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THEORY OF CONCESSION

International Express Travel And Tour Services Inc. vs Court of Appeals
343 SCRA 674 [GR No. 119002 October 19, 2000]
Facts: On June 30, 1989, petitioner International Express Travel and Tours Services Inc., through its managing director,
wrote a letter to the Philippine Football Federation through its President Henri Kahn, wherein the former offered its
services as a travel agency to the latter. The offer was accepted. Petitioner secured the airline tickets for the trips of the
athletes and officials of the Federation to the South East Asian Games in Kuala Lumpur as well as various other trips to
the People’s Republic of China and Brisbane. The total cost of the tickets amounted to Php449,654.83. For the tickets
received, the Federation made two partial payments, both in September of 1989 in the total amount of Php176,467.50. On
October 4, 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the
amount of Php265,844.33. On October 30, 1989, the Federation, through the project gintong alay, paid the amount of
Php31,603. On December 27, 1989, Henri Kahn issued a personal check in the amount of Php50,000 as partial payment
for the outstanding balance of the Federation. Thereafter, no further payments were made despite repeated demands.
Hence, this petition.
Issues: a. Whether or not private respondent can be made personally liable for the liabilities of the Philippines Football
Federation.
b. Whether or not the Court of Appeals is correct.
Held:
A. Yes. A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify a
contract. The contract entered into by its officers or agents on behalf of such association is binding or, as enforceable
against it. The officers or agents are themselves personally liable.
In attempting to prove the juridical existence of the Federation, Henri Kahn attached to his motion for
reconsideration before the trial court a copy of the constitution and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation has indeed been recognized and accredited by either the
Philippine Amateur Athletic Federation or the Department of Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports association within the purview of the aforementioned laws and does
not have corporate existence of its own.
Thus being said, it follows that private respondent Henri Kahn should be liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled principle in corporation law that any person acting or
purporting to act on behalf of the corporation which has no valid existence assumed such privileges and becomes
personally liable for contract entered into or for other acts performed as such agent.
B. No. PFF, upon its creation, 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. This fact
was never substantiated by Kahn. As such, PFF is considered as an unincorporated sports association. And under the
law, 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. Kahn is
therefore personally liable for the contract entered into by PFF with IETTI.
There is also no merit on the finding of the CA that IETTI is in estoppel. 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. In the case at bar, IETTI is not trying to escape liability from
the contract but rather is the one claiming from the contract.
DIFFERENTIATE VS PARTNERSHIP; SOLE PROPRIETORSHIP
Pioneer Insurance & Surety Corporation vs Court of Appeals
FACTS: Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced Constancio
Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy Equipment Company
(BORMAHECO) to contribute funds and to buy two aircrafts which would form part a corporation which will be the
expansion of Southern Air Lines. Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of Maglana et
al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which were brought in installment
from Japan Domestic Airlines (JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.

it was held that a—"A franchise is a special privilege conferred by governmental authority. for P10. That the sale shall not become effective until confirmed by the court after due notice. filed a "Motion for the Insurance of a Writ of Execution". indicates the procedure under which the same (secondary franchise and the properties necessary for its enjoyment) may be sold under execution. all must share in the losses and/or gains of the venture in proportion to their contribution. Inc. Subsequently. It may have different significations. enjoy. by virtue of a legislative enactment. franchise (right to operate) and capital stocks of the petitioner are properties or property rights which could be the subject of levy. L-19891 July 31. the law mandates. JRS presented an "Urgent Petition for Postponement of Auction Sale and for Release of Levy on the Business Name and Right to Operate of JRS Business Corporation". are divisible into (1) corporate or general franchises. execution and sale. Hence. No. all the properties of JRS contained in the Notices of Sale. the present appeal. Corp. Law). when co-investors agreed to do business through a corporation but failed to incorporate. That the sale of the franchise or right of way and the property necessary for the enjoyment. the Insurance Company was not authorized to take over and appropriate for its own use. the whole assets. were bought by Imperial Insurance. the trade name or business name corresponds to the initials of the President of the petitioner corporation and there can be no serious dispute regarding the fact that a trade name or business name and capital stock are necessarily included in the enjoyment of the franchise. RTC denied the motion for postponement of the auction sale. stating that they were busy negotiating for a loan with which to pay the judgment debt. The compromise agreement and the judgment based thereon. IMPERIAL INSURANCE. Inc. handed down. Like that of a franchise. This can be inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using the funds he got from Maglana et al. 56. "For practical purposes. A Notice of Sale of the "whole capital stocks of the JRS Business Corporation. Said SECONDARY franchise can be sold under execution. and the receipt of the proceeds of such franchise or right of way. The same thing may be stated with respect to petitioner's trade name or business name and its capital stock.000. further.R. A Writ of Execution was issued by the Sheriff of Manila and Notices of Sale were sent out for the auction of the personal properties of the J.. and any rights and privileges acquired under such franchise may be levied upon and sold under execution. on forced sale of franchises. the parties entered into a Compromise Agreement where JRS promised to pay their obligation and should they fail to pay. vs. can only be sold to satisfy a judgment debt if the decision . The law. as such. v. and as such. The primary franchise of a corporation that is. and Net Worth. Imperial Insurance shall be entitled to move for the execution of the decision. is admittedly a secondary franchise and. the exercise of the powers. in the same manner and with like effect as any other property to satisfy any judgment against the corporation: Provided. Cleveland Trust Co. Corporation Law. and the receipt of the proceeds of said franchise or right of way is especially decreed and ordered in the judgment: And provided. There was no de facto partnership. the Insurance Company took possession of the properties and started running the affairs and operating the business of the JRS. ISSUE: WON the business name or trade name. 1964 FACTS: Imperial Insurance. etc. G. Immediately after the sale. so far as relating to corporations. when such sale is especially decreed and ordered in the judgment and it becomes effective only when the sale is confirmed by the Court after due notice (Sec. BUSINESS CORPORATION. which was the highest bid offered. TWO CORPORATE FRANCHISES J. together with the property necessary for the enjoyment. In the auction sale. such as the right to use the streets of a municipality to lay pipes or tracks. do not contain any special decree or order making the franchise answerable for the judgment debt. is subject to levy and sale on execution together and including all the property necessary for the enjoyment thereof. erect poles or string wires. the total liabilities. property. the right to exist as such. and which does not belong to citizens of the country generally as a matter of common right. franchises. and (2) special or secondary franchises. (Sec. The corporation law. Incidentally.. while the latter are certain rights and privileges conferred upon existing corporations.) In the case of Gulf Refining Co. filed with the CFI Manila a complaint for sum of money against JRS. the exercise of the powers. is vested "in the individuals who compose the corporation and not in the corporation itself" The right to operate a messenger and express delivery service.00.R. was not transferable and could not be considered a personal or immovable. provides that any franchise granted to a corporation to collect tolls or to occupy.." of the petitioner corporation was. right of operation. The record shows that Lim was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.. When JRS failed to pay. furnitures and equipments. The former is the franchise to exist as a corporation.S. subject to levy and sale. the business name. or use public property or any portion of the public domain or any right of way over public property or the public domain. however. etc. that the right to operate under the franchise. under our corporation law. Imperial Insurance Inc.HELD: No.S.. 56. HELD: NEGATIVE. therefore.R. it was shown that Lim did not have the intent to form a corporation with Maglana et al. a de facto partnership would have been formed. that the judgment was for money only and. But in this case. the business name of the defendants. books of accounts. that property necessary for the enjoyment of said franchise. INC. Ordinarily.

signed by the spouses in their personal capacities and as managing partners of CCCC. On 3 October 1977. which unfortunately affirmed the appealed decision in toto. CRYSTAL vs. Secosa is an employee of Dassad and not of Sy. BPI resorted to the foreclosure of the chattel mortgage and the real estate mortgage. the present petition. Secosa left his truck and fled the scene of the collision. an 18 year old 3rd year physical therapy student was riding a motorcycle.393. As a rule. to secure an additional loan of P20.000. Inc. CCCC renewed a previous loan. June 29. The records of the case does not point toward the presence of any grounds enumerated above that will justify the piercing of the veil of corporate entity such as to hold Sy. spouses Raymundo and Desamparados Crystal obtained a P300. The parents of Francisco. HELD: No. The doctrine of ‘veil of corporation’ treats as separate and distinct the affairs of a corporation and its officers and stockholders. solidarily liable with it. BPI-Cebu City required CCCC to put up a security.00 loan in behalf of the Cebu Contractors Consortium Co. Inc. for the matter. hence. When Secosa overtook the sand and gravel truck. also in favor of BPI-Butuan. ISSUE: Whether or not Dassad’s president. 