Puno vs. Puno EnterprisesG.R. No.

177066 (September 11, 2009)

Facts:
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises,
Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be an heir of Carlos L.
Puno, initiated a complaint for specific performance against respondent. Petitioner averred that
he is the son of the
deceased with the latter‘s common
-law wife, Amelia Puno. As surviving heir, he claimed entitlement to the rights and privileges of
his late father as stockholder of respondent. The complaint thus prayed that respondent allow
petitioner to inspect its corporate book, render an accounting of all the transactions it entered into
from 1962, and give petitioner all the profits, earnings, dividends, or income pertaining to the
shares of Carlos L. Puno.

Issue:
Whether or not Joselito Musni Puno as an heir is automatically entitled for the stocks upon the
death of a shareholder.
Held:
Upon the death of a shareholder, the heirs do not automatically become stockholders of the
corporation and acquire the rights and privileges of the deceased as shareholder of the
corporation. The stocks must be distributed first to the heirs in estate proceedings, and
the transfer of the stocks must be recorded in the books of the corporation. Section 63 of the
Corporation Code provides that no transfer shall be valid, except as between the parties, until the
transfer is recorded in the books of the corporation. During such interim period, the heirs stand as
the equitable owners of the stocks, the executor or administrator duly appointed by the court
being vested with the legal title to the stock. Until a settlement and division of the estate is
effected, the stocks of the decedent are held by the administrator or executor.

Consequently, during such time, it is the administrator or executor who is entitled to exercise the
rights of the deceased as stockholder

SAPPARI K. SAWADJAAN V. CA (G.R. NO. 141735)

Facts:
Petitioner Sawadjaan was an appraiser/investigator in the Philippine Amanah Bank (PAB) when
on the basis of his report, a credit line was granted to Compressed Air Machineries and Equipment
Corporation (CAMEC) by virtue of the two parcels of land it offered as collaterals. Meanwhile,
Congress passed a law which created Al-Amanah Investment Bank of the Philippines (AIIBP) and
repealed the law creating PAB, transferring all its assets, liabilities and capital accounts to AIIBP.
Later, AIIBP discovered that the collaterals were spurious, thus conducted an investigation and
found petitioner Sawadjaan at fault. Petitioner appealed before the SC which ruled against him.
Petitioner moved for a new trial claiming he recently discovered that AIIBP had not yet adopted
its corporate by-laws and since it failed to file within 60 days from the passage of its law, it had
forfeited its franchise or charter and thus has no legal standing to initiate an administrative case.
The motion was denied.
Issue:
Whether or not the failure of AIIBP to file its by-laws within the period prescribed results to a
nullity of all actions and proceedings it has initiated.
Ruling: NO.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business, has
shareholders, corporate officers, a board of directors, assets, and personnel. It is, in fact, here
represented by the Office of the Government Corporate Counsel, “the principal law office of
government-owned corporations, one of which is respondent bank.” At the very least, by its failure
to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose right to
exercise corporate powers may not be inquired into collaterally in any private suit to which such
corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the Certificate
of Registration of Corporations, details the procedures and remedies that may be availed of before
an order of revocation can be issued. There is no showing that such a procedure has been initiated
in this case.

Gamboa v. Teves G.R. No. 176579 June 28, 2011

In 1928, the Philippine Long Distance Telephone Company (PLDT) was granted a franchise
to engage in the business of telecommunications. Telecommunications is a nationalized area
of activity where a corporation engaged therein must have 60% of its capital be owned by
Filipinos as provided for by Section 11, Article XII (National Economy and Patrimony) of the
1987 Constitution, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least sixty per centum of
whose capital is owned by such citizens; xxx
In 1999, First Pacific, a foreign corporation, acquired 37% of PLDT common shares. Wilson
Gamboa opposed said acquisition because at that time, 44.47% of PLDT common shares
already belong to various other foreign corporations. Hence, if First Pacific’s share is added,
foreign shares will amount to 81.47% or more than the 40% threshold prescribed by the
Constitution.
Margarito Teves, as Secretary of Finance, and the other respondents argued that this is okay
because in totality, most of the capital stocks of PLDT is Filipino owned. It was explained that
all PLDT subscribers, pursuant to a law passed by Marcos, are considered shareholders (they
hold serial preferred shares). Broken down, preferred shares consist of 77.85% while
common shares consist of 22.15%.
Gamboa argued that the term “capital” should only pertain to the common shares because
that is the share which is entitled to vote and thus have effective control over the corporation.
ISSUE: What does the term “capital” pertain to? Does the term “capital” in Section 11, Article
XII of the Constitution refer to common shares or to the total outstanding capital stock
(combined total of common and non-voting preferred shares)?
HELD: Gamboa is correct. Capital only pertains to common shares. It will be absurd for
capital to pertain as inclusive of non-voting shares. This is because a corporation consisting
of 1,000,000 capital stocks, 100 of which are common shares which are foreign owned and
the rest (999,900 shares) are preferred shares which are non-voting shares and are Filipino
owned, would seem compliant to the constitutional requirement – here 99.999% is Filipino
owned. But if scrutinized, the controlling stock – the voting stock – or that miniscule .001% is
foreign owned. That is absurd.
In this case, it is true that at least 77.85% of the capital is owned by Filipinos (the PLDT
subscribers). But these subscribers, who hold non-voting preferred shares, have no control
over the corporation. Hence, capital should only pertain to common shares.
Thus, to be compliant with the constitution, 60% of the common shares of PLDT should be
Filipino owned. That is not so in this case as it appears that 81.47% of the common shares
are already foreign owned (split between First Pacific (37%) and a Japanese corporation).
When may preferred shares be considered part of the capital share?
If the preferred shares are allowed to vote like common shares.

NARRA NICKEL MINING VS REDMONT (G.R. NO. 195580 APRIL

21, 2014)
Narra Nickel Mining and Development Corp. vs Redmont Consolidated Mines Corporation
G.R. No. 195580 April 21, 2014

Facts: Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont),
a domestic corporation organized and existing under Philippine laws, took interest in mining and
exploring certain areas of the province of Palawan. After inquiring with the Department of
Environment and Natural Resources (DENR), it learned that the areas where it wanted to undertake
exploration and mining activities where already covered by Mineral Production Sharing
Agreement (MPSA) applications of petitioners Narra, Tesoro and McArthur. Petitioner McArthur,
through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an application for an
MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences Bureau (MGB), Region IV-
B, Office of the Department of Environment and Natural Resources (DENR). Subsequently,
SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in Barangay
Sumbiling, Municipality of Bataraza, Province of Palawan and EPA-IVB-44 which includes an
area of 3,720 hectares in Barangay Malatagao, Bataraza, Palawan. The MPSA and EP were then
transferred to Madridejos Mining Corporation (MMC) and, on November 6, 2006, assigned to
petitioner McArthur. Petitioner Narra acquired its MPSA from Alpha Resources and Development
Corporation and Patricia Louise Mining & Development Corporation (PLMDC) which previously
filed an application for an MPSA with the MGB, Region IV-B, DENR on January 6, 1992.
Through the said application, the DENR issued MPSA-IV-1-12 covering an area of 3.277 hectares
in barangays Calategas and San Isidro, Municipality of Narra, Palawan. Subsequently, PLMDC
conveyed, transferred and/or assigned its rights and interests over the MPSA application in favor
of Narra. Another MPSA application of SMMI was filed with the DENR Region IV-B, labeled as
MPSA-AMA-IVB-154 (formerly EPA-IVB-47) over 3,402 hectares in Barangays Malinao and
Princesa Urduja, Municipality of Narra, Province of Palawan. SMMI subsequently conveyed,
transferred and assigned its rights and interest over the said MPSA application to Tesoro. On
January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3)
separate petitions for the denial of petitioners’ applications for MPSA designated as AMA-IVB-
153, AMA-IVB-154 and MPSA IV-1-12. In the petitions, Redmont alleged that at least 60% of
the capital stock of McArthur, Tesoro and Narra are owned and controlled by MBMI Resources,
Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that since MBMI is a considerable
stockholder of petitioners, it was the driving force behind petitioners’ filing of the MPSAs over
the areas covered by applications since it knows that it can only participate in mining activities
through corporations which are deemed Filipino citizens. Redmont argued that given that
petitioners’ capital stocks were mostly owned by MBMI, they were likewise disqualified from
engaging in mining activities through MPSAs, which are reserved only for Filipino citizens.

