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CARAM V.

CA FOA has a separate & distinct personality from its incorporators


FACTS: o It is not justified to make the Carams, as principal
Fermin & Rosa Caram question the order of the respondent court, stockholders to be responsible for FOAs obligations
CA, holding them jointly & severally liable with Filipinas
Orient Airways, Barretto & Garcia to Alberto Arellano
Carams claim that the order for solidary liability has no support in
fact & law because they had no contract with Arellano YUTIVO V. CTA
Barretto & Garcia initiated the incorporation of a company called FACTS:
Filipinas Orient Airways Yutivo: Domestic corporation, incorporated under Philippine Laws
Prior to creation, they contracted with a third person, Alberto o Engaged in the importation & sale of hardware
Arellano supplies & equipment
o For Arellano to prepare a project study for the feasibility of After the first world war, it resumed business & bought a number
creating a corporation if cars & trucks from General Motors
It was on the basis of this study that defendant corporation was 1946 Southern Motors was organized to engage in the
organized and rendered operational business of selling cars, trucks & spare parts
Project study was revised for purposes of presentation to Subscribers of the stocks were
financiers & the banks o Yu Khe Thai, Yu Khe Siong & Hu Kho Jin Sons of Yu Tio Yee
Project study was then presented to the would-be incorporators & o Yu Eng Poh & Washington Sycip Sons of Albino Sycap
investors o Founders of Yutivo
o On the basis of the project study, Fermin & Rosa Caram Cars & trucks purchased by Yutivo from GM were sold to SM
agreed to be incorporators of FOA which the latter sold to the public in the Visayas &
o They became members of the Board Mindanao
Later on, Arellano filed a collection suit against FOA, When GM withdrew from the PH Yutivo was appointed as
Barretto & Caram importer for Visayas & Mindanao by the US manufacturer sold
o Claimed that he was not paid for his work on the by GM
project study o Yutivo continued selling exclusively to SM
ISSUE: W/N the Carams are personally & solidarily liable to Arellano NO! Yutivo paid the sales tax prescribed
HELD: SM paid no sales ta on its sales to the public
As mere subsequent investors in the corporation that was later Assessment was made upon Yutivo for deficiency sales tax
created, they should not be held liable with FOA & Barretto ( P1,804, 769. 85)
& Garcia Collector for Internal revenue contends that the taxable sales
Petitioners were merely among the financiers whose interest was were the retail sales by SM to the public not the the sales
to be invited & to invest on the airline at wholesale made by Yutivo to the SM inasmuch as SM &
They did not contract the services of Arellano Yutivo were one and the same corporation
o It was only the result of the services of Arellano that The assessment was disputed by the petitioner; alleged that:
Barretto & Garcia presented to the petitioners & o There is no valid ground to disregard the corporate
persuaded petitioners to invest in the airline personality & to hold that it is an adjunct to the
o The most that can be said is that they benefitted from the petitioner
services which is not a justification to hold them liable o Assuming the separate personality may be disregarded,
Otherwise, all other stockholders including those the sales tax already paid by Yutivo should first be
who came in later would be equally & personally deducted from the selling prince of SM in the Sales
liable tax due on each vehicle
FOA is now a bona fide corporation FOA should be liable for its o Surcharge has been erroneously imposed by the
corporate acts as duly authorized by its officers respondent
o INCLUDES ACTS WHICH ULTIMATELY LED TO ITS ISSUE: W/N the corporate personality of SM could be disregarded. YES
INCORPORATION HELD:
When the notion of legal entity is used to defeat the public
convenience, justify wrong, protect fraud or defend crime the law JARDINE V. JRB REALTY
will regard the corporation as an associate of persons, or FACTS:
in case of 2 corporations, merge them in to one 1979-1980 JRB Realty, Inc. built a nine-storey building Blanco
When the corporation is a mere alter ego, it may be Center
disregarded on its parcel of land in Salcedo Village, Makati City
SC ruled that CTA was not justified in finding that SM was An air conditioning system was needed for the Blanco Law
organized to defraud the Government Firm housed at the second floor of the building
SM was organized in June 1946, from that date until June 30, March 1980 JRBS EVP Jose R. Blanco, accepted the contract
1947, quotation of Mr. A.G. Morrison, President of Aircon and
o GM was the importer of the cars and trucks sold to Yutivo, Refrigeration Industries, Inc. (AIRCON) 2 sets of Fedders air
which in turn was sold to SM. conditioning equipment with a net total selling price of
o GM, as importer was the one solely liable for sales taxes. P99,586.00
o Neither Yutivo nor SM was subject to the sales 2 brand new packaged air conditioners were installed
taxes. When the units with rotary compressors were installed, they
o Yutivos liability arose only until July 1, 1947 when could not deliver the desired cooling temperature
it became the importer. Hence, there was no tax to The parties thereby agreed to replace the units with
evade. reciprocating/semi-hermetic compressors instead.
However, SC agreed with the respondent court that SM was March 1981 Aircon stated that it would be replacing the
actually owned and controlled by petitioner. units currently installed with new ones using rotary
Consideration of various circumstances indicate that Yutivo compressors, at the earliest possible time
treated SM merely as its department or adjunct: o It could not specify a date when delivery could be effected
o The founders of the corporation are closely related to TempControl Systems, Inc. (a subsidiary of Aircon until
