1
Reynoso v. CA
Reynoso was the branch manager of
Commercial Credit Corporation – Quezon City
(CCC-QC), a branch of Commercial Credit
Corporation (CCC). It was alleged that Reynoso
was opposed to certain questionable
commercial practices being facilitated by CCC
which caused its branches, like CCC-QC, to rack
up debts. Eventually, Reynoso withdrew his
own funds from CCC-QC. This prompted CCC-QC
to file criminal cases for estafa and qualified
theft against Reynoso. The criminal cases were
dismissed and Reynoso was exonerated and at
the same time CCC-QC was ordered to pay
Reynoso’s counterclaims which amounted to
millions. A writ of execution was issued against
CCC-QC. The writ was opposed by CCC-QC as it
now claims that it has already closed and that
its assets were taken over by the mother
company, CCC. Meanwhile, CCC changed its
name to General Credit Corporation (GCC).
Reynoso then filed a petition for an alias writ of
execution. GCC opposed the writ as it argued
that it is a separate and distinct corporation
from CCC and CCC-QC, in short, it raises the
defense of corporate fiction.
ISSUE: Whether or not GCC is correct.
HELD: No. The veil of corporate fiction must be
pierced. It is obvious that CCC’s change of name
to GCC was made in order to avoid liability.
CCC-QC willingly closed down and transferred
its assets to CCC and thereafter changed its
name to GCC in order to avoid its
responsibilities from its creditors. GCC and CCC
are one and the same; they are engaged in the
same line of business and single transaction
process, i.e. finance and investment. When the
mother corporation and its subsidiary cease to
act in good faith and honest business judgment,
when the corporate device is used by the
parent to avoid its liability for legitimate
obligations of the subsidiary, and when the
corporate fiction is used to perpetrate fraud or
promote injustice, the law steps in to remedy
the problem. When that happens, the
corporate character is not necessarily
abrogated. It continues for legitimate
objectives. However, it is pierced in order to
remedy injustice, such as that inflicted in this
case.
TAYAG V. BENGUET CONSOLIDATED
In March 1960, Idonah Perkins died in New
York. She left behind properties here and
abroad. One property she left behind were two
stock certificates covering 33,002 shares of
stocks of the Benguet Consolidated, Inc (BCI).
Said stock certificates were in the possession of
the Country Trust Company of New York (CTC-
NY). CTC-NY was the domiciliary administrator
of the estate of Perkins (obviously in the USA).
Meanwhile, in 1963, Renato Tayag was
appointed as the ancillary administrator (of the
properties of Perkins she left behind in the
Philippines). A dispute arose between CTC-NY
and Tayag as to who between them is entitled
to possess the stock certificates. A case ensued
and eventually, the trial court ordered CTC-NY
to turn over the stock certificates to Tayag. CTC-
NY refused. Tayag then filed with the court a
petition to have said stock certificates be
declared lost and to compel BCI to issue new
stock certificates in replacement thereof. The
trial court granted Tayag’s petition.
BCI assailed said order as it averred that it
cannot possibly issue new stock certificates
because the two stock certificates declared lost
are not actually lost; that the trial court as well
Tayag acknowledged that the stock certificates
exists and that they are with CTC-NY; that
according to BCI’s by laws, it can only issue new
stock certificates, in lieu of lost, stolen, or
destroyed certificates of stocks, only after court
of law has issued a final and executory order as
to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of
Benguet Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a
corporation who owes its existence to
Philippine laws. It has been given rights and
privileges under the law. Corollary, it also has
obligations under the law and one of those is to
follow valid legal court orders. It is not immune
from judicial control because it is domiciled
here in the Philippines. BCI is a Philippine
corporation owing full allegiance and subject to
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the unrestricted jurisdiction of local courts. Its
shares of stock cannot therefore be considered
in any wise as immune from lawful court orders.
Further, to allow BCI’s opposition is to render
the court order against CTC-NY a mere scrap of
paper. It will leave Tayag without any remedy
simply because CTC-NY, a foreign entity refuses
to comply with a valid court order. The final
recourse then is for our local courts to create a
legal fiction such that the stock certificates in
issue be declared lost even though in reality
they exist in the hands of CTC-NY. This is valid.
As held time and again, fictions which the law
may rely upon in the pursuit of legitimate ends
have played an important part in its
development. Further still, the argument
invoked by BCI that it can only issue new stock
certificates in accordance with its bylaws is
misplaced. It is worth noting that CTC-NY did
not appeal the order of the court – it simply
refused to turn over the stock certificates hence
ownership can be said to have been settled in
favor of estate of Perkins here. Also, assuming
that there really is a conflict between BCI’s
bylaws and the court order, what should prevail
is the lawful court order. It would be highly
irregular if court orders would yield to the
bylaws of a corporation. Again, a corporation is
not immune from judicial orders.
International Express Travel v. CA
In 1989, International Express Travel & Tour
Services, Inc. (IETTI), offered to the Philippine
Football Federation (PFF) its travel services for
the South East Asian Games. PFF, through Henri
Kahn, its president, agreed. IETTI then delivered
the plane tickets to PFF, PFF in turn made a
down payment. However, PFF was not able to
complete the full payment in subsequent
installments despite repeated demands from
IETTI. IETTI then sued PFF and Kahn was
impleaded as a co-defendant.
Kahn averred that he should not be impleaded
because he merely acted as an agent of
PFF which he averred is a corporation with
separate and distinct personality from him. The
trial court ruled against Kahn and held him
personally liable for the said obligation (PFF was
declared in default for failing to file an answer).
The trial court ruled that Kahn failed to prove
that PFF is a corporation. The Court of Appeals
however reversed the decision of the trial court.
The Court of Appeals took judicial notice of the
existence of PFF as a national sports
association; that as such, PFF is empowered to
enter into contracts through its agents; that
PFF is therefore liable for the contract entered
into by its agent Kahn. The CA further ruled that
IETTI is in estoppel; that it cannot now deny the
corporate existence of PFF because it had
contracted and dealt with PFF in such a manner
as to recognize and in effect admit its existence.
ISSUE: Whether or not the Court of Appeals is
correct.
HELD: No. PFF, upon its creation, is not
automatically considered a national sports
association. It must first be recognized and
accredited by the Philippine Amateur Athletic
Federation and the Department of Youth and
Sports Development. This fact was never
substantiated by Kahn. As such, PFF is
considered as an unincorporated sports
association. And under the law, any person
acting or purporting to act on behalf of a
corporation which has no valid existence
assumes such privileges and becomes
personally liable for contract entered into or for
other acts performed as such agent. Kahn is
therefore personally liable for the contract
entered into by PFF with IETTI.
There is also no merit on the finding of the CA
that IETTI is in estoppel. The application of the
doctrine of corporation by estoppel applies to a
third party only when he tries to escape liability
on a contract from which he has benefited on
the irrelevant ground of defective
incorporation. In the case at bar, IETTI is not
trying to escape liability from the contract but
rather is the one claiming from the contract
ABSCBN v. CA
In 1992, ABS-CBN Broadcasting Corporation,
through its vice president Charo Santos-Concio,
requested Viva Production, Inc. to allow ABS-
CBN to air at least 14 films produced by Viva.
