1. Manila Gas Corp.vs.

CIR, 62 Phil 895

FACTS:
*The plaintiff is a corporation organized under the laws of the Philippine Islands. It
operates a gas plant in the City of Manila and furnishes gas service to the people of the
metropolis and surrounding municipalities by virtue of a franchise granted to it by the
Philippine Government. Associated with the plaintiff are the Islands Gas and Electric
Company domiciled in New York, United States, and the General Finance Company
domiciled in Zurich, Switzerland. Neither of these last mentioned corporations is
resident in the Philippines.
* For the years 1930, 1931, and 1932, dividends in the sum of P1,348,847.50 were paid
by the plaintiff to the Islands Gas and Electric Company in the capacity of stockholders
upon which withholding income taxes were paid to the defendant totalling P40,460.03
For the same years interest on bonds in the sum of P411,600 was paid by the plaintiff
to the Islands Gas and Electric Company upon which withholding income taxes were
paid to the defendant totalling P12,348. Finally for the stated time period, interest on
other indebtedness in the sum of P131,644,90 was paid by the plaintiff to the Islands
Gas and Electric Company and the General Finance Company respectively upon which
withholding income taxes were paid to the defendant totalling P3,949.34.
* Appellant first contends that the dividends paid by it to its stockholders, the Islands
Gas and Electric Company , were not subject to tax because to impose a tax thereon
would be to do so on the plaintiff corporation, in violation of the terms of its franchise
and would, moreover, be oppressive and inequitable. This argument is predicated on
the constitutional provision that no law impairing the obligation of contracts shall be
enacted.
* Appellant contends that, as the Islands Gas and Electric Company and the General
Finance Company are domiciled in the United States and Switzerland respectively, and
as the interest on the bonds and other indebtedness earned by said corporations has
been paid in their respective domiciles, this is not income from Philippine sources within
the meaning of the Philippine Income Tax Law.

ISSUE:
WON the dividends paid were subject to tax.

HELD:
* The approved doctrine is that no state may tax anything not within its jurisdiction
without violating the due process clause of the constitution. The taxing power of a state
does not extend beyond its territorial limits, but within such it may tax persons,
property, income, or business. If an interest in property is taxed, the situs of either the
property or interest must be found within the state. If an income is taxed, the recipient
thereof must have a domicile within the state or the property or business out of which
the income issues must be situated within the state so that the income may be said to
have a situs therein. Personal property may be separated from its owner, and he may
be taxed on its account at the place where the property is although it is not the place of
his own domicile and even though he is not a citizen or resident of the state which
imposes the tax. But debts owing by corporations are obligations of the debtors, and
only possess value in the hands of the creditors.
* These views concerning situs for taxation purposes apply as well to an organized,
unincorporated territory or to a Commonwealth having the status of the Philippines.
* As there held and as now confirmed, a corporation has a personality distinct from that
of its stockholders, enabling the taxing power to reach the latter when they receive
dividends from the corporation. It must be considered as settled in this jurisdiction that
dividends of a domestic corporation, which are paid and delivered in cash to foreign
corporations as stockholders, are subject to the payment in the income tax, the
exemption clause in the charter of the corporation notwithstanding.
* The Collector of Internal Revenue was justified in withholding income taxes on
interest on bonds and other indebtedness paid to non-resident corporations because
this income was received from sources within the Philippine Islands as authorized by
the Income Tax Law.

2. Stockholders of F. Guanzon & Sons vs. Register of Deeds of Manila, 6 SCRA

373

FACTS:
* On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc.
executed a certificate of liquidation of the assets of the corporation reciting, among
other things, that by virtue of a resolution of the stockholders adopted on September
17, 1960, dissolving the corporation, they have distributed among themselves in
proportion to their shareholdings, as liquidating dividends, the assets of said
corporation, including real properties located in Manila.
* The certificate of liquidation, when presented to the Register of Deeds of Manila, was
denied registration on seven grounds, of which the following were disputed by the
stockholders:
3. The number of parcels not certified to in the acknowledgment;
5. P430.50 Reg. fees need be paid;
6. P940.45 documentary stamps need be attached to the document;
7. The judgment of the Court approving the dissolution and directing the disposition of
the assets of the corporation need be presented (Rules of Court, Rule 104, Sec. 3).
* The Commissioner of Land Registration overruled ground No. 7 and sustained
requirements Nos. 3, 5 and 6. The stockholders interposed the present appeal.

