Corporate Charter and Its Amendment Chapter 5

TITLE IV - POWERS OF CORPORATIONS
Section 36. Corporate powers and capacity. - Every corporation incorporated under this Code has the
power and capacity:
1. To sue and be sued in its corporate name;
2. Of succession by its corporate name for the period of time stated in the articles of incorporation
and the certificate of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in
accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to
subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit
members to the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including securities and bonds of other corporations, as the
transaction of the lawful business of the corporation may reasonably and necessarily require, subject
to the limitations prescribed by law and the Constitution;
8. To enter into merger or consolidation with other corporations as provided in this Code;
9. To make reasonable donations, including those for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign,
shall give donations in aid of any political party or candidate or for purposes of partisan political
activity;
10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers
and employees; and
11. To exercise such other powers as may be essential or necessary to carry out its purpose or
purposes as stated in the articles of incorporation. (13a)
Section 37. Power to extend or shorten corporate term. - A private corporation may extend or shorten
its term as stated in the articles of incorporation when approved by a majority vote of the board of
directors or trustees and ratified at a meeting by the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members in case of non-
stock corporations. Written notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence as shown on the books of
the corporation and deposited to the addressee in the post office with postage prepaid, or served
personally: Provided, That in case of extension of corporate term, any dissenting stockholder may
exercise his appraisal right under the conditions provided in this code. (n)
Section 38. Power to increase or decrease capital stock; incur, create or increase bonded
indebtedness. - No corporation shall increase or decrease its capital stock or incur, create or increase
any bonded indebtedness unless approved by a majority vote of the board of directors and, at a
stockholder's meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital stock
shall favor the increase or diminution of the capital stock, or the incurring, creating or increasing of
any bonded indebtedness. Written notice of the proposed increase or diminution of the capital stock
or of the incurring, creating, or increasing of any bonded indebtedness and of the time and place of
the stockholder's meeting at which the proposed increase or diminution of the capital stock or the
incurring or increasing of any bonded indebtedness is to be considered, must be addressed to each
stockholder at his place of residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally.
A certificate in duplicate must be signed by a majority of the directors of the corporation and
countersigned by the chairman and the secretary of the stockholders' meeting, setting forth:
(1) That the requirements of this section have been complied with;
(2) The amount of the increase or diminution of the capital stock;
(3) If an increase of the capital stock, the amount of capital stock or number of shares of no-par stock
thereof actually subscribed, the names, nationalities and residences of the persons subscribing, the
amount of capital stock or number of no-par stock subscribed by each, and the amount paid by each
on his subscription in cash or property, or the amount of
capital stock or number of shares of no-par stock allotted to each stock-holder if such increase is for
the purpose of making effective stock dividend therefor authorized;
(4) Any bonded indebtedness to be incurred, created or increased;
(5) The actual indebtedness of the corporation on the day of the meeting;
(6) The amount of stock represented at the meeting; and
(7) The vote authorizing the increase or diminution of the capital stock, or the incurring, creating or
increasing of any bonded indebtedness.
Any increase or decrease in the capital stock or the incurring, creating or increasing of any bonded
indebtedness shall require prior approval of the Securities and Exchange Commission.
One of the duplicate certificates shall be kept on file in the office of the corporation and the other shall
be filed with the Securities and Exchange Commission and attached to the original articles of
incorporation. From and after approval by the Securities and Exchange Commission and the issuance
by the Commission of its certificate of filing, the capital stock shall stand increased or decreased and
the incurring, creating or increasing of any bonded indebtedness authorized, as the certificate of filing
may declare: Provided, That the Securities and Exchange Commission shall not accept for filing any
certificate of increase of capital stock unless accompanied by the sworn statement of the treasurer of
the corporation lawfully holding office at the time of the filing of the certificate, showing that at least
twenty-five (25%) percent of such increased capital stock has been subscribed and that at least
twenty-five (25%) percent of the amount subscribed has been paid either in actual cash to the
corporation or that there has been transferred to the corporation property the valuation of which is
equal to twenty-five (25%) percent of the subscription: Provided, further, That no decrease of the
capital stock shall be approved by the Commission if its effect shall prejudice the rights of corporate
creditors.
Non-stock corporations may incur or create bonded indebtedness, or increase the same, with the
approval by a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in a
meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the Securities and Exchange Commission,
which shall have the authority to determine the sufficiency of the terms thereof. (17a)
Section 39. Power to deny pre-emptive right. - All stockholders of a stock corporation shall enjoy pre-
emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their
respective shareholdings, unless such right is denied by the articles of incorporation or an
amendment thereto: Provided, That such pre-emptive right shall not extend to shares to be issued in
compliance with laws requiring stock offerings or minimum stock ownership by the public; or to
shares to be issued in good faith with the approval of the stockholders representing twothirds (2/3) of
the outstanding capital stock, in exchange for property needed for corporate purposes or in payment
of a previously contracted debt.
Section 40. Sale or other disposition of assets. - Subject to the provisions of existing laws on illegal
combinations and monopolies, a corporation may, by a majority vote of its board of directors or
trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its
property and assets, including its goodwill, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other instruments for the payment of money or
other property or consideration, as its board of directors or trustees may deem expedient, when
authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding
capital stock, or in case of non-stock corporation, by the vote of at least to two-thirds (2/3) of the
members, in a stockholder's or member's meeting duly called for the purpose. Written notice of the
proposed action and of the time and place of the meeting shall be addressed to each stockholder or
member at his place of residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting
stockholder may exercise his appraisal right under the conditions provided in this Code.
A sale or other disposition shall be deemed to cover substantially all the corporate property and
assets if thereby the corporation would be rendered incapable of continuing the business or
accomplishing the purpose for which it was incorporated.
After such authorization or approval by the stockholders or members, the board of directors or
trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge
or other disposition of property and assets, subject to the rights of third parties under any contract
relating thereto, without further action or approval by the stockholders or members.
Nothing in this section is intended to restrict the power of any corporation, without the authorization
by the stockholders or members, to sell, lease, exchange, mortgage, pledge or otherwise dispose of
any of its property and assets if the same is necessary in the usual and regular course of business of
said corporation or if the proceeds of the sale or other disposition of such property and assets be
appropriated for the conduct of its remaining business.
In non-stock corporations where there are no members with voting rights, the vote of at least a
majority of the trustees in office will be sufficient authorization for the corporation to enter into any
transaction authorized by this section.
Section 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or
acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the
following cases: Provided, That the corporation has unrestricted retained earnings in its books to
cover the shares to be purchased or acquired:
1. To eliminate fractional shares arising out of stock dividends;
2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in
a delinquency sale, and to purchase delinquent shares sold during said sale; and
3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the
provisions of this Code. (a)
Section 42. Power to invest corporate funds in another corporation or business or for any other
purpose. - Subject to the provisions of this Code, a private corporation may invest its funds in any
other corporation or business or for any purpose other than the primary purpose for which it was
organized when approved by a majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or by at least two
thirds (2/3) of the members in the case of non-stock corporations, at a stockholder's or member's
meeting duly called for the purpose. Written notice of the proposed investment and the time and place
of the meeting shall be addressed to each stockholder or member at his place of residence as shown
on the books of the corporation and deposited to the addressee in the post office with postage
prepaid, or served personally: Provided, That any dissenting stockholder shall have appraisal right as
provided in this Code: Provided, however, That where the investment by the corporation is reasonably
necessary to accomplish its primary purpose as stated in the articles of incorporation, the approval of
the stockholders or members shall not be necessary. (17 1/2a)
Section 43. Power to declare dividends. - The board of directors of a stock corporation may declare
dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in
stock to all stockholders on the basis of outstanding stock held by them: Provided, That any cash
dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription
plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder
until his unpaid subscription is fully paid: Provided, further, That no stock dividend shall be issued
without the approval of stockholders representing not less than two-thirds (2/3) of the outstanding
capital stock at a regular or special meeting duly called for the purpose. (16a)
Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%)
percent of their paid-in capital stock, except: (1) when justified by definite corporate expansion
projects or programs approved by the board of directors; or (2) when the corporation is prohibited
under any loan agreement with any financial institution or creditor, whether local or foreign, from
declaring dividends without its/his consent, and such consent has not yet been secured; or (3) when it
can be clearly shown that such retention is necessary under special circumstances obtaining in the
corporation, such as when there is need for special reserve for probable contingencies. (n)
Section 44. Power to enter into management contract. - No corporation shall conclude a management
contract with another corporation unless such contract shall have been approved by the board of
directors and by stockholders owning at least the majority of the outstanding capital stock, or by at
least a majority of the members in the case of a non-stock corporation, of both the managing and the
managed corporation, at a meeting duly called for the purpose: Provided, That (1) where a stockholder
or stockholders representing the same interest of both the managing and the managed corporations
own or control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the
managing corporation; or (2) where a majority of the members of the board of directors of the
managing corporation also constitute a majority of the members of the board of directors of the
managed corporation, then the management contract must be approved by the stockholders of the
managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to
vote, or by at least two-thirds (2/3) of the members in the case of a non-stock corporation. No
management contract shall be entered into for a period longer than five years for any one term.
The provisions of the next preceding paragraph shall apply to any contract whereby a corporation
undertakes to manage or operate all or substantially all of the business of another corporation,
whether such contracts are called service contracts, operating agreements or otherwise: Provided,
however, That such service contracts or operating agreements which relate to the exploration,
development, exploitation or utilization of natural resources may be entered into for such periods as
may be provided by the pertinent laws or regulations. (n)
Section 45. Ultra vires acts of corporations. - No corporation under this Code shall possess or
exercise any corporate powers except those conferred by this Code or by its articles of incorporation
and except such as are necessary or incidental to the exercise of the powers so conferred. (n)
SORIANO NOTES
CHAPTER 5: THE CORPORATE CHARTER AND ITS AMENDMENTS
A. CORPORATE CHARTER
CORPORATE CHARTER signifies an instrument or authority from the sovereign power, bestowing rights or
power, and is often used convertibly with the term “act of incorporation”, where the corporation was formed
under a special act of the legislature, and with the “articles of incorporation”, when the corporation was formed
under a general law.
THREE - FOLD CONTRACT : 1. Between the corporation and the state insofar as it concerns its primary
franchise to be and act as a corporation’ 2. Between the corporation and the stockholders or members insofar
as it governs their respective rights and obligations; 3. Between and among the stockholders or members
themselves as far as their relationship with one another is concerned.
FRANCHISE: appropriately applies to the right or privilege itself to be and act as a corporation or to do a
certain act while charter applies to the instrument by which the state vests such right or privilege. Franchise
may either be: (1) Primary – nothing more than the right or privilege of being a corporation; or (2) Secondary –
the powers and privileges vested in, and to be exercised by the corporate body as such. Example:
Employment Agencies, primary franchise is the certificate of incorporation from the SEC, the secondary
franchise is the license issued by the POEA.
B. CORPORATE ENTITY THEORY
As a legal entity, the corporation is possessed with a juridical personality separate and distinct from the
individual stockholders or members and is not affected by the personal rights, obligations or transactions of
the latter. The properties it possesses belongs to it exclusively as a separate juridical entity such that the
personal creditors of its stockholders or members cannot attach corporate properties to satisfy their claims.
On the other hand, the corporation is not likewise liable for the debts, obligations or liabilities of its
stockholders. Neither may it properties be made answerable to satisfy the claim of creditors against its
stockholders or member even if the stockholder concerned is its president.
SULO NG BAYAN, INC., plaintiff-appellant VS. GREGORIO ARANETA, INC. ET AL., defendant-appelle (72
SCRA 347; Aug. 17, 1976) – Plaintiffappellant Sulo ng Bayan, Inc. instituted a reinvindicatory action for the
recovery of 28,000 square meters of land for and in behalf of its members, who were themselves and their
predecessors-in-interest pioneered in the clearing of the land and cultivated the same since the Spanish
Regime and have been in continuous possession of the same. The action was dismissed on the ground that
there is no cause of action. On appeal, the CA certified the case to the SC for the legal issues involved.
ISSUED: WON Sulo ng Bayan, Inc. may institute the action for recovery of property of it individual members?
HELD: No. It is a doctrine well-established and obtains both at law and in equity that 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 a 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. Conversely, a corporation ordinarily has no interest in the individual
property of its stockholders unless transferred to the corporation, “even in the case of a one-man corporation”.
Absent any showing of interest, therefore, a corporation, like plaintiff
19 Cesar Nickolai F. Soriano Jr. Arellano University School of Law 2011-0303 THE CORPORATION CODE
OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based on the book of Atty Ruben C. Ladia
appellant herein, 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.
It is fundamental that there cannot be a cause of action without an antecedent primary legal right conferred by
law upon a person. Evidently, there can be no wrong without a corresponding right, and no breach of duty by
one person without a corresponding right belonging to some other person.
FERMIN CARAM, JR. AND ROSA DE CARAM VS. CA AND ALBERTO V. ARELLANO ( 1 5 1 S C R A 3 7 2 ;
J u n e 3 0 , 1 9 8 7 ) – Herein petitioners were ordered jointly and severally to pay the plaintiff P50,000 for the
preparation of the project study and his technical services that led to the organization of the defendant
corporation. The petitioners questioned the order stating that they are mere subsequent investors in the
corporation that was later created, that they should not be held solidarily liable with the Filipinas Orient
Airways, a separate juridical entity, and with co-defendants who were the ones who requested the said
services from the private respondent.
ISSUE: WON petitioners can be held personally liable for such expenses?
HELD: No. Petitioners were not involved in the initial stages of the organization of the airline, which were
being directed by Baretto, respondent, as the main promoter. It was he who was putting all the pieces
together, so to speak. The petitioners were merely among the financiers whose interest was to be invited and
who were in fact persuaded, on the strength of the project study, to invest in the proposed airline.
Significantly, there was no showing that the Filipinas Orient Airways was a fictitious corporation and did not
have a separate juridical personality, to justify making the petitioner, as principal stockholder thereof,
responsible for its obligations. As a bona fide corporation, the Filipinas Orient Airways should alone be liable
for its corporate acts as duly authorized by its directors and officers.
The most that can be said is that they benefited from the services, but that surely is no justification to hold
them personally liable therefor. Otherwise, all other stockholders of the corporation, including those who came
in later, and regardless of the amount of their stockholdings would be equally and personally liable also with
