Case No.

2
G.R. No. 155650. July 20, 2006.
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. COURT OF APPEALS, CITY OF
PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE,
CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents.

FACTS:
As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA
Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land. The MIAA Charter further
provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless
specifically approved by the President of the Philippines. The OGCC opined that the Local Government Code of 1991
withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the
real estate tax already due. MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque and
the Mayor of the City threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the
real estate tax delinquency.

MIAA filed with the Court of Appeals an original petition for prohibition and injunction. The petition sought to restrain
the City of Parañaque from imposing real estate tax on, levying... against, and auctioning for public sale the Airport Lands
and Buildings. MIAA insists that it is exempt from real estate tax under Section 234 of the Local Government Code
because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the
principle that the government cannot tax itself. Respondents invoke Section 193 of the Local Government Code, which
expressly withdrew the tax exemption privileges of "government owned and controlled corporations" upon the effectivity
of the Local Government Code.

ISSUE: Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws.

RULING: Yes, MIAA’s Airport Lands and Buildings are exempt from real estate tax imposed by local governments.
While there is no dispute that a government-owned or controlled corporation is not exempt from real estate tax, MIAA is
not a government-owned or controlled corporation; A government-owned or controlled corporation must be “organized as
a stock or non-stock corporation,” of which MIAA is neither; MIAA is not a stock corporation because it has no capital
stock divided into shares.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-
stock corporation as “one where no part of its income is distributable as dividends to its members, trustees or officers.” A
non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of
MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their
income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating
income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled
corporation. What then is the legal status of MIAA within the National Government? MIAA is a government
instrumentalityvested with corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the
Introductory Provisions of the Administrative Code defines a government “instrumentality” as follows: SEC. 2. General
Terms Defined.––x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis
supplied).

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation.
Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental
powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises “all
the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of
this Executive Order.”
Case No.4
Sulo ng Bayan vs. Araneta
GR L-31061, 17 August 1976
Facts:
On 26 April 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First Instance of Bulacan, Fifth
Judicial District, Valenzuela, Bulacan, against Gregorio Araneta Inc. (GAI), Paradise Farms Inc., National Waterworks &
Sewerage Authority (NAWASA), Hacienda Caretas Inc., and the Register of Deeds of Bulacan to recover the ownership
and possession of a large tract of land in San Jose del Monte, Bulacan, containing an area of 27,982,250 sqm. registered
under the Torrens System in the name of Gregorio Araneta, Inc, et. al.'s predecessors-in-interest, who are members of the
corporation.
On 2 September 1966, Gregorio Araneta,Inc. filed a motion to dismiss the amended complaint on the grounds that the
complaint states no cause of action and that the cause of action, if any, is barred by prescription and laches. Paradise
Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss based on the same grounds. NAWASA did not file any
motion to dismiss but pleaded in its answer the lack of cause of action by Sulo ng Bayan Inc. and the barring of such
action by prescription and laches.
On 24 January 1967, the trial court issued an Order dismissing the amended complaint. On 14 February 1967, Sulo ng
Bayan filed a motion to reconsider the Order of dismissal, arguing that the complaint states a sufficient cause of action
because the subject matter of the controversy in one of common interest to the members of the corporation who are so
numerous that the present complaint should be treated as a class suit. The motion was denied by the trial court in its Order
dated 22 February 1967. Sulo ng Bayan appealed to the Court of Appeals. On 3 September 1969, the Court of Appeals
certified the case to the Supreme Court for resolution of the legal issues involved in the controversy, since it is a question
of law.
Issue:
Whether the corporation may institute an action in behalf of its individual members for the recovery of certain parcels of
land allegedly owned by said members.
Ruling:
A corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members
who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members.
The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in
it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members.
A corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation.
The mere fact that one is president of a corporation does not render the property which he owns or possesses the property
of the corporation, since the president, as individual, and the corporation are separate entities. Similarly, stockholders in a
corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder thereof to an
allotment in the distribution of the land of the corporation upon surrender of their stock certificates were considered not to
have such legal or equitable title or interest in the land, as would support a suit for title, especially against parties other
than the corporation. It must be noted, however, that the juridical personality of the corporation, as separate and distinct
from the persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the ends of
justice.
This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it
is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where necessary to achieve equity. It has not
been claimed that the members have assigned or transferred whatever rights they may have on the land in question to the
corporation. Absent any showing of interest, a corporation 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. Thus, the appeal was dismissed.
Case No.7
CONCEPT BUILDERS, INC. vs. NLRC
G.R. No. 108734. May 29, 1996
FACTS:
Petitioner is a domestic corporation engaged in construction business. Private respondents were employed by the said
company as laborers, carpenters and riggers. Private respondents were served individual written notices of termination of
employment stating that their contracts of employment has expired and the projects in which they were hired had been
completed. Respondent however found out that at the time of termination, the project in which they were hired had not yet
finished and completed. Private respondent filed a complaint for illegal dismissal. Labor Arbiter rendered a decision
against the petitioner which was affirmed by the NLRC. Labor Arbiter issued a writ of execution which was partially
satisfied. The special sheriff recommended that a break open order be issued to enable him to enter petitioner’s property.
Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied by the
sheriff were owned Hydro Pipes Philippines, Inc. (HPPI) of which he is the vice president. Private respondent alleged that
HPPI and petitioner were owned by the same incorporators/stockholders. HPPI filed an opposition to private respondents
motion contending that HPPI is a corporation separate and distinct from petitioner; that the doctrine of piercing the veil
should not be applied in the absence of any showing that HPPI was created in order to evade petitioner’s liability to
private respondent.
ISSUE:
Whether or not veil of corporate fiction should be pierced?
RULING:
YES. Veil of corporate fiction should be pierced.
Under the law a corporation the 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 convenience
and justify a wrong, protect fraud or defend a crime, this separate personality may be disregarded. This is likewise true
when the corporation is merely an adjunct business conduit or an alter ego of another corporation. In the given case,
petitioner claimed that it ceased its business operation on April 29, 1986, the same day when HPPI submitted an
information sheet containing the same office address as that of the petitioner. Clearly, petitioner ceased its operation
business in order to evade the payment to respondent backwages and to bar their reinstatement. HPPI is obviously a
business conduit of petitioner orchestrated to avoid the financial liability that is already attached to the petitioner.
Case No. 8

