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Justice Teresita Leonardo-De Castro Cases (2008-2015)

CORPORATION LAW

DOCTRINE OF SEPARATE LEGAL PERSONALITY


Stockholders cannot claim ownership over corporate
properties by virtue of the Minutes of a Stockholders
meeting which merely evidence a loan agreement
between the stockholders and the corporation. As
such, there interest over the properties are merely
inchoate. - Philippine National Bank vs. Merelo B.
Aznar et al., G.R. No. 171805, May 30, 2011
DOCTRINE OF PIERCING THE VEIL OF
CORPORATE FICTION
In this connection, case law lays down a threepronged test to determine the application of the alter
ego theory, which is also known as the instrumentality
theory, namely:
(1) Control, not mere majority or complete
stock control, but complete domination, not
only of finances but of policy and business
practice in respect to the transaction
attacked so that the corporate entity as to
this transaction had at the time no separate
mind, will or existence of its own;
(2) Such control must have been used by the
defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or
other positive legal duty, or dishonest and
unjust act in contravention of plaintiffs legal
right; and
(3) The aforesaid control and breach of duty
must have proximately caused the injury or
unjust loss complained of.
The first prong is the instrumentality or control
test. This test requires that the subsidiary be
completely under the control and domination of the
parent.
It examines the parent corporations
relationship with the subsidiary. It inquires whether a
subsidiary corporation is so organized and controlled
and its affairs are so conducted as to make it a mere
instrumentality or agent of the parent corporation such
that its separate existence as a distinct corporate
entity will be ignored. It seeks to establish whether

the subsidiary corporation has no autonomy and the


parent corporation, though acting through the
subsidiary in form and appearance, is operating the
business directly for itself.
The second prong is the fraud test. This test
requires that the parent corporations conduct in using
the subsidiary corporation be unjust, fraudulent or
wrongful. It examines the relationship of the plaintiff
to the corporation. It recognizes that piercing is
appropriate only if the parent corporation uses the
subsidiary in a way that harms the plaintiff creditor. As
such, it requires a showing of an element of injustice
or fundamental unfairness.

corporations as there exists another distinct class of


corporations or chartered institutions which are
otherwise known as "public corporations." These
corporations are treated by law as agencies or
instrumentalities of the government which are not
subject to the tests of ownership or control and
economic viability but to different criteria relating to
their public purposes/interests or constitutional
policies and objectives and their administrative
relationship to the government or any of its
Departments or Offices. - Boy Scouts of the
Philippines vs. Commission On Audit, G.R. No.
177131, June 7, 2011
CORPORATE NAME

The third prong is the harm test. This test requires


the plaintiff to show that the defendants control,
exerted in a fraudulent, illegal or otherwise unfair
manner toward it, caused the harm suffered. A causal
connection between the fraudulent conduct committed
through the instrumentality of the subsidiary and the
injury suffered or the damage incurred by the plaintiff
should be established. The plaintiff must prove that,
unless the corporate veil is pierced, it will have been
treated unjustly by the defendants exercise of control
and improper use of the corporate form and, thereby,
suffer damages. - Development Bank of the
Philippines vs. Hydro Resources Contractors
Corporation, GR. No. 167603, 167561 & 167603,
March 13, 2013
GOVERNMENT CORPORATIONS
The PNRC enjoys a special status as an important
ally and auxiliary of the government in the
humanitarian field in accordance with its commitments
under international law. Its structure is sui generis.
The Court should not shake its existence to the core
in an untimely and drastic manner that would not only
have negative consequences to those who depend on
it in times of disaster and armed hostilities but also
have adverse effects on the image of the Philippines
in the international community. - Dante V. Liban,
Reynaldo M. Bernardo and Salvador M. Viari vs.
Richard J. Gordon, Philippine National Red Cross,
Intervenor, G. R. No. 175352, January 18, 2011
Not all corporations, which are not government owned
or controlled, are ipso facto to be considered private

