Tayag v.

Benguet Consolidated, 26 SCRA 242 [1968])

Facts:

Idonah Slade Perkins, who died in New York City on March 27, she is
an owner of a stock certificate of a domestic company of Benguet
Consolidated, Inc. covering the 33,002 shares of stock standing in her
name. the County Trust Company of New York, United States of America
was assigned as a domiciliary administrator and the first ancillary
administrator was Lazaro A. Marquez, he was substituted by the appellee
Renato D. Tayag. A dispute arose between the domiciary administrator in
New York and the ancillary administrator in the Philippines as to which of
them was entitled to the possession of the stock certificates in question.
The Court of First Instance of Manila ordered the domiciliary administrator,
County Trust Company, to "produce and deposit" them with the ancillary
administrator or with the Clerk of Court. The domiciliary administrator did
not comply with the order. The ancillary administrator petitioned the court to
"issue an order declaring the certificate or certificates of stocks covering the
33,002 shares issued in the name of Idonah Slade Perkins by Benguet
Consolidated, Inc., be declared [or] considered as lost." Benguet
consolidated refused to issue a new stock certificate for in the first place it
is really not lost it is within the possession of the domiciliary administrator
and it is violates their by-laws in the issuance of a lost stock certificate

Issue:

Whether or not Benguet Consolidated, Inc. is right in not providing for

a copy of the stock certificate.

Held:

No, Benguet Consolidated, Inc. is not correct in not issuing a new

stock certificate. In the first place, there is no such occasion to apply such
by-law. It is admitted that the foreign domiciliary administrator did not
appeal from the order now in question. Moreover, there is likewise the
express admission of appellant that as far as it is concerned, "it is
immaterial ... who is entitled to the possession of the stock certificates ..."
Even if such were not the case, it would be a legal absurdity to impart to
such a provision conclusiveness and finality. Assuming that a contrariety
exists between the above by-law and the command of a court decree, the
latter is to be followed.

"a corporation is an artificial being created by operation of law...." It

owes its life to the state, its birth being purely dependent on its will. As
Berle so aptly stated: "Classically, a corporation was conceived as an
artificial person, owing its existence through creation by a sovereign
power."As a matter of fact, the statutory language employed owes much to
Chief Justice Marshall, who in the Dartmouth College decision defined a
corporation precisely as "an artificial being, invisible, intangible, and
existing only in contemplation of law."

The well-known authority Fletcher could summarize the matter thus:

"A corporation is not in fact and in reality a person, but the law treats it as
though it were a person by process of fiction, or by regarding it as an
artificial person distinct and separate from its individual stockholders.... It
owes its existence to law. It is an artificial person created by law for certain
specific purposes, the extent of whose existence, powers and liberties is
fixed by its charter."Dean Pound's terse summary, a juristic person,
resulting from an association of human beings granted legal personality by
the state, puts the matter neatly.

As a matter of fact, a corporation once it comes into being, following

American law still of persuasive authority in our jurisdiction, comes more
often within the ken of the judiciary than the other two coordinate branches.
It institutes the appropriate court action to enforce its right. Correlatively, it
is not immune from judicial control in those instances, where a duty under
the law as ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to
disregard is to confer upon it not autonomy which may be conceded but
license which cannot be tolerated. It is to argue that it may, when so
minded, overrule the state, the source of its very existence; it is to contend
that what any of its governmental organs may lawfully require could be
ignored at will. So extravagant a claim cannot possibly merit approval.
 Remo, Jr. v. IAC, 172 SCRA 405 (1989)

Facts:

Petitioners(Jose Remo, Jr., Ernesto Baares, Feliciano Coprada,

Jemina Coprada, and Dario Punzalan with Lucia Lacaste as Secretary,) as
the board of directors of AKRON adopted a resolution authorizing the
purchase of thirteen (13) trucks for use in its business to be paid out of a
loan the corporation may secure from any lending institution.

Feliciano Coprada, as President and Chairman of Akron, purchased

thirteen trucks from private respondent (E.B. MARCHA TRANSPORT
COMPANY, INC.) evidence by a deed of sale and was further secured by a
promissory note executed by Coprada in favor of Akron. It is stated in the
promissory note that the balance shall be paid from the proceeds of a loan
obtained from the Development Bank of the Philippines (DBP) within sixty
(60) days. Private respondent sent Coprada a letter of demand dated May
10, 1978. 9 In his reply to the said letter, Coprada reiterated that he was
applying for a loan from the DBP from the proceeds of which payment of
the obligation shall be made.