ISSUE:
* WON that certificate merely involves a distribution of the corporation's assets or
should be considered a transfer or conveyance.
HELD:
* A corporation is a juridical person distinct from the members composing it. Properties
registered in the name of the corporation are owned by it as an entity separate and
distinct from its members. While shares of stock constitute personal property they do
not represent property of the corporation. The corporation has property of its own
which consists chiefly of real estate. A share of stock only typifies an aliquot part of the
corporation's property, or the right to share in its proceeds to that extent when
distributed according to law and equity, but its holder is not the owner of any part of
the capital of the corporation. Nor is he entitled to the possession of any definite
portion of its property or assets. The stockholder is not a co-owner or tenant in
common of the corporate property.
* It is clear that the act of liquidation made by the stockholders of the F. Guanzon and
Sons, Inc. of the latter's assets is not and cannot be considered a partition of
community property, but rather a transfer or conveyance of the title of its assets to the
individual stockholders. Indeed, since the purpose of the liquidation, as well as the
distribution of the assets of the corporation, is to transfer their title from the
corporation to the stockholders in proportion to their shareholdings, — and this is in
effect the purpose which they seek to obtain from the Register of Deeds of Manila, —
that transfer cannot be effected without the corresponding deed of conveyance from
the corporation to the stockholders. It is, therefore, fair and logical to consider the
certificate of liquidation as one in the nature of a transfer or conveyance.

3. Magsaysay Labrador vs. Court of Appeals, 354 SCRA 279

FACTS:
* On February 9, 1979, Adelaida Rodriguez-Magsaysay, widow and special administratix
of the estate of the late Senator Genaro Magsaysay, brought before the then Court of
First Instance of Olongapo an action against Artemio Panganiban, Subic Land
Corporation (SUBIC), Filipinas Manufacturer's Bank (FILMANBANK) and the Register of
Deeds of Zambales. In her complaint, she alleged that in 1958, she and her husband
acquired, thru conjugal funds, a parcel of land with improvements, known as "Pequena
Island", covered by TCT No. 3258; that after the death of her husband, she discovered
[a] an annotation at the back of TCT No. 3258 that "the land was acquired by her
husband from his separate capital;" [b] the registration of a Deed of Assignment dated
June 25, 1976 purportedly executed by the late Senator in favor of SUBIC, as a result of
which TCT No. 3258 was cancelled and TCT No. 22431 issued in the name of SUBIC;
and [c] the registration of Deed of Mortgage dated April 28, 1977 in the amount of P
2,700,000.00 executed by SUBIC in favor of FILMANBANK; that the foregoing acts were
void and done in an attempt to defraud the conjugal partnership considering that the
land is conjugal, her marital consent to the annotation on TCT No. 3258 was not
obtained, the change made by the Register of Deeds of the titleholders was effected
without the approval of the Commissioner of Land Registration and that the late
Senator did not execute the purported Deed of Assignment or his consent thereto, if
obtained, was secured by mistake, violence and intimidation. She further alleged that
the assignment in favor of SUBIC was without consideration and consequently null and
void. She prayed that the Deed of Assignment and the Deed of Mortgage be annulled
and that the Register of Deeds be ordered to cancel TCT No. 22431 and to issue a new
title in her favor.
* On March 7, 1979, herein petitioners, sisters of the late senator, filed a motion for
intervention on the ground that on June 20, 1978, their brother conveyed to them one-
half (1/2 ) of his shareholdings in SUBIC or a total of 416,566.6 shares and as
assignees of around 41 % of the total outstanding shares of such stocks of SUBIC, they
have a substantial and legal interest in the subject matter of litigation and that they
have a legal interest in the success of the suit with respect to SUBIC.
* On July 26, 1979, the court denied the motion for intervention, and ruled that
petitioners have no legal interest whatsoever in the matter in litigation and their being
alleged assignees or transferees of certain shares in SUBIC cannot legally entitle them
to intervene because SUBIC has a personality separate and distinct from its
stockholders.
* On appeal, respondent Court of Appeals found no factual or legal justification to
disturb the findings of the lower court. The appellate court further stated that whatever
claims the petitioners have against the late Senator or against SUBIC for that matter
can be ventilated in a separate proceeding, such that with the denial of the motion for
intervention, they are not left without any remedy or judicial relief under existing law.
Petitioners' motion for reconsideration was denied. Hence, the instant recourse.

