Pantranco Employees Asso., et al. vs. NLRC, et al./Philippine National Bank Vs. Pantranco Employees Association Inc., et al., G.R. No. 170689/G.R. No.

170705, March 17, 2009, is an interesting case wherein former employees of a company sought to satisfy their unpaid labor claims against another company that eventually acquired, and then sold, the employer company. The Gonzales family owned two corporations, namely, the Pantranco North Express, Inc. (PNEI) and Macris Realty Corporation (Macris). PNEI provided transportation services to the public, and had its bus terminal at the corner of Quezon and Roosevelt Avenues in Quezon City. The terminal stood on four valuable pieces of real estate (known as Pantranco properties) registered under the name of Macris. The Gonzales family later incurred huge financial losses despite attempts of rehabilitation and loan infusion. In March 1975, their creditors took over the management of PNEI and Macris. By 1978, full ownership was transferred to one of their creditors, the National Investment Development Corporation (NIDC), a subsidiary of the PNB. Macris was later renamed as the National Realty Development Corporation (Naredeco) and eventually merged with the National Warehousing Corporation (Nawaco) to form the new PNB subsidiary, the PNB-Madecor. In 1985, NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned by Gregorio Araneta III. In 1986, PNEI was among the several companies placed under sequestration by the Presidential Commission on Good Government (PCGG) shortly after the historic events in EDSA. In January 1988, PCGG lifted the sequestration order to pave the way for the sale of PNEI back to the private sector through the Asset Privatization Trust (APT). APT thus took over the management of PNEI. In 1992, PNEI applied with the Securities and Exchange Commission (SEC) for suspension of payments. A management committee was thereafter created which recommended to the SEC the sale of the company through privatization. As a cost-saving measure, the committee likewise suggested the retrenchment of several PNEI employees. Eventually, PNEI ceased its operation. Along with the cessation of business came the various labor claims commenced by the former employees of PNEI where the latter obtained favorable decisions. On July 5, 2002, the Labor Arbiter issued the Sixth Alias Writ of Execution commanding the National Labor Relations Commission (NLRC) sheriffs to levy on the assets of PNEI in order to satisfy the P722,727,150.22 due its former employees, as full and final satisfaction of the judgment awards in the labor cases. The sheriffs were likewise instructed to proceed against

PNB, PNB-Madecor and Mega Prime. In implementing the writ, the sheriffs levied upon the four valuable pieces of real estate located at the corner of Quezon and Roosevelt Avenues, on which the former Pantranco Bus Terminal stood. These properties were covered by Transfer Certificate of Title (TCT) Nos. 87881-87884, registered under the name of PNB-Madecor. Subsequently, Notice of Sale of the foregoing real properties was published in the newspaper and the sale was set on July 31, 2002. Having been notified of the auction sale, motions to quash the writ were separately filed by PNB-Madecor and Mega Prime, and PNB. They likewise filed their Third-Party Claims. PNBMadecor anchored its motion on its right as the registered owner of the Pantranco properties, and Mega Prime as the successor-in-interest. For its part, PNB sought the nullification of the writ on the ground that it was not a party to the labor case. In its Third-Party Claim, PNB alleged that PNB-Madecor was indebted to the former and that the Pantranco properties would answer for such debt. On September 10, 2002, the Labor Arbiter declared that the subject Pantranco properties were owned by PNB-Madecor. It being a corporation with a distinct and separate personality, its assets could not answer for the liabilities of PNEI. Considering, however, that PNB-Madecor executed a promissory note in favor of PNEI for P7,884,000.00, the writ of execution to the extent of the said amount was concerned was considered valid. PNB’s third-party claim – to nullify the writ on the ground that it has an interest in the Pantranco properties being a creditor of PNB-Madecor, – on the other hand, was denied because it only had an inchoate interest in the properties. The NLRC affirmed the Labor Arbiter’s decision. The CA also affirmed the NLRC’s decision. The appellate court pointed out that PNB, PNB-Madecor and Mega Prime are corporations with personalities separate and distinct from PNEI. As such, there being no cogent reason to pierce the veil of corporate fiction, the separate personalities of the above corporations should be maintained. The CA added that the Pantranco properties were never owned by PNEI; rather, their titles were registered under the name of PNB-Madecor. If PNB and PNB-Madecor could not answer for the liabilities of PNEI, with more reason should Mega Prime not be held liable being a mere successor-in-interest of PNB-Madecor. The former PNEI employees argued before the Supreme Court that PNB, through PNBMadecor, directly benefited from the operation of PNEI and had complete control over the funds of PNEI. Hence, they are solidarily answerable with PNEI for the unpaid money claims of the employees. Citing A.C. Ransom Labor Union-CCLU v. NLRC, the employees insist that

where the employer corporation ceases to exist and is no longer able to satisfy the judgment awards in favor of its employees, the owner of the employer corporation should be made jointly and severally liable. The Supreme Court ruled that the former PNEI employees cannot attach the properties (specifically the Pantranco properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid labor claims against PNEI. According to the Supreme Court: “First, the subject property is not owned by the judgment debtor, that is, PNEI. Nowhere in the records was it shown that PNEI owned the Pantranco properties. Petitioners, in fact, never alleged in any of their pleadings the fact of such ownership. What was established, instead, in PNB MADECOR v. Uy and PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB was that the properties were owned by Macris, the predecessor of PNB-Madecor. Hence, they cannot be pursued against by the creditors of PNEI. We would like to stress the settled rule that the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone. To be sure, one man’s goods shall not be sold for another man’s debts. A sheriff is not authorized to attach or levy on property not belonging to the judgment debtor, and even incurs liability if he wrongfully levies upon the property of a third person. Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities separate and distinct from that of PNEI. PNB is sought to be held liable because it acquired PNEI through NIDC at the time when PNEI was suffering financial reverses. PNB-Madecor is being made to answer for petitioners’ labor claims as the owner of the subject Pantranco properties and as a subsidiary of PNB. Mega Prime is also included for having acquired PNB’s shares over PNBMadecor. The general rule is that a corporation has a personality separate and distinct from those of its stockholders and other corporations to which it may be connected. This is a fiction created by law for convenience and to prevent injustice. Obviously, PNB, PNB-Madecor, Mega Prime, and PNEI are corporations with their own personalities. The “separate personalities” of the first three corporations had been recognized by this Court in PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB where we stated that PNB was only a stockholder of PNB-Madecor which later sold its shares to Mega Prime; and that PNB-Madecor was the owner of the Pantranco properties. Moreover, these corporations are registered as separate entities and, absent any valid reason, we maintain their separate identities and we cannot treat them as one.


Petitioners rely on the pronouncement of this Court in A. Another formulation of this doctrine is that when two business enterprises are owned. being the person acting in the interest of the employer. disregard the legal fiction that two corporations are distinct entities and treat them as identical or as one and the same. The corporation. only in the technical sense. the latter is not. However. As between PNB and PNEI. in the said cases. PNEI. or PNB and PNB-Madecor. Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately pleaded or proved. albeit the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. Settled is the rule that where one corporation sells or otherwise transfers all its assets to another corporation for value. none applies in the present case whether between PNB and PNEI. the persons made liable after the company’s cessation of operations were the officers and agents of the corporation. is the employer. the concept of corporate entity was not meant to promote unfair objectives. Ransom Labor Union-CCLU v.Neither can we merge the personality of PNEI with PNB simply because the latter acquired the former. by that fact alone. 4 . what is being made liable is another corporation (PNB) which acquired the debtor corporation (PNEI). since the corporation is an artificial person. corporate officers can be held jointly and severally liable with the company. disregarding the separate juridical personality of the corporation unifying the group. has already ceased operations and there is no other way by which the judgment in favor of the employees can be satisfied. and insist that because the company. This reliance fails to persuade. In the instant case. Under the doctrine of “piercing the veil of corporate fiction. it must have an officer who can be presumed to be the employer. After all. NLRC and subsequent cases. while we recognize that there are peculiar circumstances or valid grounds that may exist to warrant the piercing of the corporate veil. when necessary to protect the rights of third parties. conducted and controlled by the same parties. petitioners want us to disregard their separate personalities. For one.” the court looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking business as a group. any piercing of the corporate veil has to be done with caution. both law and equity will. We find the aforesaid decisions inapplicable to the instant case. liable for the debts and liabilities of the transferor.C. The rationale is that. Lastly.