VILLA REY TRANSIT, INC., plaintiff-appellant vs. FERRER, PANTRANCO and PSC, defendants-appellants.
PANTRANCO, third-party plaintiff-appellant, vs. VILLARAMA, third-party defendant-appellee.

G.R. No. L-23893 October 29, 1968 ANGELES, J.:

FACTS:

Jose Villarama was an operator of a bus transportation pursuant to two certificates of public convenience granted him by
the Public Service Commission (PSC). Later, he sold the certificates to the Pangasinan Transportation Company, Inc.
(Pantranco) with the condition that the seller (Villarama) "shall not for a period of 10 years, apply for any TPU service
identical or competing with the buyer."

Barely three months thereafter, a corporation called Villa Rey Transit, Inc. (the Corporation) was organized with a capital
stock of P500,000.00 divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the subscribed stock;
Natividad Villarama (wife of Jose Villarama) was one of the incorporators, and she subscribed for P1,000.00; the balance
of P199,000.00 was subscribed by the brother and sister-in-law of Jose Villarama; of the subscribed capital stock,
P105,000.00 was paid to the treasurer of the corporation, Natividad.

In less than a month after its registration with the SEC, the Corporation bought five certificates of public convenience and
49 buses from one Valentin Fernando. Later, the Sheriff of Manila levied on 2 of the 5 certificates, in favor of Eusebio
Ferrer, judgment creditor, against Fernando, judgment debtor. A public sale was conducted. Ferrer was the highest bidder.
Ferrer sold the two certificates to Pantranco.

The Corporation filed a complaint against Ferrer, Pantranco and the PSC for the annulment of the sheriff's sale. Pantranco,
on its part, filed a third-party complaint against Villarama, alleging that Villarama and/or the Corporation was disqualified
from operating the two certificates in question by virtue of the previous agreement. The trial court declared null and void
the sheriff's sale of two certificates of public convenience in favor of Ferrer and the subsequent sale thereof by the latter to
Pantranco and declaring Villa Rey Transit, Inc., to be the lawful owner of the said certificates of public convenience.

Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey Transit, Inc. (Corporation) is a distinct
and separate entity from Villarama. Ferrer, for his part, challenges the decision insofar as it holds that the sheriff's sale is
null and void.

