1. Philippine National Bank vs.

Court of Appeals
FACTS: Rita Tapino owes PNB an amount of P2,000.00. The amount is secured by her sugar
crops about to be harvested including her export quota allocation worth 1,000 piculs. The said
export quota was later dealt by Tapnio to a certain Jacobo Tuazon at P2.50 per picul or a total of
P2,500. Since the subject of the deal is mortgaged with PNB, the latter has to approve it. The
branch manager of PNB recommended that the price should be at P2.80 per picul which was the
prevailing minimum amount allowable. Tapnio and Tuazon agreed to the said amount. And so
the bank manager recommended the agreement to the vice president of PNB. The vice president
in turn recommended it to the board of directors of PNB.

However, the Board of Directors wanted to raise the price to P3.00 per picul. This Tuazon does
not want hence he backed out from the agreement. This resulted to Tapnio not being able to
realize profit and at the same time rendered her unable to pay her P2,000.00 crop loan which
would have been covered by her agreement with Tuazon.

Eventually, Tapnio was sued by her other creditors and Tapnio filed a third party complaint
against PNB where she alleged that her failure to pay her debts was because of PNB’s negligence
and unreasonableness.

ISSUE: Whether or not PNB is liable to Tapino

HELD: Yes PNB is liable to Tapnio. PNB argue that it has a right both under its own Charter and
under the Corporation Law, to approve or disapprove the said lease of sugar quota and in the
exercise of that authority.

A corporation is civilly liable in the same manner as natural persons for torts, because “generally
speaking, the rules governing the liability of a principal or master for a tort committed by an
agent or servant are the same whether the principal or master be a natural person or a
corporation, and whether the servant or agent be a natural or artificial person.

All of the authorities agree that a principal or master is liable for every tort which he expressly
directs or authorizes, and this is just as true of a corporation as of a natural person a corporation
is liable, therefore, whenever a tortious act is committed by an officer or agent under express
direction or authority from the stockholders or members acting as a body, or, generally, from the
directors as the governing body.”

 Art. 21 of the Civil Code: any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall compensate the latter
for the damage.
2. Sia vs. People No. L-30896. April 28, 1983

FACTS: Jose Sia, President and General Manager of the Metal Manufacturing of the Philippines
Inc. (MEMAP) and on behalf of said company, obtained delivery of 150 MT Cold Rolled Steel
Sheets under a trust receipt agreement which where consigned to the Continental Bank, under the
express obligation on the part of said accused of holding the said steel sheets in trust and selling
them and turning over the proceeds to the Continental Bank, however, Sia did not comply with
his obligation and with intent to defraud, failed and refused to return the said cold rolled sheets
or account for the proceeds thereof, thus, Sia misappropriated the proceeds into his personal use
and benefits.

ISSUE: whether petitioner Jose O. Sia, having only acted for and in behalf of the Metal
Manufacturing Company of the Philippines (Metal Company, for short) as President thereof in
dealing with the complainant, the Continental Bank, (Bank for short) he may be liable for the
crime charged.

HELD: Acquitted. An officer of a corporation can be held criminally liable for acts or omissions
done in behalf of the corporation only where the law directly requires the corporation to do an
act in a given manner.

The performance of the act is an obligation directly imposed by the law on the corporation. Since
it is a responsible officer or officers of the corporation who actually perform the act for the
corporation, they must of necessity be the ones to assume the criminal liability; otherwise this
liability as created by the law would be illusory, and the deterrent effect of the law, negated.

In the absence of a law making a corporate officer liable for a criminal offense committed by the
corporation, the existence of criminal liability of the former may not be said to be beyond doubt.
The intention of the parties must be ascertained in such a situation to determine if criminal
liability was intended to result.

In the present case, a distinction is to be found with the Tan Boon Kong case in that the act
alleged to be a crime is not in the performance of an act directly ordained by law to be performed
by the corporation. The act is imposed by agreement of parties, as a practice observed in the
usual pursuit of a business or a commercial transaction
In the absence of a express provision of law making the petitioner liable for the criminal offense
committed by the corporation of which he is a president as in fact there is no such provisions in
the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal
liability on his part may not be said to be beyond any doubt

