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SEPARATE JURIDICAL PERSONALITY AND THE DOCTRINE OF damages that BF Corporation incurred as a result of Shangri-La‘s
PIERCING THE VEIL OF CORPORATE FICTION default.
Lanuza, Jr. v. BF Corp. ● On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco,
G.R. No. 174938 | October 1, 2014 | LEONEN, J. Maximo G. Licauco III, and Benjamin C. Ramos filed a motion to
Digest by: LAUIGAN suspend the proceedings in view of BF Corporation‘s failure to submit its
dispute to arbitration, in accordance with the arbitration clause provided
Petitioners: GERARDO LANUZA, JR. AND ANTONIO O. OLBES in its contract.
Respondents: BF CORPORATION, SHANGRI-LA PROPERTIES, INC.,
● Petitioners filed their comment on Shangri-La‘s and BF Corporation‘s
ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND
motions, praying that they be excluded from the arbitration proceedings
BENJAMIN C. RAMOS
for being non-parties to Shangri-La‘s and BF Corporation‘s agreement.
Doctrine:
A consequence of a corporation‘s separate personality is that consent by a
Issue/s:
corporation through its representatives is not consent of the representative,
personally. Its obligations, incurred through official acts of its representatives, are ● Whether or not petitioners as directors of Shangri-La is personally liable
its own. A stockholder, director, or representative does not become a party to a for the contractual obligations entered into by the corporation. - NO
contract just because a corporation executed a contract through that stockholder,
Ratio:
director or representative. Hence a corporation‘s representatives are generally not
ersonally bound by the terms of the contract executed in behalf of the corporation.
● 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,
Facts: who are all natural persons. A corporation cannot sue or enter into
contracts without them.
● In 1993, BF Corporation filed a collection complaint with the Regional ● A consequence of a corporation‘s separate personality is that consent by
Trial Court against Shangri-La and the members of its board of directors: a corporation through its representatives is not consent of the
Alfredo C. Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo Lanuza, representative, personally. Its obligations, incurred through official acts of
Jr., Maximo G. Licauco III, and Benjamin C. Ramos. its representatives, are its own. A stockholder, director, or representative
● BF Corporation alleged in its complaint that on December 11, 1989 and does not become a party to a contract just because a corporation
May 30, 1991, it entered into agreements with Shangri-La wherein it executed a contract through that stockholder, director or representative.
undertook to construct for Shangri-La a mall and a multilevel parking ● Hence, a corporation‘s representatives are generally not bound by the
structure along EDSA. terms of the contract executed by the corporation. They are not
● Shangri-La had been consistent in paying BF Corporation in accordance personally liable for obligations and liabilities incurred on or in behalf of
with its progress billing statements. However, by October 1991, Shangri- the corporation.
La started defaulting in payment. ● A submission to arbitration is a contract. As such, the Agreement,
● BF Corporation alleged that Shangri-La induced BF Corporation to containing the stipulation on arbitration, binds the parties thereto, as well
continue with the construction of the buildings using its own funds and as their assigns and heirs.
credit despite Shangri-La‘s default. ● When there are allegations of bad faith or malice against corporate
● According to BF Corporation, Shangri-La misrepresented that it had directors or representatives, it becomes the duty of courts or tribunals to
funds to pay for its obligations with BF Corporation, and the delay in determine if these persons and the corporation should be treated as one.
payment was simply a matter of delayed processing of BF Corporation‘s Without a trial, courts and tribunals have no basis for determining
progress billing statements. whether the veil of corporate fiction should be pierced. Courts or tribunals
● BF Corporation eventually completed the construction of the buildings. do not have such prior knowledge. Thus, the courts or tribunals must first
Shangri-La allegedly took possession of the buildings while still owing BF determine whether circumstances exist to warrant the courts or tribunals
Corporation an outstanding balance. to disregard the distinction between the corporation and the persons
● BF Corporation alleged that despite repeated demands, Shangri-La representing it.
refused to pay the balance owed to it. ● The determination of these circumstances must be made by one tribunal
● It also alleged that the Shangri-La‘s directors were in bad faith in or court in a proceeding participated in by all parties involved, including
directing Shangri-La‘s affairs. Therefore, they should be held jointly and current representatives of the corporation, and those persons whose
severally liable with Shangri-La for its obligations as well as for the personalities are impliedly the same as the corporation. This is because
CORP 2-D Digests | 1
when the court or tribunal finds that circumstances exist warranting the Dispositive:
piercing of the corporate veil, the corporate representatives are treated WHEREFORE, the petition is DENIED. The Court of Appeals' decision of May 11,
as the corporation itself and should be held liable for corporate acts. 2006 and resolution of October 5, 2006 are AFFIRMED.
● The corporation‘s distinct personality is disregarded, and the corporation
is seen as a mere aggregation of persons undertaking a business under
the collective name of the corporation.
● A corporation is an artificial entity created by fiction of law. This means
that while it is not a person, naturally, the law gives it a distinct
personality and treats it as such. A corporation, in the legal sense, is an
individual with a personality that is distinct and separate from other
persons including its stockholders, officers, directors, representatives,
and other juridical entities. The law vests in corporations rights,powers,
and attributes as if they were natural persons with physical existence and
capabilities to act on their own. For instance, they have the power to sue
and enter into transactions or contracts. Section 36 of the Corporation
Code enumerates some of a corporation‘s powers, thus:-
○ Section 36. Corporate powers and capacity.– Every
corporation incorporated under this Code has the power and
capacity: 1. To sue and be sued in its corporate name; 2. Of
succession by its corporate name for the period of time stated in
the articles of incorporation and the certificate ofincorporation;
3. To adopt and use a corporate seal; 4. To amend its articles of
incorporation in accordance with the provisions of this Code; 5.
To adopt by-laws, not contrary to law, morals, or public policy,
and to amend or repeal the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to
subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and to admit members to the
corporation if it be a non-stock corporation; 7. To purchase,
receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations,
as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution; 8. To enter into merger
or consolidation with other corporations as provided in this
Code; 9. To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural, scientific, civic,
or similar purposes: Provided, That no corporation, domestic or
foreign, shall give donations in aid of any political party or
candidate or for purposes of partisan political activity; 10. To
establish pension, retirement, and other plans for the benefit of
its directors, trustees, officers and employees; and 11. To
exercise such other powers as may be essential or necessary to
carry out its purpose or purposes as stated in its articles of
incorporation.