Hence. The general rule remains that PNB-Madecor has a personality separate and distinct from PNB. that PNB may be held liable for the debts of PNEI. by itself. the Court sustained the piercing of the corporate veil and made the officers of Ransom personally liable for the debts of the latter. does not make a corporate officer personally liable for the debts of the corporation. bad faith. but does not include any labor organization or any of its officers or agents except when acting as employer. In AC Ransom. In the absence of malice. or a specific provision of law making a corporate officer liable. notwithstanding the fact that PNB-Madecor was a subsidiary of PNB. agency. it appears that Ransom. The Court ruled that assuming. employer includes any person acting in the interest of an employer. or defend a crime. namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation. 2) fraud cases or when the corporate entity is used to justify a wrong. taken 5 . More importantly. It was clarified in Carag and McLeod that Article 212(e) of the Labor Code. foreseeing the possibility or probability of payment of backwages to its employees. with the latter to be eventually phased out if the strikers win their case. Under the said provision. for the sake of argument. directly or indirectly. protect fraud. or 3) alter ego cases. The execution could not be implemented against Ransom because of the disposition posthaste of its leviable assets evidently in order to evade its just and due obligations. such corporate officer cannot be made personally liable for corporate liabilities. as aptly observed by this Court in AC Ransom. National Labor Relations Commission. petitioners still cannot proceed against the Pantranco properties. Clearly. what can be inferred from the earlier cases is that the doctrine of piercing the corporate veil applies only in three (3) basic areas. National Labor Relations Commission and McLeod v. the Court explained the doctrine laid down in AC Ransom relative to the personal liability of the officers and agents of the employer for the debts of the latter. organized Rosario to replace Ransom. in the recent cases Carag v. where a corporation is merely a farce since it is a mere alter ego or business conduit of a person. the Court imputed liability to the officers of the corporation on the strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code. It added that the governing law on personal liability of directors or officers for debts of the corporation is still Section 31 of the Corporation Code. conduit or adjunct of another corporation. the same being owned by PNB-Madecor. The mere fact that a corporation owns all of the stocks of another corporation. or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality.Moreover.

The plaintiff on appeal advanced that its totalindebtedness to the PNB as of November 21. subject to the right of the plaintiff to redeem the same within a period of one year. the proceeds of the foreclosure sale of its real property alone in the amount of P56. PHILIPPINE NATIONAL BANK and ANACLETOHERALDO Deputy Provincial Sheriff of Camarines Norte. and the said property was sold to the PNB for the sum of P56.500.59. and another release of P15. It was found that the plaintiff had already stopped operation about the end of 1957 or early part of 1958. excludingattorney's fees.87 and not P58.alone. The PNB released from the approvedloan the sum of P27. 1961. To secure payment. a subsidiary’s separate existence shall be respected. held on November 21.00 on that 6 . 1961. J. G.The unpaid obligation of the plaintiff as of September 22.908.485.52 with interest thereon at the rate of 6% per annum.582. and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective businesses.500.00.51 as concludedby the court a quo. L-22973. situated in the poblacion of Jose Panganiban (formerly Mambulao). 1961. together with the buildings and improvements existing thereon.908. 1968 ANGELES. If used to perform legitimate functions.R. 1956 the plaintiff applied for an industrial loan of P155.213. together with the buildings and improvementsthereon was. plaintiff-appellant. A foreclosure sale of the parcel of land.000 (approved for a loan of P100. No.The trial court sentenced the Mambulao Lumber Company to pay to the defendant PNB the sum of P3.000 only) with the Naga Branch of defendant PNB.The plaintiff sent a letter reiterating its request that the foreclosure sale of the mortgaged chattels bediscontinued on the grounds that the mortgaged indebtedness had been fully paid and that it could not belegally effected at a place other than the City of Manila.January 30. vs. MAMBULAO LUMBER COMPANY. amounted to P57.646.: FACTS: On May 5. province of Camarines Norte.The plaintiff failed to pay the amortization on the amounts released to and received by it. is not sufficient to justify their being treated as one entity. the plaintiff mortgaged aparcel of land. was only P56. hence. defendants-appellees.

serious anxiety. mentalanguish. added to the sum of P738. not only because it is admitted that herein appellant had already ceased in its business operationat the time of the foreclosure sale of the chattels. anartificial person like herein appellant corporation cannot experience physical sufferings. and by detaining its "man-in-charge" of said properties.however. REGISTER OF DEEDS. HELD: Herein appellant's claim for moral damages. Obviously. wounded feelings.59 it remitted to the PNB thereafter was more thansufficient to liquidate its obligation. intimidation. A corporation may have a good reputation which. or in Manila which is theplace agreed upon by the parties in the mortgage contract. PACIFIC BANKING CORPORATION.That for the acts of the PNB in proceeding with the sale of the chattels. and in taking possession thereof after the sale thru force. if besmirched. the PNB is liable to plaintiff fordamages and attorney's fees. in utter disregard of plaintiff'svigorous opposition thereto.OFFICIO SHERIFF OF QUEZON 7 . ESTELITA BURGOS LIPAT AND ALFREDO Camarines Norte. fright. may also be aground for the award of moral damages. The same cannot be considered under the facts of this case.coercion. thereby rendering the subsequent foreclosure sale of its chattelsunlawful. moral shock or social humiliation which arebasis of moral damages . ISSUE: Whether or not PNB may be held l iable to plaintiff Corporation for damages and attorney’s fees. RTC EX. vs. but also for the reason that whatever adverse effects of the foreclosure sale of the chattels could have upon its reputation or business standing would undoubtedlybe the same whether the sale was conducted at Jose Panganiban. seems to have no legal or factual basis.

is derived not merely from practice. the mere fact that thePhilippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL). repair. 2. among others. TRINIDAD. defend crime. G. transformers. the board of directors may validly delegate some of its functions and powers to officers. 2003 http://www. Its existence may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or. defeat publicconvenience. or agents. The corporate veil may be lifted only if it has been used to shield fraud. 8 . NASUDECO vs. the construction of a power house building. justify a wrong. or authorization from the board. or relevant provisions of law.CITY AND THE HEIRS OF EUGENIO D. just as a natural person may authorize another to do certain acts for and on his behalf. custom. or acquiescence in the general course of business. yet. by-laws. with which it clothes him. or (2) the acquiescence in his acts of a particular nature.[31] Apparent authority. with actual or constructive knowledge thereof.html While the power and responsibility to decide whether the corporation should enter into a contract that will bind the corporation is lodged in its board of directors.PASUMIL (Pampanga Sugar Mills) engaged the services of Andrada Electric for electrical rewinding. subject to the articles of incorporation. which had earlier been foreclosed and purchasedat the resulting public auction by the Development Bank of the Philippines (DBP). The authority of such individuals to bind the corporation is generally derived from law. No. insulate bad faith or perpetuate injustice. Thus. Most of the services werepartially paid by PASUMIL.[32] PNB. Facts: 1. whether within or beyond the scope of his ordinary powers. 142435 April 30. in other words. corporate by-laws. leaving several unpaid accounts. the apparent authority to act in general.R. either expressly or impliedly by habit.installation of turbines. willnot make PNB liable for the PASUMIL’s contractual debts to respondent. Andrada Electric and Engineering Company (2002)Doctrine: Basic is the rule that a corporation has a legal personality distinct andseparate from the persons and entities owning it.chanrobles.

311 to take ownership and possession of the assetsand ultimately. under LOI No.On August 1975. the mere fact that the Philippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL). Held: NO. The corporate veil may be lifted only if it has been usedto shield fraud. PNB. (2) such control must have been used by thedefendant to commit a fraud or a wrong to perpetuate the violation of a statutory or other positive legal duty. 3. acquired the assets of PASUMIL— assets that were earlier foreclosed by the DBP.Thus.The absence of the foregoing elements in the present case precludes the piercing of thecorporate veil. Piercing the veil of corporate fiction may be allowed only if the following elementsconcur: (1) control not mere stock control.4. insulate badfaith or perpetuate injustice. musthave been such that the corporate entity as to this transaction had at the time noseparate mind. and attorney’sfees. and (3) the said control and breach of duty must have proximately causedthe injury or unjust loss complained of. which had earlier been foreclosed and purchased at the resulting public auction by the Development Bankof the Philippines (DBP). to nationalize and consolidate its interest in other PNB controlledsugar mills. On September 1975. Issue: Whether PNB and NASUDECO may be held liable for PASUMIL’s liability to AndradaElectric and Engineering Company. PNB organized NASUDECO (National Sugar DevelopmentCorporation). but complete domination² not only of finances. other than the fact that PNB and NASUDECO acquired 9 . will not make PNB liable for the PASUMIL's contractualdebts to Andrada Electric & Engineering Company (AEEC). will or existence of its own. NASUDECO is a semi-government corporation and the sugar arm of the PNB. damages. justify a wrong. but of policy and business practice in respect to the transaction attacked.Andrada Electric alleges that PNB and NASUDECO should be liable for PASUMIL’s unpaid obligation amounting to 500K php. defeat public convenience. a semi-government corporation. or a dishonest and an unjust act in contravention of plaintiff'slegal right.First. defend crime. having owned and possessed the assets of PASUMIL. Basic is the rule that a corporation has a legal personality distinct and separate from thepersons and entities owning it.

