BUSINESS ORGANIZATION II – TITLE I (GENERAL PROVISIONS)
P1,417,952.15. A certificate for 600,000 shares of the stock of the Balatoc
1. HARDEN V. BENGUET CONSOLIDATED MINING CO.
DOCTRINE: A sociedad anonima is something very much like the English
joint stock company, with features resembling those of both the
partnership is shown in the fact that sociedad, the generic component of
its name in Spanish, is the same word that is used in that language to
designate other forms of partnership, and in its organization it is
constructed along the same general lines as the ordinary partnership.
In section 75 of the Corporation Law, a provision is found making the
sociedad anonima subject to the provisions of the Corporation Law "so far
as such provisions may be applicable", and giving to the sociedades
anonimas previously created in the Islands the option to continue business
as such or to reform and organize under the provisions of the Corporation
Law.
FACTS:
Benguet Consolidated Mining Co. was organized in June, 1903, as a
sociedad anonima in conformity with the provisions of the Spanish Law.
Balatoc Mining Co. was organized in December 1925, as a corporation in
conformity with the provisions of the Corporation Law (Act No. 1459). Both
were organized for mining of gold and their respective properties are
located only a few miles apart in Benguet. Balatoc capital stock consists of
one million shares of the par value of one peso (P1) each.
When the Balatoc was first organized, its properties were largely
undeveloped. To improve its operations, the company’s committee
approached A. W. Beam, then president and general manager of the
Benguet Company, to secure the capital necessary to the development of
the Balatoc property. A contract was entered into wherein Benguet will (1)
construct a milling plant for the Balatoc mine, of a capacity of 100 tons of
ore per day, and with an extraction of at least 85 per cent of the gold
content; (2) erect an appropriate power plant. In return, Benguet will
receive from Balatoc shares of a par value of P600,000.
The total cost incurred by Benguet in developing Balatoc was
Company was given to Benguet and the excess value was paid to
Benguet by Balatoc in cash. Due to the improvements made by Benguet,
the value of shares of Balatoc increased in the market (from P1 to more
than P11) and dividends enriched its stockholders. Harden, the owner of
thousands of shares of Balatoc, questioned the transfer of 600,000 shares
to Benguet with the success of the development.
ISSUE:
W/N, assuming the first question to be answered in the affirmative, the
Benguet Company, which was organized as a sociedad anonima, is a
corporation within the meaning of the language used by the Congress of
the United States, and later by the Philippine Legislature, prohibiting a
mining corporation from becoming interested in another mining
corporation?
HELD:
Having shown that the plaintiffs in this case have no right of action against
Benguet Company for the infraction of the law supposed to have been
committed, we forego any discussion of the further question whether a
socieda anonima created under Spanish Law, such as the Benguet
Company, is a corporation within the meaning of the prohibitory provision
already so many times mentioned.
A sociedad anonima is something very much like the English joint stock
company, with features resembling those of both the partnership is shown
in the fact that sociedad, the generic component of its name in Spanish, is
the same word that is used in that language to designate other forms of
partnership, and in its organization it is constructed along the same
general lines as the ordinary partnership.
In section 75 of the Corporation Law, a provision is found making the
sociedad anonima subject to the provisions of the Corporation Law "so far
as such provisions may be applicable", and giving to the sociedades
anonimas previously created in the Islands the option to continue business
as such or to reform and organize under the provisions of the Corporation
Law.
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The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine
Bill), generally prohibiting corporations engaged in mining and members of
such from being interested in any other corporation engaged in mining,
was amended by section 7 of Act No. 3518 of the Philippine Legislature,
approved by Congress March 1, 1929. The change in the law effected by
this amendment was in the direction of liberalization. Thus, the inhibition
contained in the original provision against members of a corporation
engaged in agriculture or mining from being interested in other
corporations engaged in agriculture or in mining was so modified as
merely to prohibit any such member from holding more than fifteen per
centum of the outstanding capital stock of another such corporation.
Moreover, the explicit prohibition against the holding by any corporation
(except for irrigation) of an interest in any other corporation engaged in
agriculture or in mining was so modified as to limit the restriction to
corporations organized for the purpose of engaging in agriculture or in
mining.
2. BENGUET CONSOLIDATED MINING CO. V. PINEDA
DOCTRINE: Benguet Mining has no vested right to extend its life. It is a
well-settled rule that no person has a vested interest in any rule of law
entitling him to insist that it shall remain unchanged for his benefit. Had
Benguet Mining agreed to extend its life prior to the passage of the
Corporation Code of 1906 such right would have vested. But when the law
was passed in 1906, Benguet Mining was already deprived of such right.
FACTS:
Benguet Consolidated Mining Company was organized in 1903 under the
Spanish Code of Commerce of 1886 as a sociedad anonima. It was
agreed by the incorporators that Benguet Mining was to exist for 50 years.
In 1906, Act 1459 (Corporation Law) was enacted which superseded the
Code of Commerce of 1886. Act 1459 essentially introduced the American
concept of a corporation. The purpose of the law, is to eradicate the
Spanish Code and make sociedades anonimas obsolete.
In 1953, the board of directors of Benguet Mining submitted to the
Securities and Exchange Commission (SEC) an application for them to be
allowed to extend the lifespan of Benguet Mining. Then Commissioner
Mario Pineda denied the application as it ruled that the extension
requested is contrary to Section 18 of the Corporation Law of 1906 which
provides that the life of a corporation shall not be extended by amendment
beyond the time fixed in their original articles.
Benguet Mining contends that they have a vested right under the Code of
Commerce of 1886 because they were organized under said law; that
under said law, Benguet Mining is allowed to extend its life by simply
amending its articles of incorporation; that the prohibition in Section 18 of
the Corporation Code of 1906 does not apply to sociedades anonimas
already existing prior to the Law’s enactment; that even assuming that the
prohibition applies to Benguet Mining, it should be allowed to be
reorganized as a corporation under the said Corporation Law.
ISSUE:
Whether or not Benguet Mining is correct.
HELD:
No. Benguet Mining has no vested right to extend its life. It is a well-settled
rule that no person has a vested interest in any rule of law entitling him to
insist that it shall remain unchanged for his benefit. Had Benguet Mining
agreed to extend its life prior to the passage of the Corporation Code of
1906 such right would have vested. But when the law was passed in 1906,
Benguet Mining was already deprived of such right.
To allow Benguet Mining to extend its life will be inimical to the purpose of
the law which sought to render obsolete sociedades anonimas. If this is
allowed, Benguet Mining will unfairly do something which new corporations
organized under the new Corporation Law can’t do – that is, exist beyond
50 years. Plus, it would have reaped the benefits of being a sociedad
anonima and later on of being a corporation. Further, under the
Corporation Code of 1906, existing sociedades anonimas during the
enactment of the law must choose whether to continue as such or be
organized as a corporation under the new law. Once a sociedad
anonima chooses one of these, it is already proscribed from choosing the
other. Evidently, Benguet Mining chose to exist as a sociedad
anonima hence it can no longer elect to become a corporation when
its life is near its end.
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 the state-appointed secretary of the board of Dartmouth under the new
charter.
3. TRUSTEES OF DARMOUTH COLLEGE V. WOODWARD Webster argued that the New Hampshire legislature had violated the
Contract Clause of the Constitution by passing a law “impairing the
Obligation of Contracts.” Webster and his team asserted that the state
DOCTRINE: A corporation is an artificial being, invisible, intangible, and
legislature through its action had taken property rights from one group and
existing only in contemplation of law. Being the mere creature of law, it
given them to another group.
possesses only those properties which the charter of its creation confers
upon it either expressly or as incidental to its very existence. These are
ISSUE: WON the amendment of the Charter violated the Contract Clause
such as are supposed best calculated to effect the object for which it was
created. Among the most important are immortality, and, if the expression
RULING: Yes. In the decision written by Chief Justice John Marshall, the
may be allowed, individuality — properties by which a perpetual
Court found that the college charter was a contract and that the charter
succession of many persons are considered as the same, and may act as
made it clear Dartmouth College was a private entity and not a public one.
a single individual. They enable a corporation to manage its own affairs
Marshall explained the details of how a corporation functions:
and to hold property without the perplexing intricacies, the hazardous and
A corporation is an artificial being, invisible, intangible, and existing only in
endless necessity, of perpetual conveyances for the purpose of
contemplation of law. Being the mere creature of law, it possesses only
transmitting it from hand to hand. It is chiefly for the purpose of clothing
those properties which the charter of its creation confers upon it either
bodies of men, in succession, with these qualities and capacities that
expressly or as incidental to its very existence. These are such as are
corporations were invented, and are in use. By these means, a perpetual
supposed best calculated to effect the object for which it was created.
succession of individuals are capable of acting for the promotion of the
Among the most important are immortality, and, if the expression may be
particular object like one immortal being. But this being does not share in
allowed, individuality — properties by which a perpetual succession of
the civil government of the country, unless that be the purpose for which it
many persons are considered as the same, and may act as a single
was created.
individual. They enable a corporation to manage its own affairs and to hold
property without the perplexing intricacies, the hazardous and endless
FACTS: In 1769, King George III of Great Britain granted a charter to
necessity, of perpetual conveyances for the purpose of transmitting it from
Dartmouth College. This document spelled out the purpose of the school,
hand to hand. It is chiefly for the purpose of clothing bodies of men, in
the structure to govern it, and gave the land to the college.
succession, with these qualities and capacities that corporations were
In 1816, the legislature of New Hampshire attempted to alter Dartmouth’s
invented, and are in use. By these means, a perpetual succession of
charter in order to reinstate the College’s deposed president, placing the
individuals are capable of acting for the promotion of the particular object
ability to appoint positions in the hands of the governor, adding new
like one immortal being. But this being does not share in the civil
members to the board of trustees, and creating a state board of visitors
government of the country, unless that be the purpose for which it was
with veto power over trustee decisions. This effectively converted the
created.
school from a private to a public institution. The College's book of records,
Contracts Clause applied to individual property rights and not to “the
corporate seal, and other corporate property were removed.
political relations between the government and its citizens”.
The trustees of the College objected and sought to have the actions of the
“The provision of the Constitution never has been understood to embrace
legislature declared unconstitutional. They claimed that New Hampshire
other contracts than those which respect property, or some object of value,
was overstepping its legal authority by interfering with the contract of a
and confer rights which may be asserted in a court of justice,” Chief
private institution. The trustees had Daniel Webster, an alumnus of
Justice Marshall further explained.
