Balt, Al-Emir Yusoph J.

CORPORATION LAW
LLB-3

RUBEN SAW v. CA, GR No. 90580, 1991-04-08

Facts:
collection suit with preliminary attachment... filed by Equitable Banking Corporation against
Freeman, Inc. and Saw Chiao Lian, its President and General Manager... petitioners moved to intervene...
denied... petitioners appealed to the Court of Appeals.
Equitable and Saw Chiao Lian entered into a compromise agreement which they submitted to and was
approved by the lower court.
it was not complied with, Equitable secured a writ of execution... two lots owned by Freeman, Inc. were
levied upon and... sold at public auction to Freeman Management and Development Corp.
Court of Appeals[1] sustained the denial of the petitioners' motion for intervention, holding that "the
compromise agreement... will not necessarily prejudice petitioners
It also ruled against the petitioners' argument that because they had already filed a notice of appeal, the
trial judge had lost jurisdiction over the case and could no longer issue the writ of execution.
The petitioners base their right to intervene for the protection of their interests as stockholders on Everett
v. Asia Banking Corp.
The well-known rule that shareholders cannot ordinarily sue in equity to redress wrongs done to the
corporation, but that the action must be brought by the Board of Directors, x x x has its exceptions.
[If] the corporation [were] under the complete control of the principal... defendants
Equitable...Contending that the collection suit against Freeman, Inc. and Saw Chiao Lian is essentially in
personam and, as an action against defendants in their personal capacities, will not prejudice the
petitioners as stockholders of the corporation.
Equitable also argues that the subject matter of the intervention falls properly within the original and
exclusive jurisdiction of the Securities and Exchange Commission
Equitable maintains that the petitioners' appeal could only apply to the denial of their motion for
intervention and not to the main case because their personality as party litigants had not been recognized
by the trial court.

Issues:
The Honorable Court of Appeals erred in holding that the petitioners cannot intervene... because
their rights as stockholders of Freeman are merely inchoate and not actual, material, direct and immediate
prior to the dissolution of the... corporation
The Honorable Court of Appeals erred in holding that the appeal of the petitioners... was confined only to
the order denying their motion to intervene and did not divest the trial court of its jurisdiction over the
whole case.

Ruling:
The Court finds that the respondent court committed no reversible error in sustaining the denial
by the trial court of the petitioners' motion for intervention.
To allow intervention, [a] it must be shown that the movant 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 prejudiced, or whether... the intervenor's rights may be
protected in a separate proceeding or not.
The interest which entitles a 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.
The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which
would put the intervenor in a legal position to litigate a fact alleged in the complaint, without the
establishment of which plaintiff could not recover.
Here, 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.
The petitioners' appeal could not have concerned the "whole" case (referring to the decision) because the
petitioners "did not appeal the decision as indeed they cannot because they are not parties to the case
despite their being stockholders of respondent Freeman, Inc." They... could only appeal the denial of their
motion for intervention as they were never recognized by the trial court as party litigants in the main case.
In the case at bar, there is no more principal action to be resolved as a writ of execution had already been
issued by the lower court and the claim of Equitable had already been satisfied. The decision of the lower
court had already become final and in fact had already... been enforced. There is therefore no more
principal proceeding in which the petitioners may intervene.

PNB vs CA 83 SCRA 237

Facts:
Rita Tapnio owes PNB an amount of P2,000.00. The amount is secured by her sugar crops about to be
harvested including her export quota allocation worth 1,000 piculs. The said export quota was later dealt
by Tapnio to a certain Jacobo Tuazon at P2.50 per picul or a total of P2,500. Since the subject of the deal
is mortgaged with PNB, the latter has to approve it. The branch manager of PNB recommended that the
price should be at P2.80 per picul which was the prevailing minimum amount allowable. Tapnio and
Tuazon agreed to the said amount. And so the bank manager recommended the agreement to the vice
president of PNB. The vice president in turn recommended it to the board of directors of PNB.
However, the Board of Directors wanted to raise the price to P3.00 per picul. This Tuazon does not want
hence he backed out from the agreement. This resulted to Tapnio not being able to realize profit and at
the same time rendered her unable to pay her P2,000.00 crop loan which would have been covered by
her agreement with Tuazon.
Eventually, Tapnio was sued by her other creditors and Tapnio filed a third party complaint against PNB
where she alleged that her failure to pay her debts was because of PNB’s negligence and
unreasonableness.

