CORPO Case Digests 2020
Case Name
Pioneer Insurance Surety Corp. v.
Morning Star Travel & Tours, Inc.,
GRN. 198436, July 8, 2015.
[separate personality]
Professional Services Inc. v.Court of
Appeals, GRN. 126297, Feb. 2, 2008)
[corporate tort]
“The leading rule for the lawyer, as for the man of every calling, is diligence”
Initial Facts
Int’l Air Transport Association (IATA)
appointed Morning Star as an accredited travel
agent. They entered into an agreement where
Morning Star is obliged to report all ticket sales
and account for all payments. IATA then
obtained a credit insurance policy from Pioneer
to assure the payments that runs from Nov 2001
to Dec 2002 and renewed on Jan 1, 2003 to Dec
31, 2003.
Morning Star failed to remit and was declared in
default. IATA then demanded from Pioneer the
sums representing Morning Star’s overdue
account and which Pioneer paid.
Pioneer then demanded the amounts from
Morning Star. The demand remained unheeded
so Pioneer filed a complaint for collection of
sum of money. The agency failed to answer and
was declared in default. Pioneer filed a
complaint for collection of sum of money,
Natividad Aganas was admitted at Medical City.
She was diagnosed by Dr. Ampil with cancer
and went under surgery but the malignancy
spread to her ovary. Thus, Dr. Fuentes
performed surgery on her ovary. Afterwards, Dr.
Ampil completed the operation and closed the
incision. Natividad felt pain and consulted both
doctors where they told her that it was natural.
Eventually, Natividad’s daughter found a piece
of gauze in her vagina and Dr. Ampil extracted
it assuring her that the pain will cease.
The pain intensified so she went to Polymedic
where it was found that the gauze had badly
infected her vagina. She underwent another
surgery and filed with the RTC complaint for
Lower Court
RTC ruled in favor of Pioneer
Ordered Morning Star, as well as
respondents herein:
Benny Wong – Chairman of the Board
Estelita Wong -President and Member of the
Board
Arsenio Chua – Member of the Board
Sonny Chua – Secretary and Member of the
board
Wong Yan Tak – Treasurer and Member
to jointly and severally pay the amounts to
Pioneer. (P100k, $450k)
TC found PSI, Dr. Ampil, and Dr.
Fuentes are jointly and severally liable.
Court of Appeals
CA MODIFIED THE TRIAL
COURT’S DECISION
Declaring only Morning Star as liable to
Pioneer since the latter failed to prove that
bad faith amounting to fraud made by the
officers.
Thus, Pioneer filed this petition to declare
Morning Star and herein respondent
members, as jointly and severally liable,
thus piercing the corporate veil because
they were grossly negligent by allowing
the incurrence of a huge debt to IATA
despite its financial distress in fraud and
bad faith citing the badges of fraud.
 The financial statements showed that
the corp has been incurring losses
since 1998 and resulted to a deficit of
P26M as of 2000. Despite that, the
corp still contracted loans and
obligations with IATA.
 No assets and properties were in the
name of the corporation as the land
and bldg were in the name of
Morning Star Mgmt Venture Corp, a
corporation where the officers are the
children of herein respondents and
was doing well at the time
respondent corporation were
amassing huge losses.
On appeal, the CA only found PSI and
Dr. Ampil liable.
Thus, PSI, Dr. Ampil, and Aganas filed
petition for review in the SC.
Supreme Court Notes
SC DENIES PETITION A separate corporate personality shields
Piercing the corporate veil is unavailing. There is corporate officers acting in good faith and within
no clear establishment as to bad faith by the their scope of authority from personal liability.
officers nor a substantial claim of the alleged The exceptions are:
badges of fraud. 1. He assents (a) to a patently unlawful act of
 As to the badge on “evidence of large the corporation, or (b) for bad faith or gross
indebtedness” - The financial statements negligence in directing its affairs, or (c) for
presented are not reflective of the financial conflict of interest, resulting in damages to
status of Morning Star since it was not for the corporation, its stockholders or other
the year 2002, the time when the corp persons;
incurred the obligation to IATA. Businesses 2. He consents to the issuance of watered stocks
may earn profits in some years and operate or who, having knowledge thereof, does not
at a loss in other years. The deficit from 1998 forthwith file with the corporate secretary his
to 2000, does not mean deficit in 2002. written objection thereto;
 As to the badge on “transfer of all or nearly 3. He agrees to hold himself personally and
all of his property by a debtor” – The mere solidarily liable with the corporation; or
allegations that Morning Star Mgmt were 4. He is made, by a specific provision of law, to
doing well at the time of the respondent corp personally answer for his corporate action.
loss does not prove that respondent officers
were transferring properties in fraud of its The first exception comes from the then Corpo
creditors. Code.