ISSUE:
* WON respondent Court of Appeals correctly denied their motion for intervention.

HELD:
*This Court affirms the respondent court's holding that petitioners herein have no legal
interest in the subject matter in litigation so as to entitle them to intervene in the
proceedings.
* As clearly stated in Section 2 of Rule 12 of the Rules of Court, to be permitted to
intervene in a pending action, the party must have a legal interest in the matter in
litigation, or in the success of either of the parties or an interest against both, or he
must be so situated as to be adversely affected by a distribution or other disposition of
the property in the custody of the court or an officer thereof.
* While a share of stock represents a proportionate or aliquot interest in the property of
the corporation, it does not vest the owner thereof with any legal right or title to any of
the property, his interest in the corporate property being equitable or beneficial in
nature. Shareholders are in no legal sense the owners of corporate property, which is
owned by the corporation as a distinct legal person.
* The petitioners cannot claim the right to intervene on the strength of the transfer of
shares allegedly executed by the late Senator. The corporation did not keep books and
records. Perforce, no transfer was ever recorded, much less effected as to prejudice
third parties. The transfer must be registered in the books of the corporation to affect
third persons. The law on corporations is explicit. Section 63 of the Corporation Code
provides, thus: "No transfer, however, shall be valid, except as between the parties,
until the transfer is recorded in the books of the corporation showing the names of the
parties to the transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.

4. San Juan Structural & Steel Fabricators, Inc. Vs. CA., 296 SCRA 631

FACTS:
* Plaintiff-appellant San Juan structural and steel fabricators Inc.’s amended complaint
alleged that on February 14, 1989, plaintiff-appellant entered into an agreement with
defendant-appellee Motorich Sales Corporation for the transfer to it of a parcel of land
identified as lot 30, Block 1 of the Acropolis Greens Subdivision located in the district of
Murphy, Quezon City, Metro Manila containing an area of 414 sqm, covered by TCT no.
362909; that as stipulated in the agreement of February 14, 1i989, plaintiff-appellant
paid the down payment in the sum of P100,000, the balance to be paid on or before
March 2, 19889; that on March 1, 1989,Mr. Andres T. Co, president of Plaintiff-appellant
corporation, wrote a letter to defendant-appellee Motorich Sales Corporation requesting
a computation for the balance to be paid; that said letter was coursed through the
defendant-appellee’s broker. Linda Aduca who wrote the computation of the balance;
that on March 2, 1989, plaintiff-appellant was ready with the amount corresponding to
the balance, covered by Metrobank cashier’s check no. 004223 payable to defendant-
appellee Motorich Sales Corporation; that plaintiff-appellant and defendant-appellee
were supposed to meet in the plaintiff-appellant’s office but defendant-appellee’s
treasurer, Nenita Lee Gruenbeg did not appear; that defendant-appelle despite
repeated demands and in utter disregard of its commitments had refused to execute
the transfer of rights/deed of assignment which is necessary to transfer the certificate
of title; that defendant ACL development corporation is impleaded as a necessary party
since TCT no. 362909 is still in the name of said defendant; while defendant VNM
Realty and Development Corporation is likewise impleaded as a necessary party in view
of the fact that it is the transferor of the right in favor of defendant-appellee Motorich
Sales Corporation; that on April 6, 1989 defendant ACL Development Corporation and
Motorich Sales Corporation entered into a deed of absolute sale whereby the former
transferred to the latter the subject property; that by reason of said transfer; the
registry of deeds of Quezon City issued a new title in the name of Motorich Sales
Corporation, represented by defendant-appellee Nenita Lee Gruenbeg and Reynaldo L.
Gruenbeg, under TCT no. 3751; that as a result of defendants-appellees Nenita and
Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of
assignment, plaintiff-appellant suffered moral and nominal damages which may be
assessed against defendant-appellees in the sum of P500,000; that as a result of an
unjustified and unwarranted failure to execute the required transfer or formal deed of
sale in favor of plaintiff-appellant, defendant-appellees should be assessed exemplary
damages in the sum of P100,000; that by reason of the said bad faith in refusing to
execute a transfer in favor of plaintiff-appellant the latter lost opportunity to construct a
residential building in the sum of P100,000 and that as a consequence of such bad
faith, it has been constrained to obtain the services of counsel at an agreed fee of
P100,000 plus appearance fee of for every appearance in court hearings.
ISSUE:
* WON the doctrine of piercing the veil of corporate entity is applicable.

