Corporation Law Case Doctrines

CORPORATION LAW CASE DOCTRINES
Topic Case Title Case Doctrine
Sec 2 BASECO v PCGG The right against self-incrimination has no application to corporations.While an
Corporation as an artificial individual may lawfully refuse to answer incriminating questions unless protected
being 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.
Sec 2 Filipinas Broadcasting Network v Ago A corporation can be an offended party in a defamation case and can recover
Corporation as an artificial Medical and Educational Center moral damages under Article 2219(7) of the Civil Code.
being
Sec 2 Ong v CA It is clear that if the violation or offense is committed by a corporation,

Corporation as an artificial partnership, association or other juridical entities, the penalty shall be imposed
being upon the directors, officers, employees or other officials or persons responsible for
the offense.
Sec 2 Boyer Roxas v CA The petitioners’ suggestion that the veil of the corporate fiction should be pierced
Doctrine of separate legal is untenable.The separate personality of the corporation may be disregarded only
entity when the corporation is used "as a cloak or cover for fraud or illegality, or to work
injustice, or where necessary to achieve equity or when necessary for the
protection of the creditors." The circumstances in the present cases do not fall
under any of the enumerated categories.
Almaiz, Azuelo, Barredo , Bayta, Billones , de la Peña, Escarda, Gangoso, Garcia, Garzon, Gerangaya, Go, Montelibano, Motus, Natan, Roa, Senadre, Tan
Sec 2 Lim v CA Inasmuch as the real properties included in the inventory of the estate of the
Doctrine of separate legal decedent are in the possession of and are registered in the name of respondent
entity corporations, which under the law possess a personality separate and distinct from
their stockholders and in the absence of any cogency to shred the veil of corporate
fiction, the presumption of conclusiveness of said titles in favor of private
respondents should stand undisturbed.
Sec 2 Ricardo Silverio Jr. et. al v Filipino While shares of stock constitute personal property, they do not represent property
Doctrine of separate legal Business Consultants of the corporation. The corporation has property of its own which consists chiefly
entity of real estate. 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
Sec 2 Palay Inc v Clave Mere ownership by a single stockholder or by another corporation of all or nearly
Doctrine of separate legal all of the
entity capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality
Sec 2 EPG Construction Com Inc v CA The exception noted is where the official "had acted maliciously or in bad faith,"
Doctrine of separate legal in which event he may be made personally liable for his own act.
entity
Sec 2 Stronghold Insurance v Tomas Cuenca The personality of a corporation is distinct and separate from the personalities of
Doctrine of separate legal its stockholders. Hence, its stockholders are not themselves the real parties in
entity interest to claim and recover compensation for the damages arising from the
wrongful attachment of its assets. Only the corporation is the real party in interest
for that purpose.
Sec 2 Complex Electronics Employees Asso. v The mere fact that one or more corporations are owned or controlled by the same
Doctrine of separate legal NLRC or single stockholder is not a sufficient ground for disregarding separate corporate
entity personalities.
Sec 2 Indophile Textile Mill Workers v Calica Under the doctrine of piercing the veil of corporate entity, when valid grounds
Doctrine of separate legal therefore exist, the legal fiction that a corporation is an entity with a juridical
entity personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere
association of persons. The members or stockholders of the corporation will be
considered as the corporation, that is liability will attach directly to the officers
and stockholders.
Sec 2 DBP v Hydro Resources Three-pronged test to determine the application of the alter ego theory:(1) Control,
Doctrine of piercing the not mere majority or complete stock control, but complete domination, not only of
corporate veil finances but of policy and business practice in respect to the transaction attacked
so that the corporate entity as to this transaction had at the time no separate mind,
will or existence of its own; (2) Such control must have been used by the
defendant to commit fraud or wrong, to perpetuate the violation of a statutory or
other positive legal duty, or dishonest and unjust act in contravention of plaintiff’s
legal right; and (3) The aforesaid control and breach of duty must have
proximately caused the injury or unjust loss complained of
Sec 2 ABS CBN v Hilario The doctrine of piercing the veil of corporate fiction is a legal precept that allows
Doctrine of piercing the a
corporate veil corporation's separate personality to be disregarded under certain circumstances so
that a corporation and its stockholders or members, or a corporation and another
related corporation should be treated as a single entity
Sec 2 Heirs of Fe Tan Uy v IE Bank Sec. 31. Liability of directors, trustees or officers.— Directors or trustees who
Doctrine of piercing the wilfully and knowingly vote for or assent to patently unlawful acts of the
corporate veil corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
Sec 2 International Academy of Management Reverse corporate piercing is an equitable remedy which if utilized cavalierly,
Doctrine of reverse piercing and Economics v Litton and Company, may lead to disastrous consequences for both stock and non-stock corporations.
of the corporate veil Inc. We are aware that ordinary judgment collection procedures or other legal remedies
are preferred over that which would risk damage to third parties (for instance,
innocent stockholders or voluntary creditors) with unprotected interests in the
assets of the beleaguered corporation.
Sec 3 MIAA v city of Pasay MIAA is not a government-owned or controlled corporation under Section
Other classes of corporation 2(13) of the Introductory Provisions of the Administrative Code because it
is not organized as a stock or non-stock corporation.
Sec 4 Dante Liban v Richard Gordon Clause 5 of the Instruction to Bidders provides that the following may participate
Governing Law in the bidding process:
5.1. Unless otherwise provided in the BDS, the following persons shall
be eligible to participate in the bidding:
(e) Unless otherwise provided in the BDS, persons/entities forming themselves
into a JV, i.e., group of two (2) or more persons/entities that intend to be jointly
and severally responsible or liable for a peculiar contract: Provided, however, that
Filipino ownership or interest of the joint venture concerned shall be at least sixty
percent (60%).
Sec 13 Forest Hills Golf and Country Club Inc The articles of incorporation and the by-laws of a corporation define and regulate
Contents of Articles of v Gardpro, Inc. the relations between the corporation and the stockholders. In interpreting them,
Incorporation the literal meaning of their provisions shall control, and such provisions should be
construed as a whole and not in isolation.
Converse Rubber Corp. v Universal A trade name is any individual name or surname, firm name, device or word used
Sec 17 Rubber Product by manufacturers, industrialists, merchants and others to identify their businesses,
Corporate name vocations or occupations. As the trade name refers to the business and its
goodwill, the trademark refers to the goods.
A corporation is entitled to the cancellation of a mark that is confusingly similar to

