SAW, petitioner
vs.
COURT OF APPEALS, respondent
G.R. No. 90580 April 8, 1991
FACTS:
A collection suit with preliminary attachment was filed by Equitable Banking
Corporation against Freeman, Inc. and Saw Chiao Lian, its President and General Manager. The
petitioners moved to intervene, alleging that (1) the loan transactions between Saw Chiao Lian
and Equitable Banking Corp. were not approved by the stockholders representing at least 2/3 of
corporate capital; (2) Saw Chiao Lian had no authority to contract such loans; and (3) there was
collusion between the officials of Freeman, Inc. and Equitable Banking Corp. in securing the
loans. The motion to intervene was denied, and the petitioners appealed to the Court of Appeals.
Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement
which they submitted to and was approved by the lower court. But because it was not complied
with, Equitable secured a writ of execution, and two lots owned by Freeman, Inc. were levied
upon and sold at public auction to Freeman Management and Development Corp.
The Court of Appeals sustained the denial of the petitioners' motion for intervention,
holding that "the compromise agreement between Freeman, Inc., through its President, and
Equitable Banking Corp. will not necessarily prejudice petitioners whose rights to corporate
assets are at most inchoate, prior to the dissolution of Freeman, Inc. And intervention under Sec.
2, Rule 12 of the Revised Rules of Court is proper only when one's right is actual, material,
direct and immediate and not simply contingent or expectant."
It also ruled against the petitioners' argument that because they had already filed a
notice of appeal, the trial judge had lost jurisdiction over the case and could no longer issue the
writ of execution.
ISSUE:
Whether or not the Honorable Court of Appeals erred in holding that the petitioners
cannot intervene in Civil Case No. 88-44404 because their rights as stockholders of Freeman
are merely inchoate and not actual, material, direct and immediate prior to the dissolution of the
corporation.
RULING:
NO. The petitioners base their right to intervene for the protection of their interests as
stockholders on Everett v. Asia Banking Corp. where it was held: The well-known rule that
shareholders cannot ordinarily sue in equity to redress wrongs done to the corporation, but that
the action must be brought by the Board of Directors, has its exceptions.
Equitable demurs, contending that the collection suit against Freeman, Inc, and Saw
Chiao Lian is essentially in personam and, as an action against defendants in their personal
capacities, will not prejudice the petitioners as stockholders of the corporation. The Everett case
is not applicable because it involved an action filed by the minority stockholders where the board
of directors refused to bring an action in behalf of the corporation. In the case at bar, it was
Freeman, Inc. that was being sued by the creditor bank.
On the second assignment of error, Equitable maintains that the petitioners' appeal
could only apply to the denial of their motion for intervention and not to the main case because
their personality as party litigants had not been recognized by the trial court.
After examining the issues and arguments of the parties, the Court finds that the
respondent court committed no reversible error in sustaining the denial by the trial court of the
petitioners' motion for intervention.
BACHE & CO. (PHIL.), INC. and FREDERICK E. SEGGERMAN
vs.
HON. JUDGE VIVENCIO M. RUIZ, MISAEL P. VERA, in his capacity as Commissioner of
Internal Revenue, et al.
G.R. No.L-32409. February 27, 1971
FACTS:
Misael P. Vera, CIR wrote a letter to respondent Judge Vivencio M. Ruiz requesting
the issuance of a search warrant against petitioners for violation of Section 46(a) of the National
Internal Revenue Code, in relation to all other pertinent provisions thereof, particularly Sections
53, 72, 73, 208 and 209, and authorizing Revenue Examiner Rodolfo de Leon, one of herein
respondents, to make and file the application for search warrant which was attached to the letter.
De Leon and his witness, respondent Arturo Logronio, went to the Court of First Instance of
Rizal. They brought with them the following papers: respondent Veras aforesaid letter-request;
an application for search warrant already filled up but still unsigned by respondent De Leon; an
affidavit of respondent Logronio subscribed before respondent De Leon; a deposition in printed
form of respondent Logronio already accomplished and signed by him but not yet subscribed;
and a search warrant already accomplished but still unsigned by respondent Judge. Judge was
hearing a certain case so he instructed his Deputy Clerk of Court to take the depositions of
respondents De Leon and Logronio. After the session had adjourned, respondent Judge was
informed that the depositions had already been taken. Respondent Judge signed respondent de
Leons application for search warrant and respondent Logronios deposition, Search Warrant No.
2-M-70 was then sign by respondent Judge and accordingly issued.
BIR agents served the search warrant petitioners at the offices of petitioner
corporation. Petitioners lawyers protested the search on the ground that no formal complaint or
transcript of testimony was attached to the warrant. The agents nevertheless proceeded with
their search which yielded six boxes of documents.
ISSUES:
Whether or not a corporation is entitled to protection against unreasonable search and
seizures.