is a union whereby one or more existing corporations are absorbed by another corporation that survives andcontinues the combined business. The procedure prescribed under Title IX of the Corporation Code was notfollowed. despite respondent’s insistence tothe contrary.In the case at bar. petitioners contend that their takeover of the operations of PASUMILdid not involve any corporate merger or consolidation. on the other hand. 10 .Third.the assets of PASUMIL. Clearly. LOI No. the approval by the SEC of the articles of merger or consolidation is required. A consolidation is the union of two or more existing entities to form a new entity calledthe consolidated corporation.The merger.80. which expresslyauthorized PASUMIL and PNB to merge or consolidate (allegedly). 1973. as correctly found by the CA. A merger.Respondent further claims that petitioners should be held liable for the unpaidobligations of PASUMIL by virtue of LOI Nos. These articles must likewise be duly approved by a majority of the respective stockholders of the constituent corporations.another P14. 189-A and 311. as well as in the rights of stockholders and creditors. PASUMIL’s corporate existence.there is no showing that their control over it warrants the disregard of corporatepersonalities.000 to respondent and. prior to PNB’s acquisition of the foreclosedassets. there is no merger or consolidation with respect to PASUMIL andPNB. does not become effective upon the mere agreement of theconstituent corporations.In fact.There was NO merger or consolidation with respect to PASUMIL and PNB. although the assets of NASUDECO can be easily traced toPASUMIL. PASUMIL hadpaid P250. because the latter had never lostits separate identity as a corporation. the corporateseparateness between PASUMIL and PNB remains.For a valid merger or consolidation. had not beenlegally extinguished or terminated. from January 5. Hence. As of June 27. business conduit or instrumentality of another entityor person. PASUMIL had previously made partial payments to respondent for the former’sobligation in the amount of P777. there must bean express provision of law authorizing them. there is no evidence that their juridical personality was used tocommit a fraud or to do a wrong. Since a merger or consolidation involves fundamental changesin the corporation. Further.On the other hand. the transfer of the latter's assets to PNB and NASUDECO was notfraudulently entered into in order to escape liability for its debt to AEEC. or that the separate corporate entity was farcicallyused as a mere alter ego. 1974 to May 23. AEEC was not defrauded or injured when PNB and NASUDECO acquired theassets of PASUMIL. 11 explicitly provides that PNB shall study and submitrecommendations on the claims of PASUMIL’s creditors. Second.263.Neither did petitioner expressly or impliedly agree to assume the debt of PASUMIL torespondent.000. 1974. however.

Cardale was dissolved and the subject properties were divided and sold to other people. Cardale defaulted in its payment. contracted with Andrea Gutierrez for the latter to execute a deed of sale over certain parcels of land in favor of Cardale. Mejia then sought to nullify the auction sale on the ground that Francisco used the two corporations as dummies to defraud the estate of Gutierrez especially so that these circumstances are present: Francisco did not inform the lower court that the properties were delinquent in taxes. Gutierrez shall retain a lien over the properties by way of mortgage. The case dragged on for 14 years because Francisco lost interest in presenting evidence. ISSUE: Whether or not Merryland and Francisco shall be held solidarily liable. Cardale. Gutierrez died. While the case was pending. Nonetheless.FRANCISCO v MEIJA FACTS: Adalia Francisco was the Treasurer of Cardale Financing and Realty Corporation (Cardale). being the executrix of the will of Gutierrez took over the affairs of the estate. Cardale failed to pay real estate taxes over the properties in litigation hence. That without knowledge of the auction. And while the case was pending. 11 . and later on full payment in installment. That there was notice for an auction sale and Francisco did not inform the Gutierrez estate and as such. the Gutierrez estate cannot exercise their right of redemption. It was agreed that Gutierrez shall hand over the titles to Cardale but Cardale shall only give a downpayment. That Francisco failed to inform the court that the highest bidder in the auction sale was Merryland. the local government subjected said properties to an auction sale to satisfy the tax arrears. Apparently. Merryland is a corporation in which Francisco was the President and majority stockholder. The highest bidder in the auction sale was Merryland Development Corporation (Merryland). As security. and Rita Mejia. her other company. the estate was not able to perform appropriate acts to remedy the same. Gutierrez then filed a petition with the trial court to have the Deed rescinded. That thereafter. through Francisco.

INC. Francisco left Gutierrez in the dark. represented by it Managing PARTNER. Francisco’s elaborate act of defaulting payment.. There is constructive dismissal when the continued employment is rendered impossible so as to foreclose any choice on the employee’s part except to resign from such employment. She obviously acted in bad faith. plaintiff-appellee. there was no proof that it is merely an alter ego or a business conduit of Francisco.HELD: No. INC. M. Hence.[25][12] enunciated: Constructive dismissal or a constructive discharge has been defined as quitting because continued employment is rendered impossible.. What was only proven was that Francisco defrauded the Gutierrez estate as clearly shown by the dubious circumstances which caused the encumbered properties to be auctioned. Suldao vs. Cardale and Francisco cannot escape liability now that Cardale has been dissolved. J.FACTS: This was an action to recover possession of a parcel of land where theplaintiff was represented by a corporation.-versusQUIRINO BOLAÑOS. Time and again it has been reiterated that mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. unreasonable or unlikely. defendant-appellant. not paying realty taxes (since as treasurer of Cardale.Issue: WON the case should be dismissed on the ground that the case was notbrought by the real property in interestHeld:No. Francisco shall then pay Guttierez estate the outstanding balance with interest (total of P4.3 + million). disregarding the case. Inc. Cimech System Construction. Merryland merely bought the properties from the auction sale and such per se is not a wrongful act or a fraudulent act. 12 . Only Francisco shall be held liable to pay the indebtedness to the Gutierrez estate. Merryland can’t be held solidarily liable with Francisco. she’s responsible for paying the real estate taxes for Cardale). As regards Merryland however. as an offer involving a demotion in rank and a diminution in pay. By not disclosing the tax delinquency. and failure to advise Gutierrez of the tax delinquencies all constitute bad faith.GREGORIA ARANETA. TUASON & CO. The attendant fraud and bad faith on the part of Francisco necessitates the piercing of the veil of corporate fiction in so far as Cardale and Francisco are concerned..

that is. by J. What the Rulesof Court require is that an action be brought in the name of. in a suit in court. but notnecessarily by . the real party in interest.". "counsel forplaintiff" and commences with the statement "comes now plaintiff..Inc. another corporation • There is nothing against one corporation being represented byanother person. natural or juridical. Tuason does not explain why there was a difference in treatment of corporate involvement in partnerships as compared to that when it come to jointventures. cannot act as managingpartner for plaintiff on the theory that it is illegal for twocorporations to enter into a partnership is without merit. for the truerule is that though a corporation has no power into a partnership. • The contention that Gregorio Araneta Inc. Inc.) • The complaint is signed by the law firm of Araneta and Araneta. Philippine Fishing Gear Industries. Tuason and Co. Inc. throughits undersigned counsel.• there is nothing to the contention that the present action is not brought bythe real party in interest. Rule 2. (Section 2. Lim v. 13 ." It is true that the complaint also states that theplaintiff is "represented herein by its Managing Partner Gregorio Araneta. NOTE: Point of the case is about joint ventures being treated separately frompartnerships. M. itmay nevertheless enter into a joint venture with another where thenature of that venture is in line with the business authorized by itscharter.

Unquestionably. knowing it to be without valid existence. They were however unable to pay PFGI and so they were sued in their own names because apparently OQFC is a non-existent corporation. ISSUE: Whether or not Lim Tong Lim is liable. The three agreed to purchase two fishing boats but since they do not have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim). and to divide equally among them the excess or loss. which they started by buying boats worth P3. under the law on estoppel. this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. it is clear that Chua. They again borrowed money and they agreed to purchase fishing nets and other fishing equipments. Chua admitted liability and asked for some time to pay. are held liable as general partners. Lim. Although it was never legally formed for unknown reasons.. that the two acted without his knowledge and consent. fell under the term “common fund” under Article 1767. HELD: Yes. it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. These boats. Chua and Yao decided to form a corporation. Lim Tong Lim benefited from the use of the nets found in his boats. From the factual findings of both lower courts. International Express Travel & Tour Services Inc. financed by a loan secured from Jesus Lim.35 million. Yao waived his rights. CA 14 . the boat which has earlier been proven to be an asset of the partnership. Yao and Lim had decided to engage in a fishing business. they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats. Clearly. the purchase and the repair of which were financed with borrowed money. In their Compromise Agreement. Lim Tong Lim however argued that he’s not liable because he was not aware that Chua and Yao represented themselves as a corporation. v. Yao and Chua represented themselves as acting in behalf of “Ocean Quest Fishing Corporation” (OQFC) they contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to more than P500k. Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be imputed to Yao and Chua.FACTS: It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing with him and one Antonio Chua. Now. those acting on behalf of a corporation and those benefited by it. The contribution to such fund need not be cash or fixed assets.