ISSUE: Whether the stipulation between Villarama and Pantranco binds Villa Rey Transit, Inc.?

RULING:

Yes. The Supreme Court decision in is the affirmative. The restrictive clause in the contract entered into by the Villarama
and Pantranco is also enforceable and binding against the said Corporation. 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. The evidence has disclosed that
Villarama, albeit was not an incorporator or stockholder of the Corporation, his wife, however, was an incorporator and
was elected treasurer of the Corporation. The evidence further shows that the initial cash capitalization of the corporation
was mostly financed by Villarama; he 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 and P100,000.00 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. The foregoing circumstances are strong persuasive evidence
showing that Villarama has been too much involved in the affairs of the Corporation to altogether negate the claim that he
was only a part-time general manager. They show beyond doubt that the Corporation is his alter ego.
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.
Case No. 10
G.R. No. 142435 April 30, 2003
ESTELITA BURGOS LIPAT and ALFREDO LIPAT vs. PACIFIC BANKING CORPORATION,
Facts:
Spouses Alfredo and Estelita Lipat, owned "Bela's Export Trading" (BET), a single proprietorship engaged in the
manufacture of garments for domestic and foreign consumption. The Lipats also owned the "Mystical Fashions" in the US
which sells goods imported from the Philippines through BET.
To facilitate the convenient operation of BET, Estelita executed SPA appointing Teresita, her daughter, to obtain loans
and other credit accommodations from respondent Pacific Bank. She also authorized Teresita to execute mortgage
contracts on properties owned or co-owned by her as security for the obligations.
A loan was secured and as security therefore a Real Estate Mortgage (REM) was executed over the property of the
spouses. Sometime after, BET was incorporated into a family corporation named Bela’s Export Corporation (BEC) and
the loan was restructured in its name. Subsequent loans were obtained in behalf of BEC all secured by the previous REM.
BEC defaulted in its payments which led to the foreclosure and sale of the mortgaged property. The spouses moved to
annul the sale alleging that BEC is a distinct and separate personality from them and that the REM was executed only to
secure BET’s loan. Both trial court and CA ruled to pierce the corporate veil to hold petitioner spouses liable for BEC’s
obligation.
Issue:
Whether or not the doctrine of piercing the veil of corporate fiction is applicable in this case.
Ruling:
YES. The doctrine of piercing the veil of corporate fiction is applicable in this case.
We find that the evidence on record demolishes, rather than buttresses, petitioners’ contention that BET and BEC are
separate business entities. Note that Estelita Lipat admitted that she and her husband, Alfredo, were the owners of BET
and were two of the incorporators and majority stockholders of BEC. It is also undisputed that Estelita Lipat executed a
special power of attorney in favor of her daughter, Teresita, to obtain loans and credit lines from Pacific Bank on her
behalf. Incidentally, Teresita was designated as executive-vice president and general manager of both BET and BEC,
respectively. It could not have been coincidental that BET and BEC are so intertwined with each other in terms of
ownership, business purpose, and management. Apparently, BET and BEC are one and the same and the latter is a conduit
of and merely succeeded the former. Petitioners’ attempt to isolate themselves from and hide behind the corporate
personality of BEC so as to evade their liabilities to Pacific Bank is precisely what the classical doctrine of piercing the
veil of corporate entity seeks to prevent and remedy.
In our view, BEC is a mere continuation and successor of BET, and petitioners cannot evade their obligations in the
mortgage contract secured under the name of BEC on the pretext that it was signed for the benefit and under the name of
BET. We are thus constrained to rule that the Court of Appeals did not err when it applied the instrumentality doctrine in
piercing the corporate veil of BEC.
Case No.11

TIMES TRANSPORTATION COMPANY, INC., petitioner,

vs.
SANTOS SOTELO
G.R. No. 163786 February 16, 2005 YNARES-SANTIAGO, J.:

FACTS:

Petitioner Times Transportation Company, Inc. (Times) is a corporation engaged in the business of land transportation.
Prior to its closure in 1997, the Times Employees Union (TEU) was formed and issued a certificate of union registration.
Times challenged the legitimacy of TEU by filing a petition for the cancellation of its union registration.

In a certification election held on July 1, 1997, TEU was certified as the sole and exclusive collective bargaining agent in
Times. Consequently, TEU’s president wrote the management of Times and requested for collective bargaining. Times
refused on the ground that the decision of the Med-Arbiter upholding the validity of the certification election was not yet
final and executory.

