCRA 641, 644).
(b) Those who by themselves or
As held in Oh Cho vs. Director of Lands, 75 Phil. 890,
through their predecessors-in-interest
"all lands that were not acquired from the
have been in open, continuous,
Government, either by purchase or by grant, belong
exclusive, and notorious possession
to the public domain. An exception to the rule would
and occupation of agricultural lands of
be any land that should have been in the possession
the public domain, under a bona
of an occupant and of his predecessors-in-interest
fide claim of acquisition of ownership,
since time immemorial, for such possession would
for at least thirty years immediately
justify the presumption that the land had never been
preceding the filing of the application
part of the public domain or that it had been a private
for confirmation of title except when
property even before the Spanish conquest. "
prevented by war or force majeure.
These shall be conclusively presumed
to have performed all the conditions In Uy Un vs. Perez, 71 Phil. 508, it was noted that the
essential to a Government grant and right of an occupant of public agricultural land to
shall be entitled to a certificate of title obtain a confirmation of his title under section 48(b) of
under the provisions of this chapter." the Public Land Law is a "derecho dominical
(As amended by Republic Act No. incoativo"and that before the issuance of the
1942, approved on June 22, 1957.) certificate of title the occupant is not in the juridical
sense the true owner of the land since it still pertains
to the State.
The Republic of the Philippines, through the Direct/r
of Lands, opposed the application on the grounds that
applicant, as a private corporation, is disqualified to The lower court's judgment is reversed and set aside.
hold alienable lands of the public domain, that the The application for registration of the Iglesia Ni Cristo
land applied for is public land not susceptible of is dismissed with costs against said applicant.
private appropriation and that the applicant and its
predecessors-in-interest have not been in the open, SO ORDERED
continuous, exclusive and notorious possession of the
land since June 12, 1945. ______________ CASE ENDS HERE ___________
After hearing, the trial court ordered the registration of Republic Planters Bank vs. Agana
the two lots, as described in Plan Ap-04-001344 (Exh. [GR 51765, 3 March 1997]
E), in the name of the Iglesia Ni Cristo, a corporation
sole, represented by Executive Minister Eraño G. Facts: On 18 September 1961, the Robes-Francisco
Manalo, with office at the corner of Central and Don Realty & Development Corporation (RFRDC) secured
Mariano Marcos Avenues, Quezon City, From that a loan from the Republic Planters Bank in the amount
decision, the Republic of the Philippines appealed to of P120,000.00. As part of the proceeds of the loan,
this Court under Republic Act No. 5440. The appeal preferred shares of stocks were issued to RFRDC
should be sustained. through its officers then, Adalia F. Robes and one
Carlos F. Robes. In other words, instead of giving the
legal tender totaling to the full amount of the loan, deficiency, and that such finding resulted in a
which is P120,000.00, the Bank lent such amount directive, issued on 31 January 1973 by then Gov. G.
partially in the form of money and partially in the form S. Licaros of the Central Bank, to the President and
of stock certificates numbered 3204 and 3205, each Acting Chairman of the Board of the bank prohibiting
for 400 shares with a par value of P10.00 per share, the latter from redeeming any preferred share, on the
or for P4,000.00 each, for a total of P8,000.00. Said ground that said redemption would reduce the assets
stock certificates were in the name of Adalia F. Robes of the Bank to the prejudice of its depositors and
and Carlos F. Robes, who subsequently, however, creditors. Redemption of preferred shares was
endorsed his shares in favor of Adalia F. Robes. prohibited for a just and valid reason. The directive
issued by the Central Bank Governor was obviously
Said certificates of stock bear the following terms and meant to preserve the status quo, and to prevent the
conditions: "The Preferred Stock shall have the financial ruin of a banking institution that would have
following rights, preferences, qualifications and resulted in adverse repercussions, not only to its
limitations, to wit: 1. Of the right to receive a quarterly depositors and creditors, but also to the banking
dividend of 1%, cumulative and participating. xxx 2. industry as a whole. The directive, in limiting the
That such preferred shares may be redeemed, by the exercise of a right granted by law to a corporate
system of drawing lots, at any time after 2 years from entity, may thus be considered as an exercise of
the date of issue at the option of the Corporation." On police power.
31 January 1979, RFRDC and Robes proceeded
against the Bank and filed a complaint anchored on 2. Both Section 16 of the Corporation Law and
their alleged rights to collect dividends under the Section 43 of the present Corporation Code prohibit
preferred shares in question and to have the bank the issuance of any stock dividend without the
redeem the same under the terms and conditions of approval of stockholders, representing not less than
the stock certificates. The bank filed a Motion to two-thirds (2/3) of the outstanding capital stock at a
Dismiss 3 private respondents' Complaint on the regular or special meeting duly called for the purpose.
following grounds: (1) that the trial court had no These provisions underscore the fact that payment of
jurisdiction over the subject-matter of the action; (2) dividends to a stockholder is not a matter of right but
that the action was unenforceable under substantive a matter of consensus. Furthermore, "interest bearing
law; and (3) that the action was barred by the statute stocks", on which the corporation agrees absolutely to
of limitations and/or laches. The bank's Motion to pay interest before dividends are paid to common
Dismiss was denied by the trial court in an order stockholders, is legal only when construed as
dated 16 March 1979. The bank then filed its Answer requiring payment of interest as dividends from net
on 2 May 1979. Thereafter, the trial court gave the earnings or surplus only. In compelling the bank to
parties 10 days from 30 July 1979 to submit their redeem the shares and to pay the corresponding
respective memoranda after the submission of which dividends, the Trial committed grave abuse of
the case would be deemed submitted for resolution. discretion amounting to lack or excess of jurisdiction
On 7 September 1979, the trial court rendered the in ignoring both the terms and conditions specified in
decision in favor of RFRDC and Robes; ordering the the stock certificate, as well as the clear mandate of
bank to pay RFRDC and Robes the face value of the the law.
stock certificates as redemption price, plus 1%
quarterly interest thereon until full payment. The bank ______________ CASE ENDS HERE ___________
filed the petition for certiorari with the Supreme Court,
essentially on pure questions of law.
Commissioner of Internal Revenue vs Court of
Appeals and A. Soriano Corp.
Issue:
1. Whether the bank can be compelled to
Don Andres Soriano (American), founder of A.
redeem the preferred shares issued to
Soriano Corp. (ASC) had a total shareholdings of
RFRDC and Robes.
185,154 shares. Broken down, the shares comprise of
2. Whether RFRDC and Robes are 50,495 shares which were of original issue when the
entitled to the payment of certain rate of corporation was founded and 134,659 shares as
interest on the stocks as a matter of right stock dividend declarations. So in 1964 when Soriano
without necessity of a prior declaration of died, half of the shares he held went to his wife as her
dividend. conjugal share (wife’s “legitime”) and the other half
Held: (92,577 shares, which is further broken down to
25,247.5 original issue shares and 82,752.5 stock
1. While the stock certificate does allow redemption, dividend shares) went to the estate. For sometime
the option to do so was clearly vested in the bank. after his death, his estate still continued to receive
The redemption therefore is clearly the type known as stock dividends from ASC until it grew to at least
"optional". Thus, except as otherwise provided in the 108,000 shares.
stock certificate, the redemption rests entirely with the
corporation and the stockholder is without right to In 1968, ASC through its Board issued a resolution for
either compel or refuse the redemption of its stock. the redemption of shares from Soriano’s estate
Furthermore, the terms and conditions set forth purportedly for the planned “Filipinization” of ASC.
therein use the word "may". It is a settled doctrine in Eventually, 108,000 shares were redeemed from the
statutory construction that the word "may" denotes Soriano Estate. In 1973, a tax audit was conducted.
discretion, and cannot be construed as having a Eventually, the Commissioner of Internal Revenue
mandatory effect. The redemption of said shares (CIR) issued an assessment against ASC for
cannot be allowed. The Central Bank made a finding deficiency withholding tax-at-source. The CIR
that the Bank has been suffering from chronic reserve explained that when the redemption was made, the
estate profited (because ASC would have to pay the property rights was filed before the SEC over 120
estate to redeem), and so ASC would have withheld founders’ shares and 12 common shares owned by
tax payments from the Soriano Estate yet it remitted their father
no such withheld tax to the government. · SEC Hearing Officer: heirs of Acayan were
entitled to the claimed shares and called for a special
ASC averred that it is not duty bound to withhold tax stockholders’ meeting to elect a new set of officers.
from the estate because it redeemed the said shares · SEC en banc: affirmed the decision
for purposes of “Filipinization” of ASC and also to · As a result, the shares of Acayan were
reduce its remittance abroad. recorded in the stock and transfer book.
