Corporation Law Case Digest.docx

7/24/2019 Corporation Law Case Digest.docx

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BARRANTES, Hannah R.Second Year JDCorporation Law

Concession Theory and Corporate ranchises

Tayag v. Benguet Consolidated, Inc.

G.R. No. L-23145, Nove!e" 2#, 1#$%

&acts' In (a"c) 1#$*, Idona) +e"ins died in Ne o". /)e le0t !e)ind "oe"ties )e"e and a!"oad. ong t)e"oe"ties s)e le0t !e)ind in t)e +)iliines e"e 2 stoc ce"ti0icates cove"ing 33,**2 s)a"es o0 stocs o0 t)eBenguet Consolidated, Inc BCI. /aid stoc ce"ti0icates e"e in t)e ossession o0 t)e Count"y T"ust Coany o0Ne o" CTCN. CTCN as t)e doicilia"y adinist"ato" o0 t)e estate o0 +e"ins in t)e /. (ean)ile, in1#$3, Renato Tayag as aointed as t)e ancilla"y adinist"ato" o0 t)e "oe"ties t)at +e"ins le0t !e)ind in t)e+)iliines. disute a"ose !eteen CTCN and Tayag as to )o !eteen t)e is entitled to ossess t)e stocce"ti0icates. case ensued and eventually, t)e t"ial cou"t o"de"ed CTCN to tu"n ove" t)e stoc ce"ti0icates toTayag. CTCN "e0used and !ecause o0 t)is Tayag 0iled it) t)e cou"t a etition to )ave said stoc ce"ti0icates !edecla"ed lost and to coel BCI to issue ne stoc ce"ti0icates in "elaceent t)e"eo0. T)e t"ial cou"t g"antedTayag6s etition. BCI did not 0ollo said o"de" as it ave""ed t)at it cannot ossi!ly issue ne stoc ce"ti0icates!ecause t)e to stoc ce"ti0icates decla"ed lost a"e not actually lost and t)at t)e t"ial cou"t as ell Tayag

acnoledged t)at t)e stoc ce"ti0icates indeed e7isted. &u"t)e"o"e, acco"ding to BCI6s !y-las, it can onlyissue ne stoc ce"ti0icates, in lieu o0 lost, stolen, o" dest"oyed ce"ti0icates o0 stocs, only a0te" cou"t o0 la )asissued a 0inal and e7ecuto"y o"de" as to )o "eally ons a ce"ti0icate o0 stoc. "e t)e a"guents o0 BenguetConsolidated, Inc. co""ect8

9eld' No. Benguet Consolidated is a co"o"ation )ic) oes its e7istence to +)iliine las and )as !een given"ig)ts and "ivileges unde" t)e said la. Co"olla"y, it also )as o!ligations unde" t)e la and one o0 t)ese is to0ollo valid legal cou"t o"de"s. It is not iune 0"o :udicial cont"ol !ecause it is doiciled )e"e in t)e+)iliines. BCI is a +)iliine co"o"ation oing 0ull allegiance and su!:ect to t)e un"est"icted :u"isdiction o0local cou"ts. Its s)a"es o0 stoc cannot t)e"e0o"e !e conside"ed in any ay as iune 0"o la0ul cou"t o"de"s.&u"t)e"o"e, to allo BCI6s oosition is to "ende" t)e cou"t o"de" against CTCN a e"e sc"a o0 ae". It illleave Tayag it)out any "eedy sily !ecause CTCN, a 0o"eign entity, "e0uses to coly it) a valid cou"to"de". T)e 0inal "ecou"se t)en is 0o" ou" local cou"ts to c"eate a legal 0iction suc) t)at t)e stoc ce"ti0icates in

issue !e decla"ed lost even t)oug) in "eality t)ey e7ist in t)e )ands o0 CTCN. T)is is valid. s )eld tie andagain, 0ictions )ic) t)e la ay "ely uon in t)e u"suit o0 legitiate ends )ave layed an io"tant a"t in itsdeveloent.

T)e a"guent invoed !y BCI t)at it can only issue ne stoc ce"ti0icates in acco"dance it) its !y-las isislaced. It is o"t) noting t)at CTCN did not aeal t)e o"de" o0 t)e cou"t. Instead, it sily "e0used to tu"nove" t)e stoc ce"ti0icates. 9ence, one"s)i can !e said to )ave !een settled in 0avo" o0 t)e estate o0 +e"ins int)e +)iliines. lso, assuing t)at t)e"e "eally is a con0lict !eteen BCI6s !y-las and t)e cou"t o"de", )ats)ould "evail is t)e la0ul cou"t o"de". It ould !e )ig)ly i""egula" i0 cou"t o"de"s ould yield to t)e !y-las o0 aco"o"ation.

;R/ Business Co". v. Ie"ial Insu"anceG.R. No. L-1#%#1, ;uly 31, 1#$4

&acts' +etitione" ;. R.


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against t)e etitione" co"o"ation. 0te" t)e de0endants t)e"ein )ave su!itted t)ei" nse", t)e a"ties ente"edinto a Co"oise g"eeent, assisted !y t)ei" "esective counsels, t)e e"tinent o"tions o0 )ic) "ecite'>?9@R@/, t)e


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9eld' No. na", et al., )ave no legal andFo" eDuita!le "ig)ts ove" t)e "oe"ties t)at a"e de"ived 0"o t)e"evious "egiste"ed one" )ic) is RI/C=, t)e e"tinent "ovision o0 t)e la is /ection 2 o0 t)e Co"o"ationCode Batas +a!ansa Blg. $%, )ic) states t)at Ha co"o"ation is an a"ti0icial !eing c"eated !y oe"ation o0la, )aving t)e "ig)t o0 succession and t)e oe"s, att"i!utes and "oe"ties e7"essly aut)o"ied !y la o"incident to its e7istence. s a conseDuence t)e"eo0, a co"o"ation )as a e"sonality sea"ate and distinct 0"ot)ose o0 its stoc)olde"s and ot)e" co"o"ations to )ic) it ay !e connected. T)us, e )ad "eviously "uled in(agsaysay-La!"ado" v. Cou"t o0 eals t)at t)e inte"est o0 t)e stoc)olde"s ove" t)e "oe"ties o0 t)e

co"o"ation is e"ely inc)oate and t)e"e0o"e does not entitle t)e to inte"vene in litigation involving co"o"ate"oe"ty. &u"t)e"o"e, t)e"e is no allegation, uc) less any "oo0, t)at t)e co"o"ate e7istence o0 RI/C= )asceased and t)e co"o"ate "oe"ty )as !een liDuidated and dist"i!uted to t)e stoc)olde"s. Je"ily, na", et al.,)o a"e stoc)olde"s o0 RI/C=, cannot clai one"s)i ove" t)e "oe"ties at issue in t)is case on t)e st"engt)o0 t)e (inutes, )ic), at ost, is e"ely evidence o0 a loan ag"eeent !eteen t)e and t)e coany. T)e"e isno indication o" even a suggestion t)at t)e one"s)i o0 said "oe"ties e"e t"ans0e""ed to t)e )ic) ould"eDui"e no less t)at t)e said "oe"ties !e "egiste"ed unde" t)ei" naes. &o" t)is "eason, t)e colaint s)ould !edisissed since na", et al., )ave no cause to see a Duieting o0 title ove" t)e su!:ect "oe"ties. t ost, )at

na", et al., )ad as e"ely a "ig)t to !e "eaid t)e aount loaned to RI/C=. n0o"tunately, t)e "ig)t to see"eayent o" "ei!u"seent o0 t)ei" cont"i!utions used to u"c)ase t)e su!:ect "oe"ties is al"eady !a""ed !y"esc"ition.

Doctrine o! Li$ited Lia%i#ity

9alley v. +"intellG.R. No. 15A54#, (ay 3*, 2*11

&acts' T)e etitione" as an inco"o"ato" and o"iginal di"ecto" o0 Business (edia +)iliines, Inc. B(+I, )ic),at its inco"o"ation on Nove!e" 12, 1#%A, )ad an aut)o"ied caital stoc o0 +3,***,***.** divided into3**,*** s)a"es eac) it) a a" value o0 +1*.** o0 )ic) A5,*** e"e initially su!sc"i!ed. +"intell engaged incoe"cial and indust"ial "inting. B(+I coissioned +"intell 0o" t)e "inting o0 t)e againe +)iliines,Inc. toget)e" it) "ae"s and su!sc"ition ca"ds t)at B(+I u!lis)ed and sold. &o" t)at u"ose, +"intelle7tended 3*-day c"edit accoodations to B(+I. In t)e e"iod 0"o =cto!e" 11, 1#%% until ;uly 12, 1#%#, B(+Ilaced it) +"intell seve"al o"de"s on c"edit, evidenced !y invoices and delive"y "eceits totaling +31$,342.A$.Conside"ing t)at B(+I aid only +25,***.**, +"intell sued B(+I on ;anua"y 2$, 1##* 0o" t)e collection o0 t)e

unaid !alance o0 +2#1,342.A$ in t)e RTC. =n &e!"ua"y %, 1##*, +"intell aended t)e colaint in o"de" toilead as de0endants all t)e o"iginal stoc)olde"s and inco"o"ato"s to "ecove" on t)ei" unaid su!sc"itions.(ay su!sc"ition to t)e caital stoc o0 a co"o"ation constitute a 0und to )ic) c"edito"s )ave a "ig)t to loo uto 0o" satis0action o0 t)ei" clais, and t)at t)e assignee in insolvency can aintain an action uon any unaidstoc su!sc"ition in o"de" to "ealie assets 0o" t)e ayent o0 its de!ts8

9eld' es. It is an esta!lis)ed doct"ine t)at su!sc"ition to t)e caital stoc o0 a co"o"ation constitute a 0und to)ic) c"edito"s )ave a "ig)t to loo u to 0o" satis0action o0 t)ei" clais, and t)at t)e assignee in insolvency canaintain an action uon any unaid stoc su!sc"ition in o"de" to "ealie assets 0o" t)e ayent o0 its de!ts.+"eised on t)e said doct"ine, an in0e"ence could !e ade t)at t)e 0unds, )ic) consists o0 t)e ayent o0su!sc"itions o0 t)e stoc)olde"s, is )e"e t)e c"edito"s can clai oneta"y conside"ations 0o" t)e satis0action o0t)ei" clais. I0 t)ese 0unds, )ic) oug)t to !e 0ully su!sc"i!ed !y t)e stoc)olde"s, e"e not aid o" "eainunaid t)en t)e c"edito"s )ave no ot)e" "ecou"se to collect 0"o t)e co"o"ation o0 its lia!ility. /uc) occu""enceas evident in t)e case at !a" )e"ein t)e aellants as stoc)olde"s 0ailed to 0ully ay t)ei" unaidsu!sc"itions, )ic) le0t t)e c"edito"s )elless in collecting t)ei" clai due to insu00iciency o0 0unds o0 t)eco"o"ation. Lieise, t)e clai o0 aellants t)at t)ey al"eady aid t)e unaid su!sc"itions could not !e giveneig)t !ecause said ayent did not "e0lect in t)e "ticles o0 Inco"o"ations o0 B(+I t)at t)e unaidsu!sc"itions e"e 0ully aid !y t)e aellants6 stoc)olde"s. &o" it is a "ule t)at a stoc)olde" ay !e sueddi"ectly !y c"edito"s to t)e e7tent o0 t)ei" unaid su!sc"itions to t)e co"o"ation.