Issue: Whether or not the petitioner corporations are Filipino and can validly be issued MPSA
and EP.

Held: No. The SEC Rules provide for the manner of calculating the Filipino interest in a
corporation for purposes, among others, of determining compliance with nationality requirements
(the ‘Investee Corporation’). Such manner of computation is necessary since the shares in the
Investee Corporation may be owned both by individual stockholders (‘Investing Individuals’) and
by corporations and partnerships (‘Investing Corporation’). The said rules thus provide for the
determination of nationality depending on the ownership of the Investee Corporation and, in
certain instances, the Investing Corporation.

Under the SEC Rules, there are two cases in determining the nationality of the Investee
Corporation. The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its
30 May 1990 Opinion, and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which
states, ‘(s)hares belonging to corporations or partnerships at least 60% of the capital of which is
owned by Filipino citizens shall be considered as of Philippine nationality.’ Under the liberal
Control Test, there is no need to further trace the ownership of the 60% (or more) Filipino
stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino-
owned is considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in
said Paragraph 7 of the 1967 SEC Rules which states, “but if the percentage of Filipino ownership
in the corporation or partnership is less than 60%, only the number of shares corresponding to such
percentage shall be counted as of Philippine nationality.” Under the Strict Rule or Grandfather
Rule Proper, the combined totals in the Investing Corporation and the Investee Corporation must
be traced (i.e., “grandfathered”) to determine the total percentage of Filipino ownership. Moreover,
the ultimate Filipino ownership of the shares must first be traced to the level of the Investing
Corporation and added to the shares directly owned in the Investee Corporation.

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second
part of the SEC Rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt
(i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less
than 60% Filipino stockholdings [or 59%] invests in other joint venture corporation which is either
60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the 60-40 Filipino-
foreign equity ownership is not in doubt, the Grandfather Rule will not apply.

Mcleod vs NLRC
FACTS:
On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and sick leave
benefits and other benefits against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc.,
Sta. Rosa Textiles, Inc., Complainant was the former VP and Plant Manager of Peggy Mills, Inc.; that he
was hired in June 1980 and Peggy Mills closed operations due to irreversible losses but its assets were
acquired by Sta. Rosa Textile Corporation complainant was hired by Sta. Rosa Textile but he resigned and
that while complainant was Vice President and Plant Manager of Peggy Mills, the union staged a strike up
to July 1992 resulting in closure of operations due to irreversible losses as per Notice .The complainant was
relied upon to settle the labor problem but due to his lack of attention and absence the strike continued
resulting in closure of the company. Mcleod contends that the corporations are solidarily liable. On 3 April
1998, the Labor Arbiter rendered his decision in favor of Mcleod The NLRC – Reversed decision CA-
Modified the NLRC’s decision. Lim was solidarily liable

Issue:

whether there is merger/ consolidation

w/n Patricio Lim must be solidarily liable with PMI

Held:

There was also no merger or consolidation of PMI and SRTI. Consolidation is the union of two or more
existing corporations to form a new corporation called the consolidated corporation. It is a combination by
agreement between two or more corporations by which their rights, franchises, and property are united and
become those of a single, new corporation, composed generally, although not necessarily, of the
stockholders of the original corporations. Merger, on the other hand, is a union whereby one corporation
absorbs one or more existing corporations, and the absorbing corporation survives and continues the
combined business.

The parties to a merger or consolidation are called constituent corporations. In consolidation, all the
constituents are dissolved and absorbed by the new consolidated enterprise. In merger, all constituents,
except the surviving corporation, are dissolved. In both cases, however, there is no liquidation of the assets
of the dissolved corporations, and the surviving or consolidated corporation acquires all their properties,
rights and franchises and their stockholders usually become its stockholders. The surviving or consolidated
corporation assumes automatically the liabilities of the dissolved corporations, regardless of whether the
creditors have consented or not to such merger or consolidation.27 In the present case, there is no showing
that the subject dation in payment involved any corporate merger or consolidation. Neither is there any
showing of those indicative factors that SRTI is a mere instrumentality of PMI.

Moreover, SRTI did not expressly or impliedly agree to assume any of PMI’s debts. 2. In the present case,
there is nothing substantial on record to show that Patricio acted in bad faith in terminating McLeod’s
services to warrant Patricio’s personal liability. PMI had no other choice but to stop plant operations. The
work stoppage therefore was by necessity. The company could no longer continue with its plant operations
because of the serious business losses that it had suffered. The mere fact that Patricio was president and
director of PMI is not a ground to conclude that he should be held solidarily liable with PMI for McLeod’s
money claims.
 The ruling in A.C. Ransom Labor Union-CCLU v. NLRC,59 which the Court of Appeals cited, does not apply
to this case. We quote pertinent portions of the ruling, thus:

(a) Article 265 of the Labor Code, in part, expressly provides: "Any worker whose employment has been
terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full backwages."

Article 273 of the Code provides that: "Any person violating any of the provisions of Article 265 of this Code
shall be punished by a fine of not exceeding five hundred pesos and/or imprisonment for not less than one
(1) day nor more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation? The answer is
found in Article 212 (c) of the Labor Code which provides: "(c) ‘Employer’ includes any person acting in the
interest of an employer, directly or indirectly. The term shall not include any labor organization or any of
its officers or agents except when acting as employer.". The foregoing was culled from Section 2 of RA 602,
the Minimum Wage Law. Since RANSOM is an artificial person, it must have an officer who can be
presumed to be the employer, being the "person acting in the interest of (the) employer" RANSOM. The
corporation, only in the technical sense, is the employer. The responsible officer of an employer corporation
can be held personally, not to say even criminally, liable for non-payment of back wages. That is the policy
of the law.

Concept Builders Inc. vs. NLRC (May 29, 1996)

Posted on January 27, 2015by Zoj D

FACTS:
1. Private Respondents were the employees of the Petitioner Corporation. They filed
illegal dismissal, unfair labor practice and claimed for their benefits with the NLRC.
They alleged that their contract of employment had not yet expired and the project in
which they were hired were not yet completed, as stated in the written notices sent by
the Company.

2. NLRC, ruled in favor of the Employees. At the time of the termination of private
respondent’s employment, the project in which they were hired had not yet been
finished and completed. Petitioner had to engage the services of sub-contractors whose
workers performed the functions of private respondents.

3. An alias Writ of Execution was issued by the Labor Arbiter to collect the balance of
the judgment award and to reinstate private respondents. However, the sheriff failed to
enforce because the security guard on the premises refused him to enter on the ground
that, it is no longer occupied by the petitioner.

4. A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging
that the properties sought to be levied upon by the sheriff were owned by Hydro (Phils.),
Inc. (HPPI) of which he is the Vice-President. He alleged that HPPI is a manufacturing
firm while petitioner was then engaged in construction.

5. Private respondents filed a “Motion for Issuance of a Break-Open Order,” alleging

that HPPI and petitioner corporation were owned by the same incorporator
and stockholders. NLRC granted the Motion.
ISSUES:
1. WON the Sister Company (HPPI) has a personality separate and distinct from the
petitioner corporation (CONCEPT BUILDERS)?
2. WON HPPI is used as a shield to evade the corporation’s subsidiary liability for
damages?
3. WON NLRC commited a grave abuse of discretion when it issued a break open order?