Pursuant to this request, a meeting was held
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between Viva’s representative (Vicente Del
Rosario) and ABS-CBN’s Eugenio Lopez (General
Manager) and Santos-Concio was held on April
2, 1992. During the meeting Del Rosario
proposed a film package which will allow ABS-
CBN to air 104 Viva films for P60 million. Later,
Santos-Concio, in a letter to Del Rosario,
proposed a counterproposal of 53 films
(including the 14 films initially requested) for
P35 million. Del Rosario presented the counter
offer to Viva’s Board of Directors but the Board
rejected the counter offer. Several negotiations
were subsequently made but on April 29, 1992,
Viva made an agreement with Republic
Broadcasting Corporation (referred to as RBS –
or GMA 7) which gave exclusive rights to RBS to
air 104 Viva films including the 14 films initially
requested by ABS-CBN.
ABS-CBN now filed a complaint for specific
performance against Viva as it alleged that
there is already a perfected contract between
Viva and ABS-CBN in the April 2, 1992 meeting.
Lopez testified that Del Rosario agreed to the
counterproposal and he (Lopez) even put the
agreement in a napkin which was signed and
given to Del Rosario. ABS-CBN also filed an
injunction against RBS to enjoin the latter from
airing the films. The injunction was granted. RBS
now filed a countersuit with a prayer for moral
damages as it claimed that its reputation was
debased when they failed to air the shows that
they promised to their viewers. RBS relied on
the ruling in People vs Manero and Mambulao
Lumber vs PNB which states that a corporation
may recover moral damages if it “has a good
reputation that is debased, resulting in social
humiliation”. The trial court ruled in favor of
Viva and RBS. The Court of Appeals affirmed the
trial court.
ISSUE:
1. Whether or not a contract was perfected
in the April 2, 1992 meeting between the
representatives of the two corporations.
2. Whether or not a corporation, like RBS, is
entitled to an award of moral damages upon
grounds of debased reputation.
HELD:
1. No. There is no proof that a contract was
perfected in the said meeting. Lopez’ testimony
about the contract being written in a napkin is
not corroborated because the napkin was never
produced in court. Further, there is no meeting
of the minds because Del Rosario’s offer was of
104 films for P60 million was not accepted. And
that the alleged counter-offer made by Lopez
on the same day was not also accepted because
there’s no proof of such. The counter offer can
only be deemed to have been made days after
the April 2 meeting when Santos-Concio sent a
letter to Del Rosario containing the counter-
offer. Regardless, there was no showing that
Del Rosario accepted. But even if he did accept,
such acceptance will not bloom into a perfected
contract because Del Rosario has no authority
to do so.
As a rule, corporate powers, such as the power;
to enter into contracts; are exercised by the
Board of Directors. But this power may be
delegated to a corporate committee, a
corporate officer or corporate manager. Such a
delegation must be clear and specific. In the
case at bar, there was no such delegation to Del
Rosario. The fact that he has to present the
counteroffer to the Board of Directors of Viva is
proof that the contract must be accepted first
by the Viva’s Board. Hence, even if Del Rosario
accepted the counter-offer, it did not result to a
contract because it will not bind Viva sans
authorization.
2. No. The award of moral damages cannot be
granted in favor of a corporation because, being
an artificial person and having existence only in
legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore,
experience physical suffering and mental
anguish, which call be experienced only by one
having a nervous system. No moral damages
can be awarded to a juridical person. The
statement in the case of People vs Manero and
Mambulao Lumber vs PNB is a mere obiter
dictum hence it is not binding as a
jurisprudence.
 4
Arnold v. Wilits
Facts: In 1916, the Firm Willits & Patterson in
San Francisco entered into a contract with
Arnold whereby Arnold was to be employed for
a period of five years as the agent of
the firm here in the PI to operate an oil mill
for which he was to receive a minimum salary
of $200/mth, a 1% brokerage fee from all
purchases and sales of merchandise, and half of
the profits of the oil business and other
businesses. provided if the business was at a
loss, Arnold would receive $400/mth. Later,
Patterson retired and Willits acquired all
interests of the business. Willits organized a
new Corp in San Francisco which took over and
acquired all assets of the Firm Willits &
Patterson. Willits was the owner of all the
capital stock. New corp had the same name.
After, Willits, organized anew Corporation here
in the PI to take over all the business and assets
of thefirm here in the PI. Willits was the owner
of all the capital stock. Later, there was dispute
with regard to the construction of the contract
as a result, a new contract in the form of a
letter was entered into. Willits signed this. The
statements of account showed that 106K was
due and owing to Arnold. W&P Corp was in
financial trouble and all assets were turned over
to a creditor‘s committee. In 1922, Arnold filed
this complaint to recover 106K from W&P. W&P
argues that the 2nd contract was signed without
authority. And as counterclaim alleged that
Arnold took 30K from the Corp but only 19.1K
was due to him thus he owed 10.1K to W&P. CFI
ordered Arnold to return the 10.1K.
Issue:
Is the CFI correct?
Held:
No. The SC reverses. Arnold entitled to 68K plus
half of 75K, representing PNs.
Both Corp‘s organized by Willits were a One
Man Corporation. After the 2nd contract was
signed it was recognized by Willits that Arnold‘s
services were to be performed by its terms and
there never was any dispute between Arnold
and Willits. Although a new corp was created,
the new corp dealt with and treated Arnold as
its agent in the same manner as the previous
corp had, thus the new corp is bound by the
contract which the old firm made. In fact, the
2nd contract protected Willits from a larger
claim, which the accountant said, would be
over160K.Where a stock of a corporation is
owned by one person whereby the corp
functions only for the benefit of such individual
owner, the corp and the individual should be
deemed to be the same. Thus the corp is bound
by the contract.
Philippine Stock Exchange v. CA
Puerto Azul Land, Inc. (PALI) is a corporation
engaged in the real estate business. PALI was
granted permission by the Securities and
Exchange Commission (SEC) to sell its shares to
the public in order for PALI to develop its
properties. PALI then asked the Philippine Stock
Exchange (PSE) to list PALI’s stocks/shares to
facilitate exchange. The PSE Board of Governors
denied PALI’s application on the ground that
there were multiple claims on the assets of
PALI. Apparently, the Marcoses, Rebecco
Panlilio (trustee of the Marcoses), and some
other corporations were claiming assets if not
ownership over PALI. PALI then wrote a letter to
the SEC asking the latter to review PSE’s
decision. The SEC reversed PSE’s decisions and
ordered the latter to cause the listing of PALI
shares in the Exchange.
ISSUE: Whether or not it is within the power of
the SEC to reverse actions done by the PSE.
HELD: Yes. The SEC has both jurisdiction and
authority to look into the decision of PSE
pursuant to the Revised Securities Act and for
the purpose of ensuring fair administration of
the exchange. PSE, as a corporation itself and as
a stock exchange is subject to SEC’s jurisdiction,
regulation, and control. In order to insure fair
dealing of securities and a fair administration of
exchanges in the PSE, the SEC has the authority
to look into the rulings issued by the PSE. The
SEC is the entity with the primary say as to
whether or not securities, including shares of
stock of a corporation, may be traded or not in
the stock exchange.