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Doctrine o! "iercin& the 'ei# o! Corporate iction

Concet Builde"s, Inc. v. NLRCG.R. No. 1*%A34, (ay 2#,1##$

&acts' Concet Builde"s, Inc., CBI a doestic co"o"ation, is engaged in t)e const"uction !usiness )ileNo"!e"to (a"a!e, and 21 ot)e"s e"e eloyed !y said coany as la!o"e"s, ca"ente"s and "igge"s. =nNove!e" 1#%1, (a"a!e, et. al. e"e se"ved individual "itten notices o0 te"ination o0 eloyent !y CBI,e00ective on 3* Nove!e" 1#%1. It as stated in t)e individual notices t)at t)ei" cont"acts o0 eloyent )ade7i"ed and t)e "o:ect in )ic) t)ey e"e )i"ed )ad !een coleted. T)e National La!o" Relations CoissionNLRC 0ound it to !e, t)e 0act, )oeve", t)at at t)e tie o0 t)e te"ination o0 (a"a!e, et.al.Es eloyent, t)e"o:ect in )ic) t)ey e"e )i"ed )ad not yet !een 0inis)ed and coleted. gg"ieved, (a"a!e, et. al. 0iled acolaint 0o" illegal disissal, un0ai" la!o" "actice and non-ayent o0 t)ei" legal )oliday ay, ove"tie ay and

t)i"teent)-ont) ay against CBI. =n 1# 9++I "oe"ties located at CBI andFo" 9++I6s "eises8

9eld' It is a 0undaental "incile o0 co"o"ation la t)at a co"o"ation is an entity sea"ate and distinct 0"o itsstoc)olde"s and 0"o ot)e" co"o"ations to )ic) it ay !e connected. But, t)is sea"ate and distincte"sonality o0 a co"o"ation is e"ely a 0iction c"eated !y la 0o" convenience and to "oote :ustice. /o, )ent)e notion o0 sea"ate :u"idical e"sonality is used to de0eat u!lic convenience, :usti0y "ong, "otect 0"aud o"de0end c"ie, o" is used as a device to de0eat t)e la!o" las, t)is sea"ate e"sonality o0 t)e co"o"ation ay !edis"ega"ded o" t)e veil o0 co"o"ate 0iction ie"ced. T)is is t"ue lieise )en t)e co"o"ation is e"ely anad:unct, a !usiness conduit o" an alte" ego o0 anot)e" co"o"ation. T)e conditions unde" )ic) t)e :u"idical entityay !e dis"ega"ded va"y acco"ding to t)e eculia" 0acts and ci"custances o0 eac) case. No )a"d and 0ast "ulecan !e accu"ately laid don, !ut ce"tainly, t)e"e a"e soe "o!ative 0acto"s o0 identity t)at ill :usti0y t)ealication o0 t)e doct"ine o0 ie"cing t)e co"o"ate veil, to it' 1 /toc one"s)i !y one o" coonone"s)i o0 !ot) co"o"ationsK 2 Identity o0 di"ecto"s and o00ice"sK 3 T)e anne" o0 eeing co"o"ate !oosand "eco"dsK and 4 (et)ods o0 conducting t)e !usiness. T)e /@C en !anc e7lained t)e inst"uentality "ule)ic) t)e cou"ts )ave alied in dis"ega"ding t)e sea"ate :u"idical e"sonality o0 co"o"ations as ?)e"e oneco"o"ation is so o"ganied and cont"olled and its a00ai"s a"e conducted so t)at it is, in 0act, a e"einst"uentality o" ad:unct o0 t)e ot)e", t)e 0iction o0 t)e co"o"ate entity o0 t)e inst"uentality ay !edis"ega"ded. T)e cont"ol necessa"y to invoe t)e "ule is not a:o"ity o" even colete stoc cont"ol !ut suc)doination o0 instances, olicies and "actices t)at t)e cont"olled co"o"ation )as, so to sea, no sea"ateind, ill o" e7istence o0 its on, and is !ut a conduit 0o" its "incial. It ust !e et in ind t)at t)e cont"olust !e s)on to )ave !een e7e"cised at t)e tie t)e acts colained o0 too lace. (o"eove", t)e cont"ol and!"eac) o0 duty ust "o7iately cause t)e in:u"y o" un:ust loss 0o" )ic) t)e colaint is ade. T)e test indete"ining t)e alica!ility o0 t)e doct"ine o0 ie"cing t)e veil o0 co"o"ate 0iction is as 1 Cont"ol, not e"e


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a:o"ity o" colete stoc cont"ol, !ut colete doination, not only o0 0inances !ut o0 olicy and !usiness"actice in "esect to t)e t"ansaction attaced so t)at t)e co"o"ate entity as to t)is t"ansaction )ad at t)e tieno sea"ate ind, ill o" e7istence o0 its onK 2 /uc) cont"ol ust )ave !een used !y t)e de0endant to coit0"aud o" "ong, to e"etuate t)e violation o0 a statuto"y o" ot)e" ositive legal duty o" dis)onest and un:ust act incont"avention o0 lainti00Es legal "ig)tsK and 3 T)e a0o"esaid cont"ol and !"eac) o0 duty ust "o7iately causet)e in:u"y o" un:ust loss colained o0. T)e a!sence o0 any one o0 t)ese eleents "events ie"cing t)eco"o"ate veil. In alying t)e inst"uentality o" alte" ego doct"ine, t)e cou"ts a"e conce"ned it) "eality andnot 0o", it) )o t)e co"o"ation oe"ated and t)e individual de0endantEs "elations)i to t)at oe"ation. T)us

t)e Duestion o0 )et)e" a co"o"ation is a e"e alte" ego, a e"e s)eet o" ae" co"o"ation, a s)a o" asu!te"0uge is u"ely one o0 0act. 9e"e, )ile CBI claied t)at it ceased its !usiness oe"ations on 2# "il 1#%$,it 0iled an In0o"ation /)eet it) t)e /ecu"ities and @7c)ange Coission on 15 (ay 1#%A, stating t)at its o00iceadd"ess is at 355 (aysan Road, Jalenuela, (et"o (anila. =n t)e ot)e" )and, 9++I, t)e t)i"d-a"ty claiant,su!itted on t)e sae day, a siila" in0o"ation s)eet stating t)at its o00ice add"ess is at 355 (aysan Road,Jalenuela, (et"o (anila. &u"t)e", !ot) in0o"ation s)eets e"e 0iled !y t)e sae Ji"gilio =. Casio as t)eco"o"ate sec"eta"y o0 !ot) co"o"ations. Bot) co"o"ations )ad t)e sae "esident, t)e sae !oa"d o0 di"ecto"s,t)e sae co"o"ate o00ice"s, and su!stantially t)e sae su!sc"i!e"s. &"o t)e 0o"egoing, it aea"s t)at, aongot)e" t)ings, t)e CBI and t)e 9++I s)a"ed t)e sae add"ess andFo" "eises. nde" t)ese ci"custances, itcannot !e said t)at t)e "oe"ty levied uon !y t)e s)e"i00 e"e not o0 CBIEs. Clea"ly, CBI ceased its !usinessoe"ations in o"de" to evade t)e ayent to (a"a!e, et. al. o0 !ac ages and to !a" t)ei" "einstateent to t)ei"0o"e" ositions. 9++I is o!viously a !usiness conduit o0 CBI and its ee"gence as sill0ully o"c)est"ated toavoid t)e 0inancial lia!ility t)at al"eady attac)ed to CBI.

9alley v. +"intellG.R. No. 15A54#, (ay 3*, 2*11

&acts' T)e etitione" as an inco"o"ato" and o"iginal di"ecto" o0 Business (edia +)iliines, Inc. B(+I, )ic),at its inco"o"ation on Nove!e" 12, 1#%A, )ad an aut)o"ied caital stoc o0 +3,***,***.** divided into3**,*** s)a"es eac) it) a a" value o0 +1*.** o0 )ic) A5,*** e"e initially su!sc"i!ed. +"intell engaged incoe"cial and indust"ial "inting. B(+I coissioned +"intell 0o" t)e "inting o0 t)e againe +)iliines,Inc. toget)e" it) "ae"s and su!sc"ition ca"ds t)at B(+I u!lis)ed and sold. &o" t)at u"ose, +"intelle7tended 3*-day c"edit accoodations to B(+I. In t)e e"iod 0"o =cto!e" 11, 1#%% until ;uly 12, 1#%#, B(+Ilaced it) +"intell seve"al o"de"s on c"edit, evidenced !y invoices and delive"y "eceits totaling +31$,342.A$.Conside"ing t)at B(+I aid only +25,***.**, +"intell sued B(+I on ;anua"y 2$, 1##* 0o" t)e collection o0 t)e

unaid !alance o0 +2#1,342.A$ in t)e RTC. =n &e!"ua"y %, 1##*, +"intell aended t)e colaint in o"de" toilead as de0endants all t)e o"iginal stoc)olde"s and inco"o"ato"s to "ecove" on t)ei" unaid su!sc"itions.(ay t)e co"o"ate e"sonality o0 a co"o"ation !e dis"ega"ded in t)e given case8

9eld' es. lt)oug) a co"o"ation )as a e"sonality sea"ate and distinct 0"o t)ose o0 its stoc)olde"s,di"ecto"s, o" o00ice"s, suc) sea"ate and distinct e"sonality is e"ely a 0iction c"eated !y la 0o" t)e sae o0convenience and to "oote t)e ends o0 :ustice. T)e co"o"ate e"sonality ay !e dis"ega"ded, and t)eindividuals coosing t)e co"o"ation ill !e t"eated as individuals, i0 t)e co"o"ate entity is !eing used as acloa o" cove" 0o" 0"aud o" illegality, as a :usti0ication 0o" a "ong, as an alte" ego, an ad:unct, o" a !usinessconduit 0o" t)e sole !ene0it o0 t)e stoc)olde"s. s a gene"al "ule, a co"o"ation is looed uon as a legal entity,unless and until su00icient "eason to t)e cont"a"y aea"s. T)us, t)e cou"ts alays "esue good 0ait), and 0o"t)at "eason acco"d "ie io"tance to t)e sea"ate e"sonality o0 t)e co"o"ation, dis"ega"ding t)e co"o"atee"sonality only a0te" t)e "ongdoing is 0i"st clea"ly and convincingly esta!lis)ed. It t)us !e)ooves t)e cou"ts to!e ca"e0ul in assessing t)e ilieu )e"e t)e ie"cing o0 t)e co"o"ate veil s)all !e done. lt)oug) no)e"e in+"intells aended colaint o" in t)e testionies +"intell o00e"ed can it !e "ead o" in0e""ed 0"o t)at t)eetitione" as inst"uental in e"suading B(+I to "enege on its o!ligation to ayK o" t)at s)e induced +"intell toe7tend t)e c"edit accoodation !y is"e"esenting t)e solvency o0 B(+I to +"intell, )e" e"sonal lia!ility,toget)e" it) t)at o0 )e" co-de0endants, "eained !ecause t)e C 0ound )e" and t)e ot)e" de0endantstoc)olde"s to !e in c)a"ge o0 t)e oe"ations o0 B(+I at t)e tie t)e unaid o!ligation as t"ansacted andincu""ed. It 0ollos, t)e"e0o"e, t)at )et)e" o" not t)e etitione" e"suaded B(+I to "enege on its o!ligations toay, and )et)e" o" not s)e induced +"intell to t"ansact it) B(+I e"e not good de0enses in t)e suit.