HELD:
PETITIONER DENIED.
1. The Sister Company has NO separate and distinct personality from the Concept
Builders 2. HPPI is used to Evade Corporations’ liability.
3. NLRC did not commit a grave abuse of discretion when it issued a “break-open
order against HHPI.
RATIONALE:
1. It is a fundamental principle of corporation law that a corporation is an entity
separate and distinct from its stockholders and from other corporations to which it may
be connected.8 But, this separate and distinct personality of a corporation is merely a
fiction created by law for convenience and to promote justice.9 So, when the notion of
separate juridical personality is used to defeat public convenience, justify wrong, protect
fraud or defend crime, or is used as a device to defeat the labor laws,10 this separate
personality of the corporation may be disregarded or the veil of corporate fiction
pierced.11 This is true likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation
2. The conditions under which the juridical entity may be disregarded vary according to
the peculiar facts and circumstances of each case. No hard and fast rule can be
accurately laid down, but certainly, there are some probative factors of identity that will
justify the application of the doctrine of piercing the corporate veil, to wit:
“1. Stock ownership by one or common ownership of both corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.”13
3. The test in determining the applicability of the doctrine of piercing the veil of
corporate fiction is as follows:
“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 rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complained of.
The absence of any one of these elements prevents ‘piercing the corporate veil. ‘ in
applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with
reality and not form, with how the corporation operated and the individual
defendant’s relationship to that operation. “
4. NLRC stated that:
“Both information sheets were filed by the same Virgilio O. Casino as the corporate
secretary of both corporations. It would also not be amiss to note that both
corporations had the same president, the same board of directors, the same corporate
officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein
petitioner) and the third-party claimant shared the same address and/or premises.
Under this circumstances, (sic) it cannot be said that the property levied upon by the
sheriff were not of respondents.16
Clearly, petitioner ceased its business operations in order to evade the payment to
private respondents of backwages and to bar their reinstatement to their former
positions. HPPI is obviously a business conduit of petitioner corporation and its
emergence was skillfully orchestrated to avoid the financial liability that already
attached to petitioner corporation.

5. It is very obvious that the second corporation seeks the protective shield of a
corporate fiction whose veil in the present case could, and should, be pierced as it was
deliberately and maliciously designed to evade its financial obligation to its employees.”
In view of the failure of the sheriff, in the case at bar, to effect a levy upon the property
subject of the execution, private respondents had no other recourse but to apply for a
break-open order after the third-party claim of HPPI was dismissed for lack of merit by
the NLRC.

WHEREFORE, the petition is DISMISSED and the assailed resolutions of the NLRC,
dated April 23, 1992 and December 3, 1992, are AFFIRMED.

G.R. No. 158086 Feb. 14, 2008

ASJ Corporation and Antonio San Juan vs Spouses Efren and Maura Evangelista

Facts:

This case is a petition for review on certiorari on the decision of the Court of Appeals affirming
the decision of the Regional Trial Court of Malolos, Bulacan Branch 9 in Civil Case No. 745-M-93.
Respondents Efren and Maura Evangelista are owners of R.M. Sy Chicks, a business engaged
in selling chicks and egg by-products. For hatching and incubation of eggs, they availed the services
of ASJ Corp., owned by San Juan and his family.
After years of doing business with the ASJ Corp., the respondents delayed payments for the
services of ASJ Corp, prompting owner San Juan to refuse the release of the hatched egg. The
respondents tendered Php 15,000 to San Juan for partial payment which San Juan accepted but he
still insisted on the full settlement of respondents’ accounts before releasing the chicks and by-
products. He also threated the respondents that he would impound their vehicle and detain them at
the hatchery compound if they should come back unprepared to fully settle their accounts with him.
The parties tried to settle amicably before police authorities but failed. The respondents then
filed with the RTC an action for damages based on the retention of the chicks and by-products by the
petitioners.
The RTC held ASJ Corp. and San Juan solidarily liable for the actual and moral damages and
attorney’s fees. On appeal, the Court of Appeals affirmed the decision and added exemplary damages.
Hence, this petition.
Issue: Whether or not the petitioner’s retention of the chicks and by-products on account of
respondents’ failure to pay the corresponding fees justified.

Held:

Yes. The retention has legal basis, although the threats had none. Under Article 1248 of the
Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there
is an express stipulation to that effect. It was the respondents who violated the reciprocity in contracts,
hence, the petitioners have the right of retention. This case is a case on non-performance of reciprocal
obligation.
Reciprocal obligations are those which arise from the same cause, wherein each party is a
debtor and a creditor of the other such that the performance of one is conditioned upon the
simultaneous fulfillment of the other.
Since respondents are guilty of delay in the performance of their obligations, they are liable to
pay petitioners actual damages.
The petition was partly granted. The respondents were ordered to pay petitioners for actual
damages. The actual, exemplary and moral damages laid down by the Court of Appeals were retained.

CHINA BANKING CORPORATION, vs DYNE-SEM ELECTRONICS CORPORATION

Facts:
-
On June 19 and 26, 1985, Dynetics, Inc. and Elpidio O. Lim borrowed a total of
P8,939,000 from petitioner China Banking Corporation.
-
The loan was evidenced by six promissory notes.
-
The borrowers failed to pay when the obligations became due.
-
Petitioner consequently instituted a complaint for sum of money on June 25, 1987 against
them.
-
Summons was not served on Dynetics, however, because it had already closed down.
-
Lim, on the other hand, filed his answer on December 15, 1987 denying that “he
promised to pay [the obligations] jointly and severally to [petitioner].”
-
On January 7, 1988, the case was scheduled for pre-trial with respect to Lim. The case
against Dynetics was archived.
-
On September 23, 1988, an amended complaint was filed by petitioner impleading
respondent Dyne-Sem Electronics Corporation (Dyne-Sem) and its stockholders Vicente
Chuidian, Antonio Garcia and Jacob Ratinoff.
-
According to petitioner, respondent was formed and organized to be Dynetics’ as its alter
ego.
-
The trial court favored Dyne Sem.
-
Petitioner appealed to CA.

Issue:
Whether or not TC was correct? Yes.
Held:
A corporation could not be made a party defendant to a collection case simply because
summons
could not be served on the debtor corporation on the mere grounds that the businesses of the
two
corporations are interrelated and they have common directors absent sufficient showing that the
corporate entity was purposely used as a shield to defraud creditors and third persons of their
rights
.
Likewise, respondent’s acquisition of some of the machineries and equipment of Dynetics was
not proof that respondent was formed to defraud petitioner. As the Court of Appeals found, 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. Merger is legally distinct from a sale of assets. Thus,
where
one corporation sells or otherwise transfers all its assets to another corporation for value, the
latter is not, by that fact alone, liable for the debts and liabilities of the transferor.

PANTRANCO EMPLOYEES ASSOCIATION (PEA-PTGWO) vs. NLRC

FACTS:
-
These are two consolidated petitions by PEA-PTGWO against NLRC and PNB vs PEA-
PTGWO.
-
Gonzales family owned two corporations, namely, the PNEI and Macris Realty
Corporation (Macris).
o
PNEI provided transportation services to the public, and had its bus terminal in
Quezon City standing on four valuable pieces of real estate (known as Pantranco
properties) registered under the name of Macris.
-
The Gonzales family later incurred huge financial losses and so their creditors took over
the management of PNEI and Macris.
-
Few years after, full ownership was transferred to one of their creditors, the National
Investment Development Corporation (NIDC), a subsidiary of the PNB.
o
Macris was later renamed as the National Realty Development Corporation
(Naredeco) and eventually merged with the National Warehousing Corporation
(Nawaco) to form the new PNB subsidiary, the PNB-Madecor.
-
NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned by
Gregorio Araneta III.
-
In 1986, PNEI was among the several companies placed under sequestration by the
PCGG.
-
In 1988, PCGG lifted the sequestration order to pave the way for the sale of PNEI back to
the private sector through the Asset Privatization Trust (APT). APT thus took over the
management of PNEI.
-
PNEI applied with the Securities and Exchange Commission (SEC) for suspension of
payments.
o
A management committee was thereafter created which recommended to the SEC
the sale of the company through privatization.
o
As a cost-saving measure, the committee likewise suggested the retrenchment of
several PNEI employees.
-
Eventually, PNEI ceased its operation.
-
Along with the cessation of business came the various labor claims commenced by the
former employees of PNEI where the latter obtained favorable decisions
.
-
Labor Arbiter:
o
issued the Sixth Alias Writ of Execution commanding the NLRC Sheriffs to levy
on the assets of PNEI in order to satisfy the
P
722,727,150.22 due its former
employees, as full and final satisfaction of the judgment awards in the labor cases.
o
The sheriffs were likewise instructed to proceed against PNB, PNB-Madecor and
Mega Prime.
o
In implementing the writ, the sheriffs levied upon the four valuable pieces of real
estate on which the former Pantranco Bus Terminal stood which were registered
under the name of PNB-Madecor.
-
Subsequently, Notice of Sale of the foregoing real properties was published in the
newspaper and the sale was set.
-
Having been notified of the auction sale, motions to quash the writ were separately filed
by PNB-Madecor and Mega Prime, and PNB and likewise filed their Third-Party Claims.
o
PNB-Madecor
anchored its motion on its right as the registered owner of the
Pantranco properties, and
o
Mega Prime
as the successor-in-interest.
o
For its part,
PNB
sought the nullification of the writ on the ground that it was not
a party to the labor case.