● Pabst Brewing Company is a Wisconsin Corporation operating a large 1 Sec. 10. Common carriers, and the officers of such as are corporations, re-ceivers, agents, etc.,
brewery. It sells and ships beer into all the states and territories and to of such corporations, are prohibited from giving rebates, preferences, and advantages, and
purchasers in foreign countries. making unjust discrimina-tions, and are punishable by fine and imprisonment. Under this
sec-tion only the agents of corporate carriers, and not the carriers them-selves, were
● It has a capital of $10,000,000 or 10,000 shares. Gustav Pabst and Fred punishable.-- United States v. Milwaukee Refrigerator Transit Co., 142 F. 247, 249 (1905)
Pabst are brothers, owning 2,000 shares, and with their mother and
sisters over half of the stock. They vote and control a majority of the 2 petition/complaint/suit
CORP 2-D Digests | 5
tenth of the published tariff rates, thus showing, in real effect, acts neither ● It is argued that the procurement of the shipments through the contract is
unlawful, immoral, nor injurious. the mere soliciting of them for the carriers, for which they are lawfully
authorized to pay a part of the rate, in order to get the business; But this
● A motion to strike out certain allegations averring prior and disconnected theory of innocence is exploded (lol US court) by the fact, as alleged, that
illegal acts on its part, said to be material in proof, to characterize the the transit company is a mere separate name for the brewing company,
acts of its principal officers and managers in organizing the transit being in fact the same collection of persons and interests
company was also raised.
Issue: WoN there the brewing company fully owns and controls the transit
company, as to amount to evasion of the Elkins prohibition - Yes Dispositive:
The demurrers are overruled, and the motion to strike out denied.
Ratio:
● That the transit company is controlled by the managing agents of the
brewing company is entirely clear. But is it controlled by the
shipper(brewer) corporation(the company‘s juridical personality)? The
solution of this question depends on whether the brewing corporation, in
a case like this, is an association of individuals, rather than a legal entity
apart from those who own and control it.
● It is, however, most significant that the Supreme Court of the United
States was the first to break away from the notion that a corporation is
only a legal entity, when its literal application would operate with
injustice.
● Applying the rule here laid down to the circumstances shown to surround
the brewing company and transit company, it cannot be doubted that
there really is, in substance and effect, an identity of interest, or that the
brewing company, considered as an association of individuals,
really owns and fully controls the transit company.
Dispositive:
ACCORDINGLY, the petition is DISMISSED and the decision appealed from
dated January 29, 1990 is hereby AFFIRMED.
Dispositive:
ACCORDINGLY, the petition is DENIED and the award of the respondent
Voluntary Arbitrator are hereby AFFIRMED.
Facts: Ratio:
● Tan Tong, has been engaged in the business of buying and selling ● True, the coffee factory is a corporation and, by legal fiction, an entity
gaugau under the trade name La Campana Gaugau Packing. On July 6, existing separate and apart from the persons composing it, that is, Tan
1950, Tan Tong, with himself and members of his family, organized a Tong and his family. But it is settled that this fiction of law, which has
family corporation known as La Campana Coffee Factory Co., Inc., with been introduced as a matter of convenience and to subserve the ends of
its principal office located in the same place as that of La Campana justice cannot be invoked to further an end subversive of that purpose.
Gaugau Packing.
● Disregarding Corporate Entity. — The doctrine that a corporation is a
● Before the formation of the corporation, Tan Tong had entered into a legal entity existing separate and apart from the persons composing it is
collective bargaining agreement (CBA) with the Philippine Legion of a legal theory introduced for purposes of convenience and to subserve
Organized Workers (PLOW) to which the union of Tan Tong's employees the ends of justice. The concept cannot, therefore, be extended to a point
was then affiliated. Seceding, however, from the PLOW, Tan Tong's beyond its reason and policy, and when invoked in support of an end
employees later formed their own organization known as Kaisahan Ng subversive of this policy, will be disregarded by the courts. Thus, in an
Mga Manggagawa Sa La Campana (Kaisahan). appropriate case and in furtherance of the ends of justice, a corporation
and the individual or individuals owning all its stocks and assets will be
● On July 19, 1951, Kaisahan with 66 members — workers all of them of treated as identical, the corporate entity being disregarded where used
both La Campana Gaugau Packing and La Campana Coffee Factory as a cloak or cover for fraud or illegality.
Co., Inc. demanded for higher wages and more privileges . As the
demand was not granted and an attempt at settlement failed, the Dept. ● In the present case Tan Tong appears to be the owner of the gaugau
of Labor certified the dispute to the Court of Industrial Relations. factory. And the coffee factory, though an incorporated business, is in
reality owned exclusively by Tan Tong and his family.
● La Campana filed a motion to dismiss on the following grounds; that the
action is directed against two different entities with distinct personalities, ● As found by the Court of Industrial Relations, the two factories have but
with "La Campana Starch Factory" and the "La Campana Coffee Factory, one office, one management and one payroll, except after July 17, the
Inc.‖; that the workers of the "La Campana Coffee Factory, Inc." are less day the case was certified to the Court of Industrial Relations, when the
than thirty-one. person who was discharging the office of cashier for both branches of the
business began preparing separate payrolls for the two.
CORP 2-D Digests | 16
● Also, as found by the industrial court, the laborers of the gaugau factory
and the coffee factory were interchangeable, that is, the laborers from
the gaugau factory were sometimes transferred to the coffee factory and
vice-versa.
● In view of all these, the attempt to make the two factories appear as two
separate businesses, when in reality they are but one, is but a device to
defeat the ends of the law and should not be permitted to prevail.
Dispositive:
In view of the foregoing, the petition is denied, with costs against the petitioner.
(Note: Issue regarding the suspension of the union’s permit and its personality to
sue—it is to be noted that before the certification of the case to the Industrial
Court on July 17, 1951, the petitioner Kaisahan, had a separate permit from the
Dept of Labor. This permit was suspended only on September 30, 1951. The SC
declared that jurisdiction was not lost when the Dept of Labor suspended the
permit of the respondent as a Labor organization. For once jurisdiction is acquired
by the Court of Industrial Relations it is retained until the case is completely
decided)
Dispositive:
IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The assailed
decision of the Court of Appeals is hereby REVERSED. The Orders dated June
30, 1999 and October 4, 1999 of the Regional Trial Court of Makati, Branch 147 in
Civil Case No. 99-1037 are hereby ANNULLED and SET ASIDE and the
complaint in said case DISMISSED.