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/iain @nte""ises v. Cue"tino Realty Co".G.R. No. 1A*A%2, ;une 22, 2**#

&acts' +etitione", /iain @nte""ises, Inc. o!tained a loan o0 +3A,***,***.** 0"o "esondent Cue"tino RealtyCo"o"ation Cue"tino cove"ed !y a "oisso"y note signed !y !ot) etitione"s and Cue"tinos "esective"esidents, Cua Le Leng and ?il0"edo Lua. To 2 days t)e"ea0te", t)e a"ties e7ecuted an aendent to t)e"oisso"y note )ic) "ovided 0o" a 1AM inte"est e" annu on t)e +3A,***,***.** loan. It as lieisesigned !y Cua Le Leng and ?il0"edo Lua on !e)al0 o0 etitione" and Cue"tino, "esectively. =n ugust 1$,1##5, Cua Le Leng signed a second "oisso"y note in 0avo" o0 Cue"tino 0o" +1$*,***,***.**. Cua Le Lengsigned t)e second "oisso"y note as ae", on !e)al0 o0 etitione", and as co-ae", lia!le to Cue"tino in )e"e"sonal caacity. 9oeve", eitione", "ote Cue"tino and deanded t)e "elease o0 t)e +1$*,***,***.** loaninc"ease cove"ed !y t)e aendent o0 "eal estate o"tgage. In t)e deand lette", etitione"s counsel statedt)at desite "eeated ve"!al deands, Cue"tino )ad yet to "elease t)e +1$*,***,***.** loan. In colete"e0utation, Cue"tino, lieise t)"oug) counsel, "esonded and denied t)at it )ad yet to "elease t)e+1$*,***,***.** loan. Cue"tino aintained t)at etitione" )ad long o!tained t)e "oceeds o0 t)e a0o"esaid

loan. Cue"tino decla"ed etitione"6s deand as ade to a!scond 0"o a :ust and valid o!ligation, a e"ea0te"t)oug)t, 0olloing Cue"tino6s lette" deanding ayent o0 t)e +3A,***,***.** loan cove"ed !y t)e 0i"st"oisso"y note )ic) !ecae ove"due on (a"c) 5, 1##$. Not su""isingly, Cue"tino instituted e7t"a:udicial0o"eclosu"e "oceedings ove" t)e "oe"ties su!:ect o0 t)e aended "eal estate o"tgage. 0te" t"ial, t)e RTC"ende"ed a decision disissing etitione"6s colaint. =n aeal, t)e C a00i"ed t)e "uling o0 t)e RTC. Indisissing etitione"s colaint and 0inding 0o" Cue"tino, !ot) t)e loe" cou"ts u)eld t)e validity o0 t)eaended "eal estate o"tgage. T)e RTC and t)e C gave c"edence to Cue"tino6s evidence t)at t)e+1$*,***,***.** "oceeds e"e t)e total aount "eceived !y etitione" and its a00iliate coanies ove" t)eyea"s 0"o ?il0"edo Lua, Cue"tino6s "esident. In t)is "ega"d, t)e loe" cou"ts alied t)e doct"ine o0 ie"cingt)e veil o0 co"o"ate 0iction to "eclude etitione" 0"o disavoing "eceit o0 t)e +1$*,***,***.** and aying itso!ligation unde" t)e aended "eal estate o"tgage. ?e"e t)e loe" cou"ts co""ect in alying t)e said doct"ine8

9eld' es. s a gene"al "ule, a co"o"ation ill !e deeed a sea"ate legal entity until su00icient "eason to t)e

cont"a"y aea"s. But t)e "ule is not a!solute. co"o"ation6s sea"ate and distinct legal e"sonality ay !edis"ega"ded and t)e veil o0 co"o"ate 0iction ie"ced )en t)e notion o0 legal entity is used to de0eat u!licconvenience, :usti0y "ong, "otect 0"aud, o" de0end c"ie. In t)is case, Cue"tino "esented ove")elingevidence t)at etitione" and its a00iliate co"o"ations )ad "eceived t)e "oceeds o0 t)e +1$*,***,***.** loaninc"ease )ic) as t)en ade t)e conside"ation 0o" t)e ended Real @state (o"tgage. &i"stly. s can !evieed 0"o t)e e7tant "eco"d o0 t)e instant case, Cua Leleng is t)e a:o"ity stoc)olde" o0 t)e t)"ee 3co"o"ations naely, uye (anu0actu"ing Co"o"ation, /iain T"anso"t, Inc., and /iain @nte""ises Inc., at t)esae tie t)e +"esident t)e"eo0. /econd. Being t)e a:o"ity stoc)olde" and t)e "esident, Cua Le leng )as t)eunliited oe", cont"ol and aut)o"ity it)out t)e a"oval 0"o t)e !oa"d o0 di"ecto"s to o!tain 0o" and in !e)al0o0 t)e Hetitione" co"o"ation 0"o HCue"tino t)e"e!y o"tgaging )e" :eel"ies, t)e condoinius o0 )e"coon la )us!and, l!e"to Li, t)e t"ucs "egiste"ed in t)e nae o0 Hetitione" co"o"ations siste" coany,/iain T"anso"t Inc., t)e su!:ect lots "egiste"ed in t)e nae o0 Hetitione" co"o"ation and )e" oil ill "oe"ty atIloilo City. nd, to aly t)e "oceeds t)e"eo0 in )ateve" ay s)e ants, to t)e "e:udice o0 t)e u!lic. s suc),etitione" co"o"ation is no estoed 0"o denying t)e a!ove aa"ent aut)o"ities o0 Cua Le Leng )o )olds)e"sel0 to t)e u!lic as ossessing t)e oe" to do t)ose acts, against any e"son )o dealt in good 0ait) as int)e case o0 Cue"tino.

uan Inte"national Co"o"ation v. 9on. o" ReyesG.R. No. 1%2A2#, /ete!e" 2#, 2*1*

&acts' uan, Inc. conducted a !idding 0o" t)e suly and installation o0 signages in a !uilding !eing const"uctedin (aati City. Roeo (. (o"ales tende"ed t)e inning !id and as aa"ded t)e +5 illion cont"act. /oe o0t)e ites in t)e "o:ect aa"d e"e late" e7cluded "esulting in t)e co""esonding "eduction o0 t)e cont"act "iceto +3,3%%,5*2.


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/)o"tc)anged, (o"ales 0iled a Colaint it) t)e RTC against uan, Inc. 0o" a su o0 oney. T)e RTC"ende"ed a


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caitaliation uon inco"o"ation in 1##A o0 uan, Inc. +aid-u caitaliation o0 +5,*** is not and s)ould not !etaen as a "e0lection o0 t)e 0i"s caacity to eet its "ecu""ent and long-te" o!ligations. It ust !e !o"ne inind t)at t)e eDuity o"tion cannot !e eDuated to t)e via!ility o0 a !usiness conce"n, 0o" t)e !est test is t)eo"ing caital )ic) consists o0 t)e liDuid assets o0 a given !usiness "elating to t)e natu"e o0 t)e !usinessconce"n. Neit)e" s)ould t)e level o0 aid-u caital o0 uan, Inc. uon its inco"o"ation !e vieed as a !adge o00"aud, 0o" it is in coliance it) /ec. 13 o0 t)e Co"o"ation Code, )ic) only "eDui"es a iniu aid-ucaital o0 +5,***. T)e suggestion t)at IC is !ut a continuation and successo" o0 uan, Inc., oned andcont"olled as t)ey a"e !y t)e sae stoc)olde"s, stands it)out 0actual !asis. It is t"ue t)at (ic)ael C)an ons

4*M o0 t)e outstanding caital stoc o0 !ot) co"o"ations. But suc) ci"custance, standing alone, is insu00icientto esta!lis) identity. T)e"e ust !e at least a su!stantial identity o0 stoc)olde"s 0o" !ot) co"o"ations in o"de" toconside" t)is 0acto" to !e constitutive o0 co"o"ate identity. It !ea"s "eite"ating t)at ie"cing t)e veil o0 co"o"ate0iction is 0"oned uon. cco"dingly, t)ose )o see to ie"ce t)e veil ust clea"ly esta!lis) t)at t)e sea"ateand distinct e"sonalities o0 t)e co"o"ations a"e set u to :usti0y a "ong, "otect 0"aud, o" e"et"ate adecetion. In t)e conc"ete and on t)e assution t)at t)e RTC )as validly acDui"ed :u"isdiction ove" t)e a"tyconce"ned, (o"ales oug)t to )ave "oved !y convincing evidence t)at uan, Inc. as collased and t)e"ea0te"IC u"osely 0o"ed and oe"ated to de0"aud )i.

oel v. atcoG.R. No. 4A$A3, =cto!e" 1*, 1#4$

&acts' oel +)iliines Inc. +I )as a caital stoc divided into t)ousand 1,*** s)a"es o0 +1** eac).oel Indust"ial Ca" and @Duient Coany IC@C, on t)e ot)e" )and, ons ##5 s)a"es o0 t)e total caitalstoc. IC@C is o"ganied unde" / las and not licensed to do !usiness in t)e +)iliines. T)e "eaining 0ive5 s)a"es only e"e and a"e oned one eac) !y o00ice"s o0 t)e +I. It aea"s t)at IC@C is t)e only 0o"eign"incial o0 +I. T)e +I co"o"ation !o"e alone incidental e7enses - as, 0o" instance, ca!le e7enses-not onlyt)ose o0 its on ca!les !ut also t)ose o0 its "incial. T)e +IEs s)a"e in t)e "o0its "ealied 0"o t)et"ansactions in )ic) it inte"vened as le0t vi"tually in t)e )ands o0 IC@C. ?)e"e d"a0ts e"e not aid !y t)eu"c)ase"s, t)e local !ans e"e inst"ucted not to "otest t)e !ut to "e0e" t)e to +I )ic) as 0ullyeoe"ed !y IC@C to inst"uct t)e !ans it) "ega"ds to disosition o0 t)e d"a0ts and docuents. ?)e"e t)egoods e"e @u"oean o"igin, consula" invoices, !ill o0 lading, and, in gene"al, t)e docuents necessa"y 0o"clea"ance e"e sent di"ectly to +I. I0 +I )ad in stoc t)e e"c)andise desi"ed !y local !uye"s, it iediately0illed t)e o"de"s o0 suc) local !uye"s and ade delive"y in t)e +)iliines it)out t)e necessity o0 ca!ling its"incial in e"ica eit)e" 0o" "ice Duotations o" con0i"ation o" "e:ection o0 t)at ag"eed uon !eteen it and t)e

