MAMBULAO LUMBER COMPANY

vs.
PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy Provincial Sheriff
of Camarines Norte
G.R. No.L-22973.January 30, 1968

FACTS:
of Camarines Norte, and covered by TCT No. 381 of the land records of said province, as
well as various sawmill equipment, rolling unit and other fixed assets of the plaintiff, all situated
in its compound in the aforementioned municipality.
PNB released from the approved loan the sum of P27, 500.00, for which the plaintiff
signed a promissory note wherein it promised to pay to the PNB. PNB made another release of
P15, 500.00 as part of the approved loan granted to the plaintiff and so on the said date, the latter
executed another promissory note. Plaintiff failed to pay the amortization on the amounts
released to and received by it. Repeated demands were made upon the plaintiff to pay its
obligation but it failed or otherwise refused to do so. Upon inspection and verification made by
employees of the PNB, it was found that the plaintiff had already stopped operation.
PNB initiated steps to have the properties extrajudicially foreclosed. The Plaintiff
opposed. The foreclosure sale of the parcel of land, together with the buildings and
improvements thereon, was held and the said property was sold to the PNB for the sum of P56,
908.00, subject to the right of the plaintiff to redeem the same within a period of one year. PNB
sold the properties to Mariano Bundok. The Security guard of the properties refused to let
PNB’s successor in interest to retrieve properties inside the premises of the property bought by
them.
RTC sentenced the Mambulao Lumber Company to pay to the defendant PNB.
Mambulao therefore appealed.

ISSUE:
Plaintiff applied for an industrial loan of P155, 000.00 with the PNB and the former offered real
estate, machinery, logging and transportation equipment as collaterals. The application was
approved for a loan of P100, 000.00 only. To secure the payment of the loan, the plaintiff
mortgaged to defendant PNB a parcel of land, together with the buildings and improvements
existing thereon, situated in the province

Can a corporation be awarded for moral damages?

RULING:

NO.

An artificial person like herein appellant corporation cannot experience physical

sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social
humiliation which are basis or moral damages.
A Corporation may have a good reputation if besmirched, may also be a ground for the
award of moral damages. The same cannot be considered under the facts of this case, however,
not only because it is admitted that herein appellant had already ceased in its business operation
at the time of the foreclosure sale of the chattels, 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 undoubtedly be the same whether the sale was conducted at Camarines Norte, or in
Manila which is the place agreed upon by the parties in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines
Norte in proceeding with the sale in utter disregard of the agreement to have the chattels sold in
Manila as provided for in the mortgage contract, to which their attentions were timely called by
herein appellant, and in disposing of the chattels in gross for the miserable amount of P4, 200.00,
herein appellant should be awarded exemplary damages in the sum of P10, 000.00. The
circumstances of the case also warrant the award of P3, 000.00 as attorney's fees for herein
appellant.

PHILIPPINE NATIONAL BANK

vs.
HYDRO RESOURCES CONTRACTORS CORPORATION
G.R. No. 167530. March 13, 2013

FACTS:

A contract was entered into between Hydro and NIA for the project of the latter. The
contract price is to be payable partly in Philippine peso and US dollars. Once the project was
being executed, there was depreciation in value of Peso resulting to price differential. In order to
resolve the issue, the administrator of NIA, Mr Tek, and Hydro made a joint computation of the
amount corresponding to the foreign currency differential. The computation showed that NIA
owed Hydro for the differential. When a demand was made by Hydro against NIA, NIA refused
to pay contending that Mr Tek has no authority to participate into a joint computation of the
foreign currency differential and that Mr Tek has no authority to bind NIA.

ISSUE:

Whether or not the corporate entity of PNB and DBP must be pierced.

RULING:

NO.

A corporation is an artificial entity created by operation of law. It possesses the right of

succession and such powers, attributes, and properties expressly authorized by law or incident to
its existence. It has a personality separate and distinct from that of its stockholders and from that
of other corporations to which it may be connected. As a consequence of its status as a distinct
legal entity and as a result of a conscious policy decision to promote capital formation, a
corporation incurs its own liabilities and is legally responsible for payment of its obligations.40
In other words, by virtue of the separate juridical personality of a corporation, the corporate debt
or credit is not the debt or credit of the stockholder. This protection from liability for
shareholders is the principle of limited liability.
 Equally well-settled is the principle that the corporate mask may be removed or the
corporate veil pierced when the corporation is just an alter ego of a person or of another
corporation. For reasons of public policy and in the interest of justice, the corporate veil will
justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed
against third persons.
However, the rule is that a court should be careful in assessing the milieu where the
doctrine of the corporate veil may be applied. Otherwise an injustice, although unintended, may
result from its erroneous application. Thus, cutting through the corporate cover requires an
approach characterized by due care and caution.
Hence, any application of the doctrine of piercing the corporate veil should be done with
caution. A court should be mindful of the milieu where it is to be applied. It must be certain that
the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed
against another, in disregard of its rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed.