the petitioners for the claims of the private respondents.
Petitioners are not liable under the challenged decision.
RUSTAN PULP AND PAPER MILLS, INC. VS. IAC
(214 SCRA 665; Oct.
19, 1992) – Petitioner Rustan entered into a contract of sale with respondent Lluch which was later on
stopped by Rustan through a letter. Lluch sent a letter to clarify whether the letter sent by Rustan was for the
stoppage of delivery or termination of the contract of sale. Unanswered, respondent Lluch resumed deliveries
and later on filed a complaint for contractual breach which was dismissed. On appeal, the CA modified the
decision of the trial court directing petitioner including Tantoco, president and general manager, and Vergara,
resident manager, to pay private respondents.
ISSUE: WON individual petitioners may be held liable?
HELD: No. The president and manager of a corporation, who entered into and signed a contract in his official
capacity, cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect
due to the personality of a corporation being separate and distinct from the person composing it. And because
of this precept, Vergara’s supposed non-participation in the contract of sale although he signed the letter
terminating it is completely immaterial.
CRUZ VS. DALISAY
(152 SCRA 482; July 31, 1987) – Adelio Cruz charged Quiterio Dalisay, Senior Deputy Sheriff of Manila, with
malfeasance in office, corrupt practices and serious irregularities when the respondent sheriff attached and/or
levied the money belonging to complainant Cruz when he was not himself the judgment debtor in the final
judgment of NLRC sought to be enforced but rather the company known as Qualitrans Limousine Service,
Inc., a duly registered corporation.
ISSUE: WON the charge against the respondent should be upheld for attaching personal property of the
corporate president?
HELD: Yes. The respondent’s action in enforcing judgment against complaint who is not the judgment debtor
in the case calls for disciplinary action. Considering the ministerial duty in enforcing writs of execution, what is
incumbent upon him is to ensure that only that portion of a decision ordered or decreed in the dispositive part
should be the subject of execution. No more, no less. That the title of the case specifically names complaint
as one of the respondent is of no moment as execution must conform to that directed in the dispositive portion
and not in the title of the case. The tenor of the NLRC judgment and the implementing writ are clear enough. It
directed Qualitrans to reinstate the discharged employee and pay the full backwages. Respondent, however,
chose to “pierce the veil of corporate entity” usurping a power belonging to the court and assumed
improvidently that since the complainant is the owner/president, they are one and the same. It is well-settled
doctrine, both in law and in equity that as a legal entity, a corporation has a personality distinct and separate
from its individual stockholders or members. The mere fact that one is president of a corporation does not
render the property he owns or possesses the property of the corporation, since the president, as individual,
and the corporation are separate entities.
PALAY INC. VS. CLAVE (124 SCRA 638; Sept. 21, 1983) – Petitioner Palay, Inc. through its president Albert
Onstott, executed in favor of respondent Naario Dumpit a Contract to Sell a parcel of land which provided for
automatic rescission upon default in payment of any monthly amortization without need of notice and forfeiture
of all instalments paid. Respondent failed to pay some instalments and later offered to update all his overdue
account but was informed that the contract has already been rescinded.
Respondent filed with the NHA a complaint questioning the validity of the rescission which decided in its favor
holding Palay, Inc. and Alberto Onstott, in his capacity as president, jointly and severally liable.
ISSUE: WON the corporate president is liable to refund the amount state in the NHA ruling?
HELD: No. As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders
or those of the legal entities to which it may be connected and vice versa. However, the veil of corporate
fiction may be pierced when it is used as a shield to further an end subversive of justice; or for purposes that
could not have been intended by the law that created it; or to defeat public convenience, justify wrong, protect
fraud, or defend crime; or to perpetuate fraud or confuse legitimate issues; or to circumvent the law or
perpetuate deception; or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders.
We find no badges of fraud on petitioners’ part. They had literally relied, albeit mistakenly, on its contract with
private respondent when it rescinded the contract to sell extrajudicially and had sold it to another person.
No sufficient proof exists on record that said petitioner used the corporation to defraud private respondent. He
cannot, therefore, be made personally liable just because he “appears to be the controlling stockholder”.
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.
PAULINO SORIANO, NENITA C. ESPERANZA and JANDRO G. MACADANGDANG, petitioners, vs. HON.
COURT OF APPEALS (Former Sixth Division) and GERVACIO CU, respondents (GR No. L - 49834 ; June
22, 1989)
FACTS: Petitioners were held solidarily liable by the appellate court in their personally capacity to the private
respondent for non-payment of tobacco under an agreement between them embodied in a receipt which
states as follows:
GREETINGS: WE, the President, Manager, Treasurer and Director Representative of Bacarra (I.N.) Facoma,
Inc., do hereby execute this document:
That we received from Mr. Gervacio Cu, a truck load of Virginia tobacco consisting of ONE HUNDRED SIXTY
(160) bales of fifty (50) kilos each bale (sic) the said Virginia tobacco consists of different grades or class from
E to A (sic) the said tobaccos are to be shipped to the redrying plants through the Bacarra Facoma under
Guia number 236.
Conditions of the deal between Mr. Cu and the Association. Upon payment of the said tobacco by the
Philippine Virginia Tobacco Administration then Mr. Cu, will collect the corresponding payments as graded by
the redrying plant as further stipulated that the check representing the payment shall only be cashed in the
presence of Mr. Cu, or his authorized representative. (Sic) This instrument is executed for the protection,
guidance and information of the parties concerned.
Done this 10th day of August 1964 at Bacarra, Ilocos Norte.
(Sgd.) Paulino Soriano PAULINO SORIANO President
(Sgd.) Nenita C. Esperanza NENITA C. ESPERANZA Sec. Treasurer
by: (Sgd.) Erlinda V. Acosta BIENVENIDO E. ACOSTA Director, Official Representative
(Sgd.) A. Macadangdang A.G. MACADANGDANG Manager
ISSUE: WON petitioners are liable?
HELD: No. We cannot accept the conclusion that the official designations of petitioners were written on the
document merely as meaningless and hollow decorations or as mere d e s c rip t o p e r s o n a e without any
relevance to the liability of the corporation these officers obviously represented. Indeed, taking in conjunction
with the other obtaining circumstances, the receipt discloses the capacity by which the petitioners entered into
the “deal” with private respondent.
The subject receipt itself states that the conditions contained therein were between the private respondent
and the “Association”. The lower court held that the “Association” referred only to the signatories. We
disagree. It is quite plain and we are convinced that the “Association is none other than the Bacarra (I.N.)
Facoma, Inc. which is a farmer’s cooperative marketing association. Not only that , we cannot find any cogent
reason why the petitioners used the word “Association” when they could have more easily and conveniently
placed “the undersigned” or words to the same effect in its stead.
In light of the foregoing, it is clear that the liability of the petitioners under the document subject of the instant
case is not personal but corporate, and therefore attached to the Bacarra (I.N.) Facoma, Inc. which being a
corporation, has a personality distinct and separate from that of the petitioners who are only its officers. It is
the general rule that the protective mantle of a corporation’s separate and distinct personality could only be
pierced and liability attached directly to its officers and/or member-stockholders, when the same is used for
fraudulent, unfair or illegal purpose.
C. PIERCING THE VEIL OF CORPORATE FICTION
The notion of corporate legal entity is not, at all ties respected. This is because the applicability of the
corporate entity theory is confined to
legitimate transactions and is subject to equitable limitations to prevent its being used as a cloak or cover for
fraud or illegality, or to work injustice.
While no hard and fast rule exists as to when the corporate fiction may pierced or disregarded, it is a
fundamental principle in Corporation law that a corporation is an entity separate and distinct from its
stockholders or member and from other corporations to which it may be connected. But when the notion of
legal entity is used to defeat public convenience, Justify wrong, Protect fraud, Defend crime, the law will
regard the corporation as a mere association of persons, or in the case of two corporations, merge them into
one, the one being merely regarded as part or instrumentality of the other. The same is true where a
corporation is a mere dummy and serves no business purpose and is intended only as a blind, or an alter-ego
or business conduit for the sole benefit of the stockholders.
In cases where the doctrine of piercing the veil of corporate fiction, liability will attach directly to the officers
and stockholders, at least, in so far as that particular act is concerned.
PALACIO VS. FELY TRANSPORTATION COMPANY
(5 SCRA 1 011; Aug.
31, 1962) – Alfredo Carillo, a driver of herein respondent corporation, ran over the child of herein petitioner
Mario Palacio, and was found guilty of the criminal case filed against him. Isabelo Calingasan, the employer,
was held subsidiarily liable and not the defendant corporation. Plaintiffs now contend that the defendant
corporation should be made subsidiarily liable for damages in the criminal case because the sale to it of the
jeep in question, after the conviction of Carillo was merely an attempt on the part of Calingasan, its president
and general manager, to evade his subsidiary civil liability.
ISSUE: WON the corporation can be held liable for the subsidiary civil liability of Isabelo Calingasan?
HELD: Yes. It is evident that Calingasan’s main purpose in forming the corporation was to evade his
subsidiary civil liability resulting from the conviction of his driver. This conclusion is borne out by the fact that
the incorporators of the Fely Transportation are Isabelo Calingasan, his wife, his son, Dr. Calingasan, and his
two daughters. We believe that this one case where the defendant corporation should not be heard to say that
it has a personality separate and distinct from its members when to allow it to do so would be to sanction the
use of the fiction of corporate entity as a shield to further an end of subversive of justice. Furthermore, the
failure of the defendant corporation to prove that it has other property other than the jeep strengthens the
conviction that its formation was for the purpose above indicated.
MARVEL BUILDING CORPORATION, et al. VS. DAVID
(94 Phil. 376;
Feb. 24, 1954) – Plaintiffs, as stockholders of Marvel Building Corporation sought to enjoin the defendant
Collector of Internal Revenue from selling at a public auction properties which were said to be registered in
the name of said corporation. Said properties were seized and distrained by defendant to collect war profits
taxes against Maria Castro who the former claims to be the sole owner of the said corporation. Maria Castro
owns P250,000 of the P1,025,000 capital of the corporation, of the rest of the incorporators were her half-
brothers, half-sister and a brother-in-law.
ISSUE: WON Maria Castro is the sole owner of the Corporation?
HELD: Yes. Circumstantial pieces of evidence presented were: (1) Endorsement in blank of the certificates of
stock issued in the name of the incorporators and the possession thereof by Maria Castro; (2) The other
incorporators did not have incomes in such amount, during the time of the organization of the corporation or
immediately thereto, as to enable them to pay in full their supposed subscriptions; and (3) It should have been
the supposed subscribers who should have come to court to assert that they actually paid for their
subscriptions and are not mere dummies.
The circumstantial evidence is not only convincing, it is conclusive. In addition to the above, the fact that the
stockholders or directors never appeared to have ever met to discuss the business of the corporation and the
fact that Maria Castro advanced big sums of money to the corporation without any previous arrangements or
account, and the fact that the books of
accounts were kept as if they belonged to Maria Castro alone – these facts are of patent and potent
significance.
In our opinion, the facts and circumstances duly set forth, all of which have been proved to our satisfaction,
prove conclusively and beyond reasonable doubt that Maria Castro is the sole and exclusive owner of all the
shares of stock of the corporation and that the other partners are her dummies.
YUTIVO & SONS CO. VS. CTA
(1 SCRA 160; Jan. 28, 1961) – Herein petitioner Yutivo purchased its cars and trucks from General Motors
Overseas Corporation (GM), the latter paying the sales tax once on original sales, Yutivo no longer paid sales
tax on its sales to the public. Later no, GM withdrew from the Philippines and appointed Yutivo as importer.
Yutivo in turn exclusively sold to Southern Motors, Inc. (SM), a corporation where the incorporators are sons
of the founders of Yutivo. Under this arrangement, Yutivo paid the sales tax on original sale, while SM did not
subject to sales tax its sales to the public.
The Collector of Internal Revenue assessed Yutivo for deficiency sales taxes which the CTA affirmed.
ISSUE: WON Yutivo is liable for the deficiency taxes?
HELD: No. It is elementary rule and fundamental principle of corporation law that a corporation is an entity
separate and distinct from its stockholders and from other corporations to which it may be connected.
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 case of two corporations
merge them into one. Another rule is that, when the corporation is a mere alter-ego or business conduit of a
person, it may disregarded.
The sales tax liability of Yutivo did not arise until it became the importer and simply continued its practice of
selling to SM. The decision, therefore, of the Tax Court that SM was organized purposely as a tax evasion
device runs counter to the fact that there was no tax to evade.
We are, however, inclined to agree with the court below that SM was actually owned and controlled by
petitioner as to make it a mere subsidiary or branch of the latter created for the purpose of selling the vehicles
at retail and maintaining stores for spare parts as well as service repair shops. It is not disputed that the
petitioner, which is engaged principally in hardware supplies and equipment, is completely controlled by the
Yutivo, Young and Yu family. The founders of the corporation are closely related to each other either by blood
or affinity and most of its stockholders are members of the Yu (Yutivo or Young) family.
According to the AOI, the amount of P62,500 was actually advanced by Yutivo. The additional subscriptions to
SM were paid by Yutivo. The shareholders in SM are mere nominal stockholders holding the share for and in
behalf of Yutivo, so even conceding that the original subscribers were bona fide stockholders, Yutivo was at
all tie in control of the stock of SM and that the latter was a mere subsidiary of the former.
SM is under the management control of Yutivo by virtue of the management contract entered into between the
two parties. In fact, the controlling majority of the BOD of Yutivo is also the controlling majority of the Board of
SM. At the same time, the principal officers of both corporations are identical. In addition, both corporations
have a common comptroller. There is therefore no doubt that by virtue of such control, the business, financial
and management policies of both corporations would be directed towards common ends. Likewise, cash or
funds of SM, including those of its branches which are directly remitted to Yutivo, and subject to withdrawal
only by Yutivo, SM’s being under Yutivo’s control, the former’s operations and existence became dependent
upon the latter.
SM, being but a mere instrumentality or adjunct of Yutivo, the CTA correctly disregarded the technical defense
of separate corporate entity to arrive at the true tax liability of Yutivo.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
NORTON and HARRISON COMPANY, respondent. ( GR No. L - 17618; 11 SCRA 714; Aug 31, 1964)
FACTS: Herein respondent entered into an agreement with Jackbilt where the former was made the sole and
exclusive distributor of concrete blocks manufactured by Jackbilt and accordingly every order of a customer of
Norton was transmitted to Jackbilt which delivered the merchandise directly to the customer. Payment of the
goods, however, is made to Norton, which in turn pays Jackbilt the amount charged the customer less a
certain amount, as its compensation or profit.
During the existence of the agreement, Norton acquired by purchase all the outstanding stocks of Jackbilt.
Due to this, the Commissioner of Internal Revenue, assess respondent Norton for deficiency taxes making the
basis of sales tax the sales of Norton to the public, which is the higher price compare to the sale of Jackbilt to
Norton. The CTA decided in favor of Norton.
ISSE: WON the two corporations may be merged into a single corporation?
HELD: Yes. It has been settled that the ownership of all the stocks of a corporation by another corporation
does not necessarily breed an identity of corporate interest between the two companies and be considered as
a sufficient ground for disregarding distinct personalities. However, in the case at bar, we find sufficient
grounds to support the theory that the separate identities of the two companies should be disregarded.
(a) Norton owned all the outstanding stocks of Jackbilt; (b) Norton constituted Jackbilt’s directors; (c) Norton
financed the operations of Jackbilt; (d) Norton treats Jackbilt’s employees as its own; (e) Compensation given
to board members of Jackbilt indicate that Jackbilt is merely a department of Norton; (f) The offices of Norton
and Jackbilt are located in the same compound; (g) Payments were effected by Norton of accounts for
Jackbilt and vice versa; (h) Payments were also made to Norton of accounts due or payable to Jackbilt and
vice versa.
The circumstances presented by the facts of the case, yields to the conclusion that Jackbilt is merely an
adjunct, business conduit or alter-ego of Norton and that the fiction of corporate entities, separate and distinct
from each other should be disregarded.
LA CAMPANA COFFEE FACTORY, INC. VS. KAISAHAN NG MGA MANGGAGAWA SA LA CAMPANA
(KKM) (93 Phil. 160; May 25, 1953) – Tan Tong, one of herein petitioners, is engaged in the buying and
selling of guagua under the trade name La Campana Guagua Packing. Later on, Tong and his family
organized a family corporation known as La Campana Coffee Factory Co, Inc. with its principal office located
at the same place as that of La Campana Guagua Packing.
Tan Tong’s employees later on formed a union (herein respondent) through which they demanded (from both
companies) higher salaries and more privileges. As the demand was not granted and an attempt at a
settlement through mediation had given no result, the Department of Labor certified the dispute to the Court of