Dartmouth College, to argue their positions, and sued William Woodward,

3
Applying this reasoning, the Court further held that the state could not
interfere with the college’s corporate charter because it constituted a
contract between private parties. “That a corporation is established for
purposes of general charity, or for education generally does not, per se,
make it a public corporation, liable to the control of the legislature,”
obligation of the Federation, he should not be held liable for the same as
said entity has a separate and distinct personality from its officers.
ISSUE: Whether or not private respondent can be made personally liable
for the liabilities of the Philippines Football Federation.

RULING: 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
4. INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC. binding or, as enforceable against it. The officers or agents are themselves
V. COURT OF APPEALS 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
DOCTRINE: 1. It is a settled doctrine in corporation law that any person
the constitution and by-laws of the Philippine Football Federation.
acting or purporting to act on behalf of the corporation which has no valid
Unfortunately, the same does not prove that said Federation has indeed
existence assumed such privileges and becomes personally liable for
been recognized and accredited by either the Philippine Amateur Athletic
contract entered into or for other acts performed as such agent.
Federation or the Department of Youth and Sports Development.
2. The application of the doctrine of corporation by estoppel applies to a
Accordingly, we rule that the Philippine Football Federation is not a
third party only when he tries to escape liability on a contract from which
national sports association within the purview of the aforementioned laws
he has benefitted on the irrelevant ground of defective incorporation.
and does not have corporate existence of its own.
FACTS: Petitioner offered its services as travel agency to respondent
Thus being said, it follows that private respondent Henri Kahn should be
Philippine Football Federation. Petitioner secured the airline tickets for the
liable for the unpaid obligations of the unincorporated Philippine Football
trips of the athletes and officials of the Federation to the South East Asian
Federation. It is a settled principle in corporation law that any person
Games in Kuala Lumpur as well as various other trips to the People's
acting or purporting to act on behalf of the corporation which has no valid
Republic of China and Brisbane, the tickets amounting to P449,654.83.
existence assumed such privileges and becomes personally liable for
The Federation made two partial payments, the President of respondent,
contract entered into or for other acts performed as such agent.
Henri Khan, also issued a personal check in the amount of P50,000.
However, the balance was not paid despite demands.
Petitioner sued Henri Kahn in his personal capacity and as President of
the Federation and impleaded the Federation as an alternative defendant.
Petitioner sought to hold Henri Kahn liable for the unpaid balance for the
tickets purchased by the Federation on the ground that Henri Kahn 5. PHILIPPINE OVERSEAS TELECOMMUNICATIONS CORP. V.
allegedly guaranteed the said obligation. Khan averred petitioner has no SANDIGANBAYAN
cause of action against him. He maintained that he did not guarantee
payment but merely acted as an agent of the Federation which has a Facts: POTC is a private corporation which is a main stockholder of
separate and distinct juridical personality. PHILCOMSAT, a GOCC granted with a telecommunications franchise.
The trial court rendered a decision in favor of petitioner. CA reversed,
holding that, ince petitioner failed to prove that Henri Kahn guaranteed the In July 1987, the OSG, on behalf of the Republic, filed a complaint for
reconveyance, reversion, accounting, restitution and damages against

4
Jose Africa, Manuel Nieto, Ferdinand Marcos, Imelda Marcos, Ferdinand
Marcos Jr. Roberto Benedicto, Juan Ponce Enrile and Potenciano
Illusorio, alleging that through clever schemes, the wealth that should go to
the coffers of the government, went to the defendants in their own
individual accounts, some through corporations. For instance, Africa
allegedly channelled the ill-gotten wealth in shares of stock in 20
corporations including POTC and PHILCOMSAT. Thus, the PCGG wanted
to sequester the same and appointed a controller for disbursement of
funds from the said corporations. POTC and PHILCOMSAT, filed separate
complaints for injuction with the Sandiganbayan to nullify and lift the
sequestration order issued against them for failure to file the necessary
judicial action against them within the period prescribed by the
constitution.
Issue: whether or not failure to properly implead POTC and PHILCOMSAT
as defendants in the civil case is a jurisdictional error.
Held: Yes. Section 26, Article XVIII of the Constitution mandates that if no
judicial action has been filed within six (6) months after the ratification of
the 1987 Constitution, the writ of sequestration shall automatically be
lifted. In the case at bar, there was no judicial action filed against POTC
and PHILCOMSAT. There has never been any appropriate judicial action
for reconveyance or recovery ever instituted by the Republic against
POTC and PHILCOMSAT. The complaint was filed against the private
individuals. Failure to implead POTC and PHILCOMSAT is a violation of
the fundamental principle that a corporation has a legal personality distinct
and separate from its stockholders; that, the filing of a complaint against a
stockholder is not ipso facto a complaint against the corporation.
6. STOCKHOLDERS OF GUANZON & SONS, INC. V. REGISTER
OF DEEDS OF MANILA
Doctrine: Where the purpose of the liquidation, as well as the distribution
of the assets of the corporation, is to transfer their title from the corporation
to the stockholders in proportion to their shareholdings, that transfer
cannot be affected without the corresponding deed of conveyance from
the corporation to the stockholders, and the certificate should be
considered as one in the nature of a transfer or conveyance.
Facts:  Five stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation, distributing among
themselves in proportion to their shareholdings, as liquidating dividends,
the assets of said corporation, including real properties located in Manila.
When they presented the certificate of liquidation to the Register of Deeds
of Manila, it was denied registration on seven grounds, of which the
following were disputed by the stockholders:
3.         The number of parcels not certified to in the acknowledgment;
5.         P430.50 Reg. fees need be paid;
6.         P940.45 documentary stamps need be attached to the document;
Appellants contend that the certificate of liquidation is not a conveyance or
transfer but merely a distribution of the assets of the corporation which has
ceased to exist for having been dissolved.
The commissioner of land registration and register of deeds of manila
argued that the certificate of liquidation in question, though it involves a
distribution of the corporation's assets, in the last analysis represents a
transfer of said assets from the corporation to the stockholders.
Issue: whether or not the said certificate of liquidation is equivalent to a
transfer of assets from the corporation to the stockholders.
Held:  Yes. Properties registered in the name of the corporation are owned
by it as an entity separate and distinct from its members. While shares of
stock constitute personal property they do not represent property of the
corporation. A share of stock only typifies an aliquot part of the
corporation's property, or the right to share in its proceeds to that extent
when distributed according to law and equity, but its holder is not the
owner of any part of the capital of the corporation. Nor is he entitled to the
possession of any definite portion of its property or assets. The
stockholder is not a co-owner or tenant in common of the corporate
property.
5

7. LITONJUA, JR. V. ETERNIT CORPORATION
Doctrine:
The property of a corporation is not the property of the
stockholders or members, and as such, may not be sold without express
authority from the board of directors.
Facts:
        The Eternit Corporation (EC) is a corporation duly organized and
registered under Philippine laws. Its manufacturing operations were
conducted on eight parcels of land. The properties are located in
Mandaluyong City under the name of Far East Bank & Trust Company, as
trustee. (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium. Jack Glanville, an Australian citizen,
was the General Manager and President of EC, while Claude Frederick
Delsaux was the Regional Director for Asia of ESAC.
        The management of ESAC grew concerned about the political
situation in the Philippines and wanted to stop its operations in the country.
The Committee for Asia of ESAC instructed Michael Adams, a member of
EC's Board of Directors, to dispose of the eight parcels of land. Adams
engaged the services of realtor/broker Lauro G. Marquez so that the
properties could be offered for sale to prospective buyers. Glanville later
showed the properties to Marquez.
        Marquez thereafter offered the parcels of land and the
improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua &
Company, Inc. In a Letter, Marquez declared that he was authorized to sell
the properties for P27,000,000.00 and that the terms of the sale were
subject to negotiation.
        Eduardo Litonjua, Jr. responded to the offer. Marquez showed the
property to Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The
Litonjua siblings offered to buy the property for P20,000,000.00 cash.
Marquez apprised Glanville of the Litonjua siblings' offer and relayed the
same to Delsaux in Belgium, but the latter did not respond.
Thereafter, Glanville telexed Delsaux in Belgium, inquiring on his
position/counterproposal to the offer of the Litonjua siblings. Delsaux sent
a telex to Glanville stating that, based on the "Belgian/Swiss decision," the
final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing
obligations prior to final liquidation."
        Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex
sent by Delsaux. Litonjua, Jr. accepted the counterproposal of Delsaux.
Marquez conferred with Glanville, and in a Letter, confirmed that the
Litonjua siblings had accepted the counter-proposal of Delsaux.
        Sometime later, Marquez and the Litonjua brothers inquired from
Glanville when the sale would be implemented. In a telex, Glanville
informed Delsaux that he had met with the buyer, which had given him the
impression that "he is prepared to press for a satisfactory conclusion to the
sale."
        Meanwhile, with the assumption of Corazon C. Aquino as
President of the Republic of the Philippines, the political situation in the
Philippines had improved. Marquez received a telephone call from
Glanville, advising that the sale would no longer proceed. Glanville
followed it up with a Letter, confirming that he had been instructed by his
principal to inform Marquez that "the decision has been taken at a Board
Meeting not to sell the properties on which Eternit Corporation is situated."
        The Litonjuas then filed a complaint for specific performance and
damages against ECand the Far East Bank & Trust Company, and ESAC
in the RTC.
        In their answer to the complaint, EC and ESAC alleged that since
Eteroutremer was not doing business in the Philippines, it cannot be
subject to the jurisdiction of Philippine courts; the Board and stockholders
of EC never approved any resolution to sell subject properties nor
authorized Marquez to sell the same; and the telex of Jack Glanville was
his own personal making which did not bind EC.
        The trial court rendered judgment in favor of defendants and
dismissed the amended complaint.
        The trial court declared that since the authority of the
agents/realtors was not in writing, the sale is void and not merely
unenforceable, and as such, could not have been ratified by the principal.
In any event, such ratification cannot be given any retroactive effect.
Plaintiffs could not assume that defendants had agreed to sell the property
without a clear authorization from the corporation concerned, that is,
through resolutions of the Board of Directors and stockholders.
        The Litonjuas appealed the decision to the CA.
        The CA rendered judgment affirming the decision of the RTC.
        The CA ruled that Marquez, who was a real estate broker, was a
special agent within the purview of Article 1874 of the New Civil Code.
Under Section 23 of the Corporation Code, he needed a special authority
6
from EC's board of directors to bind such corporation to the sale of its
properties. Delsaux, who was merely the representative of ESAC (the
majority stockholder of EC) had no authority to bind the latter. The CA
pointed out that Delsaux was not even a member of the board of directors
of EC. Moreover, the Litonjuas failed to prove that an agency by estoppel
had been created between the parties.
Issue: Whether there is a perfected contract of sale.
Held: NO.
