1
TITLE FACTS
LIVESEY V. BINSWANGER Petitioner filed a complaint for illegal
PHILIPPINES, INC. AND dismissal with money claims against CBB.
ELIOT, G.R. No. 177493, CBB alleged that it engaged Livesey as a
March 19, 2014 corporate officer. CBB posited that the labor
arbiter (LA) had no jurisdiction as the
complaint involved an intra-corporate
dispute. The LA found that there was illegal
dismissal and to reinstate Livesey. They
entered into a compromise agreement.
Under the agreement, Livesey was to
receive his money claim in an installment
basis and that CBB shall not: (1) SLEMPAD
of all or substantially all of its propertiess; (2)
suspend, discontinue, or cease its entire, or
a substantial portion of its business
operations; (3) substantially change the
nature of its business; and (4) declare
bankruptcy or insolvency.
CBB initially paid but company ceased
operations. Livesey moved for the issuance
of a writ of execution. Invoking the doctrine
of piercing the veil of corporate fiction,
Livesey prayed that an alias writ of execution
be issued against Binswanger and Keith
Elliot, CBB’s former President, and now
Binswanger’s President and CEO.
ISSUE/S
(1) Whether or not the case is an
intra-corporate dispute therefore
beyond the jurisdiction of the
NLRC;
(2) Whether or not the doctrine of
piercing the veil of corporate
fiction is applicable in the case.
RULING
(1) The issue is rendered moot and
academic because of the compromise
agreement between the parties.
(2) YES, it is applicable. Piercing the veil of
corporate fiction is an equitable doctrine
developed to address situations where the
separate corporate personality of a
corporation is abused or used for wrongful
purposes. Under the doctrine, the corporate
existence may be disregarded where the
entity is formed or used for non-legitimate
purposes, such as to evade a just and due
obligation, or to justify a wrong, to shield or
perpetrate fraud or to carry out similar or
inequitable considerations, other
unjustifiable aims or intentions, in which
case, the fiction will be disregarded and the
individuals composing it and the two
corporations will be treated as identical.
In the present case, CBB ceased to exist
only in name; it re-emerged in the person of
Binswanger to avoid payment by CBB of its
monetary obligation to Livesey. It was not
just coincidence that Binswanger is engaged
in the same line of business CBB embarked
on: (1) it even holds office in the very same
building and on the very same floor where
CBB once stood; (2) CBB’s key officers,
Elliot, no less, and Catral moved over to
Binswanger, performing the tasks they were
doing at CBB; (3) notwithstanding CBB’s
closure, Binswanger’s Web Editor, in an e-
mail correspondence, supplied the
information that Binswanger is "now known"
as either CBB (Chesterton Blumenauer
Binswanger or as Chesterton Petty, Ltd., in
the Philippines; (4) the use of Binswanger of
CBB’s paraphernalia (receiving stamp) in
connection with a labor case where
Binswanger was summoned by the
authorities, although Elliot claimed that he
bought the item with his own money; and (5)
 2

Binswanger’s takeover of CBB’s project with

the PNB.
MANILA ELECTRIC Petitioner and TEC were parties to two Whether or not respondent TEC No. The court deems it proper to delete the
COMPANY V. T.E.A.M separate contracts for the Sale of Electric and TPC are entitled to moral award of moral damages. As a rule, a
ELECTRONICS Energy. Under the agreements, petitioner damages. corporation is not entitled to moral damages
CORPORATION, ET AL., undertook to supply TECs building DCIM because, not being a natural person, it
G.R. No. 131723, December with electric power. Another contract was cannot experience physical suffering or
13, 2007 entered into for the supply of electric power sentiments like wounded feelings, serious
to TEC’s NS Building. A team of petitioner’s anxiety, mental anguish and moral shock.
inspectors conducted a surprise inspection The only exception to this rule is when the
of the electric meters installed at the DCIM corporation has a reputation that is debased,
building. The two meters were found to be resulting in its humiliation in the business
allegedly tampered with and did not register realm. But in such a case, it is imperative for
the actual power consumption in the the claimant to present proof to justify the
building. Petitioner informed TEC and award. It is essential to prove the existence
demanded from the latter the differential of the factual basis of the damage and its
billing. TEC referred the letter to Ultra being causal relation to petitioner’s acts. In the
in possession during the covered period. present case, the records are bereft of any
Due to failure of TEC to pay the differential evidence that the name or reputation of
billing, petitioner disconnected the electricity TEC/TPC has been debased as a result of
supply to the DCIM building but eventually petitioner’s acts. Besides, the trial court
reconnected it when ordered by ERB and simply awarded moral damages in the
upon payment of TEC of 1M, under protest. dispositive portion of its decision without
Meanwhile, petitioner conducted another stating the basis thereof. PETITION
inspection, this time, in TECs NS Building. DENIED.
The inspection allegedly revealed that the
electric meters were not registering the
correct power consumption. Petitioner
demand payment but TEC denied
petitioner’s allegations. Petitioner, thus, sent
TEC another letter demanding payment of
the aforesaid amount, with a warning that the
electric service would be disconnected in
case of continued refusal to pay the
differential billing. TEC paid the amount,
under protest. TEC and TPC filed a
complaint for damages before the RTC of
Pasig. The trial court rendered a decision in
favor of respondents granting actual
damages, moral damages and exemplary
damages. TECs claim of moral damage was
premised allegedly on the damage to its
goodwill and reputation, that the name or
reputation of TEC/TPC has been debased
as a result of petitioners’ acts.

PILIPINAS SHELL
PETROLEUM
CORPORATION V. ROYAL
FERRY SERVICES, INC.,
G.R. No. 188146, February 1,
2017
PEÑA V. CA, G.R. No. 91478,
February 7, 1991
Respondent is a corporation duly organized
and existing under the Philippine Law.
According to its Articles of Incorporation,
Royal Ferry’s principal place of business is
located at Makati City. However, it currently
holds office at Intramuros, Manila. In 2005,
Royal Ferry filed a verified Petition for
Voluntary Insolvency before the RTC of
Manila. It alleged that in 2000, it suffered
serious business losses that led to heavy
debts. Royal Ferry ceased its operations in
2002. The RTC declared Royal Ferry
insolvent in its order. On December 2005,
petitioner filed before the RTC of Manila a
Formal Notice of Claim and a Motion to
Dismiss. In its Motion to Dismiss, Petitioner
alleged that the Petition was filed in the
wrong venue. It argued that the Insolvency
Law provides that a petition for insolvency
should be filed before the court with territorial
jurisdiction over the corporation's residence.
Since Royal Ferry's Articles of Incorporation
stated that the corporation's principal office
is located Makati City, the Petition should
have been filed before the RTC of Makati
and not before the RTC of Manila.
In 1962, the Pampanga Bus Company
(PAMBUSCO) took out a loan from the
Development Bank of the Philippines (DBP).
PAMBUSCO used the parcels of land it
owned to secure the loan. In October 1974,
due to PAMBUSCO’s nonpayment, DBP
foreclosed the parcels of land. Rosita Peña
was the highest bidder. Meanwhile, in
November 1974, the Board of Directors of
PAMBUSCO had a meeting. The meeting
was attended by only 3 out of the 5 Directors.
3
Whether or not Petition for Yes. The Petition for Insolvency was
Insolvency was properly filed. properly filed before the RTC of Manila.
Section 14 of the Insolvency Law specifies
that the proper venue for a petition for
voluntary insolvency is the RTC of the
province or city where the insolvent debtor
has resided in for six (6) months before the
filing of the petition. To determine the venue
of an insolvency proceeding, the residence
of a corporation should be the actual place
where its principal office has been located for
six (6) months before the filing of the petition.
If there is a conflict between the place stated
in the articles of incorporation and the
physical location of the corporation's main
office, the actual place of business should
control. Requiring a corporation to go back
to a place it has abandoned just to file a case
is the very definition of inconvenience. There
is no reason why an insolvent corporation
should be forced to exert whatever meager
resources it has to litigate in a city it has
already left. In any case, the creditors deal
with the corporation's agents, officers, and
employees in the actual place of business.
To compel a corporation to litigate in a city it
has already abandoned would create more
confusion. Moreover, the six (6)-month
qualification of the law's requirement of
residence shows intent to find the most
accurate location of the debtor's activities. If
the address in a corporation's articles of
incorporation is proven to be no longer
accurate, then legal fiction should give way
to fact. PETITION DENIED.
Whether or not the board No, the board resolution is void.
resolution is valid. The by-laws are the laws of the corporation.
PAMBUSCO’s by-laws provide that a
quorum consists of at least four directors.
The meeting was attended by only three
directors did not comply with the required
quorum. Thus, the three directors were not
able to come up with a valid resolution which
could bind the corporation. Anent the issue
of Peña being a third person, she can
question the board resolution. The resolution

In the said meeting, the Board, through a
resolution, authorized one of the directors,
Atty. Joaquin Briones, to assign the
properties of PAMBUSCO. Pursuant to the
resolution, Briones assigned PAMBUSCO’s
assets to Marcelino Enriquez. Enriquez,
knowing that the properties were previously
mortgaged and foreclosed, exercised
PAMBUSCO’s right to redeem. So in August
1975, he redeemed the said properties and
thereafter he sold them to Rising Yap. Yap
then registered the properties under his
name. He then demanded Peña to vacate
the properties. Peña refused to do and so
Yap filed a complaint.
In her defense, Peña averred that Yap
acquired no legal title over the property
because the board resolution issued by
PAMBUSCO in November 1974 was void
because the resolution was issued without a
quorum; that there was no quorum because
under the by-laws of PAMBUSCO, a quorum
requires the presence of 4 out of 5 directors
and yet the meeting was only attended by
three directors. Thus, the authority granted
to Briones to assign the properties was void;
that the subsequent assignment by Briones
to Enriquez was void; that Enriquez acquired
no title and hence thus Yap acquired no title.
Yap insisted that Peña has no legal standing
to question the board resolution because
she was not a stockholder.
CARAG V. NLRC, G.R. No. National Federation of Labor Unions
147590, April 2, 2007 (NAFLU) and Mariveles Apparel Corporation
Labor Union (MACLU), on behalf of all of
MAC’s rank and file employees, filed a
complaint against MAC for illegal dismissal
brought about by its illegal closure of
business. They included in their complaint
Mariveles Apparel Corporation’s Chairman
of the Board Antonio Carag in order to be
Whether or not Antonio Carag be
held solidarily liable for the
payment of the illegally dismissed
employees.
4
here is likened to a contract. Under the law,
a person who is not a party obliged
principally or subsidiarity in a contract may
exercise an action for nullity of the contract if
he or she is prejudiced in his or her rights
with respect to one of the contracting parties,
and can show the detriment which would
positively result to him or her from the
contract in which he or she had no
intervention.
Other findings: Furthermore, the sale of the
properties of PAMBUSCO did not comply
with the procedure laid down by the
Corporation Law. Under the law, the sale or
disposition of an and/or substantially all
properties of the corporation requires, in
addition to a proper board resolution, the
affirmative votes of the stockholders holding
at least two-thirds (2/3) of the voting power
in the corporation in a meeting duly called for
that purpose. No doubt, the questioned
resolution was not confirmed at a
subsequent stockholders meeting duly
called for the purpose by the affirmative
votes of the stockholders holding at least
two-thirds (2/3) of the voting power in the
corporation. Further still, the Supreme Court
discovers a few other anomalies with
PAMBUSCO. One is that PAMBUSCO has
been inactive since 1949 as per the records
provided by the Securities and Exchange
Commission. Its general information sheet
with the SEC has not been updated regularly
even. And the three directors present were
not even listed as current directors of
PAMBUSCO.
The Supreme Court held that the rule is that
a director is not personally liable for the
debts of the corporation, which has a
separate legal personality of its own. Section
31 of the Corporation Code lays down the
exceptions to the rule, as follows:
Liability of directors, trustees or officers. -
Directors or trustees who wilfully and

solidarily liable for the illegal dismissal and
illegal closure of business. According to the
Labor Union of MAC, the Corporation
suddenly closed its business without
following the notice as laid down in the Labor
Law of the Philippines. The Labor Arbiter
decided in favor of the Labor Union and held
that Antonio Carag being the owner of the
corporation be solidarily liable for the
payment of separation pay and backwages
of the rank and file employees. Antonio
Carag questioned the decision of the Labor
Arbiter and alleged that the Corporation and
its officers have separate and distinct
personality and the latter cannot be held
liable solidarily in cases of payment of
damages.
METROBANK V. CENTRO In a special meeting of the board of directors
DEVELOPMENT of respondent Centro, its president Go Eng
CORPORATION, ET AL, Uy was authorized to mortgage its properties
and assets to secure the medium-term loan
Whether the requirements of
Section 40 of the Corporation
Code was complied with in the
execution of the MTI.
5
knowingly vote for or assent to patently
unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in
directing the affairs of the corporation or
acquire any personal or pecuniary interest in
conflict with their duty as such directors or
trustees shall be liable jointly and severally
for all damages resulting therefrom suffered
by the corporation, its stockholders or
members and other persons.
xxxx
Section 31 makes a director personally liable
for corporate debts if he wilfully and
knowingly votes for or assents to patently
unlawful acts of the corporation. Section 31
also makes a director personally liable if he
is guilty of gross negligence or bad faith in
directing the affairs of the corporation.
Complainants did not allege in their
complaint that Carag wilfully and knowingly
voted for or assented to any patently
unlawful act of MAC. Complainants did not
present any evidence showing that Carag
wilfully and knowingly voted for or assented
to any patently unlawful act of MAC. Neither
did Arbiter Ortiguerra make any finding to
this effect in her Decision.
For a wrongdoing to make a director
personally liable for debts of the corporation,
the wrongdoing approved or assented to by
the director must be a patently unlawful act.
Mere failure to comply with the notice
requirement of labor laws on company
closure or dismissal of employees does not
amount to a patently unlawful act. Patently
unlawful acts are those declared unlawful by
law which imposes penalties for commission
of such unlawful acts. There must be a law
declaring the act unlawful and penalizing the
act.
No. Reading carefully the Secretary’s
Certificate, it is clear that the main purpose
of the directors Resolution was to appoint
petitioner as the new trustee of the

of ₱84M of Lucky Two Corporation and
Lucky Two Repacking. Centro and BPI
amended the MTI to allow an additional loan
of ₱36M and to include San Carlos Milling
Company, Inc. (San Carlos) as a borrower.
Centro and BPI again amended the MTI for
another loan of ₱24M, bringing the total
obligation to ₱144M. Meanwhile, respondent
Centro, represented by Go Eng Uy,
approached petitioner Metrobank and
proposed that the latter assume the role of
successor-trustee of the existing MTI. After
petitioner Metrobank agreed to the proposal,
the board of directors of respondent Centro
allegedly resolved to constitute petitioner as
successor-trustee of BPI. During the period
April 1998 to December 1998, San Carlos
obtained loans in the total principal amount
of ₱812,793,513.23 from petitioner
Metrobank. San Carlos failed to pay these
outstanding obligations hence Metrobank as
the successor trustee initiated foreclosure of
the mortgaged executed for the loan. Before
the scheduled foreclosure date, respondents
herein filed a Complaint for the annulment of
the MTI with a prayer for a temporary
restraining order (TRO) and preliminary
injunction. The bone of contention in Civil
Case No. 00-942 was that since the
mortgaged properties constituted all or
substantially all of the corporate assets, the
amendment of the MTI failed to meet the
requirements of Section 40 of the
Corporation Code on notice and voting
requirements. Under this provision, in order
for a corporation to mortgage all or
substantially all of its properties and assets,
it should be authorized by the vote of its
stockholders representing at least 2/3 of the
outstanding capital stock in a meeting held
for that purpose. Furthermore, there must be
a written notice of the proposed action and
of the time and place of the meeting. Thus,
respondents alleged, the representation of
Go Eng Uy that he was authorized by the
board of directors and/or stockholders of
6
previously executed and amended MTI.
Going through the original and the revised
MTI, the Court find no substantial
amendments to the provisions of the
contract. The Court agree with petitioner that
the act of appointing a new trustee of the MTI
was a regular business transaction. The
appointment necessitated only a decision of
at least a majority of the directors present at
the meeting in which there was a quorum,
pursuant to Section 25 of the Corporation
Code. The second paragraph of the directors
Resolution No. 005, s. 1994, which
empowered Go Eng Uy to sign the Real
Estate Mortgage and all
documents/instruments with Metrobank, for
and in behalf of the Company which are
necessary and pertinent thereto, must be
construed to mean that such power was
limited by the conditions of the existing
mortgage, and not that a new mortgage was
thereby constituted, thus, Section 40 of the
Corporation Code finds no application in the
present case. Nevertheless, while the Court
uphold the validity of the stockholders
Resolution appointing Metrobank as
successor-trustee, this is not to say that we
uphold the validity of the extrajudicial
foreclosure of the mortgage.
 7

Centro was false. After trial on the merits, the

RTC dismissed the Complaint. On 30 August
2007, the CA promulgated the assailed
Decision. Petitioner’s Motion for
Reconsideration was likewise denied.
AFRICA V. PCGG ET AL., Shortly after the PCGG sequestered ETPI, Whether or not the issuance of the Yes, it is valid. In upholding the right of a
G.R. No. 83831, January 9, the sequestration order was partially lifted in subpoenas over the books of stockholder of a sequestered company to
1992 when 40% of the shares of stock owned by ETPI were valid. inspect and/or examine the records of a
Cable and Wireless, Ltd. were freed from the corporation pursuant to Section 74 of the
effects of sequestration. The remaining 60% Corporation Code, the Court found nothing
of the shares, however, remained under in Executive Orders Nos. 1, 2 and 14, to
sequestration. Subsequently, during the indicate an implied amendment of the
annual stockholders meeting pursuant to a Corporation Code, much less an implied
PCGG Resolution (January 28, 1988) which modification of a stockholder's right of
called for the resumption of the stockholders inspection as guaranteed by Section 74
meeting originally scheduled, Villanueva, as thereof. The only express limitation on the
PCGG nominee, Mabanta, and de los right of inspection, according to the Court, is
Angeles as nominees of the foreign that (1) the right of inspection should be
investors, and Africa were elected as exercised at reasonable hours on business
members of the board. The nomination and days; (2) the person demanding the right to
election of PCGG nominees to the ETPI examine and copy excerpts from the
Board, as well as the election of its new corporate records and minutes has not
officers, triggered a chain of contentious improperly used any information secured
proceedings before the Sandiganbayan (SB) through any previous examination of the
and the SC. records of such corporation; and (3) the
demand is made in good faith or for a
G.R. No. 85594: Africa et al. filed before the legitimate purpose.
SB action for injunction with prayer for a writ
of preliminary injunction/TRO. They
questioned the acts and orders of the PCGG
leading to the election of petitioners to the
ETPI Board. They, claimed to be the duly
elected members of the ETPI Board of
Directors during a special stockholders
meeting, prayed that Villanueva et al. be
removed from their ETPI positions, and that
an injunction be issued to perpetually
restrain the PCGG from electing,
designating and supporting the defendants
in their ETPI roles. While the motions to
dismiss remained pending and prior to the
hearing for the issuance of a writ /TRO, the
SB issued, upon request of Africa, et al. a
subpoena ordering the PCGG to appear and
testify before the SB and to produce the
stock and transfer book and all stubs of the
 8

outstanding stock certificates of ETPI.

Thereafter, another subpoena duces tecum
was issued upon an amended request for
subpoena ordering the Ass. SolGen to
appear before the SB and to produce the
minutes of all meetings of the Board and
Stockholders of held from January 29, 1988
to date. A petition for certiorari, was filed by
the before the Court, assailing the orders as
having been issued with grave abuse of
discretion on the ground that the SB has no
jurisdiction over the main action for damages
since it is in truth a suit against the State
without its consent. The PCGG also prayed
for the issuance of a TRO to enjoin the
respondents from enforcing/ executing the
subpoenas, the Court granted the TRO. All
in all, the petitions have substantially the
same relief sought that is to nullify the acts
and orders of PCGG which lead to the
election of the new members of the board
and officers of ETPI and to enjoin them from
exercising the powers of the said positions.
BLBT V. BITANGA The Potencianos, Delfin C. Yorro, and Maya Whether or not the stockholder’s The validity of the BLTB stockholders'
Industries, Inc., entered into a Sale and meeting held on May 19, 1998 meeting held on May 19, 1998 was
Purchase Agreement, whereby, they sold to was void since BMB Holdings, sustained, in light of the time-honored
BMB Property Holdings, Inc represented by Inc., represented by Bitanga doctrine in corporation law that a transfer of
its President, Benjamin Bitanga, their shares group was not present at the shares is not valid unless recorded in the
of stock in BLTB representing 47.98% of the meeting. books of the corporation. It is not disputed
total outstanding capital stock of BLTB. that the transfer of the shares of the group of
Barely a month after the Agreement was Dolores Potenciano to the Bitanga group has
executed, Bitanga and Monina Grace Lim not yet been recorded in the books of the
were elected as new directors. During a corporation. Hence, the group of Dolores
meeting of the Board, the newly elected Potenciano, in whose names those shares
directors scheduled the annual stockholders’ still stand, were the ones entitled to attend
meeting. Before the scheduled meeting, and vote at the stockholders' meeting of the
Michael Potenciano wrote Bitanga, BLTB on 19 May 1998. This being the case,
requesting for a postponement of the the Hearing Panel committed grave abuse of
stockholders’ meeting due to the absence of discretion in holding otherwise and in
a thirty-day advance notice. However, there concluding that there was no quorum in said
was no response on whether or not the meeting. The Court is in full accord with the
request for postponement was favorably SEC En Banc on this matter. Indeed, until
acted upon. On the scheduled date of the registration is accomplished, the transfer,
meeting, a notice of postponement of the though valid between the parties, cannot be
stockholders’ meeting was published in the effective as against the corporation. Thus,
Manila Bulletin. In as much as there was no the unrecorded transferee, the Bitanga

