Section 16.

 The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-owned
or controlled corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic viability.

Labrador vs Court of Appeals

180 SCRA 266 [GR No. 58168 December 19, 1989]

Facts: On February 9, 1979, Adelaida Rodriguez Magsaysay widow and special administratrix of the estate of the late senator
Magsaysay, brought before the then Court of First Instance of Olongapo an action against Artemio Panganiban, Subic Land Corporation,
Filipinas Manufacturer’s Bank and the Register of Deeds of Zambales. In her complaint, she alleged that in 1958, she and her husband
acquired thru conjugal funds, a parcel of land with improvements known as “Pequena Island” covered by TCT No. 3258; that after the
death of her husband, she discovered a.) an annotation at the back of TCT No. 3258 that the land was acquired by her husband from his
separate capital; b.) the registration of a deed of assignment dated June 25, 1976 purportedly executed by the late senator in favor of
SUBIC, as a result of which TCT No. 3258 was cancelled and TCT No. 22431 issued in the name of SUBIC; and c.) the registration of
deed of mortgage dated April 28, 1977 in the amount of Php2,700,000 executed by SUBIC in favor of FILMABANK that the foregoing
acts were void and done in an attempt to defraud the conjugal partnership considering that the land is conjugal, her marital consent to the
annotation on TCT No. 3258 was not obtained, the change made by the Register of Deeds of the titleholders was effected without the
approval of the commissioner of land registration and that the late senator did not execute the purported deed of assignment or his consent
thereto, if obtained, was secured by mistake, violence, and intimidation. She further alleged that the assignment in favor of SUBIC was
without consideration and consequently null and void. She prayed that the deed of assignment and the deed of mortgage be annulled and
that the register of deeds be ordered to cancel TCT no. 22431 and to issue a new title in her favor. on March 7, 1979, herein petitioners,
sisters of the late senator, filed a motion for intervention on the ground that on June 20, 1978, their brother conveyed to them 1/2 of his
shareholdings in SUBIC or a total of 416,566.6 shares and as assignees of around 41% of the total outstanding shares of such stocks of
SUBIC, they have substantial and legal interest in the subject matter of litigation and that they have a legal interest in the success of the
suit with respect to SUBIC.

Issue: Whether or not the intervention of the petitioners is proper.

Held: No. To allow intervention, a.) it must be shown that the m ovant has legal interest in the matter in litigation, or otherwise qualified;
and b.) consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudicial, or
whether the intervenor’s rights may be protected in a separate proceeding or not. Both requirements must concur as the first is not more
important than the second.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof
with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature.
Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.

The movant’s interest may be protected in a separate proceeding is a factor to be considered in allowing or disallowing a motion for
intervention.

Advertisements

G.R. No. L-4900             August 31, 1953

FINANCING CORPORATION OF THE PHILIPPINES and J. AMADO ARANETA, petitioners,

vs.
HON. JOSE TEODORO, Judge of the Court of First Instance of Negros Occidental, Branch II, and
ENCARNACION LIZARES VDA. DE PANLILIO, respondents.

Vicente Hilado for petitioners.

Antonio Barredo for respondents.

MONTEMAYOR, J.:

In civil case No. 1924 of the Court of First Instance of Negros Occidental, Asuncion Lopez Vda. de Lizares,
Encarnacion Lizares Vda. de Panlilio and Efigenia Vda. de Paredes, in their own behalf and in behalf of the other
minority stockholders of the Financing Corporation of the Philippines, filed a complaint against the said corporation
and J. Amado Araneta, its president and general manager, claiming among other things alleged gross
mismanagement and fraudulent conduct of the corporate affairs of the defendant corporation by J. Amado Araneta,
and asking that the corporation be dissolved; that J. Amado Araneta be declared personally accountable for the
amounts of the unauthorized and fraudulent disbursements and disposition of assets made by him, and that he be
required to account for said assets, and that pending trial and disposition of the case on its merits a receiver be
appointed to take possession of the books, records and assets of the defendant corporation preparatory to its
dissolution and liquidation and distribution of the assets. Over the strong objection of the defendants, the trial court
presided by respondent Judge Jose Teodoro, granted the petition for the appointment of a receiver and designated
Mr. Alfredo Yulo as such receiver with a bond of P50,000. Failing to secure a reconsideration of the order appointing
a receiver, the defendants in said case, Financing Corporation of the Philippines and J. Amado Araneta, as
petitioners, have filed the present petition for certiorari with preliminary injunction to revoke and set aside the order.
Acting upon that part of the petition asking for a writ of preliminary injunction, a majority of the court granted the same
upon the filing of a bond by the petitioners in the sum of P50,000.