3. People vs. Concepcion

FACTS: Venancio Concepcion, President PNB, Appari branch and a member of the Board
thereof, authorized an extension of credit in favour of Puno Concepcion through telegram and a
letter of confirmation who was a co-partner where Conception is a partner. Subsequently,
Conception was charged and found guilty in the CFI of Cagayan with violation of Section 35 of
Act no 2747 which provides that the National Bank shall not, directly or indirectly, grant loans to
any of the members of the board of directors of the bank nor to agents of the branch banks.
Counsel for the defense argue that the documents of record do not prove that authority to make a
loan was given, but only show the concession of a credit. They averred that the granting of a
credit to the co-partnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President
of the Philippine National Bank, is not a "loan" within the meaning of section 35 of Act No.
2747
ISSUE: W/N Defendant can be convicted of violating Sections of Act No. 2747
HELD:
When the corporation itself is forbidden to do an act, the prohibition extends to the board of
directors, and to each director separately and individually.
Where an Act of the Legislature which penalizes an offense repeals a former Act which
penalized the same offense, such repeal does not have the effect of thereafter depriving the courts
of jurisdiction to try, convict, and sentence offenders charged with violations of the old law.
Under section 35 of Act No. 2747, criminal intent is not necessarily material. The doing of the
inhibited act, inhibited on account of public policy and public interest, constitutes the crime.
Judgement Affirmed.
4. Albert vs. University Publishing Co., Inc. No. L-19118. January 30, 1965.
FACTS: Petitioner sued Respondent Corporation. Petitioner alleged that the corporation was
duly organized and existing under the laws of the Philippines entered into a contract for the
exclusive right to publish his Commentaries and the Revised Penal Code and for his share in
previous sale of the books for 30,000, after payment made by the respondent to petitioner in 8th
quarterly installments, respondent failed to pay the second installments. CFI ruled in favour of
the petitioner and issued writ of execution, however plaintiff’s counsel and the Sheriff of Manila
discovered that there is no such entity as University Publishing Co., Inc. Petitioner filed a
petition which was countered by the respondent through manifestation stating that Jose Aruego is
not a party to the case, hence, plaintiff’s petition should be denied. The court denied the petition
and from this, petitioner has appealed.
Defendant admitted plaintiff’s allegation of defendant’s corporate existence; admitted the
execution and terms of the contract; but alleged it was the petitioner who breached the contract
by failing to deliver his manuscript.
ISSUE: Whether or not there was a due process was observed.
HELD:
One who has induced another to act upon his wilful misrepresentation that a corporation was
duly organized and existing under the law, cannot thereafter set up against his victim the
principle of corporation by estoppel.
A person acting or purporting to act on behalf of a corporation which has no valid existence
assumes such privileges and obligations and becomes personally liable for contracts entered into
or for other acts performed as such agent.
In a suit against a corporation with no valid existence the person who had and exercised
the rights to control the proceedings, to make defense, to adduce and cross-examine
witnesses, and to appeal from a decision, is the real defendant, and .the enforcement of a
judgment against the corporation upon him is substantial observance of due process of law.
By ‘due process of law’ we mean ‘“a law which hears before it condemns; which proceeds upon
inquiry, and renders judgment only after trial.
5. Smith, Bell & Co. vs. Natividad. [No. 15574. September 17, 1919.]
FACTS: Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a motor
vessel known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons
gross. The Bato was brought to Cebu in the present year for the purpose of transporting plaintiff's
merchandise between ports in the Islands. Application was made at Cebu, the home port of the
vessel, to the Collector of Customs for a certificate of Philippine registry. The Collector refused
to issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd.,
were not citizens either of the United States or of the Philippine Islands under Act no 2761.
Counsel says that Act no 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the laws
because it in effect prohibits the corporation from owning vessels, and because classification of
corporations based on citizenship of one or more of their stockholders is capricious, and that Act
no 2761 deprives the corporation of its property without due process of law because by the
passage of the law, company was automatically deprived of every beneficial attribute of
ownership in the Bato and left with the naked title to a boat it could not use.
ISSUE: Whether the legislature through Act no 2176 can deny registry of vessel with foreign
stockholders.
HELD: Yes. We are inclined to the view that while Smith, Bell & Co., Ltd, a corporation having
alien stockholders, is entitled to the protection afforded by the due-process of law and equal
protection of the laws clause of the Philippine Bill of rights, nevertheless, Act no 2761 of the
Philippine Legislature, in denying to corporation such as Smith, Belll & Co, the right to register
vessel in the Philippines coastwise trade, does not belong to the vicious species of class of
legislation which must always be condemned, but does fall within authorized exceptions,
notably within the purview of the police power, and so does not offend against the
constitutional provision.
Act No. 2761 does not violate the provisions of paragraph 1 of section 3 of the Act of Congress
of August 29, 1916, providing "that no law shall be enacted in said Islands which shall deprive
any person of life, liberty, or property without due process of law, or deny to any person therein
the equal protection of the laws."
The guaranties of the Fourteenth Amendment and so of the first paragraph of the Philippine Bill
of Rights, are universal in their application to all persons within the territorial jurisdiction,
without regard to any differences of race, color, or nationality. The word "person" includes
aliens. Private corporations are "persons" within the scope of the guaranties in so far as their
property is concerned. Classification with the end in view of providing diversity of treatment
may be made among corporation, but must be based upon some reasonable and not be a mere
arbitrary selection.
Equal protection simply requires that all persons or things similarly situated should be treated alike, both
as to rights conferred and responsibilities imposed
6. Stonehill vs. Diokno No. L-19550. June 19, 1967.
FACTS: Petitioners, who have prior deportation cases pending, and the corporation they form
were alleged to committed "violation of Central Bank Laws, Tariff and Customs Laws, Internal
Revenue (Code) and the Revised Penal Code,” to which they were served 42 search warrants,
directing any peace officer to search petitioners’ persons and/or premises of their offices,
warehouses and/or residences for: “books of accounts, financial records, vouchers,
correspondence, receipts, ledgers, journals, portfolios, credit journals, typewriters, and other
documents and/or papers showing all business transactions including disbursements receipts,
balance sheets and profit and loss statements and Bobbins (cigarette wrappers).”

The items allegedly illegally obtained can be classified into two groups: (1) those found and
seized in the offices of aforementioned corporations, and (2) those found in petitioners’
residences.
Petitioners aver that the warrant is illegal for, inter alia: (1) they do not describe with
particularity the documents, books and things to be seized; (2) cash money, not mentioned in the
warrants, were actually seized; (3) the warrants were issued to fish evidence against the
aforementioned petitioners in deportation cases filed against them; (4) the searches and seizures
were made in an illegal manner; and (5) the documents, papers and cash money seized were not
delivered to the courts that issued the warrants, to be disposed of in accordance with law x x x.