While the SC stand by in its pronouncement on the


importance of the corporate name to the very
existence of corporations and the significance thereof
in the corporations right to sue, it shall not go so far
as to dismiss a case filed by the proper party using its
former name when adequate identification is
presented. - NM Rothschild & Sons (Australia)
Limited vs. Lepanto Consolidated Mining
Company, G.R. No. 175799, November 28, 2011
BOARD OF DIRECTORS/CORPORATE OFFICERS
Except for the powers which are expressly conferred
on it by the Corporation Code and those that are
implied by or are incidental to its existence, a
corporation has no powers. Physical acts, like the
signing of documents, can be performed only by
natural persons duly authorized for the purpose by
corporate bylaws or by a specific act of the board of
directors. - Cebu Bionic Builders Supply, Inc. and
Lydia Sia vs. Development Bank of the
Philippines, Jose To Chip, Patricio Yap and Roger
Balila, G.R. No. 154366, November 17, 2010
The requirement of the certification of non-forum
shopping is rooted in the principle that a party-litigant
shall not be allowed to pursue simultaneous remedies
in different fora, as this practice is detrimental to an
orderly judicial procedure. However, the Court has
relaxed, under justifiable circumstances, the rule
requiring the submission of such certification
considering that, although it is obligatory, it is not
jurisdictional. Not being jurisdictional, it can be
relaxed under the rule of substantial compliance.

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Justice Teresita Leonardo-De Castro Cases (2008-2015)


Thus, a President of a corporation, among other
enumerated corporate officers and employees, can
sign the verification and certification against of nonforum shopping in behalf of the said corporation
without the benefit of a board resolution. - South
Cotabato Communications Corporation and
Gauvain J. Benzonan vs. Hon. Patricia A. Sto.
Tomas, Secretary of Labor And Employment,
Rolando Fabrigar, Merlyn Velarde, Vince Lamboc,
Felipe Galindo, Leonardo Miguel, Julius Rubin,
Edel Roderos, Merlyn Coliao and Edgar Jopson,
G.R. No. 173326, December 15, 2010
DERIVATIVE SUIT
A derivative suit cannot prosper without first
complying with the legal requisites for its institution.
Thus, a complaint which contained no allegation
whatsoever of any effort to avail of intra-corporate
remedies allows the court to dismiss it, even motu
proprio. Indeed, even if petitioners thought it was futile
to exhaust intra-corporate remedies, they should have
stated the same in the Complaint and specified the
reasons for such opinion. The requirement of this
allegation in the Complaint is not a useless formality
which may be disregarded at will. - Nestor Ching and
Andrew Wellington vs. Subic Bay Golf And
Country Club, Inc., Hu Ho Hsiu Lien alias Susan
Hu, Hu Tsung Chieh alias Jack Hu, Hu Tsung Hui,
Hu Tsung Tzu and Reynald R. Suarez, G.R. No.
174353, September 10, 2014
MERGER
FEBTC employees that were absorbed by petitioner
upon the merger between FEBTC and BPI should be
covered by the Union Shop Clause found in the
existing CBA between petitioner and respondent
Union. The Court believes that it is contrary to public
policy to declare the former FEBTC employees as
forming part of the assets or liabilities of FEBTC that
were transferred and absorbed by BPI in the Articles
of Merger. Assets and liabilities, should be deemed to
refer only to property rights and obligations of FEBTC
and do not include the employment contracts of its
personnel. A corporation cannot unilaterally transfer
its employees to another employer like chattel. Even
though FEBTC employees had no choice or control
over the merger of their employer with BPI, they had a
choice whether or not they would allow themselves to

