Corporation Law Digest Compilation

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National Coal Co. v. CIR Case Brief  Facts: The National Coal Co.(NCC) was created by a special law and was enacted by virtue of Act 27! in order to develop a coal industry. "t was en#a#ed in coal $inin# on reserved lands land s belon#in belon#in# # to the #ove #overn$e rn$ent. nt. The National National Coal Co. (NCC) %led a case a#ainst the C"& for the recovery of su$ of  $oney it paid on protest as speci%c ta' on 2*+ tons of  coals clai$in# e'e$ption e'e$ption to ta' pursuant to ,ec. - and -! of  Act 27-+. "ssue: hether or not NCC is a private corporation/

0eld: 1lainti is a private corporation. The $ere fact that the #overn$ent is a $a3ority stoc4holder of the corporation does not $a4e the corporation. Act 27! as a$ended by Act 2*22 $a4es it sub3ect to all the provision of the corporation law. As a privat private e cor corpor porati ation on it has no #r #reat eater er ri# ri#hts hts powers powers or privile#es privile#e s than any other corporation which $ay be or#ani5ed for the sa$e purpose under the corporation law and certainly it was not the intention of the le#islature to #ive preference or ri#ht or privile#e over other le#iti$ate private corporation in the $inin# of coal. NCC is re6uired to pay ta'es pursuant to ,ection -+ of the Ad$inistrative Code. 8oreover Act 27-+ is applicable only to lessee or owner of coal bearin# lands which NCC is not.

that Gthe issue is not the ownership of shares but rather the non;perfor$ance by the Corporate ,ecretary of the $inisterial duty duty of reco record rdin in# # tran transf sfer ers s of sh shar ares es of stoc stoc4 4 of th the e Corporation of which he is secretary.G  The dispute at bar as held by the ,C is an intra; corporate dispute that has arise corporate arisen n between between and a$on a$on# # the principal stoc4holders of the corporation 1oc4et >ell due to the re refus fusal al of the corpo corporate rate secr secreta etary ry bac bac4e 4ed d up by hi his s parents pare nts as erst erstwhil while e $a3ority $a3ority share sharehold holders ers to perf perfor$ or$ his G$inisterial dutyG to record the transfers of the corporations controllin# (!@) shares of stoc4 covered by duly endorsed certi%cates of stoc4 in favor of Telectronics as the purchaser thereof. (2) NE. As pointed out by the Abe3os 1oc4et >ell is not a close close corpor corporati ation on and and no re restr strict iction ion ove overr the free tran transf sfer erab abil ilit ity y of th the e shar shares es appe appear ars s in th the e Arti Articl cles es of  "ncorporation as well as in the bylaws and the certi%cates of  stoc4 the$selves as re6uired by law for the enforce$ent of  su such ch rest restri rict ctio ion. n. As the the ,C $ain $ainta tain ins s GT GThe here re is no re6uire$ent that a stoc4holder of a corporation $ust be a re#iste re# istered red one in order that the ,ecu ,ecuritie rities s and 'c 'chan# han#e e Co$$ission $ay ta4e co#ni5ance of a suit see4in# to enforce his ri#hts as such stoc4h stoc4holde olderr.G This is because the ,C by e'press $andate has Gabsolute 3urisdiction supervision and control over all corporationsG and is called upon to enforce the provisions of the Corporation Code a$on# which is the stoc4 purchasers ri#ht to secure the correspondi correspondin# n# certi%cate in his na$e under the provisions of ,ection < of the Code.

Abejo vs. De la Cruz 9.&. No. ;<!!*= 8ay -+ -+*7 FAC ACT, T,:: Ca Case se invo involv lves es a di disp sput ute e be betw twee een n th the e pr prin inci cipa pall stoc4hold stoc4 holders ers of the corp corporatio oration n 1oc4et 1oc4et >ell 1hilippines 1hilippines "nc. (1oc4e (1oc4ett >ell) >ell) na$ely na$ely spouses spouses Abe3 Abe3os? os? and the purc purchaser haser  Telectronic  Telectronic ,yste$s "nc. (T (Telectroni electronics) cs) of their $inority shareholdin#s and of shares re#istered in the na$e of spouses >ra#as?. ith the said purchases Telectronics would beco$e the $a3ority $a3ority stoc4holde stoc4holder r holdin# holdin# !@ of the outstandin# outstandin# stoc4 and votin# power of the corporation 1oc4et >ell.  Telectroni  Telectronics cs re6uested the corporate secretary of the corporation corporatio n Norberto Norberto >ra#a to re#iste re#isterr and transfer to its na$e and those of its no$inees the total -+ 1oc4et >ell shar shares es in th the e co corp rpor orat atio ion ns s tran transf sfer er bo boo4 o4 ca canc ncel el th the e surrendered certi%cates of stoc4 and issue the correspondin# ne new w ce cert rti% i%ca cate tes s of st stoc oc4 4 in it its s na na$e $e an and d th thos ose e of it its s no$inees. The latter refused to re#ister the aforesaid transfer of shares in the corporate boo4s assertin# that the >ra#as clai$ clai$ pr pre;e e;e$pt $ptiv ive e ri# ri#hts hts over over the Abe3o Abe3o sha share res s and tha thatt Bir#inia >ra#a never transferred her shares to Telectronics but had lost the %ve certi%cates representin# thosebetween shares.  This tri##ered ostoc4 the series of intertwined actions the prota#onists all centered on the 6uestion of 3urisdiction over the dispute. The >ra#as assert that the re#ular civil court has ori#inal and e'clusi e'clusive ve 3urisdict 3urisdiction ion as a#ainst a#ainst the ,C ,C while hile th the e Ab Abe3 e3os os an and d Tel elec ectr tron onic ics s as new new $a $a3o 3ori rity ty shareholders clai$ the contrary. &espondent Dud#e de la Cru5 issued issu ed an order order rescindi rescindin# n# the order which which dis$issed dis$issed the co$plaint of the >ra#as in the &TC thus holdin# that the &TC and not the , ,C C had 3ur 3urisd isdic ictio tion. n. &espo &esponde ndent nt 3ud 3ud#e #e also also revived rev ived the T&E previous previously ly issued issued restraini restrainin# n# Telectron electronics ics a#ents a#en ts or rep represe resentati ntatives ves fro$ enforcin# enforcin# their their resoluti resolution on constitutin# the$selves as the new set of ocers of 1oc4et >ell >ell and and fr fro$ o$ as assu su$i $in# n# co cont ntro roll of th the e co corp rpora orati tion on an and d dischar# disc har#in# in# their func functions tions.. The Abe3os %led %led a 8& which $otion was duly opposed by the >ra#as which was denied by respondent Dud#e. ISSUE: (-) ho has 3urisdiction/ 3urisdiction/

CIR vs. THE CLUB CLUB ILI!I ILI!IN" N"## INC. INC. DE CEBU CEBU Case Brief  $R No. L%&'(&) * +a, -&# &)' * !are/es# J. ACTS:  The Club Filip Filipino ino is a civi civic c corpo corporatio ration n or#a or#ani5e ni5ed d under the laws of the 1hilippines with an ori#inal authori5ed capital stoc4 of 122 which was subse6uently increased to 12 12   to ope operat rate e and $ai $ainta ntain in a #olf #olf cou course rse ten tennis nis #y$nasiu$s bowlin# alleys billiard tables and pools and all sorts of #a$e #a$es s not prohibite prohibited d by #ene #eneral ral laws and #eneral #eneral ordi ordina nanc nces es an and d deve develo lop p an and d nu nurt rtur ure e sport sports s of an any y 4i 4ind nd and any deno$ination for recreati recreation on and healthy trainin# of  it its s $e$b $e$ber ers s an and d shar shareh ehol olde dersG rsG (sec (sec.. 2 scr scrit itur ura a de "ncorporacion (Heed of "ncorporation) del Club Filipino "nc.).  There is no provision either in the articles or in the by;laws rel relative ative to divi dividend dends s and their dist distribu ribution tion althou#h althou#h it is covenante cove nanted d that upon its diss dissoluti olution on the Club Clubs s re$ re$aini ainin# n# assets after payin# debts shall be donated to a charitable 1hil. "nstitution in Cebu (Art. 27 statutos del (,tatutes of the)

Club).  The Club owns and operates a club house a bowlin# alley a #olf course (on a lot leased fro$ the #overn$ent) and a bar; restau staura rant nt wher here it se sellls win ine es an and d li6uor 6uors s sof soft drin4s  $eals  drin4s $eals an and d shor shortt orde orders rs to its its $e $e$b $ber ers s an and d th thei eirr #uests. #ues ts. The bar-restaurant  was   was a ne neces cessary sary inc incide ident nt to the operation of the club and its #olf;course. The club is operated $ainly with funds derived fro$ $e$bership fees and dues. hatever hate ver pro%ts it had were used to defray defray its overhe overhead ad e'penses and to i$prove its #olf;course. "n -+!- as a result of a capital surplus arisin# fro$ the re;valuation of its real properties the value or price of which increased the Club declared stoc4 dividends= but no actual cash dividends were distributed to the stoc4holders. "n -+!2 a >"& a#ent discovered that the Club has never paid percenta#e ta' on the #ross receipts of its bar and restaurant althou#h it secured licenses. "n a letter the Collector assessed a#ainst a#ain st and de$ande de$anded d fro$ the Clu Club b 1-2 1-2*. *.* * -  as %'ed

(2) EN the cor corpor porate ate secr secreta etary ry $ay refuse refuse to re#ister the transfer of shares in the corporate boo4s.

and percenta# percenta#e e ta'e ta'es s surchar surchar#e #e and co$p co$pro$i ro$ise se pen penalty alty.

HELD: (-) The Court ruled that the ,C has ori#inal and e'clu e'clusiv sive e 3ur 3urisd isdic ictio tion n and tha thatt the ,C cor corre rectl ctly y ruled ruled in dis$issi dis$ issin# n# the >ra#as >ra#as petition petition 6ues 6uestion tionin# in# its 3uri 3urisdic sdiction tion

-  1+

!++.7 as percenta#e percenta#e ta' on its #ross recei receipts pts (ta' years -+;-+!-) -+;-+!-) 12<++.7 12<++.77 7 surchar# surchar#e e 17 %'ed ta' (ta' years -+;-+!2 and 1! co$pro$ise penalty.

 

Also the Collector denied the Club?s re6uest to cancel the assess$ent. En appeal the CTA reversed the Collector and ruled that the Club is not liable for the assessed ta' liabilities of 1-2*.* alle#edly due fro$ it as a 4eepe 4eeperr of bar and restaurant as it is a non;stoc4 corporation. 0ence the Collector %led the instant petition for review. ISSUE: EN the Club is a stoc4 corporation HELD: NE. "t is a non;stoc4 corporation.

 The facts that the capital stoc4 of the Club is divided into shares does not detract fro$ the %ndin# of the trial court that it is not en#a en#a#ed #ed in the busi busine ness ss of operato operatorr of bar and restaurant. 01at is /eter2inative of 31et1er or not t1e Club Club is en en4a 4a4e 4e/ / in su su51 51 busi busine ness ss is its its ob obje je5t 5t or 6ur6ose# as state/ in its arti5les an/ b,%la3s.  The actual purpos pur pose e is not contr controll olled ed by the corporate corporate for$ or by the co$$ercial aspect of the business prosecuted but $ay be shown by e'trinsic evidence includin# the by;laws and the $ethod $eth od of operation. operation. Fro$ the e't e'trinsi rinsic c evidence evidence adduced adduced the CTA CTA co concl nclude uded d that that the Club is not en#a#ed en#a#ed in the business as a bar4eeper and restaurateur. Fo Forr a sto stoc4 c4 cor corpor porati ation on to e'ist e'ist two re6uisi re6uisites tes $ust be co$plied with: -. 2.

a cap capita itall sto stoc4 c4 divi divide ded d into into share shares s and and an aut author hority ity to di distr strib ibute ute to the the holder holders s of such sh share ares s dividends or allot$ents of the surplus pro%ts on the basis of the shares held (sec. < Act No. -!+).

Nowhere in its articles of incorporation or by;laws could be found fou nd an author authority ity for the dis distri tribut bution ion of its dividen dividends ds or surplus surp lus pro% pro%ts. ts. ,trictly ,trictly spea4in# spea4in# it cannot cannot therefor therefore e be considered a stoc4 corporation within the conte$plation of  the corpo law. ISSUE: EN the Club is liable for the pay$ent of 1-2*.* as %'ed and percenta#e ta'es and surchar#es prescribed in sec. -*22 -*<<  and -+-  of the Ta' Code in connection with the operati operation on of its bar and restau restauran rant= t= and for 1! 1! as co$pro$ise penalty. HELD: NE. A ta' is a burden burden and as such such it should not be dee$ed dee $ed i$posed i$posed upon fraternal fraternal civic civic non;pro% non;pro%t t nonstoc4 nonstoc4 or#ani5ations unless the intent to the contrary is $anifest and patentG (Collector v. >1E l4s Club et al.) which is not the case here.

0avin# found as a fact that the Club was or#ani5ed to develop and cultivate cultivate sports of all class and deno$ina deno$ination tion for the healthful recreation recreation and entertain$ent entertain$ent of its stoc4holders and $e$bers= thatshall uponbe itsdonated dissolution re$ainin# assets after payin# debts to a its charitable 1hil. "nstitution in Cebu= that it is operated $ainly with funds derived fro$ $e$bership fees and dues= that the Clubs bar and restaurant catered only to its $e$bers and their #uests= that there was in fact no cash dividend distribution to its stoc4holders and th that at what whatev ever er was was de deri rive ved d on re reta tail il fro$ fro$ it its s ba barr an and d restaurant was used to defray its overall overhead e'penses and to i$prove its #olf;course (cost;plus;e'penses;basis) (cost;plus;e'penses;basis) it stands to reason that the Club is not en#a#ed in the business of an operator of bar and restaurant.

2

 Sec. 182, of the Tax Code states, "Unless otherwise provided, every  person engaging in a bsiness on which the percentage tax is i!posed shall pay in fll a fixed annal tax of ten pesos for each calendar year or  fraction thereof in which sch person shall engage in said bsiness."



 Sec. 18 provides in general that "the percentage taxes on bsiness shall  be payable at the end of each c alendar #arter in the a!ont lawflly de on the bsiness transacted dring each #arter$ etc."   Sec. 1&1, sa!e Tax Code, provides "'ercentage tax . . . (eepers of  restarants, refresh!ent parlors and other eating places shall pay a tax three per centum, and )eepers of bar and cafes where wines or li#ors are served five per centum of their gross receipts . . .".

%

Ratio: T1e liabilit, for 78e/ an/ 6er5enta4e ta8es# as 6rovi/e/ b, t1ese se5tions# /oes not ipso facto atta51 b, 2e 2ere re re rea aso son n of t1 t1e e o6e 6era rati tion on of a bar bar an an/ / restau res tauran rant. t. o orr t1e liabili liabilit, t, to atta51 atta51## t1e o6erat o6erator or t1 t1er ereo eoff 2ust 2ust be en en4 4a4 a4e/ e/ in t1 t1e e bu busi sine ness ss as a bar9ee6er bar9 ee6er an/ restaurate restaurateur ur..  Th The e plai plain n an and d ordi ordina nary ry 2eanin4 of business is restri5te/ to a5tivities or aairs 31ere 6ro7t is t1e 6ur6ose or liveli1oo/ is t1e 2otive# an/ t1e ter2 business 31en use/ 3it1out ;uali75ation# s1oul/ be 5onstrue/ in its 6lain an/ or/inar, 2eanin4# restri5te/ restr i5te/ to a5tivities a5tivities for 6ro7t or liveli1oo/ liveli1oo/  (C"& v v.. 8anila 8anil a od#e od#e I CTA CTA -+!+ -+!+== C"& v. ,weeney ,weeney et al. -+!+ -+!+= = 8anila 1olo Club v. >. . 8eer -+).

 The Club derived pro%t fro$ the operation of its bar and restaurant but such fact does not necessarily convert it into a pr pro% o%t;$ t;$a4 a4in in# # en ente terp rpri rise se.. Th The e bar bar an and d re rest stau aura rant nt are are necessary ad3uncts of the Club to foster its purposes and the pro%ts pro% ts deriv derived ed ther therefro efro$ $ are nece necessari ssarily ly inci incident dental al to the pri$ary pri$ ary ob3e ob3ect ct of deve developi lopin# n# and cultiva cultivatin# tin# sports for the healthfu heal thfull recreat recreation ion and entertain entertain$ent $ent of the stoc4 stoc4hold holders ers and $e$bers. That a Club $a4es so$e pro%t does not $a4e it a pro%t;$a4in# Club. As has been re$ar4ed a club should always alw ays strive strive whe whene never ver pos possib sible le to hav have e surpl surplus us (De (Desus sus ,acred 0eart Colle#e v. C"& -+!= C"& v. ,inco ducational Corp. -+!). Ar$ed.

+anuel R. Dula, Enter6rises vs. Court of A66eals J9& +-**+ 27 Au#ust -++<K ,econd Hivision Nocon Nocon (D): < concur - too4 no part Facts:  8a 8anu nuel el &.Hu &.Hula lay y nte nterp rpri rise ses s "n "nc. c. a do$e do$est stic ic corporation with the followi corporation followin# n# as $e$b $e$bers ers of its >oard of  Hirectors: 8anuel &. Hulay with -++ shares and desi#nated as president treasurer and #eneral $ana#er= Atty. Bir#ilio . Hulay with - shares and desi#nated as vice;president= inda . Hulay with - shares= Celia Hulay;8endo5a with - shares= and Atty. 1laridel C. Dose with - shares and desi#nated as secretary secr etary owne owned d a pro property perty covered covered by TC TCT T -7** -7**   and 4nown as Hulay Apart$ent consistin# of - apart$ent units on a *+ s6uare $eter lot $ore or less located at ,eventh ,treet ,tre et (now >uen >uendia dia 'ten 'tension sion)) and F.>. 0arri 0arrison son ,treet ,treet 1asay 1a say City. The corpo corporatio ration n thro throu#h u#h its pres preside ident nt 8anu 8anuel el Hulay obtained various loans for the construction of its hotel pro3ect Hulay Continental 0otel (now Frederic4 Frederic4 0otel). "t even ha had d to borr borrow ow $one $oney y fro$ fro$ Bi Bir# r#il ilio io Hu Hula lay y to be able able to continue the hotel pro3ect. As a result of said loan Bir#ilio Hulay Hula y occupied occupied one of the unit apart$e apart$ents nts of the sub3ec sub3ectt property since -+7< while at the sa$e ti$e $ana#in# the Hulay Apart$ent as his shareholdin#s in the corporation was subse6uently increased by his father. En 2< Hece$ber -+7 8a 8anu nuel el Hu Hula lay y by vi virt rtue ue of >oar >oard d &esol esolut utio ion n -* of th the e cor corpor porati ation on sold sold the sub3e sub3ect ct pro prope perty rty to spous spouses es 8ar 8aria ia  Theresa and Castrense Beloso in the a$ount of 1<. as evidenced by the Heed of Absolute ,ale. Thereafter TCT -7** -7**  was cancelled cancelled and TC TCT T 2<22 2<22! ! was issued to 8aria  Theresa Beloso. Beloso. ,ubse6uently 8anuel Hulay and the spouses Beloso e'ecuted a 8e$orandu$ to the Heed of Absolute ,ale of 2< Hece$ber -+7 dated + Hece$ber -+77 #ivin# 8anuel Hulay within 2 years or until + Hece$ber -+7+ to repurchase the sub3ect property for 12. which was however not annotated either in TCT -7** or TCT 2<22!. En 2 Hece$ber -+7 8aria Beloso without the 4nowled#e of 8anuel Hulay $ort#a#ed the sub3ect property to 8anuel A. Torres Torres for a loan of 12!. which was duly annotated as ntry *-<+ in  TCT 2<22!. Lpon the failure of 8aria Beloso Beloso to pay Torres the sub3ect sub3 ect propert property y was sold on ! Apri Aprill -+7* to Torres orres as the hi hi#h #hes estt bidd bidder er in an e' e'tr tra3 a3ud udic icia iall fore forecl clos osur ure e sale sale as evidence evid enced d by the Certi% Certi%cate cate of ,heri ,heris s ,ale issu issued ed on 2 April -+7*. En 2 Duly -+7* 8aria Beloso e'ecuted a Heed of  Absol Absolute ute Assi# Assi#n$ n$ent ent of the &i#ht to &edee &edee$ $ in favor favor of  8anuel Hulay assi#nin# her ri#ht to repurchase the sub3ect property fro$ Torres as a result of the e'tra3udicial sale. As neither 8aria Beloso nor her assi#nee 8anuel Hulay was able

 

to redee$ the sub3ect property within the one year statutory period for rede$ption Torres %led an Adavit of Consolidation of Ewnership -< with the &e#istry of Heeds of 1asay City and  TCT 27++ was subse6uen subse6uently tly issued to Torres on 2< April -+7+. -+7 +. En - Ectobe Ectoberr -+7 -+7+ + Torr orres es %l %led ed a petiti petition on for the issuance of a writ of possession a#ainst spouses Beloso and 8anuell Hulay in &C Case -72 8anue -72;1 ;1.. 0owever 0owever when when Bir Bir#ili #ilio o Hulay appeared in court to intervene in said case alle#in# that 8anuel Hulay was never authori5ed by the corporation to sell or $ort# $ort#a#e a#e the sub3 sub3ect ect pro property perty the trial court ordered ordered  Torres  Torres to i$plead the corporation as an indispensable indispensable party but the latter $oved for the dis$issal of his petition which was #ranted in an Erder dated * April -+*. En 2 Dune -+*  Torres  Torres and d#ardo 1abalan real estate ad$inistrator of 

co corp rpor orat atio ion n is clas classi si%e %ed d as a clos close e corp corpor orat atio ion n an and d conse6ue conse6 uentl ntly y a boa board rd re resol soluti ution on aut author hori5i i5in# n# the sale sale or $ort#a#e of the sub3ect property is not necessary to bind the cor corpor porati ation on for the actio action n of its presi presiden dent. t. At any rate a corporate action ta4en at a board $eetin# without proper call or not notic ice e in a close close corpor corporati ation on is dee dee$e $ed d rat rati% i%ed ed by the absent abse nt dire director ctor unle unless ss the latter pro$ pro$ptly ptly %les his written ob3ection with the secretary of the corporation after havin# 4nowled#e of the $eetin# which in this case Bir#ilio Hulay faile failed d to do. do. The corpo corporat ration ions s cla clai$ i$ tha thatt the sale of the sub3ect property by its president 8anuel Hulay to spouses Beloso is null and void as the alle#ed >oard &esolution -* was passed pas sed witho without ut the 4no 4nowl wled# ed#e e and con conse sent nt of the other $e $e$be $bers rs of the boa board rd of dir direc ector tors s can cannot not be sus sustai tained ned..