Kahn is therefore personally liable for the contract entered into by PFF with IETTI. And under the law. Kahn averred that he should not be impleaded because he merely acted as an agent of PFF which he averred is a corporation with separate and distinct personality from him.FACTS: In 1989. The Court of Appeals however reversed the decision of the trial court. that PFF is therefore liable for the contract entered into by its agent Kahn. IETTI then sued PFF and Kahn was impleaded as a co-defendant. Inc. ISSUE: Whether or not the Court of Appeals is correct. International Express Travel & Tour Services. PFF was not able to complete the full payment in subsequent installments despite repeated demands from IETTI. PFF is considered as an unincorporated sports association. PFF. However. PFF. The trial court ruled against Kahn and held him personally liable for the said obligation (PFF was declared in default for failing to file an answer). There is also no merit on the finding of the CA that IETTI is in estoppel. through Henri Kahn. (IETTI). The application of the doctrine of corporation by estoppel applies to a third party only when he tries to escape liability on a contract from which he has benefited on the irrelevant ground of defective incorporation. that it cannot now deny the corporate existence of PFF because it had contracted and dealt with PFF in such a manner as to recognize and in effect admit its existence. HELD: No. This fact was never substantiated by Kahn. offered to the Philippine Football Federation (PFF) its travel services for the South East Asian Games. The CA further ruled that IETTI is in estoppel. upon its creation. PFF is empowered to enter into contracts through its agents. IETTI is not trying to escape liability from the contract but rather is the one claiming from the contract. As such. its president. In the case at bar. agreed. any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. Engr. is not automatically considered a national sports association. It must first be recognized and accredited by the Philippine Amateur Athletic Federation and the Department of Youth and Sports Development. People of the Philippines v. that as such. The Court of Appeals took judicial notice of the existence of PFF as a national sports association. Pineda 15 . PFF in turn made a down payment. IETTI then delivered the plane tickets to PFF. The trial court ruled that Kahn failed to prove that PFF is a corporation.

liabilities and damages incurred or arising as a result thereof: Provided. 19 March 1993] 16 . 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. that Ricorn is a recruitment agency for seamen. HELD: No. When he was receiving applicants.FACTS: In 1993. that Garcia is the president. ISSUE: Whether or not Botero is a mere employee of Ricorn. It was alleged that they represented themselves as the incorporators and officers of Ricorn Philippine International Shipping Lines. that he was merely an employee of Ricorn in charge of following up on their documents. It was later discovered that Ricorn was never registered with the Securities and Exchange Commission (SEC) and that it was never authorized to recruit by the Philippine Overseas Employment Agency (POEA).. Botero is the vice-president. the penalty shall be imposed upon the officer or officers of the corporation. But Ricorn was never incorporated? How will this affect his liability in the crime illegal recruitment? Under the law. Inc. Section 25 of the Corporation Code 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 the debts. Botero and Garcia were convicted. partnership. Botero averred that he was not an incorporator. if the offender is a corporation. Botero appealed.” Prime White Cement vs IAC Case Digest Prime White Cement Corporation vs. partnership. Intermediate Appellate Court [GR 68555. association or entity responsible for violation. it shall not be allowed to use as a defense its lack of corporate personality. and Miraples (now at large) is the treasurer. In his defense. Botero and his cohorts are estopped from denying liability as corporate officers of Ricorn. even if Ricorn was not incorporated. association or entity. It was proven by evidence that he was introduced to the applicants as the vice president of Ricorn. Carlos Garcia. and Luisa Miraples were accused of illegal recruitment. Patricio Botero. however. In this case. he was receiving them behind a desk which has a nameplate representing his name and his position as VP of Ricorn.

70. per bag of white cement. FOB Davao and Cagayan de Oro ports. replied that the board of directors of PWCC decided to impose the following conditions: (a) Delivery of white cement shall commence at the end of November. Alejandro Te and Prime White Cement Corporation (PWCC) thru its President. (c) The price of white cement 17 . as dealer with 20. 1969. 1970. and December. 1970. Zosimo Falcon and Justo C. entered into a dealership agreement whereby Te was obligated to act as the exclusive dealer and/or distributor of PWCC of its cement products in the entire Mindanao area for a term of 5 years and providing among others that (a) the corporation shall. he was asked by some of his businessmen friends and close associates if they can be his sub-dealer in the Mindanao area. Mr. unconditional. Trazo. entered into a written agreement with several hardware stores dealing in buying and selling white cement in the Cities of Davao and Cagayan de Oro which would thus enable him to sell his allocation of 20. as Chairman of the Board. (b) Te shall pay PWCC P9. circulating newspaper the fact of his being the exclusive dealer of PWWC's white cement products in Mindanao area." Right after Te entered into the dealership agreement. October.000 bags regular supply of the said commodity. (c) Te shall every time PWCC is ready to deliver the good.Facts: On or about 16 July 1969.000 bags (94 lbs/bag) of white cement per month. After Te was assured by his supposed buyer that his allocation of 20. by September.000 bags of white cement per month for only a period of three (3) months will be delivered. and irrevocable letter of credit in favor of PWCC and that upon certification by the boat captain on the bill of lading that the goods have been loaded on board the vessel bound for Davao the said bank or banking institution shall release the corresponding amount as payment of the goods so shipped. 1970. PWCC thru its corporate secretary. Philippine Currency. more particularly. sell to and supply Te. commencing September. (b) Only 8. in the Manila Chronicle dated 16 August 1969 and was even congratulated by his business associates. Te sometime in the months of September. he informed the defendant corporation in his letter dated 18 August 1970 that he is making the necessary preparation for the opening of the requisite letter of credit to cover the price of the due initial delivery for the month of September 1970. Relying heavily on the dealership agreement. open with any bank or banking institution a confirmed. he placed an advertisement in a national. so much so. In reply to the aforesaid letter of Te. looking forward to PWCC's duty to comply with the dealership agreement.000 bags of white cement can be disposed of.

In the absence of such express delegation.00 as moral damages. bind the corporation by a contract in the ordinary course of business. Issue: Whether the "dealership agreement" referred by the President and Chairman of the Board of PWCC is a valid and enforceable contract. (f) The letter of credit may be opened only with the Prudential Bank. PWCC.was priced at P13.00 as actual damages. and with evident intention not to be bound by the terms and conditions thereof.30 per bag. Held: The “dealership agreement” is not valid and unenforceable. Makati Branch.000 00 as and for attorney's fees and costs. (g) Payment of white cement shall be made in advance and which payment shall be used by the defendant as guaranty in the opening of a foreign letter of credit to cover costs and expenses in the procurement of materials in the manufacture of white cement. except as otherwise provided by law. and Te by force of circumstances was constrained to cancel his agreement for the supply of white cement with third parties. as a general rule. Several demands to comply with the dealership agreement were made by Te to PWCC. Hence. or by acceptance and retention of benefits flowing therefrom. Te filed suit. PWCC filed the petition for review on certiorari. After trial. the President as such may. which were concluded in anticipation of. however. Under the Corporation Law.302. Although it cannot completely abdicate its power and responsibility to act for the juridical entity. and P10.400. even in the absence of express or implied authority by ratification. a contract entered into by its President. in violation of.000. on behalf of the corporation. the trial court adjudged PWCC liable to Alejandro Te in the amount of P3. may still bind the corporation if the board should ratify the same expressly or impliedly. PWCC refused to comply with the same. as well as under the present Corporation Code. (e) The place of delivery of white cement shall be Austurias (sic). Furthermore. Notwithstanding that the dealership agreement between Te and PWCC was in force and subsisting. P100. by acts showing approval or adoption of the contract. all corporate powers shall be exercised by the Board of Directors. The appellate court affirmed the said decision. entered into an exclusive dealership agreement with a certain Napoleon Co for the marketing of white cement in Mindanao. which was then in force at the time the case arose. the Board may expressly delegate specific powers to its President or any of its officers. (d) The price of white cement is subject to readjustment unilaterally on the part of the defendant. and pursuant to the said dealership agreement. Implied ratification may take various forms — like silence or acquiescence. provided the same is reasonable 18 .

