1) TAYAG v BENGUET CONSOLIDATED, INC.

G.R. No. L-23145November 29, 1968CASE DOCTRINE: A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state according to law. It is logically inconceivable that it will have rights and privileges of a higher priority than that of its creator. It cannot legitimately refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever called upon to do so. It is not immune from judicial control in those instances, where a duty under the law as ascertained in an appropriate legal proceeding is cast upon it.

FACTS:

Idonah Slade Perkins died in New York leaving, among others, 2 stock certificates covering 33,002 shares of respondent, Benguet Consolidated. The said certificates were in possession of County Trust Company of New York being the domiciliary administrator of the estate of the deceased. Ancillary administration proceedings were instituted before the CFI of Manila wherein Tayag was eventually appointed as ancillary administrator.

A dispute arose between the domiciary administrator in New York and the ancillary administrator in the Philippines as to which of them was entitled to the possession of the stock certificates in question.

The CFI of Manila ordered the domiciliary administrator, County Trust Company, to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did not comply with the order. Hence, the ancillary administrator petitioned the court to "issue an order declaring the certificate or certificates of stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, be declared [or] considered as lost."Respondent argues that the stock certificates cannot be declared or considered as lost since there was a failure to observe certain requirements of its by-laws before new stock certificates could be issued.

ISSUE: WHETHER OR NOT THE STOCK CERTIFICATES SHALL BE DECLARED OR CONSIDERED AS LOST DESPITE FAILURE TO OBSERVE CERTAIN REQUIREMENTS OF RESPONDENTS BY-LAWS BEFORE NEW STOCK CERTIFICATES COULD BE ISSUED.

HELD: YES.

1. The ancillary administration is proper, whenever a person dies, leaving in a country other than that of his last domicile, property to be administered in the nature of assets of the deceased liable for his individual debts or to be distributed among his heirs.

2. Since there is a refusal, persistently adhered to by the domiciliary administrator in New York, to deliver the shares of stocks of Appellant Corporation owned by the decedent to the ancillary administrator in the Philippines, there was nothing unreasonable or arbitrary in considering them as lost and requiring the appellant to issue new certificates in lieu thereof.3. It is understandable that the Constitution overrides a statute, to which, however, the judiciary must yield deference, when appropriately invoked and deemed applicable. It would be most highly unorthodox, however, if a corporate by-law would be accorded such a high estate in the jural order that a court must not only take note of it but yield to its alleged controlling force.4. "A corporation is not in fact and in reality a person, but the law treats it as though it were a person by process of fiction, or by regarding it as an artificial person distinct and separate from its individual stockholders.... It owes its existence to law. It is an artificial person created by law for certain specific purposes, the extent of whose existence, powers and liberties is fixed by its charter."19Dean Pound's terse summary, a juristic person, resulting from an association of human beings granted legal personality by the state, puts the matter neatly.20There is thus a rejection of Gierke'sgenossenchafttheory, the basic theme of which "is the reality of the group as a social and legal entity, independent of state recognition and concession."21

A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state according to law. It is logically inconceivable that it will have rights and privileges of a higher priority than that of its creator. It cannot legitimately refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever called upon to do so. It is not immune from judicial control in those instances, where a duty under the law as ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard is to confer upon it not autonomy which may be conceded but license which cannot be tolerated. It is to argue that it may, when so minded, overrule the state, the source of its very existence; it is to contend that what any of its governmental organs may lawfully require could be ignored at will. So extravagant a claim cannot possibly merit approval.

2) Monfort Hermanos Agricultural Devt Corporation v. Monfort III

434 SCRA 27 (2004)

Doctrine: The power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers.In turn, physical acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.

Facts:

Petitioner, a domestic private corporation, is the registered owner of four Haciendas in Cadiz City.It also owns one unit of motor vehicle and two units of tractors.

The group of Antonio Monfort III, through force and intimidation, allegedly took possession of the said Haciendas, the motor vehicle and tractors, as well as the fighting cocks bred and maintained in one of the haciendas by petitioners Executive Vice President, Ramon Monfort.

The Corporation, represented by its President, Ma. Antonia M. Salvatierra, and Ramon H. Monfort, in his personal capacity, filed a complaintfor delivery of motor vehicle, tractors and fighting cocks, against the group of Monfort III.

The group of Monfort III filed a motion to dismiss contending that Salvatierra has no capacity to sue on behalf of the Corporation because theBoard Resolutionauthorizing Salvatierra and/or Monfort to represent the Corporation is void as the purported Members of the Board who passed the same were not validly elected officers of the Corporation.

The signatories to the Board Resolution authorizing Salvatierra and/or Monfort to represent the Corporation, were: Ma. Antonia M. Salvatierra, President; Ramon H. Monfort, Executive Vice President; Directors Paul M. Monfort, Yvete M. Benedicto and Jaqueline M. Yusay; and EsterS. Monfort, Secretary.However, the names of the last four (4) signatories to the said Board Resolution do not appear in the 1996 General Information Sheet submitted by the Corporation with the SEC.

Issue:

Whether or not Salvatierra has the legal capacity to sue on behalf of the Corporation.

Held:

No. Corporations are required under Section 26 of the Corporation Code to submit to the SEC within thirty (30) days after the election the names, nationalities and residences of the elected directors, trustees and officers of the Corporation.In order to keep stockholders and the public transacting business with domestic corporations properly informed of their organizational operational status, the SEC issued rules requiring a General Information Sheet be filed with the Commission which shall state, among others, the names of the elected directors and officers, together with their corresponding position title.

In the case at bar, the fact that four of the six Members of the Board listed in the 1996 General Information Sheetare already deadat the time the questioned Board Resolution was issued, does not automatically make the four signatories (i.e., Paul M. Monfort, Yvete M. Benedicto, Jaqueline M. Yusay and Ester S. Monfort)to the said Board Resolution (whose name do not appear in the 1996 General Information Sheet) as among the incumbent Members of the Board.This is because it was not established that they were duly elected to replace the said deceased Board Members.

Salvatierra failed to prove that four of those who authorized her to represent the Corporation were the lawfully elected Members of the Board of the Corporation.As such, they cannot confer valid authority for her to sue on behalf of the corporation.

3) Phil. Exchange Stock vs CA

G.R. No. 125469.October 27, 1997

Torres, J;

Case Doctrine: A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and perquisites appropriate to such bodyAs to its corporate and management decisions, therefore, the state will generally not interfere with the same. Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.

FACTS: The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, had sought to offer its shares to the public in order to raise funds allegedly to develop its properties and pay its loans with several banking institutions. PALI was issued a Permit to Sell its shares to the public by the SEC). To facilitate the trading of its shares among investors, PALI sought to course the trading of its shares through the Philippine Stock Exchange, Inc. (PSE), for which purpose it filed with the said stock exchange an application to list its shares, with supporting documents attached. Listing Committee of the PSE, upon a perusal of PALIs application, recommended to the PSEs Board of Governors the approval of PALIs listing application. before it could act upon PALIs application, the Board of Governors of PSE received a letter from the heirs of Ferdinand E. Marcos, claiming that the late President Marcos was the legal and beneficial owner of certain properties forming part of the Puerto Azul Beach Hotel and Resort Complex which PALI claims to be among its assets and that the Ternate Development Corporation, which is among the stockholders of PALI, likewise appears to have been held and continue to be held in trust by one Rebecco Panlilio for then President Marcos and now, effectively for his estate, and requested PALIs application to be deferred. . the Board of Governors of the PSE reached its decision to reject PALIs application, citing the existence of serious claims, issues and circumstances surrounding PALIs ownership over its assets that adversely affect the suitability of listing PALIs shares in the stock exchange. PALI wrote a letter to the SEC bringing to the SECs attention the action taken by the PSE in the application of PALI for the listing of its shares with the PSE, and requesting that the SEC, in the exercise of its supervisory and regulatory powers over stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSEs action on PALIs listing application and institute such measures as are just and proper and under the circumstances.