Private respondent found out that there was no loan application filed
with the DBP. Coprada wrote 2 times to private respondent to beg for a
grace period for the payment of the obligation and still defaulted in paying
which prompted respondent to file a case for the payment of the debt and
the return of the 13 trucks. In the meanwhile, petitioner sold all his shares
in Akron to Coprada. It also appears that Akron amended its articles of
incorporation thereby changing its name to Akron Transport International,
Inc. which assumed the liability of Akron to private respondent.

The trial court made a decision finding that Petitioners the board of
directors was made personally liable for the debts made by AKRON and
this decision was affirmed by the court of appeals.
Issue:

Whether or not the petitioners are personally liable for the

transactions made as board of directors.

Held:

There is no cogent basis to pierce the corporate veil of Akron and

hold petitioner personally liable for its obligation to private respondent.
While it is true that in December, 1977 petitioner was still a member of the
board of directors of Akron and that he participated in the adoption of a
resolution authorizing the purchase of 13 trucks for the use in the
brokerage business of Akron to be paid out of a loan to be secured from a
lending institution, it does not appear that said resolution was intended to
defraud anyone and more particularly private respondent. It was Coprada,
President and Chairman of Akron, who negotiated with said respondent for
the purchase of 13 cargo trucks on January 25, 1978. It was Coprada who
signed a promissory note to guarantee the payment of the unpaid balance
of the purchase price out of the proceeds of a loan he supposedly sought
from the DBP. The word "WE' in the said promissory note must refer to the
corporation which Coprada represented in the execution of the note and
not its stockholders or directors. Petitioner did not sign the said promissory
note so he cannot be personally bound thereby.

Thus, if there was any fraud or misrepresentation that was foisted on

private respondent in that there was a forthcoming loan from the DBP when
it fact there was none, it is Coprada who should account for the same and
not petitioner.

If the private respondent is the victim of fraud in this transaction, it

has not been clearly shown that petitioner had any part or participation in
the perpetration of the same. Fraud must be established by clear and
convincing evidence. If at all, the principal character on whom fault should
be attributed is Feliciano Coprada, the President of Akron, whom private
respondent dealt with personally all through out. Fortunately, private
respondent obtained a judgment against him from the trial court and the
said judgment has long been final and executory.
 Corpuz v. Grospe, 333 SCRA 425 (2000)

Facts:

Petitioner Gavino Corpuz was a farmer-beneficiary under the

Operation Land Transfer (OLT) Program of the Department of Agrarian
Reform (DAR). Petitioner Gavino Corpuz was a farmer-beneficiary under
the Operation Land Transfer (OLT) Program of the Department of Agrarian
Reform (DAR). To pay for his wifes hospitalization, petitioner mortgaged
the subject land on January 20, 1982, in favor of Virginia de Leon.

He contract period expired, he again mortgaged it to Respondent

Hilaria Grospe, wife of Geronimo Grospe, for a period of four years (to
guarantee a loan of P32,500. The parties executed a contract denominated
as "Kasunduan Sa Pagpapahiram Ng Lupang Sakahan," which allowed the
respondents to use or cultivate the land during the duration of the
mortgage.

In DARAB, petitioner instituted against the respondents an action for

recovery of possession. In his Complaint, he alleged that they had entered
the disputed land by force and intimidation on January 10 and 11, 1991,
and destroyed the palay that he had planted on the land.

Respondents, in their Answer, claimed that the "Kasunduan" between

them and petitioner allowed the former to take over the possession and
cultivation of the property until the latter paid his loan. Instead of paying his
loan, petitioner allegedly executed on June 29, 1989, a "Waiver of Rights"
over the landholding in favor of respondents in consideration of P54,394.

Provincial Agrarian Reform Adjudicator (PARAD) Ernesto P. Tabara

ruled that petitioner abandoned and surrendered the landholding to the
Samahang Nayon of Malaya, Sto. Domingo, Nueva Ecija, which had
passed Resolution Nos. 16 and 27 recommending the reallocation of the
said lots to the respondent spouses, who were the "most qualified
farmer[s]-beneficiaries.
Issue:

Whether or not petitioner voluntary surrendered his land

Held:

In this case, petitioners intention to surrender the landholding was

clear and unequivocal. He signed his concurrence to the Samahang Nayon
Resolutions surrendering his possession of the landholding. The Samahan
then recommended to the team leader of the DAR District that the private
respondent be designated farmer-beneficiary of said landholding.