Villanueva v. Adre, G.R. No.
80863, April 27, 1989
9
notice of postponement prior to that, a total group in this case, cannot vote nor be voted
of 286 stockholders arrived and attended the for.
meeting. The majority of the stockholders
present rejected the postponement and
voted to proceed with the meeting. The
Potenciano group was re-elected to the
Board of Directors, however, the Bitanga
group refused to relinquish their positions
and continued to act as directors and officers
of BLTB. The Bitanga group filed with the
SEC a complaint for Damages which,
however, was denied. Likewise, the
Potenciano group filed a Complaint for
Injunction and Damages with Preliminary
Injunction and TRO with the SEC which
issued a TRO enjoining the Bitanga group
from acting as officers and directors of BLTB.
The Bitanga group filed another complaint
which was granted. It declared that the
stockholders’ meeting was void on the
grounds that, first, Michael Potenciano had
himself asked for its postponement due to
improper notice; and, second, there was no
quorum, since BMB Holdings, Inc.,
represented by the Bitanga group, which
then owned 50.26% of BLTB’s shares
having purchased the same from the
Potenciano group, was not present at the
said meeting. The Potenciano group filed a
petition for certiorari with the SEC En Banc.
The SEC En Banc set aside the Order of the
Hearing Panel and issued the writ of
preliminary injunction prayed for. The
Bitanga group immediately filed a a petition
for certiorari with the Court of Appeals which
reversed the assailed Orders of the SEC En
Banc and reinstating the Order of the
Hearing Panel. The Court of Appeals denied
petitioner’s Motion for Reconsideration.
Hence, this petition.
The employees of South Cotabato W/N Velayo may be held Yes, he may be held liable had there been
Integrated Port Services, Inc. (SCIPSI), Inc personally liable using the no off-court settlement rendering the petition
filed a case against SCIPSI and it's Doctrine of Piercing the Veil of moot and academic. In the case of A.C.
president, Velayo for the unpaid 13th month Corporate Fiction despite his Ransom Labor Union-CCLU v. NLRC it was
pays. The employees garnered a favorable contention that he is just the held that it is the president of the corporation
judgement. As a result, two lands owned by who responds personally for violation of the

Ching v. CA, et al., G.R. No.
164317, February 6, 2006
Velayo were levied upon by the sheriff.
Velayo assailed the decision contending that
he was never a party to the labor case and
that a corporation has a separate and distinct
personality from its incorporators,
stockholders and officers. He also contends
that he was never mentioned in the
pleadings before the petitioner-labor arbiter
and therefore is a stranger to the case. Soon
After, the parties agreed to an off court
settlement.
Ching signed 13 trust receipts (granted by
RCBC), as a surety for PBMI, covering the
goods for importation by the latter. Ching
was given the authority to sell but not by way
of conditional sale, pledge or otherwise; and
in case such goods were sold, to turn over
the proceeds thereof as soon as received, to
apply against the relative acceptances and
payment of other indebtedness to RCBC.
When the trust receipts matured, Ching
failed to return the goods to RCBC, or to
return their value. RCBC filed a criminal
complaint for estafa against Ching.
He could be proceeded against in two ways:
as surety as determined by the Supreme
Court or as the corporate official responsible
for the offense under P.D. No. 115.
president and that he was never a
party to the case
1) Whether or not mere corporate
officers should be held liable for
the violation of PD No. 115 by the
corporation despite the principle
of separate corporate personality
2) If they may be made liable,
whether or not Ching is the proper
corporate officer to stand as a
defendant
10
labor pay laws. Art. 273 of the Labor Code
provides that: "Any person violating any of
the provisions of Art. 265 of this Code shall
be punished by ... imprisonment". To apply
this provision Art. 212. It states that
“Employer” includes any person acting in the
interest of an employer, directly or indirectly.
In this case, just like RANSOM, SCIPSI is an
artificial being that acts through its officers.
RA 602 states that criminal responsibility is
with the "Manager or in his default, the
person acting as such", in this case, it would
be the president. Velayo cannot be excused
from payment of SCIPSI's liability by mere
reason of SCIPSI's separate corporate
existence. The theory of corporate entity, in
the first place, was not meant to promote
unfair objectives or otherwise, to shield
them. This Court has not hesitated in
penetrating the veil of corporate fiction when
it would defeat the ends envisaged by law,
not to mention the clear decree of the Labor
Code.
1) Yes. Section 13 of PD 115 states that, “If
the violation or offense is committed by a
corporation, partnership, association or
other judicial entities, the penalty provided
for in this Decree shall be imposed upon the
directors, officers, employees or other
officials or persons therein responsible for
the offense, without prejudice to the civil
liabilities arising from the criminal offense.”
A corporation cannot be proceeded against
criminally because it cannot commit crime in
which personal violence or malicious intent
is required, criminal action is limited to the
corporate agents guilty of an act amounting
to a crime and never against the corporation
itself.
2) Yes, Ching is the proper corporate officer
to stand as defendant for the crime. Ching,
having participated in the negotiations for the
trust receipts and having received the goods
for PBMI, it was inevitable that he is the
proper corporate officer to be proceeded

Magsaysay-Labrador v. CA,
G.R. No. 58168, December
19, 1989
Donnina Halley vs. Printwell,
Inc. (G.R. No 157549) May 30,
2011
The petitioners are the sisters of the late
Sen. Magsaysay. The respondent is the
widow of Sen. Magsaysay. The respondent
filed for the cancellation of the title of
Pequena Island which was issued in the
name of Subic Land Corp. Such title was
allegedly acquired by the corp through fraud.
The petitioners filed a motion for intervention
in the case contending that that their brother
conveyed to them one-half (1/2 ) of his
shareholdings in the corp. and as assignees
of around 41 % of the total outstanding
shares of such stocks, they have a
substantial and legal interest in the subject
matter of litigation and that they have a legal
interest in the success of the suit.
BMPI (Business Media Philippines Inc.) is a
corporation under the control of its
stockholders, including Donnina Halley. In
Whether or not the CA correctly
denied the sisters' motion for
intervention
WON a stockholder who was in
active management of the
business of the corporation and
11
against by virtue of the PBMI’s violation of
P.D. No. 115.
The crime defined in P.D. No. 115 is malum
prohibitum but is classified as estafa which
may be committed by a corporation.
However, the penalty for the crime is
imprisonment, which means that the penalty
provided for must be served by a natural
person. If the crime is committed by a
corporation or other juridical entity, the
directors, officers, employees or other
officers thereof responsible for the offense
shall be charged and penalized. Ching
signed the trust receipts in question. He
cannot, thus, hide behind the cloak of the
separate corporate personality of PBMI. In
the words of Chief Justice Earl Warren, a
corporate officer cannot protect himself
behind a corporation where he is the actual,
present and efficient actor.
The CA correctly denied such motion. The
petitioners have no legal interest in the
subject matter in litigation so as to entitle
them to intervene in the proceedings. The
interest of petitioners is indirect, contingent,
remote, conjectural, consequential and
collateral. At the very least, their interest is
purely inchoate, or in sheer expectancy of a
right in the management of the corporation
and to share in the profits thereof and in the
properties and assets thereof on dissolution,
after payment of the corporate debts and
obligations. While a share of stock
represents a proportionate or aliquot interest
in the property of the corporation, it does not
vest the owner thereof with any legal right or
title to any of the property, his interest in the
corporate property being equitable or
beneficial in nature. Shareholders are in no
legal sense the owners of corporate
property, which is owned by the corporation
as a distinct legal person.
YES! Such stockholder should be made
liable up to the extent of her unpaid
subscription. The stockholders cannot now

the course of its business, BMPI
commissioned PRINTWELL to print
Philippines, Inc. (a magazine published and
distributed by BMPI). PRINTWELL extended
30-day credit accommodation in favor of
BMPI and in a period of 9 mos. BMPI placed
several orders amounting to 316,000.
However, only 25,000 was paid hence a
balance of 291,000.
PRINTWELL sued BMPI for collection of the
unpaid balance and later on impleaded
BMPI’s original stockholders and
incorporators to recover on their unpaid
subscriptions. It appears that BMPI has an
authorized capital stock of 3M divided into
300,000 shares with P10 par value. Only
75,000 shares worth P750,000 were
originally subscribed of which P187,500
were paid up capital. Halley subscribed to
35,000 shares worth P350,000 but only paid
P87,500.
Halley contends that they all had already
paid their subscriptions in full by presenting
official receipts (O.R.), BMPI had a separate
and distinct personality and BOD and SH
had resolved to dissolve BMPI.
RTC and CA both ruled that BMPI merely
used the corporate fiction as a cloak/cover to
create an injustice (against PRINTWELL).
They also rejected the allegations of full
payment in view of irregularity in the
issuance of O.R.s (Payment made on a later
date was covered by an O.R. with a lower
serial number than payment made on an
earlier date.
HEIRS OF FE TAN UY vs. Respondent iBank granted loans to Hammer
INTERNATIONAL Garments, covered by PNs and deeds of
EXCHANGE BANK (G.R. No. assignments pursuant to the letter-
166282) February 13, 2013 agreement between iBank and Hammer,
still has unpaid subscriptions
should be made liable for the
debts of the corporation by
piercing the veil of corporate
fiction
1. Whether Uy can be held liable
2. Whether Goldkey can be held
liable
12
claim the doctrine of corporate fiction
otherwise (to deny creditors to collect from
SH) it would create an injustice because
creditors would be at a loss (limbo) against
whom it would assert the right to collect.
On Piercing the Veil:
Although the corporation has a personality
separate and distinct from its SH, such
personality is merely a legal fiction (for the
convenience and to promote the ends of
justice) which may be disregarded by the
courts if it is used as a cloak or cover for
fraud, justification of a wrong, or an alter ego
for the sole benefit of the SH.
As to the Trust Fund Doctrine:
The RTC and CA correctly applied the Trust
Fund Doctrine. Under which, corporate
debtors might look to the unpaid
subscriptions for the satisfaction of unpaid
corporate debts. Subscriptions to the capital
of a corporation constitutes a trust fund for
the payment of the creditors (by mere
analogy) In reality, corporation is a simple
debtor. Moreover, the corporation has no
legal capacity to release an original
subscriber to its capital stock from the
obligation of paying for his shares, in whole
or in part, without valuable consideration, or
fraudulently, to the prejudice of the creditors.
The creditor is allowed to maintain an action
upon any unpaid subscriptions and thereby
steps into the shoes of the corporation for the
satisfaction of its debt. The trust fund
doctrine is not limited to reaching the SH’s
unpaid subscriptions. The scope of the
doctrine when the corporation is insolvent
encompasses not only the capital stock but
also other property and assets generally
regarded in equity as a trust fund for the
payment of corporate debts.
1. No, Uy is not liable. Considering that the
only basis for holding Uy liable for the
payment of the loan was proven to be a
falsified document, there was no sufficient
 13

represented by its President and General justification for the RTC to have ruled that Uy
Manager, Chua, granting Hammer a P25M should be held jointly and severally liable to
credit line. The loans were secured by a iBank for the unpaid loan of Hammer. At
REM executed by Goldkey Dev’t Corp over most, Uy could have been charged with
several of its properties and a peso surety negligence in the performance of her duties
agreement signed by Chua and his wife (FE as treasurer of Hammer by allowing the
TAN UY). company to contract a loan despite its
precarious financial position. Uy’s
Hammer defaulted, iBank foreclosed shortcomings are not sufficient to justify the
Goldkey’s third party REM. The mortgaged piercing of the corporate veil, which requires
properties were sold for P12M, leaving a that the negligence of the officer must be so
balance of P13M. Hammer failed to pay the gross that it could amount to bad faith.
deficiency, iBank filed a complaint for sum of
money against Hammer, Chua, Uy and 2. Yes. It was apparent that Goldkey was
Goldkey. merely an adjunct of Hammer, and as such,
the legal fiction that it has a separate
Uy claimed she was not liable to iBank personality from that of Hammer should be
because she never executed a surety brushed aside as they are, undeniably, one
agreement in favor of iBank as her signature and the same.
was forged.Goldkey denies liability averring
that it acted only as a third party mortgagor
and that it was a corporation separate and
distinct from Hammer.

RTC held Uy liable despite forgery of

signature for being officer and stockholder of
Hammer Corporation. RTC came to the
conclusion that Hammer and Goldkey were
one and the same because both were family
corporations of Chua and Uy, both shared
the same office, assets of both corporations
were co-mingled, when Chua absconded,
both Hammer and Goldkey ceased to
operate. RTC held Hammer, Goldkey, Chua
and Uy liable to iBank. Affirmed by CA.
CHINA BANKING Dynetics, Inc. and Lim borrowed a total of Whether or not respondent Dyne- NO. The Court ruled that to disregard the
CORPORATION V. DYNE- P8,939,000 from petitioner. However, they Sem is an alter ego of Dynetics, separate juridical personality of a
SEM ELECTRONICS failed to pay when the obligations became Inc. corporation, the wrongdoing must be proven
CORPORATION due. Petitioner instituted a complaint for sum clearly and convincingly. In this case,
G.R. No. 149237, June 11, of money. Summons was not served on petitioner failed to prove that Dyne-Sem was
2006 Dynetics because it had already closed organized and controlled, and it’s affairs
down. In an amended complaint, petitioner conducted, in a manner that made it merely
impleaded respondent Dyne-Sem. an instrumentality, agency, conduit or
According to petitioner, respondent adjunct of Dynetics, or that it was established
organized to be Dynetics’ alter ego. to defraud Dynetics’ creditors, including
Respondent denied the allegations and petitioner.

claimed that they are totally different from
Dynetics, Inc. Court a quo ruled that Dyne-
Sem is not an alter ego of Dynetics. CA
dismissed the subsequent appeal filed by
petitioner and affirmed the trial court’s
decision.
BOY SCOUTS OF THE In a COA Resolution entitled "Defining the
PHILIPPINES (BSP) V. Commission’s policy with respect to the audit
COMMISSION ON AUDIT of the Boy Scouts of the Philippines," which
(COA) stated COA claimed that the character of the
G.R. No. 177131, June 7, BSP’s purposes and functions which has a
2011 public aspect and the statutory designation
of the BSP as a "public corporation". That the
SC, in a decided case involving BSP, has
elucidated that BSP is regarded as, both a
"government-controlled corporation with an
original charter" and as an "instrumentality"
of the Government. Therefore, subject to its
audit jurisdiction. BSP sought
reconsideration of the COA resolution
claiming that it is not subject to the
Commission’s jurisdiction.
14
The similarity of business of the two
corporations did not warrant a conclusion
that respondent was but a conduit of
Dynetics. Respondent’s acquisition of some
of the machineries and equipment of
Dynetics was not proof that respondent was
formed to defraud petitioner. No merger took
place between Dynetics and respondent
Dyne-Sem. What took place was a sale of
the assets of the former to the latter. The
assets were not "diverted" to respondent as
an alter ego of Dynetics. The sales of
machineries and equipment were valid and
the transfers of the properties to respondent
legal and not in any way in contravention of
petitioner’s rights as Dynetics’ creditor.
Whether or not BSP is a public YES. The Court ruled that BSP, under its
corporation (GOCC, amended charter, continues to be a public
instrumentality, agency or corporation or a government instrumentality,
subdivision of the Government) hence, it is subject to the exercise by the
falling under the COA’s audit COA of its audit jurisdiction.
jurisdiction
The purpose of the BSP as stated in its
amended charter shows that it was created
in order to implement a State policy declared
in the Constitution, which states the
recognition by the State of the vital role of the
youth in nation-building. Hence, BSP, which
was created by a special law to serve a
public purpose in pursuit of a constitutional
mandate, comes within the class of "public
corporations" defined by paragraph 2, Art. 44
of the Civil Code and governed by the law
which creates it, pursuant to Article 45 of the
same Code.
BSP is a public corporation created by law
for a public purpose, attached to the DECS
pursuant to its Charter and the
Administrative Code of 1987. It is not a
private corporation which is required to be
owned or controlled by the government and
be economically viable to justify its existence
under a special law. Likewise, BSP meets
the minimum statutory requirement of an

Philippine National Bank vs
Hydro Resources Contractors
Corporation– G.R. No.
167530, March 13, 2013
Gosiaco vs Ching and Casta –
G.R. No. 173807, April 16,
2009, J. Tinga
DBP and PNB acquired substantially all the
assets of MMIC and resumed the business
operations by organizing Nonoc Mining and
Industrial Corporation (NMIC). DBP and
PNB owned 57% and 43% of the shares of
NMIC and the members of the Board of
Directors of NMIC were either from DBP or
PNB. NMIC engaged the services of Hercon,
Inc., (later on acquired by Hydro Resources
Contractors Corporation in a merger) for
Mine Stripping and Road Construction
Program. Hercon, Inc., found that NMIC still
has unpaid balance and made several
demands but it was unheeded. A complaint
for sum of money was filed where RTC and
CA pierced the corporate veil of NMIC and
held DBP and PNB solidarily liable with
NMIC.
Petitioner Gosiaco invested with ASB
Holdings, Inc. by way of loan and in
exchange ASB through its manager Ching
issued DBS checks. Upon maturity of the
ASB checks, Gosiaco went to deposit the
checks but the checks were dishonored.
Gosiaco informed respondents and
demanded replacement checks or the return
of the money but to no avail. Gosiaco filed a
criminal complaint for violation of BP22. MTC
acquitted Ching of criminal liability but it did
not absolve her from civil liability because as
a corporate officer of ASB she is civilly liable
since she was a signatory to the checks.
RTC and CA affirmed the MTCs ruling and
exonerated Ching from civil liability.
Whether or not there is sufficient
ground to pierce the veil of
corporate fiction.
Whether or not a corporate officer
who signed a bouncing check be
held civilly liable under B.P. Blg.
22.
15
attached government agency as the DECS
Secretary sits at the BSP Board ex officio,
thus facilitating the policy and program
coordination between the BSP and the
DECS.
There is no sufficient proof to pierce the veil
of corporate fiction. The doctrine of piercing
the corporate veil applies in alter ego cases.
Case law lays down a three-pronged test to
determine the application of the alter ego
theory, which is also known as the
instrumentality theory, namely:
(1) Control or 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
right; and
(3) The aforesaid control and breach of duty
must have proximately caused the injury or
unjust loss complained of.
This Court finds that none of the tests has
been satisfactorily met in this case.
Yes, a corporate officer who issues a
bouncing corporate check can only be held
civilly liable when he is convicted. The Court
ruled that the civil liability of a corporate
officer in a BP22 case is extinguished with
the criminal liability. Ching is discharge of
any civil liability arising from B.P. Blg. 22
case filed against her on account of her
acquittal in the criminal charge and it is ASB
who is civilly obligated to petitioner.

ESGUERRA, ET AL. V. Esguerra filed an action to annul the Free
HOLCIM PHILIPPINES, INC Patent in the name of de Guzman alleging
G.R. No. 182571, September himself to be the owner over the disputed lot
2, 2013 in Matiktik, Norzagaray, Bulacan. De
Guzman sold the lot to herein respondents
who utilized the land extracted limestones
from it. The Court granted such action and
remanded the case to the Trial Court for
execution. The RTC denied HOLCIM’s
motion for reconsideration and motion for
ocular inspection. It held that the petitioners
proved their entitlement to the royalties
totaling to ₱91,872,576.72. CA, on the other
hand, granted the petition which prompted
petitioners to filed the case before the
Supreme Court. One of the claims of the
petitioner is that HOLCIM’s petition for
certiorari in the CA failed to comply with the
rules on Verification and Certification of Non-
Forum Shopping because the latter did not
secure and/or attach a certified true copy of
a board resolution authorizing any of its
officers to file said petition. Thus, the CA
should have dismissed outright HOLCIM’s
petition before it.
RURAL BANK OF LIPA CITY Reynaldo Villanueva, Sr., a stockholder of
V. COURT OF APPEALS G.R. the Rural Bank of Lipa City assigned his
No. 124535. September 28, shares, as well as those of 8 other
2001 shareholders under his control with a total of
10,467 shares, in favor of the stockholders
of the Bank. Sometime thereafter, Reynaldo
Villanueva, Sr. and his wife, Avelina,
executed an Agreement wherein they
stipulated that said debt will be paid out of
the proceeds of the sale of their real property
described in the Agreement. The Villanueva
spouses also assured the Board on a
subsequent meeting that their debt would be
paid on or before December 31 of that same
year; otherwise, the Bank would be entitled
to liquidate their shareholdings, including
those under their control and any deficiency
shall be secured by other collateral sufficient
therefor. The Villanuevas failed to make
good their obligation, thereafter their shares
of stock were converted into Treasury
Whether or not the Court of
Appeals gravely erred in not
dismissing Holcim’s petition for
certiorari on the ground of lack of
board resolution authorizing the
filing of the petition
Whether or not there was valid
transfer of the shares to the Bank
that would deprive the Villanueva
spouses to exercise their rights as
stockholders.
16
NO, The general rule is that a corporation
can only exercise its powers and transact its
business through its board of directors and
through its officers and agents when
authorized by a board resolution or its
bylaws. Absent the said board resolution, a
petition may not be given due course.
However, this admits to exceptions such as
in the case at bar when the corporation
performed acts in substantial compliance to
such requirement. While the board
resolution may not have been attached,
HOLCIM complied just the same when it
attached the Secretary’s Certificate dated
July 17, 2006, thus proving that O’Callaghan
had the authority from the board of directors
to appoint the counsel to represent them in
Civil Case No. 725-M-89.
NO. For a valid transfer of stocks, there must
be strict compliance with the mode of
transfer prescribed by law. The requirements
are: (a) There must be delivery of the stock
certificate: (b) The certificate must be
endorsed by the owner or his attorney-in-fact
or other persons legally authorized to make
the transfer; and (c) To be valid against third
parties, the transfer must be recorded in the
books of the corporation. As it is, compliance
with any of these requisites has not been
clearly and sufficiently shown. Still, while the
assignment may be valid and binding on the
bank, et al. and the Villanuevas, it does not
necessarily make the transfer effective.
Consequently, the Villanuevas cannot, as
yet, be deprived of their rights as
stockholders, until and unless the issue of
ownership and transfer of the shares in
question is resolved with finality.

Samahan ng Optometrists sa
Pilipinas vs Acebedo
International Corporation, G.R.
No. 117097, March 21, 1997
Yamamoto v. Nishino Leather
Industries, Inc., G.R. No.
150283, April 16, 2008
Stocks. Thereafter, the new set of officers of
the Bank informed Atty. Ignacio, counsel for
the Villanueva spouses that the latter were
no longer entitled to notice of the recently
held stockholder’s meeting since they had
relinquished their rights as stockholders in
favor of the Bank. Consequently, the
Villanueva spouses filed with the Securities
and Exchange Commission (SEC), a petition
for annulment of the stockholders' meeting
and election of directors and officers on 15
January 1994, with damages and prayer for
preliminary injunction.
Acebedo filed an application with the Office
of the Mayor of Candon, Ilocos Sur, for the
issuance of a permit for the opening and
operation of a branch of the Acebedo Optical
in that municipality. The application was
opposed by the Samahan ng Optometrists
sa Pilipinas (SOP) which contended that
respondent is a juridical entity not qualified
to practice optometry. Acebedo filed its
answer, arguing it is not the corporation, but
the optometrists employed by it, who would
be practicing optometry.
In 1983, Ruichi Yamamoto (Petitioner),
organized under Philippine laws Wako
Enterprises Manila, Inc., a leather tanning
business. Later on in 1987, Yamamoto and
Ikuo Nishino (Respondent) entered into a
joint venture embodied in a Memorandum of
Agreement whereunder Nishino would
acquire 70% of the authorized capital stock
of Wako. Eventually Ikuo Nishino and his
brother, Yoshinobu Nishino acquired more
than 70% of the authorized capital stock and
reduced Yamamoto’s equity to 10%. The
corporation was later renamed to Nishino
Leather Industries, Inc. (NLII, Respondent).
Pursuant to negotiations to the Nishinos’
planned takeover the company, Yoshinobu
Nishino, through his counsel sent a letter to
WON Acebedo violates
R.A.1998(OPTOMETRY LAW)
and the Corporation Code when
it employs optometrists to engage
in the practice of optometry under
its name and for its behalf.
Whether or not the veil of
corporate fiction should be
pierced.
17
No.The fact that private respondent hires
optometrists who practice their profession in
the course of their employment in private
respondent's optical shops, does not
translate into a practice of optometry by
private respondent itself. The determination
of the proper lenses to sell to private
respondent's clientele entails the
employment of optometrists who have been
precisely trained for that purpose. All told,
there is no law that prohibits the hiring by
corporations of optometrists or considers the
hiring by corporations of optometrists as a
practice by the corporation itself of the
profession of optometry.
No.
The veil of corporate personality may be
pierced when the corporation is merely an
adjunct, a business conduit, or alter ego of a
person, but the mere ownership of a single
stockholder of even all or nearly all of the
capital stocks of a corporation is not by itself
a sufficient ground to disregard the separate
corporate personality. In order for the
doctrine of piercing the veil of corporate
fiction to apply the following elements must
be proven:
a. There must be complete domination, not
only of finances but of policy and business
practice so that the corporate entity had not
separate mind, will or existence of its own.