Dispositive:
WHEREFORE, the decision of respondent Court of Appeals is hereby
REVERSED and SET ASIDE, and judgment is hereby rendered declaring the
following as null and void: (1) Certificate of Sale, dated September 28, 1973,
executed by the Provincial Sheriff of Quezon in favor of the Insurance Corporation
of the Philippines; (2) Transfer Certificates of Title Nos. T-23705, T-23706, T-
23707 and T-23708 issued in the name of the Insurance Corporation of the
Philippines; (3) the sale by Insurance Corporation of the Philippines in favor of
Philippine Machinery Parts Manufacturing Co., Inc. of the four (4) parcels of land
covered by the aforesaid certificates of title; and (4) Transfer Certificates of Title
Nos. T-24846, T-24847, T-24848 and T-24849 subsequently issued by virtue of
said sale in the name of the latter corporation.
The foregoing dispositions are without prejudice to such other and proper legal
remedies as may be available to respondent Bormaheco, Inc. against herein
petitioners.
SO ORDERED.
Dispositive:
To summarize, the following are our findings and decision: Note: There were two MRs filed. Both were dismissed and court did not change its
decision.
The contract of sale Exhibit A was valid and enforceable, but the loss of the
checks for P143,150 and P12,932.61 and invalidation of the corresponding
deposit is to be borne by the buyer. Gregorio Araneta, Inc. the value of these
checks as well as the several payments made by Paz Tuason to Gregorio
Araneta, Inc. shall be deducted from the sum of P190,000 which the buyer
advanced to the seller on the execution of Exhibit 1.
The buyer shall be entitled to the rents on the land which was the subject of the
sale, rents which may have been collected by Paz Tuason after the date of the
sale.
Paz Tuason shall pay Jose Vidal the amount of the mortgage and the stipulated
interest up to October 20,1943, plus the penalty of P30,000, provided that the
loans obtained during the Japanese occupation shall be reduced according to the
Ballantyne scale of payment, and provided that the date basis of the computation
as to the penalty is the date of the filing of the suit against Vidal.
Paz Tuason shall pay the amount that shall have been found due under the
contracts of mortgage within 90 days from the time the court's judgment upon the
liquidation shall have become final, otherwise the property mortgaged shall be
ordered sold provided by law.
This case will be remanded to the court of origin with instruction to hold a
rehearing for the purpose of liquidation as herein provided. The court also shall
hear and decide all other controversies relative to the liquidation which may have
been overlooked at this decision, in a manner not inconsistent with the above
findings and judgment.
Dispositive:
WHEREFORE, the present petition is partly GRANTED. The questioned decision
of the Court of Appeals affirming the decision of the Regional Trial Court of
Laguna, Branch 37, in RTC Civil Case No. 802-84-C is MODIFIED in that
subparagraphs (c) and (d) of Paragraph 1 of the dispositive portion of the decision
are deleted. In their stead, the petitioner Rebecca Boyer-Roxas and the
respondent corporation are ordered to follow the provisions of Article 448 of the
Civil Code as regard the questioned unfinished building in RTC Civil Case No.
802-84-C. The questioned decision is affirmed in all other respects.
The same principle equally applies to Cupertino. Thus, while it appears that
the issuance of the checks and the debit memos as well as the pledges of the
condominium units, the jewelries, and the trucks had occurred prior the date when
Cupertino was incorporated, the same does not affect the validity of the subject
transactions because applying again the principle of piercing the corporate veil,
the transactions entered into by Cupertino Realty Corporation, it being merely the
alter ego of Wilfredo Lua, are deemed to be the latters personal transactions and
vice-versa.
Dispositive:
WHEREFORE, premises considered, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the
petitioner.
Dispositive:
WHEREFORE, the petition is DENIED. The Decision dated October 21, 1999 and
the Resolution dated February 23, 2000 of the Court of Appeals in CA-G.R. CV
No. 41536 are AFFIRMED. Costs against petitioners.
SO ORDERED.
Dispositive:
WHEREFORE, this Petition is hereby dismissed.
CORP 2-D Digests | 34
Emilio Cano Enterprises v. CIR ● While it is an undisputed rule that a corporation has a personality
G.R. No. L-20502 | February 26, 1965 | BAUTISTA ANGELO, J. separate and distinct from its members or stockholders because of a
Digest by: CAPACITE fiction of the law, here we should not lose sight of the fact that
Enterprises is a closed family corporation where the incorporators and
Petitioners: Emilio Cano Enterprises, Inc. (Enterprises)
directors belong to one single family.
Respondents: Court of Industrial Relations, et al.
○ Here, the corporation and its members can be considered as
one.
Doctrine:
○ To hold such entity liable for the acts of its members is not to
To hold such entity (closed family corporation) liable for the acts of its members is ignore the legal fiction but merely to give meaning to the
not to ignore the legal fiction but merely to give meaning to the principle that such principle that such fiction cannot be invoked if its purpose is to
fiction cannot be invoked if its purpose is to use it as a shield to further an end use it as a shield to further an end subversive of justice.
subversive of justice. ○ While a corporation is a legal entity existing separate and apart
from the persons composing it, that concept cannot be
Facts: extended to a point beyond its reason and policy, and when
● Complaint for unfair labor practice - the ff (all Cano) were made invoked in support of an end subversive of this policy it should
respondents: be disregarded by the courts.
○ Emilio - as president and proprietor of Enterprises ● Emilio and Rodolfo were not indicted in their private capacities but as
○ Ariston - as field supervisor president and manager of Enterprises.
○ Rodolfo - as manager ○ Having been sued officially their connection with the case must
● Incorporators of Enterprises: be deemed to be impressed with the representation of the
○ Emilio corporation.
○ Juliana, his wife ● The court's order is for them to reinstate Cruz to her former position in
○ Rodolfo and Carlos, his sons the corporation and incidentally pay her the wages she had been
○ Ana, his daughter-in-law deprived of during her separation.
○ (no mention of Ariston) ○ Verily, the order against them is in effect against the
● Emilio and Rodolfo - guilty, ordered to reinstate Honorata Cruz to her corporation.
former position with payment of backwages; Ariston - absolved for
insufficiency of evidence Dispositive:
● Emilio died. WHEREFORE, petition is dismissed, with costs.
4
○ Order of execution was directed against the properties of
Enterprises instead of the respondents.
● Enterprises filed a motion to quash that the judgment was not rendered
against it which is a juridical entity separate from its officials.
○ Denied
Issue/s:
Can the judgment rendered against Emilio and Rodolfo in their capacities as
officials of Enterprises be made effective against the property of the latter which
was not a party to the case? - YES
Ratio:
4 (1) to reinstate Honorata Cruz to her former position as ordered in the decision; and (2) to
deposit with the court the amount of P7,222.58 within ten days from receipt of the order,
failing which the court will order either a levy on respondents' properties or the filing of an
action for contempt of court.