Respondent-prosecutors invoke the Moncado vs People’s Court ruling: even if the searches and
seizures under consideration were unconstitutional, the documents, papers and things thus seized
are admissible in evidence against petitioners herein.
.
Issue: Whether the search warrants in question, and the searches and seizures made under the
authority thereof, are valid or not

Held: 
The SC ruled in favor of Stonehill et. al., reversing the Moncado doctrine. Though Stonehill et.
al. are not the proper parties to assail the validity of the search warrant issued against their
corporation and thus they have no cause of action (only the officers or board members of said
corporation may assail said warrant, and that corporations have personalities distinct from
petitioners’ personalities), the 3 warrants issued to search petitioners’ residences are hereby
declared void. Thus, the searches and seizures made therein are made illegal.

The constitution protects the people’s right against unreasonable search and seizure. It provides:

(1) that no warrant shall issue but upon probable cause, to be determined by the judge in the
manner set forth in said provision; and
(2) that the warrant shall particularly describe the things to be seized.

In the case at bar, none of these are met.

The warrant was issued from mere allegation that petitioners committed a “violation of Central
Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code.” As no
specific violation has been alleged, it was impossible for the judges who issued said
warrants to have found the existence of probable cause, for the same presupposes the
introduction of competent proof that the party against whom it is sought has performed or
committed violations of the law. In other words, it would be a legal heresy, of the highest
order, to convict anybody of a “violation of Central Bank Laws, Tariff and Customs Laws,
Internal Revenue (Code) and Revised Penal Code,” — as alleged in the aforementioned
applications — without reference to any determinate provision of said laws or codes.
General warrants are also to be eliminated, as the legality or illegality of petitioners’ transactions
is immaterial to the invalidity of the general warrant that sought these effects to be searched and
seized: “Books of accounts, financial records, vouchers, journals, correspondence, receipts,
ledgers, portfolios, credit journals, typewriters, and other documents and/or papers showing all
business transactions including disbursement receipts, balance sheets and related profit and loss
statements.”

The Court also holds that the only practical means of enforcing the constitutional injunction
against unreasonable searches and seizures is, in the language of the Federal Supreme Court: x x
x If letters and private documents can thus be seized and held and used in evidence against
a citizen accused of an offense, the protection of the 4th Amendment, declaring his rights to
be secure against such searches and seizures, is of no value, and, so far as those thus placed
are concerned, might as well be stricken from the Constitution. The efforts of the courts and
their officials to bring the guilty to punishment, praiseworthy as they are, are not to be
aided by the sacrifice of those great principles established by years of endeavor and suffering
which have resulted in their embodiment in the fundamental law of the land

7. Tayag vs. Benguet Consolidated, Inc. No. L-23145. November 29, 1968.
FACTS: Idonah Slade Perkins died in 1960 with County Trust & Co. of New York as her
domiciliary administrator & left, among others, 2 stock certificates covering 33, 002 shares of
stock of appellant Benguet Consolidated, Inc. –
Renato Tayag, as ancilliary administrator in the Philippines, requested County Trust to surrender
to ancilliary administrator the stock certificates to satisfy the legitimate claims of local creditors.
However, County Trust refused.
The lower court then presided by Judge Santos ruled that : 1. stock certificates are considered
lost for all purposes of admin. & liquidation of the Philippine estate of Perkins 2. said certificates
are cancelled 3. directs said corp. To issue new certificates in lieu thereof, the same to be
delivered by said corp. to either Tayag or the Probate division of this court.
An appeal was taken not by County Trust, as domiciliary admin., but by Benguet on the ground
that the certificates of stock are existing and in possession of County Trust. They also assert that
there was a failure to observe certain requirements of its by-laws before new stock certificates
could be issued.
ISSUE: Whether or not the appeal will prosper.
HELD: The Court held that the appeal cannot prosper.
Corporation is an artificial being created by operation of law. It owes it life to the state its birth
being purely dependent on its will.
A corporation as known to Philippine jurisprudence is a creature without any existence
until it has received the imprimatur of the state acting according to law. It is logically
inconceivable therefore that it will have rights and privileges of a higher priority than that
of its creator. More than that, it cannot legitimately refuse to yield obedience to acts of its state
organs, certainly not excluding the judiciary. whenever called upon .to do so.
A corporation is not in fact and in reality a person, but the law treats it as though it were a person
by process of fiction, or by regarding it as an artificial icial person distinct and separate from its
individual stockholders (1 Fletcher, Cyclopedia Corporations, pp. 19-20)
Corporate by-laws must yield to judicial order –
As a matter of fact, a corp. once it comes into being comes more often w/n the ken of the
judiciary than the other two coordinate branches. It institutes the appropriate court action to
enforce its right. Correlatively, it is not immune from judicial control in those instances, where a
duty under the law as ascertained in an appropriate legal proceeding is cast upon it.