Nora Bitong v. CA, G.R. No.
123553, July 13, 1998
Yamamoto offering to the latter the return of
equipment which were his capital
contributions to Wako.
Yamamoto attempted to recover the said
equipment however, this attempt was
frustrated. This forced Yamamoto to file a
complaint for replevin against the
respondents on January 15, 1992, before
the Regional Trial Court of Makati.
The RTC ruled in favor of Yamamoto and
declared him as the rightful owner and
possessor of the equipment.
On appeal, the Court of Appeals reversed
the RTC decision holding that the equipment
are corporate property of NLII and could not
be retrieved without the authority of the NLII
Board of Directors. It also held that the
doctrine of piercing the veil of corporate
fiction does not apply. Finally, that
Yamamoto’s invocation of the doctrine of
promissory estoppel does not apply.
Yamamoto filed a Petition for Review on
Certiorari.
Nora Bitong filed a derivative suit before the
SEC for the benefit of Mr. & Ms. Publishing
Company Incorporated, against Sps.
Eugenia and Jose Apostol (Respondents)
for fraud, misrepresentation, disloyalty,
evident bad faith, conflict of interest, and
mismanagement of the affairs of the said
corporation when on several occasions, the
respondents allegedly made fraudulent and
other unauthorized transactions and with the
Philippine Daily Inquirer.
Respondents contended that Bitong is a
mere holder-in-trust of JAKA shares, thus
she was not the proper party to initiate a
derivative suit.
Bitong averred that she acquired legal and
beneficial ownership of 997 out of 4,088
1. Whether or not Nora Bitong has
the legal personality to initiate and
prosecute the derivative suit for
the benefit of Mr.&Ms. Publishing
Co., Inc.
2. Whether or not Nora Bitong
was a valid stockholder.
18
b. Such domination or control was used by
the defendant to commit fraud or wrong, to
perpetuate the violation of a right of positive
legal duty
c. Said breach of duty was the proximate
cause of the injury complained of.
The absence of either one of these elements
prevents the application of the doctrine. It is
not the form which the courts consider, but
rather, how the corporation operated and the
individual defendant’s relationship to that
operation.
In this case, Yamamoto failed to show by
clear and convincing evidence the presence
of any of the elements aforementioned.
There is no showing that Nishino used the
separate personality of NLII to unjustly act or
do wrong in contravention of Yamamoto’s
rights.
1. No. The Certificate of Stock held by
Bitong, was sold to her through a deed of
sale executed by JAKA Inc. in her favor in
1983. However, it was actually signed by the
President of the corporation only on March
17, 1989, thus it was only then that said
Certificate of Stock could be considered to
have been legally issued to her. A Certificate
of Stock shall be signed by the president or
vice president, countersigned by the
secretary or assistant secretary, and sealed
with the seal of the corporation. Thus, at the
time the acts complained of were committed,
Bitong was not qualified to institute a
stockholder's derivative suit.
2. No. Section 63 of the Corporation Code
provides that a formal Certificate of Stock
can only be issued if it is signed by the

G.R. No. 116631 October 28,
1998
MARSH THOMSON vs. CA
outstanding shares by virtue of a deed of
sale executed by JAKA in her favor on July
25, 1983, and recorded in the Stock and
Transfer Book of Mr. & Ms. Corporation,
under Certificate of Stock No. 008.
Respondents on the other hand countered
that Eugenia D. Apostol signed Certificate of
Stock No. 008 only on March 17 1989 and
not in 1983. Respondents also averred that
the Stock and Transfer Book which Bitong
presented in evidence was not registered
with the SEC, thus the entries therein, which
included Certificate of Stock No. 008 were
fraudulent.
SEC Hearing Panel dismissed the derivative
suit. SEC en banc reversed the Hearing
Panel's decision. CA reversed the SEC en
banc; Bitong not a stockholder thus, not a
real party-in-interest
Marsh Thomson was the EVP and, later on,
the Mgt. Consultant of American Chamber of
Commerce of the Philippines, Inc.
(AmCham) for over 10 years. While
Thomson was still working with AmCham,
his superior, A. Lewis Burridge, retired as
AmCham's President. Burridge wanted to
transfer his proprietary share in the Manila
Polo Club to Thomson. However, through
the intercession of Burridge, AmCham paid
for the share but had it listed in Thomson's
name. This was made clear in an
employment advice.
Burridge transferred said proprietary share
to Thomson, as confirmed in a letter of
notification to the MPC. Upon his admission
as a new member of the MPC, Thomson
paid the transfer fee of P40k from his own
funds; but AmCham subsequently
reimbursed this amount. MPC issued a
Proprietary Membership Certificate Number
in favor of Thomson but the latter failed to
execute a document recognizing AmCham's
beneficial ownership over said share.
WON CA erred in ordering
Thomson to transfer said share to
AmCham’s nominees
19
President or Vice-President, countersigned
by the Secretary or Assistant Secretary, and
sealed with the Corporate Seal. In this case,
the Certificate of Stock which she allegedly
owns was legally issued on March 17, 1989,
the date when it was actually signed by the
President of the corporation. Thus, Bitong
was not a bona fide stockholder of Mr. & Ms.
prior to March 1989.
MPC does not necessarily prohibit the
transfer of proprietary shares by its
members. The Club only restricts
membership to deserving applicants in
accordance with its rules, when the
amended AOI states that: "No transfer shall
be valid except between the parties, and
shall be registered in the Membership Book
unless made in accordance with these
Articles and the By-Laws". Thus, as
between parties herein, there is no question
that a transfer is feasible. Moreover,
authority granted to a corporation to regulate
the transfer of its stock does not empower it
to restrict the right of a stockholder to
transfer his shares, but merely authorizes
the adoption of regulations as to the
formalities and procedure to be followed in
effecting transfer.
In this case, Thomson was the nominee of
AmCham to hold the share and enjoy the
privileges of the club. But upon the expiration
of Thomson's employment as officer and
consultant of AmCham, the incentives that
 20

Following AmCham's policy and practice, go with the position, including use of the
there was a yearly renewal of employment MPC share, also ceased to exist. It now
contract between Thomson and AmCham. behooves Thomson to surrender said share
Separate letters of employment advice in to AmCham's next nominee, another natural
various dates mentioned the MPC share. But person. Obviously this arrangement of trust
Thomson never acknowledged that and confidence cannot be defeated by
AmCham is the beneficial owner of the Thomson's citation of the MPC rules to
share. shield his untenable position, without doing
When Thomson's contract of employment violence to basic tenets of justice and fair
was up for renewal, he notified AmCham that dealing.
he would no longer be available as EVP. Petition for Review on Certiorari is DENIED
Still, AmCham asked Thomson to stay on for and AFFIRMED CA’s decision.
another 6 months. Thomson indicated his
acceptance of the consultancy arrangement
with a counter-proposal in his letter:
“Retention of the MPC share, subject to
reimbursing the purchase price to the
Chamber.” However, AmCham rejected
Thomson's counter-proposal. Pending the
negotiation for the consultancy arrangement,
AmCham executed a Release and
Quitclaim. The quitclaim, expressed in
general terms, did not mention specifically
the MPC share. AmCham, sent a letter to
Thomson demanding the return and delivery
of the MPC share which "AmCham owns and
placed in Thomson's name. Am Cham filed
a complaint against Thomson with RTC
Makati, which render judgment stating that:
(1) The ownership of the contested MPC
share is adjudicated in favor of Thomson;
and; (2) Thomson shall pay AmCham the
sum of P300k. RTC awarded the MPC share
to Thomson on the ground that the AOI and
By-laws of MPC prohibit artificial persons,
such as corporations, to be club members. It
was the intention of the parties that a
membership to MPC was to be secured by
AmCham for Thomson’s use. The latter was
to execute the necessary documents to
acknowledge ownership of the Polo
membership in favor of Thomson. However,
Thomson had second thoughts and decided
to keep the membership for himself.
AmCham appealed to CA. The latter
reversed RTC’s decsision and ordered

Thomson to transfer the MPC share to the
nominee of AmCham, since the latter
purchased the MPC share for the use of
Thomson and the latter expressly conformed
thereto. By such express conformity of
Thomson, he was bound to recognize
AmCham as the owner of the said share for
a contract has the force of law between the
parties. CA denied Thomson’s MR. Hence
this petition.
G.R. No. 184332 FEB. 17, Ting Ping purchased shares of TCL Sales
2016 Corp: (1) 480 shares from Peter Chiu; (2)
ANNA TENG vs. SEC and 1,400 shares from his brother Teng Ching
TING PING LAY Lay, TCL Pres. and operations manager;
and (3) 1,440 shares from Ismaelita Maluto.
Upon Ching Lay's death, his son Henry Teng
took over the mgt. of TCL. To protect his
shareholdings with TCL, Ting Ping
requested TCL's Cor sec Anna Teng to enter
the transfer in the Stock and Transfer Book
of TCL for the proper recording of his
acquisition and demanded the issuance of
new certificates of stock in his favor. TCL
and Teng refused despite repeated
demands. Because of their refusal, Ting
Ping filed a petition for mandamus with SEC
against TCL and Teng.
SEC granted Ting Ping's petition, ordering
TCL and Teng to record in the Books of the
Corporation, Ting Ping’s shares purchased
and to issue corresponding new certificates
of stocks.
TCL and Teng appealed to SEC en
banc, which, the latter affirmed the SEC
decision with modification, in that Teng was
held solely liable.
TCL and Teng filed a petition for review with
CA which the latter dismissed finding no
cogent and justifiable grounds to disturb the
findings of SEC en banc. A petition for
review on certiorari under Rule 45 before SC
which promulgated its Decision in G.R. No.
WON the surrender of the
certificates of stock is a requisite
before registration of the transfer
may be made in the corporate
books and for the issuance of new
certificates in its stead.
21
A certificate of stock is a written instrument
signed by the proper officer of a corporation
stating or acknowledging that the person
named in the document is the owner of a
designated number of shares of its stock. It
is prima facie evidence that the holder is a
shareholder of a corporation. A certificate is
merely a tangible evidence of ownership of
shares of stock. It is not a stock in the
corporation and merely expresses the
contract between the corporation and the
stockholder. The shares of stock evidenced
by said certificates are regarded as property
and the owner of such shares may, as a
general rule, dispose of them as he sees fit,
unless the corporation has been dissolved,
or unless the right to do so is properly
restricted, or the owner's privilege of
disposing of his shares has been hampered
by his own action.
Sec. 63 Corporation Code provides that: x x
x Shares of stock so issued are personal
property and may be transferred by delivery
of the certificate or certificates indorsed by
the owner or his attorney-in-fact or other
person legally authorized to make the
transfer. No transfer, however, shall be valid,
except as between the parties, until the
transfer is recorded in the books of the
corporation showing the names of the
parties to the transaction, the date of the
transfer, the number of the certificate or
certificates and the number of shares
transferred. No shares of stock against
which the corporation holds any unpaid
claim shall be transferable in the books of the

129777, denying the petition. After the
finality of SC's decision, the SEC issued a
writ of execution addressed to the Sheriff of
RTC Manila.
Thereafter, Teng filed a complaint for
interpleader with RTC Manila where Teng
sought to compel Henry and Ting Ping to
interplead and settle the issue of ownership
over the 1,400 shares previously owned by
Ching Lay. The deputized sheriff held in
abeyance the implementation of the writ of
execution pending outcome of the civil case.
RTC Manila finding Henry to have a better
right to the shares of stock formerly owned
by Ching Lay.
TIng Ping filed An Ex Parte Motion for the
Issuance of Alias Writ of Execution where he
sought the partial satisfaction of SEC en
banc Order, ordering TCL and Teng to
record the 480 shares and 1,440 shares he
acquired from Chiu and Maluto, respectively.
SEC issued an Order granting Ting Ping’s
motion.
Teng and TCL filed their respective motions
to quash the alias, which was opposed by
Ting Ping, who is willing to surrender the
original stock certificates of Chiu and Maluto
to facilitate and expedite the transfer of the
shares in his favor. SEC denied the motions
to quash the alias.
Teng filed a petition for certiorari and
prohibition under Rule 65 ROC. SEC,
through the OSG, filed a Comment which
Teng moved to expunge. CA dismissed the
petition and denying the motion to expunge
SEC's comment.
22
corporation.
Under the provision, requisites must be
complied with for there to be a valid transfer
of stocks, to wit: (a) there must be delivery of
the stock certificate; (b) the certificate must
be endorsed by the owner or his attorney-in-
fact or other persons legally authorized to
make the transfer; and (c) to be valid against
3rd parties, the transfer must be recorded in
the books of the corporation.
It is the delivery of the certificate, coupled
with the endorsement by the owner or his
duly authorized representative that is the
operative act of transfer of shares from the
original owner to the transferee. In "a sale of
shares of stock, physical delivery of a stock
certificate is one of the essential requisites
for the transfer of ownership of the stocks
purchased." The delivery contemplated in
Sec. 63, however, pertains to the delivery of
the certificate of shares by the transferor to
the transferee, that is, from the original
stockholder named in the certificate to the
person or entity the stockholder was
transferring the shares to, whether by sale or
some other valid form of absolute
conveyance of ownership. "Shares of stock
may be transferred by delivery to the
transferee of the certificate properly
indorsed. Title may be vested in the
transferee by the delivery of the duly
indorsed certificate of stock."
It is clear that Teng's position does not have
legal basis. The delivery or surrender
adverted to by Teng, i.e., from Ting Ping to
TCL, is not a requisite before the
conveyance may be recorded in its books.
To compel Ting Ping to deliver to the
corporation the certificates as a condition for
the registration of the transfer would amount
to a restriction on the right of Ting Ping to
have the stocks transferred to his name,
which is not sanctioned by law. The only
limitation imposed by Sec. 63 is when the
 23

corporation holds any unpaid claim against

the shares intended to be transferred.
The right of a transferee/assignee to have
stocks transferred to his name is an inherent
right flowing from his ownership of the
stocks. If a corporation refuses to make such
transfer without good cause, it may, in fact,
even be compelled to do so by mandamus.
With more reason in this case where SC, in
G.R. No. 129777, already upheld Ting Ping's
definite and uncontested titles to the subject
shares. TCl and Teng could not repudiate
these documents. Hence, the transfer of
shares to Ting Ping must be recorded on the
corporation's stock and transfer book.
Teng cannot refuse registration of the
transfer. The respective duties of the
corporation and its secretary to transfer
stock are purely ministerial. To be valid
against 3rd parties and the corporation, the
transfer must be recorded or registered in
the books of corporation. Reasons why
registration of the transfer is necessary: (1)
to enable the transferee to exercise all the
rights of a stockholder; (2) to inform the
corporation of any change in share
ownership so that it can ascertain the
persons entitled to the rights and subject to
the liabilities of a stockholder; and (3) to
avoid fictitious or fraudulent
transfers, among others. Upon registration
of the transfer in the books of the
corporation, the transferee may now then
exercise all the rights of a stockholder, which
include the right to have stocks transferred
to his name. The stock and transfer book is
the basis for ascertaining the persons
entitled to the rights and subject to the
liabilities of a stockholder. Where a
transferee is not yet recognized as a
stockholder, the corporation is under no
specific legal duty to issue stock certificates
in the transferee's name. The manner of
issuance of certificates of stock is generally
regulated by the corporation's by-laws. Sec.
47 CC states: "a private corporation may
 24

provide in its by-laws for x x x the manner of

issuing stock certificates." Sec. 63,
meanwhile, provides that "the capital stock
of stock corporations shall be divided into
shares for which certificates signed by the
president or vice president, countersigned
by the secretary or assistant secretary, and
sealed with the seal of the corporation shall
be issued in accordance with the by-laws."
SC outlined the procedure for the issuance
of new certificates of stock in the name of a
transferee:
1.the certificates must be signed by the Pres.
or VP, countersigned by the Sec. or Asst.
Sec, and sealed with the seal of the
corporation. Xxx
2.delivery of the certificate is an essential
element of its issuance. xxx
3.the par value, as to par value shares, or the
full subscription as to no par value shares,
must first be fully paid.
4.the original certificate must be surrendered
where the person requesting the issuance of
a certificate is a transferee from a
stockholder.
The surrender of the original certificate of
stock is necessary before the issuance of a
new one so that the old certificate may be
cancelled. A corporation is not bound and
cannot be required to issue a new certificate
unless the original certificate is produced
and surrendered. Surrender and
cancellation of the old certificates serve to
protect not only the corporation but the
legitimate shareholder and the public as
well, as it ensures that there is only one
document covering a particular share of
stock.
Ting Ping manifested from the start his
intention to surrender the subject certificates
of stock to facilitate the registration of the
transfer and for the issuance of new
certificates in his name. It would be
sacrificing substantial justice if SC were to
grant the petition simply because Ting Ping
is yet to surrender the subject certificates for

Mariano A. Albert vs
University Publishing Co., Inc.,
G.R. No. L-19118, January 30,
1965
Mariano A. Albert (Albert) and University
Publishing Co., Inc. (University Publishing),
through Jose M. Aruego (Aruego), its
President, entered into a contract to pay
Albert P30,000.00 for the exclusive right to
publish his revised Commentaries on the
Revised Penal Code and for his share in
previous sales of the book's first edition.
Failure to pay one installment would render
the rest due. University Publishing had
undertaken to pay in eight quarterly
installments, however, failed to pay the
second installment. Albert sued University
Publishing for the breach of contract.
University Publishing admitted its corporate
existence and execution and terms of the
contract but alleged that it was Albert who
breached their contract by failing to deliver
his manuscript. Albert died before trial and
Justo R. Albert (Justo), his estate's
administrator, was substituted for him. CFI
Manila rendered judgment in favor of Albert
and a writ of execution was issued against
University Publishing. Albert However, a writ
of execution was petitioned by Justo against
Aruego, as the real defendant, stating that
there is no such entity as University
Publishing Co. Inc. Justo annexed to the
petition a certification from the SEC saying
that their records contain no such registered
corporation. University Publishing countered
in its manifestation that Aruego is not a party
to the case and therefore, Justo’s petition
should be denied. In truth, University
Publishing actually did not want Aruego to be
considered a party to the case because there
1. WON Aruego is a party to the
case
2. WON University Publishing is a
corporation by estoppel
25
cancellation instead of ordering in this case
such surrender and cancellation, and the
issuance of new ones in his name. Teng, and
TCL have already deterred for so long Ting
Ping's enjoyment of his rights as a
stockholder. Ting Ping already requested
Teng to enter the transfer of the subject
shares in TCL's Stock and Transfer Book.
SC will not allow Teng and TCL to frustrate
Ting Ping's rights any longer.
1. Yes. Aruego is a party to the case.
"University Publishing Co., Inc." purported to
come to court, answering the complaint and
litigating upon the merits. But as stated,
"University Publishing Co., Inc." has no
independent personality; it is just a name.
Jose M. Aruego was, in reality, the one who
answered and litigated, through his own law
firm as counsel. He was in fact, if not, in
name, the defendant. He had control over
the proceedings. Had Aruego been named
as party defendant instead of or together
with the corporation, there would be no room
for debate as to his personal liability. Since
he was not so named, matters of due
process have arisen. Parties to a suit are
persons who have a right to control the
proceedings, to make defense, to adduce
and cross-examine witnesses and to appeal
from a decision. Acting as representative of
a non-existent principal, Jose M. Aruego was
the real party to the contract sued upon, he
was the one who reaped the benefits
resulting from it, so much so that partial
payments of the consideration were made by
him, he violated its terms, thereby
precipitating the suit in question and that in
the litigation he was the real defendant.
Perforce, in line with the ends of justice,
responsibility under the judgment falls on
him.
2. No. University Publishing is not a
corporation by estoppel. The corporation-by-
estoppel doctrine has not been invoked in
this case. At any rate, the same is