RULING:
YES. Although, for the reasons above stated, the Supreme Court is of the opinion that
an officer of a corporation which is charged with a violation of a statute of the state of its
creation, or of an act of Congress passed in the exercise of its constitutional powers, cannot
refuse to produce the books and papers of such corporation, the Court does not wish to be
understood as holding that a corporation is not entitled to immunity against unreasonable
searches and seizures. A corporation is, after all, but an association of individuals under an
assumed name and with a distinct legal entity. In organizing itself as a collective body it waives
no constitutional immunities appropriate to such body. Its property cannot be taken without
compensation. It can only be proceeded against by due process of law, and is protected against
unlawful discrimination.
CONCEPT BUILDERS, INC.
vs.
THE NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 108734. May 29, 1996
FACTS:
Petitioner, a domestic corporation, with principal office at 355 Maysan Road, Valenzuela, Metro
Manila, is engaged in the construction business. Private respondents were employed by said
company as laborers, carpenters and riggers.
Eventually, respondents services were terminated. The Labor Arbiter then rendered judgment
ordering petitioner to reinstate private respondents and to pay them back wages. A writ of
execution was then issued but was partially satisfied because the sheriff reported all the
employees inside petitioner's premises at 355 Maysan Road, Valenzuela, Metro Manila, claimed
that they were employees of Hydro Pipes Philippines, Inc and not by respondent. Subsequently,
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 Hydro (Phils.), Inc. of which he
is the Vice-President.
Private respondents filed a "Motion for Issuance of a Break-Open Order," alleging that HPPI and
petitioner corporation 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 private respondents were willing to post an indemnity bond to answer for any
damages which petitioner and HPPI may suffer because of the issuance of the break-open
order.
ISSUE:
Whether or not petitioner corporation and HPPI are one and the same.
RULING:
YES. It is a fundamental principle of corporation law that a corporation is an entity separate and
distinct from its stockholders and from other corporations to which it may be connected. But,
this separate and distinct personality of a corporation is merely a fiction created by law for
convenience and to promote justice. So, when the notion of separate juridical personality is
used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a
device to defeat 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 test in determining the applicability of the doctrine of piercing the veil of corporate fiction is
as follows: a. 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; b. 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 c. The aforesaid control
and breach of duty must proximately cause the injury or unjust loss complained of.
HPPI is obviously a business conduit of Petitioner Corporation and its emergence was skillfully
orchestrated to avoid the financial liability that already attached to Petitioner Corporation.
THE HEIRS OF THE LATE PANFILO
PAJARILLO VS. CA, NLRC, et al.
G.R. No. 155056-57. October 19, 2007
FACTS:
Private respondents were employed as drivers, conductors and conductresses by Panfilo. In
sum, each of the private respondents earned an average daily commission of about P150.00 a
day. They were not given emergency cost of living allowance, 13th month pay, legal holiday pay
and service incentive leave pay.The following were deducted from the private respondents daily
commissions. Thereafter, private respondents and several co-employees formed a union
called SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO. The Department of
Labor and Employment issued a Certificate of Registration in favor of the respondent union.
Upon learning of the formation of respondent union, Panfilo and his children ordered some of the
private respondents to sign a document affirming their trust and confidence in Panfilo and
denying any irregularities on his part. Other private respondents were directed to sign a blank
document which turned out to be a resignation letter. Private respondents refused to sign the
said documents; hence, they were barred from working or were dismissed without hearing and
notice. Panfilo and his children and relatives also formed a company union where they acted as
its directors and officers.
On 25 August 1987, respondent union and several employees filed a Complaint for unfair labor
practice and illegal deduction before the Labor Arbiter with Panfilo V. Pajarillo Liner as party-
respondent. After hearing and submission by both parties of their respective position papers
and memoranda, Labor Arbiter Manuel P. Asuncion rendered a Decision dated 28 December
1992, dismissing the consolidated complaints for lack of merit. Respondent union appealed to
the NLRC. On 18 June 1996, the NLRC reversed the decision of Arbiter Asuncion and ordered
the reinstatement and payment of backwages, ECOLA, 13th month pay, legal holiday pay and
service incentive leave pay to, private respondents.
ISSUE:
Whether the Honorable Court of Appeals seriously erred in piercing the veil of corporate entity of
Pvp Pajarillo Liner Inc.
RULING:
NO. Hence, when the notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat labor
laws, this separate personality of the corporation may be disregarded or the veil of the 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 corporate mask may be lifted and the
corporate veil may be pierced when a corporation is but the alter ego of a person or another
corporation. It is clear from the foregoing that P.V. Pajarillo Liner Inc. was a mere continuation
and successor of the sole proprietorship of Panfilo. It is also quite obvious that Panfilo
transformed his sole proprietorship into a family corporation in a surreptitious attempt to evade
the charges of respondent union. Given these considerations, Panfilo and P.V. Pajarillo Liner Inc.
should be treated as one and the same person for purposes of liability.