Corporation-Law Digest Compiled PDF
Corporation-Law Digest Compiled PDF
Week 1
G.R. No. 82797 February 27, 1991 president of the corporation at the time of the perfection of the
contract of lease, and in support the supreme court invoked the
juridical personality of a corporation as it states; A corporation
GOOD EARTH EMPORIUM INC., and LIM KA
has a personality distinct and separate from its individual
PING, petitioners, stockholders or members. Being an officer or stockholder of a
vs. corporation does not make one's property also of the
HONORABLE COURT OF APPEALS and corporation, and vice-versa, for they are separate entities
ROCES-REYES REALTY INC., respondents. (Traders Royal Bank v. CA-G.R. No. 78412, September 26,
1989; Cruz v. Dalisay, 152 SCRA 482). Shareowners are in no
(ETO YONG BINAYARAN SA MAGKAPATID, JUDGEMENT legal sense the owners of corporate property (or credits) which
DEBT) is owned by the corporation as a distinct legal person
(Concepcion Magsaysay-Labrador v. CA-G.R. No. 58168,
Facts: a lease contract was entered into between the December 19, 1989). As a consequence of the separate
respondent corporation, Roces-reyes realty inc. and good juridical personality of a corporation, the corporate debt or
earth emporium inc.. During the term of lease, petitioner good credit is not the debt or credit of the stockholder, nor is the
earth has failed to make good of the rentals due from them, stockholder's debt or credit that of the corporation (Prof. Jose
hence a case for unlawful detainer was filed against the Nolledo's "The Corporation Code of the Philippines, p. 5, 1988
petitioner lessee. Edition, citing Professor Ballantine).
The MTC manila has rendered a decision in favor of the In the absence of sufficient proof to the contrary, the Supreme
respondets, which ordered the vacation of the leased property Court ruled that there has been no satisfaction of the
and payment of the rental arrears; thus a writ of execution was judgement debt.
filed by the respondents and ruled in their favor.
Adm. Matter No. R-181-P July 31, 1987
Petitioner raised a motion for the quashal of the writ of alias
execution, alleging among others that they have already ADELIO C. CRUZ, complainant,
satisfied the judgement debt, which was ruled by RTC of vs.
manila in favor of the petitioner.
QUITERIO L. DALISAY, Deputy Sheriff, RTC,
However, on appeal to the respondent court, the Court of Manila, respondents.
appeals ruled that there was no actual satisfaction of debt and
so, reversed the ruling . (ETO YUNG SHERIFF NA MARUNONG PA SA KORTE)
Issue: WON the writ of execution shall be quashed. Facts: Cruz has filed an administrative case against dalisay for
alleged “malfeasance, corrupt practices and serious
Held: No, The Supreme Court ruled that there is no evidence irregularities” for attaching his property to satisfy a judgement
that the judgement debt has been fully satisfied for; it was debt in a labor case. On his defense, Dalisay said that he was
ruled that payment shall be made in favor of whose obligation merely performing a ministerial duty, hence cannot be charged
was constituted, his successor in interest or any person of such allegation. Respondent hinges on the claim that
authorized to receive it. because of Dalisay’s affidavit stating that he is the president
/owner of the corporation involved in the labor case, the
However, It appears in this case that the payment made by the plaintiff’s counsel advised him (dalisay) to go after Cruz’s
petitioners was not in favor of Roces Realty but to roces accounts.
brothers, and there appears no evidence that it was received
by them as a payment to the judgement debt since the receipts Issue: WON dalisay shall held be responsible for piercing the
was named after them, whereas the supreme court ruled that it corporate veil.
raised the presumption that the payment was made unto them
and not for the roces realty, as a payment of a loan extended Held: yes, the supreme court ruled that he has exceeded his
by them to the petitioners. It is true despite of being the territorial jurisdiction and even stated that, The tenor of the
NLRC judgment and the implementing writ is clear enough. It
Darla Grey| Corporation Law Digest | 1
directed Qualitrans Limousine Service, Inc. to reinstate the vessels as owners since they merely have an inchoate right to
discharged employees and pay them full backwages. whatever may remain upon the dissolution of the said foreign
Respondent, however, chose to "pierce the veil of corporate corporations and after all creditors have been fully paid and
entity" usurping a power belonging to the court and assumed satisfied;[19] and that while private respondents may have
improvidently that since the complainant is the owner/president allegedly spent amounts equal to 10% of the acquisition costs
of Qualitrans Limousine Service, Inc., they are one and the of the vessels in question, their 10% however represents their
same. It is a well-settled doctrine both in law and in equity that investments as stockholders in the foreign corporations
as a legal entity, a corporation has a personality distinct and
separate from its individual stockholders or members. The Petitioner argues that respondents has no legal personalities to
mere fact that one is president of a corporation does not render sue for being a mere stockholders of the foreign corporation,
the property he owns or possesses the property of the hence the case shall be dismissed.
corporation, since the president, as individual, and the
corporation are separate entities. Issue: WON the respondent court has committed grave abuse
of discretion in refusing to dismiss the case.
[G.R. No. 120135. March 31, 2003]
Held: No, Petitioners argument that private respondents, being
BANK OF AMERICA NT&SA, BANK OF mere stockholders of the foreign corporations, have no
personalities to sue, and therefore, the complaint should be
AMERICA INTERNATIONAL, LTD., petitioners,
dismissed, is untenable. A case is dismissible for lack of
vs. COURT OF APPEALS, HON. MANUEL personality to sue upon proof that the plaintiff is not the real
PADOLINA, EDUARDO LITONJUA, SR., and party-in-interest. Lack of personality to sue can be used as a
AURELIO K. LITONJUA, JR., respondents. ground for a Motion to Dismiss based on the fact that the
complaint, on the face thereof, evidently states no cause of
(ETO YONG LOAN SA MGA VESSEL, FORUM SHOPPING) action.[35] In San Lorenzo Village Association, Inc. vs. Court of
Appeals, this Court clarified that a complaint states a cause of
Facts: Litonjua-s filed a complaint against petitioner bank action where it contains three essential elements of a cause of
alleging that: they were engaged in shipping business and action, namely: (1) the legal right of the plaintiff, (2) the
owned two vessels through they wholly owned corporations, as correlative obligation of the defendant, and (3) the act or
their business doing well, respondent bank induced them to omission of the defendant in violation of said legal right. If
obtain more vessels and so an additional four was procured by these elements are absent, the complaint becomes
them from the respondent bank, these vessels were put on the vulnerable to a motion to dismiss on the ground of failure
exclusive control and disposition of the petitioners. The bank, to state a cause of action. To emphasize, it is not the lack or
being a trustee of the corporation claimed that the petitioner absence of cause of action that is a ground for dismissal of the
bank did not fully render an account from the operations of the complaint but rather the fact that the complaint states no cause
vessels as well as the proceeds of the subsequent foreclosure of action. Failure to state a cause of action refers to the
sale; due to such the loans acquired for the additional insufficiency of allegation in the pleading, unlike lack of cause
purchase of the four vessels has matured and not paid of action which refers to the insufficiency of factual basis for
therefore been foreclosed and sold for public auction to answer the action. Failure to state a cause of action may be raised at
for obligations incurred for and in behalf of the operation of the the earliest stages of an action through a motion to dismiss the
vessels. complaint, while lack of cause of action may be raised any time
after the questions of fact have been resolved on the basis of
The Litonjuas prayed for the accounting of the revenues stipulations, admissions or evidence presented.
derived in the operation of the six vessels and of the proceeds
of the sale thereof at the foreclosure proceedings instituted by In the case at bar, the complaint contains the three elements of
petitioners; damages for breach of trust; exemplary damages a cause of action. It alleges that: (1) plaintiffs, herein private
and attorneys fees. respondents, have the right to demand for an accounting
from defendants (herein petitioners), as trustees by
As to the first assigned error: Petitioners argue that the reason of the fiduciary relationship that was created
borrowers and the registered owners of the vessels are the between the parties involving the vessels in question; (2)
foreign corporations and not private respondents Litonjuas who petitioners have the obligation, as trustees, to render such
are mere stockholders; and that the revenues derived from the an accounting; and (3) petitioners failed to do the same.
operations of all the vessels are deposited in the accounts of
the corporations. Hence, petitioners maintain that these foreign Petitioners insist that they do not have any obligation to the
corporations are the legal entities that have the personalities to private respondents as they are mere stockholders of the
sue and not herein private respondents; that private corporation; that the corporate entities have juridical
respondents, being mere shareholders, have no claim on the personalities separate and distinct from those of the private
respondents. Private respondents maintain that the
Darla Grey| Corporation Law Digest | 2
corporations are wholly owned by them and prior to the Issue: WON avon dale garments is a separate and distinct
incorporation of such entities, they were clients of entity from avon dale shirt factory.
petitioners which induced them to acquire loans from said
petitioners to invest on the additional ships. Held: No, Petitioner failed to establish that Avon Dale
Garments, Inc., is a separate and distinct entity from Avon
We agree with private respondents. As held in the San Dale Shirt Factory, absent any showing that there was indeed
Lorenzo case, an actual closure and cessation of the operations of the latter.
The mere filing of the Articles of Dissolution with the Securities
xxx assuming that the allegation of facts constituting plaintiffs and Exchange Commission, without more, is not enough to
cause of action is not as clear and categorical as would support the conclusion that actual dissolution of an entity in
otherwise be desired, any uncertainty thereby arising should fact took place.
be so resolved as to enable a full inquiry into the merits of the
action. On the contrary, the prevailing circumstances in this case
indicated that petitioner company is not distinct from its
As this Court has explained in the San Lorenzo case, such a predecessor Avon Dale Shirt Factory, but in fact merely
course, would preclude multiplicity of suits which the law continued the operations of the latter under the same
abhors, and conduce to the definitive determination and owners, the same business venture, at same address6, and
termination of the dispute. To do otherwise, that is, to abort the even continued to hire the same employees (herein private
action on account of the alleged fatal flaws of the complaint respondents).
would obviously be indecisive and would not end the
controversy, since the institution of another action upon a Thus, conformably with established jurisprudence, the two
revised complaint would not be foreclosed. entities cannot be deemed as separate and distinct where
there is a showing that one is merely the continuation of
G.R. No. 117932 July 20, 1995 the other.7 In fact, even a change in the corporate name
does not make a new corporation, whether effected by a
special act or under a general law, it has no effect on the
AVON DALE GARMENTS, INC., petitioner,
identity of the corporation, or on its property, rights, or
vs. liabilities.8 Respondent NLRC therefore, did not commit any
NATIONAL LABOR RELATIONS COMMISSION, grave abuse of discretion in holding that petitioner should
LILIA DUMANTAY, ET AL., respondents. likewise include private respondents' employment with Avon
Dale Shirt Factory in computing private respondents'
(ETO YONG MAY TSHIRT FACTORY, UNSATISFIED separation pay as petitioner failed to substantiate its claim that
JUDGEMENT DEBT) it is a distinct entity.
Facts: respondents were employees of petitioner avon dale [G.R. No. 108734. May 29, 1996]
garments and its predecessor in interest avon dale shirt
factory. Following a dispute brought about by the rotation of CONCEPT BUILDERS, INC., petitioner, vs. THE
workers, a compromise agreement was entered into between
NATIONAL LABOR RELATIONS COMMISSION,
petitioner and private respondents wherein the latter were
terminated from service and given their corresponding
(ILLEGAL DISMISSAL DAW, IDENTITY RULE)
separation pay.
PONENCIA:
However, petitioners refused to compute their separation pay
while they were employed by avond dale shirts amounting to
The corporate mask may be lifted and the corporate veil may
deficiency in their separation pay.
be pierced when a corporation is just but the alter ego of a
person or of another corporation. Where badges of fraud exist;
On its defense, avon dale raised before the court that it has
where public convenience is defeated; where a wrong is
separate and distinct personality from its predecessor-in-
sought to be justified thereby, the corporate fiction or the notion
interest avon dale shirts.
of legal entity should come to naught. The law in these
instances will regard the corporation as a mere association of
Pending resolution of the instant petition, counsel for private
persons and, in case of two corporations, merge them into one.
respondents informed the court that they’ve entered into an
amicable settlement by virtue of which a waiver and a quitclaim
Thus, where a sister corporation is used as a shield to evade a
was executed, without however the knowledge and
corporations subsidiary liability for damages, the corporation
participation of NLRC.
may not be heard to say that it has a personality separate and
Facts: Petitioner is a construction corporation while Held: No, It is a fundamental principle of corporation law that a
respondents were employee of the former as carpenters and corporation is an entity separate and distinct from its
riggers. stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a
On November 1981, respondents were served individual corporation is merely a fiction created by law for
written notices of termination by reason of expiration of their convenience and to promote justice. So, when the notion
contract and the project they were hired was already of separate juridical personality is used to defeat public
completed. convenience, justify wrong, protect fraud or defend crime,
or is used as a device to defeat the labor laws, this
Public respondent found it to be, the fact, however, that at the separate personality of the corporation may be
time of the termination of private respondents employment, the disregarded or the veil of corporate fiction pierced. This is
project in which they were hired had not yet been finished and true likewise when the corporation is merely an adjunct, a
completed. Petitioner had to engage the services of sub- business conduit or an alter ego of another corporation.
contractors whose workers performed the functions of private
respondents. The conditions under which the juridical entity may be
disregarded vary according to the peculiar facts and
Aggrieved, private respondents filed a labor case against the circumstances of each case. No hard and fast rule can be
petitioner. accurately laid down, but certainly, there are some probative
factors of identity that will justify the application of the
The case brought before the labor arbiter has favored the doctrine of piercing the corporate veil, to wit:
private respondents, and so a writ of execution was sought by
them to satisfy the judgement debt. 1. Stock ownership by one or common ownership of both
corporations.
a certain Dennis Cuyegkeng filed a third-party claim with the
Labor Arbiter alleging that the properties sought to be levied 2. Identity of directors and officers.
upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI)
of which he is the Vice-President. 3. The manner of keeping corporate books and records.
Private respondents filed a Motion for Issuance of a Break- 4. Methods of conducting the business.
Open Order, alleging that HPPI and petitioner corporation were
owned by the same incorporator! stockholders. They also The test in determining the applicability of the doctrine of
alleged that petitioner temporarily suspended its business piercing the veil of corporate fiction is as follows:
operations in order to evade its legal obligations to them and
that private respondents were willing to post an indemnity bond 1. Control, not mere majority or complete stock control,
to answer for any damages which petitioner and HPPI may but complete domination, not only of finances but of
suffer because of the issuance of the break-open order. policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction
HPPI submitted its GIS and opposed the issuance of had at the time no separate mind, will or existence of its
break-open order alleging that they have separate and own;
distinct personality from the petitioner.
2. Such control must have been used by the defendant to
Petitioner alleges that the NLRC committed grave abuse of commit fraud or wrong, to perpetuate the violation of a
discretion when it ordered the execution of its decision despite statutory or other positive legal duty, or dishonest and
a third-party claim on the levied property. Petitioner further unjust act in contravention of plaintiffs legal rights; and
contends, that the doctrine of piercing the corporate veil should
not have been applied, in this case, in the absence of any 3. The aforesaid control and breach of duty must
showing that it created HPPI in order to evade its liability to proximately cause the injury or unjust loss complained of.
private respondents. It also contends that HPPI is engaged in
the manufacture and sale of steel, concrete and iron pipes, a The absence of any one of these elements prevents
business which is distinct and separate from petitioners piercing the corporate veil. in applying the instrumentality
construction business. Hence, it is of no consequence that or alter ego doctrine, the courts are concerned with reality
petitioner and HPPI shared the same premises, the same and not form, with how the corporation operated and the
President and the same set of officers and subscribers. individual defendants relationship to that operation.
From the foregoing, it appears that, among other things, the Private respondent Ejercito vigorously argues that in spite of
respondent (herein petitioner) and the third-party claimant this verification, petitioners are guilty of actual forum shopping
shared the same address and/or premises. Under this because the instant petition pending before this Court involves
circumstances, (sic) it cannot be said that the property levied identical parties or interests represented, rights asserted and
upon by the sheriff were not of respondents. reliefs sought (as that) currently pending before the Regional
Trial Court, Makati Branch 134 in the Second Case. In fact, the
Clearly, petitioner ceased its business operations in order to issues in the two cases are so intertwined that a judgment or
evade the payment to private respondents of backwages and resolution in either case will constitute res judicata in the other.
to bar their reinstatement to their former positions. HPPI is
obviously a business conduit of petitioner corporation and its On the other hand, petitioners explain that there is no forum-
emergence was skillfully orchestrated to avoid the financial shopping because:
liability that already attached to petitioner corporation.
1) In the earlier or First Case from which this proceeding arose,
It is very obvious that the second corporation seeks the the Bank was impleaded as a defendant, whereas in the
protective shield of a corporate fiction whose veil in the present Second Case (assuming the Bank is the real party in interest in
case could, and should, be pierced as it was deliberately and a derivative suit), it was the plaintiff;
maliciously designed to evade its financial obligation to its
employees. 2) The derivative suit is not properly a suit for and in behalf of
the corporation under the circumstances;
[G.R. No. 115849. January 24, 1996]
3) Although the CERTIFICATION/VERIFICATION (supra)
signed by the Bank president and attached to the Petition
FIRST PHILIPPINE INTERNATIONAL BANK
identifies the action as a derivative suit, it does not mean that it
(Formerly Producers Bank of the Philippines) is one and (t)hat is a legal question for the courts to decide;
and MERCURIO RIVERA, petitioners, vs.
COURT OF APPEALS 4) Petitioners did not hide the Second Case as they mentioned
it in the said VERIFICATION/CERTIFICATION.
(ETO YONG NAGSULATAN ANG MGA ULOL SA BENTAHAN
NG LUPA) Issue(s):1. WON the sale has been perfected through the
bank’s corporate officer Rivera?
Facts: The defendant Producer bank acquired six parcels of
land formerly owned by BYME investment and development 2. was there a forum shopping?
corporation which had them mortgaged with the bank as
collateral form of loan. The original plaintiffs were interested in Held: 1. Yes, The Supreme Court Ruled in the case of The
the property and thus initiated negotiations for that purpose. authority of a corporate officer in dealing with third persons
may be actual or apparent. The doctrine of apparent authority,
An exchange of letters as an offer were made for the proposed with special reference to banks, was laid out in Prudential Bank
purchase of the subject properties, vs. Court of Appeals, where it was held that:
On their initial offer, they wasn’t able to meet the counter offer Conformably, we have declared in countless decisions that the
of the bank, but later on agreed to purchase the same on the principal is liable for obligations contracted by the agent. The
tenure of the bank’s proposal. agents apparent representation yields to the principals true
representation and the contract is considered as entered into
Comes now the question of fact is that whether or not there between the principal and the third person (citing National
was a sale made by merely exchanging of letters. Food Authority vs. Intermediate Appellate Court, 184 SCRA
166).