He must have known that within that period of 6 years. In fact. First of all. The situation is quite different where a director or officer is dealing with his own corporation. was to sell and supply to Te 20. but are all general and thus quite flexible.50 per bag. Te's bounden duty was to act in such manner 19 . The fixed price of P9. he was a member of the Board of Directors and Auditor of the corporation as well. In fact. it was already P37. In case his interests conflict with those of the corporation. it may be ratified by the stockholders provided a full disclosure of his adverse interest is made. and by the middle of 1975. the contract was neither fair nor reasonable.70 per bag for a period of 5 years was not fair and reasonable. At the time of the contract.under the circumstances. void or voidable. specially since he was the other party in interest. there would be a considerable rise in the price of white cement. the fact that the other party to the contract was a Director and Auditor of PWCC changes the whole situation. As corporate managers. These rules are basic.50. directors are committed to seek the maximum amount of profits for the corporation. Te's own Memorandum shows that in September 1970. If the contract is fair and reasonable under the circumstances. this unfairness in the contract is also a basis which renders a contract entered into by the President.70 per bag. a person outside the corporation. A director's contract with his corporation is not in all instances void or voidable. The "dealership agreement" entered into in July 1969. purportedly acting for the corporations. although it may have been in the ordinary course of business. were not stable and were expected to rise. the reason why delivery was not to begin until 14 months later. He was what is often referred to as a "self-dealing" director. the price per bag was P14. at the fixed price of P9.. As director. without authority from the Board of Directors. that at that time.70 per bag for the whole 5 years of the contract. Fairness on his part as a director of the corporation from whom he was to buy the cement. They apply where the President or other officer.000 bags of white cement per month. he owes a duty of loyalty to his corporation. A director of a corporation holds a position of trust and as such. is dealing with a third person. Instead. PWCC had not even commenced the manufacture of white cement. prices of commodities in general. no provision was made in the "dealership agreement" to allow for an increase in price mutually acceptable to the parties.e. i. Te was not an ordinary stockholder. the price was pegged at P9. Despite this. Herein. for 5 years starting September 1970. or at least must be presumed to know. would require such a provision. Te is a businessman himself and must have known. Granting arguendo that the "dealership agreement" would be valid and enforceable if entered into with a person other than a director or officer of the corporation. and white cement in particular. he cannot sacrifice the latter to his own advantage and benefit.

Alfredo Montelibano. it is to Us quite clear that he was guilty of disloyalty to the corporation. Sometime in 1936. said contracts were stipulated to be in force for 30 years starting with the 1920-21 crop. Alejandro Montelibano. had already granted increased participation (of 62. being in effect a donation that was ultra vires and beyond the powers of the corporate directors to adopt. and the Limited copartnership Gonzaga and Company. he was attempting in effect. had been and are sugar planters adhered to the defendant-appellee’s sugar central mill under identical milling contracts. increasing the planters’ share to 60% of the manufactured sugar and resulting molasses. In the light of the circumstances of this case. null and void ab initio.. and provided that the resulting product should be divided in the ratio of 45% for the mill and 55% for the planters.5%) to their planters. Montelibano vs Bacolod-Murcia Milling (1962) Facts: Plaintiffs-appellants. but extending the operation of the milling contract from the original 30 years to 45 years.. adopted a resolution granting further concessions to the planters over and above those contained in the printed Amended Milling Contract. that the resolution in question was. Issue: WON the board resolution is an ultra vires act and in effect a donation from the board of directors? Held: No. Inc. resisted the claim. besides other concessions. The appellants initiated the present action. The contract was therefore not valid and the Court cannot allow him to reap the fruits of his disloyalty. and that under the resolution the appellee had become obligated to grant similar concessions to the not to unduly prejudice the corporation. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its 20 . and defended by urging that the stipulations contained in the resolution were made without consideration.. The appellee Bacolod-Murcia Milling Co. inc. it was proposed to execute amended milling contracts. to enrich himself at the expense of the corporation. contending that three Negros sugar centrals with a total annual production exceeding one-third of the production of all the sugar central mills in the province. There is no showing that the stockholders ratified the "dealership agreement" or that they were fully aware of its provisions.. therefore. Originally executed in 1919. The Board of Directors of the appellee Bacolod-Murcia Milling Co.

Acuña. vs. J. GAMBOA. G. DACLES respondents. 1936. duty bound to grant similar increases to plaintiffs-appellants herein. A Alejandro for petitioners. 1975. denying the petitioners' motion to dismiss the complaint filed in Civil Case No. Exequiel T.terms more acceptable to the other contracting parties. The appellee Bacolod-Murcia Milling Company is. 1979 RICARDO L. and LUISA U. and whether or not it will cause losses or decrease the profits of the central. petitioners. 10257 of the 21 . dated January 2. Branch II. it is valid and binding.: Petition for certiorari to review the order of the respondent judge. LEONITO LOPUE. or close down at a smaller loss. VICTORIANO as Presiding Judge of the Court of First Instance of Negros Occidental. HONORIO DE 1A RAMA. CONCEPCION JR. the court has no authority to review them. LYDIA R. Whether the business of a corporation should be operated at a loss during depression. SR. Lirazan & Associates for private respondents. JR. OSCAR R. No. HON. L-40620 May 5. and the HEIRS OF MERCEDES DE LA RAMA-BORROMEO. As the resolution in question was passed in good faith by the board of directors.. is a purely business and economic problem to be determined by the directors of the corporation and not by the court. GAMBOA. BENJAMIN LOPUE. BENJAMIN LOPUE. under the terms of its Resolution of August 20.R. EDUARDO DE LA RAMA...

. et al. then President and Vice-President of the corporation.Court of First Instance of Negros Occidental. and the late Mercedes de la Rama-Borromeo. in order to forestall the takeover by the plaintiffs of the afore-named corporation. The gist of the complaint. Honorio de la Rama.. remaining members of the board of directors of the corporation. as well as Ramon de la Rama." as well as the order dated April 4. Jr. Lydia R. Gamboa. thus leaving 823 shares unissued. the herein petitioners..00 per share. respectively. Eduardo de la Rama. Battistuzzi Eduardo de la Rama. and thereafter passed a resolution authorizing the sale of the 823 unissued shares of the corporation to the defendants. or continuing the performance of an act tending to prejudice. et al. Lydia de la Rama-Gamboa. Borromeo. Honorio de la Rama. Honorio de la Rama. now represented by her heirs. Leonito Lopue. plaintiffs. in favor of the said defendants. Paz R. Lydia R. and Ricardo Gamboa.. after which the defendants Honorio de la Rama. and Enzo Battistuzzi. Jr. Wherefore. Paz de la Rama-Battistuzzi. 10257 of the Court of First Instance of Negros Occidental. filed on April 4. Gamboa. versus Ricardo Gamboa. a domestic corporation. with a par value of P100. and Enzo Battistuzzi were not legally elected to the board of directors of the said corporation and has unlawfully usurped or intruded into said office to the prejudice of the plaintiffs. "Benjamin Lopue Sr. are the owners of 1. as stockholders thereof. diminish or otherwise injure the plaintiffs' 22 . Inc.000 shares. and Enzo Battistuzzi were elected to the board of directors of the corporation. Dacles to nullify the issuance of 823 shares of stock of the Inocentes de la Rama. defendants. Sr. and that the defendants Lydia de la Rama-Gamboa. Benjamin Lopue. Inc. Benjamin Lopue. the defendants Mercedes R. with an authorized capital stock of 3. Ricardo L. Ricardo L.. with the exception of Anastacio Dacles who was joined as a formal party.328 shares of stock of the Inocentes de la Rama. they prayed that a writ of preliminary injunction be issued restraining the defendants from committing. In the aforementioned Civil Case No. at par value. that upon the plaintiffs' acquisition of the shares of stock held by Rafael Ledesma and Jose Sicangco. is that the plaintiffs. entitled. and is in disregard of the strictest relation of trust existing between the defendants. that the sale of the unissued 823 shares of stock of the corporation was in violation of the plaintiffs' and pre-emptive rights and made without the approval of the board of directors representing 2/3 of the outstanding capital stock. Gamboa and Honorio de la Rama as president and vice-president of the corporation. 1972. 1975.177 of which were subscribed and issued. 2. Gamboa.. and Luisa U. denying the motion for the reconsideration of Said order.. Honorio de la Rama. were sued by the herein private respondents. surreptitiously met and elected Ricardo L. Ramon de la Rama. and Mercedes R. respectively. Gamboa. Borromeo.