        Section 23 of Batas Pambansa Bilang 68, otherwise known as the
Corporation Code of the Philippines, provides:
The Board of Directors or Trustees. — Unless otherwise provided
in this Code, the corporate powers of all corporations formed
under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of
directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of
the corporation, who shall hold office for one (1) year and until
their successors are elected and qualified.
A corporation is a juridical person separate and distinct from its members
or stockholders and is not affected by the personal rights, obligations and
transactions of the latter. It may act only through its board of directors or,
when authorized either by its by-laws or by its board resolution, through its
officers or agents in the normal course of business.
        The property of a corporation is not the property of the
stockholders or members, and as such, may not be sold without express
authority from the board of directors. Physical acts, like the offering of the
properties of the corporation for sale, or the acceptance of a counter-offer
of prospective buyers of such properties and the execution of the deed of
sale covering such property, can be performed by the corporation only by
officers or agents duly authorized for the purpose by corporate by-laws or
by specific acts of the board of directors. Absent such valid
delegation/authorization, the rule is that the declarations of an individual
director relating to the affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of such director, are
not binding on the corporation.
        Any sale of real property of a corporation by a person purporting to
be an agent thereof but without written authority from the corporation is
null and void. The declarations of the agent alone are generally insufficient
to establish the fact or extent of his/her authority.
        By the contract of agency, a person binds himself to render some
service or to do something in representation on behalf of another, with the
consent or authority of the latter.
        An agency may be expressed or implied from the act of the
principal, from his silence or lack of action, or his failure to repudiate the
agency knowing that another person is acting on his behalf without
authority. To create or convey real rights over immovable property, a
special power of attorney is necessary. Thus, when a sale of a piece of
land or any portion thereof is through an agent, the authority of the latter
shall be in writing, otherwise, the sale shall be void.
        In this case, the petitioners as plaintiffs below, failed to adduce in
evidence any resolution of the Board of Directors of respondent EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in its behalf, the eight parcels of land owned by
respondent EC including the improvements thereon.
        While Glanville was the President and General Manager of
respondent EC, and Adams and Delsaux were members of its Board of
Directors, the three acted for and in behalf of respondent ESAC, and not
as duly authorized agents of respondent EC; a board resolution evincing
the grant of such authority is needed to bind EC to any agreement
regarding the sale of the subject properties. Such board resolution is not a
mere formality but is a condition sine qua non to bind respondent EC.
Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a majority
of the shares of stocks of another, or even all of such shares of stocks,
taken alone, will not justify their being treated as one corporation.
Note: For an agency by estoppel to exist, the following must be
established: (1) the principal manifested a representation of the agent's
authority or knowlingly allowed the agent to assume such authority; (2) the
third person, in good faith, relied upon such representation; (3) relying
upon such representation, such third person has changed his position to
his detriment. An agency by estoppel, which is similar to the doctrine of
apparent authority, requires proof of reliance upon the representations,
and that, in turn, needs proof that the representations predated the action
taken in reliance.
7

8. LIM V. COURT OF APPEALS
Facts:
Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y.
Lim whose estate is the subject of probate proceedings in special
proceedings Q-95-23334 entitled, “In re: Intestate Estate Of Pastor Y. Lim
Rufina Luy Lim, represented by George Luy, petitioner.” Private
respondents auto truck corporation, alliance marketing corporation, speed
distributing inc, active distributing inc, and action company are
corporations formed, organized and existing under Philippine laws and
which owned real properties covered under the Torrens system. On June
11, 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving
spouse and duly represented by her nephew, George Luy filed on March
17, 1995, a joint petition for the administration of the estate of Pastor Y.
Lim before the Regional Trial Court of Quezon City. Private respondents
corporations whose properties were included in the inventory of the estate
of Pastor Y. Lim, then filed a motion for the lifting of his pendens an motion
for exclusion of certain properties from the estate of the decedent.
Issue: Whether or not the doctrine of piercing the veil of corporate entity is
applicable to be able to include in the probate proceedings the company
formed by deceased Pastor Y. Lim.
Held: No.
It is settled that a corporation is clothed with personality separate
and distinct from that of the persons composing it. It may not generally be
held liable for that of the persons composing it. It may not be held liable for
the personal indebtedness of its stockholders or those of the entities
connected with it.
Rudimentary is the rule that a corporation is invested by law with a
personality distinct and separate from its stockholders or members. In the
same vein, a corporation by legal fiction and convenience is an entity
shielded by protective mantle and imbued with by law with a character
alien to the persons comprising it.
Piercing the veil of corporate entity requires the court to see
through the protective shroud which exempts its stockholders from
liabilities that ordinarily, they could subject to, or distinguishes one
corporation from a seemingly separate one, were it not for the existing
corporate fiction.
The corporate mask may be lifted and the corporate veil may be pierced
when a corporation is just but the alter ego of a person or of another
corporation. Where badges of fraud exist, where public convenience is
defeated; where a wrong is sought to be justified thereby, the corporate
fiction or the notion of the legal entity should come to naught.
Further, the test in determining the applicability of the doctrine of
piercing the veil of corporate fiction is as follows: 1.) Control, not merely
the 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
so separate mind, will or existence of its own; 2.) Such control must have
been used by the defendant to commit fraud on wrong to perpetuate the
violation of a statutory or other positive legal duty, on dishonest and unjust
act in contravention of plaintiffs legal right; and 3.) The aforesaid control
and breach of duty must proximately cause the injury or unjust loss
complained of. The absence of any of these elements prevent “piercing
the corporate veil.”
Mere ownership by a single stockholder or by another corporation
of all or nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate personalities.
Moreover, to disregard the separate juridical personality of a
corporation, the wrong doing must be clearly and convincingly established,
it cannot be presumed.
9. UNION BANK OF THE PHILIPPINES V. SPOUSES ONG
DOCTRINE: Doctrine of Separate Personality; Properties of a stockholder
are not properties of a judicially declared insolvent corporation.
FACTS:
Spouses Ong are majority stockholders of Baliwag Mahogany
Corporation (BMC). The spouses executed a Continuing Surety
Agreement with the Bank for a P40 million credit line extended by the
former to BMC, with a stipulation on solidary liability undertaking in
8
October 10, 1990. After about a year on Oct 22, 1991, Spouses Ong sold
their 974-sqm lot (with house as improvement) to Lee for P12.5 Million.
The market value of the property was at P14 million. On Nov 22, 1991, or
within a 30-day period from the conveyance of said lot, BMC filed a
Petition for Rehabilitation and for Declaration for Suspension of Payments
with SEC. The Bank filed an action to rescind the sale made by Spouses
Ong to Lee.
ISSUE:
Whether or not the sale of the lot to Lee was one that partakes of
a conveyance intended to defraud creditors.
RULING:
The Court ruled that a sale made at a price lower than the market
value cannot by itself support a presumption of intent to defraud creditors.
For a transaction to be considered as one to defraud creditors, both
contracting parties must be shown to have acted maliciously to prejudice
creditors. The sale was made (1) with sufficient consideration, and; (2)
result of a fair and regular transaction. The Bank has the burden to prove
that Spouses Ong, as sureties, had no other means and properties to
answer for the debt of BMC upon the surety agreement. The provision of
Section 70 of the Insolvency Law does not apply to the Spouses Ong, as
the insolvency pertains to BMC, and Spouses Ong did not fille for their
own insolvency. BMC has a separate juridical personality from Spouses
Ong.
10. DE LIMA VS. GOIS
DOCTRINE: Doctrine of Separate Personality; Properties belonging to a
stockholder and officer of a corporation cannot be made to answer for the
debt of the corporation. The stockholder only has an indirect interest in the
assets and business of the corporation.
FACTS:
A case for illegal dismissal was filed by De Lima against Golden Union
Manufacturing Corp. The Labor Arbiter ruled in favor of the petitioner and
ordered Golden to pay separation and other benefits amounting
115,561.05. Golden did not appeal, and a writ of execution was issued
against the Isuzu jeep, which was registered under the name of
respondent Susan Mercaida Gois. Gois filed a 3rd party claim citing that the
attachment of the vehicle was irregular because it was registered under
her name and not the corporation. She posted a cash bond for the amount
of the judgment debt for the release of said vehicle.  
ISSUE:
Whether or not the vehicle under the name of a stockholder can be a
subject of a garnishment against the corporation.
RULING:
The Court ruled that a corporation has a personality separate and distinct
from its stockholders. Obligations incurred by the corporation, acting
through its directors, officer and employees, are its sole liabilities. Property
belonging to a corporation cannot be attached to satisfy the debt of a
stockholder and vice versa, the latter only having an indirect interest in the
assets and business of the former. The Labor Arbiter only directed Golden
to pay petitioner the sum of the judgment debt, and was not a joint and
solidary liability with Gois. Unless they had exceeded their authority,
corporate officers, as a general rule, are not personally liable for their
official acts because of the separate and distinct personality between the
stockholders and the corporation. Further, the dismissal was not done in
bad faith, and therefore no personal liability attaches to Gois.
11.   ASIA’S EMERGING DRAGON CORPORATION V.
DEPARTMENT OF TRANSPORTATION AND COMMUNICATION
FACTS: This case is about petitions arising from the awarding of NAIA
International Passenger Terminal III to PIATCO. Thus, it is only proper to
recall the facts in the cases of Agan, Jr v PIATCO and Republic v
Gingoyon.
The facts in the first case are as follows:
Six business leaders namely, John Gokongwei, Henry Sy, Sr., Lucio Tan,
Andrew Gotianun, George Ty and Alfonso Yuchengco met with then
President Fidel V. Ramos to explore the possibility of investing in the
construction and operation of a new international airport terminal. As a
result of this, the six business leaders formed Asia’s Emerging Dragon
Corp. (AEDC). Eventually, AEDC submitted various proposals to the
9
government and NEDA approved the construction of a new international
airport terminal. Thus, bidders were invited. However, it was the proposal
of Peoples Air Cargo (PAIRCARGO) was chosen. AEDC protested this
contesting that preference was given to PAIRCARGO and thus the latter
was incorporated into Phil. International Airport Terminals Co. (PIATCO). It
entered into a concession agreement with DOTC in 1997 to franchise and
operate the said terminal for 21 years. In 1998, the definition pertaining to
obligations given to the concessionaire, development of facilities and
proceeds, fees and charges and termination of contract was amended.
MIAA was originally designated with maintenance and operations of NAIA
terminals 1 and 2 since it has a contract with service providers. And so,
workers filed a petition for prohibition, claiming that they would lose their
job, and the service providers as well, which filed a motion for intervention.
