18. MARC II MARKETING, INC. v. ALFREDO M. JOSON (G.R. No.

171993, December 12, 2011) president; (2) secretary; (3) treasurer; and (4) such other officers as may be provided for in the by-laws. The
Court in Matling Industrial and Commercial Corporation v. Coros, held that: Conformably with Section 25, a
position must be expressly mentioned in the by-laws in order to be considered as a corporate office. Thus,
FACTS: Before petitioner corporation was officially incorporated, respondent has already been engaged by the creation of an office pursuant to or under a by-law enabling provision is not enough to make a position a
petitioner Lucila, in her capacity as President of Marc Marketing, Inc., to work as the General Manager of corporate office.
petitioner corporation.  It was formalized through the execution of a Management Contract dated 16
January 1994.  It was explicitly provided therein that respondent shall be entitled to 30% of its net income for A careful perusal of petitioner corporation's by-laws, particularly paragraph 1, Section 1, Article IV, would
his work as General Manager.  For occupying the said position, respondent was among its corporate officers explicitly reveal that its corporate officers are composed only of: (1) Chairman; (2) President; (3) one or more
by the express provision of Section 1, Article IV of its by-laws. On 15 August 1994, petitioner corporation was Vice-President; (4) Treasurer; and (5) Secretary. The position of General Manager was not among those
officially incorporated and registered with the SEC.  Respondent continued to discharge his duties as General enumerated. It is by virtue of this enabling provision that petitioner corporation's Board of Directors
Manager but this time under petitioner corporation. Pursuant to Section 1, Article IV of petitioner allegedly approved a resolution to make the position of General Manager a corporate office, and, thereafter,
corporation's by-laws, its corporate officers are as follows: Chairman, President, one or more Vice-Presidents, appointed respondent thereto making him one of its corporate officers.  All of these acts were done without
Treasurer and Secretary.  Per an undated Secretary's Certificate, petitioner corporation's Board of Directors first amending its by-laws so as to include the General Manager in its roster of corporate officers . With the
appointed respondent as one of its corporate officers with the designation or title of General Manager to given circumstances and in conformity with Matling Industrial and Commercial Corporation v. Coros, this
function as a managing director with other duties and responsibilities that the Board of Directors may Court rules that respondent was not a corporate officer of petitioner corporation because his position as
provide and authorized. Nevertheless, on 30 June 1997, petitioner corporation decided to stop and cease its General Manager was not specifically mentioned in the roster of corporate officers in its corporate by-laws.
operations due to poor sales collection aggravated by the inefficient management of its affairs. Accordingly, respondent's dismissal as petitioner corporation's General Manager did not amount to an intra-
Concomitantly, respondent was apprised of the termination of his services as General Manager since his corporate controversy.  Jurisdiction therefore properly belongs with the Labor Arbiter and not with the RTC.
services as such would no longer be necessary for the winding up of its affairs.  On the validity of management contract. The Management Contract executed between respondent and
Feeling aggrieved, respondent filed a Complaint for Reinstatement and Money Claim against petitioners petitioner Lucila has no binding effect on petitioner corporation for having been executed way before its
before the Labor Arbiter. In his complaint, respondent averred that petitioner Lucila dismissed him from his incorporation. Section 19 of the Corporation Code expressly provides: Sec. 19. Commencement of corporate
employment with petitioner corporation due to the feeling of hatred she harbored towards his family.   existence. - A private corporation formed or organized under this Code commences to have corporate
Petitioners filed a Motion to Dismiss grounded on the Labor Arbiter's lack of jurisdiction as the case involved existence and juridical personality and is deemed incorporated from the date the Securities and Exchange
an intra-corporate controversy, which jurisdiction belongs to the SEC [now with the RTC]. On 1 October 2001, Commission issues a certificate of incorporation under its official seal; and thereupon the incorporators,
the Labor Arbiter rendered his Decision in favor of respondent declaring the respondent's dismissal from stockholders/members and their successors shall constitute a body politic and corporate under the name
employment as illegal. The Labor Arbiter elucidated that the respondent was not a corporate officer under stated in the articles of incorporation for the period of time mentioned therein, unless said period is
petitioner corporation's by-laws.  As such, respondent's complaint clearly arose from an employer-employee extended or the corporation is sooner dissolved in accordance with law.  Logically, there is no corporation to
relationship, thus, subject to the Labor Arbiter's jurisdiction.  speak of prior to an entity’s incorporation.  And no contract entered into before incorporation can bind the
Petitioners appealed to the NLRC, which reversed and set aside the Labor Arbiter's Decision and ruled in corporation. As can be gleaned from the records, the Management Contract dated 16 January 1994 was
favor of petitioners by giving credence to the Secretary's Certificate, which evidenced respondent’s executed between respondent and petitioner Lucila months before petitioner corporation's incorporation on
appointment by the Board of Directors as its corporate officer with designation as General Manager.  Had 15 August 1994.  Similarly, it was done when petitioner Lucila was still the President of Marc Marketing, Inc.
respondent been an ordinary employee, such board action would not have been required.  As such, it is clear Undeniably, it cannot have any binding and legal effect on petitioner corporation. Also, there was no
that respondent was a corporate officer whose dismissal involved a purely intra-corporate controversy.  evidence presented to prove that the petitioner corporation adopted, ratified or confirmed the Management
Respondent's Motion for Reconsideration was denied, and subsequently, he filed a Petition for Certiorari Contract.  It is for the same reason that petitioner corporation cannot be considered estopped from
with the Court of Appeals ascribing grave abuse of discretion on the part of the NLRC. On 20 June 2005, the questioning its binding effect now that respondent was invoking the same against it.  In no way, then, can it
Court of Appeals declared that the Labor Arbiter has jurisdiction over the present controversy.  It upheld the be enforced against petitioner corporation, much less, its provisions fixing respondent's compensation as
finding of the Labor Arbiter that respondent was a mere employee of petitioner corporation, who has been General Manager to 30% of petitioner corporation's net profit.  Consequently, such percentage cannot be the
illegally dismissed.  Petitioners moved for its reconsideration but to no avail. basis for the computation of respondent's separation pay.  This finding, however, will not affect the
undisputed fact that respondent was, indeed, the General Manager of petitioner corporation from its
ISSUE: Whether or not the Management Contract executed between respondent and petitioner Lucila has no incorporation up to the time of his dismissal.
binding effect on petitioner corporation for having been executed way before its incorporation.
As regards petitioner Lucila's solidary liability, this Court affirms the same. As a rule, corporation has a
RULING: Yes.  personality separate and distinct from its officers, stockholders and members such that corporate officers are
On whether the controversy is an intra-corporate controversy or not. In Easycall Communications Phils., Inc. v. not personally liable for their official acts unless it is shown that they have exceeded their authority. 
King, this Court held that in the context of Presidential Decree No. 902-A, corporate officers are those officers However, this corporate veil can be pierced when the notion of the legal entity is used as a means to
of a corporation who are given that character either by the Corporation Code or by the corporation's by- perpetrate fraud, an illegal act, as a vehicle for the evasion of an existing obligation, and to confuse
laws.  Section 25 of the Corporation Code specifically enumerated who are these corporate officers: (1) legitimate issues.  Under the Labor Code, for instance, when a corporation violates a provision declared to be
penal in nature, the penalty shall be imposed upon the guilty officer or officers of the corporation. Based on
the prevailing circumstances in this case, petitioner Lucila, being the President of petitioner corporation,
acted in bad faith and with malice in effecting respondent's dismissal from employment. Although petitioner
corporation has a valid cause for dismissing respondent due to cessation of business operations, however,
the latter's dismissal therefrom was done abruptly by its President, petitioner Lucila.  Respondent was not
given the required one-month prior written notice that petitioner corporation will already cease its business
operations.

19. CAGAYAN FISHING DEVELOPMENT CO., INC.,  vs.
TEODORO SANDIKO, G.R. No. L-43350 December 23, 1937 Promotion
Facts:
·        Manuel Tabora is the registered owner of four parcels of land situated in the barrio of Linao, town
of Aparri, Province of Cagayan. To guarantee the payment of a loan in the sum of P8,000, Manuel
Tabora, on August 14, 1929, executed in favor of the Philippine National Bank a first mortgage on
the four parcels of land above-mentioned. A second mortgage in favor of the same bank was in
April of 1930 executed by Tabora over the same lands to guarantee the payment of another loan
amounting to P7,000. A third mortgage on the same lands was executed on April 16, 1930 in favor
of Severina Buzon to whom Tabora was indebted in the sum of P2,9000.
·        On May 31, 1930, Tabora executed a public document entitled "Escritura de Transpaso de Propiedad
Inmueble" by virtue of which the four parcels of land owned by him was sold to the plaintiff
company, said to under process of incorporation, in consideration of one peso (P1) subject to the
mortgages in favor of the Philippine National Bank and Severina Buzon and, to the condition that
the certificate of title to said lands shall not be transferred to the name of the plaintiff company
until the latter has fully and completely paid Tabora's indebtedness to the Philippine National Bank.
·        The plaintiff company filed its article incorporation with the Bureau of Commerce and Industry on
October 22, 1930). A year later, the board of directors of said company adopted a resolution
authorizing its president, Jose Ventura, to sell the four parcels of lands in question to Teodoro
Sandiko for P42,000. A deed of sale is executed before a notary public by the terms of which the
plaintiff sold ceded and transferred to the defendant all its right, titles, and interest in and to the
four parcels of land described in transfer certificate in turn obligated himself to shoulder the three
mortgages hereinbefore referred to. Another exhibit is a promisory note for P25,300. drawn by the
defendant in favor of the plaintiff, payable after one year from the date thereof. Another exhibit is a
deed of mortgage executed before a notary public in accordance with which the four parcels of
land were given a security for the payment of the promissory note. All these three instrument were
dated February 15, 1932.
·        The defendant having failed to pay the sum stated in the promissory note, plaintiff, on January 25,
1934, brought this action in the Court of First Instance of Manila praying that judgment be rendered
against the defendant for the sum of P25,300, with interest at legal rate from the date of the filing
of the complaint, and the costs of the suits.
·        CFI- absolved defendant. MNT denied.
not even a de facto corporation at the time. Not being in legal existence then, it did not possess juridical
capacity to enter into the contract.
Corporations are creatures of the law, and can only come into existence in the manner prescribed
by law. As has already been stated, general law authorizing the formation of corporations are
general offers to any persons who may bring themselves within their provisions; and if conditions
precedent are prescribed in the statute, or certain acts are required to be done, they are terms of
the offer, and must be complied with substantially before legal corporate existence can be
acquired.
That a corporation should have a full and complete organization and existence as an entity before it
can enter into any kind of a contract or transact any business, would seem to be self evident. . . . A
corporation, until organized, has no being, franchises or faculties. Nor do those engaged in bringing
it into being have any power to bind it by contract, unless so authorized by the charter there is not a
corporation nor does it possess franchise or faculties for it or others to exercise, until it acquires a
complete existence.
Boiled down to its naked reality, the contract here was entered into not between Manuel Tabora and a non-
existent corporation but between the Manuel Tabora as owner of the four parcels of lands on the one hand
and the same Manuel Tabora, his wife and others, as mere promoters of a corporations on the other hand.
For reasons that are self-evident, these promoters could not have acted as agent for a projected corporation
since that which no legal existence could have no agent. A corporation, until organized, has no life and
therefore no faculties. It is, as it were, a child in ventre sa mere. This is not saying that under no circumstances
may the acts of promoters of a corporation be ratified by the corporation if and when subsequently
organized. There are, of course, exceptions but under the peculiar facts and circumstances of the present
case, The Court declines to extend the doctrine of ratification which would result in the commission of
injustice or fraud to the candid and unwary.
 

Issue: Whether the sale entered into was valid?

Ruling: No.
The transfer made by Tabora to the Cagayan fishing Development Co., Inc., plaintiff herein, was affected on
May 31, 1930 (Exhibit A) and the actual incorporation of said company was affected later on October 22, 1930
(Exhibit 2). In other words, the transfer was made almost five months before the incorporation of the
company. Unquestionably, a duly organized corporation has the power to purchase and hold such real
property as the purposes for which such corporation was formed may permit and for this purpose may enter
into such contracts as may be necessary. But before a corporation may be said to be lawfully organized,
many things have to be done. Among other things, the law requires the filing of articles of incorporation.
Although there is a presumption that all the requirements of law have been complied with, in the case before
THE COURT it can not be denied that the plaintiff was not yet incorporated when it entered into a contract of
sale, Exhibit A. The contract itself referred to the plaintiff as "una sociedad en vias de incorporacion." It was
 20. FERMIN Z. CARAM, JR. and ROSA O. DE CARAM v.                                                            CA and ALBERTO no justification to hold them personally liable, therefore. Otherwise, all the other stockholders of the
ARELLANO corporation, including those who came in later, and regardless of the amount of their shareholdings, would
G.R. No. L-48627, June 30, 1987 be equally and personally liable also with the petitioners for the claims of the private respondent.

Facts:

Barretto and Garcia requested Arellano to conduct a project study regarding putting up an airline
business. Arellano was also tasked to perform pre-organizational services and was promised P50,000 as
compensation. The project study was revised before being presented to prospective investors. Such
investors are petitioners in this case. Garcia, Caram and Barreto became members of the board of the
resultant corporation which is Filipinas Orient Airways.

The lower court held that the petitioners (who are subsequent investors of the company) are jointly
and severally liable with the corporation for the compensation of Arellano. The court, in its dispositive
portion, ruled:

         Defendants are hereby ordered to jointly and severally pay the plaintiff the amount of P50,000.00 for
the preparation of the project study and his technical services that led to the organization of the defendant
corporation, plus P10,000.00 attorney's fees;

The petitioners claim that this order has no support in fact and law because they had no contract
whatsoever with the private respondent. The petitioners state that they merely invested in the corporation
after the project study was made and it was Barreto who was the “moving spirit” in the creation of the
company.

Issue: Should the petitioners be held liable?

Ruling: No. They cannot be held personally liable for the compensation because they did not contract such
services.

Petitioners were not involved in the initial stages of the organization of the airline, which were
being directed by Barretto as the main promoter. The petitioners were merely among the financiers whose
interest was to be invited and who were in fact persuaded, on the strength of the project study, to invest in
the proposed airline.

There was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have
a separate juridical personality, to justify making the petitioners, as principal stockholders thereof,
responsible for its obligations. As a bona fide corporation, the Filipinas Orient Airways should alone be liable
for its corporate acts as duly authorized by its officers and directors. Granting that the petitioners benefited
from the services rendered, such is no justification to hold them personally liable therefore. Otherwise, all the
other stockholders of the corporation, including those who came in late, and regardless of the amount of
their shareholdings, would be equally and personally liable also with the petitioner for the claims of the
private respondent.

Hence, the petitioners cannot be held personally liable for the compensation claimed by the private
respondent for the services performed by him in the organization of the corporation. The petitioners did not
contract such services. The most that can be said is that they benefited from such services, but that surely is
21. PIONEER INSURANCE & SURETY CORPORATION vs. THE HON. COURT OF APPEALS, BORDER MACHINERY No de facto partnership was created among the parties which would entitle petitioner Lim to a
& HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM reimbursement of the supposed losses of the proposed corporation. The record shows that the petitioner
G.R. No. 84197, July 28, 1989 was acting on his own and not on behalf of his other would-be incorporators in transacting the sale of the
FACTS: airplanes and spare parts.
In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a
single proprietorship. Domestic Airlines (JDA) and Lim entered into a sales contract for the sale and purchase
of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US
$109,000.00 to be paid in installments. The aircrafts later on arrived in Manila. Pioneer Insurance and Surety
Corporation (Pioneer) as surety executed and issued a surety bond in favor of JDA, in behalf of its principal,
Lim, for the balance price of the aircrafts and spare parts.
 It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto
Cervantes (Cervanteses) and Constancio Maglana contributed some funds used in the purchase of the above
aircrafts and spare parts. The funds were supposed to be their contributions to a new corporation proposed
by Lim to expand his airline business. They executed two (2) separate indemnity agreements in favor of
Pioneer.
Later on, Lim doing business under the name and style of SAL executed in favor of Pioneer Insurance a deed
of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that
Lim was to transfer and convey to the surety the two aircrafts. Lim defaulted on his subsequent installment
payments prompting JDA to request payments from the surety. Pioneer paid a total sum of P298,626.12.
After paying the balance of the purchase price, Pioner now seeks to foreclose the mortgage over the
aircrafts. The contributors (Bormaheco, Cervanteses and Maglana) intervened, claiming that they were part
owners of such aircrafts and that Lim acted in his own name and not in the name of the supposed
corporation. It should be noted that despite Lim’s representations, he did not incorporate his businesses and
did not include the contributors in his plans. Ultimately, the trial and appellate courts ruled that
ISSUE:
 
Should the contributors be held liable for the amount owed to Pioneer Insurance?
 
RULING:
 
No. While it has been held that as between themselves the rights of the stockholders in a
defectively incorporated association should be governed by the supposed charter and the laws of the state
relating thereto and not by the rules governing partners, it is ordinarily held that persons who attempt, but
fail, to form a corporation and who carry on business under the corporate name occupy the position of
partners inter se. Thus, where persons associate themselves together under articles to purchase property
to carry on a business, and their organization is so defective as to come short of creating a corporation
within the statute, they become in legal effect partners inter se, and their rights as members of the
company to the property acquired by the company will be recognized.
However, such a relation does not necessarily exist, for ordinarily persons cannot be made to assume the
relation of partners, as between themselves, when their purpose is that no partnership shall exist, and it
should be implied only when necessary to do justice between the parties; thus, one who takes no part
except to subscribe for stock in a proposed corporation which is never legally formed does not become a
partner with other subscribers who engage in business under the name of the pretended corporation, so as
to be liable as such in an action for settlement of the alleged partnership and contribution.
In his answer, the petitioner Lim denied having received any amount from respondents Bormaheco, the
Cervanteses and Maglana. The trial court and the appellate court, however, found that Lim received
contributions. It is therefore clear that the petitioner never had the intention to form a corporation with
the respondents despite his representations to them.
 TOPIC: STAGES IN THE FORMATION/ORGANIZATION OF A CORPORATION
 22. RIZAL LIGHT & ICE CO., INC., petitioner, vs. THE MUNICIPALITY OF MORONG, RIZAL and THE PUBLIC
SERVICE COMMISSION, respondents
G.R. No. L-20993 | September 28, 1968
RIZAL LIGHT & ICE CO., INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION and MORONG ELECTRIC CO.,
INC., respondents
G.R. No. L-21221| September 28, 1968
FACTS:
·         Rizal Light and Ice Co., Inc. is a duly organized corporation that was granted a certificate of public
convenience (CPC) for the installation, operation and maintenance of an electric light, heat and power
service in the municipality of Morong, Rizal.
·         However, it was ordered to appear before the Public Service Commission for failing to fulfil its duties as
stated in its certificate and in the regulations of the Public Service Commission. The comitted acts of Rizal
Light & Ice Co. are as follows:
o    Violation of the conditions of its certificate of public convenience and the regulations
of the Commission
o    Failure to comply with the directives to raise its service voltage and maintain them
within the limits prescribed in the Revised Order No. 1 of the Commission
o    Failure to acquire and install a kilowattmeter to indcate the load in kilowatts at any
particular time of the generating unit.  NO. When prosecuting and investigating duties are delegated by statute to an administrative body, as in the
·         For failing to appear, its CPC was cancelled. They moved for reconsideration due to their manager
allegedly not being aware of the hearing. The manager, Juan D. Francisco, was sick. The revocation was set
aside.
·         The Municipality of Morong, Rizal asked the Commission to revoke the CPC of the corporation and to
forfeit its franchise. Due to the noncompliance of the petitioner to the demands of court for it to appear and
to submit its reply, the case was submitted for decision.
·         On July 2, 1962, the electric plant was burner.
·         The PSC, on the basis of inspection reports, found that the corporation failed to comply with PSC’s
directives and violated the conditions of its CPC. The PSC ordered the cancellation and revocation of their
CPC.
·         Rizal Light & Ice, Co. moved for reconsideration alleging that prior to the burning of the electric plant,
its service was greatly improved.
·         While Rizal Light & Ice, Co.  ascontesting the cancellation of its CPC, the Commission granted another
corporation, Morong Electric Co., a CPC to install, operate and maintain an electric heat, light and power
service in said municipality.
·         Rizal Light & Ice, Co. opposed such act, alleging that it would not promote public convenience, but
would only cause competition.
·         Rizal Light & Ice Co. also stated that Morong Electric Co did not have a legal personality when it filed its
application on September 10, 1962, because its certificate of incorporation was issued by the Securities and
Exchange Commission only on October 17, 1962. This was denied on the premise that Morong Electric was a
de facto corporation.
·         PSC RULING: The Commission, in its decision, found that there was an absence of electric service in the
municipality of Morong and that applicant Morong Electric, a Filipino-owned corporation duly organized and
existing under the laws of the Philippines, has the financial capacity to maintain said service
ISSUE/S:
FOCUS ON THE GR NO L-21221 DECISION (#01)
 
GR NO L-20993 
1. Did the Commission act without or in excess of its jurisdiction when it delegated the hearing of
the case and the reception of evidence to Mr. Pedro S. Talavera who is not allowed by law to hear the
same?
NO. Mr. Talavera is not a lawyer.  Under the second paragraph of Section 32 of Commonwealth Act No. 146,
as amended,  the Commission can only authorize a division chief to hear and investigate a case filed before it
if he is a lawyer. However, the petitioner is raising this question for the first time in this appeal. The Court also
found out that it is only after the decision in the case turned out to be adverse to it that the petitioner
questioned the proceedings held before Mr. Talavera. Since petitioner has never raised any objection to the
authority of Mr. Talavera before the Commission, it should be deemed to have waived such procedural
defect, and consonant with the precedents on the matter, petitioner's claim that the Commission acted
without or in excess of jurisdiction in so authorizing Mr. Talavera should be dismissed.
 
2. Was the cancellation of petitioner's certificate of public convenience unwarranted because no
sufficient evidence was adduced against the petitioner and that petitioner was not able to present evidence
in its defense?
case of the Public Service Commission, said body may take steps it believes appropriate for the proper
exercise of said duties, particularly in the manner of informing itself whether there is probable violation of
the law and/or its rules and regulations. It may initiate an investigation, file a complaint, and then try the
charge as preferred. So long as the respondent is given a day in court, there can be no denial of due process,
and objections to said procedure cannot be sustained.
The inspection reports specify in detail the deficiencies incurred, and violations committed, by the petitioner
resulting in the inadequacy of its service. Said reports are sufficient to serve reasonably as bases of the
decision in question. These reports are not mere documentary proofs presented for the consideration of the
Commission, but are the results of the Commission's own observations and investigations which it can
rightfully take into consideration, particularly in this case where the petitioner had not presented any
evidence in its defense, and speaking of petitioner's failure to present evidence, as well as its failure to cross-
examine the authors of the inspection reports, petitioner should not complain because it had waived not
only its right to cross-examine but also its right to present evidence.
 
3. Did the Commission fail to give protection to the petitioner's investment?
·         "PROTECTION-OF-INVESTMENT RULE"
o    The Government having taken over the control and supervision of all public utilities, so
long as an operator under a prior license complies with the terms and conditions of his
license and reasonable rules and regulations for its operation and meets the reasonable
demands of the public, it is the duty of the Commission to protect rather than to destroy
his investment by the granting of the second license to another person for the same thing
over the same route of travel. The granting of such a license does not serve its
convenience or promote the interests of the public.
 
NO. The rule is not absolute for nobody has the exclusive right to secure a franchise or a certificate of public
convenience. The duty of the Commission to protect investment of a public utility operator refers only to
operators of good standing — those who comply with the laws, rules and regulations — and not to
operators who are unconcerned with the public interest and whose investments have failed or deteriorated
because of their own fault. Where, as in the present case, it has been shown by ample evidence that the
petitioner, despite ample time and opportunity given to it by the Commission, had failed to render adequate,
sufficient and satisfactory service and had violated the important conditions of its certificate as well as the
directives and the rules and regulations of the Commission, the rule cannot apply.
 
4. Did the Commission err in imposing the extreme penalty of revocation of the certificate?
The petitioner has in mind Section 21 of Commonwealth Act No. 146, as amended, which provides that a
public utility operator violating or failing to comply with the terms and conditions of any certificate, or any
orders, decisions or regulations of the Commission, shall be subject to a fine and that the Commission is
authorized and empowered to impose such fine, after due notice and hearing. It should be noted, however,
that the last sentence of said section states that the remedy provided therein "shall not be a bar to, or affect
any other remedy provided in this Act but shall be cumulative and additional to such remedy or remedies." In
other words, the imposition of a fine may only be one of the remedies which the Commission may resort to,
in its discretion. But that remedy is not exclusive of, or has preference over, the other remedies. And this
Court will not substitute its discretion for that of the Commission, as long as there is evidence to support
the exercise of that discretion by the Commission.
 