TEU filed a Notice of Strike on August 8, 1997. Another conciliation/mediation proceeding was conducted for the
purpose of settling the brewing dispute. In the meantime, Times’ management implemented a retrenchment program and
notices of retrenchment.

On October 17, 1997, TEU held a strike vote on grounds of unfair labor practice on the part of Times. For alleged
participation in what it deemed was an illegal strike, Times terminated all the 123 striking employees by virtue of two
notices dated October 26, 1997 and November 24, 1997. On November 17, 1997, then DOLE Secretary Quisumbing
issued the second return-to-work order certifying the dispute to the NLRC. While the strike was ended, the employees
were no longer admitted back to work.

In the meantime, by December 12, 1997, Mencorp Transport Systems, Inc. (Mencorp) had acquired ownership over
Times’ Certificates of Public Convenience and a number of its bus units by virtue of several deeds of sale.4 Mencorp is
controlled and operated by Mrs. Virginia Mendoza, daughter of Santiago Rondaris, the majority stockholder of Times.

On May 21, 1998, the NLRC rendered a decision5 in the cases certified to it by the DOLE, the dispositive portion of which
read:

WHEREFORE, the respondents’ first strike, conducted from March 3, 1997 to March 12, 1997, is hereby declared
LEGAL; its second strike, which commenced on October 17, 1997, is hereby declared ILLEGAL. Consequently, those …
23 persons who participated in the illegal strike … are deemed to have lost their employment status and were therefore
validly dismissed from employment: …

Times and TEU both appealed the decision of the NLRC, which the Court of Appeals affirmed on November 17, 2000.

NLRC DECISION: WHEREFORE, premises considered, judgment is hereby entered FINDING that the dismissals of
complainants, excluding the expunged ones, by respondent Times Transit (sic) Company, Inc. effected, participated in,
authorized or ratified by respondent Santiago Rondaris constituted the prohibited act of unfair labor practice under Article
248(a) and (e) of the Labor Code, as amended and hence, illegal and that the sale of said respondent company to
respondents Mencorp Transport Systems Company (sic), Inc. and/or Virginia Mendoza and Reynaldo Mendoza was
simulated and/or effected in bad faith, ORDERING:The monetary award amounted to P43,347,341.69.

On March 4, 2002, Times, Mencorp and the Spouses Mendoza submitted their respective memorandum of appeal to the
NLRC with motions to reduce the bond. Mencorp posted a P5 million bond issued by Security Pacific Assurance Corp.
(SPAC).

On April 30, 2002, the NLRC issued an order disposing of the said motion, thus: WHEREFORE, premises considered, the
Urgent Motion for Reduction of Bond is denied for lack of merit.
On May 18, 2002, Times moved to reconsider said order arguing mainly that it did not have sufficient funds to put up the
required bond. On July 26, 2002, Mencorp and the Spouses Mendoza posted an additional P10 million appeal bond. Thus
far, the total amount of bond posted was P15 million.

August 7, 2002, the NLRC granted the Motion for Reduction of Bond and approved the P10 million additional appeal
bond.

On September 17, 2002, the NLRC rendered its decision, stating:

WHEREFORE, the foregoing premises duly considered, the decision appealed from is hereby VACATED.

ISSUE:

W/N NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DELAYING THE RESOLUTION OF TIMES
MOTION FOR RECONSIDERATION, THAT NLRC UNNECESSARILY PROLONGED THE PERIOD OF APPEAL.

W/N THE SALE OF TIMES TO TRANSPORTATION COMPANY INC. TO MENCORP TRANSPORT SYSTEM INC
IS VALID

HELD:

1.) YES. NLRC COMITTED A GRAVE ABUSE OF DISCRETION IN PROLONGING THE PERIOD OF THE
APPEAL.

Article 223 of the Labor Code provides that in case of a judgment involving a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited
by the NLRC in the amount equivalent to the monetary award in the judgment appealed from. The perfection of an appeal
in the manner and within the period prescribed by law is not only mandatory but also jurisdictional, and failure to perfect
an appeal has the effect of making the judgment final and executory.