12.   SECOSA, ET AL. V. HEIRS OF FRANCISCO
FACTS:
Erwin Suarez Francisco was an 18-year old Physical Therapy student of
Manila Central University. He was riding a motorcycle along Radical 10
Avenue near Veteran Shipyard Gate. Meanwhile, Secosa was driving an
Isuzu truck which was owned by Dassad Warehousing and Port Services,
Inc.
Behind Francisco was a sand and gravel truck and after that truck was
Secosa in the Isuzu. Secosa overtook the sand and gravel truck and then
bumped Francisco, which caused the latter to fall. The rear wheels of the
Isuzu truck ran over Francisco which resulted to his death. Secosa then
fled the scene. Erwin’s parents filed an action for damages against
Secosa, Dassad Warehousing and Port Services, Inc., and El
Buenasucenso Sy, Dassad’s president.
ISSUE:
W/N Sy can be held solidarily liable without violating the veil of corporate
fiction
HELD:
NO. The Isuzu truck was registered in the name of Dassad Warehousing
and Port Services, Inc. and not of Sy. Secosa is merely an employee of
Dassad and not of Sy. It is well enshrined in our law that a corporation is
invested by law with a personality separate from that of its stockholders or
members. Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not in
itself sufficient ground for disregarding the separate corporate personality.
The veil of corporation fiction treats as separate and distinct the affairs of
the corporation and its officers and stockholders. As a general rule, a
corporation will be looked upon as a legal entity, unless and until there is a
sufficient reason to the contrary. When the notion of the legal entity is used
to defeat public convenience, justify wrong, or defend crime, the law will
regard the corporation as an association of persons. Further, a
corporation’s authority to act and its liability for its actions are separate and
apart from the individuals who own it. In order for the separate juridical
personality of a corporation to be disregarded, the wrongdoing must be
clearly established, it cannot be presumed. In the present case, there is no
evidence that would justify the piercing of the veil of corporate fiction.
13.   EDWARD A. KELLER & CO., LTD. V. COB GROUP
MARKETING INC.
Doctrine:  As to the liability of the stockholders, it is settled that a
stockholder is personally liable for the financial obligations of a corporation
to the extent of his unpaid subscription
Facts: Edward A. Keller & Co. Ltd appointed COB Group Marketing Inc.
as exclusive distributor of its household products, Brite and Nuvan in
Panay and Negros, as shown in the sales agreement dated March 14,
1970. Under that agreement sold by Keller on credit its products to COB
Group Marketing. As security for COB Group Marketing’s credit,
purchases up to amount of Php35,000, one Asuncion Manahan mortgaged
her land to Keller. Manahan assumed solidarity with COB Group the
faithful performance of all terms and conditions of the sales agreement. In
July 1970 the parties executed a second sales agreement whereby COB
Group Marketing’s territory was extended to Northern and Southern
Luzon. As security for the credit purchases up to Php25,000 of COB
10
Group Marketing for that area, Tomas C. Lorenzo Jr. and his father
executed a mortgage on their land in Nueva Ecija. Like Manahan, the
Lorenzos were solidarily liable with COB Group Marketing for its
obligations under the sales agreement. The credit purchases of COB
Group Marketing, which started on October 15, 1969, limited up to January
22, 1971. On May 8, the board of directors of COB Group Marketing where
apprised by Jose E. Bax, the firm’s president and general manager, that
the firm owed Keller about Php179,000. Bax was authorized to negotiate
with Keller for the settlement of his firm’s liability.
Issue: Whether or not the stockholders of COB Group Marketing can be
held personally liable for the credit.
Ruling: As to the liability of the stockholders, it is settled that a stockholder
is personally liable for the financial obligations of a corporation to the
extent of his unpaid subscription (Vda. de Salvatierra vs. Garlitos, 103
Phil. 757, 763; 18 CJS 1311-2).
While the evidence shows that, the amount due from COB Group
Marketing is P184,509.60 as of July 31, 1971 or P186,354.70 as of August
31, 1971 (Exh. JJ), the amount prayed for in Keller's complaint is
P182,994.60 as of July 31, 1971 (18-19 Record on Appeal).  This latter
amount should be the one awarded to Keller because a judgment entered
against a party in default cannot exceed the amount prayed for (Sec. 5,
Rule 18, Rules of Court).
COB Group Marketing, Inc. is ordered to pay Edward A. Keller & Co., Ltd.
the sum of P182,994.60 with 12% interest per annum from August 1, 1971
up to the date of payment plus P20,000 as attorney's fees.
Asuncion Manahan and Tomas C. Lorenzo, Jr. are ordered to pay
solidarily with COB Group Marketing the sums of P35,000 and P25,000,
respectively.
The following respondents are solidarily liable with COB Group Marketing
up to the amounts of their unpaid subscription to be applied to the
company's liability herein:  Jose E. Bax, P36,000; Francisco C. de Castro,
P36,000; Johnny de la Fuente, P12,000; Sergio C. Ordoñez, P12,000;
Trinidad C. Ordoñez, P3,000; Magno C. Ordoñez, P3,000; Adoracion C.
Ordoñez, P3,000; Tomas C. Lorenzo, Jr., P3,000 and Luz M. Aguilar-
Adao, P6,000.
14.   HEIRS OF FELY TAN, UY V. INTERNATIONAL EXCHANGE
BANK
Doctrine: The Court emphasized that the 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. Otherwise, an injustice that was never unintended may result
from an erroneous application.
Facts: Respondent International Exchange Bank (iBank), granted loans to
Hammer Garments Corporation (Hammer), covered by promissory notes
and deeds of assignment. The loans were likewise secured by a P 9
Million-Peso Real Estate Mortgage executed by Goldkey Development
Corporation (Goldkey) over several of its properties and a P 25 Million-
Peso Surety Agreement signed by Chua and his wife, Fe Tan Uy (Uy).
However, Hammer defaulted in the payment of its loans, prompting iBank
to foreclose on Goldkey’s third-party Real Estate Mortgage. The
mortgaged properties were sold for P 12 million during the foreclosure
sale, leaving an unpaid balance of P 13,420,177.62.9. For failure of
Hammer to pay the deficiency, iBank filed a Complaint for sum of money
on December 16, 1997 against Hammer, Chua, Uy, and Goldkey before
the Regional Trial Court, Makati City (RTC).
Hammer did not file any Answer, thus it was held in default. On the other
hand, Uy claimed that she was not liable to iBank because she never
executed a surety agreement in favor of iBank. Goldkey also denies
liability, averring that it acted only as a third-party mortgagor and that it
was a corporation separate and distinct from Hammer.
The ruled in favor of iBank. The lower court said that while it made the
pronouncement that the signature of Uy on the Surety Agreement was a
forgery, it nevertheless held her liable for the outstanding obligation of
11
Hammer because she was an officer and stockholder of the said
corporation. The RTC agreed with Goldkey that as a third-party mortgagor,
its liability was limited to the properties mortgaged. It came to the
conclusion, however, that Goldkey and Hammer were one and the same
entity.
Aggrieved, the heirs of Uy and Goldkey (petitioners) elevated the case to
the CA.
The CA affirmed the findings of the RTC. The CA found that iBank was not
negligent in evaluating the financial stability of Hammer. According to the
appellate court, iBank was induced to grant the loan because petitioners,
with intent to defraud the bank, submitted a falsified Financial Report for
1996 which incorrectly declared the assets and cashflow of Hammer.
Because petitioners acted maliciously and in bad faith and used the
corporate fiction to defraud iBank, they should be treated as one and the
same as Hammer.
Hence, the present petitions filed separately by the heirs of Uy and
Goldkey which later on consolidated by this Court.
ISSUE: Whether or not the doctrine of piercing the corporate veil should
apply in this case?
Ruling: No. Basic is the rule in corporation law that a corporation is a
juridical entity which is vested with a legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people
comprising it. Following this principle, obligations incurred by the
corporation, acting through its directors, officers and employees, are its
sole liabilities. A director, officer or employee of a corporation is generally
not held personally liable for obligations incurred by the corporation.
Nevertheless, this legal fiction may be disregarded if it is used as a means
to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, or to confuse legitimate
issues.
In this case, petitioners are correct to argue that it was not alleged, much
less proven, that Uy committed an act as an officer of Hammer that would
permit the piercing of the corporate veil. A reading of the complaint reveals
that with regard to Uy, iBank did not demand that she be held liable for the
obligations of Hammer because she was a corporate officer who
committed bad faith or gross negligence in the performance of her duties
such that the lifting of the corporate mask would be merited. What the
complaint simply stated is that she, together with her errant husband
Chua, acted as surety of Hammer, as evidenced by her signature on the
Surety Agreement which was later found by the RTC to have been forged.
The Court emphasized that the 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. Otherwise,
an injustice that was never unintended may result from an erroneous
application.
However, the Court finds Goldkey liable for it is a mere alter ego of
Hammer.
Goldkey contends, among others, that iBank is estopped from expanding
Goldkey’s liability beyond the real estate mortgage. It adds that it did not
authorize the execution of the said mortgage. Finally, it passes the blame
on to iBank for failing to exercise the requisite due diligence in properly
evaluating Hammer’s creditworthiness before it was extended an omnibus
line.
The Court disagrees.
Goldkey’s argument, that iBank is barred from pursuing Goldkey for the
satisfaction of the unpaid obligation of Hammer because it had already
limited its liability to the real estate mortgage, is completely absurd.
Goldkey needs to be reminded that it is being sued not as a consequence
of the real estate mortgage, but rather, because it acted as an alter ego of
Hammer. Accordingly, they must be treated as one and the same entity,
making Goldkey accountable for the debts of Hammer.
Similarly, Goldkey is undoubtedly mistaken in claiming that iBank is
seeking to enforce an obligation of Chua. The records clearly show that it
was Hammer, of which Chua was the president and a stockholder, which
contracted a loan from iBank. What iBank sought was redress from
Goldkey by demanding that the veil of corporate fiction be lifted so that it
could not raise the defense of having a separate juridical personality to
evade liability for the obligations of Hammer.
Under a variation of the doctrine of piercing the veil of corporate fiction,
when two business enterprises are owned, conducted and controlled by
the same parties, both law and equity will, when necessary to protect the
rights of third parties, disregard the legal fiction that two corporations are
distinct entities and treat them as identical or one and the same.
12
15. GENERAL CREDIT CORPORATION V. ALSONS
DEVELOPMENT AND INVESTMENT CORPORATION
DOCTRINE:
A corporation is an artificial being vested by law with a personality distinct
and separate from those of the persons composing it as well as from that
of any other entity to which it may be related. The first consequence of the
doctrine of legal entity of the separate personality of the corporation is that
a corporation may not be made to answer for acts and liabilities of its
stockholders or those of legal entities to which it may be connected or vice
versa. The notion of separate personality, however, may be disregarded
under the doctrine — “piercing the veil of corporate fiction” — as in fact the
court will often look at the corporation as a mere collection of individuals or
an aggregation of persons undertaking business as a group, disregarding
the separate juridical personality of the corporation unifying the group.
