G.R. No.

129459 September 29, 1998

SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner, vs.

COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT CORP. and JNM REALTY
AND DEVELOPMENT CORP., respondents.

FACTS: In 1989, San Juan Structural and Steel Fabricators, Inc. (San Juan) alleged that it entered into a contract of sale with Motorich
Sales Corporation (Motorich) through the latter’s treasurer, Nenita Gruenberg. The subject of the sale was a parcel of land owned by
Motorich. San Juan advanced P100k to Nenita as earnest money.

On the day agreed upon on which Nenita was supposed to deliver the title of the land to Motorich, Nenita did not show up. Nenita
and Motorich did not heed the subsequent demand of San Juan to comply with the contract hence San Juan sued Motorich.
Motorich, in its defense, argued that it is not bound by the acts of its treasurer, Nenita, since her act in contracting with San Juan
was not authorized by the corporate board.

San Juan raised the issue that Nenita was actually the wife of the President of Motorich; that Nenita and her husband owns 98% of
the corporation’s capital stocks; that as such, it is a close corporation and that makes Nenita and the President as principal
stockholders who do not need any authorization from the corporate board; that in this case, the corporate veil may be properly
pierced.

ISSUE: Whether or not San Juan is correct.

HELD: No. Motorich is right in invoking that it is not bound by the acts of Nenita because her act in entering into a contract with San
Juan was not authorized by the board of directors of Motorich. Nenita is however ordered to return the P100k.

There is no merit in the contention that the corporate veil should be pierced even though it is true that Nenita and her husband own
98% of the capital stocks of Motorich. The corporate veil can only be pierced if the corporate fiction is merely used by the
incorporators to shield themselves against liability for fraud, illegality or inequity committed on third persons. It is incumbent upon
San Juan to prove that Nenita or her husband is merely using Motorich to defraud San Juan. In this case however, San Juan utterly
failed to establish that Motorich was formed, or that it is operated, for the purpose of shielding any alleged fraudulent or illegal
activities of its officers or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the expense of third
persons like San Juan.

G.R. No. 124950 May 19, 1998

ASIONICS PHILIPPINES, INC. and/or FRANK YIH, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION, YOLANDA BOAQUINA, and JUANA GAYOLA, respondents.

FACTS: API is a domestic corporation engaged in the business of assembling semi-conductor chips and other electronic products
mainly for export. Yolanda Boaquina and Juana Gayola started working for API as material control clerk and as production operator.
API commenced negotiations with the duly recognized bargaining agent of its employees, the Federation of Free Workers ("FFW"),
for a Collective Bargaining Agreement ("CBA"). A deadlock, however, ensued and the union decided to file a notice of strike. Private
respondents Boaquina and Gayola were among the employees asked to take a leave from work.

Upon the resolution of the bargaining deadlock a CBA was concluded between API and FFW. Respondent Boaquina was directed to
report back. On the other hand, Juana Gayola, among other employees, could not be recalled.

Inasmuch as its business activity remained critical, API was constrained to implement a company-wide retrenchment. The selection
was based on productivity/performance standards pursuant to the CBA. Yolanda Boaquina was one of those affected by the
retrenchment and API, While Juana Gayola was not supposed to be affected by the retrenchment in view of her high performance
rating, her services, nevertheless, were considered to have been ended when she was ordered by API to take an indefinite leave of
absence. She had not since been recalled.

Dissatisfied with their union (FFW), Boaquina and Gayola, together with some of other co-employees, joined the Lakas ng
Manggagawa sa Pilipinas Labor Union ("Lakas Union") where they eventually became members of its Board of Directors.
Lakas Union filed a notice of strike against API on the ground of unfair labor practice ("ULP") allegedly committed by the latter,
specifically, for union busting, termination of union officers/members, harassment and discrimination.

Claiming that the strike staged by Lakes Union was illegal, API, brought before the NLRC National Capital Region Arbitration a
petition, for declaration of illegality of the strike. Lakas Union countered that their strike was valid and staged as a measure of self-
preservation and as self-defense against the illegal dismissal of petitioners aimed at union busting in the guise of a retrenchment
program.

Meanwhile, at the instance of several employees which included private respondents Boaquina and Gayola, a complaint for illegal
dismissal, violation of labor standards and separation pay, as well as for recovery of moral and exemplary damages, was filed against
API and/or Frank Yih before the NLRC National Capital Region Arbitration Branch. The illegal dismissal case.

Labor Arbiter Canizares rendered his decision holding petitioners guilty of illegal dismissal. He ordered petitioners to pay private
respondent Yolanda Boaquina separation pay of one-half (1/2) month pay for every year of service, plus overtime pay, and to
reinstate private respondent Juana Gayola with full backwages from the time her salaries were withheld from her until her actual
reinstatement.

ISSUE: WHETHER OR NOT A STOCKHOLDER/DIRECTOR/OFFICER OF A CORPORATION CAN BE HELD LIABLE FOR THE OBLIGATION OF
THE CORPORATION ABSENT ANY PROOF AND FINDING OF BAD FAITH?

RULING: No, A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and,
in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities. Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist
to warrant, albeit done sparingly, the disregard of its independent being and the lifting of the corporate veil. As a rule, this situation
might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield or perpetrate fraud, to carry
out similar unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the law.

Nothing on record is shown to indicate that Frank Yih has acted in bad faith or with malice in carrying out the retrenchment program
of the company. His having been held by the NLRC to be solidarily and personally liable with API is thus legally unjustified.

G.R. No. L-18216 October 30, 1962

STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants, vs.

REGISTER OF DEEDS OF MANILA, respondent-appellee.

FACTS: stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the assets of the corporation, dissolution
and distribution among themselves in proportion to their shareholdings, as liquidating dividends, corporate assets, including real
properties

Register of Deeds of Manila denied the registration of the certificate of liquidation on the following grounds:

3. The number of parcels not certified to in the acknowledgment;

5. P430.50 Reg. fees need be paid;

6. P940.45 documentary stamps need be attached to the document;

7. The judgment of the Court approving the dissolution and directing the disposition of the assets of the corporation need be
presented (Rules of Court, Rule 104, Sec. 3).

Deciding the consulta elevated by the stockholders, the Commissioner of Land Registration overruled ground No. 7 and sustained
requirements Nos. 3, 5 and 6.

The stockholders interposed the present appeal.

Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a distribution of the assets of the
corporation which has ceased to exist for having been dissolved. This is apparent in the minutes for dissolution attached to the
document. Not being a conveyance the certificate need not contain a statement of the number of parcel of land involved in the
distribution in the acknowledgment appearing therein. Hence the amount of documentary stamps to be affixed thereon should only
be P0.30 and not P940.45, as required by the register of deeds. Neither is it correct to require appellants to pay the amount of
P430.50 as registration fee.

ISSUE: whether or not that certificate merely involves a distribution of the corporation's assets or should be considered a transfer or
conveyance?

HELD: NO. A corporation is a juridical person distinct from the members composing it. Properties registered in the name of the
corporation are owned by it as an entity separate and distinct from its members. While shares of stock constitute personal property
they do not represent property of the corporation. The corporation has property of its own which consists chiefly of real estate
(Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part
of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity (Hall
& Faley v. Alabama Terminal, 173 Ala 398, 56 So., 235), but its holder is not the owner of any part of the capital of the corporation
(Bradley v. Bauder 36 Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property or assets (Gottfried v.
Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate
property (Halton v. Hohnston, 166 Ala 317, 51 So 992).

On the basis of the foregoing authorities, it is clear that the act of liquidation made by the stockholders of the F. Guanzon and Sons,
Inc. of the latter's assets is not and cannot be considered a partition of community property, but rather a transfer or conveyance of
the title of its assets to the individual stockholders. Indeed, since the purpose of the liquidation, as well as the distribution of the
assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, —
and this is in effect the purpose which they seek to obtain from the Register of Deeds of Manila, — that transfer cannot be effected
without the corresponding deed of conveyance from the corporation to the stockholders. It is, therefore, fair and logical to consider
the certificate of liquidation as one in the nature of a transfer or conveyance.

G.R. No. L-67626 April 18, 1989

JOSE REMO, JR., petitioner, vs.

THE HON. INTERMEDIATE APPELLATE COURT and E.B. MARCHA TRANSPORT COMPANY, INC., represented by APIFANIO B.
MARCHA, respondents.

FACTS: the BOD of Akron Customs Brokerage Corporation (Akron), composed of Jose Remo, Jr., Ernesto Bañares, Feliciano Coprada,
Jemina Coprada, and Dario Punzalan with Lucia Lacaste as Secretary, adopted a resolution authorizing the purchase of 13 trucks for
use in its business to be paid out of a loan the corporation may secure from any lending institution

Feliciano Coprada, as President and Chairman of Akron, purchased the trucks from E.B. Marcha Transport Company, Inc. (Marcha)
for P 525K as evidenced by a deed of absolute sale.

The obligation is further secured by a promissory note executed by Coprada in favor of Akron. It is stated that the balance shall be
paid from the proceeds of a loan obtained from the Development Bank of the Philippines (DBP) within 60 days

After the lapse of 90 days, Marsha tried to collect from Coprada but the Coprada promised to pay only upon the release of the DBP
loan. Marsha sent Coprada a letter of demand

Coprada reiterated that he was applying for a loan from the DBP from the proceeds of which payment of the obligation shall be
made.

Meanwhile, 2 of the trucks were sold under a pacto de retro sale to a Mr. Bais of the Perpetual Loans and Savings Bank at Baclaran.
Sale was authorized by board resolution

Marsha found that no loan application was ever filed by Akron with DBP.

Coprada wrote Marsha begging for a grace period of until the end of the month to pay the balance of the purchase price; that he will
update the rentals within the week; and in case he fails, then he will return the 13 units should Marsha elect

Marsha through counsel, wrote Akron demanding the return of the 13 trucks and the payment of P 25K back rentals.
Coprada informed Marsha that he had returned 10 trucks to Bagbag and that a resolution was passed by the board of directors
confirming the deed of assignment to Marsha of P 475K from the proceeds of a loan obtained by Akron from the State Investment
House, Inc.

In due time, Marsha filed a compliant for the recovery of P 525K or the return of the 13 trucks with damages against Akron and its
officers and directors

Remo Jr. sold all his shares in Akron to Coprada. It also appears that Akron amended its articles of incorporation thereby changing its
name to Akron Transport International, Inc. which assumed the liability of Akron to Marsha.