 Torres  T orres %led an action a#ainst the corporation Bir#ilio Bir#ilio Hulay and Nepo$uceno &edovan a tenant of Hulay Apart$ent Lnit No. *;A for the recovery of possession su$ of $oney and da$a#es with preli$inary in3unction in Civil Case *-+*;1 with the then Court of First "nstance of &i5al. En 2- Duly -+* the corporation %led an action a#ainst spouses Beloso and Torres for the cancellation of the Certi%cate of ,heris ,ale and TCT 27++ 27 ++ in Civil Civil Case *27*;1 *27*;1 with the then Court Court of Firs irstt "nstance of &i5al. En 2+ Danuary -+*- 1abalan and Torres %led an action a#ainst spouses Florentino and lvira 8analastas a tenant of Hulay Apart$ent Lnit No. 7;> with the corporation as int interv erven enor or for e3 e3ec ect$e t$ent nt in Ci Civil vil Case <*;*<*;*- with with the 8etro 8etropol polita itan n Tria riall Court Court of 1asay asay Ci City ty which which re rende ndere red d a decision on 2! April -+*! in favor of 1abalan et al. orderin# the spouses 8analastas and all persons clai$in# possession under the$ to vacate the pre$ises= and to pay the rents in the su$ of 1!. a $onth fro$ 8ay -+7+ until they shall have vacated the pre$ises with interest at the le#al rate= and to pay attorneys fees in the su$ of 12. and 1-.

Bir#ilio . Hulays protestations co$plete innocence to any the eect that he never participatedofnor was even aware of $eetin# or resolution authori5in# the $ort#a#e or sale of the sub3ect pre$ises is dicult to believe. En the contrary he is very $uch privy to the transactions involved. To be#in with he is an inc incorp orpora orator tor and one of the boar board d of dir direc ector tors s desi#nated at the ti$e of the or#ani5ation of 8anuel &. Hulay nterprises "nc. "n ordinary parlance the said entity is loosely referr referred ed to as a Gfa$i Gfa$ily ly corp corporatio oration.G n.G The no$encl no$enclature ature if  i$precise i$precis e however fairly reMects the cohesiveness cohesiveness of a #roup and the parochial instincts of the individual $e$bers of such an a##rupation of which 8anuel &. Hulay nterprises "nc. is typical: typi cal: four four;%ft ;%fths hs of its inco incorporat rporators ors bein bein# # clos close e rel relative atives s na$ely na$e ly < chil childre dren n and their fathe fatherr whos whose e na$e identi identi%es %es their corporation. >esides the fact that Bir#ilio Hulay on 2  Dune -+7! e'ecuted e'ecuted an adavit that he was a si#natory witness to the e'ecution of the post;dated Heed of Absolute ,ale of the sub3ect property in favor of Torres indicates that he was aware of the transaction e'ecuted between his father and

as other e'penses of liti#ation and for the$ to pay the costs of the suit. Thereafter or on -7 8ay -+*! the corporation and Bir#ilio Bir#i lio Hulay %led an action a#ainst the presidin# 3ud#e of the 8etropolitan Trial Court of 1asay City 1abalan and Torres for the annul$ent of said decision with the &e#ional Trial Trial Court of  1asay in Civil Case 2**;1. Thereafter the < cases were 3ointly tri tried ed and the tri trial al court court re rend nder ered ed a decisi decision on in favor favor of  1abalan abalan and Torr orres. es. Not satis% satis%ed ed with with said said dec decisi ision on the corporation et al. appealed to the Court of Appeals which rendered a decision on 2< Ectober -+*+ ar$in# the trial court decision. En * Nove$ber -+*+ the corporation et al. %led a 8otion for &econsideration which was denied on 2  Danuary -++. The corporation et al. %led the petition for review rev iew on certi certiorari. orari. Hurin# the pendency pendency of the petition petition  Torres  Torres died on < April -++- as shown in his death certi%cate and na$ed Torres;1abalan orres;1abalan &ealty I Hevelop$ent Hevelop$ent Corporation as his heir in his holo#raphic will dated <- Ectober -+*.

 Torres  Torres and had therefor therefore e ade6uate 4nowled#e about the sale of th the e sub3 sub3ec ectt prop proper erty ty to Torre orres. s. Co Cons nse6 e6ue uent ntly ly th the e corporation is liable for the act of 8anuel Hulay and the sale of the sub3ect property to Torres by 8anuel Hulay is valid and bindin#.

Issue:  hether hether the sale of the sub3ec sub3ectt property property betwe between en

spouses Beloso Beloso and 8anuel Hulay has no bindin# eect on the corporation as >oard &esolution -* which authori5ed the sale of the sub3ect property was resolved without the approval of  all the $e$ber $e$bers s of the board board of di dire recto ctors rs and said >oard >oard &esolution was prepared by a person not desi#nated by the corporation to be its secretary. Held: ,ection -- of the Corporation Code of the 1hilippines pr prov ovid ides es th that at Ghe Ghen n bo boar ard d $eet $eetin in# # is un unne nece cess ssary ary or i$properl i$pr operly y held. held. Lnless Lnless the by;l by;laws aws provide provide otherwis otherwise e any act action ion by the directo directors rs of a clo close se cor corpor porati ation on withou withoutt a $eetin# shall nevertheless be dee$ed valid if: (-) >efore or after such action is ta4en written consent thereto is si#ned by all the directors= or (2) All the stoc4holders have actual or i$pl i$plie ied d 4n 4now owle led# d#e e of th the e ac acti tion on an and d $a4e $a4e no pr pro$ o$pt pt ob3e ob3ect ctio ion n th ther eret eto o in writ writin in#= #= or (< (<)) Th The e di dire rect ctor ors s are are accust acc usto$e o$ed d to ta4 ta4e e inf infor$ or$al al act action ion with with the e'pre e'press ss or i$pli i$plied ed ac6uie ac6uiesce sce of all the sto stoc4h c4hold olders ers== or () All the directors have e'press or i$plied 4nowled#e of the action in

6uestion"fand none of the$ $a4es pro$pt ob3ection thereto in writin#. a directors $eetin# is held without proper call or notice an action ta4en therein within the corporate powers is dee$ed rati%ed by a director who failed to attend unless he pro$ptly %les his written ob3ection with the secretary of the corporatio corpo ration n afte afterr havi havin# n# 4nowled# 4nowled#e e thereof thereof.G .G 0erein 0erein the

$a2boa vs. Teves <9.&. No. -7!7+= Dune 2* 2--) ACTS: This is a petition to nullify the sale of shares of stoc4 of 1hil 1hilippi ippine ne Telec eleco$$un o$$unicati ications ons "nvest$e "nvest$ent nt Corpo Corporation ration (1T"C) by the #overn$ent of the &epublic of the 1hilippines actin# throu#h the "nter;A#ency 1rivati5ation Council ("1C) to 8etro 1aci%c Assets 0oldin#s "nc. (81A0) an aliate of First 1aci%c 1a ci%c Co$p Co$pany any i$ited i$ited (First (First 1aci%c 1aci%c) ) a 0on# on on#;base #;based d in inve vest st$e $ent nt $ana $ana#e #e$e $ent nt an and d ho hold ldin in# # co co$p $pan any y an and d a share sha rehol holder der of the 1hi 1hilip lippin pine e on# on# Hista Histance nce Tel elep ephon hone e Co$pany (1HT).

 The petitioner petitioner 6uestioned the sal sale e on the #roun #round d that it also involved an indirect sale of -2 $illion shares (or about .< pe perc rcent ent of the outsta outstandi ndin# n# co$$on co$$on share shares) s) of 1H 1HT T owned owne d by 1T"C to First 1aci%c 1aci%c.. ith ith this sale Fi First rst 1aci%c 1aci%c?s ?s co$$on shareholdin#s in 1HT increased fro$ <.7 percent to <7 perc percen ent t th ther ereb eby y in incr crea easi sin# n# th the e tota totall co co$$ $$on on sharehol shar eholdin# din#s s of fore forei#ne i#ners rs in 1HT to abou aboutt *-. *-.[email protected] [email protected] This This accordin# to the petitioner violates ,ection -- Article O"" of  th the e -+ -+*7 *7 1h 1hil ilip ippi pine ne Co Cons nsti titu tuti tion on whic which h li li$i $its ts fore forei# i#n n ownership of the capital of a public utility to not $ore than @ thus: ,ection ,ect ion --. No franc franchise hise certi certi%cat %cate e or any other other for$ of  authori5a author i5atio tion n for the ope operati ration on of a pub public lic utilit utility y shall shall be #ranted e'cept to citi5ens of the 1hilippi 1hilippines nes or to corporations or associations or#ani5ed under the laws of the 1hilippin 1hilippines es at leastt si'ty per centu$ of whose capital is owned by such leas citi5ens= ' ' ' ISSUE: Hoes refer the ter$ PcapitalQ in ,ection -- Article of the Constitution to the total co$$on shares only O"" or to total outstandin# outstandin# capital capital stoc4 (co$bin (co$bined ed total of co$$o co$$on n and non;votin# preferred shares) of 1HT a public utility/ HELD:  [The Court partly granted the petition and held that  the term “capital” in Section 11, Article XII o the Constitution

 

reers only to shares o stoc! entitled to "ote in the election o  directors director s o a public utility, i#e#, to the total common shares in $%&T#'

Considerin# that co$$on shares have votin# ri#hts which whi ch translate translate to control control as opposed opposed to preferr preferred ed shares shares which whi ch usua usually lly have no votin# votin# ri#hts the ter$ PcapitalQ PcapitalQ in ,e ,ecti ction on -- Art Artic icle le O"" O"" of the Con Consti stitut tution ion re refer fers s onl only y to co$$on shares. 0owever if the preferred shares also have the ri#ht to vote in the election of directors then the ter$ PcapitalQ shall include such preferred shares because the ri#ht to participate in the control or $ana#e$ent of the corporation is e'er e'ercis cised ed throu# throu#h h the ri#ht to vote vote in the electio election n of  directors. "n short the ter$ PcapitalQ in ,ection -- Article O"" of the Constitution refers only to shares of stoc4 that can vote in the election of directors.  To  To construe broadly the ter$ PcapitalQ as the total outstandin# outstandi n# capital capital stoc4 stoc4 includi includin# n# both co$$on co$$on and non; non; votin# preferred preferred shares #rossly contravenes the intent and letter of the Constitution that the P,tate shall develop a self; re reli lian antt and and in inde depe pend nden entt na nati tion onal al ec econ ono$ o$y y e eec ecti tive vely ly contr con troll olled ed by Fili ilipin pinos. os.Q Q A broad broad de% de%nit nition ion un3ust un3usti% i%abl ably y disre#ar disr e#ards ds who owns owns the all; all;i$por i$portant tant votin# votin# stoc4 stoc4 which which necessarily e6uates to control of the public utility.

NDC v A4ri8 $.R. Nos. =>&-'%-- De5e2ber &?# &))? a5ts: 1res. 1r es. Hec Hecree ree No No.. -7-7 -7-7 which which order ordered ed the rehab rehabilit ilitatio ation n of the A#ri' 9roup of Co$panies to be ad$inistered $ainly by the National Hevelop$ent Co$pany outlined the procedure for %lin#clai$s a#ainst the A#ri' co$panies and created a Clai$s Co$$ittee to process these clai$s. specially relevant to this case is ,ec. (-) thereof providin# that Gall $ort#a#es and other liens presently attachin# to any of the assets of  the dissolved corporations are hereby e'tin#uished.G >efore this the A#ri' 8ar4etin# had e'ecuted in favor of petitioner 1hilippine Beterans >an4 a real estat estate e $ $ort#a ort#a#e #e dated Duly 7 -+7* over three (<) parcels of land situated in os >aRos a#una. Hurin# the e' e'ist istenc ence e of the $ort#a $ort#a#e #e A9& A9&"O "O wen wentt ban ban4ru 4rupt. pt. "t was for the e'pressed purpose of salva#in# this and the other A#ri' co$panies that the afore$entioned decree was issued by 1resident 8arcos. 1etit 1e tition ioner er %le %led d a clai$ clai$ wit with h the A9&"O Clai$s Clai$s Co$$it Co$$ittee tee for the pay$ent of its loan credit. credit . "n the $eanti$e the New A#ri' "nc. and the National Hevelop$ent Co$pany Co$pany invo4in# ,ec.  (-) of the decree %led a petition with the &e#ional Trial Court of Cala$ba a#una for the cancellation of the $ort#a#e lien in favor of 1hilippine Beterans. For its part the 1hilippine Beterans too4 steps to e'tra3udicially foreclose the $ort#a#e pro$ptin# A#ri' to %le a second case with the sa$e court to stop the foreclosure. "n the trial court the 3ud#e annulled not only the challen#ed provision of ,ec.  (-) but the entire 1res. Hecree No. -7-7 on the #rounds that: (-) the presidential e'ercise of le#islative power was a violation of the principle of separation of powers= (2) the law i$paired the obli#ation of  contracts= and (<) the decree violated the e6ual protection clause.  The $otion for reconsideration of this decision havin# been denied the present petition was %led in the ,upre$e Court.  The petitioners contend that the private respondent is now estopped fro$ contestin# the validity of the decree. They cited 8endo5a v. A#ri' 8ar4etin# "nc.- where the constitutionality of 1res. Hecree No. -7-7 was also raised but not resolved. 8oreover the clai$s co$$ittee dis$issed the %lin# of the petition by 1hilippine Beterans on the #round of the afore$entioned estoppel.  The petitioners stress that in that the private respondent also invo4ed the provisions of 1res. Hecree No. -7-7 by %lin# a clai$ with the A9&"O Clai$s Co$$ittee. Failin# to #et results it sou#ht to foreclose the real est estate ate $ort#a $ort#a#e #e e' e'ecu ecuted ted by A9&"O A9&"O in its favor favor whi which ch had bee been n e'tin e'tin#u #uis ishe hed d by the the de decr cree ee.. "t wa was s only only wh when en the the peti petiti tion oner ers s challen#ed the foreclosure on the basis of ,ec.  (-) of the decree that the private respondent attac4ed the validity of the provision. At that sta#e however consistent with 8endo5a the petitioners alle#ed that privat private e res respon ponden dentt was alread already y estopp estopped ed fro fro$ $ 6ue 6uesti stioni onin# n# the constitutionality of the decree.

Issues:  -. "s estoppel applicable/ 2. "s 1H -7-7 constitutional/ Hel/: No. Hel/:  No. Ses. petition dis$issed &atio: -. To rule now that the priva private te resp responde ondent nt is estopped for havi havin# n# abided with the decree instead of boldly assailin# it is to close our eyes to a cynical fact of life durin# the 8arcos ti$e.  This case $ust be distin#uished fro$ 8endo5a where the petitioners after %lin# their clai$s with the A9&"O Clai$s Co$$ittee received in set settle tle$en $entt share shares s of   stoc4  stoc4 valued valued at 1 1 . .  withou withoutt pr prote otest st or reservation.  The private respondent has not been paid paid a sin#le centavo on its clai$ which was 4ept pendin# for $ore than seven years for alle#ed lac4 of  supportin# supp ortin# papers papers.. ,i#ni ,i#ni%cant %cantly ly the validity of that clai$ was not 6ues 6uesti tion oned ed by th the e peti petiti tion oner er when when it sou# sou#ht ht to rest restra rain in th the e e'tra3udi e'tra3udicial cial foreclosu foreclosureof reof the $ort# $ort#a#e a#e by the private private responden respondent. t.  The petitioner li$ited itself to the ar#u$ent that the private respondent was estopped fro$ 6uestionin# the decree because of its earlier co$pliance with its provisions. 2. The Court Court is especially especially disturbed by ,ection (-) of the decree decree 6uoted above e'tin#uishin# all $ort#a#es and other liens attachin# to the assets of A9&"O. "t also notes notes the restriction restriction in ,ubsection ,ubsection (ii) thereof that all Gunsecured obli#ations shall not bear interestG and in ,ubsection (iii) that Gall accrued interests penalties or char#es as of  date date hereof hereof pertai pertainin nin# # to the obl obli#a i#atio tions ns whethe whetherr sec secur ured ed or unsecured shall not be reco#ni5ed.G  These provisions $ust be read with the >ill of &i#hts where it is clearly provided in ,ection - that Gno person shall be deprived of life liberty or property without due course of law nor shall any person be denied the e6ual e6ual prote protecti ction on of the lawG lawG and in ,ec ,ection tion - that that Gno law i$pairin# the obli#ation of contracts shall be passed. 1etitione 1etitioners rs ar#u ar#ue e that propert property y ri#ht ri#hts s li4e all ri#hts ri#hts are sub3ect to re#ulation re#u lation under under the police the policepower power for the pro$otion pro$otion of the co$$on co$$on welfare. 0ence 3usti%cation of the provision. Court; The police powe Court; powerr is not not a pana panace cea a for for all all co cons nsti titu tuti tion onal al $aladies. $alad ies. Neither does its $ere invocation invocation con3ure an instant instant and auto$atic auto $atic 3usti%cation 3usti%cation for every act of the #overn #overn$ent $ent deprivin# a person of his life liberty or property. A le#islative act based on the  police power  police  power re6uires the concurrence of  a lawful sub3ect and a lawful $ethod. "n $ore fa$iliar words a) the interests inter ests of the public #enerall #enerally y as distin#uished distin#uished fro$ those of a particular class should 3ustify the interference of the state= and b) the $eans e$ployed are reasonably necessary for the acco$plish$ent of  the purpose and not unduly oppressive upon individuals  The case is not applicable to these re6uire$ents because the interests of the public are not suciently involved to warrant the interference of  the #ov #overn ern$en $entt wit with h the pri priva vate te con contra tracts cts of A9& A9&"O. "O. The dec decree ree spea4s va#uely of the Gpublic particularly the s$all investorsG who would be pre3udiced if the corporation were not to be assisted. There was no record of these investors. Also there was no public interest to be protected. The decree was to the bene%t of an e'clusive set of  investors.  The oppressiveness is patent on the face of the decree to rehabilitate A#ri'. No consi d de eration is paid for the e't iin nction of   the $ort#a#e $ort#a#e ri#hts ri#hts.. The accrued accrued inter interests ests and other char char#es #es are si$ply re3ected by the decree. A $ort#a#e lien is a property ri#ht derived fro$ contract and so co$es underr the prot unde protectio ection n of the >ill of &i#hts. &i#hts. 1rivate 1rivate property property cannot si$ply be ta4en by law fro$ one person and #iven to another without co$pensation and any 4nown public purpose. This is plain arbitrariness and is not per$itted under the Constitution. And not only is there arbitrary ta4in# there is discri$ination as well. "n e'tin#uis e'ti n#uishin# hin# the $ort#a $ort#a#ean #eand d other liens the decr decree ee lu$ps the secured creditors with the unsecured creditors and places the$ on the sa$e level in the prosecution of their respective clai$s. Lnder Lnd er the e6u e6ual al prote protecti ction on cla clause use all person persons s or thin#s thin#s si$ si$ila ilarly rly situated $ust be treated ali4e both in the privile#es conferred and the obli#ations obli# ations i$posed. Conv Conversel ersely y all persons persons or thin#s thin#s dier dierently ently situated situa ted should be trea treated ted dierent dierently ly.. "n the case at bar persons dierently dier ently situated are si$ila si$ilarly rly treated treated in disr disre#ard e#ard of the principle that there should be e6uality only a$on# e6uals. Ene $ay also well wonder why A9&"O was sin#led out for #overn$ent help a$on# help a$on# other other corpo corporation rations s wher where e the stoc4 stoc4hold holders ers or inve investors stors