Another formulation of this doctrine is that when two (2) business
enterprises are owned, conducted and controlled by the same parties,
both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that two corporations are distinct entities
and treat them as identical or one and the same.
FACTS:
Petitioner General Credit Corporation (GCC), then known as Commercial
Credit Corporation(CCC), established CCC franchise companies in
different urban centers of the country. In furtherance of its business, GCC
was able to secure license from Central Bank (CB) and SEC to engage
also in quasi-banking activities. On the other hand, respondent CCC
Equity Corporation (EQUITY) was organized inby GCC for the purpose of,
among other things, taking over the operations and management of the
various franchise companies. At a time material hereto, respondent Alsons
Development and Investment Corporation (ALSONS) and the Alcantara
family, each owned, just like GCC, shares in the aforesaid GCC franchise
companies, e.g., CCC Davao and CCC Cebu.
ALSONS and the Alcantara family, for a consideration of P2M, sold their
shareholdings (101,953 shares), in the CCC franchise companies to
EQUITY. EQUITY issued ALSONS et al., a "bearer" promissory note for
P2M with a one-year maturity date.
4 years later, the Alcantara family assigned its rights and interests over the
bearer note to ALSONS which became the holder thereof. But even before
the execution of the assignment deal aforestated, letters of demand for
interest payment were already sent to EQUITY. EQUITY no longer then
having assets or property to settle its obligation nor being extended
financial support by GCC, pleaded inability to pay. ALSONS, having failed
to collect on the bearer note aforementioned, filed a complaint for a sum of
money against EQUITY and GCC. GCC is being impleaded as party-
defendant for any judgment ALSONS might secure against EQUITY and,
under the doctrine of piercing the veil of corporate fiction, against GCC,
EQUITY having been organized as a tool and mere conduit of GCC.
According to EQUITY (cross-claim against GCC): it acted merely as
intermediary or bridge for loan transactions and other dealings of GCC to
its franchises and the investing public; and is solely dependent upon GCC
for its funding requirements. Hence, GCC is solely and directly liable to
ALSONS, the former having failed to provide …EQUITY the necessary
funds to meet its obligations to ALSONS.GCC filed its ANSWER to Cross-
claim, stressing that it is a distinct and separate entity from EQUITY.RTC,
finding that EQUITY was but an instrumentality or adjunct of GCC and
considering the legal consequences and implications of such relationship,
rendered judgment for Alson. CA affirmed.
ISSUE:
Whether or not the doctrine of piercing the veil of corporate fiction be
applied to Equity Corporation? Or in other words, whether Equity and GCC
should both be regarded merely as an aggregate of persons doing
business enterprise?
HELD:
The Court held that the corporate veil of Equity Corporation be pierced.
13

The Court cites three basic areas where piercing the veil of corporate
fiction is allowed. First, when it is used to defeat public convenience to
evade existing operations or “equity piercing”; second, in fraud cases
where it is used to justify a wrong or “fraud piercing” and third, in alter ego
cases where the corporation is organized as to make it merely an
instrumentality agency.
In this case, the Court has the right to pierce GCC’s corporate veil
because evidence point to the following facts: first, Equity is but an
instrumentality of GCC and  has always been dependent on the latter
for its operations, second, the commonality of directors, stockholders
and sharing of office between the two companies shows that they
should clearly be regarded merely as an aggregate of persons in a
business enterprise; third, the establishment of Equity is primarily for GCC
to circumvent Central Bank rules specifically the Anti-Usury Law, using it
as a conduit to its non-quasi bank affiliates; and lastly, the funds invested
by Equity to GCC franchises are from GCC funds as well.
Applying the three basic areas of corporate veil piercing, GCC clearly
defeated public convenience  when it established Equity to extend credit
to its investors which in turn is not allowed by the law; it justified a wrong
by fraudulently evading the Anti-Usury Law established by the Central
Bank to quasi-banking businesses, and lastly, Equity was but a mere
instrumentality of GCC for it to get away with its obligations.
16.   MANACOP V. EQUITABLE PCI BANK
DOCTRINE:
Execution pending appeal may be allowed when “the prevailing party is
already of advanced age and in danger of extinction,” but not in this case
where the winning party is a corporation. “[A] juridical entity’s existence
cannot be likened to a natural person — its precarious financial condition
is not by itself a compelling circumstance warranting immediate execution
and does not outweigh the long standing general policy of enforcing only
final and executory judgment.”
FACTS:
Respondent Lavine Loungewear Manufacturing, Inc. (Lavine) insured its
buildings and supplies against fire with Philippine Fire and Marine
Insurance Corporation (PhilFire), Rizal Surety and Insurance Company
(Rizal Surety), Tabacalera Insurance Company (TICO), First Lepanto
Taisho Insurance Corporation (First Lepanto), Equitable Insurance
Corporation (Equitable Insurance), and Reliance Insurance Corporation
(Reliance Insurance). Except for Policy No. 13798 issued by First Lepanto,
all the policies provide that:
Loss, if any, under this policy is payable to Equitable Banking Corporation-
Greenhills Branch, as their interest may appear subject to the terms,
conditions, clauses and warranties under this policy.
A fire gutted Lavines buildings and their contents thus claim were made
against the policies. The insurance proceeds payable to Lavine is P112,
245, 324.34.
Lavine was then represented by Harish Ramnani but his authority was
withdrawn by the Board of Directors due to his alleged failure to account
for the insurance proceeds. Chandru was appointed in his stead and was
designated, as Lavines representatives in negotiating with the insurance
companies.
Notwithstanding Chandrus request that payments be made first to Lavine
who shall thereafter pay Equitable Bank as the latters interest may appear,
certain insurance companies released the proceeds directly to Equitable
Bank.
Harish, Jose F. Manacop, Chandru P. Pessumal, Maureen M. Ramnani
and Salvador Cortez, moved to intervene claiming they were Lavines
incumbent directors and that Harish was Lavines authorized
representative. They disclaimed Chandrus designation as president of
Lavineas well as his and Atty. Aguinaldos authority to file the action.
14

Rizal Surety stated its willingness to pay the insurance proceeds but only
to the rightful claimant, while Equitable Bank alleged it had sufficiently
established the amount of its claim and as beneficiary of the insurance
policies, it was entitled to collect the proceeds.
On April 2, 2002, the trial court rendered a decision ordering the defendant
Bank to refund to plaintiff.
The intervenors filed a Motion for Execution Pending Appeal on the
following grounds: (a) TICO was on the brink of insolvency; (b) Lavine was
in imminent danger of extinction; and (c) any appeal from the trial courts
judgment would be merely dilatory.
Rizal Surety, First Lepanto, Equitable Bank and Lavine separately filed a
Notice of Appeal. PhilFire likewise filed a Notice of Appeal.
Without filing a motion for reconsideration from the decision of the trial
court and even before the latter could rule on the motion for execution
pending appeal, Equitable Bank filed on April 24, 2002 a Petition for
Certiorari, Prohibition and Mandamus (with Prayer for Temporary
Restraining Order and Preliminary Injunction) before the Court of Appeals
docketed as CA-G.R.SP No. 70298. Lavine also filed a Petition for
Certiorari with Prayer for Temporary Restraining Order (TRO) and Writ of
Preliminary Injunction docketed as CA-G.R. SP No. 70292, after it
withdrew its Notice of Appeal.
ISSUE:
Whether or not the CA erred in giving due course to the petition for
certiorari of equitable pci bank in notwithstanding that the ordinary mode of
appeal under Sec. 2, Rule 42 of the Revised Rules of Court had already
been availed of by them.
HELD:
The Court of Appeals should have dismissed CA-G.R.SP Nos. 70292 and
70298. A perusal of these petitions show that Equitable Bank and Lavine
in appropriately filed the petitions for certiorari when appeal was clearly a
plain, speedy and adequate remedy from the decision of the trial court.
Simultaneous filing of a petition for certiorari under Rule 65 and an
ordinary appeal under Rule 41 of the Revised Rules of Civil Procedure
cannot be allowed since one remedy would necessarily cancel out the
other.
It is elementary that for certiorari to prosper, it is not enough that the trial
court committed grave abuse of discretion amounting to lack or excess of
jurisdiction; the requirement that there is no appeal, nor any plain, speedy
and adequate remedy in the ordinary course of law must likewise be
satisfied.
In the instant case, Equitable Bank and Lavine assailed the trial courts
decision through certiorari by alleging that Judge Lavia was biased.
Judge Lavia disregarded mandatory provisions of the Rules of Court when
he allowed petitioners to intervene; that he also resolved the issue of
corporate representation between the two groups of directors of Lavine
when he had no jurisdiction over the subject matter.
Clearly, the foregoing allegations are proper under Rule 41. It should be
pointed out that when Equitable Bank and Lavine filed their respective
petitions before the Court of Appeals on April 24, 2002, the trial court had
already rendered on April 2, 2002 a judgment on the merits. Both had
notice of said final judgment as they even filed notices of appeal with the
trial court.
It is well-settled that the remedy to obtain reversal or modification of the
judgment on the merits is appeal. This is true even if the error, or one of
the errors, ascribed to the trial court rendering the judgment is its lack of
jurisdiction over the subject matter, or the exercise of power in excess
thereof, or grave abuse of discretion in the findings of fact or of law set out
in the decision. Thus, while it may be true that a final order or judgment
was rendered under circumstances that would otherwise justify resort to a
special civil action under Rule 65, the latter would nonetheless be
15
unavailing if there is an appeal or any other plain, speedy and adequate
remedy in the ordinary course of law.
Equitable Bank has not shown any valid or extraordinary circumstance that
would justify immediate resort to certiorari. It simply alleged grave abuse of
discretion on the part of the trial judge as purportedly shown by a pattern
of questionable rulings in favor of petitioners. However, these rulings may
not be corrected by certiorari no matter how irregular or erroneous they
might be. If the court has jurisdiction over the subject matter and of the
person, its rulings upon all questions involved are within its jurisdiction and
may be corrected only by an appeal from the final decision.
17. LANUZA JR. V. BF CORPORATION
DOCTRINE:
Corporate representatives may be compelled to submit to arbitration
proceedings pursuant to a contract entered into by the corporation they
represent if there are allegations of bad faith or malice in their acts
representing the corporation.
FACTS:
In 1993, BF Corporation filed a collection complaint with the Regional Trial
Court against Shangri-Laand the members of its board of directors: Alfredo
C. Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr.,
Maximo G. Licauco III, and Benjamin C. Ramos.