The main contention of the petitioners in opposing the appointment of a receiver in this case is that said appointment
is merely an auxiliary remedy; that the principal remedy sought by the respondents in the action in Negros Occidental
was the dissolution of the Financing Corporation of the Philippines; that according to the law a suit for the dissolution
of a corporation can be brought and maintained only by the State through its legal counsel, and that respondents,
much less the minority stockholders of said corporation, have no right or personality to maintain the action for
dissolution, and that inasmuch as said action cannot be maintained legally by the respondents, then the auxiliary
remedy for the appointment of a receiver has no basis.

True it is that the general rule is that the minority stockholders of a corporation cannot sue and demand its
dissolution. However, there are cases that hold that even minority stockholders may ask for dissolution, this, under
the theory that such minority members, if unable to obtain redress and protection of their rights within the corporation,
must not and should not be left without redress and remedy. This was what probably prompted this Court to state in
the case of Hall, et al. vs. Judge Piccio,* G.R. No. L-2598 (47 Off. Gaz. No. 12 Supp., p. 200) that even the existence
of a de jure corporation may be terminated in a private suit for its dissolution by the stockholders without the
intervention of the State. It was therein further held that although there might be some room for argument on the right
of minority stockholders to ask for dissolution,-that question does not affect the court's jurisdiction over the case, and
that the remedy by the party dissatisfied was to appeal from the decision of the trial court. We repeat that although as
a rule, minority stockholders of a corporation may not ask for its dissolution in a private suit, and that such action
should be brought by the Government through its legal officer in a quo warranto case, at their instance and request,
there might be exceptional cases wherein the intervention of the State, for one reason or another, cannot be
obtained, as when the State is not interested because the complaint is strictly a matter between the stockholders and
does not involve, in the opinion of the legal officer of the Government, any of the acts or omissions warranting quo
warranto proceedings, in which minority stockholders are entitled to have such dissolution. When such action or
private suit is brought by them, the trial court had jurisdiction and may or may not grant the prayer, depending upon
the facts and circumstances attending it. The trial court's decision is of course subject to review by the appellate
tribunal. Having such jurisdiction, the appointment of a receiver pendente lite is left to the sound discretion of the trial
court. As was said in the case of Angeles vs. Santos (64 Phil., 697), the action having been properly brought and the
trial court having entertained the same, it was within the power of said court upon proper showing to appoint a
receiver pendente lite for the corporation; that although the appointment of a receiver upon application of the minority
stockholders is a power to be exercised with great caution, nevertheless, it should be exercised necessary in order
not to entirely ignore and disregard the rights of said minority stockholders, especially when said minority
stockholders are unable to obtain redress and protection of their rights within the corporation itself.

In that civil case No. 1924 of Negros Occidental court, allegations of mismanagement and misconduct by its
President and Manager were made, specially in connection with the petition for the appointment of a receiver. in
order to have an idea of the seriousness of said allegations, we reproduce a pertinent portion of the order of
respondent Judge Teodoro dated June 23, 1951, subject of these certiorari proceedings:

Considering plaintiffs' complaint and verified motion for appointment of a receiver together, as they have been treated
jointly in the opposition of the defendants, the grounds of the prayer for receivership may be briefly stated to be: (1)
imminent danger of insolvency; (2) fraud and mismanagement, such as, particularly, (a) wrongful and unauthorized
diversion from corporate purposes and use for personal benefit of defendant Araneta, for the benefit of the
corporations under his control and of which he is majority stockholder and/or for the benefit of his relatives, personal
friends and the political organization to which he is affiliated of approximately over one and a half million pesos of the
funds of the defendant corporation in the form of uncollected allowances and loans, either without or with uncollected
interest, and either unsecured or insufficiently secured, and sometimes with a securities appearing in favor of
defendant Araneta as if the funds advanced or loaned were his own; (b) unauthorized and profitless pledging of
securities owned by defendant corporation to secure obligations amounting to P588,645.34 of another corporation
controlled by defendant Araneta; (c) unauthorized and profitless using of the name of the defendant corporation in
the shipping of sugar belonging to other corporations controlled by defendant Araneta to the benefit of said
corporations in the amount of at least P104,343.36; (d) refusal by defendant Araneta to endorse to the defendant
corporation shares of stock and other securities belonging to it but which are still in his name; (e) negligent failure to
endorse other shares of stock belonging to defendant corporation but still in the names of the respective vendors;
and (f) illegal and unauthorized transfer and deposit in the United States of America of 6,426,281 shares of the Atok-
Big Wedge Mining Company; (3) violations of the corporation law and the by-laws of the corporation such as (a)
refusal to allow minority stockholders to examine the books and records of the corporation; (b) failure to call and hold
stockholders' and directors' meetings; (c) virtual disregard and ignoring of the board of directors by defendant
Araneta who has been and is conducting the affairs of the corporation under his absolute control and for his personal
benefit and for the benefit of the corporations controlled by him, to the prejudice and in disregard of the rights of the
plaintiffs and other minority stockholders; and (d) irregularity in the keeping and (e) errors and omissions in the books
and failure of the same to reflect the real and actual transactions of the defendant corporations; (4) failure to achieve
the fundamental purpose of the corporation; (5) if administration, possession and control of the affairs, books, etc. of
defendant corporation are left in the hands of the defendant Araneta and the present corporate officials, under his
power and influence, the remaining assets of the corporation are in danger of being further dissipated, wasted or lost
and of becoming ultimately unavailable for distribution among its stockholders; and (6) the best means to protect and
preserve the assets of defendant corporation is the appointment of a receiver.

In conclusion, we hold that the trial court through respondent Judge Teodoro had jurisdiction and properly entertained
the original case; that he also had jurisdiction to appoint a receiver pendente lite, and considering the allegations
made in connection with the petition for the appointment of a receiver, he neither exceeded his jurisdiction nor
abused his discretion in appointing a receiver. The petition for certiorari is hereby denied, with costs. The writ of
preliminary injunction heretofore issued is hereby ordered dissolved.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Reyes, Jugo, Bautista Angelo, and Labrador, JJ., concur.

CRUZ  VS. DALISAY
152 SCRA 482 (1987)

FACTS OF THE CASE

A sworn complaint was filed by Adelio Cruz charging
Quiterio Dalisay, Senior Deputy Sheriff of Manila, with
malfeasance in office, corrupt practices and serious
irregularities who allegedly attached and/or levied the
money belonging to complainant Cruz when he was not
himself   the judgment debtor in the final judgment of an
NLRC case sought to be enforced but rather the company
known as “Qualitrans Limousine Service, Inc.”; and also
caused the service of the alias writ of execution upon
complainant who is a resident of Pasay City, despite
knowledge that his territorial jurisdiction covers Manila
only and does not extend to Pasay City.
Respondent, however, choose to pierce the veil of
corporate entity usurping a power belonging to the court
and assumed improvidently that since the complainant is
the owner/president of Qualitrans Limousine Service, Inc.,
they are one and the same. His reply explained that when
he garnished complainant’s cash deposit at the Phil trust
bank he was merely performing a ministerial duty. And
that while it is true that said writ was addressed to
Qualitrans Limousine Service, Inc., it is also a fact that
complainant had executed an affidavit before the Pasay
City assistant fiscal stating that he is the owner/ president
of Qualitrans. Because of that declaration, the counsel for
the plaintiff in the labor case advised him to serve notice
of garnishment on the Phil trust bank.

ISSUE
Whether the personal property of Cruz (complainant) can
be levied or attached being the owner/president of the
corporation.

RULING
No. The mere fact that one is president of the corporation
does not render the property he owns or possesses the
property of the corporation, since that president, as an
individual, and the corporation, are separate entities. It is a
well settled doctrine both in law and equity that as a legal
entity, a corporation has a personality distinct and
separate from its individual stockholders or members.
Adelio Cruz v. Quiterio Dalisay
152 SCRA 482, 1987
Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)
(Topic: Doctrine of Piercing the Veil of Corporate Fiction)

FACTS:

In a sworn complaint dated July 23, 1984, Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy Sheriff of
Manila, with "malfeasance in office, corrupt practices and serious irregularities" allegedly committed as follows:

1. Respondent sheriff attached and/or levied the money belonging to complainant Cruz when he was not
himself the judgment debtor in the final judgment of NLRC NCR Case No. 8-12389-91 sought to be enforced
but rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered corporation; and,

2. Respondent likewise caused the service of the alias writ of execution upon complainant who is a resident of
Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and does not extend to Pasay
City.