!uye". ?)eneve" t)e delive"ies ade !y IC@C e"e incolete o" insu00icient to 0ill t)e local !uye"Es o"de"s,+I used to ae good t)e de0iciencies !y delive"ies 0"o its on local stoc, !ut in suc) cases it c)a"ged its"incial only t)e actual cost o0 t)e e"c)andise t)us delive"ed !y it 0"o its stoc and in suc) t"ansactions, +Idid not "ealie any "o0it. T)e C&I 0ound and )eld t)at +I is a e"e duy o" !"anc) o0 IC@C. T)e loe" cou"tdid not deny legal e"sonality to +I 0o" any and all u"oses, !ut in e00ect its conclusion as t)at, in t)et"ansactions involved )e"ein, t)e u!lic inte"est and convenience ould !e de0eated and )at ould aount to ata7 evasion e"et"ated, unless "eso"t is )ad to t)e doct"ine o0 dis"ega"d o0 t)e co"o"ate 0iction. ?as +I adoestic co"o"ation distinct and sea"ate 0"o, and not a e"e !"anc) o0 IC@C8

ONoPO+I as a e"e !"anc) o" agency o" duy o0 IC@C. T)e loe" cou"t did not )old t)at t)eco"o"ate e"sonality o0 +I ould also !e dis"ega"ded in ot)e" cases o" 0o" ot)e" u"oses. It ould )ave )adno oe" to do so. T)e cou"t6s action in t)is "ega"d ust !e con0ined to t)e t"ansactions involved in t)e case at!a" 0o" t)e u"ose o0 ad:udging t)e "ig)ts and lia!ilities o0 t)e a"ties in t)e case. T)ey )ave no :u"isdiction todo o"e. s a gene"al "ule, a co"o"ation ill !e looed uon as a legal entity and until su00icient "eason to t)econt"a"y aea"s )ile t)e e7cetion is t)at i0 t)e notion o0 legal entity is used to de0eat u!lic convenience,

:usti0y "ong, "otect 0"aud, o" de0end c"ie. In t)is case, t)e la ill "ega"d t)e co"o"ation as an association o0e"sons. (ani0estly, t)e "incile is t)e sae )et)e" t)e e"son !e natu"al o" a"ti0icial. ?)e"e it aea"s t)atto !usiness ente""ises a"e oned, conducted and cont"olled !y t)e sae a"ties, !ot) la and eDuity ill,)en necessa"y to "otect t)e "ig)ts o0 t)i"d e"sons, dis"ega"d t)e legal 0iction t)at to co"o"ations a"e distinctentities, and t"eat t)e as identical. T)e 0act t)at +I is a e"e !"anc) is conclusively !o"ne out !y t)e "oo0,aong ot)e"s, t)at t)e aount o0 t)e so-called s)a"e in t)e "o0its o0 +I as ultiately le0t to t)e sole,un!"idled cont"ol o0 IC@C. I0 +I as intended to 0unction as a !ona 0ide sea"ate co"o"ation, it cannot !eossi!le 0o" t)is a""angeent to !e adoted. No g"ou o0 !usinessen could !e e7ected to o"ganie ae"cantile co"o"ation i0 t)e aount o0 t)at "o0it e"e to !e su!:ected to suc) a unilate"al cont"ol o0 anot)e"co"o"ation, unless indeed t)e 0o"e" )as "eviously !een designed !y t)e inco"o"ato"s to se"ve as a e"e


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su!sidia"y, !"anc) o" agency o0 t)e latte".

9ei"s o0 &e Tan y v. Inte"national @7c)ange BanG.R. No. 1$$2%2, &e!"ua"y 13, 2*13

&acts' =n seve"al occasions, "esondent Inte"national @7c)ange Ban iBan, g"anted loans to 9ae"Ga"ents Co"o"ation 9ae", cove"ed !y "oisso"y notes and deeds o0 assignent. T)ese e"e adeu"suant to t)e Lette"-g"eeent !eteen iBan and 9ae", "e"esented !y its +"esident and Gene"al(anage", (anuel C)ua C)ua a..a. (anuel C)ua y +o Tiong, g"anting 9ae" a +25 (illion =ni!us Line.T)e loans e"e secu"ed !y a +# (illion Real @state (o"tgage e7ecuted on ;uly 1, 1##A !y Goldey


10/28

:usti0y t)e alication o0 t)e doct"ine o0 ie"cing t)e co"o"ate veil, as laid don in Concet Builde"s, Inc. vNLRC'

1 /toc one"s)i !y one o" coon one"s)i o0 !ot) co"o"ationsK2 Identity o0 di"ecto"s and o00ice"sK3 T)e anne" o0 eeing co"o"ate !oos and "eco"ds, and4 (et)ods o0 conducting t)e !usiness.41

T)ese 0acto"s a"e unDuestiona!ly "esent in t)e case o0 Goldey and 9ae", as o!se"ved !y t)e RTC, as0ollos'

1. Bot) co"o"ations a"e 0aily co"o"ations o0 de0endants (anuel C)ua and )is i0e &e Tan y.2. 9ae" Ga"ents and Goldey s)a"e t)e sae o00ice and "actically t"ansact t)ei" !usiness 0"o t)e saelace.3.


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as t)e "incial stoc)olde" o0 ?+(, "eco"ds do not s)o t)at ?+( as o"ganied and cont"olled, and itsa00ai"s conducted in a anne" t)at ade it e"ely an inst"uentality, agency, conduit o" ad:unct o0 (anlaa. s)eld in (a"tine v. Cou"t o0 eals, t)e e"e one"s)i !y a single stoc)olde" o0 even all o" nea"ly all o0 t)ecaital stocs o0 a co"o"ation is not !y itsel0 a su00icient g"ound to dis"ega"d t)e sea"ate co"o"ate e"sonality.To dis"ega"d t)e sea"ate :u"idical e"sonality o0 a co"o"ation, t)e "ongdoing ust !e clea"ly and convincinglyesta!lis)ed.

Lieise, t)e "eco"ds o0 t)e case do not suo"t t)e loe" cou"ts6 0inding t)at (anlaa )ad cont"ol o"

doination ove" ?+( o" its 0inances. T)at (anlaa concu""ently )eld t)e ositions o0 "esident, c)ai"an andt"easu"e", o" t)at t)e (anlaa6s "esidence is t)e "egiste"ed "incial o00ice o0 ?+(, a"e insu00icientconside"ations to "ove t)at )e )ad e7e"cised a!solute cont"ol ove" ?+(. In t)is connection, e st"ess t)at t)econt"ol necessa"y to invoe t)e inst"uentality o" alte" ego "ule is not a:o"ity o" even colete stoc cont"ol !utsuc) doination o0 0inances, olicies and "actices t)at t)e cont"olled co"o"ation )as, so to sea, no sea"ateind, ill o" e7istence o0 its on, and is !ut a conduit 0o" its "incial. T)e cont"ol ust !e s)on to )ave !eene7e"cised at t)e tie t)e acts colained o0 too lace. (o"eove", t)e cont"ol and !"eac) o0 duty ust"o7iately cause t)e in:u"y o" un:ust loss 0o" )ic) t)e colaint is ade.

9e"e, t)e "esondent 0ailed to "ove t)at (anlaa, acting as "esident, )ad a!solute cont"ol ove" ?+(. @veng"anting t)at )e e7e"cised a ce"tain deg"ee o0 cont"ol ove" t)e 0inances, olicies and "actices o0 ?+(, in vieo0 )is osition as "esident, c)ai"an and t"easu"e" o0 t)e co"o"ation, suc) cont"ol does not necessa"ily a""antie"cing t)e veil o0 co"o"ate 0iction since t)e"e as not a single "oo0 t)at ?+( as 0o"ed to de0"aud CLN o"

t)e "esondent, o" t)at (anlaa as guilty o0 !ad 0ait) o" 0"aud.

=n t)e cont"a"y, t)e evidence esta!lis)es t)at CLN and t)e "esondent ne and acted on t)e noledge t)att)ey e"e dealing it) ?+( 0o" t)e "enovation o0 t)e latte"6s "estau"ant, and not it) (anlaa. T)at ?+( late""eneged on its oneta"y o!ligation to CLN, "esulting to t)e 0iling o0 a civil case 0o" su o0 oney against t)e"esondent, does not autoatically indicate 0"aud, in t)e a!sence o0 any "oo0 to suo"t it.

T)is Cou"t also o!se"ved t)at t)e C 0ailed to deonst"ate )o t)e sea"ate and distinct e"sonality o0 ?+(as used !y (anlaa to de0eat t)e "esondent6s "ig)t 0o" "ei!u"seent. Neit)e" as t)e"e any s)oing t)at?+( atteted to avoid lia!ility o" )ad no "oe"ty against )ic) to "oceed.

/ince no )a" could !e said to )ave !een "o7iately caused !y (anlaa 0o" )ic) t)e latte" could !e )eldsolida"ily lia!le it) ?+(, and conside"ing t)at t)e"e as no "oo0 t)at ?+( )ad insu00icient 0unds, t)e"e as

no su00icient :usti0ication 0o" t)e RTC and t)e C to )ave "uled t)at (anlaa s)ould !e )eld :ointly and seve"allylia!le to t)e "esondent 0o" t)e aount s)e aid to CLN. 9ence, only ?+( is lia!le to indeni0y t)e "esondent.

&inally, e e)asie t)at t)e ie"cing o0 t)e veil o0 co"o"ate 0iction is 0"oned uon and t)us, ust !e doneit) caution. It can only !e done i0 it )as !een clea"ly esta!lis)ed t)at t)e sea"ate and distinct e"sonality o0 t)eco"o"ation is used to :usti0y a "ong, "otect 0"aud, o" e"et"ate a decetion. T)e cou"t ust !e ce"tain t)at t)eco"o"ate 0iction as isused to suc) an e7tent t)at in:ustice, 0"aud, o" c"ie as coitted against anot)e", indis"ega"d o0 its "ig)tsK it cannot !e "esued.