GR NO L-21221
 1.    Was the grant of a municipal franchise to Morong Electric proper? YES
Morong Electric was not a de facto corporation and had no corporate experience on the day the franchise
was granted to them. The fact that a company is not completely incorporated at the time the grant is made
to it by a municipality to use the streets does not, in most jurisdictions, affect the validity of the grant. Such
grant however cannot take effect until the corporation is organized.
·         RELEVANT DATES:
o    Filing of application of the franchise: September 10, 1962,
o    Certificate of Incorporation issuance: October 17, 1962
o    Efficacy of the franchise: March 13, 1963 (Approval by the Commission)
·         CONTENTION OF RIZAL LIGHT CO.: Since a franchise is a contract, at least two competent parties are
necessary to the execution thereof, and parties are not competent except when they are in being. Hence, it is
contended that until a corporation has come into being, in this jurisdiction, by the issuance of a certificate
of incorporation by the Securities and Exchange Commission (SEC) it cannot enter into any contract as a
corporation. The certificate of incorporation of the Morong Electric was issued by the SEC on October 17,
1962, so only from that date, not before, did it acquire juridical personality and legal existence.
·         CONTENTION OF MORONG ELECTRIC: Morong Electric argues, and to which argument the Commission
agrees, that it was a de facto corporation at the time the franchise was granted and, as such, it was not
incapacitated to enter into any contract or to apply for and accept a franchise. Not having been
incapacitated, Morong Electric maintains that the franchise granted to it is valid and the approval or
disapproval thereof can be properly determined by the Commission.
RULING: YES.
·         Morong Electric did not yet have a legal personality on May 6, 1962 when a municipal franchise was
granted to it. The juridical personality and legal existence of Morong Electric began only on October 17, 1962
when its certificate of incorporation was issued by the SEC.
·         Before that date, or pending the issuance of said certificate of incorporation, the incorporators cannot
be considered as de facto corporation.
·         But the fact that Morong Electric had no corporate existence on the day the franchise was granted in
its name does not render the franchise invalid, because later Morong Electric obtained its certificate of
incorporation and then accepted the franchise in accordance with the terms and conditions thereof.
·         The fact that a company is not completely incorporated at the time the grant is made to it by a
municipality to use the streets does not, in most jurisdictions, affect the validity of the grant. (American
authorities)
·         But such grant cannot take effect until the corporation is organized. The reason is that a privilege of
this character is a mere license to the corporation until it accepts the grant and complies with its terms and
conditions.
·         While a franchise cannot take effect until the grantee corporation is organized, the franchise may,
nevertheless, be applied for before the company is fully organized. A grant of a street franchise is valid
although the corporation is not created until afterwards. (Fletcher)
·         The incorporation of Morong Electric on October 17, 1962 and its acceptance of the franchise as shown
by its action in prosecuting the application filed with the Commission for the approval of said franchise, not
only perfected a contract between the respondent municipality and Morong Electric but also cured the
deficiency pointed out by the petitioner in the application of Morong Electric.
·         The efficacy of the franchise, however, arose only upon its approval by the Commission on March 13,
1963. The reason is that under Act No. 667, as amended by Act No. 1022, a municipal council has the power to
grant electric franchises, subject to the approval of the provincial board and the President. However, under
Section 16(b) of Commonwealth Act No. 146, as amended, the Public Service Commission is empowered "to
approve, subject to constitutional limitations any franchise or privilege granted under the provisions of Act
No. 667, as amended by Act No. 1022, by any political subdivision of the Philippines when, in the judgment of
the Commission, such franchise or privilege will properly conserve the public interests and the Commission
shall in so approving impose such conditions as to construction, equipment, maintenance, service, or
operation as the public interests and convenience may reasonably require, and to issue certificates of public
convenience and necessity when such is required or provided by any law or franchise." Thus, the efficacy of a
municipal electric franchise arises, therefore, only after the approval of the Public Service Commission.
·         A corporation should have a full and complete organization and existence as an entity before it can
enter into any kind of a contract or transact any business. It should be pointed out, however, that the rule is
absolute or that under no circumstances may the acts of promoters of a corporation be ratified or accepted
by the corporation if and when subsequently organized. Of course, there are exceptions. It will be noted
that American courts generally hold that a contract made by the promoters of a corporation on its behalf
may be adopted, accepted or ratified by the corporation when organized.
 
2. Does Moro Electric have the financial qualification to operate an electric light, heat, and power
service?
YES. The finding of PSC is supported. It is now a very well-settled rule in this jurisdiction that the findings and
conclusions of fact made by the Public Service Commission, after weighing the evidence adduced by the
parties in a public service case, will not be disturbed by the Supreme Court unless those findings and
conclusions appear not to be reasonably supported by evidence. The inspection report conducted by PSC
clearly removes any doubt as to the qualification of Moro Electric.
 
3. Are the findings of fact of the PSC regarding the petitioner’s service supported by evidence?
YES. As between the testimony of Mr. Bernardino and the inspection reports of the engineers of the
Commission, which served as the basis of the revocation order, the Commission gave credence to the latter.
Naturally, whatever conclusion or finding of fact that the Commission arrived at regarding the quality of
petitioner's service are not borne out by the evidence presented in this case but by evidence in the earlier
case. Where the Commission has reached a conclusion of fact after weighing the conflicting evidence, that
conclusion must be respected, and the Supreme Court will not interfere unless it clearly appears that there is
no evidence to support the decision of the Commission.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 23. LEO Y. QUERUBIN, MARIA CORAZON M. AKOL, AND AUGUSTO C. LAGMAN v. COMMISSION ON
ELECTIONS EN BANC, et.al.
G.R. No. 218787, December 08, 2015
NOTE: In the syllabus, this case is entitled Smartmatic v. COMELEC
 
FACTS:
 On October 27, 2014, COMELEC en banc issued Resolution No. 14 -0715 which released the bidding
documents for the "Two-Stage Competitive Bidding for the Lease of Election Management System
(EMS) and Precinct-Based Optical Mark Reader (OMR) or Optical Scan (OP-SCAN) System.”  specifications for the second time, but this time before the electoral tribunal's Technical Evaluation
 
 Specified in the published Invitation to Bid are the details for the lease with option to
purchase, through competitive public bidding, of 23,000 new units of precinct-based
OMRs or OP-SCAN Systems, with a total Approved Budget for Contract of P2,503,518,000,
to be used in the 2016 National and Local Elections.  
 
 “Smartmatic JV” is the joint venture of Smartmatic – TIM Corporation (SMTC), Smartmatic
International Holding B.V., and Jarltech International Corporation. Smartmatic JV and Indra
Sistemas, S.A. (Indra) responded to the call and submitted their bids for the project on the
scheduled date.  Commissioner Luie Tito F. Guia questioned the sufficiency of the documents submitted by
 
 During the opening of the bids, Smartmatic JV informed the BAC that SMTC has a pending
application with the SEC to amend its Articles of Incorporation (AOI), attaching therein all pending
documents. The amendments adopted as early as November 12, 2014 were approved by the SEC on
December 10, 2014.  1.     Can the mere failure to file an AOI automatically result in the bidder concerned being declared
 
 Smartmatic JV and Indra participated in the end-to-end testing of their initial technical proposals for
the procurement project before the BAC.
 
 Upon evaluation of the submittals, the BAC issued a resolution declaring Smartmatic JV and Indra
eligible to participate in the second stage of the bidding process. The BAC then issued a Notice
requiring them to submit their Final Revised Technical Tenders and Price proposals on February 25,
2015, to which the eligible participants complied. 
 
 On March 26, 2015, Smartmatic JV was declared to have tendered a complete and responsive
Overall Summary of the Financial Proposal. Meanwhile, Indra was disqualified for submitting a non-
responsive bid.
 Subsequently, for purposes of post-qualification evaluation, the BAC required Smartmatic JV to
submit additional documents and a prototype sample of its OMR. The prototype was subjected to
testing to gauge its compliance with the requirements outlined in the project's Terms of Reference
(TOR). 
 After the conduct of post-qualification, the BAC issued Resolution No. 9 disqualifying Smartmatic JV
on two grounds: a) Failure to submit valid AOI; and b) the demo unit failed to meet the technical
requirement that the system shall be capable of writing all data/files, audit log, statistics and ballot
images simultaneously in at least two (2) data storages.
 
 The ruling prompted Smartmatic JV to move for reconsideration. However, this was denied. The
BAC declared that Smartmatic JV complied with the requirements of Sec. 23.1(b) of the Revised
Implementing Rules and Regulations of RA 9184 (GPRA IRR), including the submission of a valid
AOI, but was nevertheless disqualified as it still failed to comply with the technical requirements of
the project.
 Smartmatic JV filed a protest seeking permission to conduct another technical demonstration.
Accordingly, on June 19, 2015, Smartmatic JV was allowed to prove compliance with the technical
Committee (TEC). This was followed by another technical demonstration before the Commission en
banc at the Advanced Science and Technology Institute (ASTI) at the University of the Philippines,
Diliman, Quezon City. 
 
DECISION OF THE COMELEC EN BANC (June 29, 2015): GRANTED SMARTMATIC JV’S PROTEST. The
seven-man commission was unanimous in holding that Smartmatic JV's OMR+ sufficiently satisfied
the technical requirements itemized in the TOR. 
 
 Notwithstanding Smartmatic JV's compliance with the technical requirements in the TOR,
Smartmatic JV.  Based on Commissioner Guia's dissent, petitioners now assail the decision of the
COMELEC en banc through the instant recourse.
 
ISSUE: 
ineligible? NO.
2.     Can Smartmatic JV validly undertake the project sought to be procured? YES.
 
RULING: 
 
1.     THE MERE FAILURE TO FILE AN AOI CANNOT AUTOMATICALLY RESULT IN THE BIDDER CONCERNED
BEING DECLARED INELIGIBLE. 
 
a.     The submission of an AOI was not a pre-qualification requirement.  
Based on the rule, the BAC's function in determining the eligibility of a bidder during pre-qualification is
ministerial in the sense that it only needs to countercheck the completeness and sufficiency of the
documents submitted by a bidder against a checklist of requirements. It cannot, therefore, declare a bidder
ineligible for failure to submit a document which, in the first place, is not even required in the bid documents.
Section 23 of the GPRA IRR does not require the submission of an AOI in order for a bidder to be declared
eligible. The requirement that bears the most resemblance is the submission by each partner to the venture
of a registration certificate issued by the SEC, but compliance therewith was never disputed by the
petitioners. Moreover, it was never alleged that Smartmatic JV was remiss in submitting a copy of its joint
venture agreement pursuant to Sec. 23.1(b), which petitioners specifically invoked.
 
It may be that the procuring entity has the option to additionally require the submission of the bidders'
respective AOIs in order to substantiate the latter's claim of due registration with the government entities
concerned. However, a perusal of the bidding documents would readily reveal that the procuring entity, the
COMELEC in this case, did not impose such a requirement.  SMTC has not yet completed its purpose under its AOI, toppling petitioners' argument like a house of cards.
As can be gleaned in the Instruction to Bidders, the AOI is not a document that was required for purposes of
determining a bidder's eligibility. Furthermore, The non-requirement of an AOI is further made evident by the
Bid Data Sheet (BDS) which provides a "complete list" of eligibility proposal documents to be submitted
during the first stage of the bidding process. Even the furnished Schedule of Requirements89 does not
mandate the submission of an AOI.  Therefore, petitioners' theory—that SMTC no longer has a valid purpose—is flawed. Otherwise, there would
                                     
Verily, based on Sec. 23.1 (b) of the GPRA IRR, the Instruction to Bidders, the BDS, and the Checklist of
Requirements, the non-submission of an AOI is not fatal to a bidder's eligibility to contract the project at
hand. Thus, it cannot be considered as a ground for declaring private respondents ineligible to participate in
the bidding process. To hold otherwise would mean allowing the BAC to consider documents beyond the
checklist of requirements, in contravention of their non-discretionary duty under Sec. 30(l) of the GPRA IRR.
 
b.     Neither is the AOI a post-qualification requirement
 
Even on post-qualification, the submission of an AOI was not included as an added requirement. Clauses 12
and 13 of the Instruction to Bidders pertain to the eligibility documents, technical documents, and the
financial component of a participant's bid. Meanwhile, the Clause 5 adverted to is an enumeration of persons
or entities who may participate in the bidding. Nowhere in these clauses does it appear that an AOI is a
mandatory requirement even for post-qualification. Even the BAC's March 27, 2015 Notice addressed to
Smartmatic JV supports this finding.  AOI, at that time, were immaterial since the AOI is not an eligibility requirement that can be considered by
 
2.     SMARTMATIC JV MAY VALIDLY UNDERTAKE THE PROJECT SOUGHT TO BE PROCURED
 
a.     SMTC still has the authority to conduct business even after the conduct of the 2010 national and local
elections
 
Petitioner contends that Smartmatic JV is ineligible because they considered the subject of the procurement
beyond the ambit of SMTCs corporate purpose. Petitioners postulate that SMTC's authority to conduct
business ceased upon fulfillment of its primary purpose stated in its AOI – that of automating the 2010
National and Local Elections, and this allegedly rendered SMTC's subsequent involvement in the subject
procurement project an ultra vires act. This is incorrect. 
 
While it is true that SMTC's AOI made specific mention of the automation of the 2010 National and Local
Elections as its primary purpose, it is erroneous to interpret this as meaning that the corporation's authority
to transact business will cease thereafter. Indeed, the contractual relation between SMTC and the COMELEC
has been the subject of prior controversies that have reached the Supreme Court, and the Supreme Court has
on these occasions held that even beyond the 2010 election schedule, the parties remain to have subsisting
rights and obligations relative to the products and services supplied by SMTC to the COMELEC for the
conduct of the 2010 polls.
 
The cessation of SMTC's business cannot be assumed just because the May 10, 2010 polls have already
concluded. For clearly, SMTC's purpose—the "automation of the 2010 national and local elections"—is not
limited to the conduct of the election proper, but extends further to the fulfillment of SMTC's contractual
obligations that spring forth from the AES Contract during the lifetime of the agreement (i.e. until the release
of the performance security), and even thereafter insofar as the surviving provisions of the contract are
concerned. In other words, regardless of whether or not SMTC's performance security has already been
released, establishing even just one surviving provision of the AES Contract would be sufficient to prove that
Indubitably, the vinculum juris between COMELEC and SMTC remains solid and unsevered despite the 2010
elections' inevitable conclusion. Several contractual provisions contained in the 2009 AES Contract, as
observed in a review of our jurisprudence, continue to subsist and remain enforceable up to this date. Pabillo,
in effect, at least guaranteed that SMTC's purpose under its AOI will not be fulfilled until May 10, 2020.
be no way of enforcing the subsisting provisions of the contract and of holding SMTC to its warranties after
the conduct of the. May 10, 2010 elections.
 
b.     The issue is mooted by the subsequent approval of the amendment to SMTC's AOI
 
Bearing in mind the non-discretionary function of the BAC during pre-qualification, it is then understandable
that it is only on post-qualification, when it is allowed to consider other documents, during which an
extensive inquiry will be made to detect any defect in the bidder's capacity to contract. Hence, even though
the submission of an AOI was not required for either pre or post-qualification purposes, the COMELEC and
BAC, on post-qualification, may still consider the same in determining whether or not the project is in line
with the bidder's corporate purpose, and, ultimately, in ascertaining the bidder's eligibility.
 
In the case at bar, We take note that during the opening of the bids on December 4, 2014, Smartmatic JV
already informed the BAC that SMTC was already in the process of amending its AOI. The contents of the
the BAC on pre-qualification. By post-qualification, however, the time the BAC can validly consider
extraneous documents, SMTC's AOI has already been duly amended, and the amendments approved by the
SEC on December 10, 2014, for its updated primary purpose to read:
 
To sell, supply, lease, import, export, develop, assemble, repair and deal with automated voting
machines, canvassing equipment, computer software, computer equipment and all other goods
and supplies, and/or to provide, render and deal in all kinds of services, including project
management services for the conduct of elections, whether regular or special, in the Philippine(s)
and to provide Information and Communication Technology (ICT) goods and services to private and
government entities in the Philippines.
 
Hence, any doubt on SMTC's authorization to continue its business has already been dispelled by December
10, 2014. It matters not that the amendments to the AOI took effect only on that day for as long as it
preceded post-qualification.
 
c.     SMTC's participation in the bidding is not an ultra vires act but one that is incidental to its corporate
purpose
 
The language of the Code appears to confine the term ultra vires to an act outside or beyond express, implied
and incidental corporate powers. Nevertheless, the concept can also include those acts that may ostensibly
be within such powers but are, by general or special laws, either proscribed or declared illegal. Ultra vires
acts or acts which are clearly beyond the scope of one's authority are null and void and cannot be given any
effect.
 
In determining whether or not a corporation may perform an act, one considers the logical and necessary
relation between the act assailed and the corporate purpose expressed by the law or in the charter, for if the
act were one which is lawful in itself or not otherwise prohibited and done for the purpose of serving
corporate ends or reasonably contributes to the promotion of those ends in a substantial and not merely in a
remote and fanciful sense, it may be fairly considered within corporate powers. The test to be applied is
whether the act in question is in direct and immediate furtherance of the corporation's business, fairly
incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the
power to do it; otherwise, not.
 
In the case at bar, notwithstanding the specific mention of the 2010 National and Local Elections in SMTC's
primary purpose, it is not, as earlier discussed, precluded from entering into contracts over succeeding ones.
Here, SMTC cannot be deemed to be overstepping its limits by participating in the bidding for the 23,000 new
optical mark readers for the 2016 polls since upgrading the machines that the company supplied the
COMELEC for the automation of the 2010 elections and offering them for subsequent elections is but a logical
consequence of SMTC's course of business, and should, therefore, be considered included in, if not incidental
to, its corporate purpose. A restricted interpretation of its purpose would mean limiting SMTC's activity to
that of waiting for the expiration of its warranties in 2020. 
 
In the final analysis, We see no defect in the AOI that needed to be cured before SMTC could have
participated in the bidding as a partner in Smartmatic JV, the automation of the 2016 National and Local
Elections being a logical inclusion of SMTC's corporate purpose.
24. JESUS V. LANUZA, MAGADYA REYES, BAYANI REYES and ARIEL REYES v. COURT OF APPEALS, A review of PMMSI’s articles of incorporation shows that the corporation complied with the requirements
SECURITIES AND EXCHANGE COMMISSION, DOLORES ONRUBIA, ELENITA NOLASCO, JUAN O. NOLASCO III, laid down by Act No. 1459.
ESTATE OF FAUSTINA M. ONRUBIA, PHILIPPINE MERCHANT MARINE SCHOOL, INC, G.R. No. 131394, March There is no gainsaying that the contents of the articles of incorporation are binding, not only on the
28. 2005 corporation, but also on its shareholders. In the instant case, the articles of incorporation indicate that at the
Facts:  time of incorporation, the incorporators were bona fide stockholders of seven hundred (700) founders’
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven shares and seventy-six (76) common shares. Hence, at that time, the corporation had 776 issued and
hundred (700) founders’ shares and seventy-six (76) common shares as its initial capital stock subscription outstanding shares.
reflected in the articles of incorporation. However, private respondents and their predecessors who were in On the other hand, a stock and transfer book is the book which records the names and addresses of all
control of PMMSI registered the company’s stock and transfer book for the first time in 1978, recording stockholders arranged alphabetically, the installments paid and unpaid on all stock for which subscription has
thirty-three (33) common shares as the only issued and outstanding shares of PMMSI. Sometime in 1979, a been made, and the date of payment thereof; a statement of every alienation, sale or transfer of stock made,
special stockholders’ meeting was called and held on the basis of what was considered as a quorum of the date thereof and by and to whom made; and such other entries as may be prescribed by law. A stock and
twenty-seven (27) common shares, representing more than two-thirds (2/3) of the common shares issued transfer book is necessary as a measure of precaution, expediency and convenience since it provides the only
and outstanding. certain and accurate method of establishing the various corporate acts and transactions and of showing the
In 1982, the heirs of one of the original incorporators, Juan Acayan, filed a petition with the ownership of stock and like matters. However, a stock and transfer book, like other corporate books and
Securities and Exchange Commission (SEC) for the registration of their property rights over one hundred records, is not in any sense a public record, and thus is not exclusive evidence of the matters and things
(120) founders’ shares and twelve (12) common shares owned by their father. The SEC hearing officer held which ordinarily are or should be written therein. In fact, it is generally held that the records and minutes of a
that the heirs of Acayan were entitled to the claimed shares and called for a special stockholders’ meeting to corporation are not conclusive even against the corporation but are prima facie evidence only, and may be
elect a new set of officers. The SEC En Banc affirmed the decision. As a result, the shares of Acayan were impeached or even contradicted by other competent evidence. Thus, parol evidence may be admitted to
recorded in the stock and transfer book. supply omissions in the records or explain ambiguities, or to contradict such records.
On 06 May 1992, a special stockholders’ meeting was held to elect a new set of directors. Private Quorum is based on the totality of the shares which have been subscribed and issued, whether it be
respondents thereafter filed a petition with the SEC questioning the validity of the 06 May 1992 stockholders’ founders’ shares or common shares. To base the computation of quorum solely on the obviously deficient, if
meeting, alleging that the quorum for the said meeting should not be based on the 165 issued and not inaccurate stock and transfer book, and completely disregarding the issued and outstanding shares as
outstanding shares as per the stock and transfer book, but on the initial subscribed capital stock of seven indicated in the articles of incorporation would work injustice to the owners and/or successors in interest of
hundred seventy-six (776) shares, as reflected in the 1952 Articles of Incorporation. The petition was the said shares. This case is one instance where resort to documents other than the stock and transfer books
dismissed. Appeal was made to the SEC En Banc, which granted said appeal, holding that the shares of the is necessary. The stock and transfer book of PMMSI cannot be used as the sole basis for determining the
deceased incorporators should be duly represented by their respective administrators or heirs concerned. quorum as it does not reflect the totality of shares which have been subscribed, more so when the articles of
The SEC directed the parties to call for a stockholders meeting on the basis of the stockholdings reflected in incorporation show a significantly larger amount of shares issued and outstanding as compared to that listed
the articles of incorporation for the purpose of electing a new set of officers for the corporation. in the stock and transfer book.
Issue: 
What should be the basis of quorum for a stockholders’ meeting—the outstanding capital stock as
indicated in the articles of incorporation or that contained in the company’s stock and transfer book?
 
Ruling: 
The articles of incorporation must prevail. The articles of incorporation has been described as one
that defines the charter of the corporation and the contractual relationships between the State and the
corporation, the stockholders and the State, and between the corporation and its stockholders. When
PMMSI was incorporated, the prevailing law was Act No. 1459, otherwise known as "The Corporation Law."
Section 6 thereof states:
Sec. 6. Five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippines, may
form a private corporation for any lawful purpose or purposes by filing with the Securities and Exchange
Commission articles of incorporation duly executed and acknowledged before a notary public, setting forth:
(7) If it be a stock corporation, the amount of its capital stock, in lawful money of the Philippines, and the
number of shares into which it is divided, and if such stock be in whole or in part without par value then such
fact shall be stated; Provided, however, That as to stock without par value the articles of incorporation need
only state the number of shares into which said capital stock is divided.
(8) If it be a stock corporation, the amount of capital stock or number of shares of no-par stock actually
subscribed, the amount or number of shares of no-par stock subscribed by each and the sum paid by each on
his subscription.
25. De La Salle Montessori International of Malolos, Inc. v. De La Salle Brothers, Inc., et al. G.R. No. 205548   (1) that the complainant corporation acquired a prior right over the use of such corporate name;
February 7, 2018 and
FACTS: (2) the proposed name is either:
            Petitioner De La Salle Montessori reserved its corporate name De La Salle Montessori International
Malolos, Inc. with the SEC to which the latter indorsed petitioner’s articles of incorporation and by-laws to the (a) identical, or
DepEd. No objections were made by DepEd, consequently, SEC issued a certificate of incorporation in favor (b) deceptively or confusingly similar to that of any existing corporation or to any other
of De La Salle Montessori. name already protected by law; or
            Respondents De La Salle Brothers, Inc., La Salle Academy, Inc., De La Salle-Santiago Zobel School, (c) patently deceptive, confusing or contrary to existing law.
Inc., and De La Salle Canlubang, Inc. filed a petition with the SEC to compel Petitioner to change its corporate
name because it is misleading or confusingly similar to that of the respondents who have acquired a prior             The enforcement of the protection accorded by Sec. 18 of the Corporation Code to corporate name
right to use and consent was not obtained thereby making Petitioner look as if it is part of the “La Salle” is lodged exclusively in the SEC. The SEC has absolute jurisdiction and control over all corporations. Its duty is
group which violates Sec. 18 of the Corporation Code. to prevent confusion in the use of corporate names not only for the protection of the corporations involved,
            SEC Office of the General Counsel issued an Order directing Petitioner to change or modify its mut more so for the protection of the public.
corporate name because Respondents have the right to the exclusive use of the name “La Salle” with             The SEC has the power to de-register at all times and under all circumstances, corporate names
freedom from infringement by priority of adoption. The SEC OGC also disagreed with the contention of which are likely to generate confusion. 
Petitioner’s use of Lyceum of the Philippines, Inc., v. CA where the Supreme Court ruled that the word  
“lyceum” is a generic word thereby Lyceum of the Philippines, Inc. and there was failure to prove that such  
word acquired secondary meaning cannot claim exclusive use of the name “lyceum” To which Petitioners  
asserted that “De La Salle” is also generic and respondents cannot claim exclusive use of the same.  
Nonetheless, there was failure on the part of Petitioners to establish that “De La Salle” is generic.  
ISSUE:
            Is the doctrine laid down in Lyceum of the Philippines, Inc. v. CA applicable to La Salle?
RULING:
            NO. It is inapplicable in the case. “De La Salle” is not merely a generic term. The use of the phrase
being suggestive and may be properly regarded as fanciful, arbitrary, and whimsical, hence entitled to legal
protection. The word “lyceum” refers to a school or institution of learning. It is generic like that of the word
“university.”
Right to use corporate and trade name a PROPERTY RIGHT
A corporation’s right to use its corporate and trade name is a property right, a right in rem, which it may
assert and protect against the world in the same manner as it may protect its tangible property, real or
personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and one which
cannot be impaired or defeated by subsequent appropriation by another corporation in the same field.
            A name is peculiarly important as necessary to the very existence of a corporation. Its name is one
of its attributes, an element of its existence, and essential to its identity. The general rule as to corporations
is that each corporation must have a name by which it is to sue and be sued and do all legal acts. The name of
a corporation in this respect designates the corporation in the same manner as the name of an individual
designates the person and the right to use its corporate name is as much a part of the corporate franchise as
any other privilege granted.
SECTION 18 of the Corporation Code
The Corporation Code recognizes the intrinsic importance of corporate names to which it provided a
restrictive rule under Sec. 18 to wit:

Sec. 18. Corporate name. - No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or 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 laws. When a change in the corporate name is approved, the
Commission shall issue an amended certificate of incorporation under the amended name.
To fall within the prohibition of Section 18, two requisites must be proven, to wit:
 26. GSIS Family Bank v. BPI Family Bank, 23 September 2015
Petitioner was originally organized as Royal Savings Bank in 1971. Due to liquidity problems, after 2 months of
closure after being under receivership, petitioner renamed Comsavings Bank, Inc under the management of
Commercial Bank of Manila. In 1987, GSIS acquired Commercial Bank of Manila.  and Partnership Names. “If the proposed name is similar to the name of a registered firm, the
 
To improve its marketability to the public, petitioner sought SEC approval to change its corporate name to
“GSIS Family Bank, a Thrift Bank.” Petitioner likewise had approval with DTI and BSP to use the said business
name which was granted. Thus, petitioner operates under the corporate name "GSIS Family Bank – a Thrift
Bank," pursuant to the DTI Certificate of Registration and the Monetary Board Circular approval.
 
On the other hand, respondent BPI Family Bank was a product of the merger between the Family Bank and
Trust Company (FBTC) and the Bank of the Philippine Islands (BPI). In 1969, the Gotianum family registered
with the SEC the corporate name "Family First Savings Bank," which was amended to "Family Savings Bank,"
and then later to "Family Bank and Trust Company." Since its incorporation, the bank has been commonly
known as "Family Bank." In 1985, Family Bank merged with BPI, and the latter acquired all the rights,
privileges, properties, and interests of Family Bank, including the right to use names, such as "Family First
Savings Bank,"
 
Hence, BPI filed with SEC to disallow the use of GSIS Family Bank’s name. SEC using priority right rule ruled in
favor of BPI.
 
ISSUE: Which bank has the right over the term “Family Bank?  circumstance that both petitioner and respondent are engaged in the same business of banking.
 