8. Umali vs. Court of Appeals G.R. No. 89561. September 13, 1990.
FACTS: The Castillos are the owners of a parcel of land which was given as security for a loan
from the DBP. However the same were foreclosed due to failure of payment. Santiago Rivera,
nephew of Mauricia Castillo, proposed to them the conversion into subdivision of the 4 parcels
of land adjacent to the mortgaged property to raise the necessary fund. It was accepted by the
Castillos and a MOA was executed by and between Slobec Realty and Development, Inc.,
represented by its President Santiago Rivera and the Castillo family. Rivera promised to pay the
Castill0 P70,000.00 after the execution of the agreement and an additional P400,000 after it has
been converted. Rivera purchased from Mr. Modesto Cervantes, President of Bormaheco 2
tractors.
Bormaheco, Inc. and Slobec represented by Rivera, executed a Sales Agreement over 1 unit of
Caterpillar Tractor. Slobec, through Rivera, executed in favor of Bormaheco a Chattel Mortgage
over the said equipment as security for the payment of a remaining balance of P180k. As further
security of the balance, Slobec obtained from Insurance Corporation of the Phil. a Surety Bond.
The surety bond was secured by an Agreement of Counter-Guaranty with Real Estate Mortgage
executed by Rivera as president of Slobec and Mauricia Castillo and her children, as mortgagors
and ICP as mortgagee. In giving the bond, ICP required that the Castillos mortgage to them the
properties in question.
Meanwhile, for violation of the terms and conditions of the Counter-Guaranty Agreement, the
properties of the Castillos were foreclosed by ICP As the highest bidder. ICP sold to PM Parts
the 4 parcels of land.
ISSUES: Whether or not the foreclosure is proper so as to apply the doctrine of piercing the veil
of corporate entity.
HELD:
No. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore
exists, the legal fiction that a corporation is an entity with a juridical personality separate and
distinct from its members or stockholders may be disregarded. In such cases, the corporation will
be considered as a mere association of persons. The members or stockholders of the corporation
will be considered as the corporation, that is, liability will attach directly to the officers and
stockholders.
The doctrine applies when the corporate fiction is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, on when it is made as a shield to confuse the legitimate
issues or where a corporation is the 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.

In the case at bar, petitioners seek to pierce the veil of corporate entity of Bormaheco, ICP and
PM parts, alleging that these corporations employed fraud in causing the foreclosure and
subsequent sale of the real properties belonging to petitioners while we do not discount the
possibility of existence of fraud in the foreclosure proceeding, neither are we inclined to apply
the doctrine invoked by petitioners in granting the relief sought. It is our considered opinion that
piercing the veil of corporate entity is not the proper remedy in order that the foreclosure
proceeding may be declared a nullity under the circumstances obtaining in the legal case at bar.

First, the legal corporate entity is disregarded only if it is sought to hold the officers and
stockholders directly liable for a corporate debt or obligation. Petitioners do not seek to
impose a claim against the individual members of the corporations involved; on the
contrary, it is these corporations which desire to enforce an alleged right against petitioners.
Assuming that petitioners were indeed defrauded by private respondents in the foreclosure of the
mortgaged properties, this fact alone is not, under the circumstances, sufficient to justify the
piercing of the corporate fiction, since petitioners do not intend to hold the officers and/or
members of respondent corporations personally liable therefor. Petitioners are merely seeking the
declaration of the nullity of the foreclosure sale, which relief may be obtained without having to
disregard the aforesaid corporate fiction attaching to respondent corporations.

Secondly, petitioners failed to establish by clear and convincing evidence that private
respondents were purposely formed and operated, and thereafter transacted with
petitioners, with the sole intention of defrauding the latter
The mere fact, therefore, that the business of two or more corporations are interrelated is
not a justification for disregarding their separate personalities, absent sufficient showing
that the corporate entity was purposely used as a shield to defraud creditors and third
persons of their rights.

9. Claparols vs. CIR No.L-30822. July 31, 1975

FACTS: Private respondent (Allied workers Association) filed a complaint on account of
dismissal of workers against herein petitioner Claparols on the grounds of unfair labor practices.
CIR (Court of Industrial Relations) found Mr. Claparols guilty of union busting and of having
dismissed complainants because of Union Activities, and ordered him to pay the workers
backwages and their reinstatement. However, petitioners averred that Claparols could not
personally reinstate the workers and that assuming the workers are entitled to backwages, the
same should be limited to three months only, and that since Claparols Steel Corporation ceased
to operate on December 7 1962, re-employment of the workers cannot go beyond said date.
Workers alleged that Claparols Steel and Nail Plant and Calparols steel corporation, are on and
the corporation controlled by Eduardo Claparols; the latter corporation succeeding the former.
ISSUE: Whether or not the corporate veil be pierced.
HELD:
Respondent Court’s findings that indeed the Claparols Steel and Nail Plant, which ceased
operation of June 30, 1957, was SUCCEEDED by the Claparols Steel Corporation effective the
next day, July 1, 1957 up to December 7, 1962, when the latter finally ceased to operate, were
not disputed by petitioners. It is very clear that the latter corporation was a continuation and
successor of the first entity, and its emergence was skillfully timed to avoid the financial liability
that already attached to its predecessor, the Claparols Steel and Nail Plant. Both predecessors and
successor were owned and controlled by petitioner Eduardo Claparols and there was no break in
the succession and continuity of the same business. This “avoiding-the-liability” scheme is very
patent, considering that 90% of the subscribed shares of stocks of the Claparols Steel
Corporation (the second corporation) was owned by respondent (herein petitioner) Claparols
himself, and all the assets of the dissolved Claparols Steel and Nail Plant were turned over to the
emerging Claparols Steel Corporation.
It is very obvious that the second corporation seeks the protective shield of a corporate fiction
whose veil in the present case could, and should, be pierced as it was deliberately and
maliciously designed to evade its financial obligation to its
We held that when the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association or persons,
or, in the case of two corporations, will merge them into one
In Liddel & Company, Inc. vs. Collector of Internal Revenue (L-9687, June 30, 1961, 2 SCRA
632), this Court likewise held that where a corporation is a dummy and serves no business
purpose and is intended only as a blind, the corporate fiction may be ignored.
In Commissioner of Internal Revenue vs. Norton and Harrison Company (L-17618, Aug. 31,
1964, 11 SCRA 714), We ruled that where a corporation is merely an adjunct, business
conduit or alter ego of another corporation, the fiction of separate and distinct corporate entities
should be disregarded