To repeat, the land was surrendered to the government, not

transferred to another private person. It was the government, through the
DAR, which awarded the landholding to the private respondents who were
declared as qualified beneficiaries under the agrarian laws. Voluntary
surrender, as a mode of extinguishment of tenancy relations, does not
require court approval as long as it is convincingly and sufficiently proved
by competent evidence.[23]

Petitioners voluntary surrender to the Samahang Nayon qualifies as a

surrender or transfer to the government because such action forms part of
the mechanism for the disposition and the reallocation of farmholdings of
tenant-farmers who refuse to become beneficiaries of PD 27. Under
Memorandum Circular No. 8-80 of the then Ministry of Agrarian Reform, the
Samahan shall, upon notice from the agrarian reform team leader,
recommend other tenant-farmers who shall be substituted to all rights and
obligations of the abandoning or surrendering tenant-farmer. Besides,
these cooperatives are established to provide a strong social and economic
organization to ensure that the tenant-farmers will enjoy on a lasting basis
the benefits of agrarian reform.
 Smith Bell & Co. v. Natividad, 40 Phil. 136, 144 (1920)

Facts:

Smith, Bell & Co. is a corporation organized and existing under the
laws of the Philippine Islands; majority of the stockholders are British;
owner of a motor vessel known as the Bato brought to Cebu for the
purpose of transporting Smith, Bell & Co.s merchandise between ports in
the islands. Application for registration was made at Cebu at the Collector
of Customs denied Because they were not citizens of the US/Phils.-Act
2671, Sec. 1172. Certificate of Philippine Register upon registration of a
vessel of domestic ownership, and of more than 15 tons gross, a certificate
of Philippine register shall be issued for it. If the vessel is of domestic
ownership and of 15 tons gross or less, the taking of the certificate of
Philippine register shall be optional with the owner.

Domestic ownership, as used in this section, means ownership

vested in the

(a) citizens ornative inhabitants of the Phil Islands;

(b) citizens of the US residing in the Phil. Islands;

(c) any corporation or company composed wholly of citizen of

Phils./US or both

Plaintiffs contention: Act No. 2671 deprives the corp. of its property
without due process of law because by the passage of the law, the
company was automatically deprived of every beneficial attribute of
ownership of the Bato and that they are left with a naked title they could not
use.

Issue:

WON Smith, Bell & Co. were denied of the due process of law by the
Phil. Legislature in its enactment of Act 2761.
Held:

No. (judgment affirmedplaintiff cant be granted registry.)RD: Act

No. 2761, in denying to corporations such as Smith, Bell & Co. Ltd., the
right to register vessels in the Phils. Coastwide trade, falls within the
authorized exceptions. Specifically withinthe purview of the police power.
Literally and absolutely, steamship lines are the arteries of thecommerce in
the Phils. If one be severed, the lifeblood of the nation is lost. If these
areprotected, security of the country and general welfare is sustained.

Without any subterfuge, the apparent purpose of the Philippine

Legislature is seen to be to enact an anti-alien shipping act. The ultimate
purpose of the Legislature is to encourage Philippine ship-building. This,
without doubt, has, likewise, been the intention of the United States
Congress in passing navigation or tariff laws on different occasions. The
object of such a law, the United States Supreme Court once said, was to
encourage American trade, navigation, and ship-building by giving
American ship-owners exclusive privileges.
 West Coast Life Ins. Co. v. Hurd, 27 Phil. 401 (1914)

Facts:

The petitioner is a foreign life-insurance corporation, duly organized

under and by virtue of the laws of the State of California, doing business
regularly and legally in the Philippine Islands pursuant to its laws. The said
corporation together with John Northcott and Manuel C. Grey was charged
by libel.

Libel was committed allegedly by the petitioner with intent to cause

such damage and to expose Insular Life Insurance Company to public
hatred, contempt, and ridicule, compose and print, and cause to be printed
a large number of circulars, and, in numerous printings in the form of said
circulars, did publish and distribute, and cause to be published and
distributed, among other persons, to policy holders and prospective policy
holders of the said Insular Life Insurance Company, among other things, a
malicious defamation and libel in the Spanish language.

"First. For some time past various rumors are current to the effect
that the Insular Life Insurance Company is not in as good a condition as i
should be at the present time, and that really it is in bad shape.
Nevertheless, the investigations made by the representative of the
"Bulletin" have failed fully to confirm these rumors. It is known that the
Insular Auditor has examined the books of the company and has found that
its capital has diminished, and that by direction of said official the company
has decided to double the amount of its capital, and also to pay its reserve
fund. All this is true."

