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Aurbach vs.

Sanitary Wares
(Partnership; Joint Venture; Foreign and Domestic Corp)

F: This consolidated petition assailed the decision of the CA directing a certain MANNER OF ELECTION OF
OFFICERS IN THE BOARD OF DIRECTORS
*There are two groups in this case, the Lagdameo group composed of Filipino investors and the
American Standard Inc. (ASI) composed of foreign investors.
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the
parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly stated
that the parties' intention was to form a corporation and not a joint venture.

I: The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8, 1983. To answer this question the following factors
should be determined:
*(1) the nature of the business established by the parties whether it was a joint venture or a corporation
and

H:
While certain provisions of the Agreement would make it appear that the parties thereto
disclaim being partners or joint venturers such disclaimer is directed at third parties and is not
inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in
Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASI
shall constitute the minority stockholder. In any event, the evident intention of the Philippine
Investors and ASI in entering into the Agreement is to enter into a joint venture enterprise
An examination of the Agreement shows that certain provisions were inccuded to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in
certain enumerated corporate acts. ASI is contractually entitled to designate a member of the
Executive Committee and the vote of this member is required for certain transactions
The Agreement also requires a 75% super-majority vote for the amendment of the articles and
by-laws of Saniwares. ASI is also given the right to designate the president and plant manager
.The Agreement further provides that the sales policy of Saniwares shall be that which is
normally followed by ASI and that Saniwares should not export "Standard" products otherwise
than through ASI's Export Marketing Services. Under the Agreement, ASI agreed to provide
technology and know-how to Saniwares and the latter paid royalties for the same.
The legal concept of a joint venture is of common law origin. It has no precise legal definition
but it has been generally understood to mean an organization formed for some temporary
purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar
community of interest in the business, sharing of profits and losses, and a mutual right of
control.
The main distinction cited by most opinions in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while the joint venture is formed
for the execution of a single transaction, and is thus of a temporary nature.
Mambulao Lumber Company v. PNB (G.R.
No. L-22973)
Facts:

Petitioner Mambulao Lumber applied for an industrial loan with herein respondent PNB and was
approved with its real estate, machinery and equipments as collateral. PNB released the approved
loan but petitioner failed to pay and was later discovered to have already stopped in its operation.
PNB then moved for the foreclosure and sale of the mortgaged properties. The properties were
sold and petitioner sent a bank draft to PNB to settle the balance of the obligation. PNB however
alleges that a remaining balance stands and a foreclosure sale would still be held unless
petitioner remits said amount. The foreclosure sale proceeded and petitioners properties were
taken out of its compound. Petitioner filed actions before the court and claims among others,
moral damages.

Issue:

Whether or not petitioner corporation, who has already ceased its operation, may claim for moral
damages.

Ruling: NO.

Herein appellants claim for moral damages, however, seems to have no legal or factual basis.
Obviously, an artificial person like herein appellant corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social
humiliation which are basis of moral damages. A corporation may have a good reputation which,
if besmirched, may also be a ground for the award of moral damages. The same cannot be
considered under the facts of this case, however, not only because it is admitted that herein
appellant had already ceased in its business operation at the time of the foreclosure sale of the
chattels, but also for the reason that whatever adverse effects of the foreclosure sale of the
chattels could have upon its reputation or business standing would undoubtedly be the same
whether the sale was conducted at Jose Panganiban, Camarines Norte, or in Manila which is the
place agreed upon by the parties in the mortgage contract.
Bache & Co. Inc. et al vs BIR Commissioner
Vivencio Ruiz et al
On 24 Feb 1970, Commissioner Vera of Internal Revenue, wrote a letter addressed to J Ruiz
requesting the issuance of a search warrant against petitioners for violation of Sec 46(a) of the
NIRC, in relation to all other pertinent provisions thereof, particularly Sects 53, 72, 73, 208 and
209, and authorizing Revenue Examiner de Leon make and file the application for search
warrant which was attached to the letter. The next day, de Leon and his witnesses went to CFI
Rizal to obtain the search warrant. At that time J Ruiz was hearing a certain case; so, by means
of a note, he instructed his Deputy Clerk of Court to take the depositions of De Leon and
Logronio. After the session had adjourned, J Ruiz was informed that the depositions had already
been taken. The stenographer read to him her stenographic notes; and thereafter, J Ruiz asked
respondent Logronio to take the oath and warned him that if his deposition was found to be false
and without legal basis, he could be charged for perjury. J Ruiz signed de Leons application for
search warrant and Logronios deposition. The search was subsequently conducted.

ISSUE: Whether or not there had been a valid search warrant.

HELD: The SC ruled in favor of Bache on three grounds.

1. J Ruiz failed to personally examine the complainant and his witness.

Personal examination by the judge of the complainant and his witnesses is necessary to enable
him to determine the existence or non-existence of a probable cause.

2. The search warrant was issued for more than one specific offense.

The search warrant in question was issued for at least four distinct offenses under the Tax Code.
As ruled in Stonehill Such is the seriousness of the irregularities committed in connection with
the disputed search warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the
former Rules of Court that a search warrant shall not issue but upon probable cause in
connection with one specific offense. Not satisfied with this qualification, the Court added
thereto a paragraph, directing that no search warrant shall issue for more than one specific
offense.

3. The search warrant does not particularly describe the things to be seized.

The documents, papers and effects sought to be seized are described in the Search Warrant

Unregistered and private books of accounts (ledgers, journals, columnars, receipts and
disbursements books, customers ledgers); receipts for payments received; certificates of stocks
and securities; contracts, promissory notes and deeds of sale; telex and coded messages; business
communications, accounting and business records; checks and check stubs; records of bank
deposits and withdrawals; and records of foreign remittances, covering the years 1966 to 1970.
The description does not meet the requirement in Art III, Sec. 1, of the Constitution, and of Sec.
3, Rule 126 of the Revised Rules of Court, that the warrant should particularly describe the
things to be seized.

