TITLE: Yutivo v CT

Facts:1. Yutivo Sons Hardware Co, a domestic corporation incorporated in 1916 under
Philippine laws, wasengaged in the importation and sale of hardware supplies and equipment.2.
After the first world war, it resumed its business and bought a number of cars and trucks
fromGeneral Motors(GM), an American Corporation licensed to do business in the Philippines.
As importer,GM paid sales tax prescribed by the Tax Code on the basis of its selling price to
Yutivo. Yutivo paid nofurther sales tax on its sales to the public.3. On June 13, 1946, the
Southern Motors Inc,(SM) was organized to engage in the business of sellingcars, trucks and
spare parts. One of the subscribers of stocks during its incorporation was Yu Khe Thai,
Yu Khe Siong and Hu Kho Jin, who are sons of Yu Tiong Yee, one of Yutivos founders.4. After
SMs incorporation and until the withdrawal of GM from the Philippines, the cars and trucks
purchased by Yutivo from GM were sold by Yutivo to SM which the latter sold to the public.5.
Yutivo was appointed importer for Visayas and Mindanao by the US manufacturer of cars and
truckssold by GM. Yutivo paid the sales tax prescribed on the basis of selling price to SM. SM
paid no sales taxon its sales to the public.6. An assessment of PhP 1.8 million was made upon
Yutivo for deficiency sales tax plus surcharge. TheCollector of Internal Revenue, contends that
the taxable sales were the retail sales by SM to the publicand not the sales at wholesale
made by Yutivo to the latter inasmuch as SM and Yutivo were one andthe same corporation, the
former being a subsidiary of the latter.7. Yutivo: Disputed the assessment.8. After
reinvestigation, a second assessment was made, sustaining the validity of the first
assessment.9. Yutivo contested the second assessment, alleging that there is no valid ground
to disregard thecorporate personality of SM and to hold that it is an adjunct of
petitioner.
ISSUES:1. Whether or not the corporate personality of SM could be disregarded for the
purposes of taxation?Yes.2. WON there was fraud on the part of Yutivo and SM? No,
therefore no tax evasion.RATIO:
1. General Rule: A corporation is an entity separate and distinct from its stockholders and from
othercorporations to which it may be connected. However, when the notion of legal entity is
used to defeatpublic convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation asan association of persons, or, in the case of two corporations, merge
them into one. When thecorporation is a mere alter ego or business conduit of a person, it
may be disregarded.2. SC ruled that CTA was not justified in finding that SM was organized to
defraud the Government. SMwas organized in June 1946, from that date until June 30, 1947,
GM was the importer of the cars andtrucks sold to Yutivo, which in turn was sold to SM. GM, as
importer was the one solely liable for salestaxes. Neither Yutivo nor SM was subject
to the sales taxes. Yutivos liability arose only until July 1, 1947
when it became the importer. Hence, there was no tax to evade.3. It should be stated that
the intention to minimize taxes, when used in the context of fraud, must beproved to exist by
clear and convincing evidence amounting to more than mere preponderance, andcannot be
justified by a mere speculation. This is because fraud is never lightly to be presumed. Fraud
isnever imputed and the courts never sustain findings of fraud upon circumstances which, at the
most,create only suspicion.4. TAX EVASION vs TAX AVOIDANCE: Tax evasion" is a term that
connotes fraud thru the use ofpretenses and forbidden devices to lessen or defeat taxes. The
transactions between Yutivo and SM,however, have always been in the open, embodied in
private and public documents, constantly subjectto inspection by the tax authorities. But the
attempt to avoid tax does not necessarily establish fraud. Itis a settled principle that a taxpayer
may diminish his liability by any means which the law permits (taxavoidance).5. However, SC
agreed with the respondent court that SM was actually owned and controlled by
Yutivo.Indications that Yutivo treated SM merely as its department or adjunct:a. The founders of

