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KRISANDRA ANN D. MALALUAN JD 3 Corporation Law TAN BOON BEE vs. JARENCIO G.R. No.

L-41337 June 30, 1988 Facts: Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on credit to herein private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products. For failure of GRAPHIC to pay any installment, as agagreed on the contract of sale, petitioner filed with the then Court of First Instance of Manila for sum of Money. The trial court ordered GRAPHIC to pay the petitioner. On motion of petitioner, a writ of execution was issued and the executing sheriff levied upon one (1) unit printing machine Identified as "Original Heidelberg Cylinder Press" Type H 222, NR 78048, found in the premises of GRAPHICbut herein private respondent, Philippine American Drug Company (PADCO for short) had informed the sheriff that the printing machine is its property and not that of GRAPHIC however the sheriff proceeded with the scheduled auction sale, sold the property to the petitioner. PADCO filed an "Affidavit of Third Party Claim" with the Office of the City Sheriff. Thereafter, PADCO filed with the Court of First Instance of Manila, a Motion to Nullify Sale on Execution (With Injunction) which was opposed by the petitioner. Respondent judge ruled in favor of PADCO hence the instant petition. Plaintiff contends that the controlling stockholders of the Philippine American Drug Co. are also the same controlling stockholders of the Graphic Publishing, Inc. and, therefore, the levy upon the said machinery which was found in the premises occupied by the Graphic Publishing, Inc. should be upheld. Issue: Whether or not there is a need to pierce the corporate veil. Held: It is true that a corporation, upon coming into being, is invested by law with a personality separate and distinct from that of the persons composing it as well as from any other legal entity to which it may be related. As a matter of fact, the doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in all cases which are within reason and the law. However, this separate and distinct personality is merely a fiction created by law for convenience and to promote justice. Accordingly, this separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve equity or when necessary for the protection of creditors. Likewise, this is true when the corporation is merely an adjunct, business conduit or alter ego of another corporation. In such case, the fiction of separate and distinct corporation entities should be disregarded. In the instant case, petitioner's evidence established that PADCO was never engaged in the printing business; that the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO holds 50% share of stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the printing machine in question had been in the premises of GRAPHIC since May, 1965, long before PADCO even acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased by PADCO to GRAPHIC on January 24, 1966, even before PADCO purchased it from Capital Publishing on July 11, 1966, only serves to show that PADCO's claim of ownership over the printing machine is not only farce and sham but also unbelievable. Considering the principles and circumstances mentioned, respondent judge should have pierced PADCO's veil of corporate Identity.

ALHAMBRA CIGAR vs. SEC Facts: Alhambra Cigar was incorporated Jan 15, 1912. Under its articles, it had a corporate life of 50 years and on Jan 15, 1962, its term of existence expired. On that date it ceased transacting business and entered into a state of liquidation. On June 20, 1963, Republic Act 3531 was enacted empowering corporations to extend their life beyond the period fixed by its articles for a term not exceeding 50 years. Prior to the law, Corporations had a non-extendable life of 50 years. On July 15, 1963, the Board of Alhambra resolved to amend the life of the Corporation for another 50 years which was approved by the stockholders on August 1963. The amended articles were then filed with the SEC but the SEC returned the amended articles and said that the law has no retroactive effect. Issue: Whether or not the SEC correctly denied the amended articles of Alhambra Held: Yes. Supreme Court affirms the decision of the SEC. Continuance of a dissolved corporation for 3 years has only for its purpose the closure of its affairs and no other. The Corporation is enjoined from doing business for which it was established. Liquidation is necessary because the Corps life has ended. For this reason alone, the Corps life may no longer be extended. An extension, which is in fact an amendment, must be made during the life of the Corp and before the expiration of the term of existence as fixed by the Articles. Moreover, the filing of the certificate of extension cannot retroact to the date of the passing of the resolution extending the life. TCL Sales Corporation v. CA 349 SCRA 35 Jan.5, 2001 Facts: Ting Ping Lay, not one of the original subscribers of the shares of stock of TCL Sales Corporation, acquired his shares by purchasing those of some of the original subscribers. In order to protect his shareholdings with TCL, Lay requested Anna Teng, TCL Corporate Secretary to enter the transfer of shares of stock for proper recording of his acquisitions in the Stock & Transfer Book of TCL. He too demanded issuance of new certificates of stock in his favor. TCL, however, even after repeated demands, refused. Lay filed a case with the SEC for mandamus against TCL and Teng. This was in turn granted by the SEC denying a later MR as well. The CA dismissed TCLs petition as well for being filed out of time. Issues: Whether or not SEC has jurisdiction over the petition for mandamus filed by Lay. Held: Even if Lay was not a Share Holder, he is still a member of the public whose investment in the corporate the law seeks to protect and encourage, as his purchase of shares of stock has been established. Principal function of SEC is supervision and control of corps, partnerships, assoc with the view of protecting and encouraging investments for the protection of economic development. SEC has power of control & supervision over all corps to encourage active public participation in the affairs of private corps through investments. Jurisdiction over an action for mandamus lies with the SEC even if the proponent is not yet a SH of record, as in the case of Abejo v. de la Cruz. SEC by express mandate has absolute jurisdiction to enforce the provisions of the Corp Code among which is the stock purchasers right to secure the corresponding certificate of stock in his name. Determination of whether or not a Share Holder is entitled to exercise the rights of a Share Holder is within jurisdiction of the SEC. The SEC en banc found that TCL did not refute the validity of the transfers of the shares of stock they conceded that they could not assail the documents evincing the