The SEC rendered its Order, reversing the PSEs decision. PSE filed a motion for reconsideration wHich was denied. PSE then filed a petition for review with The CA assailing the jurisdiction of SEC to review the order of PSE. CA dismissed the petition stating that SEC has a regulatory power over PSE and that the SEC had authority to order the PSE to list the shares of PALI in the stock exchange.

ISSUE: WON SEC has jurisdiction to review the order of PSE?

HELD: YES .Section 3 of Presidential Decree 902-A, standing alone, is enough authority to uphold the SECs challenged control authority over the petitioner PSE even as it provides that the Commission shall have absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are the grantees of primary franchises and/or a license or permit issued by the government to operate in the Philippines The SECs regulatory authority over private corporations encompasses a wide margin of areas, touching nearly all of a corporations concerns. This authority springs from the fact that a corporation owes its existence to the concession of its corporate franchise from the state.The SECs power to look into the subject ruling of the PSE, therefore, may be implied from or be considered as necessary or incidental to the carrying out of the SECs express power to insure fair dealing in securities traded upon a stock exchange or to ensure the fair administration of such exchange.

This is not to say, however, that the PSEs management prerogatives are under the absolute control of the SEC. The PSE is, after all, a corporation authorized by its corporate franchise to engage in its proposed and duly approved business. One of the PSEs main concerns, as such, is still the generation of profit for its stockholders. Moreover, the PSE has all the rights pertaining to corporations, including the right to sue and be sued, to hold property in its own name, to enter (or not to enter) into contracts with third persons, and to perform all other legal acts within its allocated express or implied powers.

A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and perquisites appropriate to such bodyAs to its corporate and management decisions, therefore, the state will generally not interfere with the same. Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.

Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority to reverse the PSEs decision in matters of application for listing in the market, the SEC may exercise such power only if the PSEs judgment is attended by bad faith. In reaching its decision to deny the application for listing of PALI, the PSE considered important facts, which in the general scheme, brings to serious question the qualification of PALI to sell its shares to the public through the stock exchange. The petitioner was in the right when it refused application of PALI, for a contrary ruling was not to the best interest of the general public.

In sum, the Court finds that the SEC had acted arbitrarily in arrogating unto itself the discretion of approving the application for listing in the PSE of the private respondent PALI, since this is a matter addressed to the sound discretion of the PSE, a corporate entity, whose business judgments are respected in the absence of bad faith.

4) Land Bank of the Philippines vs CA

CASE DOCTIRNEA corporation, upon coming into existence, is invested by law with a personality separate and distinct from those persons composing it as well as from any other legal entity to which it may be related. In order to disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established.

FACTSLand Bank of the Philippines (LBP) extended a series of credit accommodations to ECO Managament Corporation, using the trust funds of the Philippine Virginia Tobacco Administration (PVTA) in the aggregate amount of P26,109,000.00. The proceeds of the credit accommodations were received on behalf of ECO by appellee Emmanuel Oate. On the respective maturity dates of the loans, ECO failed to pay the same. Oral and written demands were made, but ECO was unable to pay. ECO claims that the company was in financial difficulty for it was unable to collect its investments with companies which were affected by the financial crisis brought about by the Dewey Dee scandal.

ECO proposed and submitted to LBP a Plan of Payment whereby the former would set up a financing company which would absorb the loan obligations. It was proposed that LBP would participate in the scheme through the conversion of P9,000,000.00 which was part of the total loan, into equity. LBP informed ECO of the action taken by the formers Trust Committee concerning the Plan of Payment. The Committee arrived at a decision that ECO may proceed with their Plan of Payment provided Land Bank shall not participate in the undertaking in any manner whatsoever.

ECO submitted to LBP a Revised Plan of Payment deleting the latters participation in the proposed financing company. The Trust Committee deliberated on the Revised Plan of Payment and resolved to reject it. LBP then sent a letter to the PVTA for the latters comments. The letter stated that if LBP did not hear from PVTA within five (5) days from the latters receipt of the letter, such silence would be construed to be an approval of LBPs intention to file suit against ECO and its corporate officers. PVTA did not respond to the letter. Thus, Landbank filed a complaint for Collection of Sum of Money against ECO and Emmanuel C. Oate before the Regional Trial Court of Manila.After trial on the merits, a judgment was rendered in favor of LBP; however, appellee Oate was absolved from personal liability for insufficiency of evidence. Dissatisfied, both parties filed their respective Motions for Reconsideration. Hence, the trial court rendered an Amended Decision, ordering defendant Eco Management Corporation to pay plaintiff Land Bank of the Philippines. The Court of Appeals affirmed in toto the amended decision of the trial court. Hence, this petition.

ISSUE/S(1) whether or not the corporate veil of ECO Management Corporation should be pierced(2) whether or not Emmanuel C. Oate should be held jointly and severally liable with ECO Management Corporation for the loans incurred from Land Bank.

RULING(1) NO. A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those persons composing it as well as from any other legal entity to which it may be related. By this attribute, a stockholder may not, generally, be made to answer for acts or liabilities of the said corporation, and vice versa.This separate and distinct personality is, however, merely a fiction created by law for convenience and to promote the ends of justice. For this reason, it may not be used or invoked for ends subversive to the policy and purpose behind its creation or which could not have been intended by law to which it owes its being. This is particularly true when the fiction is used to defeat public convenience, justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. This is likewise true where the corporate entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity. In all these cases, the notion of corporate entity will be pierced or disregarded with reference to the particular transaction involved.

(2) NO. The burden is on petitioner to prove that the corporation and its stockholders are, in fact, using the personality of the corporation as a means to perpetrate fraud and/or escape a liability and responsibility demanded by law. In order to disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. In the absence of any malice or bad faith, a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities.The mere fact that Oate owned the majority of the shares of ECO is not a ground to conclude that Oate and ECO is one and the same. Mere ownership by a single stockholder of all or nearly all of the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of separate corporate personalities. Neither is the fact that the name ECO represents the first three letters of Oates name sufficient reason to pierce the veil. Even if it did, it does not mean that the said corporation is merely a dummy of Oate. A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation acquiring the name or as in this case, the initials of one of its shareholders.