HELD:
* No. Such contract cannot bind Motorich, because it never authorized or ratified such
sale.
A corporation is a juridical person separate and distinct from its stockholders or
members. Accordingly, the property of the corporation is not the property of the
corporation is not the property of its stockholders or members and may not be sold by
the stockholders or members without express authorization from the corporation’s
board of directors.
Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise
provided in this code, the corporate powers of all corporations formed under this code
shall be exercised, all business conducted, and all property of such corporations
controlled and held by the board of directors or trustees to be elected from among the
stockholders of stocks, or where there is no stock, from among the members of the
corporations, who shall hold office for 1 year and until their successors are elected and
qualified.

*As a general rule, the acts of corporate officers within the scope of their authority are
binding on the corporation. But when these officers exceed their authority, their
actions, cannot bind the corporation, unless it has ratified such acts as is estopped from
disclaiming them.

Because Motorich had never given a written authorization to respondent Gruenbeg to

sell its parcel of land, we hold that the February 14, 1989 agreement entered into by
the latter with petitioner is void under Article 1874 of the Civil Code. Being inexistent
and void from the beginning, said contract cannot be ratified.

The statutorily granted privilege of a corporate veil may be used only for legitimate
purposes. On equitable consideration, the veil can be disregarded when it is utilized as
a shield to commit fraud, illegality or inequity, defeat public convenience; confuse
legitimate issues; or serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation.

We stress that the corporate fiction should be set aside when it becomes a shield
against liability for fraud, or an illegal act on inequity committed on third person. The
question of piercing the veil of corporate fiction is essentially, then a matter of proof. In
the present case, however, the court finds no reason to pierce the corporate veil of
respondent Motorich. Petitioner utterly failed to establish the said corporation was
formed, or that it is operated for the purpose of shielding any alleged fraudulent or
illegal activities of its officers or stockholders; or that the said veil was used to conceal
fraud, illegality or inequity at the expense of third persons like petitioner.
5. Kukan International Corp. Vs. Reyes, 631 SCRA 596