CA affirmed RTC: favor of Marsha

ISSUE: W/N Remo Jr. should be held personally liable together with Akron Transport International, Inc.

HELD: NO. The environmental facts of this case show that there is no cogent basis to pierce the corporate veil of Akron and hold
petitioner personally liable.

While it is true that in December, 1977 petitioner was still a member of the board of directors of Akron and that he participated in
the adoption of a resolution authorizing the purchase of 13 trucks for the use in the brokerage business of Akron to be paid out of a
loan to be secured from a lending institution, it does not appear that said resolution was intended to defraud anyone Coprada,
President and Chairman of Akron, who negotiated

The word "WE' in the said promissory note must refer to the corporation which Coprada represented in the execution of the note
and not its stockholders or directors. Petitioner did not sign the said promissory note so he cannot be personally bound thereby.

As to the sale through pacto de retro of the two units to a third person by the corporation by virtue of a board resolution, Remo Jr.
asserts that he never signed the resolution.

Be that as it may, the sale is not inherently fraudulent as the 13 units were sold through a deed of absolute sale to Akron so that the
corporation is free to dispose of the same. Of course, it was stipulated that in case of default , a chattel mortgage lien shall be
constituted on the 13 units.

The new corporation confirmed and assumed the obligation of the old corporation. There is no indication of an attempt on the part
of Akron to evade payment of its obligation

It is his inherent right as a stockholder to dispose of his shares of stock anytime he so desires.

Fraud must be established by clear and convincing evidence. If at all, the principal character on whom fault should be attributed is
Feliciano Coprada, the President of Akron. Fortunately, a judgment against him from the trial court has long been final and
executory.

G.R. No. L-42780 January 17, 1936

MANILA GAS CORPORATION, plaintiff-appellant, vs.

THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.

FACTS: The plaintiff is a corporation organized under the laws of the Philippine Islands. It operates a gas plant in the City of Manila
and furnishes gas service to the people of the metropolis and surrounding municipalities by virtue of a franchise granted to it by the
Philippine Government. Associated with the plaintiff are the Islands Gas and Electric Company domiciled in New York, United States,
and the General Finance Company domiciled in Zurich, Switzerland. Neither of these last mentioned corporations is resident in the
Philippines.

For the years 1930, 1931, and 1932, dividends in the sum of P1,348,847.50 were paid by the plaintiff to the Islands Gas and Electric
Company in the capacity of stockholders upon which withholding income taxes were paid to the defendant totalling P40,460.03 For
the same years interest on bonds in the sum of P411,600 was paid by the plaintiff to the Islands Gas and Electric Company upon
which withholding income taxes were paid to the defendant totalling P12,348. Finally for the stated time period, interest on other
indebtedness in the sum of P131,644,90 was paid by the plaintiff to the Islands Gas and Electric Company and the General Finance
Company respectively upon which withholding income taxes were paid to the defendant totalling P3,949.34.
Some uncertainty existing regarding the place of payment, we will not go into this factor of the case at this point, except to remark
that the bonds and other tokens of indebtedness are not to be found in the record. However, Exhibits E, F, and G, certified correct by
the Treasurer of the Manila Gas Corporation, purport to prove that the place of payment was the United States and Switzerland.

ISSUE: 1. Whether or not the trial court erred in holding that the dividends paid by the plaintiff corporation were subject to income
tax in the hands of its stockholders, because to impose the tax thereon would be to impose a tax on the plaintiff, in violation of the
terms of its franchise, and would, moreover, be oppressive and inequitable.

2. Whether or not the trial court erred in not holding that the interest on bonds and other indebtedness of the plaintiff corporation,
paid by it outside of the Philippine Islands to corporations not residing therein, were not, on the part of the recipients thereof,
income from Philippine sources, and hence not subject to Philippine income tax.

RULING: 1. No. It is true that the tax exemption provision relating to the Manila Gas Corporation hereinbefore quoted differs in
phraseology from the tax exemption provision to be found in the franchise of the Telephone and Telegraph Company, but the ratio
decidendi of the two cases is substantially the same. As there held and as now confirmed, a corporation has a personality distinct
from that of its stockholders, enabling the taxing power to reach the latter when they receive dividends from the corporation. It
must be considered as settled in this jurisdiction that dividends of a domestic corporation, which are paid and delivered in cash to
foreign corporations as stockholders, are subject to the payment in the income tax, the exemption clause in the charter of the
corporation notwithstanding. For the foreign reasons, we are led to sustain the decision of the trial court.

2. No. In the judgment of the majority of the court, the question should be answered in the affirmative. The Manila Gas Corporation
operates its business entirely within the Philippines. Its earnings, therefore come from local sources. The place of material delivery
of the interest to the foreign corporations paid out of the revenue of the domestic corporation is of no particular moment. The place
of payment even if conceded to be outside of the country cannot alter the fact that the income was derived from the Philippines.
The word "source" conveys only one idea, that of origin, and the origin of the income was the Philippines.

In synthesis, therefore, we hold that conditions have not been provided which justify the court in passing on the constitutional
question suggested; that the facts while somewhat obscure differ from the facts to be found in the cases relied upon, and that the
Collector of Internal Revenue was justified in withholding income taxes on interest on bonds and other indebtedness paid to non-
resident corporations because this income was received from sources within the Philippine Islands as authorized by the Income Tax
Law.

Adm. Matter No. R-181-P July 31, 1987

ADELIO C. CRUZ, complainant, vs.

QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.

FACTS: In 1984, the National Labor Relations Commission issued an order against Qualitrans Limousine Service, Inc. (QLSI) ordering
the latter to reinstate the employees it terminated and to pay them backwages. Quiterio Dalisay, Deputy Sheriff of the court, to
satisfy the backwages, then garnished the bank account of Adelio Cruz. Dalisay justified his act by averring that Cruz was the owner
and president of QLSI. Further, he claimed that the counsel for the discharged employees advised him to garnish the account of
Cruz.

ISSUE: Whether or not the action of Dalisay is correct.

HELD: No. The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans Limousine Service, Inc.
to reinstate the discharged employees and pay them full backwages. Respondent, however, chose to "pierce the veil of corporate
entity" usurping a power belonging to the court and assumed improvidently that since the complainant is the owner/president of
Qualitrans Limousine Service, Inc., they are one and the same. It is a well-settled doctrine both in law and in equity that as a legal
entity, a corporation has a personality distinct and separate from its individual stockholders or members. The mere fact that one is
president of a corporation does not render the property he owns or possesses the property of the corporation, since the president,
as individual, and the corporation are separate entities.

G.R. No. L-31061 August 17, 1976

SULO NG BAYAN INC., plaintiff-appellant, vs.

GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL WATERWORKS & SEWERAGE AUTHORITY, HACIENDA CARETAS,
INC, and REGISTER OF DEEDS OF BULACAN, defendants-appellees.

FACTS: Plaintiff-appellant Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First Instance against defendants-
appellees to recover the ownership and possession of a large tract of land registered under the Torrens System in the name of
defendants-appellees' predecessors-in-interest. plaintiff is a corporation organized and existing under the laws of the Philippines,
that its membership is composed of natural persons; that the members of the plaintiff corporation, through themselves and their
predecessors-in-interest, had pioneered in the clearing of the fore-mentioned tract of land, cultivated the same since the Spanish
regime and continuously possessed the said property openly and public under concept of ownership adverse against the whole
world;

that defendant-appellee Gregorio Araneta, Inc., through force and intimidation, ejected the members of the plaintiff corporation
from their possession of the aforementioned vast tract of land; that upon investigation conducted by the members and officers of
plaintiff corporation, they found out for the first time that the land in question "had been either fraudelently or erroneously
included, by direct or constructive fraud, in Original Certificate of Title of the Land of Records of the province of Bulacan", which title
is fictitious, non-existent and devoid of legal efficacy due to the fact that "no original survey nor plan whatsoever" appears to have
been submitted as a basis thereof and that the Court which issued the decree of registration did not acquire jurisdiction over the
land registration case because no notice of such proceeding was given to the members of the plaintiff corporation who were then in
actual possession of said properties, that as a consequence of the nullity of the original title, all subsequent titles derived therefrom,
are therefore void.

Defendant-appellee Gregorio Araneta, Inc. filed a motion to dismiss the amended complaint on the grounds that (1) the complaint
states no cause of action; and (2) the cause of action, if any, is barred by prescription and laches.

The trial court issued an Order dismissing the amended complaint.

Appellant filed a motion to reconsider the Order of dismissal.This motion was denied by the trial court in. From the afore-mentioned
Order of dismissal and the Order denying its motion for reconsideration, plaintiff-appellant appealed to the Court of Appeals.

The Court of Appeals, upon finding that no question of fact was involved in the appeal but only questions of law and jurisdiction,
certified this case to this Court for resolution of the legal issues involved in the controversy.

ISSUE: Whether or not plaintiff corporation (non- stock may institute an action in behalf of its individual members for the recovery of
certain parcels of land allegedly owned by said members; for the nullification of the transfer certificates of title issued in favor of
defendants appellees covering the aforesaid parcels of land; for a declaration of "plaintiff's members as absolute owners of the
property" and the issuance of the corresponding certificate of title; and for damages?

RULING: No, It has not been claimed that the members have assigned or transferred whatever rights they may have on the land in
question to the plaintiff corporation. Absent any showing of interest, therefore, a corporation, like plaintiff-appellant herein, has no
personality to bring an action for and in behalf of its stockholders or members for the purpose of recovering property which belongs
to said stockholders or members in their personal capacities.

It is fundamental that there cannot be a cause of action 'without an antecedent primary legal right conferred' by law upon a person.
Evidently, there can be no wrong without a corresponding right, and no breach of duty by one person without a corresponding right
belonging to some other person. Thus, the essential elements of a cause of action are legal right of the plaintiff, correlative
obligation of the defendant, an act or omission of the defendant in violation of the aforesaid legal right. Clearly, no right of action
exists in favor of Plaintiff Corporation, for as shown heretofore it does not have any interest in the subject matter of the case which
is material and, direct so as to entitle it to file the suit as a real party in interest.

G.R. No. 121171 December 29, 1998

ASSET PRIVATIZATION TRUST, petitioner, vs.