 5
HOWEVER, in the case at bar, the Supreme
Court emphasized that the SEC may only
reverse decisions issued by the PSE if such are
tainted with bad faith. In this case, there was no
showing that PSE acted with bad faith when it
denied the application of PALI. Based on the
multiple adverse claims against the assets of
PALI, PSE deemed that granting PALI’s
application will only be contrary to the best
interest of the general public. It was reasonable
for the PSE to exercise its judgment in the
manner it deems appropriate for its business
identity, as long as no rights are trampled upon,
and public welfare is safeguarded.
Francisco v. Mejia
FACTS:
Gutierrez was the registered owner of a
parcel of land which was later subdivided into
five lots. In 1964, Gutierrez and Cardale
Financing and Realty Corporation executed a
Deed of Sale with Mortgage relating to the four
of the five lots for the consideration of
P800,000.00. Upon the execution of the deed,
Cardale paid Gutierrez P171,000.00. To secure
payment of the balance of the purchase price,
Cardale constituted a mortgage on three of the
four parcels of land.
In 1968, owing to Cardale's failure to
settle its mortgage obligation, Gutierrez filed a
complaint for rescission of the contract with the
Quezon City Regional Trial Court. In 1969,
during the pendency of the rescission case,
Gutierrez died and was substituted by her
executrix, respondent Rita C. Mejia.
In the meantime, the mortgaged
parcels of land became delinquent in the
payment of real estate taxes, which culminated
in their levy and auction sale in satisfaction of
the tax arrears. The highest bidder for the three
parcels of land was petitioner Merryland
Development Corporation, whose President and
majority stockholder is Francisco.
ISSUES:
Whether or not the corporate fiction of
Cardale will be pierced.
Whether or not the corporate entity of
Merryland must be pierced.
RULING:
YES.
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 merealter
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.
NO.
Merryland cannot be solidarily liable
with Francisco. The only act imputable to
Merryland in relation to the mortgaged
properties is that it purchased the same and
this by itself is not a fraudulent or wrongful act.
No evidence has been adduced to establish that
Merryland was a mere alter ego or business
conduit of Francisco. Time and again it has been
reiterated that mere ownership by a single
stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding
the separate corporate personality. Neither has
it been alleged or proven that Merryland is so
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organized and controlled and its affairs are so
conducted as to make it merely an
instrumentality, agency, conduit or adjunct of
Cardale. Even assuming that the businesses of
Cardale and Merryland are interrelated, this
alone is not justification for disregarding their
separate personalities, absent any showing that
Merryland was purposely used as a shield to
defraud creditors and third persons of their
rights. Thus, Merryland's separate juridical
personality must be upheld.
Concept Builders v. NRLC
FACTS:
Petitioner, a domestic corporation, with
principal office at 355 Maysan Road,
Valenzuela, Metro Manila, is engaged in the
construction business. Private respondents
were employed by said company as laborers,
carpenters and riggers.
Eventually, respondent’s services were
terminated. The Labor Arbiter then rendered
judgment ordering petitioner to reinstate
private respondents and to pay them back
wages. A writ of execution was then issued but
was partially satisfied because the sheriff
reported all the employees inside petitioner's
premises at 355 Maysan Road, Valenzuela,
Metro Manila, claimed that they were
employees of Hydro Pipes Philippines, Inc and
not by respondent. Subsequently, 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. 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.
ISSUE:
Whether or not petitioner corporation and HPPI
are one and the same.
RULING:
YES.
It is a fundamental principle of corporation law
that a corporation is an entity separate and
distinct from its stockholders and from other
corporations to which it may be connected.
But, this separate and distinct personality of a
corporation is merely a fiction created by law
for convenience and to promote justice. So,
when the notion of separate juridical
personality is used to defeat public
convenience, justify wrong, protect fraud or
defend crime, or is used as a device to defeat
the labor laws, this separate personality of the
corporation may be disregarded or the veil of
corporate fiction pierced. This is true likewise
when the corporation is merely an adjunct, a
business conduit or an alter ego of another
corporation.
The test in determining the applicability of the
doctrine of piercing the veil of corporate fiction
is as follows: a. Control, not mere majority or
complete stock control, but complete
domination, not only of finances but of policy
and business practice in respect to the
transaction attacked so that the corporate
entity as to this transaction had at the time no
separate mind, will or existence of its own; b.
Such control must have been used by
the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other
positive legal duty or dishonest and unjust act in
contravention of plaintiff's legal rights; and c.
The aforesaid control and breach of
duty must proximately cause the injury or
unjust loss complained of.
HPPI is obviously a business conduit of
Petitioner Corporation and its emergence was
skillfully orchestrated to avoid the financial
 7
liability that already attached to Petitioner
Corporation.
Lim v. CA
FACTS:
Petitioner Rufina Luy Lim is the surviving spouse
of late Pastor Y. Lim whose estate is the subject
of probate proceedings. The respondent herein
is the owner of the properties subject of this.
Said properties were included in the inventory
of estate late Pastor Lim. Thus he respondents
moved for the exclusion of said properties
which was denied by the trial court. Petitioner
contended upon filing an amended petition that
the properties were actually owned by Pastor
Lim and the same were registered under his
name, hence they should be included in the
inventory of his estate, and that during his
lifetime, he organized and wholly-owned the
five corporations, which are the private
respondents in the instant case.
ISSUE:
Whether or not the doctrine of piercing the
corporate veil is applicable.
RULING:
NO.
The test in determining the applicability of the
doctrine of piercing the veil of corporate fiction
is as follows: 1) Control, not mere majority or
complete stock control, but complete
domination, not only of finances but of policy
and business practice in respect to the
transaction attacked so that the corporate
entity as to this transaction had at the time no
separate mind, will or existence of its own; (2)
Such control must have been used by the
defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust act
in contravention of plaintiffs legal right; and (3)
The aforesaid control and breach of duty must
proximately cause the injury or unjust loss
complained of. The absence of any of these
elements prevents piercing the corporate veil.
In this case there is no showing that the
elements are present. Furthermore, it was
proven that said properties were registered in
the name of the corporation, hence the same
were owned by the corporation despite the fact
that, assuming true, it was Pastor Lim who
organized the corporation.
The Manila Hotel Corp v. NLRC
FACTS:
MHICL is a corporation duly organized and
existing under the laws of Hong Kong. MHC is
an “incorporator” of MHICL, owning 50% of its
capital stock. By virtue of a “management
agreement” with the Palace Hotel (Wang Fu
Company Limited), MHICL trained the personnel
and staff of the Palace Hotel at Beijing, China.
Respondent Santos accepted an employment
offer from Palace Hotel. On November 5, 1988,
respondent Santos left for Beijing, China. He
started to work at the Palace Hotel. A year later
he received a letter stating that his employment
is being terminated due to business reverses
brought about by the political upheaval in
China. On February 20, 1990, respondent
Santos filed a complaint for illegal dismissal.
ISSUE:
Whether or not the doctrine of piercing the
corporate veil is available to make MHC liable
for damages.
RULING:
NO.
MHC, as a separate and distinct juridical entity
cannot be held liable. True, MHC is an
incorporator of MHICL and owns fifty percent
(50%) of its capital stock. However, this is not
enough to pierce the veil of corporate fiction
between MHICL and MHC.