2004] Facts: Francisco.. and the capital stock of the petitioner corporation or any other corporation. Cebu City branch.. No. The loan was secured by a chattel mortgage on heavy equipment and machinery of CCCC. Moreover. he bumped the motorcycle causing Francisco to fall.000. BANK OF THE PHILIPPINE ISLANDS G. involving no rights of the public or third persons. Sometime in August 1979. The Isuzu cargo truck was owned by Dassad Warehousing and Port Services.000. and Dassad’s president. which in turn was being tailed by the Isuzu truck driven by Secosa. the corporate entity may be disregarded in the interest of justice in such cases as fraud that may work inequities among members of the corporation internally. In both instances. there must have been fraud and proof of it. a corporation will be looked upon as a legal entity. However.00 applied to the loan from BPI-Butuan which had then reached P707. the president of Dassad Warehousing and Port Services. the Isuzu cargo truck which ran over Francisco was registered in the name of Dassad and not in the name of Sy. The renewal was evidenced by a promissory note dated 13 August 1979. which resulted in his instantaneous death. Inc. Sy cannot be held solidarily liable with his co-petitioners.. Hence. justify wrong. 172428 November 28. ARTIFICIAL BEING Secosa vs. such fact is not by itself sufficient to hold him solidarily liable for the liabilities adjudged against his co-petitioners. The court a quo rendered a decision in favor of herein respondents. Also. CORPORATIONS AND MORAL DAMAGES HERMAN C. this time from BPI. The promissory note states that the spouses are jointly and severally liable with CCCC. Raymundo Crystal executed a promissory note for the amount of P300. CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City when they became due despite demands. Furthermore. Thereafter. [G. a trade name or business name cannot be sold separately from the franchise. can be held solidary liable with co-petitioners. Heirs of Francisco. they executed another real estate mortgage over the same lot in favor of BPI-Cebu City. While it may be true that Sy is the president of Dassad Warehousing and Port Services. the law will regard the corporation as an association of persons.00. However. The rear wheels of the Isuzu truck then ran over Francisco. unless and until sufficient reason to the contrary appears.especially so provides. 160039. thus petitioners appealed the decision to the Court of Appeals. who can only be deprived thereof in the manner provided by law. El Buenasucenso Sy. the spouses executed a real estate mortgage over their own real property on 22 September 1977. or defend crime. Inc. Dassad Warehousing and Port Services. following BPI’s compliance with the necessary requisites of extrajudicial foreclosure. It appears that before the original loan could be granted. No. with the proceeds amounting to P240. (CCCC) from the BPI-Butuan. When the notion of legal entity is used to defeat public convenience.90. protect fraud.000. filed an action for damages against Secosa. A corporation has a personality separate from that of its stockholders or members. The foreclosure sale on the chattel mortgage was initially stalled with the issuance of a restraining order against BPI.00 of CCCC.R. These facts showed Sy’s exclusion from liability for damages arising from the death of Francisco. The three vehicles were traversing the southbound lane at a fairly high speed. respondents herein. .R. the foreclosure sale on the chattel mortgage was consummated on 28 February 1988. represents the interest and is the property of stockholders in the corporation. Thus. El Buenasucenso Sy. A sand and gravel truck was traveling behind the motorcycle. CCCC had no real property to offer as security for the loan. 2008 Facts: On 28 March 1978. or on 29 March 1979.

and absolute. moral shock. on 7 July 1981. mental anguish or moral shock. Thus we held in one case that if solidary liability was instituted to "guarantee" a principal obligation. serious anxiety. The trial court dismissed the spouses’ complaint and ordered them to pay moral and exemplary damages and attorney’s fees to BPI. when the law so provides or when the nature of the obligation so requires. as stated in the written notices sent by the Company. It ruled that since the spouses agreed to bind themselves jointly and severally. litigation expenses and cost of suit. the spouses are not entitled to the benefit of exhaustion. A solidary obligation is one in which each of the debtors is liable for the entire obligation. NLRC (May 29. such as in this case. vs. They alleged that their contract of employment had not yet expired and the project in which they were hired were not yet completed. There being no wrongful or unjust act on the part of BPI in demanding payment from them and in seeking the foreclosure of the chattel and real estate mortgages. primary. On 10 April 1985. mental anguish. HELD: 1. BPI instituted extrajudicial foreclosure of the spouses’ mortgaged property. hence. prompting BPI’s valid resort to the foreclosure of the chattel mortgage and the real estate mortgages. serious anxiety. SEPARATE JURIDICAL PERSONALITY AND PIERCING THE CORPORATE VEIL Concept Builders Inc. unfair labor practice and claimed for their benefits with the NLRC. They filed illegal dismissal. the law deems the contract to be one of suretyship. Neither is BPI entitled to moral damages. the surety’s liability to the creditor or promisee of the principal is said to be direct. Moral damages are meant to compensate the claimant for any physical suffering. The trial court ruled in favor of BPI. seeking to recover the deficiency of the loan of CCCC and the spouses with BPI-Butuan. but they failed to comply with their obligation. 