Now plaintiffs demanded for the execution of the sale after
tendering the agreed purchase price to which the bank A bank is liable for wrongful acts of its officers done in the
declines and refused to received the same. interests of the bank or in the course of dealings of the officers
in their representative capacity but not for acts outside the
Darla Grey| Corporation Law Digest | 5
scope of their authority (9 C.J.S., p. 417). A bank holding out are present or where a final judgment in one case will amount
its officers and agents as worthy of confidence will not be to res judicata in the other, as follows:
permitted to profit by the frauds they may thus be enabled to
perpetrate in the apparent scope of their employment; nor will it There thus exists between the action before this Court and
be permitted to shirk its responsibility for such frauds, even RTC Case No. 86-36563 identity of parties, or at least such
though no benefit may accrue to the bank therefrom (10 Am parties as represent the same interests in both actions, as well
Jur 2d, p. 114). Accordingly, a banking corporation is liable to as identity of rights asserted and relief prayed for, the relief
innocent third persons where the representation is made in the being founded on the same facts, and the identity on the two
course of its business by an agent acting within the general preceding particulars is such that any judgment rendered in the
scope of his authority even though, in the particular case, the other action, will, regardless of which party is successful,
agent is secretly abusing his authority and attempting to amount to res adjudicata in the action under consideration: all
perpetrate a fraud upon his principal or some other person, for the requisites, in fine, of auter action pendant.
his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND
752, 204 NW 818, 40 ALR 1021). xxx xxx xxx
Application of these principles is especially necessary because As already observed, there is between the action at bar and
banks have a fiduciary relationship with the public and their RTC Case No. 86-36563, an identity as regards parties, or
stability depends on the confidence of the people in their interests represented, rights asserted and relief sought, as well
honesty and efficiency. Such faith will be eroded where banks as basis thereof, to a degree sufficient to give rise to the
do not exercise strict care in the selection and supervision of ground for dismissal known as auter action pendant or lis
its employees, resulting in prejudice to their depositors. pendens. That same identity puts into operation the sanction of
twin dismissals just mentioned. The application of this sanction
From the evidence found by respondent Court, it is obvious will prevent any further delay in the settlement of the
that petitioner Rivera has apparent or implied authority to act controversy which might ensue from attempts to seek
for the Bank in the matter of selling its acquired assets. His reconsideration of or to appeal from the Order of the Regional
acts for receiving the letter, signing and making a counter offer Trial Court in Civil Case No. 86-36563 promulgated on July 15,
to it and arranging meeting between the buyer and Luis Co, as 1986, which dismissed the petition upon grounds which appear
well as the newspaper advertisement confirming his authority persuasive.
and that he is a manager of the bank and In fact, Rivera was
the officer mentioned in the Banks advertisements offering for Consequently, where a litigant (or one representing the same
sale the property in question. interest or person) sues the same party against whom another
action or actions for the alleged violation of the same right and
We note that the Banks repudiation, through Conservator the enforcement of the same relief is/are still pending, the
Encarnacion, of Riveras authority and action, particularly the defense of litis pendencia in one case is a bar to the others;
latters counter-offer of P5.5 million, as being unauthorized and and, a final judgment in one would constitute res judicata and
illegal came only on May 12, 1988 or more than seven (7) thus would cause the dismissal of the rest. In either case,
months after Janolos acceptance. Such delay, and the forum shopping could be cited by the other party as a ground
absence of any circumstance which might have justifiably to ask for summary dismissal of the two[20] (or more)
prevented the Bank from acting earlier, clearly characterizes complaints or petitions, and for the imposition of the other
the repudiation as nothing more than a last-minute attempt on sanctions, which are direct contempt of court, criminal
the Banks part to get out of a binding contractual obligation. prosecution, and disciplinary action against the erring lawyer.
2. Yes, There is forum-shopping whenever, as a result of an Applying the foregoing principles in the case before us and
adverse opinion in one forum, a party seeks a favorable comparing it with the Second Case, it is obvious that there
opinion (other than by appeal or certiorari) in another. The exist identity of parties or interests represented, identity of
principle applies not only with respect to suits filed in the courts rights or causes and identity of reliefs sought.
but also in connection with litigations commenced in the courts
while an administrative proceeding is pending, as in this case, Very simply stated, the original complaint in the court a quo
in order to defeat administrative processes and in anticipation which gave rise to the instant petition was filed by the buyer
of an unfavorable administrative ruling and a favorable court (herein private respondent and his predecessors-in-interest)
ruling. This is specially so, as in this case, where the court in against the seller (herein petitioners) to enforce the alleged
which the second suit was brought, has no jurisdiction [18] perfected sale of real estate. On the other hand, the
complaint[21] in the Second Case seeks to declare such
The test for determining whether a party violated the rule purported sale involving the same real property as
against forum-shopping has been laid down in the 1986 case unenforceable as against the Bank, which is the petitioner
of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that herein. In other words, in the Second Case, the majority
is, forum-shopping exists where the elements of litis pendentia stockholders, in representation of the Bank, are seeking to
Darla Grey| Corporation Law Digest | 6
accomplish what the Bank itself failed to do in the original case essentially the same facts. The adoption of this latter recourse
in the trial court. In brief, the objective or the relief being renders the petitioners amenable to disciplinary action and
sought, though worded differently, is the same, namely, to both their actions, in this Court as well as in the Court a quo,
enable the petitioner Bank to escape from the obligation to sell dismissible.
the property to respondent. In Danville Maritime, Inc. vs.
Commission on Audit,[22] this Court ruled that the filing by a In the instant case before us, there is also identity of parties, or
party of two apparently different actions, but with the same at least, of interests represented. Although the plaintiffs in the
objective, constituted forum shopping: Second Case (Henry L. Co. et al.) are not name parties in the
First Case, they represent the same interest and entity,
In the attempt to make the two actions appear to be different, namely, petitioner Bank, because:
petitioner impleaded different respondents therein - PNOC in
the case before the lower court and the COA in the case Firstly, they are not suing in their personal capacities, for they
before this Court and sought what seems to be different reliefs. have no direct personal interest in the matter in controversy.
Petitioner asks this Court to set aside the questioned letter- They are not principally or even subsidiarily liable; much less
directive of the COA dated October 10, 1988 and to direct said are they direct parties in the assailed contract of sale; and
body to approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the Secondly, the allegations of the complaint in the Second Case
complaint before the lower court petitioner seeks to enjoin the show that the stockholders are bringing a derivative suit. In the
PNOC from conducting a rebidding and from selling to other caption itself, petitioners claim to have brought suit for and in
parties the vessel T/T Andres Bonifacio, and for an extension behalf of the Producers Bank of the Philippines.[24] Indeed,
of time for it to comply with the paragraph 1 of the this is the very essence of a derivative suit:
memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are An individual stockholder is permitted to institute a derivative
ostensibly different, the ultimate objective in both actions is the suit on behalf of the corporation wherein he holds stock in
same, that is, the approval of the sale of vessel in favor of order to protect or vindicate corporate rights, whenever the
petitioner, and to overturn the letter-directive of the COA of officials of the corporation refuse to sue, or are the ones to be
October 10, 1988 disapproving the sale. (italics supplied) sued or hold the control of the corporation. In such actions, the
suing stockholder is regarded as a nominal party, with the
In an earlier case,[23] but with the same logic and vigor, we corporation as the real party in interest. (Gamboa v. Victoriano,
held: 90 SCRA 40, 47 [1979]; italics supplied).
In other words, the filing by the petitioners of the instant special In the face of the damaging admissions taken from the
civil action for certiorari and prohibition in this Court despite the complaint in the Second Case, petitioners, quite strangely,
pendency of their action in the Makati Regional Trial Court, is a sought to deny that the Second Case was a derivative suit,
species of forum-shopping. Both actions unquestionably reasoning that it was brought, not by the minority shareholders,
involve the same transactions, the same essential facts and but by Henry Co et al., who not only own, hold or control over
circumstances. The petitioners claim of absence of identity 80% of the outstanding capital stock, but also constitute the
simply because the PCGG had not been impleaded in the RTC majority in the Board of Directors of petitioner Bank. That being
suit, and the suit did not involve certain acts which transpired so, then they really represent the Bank. So, whether they sued
after its commencement, is specious. In the RTC action, as in derivatively or directly, there is undeniably an identity of
the action before this Court, the validity of the contract to interests/entity represented.
purchase and sell of September 1, 1986, i.e., whether or not it
had been efficaciously rescinded, and the propriety of Petitioner also tried to seek refuge in the corporate fiction that
implementing the same (by paying the pledgee banks the the personality of the Bank is separate and distinct from its
amount of their loans, obtaining the release of the pledged shareholders. But the rulings of this Court are consistent:
shares, etc.) were the basic issues. So, too, the relief was the When the fiction is urged as a means of perpetrating a fraud or
same: the prevention of such implementation and/or the an illegal act or as a vehicle for the evasion of an existing
restoration of the status quo ante. When the acts sought to be obligation, the circumvention of statutes, the achievement or
restrained took place anyway despite the issuance by the Trial perfection of a monopoly or generally the perpetration of
Court of a temporary restraining order, the RTC suit did not knavery or crime, the veil with which the law covers and
become functus oflcio. It remained an effective vehicle for isolates the corporation from the members or stockholders who
obtention of relief; and petitioners remedy in the premises was compose it will be lifted to allow for its consideration merely as
plain and patent: the filing of an amended and supplemental an aggregation of individuals.[25]
pleading in the RTC suit, so as to include the PCGG as
defendant and seek nullification of the acts sought to be In addition to the many cases[26] where the corporate fiction
enjoined but nonetheless done. The remedy was certainly not has been disregarded, we now add the instant case, and
the institution of another action in another forum based on
Darla Grey| Corporation Law Digest | 7
declare herewith that the corporate veil cannot be used to decision recognizing the perfection and directing the
shield an otherwise blatant violation of the prohibition against enforcement of the contract of sale will directly conflict with a
forum-shopping. Shareholders, whether suing as the majority possible decision in the Second Case barring the parties from
in direct actions or as the minority in a derivative suit, cannot enforcing or implementing the said sale. Indeed, a final
be allowed to trifle with court processes, particularly where, as decision in one would constitute res judicata in the other.[28]
in this case, the corporation itself has not been remiss in
vigorously prosecuting or defending corporate causes and in The foregoing conclusion finding the existence of forum-
using and applying remedies available to it. To rule otherwise shopping notwithstanding, the only sanction possible now is
would be to encourage corporate litigants to use their the dismissal of both cases with prejudice, as the other
shareholders as fronts to circumvent the stringent rules against sanctions cannot be imposed because petitioners present
forum shopping. counsel entered their appearance only during the proceedings
in this Court, and the Petitions
Finally, petitioner Bank argued that there cannot be any forum VERIFICATION/CERTIFICATION contained sufficient
shopping, even assuming arguendo that there is identity of allegations as to the pendency of the Second Case to show
parties, causes of action and reliefs sought, because it (the good faith in observing Circular 28-91. The lawyers who filed
Bank) was the defendant in the (first) case while it was the the Second Case are not before us; thus the rudiments of due
plaintiff in the other (Second Case), citing as authority process prevent us from motu propio imposing disciplinary
Victronics Computers, Inc. vs. Regional Trial Court, Branch 63, measures against them in this Decision. However, petitioners
Makati, etc. et al.,[27] where the Court held: themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping
The rule has not been extended to a defendant who, for and not to trifle with court proceedings and processes. They
reasons known only to him, commences a new action against are warned that a repetition of the same will be dealt with more
the plaintiff - instead of filing a responsive pleading in the other severely.
case - setting forth therein, as causes of action, specific
denials, special and affirmative defenses or even Having said that, let it be emphasized that this petition should
counterclaims. Thus, Velhagens and Kings motion to dismiss be dismissed not merely because of forum-shopping but also
Civil Case No. 91-2069 by no means negates the charge of because of the substantive issues raised, as will be discussed
forum-shopping as such did not exist in the first place. (italics shortly.
supplied)
[G.R. No. 100812. June 25, 1999]
Petitioner pointed out that since it was merely the defendant in
the original case, it could not have chosen the forum in said
FRANCISCO MOTORS
case.
CORPORATION, petitioner, vs. COURT OF
Respondent, on the other hand, replied that there is a APPEALS and SPOUSES GREGORIO and
difference in factual setting between Victronics and the present LIBRADA MANUEL, respondents.
suit. In the former, as underscored in the above-quoted Court
ruling, the defendants did not file any responsive pleading in (ETO YONG SA JEEP, TSAKA ESTATE NI BENITA
the first case. In other words, they did not make any denial or TRINIDAD)
raise any defense or counter-claim therein. In the case before
us however, petitioners filed a responsive pleading to the Facts: Petitioner filed a case for recovery of sum of money
complaint - as a result of which, the issues were joined. against respondents representing the balance of unpaid
jeepney body purchased by manuels from the petitioner, as
Indeed, by praying for affirmative reliefs and interposing well as for its repairs and other expenses for the costs of suit.
counter-claims in their responsive pleadings, the petitioners Respondents interposed a counterclaim alleging that Manuel
became plaintiffs themselves in the original case, giving unto merely withholds na money for his unpaid legal services due to
themselves the very remedies they repeated in the Second the incorporators of the petitioner.
Case.
Manuel stated that during his employment as a assistant legal
Ultimately, what is truly important to consider in determining officer, he represented the members of Francisco family for the
whether forum-shopping exists or not is the vexation caused intestate proceedings in the judicial settlement of the properties
the courts and parties-litigant by a party who asks different left by the late Benita Trinidad; whereas the petitioners did not
courts and/or administrative agencies to rule on the same or paid for his services after such settlement, adding that the
related causes and/or to grant the same or substantially the parties in the settlement were incorporators, directors and
same reliefs, in the process creating the possibility of officers of the petitioner corporation to which the trial court
conflicting decisions being rendered by the different fora upon ruled in favor of manuel.
the same issue. In this case, this is exactly the problem: a
Darla Grey| Corporation Law Digest | 8
Petitioner submits that respondent court should not have estate. These estate proceedings did not involve any
resorted to piercing the veil of corporate fiction because the business of petitioner.
transaction concerned only respondent Gregorio Manuel and
the heirs of the late Benita Trinidad. According to petitioner, Note also that he sought to collect legal fees not just from
there was no cause of action by said respondent against certain Francisco family members but also from petitioner
petitioner; personal concerns of the heirs should be corporation on the claims that its management had requested
distinguished from those involving corporate affairs.Petitioner his services and he acceded thereto as an employee of
further contends that the present case does not fall among the petitioner from whom it could be deduced he was also
instances wherein the courts may look beyond the distinct receiving a salary. His move to recover unpaid legal fees
personality of a corporation. According to petitioner, the through a counterclaim against Francisco Motors Corporation,
services for which respondent Gregorio Manuel seeks to to offset the unpaid balance of the purchase and repair of
collect fees from petitioner are personal in nature. Hence, it a jeep body could only result from an obvious
avers the heirs should have been sued in their personal misapprehension that petitioners corporate assets could
capacity, and not involve the corporation. be used to answer for the liabilities of its individual
directors, officers, and incorporators. Such result if
Issue: WON the court of appeals erred in piercing the permitted could easily prejudice the corporation, its own
corporate veil. creditors, and even other stockholders; hence, clearly
inequitous to petitioner.
Held: Yes, Basic in Corporation law is the principle that a
corporation has a separate personality distinct from its Furthermore, considering the nature of the legal services
stockholders and from other corporations to which it may be involved, whatever obligation said incorporators, directors
connected. However, under the doctrine of piercing the veil of and officers of the corporation had incurred, it was
corporate entity, the corporations separate juridical personality incurred in their personal capacity. When directors and
may be disregarded, for example, when the corporate identity officers of a corporation are unable to compensate a party for a
is used to defeat public convenience, justify wrong, protect personal obligation, it is far-fetched to allege that the
fraud, or defend crime. Also, where the corporation is a mere corporation is perpetuating fraud or promoting injustice, and be
alter ego or business conduit of a person, or where the thereby held liable therefor by piercing its corporate veil. While
corporation is so organized and controlled and its affairs are so there are no hard and fast rules on disregarding separate
conducted as to make it merely an instrumentality, agency, corporate identity, we must always be mindful of its function
conduit or adjunct of another corporation, then its distinct and purpose. A court should be careful in assessing the milieu
personality may be ignored. In these circumstances, the courts where the doctrine of piercing the corporate veil may be
will treat the corporation as a mere aggrupation of persons and applied. Otherwise an injustice, although unintended, may
the liability will directly attach to them. The legal fiction of a result from its erroneous application.
separate corporate personality in those cited instances, for
reasons of public policy and in the interest of justice, will be The personality of the corporation and those of its
justifiably set aside. incorporators, directors and officers in their personal capacities
ought to be kept separate in this case. The claim for legal fees
In our view, however, given the facts and circumstances of this against the concerned individual incorporators, officers and
case, the doctrine of piercing the corporate veil has no relevant directors could not be properly directed against the corporation
application here. Respondent court erred in permitting the trial without violating basic principles governing corporations.
courts resort to this doctrine. The rationale behind piercing a Moreover, every action including a counterclaim must be
corporations identity in a given case is to remove the prosecuted or defended in the name of the real party in
barrier between the corporation from the persons interest. It is plainly an error to lay the claim for legal fees of
comprising it to thwart the fraudulent and illegal schemes private respondent Gregorio Manuel at the door of petitioner
of those who use the corporate personality as a shield for (FMC) rather than individual members of the Francisco family.
undertaking certain proscribed activities. However, in the
case at bar, instead of holding certain individuals or [G.R. Nos. 116124-25. November 22, 2000]
persons responsible for an alleged corporate act, the
situation has been reversed. It is the petitioner as a
BIBIANO O. REYNOSO, IV, petitioner, vs. HON.
corporation which is being ordered to answer for the
personal liability of certain individual directors, officers COURT OF APPEALS and GENERAL CREDIT
and incorporators concerned. Hence, it appears to us that CORPORATION, respondents.
the doctrine has been turned upside down because of its
erroneous invocation. Note that according to private (ETO YONG MANAGER NA NAG LOAN, NANALO KASE
respondent Gregorio Manuel his services were solicited as WALA NAMAN EMBEZZLEMENT)
counsel for members of the Francisco family to represent
them in the intestate proceedings over Benita Trinidads
Darla Grey| Corporation Law Digest | 9
Facts: Commercial Credit Corporation (CCC) has decided to whether or not the judgment in favor of petitioner may be
branch out, and pursuant to its goal, it created another executed against respondent General Credit Corporation.
corporation named CCC-QC , (Quezon City). Petitioner
Reynoso was a resident manager of CCC. CCC-QC entered
into an exclusive management contract with CCC whereby the
latter was granted the management and full control of the Held: The defense of separateness will be disregarded where
business activities of the former. Under the contract, CCC-QC the business affairs of a subsidiary corporation are so
shall sell, discount and/or assign its receivables to CCC. controlled by the mother corporation to the extent that it
Subsequently, however, this discounting arrangement was becomes an instrument or agent of its parent. But even when
discontinued pursuant to the so-called DOSRI Rule, prohibiting there is dominance over the affairs of the subsidiary, the
the lending of funds by corporations to its directors, officers, doctrine of piercing the veil of corporate fiction applies only
stockholders and other persons with related interests therein. when such fiction is used to defeat public convenience, justify
wrong, protect fraud or defend crime.
