MAGSAYSAY LABRADOR VS COURT OF APPEALS

FACTS:
On 9 February 1979, Adelaida Rodriguez-Magsaysay, widow and special
administratix of the estate of the late Senator Genaro Magsaysay, brought before
the then Court of First Instance of Olongapo an action against Artemio Panganiban,
Subic Land Corporation (SUBIC), Filipinas Manufacturer's Bank (FILMANBANK) and
the Register of Deeds of Zambales, for the annulment of the Deed of Assignment
executed by the late Senator in favor of SUBIC (as a result of which TCT 3258 was
cancelled and TCT 22431 issued in the name of SUBIC), for the annulment of the
Deed of Mortgage executed by SUBIC in favor of FILMANBANK (dated 28 April 1977
in the amount of P 2,700,000.00), and cancellation of TCT 22431 by the Register of
Deeds, and for the latter to issue a new title in her favor. On 7 March 1979,
Concepcion Magsaysay-Labrador, Soledad Magsaysay-Cabrera, Luisa MagsaysayCorpuz, Felicidad Magsaysay, and Mercedes Magsaysay-Diaz, sisters of the late
senator, filed a motion for intervention on the ground that on 20 June 1978, their
brother conveyed to them 1/2 of his shareholdings in SUBIC or a total of 416,566.6
shares and as assignees of around 41 % of the total outstanding shares of such
stocks of SUBIC, they have a substantial and legal interest in the subject matter of
litigation and that they have a legal interest in the success of the suit with respect
to SUBIC. On 26 July 1979, the trial court denied the motion for intervention, and
ruled that petitioners have no legal interest whatsoever in the matter in litigation
and their being alleged assignees or transferees of certain shares in SUBIC cannot
legally entitle them to intervene because SUBIC has a personality separate and
distinct from its stockholders.
On appeal, the Court of Appeals found no factual or legal justification to disturb the
findings of the lower court. The appellate court further stated that whatever claims
the Magsaysay sisters have against the late Senator or against SUBIC for that
matter can be ventilated in a separate proceeding. The motion for reconsideration
of the Magsaysay sisters was denied. Hence, the petition for review on certiorari.
ISSUE:
Whether the Magsaysay sister, allegedly stockholders of SUBIC, are interested
parties in a case where corporate properties are in dispute.
HELD:
Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, the
Magsaysay sisters have no legal interest in the subject matter in litigation so as to
entitle them to intervene in the proceedings. To be permitted to intervene in a
pending action, the party must have a legal interest in the matter in litigation, or in
the success of either of the parties or an interest against both, or he must be so
situated as to be adversely affected by a distribution or other disposition of the
property in the custody of the court or an officer thereof. Here, the interest, if it
exists at all, of the Magsaysay sisters is indirect, contingent, remote, conjectural,

consequential and collateral. At the very least, their interest is purely inchoate, or in
sheer expectancy of a right in the management of the corporation and to share in
the profits thereof and in the properties and assets thereof on dissolution, after
payment of the corporate debts and obligations. While a share of stock represents a
proportionate or aliquot interest in the property of the corporation, it does not vest
the owner thereof with any legal right or title to any of the property, his interest in
the corporate property being equitable or beneficial in nature. Shareholders are in
no legal sense the owners of corporate property, which is owned by the corporation
as a distinct legal person.
PHILIPPINE TRUST CORPORATION VS RIVERA
FACTS:
Cooperative Naval Filipinas was incorporated under the Philippine laws. Mariano
Rivera was one of the incorporators. The AOI were registered in the Bureau of
Commerce and Industry. In the course of time, the corporation became insolvent
and went into the hands of Phil. Trust Co., as assignee in bankruptcy. The latter
instituted an action to recover unpaid stock subscription of defendant. Defendant
insists the resolution that has been made on the reduction of the capital, the reason
why he did not fully pay the entire subscription.
ISSUE:
WON the reduction of the corporate capital by releasing the subscribers from
payment of their subscription is valid and proper.
HELD:
It is established doctrine that subscription to the capital of a corporation constitute
a find to which creditors have a right to look for satisfaction of their claims and that
the assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts. (Velasco vs.
Poizat, 37 Phil., 802.) A corporation has no power to release an original subscriber to
its capital stock from the obligation of paying for his shares, without a valuable
consideration for such release; and as against creditors a reduction of the capital
stock can take place only in the manner an under the conditions prescribed by the
statute or the charter or the articles of incorporation. Moreover, strict compliance
with the statutory regulations is necessary
In the case at bar, therefore held that the resolution relied upon the defendant was
without effect and that the defendant was still liable for the unpaid balance of his
subscription.
PHILIPPINE NATIONAL BANK VS HYDRO RESOURCES CONTRACTORS
CORPORATION
Doctrine of Piercing the Veil of Corporate Fiction
FACTS:

Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made
on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a
result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC
and resumed the business operations of the defunct MMIC by organizing NMIC.7
DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except for
five qualifying shares. As of September 1984, the members of the Board of Directors
of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta, Geraldo Agulto,
and Faustino Agbada, were either from DBP or PNB.
Subsequently, NMIC engaged the services of Hercon, Inc., for NMICs Mine Stripping
and Road Construction Program in 1985 for a total contract price of P35,770,120.
After computing the payments already made by NMIC under the program and
crediting the NMICs receivables from
Hercon, Inc., the latter found that NMIC still has an unpaid balance of
P8,370,934.74.10 Hercon, Inc. made several demands on NMIC, including a letter of
final demand dated August 12, 1986, and when these were not heeded, a complaint
for sum of money was filed in the RTC of Makati, Branch 136 seeking to hold
petitioners NMIC, DBP, and PNB solidarily liable for the amount owing Hercon, Inc.
Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a
merger.
Thereafter, on December 8, 1986, then President Corazon C. Aquino issued
Proclamation No. 50 creating the APT for the expeditious disposition and
privatization of certain government corporations and/or the assets thereof. Pursuant
to the said Proclamation, on February 27, 1987, DBP and PNB executed their
respective deeds of transfer in favor of the National Government assigning,
transferring and conveying certain assets and liabilities, including their respective
stakes in NMIC. In turn and on even date, the National Government transferred the
said assets and liabilities to the APT as trustee under a Trust Agreement.
ISSUE:
Whether or not there is sufficient ground to pierce the veil of corporate fiction of
NMIC and held DBP and PNB solidarily liable with NMIC?
RULING:
No. From all indications, it appears that NMIC is a mere adjunct, business conduit or
alter ego of both DBP and PNB. Thus, the DBP and PNB are jointly and severally
liable with NMIC for the latters unpaid obligations to plaintiff.
Then concluded that, "in keeping with the concept of justice and fair play," the
corporate veil of NMIC should be pierced.
For to treat NMIC as a separate legal entity from DBP and PNB for the purpose of
securing beneficial contracts, and then using such separate entity to evade the

payment of a just debt, would be the height of injustice and iniquity. Surely that
could not have been the intendment of the law with respect to corporations.
The doctrine of piercing the corporate veil applies only in three (3) basic areas,
namely: 1) defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation; 2) fraud cases or when the
corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.