[Is the word he word "Family" not generic despite its unregistered status with the IPO of the Bureau of
Patents and the use by GSIS-Family Bank in its corporate name of the words "[F]amily [B]ank" as deceptive
and [confusingly similar] to the name BPI Family Bank.]
RULING: The BPI Family Bank has the right over the said corporate name.
 
Section 18 of the Corporation Code - No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or 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 laws. When a change in the corporate name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name.
 
In Philips vs. CA, to fall within the prohibition of the law on the right to the exclusive use of a corporate name,
two requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of such corporate name; and
(2) the proposed name is either: (a) identical or (b) deceptive or confusingly similar to that of any existing
corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary
to existing law.
 
These two requisites are present in this case.
First requisite: priority of adoption rule determines prior right
 Here, BPI was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank. GSIS, on
the other hand, was incorporated as GSIS Family – Thrift Bank only in 2002, or at least seventeen
(17) years after respondent started using its name.  Hence, we rule that the respondent has the
prior right over the use of the corporate name.
Second requisite: (a), the words "Family Bank" present in both petitioner and respondent's corporate name
satisfy the requirement that there be identical names in the existing corporate name and the proposed one.
 GSIS cannot justify its claims under Section 3 of the Revised Guidelines in the Approval of Corporate
proposed name must contain at least one distinctive word different from the name of the company
already registered.”
 To show contrast with BPI’s corporate name, petitioner used the words "GSIS" and "thrift." But
these are not sufficiently distinct words that differentiate petitioner's corporate name from
respondent's. While "GSIS" is merely an acronym of the proper name by which petitioner is
identified, the word "thrift" is simply a classification of the type of bank that petitioner is. Even if
the classification of the bank as "thrift" is appended to petitioner's proposed corporate name, it will
not make the said corporate name distinct from respondent's because the latter is likewise
engaged in the banking business.
Still second requisite: (b) In determining the existence of confusing similarity in corporate names, the test is
whether the similarity is such as to mislead a person using ordinary care and discrimination. And even without
such proof of actual confusion between the two corporate names, it suffices that confusion is probable or
likely to occur.
 The only words that distinguish the two are "BPI," "GSIS," and "Thrift." The first two words are
merely the acronyms of the proper names by which the two corporations identify themselves; and
the third word simply describes the classification of the bank. The overriding consideration in
determining whether a person, using ordinary care and discrimination, might be misled is the
"The likelihood of confusion is accentuated in cases where the goods or business of one
corporation are the same or substantially the same to that of another corporation.
 BPI alleged that some officers and clients ask whether GSIS has acquired them, or there is joint
agreement between them or similar arrangement.
Overall, SEC correctly applied Sec. 18. 
 The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate
names is lodged exclusively in the SEC. 
 The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5
of the SEC Reorganization Act, as amended. By express mandate, the SEC has absolute jurisdiction,
supervision and control over all corporations. 
 It is the SEC’s duty to prevent confusion in the use of corporate names not only for the protection
of the corporations involved, but more so for the protection of the public. It has authority to de-
register at all times, and under all circumstances corporate names which in its estimation are likely
to generate confusion
 
Extra Notes: BPI claims
 Claiming exclusive ownership to the name "Family Bank," having acquired the name since its
purchase and merger with Family Bank and Trust Company way back 1985. Through the years, it has
been known as "BPI Family Bank" or simply "Family Bank'' both locally and internationally. It has
already acquired reputation and good will under said name
SEC’s rurling: Upon the merger of FBTC with the BPI in 1985, the latter acquired the right to the use of the
name of the absorbed corporation. Thus, BPI Family Bank has a prior right to the use of the name
 
 
27. SAMAHAN NG MANGGAGAWA SA HANJIN SHIPYARD rep. by its President, ALFIE ALIPIO v. BUREAU OF workers organized for mutual aid and protection of its members or for any legitimate purpose other than
LABOR RELATIONS (G.R. No. 211145, October 14, 2015) collective bargaining registered with the DOLE. Having been granted a certificate of registration, Samahan's
FACTS: On February 16, 2010, Samahan, through its authorized representative, Alfie F. Alipio, filed an association is now recognized by law as a legitimate workers' association. According to Samahan, inherent in
application for registration of its name "Samahan ng Mga Manggagawa sa Hanjin Shipyard" with the DOLE. the workers' right to self-organization is its right to name its own organization. It seems to equate the
Attached to the application were the list of names of the association's officers and members, signatures of dropping of words "Hanjin Shipyard" from its name as a restraint in its exercise of the right to self-
the attendees of the February 7, 2010 meeting, copies of their Constitution and By-laws. The application organization. Hanjin, on the other hand, invokes that "Hanjin Shipyard" is a registered trade name and, thus,
stated that the association had a total of 120 members. On February 26, 2010, the DOLE Regional Office it is within their right to prohibit its use.
issued the corresponding certificate of registration in favor of Samahan. On March 15, 2010, respondent As there is no provision under our labor laws which speak of the use of name by a workers' association, the
Hanjin Heavy Industries and Construction Co., Ltd. Philippines filed a petition for the cancellation of Court refers to the Corporation Code, which governs the names of juridical persons . Section 18 thereof
registration of Samahan's association on the ground that its members did not fall under any of the types of provides: No corporate name may be allowed by the Securities and Exchange Commission if the proposed
workers enumerated in the second sentence of Article 243 (now 249). Hanjin opined that only ambulant, name is identical or deceptively or confusingly similar to that of any existing corporation or to any other
intermittent, itinerant, rural workers, self-employed, and those without definite employers may form a name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a
workers' association. It further posited that the Samahan committed misrepresentation for using the phrase, change in the corporate name is approved, the Commission shall issue an amended certificate of
"KAMI, ang mga Manggagawa sa HANJIN Shipyard (thereby showing that all members are employees of incorporation under the amended name. The policy underlying the prohibition in Section 18 against the
Hanjin, but in fact are not). DOLE Regional Director: ruled in favor of Hanjin. He found that the preamble, as registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any
stated in the Constitution and By-Laws of Samahan, was an admission on its part that all of its members were existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws,"
employees of Hanjin; Aggrieved, Samahan filed an appeal before the BLR and pointed out that the words is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the
"Hanjin Shipyard," as used in its application for registration, referred to a workplace and not as employer or evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision
company. It explained that when a shipyard was put up in Subic, Zambales, it became known as Hanjin over corporations.
Shipyard. BLR: granted Samahan's appeal and reversed the ruling of the Regional Director: It stated that the For the same reason, it would be misleading for the members of Samahan to use "Hanjin Shipyard" in its
law clearly afforded the right to self-organization to all workers including those without definite employers. name as it could give the wrong impression that all of its members are employed by Hanjin . Further,
The BLR was of the opinion that there was no misrepresentation on the part of Samahan. The phrase, "KAMI, Section 9, Rule IV of D.O. No. 40-03, Series of 2003 explicitly states: The change of name of a labor
ang mga Manggagawa sa Hanjin Shipyard," if translated, would be: "We, the workers at Hanjin Shipyard." organization shall not affect its legal personality. All the rights and obligations of a labor organization under
The use of the preposition "at" instead of "of' would indicate that "Hanjin Shipyard" was intended to its old name shall continue to be exercised by the labor organization under its new name. Thus, in the
describe a place. Should Hanjin feel that the use of its name had affected the goodwill of the company, the directive of the BLR removing the words "Hanjin Shipyard," no abridgement of Samahan's right to self-
remedy was not to seek the cancellation of the association's registration. At most, the use by Samahan of the organization was committed.
name "Hanjin Shipyard" would only warrant a change in the name of the association. CA: affirmed BLR's
directive, ordering that the words "Hanjin Shipyard" be removed from petitioner association's name.
ISSUE: WON the CA erred in ordering the removal/deletion of the word "Hanjin" in the name of the union by
reason of the company's property right over the company name "Hanjin.
RULING: No. No misrepresentation on the part of Samahan to warrant cancellation of registration.
Misrepresentation, as a ground for the cancellation of registration of a labor organization, is committed "in
connection with the adoption, or ratification of the constitution and by-laws or amendments thereto, the
minutes of ratification, the list of members who took part in the ratification of the constitution and by-laws or
amendments thereto, and those in connection with the election of officers, minutes of the election of
officers, and the list of voters. The Court concludes that misrepresentation, to be a ground for the
cancellation of the certificate of registration, must be done maliciously and deliberately. Further, the
mistakes appearing in the application or attachments must be grave or refer to significant matters. The
details as to how the alleged fraud was committed must also be indubitably shown.
The records of this case reveal no deliberate or malicious intent to commit misrepresentation on the part of
Samahan. The use of such words "KAMI, ang mga Manggagawa sa HANJIN Shipyard" in the preamble of the
constitution and by-laws did not constitute misrepresentation so as to warrant the cancellation of
Samahan's certificate of registration. Neither was there any showing that the alleged misrepresentation was
serious in character. Even granting arguendo that Samahan' s members misrepresented themselves as
employees or workers of Hanjin, said misrepresentation does not relate to the adoption or ratification of its
constitution and by-laws or to the election of its officers.
Removal of the word "Hanjin Shipyard" from the association 's name, however, does not infringe on
Samahan 's right to self-organization. Nevertheless, the Court agrees with the BLR that "Hanjin Shipyard"
must be removed in the name of the association. A legitimate workers' association refers to an association of
 28. INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE
PHILIPPINES, G.R. No. 122174   October 3, 2002 Corporate Name
Facts:
·        Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13,
1976 for the purpose of engaging in the business of manufacturing, producing, selling, exporting and
otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it
registered its corporate and business name with the Bureau of Domestic Trade.
·        Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name "Synclaire
Manufacturing Corporation". It amended its Articles of Incorporation on August 23, 1985 to change its
corporate name to "Industrial Refractories Corp. of the Philippines". It is engaged in the business of
manufacturing all kinds of ceramics and other products, except paints and zincs.
·        Both companies are the only local suppliers of monolithic gunning mix.
·        Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with the
Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate name on
the ground that its corporate name is confusingly similar with that of petitioner’s such that the public may be
confused or deceived into believing that they are one and the same corporation.
·        SEC in favor of RCP. SEC en Banc ordered in a decision petitioner to delete or drop from its corporate name
“Refractories.”
Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on certiorari to the
Court of Appeals which then rendered the herein assailed decision. The appellate court upheld the
jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent
RCP are confusingly or deceptively similar, and that respondent RCP has established its prior right to use the
word "Refractories" as its corporate name. 6 The appellate court also found that the petition was filed beyond
the reglementary period.7
Issue: a. Whether jurisdiction is vested with the regular courts as the present case is not one of the instances
provided in P.D. 902-A?
b. Whether respondent RCP is not entitled to use the generic name "refractories"
c. Whether there is no confusing similarity between their corporate names.
Ruling:
a.  Yes, SEC is vested jurisdiction.
Petitioner’s argument on the SEC’s jurisdiction over the case is utterly myopic. The jurisdiction of the SEC is
not merely confined to the adjudicative functions provided in Section 5 of P.D. 902-A, as amended. By express
mandate, it has absolute jurisdiction, supervision and control over all corporations. It also exercises
regulatory and administrative powers to implement and enforce the Corporation Code 1 one of which is
Section 18, which provides:
"SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange Commission
if the proposed name is identical or deceptively or 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 laws.
When a change in the corporate name is approved, the Commission shall issue an amended certificate of
incorporation under the amended name."
It is the SEC’s duty to prevent confusion in the use of corporate names not only for the protection of the
corporations involved but more so for the protection of the public, and it has authority to de-register at all
times and under all circumstances corporate names which in its estimation are likely to generate confusion.
Clearly therefore, the present case falls within the ambit of the SEC’s regulatory powers.
b.  No, respondent is entitled to use the name.
While the word "refractories" is a generic term, its usage is not widespread and is limited merely to the
industry/trade in which it is used, and its continuous use by respondent RCP for a considerable period has
made the term so closely identified with it. Moreover, as held in the case of Ang Kaanib sa Iglesia ng Dios kay
Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng
Katotohanan, petitioner’s appropriation of respondent's corporate name cannot find justification under the
generic word rule.  A contrary ruling would encourage other corporations to adopt verbatim and register an
existing and protected corporate name, to the detriment of the public.
c.  No, there is confusing similarity.
Likewise untenable is petitioner’s argument that there is no confusing or deceptive similarity between
petitioner and respondent RCP’s corporate names. Section 18 of the Corporation Code expressly prohibits
the use of a corporate name which is "identical or deceptively or 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 laws". The policy behind the foregoing prohibition is to avoid fraud upon the public that will 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 corporation.
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names specifically
requires that: (1) a corporate name shall not be identical, misleading or confusingly similar to one already
registered by another corporation with the Commission; and (2) if the proposed name is similar to the name
of a registered firm, the proposed name must contain at least one distinctive word different from the name
of the company already registered.
As held in Philips Export B.V. vs. Court of Appeals 8 to fall within the prohibition of the law, two requisites
must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use of such corporate name; And (2) the
proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary
to existing law.
As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with
freedom from infringement by similarity is determined by priority of adoption. In this case, respondent RCP
was incorporated on October 13, 1976 and since then has been using the corporate name "Refractories Corp.
of the Philippines". Meanwhile, petitioner was incorporated on August 23, 1979 originally under the name
"Synclaire Manufacturing Corporation". It only started using the name "Industrial Refractories Corp. of the
Philippines" when it amended its Articles of Incorporation on August 23, 1985, or nine (9) years after
respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the
right to use the word "Refractories" as part of its corporate name.
Anent the second requisite, in determining the existence of confusing similarity in corporate names, the test
is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court
must look to the record as well as the names themselves. Petitioner’s corporate name is "Industrial
Refractories Corp. of the Phils.", while respondent’s is "Refractories Corp. of the Phils." Obviously, both
names contain the identical words "Refractories", "Corporation" and "Philippines". The only word that
distinguishes petitioner from respondent RCP is the word "Industrial" which merely identifies a corporation’s
general field of activities or operations. We need not linger on these two corporate names to conclude that
they are patently similar that even with reasonable care and observation, confusion might arise. It must be
noted that both cater to the same clientele, i.e.¸ the steel industry. In fact, the SEC found that there were
instances when different steel companies were actually confused between the two, especially since they also
have similar product packaging. Such findings are accorded not only great respect but even finality, and are
binding upon this Court, unless it is shown that it had arbitrarily disregarded or misapprehended evidence
before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated.
And even without such proof of actual confusion between the two corporate names, it suffices that
confusion is probable or likely to occur.
Refractory materials are described as follows:
"Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are supplied
mainly in the form of brick of standard sizes and of special shapes. Refractories also include refractory
cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk materials such as
dead-burned grain magneside, chrome or ground ganister and special clay."
 29. ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, H.S.K. SA BANSANG PILIPINAS, INC., v.  
IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN  
 
G.R. No. 137592            December 12, 2001  
Facts:  
On July 16, 1979, 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, which petition was docketed  
as SEC Case No. 1774. On May 4, 1988, the SEC rendered judgment in favor of respondent, ordering 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.5 No appeal was taken from said decision.  
It appears that during the pendency of SEC Case No. 1774, Soriano, et al., caused the registration on  
April 25, 1980, of petitioner corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang  
Pilipinas. The acronym "H.S.K." stands for Haligi at Saligan ng Katotohanan. On March 2, 1994, respondent  
corporation filed before the SEC a petition, docketed as SEC Case No. 03-94-4704, praying that petitioner be  
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.  
Issue: Is the petitioner’s corporate name deceptively or confusingly similar to that of the petitioner?  
Ruling:  YES.  
The SEC has the authority to de-register at all times and under all circumstances, corporate names  
which in its estimation are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use  
of corporate names not only for the protection of the corporations involved but more so for the protection  
of the public. Petitioner claims that it complied with the SEC guidelines by adding not only two but eight  
words to their registered name. 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. Parenthetically, it is well to mention that the acronym H.S.K. used by the petitioner stands for
"Haligi at Saligan ng Katotohanan."
Then, too, the records reveal that in holding out their corporate name to the public, petitioner
highlights the dominant words "IGLESIA NG DIOS KAY KRISTO HESUS, HALIGI AT SALIGAN NG KATOTOHANAN,"
which is strikingly similar to respondent's corporate name, thus making it even more evident that the
additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.", are merely descriptive of and pertaining
to the members of respondent corporation. Significantly, the only difference between the corporate names
of petitioner and respondent are the words SALIGAN and SUHAY. These words are synonymous — both mean
ground, foundation or support. Hence, this case is on all fours with Universal Mills Corporation v. Universal
Textile Mills, Inc., where the Court ruled that the corporate names Universal Mills Corporation and Universal
Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable care and observation"
confusion may arise.
The wholesale appropriation by petitioner’s corporate name cannot find justification under the
generic word rule. A contrary ruling would encourage other corporations to adopt verbatim and register an
existing and protected corporate name, to the detriment of the public.  Certainly, 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.
 30. UNIVERSAL MILLS CORPORATION vs. UNIVERSAL TEXTILE MILLS, INC.
G.R. No. L-28351, July 28, 1977
FACTS:  
 
Universal Textile Mills, Inc. was organized on December 29, 1953, as a textile manufacturing firm for which it
was issued a certificate of registration on January 8, 1954. The Universal Mills Corporation, on the other
hand, was registered with the Commission on October 27, 1954, under its original name, Universal Hosiery
Mills Corporation, having as its primary purposes the "manufacture and production of hosieries and wearing
apparel of all kinds." On May 24, 1963, it filed an amendment to its articles of incorporation changing its
name to Universal Mills Corporation, its present name, for which it was issued the certificate of approval on
June 10, 1963.

The immediate cause of this complaint was the occurrence of a fire which gutted Universal Mills
Corporation’s spinning mills in Pasig, Rizal. Universal Textile Mills, Inc. alleged that as a result of this fire and
because of the similarity of petitioner's name to that of the former, the news items appearing in the various
metropolitan newspapers carrying reports on the fire created uncertainty and confusion among its bankers,
friends, stockholders and customers prompting respondent to make announcements, clarifying the real
identity of the corporation whose property was burned. The SEC then issued an order enjoining Universal
Mills Corporation from using its present corporate name because it is confusingly and deceptively similar with
Universal Textile Mills, Inc.

ISSUE:   Is the order of the SEC proper?

RULING:

YES. The corporate names in question are not Identical, but they are indisputably so similar that even under
the test of "reasonable care and observation as the public generally are capable of using and may be
expected to exercise" invoked by appellant. The Supreme Court ruled that confusion will usually arise,
considering that under the
second amendment of its articles of incorporation on August 14, 1964, appellant included among its primary
purposes the "manufacturing, dyeing, finishing and selling of fabrics of all kinds" in which the respondent
had been engaged for more than a decade ahead of the petitioner.

And since respondent is not claiming damages in this proceeding, it is, of course, immaterial whether or not
appellant has acted in good faith, but the SC cannot perceive why of all names, petitioner had to choose a
name already being used by another firm engaged in practically the same business for more than a decade
enjoying well-earned patronage and goodwill, when there are so many other appropriate names it could
possibly adopt without arousing any suspicion as to its motive and, more importantly, any degree of
confusion in the mind of the public which could mislead even its own customers, existing or prospective.
 TOPIC: CORPORATE NAME  one another, especially in view of the fact that the campuses of petitioner and those of the private
31. LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF
CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI
LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF
EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., respondents
G.R. No. 101897 | March 5, 1993.
FACTS:
·         Petitioner is an educational institution duly registered with the Securities and Exchange Commission.
·         When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum of the
Philippines, Inc. and has used that name ever since.
·         On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private
respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate
names and permanently to enjoin them from using "Lyceum" as part of their respective names.
·         The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of
Marbel, for failure to serve summons upon these two (2) entities. The case against the Liceum of Araullo was
dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo."
·         Petitioner had sometime before commenced in the SEC a proceeding against the Lyceum of Baguio, Inc.
to require it to change its corporate name and to adopt another name not "similar to or identical" with that
of petitioner.
·         In an Order dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of
petitioner and that of the Lyceum of Baguio, Inc. were substantially identical because of the presence of a
"dominant" word, "Lyceum," the name of the geographical location of the campus being the only word
which distinguished one from the other corporate name.
·         Lyceum of the Philippines then wrote all the educational institutions it could find using the word
"Lyceum" as part of their corporate name, and advised them to discontinue such use of "Lyceum."
·         The SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the
word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case (SEC-Case
No. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an
enforceable exclusive right to the use of that word.
·         On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer
was reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so
identified with petitioner as to render use thereof by other institutions as productive of confusion about
the identity of the schools concerned in the mind of the general public. The SEC En Banc held that the
attaching of geographical names to the word "Lyceum" served sufficiently to distinguish the schools from
respondents were physically quite remote from each other.
ISSUE/S: Is the petitioner institution entitled to a legally enforceable exclusive right to use the word
"Lyceum" in its corporate name? NO
RULING:
·         The Articles of Incorporation of a corporation must, among other things, set out the name of the
corporation.
o    Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate
names are concerned:
"SECTION 18. Corporate name. — No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or
deceptively or 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 laws. When a change in the corporate name is approved,
the Commission shall issue an amended certificate of incorporation under the
amended name." (Emphasis supplied)
·         The policy underlying the prohibition in Section 18 against the registration of a corporate name 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.
·         The Supreme Court does not consider that the corporate names of private respondent institutions are
"identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the
corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are
effectively precluded by the appending of geographic names to the word "Lyceum."
·         The Court concludes and so holds that the petitioner institution is not entitled to a legally enforceable
exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum"
as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly
or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names.
·         One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed
with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
DOCTRINE OF SECONDARY MEANING
o    "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive
appropriation with reference to an article in the market, because geographical or otherwise descriptive
might nevertheless have been used so long and so exclusively by one producer with reference to this article
that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the
article was his produce.