That respondent corporation in this case was being used as a mere alter ego of Oate to obtain the loans had not been shown. Bad faith or fraud on the part of ECO and Oate was not also shown. As the Court of Appeals observed, if shareholders of ECO meant to defraud petitioner, then they could have just easily absconded instead of going out of their way to propose Plans of Payment. Likewise, Oate volunteered to pay a portion of the corporations debt. This offer demonstrated good faith on his part to ease the debt of the corporation of which he was a part. It is understandable that a shareholder would want to help his corporation and in the process, assure that his stakes in the said corporation are secured. In this case, it was established that the P1 Million did not come solely from Oate. It was taken from a trust account which was owned by Oate and other investors. It was likewise proved that the P1 Million was a loan granted by Oate and his co-depositors to alleviate the plight of ECO. This circumstance should not be construed as an admission that he was really the debtor and not ECO.5) GOOD EARTH EMPORIUM INC., and LIM KA PING vs. COURT OF APPEALS and ROCES-REYES REALTY INC. ; G.R. No. 82797 , February 27, 1991 ; PARAS,J.:DOCTRINE: A corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make ones property also of the corporation, and vice-versa, for they are separate entities. Shareowners are in no legal sense the owners of corporate property (or credits) which is owned by the corporation as a distinct legal person.FACTS: A lease contract was entered into between ROCES and Good Earth Emporioum (GEE). A five-storey building was the subject of the said contract, which upon failure of the latter to pay its rentals, ROCES filed an ejectment case against the petitioner. The MTC of Manila rendered a decision ordering GEE and all persons under him to vacate the premises and surrender the same to ROCES and pay the plaintiffs the rental.

GEE filed a motion to quash the writ of execution but the same was denied by the MTC for lack of merit. In 1987 the RTC of Manila reversed the decision of the MTC finding that the amount of P1 million evidenced by Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument were in full satisfaction of the judgment obligation.

On further appeal, the CA reversed the decision of the RTC and reinstated the Resolution of the MTC of Manila. GEEs m/r was denied, hence this petition.

ISSUE: Whether or not there was full satisfaction of the judgment debt in favor of respondent corporation.

RULING: There is no indication in the receipt, that it was in payment, full or partial, of the judgment obligation. Likewise, there is no indication in thepacto de retrosale which was drawn in favor of Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the obligation embodied therein had something to do with petitioners' judgment obligation with respondent corporation.

Article 1240 of the Civil Code provides that: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its successor in interest nor is there positive evidence that the payment was made to a person authorized to receive it. No such proof was submitted but merely inferred by the Regional Trial Court from Marcos Roces having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. The assertion is home by the receipt itself whereby they acknowledged payment of the loan in their names and in no other capacity. A corporation has a personality distinct and separate from its individual stockholders or members. As a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholders debt or credit that of the corporation.

The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that the payment was in favor of the latter, especially in the case at bar where the amount was not receipted for by respondent corporation and there is absolutely no indication in the receipt from which it can be reasonably inferred, that said payment was in satisfaction of the judgment debt. Likewise, no such inference can be made from the execution of thepacto de retrosale which was not made in favor of respondent corporation but in favor of the two Roces brothers in their individual capacities without any reference to the judgment obligation in favor of respondent corporation.6) Case title: G.R. No. 86932. June 27, 1990.*

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and DOROTHY S. ANCHETA, MA. MAGDALENA Y. ARMARILLE, CONSTANTE A. ANCHETA, CONSTANTE B. BANAYOS, EVELYN BARRIENTOS, JOSE BENAVIDEZ, LEO-NARDO BUENAAGUA, BENJAMIN BAROT, ERNESTO S. CANTILLER, EDUARDO CANDA, ARMANDO CANDA, AIDA DE LUNA, PACIFICO M. DE JESUS, ALFREDO ESTRERA, AURELIO A. FARIAS, FRANCISCO GREGORIO, DOMELINA GONZALES, JUANA JALANDONI, MANUEL MALUBAY, FELICIANO OCAMPO, MABEL PADO, GEMINIANO PLETA, ERNESTO S. SALAMAT, JULIAN TRAQUENA, JUSFIEL SILVERIO, JAMES CRISTALES, FRANCISCO BAMBIO, JOSE T. MARCELO, JR., SUSAN M. OLIVAR, ERNESTO JULIO, CONSTANTE ANCHETA, JR., ENRIQUE NABUA and JAVIER P. MATARO, respondents.

Case doctrine:

Ownership of majority of capital stock and fact that majority of directors of a corporation are the directors of another corporation creates no employer-employee relationship with latters employees.

Facts:

Philippine Smelters Corporation (PSC), a corporation registered under Philippine law, obtained a loan in 1983 from the Development Bank of the Philippines, a government-owned financial institution, to finance its iron smelting and steel manufacturing business. To secure said loan, PSC mortgaged to DBP real properties with all the buildings and improvements thereon and chattels, with its President, Jose T. Marcelo, Jr., as co-obligor.

By virtue of the said loan agreement, DBP became the majority stockholder of PSC, with stockholdings in the amount of P31,000,000.00 of the total P60,226,000.00 subscribed and paid-up capital stock. Subsequently, it took over the management of PSC.

When PSC failed to pay its obligation with DBP, which amounted to P75,752,445.83 as of March 31, 1986, DBP foreclosed and acquired the mortgaged real estate and chattels of PSC in the auction sales held on February 25, 1987 and March 4, 1987.

On February 10, 1987, forty (40) petitioners filed a Petition for Involuntary Insolvency in the Regional Trial Court of Makati,2 against PSC and DBP, impleading as co-respondents therein Olecram Mining Corporation, Jose Panganiban Ice Plant and Cold Storage, Inc. and PISO Bank, with said petitioners representing themselves as unpaid employees of said private respondents, except PISO Bank.

They filed a complaint with the Department of Labor against PSC for non-payment of salaries, 13th month pay, incentive leave pay and separation pay. On February 20, 1987, the complaint was amended to include DBP as party respondent. The case was thereafter indorsed to the Arbitration Branch of the National Labor Relations Commission (NLRC). DBP filed its position paper invoking the absence of employer-employee relationship between private respondents and DBP and submitting that when DBP foreclosed the assets of PSC, it did so as a foreclosing creditor.

The labor arbiter rendered a decision, the dispositive portion of which directed that DBP as foreclosing creditor is hereby ordered to pay all the unpaid wages and benefits of the workers which remain unpaid due to PSCs foreclosure.3

On appeal by DBP, the NLRC sustained the ruling of the labor arbiter, holding DBP liable for unpaid wages of private respondents not as a majority stockholder of respondent PSC, but as the foreclosing creditor who possesses the assets of said PSC by virtue of the auction sale it held in 1987.

Issue:

Whether or not DBP, as foreclosing creditor, could be held liable for the unpaid wages, 13th month pay, incentive leave pay and separation pay of the employees of PSC.

Ruling:

No. Ownership of majority of capital stock and fact that majority of directors of a corporation are the directors of another corporation creates no employer-employee relationship with latters employees.

It is to be noted that in their comment, private respondents tried to prove the existence of employer-employee relationship based on the fact that DBP is the majority stockholder of PSC and that the majority of the members of the board of directors of PSC are from DBP. We do not believe that these circumstances are sufficient indicia of the existence of an employer-employee relationship as would confer jurisdiction over the case on the labor arbiter, especially in the light of the express declaration of said labor arbiter and the NLRC that DBP is being held liable as a foreclosing creditor. At any rate, this jurisdictional defect was cured when DBP appealed the labor arbiters decision to the NLRC and thereby submitted to its jurisdiction.7) Traders Royal Bank vs CA

DOCTRINE: It is elementary that a corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make one's property the property also of the corporation, for they are separate entities.