BF Corporation alleged in its complaint that on December 11, 1989 and
May 30, 1991, it entered into agreements with Shangri-La wherein it
undertook to construct for Shangri-La a mall and a multilevel parking
structure along EDSA.
Shangri-La had been consistent in paying BF Corporation in accordance
with its progress billing statements. However, by October 1991, Shangri-
La started defaulting in payment.
BF Corporation alleged that Shangri-La induced BF Corporation to
continue with the construction of the buildings using its own funds and
credit despite Shangri-La’s default. According to BF Corporation,
ShangriLa misrepresented that it had funds to pay for its obligations with
BF Corporation, and the delay in payment was simply a matter of delayed
processing of BF Corporation’s progress billing statements.
BF Corporation eventually completed the construction of the buildings.
Shangri-La allegedly took possession of the buildings while still owing BF
Corporation an outstanding balance.
BF Corporation alleged that despite repeated demands, Shangri-La
refused to pay the balance owed to it. It also alleged that the Shangri-La’s
directors were in bad faith in directing Shangri-La’s affairs. Therefore, they
should be held jointly and severally liable with Shangri-La for its
obligations as well as for the damages that BF Corporation incurred as a
result of Shangri-La’s default.
On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco,
Maximo G. Licauco III, and Benjamin C. Ramos filed a motion to suspend
the proceedings in view of BF Corporation’s failure to submit its dispute to
arbitration, in accordance with the arbitration clause provided in its
contract.
Petitioners filed their comment on Shangri-La’s and BF Corporation’s
motions, praying that they be excluded from the arbitration proceedings for
being non-parties to Shangri-La’s and BF Corporation’s agreement.
ISSUE:
Whether petitioners should be made parties to the arbitration proceedings,
pursuant to the arbitration clause provided in the contract between BF
Corporation and Shangri-La.
HELD:
Because a corporation's existence is only by fiction of law, it can only
exercise its rights and powers through its directors, officers, or agents,
who are all natural persons. A corporation cannot sue or enter into
contracts without them.
As a general rule, therefore, a corporation's representative who did not
personally bind himself or herself to an arbitration agreement cannot be
forced to participate in arbitration proceedings made pursuant to an
agreement entered into by the corporation. He or she is generally not
considered a party to that agreement.
However, there are instances when the distinction between personalities
of directors, officers, and representatives, and of the corporation, are
disregarded. We call this piercing the veil of corporate fiction.
16
Piercing the corporate veil is warranted when "[the separate personality of
a corporation] is used as a means to perpetrate fraud or an illegal act, or
as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, or to confuse legitimate issues."
It is also warranted in alter ego cases "where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation."
When corporate veil is pierced, the corporation and persons who are
normally treated as distinct from the corporation are treated as one
person, such that when the corporation is adjudged liable, these persons,
too, become liable as if they were the corporation.
Among the persons who may be treated as the corporation itself under
certain circumstances are its directors and officers.
In cases alleging solidary liability with the corporation or praying for the
piercing of the corporate veil, parties who are normally treated as distinct
individuals should be made to participate in the arbitration proceedings in
order to determine if such distinction should indeed be disregarded and, if
so, to determine the extent of their liabilities.
In this case, the Arbitral Tribunal rendered a decision, finding that BF
Corporation failed to prove the existence of circumstances that render
petitioners and the other directors solidarily liable. It ruled that petitioners
and Shangri-La's other directors were not liable for the contractual
obligations of Shangri-La to BF Corporation. The Arbitral Tribunal's
decision was made with the participation of petitioners, albeit with their
continuing objection. In view of our discussion above, we rule that
petitioners are bound by such decision.
18.   FRANCISCO V. GSIS
DOCTRINE:
A corporation cannot evade the binding effect produced by a telegram sent
by its board secretary, and the addressee of such telegram cannot be
blamed for relying upon it, because if every person dealing with a
corporation were held duty-bound to disbelieve every act of its responsible
officers no matter how regular it should appear on its face, corporate
transactions would speedily come to a standstill.
If a private corporation intentionally or negligently clothes its officers or
agents with apparent power to perform acts for it, the corporation will be
estopped to deny that such apparent authority is real, as to innocent third
persons dealing in good faith with such officers or agents.
FACTS:
On 10 October 1956, the plaintiff, Trinidad J. Francisco, in consideration of
a loan in the amount of P400,000.00, out of which the sum of P336,100.00
was released to her, mortgaged in favor of the defendant, Government
Service Insurance System, a parcel of land containing an area of 18,232
square meters, with twenty-one (21) bungalows, known as Vic-Mari
Compound, located at Baesa, Quezon City, payable within ten (10) years
in monthly installments of P3,902.41, and with interest of 7% per annum
compounded monthly.
On 6 January 1959, the System extrajudicially foreclosed the mortgage on
the ground that up to that date the plaintiff-mortgagor was in arrears on her
monthly installments in the amount of P52,000.00. Payments made by the
plaintiff at the time of foreclosure amounted to P130,000.00. The System
itself was the buyer of the property in the foreclosure sale.
On 20 February 1959, the plaintiff's father, Atty. Vicente J. Francisco, sent
a letter of REQUEST RE REDEMPTION OF FORECLOSED PROPERTY
to the general manager of the defendant corporation, Mr. Rodolfo P.
Andal. And latter the System approved the request of Francisco to redeem
the land through a telegram. Defendant received the payment and it did
not, however, take over the administration of the compound. The System
then sent a letter to Francisco informing of his indebtedness and the 1
year period of redemption has been expired. And the System argued that
the telegram sent to Francisco saying that the System has approved the
request in redeeming the property is incorrect due to clerical problems.
ISSUE:
Whether or not GSIS is liable for the acts of its employees regarding the
telegram?
HELD:
Yes. The terms of the offer were clear, and over the signature of
defendant's general manager, Rodolfo Andal, plaintiff was informed
telegraphically that her proposal had been accepted. There was nothing in
17
the telegram that hinted at any anomaly, or gave ground to suspect its
veracity, and the plaintiff, therefore, can not be blamed for relying upon it.
There is no denying that the telegram was within Andal’s apparent
authority. Hence, even if it were the board secretary who sent the
telegram, the corporation could not evade the binding effect produced by
the telegram. Knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment, and in relation to
matters within the scope of his authority, is notice to the corporation,
whether he communicates such knowledge or not. Yet, notwithstanding
this notice, the defendant System pocketed the amount, and kept silent
about the telegram not being in accordance with the true facts, as it now
alleges. This silence, taken together with the unconditional acceptance of
three other subsequent remittances from plaintiff, constitutes in itself a
binding ratification of the original agreement.
Indeed, it is well-settled that — "If a private corporation intentionally or
negligently clothes its officers or agents with apparent power to perform
acts for it, the corporation will be estopped to deny that such apparent
authority is real, as to innocent third persons dealing in good faith with
such officers or agents." (2 Fletcher's Encyclopedia, Priv. Corp. 255,
Perm. Ed).
Hence, even if it were the board secretary who sent the telegram, the
corporation could not evade the binding effect produced by the telegram.
19.   NARRA NICKEL MINING AND DEVELOPMENT CORP. V.
REDMONT CONSOLIDATED MINES
Doctrine: Grandfather Test
Shares belonging to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality, but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares
corresponding to such percentage shall be counted as of Philippine
nationality. Thus, if 100,000 shares are registered in the name of a
corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be
recorded as owned by Filipinos. But if less than 60%, or say, 50% of the
capital stock or capital of the corporation or partnership, respectively,
belongs to Filipino citizens, only 50,000 shares shall be counted as owned
by Filipinos and the other 50,000 shall be recorded as belonging to aliens
Facts:
Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining,
Inc. (SMMI), filed an application for an Mineral Production Sharing
Agreement (MPSA) and Exploration Permit (EP) with the Mines and Geo-
Sciences Bureau (MGB), Region IV-B, OAce of the Department of
Environment and Natural Resources (DENR). Subsequently, SMMI was
issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in
Barangay Sumbiling, Municipality of Bataraza, Province of Palawan and
EPA-IVB-44 which includes an area of 3,720 hectares in Barangay
Malatagao, Bataraza, Palawan. The MPSA and EP were then transferred
to Madridejos Mining Corporation (MMC) and, on November 6, 2006,
assigned to petitioner McArthur.
Petitioner Narra acquired its MPSA from Alpha Resources and
Development Corporation and Patricia Louise Mining & Development
Corporation (PLMDC) which previously filed an application for an MPSA
with the MGB, Region IV-B, DENR on January 6, 1992. Through the said
application, the DENR issued MPSA covering an area of 3.277 hectares in
barangays Calategas and San Isidro, Municipality of Narra, Palawan.
Subsequently, PLMDC conveyed, transferred and/or assigned its rights
and interests over the MPSA application in favor of Narra.
Another MPSA application of SMMI was 2led with the DENR Region IV-B,
labeled as MPSAAMA-IVB-154 (formerly EPA-IVB-47) over 3,402
hectares in Barangays Malinao and Princesa Urduja, Municipality of Narra,
Province of Palawan. SMMI subsequently conveyed, transferred and
assigned its rights and interest over the said MPSA application to Tesoro.
On January 2, 2007, Redmont fi,ed before the Panel of Arbitrators (POA)
of the DENR three (3) separate petitions for the denial of petitioners'
applications for MPSA.
In the petitions, Redmont alleged that at least 60% of the capital stock of
McArthur, Tesoro and Narra are owned and controlled by MBMI
Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont
18
reasoned that since MBMI is a considerable stockholder of petitioners, it
was the driving force behind petitioners' filing of the MPSAs over the areas
covered byapplications since it knows that it can only participate in mining
activities through corporations which are deemed Filipino citizens.
Redmont argued that given that petitioners' capital stocks were mostly
owned by MBMI, they were likewise disqualified from engaging in mining
activities through MPSAs, which are reserved only for Filipino citizens.
In their Answers, petitioners averred that they were qualified persons
under Section 3 of Republic Act No. 7942 or the Philippine Mining Act of
1995.