10. Cruz vs. Dalisay Adm. Matter No. R-181-P. July 31, 1987.
FACTS: Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy Sheriff of Manila, with
"malfeasance in office, corrupt practices and serious irregularities" allegedly committed as
follows: Respondent sheriff attached and/or levied the money belonging to complainant Cruz
when he was not himself the judgment debtor in the final judgment sought to be enforced but
rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered
corporation; and, Respondent likewise caused the service of the alias writ of execution upon
complainant who is a resident of Pasay City, despite knowledge that his territorial jurisdiction
covers Manila only and does not extend to Pasay City.
In his Comments, respondent Dalisay explained that when he garnished complainant's cash
deposit at the Philtrust bank, he was merely performing a ministerial duty. While it is true that
said writ was addressed to Qualitrans Limousine Service, Inc., yet it is also a fact that
complainant had executed an affidavit before the Pasay City assistant fiscal stating that he is the
owner/president of said corporation and, because of that declaration, the counsel for the plaintiff
in the labor case advised him to serve notice of garnishment on the Philtrust bank
Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging
to the court and assumed improvidently that since the complainant is the owner/president of
Qualitrans Limousine Service, Inc., they are one and the same.
ISSUE: Whether the personal property of Cruz (complainant) can be levied or attached being the
owner/president of the corporation.
HELD: No. The mere fact that one is president of the corporation does not render the property he
owns or possesses the property of the corporation, since that president, as an individual, and the
corporation, are separate entities. It is a well settled doctrine both in law and equity that as a legal
entity, a corporation has a personality distinct and separate from its individual stockholders or
members.
11. Tan Boon Bee & Co., Inc. vs. Jarencio No L-41337. June 30,1988.
FACTS: Anchor Supply Co. (ASC), through Tan Boon Bee, entered into a contract of sale with
Graphic Publishing Inc. (GPI) whereby ASC shall deliver paper products to GPI. GPI paid a
down payment but defaulted in paying the rest despite demand from ASC.
ASC sued GPI and ASC won. To satisfy the indebtedness, the trial court, presided by Judge
Hilarion Jarencio, ordered that one of the printing machines of GPI be auctioned. But before the
auction can be had, Philippine American Drug Company (PADCO) notified the sheriff that
PADCO is the actual owner of said printing machine. Notwithstanding, the sheriff still went on
with the auction sale where Tan Boon Bee was the highest bidder. Later, PADCO filed with the
same court a motion to nullify the sale on execution. The trial court ruled in favor of PADCO
and it nullified said auction sale. On the basis that two corporations were duly incorporated
under the Corporation Law and each of them has a juridical personality distinct and separate
from the othe
Tan Boon Bee assailed the order of the trial court. Tan Boon Bee averred that PADCO holds
50% of GPI; that the board of directors of PADCO and GPI is the same; that the veil of corporate
fiction should be pierced based on the premises. PADCO on the other hand asserts ownership
over the said printing machine; that it is merely leasing it to GPI.
ISSUE: Whether or not veil of corporate fiction should be pierced.
HELD: 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.
However, the separate and distinct personality is merely a fiction created by law for convenience
and to promote justice
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.
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. Further, the printing machine, as
shown by evidence, has been in GPI’s premises even before the date when PADCO alleged that
it acquired ownership thereof
12. Commissioner of Internal Revenue vs. Norton & Harrison Company No. L-17618. August
31, 1964.
FACTS: Norton and Harrison is a corporation organized (1) to buy and sell at wholesale and
retail, all kinds of goods, wares, and merchandise; (2) to act as agents of manufacturers in the
United States and foreign countries; and (3) to carry on and conduct a general wholesale and
retail mercantile establishment in the Philippines. Jackbilt is, likewise, a corporation organized
on February 16, 1948 primarily for the purpose of making, producing and manufacturing
concrete blocks. Norton and Jackbilt entered into an agreement whereby Norton was made the
sole and exclusive distributor of concrete blocks manufactured by Jackbilt.
During the existence of the agreement, Norton acquired by purchase all the outstanding shares of
stock of Jackbuilt. Apparently, due to this transaction, the CIR assessed the respondent for
deficiency tax, making Norton sold to the public as original sale and not the transaction from
jackbuilt.
The CIR contends that since Jackbuilt was owned and controlled by Norton, the corporate
personality of the former should be disregarded for sales tax purposes.
ISSUE: Whether or not the doctrine of piercing the corporate veil should be applied in order to
make respondent corporation liable for the sales deficiency tax.
HELD: Yes. Jackbilt is merely an adjunct, business conduit or alter ego, of Norton and Harrison
and that the fiction of corporate entities, separate and distinct from each, should be disregarded.
This is a case where the doctrine of piercing the veil of corporate fiction, should be made to
apply.
 