As Resident Manager of CCC-QC, petitioner oversaw the
operations of CCC-QC and supervised its employees. The We stated in Tomas Lao Construction v. National Labor
business activities of CCC-QC pertain to the acceptance of Relations Commission, that the legal fiction of a corporation
funds from depositors who are issued interest-bearing being a judicial entity with a distinct and separate personality
promissory notes. The amounts deposited are then loaned out was envisaged for convenience and to serve justice.
to various borrowers. Petitioner, in order to boost the business Therefore, it should not be used as a subterfuge to commit
activities of CCC-QC, deposited his personal funds in the injustice and circumvent the law.
company. In return, CCC-QC issued to him its interest-bearing
promissory notes. Precisely for the above reasons, we grant the instant petition.
a complaint for sum of money with preliminary attachment was It is obvious that the use by CCC-QC of the same name of
filed by CCC-QC against the petitioner alleging that there was Commercial Credit Corporation was intended to publicly
an embezzlement of company funds, among the causes of identify it as a component of the CCC group of companies
action it stated that petitioner obtained a specific immovable engaged in one and the same business, i.e., investment
property which was mortgaged to CCC and later on was and financing. Aside from CCC-Quezon City, other franchise
foreclosed. companies were organized such as CCC-North Manila and
CCC-Cagayan Valley. The organization of subsidiary
Petitioner denied having unlawfully used funds of CCC-QC and corporations as what was done here is usually resorted to for
asserted that the sum represented his money placements in the aggrupation of capital, the ability to cover more territory
CCC-QC, as shown by twenty-three (23) checks which he and population, the decentralization of activities best
issued to the said company. decentralized, and the securing of other legitimate advantages.
But when the mother corporation and its subsidiary cease to
The court ruled in favor of reynoso awarding him moral and act in good faith and honest business judgment, when the
exemplary damage, however the award to reynoso remained corporate device is used by the parent to avoid its liability for
unsatisfied, hence a writ of execution was sought by him. legitimate obligations of the subsidiary, and when the corporate
fiction is used to perpetrate fraud or promote injustice, the law
General Credit Corporation filed a Special Appearance and steps in to remedy the problem. When that happens, the
Opposition on December 2, 1991, alleging that it was not a corporate character is not necessarily abrogated. It continues
party to the case, and therefore petitioner should direct his for legitimate objectives. However, it is pierced in order to
claim against CCC-QC and not General Credit Corporation. remedy injustice, such as that inflicted in this case.
Petitioner filed his reply, stating that the CCC-QC is an adjunct
instrumentality, conduit and agency of CCC. Furthermore, Factually and legally, the CCC had dominant control of the
petitioner invoked the decision of the Securities and Exchange business operations of CCC-QC. The exclusive management
Commission in SEC Case No. 2581, entitled, Avelina G. contract insured that CCC-QC would be managed and
Ramoso, et al., Petitioner versus General Credit Corp., et al., controlled by CCC and would not deviate from the commands
Respondents, where it was declared that General Credit of the mother corporation. In addition to the exclusive
Corporation, CCC-Equity and other franchised companies management contract, CCC appointed its own employee,
including CCC-QC were declared as one corporation. petitioner, as the resident manager of CCC-QC.
The latter contends that it is a corporation separate and distinct Petitioners designation as resident manager implies that
from CCC-QC and, therefore, its properties may not be levied he was placed in CCC-QC by a superior authority. In fact,
upon to satisfy the monetary judgment in favor of petitioner. In even after his assignment to the subsidiary corporation,
short, respondent raises corporate fiction as its defense. Issue: petitioner continued to receive his salaries, allowances,
and benefits from CCC, which later became respondent
Darla Grey| Corporation Law Digest | 10
General Credit Corporation. Not only that. Petitioner and properties and assets had been transferred and taken over by
the other permanent employees of CCC-QC were qualified CCC.
members and participants of the Employees Pension Plan
of CCC. Under the foregoing circumstances, the contention of
respondent General Credit Corporation, the new name of CCC,
There are other indications in the record which attest to that the corporate fiction should be appreciated in its favor is
the applicability of the identity rule in this case, namely: without merit.
the unity of interests, management, and control; the
transfer of funds to suit their individual corporate SIMEON DE LEON V. NLRC
conveniences; and the dominance of policy and practice
by the mother corporation insure that CCC-QC was an (ETO YUNG SA FORTUNE NA YOSI, TNERMINATE YUNG
instrumentality or agency of CCC. AGENCY, ULP,)
As petitioner stresses, both CCC and CCC-QC were engaged Facts: Fortune Tobacco Corporation (FTC) and Fortune
in the same principal line of business involving a single Integrated Services, Inc. (FISI) entered into a contract for
transaction process. Under their discounting arrangements, security services where the latter undertook to provide security
CCC financed the operations of CCC-QC. The subsidiary sold, guards for the protection and security of the former. The
discounted, or assigned its accounts receivables to CCC. petitioners were among those engaged as security guards
pursuant to the contract.
The challenged decision of the Court of Appeals states that
CCC, now General Credit Corporation, is not a formal party in The incorporators and stockholders of FISI sold out lock, stock
the case. The reason for this is that the complaint was filed by and barrel to a group of new stockholders by executing for the
CCC-QC against petitioner. The choice of parties was with purpose a "Deed of Sale of Shares of Stock". On the same
CCC-QC. The judgment award in this case arose from the date, the Articles of Incorporation of FISI was amended
counterclaim which petitioner set up against CCC-QC. changing its corporate name to Magnum Integrated Services,
Inc. (MISI). A new by-laws was likewise adopted and approved
The circumstances which led to the filing of the aforesaid by the Securities and Exchange Commission on June 4, 1993.
complaint are quite revealing. As narrated above, the
discounting agreements through which CCC controlled the Wherefore, as a result of such actions of the respondent
finances of its subordinates became unlawful when Central corporation , morethan a hundred security guards were
Bank adopted the DOSRI prohibitions. Under this rule the terminated and no longer renewed as represented by two
directors, officers, and stockholders are prohibited from different agencies.
borrowing from their company. Instead of adhering to the letter
and spirit of the regulations by avoiding DOSRI loans Petitioners alleged that they were regular employees of FTC
altogether, CCC used the corporate device to continue the which was also using the corporate names Fortune Integrated
prohibited practice. CCC organized still another corporation, Services, Inc. and Magnum Integrated Services, Inc. They
the CCC-Equity Corporation. However, as a wholly owned were assigned to work as security guards at the company's
subsidiary, CCC-Equity was in fact only another name for main factory plant, its tobacco redrying plant and warehouse.
CCC. Key officials of CCC, including the resident managers of They averred that they performed their duties under the control
subsidiary corporations, were appointed to positions in CCC- and supervision of FTC's security supervisors. Thus, a case for
Equity. illegal dismissal ensued.
In order to circumvent the Central Banks disapproval of CCC- Respondent FTC, on the other hand, maintained that there
QCs mode of reducing its DOSRI lender accounts and its was no employer-employee relationship between FTC and
directive to follow Central Bank requirements, resident petitioners. It said that at the time of the termination of their
managers, including petitioner, were told to observe a pseudo- services, petitioners were the employees of MISI which was a
compliance with the phasing out orders. For his unwillingness separate and distinct corporation from FTC. Hence, petitioners
to satisfactorily conform to these directives and his reluctance had no cause of action against FTC.
to resort to illegal practices, petitioner earned the ire of his
employers. Eventually, his services were terminated, and Respondent FISI, meanwhile, denied the charge of illegal
criminal and civil cases were filed against him. dismissal and unfair labor practice. It argued that petitioners
were not dismissed from service but were merely placed on
Faced with the financial obligations which CCC-QC had to floating status pending re-assignment to other posts. It alleged
satisfy, the mother firm closed CCC-QC, in obvious fraud of its that the temporary displacement of petitioners was not due to
creditors. CCC-QC, instead of opposing its closure, cooperated its fault but was the result of the pretermination by FTC of the
in its own demise. Conveniently, CCC-QC stated in its contract for security services
opposition to the motion for alias writ of execution that all its
Darla Grey| Corporation Law Digest | 11
The Labor arbiter denied the defense of no-employer- the displacement of petitioners. As MISI had no other clients, it
employee relationship, ruling the “single employer principle” failed to give new assignments to petitioners. Petitioners have
remained unemployed since then. All these facts indicate a
On appeal, the NLRC reversed and set aside the decision of concerted effort on the part of respondents to remove
the Labor Arbiter. First, it held that the Labor Arbiter erred in petitioners from the company and thus abate the growth of the
applying the "single employer" principle and concluding that union and block its actions to enforce their demands in
there was an employer-employee relationship between FTC accordance with the Labor Standards laws
and FISI on one hand, and petitioners on the other hand. It
found that at the time of the termination of the contract of We find that the Labor Arbiter correctly applied the
security services on October 15, 1991, FISI which, at that time, doctrine of piercing the corporate veil to hold all
had been renamed Magnum Integrated Services, Inc. had a respondents liable for unfair labor practice and illegal
different set of stockholders and officers from that of FTC. termination of petitioners' employment. It is a fundamental
They also had separate offices. The NLRC held that the principle in corporation law that a corporation is an entity
principle of "single employer" and the doctrine of piercing the separate and distinct from its stockholders and from other
corporate veil could not apply under the circumstances. It corporations to which it is connected. However, when the
further ruled that the proximate cause for the displacement of concept of separate legal entity is used to defeat public
petitioners was the termination of the contract for security convenience, justify wrong, protect fraud or defend crime,
services by FTC on October 15, 1991. FISI could not be the law will regard the corporation as an association of
faulted for the severance of petitioners' assignment at the persons, or in case of two corporations, merge them into
premises of FTC. Consequently, the NLRC held that the one. The separate juridical personality of a corporation
charge of illegal dismissal had no basis. As regards the charge may also be disregarded when such corporation is a mere
of unfair labor practice, the NLRC found that petitioners who alter ego or business conduit of another person. In the
had the burden of proof failed to adduce any evidence to case at bar, it was shown that FISI was a mere adjunct of
support their charge of unfair labor practice against FTC. FISI, by virtue of a contract for security services,
respondents. Hence, it ordered the dismissal of petitioners' provided FTC with security guards to safeguard its
complaint. premises. However, records show that FISI and FTC have
the same owners and business address, and FISI provided
The petitioners filed a motion for reconsideration of the security services only to FTC and other companies
resolution of the NLRC but the same was denied. Hence, this belonging to the Lucio Tan group of companies. The
petition. purported sale of the shares of the former stockholders to
a new set of stockholders who changed the name of the
Issue: Whether or not the principle of single employer and corporation to Magnum Integrated Services, Inc. appears
piercing the corporate veil doctrine was properly applied in this to be part of a scheme to terminate the services of FISI's
case. security guards posted at the premises of FTC and bust
their newly-organized union which was then beginning to
Held: Yes, Petitioners have been employed with FISI since the become active in demanding the company's compliance
1980s and have since been posted at the premises of FTC -- with Labor Standards laws. Under these circumstances,
its main factory plant, its tobacco redrying plant and the Court cannot allow FTC to use its separate corporate
warehouse. It appears from the records that FISI, while having personality to shield itself from liability for illegal acts
its own corporate identity, was a mere instrumentality of FTC, committed against its employees.
tasked to provide protection and security in the company
premises. The records show that the two corporations had [G.R. No. 142936. April 17, 2002]
identical stockholders and the same business address. FISI
also had no other clients except FTC and other companies PHILIPPINE NATIONAL BANK & NATIONAL
belonging to the Lucio Tan group of companies. Moreover, the
early payslips of petitioners show that their salaries were
SUGAR DEVELOPMENT
initially paid by FTC. CORPORATION, petitioners, vs. ANDRADA
ELECTRIC & ENGINEERING
To enforce their rightful benefits under the laws on Labor COMPANY, respondent.
Standards, petitioners formed a union which was later certified
as bargaining agent of all the security guards. On February 1, (ETO YUNG TNAKE OVER NG PNB YUNG ASUKALAN
1991, the stockholders of FISI sold all their participations in the TAPOS NAG CONSTRUCT YUNG DATING MAY ARI)
corporation to a new set of stockholders which renamed the
corporation Magnum Integrated Services, Inc. On October 15, Facts: Respondent’s services was engaged by petitioners for
1991, FTC, without any reason, preterminated its contract of electrical repairs and rewinding
security services with MISI and contracted two other agencies
to provide security services for its premises. This resulted in
Darla Grey| Corporation Law Digest | 12
Leaving several unpaid accounts by PASUMIL. Now - not mere stock control, but complete domination -- not
NASUDECO in order to nationalize and consolidate its interest only of finances, but of policy and business practice in
on the sugar milling of PNB, was organized by PnB. respect to the transaction attacked, must have been such
that the corporate entity as to this transaction had at the
NASUDECO in taking over of PASUMIL’s business, was time no separate mind, will or existence of its own; (2)
sought after by the respondent construction firm alleging that it such control must have been used by the defendant to
benefited from the previous repairs made by them in favor of commit a fraud or a wrong to perpetuate the violation of a
PASUMIL, hence they shall be be held liable for the corporate statutory or other positive legal duty, or a dishonest and
debts of PASUMIL. an unjust act in contravention of plaintiffs legal right; and
(3) the said control and breach of duty must have
The defendants PNB and NASUDECO filed a joint motion to proximately caused the injury or unjust loss complained
dismiss the complaint chiefly on the ground that the complaint of.
failed to state sufficient allegations to establish a cause of
action against both defendants, inasmuch as there is lack or We believe that the absence of the foregoing elements in the
want of privity of contract between the plaintiff and the two present case precludes the piercing of the corporate veil. First,
defendant. other than the fact that petitioners acquired the assets of
PASUMIL, there is no showing that their control over it
Both the trial court and the CA ruled in favor of the respondent, warrants the disregard of corporate personalities. Second,
stating that; , the CA held that it was offensive to the basic there is no evidence that their juridical personality was
tenets of justice and equity for a corporation to take over and used to commit a fraud or to do a wrong; or that the
operate the business of another corporation, while disavowing separate corporate entity was farcically used as a mere
or repudiating any responsibility, obligation or liability arising alter ego, business conduit or instrumentality of another
therefrom, hence this petition. entity or person. Third, respondent was not defrauded or
injured when petitioners acquired the assets of PASUMIL.
Issue: WON NASUDECO and PNB shall be held liable for
unpaid obligations by PASUMIL, whose existence was not Being the party that asked for the piercing of the corporate veil,
actually terminated or legally extinguished, simply because it respondent had the burden of presenting clear and convincing
was merely a take over by virtue of mandates by LOI 189-A as evidence to justify the setting aside of the separate corporate
amended by LOI 311 personality rule. However, it utterly failed to discharge this
burden; it failed to establish by competent evidence that
Held: Yes, A corporation is an artificial being created by petitioners separate corporate veil had been used to conceal
operation of law. It possesses the right of succession and such fraud, illegality or inequity.
powers, attributes, and properties expressly authorized by law
or incident to its existence. It has a personality separate and While we agree with respondents claim that the assets of
distinct from the persons composing it, as well as from any the National Sugar Development Corporation
other legal entity to which it may be related. This is basic. (NASUDECO) can be easily traced to PASUMIL, we are not
convinced that the transfer of the latters assets to
Equally well-settled is the principle that the corporate mask petitioners was fraudulently entered into in order to
may be removed or the corporate veil pierced when the escape liability for its debt to respondent.
corporation is just an alter ego of a person or of another
corporation. For reasons of public policy and in the interest of A careful review of the records reveals that DBP foreclosed the
justice, the corporate veil will justifiably be impaled only when it mortgage executed by PASUMIL and acquired the assets as
becomes a shield for fraud, illegality or inequity committed the highest bidder at the public auction conducted.The bank
against third persons. was justified in foreclosing the mortgage, because the
PASUMIL account had incurred arrearages of more than 20
This Court has pierced the corporate veil to ward off a percent of the total outstanding obligation. Thus, DBP had not
judgment credit, to avoid inclusion of corporate assets as part only a right, but also a duty under the law to foreclose the
of the estate of the decedent, to escape liability arising from a subject properties.
debt, or to perpetuate fraud and/or confuse legitimate issues
either to promote or to shield unfair objectives or to cover up Pursuant to LOI No. 189-A as amended by LOI No. 311, PNB
an otherwise blatant violation of the prohibition against forum- acquired PASUMILs assets that DBP had foreclosed and
shopping. Only in these and similar instances may the veil be purchased in the normal course. Petitioner bank was likewise
pierced and disregarded. tasked to manage temporarily the operation of such assets
either by itself or through a subsidiary corporation.
The question of whether a corporation is a mere alter ego is
one of fact. Piercing the veil of corporate fiction may be PNB, as the second mortgagee, redeemed from DBP the
allowed only if the following elements concur: (1) control - foreclosed PASUMIL assets pursuant to Section 6 of Act No.
Darla Grey| Corporation Law Digest | 13
3135. These assets were later conveyed to PNB for a Thereafter BET was incorporated into a family corporation
consideration, the terms of which were embodied in the named Belas Export Corporation (BEC) which undertakes the
Redemption Agreement. PNB, as successor-in-interest, same kind of business and uses the same machineries.
stepped into the shoes of DBP as PASUMILs creditor. By way
of a Deed of Assignment, PNB then transferred to NASUDECO The loan obtained by Teresita became due, thus the REM
all its rights under the Redemption Agreement. constituted previously was foreclosed.
In Development Bank of the Philippines v. Court of Appeals, Petitioner now assails the validity of foreclosure, attacking the
we had the occasion to resolve a similar issue. We ruled that authority of her daughter alleging that these acts that caused
PNB, DBP and their transferees were not liable for Marinduque the case was ultra vires acts of Teresita and never authorized
Minings unpaid obligations to Remington Industrial Sales by them through the requisite board resolution and secretary
Corporation (Remington) after the two banks had foreclosed certificate.
the assets of Marinduque Mining. We likewise held that
Remington failed to discharge its burden of proving bad faith Issue: WON the doctrine of piercing the corporate veil is
on the part of Marinduque Mining to justify the piercing of the applicable in this case.
corporate veil.