FACTS:
* Sometime in March 1998, Kukan, Inc. conducted a bidding worth Php 5M (reduced to
PhP 3,388,502) for the supply and installation of signages in a building being
constructed in Makati City which was won by Morales.
Despite his compliance, Morales was only paid the amount of PhP 1,976,371.07, leaving
a balance of PhP 1,412,130.93, which Kukan, Inc. refused to pay despite demands.
Morales filed a Complaint with the RTC against Kukan, Inc. for a sum of money.
However, starting November 2000, Kukan, Inc. no longer appeared and participated in
the proceedings before the trial court, prompting the RTC to declare Kukan, Inc. in
default and paving the way for Morales to present his evidence ex parte.
*On November 28, 2002, the RTC rendered a Decision finding for Morales and against
Kukan, Inc.
After the above decision became final and executory, Morales moved for and secured a
writ of execution against Kukan, Inc. The sheriff then levied upon various personal
properties found at what was supposed to be Kukan, Inc.’s office at Unit 2205, 88
Corporate Center, Salcedo Village, Makati City. Alleging that it owned the properties
thus levied and that it was a different corporation from Kukan, Inc., Kukan International
Corporation (KIC) filed an Affidavit of Third-Party Claim. Notably, KIC was incorporated
in August 2000, or shortly after Kukan, Inc. had stopped participating in Civil Case No.
99-93173.
*In reaction to KIC’s claim, Morales interposed an Omnibus Motion dated April 30,
2003, praying, and applying the principle of piercing the veil of corporate fiction, that an
order be issued for the satisfaction of the judgment debt of Kukan, Inc. with the
properties under the name or in the possession of KIC, it being alleged that both
corporations are but one and the same entity. KIC opposed Morales’ motion. The court
denied the omibus motion.
In a bid to establish the link between KIC and Kukan, Inc., Morales filed a Motion for
Examination of Judgment Debtors dated May 4, 2005 which sought that subponae be
issued against the primary stockholders of Kukan, Inc., among them Michael Chan,
a.k.a. Chan Kai Kit. This too was denied by the court.
Morales then sought the inhibition of the presiding judge, Eduardo B. Peralta, Jr., who
eventually granted the motion. The case was re-raffled to Branch 21, presided by public
respondent Judge Amor Reyes.
*Before the Manila RTC, Branch 21, Morales filed a Motion to Pierce the Veil of
Corporate Fiction to declare KIC as having no existence separate from Kukan, Inc. This
time around, the RTC, by Order dated March 12, 2007, granted the motion. From the
above order, KIC moved but was denied reconsideration in another Order dated June 7,
2007.
KIC went to the CA on a petition for certiorari to nullify the aforesaid March 12 and
June 7, 2007 RTC Orders but on January 23, 2008, the CA denied the petition and
affirmed the assailed Orders. The CA later denied KIC’s MR in the assailed resolution.
ISSUE:
* WON the trial and appellate courts correctly applied, under the premises, the principle
of piercing the veil of corporate fiction.

HELD:
*No. The principle of piercing the veil of corporate fiction, and the resulting treatment
of two related corporations as one and the same juridical person with respect to a given
transaction, is basically applied only to determine established liability; it is not available
to confer on the court a jurisdiction it has not acquired, in the first place, over a party
not impleaded in a case. Elsewise put, a corporation not impleaded in a suit cannot be
subject to the court’s process of piercing the veil of its corporate fiction. In that
situation, the court has not acquired jurisdiction over the corporation and, hence, any
proceedings taken against that corporation and its property would infringe on its right
to due process. Aguedo Agbayani, a recognized authority on Commercial Law, stated
as much:

23. Piercing the veil of corporate entity applies to determination of liability not of
jurisdiction. x x x

This is so because the doctrine of piercing the veil of corporate fiction comes to play
only during the trial of the case after the court has already acquired jurisdiction over
the corporation. Hence, before this doctrine can be applied, based on the evidence
presented, it is imperative that the court must first have jurisdiction over the
corporation.[35] x x x (Emphasis supplied.)
*The implication of the above comment is twofold: (1) the court must first acquire
jurisdiction over the corporation or corporations involved before its or their separate
personalities are disregarded; and (2) the doctrine of piercing the veil of corporate
entity can only be raised during a full-blown trial over a cause of action duly
commenced involving parties duly brought under the authority of the court by way of
service of summons or what passes as such service.
In fine, to justify the piercing of the veil of corporate fiction, it must be shown by clear
and convincing proof that the separate and distinct personality of the corporation was
purposefully employed to evade a legitimate and binding commitment and perpetuate a
fraud or like wrongdoings. To be sure, the Court has, on numerous occasions, applied
the principle where a corporation is dissolved and its assets are transferred to another
to avoid a financial liability of the first corporation with the result that the second
corporation should be considered a continuation and successor of the first entity.
*In those instances when the Court pierced the veil of corporate fiction of two
corporations, there was a confluence of the following factors:

1. A first corporation is dissolved;

2. The assets of the first corporation is transferred to a second corporation to
avoid a financial liability of the first corporation; and

3. Both corporations are owned and controlled by the same persons such that the
second corporation should be considered as a continuation and successor of the first
corporation.