 

were also were also swindl swindled. ed. "t is not clear not clear why other co$panies co$panies entitled to si$ilar concern were not si$ilarly treated. En top of all thi this s New A#ri' A#ri' "nc. "nc. was created created by spe specia ciall decre decree e notwithstandin# notwithstan din# the provisio provision n of Article O"B ,ection  of the -+7< Constitution then in force that: ,C. . The >atasan# 1a$b 1a$bansa ansa shall not e'cept by #ene #eneral ral law provi provide de for the for for$at $ation ion or# or#ani ani5ati 5ation on or re re#ul #ulatio ation n of pri privat vate e corporations unless such corporations are owned or controlled by the 9overn$ent or any subdivision or instru$entality thereof.  The new corporation is #overn$ent.

neither owned

nor controlled by the

T1e Court also feels t1at t1e /e5ree i26airs t1e obli4ation of  t1e 5ontr 5ontra5t a5t bet3ee bet3een n A$R [email protected] [email protected] an/ t1e 6rivat 6rivate e res6on res6on/en /entt 3it1out justi75ation. justi75atio n. hile  hile it is pri true that thel  police power  police is superior to the i$p i$pair air$en $entt clause cla use the princi nciple ple will wil app apply ly power only only whe where re the contract is so related to the public welfare that it will be considered con#enitally susceptible to chan#e by the le#islature in the interest of  the #reater nu$ber. nu$ber. "t can be seen that the contracts of loan and $ort#a#e e'ecuted by A9&"O are purely private transactions and have not been shown to be aected with public interest.

CEASE S CA Case Brief  FACT,: For Forrest rest Cease and %ve (!) othe otherr A$erican A$erican citi5e citi5ens ns for$ for$ed ed  Tiaon# 8illin# 8illin# and 1lantation Co$pany Co$pany.. ventually the shares of the other ori#inal incorporators were bou#ht out by Cease with his children. The co$pany?s charter lapsed in Dune -+!*. For Forrest rest Cease Cease died in Au#ust Au#ust -+!+. There There was no $ent $ention ion whether there were steps to li6uidate the co$pany. ,o$e of  his children wanted an actual division while others wanted a reincorporation. Two of his children >en3a$in and Florence initiated ,pecial 1roceedin# No. <*+< with CF" Tayabas as4in# that the Tiaon# 8illin# and 1lantation Corporation be declared identical to Forrest Cease and that its properties be divided a$on# his children as intestate heirs. Hefendants opposed the sa$e but the CF" ruled in favor of the plaintis. Hefendants %led a notice of appeal fro$ the CF"?s decision but the sa$e was dis$issed for bein# pre$ature. The case was elevated to the ,C which re$anded it to the Court of Appeals. The CA dis$issed the petition. ",,L: hether or not the Court of Appeals erred in ar$in# the lower court?s decision that the sub3ect properties owned by the corporation are also properties of the estate of Forrest Cease 0H: NE. The trial court court indeed found stron# stron# support one that is based on a well;entrenched principle of law which is the theory of G$er#er G$er#er of For Forrest rest . Cease and The Tiaon# Tiaon# 8illin# as one personalityG or that Gthe co$pany is only the business busi ness condui conduitt and alter e#o of the deceased deceased Forrest Forrest . Cease Ceas e and the re#iste re#istered red properties properties of Tia Tiaon# on# 8ill 8illin# in# are actually properties of Forrest . Cease and should be divided e6ually share and share ali4e a$on# his si' children children ... GG the trial court aptly applied the fa$iliar e'ception to the #eneral rule by disre#ardin# the le#al %ction of distinct and separate corporate personality and re#ardin# the corporation and the indiv individ idual ual $e$ber $e$ber one and the sa$e. sa$e. "n shr shredd eddin in# # the %c %cti titi tiou ous s co corp rpor orat ate e veil veil th the e tria triall 3u 3ud# d#e e na narr rrat ated ed th the e undisputed factual pre$ise thus: hile the records showed that ori#inally or i#inally its incorporators were aliens friends or third;parties in relation to another in the course cou rse of its e'ist e'isten ence ce it de devel velope oped d int into o a clo close se fa$ily fa$ily corporation. The >oard of Hirectors and stoc4holders belon# to one fa$ily fa$ily the head of wh which ich Forre Forrest st . Cease Cease alw always ays re retai taine ned d the $a3 $a3ori ority ty sto stoc4s c4s and hence hence the con contro troll and $an $ana#e a#e$en $ent t of or itsbeco$e aairs. aairs. of "t a#e $ust $ushe t be noted noted that tha t as his children increase continued distributin# his shares a$on# the$ addin# Florence Teresa and 8arion until at the ti$e of his death only -+ were left to his na$e. He%nitely only the $e$bers of his fa$ily bene%ted fro$ the Corporation.

 The corporation never had any account with any ban4in# ins instit tituti ution on or if any acc accoun ountt was car carrie ried d in a ban ban4 4 on its behalf it was in the na$e of 8r. Forrest . Cease. There is truth in plai plainti ntis s alle alle#ati #ation on that the corpo corporation ration is only a bu busi sine ness ss co cond ndui uitt of hi his s fath father er an and d an e'ten 'tensi sion on of hi his s personality they are one and the sa$e thin#. Thus the assets of the corporation are also the estate of Forrest . Cease the father of the parties herein who are all le#iti$ate children of  full blood. A rich store of 3urisprudence has established the rule 4nown as th the e doct doctri rine ne of disr disre# e#ar ardi din# n# or pier pierci cin# n# th the e veil veil of  corporate %ction. 9N 9N& &A &L &L:: a co corp rpor orat atio ion n is ve vest sted ed by la law w with with a personality separate and distinct fro$ the persons co$posin# it as well as any other le#al entity to which it $ay be related. >y virtue virtue of this attribu attribute te a corpo corporation ration $ay not #enera #enerally lly be $ade to answer for acts or liabilities of its stoc4holders or those of the le#al entities to which it $ay be connected and vice versa. This separate and distinct personality is however $e $ere rely ly a %ctio %ction n create created d by law for conve conveni nienc ence e and to pro$ote the ends of 3ustice OC1T"EN,: ,uch rule $ay not be used or invo4ed for ends subversive of the policy and purpose behind its creation or which could not have been intended by law to which it owes its bein#. This is particularly true where the %ction is used to defeat def eat publi public c conve conveni nienc ence e 3us 3ustif tify y wron# wron# pr prote otect ct fra fraud ud defend defe nd cri$e cri$e conf confuse use le#iti$at le#iti$ate e le#al le#al or 3udicia 3udiciall issu issues es perpetrate deception or otherwise circu$vent the law  This is li4ewi li4ewise se true where the corporate entity is bein# used as an alter alter e#o e#o ad3unc ad3unct t or bus busin iness ess conduit conduit for the sole bene%tcases of thethe stoc4holders or of another corporate. "n any of  these notion of corporate entity will be pierced or disre#arded and the corporation will be treated $erely as an association of persons or where there are two corporations they will be $er#ed as one the one bein# $erely re#arded as part or the instru$entali instru$entality ty of the other other.. An indubitable deduction fro$ the %ndin#s of the trial court cannot but lead to the conclusion that the business of the corporation is lar#ely if not wholly the personal venture of  Forrest Forre st . Cease. There is not even a shadow of a showin# that his children were subscribers or purchasers of the stoc4s they own. Thei Theirr participa participation tion as no$i no$inal nal sharehol shareholders ders e$an e$anated ated solely sole ly fro$ Forr Forrest est . Cea Ceases ses #ratuitous #ratuitous dole out of his own shares to the bene%t of his children and ulti$ately his fa$ily. "f the Court sustained the theory of petitioners that the trial court acted in e'cess e'cess of 3uri 3urisdic sdiction tion or abuse of disc discreti retion on a$ountin# to lac4 of 3urisdiction in decidin# the civil case as a case for parti partition tion Tiaon# 8illin 8illin# # and 1lantatio 1lantation n Co$p Co$pany any would wou ld hav have e bee been n able able to e'ten e'tend d its corpor corporate ate e'ist e'istenc ence e beyond the period of its charter which lapsed in Dune -+!* under the #uise and cover of F.  Cease 1lantation Co$pany "nc. as Trustee which would be a#ainst the law and as Trustee shall have been able to use the assets and properties for the be bene ne%t %t of th the e peti petiti tion oner ers s to th the e #rea #reatt pre3 pre3ud udic ice e an and d defraudati defr audation. on. of priv private ate res responde pondents. nts. 0enc 0ence e it bec beco$es o$es necessary and i$perative to pierce that corporate veil.  The 3ud#$ent 3ud#$ent appealed fr fro$ o$ is AFF"&8H.

ran5is5o +otors Cor6oration vs. Court of A66eals J9& -*-2 2! Dune -+++K ,econd Hivision uisu$bin# uisu$bin# (D):  concur Facts:  En 2< Danuary -+*! Francisco 8otors Corp. %led a co$plain co$p laintt a#ain a#ainst st ,pou ,pouses ses 9re#ori 9re#orio o and ibrada 8anu 8anuel el to recover 1<-2. representin# the balance of the 3eep body pu purc rcha hase sed d by th the e 8a 8anu nuel els s fr fro$ o$ Fra ranc ncis isco co 8oto 8otors= rs= an additional su$ of 12!.* represe representin# ntin# the unpaid balance on the cost of repair of the vehicle= and 1. for cost of  suit and attorneys fees. To the or ori#inal i#inal balance on the price of   3eep body were added the costs of repair repair.. "n their answer the

 

8anuel spouses 8anuel spouses interpose interposed d a counter counterclai clai$ $ for unpaid unpaid le#al le#al services by 9re#orio 8anuel in the a$ount of 1! which was not paid by the incorporators directors and ocers of  Francisco 8otors. The trial court decided the case on 2 Dune -+*! in favor of Francisco 8otors in re#ard to its clai$ for $oney $one y but also allowed allowed the counter;clai counter;clai$ $ of the 8anuel spouses. >oth parties appealed. En -! April -++- the Court of  Appeal App eals s sustai sustained ned the tri trial al court courts s de deci cisio sion. n. 0ence 0ence the present petition for review on certiorari. Issue:  hether the Francisco 8otors Corporation should be liable for the le#al services of 9re#orio 8anuel render rendered ed in the intestate inte state proc proceed eedin#s in#s over >enita >enita Trini rinidad?s dad?s estate (of the Francisco fa$ily). Held:  >asi >asic c in co corp rpora orati tion on law law is th the e pr prin inci cipl ple e th that at a cor corpor porati ation on has a sep separa arate te person personali ality ty di disti stinct nct fr fro$ o$ its stoc4holders and fro$ other corporations to which it $ay be connected. 0owever 0owever under the doctrine of piercin# the veil of  co corp rpor orat ate e en enti tity ty th the e co corp rpora orati tion ons s sepa separa rate te 3u 3uri ridi dica call pe perso rsonal nality ity $ay be di disre sre#ar #arde ded d for e'a$p e'a$ple le when when the corporate identity is used to defeat public convenience 3ustify wr wron# on# pr prote otect ct fra fraud ud or de defen fend d cri$e. cri$e. Also Also wher where e the cor corpor porati ation on is a $e $ere re alter e#o or busin business ess conduit conduit of a pe pers rson on or wher where e th the e co corp rpor orat atio ion n is so or#a or#ani ni5e 5ed d an and d contr con troll olled ed and its aairs aairs are so conduc conducte ted d as to $a4e $a4e it $e $ere rely ly an in instr stru$e u$enta ntali lity ty a#ency a#ency condui conduitt or ad3 ad3unc unctt of  anothe ano therr cor corpor porati ation on then then its dis distin tinct ct pe perso rsonal nality ity $ay be i#nored i#no red.. "n these these circu$st circu$stance ances s the courts courts wil willl treat treat the corporation as a $ere a##rupation of persons and the liability will directly attach to the$. The le#al %ction of a separate corporate personality in those cited instances for reasons of  public policy and in the interest of 3ustice will be 3usti%ably set aside. 0erein however #iven the facts and circu$stances circu$stances of this case the doctrine of piercin# the corporate veil has no re rele leva vant nt appl applic icat atio ion. n. The The ra rati tion onal ale e be behi hind nd pi pier erci cin# n# a corporations identity in a #iven case is to re$ove the barrier between the corporation fro$ the persons co$prisin# it to thwart the fraudulent and ille#al sche$es of those who use the corporate personality as a shield for underta4in# certain proscribed activities. "n the present case instead of holdin# ce certa rtain in ind indivi ividua duals ls or pe perso rsons ns re respo sponsi nsible ble for an alle#e alle#ed d cor corpor porate ate act act the si situa tuatio tion n has been been re rever versed sed.. "t is the Francisco 8otors Corporation (F8C) as a corporation which is bein# ordered to answer for the personal liability of certain individu indi vidual al director directors s ocers ocers and incorporat incorporators ors concerne concerned. d. 0ence the doctrine has been turned upside down because of  its erroneous erroneous invocatio invocation. n. "n fact the services services of 9re#orio 9re#orio 8anuel were solicited as counsel for $e$bers of the Francisco Francisco fa$ily fa$i ly to represe represent nt the$ in the intestate intestate proceed proceedin#s in#s over >enita >eni ta Trini rinidads dads esta estate. te. These These estate estate proc proceed eedin#s in#s did not invol involve ve any bu busin siness ess of F8C. F8C. 8anue 8anuels ls $ove $ove to re recov cover er

unpaid unp aidthe le#a le#al l feesbalance throu#h throu#of h the a counterc coun terclai$ lai$ F8C to oset unpaid purchase anda#ainst repair of a 3eep body could only result fro$ an obvious $isapprehension that F8Cs F8C s cor corpor porate ate assets assets coul could d be used used to answe answerr for the liabilities liabilitie s of its individual directors ocers and incorporators. ,uch result if per$itted could easily pre3udic pre3udice e the corporation its own creditors and even other stoc4holders= hence clearly ine6uitous to F8C. Further$ore considerin# the nature of the le#a le#all se serv rvic ices es in invo volv lved ed what whatev ever er ob obli li#a #ati tion on sa said id incorporat inco rporators ors director directors s and ocers of the corporation corporation had incurre incu rred d it was incu incurre rred d in their their perso personal nal capacity capacity. hen dire direct ctor ors s an and d o oce cers rs of a corp corpor orat atio ion n are are unab unable le to co$pensate a party for a personal obli#ation it is far;fetched to alle alle#e #e th that at th the e co corp rpora orati tion on is pe perp rpet etua uati tin# n# frau fraud d or pro$otin# pro$ otin# in3ust in3ustice ice and be thereby thereby held liable liable therefor therefor by piercin# its corporate veil. hile there are no hard and fast rules rule s on disr disre#ar e#ardin# din# separate corporate identit identity y we $ust always be $indful of its function and purpose. A court should be car carefu efull in asses assessin sin# # the $i $ilie lieu u wher where e the doctri doctrine ne of  piercin pie rcin# # the corporate veil $ay beresult applied. applied . Etherwis Ethe rwise e an in3ustice althou#h unintended $ay fro$ its erroneous application. The personality of the corporation and those of its in inco corp rpor orat ator ors s di dire rect ctor ors s an and d o oce cers rs in th thei eirr pe pers rson onal al capacities ou#ht to be 4ept separate in this case. The clai$ for le#al fees a#ainst the concerned individual incorporators

ocers and directors could not be properly directed a#ainst the corp corporatio oration n with without out viol violatin# atin# basic basic princ principle iples s #ove #overnin rnin# # co corp rpor orat atio ions ns.. 8ore 8oreov over er ev ever ery y acti action on U in incl clud udin in# # a counterclai$ U $ust be prosecuted or defended in the na$e of the real party in interest. "t is plainly an error to lay the clai$ for le#al fees of private respondent 9re#orio 8anuel at the door of F8C rathe ratherr tha than n indivi individua duall $e$ber $e$bers s of the Francisco fa$ily fa $ily..

CIR vs Norton an/ Harrison Co26an, Case Brief  1laintis 1laint is %led a collec collection tion action a#ainst O Corporatio Corporation. n. Lpon e' e'ecutio ecution n of the courts courts decision O Corpo Corporatio ration n was found to be without withou assets. Thereaft er plaintis %led an actio action n a#ainst a#ains its pr pres esen enttt asset and and s.past paTher st eafter stoc stoc4h 4hol olde derr S Co Corp rpor orat atio ion n whi which ch owned owtned subs substa tant ntial ially ly all all of the the stoc stoc4s 4s of O co corp rpor orat atio ion. n. The The two two corporations have the sa$e board of directors and S Corporation %nanced the operations of O corporation. 8ay S Corporation be held liable for the debts of O Corporation/ hy/ A: Ses Ses S Cor Corpor porati ation on $ay be held held liable liable for the debts of O Corporation. The doctrine of piercin# the veil of corporation %ction applies to this case. The two corporations have the sa$e board of  directors and S Corporation owned substantially all of the stoc4s of  O Corporation which facts 3ustify the conclusion that the latter is $erely an e'tension of the personality of the for$er and that the for$er controls the policies of the latter. Added to this is the fact that S Corporation controls the %nances of O Corporation which is $erely an ad3unct business conduit or alter e#o of S Corporation.