In its Third-Party Claim, PNB alleged that PNB-Madecor was indebted to
the former and that the Pantranco properties would answer for such debt.
-
Labor Arbiter declared:
1.
that the subject Pantranco properties were owned by PNB-Madecor.
a.
It being a corporation with a distinct and separate personality, its assets
could not answer for the liabilities of PNEI.
b.
Considering, however, that PNB-Madecor executed a promissory note in
favor of PNEI for
P
7,884,000.00, the writ of execution to the extent of the
said amount was concerned was considered valid.
2.
PNB’s third-party claim – to nullify the writ on the ground that it has an interest in
the Pantranco properties being a creditor of PNB-Madecor, – on the other hand,
was denied because it only had an inchoate interest in the properties.
-
On appeal, NLRC affirmed Labor Arbiter’s disposition and CA affirming NLRC.
-
Hence, this separate petitions by PNB and the former PNEI employees.
o
Contentions of petitioners:

PEA-PTGWO
- that PNB, through PNB-Madecor, directly benefited from
the operation of PNEI and had complete control over the funds of PNEI.
Hence, they are solidarily answerable with PNEI for the unpaid money
claims of the employees.

PNB
insists that the Pantranco properties could no longer be levied upon
because the promissory note for which the Labor Arbiter held PNB-
Madecor liable to PNEI, and in turn to the latter’s former employees, had
already been satisfied in favor of Gerardo C. Uy. It added that the
properties were in fact awarded to the highest bidder. Besides, says PNB,
the subject properties were not owned by PNEI, hence, the execution sale
thereof was not validly effected.
ISSUES:
1.
w/N PNEI employees can attach the Pantranco properties of PNB, PNB-Madecor and
Mega Prime to satisfy their unpaid labor claims against PNEI? NO!
HELD:
Both petitions must fail.
First, the subject property is not owned by the judgment debtor, that is, PNEI
-
the properties were owned by Macris, the predecessor of PNB-Madecor. Hence, they
cannot be pursued against by the creditors of PNEI.
-
the power of the court in executing judgments extends only to properties unquestionably
belonging to the judgment debtor alone.
-
To be sure, one man’s goods shall not be sold for another man’s debts.
Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities separate
and distinct from that of PNEI.
-
PNB, PNB-Madecor, Mega Prime, and PNEI are corporations with their own
personalities.
o
PNB was only a stockholder of PNB-Madecor which later sold its shares to Mega
Prime;
o
and that PNB-Madecor was the owner of the Pantranco properties.
-
these corporations are registered as separate entities and, absent any valid reason, we
maintain their separate identities and we cannot treat them as one.
-
Neither can we merge the personality of PNEI with PNB simply because the latter
acquired the former. Settled is the rule that where one corporation sells or otherwise
transfers all its assets to another corporation for value, the latter is not, by that fact alone,
liable for the debts and liabilities of the transferor
.
Lastly, while we recognize that there are peculiar circumstances or valid grounds that may
exist to warrant the piercing of the corporate veil, none applies in the present case whether
between PNB and PNEI; or PNB and PNB-Madeco

UCCP v. Bradford – 674 SCRA 92

FACTS:Petitioner United Church of Christ in the Philippines, Inc. (UCCP) is a religious

corporation dulyorganized under the laws of the Philippines. It is a confederation of incorporated
and unincorporatedself-governing Evangelical churches of different denominations, devised for
fellowship, mutual counseland cooperation.Respondent Bradford United Church of Christ, Inc.
(BUCCI), is likewise a religious corporation with a personality separate and distinct from
UCCP. Private respondents are members of BUCCI.UCCP has 3 governing bodies: the General
Assembly, the Conference and the Local Churches. BUCCI belonged to the Cebu Conference
Inc. (CCI) and enjoyed a peaceful co-existence until late 1989 whenBUCCI constructed a fence
that encroached upon the right of way allocated by UCCP for CCI.The General Assembly
attempted to settle the dispute and rendered a decision in favor of CCI. Thistriggered a series of
events, which further increased enmity and led to the formal break-up of BUCCIfrom
UCCP. Consequently, BUCCI filed its Amended Article of Incorporation and By-Laws,
which provided for and affected its disaffiliation from UCCP. SEC approved the same. UCCP
filed acomplaint before SEC to reject the same but SEC dismissed UCCP’s petition. CA affirmed
SEC, hence,this petition for review on certiorari.ISSUES/HELD:1.

W/N the separation of BUCCI from UCCP is valid.YES. SEC defended the right of BUCCI to
disassociate itself from UCCP in recognition of itsconstitutional freedom to associate and
disassociate. SEC also pointed out that since UCCP used thefact of BUCCI’s disaffiliation to
consolidate its claim over the property subject of unlawful detainercase against BUCCI before
the RTC, UCCP cannot now deny the validity of said disaffiliation.The SC ruled that the matter
at hand is not purely an ecclesiastical affair. BUCCI has the powerunder the law to effect
disaffiliation such that it should be given legal consequence and grantedrecognition. UCCP and
BUCCI, being corporate entities and grantees of primary franchises, aresubject to the jurisdiction
of the SEC in matters that are legal and corporate.The Court owes recognition to BUCCI’s
decision as it concerns its legal right as a religiouscorporation to disaffiliate from another
religious corporation via legitimate means is a secular matterwell within the civil courts
purview.2.

W/N the amendments to the Articles of Incorporation and By-Laws of BUCCI made after it
separatedfrom UCCP are valid.YES. SEC also found that UCCP is not the real party in interest
to question the amendments made by BUCCI to its Articles of Incorporation and By-
Laws. UCCP’s control an authority over its localchurches is not full and supreme; memberships
of the local churches in the UCCP is voluntary andnot perpetual; local churches enjoy
independence and autonomy and may maintain or continuechurch-life with or without
UCCP. Under the law and UCCP polity, BUCCI may validly bring aboutits disaffiliation from
UCCP through the amendment of its Articles of Incorporation and By-Laws.SEC approved the
amendments, which approval has in its favor the presumption of regularity. ThisCourt is not a
trier of facts. Moreover, UCCP, not being a member of BUCCI, has no locus standi toquestion
the amendments

Lyceum of the Philippines vs. Court of Appeals

[GR 101897, 5 March 1993]

Facts: Lyceum of the Philippines Inc. had sometime before commenced in the SEC a proceeding
(SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to change its corporate name
and to adopt another name not "similar [to] or identical" with that of petitioner. In an Order dated 20
April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner and that of
the Lyceum of Baguio, Inc. were substantially identical because of the presence of a "dominant" word,
i.e., "Lyceum," the name of the geographical location of the campus being the only word which
distinguished one from the other corporate name. The SEC also noted that Lyceum of the Philippines
Inc. had registered as a corporation ahead of the Lyceum of Baguio, Inc. in point of time, and ordered
the latter to change its name to another name "not similar or identical [with]" the names of previously
registered entities. The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme
Court (GR L-46595). In a Minute Resolution dated 14 September 1977, the Court denied the Petition
for Review for lack of merit. Entry of judgment in that case was made on 21 October 1977.

Armed with the Resolution of the Supreme Court, the Lyceum of the Philippines then wrote all the
educational institutions it could find using the word "Lyceum" as part of their corporate name, and
advised them to discontinue such use of "Lyceum." When, with the passage of time, it became clear
that this recourse had failed, and on 24 February 1984, Lyceum of the Philippines instituted before the
SEC SEC-Case 2579 to enforce what Lyceum of the Philippines claims as its proprietary right to the
word "Lyceum." The SEC hearing officer rendered a decision sustaining petitioner's claim to an
exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum
of Baguio, Inc. case (SEC-Case 1241) and held that the word "Lyceum" was capable of appropriation
and that petitioner had acquired an enforceable exclusive right to the use of that word. On appeal,
however, by Lyceum Of Aparri, Lyceum Of Cabagan, Lyceum Of Camalaniugan, Inc., Lyceum Of
Lallo, Inc., Lyceum Of Tuao, Inc., Buhi Lyceum, Central Lyceum Of Catanduanes, Lyceum Of
Southern Philippines, Lyceum Of Eastern Mindanao, Inc. and Western Pangasinan Lyceum, Inc.,,
which are also educational institutions, to the SEC En Banc, the decision of the hearing officer was
reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so
identified with Lyceum of the Philippines as to render use thereof by other institutions as productive of
confusion about the identity of the schools concerned in the mind of the general public. Unlike its
hearing officer, the SEC En Banc held that the attaching of geographical names to the word "Lyceum"
served sufficiently to distinguish the schools from one another, especially in view of the fact that the
campuses of Lyceum of the Philippines and those of the other Lyceums were physically quite remote
from each other. Lyceum of the Philippines then went on appeal to the Court of Appeals. In its Decision
dated 28 June 1991, however, the Court of Appeals affirmed the questioned Orders of the SEC En
Banc. Lyceum of the Philippines filed a motion for reconsideration, without success. Lyceum of the
Philippines filed the petition for review.