o    The doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase
originally incapable of exclusive appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by
one producer with reference to his article that, in that trade and to that branch of the purchasing public, the
word or phrase has come to mean that the article was his product."
 32. INDIANA AEROSPACE UNIVERSITY vs. COMMISSION ON HIGHER EDUCATION
G.R. No. 139371 April 4, 2001, Panganiban, J.
FACTS:
In 1996, Dr. Reynaldo B. Vera, Chairman, Technical Panel for Engineering, Architecture, and Maritime
Education (TPRAM) of [CHED], received a letter from Douglas R. Macias, Chairman, Board of Aeronautical
Engineering, Professional Regulatory Commission (PRC) and Chairman, Technical Committee for Aeronautical
Engineering (TPRAME) inquiring whether [petitioner] had already acquired university status in view of the
latter's advertisement in [the] Manila Bulletin. An investigation was thereafter conducted as regards the
alleged misrepresentation by petitioner.
As a consequence of said Report, [respondent's] Legal Affairs Service was requested to take legal action
against [petitioner]. In 1997, [respondent] directed [petitioner] to desist from using the term University,
including the use of the same in any of its alleged branches. In the course of its investigation, [respondent]
was able to verify from the Securities and Exchange Commission (SEC) that [petitioner had] filed a proposal
to amend its corporate name from Indiana School of Aeronautics to Indiana Aerospace University, which was
supposedly favorably recommended by the Department of Education, Culture and Sports (DECS) per its
Indorsement dated 17 July 1995, and on [that] basis, SEC issued to [petitioner] Certificate of Registration.
In reaction to [respondent's] order for [petitioner] to desist from using the word 'University', Jovenal Toring,
[c]hairman and [f]ounder of [petitioner] wrote a letter appealing for reconsideration "In reaction to
[respondent's] order for [petitioner] to desist from using the word 'University', Jovenal Toring, [c]hairman
and [f]ounder of [petitioner] wrote a letter dated February 24, 1997 (Annex 'G') appealing for
reconsideration. This was however denied.
Petitioner filed a Complaint for Damages with prayer for Writ of Preliminary and Mandatory Injunction and
Temporary Restraining Order against [respondent]. Respondent filed Motion to Dismiss. The RTC issued the
injunction and denied the motion to dismiss filed by the respondent.
In 1998, petitioner filed before public respondent a Motion to Declare [Respondent] in [D]efault. On the
same date, [respondent] filed a Motion For Extension of Time to File its Answer. Petitioner opposed the
motion for extension and instead filed a motion to expunge respondent’s answer. Unable to file their written
Opposition to the Motion to Expunge within the period given by public respondent, the OSG filed a Motion to
Admit Written Opposition stating the reasons for the same, attaching thereto the Opposition with [F]ormal
[E]ntry of [A]ppearance. The RTC declared the respondent in default thereafter allowed the petitioner to
present evidence ex parte.
On appeal, the CA decided in favor of respondent and ruled that petitioner had no cause of action against
respondent. Petitioner failed to show any evidence that it had been granted university status by respondent
as required under existing law and CHED rules and regulations.
ISSUES:
1.   Was it proper to declare CHED in default?
2.   Was the issuance by the RTC of the preliminary injunction proper?
3.   Was the dismissal of the complaint by CA proper?
RULING:
1.   NO. Trial court gravely abused its discretion when it declared respondent in default despite the latter's filing
of an Answer.10 Placing respondent in default thereafter served no practical purpose. The hornbook rule is
that default judgments are generally disfavored. While there are instances when a party may be properly
declared in default, these cases should be deemed exceptions to the rule and should be resorted to only in
clear cases of obstinate refusal or inordinate neglect in complying with the orders of the court. In the present
case, however, no such refusal or neglect can be attributed to respondent. It appears that respondent failed
to file its Answer because of excusable negligence. Atty. Joel Voltaire Mayo, director of the Legal Affairs
Services of CHED, had to relinquish his position in accordance with the Memorandum dated July 7, 1998,
requiring all non-CESO eligibles holding non-career positions to vacate their respective offices. It was only on
September 25, 1998, after CHED Special Order No. 63 had been issued, when he resumed his former position.
Judges, as a rule, should avoid issuing default orders that deny litigants the chance to be heard. Instead, the
former should give the latter every opportunity to present their conflicting claims on the merits of the
controversy, as much as possible avoiding any resort to procedural technicalities.
2.   NO. Petitioner failed to establish a clear right to continue representing itself to the public as a university.
Indeed, it has no vested right to misrepresent itself. Before an injunction can be issued, it is essential that (1)
there must be a right in esse to be protected, and (2) the act against which the injunction is to be directed
must have violated such right. The establishment and the operation of schools are subject to prior
authorization from the government. No school may claim to be a university unless it has first complied with
the prerequisites provided in Section 34 of the Manual of Regulations for Private Schools. The Rules limit the
grant of preliminary injunction to cases in which the plaintiff is clearly entitled to the relief prayed for. We
also agree with the finding of the CA that the act sought to be enjoined by petitioner is not violative of the
latter's rights. Respondent's Cease and Desist Order of July 30, 1997 merely restrained petitioner from using
the term "university" in its name. It was not ordered to close, but merely to revert to its authorized name;
hence, its proprietary rights were not violated.
3.   NO. An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a case is to
appeal after a decision has been rendered. A writ of certiorari is not intended to correct every controversial
interlocutory ruling; it is resorted to only to correct a grave abuse of discretion or a whimsical exercise of
judgment equivalent to lack of jurisdiction. In the case at bar, we find no grave abuse of discretion in the
RTC's denial of the Motion to Dismiss. The CA erred in ruling otherwise. The trial court stated in its Decision
that petitioner was an educational institution, originally registered with the Securities and Exchange
Commission as the "Indiana School of Aeronautics, Inc." That name was subsequently changed to "Indiana
Aerospace University" after the Department of Education, Culture and Sports had interposed no objection to
such change. Respondent issued a formal Cease and Desist Order directing petitioner to stop using the word
"university" in its corporate name. The former also published an announcement in the March 21, 1998 issue of
Freeman, a local newspaper in Cebu City, that there was no institution of learning by that name. The counsel
of respondent was quoted as saying in the March 28, 1998 issue of the newspaper Today that petitioner had
been ordered closed by the respondent for illegal advertisement, fraud and misrepresentation of itself as a
university. Such acts, according to the RTC undermined the public's confidence in petitioner as an educational
institution. This was a clear statement of a sufficient cause of action. When a motion to dismiss is grounded
on the failure to state a cause of action, a ruling thereon should be based only on the facts alleged in the
complaint. The court must pass upon this issue based solely on such allegations, assuming them to be true.
For it to do otherwise would be a procedural error and a denial of plaintiff's right to due process.
 33) Philips Export B.V., Philips Electrical Lamps, Inc. and Philips Industrial Development, Inc. vs CA,
Securities and Exchange Commission, and Standard Philips Corporation
G.R. No. 96161 February 21, 1992 | Articles of Incorporation – Corporate Name
FACTS
Philips Export B.V. is a foreign corporation organized under the laws of the Netherlands. It is not engaged in
business in the Philippines, but it is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD
EMBLEM. Philips Electrical Lamps, Inc (incorporated 29 August 1965) and Philips Industrial Developments, Inc
(incorporated 25 May 1965, the petitioners in this case, belong to the Philips group of companies and are
authorized users of the registered trademarks.
Standard Philips Corporation registered itself with the SEC (12 April 1982), and Philips Export BV filed a
complaint with the SEC asking for cancellation of the word “Philips” from the corporate name of Standard
Philips Corporation in view of the prior registration with the Bureau of Patents of the trademark "PHILIPS"
and the logo "PHILIPS SHIELD EMBLEM" in the name of Philips Export BV and the previous registration of
Philips Electrical and Philips Industrial with the SEC.
Standard Philips Corporation refused to amend its articles of incorporation, thus the Philips corporations filed
a petition with the SEC praying for the issuance of a writ of Preliminary Injunction alleging that the use of the
word PHILIPS in the name of Standard Philips Corporation amounts to infringement.
The SEC denied the petition, finding that there is no sufficient ground for the grant of injunctive relief, and it
cannot order the removal or cancellation of the word “PHILIPS” from the corporate name of Standard Philips
Corporation. Section 18 of the Corporation Code (infra) is applicable only when the corporate names in
question are identical. Here, there is no confusing similarity between Petitioners' and Private Respondent's
corporate names as those of the Petitioners contain at least two words different from that of the
Respondent. On appeal, the SEC en banc affirmed the dismissal declaring that the corporate names of
Petitioners and Private Respondent hardly breed confusion inasmuch as each contains at least two different
words and, therefore, rules out any possibility of confusing one for the other.
 ISSUE: Whether Standard Philips Corporation can use the word PHILIPS in its corporate name.
 RULING: No.
The Court declared that a corporation's right to use its corporate and trade name is a property right, a right in
rem, which it may assert and protect against the world in the same manner as it may protect its tangible
property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property
right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in
the same field.
A name is peculiarly important as necessary to the very existence of a corporation. Its name is one of its
attributes, an element of its existence, and essential to its identity. A corporation acquires its name by choice
and need not select a name identical with or similar to one already appropriated by a senior corporation. A
corporation can not use a corporate name in violation of the rights of others.
Section 18 of the Corporation Code provides: No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or deceptively or 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. Where a change in a corporate name is approved, the commission shall issue an
amended certificate of incorporation under the amended name.
In order for Section 18 to apply, two requisites must be proven: (1) that the complainant corporation acquired
a prior right over the use of such corporate name; and (2) the proposed name is either: [(a) identical; or (b)
deceptively or confusingly similar] to that of any existing corporation or to any other name already protected
by law; or (c) patently deceptive, confusing or contrary to existing law.
Philips Electrical and Philips Industrial were incorporated 26 years before Standard Philips Corporation, thus
satisfying the first requisite that the complainant acquired a prior right over the use of the name. As for the
second requisite, the Court held that In determining the existence of confusing similarity in corporate names,
the test is whether the similarity is such as to mislead a person, using ordinary care and discrimination. A
reading of the names inevitably leads one to conclude that "PHILIPS" is the dominant word, and also that all
these companies are affiliated or associated with the Philips Group of Companies.
Additionally, PHILIPS is a trademark or trade name which was registered as far back as 1922. Petitioners,
therefore, have the exclusive right to its use which must be free from any infringement by similarity. A
corporation has an exclusive right to the use of its name, which may be protected by injunction. Such
principle proceeds upon the theory that it is a fraud on the corporation which has acquired a right to that
name and perhaps carried on its business thereunder, that another should attempt to use the same name, or
the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they
are dealing with the corporation which has given a reputation to the name.
The fact that there are other companies engaged in other lines of business using the word "PHILIPS" as part
of their corporate names is no defense and does not warrant the use by Private Respondent of such word
which constitutes an essential feature of Petitioners' corporate name previously adopted and registered and-
having acquired the status of a well-known mark in the Philippines and internationally as well.
34. LAUREANO INVESTMENT & DEVELOPMENT CORPORATION v. THE HONORABLE COURT OF APPEALS and Corporation" for petitioner is presumed to know by which name it is registered, and the legal provisions on
BORMAHECO, INC. G.R. No. 100468 May 6, 1997 (PANGANIBAN, J.) the use of its corporate name.
Facts Section 1, Rule 3 of the Rules of Court provides that only natural or juridical persons or entities authorized by
Spouses Reynaldo Laureano and Florence Laureano are majority stockholders of petitioner law may be parties to a civil action. Under the Civil Code, a corporation has a legal personality of its own
Corporation who entered into a series of loan and credit transactions with Philippine National Cooperative (Article 44), and may sue or be sued in its name, in conformity with the laws and regulations of its
Bank. To secure payment of the loans, they executed Deeds of Real Estate Mortgage for several amounts. In organization (Article 46). Additionally, Article 36 of the Corporation Code similarly provides:
view of their failure to pay their indebtedness, PNCB applied for extrajudicial foreclosure of the real estate Art. 36. Corporate powers and capacity. - Every corporation incorporated under this Code has the power and
mortgages. The bank was the purchaser of the properties in question in the foreclosure sale and titles capacity:
thereof were consolidated in PNCB's name. PNCB did not secure a writ of possession nor did it file ejectment 1. To sue and be sued in its corporate name;
proceedings against the Laureano spouses, because there were then pending cases involving the titles of As the trial and appellate courts have held, "Lideco Corporation" had no personality to intervene since it had
ownership of subject two lots, which are situated at Bel-Air Subdivision, Makati, Metro Manila. not been duly registered as a corporation. If petitioner legally and truly wanted to intervene, it should have
Bormaheco, Inc. became the successor of the obligations and liabilities of PNCB over subject lots by used its corporate name as the law requires and not another name which it had not registered. Indeed, as the
virtue of a Deed of Sale/Assignment wherein Bormaheco bought from PNCB under a bulk sale 114 titled and Respondent Court found, nowhere in the motion for intervention and complaint in intervention does it
untitled properties including the two parcels of land in question, formerly registered in the name of the appear that "Lideco Corporation" stands for Laureano Investment and Development Corporation.
Laureano spouses. Bormaheco filed an "Ex-Parte Petition for the Issuance of Writ of Possession of the subject Bormaheco, Inc., thus, was not estopped from questioning the juridical personality of "Lideco Corporation,"
lots. Petitioner Corporation filed on January 18, 1989 its Motion for Intervention and to Admit Attached even after the trial court had allowed it to intervene in the case.
Complaint in Intervention in said case.
Bormaheco filed its Motion to Strike out the Complaint in Intervention and all related pleadings filed
by LIDECO Corporation. The motion was granted in the first questioned order which found intervenor LIDECO
Corporation and LAUREANO INVESTMENT AND DEVELOPMENT CORPORATION as two (2) separate and
distinct entities. Laureano Investment and Development Corporation filed its Urgent Motion to Substitute
Party Intervenor and to Adopt Complaint in Intervention and All Pleadings. An opposition thereto was filed
by BORMAHECO, after which the lower court issued its second questioned order ruling in favor of
Bormaheco.
Petitioner Corporation contends that respondent Bormaheco's motion to strike out the complaint
in intervention and all related pleadings filed by LIDECO Corporation was based on misleading and confusing
assertions that LIDECO Corporation is not a registered corporation despite its admission and/or use of the
word LIDECO as acronym for Laureano Investment and Development Corporation. The lower court found the
contention untenable. BORMAHECO has shown that LIDECO Corporation is not organized and existing under
Philippine laws. Neither has it been registered with the Securities and Exchange Commission. In support of
said claim, BORMAHECO presented a certification to the effect that the records of the Commission do not
show the registration of LIDECO, INC. either as a corporation or as partnership. From the very first motion
and pleading filed by petitioner, it is very clear that the intervenor therein is LIDECO Corporation. Nowhere in
its complaint does it appear that LIDECO Corporation is the brevity or acronym for Laureano Investment and
Development Corporation.
Issue
May a plaintiff/petitioner which purports to be a corporation validly bring suit under a name other than that
registered with the Securities and Exchange Commission?
RULING
NO.
We observe that the motion adverted to indeed made use of LIDECO as an acronym for Laureano Investment
and Development Corporation. But said motion distinctly specified that LIDECO was the shorter term for
Laureano Investment and Development Corporation. It is obvious that no false representation or
concealment can be attributed to private respondents. Neither can it be charged with conveying the
impression that the facts are other than, or inconsistent with, those which it now asserts since LIDECO, as an
acronym, is clearly different from "Lideco Corporation" which represented itself as a corporation duly
registered and organized in accordance with law. Nor can it be logically inferred that petitioner relied or
acted upon such representation of private respondent in thereafter referring to itself as "Lideco
35 Gala v. Ellice, 418 S 431  ISSUE: WON the purposes for which Ellice and Margo were organized should be declared as illegal and
FACTS: On March 28, 1979, the spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul contrary to public policy. 
Gala, and Rita Benson, and their encargados Virgilio Galeon and Julian Jader formed and organized the Ellice  
Agro-Industrial Corporation formed and organized the Ellice Agro-Industrial Corporation. The total RULING: NO. The Court holds that petitioners’ contentions impugning the legality of the purposes for which
subscribed capital stock of the corporation was 35,000 valued at P3,500,000.00. As payment for their Ellice and Margo were organized, amount to collateral attacks which are prohibited in this jurisdiction. The
subscriptions, the Gala spouses transferred several parcels of land located in the provinces of Quezon and best proof of the purpose of a corporation is its articles of incorporation and by-laws. The articles of
Laguna to Ellice. Subsequently, on September 16, 1982, Guia Domingo, Ofelia Gala, Raul Gala, Virgilio Galeon incorporation must state the primary and secondary purposes of the corporation, while the by-laws outline
and Julian Jader incorporated the Margo Management and Development Corporation (Margo). The total the administrative organization of the corporation, which, in turn, is supposed to insure or facilitate the
subscribed capital stock of Margo was 20,000 amounting to P200,000.00. Then, Manuel Gala sold his shares accomplishment of said purpose. In the case at bar, a perusal of the Articles of Incorporation of Ellice and
in Ellice to Margo and transferred his remaining holdings in Ellice to Raul Gala. Alicia Gala transferred her Margo shows no sign of the allegedly illegal purposes that petitioners are complaining of. It is well to note
shares in Ellice to Victor de Villa where the latter transferred said shares to Margo. She also transferred some that, if a corporation’s purpose, as stated in the Articles of Incorporation, is lawful, then the SEC has no
shares to Ofelia Gala, Guia Domingo, Raul Gala, and Margo.   authority to inquire whether the corporation has purposes other than those stated, and mandamus will lie to
  compel it to issue the certificate of incorporation. Assuming there was even a grain of truth to the
A special stockholders’ meeting of Margo was held, where a new board of directors was elected. petitioners’ claims regarding the legality of what are alleged to be the corporations’ true purposes, we are
That same day, the newly-elected board elected a new set of officers. Raul Gala was elected as chairman, still precluded from granting them relief. We cannot address here their concerns regarding circumvention of
president and general manager. During the meeting, the board approved several actions, including the land reform laws, for the doctrine of primary jurisdiction precludes a court from arrogating unto itself the
commencement of proceedings to annul certain dispositions of Margo’s property made by Alicia Gala. The authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of
board also resolved to change the name of the corporation to MRG Management and Development special competence. Since primary jurisdiction over any violation of Section 13 of Republic Act No. 3844 that
Corporation. Similarly, a special stockholders’ meeting of Ellice was also held to elect a new board of may have been committed is vested in the Department of Agrarian Reform Adjudication Board (DARAB),
directors. In the ensuing organizational meeting later that day, a new set of corporate officers was elected. then it is with said administrative agency that the petitioners must first plead their case. With regard to their
Likewise, Raul Gala was elected as chairman, president and general manager.  claim that Ellice and Margo were meant to be used as mere tools for the avoidance of estate taxes, suffice it
  say that the legal right of a taxpayer to reduce the amount of what otherwise could be his taxes or
Respondents filed against petitioners with the Securities and Exchange Commission (SEC) a petition altogether avoid them, by means which the law permits, cannot be doubted.  
(first petition SEC Case No. 3747) for accounting and restitution by the directors and officers. Additionally,   
respondents prayed that they be allowed to inspect the corporate books and documents of Ellice. In turn, The petitioners’ allegation that Ellice and Margo were run without any of the typical corporate formalities,
petitioners initiated a complaint (second petition SEC Case No. 4027) against the respondents praying for, even if true, would not merit the grant of any of the relief set forth in their prayer. We cannot disregard the
among others, the nullification of the elections of directors and officers of both Margo Management and corporate entities of Ellice and Margo on this ground. At most, such allegations, if proven to be true, should
Development Corporation and Ellice Industrial Corporation; the nullification of all board resolutions issued by be addressed in an administrative case before the SEC. 
Margo from June 23, 1990 up to the present and all board resolutions issued by Ellice from August 24, 1990   
up to the present; and the return of all titles to real property in the name of Margo and Ellice, as well as all Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala
corporate papers and records of both Margo and Ellice which are in the possession and control of the spouses from the coverage of land reform legislation and avoiding estate taxes, we cannot disregard their
respondents.   separate juridical personalities. 
   
The two cases were consolidated. During the pendency of the SEC cases, the shares of stock of  
Alicia and Ofelia Gala in Ellice were levied and sold at public auction to satisfy a judgment rendered against  
them by the Regional Trial Court of Makati in a civil case.  The SEC rendered a Joint Decision where it  
dismissed the first petition, and issuing the following orders for the second petition enjoining the  
respondents to perform corporate acts of both Ellice and Margo, as directors and officers thereof; nullifying  
the election of the new sets of Board of Directors and Officers of Ellice and Margo; ordering the respondent  
Raul Gala to return all the titles of real properties in the names of Ellice and Margo which were unlawfully  
taken and held by him; and directing the respondents to return to herein petitioners all corporate papers,  
records of both Ellice and Margo which are in their possession and control.   
   
Respondents appealed to the SEC En Banc, which reversed and set aside the decision of of the  
Hearing Officer, granting the appeal, upholding the first Petition, dismissing the Petition with Prayer for  
Issuance of Preliminary Restraining Order, and granting the Compulsory Counterclaim in the second petition.  
Petitioners filed a petition for review with the Court of Appeals which dismissed the petition for review and  
affirmed the decision of the SEC En Banc. Hence, they filed a petition before the Supreme Court.   
   
 Court affecting the properties would create a cloud over U.P.’s title, for which reason it had a right
36 HEIRS OF ANTONIO PAEL, ANDREA ALCANTARA and CRISANTO PAEL v. to intervene in these proceedings.
COURT OF APPEALS, JORGE H. CHIN and RENATO B. MALLARI  
G.R. No. 133547 ; December 7, 2001 ISSUE: Should UP’s motion to intervene be granted? YES.
   
FACTS:  RULING:
   
 The title of PFINA Properties, Inc., Transfer Certificate of Title No. 186662, was irregularly and While as a rule, the intervention of a new party at this late stage should no longer be allowed, there is in the
illegally issued. As such, the reinstatement of the titles of private respondents was proper and did cases at bar an inescapable issue waiting to be resolved, and which issue can be taken up herein without the
not constitute a collateral attack on the title of PFINA.  necessity of separate proceedings.
   
 The transfer of title from the Heirs of Pael in favor of PFINA was replete with badges of fraud and Therefore, notwithstanding its belated filing, the motion for intervention of U.P. is granted, albeit the
irregularities which rendered nugatory and inoperative the existing doctrines on land registration adjudication thereof shall be limited to a determination of the alleged overlapping or encroachment between
and land titles. More important, the Heirs of Pael had earlier disposed of their rights. There was U.P.’s title, on the one hand, and respondents’ TCT Nos. 52928 and 52929, on the other hand. U.P. specifically
nothing to transfer to PFINA. The transfer was not only fictitious, it was void. cites the decision in Roberto A. Pael et al. v. Court of Appeals, et al., supra, wherein the title of the Paels was
  declared to be of dubious origin and a fabrication. Hence, since respondents derive their titles from a
defective title, their titles should also be null and void. intervenor U.P. narrates that its titles previously
 PFINA claims that it acquired the properties from the Heirs of Pael by virtue of a deed of assignment
covered by TCT No. 9462 emanated from a sale by the Commonwealth of the Philippines to the University in
dated January 25, 1983, hence, it filed a motion to intervene before the Court of Appeals. 
1949. Prior to that, the U.P. title can be traced back to OCT No. 730 in the name of Mariano Severo Tuason
 
and others as early as 1914.
 However, before it filed its motion for intervention, or for a long period of 15 years, PFINA and the
 
Heirs of Pael were totally silent about the alleged deed of assignment. No steps were taken by
On the other hand, respondents Chin and Mallari contend that their titles, TCT Nos. 52928 and 52929, cover
either of them to register the deed or secure transfer certificate of title evidencing the change of
lands which are outside of the properties validly and legitimately owned by, and titled in the name of, U.P.
ownership during this long period of time.
They claim that there is neither encroachment nor overlapping.
 
 
 Furthermore, at the time PFINA acquired the disputed properties in 1983, its corporate name was Considering the conflicting claims by U.P. and respondents, the ascertainment of boundaries of the lands
PFINA Mining and Exploration, Inc., a mining company which had no valid grounds to engage in the they respectively claim becomes imperative. The instant cases have altogether taken more than eight (8)
highly speculative business of urban real estate development. years. Despite the exceedingly voluminous records, the boundaries of the properties covered by the disputed
  titles of respondents and the boundaries of the lands covered by the title of U.P. are not discussed therein. In
 Both the decisions of the Court of Appeals and the Supreme Court show that the alleged transfer in order to avoid the institution of new cases and thus obviate further litigation, we deem it best to have any
1983 was not only dubious and fabricated; it could produce no legal effect. As stated above, the conflict and dispute on this matter speedily resolved through an intervention. Concomitantly, there is a need
Paels were no longer owners of the land they allegedly assigned. for reception of further evidence which, however, cannot be done before this Court. Hence, this case should
  be remanded to the Court of Appeals for reception of evidence relevant to determining the boundaries of
 In the Decision, the Supreme Court affirmed the factual findings of the Court of Appeals because the conflicting claims between U.P. and respondents Chin and Mallari over the property in dispute.
they are amply supported by the evidence on record. Well established is the rule that if there is no
showing of error in the appreciation of facts by the Court of Appeals, this Court treats them as
conclusive. The conclusions of law which the Court of Appeals drew from those facts are likewise
accurate and convincing. 
 
 Insofar as the original parties in G.R. Nos. 133547 and 133843 are concerned, the motions for
reconsideration are, therefore, denied with finality. No further pleadings from them will be
entertained.
 
 During the pendency of the motions for reconsideration, the University of the Philippines filed a
motion for intervention, alleging that the properties covered by TCT No. 52928 and No. 52929 in the
name of respondents Chin and Mallari form part of the vast tract of land that is the U.P. Campus,
which is registered in the name of U.P. under TCT No. 9462. Therefore, any pronouncement by this
 37. UY SIULIONG, MARIANO LIMJAP, GACU UNG JIENG, EDILBERTO CALIXTO and UY CHO YEE v. THE said articles of incorporation are somewhat loosely drawn, it is clear from a reading of the same that the
DIRECTOR OF COMMERCE AND INDUSTRY, G.R. No. L-15429, December 1, 1919 principal purpose of said corporation is to engage in a mercantile business, with the power to do and perform
  the particular acts enumerated in said subparagraphs above referred to.
Facts:  Without discussing or deciding whether a corporation organized under the laws of the Philippine
Prior to the presentation of the petition the petitioners had been associated together as partners, Islands may be organized for more than one purpose, the Court was of the opinion and so decide that a
which partnership was known as "mercantil regular colectiva, under the style and firm name of "Siuliong y corporation may be organized under the laws of the Philippine Islands for mercantile purposes, and to
Cia. Petitioners, who had been members of said partnership of "Siuliong y Cia.," desired to dissolve said engage in such incidental business as may be necessary and advisable to give effect to, and aid in, the
partnership and to form a corporation composed of the same persons as incorporators, to be known as successful operation and conduct of the principal business.
"Siulong y Compañia, Incorporada. The purpose of said corporation, "Siuliong y Cia., Inc.," is (a) to acquire In the present case, the Court was fully persuaded that all of the power and authority included in
the business of the partnership theretofore known as Siuliong & Co., and (b) to continue said business with the articles of incorporation of "Siuliong y Cia., Inc.," are only incidental to the principal purpose of said
some of its objects or purposes. However, an examination of the articles of incorporation of the said proposed incorporation, to wit: "mercantile business." The purchase and sale, importation and exportation
"Siuliong y Compañia, Incorporada" shows that it is to be organized for the following purposes: of the products of the country, as well as of foreign countries, might make it necessary to purchase and
(a) The purchase and sale, importation and exportation, of the products of the country as well as of foreign discount promissory notes, bills of exchange, bonds, negotiable instruments, stock, and interest in other
countries; mercantile and industrial associations. It might also become important and advisable for the successful
(b) To discount promissory notes, bills of exchange, and other negotiable instruments; operation of the corporation to act as agent for insurance companies as well as to buy, sell and equip boats
(c) The purchase and sale of bills of exchange, bonds, stocks, or "participaciones de sociedades mercantiles e and to buy and sell other establishments, and industrial and mercantile businesses.
industriales [joint account of mercantile and industrial associations]," and of all classes of mercantile While the Court have arrived at the conclusion that the proposed articles of incorporation do not
documents; "comisiones [commissions];" "consignaciones [consignments];" authorize the petitioners to engage in a business with more than one purpose, it does not mean to be
(d) To act as agents for life, marine and fire insurance companies; lawphi1.net understood as having decided that corporations under the laws of the Philippine Islands may not engage in a
(e) To purchase and sell boats of all classes "y fletamento de los mismos and charterage of same;" and business with more than one purpose. Such an interpretation might work a great injustice to corporations
(f) To purchase and sell industrial and mercantile establishments. organized under the Philippine laws. Such an interpretation would give foreign corporations, which are
  permitted to be registered under the laws here and which may be organized for more than one purpose, a
While the articles of incorporation of "Siuliong y Cia., Inc." states that its purpose is to acquire and great advantage over domestic corporations. 
continue the business, with some of its objects or purposes, of Siuliong & Co., it will be found upon an
examination of the purposes enumerated in the proposed articles of incorporation of "Siuliong y Cia., Inc.,"
that some of the purposes of the original partnership of "Siuliong y Cia." have been omitted. For example,
the articles of partnership of "Siuliong y Cia." gave said company the authority to purchase and sell all classes
"de fincas rusticas y urbanas [of rural and city real estate]" as well as the right to act as agents for the
establishment of any other business which it might esteem convenient for the interests of "la compañia [the
company]."
The respondent contends (a) that the proposed articles of incorporation presented for file and
registry permitted the petitioners to engage in a business which had for its end more than one purpose; (b)
that it permitted the petitioners to engage in the banking business, and (c) to deal in real estate, in violation
of the Act of Congress of July 1, 1902.
The petitioners, while insisting that said proposed articles of incorporation do not permit it to enter
into the banking business nor to engage in the purchase and sale of real estate in violation of said Act of
Congress, expressly renounced in open court their right to engage in such business under their articles of
incorporation, even though said articles might be interpreted in a way to authorize them to so to do. That
renouncement on the part of the petitioners eliminates from the purposes of said proposed corporation (of
"Siuliong y Cia., Inc.") any right to engage in the banking business as such, or in the purchase and sale of real
estate.
 
Issue: 
Do the proposed articles of incorporation of "Siuliong y Cia., Inc.," permit it to engage in a business
with more than one purpose?
 
Ruling: 
NO. Referring to the proposed articles of incorporation, it will be seen that the only purpose of said
corporation are those enumerated in subparagraphs (a), (b), (c), (d), (e) and ( f ) of paragraph 4 above. While
38. Asuncion, et al., v. De Yriarte G.R. No. 9321   September 24, 1914
FACTS:
            De Yriarte is the chief of the division of archives who refused to file the articles of incorporation
because the object of the corporation was unlawful and not registerable under to Sec. 6 of Act No. 1459.
            The incorporators filed a petition to compel De Yriarte to receive and register the articles of
incorporation and all acts necessary for the completion of incorporation of the persons named in the articles.
But the CFI of Manila denied the petition because De Yriarte, as chief of the division of archives had the
authority to determine the sufficiency of the form of the articles and legality of the object of the proposed
corporation.
ISSUES:
1.  Does the Chief of the Division of Archives have the authority under the Corporation Law to decide
the sufficiency of the form of the articles and lawfulness of the purpose of the proposed corporation?
2.  Is the purpose of the corporation provided in the articles of incorporation lawful within the
meaning of the Corporation Law?
RULING:
1.  YES. It is the duty of the Division of Archives, when articles of incorporation are presented for
registration, to determine whether the objects and purposes of the corporation as expressed in the articles
are lawful.
Just because articles of incorporation are presented for registration are perfect in form, it does not mean
that the Division of Archives must accept and register them and issue the certificate of incorporation no
matter what the purpose of the corporation may be as expressed in the articles. The Division of Archives
cannot just issue a certificate of incorporation to a corporation which was organized for immoral purposes.
Such corporation might later on be dissolved or that it s officials be imprisoned or itself be heavily fined.
The Division of Articles may be mandamused if he act in violation of law or if he refuses to comply with the
law. While it is true that the Division of Archives has the power to determine the lawfulness of the purpose of
the proposed corporation, it does not necessarily mean that his duties are not ministerial.
 