 As to “transfer made between father and
son..” – Compliance with recognized
acquisition of jurisdiction cannot be
dispensed with. Morning Star Mgmt, not
being a party to this case, cannot be held
responsible for Morning Star’s liability as it
would tantamount to a violation of due
process.
 The alter ego doctrine does not apply
because Pioneer failed to show that
respondent officers controlled the
corporation and such control was used to
commit fraud against Pioneer.
SC holds PSI and Dr. Ampil liable
 There “in effect” exists an ee-er relationship
between hospitals and their attending
physicians; the public display Dr. Ampil in
its accredited physicians in their lobby under
the doctrine of agency by estoppel; and
PSI’s failure to supervise Dr. Ampil to take
an active step to remedy their negligence
rendered it directly liable under the doctrine
of corporate negligence.
 PSI argues that the doctrine of corporate
negligence is misplaced because the
proximate cause of the injury was Dr. Ampil
which the hospital denies having an
employer-employee relationship with.
 PSI is liable for the negligence of Dr. Ampil.
SOBERANOTES
CORPO Case Digests 2020
Dutch Movers, Inc., Cesar Lee and
Yolanda Lee, v. Lequin GRN.
210032. April 25, 2017.
[piercing the veil]
damages against PSI (the owner of Medical
City), Dr. Ampil, and Dr. Fuentes. Natividad
eventually died and substituted by her children.
Lequin et. al (respondents), filed an illegal
dismissal complaint against DMI and the Lee’s
(owner and manager) when they allegedly
dismissed them under the pretext of closure. LA
initially dismissed the case but in the final
NLRC decision, respondents complaint was
granted holding DMI only to be liable.
When the workers filed for execution, it was
found that DMI was no longer operating.
Nonetheless, the workers insist that the Lee’s
were liable. Also, they averred that the Lee’s
were not included in the AOI as
directors/officers but it was the spouses Smith
that was in the article, nor was there any notice
of business closure, and therefore, the creation
of DMI was attended with fraud.
The Smith’s aver that they only lent their names
to assist in the incorporation of DMI; transferred
their rights in DMI in favor of the Lee’s; and
never participated in the mgmt and operations of
DMI. The worker’s prayed for DMI, Sps Smith,
and the Lee’s to be solidarily liable.
LA held DMI and the Lee’s liable as they
represented themselves as owners of DMI
and managed the same.
LA issued a writ of execution and
petitioners moved to quash on the basis that
the LA order is void since it has no
jurisdiction to modify the NLRC’s final and
executory ruling and there was no finding of
bad faith against them. However, the motion
was denied. Thus, petitioners appealed to
the NLRC.
NLRC ruled that the execution should
only be against DMI since SPS Lee were
not held liable in the final and executory
NLRC decision. The Lee’s cannot be sued
since they have a separate and distinct
personality and there was no bad faith.
Thus, the workers filed a petitioner for
certiorari with the CA.
CA reversed NLRC decision and
affirmed the execution impleading the
Lee’s as liable.
 While a judge that becomes final and
executory cannot anymore be altered,
a supervening event which renders
the execution of judgment unjust or
impossible is an exception.
Hence, this petition where petitioner
further claims that there is no basis to
pierce the veil of corporate fiction because
DMI had a separate and distinct
personality from the officers comprising
it. They insist that there was no showing
that the termination of respondents was
attended by bad faith. In the absence of
bad faith, they cannot be held liable.
Dr. Ampil and Dr. Fuentes operated on
Natividad with the assistance of the Medical
City Hospital’s staff, composed of resident
doctors, nurses, and interns. It is reasonable
to conclude that PSI, as the operator of the
hospital, has actual or constructive
knowledge of the procedures carried out,
particularly the report of the attending nurses
that the two pieces of gauze were missing.
 The plaintiffs did plead that the operation
was performed at the hospital with its
knowledge, aid, and assistance, and that the
negligence of Dr. Ampil was the proximate
cause of the patient’s injuries.
 Such general allegations of negligence,
along with the evidence produced at the trial
of this case, are sufficient to support the
hospital’s liability based on the theory of
negligent supervision.