A motion to quash was filed by the petitioners on the ground that the
court had no jurisdiction over the said company, there being no authority in
the court for the issuance of the process. An action for prohibition to try the
case was then filed by the parties alleging that The basis of the action is
that the Court of First Instance has no power or authority, under the laws of
the Philippine Islands, to proceed against a corporation, as such, criminally,
to bring it into court for the purpose of making it amenable to the criminal
laws. It is contended that the court had no jurisdiction to issue the process
in evidence against the plaintiff corporation; that the issuance and service
thereof upon the plaintiff corporation were outside of the authority and
jurisdiction of the court, were authorized by no law, conferred no jurisdiction
over said corporation, and that they were absolutely void and without force
or effect.

Issue:

Whether or not thr corporation may be charged criminally

Held:

No, it could not.

There are many cases cited by counsel for the defendant which show
that corporations have been proceeded against criminally by indictment
and otherwise and have been punished as malefactors by the courts. Of
this, of course, there can be no doubt; but it is clear that, in those cases,
the statute, by express words or by necessary intendment, included
corporations within the persons who could offend against the criminal laws;
and the legislature, at the same time established a procedure applicable to
corporations. No case has been cited to us where a corporation has been
proceeded against under a criminal statute where the court did not exercise
its common law powers or where there was not in force a special procedure
applicable to corporations.

The courts of the Philippine Islands are creatures of statute and, as

we have said, have only those powers conferred upon them by statute and
those which are required to exercise that authority fully and adequately.
The courts here have no common law jurisdiction or powers. If they have
any powers not conferred by statute, expressly or impliedly, they would
naturally come from Spanish and not from common law sources. It is
undoubted that, under the Spanish criminal law and procedure, a
corporation could not have been proceeded against criminally, as such, if
such an entity as a corporation in fact existed under the Spanish law, and
as such it could not have committed a crime in which a willful purpose or a
malicious intent was required. Criminal actions would have been restricted
or limited, under that system, to the officials of such corporations and never
would have been directed against the corporation itself. This was the rule
with relation to associations or combinations of persons approaching, more
or less, the corporation as it is now understood, and it would undoubtedly
have been the rue with corporations. From this source, then, the courts
derive no authority to bring corporations before them in criminal actions,
nor to issue processes for that purpose.
 Mambulao Lumber Co. v. Philippine National Bank, 22 SCRA 359
(1968)

Facts:

The plaintiff(Mambulao Lumber and Co. applied for an industrial loan

of P155,000 with the Naga Branch of defendant PNB and the former
offered real estate, machinery, logging and transportation equipments as
collaterals.

Plaintiff failed to pay the amortization and the amounts released to

and received by it. Repeated demands were made but upon inspection it
was found that Plaintiff stopped operation. Defendant sent a letter to
respondent sheriff of Camarines Norte requesting him to take possession
of the parcel of land and the chattels and to sell them at public auction. The
sheriff issued corresponding notice of extrajudicial sale and sent copy to
Plaintiff.

Plaintiff sent a bank draft for to PNB allegedly full settlement of the
obligation after the application of the sum representing the proceeds of the
foreclosure sale of the parcel of land. Plaintiff averred that the foreclosure
of chattel mortgage is no longer needed for being fully paid and that it could
not be legally effected at a place other than City of Manila, the place
agreed and stipulated in their contract.

Respondents counsel wrote to Plaintiff that the remitted amount was

not enough for its liability to which should be added the expenses for
guarding the mortgaged of chattels, attorneys fees and expenses of the
sale. Notwithstanding, the foreclosure of both land and the chattels were
held.

Issue:

Whether or not Plaintiff us entitled of moral damages

Held:

Obviously, an artificial person like herein appellant corporation cannot

experience physical sufferings, mental anguish, fright, serious anxiety,
wounded feelings, moral shock or social humiliation which are basis of
moral damages. A corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages. The
same cannot be considered under the facts of this case, however, not only
because it is admitted that herein appellant had already ceased in its
business operation at the time of the foreclosure sale of the chattels, but
also for the reason that whatever adverse effects of the foreclosure sale of
the chattels could have upon its reputation or business standing would
undoubtedly be the same whether the sale was conducted at Jose
Panganiban, Camarines Norte, or in Manila which is the place agreed upon
by the parties in the mortgage contract.