Pacific Rehouse Corporation
vs Court of Appeals and
Export and Industry Bank, Inc.
– G.R. No. 199687, March 24,
2014
would then be a need to institute a separate
action against Aruego and if done, Justo can
set up the defense of prescription under the
Statute of Limitations.
A complaint was instituted with the Makati
City Regional Trial Court (RTC) against EIB
Securities Inc. (E–Securities) for
unauthorized sale of 32,180,000 DMCI
shares of Pacific Rehouse Corporation,
Pacific Concorde Corporation, Mizpah
Holdings, Inc., Forum Holdings Corporation,
and East Asia Oil Company, Inc. RTC
rendered judgment on the pleadings,
directing the E–Securities to return to the
petitioners 32,180,000 DMCI shares, as of
judicial demand. On the other hand,
petitioners are directed to reimburse the
defendant the amount of [P]10,942,200.00,
representing the buyback price of the
60,790,000 KPP shares of stocks at [P]0.18
per share. The Resolution was ultimately
affirmed by the Supreme Court and attained
finality. However, the Writ of Execution was
returned unsatisfied. Pacific Rehouse
moved for the issuance of an alias writ of
execution to hold Export and Industry Bank,
Inc. (Export Bank) liable for the judgment
obligation as E–Securities is “a wholly–
owned controlled and dominated subsidiary
of Export and Industry Bank, Inc., and is a
mere alter ego and business conduit of the
latter. E–Securities opposed the motion,
arguing that it has a corporate personality
that is separate and distinct from the
respondent.
The RTC concluded that E–Securities is a
WON E-Securities is a mere alter
ego Export Bank
26
inapplicable. Aruego represented a non-
existent entity and induced not only to Albert
but even the court to believe in such
representation. He signed the contract as
"President" of "University Publishing Co.,
Inc.," stating that this was "a corporation duly
organized and existing under the laws of the
Philippines," and obviously misled Albert into
believing the same. One who has induced
another to act upon his willful
misrepresentation that a corporation was
duly organized and existing under the law,
cannot thereafter set up against his victim
the principle of corporation by estoppel.
NO. An alter ego exists 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 control necessary to invoke the
alter ego doctrine is not majority or even
complete stock control but such domination
of finances, 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. In this
case, the alleged control exercised by Export
Bank upon its subsidiary E–Securities, by
itself, does not mean that the controlled
corporation is a mere instrumentality or a
business conduit of the mother company.
Even control over the financial and
operational concerns of a subsidiary
company does not by itself call for
disregarding its corporate fiction. There must
be a perpetuation of fraud behind the control
or at least a fraudulent or illegal purpose
behind the control in order to justify piercing
the veil of corporate fiction. Such fraudulent
intent is lacking in this case. Furthermore,
ownership by Export Bank of a great majority
or all of stocks of E-Securities and the
existence of interlocking directorates may
serve as badges of control, but ownership of
another corporation, per se, without proof of
actuality of the other conditions are
insufficient to establish an alter ego

mere business conduit or alter ego of Export
Bank, the dominant parent corporation,
which justifies piercing of the veil of
corporate fiction, and issued an alias writ of
summons directing defendant EIB
Securities, Inc., and/or Export and Industry
Bank, Inc., to fully comply therewith. It
ratiocinated that being one and the same
entity in the eyes of the law, the service of
summons upon E–Securities has bestowed
jurisdiction over both the parent and wholly–
owned subsidiary.Export Bank filed before
the Court of Appeals (CA) a petition for
certiorari with prayer for the issuance of a
temporary restraining order (TRO) seeking
the nullification of the RTC Order for having
been made with grave abuse of discretion
amounting to lack or excess jurisdiction. The
CA reversed the RTC Order and explained
that the alter ego theory cannot be sustained
because ownership of a subsidiary by the
parent company is not enough justification to
pierce the veil of corporate fiction. There
must be proof, apart from mere ownership,
that Export Bank exploited or misused the
corporate fiction of E–Securities. The
existence of interlocking incorporators,
directors and officers between the two
corporations is not a conclusive indication
that they are one and the same. The records
also do not show that Export Bank has
complete control over the business policies,
affairs and/or transactions of E–Securities. It
was solely E–Securities that contracted the
obligation in furtherance of its legitimate
corporate purpose; thus, any fall out must be
confined within its limited liability.
ELCEE FARMS INC. V. Private respondents were regular farm
NLRC, ET AL., G.R. No. workers in Hacienda Trinidad, owned and
126428, January 25, 2007 operated by Elcee Farms. According to
them, Corazon Saguemuller was the
president of Elcee Farms, but it was actually
her son, Konrad, who was the president
thereof. Elcee Farms later entered into a
lease agreement with Garnele but most of
the private respondents continued to work in
Whether or not Saguemuller is
subsidiarily liable with Elcee
Farms for the payment of
separation pay and damages.
27
relationship or connection between the two
corporations, which will justify the setting
aside of the veil of corporate fiction.
N.B. Control Test
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
right; and
3. The aforesaid control and breach of duty
must [have] proximately caused the injury or
unjust loss complained of.
No. A corporation has 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. In
Santos v. NLRC, a corporate officer was not
held liable for the obligations incurred by the
corporation, where the corporate officer was
not even shown to have had a direct hand in
the dismissal of the employee enough to

FEDERATED LPG DEALERS
ASSOCIATION V. DEL
ROSARIO, ET AL., G.R. No.
202639, November 9, 2016
Associated Bank versus
Spouses Rafael and Monaliza
Pronstroller – G.R. No.
148444, July 14, 2008
Hacienda Trinidad. Garnele then sub-leased
Hacienda Trinidad to Hilado, who operated
HILLA. Private respondents were allowed to
continue working in Hacienda Trinidad under
HILLA’s management. Afterwards, Hilado
and the United Sugar Farmers’ Organization
(USFO) entered into a CBA, which contained
a closed shop provision. Due to their refusal
to join the labor union, private respondents
were terminated by HILLA. Private
respondents, filed against Elcee Farms,
Saguemuller, HILLA and two of its officers a
complaint for illegal dismissal with
reinstatement with back wages and
separation pay with damages.
The CIDG-AFCCD of the PNP acting on the
request for assistance of petitioner,
conducted surveillance and investigation of
ACCS Ideal Gas Corporation (ACCS) for
allegedly committing the acts of illegal
trading of petroleum products and
underfilling of LPG cylinders in violation of
BP 33, as amended by PD 1865. A test-buy
operation was done and the inspection and
evaluation of the refilled LPG cylinders
revealed that they were underfilled. Search
warrants were issued against the officers of
ACCS and a search and seizure operation
was conducted. Again, inspection and
evaluation of the said filled LPG cylinders
showed that they were underfilled.
Complaints were filed against respondents,
as members of the BOD of ACCS, for illegal
trading of petroleum products and for
underfilling of LPG cylinders under BP 33, as
amended.
Spouses Vaca executed a REM in favor of
Associated Bank (AB) covering land in
Quezon City. The Vacas’ defaulted which led
to the property’s foreclosure and auction
where AB was the highest bidder. Spouses
Vaca, however, filed an action for the
nullification of the REM and the foreclosure
sale. On the other hand, AB filed for a writ of
possession which was denied by the RTC.
On appeal, the CA granted said writ which
Whether or not respondents, as
members of the Board of
Directors of ACCS, must be
criminally prosecuted for the
latter's alleged violation/s of BP 33
as amended.
Whether Associated Bank is
bound by the 2nd letter-
agreement signed by Atty. Soluta
under the doctrine of apparent
authority.
28
attribute to him an unlawful act. No evidence
was presented to prove that Saguemuller
was truly the president of Elcee Farms. Nor
was there even proof that she was in active
management of the corporation and had
dictated policies for implementation by the
corporation. There is also no evidence on
record that she had acted maliciously or in
bad faith in terminating the services of the
private respondents; nor has it been shown
that she has in any way consented to the
simulated lease contract which effectively
terminated the services of the private
respondents.
No. Section 4 of BP 33, as amended, states
that: "When the offender is a corporation,
partnership, or other juridical person, the
president, the general manager, managing
partner, or such other officer charged with
the management of the business affairs
thereof, or employee responsible for the
violation shall be criminally liable. " Neither
of the respondents was the President,
General Manager, or Managing Partner of
ACCS. Respondents who were mere
members of the Board of Directors are not
also shown to be charged with the
management of the business affairs.
Yes, AB is bound by the 2nd letter-
agreement. The general rule is that, in the
absence of authority from the board of
directors, no person, not even its officers,
can validly bind a corporation. The power
and responsibility to decide whether the
corporation should enter into a contract that
will bind the corporation is lodged in the
board of directors. However, just as a natural
person may authorize another to do certain

Dr. Hans Christian M. Señeres
versus Commission on
Elections and Melquiades A.
Robles – G.R. No. 178678,
April 16, 2009
29
caused Spouses Vaca to appeal the CA acts for and on his behalf, the board may
decision. validly delegate some of its functions and
During the pendency of said cases, AB powers to officers, committees and agents.
advertised the property for sale to which
Respondents Pronstroller responded AB had previously allowed Atty. Soluta to
favorably through Atty. Soluta, AB’s VP, enter into the first agreement without a board
CorSec and Board member. The spouses resolution expressly authorizing him; thus, it
then paid the downpayment. AB, through had clothed him with apparent authority to
Atty. Soluta and respondents’, executed a modify the same via the second letter-
letter-agreement requiring that the balance agreement. Further, the two (2) letter-
of the purchase price be deposited under agreements were written on a paper with
escrow agreement within 90 days from date AB’s letterhead. It is not the quantity of
of the agreement. Prior to end of 90day similar acts which establishes apparent
period, respondents proposed that the authority, but the vesting of a corporate
balance be due only upon service of a final officer with the power to bind the corporation.
decision of the SC affirming AB’s right to By holding Atty. Soluta to possess the
possess the property. Atty. Soluta referred authority to enter into the agreement which
this to the bank’s ARRMC which merely led respondents to deal with him, AB is now
deferred action. A month after such estopped from denying such authority.
proposal, Atty. Soluta, acting for AB, and
respondents executed a 2nd letter-
agreement adopting the proposal of
respondents.
AB reorganized its management and Atty.
Dayday became its Assistant VP while Atty.
Soluta was relieved of his duties. Atty.
Dayday reviewed respondents’ record and
learned of their failure to deposit the balance.
Respondents Pronstroller presented the 2nd
letter-agreement wherein they were granted
an extension but Atty. Dayday claimed that
Atty. Soluta was not authorized to give such
extension. Subsequently, the SC affirmed
AB’s right to possess the property which led
respondents to file an action for specific
performance against AB to enforce their 2nd
letter-agreement.
Melquiades Robles (Robles for brevity) was Whether the hold-over principle Yes, the hold-over principle applies in this
elected as BUHAY party-list’s president and applies in this case. case. Señeres’ contention that the CoN
chairperson. Under BUHAY’s constitution, signed by Robles is null and void is
all of its party officers shall have a term of untenable. As a general rule, Sec. 23 of the
three (3) years, without re-election. BUHAY Corporation code provides that officers and
participated in the 2002 and 2004 elections, directors of a corporation hold over after the
with Robles as its president. BUHAY’s expiration of their terms until such time as
manifestation to participate in the party-list their successors are elected or appointed.

election (manifestation) and even the
certificates of nomination of representatives
(CoN) for those years carried Robles’
signature as its president.
For the May 2007 elections, BUHAY
submitted its manifestation and CoN bearing
Robles’ signature again. However, two (2)
days prior to Robles’ submission of his
nominations, Dr. Hans Christian Señeres
(Señeres), holding himself as the acting
president and secretary-general of BUHAY,
also filed a CoN with the COMELEC.
Señeres then filed a petition to deny due
course to Robles’ CoN with the COMELEC
contending that said nominations were null
and void for they were made without
authority for Robles’ term already expired.
BUHAY expelled Señeres as party member
for his act of submitting a CoN for the party
without authority and nominating
representatives not even members of the
party.
PIONEER vs. CA G.R. No. Lim entered into a contract of sale to Japan
84197 July 28, 1989 Domestic Airlines (JDA) regarding aircrafts
and spare parts. Pioneer Insurance
executed and issued a surety bond in favor
of JDA on behalf of Lim. Lim convinced
Bormacheco, Cervantes Brothers and
Maglana to contribute funds to buy the two
aircrafts and spare parts which would form
part of a new corporation that would expand
his airline business. Lim then executed in
favor of Pioneer a chattel mortgage
stipulating that Lim transfers the two aircrafts
and spareparts to Pioneer as a security for
the suretyship. Lim defaulted on his
payment.
30
The holdover doctrine accords validity to
what would otherwise be deemed as
dubious corporate acts and gives continuity
to a corporate enterprise in its relation to
outsiders. The voting members of BUHAY
duly elected Robles as party President in
October 1999 and although his regular term
as such President expired in October 2002,
no election was held to replace him and the
other original set of officers. Further,
BUHAY’s constitution and by-laws do not
expressly or impliedly prohibit a hold-over
situation. As such, since no successor was
ever elected or qualified, Robles remained
the President of BUHAY in a hold-over
capacity.
The view is that one who continues with the
discharge of the functions of an office after
the expiration of his or her legal term, having
no successor appointed or chosen in the
meantime, is commonly regarded as a de
facto officer, even where no provision is
made by law for his holding over and there is
nothing to indicate the contrary. By fiction of
law, the acts of such de facto officer are
considered valid and effective. Hence,
Robles merely acted as a hold-over
president for BUHAY and his acts of causing
the submission of the manifestation and the
CoN is, therefore, valid and effective.
Whether or not the failure of Lim, No, there was no de facto partnership that
Cervantes, Bormacheco and was created. It was held that persons who
Maglana to incorporate attempt but fail to form a corporation and
automatically result to a de facto who carry on business under the corporate
partnership name occupy the position of partners inter se
and their rights as members of the company
to the property acquired by the company will
be recognized. However, such a relation
does not necessarily exist, for ordinarily
persons cannot be made to assume the
relation of partners when their purpose is
that no partnership shall exist and it should
be implied only when necessary to do justice
between the parties
Lim signing and executing the chattel

PHIVIDEC V. CA G.R No. Violeta M. Borres was injured in an accident
85266 January 30, 1990 due to the negligence of Phividec Railways,
Inc. (PRI). Days prior to the accident
Philippine Veterans Invest Development
Corporation (PHIVIDEC) sold all its rights
and interests in the PRI to the Philippine
Sugar Commission (PHILSUCOM).
Philsucom then created a wholly-owned
subsidiary, Panay Railways to operate the
railway assets acquired from PHIVIDEC.
Borres filed a complaint for damages against
PRI and Panay Railways while the latter filed
a third party complaint against PHIVIDEC.
PRINCE TRANSPORT, Inc. v. Respondents alleged that they were
GARCIA employees of Prince Transport, Inc. (PTI), a
company engaged in the business of
transporting passengers by land, they were
hired either as drivers, conductors,
mechanics or inspectors, except for
respondent Diosdado Garcia (Garcia), who
was assigned as Operations Manager; in
addition to their regular monthly income,
respondents also received commissions
equivalent to 8 to 10% of their wages;
sometime in October 1997, the said
commissions were reduced to 7 to 9%; this
led respondents and other employees of PTI
to hold a series of meetings to discuss the
protection of their interests as employee. In
order to block the continued formation of the
union, PTI caused the transfer of all union
members and sympathizers to one of its sub-
companies, Lubas Transport (Lubas);
despite such transfer, the schedule of drivers
and conductors, as well as their company
identification cards, were issued by PTI; the
daily time records, tickets and reports of the
Whether or not the PHIVIDEC and
PRI are entirely distinct and
separate corporations even
though the latter is its subsidiary
Whether or not the CA err in
applying the doctrine of piercing
the corporate veil with respect to
Lubas.
31
mortgage and surety bond in his own
personal capacity shows he was acting on
his own and not in behalf of his other would-
be incorporators in transacting the sale of the
aircrafts and spare parts.
No PHIVIDEC and PRI are not distinct and
separate corporation. The court stated the
rule that where it appears that two business
enterprise are owned, conducted and
controlled by the same parties, both law and
equity will, when necessary to protect the
rights of the third persons, disregard the
legal fiction that two corporations are distinct
entities, and treat them as identical.
PHIVIDEC’s act of selling PRI to
PHILSUCOM shows that it had complete
control of PRI’s business. It also clearly
stipulated between the agreement of
PHIVIDEC and PHILSUCOM that the former
will assume liability for any claim or liability
arising out of any act or transaction prior to
the turnover of PRI.
No. The Court agrees with the CA that Lubas
is a mere agent, conduit or adjunct of PTI. A
settled formulation of the doctrine of piercing
the corporate veil is that when two business
enterprises are owned, conducted and
controlled by the same parties, both law and
equity will, when necessary to protect the
rights of third parties, disregard the legal
fiction that these two entities are distinct and
treat them as identical or as one and the
same. In the present case, it may be true that
Lubas is a single proprietorship and not a
corporation. However, petitioners’ attempt to
isolate themselves from and hide behind the
supposed separate and distinct personality
of Lubas so as to evade their liabilities is
precisely what the classical doctrine of
piercing the veil of corporate entity seeks to
prevent and remedy.

Indophil Textile Mill Workers
Union-PTGWO, Petitioner,
v.
Voluntary Arbitrator Teodorico
P. Calica And Indophil Textile
Mills, Inc., Respondents. -
G.R. No. 96490 February 3,
1992
respondents were also filed at the PTI office;
and, all claims for salaries were transacted
at the same office; later, the business of
Lubas deteriorated because of the refusal of
PTI to maintain and repair the units being
used therein, which resulted in the virtual
stoppage of its operations and respondents'
loss of employment.
Petitioner Indophil Textile Mill Workers
Union-PTGWO is the exclusive bargaining
agent of all the rank-and-file employees of
Indophil Textile Mills, Incorporated.
Teodorico P. Calica is impleaded in his
official capacity as the Voluntary Arbitrator,
while private respondent Indophil Textile
Mills, Inc. is a corporation engaged in the
manufacture, sale and export of yarns of
various counts and kinds and of materials of
kindred character. Indophil Acrylic
Manufacturing Corporation was formed and
registered with the Securities and Exchange
Commission. In 1988, Acrylic became
operational and hired workers according to
its own criteria and standards. Sometime in
July, 1989, the workers of Acrylic unionized
and a duly certified collective bargaining
agreement was executed. In 1990, the
petitioner union claimed that the plant
facilities built and set up by Acrylic should be
considered as an extension or expansion of
the facilities of private respondent Company
pursuant to Section 1(c), Article I of the CBA.
It is the petitioner's contention that Acrylic is
part of the Indophil bargaining unit. The
petitioner's contention was opposed by
private respondent which submits that
Acrylic is not an alter ego or an adjunct or
business conduit of private respondent
because it has a separate legitimate
business purpose.
Whether or not the operations in
Indophil Acrylic Corporation are
an extension or expansion of
private respondent.
32
No. Under the doctrine of piercing the veil of
corporate entity, when valid grounds
therefore exist, the legal fiction that a
corporation is an entity with a juridical
personality separate and distinct from its
members or stockholders may be
disregarded. In such cases, the corporation
will be considered as a mere association of
persons. The members or stockholders of
the corporation will be considered as the
corporation that is liability will attach directly
to the officers and stockholders. The
doctrine applies when the corporate fiction is
used to defeat public convenience, justify
wrong, protect fraud, or defend crime, or
when it is made as a shield to confuse the
legitimate issues, or where a corporation is
the mere alter ego or business conduit of a
person, or where the corporation is so
organized and controlled and its affairs are
so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of
another corporation. In the case at bar,
petitioner seeks to pierce the veil of
corporate entity of Acrylic, alleging that the
creation of the corporation is a devise to
evade the application of the CBA between
petitioner Union and private respondent
Company. While we do not discount the
possibility of the similarities of the
businesses of private respondent and
Acrylic, neither are we inclined to apply the
doctrine invoked by petitioner in granting the
relief sought. The fact that the businesses of
private respondent and Acrylic are related,
that some of the employees of the private
respondent are the same persons manning
and providing for auxiliary services to the

BALUYOT V. HOLGANZA and
Office of the Ombudsman –
G.R. No. 136374, February 9,
2000
During a spot audit conducted on March 21,
1977 by the Philippine National Red Cross
(PNRC) headquarters, a cash shortage of
P154,350.13 was discovered in the funds of
its Bohol chapter. The chapter administrator,
petitioner Francisca S. Baluyot, was held
accountable for the shortage.
On January 8, 1998, Paul E. Holganza, a
member of the board of directors of the
Bohol chapter, filed an affidavit-complaint
before the Office of the Ombudsman
charging petitioner of malversation under
Article 217 of the Revised Penal Code and
an administrative docket for dishonesty was
also opened against petitioner. Petitioner
filed her counter-affidavit, raising the
defense that the ombudsman had no
jurisdiction over the controversy. She argued
that the Ombudsman had authority only over
government-owned or controlled
corporations, which the PNRC was not.
The Ombudsman issued the first assailed
Order denying petitioner's motion to dismiss.
Petitioner filed a Motion for Reconsideration.
Public respondent likewise denied the
Motion for Reconsideration. Petitioner
contends that the Ombudsman has no
jurisdiction over the subject matter of the
controversy since the PNRC is allegedly a
private voluntary organization that the PNRC
falls under the International Federation of
Red Cross, a Switzerland-based
organization, and that the power to discipline
employees accused of misconduct,
malfeasance, or immorality belongs to the
PNRC Secretary General.
Whether or not the Ombudsman
has jurisdiction over the subject
matter of the controversy.
33
units of Acrylic, and that the physical plants,
offices and facilities are situated in the same
compound, it is our considered opinion that
these facts are not sufficient to justify the
piercing of the corporate veil of Acrylic.
Yes. The Philippine National Red Cross is a
government owned and controlled
corporation, with an original charter under
Republic Act No. 95, as amended. The test
to determine whether a corporation is
government owned or controlled, or private
in nature is simple. Is it created by its own
charter for the exercise of a public function,
or by incorporation under the general
corporation law? Those with special charters
are government corporations subject to its
provisions, and its employees are under the
jurisdiction of the Civil Service Commission,
and are compulsory members of the
Government Service Insurance System. The
PNRC was not "impliedly converted to a
private corporation" simply because its
charter was amended to vest in it the
authority to secure loans, be exempted from
payment of all duties, taxes, fees and other
charges of all kinds on all importations and
purchases for its exclusive use, on donations
for its disaster relief work and other services
and in its benefits and fund raising drives,
and be allotted one lottery draw a year by the
Philippine Charity Sweepstakes Office for
the support of its disaster relief operation in
addition to its existing lottery draws for blood
program. Clearly then, public respondent
has jurisdiction over the matter, pursuant to
Section 13, of Republic Act No. 6770,
otherwise known as "The Ombudsman Act
of 1989", to wit:
Sec. 13. Mandate. — The Ombudsman and
his Deputies, as protectors of the people,
shall act promptly on complaints filed in any
form or manner against officers or
employees of the Government, or of any
subdivision, agency or instrumentality
thereof, including government-owned or
controlled corporations, and enforce their