SC DENIES PETITION. Valderrama v. NLRC and David v. CA
 The supervening event led the execution of  The rule on immutability of judgment
the decision to be unjust and impossible. or the non-alteration of final and
During the execution, DMI ceased its executory decisions is not absolute.
operation but did not file any formal notice.  One exception is the existence of
 The piercing of the corporate veil is justified supervening events occurring after
because the peculiarity of the situation judgment has become final and
shows that they controlled DMI, actively executory making the decision
participated in its operation as shown by unenforceable.
their actions when the Lee’s and DMI jointly  In this case, the closure of DMI was
filed their position paper; was aware of and the supervening event which is akin to
disclosed matters concerning the worker’s the Valderrama case where
employment despite their denial of Commodex closed their company
participating with DMI’s management; the without any showing that they filed
shares of the Smith were transferred to them for bankruptcy.
after DMI’s incorporation; and failure to
debunk the claim of Sps Smith.
 While it is true that one’s control does not by
itself result to disregard of the corporation’s
fiction, considering the irregularity of the
incorporation of DMI, there is sufficient
basis that the corp was used for an illegal
purpose.
 Clearly, petitioners resorted to such scheme
to countermand labor laws by causing the
incorporation of DMI without any indication
that they were part thereof.

Commissioner of Customs v. Oilink
International Corporation, GRN.
161759, July 2, 2014
[alter-ego piercing]
Union Refinery Corp (URC) imported oil
products in the PH. Oilink was incorporated for
manufacturing, importing, exporting, buying,
selling, or dealing in oil and gas at wholesale and
retail. URC and Oilink had interlocking directors
CTA declared the assessment null and
void.
The Commissioner filed a petition of review
with the CA after MR was denied on the
following grounds:
CA denied petition.
 On the matter of jurisdiction: the case is
within the jurisdiction of the CTA since
what is involved is respondent’s
liability for payment of money to the
Government.
SC AFFIRMS CA JUDGMENT
 As to JD: CTA has JD as provided by RA
1125 for decisions of the Commissioner of
Customs.
 Oilink had a cause of action because the
principle of non-exhaustion of admin
Control test for the application of the alter ego
doctrine (A piercing of corporate veil when there
is no legitimate business purpose or its only
purpose is to avoid tax):
1. Control, not mere majority or complete stock
control, but complete domination, not only

SOBERANOTES

“The leading rule for the lawyer, as for the man of every calling, is diligence”
CORPO Case Digests 2020
International Academy of
Management and Economics v.
Litton and Co., Inc., GRN 191525,
December 13, 2017
[ reverse piercing]
Concept Builders Inc. v. NLRC,
GRN 108734, May 29, 1996.
[probative factors in alter-ego cases]
“The leading rule for the lawyer, as for the man of every calling, is diligence”
and URC’s VP declared in a letter that both corp
had the same BOD and URC 100% owns Oilink.
The district collector demanded URC the
payment of taxes and the latter challenged such.
Several demands were made to URC.
Eventually, the dispute led to a final demand
from the Commissioner of Customs for a total
liability of P100M to both URC and Oilink on
July 2, 1999.
Oilink protested averring that it was not the party
liable for the deficiency taxes. The
Commissioner stressed that the BOC would not
issue any clearance to Oilink unless the amount
was paid. Thus Oilink appealed to the CA to
nullify the assessment.
Santos owed Litton rental arrears as well as
realty taxes for two buildings owned by the
latter. Litton filed for unlawful detainer which
the MeTC granted. However, the judgment
was not executed so Litton filed an action for
revival of judgment which was granted by the
RTC and made final by the CA.
The Sheriff of MeTC levied on a property
registered under the name of petitioner with an
annotation of “only up to the extent of the share
of Santos”.
Petitioner filed a motion to remove the
annotation and claimed that it has a separate
personality from Santos hence its properties
should not answer for his liabilities.
Concept Builders employed private respondents
as laborers, carpenters and riggers. However,
they were illegally dismissed. They filed a
complaint for illegal dismissal. The LA rendered
judgment ordering petitioner to reinstate private
1. CTA had no jurisdiction over the
subj matter
2. CTA erred in holding that Oilink
had a cause of action
3. CTA erred in holding that the
Commissioner could not pierce
the veil of corporate fiction.
MOTION WAS DENIED BUT UPON
MR, THE METC REVERSED AND
CANCELLED THE ANNOTATION.
The RTC upon Litton’s motion, reversed the
MR and reinstated the original order holding
petitioner’s property liable for Santos.