2.  OBJECT/PURPOSE of the Corporation is NOT LAWFUL.
The object of the corporation, as provided in the articles, is “to organize and regulate the management,
disposition, administration and control which the barrio of Pulo or San Miguel or its inhabitants or residents
have over the common property of said residents or inhabitants or property belonging to the whole barrio as
such; and to use the natural products of the said property for institutions, foundations, and charitable works
of common utility and advantage to the barrio or its inhabitants.”
The Municipality of Pasig governs several barrios, which includes Pulo or San Miguel. Pasig has control over
all property of the municipality, and that the barrios of the municipality has no right to own or hold property
since they are not recognized as legal entities by any law.
If there is any public property situated in the barrio of Pulo or San Miguel not belonging to the general
government or the province, then such property belongs to the Municipality of Pasig that has the sole
authority to manage and administer the same unless and until a law charges another entity to control or
administer such property.
The object of the proposed corporation is to make the barrio of Pulo or San Miguel a corporation which will
become the owner of and have the right to control and administer any property belonging to the
municipality of Pasig that are found within the limits of that barrio.
Such is not permitted because it will deprive municipalities from having ownership, and exercise control and
administration of the property thereby being contrary to law. To allow this would disrupt the municipalities
of the islands by dividing them into a series of smaller municipalities entirely independent of the original
municipality.
40. DAVAO LIGHT & POWER CO., INC. v. THE HON. COURT OF APPEALS (G.R. No. 111685, August 20, 2001)
 
FACTS: On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for damages in the
amount of P11,000,000.00 against private respondent Francisco Tesorero before the Regional Trial Court of
Cebu City. In lieu of an answer, private respondent filed a motion to dismiss claiming that: (a) the complaint
did not state a cause of action; (b) the plaintiff’s claim has been extinguished or otherwise rendered moot
and academic; (c) there was non-joinder of indispensable parties; and (d) venue was improperly laid. Of
these four (4) grounds, the last mentioned is most material in this case at bar. On August 3, 1992, the trial
court dismissed the petitioner's complaint on the ground of improper venue. The trial court stated that: The
plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff’s principal place of
business as alleged in the complaint and which for purposes of venue is considered as its residence .
However, in defendant’s motion to dismiss, it is alleged and submitted that the principal office of plaintiff is at
"163-165 P. Reyes Street, Davao City as borne out by the Contract of Lease and another Contract of Lease of
Generating Equipment executed by the plaintiff with the NAPOCOR. The representation made by the plaintiff
in the 2 aforementioned Lease Contracts stating that its principal office is at "163-165 P. Reyes Street, Davao
City" bars the plaintiff from denying the same. Considering the foregoing, the Court is of the opinion that the
principal office of plaintiff is at Davao City which for purposes of venue is the residence of plaintiff. Hence, the
case should be filed in Davao City. Upon appeal, on August 31, 1993, the Court of Appeals rendered the
assailed judgment denying due course and dismissing the petition. Hence, this petition.
 
ISSUE: WON Davao Light's filing of a personal action for damages against Tesorero before the Cebu City RTC
was proper.
 
RULING: Yes.  In Young Auto Supply Co. v. Court of Appeals, the defendant therein sought the dismissal of an
action filed by the plaintiff, a corporation, before the Regional Trial Court of Cebu City, on the ground of
improper venue. The trial court denied the motion to dismiss; on certiorari before the Court of Appeals, the
denial was reversed and the case was dismissed. According to the appellate tribunal, venue was improperly
laid since the address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of sale, letters
and several commercial documents sent by the plaintiff to the defendant, even though the plaintiff’s articles
of incorporation stated that its principal office was in Cebu City. On appeal, we reversed the Court of
Appeals:  In the Regional Trial Courts, all personal actions are commenced and tried in the province or city
where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff. There are two plaintiffs in the case at bench: a natural person
and a domestic corporation. Both plaintiffs aver in their complaint that they are residents of Cebu City, thus:
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states: "THIRD. That the place where the
principal office of the corporation is to be established or located is at Cebu City, Philippines.
 
A corporation has no residence in the same sense in which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office
is located as stated in the articles of incorporation. The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the principal office of the corporation
is to be located which must be within the Philippines" (Sec. 14[3]). The purpose of this requirement is to fix
the residence of a corporation in a definite place, instead of allowing it to be ambulatory.
 
In Clavecilla Radio System v. Antillon, 19 SCRA 379 (1967), this Court explained why actions cannot be filed
against a corporation in any place where the corporation maintains its branch offices. The Court ruled that to
allow an action to be instituted in any place where the corporation has branch offices, would create
confusion and work untold inconvenience to said entity. By the same token, a corporation cannot be
allowed to file personal actions in a place other than its principal place of business unless such a place is also
the residence of a co-plaintiff or a defendant. If it was Roxas who sued YASCO in Pasay City and the latter
questioned the venue on the ground that its principal place of business was in Cebu City, Roxas could argue
that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal place of
business. But this is not the case before us. With the finding that the residence of YASCO for purposes of
venue is in Cebu City, where its principal place of business is located, it becomes unnecessary to decide
whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the
choice of Cebu City as the venue. 
The same considerations apply to the instant case. It cannot be disputed that petitioner’s principal office is
in Cebu City, per its amended articles of incorporation and by-laws. An action for damages being a personal
action, venue is determined pursuant to Rule 4, section 2 of the Rules of Court::  Venue of personal actions.
— All other actions may be commenced and tied where the plaintiff or any of the principal plaintiffs resides,
or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant
where he may be found, at the election of the plaintiff. 
 
Further, private respondent is not a party to any of the contracts presented before us. He is a complete
stranger to the covenants executed between petitioner and NAPOCOR, despite his protestations that he is
privy thereto, on the rather flimsy ground that he is a member of the public for whose benefit the electric
generating equipment subject of the contracts were leased or acquired. We are likewise not persuaded by his
argument that the allegation or representation made by petitioner in either the complaints or answers it filed
in several civil cases that its residence is in Davao City should estop it from filing the damage suit before the
Cebu courts. Besides there is no showing that private respondent is a party in those civil cases or that he
relied on such representation by petitioner.
 
 

 
41.  CLAVECILLIA RADIO SYSTEM,  vs. HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of
Cagayan de Oro City and NEW CAGAYAN GROCERY. G.R. No. L-22238    February 18, 1967 Principal Office/
Domicile
Facts:
·                  It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint against the Clavecilla
Radio System alleging, in effect, that on March 12, 1963, the following message, addressed to the former, was
filed at the latter's Bacolod Branch Office for transmittal thru its branch office at Cagayan de Oro:
places. To allow an action to be instituted in any place where a corporate entity has its branch offices would
create confusion and work untold inconvenience to the corporation.
It is important to remember, as was stated by this Court in Evangelista vs. Santos, et al., supra, that the laying
of the venue of an action is not left to plaintiff's caprice because the matter is regulated by the Rules of
Court. Applying the provision of the Rules of Court, the venue in this case was improperly laid.

NECAGRO CAGAYAN DE ORO (CLAVECILLA)

REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER
REPLY POHANG
The Cagayan de Oro branch office having received the said message omitted, in delivering the same
to the New Cagayan Grocery, the word "NOT" between the words "WASHED" and "AVAILABLE,"
thus changing entirely the contents and purport of the same and causing the said addressee to
suffer damages. After service of summons, the Clavecilla Radio System filed a motion to dismiss the
complaint on the grounds that it states no cause of action and that the venue is improperly laid. The
New Cagayan Grocery interposed an opposition to which the Clavecilla Radio System filed its
rejoinder. Thereafter, the City Judge, on September 18, 1963, denied the motion to dismiss for lack
of merit and set the case for hearing.1äwphï1.ñët

·                  Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with
the Court of First Instance praying that the City Judge, Honorable Agustin Antillon, be enjoined from further
proceeding with the case on the ground of improper venue. The respondents filed a motion to dismiss the
petition but this was opposed by the petitioner. Later, the motion was submitted for resolution on the
pleadings.
·                  CFI- dismissed. Clavecilla Radio System may be sued either in Manila where it has its principal office
or in Cagayan de Oro City where it may be served, as in fact it was served, with summons through the
Manager of its branch office in said city. In other words, the court upheld the authority of the city court to
take cognizance of the case.1äwphï1.ñët
Issue: Whether the suit against Clavecilla Radio System should be filed in Manila where it holds its principal
office.
Ruling: Yes, the case should be filed in Manila.
It is clear that the case for damages filed with the city court is based upon tort and not upon a written
contract. Section 1 of Rule 4 of the New Rules of Court, governing venue of actions in inferior courts,
provides in its paragraph (b) (3) that when "the action is not upon a written contract, then in the municipality
where the defendant or any of the defendants resides or may be served with summons."
Settled is the principle in corporation law that the residence of a corporation is the place where its principal
office is established. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila,
it follows that the suit against it may properly be filed in the City of Manila.
The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue was properly
laid on the principle that the appellant may also be served with summons in that city where it maintains a
branch office. This Court has already held in the case of Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526;
that the term "may be served with summons" does not apply when the defendant resides in the Philippines
for, in such case, he may be sued only in the municipality of his residence, regardless of the place where he
may be found and served with summons. As any other corporation, the Clavecilla Radio System maintains a
residence which is Manila in this case, and a person can have only one residence at a time. The fact that it
maintains branch offices in some parts of the country does not mean that it can be sued in any of these
 42. JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION v. TYSON ENTERPRISES, INC., JUDGE  
GREGORIO G. PINEDA and COURT OF APPEALS  
G.R. No. L-56763                                                  December 15, 1982  
Facts:  
John Sy, doing business under the trade name, Universal Parts Supply, is a resident of Fuentebella  
Subdivision, Bacolod City and that his co-defendant, Universal Parts Supply Corporation, allegedly controlled  
by Sy, is doing business in Bacolod City. There is no allegation in the complaint as to the office or place of  
business of plaintiff Tyson Enterprises, Inc., a firm actually doing business at 1024 Magdalena, now G.  
Masangkay Street, Binondo, Manila (p. 59, Rollo). What is alleged is the postal address or residence of  
Dominador Ti, the president and general manager of plaintiff firm, which is at 26 Xavier Street, Greenhills  
Subdivision, San Juan, Rizal. The evident purpose of alleging that address and not mentioning the place of  
business of plaintiff firm was to justify the filing of the suit in Pasig, Rizal instead of in Manila.  
Defendant Sy and Universal Parts Supply Corporation invoked the provision of section 2(b), Rule 4  
of the Rules of Court that personal actions "may be commenced and tried where the defendant or any of the  
defendants resides or may be found, or where the plaintiffs or any of the plaintiffs resides, at the election of  
the plaintiff." they also cited the stipulation in the sales invoice that "the parties expressly submit to the  
jurisdiction of the Courts of the City of Manila for any legal action arising out of" the transaction which  
stipulation is quoted in paragraph 4 of plaintiff's complaint. The plaintiff opposed the motion to dismiss on  
the ground that the defendants had waived the objection based on improper venue because they had  
previously filed a motion for a bill of particulars which was not granted. The trial court denied the motion to  
dismiss on the ground that by filing a motion for a bill of particulars the defendants waived their objection to  
the venue.   
Issue: Did the petitioner properly lay the venue?  
Ruling: NO.  
The place of business of plaintiff Tyson Enterprises, Inc., which for purposes of venue is considered  
as its residence, because a corporation has a personality separate and distinct from that of its officers and  
stockholders. Consequently, the collection suit should have been filed in Manila, the residence of plaintiff  
corporation and the place designated in its sales invoice, or it could have been filed also in Bacolod City, the  
residence of defendant Sy. Section 4, Rule 4 of the Rules of Court provides that, "when improper venue is not  
objected to in a motion to dismiss it is deemed waived" and it can no longer be pleaded as an affirmative  
defense in the answer (Sec. 5, Rule 16).  
In this case, the petitioners, before filing their answer, filed a motion to dismiss based on improper  
venue. That motion was seasonably filed. The fact that they filed a motion for a bill of particulars before they  
filed their motion to dismiss did not constitute a waiver of their objection to the venue. It should be noted  
that the provision of Section 377 of the Code of Civil Procedure that "the failure of a defendant to object to
the venue of the action at the time of entering his appearance in the action shall be deemed a waiver on his
part of all objections to the place or tribunal in which the action is brought" is not found in the Rules of Court.
What Section 4 of Rule 4 of the present Rules of Court provides is that the objection to improper
venue should be raised in a motion to dismiss seasonably filed and, if not so raised, then the said objection is
waived. Section 4 does not provide that the objection based on improper venue should be interposed by
means of a special appearance or before any pleading is filed. This Court sustained the dismissal of the
complaint on the ground of improper venue because the defendant was really a resident of Iloilo City. His
Pasay City residence was used by his children who were studying in Manila.
 
 
 
 
 
 43. YOUNG AUTO SUPPLY CO. and NEMESIO GARCIA vs.
THE HONORABLE COURT OF APPEALS and GEORGE
CHIONG ROXAS
G.R. No. 104175. June 25, 1993
FACTS:
On October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia (its president),
Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development
Corporation (CMDC) to Roxas. The purchase price was P8,000,000.00 payable as follows: a down payment of
P4,000,000.00 and the balance of P4,000,000.00 in four postdated checks of P1,000,000.00 each. The first
check of P4, 000,000.00, representing the down payment, was honored by the drawee bank but the four
other checks representing the balance of P4, 000,000.00 were dishonored.
. inconvenience to said entity. By the same token, a corporation cannot be allowed to file personal actions in a
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu
City, praying that Roxas be ordered to pay petitioners the sum of P3, 400,000.00 or that full control of the
three markets be turned over to YASCO and Garcia, among other prayers. The RTC rendered orders, for
which Roxas appealed via a petition for certiorari before the CA. The CA sustained some of the trial court’s
ruling, however, CA dismissed the complaint due to improper venue.  In holding that the venue was
improperly laid in Cebu City, the CA relied on the address of YASCO, as appearing in a Deed of Sale, which is
"No. 1708 Dominga Street, Pasay City." This was the same address written in YASCO's letters and several
commercial documents in the possession of Roxas.
THIRD. That the place where the principal office of the corporation is to be established or
located is at Cebu City, Philippines (as amended on December 20, 1980 and further amended
on December 20, 1984)
A corporation has no residence in the same sense in which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office
is located as stated in the articles of incorporation. The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the principal office of the corporation
is to be located which must be within the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix
the residence of a corporation in a definite place, instead of allowing it to be ambulatory.
In Clavencilla Radio System v. Antillon, this Court explained why actions cannot be filed against a corporation
in any place where the corporation maintains its branch offices. The Court ruled that to allow an action to be
instituted in any place where the corporation has branch offices, would create confusion and work untold
place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a
defendant.
 
 

ISSUE:

Is the proper venue Pasay City instead of Cebu City where the complaint had been filed?

RULING:

No. The proper venue is Cebu City, the principal place of business of YASCO as stated in its Articles of
Incorporation.

In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff. There are two plaintiffs in the case at bench: a natural person and a
domestic corporation. Both plaintiffs aver in their complaint that they are residents of Cebu City, thus:

1.1. Plaintiff Young Auto Supply Co., Inc., (YASCO) is a domestic corporation duly organized
and existing under Philippine laws with principal place of business at M. J. Cuenco Avenue,
Cebu City. It also has a branch office at 1708 Dominga Street, Pasay City, Metro Manila.
Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with business address at
Young Auto Supply Co., Inc., M. J. Cuenco Avenue, Cebu City x x x

The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:

 TOPIC: TERM OF A CORPORATION  o    NO. The continuance of a "dissolved" corporation as a body corporate for three years has for its
44. ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner, vs. SECURITIES &
EXCHANGE COMMISSION, respondent
G.R. No. L-23606|July 29, 1968 | 24 SCRA 269
FACTS:
·         Petitioner Alhambra Cigar and Cigarette Manufacturing Company, Inc. was duly incorporated on
January 15, 1912.
·         By its corporate articles it was to exist for fifty (50) years from incorporation. Its term of existence
expired on January 15, 1962. On that date, it ceased transacting business, entered into a state of liquidation.
purpose the final closure of its affairs, and no other; the corporation is specifically enjoined from
"continuing the business for which it was established".
o    The liquidation of the corporation's affairs set forth in Section 77 became necessary precisely because its
life had ended. For this reason alone, the corporate existence and juridical personality of the corporation to
do business may no longer be extended. The moment a corporation's right to exist as an "artificial person"
ceases, its corporate powers are terminated "just as the powers of a natural person to take part in mundane
affairs cease to exist upon his death". There is nothing left but to conduct, as it were, the settlement of the
estate of a deceased juridical person.
o    Republic Act 3531, amending Section 18 of the Corporation Law, is silent, as to when an act of extension
may be made. However, implicit in Section 77 is that the privilege given to prolong corporate life under the
amendment must be exercised before the expiry of the term fixed in the articles of incorporation.

·         Thereafter, a new corporation. — Alhambra Industries, Inc. — was formed to carry on the business of
Alhambra. The stockholders named Angel S. Gamboa as trustee to take charge of its liquidation.
·         On June 20, 1963 — within Alhambra's three-year statutory period for liquidation - Republic Act 3531
was enacted into law.
o    The steps necessary to effect the extension must be taken, during the life of the corporation, and before
the expiration of its term of existence as originally fixed by its charter or the general law, since, as a rule, the
corporation is ipso facto dissolved as soon as that time expires. So where the extension is by amendment of
the articles of incorporation, the amendment must be adopted before that time.

o    It amended Section 18 of the Corporation Law. It empowered domestic private

corporations to extend their corporate life beyond the period fixed by the articles of
incorporation for a term not to exceed fifty years in any one instance. Previous to
Republic Act 3531, the maximum non-extendible term of such corporations was fifty years.

·         Alhambra's board of directors resolved to amend its articles of incorporation to extend its corporate life
for an additional fifty years, or a total of 100 years from its incorporation for which when submitted to the
SEC was denied on ground that its term already expired.

o    REASON: Republic Act 3531 "which took effect only on June 20, 1963, cannot be availed
of by the said corporation, for the reason that its term of existence had already expired
when the said law took effect; in short, said law has no retroactive effect."

ISSUE/S:

May Alhambra extend its corporate term by amendment of its articles of incorporation effected during the
three-year statutory period for liquidation when its original term of existence had already expired?

CONTENTION OF ALHAMBRA: It says that before cessation of its corporate life, it could not have extended
the same, for the simple reason that Republic Act 3531 had not then become law. It must be remembered
that Republic Act 3531 took effect on June 20, 1963, while the original term of Alhambra’s existence expired
before that date — on January 15, 1962.

RULING:
 46) Zuellig Freight and Cargo Systems, ss NLRC and Ronaldo V. San Miguel original corporation. It is the same corporation with a different name, and its character is in no respect
changed.
G.R. No. 157900, July 22, 2013 | Amendment of Articles of Incorporation
In short, Zeta and petitioner remained one and the same corporation. The change of name did not give
FACTS petitioner the license to terminate employees of Zeta like San Miguel without just or authorized cause.
Despite the change of name, Zuellig was the mere continuation of Zeta’s corporate being, and still held the
Ronaldo San Miguel was employed as a checked/customs representative at Zeta Brokerage Corporation. He obligation to honor all of Zeta’s obligations, one of which was to respect San Miguel’s security of tenure. The
and other employees were informed that Zeta would cease operations and all affected employees would be dismissal of San Miguel from employment on the pretext that petitioner, being a different corporation, had
dismissed. San Miguel received notice of termination and he accepted his separation pay subject to the no obligation to accept him as its employee, was illegal and ineffectual.
condition that he will be hired to his former position by Zuellig Freight and Cargo Systems. He alleged that
Zeta amended its articles of incorporation to change its name to Zuellig Freight and Cargo Systems,
broadening the primary functions, and increasing the capital stock; and that such amendments could not
mean that Zeta had been thereby dissolved. He therefore brought a complaint for unfair labor practice,
illegal dismissal, non-payment of salaries and moral damages against Zuellig.

Zuellig claimed the dismissal was for valid cause and done in accordance with law and that he did not accept
the employment within the given time. The Labor Arbiter ruled that San Miguel had been illegally dismissed.
The LA held that Zeta did not cease operations and close its business, but rather it only changed its name to
Zuellig. Zeta and Zuellig are legally the same person. Thus, the dismissal of San Miguel due to cessation of
business operations is illegal and  Zuellig is liable for the backwages of San Miguel.

The NLRC and CA ruled in the same manner. The CA found that the closure of business operation was not
validly made. The filing of the amended Articles of Incorporation shows that Zuellig is the former Zeta. The
amendment of the articles of incorporation merely changed its corporate name, broadened its primary
purpose and increased its authorized capital stocks. There was no closure in this case.

 ISSUE:  Whether there was a cessation of business and creation of a new corporation or just a change of
name.

 RULING: There was only a change of name.

The mere change in the corporate name is not considered under the law as the creation of a new
corporation; hence, the renamed corporation remains liable for the illegal dismissal of its employee
separated under that guise.

The cessation of business by Zeta was not a bona fide closure to be regarded as a valid ground for the
termination of employment of San Miguel within the ambit of Article 283 of the Labor Code. The
amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight and
Cargo Systems, Inc. did not produce the dissolution of Zeta as a corporation. The Corporation Code defined
and delineated the different modes of dissolving a corporation, and amendment of the articles of
incorporation was not one of such modes. The effect of the change of name was not a change of the
corporate being.

A change in the corporate name does not make a new corporation, whether effected by a special act or
under a general law. It has no effect on the identity of the corporation, or on its property, rights, or liabilities.
The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the
47. REPUBLIC PLANTERS BANKVs. COURT OF APPEALS and FERMIN CANLAS, G.R. No. 93073 December 21,
1992
This is an appeal by way of a Petition for Review on Certiorari from the decision of the Court of Appeals in CA
G.R. CV No. 07302, entitled "Republic Planters Bank. Plaintiff-Appellee vs. Pinch Manufacturing Corporation,
et al., Defendants, and Fermin Canlas, Defendant-Appellant", which affirmed the decision in Civil Case No. 82-
5448 except that it completely absolved Fermin Canlas from liability under the promissory notes and reduced
the award for damages and attorney's fees.
FACTS:
Shozo Yamaguchi and Fermin Canlas were President/Chief Operating Officer and Treasurer
respectively, of Worldwide Garment Manufacturing, Inc. By virtue of Board Resolution No.1 dated August 1,
1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit
facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust
receipts accommodations. Petitioner bank issued nine promissory notes.
On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi
and Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten
below. In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing,
Inc. was apparently rubber stamped above the signatures of defendant and private respondent. Worldwide
Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered
among others, by the nine promissory notes with interest thereon, plus attorney's fees and penalty charges.
The complaint was originally brought against Worldwide Garment Manufacturing, Inc. , but it was later
amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing
Corporation it its place. Pinch Manufacturing Corporation and Shozo Yamaguchi did not file an Amended
Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only private
respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory notes
in question since according to him, he was not an officer of Pinch Manufacturing Corporation, but instead of
Worldwide Garment Manufacturing, Inc., and that when he issued said promissory notes in behalf of
Worldwide Garment Manufacturing, Inc., the same were in blank, the typewritten entries not appearing
therein prior to the time he affixed his signature.
ISSUE:
Whether private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch
Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes. (Despite signing as an
officer of Worldwide Garment Manufacturing)
RULING:
YES.
We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his
signature.
Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are
makers and are liable as such.  By signing the notes, the maker promises to pay to the order of the payee or
any holder  according to the tenor thereof. Based on the above provisions of law, there is no denying that
private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape
liability arising therefrom.
On Corporation law:
Respondent Court made a grave error in holding that an amendment in a corporation's Articles of
Incorporation effecting a change of corporate name, in this case from Worldwide Garment manufacturing Inc
to Pinch Manufacturing Corporation extinguished the personality of the original corporation.
The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the
original corporation. It is the same corporation with a different name, and its character is in no respect
changed.
A change in the corporate name does not make a new corporation, and whether effected by special act or
under a general law, has no effect on the identity of the corporation, or on its property, rights, or liabilities. 
The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had
previously contracted or incurred.
As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or
contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in
their capacity as agent of the old corporation and the change of name meant only the continuation of the old
juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by
the Board. Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically
provided for as follows:
Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains
or a person adds to his signature words indicating that he signs for or on behalf of a
principal , or in a representative capacity, he is not liable on the instrument if he was duly
authorized; but the mere addition of words describing him as an agent, or as filling a
representative character, without disclosing his principal, does not exempt him from
personal liability.
Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a
representative capacity or the name of the third party for whom he might have acted as agent, the agent is
personally liable to take holder of the instrument and cannot be permitted to prove that he was merely
acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal
liability. 
48 Hall v. Piccio, 86 P 603 
 
FACTS: The petitioners C. Arnold Hall and Bradley P. Hall, and the respondents Fred Brown, Emma Brown,
Hipolita D. Chapman and Ceferino S. Abella, signed and acknowledged in Leyte, the article of incorporation of
the Far Eastern Lumber and Commercial Co., Inc., organized to engage in a general lumber business to carry
on as general contractors, operators and managers, etc. Attached to the article was an affidavit of the
treasurer stating that 23,428 shares of stock had been subscribed and fully paid with certain properties
transferred to the corporation described in a list appended thereto. Immediately after the execution of said
articles of incorporation, the corporation proceeded to do business with the adoption of by-laws and the
election of its officers. Then, the said articles of incorporation were filed in the office of the Securities and
Exchange Commissioner, for the issuance of the corresponding certificate of incorporation.  
 
Pending action on the articles of incorporation by the aforesaid governmental office, the respondents Fred
Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella filed before the Court of First Instance of
Leyte a civil case, alleging among other things that the Far Eastern Lumber and Commercial Co. was an
unregistered partnership; that they wished to have it dissolved because of bitter dissension among the
members, mismanagement and fraud by the managers and heavy financial losses. The defendants in the suit,
namely, C. Arnold Hall and Bradley P. Hall, filed a motion to dismiss, contesting the court's jurisdiction and the
sufficiently of the cause of action. 
 
After hearing the parties, the Hon. Edmund S. Piccio ordered the dissolution of the company; and at the
request of plaintiffs, appointed of the properties thereof, upon the filing of a P20,000 bond. The defendants
therein (petitioners herein) offered to file a counter-bond for the discharge of the receiver, but the
respondent judge refused to accept the offer and to discharge the receiver. Hence, this petition. 
 
ISSUE: WON the court had no jurisdiction to decree the dissolution of the company, because it being a de
facto corporation, dissolution thereof may only be ordered in a quo warranto proceeding instituted in
accordance with section 19 of the Corporation Law. 
 