1996) FACTS: 1. they are solidarily liable for the loans. through its Vice-President for Legal and Corporate Affairs. By stating "I/we promise to pay. in other words." the spouses agreed to be sought out and be demanded payment from. Moreover. jointly and severally. Such damages. offered to buy the lot subject of the two (2) real estate mortgages and to pay directly the spouses’ indebtedness in exchange for the release of the mortgages. Insular Bank of Asia and America (IBAA). ISSUES: 1. there is no lawful basis for award of damages in favor of the spouses. by BPI. .26 And while a contract of a surety is in essence secondary only to a valid principal obligation. must be the proximate result of a wrongful act or omission the factual basis for which is satisfactorily established by the aggrieved party. BPI filed a complaint for sum of money against CCCC and the spouses before the Regional Trial Court of Butuan City. With A Prayer For A Restraining Order and/ or Writ of Preliminary Injunction. it means that the obligation is solidary. wounded feelings. Whether or not Spouses are solidarily liable with the corporation’s debt. Whether or not they are entitled to moral damages. the spouses filed an action for Injunction With Damages. fright. it cannot experience physical suffering or such sentiments as wounded feelings. and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. Pursuant to the decision. The spouses claimed that the foreclosure of the real estate mortgages is illegal because BPI should have exhausted CCCC’s properties first. They also prayed that they be awarded moral and exemplary damages." Thus. being guarantorsmortgagors. Private Respondents were the employees of the Petitioner Corporation. but their appeal was dismissed. BPI did demand payment from them. to be recoverable. BPI can validly foreclose the two real estate mortgages. A juridical person is generally not entitled to moral damages because. social humiliation and similar injuries unjustly caused. The spouses moved for the reconsideration of the decision. to the BANK OF THE PHILIPPINE ISLANDS. attorney’s fees. BPI rejected IBAA’s offer to pay. besmirched reputation. 2. stressing that they are mere guarantors of the renewed loans. but the Court of Appeals also denied their motion for reconsideration. The spouses appealed the decision of the trial court to the Court of Appeals. the surety is directly and equally bound with the principal 2. unlike a natural person. A liability is solidary "only when the obligation expressly so states. when the obligor undertakes to be "jointly and severally" liable.Meanwhile.

RATIONALE: 1. among other things. petitioner ceased its business operations in order to evade the payment to private respondents of backwages and to bar their reinstatement to their former positions. 3. the same corporate officers. this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced. 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. .2. when the notion of separate juridical personality is used to defeat public convenience. with how the corporation operated and the individual defendant’s relationship to that operation.). justify wrong. ISSUES: 1. and substantially the same subscribers. At the time of the termination of private respondent’s employment. Methods of conducting the business. it appears that. However. 5. But. The manner of keeping corporate books and records. will or existence of its own. the project in which they were hired had not yet been finished and completed. NLRC. 3. Under this circumstances. This is true likewise when the corporation is merely an adjunct. NLRC granted the Motion.” alleging that HPPI and petitioner corporation were owned by the same incorporator and stockholders. protect fraud or defend crime. Stock ownership by one or common ownership of both corporations. to wit: “1. An alias Writ of Execution was issued by the Labor Arbiter to collect the balance of the judgment award and to reinstate private respondents. Casino as the corporate secretary of both corporations. HPPI is obviously a business conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner corporation. So. “ NLRC stated that: “Both information sheets were filed by the same Virgilio O. It would also not be amiss to note that both corporations had the same president. there are some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil. this separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice. a business conduit or an alter ego of another corporation 2.” The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: “Control. He alleged that HPPI is a manufacturing firm while petitioner was then engaged in construction. 2. HPPI is used to Evade Corporations’ liability. A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by Hydro (Phils. The absence of any one of these elements prevents ‘piercing the corporate veil. or is used as a device to defeat the labor laws. ruled in favor of the Employees. Such control must have been used by the defendant to commit fraud or wrong. but complete domination. the courts are concerned with reality and not form. Inc. WON HPPI is used as a shield to evade the corporation’s subsidiary liability for damages? HELD: 1. (HPPI) of which he is the Vice-President. Clearly. It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders and from other corporations to which it may be connected. Private respondents filed a “Motion for Issuance of a Break-Open Order. and The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. WON the Sister Company (HPPI) has a personality separate and distinct from the petitioner corporation (CONCEPT BUILDERS)? 2. The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and circumstances of each case. to perpetuate the violation of a statutory or other positive legal duty. 4. Petitioner had to engage the services of sub-contractors whose workers performed the functions of private respondents. From the foregoing. ‘ in applying the ‘instrumentality’ or ‘alter ego’ doctrine. The Sister Company has NO separate and distinct personality from the Concept Builders 2. the sheriff failed to enforce because the security guard on the premises refused him to enter on the ground that. the same board of directors. it is no longer occupied by the petitioner. not mere majority or complete stock control. the respondent (herein petitioner) and the third-party claimant shared the same address and/or premises. or dishonest and unjust act in contravention of plaintiff’s legal rights. (sic) it cannot be said that the property levied upon by the sheriff were not of respondents. but certainly. Identity of directors and officers. 4. No hard and fast rule can be accurately laid down.