CORP 2-D Digests | 35
Gabionza v. Court of Appeals ● May 2000, ASBHI filed a petition for rehabilitation and receivership
G.R. No. 161057 | September 12, 2008 | Tinga with the SEC, and it was able to obtain an order enjoining it from paying
Digest by: CHANG its outstanding liabilities.
● This led to the filing of the complaints by petitioners, together with
Petitioners: Betty Gabionza and Isabelita Tan
Christine Chua, Elizabeth Chan, Ando Sy and Antonio Villareal, against
Respondents: CA, Luke Roxas and Evelyn Nolasco
ASBHI.
o Complaints: Estafa under Art. 315(2)(a) and (2)(d) of the RPC,
Doctrine:
violation of the Revised Securities Act and violation of the
The DOJ Resolution explicitly identified the false pretense, fraudulent act or General Banking Act.
fraudulent means perpetrated upon the investing public who were made to believe
that ASBHI had the financial capacity to repay the loans it enticed petitioners to [Procedural part below.]
extend, despite the fact that the deficient capitalization evidenced by its articles of ● The Task Force on Financial Fraud (Task Force) that was created by the
incorporation, the treasurer‘s affidavit, the audited financial statements. ―Moreover, DOJ to investigate the complaints lodged against ASBHI dismissed the
respondent‘s argument assumes that there is legal obligation on the part of complaint.
petitioners to undertake an investigation of ASBHI before agreeing to provide the ● Petitioners filed an MR but was denied in Feb 2001.
loans. There is no such obligation. It is unfair to expect a person to procure every ● With respect to the charges of estafa under Article 315(2) of the RPC
available public record concerning an applicant for credit to satisfy himself of the and of violation of the Revised Securities Act, the Task Force
latter‘s financial standing. At least, that is not the way an average person takes concluded that the subject transactions were loans which gave rise
care of his concerns.‖ (Based on the outline) only to civil liability; that petitioners never directly dealt with
Nolasco and Roxas.
Facts: ● 15 Oct 2001, then DOJ Sec. Hernando Perez issued a resolution which
● Roxas was the president of ASB Holdings, Inc. (ASBHI) while Nolasco partially reversed the Task Force and instead directed the filing of
was the senior vice president and treasurer. five (5) Informations for estafa under Article 315(2)(a) of the RPC,
● ASBHI was incorporated in 1996 with its declared primary purpose to and an Information for violation of Section 4 in relation to Section 56 of
invest in any and all real and personal properties of every kind or the Revised Securities Act.
otherwise acquire the stocks, bonds, and other securities or evidence of ● As the Informations were filed before the RTC of Makati, private
indebtedness of any other corporation, and to hold or own, use, sell, deal respondents assailed the DOJ Resolution by way of a certiorari petition
in, dispose of, and turn to account any such stocks. with the CA.
o ASBHI was organized with an authorized capital stock of P500k, ● The CA reversed the DOJ and ordered the dismissal of the criminal
a fact shown in the articles of incorporation. cases. The dismissal was sustained when the CA denied petitioners‘
● Gabionza and Tan had previously placed monetary investment with the MR. Hence, petitioners filed this case.
Bank of Southeast Asia (BSA).
o They alleged that they were convinced by the officers of Issue/s:
ASBHI to lend or deposit money with the corporation. ● W/N the facts result in a prima facie case against either Roxas or Nolasco,
o At first, they were issued receipts reflecting the name ASB especially given that neither of them engaged in any face-to-face dealings
Realty Development which they were told was the same entity with petitioners? Yes! There is probable cause.
as BSA or was connected therewith, but beginning in March
1998, the receipts were issued in the name of ASBHI. Ratio:
o They claimed that they were told that ASBHI was exactly ● It is critical to know the key factual findings of the DOJ which led to the
the same institution that they had previously dealt with. conclusion that probable cause existed against the respondents.
● ASBHI would issue 2 postdated checks to its lenders, one representing ● (I think that the SC agreed with the resolution of the DOJ. Please
the principal amount and the other covering the interest thereon. The read the resolution carefully.)
checks were drawn against DBS Bank and would mature in 30 to 45 ● The DOJ Resolution states, to wit: (copy and pasted from the case)
days. ―The transactions in question appear to be mere renewals of the loans the
● In the first quarter of 2000, DBS Bank started to refuse to pay for the complainant-petitioners earlier granted to BSA. However, just after they agreed to
checks purportedly by virtue of stop payment orders from ASBHI. renew the loans, the ASB agents who dealt with them issued to them receipts
indicating that the borrower was ASB Realty, with the representation that it
was the same entity as BSA or connected therewith. On the strength of this
CORP 2-D Digests | 36
representation, along with other claims relating to the status of ASB and its extended the loans in the first place had they known its true
supposed financial capacity to meet obligations, the complainant-petitioners financial setup.
acceded to lend the funds to ASB Realty instead. As it turned out, however, ASB ● Even if ASBHI‘s lack of financial and structural integrity is verifiable from
had in fact no financial capacity to repay the loans as it had an authorized capital the articles of incorporation or other publicly available SEC records, it
stock of only P500,000.00 and paid up capital of only P125,000.00. Clearly, the does not follow that the crime of estafa through deceit would be beyond
representations regarding its supposed financial capacity to meet its obligations to commission when precisely there are bending representations that the
the complainant-petitioners were simply false. Had they known that ASB had in company would be able to meet its obligations.
fact no such financial capacity, they would not have invested millions of pesos. a. There is no obligation on the part of petitioners to undertake an
Indeed, no person in his proper frame of mind would venture to lend millions of investigation of ASBHI before agreeing to provide the loans. It is
pesos to a business entity having such a meager capitalization. The fact that the unfair to expect a person to procure every available public
complainant-petitioners might have benefited from its earlier dealings with ASB, record concerning an applicant for credit to satisfy himself of the
through interest earnings on their previous loans, is of no moment, it appearing latters financial standing. At least, that is not the way an
that they were not aware of the fraud at those times they renewed the loans. average person takes care of his concerns.