ISSUE: Whether or not Tapnio is correct.

HELD: Yes. In this type of transaction, time is of the essence considering that Tapnio’s sugar quota for said
year needs to be utilized ASAP otherwise her allotment may be assigned to someone else, and if she can’t
use it, she won’t be able to export her crops. It is unreasonable for PNB’s board of directors to disallow
the agreement between Tapnio and Tuazon because of the mere difference of 0.20 in the agreed price
rate. What makes it more unreasonable is the fact that the P2.80 was recommended both by the bank
manager and PNB’s VP yet it was disapproved by the board. Further, the P2.80 per picul rate is the
minimum allowable rate pursuant to prevailing market trends that time. This unreasonable stand reflects
PNB’s lack of the reasonable degree of care and vigilance in attending to the matter. PNB is therefore
negligent.
A corporation is civilly liable in the same manner as natural persons for torts, because “generally speaking,
the rules governing the liability of a principal or master for a tort committed by an agent or servant are
the same whether the principal or master be a natural person or a corporation, and whether the servant
or agent be a natural or artificial person. All of the authorities agree that a principal or master is liable for
every tort which it expressly directs or authorizes, and this is just as true of a corporation as of a natural
person, a corporation is liable, therefore, whenever a tortious act is committed by an officer or agent
under express direction or authority from the stockholders or members acting as a body, or, generally,
from the directors as the governing body.”

Sia vs CA 166 SCRA 263

FACTS:

Sia was the President and General Manager of the Metal Manufacturing of the Philippines Inc.
(MEMAP)
He obtained 150 M/T Cold Rolled Sheets consigned to Continental Bank and converted it into personal
used instead of selling it and turning over the proceeds
It resulted to a damage of 46,819 php, interest of 28,736.47 php and forfeited deposit of 71,023.60 php
ISSUE: W/N Sia can be criminally charged.

HELD: NO. Acquit.

Sia did not act for and on behalf of MEMAP

For crimes committed by corp. officers criminally charged, existence of criminal liability for which the
petition is being prosecuted must be clear and certain, here it may not be said to be beyond reasonable
doubt
Allegation v. evidence = strictly in harmony
The merchandise was manufactured before sold but although the bank was aware of this, it was not in
the trust agreement
 Reynoso vs CA

Facts:

Reynoso was the branch manager of Commercial Credit Corporation – Quezon City (CCC-QC), a
branch of Commercial Credit Corporation (CCC). It was alleged that Reynoso was opposed to certain
questionable commercial practices being facilitated by CCC which caused its branches, like CCC-QC, to
rack up debts. Eventually, Reynoso withdrew his own funds from CCC-QC. This prompted CCC-QC to file
criminal cases for estafa and qualified theft against Reynoso. The criminal cases were dismissed and
Reynoso was exonerated and at the same time CCC-QC was ordered to pay Reynoso’s counterclaims which
amounted to millions. A writ of execution was issued against CCC-QC. The writ was opposed by CCC-QC
as it now claims that it has already closed and that its assets were taken over by the mother company,
CCC.
Meanwhile, CCC changed its name to General Credit Corporation (GCC).
Reynoso then filed a petition for an alias writ of execution. GCC opposed the writ as it argued that it is a
separate and distinct corporation from CCC and CCC-QC, in short, it raises the defense of corporate fiction.

ISSUE: Whether or not GCC is correct.