Industrial Relations (CIR). Petitioners filled a motion to dismiss which was denied. Hence, this present petition
for certiorari.
ISSUE: WON the corporate entity of La Campana Coffee Factory, Inc. may be disregarded?
HELD: Yes. La Campana Guagua Packing and La Campana Coffee Factory, Inc. are operating under on
single management, that is, as one business though with two trade names. True, the coffee factory is a
corporation and, by legal fiction, an entity existing separate and apart from the person composing it, that Tan
Tong and his family. But it is settled that this fiction of law, which has been introduced as a matter of
convenience and to subserve the ends of justice cannot be invoked as to further and end subversive of that
purpose.
In the present case, Tan Tong appears to be the owner of the guagua factory. And the factory, though an
incorporated business, is in reality owned
exclusively by Tan Tong and his family. As found by the CIR, one payroll, except after July 17, the day the
case was certified to the CIR, when the person who was discharging the office of cashier for both branches of
the business began preparing separate payrolls for the two. And above all, it should not be overlooked that, as
also found by the industrial court, the laborers of the guagua factory and the coffee factory were
interchangeable. In view of all these, the attempt to make the two factories appear as two separate
businesses, when in reality they are but one, is but a device to defeat the ends of the law and should not be
permitted to prevail.
EMILIO CANO ENTERPRISES, INC. VS. COURT OF INDUSTRIAL RELATIONS (CIR) (13 SCRA 290; Feb.
26, 1965) – In a complaint for unfair labor practice, the Court of Industrial Relations rendered a decision in
favor of Honorata Cruz, ordering Emilio and Rodolfo Cano, officials of herein petitioner corporation, to
reinstate Cruz. An order of execution was issued directed against the properties of herein petitioner. Hence,
this petition.
ISSUE: WON execution may be had on the properties of the corporation?
HELD: Yes. We should not lose sight of the fact that Emilio Cano Enterprises, Inc. is a closed family
corporation where the incorporators and directors belong to one single family. Here is an instance where the
corporation and its members are considered as one. And to hold such entity liable for the acts of its members
is not to ignore the legal fiction but merely to give meaning to the principle that such fiction cannot be invoked
if its purpose is to use it as a shield to further an end subversive of justice. And so it has been held that while
a corporation is a legal entity existing separate and apart from the person composing it, that concept cannot
be extended to a point beyond it reason and policy, and when invoked in support of an end subversive of this
policy it should be disregarded by the courts.
Emilio and Rodlfo Cano were indicted in the case, not in their personal capacity, but as president and
manager of the corporation. Having been sued officially, their connection with the case must be deemed to be
impressed with the representation of the corporation. In fact, the court’s order is for them to reinstate Honorata
Cruz to her former position in the corporation and incidentally pay her the wages she had been deprived of
during her separation. Verily, the order against them is in effect against the corporation. No benefit can be
attained if this case were to be remanded to the court a quo merely in response to a technical substitution of
parties.
TELEPHONE ENGINEERING SERVICE CO. VS. WCC (104 SCRA 354 ; May 13, 1981 ) – The late Pacifico
Gatus was an employee of Utilities Management Corporation (UMACOR), a sister company of herein
Petitioner TESCO. He was later on detailed with Petitioner Company and returned back to UMACOR. But he
contracted illness and later on died of “liver cirrhosis with malignant degeneration”.
His wife, respondent Leonila Gatus filed a Notice and Claim for Compensation with the Workmen’s
Compensation Commission (WCC) alleging Pacifico to be an employee of TESCO. An employer’s report was
submitted to WCC where UMACOR was indicated as the employer of the deceased and stated that it would
not contravert the claim and admitted that Pacifico contracted illness “in regular occupation”.
The sheriff levied on and attached the property of TESCO and scheduled the sale of the same at public
auction. Thus, the present petition for certiorari with preliminary injunction.
ISSUE: WON the award may be rendered against TESCO?
HELD: Yes. We note that it is only in this Petition that petitioner denied, for the first time, the employer-
employee relationship. In fact, in the letters it submitted to the Acting Referee and to the Commission,
petitioner represented and defended itself as the employer of the deceased. Petitioner even admitted that
TESCO and UMACOR are sister companies operating under one single management and housed in the
same building. Although respect for the corporate personality as such, is the general rule, there are
exceptions. In appropriate cases, the veil of corporate fiction may be pierced as when the same is made as a
shield to confuse the legitimate issues.
While indeed, jurisdiction cannot be conferred by acts or omission of the parties. TESCO’s denial at this stage
that it is the employer of the deceased is obviously an afterthought, a devise to defeat the law and evade its
obligations. This denial also constitutes a change of theory on appeal which is not allowed in this jurisdiction.
CLARAPOLS VS. COMMISSIONER OF INTERNAL REVENUE
( July 31,
1975; 65 SCRA 613) – A decision rendered against herein petitioner was rendered on a complaint filed by
herein private respondents Allied Workers’ Association, Demetrio Garlitos and 10 respondent workers who
petitioner dismissed from Clarapols Steel and Nail Plant.
ISSUE: WON the veil of corporate fiction should be pierced?
HELD: Yes. It very clear that the latter corporation was a continuation and successor of the first entity, and its
emergence was skilfully timed to avoid financial liability that already attached to its predecessor, Clarapols
Steel and Nail Plant. (1) Both predecessor and successor were owned and controlled by the petitioner
Eduardo Clarapols; and (2) there was no break in the succession and continuity in the same business. This
avoiding-the-liability scheme is very patent, considering that (3) 90% of the subscribed shares of stock of the
second corporation was owned by Clarapols himself, and (4) all assets of the dissolved Clarapols Steel and
Nail Plant were turned over to the emerging Clarapols Steel Corporation.
It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in
the present case could, and should be pierced as it was deliberately and maliciously designed to evade its
financial obligations to its employees.
NATIONAL FEDERATION OF LABOR UNION (NAFLU) VS. OPLE
(143
SCRA 124 ; July 22, 1986 ) – NAFLU requested for conciliation before the Bureau of Labor Relations for
certain money claims and refusal of the company to conclude collective agreement and run-away shop
undertaken by management. In the course of the negotiation, management unilaterally declared a temporary
shutdown. But it was discovered that the actual partial shutdown begun a month before and that the machines
of Lawman were transferred to a different location and the name of the company was changed to Libra
Garments, upon discovery of this, the name was further changed to DOLPHIN garments. For failure of the
company to resume operations in January 1983 (as promised) a complaint for unfair labor practice was filed.
ISSUE: WON the corporate fiction of LIBRA (now DOLPHIN) garments should be pierced?
HELD: Yes. It is very obvious from the above findings that the second corporation seeks the protective shield
of a corporate fiction to achieve illegal purpose. As enunciated in Clarapols vs. CIR, its view in the present
case should, therefore be pierced as it was deliberately and maliciously designed to evade its financial
obligations to it employees. It is an established principle that when the veil of corporate fictions is made as a
shield to perpetrate a fraud or to confuse legitimate issues (here, the relation of employeremployee), the same
should be pierced.
After finding that Lawman Industrial Corporation had transferred business operations to Libra Garments,
which later changed to Dolphin Garments, the public respondent cannot deny reinstatement to the petitioners
simply because Lawman has ceased its operation.
As Libra Garments is but an alter-ego of the old employer, Lawman Industrial, the former must bear the
consequences of the latter’s unfair act by reinstating petitioners to their former positions without loss of
seniority rights.
AC RANSOM LABOR UNION-CCLU VS. NLRC
(150 SCRA 498 May 29,
1987 ) – A decision was rendered by the CIR and affirmed by this Court against AC Ransom for unfair labor
practice. Writ of execution were issued successively against Ransom to no avail. The Union filed an ex-parte
motion for a Writ of Execution and Garnishment against the officers/agents of AC Ransom personally and on
their estates, as the case may be, which the Labor Arbiter granted. On appeal, the NLRC reversed the Labor
Arbiter relieving the
officers of personal liability.
ISSUE: WON the officers may be liable?
HELD: Yes. The NLRC, on appeal, could not have modified the CIR decision as affirmed by this Court, by
relieving AC Ransom’s officers and agent of liability which were held to be jointly and severally liable to the 22
employees for unfair labor practice.
This finding does not ignore the legal fiction that a corporation has a personality separate and distinct from its
stockholders and members for, as this Court had held “where the incorporators belong to a single family, the
corporation and its members can be considered as one in order to avoid it being used as an instrument to
commit injustice,” or to further an end subversive of justice. In the case of Clarapols vs. CIR involving almost
similar facts as in this case, it was also held that the shield of corporate fiction should be pierced when it is
deliberately and maliciously designed to evade financial obligations to employees.
Aggravating AC Ransom’s clear evasion of payment of its financial obligations is the organization of a “run-
away” corporation, ROSARIO Industrial Corporation, in 1969 at the time the unfair labor practice case was
proceeding before the CIR by the same person who were the officers and stockholders of AC Ransom,
engaged in the same line of business, producing the same line of product, occupying the same compound,
using the same machineries, buildings, factories, bodega and sales and accounts departments used by AC
Ransom, and which is still in existence. Both corporations were closed corporations owned and managed by
members of the same family. Its organization proved to be a convenient instrument to avoid payment of
backwages and the reinstatement of 22 workers. This is another instance where the fiction of separate and
distinct corporate entities should be disregarded.
CONCEPT BUILDERS, INC. VS. NLRC
(257 SCRA 149; May 29, 1996) – Private respondents were employees of petitioner Concept Builders, Inc.,
who were served termination letters stating that the project for which they were hired was already completed
and that their contracts have already expired. Finding that the project was not actually completed yet, and that
petitioner employed a subcontractor whose employees performed the duties of private respondents, the latter
filed a complaint for illegal dismissal with the Labor Arbiter who held that the dismissal was illegal.
A writ of execution was issued but was partially satisfied only. The sheriff sought levy upon the properties in
the head office of Concept Builders, Inc. but was not allowed to do so on the ground that it was occupied by
Hydro Pipes Philippines, Inc. and not concept builders. Unable to remove the personal properties he found
thereat, the Sheriff asked for a “break-open” order which was denied by the Labor Arbiter after a third party
claim was filed by Hydro, which was reversed by the NLRC on appeal.
ISSUE: WON the break-open order should be issued?
HELD: Yes. The conditions under which the juridical entity may be disregarded vary according to the
particular facts and circumstances of each case. No hard and fast rule can be accurately laid down, but
certainly there are some probative factors of identity that will justify the application of the doctrine of piercing
the veil of corporate veil, to wit: 1. Stock ownership by one or common ownership of both corporations; 2.
Identity of directors and officers; 3. The manner of keeping corporate books and records; 4. Methods of
conducting the business.
The SEC en banc explained the “instrumentality rule” which the courts have applied in disregarding separate
juridical personality of corporations as follows:
“Where on corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere
instrumentality or adjunct of the other, the fiction of the corporate entity of the “instrumentality” may be
disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such
domination of finances, policies, and practices that the controlled corporation has, so to speak, no separate
mind,
will or existence of its own and is a business conduit of its principal. It must be kept in mind that the control
must be shown to have been exercised at the time the acts complained of took place. Moreover, the control
and breach of duty must proximately cause the injury or unjust loss for which the complaint is made”
The test in determining the applicability of piercing the veil of corporate fictions is as follows: 1. Control, not
mere majority or complete stock control, but complete domination, not only in 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 plaintiff’s legal rights; and 3. The aforesaid control and breach of
duty must proximately cause the injury or unjust los complained of.
The absence of one of the elements prevents piercing the corporate veil. In applying the “instrumentality” or
“alter-ego” doctrine, the courts are concerned with reality and not form, with how the corporation operated and
the individual defendant’s relationship to that operation. Thus, the question of whether a corporation is mere
alter-ego, a mere sheet of paper corporation, a sham or a subterfuge is purely one of fact.
In this case, while petitioner claimed that it ceased on operations on April 29, 1986, it filed an information
sheet with the SEC on May 15, 1987 stating that its office address is at 355 Maysan Road, Valenzuela Metro
Manila. On the other hand, third-party claimant Hydro, on the same day, filed an information sheet with the
same address, both information sheets filed by the same Virgilio O. Casino. Both companies have the same
president, the same BOD, the same corporate officers and substantially the same subscribers.
Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of
back wages and to bar their reinstatement to their former position. Hydro is obviously a business conduit of
petitioner corporation and its emergence was skilfully orchestrated to avoid the financial liability attached to
petitioner corporation.
MC CONNEL VS. CA
(1 SCRA 722 ; March 1, 1961 ) – Petitioners, original incorporators of Park Rite Co., Inc. was ordered to pay
the unsatisfied balance of a judgment rendered in favor of lot owners whose property they used in the
operations of their parking business without the owners’ consent.
ISSUE: WON the incorporators may be held liable for obligations of the corporation?
HELD: Yes. The Court has already answered the question in the affirmative wherever the circumstances have
shown that the corporate entity is being used as an alter-ego or business conduit for the sole benefit of the
stockholders, or else to defeat public convenience, justify wrong, protect fraud, or defend crime.
The evidence shows that Cirilio Paredes and Ursula Tolentino (present stockholders) and M. McConnel, WP
Cochrane and Ricardo Rodriguez (previous stockholders) completely dominated and controlled the
corporation and that the functions of the corporation were solely for their benefit, as shown that the other
shareholders were merely qualifying shares. This is strengthened by the fact that the office of Cirilio Paredes
and that of Park Rite Co., Inc. were located in the same building, in the same floor, and in the same room.
This is further shown by the fact that the funds of the corporation were kept by Cirilio Paredes in his own
name. The corporation itself had no visible assets, as correctly found by the trial court, except perhaps the toll
house, the wire fence around the lot and the signs thereon It was for this reason that the judgment against it
could not be fully satisfied.
While the mere ownership of all or nearly all of the capital stock of a corporation does not necessarily mean
that it is a mere business conduit of the stockholder, that conclusion is amply unjustified where it is shown, as
in this case before us, that the operations of
the corporation were so merged with the stockholders as to be practically indistinguishable from them. To hold
the latter liable for the corporation’s obligations is not to ignore the corporation’s separate entity, but merely to
apply the established principle that such entity cannot be invoked or used for purposes that could not have
been intended by the law that created the separate personality.
TAN BOON BEE & CO., INC., petitioner, vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING
JUDGE OF BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and
PHILIPPINE AMERICAN CAN DRUG COMPANY, respondents ( GR No. L - 41337; 163 SCRA 205 ; June
30, 1988 )
FACTS: For failure of private respondent Graphic Publishing Inc. to pay paper products purchased from
petitioner (doing business under the name and style Anchor Supply, Inc.), petitioner filed a complaint in the
CFI of Manila. A writ of Execution was issued levying a printing machine which private respondent Philippine
American Drug Company claimed as its own. PADCO filed a third party claim and asked the court to nullify
the auction sale already conducted, which herein respondent judge granted.
ISSUE: WON the respondent judge should be upheld?
HELD: No. It is true that a corporation, upon coming into being, is invested by law with a personality separate
and distinct from that of the persons composing it as well as from any other legal entity to which it may be
related. As a matter of fact, 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. However, this separate and distinct personality is merely a fiction created by law for convenience
and to promote justice. Accordingly, 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 or when necessary for the protection of creditors.
Corporations are composed of natural persons and the legal fiction of a separate corporate personality is not
a shield for the commission of injustice and inequity. Likewise, this is true when the corporation is merely an
adjunct, business conduit or alter-ego of another corporation. In such case, the fiction of separate and distinct
corporate entities should be disregarded.
In the instant case, petitioner’s evidence established that PADCO never engaged in the printing business; that
the BOD and the officers of PADCO and Graphic are the same; and that PADCO holds 50% share of stock of
Graphic. The printing machine in question was in the premises of Graphic, long before PADCO even acquired
its alleged title from Capitol Publishing.
Considering the above, respondent judge should have pierced PADCO’s veil of corporate identity.
CEASE VS. CA
(93 SCRA 483 ; Oct. 18, 1979 ) – Forrest L. Cease is the common predecessor-in-interest of the parties. He
and other American citizens organized the Tiaong Milling and Plantation Company and in the course of its