In his Comments, respondent Dalisay explained that when he garnished complainant's cash deposit at the
Philtrust bank, he was merely performing a ministerial duty. While it is true that said writ was addressed to
Qualitrans Limousine Service, Inc., yet it is also a fact that complainant had executed an affidavit before the
Pasay City assistant fiscal stating that he is the owner/president of said corporation and, because of that
declaration, the counsel for the plaintiff in the labor case advised him to serve notice of garnishment on the
Philtrust bank.

ISSUE:

Whether or not Respondent Deputy Sheriff Quiterio L. Dalisay in the enforcement of the writ of execution in
NLRC is correct?

HELD:

No.

Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging to the court
and assumed improvidently that since the complainant is the owner/president of Qualitrans Limousine Service,
Inc., they are one and the same.

It is a well-settled doctrine both in law and in equity that as a legal entity, a corporation has a personality
distinct and separate from its individual stockholders or members. The mere fact that one is president of a
corporation does not render the property he owns or possesses the property of the corporation, since the
president, as individual, and the corporation are separate entities.

MAGSAYSAY-LABRADOR vs. COURT OF APPEALS

G.R. No. 58168. December 19, 1989.
Fernan, C.J.

FACTS: Private respondent Adelaida Rodriguez Magsaysay filed an action against Subic
Land Corporation (SUBIC), among others, to annul the deed of assignment and deed of
mortgage executed in favor of the latter by her late husband. Private respondent alleged that
the subject land of the two deeds was acquired through conjugal funds. Since her consent to
the disposition of the same was not obtained, she claimed that the acts of assignment and
mortgage were done to defraud the conjugal partnership. She further contended that the
same were done without consideration and hence null and void. Petitioners, sisters of the
deceased husband of the private respondent, filed a motion for intervention on the ground
that their brother conveyed to them one-half of his shareholdings in SUBIC, or about 41%.
The trial court denied the motion for intervention ruling that petitioners have no legal interest
because SUBIC has a personality separate and distinct from its stockholders. The CA
confirmed the denial on appeal. Hence, this petition.

ISSUE: Whether petitioners, as stockholders of SUBIC, have a legal interest in the action for
annulment of the deed of assignment and deed of mortgage in favor of the corporation.

HELD: NO. The Court noted that the interest which entitles person to intervene in a suit
between other parties must be in the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by the direct legal operation and effect of
the judgment. In the instant petition, it was said that the interest, if it exists at all, of
petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral.
At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the profits thereof and in the properties and
assets thereof on dissolution, after payment of the corporate debts and obligations. While a
share of stock represents a proportionate or aliquot interest in the property of the corporation,
it does not vest the owner thereof with any legal right or title to any of the property, his interest
in the corporate property being equitable or beneficial in nature. Shareholders are in no legal
sense the owners of corporate property, which is owned by the corporation as a distinct legal
person.

FILIPINAS BROADCASTING NETWORK,

INC., petitioner, vs. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL
CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO,
respondents.
FACTS: Expos is a radio documentarY program hosted by Carmelo Mel Rima (Rima) and Hermogenes Jun Alegre (Aleg
morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi Cit
municipalities and other Bicol areas.

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from students, teache
Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC) and its administrators. Claiming that the
defamatory, AMEC and Angelita Ago (Ago), as Dean of AMECs College of Medicine, filed a complaint for damages again
Alegre on 27 February 1990.

ISSUE: WON CORP IS ENTITLED TO MORAL DAMAGES. 

HELD: YES. FBNI contends that AMEC is not entitled to moral damages because it is a corporation.

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physi
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals cites Mambulao
al. to justify the award of moral damages. However, the Courts statement in Mambulao that a corporation may have a go
besmirched, may also be a ground for the award of moral damages is an obiter dictum.

Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2210 of the Civil Code. This provision expres
recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify wh
natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other fo
claim for moral damages.