COURT OF APPEALS, JESUS S. CABARRUS, SR., JESUS S. CABARRUS, JR., JAIME T. CABARRUS, JOSE MIGUEL CABARRUS, ALEJANDRO
S. PASTOR, JR., ANTONIO U. MIRANDA, and MIGUEL M. ANTONIO, as Minority Stock-Holders of Marinduque Mining and
Industrial Corporation, respondents.
FACTS: the Republic of the Philippines thru the Surigao Mineral Reservation Board, granted MMIC the exclusive right to explore,
develop and exploit nickel, cobalt and other minerals in the Surigao mineral reservation. 1 MMIC is a domestic corporation engaged
in mining with respondent Jesus S. Cabarrus, Sr. as President and among its original stockholders.

The Philippine Government undertook to support the financing of MMIC by purchase of MMIC debenture bonds and extension of
guarantees. Further, the Philippine Government obtained a firm commitment form the DBP and/or other government financing
institutions to subscribe in MMIC and issue guarantee/s for foreign loans or deferred payment arrangements secured from the US
Eximbank, Asian Development Bank, Kobe Steel, of amount not exceeding US$100 Million.

MMIC, PNB and DBP executed a Mortgage Trust Agreement whereby MMIC, as mortgagor, agreed to constitute a mortgage in favor
or PNB and DBP as mortgagees, over all MMIC's assets; subject of real estate and chattel mortgage executed by the mortgagor, and
additional assets described and identified, including assets of whatever kind, nature or description, which the mortgagor may
acquire whether in substitution of, in replenishment, or in addition thereto.

In various requests for advances/remittances of loans if huge amounts, Deeds of Undertaking, Promissory Notes, Loan Documents,
Deeds of Real Estate Mortgages, MMIC invariably committed to pay either on demand or under certain terms the loans and
accommodations secured from or guaranteed by both DBP and PNB.

DBP and PNB's financial both in loans and in equity in MMIC had reached tremendous proportions, and MMIC was having a difficult
time meeting its financial obligations. MMIC had an outstanding loan with DBP and with PNB. Thus, a financial restructuring plan
(FRP) designed to reduce MMIC's interest expense through debt conversion to equity was drafted by the Sycip Gorres Velayo
accounting firm. The FRP was approved by the Board of Directors of the MMIC. However, the proposed FRP had never been formally
adopted, approved or ratified by either PNB or DBP. As the various loans and advances made by DBP and PNB to MMIC had become
overdue and since any restructuring program relative to the loans was no longer feasible, and in compliance with the directive of
Presidential Decree No. 385, DBP and PNB as mortgagees of MMIC assets, decided to exercise their right to extrajudicially foreclose
the mortgages in accordance with the Mortgage Trust Agreement.

The foreclosed assets were sold to PNB as the lone bidder and were assigned to three newly formed corporations, namely, Nonoc
Mining Corporation, Maricalum Mining and Industrial Corporation, and Island Cement Corporation. These assets were transferred to
the Asset Privatization Trust (APT).

Jesus S. Cabarrus, Sr., together with the other stockholders of MMIC, filed a derivative suit against DBP and PNB, for Annulment of
Foreclosures, Specific Performance and Damages. The suit prayed that the court: (1) annul the foreclosures, restore the foreclosed
assets to MMIC, and require the banks to account for their use and operation in the interim; (2) direct the banks to honor and
perform their commitments under the alleged FRP; and (3) pay moral and exemplary damages, attorney's fees, litigation expenses
and costs.

In the course of the trial, private respondents and petitioner APT, as successor of the DBP and the PNB's interest in MMIC, mutually
agreed to submit the case to arbitration by entering into a "Compromise and Arbitration Agreement,".

The Arbitration Committee rendered a majority decision in favor of MMIC. Private respondents filed in the same Civil Case an
"Application/Motion for Confirmation of Arbitration Award." Petitioner countered with an "Opposition and Motion to Vacate
Judgment".

ISSUE: Whether or not the arbitral award should be vacated.

RULING: Yes, the arbiters exceeded their authority in awarding damages to MMIC, which is not impleaded as a party to the
derivative suit.

Civil Case filed before the RTC being a derivative suit, MMIC should have been impleaded as a party. It was not joined as a party
plaintiff or party defendant at any stage of the proceedings. As it is, the award of damages to MMIC, which was not a party before
the Arbitration Committee, is a complete nullity.

Settled is the doctrine that in a derivative suit, the corporation is the real party in interest while the stockholder filing suit for the
corporation's behalf is only a nominal party. The corporation should be included as a party in the suit.

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 the 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 a nominal party, with the corporation as the real
party in interest.

The arbiters, likewise, exceeded their authority in awarding moral damages to Jesus Cabarrus, Sr.

It is perplexing how the Arbitration Committee can in one breath rule that the case before it is a derivative suit, in which the
aggrieved party or the real party in interest is supposedly the MMIC, and at the same time award moral damages to an individual
stockholder,

The majority decision of the Arbitration Committee sought to justify its award of moral damages to Jesus S. Cabarrus, Sr. by pointing
to the fact that among the assets seized by the government were assets belonging to Industrial Enterprise Inc. (IEI), of which
Cabarrus is the majority stockholder. It then acknowledged that Cabarrus had already recovered said assets in the RTC, but that "he
won no more than actual damages. While the Committee cannot possibly speak for the RTC, there is no doubt that Jesus S. Cabarrus,
Sr., suffered moral damages on account of that specific foreclosure, damages the Committee believes and so holds, he, Jesus S.
Cabarrus, Sr., may be awarded in this proceeding."

Cabarrus cause of action for the seizure of the assets belonging to IEI, of which he is the majority stockholder, having been
ventilated in a complaint he previously filed with the RTC, from which he obtained actual damages, he was barred by res judicata
from filing a similar case in another court, this time asking for moral damages which he failed to get from the earlier case. Worse,
private respondents violated the rule against non-forum shopping.

It is a basic postulate that a corporation has a personality separate and distinct from its stockholders. The properties foreclosed
belonged to MMIC, not to its stockholders. Hence, if wrong was committed in the foreclosure, it was done against the corporation.
Another reason is that Jesus S. Cabarrus, Sr. cannot directly claim those damages for himself that would result in the appropriation
by, and the distribution to, him part of the corporation's assets before the dissolution of the corporation and the liquidation of its
debts and liabilities. The Arbitration Committee, therefore, passed upon matters nor submitted to it. Moreover, said cause of action
had already been decided in a separate case. It is thus quite patent that the arbitration committee exceeded the authority granted
to it by the parties' Compromise and Arbitration Agreement by awarding moral damages to Jesus S. Cabarrus, Sr.

Atty. Sison, in his separate opinion, likewise expressed befuddlement to the award of moral damages to Jesus S. Cabarrus, Sr.:

It is clear and it cannot be disputed therefore that based on these stipulated issues, the parties themselves have agreed that the
basic ingredient of the causes of action in this case is the wrong committed on the corporation (MMIC) for the alleged illegal
foreclosure of its assets. By agreeing to this stipulation, PLAINTIFFS themselves (Cabarrus, et al.) admit that the cause of action
pertains only to the corporation (MMIC) and that they are filing this for and in behalf of MMIC.

Perforce this has to be so because it is the basic rule in Corporation Law that "the shareholders have no title, legal or equitable to
the property which is owned by the corporation (13 Am. Jur. 165; Pascual vs. Oresco, 14 Phil. 83). In Ganzon & Sons vs. Register of
Deeds, 6 SCRA 373, the rule has been reiterated that "a stockholder is not the co-owner of corporate property." Since the property
or assets foreclosed belongs [sic] to MMIC, the wrong committed, if any, is done against the corporation. There is therefore no
direct injury or direct violation of the rights of Cabarrus et al. There is no way, legal or equitable, by which Cabarrus et al. could
recover damages in their personal capacities even assuming or just because the foreclosure is improper or invalid. The Compromise
and Arbitration Agreement itself and the elementary principles of Corporation Law say so. Therefore, I am constrained to dissent
from the award of moral damages to Cabarrus. 64

From the foregoing discussions, it is evident that, not only did the arbitration committee exceed its powers or so imperfectly execute
them, but also, its findings and conclusions are palpably devoid of any factual basis, and in manifest disregard of the law.

We do not find it necessary to remand this case to the RTC for appropriate action. The pleadings and memoranda filed with this
Court, as well as in the Court of Appeals, raised and extensively discussed the issues on the merits. Such being the case, there is
sufficient basis for us to resolve the controversy between the parties anchored on the records and the pleadings before us.

G.R. No. 89561 September 13, 1990

BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO, VICTORIA M. CASTILLO, BERTILLA C. RADA, MARIETTA C. ABAÑEZ,
LEOVINA C. JALBUENA and SANTIAGO M. RIVERA, petitioners, vs.

COURT OF APPEALS, BORMAHECO, INC. and PHILIPPINE MACHINERY PARTS MANUFACTURING CO., INC., respondents.
FACTS: Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de Castillo. The Castillo family are the owners of a
parcel of land located in Lucena City which was given as security for a loan from the Development Bank of the Philippines. For their
failure to pay the amortization, foreclosure of the said property was about to be initiated. This problem was made known to
Santiago Rivera, who proposed to them the conversion into subdivision of the four (4) parcels of land adjacent to the mortgaged
property to raise the necessary fund. The Idea was accepted by the Castillo family and to carry out the project, a Memorandum of
Agreement was executed by and between Slobec Realty and Development, Inc., represented by its President Santiago Rivera and the
Castillo family. In this agreement, Santiago Rivera obliged himself to pay the Castillo family immediately after the execution of the
agreement and to pay the additional amount after the property has been converted into a subdivision. Rivera, armed with the
agreement, approached Mr. Modesto Cervantes, President of defendant Bormaheco, and proposed to purchase from Bormaheco
two (2) tractors Subsequently, a Sales Agreement was executed.

