Bituin, Remy Rose Ann S.

Case No. 6 (Corporate Personality)

Pantranco Employees Association (PEA-PTGWO), et al. vs. NLRC, et al
G.R. No. 170689/March 17, 2009
Facts:
The Gonzales family owned two corporations, namely, the Pantranco
North Express, Inc. (PNEI) and the Macris realty Corporation (Macris). The
Gonzales family later incurred huge financial losses despite attempts of
rehabilitation and loan infusion. As a result, their creditors took over the
management of PNEI and Macris. Thereafter, the full ownership was transferred
to one of their creditors, the national Investment Development Corporation
(NIDC), a subsidiary of PNB. Macris, moreover, was renamed as the National
Realty Development Corporation (Naredeco) and eventually merged with the
National Warehousing Corporation (Nawaco) to form new PNB subsidiary, the
PNB-Madecor.
Consequent to the financial losses suffered by the Gonzales family was
the various allegations of unpaid labor claims commenced by the former
employees of PNEI, herein petitioners against PNEIs properties. They also
wanted that the properties belonging to PNB-Madecor and Mega Prime be
attached to their unpaid labor claims. Their contention was the fact that the
transfer of the properties to PNB-Madecor was to avoid satisfaction of their
claims, hence the subsequent sale of the properties by PNB to Mega Prime was
rescinded. Thus, the herein petitioners faulted the Labor Arbiter for not finding
that PNEI, PNB, PNB-Madecor andMega Prime were all jointly and severally
liable for their clamins.
Issue:
Whether or not the properties of PNB, PNB-Madecor and Mega Prime can
be attached as to satisfy unpaid labor claims by PNEIs employees.
Held:
The Supreme Court in the negative; PNB, PNB-Madecor and Mega Prime
are corporations with personalities separate and distinct from PNEI. As such,
there being no cogent reason to pierce the veil of corporate fiction, the separate
personalities of the above corporations should be maintained. Moreso, that the
Pantranco properties were never owned by PNEI; rather, their titles were
registered under the name of PNB-Madecor. If PNB and PNB-Madecor could not
answer for the liabilities of PNEI, with more reason should Mega Prime not be
held liable being a mere successor-in-interest of PNB-Madecor.
To buttressed, PNB, PNB-Madecor and Mega Prime are corporations
with personalities separate and distinct from that of PNEI. PNB is sought to be
held liable because it acquired PNEI through NIDC at the time when PNEI was
suffering financial reverses. PNB-Madecor is being made to answer for

petitioners labor claims as the owner of the subject Pantranco properties and as
a subsidiary of PNB. Mega Prime is also included for having acquired PNBs
shares over PNB-Madecor. The general rule is that a corporation has a
personality separate and distinct from those of its stockholders and other
corporations to which it may be connected. This is a fiction created by law for
convenience and to prevent injustice. Obviously, PNB, PNB-Madecor, Mega
Prime, and PNEI are corporations with their own personalities. Here we stated
that PNB was only a stockholder of PNB-Madecor which later sold its shares to
Mega Prime; and that PNB-Madecor was the owner of the Pantranco properties.
Moreover, these corporations are registered as separate entities and, absent any
valid reason, we maintain their separate identities and we cannot treat them as
one.
Neither can we merge the personality of PNEI with PNB simply because
the latter acquired the former. Settled is the rule that where one corporation sells
or otherwise transfers all its assets to another corporation for value, the latter is
not, by that fact alone, liable for the debts and liabilities of the transferor.
Assuming, for the sake of argument, that PNB may be held liable for the debts of
PNEI, petitioners still cannot proceed against the Pantranco properties, the same
being owned by PNB-Madecor, notwithstanding the fact that PNB-Madecor was a
subsidiary of PNB. The general rule remains that PNB-Madecor has a personality
separate and distinct from PNB. The mere fact that a corporation owns all of the
stocks of another corporation, taken alone, is not sufficient to justify their being
treated as one entity. If used to perform legitimate functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation
as well as the subsidiary will be confined to those arising in their respective
businesses.

Bituin, Remy Rose Ann S.

