18) Philippine National Bank v. Ritratto Group, Inc.

G.R. No. 142616 | 2001-07-31

FACTS:

 May 29, 1996: PNB International Finance Ltd. (PNB-IFL) a subsidiary company of PNB,
organized and doing business in Hong Kong, extended a letter of credit in favor of the
Ritratto Group, Inc. (Ritartto) in the amount of US$300K secured by real estate
mortgages constituted over 4 parcels of land in Makati City
 September 1996: increased successively to US$1,140,000.00
 November 1996: to US$1,290,000.00
 February 1997: US$1,425,000.00
 April 1998: decreased to US$1,421,316.18
 Ritratto Group, Inc. made repayments of the loan incurred by remitting those amounts to
their loan account with PNB-IFL in Hong Kong.
 April 30, 1998: outstanding amounted to US$1,497,274.70
 PNB-IFL, through its attorney-in-fact PNB, notified them of the foreclosure of all the real
estate mortgages and that the properties subjected
 May 25, 1999: Ritratto Group, Inc filed a complaint for injunction with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order before the
RTC. -granted 72-hour TRO
 RTC and CA: dismissed motion to dismiss
 PNB-IFL, is a wholly owned subsidiary of defendant Philippine National Bank, the suit
against the defendant PNB is a suit against PNB-IFL
 Rittratto: entire credit facility is void as it contains stipulations in violation of the principle
of mutuality of contracts

ISSUE: W/N PNB is an alter ego of PNB-IFL

HELD: NO. Petition is granted

 PNB is an agent with limited authority and specific duties under a special power of
attorney incorporated in the real estate mortgage.
 not privy to the loan contracts entered into by PNB-IFL.
 mere fact that a corporation owns all of the stocks of another corporation, taken alone is
not sufficient to justify their being treated as one entity.
 If used to perform legitimate functions, a subsidiary's separate existence may be
respected, and the liability of the parent corporation as well as the subsidiary will be
confined to those arising in their respective business.
  general rule the stock ownership alone by one corporation of the stock of another does
not thereby render the dominant corporation liable for the torts of the subsidiary unless
the separate corporate existence of the subsidiary is a mere sham, or unless the control
of the subsidiary is such that it is but an instrumentality or adjunct of the dominant
corporation.
 The Circumstance rendering the subsidiary an instrumentality (common circumstances)

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

(b) The parent and subsidiary corporations have common directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise
causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no assets
except those conveyed to or by the parent corporation.

(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is
described as a department or division of the parent corporation, or its business or financial
responsibility is referred to as the parent corporation's own.

(i) The parent corporation uses the property of the subsidiary as its own.

(j) The directors or executives of the subsidiary do not act independently in the interest of the
subsidiary but take their orders from the parent corporation.

(k) The formal legal requirements of the subsidiary are not observed.

19) Sunio vs.NLRC,127 SCRA 390

EM Ramos & Co., Inc (EMRACO) and Cabugao Ice Plant, Inc. (CIPI), sister corporations, sold
an ice plant to Rizal Development and Finance, Corp. (RDFC). To secure RDFC’s payment of
the purchase price, the ice plant was mortgaged to EMRACO-CIPI. Because of the sale,
EMRACO-CIPI terminated all of their employees, including private respondents.

Later, RDFC sold the ice plant, subject to the mortgage in favor of EMRACO-CIPI, to petitioner
Ilocos Commercial Corp. (ICC).

When RDFC and ICC defaulted on the payment of the balance of the purchase price,
EMRACO-CIPI extrajudicially foreclosed the ice plant. It then sold it to Nilo Villanueva, subject
to RDFC’s right of redemption. Nilo Villanueva rehired private respondents.
When RDFC redeemend the ice plant, private respondents were again dismissed. Thus, the
latter filed complaints against the petitioner corporation, and its President and General Manager,
Alberto Sunio, for illegal dismissal.

The Assistance Regional Director of the Ministry of Labor and Employment ordered petitioners
to reinstate private respondents. NLRC affirmed. Petitioner Sunio, who owned ½ of ICC, was
made jointly and severally liable with ICC and CIPI for the payment of backwages.

RATIO: A corporation is invested by law with a personality separate and distinct from those of
the persons composing it as well as from that of any other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not itself sufficient ground for disregarding the separate
corporate personality. Therefore, Sunio should not have been made personally liable for the
payment of backwages to private respondents.