● There is also the fact that ABSHI actually received the alleged amounts
The false representations made by the ASB agents who dealt with the of money from petitioners. It is especially curious that according to the
complainant-petitioners and who inveigled them into investing their funds in ASBHI balance sheets, over Php 5B were booked as advances to
ASB are properly imputable to respondents Roxas and Nolasco, because stockholders when, according to the general information sheet for
they, as ASBs president and senior vice president/treasurer, respectively, in 1999, Roxas owned 124,996 of the 125k subscribed shares of
charge of its operations, directed its agents to make the false ASBHI. Considering that ASBHI had an authorized capital stock of
representations to the public, including the complainant-petitioners, in order only P500k and a subscribed capital of P125k, it can be reasonably
to convince them to invest their moneys in ASB. It is difficult to make a deduced that such large amounts booked as advances to
different conclusion, judging from the fact that respondents Roxas and Nolasco stockholder could have only come from the loans extended by over
authorized and accepted for ASB the fraud-induced loans. This makes them 700 investors to ASBHI.
liable for estafa under Article 315 (paragraph 2 [a]) of the Revised Penal ● The Court's conclusion is that the DOJ‘s decision to prosecute private
Code. They cannot escape criminal liability on the ground that they did not respondents is founded on sufficient probable cause, and the ultimate
personally deal with the complainant-petitioners in regard to the transactions in determination of guilt or acquittal is best made through a full trial on the
question. Suffice it to state that to commit a crime, inducement is as sufficient and merits. Indeed, many of the points raised by private respondents before
effective as direct participation.‖(Read notes for elements of estafa by means of this Court, related as they are to the factual context surrounding the
deceit.) subject transactions, deserve the full assessment and verification only a
trial on the merits can accord.
● The DOJ Resolution explicitly identified the false pretense,
fraudulent act or fraudulent means perpetrated upon the Dispositive:
petitioners. WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution
● It narrated that petitioners were made to believe that ASBHI had the of the Court of Appeals dated 18 July 2003 and 28 November 2003 are
financial capacity to repay the loans it enticed petitioners to extend, REVERSED and SET ASIDE. The Resolutions of the Department of Justice in I.S.
despite the fact that it had an authorized capital stock of only Nos. 2000-1418 to 1422 dated 15 October 2001 and 3 July 2002 are
P500,000.00 and paid up capital of only P125,000.00. REINSTATED. Costs against private respondents.
a. The deficient capitalization of ASBHI is evinced by its articles of
incorporation, the treasurer's affidavit executed by Nolasco, the Notes:
audited financial statements of the corporation for 1998 and the ● Article 315(2)(a) of the Revised Penal Code states:
general information sheets. ART. 315. Swindling (estafa). Any person who shall defraud another by any of the
● Even if ASBHI, was able to repay its initial loans does not negate the means mentioned herein below shall be punished by:
fraudulent misrepresentation or inducement it has undertaken to obtain xxx xxx xxx
the loans in the first place. (2) By means of any of the following false pretenses or fraudulent acts
a. The material question is not whether ASBHI inspired executed prior to or simultaneous with the commission of the fraud:
exculpatory confidence in its investors by making good on its (a) By using a fictitious name, or falsely pretending to possess power,
loans for a while, but whether such investors would have influence, qualifications, property, credit, agency, business or imaginary
transactions, or by means of other similar deceits;
CORP 2-D Digests | 37
● The elements of estafa by means of deceit as defined under
Article 315(2)(a) of the Revised Penal Code are as follows:
(1) that there must be a false pretense, fraudulent act or fraudulent
means;
(2) that such false pretense, fraudulent act or fraudulent means must be
made or executed prior to or simultaneously with the commission of the
fraud;
(3) that the offended party must have relied on the false pretense,
fraudulent act or fraudulent means, that is, he was induced to part with
his money or property because of the false pretense, fraudulent act or
fraudulent means; and
(4) that as a result thereof, the offended party suffered damage.
Dispositive:
IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals under
review is hereby modified in that petitioner shall be ordered to pay to respondent
the sum of P820,549.91, plus 25% surcharge thereon for late payment.
CORP 2-D Digests | 41
Padilla v. Court of Appeals ● In the meantime, SRI sold part of its remaining property to a third party.
G.R. No. 123893 | November 22, 2001 | Quisumbing J. ● An amended contract of lease was thus forged in January 1989 among
Digest by: CRUZ SRI, PKA and Phoenix Omega, whereby the parties agreed to substitute
the already sold portion of SRI's remaining property with 2 parcels of land
Petitioners: Luisito Padilla and Phoenix-Omega Development and Management
also belonging to SRI. In this amended contract of lease, PKA was again
Corporation represented by Padilla in his capacity as its President and General
Respondents: CA and Susana Realty Inc. Manager.
● And Phoenix Omega, which was not a party to the July 28, 1988 lease
Doctrine: The general rule is that a corporation is clothed with a personality contract sought to be amended but which was a party, to the amended
separate and distinct from the persons composing it. It may not be held liable for contract, was also represented by Padilla as Chairman of the Board of
the obligations of the persons composing it, and neither can its stockholders be Directors of Phoenix Omega.
held liable for its obligations. This veil of corporate fiction may only be disregarded ● PKA's building permit was later revoked due to certain violations of the
in cases where the corporate vehicle is being used to defeat public convenience, National Building Code
justify wrong, protect fraud, or defend crime. ● On August 24, 1989, PKA was allowed by the (Department) of Public
Works and Highway(s) to resume construction on the leased premises
Facts: subject to PKA's correction of the defects in the construction to conform
● On June 27, 1983, Susana Realty, Inc. (SRI), by a deed of absolute to BP 344.
sale, sold to the Light Rail Transit Authority (LRTA) several parcels of ● As SRI's approval of PKA's amended plans in the construction was
land located in Taft Avenue Extension, San Rafael District, Pasay City. required, PKA transmitted the same to SRI which withheld approval
● Under paragraph 7 of the deed of sale, SRI reserved to itself the right of thereof pending PKA's correction of the defects in the construction.
first refusal to develop and/or improve the property sold should the LRTA ● Repeated requests for approval of its amended plans not having been
decide to lease and/or assign to any person the right to develop and/or heeded by SRI, PKA filed at the court a quo the action at bar for
improve the property. rescission of contract of lease against SRI, alleging that SRI's refusal to
● The LRTA and Phoenix Omega Development and Management approve the plans without any justifiable reason deprived it of the use of
Corporation (Phoenix Omega) entered into a Commercial Stall the commercial stalls, thereby incurring losses.