Li6at vs. !a5i75 Ban9in4 Cor6oration Case Brief  J9& -2<! < April 2<K ,econd Hivision uisu$bin# uisu$bin# (D): < concur

Facts: The spouses Alfredo ipat and stelita >ur#os ipat owned G>elas 'port Tradin#G (>T) a sin#le proprietorship with principal principal oce at No. *- Aur Aurora ora >oul >oulevar evard d Cub Cubao ao u ue5 e5on on Ci City ty. >T >T was was en en#a #a#e #ed d in th the e $anu $anufa fact ctur ure e of  #ar$ents for do$estic and forei#n consu$ption. The ipats also owned the G8ystical FashionsG in the Lnited ,tates which sells #oods i$ported fro$ the 1hilippines throu#h >T. 8rs. ipat desi#nated her dau#hter Teresita >. ipat to $ana#e >T in the 1hilippine 1hilippines s whi while le she was $ana $ana#in# #in# G8ystical G8ystical Fashion ashionsG sG in the Ln Lnite ited d ,ta ,tates tes.. "n ord order er to facili facilitate tate the convenient operation of >T stelita ipat e'ecuted on - Hece$ Hec e$ber ber -+7 -+7* * a spe specia ciall pow power er of attorn attorney ey app appoin ointin tin# #  Teresita  Teresita ipat as her attorney;in;fact to obtain loans and other cre credit dit acco$ acco$$odat $odations ions fro$ 1ac 1aci%c i%c >an4in# >an4in# Corpo Corporatio ration n (1aci% (1aci%c c >an4) >an4).. ,he li4 li4ewis ewise e authori5ed authori5ed Tere eresita sita to e'ecut e'ecute e $ort#a#e contracts on properties owned or co;owned by her as security for the obli#ations to be e'tended by 1aci%c >an4 includin# any e'tension or renewal thereof thereof.. ,o$eti$e in April -+7+ Teresita Teresita by virtue of the special power of attorney was able to secure for and in behalf of her $other 8rs. ipat and >T a loan fro$ 1aci%c >an4 a$ountin# to 1!*<*!. to buy fabrics fabrics to be $an $anufa ufactu cture red d by >T >T and e'po e'porte rted d to G8ystical FashionsG in the Lnited ,tates. As security therefor the ipat spouses as represented by Teresita e'ecuted a &eal state 8ort#a#e over their property located at No. *- Aurora >lvd. Cubao ue5on City. ,aid property was li4ewise $ade to secure other additional or new loans etc. En ! ,epte$ber -+7+ >T was incorporated into a fa$ily corporation na$ed >ela >elas s ' 'por portt Cor Corpor porati ation on (> (>C) C) in order order to facil facilita itate te the $ana#e $an a#e$e $ent nt of the bus busin iness ess.. >C was en en#a# #a#ed ed in the business busi ness of $anu $anufact facturin# urin# and e'portati e'portation on of all 4inds of  #ar$ents of whatever 4ind and description and utili5ed the sa$e $achineries and e6uip$ent previously used by >T. "ts incorporators and directors included the ipat spouses who owne owned d a co co$b $bin ined ed < <  shar shares es ou outt of th the e 2 2  shar shares es subscribed Teresita ipat who owned 2 shares and other close clos e rel relative atives s and friends of the ipats. steli stelita ta ipat was na$ed na$e d pres presiden identt of >C while Teresita eresita beca beca$e $e the vice vice;; president and #eneral $ana#er. $ana#er. ventually the loan was later restructured in the na$e of >C and subse6uent loans were

 

obtained obtai ned by >C with the correspon correspondin# din# pro$issory pro$issory note notes s duly e'ecuted by Teresita on behalf of the corporation. A letter of credit was also opened by 1aci%c >an4 in favor of A. E. nittin# 8anufacturin# Co. "nc. upon the re6uest of >C after >C e'ecuted the correspondin# trust receipt therefor. therefor. 'port bills were also e'ecuted in favor of 1aci%c >an4 for additional %nances. %nan ces. These transactions transactions wer were e all secured secured by the real estate esta te $ort# $ort#a#e a#e over the ipats property property. The pro$issor pro$issory y notes e'port bills and trust receipt eventually beca$e due and and de de$a $and ndab able le.. Lnfo Lnfort rtun unat atel ely y > >C C de defa faul ulte ted d in it its s pay$ents. pay$ ents. After receipt receipt of 1aci%c 1aci%c >an4 >an4s s de$and de$and letters letters stelita ipat went to the oce of the ban4s li6uidator and as4ed for additional ti$e to enable her to personally settle >Cs >C s obl obli# i#ati ations ons.. The ban ban4 4 accede acceded d to her re re6ue 6uest st but

corporation with the ipats as its $a3ority stoc4holders= () the business operations of the >C were so $er#ed with those of 8rs. ipat such that they were practically indistin#ui indistin#uishable= shable= (7) the corporate funds were held by stelita ipat and the cor corpor porati ation on itsel itselff had no vis visib ible le ass assets ets== (*) the board of  directors of >C was co$posed of the >ur#os and ipat fa$ily $e$bers= $e$b ers= (+) ste stelita lita had full contr control ol over the activ activitie ities s of  and decided business $atters of the corporation= and that (-) stelita ipat had bene%ted fro$ the loans secured fro$ 1aci%c 1a ci%c >an4 to %nan %nance ce her busi business ness abroad and fro$ the e'por e'portt bil bills ls sec secur ured ed by >C for the acc accoun ountt of G8y G8ysti stical cal Fashion.G "t could not have been coincidental that >T and >C are so intertwined with each other in ter$s of ownership business purpose and $ana#e$ent. Apparently >T and >C

stelita ste lita$ort#a#e failed towas ful%ll ful%foreclosed ll her pro$ise. pro$ise . Conse6ue Cons e6uently ntly the estate and after co$pliance with real the re6uire$ents of the law the $ort#a#ed property was sold at public auction. En <- Danuary -+*+ a certi%cate of sale was issue issued d to re resp spond onden entt u#eni u#enio o H. Trin rinida idad d as the hi hi#he #hest st bidder. En 2* Nove$ber -+*+ the spouses ipat %led before the ue5on City &TC a co$plaint for annul$ent of the real estate $ort#a#e e'tra3udicial foreclosure and the certi%cate of sale sale issue issued d ove overr the pr prope operty rty a#a a#ain inst st 1aci 1aci%c %c >an >an4 4 and u#enio u# enio H. Trini rinidad. dad. The co$plain co$plaintt alle#ed alle#ed a$on# a$on# others others that the pro$issory notes trust receipt and e'port bills were all ultra vires acts of Teresita as they were e'ecuted without the re6uisite board resolution resolution of the >oard of Hirectors of >C.  The ipats also averred that assu$in# said acts were valid and bindin# on >C the sa$e were the corporations sole obli#ation it havin# a personality distinct and separate fro$ spouses spou ses ipat. ipat. "t was li4 li4ewi ewise se pointed pointed out that Tere eresita sitas s authority to secure a loan fro$ 1aci%c >an4 was speci%cally li$ited to 8rs. ipats sole use and bene%t and that the real

are onesucceeded and thed sa$e and the is aatte$pt conduit and $erely succeede the for$er. The latter spouses to of isolate the$selves fro$ and hide behind the corporate personality of  >C so as to evade their liabilities to 1aci%c >an4 is precisely what the classical doctrine of piercin# the veil of corporate en enti tity ty se see4 e4s s to prev preven entt an and d re$e re$edy dy. > >C C is a $ere $ere continuati conti nuation on and success successor or of >T and the ipat spou spouses ses cannot can not eva evade de the their ir obli#a obli#atio tions ns in the $or $ort#a t#a#e #e con contra tract ct secured under the na$e of >C on the prete't that it was si#ned for the bene%t and under the na$e of >T.

estate $ort#a#e was e'ecuted to secure the ipats and >Ts 1!*<*! 1!*< *!. . loan only. "n their their resp respecti ective ve answers answers 1aci%c 1aci%c >an4 and Trinidad alle#ed in co$$on that petitioners ipat cannot evade pay$ents of the value of the pro$issory notes trust receipt and e'port bills with their property because they and the >C are one and the sa$e the latter bein# a fa$ily corporation. Trinidad further clai$ed that he was a buyer in #ood #oo d faith faith and for value value and that that the ipat ipat spous spouses es are es esto topp pped ed fro$ fro$ de deny nyin in# # > >C Cs s e' e'is iste tenc nce e af afte terr ho hold ldin in# # the$selves out as a corporation. After trial on the $erits the &TC dis$issed the co$plaint. The ipats ti$ely appealed the &TC decision to the Court of Appeals in CA;9.&. CB -!<. ,aid appeal however was dis$issed by the appellate court for lac4 of $erit. The ipats then $oved for reconsideration but this was denied by the appellate court in its &esolution of  2< February February 2. The ipat spouses spouses %led the petition petition for review on certiorari. Issue: hether >C and >T are separate business entities

and thus the ipt spouses can isolate the$selves behind the corporate personality of >C. Held: hen the corporation is the $ere alter e#o or business co cond ndui uitt of a pe pers rson on th the e se sepa parat rate e pe pers rson onal alit ity y of th the e corporation $ay be disre#arde disre#arded. d. This is co$$only referre referred d to as the Ginstru$entality ruleG or the alter e#o doctrine which the courts have applied in disre#ardin# the separate 3uridical personality of corporations. As held in one case where one corporation is so or#ani5ed and controlled and its aairs are condu con ducte cted d so that that it is in fact fact a $ere $ere in instr stru$e u$enta ntali lity ty or ad3unct of the other the %ction of the corporate entity of the instru$entality $ay be disre#arded. The control necessary to inv invo4 o4e e the rule is not $a3ority $a3ority or even even co$ co$pl plete ete stoc4 control but such do$ination of %nances policies and practices that the controlled corporation has so to spea4 no separate $ind will or e'istence of its own and is but a conduit for its principal. The evidence on record shows >T and >C are not separate business entities. (-) stelita and Alfredo ipat are

the own owners ers (2) andboth $a3ori $a3%r$s ority ty were share sharehol holde ders rs of >C >C respectively= $ana#ed by >T their and dau#hter  Teresita=  Teresita= -+ (<) both %r$s were en#a#ed in the #ar$ent business supplyin# products to G8ystical FashionG a L.,. %r$ established by stelita ipat= () both %r$s held oce in the sa$e sa$ e buildi buildin# n# owned owned by the ipats= ipats= (!) >C >C is a fa$ily fa$ily

Albert vs. Universit, !ublis1in4 Co. <9.&. No. ; -+--*= Danuary < -+!) ACTS: 8ariano Albert entered into a contract with Lniversity 1ublish 1ub lishin# in# Co. "nc. "nc. throu throu#h #h Dose 8. Arue# Arue#o o its 1re 1reside sident nt whereby Lniversity would pay plainti for the e'clusive ri#ht to publ publish ish his revised revised Co$$enta Co$$entaries ries on the &evise &evised d 1enal 1enal Code. Cod e. The cont contrac ractt sti stipul pulate ated d tha thatt failur failure e to pay one install$ent would would render the rest of the pay$ents pay$ents due. hen Lniversity failed to pay the second install$en install$ent t Albert sued for collection and won. won. 0owever upon e' e'ecution ecution it was found thatt Ln tha Lnive iversi rsity ty was not re re#is #ister tered ed with with the ,C. ,C. Albe Albert rt petitioned for a writ of e'ecution a#ainst Dose 8. Arue#o as the real defendant. Lniversity opposed on the #round that Arue#o was not a party to the case. ISSU ISSUE: E: EN Arue#o Arue#o can be hel held d pe perso rsonal nally ly liabl liable e to the plainti. HELD:  S,. The ,upre$e Court found that Arue#o represented a non;e'istent entity and induced not only Albert but the court to beli believe eve in such representat representation. ion. Arue#o Arue#o actin# as representative of such non;e'istent principal was the real party to the contract sued upon and thus assu$ed such privile#es and obli#ations and beca$e personally liable for the contract entered into or for other acts perfor$ed as

such Ene who has another actor#ani5ed upon his wilful a#ent. $isrepre $isrepresentation sentation thatinduced a corporation wastoduly and e'istin# under the law cannot thereafter set up a#ainst his victi$ the principle of corporation by estoppel  The ,upre$e Court li4ewise li4ewise held that the doctrine of  corporation by estoppel cannot be set up a#ainst Albert since it was Arue#o who had induced hi$ to act upon his (Arue#os) willful representation that Lniversity had been duly or#ani5ed and was e'istin# under the law.

ABS%CBN vs CA Case Brief < $.R. No. &'=)?#  anuar, '&# &))) ACTS: "n -++ A>,;C>N and Biva e'ecuted a Fil$ 'hibition A#ree$e A#re e$ent nt whe whereby reby A>,;C A>,;C>N >N was #iven the ri#h ri#htt of %rst refusal to the ne't twenty;four (2) Biva %l$s for TB telecast un under der such ter$s ter$s as $ay be a#r a#reed eed upon by the parti parties es

hereto provided that such shall be e'ercised by A>,;C>N fro$however the actual oer in ri#ht writin#. Conse6uently Biva Biva throu# throu#h h def defend endant ant Hel &osar &osario io oe oere red d A>,;C A>,;C>N >N thr throu# ou#h h its vice;p vice;pre resid sident ent Ch Charo aro ,an ,antos tos;Co ;Conci ncio o a list list of  three(<) %l$ pac4a#es (< titles) fro$ which A>,;C>N $ay e'erc 'ercis ise e its its ri#h ri#htt of %r %rst st re refu fusa sall un unde derr th the e afor afore; e;sa said id

 

a#ree$ent. A>, C>N re3ected said list. En February 27 -++2 Hel &osario approached 8s. Concio with a list consistin# of !2 ori#inal $ovie titles as well as - re;runs fro$ which A>,;C>N $ay choose another !2 titles or a total of -! titles proposin# to sell to A>,;C>N airin# ri#hts ov over er th this is pac4 pac4a# a#e e of !2 or ori# i#in inal als s an and d !2 re;r re;run uns s for for 1.. The pac4a#e was re3ected by A>,;C>N. En April  -++2 Hel &osario and 8r. 9raciano 9o5on of &>, discussed the ter$s and conditions of Biva?s oer to sell the - %l$s. En April 7 -++2 defendant Hel &osario received throu#h his secretary a handwritten note fro$ 8s. Concio which reads: P0ere?s P0er e?s the draft of the contract. " hope you %nd everythin# in orderQ to which was attached a draft e'hibition a#ree$ent a counter;proposal coverin# !< %l$s for a consideration of 1<! $illion. The said counter;proposal was however re3ected by Biva?s >oard of Hirectors. En April 2+ -++2 Biva #ranted &>, the e'clusive ri#ht to air - Bi Biva;p va;pro roduc duced ed andVor andVor ac6 ac6uir uired ed %l %l$s $s in inclu cludin din# # the fourteen (-) %l$s sub3ect of the present case. A>,;C>N A>, ;C>N then %led a a co$p co$plain laintt for speci%c speci%c perfor$ance perfor$ance.. &TC rendered a decision in favor of &>, and B"BA and a#ainst A>,;C>N rulin# that there was no $eetin# of $inds on the price and ter$s of the oer. Further$ore the ri#ht of %rst re refus fusal al un under der the -+ -++ + Fil il$ $ ' 'hib hibiti ition on A#ree A#ree$e $ent nt had pr previ evious ously ly be been en e'er e'erci cised sed per 8s. Co Conci ncio?s o?s let letter ter to Hel Hel &osario tic4in# o ten titles acceptable to the$ which would have $ade the -++2 a#ree$ent an entirely new contract. The Court of Appeals ar$ed the decision of the &TC &TC.. 0ence this petition. ISSUES -. hether or not there was no perfected contract between petitioner and private respondent 2. hether or not A>,;C>N has already e'ercised its ri#ht of  %rst refusal HELD -. The issue should be resolved a#ainst A>,;C>N. Contracts thatt are con tha consen sensua suall in natur nature e are per perfec fected ted upon upon $ere $ere $eetin# of the $inds. Ence there is concurrence between the o oer er an and d th the e ac acce cept ptan ance ce up upon on th the e su sub3 b3ec ectt $att $atter er consideration and ter$s of pay$ent a contract is produced.  The oer $ust be certain. To To convert the oer into a contract the acceptance $ust be absolute and $ust not 6ualify the ter$s of the o oe er= it $ust be plain ain une une6ui uiv voc ocal al uncond unc onditi itiona onal l and wi witho thout ut var varian iance ce of any sort sort fro$ fro$ the proposal. A 6uali%ed acceptance or one that involves a new proposal constitutes a counter;oer and is a re3ection of the ori#inal oer. Conse6uently Conse6uently when so$ethin# is desired which is not e'actly what is proposed in the oer such acceptance is not sucient to #enerate consent because any $odi%cation or variation fro$ the ter$s of the oer annuls the oer. oer.

v ven en if it be co conc nced eded ed ar#u ar#uen endo do th that at He Hell &o &osa sari rio o ha had d accepted the counter;oer the acceptance did not bind B"BA as there was no proof whatsoever that Hel &osario had the speci%c authority to do so. That Hel &osario did not have the auth author orit ity y to acce accept pt A> A>,; ,;C> C>N? N?s s co coun unte terr;oer ;oer was was be best st evidenced by his sub$ission of the draft contract to B"BA?s >oard of Hirectors for the latter?s approval. "n any event there was between Hel &osario and ope5 """ no $eetin# of $inds. 2. Ses. A>,;C A>,;C>N >N?s ?s ri# ri#ht ht of %rst %rst re refus fusal al had alread already y bee been n e'ercised when 8s. Concio wrote to B"BA tic4in# o ten %l$s. As observed observed by the trial court court the subse6uent subse6uent ne#otiation ne#otiation wi with th A>,;C A>,;C>N >N was for an ent entir irel ely y dier dierent ent pac pac4a 4a#e. #e. 8s. Concio herself ad$itted on cross;e'a$ination to havin# used or e'ercised the ri#ht of %rst refusal. ,he stated that the list was not acceptable was indeed not accepted by A>,;C>N. Hel &osario hi$selfand 4new and understood that A>,;C>N has lost its ri#hts of the %rst refusal when his list of < titles were re3ected.

Coastal !a5i75 Tra/in4 vs Sout1ern Rollin4 +ills Case Brief  ACTS:  ,outh ,outhern ern &olli &ollin# n# 8ill 8ills s was rena$ed into Bi Bisayan sayan "nt "nte#r e#rate ated d ,te ,teel el Cor Corp p (B" (B",C ,CE). E). En Hec. Hec. --- -+ -+-; -;B", B",CE CE obtain obt ained ed a loan loan fro$ fro$ H>1 H>1 a$o a$ount untin# in# to 1*< 1*< . . "t was secured by a &eal state 8ort#a#e coverin# B",CEs < parcels of land includ includin# in# the $achiner $achinery y and e6ui e6uip$en p$ents ts ther therein. ein. ,e ,eco cond nd o oan an:: B",C B",CE E en ente tere red d a o oan an A#re A#ree$ e$en entt with with respondent ban4s ( referred as GConsortiu$G) to %nance its i$port i$p ortati ation on for var variou ious s raw $at $ateri erials als.. B", B",CE CE e'ecu e'ecuted ted a second seco nd $ort# $ort#a#e a#e over the prev previous ious properti properties es $en $entione tioned d however they were unrecorded B",CE was unable to pay its second $ort#a#e with the consortiu$ which resulted in the la latte tterr ac6u ac6uir irin in# # + +@ @ of th the e e6ui e6uity ty of B",C B",CE E #ivi #ivin# n# th the e Consortiu$ the control and $ana#e$ent of B",CE. Hespite th the e ac6u ac6uis isit itio ion n B" B",C ,CE E stil stilll re re$a $ain ined ed in inde debt bted ed to th the e Consortiu$.