transfer of the shares to Lay. Lay was able to establish prima facie ownership through the deeds of transfer of shares of stock of TCL. A listing of TCLs Share Holders & their respective shares before & after the execution of a certain deed of assignment shows that Lay is indeed listed as a Share Holder of TCL. The dispute is an intra-corporation controversy involving Share Holders of TCL Lim vs. Philippine Fishing Gear Industries Inc. GR 136448 3 November 1999 Facts: On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated 7 February 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc. (PFGI). They claimed that they were engaged in a business venture with Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets amounted to P532,045. 400 pieces of floats worth P68,000 were also sold to the Corporation. The buyers, however, failed to pay for the fishing nets and the floats; hence, PFGI filed a collection suit against Chua, Yao and Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. On 20 September 1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila. Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay. He also turned over to PFGI some of the nets which were in his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. The trial court maintained the Writ, and upon motion of PFGI, ordered the sale of the fishing nets at a public auction. PFGI won the bidding and deposited with the said court the sales proceeds of P900,000. On 18 November 1992, the trial court rendered its Decision, ruling that PFGI was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay PFGI. The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the witnesses presented and (2) on a Compromise Agreement executed by the three in Civil Case 1492-MN which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and (e) damages. Lim appealed to the Court of Appeals (CA) which, affirmed the RTC. Lim filed the Petition for Review on Certiorari. Lim argues, among others, that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him. Issue: Whether the doctrine of corporation by estoppels can be applied. Held: As to Lim's argument that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and Yao, and not to him; Section 21 of the Corporation Code of the Philippines provides that "All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation." Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped from denying its corporate existence. "The reason behind this doctrine is obvious an unincorporated association has no personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation as

provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or purport to act as its representatives or agents do so without authority and at their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the principal, possessed of all the right and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent." The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first instance, an unincorporated association, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits. On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as a corporation and received benefits from it, may be barred from denying its corporate existence in a suit brought against the alleged corporation. In such case, all those who benefited from the transaction made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they impliedly assented to or took advantage of. There is no dispute that PFGI is entitled to be paid for the nets it sold. The only question here is whether Lim should be held jointly liable with Chua and Yao. Lim contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable. Although technically it is true that Lim did not directly act on behalf of the corporation; however, having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. Republic Planters Bank vs. Agana GR 51765 3 March 1997 Facts: On 18 September 1961, the Robes-Francisco Realty & Development Corporation (RFRDC) secured a loan from the Republic Planters Bank in the amount of P120,000.00. As part of the proceeds of the loan, preferred shares of stocks were issued to RFRDC through its officers then, Adalia F. Robes and one Carlos F. Robes. In other words, instead of giving the legal tender totaling to the full amount of the loan, which is P120,000.00, the Bank lent such amount partially in the form of money and partially in the form of stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in favor of Adalia F. Robes. Said certificates of stock bear the following terms and conditions: "The Preferred Stock shall have the following rights, preferences, qualifications and limitations, to wit: 1. Of the right to receive a quarterly dividend of 1%, cumulative and participating. xxx 2. That such preferred shares may be redeemed, by the system of drawing lots, at any time after 2 years from the date of issue at the option of the Corporation." On 31 January 1979, RFRDC and Robes proceeded against the Bank and filed a complaint anchored on their alleged rights to collect dividends under the preferred shares in question and to have the bank redeem the same under the terms and conditions of the stock certificates. The bank filed a Motion to Dismiss 3 private respondents' Complaint on the following grounds: (1) that the trial court had no jurisdiction over the subject-matter of the action; (2) that the action was unenforceable under substantive law; and (3) that the action was barred by the statute of limitations and/or laches. The bank's Motion to Dismiss was denied by the trial court in an order dated 16 March 1979. The bank then filed its Answer on 2 May 1979. Thereafter, the trial court gave the parties 10 days from 30 July 1979 to submit their respective memoranda after the submission of which the case would be deemed submitted for resolution. On 7 September 1979, the trial court rendered the decision in favor of RFRDC and Robes; ordering the bank to pay RFRDC and Robes the face value of the stock certificates as redemption price, plus 1%