corporate existence all other incorporators were bought out by Cease and his children. The corporation’s
charter expired but there were no records as to its liquidation. Upon Cease’s death, Ernesto, Teresita, Cecilia
(3 of the 5 children) and Bonifacia Terante re-incorporated under FL Cease Plantation Company, to the
objection of Benjamin and Florence who wanted actual division of Forrest Cease’s shares. The latter two filed
a civil case asking to declare the corporation identical to FL Cease and that its properties be divided among
Fl Cease’s children as his intestate heirs which was granted by the trial court.
ISSUE: WON the assets of the corporation are also the properties of Forrest L. Cease?
HELD: Yes. In sustaining respondent’s theory of “merger of Forrest Cease and the Tiaong Milling as one
personality”, or that “the company is only the business conduit and alter-ego of the deceased FL Cease and
the registered
properties of Tiaong Milling are actually properties of FL Cease and should be divided equally among his
children”, the trial court did aptly apply the familiar exception to the general rule by disregarding the legal
fiction of distinct and separate corporate personality and regarding the corporation and the individual
members one and the same. In shredding the fictitious corporate veil, the trial judge narrated the undisputed
factual premise:
“While the records show that originally, the incorporators were aliens, friends or third-parties in relation of one
to another, in the course of its existence, it developed into a close family corporation. The BOD and
stockholders belong to one family the head of which FL Cease always retained the majority and hence, the
control and management of its affairs. In fact, during the reconstruction of its records before the SEC, only 9
nominal shares out of 300 appear in the name of his 3 eldest children then and another person close to them
(Ternate). It is likewise noteworthy to observe that as his children increase or perhaps become of age, he
continued distributing his shares among them adding Florence, Teresa and Marion until at the time of his
death, only 190 were left to his name. Definitely, only the members of his family benefited from the
corporation.
The accounts of the corporation and therefore its operation, as well as that of the family appears to be
indistinguishable and apparently joined together. As admitted by the defendants, the corporation “never” had
any account with any banking institution or if any account was carried in a bank on its behalf, it was in the
name of FL Cease. In brief, the operation of the Corporation is merged with those of the majority stockholders,
the latter using the former as his instrumentality and for the exclusive benefit of all his family. From the
foregoing indication, therefore, there is truth in plaintiffs’ allegation that the corporation is only a business
conduit of his father and an extension of his personality, they are once and the same thing. Thus, the assets
of the corporation are also the estate of FL Cease, the father of the parties herein who are al legitimate
children of full blood”
Were we to sustain petitioners, the legal fiction of separate corporate personality shall have been used to
delay and ultimately deprive and defraud the respondents of their successional right to the estate of their
deceased father.
D. WHEN PIERCING THE CORPORATE FICTION IS NOT JUSTIFIED
WHEN PIERCING THE CORPORATE FICTION IS NOT JUSTIFIED
1. Absent any of the following circumstances, the courts will not be justified in disregarding the corporate
entity; a. The corporation is used or being used to defeat public convenience; b. Justify wrong; c. Protect
fraud; d. Defend crime; e. Confuse legitimate issues; f. Circumvent the law; g. Perpetuate deception; or h. An
alter-ego, adjunct or business conduit for the sole benefit of a stockholder or a group of stockholders or
another corporation. 2. The wrong doing must be clearly and convincingly established. It cannot be justified by
speculation and can never be presumed. 3. The petitioner must seek to impose a claim against the
stockholders or officers directly liable, otherwise piercing the veil of corporate fiction would not be available
nor justified.
CRUZ VS. DALISAY
(supra) – It is well-settled doctrine, both in law and in equity that as a legal entity, a corporation has a
personality distinct and separate from its individual stockholders or members. The mere fact that one is
president of a corporation does not render the property he owns or possesses the property of the corporation,
since the president, as individual, and the corporation are separate entities
REMO, JR. VS. INTERMEDIATE APPELLATE COURT
(175SCRA405;
A p ril 1 8 , 1 9 8 9 ) – Petitioner Feliciano Coprada, as president of Akron, purchased 13 trucks from private
respondent (EB Marcha Transport Co., Inc.) for and in consideration of P525,000 as evidenced by a deed of
absolute sale.
In a side agreement, the parties agreed on a down payment of P50,000 and the balance to be paid within 60
days. They further agreed that until the balance is paid, the down payment shall accrue as rentals for the 13
trucks; and in case of failure to pay the balance shall constitute a chattel mortgage lien; and the parties may
allow 30 day extension; and private respondent may ask for the revocation of the contract and re-conveyance
of the said trucks. The obligation is further secured by a promissory note executed by Coprada, where it is
stated that the balance shall be paid from the proceeds of a loan from DBP which was never applied for. A
complaint was later on filed by private respondent for the recovery of the P525, 000 or the return of the 13
trucks against Akron and its officers and directors including herein petitioner which was granted by the CFI of
Rizal. Petitioner denied any participation the transaction and alleging that Akron has distinct corporate
personality. He was, however, declared in default for failure to attend pretrial.
ISSUE: WON Petitioner Remo, Jr. is jointly and severally liable?
HELD: No. The facts of the case show that 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 he is a member of
the board at the time the resolution to purchase the trucks were adopted, it does not appear that said
resolution was intended to defraud anyone. It was Coprada who negotiated with respondent and the one who
signed the promissory note. The word “We” in the said promissory note must refer to the corporation and
Coprada and not of its stockholders and directors. Petitioner did not sign such 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 forthcoming loan from the DBP when in fact there as none, it is Coprada who
should account for the same and not the petitioner.
DEL ROSARIO VS. NLRC
(182 SCRA 777; July 24, 1990) - Pursuant to a complaint for money claims which was ultimately decided by
the NLRC against PHILSA Construction and Trading Co. (recruiter) and Arieb Enterprises (employer), a writ of
execution was issued by the POEA which was returned unsatisfied as PHILSA was no longer operating and
was financially incapable of satisfying the judgment.
At the motion of private respondent, an alias writ was issued against the properties of Mr. Francisco del
Rosario and if insufficient, against the cash and/or surety bond of the Bonding Company concerned.
Petitioner appealed to the NLRC which was denied together with his MR.
ISSUE: WON the writ of execution must be upheld?
HELD: No. Under the law, a corporation is bestowed juridical personality, separate and distinct from its
stockholders. But when the juridical personality of the corporation is used to defeat public convenience, Justify
wrong, protect fraud or defend crime, the corporation shall be considered as a mere association of persons,
and its responsible officers and/or stockholders shall be held individually liable. For the same reasons, a
corporation shall be liable for the obligation of a stockholder or a corporation and its successor-in-interest shall
be considered as one and the liability of the former shall attach to the latter.
But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly
and convincingly established. It cannot be presumed. In this regard, we find the NLRC decision wanting.
1 . PHILSA allowed its license to expire so as to evade payment of private respondent’s claim – not supported
by facts. The license expired in 1985, it was delisted in 1986, there was no judgment yet in favour of PR. An
intent to evade payment of his claims cannot therefore be implied from the expiration of PHILSA’s license and
its delisting.
2. Organization of PHILSA International Plac emen and Services Corp. and its registration with POEA implies
fraud – it was organized and registered in 1981, several years before private respondent filed his complaint
with the POEA in 1985. The creation of the second corporation could not
therefore have been in anticipation of PR’s money claims and the consequent adverse judgment against
PHILSA.
3. Substantial identity of the incorporators of the two corporations – does not necessarily imply fraud.
*Distinguished from other cases* LA CAMPANA – the two companies were substantially owned by the same
person. They had one office, one management, and a single payroll for both businesses. The laborers were
also interchangeable.
CLARAPOLS – Both corporations were substantially owned and controlled by the same person and there was
no break or cessation in operations. Moreover, all the assets of the old were transferred to the new
corporation.
AC RANSOM – The distinguishing mark of fraud were clearly apparent in AC Ransom, when such
corporation ceased operation after the decision of the CIR and new one replacing it which was owned by the
same family, engaging in the same business and operating in the same compound. In the present case, not
only has there been failure to establish fraud, but it has also not been shown that petitioner is the corporation
officer responsible for PR’s predicament. It must be emphasized that the claims were actually directed against
the employer, PHILSA became liable only because of its undertaking to be jointly and severally bound with the
foreign employer, as required by POEA rules.
INDOPHIL TEXTILE MILL WORKERS UNION VS. CALICA
(205 SCRA
697; Feb. 3, 1992) - On April 1987, petitioner and Indophil Textile Mills, Inc. executed a CBA effective from
April 1, 1987 to March 31, 1990. On November 3, 1987, Indophil ACRYLIC MANUFACTURING CORP was
formed and registered with the SEC and in 1988 became operation and hired workers according to its own
criteria and standards.
In 1989, the workers of ACRYLIC unionized and a CBA was executed. In 1990, petitioner union claimed that
the plant facilities build and set up by ACRYLIC should be considered an extension or expansion of the
facilities of TEXTILE MILLS, to make ACRYLIC part of the TEXTILE MILLS bargaining unit. Public respondent
voluntary arbitrator Calica declared that the CBA of petitioner DOES NOT extend to employees of ACRYLIC.
ISSUE: WON the veil of corporate entity should be pierced?
HELD: No. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the
legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or
stockholders may be disregarded. In such cases, the corporation will be considered as a mere association of
persons. The members or stockholders of a corporation will be considered as the corporation, that is, liability
will attach directly to the officers and stockholders.
In the case at bar, petitioner alleges that the creation of the ACRYLIC is a devise to evade the application of
the CBA between petitioner and TEXTILE MILL. While we do not discount the possibility of the similarities of
the businesses of the two corporations, neither are we inclined to apply the doctrine invoked by petitioner. 1.
The fact that the business of Indophil Textile Mills and Indphil Acrylic Manufacturing are related; 2. That some
of the employees of PR are the same persons manning and providing for auxilliary services to the units of
ACRILYC, and that; 3. The physical plants, offices and facilities are situated in the same compound.
It is our considered opinion that these facts are not sufficient to justify piercing the corporate veil of ACRILYC.
UMALI VS. CA – “the legal corporate entity is disregarded only if it’s sought to hold the officers and
stockholders directly liable for a corporate debt or obligation”. In the instant case, petitioner does not seek to
impose a claim against the members of ACRILYC.
PNB VS. RITRATTO GROUP, INC. ET. AL. (362 SCRA 216; July 31, 2001) - PNB International Finance Ltd.
(IFL), a wholly-owned subsidiary of PNB, organized and doing business in HK, extended a letter of credit in
favor of respondent RITRATTO in the amount of US$300K , later increased to 1.14M, to 1.29M, to 1.425M
and decreased to 1,421,316.18, secured by a real estate mortgage constituted in 4 parcels of land in Makati
City.
As of April 1998, the outstanding obligation of respondents stood at US$1,497,274.70. Pursuant to the terms
of the mortgages, IFL, through its attorney-in-fact PNB, notified respondents of the foreclosure of all the real
estate mortgages and that the properties would be sold at a public auction.
Respondents filed a complaint for injunction for which a TRO was issued and later on a writ of preliminary
injunction, which petitioner assailed with the CA through petition for certiorari.
The CA dismissed the petition.
ISSUE: WON the corporate entity of IFL may be disregarded?
HELD: No. Respondents, therefore, do not have any cause of action against it. The trial court erred in
disregarding the corporate entity by saying that IFL is a wholly owned subsidiary of PNB and that it is a mere
alter-ego or business conduit 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 businesses.
KOPPEL PHIL VS. YATCO – this Court disregarded the separate existence of the parent and 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 failed to show any cogent reason why the separate entities of PNB and IFL should
be disregarded.
While there exists no definite test of general application in determining when a subsidiary may be treated as a
mere instrumentality of the parent corporation some factors have been identified that will justify the application
of the treatment of the doctrine of piercing the corporate veil:
1. As a general rule, the stock ownership alone by one corporation of the stock of another does not thereby
render the dominant corporation liable for the torts of the subsidiary unless the separate corporate existence
of the subsidiary is a mere sham, or unless the control of the subsidiary is such that it is by an instrumentality
or adjunct of the dominant corporation (Garrett vs. Southern Railway Co.; Tennessee SC) ;
2. 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 purpose. The doctrine
applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend
crime, or when it is used as a shield to confuse legitimate issues 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;
3. The test in determining the doctrine of piercing the veil of corporation fiction: a. Control, not mere majority
of complete control, but complete domination, not only of finances, but of policy and business practices in
respect to the transaction attacked so that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own;
b. Such control must have been used by the defendant to commit fraud, or wrong to perpetuate the violation
of a statutory or other positive legal duty, or dishonest and unjust act in contravention to plaintiff’s legal rights;
and
c. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents “piercing the corporate veil”. In applying the
“instrumentality” or “alter-ego” doctrine, the courts are concerned with reality and not form, with how the
corporation operated and the individual defendant’s relationship to the operation. (Concept Builders, Inc. vs.
NLRC)
Aside from the fact that IFL is a wholly owned subsidiary, there is no showing of the indicative factors that the
it is a mere instrumentality of PNB. Neither is there a demonstration that any of the evils sought to be
prevented by the doctrine of piercing the corporate veil based on the alter-ego or instrumentality doctrine finds
application in the case at bar.
The injunction suit was directed against PNB, as agent of IFL and not as parent. A suit against an agent,
cannot, without compelling reasons be considered a suit against the principal, for he is not the real party in
interest provided under the Rules of Court.
YU VS. NLRC, FERNANDO DURAN, EDUARDO PALIWAN, ROQUE ESTOCE AND RODRIGO SANTOS
(245 SCRA 134) - Private respondents were employees of Tanduay Distillery, Inc. (TDI). On March 29, 1988,
22 employees of TDI, including PRs, received a memorandum from TDI, terminating their services for reasons
of retrenchment, because First Pacific Metro Corporation is buying TDI’s assets, which purchase did not push
through.
On June 1, 1988, after employees had ceased as such, Twin Ace Holdings, Inc. took over the business and
assumed the name Tanduay Distillers (Tanduay).
Labor Arbiter, on a case originally filed in April 26, decided in favor of PRs holding the retrenchment illegal,
which was affirmed by the NLRC. Petitioners filed an opposition against the motion for execution (which was
directed towards them and TDI) contending that Tanduay is a separate entity distinct from TDI, and
respondents James Yu and Wilson Young, which was dismissed by the NLRC.
ISSUE1: WON the order of execution is void?
HELD: Yes. The decision dated May 24, 1989, was already final and executory and cannot be amended or
corrected except for clerical errors or mistakes. An examination of the said decision does not in any manner
obligate Tanduay or even petitioners Yu and Young to reinstate PRs. Only TDI was held liable up to the time
of change of ownership. The order of execution in effect amended the decision. It is beyond the power and
competence of Labor Arbiter Cueto to amend a final decision. The writ of execution must not go beyond the
scope of judgment.
ISSUE2: WON NLRC committed grave abuse of discretion in holding petitioner Yu and Young liable?
HELD: It cannot be said that TDI and Tanduay are one and the same, as seems to be the impression of
respondents when they impleaded petitioners as party-respondents in their complaint.
Such a stance is not supported by the facts . The name of the company for whom the petitioners are working
is Twin Ace Holdings Corporation. As stated by the SolGen, Twin Ace is part of the Allied Banking Group
although it conducts the rum business under the name of Tanduay Distillers. The use of a similar sounding or
almost identical name is an obvious device to capitalize on the goodwill which Tanduay Rhum has built over
the years. Twin Ace or Tanduay Distillers and TDI are distinct and separate corporations. There is nothing to
suggest that the owners of TDI, have any common relationship as to identify it with Allied Banking Group
which runs Tanduay Distillery.
The genuine nature of the sale to Twin Ace is evidenced by the fact that Twin Ace was only a subsequent
interested buyer . PRs have not presented any proof as to communality of ownership and management to
support
their contention that the two companies are one firm or closely related.
The complaint was filed against TDI . Only later when the manufacture and sale of Tanduay products was
taken over by Twin Ace or Tanduay Distillers were James Yu and Wilson Young impleaded. The corporation
itself was never made a party to the case .
The buyer (Twin Ace) did not buy TDI as a corporation, only most of its assets, equipment and mach inery.
Thus, Tanduay Distillers or Twin-Ace did not take over the corporate personality of TDI although they
manufacture the same product at the same plant with the same equipment and machinery. Obviously, the
trade name “Tanduay” went with the sale because the new firm does business as Tanduay Distillers and its