But for the wrongful acts of herein appellee bank and the deputy
sheriff of Camarines Norte in proceeding with the sale in utter disregard of
the agreement to have the chattels sold in Manila as provided for in the
mortgage contract, to which their attentions were timely called by herein
appellant, and in disposing of the chattels in gross for the miserable
amount of P4,200.00, herein appellant should be awarded exemplary
damages in the sum of P10,000.00. The circumstances of the case also
warrant the award of P3,000.00 as attorney's fees for herein appellant.
 ABS-CBN Broadcasting Corp. v. Court of Appeals, 301 SCRA 589
(1999)

Facts:

In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement

Viva gave ABS-CBN an exclusive right to exhibit some Viva films.That
ABS-CBN shall have the right of first refusal to the next twenty-four (24)
Viva films for TV telecast under such terms as may be agreed upon by the
parties hereto, provided, however, that such right shall be exercised by
ABS-CBN from the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN, through its

vice-president Charo Santos-Concio, a list of three(3) film packages (36
title) from which ABS-CBN may exercise its right of first refusal under the
afore-said agreement.

ABS-CBN, however through Mrs. Concio, "can tick off only ten (10)
titles" (from the list) "we can purchase" and therefore did not accept said
list. The titles ticked off by Mrs. Concio are not the subject of the case at
bar except the film ''Maging Sino Ka Man."

Defendant Del Rosario approached ABS-CBN's Ms. Concio, with a

list consisting of 52 original movie titles ( i . e . not yet aired on television)
including the 14 titles subject of the present case, as well as 104 re-runs
(previously aired on television) from which ABS-CBN may choose another
52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights
over this package of 52 originals and 52 re-runs for P60,000,000.00 of
which P30,000,000.00 will be in cash and P30,000,000.00 worth of
television spots.

Defendant Del Rosario and ABS-CBN general manager, Eugenio

Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss
the package proposal of Viva. What transpired in that lunch meeting is the
subject of conflicting versions. Mr. Lopez testified that he and Mr. Del
Rosario allegedly agreed that ABSCBN was granted exclusive film rights to
fourteen (14) films for a total consideration of P36 million; that he allegedly
put this agreement as to the price and number of films in a "napkin'' and
signed it and gave it to Mr. Del Rosario

On the other hand, Del Rosario denied having made any agreement
with Lopez regarding the 14 Viva films; denied the existence of a napkin in
which Lopez wrote something; and insisted that what he and Lopez
discussed at the lunch meeting was Viva's film package offer of 104 films
(52 originals and 52 reruns) for a total price of P60 million. Mr. Lopez
promising [ sic ]to make a counter proposal which came in the form of a
proposal contract Annex "C" of the complaint.

Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president

for Finance discussed the terms and conditions of Viva's offer to sell the
104 films, after the rejection of the same package by ABS-CBN.

Defendant Del Rosario received through his secretary, a handwritten

note from Ms. Concio, which reads: "Here's the draft of the contract. I hope
you find everything in order," to which was attached a draft exhibition
agreement a counter-proposal covering 53 films, 52 of which came from
the list sent by defendant Del Rosario and one film was added by Ms.
Concio, for a consideration of P35 million. Exhibit "C" provides that ABS-
CBN is granted films right to 53 films and contains a right of first refusal to
"1992 Viva Films. "Said counter proposal was however rejected by Viva's
Board of Directors [in the] evening of the same day, April 7, 1992, as Viva
would not sell anything less than the package of 104 films for P60 million
pesos, and such rejection was relayed to Ms. Concio.

After the rejection of ABS-CBN and following several negotiations

and meetings defendant Del Rosario and Viva's President Teresita Cruz, in
consideration of P60 million, signed a letter of agreement granting RBS the
exclusive right to air 104 Viva-produced and/or acquired films including the
fourteen (14) films subject of the present case.

ABS-CBN filed before the RTC a complaint for specific performance

with a prayer for a writ of preliminary injunction and/or temporary
restraining order against private respondents Republic Broadcasting
Corporation 5 (hereafter RBS ), Viva Production (hereafter VIVA), and
Vicente Del Rosario.