quarterly interest thereon until full payment. The bank filed the petition for certiorari with the Supreme Court, essentially on pure questions of law. Issues: (1) Whether the bank can be compelled to redeem the preferred shares issued to RFRDC and Robes. (2) Whether RFRDC and Robes are entitled to the payment of certain rate of interest on the stocks as a matter of right without necessity of a prior declaration of dividend. Held: (1) While the stock certificate does allow redemption, the option to do so was clearly vested in the bank. The redemption therefore is clearly the type known as "optional". Thus, except as otherwise provided in the stock certificate, the redemption rests entirely with the corporation and the stockholder is without right to either compel or refuse the redemption of its stock. Furthermore, the terms and conditions set forth therein use the word "may". It is a settled doctrine in statutory construction that the word "may" denotes discretion, and cannot be construed as having a mandatory effect. The redemption of said shares cannot be allowed. The Central Bank made a finding that the Bank has been suffering from chronic reserve deficiency, and that such finding resulted in a directive, issued on 31 January 1973 by then Gov. G. S. Licaros of the Central Bank, to the President and Acting Chairman of the Board of the bank prohibiting the latter from redeeming any preferred share, on the ground that said redemption would reduce the assets of the Bank to the prejudice of its depositors and creditors. Redemption of preferred shares was prohibited for a just and valid reason. The directive issued by the Central Bank Governor was obviously meant to preserve the status quo, and to prevent the financial ruin of a banking institution that would have resulted in adverse repercussions, not only to its depositors and creditors, but also to the banking industry as a whole. The directive, in limiting the exercise of a right granted by law to a corporate entity, may thus be considered as an exercise of police power. (2) Both Section 16 of the Corporation Law and Section 43 of the present Corporation Code prohibit the issuance of any stock dividend without the approval of stockholders, representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. These provisions underscore the fact that payment of dividends to a stockholder is not a matter of right but a matter of consensus. Furthermore, "interest bearing stocks", on which the corporation agrees absolutely to pay interest before dividends are paid to common stockholders, is legal only when construed as requiring payment of interest as dividends from net earnings or surplus only. In compelling the bank to redeem the shares and to pay the corresponding dividends, the Trial committed grave abuse of discretion amounting to lack or excess of jurisdiction in ignoring both the terms and conditions specified in the stock certificate, as well as the clear mandate of the law. CIR vs CA G. R. No. 108576 January 20, 1999 Facts: Don Andres Soriano, a citizen and resident of the United States, formed the corporation "A. Soriano Y Cia", predecessor of ANSCOR, with a P1,000,000.00 capitalization divided into 10,000 common shares at a par value of P100/share. In 1937, Don Andres subscribed to 4,963 shares of the 5,000 shares originally issued. In 1945, ANSCOR's authorized capital stock was increased to P2,500,000.00 divided into 25,000 common shares with the same par value. Don Andres' increased his subscription to 14,963 common shares. From 1947-1963, ANSCOR declared stock dividends. On December 30, 1964 Don Andres died. A day after Don Andres died, ANSCOR increased its capital stock to P20M and in 1966 further increased it to P30M. Stock dividends worth 46,290 and 46,287 shares were respectively received by the Don