main product of rum is sold as Tanduay Rum. There is no showing, however, that TDI itself was absorbed by
Twin Ace or that it ceased to exist as a separate corporation. In point of fact, TDI is now herein a party
respondent represented by its own counsel.
The fiction of separate and distinct corporate entities cannot, in the instant case, be disregarded and brushed
aside, there being not the lease indication that the second corporation was a dummy or services as a client of
the first corporate entity.
AMENDMENT OF THE CORPORATE CHARTER
Sec. 36.
C o r p o r a t e p o w e r s a n d c a p a c i t y . - Every corporation incorporated under this Code has the
power and capacity:
xxx 4. To amend its articles of incorporation in accordance with the provisions of this Code;
Sec. 16.
Amendment of Articles of Incorporation. - Unless otherwise prescribed by this Code or by special law, and for
legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a
majority vote of the board of directors or trustees and the vote or written assent of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of
dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of at least
two-thirds (2/3) of the members if it be a non-stock corporation.
The original and amended articles together shall contain all provisions required by law to be set out in the
articles of incorporation. Such articles, as amended shall be indicated by underscoring the change or changes
made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors
or trustees stating the fact that said amendment or amendments have been duly approved by the required
vote of the stockholders or members, shall be submitted to the Securities and Exchange Commission.
The amendments shall take effect upon their approval by the Securities and Exchange Commission or from
the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a
cause not attributable to the corporation
The steps to be followed for an effective amendment of the articles of incorporation would thus be: 1.
Resolution by at least a majority of the board of directors or trustees; 2. Vote OR WRITTEN ASSENT of the
stockholders representing at least 2/3 of the outstanding capital stocks or members in case of a non-stock
corporation. (Note: non-voting shares are considered in determining the voting and quorum requirement in
case of amendments of the articles of incorporation as provided in Sec. 6); 3. Submission and filing of the
amendments with the SEC as follows: a. The original and amended articles together shall contain all the
provision required by law to be set out in the articles of incorporation. Such articles, as amended, shall be
indicated by underscoring the change or changes made;
b. A copy thereof, duly certified under oath by the corporate secretary and a majority of the directors or
trustees stating the fact that such amendments have been approved by the required vote of the stockholders
or members; c. Favorable recommendation of the appropriate government agency concerned in the case
where the corporation is under its supervision such as banking and insurance companies, etc.
When to take effect? (1) Upon approval by the SEC; or (2) From the date of filing if not acted upon within 6
months for a cause not attributed to the corporation (does not apply to increasing or decreasing the capital
stock or shortening the corporate term, which shall require the approval of the SEC [Sec. 38 and 120])
SPECIAL AMENDMENTS
Sec. 37. P o w e r t o e x t e n d o r s h o r t e n c o r p o r a t e t e r m . - A private corporation may extend or
shorten its term as stated in the articles of incorporation when approved by a majority vote of the board of
directors or trustees and ratified at a meeting by the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or by at least two-thirds (2/3) of the members in case of non-stock corporations.
Written notice of the proposed action and of the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown on the books of the corporation and deposited to
the addressee in the post office with postage prepaid, or served personally: Provided, That in case of
extension of corporate term, any dissenting stockholder may exercise his appraisal right under the conditions
provided in this code.
Sec. 38. Power to increase or decrease capital stock; incur, create or i n c r e a s e b o n d e d i n d e b t e d n
e s s . - No corporation shall increase or decrease its capital stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of the board of directors and, at a stockholder's meeting
duly called for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increase or
diminution of the capital stock, or the incurring, creating or increasing of any bonded indebtedness. Written
notice of the proposed increase or diminution of the capital stock or of the incurring, creating, or increasing of
any bonded indebtedness and of the time and place of the stockholder's meeting at which the proposed
increase or diminution of the capital stock or the incurring or increasing of any bonded indebtedness is to be
considered, must be addressed to each stockholder at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post office with postage prepaid, or served personally.
A certificate in duplicate must be signed by a majority of the directors of the corporation and countersigned by
the chairman and the secretary of the stockholders' meeting, setting forth:
(1) That the requirements of this section have been complied with; (2) The amount of the increase or
diminution of the capital stock; (3) If an increase of the capital stock, the amount of capital stock or number of
shares of no-par stock thereof actually subscribed, the names, nationalities and residences of the persons
subscribing, the amount of capital stock or number of no-par stock subscribed by each, and the amount paid
by each on his subscription in cash or property, or the amount of capital stock or number of shares of no-par
stock allotted to each stock-holder if such increase is for the purpose of making effective stock dividend
therefor authorized; (4) Any bonded indebtedness to be incurred, created or increased; (5) The actual
indebtedness of the corporation on the day of the meeting; (6) The amount of stock represented at the
meeting; and (7) The vote authorizing the increase or diminution of the capital stock, or the incurring, creating
or increasing of any bonded indebtedness.
One of the duplicate certificates shall be kept on file in the office of the corporation and the other shall be filed
with the Securities and Exchange Commission and attached to the original articles of incorporation. From and
after approval by the Securities and Exchange Commission and the issuance
by the Commission of its certificate of filing, the capital stock shall stand increased or decreased and the
incurring, creating or increasing of any bonded indebtedness authorized, as the certificate of filing may
declare: Provided, That the Securities and Exchange Commission shall not accept for filing any certificate of
increase of capital stock unless accompanied by the sworn statement of the treasurer of the corporation
lawfully holding office at the time of the filing of the certificate, showing that at least twenty-five (25%) percent
of such increased capital stock has been subscribed and that at least twenty-five (25%) percent of the amount
subscribed has been paid either in actual cash to the corporation or that there has been transferred to the
corporation property the valuation of which is equal to twenty-five (25%) percent of the subscription: Provided,
further, That no decrease of the capital stock shall be approved by the Commission if its effect shall prejudice
the rights of corporate creditors.
Non-stock corporations may incur or create bonded indebtedness, or increase the same, with the approval by
a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in a meeting duly called
for the purpose.
Bonds issued by a corporation shall be registered with the Securities and Exchange Commission, which shall
have the authority to determine the sufficiency of the terms thereof.
SEC. 37&38 vs. SEC. 16: 1. In the former a meeting of the stockholders would be REQUIRED, unlike in Sec.
16, where the “written assent” would suffice. 2. Former requires the approval of the SEC.
NOTE: When the amendment of the corporate charter involves shortening the life of the corporation with the
effect of dissolution, Sec. 120 would apply, requiring approval by the SEC.
GROUNDS FOR DISAPPROVAL OF AMENDMENT
Sec. 17. Grounds when articles of incorporation or amendment may be rejected or disapproved . - The
Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment
thereto if the same is not in compliance with the requirements of this Code: Provided, That the Commission
shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of
the articles or amendment. The following are grounds for such rejection or disapproval:
1. That the articles of incorporation or any amendment thereto is not substantially in accordance with the form
prescribed herein;
2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to
government rules and regulations;
3. That the Treasurer's Affidavit concerning the amount of capital stock subscribed and/or paid if false;
4. That the percentage of ownership of the capital stock to be owned by citizens of the Philippines has not
been complied with as required by existing laws or the Constitution.
No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking
institutions, building and loan associations, trust companies and other financial intermediaries, insurance
companies, public utilities, educational institutions, and other corporations governed by special laws shall be
accepted or approved by the Commission unless accompanied by a favorable recommendation of the
appropriate government agency to the effect that such articles or amendment is in accordance with law.
PROVISIONS NOT SUBJECT TO AMENDMENT (fait accompli) : 1. Names of the incorporations and the
incorporating directors or trustees; 2. Name of the treasurer originally or first elected by the subscribers or
members to act as such; 3. Number of shares and the amount originally subscribed and paid out of the
original authorized capital stock of the corporation; and
4. Date and place of execution of the articles of incorporation and the signatories and acknowledgment
thereof.
CHANGE IN CORPORATE NAME
Change in corporate name is included in the general power to amend and maybe effected with compliance to
Sec. 16.
Any change in the corporate identity or name does not affect the rights and obligations of the corporation. A
mere change in the name of the corporation does not affect the identity of a corporation nor in any manner
affect the rights, privileges and obligations previously acquired or incurred by it.
PHILIPPINE FIRST INSURANCE CO., plaintiff-appellant vs. MARIA CARMEN HARTIGAN, CGH and O.
ENGKEE, defendantsappellees (GR No. L - 26370; 74 SCRA 252; July 31, 1970)
FACTS: Plaintiff changed its name from “The Yek Tong Lin Fire and Marine Insurance Co., Ltd” (Yek Tong).
The complaint alleges that under its old name, PFIC signed as co-maker together with Hartigan, a promissory
note for P5,000 in favor of China Banking Corporation (Chinabank). Plaintiff agreed to act as such upon
application of the defendant, who together with Antonio Chua and Chang Ka Fu, signed an indemnity
agreement in favor of the plaintiff.
Defendants admitted the execution of the indemnity agreement but argued that it was made in favor of Yek
Tong and not PFIC. They claim that there was no privity of contract between plaintiff and defendants and
consequently, the plaintiff has no cause of action against them considering that the plaintiff does not allege
that PFIC and Yek Tong are one and the same or that the plaintiff has acquired the rights of the latter.
CFI of Manila dismissed the complaint.
ISSUE: WON the trial court correctly dismissed the case?
HELD: No. Sec. 18 (Now Sec. 16) of the Corporation Law (Act No. 1459) explicitly permits the articles of
incorporation to be amended. The law does not only authorize corporations to amend their charter; it also lays
down the procedure for such amendment; and, what is more relevant to the present discussion, it contains
provisos restricting the power to amend when it comes to the term of their existence and the increase or
decrease of the capital stock. There is no prohibition therein against the change of name. The inference is
clear that such a change is allowed, for if the legislature had intended to enjoin corporations from changing
names, it would have expressly stated so in this section or in any other provision of the law.
No doubt, the name of the corporation is peculiarly important as necessary to the very existence of a
corporation. The general rule as to corporation is that each corporation shall have a name by which i t i s t o s
u e a n d b e s u e d a n d d o a ll l e g a l a c t s . The name of the corporation in this respect designates the
corporation in the same manner as the name of an individual designates the person. Since an individual has
the right to change his name under certain conditions, there is no compelling reason why a corporation may
not enjoy the same rig ht. The sentimental considerations which individuals attach to their names are not
present in corporations and partnerships. Of course, as in the case of an individual, such change may not be
made exclusively by the corporation’s own act. It has to follow the procedure prescribed by law for the
purpose, and this is what is important and indispensably prescribed – strict adherence to such procedure.
RED LINE TRANSPORT VS. RURAL TRANSIT CO. – what was held as contrary to public policy is the USE
by one corporation of the name of another corporation as its trade name. We are certain no one will disagree
that such an act can only result in confusion and open the door to frauds and evasions and difficulties of
administration and supervision. Surely, the Red Line case was not one of change of name.
The change of name of a corporation DOES NOT result in its dissolution . There is unanimity in authorities:
“An authorized change in the name of a corporation has no more effect upon its identity as a corporation than
change of name of natural person has upon his identity. It does not affect the rights of the corporation or
lessen or add to its obligations. After a corporation has effected a change in its name it should sue and be
sued in its new name” (13 Am. Jur. 276-277)
A mere change in the name of a corporation, either by the legislature or by the corporators or stockholders
under legislative authority, does not, generally speaking, affect the identity of the corporation, nor in any way
affect the rights, privileges, or obligations previously acquired or incurred by it. Indeed, it has been said that a
change of name by a corporation has no more effect upon the identity of the corporation than a change of
name by a natural person has upon the identity of such person. The corporation, upon such change in its
name, is in no sense a new corporation, nor the successor of the original one, but remains and continues to
be the original corporation. It is the same corporation with a different name, and its character is in no respect
changed. ... (6 Fletcher, Cyclopedia of the Law of Private Corporations, 224-225, citing cases).
REPUBLIC PLANTERS BANK VS. CA
(216 SCRA 738; Dec. 31, 1992) – A change in the corporate name does not make a new corporation, and
whether effected by special act or under a general law, has no effect on the identity of the corporation, or on
its property rights or liabilities. The corporation continues, as before, responsible in its new name for all debts
or other liabilities which it had previously contracted or incurred.
AMENDMENT OF THE CORPORATION TERM For purposes of amending the corporate term, the following
procedure is to be observed (Sec. 37): 1. Approval by a majority vote of the board of directors or trustees; 2.
Written notice of the proposed action and the time and place of meeting shall be served to each stockholder
or member either by mail or by personal service; 3. Ratification by the stockholders or members representing
at least 2/3; 4. In case of extension of corporate term, it should be for periods not exceeding 50 years in any
single instance, and provided that no extension can be made earlier than 5 years prior to the original or
subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined
by the SEC. 5. In cases of extension of corporate term, a dissenting stockholder may exercise appraisal rights
under the conditions prescribes by Sec. 81 and 82 of the Code.
ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner, vs. SECURITIES &
EXCHANGE COMMISSION, respondent (G.R. No. L - 23606 July 29, 1968)
FACTS: ACCMC was incorporated on Jan. 15, 1912 for a period of 50 years which expired on Jan. 15, 1962.
On July 15, 1963, during the period within which it is to liquidate, the board of directors resolved to amend its
articles of incorporation extending its corporate life for another 50 years which was approved by the
stockholders but denied by the SEC.
ISSUE: WON the extension of corporate term should be allowed?
HELD: No. The privilege of extension is purely statutory. All the statutory conditions precedent must be
complied with in order that the extension may be effectuated. And, generally, these conditions must be
complied with, and the steps necessary to effectuate an extension must be taken, during the life of the
corporation, and before the expiration of the term of existence as originally fixed by its charter or the general
law, since, as a rule, the corporation is ipso facto dissolved as soon as the
time expires. So where the extension is by amendment of the articles of incorporation, the amendment must
be adopted before that time.
The logic of this position is well-expressed in a four square case decided by the CA of Kentucky:
“But section 561 (section 2147) provides that, when any corporation expires by the terms of its articles of
incorporation, it may be thereafter continued to act for the purpose of closing up its business, but for no other
purpose. The corporate life of the Home Building Association expired on May 3, 1905. After that date, by the
mandate of the statute, it could continue to act for the purpose of closing up its business, but for no other
purpose. The proposed amendment was not made until January 16, 1908, or nearly three years after the
corporation expired by the terms of the articles of incorporation. When the corporate life of the corporation
was ended, there was nothing to extend. Here it was proposed nearly three years after the corporate life of
the association had expired to revivify the dead body, and to make that relate back some two years and eight
months. In other words, the association for two years and eight months had only existed for the purpose of
winding up its business, and, after this length of time, it was proposed to revivify it and make it a live
corporation for the two years and eight months daring which it had not been such.
The law gives a certain length of time for the filing of records in this court, and provides that the time may be
extended by the court, but under this provision it has uniformly been held that when the time was expired,
there is nothing to extend, and that the appeal must be dismissed... So, when the articles of a corporation
have expired, it is too late to adopt an amendment extending the life of a corporation; for, the corporation
having expired, this is in effect to create a new corporation ..."
OTHER MATTERS SUBJECT TO AMENDMENT:
1. Purpose clause – by changing, altering or including other purpose or purposes;
2. Principal Office;
3. Number of Directors;
4. Shares of stock and their classification;
5. Restrictions as well as preference;
LADIA NOTES:
CORPORATE CHARTER AND ITS AMENDMENTS