FACTS:

On May 13, 1983, the petitioner bank filed Civil Case No. 1028-P in the Regional Trial Court, Branch CXIII in Pasay City, against PBM and Alfredo Ching, to collect P22,227,794.05 exclusive of interests, penalties and other bank charges representing PBM's outstanding obligation to the bank. Alfredo Ching, a stockholder of PBM, was impleaded as co-defendant for having signed as a surety for PBM's obligations to the extent of ten million pesos (Pl0,000,000) under a Deed of Suretyship dated July 21, 1977.

On July 9, 1982, the SEC issued an Order placing PBM's business, including its assets and liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule A of the petition pending before any court or tribunal are hereby suspended in whatever stage the same may be, until further orders from the Commission".

Ching and PBM filed jointly a motion to dismiss Civil Case No. 1028-P in the RTC, Pasay City, invoking the pendency in the SEC of PBM's application for suspension of payments (which Ching co-signed) and over which the SEC had already assumed jurisdiction. Before the motion was resolved, PBM was dropped from the complaint by the court. Chings motion was denied and the court argued that under P ' D. 902-A, as amended, the SEC may not validly acquire jurisdiction over an individual, like Ching.

CA: Ching filed a petition for certiorari and prohibition in the Court of Appeals to annul the orders of respondent Judge and to prohibit him from further proceeding in the civil case. CA ruled in his favor and granted the writs prohibiting the judge from proceeding with the case.

Petitoner bank filed a petition for review assailing the decision of the CA.

ISSUE:

whether the court a quo could acquire jurisdiction over Ching in his personal and individual capacity as a surety of PBM in the collection suit filed by the bank, despite the fact that PBM's obligation to the bank had been placed under receivership by the SEC.

HELD:YES

Case was ordered reinstated. Ching can be sued separately to enforce his liability as surety for PBM, as expressly provided by Article 1216 of the New Civil Code:

ART. 1216. The creditor may proceed against any of the solidary debtors or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, as long as the debt has not been fully collected.

It is elementary that a corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make one's property the property also of the corporation, for they are separate entities (Adelio Cruz vs. Quiterio Dalisay, 152 SCRA 482).

Ching's act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest in the SEC jurisdiction over his person or property, for jurisdiction does not depend on the consent or acts of the parties but upon express provision of law.8) G.R. No. 103372 June 22, 1992EPG CONSTRUCTION COMPANY, INC., and EMMANUEL P. DE GUZMAN,petitioner,vs.HONARABLE COURT OF APPEALS (17th Division), ( Republic of the Philippines), UNIVERSITY OF THE PHILIPPINES,respondents.

Doctrine:

A corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other 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 of itself sufficient ground for disregarding the separate corporate personality.

Facts:

EPG Construction Co., Inc. and the University of the Philippines, private respondent, entered into a contract for the construction of the UP Law Library Building for the stipulated price of P7,545,000.00. The agreement included a provision wherein EPG guarantees the completion of the work in accordance with the specification of the architect and that EPG will be liable in case the building collapses due to defects in construction.

Upon its completion, the building was formally turned over by EPG to the private respondent. UP issued a certification of acceptance dated January 13, 1983 stating that the General Construction Work of the College of Law library was satisfactorily completed and had no defects.

Sometime in July, 1983, UP complained to the petitioner that 6 air-conditioning units on the third floor of the building were not cooling properly. After inspection of the equipment, EPG agreed to shoulder the expenses for their repair, including labor and materials, in the amount of P38.000.00.

The repair was never undertaken. UP repeated its complaints to EPG. Finally, it made UP a written offer to repair the system for P194,000.00.

UP insisted that EPG was obligated to repair the defects at its own expense under the guarantee provision in their contract. EPG demurred. UP then contracted with another company, which repaired the defects for P190,000.00.

UP subsequently demanded from EPG reimbursement of the said amount plus an equal sum as liquidated damages but was denied. UP sued EPG and its president, Emmanuel P. de Guzman, in the Regional Trial Court of Quezon City. De Guzman moved to dismiss the complaint as to him for lack of a cause of action, but the motion was denied.

RTC ruled against EPG and de Guzman requiring them jointly and severally to pay the plaintiff P190,000.00 as actual damages, P50,000.00 as liquidated damages, P10,000.00 as attorney's fees, and costs. On appeal, CA affirmed the RTC.

Issue:

WON de Guzman, President of EPG, has a separate personality from the latter, hence, not liable for damages.

Held:

YES. The trial court did not explain why Emmanuel de Guzman was held solidarity liable with EPG Construction Co., Inc., and neither did the CA when it affirmed the appealed decision.

Notably, when Emmanuel de Guzman moved to dismiss the complaint as to him, UP said in its opposition to the motion that it was suing him "in hisofficialcapacity and not in his personal capacity." His inclusion as President of the company was therefore superfluous, as De Guzman correctly contended, because his acts as such were corporate acts imputable to EPG itself as his principal.

It is settled that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other 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 of itself sufficient ground for disregarding the separate corporate personality.

The exception noted is where the official "had acted maliciously or in bad faith," in which event he may be made personally liable for his own act. That exception is not applicable in the case at bar, because it has not been proved that De Guzman acted maliciously or in bad faith when, as President of EPG, he sought to protect its interests and resisted UP's claims. Whatever damage was caused to UP as a result of his acts is the sole responsibility of EPG even though De Guzman was its principal officer and controlling stockholder.

The lower court did not err in holding EPG liable for the repair of the air-conditioning system at its expense pursuant to the guarantee provision in the construction contract with UP. However, De Guzman is not solidarily liable with it, having acted on its behalf within the scope of his authority and without any demonstrated malice or bad faith.9) G.R. No. 171392 October 30, 2006RUPERTO SULDAO,petitioner,vs.CIMECH SYSTEM CONSTRUCTION, INC. and ENGR. RODOLFO S. LABUCAY,respondents.

Doctrine: 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. A corporations authority to act and its liability for its actions are separate and apart from the individuals who own it.Facts:Respondent Cimech Systems Construction, Inc. employed the services of petitioner Ruperto Suldao on August 31, 2001 as a machinist on a contractual status for a period of five months. After January 31, 2002, respondent continued to engage the services of petitioner as a machinist until he became a permanent employee. Petitioner alleged that owing to a dearth in projects being handled by the respondent, he was ordered by Ms. Elsa Labocay to take a leave of absence from November 1 to 6, 2002. He reported for work on November 7, 2002 but was again ordered to take a leave of absence from November 7 to 14, 2002. On November 15, 2002, he was purportedly ordered to make a letter-request for field work transfer which he complied. The following day, he failed to report back for work because he was sick. On November 17, 2002, he reported for work but was allegedly barred from entering by the security guard on duty. On November 21, 2002, he was again barred from entering the premises, hence he filed the instant complaint4for constructive dismissal. Respondent opposed the allegations and averred that because of the lack of work in the machine shop, petitioner was transferred to its fabrication department of which the latter refused and acted arrogantly and unruly tantamount to insubordination. Thus he was suspended and after his suspension he returned to work but again was absent the following day, hence his dismissal. LA ruled in favor of the petitioner and the NLRC concurred. CA reversed the decision and dismissed the case.