Petitioner filed with the CA
LA denied the motion for break open
order.
Respondents appealed to the NLRC.
 The principle of non-exhaustion of
administrative remedies is not iron clad.
In the case, the principle is unavailing
since it is the Commissioner himself
who was demanding the payment of tax
liability.
 CA concurred with CTA in the finding
that the Commissioner could not pierce
the corporate veil in order to treat Oilink
as the mere alter ego of URC. There was
no evidence presented to support his
allegations, but he merely submitted the
case for decision based on pleadings and
evidence presented by petitioner.
The Commissioner appealed reiterating
the grounds made in the CA.
CA UPHELD RTC AND ALLOWED
THE PIERCING OF CORPORATE
VEIL.
 The Deed of Absolute Sale in 1979
indicated that Santos as the Pres, was
representing petitioner as vendee.
However, petitioner was organized only
in 1985. Santos could not have been a
pres of a non-existent corp.
 The subject property was transferred to
petitioner during the pendency of the
appeal for revival of judgment.
 TCT was issued only in 1993, 14 yrs
after the execution of the Deed of
Absolute Sale and more than 8 years
after petitioner was incorporated.
The CA concluded that Santos merely
used petitioner IAME as a shield to protect
his property from the coverage of the writ
of execution, therefore piercing is proper.
Hence, this petition for review.
NLRC set aside LA’s decision and
directed the sheriff to proceed with the
auction sale of the properties already
levied upon.
remedies cannot be had when it is already the
Commissioner of Customs demanding
payment of the deficiency taxes and duties.
There is no justification to pierce the corporate
veil.
 There was no showing that the corporate entity
was used as an alter ego for the sole benefit of
the stockholders or of another corporate entity.
The control test for the application of the alter
ego doctrine is absent since the Commissioner
of Customs failed to establish that Oilink was
set up to avoid the payment of taxes or duties,
or for purposes that would defeat public
convenience, justify wrong, protect fraud,
defend crime, or otherwise circumvent the law.
 In addition, the Commissioner sought to collect
the deficiency taxes from Oilink only on July 2,
1999 which manifests that its belated pursuit of
Oilink was only an afterthought.
SC UPHELD THE PIERCING OF THE
CORPORATE VEIL.
 The law does not make a distinction between
a stock and non-stock corporation in the case
of doctrine of piercing the corporate veil.
Petitioner may be an education institution, but
it is registered as a corporation. The mere fact
that the corporation involved is a nonprofit
corporation does not by itself preclude a court
from applying the equitable remedy of
piercing the corporate veil.
 The piercing applies to natural persons since
the premise of the alter ego doctrine is based
upon the misuse of a corporation by an
individual, thus it can be applied to Santos.
 Outsider reverse piercing is applicable in the
case since Litton seeks to pierce the corporate
veil of petitioner to make its property answer
for Santos’ liability.
 Although the SC would have recommended
that the rules on CivPro apply such that
Santos has the option which properties would
be levied, it would frustrate the decision of
MeTC judgment and condone the hiding of
Santos to evade his obligation. As such, the
piercing of the corporate veil of the petitioner
now stands.
Petition is dismissed. Break open order and
piercing of corporate veil is justified.
 Petitioner claimed that it stopped its
business in 1986 yet it filed with the SEC
in 1987 stating that its office is in 355
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 plaintiff’s legal
right; and
3. The aforesaid control and breach of duty
must [have] proximately caused the injury or
unjust loss complained of.
 “Reverse Corporate Piercing” – flows in the
opposite direction and makes the corporation
liable for the debt of the shareholders. It has
two types:
1. Outsider reverse piercing – occurs when a
party with a claim against an individual or
corporation attempts to be repaid with assets
of a corp owned or substantially controlled by
the defendant.
2. Insider reverse piercing – the controlling
members will attempt to ignore the corporate
fiction in order to take advantage of a benefit
available to the corp.
There is no hard & fast rule to the conditions of
piercing corporate veil, still, there are probative
factors of identity that will justify such:
1. Stock ownership by one or common
ownership of both corporations.
SOBERANOTES
CORPO Case Digests 2020
Republic v. City of Parañaque, GRN.
191109, July 18, 2012.
[stock or non-stock]
“The leading rule for the lawyer, as for the man of every calling, is diligence”
respondents and to pay them back wages. It
became final and executory.