Held: Yes, Petitioners contentions fail to persuade this Court. A
In the instant case, the CA erred in affirming the trial courts careful reading of the judgment of the RTC and the resolution
lifting of the corporate mask. The CA did not point to any fact of the appellate court show that in finding petitioners
evidencing bad faith on the part of PNB and its transferee. The mortgaged property liable for the obligations of BEC, both
corporate fiction was not used to defeat public convenience, courts below relied upon the alter ego doctrine or
justify a wrong, protect fraud or defend crime. None of the instrumentality rule, rather than fraud in piercing the veil of
foregoing exceptions was shown to exist in the present case. corporate fiction. When the corporation is the mere alter ego or
On the contrary, the lifting of the corporate veil would result in business conduit of a person, the separate personality of the
manifest injustice. This we cannot allow. corporation may be disregarded.This is commonly referred
to as the instrumentality rule or the alter ego doctrine,
[G.R. No. 142435. April 30, 2003] which the courts have applied in disregarding the separate
juridical personality of corporations. As held in one case,
ESTELITA BURGOS LIPAT and ALFREDO
Where one corporation is so organized and controlled and its
LIPAT, petitioners, vs. PACIFIC BANKING affairs are conducted so that it is, in fact, a mere
CORPORATION, REGISTER OF DEEDS, RTC instrumentality or adjunct of the other, the fiction of the
EX-OFFICIO SHERIFF OF QUEZON CITY and the corporate entity of the instrumentality may be disregarded. The
Heirs of EUGENIO D. TRINIDAD, respondents. control necessary to invoke the rule is not majority or even
complete stock control but such domination of finances,
(TINDERA NG DAMIT NA INAUTHORIZE ANAK NILA) policies and practices that the controlled corporation has, so to
speak, no separate mind, will or existence of its own, and is but
Facts: Petitioners owned BELAS EXPORT TRADING (BET) a conduit for its principal.
which is engaged in manufacture of garments for domestic and
foreign consumption, the lipats also owns Mystical Fashions in We find that the evidence on record demolishes, rather than
the United States, which sells the imported goods from BET. buttresses, petitioners contention that BET and BEC are
separate business entities. Note that Estelita Lipat admitted
The owner spouses designated their daughter TERESITA that she and her husband, Alfredo, were the owners of
LIPAT to manage BET while she manage Mystical Fashion. BET and were two of the incorporators and majority
stockholders of BEC. It is also undisputed that Estelita
In the view of the foregoing, Estelita executed a special- Lipat executed a special power of attorney in favor of her
powers-of-attorney to authorize their daughter to execute daughter, Teresita, to obtain loans and credit lines from
mortgage contracts on properties owned or co-owned by her Pacific Bank on her behalf.[16] Incidentally, Teresita was
as security for the obligations to be extended by Pacific Bank designated as executive-vice president and general
including any extension or renewal thereof. manager of both BET and BEC, respectively. We note
further that: (1) Estelita and Alfredo Lipat are the owners
Teresita by virtue of the SPA, obtained a loan from PACIFIC and majority shareholders of BET and BEC, respectively;
banking corporation and other credit transaction. (2) both firms were managed by their daughter, Teresita;
(3) both firms were engaged in the garment business,
supplying products to Mystical Fashion, a U.S. firm
established by Estelita Lipat; (4) both firms held office in
the same building owned by the Lipats; (5) BEC is a family
Darla Grey| Corporation Law Digest | 14
corporation with the Lipats as its majority stockholders; Lipat with Pacific Bank, who in good faith, relied on the
(6) the business operations of the BEC were so merged authority of the former as manager to act on behalf of petitioner
with those of Mrs. Lipat such that they were practically Estelita Lipat and both BET and BEC. While the power and
indistinguishable; (7) the corporate funds were held by responsibility to decide whether the corporation should enter
Estelita Lipat and the corporation itself had no visible into a contract that will bind the corporation is lodged in its
assets; (8) the board of directors of BEC was composed of board of directors, subject to the articles of incorporation, by-
the Burgos and Lipat family members; (9) Estelita had full laws, or relevant provisions of law, yet, just as a natural person
control over the activities of and decided business matters may authorize another to do certain acts for and on his behalf,
of the corporation; and that (10) Estelita Lipat had the board of directors may validly delegate some of its
benefited from the loans secured from Pacific Bank to functions and powers to officers, committees, or agents. The
finance her business abroad and from the export bills authority of such individuals to bind the corporation is generally
secured by BEC for the account of Mystical Fashion. It derived from law, corporate by-laws, or authorization from the
could not have been coincidental that BET and BEC are so board, either expressly or impliedly by habit, custom, or
intertwined with each other in terms of ownership, acquiescence in the general course of business.[31] Apparent
business purpose, and management. Apparently, BET and authority, is derived not merely from practice. Its existence may
BEC are one and the same and the latter is a conduit of be ascertained through (1) the general manner in which the
and merely succeeded the former. Petitioners attempt to corporation holds out an officer or agent as having the power
isolate themselves from and hide behind the corporate to act or, in other words, the apparent authority to act in
personality of BEC so as to evade their liabilities to Pacific general, with which it clothes him; or (2) the acquiescence in
Bank is precisely what the classical doctrine of piercing his acts of a particular nature, with actual or constructive
the veil of corporate entity seeks to prevent and remedy. knowledge thereof, whether within or beyond the scope of his
In our view, BEC is a mere continuation and successor of ordinary powers.[32]
BET, and petitioners cannot evade their obligations in the
mortgage contract secured under the name of BEC on the In this case, Teresita Lipat had dealt with Pacific Bank on the
pretext that it was signed for the benefit and under the mortgage contract by virtue of a special power of attorney
name of BET. We are thus constrained to rule that the executed by Estelita Lipat. Recall that Teresita Lipat acted as
Court of Appeals did not err when it applied the the manager of both BEC and BET and had been deciding
instrumentality doctrine in piercing the corporate veil of business matters in the absence of Estelita Lipat. Further, the
BEC. export bills secured by BEC were for the benefit of Mystical
Fashion owned by Estelita Lipat.[33] Hence, Pacific Bank
Petitioners contend further that the mortgaged property cannot be faulted for relying on the same authority granted to
should not bind the loans and credit lines obtained by Teresita Lipat by Estelita Lipat by virtue of a special power of
BEC as they were secured without any proper attorney. It is a familiar doctrine that if a corporation knowingly
authorization or board resolution. They also blame the permits one of its officers or any other agent to act within the
bank for its laxity and complacency in not requiring a scope of an apparent authority, it holds him out to the public as
board resolution as a requisite for approving the loans. possessing the power to do those acts; thus, the corporation
will, as against anyone who has in good faith dealt with it
Such contentions deserve scant consideration. through such agent, be estopped from denying the agents
authority.[34]
Firstly, it could not have been possible for BEC to release
a board resolution since per admissions by both petitioner We find no necessity to extensively deal with the liability of
Estelita Lipat and Alice Burgos, petitioners rebuttal Alfredo Lipat for the subsequent credit lines of BEC. Suffice it
witness, no business or stockholders meetings were to state that Alfredo Lipat never disputed the validity of the real
conducted nor were there election of officers held since estate mortgage of the original loan; hence, he cannot now
its incorporation. In fact, not a single board resolution was dispute the subsequent loans obtained using the same
passed by the corporate board and it was Estelita Lipat mortgage contract since it is, by its very terms, a continuing
and/or Teresita Lipat who decided business matters. mortgage contract.
Week 2
Secondly, the principle of estoppel precludes petitioners from
denying the validity of the transactions entered into by Teresita
G.R. No. 119002 October 19, 2000 HON. COURT OF APPEALS, HENRI KAHN,
PHILIPPINE FOOTBALL
INTERNATIONAL EXPRESS TRAVEL & TOUR FEDERATION, respondents.
SERVICES, INC., petitioner,
vs. KAPUNAN, J.:
Darla Grey| Corporation Law Digest | 15
Facts: Petitioner filed a motion for reconsideration and as an
alternative prayer pleaded that the Federation be held liable for
On June 30 1989, petitioner International Express Travel and the unpaid obligation.
Tour Services, Inc., through its managing director, wrote a
letter to the Philippine Football Federation (Federation), Appellate court: denied the motion, “it should be remembered
through its president private respondent Henri Kahn, wherein that the trial court dismissed the complaint against the
the former offered its services as a travel agency to the Philippine Football Federation, and the plaintiff did not appeal
latter.1 The offer was accepted. from this decision. Hence, the Philippine Football Federation is
not a party to this appeal and consequently, no judgment may
Petitioner secured the airline tickets for the trips of the athletes be pronounced by this Court against the PFF without violating
and officials of the Federation to the South East Asian Games the due process clause, let alone the fact that the judgment
in Kuala Lumpur as well as various other trips to the People's dismissing the complaint against it, had already become final
Republic of China and Brisbane. The total cost of the tickets by virtue of the plaintiff's failure to appeal therefrom.”
amounted to P449,654.83. For the tickets received, the
Federation made two partial payments, both in September of Issue:
1989, in the total amount of P176,467.50.2
WON CA erred in holding that petitioner dealt with PFF as a
On 4 October 1989, petitioner wrote the Federation, through corporate entity and in holding that private respondent Henri
the private respondent a demand letter requesting for the Kahn not liable (WON there is a corporation by estoppel)
amount of P265,894.33.3 On 30 October 1989, the Federation,
through the Project Gintong Alay, paid the amount of Held:
P31,603.00.4
Nowhere can it be found in R.A. 3135 or P.D. 604 any
On 27 December 1989, Henri Kahn issued a personal check in provision creating the Philippine Football Federation. These
the amount of P50,000 as partial payment for the outstanding laws merely recognized the existence of national sports
balance of the Federation.5 Thereafter, no further payments associations and provided the manner by which these entities
were made despite repeated demands. may acquire juridical personality. The powers and functions
granted to national sports associations clearly indicate that
This prompted petitioner to file a civil case before the Regional these entities may acquire a juridical personality. The power to
Trial Court of Manila. Petitioner sued Henri Kahn in his purchase, sell, lease and encumber property are acts which
personal capacity and as President of the Federation and may only be done by persons, whether natural or artificial, with
impleaded the Federation as an alternative defendant. juridical capacity. However, while we agree with the appellate
Petitioner sought to hold Henri Kahn liable for the unpaid court that national sports associations may be accorded
balance for the tickets purchased by the Federation on the corporate status, such does not automatically take place by the
ground that Henri Kahn allegedly guaranteed the said mere passage of these laws. It is a basic postulate that before
obligation.6 a corporation may acquire juridical personality, the State must
give its consent either in the form of a special law or a general
Henri Kahn filed his answer with counterclaim. While not enabling act. We cannot agree with the view of the appellate
denying the allegation that the Federation owed the amount court and the private respondent that the Philippine Football
P207,524.20, representing the unpaid balance for the plane Federation came into existence upon the passage of these
tickets, he averred that the petitioner has no cause of action laws.
against him either in his personal capacity or in his official
capacity as president of the Federation. He maintained that he Clearly the provisions require that before an entity may be
did not guarantee payment but merely acted as an agent of the considered as a national sports association, such entity must
Federation which has a separate and distinct juridical be recognized by the accrediting organization, the Philippine
personality. On the other hand, the Federation failed to file its Amateur Athletic Federation under R.A. 3135, and the
answer, hence, was declared in default by the trial court. Department of Youth and Sports Development under P.D. 604.
This fact of recognition, however, Henri Kahn failed to
Trial Court: in favor of petitioner, Henri Kahn, personally liable substantiate. In attempting to prove the juridical existence of
for the unpaid obligation of the Federation, failed to adduce the Federation, Henri Kahn attached to his motion for
evidence proving the corporate existence reconsideration before the trial court a copy of the constitution
and by-laws of the Philippine Football Federation.
CA: reversed Trial Court decision, petitioner failed to prove Unfortunately, the same does not prove that said Federation
that Henri Kahn guaranteed the obligation of the Federation as has indeed been recognized and accredited by either the
said entity has a separate and distinct personality from its Philippine Amateur Athletic Federation or the Department of
officers. Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports
G.R. No. 136448 November 3, 1999 CA: held that petitioner was a partner of Chua and Yao in a
fishing business and may thus be held liable as such for the
LIM TONG LIM, petitioner, fishing nets and floats purchased by and for the use of the
partnership. “The ultimate undertaking of the defendants was
vs. to divide the profits among themselves which is what a
PHILIPPINE FISHING GEAR INDUSTRIES, partnership essentially is.”
INC., respondent.
Issue:
PANGANIBAN, J.:
Whether by their acts, Lim, Chua and Yao could be deemed to
have entered into a partnership
Facts:
Whether or not under the doctrine of corporation by estoppel,
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua
liability can only be imputed only to Chua and Yao and not to
and Peter Yao entered into a Contract dated February 7, 1990,
Lim.
for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent).
Held:
They claimed that they were engaged in a business venture
with Petitioner Lim Tong Lim, who however was not a signatory
1. Yes. The Court is not persuaded by the arguments of
to the agreement. The total price of the nets amounted to
petitioner. The facts as found by the two lower courts
P532,045. Four hundred pieces of floats worth P68,000 were
clearly showed that there existed a partnership
also sold to the Corporation. 4
among Chua, Yao and him, pursuant to Article 1767
of the Civil Code.
The buyers, however, failed to pay for the fishing nets and the
floats; hence, private respondents filed a collection suit against
From the factual findings of both lower courts, it is clear that
Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ
Chua, Yao and Lim had decided to engage in a fishing
of preliminary attachment. The suit was brought against the
business, which they started by buying boats worth P3.35
three in their capacities as general partners, on the allegation
million, financed by a loan secured from Jesus Lim who was
that "Ocean Quest Fishing Corporation" was a nonexistent
petitioner's brother. In their Compromise Agreement, they
corporation as shown by a Certification from the Securities and
subsequently revealed their intention to pay the loan with the
Exchange Commission. 5 On September 20, 1990, the lower
proceeds of the sale of the boats, and to divide equally among
court issued a Writ of Preliminary Attachment, which the sheriff
Darla Grey| Corporation Law Digest | 17
them the excess or loss. These boats, the purchase and the G.R. No. 125221 June 19, 1997
repair of which were financed with borrowed money, fell under
the term "common fund" under Article 1767. The contribution to
REYNALDO M. LOZANO, petitioner,
such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that
vs.
any loss or profit from the sale and operation of the boats HON. ELIEZER R. DE LOS SANTOS, Presiding
would be divided equally among them also shows that they Judge, RTC, Br. 58, Angeles City; and ANTONIO
had indeed formed a partnership. ANDA, respondents.
Moreover, it is clear that the partnership extended not only to
PUNO, J.:
the purchase of the boat, but also to that of the nets and the
floats. The fishing nets and the floats, both essential to fishing,
Facts:
were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so
On December 19, 1995, petitioner Reynaldo M. Lozano filed
much in buying the boat but not in the acquisition of the
Civil Case No. 1214 for damages against respondent Antonio
aforesaid equipment, without which the business could not
Anda before the Municipal Circuit Trial Court (MCTC),
have proceeded.
Mabalacat and Magalang, Pampanga. Petitioner alleged that
he was the president of the Kapatirang Mabalacat-Angeles
Given the preceding facts, it is clear that there was, among
Jeepney Drivers' Association, Inc. (KAMAJDA) while
petitioner, Chua and Yao, a partnership engaged in the fishing
respondent Anda was the president of the Samahang Angeles-
business. They purchased the boats, which constituted the
Mabalacat Jeepney Operators' and Drivers' Association, Inc.
main assets of the partnership, and they agreed that the
(SAMAJODA); in August 1995, upon the request of the
proceeds from the sales and operations thereof would be
Sangguniang Bayan of Mabalacat, Pampanga, petitioner and
divided among them.
private respondent agreed to consolidate their respective
associations and form the Unified Mabalacat-Angeles Jeepney
2. No. There is no dispute that the respondent,
Operators' and Drivers Association, Inc. (UMAJODA);
Philippine Fishing Gear Industries, is entitled to be
petitioner and private respondent also agreed to elect one set
paid for the nets it sold. The only question here is
of officers who shall be given the sole authority to collect the
whether petitioner should be held jointly 18 liable with
daily dues from the members of the consolidated association;
Chua and Yao. Petitioner contests such liability,
elections were held on October 29, 1995 and both petitioner
insisting that only those who dealt in the name of the
and private respondent ran for president; petitioner won;
ostensible corporation should be held liable. Since his
private respondent protested and, alleging fraud, refused to
name does not appear on any of the contracts and
recognize the results of the election; private respondent also
since he never directly transacted with the respondent
refused to abide by their agreement and continued collecting
corporation, ergo, he cannot be held liable.
the dues from the members of his association despite several
demands to desist. Petitioner was thus constrained to file the
Unquestionably, petitioner benefited from the use of the nets
complaint to restrain private respondent from collecting the
found inside F/B Lourdes, the boat which has earlier been
dues and to order him to pay damages in the amount of
proven to be an asset of the partnership. He in fact questions
P25,000.00 and attorney's fees of P500.00. 1
the attachment of the nets, because the Writ has effectively
stopped his use of the fishing vessel.
Private respondent moved to dismiss the complaint for lack of
jurisdiction, claiming that jurisdiction was lodged with the
It is difficult to disagree with the RTC and the CA that Lim,
Securities and Exchange Commission (SEC).
Chua and Yao decided to form a corporation. Although it was
never legally formed for unknown reasons, this fact alone does
MCTC: The MCTC denied the motion to dismiss on February
not preclude the liabilities of the three as contracting parties in
9, 1996. 2 It denied reconsideration on March 8, 1996.
representation of it. Clearly, under the law on estoppel, those
acting on behalf of a corporation and those benefited by it,
RTC: certiorari; found the dispute to be intracorporate, hence,
knowing it to be without valid existence, are held liable as
subject to the jurisdiction of the SEC, and ordered the MCTC to
general partners.
dismiss Civil Case No. 1214 accordingly.
Technically, it is true that petitioner did not directly act on
Issue:
behalf of the corporation. However, having reaped the benefits
of the contract entered into by persons with whom he
WON the SEC has jurisdiction over associations not yet
previously had an existing relationship, he is deemed to be part
approved and registered with the SEC
of said association and is covered by the scope of the doctrine
of corporation by estoppel.
Held:
Central Lyceum of Catanduanes; The doctrine of secondary meaning originated in the field of
trademark law. Its application has, however, been extended to
Lyceum of Eastern Mindanao, Inc.; and corporate names sine the right to use a corporate name to the
exclusion of others is based upon the same principle which
Lyceum of Southern Philippines underlies the right to use a particular trademark or tradename.
