RATIONALE OF CASES

CONCESSION THEORY

1. INTL EXPRESS TRAVEL & TOUR SERVICES, INC. V. CA

It is a basic postulate that before a corporation may acquire juridical personality, the State
must give its consent either in the form of a special law or a general enabling act, and the
procedure and conditions provided under the law for the acquisition of such juridical
personality must be complied with. Although the statutory grant to an association of the
powers to purchase, sell, lease and encumber property can only be construed the grant of a
juridical personality to such an association nevertheless, the failure to comply with the
statutory procedure and conditions does not warrant a finding that such association acquired
a juridical personality, even when it adopts constitution and by-laws.

DIFFERENCE OF CORPO FROM PARTNERSHIP & SOLE PROPRIETORSHIP

1. PIONEER INSURANCE & SURETY CORP. VS COURT OF APPEALS

It is ordinarily held that persons who attempt, but fail, to form a corporation and who
carry on business under the corporate name occupy the position of partners inter
se. Thus, where persons associate themselves together under articles to purchase
property to carry on a business, and their organization is so defective, as to come short of
creating a corporation within the statute, they become in legal effect partners inter se, and
their rights as members of the company to the property acquired by the company will be
recognized.

However, such a relation does not necessarily exist, for ordinarily persons cannot be
made to assume the relation of partners, as between themselves, when their
purpose is that no partnership shall exist , and it should be implied only when
necessary to do justice between the parties; thus, one who takes no part except to
subscribe for stock in a proposed corporation which is never legally formed does not
become a partner with other subscribers who engage in business under the name of the
pretended corporation, so as to be liable as such in an action for settlement of the alleged
partnership and contribution .

TWO CORPORATE FRANCHISES

1. J.R.S. BUSINESS CORP. VS. IMPERIAL INSURANCE, INC.

The primary franchise of a corporation that is, the right to exist as such, is vested "in the
individuals who compose the corporation and not in the corporation itself", and cannot be
conveyed in the absence of a legislative authority to do so, but the specific or secondary
franchises of a corporation are vested in the corporation and may ordinarily be
conveyed or mortgaged under a general power granted to a corporation to dispose of
its property, except such special or secondary franchises as are charged with a public use.
 The right to operate a messenger and express delivery service, by virtue of a legislative
enactment, is admittedly a secondary franchise under the law, and is subject to levy and
sale on execution together and including all the property necessary for the enjoyment
thereof. The law, however, indicates the procedure under which the secondary franchise and
the properties necessary for its enjoyment may be sold under execution. Said franchise
can be sold under execution, when such sale is especially decreed and ordered in the
judgment and it becomes effective only when the sale is confirmed by the Court after
due notice (Sec. 56, Corp. Law).

Incidentally, the trade name or business name corresponds to the initials of the
President of the petitioner corporation and there can be no serious dispute regarding the
fact that a trade name or business name and capital stock are necessarily included in
the enjoyment of the franchise. Like that of a franchise, the law mandates, that property
necessary for the enjoyment of said franchise, can only be sold to satisfy a judgment debt if
the decision especially so provides. As we have stated heretofore, no such directive appears
in the decision. Moreover, a trade name or business name cannot be sold separately
from the franchise, and the capital stock of the petitioner corporation or any other
corporation, because it represents the interest and is the property of stockholders in the
corporation, who can only be deprived thereof in the manner provided by law

ARTIFICIAL BEING

1. SECOSA VS. HEIRS OF FRANCISCO

When an injury is caused by the negligence of an employee, there instantly arises a

presumption that there was negligence on the part of the employer, which however, may
be rebutted by a clear evidence showing on the part of the employer that it exercised the
care and diligence of a good father of a family in the selection and supervision of his
employee.

In this case, the corporation was held solidary liable with its employee, but the president
of the corporation was not held solidary liable with the employee of the corporation
because

A corporation has a personality separate from that of its stockholders or

members. The doctrine of veil of corporation treats as separate and distinct the
affairs of a corporation and its officers and stockholders. As a 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.
CORPORATIONS & MORAL DAMAGES

1. CRYSTAL vs. BANK OF THE PHILIPPINE ISLANDS

General Rule: A corporation, being an artificial person, cannot experience physical

sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or
social humiliation which are basis for moral damages under Art. 2217 of the Civil Code.

Exception: However, if a corporation has good reputation, and such was besmirched, it
may be a ground for the award of moral damages.

While the Court may allow the grant of moral damages to corporations, it is not
automatically granted; there must still be proof of the existence of the factual basis
of the damage and its causal relation to the defendants acts. This is so because
moral damages, though incapable of pecuniary estimation, are in the category of an
award designed to compensate the claimant for actual injury suffered and not to impose
a penalty on the wrongdoer.

SEPARATE JURIDICAL PERSONALITY & PIERCING THE CORPORATE VEIL

1. CONCEPT BUILDERS, INC. VS NLRC

In the case, the SC summarized the FACTORS that are to be considered when
the corporate mask may be lifted and the corporate veil pierced, or when to consider a
corporation as but the alter ego of the controlling person or of another corporation:

a. Stock ownership by one or common ownership of both corporations.

b. Identity of directors and officers.
c. The manner of keeping corporate books and records.
d. Methods of conducing the business.
The SC adopted the following TESTS in determining the applicability of the
doctrine of piercing the veil of corporate fiction:
a. CONTROL, not merely of complete stock control, but COMPLETE
DOMINATION, not only of finances but of policy and business practice in
respect to the transaction attacked that the corporate entity as to this
transaction had at the time to separate mind, will or existence of its own.
b. Such control MUST HAVE BEEN USED by the defendant to commit FRAUD
or WRONG, to perpetuate a violation of statutory or other positive legal duty,
or dishonest and unjust act in contravention of plaintiffs legal rights.
c. The control and breach of duty must PROXIMATELY CAUSE the injury or
unjust loss complained of.
2. MARUBENI VS LIRAG

There was no consultancy agreement. The testimonial and documentary evidence

did not support Lirags claims. The testimony of Lirags witnesses comes from the fact that
they learned about the oral consultancy only from Lirag.
Assuming that there was a contract for consultancy services, still Lirag could not
claim fees from projects that Marubeni were not awarded to Marubeni. In the Bureau of
Posts project, it was Sanritsu, and not Marubeni which was awarded. The latter did not even
join the bidding. Lirag clarified that he wasnt providing services for Sanritsu, but still claimed
the 6% commission because Marubeni and Sanritsu are sister companies thereby implying
the need to pierce the veil of corporate fiction. Marubeni is allegedly the supplier and
contractor while Sanritsu is the subcontractor. They also come from the same country.
Nevertheless, piercing the veil requires more than these circumstances. The wrongdoing
must be clearly and convincingly established.
Contrary to the trial courts finding that Lirag was made to believe that he was hired
to provide the consultancy services, Shoichi One, an officer of Marubeni testified that it was
Lirag who insisted on providing the services even if Marubeni Phils. had no such authority to
hire him, as this was subject to approval of the head office in Japan. If the Tokyo office
agrees to hire a consultant, it would give a power of attorney to its Gen. Manager in Manila
to enter into such agreement. However, Marubeni did not wish to participate in the bidding,
hence there was no need for consultancy services.