Additionally, they stated that their nationality as applicants is immaterial
because they also applied for Financial or Technical Assistance
Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur, AFTA-
IVB-08 for Tesoro and AFTA-IVB-07 for Narra, which are granted to
foreign-owned corporations. Nevertheless, they claimed that the issue on
nationality should not be raised since McArthur, Tesoro and Narra are in
fact Philippine Nationals as 60% of their capital is owned by citizens of the
Philippines. They asserted that though MBMI owns 40% of the shares of
PLMC (which owns 5,997 shares of Narra), 3 40% of the shares of MMC
(which owns 5,997 shares of McArthur) 4 and 40% of the shares of SLMC
(which, in turn, owns 5,997 shares of Tesoro), 5 the shares of MBMI will
not make it the owner of at least 60% of the capital stock of each of
petitioners. They added that the best tool used in determining the
nationality of a corporation is the "control test," embodied in Sec. 3 of RA
7042 or the Foreign Investments Act of 1991. They also claimed that the
POA of DENR did not have jurisdiction over the issues in Redmont's
petition since they are not enumerated in Sec. 77 of RA 7942. Finally, they
stressed that Redmont has no personality to sue them because it has no
pending claim or application over the areas applied for by petitioners.
On December 14, 2007, the POA issued a Resolution disqualifying
petitioners from gaining MPSAs. The POA considered petitioners as
foreign corporations being "effectively controlled" by MBMI, a 100%
Canadian company and declared their MPSAs null and void. In the same
Resolution, it gave due course to Redmont's EPAs. Thereafter, on
February 7, 2008, the POA issued an Order 7 denying the Motion for
Reconsideration filed by petitioners.
Issue:
Whether or not petitioners are Filipino Corporations.
Ruling:
No. The Court finds that this case calls for the application of the
grandfather rule since, as ruled by the POA and aArmed by the OP, doubt
prevails and persists in the corporate ownership of petitioners. Also, as
found by the CA, doubt is present in the 60-40 Filipino equity ownership of
petitioners Narra, McArthur and Tesoro, since their common investor, the
100% Canadian corporation — MBMI, funded them. However, petitioners
also claim that there is "doubt" only when the stockholdings of Filipinos are
less than 60%.
The assertion of petitioners that "doubt" only exists when the
stockholdings are less than 60% fails to convince this Court. DOJ Opinion
No. 20, which petitioners quoted in their petition, only made an example of
an instance where "doubt" as to the ownership of the corporation exists. It
would be ludicrous to limit the application of the said word only to the
instances where the stockholdings of non-Filipino stockholders are more
than 40% of the total stockholdings in a corporation. The corporations
interested in circumventing our laws would clearly strive to have "60%
Filipino Ownership" at face value. It would be senseless for these applying
corporations to state in their respective articles of incorporation that they
have less than 60% Filipino stockholders since the applications will be
denied instantly. Thus, various corporate schemes and layerings are
utilized to circumvent the application of the Constitution.
Obviously, the instant case presents a situation which exhibits a scheme
employed by stockholders to circumvent the law, creating a cloud of doubt
in the Court's mind. To determine, therefore, the actual participation, direct
or indirect, of MBMI, the grandfather rule must be used.
20.   STONEHILL ET AL. V. DIOKNO, ET AL.
19
Doctrine:
". . . that the Government's action in gaining possession of papers
belonging to the corporation did not relate to nor did it affect the personal
defendants. If these papers were unlawfully seized and thereby the
constitutional rights of or any one were invaded, they were the rights of the
corporation and not the rights of the other defendants. Next, it is clear that
a question of the lawfulness of a seizure can be raised only by one whose
rights have been invaded. Certainly, such a seizure, if unlawful, could not
affect the constitutional rights of defendants whose property had not been
seized or the privacy of whose homes had not been disturbed; nor could
they claim for themselves the benefits of the Fourth Amendment, when its
violation, if any, was with reference to the rights of another. Remus vs.
United States (C.C.A.) 291 F. 501, 511. It follows, therefore, that the
question of the admissibility of the evidence based on an alleged unlawful
search and seizure does not extend to the personal defendants but
embraces only the corporation whose property was taken . . ."
Facts:
A total of 42 search warrants was issued by the Respondent-Judges on
different dates against petitioners herein and/or the corporations of which
they were officers, directed to any peace officer, to search the persons
and/or the premises of their offices, warehouses and/or residences, and to
sieze and take possession of the several personal property as "the subject
of the offense; stolen or embezzled and proceeds or fruits of the offense,"
or "used or intended to be used as the means of committing the offense,"
which is described in the applications adverted to above as "violation of
Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code)
and the Revised Penal Code."
Thus, the documents, papers, and things seized under the alleged
authority of the warrants in question may be split into (2) major groups,
namely: (a) those found and seized in the oHces of the aforementioned
corporations and (b) those found seized in the residences of petitioners
herein.
Issue:
Whether or not the officers of corporation may validly invoke the juridical
personality of the said corporation with regards to the evidences siezed
within it's premises.
Ruling:
No. Petitioners herein may not validly object to the use in evidence against
them of the documents, papers and things seized from the offices and
premises of the corporations adverted to above, since the right to object to
the admission of said papers in evidence belongs exclusively to the
corporations, to whom the seized effects belong, and may not be invoked
by the corporate officers in proceedings against them in their individual
capacity. Indeed, it has been held that the Government's action in gaining
possession of papers belonging to the corporation did not relate to nor did
it affect the personal defendants. If these papers were unlawfully seized
and thereby the constitutional rights of or any one were invaded, they were
the rights of the corporation and not the rights of the other defendants.
Next, it is clear that a question of the lawfulness of a seizure can be raised
only by one whose rights have been invaded. Certainly, such a seizure, if
unlawful, could not affect the constitutional rights of defendants whose
property had not been seized or the privacy of whose homes had not been
disturbed; nor could they claim for themselves the benefits of the Fourth
Amendment, when its violation, if any, was with reference to the rights of
another. Remus vs. United States (C.C.A.) 291 F. 501, 511. It follows,
therefore, that the question of the admissibility of the evidence based on
an alleged unlawful search and seizure does not extend to the personal
defendants but embraces only the corporation whose property was taken .
21.   BATAAN SHIPYARD & ENGINEERING CO., INC. V. PCGG
Doctrine:
Right against self-incrimination has no application to juridical persons.
FACTS:
A sequestration order was issued on April 14,1986 by Commissioner
Bautista addressed to three of the agents of the Commission, hereafter
referred to as PCGG. The sequestration included Petitioner BASECO,
among others. The following are acts pursuant to sequestration order:
20
  Pursuant to the sequestration order, Mr. Balde, acting for PCGG
reiterated an earlier request for the production of certain
documents, and that if not submitted, the officers will be cited for
contempt.
 Capt. Zabala, member of the task force assigned to carry out the
basic sequestration order, sent a letter to BASECO’s Vice-
President for Finance, terminating the contract for security
services with the Engineer Island compound between BASECO
and “Anchor and FAIRWAYS”, CAPCOM military personnel
having already been assigned to the area.
 He also issued a memorandum addressed to “Truck Owners and
Contractors” amending part of their contract with BASECO that
stipulated charges for use of the BASECO road network were
made payable “upon entry and not anymore subject to monthly
billing as was originally agreed upon.”
 PCGG fiscal agent, Berenguer, entered into a contract in behalf of
BASECO with Deltamarine Integrated Port Services in which the
latter undertook to introduce improvements on the BASECO wharf
at Engineer Island. However, this contract was never
consummated. Capt. Siacunco, Head-(PCGG) BASECO
Management Team, advised Deltamarine that “the new
management is not in position to honor the said contract”.
 Commissioner Bautista first directed PCGG agent, Mayor
Buenaventura to plan implement progress for the Seisman Rock
Quarry but afterwards, Commissioner Bautista, in representation
of PCGG, authorized another party, Abesamis, to operate the
querry.
 By another order of Commissioner Bautista, Mayor Buenaventura
was also authorized to clean and beautify the Company’s
compound by disposing of “metal scraps” and other materials,
equipment and machineries no longer usable.
 BASECO officer’s services were terminated by the PCGG.

On July 14, 1986, Commissioner Diaz decreed the provisional takeover by
the PCGG of BASECO invoking provisions of Sec 3 of EO 1, empowering
the Commission to – “provisionally takeover in the public interest or to
prevent its disposal or dissipation, business enterprises taken over by the
government of the Marcos Administration or by entities or persons close to
former President Marcos...”
Challenged in this special civil action of certiorari and Exhibition by a
private corporation known as the Bataan Shipyard and Engineering Co.,
Inc. (BASECO) to: (1) declare unconstitutional and void Executive Orders
1 and 2, and (2) to annul the sequestration, takeover, and other orders
issued, and acts done, in accordance with said executive orders.
ISSUE:
WON there was a violation of Right against Self-Incrimination and
Unreasonable Searches and Seizures
OR WON such right is applicable to juridical persons
HELD:
BASECO contends that its right against self-incrimination and
unreasonable searches and seizure had been transgressed by the Order
requiring it to produce corporate records under pain of contempt if it fails to
do so. The order was issued upon the authority of Sec 3 of EO 1, treating
of the PCGG’s power to “issue subpoenas requiring...the production of
such books, papers, contracts, records, statements of accounts and other
documents as may be material to the investigation conducted by the
Commission,” and par (3) of EO 2 dealing with its power to “require all
persons in the Philippines holding...(alleged “ill-gotten”) assets or
properties, whether located in the Philippines or abroad, in their names as
nominees, agents or trustees, to make full disclosure of the same...” THE
CONTENTION LACKS MERIT.
It is elementary that the right against self-incrimination has no application
to juridical persons.
“While an individual may lawfully refuse to answer incriminating questions
unless protected by an immunity statute, it does not follow that a
corporation, vested with special privileges and franchises, may refuse to
show its hand when charged with an abuse of such privileges.”
Based on relevant jurisprudence cited by the SolGen, “Corporations are
not entitled to all of the constitutional protections which private individuals
have...” (Oklahoma Press Publishing Co. v. Walling)
21
“...The corporation is a creature of the state. It is presumed to be
incorporated for the benefit of the public. It received certain special
privileges and franchises, and holds them subject to the laws of the state
and the limitations of its charter. Its powers are limited by law. It can make
no contract not authorized by its charter. Its rights to act as a corporation
are only preserved to it so long as it obeys the law of its creation. There is
a reserve right in the legislature to investigate its contracts and find out
whether it has exceeded its powers...While an individual may lawfully
refuse to answer incriminating questions unless protected by an immunity
statute, it does not follow that a corporation vested with special privileges
and franchises may refuse to show its hand when charged with an abuse
of such privileges.” (Wilson v. United States)
At any rate, EO 14-A, amending Sec 4 of EO 14 assures protection to
individuals required to produce evidence before the PCGG against any
possible violation of his right against self-incrimination. Also, there has
been no search undertaken by any agent or representative of the PCGG,
and of course no seizure on the occasion thereof.
22.   TIME INC. V. REYES
Doctrine:
Doctrine that foreign corporation not licensed to do business cannot
maintain suit not applicable to case at bar -- Petitioner in this case is not
“maintaining any suit” but is merely defending one against itself; it did not
file any complaint but only a corollary defensive petition to prohibit the
lower court from further proceeding with a suit that it had no jurisdiction to
entertain.