each other by blood and affinity. 1987) undertook the maintenance of the units, inclusive of
o The object and purpose of the business are the parts and services
same; both are engaged in sale of vehicles, spare parts, October 1987 the respondent learned, through newspaper
hardware supplies and equipment. ads, that Maxim Industrial and Merchandising Corporation
o The accounting system maintained by Yutivo shows that (MAXIM) was the new and exclusive licensee of Fedders Air
it maintained high degree of control over Conditioning USA in the Philippines for the manufacture,
SM accounts. distribution, sale, installation and maintenance of Fedders
o Several correspondences have reference to Yutivo as the air conditioners.
head office of SM. JRB requested that Maxim honor the obligation of Aircon, but the
o SM may even freely use forms or stationery of Yutivo. latter refused
o All cash collections of SMs branches are remitted JRB instituted, an action for specific performance with
directly to Yutivo. damages against Aircon & Refrigeration Industries, Inc.,
o The controlling majority of the Board of Directors of Fedders Air Conditioning USA, Inc., Maxim Industrial &
Yutivo is also the controlling majority of SM. Merchandising Corporation and petitioner Jardine Davies,
o The principal officers of both corporations are Inc.
identical o The latter was impleaded as defendant, considering that
o Both corporations have a common controller in the Aircon was a subsidiary of the petitioner
person of Simeon Sy, who is a brother-in-law of o The respondent prayed that judgment be rendered, as
Yutivos president, Yu Khe Thai. follows:
o Yutivo, financed principally the business of SM and RTC: ordered defendants jointly & severally to deliver 2 new units
actually extended all the credit to the latter not of Fedders unitary packaged airconditioning; reimburse plaintiff fot
only in the form of starting capital but also in the unsaved electricity bills
the form of credits extended for the cars and vehicles CA: affirmed RTC ruling
allegedly sold by Yutivo to SM.
ISSUE: W/N Jardine is liable for the alleged contractual breach of Aircon It bears stressing that the petitioner was never a party to
because the latter was formerly the formers subsidiary. the contract.
HELD: Privity of contracts take effect only between parties, their
While it is true that Aircon is a subsidiary of the petitioner, it does successors-in-interest, heirs and assigns.
not necessarily follow that Aircon's corporate legal The petitioner, which has a separate and distinct legal
existence can just be disregarded. personality from that of Aircon, cannot, therefore, be held
In Velarde v. Lopez, Inc the Court held that a subsidiary has an liable
independent and separate juridical personality, distinct
from that of its parent company MARCUS V. RH MACY
o Any claim or suit against the latter does not bind
the former, and vice versa FACTS
The records bear out that Aircon is a subsidiary of the Appellant has been the registered owner of 50 shares of the
petitioner only because the latter acquired Aircon's common stock of the respondent, RH Macy
majority of capital stock. 1945 Respondent gave formal notice to its stockholders that
It does not exercise complete control over Aircon among other matters at its annual meeting, would be a
o Nowhere can it be gathered that the petitioner manages proposal, recommended by its board of directors, that its
the business affairs of Aircon certificate of incorporation be amended as to add to the
Indeed, no management agreement exists between the rights of preferred stockholders voting rights, equal share
petitioner and Aircon, and the latter is an entirely different to share, to those to which the holders of the
entity from the petitioner corporations common stock are entitled
Jardine Davies, Inc primarily a financial and trading company October 1945 Marcus sent to RH Macy a written notice that she
Aircon manufacturing firm objected to:
The existence of interlocking directors, corporate officers and o The proposed amendment &
shareholders, which the respondent court considered, is not o To the adoption of any resolution
enough justification to pierce the veil of corporate fiction, in the Which there would be added to the rights of
absence of fraud or other public policy considerations owners of the corporations preferred stock voting
But even when there is dominance over the affairs of the rights equal, share for share, to the voting rights
subsidiary, the doctrine of piercing the veil of corporate of the common stock holders
fiction applies only when such fiction is used to defeat o Appellant demanded for the common stock owned by
public convenience, justify wrong, protect fraud or defend Marcus
crime At the annual meeting, proposal to amend certificate of incorp.
There is no evidence that Aircon was formed or utilized with the Was approved but the common stock owned by Marcus was voted
intention of defrauding its creditors or evading its contracts and against such amendment
obligations Marcus instituted the present proceeding to determine the
There was nothing fraudulent in the acts of Aircon in this case value of her stock as a basis for the enforcement of
o Aircon, as a manufacturing firm of air conditioners, payment therefor
complied with its obligation of providing two air o Her application for the appointment of appraisers to
conditioning units for the second floor of the evaluate her stock was denied & petition was dismissed
Blanco Center in good faith, pursuant to its o Appeal! Denied
contract with the respondent
o Unfortunately, the performance of the air conditioning ISSUE: W/N the appellant may invoke paragraph 9 of sec. 38 of the Stock
units did not satisfy the respondent despite several Corporation Law as a means to legally appropriate to accomplish the
adjustments and corrective measures appraisal of her stock & to enforce payment therefor
We sustain the petitioner's separateness from that of Aircon in this
case HELD:

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