 8
Piercing the veil of corporate entity is an
equitable remedy. It is resorted to when the
corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or
defend a crime. It is done only when a
corporation is a mere alter ego or business
conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals, the
court held that “the mere ownership by a single
stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is
not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities.”
The tests in determining whether the corporate
veil may be pierced are: First, the defendant
must have control or complete domination of
the other corporation’s finances, policy and
business practices with regard to the
transaction attacked. There must be proof that
the other corporation had no separate mind,
will or existence with respect the act
complained of. Second, control must be used by
the defendant to commit fraud or wrong. Third,
the aforesaid control or breach of duty must be
the proximate cause of the injury or loss
complained of. The absence of any of the
elements prevents the piercing of the corporate
veil.
It is basic that a corporation has a personality
separate and distinct from those composing it
as well as from that of any other legal entity to
which it may be related. Clear and convincing
evidence is needed to pierce the veil of
corporate fiction. In this case, the court found
no evidence to show that MHICL and MHC are
one and the same entity.
San Juan Structural Steel Fabricators Inc. v. CA
FACTS:
A parcel of land was sold by Nenita Lee
Gruenberg, the corporate treasurer of
defendant corporation Motorich Sale in favor of
San Juan Structural and Steel Fabricators, Inc.
However, the latter failed to execute the
necessary Transfer of Rights/Deed of
Assignment in favor of plaintiff-appellant.
Hence a case for damages was filed. The
defendant corporation questions the validity of
the contract entered by its treasurer in its
behalf without authorization from the
corporation’s Board.
ISSUE:
Whether or not the doctrine of piercing the veil
of corporate fiction be applied to Motorich.
RULING:
NO.
The contract cannot bind Motorich, because it
never authorized or ratified such sale. A
corporation is a juridical person separate and
distinct from its stockholders or members.
Accordingly, the property of the corporation is
not the property of its stockholders or members
and may not be sold by the stockholders or
members without express authorization from
the corporation’s board of directors. The
corporation may act only through its board of
directors, or, when authorized either by its
bylaws or by its board resolution, through its
officers or agents in the normal course of
business. The general principles of agency
govern the relation between the corporation
and its officers or agents, subject to the articles
of incorporation, bylaws, or relevant provisions
of law.
As to the piercing of the corporate veil, the
same is not applicable. In the present case, the
Court finds no reason to pierce the corporate
veil of Respondent Motorich. Petitioner utterly
failed to establish that said corporation 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
petitioner.
Umali v. CA
FACTS:
 9
Santiago Rivera is the nephew of plaintiff
Mauricia Meer Vda. de Castillo. The Castillo
family is the owners of a parcel of land located
in Lucena City which was given as security for a
loan from the Development Banks 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 the sum of P70,000.00
immediately after the execution of the
agreement and to pay the additional amount of
P400,000.00 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 Model D-7 and D-8. Subsequently, a
Sales Agreement was executed on December
28, 1970, which was accepted by the latter and
executed Sales Agreement. The balance of the
consideration was secured by a surety bond
from ICP (Insurance Corporation of the Phil.)
which was in turn secured by a mortagage, the
properties of the Castillos.
ISSUE:
Whether or not the doctrine of piercing the veil
of corporate fiction is applicable.
RULING:
NO.
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.
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 therefore.
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.
Bataan Shipyard and Co. v. PCGG
FACTS:
This case arose from a sequestration order
issued by the PCGG under authority given by
the president. Such sequestration order was
sent and received by petitioner. Pursuant to this
sequestration orders, take over orders were
also issued to protect public interest and to
prevent the disposal or dissipation of business
enterprises and properties taken over by the
government of the Marcos Administration or by
entities or persons close to former President
Marcos, until the transactions leading to such
acquisition by the latter can be disposed of by
 10
the appropriate authorities. However, among
other facts, the petitioner questions the
exercise of PCGGs right of ownership and
management when it terminated several
contracts without the consent of both parties,
to enter contracts, and to operate its quarry
business, and especially its right ot vote during
stockholders’ meetings.
ISSUE:
Whether or not PCGG may vote in stockholders’
meetings.
RULING:
YES.
PCGG may properly exercise the prerogative to
vote sequestered stock of corporations, granted
to it by the President of the Philippines through
a Memorandum dated June 26, 1986. That
Memorandum authorizes the PCGG, pending
the outcome of proceedings to determine the
ownership of sequestered shares of stock, to
vote such shares of stock as it may have
sequestered in corporations at all stockholders'
meetings called for the election of directors,
declaration of dividends, amendment of the
Articles of Incorporation, etc. Moreover, in the
case at bar, there was adequate justification to
vote the incumbent directors out of office and
elect others in their stead because the evidence
showed prima facie that the former were just
tools of President Marcos and were no longer
owners of any stock in the firm, if they ever
were at all.
Complex electronics employees v. NLRC
FACTS:
Complex informed its Lite-On personnel
that a request from Lite On Philippines to lower
their selling price by 10% was not feasible as
they were already incurring losses at the
present prices of their products. Under such
circumstances, Complex regretfully informed
the employees that it was left with no
alternative but to close down the operations of
the Lite-On Line. The Union, however, decried
the decision and voted to declare a strike. Labor
unrest within the company eventually ensued.
In the evening of April 6, 1992, the
machinery, equipment and materials being used
for production at Complex were pulled-out
from the company premises and transferred to
the premises of Ionics Circuit, Inc. at Cabuyao,
Laguna. The following day, a total closure of
company operation was effected at Complex.
A complaint was, thereafter, filed with
the Labor Arbitration Branch of the NLRC for
unfair labor practice, illegal closure/illegal
lockout, money claims for vacation leave, sick
leave, unpaid wages, 13th month pay, damages
and attorney's fees. Ionics was impleaded as a
party defendant because the officers and
management personnel of Complex were also
holding office at Ionics with Lawrence Qua as
the President of both companies.
Ionics contended that it was an entity
separate and distinct from Complex and had
been in existence since July 5, 1984 or eight (8)
years before the labor dispute arose at
Complex. Like Complex, it was also engaged in
the semi-conductor business where the
machinery, equipment and materials were
consigned to them by their customers. While
admitting that Lawrence Qua, the President of
Complex was also the President of Ionics, the
latter denied having Qua as their owner since
he had no recorded subscription of
P1,200,000.00 in Ionics as claimed by the Union.
ISSUE:
Whether or not Lawrence Qua should
be held liable for the alleged illegal transfer of
machineries of Complex to Ionics.
RULING:
NO.
It is settled that in the absence of
malice or bad faith, a stockholder or an officer
of a corporation cannot be made personally
 11
liable for corporate liabilities. The fact that the
pull-out of the machinery, equipment and
materials was effected during nighttime is not
per se an indicia of bad faith on the part of
respondent Qua since he had no other
recourse, and the same was dictated by the
prevailing mood of unrest as the laborers were
already vandalizing the equipment, bent on
picketing the company premises and threats to
lock out the company officers were being made.
Such acts of respondent Qua were, in fact,
made pursuant to the demands of Complex's
customers who were already alarmed by the
pending labor dispute and imminent strike to be
stage by the laborers, to have their equipment,
machinery and materials pull out of Complex.
As such, these acts were merely done pursuant
to his official functions and were not, in any
way, made with evident bad faith.