Issue: WON the officers of the corporation should be held liable for the constructive dismissal of the Suldao

Held: No. The veil of corporate 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.10) CONCEPT BUILDERS, INC.,vs. THE NATIONAL LABOR RELATIONS COMMISSION, and Norberto Marabe, et al

Doctrine: The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a person or of another corporation. Where badges of fraud exist; where public convenience is defeated; where a wrong is sought to be justified thereby, the corporate fiction or the notion of legal entity should come to naught.The law in these instances will regard the corporation as a mere association of persons and, in case of two corporations, merge them into one.

Facts: Petitioner Concept Builders, Inc., a domestic corporation, with principal office at355Maysan Road, Valenzuela, Metro Manila engaged in the construction business.Private respondents were employed by said company as laborers, carpenters and riggers.

Private respondent were illegally dismissed by petitioners. To satisfy the judgment rendered by the LA in the amount of P199,800. The LA issued a writ of execution wherein it was partially satisfied through garnishment of petitioners debtor in the amount of P81, 385.34

For the remaining balance of P 117,414.76 an Alias Writ of execution was issued by the LA. However the sheriff reported that the service of the order was refused on the ground that the petitioner no longer occupied the premises. That it is now occupied by Hydro Pipes Philippines Ince (HPPI)

the sheriff recommended that a break-open order be issued to enable him to enter petitioners premises so that he could proceed with the public auction sale of the aforesaid personal properties.

OnNovember 6, 1989, 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.

private respondents filed a Motion for Issuance of a Break-Open Order, alleging that HPPI and petitioner corporation were owned by the same incorporator! stockholders.They also alleged that petitioner temporarily suspended its business operations in order to evade its legal obligations to them and that private respondents were willing to post an indemnity bond to answer for any damages which petitioner and HPPI may suffer because of the issuance of the break-open order. To support their claims they presented General Informations Sheet, datedMay 15, 1987, submitted by petitioner to the Securities and Exchange Commission (SEC) and the General Information Sheet, datedMay15,1987, submitted by HPPI to the Securities and Exchange Commission. ( which shows that both corporations have the same stockholders and officers)

HPPI argued that HPPI and petitioner is two separate and distinct corporations and that both have different kind of business, HPPI is a manufacturing firm while petitioner was then engaged in construction. And that the doctrine of piercing the corporate veil should not be applied in this case, in the absence of any showing that it created HPPI in order to evade its liability to private respondents

Issue: Whether or Not the doctrine of Piercing the veil should be applied in this case

Held: Yes, 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.But, this separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice.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,this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced.This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation.

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.

The SEC en banc explained the instrumentality rule which the courts have applied in disregarding the separate juridical personality of corporations as follows:

Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the instrumentality may be disregarded.The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place.Moreover, the control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made.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 plaintiffs legal rights; and3. 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 defendants relationship to that operation. In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations onApril 29, 1986, it filed an Information Sheet with the Securities and Exchange Commission onMay 15, 1987, stating that its office address is at355Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the third-party claimant, submitted on the same day, a similar information sheet stating that its office address is at355Maysan Road, Valenzuela, Metro Manila.

Furthermore, the NLRC stated that:

Both information sheets were filed by thesameVirgilio O. Casino as the corporate secretary of both corporations. It would also not be amiss to note that both corporations had thesamepresident, the same board of directors, thesamecorporate officers, and substantially thesamesubscribers.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.

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.

11) PHILIPPINE NATIONAL BANK & NATIONAL SUGAR DEVELOPMENT CORPORATION vs. ANDRADA ELECTRIC & ENGINEERING COMPANY

April 17, 2002

CASE DOCTRINE: Basic is the rule that a corporation has a legal personality distinct and separate from the persons and entities owning it. The corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or perpetuate injustice. Thus, the mere fact that PNB acquired ownership or management of some assets of PASUMIL will not make PNB liable for PASUMILs contractual debts.

FACTS

Philippine National Bank PNB

National Sugar Development Corp NASUDECO

Pampanga Sugar Mills PASUMIL

Development Bank of the Philippines DBP

On 26 August 1975, PNB acquired the assets of PASUMIL that were earlier foreclosed by DBP. In September 1975, PNB organized NASUDECO to take possession of the assets and to nationalize and consolidate its interest in other PNB controlled sugar mills.

Prior to 29 October 1971, PASUMIL engaged the services Andrada Electric for electrical rewinding and repair. Most of the services were partially paid by PASUMIL, leaving several unpaid accounts. On 29 October 1971, PASUMIL and Andrada Electric entered into another contract to perform several services. The total obligation amounted to P777,263.80. PASUMIL only paid P250,000. Out of the unpaid balance, PASUMIL made partial payments amounting to P14,000.

PASUMIL, PNB, and NASUDECO failed and refused to pay Andrada Electric the remaining balance. The President of NASUDECO is the Vice President of PNB, and Andrada Electric besought this official to pay the outstanding obligation of PASUMIL. Andrada Electric contends that PNB and NASUDECO should pay since they now owned and possessed the assets of PASUMIL, and that they also benefited from the services rendered.

PNB and NASUDECO argue that there is lack or want of privity of contract between them and Andrada Electric.

The trial court ruled in favor of Andrada Electric. The court ordered PNB, NASUDECO and PASUMIL to pay. CA affirmed the decision.

ISSUE: WHETHER PNB IS LIABLE FOR THE UNPAID DEBTS OF PASUMIL TO RESPONDENT.

RULING: NO.

Liability for Corporate Debts

As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling corporation, provided the former acted in good faith and paid adequate consideration for such assets, except when any of the ff. circumstances is present: (1) where the purchaser expressly or impliedly agreed to assume the debts; (2) where the transaction amounts to a consolidation or merger of corporations; (3) where the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is fraudulently entered into in order to escape liability for those debts.

Piercing the Corporate Veil Not Warranted

Equally well-settled is the principle that the corporate mask may be removed or then corporate veil pierced when the corporation is just an alter ego of a person or another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against third persons.

The question of whether a corporation is a mere alter ego is one of fact. Piercing the veil of corporate fiction may be allowed only if the ff. elements concur: (1) control not mere stock control, but complete domination not only of finances, but of policy and business practice in respect to the transaction attacked, must have been such 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 a fraud or wrong to perpetuate the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of plaintiffs legal right; and (3) the said control and breach of duty must have proximately caused the injury or unjust loss complained of.

All of the elements are absent in the case at bar. First, other than the fact that petitioners acquired the assets of PASUMIL, there is no showing that their control over it warrants the disregard of corporate personalities. Second, there is no evidence that their juridical personality was used to commit a fraud or to do a wrong; or that the separate corporate entity was farcically used as a mere alter ego, business conduit or instrumentality of another entity or person. Third, respondent was not defrauded or injured when petitioners acquired the assets of PASUMIL.

12) First Philippine International Bank v. CA (Gr. No. 115849. January 24, 1996)

Panganiban J,

Doctrine: The corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum shopping, shareholders whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.

Facts: In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. Upon the suggestion of BYME Investments legal counsel, Jose Fajardo, met with Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property. After the meeting, Janolo, following the advice of Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987. The Bank had an agreement with Demetrio Demetria and Jose Janolo for the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made by Demetria and Janolo with the Banks manager, Mercurio Rivera. Later however, the Bank, through its conservator, Leonida Encarnacion, sought the repudiation of the agreement as it alleged that Rivera was not authorized to enter into such an agreement; hence there was no valid contract of sale. On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale, The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price. The regional trial court ruled in favor of Demetria et al. The Bank filed an appeal with theCourt of Appeals. During the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank purportedly filed a derivative suit with the RTC against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale. In his answer, Janolo argued that the Second Case was barred bylitis pendentiaby virtue of the case then pending in the Court of Appeals.