10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11
The background of the case at bar needs some recounting. the doctrine of secondary meaning was elaborated in the
Petitioner had sometime before commenced in the SEC a following terms:
proceeding (SEC-Case No. 1241) against the Lyceum of
Baguio, Inc. to require it to change its corporate name and to " . . . a word or phrase originally incapable of exclusive
adopt another name not "similar [to] or identical" with that of appropriation with reference to an article on the market,
petitioner. In an Order dated 20 April 1977, Associate because geographically or otherwise descriptive, might
Commissioner Julio Sulit held that the corporate name of nevertheless have been used so long and so exclusively by
petitioner and that of the Lyceum of Baguio, Inc. were one producer with reference to his article that, in that trade and
substantially identical because of the presence of a "dominant" to that branch of the purchasing public, the word or phrase has
word, i.e., "Lyceum," the name of the geographical location of come to mean that the article was his product."
the campus being the only word which distinguished one from
the other corporate name. The SEC also noted that petitioner With the foregoing as a yardstick, [we] believe the appellant
had registered as a corporation ahead of the Lyceum of failed to satisfy the aforementioned requisites. No evidence
Baguio, Inc. in point of time, 1 and ordered the latter to change was ever presented in the hearing before the Commission
its name to another name "not similar or identical [with]" the which sufficiently proved that the word 'Lyceum' has indeed
names of previously registered entities. acquired secondary meaning in favor of the appellant. If there
was any of this kind, the same tend to prove only that the
Armed with the Resolution of this Court in G.R. No. L-46595, appellant had been using the disputed word for a long period of
petitioner then wrote all the educational institutions it could find time. Nevertheless, its (appellant) exclusive use of the word
using the word "Lyceum" as part of their corporate name, and (Lyceum) was never established or proven as in fact the
advised them to discontinue such use of "Lyceum." When, with evidence tend to convey that the cross-claimant was already
the passage of time, it became clear that this recourse had using the word 'Lyceum' seventeen (17) years prior to the date
failed, petitioner instituted before the SEC SEC-Case No. 2579 the appellant started using the same word in its corporate
to enforce what petitioner claims as its proprietary right to the name. Furthermore, educational institutions of the Roman
word "Lyceum." The SEC hearing officer rendered a decision Catholic Church had been using the same or similar word like
sustaining petitioner's claim to an exclusive right to use the 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate),
word "Lyceum." The hearing officer relied upon the SEC ruling 'Liceo de Masbate,' 'Liceo de Albay' long before appellant
in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and started using the word 'Lyceum'. The appellant also failed to
held that the word "Lyceum" was capable of appropriation and prove that the word 'Lyceum' has become so identified with its
that petitioner had acquired an enforceable exclusive right to educational institution that confusion will surely arise in the
the use of that word. minds of the public if the same word were to be used by other
educational institutions.
SEC En Banc: (private respondents) appeal; reversed the
decision of hearing officer, did not consider the word "Lyceum" In other words, while the appellant may have proved that it had
to have become so identified with petitioner as to render use been using the word 'Lyceum' for a long period of time, this fact
thereof by other institutions as productive of confusion about alone did not amount to mean that the said word had acquired
the identity, held that the attaching of geographical names to secondary meaning in its favor because the appellant failed to
the word "Lyceum" served sufficiently to distinguish the prove that it had been using the same word all by itself to the
schools from one another. exclusion of others. More so, there was no evidence presented
to prove that confusion will surely arise if the same word were
Court of Appeals: (petitioner) appeal; affirmed SEC En Banc; to be used by other educational institutions. Consequently, the
reconsideration, same same. allegations of the appellant in its first two assigned errors must
necessarily fail."
Issue:
Petitioner IRCP on the other hand, was incorporated on August (2) the proposed name is either: (a) identical, or (b) deceptively
23, 1979 originally under the name "Synclaire Manufacturing or confusingly similar to that of any existing corporation or to
Corporation". It amended its Articles of Incorporation on August any other name already protected by law; or (c) patently
23, 1985 to change its corporate name to "Industrial deceptive, confusing or contrary to existing law.
Refractories Corp. of the Philippines". It is engaged in the
business of manufacturing all kinds of ceramics and other As regards the first requisite, it has been held that the right to
products, except paints and zincs. the exclusive use of a corporate name with freedom from
infringement by similarity is determined by priority of
Both companies are the only local suppliers of monolithic adoption.29 In this case, respondent RCP was incorporated on
gunning mix.1 October 13, 1976 and since then has been using the corporate
name "Refractories Corp. of the Philippines". Meanwhile,
Discovering that petitioner was using such corporate name, petitioner was incorporated on August 23, 1979 originally
respondent RCP filed on April 14, 1988 with the Securities and under the name "Synclaire Manufacturing Corporation". It only
Exchange Commission (SEC) a petition to compel petitioner to started using the name "Industrial Refractories Corp. of the
change its corporate name on the ground that its corporate Philippines" when it amended its Articles of Incorporation on
name is confusingly similar with that of petitioner’s such that August 23, 1985, or nine (9) years after respondent RCP
the public may be confused or deceived into believing that they started using its name. Thus, being the prior registrant,
are one and the same corporation. respondent RCP has acquired the right to use the word
"Refractories" as part of its corporate name.
SEC: decided in favor of RCP, IRCP, deceptively and
confusingly similar to that of respondent’s corporate name Anent the second requisite, in determining the existence of
confusing similarity in corporate names, the test is whether the
similarity is such as to mislead a person using ordinary care
On May 28, 1947, the petitioners C. Arnold Hall and Bradley P. Under our statue it is to be noted (Corporation Law, sec. 11)
Hall, and the respondents Fred Brown, Emma Brown, Hipolita that it is the issuance of a certificate of incorporation by the
D. Chapman and Ceferino S. Abella, signed and Director of the Bureau of Commerce and Industry which calls a
acknowledged in Leyte, the article of incorporation of the Far corporation into being. The immunity if collateral attack is
Eastern Lumber and Commercial Co., Inc., organized to granted to corporations "claiming in good faith to be a
engage in a general lumber business to carry on as general corporation under this act." Such a claim is compatible with the
contractors, operators and managers, etc. Attached to the existence of errors and irregularities; but not with a total or
article was an affidavit of the treasurer stating that 23,428 substantial disregard of the law. Unless there has been an
shares of stock had been subscribed and fully paid with certain evident attempt to comply with the law the claim to be a
properties transferred to the corporation described in a list corporation "under this act" could not be made "in good faith."
appended thereto. (Fisher on the Philippine Law of Stock Corporations, p. 75. See
also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)
Immediately after the execution of said articles of
incorporation, the corporation proceeded to do business with Second, this is not a suit in which the corporation is a party.
the adoption of by-laws and the election of its officers. On This is a litigation between stockholders of the alleged
December 2, 1947, the said articles of incorporation were filed corporation, for the purpose of obtaining its dissolution. Even
in the office of the Securities and Exchange Commissioner, for the existence of a de jure corporation may be terminated in a
the issuance of the corresponding certificate of incorporation.
G.R. No. 150416 July 21, 2006 On September 28, 1987, petitioners filed a case, docketed as
Civil Case No. 63 (a suit for cancellation of title, quieting of
ownership and possession, declaratory relief and
SEVENTH DAY ADVENTIST CONFERENCE
reconveyance with prayer for preliminary injunction and
CHURCH OF SOUTHERN PHILIPPINES, INC., damages), in the RTC of Bayugan, Agusan del Sur.
and/or represented by MANASSEH C.
ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO Trial Court: favor of respondents
M. LUCENARA, DIONICES O. TIPGOS,
CA: affirmed decision of RTC; Motion for recon: denied
LORESTO C. MURILLON, ISRAEL C. NINAL,
GEORGE G. SOMOSOT, JESSIE T. ORBISO, Issue:
LORETO PAEL and JOEL
BACUBAS, petitioners, WON respondents (SDA-NEMM) own the land
vs.
Held:
NORTHEASTERN MINDANAO MISSION OF
SEVENTH DAY ADVENTIST, INC., and/or Yes. The controversy between petitioners and respondents
represented by JOSUE A. LAYON, WENDELL M. involves two supposed transfers of the lot previously owned by
SERRANO, FLORANTE P. TY and JETHRO the spouses Cosio: (1) a donation to petitioners’ alleged
predecessors-in-interest in 1959 and (2) a sale to respondents
CALAHAT and/or SEVENTH DAY ADVENTIST
in 1980. Donation is undeniably one of the modes of acquiring
CHURCH [OF] NORTHEASTERN MINDANAO ownership of real property. Likewise, ownership of a property
MISSION,* Respondents. may be transferred by tradition as a consequence of a sale.
CORONA, J.: We agree with the appellate court that the alleged donation to
petitioners was void. Donation is an act of liberality whereby a
Facts: person disposes gratuitously of a thing or right in favor
of another person who accepts it. The donation could not have
SPUM-SDA: petitioner been made in favor of an entity yet inexistent at the time it was
made. Nor could it have been accepted as there was yet no
SDA-NEMM: respondent one to accept it.
This case involves a 1,069 sq. m. lot covered by Transfer The deed of donation was not in favor of any informal group of
Certificate of Title (TCT) No. 4468 in Bayugan, Agusan del Sur SDA members but a supposed SPUM-SDA Bayugan (the local
originally owned by Felix Cosio and his wife, Felisa Cuysona. church) which, at the time, had neither juridical personality nor
capacity to accept such gift. Declaring themselves a de
On April 21, 1959, the spouses Cosio donated the land to the facto corporation, petitioners allege that they should benefit
South Philippine Union Mission of Seventh Day Adventist from the donation.
Church of Bayugan Esperanza, Agusan (SPUM-SDA
Bayugan). The donation was allegedly accepted by one But there are stringent requirements before one can qualify as
Liberato Rayos, an elder of the Seventh Day Adventist Church, a de facto corporation:
on behalf of the donee.
(a) the existence of a valid law under which it may be
Twenty-one years later, however, on February 28, 1980, the incorporated;
same parcel of land was sold by the spouses Cosio to the
Seventh Day Adventist Church of Northeastern Mindanao (b) an attempt in good faith to incorporate; and
Mission (SDA-NEMM).5 TCT No. 4468 was thereafter issued in
the name of SDA-NEMM.6 (c) assumption of corporate powers.10
Claiming to be the alleged donee’s successors-in-interest, While there existed the old Corporation Law (Act 1459),11 a law
petitioners asserted ownership over the property. This was under which SPUM-SDA Bayugan could have been organized,
opposed by respondents who argued that at the time of the there is no proof that there was an attempt to incorporate at
donation, SPUM-SDA Bayugan could not legally be a donee that time.
because, not having been incorporated yet, it had no juridical
personality. Neither were petitioners members of the local
Darla Grey| Corporation Law Digest | 23
The filing of articles of incorporation and the issuance of the As adopted in 1968, the by-laws of the association provided as
certificate of incorporation are essential for the existence of follows: “The annual meeting of the members of the
a de facto corporation.12 We have held that an organization not Association shall be held on the first Sunday of
registered with the Securities and Exchange Commission January…where they shall elect by plurality vote and by secret
(SEC) cannot be considered a corporation in any concept, not balloting, the Board of Directors…”
even as a corporation de facto.13 Petitioners themselves
admitted that at the time of the donation, they were not It appears, that on December 20, 1975, a committee of the
registered with the SEC, nor did they even attempt to board of directors prepared a draft of an amendment to the
organize14 to comply with legal requirements. by-laws, amending the annual meeting and the election of
the board of directors, with the provision that, GRACE
Corporate existence begins only from the moment a certificate CHRISTIAN HIGH SCHOOL representative is a permanent
of incorporation is issued. No such certificate was ever issued Director of the ASSOCIATION. This draft was never
to petitioners or their supposed predecessor-in-interest at the presented to the general membership for approval.
time of the donation. Petitioners obviously could not have Nevertheless, from 1975, after it was presumably submitted to
claimed succession to an entity that never came to exist. the board, up to 1990, petitioner was given a permanent seat
Neither could the principle of separate juridical personality in the board of directors of the association.
apply since there was never any corporation 15 to speak of.
And, as already stated, some of the representatives of For fifteen years — from 1975 until 1989 — petitioner's
petitioner Seventh Day Adventist Conference Church of representative had been recognized as a "permanent director"
Southern Philippines, Inc. were not even members of the local of the association. But on February 13, 1990, petitioner
church then, thus, they could not even claim that the donation received notice from the association's committee on election
was particularly for them. that the latter was "reexamining" (actually, reconsidering) the
right of petitioner's representative to continue as an unelected
"The de facto doctrine thus effects a compromise between two member of the board stating that "it was the sentiment that all
conflicting public interest[s]—the one opposed to an directors should be elected by members of the association"
unauthorized assumption of corporate privileges; the other in because "to make a person or entity a permanent Director
favor of doing justice to the parties and of establishing a would deprive the right of voters to vote for fifteen (15)
general assurance of security in business dealing with members of the Board," and "it is undemocratic for a person or
corporations." Generally, the doctrine exists to protect the entity to hold office in perpetuity." Petitioner requested the
public dealing with supposed corporate entities, not to favor the chairman of the election committee to change the notice of
defective or non-existent corporation. election by following the procedure in previous elections,
claiming that the notice issued for the 1990 elections ran
WEEK 3
"counter to the practice in previous years" and was "in violation
of the by-laws (of 1975)" and "unlawfully deprive[d] Grace
Christian High School of its vested right [to] a permanent seat
in the board." 5
G.R. No. 108905 October 23, 1997
As the association denied its request, the school brought suit
GRACE CHRISTIAN HIGH SCHOOL, petitioner, for mandamus in the Home Insurance and Guaranty
vs. Corporation to compel the board of directors of the association
to recognize its right to a permanent seat in the board.
THE COURT OF APPEALS, GRACE VILLAGE
Petitioner based its claim on the abovementioned proposed
ASSOCIATION, INC., ALEJANDRO G. amendment which, it contended, had become part of the by-
BELTRAN, and ERNESTO L. GO, respondents. laws of the association.
MENDOZA, J.: SEC: opinion; that the practice of allowing unelected members
in the board was contrary to the existing by-laws of the
Facts: association and to §92 of the Corporation Code (B.P. Blg. 68).
Petitioner Grace Christian High School is an educational The association contended that the basis of the petition
institution offering preparatory, kindergarten and secondary for mandamus was merely "a proposed by-laws which has not
courses at the Grace Village in Quezon City. Private yet been approved by competent authority nor registered with
respondent Grace Village Association, Inc., on the other hand, the SEC or HIGC." It argued that "the by-laws which was
is an organization of lot and/or building owners, lessees and registered with the SEC on January 16, 1969 should be the
residents at Grace Village, while private respondents Alejandro prevailing by-laws of the association and not the proposed
G. Beltran and Ernesto L. Go were its president and chairman amended by-laws." In reply, petitioner maintained that the
of the committee on election, respectively, in 1990, when this "amended by-laws is valid and binding" and that the
suit was brought. association was estopped from questioning the by-laws.
Held:
ANTONIO, J.:
DILY DANY NACPIL, petitioner, Petitioner's argument is untenable. Even assuming that he was
in fact appointed by the General Manager, such appointment
vs. was subsequently approved by the Board of Directors of the
INTERNATIONAL BROADCASTING IBC.11 That the position of Comptroller is not expressly
CORPORATION, respondent. mentioned among the officers of the IBC in the By-Laws is of
no moment, because the IBC's Board of Directors is
KAPUNAN, J.: empowered under Section 25 of the Corporation Code 12 and
under the corporation's By-Laws to appoint such other officers
Facts: as it may deem necessary. The By-Laws of the IBC
categorically provides:
Petitioner states that he was Assistant General Manager for
Finance/Administration and Comptroller of private respondent XII. OFFICERS
Intercontinental Broadcasting Corporation (IBC) from 1996 until
April 1997. According to petitioner, when Emiliano Templo was The officers of the corporation shall consist of a President, a
appointed to replace IBC President Tomas Gomez III Vice-President, a Secretary-Treasurer, a General
sometime in March 1997, the former told the Board of Directors Manager, and such other officers as the Board of
that as soon as he assumes the IBC presidency, he would Directors may from time to time does fit to provide for.
terminate the services of petitioner. Apparently, Templo Said officers shall be elected by majority vote of the Board
blamed petitioner, along with a certain Mr. Basilio and Mr.
Darla Grey| Corporation Law Digest | 28
of Directors and shall have such powers and duties as shall Private respondents Ricardo T. Salas, Salvador T. Salas,
hereinafter provide (Emphasis supplied). Soledad Salas-Tubilleja, Antonio S. Salas, and Richard S.
Salas, belonging to the same family, are the majority and
The Court has held that in most cases the "by-laws may and controlling members of the Board of Trustees of Western
usually do provide for such other officers," 14 and that where a Institute of Technology, Inc. (WIT, for short), a stock
corporate office is not specifically indicated in the roster of corporation engaged in the operation, among others, of an
corporate offices in the by-laws of a corporation, the board of educational institution. According to petitioners, the minority
directors may also be empowered under the by-laws to create stockholders of WIT, sometime on June 1, 1986 in the principal
additional officers as may be necessary.15 office of WIT at La Paz, Iloilo City, a Special Board Meeting
was held. In attendance were other members of the Board
An "office" has been defined as a creation of the charter of a including one of the petitioners Reginald Villasis. Prior to
corporation, while an "officer" as a person elected by the aforesaid Special Board Meeting, copies of notice thereof,
directors or stockholders. On the other hand, an "employee" dated May 24, 1986, were distributed to all Board Members.
occupies no office and is generally employed not by action of The notice allegedly indicated that the meeting to be held on
the directors and stockholders but by the managing officer of June 1, 1986 included a possible implementation of Art. III,
the corporation who also determines the compensation to be Sec. 6 of the Amended By-Laws of Western Institute of
paid to such employee.16 Technology, Inc. on compensation of all officers of the
corporation.
As petitioner's appointment as comptroller required the
approval and formal action of the IBC's Board of Directors to In said meeting, the Board of Trustees passed Resolution No.
become valid,17 it is clear therefore holds that petitioner is a 48, s. 1986, granting monthly compensation to the private
corporate officer whose dismissal may be the subject of a respondents as corporate officers retroactive June 1, 1985. on
controversy cognizable by the SEC under Section 5(c) of P.D. March 13, 1991, petitioners Homero Villasis et. al, filed an
902-A which includes controversies involving both election affidavit-complaint against private respondents before the
and appointment of corporate directors, trustees, officers, and Office of the City Prosecutor of Iloilo, as a result of which two
managers.18 Had petitioner been an ordinary employee, such (2) separate criminal informations, one for falsification of a
board action would not have been required. public document and the other for estafa were filed before the
Regional Trial Court of Iloilo City.