20. Collector of Internal revenue v. Club Filipino, Inc. de Cebu, 5 SCRA 321 (1962)

FACTS: Club Filipino owns and operates a club house, a sports complex, and a bar restaurant,
which is incident to the operation of the club and its gold course. The club is operated mainly
with funds derived from membership fees and dues. The BIR seeks to tax the said restaurant as
a business.

HELD: The Club was organized to develop and cultivate sports of all class and denomination
for the healthful recreation and entertainment of its stockholders and members. There was in
fact, no cash dividend distribution to its stockholders and whatever was derived on retail from its
bar and restaurants used were to defray its overhead expenses and to improve its golf course.

For a stock corporation to exist, 2 requisites must be complied with:

(1) a capital stock divided into shares

(2) an authority to distribute to the holders of such shares, dividends or allotments of the surplus
profits on the basis of shares held.

In the case at bar, nowhere in the AOI or by-laws of Club Filipino could be found an authority for
the distribution of its dividends or surplus profits.

21) Shipside Inc vs. Court of Appeals, G.R. No. 1433 | 2001-02-20

Facts:

On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael
Galvez, over four parcels of land - Lot 1 with 6,571 square meters; Lot 2, with 16,777 square
meters; Lot 3 with 1,583 square meters; and Lot 4, with 508 square meters. On April 11, 1960,
Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra Llana,
Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115
OCT No.0-381 on August 10, 1960. August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to
Lepanto Consolidated Mining Company.

On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First
Instance of La Union, Second Judicial District, issued an order declaring OCT No. 0-381 of the
Registry of Deeds for the Province of La Union issued in the name of Rafael Galvez, null and
void, and ordered the cancellation thereof.

On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No.
1 and 4. In the meantime, Rafael Galvez filed his motion for reconsideration against the order
issued by the trial court declaring OCT No. 0-381 null and void. The motion was denied. The
Court of Appeals ruled in favor of the Republic of the Philippines.

Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated
August 14, 1973 became final and executory on October 23, 1973. Twenty four long years,
thereafter, on January 14, 1999, the Office of the Solicitor General received a letter dated
January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point
Development Corporation, stating that the aforementioned orders and decision of the trial court
in L.R.C. No. N-361 have not been executed by the Register of Deeds, San Fernando, La Union
despite receipt of the writ of execution. On April 21, 1999, the Office of the Solicitor General filed
a complaint for revival of judgment and cancellation of titles before the Regional Trial Court of
the First Judicial Region (Branch 26, San Fernando, La Union)

RULING

The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the
resident manager for petitioner, who was the signatory in the verification and certification on
non-forum shopping, failed to show proof that he was authorized by petitioners board of
directors to file such a petition.

A corporation, such as petitioner, has no power except those expressly conferred on it by the
Corporation Code and those that are implied or incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and / or its duly authorized officers and
agents. Thus, it has been observed that the power of a corporation to sue and be sued in any
court is lodged with the board of directors that exercises its corporate powers (Premium Marble
Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the
signing of documents, can be performed only by natural persons duly authorized for the purpose
by corporate by-laws or by a specific act of the board of directors.

It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the
petition, there was no proof attached thereto that Balbin was authorized to sign the verification
and non-forum shopping certification therein, as a consequence of which the petition was
dismissed by the Court of Appeals. However, subsequent to such dismissal, petitioner filed a
motion for reconsideration, attaching to said motion a certificate issued by its board secretary
stating that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been
authorized by petitioners board of directors to file said petition.

The Court has consistently held that the requirement regarding verification of a pleading is
formal, not jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is
simply a condition affecting the form of the pleading, non-compliance with which does not
necessarily render the pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith. The court may
order the correction of the pleading if verification is lacking or act on the pleading although it is
not verified, if the attending circumstances are such that strict compliance with the rules may be
dispensed with in order that the ends of justice may thereby be served.

On the other hand, the lack of certification against forum shopping is generally not curable by
the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of
Civil Procedure provides that the failure of the petitioner to submit the required documents that
should accompany the petition, including the certification against forum shopping, shall be
sufficient ground for the dismissal thereof. The same rule applies to certifications against forum
shopping signed by a person on behalf of a corporation which are unaccompanied by proof that
said signatory is authorized to file a petition on behalf of the corporation.

In certain exceptional circumstances, however, the Court has allowed the belated filing of the
certification. In Loyola v. Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered
the filing of the certification one day after the filing of an election protest as substantial
compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et. al. (264
SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the dismissal
of the petition. In Uy v. LandBank, supra, the Court had dismissed Uys petition for lack of
verification and certification against non-forum shopping. However, it subsequently reinstated
the petition after Uy submitted a motion to admit certification and non-forum shopping
certification. In all these cases, there were special circumstances or compelling reasons that
justified the relaxation of the rule requiring verification and certification on non-forum shopping.