Carandang vs. Hon. Desierto
(G.R. No. 153161, January 12,
2011)
BENITO V. SEC and
JAMIATUL PHILIPPINE-AL
ISLAMIA, INC. G.R. No. L-
56655, July 25, 1983
In 1986, PCGG orderedordered the
sequestration of RPN’s properties, assets,
and business. PCGG entered into a
compromise agreement with Benedicto,
whereby he ceded to the Government all his
shares of stock (72% shares) in RPN. But
Benedcto contended that the shared was
only 32%. Carandang assumed office as
general manager and subsequently he was
charged with grave misconduct and violation
of RA 3019 before the Ombudsman and the
Sandiganbayan respectively. Carandang
moved for the quashal of the informations
alleging that the Ombudsman and
Sandiganbayan do not have jurisdiction
because RPN is not a GOCC.
The Articles of Incorporation of respondent
Jamiatul Philippine-Al Islamia, Inc. were filed
with the SEC and were approved. The
corporation had an authorized capital stock
Whether or not RPN was a
government-owned or -controlled
corporation.
1. Whether or not the issuance of
the 110, 980 shares without the
consent of the stockholders or of
the Board of Directors, and in the
34
administrative, civil and criminal liability in
every case where the evidence warrants in
order to promote efficient service by the
Government to the people.
No. A GOCC refer to any agency organized
as a stock or non-stock corporation vested
with functions relating to public needs
whether governmental or proprietary in
nature, and owned by the government
directly or indirectly through its
instrumentalities either wholly, or where
applicable as in the case of stock
corporations to the extent of at least 51% of
its capital stock. The definition mentions
three (3) requisites, namely, first, any
agency organized as a stock or non-stock
corporation; second, vested with functions
relating to public needs whether
governmental or proprietary in nature; and,
third, owned by the Government directly or
through its instrumentalities either wholly, or,
where applicable as in the case of stock
corporations, to the extent of at least fifty-one
(51) of its capital stock.
RPN was neither a government-owned nor a
controlled corporation because of the
Government’s total share in RPN’s capital
stock being only 32.4%. RPN-9 was
organized for private needs and profits, and
not for public needs and was not specifically
vested with functions relating to public
needs. Lastly, the conclusion that
Carandang was a public official by virtue of
his having been appointed as general
manager and chief operating officer of RPN
by President Estrada deserves no
consideration. President Estrada’s
intervention was merely to recommend
Carandang’s designation as general
manager and chief operating officer of RPN
to the PCGG.
1.No. The questioned issuance of the
unsubscribed portion of the capital stock
worth P110,980.00 is ' not invalid even if
assuming that it was made without notice to

of P200,000.00 divided into 20,000 shares at
a par value of P10.00 each. Petitioner Datu
Tagoranao Benito subscribed to 460 shares
worth P4,600.00.
Respondent corporation filed a certificate of
increase of its capital stock from
P200,000.00 to P1,000,000.00. It was
shown in said certificate that P191,560.00
worth of shares were represented in the
stockholders' meeting held on November 25,
1975 at which time the increase was
approved. Thus, P110,980.00 worth of
shares were subsequently issued by the
corporation from the unissued portion of the
authorized capital stock of P200,000.00. Of
the increased capital stock of
P1,000,000.00, P160,000.00 worth of
shares were subscribed.
Petitioner Datu Tagoranao filed with
respondent SEC a petition alleging that the
additional issue of previously subscribed
shares of the corporation was made in
violation of his pre-emptive right to said
additional issue and that the increase in the
authorized capital stock of the corporation
from P200,000.00 to P1,000,000.00 was
illegal considering that the stockholders of
record were not notified of the meeting
wherein the proposed increase was in the
agenda.
Petitioner prayed that the additional issue of
shares of previously authorized capital stock
and the shares issued from the increase in
capital stock of respondent corporation be
cancelled and that the corporation be
ordered to render an accounting of funds to
the stockholders. The SEC rendered a
decision as follows:
(a) That the issuance by the corporation of
its unissued shares was validly made and
was not subject to the pre-emptive rights of
stockholders
absence of consideration, is null
and void.
2. Whether or not the increase in
the authorized capital stock from
P200,000.00 to P1,000,000.00
without the consent or express
waiver of the stockholders, is null
and void.
35
the stockholders as claimed by petitioner.
The power to issue shares of stocks in a
corporation is lodged in the board of
directors and no stockholders' meeting is
necessary to consider it because additional
issuance of shares of stocks does not need
approval of the stockholders. The by-laws of
the corporation itself states that 'the Board of
Trustees shall, in accordance with law,
provide for the issue and transfer of shares
of stock of the Institute and shall prescribe
the form of the certificate of stock of the
Institute. The general rule is that pre-emptive
right is recognized only with respect to new
issue of shares, and not with respect to
additional issues of originally authorized
shares.
2.No. With respect to the claim that the
increase in the authorized capital stock was
without the consent, expressed or implied, of
the stockholders, it was the finding of the
Securities and Exchange Commission that a
stockholders' meeting was held on
November 25,1975 and among the many
items taken up then were the change of
name of the corporation, the increase of its
capital stock from P200,000.00 to
P1,000,000.00, and the increase of the
number of its Board of Trustees from five to
nine. "Despite the insistence of petitioner,
this Commission is inclined to believe that
there was a stockholders' meeting on
November 25, 1975 which approved the
increase. The petitioner had not sufficiently
overcome the evidence of respondents that
such meeting was in fact held. What
petitioner successfully proved, however, was
the fact that he was not notified of said
meeting and that he never attended the
same. Another thing that petitioner was able
to disprove was the allegation in the
certificate of increase that all stockholders
who did not subscribe to the increase of
capital stock have waived their pre-emptive
right to do so. As far as the petitioner is

MAJORITY STOCK
HOLDERS OF RUBY
INDUSTRIAL CORP v.
LIM. G.R. No. 165887, June 6,
2011.
PNCC SKYWAY WORKERS
ORGANIZATION v. PNCC
SKYWAY. G.R. No. 171231,
February 17, 2010.
(b) That there is no sufficient legal basis to
set aside the certificate issued by this
Commission authorizing the increase in
capital stock of respondent corporation from
P200,000.00 to Pl,000,000.00. Considering,
that petitioner has not waived his pre-
emptive right to subscribe to the increased
capitalization, respondent corporation is
directed to allow petitioner to subscribe
thereto, at par value, proportionate to his
present shareholdings.
(c) To direct respondent corporation to
comply with the requirement of filing annual
financial statements under pain of a more
drastic action.
In 1983, Ruby Corporation is already
experiencing severe financial losses. It filed
a petition for suspension of payments with
the Securities and Exchange Commission
which granted it. A management committee
was formed to manage and control Ruby
Corp. and study and evaluate a rehabilitation
plan. 2 rehabilitation plans were submitted,
one from Benhar (by the majority
stockholders), and another is the Alternative
(by the minority).
The Benhar plan was denied, and upon its
revision, was executed/implemented by the
majority despite the contention of the
minority stockholders and the creditors of the
corporation. The validity of it was made an
issue in the courts. Meanwhile, the majority
stockholders increased the subscription
without notifying the minority, so the majority
got a 2/3 of the OCS. Using that, they
extended the corporate term in 1996 for
another 25 years. The term was supposed to
end in 1997. In 1998, the Benhar plan's
validity was finally adjudicated and was
declared null and void.
PNCC Workers Organization (The
Union/Petitioner) and the PNCC Skyway
(The employer/respondent) entered into
their collective bargaining agreement. Under
the said agreement, the employer shall
Whether or not the extension of
the corporate term was valid.
Whether or not the verification
and certification against forum
shopping is defective, having
signed by the Union President
36
concerned, he had not waived his pre-
emptive right to subscribe as he could not
have done so for the reason that he was not
present at the meeting and had not executed
a waiver, thereof. Not having waived such
right and for reasons of equity, he may still
be allowed to subscribe to the increased
capital stock proportionate to his present
shareholdings.
No. Among the requirements for extension of
corporate term is a vote of 2/3 of the
Outstanding Capital Stock. The ratification
by the majority stockholders of the board
resolution for the extension was seriously
disputed by the minority stockholders (The
2/3 OCS was obtained by the majority only
because of their wrongful increase of
subscription, in other words, under the
invalid additional subscriptions). The notice
and quorum requirement were insufficient
and doubtful. No extension was validly
made. The term has expired, which calls for
the liquidation of the corporation.
The union president has the authority file the
remedies with the courts. The late board
resolution of June 2006 was only a
reiteration of the October 2005 resolution
authorizing the president to do so. The

schedule the vacation leaves for the
employees, taking into consideration their
preferences of schedule. Also in the
agreement was that the employees shall
bear the expenses of the renewal of their
license as security personnel.
A labor dispute involving the validity of the
provisions of the CBA arose. When the case
was already in the CA, the union authorized
the Union President to represent the
petitioner union (to sign the verification and
certification against forum shopping). The
ruled against the petitioner in Jan. 2006. The
union elevated it to the SC in Feb. 2006.
A.C. RANSOM LABOR CIR held respondent RANSOM guilty of
UNION-CCLU V. NLRC unfair labor practice of interference and
G.R. No. L-69464, May 29, discrimination and ordered said corporation
1987 the payment of backwages. Successive
motions for execution were filed by the
prevailing Petitioner-UNION but RANSOM
opposed contending that it was suffering
from financial difficulties and has no
necessary funds for the payment of the
backwages. Subsequently, respondent
RANSOM filed before the Sec. of labor to
cease operation and terminate employment,
which was then granted by the latter.
Another motion for executions were filed by
the UNION alleging that although RANSOM
had assumed a posture of suffering from
business reverse, its officers and principal
stockholders had organized a new
corporation namely the Rosario Industrial
Corporation (ROSARIO) using the same
equipment, personnel, business stocks and
the same place of business. RANSOM
declared that ROSARIO is a distinct and
separate corporation which was organized
long before the cases were decided
adversely against RANSOM.
The UNION filed its ex parte Motion for Writ
of Execution and Garnishment praying that it
be issued against the Officers/Agents of
Ransom personally and or their estates. The
who had no authority via board
resolution.
Whether or not piercing of the veil
of corporate fiction of the
RANSOM corporation is proper in
the case at bar?
37
purpose of certification
against forum shopping is that the party
litigant shall not be allowed to pursue
simultaneous remedies in different fora. The
union president has authority because of the
following reasons: 1. It was granted via
board resolution, 2. He is in the position to
know the truthfulness and correctness of the
action, and 3. Assuming that there was no
board resolution of Oct. 2005, the authority
was ratified in June 2006, thus curing the
defects of the certification against forum
shopping made in Feb. 2006.
Piercing the veil of the corporate fiction is
proper. The finding of this Court holding the
officers and agents of RANSOM jointly and
severally liable for the payment of
backwages does not ignore the legal fiction
that a corporation has a personality separate
and distinct from its stockholders and
members, for, as this Court had held “where
the incorporators and directors belong to a
single family, the corporation and its
members can be considered as one in order
to avoid its being used as an instrument to
commit injustice,". When the notion of legal
entity is used as a means to perpetrate fraud
or an illegal act or as a vehicle for the
evasion of an existing obligation, the
circumvention of statutes, and or confuse
legitimate issues the veil which protects the
corporation will be lifted

INTERNATIONAL EXPRESS
TRAVEL &TOUR SERVICES,
INC. V. CA
G.R. No. 119020, October 19,
2000
CIR vs. CA G.R. No. 108576.
January 20, 1999
Labor Arbiter ruled in favor of the UNION
thereby holds the respondent corporation’s
officers and agents liable. NLRC on appeal,
modified the decision by relieving the officers
and agents liable. Motion for reconsideration
was filed by the petitioner but was denied
hence ghis special civil action for Certiorari.
Philippine Football Federation (Federation)
through its President Henri Kahn, secured
the services of petitioner International
Express Travel and Tours Services as their
travel agency. The latter secured the airline
tickets for the trips of the athletes and
officials of the Federation. Federation made
two partial payments. Subsequently
petitioner wrote a letter to the Federation for
the demand of the remaining balance
thereof. Henri Kahn issued a personal check
in the amount of P50,000 as partial
payments for the outstanding balance.
Thereafter, no further payments were made
despite repeated demands. This prompted
petitioner to file a civil case before the RTC
of Manila against Henri Kahn in his personal
capacity for the unpaid balance of the tickets
on the ground that Henri Kahn as president
of the Federation who allegedly guaranteed
the said obligations and impleaded the
Federation as an alternative defendant.
Henri Kahn denied to have guaranteed the
obligation of the Federation but acted merely
as the latter’s agent which has a separate
and distinct personality. RTC holds Henri
Kahn personally liable for the unpaid
obligation of the Federation on the grounds
that corporate existence of the Federations
was not proved. Henri Kahn elevated the
lower court’s decision before the Court of
Appeals. Finding for Henri Kahn, the CA
recognized the juridical existence of the
Federation. Petitioner filed for a motion for
reconsideration but was denied. Hence, this
petition.
Don Andres Soriano formed the corporation
A. Soriano Y Cia corporation predecessor of
ANSCOR. ANSCOR has an initial of 1M
Whether or not the Philippine
Football Federation is a juridical
person?
WON redemption of stocks from
the stockholder is equivalent to
the distribution of taxable
38
The Philippine Football Federation has no
juridical personality. It is basic postulate that
before a corporation may acquire juridical
personality, the State must give its consent
either in the form of special law or general
enabling act. Before an entity may be
considered as a national sports association,
such entity must be recognized by the
accrediting organization, the Philippine
Amateur Athletic Federation under R.A.
3135, and the Department of Youth and
Sports Development under P.D. 604. This
fact of recognition, however, Henri Kahn
failed to substantiate. Accordingly, we rule
that the Philippine Football Federation is not
a national sports association within the
purview of the aforementioned laws and
does not have corporate existence of its
own. Thus being said, it follows that private
respondent Henry Kahn should be held
liable for the unpaid obligations of the
unincorporated Philippine Football
Federation. It is a settled principal in
corporation law that any person acting or
purporting to act on behalf of a corporation
which has no valid existence assumes such
privileges and becomes personally liable for
contract entered into or for other acts
performed as such agent.
Yes. As a rule, a stock dividend representing
the transfer of surplus to capital account
shall not be subject to tax. However, if a
 39

capitalization divided into 10,000 common
shares at par value of 100 per share. Don
Andres subscribed to 4,963 shares of the
5,000 shares originally issued. Eventually,
ANSCOR’s authorized capital stock was
increased to which Don Andres subscribed
after the other stockholders waived in favor
of the former their pre-emptive rights to
subscribe to the new issues. ANSCOR
declared stock dividends.
Later on, Don Andres died. The record
reveals that he has 185,154 shares, 50,495
of which are original issues and the balance
of 134,659 shares as stock dividend
declaration.One –half of the shareholdings
92,577 were transferred to his wife Doa
Carmen Soriano as her conjugal share. The
other formed part of his estate.
Doa Carmen exchanged her whole common
shares into preferred shares. As well as the
estate of Don Andres, thus, reducing his
estate common shares to 127,727.
A board resolution was passed redeeming
the common shares from the estate of Don
Andres twice. The purpose for both
redemptions as stated is to partially retire
stocks as treasury shares in order to reduce
the company’s foreign exchange
remittances in case cash dividends are
declared.
dividend, making the proceeds
taxable.
corporation cancels or redeems stock issued
as a dividend at such time and in such
manner as to make the distribution and
cancellation or redemption, in whole or in
part, essentially equivalent to the distribution
of a taxable dividend, the amount so
distributed in redemption or cancellation of
the stock shall be considered as taxable
income to the extent it represents.
For exempting clause to apply Sec. 83 a)
there is redemption or cancellation b)
transaction involves stock dividends c) time
and manner of the transaction makes it
equivalent to a distribution of taxable
dividends.
In the case at bar, it is undisputed that at the
time of the last redemption, the original
common shares owned by the estate were
only 25,247.5. This means that from the total
of 108,000 shares redeemed from the
estate, the balance of 82,725.5 must have
come from stock dividends hence, proceeds
of the redemption is additional wealth, for it
is not merely a return of capital but a gain.
The purposes invoked by ANSCOR to justify
redemptions are no excuse for its tax liability.

Revenue examiners assessed ANSCOR for

deficiency withholding tax at source,
pursuant to sections 53 and 54 of the 1939
Revenue Code based on the transactions of
exchange and redemption stocks.
Concorde Condominium vs. Concorde Condominium Inc is a duly WON the
Baculio G.R. No. 203678, constituted corporation or association which corporate
February 17, 2016 owns common ares in the project comprising RTC as
lot 1 where the condominium stands and lot Court has
2 which serves as the parking lot of the unit case.
owners and Concorde Condominium
Building that was developed by Pulp and
Paper Distributors now New PPI Corp.
case involves intra- No. The relationship and nature of
controversy hence, controversy test can be applied in
Special Commercial determining whether a dispute constitute
jurisdiction over the intra-corporate controversy. The Court
agreed with RTC Branch 149 that injunction
with damages is an ordinary civil case.
Based on the allegations in the petition no
intra-corporate relations exist between the
 40

opposing parties namely 1) petitioner

PPI as developer engaged in real estate condominium corporation and its unit owners
business practice, altered the condominium and 2) respondent New PPI Corp., together
plan to segregate lot 2 from the common with other respondents such as City Fire
areas and cause the issuance of separate Marshal of Makati City, Regional Director of
title thereof in the name of PPI. bureau of fire protection and the private
agebcy. Clearly the suit involves conflicting
CCI questioned the said act of PPI in claims of ownership over the lots of
HLURB. The same case was elevated on Concorde Condominium and violations of
appeal to HLRUB board commissioners. In National Building Code resulted in the
both cases HLURB ruled in favor of CCI. PPI revocation of the occupancy permit.
did not appeal from the decision of HLURB
board of commissioners to the office of the
president thus, it became final and
executory.

At present, Baculio by himself and on behalf

of New PPI Corp., misrepresents to the
public and gov’t offices/agencies that the lot
where the building stands and the parking lot
are owned by the New PPI Corp., Baculio
requested that the building be subjected to
ocular inspection, the demolition of the
building as it is already 40 yrs old, cutting off
the electricity, and stationed security guards
on a rotation basis for 24 hrs within the
perimeter of the building.

CCI/ all unit owners urgently seek the SC for

the issuance of TRO /WPI against
respondents. And to hold them solidarily
liable for actual, moral, exemplary damages,
atty’s fees litigation expenses and cost of
suit.

The case was raffled to RTC Makati Branch

149 which was designated as Special
Commercial Court.

Baculio and New PPI Corp., filed an urgent

BENGUET ELECTRIC
COOPERATIVE v. NLRC,
G.R. No. 89070, May 18, 1992
motion to re-raffle, claiming that it is a regular
court which has jurisdiction over the case.
Peter Cosalan was elected General
Manager of Benguet Electric Cooperative
(BENECO). After receiving 3 audit
documents from COA, Cosalan adopted
Whether or not the NLRC gravely YES. The Board of Directors of a corporation
abused its discretion by releasing would not be held liable if they act for and in
the respondent board members behalf of the corporation within the scope of
from liability. its authority and in good faith. In this case,

VDA. DE ROXAS v. OUR
LADY'S FOUNDATION, G.R.
No. 182378, March 06, 2013
Sales vs. SEC (G.R. No. No.
L-54330, January 13, 1989)
several measures to correct the irregularities
found by the COA. Because of this, the
Board Members of BENECO adopted
several resolutions depriving Cosalan of his
salary and other benefits and suspending
him indefinitely. Later on, he was dismissed
without being informed. He discovered it only
later when he demanded for his salary.
Cosalan filed a complaint before the Labor
Arbiter. It found BENECO and respondent
board members liable. The NLRC reversed,
saying only BENECO is liable.
Salve Dealca Latosa was the owner of a
residential lot in Our Lady's Village in
Sorsogon. A quarter of her lot (112 sq.
meters) was encroached upon by Atty.
Henry Roxas, who did so because 92 sq.
meters of his land was taken by Our Lady's
Village for the construction of a subdivision
road.
Latosa filed a complaint against Atty. Roxas.
Atty. Roxas filed a third-party complaint
against Our Lady's Foundation (OLFI). After
due hearing, Atty. Roxas was directed to
return the subject portion of land to Latosa,
and OLFI was directed to reimburse Atty.
Roxas.
The RTC issued notices of garnishment
against Bishop Robert Arcilla-Maullon,
general manager of OLFI. On appeal, CA
declared the said notices as null and void.
Sipalay Mining sold to the State Investment
House 200,000,000 common shares of its
capital stock in the amount of P2.6M with the
condition that the stockbroker shall not sell
more than 1,000,000 shares per buyer but
subsequently, the restriction was modified to
5,000,000 shares per buyer. SHI transferred
its 200M common shares to Anslemo
Trinidad & Co. who in turn, transferred its
shares to Vulcan. Minority stockholders of
Sipalay Mining (petitioners) filed a petition to
nullify the sale of the shares to VULCAN and
Whether or not the CA erred in
declaring the Notice of
Garnishment void.
Whether the SEC has the power
to create a committee composed
of the SEC representative, as
Chairman, to supervise and
control the conduct of the
proceedings and perform the
functions of the Corporate
Secretary, in relation to the
regular annual stockholders'
meeting
41
the Board of Directors cannot escape liability
because they were guilty of gross
negligence and bad faith in directing the
affairs of the corporation by dismissing
Cosalan without cause and due process. As
such, they shall be solidarily liable, as
provided in Section 31 of the Corporation
Code.
NO. A corporation is a juridical entity with a
legal personality separate and distinct from
those acting for and on its behalf and, in
general, of the people comprising it. Hence,
the obligations incurred by the corporation
are its own alone, and not of its directors,
trustees, officers, stockholders, or members.
Moreover, Arcilla-Maullon was not
impleaded in the original case. Absent any
evidence of wrongdoing on his part, the
corporate fiction cannot be pierced to make
him personally liable.
Yes.The Court finds that the order of the
SEC creating the committee is fully
supported by P.D. No. 902-A that the
Commission shall have absolute jurisdiction,
supervision and control over all corporations,
partnerships or associations, who are the
grantees of primary franchise and/or a
license or permit issued by the government
to operate in the Philippines (1)
controversies arising out of intra-corporate
or partnership relations, between and among
stockholders members, or associates;

Fil-Estate Golf and
Development, Inc. v. Vertex
to enjoin VULCAN from voting the shares. A
Notice of Call was published, calling for the
payment of (20%) of unpaid subscriptions in
Sipalay Mining. Sec issued a resolution
ordering the Board of Directors and officers
of the corporation to call and hold said
regular meeting and a Committee composed
of one representative of the Securities and
Exchange Commission, as Chairman, and
one representatives each from the
respondents and the petitioners, as
members, is hereby formed to supervise and
control the conduct of the proceedings and
perform the functions of the Corporate
Secretary.
FEGDI was the developer of the Forest Hills
Golf and Country Club and, in consideration
for its financing support and construction
Whether or not the delay in the
issuance of a stock certificate can
be considered a substantial
42
between any or all of them and the
corporation, partnership or association of
which they are stockholders members or
associates, respectively; and between such
corporation, partnership or association and
the state insofar as it concerns their
individual franchise or right to exist as such
entity and (2) Controversies in the election or
appointments of directors, trustees, officers
or managers of such corporations,
partnerships or associations.
As correctly pointed out by the Solicitor
General, the case before the SEC involves a
controversy regarding the election of
directors of a corporation. It is apparent from
the foregoing that a controversy in the
election of directors of Sipalay Mining came
about because it was petitioners themselves
who had asked the Commission not to allow
the disputed 198,500,000 shares to be voted
on at the July 18, 1979 annual stockholders'
meeting of the corporation. . Respondent
Commission had to address itself to the
controversy by issuing its questioned order
dated June 13, 1980, directing the holding of
the annual stockholders' meeting of Sipalay
Mining for the year 1980 as mandated in its
by-laws, and creating a committee to
supervise and control the conduct of the
proceedings to insure an orderly
stockholders meeting and forestall possible
controversy in the sending of notices,
processing and validation of proxies and
closing of the stock and transfer book.
Certainly, the Commission cannot be
faulted, much less can it be said that it
exceeded its jurisdiction, for having taken all
proper measures to insure that an orderly
meeting and election are held in Sipalay
Mining in the light of the issues raised in SEC
Case No. 1751 pending before the
Commission.
Yes. The Court cited Raquel-Santos v. Court
of Appeals where it held that in “a sale of
shares of stock, physical delivery of a stock