Concession Contract authorizing the latter to construct and develop ● SRI, upon the other hand, claimed that it was PKA which violated the
commercial stalls on a 90 sq. m. portion of the property bought from SRI. terms of their contract, alleging that PKA failed to complete within six
● SRI opposed the agreement as having violated the deed of sale it months the construction of the commercial stalls during which period it
entered with LRTA. was not paying any rentals and that PKA undertook the construction
● A tripartite agreement was later concluded by the parties, however, without first having its plans approved."
whereby SRI agreed to honor the terms of the concession contract and ● RTC rendered its decision, as follows:
to lease to Phoenix Omega its (SRI's) property (remaining property) ● 1. Declaring the rescission and termination of the Contract of Lease, as
adjacent to the 90 sq. m. portion subject of the concession contract. amended, and the passing in ownership of all the improvements now
● A contract was thus entered into on July 28, 1988 between Phoenix existing on the premises, and ordering plaintiff to surrender possession
Omega and SRI with LRTA whereby Phoenix Omega undertook to of the leased premises to the defendant.
construct commercial stalls on the 90-sq. m. property in accordance with ● 2. Ordering PKA to pay to the SRI sums of money
plans and specifications prepared by the latter, the construction to begin, ● CA affirmed the RTC decision
however, only upon SRI's approval of such plans and specifications. ● A writ of execution was issued in due course by the RTC
● Also on July 28, 1988, Phoenix Omega, by a deed of assignment, ● Possession of the subject properties was subsequently restored to SRI,
assigned its right and interests over the remaining property unto its sister but the monetary award was left unsatisfied.
company, PKA Development and Management Corporation (PKA). ● SRI filed a motion for issuance of an alias writ against herein petitioners,
● Signatories to the deed of assignment were Eduardo Gatchalian in his based on the trial court's observation that PKA and Phoenix-Omega
capacity as President of Phoenix Omega, and Luisito B. Padilla (Padilla), are one and the same entity.
one of the petitioners herein, in his capacity as President and General ● This was granted by the RTC in an order which reads: "WHEREFORE,
Manager of PKA. as prayed for by the defendant-judgment creditor Susana Realty, Inc., let
● The development of the remaining property having been assigned to an alias writ of execution issue against the properties, both real and
PKA, it entered into a contract of lease with SRI likewise on July 28, personal, of PKA Development and Management Corporation, of
1988. Phoenix-Omega Development Corporation, and of Luisito B. Padilla,
CORP 2-D Digests | 42
for the enforcement of the decision dated January 7, 1991, promulgated participation by Phoenix-Omega in the same proceedings. We again
by this Court, the same be implemented by deputy sheriff Edilberto A. stress that Phoenix-Omega was not a party to the case and so
Santiago." could not have taken part therein.
● The RTC issued an alias writ on the same day pursuant to the above ● SRI, however, insists that the trial court had pierced the veil of corporate
order fiction protecting petitioners, and this justifies execution against their
● Alleging that the writ of execution cannot be enforced against them, properties.
Padilla and Phoenix filed with the RTC an omnibus motion for the ● The general rule is that a corporation is clothed with a personality
reconsideration and for annulment of the alias writ separate and distinct from the persons composing it. It may not be
● Padilla and Phoenix assailed these orders as confiscatory, since they held liable for the obligations of the persons composing it, and
were never parties to the case filed by PKA against SRI, and they neither can its stockholders be held liable for its obligations.
were unable to present evidence on their behalf. ● This veil of corporate fiction may only be disregarded in cases
● The motion was denied where the corporate vehicle is being used to defeat public
● CA also denied the petition convenience, justify wrong, protect fraud, or defend crime.
● PKA and Phoenix-Omega are admittedly sister companies, and may be
sharing personnel and resources, but we find in the present case no
Issue/s: allegation, much less positive proof, that their separate corporate
W/N the RTC‘s issuance of the alias writ of execution can be enforced against personalities are being used to defeat public convenience, justify wrong,
Padilla and Phoenix? NOOOOOooooooo protect fraud, or defend crime.
● "For the separate juridical personality of a corporation to be disregarded,
the wrongdoing must be clearly and convincingly established. It cannot
Ratio: be presumed." We find no reason to justify piercing the corporate veil in
● A court acquires jurisdiction over a person through either a valid service this instance.
of summons or the person's voluntary appearance in court. ● We understand private respondent's frustration at not being able to have
● A court must necessarily have jurisdiction over a party for the latter to be the monetary award in their favor satisfied. But given the circumstances
bound by a court decision. of this case, public respondent cannot order the seizure of petitioners'
● Generally accepted is the principle that no man shall be affected by any properties without violating their constitutionally enshrined right to due
proceeding to which he is a stranger, and strangers to a case are not process, merely to compensate private respondent.
bound by judgment rendered by the court
● In the present case, we note that the trial court never acquired Dispositive:
jurisdiction over petitioners through any of the modes mentioned WHEREFORE, the instant petition is GRANTED. The assailed decision and
above. Neither of the petitioners was even impleaded as a party to the resolution of the Court of Appeals in CA-G.R. SP No. 36685 are SET ASIDE, and
case. the order of the trial court dated November 29, 1994 and the alias writ of
● Without the trial court having acquired jurisdiction over petitioners, the execution issued on the same date in connection with Civil Case No. 7302, are
latter could not be bound by the decision of the court. declared NULL and VOID.
● Execution can only be issued against a party and not against one who
was not accorded his day in court.
● The courts a quo ruled that petitioner Padilla, in particular, had his day in
court. As general manager of PKA, he actively participated in the case in
the trial court. He "ha(d) the right to control the proceedings, to make
defense, to adduce and cross examine witnesses, and to appeal from a
decision." Therefore, Padilla and Phoenix-Omega, of which Padilla is
chairman of the board, could not now argue that they did not have the
opportunity to present their case in court, according to private
respondent.
● To begin with, it is clear that Padilla participated in the proceedings
below as general manager of PKA and not in any other capacity.