· On May 6, 1992, a special stockholders’
ISSUE: Whether or not ASC’s arguments are tenable. meeting was held to elect a new set of directors
· Onrubia et al filed a petition with SEC
HELD: No. The reason behind the redemption is not questioning the validity of said meeting alleging that
material. The proceeds from a redemption is taxable the quorum for the said meeting should not be based
and ASC is duty bound to withhold the tax at source. on the 165 issued and outstanding shares as per the
The Soriano Estate definitely profited from the stock and transfer book, but on the initial subscribed
redemption and such profit is taxable, and again, ASC capital stock of seven hundred seventy-six (776)
had the duty to withhold the tax. There was a total of shares, as reflected in the 1952 Articles of
108,000 shares redeemed from the estate. 25,247.5 Incorporation
of that was original issue from the capital of ASC. The · Petition was dismissed
rest (82,752.5) of the shares are deemed to have · SC en banc: shares of the deceased
been from stock dividend shares. Sale of stock incorporators should be duly represented by their
dividends is taxable. It is also to be noted that in the respective administrators or heirs concerned. Called
absence of evidence to the contrary, the Tax Code for a stockholders meeting on the basis of the
presumes that every distribution of corporate stockholdings reflected in the articles of incorporation
property, in whole or in part, is made out of corporate for the purpose of electing a new set of officers for the
profits such as stock dividends. corporation
It cannot be argued that all the 108,000 shares were · Lanuza, Acayan et al, who are PMMSI
distributed from the capital of ASC and that the latter stockholders, filed a petition for review with the CA,
is merely redeeming them as such. The capital cannot raising the following issues:
be distributed in the form of redemption of stock 1. whether the basis the outstanding capital stock
dividends without violating the trust fund doctrine — and accordingly also for determining the quorum at
wherein the capital stock, property and other assets of stockholders’ meetings it should be the 1978 stock
the corporation are regarded as equity in trust for the and transfer book or if it should be the 1952 articles of
payment of the corporate creditors. Once capital, it is incorporation
always capital. That doctrine was intended for the (They contended that the basis is the stock and
protection of corporate creditors. transfer book, not articles of incorporation in
computing the quorum)
2. whether the Espejo decision (decision of SEC
______________ CASE ENDS HERE ___________ en banc ordering the recording of the shares of Jose
Acayan in the stock and transfer book) is applicable to
the benefit of Onrubia et al
Lanuza vs. CA
· CA decision:
GR No. 131394 | March 28, 2005
1. For purposes of transacting business, the
quorum should be based on the outstanding capital
Facts:
stock as found in the articles of incorporation
· Petitioners seek to nullify the Court of
2. To require a separate judicial declaration to
Appeals’ Decision in CA–G.R. SP No.
recognize the shares of the original incorporators
414731 promulgated on 18 August 1997, affirming the
would entail unnecessary delay and expense.
SEC Order dated 20 June 1996, and
Besides. the incorporators have already proved their
the Resolution2 of the Court of Appeals dated 31
stockholdings through the provisions of the articles of
October 1997 which denied petitioners’ motion for
incorporation.
reconsideration.
· Appeal was made by Lanuza et al before the
· In 1952, the Philippine Merchant Marine
SC
School, Inc. (PMMSI) was incorporated, with seven
· Lanuza et al’ contention:
hundred (700) founders’ shares and seventy-six (76)
a. 1992 stockholders’ meeting was valid and
common shares as its initial capital stock subscription
legal
reflected in the articles of incorporation
b. Reliance on the 1952 articles of incorporation
· Onrubia et. al, who were in control of PMMSI
for determining the quorum negates the
registered the company’s stock and transfer book for
existence and validity of the stock and transfer
the first time in 1978, recording thirty-three (33)
book Onrubia et al prepared
common shares as the only issued and outstanding
c. Onrubia et al must show and prove
shares of PMMSI.
entitlement to the founders and common
· In 1979, a special stockholders’ meeting was
shares in a separate and independent
called and held on the basis of what was considered
action/proceeding in order to avail of the
as a quorum of twenty-seven (27) common shares,
benefits secured by the heirs of Acayan
representing more than two-thirds (2/3) of the
· Onrubia et al’s contention, based on the
common shares issued and outstanding.
Memorandum: petition should be dismissed on the
· In 1982, Juan Acayan, one of the heirs of the
ground of res judicata
incorporators filed a petition for the registration of their
· Another appeal was made only evidence of the ownership of stock in a

· Lanuza et al’s contention: instant petition is corporation.
separate and distinct from G.R. No. 131315, there · It is no less than the articles of incorporation
being no identity of parties, and more importantly, the that declare the incorporators to have in their name
parties in the two petitions have their own distinct the founders and several common shares. Thus, to
rights and interests in relation to the subject matter in disregard the contents of the articles of incorporation
litigation would be to pretend that the basic document which
· Onrubia et al’s manifestation and motion: legally triggered the creation of the corporation does
moved for the dismissal of the case not exist and accordingly to allow great injustice to be
caused to the incorporators and their heirs
Issue: What should be the basis of quorum for a
stockholders’ meeting—the outstanding capital stock WHEREFORE, the petition is DENIED and the
as indicated in the articles of incorporation or that assailed Decision is AFFIRMED. Costs against
contained in the company’s stock and transfer book? petitioners
Ruling:
______________ CASE ENDS HERE ___________
· Articles of Incorporation
- Defines the charter of the corporation and the Ang mga Kaanib sa Iglesia ng Dios Kay Kristo
contractual relationships between the State and the Hesus, HSK sa Bansang Pilipinas Inc. vs. Iglesia
corporation, the stockholders and the State, and ng Dios kay Cristo Jesus, Haligi at Suhay ng
between the corporation and its stockholders. Katotohanan
- Contents are binding, not only on the [GR 137592, 12 December 2001]
corporation, but also on its shareholders.
· Stock and transfer book Facts: The Iglesia ng Dios Kay Cristo Jesus, Haligi at
- Book which records the names and addresses of Suhay ng Katotohanan (IDCJ-HSK; Church of God in
all stockholders arranged alphabetically, the Christ Jesus, the Pillar and Ground of Truth), is a non-
installments paid and unpaid on all stock for which stock religious society or corporation registered in
subscription has been made, and the date of payment 1936. Sometime in 1976, one Eliseo Soriano and
thereof; a statement of every alienation, sale or several other members of said corporation
transfer of stock made, the date thereof and by and to disassociated themselves from the latter and
whom made; and such other entries as may be succeeded in registering on 30 March 1977 a new
prescribed by law non-stock religious society or corporation, named
- necessary as a measure of precaution, Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng
expediency and convenience since it provides the Katotohanan (IDKJ-HSK). On 16 July 1979, IDCJ-
only certain and accurate method of establishing the HSK filed with the SEC a petition to compel IDKJ-
various corporate acts and transactions and of HSK to change its corporate name (SEC Case 1774).
showing the ownership of stock and like matters On 4 May 1988, the SEC rendered judgment in favor
- Not public record, and thus is not exclusive of IDCJ-HSK, ordering IDKJ-HSK to change its
evidence of the matters and things which ordinarily corporate name to another name that is not similar or
are or should be written therein identical to any name already used by a corporation,
· In this case, the articles of incorporation partnership or association registered with the
indicate that at the time of incorporation, the Commission. No appeal was taken from said
incorporators were bona fide stockholders of 700 decision.
founders’ shares and 76 common shares. Hence, at
that time, the corporation had 776 issued and During the pendency of SEC Case 1774, Soriano, et
outstanding shares. al., caused the registration on 25 April 1980 of Ang
· According to Sec. 52 of the Corp Code, “a Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus,
quorum shall consist of the stockholders representing H.S.K, sa Bansang Pilipinas (AK[IDKH-HSK]BP). The
a majority of the outstanding capital stock.” As such, acronym "H.S.K." stands for Haligi at Saligan ng
quorum is based on the totality of the shares which Katotohanan. On 2 March 1994, IDCJ-HSK filed
have been subscribed and issued, whether it be before the SEC a petition (SEC Case 03-94-4704),
founders’ shares or common shares praying that AK[IDKH-HSK]BP be compelled to
· To base the computation of quorum solely on change its corporate name and be barred from using
the obviously deficient, if not inaccurate stock and the same or similar name on the ground that the
transfer book, and completely disregarding the issued same causes confusion among their members as well
and outstanding shares as indicated in the articles of as the public. KIDKH-HSK-BP filed a motion to
incorporation would work injustice to the owners dismiss on the ground of lack of cause of action. The
and/or successors in interest of the said shares. motion to dismiss was denied. Thereafter, for failure
· The stock and transfer book of PMMSI cannot to file an answer, AK[IDKH-HSK]BP was declared in
be used as the sole basis for determining the quorum default and IDCJ-HSK was allowed to present its
as it does not reflect the totality of shares which have evidence ex parte. On 20 November 1995, the SEC
been subscribed, more so when the articles of rendered a decision ordering AK[IDKH-HSK]BP to
incorporation show a significantly larger amount of change its corporate name. AK[IDKH-HSK]BP
shares issued and outstanding as compared to that appealed to the SEC En Banc (SEC-AC 539). In a
listed in the stock and transfer book. decision dated 4 March 1996, the SEC En Banc
· One who is actually a stockholder cannot be affirmed the above decision, upon a finding that
denied his right to vote by the corporation merely AK[IDKH-HSK]BP's corporate name was identical or
because the corporate officers failed to keep its confusingly or deceptively similar to that of IDCJ-
records accurately. A corporation’s records are not the HSK's corporate name. AK[IDKH-HSK]BP filed a
petition for review with the Court of Appeals. On 7 Pilipinas, Inc.", are merely descriptive of and
October 1997, the Court of Appeals rendered the pertaining to the members of IDCH-HSK.