 Transaction  Transaction to Coastal: >etween -+ to -+! B",CE entered a proc proces essi sin# n# a#re a#ree$ e$en entt with with Co Coas asta tall wh wher erei ein n Coas Coasta tall deliver deli vered ed < <  $etric $etric tons of hot rolled steel coils which which B",CE would process into bloc4 iron sheets. 0owever B",CE was only able to return - $etric tons of those sheets. En the loan to H>1: To pay its %rst $ort#a#e with H>1 B",CE sold 2 of its #enerators to F"8A9 1hils "nc. H>1 e'ecuted a He Heed ed of As Assi si#n #n$e $ent nt of the the $o $ort rt#a #a#e #e in favo favorr of the the consortiu$. The Consortiu$ foreclosed the $ort#a#e and was the hi#hest bidder in an auction sale of B",CEs properties.  The Consortiu$ later sold the properties in favor of National ,teel Corporation. Coastal %les a civil action for Annul$ent or &escission of ,ale Ha$a# Ha$a#es 1re 1reli$i li$inary nary "n3uncti "n3unction. on.the Coas Coastal tal bein# i$pu i$putes tes faith ones thewith action of the Consortiu$ latter ablebad to sell the properties of B",CE despite the attach$ent of the properties placin# the$ beyond the reach of B",CEs other creditors.  The lower court ruled in favor of B",CE declarin# the sale valid and le#al. The CA ar$ed this. ISSUE -: hether the consortiu$ disposed B",CEs assets in fraud of creditors/

HELD: Ses. hat the consortiu$ did was to pay to the$ the proceeds fro$ the sale of the #enerator sets which in turn they used to pay H>1. Hue to the Heed of Assi#n$ent issued by H>1 the respondent ban4s recovered what they re$itted to H>1 I it allowed the Consortiu$ to ac6uire H>1s pri$ary lien on the $ort#a#ed properties. Allowin Allowin# # the$ as unsecure unsecured d creditors ( as the $ort#a#e was unrecorded) to foreclose on the assets of the corporation without re#ard to inferior clai$s ISSUE ': hether petitioner is entitled to $oral da$a#es/

No. As a rule a corporation is not entitled to $oral da$a#es because beca use not bein bein# # a natu natural ral person it cann cannot ot e'p e'perie erience nce physical suerin# or senti$ents li4e wounded feelin#s serious an'iety $ental an#uish and $oral shoc4. The only e'ception to this rule is when the corporation has a #ood reputation that is deb debase ased d re resul sultin tin# # in its hu hu$il $iliat iation ion in the bu busin sines ess s re real$ al$.. "n the prese present nt cas case e the re recor cords ds do not show show any evidence that the na$e or reputation of petitioner has been sul sulli lied ed as a re resul sultt of the Con Consort sortiu$ iu$s s fra fraudu udulen lentt acts. acts. Accordin#ly Accordin #ly $oral da$a#es are not warranted. 1etitionerr was able to recover e'e$p 1etitione e'e$plary lary da$a#es.

 ar/ine Davies vs. Court of A66eals A66eals J9& -2* -+ Dune 2K also $ureoods Corporation "s# Court o Appeals [() 1*+.' ,econd Hivision >ellosillo (D):  concur Facts:  "n -++2 at the h ei#ht of the power crisis which the country was then e'perienci e'periencin# n# and to re$edy and curt curtail ail further losses

 

due to the series series of power power fai failur lures es 1ur 1ure e Fo Foods ods Corpor Corporati ation on deci decide ded d to insta install ll two two (2) (2) -! -!   #ene #enera rato tors rs in its its fo food od proce processi ssin# n# plant plant in ,an &o6u o6ue e 8ar 8ari4in i4ina a Cit City y. ,o$ ,o$eti eti$e $e in Nove$ber -++2 a biddin# for the supply and installation of the #enerators was held. ,everal suppliers and dealers were invited to attend a pre;biddin# conference to discuss the conditions propose sche$e sch e$e and spe speci% ci%cat cation ions s that that wou would ld bes bestt suit the needs needs of  1L&FEEH,. Eut of the * prospective bidders who attended the pre;biddin# pre; biddin# confer conference ence only < bidder bidders s na$ely na$ely Far ast 8ills ,upply ,up ply Corpor Corporati ation on (F (F8,C 8,CE) E) 8onar4 8onar4 and Ad Advan vance ce 1o 1ower wer sub$itted sub$i tted bid proposals proposals and #ave bid bonds e6uivalent to [email protected] of  their respective bids as re6uired. Thereafter in a letter dated -2 Hece$b Hec e$ber er -++ -++2 2 addres addressed sed to F8 F8,CE ,CE 1r 1resi esiden dentt Alfons Alfonso o 1o 1o 1L&FEEH 1L& FEEH, , con%r con%r$ed $ed the award of the contract contract to F8,CE. F8,CE. "$$ediately F8,CE sub$itted the re6uired perfor$ance bond

pro proces cess s of biddin# biddin#.. This This is a Ma# Ma#ran rantt vio violat lation ion of the e'press e'press provisions of the law and is contrary to fair and 3ust dealin#s to which every $an is due. The Court has awarded in the past $oral da$a#es to a corporation whose reputation has been bes$irched. 0erein 0er ein F8,CE has suc suciently iently shown that its reputat reputation ion was tar tarnish nished ed af after ter it i$$ i$$edi ediate ately ly order ordered ed e6u e6uip$ ip$ent ent fr fro$ o$ its suppliers on account of the ur#ency of the pro3ect only to be canceled later. The Court thus sustain the appellate courts award of $oral da$a#es. The Court however reduced the award fro$ 12. 12 .  to 1-. 1-. as $oral da$a#es are never intended to enrich the recipient. i4ewise the award of e'e$plary da$a#es by way of e'a$ple for the public #ood is e'cessive and should sho uld be reduc reduced ed to 1- 1- . .. . En the other han hand d the appellate court erred in orderin# DA&H"N to pay $oral da$a#es to F8,CE as it supposedly induced 1L&FEEH, to violate the

in the a$ount of 1-*--*7.+ and contractors all;ris4 insurance policy in the a$ount of 1-<72+<. which 1L&FEEH, throu#h its Bice 1re 1resident sident >enedicto >enedicto 9. Tope ac4nowled# ac4nowled#ed ed in a lette letterr dated -* Hece$ber -++2. F8,CE also $ade arran#e$ents with its principal and started the 1L&FEEH, pro3ect by purchasin# the necessary neces sary $aterials. $aterials. 1L& 1L&FEEH, FEEH, on the other hand ret returned urned F8,CE F8 ,CEs s >id >idder ders s >ond >ond in the a$o a$ount unt of 1- 1- . .  as re6uested. re6u ested. ater ater however however in a letter dated 22 Hece$ber Hece$ber -++2 1L& 1L&FE FEEH EH, , thro throu# u#h h its its ,e ,eni nior or Bice Bice 1r 1res eside ident nt Teodo eodoro ro . Hi$ayu#a unilaterally cancelled the award as Gsi#ni%cant factors were uncovered uncovered and brou#ht brou#ht to (their) attention which dicta dictate te (the) cancellation and warrant a total review and re;bid of (the) pro3ect.G Conse6uently F8,CE protested the cancellation of the award and sou#ht a $eetin# with 1L&FEEH,. 0owever on 2 8arch 8arc h -++< before the $att $atter er could be resolved resolved 1L&FEEH, 1L&FEEH, already alre ady awarded the pro3 pro3ect ect and entered entered into a contract contract with  DA&H"N N a division of Dardine Havies "nc. (DA&H"N) which incide incidenta ntally lly was not one of the bidder bidders. s. F8,CE F8,CE thus thus wrote wrote 1L&FEEH, to honor its contract with the for$er and to DA&H"N to cease and desist fro$ deliverin# and installin# the 2 #enerators

contract with F8,CE. hile it $ay see$ that 1L&FEEH, and  DA&H"N connived to deceive F8,CE there is no speci%c evidence on record to support such perception. i4ewise there is no showin# whatsoever that DA&H"N induced 1L&FEEH,. The si$ilarity in the desi#n sub$itted to 1L&FEEH, by both DA&H"N and F8,CE and the tender of a lower 6uotation by DA&H"N are insucient insu cient to show that DA&H"N DA&H"N indeed induc induced ed 1L&F 1L&FEEH, EEH, to violate its contract with F8,CE.

at 1L&FEEH,. "ts de$and unheeded sued 1L&FE 1L& FEEH, EH, and DA DA&H" &H"N: N:letters 1L&FE 1L&FEEH, EH, forF8,CE rene#i rene#in# n# onboth its contra con tract ct and DA&H" DA&H"N N for its unwarr unwarrant anted ed interf interfer erenc ence e and induce$ent. Trial ensued. After F8,CE presented its evidence  DA&H"N %led a He$urrer to vidence. En 27 Dune -++ the &e#ional e#ional Tria riall Cou Court rt of 1a 1asi# si# >ra >ranch nch * #rante #ranted d DA DA&H" &H"N Ns s He$urrer to vidence. En 2* Duly -++ the trial court rendered a decision orderin# 1L&FEEH,: (a) to inde$nify F8,CE the su$ of 12<. representin# the value of en#ineerin# services it rendered= (b) to pay F8,CE the su$ of L,W-. or its peso e6uivalent and 1+. representin# contractors $ar4;up on instal installat lation ion wor4 wor4 con consid sideri erin# n# that that it woul would d be i$poss i$possible ible to co$pel 1L&FEEH, to honor perfor$ and ful%ll its contractual obli#ations obli#a tions in view of 1L& 1L&FEEH FEEHs s contract contract with DA&H"N DA&H"N and notin# that construction had already started thereon= (c) to pay attor attorney neys s fee fees s in an a$o a$ount unt e6uiv e6uivale alent nt to 2@ of the tot total al a$ountt due= and (d) to pay the cost a$oun costs. s. The trial court dis$is dis$issed sed the counterclai$ %led by 1L&FEEH, for lac4 of factual and le#al basis. >oth F8,CE and 1L&FEEH, appealed to the Court of  Appeals. F8,CE appealed the 27 Dune -++ &esolution of the

$unicipalities and other the $ornin# of alle#ed - and -! Hece$ber -+*+ &i$a>icol and areas. Ale#re"n e'posed various co$plaints fro$ students teachers and parents a#ainst A#o 8edical 8edi cal and duc ducation ational al Cent Center er;>ic ;>icol ol Chri Christian stian Coll Colle#e e#e of  8edicine (PA8CQ) and its ad$inistrators. Clai$in# that the broadcasts were defa$atory A8C and An#elita A#o (PA#o (PA#oQ) Q) as Hean of A8C?s Colle#e of 8edicine %led a co$plaint for da$a#es a#ainst F>N" &i$a and Ale#re on 27 February -++.  The co$plaint further alle#ed that A8C is a reputable learnin# institution. ith the supposed e'posXs F>N" &i$a and Ale#re Ptrans$itted $alicious i$putations and as such destroyed plaintis? (A8C and A#o) reputation.Q A8C and A#o inc includ luded ed F>N F>N"" as de defen fendan dantt for alle#e alle#edly dly failin failin# # to e'ercise due dili#ence in the selection and supervision of its e$ployees particularly &i$a and Ale#re. En -* Dune -++ F>N" &i$a and Ale#re throu#h Atty. &o5il o5ares %led an Answer alle#in# that the broadcasts a#ainst A8C were fair and true. F>N F>N" " &i$ &i$a a and Ale#r Ale#re e clai$ clai$ed ed tha thatt the they y were were pla plain inly ly i$pel i$pelled led by a sen sense se of pu publi blic c dut duty y to re repor portt the

trial trial court court which which in #rante #rathe nted ddis$issal the He$ He$urr urrer er to viden vidence cea#ainst %led %led by  DA&H"N resultin# of the co$plaint it while 1L&FEEH, appealed the 2* Duly -++ Hecision of the sa$e court which ordered it to pay F8,CE. En - Au#ust -++ the Court of Appeals ar$ed in toto the 2* Duly -++ Hecision of the trial court. "t also reversed the 27 Dune -++ &esolution of the lower court and ordered ordered DA&H"N DA&H"N  to pay F8,CE F8,CE da$a#es for inducin# 1L&FEEH, to violate the latters contract with F8,CE. As such DA&H"N was ordered to pay F8,CE 12. for $oral da$a#es. "n addition 1L&FEEH, was also directed to pay F8,CE 12. as $oral da$a#es and 1-. as e'e$plary da$a#es as well as 2@ of the total a$ount due as attorneys fees. En <- Danuary -++7 the Court of Appeals denied for lac4 of $erit the separate $otions for reconsideration %led by 1L&FEEH, and DA&H"N. 0ence 2 petitions for review %led were by 1L& 1L&FE FEEH EH, , and and DA&H DA&H"N "N  whic which h wer were subs subse6 e6ue uent ntly ly consolidated.

P#oin#s;on P#oi n#s;on in A8C A8C  erea Jwhi Jwhich ch institut itution ion i$bu ed with pu publ blic ic in inte tere rest st.Q .Q Th Ther eaft fter erisK tria tran iall inst en ensu sued ed. . i$bued Hu Huri rin# n# th the e presentation of the evidence for the defense Atty. d$undo Cea collaboratin# counsel of Atty. o5ares %led a 8otion to His$iss on F>N"?s behalf. The trial court denied the $otion to dis$iss. Conse6uently F>N" %led a separate Answer clai$in# that it e'er e'ercised cised due dili#ence in the selection and supervision of &i &i$a $a an and d Al Ale# e#re re.. F> F>N" N" clai clai$e $ed d th that at befo before re hi hiri rin# n# a broadcaster the broadcaster should (-) %le an application= (2) be int interv ervie iewed wed== and (<) un under der#o #o an app appre renti ntice ceshi ship p and trainin# train in# pro pro#ra$ #ra$ afte afterr passi passin# n# the inte intervie rview w. F>N" li4 li4ewi ewise se clai$ed that it always re$inds its broadcasters to Pobserve truth truth fairn fairness ess and ob3ect ob3ectiv ivity ity in the their ir br broad oadcas casts ts and to refrain fro$ usin# libelous and indecent lan#ua#e.Q 8oreover F>N" re6uires all broadcasters to pass the apisanan n# $#a >rod4 >rod4ast aster er sa 1ili 1ilipin pinas as (P>1 (P>1Q) Q) acc accre redit ditati ation on test test and to secure a >1 per$it. En - Hece$ber -++2 the trial court rendered a Hecision %ndin# F>N" and Ale#re liable for libel e'cep e'ceptt &i$ &i$a. a. The trial cou court rt hel held d tha thatt the br broad oadcas casts ts are

Issue:  h het ethe herr F F8, 8,CE CE is ent entit itle led d to an awar award d for for $o $ora rall da$a#es. Held: >y the unilateral cancellation of the contract 1L& FEEH, has acted with bad faith and this was further a##ravated by the subse6uent in4in# of a contract between 1urefoods and Dardine. "t is ver very y evi eviden dentt that that 1urefo 1urefoods ods thou#h thou#htt tha thatt by the e'pedi e'pedient ent $eans of $ere $erely ly writin writin# # a lette letterr would auto$at auto$atically ically cancel or nullify the e'istin# contract entered into by both parties after a

ili6inas Broa/5astin4 Net3or9 In5. vs. A4o +e/i5al an/ E/u5ational Center%Bi5ol C1ristian Colle4e of +e/i5ine <A+EC%BCC+ J9& --++ -7 Danuary 2!K Facts: P'posXQ is a radio docu$entary pro#ra$ hosted by Car$elo Car$ elo Y8el Y8el?? &i$a (P&i$aQ (P&i$aQ)) and 0er 0er$o#e $o#enes nes YDun? YDun? Ale# Ale#re re (PAle# (PAle#reQ) reQ).. 'po 'posX sX is aire aired d ever every y $orn $ornin# in# over HZ& HZ&C;A8 C;A8 which which is own owned ed by Fili ilipin pinas as >road >roadcas castin tin# # Netwo Networ4 r4 "nc "nc.. (PF>N (PF>N"Q) "Q).. P' P'pos posXQ XQ is hea heard rd ove overr e e#a5 #a5pi pi Ci City ty the Albay Albay

libelous per se. The trial court re3ecte re3ected d the broadcasters? clai$ that their utter utterance ances s wer were e the result of strai strai#ht #ht reportin# reportin# because it had no factual basis. The broadcasters did not even verify their reports before airin# the$ to show #ood faith. "n holdin# F>N" liable for libel the trial court found that F>N" failed to e'ercise dili#ence in the selection and supervision of 

 

its e$ployees. "n absolvin# &i$a fro$ the char#e the trial court ruled that &i$a?s only participation was when he a#reed with Ale#re?s e'posX. The trial court found &i$a?s state$ent within the Pbounds of freedo$ of speech e'pression and of  the press.Q >oth parties na$ely F>N" &i$a and Ale#re on one hand and A8C and A#o on the other appealed the de decis cision ion to the Court of Appeal Appeals. s. The Court of Appeal Appeals s ar$ed ar $ed the trial court?s 3ud#$ent 3ud#$ent with $odi%cati $odi%cation. on. The appellat appe llate e court court $ade &i$a solidaril solidarily y liable liable with F>N" and Ale#re. The appellate court denied A#o?s clai$ for da$a#es and attorney? attorney?s s fees because the broadcasts broadcasts were directe directed d a#ainst A8C and not a#ainst her. F>N" &i$a and Ale#re %led a $otion for reconsideration which the Court of Appeals denied in its 2 Danuary 2 &esolution. 0ence F>N" %led the

ISSUE: VN 1N> should be liable for tort HELD: S,. ar$ed. •



Art. 2- of the Civil Code: any person who wil wilfull fully y causes loss or in3ury to another in a $anner that is contrary contr ary to $oral $orals s #ood cust custo$s o$s or publ public ic policy shall co$pensate the latter for the da$a#e.

petition for review. Issue: hether A8C is entitled to $oral da$a#es. Held:  A 3uridical 3uridical person is #enerally #enerally not entitled entitled to $oral da da$a $a#e #es s be beca caus use e un unli li4e 4e a na natu tura rall pe pers rson on it ca cann nnot ot e'perience physical suerin# or such senti$ents as wounded feelin#s serious an'iety $ental an#uish or $oral shoc4. The Court of Appeals cites 8a$bulao u$ber Co. v. 1N> et al. to  3ustify the award of $oral da$a#es. 0owever the Court?s state$ent in 8a$bulao that Pa corporation $ay have a #ood reputation which if bes$irched $ay also be a #round for the award of $oral da$a#esQ is an obiter dictu$. Nevertheless A8C?s clai$ for $oral da$a#es falls under ite$ 7 of Article 22-+ of the Civil Code. This provision e'pressly authori5es the recovery of $oral da$a#es in cases of libel slander or any otherr for$ of defa$ati othe defa$ation. on. Article Article 22-+(7) 22-+(7) does not 6ualify 6ualify whether the plainti is a natural or 3uridical person. Therefore a 3uridical person such as a corporation can validly co$plain for libel or any other for$ of defa$ation and clai$ for $oral da$a#es. 8oreover where the broadcast is libelous per se the law i$plie i$plies s da$a#e da$a#es. s. "n such such a case case evide evidence nce of an honest $ista4e or the want of character or reputation of the party libeled #oes only in $iti#ation of da$a#es. Neither in such a case is the plainti re6uired to introduce evidence of  actual da$a#es as a condition precedent to the recovery of  so$e da$a#es. "n this case the broadcasts are libelous per se. Thus A8C is entitled to $oral da$a#es. 0owever the Co Cour urtt foun found d th the e aw awar ard d of 1< 1<   $ora $orall da$ a$a# a#es es unreas unr eason onabl able. e. The re recor cord d shows shows that that even even thou#h thou#h the broadcasts were libelous per se A8C has not suered any substantial or $aterial da$a#e to its reputation. Therefore th the e Co Cour urtt re redu duce ced d th the e aw awar ard d of $oral $oral da da$a $a#e #es s fro$ fro$ 1< to 1-!.

hile Tapnio had the ulti$ate authority of approvin# or disapprovin# the proposed lease since the 6uota was $or $ort#a t#a#e #ed d to the ban ban4 4 it ce certa rtainl inly y CANNE CANNET T es esca cape pe its its re resp spon onsi sibi bili lity ty of obse observ rvin in# # for for th the e protection of the interest of Tapnio and Tua5on that the de#ree of care precaution and vi#ilance which the circu$st circu$stance ances s 3ust 3ustly ly de$a de$and nd in appr approvin ovin# # or disapprovin# the lease of said su#ar 6uota

!rofessional Servi5es# In5 . CA <'?&? Case Brief <9.&. No. -22+7 -22+7 February 2 2-) essons Applicable: iability for Torts (Corporate aw) ACTS: •





nri6ue A#ana told his wife Natividad A#ana to #o loo4 for their nei#hbor Hr Hr.. A$pil a sur#eon sta $e$ber of 8edical City a pro$inent and 4nown hospital Natividad suered fro$ in3ury due to 2 #au#es left inside her body so they sued 1rofession 1rofessional al "nc. (1,") Hespit Hes pite e the re repor portt of 2 $i $issi ssin# n# #au #au5es 5es after after the operation 1," did NET initiate an investi#ation

ISSUE: VN 1," should be liable for tort. HELD: S,. -!8 [ [email protected] int. until full satisfaction. •





hile 1," had no power to control the $eansV$ethod by whic which h Hr Hr.. A$ A$pi pill co cond nduc ucte ted d th the e sur# sur#er ery y on Natividad they had the power to review or cause the review 1," had the duty to tread on as captain of the ship for the purpose purpose of ensu ensuin# in# the safety safety of the patients patients availin# the$selves of its services and facilities 1," de%ned its standards of corporate conduct: -. 2.

Cor6 Co r6or orat ate e La3 La3 Case Case Di Di4e 4est st:: !NB !NB . CA <&)(= Case Brief 

<.

9.&. No. ;27-!! ;27-!!  8ay -* -+7* essons Applicable: iability for Torts (Corporate aw)



ACTS: •











1N> 1N> e'ec e'ecute uted d its bond bond wV &ita &ita 9ueco 9ueco Tapn apnio io as pr prin inci cipa pal l in favo favorr of th the e 1N> 1N> to #u #uar aran ante tee e th the e pay$ent of Tapnios account with 1N>.