The records reveal that Times, Mencorp and the Spouses Mendoza’s motion to reduce the bond was denied and the NLRC
ordered them to post the required amount within an unextendible period of ten (10) days.21 However, instead of complying
with the directive, Times filed another motion for reconsideration of the order of denial. Several weeks later, Mencorp
posted an additional bond, which was still less than the required amount. Three (3) months after the filing of the motion
for reconsideration, the NLRC reversed its previous order and granted the motion for reduction of bond.1awphi1.nét

From the decision of the Labor Arbiter, it took the NLRC four months to rule on the "motion" for exemption to pay bond
and another four months to decide the merits of the case. This Court has repeatedly ruled that delay in the settlement of
labor cases cannot be countenanced. Not only does it involve the survival of an employee and his loved ones who are
dependent on him…, it also wears down the meager resources of the workers...

We agree with the Court of Appeals that the foregoing constitutes grave abuse of discretion on the part of the NLRC. By
delaying the resolution of Times’ motion for reconsideration, it has unnecessarily prolonged the period of appeal. We
have held that to extend the period of appeal is to prolong the resolution of the case, a circumstance which would give the
employer the opportunity to wear out the energy and meager resources of the workers to the point that they would be
constrained to give up for less than what they deserve in law.22 The NLRC is well to take notice of our pronouncement
in Santos v. Velarde:23

2.) NO. THE SALE OF TIMES TO TRANSPORTATION COMPANY INC. TO MENCORP TRANSPORT SYSTEM
INC IS INVALID/ VOID

We have held that piercing the corporate veil is warranted only in cases when the separate legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will
regard the corporations as merged into one.27 It may be allowed only if the following elements concur: (1) control—not
mere stock control, but complete domination—not only of finances, but of policy and business practice in respect to the
transaction attacked; (2) such control must have been used to commit a fraud or a wrong to perpetuate the violation of a
statutory or other positive legal duty, or a dishonest and an unjust act in contravention of a legal right; and (3) the said
control and breach of duty must have proximately caused the injury or unjust loss complained of.28

The following findings of the Labor Arbiter, which were cited and affirmed by the Court of Appeals, have not been
refuted by Times, to wit:

1. The sale was transferred to a corporation controlled by V. Mendoza, the daughter of respondent S. Rondaris of
[Times] where she is/was also a director, as proven by the articles of incorporation of [Mencorp];

2. All of the stockholders/incorporators of [Mencorp]: Reynaldo M. Mendoza, Virginia R. Mendoza, Vernon

Gerard R. Mendoza, Vivian Charity R. Mendoza, Vevey Rosario R. Mendoza are all relatives of respondent S.
Rondaris;

3. The timing of the sale evidently was to negate the employees/complainants/members’ right to organization as it
was effected when their union (TEU) was just organized/requesting [Times] to bargain;

4. [Mencorp] never obtained a franchise since its supposed incorporation in 10 May 1994 but at present, all the
buses of [Times] are already being run/operated by respondent [Mencorp], the franchise of [Times] having been
transferred to it.29

THEREFORE, We uphold the findings of the labor arbiter and the Court of Appeals. The sale of Times’ franchise as well
as most of its bus units to a company owned by Rondaris’ daughter and family members, right in the middle of a labor
dispute, is highly suspicious. It is evident that the transaction was made in order to remove Times’ remaining assets from
the reach of any judgment that may be rendered in the unfair labor practice cases filed against it.
Case No.12