as follows: 23 . " 2 Pursuant thereto. 1 Acting upon the complaint. Paz de la Rama Battistuzzi and Enzo Battistuzzi .' and from disposing. Honorio de la Rama. as well as the costs of suit . the defendants deposited with the clerk of court the corporation's certificates of stock Nos. and Enzo Battistuzzi be declared as usurpers or intruders into the office of director in the corporation and. selling or otherwise impairing the value of the certificates of stock allegedly issued illegally in their names on February 11. consequently. entered into a compromise agreement with the defendants Ramon de la Rama. or otherwise impairing the value of the 823 shares of stock illegally issued by the defendants. 3 On October 31. that a receiver be appointed to preserve and administer the property and funds of the corporation. after proper hearing. transferring. diminish or otherwise injure plaintiffs' rights in the corporate properties and funds of the corporation Inocentes de la Rama.000. 80 to 86. ousting them therefrom and declare Luisa U. 4 whereby the contracting parties withdrew their respective claims against each other and the aforenamed defendants waived and transferred their rights and interests over the questioned 823 shares of stock in favor of the plaintiffs. 1972. inclusive. Inc. upon plaintiffs' posting a bond in the sum of P50. Dacles as a legally elected director of the corporation. now private respondents. agents. 1972. transferring. representing the disputed 823 shares of stock of the corporation. directed the clerk of court "to issue the corresponding writ of preliminary injunction restraining the defendants and/or their representatives. or persons acting in their behalf from the commission or continuance of any act tending in any way to prejudice. selling. and from disposing. 1972. copy of the bond to be furnished to the defendants. that the sale of 823 shares of stock of the corporation be declared null and void. that defendants Lydia de la Rama-Gamboa. to answer for any damages and costs that may be sustained by the defendants by reason of the issuance of the writ.00. the respondent judge. or at any date thereafter. and ordering them to deposit with the Clerk of Court the corresponding certificates of stock for the 823 shares issued to said defendants on February 11. the plaintiffs therein.rights in the corporate properties and funds of the corporation. and that the defendants be ordered to pay damages and attorney's fees.

That the defendants Ramon L. the defendants filed a motion to dismiss the complaint. 7 On February 10. transfer or other wise convey. the defendants filed the instant petition for certiorari for the review of said orders. claiming that the respondent court has no jurisdiction to interfere with the management of the corporation by the board of directors. for having violated the writ of preliminary injunction when they entered into the aforesaid compromise agreement with the plaintiffs. de la Rama. 1975. Paz de la Rama Battistuzzi Enzo Battistuzzi now have or may have in the eight hundred twenty-three (823) shares in the capital stock of the corporation INOCENTES DELA RAMA. an Addendum thereto. cede. 6 The defendants also filed a motion to declare the defendants Ramon L. interests.' which were issued in the names of the defendants in the above-entitled case on or about February 11. Paz de la Rama Battistuzzi and Enzo Battistuzzi in contempt of court. When the trial court denied said motion and its addendum. 1972. The motion was denied on January 2. 1975. allowing the sale of the 823 shares of stock to the defendants was purely a management concern which the courts could not interfere with. The compromise agreement was approved by the trial court on December 4. the defendants filed a motion for the reconsideration of the order denying their motion to dismiss the complaint' and subsequently. 24 . INC. 5 As a result. but the respondent judge denied the said motion for lack of merit. and (2) that they were estopped from further prosecuting the case since they have. upon the grounds: (1) that the plaintiffs' cause of action had been waived or abandoned. 1974. free from all liens and encumbrances unto the plaintiffs. acknowledged the validity of the issuance of the disputed 823 shares of stock. Paz de la Rama Battistuzzi and Enzo Battistuzzi will waive. and the enactment of a resolution by the defendants. as members of the board of directors of the corporation. as they hereby waive. participations or title that the defendants Ramon L.3. cede. de la Rama. in effect. transfer and convey. de la Rama. or at any date thereafter and which shares are the subject-matter of the present suit. on November 19. all of the rights. 1972. in such proportion as the plaintiffs may among themselves determine.

It would be a breach of orderly procedure to allow a party to come before this Court every time an order is issued with which he does not agree. The foregoing circumstances and the fact that no consideration was mentioned in the agreement for the transfer of rights to the said shares of stock to the plaintiffs are sufficient to show that the agreement was merely an admission by the defendants Ramon de la Rama. Besides. questioning the trial court's jurisdiction on matters affecting the management of the corporation. The questioned order denying the petitioners' motion to dismiss the complaint is merely interlocutory and cannot be the subject of a petition for certiorari. to reiterate the issue on appeal. 10 action and contracts intra vires entered into by the board of directors are binding upon the corporation and courts will not interfere unless such contracts are so unconscionable and oppressive as to amount to a wanton destruction of the rights of the minority. or that the respondent court lacked jurisdiction over the cause as to warrant the issuance of the writ prayed for.The petition is without merit. arbitrarily. or whimsically issued. so that the trial court has jurisdiction over the case. The well-known rule is that courts cannot undertake to control the discretion of the board of directors about administrative matters as to which they have legitimate power of. 11 In the instant case. 25 . As found by the respondent judge. in their Addendum to the motion for reconsideration of the order denying the motion to dismiss the complaint. is without merit. The claim of the petitioners. the petitioners have not waived their cause of action against the petitioners by entering into a compromise agreement with the other defendants in view of the express provision of the compromise agreement that the same "shall not in any way constitute or be considered a waiver or abandonment of any claim or cause of action against the other defendants. the order denying the petitioners' motion to dismiss the complaint was not capriciously. if the decision is adverse. The proper procedure to be followed in such a case is to continue with the trial of the case on the merits and. the plaintiffs aver that the defendants have concluded a transaction among themselves as will result to serious injury to the interests of the plaintiffs. Paz de la Rama Battistuzzi and Enzo Battistuzzi of the validity of the claim of the plaintiffs." There is also no estoppel because there is nothing in the agreement which could be construed as an affirmative admission by the plaintiff of the validity of the resolution of the defendants which is now sought to be judicially declared null and void.

the petition should be. LABOR ARBITER AMBROSIO B. SISON. it is yet too early in the proceedings since the issues have not been joined. ET AL. In such actions. with the corporation as the real party in interest. 12 In the case at bar. as it is hereby DISMISSED for lack of merit. vs. and not that of the corporation. 89879 April 20.The petitioners further contend that the proper remedy of the plaintiffs would be to institute a derivative suit against the petitioners in the name of the corporation in order to secure a binding relief after exhausting all the possible remedies available within the corporation. An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights. however. NATIONAL LABOR RELATIONS COMMISSION. Larcia and Conrado Abriol Padilla for petitioners. Besides. the suing stockholder is regarded as a nominal party. Sofronio A. 13 WHEREFORE. 1990 JAIME PABALAN AND EDUARDO LAGDAMEO. respondents. At any rate. the plaintiffs are alleging and vindicating their own individual interests or prejudice.R. 26 . whenever the officials of the corporation refuse to sue. ELIZABETH RODEROS. With costs against the petitioners. misjoinder of parties is not a ground to dismiss an action. G. and THE SHERIFF OF THE NATIONAL LABOR RELATIONS COMMISSION. petitioners.. or are the ones to be sued or hold the control of the corporation. No. SO ORDERED.

The hearing was re-set on January 14. GANCAYCO. 13th month pay and other benefits under existing laws and/or separation pay. J. Lomabao. eighty-four (84) workers of the Philippine Inter-Fashion. 130. 1987. 1987 both parties were directed to submit their respective position papers within ten (10) days. The hearing was re-set for November 27. 27 . 1987. On October 21. On November 30.: Once again the parameters of the liability of the officers of a corporation as to unpaid wages and other claims of the employees of a corporation which has a separate and distinct personality are brought to fore in this case. through its General Manager. Inc. Complainants demanded reinstatement with full backwages. 1987 but on said date respondents and/or counsel failed to appear. (PIF) filed a complaint against the latter for illegal transfer simultaneous with illegal dismissal without justifiable cause and in violation of the provision of the Labor Code on security of tenure as well as the provisions of Batas Pambansa Blg. living allowance.Apolinario N. 1987 for failure of respondents to appear. By mutual agreement the hearing was re-set on December 21. for private respondents. On December 10. 1987 so that they could engage a counsel to properly represent them preferably on November 17. 1987 respondents (petitioners herein) moved for the cancellation of the hearing scheduled on November 6. 1987. was notified about the complaint and summons for the hearing set for November 6. Jr. 1987. On October 20. 1988 on which date respondents were given a deadline to submit their position paper. PIF.

(See attached Annex "A" of complainants' position paper. complainants filed their supplemental position paper impleading the petitioners as officers of the PIF in the complaint for their illegal transfer to a new firm. reinstate the sixty two (62) complainants to their former or equivalent position without loss of seniority rights and privileges. Jaime Pabalan and Mr.) SO ORDERED. 1988 and on March 29. On January 14.On January 4. 1988 was re-set to March 9. 1988 complainants filed their position paper. 1988 on which dates respondents failed to appear. their backwages and other benefits from the time they were dismissed up to the time they are actually reinstated. Eduardo Lagdameo are hereby ordered to: 1. 1988 counsel for respondents moved that he be given until January 22. 1988 a decision was rendered by the labor arbiter the dispositive part of which reads as follows: IN VIEW OF THE FOREGOING CONSIDERATION. respondent Philippine Inter-Fashion and its officers Mr. the computation to be based from the latest minimum wage law at the time of their dismissal. jointly and severally. The labor arbiter granted the motion. On July 13. On May 5. 1988. 1988 to file their position paper. 1 28 . 2. with leave of the labor arbiter. 1988. to pay. The heating for February 17. The PIF filed its position paper on January 22.