RULING: YES. Section 19 of the Corporation Law does not apply.  
 
The due incorporation of any corporations claiming in good faith to be a corporation under
this Act and its right to exercise corporate powers shall not be inquired into collaterally in
any private suit to which the corporation may be a party, but such inquiry may be had at the
suit of the Insular Government on information of the Attorney-General. 
 
First, Not having obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co. —
even its stockholders — may not probably claim "in good faith" to be a corporation. Under our statue it is to
be noted (Corporation Law, sec. 11) that it is the issuance of a certificate of incorporation by the Director of
the Bureau of Commerce and Industry which calls a corporation into being. The immunity if collateral attack
is granted to corporations "claiming in good faith to be a corporation under this act." Such a claim is
compatible with the existence of errors and irregularities; but not with a total or substantial disregard of the
law. Unless there has been an evident attempt to comply with the law the claim to be a corporation "under
this act" could not be made "in good faith." Second, this is not a suit in which the corporation is a party. This
is a litigation between stockholders of the alleged corporation, for the purpose of obtaining its dissolution.
Even the existence of a de jure corporation may be terminated in a private suit for its dissolution between
stockholders, without the intervention of the state. 
 49. THE MISSIONARY SISTERS OF OUR LADY OF FATIMA, ET AL. v. AMANDO V. ALZONA, ET AL.
G.R. No. 224307 ; August 06, 2018
   Mother Concepcion filed an application before the BIR that the petitioner be exempted from
FACTS:  donor's tax as a religious organization. The application was granted by the BIR.
 
 The Missionary Sisters of Our Lady of Fatima, otherwise known as the Peach Sisters of Laguna, is a
religious and charitable group established under the patronage of the Roman Catholic Bishop of
San Pablo on May 30, 1989. 
 Subsequently, the Deed, together with the owner's duplicate copies of the TCTs, and the
exemption letter from the BIR was presented for registration. However, the Register of Deeds
 
denied the registration on account of the Affidavit of Adverse Claim filed by the brother of
·       Its primary mission is to take care of the abandoned and neglected elderly persons. 
Purificacion, Amando Y. Alzona (Amando). 
·    The petitioner came into being as a corporation by virtue of a Certificate issued by the SEC on
August 31, 2001.
·       Mother Ma. Concepcion R. Realon (Mother Concepcion) is the petitioner's Superior General.
   On October 30, 2001, Purificacion died without any issue, and was survived only by Amando, who
  The respondents are the legal heirs of the late Purificacion Y. Alzona.  nonetheless died during the pendency of this case and is now represented and substituted by his
  legal heirs, joined as herein respondents.
·       Purificacion Y. Alzona, a spinster, is the registered owner of several parcels of land which are
located in Calamba City, Laguna. 
   On April 9, 2002, Amando filed a Complaint before the RTC, seeking to annul the Deed executed
 In 1996, Purificacion, impelled by her unmaterialized desire to be nun, decided to devote the rest of between Purificacion and the petitioner, on the ground that at the time the donation was made,
her life in helping others. In the same year, she then became a benefactor of the petitioner by the latter was not registered with the SEC and therefore has no juridical personality and cannot
giving support to the community and its works.  legally accept the donation.

 In 1997, Purificacion was diagnosed with lung cancer. Considering the restrictions in her movement,
Purificacion requested Mother Concepcion to take care of her in her house, to which the latter
agreed.  ·       The RTC ruled that all the essential elements of a donation are present. On the capacity of the
 In October 1999, Purificacion gave Mother Concepcion a handwritten letter. In this letter,
Purification stated that she is donating her house and lot at F. Mercado Street and Riceland at
Banlic, both at Calamba, Laguna, to the petitioner through Mother Concepcion. On the same
occasion, Purificacion instructed her nephew, Francisco Del Mundo to give a share of the harvest to
Mother Concepcion, and informed her niece Ma. Lourdes Alzona Aguto - Africa that she had given
her house to Mother Concepcion. 
 In August 2001, acting on the advice given by Atty. Nonato Arcillas, Mother Concepcion went to SEC
and filed the corresponding registration application on August 28, 2001.
 On August 29, 2001, Purificacion executed a Deed of Donation Inter Vivos (Deed) in favor of the
petitioner, conveying her properties. The Deed was notarized by Atty. Arcillas and witnessed by
Purificacion's nephews Francisco and Diosdado Alzona, and grandnephew, Atty. Fernando M.
Alonzo. The donation was accepted on even date by Mother Concepcion for and in behalf of the
petitioner.
 DECISION OF THE RTC (August 14, 2013): DISMISSED THE COMPLAINT FINDING NO MERIT IN SUCH. 
 
donee, the RTC held that at the time of the execution of the Deed, the petitioner was a de
facto corporation and as such has the personality to be a beneficiary and has the power to
acquire and possess property. Further then, the petitioner's incapacity cannot be questioned
or assailed in the instant case as it constitutes a collateral attack which is prohibited by the
Corporation Code of the Philippines. 
 
-       DECISION OF THE CA (January 7, 2016): PARTLY GRANTED THE APPEAL. 
 
·       As an unregistered corporation, the CA concluded that the petitioner cannot exercise the
powers, rights, and privileges expressly granted by the Corporation Code. Ultimately, bereft of
juridical personality, the CA ruled that the petitioner cannot enter into a contract of Donation
with Purificacion. 
 
-       The petitioner sought a reconsideration but the CA denied such.  
ISSUE: Is the Deed of Donation Inter Vivos executed by Purificacion in favor of the petitioner valid and
binding? YES.
 
RULING: 
 
In order that a donation of an immovable property be valid, the following elements must be present: 
 a)     The essential reduction of the patrimony of the donor;  The doctrine of corporation by estoppel rests on the idea that if the Court were to disregard the existence of
b)     The increase in the patrimony of the donee;  an entity which entered into a transaction with a third party, unjust enrichment would result as some form of
c)      The intent to do an act of liberality or animus donandi; benefit have already accrued on the part of one of the parties. Thus, in that instance, the Court affords upon
d)     The donation must be contained in a public document; and  the unorganized entity corporate fiction and juridical personality for the sole purpose of upholding the
e)      The acceptance thereof be made in the same deed or in a separate public instrument; if acceptance contract or transaction.
is made in a separate instrument, the donor must be notified thereof in an authentic form, to be  
noted in both instruments. In this case, while the underlying contract which is sought to be enforced is that of a donation, and thus
  rooted on liberality, it cannot be said that Purificacion, as the donor failed to acquire any benefit therefrom
There is no question that the true intent of Purificacion, the donor and the owner of the properties in so as to prevent the application of the doctrine of corporation by estoppel. To recall, the subject properties
question, was to give, out of liberality the subject house and lot, which she owned, to the petitioner. This act, were given by Purificacion, as a token of appreciation for the services rendered to her during her illness. In
was then contained in a public document, the deed having been acknowledged before Atty. Arcillas, a Notary fine, the subject deed partakes of the nature of a remuneratory or compensatory donation, having been
Public. The acceptance of the donation is made on the same date that the donation was made and contained made "for the purpose of rewarding the donee for past services, which services do not amount to a
in the same instrument as manifested by Mother Concepcion's signature. In fine, the remaining issue to be demandable debt."
resolved is the capacity of the petitioner as donee to accept the donation.   
  Therefore, under the premises, past services constitutes consideration, which in sum can be regarded as
The Supreme Court ruled that for the purpose of accepting the donation, the petitioner is deemed vested with "benefit" on the part of the donor, consequently, there exists no obstacle to the application of the doctrine
personality to accept, and Mother Concepcion is clothed with authority to act on the latter's behalf. of corporation by estoppel; although strictly speaking, the petitioner did not perform these services on the
  expectation of something in return.
A review of the attendant circumstances reveals that it calls for the application of the doctrine of corporation  
by estoppel as provided for under Section 21 of the Corporation Code, viz.: Precisely, the existence of the petitioner as a corporate entity is upheld in this case for the purpose of
  validating the Deed to ensure that the primary objective for which the donation was intended is achieved,
All persons who assume to act as a corporation knowing it to be without authority to do so shall be that is, to convey the property for the purpose of aiding the petitioner in the pursuit of its charitable
liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: objectives.
Provided, however, That when any such ostensible corporation is sued on any transaction entered
by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a
defense its lack of corporate personality.
 
One who assumes an obligation to an ostensible corporation as such, cannot resist performance
thereof on the ground that there was in fact no corporation. 
 
The doctrine of corporation by estoppel is founded on principles of equity and is designed to prevent
injustice and unfairness. It applies when a non-existent corporation enters into contracts or dealings with
third persons. In which case, the person who has contracted or otherwise dealt with the non-existent
corporation is estopped to deny the latter's legal existence in any action leading out of or involving such
contract or dealing. While the doctrine is generally applied to protect the sanctity of dealings with the public,
nothing prevents its application in the reverse, in fact the very wording of the law which sets forth the
doctrine of corporation by estoppel permits such interpretation. Such that a person who has assumed an
obligation in favor of a non-existent corporation, having transacted with the latter as if it was duly
incorporated, is prevented from denying the existence of the latter to avoid the enforcement of the contract.
 
Jurisprudence dictates that the doctrine of corporation by estoppel applies for as long as there is no fraud
and when the existence of the association is attacked for causes attendant at the time the contract or
dealing sought to be enforced was entered into, and not thereafter.
 
In this controversy, Purificacion dealt with the petitioner as if it were a corporation. This is evident from the
fact that Purificacion executed two (2) documents conveying her properties in favor of the petitioner – first,
on October 11, 1999 via handwritten letter, and second, on August 29, 2001 through a Deed; the latter having
been executed the day after the petitioner filed its application for registration with the SEC.
 
 54. JOSELITO HERNAND M. BUSTOS v. MILLIANS SHOE, INC., SPOUSES FERNANDO AND AMELIA CRUZ, AND
THE REGISTER OF DEEDS OF MARIKINA CITY, G.R. No. 185024, April 24, 2017 Doctrine of Corporate Entity
Facts:
·        Spouses Fernando and Amelia Cruz owned a 464-square-meter lot covered by No. N-126668. On 6 January
2004, the City Government of Marikina levied the property for nonpayment of real estate taxes. The Notice
of Levy was annotated on the title on 8 January 2004. On 14 October 2004, the City Treasurer of Marikina
auctioned off the property, with petitioner Joselito Hernand M. Bustos emerging as the winning bidder.
·        Petitioner then applied for the cancellation of TCT. On 13 July 2006, the Regional Trial Court, Marikina City,
Branch 273, rendered a final and executory Decision ordering the cancellation of the previous title and the
issuance of a new one under the name of petitioner.
·        Meanwhile, notices of lis pendens were annotated on TCT No. N-126668 on 9 February 2005. These markings
indicated that SEC Corp. Case No. 036-04, which was filed before the RTC and involved the rehabilitation
proceedings for MSI, covered the subject property and included it in the Stay Order issued by the RTC dated
25 October 2004.
·        On 26 September 2006, petitioner moved for the exclusion of the subject property from the Stay Order. He
claimed that the lot belonged to Spouses Cruz who were mere stockholders and officers of MSL He further
argued that since he had won the bidding of the property on 14 October 2004, or before the annotation of
the title on 9 February 2005, the auctioned property could no longer be part of the Stay Order.
·        RTC denied entreaty of petitioner. It ruled that because the period of redemption up to 15 October 2005 had
not yet lapsed at the time of the issuance of the Stay Order on 25 October 2004, the ownership thereof had
not yet been transferred to petitioner. MR denied. CA denied claims for suspension order as it undermines
the power to tax.
Issue: Whether the properties of Spouses Cruz should be made answerable to the obligations to MSI.
Ruling: NO
To be considered a close corporation, an entity must abide by the requirements laid out in Section 96 of the
Corporation Code, which reads:chanRoblesvirtualLawlibrary
Sec. 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is one
whose articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of
treasury shares, shall be held of record by not more than a specified number of persons, not exceeding
twenty (20); (2) all the issued stock of all classes shall be subject to one or more specified restrictions on
transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any
public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall not be
deemed a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or
controlled by another corporation which is not a close corporation within the meaning of this Code. x x x.
In San Juan Structural and Steel Fabricators. Inc. v. Court of Appeals, thr Court held that a narrow distribution
of ownership does not, by itself, make a close corporation. Courts must look into the articles of incorporation
to find provisions expressly stating that (1) the number of stockholders shall not exceed 20; or (2) a
preemption of shares is restricted in favor of any stockholder or of the corporation; or (3) the listing of the
corporate stocks in any stock exchange or making a public offering of those stocks is prohibited.
Here, neither the CA nor the RTC showed its basis for finding that MSI is a close corporation. The courts a quo
did not at all refer to the Articles of Incorporation of MSI.
In effect, the CA and the RTC deemed MSI a close corporation based on the allegation of Spouses Cruz that it
was so. However, mere allegation is not evidence and is not equivalent to proof. For this reason alone, the
CA rulings should be set aside.
Furthermore, we find that the CA seriously erred in portraying the import of Section 97 of the Corporation
Code. Citing that provision, the CA concluded that "in a close corporation, the stockholders and/or officers
usually manage the business of the corporation and are subject to all liabilities of directors, i.e. personally
liable for corporate debts and obligations."
However, Section 97 of the Corporation Code only specifies that "the stockholders of the corporation shall
be subject to all liabilities of directors." Nowhere in that provision is there any inference that stockholders of
a close corporation are automatically liable for corporate debts and obligations.
Parenthetically, only Section 100, paragraph 5, of the Corporation Code explicitly provides for personal
liability of stockholders of close corporation, viz:chanRoblesvirtualLawlibrary
Sec. 100. Agreements by stockholders. -x x x x
5. To the extent that the stockholders are actively engaged in the management or operation of the business
and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties to each other and
among themselves. Said stockholders shall be personally liable for corporate torts unless the corporation
has obtained reasonably adequate liability insurance.
As can be read in that provision, several requisites must be present for its applicability. None of these were
alleged in the case of Spouses Cruz. Neither did the RTC or the CA explain the factual circumstances for this
Court to discuss the personally liability of respondents to their creditors because of "corporate torts."
We thus apply the general doctrine of separate juridical personality, which provides that a corporation has a
legal personality separate and distinct from that of people comprising it. By virtue of that doctrine,
stockholders of a corporation enjoy the principle of limited liability: the corporate debt is not the debt of the
stockholder. Thus, being an officer or a stockholder of a corporation does not make one's property the
property also of the corporation.

Situs Development Corp. v. Asiatrust Bank is analogous to the case at bar. The parcels of land mortgaged to
creditor banks were owned not by the corporation. but by the spouses who were its stockholders. Applying
the doctrine of separate juridical personality, the parcels of land of the spouses could not be considered part
of the corporate assets that could be subjected to rehabilitation proceedings.

In rehabilitation proceedings, claims of creditors are limited to demands of whatever nature or character
against a debtor or its property, whether for money or otherwise. In several cases, we have already held that
stay orders should only cover those claims directed against corporations or their properties, against their
guarantors, or their sureties who are not solidarily liable with them, to the exclusion of accommodation
mortgagors. To repeat, properties merely owned by stockholders cannot be included in the inventory of
assets of a corporation under rehabilitation.

Given that the true owner the subject property is not the corporation, petitioner cannot be considered a
creditor of MSI but a holder of a claim against respondent spouses.
 TOPIC: DOCTRINE OF CORPORATE ENTITY VS. PIERCING THE VEIL OF CORPORATE FICTION   ISSUE/S: Whether or not Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama?
57. VILLA REY TRANSIT, INC., plaintiff-appellant, vs. EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION
CO., INC. and PUBLIC SERVICE COMMISSION, defendants.
G.R. No. L-23893 | October 29, 1968
FACTS:
·         Prior to 1959, Jose M. Villarama was an operator of a bus transportation, under the business name of
Villa Rey Transit, pursuant to certificates of public convenience granted him by the Public Service
Commission.
·         On January 8, 1959, Jose M. Villarama sold two certificates of public convenience (CPC) to Pantranco,
with the condition that the seller “shall not for a period of 10 years from the date of this sale, apply for any
TPU service identical or competing with the buyer."
·         On March 6, 1959, Villa Rey Transit, Inc. was organized with the wife of Jose M. Villarama as one of the
incorporators, and at the same time the treasurer of the corporation.
·         On April 7, 1959, Villa Rey Transit executed with Valentin Fernando a contract of sale over five CPC. The
parties immediately applied with the PSC for its approval with a prayer for the issuance of a provisional
authority in favor of the vendee corporation. This was granted by the PSC with the condition that "it may be
modified or revoked by the Commission at any time, shall be subject to whatever action that may be taken on
the basic application and shall be valid only during the pendency of said application."
·         Before the final action of the PSC, the Sheriff of Manila levied on two of the five CPC, by virtue of a writ
of execution issued by the CFI – Pangasinan, in favor of Eusebio Ferrer, judgment creditor, against Valentin
Fernando, judgment debtor. A public sale was conducted by the Sheriff of the said two CPC.
·         Ferrer was the highest bidder, and a certificate of sale was issued in his name. Thereafter, Ferrer sold
the two CPC to Pantranco. Thus, two sets of applications for approval of sale were filed before the PSC, by
Fernando and the Corporation, and that of Ferrer and Pantranco.
·         In the meantime, the Court decreed that until the issue on the ownership of the disputed certificates
shall have been finally settled by the proper court, the Corporation should be the one to operate the lines
provisionally.
·         On November 4, 1959, the Corporation filed in the CFI-Manila, a complaint for the annulment of the
sheriff's sale of the aforesaid two certificates of public convenience in favor of Ferrer, and the subsequent
sale thereof by the latter to Pantranco.
·         Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama and
the Corporation, are one and the same; that Villarama and/or the Corporation was disqualified from
operating the two certificates in question by virtue of the contract non-competition stipulation.
RULING:
·         YES.
·         The doctrine that a corporation is a legal entity distinct and separate from the members and
stockholders who compose it is recognized and respected in all cases which are within reason and the law.
When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion
of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow for its consideration
merely as an aggregation of individuals.
·         Upon the foregoing considerations, it is shown that the Villa Rey Transit, Inc. is an alter ego of Jose M.
Villarama, and that the restrictive clause in the contract entered into by the latter and Pantranco is also
enforceable and binding against the said Corporation. For the rule is that a seller or promisor may not make
use of a corporate entity as a means of evading the obligation of his covenant. Where the Corporation is
substantially the alter ego of the covenantor to the restrictive agreement, it can be enjoined from competing
with the covenantee.
·         Villarama's explanation on his involvement with the corporate affairs of the Corporation renders that his
control over the corporation, especially in the management and disposition of its funds, was so extensive and
intimate that it is impossible to segregate and identify which money belonged to whom. The interference of
Villarama in the complex affairs of the corporation, and particularly its finances, are much too inconsistent
with the ends and purposes of the Corporation law, which, precisely, seeks to separate personal
responsibilities from corporate undertakings. It is the very essence of incorporation that the acts and
conduct of the corporation be carried out in its own corporate name because it has its own personality.
·         The foregoing circumstances are strong persuasive evidence showing that Villarama has been too much
involved in the affairs of the Corporation to altogether negative the claim that he was only a part-time
general manager:
o    Villarama supplied the organization expenses and the assets of the Corporation, such
as trucks and equipment; there was no actual payment by the original subscribers of the
amounts of P95,000.00 and P100,000.00 as appearing in the books.
o    Villarama made use of the money of the Corporation and deposited them to his private
accounts; and the Corporation paid his personal accounts.
o    Villarama himself admitted that he mingled the corporate funds with his own money.
o    He also admitted that gasoline purchases of the Corporation were made in his name
because "he had an existing account with Stanvac which was properly secured and he
wanted the Corporation to benefit from the rebates that he received."
o    They show beyond doubt that the Corporation is his alter ego. 

59) Symex Security Services, Inc. And Rafael Y. Arcega vs Magdalino O. Rivera, Jr. and Roberto B. Yago | G.R.
No. 202613, November 08, 2017
Doctrine of Piercing the Veil of Corporate Fiction: Instances - Public Convenience Cases
to patently unlawful acts of the corporation or that the officer was guilty of gross negligence or bad faith;
and (2) there must be proof that the officer acted in bad faith. The two requisites are not present in this case.
There was no allegation that Arcega, as an officer of Symex, willfully and knowingly assented to the acts of
Capt. Cura, or that Arcega had been guilty of gross negligence or bad faith in directing the affairs of the
corporation. In fact, there was no evidence at all o show Arcega's participation in the illegal dismissal of
Rivera and Yago.

FACTS Piercing of the veil of corporate fiction is frowned upon and can only be done if it has been clearly established
that the separate and distinct personality of the corporation is used to justify a wrong, protect fraud, or
Symex Security Systems is in the business of investigation and security services. Its President and Chairman perpetrate a deception. To disregard the separate juridical personality of a corporation, the wrongdoing
of the Board is Rafael Arcega. Magdalino O. Rivera, Jr. and Roberto B. Yago were employed by Symex as must be established clearly and convincingly. It cannot be presumed. Since it was not established in this case,
security guards. On February 25, 2003, they filed a complaint for nonpayment of holiday pay, premium for Arcega cannot be held liable.  
rest day, 13th month pay, illegal deductions and damages. Subsequently, they were informed that they are
being relieved from duty because their client reduced the number of guards on duty and that they should
return for reassignment. When they returned for reassignment, their operations manager Capt. Cura
informed them that they would not be given a duty assignment unless they withdrew the complaint they
filed before the LA. They were made to choose between resignation or forcible leave. They refused to
withdraw the complain thus they were dismissed. They amended their complaint to include illegal dismissal.

Symex and Arcega maintain that there was no illegal dismissal, Rivera and Yago are still included in the roll of
security guards, and it was them who refused to accept available postings. The LA dismissed the complaint
for illegal dismissal, but ordered Symex to pay the proportionate 13 th month pay. The NLRC reversed the LA,
ruling that they were illegally dismissed by Capt. Cura, the Operations Manager of petitioner Symex, who told
them that unless they withdrew their complaint for money claims pending before the LA, their services
would be terminated. Symex failed to prove Rivera and Yago were dismissed for valid cause thus they were
illegally dismissed. The CA affirmed the NLRC decision.

ISSUE: Whether Rafael Arcega is solidarily liable with Symex for the payment of obligations to Rivera and
Yago.

RULING: No.

The court upgeld the decision of the CA ruling that Rivera and Yago were indeed dismissed by Capt. Cura. The
court found that they were terminated when they refused to execute an affidavit of desistance and withdraw
their complaint with the LA. There was a failure to prove that the dismissal was for valid grounds. Rivera and
Yago are also not guilty of abandonment since the act of filing a complaint for illegal dismissal with prayer for
reinstatement is incompatible with abandonment.

As for the question of who is liable to pay – the court held that Symex is liable to pay Rivera and Yago. Arcega
is not liable for obligations of petitioner Symex absent showing of gross negligence or bad faith on his part. A
corporation is a juridical entity with a legal personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it. Thus, as a general rule, an officer may not be held liable
for the corporation's labor obligations unless he acted with evident malice and/or bad faith in dismissing an
employee.

To hold a director or officer personally liable for corporate obligations under Section 31 of the Corporation
Code, two requisites must concur: (1) it must be alleged in the complaint that the director or officer assented
60. THE LINDEN SUITES, INC. V MERIDIEN FAR EAST PROPERTIES, G.R. NO. 211969, OCTOBER 4, 2021 respondent's officers would constitute a violation of the doctrine of separate juridical personality. The trial
court held that the doctrine applies even if the officers would be examined for the sole purpose of
FACTS: ascertaining respondent's properties and income. The Court finds the trial court's pronouncement misplaced.
The doctrine of separate juridical personality provides that a corporation has a legal personality separate and
The Linden Suites Inc. filed a complaint for damages against respondent Meridien Far East distinct from those individuals acting for and in its behalf and, in general, from those comprising it. Any
Properties, Inc. Petitioner averred that while doing excavation works for the construction of the Linden obligation incurred by the corporation, acting through its directors, officers and employees, is therefore its
Suites in Ortigas, Pasig City, it discovered that the concrete retaining wall of the adjacent building, One sole liability. This legal fiction may only be disregarded if it is used as a means to perpetrate fraud or an illegal
Magnificent Mile (OMM), owned by respondent, had encroached on its property line. Petitioner then act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse
informed respondent about the encroachment which in turn, immediately instructed its workers to remove legitimate issues.
the same. However, respondent's workers were unable to finish it and a substantial part still needed to be  
removed. Petitioner was consequently compelled to hire a contractor to complete the demolition. The well settled doctrine is inapplicable in the case at bench. Petitioner wanted the officers to be
  examined not for the purpose of passing unto them the liability of respondents as its judgment obligor. In
The RTC adjudged respondent liable for the cost of the demolition, actual and compensatory fact, it never averred in the motion any intention to make the officers liable for respondent's obligation due
damages, and attorney's fees, which was affirmed by both the CA and the Supreme Court. Considering that to the latter's purported attempts to evade the execution of the final judgment. What is clear therein is that
the RTC Decision had already attained finality, petitioner filed a motion for issuance of a writ of execution the sole objective of the examination of the officers was to ascertain the properties and income of the
before the RTC. respondent which can be subjected for execution in order to satisfy the final judgment and nothing else.
   
Sheriff Marco A. Boco attempted to serve the writ on respondent in its office address in Makati City In sum, the Court finds that the CA committed reversible error in finding that the RTC did officers.
but failed. Petitioner then advised the sheriff to serve the writ to respondent at 2/F, Soho Central not gravely abuse its discretion when it denied petitioner's motion to examine respondent's
Condominium located in Mandaluyong City, its registered address in its 2006 General Information Sheet that
was filed before the Securities and Exchange Commission. Sheriff Boco proceeded to the said condominium
to serve the writ. However, Atty. Rufo B. Baculi, the Legal and Administrative Officer of Meridien East Realty
and Development Corporation, informed him that it was Meridien Development Group, Inc., not respondent,
which owned the office in the said address. Atty. Baculi showed a GIS issued by the SEC as proof that the
occupant of the said address was indeed MDGI.
 
As a result, Sheriff Boca returned the writ unserved. Petitioner observed that the 2006 GIS of
respondent and 2009 GIS of MERDC stated the names of the same officers. The officers were likewise
shareholders of both corporations and had similar residential addresses. Petitioner filed an Urgent Motion to
Examine Judgment Obligor before RTC of Pasig City, the same trial court which rendered the final judgment.
It prayed that respondent's officers be directed to appear before the court for an examination of the income
and properties owned by respondent for the satisfaction of the RTC Decision. Respondent argued for the
dismissal of the motion alleging that the persons sought to be examined are not the judgment obligors in the
RTC Decision. It also claimed that their examination is a violation of the doctrine of separate corporate
personality. The RTC ruled that respondent's officers cannot be subjected to an examination as to call upon
the officers to ascertain the properties and income of respondent for purposes of satisfying the execution of
the final judgment would be violative of the doctrine of separate juridical entity. The CA affirmed.
 