Bormaheco, Inc. and Slobec Realty and Development, Inc., represented by its President, Santiago Rivera, executed a Sales
Agreement over one unit of Caterpillar Tractor, On the same date, Slobec, through Rivera, executed in favor of Bormaheco a Chattel
Mortgage over the said equipment as security for the payment of the balance. As further security of the aforementioned unpaid
balance, Slobec obtained from Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance Corporation of the Phil.) as
surety and Slobec as principal, in favor of Bormaheco, as borne out by The aforesaid surety bond was in turn secured by an
Agreement of Counter-Guaranty with Real Estate Mortgage executed by Rivera as president of Slobec and Mauricia Meer Vda. de
Castillo, Buenaflor Castillo Umali, Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and Leovina Castillo Jalbuena, as
mortgagors and Insurance Corporation of the Philippines (ICP) as mortgagee. In this agreement, ICP guaranteed the obligation of
Slobec with Bormaheco . In giving the bond, ICP required that the Castillos mortgage to them the properties in question, namely,
four parcels of land in the name of the aforementioned mortgagors.

Meanwhile, for violation of the terms and conditions of the Counter-Guaranty Agreement the properties of the Castillos were
foreclosed by ICP As the highest bidder. The mortgagors had one (1) year from the date of the registration of the certificate of sale,
that is, to redeem the property, but they failed to do so. Consequently, ICP consolidated its ownership over the subject parcels of
land through the requisite affidavit of consolidation of ownership. Pursuant thereto, a Deed of Sale of Real Estate covering the
subject properties was issued in favor of ICP.

Insurance Corporation of the Phil. ICP sold to Phil. Machinery Parts Manufacturing Co. (PM Parts) the four (4) parcels of land and by
virtue of said conveyance, PM Parts transferred unto itself the titles over the lots in dispute.

Thereafter, PM Parts, through its President, Mr. Modesto Cervantes, sent a letter addressed to plaintiff Mrs. Mauricia Meer Castillo
requesting her and her children to vacate the subject property, who (Mrs. Castillo) in turn sent her reply expressing her refusal to
comply with his demands.

The heirs of the late Felipe Castillo, particularly plaintiff Buenaflor M. Castillo Umali as the appointed administratrix of the properties
in question filed an action for annulment of title. They contended that all the aforementioned transactions starting with the
Agreement of Counter-Guaranty with Real Estate Mortgage, Certificate of Sale and the Deeds of Authority to Sell, Sale and the
Affidavit of Consolidation of Ownership as well as the Deed of Sale are void for being entered into in fraud and without the consent
and approval of the Court before whom the administration proceedings has been pending. Plaintiffs pray that the four (4) parcels of
land subject hereof be declared as owned by the estate of the late Felipe Castillo and those appearing as encumbrances at the back
of the certificates of title mentioned be declared as a nullity and defendants to pay damages and attorney's fees.

In their amended answer, the defendants controverted the complaint and alleged, by way of affirmative and special defenses that
the complaint did not state facts sufficient to state a cause of action against defendants; that plaintiffs are not entitled to the reliefs
demanded; that plaintiffs are estopped or precluded from asserting the matters set forth in the Complaint; that plaintiffs are guilty
of laches in not asserting their alleged right in due time; that defendant PM Parts is an innocent purchaser for value and relied on
the face of the title before it bought the subject property.

After trial, the court a quo rendered judgment in favor of the plaintiffs and against the defendants. Respondent court reversed the
decision of the trial court

ISSUE: Whether or not respondent Court of Appeals erred in aside the finding of the lower court that there was necessity to pierce
the veil of corporate existence?

RULING: No, under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal fiction that a
corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded. In
such cases, the corporation will be considered as a mere association of persons. The members or stockholders of the corporation
will be considered as the corporation, that is, liability will attach directly to the officers and stockholders. The doctrine applies when
the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a
shield to confuse the legitimate issues or where a corporation is the 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 merely an instrumentality, agency, conduit
or adjunct of another corporation.

In the case at bar, petitioners seek to pierce the Veil Of corporate entity of Bormaheco, ICP and PM Parts, alleging that these
corporations employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to petitioners While we
do not discount the possibility of the existence of fraud in the foreclosure proceeding, neither are we inclined to apply the doctrine
invoked by petitioners in granting the relief sought. It is our considered opinion that piercing the veil of corporate entity is not the
proper remedy in order that the foreclosure proceeding may be declared a nullity under the circumstances obtaining in the legal
case at bar.

In the first place, the legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a
corporate debt or obligation. In the instant case, petitioners do not seek to impose a claim against the individual members of the
three corporations involved; on the contrary, it is these corporations which desire to enforce an alleged right against petitioners.
Assuming that petitioners were indeed defrauded by private respondents in the foreclosure of the mortgaged properties, this fact
alone is not, under the circumstances, sufficient to justify the piercing of the corporate fiction, since petitioners do not intend to
hold the officers and/or members of respondent corporations personally liable therefor. Petitioners are merely seeking the
declaration of the nullity of the foreclosure sale, which relief may be obtained without having to disregard the aforesaid corporate
fiction attaching to respondent corporations. Secondly, petitioners failed to establish by clear and convincing evidence that private
respondents were purposely formed and operated, and thereafter transacted with petitioners, with the sole intention of defrauding
the latter.

The mere fact, therefore, that the businesses of two or more corporations are interrelated is not a justification for disregarding their
separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and
third persons of their rights.

G.R. No. 125986 January 28, 1999

LUXURIA HOMES, INC., and/or AIDA M. POSADAS, petitioners, vs.

HONORABLE COURT OF APPEALS, JAMES BUILDER CONSTRUCTION and/or JAIME T. BRAVO, respondents.

FACTS: Petitioner Aida M. Posadas and her two (2) minor children co-owned a 1.6 hectare property, which was occupied by
squatters. Petitioner Posadas entered into negotiations with private respondent Jaime T. Bravo regarding the development of the
said property into a residential subdivision. She authorized private respondent to negotiate with the squatters to leave the said
property. With a written authorization, respondent Bravo buckled down to work and started negotiations with the squatters.

Petitioner Posadas and her two (2) children, through a Deed of Assignment, assigned the said property to petitioner Luxuria Homes,
Inc., purportedly for organizational and tax avoidance purposes. Respondent Bravo signed as one of the witnesses to the execution
of the Deed of Assignment and the Articles of Incorporation of petitioner Luxuria Homes, Inc.

The harmonious and congenial relationship of petitioner Posadas and respondent Bravo turned sour when the former supposedly
could not accept the management contracts to develop the 1.6 hectare property into a residential subdivision, the latter was
proposing. In retaliation, respondent Bravo demanded payment for services rendered in connection with the development of the
land. In his statement of account respondent demanded the payment for various services rendered, i.e., relocation of squatters,
preparation of the architectural design and site development plan, survey and fencing.

Petitioner Posadas refused to pay the amount demanded. Thus, private respondents James Builder Construction and Jaime T. Bravo
instituted a complaint for specific performance before the trial court against petitioners Posadas and Luxuria Homes, Inc.

The trial court declared petitioner Posadas in default and allowed the private respondents to present their evidence ex-parte. It
ordered petitioner Posadas, jointly and in solidum with petitioner Luxuria Homes, Inc., to pay private respondents.

Aggrieved by the aforecited decision, petitioners appealed to respondent Court of Appeals, which, as aforestated, affirmed with
modification the decision of the trial court. The appellate court deleted the award of moral damages on the ground that respondent
James Builder Construction is a corporation and hence could not experience physical suffering and mental anguish. It also reduced
the award of exemplary damages. Petitioners' motion for reconsideration was denied, prompting the filing of this petition for review
before this Court.

ISSUE: Whether or not petitioner Luxuria Homes, Inc., can be held liable to private respondents for the transactions supposedly
entered into between petitioner Posadas and private respondents?

RULING: No, Private respondents contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and transferred the
subject parcel of land to it to evade payment and defraud creditors, including private respondents. This allegation does not find
support in the evidence on record.

To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. It
cannot be presumed. This is elementary. Thus in Bayer-Roxas v. Court of Appeals, we said that the separate personality of the
corporation may be disregarded only when the corporation is used as a cloak or cover for fraud or illegality, or to work injustice, or
where necessary for the protection of the creditors. Accordingly in Del Roscrrio v. NLRC, where the Philsa International Placement
and Services Corp. was organized and registered with the POEA in 1981, several years before the complainant was filed a case in
1985, we held that this cannot imply fraud.

Obviously in the instant case, private respondents failed to show proof that petitioner Posadas acted in bad faith. Consequently
since private respondents failed to show that petitioner Luxuria Homes, Inc., was a party to any of the supposed transactions, not
even to the agreement to negotiate with and relocate the squatters, it cannot be held liable, nay jointly and in solidum, to pay
private respondents. In this case since it was petitioner Aida M. Posadas who contracted respondent Bravo to render the subject
services, only she is liable to pay the amounts adjudged herein.

G.R. No. 100866 July 14, 1992

REBECCA BOYER-ROXAS and GUILLERMO ROXAS, petitioners, vs.

HON. COURT OF APPEALS and HEIRS OF EUGENIA V. ROXAS, INC., respondents.

FACTS: In two (2) separate complaints for recovery of possession filed with the Regional Trial Court of Laguna against petitioners
Rebecca Boyer-Roxas and Guillermo Roxas respectively, Respondent Corporation, Heirs of Eugenia V. Roxas, Inc., prayed for the
ejectment of the petitioners from buildings inside the Hidden Valley Springs Resort allegedly owned by the respondent corporation.