• •

ven after her operation to ensure her safety as a patient NET llii$ited to to re record th the 2 $issin# #a #au5es 'tended to to d de eter$inin# H Hrr. A$ A$pils ro role iin n it it brin brin#i #in# n# th the e $att $atter er to hi his s atte attent ntio ion n an and d correctin# his ne#li#ence

Ad$ission bars itself fro$ ar#uin# that its corp. resp. is NET NET yet yet in e'i 'iste stenc nce e at th the e ti$e ti$e Nati Nativi vida dad d underwent treat$ent Hr. A$pil ; $edial ne#li#ence 1," ; Corporate Ne#li#ence

NET:

"nde$nity A#ree$ent wV [email protected] int. and [email protected] atty. fees



,e ,ept pt -* -+ -+!7 !7:: 1N> 1N> sent sent a le lett tter er of de de$a $and nd for for  Tapnio  Tapnio to pay the reduced reduced a$ount a$ount of 2<7+.+-



ia iabi bilit lity y uni6ue uni6ue to this this cas case e be becau cause se of i$pli i$plied ed a#ency and ad$itted corporate duty 2 years years alread already y and Hr. Hr. A$p A$pil ils s status status cou could ld no lon#er be ascertained

1N> de$anded both oral and written but to no avail  Tapnio  Tapnio $ort#a#ed to the ban4 her lease a#ree$ent wV Dacobo Tua5on for her unused e'port su#ar 6uota at 12.* per picular or a total of 12* which was $ore than the value of the bond 1N> 1N> in insis sisted ted on rai raisin sin# # it to 1<. 1<.  pe perr pic picula ularr so  Tua5on  Tua5on re3ected re3ected the oer

UAN UA N INTERNA INTERNATI"NA TI"NAL L C"R!"RA C"R!"RATI"N TI"N vs. REES <$.R. No. &='(')# Se6te2ber ')# '?&? ACTS:  ,o$ ,o$eti eti$e $e in 8arch 8arch -++ -++* * u u4an 4an "nc "nc.. con conduc ducted ted biddin biddin# # for the suppl supply y and in insta stall llati ation on of si#na# si#na#es es in a buildin# buil din# bein# cons construct tructed ed in 8a4at 8a4atii City. &o$ &o$eo eo 8oral 8orales es tendered the winnin# bid and was awarded the 1h1 ! $illion contract. ,hort chan#ed 8orales %led a Co$plaint with the

 

&TC a#ainst u4an "nc. for a su$ of $oney. The &TC rendered a Hecision in favor of 8orales and a#ainst u4an "nc. After the decision beca$e %nal and e'ecutory 8orales $oved for and secured secu red a writ of e'ecut e'ecution ion a#ainst a#ainst u u4an 4an "nc. The sheri  then the n lev levied ied upon upon variou various s person personal al pr prope operti rties es of u u4an 4an "nternational Corporation ("C). "C then %led an Adavit of   Third;1arty  Third;1 arty Clai$. Notably "C was incorporated in Au#ust 2 or shortly after u4an "nc. had stopped participatin# in Civil Civil Cas Case. e. "n re react action ion to the thi third rd party party cl clai$ ai$ 8or 8orale ales s interpose inte rposed d an E$nibus 8otion dated April < 2<. 2<. "n it 8orales prayed applyin# the principle of piercin# the veil of  corporate %ction that an order be issued for the satisfaction of the 3ud#$ent debt of u4an "nc. with the properties under the na$e or in the possession of "C it bein# alle#ed that both corporations are but one and the sa$e entity. >y Erder of 8ay 2+ 2< as reiterated in a subse6uent order the court de denie nied d the o$nibus o$nibus $otion. $otion. "n a bid to est establ ablish ish the li lin4 n4 between "C and u4an "nc. and thus deter$ine the true re relat lation ionshi ship p be betwe tween en the two two 8orale 8orales s %l %led ed a 8otion 8otion for 'a$ination of Dud#$ent Hebtors dated 8ay  2!. "n this $otion $oti on 8orale 8orales s sou#ht sou#ht that subpoen subpoena a be issued issued a#ainst the pri$ary pri$ ary stoc4holde stoc4holders rs of u u4an 4an "nc. a$on# the$ 8ichael 8ichael Chan a.4.a. Chan ai it. This too was denied Chan denied by the trial court in an Erder dated 8ay 2 2!. 8orales then sou#ht the inhibition of the presidin# 3ud#e duardo >. 1eralta Dr. who eventually #ranted the $otion. The case was re;ra\ed to >ranch 2- presided by public respondent Dud#e A$or &eyes. >efore the 8anila &TC >ranch 2- 8orales %led a 8otion to 1ierce the Beil of Corporate Fiction to declare "C as havin# no e'i e'isten stence ce separate separate fro$ u4a u4an n "nc. This ti$e around the &TC by Erder dated 8arch -2 27 #ranted the $otion. "C $oved but was denied reconsideration in another Erder dated  Dune 7 27. En petition for certiorari before CA the sa$e was deni denie ed. Th The e CA lat ate er deni denie ed "C? "C?s s $ot otiion fo forr reconsideration in the assailed resolution. 0ence the instant petition for review. ISSU ISSUE: E: he hethe therr the tri trial al and appell appellate ate courts courts cor corre rectl ctly y applied under the pre$ises the principle of piercin# the veil of corporate %ction. RULIN$: 1iercin# the veil of corporate entity apllies only: (-) the court $ust %rst ac6uire 3urisdiction over the corporation or corporations involved before its or their separate personalities are disre#arded= and (2) the doctrine of piercin# the veil of  corporate entity can only be raised durin# a full;blown trial over a cause of action duly co$$enced involvin# parties duly brou#ht under the authority of the court by way of service of  su$$ons or what passes as such service.

8e 8ere re owne owners rshi hip p by a si sin# n#le le stoc stoc4h 4hol olde derr or by an anot othe herr corporation of a substantial bloc4 of shares of a corporation does not standin# standin# alone alone provide provide sucient sucient 3usti%cation 3usti%cation for disre#ar disr e#ardin# din# the sepa separate rate corpo corporate rate perso personali nality ty.. For this #round to hold sway in this case there $ust be proof that Chan had control or co$plete do$inion of u4an and "C?s %n %nanc ances es pol polic icies ies and busin business ess pra practi ctices ces== he used used such such control to co$$it fraud= and the control was the pro'i$ate cause caus e of the %nanci %nancial al loss co$plain co$plained ed of by 8orales. The absence of any of the ele$ents prevents the piercin# of the cor corpor porate ate veil. veil. And And in indee deed d the re recor cords ds do not sho show w the presence of these ele$ents. "n %ne there is no showin# that the incorporation and the separate and distinct personality of "C was used to defeat 8orales? ri#ht to recover fro$ u4an "nc. Dud#in# fro$ the re reco cord rds s no seri seriou ous s atte atte$p $ptt was was $ade $ade to le levy vy on th the e properties of u4an u4an "nc. 8orales could not thus validly ar#ue that u4an u4an "nc. tried to avoid liabili liability ty or had no property property a#ainst which to proceed.  The su##estion that "C "C is but a continuation and succe successor ssor of  u4an "nc. controlled asl they stoc4h stoc4hold olders ersowned stands standsand wi witho thout ut factua factual basis basis..are "t by is the true truesa$e that that 8i 8ich chae aell Ch Chan an a. a.4. 4.a. a. Ch Chan an ai it it ow owns ns  @ @ of th the e outsta out standi ndin# n# cap capita itall sto stoc4 c4 of both both cor corpor porati ations ons.. >ut such such circ circu$s u$stan tance ce standi standin# n# alone alone is in insu sucie cient nt to est establ ablish ish id ident entity ity. The There re $us $ustt be at le least ast a sub substa stanti ntial al ide identi ntity ty of 

stoc4holders for both corporations in order to consider this factor to be constitutive of corporate identity. vidently videntl y the afore afore$ent $entione ioned d case rel relied ied upon by 8oral 8orales es cannot 3ustify the application of the principle of piercin# the veil of corporate %ction to the instant case. As shown by the records the na$e 8ichael Chan the si$ilarity of business activi activitie ties s en en#a# #a#ed ed in and in incid ciden ental tally ly the wor word d Gu4 Gu4anG anG appearin# in the corporate na$es provide the ne'us between u4an "nc. and "C. As illustrated these circu$stances are insucient to establish the identity of "C as the alter e#o or successor of u4an "nc.

 a9a Invest2ents Cor6 vs CIR Case Brief  -++  petiti petitione onerr sou#ht sou#ht to invest invest in DA DAA A 6uitie 6uities s a5ts:  in -++ a5ts:  Corporation (DC) which was then plannin# to underta4e an initial public oerin# ("1E) and listin# of its shares of stoc4 with the 1hilippine 1hilippi ne ,toc4 'cha 'chan#e. n#e. petiti petitioner oner propo proposed sed to subscri subscribe be to Five 0undre 0undred d i# i#ht ht 8illio 8illion n i# i#ht ht 0un 0undr dred ed ,i' Thousa Thousand nd Two 0undre 0un dred d 1e 1esos sos (1!* (1!** *2 2.) .) out of the increa increase se in the authori5ed capital stoc4 of DC throu#h a ta';free e'chan#e under ,ection <(c)(2) of the National "nternal &evenue Code (N"&C) of  -+77 -+7 7 as a$e a$ende nded d whi which ch was eected eected by the e'ecut e'ecution ion of a ,ubscription A#ree$ent and Heed of Assi#n$ent of 1roperty in 1ay$ent of ,ubscription. Lnder this A#r A#ree$ent ee$ent as pay$ent pay$ent for its subscription petitioner will assi#n and transfer to DC shares of  stoc4.  The intended i ntended "1E and llistin# istin# of shares of DC did not $ateriali5e. 0oweve 0ow ever r DC still dec decided ided to procee proceed d wit with h the incre increase ase in its author authori5e i5ed d cap capita itall stoc4 stoc4 and petiti petitione onerr a#reed a#reed to sub subscr scribe ibe thereto but under dierent ter$s of pay$ent.  Thus petitioner and DC e'ecuted the A$ended ,ubscription A#ree$ent wherein the above;enu$erated &90C 19C" and LC1> shares shar es of stoc4 wer were e transferre transferred d to DC. "n lieu of the F>TC F>TC shares petitioner paid DC. petitioner paid Ene basic docu$entary sta$p ta' inclusive of the [email protected] surchar#e surchar#e for late pay$e pay$ent nt on the A$ended A$ended ,ubscr ,ubscription iption A#ree$ent. 1etitioner after seein# the &HE?s certi%cations the total a$ount of whic which h was was less less than than the the actu actual al a$ou a$ount nt it had had paid paid as docu docu$e $ent ntar ary y sta$ sta$p p ta' ta' co conc nclud luded ed that that it had had over overpa paid id.. 1et 1etitione itionerr subse6 subse6uentl uently y sou#ht a refund refund for the alle#e alle#ed d e'c e'cess ess docu$entary sta$p ta' and surchar#es it had paid. 1etitioner?s $ain contention in this clai$ for refund is that the ta' base for the docu$entary sta$p ta' on the A$ended ,ubscription A#ree$ent should have been only the shares of stoc4 in &90C 19C" and LC1> that petitioner had transferred to DC as pay$ent for its subscription to the DC shares and should not have included the cash portion portion of its pay$ent pay$ent bas based ed on ,ecti ,ection on -7 of the National "nternal &evenue Code of -+77 as a$ended by &epublic Act No. 7 or the New Hocu$entary ,ta$ps Ta' Ta' aw (the -++  Ta'  Ta' Code) the law applicable at the ti$e of the transaction. 1et 1etitione itionerr ar#ues ar#ues that the cash co$po co$ponent nent of its pay$ent for its subscription to the DC shares totalin# Three 0undred ,eventy 8illio llion n ,even 0undred ,i'ty; ,i ,i' Thousand 1esos (1<7 (1<7 7 7  . . )) shou should ld not not have have be been en ch char ar#e #ed d any any docu$e doc u$enta ntary ry sta$p ta' ta'.. 1e 1etit titione ionerr clai$s clai$s that ther there e was overpay$ent because the ta' due on the transferred shares was only Five 0undred Ninety;Three Thousand Five 0undred Twenty; i#ht i#ht and -!V -!V- - 1e 1esos sos (1!+<!2* (1!+<!2*.-! .-!) ) as indi indicat cated ed in the certi%cations issued by &HE s6uivias. 1etitioner alle#es tthat hat it is entitled to a refund for the overpay$ent wh which ich is the dierence in the a$oun a$ountt it had act actual ually ly paid paid (1(1- <* <*+!. +!.!) !) and the a$ount of docu$entary sta$p ta' due on the transfer of said shares (1!+<!2*.-!) or a total of Four 0undred Ten Thousand  Three 0undred ,i'ty;,even ,i'ty;,even 1esos (1-<7.). 1etitioner e'plains that in this instance where shares of stoc4 are used as subscription pay$ent there are two docu$entary sta$p ta' incide incidence nces s na$ely na$ ely  the subscribed docu$e docu$enta ntary ry sta$p sta $p ta' on the ori#inal issuance of the shares (the DC shares) which is i$posed under ,ection -7!= and the docu$entary sta$p ta' on the sha share res s tra transf nsferr erred ed in pay$en pay$entt of such such sub subscr scripti iption on (the (the transf transfer er of the &90C &90C 19C" 19C" and LC1> sha share res s of stoc4 stoc4 fr fro$ o$ petitioner to DC) which is i$posed under ,ection -7 of the -++  Ta'  Ta' Code. 1etitioner ar#ues that the docu$entary sta$p ta'

 

i$pose i$p osed d und under er ,ec ,ectio tion n -7! is due on ori#in ori#inal al iss issuanc uances es of  certi%cates of stoc4 and is co$puted based on the a##re#ate par value of the shares to be issued= and that these certi%cates of  stoc4 are issued only upon full pay$ent of the subscription price such that under the >ureau of "nternal &evenue?s (>"&?s). &espondent $aintains that the docu$entary sta$p ta' i$posed in this case is on the ori#inal issue of certi%cates of stoc4 of DC on the subscription by the petitioner of the 1!**2. shares out of the increase in the authori5ed capital stoc4 of the for$er pursuant to ,ection -7! of the N"&C. N"&C. The docu$entary sta$p ta' was not i$posed on the shares of stoc4 owned by petitioner in &90C &90 C 19C 19C" " and LC1> which $erely $erely for$ for$ par partt of the parti partial al pay$ent of the subscribed subscribed shares in DC. DC. &espondent av avers ers that the a$ounts indicated in the Certi%cates of &HE s6uivias are the a$ounts of docu$entary sta$p ta' for representin# e6uivalent of  each #roup of shares shares bein# applied pay$ent. the Considerin# that the a$ount of docu$entary sta$p ta' represented by the shares of stoc4 stoc4 in the afo afore re$en $entio tioned ned co$ co$pan panies ies a$ount a$ounted ed only only to 1!+<! 1!+ <!2*. 2*.-! -! while while the basic basic doc docu$e u$enta ntary ry sta sta$p $p ta' for the enti entire re subs subscr cript iptio ion n of 1!* 1!** *2 2 . .  was was co co$p $put uted ed by respo responde ndent? nt?s s revenue revenue oc ocers ers to the tune tune of 1*<1*<--. -.72 72 e'clusive of the penalties leavin# a balance of 12+!**.!7 is a clear indication that the pay$ent $ade with the shares of stoc4 is insucient.  whether or not petitioner is entitled to a partial refund of  ISSUE: whether ISSUE: the the docu docu$e $ent ntar ary y sta$ sta$p p ta' ta' and and surc surcha har# r#es es it paid paid on the the e'ecution of the A$ended ,ubscription A#ree$ent. refund the bur burden den of pro proof of is on the RULIN$:: "n clai$s for refund RULIN$ ta'pay ta'payer er to pro prove ve entitle$ entitle$ent ent to such refund. refund. "t was thus incu$bent upon petitioner to show clearly its basis for clai$in# that it is entitled to a ta' ta' refund. the petitioner failed to do. "n the case at bar the ri#hts and obli#ations between petitioner  DAA "nvest$ents are esta establ blis ishe hed d and and Corporation enfo enforrce ceab able leand at DAA the the 6uities ti$e ti$e Corporation the the PA$en A$ende ded d ,ubscription A#ree$ent and Heed of Assi#n$ent of 1roperty in 1ay$ent 1ay $ent of ,ubscriptio ,ubscriptionQ nQ were si#ned by the parties and their witn witnes ess s so is the the ri#h ri#htt of the the st stat ate e to ta' ta' the the afor afores esta tate ted d docu$e doc u$ent nt evide evidenci ncin# n# the transac transactio tion. n. H,T is a ta' on the docu$ent itself and therefore the rate of ta' $ust be deter$ined on the basis of what is written or indicated on the in stru$ent itself  independent of any ad3ust$ent which the parties $ay a#ree on in the future ' ' '. The H,T upon the ta'able docu$ent should be paid paid at the ti$e ti$e the contrac contractt is e'ecu e'ecuted ted or at the ti$ ti$e e the transaction is acco$plished. acco$plished. The overridin# purpose o off the law is the collection of ta'es. ta'es. ,o that when it paid in cash the a$ount of  1<77 1<7 7  . . in substi substitut tution ion for for or replac replace$e e$ent nt of the -<-<-< <-7 -7  F F>T >TC C shar shares es its its pay pay$e $ent nt of 11- < <*< *<!. !.! ! docu$entary sta$ps ta' pursuant to ,ection -7! of N"&C is in order.  Thus applyin# the settled rule in this 3urisdiction that a clai$ for refund is in the nature of a clai$ for e'e$ption thus should be construed in strictissi$i 3uris a#ainst the ta'payer (Co$$issioner of "nternal &evenue vs. To4yo ,hippin# Co. td. 2 ,C&A <<2) and since the petitioner failed to adduce evidence that will show that it is e'e$pt fro$ H,T under ,ection -++ or other provision of  the ta' code the court ruled the focal issue in the ne#ative. A docu$entary sta$p ta' is in the nature of an e'cise ta'. "t is not i$posed i$pose d upon the business transacted transacted but is an e'cise e'cise upon the privile#e privil e#e opportunity opportunity or facility facility oered at e'chan#es e'chan#es for the transaction of the business. "t is an e'cise upon the facilities used in the transaction of the business separate and apart fro$ the business busine ss itself. itself. Hocu$ Hocu$entar entary y sta$p ta' ta'es es are levied on the e'ercise by persons of certain privile#es conferred by law for the cre creation ation revision revision or ter$inatio ter$ination n of speci speci%c %c le#al relations relationships hips throu#h the e'ecution of speci%c instru$ents. docu$entary sta$p ta'es are levied independently of the le#al status of the transactions #ivin# rise thereto. The docu$entary st sta$ a$p p ta' ta'es $u $ust st be paid paid up upon on the the issu issuan ance ce of the the said said instru$ents without re#ard to whether the contracts which #ave rise to the$ are rescissible void voidable or unenforceable.  The fact that it was petitioner and not DC that paid for the docu$entary sta$p ta' on the ori#inal issuance of shares is of no $o$ent as ,ection -7< of the -++ Ta' Code states that the docu$e doc u$enta ntary ry sta$p sta$p ta' shall be paid paid by the person person $a4in# $a4in# si#nin# issuin# acceptin# or transferrin# the property ri#ht or obli#ation.

petition is H",8",,H.