Issue:
1. Whether the names of the contending Lyceum schools are confusingly similar.
2. Whether the use by the Lyceum of the Philippines of "Lyceum" in its corporate name
has been for such length of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public (or at least that portion
of the general public which has to do with schools).
Held:

1. The Articles of Incorporation of a corporation must, among other things, set out the name of the
corporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate
names are concerned. It provides that "No corporate name may be allowed by the Securities an
Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that
of any existing corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws. When a change in the corporate name is approved, the
Commission shall issue an amended certificate of incorporation under the amended name." The policy
underlying the prohibition in Section 18 against the registration of a corporate name which is "identical
or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive"
or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which
would have occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporations. Herein, the Court
does not consider that the corporate names of the academic institutions are "identical with, or
deceptively or confusingly similar" to that of Lyceum of the Philippines Inc.. True enough, the corporate
names of the other schools (defendant institutions) entities all carry the word "Lyceum" but confusion
and deception are effectively precluded by the appending of geographic names to the word "Lyceum."
Thus, the "Lyceum of Aparri" cannot be mistaken by the general public for the Lyceum of the
Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the
Philippines. Further, etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which
in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated
to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus
frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching."
In time, the word "Lyceum" became associated with schools and other institutions providing public
lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a
school or an institution of learning. Since "Lyceum" or "Liceo" denotes a school or institution of
learning, it is not unnatural to use this word to designate an entity which is organized and operating as
an educational institution. To determine whether a given corporate name is "identical" or "confusingly
or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence
of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when
the name of Lyceum of the Philippines is juxtaposed with the names of private respondents, they are
not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other.

2. The number alone of the private respondents in the present case suggests strongly that the Lyceum
of the Philippines' use of the word "Lyceum" has not been attended with the exclusivity essential for
applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private
respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" 17 years before
Lyceum of the Philippines registered its own corporate name with the SEC and began using the word
"Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that
institution would have been the Western Pangasinan Lyceum, Inc. rather than Lyceum of the
Philippines. Hence, Lyceum of the Philippines is not entitled to a legally enforceable exclusive right to
use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of
their corporate names

Young Auto Supply vs CA Case Digest

Young Auto Supply vs. Court of Appeals
[GR 104175, 25 June 1993]

Facts: On 28 October 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia,
its president, Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing
& Development Corporation (CMDC) to George C. Roxas. The purchase price was P8,000,000.00
payable as follows: a down payment of P4,000,000.00 and the balance of P4,000,000.00 in four
postdated checks of P1,000,000.00 each. Immediately after the execution of the agreement, Roxas
took full control of the four markets of CMDC. However, the vendors held on to the stock certificates
of CMDC as security pending full payment of the balance of the purchase price. The first check of
P4,000,000.00, representing the down payment, was honored by the drawee bank but the four other
checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold one
of the markets to a third party. Out of the proceeds of the sale, YASCO received P600,000.00, leaving
a balance of P3,400,000.00.

Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the
sale of the CMDC shares to Nemesio Garcia. On 10 June 1988, YASCO and Garcia filed a complaint
against Roxas in the Regional Trial Court, Branch 11, Cebu City, praying that Roxas be ordered to
pay them the sum of P3,400,000.00 or that full control of the three markets be turned over to YASCO
and Garcia. The complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and
the payment of attorney's fees and costs. Failing to submit his answer, and on 19 August 1988, the
trial court declared Roxas in default. The order of default was, however, lifted upon motion of Roxas.
On 22 August 1988, Roxas filed a motion to dismiss. After a hearing, wherein testimonial and
documentary evidence were presented by both parties, the trial court in an Order dated 8 February
1991 denied Roxas' motion to dismiss. After receiving said order, Roxas filed another motion for
extension of time to submit his answer. He also filed a motion for reconsideration, which the trial court
denied in its Order dated 10 April 1991 for being pro-forma. Roxas was again declared in default, on
the ground that his motion for reconsideration did not toll the running of the period to file his answer.
On 3 May 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not
accompanied with the required affidavit of merit. But without waiting for the resolution of the motion,
he filed a petition for certiorari with the Court of Appeals. The Court of Appeals dismissal of the
complaint on the ground of improper venue. A subsequent motion for reconsideration by YASCO was
to no avail. YASCO and Garcia filed the petition.

Issue: Whether the venue for the case against YASCO and Garcia in Cebu City was improperly laid.
Held: A corporation has no residence in the same sense in which this term is applied to a natural
person. But for practical purposes, a corporation is in a metaphysical sense a resident of the place
where its principal office is located as stated in the articles of incorporation. The Corporation Code
precisely requires each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the Philippines." The purpose
of this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to
be ambulatory. Actions cannot be filed against a corporation in any place where the corporation
maintains its branch offices. The Court ruled that to allow an action to be instituted in any place where
the corporation has branch offices, would create confusion and work untold inconvenience to said
entity. By the same token, a corporation cannot be allowed to file personal actions in a place other
than its principal place of business unless such a place is also the residence of a co-plaintiff or a
defendant. With the finding that the residence of YASCO for purposes of venue is in Cebu City, where
its principal place of business is located, it becomes unnecessary to decide whether Garcia is also a
resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as
the venue. The decision of the Court of Appeals was set aside

Loyola Grand Villas Homeowners (South) Association v. CA

– Corporation Law – Failure to File By-Laws
In 1983, the Loyola Grand Villas Association, Inc. (LGVAI) was incorporated by the
homeowners of the Loyola Grand Villas (LGV), a subdivision. The Securities and Exchange
Commission (SEC) issued a certificate of incorporation under its official seal to LGVAI in the
same year. LGVAI was likewise recognized by the Home Insurance and Guaranty
Corporation (HIGC), a government-owned-and-controlled corporation whose mandate is to
oversee associations like LGVAI.
Later, LGVAI later found out that there are two homeowners associations within LGV, namely:
Loyola Grand Villas Homeowners (South) Association, Inc. (LGVAI-South) and Loyola Grand
Villas Homeowners (North) Association, Inc. (LGVAI-North). The two associations asserted
that they have to be formed because LGVAI is inactive. When LGVAI inquired about its status
with HIGC, HIGC advised that LGVAI was already terminated; that it was automatically
dissolved when it failed to submit it By-Lawsafter it was issued a certificate of incorporation
by the SEC.
ISSUE: Whether or not a corporation’s failure to submit its by-laws results to its automatic
dissolution.
HELD: No. A private corporation like LGVAI commences to have corporate existence and
juridical personality from the date the Securities and Exchange Commission (SEC) issues a
certificate of incorporation under its official seal. The submission of its by-laws is a condition
subsequent but although it is merely such, it is a MUST that it be submitted by the corporation.
Failure to submit however does not warrant automatic dissolution because such a
consequence was never the intention of the law. The failure is merely a ground for dissolution
which may be raised in a quo warranto proceeding. It is also worthwhile to note that failure to
submit can’t result to automatic dissolution because there are some instances when a
corporation does not require a by-laws.