Moreover, where the broadcast is libelous per se, the law implies damages. In such a case, evidence of an honest mistak
character or reputation of the party libeled goes only in mitigation of damages. Neither in such a case is the plaintiff requi
evidence of actual damages as a condition precedent to the recovery of some damages. In this case, the broadcasts are
AMEC is entitled to moral damages.

However, we find the award of P300,000 moral damages unreasonable. The record shows that even though the broadca
AMEC has not suffered any substantial or material damage to its reputation. Therefore, we reduce the award of moral da
to P150,000.

MAGSAYSAY-LABRADOR vs. COURT OF APPEALS

G.R. No. 58168. December 19, 1989.
Fernan, C.J.

FACTS: Private respondent Adelaida Rodriguez Magsaysay filed an action against Subic
Land Corporation (SUBIC), among others, to annul the deed of assignment and deed of
mortgage executed in favor of the latter by her late husband. Private respondent alleged that
the subject land of the two deeds was acquired through conjugal funds. Since her consent to
the disposition of the same was not obtained, she claimed that the acts of assignment and
mortgage were done to defraud the conjugal partnership. She further contended that the
same were done without consideration and hence null and void. Petitioners, sisters of the
deceased husband of the private respondent, filed a motion for intervention on the ground
that their brother conveyed to them one-half of his shareholdings in SUBIC, or about 41%.
The trial court denied the motion for intervention ruling that petitioners have no legal interest
because SUBIC has a personality separate and distinct from its stockholders. The CA
confirmed the denial on appeal. Hence, this petition.

ISSUE: Whether petitioners, as stockholders of SUBIC, have a legal interest in the action for
annulment of the deed of assignment and deed of mortgage in favor of the corporation.

HELD: NO. The Court noted that the interest which entitles person to intervene in a suit
between other parties must be in the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by the direct legal operation and effect of
the judgment. In the instant petition, it was said that the interest, if it exists at all, of
petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral.
At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the profits thereof and in the properties and
assets thereof on dissolution, after payment of the corporate debts and obligations. While a
share of stock represents a proportionate or aliquot interest in the property of the corporation,
it does not vest the owner thereof with any legal right or title to any of the property, his interest
in the corporate property being equitable or beneficial in nature. Shareholders are in no legal
sense the owners of corporate property, which is owned by the corporation as a distinct legal
person.
 BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner,
vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT.

Facts:
Challenged in this special civil action of certiorari and prohibition by a private
corporation known as the Bataan Shipyard and Engineering Co., Inc. are: (1)
Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino
on February 28, 1986 and March 12, 1986, respectively, and (2) the sequestration,
takeover, and other orders issued, and acts done, in accordance with said executive
orders by the Presidential Commission on Good Government and/or its
Commissioners and agents, affecting said corporation.
The PCGG was tasked to sequester the BASECO thru Executive Orders 1 and 2 of
President Cory Aquino.
The PCGG was able to take over the BASECO and terminate its executive
employees and requested to have the following documents of the said company.
Such as (Stock transfer book, Legal documents, Minutes of the meetings, Financial
statements, and the likes)
Petitioner contends that he cannot produce the said documents due to it is an
infringement of its right against self incrimination.
ISSUE:
WON documents ask in by PCGG would vitiate their right against self incrimination.
RULING:
BASECO also contends that its right against self incrimination and unreasonable
searches and seizures had been transgressed by the Order of April 18, 1986 which
required it "to produce corporate records from 1973 to 1986 under pain of contempt
of the Commission if it fails to do so." The order was issued upon the authority of
Section 3 (e) of Executive Order No. 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 paragraph (3), Executive Order No. 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 ofsuchprivileges
At any rate, Executive Order No. 14-A, amending Section 4 of Executive Order No.
14 assures protection to individuals required to produce evidence before the PCGG
against any possible violation of his right against self-incrimination. It gives them
immunity from prosecution on the basis of testimony or information he is compelled
to present. As amended, said Section 4 now provides that —
xxx xxx xxx
The witness may not refuse to comply with the order on the basis of
his privilege against self-incrimination; but no testimony or other
information compelled under the order (or any information directly or
indirectly derived from such testimony, or other information) may be
 used against the witness in any criminal case, except a prosecution
for perjury, giving a false statement, or otherwise failing to comply with
the order.
Relevant jurisprudence is also cited by the Solicitor General. 114
* * corporations are not entitled to all of the constitutional protections
which private individuals have. * * They are not at all within the privilege
against self-incrimination, although this court more than once has said
that the privilege runs very closely with the 4th Amendment's Search and
Seizure provisions.It is also settled that an officer of the company cannot
refuse to produce its records in its possession upon the plea that they will
either incriminate him or may incriminate it." (Oklahoma Press Publishing
Co. v. Walling, 327 U.S. 186; emphasis, the Solicitor General's).
* * 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 laws of its creation. There
is a reserve right in the legislature to investigate its contracts and find out
whether it has exceeded its powers. It would be a strange anomaly to
hold that a state, having chartered a corporation to make use of certain
franchises, could not, in the exercise of sovereignty, inquire how these
franchises had been employed, and whether they had been abused, and
demand the production of the corporate books and papers for that
purpose. The defense amounts to this, that an officer of the corporation
which is charged with a criminal violation of the statute may plead the
criminality of such corporation as a refusal to produce its books. To state
this proposition is to answer it. 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.