Where a corporation is a dummy, is unreal or a sham and serves no business purpose and is
intended only as a blind, the corporate form may be ignored for the law cannot countenance a
form that is bald and a mischievous fictions.
 
A taxpayer may gain advantage of doing business thru a corporation if he pleases, but the
revenue officers in proper cases, may disregard the separate corporate entity where it serves but
as a shield for tax evasion and treat the person who actually may take benefits of the transactions
as the person accordingly taxable.
The circumstances of the case at bar where: (a) N. corporation owned all the outstanding stocks
of J. corporation: (b) the board of directors of N corporation is constituted in such a way to
enable it to actual-ly direct and manage the other corporation's affairs by making the same
officers of the board for both companies: (c) N corporation financed the operations of the other:
(d) N corporation treats the other employees as its own; (e) Compensation given to board
members of corporation, who are also board members and or employees of N indicate that J is
only a department of N; and (f) the offices of both corporations are located in the same
compound; all lead to the conclusion that J corporation is merely an adjunct, business conduit or
alter ego of N corporation and that the fiction of separate and distinct corporate entities should be
disregarded.
13. Philippine Veterans Investment Development Corporation vs. Court of Appeals G.R. No.
85266. January 30, 1990.
FACTS: Petitioner PHIVIDEC sold all its rights and interest in the PRI (PHIVIDEC Railways,
Inc.) to the Philippine Sugar Commission (PHILSUMCO). Later, PHILSUMCO caused the
creation of a wholly owned subsidiary, the Panay Railways, Inc to operate the railway assets
acquired from PHIVIDEC.
Borres filed a complaint for damages against PRI and Panay Railways Inc. whereupon the latter
filed with leave of court a third-party complaint against the herein petitioner. It alleged that upon
the sale to PHILSUCOM of PRI, the corporate name of PRI was changed to Panay Railways,
Inc. It disclaimed liability on the ground that in the Agreement concluded between PHIVIDEC
and PHILSUCOM.
The trial court held Phividec Railways Inc. negligent and so liable to the plaintiff for damages. It
also held that as PRI was a wholly-owned subsidiary of PHIVIDEC, the latter should answer for
PRI’s liability. The decision was affirmed on appeal by the respondent court.
ISSUE: Whether or not the doctrine of piercing the corporate veil should be applied
HELD: The Supreme Court affirmed the challenged decision.
Where it appears that two business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third persons, disregard
the legal fiction that two corporations are distinct entities, and treat them as identical.
if a parent-holding company assumes complete control of the operation of its subsidiary’s
business, the separate corporate existence of the subsidiary must be disregarded, such that the
holding company will be responsible for the negligence of the employees of the subsidiary as if it
were the holding company’s own employees.
It is clear from the evidence of record that by virtue of the agreement between PHIVIDEC and
PHILSUCOM, particularly the stipulation exempting the latter from any “claim or liability
arising out of any act or transaction” prior to the turn-over, PHIVIDEC had expressly assumed
liability for any claim against PRI. Since the accident happened before that agreement and PRI
ceased to exist after the turn-over, it should follow that PHIVIDEC cannot evade its liability for
the injuries sustained by the private respondent.
A contrary conclusion would leave the private respondent without any recourse for her legitimate
claim. In the interest of justice and equity, and to prevent the veil of corporate fiction from
denying her the reparation to which she is entitled, that veil must be pierced and PHIVIDEC and
PRI regarded as one and the same entity.
14. Telephone Engineering & Service Co., Inc. vs. WCC No. L-28694. May 13, 1981.
FACTS: Petitioner (TESCO) is a domestic corporation engaged in the business of manufacturing
telephone equipment. It has a sister company, the Utilities Management Corporation
(UMACOR), both corporation is under the management of Jose Luis Santiago, the executive VP
and General Manager of TESCO.
UMACOR employed Pacifico Gatus as Purchasing Agent in . He was assigned in TESCO for 2.5
months, and reported back to UMACOR. Later, he contracted an illness and died eventually of
“liver cirrhosis with malignant degeneration”.
Pacifico’s widowed wife, Leonila Gatus, filed a Notice and Claim for Compensation with the
Workmen’s Compensation Section alleging the employment of Pacifico under TESCO and his
death of liver cirrhosis. The Notice and Claim was transmitted to TESCO, to which TESCO
responded with an Employer’s Report of Accident or Sickness, signed by Santiago, stating that
UMACOR was Pacifico’s employer, and that employer UMACOR would not controvert the
claim for compensation, and admitted that the deceased employee contracted illness “in regular
occupation”. Thus, the Acting Referee awarded death benefits (5,759) and burial expenses (200)
in favor of Pacifico’s heirs.
TESCO filed a Motion for Reconsideration and Petition to Set Aside Award alleging that the
admission in the Employer’s Report was due to honest mistake and excusable negligence, and
that the illness for which compensation is sought is not an occupational disease, hence, not
compensable under the law. The MR was denied.
The Provincial Sheriff levied on and attached the properties of TESCO and scheduled the sale of
such at public auction. Hence, this petition seeking to annul the award and to enjoin the Sheriff
from levying and selling its properties at public auction.
In its Petition, TESCO asserts that there is no employer-employee relationship between it and
Pacifico Gatus.