● The fact that at the same time he was the chairman of the board of
Phoenix-Omega cannot, by any stretch of reasoning, equate to
CORP 2-D Digests | 43
Mayor v. Tiu ● The RTC granted the motion of Marty and appointed a special
G.R. No. 203770 | November 23, 2016 | MENDOZA, J. administrator of the estate. The probate court also ordered Mercury
Digest by: CUA and Chowking to deposit its rental income with the court and Metrobank
to freeze the bank accounts mentioned in the motion of Marty. The
Petitioners: Manuela Azucena Mayor
doctrine of piercing the corporate veil was applied considering that
Respondents: Edwin Tiu and Damiana Charito Marty
Rosario had no other properties comprising her estate
● Remedios and Manuela filed a motion for inhibition and later an MR ad
Doctrine:
cautelam
Ownership by a single stockholder or another corporation of all or nearly all of the ○ They argued that Rosario‘s estate consisted only of shares of
capital stocks of a corporation is not of itself a sufficient reason for disregarding the stock in Primrose and not the corporation itself
fiction of separate corporate personalities. To disregard the separate personality ○ Thus the probate court could not order lessees to remit the
the wrong doing cannot be presumed but must be clearly and convincingly rentals to the estate‘s administrators. They also insisted that the
established special administrator be recalled
● RTC denied the mr
Facts: ● CA reversed the orders except as to the appointment of a special
● Rosario, the widow of Primo passed away leaving a holographic last will administrator. Court held that Primose had a personality separate and
and testament distinct from the estate and thus the probate court had no jurisdiction to
● There she named her sister Remedios and her niece, Manuela as apply the doctrine of piercing the corporate veil
executors ○ When the probate court applied the doctrine of "piercing," in
● Remedios and Manuel filed a petition for the probate of Rosario‘s effect, it adjudicated with finality the ownership of the properties
holographic will in favor of the Estate.
● A few days later Marty, claiming to be the adopted daughter of Rosario ○ CA stated that RTC had no jurisdiction to adjudicate ownership
filed a petition for letters of administration. It was not given due course of a property claimed by another based on adverse title; and
because of the probate proceedings. that questions like this must be submitted to a court of general
● RTC found the petition for probate of will filed by Remedios and Manuela jurisdiction and not to a probate court.
as sufficient in form and substance and set the case for hearing ● Even if the court‘s determination on ownership was merely intended to
● Marty filed motion stating that Remedios kept Rosario a virtual hostage be provisional, the properties claimed are registered under the Torrens
for the past ten years and her family was financially dependent on her system
which led to the disposal of her and her husband‘s properties. ● As such Primrose was considered owner until the titles were nullified in
● Marty averred that until the will of the descendent could be probated and an appropriate ordinary action
admitted, Remedios and her ten children had no standing to possess or ● The CA further stated that the RTC erroneously relied on the order
control the properties. issued by the CFI Leyte in 1981, in the probate proceedings involving the
● She prayed for the probate court to 1.) make immediate inventory of all estate of Primo. Whatever determination the CFI made at the time
the properties 2.) direct tenants (Mercury Drug, Chowking) located at regarding the title of the properties was merely provisional, hence, not
Primrose Hotel to deposit their rentals with the court 3.) direct Metrobank conclusive as to the ownership.
to freeze the accounts in the name of Rosario and Primrose ● By reason of the favorable decision by the CA, Remedios and Manuela
Development 4.) lock up the Primrose Hotel in order to preserve the filed a motion to partially revoke the write of execution. RTC granted the
property motion and revoked the power of the special administrator to oversee the
● Remedios and Manuela claim that Marty was not an adopted child and operations of Primrose and revoked orders with respect to Mercury Drug
that the probate court had no jurisdiction over the properties mistakenly and Chowking
claimed by Marty as part of Rosario‘s estate as the properties were ● 10 months after the order, Marty filed an Omnibus motion praying for
actually owned by Primrose the probate court to 1.) order accounting of all properties 2.) deposit all
● Marty in her reply cited a CFI order claiming that the veil of corporate rental payments and 3.) prohibit the disbursement of funds comprising
entity of Primrose was pierced on the ground that it was a closed family the estate without formal motion and approval by the probate court
corporation controlled by Rosario and Primo‘s death. ● RTC granted Marty’s Omnibus motion. Although it agreed with the CA
● Thus Marty alleged that the piercing was proper in the case as the decision reversing the previous RTC order, the court acknowledged the
incorporation of Primrose was founded on a fraudulent consideration, urgency and necessity of appointing a special administrator
having been done in contemplation of Primo‘s death. ● The court directed the following:
CORP 2-D Digests | 44
● The purpose behind piercing a corporation's identity is to remove the
○ 1. DIRECTS petitioners, either individually or jointly, to: (a) barrier between the corporation and the persons comprising it to thwart
RENDER AN ACCOUNTING of all the properties and assets the fraudulent and illegal schemes of those who use the corporate
comprising the estate of the decedent that may have come into personality as a shield for undertaking certain proscribed activities.
their possession; and, (b) DEPOSIT OR CONSIGN all the ● Instead of holding the decedent's interest in the corporation separately
rentals payments or such other passive incomes from the as a stockholder, the situation was reversed. The probate court ordered
properties and assets registered in the name of Primrose the lessees of the corporation to remit rentals to the estate's
Development Corporation, including all income derived from administrator without taking note of the fact that the decedent was not
the Primrose Hotel and the lease contracts with Mercury Drug the absolute owner of Primrose but only an owner of shares
and Chowking Restaurant, both within fifteen (15) days from ● Ownership by a single stockholder or another corporation of all or
receipt of this Order; nearly all of the capital stocks of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate
○ 2. DIRECTS the Special Administrator to take possession and personalities. To disregard the separate personality the wrong
charge of the properties comprising the decedent's estate, doing cannot be presumed but must be clearly and convincingly
specially those pertaining to the shareholding of the decedent in established
Primrose Development Corporation, to determine whether or ● It is a well-settled rule that a probate court or one in charge of
not action for the recovery of the shares of stock supposedly proceedings cannot adjudicate or determine title to properties claimed to
transferred from the decedent to petitioners Remedios Tiu, be part of the estate but which are equally claimed to belong to outside
Manuela Azucena Mayor should be instituted in the name of the parties.
estate against the said transferees and to submit a Report on ● The court can only determine whether they should, or should not, be
the foregoing matters to this Court, within fifteen (15) days from included in the inventory or list of properties to be overseen by the
receipt of this Order; and, administrator.
● If there is a dispute the administrator and the opposing parties have
○ 3. ORDERS that no funds comprising the estate of the decedent to resort to an ordinary action for the final determination of the
shall be disbursed without formal Motion therefor, with the conflicting claims of title because the probate court cannot do so
conformity of the Special Administrator, duly approved by this ● The probate court should have recognized the incontestability accorded
Court. to the Torrens title of Primrose over Marty's arguments of possible
● CA dismissed the MR field by Remedios and Manuela dissipation of properties.
● Later Manuela filed a motion for issuance of TRO and writ of preliminary ○ If a property covered by Torrens title is involved, "the
injunction on the ground that the probate court ordered an inventory of presumptive conclusiveness of such title should be given due
the assets of Primrose, as separate and distinct entity. weight, and in the absence of strong compelling evidence to the
contrary, the holder thereof should be considered as the owner
Issue/s: of the property in controversy until his title is nullified or modified
WON Primrose is a separate and distinct entity? YES in an appropriate ordinary action, particularly, when as in the
case at bar, possession of the property itself is in the persons
Ratio: named in the title.