Issue: Whether or not there is forum shopping and Whether or not the Doctrine of Piercing the Veil of the Corporate Entity applies in this case.

Held: (1) Yes (2) No. (1) Where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense oflitis pendenciain one case is bar to the others; and, a final judgment in one would constituteres judicataand thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two (or more) complaints or petitions, and for imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer. Applying the foregoing principles in the case before us, it is obvious that there exist identity of parties or interests represented identity of rights or causes and identity of reliefs sought.

In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and

Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines"

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought,not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued "derivatively" or directly, there is undeniably an identity of interests/entity represented.

(2) Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals."In addition to the many cases where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.

13) SHOEMART, INC.,vs NLRC

DOCTRINE: The corporate veil may be lifted where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it a mere instrumentality, agency, conduit, or adjunct of another corporation.

FACTS:One of the corporations involved is Moris Industries, Inc. a private corporation engaged in the manufacture of leather products, It had in its employ seventy-three (73) workers, fifty-six (56) of whom are members of a labor organization known as Moris Industries Workers Union (UNION, for short).

On June 7, 1985 the UNION affiliated itself with the (PAFLU). On June 15, 1985, the UNION, through PAFLU, sent a letter to MORIS informing it of the UNION's existence, and inviting the latter to enter into negotiations for a (CBA). MORIS's reaction was as swift as it was unexpected. Within two days, it suddenly closed shop and ceased operations, claiming that such a closure had become inevitable because of business reverses.

On June 20, 1985, the UNION (PAFLU) filed a complaint for unfair labor practice against MORIS. A week later, it commenced another case against MORIS, this time for recovery of wage differentials and other monetary benefits.

Shoemart, Inc., the other corporation involved in these cases, was impleaded by the UNION in both cases, together with the former's president, Mr. Henry Sy, on the stated theory that Shoemart, Inc. (hereafter, simply SHOEMART) and MORIS were one and the same juridical entity.

SHOEMART's position paper set up the claim inter alia that its corporate personality was separate and distinct from that of MORIS, and there was no employer-employee relationship between it and the UNION's members.

Arbiter Linsangan rendered a decision in favor of the UNION, holding both MORIS and SHOEMART "equally liable" to the complaining UNION

The Linsangan decision declared "that indeed Moris Industries was but a conduit of SM Shoe Mart, Inc.," it appearing that the "payrolls used by the former bear the letterhead of the latter," and that "Moris Industries is a family corporation of the Sy's, . . . the same family that owns and controls SM Shoe Mart, Incorporated . . . ." 5

ISSUE: whether a corporation may be held liable for acts of unfair labor practice and illegal dismissal of employees of a "sister corporation," engaged in a different line of business, on the theory that the latter is the former's alter ego or business conduit.

RULING: Yes. The corporate veil may be lifted where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it a mere instrumentality, agency, conduit, or adjunct of another corporation.

1. In his affidavit, Mr. (Cresencio) Edic testified that he was first employed as sample maker, by the people who owned SM. His job was to make samples to be displayed on the window and only those which appealed to the customers were mass produced. When he was promoted to over-all supervisor, the factory was transferred to its present location and from then on, this production division was incorporated separately and has undergone many changes in name, yet all throughout, the known owners of the factory remain the same;

2. An examination of the Incorporation papers of SM Shoe Mart and Moris Manufacturing show (sic) that except for Elizabeth Sy all other five (5) incorporators and directors of Morris Industries are major stockholders of SM Shoe Mart as of July 20, 1985;

3. The SM Shoe Mart is the exclusive buyer of all of Moris' products;

4. Both are housed in one building and Moris for many years has been using the payrolls of SM Shoe Mart. SM glibly excuses this fact by alleging that this was done without its knowledge. We, however, considering the close relationship of parties, find this incredible.((**FACTORS to be considered that will justify the application of the treatment of the doctrine of piercing the veil or corp fiction))14) G.R. No. L-5081, February 24, 1954MARVEL BUILDING CORPORATION, ET AL. vs. SATURNINO DAVID

Case Doctrine: The fact that 1) certificates in possession of Castro were endorsed in blank; 2) Castro had enormous profits and had motive to hide them; 3) other subscribers had no incomes of sufficient magnitude; and 4) directors never met all show that other shareholders may be considered dummies of Castro. Hence, corporate veil may be pierced.

Facts:

The Secretary of Finance, upon consideration of the report of a special committee assigned to study the war profits tax case of Mrs. Maria B. Castro, recommended the collection of war profits taxes for the latter, so the President instructed the Collector that steps be taken to collect the same. Pursuant thereto various properties, including the Aguinaldo Building, the Wise Building, and the Dewey Boulevard-Padre Faura Mansion, all registered in the name of petitioner corporation, were seized by the Collector of Internal Revenue. The trial court rendered judgment ordering the release of the properties mentioned, and enjoined the Collector of Internal Revenue from selling the same.

Petitioners allege that the said three properties (lands and buildings) belong to Marvel Building Corporation and not to Maria B. Castro, while the defendant claims that Maria B. Castro is the true and sole owner of all the subscribed stock of the Marvel Building Corporation, including those appearing to have been subscribed and paid for by the other members, and consequently said Maria B. Castro is also the true and exclusive owner of the properties seized.

It does not appear that the stockholders or the board of directors of the Marvel Building Corporation have ever held a business meeting, for no books thereof or minutes meeting were ever mentioned by the officers thereof or presented by them at the trial. The by-laws of the corporation, if any had ever been approved, has not been presented. Neither does it appear that any report of the affairs of the corporation has been made, either of its transactions or accounts.

Issue: Is Maria B. Castro the owner of all the shares of stocks of Marvel Building Corporation and the other stockholders mere dummies of hers?

Ruling:

YES. The CIR presented evidence to prove his claim that Maria B. Castro the sole and true owner of theshare of stockMarvel Building Corp., this was the supposedendorsementin blank of the shares of stock in the name of other incorporators. This evidence was testified by Aquino,Internal Revenueexaminer, Mariano, examiner and Crispin Llamado, undersecretary of Finance. Julio Llamado who was at that time thebookkeeperof Marvel Building Corp also testified that he was the one who had prepared the original certificates which was given by Mariafor comparison with the Articles of Incorporation and that he also prepared stock certificates which was copied in the Photostat presented in evidence.

CIR was also able to submit evidence which proves the fact that the other stockholder did not have incomes in such amounts during the time of the organization of the corporation in 1947 or immediately thereto, as to enable them to pay full for their supposed subscription and that this supposed subscribers fail to cometo courtto assert that they actually paid for their subscription and are not mere dummies.

15) Estelita Lipat and Alfredo Lipat vs. Pacific Banking Corporation

Doctrine: When the corporation is the mere alter ego or business conduit of a person, the separate personality of the corporation may be disregarded. This is commonly referred to as the Instrumentality Rule or the Alter Ego Doctrine which the courts have applied in disregarding the separate juridical personality of corporations. When a corporation is so organized and controlled and its affairs are conducted so that it is in fact a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the instrumentality may be disregarded.