he performed his part of the agreement and helped petitioners get the project. noting that petitioner Tanaka’s reaction to respondent’s September 26.” Despite respondent’s repeated formal verbal demands for payment of the agreed consultancy fee. be pierced as it was deliberately and maliciously designed to evade its financial obligation to its employees. petitioners promised to reply within fifteen (15) days. wholly owned subsidiary companies. assuming that the parties agreed to the consultancy. it lent credence to respondent’s claim that they had an existing consultancy agreement.R.00 representing commission pursuant to an oral consultancy agreement with Marubeni. Therefore. which contemplates the use of personal influence and solicitation rather than an appeal to the judgment of the official on the merits of the object sought is contrary to public policy. it is unenforceable before a court of justice. On January 27. but they did not do so. the petition is granted.00 was awarded to the “Marubeni-Sanritsu tandem. engaging him to influence executive officials in the discharge of their duties. The consultancy agreement was not reduced into writing because of the mutual trust between Marubeni and the Lirag family. equipment. In civil cases. (2) whether or not respondent is entitled to receive a commission if there was. when respondent’s family was engaged in the textile fabric manufacturing business. is null and void as against public policy. amounting to P100. 89-3037 filed before the Regional Trial Court. He must establish his cause by a preponderance of evidence. Makati City is hereby dismissed. a mere allegation is not evidence. Civil Case No. Their close business and personal relationship dates back to 1960. It was doing business in the Philippines through its duly licensed. In response to the first demand letter. spare parts and raw materials. was agreed between petitioners and respondent.000. On the contrary. The conglomeration of these circumstances bolstered the existence of the oral consultancy agreement. ISSUES (1) whether or not there was a consultancy agreement between petitioners and respondent. six (6) additional projects were given to his group under the same undertaking. 1989. Consequently. they did not do so. relayed pertinent information as well as submitted feasibility studies and project proposals. the Bureau of Post project. The Court of Appeals observed that if indeed there were no consultancy agreement. 362 SCRA 620 (2001) G. However. oral or written. NO. he who alleges a fact has the burden of proving it. the trial court promulgated a decision and ruled that respondent is entitled to a commission. it would have been easy for petitioners to simply deny respondent’s claim. the decision of the court of appeals is hereby set aside.” MARUBENI CORPORATION VS. Respondent was led to believe that there existed an oral consultancy agreement. the agreement. arranged for meetings and conferences. Any agreement entered into because of the actual or supposed influence which the party has. On April 29. respondent Lirag made representations with various government officials. and corollary to this. . including pertinent documents required by petitioners. what was apparent in the testimonies of these witnesses was the fact that they learned about the existence of the consultancy agreement only because that was what respondent told them. Yet.000. Hence. 1993. a consultancy agreement RULINGS Wherefore.000. petitioners did not pay. which respondent failed to establish in the instant case. 1988 demand letter was not consistent with their claim that there was no consultancy agreement. 130998 FACTS: Petitioner Marubeni Corporation is a foreign corporation organized and existing under the laws of Japan. Respondent attempted to fortify his own testimony by presenting several corroborative witnesses. No costs An assiduous scrutiny of the testimonial and documentary evidence extant leads us to the conclusion that the evidence could not support a solid conclusion that a consultancy agreement. Branch 143.000. The Court of Appeals relied on the doctrine of admission by silence in upholding the existence of a consultancy agreement. LIRAG. in fact. One of the projects handled by respondent Lirag. In compliance with the agreement. As petitioners had been impressed with respondent’s performance.It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in the present case could. in which Marubeni supplied the needed machinery. respondent Felix Lirag filed with the Regional Trial Court. Makati a complaint for specific performance and damages claiming that petitioners owed him the sum of P6. and should.

we rule that the preponderance of evidence established no consultancy agreement between petitioners and respondent from which the latter could anchor his claim for a six percent (6%) consultancy fee on a project that was not awarded to petitioners. .In light of the foregoing.