Andres estate and Doa Carmen from ANSCOR. Hence, increasing their accumulated shareholdings to 138,867 and 138,864 common shares each. On June 30, 1968, pursuant to a Board Resolution, ANSCOR redeemed 28,000 common shares from the Don Andres' estate. By November 1968, the Board further increased ANSCOR's capital stock to P75M. About a year later, ANSCOR again redeemed 80,000 common shares from the Don Andres' estate. As stated in the Board Resolutions, ANSCOR's business purpose for both redemptions of stocks is to partially retire said stocks as treasury shares in order to reduce the company's foreign exchange remittances in case cash dividends are declared. In 1973, after examining ANSCOR's books of account and records, Revenue examiners issued a report proposing that ANSCOR be assessed for deficiency withholding tax-at-source, pursuant to Sections 53 and 54 of the 1939 Revenue Code for the year 1968 and the second quarter of 1969 based on the transactions of exchange and redemption of stocks. ISSUE: Whether or not ANSCOR's redemption of stocks from its stockholder as well as the exchange of common with preferred shares can be considered as "essentially equivalent to the distribution of taxable dividend" making the proceeds thereof taxable. HELD: Yes. The bone of contention is the interpretation and application of Section 83(b) of the 1939 Revenue Act 38 which provides: Sec. 83. Distribution of dividends or assets by corporations. (b) Stock dividends A stock dividend representing the transfer of surplus to capital account shall not be subject to tax. However, if a corporation cancels or redeems stock issued as a dividend at such time and in such manner as to make the distribution and cancellation or redemption, in whole or in part, essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock shall be considered as taxable income to the extent it represents a distribution of earnings or profits accumulated after March first, nineteen hundred and thirteen. Stock dividends, strictly speaking, represent capital and do not constitute income to its recipient. So that the mere issuance thereof is not yet subject to income tax as they are nothing but an "enrichment through increase in value of capital investment." The exception provides that the redemption or cancellation of stock dividends, depending on the "time" and "manner" it was made, is essentially equivalent to a distribution of taxable dividends," making the proceeds thereof "taxable income" "to the extent it represents profits". The exception was designed to prevent the issuance and cancellation or redemption of stock dividends, which is fundamentally not taxable, from being made use of as a device for the actual distribution of cash dividends, which is taxable. Simply put, depending on the circumstances, the proceeds of redemption of stock dividends are essentially distribution of cash dividends, which when paid becomes the absolute property of the stockholder. Thereafter, the latter becomes the exclusive owner thereof and can exercise the freedom of choice. Having realized gain from that redemption, the income earner cannot escape income tax. For the exempting clause of Section, 83(b) to apply, it is indispensable that: (a) there is redemption or cancellation; (b) the transaction involves stock dividends and (c) the "time and manner" of the transaction makes it "essentially equivalent to a distribution of taxable dividends." Redemption is repurchase, a reacquisition of stock by a corporation which issued the stock in exchange for property, whether or not the acquired stock is cancelled, retired or held in the treasury. Essentially, the corporation gets back some of its stock, distributes cash or property to the shareholder in

payment for the stock, and continues in business as before. In the case, ANSCOR redeemed shares twice. But where did the shares redeemed come from? If its source is the original capital subscriptions upon establishment of the corporation or from initial capital investment in an existing enterprise, its redemption to the concurrent value of acquisition may not invite the application of Sec. 83(b) under the 1939 Tax Code, as it is not income but a mere return of capital. On the contrary, if the redeemed shares are from stock dividend declarations other than as initial capital investment, the proceeds of the redemption is additional wealth, for it is not merely a return of capital but a gain thereon. It is not the stock dividends but the proceeds of its redemption that may be deemed as taxable dividends. At the time of the last redemption, the original common shares owned by the estate were only 25,247.5 91 This means that from the total of 108,000 shares redeemed from the estate, the balance of 82,752.5 (108,000 less 25,247.5) must have come from stock dividends. In the absence of evidence to the contrary, the Tax Code presumes that every distribution of corporate property, in whole or in part, is made out of corporate profits such as stock dividends. The capital cannot be distributed in the form of redemption of stock dividends without violating the trust fund doctrine. The test of taxability under the exempting clause of Section 83(b) is, whether income was realized through the redemption of stock dividends. The redemption converts into money the stock dividends which become a realized profit or gain and consequently, the stockholder's separate property. Profits derived from the capital invested cannot escape income tax. As realized income, the proceeds of the redeemed stock dividends can be reached by income taxation regardless of the existence of any business purpose for the redemption. Otherwise, to rule that the said proceeds are exempt from income tax when the redemption is supported by legitimate business reasons would defeat the very purpose of imposing tax on income. LINTONJUA, JR. vs ETERNIT CORPORATION GR. 144805 June 8, 2006 Facts: The Eternit Corporation (EC) manufactures roofing materials and pipe products. Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer SA Corporation (ESAC), a corporation registered under the laws of Belgium. Glanville was the General Manager and President of EC, while Delsaux was the Regional Director for Asia of ESAC. In 1986, because of the political situation in the Philippines the management of ESAC wanted to stop its operations and to dispose the land in Mandaluyong City. They engaged the services of realtor/broker Lauro G. Marquez. Marquez thereafter offered the land to Eduardo B. Lintojua, Jr. for PhP 27,000,000.00. Lintonjua counter offered PhP 20,000,000.00 cash. Marquez apprised Glanville and Delsaux of the offer. Delsaux sent a telex stating that, based on nthe Belgian/Swiss decision, the final offer was US$1,000,000.00 and PhP 2,500,000.00. The Lintonjua brothers deposited US$1,000,000.00 with the Security Bank & Trust Company, and drafted an Escrow Agreement to expedite the sale. Meanwhile, with the assumption of Corazon C. Aquino as President, the political situation improved. Marquez received a leet from Delsaux that the ESAC Regional Office decided not to proceed with the sale. When informed of this, the Lintonjuas, filed a complaint for specific performance and payment of damages on account of the aborted sale. Both the trial court and appellate court rendered a judgement in favor of defendants and dismissed the complaint.