● The estate of the deceased person is a juridical person separate and ● The records of this case would show that that no compelling evidence
distinct from the person of the decedent and any other corporation. This was ever presented to substantiate the position of Marty that Rosario and
status of an estate comes about by operation of law. This is in Primrose were one and the same, justifying the inclusion of the latter's
consonance with the basic tenet under corporation law that a corporation properties in the inventory of the decedent's properties.
has a separate personality distinct from its stockholders and from other ● At most Rosario owned shares of stock in Primrose, a separate and
corporations to which it may be connected. distinct personality from the estate of the decedent
● The doctrine of piercing the corporate veil has no relevant application in ● Furthermore the probate court has not acquired jurisdiction over
this case. Under this doctrine, the court looks at the corporation as a Primrose and its properties. Piercing the veil applies to determination of
mere collection of individuals or an aggregation of persons undertaking liability not of jurisdiction
business as a group, disregarding the separate juridical personality of the ● It is not available to confer on the court a jurisdiction it has not acquired.
corporation unifying the group. To apply this doctrine, it is imperative that the court must first have
jurisdiction over the corporation
CORP 2-D Digests | 45
Dispositive:
WHEREFORE, the petition is GRANTED. The Temporary Restraining Order,
dated June 14, 2013, is hereby made PERMANENT, effective immediately. The
Regional Trial Court, Branch 6, Tacloban City, is ENJOINED from enforcing and
implementing its January 20, 2011 and June 10, 2011 Orders, insofar as the
corporate properties of Primrose Development Corporation are concerned, to
avert irreparable damage to a corporate entity, separate and distinct from the
Estate of Rosario Guy-Juco Villasin Casilan.
Issue/s:
W/N The individual stockholders may be held liable for obligations contracted by
the corporation – YES
CORP 2-D Digests | 47
Jacinto v. Court of Appeals conclusions on the matter of piercing the veil of corporate fiction and on the
G.R. No. 80043 | June 6, 1991 | Davide, Jr., J. liability of Jacinto are overwhelmingly supported by the evidence.
Digest by: DE GUZMAN ● In Jacinto‘s stipulation of facts, he claimed to be both President and
General Manager of Inland Industries. However, in his direct testimony,
Petitioners: Roberto A. Jacinto
he claimed that one Bienvenida Catabas was the President and one
Respondents: Honorable Court of Appeals and Metropolitan Bank and Trust
Aurora Heresa was Chairman of the Board.
Company ● The disparity places extreme doubt as to his credibility. There was no
clear-cut delimitation between the personality of Jacinto as an individual
Doctrine: When the veil of corporate fiction is made as a shield to perpetuate fraud
and the personality of Inland Industries as a corporation.
and or confuse legitimate issues, the same should be pierced. ● Jurisprudence provides that the veil of corporate fiction may be pierced
when it is made as a shield to perpetuate fraud and or confuse legitimate
CLV Outline: There is no denial of due process to hold officers liable under the
issues.
piercing doctrine, provided that evidential basis has been adduced during trial to ● As dictum in the case of CIR v. Norton & Harrison Co., where a
apply the piercing doctrine. corporation is merely an adjunct, business conduit or alter ego, the fiction
of separate and distinct corporate entity should be disregarded.
Facts:
● This is an appeal by certiorari to partially set aside the Decision of CA On the assertion of lack of evidence:
which affirmed in toto the decision of the RTC of Manila, Branch 11. ● It was just an empty assertion because it was found that all the goods
● The RTC found that Jacinto was in fact the corporation itself known as covered by the 3 Letters of Credit and paid for under the Bills of
Inland Industries, Inc. He admitted that he was both its President and Exchange were delivered to and received by Inland Industries, Inc.
General Manager, as well as a substantial stockholder (52% with his through Roberto A. Jacinto, its President and General Manager, who
wife). He was also the one who entirely dealt with the transaction of signed for and in behalf of defendant Inland and agreed to the terms and
Metrobank through the trust receipts he signed with no indication as to in conditions of 3 separate trust receipts covering the same.
what capacity. ● While on the face of the complaint there is no specific allegation that the
● Said decision ordered Roberto Jacinto and Inland Industries, Inc. to corporation is a mere alter ego of petitioner, subsequent developments,
jointly and severally pay Metrobank for 382,015.80 pesos, with 16% from the stipulation of facts up to the presentation of evidence and the
interest and attorney‘s fees. examination of witnesses, unequivocally show that Metrobank sought to
● Jacinto argued that he cannot be held solidarily liable with Inland prove that Jacinto and Inland are one or that he is the corporation. No
because: serious objection was heard from petitioner.
❏ He just signed said instruments in his official capacity as its ● Section 5 of Rule 10 of the Rules of Court provides:
President; ● SEC. 5. Amendment to conform to or authorize presentation of evidence.
❏ Inland has a juridical personality distinct and separate from its — When issues not raised by the pleadings are tried by express or
officers and stockholders implied consent of the parties, they shall be treated in all respects,
❏ The principle of piercing the fiction of corporate entity should be as if they had been raised in the pleadings. Such amendment of the
applied with great caution and not precipitately, because a dual pleadings as may be necessary to cause them to conform to the
personality by a corporation and its stockholders would defeat evidence and to raise these issues may be made upon motion of any
the principal purpose for which a corporation is formed. party at any time, even after judgment; but failure so to amend does not
❏ There is no allegation in the complaint questioning the separate affect the trial of these issues. If the evidence is objected to at the time of
identity and existence of Inland trial on the ground that it is not within the issues made by the pleadings,
the court may allow the pleadings to be amended and shall do so freely
Issue: when the presentation of the merits of the action will be subserved
W/N CA can validly pierce the fiction of corporate identity of Inland Industries, Inc. thereby and the objecting party fails to satisfy the court that the
even if there is no allegation in the complaint nor a prayer regarding the same? – admission of such evidence would prejudice him in maintaining his action
YES or defense upon the merits. The court may grant continuance to enable
the objecting party to meet such evidence.
Ratio:
This petition is bereft of merit. The issues are basically factual and a careful Dispositive:
scrutiny of the decisions of both lower courts reveals that their findings and
CORP 2-D Digests | 48
WHEREFORE, for lack of merit, the Petition is DISMISSED with costs against
petitioner.