In the instant case, however, the second and third factors are conspicuously absent.
There is, therefore, no compelling justification for disregarding the fiction of corporate
entity separating Kukan, Inc. from KIC. In applying the principle, both the RTC and the
CA miserably failed to identify the presence of the abovementioned factors.
It bears reiterating that piercing the veil of corporate fiction is frowned upon.
Accordingly, those who seek to pierce the veil must clearly establish that the separate
and distinct personalities of the corporations are set up to justify a wrong, protect
fraud, or perpetrate a deception. In the concrete and on the assumption that the RTC
has validly acquired jurisdiction over the party concerned, Morales ought to have
proved by convincing evidence that Kukan, Inc. was collapsed and thereafter KIC
purposely formed and operated to defraud him. Morales has not to us discharged his
burden

6. Secosa Vs. Heirs of Erwin Suarez Francisco, 433 SCRA 273

FACTS:
* On June 27, 1996, at around 4:00 p.m., Erwin Suarez Francisco, an eighteen year old
third year physical therapy student of the Manila Central University, was riding a
motorcycle along Radial 10 Avenue, near the Veteran Shipyard Gate in the City of
Manila.At the same time, Petitioner, Raymundo Odani Secosa, was driving an Isuzu
cargo truck with plate number PCU-253 on the same road. The truck was owned by
petitioner, Dassad Warehousing and Port Services, Inc.
Traveling behind the motorcycle driven by Francisco was a sand and gravel truck, which
in turn was being tailed by the Isuzu truck driven by Secosa. The three vehicles were
traversing the southbound lane at a fairly high speed. When Secosa overtook the sand
and gravel truck, he bumped the motorcycle causing Francisco to fall. The rear wheels
of the Isuzu truck then ran over Francisco, which resulted in his instantaneous death.
Fearing for his life, petitioner Secosa left his truck and fled the scene of the collision.
Respondents, the parents of Erwin Francisco, thus filed an action for damages against
Raymond Odani Secosa, Dassad Warehousing and Port Services, Inc. and Dassads
president, El Buenasucenso Sy.
CA affirmed RTC decision.
ISSUE:
WON THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE DECISION
OF THE TRIAL COURT IN HOLDING PETITIONER EL BUENASENSO SY SOLIDARILY
LIABLE WITH PETITIONERS DASSAD AND SECOSA IN VIOLATION OF THE
CORPORATION LAW AND RELATED JURISPRUDENCE ON THE MATTER.

HELD:
* Petitioner El Buenasenso Sy cannot be held solidarily liable with his co-petitioners.
While it may be true that Sy is the president of petitioner Dassad Warehousing and Port
Services, Inc., such fact is not by itself sufficient to hold him solidarily liable for the
liabilities adjudged against his co-petitioners.
It is a settled precept in this jurisdiction that a corporation is invested by law with a
personality separate from that of its stockholders or members. It has a personality
separate and distinct from those of the persons composing it as well as from that of any
other entity to which it may be related. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is not in itself
sufficient ground for disregarding the separate corporate personality. A corporation’s
authority to act and its liability for its actions are separate and apart from the
individuals who own it.
The so-called veil of corporation fiction treats as separate and distinct the affairs of a
corporation and its officers and stockholders. As a general rule, a corporation will be
looked upon as a legal entity, unless and until sufficient reason to the contrary appears.
When the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association of
persons. Also, the corporate entity may be disregarded in the interest of justice in such
cases as fraud that may work inequities among members of the corporation internally,
involving no rights of the public or third persons. In both instances, there must have
been fraud and proof of it. For the separate juridical personality of a corporation to be
disregarded, the wrongdoing must be clearly and convincingly established. It cannot be
presumed.
* The records of this case are bereft of any evidence tending to show the presence of
any grounds enumerated above that will justify the piercing of the veil of corporate
fiction such as to hold the president of Dassad Warehousing and Port Services, Inc.
solidarily liable with it.
The Isuzu cargo truck which ran over Erwin Francisco was registered in the name of
Dassad Warehousing and Port Services, Inc., and not in the name of El Buenasenso
Sy.Raymundo Secosa is an employee of Dassad Warehousing and Port Services, Inc.
and not of El Buenasenso Sy. All these things, when taken collectively, point toward El
Buenasenso Sys exclusion from liability for damages arising from the death of Erwin
Francisco.
7. PNB vs. Ritratto Group, Inc. 362 SCRA 216

FACTS:
*