The RTC rendered a decision 20 in favor of RBS and VIVA and

against ABS-CBN. According to the RTC, there was no meeting of minds
on the price and terms of the offer. The alleged agreement between Lopez
III and Del Rosario was subject to the approval of the VIVA Board of
Directors, and said agreement was disapproved during the meeting of the
Board. Hence, there was no basis for ABS-CBN's demand that VIVA
signed the 1992 Film Exhibition Agreement. Furthermore, the right of first
refusal under the 1990 Film Exhibition Agreement had previously been
exercised per Ms. Concio's letter to Del Rosario ticking off ten titles
acceptable to them, which would have made the 1992 agreement an
entirely new contract.

ABS-CBN appealed to the Court of Appeals claiming that there was a

perfected contract between ABS-CBN and VIVA granting ABS-CBN the
exclusive right to exhibit the subject films. Private respondents VIVA and
Del Rosario also appealed seeking moral and exemplary damages and
additional attorney's fees.

The Court of Appeals agreed with the RTC that the contract between
ABS-CBN and VIVA had not been perfected, absent the approval by the
VIVA Board of Directors of whatever Del Rosario, it's agent, might have
agreed with Lopez III. The appellate court did not even believe ABS-CBN's
evidence that Lopez III actually wrote down such an agreement on a
"napkin," as the same was never produced in court.

Respondent Court of Appeals denied VIVA and Del Rosario's appeal

because it was "RBS and not VIVA which was actually prejudiced when the
complaint was filed by ABS-CBN."

Its motion for reconsideration having been denied, ABS-CBN filed the
petition in this case.
Issue:

Whether or not the acceptance made by Del Rosario will bind VIVA.

Held:

No.

The acceptance did not bind VIVA, as there was no proof whatsoever that
Del Rosario had the specific authority to do so.

Under Corporation Code, 46 unless otherwise provided by said Code,

corporate powers, such as the power; to enter into contracts; are exercised
by the Board of Directors. However, the Board may delegate such powers
to either an executive committee or officials or contracted managers. The
delegation, except for the executive committee, must be for specific
purposes, 47 Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the bindings
effects of their acts would apply.

For such officers to be deemed fully clothed by the corporation to exercise

a power of the Board, the latter must specially authorize them to do so.
That Del Rosario did not have the authority to accept ABS-CBN's counter-
offer was best evidenced by his submission of the draft contract to VIVA's
Board of Directors for the latter's approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds.

The testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del
Rosario had no authority to bind Viva to a contract with ABS-CBN until and
unless its Board of Directors approved it. The complaint, in fact, alleges
that Mr. Del Rosario "is the Executive Producer of defendant Viva" which
"is a corporation. As a mere agent of Viva, Del Rosario could not bind Viva
unless what he did is ratified by its Board of Directors. As a mere agent,
recognized as such by plaintiff, Del Rosario could not be held liable jointly
and severally with Viva and his inclusion as party defendant has no legal
basis.
The corporate power to enter into a contract is lodged in the Board of
Directors. (Sec. 23, Corporation Code). Without such board approval by the
Viva board, whatever agreement Lopez and Del Rosario arrived at could
not ripen into a valid contract binding upon Viva.
Filipinas Compania de Seguros v. Christern, Huenefeld & Co., Inc., 89
Phil. 54 (1951)

Facts:

On October 1, 1941, the respondent corporation, Christern Huenefeld

and Co., Inc., after payment of corresponding premium, obtained from the
petitioner, Filipinas Cia de Seguros fire policy covering merchandise
contained in a building located at Binondo, Manila. On February 27, 1942
or during the Japanese military occupation, the building and insured
merchandise were burned. In due time, the respondent submitted to the
petitioner its claim under the policy. The petitioner refused to pay the claim
on the ground that the policy in favor of the respondent that ceased to be a
force on the date the United States declared war against Germany, the
respondent corporation (through organized under and by virtue of the laws
of Philippines) being controlled by German subjects and the petitioner
being a company under American jurisdiction when said policy was issued
on October 1, 1941. The theory of the petitioner is that the insured
merchandise was burned after the policy issued in 1941 had ceased to be
effective because the outbreak of the war between United States and
Germany on December 10, 1941, and that the payment made by the
petitioner to the respondent corporation during the Japanese military
occupation was under pressure.

Issue:

Whether or not the respondent corporation is a corporation of public

enemy.

Held:

Since the majority of stockholders of the respondent corporation were

German subjects, the respondent became an enemy of the state upon the
outbreak of the war between US and Germany. The English and American
cases relied upon by the Court of Appeals lost in force upon the latest
decision of the Supreme Court of US in which the control test has adopted.
Since World War I, the determination of enemy nationality of corporations
has been discussed in many countries, belligerent and neutral. A
corporation was subject to enemy legislation when it was controlled by
enemies, namely managed under the influence of individuals or
corporations themselves considered as enemies

The Philippine Insurance Law (Act No 2427, as amended), in Section

8, provides that anyone except a public enemy may be insured. It stands
to reason that an insurance policy ceases to be allowable as soon as an
insured becomes a public enemy.