decision affirming the decision of the SEC En Banc. Significantly, the only difference between the
AK[IDKH-HSK]BP's motion for reconsideration was corporate names of AK[IDKH-HSK]BP and IDCH-HSK
denied by the Court of Appeals on 16 February 1992. are the words SALIGAN and SUHAY. These words
AK[IDKH-HSK]BP filed the petition for review. are synonymous — both mean ground, foundation or
support. Hence, this case is on all fours with Universal
Issue: Mills Corporation v. Universal Textile Mills, Inc., 22
1. Whether the corporate names of where the Court ruled that the corporate names
AK[IDKH-HSK]BP and IDCH-HSK are Universal Mills Corporation and Universal Textile
confusingly similar. Mills, Inc., are undisputably so similar that even under
2. Whether the generic word rule would the test of "reasonable care and observation"
apply to support AK[IDKH-HSK]BP’s cause. confusion may arise.
2. The wholesale appropriation by AK[IDKH-HSK]BP

Held:
of IDCH-HSK's corporate name cannot find
justification under the generic word rule. A contrary
1. The SEC has the authority to de-register at all
ruling would encourage other corporations to adopt
times and under all circumstances corporate names
verbatim and register an existing and protected
which in its estimation are likely to spawn confusion. It
corporate name, to the detriment of the public. The
is the duty of the SEC to prevent confusion in the use
fact that there are other non-stock religious societies
of corporate names not only for the protection of the
or corporations using the names Church of the Living
corporations involved but more so for the protection of
God, Inc., Church of God Jesus Christ the Son of God
the public. Section 18 of the Corporation Code
the Head, Church of God in Christ & By the Holy
provides that "No corporate name may be allowed by
Spirit, and other similar names, is of no consequence.
the Securities and Exchange Commission if the
It does not authorize the use by AK[IDKH-HSK]BP of
proposed name is identical or deceptively or
the essential and distinguishing feature of IDCH-
confusingly similar to that of any existing corporation
HSK's registered and protected corporate name.
or to any other name already protected by law or is
______________ CASE ENDS HERE ___________
patently deceptive, confusing or is contrary to existing
laws. When a change in the corporate name is
approved, the Commission shall issue an amended P.C. JAVIER & SONS, INC., SPS. PABLO C.
certificate of incorporation under the amended name." JAVIER, SR. and ROSALINA F. JAVIER,
Corollary thereto, the pertinent portion of the SEC petitioners, vs. HON. COURT OF APPEALS, PAIC
Guidelines on Corporate Names states that "(d) If the SAVINGS & MORTGAGE BANK, INC., SHERIFFS
proposed name contains a word similar to a word GRACE BELVIS, SOFRONIO VILLARIN, PIO
already used as part of the firm name or style of a MARTINEZ and NICANOR BLANCO, respondents.’
registered company, the proposed name must contain
two other words different from the name of the Facts:
company already registered; Parties organizing a - May 1984: PC Javier and Sons and Spouses Javier
corporation must choose a name at their peril; and the filed a complaint for annulment of mortgage and
use of a name similar to one adopted by another foreclosure with prelim injunction against PAIC
corporation, whether a business or a nonprofit Savings and Mortgage Bank + supplemental
organization, if misleading or likely to injure in the complaint to include defendants (sheriffs)
exercise of its corporate functions, regardless of - Feb 1981: PC Javier and Sons applied with First
intent, may be prevented by the corporation having a Summa Savings and Mortgage Bank later renamed
prior right, by a suit for injunction against the new PAIC Savings a loan accommodation under Industrial
corporation to prevent the use of the name. Herein, Guarantee Loan Fund (P1.5M) o March 1981: Javier
the additional words "Ang Mga Kaanib " and "Sa was advised that loan application was approved and
Bansang Pilipinas, Inc." in AK[IDKH-HSK]BP's name same to be forwarded to Central Bank for processing
are merely descriptive of and also referring to the and release o CB released loan to PAIC in two
members, or kaanib, of IDCH-HSK who are likewise tranches of P750k each
residing in the Philippines. These words can hardly – released to Javier Corp, but from second tranche
serve as an effective differentiating medium release, P250k was deducted and deposited in name
necessary to avoid confusion or difficulty in of Javier Corp under time deposit o Javier Corp
distinguishing AK[IDKH-HSK]BP from IDCH-HSK. claims loan releases were delayed, P250k was
This is especially so, since both AK[IDKH-HSK]BP deducted from IGLF loan and placed under time
and IDCH-HSK are using the same acronym — deposit + they were never allowed to withdraw the
H.S.K.; not to mention the fact that both are proceeds of the itme deposit because PAIC intended
espousing religious beliefs and operating in the same this time deposit as automatic payments on accrued
place. Parenthetically, it is well to mention that the principal and interest due on loan o PAIC clais only
acronym H.S.K. used by AK[IDKH-HSK]BP stands for final proceeds of the loan was delayed, because of
"Haligi at Saligan ng Katotohanan." Then, too, the shortfall in collateral cover of Javier Corp’s loan
records reveal that in holding out their corporate – second tranche was then relased after firm
name to the public, AK[IDKH-HSK]BP highlights the commitment by Javier Corp to cover collateral
dominant words "IGLESIA NG DIOS KAY KRISTO deficiency through opening time deposit using portion
HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," of loan proceeds (P250k) and in compliance with their
which is strikingly similar to IDCH-HSK's corporate commitment to submit additional security and open
name, thus making it even more evident that the time deposit, Javier executed chattel mortgage over
additional words "Ang Mga Kaanib" and "Sa Bansang some machineries in favor of PIAC + when Javier
Corp defaulted in payment of its loan, PAIC sent INDUSTRIAL REFRACTORIES CORPORATION OF
demand letter; sent a second, informing foreclosure; THE PHILIPPINES vs. COURT OF APPEALS,
finally initiated extrajudicial foreclosure of real estate SECURITIES AND EXCHANGE COMMISSION and
mortgage and accordingly auction sale was executed REFRACTORIES CORPORATION OF THE
by sheriffs o Instant complaint to forestall extrajudicial PHILIPPINES
foreclosure of sale of piece of land = temporarily
restrained by RTC o RTC: declared First Summa nd
PAIC as one and the same + Javier Corp liable to G.R. No. 122174, October 3, 2002
bank for unpaid balance of loans + extrajudicial
foreclosure justified because loans were due and
Facts:
demandable when foreclosure proceedings
commenced in April 1984, hence this appeal by
Respondent Refractories Corporation of the
certiorai. –
Philippines (RCP) is a corporation duly organized on
October 13, 1976. On June 22, 1977, it registered its
Issue:
corporate and business name with the Bureau of
WON First Summa Savings and Mortgage Bank and
Domestic Trade.
PAIC Savings are one and the same entity; whether
their obligation is already due and demandable at the
Petitioner IRCP was incorporated on August 23, 1979
time commencement of extrajudicial foreclosure took
originally under the name "Synclaire Manufacturing
place. o Is Javier corp legally justified in withholding
Corporation". It amended its Articles of Incorporation
amortized payments to respondent bank until they
on August 23, 1985 to change its corporate name to
have been properly notified of change in corporate
"Industrial Refractories Corp. of the Philippines".
name? (claim never having received formal notice of
alleged change of name + first notice of change of
Both companies are the only local suppliers of
name was when bank presented witness Michael
monolithic gunning mix.
Caguioa on April 1990, where he presented SEC
Certificate of Filing Amended Articles of Incorporation
Respondent RCP then filed a petition with the
of respondent bank)?
Securities and Exchange Commission to compel
petitioner IRCP to change its corporate name.