the plaintiff, Heirs of Eugenia V Roxas, Incorporated, was incorporated with the primary purpose of engaging in agriculture to
develop the properties inherited from Eugenia V. Roxas and that of y Eufrocino Roxas; that the Articles of Incorporation of the
plaintiff, was amended to allow it to engage in the resort business, the plaintiff put up a resort known as Hidden Valley Springs
Resort on a portion of its land and; that improvements were introduced in the resort by the plaintiff; that the house near the
Balugbugan Pool being occupied by Rebecca B. Roxas was originally intended as staff house but later used as the residence of
Eriberto Roxas, deceased husband of the defendant Rebecca Boyer-Roxas and father of Guillermo Roxas; that this house presently
being occupied by Rebecca B. Roxas was built from corporate funds; that the construction of the unfinished house was started by
the defendant Rebecca Boyer-Roxas and her husband Eriberto Roxas; that the third building presently being occupied by Guillermo
Roxas was originally intended as a recreation hall but later converted as a residential house; that this house was built also from
corporate funds; that the said house occupied by Guillermo Roxas when it was being built had nipa roofing but was later changed to
galvanized iron sheets; that at the beginning, it had no partition downstairs and the second floor was an open space; that the
conversion from a recreation hall to a residential house was with the knowledge of Eufrocino Roxas and was not objected to by any
of the Board of Directors of the plaintiff; that most of the materials used in converting the building into a residential house came
from the materials left by Coppola, a film producer, who filmed the movie "Apocalypse Now"; that Coppola left the materials as part
of his payment for rents of the rooms that he occupied in the resort; that after the said recreation hall was converted into a
residential house, defendant Guillermo Roxas moved in and occupied the same together with his family, that during the time
Eufrocino Roxas was still alive, Eriberto Roxas was the general manager of the corporation and there was seldom any board meeting;

that Eufrocino Roxas together with Eriberto Roxas were (sic) the ones who were running the corporation; that during this time,
Eriberto Roxas was the restaurant and wine concessionaire of the resort; that after the death of Eufrocino Roxas, Eriberto Roxas
continued as the general manager until his death; that after the death of Eriberto Roxas , the defendants Rebecca B. Roxas and
Guillermo Roxas, committed acts that impeded the plaintiff's expansion and normal operation of the resort; that the plaintiff could
not even use its own pavilions, kitchen and other facilities because of the acts of the defendants which led to the filing of criminal
cases in court; that cases were even filed before the Ministry of Tourism, Bureau of Domestic Trade and the Office of the President
by the parties herein; that the defendants violated the resolution and orders of the Ministry of Tourism which ordered them or the
corporation they represent to desist from and to turn over immediately to the plaintiff the management and operation of the
restaurant and wine outlets of the said resort; that the defendants also violated the decision of the Bureau of Domestic Trade; that,
because of the acts of the defendants, the Board of Directors of the plaintiff adopted Resolution authorizing the ejectment of the
defendants from the premises occupied by them; that, demand letters were sent to Rebecca Boyer-Roxas and Guillermo Roxas
demanding that they vacate the respective premises they occupy; and that the dispute between the plaintiff and the defendants was
brought before the barangay level and the same was not settled.

ISSUE: Whether or not the petitioner is legally authorized to pierce the veil of corporate fiction and interpose the same as a defense
in an accion publiciana?

RULING: No, The respondent is a bona fide corporation. As such, it has a juridical personality of its own separate from the members
composing it. (Western Agro Industrial Corporation v. Court of Appeals, 188 SCRA 709 [1990]; Tan Boon Bee & Co., Inc. v. Jarencio,
163 SCRA 205 [1988]; Yutivo Sons Hardware Company v. Court of Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. v.
Court of Industrial Relations, 13 SCRA 290 [1965]) There is no dispute that title over the questioned land where the Hidden Valley
Springs Resort is located is registered in the name of the corporation. The records also show that the staff house being occupied by
petitioner Rebecca Boyer-Roxas and the recreation hall which was later on converted into a residential house occupied by petitioner
Guillermo Roxas are owned by the respondent corporation. Regarding properties owned by a corporation, we stated in the case of
Stockholders of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila, (6 SCRA 373 [1962]):

. . . Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. While
shares of stock constitute personal property, they do not represent property of the corporation. The corporation has property of its
own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A
share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when
distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398, 56 So. 235), but its holder is not the owner
of any part of the capital of the corporation (Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite
portion of its property or assets (Gottfried V. Miller, 104 U.S., 521; Jones v. Davis, 35 Ohio St., 474). The stockholder is not a co-
owner or tenant in common of the corporate property (Harton v. Johnston, 166 Ala., 317, 51 So. 992). (at pp. 375-376)

In the present case, the record shows that Eufrocino V. Roxas who then controlled the management of the corporation, being the
majority stockholder, consented to the petitioners' stay within the questioned properties. Specifically, Eufrocino Roxas gave his
consent to the conversion of the recreation hall to a residential house, now occupied by petitioner Guillermo Roxas. The Board of
Directors did not object to the actions of Eufrocino Roxas. The petitioners were allowed to stay within the questioned properties
until August 27, 1983, when the Board of Directors approved a Resolution ejecting the petitioners.

We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners' stay within the questioned
properties was merely by tolerance of the respondent corporation in deference to the wishes of Eufrocino Roxas, who during his
lifetime, controlled and managed the corporation. Eufrocino Roxas' actions could not have bound the corporation forever. The
petitioners have not cited any provision of the corporation by-laws or any resolution or act of the Board of Directors which
authorized Eufrocino Roxas to allow them to stay within the company premises forever. We rule that in the absence of any existing
contract between the petitioners and the respondent corporation, the corporation may elect to eject the petitioners at any time it
wishes for the benefit and interest of the respondent corporation.

The petitioners' suggestion that the veil of the corporate fiction should be pierced is untenable. The separate personality of the
corporation may be disregarded only when the corporation is used "as a cloak or cover for fraud or illegality, or to work injustice, or
where necessary to achieve equity or when necessary for the protection of the creditors." (Sulong Bayan, Inc. v. Araneta, Inc., 72
SCRA 347 [1976] cited in Tan Boon Bee & Co., Inc., v. Jarencio, supra and Western Agro Industrial Corporation v. Court of Appeals,
supra) The circumstances in the present cases do not fall under any of the enumerated categories.

G.R. No. 131729 May 19, 1998

UNION BANK OF THE PHILIPPINES, petitioner, vs.

THE HONORABLE COURT OF APPEALS, COMMISSIONER FE ELOISA C. GLORIA, ATTY. MANOLITO SOLLER, IN THEIR CAPACITY AS
CHAIRPERSON AND MEMBER, RESPECTIVELY, OF THE HEARING PANEL OF THE SECURITIES AND EXCHANGE COMMISSION,
EULOGIO O. YUTINGCO, CAROLINE YUTINGCO-YAO, THERESA I. LAO, NIKON INDUSTRIAL CORPORATION, NIKOLITE INDUSTRIAL
CORPORATION, THAMES PHILIPPINES, INC., 2000 INDUSTRIES CORPORATION, TRADE HOPE INDUSTRIAL CORPORATION, FIRST
UNI-BRANDS FOOD CORPORATION, INTEGRAL STEEL CORPORATION, CLARION PRINTING HOUSE, INC., NIKON PLAZA, INC., NIKON
LAND CORPORATION, EYCO PROPERTIES, INC., INTERIM RECEIVERS AMELIA B. CABAL, as representative of SGV, INOCENCIO B.
DEZA, JR., as representative of PNB, and FLORENCIO B. ORENDAIN of EYCO, respondents.

FACTS: private respondents EYCO Group of Companies ("EYCO"), Eulogio O. Yutingco, Caroline Yutingco-Yao, and Theresa T. Lao (the
"Yutingcos"), all of whom are controlling stockholders of the aforementioned corporations, jointly filed with the SEC a Petition for
the Declaration of Suspension of Payment[s], Formation and Appointment of Rehabilitation Receiver/Committee, Approval of
Rehabilitation Plan with Alternative Prayer for Liquidation and Dissolution of Corporations alleging, among other things, that "the
present combined financial condition of the petitioners clearly indicates that their assets are more than enough to pay off the
credits" but that due to "factors beyond the control and anticipation of the management . . . the inability of the EYCO Group of
Companies to meet the obligations as they fall due on the schedule agreed with the [creditors] has now become a stark reality." In a
footnote to said petition, the Yutingcos justified their inclusion as co-petitioners before the SEC on the ground that they had
personally bound themselves to EYCO's creditors under a J.S.S. Clause (Joint Several Solidary Guaranty).

Meanwhile, some of private respondents' creditors, composed mainly of twenty-two (22) domestic banks (the "consortium")
including herein petitioner Union Bank of the Philippines, also convened on for the purpose of deciding their options in the event
that private respondents invoke the provisions of Presidential Decree No. 902-A, as amended.

Without notifying the members of the consortium, petitioner, however, decided to break away from the group by suing private
respondents in the regular courts

In the meantime, the SEC issued an order, appointing (a) Amelia B. Cabal of SGV & Co., as common representative; (b) Inocencio
Deza, Jr., of the Philippine National Bank as representative of the creditor-banks; and (c) Atty. Florencio B. Orendain as
representative of the EYCO Group and the Yutingcos, to act collectively as interim receivers of the distressed corporations.

Aside from commencing suits in the regular courts, petitioner also vehemently opposed private respondents' petition for suspension
of payments in the SEC by filing a Motion to Dismiss. It contended that the SEC was bereft of jurisdiction over such petition on the
ground that the inclusion of the Yutingcos in the petition "cannot be allowed since the authority and power of the Commission
under the (sic) virtue of [the] law applies only to corporations, partnership[s] and other forms of associations, and not to individual
petitioners who are not clearly covered by P.D. 902-A as amended." According to petitioner, what should have been applied instead
was the provision on suspension of payments under Act No. 1956, otherwise known as the "Insolvency Law," which mandated the
filing of the petition in the Regional Trial Court and not in the SEC. Finally, petitioner disputed private respondents' recourse to
suspension of payments alleging that the latter prejudiced their creditors by fraudulently disposing of corporate properties within
the 30-day period prior to the filing of such petition.

ISSUE: Whether or not the SEC can validly acquire jurisdiction over a petition for suspension of payments filed pursuant to Section 5
(d) of P.D. No. 902 — A, as amended, when such petition joins as co-petitioners the petitioning corporate entities AND individual
stockholders thereof?

RULING: No, We fully agree with petitioner in contending that the SEC's jurisdiction on matters of suspension of payments is
confined only to those initiated by corporations, partnerships or associations. This Court, however, does not subscribe to the theory
espoused by petitioner that the case filed by private respondents should be dismissed outright in its entirety. The reason is that
while it is true that the SEC cannot acquire jurisdiction over an individual filing a petition for suspension of payments together with a
corporate entity, a closer scrutiny of Chung Ka Bio and MPPI does not in any manner suggest, even tangentially, that a petition as the
one at bar must be dismissed likewise with respect to the corporate co-petitioner. What Chung Ka Bio and MPPI respectively
declared was that "Alfredo Ching, as a mere individual, cannot be allowed as a co-petitioner in SEC Case No. 2250" and "respondent
Court of Appeals was correct in ordering the dismissal of the petition for suspension of payments insofar as the Co spouses were
concerned."

We are, of course, aware of the argument advanced by petitioner that the petition should be entirely dismissed and taken out of the
SEC's jurisdiction on account of the alleged insolvency of private respondents. In this regard, petitioner theorizes that private
respondents have already become insolvent when they allegedly disposed of a substantial portion of their properties in fraud of
creditors, hence, suspension of payments with the SEC is not the proper remedy.