The respondent having an enemy corporation on December 10,

1941, the insurance policy issued in its favor on October 1, 1941, by the
petitioner had ceased to be valid and enforceable, and since the insured
good were burned during the war, the respondent was not entitled to any
indemnity under said policy from the petitioner. However, elementary rule
of justice (in the absence of specific provisions in the Insurance Law)
require that the premium paid by the respondent for the period covered by
its policy from December 11, 1941, should be returned by the petitioner.
 Sunio v. NLRC , 127 SCRA 390 (1984)

Facts:

EM Ramos & Company, Inc. (EMRACO for brevity) and Cabugao Ice
Plant, Inc. (CIPI for short), sister corporations, sold an ice plant to Rizal
Development and Finance Corporation (RDFC) with a mortgage on the
same properties constituted by the latter in favor of the former to secure the
payment of the balance of the purchase price. By virtue of that sale,
EMRACO-CIPI terminated the services of all their employees including
private respondents herein, and paid them their separation pay. RDFC
hired its own own employees and operated the plant.

RDFC sold the ice plant to petitioner Ilocos Commercial Corporation

(ICC) headed by its President and General Manager, petitioner Alberto S.
Sunio. Petitioners also hired their own employees as private respondents
were no longer in the plant. The sale was subject to the mortgage in favor
of EMRACO-CIPI. Both RDFC-ICC failed to pay the balance of the
purchase price, as a consequence of which, EMRACO-CIPI instituted
extrajudicial foreclosure proceedings.

EMRACO-CIPI sold the ice plant to Nilo Villanueva, suspect to the

right of redemption of RDFC. Nilo Villanueva then re-hired private
respondents. RDFC redeemed the ice plant. Because of the gate to Nilo
Villanueva, EMRACO-CIPI were unable to turn over possession to RDFC
and/or petitioners, prompting the latter to file a complaint for recovery of
possession against EMRACO-CIPI with the then Court of First Instance of
Ilocos Sur.

RDFC and petitioners finally obtains possession of the ice plant by

virtue of the Mandatory Injunction previously issued, which ordered
defendant "particularly Nilo C. Villanueva and his agents representatives,
or any person found in the premises to vacate and surrender the property
in litigation." Petitioners did not re-employ private respondents. Private
respondents filed complaints against petitioners for illegal dismissal with
the Regional Office, Ministry of Labor & Employment, San Fernando, La
Union.
Issue:

Whether or not Petitioner is liable for the backwages of the

respondent because of the acquisition of the plant through succession

Held:

It is basic that a corporation is invested by law with a personality

separate and distinct from those of the persons composing it as well as
from that of any other legal entity to which it may be related. 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. Petitioner Sunio, therefore,
should not have been made personally answerable for the payment of
private respondents' back salaries.

It is true that the sale of a business of a going concern does not ipso
facto terminate the employer-employee relations insofar as the
successoremployer is concerned, and that change of ownership or
management of an establishment or company is not one of the just causes
provided by law for termination of employment. The situation here,
however, was not one of simple change of ownership.

Of note is the fact that when, on July 30, 1973, EMRACO-CIPI sold
the plant to RDFC, CIPI had terminated the services of its employees,
including herein private respondents, giving them their separation pay
which they had accepted. When RDFC took over ownership and
management, therefore, it hired its own employees, not the private
respondents, who were no longer there. RDFC subsequently sold the
property to petitioners on November 28, 1973. But by reason of their failure
to pay the balance of the purchase price, EMRACO-CIPI foreclosed on the
mortgage over the ice plant; the property was sold at public auction to
EMRACO-CIPI as the highest bidders, and they eventually re-possessed
the plant on August 30, 1974. During all the period that RDFC and
petitioners were operating the plant from July 30, 1973 to August 30, 1974,
they had their own employees. CIPI-EMRACO then sold the plant, also on
August 30, 1974, to Nilo Villanueva, subject to RDFC's right of redemption.
Nilo Villanueva then rehired private respondents as employees of the plant,
also in 1974. it cannot be justifiably said that the plant together with its staff
and personnel moved from one ownership to another. No succession of
employment rights and obligations can be said to have taken place
between EMRACO-CIPI-Nilo Villanueva, on the one hand, and petitioners
on the other
 PNB v. Ritratto Group, Inc., 362 SCRA 216 (2001)

Facts:

Petitioner Philippine National Bank is a domestic corporation

organized and existing under Philippine law. Meanwhile, respondents
Ritratto Group, Inc., Riatto International, Inc. and Dadasan General
Merchandise are domestic corporations, likewise, organized and existing
under Philippine law.