DOCTRINE: a change in the corporate name does
The SEC rendered judgment in favor of respondent
not make a new corporation, whether effected by a
RCP.
special act or under a general law. It has no effect on
the identity of the corporation, or on its property,
Petitioner appealed to the SEC En Banc. The SEC En
rights, or liabilities. The corporation, upon such
Banc modified the appealed decision and the
change in its name, is in no sense a new corporation
petitioner was ordered to delete or drop from its
nor the successor of the original corporation. It is the
corporate name only the word "Refractories".
same corporation with a diff name, and its character is
in no respect changed. Undated letter signed by Petitioner IRCP filed a petition for review on certiorari
Pablo Javier Sr and addressed to PAIC Savings to the Court of Appeals and the appellate court upheld
authorzing Mr Victor Javier, Gen Manager, to secure the jurisdiction of the SEC over the case and ruled
from PAIC Savings certain documents for his that the corporate names of petitioner IRCP and
signature  Secretary’s certificate signed by Fortunato respondent RCP are confusingly or deceptively
Gabriel, Corp Secretary of Javier Corp, certifying that similar, and that respondent RCP has established its
a board resolution was passed authorizing Pablo prior right to use the word "Refractories" as its
Javier Sr to execute a chattel mortgage on corporate name.
corporation’s equipment to serve as collateral to cover
IGLF Loan with PAIC Saivings  Board of resolution of Petitioner then filed a petition for review on certiorari
Javier Corp signed by Pablo Javier Sr auhorizing him
to execute a chattle mortgage over certain machinery Issue:
in favor of PAIC Savings and Mortgage Bank  Letter
of accountant of Javier Corp addressed to bank: “we
obtained from the FORMER First Summa”  Although Are corporate names Refractories Corporation of the
no evidence showing bank furnished Javier Corp with Philippines (RCP) and "Industrial Refractories Corp.
official documents of change of name, evidence of the Philippines" confusingly and deceptively
abound that they ha dnotice  Court cannot impose similar?
on bank that changes in corporate name must notify Ruling:
debtor of such change = tantamount to judicial
legislation; such notification is discretionary on bank 
Yes, the petitioner and respondent RCP’s corporate
There exists no requirement under law or regulation
names are confusingly and deceptively similar.
ordering a bank that changes its corporate name to
Further, Section 18 of the Corporation Code expressly
formally notify all its debtors
prohibits the use of a corporate name which is
"identical or deceptively or confusingly similar to that
Ruling: No
of any existing corporation or to any other name
already protected by law or is patently deceptive,
______________ CASE ENDS HERE ___________ confusing or contrary to existing laws". The policy
behind said prohibition is to avoid fraud upon the
public that will have occasion to deal with the entity
concerned, the evasion of legal obligations and approve the transfer of more than 40% of the
duties, and the reduction of difficulties of subscribed capital stock of a telecommunications
administration and supervision over corporation. company to a single transferee.
In other words, transfer of shares of a public utility
The Supreme Court denied the petition for review on
corporation need only NTC approval, not
certiorari due for lack of merit.
congressional authorization. What transpired in ETCI
______________ CASE ENDS HERE ___________ were a series of transfers of shares starting in 1964
until 1987. The approval of the NTC may be deemed
Philippine Long Distance Telephone Co. vs
to have been met when it authorized the issuance of
National Telecommunications Commission
the provisional authority to ETCI. There was full
190 SCRA 717 [GR No. 88404 October 18, 1990]
disclosure before the NTC of the transfers. In fact, the
Facts: On June 22, 1958, Republic Act No. 2090, NTC order of November 12,1987 required ETCI to
was enacted otherwise known as “An Act Granting submit its present capital and ownership structure.
Felix Alberto and Company, Incorporated, a franchise Further, ETCI even filed a motion before the NTC,
to establish radio stations for domestic and dated November 8, 1987 or more than a year prior to
transoceanic telecommunications.” Felix Alberto & the grant of provisional authority, seeking approval of
Co. Inc. was the original corporate name, which was the increase in its capital stock from Php360,000 to
changed to ETCI with amendment of the articles of Php40,000,000 and the stock transfers made by its
incorporation in 1964. Much later, “CELLCOM Inc.” stockholders.
was the name sought to be adopted before the
A distinction should be made between shares of
Securities and Exchange Commission, but this was
stock, which are owned by stockholders, the sale of
withdrawn and abandoned.. On May 13, 1987,
which requires only NTC approval, and the franchise
alleging urgent public need, ETCI filed an application
itself which is owned by the corporation as the
with public respondent NTC for the issuance of a
grantee thereof, the sale or transfer of which requires
certificate of public convenience and necessity to
congressional sanction. Since stockholders own the
construct, install, establish, operate, and maintain a
shares of stock, they may dispose of the same as
cellular mobile telephone system and an alpha
they see fit. They may not, however, transfer or
numeric paging system in Metro Manila and in the
assign the property of a corporation, like its franchise.
Southern Luzon regions, with prayer for provisional
In other words, even if the original stockholders had
authority to operate phase A of its proposal within
transferred their shares to another group of
Metro Manila. PLDT filed an opposition with motion to
shareholders, the franchise granted to the corporation
dismiss, however NTC over ruled it. NTC granted
subsists as long as the corporation as an entity,
ETC provisional authority to install, operate, and
continues to exist. The franchise is not thereby
maintain a cellular mobile telephone system initially in
invalidated by the transfer of shares. A corporation
Metro Manila subject to terms and conditions, one of
has a personality separate and distinct from that of
which is that ETCI and PLDT shall enter into an
each stockholder. It has the right to continuity or
interconnection agreement for the provision of
perpetual succession.
adequate interconnection facilities between
applicant’s cellular mobile telephone switch and the
public switched telephone network and shall jointly
______________ CASE ENDS HERE ___________
submit such interconnection agreement to the
commission for approval ETCI admits that in 1964, LOYOLA GRAND VILLAS HOMEOWNERS
the Albertos, as original owners of more than 40% of (SOUTH) ASSOCIATION, INC.
the outstanding capital stock sold their holdings to vs.
Orbes. In 1968, the Albertos reacquired the shares HON. COURT OF APPEALS
they had sold to the Orbes. In 1987, the Albertos sold 1997 Aug 7, G.R. No. 117188
more than 40% of their shares to Horacio Yalung.
Thereafter, the present stockholders acquired their FACTS:
ETCI shares. Moreover, in 1964, ETCI had increased
its capital stock from Php40,000 to Php360,000; and LGVHAI was organized as the association of
in 1987, from Php360,000 to Php40,000,000. homeowners and residents of the Loyola Grand
Villas. It was registered with the Home Financing
Issue: Whether or not the transfers in 1987 of the
Corporation. For unknown reasons, however, LGVHAI
shares of stock to the new stockholders amount to a
did not file its corporate by-laws. Sometime in 1988,
transfer of ETCI’s franchise which needs
the officers of the LGVHAI tried to register its by-laws.
congressional approval pursuant to RA 2090.
They failed to do so. They later discovered that there
Held: No. Section 10 of RA 2090 is directed to the were two other organizations within the subdivision
grantee of the franchise, which is the corporation itself the North Association and the South Association.
and refers to a sale, lease or assignment of that According to private respondents, a non-resident and
franchise. It does not include the transfer or sale of Soliven himself respectively headed these
shares of stock of a corporation by the latter’s associations. They also discovered that these
stockholders. associations had five (5) registered homeowners each
who were also the incorporators, directors and
officers thereof. None of the members of the LGVHAI
The sale of shares of stock of a public utility is was listed as member of the North Association while
governed by another law, in section 20 (h) of the three (3) members of LGVHAI were listed as
Public Service Act (CA 146). Pursuant thereto, the members of the South Association. When they
public service commission (now NTC) is the inquired as to the status of LGVHAI, the head of the
government agency vested with the authority to legal department of the HIGC, informed him that
LGVHAI had been automatically dissolved for two the Court of Appeals, which in turn upheld the
reasons. First, it did not submit its by-laws within the decision of the HIGC's appeals board. Hence this
period required by the Corporation Code and, second, petition for review.
there was non-user of corporate charter because
HIGC had not received any report on the association's ISSUE:
activities. These prompted the LGVHAI to lodge
complaint with HIGC questioning its act of revoking its Whether or not the petitioner has acquired a
certificate of registration without due notice and vested right to be a permanent director in the
hearing and concomitantly prayed for the cancellation association under the drafted by –laws, but which
of the certificates of registration of the North and were not submitted to the members for approval.
South Associations by reason of the earlier issuance
of a certificate of registration in favor of LGVHAI. RULING:
ISSUE: NO.
Whether or not the failure of a corporation to The present Corporation Code states that the
file its by-laws within one month from the date of its board of directors of corporations must be elected
incorporation, as mandated by Section 46 of the from among the stockholders or members. There may
Corporation Code, result in its automatic dissolution. be corporations in which there are unelected
members in the board but it is clear that in the
RULING: examples cited by petitioner the unelected members
sit as ex officio members, i.e., by virtue of and for as
NO. long as they hold a particular office. But in the case of
petitioner, there is no reason at all for its
Although the Corporation Code requires the representative to be given a seat in the board. Nor
filing of by-laws, it does not expressly provide for the does petitioner claim a right to such seat by virtue of
consequences of the non-filing of the same within the an office held. In fact it was not given such seat in the
period provided for in Section 46. Even under the beginning. It was only in 1975 that a proposed
express grant of power and authority under amendment to the by-laws sought to give it one.