Lanua, ;". v. B& Co"o"ationG.R. No. 1A4#3%, =cto!e" 1, 2*14

&acts' In 1##3, B& Co"o"ation 0iled a collection colaint it) t)e Regional T"ial Cou"t against /)ang"i-La andt)e e!e"s o0 its !oa"d o0 di"ecto"s' l0"edo C. Raos, Ru0o B. Colayco, ntonio =. =l!es, Ge"a"do Lanua,;"., (a7io G. Licauco III, and Ben:ain C. Raos. B& Co"o"ation alleged in its colaint t)at on


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in !ad 0ait) in di"ecting /)ang"i-LaEs a00ai"s. T)e"e0o"e, t)ey s)ould !e )eld :ointly and seve"ally lia!le it)/)ang"i-La 0o" its o!ligations as ell as 0o" t)e daages t)at B& Co"o"ation incu""ed as a "esult o0 /)ang"i-LaEsde0ault. =n ;uly 2%, 2**3, t)e t"ial cou"t issued t)e o"de" di"ecting se"vice o0 deands 0o" a"!it"ation uon allde0endants in B& Co"o"ationEs colaint.cco"ding to t)e t"ial cou"t, /)ang"i-LaEs di"ecto"s e"e inte"esteda"ties )o >ust also !e se"ved it) a deand 0o" a"!it"ation to give t)e t)e oo"tunity to ventilate t)ei" sideo0 t)e cont"ove"sy, sa0egua"d t)ei" inte"est and 0end o00 t)ei" "esective ositions. /)ould etitione"s !e adea"ties to t)e a"!it"ation "oceedings, u"suant to t)e a"!it"ation clause "ovided in t)e cont"act !eteen B&Co"o"ation and /)ang"i-La8

9eld' es. s a gene"al "ule, a co"o"ationEs "e"esentative )o did not e"sonally !ind )isel0 o" )e"sel0 to ana"!it"ation ag"eeent cannot !e 0o"ced to a"ticiate in a"!it"ation "oceedings ade u"suant to an ag"eeentente"ed into !y t)e co"o"ation. 9e o" s)e is gene"ally not conside"ed a a"ty to t)at ag"eeent. 9oeve", t)e"ea"e instances )en t)e distinction !eteen e"sonalities o0 di"ecto"s, o00ice"s, and "e"esentatives, and o0 t)eco"o"ation, a"e dis"ega"ded. ?e call t)is ie"cing t)e veil o0 co"o"ate 0iction.

+ie"cing t)e co"o"ate veil is a""anted )en t)e sea"ate e"sonality o0 a co"o"ation is used as a eans toe"et"ate 0"aud o" an illegal act, o" as a ve)icle 0o" t)e evasion o0 an e7isting o!ligation, t)e ci"cuvention o0statutes, o" to con0use legitiate issues.%5It is also a""anted in alte" ego cases )e"e a co"o"ation is e"elya 0a"ce since it is a e"e alte" ego o" !usiness conduit o0 a e"son, o" )e"e t)e co"o"ation is so o"ganied andcont"olled and its a00ai"s a"e so conducted as to ae it e"ely an inst"uentality, agency, conduit o" ad:unct o0anot)e" co"o"ation.?)en co"o"ate veil is ie"ced, t)e co"o"ation and e"sons )o a"e no"ally t"eated as distinct 0"o t)e

co"o"ation a"e t"eated as one e"son, suc) t)at )en t)e co"o"ation is ad:udged lia!le, t)ese e"sons, too,!ecoe lia!le as i0 t)ey e"e t)e co"o"ation.

ong t)e e"sons )o ay !e t"eated as t)e co"o"ation itsel0 unde" ce"tain ci"custances a"e its di"ecto"sand o00ice"s.

?)en t)e"e a"e allegations o0 !ad 0ait) o" alice against co"o"ate di"ecto"s o" "e"esentatives, it !ecoes t)eduty o0 cou"ts o" t"i!unals to dete"ine i0 t)ese e"sons and t)e co"o"ation s)ould !e t"eated as one. ?it)out at"ial, cou"ts and t"i!unals )ave no !asis 0o" dete"ining )et)e" t)e veil o0 co"o"ate 0iction s)ould !e ie"ced.Cou"ts o" t"i!unals do not )ave suc) "io" noledge. T)us, t)e cou"ts o" t"i!unals ust 0i"st dete"ine )et)e"ci"custances e7ist to a""ant t)e cou"ts o" t"i!unals to dis"ega"d t)e distinction !eteen t)e co"o"ation andt)e e"sons "e"esenting it. T)e dete"ination o0 t)ese ci"custances ust !e ade !y one t"i!unal o" cou"t ina "oceeding a"ticiated in !y all a"ties involved, including cu""ent "e"esentatives o0 t)e co"o"ation, and

t)ose e"sons )ose e"sonalities a"e iliedly t)e sae as t)e co"o"ation. T)is is !ecause )en t)e cou"t o"t"i!unal 0inds t)at ci"custances e7ist a""anting t)e ie"cing o0 t)e co"o"ate veil, t)e co"o"ate "e"esentativesa"e t"eated as t)e co"o"ation itsel0 and s)ould !e )eld lia!le 0o" co"o"ate acts. T)e co"o"ationEs distincte"sonality is dis"ega"ded, and t)e co"o"ation is seen as a e"e agg"egation o0 e"sons unde"taing a !usinessunde" t)e collective nae o0 t)e co"o"ation.

9ence, )en t)e di"ecto"s, as in t)is case, a"e ileaded in a case against a co"o"ation, alleging alice o" !ad0ait) on t)ei" a"t in di"ecting t)e a00ai"s o0 t)e co"o"ation, colainants a"e e00ectively alleging t)at t)e di"ecto"sand t)e co"o"ation a"e not acting as sea"ate entities. T)ey a"e alleging t)at t)e acts o" oissions !y t)eco"o"ation t)at violated t)ei" "ig)ts a"e also t)e di"ecto"sE acts o" oissions. T)ey a"e alleging t)at cont"actse7ecuted !y t)e co"o"ation a"e cont"acts e7ecuted !y t)e di"ecto"s. Colainants e00ectively "ay t)at t)eco"o"ate veil !e ie"ced !ecause t)e cause o0 action !eteen t)e co"o"ation and t)e di"ecto"s is t)e sae.T)e issue o0 )et)e" t)e co"o"ationEs acts in violation o0 colainantEs "ig)ts, and t)e incidental issue o0)et)e" ie"cing o0 t)e co"o"ate veil is a""anted, s)ould !e dete"ined in a single "oceeding. /uc) 0indingould dete"ine i0 t)e co"o"ation is e"ely an agg"egation o0 e"sons )ose lia!ilities ust !e t"eated as oneit) t)e co"o"ation.

9oeve", )en t)e cou"ts dis"ega"d t)e co"o"ationEs distinct and sea"ate e"sonality 0"o its di"ecto"s o"o00ice"s, t)e cou"ts do not say t)at t)e co"o"ation, in all instances and 0o" all u"oses, is t)e sae as itsdi"ecto"s, stoc)olde"s, o00ice"s, and agents. It does not "esult in an a!solute con0usion o0 e"sonalities o0 t)eco"o"ation and t)e e"sons coosing o" "e"esenting it. Cou"ts e"ely discount t)e distinction and t"eat t)eas one, in "elation to a seci0ic act, in o"de" to e7tend t)e te"s o0 t)e cont"act and t)e lia!ilities 0o" all daagesto e""ing co"o"ate o00icials )o a"ticiated in t)e co"o"ationEs illegal acts. T)is is done so t)at t)e legal 0ictioncannot !e used to e"et"ate illegalities and in:ustices.


13/28

T)us, in cases alleging solida"y lia!ility it) t)e co"o"ation o" "aying 0o" t)e ie"cing o0 t)e co"o"ate veil,a"ties )o a"e no"ally t"eated as distinct individuals s)ould !e ade to a"ticiate in t)e a"!it"ation"oceedings in o"de" to dete"ine i0 suc) distinction s)ould indeed !e dis"ega"ded and, i0 so, to dete"ine t)ee7tent o0 t)ei" lia!ilities.

In t)is case, t)e "!it"al T"i!unal "ende"ed a decision, 0inding t)at B& Co"o"ation 0ailed to "ove t)e e7istence o0ci"custances t)at "ende" etitione"s and t)e ot)e" di"ecto"s solida"ity lia!le. It "uled t)at etitione"s and/)ang"i-LaEs ot)e" di"ecto"s e"e not lia!le 0o" t)e cont"actual o!ligations o0 /)ang"i-La to B& Co"o"ation. T)e

"!it"al T"i!unalEs decision as ade it) t)e a"ticiation o0 etitione"s, al!eit it) t)ei" continuing o!:ection. Invie o0 ou" discussion a!ove, e "ule t)at etitione"s a"e !ound !y suc) decision.

R(#es o! Attri%(tion

Lanua, ;". v. B& Co"o"ationG.R. No. 1A4#3%, =cto!e" 1, 2*14

&acts' In 1##3, B& Co"o"ation 0iled a collection colaint it) t)e Regional T"ial Cou"t against /)ang"i-La andt)e e!e"s o0 its !oa"d o0 di"ecto"s' l0"edo C. Raos, Ru0o B. Colayco, ntonio =. =l!es, Ge"a"do Lanua,

;"., (a7io G. Licauco III, and Ben:ain C. Raos. B& Co"o"ation alleged in its colaint t)at on


14/28

aount o0 +545,***.** as a"tial ayent 0o" t)e acDuisition o0 t)e su!:ect "oe"ty.


15/28

&acts' =n =cto!e" 1, 1#41, t)e "esondent co"o"ation, C)"iste"n 9uene0eld, Co., Inc., a0te" ayent o0co""esonding "eiu, o!tained 0"o t)e etitione", &iliinas Cia. de /egu"os, a 0i"e olicy in t)e su o0+1***,***, cove"ing e"c)andise contained in its !uilding. =n &e!"ua"y 2A, 1#42, o" du"ing t)e ;aaneseilita"y occuation, t)e !uilding and insu"ed e"c)andise e"e !u"ned. In due tie t)e "esondent su!itted tot)e etitione" its clai unde" t)e olicy. T)e salvage goods e"e sold at u!lic auction and a0te" deducting t)ei"value, t)e total loss su00e"ed !y t)e "esondent as 0i7ed at +#2,$5*. T)e etitione" "e0used to ay t)e clai ont)e g"ound t)at t)e olicy in 0avo" o0 t)e "esondent )ad ceased to !e in 0o"ce on t)e date t)e nited /tatesdecla"ed a" against Ge"any, t)e "esondent Co"o"ation t)oug) o"ganied unde" and !y vi"tue o0 t)e las o0

t)e +)iliines !eing cont"olled !y t)e Ge"an su!:ects and t)e etitione" !eing a coany unde" e"ican:u"isdiction )en said olicy as issued on =cto!e" 1, 1#41. T)e etitione", )oeve", in u"suance o0 t)e o"de"o0 t)e


16/28

2% &e!"ua"y 2**A. =n 2% &e!"ua"y 2**A, etitione" 0iled t)e instant etition 0o" "o)i!ition, in:unction, decla"ato"y"elie0, and decla"ation o0 nullity o0 sale o0 t)e 111,415 +TIC s)a"es. +etitione" clais, aong ot)e"s, t)at t)e saleo0 t)e 111,415 +TIC s)a"es ould "esult in an inc"ease in &i"st +aci0ic6s coon s)a"e)oldings in +L