G.R. No. 168306 June 19, 2007

Yao, Sr. v People of the Philippines
FACTS:
On 3 April 2003, NBI agent Oblanca filed two applications for search warrant with the RTC against petitioners and other
occupants of the MASAGANA compound for alleged violation of Section 155, in relation to Section 170 of Republic Act
No. 8293 or "The Intellectual Property Code of the Philippines." The applications alleged that the petitioners are actually
producing, selling, offering for sale and/or distributing LPG products using steel cylinders owned by, and bearing the
tradenames, trademarks, and devices of Petron and Pilipinas Shell, without authority.
A search warrants were issued. Petitioners filed with the RTC a Motion to Quash the Search Warrants. MASAGANA, as
third party claimant, filed with the RTC a Motion for the Return of Motor Compressor and LPG Refilling Machine, which
were seized. The RTC denied both Motions. The RTC resolved that MASAGANA cannot be considered a third party
claimant whose rights were violated as a result of the seizure since the evidence disclosed that petitioners are stockholders
of MASAGANA and that they conduct their business through the same juridical entity. Upon appeal, the CA affirmed
RTC’s decision. Petitioners filed a Motion for Reconsideration was denied. Hence, the petition.
ISSUE:
Whether or not the CA erred in ruling that the complaint is directed against MASAGANA, acting through its officers and
directors, hence MASAGANA may not be considered as third party claimant whose rights were violated as a result of the
seizure.
RULING:
No. It is an elementary and fundamental principle of corporation law that a corporation is an entity separate and distinct
from its stockholders, directors or officers. However, when the notion of legal entity is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons, or in the
case of two corporations merge them into one. In other words, the law will not recognize the separate corporate existence
if the corporation is being used pursuant to the foregoing unlawful objectives. This non-recognition is sometimes referred
to as the doctrine of piercing the veil of corporate entity or disregarding the fiction of corporate entity. Where the separate
corporate entity is disregarded, the corporation will be treated merely as an association of persons and the stockholders or
members will be considered as the corporation, that is, liability will attach personally or directly to the officers and
stockholders.
Here, the petitioners, as directors/officers of MASAGANA, are utilizing the latter in violating the intellectual property
rights of Petron and Pilipinas Shell. Thus, petitioners collectively and MASAGANA should be considered as one and the
same person for liability purposes.
Further, it is apparent that the motor compressor, LPG refilling machine and the GASUL and SHELL LPG cylinders
seized were the corpus delicti, the body or substance of the crime, or the evidence of the commission of trademark
infringement. It is possible that, if returned to MASAGANA, these items will be used again in violating the intellectual
property rights of Petron and Pilipinas Shell. Thus, the RTC was justified in denying the petitioners’ motion for their
return so as to prevent the petitioners and/or MASAGANA from using them again in trademark infringement.
The petition is denied.
Case No. 13
G.R. No. L-2598 June 29, 1950

C. ARNOLD HALL and BRADLEY P. HALL, petitioners,

vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte, FRED BROWN, EMMA BROWN,
HIPOLITA CAPUCIONG, in his capacity as receiver of the Far Eastern Lumber and Commercial Co.,
Inc.,respondents.