B THE DECISION AND THE NLRC RESOLUTION SUFFER FROM A LEGAL AND CONSTITUTIONAL INFIRMITY BECAUSE THEY SANCTION A DEPRIVATION OF PETITIONERS' PROPERTIES WITHOUT DUE PROCESS OF LAW. INC. which nevertheless. 1989. affirmed the appealed decision and dismissed the appeal for lack of merit in a resolution dated June 30. TO PAY THE JUDGMENT DEBT. UNDER DISPUTE. ARE NULL AND VOID.Not satisfied therewith petitioners filed a motion for reconsideration in the First Division of the public respondent. C THE ARBITER AND THE NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN ADJUDGING PETITIONERS HEREIN AS JOINTLY AND SEVERALLY LIABLE WITH PHILIPPINE INTER-FASHION. National Labor Relations Commission (NLRC). Petitioners were ordered to pay the appeal fee in accordance with law. THEREFORE. 29 . Hence the herein petition for certiorari with prayer for the issuance of a temporary restraining order wherein the petitioners raised the following issues: A THE ARBITER AND THE NLRC DID NOT ACQUIRE JURISDICTION OVER THE PERSONS OF THE PETITIONERS AND. THE DECISION AND THE RESOLUTION.

A motion for reconsideration filed by the petitioners of the said resolution was denied on October 16. 1989.00. Thereafter when the supplemental position paper was filed by complainants. However. 1989 for failure to raise any substantial arguments to warrant a modification thereof. petitioners were impleaded as respondents to which they filed an opposition inasmuch as they filed their own supplemental position papers. having failed to comply with the Rules of Court and Administrative Circular No. 1989. 30 . petitioners also appeared in their behalf through counsel. Now to the merit of the petition. 1989 the Court resolved to set aside said resolutions of September 25. 1989 and October 16. 1990 for failure of petitioner to file the required bond despite extensions of time granted them. and to require respondents to comment thereon within ten (10) days from notice thereof. They were therefore properly served with summons and they were not deprived of due process. As the record shows while originally it was PIF which was impleaded as respondent before the labor arbiter. 188 requiting the verification of the petition. the Court resolved to lift the temporary restraining order issued on November 13. 1989 this Court dismissed the petition for insufficiency in form and substance. The first two issues they raised are to the effect that the public respondents never acquired jurisdiction over them as they have not been served with summons and thus they were deprived due process. However. 1989 in the court's calendar which the Court granted.000. acting on an urgent motion to include the motion for reconsideration of the resolution of September 25. The Court finds these grounds to be devoid of merit.On September 25. on November 30. A temporary restraining order was issued enjoining respondents from enforcing or implementing the questioned decision of the labor arbiter affirmed by the NLRC upon a bond to be filed by petitioners in the amount of P100. on February 7. Petitioners do not question the merits of the decision insofar as PIF is concerned in this proceeding.

To the same effect . officers of a corporation are not personally liable for their official acts unless it is shown that they have exceeded their authority. 2 Mere ownership by a single stockholder or by another corporation of all or nearly all capital stocks of the corporation is not by itself sufficient ground for disregarding the separate corporate personality. a company manager acting in good faith within the scope of his authority in terminating the services of certain employees cannot be held personally liable for damages. as this Court had held "where the incorporators and directors belong to a single family. it was also held that the shield of corporate fiction should be pierced when it is deliberately and maliciously designed to evade financial obligations to employees. 5 31 . for. the circumvention of statutes. 4 However.Petitioners contend however that under the circumstances of the case as officers of the corporation PIF they could not be jointly and severally held liable with the corporation for its liability in this case. CIR involving almost similar facts as in this case. In the case of Claparols vs. . including its officers as well as from that of any other legal entity to which it may be related. 3 As a general rule. . the legal fiction that a corporation has a personality separate and distinct from stockholders and members may be disregarded as follows: This finding does not ignore the legal fiction that a corporation has a personality separate and distinct from its stockholders and members. (are) this Court's rulings in still other cases: When the notion of legal entity is used as a means to perpetrate fraud or an illegal act or as a vehicle for the evasion of an existing obligation. Thus. and or (to) confuse legitimate issues the veil which protects the corporation will be lifted." or to further an end subversive of justice. the corporation and its members can be considered as one in order to avoid its being used as an instrument to commit injustice. The settled rule is that the corporation is vested by law with a personality separate and distinct from the persons composing it.

in the questioned resolution of the NLRC dated June 30. Ransom Corporation were transferred to continue its business which acts of such officers and agents of A.C. 1989 is hereby modified by relieving petitioners of any liability as officers of the PIF and holding that the liability shall be solely that of Philippine Inter-Fashion.In this particular case complainants did not allege or show that petitioners. Indeed. 32 . Inc. the petition is GRANTED and the questioned resolution of the public respondent dated June 30. 1989 there is no finding as to why petitioners were being held jointly and severally liable for the liability and obligation of the corporation except as to invocation of the ruling of this Court in A. WHEREFORE. Ransom Corporation were intended to avoid payment of its obligations to its employees. the circumvention of statutes. that A. It must be noted. Hence petitioners can not be held jointly and severally liable with the PIF corporation under the questioned decision and resolution of the public respondent. as officers of the corporation deliberately and maliciously designed to evade the financial obligation of the corporation to its employees.C. or to confuse the legitimate issues.C.C. Ransom Labor Union-CCLU vs. No costs. NLRC the corporation was a family corporation and that during the strike the members of the family organized another corporation which was the Rosario Industrial Corporation to which all the assets of the A. 7 Not one of the above circumstances has been shown to be present. In such case this Court considered the president of the corporation to be personally liable together with the corporation for the satisfaction of the claim of the employees. however. NLRC 6 in that the liability in the cases of illegal termination of employees extends not only to the corporation as a corporate entity but also to its responsible officers acting in the interest of the corporation or employer. or used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle for the evasion of existing obligations. Ransom Labor UnionCCLU vs.

a court would not be warranted in substituting its judgment instead of the judgment of those who are authorized to make by-laws and who have exercised authority. It has the inherent power to adopt by-laws for its internal 33 . 89 SCRA 336 (1979) Facts: Petitioner. SEC. However. the Board acted without authority and in usurpation of the power of the stockholders n amending the by-laws in 1976. It is stated in the by-laws that the amendment or modification of the by-laws may only be delegated to the BODs upon an affirmative vote of stockholders representing not less than 2/3 of the subscribed and paid uo capital stock of the corporation. stockholder of San Miguel Corp. he alleged that the corporation had been using corporate funds in other corps and businesses outside the primary purpose clause of the corporation in violation of the Corporation Code. In another case filed by petitioner. This was denied by the SEC. While this was pending. Whether the bylaw is in conflict with the law of the land. He also contends that the amendment deprived him of his right to vote and be voted upon as a stockholder (because it disqualified competitors from nomination and election in the BOD of SMC). The Court held that a corporation has authority prescribed by law to prescribe the qualifications of directors. filed a petition with the SEC for the declaration of nullity of the by-laws etc. thus the amended by-laws were null and void. the corporation called for a stockholder’s meeting for the ratification of the amendment to the by-laws. this is limited where the reasonableness of a by-law is a mere matter of judgment. against the majority members of the BOD and San Miguel. He also contends that the 1961 authorization was already used in 1962 and 1963. Gokongwei vs. which 2/3 could have been computed on the basis of the capitalization at the time of the amendment. or with the charter of the corporation or is in legal sense unreasonable and therefore unlawful is a question of law. Petitioner contends that the amendment was based on the 1961 authorization.SO ORDERED. Issue: Are amendments valid? Held: The validity and reasonableness of a by-law is purely a question of law. This prompted petitioner to seek for summary judgment. and one upon which reasonable minds must necessarily differ.