ISSUE: Whether TESCO is liable for the compensation claim of Pacifico’s heirs when it claims
that it is not the employer of Pacifico
HELD:
YES, the assertion of lack employer-employee relationship cannot be admitted at the point of the
petition before the Supreme Court anymore; the difference between the corporate personality of
TESCO and UMACOR cannot be admitted anymore to confuse the legitimate issues in this case.
Considering, In TESCO’s pertinent documents – letter to Acting Referee, Motion for
Reconsideration and Petition to Set Aside Award, and Urgent Motion to Compel the Referee to
Elevate Records to Commission for Review – it represented and defended itself as the employer
of the deceased. Nowhere in the said documents did it allege that it was not the employer.
TESCO even admitted that TESCO and UMACOR are sister companies operating under one
single management and housed in the same building. Although respect for the corporate
personality as such, is the general rule, there are exceptions. In appropriate cases, the veil of
corporate fiction may be pierced as when the same is made as a shield to confuse the legitimate
issues.

15. International Academy of Management and Economics (I/AME)vs. Litton and Company, Inc., G.R.
No. 191525. December 13, 2017

FACTS: Atty. Santos, having been adjudge to pay some of money to Linton, and in consideration thereof,
the sheriff of MeTC of Manila levied certain property which was registered in the name of petitioner
such that annotations on the property was made. I/AME filed a motion to lift annotations claiming it has
separate and distinct personality from Santos . MeTC reversed its earlier decision in favour of I/AME
thus Linton elevated the case to the RTC which in turn reversed the ruling granting I/AME’s motion for
reconsideration. I/AME filed to the CA, which was eventually denied by the appellate court. CA noted
that Santos indicated in the Deed of Absolute Sale, he was the president of the corporation when it was
only that I/AME was organized. Furthermore, that real property was transferred to I/AME pending the
appeal for revival of judgement. Finally that Register of Deeds issued the TCT 14 years after deed of sale
and 8 years after I/AME was Incorporated.

ISSUE: Whether or not there is a denial of due process when the court pierced the corporate veil of
I/AME and its property was made to answer for the liability of Santos.

HELD:

In general, corporations, whether stock or nonstock, 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.

The concept of equitable ownership, for stock or nonstock corporations, in piercing of the corporate veil
scenarios, may also be considered. An equitable owner is an individual who is a non-shareholder
defendant, who exercises sufficient control or considerable authority over the corporation to the point
of completely disregarding the corporate form and acting as though its assets are his or her alone to
manage and distribute

The piercing of the corporate veil is premised on the fact that the corporation concerned must have
been properly served with summons or properly subjected to the jurisdiction of the court a quo.
Corollary thereto, it cannot be subjected to a writ of execution meant for another in violation of its right
to due process

As the Court has already ruled, a party whose corporation is vulnerable to piercing of its
corporate veil cannot argue violation of due process. The piercing of the corporate veil is
premised on the fact that the corporation concerned must have been properly served with
summons or properly subjected to the jurisdiction of the court a quo. Corollary thereto, it cannot
be subjected to a writ of execution meant for another in violation of its right to due process.
However, there is an exception to this rule: if 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.”

In this case, the Court confirms the lower courts' findings that Santos had an existing obligation
based on a court judgment that he owed monthly rentals and unpaid realty taxes under a lease
contract he entered into as lessee with the Litton. He was not able to comply with his obligation,
and in fact, refused to comply therewith. This Court agrees with the CA that Santos used I/AME
as a means to defeat judicial processes and to evade his obligation to Litton

16.
FACTS: PND and DBP owned Maricalum Mining which were transferred its ownership to the
National Government for disposition or Privatization. The NG sold its 90% share and financial
claim to G Holdings, a domestic Corporation engaged on owing and holding shares of stock of
different companies. G Holdings took possession and full control of the operation of Maricalum
Mining after payment of down payment.
Former employees of Maricalum Mining formed manpower cooperatives to supply the company
with workers, machinery and equipment for a monthly fee under Memorandum Agreement.
During the effectivity of the agreement, Maricalum Mining informed the cooperatives that it
would cease its mining and milling operations.
Properties of Maricalum which were mortgaged in favour of G Holdings were extra judicially
foreclosed. Thus, the complainant filed an illegal dismissal case against G Holdings and the
cooperatives.
The LA ruled that G Holdings, Maricalum Mining and the manpower cooperatives were guilty of
labor-only contracting, and thus, are liable for the money claims. On Appeal, the NLRC
modified the ruling. It found that only Maricalum Mining was liable to the employees because
Maricalum Mining and G Holdings had separate and distinct corporate personalities, which was
affirmed by the CA.
Complainant filed a petition for review, asserting that G Holdings should be liable for their
claims because the doctrine of piercing the corporate veil applies.
ISSUE: Whether or not piercing the corporate veils is applicable
HELD: The ponencia affirmed the CA. It held that the corporate veil should not be pierced
because there is no evidence of fraud on the part of G Holdings.
It explained that the corporate veil must be lifted only if it was used to shield fraud, defend
crime, justify a wrong, defeat public convenience, insulate bad faith, or perpetuate injustice.14
Control and ownership of all assets of another corporation is not an indication of a fraudulent
intent to evade labor claims and liabilities.15 The ponencia ruled that the employees must present
clear and convincing evidence to prove that the holding company is guilty of fraud or gross
negligence amounting to bad faith to evade the obligation.
It held that the transfer of Maricalum Mining's assets to G Holdings does not indicate fraud, as it
was done pursuant to the Purchase and Sale Agreement executed in 1992. It noted that some of
the assets had been foreclosed as early as 2001, even before the labor claims existed, and thus,
there was no evidence that the transfer was done to evade their obligations.
I dissent. I opine that the corporate veil should be pierced and that G Holdings should be held
solidarily liable with Maricalum Mining.
Piercing the veil of corporate fiction may be allowed only if the following elements concur: (1)
control - not mere stock control, but complete domination not only of finances, but of policy and
business practice in respect to the transaction attacked, must have been such 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 a fraud or a wrong to perpetuate
the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in
contravention of plaintiff's legal right; and (3) the said control and breach of duty must have
proximately caused the injury or unjust loss complained of.
Thus, while the corporate veil cannot be pierced as to the mortgage and transfer of Maricalum
Mining's properties to G Holdings, the corporate veil may still be pierced for other acts in which
the elements for the application of the doctrine are present.