 What do you understand by the word charter? Is it the same as articles of incorporation?
- Corporate charter is broader
 Franchise
- Primary power granted by the state to be and act as a corporation
- Secondary franchise is the right or privilege that the corporation may exercise
 You cannot issue investment contracts without a secondary franchise, kailangan primary muna hindi pwede
mauna secondary kasi sa section 19 it does not exist until issued with a certificate of registration or incorporation
 Corporate entity
- Corporation exist separately and independently from the stockholders
- Stockholders cannot bring an action, to bring back the properties of a corporation
- Corporation has no interest in the individual properties of its members
Sulo ng Bayan vs. Araneta
- Corporation cannot bring an action for the recovery of the properties of its members
Caram vs. CA
- Stockholders cannot be held liable for the legitimate obligations of the corporation, they exist separately and
independently from one another
Cruz vs. Dalisay
- Final judgment against a corporation cannot be enforced against stockholders
Rustan Pulp vs. CA
- Corporation exist separately and independently
- Corporation are juridical entities, they exist only in legal contemplation, can act only through its authorized
representatives
Soriano vs. CA
- They are not personally liable
- They where signed for and in behalf of the corporation
Palay inc. vs. Clave
- Liabilities incurred by the corporation cannot be enforced against stockholders, etc., even if stockholders, etc.
happens to own a substantial interest in the corporation, mere ownership does not disregard the corporate entity
theory
 Corporate entity for legal or legitimate purposes only
 Two or more corporations, one of them will be treated as a mere alter-ego
 You cannot pierce the veil of corporate fiction when there are no facts attendant in the case
 Corporate Entity Theory
- The corporation is possessed with a personality separate and distinct from the individual stockholders or members
and is not affected by the personal rights, obligations or transactions of the latter
 Instrumentality rule
- Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere
instrumentality or adjunct of the other, the fiction of the corporate entity of the “instrumentality” may be
disregarded
- Courts are concerned with reality and not form
- Mere ownership of all or substantially all of the shares of stock of a corporation is not, in itself, insufficient ground
for disregarding the separate corporate personality. And for the separate personality of the corporation to be
disregarded, the wrong doing must be clearly and convincingly established
- Fraud must be proven by clear and convincingly evidence amounting to more than preponderance. It cannot be
justified by speculation and can never be presumed. And only if it sought to hold the stockholders liable directly
for corporate debt
Palacio vs. Fely
- Piercing the veil of corporate fiction
- Fely trans and the other corporation is one and the same
Marvel bldg. vs. David
- There must be facts before the court will be justified in piercing the veil of corporate fiction
- Corporation was a mere extension of the personality of the person
Yutivo and sons vs. Court of Tax Appeals
- What where the facts or circumstances arrived by the court here?
- Subscribed capital where all advanced by Yutivo, the board where the same as Yutivo
Commissioner of Internal Revenue vs. Norton and Harrison
- Court applied the general rule
- Mere substantial ownership does not mean that it has a same corporate entity
La Campana Coffee Factory, Inc. vs. KKM
- Two corporations managed by the same family, workers were made interchangeably
Emilio Cano vs. CIR
- Sued in there official capacity
- Reverse of Soriano vs. CA (signed in their official capacity)
Tesco vs. WCC
- The two corporations where located in the same office
Claparols vs. CIR
- Same as NAFLU and A.C. Ransom
Concept builders vs. NLRC