the corporation are closely related to each other by blood and affinity.b. The object and purpose
of the business is the same; both are engaged in sale of vehicles, spare parts,hardware
supplies and equipment.c. The accounting system maintained by Yutivo shows that it
maintained high degree of control over SMaccounts.d. Several correspondences have
reference to Yutivo as the head office of SM. SM may even freely useforms or stationery of
Yutivo.
e. All cash collections of SMs branches are remitted direc
tly to Yutivo.f. The controlling majority of the Board of Directors of Yutivo is also the controlling
majority of SM.
g. The principal officers of both corporations are identical. Both corporations have a
commoncomptroller in the person of Simeon Sy, who is a brother-inlaw of Yutivos president, Yu Khe Thai.
h. Yutivo, financed principally the business of SM and actually extended all the credit to the
latter notonly in the form of starting capital but also in the form of credits extended for the cars
and vehiclesallegedly sold by Yutivo to SM.6. Southern Motors being but a mere instrumentality,
or adjunct of Yutivo, the Court of Tax Appealscorrectly disregarded the technical defense of
separate corporate entity in order to arrive at the true taxliability of Yutivo. But there is no basis
for the imposition of the 50% fraud surcharge.7. Where to impose the tax?Gross selling price or
gross value in money. These terms, do not include the amount of the sales tax, ifinvoiced
separately. 'Gross selling price' or gross value in money' of the articles sold,
bartered,exchanged, transferred as the term is used in the aforecited sections (of the National
Internal RevenueCode, is the total amount of money or its equivalent which the purchaser pays
to the vendor to receiveor get the goods. However, if a manufacturer, producer, or importer, in
fixing the gross selling price ofan article sold by him has included an amount intended to cover
the sales tax in the gross selling price ofthe articles, the sales tax shall be based on the gross
selling price less the amount intended to cover thetax, if the same is billed to the purchaser as a
separate item.DISPOSITIVE: CTA decision modified in that petitioner shall be ordered to pay to
respondent the sum ofP820,549.91, plus 25% surcharge thereon for late payment.

Good Earth Emporium Inc and Lim Ka Ping, petitionersv.CA and Roces-Reyes Realty
Inc., respondents
This is a petition for review on certiorari of the decision CA reversing the decision of respondent
Judge RTC of Manila, whichreversed the resolution of the Metropolitan Trial Court Of Manila
denying herein
GEEs
motion to quash the alias writ of execution issued against them.
Facts:
A lease contract was entered into between ROCES and GEE. A five-storey building was the
subject of which, upon failure of the latter to pay its rentals, ROCES filed an ejectment case
against the petitioner. The MTC of Mla rendered a decisionordering GEE and all persons under
him to vacate the premises and surrender the same to ROCES and pay the plaintiffs
therental.GEE filed a motion to quash the writ of execution but the same was denied by the
MTC for lack of merit. In 1987 the RTC of Manila reversed the decision of the MTC finding that
the amount of P1 million evidenced by Exhibit "I" and another P1million evidenced by the pacto
de retro sale instrument were in full satisfaction of the judgment obligation.On further appeal,

the CA reversed the decision of the RTC and reinstated the Resolution of the MTC of
Manila. GE
Es m/r
was denied, hence this petition.
Issue:
Whether or not there was full satisfaction of the judgment debt in favor of respondent
corporation which would justify thequashing of the Writ of Execution
Ruling:
The fact that at the time payment was made to the two Roces brothers, GEE was also indebted
to respondent corporationfor a larger amount, is not supportive of the Regional Trial Court's
conclusions that the payment was in favor of the latter,especially where the amount was not
receipted for by respondent corporation and there is absolutely no indication in thereceipt from
which it can be reasonably inferred, that said payment was in satisfaction of the judgment debt.
Likewise, nosuch inference can be made from the execution of the pacto de retro sale which
was not made in favor of respondentcorporation but in favor of the two Roces brothers in their
individual capacities without any reference to the judgmentobligation in favor of respondent
corporation.Respondent court was correct in stating that it "cannot go beyond what appears in
the documents submitted by petitionersthemselves in the absence of clear and convincing
evidence" that would support its claim that the judgment obligation hasindeed been fully
satisfied which would warrant the quashal of the Alias Writ of Execution.It has been an
established rule that when the existence of a debt is fully established by the evidence (which
has been donein this case), the burden of proving that it has been extinguished by payment
devolves upon the debtor who offers such adefense to the claim of the plaintiff creditor