A search warrant may be said to particularly describe the things to be seized when the
description therein is as specific as the circumstances will ordinarily allow or when the
description expresses a conclusion of fact not of law by which the warrant officer may be guided
in making the search and seizure or when the things described are limited to those which bear
direct relation to the offense for which the warrant is being issued.
Bataan Shipyard & Engineering Co., Inc. vs
Presidential Commission on Good
Government
150 SCRA 181 Business Organization Corporation Law A Corporation Cannot Invoke the
Right Against Self-Incrimination

When President Corazon Aquino took power, the Presidential Commission on Good Government
(PCGG) was formed in order to recover ill gotten wealth allegedly acquired by former President
Marcos and his cronies. Aquino then issued two executive orders in 1986 and pursuant thereto, a
sequestration and a takeover order were issued against Bataan Shipyard & engineering Co., Inc.
(BASECO). BASECO was alleged to be in actuality owned and controlled by the Marcoses
through the Romualdez family, and in turn, through dummy stockholders.

The sequestration order issued in 1986 required, among others, that BASECO produce corporate
records from 1973 to 1986 under pain of contempt of the PCGG if it fails to do so. BASECO
assails this order as it avers, among others, that it is against BASECOs right against self
incrimination and unreasonable searches and seizures.

ISSUE: Whether or not BASECO is correct.

HELD: No. First of all, PCGG has the right to require the production of such documents
pursuant to the power granted to it. Second, and more importantly, right against self-
incrimination has no application to juridical persons. There is a reserve right in the legislature to
investigate the contracts of a corporation and find out whether it has exceeded its powers. It
would be a strange anomaly to hold that a state, having chartered a corporation like BASECO to
make use of certain franchises, could not, in the exercise of sovereignty, inquire how these
franchises had been employed, and whether they had been abused, and demand the production of
the corporate books and papers for that purpose.

Neither is the right against unreasonable searches and seizures applicable here. There were no
searches made and no seizure pursuant to any search was ever made. BASECO was merely
ordered to produce the corporate records.
Stonehill vs Diokno

20 SCRA 383

Facts:

Respondents herein secured a total of 42 search warrants against petitioners herein and/or the
corporations of which they were officers, to search books of accounts, financial records,
vouchers, correspondence, receipts, ledgers, journals, portfolios, credit journals, typewriters, and
other documents and/or papers showing all business transactions including disbursements
receipts, balance sheets and profit and loss statements and Bobbins (cigarette wrappers), as the
subject of the offense; stolen or embezzled and proceeds or fruits of the offense, or used or
intended to be used as the means of committing the offense, which is described in the
applications adverted to above as violation of Central Bank Laws, Tariff and Customs Laws,
Internal Revenue (Code) and the Revised Penal Code.

The petitioner contended that the search warrants are null and void as their issuance violated the
Constitution and the Rules of Court for being general warrants.

The documents, papers, and things seized under the alleged authority of the warrants in question
may be split into two (2) major groups, namely: (a) those found and seized in the offices of the
aforementioned corporations, and (b) those found and seized in the residences of petitioners
herein.

Issue: Whether petitioners can validly assail the search warrant against the corporation.

Held: No.

As regards the first group, we hold that petitioners herein have no cause of action to assail the
legality of the contested warrants and of the seizures made in pursuance thereof, for the simple
reason that said corporations have their respective personalities, separate and distinct from the
personality of herein petitioners, regardless of the amount of shares of stock or of the interest of
each of them in said corporations, and whatever the offices they hold therein may be. Indeed, it is
well settled that the legality of a seizure can be contested only by the party whose rights have
been impaired thereby, and that the objection to an unlawful search and seizure is purely
personal and cannot be availed of by third parties. Consequently, petitioners herein may not
validly object to the use in evidence against them of the documents, papers and things seized
from the offices and premises of the corporations adverted to above, since the right to object to
the admission of said papers in evidence belongs exclusively to the corporations, to whom the
seized effects belong, and may not be invoked by the corporate officers in proceedings against
them in their individual capacity.
Land Bank of the Philippines vs Court of
Appeals
In 1980, ECO Management Corporation (ECO) obtained loans amounting to about P26 million
from Land Bank. ECO defaulted in its payment but in 1981, ECO submitted a Payment Plan with
the hope of restructuring its loan. The plan was rejected and Land Bank sued ECO. It impleaded
Emmanuel C. Oate, the majority stockholder of ECO who is serving as the Chairman and
treasurer of ECO.

The trial court ruled in favor of Land Bank but Oate was absolved from liabilities. The Court of
Appeals affirmed the decision of the trial court.

Land Bank appealed as it wanted Oate to be personally liable on the following grounds (among
others): a) ECO stands for Emmanuel C. Oate, b) Oate is the majority stockholder, c) ECO
was formed ostensibly to allow Oate to acquire loans from Land Bank which he used for his
personal advantage, d) Oate holds two positions in the corporation, and e) ECO never held any
board meeting which just shows only Oate was in control of the corporation.

ISSUE: Whether or not Oate should be held personally.

HELD: No. Land Bank was not able to produce sufficient evidence to prove its claim. 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. The corporate fiction is only disregarded 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. None of the foregoing was proved by Land Bank.

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.

Anent the issue of the corporate name, the fact that Oates initials coincide with the corporate
name ECO is not sufficient to disregard the corporate fiction. Even if ECO does stand for
Emmanuel C. Oate, 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.