"n4 on4# on4# et al. vs. Tiu# et al. < J9& -7 * April 2<K) Facts:  "n -++ the construction of the 8asa#ana Citi$all in 1asay City was threatened with stoppa#e and in co$pletion when its owner the First andlin4 Asia Hevelop$ent Corporation (FAHC) which was owned o wned by Havi Havid d ,. Tiu Cely S. S. Tiu 8oly Su 9ow >elen ,ee Su H. Terence S. Tiu Dohn Su and ourdes C. Tiu (the Tius) encountered dire %nancial diculties. "t was heavily indebted to the 1hilippine National >an4 (1N>) for 1-+ $illion. To stave o foreclosure of the $ort#a#e on the two lots where the $all was bein# built the Tius invited En# Son# Duanita Tan En# ilson T. En# Anna . En# illia$ T. En# and Dulia En# Alon5o (the En#s) to invest in FAHC. Lnder the 1re;,ubscription A#ree$ent they entered into the En#s and the Tius a#reed to $aintain e6ual shareholdin#s in FAHC: the En#s were to subscribe to - shares at a par value of 1- . each while the Tius were to subscribe to an additional !+* shares at 1-. each in addition to their already e'istin# subscription of !2 shares. Further$ore Further $ore they a#reed that the Tius were entitled to no$inate the Bice;1resident and the Treasurer Treasurer plus ! directors while the En#s were entitled to no$inate the 1resident the ,ecretary and  directors (includin# the chair$an) to the board of directors of FAHC. 8oreover the En#s were #iven the ri#ht to $ana#e and operate the $all. Accordin#ly the En#s paid 1- $illion in cash for their subscription to - shares of stoc4 while the Tius co$$itted to contribute to FAHC a four;storey buildin# and two parcels of land respectively valued at 12 $illion (for 2 shares) 1< $illion (for < shares) and 1+.* 1 +.* $illion (for +* shares) to cover their additional !+* stoc4 subscription therein. The En#s paid in another 17 $illion < to FAHC and 12 $illion to the Tius over and above their 1- $illion invest$ent the total su$ of which (1-+ $illion) was used to settle the 1-+ $illion $ort#a#e indebtedness of FAHC to 1N>. The business har$ony between the En#s and the Tius in FAHC however was shortlived because the Tius on 2< February -++ rescinded the 1re;,ubscription A#ree$ent. The Tius accused the En#s of (-) refusin# to credit to the$ the FAHC shares coverin# their real property contributions= (2) preventin# Havid ,. Tiu and Cely S S.. Tiu fro$ assu$in# the positions of and perfor$in# their duties as Bice;1resident and Treasurer Treasurer respectively and (<) refusin# to #ive the$ the oce spaces a#reed upon. The controversy %nally ca$e to a head when the case was co$$enced by the Tius on 27 February -++ at the ,ecurities and 'chan#e Co$$ission (,C) see4in# con%r$ation of their rescission of the 1re;,ubscription A#ree$ent. After hearin# the ,C throu#h then 0earin# Ecer &olando 9. Andaya Dr. Dr. issued a decision on -+ 8ay -++7 con%r$in# the rescission sou#ht by the Tius. En $otion of both parties the above decision was partially reconsidered but only insofar as the En#s 17 $illion was declared not as a pre$iu$ on capital stoc4 but an advance (loan) by the En#s to FAHC and that the i$position of interest on it was correct. >oth parties appealed to the ,C en banc which rendered a decision on -- ,epte$ber -++* ar$in# the -+ 8ay -++7 decision of the 0earin# Ecer.  The ,C en banc con%r$ed con%r$ed the rescission of the the 1re;,ubscription A#ree$ent but reverted to classifyin# the 17 $illion p aid by the En#s as pre$iu$ on capital and not as a loan or advance to FAHC hence not entitled to earn interest. En appeal the Court of Appeals (CA) rendered a decision on ! Ectober -+++ $odifyin# the ,C order of -- ,epte$ber - ++*. Their $otions for reconsideration havin# been denied both parties %led separate petitions for review before the ,upre$e Court. En - February 22 the ,upre$e Court pro$ul#ated its Hecision ar$in# the assailed decision of the Court of Appeals but with the $odi%cations that the 12 $illion loan e'tended by the En#s to the Tius shall earn interest at [email protected] per annu$ to be co$puted fro$ the ti$e of 3udicial de$and which is fro$ 2< April -++= that the 17 $illion advanced by the En#s to the FAHC shall earn interest at -@ per annu$ to be co$puted fro$ the date of the FAHC >oard &esolution which is -+ Dune -+ += and that the Tius shall be credited with +* shares in FAHC for their property contribution speci%cally the -!- s6. $. parcel of land. The Court ar$ed the fact that both the En#s and the Tius violated their respective obli#ations under the 1re;,ubscription A#ree$ent.

En -! 8arch 22 the Tius %led before the Court a 8otion for "ssuance of a rit of 'ecution. Aside fro$ their opposition to the  Tius 8otion for "ssuance of rit of 'ecution the En#s %led their

 

own G8otio G8otion n for &econsid econsidera eratio tion= n= Alt Altern ernati atively vely 8ot 8otion ion for 8odi%catio 8odi% cation n (of the February February - 22 Hecision)G Hecision)G on -! 8arc 8arch h 2 22 2.. il illi lie e En# %l %le ed a se sepa parrat ate e G8ot otio ion n for for 1art rtia iall &econsiderationG dated * 8arch 22 pointin# out that there was no violation of the 1re;,ubscription A#ree$ent on the part of the En#s a$on# others. others. En 2+ Danuary 2< the ,pecia ,peciall ,eco ,econd nd Hiv Hivisio ision n of this this Court Court held held oral oral ar#u$e ar#u$ents nts on the respe respecti ctive ve positions of the parties. En 27 February 2< Hr. illie En# and the rest of the $ovants En# %led their respective $e$oranda. En 2* February 2< the Tius sub$itted their $e$orandu$. Issue [1]: hether the pre;,ubscription A#ree$ent e'ecuted by the En#s is actually a subscription contract.

ori#inally ally incorpor incorporated ated with an authori5ed Held [1]:   FAHC was ori#in capital capit al stoc4 of ! ! shares shares with the Tius ownin# !2 shares representin# the paid;up capital. hen the Tius invited the En#s En# s to invest invest in FA FAHC HC as stoc4h stoc4holde olders rs an incre increase ase of the authori5ed autho ri5ed capital stoc4 beca$e necessary to #ive each #rou #roup p e6ua e6uall (!; (!;! !)) shar shareh ehol oldin din#s #s as a#re a#reed ed up upon on in the the 1re; 1re; ,ubscriptio ,ubsc ription n A#r A#ree$ent ee$ent.. The autho authori5ed ri5ed capital capital stoc4 stoc4 was thus increased fro$ ! shares to 2 shares with a par value of 1- each with the En#s subscribin# to - shares and the Tius to !+* $ore shares in addition to their !2 shares to co$plete - shares. Thus the sub3ect $atter of  the contract was the - unissued shares of FAHC stoc4 allocated alloc ated to the En#s. ,ince these were unissue unissued d shares shares the parties parti es 1re 1re;,ubsc ;,ubscripti ription on A#ree$ent A#ree$ent was in fact a subscriptio subscription n contract as de%ned under ,ection  Title B"" of the Corporation Code. A subscription contract necessarily involves the corporation as one of the contractin# parties since the sub3ect $atter of the transaction is property owned by the corporation U its shares of  stoc4. Thus the subscription contract (deno$inated by the parties as a 1re 1re;,ubsc ;,ubscriptio ription n A#ree$ent) A#ree$ent) whereby the En#s invested 1- $illion for - shares of stoc4 was fro$ the viewpoint of the law one between the En#s and FAHC not between the En#s and the Tius. Etherwise stated the Tius did not contract in their personal capacities with the En#s since they were not sellin# any any of th thei eirr own own shar shares es to the$ the$.. "t was was FAH FAHC C that that di did. d. Considerin# Consi derin# therefore therefore that the real contracti contractin# n# part parties ies to the subscription a#ree$ent were FAHC and the En#s alone a civil case for rescission on the #round of breach of contract %led by the  Tius in their personal capacities will not prosper. Assu$in# it had valid reasons to do so only FAHC (and certainly not the Tius) had the le#al le#al person personali ality ty to %le suit suit resci rescindin ndin# # the subscr subscripti iption on a#ree$ent with the En#s inas$uch as it was the real party in inter interest est there therein. in. Articl Article e -<-- of the Civ Civil il Code Code provi provides des that that Gcontracts ta4e eect only between the parties their assi#ns and heirs. heirs. . .G There Therefor fore e a party party who has not ta4 ta4en en par partt in the tran transa sact ctio ion n ca cann nnot ot sue sue or be sued sued for for perf perfor or$a $anc nce e or fo forr cancellation thereof unless he shows that he has a real interest aected thereby. Issue [2]: hether the rescission of 1re;,ubscription A#ree$ent would result in unauthori5ed li6uidation. Held [2]: The rescission of the 1re;,ubscription will eectively eec tively result in the unaut unauthori5e hori5ed d distributio distribution nA#ree$ent of the capit capital al assets and property of the corporation thereby violatin# the T Trust rust Fu Fund nd Hoctrine Hoctrine and the Corporat Corporation ion Code since resci rescission ssion of a subs subscr cript iptio ion n a#re a#ree$ e$en entt is not not one one of the the inst instan ance ces s when when distributio distr ibution n of capital assets and property of the corporation corporation is al allo lowe wed. d. &esci esciss ssio ion n will will in the the %nal %nal anal analys ysis is resu result lt in the the pre$atur pre$ ature e li6uidation li6uidation of the corporation corporation without without the bene%t of  prior dissolution in accordance with ,ections --7 --* --+ and -2 of the Corporation Code.

An4 24a aanib sa I4lesia n4 Dios a,  a, risto Hesus# HS sa Bansan4 !ili6inas In5. vs. I4lesia n4 Dios 9a, Cristo esus# Hali4i at Su1a, n4 atoto1anan J9& -<7!+2 -2 Hece$ber 2-K Fi First rst Hivision Snares;,antia#o (D): < concur - on ocial leave Facts: The "#lesia n# Hios ay Cristo Desus 0ali#i at ,uhay n# atotohanan atotohan an ("HCD;0 ("HCD;0,= ,= Church of 9od in Christ Christ Desu Desus s the 1illar and 9round of Truth) is a non;stoc4 reli#ious society or corporation re#istered in -+<. ,o$eti$e in -+7 one liseo ,orian ,or iano o and severa severall oth other er $e$be $e$bers rs of said said cor corpor porati ation on disassoci disa ssociated ated the$selv the$selves es fro$ the latter latter and succeed succeeded ed in

re re#is #ister terin in# # on < 8ar 8arch ch -+7 -+77 7 a ne new w non;st non;stoc4 oc4 re reli# li#iou ious s society societ y or corpor corporati ation on na$ na$ed ed "#lesi "#lesia a n# Hios Hios a ay y ri risto sto 0esus 0ali#i at ,ali#an n# atotohanan ("HD;0, ("HD;0,). ). En - Duly -+7+ "HCD;0, %led with the ,C a petition to co$pel "HD; 0, to chan#e its corporate na$e (,C Case -77). En  8ay -+** -+* * the ,C re rend nder ered ed 3u 3ud#$ d#$en entt in favor favor of "HCD "HCD;0, ;0,  orderin# "HD;0, to chan#e its corporate na$e to another na$e that is not si$ilar or identical to any na$e already used by a corporation partnership or association re#istered with the Co$$ission. No appeal was ta4en fro$ said decision. Hurin Hurin# # the pende pendency ncy of ,C ,C Cas Case e -7 -77 7 ,orian ,oriano o et al. al. caused the re#istration on 2! April -+* of An# 8#a aanib sa "#lesia n# Hios ay risto 0esus 0.,. sa >ansan# 1ilipinas (AJ"H0;0,K>1). Thean. acrony$ G0.,..G stands for;0, 0ali#i at ,ali#an ,ali #an n# at atotohan otohanan. En 2 8arc 8arch h -++ -++  "HCD;0, "HCD %led before the ,C a petition (,C Case <;+;7) prayin# that AJ"H0;0,K>1 be co$pelled to chan#e its corporate na$e and be barred fro$ usin# the sa$e or si$ilar na$e on the #round that the sa$e causes confusion a$on# their $e$bers as well as the public. "H0;0,;>1 %led a $otion to dis$iss on the #ro #round und of lac4 lac4 of cau cause se of action action.. The $oti $otion on to dis$iss was denied. Thereafter for failure to %le an answer AJ"H0;0 AJ" H0;0,K> ,K>1 1 was declared declared in defau default lt and "HCD "HCD;0, ;0, was allowed to present its evidence e' parte. En 2 Nove$ber -++! the ,C rendered a decision orderin# AJ"H0;0,K>1 to chan#e its corporate na$e. AJ"H0;0,K>1 appealed to the ,C n >anc (,C;AC !<+). "n a decision dated  8arch -++ the ,C n >anc ar$ed the above decision upon a %ndin# that AJ"H0;0,K>1s corporate na$e was identical or conf confusin usin#ly #ly or dece deceptiv ptively ely si$ilar to that of "HCD "HCD;0, ;0,s s corporate na$e. AJ"H0;0,K>1 %led a petition for review with the Court of Appeals. En 7 Ectober -++7 the Court of  Appeals rendered the decision ar$in# of the ,C n >anc. >anc . AJ"H AJ"H0;0 0;0,K>1 ,K>1s s $oti $otion on the for decision reconsi reconsiderat deration ion was denied by the Court of Appeals on - February -++2. AJ"H0;0,K>1 %led the petition for review. Issue [1]: hether the corporate na$es of AJ"H0;0,K>1 and "HC0;0, are confusin#ly si$ilar. Held [1]: The ,C has the authority to de;re#ister at all ti$es and under all circu$ circu$stanc stances es corporate na$es which in its esti$ation are li4ely to spawn confusion. "t is the duty of the ,C to pre prevent vent confus confusion ion in the use of corporate na$es not only for the protection of the corporations involved but $ore so for for th the e prot protec ecti tion on of th the e publ public ic.. ,ect ,ectio ion n -* of th the e Corporation Code provides that GNo corporate na$e $ay be allowed allo wed by the ,ecuriti ,ecurities es and 'chan# 'chan#e e Co$$ Co$$issio ission n if the pr propo oposed sed na$ na$e e is ident identic ical al or dec decept eptiv ively ely or con confus fusin# in#ly ly si$ila si$ ilarr to tha thatt of any e'is e'istin tin# # corpor corporati ation on or to any other na$e na$ e alread already y pr prote otecte cted d by law or is pat paten ently tly decept deceptive ive confusin# or is contrary to e'istin# laws. hen a chan#e in the corporate na$e is approved the Co$$ission shall issue an a$ended certi%cate of incorporation under the a$ended na$e.G na$e .G Coro Corollary llary theret thereto o the pertinen pertinentt porti portion on of the ,C 9u 9uid idel elin ines es on Corp Corpor orat ate e Na$e Na$es s stat states es th that at G(d) G(d) "f th the e proposed prop osed na$e contain contains s a word word si$i si$ilar lar to a wor word d alre already ady us used ed as part part of th the e %r %r$ $ na na$e $e or styl style e of a re re#i #ist ster ered ed co$pany the proposed na$e $ust contain two other words dierent fro$ the na$e of the co$pany already re#istered= 1arties or#ani5in# a corporation $ust choose a na$e at their peril per il== and the us use e of a na$ na$e e si$ si$ila ilarr to one adop adopted ted by anothe ano therr corpor corporati ation on whe whethe therr a bu busin siness ess or a non nonpro pro%t %t or#ani5ation if $isleadin# or li4ely to in3ure in the e'ercise of  its corporate functions re#ardless of intent $ay be prevented by the corporation havin# a prior ri#ht by a suit for in3unction a#ainst the new corporation to prevent the use of the na$e. 0ere 0erein in the add additi itiona onall wor words ds GAn GAn# # 8#a aan aanib ib G and G,a >ansan# 1ilipinas "nc.G in AJ"H0;0,K>1s AJ"H0;0,K>1s na$e are $erely descriptive of and also referrin# to the $e$bers or 4aanib of 

"HC0;0, are li4ewise residin# in dierentiatin# the 1hilippines. These words can who hardly serve as an eective $ediu $ediu$ $ necessary nece ssary to avoid confusi confusion on or di dicult culty y in dist distin#u in#uishi ishin# n# AJ"H0;0,K>1 fro$ "HC0;0,. This is especially so since both bot h AJ"H AJ"H0; 0;0, 0,K> K>1 1 and "HC0; "HC0;0, 0, are usi usin# n# the sa$ sa$e e acr acrony ony$ $ U 0.,. 0.,..= .= not to $e $enti ntion on the fact that bot both h are espousin# reli#ious beliefs and operatin# in the sa$e place.

 

1arenthetically it is well to $ention that the acrony$ 0.,.. used use d by AJ"H AJ"H0; 0;0, 0,K> K>1 1 stands stands for G0ali# G0ali#ii at ,al ,ali#a i#an n n# atotohanan.G Then too the records reveal that in holdin# out their corporate na$e to the public AJ"H0;0,K>1 hi#hli# hi#hli#hts hts the do$inant words G"9,"A N9 H"E, AS &",TE 0,L, 0A"9" 0A" 9" AT ,A"9AN ,A"9AN N9 A ATETE0 TETE0ANAN ANANG G which which is stri4in#ly stri4in#ly si$ilar to "HC0;0,s corporate na$e thus $a4in# it even $ore evident that the additional words GAn# 8#a aanibG and G,a >ansan# >ansan# 1il 1ilipin ipinas as "nc. "nc.G G are $erely descrip descriptive tive of and pertainin# to the $e$bers of "HC0;0,. ,i#ni%cantly the only dierence between the corporate na$es of AJ"H0;0,K>1 and "HC "HC0;0, 0;0, are the words words ,A"9AN ,A"9AN and ,L0A ,L0AS S. These words are synony$ous U both $ean #round foundation or support. 0ence this case is on all fours with Lniversal 8ills

however by yceu$ Ef Aparri yceu$ Ef Caba#an yceu$ Ef Ca$alaniu#an "nc. yceu$ Ef allo "nc. yceu$ Ef Tuao "nc. >uhi yceu$ Central yceu$ Ef Catanduanes yceu$ Ef ,outher ,outhern n 1hilippi 1hilippines nes yce yceu$ u$ Ef aste astern rn 8ind 8indanao anao "nc. and ester estern n 1an# an#asi asinan nan yceu$ yceu$ "nc "nc. . which which are also also educational institutions to the ,C n >anc the decision of  the hearin# ocer was reversed and set aside. The ,C n >anc did not consider the word Gyceu$G to have beco$e so identi%e iden ti%ed d with yc yceu$ eu$ of the 1hilip 1hilippine pines s as to ren render der use thereof by other institutions as productive of confusion about the identit identity y of the scho schools ols conce concern rned ed in the $ind of the #eneral public. Lnli4e its hearin# ocer the ,C n >anc held th that at th the e atta attach chin in# # of #eo# #eo#rap raphi hica call na na$e $es s to th the e word word Gyceu$G served suciently to distin#uish the schools fro$

Corporation v. Lniversal Te'tile Te'tile 8ills "nc. 22 where the Court ruled rule d that the corporate corporate na$es Lniv Lniversal ersal 8ills Corporation Corporation and Lniversal Te'tile Te'tile 8ills "nc. are undisputably so si$ilar that even under the test of Greasonable care and observationG confusion $ay arise.

one another especially in view of the fact that the ca$puses of yceu$ of the 1hilippines and those of the other yceu$s were physically 6uite re$ote fro$ each other. yceu$ of the 1hilippines then went on appeal to the Court of Appeals. "n its Hecision dated 2* Dune -++- however the Court of Appeals ar$ed the 6uestioned Erders of the ,C n >anc. yceu$ of  the 1hilippi 1hilippines nes %led %led a $oti $otion on for reconsi reconsiderat deration ion without success. yceu$ of the 1hilippines %led the petition for review.

Iss Issue ue [2]:  hether hether the #eneric word rule would apply to support AJ"H0;0,K>1?s cause. Held [2]: The wholesale appropriation by AJ"H0;0,K>1 of  "HC0;0,s corporate na$e cannot %nd 3usti%cation under the #eneric word rule. A contrary rulin# would encoura#e other corporations to adopt verbati$ and re#ister an e'istin# and protected corporate na$e to the detri$ent of the public. The fact fact tha thatt the there re are are other other non;st non;stoc4 oc4 re reli# li#iou ious s societ societie ies s or corporations usin# the na$es Church of the ivin# 9od "nc. Church of 9od Desus Christ the ,on of 9od the 0ead Church of  9od in Christ I >y the 0oly ,pirit and other si$ilar na$es is of no conse6uence. "t does not authori5e the use by AJ"H0; 0,K>1 of the essential and distin#uishin# feature of "HC0; 0,s re#istered and protected corporate na$e.