- Instrumentality rule. What is the instrumentality rule? “where one corporation is so organized and controlled and
its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the
corporate entity of the “instrumentality” may be disregarded.”
- Has no separate mind of its own. What is the degree of control?
1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy
and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had
at the time no separate mind, will or existence of its own.
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty or dishonest and unjust act in contravention of plaintiff’s legal rights; and,
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
- The absence of one of the elements prevents “piercing the corporate veil.” In applying the “instrumentality” or
“alter ego” doctrine, the courts are concerned with reality and not form, with how the corporation operated and
the individual defendant’s relationship to that operation.
 There must facts and circumstances before warrant piercing the veil of corporate fiction
 The control necessary does not mean stock ownership
MCConnel vs. CA
- were located in the same floor
- “while the mere ownership of all or nearly all of the capital stock of a corporation does not necessary mean that
it is a mere business conduit of the stockholder, that conclusion is amply justified where it is shown, as in the case
before us, that the operations of the corporation were so merged with the stockholders as to be practically
indistinguishable from them. To hold the latter liable for the corporation’s obligations is not to ignore the
corporation’s separate entity, but merely to apple the established principle that such entity cannot be invoked or
used for purposes that could not have been intended by the law that created that separate personality.”
Tan boon bee vs. Jarencio
- Why would a drug company need a printing machine
- The property must be in pursuance of a company business
Cease vs. CA
- Alter-ego or the extension of the person of forest ware does the court pierced the veil of corporate fiction
- As to not deprive the holders of their successional rights
- Mere ownership of all or substantially all is not a justification of piercing the veil of corporate fiction
 Fraud must be proven by clear and convincing evidence cannot presume or speculate, there must be facts and
circumstances
 Fraud must be clear and convincing evidence more than preponderance
Remo Jr. vs. IAC
- The resolution was not entered to defraud anyone
Del Rosario vs. National Labor Commission
- The wrongdoing must be clearly established
- There must be facts to support