Clearly then. CA. FEB. An amendment to the corporate by-laws which renders a stockholder ineligible to be director. alteration and modification. and to regulate the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its affairs. A corporation. as a stock holder. and the act done in furtherance of private needs is deemed to be for the benefit of the corporation. has been sustained as valid. which is characterized as a trust relationship.R. 2001IS A CORPORATION TO WHICH FOUR CROSSED CHECKS WERE INDORSED BY THE PAYEE CORPORATION A HOLDER IN DUE COURSE AND HENCE ENTITLED TO RECOVER THE AMOUNT OF THE CHECKS WHEN THE SAME HAD BEEN DISHONORED FOR THE REASON OF “PAYMENT STOPPED”? The checks were crossed checks and specifically indorsed for deposit to payee’s account only.government. V. Corporate officers are also not permitted to use their position of trust and confidence to further their private needs. and employees. duties and compensation of directors. but must betray one or the other. The amendment in this case serves to advance the benefit of the corporation and is good. if he be also director in a corporation whose business is in competition with that of the other corporation. From the beginning. NO. officers. with notice that the same was for 34 . it does not follow as a legal proposition that simply because it was not a holder in due course for having taken the instruments in question. G. Any corporation may amend its by-laws by the owners of the majority of the subscribed stock. This is called the doctrine of corporate opportunity. This is based upon the principle that where the director is employed in the service of a rival company. It cannot thus be said that petitioners has the vested right. 109491. However. he cannot serve both. A Director stands in a fiduciary relation to the corporation and its shareholders. it could not be considered a holder in due course. under the Corporation law. 28. in the face of the fact that the law at the time such stockholder's right was acquired contained the prescription that the corporate charter and the by-laws shall be subject to amendment. the corporation was aware of the fact that the checks were all for deposit only to payee’s account. to be elected director. ATRIUM MANAGEMENT CORP. Any person who buys stock in a corporation does so with the knowledge that its affairs are dominated by a majority of the stockholders and he impliedly contracts that the will of the majority shall govern in all matters within the limits of the acts of incorporation and lawfully enacted by-laws and not forbidden by law. may prescribe in its by-laws the qualifications.

asserted that it is the generalinformation sheet filed with the Securities and Exchange Commission. Hence. 96551November 1996 Facts: Assailed in the instant petition for review is the decision of the Court of Appeals which affirmedthe trial court’s dismissal of petitioners’ complaint for damages. inter alia. Montecillioand Ongsiako Law Office as counsel. v. nationalities and 35 . 28. In itsAnswer International Corporate Bank alleged. are not directors of thecorporation and were allegedly former officers and stockholders of Premium who were dismissed for various irregularities and fraudulent acts.Issue: Whether or not the filing of the case for damages against private respondent bank was authorized by a duly constituted Board of Directors of the petitioner corporation?Held: The claim. filed a motion to dismiss the action of petitioners on the groundthat the filing of the case was without authority from its duly constituted board of directors as shown bythe excerpt of the minutes of the Premium’s board of directors’ meeting. In the absence of an authority from the board of directors. Premium thru Atty. No.. Nograles & Reyes. of petitioners as represented by Atty.In its opposition to the motion to dismiss. Inc. (Atrium Management Corp. et al.Siguion Reyna Law firm as counsel of Premium in a rejoinder.deposit only..The same corporation. Dumadag. Feb. (Premium for brevity). that Premium has nocapacity/personality/authority to sue in this instance and the complaint should. can validly bind the corporation. therefore. all corporations duly organized pursuant thereto are required to submit within the period therein stated (30 days) to the Securities andExchange Commission the names.e.R. the case. that it was altogether precluded from recovering on the instrument. The disadvantage in not being a holder in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. Jr. CA.. 2001) Premium Marble Resources Incorporated v. not even theofficers of the corporation. Dumadag contended that the persons who signed the board resolution namely Belen. Premium. that Zaballa. has not been fullysubstantiated. Court of AppealsGR No.By the express mandate of the Corporation Code (Section 26). assisted by Atty. be dismissedfor failure to state a cause of action. that Siguion Reyna Law office is the lawyer of Belen and Nograles and not of Premium and that the Articles of Incorporation of Premium shows that Belen. no person. 109491. but this time represented by Siguion Reyna. i. among others.The case began when Premium Marble Resources. filed an action for damages against International Corporate Bank.Arnulfo Dumadag as counsel. that is the bestevidence that would show who are the stockholders of a corporation and not the Articles of Incorporation since the latter does not keep track of the many changes that take place after newstockholders subscribe to corporate shares of stocks. Nograles and Reyes are not majority stockholders. G.

the court agree with the finding of public respondent Court of Appeals.000 shares for each child.000 shares of the stock of the Company. Aderito Yujuico and Rodolfo Millare. at par. The minor children of 36 . December 29. in view of the failure of compliance with the conditions to which the above donation was made subject..000 be set aside for Pirovano’s minor children. In 1951. He proposed that out of the proceeds of the insurance policies the sum of P400. L-5377. and on that same date the same was duly approved. Mario Zavalla. inquired to the Securities and Exchange Commission asking for opinion regarding the validity of the donation of the proceeds of the insurance policies to the Pirovano children. the current President of De la Rama Steamship proposed that it is but fit and proper that the company which owes so much to the deceased should make some provision for his children.residences of the directors. the majority of the stockholders' voted to revoke the resolution approving the donation to the Pirovano children. The power of the corporation to sue and besued in any court is lodged with the board of directors that exercises its corporate powers. Jr. trustees and officerselected. Enrico Pirovano was largely responsible for the rapid and very successful development of the activities of the company. that “in theabsence of any board resolution from its board of directors the [sic] authority to act for and in behalf of the corporation.Hence. Sergio Osmeña. the last entry in their General Information Sheet with the SEC. petitioner however. Early in 1941 the company insured the life of said Enrico Pirovano in various Philippine and American Life Insurance companies. The De La Rama Steamship Co. He was killed by the Japanese in Manila sometime in 1944 leaving as his only heirs four minor children. Sometime in March 1950. as of 1986 appears to be the set of officers elected in March1981. and in view of the opinion of the SEC Commissioner. failed to show proof that this election was reported to the SEC.R. SEC rendered its opinion that the donation was void because the corporation could not dispose of its assets by gift and therefore the corporation acted beyond the scope of its corporate powers. the President of the corporation. In fact. 1982 states that the newly elected officersfor the year 1982 were Oscar Gan. No. [G. the present action must necessarily fail. In view of the fact that Enrico Pirovano left practically nothing to his heirs. or 1. 1954] Facts: Enrico Pirovano was the President and General Manager of the De la Rama Steamship Company. Pirovano vs. A resolution was adopted to carry out the proposal and submitted to the stockholders of the De la Rama company at a meeting properly convened.The Minutes of the Meeting of the Board on April 1. said sum of money to be convertible into 4.

it appearing that the donation represents not only the act of the Board of Directors but of the stockholders themselves as shown by the fact that the same has been expressly ratified in a resolution duly approved by the latter. in such manner as from time to time may be determined" and. This is specially so if the donation is not merely executory but executed and consummated and no creditors are prejudice. we find that the corporation was given broad and almost unlimited powers to carry out the purposes for which it was organized among them. or corporation of which any obligation or in which any interest is held by this corporation or in the affairs or prosperity of which this corporation has a lawful interest. or declared legally ineffective for the reason alone. (2) "to aid in any other manner any person. The donation in question undoubtedly comes within the scope of this broad power for it is a fact appearing in the evidence that the insurance proceeds were not immediately required when they were given away." The world deal is broad enough to include any manner of disposition. and refers to moneys not immediately required by the corporation. Granting arguendo that the donation given by Pirovano children is outside the scope of the powers of the defendant corporation. but the company refused to pay. Issue: Can defendant corporation give by way of donation the proceeds of said insurance policies to the minor children of the late Enrico Pirovano under the law or its articles of corporation. or it is an ultra vires act. By this ratification. Thus. the latter has expressly given their confirmity. Estefania demanded the payment of the credit due them.89. association. or if there are creditors affected.the late Enrico Pirovano. amounting to P564. or the scope of the powers that it may exercise under the law. represented by their mother and guardian. still it may said that the same can not be invalidated. or is that donation an ultra vires act? Held: After a careful perusal of the provisions of the articles of incorporation of the De la Rama company.980. they instituted an action in the Court of First Instance of Rizal. and such disposition may be made in such manner as from time to time may be determined by the corporations. (1) "To invest and deal with the moneys of the company not immediately required. the infirmity of the corporate act. it may has been obliterated thereby making the act perfectly valid and enforceable. 37 .

therefore. Said donation. 38 . nor require validity. even if ultra vires in the supposition we have adverted to. The defendant corporation. They cannot serve as basis of a court action. like similar transactions between the individuals void. morals. are merely voidable and may become binding and enforceable when ratified by the stockholders. is not void. The former contemplates the doing of an act which is contrary to law. or public policy or public duty.A distinction should be made between corporate acts or contracts which are illegal and those which are merely ultra vires. but are not merely within the scope of the articles of incorporation. but are merely within are not illegal and void ab initio. and if voidable its infirmity has been cured by ratification and subsequent acts of the defendant corporation. is now prevented or estopped from contesting the validity of the donation. or those which are not illegal and void ab initio. and are. ultra vires acts on the other hand.