As to the juridical personality of the
corporations, Ionics may be engaged in the
same business as that of Complex, but this fact
alone is not enough reason to pierce the veil of
corporate fiction of the corporation. Well-
settled is the rule that a corporation has a
personality separate and distinct from that of
its officers and stockholders. Likewise, mere
ownership by a single stockholder or by another
corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate
personality.
Acebedo Optical v. CA
FACTS: Petitioner applied with the Office of the
City Mayor of Iligan for a business permit. After
consideration of petitioner's application and the
opposition interposed thereto by local
optometrists, respondent City Mayor issued
Business Permit No. 5342 subject to the
following conditions that since it is a
corporation, Acebedo cannot put up an optical
clinic but only a commercial store; it cannot
examine and/or prescribe reading and similar
optical glasses for patients, because these are
functions of optical clinics; it cannot sell reading
and similar eyeglasses without a prescription
having first been made by an independent
optometrist (not its employee) or independent
optical clinic and can only sell directly to the
public, without need of a prescription, Ray-Ban
and similar eyeglasses; it cannot advertise
optical lenses and eyeglasses, but can advertise
Ray-Ban and similar glasses and frames; and is
allowed to grind lenses but only upon the
prescription of an independent optometrist.
Private respondent Samahan ng
Optometrist Sa Pilipinas (SOPI), Iligan Chapter,
through its Acting President, Dr. Frances B.
Apostol, lodged a complaint against the
petitioner before the Office of the City Mayor,
alleging that Acebedo had violated the
conditions set forth in its business permit and
requesting the cancellation and/or revocation
of such permit.
ISSUES: Whether or not the act of the
Respondent Mayor was lawful.
RULING:
NO. The authority of city mayors to issue or
grant licenses and business permits is beyond
cavil. However, the power to grant or issue
licenses or business permits must always be
exercised in accordance with law, with utmost
observance of the rights of all concerned to due
process and equal protection of the law. In the
case under consideration, the business permit
granted by respondent City Mayor to petitioner
was burdened with several conditions.
Distinction must be made between the grant of
a license or permit to do business and the
issuance of a license to engage in the practice of
a particular profession. The first is usually
granted by the local authorities and the second
is issued by the Board or Commission tasked to
regulate the particular profession. A business
permit authorizes the person, natural or
otherwise, to engage in business or some form
of commercial activity. A professional license,
on the other hand, is the grant of authority to a
natural person to engage in the practice or
exercise of his or her profession. A business
permit is issued primarily to regulate the
conduct of business and the City Mayor cannot,
through the issuance of such permit, regulate
 12
the practice of a profession, like that of
optometry. Such a function is within the
exclusive domain of the administrative agency
specifically empowered by law to supervise the
profession, in this case the Professional
Regulations Commission and the Board of
Examiners in Optometry.
Republic of the Philippines v. Sandiganbayan
FACTS: Eastern Telecommunications
Philippines, Inc. (ETPI) was one of the
corporations sequestered by the Presidential
Commission on Good Government (PCGG).
Among its stockholders were Roberto S.
Benedicto and Universal Molasses Corporation
(UNIMOLCO). Sometime in 1990, PCGG and
Benedicto entered into a compromise
agreement whereby Benedicto ceded to the
government 204,000 shares of stock in ETPI,
representing his fifty-one percent (51%) equity
therein. The other forty-nine percent (49%),
consisting of 196,000 shares of stock, were
released from sequestration and adjudicated by
final judgment to Benedicto and UNIMOLCO.
Furthermore, the government agreed to
withdraw the cases filed against Benedicto and
free him from further criminal prosecution.
Meanwhile, on motion of petitioner, through
the PCGG, the Sandiganbayan issued a
Resolution, dated May 7, 1996, authorizing the
entry in the Stock and Transfer Book of ETPI of
the transfer of ownership of 204,000 shares of
stock to petitioner, to be taken out of the
shareholdings of UNIMOLCO.
PCGG issued Resolution No. 96-142
enjoining all stockholders of ETPI from selling
shares of stock therein without the written
conformity of the PCGG. Subsequently, on July
24, 1996, UNIMOLCO and Smart
Communications executed a Deed of Absolute
Sale whereby UNIMOLCO sold its 196,000
shares of stock in ETPI to Smart. Prior to the
sale, Smart was not a stockholder of ETPI.
ISSUE: Whether or not petitioner was denied of
his pre-emptive right because of the defective
notice.
RULING:
NO. The records of the case clearly show that
the written notice by UNIMOLCO, the Offeror,
of its intention to sell its 196,000 shares of stock
was duly received on April 24, 1996 by the
President and Chairman of the Board of ETPI.
Moreover, the purpose of the notice
requirement in Article 10 of the ETPI Articles of
Incorporation is to give the stockholders
knowledge of the intended sale of shares of
stock of the corporation, in order that they may
exercise their preemptive right. Where it is
shown that a stockholder had actual knowledge
of the intended sale within the period
prescribed to exercise the right, the notice
requirement had been sufficiently met.
In the case at bar, PCGG had actual
knowledge of UNIMOLCO’s offer to sell its
shares of stock. In fact, it issued Resolution No.
96-142 enjoining the sale of the said shares of
stock to Smart. Petitioner, thus, cannot feign
lack of notice. PCGG had no more authority to
enjoin the sale of UNIMOLCO’s 196,000 shares
of stock, as it endeavored to do in Resolution
No. 96-142. As correctly found by the
Sandiganbayan, since the 196,000 shares of
stock had already been adjudicated by final
judgment to Benedicto and UNIMOLCO, PCGG
could no longer exercise power and authority
over the same.
PCGG v. Sandigan bayan
FACTS: On the explicit premise that 'vast
resources of the government have been
amassed by former President Ferdinand E.
Marcos, his immediate family, relatives, and
close associates both here and abroad,' the
Presidential Commission on Good Government
(PCGG) was created by Executive Order No. 1 to
assist the President in the recovery of the ill-
gotten wealth thus accumulated whether
located in the Philippines or abroad. Several
executive orders were then issued describing
the properties to be recovered. Among the
properties sequestered by the Commission
were shares of stock in the United Coconut
Planters Bank (UCPB) registered in the names of
 13
the alleged "one million coconut farmers," the
so-called Coconut Industry Investment Fund
companies (CIIF companies) and Private
Respondent Eduardo Cojuangco Jr. Six years
later, on February 13, 2001, the Board of
Directors of UCPB received from the ACCRA Law
Office a letter written on behalf of the
COCOFED and the alleged nameless one million
coconut farmers, demanding the holding of a
stockholders' meeting for the purpose of,
among others, electing the board of directors.
In response, the board approved a Resolution
calling for a stockholders' meeting on March 6,
2001 at three o'clock in the afternoon.
However, the same was meted by a Class Action
Omnibus Motion seeking to enjoin PCGG from
voting the UCPB shares of stock registered in
the respective names of the more than one
million coconut farmers; and to enjoin the
PCGG from voting the SMC shares registered in
the names of the 14 CIF holding companies
including those registered in the name of the
PCGG.
ISSUE: Whether or not PCGG may vote the
sequestered UCPB shares while the main case
for their reversion to the State is pending in the
Sandiganbayan.