PMI Colleges v. NLRC

 77 SCRA 462 – Business Organization – Corporation Law – By-laws and Innocent Third
Persons
In 1991, PMI Colleges hired the services of Alejandro Galvan for the latter to teach in said
institution. However, for unknown reasons, PMI defaulted from paying the remunerations due
to Galvan. Galvan made demands but were ignored by PMI. Eventually, Galvan filed a labor
case against PMI. Galvan got a favorable judgment from the Labor Arbiter; this was affirmed
by the National Labor Relations Commission. On appeal, PMI reiterated, among others, that
the employment of Galvan is void because it did not comply with its by-laws. Apparently, the
by-laws require that an employment contract must be signed by the Chairman of the Board
of PMI. PMI asserts that Galvan’s employment contract was not signed by the Chairman of
the Board.
ISSUE: Whether or not Galvan’s employment contract is void.
HELD: No. PMI Colleges never even presented a copy of the by-laws to prove the existence
of such provision. But even if it did, the employment contract cannot be rendered invalid just
because it does not bear the signature of the Chairman of the Board of PMI. By-Laws operate
merely as internal rules among the stockholders, they cannot affect or prejudice third
persons who deal with the corporation, unless they have knowledge of the same. In this case,
PMI was not able to prove that Galvan knew of said provision in the by-laws when he was
employed by PMI.
JAKA INVESTMENTS CORPORATION v. VS.CIR, GR No. 147629, 2010-07-28
Facts:
Sometime in 1994, petitioner sought to invest in JAKA Equities Corporation (JEC), which
was then planning to undertake an initial public offering (IPO) and listing of its shares of
stock with the Philippine Stock Exchange. JEC increased its authorized capital stock... from
One Hundred Eighty-Five Million Pesos (P185,000,000.00) to Two Billion Pesos
(P2,000,000,000.00). Petitioner proposed to subscribe to Five Hundred Eight Million Eight
Hundred Six Thousand Two Hundred Pesos (P508,806,200.00) out of the increase in the
authorized... capital stock of JEC through a tax-free exchange under Section 34(c)(2) of the
National Internal Revenue Code (NIRC) of 1977, as amended, which was effected by the
execution of a Subscription Agreement and Deed of Assignment of Property in Payment of
Subscription.
The intended IPO and listing of shares of JEC did not materialize. However, JEC still
decided to proceed with the increase in its authorized capital stock and petitioner agreed to
subscribe thereto, but under different terms of payment. Thus, petitioner and JEC
executed... the Amended Subscription Agreement
On October 14, 1994, petitioner paid One Million Three Thousand Eight Hundred Ninety-
Five Pesos and Sixty-Five Centavos (P1,003,895.65) for basic documentary stamp tax
inclusive of the 25% surcharge for late payment on the Amended Subscription Agreement
Petitioner, after seeing the RDO's certifications, the total amount of which was less than the
actual amount it had paid as documentary stamp tax, concluded that it had
overpaid. Petitioner subsequently sought a refund for the alleged excess documentary
stamp tax and... surcharges it had paid on the Amended Subscription Agreement in the
amount of Four Hundred Ten Thousand Three Hundred Sixty-Seven Pesos (P410,367.00)
On October 11, 1996, petitioner filed a petition for refund before the Court of Tax Appeals
The Court of Tax Appeals likewise denied... petitioner's Motion for Reconsideration
Petitioner appealed to the Court of Appeals by way of petition for review. The Court of
Appeals sustained the Court of Tax Appeals in its Decision
Petitioner's main contention in this claim for refund is that the tax base for the documentary
stamp tax on the Amended Subscription Agreement should have been only the shares of
stock in RGHC, PGCI, and UCPB that petitioner had transferred to JEC as payment for its
subscription... to the JEC shares, and should not have included the cash portion of its
payment, based on Section 176 of the National Internal Revenue Code
Petitioner argues that the cash component of its payment for its subscription to the JEC
shares, totaling Three Hundred Seventy Million Seven Hundred Sixty-Six Thousand Pesos
(P370,766,000.00) should not have been charged any documentary stamp... tax. Petitioner
claims that there was overpayment because the tax due on the transferred shares was only
Five Hundred Ninety-Three Thousand Five Hundred Twenty-Eight and 15/100 Pesos
(P593,528.15), as indicated in the certifications issued by RDO Esquivias.
Respondent maintains that the documentary stamp tax imposed in this case is on the
original issue of certificates of stock of JEC on the subscription by the petitioner of the
P508,806,200.00 shares out of the increase in the authorized capital stock of the former
pursuant to
Section 175 of the NIRC. The documentary stamp tax was not imposed on the shares of
stock owned by petitioner in RGHC, PGCI, and UCPB, which merely form part of the partial
payment of the subscribed shares in JEC.
Respondent stresses that the documentary stamp tax can be levied or collected from the
person making, signing, issuing, accepting, or transferring the obligation or property, as
provided in Section 173 of the Tax Code.
Issues:
whether petitioner is entitled to a partial refund of the documentary stamp tax and
surcharges it paid on the execution of the Amended Subscription Agreement.
Ruling:
In claims for refund, the burden of proof is on the taxpayer to prove entitlement to such
refund.
It was thus incumbent upon petitioner to show clearly its basis for claiming that it is entitled
to a tax refund. This, to our mind, the petitioner failed to do.
We find nothing ambiguous nor obscure in the language of Section 173, taken in relation to
Section 175 of the 1994 Tax Code x x x insofar as the same is brought to bear upon the
circumstances in the instant case. These provisions furnish the best means of their own...
exposition that a documentary stamp tax (DST) is due and payable on documents,
instruments, loan agreements and papers, acceptances, assignments, sales and transfers
which evidenced the transaction agreed upon by the parties and should be paid by the
person making, signing,... issuing, accepting or transferring the property, right or obligation.
Understood to mean what it plainly expressed, the DST imposition is essentially addressed
and directly brought to bear upon the DOCUMENT evidencing the transaction of the parties
which establishes its rights and obligations.
In the case at bar, the rights and obligations between petitioner JAKA Investments
Corporation and JAKA Equities Corporation are established and enforceable at the time the
"Amended Subscription Agreement and Deed of Assignment of Property in Payment of
Subscription" were signed... by the parties and their witness, so is the right of the state to
tax the aforestated document evidencing the transaction. DST is a tax on the document
itself and therefore the rate of tax must be determined on the basis of what is written or
indicated on the instrument... itself independent of any adjustment which the parties may
agree on in the future
Petitioner alleges, though, that considering that the assessment of payment of documentary
stamp tax was made payable only to the aforesaid issuances of certificates of [stock]
exclusive of that of FEBTC shares of stock which were paid in cash, and that it has paid a...
total of Php1,003,895.65 inclusive of surcharges for late payment, the petitioner is entitled
to a refund of Php410,367.00. This argument does not hold water. As discussed earlier, a
documentary stamp is levied upon the privilege, the opportunity and the facility... offered at
exchanges for the transaction of the business. This being the case, and as correctly found
by the tax court, the documentary stamp tax imposition is essentially addressed and directly
brought to bear upon the document evidencing the transaction of the parties... which
establishes its rights and obligations, which in the case at bar, was established and
enforceable upon the execution of the Amended Subscription Agreement and Deed of
Assignment of Property in Payment of Subscription.
A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the
business transacted but is an excise upon the privilege, opportunity or facility offered at
exchanges for the transaction of the business. It is an excise upon the facilities used in
the... transaction of the business separate and apart from the business itself. Documentary
stamp taxes are levied on the exercise by persons of certain privileges conferred by law for
the creation, revision, or termination of specific legal relationships through the execution
of... specific instruments.
Thus, we have held that documentary stamp taxes are levied independently of the legal
status of the transactions giving rise thereto. The documentary stamp taxes must be paid
upon the issuance of the said instruments, without regard to whether the contracts... which
gave rise to them are rescissible, void, voidable, or unenforceable.
Petitioner claims overpayment of the documentary stamp tax but its basis for such is not
clear at all. While insisting that the documentary stamp tax it had paid for was not based on
the original issuance of JEC shares as provided in Section 175 of the 1994 Tax Code,...
petitioner failed in showing, even through a mere basic computation of the tax base and the
tax rate, that the documentary stamp tax was based on the transfer of shares under Section
176 either. It would have been helpful for petitioner's cause had it submitted proof of... the
par value of the shares of stock involved, to show the actual basis for the documentary
stamp tax computation. For comparison, the original Subscription Agreement ought to have
been submitted as well.
The fact that it was petitioner and not JEC that paid for the documentary stamp tax on the
original issuance of shares is of no moment, as Section 173 of the 1994 Tax Code states
that the documentary stamp tax shall be paid by the person making, signing, issuing,
accepting or... transferring the property, right or obligation.