HELD:
No. The veil of corporate fiction must be pierced. It is obvious that CCC’s change of name to GCC
was made in order to avoid liability. CCC-QC willingly closed down and transferred its assets to CCC and
thereafter changed its name to GCC in order to avoid its responsibilities from its creditors. GCC and CCC
are one and the same; they are engaged in the same line of business and single transaction process, i.e.
finance and investment. When the mother corporation and its subsidiary cease to act in good faith and
honest business judgment, when the corporate device is used by the parent to avoid its liability for
legitimate obligations of the subsidiary, and when the corporate fiction is used to perpetrate fraud or
promote injustice, the law steps in to remedy the problem. When that happens, the corporate character
is not necessarily abrogated. It continues for legitimate objectives. However, it is pierced in order to
remedy injustice, such as that inflicted in this case.
 Eric Godfrey Stanley Livesey v. Binswanger Philippines, Inc. and Keith Elliot

Facts:
Petitioner Livesey filed a complaint for illegal dismissal with money claims against Chesterton
Blumenauer Binswanger Philippines Strategic Property Services, Inc. (CBB) and Keith Elliot. CBB was a
domestic corporation engaged in real estate Brokerage and Keith Elliot was its resident. Livesey alleged
that CBB failed to pay him a significant portion of his salary. For this reason, he was compelled to resign.
He claimed CBB owed him unpaid salaries. CBB denied liability. It alleged that it engaged Livesey as a
corporate officer. It claimed that Livesey was later designated as Managing director when it became
tension office of its principal in Hong Kong. CBB posited that the Labor Arbiter had no jurisdiction as the
complaint involved an intra-corporate dispute. LA ordered CBB to reinstate Livesey to his
former position as Managing director and to pay him in accrued Salaries.
The parties entered into a compromise agreement. Under the agreement, Livesey was to receivea
certain amount. Further, the agreement provided that unless and until the agreement is fully satisfied,
CBB shall not sell, alienate, or otherwise dispose of all or substantially all of its assets or "usiness3
suspend its business operations substantially change the nature of its business and declare bankruptcy
or insolvency. CBB made an initial payment to Livesey but not the next two installments as the company
ceased operations. Livesey moved for the issuance of a writ of execution. He learned that CBB, in a clear
and willful attempt to avoid their liabilities to complainant have organized another corporation,
Binswanger Philippines. He claimed that there was evidence showing that CBB and
Binswanger Philippines, Inc. (Binswanger) are one and the same corporation. Involving the doctrine of
piercing the veil of corporate fiction, Livesey prayed that an alias writ of execution be issued against
respondents Binswanger and Keith Elliot, CBBs former President. LA denied Livesey’s motion for an alias
writ of execution. He explained that the stockholders of the two corporations were not the
same. Livesey filed an appeal which the NLRC granted, reversing the LA Laderas order. The Binswanger
and Elliot moved for reconsideration. 1he NLRC denied the motion. They then sought relief from the CA
through a petition forcertiorari. The CA granted the petition and
reversed the NLRC decision. Livesey moved for reconsideration, but the CA denied the motion. Livesey
prays for a reversal of the CA rulings on the basis of the following arguments: The CA erred in not
applying the doctrine of piercing the veil of corporate fiction to the case. He insists that CBB and
Binswanger are one and the same corporation as shown by the overwhelming evidence< (a) CBB stands
for ;Chesterton Blumenauer Binswanger, After executing the compromise agreement with him, through
Elliot, CBB ceased operations following a transaction where a substantial amount of CBB shares changed
hands (c) Summons served on Binswanger in an earlier labor case was received by Binswanger using
CBBs receiving stamp (d) In a letter dated, Elliot noted a Binswanger bid solicitation for a project with
the Philippine National Bank (P8B) which was actually a CBB project as shown by a CBB draft who also
filed an illegal dismissal case against the company, attested that Elliot told her of CBBs plan to close the
corporation and to organi4e another for the purpose of evading CBB7sliabilities. Livesey posits that the
closure of CBB and its immediate replacement by Binswanger could not have been possible without
Elliot’s guiding hand, such that when CBB ceased operations, Elliot (CBBs President) moved to
Binswanger in the same position.