Sales and Trading, Inc., G.R.
No.202079, June 10, 2013
Erquiaga v. CA, G.R. No.
47206, September 27, 1989
efforts, was issued several shares of stock of
Forest Hills.
Sometime in August 1997, FEGDI sold, on
installment, to RS Asuncion Construction
Corporation one Class “C” Common Share
of Forest Hills for P1,100,000.00. Prior to the
full payment of the purchase price, RSACC
sold, on February 11, 1999, the Class “C”
Common Share to respondent Vertex Sales
and Trading, Inc.. RSACC advised FEGDI of
the sale to Vertex and FEGDI, in turn,
instructed Forest Hills to recognize Vertex as
a shareholder. For this reason, Vertex
enjoyed membership privileges in Forest
Hills.
Despite Vertex’s full payment, the share
remained in the name of FEGDI. Seventeen
(17) months after the sale (or on July 28,
2000), Vertex wrote FEDGI a letter
demanding the issuance of a stock
certificate in its name. FELI replied, initially
requested Vertex to first pay the necessary
fees for the transfer. Although Vertex
complied with the request, no certificate was
issued. This prompted Vertex to make a final
demand on March 17, 2001.
Santiago de Erquiaga was the owner of
100% or 3,100 paid-up shares of stock of the
Erquiaga Development Corporation which
owns the Hacienda San Jose in Irosin,
Sorsogon. On November 4,1968, he entered
into an Agreement with Jose L. Reynoso to
sell to the latter his 3,100 shares (or 100%)
of Erquiaga Development Corporation for
P900,000 payable in installments on definite
dates fixed in the contract but not later than
November 30, 1968. Because Reynoso
failed to pay the second and third
installments on time, the total price of the
sale was later increased to P971,371.70
payable on or before December 17, 1969.
The difference of P71,371.70 represented
brokers' commission and interest.
breach as to warrant rescission of
the contract of sale?
Whether or not the Court of
Appeals erred in annulling the trial
court's order allowing Erquiaga to
vote the 3,100 shares of Erquiaga
Development Corporation without
having effected the transfer of
those shares in his name in the
corporate books?
43
certificate is one of the essential requisites
for the transfer of ownership of the stocks
purchased.”
In this case, Vertex fully paid the purchase
price by February 11, 1999 but the stock
certificate was only delivered on January 23,
2002 after Vertex filed an action for
rescission against FEGDI.
Under these facts, considered in relation to
the governing law, FEGDI clearly failed to
deliver the stock certificates, representing
the shares of stock purchased by Vertex,
within a reasonable time from the point the
shares should have been delivered. This
was a substantial breach of their contract
that entitles Vertex the right to rescind the
sale under Article 1191 of the Civil Code.
No. The Court found no reversible error in
the Court of Appeals' decision in annulling
the trial court's order: (1) allowing Erquiaga
to vote the 3,100 shares of Erquiaga
Development Corporation without having
effected the transfer of those shares in his
name in the corporate books; and (2)
authorizing Erquiaga to call a special
meeting of the stockholders of the Erquiaga
Development Corporation and to vote the
3,100 shares, without the pre-requisite
registration of the shares in his name. It is a
fundamental rule in Corporation Law
(Section 35) that a stockholder acquires
voting rights only when the shares of stock
to be voted are registered in his name in the
corporate books.
 44

As of December 17, 1968, Reynoso was Until registration is accomplished, the

able to pay the total sum of P410,000 to transfer, though valid between the parties,
Erquiaga who thereupon transferred all his cannot be effective as against the
shares (3,100 paid-up shares) in Erquiaga corporation. Thus, the unrecorded
Development Corporation to Reynoso, as transferee cannot enjoy the status of a
well as the possession of the Hacienda San stockholder; he cannot vote nor be voted for,
Jose, the only asset of the corporation. and he will not be entitled to dividends.
However, as provided in paragraph 3,
subparagraph (c) of the contract to sell,
Reynoso pledged 1,500 shares in favor of
Erquiaga as security for the balance of his
obligation. Reynoso failed to pay the balance
of P561,321.70 on or before December 17,
1969, as provided in the promissory notes he
delivered to Erquiaga. So, on March 2, 1970,
Erquiaga, through counsel, formally
informed Reynoso that he was rescinding
the sale of his shares in the Erquiaga
Development Corporation.

Subsequently, judgment was rendered in

favor of the plaintiff and against the
defendant Jose L. Reynoso, rescinding the
sale of 3,100 paid up shares of stock of the
Erquiaga Development Corporation to the
defendant, render a full accounting of the
fruits he received by virtue of said shares,
and to return said fruits received by him to
Erquiaga and pay Erquiaga actual damages.
CFI also authorized the plaintiff to vote not
only the 1,500 shares of stock in his name
but also the 1,600 shares in the name and
possession of the defendants.

On May 31, 1976, the Court of Appeals

rendered judgment holding that CFI of
Sorsogon acted with grave abuse of
discretion or in excess of jurisdiction in giving
private respondent voting rights on the 3,100
shares of stock of the Erquiaga
Development Corporation without first
divesting petitioners of their title thereto and
ordering the registration of the same in the
corporation books in the name of private
respondent.

Rural Bank of Salinas v. CA
(G.R. No. 96674, June 26,
1992)
SIAIN ENTERPRISES, INC. v.
CUPERTINO REALTY CORP.
AND EDWIN R. CATACUTAN
(G.R. No. 170782, June 22,
2009)
Clemente Guerrero executed a special
power of attorney in favor of his wife, Melania
Guerrero, granting her the full power to sell
473 shares of Rural Bank of Salinas.
Melania, as attorney in fact, executed two
Deeds of Assignment for the 473 shares and
subsequently presented the said deeds for
registration to the bank with a request for (1)
the transfer in the Bank’s stock and transfer
book, (2) cancellation of the certificates of
stock under the name of Clemente, and (3)
issuance of new certificates in the name of
the petitioners. However, the bank denied
said request.
Melania then filed with the SEC an action for
mandamus against the corporation and the
corporate secretary which SEC granted.
Siain Enterprises, Inc. (Siain) obtained a
loan from Cupertino Realty Corporation
(Cupertino) covered by a promissory note
signed by their respective presidents. As a
security for the loan, a real estate mortgage
over 2 parcels of land and other immovable
was executed by the petitioner.
Subsequently, a second promissory note
was signed in favor of Cupertino wherein
Siain's president signed it as a maker on
behalf of the corporation, and as a co-maker,
liable to Cupertino in her personal capacity.
The parties then executed an amendment of
the real estate mortgage to reflect the
increased amount of the loan.
Siain repeatedly demanded the release of
the loan covered by the amended real estate
mortgage. However, Cupertino contended
that it had long released the loan and
declared that petitioner's demand as made
to abscond from a just and valid obligation.
As a result, Cupertino instituted an
extrajudicial foreclosure proceedings over
the properties subject of the amended real
estate mortgage.
Petitioner filed a complaint with prayer for a
WON SEC was correct to grant
the writ of mandamus.
Whether or not the lower courts'
application of the doctrine of
piercing the veil of corporation
fiction is proper.
45
Yes, Sec. 63 provides that “shares of stock
issued are personal property and may be
transferred by delivery of the certificate
indorsed by the owner, attorney-in-fact, or
other leaglly authorized person to make the
transfer.” The court interpreted Sec. 63 that
the owner is at liberty to dispose shares
without restrictions or limitations except
when the corporation holds any unpaid
claims. The right of a transferee to have
stocks transferred flows from his ownership,
thus, whenever a corporation refuses to
transfer and register stocks, which duty is
ministerial on its part, mandamus may lie.
Yes. As a general rule, a corporation will be
deemed a separate legal entity until
sufficient reason to the contrary appears.
Such separate and distinct legal personality
of a corporation may be disregarded and the
veil of corporate fiction pierced when the
notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud or
defend crime.
Cupertino presented overwhelming
evidence that petitioner and its affiliate
corporation had received proceeds of the
increased loan. Sian, Yuyek Manufacturing
Corporation, and Siain Transport are
characterized by oneness of operations
vested in the person of a common president,
and unity in the keeping and maintenance of
their corporate books and records through
their common bookkeeper. Thus, it was
sufficiently shown that the foregoing
corporations are mere alter-ego of their
president.
 46

restraining order to enjoin the Notary Public

from proceeding with the public auction sale.
The Regional Trial Court (RTC) rendered a
decision dismissing petitioner's complaint.
On appeal, the Court of Appeals affirmed the
RTC's ruling. Both the lower courts upheld
the validity of the amended real estate
mortgage. In giving credence to Cupertino's
evidence that the additional loan proceeds
were received by Siain, the lower courts
applied the doctrine of piercing the veil of
corporate fiction to preclude petitioner from
disavowing receipt of the additional loan and
paying its obligation under the amended real
estate mortgage.
ANG-ABAYA, ET AL. VS. Petitioners and private respondent are Whether or not petitioners may be No, petitioners may not be held liable.
ANG - G.R. No. 178511, shareholders, officers and members of the held liable under Sec. 74 of the Stockholder's right to inspect corporate
December 4, 2008 board of directors of family-owned Corporation Code for refusing to books is not without limitations. The Court
corporations. These corporations filed a allow private respondent to found that the allegations of petitioners that
petition for damages with prayer for issuance examine the corporate books and respondent is conniving with some other
of TRO against respondent alleging among records. persons to fraudulently wrest control or
others, of conniving to fraudulently wrest management of the corporations are
control or management of the corporations. supported by official and other documents.
During its pendency, respondent sought Hence, their refusal is justified on the
permission for the inspection of the grounds that private respondent was not
corporate books of the corporations which acting in good faith and for a legitimate
was denied by the petitioners, arguing that purpose in making his demand for inspection
respondent was not acting in good faith and of the corporate books.
for a legitimate purpose in making his
demand for inspection of the corporate
books. Hence, respondent filed a complaint
against petitioners for violating Section 74, in
relation to Section 144, of the Corporation
Code.
PANTRANCO EMPLOYEES Gonzales family owns Macris Realty as well Whether or not the labor claims by No. Pantranco Properties are not owned by
ASSOCIATION, INC. V. as PNEI, which is engaged in transportation the former employees of PNEI the judgment debtor PNEI. Nowhere in the
NLRC, ET AL., - G.R. No. business with its terminal situated on the may be enforced against PNB, records was it shown that PNEI owned the
170689, March 17, 2009 Pantranco Properties registered under the PNB-Madecor, and Mega Prime. Pantranco properties. PNB, PNB-Madecor,
name of Macris. Incurring huge financial and Mega Prime are corporations with
losses, ownership over these corporations personalities separate and distinct from that
were transferred to their creditors. Macris, of PNEI and absent any valid reason, their
subsequently became PNB-Madecor, a separate identities must be maintained and
subsidiary of PNB. PNEI ceased its they cannot be treated as one.
operations resulting to labor claims filed by
its former employees. The Labor Arbiter
issued Writ of Execution commanding the

Villamor v. Umale (G.R. No.
172843, Sept. 24, 2014)
GERARDO LANUZA, JR.
AND ANTONIO OBLES v. BF
CORPORATION, SHANGRI-
LA PROPERTIES, INC.,
ALFREDO C. RAMOS, RUFO
B. COLAYCO, MAXIMO G.
LICAUCO III, AND BENJAMIN
C. RAMOS (G.R. No. 174938,
October 1, 2014)
NLRC Sherrifs to levy on the assets of PNEI
and also to proceed against PNB, PNB-
Madecor, and Mega Prime. The sherrifs then
proceeded to levy upon the Pantranco
Properties.
Pasig Printing Corporation (PPC) obtained
an option to lease with Mid-land Pasig which
covered the area where MC Home Depot is
leasing. PPC issued a resolution waiving its
rights, interests and participation in the
option to lease in favor of Atty. Villamor. MC
Home Depot issued post dated checks
covering the rentals and gave them to
Villamor, who in turn did not turnover these
checks nor its equivalent amount to PPC
upon encashment.
Hernando Balmores, a stockholder and
director of PPC, wrote a letter to PPC’s
directors informing them that Villamor should
be made to deliver siad checks. Due to the
directors’ inaction, he filed an intra-corporate
controversy complaint before the RTC
alleging that because of Villamor’s schemes
and devices amounting to fraud abd
misrepresentation, PPC’s assets have been
actually dissipated.
BF Corporation (BF) entered into several
agreements with Shangri-la Properties, Inc.
(SPI) for the construction of a mall and
multilevel parking structure. Despite SPI's
default in payment, it induced BF to continue
with the construction of the buildings using
its own fund and credit. Accordingly, SPI
misrepresented that it had funds to pay for
its obligation, and that the delay in payment
was simply a matter of delayed processing
of the billing statements. BF eventually
completed the construction, and SPI took
possession of the buildings while still owing
an outstanding balance to the former.
Notwithstanding BF's repeated demands,
SPI refused to pay the balance owed to it.
BF instituted an arbitration proceeding
where both parties failed to agree as to the
WON Balmores filed a derivative
suit.
Whether or not petitioners as
resigned directors of Shangri-la
Properties should be made
parties to the arbitration
proceedings to determine the
distinction between the latter's
personality and its board of
directors.
47
NO, a derivative suit provides for the
following requisites:
1. That a stockholder brings an action in the
name of the corporation;
2. That he was a stockholder when the
transactions, subject of action, occurred and
whenthe complaint was filed;
3. That he exerted all the reasonable efforts
to exhaust all remedies available;
4. That no appraisal rights are available for
the act;
5. That the suit is not a nuisance not a
harassment suit.
Balmores’ action failed to satisfy all
requisites specifically exhausting all
remedies available for failing to show such
and naming or impleading PPC as an
indispensable party nor did he allege that he
was filing in behalf of PPC.
Yes. A corporation is an individual with a
personality that is distinct and separate from
other persons including its stockholders,
officers, directors, representatives, and other
juridical entities. Because a corporation’s
existence is only by fiction of law, it can only
exercise its rights and powers through its
directors, officers, or agents, who are all
natural persons.
A submission to arbitration is a contract. As
such, the Agreement, containing the
stipulation on arbitration, binds the parties
thereto, as well as their assigns and heirs.
As a general rule, a corporation’s
representative who did not personally bind
himself or herself to an arbitration agreement
cannot be forced to participate in arbitration
proceedings made pursuant to an

law that should govern the said proceedings.
The trial court ordered the parties to conduct
the proceedings in accordance with The
Arbitration Law (R.A. 876). SPI filed and
omnibus motion, while BF filed an urgent
motion for clarification, both parties seeking
to clarify the term "parties" and whether SPI's
directors should be included in the arbitration
proceedings.
The trial court issued the order directing
service of demands upon all defendants in
BF's complaint. Accordingly, SPI's directors
were interested parties who must also be
included in arbitration proceedings to give
them the opportunity to ventilate their side of
the controversy, safeguard their interest and
fend off their respective positions.
Petitioners' motion for reconsideration was
denied. Thus, they filed a petition for
certiorari with the Court of Appeals.
However, their petition and subsequent
motion for reconsideration was both
dismissed.
Concept Builders, Inc. V. Private respondents are laborers, carpenters
NLRC G.R. No. 108734, May and riggers of Concept Builders, Inc.
29, 1996 (Petitioner). In 1981, petitioner terminated
the private respondents from employment
due to the expiration of their contracts of
employment and the completion of the
WON the NLRC committed grave
abuse of discretion in issuing the
break-open order
48
agreement entered into by the corporation.
However, there are instances when the
distinction between personalities of
directors, officers, representatives and of the
corporation are disregarded.
When corporate veil is pierced, the
corporation and persons who are normally
treated as distinct from the corporation are
treated as one person, such that when the
corporation is adjudged liable, these
persons, too become liable as if they were
the corporation. When there are allegations
of bad faith or malice against corporate
directors or representatives, it becomes the
duty of courts or tribunals to determine if
these persons and the corporation should be
treated as one. Without a trial, courts and
tribunals have no basis determining whether
the veil of corporate fiction should be
pierced.
When the courts disregard the corporation’s
distinct and separate personality from its
directors or officers, the courts do not say
that the corporation, in all instances and for
all purposes, is the same as its directors,
stockholders, officers and agents. Courts
merely discount the distinction and treat
them as one, in relation to a specific act, in
order to extend the terms of the contract and
the liabilities for all damages to erring
corporate officials who participated in the
corporation’s illegal acts.
In this case, the Arbitral Tribunal rendered a
decision finding that BF failed to prove the
existence of circumstances that render
petitioner’s and the other director’s solidarily
liable.
No, While it is a recognized principle that a
corporation is an entity separate and distinct
from its stockholders and from other
corporations to which it may be connected,
this separate personality may be
disregarded when it is used to defeat public

project in which they were hired. It was
however found that at the time of the
termination that the project had not yet been
completed.
Private respondents then filed a complaint
for illegal dismissal against petitioner. The
Labor Arbiter (LA) ruled in favor of the private
respondents which decision became final
and executory. A writ of execution was then
issued, but service of the writ failed since the
petitioner no longer occupies its premises.
Also, the employees in the premises claimed
Hydro Pipes Philippines, Inc. (HPPI) as their
employer and not petitioner. Subsequently, a
certain Dennis Cuyegkeng filed a third-party
claim with the LA alleging that the properties
sought to be levied in the premises are
owned by HPPI of which he is the Vice-
President.
Private respondents then filed a "Motion for
Issuance of a Break-Open Order," alleging
that HPPI and petitioner are one and the
same. HPPI opposed contending that HPPI
is separate and distinct from petitioner. HPPI
also argued that it is engaged in
manufacturing business while petitioner was
then engaged in construction. LA denied the
motion. On appeal, the NLRC reversed.
CRYSTAL V. BPI G.R. No. Sps. Raymundo and Desamparados Crystal
172428, November 28, 2008 (Sps. Crystal) bound themselves as sureties
for the loans obtained by Cebu Contractors
Whether or not CA correctly
awarded moral damages to BPI
49
convenience, justify wrong, protect fraud or
defend crime, or is used as a device to
defeat the labor laws, or as 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: (1) Control which is the
complete domination of policy and business
practice in respect to the transaction
attacked in such a manner that the
corporation 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 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.
In this case, both the petitioner and HPPI
submitted on the same day their respective
Information Sheets with SEC bearing the
same address and filed by the same person
who represents himself as the corporate
secretary of both corporations. Also, both
corporations had the same president, the
same board of directors, the same corporate
officers, and substantially the same
subscribers. Clearly, petitioner ceased its
business operations in order to evade
payment to private respondents of
backwages and to bar their reinstatement to
their former positions. HPPI is obviously a
business conduit of petitioner and its
emergence was skillfully orchestrated to
avoid the financial liability that already
attached to petitioner corporation. From the
foregoing, the application of the doctrine of
piercing the veil of corporate fiction is
warranted. SC then upheld the break-open
order.
No. A juridical person is generally not entitled
to moral damages because, unlike a natural
person, it cannot experience physical

Consortium Co. (CCCC) from the Bank of
the Philippine Islands-Butuan branch (BPI-
Butuan) and BPI - Cebu City branch (BPI-
Cebu).
CCCC failed to pay its loans to both BPI-
Butuan and BPI-Cebu when they became
due. Thus, BPI resorted to the foreclosure of
the chattel mortgage and the real estate
mortgage. To recover the deficiency, BPI
filed a complaint for sum of money against
the Sps.Crystal. RTC ruled in favor of BPI
and ordered the foreclosure of Sps. Crystal’s
properties.
Sps. Crystal then filed an action for
Injunction with Damages arguing that they
are mere guarantors of CCCC and that BPI
failed to first exhaust all the properties of
CCCC. RTC ruled in favor of BPI and
ordered Sps. Crystal to pay moral and
exemplary damages. CA affirmed.
50
suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish or
moral shock. In the case of People v. Manero
and Mamulao Lumber v. PNB, the SC ruled
that it is only when a juridical person has a
good reputation that is debased, resulting in
social humiliation, that moral damages may
be awarded. It is for this reason that CA
awarded moral damages to BPI after
recognizing the latter’s famliarity not only in
the Philippines but also in the whole world.
However, in the more recent cases of ABS-
CBN Corp. v. Court of Appeals, et al. and
Filipinas Broadcasting Network, Inc. v. Ago
Medical and Educational Center-Bicol
Christian College of Medicine (AMEC-
BCCM), the Court held that the statements
in Manero and Mambulao were mere obiter
dicta, implying that the award of moral
damages to corporations is not a hard and
fast rule. Indeed, while the Court may allow
the grant of moral damages to corporations,
it is not automatically granted; there must still
be proof of the existence of the factual basis
of the damage and its causal relation to the
defendant's acts. This is so because moral
damages, though incapable of pecuniary
estimation, are in the category of an award
designed to compensate the claimant for
actual injury suffered and not to impose a
penalty on the wrongdoer.
The spouses' complaint against BPI proved
to be unfounded, but it does not
automatically entitle BPI to moral damages.
Although the institution of a clearly
unfounded civil suit can at times be a legal
justification for an award of attorney's fees,
such filing, however, has almost invariably
been held not to be a ground for an award of
moral damages. The rationale for the rule is
that the law could not have meant to impose
a penalty on the right to litigate. Otherwise,
moral damages must every time be awarded
in favor of the prevailing defendant against