Buenaflor Umali vs. CA

Mauricia Castillo was the administratrix in charge over a parcel of land left be Felipe Castillo.
Said land was mortgaged to the Development Bank of the Philippines and was about to be
foreclosed but then Mauricias nephew, Santiago Rivera, proposed that they convert the land
into 4 subdivisions so that they can raise the necessary money to avoid foreclosure. Mauricia
agreed. Rivera sought to develop said land through his company, Slobec Realty Corporation
(SRC), of which he was also the president. SRC then contracted with Bormaheco, Inc. for the
purchase of one tractor. Bormaheco agreed to sell the tractor on an installment basis. At the
same time, SRC mortgaged said tractor to Bormaheco as security just in case SRC will default.
As additional security, Mauricia and other family members executed a surety agreement
whereby in case of default in paying said tractor, the Insurance Corporation of
thePhilippines (ICP) shall pay the balance. The surety bond agreement between Mauricia and
ICP was secured by Mauricias parcel of land (same land to be developed).
SRC defaulted in paying said tractor. Bormaheco foreclosed the tractor but it wasnt enough
hence ICP paid the deficiency. ICP then foreclosed the property of Mauricia. ICP later sold said
property toPhilippine Machinery Parts Manufacturing Corporation (PMPMC). PMPMC then
demanded Mauricia et al to vacate the premises of said property.

While all this was going on, Mauricia died. Her successor-administratrix, Buenaflor Umali,
questioned the foreclosure made by ICP. Umali alleged that all the transactions are void and
simulated hence they were defrauded; that through Bormahecos machinations, Mauricia was
fooled into entering into a surety agreement with ICP; that Bormaheco even made the premium
payments to ICP for said surety bond; that the president of Bormaheco is a director of PMPMC;
that the counsel who assisted in all the transactions, Atty. Martin De Guzman, was the legal
counsel of ICP, Bormaheco, and PMPMC.
ISSUE: Whether or not the veil of corporate fiction should be pierced.
HELD: No. There is no clear showing of fraud in this case. The mere fact that Bormaheco paid
said premium payments to ICP does not constitute fraud per se. As it turned out, Bormaheco is
an agent of ICP. SRC, through Rivera, agreed that part of the payment of the mortgage shall be
paid for the insurance. Naturally, when Rivera was paying some portions of the mortgage to
Bormaheco, Bormaheco is applying some parts thereof for the payment of the premium and
this was agreed upon beforehand.
Further, piercing the veil of corporate fiction is not the proper remedy in order that the
foreclosure conducted by ICP be declared a nullity. The nullity may be attacked directly without
disregarding the separate identity of the corporations involved. Further still, Umali et al are not
enforcing a claim against the individual members of the corporations. They are not claiming said
members to be liable. Umali et al are merely questioning the validity of the foreclosure.
The veil of corporate fiction cant be pierced also by the simple reason that the businesses of
two or more corporations are interrelated, absent sufficient showing that the corporate entity
was purposely used as a shield to defraud creditors and third persons of their rights. In this
case, there is no justification for disregarding their separate personalities.

Mambulao Lumber Company, plaintiff-appellantvs.Philippine Natl. Bank and

Anacleto Heraldo, Deputy Provincial Sheriff of Cam-Norte,def-appellees
This is an appeal from the decision of the CFI of Manila dismissing the complaint
against bothdefendants and sentencing the plaintiff to pay the defendant the sum of
P3,582.52 with interestthereon at the rate of 6% per annum from Dec. 22,1961 until fully
paid and the costs of the suit.
Facts:
In seeking the reversal of the decision, the plaintiff contended that its total indebtedness
to the PNBhas been paid by the proceeds of the foreclosure sale of its real property and
the additional amountremitted by it to the Bank.On the belief that the proceeds of
the above-