be absorbed by BPI. Employment is a personal


consensual contract and absorption by BPI of a
former FEBTC employee without the consent of the
employee is in violation of an individuals freedom to
contract. - Bank of the Philippine Islands vs. BPI
Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank, G.R. No. 164301, August
10, 2010
SECURITIES AND REGULATIONS CODE
It is axiomatic that jurisdiction over the subject matter
is conferred by law and is determined by the
allegations of the complaint or the petition irrespective
of whether the plaintiff is entitled to all or some of the
claims or reliefs asserted therein. - Philippine Stock
Exchange, Inc. vs. The Manila Banking
Corporation et.al, G.R. No. 147778. July 23, 2008
INTRA-CORPORATE CONTROVERSIES
Civil cases involving the inspection of corporate books
are governed by the rules of procedure set forth in the
Interim Rules of Procedure for Intra-Corporate
Controversies under Republic Act No. 8799 (Interim
Rules). In order to assail the decision or order issued
under the Interim order must be sought from the
appellate court to enjoin the enforcement or
implementation of the decision or order, and unless a
restraining order is so issued, the decision or order
rendered under the Interim Rules shall remain to be
immediately executory.
In the inspection of Corporate Books, the
burden of proof lies with the corporation who refuses
to grant to the stockholder the right to inspect
corporate records.
Supervening events refer to facts which transpire after
judgment has become final and executory or to new
circumstances which developed after the judgment
has acquired finality, including matters which the
parties were not aware of prior to or during the trial as
they were not yet in existence at that time, a
supervening event affects or changes the substance
of the judgment and renders the execution thereof
inequitable, impossible or unjust. - Dee Ping Wee,
Araceli Wee and Marina U. Tan vs. Lee Hiong Wee
and Rosalind Wee, G.R. No. 169345, August 25,
2010

BANKING LAWS
Banks, their business being impressed with public
interest, are expected to exercise more care and
prudence
than
private
individuals in their
dealings, even those involving registered lands. The
rule that persons dealing with registered lands can
rely solely on the certificate of title does not apply to
banks. - Philippine Trust Company (also known as
Philtrust Bank) vs. Hon. Court of Appeals and
Forfom Development Corporation, G.R. No.
150318, November 22, 2010
Bangko Sentral ng Pilipinas placed Rural Bank of
Tuba (RBTI) under receivership with the Philippine
Deposit Insurance Corporation as the receiver.
Accordingly, PDIC filed a petition for assistance in the
liquidation of RBTI which was approved by the trial
court. As an incident of the proceeding, BIR
intervened as one of the creditors of RBTI. BIR
contends that a tax clearance is required before the
approval of project of distribution of the assets of a
bank. In denying their contention, the Court held the
law expressly provides that debts and liabilities of the
bank under liquidation are to be paid in accordance
with the rules on concurrence and preference of credit
under the Civil Code. With reference to the other real
and personal property of the debtor, sometimes
referred to as free property, the taxes and
assessments due the National Government, other
than those in Articles 2241(1) and 2242(1) of the Civil
Code, such as the corporate income tax, will come
only in ninth place in the order of preference. If the
BIRs contention that a tax clearance be secured first
before the project of distribution of the assets of a
bank under liquidation may be approved, then the tax
liabilities will be given absolute preference in all
instances, including those that do not fall under
Articles 2241(1) and 2242(1) of the Civil Code. Philippine Deposit Insurance Corporation vs.
Bureau Of Internal Revenue, G.R. No. 172892,
June 13, 2013

INTELLECTUAL PROPERTY
LAW
The conviction of Gemma for trademark infringement
under Section 155 of Republic Act No. 8293, as the
counterfeit goods seized were not only found in her

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Justice Teresita Leonardo-De Castro Cases (2008-2015)


possession and control, but also in the building
registered under her business. The counterfeit
cigarettes seized from Gemmas possession were
intended to confuse and deceive the public as to the
origin of the cigarettes intended to be sold. - Gemma
Ong a.k.a. Maria Teresa Gemma Catacutan vs.

People of the Philippines, G.R. No. 169440,


November 23, 2011

NEGOTIABLE INSTRUMENTS
LAW

Banks are engaged in a business impressed with


public interest, and it is their duty to protect in return
their many clients and depositors who transact
business with them. - Bank Of America NT & SA vs.
Philippine Racing Club, G.R. No. 150228, July 30,
2009

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