Clavecillia Radio System,
petitioner vs. Hon. Agustin
Antillon, as City Judge of
Municipal Court of Cagayan
de Oro City and New Cagayan
Grocery, respondents - G.R.
No. L-22238, February 18,
1967.
Enrique Razon, petitioner, vs.
INTERMEDIATE APPELLATE
COURT and Vicente B.
Chuidian, in his capacity as
Administrator of the Estate of
the Deceased Juan T.
Chuidian, respondents. - G.R.
No. 74306 March 16, 1992.
the New Cagayan Grocery filed a complaint
against the Clavecilla Radio System
alleging, in effect, that on March 12, 1963,
the following message, addressed to the
former, was filed at the latter's Bacolod
Branch Office for transmittal thru its branch
office at Cagayan de Oro: “REURTEL
WASHED NOT AVAILABLE REFINED
TWENTY FIFTY IF AGREEABLE SHALL
SHIP LATER REPLY POHANG”
The Cagayan de Oro branch office having
received the said message omitted, in
delivering the same to the New Cagayan
Grocery, the word "NOT" between the words
"WASHED" and "AVAILABLE," thus
changing entirely the contents and purport of
the same and causing the said addressee to
suffer damages. Clavecilla filed a motion to
dismiss. Thereafter, the City Judge denied
the motion to dismiss. In dismissing the
case, the lower court held that the Clavecilla
Radio System may be sued either in Manila
where it has its principal office or in Cagayan
de Oro City where it may be served. In
appealing, the Clavecilla Radio System
contends that the suit against it should be
filed in Manila where it holds its principal
office.
E. Razon, Inc. was organized in 1962 by
petitioner Enrique Razon for the purpose of
participating in the bidding for the arrastre
services in South Harbor, Manila. The
incorporators were Enrique Razon, Enrique
Valles, Luisa M. de Razon, Jose Tuazon, Jr.,
Victor L. Lim, Jose F. Castro and Salvador
Perez de Tagle. According to the petitioner,
some of the incorporators withdrew from the
said corporation. The petitioner then
distributed the stocks previously placed in
the names of the withdrawing nominal
Whether or not Clavecilla may be
sued only in Manila and not in
Cagayan de Oro on the ground
that it maintains its principal office
in Manila?
Whether or not Enrique Razon is
the owner of the 1500 shares of
stock?
51
an unsuccessful plaintiff. BPI may have been
inconvenienced by the suit, but we do not
see how it could have possibly suffered
besmirched reputation on account of the
single suit alone. Hence, the award of moral
damages should be deleted.
Yes. It is clear that the case for damages
filed with the city court is based upon tort and
not upon a written contract. Section 1 of Rule
4 of the New Rules of Court, governing
venue of actions in inferior courts, provides
in its paragraph (b) (3) that when "the action
is not upon a written contract, then in the
municipality where the defendant or any of
the defendants resides or may be served
with summons." Settled is the principle in
corporation law that the residence of a
corporation is the place where its principal
office is established. Since it is not disputed
that the Clavecilla Radio System has its
principal office in Manila, it follows that the
suit against it may properly be filed in the City
of Manila. The fact that it maintains branch
offices in some parts of the country does not
mean that it can be sued in any of these
places.
No. In the case of Embassy Farms, Inc. v.
Court of Appeals, Supreme Court ruled: ". . .
For an effective, transfer of shares of stock
the mode and manner of transfer as
prescribed by law must be followed. As
provided under Section 3 of the Corporation
Code, shares of stock may be transferred by
delivery to the transferee of the certificate
properly indorsed. Title may be vested in the
transferee by the delivery of the duly
indorsed certificate of stock . However, no
transfer shall be valid, except as between the

Westmond Bank v. Inland
Construction (March 23, 2009
- G.R. 123650)
incorporators to some friends, among them
the late Juan T. Chuidian to whom he gave
1,500 shares of stock. The shares of stock
were registered in the name of Chuidian only
as nominal stockholder and with the
agreement that the said shares of stock were
owned and held by the petitioner but
Chuidian was given the option to buy the
same.
The petitioner maintains that his aforesaid
oral testimony as regards the true nature of
his agreement with the late Juan Chuidian on
the 1,500 shares of stock of E. Razon, Inc. is
sufficient to prove his ownership over the
said 1,500 shares of stock.
Respondent incurred loan obligations from
petitioner secured by a Real Estage
Mortgage and Promissory Notes. The
president of Inland, Aranda, executed a
deed of assignment in favor of Abrantes,
executive vice president and general
manager of Hanil-Gonzales Corporation.
Abrantes assumed other obligations of
Inland and Aranda including the Promissory
Notes executed by Inland in favor of
petitioner. Respondent received a notice of
sheriff's sale foreclosing the REM, so
respondent filed an injunction suit against
petitioner. Petitioner bank alleged that it had
no knowledge nor it did give its conformity to
the alleged assignment of obligation covered
by the promissory note. RTC found that
petitioner bank ratified the acts of its
accounting officer, Calo, when its executive
WON Calo was clothed with
apparent authority to transact for
the petitioner bank.
52
parties until the transfer is properly recorded
in the books of the corporation. In the instant
case, there is no dispute that the questioned
1,500 shares of stock of E. Razon, Inc. are
in the name of the late Juan Chuidian in the
books of the corporation. From the point of
view of the corporation, therefore, Chuidian
was the owner of the 1,500 shares of stock.
In such a case, the petitioner who claims
ownership over the questioned shares of
stock must show that the same were
transferred to him by proving that all the
requirements for the effective transfer of
shares of stock in accordance with the
corporation's by laws, if any, were followed.
The law is clear that in order for a transfer of
stock certificate to be effective, the certificate
must be properly indorsed and that title to
such certificate of stock is vested in the
transferee by the delivery of the duly
indorsed certificate of stock. Since the
certificate of stock covering the questioned
1,500 shares of stock registered in the name
of the late Juan Chuidian was never indorsed
to the petitioner, the inevitable conclusion is
that the questioned shares of stock belong to
Chuidian.
Yes. It was shown that Calo was the one
assigned to transact on petitioner bank's
behalf respecting loan transactions of Inland,
as well as those of Hanil-Gonzales and
Abrantes. As such, there's a presumption
that Calo had authority to sign the deed. It
was also found that Abrantes notified the
petitioner bank of his assumption of Inland's
obligation and petitioner sent a reply
approving the same. Petitioner did not prove
by clear and convincing evidence that it
didn't cloth Calo with apparent authority
neither it did present any resolution from the
board confirming Calo's lack of authority.

Republic (PCGG) vs.
Sandiganbayan, Tantoco Jr.,
Dominador Santiago
(November 21, 1991 - G.R.
90478)
Uy, et al. v. Villanueva, et al.,
G.R. No. 157851, June 29,
2007
53
committee failed to repudiate the
assignment within a reasonable time.
Private respondents are defendants in a civil WON petitioner can object to the No. Rule 26, Section 1 states that if the party
case before Sandiganbayan commenced by interrogatories served on it in served with interrogatories is a juridical
PCGG. Instead of filing an answer, accordance with Rule 26. entity, the same shall be answered by any
respondents filed a motion to strike out some officer thereof competent to testify in its
portions of the complaint and for bill of behalf. Therefore, the contention of PCGG
particulars. PCGG filed an opposition. that the interrogatories are addressed only to
Respondent then presented a motion for the latter, without naming any specific
leave to file interrogatories. PCGG filed a commissioner/officer thereof is utterly of no
motion to strike out the motion and consequence.
interrogatories. Sandiganbayan denied both
motions. Respondent then again filed an
amended interrogatories to plaintiff which
was now admitted by Sandiganbayan.
PCGG filed an opposition. Sandiganbayan
issued a resolution reiterating by implication
the permission to serve the amended
interrogatories on PCGG. PCGG now filed a
petition for certiorari alleging that the
interrogatories aren't specific and do not
name particular individuals to whom they are
profounded.
Countrywide Bank of La Carlota Inc. is a Whether or not they are corporate No. It has been held that an office is created
private banking corporation engaged in rural officers of the bank and may be by the charter of the corporation and the
banking and other allied services through its held liable for illegal dismissal. officer is elected by the directors or
branches nationwide. Sometime in 1998, it stockholders. On the other hand, an
experienced liquidity problems and its employee usually occupies no office and
treasure department was unable to comply generally is employed not by action of the
with its branches demands for fresh funds. directors or stockholders, but by the
Its various branches eventually experienced managing officer of the corporation, who
bank runs. Several depositors were alarmed. also determines the compensation to be paid
Thus, a group holding 70% of the bank’s to such employee. Given this distinction,
deposit accounts met, and agreed to petitioners are neither officers nor
organize themselves into a committee of employees of the bank. They are mere
depositors. Yusay was elected Chairman of depositors who sought to manage the bank
the board, while Uy was secretary. It was in order to save it.
formed to protect their collective interests
and to increase their chances recovering
their deposits. Realizing that their bid to
rehabilitate the bank had failed, the
committee disbanded. Eventually, 3 cases
for illegal dismissal were filed. One of which
was Villanueva. She avers that she was a
regular employee of countrywide bank,
south cotabato branch. She received a

Visayan, et al. v. NLRC, et al.,
G.R. No. 69999, April 30,
1991
APODACA V. NLRC
G.R.No. 80039, April 18, 1989
memorandum accepting her courtesy
resignation, but she denies having submitted
one. Subsequently, Uy and Yusay were
made solidarily liable with the bank. Hence,
this petition.
Fujiyama Hotel and Restaurant, Inc. was
formally organized in 1978 with Rivera
holding a majority interest in the corporation.
The corporation immediately opened
Fujiyama hotel and restaurant with Akasako
as its chef and restaurant supervisor.
Subsequently, operation and management
of the corporation, including control and
possession of all its assets, were forcibly
taken by Jureidini and Tsuchiya from the
owners thereof by virtue of a writ of
preliminary injunction issued by RTC Manila.
During the 1-year period that they took over
the corporation, before the original owners
got the corporation back, they terminated the
original employees of the corporation who
were validly hired by its board of directors,
and hired new employees to replace the
original employees. When the original
owners took control of the corporation, it
reinstated the previous employees hired by
it, and replaced the employees hired by
Jureidini and Tsuchiya. Thus, the terminated
employees filed a complaint for nillegal
dismissal against the corporation, akasako,
jureidini, and tsuchiya.
Petitioner was employed in respondent
corporation. In that corporation, petitioner
was convinced to subscribe to its shares of
stock. Petitioner paid P37,500 for the
subscription. Petitioner was appointed
President and General Manager of the
corporation, and after 10 years, he resigned.
Petitioner then filed a case in the NLRC for
unpaid wages, allowances, and bonus
compensation against Respondent
corporation. Respondent corporation
admitted it owed Petitioner P17,060.7.
However responded corporation deducted
that amount, to the amount owed by
petitioner to the corporation which is
Whether or not there is privity of
contract between the petitioners
and private respodents as to
establish an employer- employee
relationship between the parties.
1) Whether or not the National
Labor Relations Commission
(NLRC) has jurisdiction to resolve
a claim for non-payment of stock
subscriptions to a corporation.
2) Whether or not an obligation of
an employee to his employer,
arising from an unpaid
subscription, be offset against a
money claim of an employee
against the employer.
54
There is none. A corporation can act only
through its board of directors. "The law is
settled that contracts between a corporation
and third persons must be made by or under
the authority of its board of directors and not
by its stockholders. Hence, the action of the
stockholders in such matters is only advisory
and not in any wise binding on the
corporation."
In the case at bar, We hold that all acts done
solely by Jureidini and Tsuchiya allegedly,
for and in behalf of private respondent during
the period from June, 1981 up to May 31,
1982 were not binding upon respondent
corporation.
1) NO. The NLRC has no jurisdiction to
determine such intra-corporate dispute
between the stockholder and the corporation
as in the matter of unpaid subscriptions. This
controversy is within the exclusive
jurisdiction of the Securities and Exchange
Commission.
2) NO. The amount of P17,060.7 owed by
the employer to the employee representing
the unpaid wages, allowances and bonus
compensation, cannot be deducted from the
amount of P95,439.93 representing the
remaining balance of unpaid subscribed
shares of stock.

PEOPLE V. DUMLAO AND
GONZALES
G.R. No. 168918, March 2,
2009
Maria Clara Pirovana Et Al Vs.
The De La Rama Steamship
Co.,
G.R. No. L-5377, December
29, 1954
P95,439.93. The number P95,439.93
represented the unpaid balance for the
shares of stock he previously subscribed to.
Respondent Dumlao, a member of the GSIS
Board of Trustees, executed a lease-
purchase agreement with respondent La'o
over GSIS properties consisting of three
parcels of land and their associated
improvements. The Office of the
Ombudsman determined that the lease-
purchase agreement was grossly
advantageous to the government and so
charged Dumlao, La'o and the rest of the
people involved in the lease-purchase
agreement with violation of the Anti-Graft
and Corrupt Practices act. Dumlao in his
defense averred that the lease-purchase
was non existent since only 3 out of 7 of the
Board of Trustees of the GSIS signed the
minutes of the meeting for the lease-
purchase agreement. 4 out of 7 must sign
the minutes of the meeting according to
Dumlao before the lease-purchase can be
deemed executed. Dumlao then filed a
motion to dismiss grounded on the above as
basis.
Enrico Pirovano was the President and
General Manager of the De la Rama
Steamship Company. Early in 1941 the
company insured the life of said Enrico
Pirovano in various Philippine and American
Life Insurance companies.He was killed by
the Japanese. the current President of De la
Rama Steamship proposed that it is but fit
and proper that the company which owes so
much to the deceased should make some
provision for his children. He proposed that
out of the proceeds of the insurance policies
the sum of P400,000 be set aside for
Pirovano’s minor children, said sum of
money to be convertible into 4,000 shares of
Whether or not the motion to
dismiss is valid.
Whether or not the defendant
corporation may give by way of
donation the proceeds of said
insurance policies to the minor
children of the late Enrico
Pirovano under the law or its
articles of corporation, or is that
donation an ultra vires act?
55
First, the set off or deduction was pre mature
since there was no call for payment of the
unpaid subscribed shares of stock from the
respondent corporation.
Second, the set off or deduction was
unlawful since Article 113 of the Labor Code
does not allow such a deduction from the
wages of the employees by the employer.
No, the motion to dismiss is not valid. The
lease-purchase agreement was deemed
executed. There's a difference between
minutes of the meeting and a board
resolution. A board resolution is a company
act, approving a transaction of the
corporation by its members. The non-signing
by the majority of the members of the GSIS
Board of Trustees of the said minutes does
not necessarily mean that the supposed
resolution was not approved by the board. A
board resolution affirming the lease-
purchase agreement exists and is valid
without a complete signing of the minutes of
the meeting for the lease-purchase
agreement.
YES. The donation is valid and binding.
The provisions second article (g) (j) of the
articles of incorporation of the Dela Rama
Co. gives the corporation broad and almost
unlimited powers to carry out the purposes
for which it was organized among them.
Granting arguendo that the donation given
by Pirovano children is outside the scope of
the powers of the defendant corporation, or
the scope of the powers that it may exercise
under the law, or it is an ultra vires act, still it
may said that the same cannot be
invalidated, for the reason alone, it
appearing that the donation represents not
only the act of the Board of Directors but of

the stock of the Company, at par, or 1,000
shares for each child. A resolution was
adopted to carry out the proposal and
submitted to the stockholders of the De la
Rama company at a meeting properly
convened, and on that same date the same
was duly approved. SEC rendered its
opinion that the donation was void because
the corporation could not dispose of its
assets by gift and therefore the corporation
acted beyond the scope of its corporate
powers.
In 1951, in view of the failure of compliance
with the conditions to which the above
donation was made subject, and in view of
the opinion of the SEC Commissioner, the
majority of the stockholders' voted to revoke
the resolution approving the donation to the
Pirovano children.
BARBA V. LICEO DE Petitioner was hired as medical
CAGAYAN UNIVERSITY, officer/school physician by Respondent.
G.R. No. 193857, November Later on, she was chosen by respondent to
28, 2012 be the recipient of a scholarship grant to
pursue a three-year residency training in
VMMC. Thereafter, she was appointed
Acting Dean and eventually appointed as
Dean of the College of Physical Therapy by
respondent’s President, Dr. Golez. Because
of drastic decreased of number of student
enrollees in her department during her
tenure, she was informed that her deanship
will terminate upon the end of school year.
Thereafter, the college ceased operations
and petitioner went on leave. A letter was
sent to petitioner informing her to return to
work as full-time faculty professor/member
as also indicated in the grant of scholarship
as an agreement. Petitioner however claims
for separation pay as there exists a demotion
which constitutes dismissal. LA decided in
favor of respondent finding no constructive
dismissal. NLRC reversed the decision.
Respondent filed an appeal before CA which
decided that there was no constructive
dismissal but did not touch upon the
petitioner's issue on jurisdiction of LA and
Whether or not her appointment is
a corporate office which divest
jurisdiction from LA and NLRC.
56
the stockholders by ratifying the resolution
duly approved by the board. Such ratification
made the act perfectly valid and enforceable.
NO. In respondent’s by-laws, there are four
officers specifically mentioned, namely, a
president, a vice president, a secretary and
a treasurer. In addition, it is provided that
there shall be other appointive officials, a
College Director and heads of departments
whose appointments, compensations,
powers and duties shall be determined by
the board of directors. A College Dean is not
among the corporate officers mentioned in
respondent’s by-laws. Petitioner, being an
academic dean, also held an administrative
post in the university but not a corporate
office as contemplated by law. Petitioner
was not directly elected nor appointed by the
board of directors to any corporate office but
her appointment was merely approved by
the board together with the other academic
deans of respondent university in
accordance with the procedure prescribed in
respondent’s Administrative Manual.
Moreover, the CA, in its amended decision
erroneously equated the position of a
College Director to that of a College Dean
thereby concluding that petitioner is an
officer of respondent.

Simny G. Guy, V. Gilbert G.
Guy\, G.R. No. 184068, April
19, 2016
NLRC, considering her appointment is a
corporate office. On motion for
reconsideration, the CA reversed its own
ruling, favorably to petitioner, this time
conceding to the fact that LA or NLRC has
no jurisdiction.
Petitioner Simny G. Guy (Simny) is a
stockholder of record and member of the
board of directors of the Goodland
Company, Inc. (GCI). Respondents are also
GCI stockholders of record who were
allegedly elected as NEW directors by virtue
of the assailed stockholders' meeting held on
7 September 2004. On 10 September 2004,
Paulino Delfin Pe and Benjamin Lim
(stockholders of record of GCI) informed
petitioner that they had received a notice
dated 31 August 2004 calling for the holding
of a special stockholders’ meeting on 7
September 2004 at the Manila Diamond
Hotel. On 22 September 2004, or fifteen (15)
days after the stockholders’ meeting,
petitioner received the aforementioned
notice.
57
1. Whether or not the 1. YES. Date of Sending: Sept 2
stockholders meeting was Date of Meeting: Sept 7 or 5 days after
properly sent. Date of Receipt: Sept 22
2. Whether or not the meeting was The provisions only require the
called by a proper person. sending/mailing of the notice of a
3. Whether or not Grace Cheu is stockholders' meeting to the stockholders of
entitled to such notice. the corporation. Sending/mailing is different
from ailing or service under the Rules of
Court. Had the lawmakers intended to
include the stockholder's receipt of the
notice, they would have clearly reflected
such requirement in the law. Absent that
requirement, the word "send" should be
understood in its plain meaning. For a
stockholders' special meeting to be valid,
certain requirements must be met with
respect to notice, quorum and place. In
relation to the above provision of B.P. 68,
one of the requirements is a previous written
notice sent to all stockholders at least one (1)
week prior to the scheduled meeting, unless
otherwise provided in the by-laws.
Under the by-laws of GCI, the notice of
meeting shall be mailed not less than five (5)
days prior to the date set for the special
meeting.
2. Yes. Under Section 3, Article IV of the By-
laws of Goodland, respondent Gilbert G.
Guy as Vice President of the corporation is
qualified to act as president.
Section 3 which provides that "the Vice
President, if qualified, shall exercise all of the
functions and perform all the duties of the
President, in the absence or disability, for
any cause, of the latter." As correctly pointed
out by defendants [respondents], the
applicable provisions of the by-laws of
Goodland are Article II, Sec. 2 which
provides that the "special meeting of the
stockholders may be called . . . by order of

GONZALES VS PNB G.R. Gonzales instituted a suit, as a taxpayer,
NO. L-33320 MAY 30, 1983 against Sec. of Public Works and
Communications, the Commissioner of
Public Highways, and PNB for alleged
anomalies committed regarding the bank’s
extension of credit to import public works
equipment intended for the massive
Whether or not Petitioner may
compel PNB to produce its books
and records upon request.
58
the President and must be called upon the
written request of stockholders registered as
the owners of one-third (1/3). Defendant
Gilbert [respondent Guy] is the owner of
more than one-third (1/3) of the outstanding
stock of Goodland. In fact, it is around
79.99%. Thus, pursuant to Art. II, Sec. 2 of
the By-laws of Goodland, defendant Gilbert
[respondent Guy] may validly call such
special stockholders' meeting.
3. No, Cheu was not a stockholder of record
of GCI and was therefore not entitled to any
notice of meeting. Section 63 of the
Corporation Code provides:
Xxx
No transfer, however, shall be valid, except
as between the parties, until the transfer is
recorded in the books of the corporation so
as to show the names of the parties to the
transaction, the date of the transfer, the
number of the certificate or certificates and
the number of shares transferred.
The evidence presented by Cheu to prove
that she was a stockholder of record — valid,
existing and uncancelled Goodland Stock
Certificate does not satisfy the requirements
imposed by the Corporation Code and the
by-laws of GCI. A "stockholder of record" is
defined as follows: A person who desires to
be recognized as stockholder for the
purpose of exercising stockholders' right
must secure standing by having his
ownership of share recorded on the stock
and transfer book. Thus, only those whose
ownership of shares are duly registered in
the stock and transfer book are considered
stockholders of record and are entitled to all
rights of a stockholder.
No. The right of inspection granted to a
stockholder under Section 51 of Act No.
1459 has been retained, but with some
modification.
SECTION 51: The record of all business
transactions of the corporation and the
minutes of any meeting shall be open to the

development program. Petitioner bought 1
share of PNB stocks in order to gain standing
as a stockholder. The petitioner has alleged
that his written request for such examination
was denied by the respondent. The bank
answered denying his request for being not
germane to his interest and for the cloud of
doubt as to his real intention and purpose in
acquiring said share. Petitioner thereafter
sought to inquire and ordered PNB to
produce its books and records which the
Bank refused, invoking the provisions from
its charter created by Congress.
SEAOIL PETROLEUM VS Seaoil Petroleum Corporation bought one
AUTOCORP GR NO. 164326 unit of ROBEX Excavator from Autocorp
OCTOBER 17, 2008 Group. It was paid in 12 monthly
installments. The sales agreement was
embodied in the Vehicle Sales Invoice.
Documents were signed by Francis Yu,
president of Seaoil, on behalf of said
corporation. Furthermore, it was agreed that
despite delivery of the excavator, ownership
thereof was to remain with Autocorp until the
obligation is fully settled. Seaoil, on the other
hand issued 12 checks which served as
payment thereof. The remaining 10 checks
were not honored by the bank since Seaoil
requested that payment be stopped. Seaoil
alleged that the transaction between Seaoil
and Autocorp were only utilized as conduits
to settle the obligation of one foreign entity
named UnilineAsia in favor of another
foreign entity, Focus Point International,
Incorporated. The real transaction is that
Uniline, through Paul Rodriguez. Rodriguez
is a stockholder and director of Autocorp. He
is also the owner of Uniline. On the other
hand, Yu is the president and stockholder of
Seaoil and is at the same time owner of
1. Whether or not parol evidence
can be used to incorporate into
contract additional
contemporaneous conditions.
2. Whether or not, given the facts
in evidence, the lower courts
should have pierced the corporate
veil.
59
inspection of any director, member or
stockholder of the corporation at reasonable
hours.
the new Code has prescribed limitations to
the same. It is now expressly required as a
condition for such examination that the one
requesting it must not have been guilty of
using improperly any information through a
prior examination, and that the person
asking for such examination must be "acting
in good faith and for a legitimate purpose in
making his demand."
The Philippine National Bank is not an
ordinary corporation. Having a charter of its
own, it is not governed, as a rule, by the
Corporation Code of the Philippines. Section
4 of the said Code. The inspection sought to
be exercised by the petitioner would be
violative of the provisions of its charter of
PNB.
1. No, parol evidence cannot be utilized to
incorporate into contract additional
contemporaneous conditions. The rules
provide that although parol evidence is
admissible to explain the meaning of a
contract, it cannot serve the purpose of
incorporating into the contract additional
contemporaneous conditions which are not
mentioned at all in the writing unless there
has been fraud or mistake. Evidence of a
prior or contemporaneous verbal agreement
is generally not admissible to vary, contradict
or defeat the operation of a valid contract.
The Vehicle Sales Invoice is the best
evidence of the transaction.
2. No. Rodriguez is a person separate and
independent from Autocorp. Whatever
obligations Rodriguez contracted cannot be
attributed to Autocorp and vice versa. The
transaction under the Vehicle Sales Invoice
is separate and distinct from that under the
Lease Purchase Agreement. In the former, it
is Seaoil that owes Autocorp, while in the
latter, Uniline incurred obligations to Focus.
There was never any allegation, much less
any evidence, that Autocorp was merely an