its corporate name.Appropriation by another of the dominant part of a corporate
name is an infringement.
Sec 17 Kabushi Kaisha Isetan v The The mere origination or adoption of a particular trade name without actual use
Corporate name Intermediate Appellate Court thereof in the
market is insufficient to give any exclusive right to its use (Johnson Mfg. Co. v.
Leader Filling Stations Corp. 196 N.E. 852, 291 Mass. 394), even though such
adoption is publicly declared, such as by use of the name in advertisements,
circulars, price lists, and on signs and stationery
Sec 17 Philips Export v Court of Appeals A corporation’s right to use its corporate and trade name is a property right, a right
Corporate name in rem, which it may assert and protect against the whole world. According to Sec.
18 of the Corporation Code, no corporate name may be allowed if the proposed
name is identical or deceptively confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing law.
Sec 17 De La Salle Montessori v De La Salle The policy underlying the prohibition against the registration of a corporate name
Corporate name Brothers, et.al which is "identical or deceptively or confusingly similar" to that of any existing
corporation or which is "patently deceptive" or "patently confusing" or "contrary
to existing laws," is the avoidance of fraud upon the public which would have
occasion to deal with the entity concerned, the evasion of legal obligations and
duties, and the reduction of difficulties of administration and supervision over
corporations.
Indeed, parties organizing a corporation must choose a name at their peril; and the
use of a name similar to one adopted by another corporation, whether a business
or a non-profit organization, if misleading or likely to injure in the exercise of its
corporate functions, regardless of intent, may be prevented by the corporation
having a prior right, by a suit for injunction against the new corporation to prevent
the use of the name.
Sec 17 Zuellig Freight and Cargo v NLRC The mere change in the corporate name is not considered under the law as the
Corporate name creation of a new corporation; hence, the renamed corporation remains liable for
the illegal dismissal of its employee separated under that guise.
Sec 20 International Express Travel & Tour Doctrine of Corporation by Estoppel - The application of the doctrine applies to a
Corporation by Services Inc., v CA, Henri Khan, et.al third party only when he tries to escape liability on a contract from which he has
Estoppel benefited on the irrelevant ground of defective incorporation. In the case at bar, the
petitioner is not trying to escape liability from the contract but rather is the one
claiming from the contract
Sec 20 Macasaet v Francisco An unincorporated association, which represents itself to be a corporation, will be
Corporation by estopped from denying its corporate capacity in a suit against it by a third person
Estoppel who relies in good faith on such representation.
Sec 24 Marc II Marketing v Joson The Corporation Code specifically enumerated who are these corporate officers
Corporate Officers, are, to wit: (1) president; (2) secretary; (3) treasurer; and (4) such other officers as
Quorum may be provided for in the by-laws. The corporate officers enumerated in the
by-laws are the exclusive Officers of the corporation and the Board has no power
to create other Offices without amending first the corporate by-laws.
Sec 24 Matling Industrial v Coros Where the complaint for illegal dismissal concerns a corporate officer, however,
Corporate Officers, the controversy falls under the jurisdiction of the Securities and Exchange
Quorum Commission (SEC), because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates, or
between any or all of them and the corporation, partnership, or association of
which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director, trustee,
officer, or manager of such corporation, partnership, or association. Such
controversy, among others, is known as an intra-corporate dispute.
Sec 24 Wesleyan University-Phils. V Maglaya The creation of the position is under the corporation's charter or by-laws, and that
Corporate Officers, the election of the officer is by the directors or stockholders must concur in order
Quorum for an individual to be considered a corporate officer, as against an ordinary
employee or officer. It is only when the officer claiming to have been illegally
dismissed is classified as such corporate officer that the issue is deemed an
intra-corporate dispute which falls within the jurisdiction of the trial courts
Sec 24 People’s Aircargo v CA The authority of certain individuals to bind the corporation is generally derived
Corporate Officers, from law, corporate bylaws or authorization from the board, either expressly or
Quorum impliedly by habit, custom or acquiescence in the general course of business.
Doctrine of Apparent Authority - It is not the quantity of similar acts which