Such argument does not persuade us. Petitioner's allegations of fraudulent dispositions of private respondents' assets and the
supposed insolvency of the latter are hardly of any consequence to the assumption of jurisdiction by the SEC over the nature or
subject matter of the petition for suspension of payments. Aside from the fact that these allegations are evidentiary in nature and
still remains to be proved, we have likewise consistently ruled that what determines the nature of an action, as well as which court
or body has jurisdiction over it, are the allegations of the complaint, or a petition as in this case, and the character of the relief
sought. That the merits of the case after due proceedings are later found to veer away from the claims asserted by EYCO in its
petition, as when it is shown later that it is actually insolvent and may not be entitled to suspension of payments, does not divest the
SEC at all of its jurisdiction already acquired at its inception through the allegations made in the petition.

Neither are we convinced by petitioner's reasoning that the Yutingcos and the corporate entities making up the EYCO Group, on the
basis of the footnote that the former were filing the petition because they bound themselves as surety to the corporate obligations,
should be considered as mere individuals who should file their petition for suspension of payments with the regular courts pursuant
to Section 2 of the Insolvency Law. We do not see any legal ground which should lead one to such conclusion. The doctrine of
piercing the veil of corporate fiction heavily relied upon by petitioner is entirely misplaced, as said doctrine only applies when such
corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime.

G.R. No. L-2886 August 22, 1952

GREGORIO ARANETA, INC., plaintiff-appellant, vs.

PAZ TUASON DE PATERNO and JOSE VIDAL, defendants-appellants.

FACTS: Paz Tuason de Paterno is the registered owner of the aforesaid land, which was subdivided into city lots. Most of these lots
were occupied by lessees who had contracts of lease, and carried a stipulation to the effect that in the event the owner and lessor
should decide to sell the property the lessees were to be given priority over other buyers if they should desire to buy their
leaseholds, all things being equal. Smaller lots were occupied by tenants without formal contract.

Paz Tuason obtained from Jose Vidal several loans and constituted a first mortgage on the aforesaid property to secure the debt. She
obtained additional loans upon the same security. On each of the last-mentioned occasions the previous contract of mortgage was
renewed and the amounts received were consolidated. In the first novated contract the time of payment was fixed at two years and
in the second and last at four years. New conditions not relevant here were also incorporated into the new contracts.

Paz Tuason decided to sell the entire property and entered into negotiations with Gregorio Araneta, Inc. for this purpose. This
contract provided that subject to the preferred right of the lessees and that of Jose Vidal as mortgagee, Paz Tuason would sell to
Gregorio Araneta, Inc. and the latter would buy the entire estate.

In furtherance of this promise to buy and sell, letters were sent the lessees giving them an option to buy the lots they occupied at
the price and terms stated in said letters. Most of the tenants who held contracts of lease took advantage of the opportunity thus
extended and after making the stipulated payments were giving their deeds of conveyance. These sales, as far as the record would
show, have been respected by the seller.

the day immediately following the signing of the agreement to buy and sell, Paz Tuason had offered to Vidal a check in full
settlement of her mortgage obligation, but the mortgagee had refused to receive that check or to cancel the mortgage, contending
that by the separate agreement before mentioned payment of the mortgage was not to be effected totally or partially before the
end of four years.

The instant action was the offshoot, begun by Gregorio Araneta, Inc. to compel Paz Tuason to deliver to the plaintiff a clear title to
the lots described in Exhibit A free from all liens and encumbrances, and a deed of cancellation of the mortgage to Vidal. Vidal came
into the case in virtue of a summon issued by order of the court, and filed a cross-claim against Paz Tuazon to foreclose his
mortgage.

ISSUE: Whether or not the sale to Gregorio Araneta, Inc. was not a sale to Jose Araneta the agent or broker?

HELD: Yes, otherwise the defendant would have the court ignore the distinction between the corporation and its stockholders and
apply to this case the other well-known principle which is thus stated in 18 C.J.S. 380: "The courts, at law and in equity, will disregard
the fiction of corporate entity apart from the members of the corporation when it is attempted to be used as a means of
accomplishing a fraud or an illegal act.".

It will at once be noted that this principle does not fit in with the facts of the case at bar. Gregorio Araneta, Inc. had long been
organized and engaged in real estate business. The corporate entity was not used to circumvent the law or perpetrate deception.
There is no denying that Gregorio Araneta, Inc. entered into the contract for itself and for its benefit as a corporation. The contract
and the roles of the parties who participated therein were exactly as they purported to be and were fully revealed to the seller.
There is no pretense, nor is there reason to suppose, that if Paz Tuason had known Jose Araneta to Gregorio Araneta, Inc's
president, which she knew, she would not have gone ahead with the deal. From her point of view and from the point of view of
public interest, it would have made no difference, except for the brokerage fee, whether Gregorio Araneta, Inc. or Jose Araneta was
the purchaser. Under these circumstances the result of the suggested disregard of a technicality would be, not to stop the
commission of deceit by the purchaser but to pave the way for the evasion of a legitimate and binding commitment buy the seller.
The principle invoked by the defendant is resorted to by the courts as a measure or protection against deceit and not to open the
door to deceit. "The courts," it has been said, "will not ignore the corporate entity in order to further the perpetration of a fraud."
(18 C.J.S. 381.)

The corporate theory aside, and granting for the nonce that Jose Araneta and Gregorio Araneta, Inc. were identical and that the acts
of one where the acts of the other, the relation between the defendant and Jose Araneta did not fall within the purview of article
1459 of the Spanish Civil Code.

G.R. No. L-47673 October 10, 1946

KOPPEL (PHILIPPINES), INC., plaintiff-appellant, vs.

ALFREDO L. YATCO, Collector of Internal Revenue, defendant-appellee.

FACTS: Koppel Industrial Car and Equipment company (KICE), a foreign company not doing business in the Philippines, owned 995
shares out of the 1000 shares that comprise the capital stock of KPI, a domestic corporation licensed as commercial broker in the
Philippines. The remaining 5 shares were owned by each of the officers of KPI. KICE is in the business of selling railway materials,
machineries and supplies. Buyers in the Philippines, when interested, asked for price quotations from KPI, and KPI then cabled for
the quotation desired from KICE. However, KPI quoted to the purchaser a selling price above the figures quoted by KICE. On the
basis of these quotations, orders were placed by the local buyers. Between KICE and KPI, the arrangement nonetheless was that
KICE controls how much share of the profits goes to KPI. For these transactions, the BIR treated KPI as a subsidiary of KICE and
collected from KPI the merchants’ sales tax, which was a revenue law in force at the time the sales took place.

KPI paid the taxes under protest, demanded for refund and contended that KPI could not be liable for merchants’ sales tax because
it was only acting as broker between KICE and the local buyers. The lower court dismissed the complaint and ruled in favor of the
government.

Issue 1: W/N KPI did business with the local buyers as an agent of KICE and not as broker

Held:Yes. The facts that KICE unilaterally controls the amount of so-called “share in the profits” of KPI and that KICE owns an
overwhelming majority (99.5%) of the capital stock of the KPI are sufficient to conclude that the latter is a mere dummy, agent or
wholly-owned subsidiary of KICE. Such conclusion is based on the doctrine that courts may ‘pierce the corporate veil’ to uncover the
true intents of these corporations.

Issue 2: W/N the application of “piercing the corporate veil” doctrine is proper

Held: Yes. With regards only to the transactions involved, KPI and KICE were treated as one and the same so that taxes could be
rightly collected. The court has to disregard this “corporate fiction” to prevent KICE / KPI from evading its taxes by contravening the
local internal revenue laws.

The court did not deny legal personality to KPI; in fact, it had no power to hold so. The doctrine was used only to adjudge the rights
and liabilities of each parties in these kind of transactions.

G.R. No. L-20886 April 27, 1967

NATIONAL MARKETING CORPORATION (NAMARCO), plaintiff-appellant, vs.

ASSOCIATED FINANCE COMPANY, INC., and FRANCISCO SYCIP, defendants.

FRANCISCO SYCIP, defendant-appellee.

FACTS: ASSOCIATED, a domestic corporation, through its President, appellee Francisco Sycip, entered into an agreement to exchange
sugar with NAMARCO, represented by its then General Manager, Benjamin Estrella, whereby the former would deliver to the latter
bags of refined sugar in exchange for bags of raw sugar belonging to NAMARCO, both agreeing to pay liquidated damages equivalent
to 20% of the contractual value of the sugar should either party fail to comply with the terms and conditions stipulated. Pursuant
thereto, NAMARCO delivered to ASSOCIATED bars of domestic raw sugar. As ASSOCIATED failed to deliver to NAMARCO the bags of
refined sugar agreed upon, the latter, demanded in writing from the ASSOCIATED either (a) immediate delivery thereof, or (b)
payment of its equivalent cash value.

ASSOCIATED, through Sycip, offered to pay NAMARCO the value of bags of refined sugar, but the latter rejected the offer. Instead, it
demanded payment of the bags of raw sugar for both kinds of sugar, based on the sugar quotations.

As ASSOCIATED refused to deliver the raw sugar or pay for the refined sugar delivered to it, inspite of repeated demands therefore,
NAMARCO instituted the present action in the lower court to recover the sum in payment of the raw sugar received by defendants
from it; liquidated damages; attorney's fees, expenses of litigation and exemplary damages, with legal interest thereon from the
filing of the complaint until fully paid.

ISSUE: Whether or not Francisco Sycip may be held liable, jointly and severally with his co-defendant, for the sums of money
adjudged in favor of NAMARCO?

RULING: Yes, The evidence of record shows that, of the capital stock of ASSOCIATED, Sycip owned P60,000.00 worth of shares, while
his wife — the second biggest stockholder — owned P20,000.00 worth of shares; that the par value of the subscribed capital stock of
ASSOCIATED was only P105,000.00; that negotiations that lead to the execution of the exchange agreement in question were
conducted exclusively by Sycip on behalf of ASSOCIATED; that, as a matter of fact, in the course of his testimony, Sycip referred to
himself as the one who contracted or transacted the business in his personal capacity, and asserted that the exchange agreement
was his personal contract; that it was Sycip who made personal representations and gave assurances that ASSOCIATED was in actual
possession of the 22,516 bags of "Victorias" and/or "National" refined sugar which the latter had agreed to deliver to NAMARCO,
and that the same was ready for delivery; that, as a matter of fact, ASSOCIATED was at that time already insolvent; that when
NAMARCO made demands upon ASSOCIATED to deliver the 22,516 bags of refined sugar it was under obligation to deliver to the
former, ASSOCIATED and Sycip, instead of making delivery of the sugar, offered to pay its value at the rate of P15.30 per bag — a
clear indication that they did not have the sugar contracted for.