RULING: YES. The SC holds that the
government should be allowed to continue
voting those shares inasmuch as they were
purchased with coconut levy funds since those
are prima facie public in character or, at the
very least, are "clearly affected with public
interest." The general rule is that the registered
owner of the shares of a corporation exercises
the right and the privilege of voting. This
principle applies even to shares that are
sequestered by the government, over which the
PCGG as a mere conservator cannot, as a
general rule, exercise acts of dominion. On the
other hand, it is authorized to vote these
sequestered shares registered in the names of
private persons and acquired with allegedly ill-
gotten wealth, if it is able to satisfy the two-
tiered test. Unfortunately, this test is not
applicable under the circumstances of this case.
Hence, the Court granted PCGG the right to
vote the sequestered shares because they
appeared to be assets belonging to the
government itself.
Mambulao v.pnb
FACTS: The plaintiff applied for an industrial
loan with interest with the PNB. To secure the
payment of the loan, the plaintiff mortgaged to
defendant PNB a parcel of land, together with
the buildings and improvements existing
thereon as well as various sawmill equipment,
rolling unit and other fixed assets of the
plaintiff. However, the plaintiff failed to pay the
amortizations on the amounts released to and
received by it. Repeated demands were made
upon the plaintiff to pay its obligation but it
failed or otherwise refused to do so. Upon
inspection and verification made by employees
of the PNB, it was found that the plaintiff had
already stopped operation about the end of
1957 or early part of 1958. Thus, PNB requested
for the foreclosure of the real estate mortgage
as well as the chattel mortgage.
ISSUE: Whether or not petitioner foreclosure of
the mortgage is tenable.
RULING:
NO. It is clear that there was no further
necessity to foreclose the mortgage of herein
appellant's chattels since the obligation has
already been paid for. On this ground alone, it
may be declared that the sale of appellant's
chattels, illegal and void. The Court took into
consideration the fact that the PNB must have
been led to believe that the stipulated 10% of
the unpaid loan for attorney's fees in the real
estate mortgage was legally maintainable, and
in accordance with such belief, herein appellee
bank insisted that the proceeds of the sale of
appellant's real property was deficient to
liquidate the latter's total indebtedness. Be that
as it may, however, still the subsequent sale of
herein appellant's chattels illegal and
 14
objectionable on other grounds. The parties
have agreed that in case of foreclosure, the sale
should be made elsewhere not necessarily
where the properties are located. This
stipulation is allowed under the law which
provides for the general rule. However, the sale
was made in the place where the properties are
situated. A clear violation of the agreement of
the parties. Thus, the foreclosure is not tenable.
Traders royal bank v. ca
FACTS: On March 30,1982, the Philippine
Blooming Mills, Inc. (PBM) and Alfredo Ching
jointly submitted to the Securities and Exchange
Commission a petition for suspension of
payments (SEC No. 2250) where Alfredo Ching
was joined as co-petitioner because under the
law, he was allegedly entitled, as surety, to avail
of the defenses of PBM and he was expected to
raise most of the stockholders' equity of Pl00
million being required under the plan for the
rehabilitation of PBM. Traders Royal Bank was
included among PBM's creditors named in
Schedule A accompanying PBM's petition for
suspension of payments. On May 13, 1983, the
petitioner bank filed a case against PBM and
Alfredo Ching, to collect P22,227,794.05
exclusive of interests, penalties and other bank
charges representing PBM's outstanding
obligation to the bank. Alfredo Ching, a
stockholder of PBM, was impleaded as co-
defendant for having signed as a surety for
PBM's obligations to the extent of ten million
pesos (Pl0,000,000) under a Deed of Suretyship
dated July 21, 1977. In its en banc decision, the
SEC declared that it had assumed jurisdiction
over petitioner Alfredo Ching pursuant to
Section 6, Rule 3 of the new Rules of Procedure
of the SEC providing that "parties in interest
without whom no final determination can be
had of an action shall be joined either as
complainant, petitioner or respondent" to
prevent multiplicity of suits. On July 9, 1982, the
SEC issued an Order placing PBM's business,
including its assets and liabilities, under
rehabilitation receivership, and ordered that
"all actions for claims listed in Schedule A of the
petition pending before any court or tribunal
are hereby suspended in whatever stage the
same may be, until further orders from the
Commission". As directed by the SEC, said order
was published once a week for three
consecutive weeks in the Bulletin Today,
Philippine Daily Express and Times Journal at
the expense of PBM and Alfredo Ching.
ISSUE: Whether or not the court a quo could
acquire jurisdiction over Ching in his personal
and individual capacity as a surety of PBM in the
collection suit filed by the bank, despite the fact
that PBM's obligation to the bank had been
placed under receivership by the SEC.
RULING:
YES. Although Ching was impleaded in SEC Case
No. 2250, as a co-petitioner of PBM, the SEC
could not assume jurisdiction over his person
and properties. The Securities and Exchange
Commission was empowered, as rehabilitation
receiver, to take custody and control of the
assets and properties of PBM only, for the SEC
has jurisdiction over corporations only not over
private individuals, except stockholders in an
intra-corporate dispute (Sec. 5, P.D. 902-A and
Sec. 2 of P.D. 1758). Being a nominal party in
SEC Case No. 2250, Ching's properties were not
included in the rehabilitation receivership that
the SEC constituted to take custody of PBM's
assets. Therefore, the petitioner bank was not
barred from filing a suit against Ching, as a
surety for PBM. An anomalous situation would
arise if individual sureties for debtor
corporations may escape liability by simply co-
filing with the corporation a petition for
suspension of payments in the SEC whose
jurisdiction is limited only to corporations and
their corporate assets.
Ramoso v. ca
FACTS: Avelina Ramoso and several others are
investors and majority stock holders of the
franchise branches of Commercial Credit
Corporation (CCC). CCC is a lending and
 15
investment firm. CCC contracted with its
franchise branches for the latter to assign its
receivables to CCC. But this practice was
discontinued due to a prohibition (DOSRI rule)
issued by the Central Bank where corporations
are prohibited from lending funds to persons
with related interests, among others. To
circumvent this, CCC incorporated CCC Equity, a
wholly owned subsidiary to manage the
franchise branches. CCC later changed its name
to General Credit Corporation (GCC).
In 1981, Ramoso et al alleged that they
discovered several bad business practices being
conducted by GCC; that such questionable
practices divested GCC of its assets thereby
placing the franchise branches at a
disadvantage; that GCC, through CCC Equity
mismanaged the franchise branches thereby
causing imminent losses to the investors.
Ramoso et al then sued GCC before the
Securities and Exchange Commission. The
hearing officer ruled in favor of Ramoso et al.
He pierced the veil of corporate fiction and he
declared that the franchise branches, GCC, and
CCC equity are one and the same corporation;
that as such, the franchise branches, in whom
Ramoso et al invested, are not liable to the
obligations incurred by GCC. The SEC en banc
however reversed the ruling of the hearing
officer. The Court of Appeals affirmed the SEC
en banc.
ISSUE: Whether or not the veil of corporate
fiction should be pierced.