The constitutional safeguard against unreasonable searches and seizures finds no

application to the case at bar either. There has been no search undertaken by any
agent or representative of the PCGG, and of course no seizure on the occasion
thereof
Name:

ILLIAM C. YAO, SR., LUISA C. YAO, RICHARD C. YAO, WILLIAM C. YAO JR., and
ROGER C. YAO, petitioners,
vs.
THE PEOPLE OF THE PHILIPPINES, PETRON CORPORATION and PILIPINAS SHELL
PETROLEUM CORP., and its Principal, SHELL INT’L PETROLEUM CO. LTD.,
respondents.

G.R. No. 168306

June 19, 2007

DOCTRINE:

A corporation is an entity separate and distinct from its stockholders, directors or officers.
However, when the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association of
persons, or in the case of two corporations merge them into one. Where the separate
corporate entity is disregarded, the corporation will be treated merely as an association of
persons and the stockholders or members will be considered as the corporation, that is,
liability will attach personally or directly to the officers and stockholders.

FACTS:

Petitioners are incorporators and officers of MASAGANA GAS CORPORATION

(MASAGANA), an entity engaged in the refilling, sale and distribution of LPG products.
Private respondents Petron Corporation (Petron) and Pilipinas Shell Petroleum Corporation
(Pilipinas Shell) are two of the largest bulk suppliers and producers of LPG in the Philippines.
Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL
cylinders used for its LPG products. It is the sole entity in the Philippines authorized to allow
refillers and distributors to refill, use, sell, and distribute GASUL LPG containers, products and
its trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename,
trademarks, symbols, or designs of its principal, Shell International Petroleum Company
Limited (Shell International), including the marks SHELLANE and SHELL device in
connection with the production, sale and distribution of SHELLANE LPGs. It is the only
corporation in the Philippines authorized to allow refillers and distributors to refill, use, sell and
distribute SHELLANE LPG containers and products.

On 3 April 2003, (NBI) agent Ritche N. Oblanca (Oblanca) filed two applications for search
warrant with the RTC, Cavite City, against petitioners and other occupants of the MASAGANA
compound for alleged violation of Section 155, in relation to Section 170 of “The Intellectual
Property Code of the Philippines.” The two applications for search warrant uniformly alleged
that per information, belief, and personal verification of Oblanca, the petitioners are actually
producing, selling, offering for sale and/or distributing LPG products using steel cylinders
owned by, and bearing the tradenames, trademarks, and devices of Petron and Pilipinas
Shell, without authority and in violation of the rights of the said entities.

MASAGANA, as third party claimant, filed with the RTC a Motion for the Return of Motor
Compressor and LPG Refilling Machine. It claimed that it is the owner of the said motor
compressor and LPG refilling machine; that these items were used in the operation of its
legitimate business; and that their seizure will jeopardize its business interests.

RTC resolved that MASAGANA cannot be considered a third party claimant whose rights
were violated as a result of the seizure since the evidence disclosed that petitioners are
stockholders of MASAGANA and that they conduct their business through the same juridical
entity.

CA affirmed RTC’s decision

Issue:

Whether or not the CA erred in ruling that the complaint is directed against MASAGANA gas
corporation, acting through its officers and directors, hence MASAGANA gas corporation may
not be considered as third party claimant whose rights were violated as a result of the seizure.