The foregoing facts, fully established by the evidence, can lead to no other conclusion than that Sycip was guilty of fraud because
through false representations he succeeded in inducing NAMARCO to enter into the aforesaid exchange agreement, with full
knowledge, on his part, on the fact that ASSOCIATED whom he represented and over whose business and affairs he had absolute
control, was in no position to comply with the obligation it had assumed. Consequently, he cannot now seek refuge behind the
general principle that a corporation has a personality distinct and separate from that of its stockholders and that the latter are not
personally liable for the corporate obligations. To the contrary, upon the proven facts, We feel perfectly justified in "piercing the veil
of corporate fiction" and in holding Sycip personally liable, jointly and severally with his co-defendant, for the sums of money
adjudged in favor of appellant. It is settled law in this and other jurisdictions that when the corporation is the mere alter ego of a
person, the corporate fiction may be disregarded; the same being true when the corporation is controlled, and its affairs are so
conducted as to make it merely an instrumentality, agency or conduit of another (Koppel Phils., etc. vs. Yatco, etc., 43 O.G. No. 11.
Nov. 1947; Yutivo Sons, etc. vs. Court of Tax Appeals, etc., G.R. No. L-13203, promulgated on January 28, 1961).

G.R. No. L-23893 October 29, 1968

VILLA REY TRANSIT, INC., plaintiff-appellant, vs.

EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE COMMISSION, defendants.

EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC., defendants-appellants.

PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant, vs.

JOSE M. VILLARAMA, third-party defendant-appellee.

FACTS: Jose M. Villarama was an operator of a bus transportation, under the business name of Villa Rey Transit, he sold the two
certificates of public convenience to the Pangasinan Transportation Company, Inc. (Pantranco), with the condition, among others,
that the seller (Villarama) "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or
competing with the buyer." Barely 3 months thereafter, a corporation called Villa Rey Transit, Inc. (the Corporation) was organized;
Natividad R. Villarama (wife of Jose M. Villarama) was one of the incorporators.

In less than a month after its registration with the Securities and Exchange Commission, the Corporation, bought 5 certificates of
public convenience, 49 buses, tools and equipment from one Valentin Fernando, of which was paid upon the signing of the contract;
the very same day that the contract of sale was executed, the parties thereto immediately applied with the PSC for its approval, with
a prayer for the issuance of a provisional authority in favor of the vendee Corporation to operate the service therein involved, the
PSC granted the provisional permit prayed for, upon the condition that "it may be modified or revoked by the Commission at any
time, shall be subject to whatever action that may be taken on the basic application and shall be valid only during the pendency of
said application."

Before the PSC could take final action on said application for approval of sale, however, the Sheriff of Manila, levied on 2 of the five
certificates of public convenience involved therein, namely, those issued under PSC cases 59494 and 63780, pursuant to a writ of
execution issued by the Court of First Instance of Pangasinan in Civil Case 13798, in favor of Eusebio E. Ferrer against Valentin
Fernando. The Sheriff made and entered the levy in the records of the PSC. A public sale was conducted by the Sheriff of the said
two certificates of public convenience. Ferrer was the highest bidder, and a certificate of sale was issued in his name. Thereafter,
Ferrer sold the two certificates of public convenience to Pantranco, and jointly submitted for approval their corresponding contract
of sale to the PSC. Pantranco therein prayed that it be authorized provisionally to operate the service involved in the said two
certificates.

The applications for approval of sale, filed before the PSC, by Fernando and the Corporation, Case 124057, and that of Ferrer and
Pantranco, Case 126278, were scheduled for a joint hearing. In the meantime, to wit, the PSC issued an order disposing that during
the pendency of the cases and before a final resolution on the aforesaid applications, the Pantranco shall be the one to operate
provisionally the service under the two certificates embraced in the contract between Ferrer and Pantranco. The Corporation took
issue with this particular ruling of the PSC and elevated the matter to the Supreme Court, which decreed, after deliberation, that
until the issue on the ownership of the disputed certificates shall have been finally settled by the proper court, the Corporation
should be the one to operate the lines provisionally.

[present case] the Corporation filed in the Court of First Instance of Manila, acomplaint for the annulment of the sheriff's sale of the
aforesaid two certificates of public convenience (PSC Cases 59494 and 63780) in favor of Ferrer, and the subsequent sale thereof by
the latter to Pantranco, against Ferrer, Pantranco and the PSC. The Corporation prayed therein that all the orders of the PSC relative
to the parties' dispute over the said certificates be annulled. The CFI of Manila declared the sheriff's sale of two certificates of public
convenience in favor of Ferrer and the subsequent sale thereof by the latter to Pantranco null and void; declared the Corporation to
be the lawful owner of the said certificates of public convenience; and ordered Ferrer and Pantranco, jointly and severally, to pay
the Corporation, the sum of P5,000.00 as and for attorney's fees. The case against the PSC was dismissed. All parties appealed.

ISSUE: Whether the stipulation, "SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE DATE OF THIS SALE, APPLY FOR ANY TPU
SERVICE IDENTICAL OR COMPETING WITH THE BUYER" in the contract between Villarama and Pantranco, binds the Corporation (the
Villa Rey Transit, Inc.).

RULING: Yes, Villarama supplied the organization expenses and the assets of the Corporation, such as trucks and equipment; there
was no actual payment by the original subscribers of the amounts of P95,000.00 andP100,000.00 as appearing in the books;
Villarama made use of the money of the Corporation and deposited them to his private accounts; and the Corporation paid his
personal accounts. Villarama himself admitted that he mingled the corporate funds with his own money. These circumstances are
strong persuasive evidence showing that Villarama has been too much involved in the affairs of the Corporation to altogether
negative the claim that he was only a part-time general manager. They show beyond doubt that the Corporation is his alter ego. The
interference of Villarama in the complex affairs of the corporation, and particularly its finances, are much too inconsistent with the
ends and purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities from corporate undertakings.
It is the very essence of incorporation that the acts and conduct of the corporation be carried out in its own corporate name because
it has its own personality. The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders
who compose it is recognized and respected in all cases which are within reason and the law. 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. Hence, the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama, and that the restrictive clause in the
contract entered into by the latter and Pantranco is also enforceable and binding against the said Corporation. For the rule is that a
seller or promisor may not make use of a corporate entity as a means of evading the obligation of his covenant. Where the
Corporation is substantially the alter ego of the covenantor to the restrictive agreement, it can be enjoined from competing with the
covenantee.

G.R. No. L-17618 August 31, 1964

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

NORTON and HARRISON COMPANY, respondent.

FACTS: Norton and Harrison is a corporation organized, (1) to buy and sell at wholesale and retail, all kinds of goods, wares, and
merchandise; (2) to act as agents of manufacturers in the United States and foreign countries; and (3) to carry on and conduct a
general wholesale and retail mercantile establishment in the Philippines. Jackbilt is, likewise, a corporation organized primarily for
the purpose of making, producing and manufacturing concrete blocks. Norton and Jackbilt entered into an agreement whereby
Norton was made the sole and exclusive distributor of concrete blocks manufactured by Jackbilt. Pursuant to this agreement,
whenever an order for concrete blocks was received by the Norton & Harrison Co. from a customer, the order was transmitted to
Jackbilt which delivered the merchandise direct to the customer. Payment for the goods is, however, made to Norton, which in turn
pays Jackbilt the amount charged the customer less a certain amount, as its compensation or profit. To exemplify the sales
procedures adopted by the Norton and Jackbilt, the following may be cited. In the case of the sale of 420 pieces of concrete blocks
to the American Builders, the purchaser paid to Norton the sum of P189.00 the purchase price. Out of this amount Norton paid
Jackbilt P168.00, the difference obviously being its compensation. As per records of Jackbilt, the transaction was considered a sale to
Norton. It was under this procedure that the sale of concrete blocks manufactured by Jackbilt was conducted until, when the agency
agreement was terminated and a management agreement between the parties was entered into. The management agreement
provided that Norton would sell concrete blocks for Jackbilt, for a fixed monthly fee of P2,000.00, which was later increased to
P5,000.00.

During the existence of the distribution or agency agreement, or on June 10, 1949, Norton & Harrison acquired by purchase all the
outstanding shares of stock of Jackbilt. Apparently, due to this transaction, the Commissioner of Internal Revenue, after conducting
an investigation, assessed the respondent Norton & Harrison for deficiency sales tax and surcharges, making as basis thereof the
sales of Norton to the Public. In other words, the Commissioner considered the sale of Norton to the public as the original sale and
not the transaction from Jackbilt. As Norton and Harrison did not conform with the assessment, the matter was brought to the Court
of Tax Appeals.

The Commissioner of Internal Revenue contends that since Jackbilt was owned and controlled by Norton & Harrison, the corporate
personality of the former (Jackbilt) should be disregarded for sales tax purposes, and the sale of Jackbilt blocks by petitioner to the
public must be considered as the original sales from which the sales tax should be computed. The Norton & Harrison Company
contended otherwise — that is, the transaction subject to tax is the sale from Jackbilt to Norton.

ISSUE: Whether or not the acquisition of all the stocks of the Jackbilt by the Norton & Harrison Co., merged the two corporations
into a single corporation?