Foreign corporation’s failure to aver its legal capacity to institute petition
for prohibition not fatal. -- “A foreign corporation may, by writ of prohibition,
seek relief against the wrongful assumption of jurisdiction. And a foreign
corporation seeking a writ of prohibition against further maintenance of a
suit, on the ground of want of jurisdiction, is not bound by the ruling of the
court in which the suit was brought, on a motion to quash service of
summons, that it has jurisdiction.”
FACTS:
Petition alleges that petitioner Time, Inc., is an American corporation, its
principal office in New York, and is the publisher of “Time”, a weekly news
magazine; the petition does not allege the petitioner’s legal capacity to sue
in the Philippine courts.
In Civil Case 10403, Villegas and Enrile sought to recover from Time Inc
damages upon an alleged libel arising from a publication of Time (Asia
edition) magazine (Aug 18, 1967 issue) of an essay, “Corruption in Asia”
particularly imputing corruption to Villegas due to his unreasonable wealth
and Enrile’s connection to it. Depositions were taken from Mr. Gonzales of
Time-Life International and Mr. Enriquez of Muller & Phipps (Manila) Ltd.
in connection with the activities and operations of the petitioner in the
Philippines. A writ of attachment on the real and personal estate of Time,
Inc was thereafter issued.
Petitioner received the summons and a copy of the complaint at its New
York office, thereafter filed a motion to dismiss for lack of jurisdiction and
improper venue relying upon the provisions of RA 4363.
Respondent CFI of Rizal deferred the determination of the motion to
dismiss until after the trial of the case on the merits, considering that the
grounds relied upon in the motion do not appear to be indubitable; for the
reason that “the rule laid down under RA 4363, amending Art. 360 of RPC,
is not applicable to actions against non-resident defendants, and because
questions involving harassments and inconvenience, as well as disruption
of public service do not appear indubitable...”
Failing to stop the taking of the depositions and to have action taken on its
motion to dismiss, Time Inc. filed this Petition for certiorari and prohibition
to annul certain orders of the respondent CFI of Rizal issued in Civil Case
10403 (Villegas and Enrile v. Time, Inc) and to prohibit said court from
further proceeding with said civil case. Upon petitioner’s posting of a bond
of P1k, WPI was issued.
Note, no dispute that at the time of publication, Villegas was the Mayor of
Manila and Enrile was the Undersecretary of Finance concurrently Acting
Commissioner of Custos with offices in Manila.
ISSUE:
22
WON RA 4363 is applicable to action against a foreign corporation or non-
resident defendant
HELD:
Under the first proviso in Sec 1 of RA 4363, the venue of a civil action for
damages in cases of written defamation is localized upon the basis of,
first, whether the offended party or plaintiff is a public officer or a private
individual; and second, if he is a public officer, whether his office is in
Manila or not, at the time of the commission of the offense. If the offended
party is a public officer with office in Manila, the proviso limits him to 2
choices of venue, either in CFI of Manila, or in the city or province where
the libelous article is printed and first published.
The complaint in this case was lodged in the court of Rizal. Respondents
did not allege that the libelous article was printed and first published in the
province of Rizal, and since they were public officers with offices in Manila,
under said proviso, it is clear that they should have filed their action in CFI
of Manila.
Villegas and Enrile argued that RA 4363 is not applicable where the action
is against non-resident defendant, Time Inc. They argue that Congress did
not intend to protect non-resident defendants since Sec. 3 of RA 3463
provides effectivity of the statute only if “newspapermen in the Philippines”
have organized a “Philippine Press Council” whose function shall be to
promulgate a Code of Ethics for “them” and “the Philippine press”; and
since a non-resident defendant is not in a position to comply with such
conditions, such defendant may not invoke its provisions; that it would be
absurd and incongruous, in the absence of an extradition treaty, for the
law to give to public officers with office in Manila the second option of filing
a criminal case in the court of the place where the libelous article is printed
and first published if the defendant is a foreign corporation and that, under
the “single publication” rule which originated in US and imported into the
Philippines, the rule was understood to mean that publications in another
state are not covered by venue statutes of the forum.
That Villegas and Enrile could not file a criminal case for libel against a
non-resident defendant does not make RA 4363 incongruous or absurd,
for such inability to file a criminal case against a non-resident natural
person equally exists in crimes other than libel. It is a fundamental rule of
international jurisdiction that no state can by its laws, and no court which is
only a creature of the state, can by its judgment or decrees, directly bind or
affect property or persons beyond the limits of that state. Not only this, but
if the accused is a corporation, no criminal action can lie against it,
whether such corporation be resident or non-resident. At any rate, the
case filed by Villegas and Enrile is not a criminal case but a civil case for
damages.
The court held that there is no reason why the inapplicability of one
alternative venue should result in rendering the other alternative also
inapplicable. Since, as the venue provisions of RA 4363 should be
deemed mandatory, such was not waived by defendant.
The dismissal of the present petition is asked on the ground that the
petitioner foreign corporation failed to allege its capacity to sue in the
courts of the Philippines. Respondents relied on Sec. 69 providing that no
foreign corporation shall maintain any suit as well as citing jurisdictions.
The Court held that petitioner Time Inc. was not maintaining any suit but
merely defending one against itself; it did not file any complaint but only a
corollary defensive petition to prohibit the lower court from further
proceeding with a suit that it had no jurisdiction to entertain.
Such failure to aver its legal capacity to institute present petition is not
fatal. “A foreign corporation may, by writ of prohibition, seek against the
wrongful assumption of jurisdiction. And a foreign corporation seeking a
writ of prohibition against further maintenance of a suit, on the ground of
want of jurisdiction, is not bound by the ruling of the court in which the suit
was brought, on a motion to quash, service of summons, that it has
jurisdiction. The present petition was also premature since respondent
court has not definitely rule on the motion to dismiss, nor held that it has
jurisdiction, but only argument is untenable. The motion to dismiss was
predicated on the respondent court’s lack of jurisdiction to entertain the
action; and the rulings of this Court are that writs of certiorari or prohibition,
or both, may issue in case of a denial or deferment of action on such a
motion to dismiss for lack of jurisdiction.
23.   SIA V. THE PEOPLE OF THE PHILIPPINES
Doctrine:
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The intention of the parties, therefore, is a factor determinant of whether a
crime was committed or whether a civil obligation alone intended by the
parties. In the absence of an express provision of law making the
petitioner liable for the criminal offense committed by the corporation of
which he is a president as in fact there is no such provisions in the
Revised Penal Code under which petitioner is being prosecuted, the
existence of a criminal liability on his part may not be said to be beyond
any doubt.
 
Facts:
Petitioner Jose Sia was General Manager of the Metal Manufacturing
Company of the Philippines, Inc.(MEMAP) engaged in the manufacture of
steel office equipment. Due to the need of his company of raw materials to
be imported from abroad, he applied for a letter of credit to import steel
sheets from Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan, which application
was directed to the Continental Bank. The goods arrived.
According to Complainant Bank, there was permitted delivery of the steel
sheets only upon execution of a trust receipt, while according to the
accused, the goods were delivered to him sometime before he executed
that trust receipt (in fact they had already been converted into steel office
equipment by the time he signed said trust receipt). The bill of exchange
issued for the purpose of collecting the unpaid account thereon having
fallen due however, neither accused nor his company having made
payment thereon despite demands. The accounts having reached the sum
in pesos of P46,818.68 after deducting his deposit valued at P28,736.47;
that was the reason why upon complaint by Continental Bank, the Fiscal
filed the information after preliminary investigation.
CA opined “A corporation is an artificial person, an abstract being. If the
defense theory is followed unscrupulously legions would form corporations
to commit swindle right and left where nobody could be convicted, for it
would be futile and ridiculous to convict an abstract being that can not be
pinched and confined in jail like a natural, living person, hence the result of
the defense theory would be hopeless chose in business and finance. It is
completely untenable.”
Issue:
Whether or not Sia, having only acted for and behalf of MEMPA, may be
held liable for the crime charged.
Held:
The case cited by the Court of Appeals in support of its stand-Tan Boon
Kong case, supra-may however not be squarely applicable to the instant
case in that the corporation was directly required by law to do an act in a
given manner, and the same law makes the person who fails to perform
the act in the prescribed manner expressly liable criminally. The
performance of the act is an obligation directly imposed by the law on the
corporation. Since it is a responsible officer or officers of the corporation
who actually perform the act for the corporation, they must of necessity be
the ones to assume the criminal liability; otherwise this liability as created
by the law would be illusory, and the deterrent effect of the law, negated.
 
In the present case, a distinction is to be found with the Tan Boon Kong
case in that the act alleged to be a crime is not in the performance of an
act directly ordained by law to be performed by the corporation. The act is
imposed by agreement of parties, as a practice observed in the usual
pursuit of a business or a commercial transaction. The offense may arise,
if at all, from the peculiar terms and condition agreed upon by the parties
to the transaction, not by direct provision of the law. The intention of the
parties, therefore, is a factor determinant of whether a crime was
committed or whether a civil obligation alone intended by the parties. With
this explanation, the distinction adverted to between the Tan Boon Kong
case and the case at bar should come out clear and meaningful. In the
absence of an express provision of law making the petitioner liable for the
criminal offense committed by the corporation of which he is a president as
in fact there is no such provisions in the Revised Penal Code under which
petitioner is being prosecuted, the existence of a criminal liability on his
part may not be said to be beyond any doubt. In all criminal prosecutions,
the existence of criminal liability for which the accused is made
answerable must be clear and certain. The maxim that all doubts must be
resolved in favor of the accused is always of compelling force in the
prosecution of offenses. This Court has thus far not ruled on the criminal
liability of an officer of a corporation signing in behalf of said corporation a
trust receipt of the same nature as that involved herein. In the case of
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Samo vs. People, the accused was not clearly shown to be acting other
than in his own behalf, not in behalf of a corporation.
 
The civil liability imposed by the trust receipt is exclusively on the Metal
Company. As one arising from The contract, as distinguished from the civil
liability arising out of a crime, the petitioner was never intended to be
equally liable as the corporation. Without being made so liable personally
as the corporation is, there would then be no basis for holding him
criminally liable, for any violation of the trust receipt. This is made clearly
so upon consideration of the fact that in the violation of the trust
agreement and in the absence of positive evidence to the contrary, only
the corporation benefited, not the petitioner personally, yet, the allegation
of the information is to effect that the misappropriation or conversion was
for the personal use and benefit of the petitioner, with respect to which
there is variance between the allegation and the evidence.

CA decision reversed. Petitioner is acquitted.

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