17/28

daages in t)e su!stantial aount o0 +1*,***,***.**. T)e aa"d as t)us also seculative and )isical. Liet)e actual daages, t)e o"al daages constituted anot)e" :udicial ise di7it, t)e inevita!le conseDuence o0)ic) as to "ende" t)e aa"d o0 o"al daages incaa!le o0 attaining 0inality. In addition, t)e g"ant o0 o"aldaages in t)at anne" cont"avened t)e la t)at e"itted t)e "ecove"y o0 o"al daages as t)e eans toassuage >)ysical su00e"ing, ental anguis), 0"ig)t, se"ious an7iety, !esi"c)ed "eutation, ounded 0eelings,o"al s)oc, social )uiliation, and siila" in:u"y. T)e cont"avention o0 t)e la as ani0est conside"ing t)at/te"n Builde"s, as an a"ti0icial e"son, as incaa!le o0 e7e"iencing ain and o"al su00e"ings. ssuing t)at ing"anting t)e su!stantial aount o0 +1*,***,***.** as o"al daages, t)e RTC ig)t )ave )ad in ind t)at

dela C"u )ad )isel0 su00e"ed ental anguis) and an7iety. I0 t)at as t)e case, t)en t)e RTC o!viouslydis"ega"ded )is sea"ate and distinct e"sonality 0"o t)at o0 /te"n Builde"s. (o"eove", )is o"al and eotionalsu00e"ings as t)e +"esident o0 /te"n Builde"s e"e not t)e su00e"ings o0 /te"n Builde"s. Lastly, t)e RTC violatedt)e !asic "incile t)at o"al daages e"e not intended to en"ic) t)e lainti00 at t)e e7ense o0 t)e de0endant,!ut to "esto"e t)e lainti00 to )is status Duo ante as uc) as ossi!le. Taen toget)e", t)e"e0o"e, all t)eseconside"ations e7osed t)e su!stantial aount o0 +1*,***,***.** alloed as o"al daages not only to !e0actually !aseless and legally inde0ensi!le, !ut also to !e unconsciona!le, ineDuita!le and un"easona!le

B/-CBN B"oadcasting Co". v. CG.R. No. 12%$#*, ;anua"y 21, 1###

&acts' In 1##*, B/-CBN and Jiva e7ecuted a &il @7)i!ition g"eeent )e"e!y Jiva gave B/-CBN an

e7clusive "ig)t to e7)i!it soe Jiva 0ils. Jiva, t)"oug) de0endant Jicente


18/28

Duino t)en issued to e7ecutive o"de"s in 1#%$ and u"suant t)e"eto, a seDuest"ation and a taeove" o"de"e"e issued against Bataan /)iya"d @nginee"ing Co., Inc. B/@C=. B/@C= as alleged to !e inactuality oned and cont"olled !y t)e (a"coses t)"oug) t)e Roualde 0aily, and in tu"n, t)"oug) duystoc)olde"s. T)e seDuest"ation o"de" issued in 1#%$ "eDui"ed, aong ot)e"s, t)at B/@C= "oduce co"o"ate"eco"ds 0"o 1#A3 to 1#%$ unde" ain o0 contet o0 t)e +CGG i0 it 0ails to do so. B/@C= assails t)is o"de" asit ave"s, aong ot)e"s, t)at it is against B/@C=6s "ig)t against sel0 inc"iination and un"easona!le sea"c)esand seiu"es. Is t)e a"guent B/@C= co""ect8

9eld' No. &i"st o0 all, +CGG )as t)e "ig)t to "eDui"e t)e "oduction o0 suc) docuents u"suant to t)e oe"g"anted to it. /econd, and o"e io"tantly, "ig)t against sel0-inc"iination )as no alication to :u"idicale"sons. T)e"e is a "ese"ve "ig)t in t)e legislatu"e to investigate t)e cont"acts o0 a co"o"ation and 0ind out)et)e" it )as e7ceeded its oe"s. It ould !e a st"ange anoaly to )old t)at a state, )aving c)a"te"ed aco"o"ation lie B/@C= to ae use o0 ce"tain 0"anc)ises, could not, in t)e e7e"cise o0 sove"eignty, inDui"e)o t)ese 0"anc)ises )ad !een eloyed, and )et)e" t)ey )ad !een a!used, and deand t)e "oduction o0t)e co"o"ate !oos and ae"s 0o" t)at u"ose. Neit)e" is t)e "ig)t against un"easona!le sea"c)es andseiu"es alica!le )e"e. T)e"e e"e no sea"c)es ade and no seiu"e u"suant to any sea"c) as eve" ade.B/@C= as e"ely o"de"ed to "oduce t)e co"o"ate "eco"ds.

Bac)e Co. +)ils Inc. v. RuiG.R. No. L-324*#, &e!"ua"y 2A, 1#A1

&acts' =n &e!"ua"y 24, 1#A*, "esondent (isael +. Je"a, Coissione" o0 Inte"nal Revenue, "ote a lette"add"essed to "esondent ;udge Jivencio (. Rui "eDuesting t)e issuance o0 a sea"c) a""ant against etitione"s0o" violation o0 /ection 4$a o0 t)e National Inte"nal Revenue Code, in "elation to all ot)e" e"tinent "ovisionst)e"eo0, a"ticula"ly /ections 53, A2, A3, 2*% and 2*#, and aut)o"iing Revenue @7aine" Rodol0o de Leon, oneo0 )e"ein "esondents, to ae and 0ile t)e alication 0o" sea"c) a""ant )ic) as attac)ed to t)e lette". In t)ea0te"noon o0 t)e 0olloing day, &e!"ua"y 25, 1#A*, "esondent lt)oug), 0o" t)e "easons a!ove stated, e a"e o0 t)e oinion t)at an o00ice" o0 a co"o"ation )ic) isc)a"ged it) a violation o0 a statute o0 t)e state o0 its c"eation, o" o0 an act o0 Cong"ess assed in t)e e7e"cise o0its constitutional oe"s, cannot "e0use to "oduce t)e !oos and ae"s o0 suc) co"o"ation, e do not is) to!e unde"stood as )olding t)at a co"o"ation is not entitled to iunity, unde" t)e 4t) endent, againstun"easona!le sea"c)es and seiu"es. co"o"ation is, a0te" all, !ut an association o0 individuals unde" anassued nae and it) a distinct legal entity. In o"ganiing itsel0 as a collective !ody it aives no constitutionaliunities a"o"iate to suc) !ody. Its "oe"ty cannot !e taen it)out coensation. It can only !e"oceeded against !y due "ocess o0 la, and is "otected, unde" t)e 14t) endent, against unla0uldisc"iination. 9ale v. 9enel, 2*1 ./. 43, 5* L. ed. $52.

>In Linn v. nited /tates, 1$3 C.C.. 4A*, 251 &ed. 4A$, 4%*, it as t)oug)t t)at a di00e"ent "ule alied to aco"o"ation, t)e g"ound t)at it as not "ivileged 0"o "oducing its !oos and ae"s. But t)e "ig)ts o0 a


19/28

co"o"ation against unla0ul sea"c) and seiu"e a"e to !e "otected even i0 t)e sae "esult ig)t )ave !eenac)ieved in a la0ul ay. /ilve"t)o"ne Lu!e" Coany, @t. l. v. nited /tates o0 e"ica, 251 ./. 3%5, $4L. ed. 31#.

In /tone)ill, @t. l. v.


20/28

!an 0o" t)e issuance o0 coe"cial lette"s o0 c"edit to 0inance its io"tation o0 asso"ted goods. nde" t)e"eceits, etitione" ag"eed to )old t)e goods in t"ust 0o" t)e said !an, it) aut)o"ity to sell !ut not !y ay o0conditional sale, ledge o" ot)e"iseK and in case suc) goods e"e sold, to tu"n ove" t)e "oceeds t)e"eo0 assoon as "eceived, to aly against t)e "elative accetances and ayent o0 ot)e" inde!tedness to "esondent!an. In case t)e goods "eained unsold it)in t)e seci0ied e"iod, t)e goods e"e to !e "etu"ned to"esondent !an it)out any need o0 deand. T)us, said >goods, anu0actu"ed "oducts o" "oceeds t)e"eo0,)et)e" in t)e 0o" o0 oney o" !ills, "eceiva!les, o" accounts sea"ate and caa!le o0 identi0ication e"e"esondent !an6s "oe"ty. ?)en t)e t"ust "eceits atu"ed, etitione" 0ailed to "etu"n t)e goods to "esondent

!an, o" to "etu"n t)ei" value aounting to +$,#4*,2%*.$$ desite deands. T)us, t)e !an 0iled a c"iinalcolaint 0o" esta0a$ against etitione" in t)e =00ice o0 t)e City +"osecuto" o0 (anila. Is C)ing t)e one c"iinallylia!le8

9eld' es. T)e"e is no disute t)at it as C)ing )o e7ecuted t)e 13 t"ust "eceits. T)e la oints to )i as t)ee"son "esonsi!le 0o" t)e o00ense. /ince a co"o"ation cannot !e "oceeded against c"iinally !ecause itcannot coit a c"ie in )ic) e"sonal violence o" alicious intent is "eDui"ed, c"iinal action is liited to t)eco"o"ate agents guilty o0 an act aounting to a c"ie and neve" against t)e co"o"ation itsel0. T)e e7ecution !yC)ing o0 "eceits is enoug) to indict )i as t)e o00icial "esonsi!le 0o" violation o0 +< 115. RCBC is estoed tostill contend t)at +< 115 cove"s only goods )ic) a"e ultiately destined 0o" sale and not goods, lie t)oseio"ted !y +B(, 0o" use in anu0actu"e. (o"eove", +< 115 e7licitly allos t)e "osecution o0 co"o"ateo00ice"s it)out "e:udice to t)e civil lia!ilities a"ising 0"o t)e c"iinal o00ense6 t)us, t)e civil lia!ility iosed on"esondent in t)e RCBC vs. Cou"t o0 eals case is clea"ly sea"ate and distinct 0"o )is c"iinal lia!ility unde"

+< 115. C)ing !eing a /enio" Jice-+"esident o0 t)e +)iliine Blooing (ills does not e7culate )i 0"o anylia!ility. T)e c"ie de0ined in +.


21/28

cylinde"s as actually unde"0illed. =n 2% "il 2**4, gent


22/28

!ased on t)e assessent 0o" delinDuent "eal "oe"ty ta7es ade !y t)en +a"aaDue City ssesso" /oledad(edina Cue 0o" ta7 yea"s 2**1 and 2**2. Is +R an inco"o"ated inst"uentality o0 t)e National Gove"nent,and as suc) is e7et 0"o ayent o0 "eal "oe"ty ta78

9eld' es. G=CC ust !e o"ganied as a stoc o" non-stoc co"o"ation )ile an inst"uentality is vested!y la it) co"o"ate oe"s. Lieise, )en t)e la aes a gove"nent inst"uentality oe"ationallyautonoous, t)e inst"uentality "eains a"t o0 t)e National Gove"nent ac)ine"y alt)oug) not integ"atedit) t)e dea"tent 0"aeo". ?)en t)e la vests in a gove"nent inst"uentality co"o"ate oe"s, t)e

inst"uentality does not necessa"ily !ecoe a co"o"ation. nless t)e gove"nent inst"uentality is o"ganiedas a stoc o" non-stoc co"o"ation, it "eains a gove"nent inst"uentality e7e"cising not only gove"nental!ut also co"o"ate oe"s.