The alias Writ of Execution cannot be served by
the sheriff because all the employees inside
petitioner’s premises at 355 Maysan Road,
Valenzuela, Metro Manila, claimed that they
were employees of Hydro Pipes Philippines, Inc.
(HPPI) and not by petitioner. Thus, private
respondents filed for a break open order alleging
that HPPI and petitioner were owned by the
same incorporators/stockholders.
PEA is a govt corporation created by PD 1084
for the reclamation of lands. Then President
GMA transformed PEA into PRA to perform all
functions of the PEA relating to reclamation.
PRA reclaimed areas in Paranaque. The City
treasurer then issued warrants on levy on PRA’s
reclaimed properties based on the assessment for
delinquent real property taxes.
PRA filed TRO which the RTC denied.
PRA then filed motion to declare the assessment
null and void.
RTC dismissed PRA’s petition.
It ruled that PRA was not exempt from real
property tax since it was a GOCC organized
as a stock corporation because it had an
authorized capital stock divided into no par
value shares. Therefore, as a GOCC, local
tax exemption is withdrawn by virtue of the
LGC.
Petitioner files for certiorari assailing this
decision claiming that it is an incorporated
instrumentality of the National Government.
(No CA ruling, refer to next table for
arguments)
Hence, this petition. Petitioner alleges
that:
Piercing of corporate veil is unavailing
since there was no showing that HPPI was
created to evade liability to respondents.
HPPI has a business which is distinct and
separate from petitioners. Hence, it is of
no consequence that HPPI and Concept
shared the same premise, president,
officers, and subscribers.
PRA’s arguments:
 Not a GOCC because it does not need
to meet the test of economic viability,
one of the two requirements for a
GOCC, the other being for the
common good.
 Not a stock corp because it is not
authorized to distribute dividends.
 Not nonstock because it does not have
members.
 Not created to compete in the market
places as there was no competing
reclamation company operated by the
private sector.
 Although it is vested with corporate
powers, it is merely an incorporated
instrumentality and the mere fact that
it holds title to real property does not
make it a GOCC. Admin Code
recognizes a scenario where a piece of
land owned by the Rep is titled in the
name of an agency, dept, or instru.
City of Paranaque argues that PRA, since
its creation, has consistently represented
itself to be a GOCC as shown in its
charter, petitioners, and briefs.
Further, it is a stock corp w/ an ACS
divided into 3M no par value, 2M of
which is subscribed and fully paid.
Mayan Road and on the same day as well, 2. Identity of directors and officers.
HPPI filed a similar information sheet 3. The manner of keeping corporate books and
stating the same address. Both info sheets records.
were filed by the same person. 4. Methods of conducting the business.
 Therefore, that both corp had the same “Instrumentality Rule”
address, president, BoD, corporate  Where one corp is so organized and
officers, and subscribers, is a clear controlled and its affairs are conducted so
showing that petitioner stopped its that it is, in fact, a mere instrumentality or
business to evade payment. HPPI is adjunct of the other, the fiction of the
obviously a business conduit of Concept. corporate entity of the instrumentality may
be disregarded. Control test is then applied.
SC GRANTS PETITION.  When the law vests in a govt instrumentality
PRA is neither a stock or non-stock corp as corporate powers, it does not necessarily become
correctly argued by PRA. Although it has capital a corpo. Unless the govt instrumentality is
stock divided into no par value shares, it is not organized as a stock or non-stock corporation, it
authorized to distribute dividends. PRA is also remains a govt instrumentality exercising
not a non-stock corp as it has no members. governmental and corporate powers.
 GOCC – any agency organized as a stock or non
It is not a GOCC either because although it may stock corp, vested with functions relating to
be come under the condition of common good, public needs whether governmental or
PRA does not need to meet the test of economic proprietary in nature, and owned by the Govt
viability as PRA was not created for economic or directly or through its instrumentalities either
commercial activities. wholly or where applicable as in the case of non
stock corp, to the extent of at least 51% of its
Instead, PRA is a govt instrumentality vested capital stock.
with corporate powers and performs an essential  Gov’t instrumentality – any agency og the Natl
public service. Govt, not integrated within the dept framework,
vested with special functions or JD by law,
endowed with some if not all corporate powers,
administering special funds, and enjoying
operational autonomy, usually thru a charter.
 Thus, a GOCC MUST be organized as a stock or
non stock while an instrumentality is vested by
law with corporate powers.
SOBERANOTES
CORPO Case Digests 2020
Liban v. Gordon, GRN. 175352,July
15, 2009; En Banc Resolution of the
Court in the same case of Liban
issued on January 18, 2011 G. R. No.