Presidential Decree No. 902-A, there can be no Since the provision in question is contrary to
automatic corporate dissolution simply because the law, the fact that for fifteen years it has not been
incorporators failed to abide by the required filing of questioned or challenged but, on the contrary,
by-laws embodied in Section 46 of the Corporation appears to have been implemented by the members
Code. There is no outright "demise" of corporate of the association cannot forestall a later challenge to
existence. Proper notice and hearing are cardinal its validity. Neither can it attain validity through
components of due process in any democratic acquiescence because, if it is contrary to law, it is
institution, agency or society. In other words, the beyond the power of the members of the association
incorporators must be given the chance to explain to waive its invalidity. For that matter the members of
their neglect or omission and remedy the same. the association may have formally adopted the
______________ CASE ENDS HERE ___________ provision in question, but their action would be of no
avail because no provision of the by-laws can be
GRACE CHRISTIAN HIGH SCHOOL
adopted if it is contrary to law.
vs.
Also, petitioner cannot claim a vested right to
THE COURT OF APPEALS, GRACE VILLAGE
sit in the board on the basis of "practice." Practice, no
ASSOCIATION, INC., ALEJANDRO G. BELTRAN,
matter how long continued, cannot give rise to any
and ERNESTO L. GO
vested right if it is contrary to law. Even less tenable is
1997 Oct 23, G.R. No. 108905
petitioner's claim that its right is "coterminus with the
existence of the association."
FACTS:
______________ CASE ENDS HERE ___________
Petitioner Grace Christian High School is an
educational institution offering preparatory, ROSITA PEÑA
kindergarten and secondary courses at the Grace vs.
Village in Quezon City. Private respondent Grace COURT OF APPEALS
Village Association, Inc., on the other hand, is an G.R. No. 91478 February 7, 1991
organization of lot and/or building owners, lessees
and residents at Grace Village, while private FACTS:
respondents Alejandro G. Beltran and Ernesto L. Go
were its president and chairman of the committee on Pampanga Bus Co. (PAMBUSCO), original
election. For 15 years the petitioner had been owners of the lots in question, mortgaged the same to
occupying a permanent seat in the Board of Directors the Development Bank of the Philippines (DBP) in
of the respondent. However, the latter decided to consideration of P935,000.00. This mortgage was
“reexamine” the right of petitioner's representative to foreclosed. In the foreclosure, the said properties
continue as an unelected member of the board. As were awarded to Peña as highest bidder. Thereafter,
the board denied petitioner's request to be allowed the board of directors of PAMBUSCO, through (3) out
representation without election, petitioner brought an of its (5) directors, resolved to assign its right of
action for mandamus in the Home Insurance and redemption over the aforesaid lots and authorized one
Guaranty Corporation. Its action was dismissed by the of its members, Atty. Joaquin Briones "to execute and
hearing officer whose decision was subsequently sign a Deed of Assignment for and in behalf of
affirmed by the appeals board. Petitioner appealed to PAMBUSCO in favor of any interested party.
Consequently, Briones executed a Deed of Sometime in November 1997 the spouses

Assignment of PAMBUSCO's redemption right over Maglasang and the spouses Cortel asked PCRB’s
the subject lots in favor of Enriquez. Thereafter, permission to sell the properties which they
Enriquez executed a deed of absolute sale of the mortgaged with the bank. They likewise requested
subject properties in favor of plaintiffs-appellants, the that the said properties be released from the
spouses Rising T. Yap and Catalina Lugue, for the mortgage since the two other loans were adequately
sum of P140,000.00. secured by the other mortgages. The spouses
Plaintiffs-appellants, the spouses Rising T. Maglasang and the spouses Cortel claimed that the
Yap and Catalina Lugue, are the registered owners of PCRB, acting through its Branch Manager, Pancrasio
the lots in question. In the complaint filed, appellants Mondigo, verbally agreed to their request but required
sought to recover possession over the subject lands first the full payment of the subject loan. They
from defendants Rosita Peña and Washington thereafter sold to petitioner Violeta Banate the subject
Distillery on the ground that being registered owners, properties for P1,750,000.00 and used the amount to
they have to enforce their right to possession against pay the subject loan with PCRB. After settling the
defendants who have been allegedly in unlawful subject loan, PCRB gave the owner’s duplicate
possession thereof since October 1974 "when the certificate of title of Lot 12868-H-3-C to Banate, who
previous owners assigned (their) right to collect was able to secure a new title in her name. It,
rentals in favor of plaintiffs. After trial, a decision was however, carried the mortgage lien in favor of PCRB,
rendered by the court in favor of the defendants. prompting the petitioners to request from PCRB a
Deed of Release of Mortgage. As PCRB refused to
ISSUE: comply with the petitioners’ request, the petitioners
instituted an action for specific performance before
Whether or not the board resolution of the RTC to compel PCRB to execute the release
PAMBUSCO is valid. deed.
Accordingly, PCRB claimed that full payment
RULING: of the three loans, obtained by the spouses
Maglasang, was necessary before any of the
NO. mortgages could be released; the settlement of the
subject loan merely constituted partial payment of the
Under Section 25 of the Corporation Code of total obligation. Thus, the payment does not authorize
the Philippines, the articles of incorporation or by-laws the release of the subject properties from the
of the corporation may fix a greater number than the mortgage lien.
majority of the number of board members to
constitute the quorum necessary for the valid ISSUE:
transaction of business. Any number less than
the number provided cannot constitute a quorum Whether or not Mondigo, as branch manager
and any act therein would not bind the of PCRB, has the authority to modify the original
corporation; all that the attending directors could mortgage contract on behalf of the company.
do is to adjourn.
Records show that PAMBUSCO ceased to RULING:
operate as of November 15, 1949. Being a dormant
corporation for several years, it was highly irregular, if NO.
not anomalous, for a group of three (3) individuals
representing themselves to be the directors of He is not authorized to modify the mortgage
PAMBUSCO to pass a resolution disposing of the contract that would in effect cause novation. Under
only remaining asset of the corporation in favor of a the doctrine of apparent authority, acts and contracts
former corporate officer. As a matter of fact, the three of the agent, as are within the apparent scope of the
(3) alleged directors who attended the said meeting authority conferred on him, although no actual
were not listed as directors of respondent authority to do such acts or to make such contracts
PAMBUSCO. Furthermore, PAMBUSCO was has been conferred, bind the principal. The principal’s
insolvent and its only remaining asset was its right of liability, however, is limited only to third persons who
redemption over the subject properties. Since the have been led reasonably to believe by the conduct of
disposition of said redemption right of respondent the principal that such actual authority exists,
PAMBUSCO by virtue of the questioned resolution although none was given. In other words, apparent
was not approved by the required number of authority is determined only by the acts of the
stockholders under the law, the said resolution, as principal and not by the acts of the agent. There can
well as the subsequent assignment to respondent be no apparent authority of an agent without acts or
Enriquez should be struck down as null and void. conduct on the part of the principal; such acts or
conduct must have been known and relied upon in
______________ CASE ENDS HERE ___________ good faith as a result of the exercise of reasonable
prudence by a third party as claimant, and such acts
or conduct must have produced a change of position
VIOLETA BANATE et. al.
to the third party’s detriment.
vs.
In the present case, the decision of the trial
PHILIPPINE COUNTRYSIDE RURAL BANK
court was utterly silent on the manner by which
GR 163825, 13 July 2010
PCRB, as supposed principal, has “clothed” or “held
out” its branch manager as having the power to enter
FACTS:
into an agreement, as claimed by petitioners. No
proof of the course of business, usages and practices
of the bank about, or knowledge that the board had or After the lapse of one year from his election
is presumed to have of, its responsible officers’ acts as member of the VVCC Board in 1996, Makalintal’s
regarding bank branch affairs, was ever adduced to term of office is deemed to have already expired. That
establish the branch manager’s apparent authority to he continued to serve in the VVCC Board in a
verbally alter the terms of mortgage contracts. Neither holdover capacity cannot be considered as extending
was there any allegation, much less proof, that PCRB his term. This holdover period, however, is not to be
ratified Mondigo’s act or is estopped to make a considered as part of his term, which, as declared,
contrary claim. had already expired.
With the expiration of Makalintal’s term of
office, a vacancy resulted which, by the terms of
______________ CASE ENDS HERE ___________
Section 29of the Corporation Code, must be filled by
the stockholders of VVCC in a regular or special
meeting called for the purpose. As correctly pointed
out by the RTC, when remaining members of the
VALLE VERDE COUNTRY CLUB, INC., et al. VVCC Board elected Ramirez to replace Makalintal,
vs. there was no more unexpired term to speak of, as
VICTOR AFRICA Makalintal’s one-year term had already expired.