FACTS:
Petitioners and the respondents signed, the article of incorporation of the Far Eastern Lumber and Commercial Co., Inc.,
organized to engage in a general lumber business to carry on as general contractors, operators and managers, etc.
Immediately after the execution of said articles of incorporation, the corporation proceeded to do business. Subsequently,
the said articles of incorporation were filed in the office of the SEC for the issuance of the corresponding certificate of
incorporation. Pending action, the respondents filed before the Court alleging among other things that the Company was
an unregistered partnership; that they wished to have it dissolved because of bitter dissension among the members,
mismanagement, fraud and heavy financial losses. The court ordered the dissolution of the company. In the present special
civil action the petitioners argued: that the court had no jurisdiction to decree the dissolution of the company, because it
being a de facto corporation, dissolution thereof may only be ordered in a quo warranto proceeding instituted in
accordance with section 19 of the Corporation Law; that inasmuch as respondents Fred Brown and Emma Brown had
signed the article of incorporation but only a partnership.
ISSUE (1):
Does a corporation exist in this case?
RULING:
No. All the parties are informed that the SEC has yet issued the corresponding certificate of incorporation. All of them
ought to know, that the personality of a corporation begins to exist only from the moment such certificate is issued — not
before (sec. 11, Corporation Law). The complaining associates have not represented to the others that they were
incorporated any more than the latter had made similar representations to them. And as nobody was led to believe
anything to his prejudice and damage, the principle of estoppel does not apply. This is not an instance requiring the
enforcement of contracts with the corporation through the rule of estoppel.
ISSUE (2):
Was the court bereft of jurisdiction to decree the dissolution?
RULING:
No. The contention of the petitioners is premised on the theory that, inasmuch as the Company is a de facto corporation,
section 19 of the Corporation Law applies, and therefore the court had no jurisdiction to take cognizance of said case.
Section 19 reads as follows:
. . . The due incorporation of any corporations claiming in good faith to be a corporation under
this Act and its right to exercise corporate powers shall not be inquired into collaterally in any private suit to which the
corporation may be a party, but such inquiry may be had at the suit of the Insular Government on information of the
Attorney-General.
However, this section does not govern the situation. Not having obtained the certificate of incorporation, the Company —
even its stockholders — may not probably claim "in good faith" to be a corporation. The immunity of collateral attack is
granted to corporations "claiming in good faith to be a corporation under this act." Unless there has been an evident
attempt to comply with the law, the claim to be a corporation "under this act" could not be made "in good faith."
Case no.14
Seventh Day Adventist vs. Northeastern Mindanao Mission
July 21, 2006 GR 150416
Facts
On April 21, 1959, Felix Cosio and his wife, Felisa Cuysona donated their land to the South Philippine Union Mission of
Seventh Day Adventist Church of Bayugan (SPUM-SDA Baguyan). The donation was allegedly accepted by Liberato
Rayos, an elder of the Seventh Day Adventist Church.
However, after 21 years, the same parcel of land was sold by the spouses Cosio to the Seventh Day Adventist Church of
Northeastern Mindanao Mission (SDA-NEMM).
Petitioners were claiming ownership over the property as donees. This was opposed by respondents who argued that at the
time of the donation, SPUM-SDA Bayugan could not legally be a donee because, not having incorporated yet, it had no
juridical personality. Neither were petitioners members of the local church then, hence, the donation could not have been
made particularly to them.
Petitioners filed suit for cancellation of title, quieting of ownership and possession, declaratory relief and reconveyance
with prayer for preliminary injunction and damages. The RTC ruled upholding the sale in favor of respondents.
The CA affirmed the RTC decision but deleted award of moral damages and attorney’s fees.
Issue
Should the Seventh Day Adventist Church of Northeastern Mindanao Mission’s ownership of the lot be upheld?
Ruling
Yes. Transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery of the property
on February 28, 1980 when the sale was made through a public instrument. TCT No. 4468 was thereafter issued and it
remains in the name of SDA-NEMM.
Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a property may
be transferred by tradition as a consequence of a sale.
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another person who
accepts it. The donation could not have been made in favor of an entity yet inexistent at the time it was made. Nor could it
have been accepted as there was yet no one to accept it.
In the case at bar, the SPUM-SDA Bayugan at the time of donation had neither juridical personality nor capacity to accept
such gift.
Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.But there are
stringent requirements before one can qualify as a de facto corporation:
(a) The existence of a valid law under which it may be incorporated;
(b) An attempt in good faith to incorporate; and
(c) Assumption of corporate powers.
The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the existence of a
de facto corporation. We have held that an organization not registered with the SEC cannot be considered a corporation in
any concept, not even as a corporation de facto. Petitioners themselves admitted that at the time of the donation, they were
not registered with the SEC.
No certificate of incorporation was ever issued to petitioners at the time of the donation. Neither could the principle of
separate juridical personality apply since there was never any corporation to speak of. And some of the representatives of
petitioner were not even members of the local church then, thus, they could not even claim that the donation was
particularly for them.In view of the foregoing, petitioners arguments anchored on their supposed de facto status hold no
water. We are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.
Case no. 16
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs. HON. COURT OF
APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, respondents.
FACTS:
On June 30, 1989, petitioner International Express Travel and Tour Services, Inc., through its managing director, wrote a
letter to the Philippine Football Federation (Federation), through its president private respondent Henri Kahn. The offer
was accepted. The Federation made two partial payments for the tickets with outstanding balance. A demand letter was
given, and another partial payment was given, still there is outstanding balance remaining. Thereafter, no further
payments were made despite repeated demands.