To "eDuisites ust concu" !e0o"e one ay !e classi0ied as a stoc co"o"ation, naely' 1 t)at it )as caitalstoc divided into s)a"esK and 2 t)at it is aut)o"ied to dist"i!ute dividends and allotents o0 su"lus and "o0itsto its stoc)olde"s. I0 only one "eDuisite is "esent, it cannot !e "oe"ly classi0ied as a stoc co"o"ation. s 0o"non-stoc co"o"ations, t)ey ust )ave e!e"s and ust not dist"i!ute any a"t o0 t)ei" incoe to saide!e"s.

In t)e case at !enc), +R is not a G=CC !ecause it is neit)e" a stoc no" a non-stoc co"o"ation. It cannot !econside"ed as a stoc co"o"ation !ecause alt)oug) it )as a caital stoc divided into no a" value s)a"es as"ovided in /ection A o0 +.


23/28

no valid o" legal !asis in ta7ing t)e su!:ect "eclaied lands anaged !y +R.

Collecto" o0 Inte"nal Revenue v. Clu! &iliinoG.R. No. L-12A1#, (ay 31, 1#$2

&acts' s 0ound !y t)e Cou"t o0 Ta7 eals, t)e Clu! &iliino, Inc. de Ce!u, Clu!, 0o" s)o"t, is a civicco"o"ation o"ganied unde" t)e las o0 t)e +)iliines it) an o"iginal aut)o"ied caital stoc o0 +22,***.**,)ic) as su!seDuently inc"eased to +2**,***.**. Neit)e" in t)e a"ticles o" !y-las is t)e"e a "ovision "elative

to dividends and t)ei" dist"i!ution, alt)oug) it is covenanted t)at uon its dissolution, t)e Clu!Es "eainingassets, a0te" aying de!ts, s)all !e donated to a c)a"ita!le +)iliine Institution in Ce!u. T)e Clu! ons andoe"ates a clu! )ouse, a !oling alley, a gol0 cou"se on a lot leased 0"o t)e gove"nent, and a !a"-"estau"ant)e"e it sells ines and liDuo"s, so0t d"ins, eals and s)o"t o"de"s to its e!e"s and t)ei" guests. T)e !a"-"estau"ant as a necessa"y incident to t)e oe"ation o0 t)e clu! and its gol0-cou"se. T)e clu! is oe"ated ainlyit) 0unds de"ived 0"o e!e"s)i 0ees and dues. ?)ateve" "o0its it )ad, e"e used to de0"ay its ove")eade7enses and to i"ove its gol0-cou"se. In 1#51. as a "esult o0 a caital su"lus, a"ising 0"o t)e "e-valuation o0its "eal "oe"ties, t)e value o" "ice o0 )ic) inc"eased, t)e Clu! decla"ed stoc dividendsK !ut no actual cas)dividends e"e dist"i!uted to t)e stoc)olde"s. In 1#52, a BIR agent discove"ed t)at t)e Clu! )as neve" aide"centage ta7 on t)e g"oss "eceits o0 its !a" and "estau"ant, alt)oug) it secu"ed B-4, B-#a and B-A licenses.In a lette" dated


24/28

>inso0a" as it c"eates t)e +NRC as a "ivate co"o"ation and conseDuently "uled t)at >t)e +NRC s)ouldinco"o"ate unde" t)e Co"o"ation Code and "egiste" it) t)e /ecu"ities and @7c)ange Coission i0 it ants to!e a "ivate co"o"ation. Is t)e o00ice o0 t)e C)ai"an o0 t)e +)iliine National Red C"oss a gove"nent o00iceo" an o00ice in a gove"nent-oned o" cont"olled co"o"ation 0o" u"oses o0 t)e "o)i!ition in /ection 13, "ticleJI o0 t)e 1#%A Constitution8

9eld' No. National /ocieties suc) as t)e +NRC act as au7ilia"ies to t)e u!lic aut)o"ities o0 t)ei" on count"iesin t)e )uanita"ian 0ield and "ovide a "ange o0 se"vices including disaste" "elie0 and )ealt) and social

"og"aes. National /ociety a"taes o0 a sui gene"is c)a"acte". It is a "otected coonent o0 t)e RedC"oss oveent unde" "ticles 24 and 2$ o0 t)e &i"st Geneva Convention, esecially in ties o0 a"ed con0lict.T)ese "ovisions "eDui"e t)at t)e sta00 o0 a National /ociety s)all !e "esected and "otected in allci"custances. /uc) "otection is not o"dina"ily a00o"ded !y an inte"national t"eaty to o"dina"y "ivate entities o"even non-gove"nental o"ganisations NG=s. T)is sui gene"is c)a"acte" is also e)asied !y t)e &ou"t)Geneva Convention )ic) )olds t)at an =ccuying +oe" cannot "eDui"e any c)ange in t)e e"sonnel o"st"uctu"e o0 a National /ociety. National societies a"e t)e"e0o"e o"ganiations t)at a"e di"ectly "egulated !yinte"national )uanita"ian la, in cont"ast to ot)e" o"dina"y "ivate entities, including NG=s. In addition, National/ocieties a"e not only o00icially "ecognied !y t)ei" u!lic aut)o"ities as volunta"y aid societies, au7ilia"y to t)eu!lic aut)o"ities in t)e )uanita"ian 0ield, !ut also !ene0it 0"o "ecognition at t)e Inte"national level. T)is isconside"ed to !e an eleent distinguis)ing National /ocieties 0"o ot)e" o"ganisations ainly NG=s and ot)e"0o"s o0 )uanita"ian "esonse. T)e au7ilia"y status o0 a Red C"oss /ociety eans t)at it is at one and t)esae tie a "ivate institution and a u!lic se"vice o"ganiation !ecause t)e ve"y natu"e o0 its o" ilies

cooe"ation it) t)e aut)o"ities, a lin it) t)e /tate. In ca""ying out t)ei" a:o" 0unctions, Red C"oss /ocietiesgive t)ei" )uanita"ian suo"t to o00icial !odies, in gene"al )aving la"ge" "esou"ces t)an t)e /ocieties, o"ingtoa"ds coa"a!le ends in a given secto".It is in "ecognition o0 t)is sui gene"is c)a"acte" o0 t)e +NRC t)at R.. No. #5 )as "eained valid and e00ective0"o t)e tie o0 its enactent in (a"c) 22, 1#4A unde" t)e 1#35 Constitution and du"ing t)e e00ectivity o0 t)e1#A3 Constitution and t)e 1#%A Constitution.

T)e +NRC is a non-"o0it, dono"-0unded, volunta"y, )uanita"ian o"ganiation, )ose ission is to !"ing tiely,e00ective, and coassionate )uanita"ian assistance 0o" t)e ost vulne"a!le it)out conside"ation o0nationality, "ace, "eligion, gende", social status, o" olitical a00iliation. T)e +NRC "ovides si7 a:o" se"vices'Blood /e"vices,


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a su!sidia"y t)e"eo0, as succinctly e7lained in t)e


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3*.A e"cent to 3A e"cent, and t)is, co!ined it) ;aanese NTT


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eit)e" coel o" "e0use t)e "edetion o0 its stoc. &u"t)e"o"e, t)e te"s and conditions set 0o"t) t)e"ein uset)e o"d ay. It is a settled doct"ine in statuto"y const"uction t)at t)e o"d ay denotes disc"etion, andcannot !e const"ued as )aving a andato"y e00ect. T)e "edetion o0 said s)a"es cannot !e alloed.

2 No. Bot) /ection 1$ o0 t)e Co"o"ation La and /ection 43 o0 t)e "esent Co"o"ation Code "o)i!it t)eissuance o0 any stoc dividend it)out t)e a"oval o0 stoc)olde"s, "e"esenting not less t)an to-t)i"ds 2F3o0 t)e outstanding caital stoc at a "egula" o" secial eeting duly called 0o" t)e u"ose. T)ese "ovisionsunde"sco"e t)e 0act t)at ayent o0 dividends to a stoc)olde" is not a atte" o0 "ig)t !ut a atte" o0 consensus.

&u"t)e"o"e, inte"est !ea"ing stocs, on )ic) t)e co"o"ation ag"ees a!solutely to ay inte"est !e0o"edividends a"e aid to coon stoc)olde"s, is legal only )en const"ued as "eDui"ing ayent o0 inte"est asdividends 0"o net ea"nings o" su"lus only. In coelling t)e !an to "edee t)e s)a"es and to ay t)eco""esonding dividends, t)e T"ial coitted g"ave a!use o0 disc"etion aounting to lac o" e7cess o0

:u"isdiction in igno"ing !ot) t)e te"s and conditions seci0ied in t)e stoc ce"ti0icate, as ell as t)e clea"andate o0 t)e la.

Corporate Contract Law

Lanua v. CG.R. No. 1313#4, (a"c) 2%, 2**5

&acts' In 1#52, t)e +)iliine (e"c)ant (a"ine /c)ool, Inc. +((/I as inco"o"ated, it) A** 0ounde"s6

s)a"es and A$ coon s)a"es as its initial caital stoc su!sc"ition "e0lected in t)e a"ticles o0 inco"o"ation.=n"u!ia et. al, )o e"e in cont"ol o0 +((/I "egiste"ed t)e coany6s stoc and t"ans0e" !oo 0o" t)e 0i"st tiein 1#A%, "eco"ding 33 coon s)a"es as t)e only issued and outstanding s)a"es o0 +((/I. In 1#A#, a secialstoc)olde"s6 eeting as called and )eld on t)e !asis o0 )at as conside"ed as a Duo"u o0 2A coons)a"es, "e"esenting o"e t)an 2F3 o0 t)e coon s)a"es issued and outstanding. In 1#%2, ;uan cayan, one o0t)e )ei"s o0 t)e inco"o"ato"s 0iled a etition 0o" t)e "egist"ation o0 t)ei" "oe"ty "ig)ts !e0o"e t)e /@C coosingo0 ove" 12* 0ounde"s6 s)a"es and 12 coon s)a"es oned !y t)ei" 0at)e". T)e /@C 9ea"ing =00ice" dec"eedt)at t)e )ei"s o0 cayan e"e entitled to t)e claied s)a"es and called 0o" a secial stoc)olde"s6 eeting toelect a ne set o0 o00ice"s. T)e /@C en !anc a00i"ed t)e decision. s a "esult, t)e s)a"es o0 cayan e"e"eco"ded in t)e stoc and t"ans0e" !oo. =n (ay $, 1##2, a secial stoc)olde"s6 eeting as )eld to elect ane set o0 di"ecto"s. =n"u!ia et al 0iled a etition it) /@C Duestioning t)e validity o0 said eeting alleging t)att)e Duo"u 0o" t)e said eeting s)ould not !e !ased on t)e 1$5 issued and outstanding s)a"es as e" t)e stocand t"ans0e" !oo, !ut on t)e initial su!sc"i!ed caital stoc o0 seven )und"ed seventy-si7 AA$ s)a"es, as