G.R. No. 151969, September 4, 2009 Pursuant to law, the authority to fill in the vacancy
caused by Makalintal’s leaving lies with the VVCC’s
FACTS: stockholders, not the remaining members of its board
of directors.
During the Annual Stockholders’ Meeting of
petitioner Valle Verde Country Club, Inc. (VVCC), the “term” as the time during which the officer may claim
following were elected as members of the VVCC to hold the office as of right, and fixes the interval
Board of Directors: Ernesto Villaluna, Jaime C. after which the several incumbents shall succeed one
Dinglasan, Eduardo Makalintal, Francisco Ortigas III, another. The term of office is not affected by the
Victor Salta, Amado M. Santiago, Jr., Fortunato Dee, holdover. The term is fixed by statute and it does not
Augusto Sunico, and Ray Gamboa. In the years 1997, change simply because the office may have become
1998, 1999, 2000, and 2001, however, the requisite vacant, nor because the incumbent holds over in
quorum for the holding of the stockholders’ meeting office beyond the end of the term due to the fact that
could not be obtained. Consequently, the above- a successor has not been elected and has failed to
named directors continued to serve in the VVCC qualify Valle Verde Country Club, Inc. vs. Africa, 598
Board in a hold-over capacity. Two of the said SCRA 195, G.R. No. 151969 September 4, 2009\
members resigned (Makalintal and Dinglasan). After
the resignation of Dinglasan, Eric Roxas was elected. “tenure” represents the term during which the
Makalintal was replaced by Jose Ramirez. incumbent actually holds office. Valle Verde Country
Respondent Africa, a member of VVCC, Club, Inc. vs. Africa, 598 SCRA 195, G.R. No. 151969
questioned the election of Roxas and Ramirez as September 4, 2009
members of the VVCC Board with the Securities and
Exchange Commission (SEC) and the Regional Trial
Court. Africa alleged that the election of Roxas was
______________ CASE ENDS HERE ___________
contrary to Section 29, in relation to Section 23, of the
Corporation Code of the Philippines. The respective
trial courts ruled in favor of Africa.
ONG YONG, et al., petitioner
vs.
ISSUE:
TIU, et al., respondent
G.R. No. 144476 8 April 2003
Whether or not the elections were valid.
FACTS:
RULING:
In 1994, the construction of the Masagana
YES.
Citimall in Pasay City was threatened with stoppage
and incompletion when its owner, the First Landlink
Section 23of the Corporation Code declares
Asia Development Corporation (FLADC), which was
that "the board of directors shall hold office for one (1)
owned by David S. Tiu, Cely Y. Tiu, Moly Yu Gow,
year until their successors are elected and qualified,"
Belen See Yu, D. Terence Y. Tiu, John Yu and
we construe the provision to mean that the term of the
Lourdes C. Tiu (the Tius), encountered dire financial
members of the board of directors shall be only for
difficulties. It was heavily indebted to the Philippine
one year; their term expires one year after election to
National Bank (PNB) for P190 million. To stave off
the office. The holdover period – that time from the
foreclosure of the mortgage on the two lots where the
lapse of one year from a member’s election to the
mall was being built, the Tius invited Ong Yong,
Board and until his successor’s election and
Juanita Tan Ong, Wilson T. Ong, Anna L. Ong,
qualification – is not part of the director’s original term
William T. Ong and Julia Ong Alonzo (the Ongs), to
of office, nor is it a new term; the holdover period,
invest in FLADC. Under the Pre-Subscription
however, constitutes part of his tenure. Corollary,
Agreement they entered into, the Ongs and the Tius
when an incumbent member of the board of directors
agreed to maintain equal shareholdings in FLADC:
continues to serve in a holdover capacity, it implies
the Ongs were to subscribe to 1,000,000 shares at a
that the office has a fixed term, which has expired,
par value of P100.00 each while the Tius were to
and the incumbent is holding the succeeding term.
subscribe to an additional 549,800 shares at P100.00
each in addition to their already existing subscription

of 450,200 shares. Furthermore, they agreed that the The plaintiff alleges that she is a doctor of
Tius were entitled to nominate the Vice-President and Medicine by profession and a recognized specialist in
the Treasurer plus 5 directors while the Ongs were the treatment of tuberculosis and that she was a
entitled to nominate the President, the Secretary and member of the Board of Directors of the defendant
6 directors (including the chairman) to the board of Society, in representation of the Philippine Charity
directors of FLADC. Moreover, the Ongs were given Sweepstakes Office. She was also duly appointed as
the right to manage and operate the mall. Executive Secretary of the Society. However, she was
Accordingly, the Ongs paid P100 million in cash for removed from such position without any cause. This
their subscription to 1,000,000 shares of stock while was denied by the respondents. The appellate courts
the Tius committed to contribute to FLADC a four- rendered decision in favor of respondents.
storey building and two parcels of land respectively
valued at P20 million (for 200,000 shares), P30 million ISSUE:
(for 300,000 shares) and P49.8 million (for 49,800
shares) to cover their additional 549,800 stock Whether or not the petitioner is an officer of
subscription therein. The Ongs paid in another P70 the corporation.
million 3 to FLADC and P20 million to the Tius over
and above their P100 million investment, the total RULING:
sum of which (P190 million) was used to settle the
P190 million mortgage indebtedness of FLADC to NO.
PNB. The business harmony between the Ongs and
the Tius in FLADC, however, was shortlived because The Court ruled that there was no clear indication that
the Tius, on 23 February 1996, rescinded the Pre- the petitioner was appointed to a permanent position.
Subscription Agreement. The Tius accused the Ongs Although the minutes of the organizational meeting
of (1) refusing to credit to them the FLADC shares show that the Chairman mentioned the need of
covering their real property contributions; (2) appointing a "permanent" Executive Secretary,
preventing David S. Tiu and Cely Y. Tiu from such statement alone cannot characterize the
assuming the positions of and performing their duties appointment of petitioner without a contract of
as Vice-President and Treasurer, respectively, and (3) employment definitely fixing her term. Without such
refusing to give them the office spaces agreed upon. term, the appointment was deemed to be temporary,
The controversy finally came to a head when the case and is subject to the pleasure of the Board or of the
was commenced by the Tius on 27 February 1996 at appointing body. Hence, when the Board opts to
the Securities and Exchange Commission (SEC), replace the incumbent, technically there is no
seeking confirmation of their rescission of the Pre- removal but only expiration of term and in an
Subscription Agreement. expiration of term, there is no need of prior notice,
due hearing or sufficient grounds before the
ISSUE: incumbent can be separated from office.
Whether or not the rescission of Pre-

Subscription Agreement would result in unauthorized ______________ CASE ENDS HERE ___________
liquidation.
MARC II MARKETING, INC. and LUCILA V. JOSON
vs.
ALFREDO M. JOSON
RULING:
G.R. No. 171993.December 12, 2011
YES.
FACTS:
The rescission of the Pre-Subscription
Marc II Marketing, Inc. and Lucila Joson is
Agreement will effectively result in the unauthorized
assailing the decision of the CA for reversing and
distribution of the capital assets and property of the
settling aside the Resolution of the National Labor
corporation, thereby violating the Trust Fund
Relations Commission. Marc II Marketing, Inc. is a
Doctrine and the Corporation Code, since
corporation duly organized and existing under and by
rescission of a subscription agreement is not one of
virtue of the laws of the Philippines. It is primarily
the instances when distribution of capital assets and
engaged in buying, marketing, selling and distributing
property of the corporation is allowed. Rescission will,
in retail or wholesale for export or import household
in the final analysis, result in the premature liquidation
appliances and products and other items. Petitioner
of the corporation without the benefit of prior
Lucila is the President and majority stockholder of
dissolution in accordance with Sections 117, 118, 119
the corporation. Before Marc II Marketing, Inc. was
and 120 of the Corporation Code.
officially incorporated, Alfredo has already been
engaged by Lucila, in her capacity as President, to
______________ CASE ENDS HERE ___________ work as General Manager of the corporation and it
was formalized through the execution of a
Management Contract dated in 1994 under Marc
MITA PARDO DE TAVERA Marketing, Inc., as Marc II Marketing, Inc. was yet to
vs. be incorporated. For occupying the said position,
PHILIPPINE TUBERCULOSIS SOCIETY, INC., et al respondent was among the corporation’s corporate
GR. No. L-48928, February 25, 1982 officers by the express provision of Section 1, Article
IV of its by-laws.
