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Case Digest - The Corporate Entity
Case Digest - The Corporate Entity
Case Digest - The Corporate Entity
2. In order that a class suit may prosper, the following 6. P940.45 documentary stamps need be attached to
requisites must be present: (1) that the subject matter the document;
of the controversy is one of common or general
7. The judgment of the Court approving the
interest to many persons; and (2) that the parties are
dissolution and directing the disposition of the assets
so numerous that it is impracticable to bring them all
of the corporation need be presented (Rules of Court,
before the court. Here, there is only one party
Rule 104, Sec. 3).
plaintiff, and the corporation does not even have an
interest in the subject matter of the controversy, and Deciding the consulta elevated by the stockholders,
cannot, therefore, represent its members or the Commissioner of Land Registration overruled
stockholders who claim to own in their individual ground No. 7 and sustained requirements Nos. 3, 5
capacities ownership of the said property. Moreover, and 6.
a class suit does not lie in actions for the recovery of
property where several persons claim partnership of Issue: whether or not that certificate merely involves
their respective portions of the property, as each one a distribution of the corporation's assets or should be
could alleged and prove his respective right in a considered a transfer or conveyance.
different way for each portion of the land, so that
they cannot all be held to have identical title through Ruling:
acquisition/prescription. The court agreed with the Commissioner of Land
: Registration that he certificate of liquidation in
question, though it involves a distribution of the
Gallagher v Germania Brewing corporation's assets, in the last analysis represents a
transfer of said assets from the corporation to the
Stockholders of Guanzon and Sons v RD Gr L-18261 stockholders. Hence, in substance it is a transfer or
Facts: conveyance.
September 19, 1960, the five stockholders of the F.
Guanzon and Sons, Inc. executed a certificate of A corporation is a juridical person distinct from the
liquidation of the assets of the corporation reciting, members composing it. Properties registered in the
among other things, that by virtue of a resolution of name of the corporation are owned by it as an entity
the stockholders adopted on September 17, 1960, separate and distinct from its members. While shares
dissolving the corporation of stock constitute personal property they do not
they have distributed among themselves in proportion represent property of the corporation.
to their shareholdings, as liquidating dividends, the
assets of said corporation, including real properties it is clear that the act of liquidation made by the
located in Manila. stockholders of the F. Guanzon and Sons, Inc. of the
latter's assets is not and cannot be considered a
partition of community property, but rather a transfer
The certificate of liquidation, when presented to the or conveyance of the title of its assets to the
Register of Deeds of Manila, was denied registration individual stockholders
on seven grounds, of which the following were
disputed by the stockholders: Caram v CA L-48627
Facts:
Caram claims that they should not be solidarily liable without need of notice and with forfeiture of all
with Filipinas Orient Airways to Arellano since they installments paid. Respondent Dumpit paid the down
are mere investors of the latter, and that no contract payment and several installments amounting to P13,
was made between Caram and Arellano. 722.50. The last payment was made on December 5,
1967 for installments up to September 1967.
Issue: Whether or not the petitioners themselves are On May 10, 1973, or almost six (6) years later,
also and personallyl iable for such expenses and, if so, private respondent wrote petitioner offering to update
to what extent. all his overdue accounts with interest, and seeking its
written consent to the assignment of his rights to a
Ruling: certain Lourdes Dizon. In response, petitioners
The Court found that that the petitioners were not informed respondent that his Contract to Sell had
really involved in the initial steps that finally led to long been rescinded pursuant to paragraph 6 of the
the incorporation of the Filipinas Orient Airways. contract, and that the lot had already been resold.
A complaint was filed by the respondent with the
The petitioners were merely among the financiers NHA for conveyance with an alternative prayer for
whose interest was to be invited and who were in fact refund. The NHA, in its resolution, ordered Palay,
persuaded, on the strength of the project study, to Inc. and Alberto Onstott in his capacity as President
invest in the proposed airline. of the corporation, jointly and severally, to refund
immediately to respondent the amount paid with 12%
no showing that the Filipinas Orient Airways was a interest from the filing of complaint. Respondent
fictitious corporation and did not have a separate Presidential Executive Assistant Clave affirmed the
juridical personality, to justify making the petitioners, NHA resolution.
as principal stockholders thereof, responsible for its
obligations. As a bona fide corporation, the Filipinas ISSUE
Orient Airways should alone be liable for its 1. Whether the doctrine of piercing the veil of
corporate acts as duly authorized by its officers and corporate fiction has application to the case.
directors. 2. Whether petitioner On Stott can be held solidarity
liable with petitioner Corporation for the refund of
we hold that the petitioners cannot be held personally the installment payments made by respondent Dump
liable for the compensation claimed by the private it.
respondent for the services performed by him in the
organization of the corporation. To repeat, the RULING
petitioners did not contract such services The doctrine of piercing the veil of corporate fiction
has no application to the case. Consequently,
Palay Inc. v Clave L-50076 petitioner Onstott cannot be held solidarity liable
Facts: with petitioner Corporation for the refund of the
ON March 28, 1965, petitioner Palay, Inc., through installment payments made by respondent Dumpit.
its President, Albert Onstott executed in favor of A corporation is invested by law with a personality
private respondent, Nazario Dumpit, a Contract to separate and distinct from those of the persons
sell a parcel of Land in Antipolo, Rizal owned by composing it. As a general rule, a corporation may
said corporation. The sale price was P23, 300.00 with not be made to answer for acts or liabilities of its
9% interest per annum, payable with a down payment stockholders or those of the legal entities to which it
of P4, 660.00 and monthly installments of P246.42 may be connected and vice versa.
until fully paid. However, the veil of corporate fiction may be pierced
Paragraph 6 of the contract provided for automatic when: it is used as a shield to further an end
extrajudicial rescission upon default in payment of subversive of justice; or for purposes that could not
any monthly installment after the lapse of 90 days have been intended by the law that created it; or to
from the expiration of the grace period of one month, defeat public convenience, justify wrong, protect
fraud, or defend crime; or to perpetrate fraud or con It is a well-settled doctrine both in law and in equity
fuse legitimate issues; or to circumvent the law or that as a legal entity, a corporation has a personality
perpetuate deception; or as an alter ego, adjunct or distinct and separate from its individual stockholders
business conduit for the sole benefit of the or members.
stockholders. In this case however, there are no
badges of fraud on the part of the petitioners. They The mere fact that one is president of a corporation
had literally relied, although mistakenly, on does not render the property he owns or possesses the
paragraph 6 of the contract with respondent when property of the corporation, since the president, as
they rescinded the contract to sell extra judicially. individual, and the corporation are separate entities
Ruling:
There was no basis to pierce CLC's separate
corporate personality.
Ruling:
The contract questioned is one entered into
between respondent and PNB-IFL, not PNB.
PNB is a mere attorney-in-fact for the
PNB-IFL with full power and authority to, inter alia,
foreclose on the properties mortgaged to secure their
loan obligations with PNB-IFL.
PNB is an agent with limited authority and
specific duties under a special power of attorney
incorporated in the real estate mortgage. It is not
privy to the loan contracts entered into by
respondents and PNB-IFL.
Ritratto does not have any cause of action
against petitioner.
The general rule is that as a legal entity, a
corporation has a personality distinct and separate
from its individual stockholders or members, and is
not affected by the personal rights, obligations and
transactions of the latter.
The mere fact that a corporation owns all of
the stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If
used to perform legitimate functions, a subsidiary's
separate existence may be respected, and the liability
of the parent corporation as well as the subsidiary
will be confined to those arising in their respective
business