PNB International Finance Ltd. (PNB-IFL) a subsidiary company of

PNB, organized and doing business in Hong Kong, extended a letter of
credit in favor of the respondents, secured by real estate mortgages
constituted over four (4) parcels of land in Makati City. Respondents made
repayments of the loan incurred by remitting those amounts to their loan
account with PNB-IFL in Hong Kong.

However, there still stood an outstanding balance and pursuant to the

terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact
PNB, notified the respondents of the foreclosure of all the real estate
mortgages. Respondents filed a complaint for injunction with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining
order before the Regional Trial Court of Makati. The Executive Judge of the
Regional Trial Court of Makati issued a 72-hour temporary restraining
order.

Issue:

Whether or not PNB and PNB-IFL are separate entities

Held:

The general rule is that as a legal entity, a corporation has a

personality distinct and separate from its individual stockholders or
members, and is not affected by the personal rights, obligations and
transactions of the latter. The mere fact that a corporation owns all of the
stocks of another corporation, taken alone is not sufficient to justify their
being treated as one entity. If used to perform legitimate functions, a
subsidiary's separate existence may be respected, and the liability of the
parent corporation as well as the subsidiary will be confined to those arising
in their respective business. The courts may in the exercise of judicial
discretion step in to prevent the abuses of separate entity privilege and
pierce the veil of corporate entity.

We find, however, that the ruling in Koppel finds no application in the

case at bar. In said case, this Court disregarded the separate existence of
the parent and the subsidiary on the ground that the latter was formed
merely for the purpose of evading the payment of higher taxes. In the case
at bar, respondents fail to show any cogent reason why the separate
entities of the PNB and PNB-IFL should be disregarded.

The Circumstance rendering the subsidiary an instrumentality. It is

manifestly impossible to catalogue the infinite variations of fact that can
arise but there are certain common circumstances which are important and
which, if present in the proper combination, are controlling.

These are as follows:

(a) The parent corporation owns all or most of the capital stock of the
subsidiary.

(b) The parent and subsidiary corporations have common directors or

officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the
subsidiary or otherwise causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or
losses of the subsidiary.
 (g) The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by the parent
corporation.

(h) In the papers of the parent corporation or in the statements of its

officers, the subsidiary is described as a department or division of the
parent corporation, or its business or financial responsibility is referred to
as the parent corporation's own.

(i) The parent corporation uses the property of the subsidiary as its
own.

(j) The directors or executives of the subsidiary do not act

independently in the interest of the subsidiary but take their orders from the
parent corporation.

(k) The formal legal requirements of the subsidiary are not observed.

In this jurisdiction, we have held that the doctrine of piercing the

corporate veil is an equitable doctrine developed to address situations
where the separate corporate personality of a corporation is abused or
used for wrongful purposes. The doctrine applies when the corporate fiction
is used to defeat public convenience, justify wrong, protect fraud or defend
crime, or when it is made as a shield to confuse the legitimate issues, or
where a corporation is the mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.

We have laid the test in determining the applicability of the doctrine of

piercing the veil of corporate fiction, to wit:

1. Contr ol, not mere majority or complete 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
rights; and,

3. The aforesaid control and breach of duty must proximately cause

the injury or unjust loss complained of.

In any case, the parent-subsidiary relationship between PNB and

PNB-IFL is not the significant legal relationship involved in this case since
the petitioner was not sued because it is the parent company of PNB-IFL.
Rather, the petitioner was sued because it acted as an attorney-in-fact of
PNB-IFL in initiating the foreclosure proceedings. A suit against an agent
cannot without compelling reasons be considered a suit against the
principal. Under the Rules of Court, every action must be prosecuted or
defended in the name of the real party-in-interest, unless otherwise
authorized by law or these Rules. In mandatory terms, the Rules require
that "parties-in-interest without whom no final determination can be had, an
action shall be joined either as plaintiffs or defendants." In the case at bar,
the injunction suit is directed only against the agent, not the principal.