175352 [special corporation]
National Coal Co. v. CIR
GRN. L 22619, Dec. 2, 1924.
[ government as corporator]
“The leading rule for the lawyer, as for the man of every calling, is diligence”
2009 Case:
Gordon was elected chairman of the PNRC
during his incumbency as a Senator. Petitioner
avers that this indicates that Gordon ceased to be
a Senate member as per Article 6 Sec 13 of the
Consti prohibiting appointment to another govt
office during incumbency since by virtue of
Camporedondo v NLRC holding PNRC is a
GOCC.
2011 Case:
This was a case filed with regard to the courts
mandate to incorporate PNRC as they declared
it a private corporation.
The NCC was created by Act 2705 for the
development of the coal industry and is engaged
in coal mining on reserved lands belonging to
the Gov.
It mined on public lands and claimed exemption
from taxes under Act 2719 and demanded a
refund from respondents.
The respondent countered arguing that the tax
was due and owing from NCC to the Gov’t of
the PH under the Admin Code.
2009 SC Ruling:
PNRC is a private org performing public
functions. The Republic established the
PNRC to adhere to the Geneva Convention.
The PNRC must be neutral, independent,
and autonomous to perform its functions on
providing aid to everyone. As such, the
PNRC cannot be seen as a GOCC,
otherwise, insurgents will treat its
volunteers as enemies.
To ensure neutrality, the PNRC cannot be
owned by the govt. Indeed, the PNRC
neither receives govt assets nor appropriate
from the congress. It is primarily financed
by private contributions and donations.
The government does not control PNRC.
Only 6/30 of the board are appointed by the
Pres. Clearly, the majority are elected by
private sector members. The PNRC
Chairman was elected by a private-sector
controlled PNRC and not by the Pres nor
any govt official. *
CFI Ordered the refund.
The trial court judge held that
 the words “lands owned by any person,
etc” under Act 2719 should be
understood as “lands held in lease or
usufruct” and thus the coal lands
possessed by NCC which belonged to
the government fell within the
exemptions.
*The PNRC chairman is not an employee
of the government. He is neither
appointed by the presidented nor does any
department or agency heads. Therefore
the chairman does not gold a government
office or employment.
The PNRC is violative of the
constitutional proscription against
creation of private corporations by special
law. Though the PNRC was created
through a special charter, the elements of
govt ownership and control are lacking
which makes it actually a private
corporation. As such, the court
recommends that PNRC should be
incorporated and registered with SEC.
2011 Case Ruling:
The court’s decision to declare PNRC as a
private corporation and ordering it to
amend certain provisions in their charter
was unconstitutional. PNRC’s structure is
sui generis.
(NOT CA DECISION) History of NCC
 NCC was created by Act 2705 to
develop the coal industry and
encourage the development of natural
resources of the country.
 Said Act granted NCC the general
powers of a corporation “and such other
powers as may be necessary…”
 The Act also made the Gov’t of the PH
the majority stockholder in order to
ensure proper gov’t supervision.
 2 mos after NCC was created, Act 2719
was passed to provide for the leasing
and development of coal lands.
 Upon petition by the NCC, the
Governor-General withdraw “from
settlement, entry, sale, or other
disposition, all coal-bearing public
lands within the Province of
Zamboanga, Dept of Mindanao and
Sulu, and Island of Pollilo, Province of
Tayabas”.
 The NCC then took possession of the
coal lands w/o any formality, contract
or lease. Of the 30k shares of stock
issued by the company, the Gov’t of the
PH is the owner of 29,809 shares or 99
The PNRC is a national society which partakes
of a sui generis character. They are organizations
that are directly regulated by international
humanitarian law.
SC REVOKES CFI DECISION
 The proclamation only provided that all
coal-bearing public lands within said
provinces and island should be withdrawn.
There is nothing that authorizes NCC or any
other person to enter and mine coal. It was
not a reservation for the sole benefit of NCC.
 The plaintiff is a private corporation. Mere
fact that the Govt is the majority stockholder
does not make it a public corporation.
 As a private corp, it has no greater rights and
privileges than any other corp organized for
the same purpose.
 It was certainly not the legislative intent to
give NCC a preference over other legitimate
private corp in coal mining.
 Section 1 of Act 2719 gives a clear
indication that no coal bearing lands of the
public domain shall be disposed of in any
manner.