RULING: Yes, It has been settled that the ownership of all the stocks of a corporation by another corporation does not necessarily
breed an identity of corporate interest between the two companies and be considered as a sufficient ground for disregarding the
distinct personalities (Liddell & Co., Inc. v. Coll. of Int. Rev. L-9687, June 30, 1961). However, in the case at bar, we find sufficient
grounds to support the theory that the separate identities of the two companies should be disregarded. Norton and Harrison, tried
to explain that the control over the affairs of Jackbilt was not made in order to evade payment of taxes; that the loans obtained by it
which were given to Jackbilt, were necessary for the expansion of its business in the manufacture of concrete blocks, which would
ultimately benefit both corporations; that the transactions and practices just mentioned, are not unusual and extraordinary, but
pursued in the regular course of business and trade; that there could be no confusion in the present set up of the two corporations,
because they have separate Boards, their cash assets are entirely and strictly separate; cashiers and official receipts and bank
accounts are distinct and different; they have separate income tax returns, separate balance sheets and profit and loss statements.
These explanations notwithstanding an over-all appraisal of the circumstances presented by the facts of the case, yields to the
conclusion that the Jackbilt is merely an adjunct, business conduit or alter ego, of Norton and Harrison and that the fiction of
corporate entities, separate and distinct from each, should be disregarded. This is a case where the doctrine of piercing the veil of
corporate fiction, should be made to apply.

It may not be amiss to state in this connection, the advantages to Norton in maintaining a semblance of separate entities. If the
income of Norton should be considered separate from the income of Jackbilt, then each would declare such earning separately for
income tax purposes and thus pay lesser income tax. The combined taxable Norton-Jackbilt income would subject Norton to a higher
tax. Based upon the 1954-1955 income tax return of Norton and Jackbilt (Exhs. 7 & 8), and assuming that both of them are operating
on the same fiscal basis and their returns are accurate, we would have the following result: Jackbilt declared a taxable net income of
P161,202.31 in which the income tax due was computed at P37,137.00 (Exh. 8); whereas Norton declared as taxable, a net income
of P120,101.59, on which the income tax due was computed at P25,628.00. The total of these liabilities is P50,764.84. On the other
hand, if the net taxable earnings of both corporations are combined, during the same taxable year, the tax due on their total which
is P281,303.90 would be P70,764.00. So that, even on the question of income tax alone, it would be to the advantages of Norton
that the corporations should be regarded as separate entities.

G.R. No. 108734 May 29, 1996

CONCEPT BUILDERS, INC., petitioner, vs.

THE NATIONAL LABOR RELATIONS COMMISSION, (First Division); and Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel
Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea ,
Alfredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno
Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos, respondents.

FACTS: Petitioner Concept Builders, Inc., a domestic corporation, engaged in the construction business. Private respondents were
employed by said company as laborers, carpenters and riggers.

Private respondents were served individual written notices of termination of employment by petitioner. It was stated in the
individual notices that their contracts of employment had expired and the project in which they were hired had been completed.

Public respondent found it to be, the fact, however, that at the time of the termination of private respondent's employment, the
project in which they were hired had not yet been finished and completed. Petitioner had to engage the services of sub-contractors
whose workers performed the functions of private respondents.

Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday
pay, overtime pay and thirteenth-month pay against petitioner.

The Labor Arbiter rendered judgment ordering petitioner to reinstate private respondents and to pay them back wages equivalent
to one year or three hundred working days.

The National Labor Relations Commission (NLRC) dismissed the motion for reconsideration filed by petitioner on the ground that the
said decision had already become final and executory.

The Labor Arbiter issued a writ of execution directing the sheriff to execute the Decision. The writ was partially satisfied through
garnishment of sums from petitioner's debtor, the Metropolitan Waterworks and Sewerage Authority.

An Alias Writ of Execution was issued by the Labor Arbiter directing the sheriff to collect from herein petitioner the balance of the
judgment award, and to reinstate private respondents to their former positions.

The sheriff issued a report stating that he tried to serve the alias writ of execution on petitioner through the security guard on duty
but the service was refused on the ground that petitioner no longer occupied the premises.

Upon motion of private respondents, the Labor Arbiter issued a second alias writ of execution.

The said writ had not been enforced by the special sheriff.

The said special sheriff recommended that a "break-open order" be issued to enable him to enter petitioner's premises so that he
could proceed with the public auction sale of the aforesaid personal properties.
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.

In support of their claim against HPPI, private respondents presented duly certified copies of the General Informations Sheet,
submitted by petitioner to the Securities Exchange Commission (SEC) and the General Information Sheet, submitted by HPPI to the
Securities and Exchange Commission.

On February 1, 1990, HPPI filed an Opposition to private respondents' motion for issuance of a break-open order, contending that
HPPI is a corporation which is separate and distinct from petitioner. HPPI also alleged that the two corporations are engaged in two
different kinds of businesses, i.e., HPPI is a manufacturing firm while petitioner was then engaged in construction.

The Labor Arbiter issued an Order which denied private respondents' motion for break-open order.

Private respondents then appealed to the NLRC. The NLRC set aside the order of the Labor Arbiter, issued a break-open order and
directed private respondents to file a bond. Thereafter, it directed the sheriff to proceed with the auction sale of the properties
already levied upon. It dismissed the third-party claim for lack of merit.

ISSUE: Whether or not the corporation is a mere alter ego, a mere sheet or Paper Corporation, a sham or a subterfuge?

RULING: Yes, In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations, it filed an Information
Sheet with the Securities and Exchange Commission, stating that its office address is at 355 Maysan 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 at 355 Maysan Road, Valenzuela, Metro Manila.

Furthermore, the NLRC stated that:

Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. It would also not
be amiss to note that both corporations had the same president, the same board of directors, the same corporate officers, and
substantially the same subscribers.

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 back wages and to bar
their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner corporation and its emergence was
skillfully orchestrated to avoid the financial liability that already attached to petitioner corporation.

G.R. No. 117963 February 11, 1999

AZCOR MANUFACTURING INC., FILIPINAS PASO and/or ARTURO ZULUAGA/Owner, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND CANDIDO CAPULSO, respondents.

FACTS: Candido Capuslo file with the Labor Arbiter a complaint for constructive illegal dismissal and illegal deduction. Petitioners
Azcor Manufacturing, Inc. (AZCOR) and Arturo Zuluaga who were respondents before the Labor Arbiter (Filipinas Paso was not yet a
party then in that case) moved to dismiss the complaint on the ground that there was no employer-employee relationship between
AZCOR and herein respondent Capulso; that the latter became an employee of Filipinas Paso effective 1 March 1996 but voluntarily
resigned there from a year after, Capulso later amended his complaint by impleading Filipinas Paso as additional respondent before
the Labor Arbiter.
Labor Arbiter Felipe T. Garduque II denied the motion to dismiss holding that the allegation of lack of employer-employee
relationship between Capulso and AZCOR was not clearly established. Thereafter, the Labor Arbiter ordered that hearings be
conducted for the presentation of evidence by both parties.

The evidence presented by Capulso showed that he worked for AZCOR as ceramics worker for more than two (2) years receiving a
daily wage plus other benefits such as vacation and sick leaves. From April to September 1989 the amount of P50.00 was deducted
from his salary without informing him of the reason therefor.

Capulso verbally requested to go on sick leave due to bronchial asthma. It appeared that his illness was, directly caused by his job as
ceramics worker where, for lack of the prescribed occupational safety gadgets, he inhaled and absorbed harmful ceramic dusts. His
supervisor, Ms. Emily Apolinaria, approved his request. Later, Capulso went back to petitioner AZCOR to resume his work after
recuperating from his illness. He was not allowed to do so by his supervisors who informed him that only the owner, Arturo Zuluaga,
could allow him to continue in his job. He returned five (5) times to AZCOR but when it became apparent that he would not be
reinstated, he immediately filed the instant complaint for illegal dismissal.

petitioners alleged that Capulso was a former employee of AZCOR who resigned as evidenced by a letter of resignation and joined
Filipinas Paso as shown by a contract of employment; Capulso allegedly informed his supervisor, Ms. Emilia Apolinaria, that he
intended to go on terminal leave because he was not feeling well; he submitted a letter of resignation addressed to the President of
Filipinas Paso, Manuel Montilla; and, in the early part Capulso tried to apply for work again with Filipinas Paso but there was no
vacancy.

The Labor Arbiter rendered a decision dismissing the complaint for illegal dismissal for lack of merit, but ordered AZCOR and/or
Arturo Zuluaga to refund to Capulso the sum representing the amount illegally deducted from his salary.

On appeal by Capulso, the NLRC modified the Labor Arbiter's decision by: (a) declaring the dismissal of Capulso as illegal for lack of
just and valid cause; (b) ordering petitioners to reinstate Capulso to his former or equivalent position without loss of Seniority rights
and without diminution of benefits, and, (c) ordering petitioners to jointly and solidarily pay Capulso his backwages computed from
the time of his dismissal up to the date of his actual reinstatement.

ISSUE: Whether or not the NLRC committed grave abuse of discretion in holding petitioners jointly and solidarily liable to Capulso for
back wages?

RULING: No, Petitioners also contend that they could not be held jointly and severally liable to Capulso for back wages since AZCOR
and Filipinas Paso are separate and distinct corporations with different corporate personalities; and, the mere fact that the
businesses of these corporations are interrelated and both owned and controlled by a single stockholder are not sufficient grounds
to disregard their separate corporate entities.

We are not persuaded. The doctrine that a corporation is a legal entity or a person in law distinct from the persons composing it is
merely a legal fiction for purposes of convenience and to subserve the ends of justice. This fiction cannot be extended to a point
beyond its reason and policy. Where, as in this case, the corporate fiction was used as a means to perpetrate a social injustice or as a
vehicle to evade obligations or confuse the legitimate issues, it would be discarded and the two (2) corporations would be merged as
one, the first being merely considered as the instrumentality, agency, conduit or adjunct of the other.

Interestingly, petitioners likewise argue that it was grave abuse of discretion for the NLRC to hold them solidarily, liable to Capulso
when the latter himself testified that he was not even an employee of Filipinas Paso. After causing much confusion, petitioners have
the temerity to use as evidence the ignorance of Capulso in identifying his true employer. It is evident from the foregoing discussion
that Capulso was led into believing that while he was working with Filipinas Paso, his real employer was AZCOR. Petitioners never
dealt with him openly and in good faith, nor was he informed of the developments within the company, i.e., his alleged transfer to
Filipinas Paso and the closure of AZCOR's manufacturing operations beginning 1 March 1990. Understandably, he sued AZCOR alone
and was constrained to implead Filipinas Paso as additional respondent only when it became apparent that the latter also appeared
to be his employer.

In fine, we see in the totality of the evidence a veiled attempt by petitioners to deprive Capulso of what he had earned through hard
labor by taking advantage of his low level of education and confusing. him as to who really was his true employer - such a callous
and despicable treatment of a worker who had rendered faithful service to their company.