FACTS:

Petitioner spouses owned Belas Export Trading (BET), a single proprietorship engaged in manufacturing garments for domestic and foreign consumption. They likewise owned the Mystical Fashions in the United States selling goods imported from the Philippines through BET. Teresita, daughter of the spouses, were designated to manage BET while her mom manages Mystical Fashions. A special power of attorney was executed to appoint Teresita as her attorney in fact for convenient operation in obtaining loans, and other credit transactions from respondent Bank. Teresita was also authorized to execute mortgage contracts on properties owned or co owned by her as security for the obligations to be extended by the bank.

A loan was secured in April 1979 by Teresita to buy fabrics to be manufactured by BET and to be exported to Mystical Fashions in the US. As security, the Spouses, as represented by Teresita, executed a real estate mortgage over their property located in Cubao, QC. In September 1979, BET was incorporated into a family corporation named Belas Export Corporation (BEC) in order to facilitate management of the business. Its incorporators include the petitioner spouses owning a combined 300 shares out of 420 shares subscribed; Teresita (20 shares) and other close relatives and friends of the Lipats.

Estelita Lipat was named as the President while her daughter Teresita was the vice president and general manager. Consequently, the loan was restructured in the name of BEC. Upon the request of BEC, a letter of credit was opened in favor of A.O Knitting Manufacturing by the bank after BEC executed the corresponding trust receipt. The bank also facilitated an export bill. These transactions were all secured by the real estate mortgage previously executed by the spouses. When all their obligations became due and demandable, they requested the bank to extend time for payment which was granted, but still the petitioner failed to fulfill their promise.

The Real Estate Mortgage was foreclosed then sold for public auction where a certificate of sale was issued to Eugenio Trinidad as the highest bidder. The spouses filed for the annulment of the real estate mortgage, extrajudicial foreclosure and the certificate of sale issued alleging that the promissory notes, trust receipts and export bills were all ultra vires acts of Teresita as they were executed without the requisite board resolution of the Board of Directors of BEC. They also assailed that assuming the acts were valid and binding on BEC, the same were corporations sole obligation, it having a personality distinct and separate from petitioner spouses. In response to the claim of the spouses, the bank and Trinidad assailed that Lipat and the BEC are one and the same, the latter being a family corporation.

ISSUE: Whether or not the Doctrine of piercing the veil of corporation fiction is applicable in this case

RULING:

YES. The spouses attempted to isolate themselves from and hide behind the corporate personality of BEC so as to evade the liabilities to the bank. This is what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

When the corporation is the mere alter ego or business conduit of a person, the separate personality of the corporation may be disregarded. This is commonly referred to as the Instrumentality Rule or the Alter Ego Doctrine which the courts have applied in disregarding the separate juridical personality of corporations. When a corporation is so organized and controlled and its affairs are conducted so that it is in fact a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the instrumentality may be disregarded.16) La Compana Coffee Factory Inc. vs. Kaisahan ng mga manggagawa sa La Campana Case

Doctrine: Disregarding Corporate Entity. The doctrine that a corporation is a legal entity existing separate and apart from the person composing it is a legal theory introduced for purposes of convenience and to subserve the ends of justice. The concept cannot, therefore, be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts. Thus, in an appropriate case and in furtherance of the ends of justice, a corporation and the individual or individuals owning all its stocks and assets will be treated as identical, the corporate entity being disregarded where used as a cloak or cover for fraud or illegality. (13 Am. Jur., 160-161.)

Facts: Tan Tong has been engaged in the business of buying and selling guagua under the trade name La Campana Guagua Packing. Later, Tan Tong and his family organized a family corporation known as La Campana Coffee Factory Co. Inc, with its principal office located in the same place as that of La Campana Guagua Packing. A year before the formation of the corporation, Tan Tong had entered into a CBA with the Phil. Legion of Organized Workers (PLOW) to which the union of Tan Tongs employees was affiliated. Said employees later formed their organization known as Kaisahan Ng Mga Manggagawa sa La Campana and applied for registration in the Dept. of Labor as an independent entity. The Kaisahan Ng Mga Manggagawa Sa La Campana, composed of 66 members consisting of both members of LCGP and LCCF, presented a demand for higher wages and more privileges addressed to La Campana Starch and Coffee Factory, by which name they sought to designate the LCGP and the LCCF. However, the demand was not granted and the attempt to settle the matter through mediation had given no result. So the Dept. of Labor certified the dispute to the Court of Industrial Relations. The 2 corpos as combined and the PLOW moved for the dismissal of the case which includes the ground, among others, that the action is directed against 2 different entities with distinct personalities the La Campana Starch Factory and the La Campana Coffee Factory Inc. CIR denied. MR was filed on the grounds that CIR had no jurisdiction to take cognizance of the case for the reason, among others, that the petitioner La Campana Coffee Factory, has only 14 employees, only 5 of whom are members of the respondent union and therefore the absence of the jurisdictional number of 30.

ISSUE WON THE CIR HAS JURISDICTION

HELD YES. CIR HAS JURISDICTION bec the number of employees of the La Campana Gaugau Packing involved in the case is more than the jurisdictional number (31) required by law. La Campana Gaugau Packing and La Campana Coffee Factory are operating under one single mgt, that is, as one business though with 2 trade names. It is true that the coffee factory is a corpo and, by legal fiction, an entity existing separate and apart from the persons composing it, that is, Tan Tong and his family. But it is settled that this fiction of law, which has been introduced as a matter of convenience and to subserve the ends of justice cannot be invoked to further an end subversive of that purpose. In the present case, Tan Tong appears to be the owner of the gaugau factory. And the coffee factory, though an incorporated business, is in reality owned exclusively by Tan Tong and his family. As found by the CIR:The 2 factories have only 1 office, 1 mgt and 1 payroll. The laborers of the gaugau factory and the coffee factory were interchangeable laborers from the gaugau factory were sometimes transferred to the coffee factory and vice-versa. Thus, the attempt to make the 2 factories appear as 2 separate businesses, when in reality they are but one, is but a device to defeat the ends of the law (the Act governing capital and labor relations) and shld not be permitted to prevail.

17) NAFLU vs OPLE143 SCRA 125 (1986)

Doctrine: The veil of corporate fiction may be pierced to safeguard the right to self-organization and certain vested rights, which had accrued in favor of the union. A corporation cannot use the corporate fiction to achieve an illegal purpose.

Facts:In 1982, NAFLU (the union) filed a request for conciliation before the Bureau of Labor Relations requesting for the intervention in its dispute with management (private respondent Lawman Industrial involving certain money claims, refusal to conclude a collective agreement after such has been negotiated and run-away shop undertaken by management in order to bust the union. In the course of proceedings, management unilaterally declared a temporary shutdown on Sept. 1982. The management of Lawman promised the union that it would start the normalization of operation effective Jan. 1983. But on Oct. 1982 NAFLU filed a notice of strike. A month after the notice, Lawman offered 200K settlement of claims inclusive of separation pay but NAFLU rejected it hence the latter filed a case for ULP. Came Jan. 1983 but Lawman was still not in operation alleging poor business condition. Lawman Industrial was able to extend their shutdown after the period expired without the Bureau claiming they had no more properties claiming that another company repossessed it (Pioneer Corp.).On the part of NAFLU, they alleged that due to Lawmans failure to grant the unions economic demands they were forced to declare a strike but subsequently entered into a settlement with respondent Lawman (essentially wage increase and other benefits embodied in the CBA they entered to take effect in Sept 1982). However, the company already started the partial shutdown a month prior to the affectivity of the CBA and allegedly committed run-away shop because the machines were removed in the premises of the employer and the name of Lawman was changed to Libra Garments. The Union members discovered this and yet again, the respondent, thinking they would get away with it the second time, changed it again to Dolphin Garments.On March 1983, the Minister of Labor ordered Lawman to stop the transfer of any of its existing assets to third parties (other company Pioneer) to the prejudice of its employees and the union and ordered reinstatement of the union members.