 Neither is there a provision in Act 2705
which authorizes NCC to enter upon any of
the reserved coal lands without acquiring
permission from the Secretary of Agriculture
and Natural Resources.
 Act 2719 has reference only to persons,
firms, associations, or corporations which
SOBERANOTES
CORPO Case Digests 2020
Boy Scouts of the Philippines v.
Commission on Audit, GRN 177131,
Jun. 7, 2011
[public corporation -created for
public interest]
Republic Planters Bank v. Agana
and ROBES-FRANCISCO
REALTY, and ROBLES, GRN.
51765, Mar. 3, 1997. [redeemable
shares]
Ong Yong v. Tiu, et.al., GRN.
144476, Apr 8, 2003.
“The leading rule for the lawyer, as for the man of every calling, is diligence”
IN 1961, Respondent Corp (Robes-Francisco
Realty) secured a loan from petitioner for 120K.
Instead of giving the legal tender totaling to the
full amount of the loan, petitioner lent it partially
in the form of money and partially in the form of
stock certificates with the ff conditions:
The preferred stock shall have the ff rights,
 Of the right to receive a quarterly dividend
of 1% cumulative and participating
 That such preferred shares may be redeemed
In 1979, respondents proceeded against
petitioner and filed a complaint under their
alleged rights to collect dividends under the
preferred shares and to have petitioner redeem
the same. The letter-demand was not offered in
evidence.
Petitioner filed a motion to dismiss. TC denied
motion to dismiss.
The construction of Citimall was threatened with
stoppage when its owner, FLADC (owned by the
 BPS is a public corporation subject to COA audit.
TC ruled in favor of private respondents.
 The court ruled that it appears that the
provision of the stock certificates
entitles plaintiff(herein respondents)
the right to receive quarterly dividends,
clearly and unequivocally, indicates
that the same are ‘interest bearing
stocks’ which are stocks issued by a
corp under an agreement to pay certain
rate of interest thereon.
 The wordings of the terms and
conditions in said stock certs allows the
redemption of the preferred shares of
stock.
Hence, the case was elevated directly to the
SC contending that petitioner cannot be
compelled to redeem the preferred shares
issued ot private respondents.
1/3 % of the whole capital stock.
 NCC’s witness stated that the company
only took possession of said lands by
virtue of the Governor General’s
proclamation.
SC GRANTS PETITION.
 While the stock cert allows
redemption, the option was clearly
vested with the petitioner. It is the
‘optional’ type. The redemption
rests entirely with the corporation
and the stockholder is without right
to either compel or refuse the
redemption of its stock.
 The redemption is not allowed as
the Central Bank has made a finding
that petitioner bank suffers from
chronic reserve deficiency and a
directive was issued prohibiting it
from redeeming any preferred
shares as it would reduce their assets
to the prejudice of depositors and
creditors. Therefore, the prohibition
of redemption was for a valid and
just reason.
had already, before the Act, become the
owners of coal alnds.
 BSP created by CA 1111 was created to serve
public purpose: to promote the ability of
boys to do useful things for themselves and
others…
 CA 111 was amended by PD 460 which was
subsequently amended by RA 7278,
strengthening its volunteer and democratic
character by reducing govt representation.
BSP is a public copr under Art 44(2) of the Civil
Code. “institutions and entities for public interest
or purpse created by law”. BSP was created by a
special law to serve a public purpose.
BSP along with GSP, is an attached agency of the
DECS under the Admin Code. As an attached
agency, the BSP enjoys operational autonomy
however, not being under govt control does make
the attached chartered agency a private corp. The
constitution in Art 12(16) refers to private
corporations created by government for
proprietary or economic/business purposes.
 The right to receive quarterly dividends cannot
be had because the code prohibit the issuance
of any stock dividend without the approval of
stockholders representing not less than 2/3 of
the outstanding capital stock at a
regular/special meeting called for the purposes.
 Considering that the stock cert indicate that
redemption may be made at any time after the
lapse of 2 years, respondents are barred by
estoppel and laches from asserting their right as
they deemed it fit to demand ony 16 years after.
SOBERANOTES
CORPO Case Digests 2020
[trust fund doctrine]
1Halley v. Printwell, Inc.,
G.R. No. 157549, May 30, 2011
[trust fund doctrine]
Care Best International, Inc. v. SEC
GRN. 215510, Mar. 16, 2015.