ISSUE
May the RTC examine the officers of the Respondent Corporation despite the Doctrine of Separate juridical
personality.
 
RULING
YES.
 
The doctrine of separate juridical personality is inapplicable in the case at bench. To recall, one of
the grounds for the denial by the RTC of petitioner's motion for examination is that the examination of
61 Delpher Trades v. IAC, 26 January 1988  "A no-par value share does not purport to represent any stated proportionate interest in the
  capital stock measured by value, but only an aliquot part of the whole number of such shares
FACTS: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of a real estate identified as of the issuing corporation. The holder of no-par shares may see from the certificate itself that
Malinta Estate, in the Municipality of Polo (now Valenzuela), Province of Bulacan (now Metro Manila). In April he is only an aliquot sharer in the assets of the corporation. But this character of
1974, the said co-owners leased to Construction Components International Inc. the same property and proportionate interest is not hidden beneath a false appearance of a given sum in money, as in
providing that during the existence or after the term of this lease the lessor should he decide to sell the the case of par value shares. The capital stock of a corporation issuing only no-par value shares
property leased shall first offer the same to the lessee and the letter has the priority to buy under similar is not set forth by a stated amount of money, but instead is expressed to be divided into a
conditions. In August 1974, lessee Construction Components International, Inc. assigned its rights and stated number of shares, such as, 1,000 shares. This indicates that a shareholder of 100 such
obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity shares is an aliquot sharer in the assets of the corporation, no matter what value they may
and consent of lessors Delfin Pacheco and Pelagia Pacheco. The contract of lease, as well as the assignment have, to the extent of 100/1,000 or 1/10. Thus, by removing the par value of shares, the
of lease were annotated at the back of the title, as per stipulation of the parties.  attention of persons interested in the financial condition of a corporation is focused upon the
  value of assets and the amount of its debts." 
In January 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and  
defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property Moreover, there was no attempt to state the true or current market value of the real estate. Land
together with another parcel of land also located in Malinta Estate, Valenzuela, Metro Manila for 2,500 shares valued at P300.00 a square meter was turned over to the family’s corporation for only P14.00 a
of stock of defendant corporation with a total value of P1,500,000.00. On the ground that it was not given square meter. It is to be stressed that by their ownership of the 2,500 no par shares of stock, the
the first option to buy the leased property pursuant to the proviso in the lease agreement, respondent Hydro Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the other
Pipes Philippines, Inc., filed an amended complaint for reconveyance of the real estate in its favor under stockholders, who also belong to the same family group. In effect, the Delpher Trades Corporation is
conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco a business conduit of the Pachecos. What they really did was to invest their properties and change the
and Delphin Pacheco.  nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades
  Corporation to take control of their properties and at the same time save on inheritance taxes. The
After trial, the Court of First Instance of Bulacan ruled in favor of the plaintiff, declaring the valid existence of records do not point to anything wrong or objectionable about this "estate planning" scheme
the plaintiff’s preferential right to acquire the subject property (right of first refusal) and ordering the resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise
defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted." 
to acquire the same at the rate of P14.00 per square meter, more or less whose area is 27,169 square meters
only. Without pronouncement as to attorney’s fees and costs. The lower court’s decision was affirmed on
appeal by the Intermediate Appellate Court. The defendants-appellants, now the petitioners, filed a petition
for certiorari to review the appellate court’s decision, where the Court initially denied the petition but upon
motion for reconsideration, set aside the resolution denying the petition and gave it due course. 
 
ISSUE: WON the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the
Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the
private respondent’s right of first refusal over the leased property included in the "deed of exchange." 
 
RULING: NO. The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation
cannot be considered a contract of sale. There was no transfer of actual ownership interests by the
Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another.
The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a
right of first refusal under the lease contract.   
 
After incorporation, one becomes a stockholder of a corporation by subscription or by purchasing stock
directly from the corporation or from individual owners thereof. In the case at bar, in exchange for their
properties, the Pachecos acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades
Corporation. Consequently, the Pachecos became stockholders of the corporation by subscription. "The
essence of the stock subscription is an agreement to take and pay for original unissued shares of a
corporation, formed or to be formed." It is significant that the Pachecos took no par value shares in
exchange for their properties. 
 
  67. TAN BOON BEE & CO., INC.,  vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE OF
BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and PHILIPPINE
AMERICAN CAN DRUG COMPANY,  G.R. No. L-41337 June 30, 1988 Fraud Cases
Facts:
·        Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on credit to herein
private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products amounting to P55,214.73.
·        On December 20, 1972, GRAPHIC made partial payment by check to petitioner in the total amount of
P24,848.74; and on December 21, 1972, a promissory note was executed to cover the balance of P30,365.99.
In the said promissory note, it was stipulated that the amount will be paid on monthly installments and that
failure to pay any installment would make the amount immediately demandable with an interest of 12% per
annum.
·        On September 6, 1973, for failure of GRAPHIC to pay any installment, petitioner filed with the then Court of
First Instance of Manila, presided over by herein respondent judge, for a Sum of Money. Respondent judge
declared GRAPHIC in default for failure to file its answer within the reglementary period and plaintiff
(petitioner herein) was allowed to present its evidence ex parte. In a Decision dated January 18, 1974, the trial
court ordered GRAPHIC to pay the petitioner the sum of P30,365.99 with 12% interest from March 30, 1973
until fully paid, plus the costs of suit. On motion of petitioner, a writ of execution was issued by respondent
judge; but the aforestated writ having expired without the sheriff finding any property of GRAPHIC, an alias
writ of execution was issued on July 2, 1974.
·        Pursuant to the said issued alias writ of execution, the executing sheriff levied upon one (1) unit printing
machine Identified as "Original Heidelberg Cylinder Press" Type H 222, NR 78048, found in the premises of
GRAPHIC. In a Notice of Sale of Execution of Personal Property dated July 29, 1974, said printing machine was
scheduled for auction sale on July 26, 1974 at 10:00 o'clock at 14th St., Cor. Atlanta St., Port Area, Manila but
in a letter dated July 19, 1974, herein private respondent, Philippine American Drug Company (PADCO for
short) had informed the sheriff that the printing machine is its property and not that of GRAPHIC, and
accordingly, advised the sheriff to cease and desist from carrying out the scheduled auction sale on July 26,
1974.
·        Notwithstanding the said letter, the sheriff proceeded with the scheduled auction sale, sold the property to
the petitioner, it being the highest bidder, and issued a Certificate of Sale in favor of petitioner. More than
five (5) hours after the auction sale and the issuance of the certificate of sale, PADCO filed an "Affidavit of
Third Party Claim" with the Office of the City Sheriff. Thereafter, on July 30,1974, PADCO filed with the Court
of First Instance of Manila, Branch XXIII, a Motion to Nullify Sale on Execution (With Injunction) which was
opposed by the petitioner.
·        Respondent judge, in an Order dated March 26, 1975 ruled in favor of PADCO.
Issue: Whether PADCO’s identity should be pierced as it is conveniently shielding under the theory of
corporate petition.
Ruling: Yes.
 
It is true that a corporation, upon coming into being, is invested by law with a personality separate and
distinct from that of the persons composing it as well as from any other legal entity to which it may be
related. As a matter of fact, the doctrine that a corporation is a legal entity distinct and separate from the
members and stockholders who compose it is recognized and respected in all cases which are within reason
and the law. However, this separate and distinct personality is merely a fiction created by law for
convenience and to promote. Accordingly, this separate personality of the corporation may be disregarded,
or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to
work an injustice, or where necessary to achieve equity or when necessary for the protection of creditors.
Corporations are composed of natural persons and the legal fiction of a separate corporate personality is not
a shield for the commission of injustice and inequity. Likewise, this is true when the corporation is merely an
adjunct, business conduit or alter ego of another corporation. In such case, the fiction of separate and
distinct corporation entities should be disregarded.
In the instant case, petitioner's evidence established that PADCO was never engaged in the printing business;
that the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO holds
50% share of stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the
printing machine in question had been in the premises of GRAPHIC since May, 1965, long before PADCO even
acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased
by PADCO to GRAPHIC on January 24, 1966, even before PADCO purchased it from Capital Publishing on July
11, 1966, only serves to show that PADCO's claim of ownership over the printing machine is not only farce and
sham but also unbelievable.
Considering the aforestated principles and the circumstances established in this case, respondent judge
should have pierced PADCO's veil of corporate Identity.
Respondent PADCO argues that if respondent judge erred in not piercing the veil of its corporate fiction, the
error is merely an error of judgment and not an error of jurisdiction correctable by appeal and not by
certiorari.
To this argument of respondent, suffice it to say that the same is a mere technicality. In the case of Rubio vs.
Mariano, the Court ruled:
While We recognize the fact that these movants — the MBTC, the Phillips spouses, the
Phillips corporation and the Hacienda Benito, Inc.— did raise in their respective answers
the issue as to the propriety of the instant petition for certiorari on the ground that the
remedy should have been appeal within the reglementary period, We considered such
issue as a mere technicality which would have accomplished nothing substantial except to
deny to the petitioner the right to litigate the matters he raised ...
Litigations should, as much as possible, be decided on their merits and not on technicality. Every party-litigant
must be afforded the amplest opportunity for the proper and just determination of his cause, free from the
unacceptable plea of technicalities.
TOPIC: ALTER EGO /INSTRUMENTALITY CASES: 3-PRONGED TEST  o    It ruled that Kho cannot be held solidarily liable with the Corporation, absent any
70. HAYDEN KHO, SR., Petitioner vs. DOLORES G. MAGBANUA, MARILYN S. MERCADO, ARCHIMEDES B.
CALUB, MARIA E. ONGOTAN, FRANCISCO J. DUQUE, MERLE G. RIVERA; DOLORES A. PULIDO, PAULINO R.
BALANGATAN, JR., ANAFEL L. ESCROPOLO, PERCIVAL A. DEINLA, JERRY C. ZABALA, ROGELIO C.
ONGONION, JR., HELEN B. DELA CRUZ, CENON JARDIN, and ROVILLA L. CATALAN, Respondents
G.R. No. 237246 | July 24, 2019
FACTS:
·         Respondents claimed that they were employed by Holy Face Cell Corporation in the Tres Pares Fast
Food as cooks, cashiers, or dishwashers.
·         On January 14, 2011, Spouses Kho’s (Hayden Kho Sr. and Irene Kho) daughter, Sheryl Kho, posted a
notice in the company premises that the restaurant would close down on January 19, 2011.
·         Fearing the loss of their jobs, they tried to seek an audience with Kho about the closure, but to no avail.
The restaurant closed as scheduled.
·         Respondents filed the complaint for illegal dismissal against Holy Face Cell Corporation (Corporation),
Tres Pares Fast Food (Tres Pares), and the Corporation's stockholders, including its alleged
President/Manager, Kho, and the latter's wife, Irene S. Kho. They prayed for the payment of separation pay,
salary differentials, nominal damages, differentials on overtime pay, service incentive leave pay, and holiday
pay, including damages, as well as attorney's fees
·         Spouses Kho argued that they had no employer-employee relationship with respondents, as the latter's
employer was the Corporation, and that they cannot be held liable for the acts of the Corporation, the same
having been imbued with a personality separate and distinct from its stockholders, directors, and officers.
·         LABOR ARBITER:
o    Ruled in favor of respondents and ordered the Corporation and Kho to solidarily pay
respondents. The Labor Arbiter found that the Corporation failed to prove that it closed
down its business due to financial distress as it did not offer financial documents to
corroborate its claim, and it also failed to comply with the notice requirement prior to
such closure as laid down under Article 298 of the Labor Code.
o    The LA ruled that Kho – who was the President of the Corporation at the time of the
closure - should be held solidarily liable for respondents' claims.
·         NLRC:
o    Reversed and set aside the LA Decision and dismissed the complaint as against Kho.
allegation and proof from respondents that he committed any act that would justify
piercing the veil of corporate fiction.
o    It stressed that mere failure to comply with the procedural due process does not
constitute an unlawful act that would render Kho personally liable.
·         CA:
o    Reversed and set aside the NLRC ruling, and accordingly, held the Corporation and
Kho solidarily liable for the payment of respondents' separation pay.
o    As regards Kho's liability, the CA noted that Kho effectively admitted that: (i) he
managed the Corporation; (ii) his daughter posted the notice of closure; and (iii)
respondents sought an audience with him to discuss the closure.
o    The CA concluded that Kho acted in bad faith when he assented to the sudden and
abrupt closure of the restaurant despite the absence of a board resolution authorizing the
closure. As such, he should be held solidarily liable with the Corporation.
ISSUE:
Did the CA commit an error in ascribing grave abuse of discretion on the part of the NLRC, and accordingly
holding Kho solidarily liable with the Corporation for the payment of respondents' money claims?
 RULING:
YES. The CA committed an error in ascribing grave abuse of discretion on the part of the NLRC, as the tribunal
correctly found that Kho should not be held solidarily libale with the corporation.
·         As a juridical entity, a corporation may act only through its directors, officers, and employees. As such,
obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole
liabilities, and these persons should not be held jointly and solidarily liable with the corporation.
·         However, being a mere fiction of law, this corporate veil can be pierced when such corporate fiction is
used:
1.     To defeat public convenience or as a vehicle for the evasion of an existing obligation;
2.     To justify wrong, protect or perpetuate fraud, defend crime, or as a shield to confuse
legitimate issues; or
3.     As a mere alter ego or business conduit of a person, or 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.
·         Fundamental in the realm of labor law that corporate directors, trustees, or officers can be held
solidarily liable with the corporation when they assent to a patently unlawful act of the corporation, or when
they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest
resulting in damages to the corporation, its stockholders, or other persons.
·         However, it bears emphasis that a finding of personal liability against a director, trustee, or a
corporate officer requires the concurrence of these 2 requisites, namely:
1. A clear allegation in the complaint of gross negligence, bad faith or malice,
fraud, or any of the enumerated exceptional instances; and
2. Clear and convincing proof of said grounds relied upon in the complaint
sufficient to overcome the burden of proof borne by the complainant.
·         In this case, the evidence on record do not support the findings of both the LA and the CA that Kho was
the Corporation's President at the time of its closure, and that he assented to a patently unlawful act,
thereby exposing him to solidary liability with the Corporation.
·         Kho was not the Corporation's President as he was merely its Treasurer in 2008 and 2009. For the year
2009, it was indicated that he was no longer a corporate officer of the Corporation.
·         There is a lack of evidence on record that would indicate that Kho was a corporate officer at the time
the restaurant, where respondents worked, closed down.
·         Even assuming arguendo that Kho was a corporate officer, nowhere in the complaint nor in the
respondents' submissions before the labor tribunals did they allege that Kho committed bad faith, fraud,
negligence, or any of the aforementioned exceptions to warrant his personal liability.
·         Personal liability attaches only when, as enumerated by the said Section 31 of the Corporation Code,
there is a willful and knowing assent to patently unlawful acts of the corporation, there is gross negligence
or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages
to the corporation. It also bears emphasis that in cases where personal liability attaches, not even all
officers are made accountable.
·         Rather, only the "responsible officer," i.e., the person directly responsible for and who "acted in bad
faith" in committing the illegal dismissal or any act violative of the Labor Code, is held solidarily liable, in cases
wherein the corporate veil is pierced. In other instances, such as cases of so-called corporate tort of a close
corporation, it is the person "actively engaged" in the management of the corporation who is held liable. In
the absence of a clearly identifiable officer(s) directly responsible for the legal infraction, the Court considers
the president of the corporation as such officer.
·         The veil of corporate fiction can be pierced, and responsible corporate directors and officers or even a
separate but related corporation, may be impleaded and held answerable solidarily in a labor case, even
after final judgment and on execution, so long as it is established that such persons have deliberately used
the corporate vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad faith or
malice in doing so.
·         When the shield of a separate corporate identity is used to commit wrongdoing and opprobriously
elude responsibility, the courts and the legal authorities in a labor case have not hesitated to step in and
shatter the said shield and deny the usual protections to the offending party, even after final judgment.
·         The key element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not
connote bad judgment or negligence but imports a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it
partakes of the nature of fraud.

·         The fact that it was Kho's daughter who posted the closure notice and with whom respondents
requested for an audience with Kho to tackle the issue of closure - which notice was not even presented in
evidence - is no proof that he orchestrated the closure or assented to the same, let alone in bad faith.

·         Bad faith cannot be ascribed on any of the Corporation's officers by the mere fact that the Corporation
failed to comply with the notice requirement before closing down the restaurant.

·         Verily, absent any finding that Kho was a corporate officer of the Corporation who willfully and
knowingly assented to patently unlawful acts of the latter, or who is guilty of bad faith or gross negligence
in directing its affairs, or is guilty of conflict of interest resulting in damages thereto, he cannot be held
personally liable for the corporate liabilities arising from the instant case.

PRINCIPLES ABOUT PIERCING THE VEIL OF CORPORATE FICTION:

·         A corporation is still an artificial being invested by law with a personality separate and distinct from that
of its stockholders and from that of other corporations to which it may be connected. It is not in every
instance of inability to collect from a corporation that the veil of corporate fiction is pierced, and the
responsible officials are made liable.
 72) Rommel M. Zambrano, et. al. vs Philippine Carpet Manufacutirng Corporation / Pacific Carpet
Manufacturing Corporation, Davide T. Lim and Evelyn Lim Forbes
G.R. No. 224099, June 21, 2017 | Alter-Ego / Instrumentality Cases: 3-Pronged Test
FACTS
The petitioners in this case were employees of Philippine Carpet Manufacturing Corporation. They were
terminated allegedly on the ground of cessation of operation due to serious business losses. They were of
the belief that their dismissal was without just cause and in violation of due process because the closure of
Phil Carpet was a mere pretense to transfer its operations to its wholly owned and controlled corporation,
Pacific Carpet Manufacturing Corporation. They claimed that the job orders of some regular clients of
PhilCarpet were transferred to Pacific Carpet and several machines were moved from the premises of Phil
Carpet to Pacific Carpet. They asserted that their dismissal constituted unfair labor practice as it involved the
mass dismissal of all union officers and members of the Philippine Carpet Manufacturing Employees
Association. In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations
because there had been a steady decline in the demand for its products due to global recession, stiffer
competition, and the effects of a changing market.
The Labor Arbiter dismissed the complaints for illegal dismissal and unfair labor practice. It ruled that the
termination of the petitioners' employment was due to total cessation of manufacturing operations of Phil
Carpet because it suffered continuous serious business losses from 2007 to 2010. The NLRC affirmed the
rulings of the LA. It held that the Audited Financial Statements show that Phil Carpet continuously incurred
net losses starting 2007 leading to its closure in the year 2010. The CA also held that the total cessation of Phil
Carpet's manufacturing operations was not made in bad faith because the same was clearly due to economic
necessity.
ISSUE: Whether Pacific Carpet may be held liable for the obligations of Philippine Carpet.
RULING: No.
The Supreme Court affirmed the findings of the lower courts and ruled that there is no illegal dismissal in this
case, since the petitioners were dismissed for an authorized cause, which is closure or cessation of
operations. The dismissal also does not amount to unfair labor practice. In order to show that the employer
committed ULP under the Labor Code, substantial evidence is required to support the claim. The petitioners
failed to discharge the duty imposed upon them.
A corporation has a personality separate and distinct from the persons composing it, as well as from any
other legal entity to which may be related. The doctrine of piercing the corporate veil applies only in three (3)
basic areas, one of which is 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.
Case law lays down a three-pronged test to determine the application of the alter ego theory, which is also
known as the instrumentality theory, namely:
(1) Control, not mere 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 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
plaintiffs legal right; and
(3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss
complained of.
The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be completely
under the control and domination of the parent. It seeks to establish whether the subsidiary corporation has
no autonomy and the parent corporation, though acting through the subsidiary in form and appearance, "is
operating the business directly for itself." The second prong is the "fraud" test. This test requires that the
parent corporation's conduct in using the subsidiary corporation be unjust, fraudulent or wrongful. The third
prong is the "harm" test. A causal connection between the fraudulent conduct committed through the
instrumentality of the subsidiary and the injury suffered or the damage incurred by the plaintiff should be
established. The plaintiff must prove that, unless the corporate veil is pierced, it will have been treated
unjustly by the defendant's exercise of control and improper use of the corporate form and, thereby, suffer
damages.
Piercing the corporate veil based on the alter ego theory requires the concurrence of three elements: control
of the corporation by the stockholder or parent corporation, fraud or fundamental unfairness imposed on
the plaintiff, and harm or damage caused to the plaintiff by the fraudulent or unfair act of the corporation.
The absence of any of these elements prevents piercing the corporate veil.
The court held that the three tests have not been met in this case. Although ownership by one corporation of
all or a great majority of stocks of another corporation and their interlocking directorates may serve as indicia
of control, by themselves and without more, these circumstances are insufficient to establish an alter ego
relationship or connection between Phil Carpet on the one hand and Pacific Carpet on the other hand, that
will justify the puncturing of the latter's corporate cover. 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 sufficient ground for
disregarding the separate corporate personality. Existence of interlocking directors, corporate officers and
shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other
public policy considerations. The petitioners failed to present substantial evidence to prove their allegation
that Pacific Carpet is a mere alter ego of Phil Carpet.
 
73. CALIFORNIA MANUFACTURING COMPANY, INC.,   vs. ADVANCED TECHNOLOGY SYSTEM, INC., G.R.No. The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
202454 April 25, 2017 convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2)
fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3)
FACTS alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a
Petitioner CMCI is a domestic corporation engaged in the food and beverage manufacturing business. person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it
Respondent ATSI is also a domestic corporation that fabricates and distributes food processing machinery merely an instrumentality, agency, conduit or adjunct of another corporation.
and equipment, spare parts, and its allied products. CMCI 's alter ego theory rests on the alleged interlocking boards of directors and stock ownership of the two
CMCI leased from ATSI a Prodopak machine which was used to pack products in 20-ml. pouches. The parties corporations. The CA, however, rejected this theory based on the settled rule that mere ownership by a
agreed to a monthly rental of ₱98,000 exclusive of tax. In November 2003, ATSI filed a Complaint for Sum of single stockholder of even all or nearly all of the capital stocks of a corporation, by itself, is not sufficient
Money against CMCI to collect unpaid rentals for the months of June, July, August, and September 2003. ground to disregard the corporate veil. We can only sustain the CA's ruling. The instrumentality or control
ATSI alleged that CMCI was consistently paying the rents until June 2003 when the latter defaulted on its test of the alter ego doctrine requires not mere majority or complete stock control, but complete domination
obligation without just cause. ATSI also claimed that CMCI ignored all the billing statements and its demand of finances, policy and business practice with respect to the transaction in question. The corporate entity
letter. Hence, in addition to the unpaid rents ATSI sought payment for the contingent attorney's fee must be shown to have no separate mind, will, or existence of its own at the time of the transaction.
equivalent to 30% of the judgment award. The fraud test, which is the second of the three-prong test to determine the application of the alter ego
CMCI moved for the dismissal of the complaint on the ground of extinguishment of obligation through legal doctrine, requires that the parent corporation's conduct in using the subsidiary corporation be unjust,
compensation. CMCI averred that ATSI was one and the same with Processing Partners and Packaging fraudulent or wrongful. Under the third prong, or the harm test, a causal connection between the fraudulent
Corporation (PPPC), which was a toll packer of CMCI products. To support its allegation, CMCI submitted conduct committed through the instrumentality of the subsidiary and the injury suffered or the damage
copies of the Articles of Incorporation and General Information Sheets (GIS) of the two corporations. CMCI incurred by the plaintiff has to be established. None of these elements have been demonstrated in this case.
pointed out that ATSI was even a stockholder of PPPC as shown in the latter's GIS.  Hence, we can only agree with the CA and RTC in ruling out mutuality of parties to justify the application of
CMCI alleged that in 2000, PPPC agreed to transfer the processing of CMCI's product line from its factory in legal compensation in this case.
Meycauayan to Malolos, Bulacan. Upon the request of PPPC, through its Executive Vice President Felicisima  
Celones, CMCI advanced ₱4 million as mobilization fund. PPPC President and Chief Executive Officer Francis  
Celones allegedly committed to pay the amount in 12 equal instalments deductible from PPPC's monthly  
invoice to CMCI beginning in October 2000. CMCI likewise claims that Felicisima proposed to set off PPPC's  
obligation to pay the mobilization fund with the rentals for the Prodopak machine.  
CMCI argued that the proposal was binding on both PPPC and ATSI because Felicisima was an officer and a  
majority stockholder of the two corporations. CMCl argued that legal compensation had set in and that ATSI  
was even liable for the balance of PPPC's unpaid obligation after deducting the rentals for the Prodopak  
machine.  
The RTC rendered a Decision in favor of ATSI. The trial court ruled that legal compensation did not apply  
because PPPC had a separate legal personality from its individual stockholders, the Spouses Celones, and  
ATSI. Moreover, there was no board resolution or any other proof showing that Felicisima's proposal to set-  
off the unpaid mobilization fund with CMCI 's rentals to A TSI for the Prodopak Machine had been authorized  
by the two corporations. The CA affirmed the trial court's ruling.  
ISSUE
Whether legal compensation between ATSI's claim against CMCI on the one hand, and the latter's claim
against PPPC on the other hand, has set in.
RULING
No.
Any piercing of the corporate veil must be done with caution. As the CA had correctly observed, 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 rights. Moreover, the wrongdoing must be clearly and
convincingly established. Sarona v. NLRC instructs, thus:
Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution,
albeit the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the
interest of justice. After all, the concept of corporate entity was not meant to promote unfair objectives.
 75 PHILIPPINE NATIONAL BANK vs. HYDRO RESOURCES CONTRACTORS CORPORATION  
G.R. No. 167530 ; March 13, 2013 ·       The RTC ruled that NMIC is a mere adjunct, business conduit or alter ego of both DBP and PNB.
  Thus, the DBP and PNB are jointly and severally liable with NMIC for the latter’s unpaid
FACTS:  obligations to plaintiff. 
  ·        The complaint against APT was dismissed. APT, as trustee of NMIC was directed to ensure
-       In 1984, DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque compliance with this decision.
Mining and Industrial Corporation (MMIC).   
  -       DECISION OF THE CA (November 30, 2004): Affirmed the decision of the RTC. 
-       As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC and  
resumed the business operations of the defunct MMIC by organizing Nonoc Mining and Industrial -       The motions for reconsideration of DBP, PNB, and APT were denied.
Corporation (NMIC).   
  ISSUE: Was the doctrine of "piercing the veil of corporate fiction” properly applied in this case? NO.
·       DBP owned 57% and PNB owned 43% of the shares of NMIC, except for five qualifying shares.   
·       The members of the Board of Directors of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, RULING: 
Ruben Ancheta, Geraldo Agulto, and Faustino Agbada, were either from DBP or PNB.  The three-pronged test to determine the application of the alter ego theory, which is also known as the
·       Rolando M. Zosa, then Governor of DBP, was signing and entering into contracts with third instrumentality theory:
persons, on behalf of NMIC  
  1.     Control, not mere majority or complete stock control, but complete domination, not only of
-       Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and Road finances but of policy and business practice in respect to the transaction attacked so that the
Construction Program in 1985 for a total contract price of ₱35,770,120.  corporate entity as to this transaction had at the time no separate mind, will or existence of its
  own;
-       After computing the payments already made by NMIC under the program and crediting the NMIC’s  
receivables from Hercon, Inc., the latter found that NMIC still has an unpaid balance of 2.     Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
₱8,370,934.74. violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention
  of plaintiff’s legal right; and
-       Hercon, Inc. made several demands on NMIC and when these were not heeded, a complaint for sum  
of money was filed in the RTC of Makati seeking to hold NMIC, DBP, and PNB solidarily liable for the 3.     The aforesaid control and breach of duty must have proximately caused the injury or unjust loss
amount owing Hercon, Inc. complained of.
   