Held:

No. It is an elementary and fundamental principle of corporation law that a corporation is an

entity separate and distinct from its stockholders, directors or officers. However, when the
notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, the law will regard the corporation as an association of persons, or in the case
of two corporations merge them into one. In other words, the law will not recognize the
separate corporate existence if the corporation is being used pursuant to the foregoing
unlawful objectives.

This non-recognition is sometimes referred to as the doctrine of piercing the veil of corporate
entity or disregarding the fiction of corporate entity. Where the separate corporate entity is
disregarded, the corporation will be treated merely as an association of persons and the
stockholders or members will be considered as the corporation, that is, liability will attach
personally or directly to the officers and stockholders.

As we now find, the petitioners, as directors/officers of MASAGANA, are utilizing the latter in
violating the intellectual property rights of Petron and Pilipinas Shell. Thus, petitioners
collectively and MASAGANA should be considered as one and the same person for liability
purposes. Consequently, MASAGANA’s third party claim serves no refuge for petitioners. The
law does not require that the property to be seized should be owned by the person against
whom the search warrants is directed. Ownership, therefore, is of no consequence, and it is
sufficient that the person against whom the warrant is directed has control or possession of
the property sought to be seized.

Hence, even if, as petitioners claimed, the properties seized belong to MASAGANA as a
separate entity, their seizure pursuant to the search warrants is still valid.

Further, it is apparent that the motor compressor, LPG refilling machine and the GASUL and
SHELL LPG cylinders seized were the corpusdelicti, the body or substance of the crime, or
the evidence of the commission of trademark infringement. These were the very instruments
used or intended to be used by the petitioners in trademark infringement. It is possible that, if
returned to MASAGANA, these items will be used again in violating the intellectual property
rights of Petron and Pilipinas Shell.

Ang Mga Kaanib vs. Iglesia (December 12, 2001)

FACTS: Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan
(Church of God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock religious
society or corporation registered in 1936. Sometime in 1976, one Eliseo Soriano and several
other members of respondent corporation disassociated themselves from the latter and
succeeded in registering on March 30, 1977 a new non-stock religious society or corporation,
named Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan. Respondent
corporation filed with the SEC a petition to compel the Iglesia ng Dios Kay Kristo Hesus,
Haligi at Saligan ng Katotohanan to change its corporate name to another name that is not
similar or identical to any name already used by a corporation, partnership or association
registered with the Commission. Petitioner is compelled to change its corporate name and be
barred from using the same or similar name on the ground that the same causes confusion
among their members as well as the public. SEC rendered a decision ordering petitioner to
change its corporate name. The Court of Appeals rendered the assailed decision affirming the
decision of the SEC En Banc.

ISSUE: Whether the court of appeals failed to properly appreciate the scope of the
constitutional guarantee on religious freedom

RULING: The additional words "Ang Mga Kaanib " and "Sa Bansang Pilipinas, Inc." in
petitioner's name are, as correctly observed by the SEC, merely descriptive of and also
referring to the members, or kaanib, of respondent who are likewise residing in the
Philippines. These words can hardly serve as an effective differentiating medium necessary to
avoid confusion or difficulty in distinguishing petitioner from respondent. This is especially so,
since both petitioner and respondent corporations are using the same acronym — H.S.K.; not
to mention the fact that both are espousing religious beliefs and operating in the same place.
The fact that there are other non-stock religious societies or corporations using the names
Church of the Living God, Inc., Church of God Jesus Christ the Son of God the Head, Church
of God in Christ & By the Holy Spirit, and other similar names, is of no consequence. It does
not authorize the use by petitioner of the essential and distinguishing feature of respondent's
registered and protected corporate name. Ordering petitioner to change its corporate name is
not a violation of its constitutionally guaranteed right to religious freedom. In so doing, the
SEC merely compelled petitioner to abide by one of the SEC guidelines in the approval of
partnership and corporate names, namely its undertaking to manifest its willingness to change
its corporate name in the event another person, firm, or entity has acquired a prior right to the
use of the said firm name or one deceptively or confusingly similar to it. The instant petition
for review is DENIED. The appealed decision of the Court of Appeals is AFFIRMED in toto.