[use of legal names in incorporation]
Lanuza v. Court of Appeals,GRN
131394, Mar. 28, 2005
[articles of incorporation]
“The leading rule for the lawyer, as for the man of every calling, is diligence”
Tius) encountered financial difficulties, being
indebted to PNB for 190M.
Tius invited the Ong’s to invest in FLADC.
Under the pre-subscription agreement, they
maintained equal shareholdings. The Ong’s paid
100M in cash for their subscription, while the
Tius commited to contrubtue a building and land
to cover for the 550K shares.
The Tius rescinded the agreement on the ground
that the Ong’s refused to credit to the the F:ADC
shares covering their real property contributions.
Halley was an incorporator and original director
of Business Media PH Inc. (BMPI) which has an
authorized capital stock of 3M divided into 300k
shares each w/ a par value of P10 of which 75k
were initially subscribed.
BMPI commissioned Printwell for the printing
of magazine that BMPI published and sold. For
that reason, Printwell extended 30 day credit
accommodations to BMPI.
From Oct 1988 to July 1989, BMPI placed with
Printwell several orders on credit totaling 316k.
Since BMPI paid only 25k, Printwell sued it for
collection in the RTC.
Printwell amended the complaint in order to
implead as defendants all the original
stockholders and incorporators to recover on
their unpaid subscriptions which included
Halley.
The stockholders averred they already paid their
subscriptions in full evidenced by OR’s; BMPI
had a separate personality; and that the directors
and stockholders had already dissolved BMPI.
The PH Merchant Marine School Inc. (PMMSI)
was incorporated in 1952. However, private
respondents and their predecessors registered the
company’s stock and transfer book for the first
time in 1978.
RTC IN FAVOR OF PRINTWELL
 Rejected the allegation of full
payment of subscriptions as
there are irregularity in the
issuance of ORs as some were
belatedly issued. (As to the
stockholders SPS YU)
 The stockholders used BMPI’s
corporate personality to evade
payment and create injustice.
 Applying the trust fund doctrine,
the RTC ordered the defendant
stockholders liable to Printwell
pro rata.
Defendant Stockholders appealed to the CA.
CA AFFIRMED RTC
 Defendants resort to corporate
personality would create an injustice
because Printwell would thereby be
at a loss against whom it would assert
the right to collect.
 To deny Printwell from recovering
from the stockholders would place
them in a limbo on where to assert
their right to collect from BMPI.
 The claim that the stockholders paid
is unavailing since said payment did
not reflect in the AoI of BMPI.
Moroever, the inconsistency of the
issuance of the OR’s render the claim
of full payment unworthy of
consideration. Thus, veil of corporate
fiction should be pierced.
 CA concurred with RTC on the
applicability of the trust fund
doctrine stating that it is an
established rule that a stockholder
may be sued directly to the extent of
their unpaid subscriptions to the
corporation.
Halley files petition for review in the SC
contending that she had no hand in
transacting with BMPI and that the trust
fund doctrine is inapplicable because she
had already fully paid her subscriptions.
SC DENIES PETITION
 WON petitioner persuaded BMPI to renege
on its obligations or WON she induced
Printewell to transact with BMPI is not a
good defense. Her personal liability,
together with the other stockholders,
remained.
As to the applicability of the trust fund doctrine:
 The creditor is allowed to maintain an action
upon any unpaid subscriptions and thereby
steps into the shoes of the corporation for the
satisfaction of its debts.
 Halley failed to discharge the burden of
proving payments. Her OR reflects that her
payment was made by means of a check, yet
the delivery of a check does not by itself
operate as a payment.
 Petitioner is therefore liable pursuant to the
trust fund doctrine for the corporate
obligation of BMPI by virtue of her
subscription being still unpaid.
However, the SC modified the pro rata liability.
Petitioner’s liability is only up to the extent of her
unpaid subscription.
Trust fund doctrine – It is an established doctrine
that subscription to the capital stock of a
corporation constitute a fund to which creditors
have a right to look up to for satisfaction of their
claims, and that the assignee in insolvency can
maintain an action upon any unpaid stock
subscription in order to realize assets for the
payment of its debts.
The court clarifies that the doctrine is not limited
to reaching the stockholders unpaid subscription.
Its scope encompasses not only the capital stock,
but also other property and assets generally
regarded in equity as a trust fund for the payment
of corporate debts. All assets and property
belonging to the corporation held in trust for the
benefit of creditors that were distributed or in the
possession of the stockholders, regardless of full
payment of their subscriptions, may be reached
by the creditor in satisfaction of its claim.
SOBERANOTES