Case No. 51 (Stocks and Shares)
Nora A. Bitong vs. Court of Appeals (Fifth Division)
G.R. No. 123553/July 13, 1998
Facts:
Ex Libris Publishing Co., Inc. (Ex Libris hereafter) was incorporated for the
purpose of publishing a weekly magazine. Its original principal stockholders were
spouses Senator Juan Ponce Enrile and Cristina Ponce Enrile through Jaka
Investments Corporation (JAKA hereafter), and respondents Eugenia and Jose
Apostol. When Ex Libris suffered financial difficulties, JAKA and the Apostols,
together with new investors Luis Villafuerte and Ramon Siy, restructured Ex Libris
by organizing a new corporation known as Mr. & Ms.; thereafter it was agreed
among them that, they being close friends, Mr. & Ms. would be operated as a
partnership or a close corporation; respondent Eugenia D. Apostol would
manage the affairs of Mr. & Ms.; and, no shares of stock would be sold to third
parties without first offering the shares to the other stockholders so that transfers
would be limited to and only among the original stockholders. The petitioner
herein being merely a holder-in-trust of JAKA shares only represented and
continued to represent JAKA in the board. In the beginning, petitioner cooperated
with and assisted the management until mid-1986 when relations between her
and her principals on one hand, and respondent Eugenia D. Apostol on the other,
became strained due to political differences. Hence from mid-1986 to mid-1988
petitioner refused to speak with respondent Eugenia D. Apostol, and in 1988 the
former became openly critical of the management of the latter. Nevertheless,
respondent Eugenia D. Apostol always made available to petitioner and her
representatives all the books of the corporation.
Petitioner testified at the trial that she became the registered and
beneficial owner of 997 shares of stock of Mr. & Ms. out of the 4,088 total
outstanding shares after she acquired them from JAKA through a deed of sale
executed on 25 July 1983 and recorded in the Stock and Transfer Book of Mr. &
Ms. under Certificate of Shares of Stock No. 008. She pointed out that Senator
Enrile decided that JAKA should completely divest itself of its holdings in Mr. &
Ms. and this resulted in the sale to her of JAKA's interest and holdings in that
publishing firm.
On the other hand, private respondents refuted the statement of petitioner
that she was a stockholder of Mr. & Ms. since 25 July 1983 as respondent
Eugenia D. Apostol signed Certificate of Stock No. 008 only on 17 March 1989,
and not on 25 July 1983. Respondent Eugenia D. Apostol explained that she
stopped using her long signature (Eugenia D. Apostol) in 1987 and changed it to
E.D. Apostol, the signature which appeared on the face of Certificate of Stock
No. 008 bearing the date 25 July 1983. And, since the Stock and Transfer Book
which petitioner presented in evidence was not registered with the SEC, the
entries therein including Certificate of Stock No. 008 were fraudulent.
Respondent Eugenia D. Apostol claimed that she had not seen the Stock and
Transfer Book at anytime until 21 March 1989 when it was delivered by petitioner

herself to the office of Mr. & Ms., and that petitioner repeatedly referred to
Senator Enrile as "my principal" during the Mr. & Ms. board meeting of 22
September 1988, seven (7) times no less.
The petitioner believing she had been the Treasurer and a Member of the
Board of Directors of Mr. & Ms. from the time it was incorporated on 29 October
1976 to 11 April 1989, and was the registered owner of 1,000 shares of stock out
of the 4,088 total outstanding shares, petitioner complained of irregularities
committed from 1983 to 1987 by Eugenia D. Apostol, President and Chairperson
of the Board of Directors. As Eugenia Apostol was advancing money to Philippine
Daily Inquirer without any interest rates thereon.
Issue:
Whether or not petitioner was a bona fide stockholder when she filed a
complaint of irregularities against herein private-respondents, the latter acting as
members of the Board of Directors of Mr. and Ms. Publishing Co., Inc.
Held:
The Supreme Court dismissed the case of herein Petitioner Bitong.
Therefore, petitioner was not a bona fide stockholder of Mr. & Ms. Publishing Co.,
Inc. before March 1989 or at the time the complained acts were committed to
qualify her to institute a stockholder's derivative suit against private respondents.
It is founded on the basic principle that stock issued without authority and in
violation of law is void and confers no rights on the person to whom it is issued
and subjects him to no liabilities. Where there is an inherent lack of power in the
corporation to issue the stock, neither the corporation nor the person to whom
the stock is issued is estopped to question its validity since an estopped cannot
operate to create stock, which under the law cannot have existence.
As found by the Hearing Panel and affirmed by respondent Court of
Appeals, there is overwhelming evidence that despite what appears on the
certificate of stock and stock and transfer book, petitioner was not a bona fide
stockholder of Mr. & Ms. before March 1989 or at the time the complained acts
were committed to qualify her to institute a stockholder's derivative suit against
private respondents. Thus, while petitioner asserts in her petition that Certificate
of Stock No. 008 dated 25 July 1983 was issued in her name, private
respondents argue that this certificate was signed by respondent Eugenia D.
Apostol as President only in 1989 and was fraudulently antedated by petitioner
who had possession of the Certificate Book and the Stock and Transfer Book. It
is safe to state that there is no truth to the statement written in Certificate of
Stock No. 008 that the same was issued and signed on 25 July 1983 by its duly
authorized officers specifically the President and Corporate Secretary because
the actual date of signing thereof was 17 March 1989. Verily, a formal certificate
of stock could not be considered issued in contemplation of law unless signed by
the president or vice-president and countersigned by the secretary or assistant