Corporate Law Case Digest: De Los Santos V.

Republic (1955)

G.R. No. L-4818 February 28, 1955

Lessons Applicable: Nature of Certificate of Stock (Corporate Law)

FACTS:

 600,000 shares of stock of the Lepanto Consolidated Mining Co., Inc., (Lepanto), a corporation duly
organized and existing under the laws of the Philippines
 Originally, 1/2 shares of stock were claimed by Apolinario de los Santos, and the other half by Isabelo
Astraquillo. During the pendency of this case, the Astraquillo has allegedly conveyed and assigned his
interest in and to de los Santos.
 Vicente Madrigal is registered in the books of the Lepanto as owner of said stocks and whose
indorsement in blank appears on the back of said certificates
 contend that De los Santos bought:
 55,000 shares from Juan Campos
 300,000 shares from Carl Hess
 800,000 shares from Carl Hess for the benefit of Astraquillo
 delivered to stock broker Leonardo Recio stock certificate No. 2279 55,000 shares to see Mr. DeWitt,
who, probably, would be interested in purchasing the shares
 DeWitt retained the shares reasoning that it was blocked by the US and receipt was burned at Recio's
dwelling
 By virtue of vesting P-12, dated February 18, 1945, title to the 1,600,000 shares of stock in dispute was,
however, vested in the Alien Property Custodian of the U. S.
 Plaintiffs filed their respective claims with the Property Custodian
 Defendant Attorney General of the U. S., successor to the Administrator contends, substantially, that,
prior to the outbreak of the war in the Pacific, shares of stock were bought by Vicente Madrigal, in trust
for, and for the benefit of, the Mitsui Bussan Kaisha a corporation organized in accordance with the laws
of Japan, the true owner thereof, with branch office in the Philippines
 March, 1942: Madrigal delivered stock certificates, with his blank indorsement thereon, to the Mitsuis,
which kept said certificates, in the files of its office in Manila, until the liberation of the latter by the
American forces early in 1945; that the Mitsuis had never sold, or otherwise disposed of, said shares of
stock; and that the stock certificates aforementioned must have been stolen or looted, therefore, during
the emergency resulting from said liberation.
 CFI: favored plaintiffs
 Defendants Appealed
 Hess, during that period, operate as broker, for being American, he was under Japanese surveillance, and
that Hess had made, during the occupation, no transaction involving mining shares, except when he sold
12,000 shares of the Benguet Consolidated, inherited from his mother, sometime in 1943.
ISSUE: W/N the plaintiffs are entitled to the shares

HELD: NO. REVERSED

 burden of proof is upon the plaintiffs

 Section 35 of the Corporation Law reads:
The capital stock corporations shall be divided into shares for which certificates signed by the president or
the vice-president, countersigned by the secretary or clerk and sealed with the seal of the corporation, shall
be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be
transferred by delivery of the certificate endorsed 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 entered and noted upon 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, and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable on the books of
the corporation. (Emphasis supplied.)

 Certificates of stock are not negotiable instruments (post, Par. 102), consequently, a transferee under a
forged assignment acquires no title which can be asserted against the true owner, unless his own
negligence has been such as to create an estoppel against him (Clarke on Corporations, Sec. Ed. p.
415). If the owner of the certificate has endorsed it in blank, and it is stolen from him, no title is acquired
by an innocent purchaser for value
 Neither the absence of blame on the part of the officers of the company in allowing an unauthorized
transfer of stock, nor the good faith of the purchaser of stolen property, will avail as an answer to the
demand of the true owner
 The doctrine that a bona fide purchaser of shares under a forged or unauthorized transfer acquires no
title as against the true owner does not apply where the circumstances are such as to estop the latter
from asserting his title. . . .
 one of two innocent parties must suffer by reason of a wrongful or unauthorized act, the loss must fall
on the one who first trusted the wrongdoer and put in his hands the means of inflicting such loss
 negligence which will work an estoppel of this kind must be a proximate cause of the purchase or
advancement of money by the holder of the property, and must enter into the transaction itself
 the negligence must be in or immediately connected with the transfer itself
 to establish this estoppel it must appear that the true owner had conferred upon the person who has
diverted the security the indicia of ownership, or an apparent title or authority to transfer the title
 So the owner is not guilty of negligence in merely entrusting another with the possession of his
certificate of stock, if he does not, by assignment or otherwise, clothe him with the apparent title.
 Nor is he deprived of his title or his remedy against the corporation because he intrusts a third person
with the key of a box in which the certificate are kept, where the latter takes them from the box and by
forging the owner's name to a power of attorney procures their transfer on the corporate books.
 Nor is the mere indorsement of an assignment and power of attorney in blank on a certificate of stock,
which is afterwards lost or stolen, such negligence as will estop the owner from asserting his title
as against a bona fide purchaser from the finder or thief, or from holding the corporation liable for
allowing a transfer on its books, where the loss or theft of the certificate was not due to any negligence
on the part of the owner
 stock pledged to a bank is endorsed in blank by the owner does not estop him from asserting title
thereto as against a bona fide purchaser for value who derives his title from one who stole the certificate
from the pledgee. And this has also been held to be true though the thief was an officer of the pledgee,
since his act in wrongfully appropriating the certificate cannot be regarded as a misappropriation by the
bank to whose custody the certificate was intrusted by the owner, even though the bank may be liable to
the pledgor
 Hence, as the undisputed principal or beneficiary of the registered owner (Madrigal), the Mitsuis may
claim his rights, which cannot be exercised by the plaintiffs, not only because their alleged title is
not derived either from madrigal or from the Mitsuis, but, also, because it is in derogation, of said rights.
madrigal and the Mitsuis are notprivies to the alleged sales by Campos and Hess to the plaintiffs,
contrary to the latter's pretense.

BITONG V. CA (G.R. NO. 123553)

Facts:
Petitioner Bitong allegedly acting for the benefit of Mr. & Ms. Co. filed a
derivative suit before the SEC against respondent spouses Apostol, who were
officers in said corporation, to hold them liable for fraud and mismanagement
in directing its affairs. Respondent spouses moved to dismiss on the ground
that petitioner had no legal standing to bring the suit as she was merely a
holder-in-trust of shares of JAKA Investments which continued to be the true
stockholder of Mr. & Ms. Petitioner contends that she was a holder of proper
stock certificates and that the transfer was recorded. She further contends that
even in the absence of the actual certificate, mere recording will suffice for her
to exercise all stockholder rights, including the right to file a derivative suit in
the name of the corporation. The SEC Hearing Panel dismissed the suit. On
appeal, the SEC En Banc found for petitioner. CA reversed the SEC En Banc
decision.
Issue:
Whether or not petitioner is the true holder of stock certificates to be able
institute a derivative suit.
Ruling: NO.
Sec 63 of the Corporation Code envisions a formal certificate of stock which
can be issued only upon compliance with certain requisites. First, the
certificates must be signed by the president or vice-president, countersigned by
the secretary or assistant secretary, and sealed with the seal of the corporation.
A mere typewritten statement advising a stockholder of the extent of his
ownership in a corporation without qualification and/or authentication cannot
be considered as a formal certificate of stock. Second, delivery of the certificate
is an essential element of its issuance. Hence, there is no issuance of a stock
certificate where it is never detached from the stock books although blanks
therein are properly filled up if the person whose name is inserted therein has
no control over the books of the company. Third, the par value, as to par value
shares, or the full subscription as to no par value shares, must first be fully
paid. Fourth, the original certificate must be surrendered where the person
requesting the issuance of a certificate is a transferee from a stockholder.
The certificate of stock itself once issued is a continuing affirmation or
representation that the stock described therein is valid and genuine and is at
least prima facie evidence that it was legally issued in the absence of evidence
to the contrary. However, this presumption may be rebutted. Aside from
petitioner’s own admissions, several corporate documents disclose that the true
party-in-interest is not petitioner but JAKA. It should be emphasized that
JAKA executed, a deed of sale over 1,000 Mr. & Ms. shares in favor of
respondent Eugenio D. Apostol. On the same day, respondent Apostol signed
a declaration of trust stating that she was the registered owner of 1,000 Mr. &
Ms. shares covered by a Certificate of Stock. And, there is nothing in the
records which shows that JAKA had revoked the trust it reposed on respondent
Eugenia D. Apostol. Neither was there any evidence that the principal had
requested her to assign and transfer the shares of stock to petitioner. In fine,
the records are unclear on how petitioner allegedly acquired the shares of stock
of JAKA.
Thus, for a valid transfer of stocks, the requirements are as follows: (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. At most, in the instant case, petitioner
has satisfied only the third requirement. Compliance with the first two
requisites has not been clearly and sufficiently shown.
*The basis of a stockholder’s suit is always one in equity. However, it cannot
prosper without first complying with the legal requisites for its institution.
The most important of these is the bona fide ownership by a stockholder of a
stock in his own right at the time of the transaction complained of which
invests him with standing to institute a derivative action for the benefit of the
corporation
REPUBLIC vs. ESTATE OF MENZI G.R.
No. 152578 November 23, 2005 PCGG
OCTOBER 30, 2017