stated sale is insufficient to cover the Plaintiffs debt,

PNBsent a letter to the Provincial Sheriff of Cam-Norte requesting him to take
possession of the chattelsmortgaged to it by the plaintiff and sell them at public
auction.Plaintiff alleged that the auction sale of the chattels mortgaged is void for being
violative of theagreement provided in the mortgage contract:
in cases of both judicial and extra-judicial foreclosure under Act 1508, as amended,
thecorresponding complaint for foreclosure or the petition for sale should be filed with
the courts or the
Sheriff of Manila, as the case may be
Herein appellant claims moral damages on account of the said violation.
Issue:
Whether Mambulao can validly claim for moral damages
Ruling:
No. An artificial person like herein appellant corporation cannot experience physical
sufferings, mentalanguish, fright, serious anxiety, wounded feelings, moral shock or
social humiliation which are basis of moral damagesA corporation may have a good
reputation which, if besmirched, may also be a ground for the award of moral damages.
The same cannot be considered under the facts of this case, however, not onlybecause
it is admitted that herein appellant had already ceased in its business operation at the
time of the foreclosure sale of the chattels, but also for the reason that whatever
adverse effects of theforeclosure sale of the chattels could have upon its reputation or
business standing would undoubtedlybe the same whether the sale was conducted at
Jose Panganiban, Camarines Norte, or in Manila whichis the place agreed upon by the
parties in the mortgage contract

Concept Builders Inc. vs. NLRC Case Digest

Concept Builders Inc. vs. National Labor Relations Commission
[GR 108734, 29 May 1996]
Facts: Concept Builders, Inc., (CBI) a domestic corporation, with principal office at 355 Maysan
Road, Valenzuela, Metro Manila, is engaged in the construction business while Norberto Marabe;
Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto
Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito
Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio,
Moreno Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos were employed by said
company as laborers, carpenters and riggers. On November 1981, Marabe, et. al. were served
individual written notices of termination of employment by CBI, effective on 30 November 1981. It
was stated in the individual notices that their contracts of employment had expired and the project in
which they were hired had been completed. The National Labor Relations Commission (NLRC)
found it to be, the fact, however, that at the time of the termination of Marabe, et.al.'s employment,
the project in which they were hired had not yet been finished and completed. CBI had to engage the
services of sub-contractors whose workers performed the functions of Marabe, et. al. Aggrieved,
Marabe, et. al. filed a complaint for illegal dismissal, unfair labor practice and non-payment of their
legal holiday pay, overtime pay and thirteenth-month pay against CBI. On 19 December 1984, the
Labor Arbiter rendered judgment ordering CBI to reinstate Marabe et. al. and to pay them back
wages equivalent to 1 year or 300 working days. On 27 November 1985, the NLRC dismissed the