Focus. Allegedly, Uniline chartered MV Asia
Property from its owner Focus. Uniline was
not able to settle the said amount. In short,
Seaoil claims that the real transaction is that
Uniline, through Rodriguez, owed money to
Focus. In lieu of payment, Uniline instead
agreed to convey the excavator to Focus.
This was to be paid by checks issued by
Seaoil but which in turn were to be funded by
checks issued by Uniline. Autocorp filed a
complaint for recovery of personal property
with damages and replevin in the Regional
Trial Court. The trial court ruled in favor of
Autocorp Group stating that the transaction
between Autocorp and Seaoil was a simple
contract of sale payable in installments. It
also held that the obligation to pay plaintiff
the remainder of the purchase price of the
excavator solely devolves on Seaoil. Paul
Rodriguez, not being a party to the sale of
the excavator, could not be held liable.
Security Bank and Trust Sta. Ines Melale Corporation (‘Sta. Ines’) is
Company, Inc.vs Rodolfo M. in logging operations & a holder of a Timber
Cuenca, G.R. No. 138544, License Agreement. Security Bank granted
October 3, 2000 Sta. Ines a credit line in the amount of 8M
until November 30, 1981 to meet
capitalization requirements. To secure
payment, it executed a 1)chattel mortgage
over some of its machineries and its
President Rodolfo Cuenca 2)executed an
Indemnity agreement in favor of SecBank
whereby he bound himself jointly and
severally with Sta. Ines. When Cuenca
resigned, Sta Ines availed of its credit line
however encountered difficulty in making the
payments; so they requested SecBank for a
complete restructuring of its credit line. It was
then approved but without notice to or the
prior consent of Cuenca (being surety of
previous credit line).
PONCE VS. ALSONS Fausto Gaid was an incorporator of ACC
CEMENT CORPORATION having subscribed to and fully paid 239,500
G.R. No. 105774 December shares. Vicente Ponce and Fausto Gaid
10, 2002 executed a “Deed of Undertaking” and
“Indorsement” whereby the latter
acknowledges that the former is the owner of
WON the 1989 Loan Agreement
novated the original credit
accommodation and Cuenca’s
liability under the Indemnity
Agreement.
Whether or not the transfer of
shares of stock not recorded in
the stock and transfer book of the
corporation is nonexistent insofar
as the corporation is concerned
and no certificate of stock can be
60
alter ego of Uniline, or that the two
corporations’ separate personalities were
being used as a means to perpetrate fraud
or wrongdoing. It is settled that a corporation
has a personality separate and distinct from
its individual stockholders or members, and
is not affected by the personal rights,
obligations and transactions of the latter.
The corporation may not be held liable for
the obligations of the persons composing it,
and neither can its stockholders be held
liable for its obligation. This Court has
recognized instances when the corporation’s
separate personality may be disregarded.
However, we have also held that the same
may only be done in cases where the
corporate vehicle is being used to defeat
public convenience, justify wrong, protect
fraud, or defend crime. Moreover, the
wrongdoing must be clearly and convincingly
established.
Yes. There is novation; indemnity agreement
by Cuenca is extinguished. Several
incompatibilities between the 1989
Agreement and the 1980 original obligation
demonstrate that the two cannot
coexist(amount, purpose, and term).
Since Cuenca did not impliedly waive his
consent for the novated credit
accommodation, such clause should be
understood in the context of the ₱8 million
limit and the November 30, 1981 term. It did
not give the bank or Sta. Ines any license to
modify the nature and scope of the original
credit accommodation.
A transfer of shares of stock not recorded in
the stock and transfer book of the
corporation is non-existent as far as the
corporation is concerned. As between the
corporation on the one hand, and its
shareholders and third persons on the other,

PHILIPPINE RACE HORSE V.
PIEDRAS NEGRAS G.R. No.
192659 December 2, 2015
Premium Marble Resources
Inc. versus CA and
International Corporate Bank -
G.R. No. 96551, November 4,
1996,
said shares and he was therefore
assigning/endorsing the same to Ponce. No
certificates of stock corresponding to the
239,500 subscribed and fully paid shares of
Gaid were issued in the name of Fausto G.
Gaid and/or Ponce. Despite repeated
demands, the defendants refused and
continue to refuse without any justifiable
reason to issue to Ponce the certificates of
stocks corresponding to the 239,500 shares
of Gaid, in violation of Ponce’s right to secure
the corresponding certificate of stock in his
name.
PRHTAI, through its president, Rogelio J.
Catajan, entered into a contract (first
contract) with Fil-Estate involving the
construction of housing units
P67,453,000.00. Fil-Estate then later
assigned its rights and obligations under the
project to PNCDC, its subcontractor. A
second contract was forged between
PRHTAI and PNCDC for P80,324,788.00.
Then PRHTAI and PNCDC signed the third
contract for the construction of the same
housing units, but this time for the revised
amount of P101,150,000.00
In 1982, Ayala Investment and Development
Corporation (Ayala) issued 3 checks in the
aggregate amount P31,663.88 payable to
Premium Marble Resources, Inc. (Premium)
and drawn against Citibank. In 1982, former
officers of the Premium headed by Belen,
without any authority whatsoever from
61
issued in the name of the the corporation looks only to its books for the
transferee purpose of determining who its shareholders
are. It is only when the transfer has been
recorded in the stock and transfer book that
a corporation may rightfully regard the
transferee as one of its stockholders.
Whether or not Catajan exceeded Contracts entered into by a corporate officer
his authority when it agreed to pay or obligations assumed by such officer for
PNCDC an increased contract and in behalf of the corporation are binding
for price in the amount of on said corporation, if such officer has acted
P101,150,000.00 within the scope of his authority, or even if
such officer has exceeded the limits of his
authority, the corporation still ratifies such
contracts or obligations. The doctrine of
apparent authority provides that a
corporation will be estopped from denying
the agent’s authority if it knowingly permits
one of its officers or any other agent to act
within the scope of an apparent authority,
and it holds him out to the public as
possessing the power to do those acts.
Apparent authority is derived not merely
from practice. Its existence may be
ascertained through (1) the general manner
in which the corporation holds out an officer
or agent as having the power to act or, in
other words, the apparent authority to act in
general, with which it clothes him; or (2) the
acquiescence in his acts of a particular
nature, with actual or constructive
knowledge thereof, whether within or beyond
the scope of his ordinary powers.
WON the filing of the case for NO. By the express mandate of the
damages against ICB was Corporation Code (Section 26), all
authorized by a duly constituted corporations duly organized pursuant
Board of Directors of Premium. thereto are required to submit within the
period therein stated (30 days) to the
Securities and Exchange Commission the
names, nationalities and residences of the

Aquilino Rivera, Isamu
Akasako and Fujiyama Hotel
& Restaurant vs The Hon.
Alfredo Florendo (CFI Manila),
Lourdes Jureidini and Milagros
Tsuchiya - G.R. No. L-57586,
October 8, 1986,
62
Premium deposited the above-mentioned directors, trustees and officers elected. In
checks to the current account of his conduit the present case, although there were newly
corporation, Intervest Merchant Finance elected officers for the year 1982, Premium
(Intervest) which the latter maintained with failed to show proof that this election was
the International Corporate Bank (ICB). reported to the SEC. In fact, the last entry in
Although the checks were clearly payable to their General Information Sheet with the
the Premium and crossed on their face and SEC, as of 1986, showed Belen et. Al. as
for payees account only, defendant bank officers.
accepted the checks to be deposited to the
current account of Intervest and thereafter
presented the same for collection from ICB
which subsequently cleared the same thus
allowing Intervest to make use of the funds
to the prejudice of the Premium. Premium
has demanded upon the ICB to restitute the
amount representing the value of the checks
but latter refused. As a result of the illegal
and irregular acts perpetrated by the ICB, the
Premium was damaged.
Aquilino Rivera (Rivera) and four other 1. WON the Corporation may 1. Yes. Under Sec. 63 of the Corporation
incorporators organized the Fujiyama Hotel refuse the registration of the Code, shares of stock may be transferred by
& Restaurants, Inc (Fujiyama), which was respondents’ shares. delivery of the certificate after indorsement
registered under Philippine Laws. Isamu by the owner or his attorney-in-fact or other
Akasako (Akasako), a Japanese national person legally authorized to make the
and the alleged real owner of the shares of transfer. By this provision it is evident that
stock in the name of Rivera, sold 2,550 Rivera’s indorsement must be obtained
shares of stocks to Milagros Tsuchiya before any transfer of the questioned shares
(Tsuchiya) and Lourdes Jureidini (Jureidini) is effected. Thus, the Corporation’s refusal
for a consideration of Php 440,000 with the for the registration of the shares of stock in
assurance that Tsuchiya will be made the names of Jureidini and Tsuchiya is
President, and Jureidini will be made director proper. Also, special action for mandamus
of the corporation after the purchase of the as a remedy to compel Rivera's indorsement
shares of stocks. Rivera assured Tsuchiya is not proper. The proper action should be
that he would sign the stock certificates as specific performance.
the shares of stocks were registered under
Rivera’s name. After the sale was complete,
Rivera refused to make the indorsement
unless he is also paid. The buyers attempted
to register the stock certificates with the
corporation but it was refused.Tsuchiya and
Jureidini filed a special action for Mandamus
and damages with preliminary injunction
and/or receivership against the petitioners
with the CFI Manila. The CFI granted the
preliminary mandatory injunction, allowing

the buyers to manage the business upon
filing a bond.
Ong Yong v. Tui 1. The construction of the Masagana Citimall
in Pasay City was threatened with stoppage
and incompletion when its owner, the First
Landlink Asia Development Corporation
(FLADC), which was owned by the Tius,
encountered dire financial difficulties.
2. The Tius invited the Ongs, to invest in
FLADC. Under the Pre-Subscription
Agreement they entered into, the Ongs and
the Tius agreed to maintain equal
shareholdings in FLADC.
3. In addition, there were agreements that
some positions like President, Vice president
secretary, treasurer among others, both ong
yong and tuis will have representatives
respectively
4. The relationship was short-lived when ong
yong rescinded the contract on alleged
dispute and conflict regarding positions
taken and disregarded.
Whether or not rescission is
proper?
63
NO. FLADC was originally incorporated with
an authorized capital stock of 500,000
shares with the Tius owning 450,200 shares
representing the paid-up capital. When the
Tius invited the Ongs to invest in FLADC as
stockholders, an increase of the authorized
capital stock became necessary to give each
group equal (50-50) shareholdings as
agreed upon in the Pre-Subscription
Agreement. The authorized capital stock
was thus increased from 500,000 shares to
2,000,000 shares with a par value of P100
each, with the Ongs subscribing to
1,000,000 shares and the Tius to 549,800
more shares in addition to their 450,200
shares to complete 1,000,000 shares. Thus,
the subject matter of the contract was the
1,000,000 unissued shares of FLADC stock
allocated to the Ongs. Since these were
unissued shares, the parties Pre-
Subscription Agreement was in fact a
subscription contract as defined under
Section 60, Title VII of the Corporation Code:
Any contract for the acquisition of unissued
stock in an existing corporation or a
corporation still to be formed shall be
deemed a subscription within the meaning of
this Title, notwithstanding the fact that the
parties refer to it as a purchase or some
other contract (Italics supplied).
A subscription contract necessarily involves
the corporation as one of the contracting
parties since the subject matter of the
transaction is property owned by the
corporation its shares of stock. Thus, the
subscription contract (denominated by the
parties as a Pre-Subscription Agreement)
whereby the Ongs invested P100 million for
1,000,000 shares of stock was, from the
viewpoint of the law, one between the Ongs
and FLADC, not between the Ongs and the
Tius. Otherwise stated, the Tius did not
contract in their personal capacities with the
Ongs since they were not selling any of their

Hacienda Cataywa/
Villanueva, et al. v. Lorezo,
G.R. No. 179640, March 18,
2015
Rosario Lorezo was informed by the Social
Security System (SSS) Western Visayas
Group that she cannot avail the retirement
benefits since she has only paid for 16
months, which is 104 months short of the
minimum requirement of 120 months to be
Whether or not the SSC
committed reversible error in
finding that Mancy & Sons
Enterprises, Inc. and Manuel
Villanueva are one and the same
64
own shares to them. It was FLADC that did.
Considering therefore that the real
contracting parties to the subscription
agreement were FLADC and the Ongs
alone, a civil case for rescission on the
ground of breach of contract filed by the Tius
in their personal capacities will not prosper.
Assuming it had valid reasons to do so, only
FLADC (and certainly not the Tius) had the
legal personality to file suit rescinding the
subscription agreement with the Ongs
inasmuch as it was the real party in interest
therein. Article 1311 of the Civil Code
provides that contracts take effect only
between the parties, their assigns and heirs
Therefore, a party who has not taken part in
the transaction cannot sue or be sued for
performance or for cancellation thereof,
unless he shows that he has a real interest
affected thereby.
The Corporation Code, SEC rules and even
the Rules of Court provide for appropriate
and adequate intra-corporate remedies,
other than rescission, in situations like this.
Rescission is certainly not one of them,
specially if the party asking for it has no legal
personality to do so and the requirements of
the law therefor have not been met.A
contrary doctrine will tread on extremely
dangerous ground because it will allow just
any stockholder, for just about any real or
imagined offense, to demand rescission of
his subscription and call for the distribution
of some part of the corporate assets to him
without complying with the requirements of
the Corporation Code.
Rescission will violate the Trust Fund
Doctrine and the procedures for the valid
distribution of assets and property under the
Corporation Code.
Yes. SSC committed reversible error in
finding that Mancy & Sons Enterprises, Inc.
and Manuel Villanueva are one and the
same.
This Court agrees with the petitioners that

entitled to the benefit. Her employment
under Hacienda Cataywa could not be
confirmed as well because Manuel
Villanueva was permanently residing in
Manila and Joemarie Villanueva denied
having managed the farm. She was also
advised of her options: continue paying
contributions as voluntary member; request
for refund; leave her contributions in-trust
with the System or file a petition before the
Social Security Commission (SSC) so that
liabilities, if any, of her employer may be
determined.
Rosario Lorezo was informed by the Social
Security System (SSS) Western Visayas
Group that she cannot avail the retirement
benefits since she has only paid for 16
months, which is 104 months short of the
minimum requirement of 120 months to be
entitled to the benefit. Her employment
under Hacienda Cataywa could not be
confirmed as well because Manuel
Villanueva was permanently residing in
Manila and Joemarie Villanueva denied
having managed the farm. She was also
advised of her options: continue paying
contributions as voluntary member; request
for refund; leave her contributions in-trust
with the System or file a petition before the
Social Security Commission (SSC) so that
liabilities, if any, of her employer may be
determined.
65
there is no need to pierce the corporate veil.
Respondent failed to substantiate her claim
that Mancy and Sons Enterprises, Inc. and
Manuel and Jose Marie Villanueva are one
and the same. She based her claim on the
SSS form wherein Manuel Villanueva
appeared as employer. However, this does
not prove, in any way, that the corporation is
used to defeat public convenience, justify
wrong, protect fraud, or defend crime, or
when it is made as a shield to confuse the
legitimate issues, warranting that its
separate and distinct personality be set
aside. Also, it was not alleged nor proven
that Mancy and Sons Enterprises, Inc.
functions only for the benefit of Manuel
Villanueva, thus, one cannot be an alter ego
of the other.
While a corporation may exist for any lawful
purpose, the law will regard it as an
association of persons or, in case of two
corporations, merge them into one, when its
corporate legal entity is used as a cloak for
fraud or illegality. This is the doctrine of
piercing the veil of corporate fiction. The
doctrine applies only when such corporate
fiction is used to defeat public convenience,
justify wrong, protect fraud, or defend crime,
or when it is made as a shield to confuse the
legitimate issues, or where a corporation is
the mere alter ego or business conduit of a
person, or where the corporation is so
organized and controlled and its affairs are
so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of
another corporation. To disregard the
separate juridical personality of a
corporation, the wrongdoing must be
established clearly and convincingly. It
cannot be presumed.
This Court has cautioned against the
inordinate application of this doctrine,
reiterating the basic rule that "the corporate
veil may be pierced only if it becomes a

MSCI-NACUSIP Local
Chapter v. NWPC and
Monomer Sugar Central,
Inc.,G.R. No. 125198, March
3, 1997
On January 11, 1990, Asturias Sugar
Central, Inc. (ASCI, for brevity), executed a
Memorandum of Agreement with Monomer
Trading Industries, Inc. (MTII, for brevity),
whereby MTII shall acquire the assets of
ASCI by way of a Deed of Assignment
provided that an entirely new organization in
place of MTII shall be organized, which new
corporation shall be the assignee of the
assets of ASCI.
By virtue of this Agreement, a new
corporation was organized and incorporated
on February 15, 1990 under the corporate
name Monomer Sugar Central, Inc. or MSCI,
the private respondent herein.
On January 16, 1991, MSCI applied for
exemption from the coverage of Wage Order
No. RO VI-01 issued by the Board on the
ground that it is a distressed employer. In
support thereto, MSCI submitted its audited
financial statements and income tax returns
duly stamped "received" by the Bureau of
Internal Revenue (BIR) and the Securities
and Exchange Commission (SEC) for the
period beginning February 15, 1990 and
ending August 31, 1990, including the
quarterly financial statements and income
tax returns for the two quarters ending
November 30, 1990 and February 28, 1991.
MSCI-NACUSIP Local Chapter (Union, for
brevity), in opposition, maintained that MSCI
is not distressed; that MSCI applicant has
not complied with the requirements for
66
shield for fraud, illegality or inequity
committed against a third person.
The Court has expressed the language of
piercing doctrine when applied to alter ego
cases, as follows: Where the stock of a
corporation is owned by one person whereby
the corporation functions only for the benefit
of such individual owner, the corporation and
the individual should be deemed the same.
What is the correct paid-up capital The correct paid-up capital is P5 million.
of MSCI for the pertinent period
covered by the application for By express provision of Section 13, paid-up
exemption P5 million or capital is that portion of the authorized
P64,688,528.00? capital stock which has been both
subscribed and paid. To illustrate, where the
authorized capital stock of a corporation is
worth P1 million and the total subscription
amounts to P250,000.00, at least 25% of this
amount, namely, P62,500.00 must be paid
up per Section 13. The latter, P62,500.00, is
the paid-up capital or what should more
accurately be termed as "paid-up capital
stock."
In the case under consideration, there is no
dispute, and the Board even mentioned in its
August 17, 1993 Decision, that MSCI was
organized and incorporated on February 15,
1990 with an authorized capital stock of P60
million, P20 million of which was subscribed.
Of the P20 million subscribed capital stock,
P5 million was paid-up. This fact is only too
glaring for the Board to have been misled
into believing that MSCI's paid-up capital
stock was P64 million plus and not P5
million.
Not all funds or assets received by the
corporation can be considered paid-up
capital, for this term has a technical
signification in Corporation Law. Such must
form part of the authorized capital stock of
the corporation, subscribed and then
actually paid up.

exemption; and that the financial statements
submitted by MSCI do not reflect the true
and valid financial status of the company,
and that the paid-up capital would have been
higher than P5 million and thus impairment
would have been lower than 25% had the
pre-organization agreement between ASCI
and MTII been complied with.
After hearings on the application for
exemption, the Board denied MSCI’s
application based on the finding that
applicant's losses of P3,400,738.00 for the
period February 15, 1990 to August 31, 1990
constitute an impairment of only 5.25% of its
paid-up capital of P64,688,528.00, cannot
be said to be sufficient to meet the required
25% in order to qualify for the exemption, as
provided in NWPC Guidelines No. 01, Series
of 1992 entitled REVISED GUIDELINES ON
EXEMPTION FROM COMPLIANCE WITH
THE PRESCRIBED WAGE/COST OF
LIVING ALLOWANCE INCREASES
GRANTED BY THE REGIONAL
TRIPARTITE WAGES AND
PRODUCTIVITY BOARDS.
67
The Commission aptly observed that the
loans and advances of MTII to respondent
MSCI cannot be treated as investments
unless the corresponding shares of stocks
are issued. But as it turned out, such loans
and advances were in fact treated as
liabilities of MSCI to MTII as shown in its
1990 audited financial statements. The
treatment by the Board of these loans as part
of MSCI's capital stock without satisfying
certain mandatory requirements is
proscribed under Section 38 of the
Corporation Code.
The requirements set forth in Section 38 of
the Corporation Code, which are condition
precedents before the capital stock of a
corporation may be increased, were
unquestionably not observed in this case.
Henceforth, the paid-up capital stock of
MSCI for the period covered by the
application for exemption still stood at P5
million. The losses, therefore, amounting to
P3,400,738.00 for the period February 15,
1990 to August 31, 1990 impaired MSCI's
paid-up capital of P5 million by as much as
68%. Likewise, the losses incurred by MSCI
for the interim period from September 1,
1990 to November 30, 1990, as found by the
Commission, per MSCI's quarterly income
statements, amounting to P13,554,337.33
impaired the company's paid-up capital of P5
million by a whopping 271.08%,[8] more
than enough to qualify MSCI as a distressed
employer. Respondent Commission thus
acted well within its jurisdiction in granting
MSCI full exemption from Wage Order No.
RO VI-01 as a distressed employer.