Issue: Whether or not the appellate court committed a grave error in holding that Marquez needed a written authority from respondent ETERNIT before the sale can be perfected. Held: Respondents maintain that Glanville, Delsaux and Marquez had no authority from the stockholders of EC and its Board of Directors to offer the properties for sale to the petitioners. Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to validly act as broker. As broker, Marquez was not an ordinary agent because his only job as a broker was to look for a buyer and to bring together the parties to the transaction. He was not authorized to sell the properties; hence, petitioners argue, Article 1874 of the New Civil Code does not apply. A corporation is a juridical person separate and distinct from its stockholders and is not affected by the personal rights, obligations and transactions of the latter. It may act only through its board of directors or, when authorized by its board resolution, through its officers or agents. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. Agency may be oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. In this case, the petitioners failed to adduce in evidence any resolution of the Board of Directors of EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and its behalf, the eight parcels of land owned by it. Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who, in turn, acted on authority of ESAC, through its Committee for Asia, and the Belgian/Swiss component of the management of ESAC. The offer of Delsaux emanated only form the Belgian/Swiss Decision, and not the entire management of Board of Directors of ESAC. While it is true that petitioners accepted the counter-offer of ESAC was not a party to the transaction between them; hence, EC was not bount by such acceptance. SULO NG BAYAN vs ARANETA GR L-31061 August 17, 1976 Facts: On April 26, 19966, Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First Instance of Bulacan, against Gregorio Araneta Inc. (GAI), Paradise Farms Inc., Nationa Waterworks & Sewage Authority (NAWASA), Hacienda Caretas Inc., and the Register of Deeds of Bulacan to recover the ownership and possession of a large tract of land in San Jose del Monte, Bulacan containing an area of 27,982,250 sq.ms., more or less, registered under the Torrens System in the name of GAI, et. Als predecessors-in-interest (who are members of the corporation). On September 2, 1966, GAI filed a motion to dismiss the amended complaint on the grounds that (1) the complaint states no cause of action; and (2) the cause of action, if any, is barred by prescription and laches. Paradise Farms Inc. and Hacienda Caretas Inc. filed motions to dismiss on the same grounds. NAWASA did not file any motion to dismiss.

However, it pleaded in its answer as special and affirmative defense lack of cause of action by Sulo ng Bayan Innc. And the barring of such action by prescription and laches. Issue: Whether the corporation (non-stock) may institute an action in behalf of its individual members for the recovery of certain parcels of land allegedly owned by said members, among others. Held: It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. Conversely, a corporation, even in the case of a one-man corporation. The mere fact that one is president of a corporation does not render the property which he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate similatities. Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder thereof to an allotment in the distribution of the land of the corporation upon surrender of the stock certificated were considered not to have such legal or equitable title or interest in the land, as would support a suit for title, especially against parties other than the corporation. It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the persons composing it, is but a legal fiction introduced for the purpose of convenience. This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve equity. It has not been claimed that the members have assigned or transferred whatever rights they may have on the land in question to the corporation. Absent any showing of interest, therefore, a corporation, has no personality to bring the action for and in behalf of its stockholders or members for the purpose of recovering property which belongs to said stockholders or members in their personal capacities.