FACTS:

In the aftermath of the EDSA Revolution, President Corazon C. Aquino issued Executive Order
(EO) No. 1, creating the Presidential Commission on Good Government (PCGG) tasked with the
recovery of all ill-gotten wealth accumulated by former President Ferdinand Marcos, his
immediate family, relatives, subordinates and close associates. This was followed by EO Nos. 2
and 14, respectively freezing all assets and properties in the Philippines in which the former
President, his wife, their close relatives, subordinates, business associates, dummies, agents or
nominees have any interest or participation, and defining the jurisdiction over cases involving the
ill-gotten wealth. Pursuant to the executive orders, several writs of sequestration were issued by
the PCGG in pursuit of the reputedly vast Marcos fortune.

The PCGG issued a Writ of Sequestration sequestering the shares of Marcos and with the Emilio
Yap and Eduardo Cojuangco and their nominees and agents in the Bulletin Publishing
Corporation (Bulletin) where they own substantial holdings, and another Writ of Sequestration
for the shares of stock, assets, properties, records and documents of Hans Menzi Holdings and
Management, Inc. (HMHMI).

ISSUE:

Is PCGG empowered to sell sequestered assets?

RULING:

The contention that the sale of the 214 block to the Bulletin was null and void as the PCGG
failed to obtain approval from the Sandiganbayan is likewise unmeritorious. While it is true that
the PCGG is not empowered to sell sequestered assets without prior Sandiganbayan approval,
this case presents a clear exception because this Court itself directed the PCGG to accept the
cash deposit offered by Bulletin in payment for the Cojuangco and Zalamea sequestered shares
subject to the alternatives mentioned therein and the outcome of the remand to the
Sandiganbayan on the question of ownership of these sequestered shares.

Like the remedies of “freeze order” and “provisional takeover” with which the PCGG has been
equipped, sequestration is not meant to deprive the owner or possessor of his title or any right to
his property and vest the same in the sequestering agency, the Government or any other person,
as these can be done only for the causes and by the processes laid down by law. These remedies
“are severe, radical measures taken against apparent, ostensible owners of property, or parties
against whom, at the worst, there are merely prima facie indications of having amassed ‘ill-
gotten wealth,’ indications which must still be shown to lead towards actual facts in accordance
with the judicial procedures of the land.” Considering that sequestration is not meant to create a
permanent situation as regards the property subject thereof and subsists only until ownership is
finally judicially determined, it stands to reason that, upon its dissolution, the property
sequestered should likewise be returned to its owner/s. Indeed, sequestration cannot be allowed
interminably and forever, if it is to adhere to constitutional due process

CORPORATION
LAWG.R. No. 157549 May 30, 2011DONNINA C. HALLEY, Petitioner, vs.

PRINTWELL, INC., Respondent.

FACTS:BMPI (Business Media Philippines Inc.) is a corporation under the control of

itsstockholders, including Donnina Halley. In the course of its business, BMPI
commissionedPRINTWELL 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 collectionof the unpaid balance and later on impleaded BMPI’s original
stockholders and incorporators
torecover 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 ofwhich P187,500 were paid up capital.
Halley subscribed to 35,000 shares worth P350,000 butonly paid P87,500.
Halley contends that:

1. They all had already paid their subscriptions in full

2. BMPI had a separate and distinct personality

3. BOD and SH had resolved to dissolve BMPI

RTC and CA:
Defendant merely used the corporate fiction as a cloak/cover to create an
injustice (againstPRINTWELL)
.
Rejected allegations of full payment in view of irregularity in the issuance of

ORsPayment made on a later date was covered by an OR with a lower serial

number than paymentmade on an earlier date).

Doctrine of Limited Liability (b. Cases)

ISSUE: Whether or not petitioner Donnina Halley is personally liable though she
submits she hadno participation in the transaction between BMPI and Printwell and
that BMPI acted on its own.

HELD:Yes. Although a corporation has a personality separate and distinct from

those of itsstockholders, directors, or officers,

such separate and distinct personality is merely a fictioncreated by law for the
sake of convenience and to promote the ends of justice.

The corporatepersonality may be disregarded, and the individuals composing the

corporation will be treatedas individuals, if the corporate entity is being used as a
cloak or cover for fraud or illegality; as a justification for a wrong; as an alter ego,
an adjunct, or a business conduit for the sole benefit ofthe stockholders. As a
general rule, a corporation is looked upon as a legal entity, unless anduntil
sufficient reason to the contrary appears. Thus, the courts always presume good
faith, andfor that reason accord prime importance to the separate personality of
the corporation,disregarding the corporate personality only after the wrongdoing
is first clearly and convincingl

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY v. NATIONAL TELECOMMUNICATIONS COMMISSION

G.R. No. 152685, 4 December 2007

Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Subscription Contract)

FACTS:
This case pertains to Section 40 (e) of the Public Service Act (PSA), as amended on March 15, 1984,
pursuant to Batas Pambansa Blg. 325, which authorized the NTC to collect from public
telecommunications companies Supervision and Regulation Fees (SRF) of PhP 0.50 for every PhP 100 or
a fraction of the capital and stock subscribed or paid for of a stock corporation, partnership or single
proprietorship of the capital invested, or of the property and equipment, whichever is higher.

Under Section 40 (e) of the PSA, the NTC sent SRF assessments to petitioner Philippine Long Distance
Telephone Company (PLDT) starting sometime in 1988. The SRF assessments were based on the market
value of the outstanding capital stock, including stock dividends, of PLDT. PLDT protested the
assessments contending that the SRF ought to be based on the par value of its outstanding capital stock.
Its protest was denied by the NTC and likewise, its motion for reconsideration.

PLDT appealed before the CA. The CA modified the disposition of the NTC by holding that the SRF should
be assessed at par value of the outstanding capital stock of PLDT, excluding stock dividends.

ISSUE:

Whether or not the value transferred from the unrestricted retained earnings of PLDT to the capital
stock account pursuant to the issuance of stock dividends is the proper basis for the assessment of the
SRF?

RULING:

NO.

In the case of stock dividends, it is the amount that the corporation transfers from its surplus profit
account to its capital account. It is the same amount that can be loosely termed as the trust fund of the
corporation. The Trust Fund doctrine considers this subscribed capital as a trust fund for the payment of
the debts of the corporation, to which the creditors may look for satisfaction. Until the liquidation of the
corporation, no part of the subscribed capital may be returned or released to the stockholder (except in
the redemption of redeemable shares) without violating this principle. Thus, dividends must never
impair the subscribed capital; subscription commitments cannot be condoned or remitted; nor can the
corporation buy its own shares using the subscribed capital as the considerations therefor.
When stock dividends are distributed, the amount declared ceases to belong to the corporation but is
distributed among the shareholders. Consequently, the unrestricted retained earnings of the
corporation are diminished by the amount of the declared dividend while the stockholders equity is
increased. Furthermore, the actual payment is the cash value from the unrestricted retained earnings
that each shareholder foregoes for additional stocks/shares which he would otherwise receive as
required by the Corporation Code to be given to the stockholders subject to the availability and
conditioned on a certain level of retained earnings.

In essence, therefore, the stockholders by receiving stock dividends are forced to exchange the
monetary value of their dividend for capital stock, and the monetary value they forego is considered the
actual payment for the original issuance of the stocks given as dividends. Therefore, stock dividends
acquired by shareholders for the monetary value they forego are under the coverage of the SRF and the
basis for the latter is such monetary value as declared by the board of directors.