FACTS:
Alfredo was appointed as one of its officers foreclosed and thereafter ownership thereof was
with the designation or title of General Manager to transferred to the bank. Out of the seven (7) parcels
function as a managing director with other duties that were foreclosed, five (5) of them are in the
and responsibilities that the Board may provide and possession of the Ocfemias because these were sold
authorized. However, in 1997, Marc II Marketing Inc. by the [petitioner] bank to the parents of Marife
decided to stop and cease its operation as evidenced Ocfemia Niño as evidenced by a Deed of Sale
by an Affidavit of Non-Operation due to poor sales executed in January 1988.
collection aggravated by the inefficient management Marife went to the Register of Deeds of
of its affairs.Alfredo was informed of the cessation Camarines Sur with the Deed of Sale (Exh. C) in
of its business operations and the termination of his order to have the same registered. The Register of
services as General Manager. He filed action for Deeds, however, informed her that the document of
reinstatement and money claim against petitioners. sale cannot be registered without a board resolution
of the Bank. Marife then went to the bank, showed to
ISSUE: it the Deed of Sale, the tax declaration and receipt of
tax payments and requested the bank for a board
Whether or not Marc II Marketing Inc.’s Board resolution so that the property can be transferred to
of Directors could create a position for corporate the name of Marife’s parents Renato Ocfemia and
officers through an enabling clause found in its Francisca Ocfemia.
corporate by-laws. The bank, after requiring so many
requirements and making so many alibis to Marife,
RULING: refused to issue the board resolution. It claims that
its bank manager Fe Tena did not have authority to
YES. sell the properties to the Ocfemias therefore rendering
the deed of sale invalid.
The Court held that in the context of PD 902-
A, corporate officers are those officers of a ISSUE:
corporation who are given that character either by the
Corporation Code or by the corporation’s by- Whether or not the bank manager has
laws.Section 25 of the Corporation Code specifically authority to act on behalf of the bank.
enumerated who are these corporate officers, namely:
president, secretary, treasurer and such other RULING:
officers as may be provided for in the by-laws. A
careful examination of Marc II Marketing Inc.’s by- YES.
laws, particularly paragraph 1, Section 1of Article IV
explicitly revealed that its corporate officers are There was an apparent authority bestowed
composed only of chairman, president, one/more vice with Tena. The bank acknowledged, by its own
president, treasurer and secretary. The position of acts or failure to act, the authority of Fe S. Tena to
general manager was not among those enumerated. enter into binding contracts. After the execution of the
Meanwhile, paragraph 2, Section 1 of Article IV of the Deed of Sale, respondents occupied the properties in
corporation’s by-laws empowered its Board of dispute and paid the real estate taxes due thereon. If
Directors to appoint such officers as it may the bank management believed that it had title to
determine necessary or proper, making this an the property, it should have taken some measures
enabling provision for approving a resolution to make to prevent the infringement or invasion of its title
the position of general manager a corporate officer. thereto and possession thereof.
All of these acts were done without first amending its Likewise, Tena had previously transacted
by-laws so as to include the General Manager in its business on behalf of the bank, and the latter had
roster of corporate officers. Though the Board of acknowledged her authority. A bank is liable to
Directors may create appointive positions other than innocent third persons where representation is made
the positions of corporate officers, the persons in the course of its normal business by an agent like
occupying such positions cannot be viewed as Manager Tena, even though such agent is abusing
corporate officers under Section 25 of the Corporation her authority. Clearly, persons dealing with her could
Code. The said provision of the Corporation Code not be blamed for believing that she was authorized to
safeguards the constitutionally enshrined right of transact business for and on behalf of the bank.
every employee to security of tenure and prevents the In this light, the ***bank is estopped from
creation of a corporate officer position by a simple questioning the authority of the bank manager to
inclusion in the corporate by-laws of an enabling enter into the contract of sale. If a corporation
clause empowering the Board of Directors. knowingly permits one of its officers or any other
______________ CASE ENDS HERE ___________ agent to act within the scope of an apparent authority,
it holds the agent out to the public as possessing the
RURAL BANK OF MILAOR (CAMARINES SUR)
power to do those acts; thus, the corporation will, as
vs.
against anyone who has in good faith dealt with it
FRANCISCA OCFEMIA, et. al.
through such agent, be estopped from denying the
GR 137686, 08 February 2000
agent’s authority.
More so, the bank is in default for failing to
FACTS:
answer the complaint of the Ocfemias within the
reglamentary period without any justifiable excuse.
The spouses Felicisimo Ocfemia and Juanita
Arellano Ocfemia were not able to redeem the
mortgaged properties consisting of seven (7) parcels
______________ CASE ENDS HERE ___________
of land from Milaor and so the mortgage was
Suico suffered grave injustice because he was

prevented from acquiring the opportunity to obtain
payment of his loans and cash advances, while
BENITO ARATEA AND PONCIANA CANONIGO V.
petitioners Aratea and Canonigo profited from the
SUICO (G.R. NO. 170284) sale of their shareholdings in SAMDECO in favor of
SPMI and Dy. These facts duly established Aratea
and Canonigo’s personal liability as
Facts: officers/stockholders of SAMDECO and their solidary
Samar Mining Development Corporation (SAMDECO) liability with SAMDECO for its obligations in favor of
is a domestic corporation engaged in mining Suico for the loans and cash advances received by
operations whose controlling stockholders are herein the corporation.
petitioners. Petitioners armed with the proper board ______________ CASE ENDS HERE ___________
resolution entered and signed an agreement with
respondent Suico, a businessman engaged in export
and general merchandise, where the latter would TRAMAT MERCANTILE, INC. AND DAVID ONG,
extend loans and cash advances to SAMDECO in petitioners,vs.HON. COURT OF APPEALS AND
exchange for the grant of exclusive right to market MELCHOR DE LA CUESTA, respondents.
50% of the total coal extracted from its mining sites.
Suico was also granted the right of first priority to FACTS: Melchor De laCuesta soldatractorto
operate the mining facilities should SAMDECO Tramatcorporation. David Ong (president of
become incapable of coping with the work demands. Tramat)paid Melchor de la Cuesta via acheck.
Pursuant to the agreement, Suico started releasing Tramat modified the tractor and made it into a lawn
loans and cash advances to SAMDECO but the latter mower and subsequently sold the same to NAWASA.
made no payments. Petitioners eventually sold the
mining rights and passed on the operations of NAWASA refused to pay Tramat for the tractor saying
SAMDECO to Southeast Pacific Marketing Inc (SPMI) that it had defects and that the tractor engine is
in violation of the agreement. Thus, Suico filed a reconditioned. Tramat through DavidOng
complaint for sum of money against herein subsequently caused stop payment of the check paid
petitioners, SAMDECO and SPMI. The trial court and to DelaCuesta. Dela Cuesta of course sued Tramat
CA found for Suico. Petitioners moved for for non-payment and asked that Tramat and David
reconsideration contending they being mere Ong be solidarily held liable. The RTC granted this
representatives/agents of SAMDECO cannot be held and asked the above mentioned to pay jointly and
personally and solidary liable with the corporation. MR severally. The CA said the same.
was denied. ISSUES:Whether or not petitioners should be held
Issue: solidarily liable? and in what instances does
Whether or not petitioners as SAMDECO’s controlling personalliability of a corporate director, trustee or
stockholders and/or representatives may be held officer validly attach together with corporate liability?
personally and solidarily liable with SAMDECO and its
successors-in-interest for obligations the corporation
incurred. WALANG RULING!!!!
Ruling: YES.
In MAM Realty Development Corporation v. NLRC, ______________ CASE ENDS HERE ___________
the Court stated: x x x The general rule is that Santos vs. National Labor Relations Commission
obligations incurred by the corporation, acting through
its directors, officers and employees, are its sole [GR 101699, 13 March 1996]
liabilities. There are times, however, when solidary
liabilities may be incurred but only when exceptional
circumstances warrant such as in the following cases: Facts: Melvin D. Millena, on 1 October 1985, was
1. When directors and trustees or, in appropriate hired to be the project accountant for Mana Mining
cases, the officers of a corporation: x x x (b) act in and Development Corporation's (MMDC) mining
bad faith or with gross negligence in directing the operations in Gatbo, Bacon, Sorsogon. On 12 August
corporate affairs; x x x 1986, Millena sent to Mr. Gil Abaño, the MMDC
Petitioners Aratea and Canonigo, despite having corporate treasurer, a memorandum calling the
separate and distinct personalities from SAMDECO latter's attention to the failure of the company to
may be held personally liable for the loans and comply with the withholding tax requirements of, and
advances made by Suico to SAMDECO which they to make the corresponding monthly remittances to,
represent on account of their bad faith in carrying out the Bureau of Internal Revenue (BIR) on account of
the business of the corporation. Petitioners Aratea delayed payments of accrued salaries to the
and Canonigo acted in bad faith when they, as company's laborers and employees. In a letter, dated
officers of SAMDECO, unreasonably prevented Suico 8 September 1986, Abaño advised Millena that it was
from selling his part of the coal-produce of the mining the board's decision that it stop porduction (operation)
site, in gross violation of their MOA. This resulted in in Sorsogon due to the upcoming rainy seasons and
Suico not being unable to realize profits from his 50% the deterioration of the peace and order in the said
share of the coal-produce, from which Suico could area; that the corporation will undertake only
obtain part of the payment for the loans and advances necessary maintenance and repair work and will keep
he made in favor of SAMDECO. Moreover, petitioners overhead down to the minimum manageable level;
also acted in bad faith when they sold, transferred and that the corporation will not need a project
and assigned their proprietary rights over the mining accountant until the corporaton resumes full-scale
area in favor of SPMI and Dy, thereby causing operations. Millena expressed "shock" over the
SAMDECO to grossly violate its MOA with Suico. termination of his employment.