As to petitioner's argument that the nature of his functions is
recommendatory thereby making him a mere managerial The charge for falsification of public document was anchored
officer, the Court has previously held that the relationship of a on the private respondents' submission of WIT's income
person to a corporation, whether as officer or agent or statement for the fiscal year 1985-1986 with the Securities and
employee is not determined by the nature of the services Exchange Commission (SEC) reflecting therein the
performed, but instead by the incidents of the relationship as disbursement of corporate funds for the compensation of
they actually exist. private respondents based on Resolution No. 4, series of 1986,
making it appear that the same was passed by the board on
WEEK 4
March 30, 1986, when in truth, the same was actually passed
on June 1, 1986, a date not covered by the corporation's fiscal
year 1985-1986 (beginning May 1, 1985 and ending April 30,
1986).
G.R. No. 113032 August 21, 1997
RTC: acquitted on both counts dated September 6, 1993
WESTERN INSTITUTE OF TECHNOLOGY, INC., without imposing any civil liability against the accused therein.
HOMERO L. VILLASIS, DIMAS ENRIQUEZ, Motion for recon of the civil aspect, denied
PRESTON F. VILLASIS & REGINALD F.
Issue:
VILLASIS, petitioner,
vs. WON the grant of compensation pursuant to Resolution No. 48
RICARDO T. SALAS, SALVADOR T. SALAS, to private respondents is proscribed in Sec. 30 of the
SOLEDAD SALAS-TUBILLEJA, ANTONIO S. Corporation Code
A writ of execution correspondingly issued; however, it was The case of petitioner is way off these exceptional instances. It
returned unsatisfied for the failure of the sheriff to locate the is not even shown that petitioner has had a direct hand in the
offices of the corporation in the address indicated. Another writ dismissal of private respondent enough to attribute to him
of execution and an order of garnishment was thereupon (petitioner) a patently unlawful act while acting for the
served on petitioner at his residence. corporation. Neither can Article 289 30 of the Labor Code be
applied since this law specifically refers only to the imposition
petitioner filed a motion for reconsideration of the NLRC's of penalties under the Code. It is undisputed that the
resolution along with a prayer for the quashal of the writ of termination of petitioner's employment has, instead, been due,
execution and order of garnishment. He averred that he had collectively, to the need for a further mitigation of losses, the
never received any notice, summons or even a copy of the onset of the rainy season, the insurgency problem in Sorsogon
complaint; hence, he said, the Labor Arbiter at no time had and the lack of funds to further support the mining operation in
acquired jurisdiction over him. Gatbo.
On 16 August 1991, the NLRC 11 dismissed the motion for As held in Sunio vs. NLRC, there appears to be no evidence
reconsideration. on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act,
Issue: therefore, was within the scope of his authority and was a
corporate act.
WON have gravely abused their discretion "in finding petitioner
solidarily liable with MMDC even (in) the absence of bad faith It is basic that a corporation is invested by law with a
and malice on his part." personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to
Held: which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the
A corporation is a juridical entity with legal personality separate capital stock of a corporation is not of itself sufficient ground for
and distinct from those acting for and in its behalf and, in disregarding the separate corporate personality. Petitioner,
general, from the people comprising it. The rule is that therefore, should not have been made personally answerable
obligations incurred by the corporation, acting through its for the payment of private respondents' back salaries.
directors, officers and employees, are its sole liabilities.
Nevertheless, being a mere fiction of law, peculiar situations or G.R. No. 159795 July 30, 2004
valid grounds can exist to warrant, albeit done sparingly, the
disregard of its independent being and the lifting of the
SPOUSES ROBERTO & EVELYN DAVID and
corporate veil.25 As a rule, this situation might arise when a
corporation is used to evade a just and due obligation or to
COORDINATED GROUP, INC., petitioners,
justify a wrong, 26 to shield or perpetrate fraud, 27 to carry out vs.
similar other unjustifable aims or intentions, or as a subterfuge CONSTRUCTION INDUSTRY AND
to commit injustice and so circumvent the law. 28 In Tramat
After conducting hearings and two (2) ocular inspections of the In February 1990, M. Greenfield, Inc. (MGI), through its
construction site, the arbitrator rendered judgment against officers Saul Tawil, Carlos Javelosa, and Renato Puangco
petitioners. Award is hereby made in favor of the Quiambaos began terminating employees. The corporation closed
against the Respondents(petitioners herein). Petitioners down one of their plants and so they said they have to
appealed to the Court of Appeals which affirmed the retrench the number of employees. Consequently, the
arbitrator’s Decision but deleted the award for lost rentals. Malayang Samahan ng mga Manggagawa sa M. Greenfield
(MSMG-UWP) filed an illegal dismissal case against MGI.
Issue: The National Labor Relations Commission, chaired by
Cresencio Ramos, ruled against the union. But on appeal,
Whether or not petitioners can be held jointly and severally the decision of the NLRC was reversed and the
liable with co-petitioner Coordinated Group, Inc. corporation was ordered, among others, to pay the
The labor union or the “local union” is an affiliate of ULGWP or On April 17, 1988, the local union held a general membership
the “federation.” The collective bargaining agreement names meeting at the Caruncho Complex in Pasig. Several union
its parties as “M. GREENFIELD, INC. (B)” (the company) and members failed to attend the meeting, prompting the Executive
“MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. Board to create a committee tasked to investigate the non-
GREENFIELD (B) (THE LABOR UNION)/UNITED LUMBER attendance of several union members in the said assembly,
AND GENERAL WORKERS OF THE PHILIPPINES pursuant to Sections 4 and 5, Article V of the Constitution and
(ULGWP).” By-Laws of the union, which read:
The CBA contained in Article II: "Seksyon 4. Ang mga kinukusang hindi pagdalo o hindi
paglahok sa lahat ng hakbangin ng unyon ng sinumang kasapi
A Union Security clause: “Section 1. Coverage and Scope. All o pinuno ay maaaring maging sanhi ng pagtitiwalag o
employees who are covered by this Agreement and presently pagpapataw ng multa ng hindi hihigit sa P50.00 sa bawat araw
members of the UNION shall remain members of the UNION na nagkulang.”
for the duration of this Agreement as a condition precedent to
continued employment with the COMPANY.” “Seksyon 5. Ang sinumang dadalo na aalis ng hindi pa
natatapos ang pulong ay ituturing na pagliban at maparusahan
“Section 4. Dismissal. Any such employee mentioned in ito ng alinsunod sa Article V, Seksyong 4 ng Saligang Batas na
Section 2 hereof, who fails to maintain his membership in the ito. Sino mang kasapi o pisyales na mahuli and dating sa
UNION for non-payment of UNION dues, for resignation and takdang oras ng di lalampas sa isang oras ay magmumulta ng
for violation of UNION’s Constitution and By-Laws and any P25.00 at babawasin sa sahod sa pamamagitan ng salary
new employee as defined in Section 2 of this Article shall upon deduction at higit sa isang oras ng pagdating ng huli ay
written notice of such failure to join or to maintain membership ituturing na pagliban.”
in the UNION and upon written recommendation to the
COMPANY by the UNION, be dismissed from the employment On June 27, 1988, the local union wrote the company a letter
by the COMPANY; provided, however, that the UNION shall requesting it to deduct the union fines from the wages/salaries
hold the COMPANY free and blameless from any and all of those union members who failed to attend the general
liabilities that may arise should the dismissed employee membership meeting.
question, in any manner, his dismissal; provided, further that
the matter of the employee’s dismissal under this Article may The Secretary General of the national federation disapproved
be submitted as a grievance under Article XIII and, provided, the resolution of the local union imposing the P50.00 fine. The
finally, that no such written recommendation shall be made local union officers protested such action by the Federation.
upon the COMPANY nor shall COMPANY be compelled to act
upon any such recommendation within the period of sixty (60) On July 11, 1988, the Federation wrote the company a letter
days prior to the expiry date of this Agreement conformably to advising the latter not to deduct the fifty-peso fine from the
law." salaries of the union members requesting that: "x x x any and
all future representations by [the local union] affecting a
On September 12, 1986, a local union election was held under number of members be first cleared from the federation before
the auspices of the federation wherein petitioner, Beda corresponding action by the Company."
Magdalena Villanueva, and the otherunion officers were
proclaimed as winners. The following day, the company sent a reply to the local
union’s request in a letter, stating that it cannot deduct fines
On March 21, 1987, a Petition for Impeachment was filed with from the employees’ salary without going against certain laws.
the federation by the defeated candidates in the local union The company suggested that the union refer the matter to the
election. proper government office for resolution in order to avoid
placing the company in the middle of the issue.
On June 16, 1987, the federation conducted an audit of the
local union funds. The investigation did not yield any The imposition of P50.00 fine became the subject of bitter
unfavorable result and the local union officers were cleared of disagreement between the Federation and the local union
the charges of anomaly in the custody, handling and culminating in the latter’s declaration of general autonomy from
disposition of the union funds. the former through Resolution No. 10 passed by the local
executive board and ratified by the general membership on
The 14 defeated candidates filed a Petition for July 16, 1988.
Impeachment/Expulsion of the local union officers with the
DOLE NCR on November 5, 1987. The same was dismissed
On appeal, Director Pura-Ferrer Calleja modified the Med- Thereafter, the Federation filed a Notice of Strike with the
Arbiter’s ruling: “the company should remit the amount of five National Conciliation and Mediation Board to compel the
thousand pesos (P5,000.00) of the P10,000.00 monthly labor company to effect the immediate termination of the expelled
education program fund to [the Federation] and the other union officers.
P5,000.00 to [the local union], both unions to use the same for
its intended purpose." On March 7, 1989, under the pressure of a threatened strike,
the company terminated the 30 union officers from
Meanwhile, on September 2, 1988, several local unions filed a employment, serving them identical copies of the termination
Petition for Audit and Examination of the federation and letter.
education funds of [the Federation] which was granted by Med-
Arbiter Rasidali Abdullah on December 25, 1988. On that same day, the expelled union officers assigned in the
first shift were physically or bodily brought out of the company
On September 30, 1988, the officials of [the Federation] called premises by the company’s security guards. Likewise, those
a Special National Executive Board Meeting at Nasipit, Agusan assigned to the second shift were not allowed to report for
del Norte where a Resolution was passed placing the [local work. This provoked some of the members of the local union to
union] under trusteeship and appointing Cesar Clarete as demonstrate their protest for the dismissal of the said union
administrator. officers. Some union members left their work posts and walked
out of the company premises.
On October 27, 1988, Clarete as administrator wrote the
company informing the latter of its designation of a certain The Federation, having achieved its objective, withdrew the
Alfredo Kalingking as local union president and "disauthorizing" Notice of Strike filed with the NCMB.
the incumbent union officers from representing the employees.
On March 8, 1989, the petitioners filed a Notice of Strike with
Petitioners protested this action by the national federation in a the NCMB, DOLE, Manila, alleging the following grounds for
letter to the company dated November 11, 1988. the strike:
On November 13, 1988, the petitioner union officers received (a) Discrimination
identical letters from the administrator requiring them to explain
On March 10, 1989, the 30 dismissed union officers filed an Petitioners then appealed to the NLRC. During its pendency,
urgent petition with the Office of the Secretary of the Commissioner Romeo Putong retired from the service, leaving
Department of Labor and Employment praying for the only two commissioners, Commissioner Vicente Veloso III and
suspension of the effects of their termination from employment. Hon. Chairman Bartolome
However, the petition was dismissed by then Secretary
Franklin Drilon on April 11, 1989: "At this point in time, it is Carale in the First Division. When Commissioner Veloso
clear that the dispute at M. Greenfield is purely an intra-union inhibited himself from the case, Commissioner Joaquin
matter. No mass lay-off is evident as the terminations have Tanodra of the Third Division was temporarily designated to sit
been limited to those allegedly leading the secessionist group in the First Division for the proper disposition of the case. The
leaving PETITIONER-LABOR UNION-THE FEDERATION to First Division affirmed the Labor Arbiter’s disposition and
form a union under the KMU. xxx" denied the MR.
On March 13 and 14, 1989, a total of 78 union shop stewards Petitioners contend that
were placed under preventive suspension by the company.
This prompted the local union members to again stage a walk- • their dismissal from work was effected in
out and resulted in the official declaration of strike at around an arbitrary, hasty, capricious and illegal
3:30 in the afternoon of March 14, 1989. The strike was manner because it was undertaken by
attended with violence, force and intimidation on both sides the company without any prior
resulting to physical injuries to several employees, both striking administrative investigation;
and non-striking, and damage to company properties.
• had the company conducted prior
The employees who participated in the strike and allegedly independent investigation it would have
figured in the violent incident were placed under preventive found that their expulsion from the union
suspension by the company. The company also sent return-to- was unlawful similarly for lack of prior
work notices to the home addresses of the striking employees administrative investigation;
thrice successively, on March 27, April 8 and April 31, 1989,
respectively. However, the company admitted that only 261 • the federation cannot recommend the
employees were eventually accepted back to work. Those who dismissal of the union officers because it
did not respond to the return-to- work notice were sent was not a principal party to the collective
termination letters dated May 17, 1989. bargaining agreement between the
company and the union;
On August 7, 1989, the petitioners filed a verified complaint
with the Arbitration Branch, National Capital Region, DOLE, • public respondents acted with grave
Manila, charging private respondents of unfair labor practice abuse of discretion when they declared
which consists of union busting, illegal dismissal, illegal petitioners’ dismissals as valid and the
suspension, interference in union activities, discrimination, union strike as illegal and in not
threats, intimidation, coercion, violence, and oppresion. declaring that respondents were guilty of
unfair labor practice.
After the filing of the complaint, the lease contracts on the
company’s office and factory at Merville Subdivision, Private respondents, on the other hand, maintain that
Parañaque expired and were not renewed. Upon demand of
the owners of the premises, the company was compelled to • the thirty dismissed employees who
vacate its office and factory. Thereafter, the company were former officers of the federation
transferred its administration and account/client servicing have no cause of action against the
department at AFP-RSBS Industrial Park in Taguig, Metro company, the termination of their
Manila. For failure to find a suitable place in Metro Manila for employment having been made upon
Darla Grey| Corporation Law Digest | 35
the demand of the federation pursuant vs.
to the union security clause of the CBA;
HONORABLE INTERMEDIATE APPELLATE
• the expelled officers of the local union
COURT and ALEJANDRO TE, respondents.
were accorded due process of law prior
to their expulsion from their federation; CAMPOS, JR., J.:
G.R. No. L-68555 March 19, 1993 Notwithstanding that the dealership agreement between the
plaintiff and defendant was in force and subsisting, the
PRIME WHITE CEMENT defendant corporation, in violation of, and with evident intention
CORPORATION, petitioner, not to be bound by the terms and conditions thereof, entered
WEEK 5
CA: Affirmed
Issue:
Whether or not the "dealership agreement" referred by the [G.R. No. 60502. July 16, 1991.]
President and Chairman of the Board of petitioner corporation
is a valid and enforceable contract. PEDRO LOPEZ DEE , petitioner, vs.
SECURITIES AND EXCHANGE COMMISSION,
Held: HEARING OFFICER EMMANUEL SISON, NAGA
Under the Corporation Law, which was then in force at the time
TELEPHONE CO., INC., COMMUNICATION
this case arose,5 as well as under the present Corporation SERVICES, INC., LUCIANO MAGGAY,
Code, all corporate powers shall be exercised by the Board of AUGUSTO FEDERIS, NILDA RAMOS, FELIPA
Directors, except as otherwise provided by law. 6 Although it JAVALERA, DESIDERIO SAAVEDRA,
cannot completely abdicate its power and responsibility to act
respondents.
for the juridical entity, the Board may expressly delegate
specific powers to its President or any of its officers. In the
PARAS, J:
absence of such express delegation, a contract entered into by
its President, on behalf of the corporation, may still bind the
Facts:
corporation if the board should ratify the same expressly or
impliedly. Implied ratification may take various forms — like
Naga Telephone Company, Inc. was organized in 1954, the
silence or acquiescence; by acts showing approval or adoption
authorized capital was P100,000.00. In 1974 Naga Telephone
of the contract; or by acceptance and retention of benefits
Co., Inc. (Natelco for short) decided to increase its authorized
flowing therefrom.7 Furthermore, even in the absence of
'capital to P3,000,000.00. As required by the Public Service
express or implied authority by ratification, the President as
Act, Natelco filed an application for the approval of the
such may, as a general rule, bind the corporation by a contract
increased authorized capital with the then Board of
in the ordinary course of business, provided the same is
Communications under BOC Case No. 74-84. On January 8,
reasonable under the circumstances.8 These rules are basic,
1975, a decision was rendered in said case, approving the said
but are all general and thus quite flexible. They apply where
application subject to certain conditions (issuance of stocks will
the President or other officer, purportedly acting for the
be for a year from the date of approval, after which, no further
corporation, is dealing with a third person, i. e., a
issues shall be made without authority from BOC).
person outside the corporation.
The Tamano group sought to intervene, but the intervention WON PNB and NASUDECO may be held liable for PASUMIL’s
was denied despite being informed of the pending SEC case. liability to AndradaElectric and Engineering Company.
In 1992, the Court subsequently ruled that the INC as the
rightful owner of the land, and ordered Ligon to surrender the Held:
titles for annotation. Ligon appealed to CA and SC, but her
appeals were denied. In 1993, the SEC ruled that the sale was Basic is the rule that a corporation has a legal personality
null and void . On appeal CA reversed the SEC ruling. distinct and separate from the persons and entities owning it.
The corporate veil may be lifted only if it has been used to
Issues: shield fraud, defend crime, justify a wrong, defeat public
convenience, insulate bad faith or perpetuate injustice. Thus,
WON the sale is void the mere fact that the Philippine National Bank (PNB) acquired
ownership or management of some assets of the Pampanga
Held: Sugar Mill (PASUMIL), which had earlier been foreclosed and
purchased at the resulting public auction by the Development
Since the SEC has declared the Carpizo group as a void Board Bank of the Philippines (DBP), will not make PNB liable for the
of Trustees, the sale it entered into with INC is likewise void. PASUMIL's contractual debts to Andrada Electric &
Without a valid consent of a contracting party, there can be no Engineering Company (AEEC).
valid contract.
[G.R. No. L-21601. December 28, 1968.]
In this case, the IDP, never gave its consent, through a
legitimate Board of Trustees, to the disputed Deed of Absolute NIELSON & COMPANY, INC., plaintiff-appellant,
Sale executed in favor of INC. Therefore, this is a case not
only of vitiated consent, but one where consent on the part of
vs. LEPANTO CONSOLIDATED MINING
one of the supposed contracting parties is totally wanting. COMPANY, defendant-appellee.