HELD: No. Ramoso et al did not properly plead
their cause. They merely alleged that CCC Equity
is a conduit of GCC. As found by the SEC en
banc, Ramoso et al were not able to prove that
CCC Equity was incorporated in order to
perpetrate fraud against them. Whether the
existence of the corporation should be pierced
depends on questions of facts, appropriately
pleaded. Mere allegation that a corporation is
the alter ego of the individual stockholders is
insufficient. The presumption is that the
stockholders or officers and the corporation are
distinct entities. The burden of proving
otherwise is on the party seeking to have the
court pierce the veil of the corporate entity. It
was not shown that the debts incurred by GCC
were actually incurred in bad faith. Further,
there is a pending case relating to the liability of
Ramoso et al as guarantors – that will be the
proper forum to raise their respective liability as
regards said debts.
Heirs of Durano Sr. v. UY
Facts: Ramon Durano III & wife instituted an
action for damages against Uy, etc. accusing
them of officiating a hate campaign against
them by lodging complaints in the police for
‘invasion of property’; sending complaints to
the Office of the President depicting them as
oppressors, land grabbers & usurpers;
spreading false rumors & damaging tales w/c
put them into public contempt & ridicule.
In their answer, Uy, etc. lodged affirmative
defenses, demanded the return of their
property & made counterclaims for actual,
moral & exemplary damages. They claim that in
the first week of August 1970, they received
mimeographed notices signed by Durano, Sr.
informing them that the land they were tilling,
formerly owned by Cepco was purchased by
Durano & Co, directing them to immediately
turn over the property. Even before they could
vacate, Durano & Co. proceeded to bulldoze &
destroy their property & fire at air
even. September 15, 1970 Durano & Co. sold
the property to Durano III who proceeded to
register the lands in his name. They claim that
they were deprived of their independent source
of income, were made victims of serious
violence & demanded damages for cost of
improvements on the land that were destroyed.
The Duranos moved for the dismissal of their
complaint w/c the trial court granted w/o
prejudice to the right of Uy, etc. to maintain
their counterclaim. The counterclaim was later
upheld. This decision was affirmed by the
CA. Hence this petition.
 16
Issue: WON Durano can invoke the doctrine of
separate corporate personality to evade liability
for damages
Held: Denied & CA decision modified. The
Duranos hinge their claim on the TCTs issued in
the name of Durano III. Their validity was put
into serious doubt by the ff: a) the certificates
reveal the lack of registered title of Cepoc to
the Properties; b) alleged reconstituted titles of
Cepoc were not produced in evidence; c) deed
of sale between Cepoc & Durano & Co. was un
notarized & thus un registerable
Fraud in the issuance of a certificate of title may
be raised only in an action expressly instituted
for that purpose; and not collaterally as in an
action for reconveyance & damages. The rule
on indefeasibility of title – Torrens titles can
only be attacked for fraud w/in 1 year from the
date of issuance of the decree of registration;
an action for reconveyance may prosper if a
property wrongfully registered has not passed
to an innocent purchaser for value. The
purchase of Durano & Co. could not be said to
have been in good faith since it is not disputed
that Durano III acquired the property w/ full
knowledge of Uy’s occupancy thereon. Uy’s
action for reconveyance will prosper, it being
clear that the property, wrongfully registered in
the name of Durano III, has not passed to an
innocent purchaser for value. Notarization of
the deed of sale is essential to its registrability,
& the action of the RD in allowing the
registration of the unacknowledged deed of
sale was unauthorized & did not render validity
to the registration of the document. A buyer
who could not have failed to know or discover
that the land sold to him was in the adverse
possession of another is a buyer in bad faith. A
purchaser cannot just close his eyes to facts w/c
should put a reasonable man upon his guard,
such as when the subject of the sale is in the
possession of persons other than the seller. Uy
& company were in open possession &
occupancy of the properties when Durano & Co.
supposedly purchased the same from Cepoc. In
applying the instrumentality or alter ego
doctrine, the courts are concerned w/ reality &
not form, w/ how the corp operated & the
individual defendant’s relationship to that
operation. Whether a corporation is a mere
alter ego is purely one of fact. Shortly after the
sale by Cepco to Durano & Co., the latter sold
the property to Durano III, who immediately
procured the registration of the property in his
name. Obviously, Durano & Co. was used by
Durano III,etc. as an instrumentality to
appropriate the disputed property for
themselves. Test to enable piercing of the veil,
except in express agency, estoppel or direct
tort: a)Control, not mere majority or complete
domination; b)Such control must have e=been
used by the defendant to commit fraud or
wrong, etc.; c)The aforesaid control & breach of
duty must approximately cause the injury or
unjust loss complained of.
• Sec.8 Rule 51 indicates that the CA is not
limited to reviewing only those errors assigned
by appellant but also those closely related to or
dependent on an assigned error. CA is imbued
w/ sufficient discretion to review matters.
• Ordinary acquisitive prescription, in the case
of immovable property, requires possession of
the thing in good faith & w/ just title for a
period of 10 years.
• Remedies of an owner on whose land
somebody has built in bad faith: a) appropriate
what has been built w/o any obligation to pay
indemnity; b) demand that the builder remove
what he had built; c) compel the builder to pay
the value of the land. In any case, landowner is
entitled to damages (Art.451)
Robledo v. NLRC
FACT OF THE CASE
Robledo ET. Al. filed a Petition for Review of the
Decision of NLRC, setting aside the decision of
the Labor Arbiter, which held private
respondents jointly and severally liable to the
petitioners for overtime and legal holiday pay.
Petitioners were former employees of Bacani
Security and Protective Agency (BPSA). They
were employed as security guards at different
times during the period 1969 to December 1989
when BPSA ceased to operate. BPSA was a
 17
single proprietorship owned, managed, and
operated by the late Felipe Bacani. On
December 31, 1989, Felipe Bacani retired the
business name and BSPA ceased to operate
effective on that day. On Jan. 15, 1990 Felipe
Bacani died. An intestate proceeding was
instituted for the settlement of his estate
before Pasig-RTC. Earlier, on Oct. 26, 1989,
respondent Bacani Security and Allied Services
Co., Inc. (BASEC) had been organized and
registered as a corporation with SEC. Several of
the incorporator (3) surnamed Bacani, and that
includes the daughter of the late Felipe Bacani.
On July 5, 1990, the petitioners filed a
complaint with the DOLE for underpayment of
wages and nonpayment of overtime pay and
other accrued benefits, and for the return of
their cash bond, which they posted, with BPSA.
Made respondents were BSPA and BASEC. On
March 1, 1992, the Labor Arbiter rendered a
decision upholding the right of petitioners,
finding the complainants entitled to their
money claims to be paid by all the respondents’
solidarily. On appeal, the NLRC reversed the
decision declaring that the Labor Arbiter is
without jurisdiction and instead suggested that
petitioners file their claims with Pasig-RTC
where an intestate proceeding of Bacani’s
estate was pending. Petitioners moved for
reconsideration but their motion was denied for
lack of merit. The case was elevated to the SC
and was treated as a special civil action of
certiorari to determine whether the NLRC
committed a grave abuse of discretion in
reversing the Labor Arbiter’s decision.
ISSUE
Whether Bacani Security and Allied Services,
Inc. (BASEC) can be held liable for claims of
petitioners against Bacani Security and
Protective Agency (BSPA).
