G.R. No.

L-15121
PALACIO vs. FELY

August 31, 1962

Facts:
1. In a criminal case, a driver was convicted and
also held his employer and jeep-owner
Calinsangan subsidiarily liable for the
damages.
2. Because driver is insolvent, Palacio later filed
a civil action for damages against Fely
Transportation, the incorporators of which are
also Calinsangan and his family.
3. Fely Transportation moved to dismiss the
case citing that Calinsangan sold and
transferred the jeep to the corporation long
after the conviction of the driver, and so the
suit should have been filed against
Calinsangan and not the corporation, it
having SJP.
Issue: WON the corporation should also be held
liable with the incorporators for the damages
Held:
Yes. A corporation should not be heard to say
that it has a personality separate and distinct
from its members when to allow it would be to
sanction the use of the fiction of corporate entity
as a shield to further an end subversive of
justice. The fact that the incorporators of the Fely
Transportation are Isabelo Calingasan, his wife,
his son, Dr. Calingasan, and his two daughters,
and that the sale and transfer of the jeep was
made after the conviction has become final, it
becomes evident that Calingasan's main purpose
in forming the corporation was to evade his
subsidiary civil liability. Fely Transportation and
Calinsangan should be held subsidiarily liable for
the damages the driver was ordered to pay in the
criminal case.

G.R. No. L-20886

NAMARCO vs. ASSOCIATED FINANCE

Facts:
1. Associated has a stock of 105k worth of
stocks, P60k worth of stock is owned by
Sycip, its President, and P20k by his wife.
2. Associated, thru Sycip, and Namarco agreed
to exchange sugar products. Namarco
complied with its obligation to deliver, but
Association failed to deliver, and instead it
offered to pay the deliveries of Namarco.
3. In a case against Associated, the court
ordered the corporation to pay Namarco the
value of the products it delivered to
Associated including damages, but dismissed
the complaint insofar as Sycip was
concerned.
4. Namarco appealed only the portion
dismissing the case insofar as Sycip was
concerned.
Issue: WON the President of a corporation may
be held liable for damages arising from the
liability of the corporation
Held:
Yes. When the corporation is the mere alter ego
of a person, the corporate fiction may be
disregarded; the same being true when the
corporation is controlled, and its affairs are so
conducted as to make it merely an
instrumentality, agency or conduit of another.
Sycip, having absolute control of the corporation,
succeeded thru false representation in inducing
Namarco to enter into the agreement knowing
fully well that Associated was in no position to
comply with the obligation it had assumed. He
cannot be allowed to seek refuge behind the
principle that a cororation has a SJP distinct from
its stockholders which would have shielded the
latter from being held liable for the corporate
obligations.

G.R. No. 167560

2008
CIR vs. MENGUITO

September 17,

Facts:
1. Menguito is a restaurant owner and operator
with business in Pasay City and branches in
Baguio City as a concessionaire at Club
John Hay and at Texas Instruments
2. In 1997, based on the data from Club John
hay and Texas Instruments, Menguito was
assessed by BIR Baguio for tax deficiencies
over undeclared sales in the years 1991,
1992 and 1993, and over income and
percentage taxes. He and his wife protested
before the CIR.
3. Later the CTA rendered a decision in favour
of CIR.
4. The CA reversed the CTA decision, when
Menguito questioned the CTA decision mainly
on the ground that CKCS is distinct from
CKCS Inc, that taxes due from one cannot be
charged to the other, notices served to one
cannot be coursed to the other.
Issue: WON the two corporations should be considered
to have personalities distinct and separate from one
another.

Held:
No. When the owner of one directs and
controls the operations of the other, and
the payments effected or received by one
are for the accounts due from or payable to
the other; or when the properties or
products of one are all sold to the other,
which in turn immediately sells them to the
public, is substantial evidence in support of
the finding that the two are actually one
juridical taxable personality. The corporate
identity will be shred. Pieces of evidence point to
the need for such piercing. Menguito expressly
admitted operating a branch in Baguio at Club
John Hay and at Texas Instruments; In the letters
his wife wrote, she referred to these branches as
HER business, that she signed the letter as
proprietress; That numerous documents show
Menguito owned and operated outlets in Club
John Hay and Texas Instruments under the names
Copper Kettle Cafeteria Specialist or CKCS and

April 27, 1967

Fraud

Copper Kettle Catering Services or Copper Kettle

Catering Services, Inc.
G.R. No. L-10510
MC CONNEL vs CA

March 17, 1961

Facts:
1. Park Rite is a parking operator. It leased a
vacant lot owned by the Samanillos, but
occupied the leased lot and another adjacent
to it.
2. The Padillas, the owners of the adjacent lot
later learned of the occupation and
demanded payment for its use.
3. The corporation, Park Rite disclaimed liability.
Its controlling shareholders (1496/1500) are
redirecting the blame to the original
incorporators.
4. Judgment was rendered in favor of the
Padillas. Upon execution the corporation was
found to be without any assets.
5. Padillas then filed a new suit against the
stockholders of Park Rite past & present, to
recover unsatisfied balance of the judgment
Issue: WON the individual stockholders may be
held liable for obligations contracted by the
corporation
Held:
Yes. Where the operations of the corporation
were so merged with those of the stockholders as
to be practically indistinguishable from them, the
corporation is a mere business conduit of the
stockholder. When it is shown that the corporate
entity is being used as an alter ego or business
conduit for the sole benefit of the stockholders,
or else to defeat public convenience, justify

wrong, protect fraud, or defend crime, the

individual stockholders may be held liable for
obligations contracted by the corporation. To
hold the latter liable for the corporation's
obligations is not to ignore the
corporation's separate entity, but merely to
apply the established principle that such
entity cannot be invoked or used for
purposes that could not have been
intended by the law that created that
separate personality.

the office of Cirilo Paredes and that of Park Rite

Co., Inc. were located in the same building, in the
same floor and in the same room
the funds of the corporation were kept by Cirilo
Paredes in his own name
The corporation itself had no visible assets

G.R. No. L-17618

August 31, 1964
CIR vs. NORTON and HARRISON

Facts:
1. NH is a general wholesale and retail
business. Jackbilt is a corp engaged in
production and manufacture of concrete
blocks.
2. 1948. The two entered into an agency
agreement where NH will be the sole
distributor of jackbilt products.
3. 1949. NH bought all the outstanding shares
of stocks of Jackbilt.
4. 1953. Later on, a management agreement
was entered into by the same parties, where
NH will sell concrete blocks by Jackbilt, and
the latter to pay NH a fixed monthly fee
therefor.
5. Upon discovering this, the CIR considered the
sale of NH to the public as original sale from
which tax should be computed.

6.

NH argued that at the time NH is a mere

agent of Jackbilt, hence Jackbilt should be
assessed for the tax deficiencies.

Issue: WON the acquisition of all the stocks of

Jackbilt by NH, merged the two corporations into
a single corporation
Held:
Yes. When it is clearly shown, that a corporation
is merely an adjunct, business conduit or alter
ego of the another, the fiction of corporate
entities, separate and distinct from each, should
be disregarded.
(a) NNH owned all the outstanding stocks of
Jackbilt
(b) NH constituted Jackbilt's board of directors in
such a way as to enable it to actually direct
and manage the other's affairs by making the
same officers of the board for both
companies.
(c) Norton financed the operations of the
Jackbilt, (d) Norton treats Jackbilt employees
as its own.
(d) Compensation given to board members of
Jackbilt, indicate that Jackbilt is merely a
department of Norton.

Fraud