ISSUES:
Whether the doctrine of piercing the veil of corporate fiction is applicable

RULING:

Petition GRANTED.
Based on the facts of the case, the Court finds this issue to have been rendered academic by the
compromise agreement between Livesey and CBB and approved. That CBB reneged in the fulfillment of
its obligation under the agreement is no reason to revive the issue and further frustrate the full settlement
of the obligation as agreed upon.
 NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT,
INC., and MCARTHUR MINING, INC.,vs.REDMONT CONSOLIDATED MINES CORP.,
G.R. No. 195580 April 21, 2014
Facts:
Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a
domestic corporation organized and existing under Philippine laws, took interest in mining and exploring
certain areas of the province of Palawan. After inquiring with the Department of Environment and Natural
Resources (DENR), it learned that the areas where it wanted to undertake exploration and mining
activities where already covered by Mineral Production Sharing Agreement (MPSA) applications of
petitioners Narra, Tesoro and McArthur.

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 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 by applications 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.
On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs. It held:

[I]t is clearly established that respondents are not qualified applicants to engage in mining activities. On
the other hand, [Redmont] having filed its own applications for an EPA over the areas earlier covered by
the MPSA application of respondents may be considered if and when they are qualified under the law.
The violation of the requirements for the issuance and/or grant of permits over mining areas is clearly
established thus, there is reason to believe that the cancellation and/or revocation of permits already
issued under the premises is in order and open the areas covered to other qualified applicants.

WHEREFORE, the Panel of Arbitrators finds the Respondents, McArthur Mining Inc., Tesoro Mining and
Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being
considered as Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby x x
x DECLARED NULL AND VOID.6

Issues:

I.The Court of Appeals erred when it did not dismiss the case for mootness despite the fact that
the subject matter of the controversy, the MPSA Applications, have already been converted into FTAA
applications and that the same have already been granted.

Held:
We find the petition to be without merit.This case not moot and academic. We of this Court note
that a grave violation of the Constitution, specifically Section 2 of Article XII, is being committed by a
foreign corporation right under our country’s nose through a myriad of corporate layering under different,
allegedly, Filipino corporations. The intricate corporate layering utilized by the Canadian company, MBMI,
is of exceptional character and involves paramount public interest since it undeniably affects the
exploitation of our Country’s natural resources. The corresponding actions of petitioners during the
lifetime and existence of the instant case raise questions as what principle is to be applied to cases with
similar issues. No definite ruling on such principle has been pronounced by the Court; hence, the
disposition of the issues or errors in the instant case will serve as a guide "to the bench, the bar and the
public."35 Finally, the instant case is capable of repetition yet evading review, since the Canadian
company, MBMI, can keep on utilizing dummy Filipino corporations through various schemes of corporate
layering and conversion of applications to skirt the constitutional prohibition against foreign mining in
Philippine soil.
 Gamboa v. Teves etal., GR No. 176579, October 9, 2012

Facts:
The issue started when petitioner Gamboa questioned the indirect sale of shares involving almost
12 million shares of the Philippine Long Distance Telephone Company (PLDT) owned by PTIC to First
Pacific. Thus, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent,
thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. The petitioner
contends that it violates the Constitutional provision on filipinazation of public utility, stated in Section
11, Article XII of the 1987 Philippine Constitution, which limits foreign ownership of the capital of a public
utility to not more than 40%. Then, in 2011, the court ruled the case in favor of the petitioner, hence this
new case, resolving the motion for reconsideration for the 2011 decision filed by the respondents.

Issue: Whether or not the Court made an erroneous interpretation of the term ‘capital’ in its 2011
decision?

Held/Reason:
The Court said that the Constitution is clear in expressing its State policy of developing an
economy ‘effectively controlled’ by Filipinos. Asserting the ideals that our Constitution’s Preamble want
to achieve, that is – to conserve and develop our patrimony , hence, the State should fortify a Filipino-
controlled economy. In the 2011 decision, the Court finds no wrong in the construction of the term
‘capital’ which refers to the ‘shares with voting rights, as well as with full beneficial ownership’ (Art. 12,
sec. 10) which implies that the right to vote in the election of directors, coupled with benefits, is
tantamount to an effective control. Therefore, the Court’s interpretation of the term ‘capital’ was not
erroneous. Thus, the motion for reconsideration is denied.