Issue: WOR Lawman and Libre/Dolphin are the same

Ruling:Yes. The 2nd Corporation seeks the protective shield of a corporate fiction to achieve an illegal purpose. As Libra/Dolphin is but an alter-ego of the old employer Lawman, the former must bear the consequences of the latters unfair acts by reinstating the petitioners to their former positions without loss of seniority rights.

20) Francisco Motors Corporation vs Court of Appeals309 SCRA 72Piercing the Veil of Corporate Fiction

DOCTRINE: The personality of the corporation and those of its incorporators, directors and officers in their personal capacities ought to be kept separate in this case.

FACTS: In 1985, Francisco Motors Corporation (FMC) sued Atty. Gregorio Manuel to recover from a him a sum of money in the amount of P23,000.00+. Said amount was allegedly owed to them by Manuel for the purchase of a jeep body plus repairs thereto. Manuel filed a counterclaim in the amount of P50,000.00. In his counterclaim, Manuel alleged that he was the Assistant Legal Officer for FMC; that the Francisco Family, owners of FMC, engaged his services for the intestate estate proceedings of one Benita Trinidad; that he was not paid for his legal services; that he is filing the counterclaim against FMC because said corporation was merely a conduit of the Francisco Family. The trial court as well as the Court of Appeals granted Manuels counterclaim on the ground that the legal fees were owed by the incorporators of FMC (an application of the doctrine of piercing the veil of corporation fiction in a reversed manner).

ISSUE: Whether or not the doctrine of piercing the veil of corporate fiction was properly used by the Court of Appeals.

HELD: No. In the first place, the doctrine is to be used in disregarding corporate fiction and making the incorporators liable in appropriate circumstances. In the case at bar, the doctrine is applied upside down where the corporation is held liable for the personal obligations of the incorporators such was uncalled for and erroneous. It must be noted that that Atty. Manuels legal services were secured by the Francisco Family to represent them in the intestate proceedings over Benita Trinidads estate. The indebtedness was incurred by the Francisco Family in their separate and personal capacity. These estate proceedings did not involve any business of FMC. The proper remedy is for Manuel to sue the concerned members of the Francisco Family in their individual capacity.

21) TRADERS ROYAL BANK VS. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES

(G.R. No. 93397 March 3, 1997)

CASE DOCTRINE: A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE CORPORATION, and to no one else, thus, discounting the petitioner's submission that the same is a negotiable instrument, and that it is a holder in due course of the certificate. Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this merely an equitable remedy, and may be awarded only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person. In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it acquired the subject certificate of indebtedness from Philfinance. Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its requirements. An entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority, may not hold the corporation liable.

FACTS:

On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached Assignment", whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank Certificates of Indebtedness (CBCI) No. D891 with a face value of P500,000.00. It was only through one of its officers by which the CBCI was conveyed without authorization from the company. Petitioner and Philfinance later entered into a Repurchase agreement, on which petitioner bought the CBCI from Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the petitioner tried to have it registered in its name in the Central Bank, the latter didn't want to recognize the transfer.

On December 4, 1984, the Regional Trial Court the case took cognizance of the defendant Central Bank of the Philippines' Motion for Admission of Amended Answer with Counter Claim for Interpleader 6 thereby calling to fore the respondent Filriters Guaranty Assurance Corporation (Filriters), the registered owner of the subject CBCI as respondent. In its Decision dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXIII found the assignment of CBCI No. D891 in favor of Philfinance, and the subsequent assignment of the same CBCI by Philfinance in favor of Traders Royal Bank null and void and of no force and effect. The petitioner assailed the decision of the trial court in the Court of Appeals, but their appeals likewise failed.

ISSUE/S:

1. Whether or not the CBCI is a negotiable instrument?

2. Whether or not the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank?

HELD:

1. The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the registered owner Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. 2. No, the officer who signed the deed of assignment purportedly for and on behalf of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violated at the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in the nullity of the transfer.

Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is defective since it acquired the instrument from Filriters fictitiously. What happened was Philfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation. Thus, for lack of any consideration, the assignment made is a complete nullity.

We find that the transfer made by Filriters to Philfinance did not conform to Central Bank Circular No. 769, series of 1980, otherwise known as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness", under which the note was issued. Published in the Official Gazette on November 19, 1980, Section 3 thereof provides that any assignment of registered certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly authorized in writing.

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to Traders Royal Bank and which the latter can register with the Central Bank. Thus, the anauthorized use or distribution of the same by a corporate officer of Filriters cannot bind the said corporation, not without the approval of its Board of Directors, and the maintenance of the required reserve fund. Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over the claimed interest of Traders Royal Bank.

22) INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO vs CALICA & INDOPHIL TEXTILE MILLS, INC.G.R. No. 96490 February 3, 1992

MEDIALDEA,J.: p

Doctrine: The fact that the businesses of Indophil and Acrylic are related, that some of the employees of Indophil are the same persons manning and providing for auxilliary services to the units of Acrylic, and that the physical plants, offices and facilities are situated in the same compound, these facts are not sufficient to justify the piercing of the corporate veil of Acrylic.

Facts: Indophil Textile Mills, Inc. (Indophil) and Indophil Acrylic Manufacturing Corp. (Acrylic) are engaged in the same business of manufacturing, sale & export of yarns of various counts and kinds of textiles, share the same physical plants, offices & facilities, has practically the same incorporators, directors and officers, and employ employees of Indophil to man the units of Acrylic. However, these two companies are registered separately in the Securities and Exchange Commission, and have separate business purposes i.e. Acrylic cannot manufacture textiles while Indophil cannot buy or import yarns. Petitioner is a legitimate labor organization and the exclusive bargaining agent of Indophils rank-and-file employees. When the Acrylic workers were unionized and a CBA executed, petitioner claimed that Acrylic should be considered as an extension or expansion of Indophil and that Acrylic should be part of Indophils bargaining unit. Indophil opposed holding that it is a juridical entity separate and distinct from Acrylic. The impasse led petitioner and Indophil to enter into a submission agreement and jointly requested respondent Calica to act as voluntary arbitrator to resolve the labor dispute. Arbitrator Calica rendered his award that the coverage clause of Indophils CBA do not extend to the employees of Acrylic as an extension or expansion of Indophil. Issue: Whether or not Indophil Acrylic Manufacturing Corp. is an extension or expansion of Indophil Textile Mills, Inc. and thus the workers of Indophil Acrylic should be recognized as part of, and/or within the scope of the bargaining unit of Indophil Textile Mills, Inc.?

Ruling: NO. While the businesses of Indophil and Acrylic are related, some employees of Indophil are the same persons manning and providing services to the units of Acrylic and the physical plants, offices and facilities are situated in the same compound do not sufficiently justify the doctrine of piercing the corporate veil of