RULING
No. Petitioners contend that public respondent,
NLRC, erred in setting aside the Labor Arbiter’s
judgment on the ground that BASEC is the same
entity as BSPA the latter being owned and
controlled by one and the same family, the
Bacani family. For this reason they urge that
corporate fiction should be disregarded and
BASEC should be held liable for the obligations
of the defunct BSPA. As correctly found by the
NLRC, BASEC is an entity separate and distinct
from that of BSPA. BSPA is a single
proprietorship owned and operated by Felipe
Bacani. Hence, its debts and obligations were
the personal obligations of its owner.
Petitioner’s claims, which are based on these
debts and personal obligations, did not survive
the death of Felipe Bacani on Jan. 15, 1990 and
should have been filed instead in the intestate
proceedings involving his estate.
Boyer-Roxas v. CA
FACTS: The corporation, Heirs of Eugenia Roxas
Inc, wasestablished to engage in agriculture to d
evelop theproperties inherited from Eugenia Ro
xas and EufroncioRoxas, which includes the
land upon which the HiddenValley Springs Resor
t was put up, including variousimprovements
thereon, using corporate funds. The AOI
of Heirs Inc. was amended for this purpose.
Heirs Inc. claims that Boyer-
Roxas and Guillermo Roxas had been in
possession of the various properties and
improvements in the resort and only upon the
tolerance of the corporation. It was
alleged that they committed acts that impeded
the corporation’s expansion and normal
operation of the
resort. They also did not comply with court and
regulatory orders, and thus the corporation
adopted a resolution authorizing
the ejectment of the
defendants. TC grants. CA affirms. Boyer and
Roxas contend that, being stockholders, their
possession of the properties
of the corporation must be respected in view of
their ownership of an aliquot portion of all
properties of the corporation.
ISSUE:WON the possession of the properties
in question must be respected in view of being
a stockholder.
 18
HELD:NO. Regarding properties owned by the
corporation, under the doctrine of corporate
entity “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. A share of stock only typifies an
aliquot part of the corporation’s property,
or theright toshare in its proceeds to that exten
t when distributedaccording to law and equity,
but its holder is not the owner of any part of
the capital of the corporation, nor is he
entitled to the possession of any definite portio
n of its property or assets. The stockholder is
not a co-owner or tenant in common of the
corporate property
National Development Bank v. PDB
Facts: Agrix Marketing executed in favor of
respondent a real estate mortgage over three
parcels of land. Agrix later on went bankrupt. In
order to rehabilitate the
company, then President Marcos issued Preside
ntial Decree 1717 whichmandated, among othe
rs, the extinguishing of all the mortgages and lie
nsattaching to the property of Agrix, and
creating a Claims Committee to
processclaims against the company to be admin
istered mainly by NDC. Respondentthereon filed
a claim against the company before the Commi
ttee. Petitionershowever filed a petition
with the RTC of Calamba, Laguna invoking
the provision of the law which cancels all
mortgage liens against it. Respondent took
measures to extra judicially foreclose which the
petitioners opposed by filing another case in
the same court. These cases were consolidated.
The RTC held in favor of the respondent on the
ground of unconstitutionality of the decree;
mainly violation of the separation of powers,
impairment of obligation of contracts, and
violation of the equal protection clause. Hence
this petition.
Issue: Is the respondent estopped from
questioning the constitutionality of the law
since they first abided by it by filing a claim with
the Committee?
•Is PD 1717 unconstitutional?
Ruling: On the issue of estoppel, the Court held
that it could not apply in the present case since
when the respondent filed his claim, President
Marcos was the supreme ruler of the country
and they could not question his acts even
before the courts because of his absolute power
over all government institutions when he was
the President. The creation of New Agrix as
mandated by the decree was also ruled as
unconstitutional
since it violated the prohibition that
the Batasang Pambansa(Congress) shall not pro
vide for the formation, organization, or regulati
on of private corporations unless such corporat
ions are owned or controlled by the
governmen. PD 1717 was held as
unconstitutional on the other grounds that it
was an invalid exercise of police power, It had
no lawful subject and no lawful method. It
violated due process by extinguishing all
mortgages and liens and interests which are
property rights unjustly taken. It also violated
the equal protection clause
bylumping together all secured and unsecured c
reditors. It also impaired theobligation of
contracts, even though it only involved purely
private interests.
PCGG v. sandiganbayan
FACTS: On 7 August 1991, the PCGG conducted
an Eastern Telecommunications, Philippines,
Inc. (ETPI) stockholders meeting during which a
PCGG controlled board of directors was elected.
A special stockholders meeting was later
convened by the registered ETPI stockholders
wherein another set of board of directors was
elected, as a result of which two sets of such
board and officers were elected. Victor Africa, a
stockholder of ETPI, alleging that the PCGG had
since been "illegally 'exercising' the rights of
stockholders of ETPI," especially in the election
of the members of the board of directors, filed
a motion before the Sandiganbayan, prayed
 19

that said court order the "calling and holding of
the ETPI annual stockholders meeting for 1992
under the court's control and supervision and
prescribed guidelines." The PCGG did not object
to Africa's motion provided that "(1) An Order
be issued upholding the right of PCGG to vote
all the Class "A" shares of ETPI; (2) In the
alternative, in the remote event that PCGG's
right to vote the sequestered shares be not
upheld, an Order be issued (a) disregarding the
Stock and Transfer Book and Booklet of Stock
Certificates of ETPI in determining who can vote
the shares in an Annual Stockholders Meeting
of ETPI, (b) allowing PCGG to vote 23.9% of the
total subscription in ETPI, and (c) directing the
amendment of the Articles of Incorporation and
By-laws of ETPI providing for the minimum
safeguards for the conservation of assets prior
to the calling of a stockholders meeting. The
Sandiganbayan resolved Africa's motion,
ordering the conduct of an annual stockholders
meeting of ETPI, for 1992. Assailing the
foregoing resolution, the PCGG filed before the
Supreme Court a petition for Certiorari,
Mandamus and Prohibition.
The PCGG is entitled to vote the shares ceded
to it by Roberto S. Benedicto and his controlled
corporations under the Compromise
Agreement, provided that the shares are first
registered in the name of the PCGG. The PCGG
may not register the transfer of the Malacañang
and the Nieto shares in the ETPI Stock and
Transfer Book; however, it may vote the same
as conservator provided that the PCGG satisfies
the two-tiered test devised by the Court in
Cojuangco v. Calpo. (4) The safeguards laid
down in the case of Cojuangco v. Roxas shall be
incorporated in the ETPI Articles of
Incorporation substantially contemporaneous
to, but not before, the election of the ETPI
Board of Directors. (5) Members of the
Sandiganbayan shall not participate in the
stockholders meeting for the election of the
ETPI Board of Directors.

ISSUE:

Whether or notthe PCGG can vote the

sequestered ETPI Class "A" shares in the
stockholders meeting for the election of the
board of directors.

RULING:

YES.

The PCGG cannot vote sequestered

shares to elect the ETPI Board of Directors or to
amend the Articles of Incorporation for the
purpose of increasing the authorized capital
stock unless there is a prima facie evidence
showing that said shares are ill-gotten and
there is an imminent danger of dissipation.
(2)The ETPI Stock and Transfer Book should be
the basis for determining which persons have
the right to vote in the stockholders meeting for
the election of the ETPI Board of Directors. (3)