L,5eu2 L,5eu2 of t1e !1ili66ines vs. Court of A66eals <J9& --*+7 ! 8arch -++<K) Facts: yceu$ of the 1hilippines "nc. had so$eti$e before co$$ence co$$ enced d in the ,C a proceedi proceedin# n# (,C;Case (,C;Case No. -2-) a#ainst the yceu$ of >a#uio "nc. to re6uire it to chan#e its corporate na$e and to adopt another na$e not Gsi$ilar JtoK or identicalG with that of petitioner. "n an Erder dated 2 April -+77 -+7 7 Ass Associ ociate ate Co$$is Co$$issio sioner ner Dul Dulio io ,ulit ,ulit he held ld that that the cor corpor porate ate na$e na$e of pet petiti itione onerr and that of the yceu yceu$ $ of  >a#ui >a# uio o "nc. "nc. we were re substa substanti ntiall ally y ide identi ntical cal becaus because e of the presence of a Gdo$inantG word i.e. Gyceu$G the na$e of  the #eo#raphical location of the ca$pus bein# the only word which distin#uished one fro$ the other corporate na$e. The

Issue Issu e [1]:  het hether her the na$es of the contendi contendin# n# yceu yceu$ $ schools are confusin#ly si$ilar. Held [1]: The Articles of "ncorporation of a corporation $ust a$on# other other thin thin#s #s set out the na$e of the corpo corporation ration.. ,ection -* of the Corporation Code establishes a restrictive rule insofar as corpo corporate rate na$es are concern concerned. ed. "t prov provide ides s that GNo corporate na$e $ay be allowed by the ,ecurities an 'chan#e 'c han#e Co$$ission Co$$ission if the propose proposed d na$e is identic identical al or decept dec eptive ively ly or con confus fusin in#ly #ly si$ si$il ilar ar to tha thatt of any e'ist e'istin# in# corporation or to any other na$e already protected by law or is patently deceptive confusin# or contrary to e'istin# laws. hen he n a ch chan# an#e e in the corpo corporat rate e na$ na$e e is app approv roved ed the Co Co$$ $$is issi sion on sh shal alll issu issue e an a$ a$en ende ded d cert certi% i%ca cate te of  in inco corp rpor orat atio ion n un unde derr th the e a$en a$ende ded d na na$e $e.G .G Th The e poli policy cy un unde derl rlyi yin# n# th the e proh prohib ibit itio ion n in ,ect ,ectio ion n -* a#ai a#ains nstt th the e re re#is #istrat tration ion of a corpor corporate ate na$ na$e e which which is Gident Gidentic ical al or deceptiv dece ptively ely or conf confusin usin#ly #ly si$ilarG to that of any e'isti e'istin# n# cor corpor porati ation on or whi which ch is Gpa Gpate tentl ntly y dec decept eptive iveGG or Gpa Gpaten tently tly confusin#G or Gcontrary to e'istin# lawsG is the avoidance of  fraud upon the public which would have occasion to deal with the entity concerne concerned d the evasion of le#a le#all obli obli#atio #ations ns and duties and the reduction of diculties of ad$inistration and supervisi supe rvision on over corporati corporations. ons. 0erein 0erein the Court Court does not co cons nsid ider er that that the the cor orpo pora rate te na na$e $es s of the the acad acade$ e$ic ic institutions are Gidentical with or deceptively or confusin#ly si$ilarG to that of yceu$ of the 1hilippines "nc.. True enou#h th the e co corp rpora orate te na na$e $es s of th the e othe otherr scho school ols s (def (defen enda dant nt institutions) entities all carry the word Gyceu$G but confusion

Ar$ed with the &esolution of the ,upre$e Court the yceu$ of the 1hilippines then wrote all the educational institutions it could %nd usin# the word Gyceu$G as part of their corporate na$e and advised the$ to discontinue such use of Gyceu$.G hen he n with the passa#e passa#e of ti$e ti$e it beca$e clear that this recourse had failed and on 2 February -+* yceu$ of the 1hili 1hilippi ppines nes ins instit titute uted d be befor fore e the , ,C C , ,C;C C;Case ase 2!7 2!7+ + to en enfo forc rce e what what yceu yceu$ $ of th the e 1h 1hil ilip ippi pine nes s cl clai ai$s $s as it its s propriet prop rietary ary ri#ht ri#ht to the word G Gyceu yceu$.G $.G The ,C hearin# hearin#

and deception are eectively the appendin# of  #eo#raphic na$es to the wordprecluded Gyceu$.GbyThus the Gyceu$ of AparriG cannot be $ista4en by the #eneral public for the yceu yceu$ $ of the the 1h 1hil ilip ippi pine nes s or that that the the G Gyc yceu eu$ $ of  Ca$alaniu Ca$al aniu#anG #anG would be conf confused used with the yceu$ yceu$ of the 1hilippines. Further ety$olo#ically the word Gyceu$G is the atin word for the 9ree4 ly4eion which in turn referred to a locality on the river "lissius in ancient Athens Gco$prisin# an enclosure dedicated dedicated to Apollo and adorned with fountains and buildi buildin#s n#s erec erected ted by 1isis 1isistrat tratus us 1eric 1ericle les s and ycu ycur# r#us us fre6uented by the youth for e'ercise and by the philosopher Aristotle Arist otle and his followe followers rs for teac teachin# hin#.G .G "n ti$e the word Gyc Gyceu eu$G $G beca beca$e $e asso associ ciat ated ed with with scho school ols s an and d othe otherr institutions providin# public lectures and concerts and public discussions. Thus today the word Gyceu$G #enerally refers to a school or an institution of learnin#. ,ince Gyceu$G or GiceoG denotes a school or institution of learnin# it is not unnatural unna tural to use this word to desi desi#nate #nate an entity which is or#ani5e or#a ni5ed d and opera operatin# tin# as an educ education ational al inst institut itution. ion. To

ocer rendered a decision sustainin# petitioners clai$ to an e'clusive ri#ht to use the word Gyceu$.G The hearin# ocer relied upon the ,C rulin# in the yceu$ of >a#uio "nc. case (,C;C (, C;Case ase -2-) -2-) and he held ld that that the word word Gyce Gyceu$G u$G was capable of appropriation and that petitioner had ac6uired an enforceable enforceabl e e'clusive ri#ht to the use of that word. En appeal

deter$ine whether a #iven corporate na$e is GidenticalG or Gconfusin Gconf usin#ly #ly or dece deceptiv ptively ely si$ilarG si$ilarG with with anoth another er enti entitys tys corporate na$e it is not enou#h to ascertain the presence of  Gyce Gyceu$G u$G or Gi Giceo ceoGG in bot both h na$ na$es es.. En Ene e $u $ust st evalu evaluate ate cor corpor porate ate na$e na$es s in their their en entir tirety ety and when the na$e of  yceu$ of the 1hilippines is 3u'taposed with the na$es of 

, ,C C also also noted noted that that yceu$ yceu$ of the 1hi 1hili lippi ppines nes "nc "nc.. had re#istered as a corporation ahead of the yceu$ of >a#uio "nc. in point of ti$e and ordered the latter to chan#e its na$e to another na$e Gnot si$ilar or identical JwithKG the na$es of  previou pre viously sly re#iste re#istered red entities entities.. The yceu yceu$ $ of >a#uio >a#uio "nc. assailed the Erder of the ,C before the ,upre$e Court (9& ; !+!). "n a 8inute &esolution dated - ,epte$ber -+77 the Court denied the 1etition for &eview for lac4 of $erit. ntry of   3ud#$ent in in that case was $ade $ade on 2- Ectober Ectober -+77.

 

private priv ate responde respondents nts they are not reasonab reasonably ly re#arde re#arded d as GidenticalG or Gconfusin#ly or deceptively si$ilarG with each other. Issue [2]: hether the use by the yceu$ of the 1hilippines of Gyceu$G Gyceu$G in its corporate na$e has been for such len#th of  ti$e and with such e'clusivity as to have beco$e associated or identi%ed with the petitioner institution in the $ind of the #eneral public (or at least that portion of the #eneral public which has to do with schools). Held [2]: The nu$ber alone of the private respondents in the pr prese esent nt cas case e su##es su##ests ts str stron# on#ly ly that that the yceu$ yceu$ of the 1hilippines use of the word Gyceu$G has not been attended with the e'clusivity e'clusivity essential for applicability of the doctrine of  secondary $eanin#. "t $ay be noted also that at least one of  the private respondents i.e. the estern 1an#asinan yceu$ "nc. used the ter$ Gyceu$G -7 years before yceu$ of the 1hilippines re#istered its own corporate na$e with the ,C and be#an usin# the word G Gyceu yceu$.G $.G "t foll follows ows that if any insti institut tution ion had ac6uir ac6uired ed an e'clu e'clusiv sive e ri# ri#ht ht to the word word Gyce Gyceu$ u$GG tha thatt in insti stitut tution ion would would have have been been the est ester ern n 1an an#a #asi sina nan n yceu yceu$ $ "nc. "nc. rath rather er th than an yceu yceu$ $ of th the e 1hilippines. 1hilippi nes. 0ence yceu$ of the 1hilippines is not entitled to a le#ally enforceable e'clusive ri#ht to use the word G Gyceu$G yceu$G in its corporate corporate na$e and that other instituti institutions ons $ay use G Gyceu$G yceu$G as part of their corporate na$es.

Cor6orate La3 La3 Case Di4est: !ioneer Insuran5e . . CA <&)=) <&)=)  Case Brief  9.&. No. *-+7 *-+7  Duly  Duly 2* -+*+ essons Applicable: Hefective atte$pt to for$ a corp. does NET result in at least a partnership absent intent to for$ one (Corporate aw) ACTS: •



-+!: Dacob ,. i$ is an owner;operator of ,outhern Airlines (,A) a sin#le proprietorship 8ay -7 -+!: Dapan Ho$estic Airlines (DHA) and i$ entered into a sales contract re#ardin#:



2 HC;]A type aircrafts



- set of necessary spare parts

















 Total:  Total: W -+ in in install$ents install$ents 8ay 22 -+!: 1ioneer "nsurance "nsurance and ,urety ,urety Corp. as surety e'ecuted its surety bond in favor of DHA on behalf of its principal i$ >order >or der 8ac 8achin hinery ery and 0eacy 0eacy 6uip$ 6uip$ent ent Co "n "nc. c. Franci rancisco sco and 8odes 8odesto to Cervantes Cervantes and Cons Constanci tancio o 8a#lana contributed funds for the transaction based on the $isrepresentation of i$ that they will for$a new corp.. to e'pand his business  Dun - -+!: i$ as ,A e'ecuted e'ecuted in favor of 1ioneer 1ioneer a deed of chattel $ort#a#e as security &estruc &estructurin turin# # of obli#atio obli#ation n to chan#e chan#e the $aturity $aturity was done 2' wVo the 4nowled#e of other defendants $ade the surety of DHA prescribed so not entitled to rei$burse$ent Lpon default on the 2V* pay$ents 1ioneer paid for hi$ and %led a petition for the foreclosure of chattel $ort#a#e as security CA ar$ed Trial of 8erits: Enly i$ is liable to pay

ISSUE: VN failure of respondents to incorporate ^ de facto partnership. HELD: NE. CA ar$ed.







1artnership inter se does NET necessarily e'ist for ordinarily CANNET be $ade to assu$e the relation of  partners as bet. the$selves when their purpose is that no partnership shall e'ists ,hould be i$plied only when necessary to do 3ustice bet. the parti parties es (i.e (i.e.. only prete pretend nd to $a4 $a4e e othe others rs liable) i$ never intended to for$ a corp.

Li2 vs. !1ili66ine is1in4 $ear In/ustries In5. J9& -<* < Nove$ber -+++K  Third Hivision Hivision 1an 1an#aniban #aniban (D): < conc concur ur Facts:  En be behal halff of GEc GEcean ean uest uest Fishin ishin# # Cor Corpor porati ation onGG Antonio Chua and 1eter Sao entered into a Contract dated 7 February -++ for the purchase of %shin# nets of various si5es fro$ the 1hilippine Fishin# 9ear "ndustries "nc. (1F9").  They clai$ed that they were en#a#ed in a business venture with i$ Ton# i$ who however was not a si#natory to the a#ree$ent.. The total price of the nets a$ounted to 1!<2!. a#ree$ent  pieces pieces of Moa Moats ts wor worth th 1* 1*   were were al also so sold sold to the Corporation. The buyers however failed to pay for the %shin# nets and the Moats= hence 1F9" %led a collection suit a#ainst Ch Chua ua Sao Sao and i$ T Ton# on# i$ with a pra prayer yer for a wri writt of  preli$i pre li$inary nary attach$ent attach$ent.. The suit was bro brou#ht u#ht a#ainst the three in their capacities as #eneral partners on the alle#ation that GEce GEcean an ues uestt Fi Fishin shin# # Corpor Corporation ationGG was a none none'ist 'istent ent corporation as shown by a Certi%cation fro$ the ,ecurities and 'chan#e Co$$ission. En 2 ,epte$ber -++ the lower court issued a ri ritt of 1re 1reli$i li$inary nary Atta Attach$e ch$ent nt whi which ch the sheri enforced by attachin# the %shin# nets on board FV> ourdes which was then doc4ed at the Fishe Fisheries ries 1ort Navotas 8etro 8anila. "nstead of answerin# the Co$plaint Chua %led a 8anife 8anifesta statio tion n ad$ ad$itt ittin# in# hi his s li liabi abili lity ty and re re6ue 6uesti stin# n# a reasonable ti$e within which to pay. 0e also turned over to 1F9" so$e of the nets which were in his possession. 1eter Sao %led an Answer after which he was dee$ed to have waived his ri#ht to cross;e'a$ine witnesses and to present evidence on his behalf because of his failure to appear in subse6uent hearin#s. i$ Ton# i$ on the other hand %led an Answer with Counterclai$ and Crossclai$ and $oved for the liftin# of  the rit of Attach$ent. The trial court $aintained the rit and upon $otion of 1F9" ordered the sale of the %shin# nets at a public auction. 1F9" won the biddin# and deposited with th the e said said co cour urtt th the e sale sales s proc procee eeds ds of 1+ 1+   .. En -* Nove$ber -++2 the trial court rendered its Hecision rulin# that 1F9" was enti entitled tled to the rit of Attach$e Attach$ent nt and that Chua Sao and i$ as #eneral partners were 3ointly liable to pay 1F9". The trial court ruled that a partnership a$on# i$ Chua and Sao e'isted based (-) on the testi$onies of the witnesse witn esses s pres presente ented d and (2) on a Co$pr Co$pro$ise o$ise A#ree$ent A#ree$ent e'ecuted by the three in Civil Case -+2;8N which Chua and  Sao  Sao had brou#ht a#ainst i$ in the &T &TC C of 8alabon >ranch 72 for (a) a declaration of nullity of co$$ercial docu$ents= (b) a refor$ation of contracts= (c) a declaration of ownership of %sh %shin in# # boats boats== (d) an in3 in3un uncti ction on and (e) da$a# da$a#es. es. i$ appealed to the Court of Appeals (CA) which ar$ed the &TC. i$ %l %led ed the 1etit 1etition ion for &evie &eview w on Ce Certi rtiorar orari. i. i$ ar#ues a$on# others that under the doctrine of corporation by estoppel liability can be i$puted only to Chua and Sao and not to hi$. Issue: hether i$ should be held 3ointly liable with Chua and Sao. Held: Chua Sao and i$ had decided to en#a#e in a %shin# business busi ness which they starte started d by buyi buyin# n# boats worth 1<.< 1<.<! !

$illion %nanced by a loan secured fro$ Desus i$ who was i$ Ton# Ton# i$?s brother brother.. "n their Co$pro$ise A#ree$e A#ree$ent nt they subse6uently subse6uentl y revealed their intention to pay the loan with the proceeds of the sale of the boats and to divide e6ually a$on# the$ the e'cess or loss. These boats the purchase and the repair of which were %nanced with borrowed $oney fell under

 

the ter$ Gco$$on fundG under Article -77. The contribution to such fund need not be cash or %'ed assets= it could be an intan#ible li4e credit or industry. That the parties a#reed that any loss or pro%t fro$ the sale and operation of the boats would be divided e6ually a$on# the$ also shows that they had indeed for$ed a partnership. The partnership e'tended not only to the purchase of the boat but also to that of the ne nets ts and the Moats. Moats. The %s %shin hin# # ne nets ts and the Moats Moats both essential to %shin# were obviously ac6uired in furtherance of  their business. "t would have been inconceivable for i$ to involve hi$self so $uch in buyin# the boat but not in the ac6uisit ac6u isition ion of the aforesai aforesaid d e6uip$en e6uip$ent t without without which which the business could not have proceeded. The sale of the boats as well as the division a$on# the three of the balance re$ainin# after the pay$ent of their loans proves beyond cavil that FV> o ourd urdes es thou# thou#h h re re#i #iste stere red d in hi his s na$e na$e was not his own property but an asset of the partnership. "t is not unco$$on to re#ister the properties ac6uired fro$ a loan in the na$e of  the person the lender trusts who in this case is i$ Ton# i$ hi$self.. After all he is the brother of the creditor Desus i$. "t hi$self is unreasonable U indeed it is absurd U for petitioner to sell his property to pay a debt he did not incur if the relationship a$on# the three of the$ was $erely that of lessor;lessee instead of partners. As to i$s ar#u$ent that under the doctrine of corporation by estoppel liability can be i$puted only to Chua and Sao and not to hi$= ,ection 2- of the Corporation Code of the 1hilippines provides that GAll persons who assu$e to act as a corporatio corpo ration n 4nowi 4nowin# n# it to be with without out authority authority to do so shall be liabl liable e as #en #enera erall par partne tners rs for all deb debts ts liabil liabiliti ities es and da$a#es da$a# es incu incurre rred d or arisin# arisin# as a result result thereof thereof:: 1rovide 1rovided d however That when any such ostensible corporation is sued on any transaction it as not a corporation tort co$$itted by itentered as suchby it shall be allowedor to on useany as a defense its lac4 of corporate personality. Ene who assu$es an obli#ation obli#ation to an ostensib ostensible le corporati corporation on as such such cannot cannot resist perfor$ance thereof on the #round that there was in fact no corporation.G Thus even if the ostensible corporate entity is proven to be le#ally none'istent a party $ay be estopped fro$ denyin# its corporate e'istence. GThe reason be behi hind nd th this is do doct ctri rine ne is obvi obviou ous s U an un unin inco corp rpora orate ted d association has no personality and would be inco$petent to act and appropriate for itself the power and attributes of a corporation as provided by law= it cannot create a#ents or confer authority on another to act in its behalf= thus those who act or purport to act as its representatives or a#ents do so without authority and at their own ris4. And as it is an ele$ ele$ent entary ary princ principl iple e of law that a person person who act acts s as an a#ent a#e nt wi witho thout ut author authority ity or wi witho thout ut a princi principal pal is hi$sel hi$self  f  re re#ar #arded ded as the princi principal pal posses possessed sed of all the ri# ri#ht ht and sub3ect to all the liabilities of a principal a person actin# or purportin# to act on behalf of a corporation which has no valid e'ist e'isten ence ce ass assu$e u$es s suc such h privi privile# le#es es and obl obli#a i#atio tions ns and beco$es beco $es personal personally ly liable liable for contracts contracts entere entered d into or for othe otherr acts acts pe perf rfor or$e $ed d as such such a#en a#ent. t.GG Th The e do doct ctri rine ne of  corporation by estoppel $ay apply to the alle#ed corporation and to a third party. "n the %rst instance an unincorporated association which represented itself to be a corporation will be estopped estopped fro$ denyin# denyin# its corporate corporate capacity capacity in a suit a#ainst it by a third person who relied in #ood faith on such representation. "t cannot alle#e lac4 of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advanta#es and bene%ts. En the other hand a third party who 4nowin# an association to be unincorporated nonetheless treated it as a corporation and rec receive eived d bene bene%ts %ts fro$ it $ay be barred fro$ deny denyin# in# its corporate corpo rate e'iste e'istence nce in a suit brou#ht brou#ht a#ainst a#ainst the alle#ed corporation. "n such case all those who bene%ted fro$ the tra transa nsacti ction on $ad $ade e by the osten ostensib sible le cor corpor porati ation on de despi spite te 4n 4now owle led# d#e e of it its s le le#a #all de defe fect cts s $ay $ay be he held ld li liab able le for for contracts they i$pliedly assented to or too4 advanta#e of.  There is no dispute dispute that 1F9" is entitled to be paid for the nets it sold. The only 6uestion here is whether i$ should be held  3ointly liable with Chua and Sao. i$ contests such liability in insi sist stin in# # th that at only only th thos ose e who who de deal altt in th the e na na$e $e of th the e ostens ostensibl ible e cor corpor porati ation on should should be hel held d li liabl able. e. Althou Althou#h #h

technically it is true that i$ did not directly act on behalf of  the corporation= however havin# reaped the bene%ts of the contract entered into by persons with who$ he previously had an e'ist e'istin# in# rela relatio tionsh nship ip he is dee dee$ed $ed to be part of said said association and is covered by the scope of the doctrine of  corporation by estoppel.

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