VIVIAN T. RAMIREZ, ALBERTO B. DIGNO, DANILO M. CASQUITE, JUMADIYA A.

KADIL, FAUJIA SALIH, ANTONIO FABIAN, ROMEL DANAG, et.al.
vs.
MAR FISHING CO., INC., MIRAMAR FISHING CO., INC., ROBERT BUEHS AND
JEROME SPITZ
G.R. No. 168208. June 13, 2012

FACTS:

Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of fishing and canning of
tuna, sold its principal assets to co-respondent Miramar through public bidding. Proceeds of the
sale were paid to the Trade and Investment Corp. to cover Mar Fishing’s outstanding obligation
in the amount of ₱ 897,560,041.00.
In view of that transfer, Mar Fishing issued a Memorandum informing all its workers that
the company would cease to operate by the end of the month. It notified the DOLE of the closure
of its business operations. Then, Mar Fishing’s labor union, Mar Fishing Workers Union –
NFL – and Miramar entered into a Memorandum of Agreement for the acquiring company,
Miramar, to absorb Mar Fishing’s regular rank and file employees whose performance was
satisfactory, without loss of seniority rights and privileges previously enjoyed. Unfortunately,
petitioners, who worked as rank and file employees, were not hired or given separation pay by
Miramar, so they filed Complaints for illegal dismissal with money claims before the Arbitration
Branch of the NLRC.

ISSUE:

Is Mar Fishing and Miramar solidarily liable to the employees?

RULING:

NO.
 Mar Fishing, and not Miramar, is required to compensate petitioners. Indeed, the back
wages and retirement pay earned from the former employer cannot be filed against the new
owners or operators of an enterprise.
Miramar and Mar Fishing are separate and distinct entities, based on the marked
differences in their stock ownership. Also, the fact that Mar Fishing’s officers remained as such
in Miramar does not by itself warrant a conclusion that the two companies are one and the same.
The mere showing that the corporations had a common director sitting in all the boards without
more does not authorize disregarding their separate juridical personalities.
Neither can the veil of corporate fiction between the two companies be pierced by the rest
of petitioners’ submissions, namely, the alleged take-over by Miramar of Mar Fishing’s
operations and the evident similarity of their businesses. Since piercing the veil of corporate
fiction is frowned upon, those who seek to pierce the veil must clearly establish that the separate
and distinct personalities of the corporations are set up to justify a wrong, protect a fraud, or
perpetrate a deception. This, unfortunately, petitioners have failed to do.

SOL LAGUIO, RENE LAOLAO, ANNALIZA ENSANDO, EDELIZA ASAS, LILIA

MARAY, EVELYN UNTALAN,* ROSARIO CHICO, REYNALDO GARCIA, MERLITA
DE LOS SANTOS,* JOSEPHINE DERONG,* GEMMA TIBALAO BANTOLO, LUCY
ALMONTE,* CRISPINA VANQUARDIA, NARCISA VENZON, NORMA ELEGANTE,*
AMELIA MORENO,* ABNER PETILOS, NARCISO HILAPO, DOLORES OLAES,
MELINDA LLADOC, ERNA AZARCON, and APRIL TOY, INC. WORKERS UNION –
ALAB
vs.
NATIONAL LABOR RELATIONS COMMISSION, WELL WORLD TOYS, INC.,
APRIL TOYS, INC., YU SHENG LING, JENN L. WANG, EUCLIFF CHENG, CHI
SHENG LIN, NENITA C. AGUIRRE, MA. THERESA R. CADIENTE and GLICERIA R.
AGUIRRE
G.R. No. 108936. October 4, 1996

FACTS:

Private respondent April Toy, Inc. is a domestic corporation, for the purpose of
"manufacturing, importing, exporting, buying , selling, sub-contracting or otherwise dealing in,
at wholesale and retail," stuffed toys. On December 20, 1989, or after almost a year of operation,
April posted a memorandum 2 within its premises and circulated a copy of the same among its
employees informing them of its dire financial condition. April decided to shorten its corporate
term "up to February 28, 1990,”
In view of April's cessation of operations, petitioners who initially composed of seventy-
seven employees below filed a complaint for "illegal shutdown/retrenchment/dismissal and
unfair labor practice." On June 21, 1990, petitioners amended their complaint to implead private
respondent Well World Toys, Inc. (Well World for brevity), a corporation also engaged in the
manufacture of stuffed toys for export.
 Petitioners further alleged that the original incorporators and principal officers of April
were likewise the original incorporators of Well World, thus both corporations should be treated
as one corporation liable for their claims. The Labor Arbiter found as valid the closure of April,
and treated April and Well World as two distinct corporations.

ISSUE:

Whether or not April and Well World two distinct corporations.

RULING:

YES.

The two corporations have two different set of officers managing their respective affairs
in two separate offices. It is basic that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it as well as from that of any other
legal entity to which it may be related. Mere substantial identity of the incorporators of the two
corporations does not necessarily imply fraud, 15 nor warrant the piercing of the veil of
corporate fiction. In the absence of clear and convincing evidence that April and Well World's
corporate personalities were used to perpetuate fraud, or circumvent the law said corporations
were rightly treated as distinct and separate from each other.
DEVELOPMENT BANK OF THE PHILIPPINES
vs.
COURT OF APPEALS, REMINGTON INDUSTRIAL SALES
GR 126200, 16 August 2001

FACTS:

Between July 1981 and April 1984, Marinduque Mining entered into 3 mortgage
agreements with PNB and DBP involving its real properties located in Surigao del Norte, Negros
Occidental, and Rizal, as well as its equipments located therein. Marinduque failed to pay its
loans, causing the foreclosure of the said mortgages. PNB and DBP thereafter gained control of
the said properties.
In the meantime, between July 16, 1982 to October 4, 1983, Marinduque Mining
purchased and caused to be delivered construction materials and other merchandise from
Remington Industrial Sales Corporation. The purchases remained unpaid as of August 1, 1984
when Remington filed a complaint for a sum of money and damages against Marinduque Mining
for the value of the unpaid construction materials and other merchandise purchased by
Marinduque Mining, as well as interest, attorney’s fees and the costs of suit.
Remington’s original complaint was amended to include PNB, DBP, Maricalum Mining
Corporation and Island Cement Corporation as co-defendants. Remington asserted that
Marinduque Mining, PNB, DBP, Nonoc Mining, Maricalum Mining and Island Cement must be
treated in law as one and the same entity by disregarding the veil of corporate fiction since the
personnel, key officers and rank-and-file workers and employees of co-defendants NMIC,
Maricalum and Island Cement creations of co-defendants PNB and DBP were the personnel of
co-defendant MMIC such that practically there has only been a change of name for all legal
purpose and intents.

ISSUE:

Is the take-over of PNB and DBP over Marinduque Mining in bad faith.

RULING:

NO.

Their actions are mandated under the law. Where the corporations have directors and
officers in common, there may be circumstances under which their interest as officers in one
company may disqualify them in equity from representing both corporations in transactions
between the two. Thus, where one corporation was ‘insolvent and indebted to another, it has
been held that the directors of the creditor corporation were disqualified, by reason of self-
interest, from acting as directors of the debtor corporation in the authorization of a mortgage or
deed of trust to the former to secure such indebtedness In the same manner that when the
corporation is insolvent, its directors who are its creditors cannot secure to themselves any
advantage or preference over other creditors. They cannot thus take advantage of their fiduciary
relation and deal directly with themselves, to the injury of others in equal right.
 Directors of insolvent corporation, who are creditors of the company, can not secure to
themselves any preference or advantage over other creditors in the payment of their claims. It is
not good morals or good law. The governing body of officers thereof are charged with the duty
of conducting its affairs strictly in the interest of its existing creditors, and it would be a breach
of such trust for them to undertake to give any one of its members any advantage over any other
creditors in securing the payment of his debts in preference to all others. When validity of these
mortgages, to secure debts upon which the directors were indorsers, was questioned by other
creditors of the corporation, they should have been classed as instruments rendered void by the
legal principle which prevents directors of an insolvent corporation from giving themselves a
preference over outside creditors.