Ineluctably, the subject sale is void and produces no effect
whatsoever. ZALDIVAR, J:
Shortly after the mines were liberated from the Japanese Whether or not Mr Tek has the authority to bind NIA in the joint
invaders in 1945, a disagreement arose between NIELSON computation of the foreign currency differential.
and LEPANTO over the status of the operating contract in
question which as renewed expired in 1947. Held:
Issue: The SC found out that in the course of the project, Hydro has
been dealing with NIA represented by Mr. Tek. And applying
WON Nielson is entitled to his share in the stock dividends. the doctrine of apparent authority, if a corporation knowingly
permits one of its officers to act within the scope of an
Held: apparent authority, it holds him out to the public possessing the
power to do those acts; and thus, the corporation will, as
In the case at bar Nielson can not be paid in shares of stock against anyone who has in good faith dealt with it through such
which form part of the stock dividends of Lepanto for services it agent, be stopped from denying the agent’s authority.
rendered under the management contract. We sustain the
WEEK 6
contention of Lepanto that the understanding between Lepanto
and Nielson was simply to make the cash value of the stock
dividends declared as the basis for determining the amount of
compensation that should be paid to Nielson, in the proportion
of 10% of the cash value of the stock dividends declared. In [G.R. No. 117188. August 7, 1997.]
other words, Nielson must still be paid his 10% fee using as
the basis for computation the cash value of the stock dividends LOYOLA GRAND VILLAS HOMEOWNERS
declared. (SOUTH) ASSOCIATION, INC., petitioner, vs.
HON. COURT OF APPEALS, HOME INSURANCE
A “stock dividend” is any dividend payable in shares of stock of
the corporation declaring or authorizing such dividend. So, a
AND GUARANTY CORPORATION, EMDEN
stock dividend is actually two things: (1) a dividend, and (2) the ENCARNACION and HORATIO AYCARDO,
enforced use of the dividend money to purchase additional respondents.
shares of stock at par.16 When a corporation issues stock
dividends, it shows that the corporation’s accumulated profits ROMERO, J:
have been capitalized instead of distributed to the stockholders
or retained as surplus available for distribution, in money or Facts:
kind, should opportunity offer.
LGVHAI was organized on February 8, 1983 as the association
[G.R. No. 160215. November 10, 2004.] of homeowners and residents of the Loyola Grand Villas. It
was registered with the Home Financing Corporation, the
HYDRO RESOURCES CONTRACTORS predecessor of herein respondent HIGC, as the sole
homeowners' organization in the said subdivision under
CORPORATION, petitioner, vs. NATIONAL
Certificate of Registration No. 04-197. It was organized by the
IRRIGATION ADMINISTRATION, respondent. developer of the subdivision and its first president was Victorio
CA: south appealed: WON failure by LGHVAI to file by laws That the failure to file by-laws is not provided for by the
resulted to automatic dissolution. WON 2 homeowners assoc. Corporation Code but in another law is of no moment. P.D. No.
be allowed by HIGC in one sprawling subdivision. CA affirmed 902-A, which took effect immediately after its promulgation on
HIGC resolution. March 11, 1976, is very much apposite to the Code.
Accordingly, the provisions abovequoted supply the law
1. Filing of the by-laws within one month from official governing the situation in the case at bar, inasmuch as the
notice of the issuance of the certificate of incorp. Corporation Code and P.D. No. 902-A are statutes in pari
presupposes that it is already incorporated. materia. Interpretare et concordare legibus est optimus
Registration of LGHVAI had not been validly revoked. interpretandi. Every statute must be so construed and
2. HIGC has the authority to order the holding of a harmonized with other statutes as to form a uniform system of
referendum to determine which of the two contending jurisprudence.
assoc should represent the entire community, village
or subdivision. [G.R. No. 117604. March 26, 1997.]
South filed the instant petition for review on certiorari.
Facts: Petitioner filed a complaint with SEC for the nullification of the
sale of Calapatia’s stock by VGCCI.
On 21 August 1974, Galicano Calapatia, Jr. (Calapatia, for
brevity) a stockholder of private respondent Valley Golf & SEC: in favor of VGCCI; said share is delinquent VGCCI had
Country Club, Inc. (VGCCI, for brevity), pledged his Stock valid reason not to transfer the share in the name of the
Certificate No. 1219 to petitioner China Banking Corporation petitioner in the books of VGCCI until liquidation of
(CBC, for brevity). On 3 August 1983, Calapatia obtained a delinquency. MR(petitioner): denied. Appealed to SEC en
loan of P20,000.00 from petitioner, payment of which was banc.
secured by the aforestated pledge agreement still existing
between Calapatia and petitioner. SEC en banc: reversed. Petitioner: has prior right over the
pledged share, may proceed with the foreclosure of the sale.
Due to Calapatia's failure to pay his obligation, petitioner, on 12 VGCCI: recon; denied.
April 1985, filed a petition for extrajudicial foreclosure before
Notary Public Antonio T. de Vera of Manila, requesting the CA: nullifying and setting aside SEC decision for lack of
latter to conduct a public auction sale of the pledged stock. On jurisdiction. Not intra-corporate dispute. Recon: denied.
14 May 1985, petitioner informed VGCCI of the above-
mentioned foreclosure proceedings and requested that the Hence, this petition.
pledged stock be transferred to its (petitioner's) name and the
same be recorded in the corporate books. However, on 15 July Issue:
1985, VGCCI wrote petitioner expressing its inability to accede
to petitioner's request in view of Calapatia's unsettled accounts 1. WON the petitioner is a stockholder of VGCCI
with the club. Despite the foregoing, Notary Public de Vera 2. WON SEC has jurisdiction over the case
held a public auction on 17 September 1985 and petitioner 3. WON petitioner is bound by the by laws if VGCCI
emerged as the highest bidder at P20,000.00 for the pledged
stock. Consequently, petitioner was issued the corresponding Held:
certificate of sale. On 21 November 1985, VGCCI sent
Calapatia a notice demanding full payment of his overdue
1. There is no question that the purchase of the subject
account in the amount of P18,783.24. 8 Said notice was
share or membership certificate at public auction by
followed by a demand letter dated 12 December 1985 for the
petitioner (and the issuance to it of the corresponding
same amount 9 and another notice dated 22 November 1986
Certificate of Sale) transferred ownership of the same
for P23,483.24.
to the latter and thus entitled petitioner to have the
said share registered in its name as a member of
On 4 December 1986, VGCCI caused to be published in the VGCCI. It is readily observed that VGCCI did not
newspaper Daily Express a notice of auction sale of a number assail the transfer directly and has in fact, in its letter
of its stock certificates, to be held on 10 December 1986 at of 27 September 1974, expressly recognized the
10:00 a.m. Included therein was Calapatia's own share of stock pledge agreement executed by the original owner,
(Stock Certificate No. 1219). Through a letter dated 15 Calapatia, in favor of petitioner and has even noted
December 1986, VGCCI informed Calapatia of the termination
said agreement in its corporate books. 25 In addition,
of his membership due to the sale of his share of stock in the Calapatia, the original owner of the subject share, has
10 December 1986 auction. not contested the said transfer. By virtue of the afore-
mentioned sale, petitioner became a bona fide
On 5 May 1989, petitioner advised VGCCI that it is the new stockholder of VGCCI and, therefore, the conflict that
owner of Calapatia's Stock Certificate No. 1219 by virtue of arose between petitioner and VGCCI aptly
being the highest bidder in the 17 September 1985 auction and exemplifies an intra-corporate controversy between a
requested that a new certificate of stock be issued in its name. corporation and its stockholder under Sec. 5(b) of
On 2 March 1990, VGCCI replied that "for reason of P.D. 902-A.
delinquency" Calapatia's stock was sold at the public auction
held on 10 December 1986 for P25,000.00. It is significant to note that VGCCI began sending
notices of delinquency to Calapatia after it was
On 9 March 1990, petitioner protested the sale by VGCCI of informed by petitioner (through its letter dated 14 May
the subject share of stock and thereafter filed a case with the 1985) of the foreclosure proceedings initiated against
WEEK 7
directors of FLADC were to be nominated from the Ong
Group, while 5 directors thereof were to be nominated
from the Tiu Group. It was also agreed that the positions
of President and Secretary of FLADC shall be held by the
[G.R. No. 144476. February 1, 2002.] Ongs, while the positions of Vice-President and Treasurer
thereof shall be held by the Tius.
ONG YONG, JUANITA TAN ONG, WILSON T.
ONG, ANNA L. ONG, WILLIAM T. ONG, WILLIE In order to comply with the Pre-Subscription Agreement, the
necessary increase in capital stock of FLADC was applied for
T. ONG, And JULIE ONG ALONZO, petitioners,
and duly approved. The Ongs subscribed to 1 million shares
vs . DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, thereof at a par value of P100.00 per share, or.
BELEN SEE YU, D. TERENCE Y. TIU, JOHN YU, P100,000,000.00. FLADC's articles of incorporation were also
LOURDES C. TIU, INTRALAND RESOURCES duly amended increasing the number of its directors from
DEVELOPMENT CORP., MASAGANA seven (7) to eleven (11), six (6) of which were nominated by
the Ong Group, while the rest were nominated by the Tiu
TELAMART, INC., REGISTER OF DEEDS OF
Group. Later, Wilson T. Ong and Juanita Tan Ong were
PASAY CITY, And the SECURITIES AND elected President and Secretary, respectively, while David S.
EXCHANGE COMMISSION, respondents. Tiu and Cely Yao Tiu were elected Vice-President and
Treasurer, respectively.
BUENA, J:
The P190,000,000.00 loan from the PNB was also settled, but
Summary: Lubog sa utang sila FLADC (owned by Tiu), ngayon not quite in accord with the provisions of the Pre-Subscription
hinelp sila ni Ong through pre-subscription agreement. Tas Agreement. In lieu of the FLADC funds which were supposed
nagkandaloko loko na. Nirescind ni Tiu yung Pre-subscription to be used as partial payment for said loan per Pre-
agreement, kinonfirm ni SEC then affirmed by everybody. Subscription Agreement, the Ongs had to pay P70,000,000.00
Keribels lang kay SC sabi niya may correlative obligation si more aside from their P100,000,000.00 subscription payment,
Ong kay Tiu pursuant sa agreement nila. Ngayon nagparecon and the Tius had to advance P20,000,000.00 in cash, which
si Ong (2003 decision) nireverse ni SC yung decision nila amount was loaned to them by the former.
(When u nod your head yes but u wanna say no. charot) na
hindi daw rescission yung remedy in this case, may other The controversy between the two parties arose when the Ongs
remedies pa daw for intra-corporate disputes. refused to credit the number of FLADC shares in the name of
On April 2, 1966 Po sold to Ricardo A. Nava for two thousand A corporation cannot release an original subscriber from
pesos twenty of his eighty shares. In the deed of sale Po paying for his shares without a valuable consideration or
represented that he was "the absolute and registered owner of without the unanimous consent of the stockholders. Under the
PANGANIBAN, J: SEC: dismissed, failed to prove legal basis for the secretary of
the Corporation be compelled to register stock transfers in
Summary: Wala namang foreclosure nung pledge pero gusto favor of the petitioner. Appeal, dismissed no jurisdiction and no
niya kaniya na yung shares of stock pledge, tapos cause of action.
minandamus niya si corporate secretary para ilipat sakanya
yung share of stocks. CA: SEC does not have jurisdiction as controversy is purely a
civil matter. Mandamus cannot be availed of as he failed to
Facts: establish a clear and legal right to the writ.
On January 8, 1980, Respondent-Appellee Sy Guiok secured a Hence, the petitioner brought before us this Petition for Review
loan from the Petitioner in the amount of P40,000 payable on Certiorari in accordance with Rule 45 of the Rules of Court.
within six (6) months. To secure the payment of the aforesaid
loan and interest thereon, Respondent Guiok executed a Issue:
Contract of Pledge in favor of the [p]etitioner whereby he
pledged his three hundred (300) shares of stock in the Go Fay WON SEC has jurisdiction
& Company Inc., Respondent Corporation, for brevity's sake.
Respondent Guiok obliged himself to pay interest on said loan - The registration of shares in a stockholder's name,
at the rate of 10% per annum from the date of said contract of the issuance of stock certificates, and the right to
pledge. On the same date, Alfonso Sy Lim secured a loan, receive dividends which pertain to the said shares are
from the Petitioner in the amount of P40,000 payable in six (6) all rights that flow from ownership. The determination
months. To secure the payment of his loan, Sy Lim executed a of whether or not a shareholder is entitled to exercise
'Contract of Pledge' covering his three hundred (300) shares of the above-mentioned rights falls within the jurisdiction
stock in Respondent Corporation. Under said contract, Sy Lim of the SEC. However, if ownership of the shares is not
obliged himself to pay interest on his loan at the rate of 10% clearly established and is still unresolved at the time
per annum from the date of the execution of said contract. the action for mandamus is filed, then jurisdiction lies
with the regular courts.
Under said contracts of pledge, Guiok and Sy Lim agreed that
in the event of their failure to pay the amount within the period Whether the petitioner is entitled to the relief of mandamus as
agreed upon, the pledgee, Lim Tay, was authorized to against the respondent Go Fay & Co., Inc. to compel the
foreclose the pledge upon the said shares of stock. As stated: corporate secretary to register the stocks in favor of the
petitioner
“at which sale the PLEDGEE may be the purchaser at his
option; and the PLEDGEE is hereby authorized and Held:
empowered at his option to transfer the said shares of stock on
the books of the corporation to his own name and to hold the The contractual stipulation, which was part of the Complaint,
certificate issued in lieu thereof under the terms of this pledge, shows that plaintiff was merely authorized to foreclose the
and to sell the said shares to issue to him and to apply the pledge upon maturity of the loans, not to own them. Such
foreclosure is not automatic, for it must be done in a public or
SEC en banc: Certiorari and annulment, denied. MR, denied. On February 8, 1968, plaintiff and Fausto Gaid executed a
"Deed of Undertaking" and "Indorsement" whereby the latter
CA: Petition for Review, dismissed. MR, denied. acknowledges that the former is the owner of said shares and
he was therefore assigning/endorsing the same to the plaintiff.
Issue: From the time of incorporation of VCC up to the present, no
certificates of stock corresponding to the 239,500 subscribed
WON the execution of the deed of assignment in favor of the and fully paid shares of Gaid were issued in the name of
petitioners, transfer of title to such shares is ineffective until Fausto G. Gaid and/or the plaintiff. Despite repeated demands,
and unless the duly indorsed certificate of stock is delivered to the defendants refused and continue to refuse without any
them justifiable reason to issue to plaintiff the certificates of stocks
corresponding to the 239,500 shares of Gaid, in violation of
Held: plaintiff's right to secure the corresponding certificate of stock
in his name.
No. We have uniformly held that for a valid transfer of stocks,
there must be strict compliance with the mode of transfer With this allegations, petitioner prayed that judgment be
prescribed by law. 22 The requirements are: (a) There must be rendered ordering respondents (a) to issue in his name
delivery of the stock certificate; (b) The certificate must be certificates of stocks covering the 239,500 shares of stocks
endorsed by the owner or his attorney-in-fact or other persons and its legal increments and (b) to pay him damages.
legally authorized to make the transfer; and (c) To be valid
against third parties, the transfer must be recorded in the Respondent moved to dismiss the complaint on the ground,
books of the corporation. As it is, compliance with any of these among others, that it states no cause of action. After
requisites has not been clearly and sufficiently shown. respondents filed their reply, the SEC hearing officer granted
the motion to dismiss.
While the assignment may be valid and binding on the
petitioners and private respondents, it does not necessarily SEC: the real party in interest is Fausto G. Gaid, or his estate
make the transfer effective. Consequently, the petitioners, as or his heirs. Gaid was an incorporator and an original
mere assignees, cannot enjoy the status of a stockholder, stockholder of the defendant corporation who subscribed and
cannot vote nor be voted for, and will not be entitled to fully paid for 239,500 shares of stock.
dividends, insofar as the assigned shares are concerned.
Parenthetically, the private respondents cannot, as yet, be SEC en banc: reversed the dismissal, that a transfer or
deprived of their rights as stockholders, until and unless the assignment of stocks need not be registered first before it can
issue of ownership and transfer of the shares in question is take cognizance of the case to enforce the petitioner's rights as
resolved with finality. a stockholder. MR, denied.
To enable the shareholders of the Rural Bank of Lipa City, Inc. CA: dismissed. The CA held that in the absence of any
to meet and elect their directors, the temporary restraining allegation that the transfer of the shares between Fausto Gaid
order issued by the SEC Hearing Officer on January 13, 1995 and Vicente C. Ponce was registered in the stock and transfer
must be lifted. However, private respondents shall be notified book of ALSONS, Ponce failed to state a cause of action.
of the meeting and be allowed to exercise their rights as
stockholders thereat. Issue:
[G.R. No. 139802. December 10, 2002.] WON Ponce can require the corporate secretary, to register
Gaid’s shares in his name.
VICENTE C. PONCE, petitioner, vs . ALSONS
Held:
CEMENT CORPORATION, and FRANCISCO M.
GIRON, JR., respondents. The Court ruled that the instant petition is without merit. The
Court of Appeals did not err in ruling that petitioner had no
QUISUMBING, J: cause of action, and that his petition for mandamus was
properly dismissed. There is no question that Fausto Gaid was
Facts: an original subscriber of respondent corporation's 239,500
shares.
On January 25, 1996, plaintiff (now petitioner) Vicente C.
Ponce, filed a complaint with the SEC for mandamus and Pursuant to Section 63 of the Corporation Code, a transfer of
damages against defendants (now respondents) Alsons shares of stock not recorded in the stock and transfer book of
WEEK 7.2
not gratify curiosity or for speculative or vicious purposes; that
such examination would violate the confidentiality of the
records of the respondent bank as provided in Section 16 of its
charter and that the petitioner has not exhausted his
[G.R. No. L-33320. May 30, 1983.] administrative remedies.
Summary: Yung petitioner ditto yung friend mong may trust Held:
issues hahaha charot. Pero yung petitioner ditto nagfile ng
case against kay bank tapos naging stockholder siya then [Naamend kasi yung previous Corporation Law ditto (RA 1459)
gusto niya mainspect books kasi right daw yun ng stockholders naging BP Blg. 68 (yung current)]
pero dineny ni bank ngayon file siya case kasi kupal siya.