motion for reconsideration filed by CBI on the ground that the said decision had already become final
and executory.
On 16 October 1986, the NLRC Research and Information Department made the finding that
Marabe, et. al.'s back wages amounted to P199,800.00. On 29 October 1986, the Labor Arbiter
issued a writ of execution directing the sheriff to execute the Decision, dated 19 December 1984.
The writ was partially satisfied through garnishment of sums from CBI's debtor, the Metropolitan
Waterworks and Sewerage Authority, in the amount of P81,385.34. Said amount was turned over to
the cashier of the NLRC. On 1 February 1989, an Alias Writ of Execution was issued by the Labor
Arbiter directing the sheriff to collect from CBI the sum of P117,414.76, representing the balance of
the judgment award, and to reinstate Marabe, et. al. to their former positions. On 13 July 1989, the
sheriff issued a report stating that he tried to serve the alias writ of execution on petitioner through
the security guard on duty but the service was refused on the ground that CBI no longer occupied
the premises. On 26 September 1986, upon motion of Marabe, et. al., the Labor Arbiter issued a
second alias writ of execution. The said writ had not been enforced by the special sheriff because,
as stated in his progress report dated 2 November 1989, that all the employees inside CBI's
premises claimed that they were employees of Hydro Pipes Philippines, Inc. (HPPI) and not by CBI;
that levy was made upon personal properties he found in the premises; and that security guards with
high-powered guns prevented him from removing the properties he had levied upon. The said
special sheriff recommended that a "break-open order" be issued to enable him to enter CBI's
premises so that he could proceed with the public auction sale of the aforesaid personal properties
on 7 November 1989. On 6 November 1989, a certain Dennis Cuyegkeng filed a third-party claim
with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned
by HPPI, of which he is the Vice-President. On 23 November 1989, Marabe, et. al. filed a "Motion for
Issuance of a Break-Open Order," alleging that HPPI and CBI were owned by the same
incorporator/stockholders. They also alleged that petitioner temporarily suspended its business
operations in order to evade its legal obligations to them and that Marabe, et. al. were willing to post
an indemnity bond to answer for any damages which CBI and HPPI may suffer because of the
issuance of the break-open order. On 2 March 1990, the Labor Arbiter issued an Order which denied
Marabe, et. al.'s motion for break-open order.
Marabe, et. al. then appealed to the NLRC. On 23 April 1992, the NLRC set aside the order of the
Labor Arbiter, issued a break-open order and directed Marabe, et. al. to file a bond. Thereafter, it
directed the sheriff to proceed with the auction sale of the properties already levied upon. It
dismissed the third-party claim for lack of merit. CBI moved for reconsideration but the motion was
denied by the NLRC in a Resolution, dated 3 December 1992. Hence, the petition.
Issue: Whether the NLRC was correct in issuing the break-open order to levy the HPPI properties
located at CBI amd/or HPPIs premises at 355 Maysan Road, Valenzuela, Metro Manila.
Held: It is a fundamental principle of corporation law that a corporation is an entity separate and
distinct from its stockholders and from other corporations to which it may be connected. But, this
separate and distinct personality of a corporation is merely a fiction created by law for convenience
and to promote justice. So, when the notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor
laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an
alter ego of another corporation. The conditions under which the juridical entity may be disregarded
vary according to the peculiar facts and circumstances of each case. No hard and fast rule can be
accurately laid down, but certainly, there are some probative factors of identity that will justify the
application of the doctrine of piercing the corporate veil, to wit: (1) Stock ownership by one or
common ownership of both corporations; (2) Identity of directors and officers; (3) The manner of
keeping corporate books and records; and (4) Methods of conducting the business. The SEC en

banc explained the "instrumentality rule" which the courts have applied in disregarding the separate
juridical personality of corporations as "Where one corporation is so organized and controlled and its
affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of
the corporate entity of the "instrumentality" may be disregarded. The control necessary to invoke the
rule is not majority or even complete stock control but such domination of instances, policies and
practices that the controlled corporation has, so to speak, no separate mind, will or existence of its
own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to
have been exercised at the time the acts complained of took place. Moreover, the control and breach
of duty must proximately cause the injury or unjust loss for which the complaint is made." The test in
determining the applicability of the doctrine of piercing the veil of corporate fiction is as (1) Control,
not mere majority or complete stock control, but complete domination, not only of finances but of
policy and business practice in respect to the transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will or existence of its own; (2) Such control must
have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory
or other positive legal duty or dishonest and unjust act in contravention of plaintiff's legal rights; and
(3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of. The absence of any one of these elements prevents "piercing the corporate veil." In
applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant's relationship to that operation.
Thus the question of whether a corporation is a mere alter ego, a mere sheet or paper corporation, a
sham or a subterfuge is purely one of fact. Here, while CBI claimed that it ceased its business
operations on 29 April 1986, it filed an Information Sheet with the Securities and Exchange
Commission on 15 May 1987, stating that its office address is at 355 Maysan Road, Valenzuela,
Metro Manila. On the other hand, HPPI, the third-party claimant, submitted on the same day, a
similar information sheet stating that its office address is at 355 Maysan Road, Valenzuela, Metro
Manila. Further, both information sheets were filed by the same Virgilio O. Casio as the corporate
secretary of both corporations. Both corporations had the same president, the same board of
directors, the same corporate officers, and substantially the same subscribers. From the foregoing, it
appears that, among other things, the CBI and the HPPI shared the same address and/or premises.
Under these circumstances, it cannot be said that the property levied upon by the sheriff were not of
CBI's. Clearly, CBI ceased its business operations in order to evade the payment to Marabe, et. al.
of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business
conduit of CBI and its emergence was skillfully orchestrated to avoid the financial liability that
already attached to CBI.