establishes apparent authority, but the vesting of a corporate officer with the power
to bind the corporation. Apparent authority is derived not merely from practice. Its
existence may be ascertained through (1) the general manner in which the
corporation holds out an officer or agent as having the power to act or, in other
words, the apparent authority to act in general, with which it clothes him; or (2)
the acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, whether within or beyond the scope of his ordinary powers. It
requires presentation of evidence of similar act(s) executed either in its favor or in
favor of other parties. It is not the quantity of similar acts which establishes
apparent authority, but the vesting of a corporate officer with the power to bind the
corporation.
Sec 24 Advance Paper Corp. v Arma Traders The doctrine of apparent authority provides that a corporation will be estopped
Corporate Officers, Corp. from denying the agent’s authority if it knowingly permits one of its officers or
Quorum any other agent to act within the scope of an apparent authority, and it holds him
out to the public as possessing the power to do those acts. The doctrine of apparent
authority does not apply if the principal did not commit any acts or conduct which
a third party knew and relied upon in good faith as a result of the exercise of
reasonable prudence. Moreover, the agent’s acts or conduct must have produced a
change of position to the third party’s detriment
Sec 26 Gokongwei v SEC An officer of a corporation cannot engage in a business in direct competition with
Disqualification of Directors, that of the corporation where he is a director by utilizing information he has
Trustees or Officers received as such officer, under "the established law that a director or officer of a
corporation may not enter into a competing enterprise which cripples or injures the
business of the corporation of which he is an officer or director."
Corporate officers "are not permitted to use their position of trust and confidence
to further their private interests.”
Sec 30 Lucia Magaling v Peter Ong It is basic that a corporation is a juridical entity with legal personality separate and
Liability of Directors, distinct from those acting for and in its behalf and, in general, from the people
Trustees or Officers comprising it. The general rule is that obligations incurred by the corporation,
acting through its directors, officers and employees, are its sole liabilities, and vice
versa.
To hold a director, a trustee or an officer personally liable for the debts of the
corporation and, thus, pierce the veil of corporate fiction, bad faith or gross
negligence by the director, trustee or officer in directing the corporate affairs must
be established clearly and convincingly. Bad faith is a question of fact and is
evidentiary. Bad faith does not connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious wrongdoing. It means
breach of a known duty through some ill motive or interest. It partakes of the
nature of fraud.
Sec 33 Ient v Tullett Prebon The rule of lenity applies when the court is faced with two (2) possible
Disloyalty of a Director interpretations of a penal statute, one that is prejudicial to the accused and another
that is favorable to him. The rule calls for the adoption of an interpretation which
is more lenient to the accused.
Sec 37 Benito v SEC Petitioner he wills the fact that in view of the lack of notice to him of such
Power to increase or subsequent issuance, he was not able to exercise right of pre-emption over the
decrease capital stock; incur, unissued shares. However, the general rule is that the pre-emptive right is
create or increase bonded recognized only with respect to new issue of shares, and not with respect to
indebtedness additional issues of originally authorized shares. This is on the theory that when a
corporation at its inception offers its first shares, it is presumed to have offered all
of those which it is authorized to issue. An original subscriber is deemed to have
taken his shares knowing that they form a definite proportionate part of the whole
number of authorized shares. When the shares left unsubscribed are later
reoffered, he cannot therefore claim a dilution of interest.
Sec 63 Lao v Lao A certificate of stock is the evidence of a holder’s interest and status in a
Issuance of Stock corporation – it is prima facie evidence that the holder is a shareholder of a
Certificates corporation.

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Corporation Law Case Doctrines

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CORPORATION LAW CASE DOCTRINES

Topic Case Title Case Doctrine

Sec 2 Ong v CA It is clear that if the violation or offense is committed by a corporation,

A corporation is entitled to the cancellation of a mark that is confusingly similar to

Doctrine of Apparent Authority - It is not the quantity of similar acts which

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