In the instant case, the merits of petitioners case should be considered special circumstances or
compelling reasons that justify tempering the requirement in regard to the certificate of non-
forum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance
with the requirement as to the certificate of non-forum shopping. With more reason should we
allow the instant petition since petitioner herein did submit a certification on non-forum
shopping, failing only to show proof that the signatory was authorized to do so. That petitioner
subsequently submitted a secretarys certificate attesting that Balbin was authorized to file an
action on behalf of petitioner likewise mitigates this oversight.

It must also be kept in mind that while the requirement of the certificate of non-forum shopping
is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat
the objective of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255
SCRA 108 [1996]). Lastly, technical rules of procedure should be used to promote, not frustrate
justice. While the swift unclogging of court dockets is a laudable objective, the granting of
substantial justice is an even more urgent ideal.

22) Roman Catholic Apostolic vs. Register of Deeds of Davao City, 102 Phils. 596 (1957)

FACTS:

 October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of the City of Davao,
executed a deed of sale of a parcel of land in favor of the Roman Catholic Apostolic
Administrator of Davao Inc.(Roman), a corporation sole organized and existing in
accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as
actual incumbent.
 The Register of Deeds of Davao for registration, having in mind a previous resolution of
the CFI in Carmelite Nuns of Davao were made to prepare an affidavit to the effect that
60% of the members of their corp. were Filipino citizens when they sought to register in
favor of their congregation of deed of donation of a parcel of land, required it to submit a
similar affidavit declaring the same.
 June 28, 1954: Roman in the letter expressed willingness to submit an affidavit but not in
the same tenor as the Carmelite Nuns because it had five incorporators while as a
corporation sole it has only one and it was ownership through donation and this was
purchased
 As the Register of the Land Registration Commissioner (LRC) : Deeds has some doubts
as to the registerability, the matter was referred to the Land Registration Commissioner
en consulta for resolution (section 4 of Republic Act No. 1151)
 LRC:
In view of the provisions of Section 1 and 5 of Article XIII of the Philippine
Constitution, the vendee was not qualified to acquire private lands in the Philippines in
the absence of proof that at least 60 per centum of the capital, property, or assets of the
Roman Catholic Apostolic Administrator of Davao, Inc., was actually owned or controlled
by Filipino citizens, there being no question that the present incumbent of the
corporation sole was a Canadian citizen

ordered the Registered Deeds of Davao to deny registration of the deed of sale
in the absence of proof of compliance with such condition

action for mandamus was instituted by Roman alleging the land is held in true for
the benefit of the Catholic population of a place

ISSUE: W/N Roman is qualified to acquire private agricultural lands in the Philippines pursuant
to the provisions of Article XIII of the Constitution

HELD: YES. Register of Deeds of the City of Davao is ordered to register the deed of sale

A corporation sole consists of one person only, and his successors (who will always be
one at a time), in some particular station, who are incorporated by law in order to give them
some legal capacities and advantages, particularly that of 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 dens, distinct from their
several chapters

Corporation sole

 composed of only one persons, usually the head or bishop of the diocese, a unit which is
not subject to expansion for the purpose of determining any percentage whatsoever
 only the administrator and not the owner of the temporalities located in the territory
comprised by said corporation sole and such temporalities are administered for and on
behalf of the faithful residing in the diocese or territory of the corporation sole
 has no nationality and the citizenship of the incumbent and ordinary has nothing to do
with the operation, management or administration of the corporation sole, nor effects the
citizenship of the faithful connected with their respective dioceses or corporation sole.

Constitution demands that in the absence of capital stock, the controlling membership should be
composed of Filipino citizens. (Register of Deeds of Rizal vs. Ung Sui Si Temple)

*undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of
Davao are predominantly Filipino citizens

*presented evidence to establish that the clergy and lay members of this religion fully covers the
percentage of Filipino citizens required by the Constitution

*fact that the law thus expressly authorizes the corporations sole to receive bequests or gifts of
real properties (which were the main source that the friars had to acquire their big haciendas
during the Spanish regime), is a clear indication that the requisite that bequests or gifts of real
estate be for charitable, benevolent, or educational purposes, was, in the opinion of the
legislators, considered sufficient and adequate protection against the revitalization of religious
landholdings.

*as in respect to the property which they hold for the corporation, they stand in position of
TRUSTEES and the courts may exercise the same supervision as in other cases of trust