- Payment of claims cannot thus be presumed
Indophil Textile Mill vs. CALICA
- How do you distinguish this ruling to La Campana, having the same issues:
- La campana, one payroll, employees were made interchangeable. Acrylic had its own standards
PNB vs. Ritratto Group
- Control test
- Not mere majority but rather complete
- Twin ace was only a subsequent interested party
- Assets and machineries
 Amendment of the articles of incorporation
- Express power granted to a corporation
 Section 16
- Appraisal right
- Section 81 to object on certain acts and transactions
Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to dissent
and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of
any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding
shares of any class, or of extending or shortening the term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the
corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
- Right granted only in specified instances
Are non-voting shares included in amending the articles of incorporation
1 100/s XYZ-----ABC
2 100/s
To
10 100/s
=1M/S what would be the 2/3?
Section 6 last paragraph
Voting shares are excluded except the foregoing instances
1 1
2 2
3 3
4 4
5 5
6 6
1 & 2=absent 1&2=absent but gave their written assent

3 & 4= objected 3&4=objected
5 & 6= approved the amendment 5&6=approved
Would there be a valid amendment
 Special amendments 37 & 38 shortening that would result to dissolution require prior approval by the SEC
Section 37. Power to extend or shorten corporate term. - A private corporation may extend or shorten its
term as stated in the articles of incorporation when approved by a majority vote of the board of directors or
trustees and ratified at a meeting by the stockholders representing at least two-thirds (2/3) of the outstanding
capital stock or by at least two-thirds (2/3) of the members in case of non-stock corporations. Written notice of
the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member
at his place of residence as shown on the books of the corporation and deposited to the addressee in the post
office with postage prepaid, or served personally: Provided, That in case of extension of corporate term, any
dissenting stockholder may exercise his appraisal right under the conditions provided in this code. (n)
Section 38. Power to increase or decrease capital stock; incur, create or increase bonded indebtedness. -
No corporation shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness
unless approved by a majority vote of the board of directors and, at a stockholder's meeting duly called for the
purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increase or diminution of the capital
stock, or the incurring, creating or increasing of any bonded indebtedness. Written notice of the proposed
increase or diminution of the capital stock or of the incurring, creating, or increasing of any bonded indebtedness
and of the time and place of the stockholder's meeting at which the proposed increase or diminution of the capital
stock or the incurring or increasing of any bonded indebtedness is to be considered, must be addressed to each
stockholder at his place of residence as shown on the books of the corporation and deposited to the addressee in
the post office with postage prepaid, or served personally.
A certificate in duplicate must be signed by a majority of the directors of the corporation and
countersigned by the chairman and the secretary of the stockholders' meeting, setting forth:
(1) That the requirements of this section have been complied with;
(2) The amount of the increase or diminution of the capital stock;
(3) If an increase of the capital stock, the amount of capital stock or number of shares of no-par stock thereof
actually subscribed, the names, nationalities and residences of the persons subscribing, the amount of capital
stock or number of no-par stock subscribed by each, and the amount paid by each on his subscription in cash or
property, or the amount of capital stock or number of shares of no-par stock allotted to each stock-holder if such
increase is for the purpose of making effective stock dividend therefor authorized;
(4) Any bonded indebtedness to be incurred, created or increased;
(5) The actual indebtedness of the corporation on the day of the meeting;
(6) The amount of stock represented at the meeting; and
(7) The vote authorizing the increase or diminution of the capital stock, or the incurring, creating or increasing of
any bonded indebtedness.
One of the duplicate certificates shall be kept on file in the office of the corporation and the other shall be
filed with the Securities and Exchange Commission and attached to the original articles of incorporation. From
and after approval by the Securities and Exchange Commission and the issuance by the Commission of its
certificate of filing, the capital stock shall stand increased or decreased and the incurring, creating or increasing
of any bonded indebtedness authorized, as the certificate of filing may declare: Provided, That the Securities and
Exchange Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by
the sworn statement of the treasurer of the corporation lawfully holding office at the time of the filing of the
certificate, showing that at least twenty-five (25%) percent of such increased capital stock has been subscribed
and that at least twenty-five (25%) percent of the amount subscribed has been paid either in actual cash to the
corporation or that there has been transferred to the corporation property the valuation of which is equal to
twenty-five (25%) percent of the subscription: Provided, further, That no decrease of the capital stock shall be
approved by the Commission if its effect shall prejudice the rights of corporate creditors.
Non-stock corporations may incur or create bonded indebtedness, or increase the same, with the approval
by a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in a meeting duly called
for the purpose.
Bonds issued by a corporation shall be registered with the Securities and Exchange Commission, which
shall have the authority to determine the sufficiency of the terms thereof. (17a)
 The vote must be cast at the meeting called for that purpose
 Written assent would not suffice
 When do amendments become valid and effective?
- Only upon the approval of the SEC TRUE OR FALSE?
- FALSE because it can be valid upon the date of filing if not acted upon within 6 months without fault attributable
to the corporation
 Why is it retroactive?
 What provision may be amended, altered or repealed
 Can you change name, address for example she married or changed address?
- NO. you cannot change that
 Fait accompli, are beyond the powers or authority of the corporation to change, alter or modify. These would
include the following:
- Names of the incorporators and
- The incorporating directors or trustees,
- The name of the treasurer originally or first elected by the subscribers or members to act as such until his
successor has been duly elected and qualified,
- The number of shares and amount originally subscribed and paid out of the original authorized capital stock of
the corporation,
- The date and place of execution of the articles of incorporation,
- The signatories and acknowledgment thereof.
- All other provisions or matters stated or contained in the articles are subject to amendment.
 Founder’s or signatories hindi pwede palitan
 Names, nationalities- you cannot
 Capital- right granted by law to all corporation
 Paid up capital- NO
 Restriction and transfer of shares in ordinary stock corporations

- You can, but close corporation cannot
- Section 96, otherwise it will not be a close corporation
Section 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is
one whose articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty
(20); (2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer
permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of
any of its stock of any class. Notwithstanding the foregoing, a corporation shall not be deemed a close corporation
when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation
which is not a close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except mining or oil companies, stock
exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared to be
vested with public interest in accordance with the provisions of this Code.
The provisions of this Title shall primarily govern close corporations: Provided, That the provisions of other
Titles of this Code shall apply suppletorily except insofar as this Title otherwise provides.
 Transfer clause, executor clause, acknowledgment, treasury affidavit-NO
Philippine First Insurance case
- Mere change in the name of a corporation or by merely complying with the law is general amendment
- It does not change its personality. It is the same person in a different name. the charter is the same
 Amendment of a corporate term
- Extending the same can never be made 7 years prior? TRUE or FALSE
- FALSE. It can be if there are justifiable reasons for earlier extension as may be determined by the SEC
 Can you extend the corporate term if it has already expired?
- Once the term expires without an amendment having happen it ceases to exist as a body politic. It is dissolved
automatically on the day it expires.
 Alhambra cigar and PNB case
 Instances when the SEC allowed extension whose term has already expired
- All of them involved are institutions of learning, it was the case in order to avoid confusion that would arise later
on.

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Corporate Charter and Its Amendment Chapter 5

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TITLE IV - POWERS OF CORPORATIONS

CORPORATE CHARTER AND ITS AMENDMENTS

- Corporate charter is broader

- Primary power granted by the state to be and act as a corporation

- Corporation exist separately and independently from the stockholders

- Stockholders cannot bring an action, to bring back the properties of a corporation

- Corporation has no interest in the individual properties of its members

Sulo ng Bayan vs. Araneta

Cruz vs. Dalisay

- Final judgment against a corporation cannot be enforced against stockholders

Rustan Pulp vs. CA

- Corporation exist separately and independently

- They are not personally liable

- They where signed for and in behalf of the corporation

Palay inc. vs. Clave

 Corporate entity for legal or legitimate purposes only

 Two or more corporations, one of them will be treated as a mere alter-ego

- Courts are concerned with reality and not form

Palacio vs. Fely

- Piercing the veil of corporate fiction

Marvel bldg. vs. David

- Corporation was a mere extension of the personality of the person

Yutivo and sons vs. Court of Tax Appeals

- What where the facts or circumstances arrived by the court here?

Commissioner of Internal Revenue vs. Norton and Harrison

- Court applied the general rule

La Campana Coffee Factory, Inc. vs. KKM

Emilio Cano vs. CIR

- Sued in there official capacity

- Reverse of Soriano vs. CA (signed in their official capacity)

Tesco vs. WCC

- The two corporations where located in the same office

Claparols vs. CIR

- Same as NAFLU and A.C. Ransom

Concept builders vs. NLRC

- Has no separate mind of its own. What is the degree of control?

 The control necessary does not mean stock ownership

- were located in the same floor

Tan boon bee vs. Jarencio

- Why would a drug company need a printing machine

- The property must be in pursuance of a company business

- As to not deprive the holders of their successional rights

 Fraud must be clear and convincing evidence more than preponderance

Remo Jr. vs. IAC

- The resolution was not entered to defraud anyone

Del Rosario vs. National Labor Commission

- The wrongdoing must be clearly established

- There must be facts to support

Indophil Textile Mill vs. CALICA

PNB vs. Ritratto Group

- Not mere majority but rather complete

- Twin ace was only a subsequent interested party

- Assets and machineries

 Amendment of the articles of incorporation

- Express power granted to a corporation

- Section 81 to object on certain acts and transactions

3. In case of merger or consolidation. (n)

- Right granted only in specified instances

Are non-voting shares included in amending the articles of incorporation

1 & 2=absent 1&2=absent but gave their written assent

(2) The amount of the increase or diminution of the capital stock;

(4) Any bonded indebtedness to be incurred, created or increased;

(6) The amount of stock represented at the meeting; and

 Written assent would not suffice