The petitioner filed a civil case before the Regional Trial Court of Manila. Petitioner sued Henri Kahn in his personal
capacity and as President of the Federation and impleaded the Federation as an alternative defendant. Henri Kahn filed his
answer with counterclaim. While not denying the allegation that the Federation owed the outstanding balance, he averred
that the petitioner has no cause of action against him either in his personal capacity or in his official capacity as president
of the Federation, being the latter having its own separate and distinct juridical personality. On the other hand, the
Federation failed to file its answer, hence, was declared in default by the trial court.
The trial court rendered judgment and ruled in favor of the petitioner and declared Henri Kahn personally liable for the
unpaid obligation of the Federation. Being the President of defendant Federation, its corporate existence is within the
personal knowledge of defendant Henri Kahn.
Henri Kahn elevated the above decision to the Court of Appeals. On 21 December 1994, the respondent court rendered a
decision reversing the trial court, which recognized the juridical existence of the Federation. It rationalized that since
petitioner failed to prove that Henri Kahn guaranteed the obligation of the Federation, he should not be held liable for the
same as said entity has a separate and distinct personality from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held liable for the
unpaid obligation. The same was denied by the appellate court in its resolution of 8 February 1995.
ISSUE:
Whether or not Henry Kahn is personally liable notwithstanding the fact that the Federation has its own separate entity.
RULING:
The resolution of the case at bar hinges on the determination of the existence of the Philippine Football Federation as a
juridical person. In the assailed decision, the appellate court recognized the existence of the Federation. In support of this,
the CA cited Republic Act 3135, otherwise known as the Revised Charter of the Philippine Amateur Athletic Federation,
and Presidential Decree No. 604 as the laws from which said Federation derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604 recognized the juridical existence of
national sports associations. This may be gleaned from the powers and functions granted to these associations.
While we agree with the appellate court that national sports associations may be accorded corporate status, such does not
automatically take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical personality, the State must give its consent either in
the form of a special law or a general enabling act. We cannot agree with the view of the appellate court and the private
respondent that the Philippine Football Federation came into existence upon the passage of these laws. Nowhere can it be
found in R.A. 3135 or P.D. 604 any provision creating the Philippine Football Federation. These laws merely recognized
the existence of national sports associations and provided the manner by which these entities may acquire juridical
personality.
As stated in the laws, before an entity may be considered as a national sports association, such entity must be recognized
by the accrediting organization, the Philippine Amateur Athletic Federation under R.A. 3135, and the Department of
Youth and Sports Development under P.D. 604. This fact of recognition, however, Henri Kahn failed to substantiate. In
attempting to prove the juridical existence of the Federation, Henri Kahn attached to his motion for reconsideration before
the trial court a copy of the constitution and by-laws of the Philippine Football Federation. Unfortunately, the same does
not prove that said Federation has indeed been recognized and accredited by either the Philippine Amateur Athletic
Federation or the Department of Youth and Sports Development. Accordingly, we rule that the Philippine Football
Federation is not a national sports association within the purview of the aforementioned laws and does not have corporate
existence of its own.
That being said, it follows that private respondent Henry Kahn should be held liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled principal in corporation law that 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. As president of the Federation, Henri Kahn is
presumed to have known about the corporate existence or non-existence of the Federation. We cannot subscribe to the
position taken by the appellate court that even assuming that the Federation was defectively incorporated, the petitioner
cannot deny the corporate existence of the Federation because it had contracted and dealt with the Federation in such a
manner as to recognize and in effect admit its existence. The doctrine of corporation by estoppel is mistakenly applied by
the respondent court to the petitioner. The application of the doctrine 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,
the petitioner is not trying to escape liability from the contract but rather is the one claiming from the contract.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The decision of the Regional Trial Court of
Manila, Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.
Case no.17
FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO MEDICAL AND EDUCATIONAL
CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO,
respondents.
FACTS:
Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima) and Hermogenes Jun Alegre (Alegre). Expos
is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (FBNI).
With the supposed exposs, FBNI, Rima and Alegre transmitted malicious imputations, and as such, destroyed plaintiffs
(AMEC and Ago) reputation. Thus, AMEC and Angelita Ago (Ago), as Dean of AMECs College of Medicine, filed a
complaint for damages against FBNI, Rima and Alegre.
AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the selection and
supervision of its employees, particularly Rima and Alegre.
The trial court rendered a decision finding FBNI and Alegre liable for libel except Rima, it ordered them to pay AMEC,
among others, some determinate moral damages.
On appeal to the Court of Appeals (CA), the CA affirmed the trial courts judgment with modification. The CA made Rima
solidarily liable with FBNI and Alegre. The appellate court denied Agos claim for damages and attorneys fees because the
broadcasts were directed against AMEC, and not against her.
In its petition for review before the Supreme Court, one of the issues raised by FBNI is whether AMEC is entitled to
moral damages contending that it is not entitled because it is a corporation.
ISSUES: Whether or not AMEC, as a corporation, is entitled to moral damages?
RULING:
Yes. A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.
In the case of Mambulao Lumber Co. v. PNB, et al., the Supreme Court held that a corporation may have a good
reputation which, if besmirched, may also be a ground for the award of moral damages.
Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision
expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article
2219 does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of defamation and claim for moral damages.
Clearly, AMEC is entitled to moral damages.