-       Subsequent to the filing of the complaint, Hercon, Inc. was acquired by Hydro Resources FIRST PRONG: “INSTRUMENTALITY” or “CONTROL” TEST. This test requires that the subsidiary be completely
Contractors Corporation (HRCC) in a merger. This prompted the amendment of the complaint to under the control and domination of the parent. It examines the parent corporation’s relationship with the
substitute HRCC for Hercon, Inc. subsidiary. It inquires whether a subsidiary corporation is so organized and controlled and its affairs are so
  conducted as to make it a mere instrumentality or agent of the parent corporation such that its separate
-       On December 8, 1986, then President Corazon C. Aquino issued Proclamation No. 50 creating the existence as a distinct corporate entity will be ignored. It seeks to establish whether the subsidiary
Asset Privatization Trust (APT) for the expeditious disposition and privatization of certain corporation has no autonomy and the parent corporation, though acting through the subsidiary in form and
government corporations and/or the assets thereof.  appearance, "is operating the business directly for itself."
   
-       Pursuant to the said Proclamation, DBP and PNB executed their respective deeds of transfer in favor SECOND PRONG: “FRAUD” TEST. This test requires that the parent corporation’s conduct in using the
of the National Government assigning, transferring and conveying certain assets and liabilities, subsidiary corporation be unjust, fraudulent or wrongful. It examines the relationship of the plaintiff to the
including their respective stakes in NMIC. In turn and on even date, the National Government corporation. It recognizes that piercing is appropriate only if the parent corporation uses the subsidiary in a
transferred the said assets and liabilities to the APT as trustee under a Trust Agreement. Thus, the way that harms the plaintiff creditor. As such, it requires a showing of "an element of injustice or
complaint was amended for the second time to implead and include the APT as a defendant. fundamental unfairness."
   
-       In their separate answers, NMIC, DBP, and PNB, and APT claimed that HRCC had no cause of action. THIRD PRONG: “HARM” TEST. This test requires the plaintiff to show that the defendant’s control, exerted in
Furthermore, DBP and PNB also claimed that NMIC has a separate juridical personality from DBP a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A causal connection
and PNB.  between the fraudulent conduct committed through the instrumentality of the subsidiary and the injury
  suffered or the damage incurred by the plaintiff should be established. The plaintiff must prove that, unless
-       DECISION OF THE RTC (November 6, 1995): Rendered a decision in favor of HRCC. The RTC stated the corporate veil is pierced, it will have been treated unjustly by the defendant’s exercise of control and
that it pierced the corporate veil of NMIC and held DBP and PNB solidarily liable with NMIC improper use of the corporate form and, thereby, suffer damages.
  III.           ABSENCE OF HARM ELEMENT
In this case, the Supreme Court finds that none of the tests has been satisfactorily met.    
  In the absence of both control by DBP and PNB of NMIC and fraud or fundamental unfairness perpetuated by
I.               ABSENCE OF CONTROL ELEMENT DBP and PNB through the corporate cover of NMIC, no harm could be said to have been proximately caused
  by DBP and PNB on HRCC for which HRCC could hold DBP and PNB solidarily liable with NMIC. 
This refers not to paper or formal control by majority or even complete stock control but actual control  
which amounts to "such domination of finances, policies and practices that the controlled corporation has,  
so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal." In addition,
the control must be shown to have been exercised at the time the acts complained of took place.
   
While ownership by one corporation of all or a great majority of stocks of another corporation and their
interlocking directorates may serve as indicia of control, by themselves and without more, however, these
circumstances are insufficient to establish an alter ego relationship or connection between DBP and PNB on
the one hand and NMIC on the other hand, that will justify the puncturing of the latter’s corporate cover.
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 sufficient ground for disregarding the separate corporate personality. The
existence of interlocking directors, corporate officers and shareholders is not enough justification to pierce
the veil of corporate fiction in the absence of fraud or other public policy considerations.
 
In this case, nothing in the records shows that the corporate finances, policies and practices of NMIC were
dominated by DBP and PNB in such a way that NMIC could be considered to have no separate mind, will or
existence of its own but a mere conduit for DBP and PNB. On the contrary, the evidence establishes that
HRCC knew and acted on the knowledge that it was dealing with NMIC, not with NMIC’s stockholders. 
 
Moreover, the finding that the respective boards of directors of NMIC, DBP, and PNB were interlocking has
no basis. Nothing in it supports a finding that NMIC, DBP, and PNB had interlocking directors as it only
indicates that, of the five members of NMIC’s board of directors, four were nominees of either DBP or PNB
and only one was a nominee of both DBP and PNB. Only two members of the board of directors of NMIC,
Jose Tengco, Jr. and Rolando Zosa, were established to be members of the board of governors of DBP and
none was proved to be a member of the board of directors of PNB. No director of NMIC was shown to be
also sitting simultaneously in the board of governors or directors of both DBP and PNB.
 
II.             ABSENCE OF THE FRAUD ELEMENT
 
In relation to the second element, to disregard the separate juridical personality of a corporation, the
wrongdoing or unjust act in contravention of a plaintiff’s legal rights must be clearly and convincingly
established; it cannot be presumed. Without a demonstration that any of the evils sought to be prevented by
the doctrine is present, it does not apply.
 
In this case, the Court of Appeals declared: “We are not saying that PNB and DBP are guilty of fraud in
forming NMIC, nor are we implying that NMIC was used to conceal fraud.” Such a declaration clearly negates
the possibility that DBP and PNB exercised control over NMIC which DBP and PNB used "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 rights." It is a recognition that, even assuming that DBP and PNB exercised
control over NMIC, there is no evidence that the juridical personality of NMIC was used by DBP and PNB to
commit a fraud or to do a wrong against HRCC. There being a total absence of evidence pointing to a
fraudulent, illegal or unfair act committed against HRCC by DBP and PNB under the guise of NMIC, there is no
basis to hold that NMIC was a mere alter ego of DBP and PNB. 
 
 80. RAMIREZ et. al. vs. Mar Fishing, Inc., G.R. No. 168208,  June 13, 2012 Alter Ego/ Instrumentality Cases 3-
pronged test
Facts:
·        On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of fishing and
canning of tuna, sold its principal assets to co-respondent Miramar Fishing Co., Inc. (Miramar) through public
bidding. The proceeds of the sale were paid to the Trade and Investment Corporation of the Philippines
(TIDCORP) to cover Mar Fishing’s outstanding obligation in the amount of ₱ 897,560,041.26. In view of that
transfer, Mar Fishing issued a Memorandum dated 23 October 2001 informing all its workers that the
company would cease to operate by the end of the month. On 29 October 2001 or merely two days prior to
the month’s end, it notified the Department of Labor and Employment (DOLE) of the closure of its business
operations.
·        Thereafter, Mar Fishing’s labor union, Mar Fishing Workers Union – NFL – and Miramar entered into a
Memorandum of Agreement. The Agreement provided that the acquiring company, Miramar, shall absorb
Mar Fishing’s regular rank and file employees whose performance was satisfactory, without loss of seniority
rights and privileges previously enjoyed.
·        Unfortunately, petitioners, who worked as rank and file employees, were not hired or given separation pay
by Miramar. Thus, petitioners filed Complaints for illegal dismissal with money claims before the Arbitration
Branch of the National Labor Relations Commission (NLRC).
·        LA: legally dismissed because of necessary closure of business, it ordered payment of separation pay.
·        NLRC: apart from the separation pay, it awarded full back wages because of the delay of notice to the DOLE
of the closure. Dismissal is still valid.Additionally, the NLRC pierced the veil of corporate fiction and ruled that
Mar Fishing and Miramar were one and the same entity, since their officers were the same. Hence, both
companies were ordered to solidarily pay the monetary claims. On reconsideration, the NLRC modified its
ruling by imposing liability only on Mar Fishing. The labor court held that petitioners had no cause of action
against Miramar, since labor contracts cannot be enforced against the transferee of an enterprise in the
absence of a stipulation in the contract that the transferee assumes the obligation of the transferor.
Issue: Whether Mar Fishing and Miramar should be held solidarily liable for the payment of monetary claims
of the petitioners.
Ruling: No
For a dismissal based on the closure of business to be valid, three (3) requirements must be established.
Firstly, the cessation of or withdrawal from business operations must be bona fide in character. Secondly,
there must be payment to the employees of termination pay amounting to at least one-half (1/2) month pay
for each year of service, or one (1) month pay, whichever is higher. Thirdly, the company must serve a written
notice on the employees and on the DOLE at least one (1) month before the intended termination.
In their Petition for Review on Certiorari, petitioners did not dispute the conclusion of the LA and the NLRC
that Mar Fishing had an authorized cause to dismiss its workers. Neither did petitioners challenge the
computation of their separation pay.
Rather, they questioned the holding that only Mar Fishing was liable for their monetary claims.
Basing their conclusion on the Memorandum of Agreement and Supplemental Agreement between Miramar
and Mar Fishing’s labor union, as well as the General Information Sheets and Company Profiles of the two
companies, petitioners assert that Miramar simply took over the operations of Mar Fishing. In addition, they
assert that these companies are one and the same entity, given the commonality of their directors and the
similarity of their business venture in tuna canning plant operations.
At the fore, the question of whether one corporation is merely an alter ego of another is purely one of fact
generally beyond the jurisdiction of the Court. In any case, given only these bare reiterations, the Court
sustains the ruling of the LA as affirmed by the NLRC that Miramar and Mar Fishing are separate and distinct
entities, based on the marked differences in their stock ownership. Also, the fact that Mar Fishing’s officers
remained as such in Miramar does not by itself warrant a conclusion that the two companies are one and the
same. As this Court held in Sesbreño v. Court of Appeals, the mere showing that the corporations had a
common director sitting in all the boards without more does not authorize disregarding their separate
juridical personalities.
Neither can the veil of corporate fiction between the two companies be pierced by the rest of petitioners’
submissions, namely, the alleged take-over by Miramar of Mar Fishing’s operations and the evident similarity
of their businesses. At this point, it bears emphasizing that since piercing the veil of corporate fiction is
frowned upon, those who seek to pierce the veil must clearly establish that the separate and distinct
personalities of the corporations are set up to justify a wrong, protect a fraud, or perpetrate a deception.
This, unfortunately, petitioners have failed to do. In Indophil Textile Mill Workers Union vs. Calica, we ruled
thus:  In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the
creation of the corporation is a devi[c]e to evade the application of the CBA between petitioner Union and
private respondent company. While we do not discount the possibility of the similarities of the businesses of
private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting
the relief sought. The fact that the businesses of private respondent and Acrylic are related, that some of the
employees of the private respondent are the same persons manning and providing for auxiliary services to
the units of Acrylic, and that the physical plants, offices and facilities are situated in the same compound, it is
our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of
Acrylic.
Having been found by the trial courts to be a separate entity, Mar Fishing – and not Miramar – is required to
compensate petitioners. Indeed, the back wages and retirement pay earned from the former employer
cannot be filed against the new owners or operators of an enterprise.
Evidently, the assertions of petitioners fail on both procedural and substantive aspects. Therefore, no special
reasons exist to reverse the CA’s dismissal of the case due to their failure to abide by the mandatory
procedure for filing a petition for review on certiorari. Given the correctness of the appellate court’s ruling
and the lack of appropriate remedies, this Court will no longer dwell on the exact computation of petitioners’
claims for back wages, which have been sufficiently threshed out by the LA and the NLRC. Judicial review of
labor cases does not go beyond an evaluation of the sufficiency of the evidence upon which labor officials'
findings rest.
While the Court sympathizes with the situation of the workers in this case, it cannot disregard, absent
compelling reasons, the factual determinations and the legal doctrines that support the findings of the courts
a quo. Generally, the findings of fact and the conclusion of the labor courts are not only accorded great
weight and respect, but are even clothed with finality and deemed binding on this Court, as long as they are
supported by substantial evidence. 
 
 
 
 
 
 
 
 
 TOPIC: MINIMUM SET OF OFFICERS; QUALIFICATIONS; DISQUALIFICATIONS; AUTHORITY & LIABILITIES
83. CAGAYAN VALLEY DRUG CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE,
respondent
G.R. No. 151413 | February 13, 2008 | 545 SCRA 10
 
FACTS:
·         Cagayan Valley Drug Corporation is a duly licensed retailer of medicine and other pharmaceutical
products. It operates two drugstores, one in Tuguegarao, Cagayan, and the other in Roxas, Isabela, under the
name and style of "Mercury Drug."
·         In 1995, Cagayan granted 20% sales discounts to qualified senior citizens on purchases of medicine
pursuant to RA 7432. It treated such discounts as deductions from the gross sales pursuant to a revenue
regulation instead of treating them as tax credit as provided under Section 4 of RA 7432.
·         Cagayan Valley Drug Corporation filed with the BIR a claim for tax refund of the full amount of the 20%
sales discount it granted to senior citizens for the year 1995. BIR failed to act on the petition.
·         Thus, Cagayan Valley Drug Corporation filed a petition for review with the CTA but the latter dismissed
the petition for lack of merit.
·         On appeal to CA, the latter dismissed the petition on the ground that the person who signed the
verification and certification of non-forum shopping, a certain Jacinto Concepcion, President of Cagayan,
failed to adduce proof that he was duly authorized by the board of directors to do so.
 
ISSUE/S:
Can the petitioner's president sign the subject verification and certification sans the approval of its Board of
Directors?
 RULING:
·         YES. Section 23 in relation to Section 25 of the Corporation Code enunciates that all corporate powers
are exercised, all business conducted, and all properties controlled by the board of directors.
·         A corporation has a separate and distinct personality from its directors and officers and can only
exercise its corporate powers through the board of directors. Thus, it is clear that an individual corporate
officer cannot solely exercise any corporate power pertaining to the corporation without authority from
the board of directors. This has been our constant holding in cases instituted by a corporation
·         However, in some cases decided by SC, the following officials or employees of the company can sign
the verification and certification without need of a board resolution:
1.     The Chairperson of the board of directors (Lepanto Case, Sept. 24, 2003);
2.     President of a corporation (Lepanto,supra);
3.     General Manager or Acting Manager (Mactan-Cebu Case, Nov. 7, 2000);
4.     Personnel Officer (Novelty Philippines Case, Sept 17, 2003);
5.     Employment Specialist in Labor Case (Pfizer Case, May 25, 2001).
·         The rationale applied in the foregoing cases is to justify the authority of corporate officers to sign being
in a position to verify the truthfulness and correctness of the allegations in the petition.
·         In the recent case of Philippine Airlines v. Flight Attendants and Stewards Association of the Philippines,
SC held that only individuals vested with authority by a valid board resolution may sign the certificate of
non-forum shopping on behalf of a corporation.
·         In this case, SC said that appending the board resolution to the complaint or petition is the better
procedure to obviate any question on the authority of the signatory to the verification and certification.
·         In the case at bar, Cagayan substantially complied with Sections 4 and 5, Rule 7 of the Rules of Court
because: 1. The requisite board resolution has been submitted albeit belatedly; 2. The application of
Lepanto case with the rationale that the President of Cagayan is in a position to verify the truthfulness and
correctness of the allegations in the petition; and 3. The President has signed the complaint before the CTA
at the inception of the judicial claim for refund.
85) International Academy of Management and Economics vs Litton and Company
G.R. No. 191525, December 13, 2017 | Reverse Piercing of the Veil of Corporate Fiction
FACTS
Atty. Emmanuel T. Santos leases two buildings owned by Litton and Company. Atty Santos owes Litton rental
arrears and his share in the payment of realty taxes. So Litton filed a complaint for unlawful detainer against
Santos. The MeTC ordered Santos to vacate A.I.D. Building and Litton Apartments and to pay various sums of
money representing unpaid arrears, realty taxes, penalty, and attorney's fees. However, the judgment was
not executed. Litton subsequently filed an action for revival of judgment, which was granted by the RTC.
Santos then appealed the RTC decision to the CA, which nevertheless affirmed the RTC. The CA decision
became final and executory thus the sheriff of the MeTC of Manila levied on a piece of real property
registered in the name of International Academy of Management and Economics Incorporated (I/AME) in
order to execute the judgement. The annotations on the title indicated that such was "only up to the extent
of the share of Emmanuel T. Santos."
I/AME filed with MeTC a Motion to Lift or Remove the Annotations, claiming it has a separate and distinct
personality from Santos, thus its properties should not be made to answer for his liabilities. The motion was
denied, but admitted upon motion for reconsideration, and the MeTC ordered the cancellation of the
annotations of levy as well as the writ of execution. Litton elevated the case to the RTC, which reinstated the
original order dismissing I/AME’s petition. The CA upheld the decision of the RTC.
ISSUE: Whether the veil of corporate fiction was properly pierced in this case thus allowing the property of
I/AME to answer for the liabilities of Santos.
RULING: Yes.
I/AME claims it was deprived of due process because it was dragged into the case and its property was made
object of a writ of execution in the case against Santos, but it was not impleaded in the main case, thus is
claims the court did not acquire jurisdiction over it.
Corporations are treated as separate and distinct legal entities from the natural persons composing them.
The privilege of being considered a distinct and separate entity is confined to legitimate uses, and is subject
to equitable limitations to prevent its being exercised for fraudulent, unfair or illegal purposes. However,
once equitable limitations are breached using the coverture of the corporate veil, courts may step in to
pierce the same.
If the veil of corporate fiction is not properly pierced, then the corporation should have been served with
summons in order for the court to acquire jurisdiction. But if the veil of corporate fiction is pierced, then
summons need not be served on the corporation, as when it is shown by clear and convincing proof that the
separate and distinct personality of the corporation was purposefully employed to evade a legitimate and
binding commitment and perpetuate a fraud or like wrongdoings. A party whose corporation is vulnerable to
piercing of its corporate veil cannot argue violation of due process. The court held that Santos used I/AME as
a means to defeat judicial processes and to evade his obligation to Litton. Thus, even while I/AME was not
impleaded in the main case and yet was so named in a writ of execution to satisfy a court judgment against
Santos, it is vulnerable to the piercing of its corporate veil.
In determining the propriety of applicability of piercing the veil of corporate fiction, the court held that the
law does not make a distinction between a stock and non-stock corporation. Non-profit corporations like
I/AME are not immune from the doctrine of piercing the corporate veil. The equitable character of the
remedy permits a court to look to the substance of the organization, and its decision is not controlled by the
statutory framework under which the corporation was formed and operated.
Also, piercing the corporate veil may apply to natural persons. "[t]he doctrine of alter ego is based upon the
misuse of a corporation by an individual for wrongful or inequitable purposes, and in such case the court
merely disregards the corporate entity and holds the individual responsible for acts knowingly and
intentionally done in the name of the corporation." This, Santos has done in this case. Santos formed I/AME,
using the non-stock corporation, to evade paying his judgment creditor, Litton. The piercing of the corporate
veil may apply to corporations as well as natural persons involved with corporations. This Court has held that
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.”
I/AME is the alter ego of Santos and Santos - the natural person - is the alter ego of I/AME. Santos falsely
represented himself as President of I/AME in the Deed of Absolute Sale when he bought the Makati real
property, at a time when I/AME had not yet existed. Also, (1) Santos is the conceptualizer and implementor of
I/AME; (2) Santos' contribution is P1,200,000.00 (One Million Two Hundred Thousand Pesos) out of the
P1,500,000.00 (One Million Five Hundred Thousand Pesos), making him the majority contributor of I/AME;
and, (3) The building being occupied by I/AME is named after Santos using his known nickname (the "Noli
Santos International Tower"). The Court deemed I/AME and Santos as alter egos of each other.
 In reverse corporate piercing or piercing the corporate veil "in reverse,” the plaintiff seeks to reach the
assets of a corporation to satisfy claims against a corporate insider. Reverse-piercing flows in the opposite
direction (of traditional corporate veil-piercing) and makes the corporation liable for the debt of the
shareholders. It has two (2) types: outsider reverse piercing and insider reverse piercing. Outsider reverse
piercing occurs when a party with a claim against an individual or corporation attempts to be repaid with
assets of a corporation owned or substantially controlled by the defendant.52 In contrast, in insider reverse
piercing, the controlling members will attempt to ignore the corporate fiction in order to take advantage of a
benefit available to the corporation, such as an interest in a lawsuit or protection of personal assets.
Outsider reverse veil-piercing is applicable in this case. Litton, as judgment creditor, seeks the Court's
intervention to pierce the corporate veil of I/AME in order to make its Makati real property answer for a
judgment against Santos, who formerly owned and still substantially controls I/AME. 
86. ACEBEDO OPTICAL COMPANY, INC.,vs.THE HONORABLE COURT OF APPEALS, Hon. MAMINDIARA
MANGOTARA, in his capacity as Presiding Judge of the RTC, 12th Judicial Region, Br. 1, Iligan City;
SAMAHANG OPTOMETRIST Sa PILIPINAS — Iligan City Chapter, LEO T. CAHANAP, City Legal Officer, and
Hon. CAMILO P. CABILI, City Mayor of Iligan, G.R. No. 100152,  March 31, 2000  to practice optometry by the Board of Examiners in Optometry.
FACTS:
Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After
consideration of petitioner's application and the opposition interposed thereto by local optometrists,
respondent City Mayor issued Business Permit No. 5342 subject to the following conditions: 1. Since it is a
corporation, Acebedo cannot put up an optical clinic but only a commercial store; 2. Acebedo cannot
examine and/or prescribe reading and similar optical glasses for patients 3. Acebedo cannot sell reading and
similar eyeglasses without a prescription having first been made by an independent optometrist; 4. Acebedo
cannot advertise optical lenses and eyeglasses; 5. Acebedo is allowed to grind lenses only upon the
prescription of an independent optometrist.  optometrical services are to be rendered by competent and licensed persons in order to protect the health
Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter, through its Acting President, Dr.
Frances B. Apostol, lodged a complaint against the petitioner before the Office of the City Mayor, alleging
that Acebedo had violated the conditions set forth in its business permit and requesting the cancellation
and/or revocation of such permit. The City Legal Officer submitted a report to the City Mayor finding the
herein petitioner guilty of violating all the conditions of its business permit and recommending the
disqualification of petitioner from operating its business. The City Mayor sent petitioner a Notice of
Resolution and Cancellation of Business Permit.
Petitioner brought a petition for certiorari, prohibition and mandamus with prayer for restraining
order/preliminary injunction. The trial court dismissed the petition for failure to exhaust administrative
remedies, and dissolved the writ of preliminary injunction it earlier issued. Instead of taking an appeal,
petitioner filed a petition for certiorari, prohibition and mandamus with the Court of Appeals. The Court of
Appeals dismissed the petition for lack of merit.
ISSUE
Whether the City Mayor was justified in refusing the Business Permit of ABECEDO
RULING
NO.
The power to grant or issue licenses or business permits must always be exercised in accordance with law,
with utmost observance of the rights of all concerned to due process and equal protection of the law.
. . . While a business may be regulated, such regulation must, however, be within the bounds of
reason, i.e., the regulatory ordinance must be reasonable, and its provision cannot be oppressive
amounting to an arbitrary interference with the business or calling subject of regulation. A lawful
business or calling may not, under the guise of regulation, be unreasonably interfered with even by
the exercise of police power. . . .
In the case under consideration, the business permit granted by respondent City Mayor to petitioner was
burdened with several conditions. Distinction must be made between the grant of a license or permit to do
business and the issuance of a license to engage in the practice of a particular profession. The first is usually
granted by the local authorities and the second is issued by the Board or Commission tasked to regulate the
particular profession. A business permit authorizes the person, natural or otherwise, to engage in business or
some form of commercial activity. A professional license, on the other hand, is the grant of authority to a
natural person to engage in the practice or exercise of his or her profession.
In the case at bar, what is sought by petitioner from respondent City Mayor is a permit to engage in
the business of running an optical shop. It does not purport to seek a license to engage in the practice of
optometry as a corporate body or entity, although it does have in its employ, persons who are duly licensed
The objective of the imposition of subject conditions on petitioner's business permit could be
attained by requiring the optometrists in petitioner's employ to produce a valid certificate of registration as
optometrist, from the Board of Examiners in Optometry. A business permit is issued primarily to regulate the
conduct of business and the City Mayor cannot, through the issuance of such permit, regulate the practice of
a profession, like that of optometry. Such a function is within the exclusive domain of the administrative
agency specifically empowered by law to supervise the profession, in this case the Professional Regulations
Commission and the Board of Examiners in Optometry.
The primary purpose of the statute regulating the practice of optometry is to insure that
and physical welfare of the people from the dangers engendered by unlicensed practice. Such a purpose may
be fully accomplished although the person rendering the service is employed by a corporation.   It was ruled
that the employment of a qualified optometrist by a corporation is not against public policy.  Unless
prohibited by statutes, a corporation has all the contractual rights that an individual has and it does not
become the practice of medicine or optometry because of the presence of a physician or optometrist.   The
manufacturing, selling, trading and bartering of eyeglasses and spectacles as articles of merchandise do not
constitute the practice of optometry. 
To accomplish the objective of the regulation, a state may provide by statute that corporations
cannot sell eyeglasses, spectacles, and lenses unless a duly licensed physician or a duly qualified optometrist
is in charge of, and in personal attendance at the place where such articles are sold.  In such a case, the
patient's primary and essential safeguard lies in the optometrist's control of the "treatment" by means of
prescription and preliminary and final examination.  In analogy, it is noteworthy that private hospitals are
maintained by corporations incorporated for the purpose of furnishing medical and surgical treatment. In the
course of providing such treatments, these corporations employ physicians, surgeons and medical
practitioners, in the same way that in the course of manufacturing and selling eyeglasses, eye frames and
optical lenses, optical shops hire licensed optometrists to examine, prescribe and dispense ophthalmic
lenses. No one has ever charged that these corporations are engaged in the practice of medicine. There is
indeed no valid basis for treating corporations engaged in the business of running optical shops differently.