It also found that G Holdings exercised absolute control over Maricalum Mining since it held
90% of its equity securities, and paid for the latter's salary expenses. It noted that Maricalum
Mining's corporate name is superimposed with G Holding's corporate name on the heading of the
cash vouchers issued in payment of the services rendered by the manpower cooperatives.

It also recognized that there is proof that G Holdings has an office in Maricalum Mining's
premises and some of its assets have commingled due to the Purchase and Sale Agreement.

There is even an allegation by the employees that their payrolls were prepared by the accounting
department of G Holdings. Likewise, they asserted that it was both Maricalum Mining and G
Holdings that advised the employees to form the manpower cooperatives after the retrenchment
program.
II. II. Incorporation and Organization of Private Corporations
1. Fil. Cía. de Seguros vs. Christern, Huenefeld & Co., Inc.
FACTS: Respondent Corporation obtained fire insurance policy with petitioner for the merchandise
during Japanese occupation, later the building and merchandise were burned. In due time the
respondent its claim to petitioner under the policy. The petitioner refused to pay the claim on the
ground that the policy in favour of respondent had ceased to be in force on the date the United States
declared war against Germany. Here, respondent was controlled by German subjects (though organized
under and by virtue of the laws of the Philippines), while petitioner, being company under American
jurisdiction when policy was in forced. However, petitioner paid respondent upon order of the Director
of Bureau of Financing, Philippine Executive Commission.

The present action was filed for recovering what he had paid to the respondent, on the theory that
policy ceased to be effected because of the outbreak of war between the United States and Germany.
The trial court dismissed the action, on appeal to the CA, judgment of the CFI was affirmed.

ISSUE: whether the policy in question became null and void upon the declaration of war between the
United States and Germany

HELD:

The nationality of a private corporation is determined by the character or citizenship of its controlling
stockholders.

The Philippine Insurance Law (Act No. 2427, as amended), in section 8, provides that "anyone except a
public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as
soon as an insured becomes a public enemy.

Where majority of the stockholders of a corporation were German subjects, the corporation became an
enemy corporation upon the outbreak of the war between the United States and Germany

It results that the petitioner is entitled to recover what was paid to the respondent under the
circumstances of this case. However, the petitioner will be entitled to recover only the equivalent, in
actual Philippine currency

2. Republic Planters Bank vs. Court of Appeals G.R. No. 93073. December 21, 1992.

FACTS: Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the
bank in form of export advances and letters of credit or trust receipts accommodations. Republic
Planters Bank issued 9 promissory notes with Worldwide Garment Manufacturing, Inc, and was signed
by Shozo Yamaguchi (President) and Fermin Canlas (Treasurer).

Later, Worldwide Garment Manufacturing, Inc, Changed its corporate name to Pinch Manufacturing
Corporation.
Three years after, the bank filed an action to recover the sums of money covered by the promissory
notes.

Yamaguchi did not file an Amended answer and failed to appear at the scheduled pre-trial conference
despite due notice.

Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and
when issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., and that the
notes were still blank when he signed them.

ISSUE: Whether or not change of corporate name extinguishes the personality of the original
corporation.

HELD: NO.

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

4. Alhambra Cigar & Cigarette Manufacturing Co., Inc. vs. Securities and Exchange Commission No. L-
23606. July 29, 1968

FACTS: Petitioner was incorporated under Philippine Laws on 01/15/1912, by its corporate articles it was
to exist for 50 years from incorporation. On the day of expiration, it cease transacting business and
entered into a state of liquidation. Thereafter, a new corporation - Alhambra Industries, Inc. was formed
to carry on the business of Alhambra.

Within the three year statutory period of liquidation – RA 3531 was enacted into law. It amended
Section 18 of the Corporation law; it empowered domestic corporations to extend their corporate life
beyond the fixed period by the articles of incorporation for a term not to exceed 50 years.
A special meeting was conducted to extend the life of Alhambra which was voted by more than 2/3 of its
subscribed capital stock then filed with SEC. However, SEC returned the amended articles of
incorporation because the company cannot availed of by the said corporation for reasons that its terms
of existence had already expired when the said law took effect.

ISSUE: May a corporation extend its life 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?

HELD:

A corporation cannot extend its life 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.

Since the privilege of extension is purely statutory, all of the statutory conditions precedent must be
complied with in order that the extension may be effectuated. And, generally, these conditions must be
complied with, and 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

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 that corporation to do business may no longer be extended.
            Upon its dissolution, a corporation became legally dead for all purposes. Statutory
authorizations had to be provided for its continuance after dissolution "for limited and specified
purposes incident to complete liquidation of its affairs". Thus, 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.

            Section 77 - 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.