and employees, are its sole liabilities. Nevertheless,

being a mere fiction of law, peculiar situations or valid
He complained that he would not have resigned from
grounds can exist to warrant, albeit done sparingly,
the Sycip, Gores & Velayo accounting firm, where he
the disregard of its independent being and the lifting
was already a senior staff auditor, had it not been for
of the corporate veil. As a rule, this situation might
the assurance of a "continuous job" by MMDC's Eng.
arise a corporation is used to evade a just and due
Rodillano E. Velasquez. Millena requested that he be
obligation or to justify a wrong, to shield or perpetrate
reimbursed the "advances" he had made for the
fraud, to carry out similar other unjustifiable aims or
company and be paid his "accrued salaries/claims."
intentions, or as a subterfuge to commit injustice and
The claim was not heeded. On October 1986, Millena
so circumvent the law. Without necessarily piercing
filed with the NLRC Regional Arbitration, Branch No.
the veil of corporate fiction, personal civil liability can
V, in Legazpi City, a complaint for illegal dismissal,
also be said to lawfully attach to a corporate director,
unpaid salaries, 13th month pay, overtime pay,
trustee or officer; to wit: When (1) He assents (a) to a
separation pay and incentive leave pay against
patently unlawful act of the corporation, or (b) for bad
MMDC and its two top officials, namely, Benjamin A
faith or gross negligence in directing its affairs, or (b)
Santos (the President) and Rodillano A. Velasquez
for conflict of interest, resulting in damages to the
(the executive vice-president). In his complaint-
corporation, its stockholders or other persons; (2) He
affidavit (position paper), submitted on 27 October
consents to the issuance of watered stocks or who,
1986, Millena alleged, among other things, that his
having knowledge thereof, does not forthwith file with
dismissal was merely an offshoot of his letter of 12
the corporate secretary his written objection thereto;
August 1986 to Abaño about the company's inability
(3) He agrees to hold himself personally and solidarily
to pay its workers and to remit withholding taxes to
liable with the corporation; or (4) He is made, by a
the BIR. On 27 July 1988, Labor Arbiter Fructouso T.
specific provision of law, to personally answer for his
Aurellano, finding no valid cause for terminating
corporate action. The case of Santos is way of these
complaint's employment, ruledthat a partial closure of
exceptional instances. It is not even shown that
an establishment due to losses was a retrenchment
Santos has had a direct hand in the dismissal of
measure that rendered the employer liable for unpaid
Millena enough to attribute to Santos a patently
salaries and other monetary claims.
unlawful act while acting for the corporation. Neither
can Article 289 of the Labor Code be applied since
this specifically refers only to the imposition of
The Labor Arbiter ordered Santos, et. al. to pay
penalties under the Code. It is undisputed that the
Millena the amount of P37,132.25 corresponding to
termination of Millena's employment has, instead,
the latter's unpaid salaries and advances: P5,400.00
been due, collectively, to the need for a further
for petitioner's 13th month pay; P3,340.95 as service
mitigation of losses, the onset of the rainy season, the
incentive leave pay; and P5, 400.00 as separation
insurgency problem, in Sorsogon and the lack of
pay. Santos, et. al. were further ordered to pay
funds to further support the mining operation in
Millena 10% of the monetary awards as attorney's
Gatbo. It is basic that a corporation is invested by law
fees. Alleging abuse of discretion by the Labor
with a personally separate and distinct from those of
Arbiter, the company and its co-respondents filed a
the persons composing it as well as from that of any,
"motion for reconsideration and /or appeal." 8 The
other legal entity to which it may be related. Mere
motion/appeal was forthwith indorsed to the Executive
ownership by a single stockholder or by another
Director of the NLRC in Manila. In a resolution, dated
corporation of all nearly all of the capital stock of a
04 September 1989, the NLRC affirmed the decision
corporation is not of itself sufficient ground for
of the Labor Arbiter. A writ of execution
disregarding the separate corporate personally.
correspondingly issued; however, it was returned
Similar to the case of Sunio vs. National Labor
unsatisfied for the failure of the sheriff to locate the
Relations Commission, Santos should not have been
offices of the corporation in the addressed indicated.
made personally answerable for the payment of
Another writ of execution and an order of garnishment
Millena's back salaries.
was thereupon served on Santos at his residence.
Contending that he had been denied due process,
Santos filed a motion for reconsideration of the
______________ CASE ENDS HERE ___________
NLRC's resolution along with a prayer for the quashal
of the writ of execution and order of garnishment. He Yao Ka Sin v CA
averred that he had never received any notice,
In 1973, Constancio Maglana, president of Prime
summons or even a copy of the complaint; hence, he
White Cement Corporation, sent an offer letter to Yao
said, the Labor Arbiter at no time had acquired
Ka Sin Trading. The offer states that Prime White is
jurisdiction over him. On 16 August 1991, the NLRC
willing to sell 45,000 bags of cement at P24.30 per
dismissed the motion for reconsideration. Santos filed
bag. The offer letter was received by Yao Ka Sin’s
the petition for certiorari.
manager, Henry Yao. Yao accepted the letter and
pursuant to the letter, he sent a check in the amount
of P243,000.00 equivalent to the value of 10,000 bags
Issue: Whether Santos should be made solidarily
of cement. However, the Board of Directors of Prime
liable with MMDC.
White rejected the offer letter sent by Maglana but it
considered Yao’s acceptance letter as a new contract
offer hence the Board sent a letter to Yao telling him
Held: A corporation is a judicial entity with legal
that Prime White is instead willing to sell only 10,000
personality separated and distinct from those acting
bags to Yao Ka Sin and that he has ten days to reply;
for and in its behalf and, in general, from the people
that if no reply is made by Yao then they will consider
comprising it. The rule is that obligations incurred by
it as an acceptance and that thereafter Prime White
the corporation, acting through its directors, officers
shall deposit the P243k check in its account and then

deliver the cements to Yao Ka Sin. Henry Yao never
replied.
Later, Yao Ka Sin sued Prime White to compel the
latter to comply with what Yao Ka Sin considered as
the true contract, i.e., 45,000 bags at P24.30 per bag.
Prime White in its defense averred that although
Maglana is empowered to sign contracts in behalf of
Prime White, such contracts are still subject to
approval by Prime White’s Board, and then it still
requires further approval by the National Investment
and Development Corporation (NIDC), a government
owned and controlled corporation because Prime
White is a subsidiary of NIDC.
Henry Yao asserts that the letter from Maglana is a
binding contract because it was made under the
apparent authority of Maglana. The trial court ruled in
favor of Yao Ka Sin. The Court of Appeals reversed
the trial court.
ISSUE: Whether or not the president of a corporation
is clothed with apparent authority to enter into binding
contracts with third persons without the authority of
the Board.
HELD: No. The Board may enter into contracts
through the president. The president may only enter
into contracts upon authority of the Board. Hence, any
agreement signed by the president is subject to
approval by the Board. Unlike a general manager (like
the case of Francisco vs GSIS), the president has no
apparent authority to enter into binding contracts with
third persons. Further, if indeed the by-laws of Prime
White did provide Maglana with apparent authority,
this was not proven by Yao Ka Sin.
As a rule, apparent authority may result from (1) the
general manner, by which the corporation holds out
an officer or agent as having power to act or, in other
words, the apparent authority with which it clothes him
to act in general or (2) acquiescence in his acts of a
particular nature, with actual or constructive
knowledge thereof, whether within or without the
scope of his ordinary powers. These are not present
in this case.
Also, the subsequent letter by Prime White to Yao Ka
Sin is binding because Yao Ka Sin’s failure to
respond constitutes an acceptance, per stated in the
letter itself – which was not contested by Henry Yao
during trial.

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CORPORATION LAW DIGEST – Compiled: Rheyne Robledo Page 1 of 48

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I. THE FACTS ______________ CASE ENDS HERE ___________

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I. THE FACTS ____ CASE ENDS HERE _