secretary.
While a certificate of stock is not necessary to make one a stockholder,
e.g., where he is an incorporator and listed as stockholder in the articles of
incorporation although no certificate of stock has yet been issued, it is supposed
to serve as paper representative of the stock itself and of the owner's interest
therein. Hence, when Certificate of Stock No. 008 was admittedly signed and
issued only on 17 March 1989 and not on 25 July 1983, even as it indicates that
petitioner owns 997 shares of stock of Mr. & Ms., the certificate has no
evidentiary value for the purpose of proving that petitioner was a stockholder
since 1983 up to 1989.
The rule is that the endorsement of the certificate of stock by the owner or
his attorney-in-fact or any other person legally authorized to make the transfer
shall be sufficient to effect the transfer of shares only if the same is coupled with
delivery. The delivery of the stock certificate duly endorsed by the owner is the
operative act of transfer of shares from the lawful owner to the new transferee.
Thus, for a valid transfer of stocks, the requirements are as follows: (a) There
must be delivery of the stock certificate; (b) The certificate must be endorsed by
the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and, (c) to be valid against third parties, the transfer must be recorded in
the books of the corporation. At most, in the instant case, petitioner has satisfied
only the third requirement. Compliance with the first two requisites has not been
clearly and sufficiently shown.

Bituin, Remy Rose Ann S.

Case No. 62 (Derivative Suit)

Majority Stockholders of Ruby Indl Corp. vs. Miguel Lim
G.R. NO. 165887/June 6, 2011
Facts:
Ruby Industrial Corporation (RUBY) is a domestic corporation engaged
in glass manufacturing. Reeling from severe liquidity problems beginning in 1980,
RUBY filed on December 13, 1983 a petition for suspension of payments with the
Securities and Exchange Commission (SEC. Thereafter, the SEC issued an
order declaring RUBY under suspension of payments and enjoining the
disposition of its properties pending hearing of the petition, except insofar as
necessary in its ordinary operations, and making payments outside of the
necessary or legitimate expenses of its business. Thus, the SEC Hearing Panel
created the management committee (MANCOM) for RUBY, The MANCOM was
tasked to perform the following functions: (1) undertake the management of
RUBY; (2) take custody and control over all existing assets and liabilities of
RUBY; (3) evaluate RUBYs existing assets and liabilities, earnings and
operations; (4) determine the best way to salvage and protect the interest of its
investors and creditors; and (5) study, review and evaluate the proposed
rehabilitation plan for RUBY. Subsequently, two (2) rehabilitation plans were
submitted to the SEC: the BENHAR/RUBY Rehabilitation Plan of the majority
stockholders led by Yu Kim Giang, and the Alternative Plan of the minority
stockholders represented by Miguel Lim (Lim). The BENHAR/RUBY Plan was
opposed by 40% of the stockholders, including Lim, a minority shareholder of
RUBY.
ALFC, the biggest unsecured creditor of RUBY and chairman of the
MANCOM, also objected to the plan as it would transfer RUBYs assets beyond
the reach and to the prejudice of its unsecured creditors. Meanwhile, BENHAR
paid off Far East Bank & Trust Company (FEBTC), one of RUBYs secured
creditors. At some time, FEBTC had already executed a deed of assignment of
credit and mortgage rights in favor of BENHAR. BENHAR likewise paid the other
secured creditors who, in turn, assigned their rights in favor of BENHAR. These
acts were done by BENHAR despite the SECs TRO and injunction and even
before the SEC Hearing Panel approved the BENHAR/RUBY Plan on October
28, 1988.
ALFC and Miguel Lim moved to nullify the deeds of assignment
executed in favor of BENHAR and cite the parties thereto in contempt for willful
violation of the SEC order enjoining RUBY from disposing its properties and
making payments pending the hearing of its petition for suspension of payments.
They also charged that in paying off FEBTCs credits, FEBTC was given undue
preference over the other creditors of RUBY.
Issue:

Whether or not Miguel Lim as a member of the minority

stockholders has a legal standing to file a derivative suit against the alleged
misconduct of the majority stockholders, which is detrimental to the corporation.
Held:
The Supreme Court ruled in favor of Miguel Lim. Therefore, he has a legal
standing to file a derivative suit. A derivative action is a suit by a shareholder to
enforce a corporate cause of action It is a remedy designed by equity and has
been the principal defense of the minority shareholders against abuses by the
majority.For this purpose, it is enough that a member or a minority of
stockholders file a derivative suit for and in behalf of a corporation. An individual
stockholder is permitted to institute a derivative suit on behalf of the corporation
wherein he holds stock in order to protect or vindicate corporate rights, whenever
officials of the corporation refuse to sue or are the ones to be sued or hold the
control of the corporation. In such actions, the suing stockholder is regarded as
the nominal party, with the corporation as the party in interest.