"e0lected in t)e 1#52 "ticles o0 Inco"o"ation. Is t)e !asis o0 a Duo"u 0o" a stoc)olde"s6 eeting t)eoutstanding caital stoc as indicated in t)e a"ticles o0 inco"o"ation8

9eld' es. T)e "ticles o0 Inco"o"ation de0ine t)e c)a"te" o0 t)e co"o"ation and t)e cont"actual "elations)is!eteen t)e /tate and t)e co"o"ation, t)e stoc)olde"s and t)e /tate, and !eteen t)e co"o"ation and itsstoc)olde"s. Its contents a"e !inding, not only on t)e co"o"ation, !ut also on its s)a"e)olde"s. stoc andt"ans0e" !oo, on t)e t)e ot)e" )and, "eco"ds t)e naes and add"esses o0 all stoc)olde"s a""angedal)a!etically, t)e installents aid and unaid on all stoc 0o" )ic) su!sc"ition )as !een ade, and t)e dateo0 ayent t)e"eo0K a stateent o0 eve"y alienation, sale o" t"ans0e" o0 stoc ade, t)e date t)e"eo0 and !y andto )o adeK and suc) ot)e" ent"ies as ay !e "esc"i!ed !y la. It is necessa"y as a easu"e o0 "ecaution,e7ediency and convenience since it "ovides t)e only ce"tain and accu"ate et)od o0 esta!lis)ing t)e va"iousco"o"ate acts and t"ansactions and o0 s)oing t)e one"s)i o0 stoc and lie atte". It is not o0 u!lic "eco"d,and t)us is not e7clusive evidence o0 t)e atte"s and t)ings )ic) o"dina"ily a"e o" s)ould !e "itten t)e"ein. Int)is case, t)e a"ticles o0 inco"o"ation indicate t)at at t)e tie o0 inco"o"ation, t)e inco"o"ato"se"e !ona 0ide stoc)olde"s o0 A** 0ounde"s6 s)a"es and A$ coon s)a"es. 9ence, at t)at tie, t)eco"o"ation )ad AA$ issued and outstanding s)a"es. cco"ding to /ec. 52 o0 t)e Co" Code, >a Duo"u s)allconsist o0 t)e stoc)olde"s "e"esenting a a:o"ity o0 t)e outstanding caital stoc. s suc), Duo"u is !asedon t)e totality o0 t)e s)a"es )ic) )ave !een su!sc"i!ed and issued, )et)e" it !e 0ounde"s6 s)a"es o" coons)a"es. T)e"e0o"e, to !ase t)e coutation o0 Duo"u solely on t)e o!viously de0icient, i0 not inaccu"ate stocand t"ans0e" !oo, and coletely dis"ega"ding t)e issued and outstanding s)a"es as indicated in t)e a"ticles o0inco"o"ation ould o" in:ustice to t)e one"s andFo" successo"s in inte"est o0 t)e said s)a"es. T)e stoc andt"ans0e" !oo o0 +((/I cannot !e used as t)e sole !asis 0o" dete"ining t)e Duo"u as it does not "e0lect t)etotality o0 s)a"es )ic) )ave !een su!sc"i!ed, o"e so )en t)e a"ticles o0 inco"o"ation s)o a signi0icantlyla"ge" aount o0 s)a"es issued and outstanding as coa"ed to t)at listed in t)e stoc and t"ans0e" !oo. =ne)o is actually a stoc)olde" cannot !e denied )is "ig)t to vote !y t)e co"o"ation e"ely !ecause t)e co"o"ate


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o00ice"s 0ailed to ee its "eco"ds accu"ately. co"o"ation6s "eco"ds a"e not t)e only evidence o0 t)e one"s)io0 stoc in a co"o"ation. It is no less t)an t)e a"ticles o0 inco"o"ation t)at decla"e t)e inco"o"ato"s to )ave int)ei" nae t)e 0ounde"s and seve"al coon s)a"es. T)us, to dis"ega"d t)e contents o0 t)e a"ticles o0inco"o"ation ould !e to "etend t)at t)e !asic docuent )ic) legally t"igge"ed t)e c"eation o0 t)e co"o"ationdoes not e7ist and acco"dingly to allo g"eat in:ustice to !e caused to t)e inco"o"ato"s and t)ei" )ei"s.

@7cellent Quality a"el, Inc. v. ?in (ulti Ric) Builde"s, Inc.G.R. No. 1A5*4%, &e!"ua"y 1*, 2**#

&acts' =n 2$ (a"c) 1##$, etitione" @7cellent Quality a"el, Inc. t)en "e"esented !y (a7 L.&. ing, Jice-+"esident 0o" +"oductions, and l0ie"o R. ="den, T"easu"e", ente"ed into a cont"act it) (ulti-Ric) Builde"s (ulti-Ric) "e"esented !y ?ilson G. C)ua C)ua, its +"esident and Gene"al (anage", 0o" t)e const"uction o0 aga"ent 0acto"y it)in t)e Cavite +)iliine @conoic Uone ut)o"ity C+@U. T)e du"ation o0 t)e "o:ect as0o" a a7iu e"iod o0 0ive 5 ont)s o" 15* consecutive calenda" days. T)e const"uction o0 t)e 0acto"y!uilding as coleted on 2A Nove!e" 1##$. Resondent ?in (ulti-Ric) Builde"s, Inc. ?in as inco"o"atedit) t)e /ecu"ities and @7c)ange Coission /@C on 2* &e!"ua"y 1##A it) C)ua as its +"esident andGene"al (anage". =n 2$ ;anua"y 2**4, ?in 0iled a colaint 0o" a su o0 oney against etitione" and (". ingaounting to +%,$34,44%.2*. It also "ayed 0o" t)e issuance o0 a "it o0 attac)ent claiing t)at (". ing asa!out to a!scond and t)at etitione" as a!out to close. In t)e )ea"ing )eld on 1* &e!"ua"y 2**4, t)e counsel o0?in oved t)at its nae in t)e case !e c)anged 0"o >?in (ulti-Ric) Builde"s, Inc. to >(ulti-Ric) Builde"s,Inc. It as only t)en t)at etitione" aa"ently !ecae aa"e o0 t)e va"iance in t)e nae o0 t)e lainti00. In t)e

Rely 0iled !y etitione", it oved to disiss t)e case since ?in as not t)e cont"acto" and neit)e" a a"ty to t)econt"act, t)us it cannot institute t)e case. +etitione" o!tained a Ce"ti0icate o0 Non-Regist"ation o0Co"o"ationF+a"tne"s)i 0"o t)e /@C )ic) ce"ti0ied t)at t)e latte" did not )ave any "eco"ds o0 a (ulti-Ric)Builde"s, Inc. (o"eove", ?in in its Re:oinde" did not oose t)e allegations in t)e Rely. ?in aditted t)at itas only inco"o"ated on 2* &e!"ua"y 1##A )ile t)e const"uction cont"act as e7ecuted on 2$ (a"c) 1##$.Lieise, it aditted t)at at t)e tie o0 e7ecution o0 t)e cont"act, (ulti-Ric) as a "egiste"ed sole "o"ieto"s)iand as issued a !usiness e"it !y t)e =00ice o0 t)e (ayo" o0 (anila. Is ?in a "eal a"ty in inte"est8

9eld' No. T)e"e is no la aut)o"iing sole "o"ieto"s)is to 0ile a suit in cou"t. sole "o"ieto"s)i does notossess a :u"idical e"sonality sea"ate and distinct 0"o t)e e"sonality o0 t)e one" o0 t)e ente""ise. T)e lae"ely "ecognies t)e e7istence o0 a sole "o"ieto"s)i as a 0o" o0 !usiness o"ganiation conducted 0o" "o0it!y a single individual and "eDui"es its "o"ieto" o" one" to secu"e licenses and e"its, "egiste" its !usinessnae, and ay ta7es to t)e national gove"nent. T)e la does not vest a sea"ate legal e"sonality on t)e sole

"o"ieto"s)i o" eoe" it to 0ile o" de0end an action in cou"t. T)e o"iginal etition as instituted !y ?in, )ic)is a /@C-"egiste"ed co"o"ation. It 0iled a collection o0 su o0 oney suit )ic) involved a const"uction cont"actente"ed into !y etitione" and (ulti-Ric), a sole "o"ieto"s)i. T)e counsel o0 ?in anted to c)ange t)e naeo0 t)e lainti00 in t)e suit to (ulti-Ric). T)e c)ange cannot !e countenanced. T)e lainti00 in t)e collection suit isa co"o"ation. T)e nae cannot !e c)anged to t)at o0 a sole "o"ieto"s)i.

?)e"e an individual o" sole t"ade" o"ganies a co"o"ation to tae ove" )is !usiness and all )is assets, and it!ecoes in e00ect e"ely an alte" ego o0 t)e inco"o"ato", t)e co"o"ation, eit)e" on t)e g"ounds o0 iliedassution o0 t)e de!ts o" on t)e g"ounds t)at t)e !usiness is t)e sae and is e"ely !eing conducted unde" ane guise, is lia!le 0o" t)e inco"o"ato"Es "ee7isting de!ts and lia!ilities. Clea"ly, )e"e t)e co"o"ation assueso" accets t)e de!t o0 its "edecesso" in !usiness it is lia!le and i0 t)e t"ans0e" o0 assets is in 0"aud o0 c"edito"s itill !e lia!le to t)e e7tent o0 t)e assets t"ans0e""ed. T)e co"o"ation is not lia!le on an ilied assution o0de!ts 0"o t)e "eceit o0 assets )e"e t)e inco"o"ato" "etains su00icient assets to ay t)e inde!tedness, o")e"e none o0 )is assets a"e t"ans0e""ed to t)e co"o"ation, o" )e"e, alt)oug) all t)e assets o0 t)e inco"o"ato")ave !een t"ans0e""ed, t)e"e is a c)ange in t)e e"sons ca""ying on t)e !usiness and t)e co"o"ation is note"ely an alte" ego o0 t)e e"son to )ose !usiness it succeeded.

In o"de" 0o" a co"o"ation to !e a!le to 0ile suit and clai t)e "eceiva!les o0 its "edecesso" in !usiness, in t)iscase a sole "o"ieto"s)i, it ust s)o "oo0 t)at t)e co"o"ation )ad acDui"ed t)e assets and lia!ilities o0 t)esole "o"ieto"s)i. ?in could )ave easily "esented o" attac)ed any docuent e.g., deed o0 assignent )ic)ill s)o )et)e" t)e assets, lia!ilities and "eceiva!les o0 (ulti-Ric) e"e acDui"ed !y ?in. 9aving !een givent)e oo"tunity to "e!ut t)e allegations ade !y etitione", ?in 0ailed to use t)at oo"tunity. T)us, e cannot"esue t)at (ulti-Ric) is t)e "edecesso"-in-!usiness o0 ?in and )old t)at t)e latte" )as standing to institutet)e collection suit.

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