The right of inspection granted to a stockholder under Section
Facts: 51 of Act No. 1459 has been retained, but with some
modifications. Among the changes introduced in the new Code
with respect to the right of inspection granted to a stockholder
CHESTER BABST, petitioner, vs . COURT OF Consequently, on January 17, 1983, BPI, as successor-in-
APPEALS, BANK OF THE PHILIPPINE ISLANDS, interest of CBTC, instituted with the Regional Trial Court of
ELIZALDE STEEL CONSOLIDATED, INC., and Makati, Branch 147, a complaint 13 for sum of money against
ELISCON, MULTI and Babst. ELISCON, in its Answer, 14
WEEK 8
prejudicing the interests of the stockholder. No payment shall
be made unless there are unrestricted retained earnings in its
books to cover such payment. Payment by the corporation to a
dissenting stockholder exercising his appraisal right without the
[G.R. No. 157479. November 24, 2010.] existence of URE is in violation of the trust fund doctrine which
proscribes the distribution of assets to a stockholder without
PHILIP TURNER and ELNORA TURNER, first paying corporate debts because the assets of the
petitioners, vs. LORENZO SHIPPING corporation are held in trust by the same for the benefit of its
creditors. Payment made under such circumstance is
CORPORATION, respondent.
prejudicial to the corporate creditors and is null and void.
Creditors are always preferred over stockholders.
BERSAMIN, J:
Petitioners Philip and Elnora Turner were the owners of SANTIAGO CUA, JR., SOLOMON S. CUA and
1,010,000 shares of stocks of Respondent Lorenzo Shipping EXEQUIEL D. ROBLES, in their capacity as
Corporation. Petitioners voted against the restriction of pre- Directors of PHILIPPINE RACING CLUB, INC.,
emptive right to newly issued stocks, to be effected via the
amendment of the articles of incorporation of the Respondent
petitioners, vs. MIGUEL OCAMPO TAN, JEMIE
Corporation. They alleged that it is prejudicial to their interests U. TAN and ATTY. BRIGIDO J. DULAY,
as shareholders. respondents.
WEEK 9
betting, raising horses, and breeding the same.
A stockholder or member may bring an action in the name of a San Juan raised the issue that Nenita was actually the wife of
corporation or association, as the case may be, provided, that: the President of Motorich; that Nenita and her husband owns
(1) He was a stockholder or member at the time the acts or 98% of the corporation’s capital stocks; that as such, it is a
transactions subject of the action occurred and at the time the close corporation and that makes Nenita and the President as
action was filed; (2) He exerted all reasonable efforts, and principal stockholders who do not need any authorization from
alleges the same with particularity in the complaint, to exhaust the corporate board; that in this case, the corporate veil may
all remedies available under the articles of incorporation, by- be properly pierced.
laws, laws or rules governing the corporation or partnership to
obtain the relief he desires; (3) No appraisal rights are Issue:
available for the act or acts complained of; And (4) the suit is
not a nuisance or harassment suit. WON private respondent corporation is not a close corporation
[G.R. No. L-8451. December 20, 1957.] As the Register of Deeds entertained some doubts as to the
registerability of the document, the matter was referred to the
Land Registration Commissioner en consulta for resolution in
THE ROMAN CATHOLIC APOSTOLIC
accordance with R.A. No. 1151. Proper hearing on the matter
ADMINISTRATOR OF DAVAO, INC., petitioner, was conducted by the Commissioner and after the petitioner
vs. THE LAND REGISTRATION COMMISSION corporation had filed its memorandum, a resolution was
and THE REGISTER OF DEEDS OF DAVAO rendered the vendee was not qualified to acquire private lands
CITY, respondents. in the Philippines in the absence of proof that at least 60 per
centum of the capital, property, or assets of the Roman
FELIX, J: Catholic Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question that the
Summary: May binenta na land kay church sa davao, tapos present incumbent of the corporation sole was a Canadian
yung incumbent dun sa church, Canadian Citizen. Ngayon, citizen.
ireregister nila sa RD yung deed, ngayon may impression kay
RD dahil sa previous ruling ng court na kelangan nila ng Motion for recon: denied. Petition for mandamus; alleging that
affidavit na 60% Filipino Corp sila. So ayun nag express sila ng under the Corporation Law, the Canon Law as well as the
willingness pero sinabi nila na di applicable sakanila yung settled jurisprudence on the matter, the deed of sale executed
ruling. So naghearing sa LRC, denied kasi bawal ang foreign by Mateo L. Rodis in favor of petitioner is actually a deed of
corp from acquiring lands under the consti unless 60% Filipino sale in favor of the Catholic Church which is qualified to
owned, MR, denied, mandamus. Ang issue sa case na to is acquire private agricultural lands for the establishment and
kung applicable ba sakanila yung 60% Filipino sh*t ngayon maintenance of places of worship.
sabi ng court, unique daw ang corporation sole. Na hindi daw
sila aliens kasi wala silang nationality. And ang prohibited sa Issue:
consti is ownership, eh hindi naman magiging owned by the
Canadian incumbent yung land but rather he will be considered 1. WON a religious corporation recognized by our
administrator lang nung land. Corporation Law and registered as a corporation sole,
may possess, acquire and register real estates in its
Facts: name when the Head, Manager, Administrator or
actual incumbent is an alien
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and 2. Who are the owners of church properties?
resident of the City of Davao, executed a deed of sale of a
parcel of land located in the same city covered by Transfer Held:
Certificate of Title No. 2263, in favor of the Roman Catholic
Administrator of Davao, Inc., a corporation sole organized and They cannot be considered as aliens because they have no
existing in accordance with Philippine laws, with Msgr. Clovis nationality at all. In determining, therefore, whether the
Thibault, a Canadian citizen, as actual incumbent. When the constitutional provision requiring 60 per centum Filipino capital
deed of sale was presented to the Register of Deeds of Davao is applicable to corporations sole, the nationality of the
for registration, the latter having in mind a previous resolution constituents of the diocese, and not the nationality of the actual
of the Fourth Branch of the Court of First Instance of Manila incumbent of the parish, must be taken into consideration. In
wherein the Carmelite Nuns of Davao were made to prepare the present case, even if the question of nationality be
an affidavit to the effect that 60 per cent of the members of considered, the aforesaid constitutional requirement is fully met
their corporation were Filipino citizens when they sought to and satisfied, considering that the corporation sole in question
register in favor of their congregation a deed of donation of a is composed of an overwhelming majority of Filipinos.
parcel of land — required said corporation sole to submit a
Darla Grey| Corporation Law Digest | 61
That leaves no room for doubt that the bishops or archbishops, religious corporation sole when they provided that 60 per
as the case may be, as corporation's sole are merely centum of the capital thereof be owned by Filipino citizens.
administrators of the church properties that come to their Thus, if this constitutional provision were not intended for
possession, and which they hold in trust for the church. It can corporation sole, it is obvious that this could not be regulated
also be said that while it is true that church properties could be or restricted by said provision.
administered by a natural person, problems regarding
succession to said properties can not be avoided to rise upon Considering that nowhere can we find any provision conferring
his death. Through this legal fiction, however, church ownership of church properties on the Pope although he
properties acquired by the incumbent of a corporation sole appears to be the supreme administrator or guardian of his
pass, by operation of law, upon his death not to his personal flock, nor on the corporations sole or heads of dioceses as
heirs but to his successor in office. It could be seen, therefore, they are admittedly mere administrators of said properties,
that a corporation sole is created not only to administer the ownership of these temporalities logically fall and devolve upon
temporalities of the church or religious society where he the church, diocese or congregation acquiring the same.
belongs but also to hold and transmit the same to his Although this question of ownership of ecclesiastical properties
successor in said office. has off and on been mentioned in several decisions of this
Court yet in no instance was the subject of citizenship of this
A corporation sole is a special form of corporation usually religious society been passed upon.
associated with the clergy. Conceived and introduced into the
common law by sheer necessity, this legal creation which was A corporation sole or "ordinary" is not the owner of the
referred to as "that unhappy freak of English law" was properties that he may acquire but merely the administrator
designed to facilitate the exercise of the functions of ownership thereof and holds the same in trust for the church to which the
carried on by the clerics for and on behalf of the church which corporation is an organized and constituents part. Being mere
was regarded as the property owner (See I Bouvier's Law administrator of the temporalities or properties titled in his
Dictionary, p. 682-683). name, the constitutional provision requiring 60 per centum
Filipino ownership is not applicable. The said constitutional
A corporation sole consists of one person only, and his provision is limited by it terms to ownership alone and does not
successors (who will always be one at a time), in some extend to control unless the control over the property affected
particular station, who are incorporated by law in order to give has been devised to circumvent the real purpose of the
them some legal capacities and advantages, particularly that of constitution.
perpetuity, which in their natural persons they could not have
had. In this sense, the king is a sole corporation; so is a
bishop, or deans, distinct from their several chapters (Reid vs.
WEEK 11
Barry, 93 Fla. 849, 112 So. 846).
Held: Held:
The enactment of Republic Act 7169, as well as the The club, according to the SEC's explicit finding, was duly
subsequent developments has rendered the liquidation court registered and a certificate of incorporation was issued in its
functus officio. Consequently, Judge Vega has been stripped favor. The question of whether the club was indeed registered
of the authority to issue orders involving acts of liquidation. and issued a certification or not is one which necessitates a
Liquidation, in corporation law, connotes a winding up or factual inquiry. To substantiate their claim of dissolution,
settling with creditors and debtors. It is the winding up of a Vesagas and Asis submitted only two relevant documents: the
corporation so that assets are distributed to those entitled to Minutes of the First Board Meeting held on 5 January 1997,
receive them. It is the process of reducing assets to cash, and the board resolution issued on 14 April 1997 which
discharging liabilities and dividing surplus or loss. On the declared "to continue to consider the club as a non-registered
opposite end of the spectrum is rehabilitation which connotes a or a non-corporate entity and just a social association of
reopening or reorganization. Rehabilitation contemplates a respectable and respecting individual members who have
continuance of corporate life and activities in an effort to associated themselves, since the 1970's, for the purpose of
restore and reinstate the corporation to its former position of playing the sports of tennis." These two documents will not
successful operation and solvency. It is crystal clear that the suffice. The requirements mandated by the Corporation Code
concept of liquidation is diametrically opposed or contrary to should have been strictly complied with by the members of the
the concept of rehabilitation, such that both cannot be club. The records reveal that no proof was offered by Vesagas
undertaken at the same time. To allow the liquidation and Asis with regard to the notice and publication
proceedings to continue would seriously hinder the requirements. Similarly wanting is the proof of the board
rehabilitation of the subject bank. members' certification. Lastly, and most important of all, the
SEC Order of Dissolution was never submitted as evidence.
[G.R. No. 142924. December 5, 2001.]
CA: same, same. Affirm RTC decision The accepted rule in jurisprudence is that each case must be
judged in the light of its own environmental circumstances. It
Issue: should be kept in mind that the purpose of the law is to subject
the foreign corporation doing business in the Philippines to the
WON a foreign corporation which sold its products sixteen jurisdiction of our courts. It is not to prevent the foreign
times over a five-month period to the same Filipino buyer corporation from performing single or isolated acts, but to bar it
without first obtaining a license to do business in the from acquiring a domicile for the purpose of business without
Philippines, prohibited from maintaining an action to collect first taking the steps necessary to render it amenable to suits in
payment therefor in Philippine courts (YES) the local courts.
WON such foreign corporation "doing business" in the We find no reason to disagree with both lower courts. The sale
Philippines without the required license and thus barred access by petitioner of the items covered by the receipts, which are
to our court system (YES) part and parcel of its main product line, was actually carried out
in the progressive prosecution of commercial gain and the
Held: pursuit of the purpose and object of its business, pure and
simple. Further, its grant and extension of 90-day credit terms
It was never the intent of the legislature to bar court access to to private respondent for every purchase made, unarguably
a foreign corporation or entity which happens to obtain an shows an intention to continue transacting with private
isolated order for business in the Philippines. Neither, did it respondent, since in the usual course of commercial
intend to shield debtors from their legitimate liabilities or transactions, credit is extended only to customers in good
obligations. 15 But it cannot allow foreign corporations or standing or to those on whom there is an intention to maintain
entities which conduct regular business any access to courts long-term relationship.
without the fulfillment by such corporations of the necessary
requisites to be subjected to our government's regulation and By this judgment, we are not foreclosing petitioner's right to
authority. By securing a license, the foreign entity would be collect payment. Res judicata does not set in a case dismissed
giving assurance that it will abide by the decisions of our for lack of capacity to sue, because there has been no
courts, even if adverse to it. determination on the merits. Moreover, this Court has ruled
that subsequent acquisition of the license will cure the lack of
The aforementioned provision prohibits, not merely absence of capacity at the time of the execution of the contract. The
the prescribed license, but it also bars a foreign corporation requirement of a license is not meant to put foreign
"doing business" in the Philippines without such license access corporations at a disadvantage. Rather, the doctrine of lack of
to our courts. A foreign corporation without such license is not capacity to sue is based on considerations of sound public
ipso facto incapacitated from bringing an action. A license is policy.
necessary only if it is "transacting or doing business" in the
country. However, there is no definitive rule on what [G.R. No. 131367. August 31, 2000.]
constitutes "doing," "engaging in," or "transacting" business.
The Corporation Code itself does not define such terms. To fill HUTCHISON PORTS PHILIPPINES LIMITED,
the gap, the evolution of its statutory definition has produced a
rather all-encompassing concept in Republic Act No. 7042:
petitioner, vs. SUBIC BAY METROPOLITAN
AUTHORITY, INTERNATIONAL CONTAINER
“…any other act or acts that imply a continuity of commercial dealings TERMINAL SERVICES INC., ROYAL PORT
or arrangements, and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
SERVICES INC. and the EXECUTIVE
incident to, and in progressive prosecution of, commercial gain or of SECRETARY, respondents.
the purpose and object of the business organization…”
The recommendation of CPLC Cayetano was approved by WON participating in the bidding is a mere isolated transaction,
President Ramos, and a copy of President Ramos' handwritten or did it constitute "engaging in" or "transacting" business in the
approval was sent to the SBMA Board of Directors. Philippines such that petitioner HPPL needed a license to do
Accordingly, the SBMA Board, with the concurrence of business in the Philippines before it could come to court
representatives of the Commission on Audit, agreed to focus
the reevaluation of the bids in accordance with the evaluation Held:
criteria and the detailed components contained in the Tender
Document, including all relevant information gleaned from the Admittedly, petitioner HPPL is a foreign corporation, organized
bidding documents, as well as the reports of the three and existing under the laws of the British Virgin Islands. While
international experts and the consultancy firm hired by the the actual bidder was a consortium composed of petitioner,
SBMA. and two other corporations, namely, Guoco Holdings (Phils.)
Inc. and Unicol Management Services, Inc., it is only petitioner
SBMA Board: SBMA through unanimous vote. HPPL is HPPL that has brought the controversy before the Court,
accordingly selected as the winning bidder and is hereby arguing that it is suing only on an isolated transaction to evade
awarded the concession for the operation and development of the legal requirement that foreign corporations must be
the Subic Bay Container Terminal. licensed to do business in the Philippines to be able to file and
prosecute an action before Philippines courts.
Notwithstanding the SBMA Board's recommendations and
action awarding the project to HPPL, then Executive Secretary There is no general rule or governing principle laid down as to
Ruben Torres submitted a memorandum to the Office of the what constitutes "doing" or "engaging in" or "transacting"
President recommending that another rebidding be conducted. business in the Philippines. Each case must be judged in the
Consequently, the Office of the President issued a light of its peculiar circumstances. 28 Thus, it has often been
Memorandum directing the SBMA Board of Directors to refrain held that a single act or transaction may be considered as
from signing the Concession Contract with HPPL and to "doing business" when a corporation performs acts for which it
conduct a rebidding of the project. was created or exercises some of the functions for which it was
organized. The amount or volume of the business is of no
Ombudsman investigated the bidding. No grave abuse of moment, for even a singular act cannot be merely incidental or
discretion on the part of SBMA in awarding the bid to HPPL. casual if it indicates the foreign corporation's intention to do
On July 7, 1997, the HPPL, feeling aggrieved by the SBMA's business.
failure and refusal to commence negotiations and to execute
the Concession Agreement despite its earlier pronouncements Participating in the bidding process constitutes "doing
that HPPL was the winning bidder, filed a complaint against business" because it shows the foreign corporation's intention
SBMA before the RTC for specific performance, mandatory to engage in business here. The bidding for the concession
injunction and damages. In due time, ICTSI, RPSI and the contract is but an exercise of the corporation's reason for
Office of the President filed separate Answers-in-Intervention creation or existence. Thus, it has been held that "a foreign
to the complaint opposing the reliefs sought by complainant company invited to bid for IBRD and ADB international projects
HPPL. While the case before the trial court was pending in the Philippines will be considered as doing business in the
litigation, on August 4, 1997, the SBMA sent notices to plaintiff Philippines for which a license is required." In this regard, it is
HPPL, ICTSI and RPSI requesting them to declare their the performance by a foreign corporation of the acts for which
interest in participating in a rebidding of the proposed project. it was created, regardless of volume of business, that
[G.R. No. 138104. April 11, 2002.] Upon the denial of its "Affidavit of Third-Party Claim" by the
RTC of Manila, petitioner commenced with the RTC of
Marinduque presided by Judge Leonardo P. Ansaldo, a
MR HOLDINGS, LTD., petitioner, vs. SHERIFF
complaint for reivindication of properties, etc., with prayer for
CARLOS P. BAJAR, SHERIFF FERDINAND M. preliminary injunction and temporary restraining order against
JANDUSAY, SOLIDBANK CORPORATION, AND respondents Solidbank, Marcopper, and sheriffs Bajar and
MARCOPPER MINING CORPORATION, Jandusay.
respondents.
RTC: In an Order 16 dated October 6, 1998, Judge Ansaldo
denied petitioner's application for a writ of preliminary
SANDOVAL-GUTIERREZ, J:
injunction on the ground that a) PETITIONER HAS NO LEGAL
CAPACITY TO SUE, IT BEING A FOREIGN CORPORATION
Facts:
DOING BUSINESS IN THE PHILIPPINES WITHOUT
LICENSE; b) an injunction will amount "to staying the
Asian Development Bank (ADB), a multilateral development
execution of a final judgment by a court of co-equal and
finance institution, agreed to extend to Marcopper Mining
concurrent jurisdiction"; and c) the validity of the "Assignment
Corporation (Marcopper) a loan in the aggregate amount of
Agreement" and the "Deed of Assignment" has been "put into
US$40,000,000.00 to finance the latter's mining project at Sta.
serious question by the timing of their execution and
Cruz, Marinduque. The principal loan of US$15,000,000.00
registration.
was sourced from ADB's ordinary capital resources, while the
complementary loan of US$25,000,000.00 was funded by the
CA: Prohibition and Mandamus, affirm RTC.
Bank of Nova Scotia, a participating finance institution.
Hence, the present Petition for Review on Certiorari.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a
foreign corporation which owns 40% of Marcopper, executed a
Issue:
"Support and Standby Credit Agreement" whereby the latter.
agreed to provide Marcopper with cash flow support for the
WON petitioner has the legal capacity to seek redress from this
payment of its obligations to ADB.
Court